8-K
Merck & Co., Inc. (MRK)
8-K
2022-04-21
For: 2022-04-20
View Original
Added on
April 02, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 20, 2022
Merck & Co., Inc.
(Exact name of registrant as specified in its charter)
| New Jersey<br> <br>(State or other jurisdiction<br> <br>of incorporation) | 1-6571<br> <br>(Commission<br> <br>File Number) | 22-1918501<br> <br>(I.R.S Employer<br> <br>Identification No.) |
|---|
2000 Galloping Hill Road
| Kenilworth | New Jersey | 07033 |
|---|---|---|
| (Address of principal executive | (Zip Code) |
(Registrant’s telephone number, including area code)
(908) 740-4000
Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock($0.50 par value) | MRK | New York Stock Exchange |
| 0.500% Notes due 2024 | MRK 24 | New York Stock Exchange |
| 1.875% Notes due 2026 | MRK/26 | New York Stock Exchange |
| 2.500% Notes due 2034 | MRK/34 | New York Stock Exchange |
| 1.375% Notes due 2036 | MRK 36A | New York Stock Exchange |
Item 2.02 Results of Operations
and Financial Condition.
The disclosure set forth in Item 8.01 of this Current Report on Form 8-K is also responsive to Item 2.02 of this Current Report on Form 8-K and is incorporated herein by reference.
Item 8.01 Other Events.
In order to align with views expressed by members of the staff of the U.S. Securities and Exchange Commission (the “Staff”) during a recent consultation between companies in Merck & Co., Inc.’s (“Merck” or the “Company”) pharmaceutical industry peer group and the Staff, the Company is changing the treatment of certain items for purposes of its non-GAAP reporting. Historically, Merck’s non-GAAP results excluded expenses for upfront and milestone payments related to collaborations and licensing agreements, as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions, to the extent the charges were considered by the Company to be significant to the results of a particular period (as well as any related adjustments recorded in a subsequent period). Beginning in 2022, Merck’s non-GAAP results will no longer exclude charges related to these items. This change will not affect the Company’s non-GAAP results to be reported for the first quarter of 2022, nor does it affect previously reported first quarter 2021 non-GAAP results, as the Company had no significant charges related to those items during such periods. However, the change will affect previously reported non-GAAP results for other periods of 2021 and for 2020 as set forth in the Company’s recast 2021 and 2020 non-GAAP results attached as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit 99.1 | 2021 and 2020 Historical Non-GAAP Financial Information Recast to Reflect Reporting Changes |
|---|---|
| Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Merck<br> & Co., Inc. | ||
|---|---|---|
| Date:<br> April 20, 2022 | By: | /s/<br> Kelly E. W. Grez |
| Kelly<br> E. W. Grez | ||
| Corporate<br> Secretary |
Exhibit 99.1
| MERCK & CO., INC. | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 QUARTERLY AND ANNUAL GAAP TO NON-GAAP RECONCILIATIONS - CONTINUING OPERATIONS | |||||||||||||||||||||||||||
| (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) | |||||||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||||||
