Merck & Co., Inc. - Quarter Report: 2025 June (Form 10-Q)

$()$()$()$()

In connection with restructuring actions (see Note 4), termination charges were recorded on pension plans related to expanded eligibility for certain employees exiting Merck.

The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 10), with the exception of certain amounts for termination benefits which are recorded in Restructuring costs if the event giving rise to the termination benefits related to restructuring actions.

- 24 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

10.

)$()$()$()Interest expense Exchange losses

Income from investments in equity securities, net (1)

()()()()Net periodic defined benefit plan (credit) cost other than service cost()()()()Other, net()()()() $()$ $()$

Interest paid for the six months ended June 30, 2025 and 2024 was $ million and $ million, respectively.

11.

% and % for the second quarter and first six months of 2025, respectively, reflect a percentage point favorable impact and a percentage point favorable impact, respectively, due to $ million of tax benefits resulting primarily from favorable audit adjustments. The effective income tax rates in both the second quarter and first six months of 2025 also reflect the favorable impacts of geographical mix of income and expense, as well as certain discrete items.

The effective income tax rates of % and % for the second quarter and first six months of 2024, respectively, reflect a percentage point favorable impact and a percentage point favorable impact, respectively, due to a $ million reduction in reserves for unrecognized income tax benefits resulting from the expiration in June 2024 of the statute of limitations for assessments related to the 2019 federal tax return year. The effective income tax rate for the first six months of 2024 also reflects a percentage point unfavorable impact of a charge for the acquisition of Harpoon for which tax benefit was recognized.

While many jurisdictions in which Merck operates have adopted the global minimum tax provision of the Organization for Economic Cooperation and Development (OECD) Pillar 2, effective for tax years beginning in January 2024, it resulted in a minimal impact to the Company’s 2024 effective income tax rate due to the accounting for the tax effects of intercompany transactions. The Company expects the impact of the global minimum tax to be approximately % for full year 2025. In addition, in July 2025, H.R.1 - One Big Beautiful Bill Act (OBBBA) was enacted into law. The Company is currently evaluating the effects of the OBBBA but does not expect a material tax impact.

The Internal Revenue Service (IRS) is currently conducting examinations of the Company’s tax returns for the years 2017 and 2018, including the one-time transition tax enacted under the Tax Cuts and Jobs Act of 2017 (TCJA). In April 2025, Merck received Notices of Proposed Adjustment (NOPAs) that would increase the amount of the one-time transition tax on certain undistributed earnings of foreign subsidiaries by approximately $ billion. In addition, the NOPAs included penalties of approximately $ million. These amounts are exclusive of any interest that may be due. The Company disagrees with the proposed adjustments and will vigorously contest the NOPAs through all available administrative and, if necessary, judicial proceedings. It is expected to take a number of years to reach resolution of this matter. If the Company is ultimately unsuccessful in defending its position, the impact could be material to its financial statements. The statute of limitations for assessments with respect to the 2019 and 2020 federal tax return years expired in June 2024 and October 2024, respectively. The IRS is also currently conducting examinations of the Company’s tax returns for the years 2021 and 2022. In addition, various state and foreign examinations are in progress.

- 25 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

12.

$ $ $ Average common shares outstanding

Common shares issuable (1)

Average common shares outstanding assuming dilution

Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders

$ $ $ $

Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders

$ $ $ $

(1) Issuable primarily under share-based compensation plans.

For the second quarter of 2025 and 2024, million and million, respectively, and for the first six months of 2025 and 2024, million and million, respectively, of common shares issuable under share-based compensation plans were excluded from the computations of earnings per common share assuming dilution because the effect would have been antidilutive.

13.

$()$()$()Other comprehensive income (loss) before reclassification adjustments, pretax ()()Tax() ()()Other comprehensive income (loss) before reclassification adjustments, net of taxes ()()Reclassification adjustments, pretax()

(1)

()

(2)

()Tax Reclassification adjustments, net of taxes()

()

()Other comprehensive income (loss), net of taxes ()()()

Balance June 30, 2024, net of taxes

$ $()$()$()

Balance April 1, 2025, net of taxes

$ $()$()$()Other comprehensive income (loss) before reclassification adjustments, pretax()() ()Tax ()()()Other comprehensive income (loss) before reclassification adjustments, net of taxes()()()()Reclassification adjustments, pretax

(1)

()

(2)

Tax() ()Reclassification adjustments, net of taxes

()

Other comprehensive income (loss), net of taxes()()()()

Balance June 30, 2025, net of taxes

$()$()$()$()

- 26 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

)$()$()$()Other comprehensive income (loss) before reclassification adjustments, pretax ()()Tax()()()()Other comprehensive income (loss) before reclassification adjustments, net of taxes ()()Reclassification adjustments, pretax()

(1)

()

(2)

()Tax Reclassification adjustments, net of taxes()() ()Other comprehensive income (loss), net of taxes ()()()

Balance June 30, 2024, net of taxes

$ $()$()$()

Balance January 1, 2025, net of taxes

(1)

()

(2)

()Tax () Reclassification adjustments, net of taxes()() ()Other comprehensive income (loss), net of taxes()() ()

Balance June 30, 2025, net of taxes

$()$()$()$()

(1) Primarily relates to foreign currency cash flow hedges that were reclassified from AOCL to Sales.

(2) Includes net amortization of prior service cost, actuarial gains and losses, settlements and curtailments included in net periodic benefit cost (see Note 9).

14.

operating segments, Pharmaceutical and Animal Health, both of which are reportable segments.

The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines. The Company sells these human health vaccines primarily to physicians, wholesalers, distributors and government entities. A large component of pediatric and adolescent vaccine sales are made to the U.S. Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the U.S. government. Additionally, the Company sells vaccines to the Federal government for placement into vaccine stockpiles.

The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceutical and vaccine products, as well as health management solutions and services, for the prevention, treatment and control of disease in all major livestock and companion animal species. The Company also offers an extensive suite of digitally connected identification, traceability and monitoring products. The Company sells its products to veterinarians, distributors, animal producers, farmers and pet owners.

- 27 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

$ $ $ $ $ $ $ $ $ $ $

Alliance revenue-Lynparza (1)

Alliance revenue-Lenvima (1)

Welireg

Alliance revenue-Reblozyl (2)

Vaccines

Gardasil/Gardasil 9

ProQuad/M-M-R II/Varivax

Vaxneuvance RotaTeq

Capvaxive

Pneumovax 23

Hospital Acute CareBridion Prevymis Dificid Zerbaxa Cardiovascular

Winrevair

Alliance revenue-Adempas/Verquvo (3)

Adempas VirologyLagevrio

Isentress/Isentress HD

Delstrigo

Pifeltro

NeuroscienceBelsomra ImmunologySimponi Remicade DiabetesJanuvia Janumet

Other pharmaceutical (4)

Total Pharmaceutical segment sales Animal Health:Livestock Companion Animal Total Animal Health segment sales Total segment sales

Other (5)

$ $ $ $ $ $ $ $ $ $ $ $ U.S. plus international may not equal total due to rounding.

(1) Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 3).

(2) Alliance revenue for Reblozyl represents royalties (see Note 3).

(3) Alliance revenue for Adempas/Verquvo represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 3).

(4) Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.

(5) Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which increased sales by $ million and $ million for the six months ended June 30, 2025 and 2024, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon & Co.). Other for the six months ended June 30, 2025 and 2024 also includes $ million and $ million, respectively, related to upfront and milestone payments received by Merck for out-licensing arrangements.

- 28 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

billion and $ billion for the three months ended June 30, 2025 and 2024, respectively, and $ billion and $ billion for the six months ended June 30, 2025 and 2024, respectively. $ $ $ Europe, Middle East and Africa Latin America Asia Pacific (other than China and Japan) Japan China Other $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

Less segment costs: (1)

Cost of sales Selling, general and administrative

Research and development (2)

Other segment items (3)

() () () () Total segment profits$ $ $ $ $ $ $ $ $ $ $ $ Other profits Unallocated:Interest income Interest expense()()()()Amortization()()()()Depreciation()()()()Research and development()()()()Restructuring costs()()()()Other unallocated, net()()()()$ $ $ $

(1) The significant expense categories and amounts align with the segment level information that is regularly provided to the chief operating decision maker.

(2) Human health-related research and development expenses incurred by Merck Research Laboratories are not allocated to segment profits as noted below.

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as selling, general and administrative expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment. The chief operating decision maker (Merck’s Chief Executive Officer) uses segment profit to allocate resources predominately during the planning and forecasting process. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, research and development expenses incurred by Merck Research Laboratories (the Company’s research and development division that focuses on human health-related activities), or general and administrative expenses not directly incurred by the segments, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. In addition, costs related to restructuring activities, as well as the amortization of intangible assets and amortization of purchase accounting adjustments are not allocated to segments.

Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits (losses) related to third-party manufacturing arrangements.

- 29 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

$ $ $ $ $ $ $ $ $ $ $

Depreciation

$ Europe, Middle East and Africa

Asia Pacific (other than China and Japan)

China Japan Latin America Other $ $

The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is not presented.

- 30 -

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Development Transactions

Below is a summary of significant business development activity thus far in 2025.

In July 2025, Merck entered into a definitive agreement to acquire Verona Pharma plc (Verona Pharma), a biopharmaceutical company focused on respiratory diseases, for $107 per American Depository Share (each of which represents eight Verona Pharma ordinary shares) for a total transaction value of approximately $10 billion. Through this acquisition, Merck will acquire Ohtuvayre (ensifentrine), a first-in-class selective dual inhibitor of phosphodiesterases 3 and 4 (PDE3 and PDE4), which was approved in the U.S. in June 2024 for the maintenance treatment of chronic obstructive pulmonary disease (COPD) in adult patients and is also being evaluated in clinical trials for the treatment of non-cystic fibrosis bronchiectasis. Closing of the acquisition is expected in the fourth quarter of 2025, but is subject to certain conditions, including approval under the Hart-Scott-Rodino Antitrust Improvements Act, approval of Verona Pharma’s shareholders, sanction by the High Court of Justice of England and Wales and other customary conditions. If the proposed transaction closes, the Company expects to capitalize most of the purchase price as an intangible asset for Ohtuvayre.

Also in July 2025, the technology transfer for MK-2010 (LM-299), a novel investigational PD-1/vascular endothelial growth factor (VEGF) bispecific antibody that was licensed from LaNova Medicines Ltd (LaNova) in 2024, was completed. Accordingly, Merck will make a $300 million payment to LaNova, which will be recorded as a charge to Research and development expenses in the third quarter of 2025, or approximately $0.09 per share.