| In<br> 2022, the Company will be changing the treatment of certain items for purposes of its non-GAAP reporting. Historically,<br> Merck’s non-GAAP results excluded expenses for upfront and milestone payments related to collaborations and licensing agreements,<br> as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions, to the extent the<br> charges were considered by the Company to be significant to the results of a particular period (as well as any related adjustments<br> recorded in a subsequent period). Beginning in 2022, Merck’s non-GAAP results will no longer exclude charges related to these<br> items. This change does not affect previously reported first quarter 2021 non-GAAP results as the Company had no significant charges<br> related to those items during that period. However, the change does affect previously reported non-GAAP results for other periods<br> of 2021 as set forth below. | |||||||||||||||||||||||||||
| The<br> table below reflects the reconciliation of GAAP to non-GAAP financial information on a continuing operations basis. As<br> the results of the businesses contributed to Organon & Co. in the June 2021 spin-off are reflected within discontinued operations,<br> they are excluded from the financial information provided below. | |||||||||||||||||||||||||||
| GAAP | Acquisition<br> and<br><br> Divestiture-Related<br><br> Costs ^(1)^ | Restructuring<br> Costs ^(2)^ | (Income) Loss from<br> Investments in Equity Securities | Certain Other Items | Adjustment Subtotal | Non-GAAP<br> as Previously Reported | Impact of Non-GAAP<br> Reporting Changes | Revised Non-GAAP<br> as Recast | |||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Full Year 2021 | |||||||||||||||||||||||||||
| Cost of sales | $ | 13,626 | 1,607 | 160 | 221 | ^(3)^ | 1,988 | $ | 11,638 | $ | 11,638 | ||||||||||||||||
| Selling, general and administrative | 9,634 | 322 | 19 | 341 | 9,293 | 9,293 | |||||||||||||||||||||
| Research and development | 12,245 | 479 | 28 | 1,661 | ^(4)^ | 2,168 | 10,077 | (1,661 | )^(4)^ | 11,738 | |||||||||||||||||
| Restructuring costs | 661 | 661 | 661 | - | - | ||||||||||||||||||||||
| Other (income) expense, net | (1,341 | ) | 76 | (1,884 | ) | (1,808 | ) | 467 | 467 | ||||||||||||||||||
| Income From<br> Continuing Operations Before Taxes | 13,879 | (2,484 | ) | (868 | ) | 1,884 | (1,882 | ) | (3,350 | ) | 17,229 | 1,661 | 15,568 | ||||||||||||||
| Income Tax Provision (Benefit) | 1,521 | (446 | )^(5)^ | (121 | )^(5)^ | 415 | ^(5)^ | (261 | )^(5)^ | (413 | ) | 1,934 | 2 | ^(5)^ | 1,932 | ||||||||||||
| Net Income from Continuing Operations | 12,358 | (2,038 | ) | (747 | ) | 1,469 | (1,621 | ) | (2,937 | ) | 15,295 | 1,659 | 13,636 | ||||||||||||||
| Net Income from Continuing Operations<br> Attributable to Merck & Co., Inc. | 12,345 | (2,038 | ) | (747 | ) | 1,469 | (1,621 | ) | (2,937 | ) | 15,282 | 1,659 | 13,623 | ||||||||||||||
| Earnings per Common Share Assuming<br> Dilution from Continuing Operations | $ | 4.86 | (0.80 | ) | (0.30 | ) | 0.58 | (0.64 | ) | (1.16 | ) | $ | 6.02 | 0.65 | $ | 5.37 | ^(6)^ | ||||||||||
| Tax Rate | 11.0 | % | 11.2 | % | 12.4 | % | |||||||||||||||||||||
| Fourth Quarter 2021 | |||||||||||||||||||||||||||
| Cost of sales | $ | 3,873 | 419 | 47 | (4 | ) | 462 | $ | 3,411 | $ | 3,411 | ||||||||||||||||
| Selling, general and administrative | 2,830 | 226 | 10 | 236 | 2,594 | 2,594 | |||||||||||||||||||||
| Research and development | 3,068 | 397 | 7 | (17 | )^(4)^ | 387 | 2,681 | 17 | ^(4)^ | 2,664 | |||||||||||||||||
| Restructuring costs | 174 | 174 | 174 | - | - | ||||||||||||||||||||||
| Other (income) expense, net | (333 | ) | (3 | ) | (381 | ) | (384 | ) | 51 | 51 | |||||||||||||||||
| Income From<br> Continuing Operations Before Taxes | 3,909 | (1,039 | ) | (238 | ) | 381 | 21 | (875 | ) | 4,784 | (17 | ) | 4,801 | ||||||||||||||
| Income Tax Provision (Benefit) | 85 | (163 | )^(5)^ | (39 | )^(5)^ | 84 | ^(5)^ | (2 | )^(5)^ | (120 | ) | 205 | 205 | ||||||||||||||
| Net Income from Continuing Operations | 3,824 | (876 | ) | (199 | ) | 297 | 23 | (755 | ) | 4,579 | (17 | ) | 4,596 | ||||||||||||||
| Net Income from Continuing Operations<br> Attributable to Merck & Co., Inc. | 3,820 | (876 | ) | (199 | ) | 297 | 23 | (755 | ) | 4,575 | (17 | ) | 4,592 | ||||||||||||||
| Earnings per Common Share Assuming<br> Dilution from Continuing Operations | $ | 1.51 | (0.34 | ) | (0.08 | ) | 0.12 | 0.01 | (0.29 | ) | $ | 1.80 | (0.01 | ) | $ | 1.81 | ^(6)^ | ||||||||||
| Tax Rate | 2.2 | % | 4.3 | % | 4.3 | % | |||||||||||||||||||||
| Third Quarter 2021 | |||||||||||||||||||||||||||
| Cost of sales | $ | 3,450 | 346 | 48 | 394 | $ | 3,056 | $ | 3,056 | ||||||||||||||||||
| Selling, general and administrative | 2,336 | 61 | 5 | 66 | 2,270 | 2,270 | |||||||||||||||||||||
| Research and development | 2,445 | 48 | 8 | (87 | )^(4)^ | (31 | ) | 2,476 | 87 | ^(4)^ | 2,389 | ||||||||||||||||
| Restructuring costs | 107 | 107 | 107 | - | - | ||||||||||||||||||||||
| Other (income) expense, net | (450 | ) | (10 | ) | (684 | ) | (694 | ) | 244 | 244 | |||||||||||||||||
| Income From<br> Continuing Operations Before Taxes | 5,266 | (445 | ) | (168 | ) | 684 | 87 | 158 | 5,108 | (87 | ) | 5,195 | |||||||||||||||
| Income Tax Provision (Benefit) | 695 | (96 | )^(5)^ | (26 | )^(5)^ | 151 | ^(5)^ | 1 | ^(5)^ | 30 | 665 | (1 | )^(5)^ | 666 | |||||||||||||
| Net Income from Continuing Operations | 4,571 | (349 | ) | (142 | ) | 533 | 86 | 128 | 4,443 | (86 | ) | 4,529 | |||||||||||||||
| Net Income from Continuing Operations<br> Attributable to Merck & Co., Inc. | 4,567 | (349 | ) | (142 | ) | 533 | 86 | 128 | 4,439 | (86 | ) | 4,525 | |||||||||||||||
| Earnings per Common Share Assuming<br> Dilution from Continuing Operations | $ | 1.80 | (0.14 | ) | (0.06 | ) | 0.21 | 0.04 | 0.05 | $ | 1.75 | (0.04 | ) | $ | 1.78 | ^(6)^ | |||||||||||
| Tax Rate | 13.2 | % | 13.0 | % | 12.8 | % | |||||||||||||||||||||
| Second Quarter 2021 | |||||||||||||||||||||||||||
| Cost of sales | $ | 3,104 | 345 | 38 | 37 | ^(3)^ | 420 | $ | 2,684 | $ | 2,684 | ||||||||||||||||
| Selling, general and administrative | 2,281 | 25 | 2 | 27 | 2,254 | 2,254 | |||||||||||||||||||||
| Research and development | 4,321 | 16 | 6 | 1,765 | ^(4)^ | 1,787 | 2,534 | (1,765 | ) | 4,299 | |||||||||||||||||
| Restructuring costs | 82 | 82 | 82 | - | - | ||||||||||||||||||||||
| Other (income) expense, net | (103 | ) | 117 | (258 | ) | (141 | ) | 38 | 38 | ||||||||||||||||||
| Income From<br> Continuing Operations Before Taxes | 1,717 | (503 | ) | (128 | ) | 258 | (1,802 | ) | (2,175 | ) | 3,892 | 1,765 | 2,127 | ||||||||||||||
| Income Tax Provision (Benefit) | 503 | (98 | )^(5)^ | (15 | )^(5)^ | 57 | ^(5)^ | (11 | )^(5)^ | (67 | ) | 570 | 3 | ^(5)^ | 567 | ||||||||||||
| Net Income from Continuing Operations | 1,214 | (405 | ) | (113 | ) | 201 | (1,791 | ) | (2,108 | ) | 3,322 | 1,762 | 1,560 | ||||||||||||||
| Net Income from Continuing Operations<br> Attributable to Merck & Co., Inc. | 1,213 | (405 | ) | (113 | ) | 201 | (1,791 | ) | (2,108 | ) | 3,321 | 1,762 | 1,559 | ||||||||||||||
| Earnings per Common Share Assuming<br> Dilution from Continuing Operations | $ | 0.48 | (0.16 | ) | (0.04 | ) | 0.08 | (0.71 | ) | (0.83 | ) | $ | 1.31 | 0.69 | $ | 0.61 | ^(6)^ | ||||||||||
| Tax Rate | 29.3 | % | 14.6 | % | 26.7 | % | |||||||||||||||||||||
| First Quarter 2021 | |||||||||||||||||||||||||||
| Cost of sales | $ | 3,199 | 497 | 27 | 188 | ^(3)^ | 712 | $ | 2,487 | $ | 2,487 | ||||||||||||||||
| Selling, general and administrative | 2,187 | 10 | 3 | 13 | 2,174 | 2,174 | |||||||||||||||||||||