In May 2025, Merck and Jiangsu Hengrui Pharmaceuticals Co., Ltd. (Hengrui Pharma) closed an exclusive license agreement for MK-7262 (HRS-5346), an investigational oral small molecule Lipoprotein(a) inhibitor, which is currently being evaluated in a Phase 2 clinical trial in China. Under the agreement, Hengrui Pharma granted Merck exclusive rights to develop, manufacture and commercialize MK-7262 (HRS-5346) worldwide, excluding the Greater China region. Merck recorded a pretax charge of $200 million to Research and development expenses in the second quarter of 2025, or approximately $0.07 per share, for the upfront payment. Hengrui Pharma is also eligible to receive future contingent payments associated with certain developmental, regulatory and sales-based milestones, as well as tiered royalties on future net sales of MK-7262 (HRS-5346), if approved.

In March 2025, Merck acquired the Dundalk, Ireland facility of WuXi Vaccines (a wholly owned subsidiary of WuXi Biologics), which was accounted for as an asset acquisition. Merck paid $437 million at closing which, combined with previous consideration transferred under a prior manufacturing arrangement with WuXi Vaccines related to this facility, resulted in $759 million being recorded as assets under construction within Property, Plant and Equipment. There are no future contingent payments associated with the acquisition.

Pricing and Tariffs

Global efforts toward health care cost containment continue to exert pressure on product pricing and market access worldwide. Changes to the U.S. health care system as part of health care reform, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, have contributed to pricing pressure. In 2021, the U.S. Congress passed the American Rescue Plan Act, which included a provision that eliminated the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. As a result of this provision, the Company paid state Medicaid programs more in rebates than it received on Medicaid sales of Januvia (sitagliptin), Janumet (sitagliptin and metformin HCl) and Janumet XR (sitagliptin and metformin HCl extended release) in 2024.

In 2022, the U.S. Congress passed the Inflation Reduction Act (IRA), which made significant changes to how drugs are covered and paid for under the Medicare program, including the creation of financial penalties for drugs whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits (which has taken effect in 2025), and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028). Government price setting may also impact pricing in the private market negatively affecting the Company’s performance. In 2023, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), selected Januvia for the first year of the IRA’s “Drug Price Negotiation Program” (Program). Pursuant to the IRA’s Program, a government price was set for Januvia, which will become effective on January 1, 2026. In January 2025, the U.S. Department of HHS, through the CMS, announced that Janumet and Janumet XR would be in included in the second year of the IRA’s Program, with government price setting to become effective on January 1, 2027. As a result of the passage of H.R.1 - One Big Beautiful Bill Act (OBBBA), the Company believes that Keytruda will not be eligible to be selected in 2026 for government price setting under the IRA, which would become effective on January 1, 2028. Instead, Keytruda will now be eligible to be selected in 2027 for government price setting to become effective on January 1, 2029. The Company has sued the U.S. government regarding the IRA’s Program.

Additionally, increased utilization of the 340B Federal Drug Discount Program and restrictions on the Company’s ability to identify inappropriate discounts are having a negative impact on Company performance. Furthermore, the Executive Branch and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs. In several international markets, government-mandated pricing actions have reduced prices of generic and patented drugs. In addition, the Company’s sales performance in the first six months of 2025 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs.

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The Company anticipates all of these actions and additional actions in the future will continue to negatively affect sales and profits.

The U.S. government has implemented tariffs on certain foreign imports into the U.S. The impact of the tariffs on Merck’s business depends on a number of factors including the duration, scope and amount of the tariffs, as well as the extent of any measures that have been or will be taken by any affected countries, including tariffs imposed by foreign governments. At this time, the Company anticipates that tariffs implemented to date will result in approximately $200 million of additional expenses in 2025 (which will be primarily reflected within Cost of sales). However, future changes to tariffs could have a further adverse effect on the Company’s business. In particular, the U.S. government has indicated that it intends to impose tariffs on pharmaceutical products.

In addition, in May 2025, the U.S. government announced an executive order that seeks to impose a “Most Favored Nation” drug pricing policy. The policy would tie drug reimbursement in the U.S. to the drug price in certain foreign developed countries and could result in reduced prices and reimbursement for certain of the Company’s products in the U.S. The impact of this executive order to the Company is uncertain and will be dependent upon many factors, including if and how this drug pricing policy is implemented.

Operating Results

Sales


	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2025		2024		% Change				2025		2024		% Change
United States	$	8,836	$	7,876	12	%	12	%	$	17,359	$	15,354	13	%	13	%
International	6,969		8,236		(15)	%	(15)	%	13,977		16,533		(15)	%	(13)	%
Total	$	15,806	$	16,112	(2)	%	(2)	%	$	31,335	$	31,887	(2)	%	—	%

U.S. plus international may not equal total due to rounding.

Worldwide sales were $15.8 billion and $31.3 billion in the second quarter and first six months of 2025, respectively, declines of 2% compared with the same periods of 2024. The declines reflect lower sales in vaccines, immunology, and virology, partially offset by growth in oncology, cardiovascular, and animal health. Higher revenue in diabetes also partially offset the sales decline in the first six months of 2025.