| Research and development | 2,412 | 18 | 7 | 25 | 2,387 | 2,387 | |||||||||||||||||||||
| Restructuring costs | 297 | 297 | 297 | - | - | ||||||||||||||||||||||
| Other (income) expense, net | (455 | ) | (28 | ) | (561 | ) | (589 | ) | 134 | 134 | |||||||||||||||||
| Income From<br> Continuing Operations Before Taxes | 2,987 | (497 | ) | (334 | ) | 561 | (188 | ) | (458 | ) | 3,445 | 3,445 | |||||||||||||||
| Income Tax Provision (Benefit) | 238 | (89 | )^(5)^ | (41 | )^(5)^ | 123 | ^(5)^ | (249 | )^(5)^ | (256 | ) | 494 | 494 | ||||||||||||||
| Net Income from Continuing Operations | 2,749 | (408 | ) | (293 | ) | 438 | 61 | (202 | ) | 2,951 | 2,951 | ||||||||||||||||
| Net Income from Continuing Operations<br> Attributable to Merck & Co., Inc. | 2,745 | (408 | ) | (293 | ) | 438 | 61 | (202 | ) | 2,947 | 2,947 | ||||||||||||||||
| Earnings per Common Share Assuming<br> Dilution from Continuing Operations | $ | 1.08 | (0.16 | ) | (0.11 | ) | 0.17 | 0.02 | (0.08 | ) | $ | 1.16 | $ | 1.16 | |||||||||||||
| Tax Rate | 8.0 | % | 14.3 | % | 14.3 | % | |||||||||||||||||||||
| Only the line items that are affected by non-GAAP adjustments are shown. | |||||||||||||||||||||||||||
| --- | |||||||||||||||||||||||||||
| Merck is providing certain<br> non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of<br> underlying business performance and trends. Management believes that providing non-GAAP information enhances investors’<br> understanding of the company’s results because management uses non-GAAP<br> measures to assess performance. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure<br> the performance of the company along with other metrics. In addition, senior<br> management’s annual compensation is derived in part using a non-GAAP pretax income metric. The non-GAAP information presented<br> should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with<br> GAAP. | |||||||||||||||||||||||||||
| ^(1)^Amounts included in cost of<br> sales primarily reflect expenses for the amortization of intangible assets. Amounts included in selling, general and administrative<br> expenses reflect acquisition and divestiture-related costs, including $169 million of transaction costs related to Acceleron Pharma<br> Inc. (Acceleron) in the fourth quarter and full year. Amounts included in research and development expenses reflect the amortization<br> of intangible assets, and for the fourth quarter and full year also reflect a $275 million in-process research and development<br> (IPR&D) impairment charge related to the ArQule, Inc. acquisition, as well as $105 million of Acceleron transaction costs.<br> Amounts included in other (income) expense, net, reflect changes in the estimated fair value measurement of liabilities for<br> contingent consideration and royalty income related to the termination of the Sanofi-Pasteur MSD joint venture. Additionally,<br> amounts in the second quarter and full year include a loss on a forward exchange contract entered into in conjunction with the<br> spin-off of Organon. | |||||||||||||||||||||||||||
| --- | |||||||||||||||||||||||||||
| ^(2)^Amounts primarily include employee separation<br> costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's<br> formal restructuring programs. | |||||||||||||||||||||||||||
| ^(3)^Reflects a charge for the discontinuation<br> of COVID-19 development programs. | |||||||||||||||||||||||||||
| ^(4)^Represents amounts related to the acquisitions<br> of Pandion Therapeutics, Inc., VelosBio Inc. and OncoImmune that were previously excluded from non-GAAP results, but are now included<br> in non-GAAP results as a result of a change in non-GAAP reporting. | |||||||||||||||||||||||||||