The declines in vaccines revenue in both the second quarter and first six months of 2025 were primarily due to lower combined Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine and Recombinant)/Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) sales, partially offset by the U.S. launch of Capvaxive (Pneumococcal 21-valent Conjugate Vaccine). The declines in immunology in both periods resulted from the transfer of marketing rights for Simponi (golimumab) and Remicade (infliximab) back to Johnson & Johnson on October 1, 2024, and the declines in virology were primarily due to lower sales of Lagevrio (molnupiravir). Growth in the oncology franchise in both the second quarter and first six months of 2025 was largely due to the performance of Keytruda (pembrolizumab) and Welireg (belzutifan), as well as higher alliance revenue from Lynparza (olaparib). Growth in the cardiovascular franchise in both periods was largely attributable to the ongoing launch of Winrevair (sotatercept-csrk). The increase in diabetes franchise sales in the first six months of 2025 was due to Januvia.

See Note 14 to the condensed consolidated financial statements for details on sales of the Company’s products. A discussion of performance for select products in the franchises follows. All product or service marks appearing in type form different from that of the surrounding text are trademarks or service marks owned, licensed to, promoted or distributed by Merck, its subsidiaries or affiliates, except as noted. All other trademarks or service marks are those of their respective owners.

Pharmaceutical Segment

Oncology


	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2025		2024		% Change				2025		2024		% Change
Keytruda	$	7,956	$	7,270	9	%	9	%	$	15,161	$	14,217	7	%	8	%
Alliance Revenue - Lynparza (1)	370		317		17	%	15	%	682		609		12	%	12	%
Alliance Revenue - Lenvima (1)	265		249		6	%	5	%	523		504		4	%	4	%
Welireg	162		126		29	%	29	%	300		211		42	%	43	%
Alliance Revenue - Reblozyl (2)	107		90		19	%	19	%	226		161		40	%	40	%

(1) Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 3 to the condensed consolidated financial statements).

(2) Alliance revenue for Reblozyl represents royalties (see Note 3 to the condensed consolidated financial statements).

Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved in over 40 indications in the U.S., including 18 tumor types and 2 tumor-agnostic indications, and has similarly been approved in markets worldwide for many

- 32 -

of these indications. The Keytruda clinical development program includes studies across a broad range of cancer types. See “Research and Development Update” below.

Global sales of Keytruda grew 9% and 7% in the second quarter and first six months of 2025, respectively. Keytruda sales growth in the U.S. in both periods reflects higher demand and pricing. U.S. sales growth in the year-to-date period reflects an approximate $200 million negative impact due to the timing of wholesaler purchases. Demand in the U.S. in both periods was driven by increased utilization across the multiple approved metastatic indications, in particular for the treatment of certain types of urothelial and endometrial cancers, as well as higher demand across earlier-stage indications, including in certain types of non-small-cell lung cancer (NSCLC), renal cell carcinoma (RCC), cervical cancer, and high-risk early-stage triple-negative breast cancer (TNBC). Keytruda sales growth in international markets reflects higher demand predominately for the TNBC, NSCLC and RCC earlier-stage indications, as well as uptake in urothelial, gastric, and cervical cancer metastatic indications. The 2025 launch and reimbursement of new indications for Keytruda in the European Union (EU) is having a negative impact on pricing in those markets. In addition, a biosimilar of Keytruda has launched in Argentina.

Keytruda has received the following regulatory approvals thus far in 2025.


Date			Approval
January 2025			China’s National Medical Products Administration (NMPA) approval in combination with enfortumab vedotin, an antibody-drug conjugate, for the treatment of adults with locally advanced or metastatic urothelial carcinoma, based on the KEYNOTE-A39 trial that was conducted in collaboration with Seagen (now Pfizer Inc.) and Astellas.
April 2025			European Commission (EC) approval in combination with pemetrexed and platinum chemotherapy for the first-line treatment of adult patients with unresectable non epithelioid malignant pleural mesothelioma, based on the IND.227/KEYNOTE-483 trial.
May 2025			Japan’s Ministry of Health, Labor and Welfare (MHLW) approval in combination with trastuzumab and chemotherapy for the first-line treatment of patients with unresectable, advanced or recurrent HER2 positive gastric or gastroesophageal junction adenocarcinoma, based on the KEYNOTE-811 trial.
May 2025			Japan’s MHLW approval in combination with pemetrexed and platinum chemotherapy for unresectable, advanced or recurrent metastatic malignant pleural mesothelioma, based on the IND.227/KEYNOTE-483 trial.
June 2025			U.S. Food and Drug Administration (FDA) approval for the treatment of adult patients with resectable locally advanced head and neck squamous cell carcinoma whose tumors express PD-L1 CPS (≥1) as determined by an FDA-approved test, as a single agent as neoadjuvant treatment, continued as adjuvant treatment in combination with radiotherapy with or without cisplatin and then as a single agent, based on the KEYNOTE-689 trial.

The Company is a party to license agreements pursuant to which the Company pays royalties on net sales of Keytruda. Under the terms of the more significant of these agreements, Merck pays a royalty of 2.5% on worldwide net sales of Keytruda; this royalty expires on December 31, 2026. The Company pays an additional 2% royalty on worldwide net sales of Keytruda to another third party, the termination date of which varies by country; this royalty expired in the U.S. in September 2024 and will expire on varying dates in major European markets in the second half of 2025. The royalty expenses are included in Cost of sales.