| ^(5)^Represents the estimated tax impact on<br> the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. Certain<br> other items in the first quarter and full year include a net tax benefit of $208 million and $207 million, respectively, related<br> to the settlement of certain federal income tax matters. | |||||||||||||||||||||||||||
| ^(6)^Revised non-GAAP EPS was calculated by<br> dividing revised non-GAAP income by the weighted-average shares for the period, which may be different than subtracting the impact<br> of the non-GAAP reporting changes from non-GAAP EPS as previously reported. | |||||||||||||||||||||||||||
| MERCK & CO., INC. | |||||||||||||||||||||||||||
| --- | |||||||||||||||||||||||||||
| 2020 ANNUAL GAAP TO NON-GAAP RECONCILIATION - CONTINUING OPERATIONS | |||||||||||||||||||||||||||
| (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) | |||||||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||||||
| In<br> 2022, the Company will be changing the treatment of certain items for purposes of its non-GAAP reporting. Historically,<br> Merck’s non-GAAP results excluded expenses for upfront and milestone payments related to collaborations and licensing agreements,<br> as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions, to the extent the<br> charges were considered by the Company to be significant to the results of a particular period (as well as any related adjustments<br> recorded in a subsequent period). Beginning in 2022, Merck’s non-GAAP results will no longer exclude charges related to these<br> items. This change affects previously reported non-GAAP results for the 2020 annual period as set forth below. | |||||||||||||||||||||||||||
| The<br> table below reflects the reconciliation of GAAP to non-GAAP financial information on a continuing operations basis. As<br> the results of the businesses contributed to Organon & Co. in the June 2021 spin-off are reflected within discontinued<br> operations, they are excluded from the financial information provided below. | |||||||||||||||||||||||||||
| GAAP | Acquisition<br> and Divestiture-<br><br>Related Costs ^(1)^ | Restructuring<br> Costs ^(2)^ | (Income)<br> Loss from<br><br> Investments in Equity <br><br>Securities | Certain<br> Other Items | Adjustment<br> Subtotal | Non-GAAP<br><br> as Previously<br><br> Reported | Impact<br> of Non-<br><br>GAAP Reporting<br><br> Changes | Revised<br> Non-<br><br>GAAP as Recast | |||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Full<br> Year 2020 | |||||||||||||||||||||||||||
| Cost of sales | $ | 13,618 | 3,355 | 175 | 260 | ^(3)^ | 3,790 | $ | 9,828 | $ | 9,828 | ||||||||||||||||
| Selling,<br> general and administrative | 8,955 | 225 | 47 | 272 | 8,683 | 8,683 | |||||||||||||||||||||
| Research<br> and development | 13,397 | 12 | 83 | 4,243 | ^(4)^ | 4,338 | 9,059 | (4,198 | )^(5)^ | 13,257 | |||||||||||||||||
| Restructuring<br> costs | 575 | 575 | 575 | - | - | ||||||||||||||||||||||
| Other (income)<br> expense, net | (890 | ) | 50 | (1,292 | ) | (20 | ) | (1,262 | ) | 372 | 372 | ||||||||||||||||
| Income from<br> Continuing Operations Before Taxes | 5,863 | (3,642 | ) | (880 | ) | 1,292 | (4,483 | ) | (7,713 | ) | 13,576 | 4,198 | 9,378 | ||||||||||||||
| Income Tax<br> Provision (Benefit) | 1,340 | (627 | )^(6)^ | (80 | )^(6)^ | 284 | ^(6)^ | (303 | )^(6)^ | (726 | ) | 2,066 | 237 | ^(6)^ | 1,829 | ||||||||||||
| Net Income<br> from Continuing Operations | 4,523 | (3,015 | ) | (800 | ) | 1,008 | (4,180 | ) | (6,987 | ) | 11,510 | 3,961 | 7,549 | ||||||||||||||
| Net Income<br> from Continuing Operations Attributable to Merck & Co., Inc. | 4,519 | (3,015 | ) | (800 | ) | 1,008 | (4,180 | ) | (6,987 | ) | 11,506 | 3,961 | 7,545 | ||||||||||||||
| Earnings<br> per Common Share Assuming Dilution from Continuing Operations | $ | 1.78 | (1.19 | ) | (0.31 | ) | 0.40 | (1.65 | ) | (2.75 | ) | $ | 4.53 | 1.56 | $ | 2.97 | ^(7)^ | ||||||||||
| Tax<br> Rate | 22.9 | % | 15.2 | % | 19.5 | % | |||||||||||||||||||||
| Only<br> the line items that are affected by non-GAAP adjustments are shown. | |||||||||||||||||||||||||||
| --- | |||||||||||||||||||||||||||
| Merck<br> is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have<br> on the analysis of underlying business performance and trends. Management believes that providing non-GAAP information enhances investors’<br> understanding of the Company’s results because management uses non-GAAP measures to assess performance. Management uses non-GAAP<br> measures internally for planning and forecasting purposes and to measure the performance of the Company along with other metrics.<br> In addition, senior management’s annual compensation is derived in part using a non-GAAP pretax income metric. The non-GAAP<br> information presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance<br> with GAAP. | |||||||||||||||||||||||||||
| ^(1)^ Amounts<br> included in cost of sales primarily reflect a $1.6 billion intangible asset impairment charge related to ZERBAXA and expenses for<br> the amortization of intangible assets. Amounts included in selling, general and administrative expenses reflect acquisition<br> and divestiture-related costs, including $95 million of transaction costs related to the acquisition of ArQule, Inc. Amounts<br> included in other (income) expense, net, primarily reflect costs related to increases in the estimated fair value measurement of<br> liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD<br> joint venture. | |||||||||||||||||||||||||||
| --- | |||||||||||||||||||||||||||
| ^(2)^Amounts<br> primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related<br> to activities under the Company's formal restructuring programs. | |||||||||||||||||||||||||||
| ^(3)^ Reflects<br> a charge for the discontinuation of COVID-19 development programs. | |||||||||||||||||||||||||||
| ^(4)^Represents<br> charges of $2.7 billion for the acquisition of VelosBio Inc., $1.1 billion for upfront payments related to license and collaboration<br> agreements, $462 million for the acquisition of OncoImmune and $45 million for the discontinuation of COVID-19 development programs. | |||||||||||||||||||||||||||
| ^(5)^Represents<br> charges of $2.7 billion for the acquisition of VelosBio Inc., $1.1 billion for upfront payments related to license and collaboration<br> agreements and $462 million for the acquisition of OncoImmune that were previously excluded from non-GAAP results, but are now included<br> in non-GAAP results as a result of a change in non-GAAP reporting. | |||||||||||||||||||||||||||
| ^(6)^ Represents<br> the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP<br> adjustments. Acquisition and divestiture-related costs also includes a tax cost of $67 million, representing an adjustment<br> to the tax benefits recorded in conjunction with the 2015 Cubist Pharmaceuticals, Inc. acquisition. | |||||||||||||||||||||||||||
| ^(7)^ Revised<br> non-GAAP EPS was calculated by dividing revised non-GAAP income by the weighted-average shares for the period, which may be different<br> than subtracting the impact of the non-GAAP reporting changes from non-GAAP EPS as previously reported. |