Lynparza is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed and commercialized as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see Note 3 to the condensed consolidated financial statements). Lynparza is approved for the treatment of certain types of advanced or recurrent ovarian, early or metastatic breast, metastatic pancreatic and metastatic castration-resistant prostate cancers. Alliance revenue related to Lynparza increased 17% and 12% in the second quarter and first six months of 2025, respectively, primarily due to higher demand in several international markets and in the U.S. In January 2025, China’s NMPA approved Lynparza as adjuvant treatment for adult patients with germline BRCA-mutated, human epidermal growth factor receptor 2 (HER2)-negative high-risk early breast cancer, based on the OlympiA trial.

Lenvima (lenvatinib) is an oral receptor tyrosine kinase inhibitor being developed and commercialized as part of a collaboration with Eisai Co., Ltd. (Eisai) (see Note 3 to the condensed consolidated financial statements). Lenvima is approved for the treatment of certain types of thyroid cancer, RCC, hepatocellular carcinoma (HCC), in combination with everolimus for certain patients with advanced RCC, and in combination with Keytruda for certain patients with advanced endometrial carcinoma or advanced RCC. Alliance revenue related to Lenvima increased 6% and 4% in the second quarter and first six months of 2025, respectively, primarily due to higher sales in the U.S. reflecting increased demand that was partially offset by lower pricing. In June 2025, Lenvima plus Keytruda was approved in China in combination with transarterial chemoembolization for the treatment of patients with unresectable, non-metastatic HCC based on the LEAP-012 clinical trial.

Sales of Welireg, for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors, certain adult patients with previously treated advanced RCC, and certain patients with pheochromocytoma and paraganglioma, rose 29% and 42% in the second quarter and first six months of 2025, respectively. Sales growth was primarily due to higher demand in the U.S. and early launch uptake in certain EU markets, partially offset by lower pricing in the U.S.

Welireg has received the following regulatory approvals thus far in 2025.


Date			Approval
February 2025			EC conditional approval as monotherapy for the treatment of adult patients with VHL disease who require therapy for associated, localized RCC, central nervous system hemangioblastomas, or pancreatic neuroendocrine tumors, and for whom localized procedures are unsuitable, based on the LITESPARK-004 trial.

- 33 -


February 2025			EC conditional approval for the treatment of adult patients with advanced clear cell RCC that progressed following two or more lines of therapy that included a PD-1 or PD-L1 inhibitor and at least two vascular endothelial growth factor targeted therapies, based on the LITESPARK-005 trial.
May 2025			FDA approval for the treatment of adult and pediatric patients (12 years and older) with locally advanced, unresectable, or metastatic pheochromocytoma and paraganglioma, based on the LITESPARK-015 trial.
June 2025			Japan’s MHLW approval as monotherapy for the treatment of adult patients with VHL disease-associated tumors, based on the LITESPARK-004 trial.
June 2025			Japan’s MHLW approval for the treatment of adults with radically unresectable or metastatic RCC that has progressed after chemotherapy, based on the LITESPARK-005 trial.

The EC conditional approvals of Welireg noted above will be valid for one year, subject to yearly renewal, pending certain additional clinical data. Timing for commercial availability of Welireg in individual EU countries will depend on multiple factors, including the completion of national reimbursement procedures.

Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein that is being commercialized through a global collaboration with Bristol-Myers Squibb Company (BMS) (see Note 3 to the condensed consolidated financial statements). Reblozyl is approved for the treatment of anemia in certain rare blood disorders. Alliance revenue related to this collaboration (consisting of royalties) increased 19% and 40% in the second quarter and first six months of 2025, respectively, primarily due to strong underlying sales performance.

Vaccines


	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2025		2024		% Change				2025		2024		% Change
Gardasil/Gardasil 9	$	1,126	$	2,478	(55)	%	(55)	%	$	2,453	$	4,727	(48)	%	(48)	%
ProQuad	273		239		15	%	14	%	395		443		(11)	%	(11)	%
M-M-R II	95		113		(15)	%	(16)	%	264		217		22	%	22	%
Varivax	240		266		(10)	%	(10)	%	489		527		(7)	%	(7)	%
Vaxneuvance	229		189		21	%	20	%	459		408		13	%	13	%
Capvaxive	129		—		—		—		236		—		—		—

Combined worldwide sales of Gardasil and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of human papillomavirus (HPV), declined 55% in the second quarter of 2025 primarily driven by lower demand in China (discussed below) and in Japan, reflecting in part that the last date to initiate the first dose in Japan’s national immunization program catch-up cohort was in March 2025. Timing of public sector purchases in certain international markets also contributed to the second quarter 2025 Gardasil/Gardasil 9 sales decline. Sales performance in the U.S. in the second quarter of 2025 reflects higher pricing and demand, which was largely offset by the unfavorable effect of public sector buying patterns. Gardasil/Gardasil 9 sales declined 48% in the first six months of 2025 primarily driven by lower demand in China (discussed below), partially offset by higher demand in certain international markets, as well as higher sales in the U.S. Sales performance in the U.S. in the first six months of 2025 reflects higher pricing and demand, which was partially offset by the unfavorable effect of public sector buying patterns. Beginning in mid-2024, the Company observed a significant decline in shipments from its distributor and commercialization partner in China, Chongqing Zhifei Biological Products Co., Ltd. (Zhifei), to disease and control prevention institutions and correspondingly into the points of vaccination compared with prior quarters of 2024, resulting in above normal inventory levels at Zhifei. Accordingly, the Company shipped less than its contracted doses to Zhifei in the latter part of 2024. Lower demand in China persisted and, at the end of 2024, overall channel inventory levels in China remained elevated at above normal levels. Therefore, the Company made a decision to temporarily pause shipments to China beginning in February 2025 and, given continued lower demand and elevated inventory levels in China thus far in 2025, the Company has determined it will not make any further shipments to China through at least the end of 2025. As a result, combined sales of Gardasil/Gardasil 9 will decline significantly in 2025 compared with 2024. In January 2025, China’s NMPA approved Gardasil for use in males 9-26 years of age to help prevent certain HPV-related cancers and diseases. In April 2025, China’s NMPA approved Gardasil 9 for use in males 16-26 years of age to help prevent certain HPV-related cancers and diseases.

Gardasil 9 is currently indicated in the U.S. for a two-dose regimen in adolescents aged 9-14 and a three-dose regimen for those aged 15-45. The U.S. Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP) has stated that it intends to discuss and, potentially, vote on a change to the dose recommendation, which could include a reduction in the number of recommended doses. A number of countries outside the U.S., predominately low- and middle-income countries, have implemented a reduced dosing schedule for HPV vaccination.

The Company is a party to license agreements pursuant to which the Company pays royalties on sales of Gardasil/Gardasil 9. Under the terms of the more significant of these agreements, Merck pays a 7% royalty on net sales of Gardasil/Gardasil 9 in the U.S.; this royalty expires in December 2028. The royalty expenses are included in Cost of sales.

Global sales of ProQuad (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella, increased 15% in the second quarter of 2025 and

- 34 -

declined 11% in the first six months of 2025. As a result of manufacturing delays, in January 2025, the Company borrowed doses of ProQuad from the CDC Pediatric Vaccine Stockpile (CDC Stockpile), which are being used to support routine vaccination in the U.S. The Company partially replenished the borrowing in the second quarter of 2025, which increased U.S. sales of ProQuad by $24 million. The net effect of the borrowing and partial replenishment resulted in a $49 million reduction of ProQuad sales in the first six months of 2025. Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella, declined 15% in the second quarter of 2025 primarily due to lower sales in the U.S. reflecting private sector buy-out, partially offset by higher demand due to measles outbreaks. Sales of M-M-R II grew 22% in the first six months of 2025 primarily due to higher sales in the U.S. largely reflecting higher pricing and increased demand due to measles outbreaks. Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), declined 10% and 7% in the second quarter and first six months of 2025, respectively, primarily due to lower sales in the U.S. largely driven by unfavorable CDC Stockpile activity and lower demand, partially offset by higher pricing. The unfavorable impact to Varivax sales from CDC Stockpile activity was offset by other CDC Stockpile activity as noted below. The Company has experienced manufacturing delays related to ProQuad and Varivax. As a result, the Company anticipates that some international markets will experience supply constraints during 2025.

Worldwide sales of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help protect against invasive pneumococcal disease caused by certain serotypes, grew 21% in the second quarter of 2025 primarily due to approximately $60 million of favorable CDC Stockpile activity in the U.S. and higher demand in certain international markets, partially offset by lower demand in the U.S. and Japan due to competitive pressure. The benefit to Vaxneuvance sales from CDC Stockpile activity was offset by a drawdown of CDC Stockpile inventory for Varivax (noted above) and RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), which resulted in a net neutral transaction. Worldwide sales of Vaxneuvance grew 13% in the first six months of 2025 reflecting favorable CDC stockpile activity in the U.S. and continued uptake following launches in the pediatric indication in Europe and certain countries in the Asia Pacific region, partially offset by lower demand in the U.S. and Japan due to competitive pressure. Merck is a party to license agreements pursuant to which the Company pays royalties on sales of Vaxneuvance. Under the terms of the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Vaxneuvance through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales.

Sales of Capvaxive were $129 million and $236 million in the second quarter and first six months of 2025, respectively, due to continued uptake following launch in the U.S. in the third quarter of 2024. In June 2024, the FDA approved Capvaxive for the prevention of invasive pneumococcal disease and pneumococcal pneumonia caused by certain serotypes in individuals 18 years of age and older. In March 2025, the EC approved Capvaxive. The timing of availability of Capvaxive in individual EU countries will depend on multiple factors including the completion of reimbursement procedures. The FDA and EC approvals were supported by results from the STRIDE clinical program, which evaluated Capvaxive in both vaccine-naïve and vaccine-experienced adult patient populations. Merck is a party to license agreements pursuant to which the Company pays royalties on sales of Capvaxive. Under the terms of the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Capvaxive through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales.

In June 2025, the CDC’s ACIP voted to recommend Enflonsia (clesrovimab-cfor), a preventive, long-acting monoclonal antibody, as an option for the prevention of respiratory syncytial virus (RSV) lower respiratory tract disease in infants younger than 8 months of age who are born during or entering their first RSV season. The ACIP’s recommendation for Enflonsia is provisional and will be official once reviewed and finalized by the CDC Director. The ACIP also voted to include Enflonsia in the Vaccines for Children Program. The FDA approved Enflonsia earlier in June 2025 based on the pivotal CLEVER and SMART clinical trials. Enflonsia became available for ordering by physicians and health care administrators in July 2025, with shipments expected to be delivered before the start of the 2025-2026 RSV season.

Hospital Acute Care


	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2025		2024		% Change				2025		2024		% Change
Bridion	$	461	$	455	1	%	1	%	$	902	$	895	1	%	1	%
Prevymis	228		188		21	%	20	%	436		362		20	%	21	%
Dificid	96		92		5	%	5	%	179		165		8	%	9	%

Worldwide sales of Bridion (sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, grew 1% in both the second quarter and first six months of 2025 as higher demand and pricing in the U.S. was offset by lower demand in most international markets due to generic competition, particularly in Japan and the EU. The patents that provided market exclusivity for Bridion in the EU and Japan expired in July 2023 and January 2024, respectively. Accordingly, the Company is experiencing sales declines of Bridion in these markets and expects the declines to continue.

Worldwide sales of Prevymis (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in certain high risk adult and pediatric recipients of an allogenic hematopoietic stem cell transplant and for prophylaxis of CMV disease in certain high risk adult and pediatric recipients of a kidney transplant, grew 21% and 20% in the second quarter and first six months of 2025, respectively, largely due to higher demand in the U.S. and EU, partially offset by lower demand in China due to generic competition.

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Worldwide sales of Dificid (fidaxomicin), a medicine for the treatment of C. difficile-associated diarrhea, grew 5% and 8% in the second quarter and first six months of 2025, respectively, primarily due to higher sales in the U.S. Timing of purchases in certain international markets also contributed to sales growth in the first six months of 2025. Dificid lost market exclusivity in the U.S. in July 2025; accordingly, the Company anticipates a significant decline in U.S. sales of Dificid for the remainder of 2025 and thereafter.

Cardiovascular


	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2025		2024		% Change				2025		2024		% Change
Winrevair	$	336	$	70	*		*		$	615	$	70	*		*
Alliance Revenue - Adempas/Verquvo (1)	123		106		16	%	16	%	229		203		12	%	12	%
Adempas	80		72		10	%	6	%	147		142		4	%	4	%

* > 100%

(1) Alliance revenue for Adempas and Verquvo represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 3 to the condensed consolidated financial statements).

Sales of Winrevair were $336 million and $615 million in the second quarter and first six months of 2025, respectively, primarily reflecting continued uptake in the U.S. since launch in the second quarter of 2024. In March 2024, the FDA approved Winrevair for the treatment of adults with pulmonary arterial hypertension (PAH) (World Health Organization [WHO] Group 1) to increase exercise capacity, improve WHO functional class (FC), and reduce the risk of clinical worsening events. In August 2024, the EC approved Winrevair, in combination with other PAH therapies, for the treatment of PAH in adult patients with WHO FC II to III, to improve exercise capacity. The FDA and EC approvals were based on the STELLAR trial. Winrevair has since launched in certain international markets, including certain markets in the EU. Timing for commercial availability of Winrevair in the remaining EU countries will depend on multiple factors, including the completion of national reimbursement procedures, which is expected to occur in the second half of 2025. In June 2025, Japan’s MHLW approved sotatercept for the treatment of adults with PAH where it will be marketed under the trademark Airwin. Winrevair is the subject of a licensing agreement pursuant to which Merck pays a 22% royalty on net sales of Winrevair to BMS. The royalty expenses are included in Cost of sales.

Adempas (riociguat) and Verquvo (vericiguat) are part of a worldwide collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators (see Note 3 to the condensed consolidated financial statements). Adempas is approved for the treatment of certain types of PAH and chronic pulmonary hypertension. Verquvo is approved to reduce the risk of cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous diuretics in adults with symptomatic chronic heart failure and reduced ejection fraction. Alliance revenue from the collaboration grew 16% and 12% in the second quarter and first six months of 2025, respectively, primarily reflecting higher demand in Bayer’s marketing territories. Revenue also includes sales of Adempas and Verquvo in Merck’s marketing territories. Sales of Adempas in Merck’s marketing territories increased 10% and 4% in the second quarter and first six months of 2025, respectively, largely due to higher demand.

Virology


	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2025		2024		% Change				2025		2024		% Change
Lagevrio	$	83	$	110	(25)	%	(27)	%	$	185	$	460	(60)	%	(59)	%

Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback Biotherapeutics LP (Ridgeback) (see Note 3 to the condensed consolidated financial statements). Sales of Lagevrio decreased 25% and 60% in the second quarter and first six months of 2025, respectively, primarily due to lower demand in several markets in the Asia Pacific region, particularly in Japan, driven largely by declining COVID-19 cases.

Immunology


	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2025		2024		% Change				2025		2024		% Change
Simponi	$	—	$	172	(100)	%	(100)	%	$	—	$	356	(100)	%	(100)	%
Remicade	—		35		(100)	%	(100)	%	—		74		(100)	%	(100)	%

Simponi and Remicade are treatments for certain inflammatory diseases that the Company marketed in Europe, Russia and Türkiye. The Company’s marketing rights with respect to these products reverted to Johnson & Johnson on October 1, 2024, subsequent to which the Company is no longer recognizing sales of these products.

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Diabetes


	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2025		2024		% Change				2025		2024		% Change
Januvia/Janumet	$	623	$	629	(1)	%	—	%	$	1,419	$	1,299	9	%	11	%

Worldwide combined sales of Januvia and Janumet, medicines that help lower blood sugar levels in adults with type 2 diabetes, in the second quarter of 2025 were comparable with sales in the same period of 2024. Lower demand in China, the ongoing impacts of generic competition in most other international markets, and lower demand in the U.S. due to competitive pressure were largely offset by higher net pricing in the U.S. Global combined sales of Januvia and Janumet increased 9% in the first six months of 2025 primarily due to higher net pricing in the U.S., including a favorable true-up to customer discounts, partially offset by the ongoing impacts of generic competition in most international markets, continuing volume declines in the U.S. due to competitive pressure, as well as lower demand in China.

The American Rescue Plan Act enacted in the U.S. in 2021 included a provision that eliminated the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. As a result of this provision, the Company paid state Medicaid programs more in rebates than it received on Medicaid sales of Januvia, Janumet and Janumet XR in 2024. In early 2025, Merck lowered the list price of the Januvia family of products to more closely align them with net prices. The lower list price has reduced the rebate amount Merck pays to Medicaid, resulting in higher realized net pricing. The Company expects higher U.S. net sales of these products for full year 2025 compared with full year 2024.

While the key U.S. patent for Januvia, Janumet and Janumet XR claiming the sitagliptin compound expired in January 2023, as a result of favorable court rulings and settlement agreements related to a later expiring patent directed to the specific sitagliptin salt form of the products (see Note 7 to the condensed consolidated financial statements), the Company expects that Januvia and Janumet will not lose market exclusivity in the U.S. until May 2026 and Janumet XR will not lose market exclusivity in the U.S. until July 2026, although a non-automatically substitutable form of sitagliptin that differs from the form in the Company’s sitagliptin products has been approved by the FDA. Additionally, in 2023, the U.S. Department of HHS, through the CMS, announced that Januvia would be included in the first year of the IRA’s Program. Pursuant to the IRA’s Program, a government price was set for Januvia, which will become effective on January 1, 2026. Also, in January 2025, the U.S. Department of HHS, through the CMS, announced that Janumet and Janumet XR would be included in the second year of the IRA’s Program, with government price setting to become effective on January 1, 2027. The Company has sued the U.S. government regarding the IRA’s Program. As a result of the anticipated patent expiries in 2026, the government price setting to take effect in 2026 and 2027 noted above, as well as ongoing competitive pressure, the Company anticipates significant sales declines for Januvia, Janumet and Janumet XR in the U.S. in 2026 and thereafter.

Animal Health Segment


	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2025		2024		% Change				2025		2024		% Change
Livestock	$	961	$	837	15	%	16	%	$	1,885	$	1,686	12	%	16	%
Companion Animal	685		645		6	%	6	%	1,349		1,307		3	%	4	%
	$	1,646	$	1,482	11	%	11	%	$	3,234	$	2,993	8	%	11	%

Sales of livestock products grew 15% and 12% in the second quarter and first six months of 2025, respectively, primarily due to higher demand across all species, as well as the inclusion of sales from the July 2024 acquisition of the aqua business of Elanco Animal Health Incorporated. Sales in 2025 also benefited from improved supply.

Sales of companion animal products grew 6% and 3% in the second quarter and first six months of 2025, respectively, due to higher pricing. Sales in 2025 also benefited from improved supply. Sales of the Bravecto (fluralaner) line of products were $335 million in the second quarter of 2025, representing growth of 1% compared with the second quarter of 2024, both nominally and excluding the effect of foreign exchange. Sales of Bravecto were $662 million for the first six months of 2025, essentially flat compared with the corresponding prior year period, or growth of 1% excluding the unfavorable effect of foreign exchange.

In July 2025, the FDA approved Bravecto Quantum (fluralaner for extended-release injectable suspension), a once-yearly injectable product to treat and protect dogs from fleas and ticks. Also in July 2025, the EC approved Numelvi (atinvicitinib) tablets for dogs, a once-daily, second-generation Janus kinase (JAK) inhibitor indicated for the treatment of pruritus associated with allergic dermatitis including atopic dermatitis and treatment of clinical manifestations of atopic dermatitis.

- 37 -

Costs, Expenses and Other


	Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2025		2024		% Change		2025		2024		% Change
Cost of sales	$	3,557	$	3,745	(5)	%	$	6,976	$	7,285	(4)	%
Selling, general and administrative	2,649		2,739		(3)	%	5,202		5,221		—	%
Research and development	4,048		3,500		16	%	7,669		7,492		2	%
Restructuring costs	560		80		*		629		202		*
Other (income) expense, net	(7)		42		*		(43)		12		*
	$	10,807	$	10,106	7	%	$	20,433	$	20,212	1	%

* > 100%

Cost of Sales

Cost of sales declined 5% and 4% in the second quarter and first six months of 2025, respectively. Cost of sales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $599 million and $603 million in the second quarter of 2025 and 2024, respectively, and $1.2 billion and $1.1 billion in the first six months of 2025 and 2024, respectively. Also included in Cost of sales are expenses associated with restructuring activities, which amounted to $165 million and $66 million in the second quarter of 2025 and 2024, respectively, and $201 million and $182 million in the first six months of 2025 and 2024, respectively, primarily reflecting accelerated depreciation and asset impairment charges related to manufacturing facilities to be fully or partially closed or divested, as well as contractual termination costs. Separation costs associated with manufacturing-related headcount reductions have been incurred and are reflected in Restructuring costs as discussed below.

Gross margin was 77.5% in the second quarter of 2025 compared with 76.8% in the second quarter of 2024. The gross margin improvement was primarily due to the favorable effect of product mix, partially offset by higher restructuring costs and inventory write-offs. Gross margin was 77.7% in the first six months of 2025 compared with 77.2% in the first six months of 2024. The gross margin improvement was primarily due to the favorable effect of product mix, partially offset by higher amortization of intangible assets and inventory write-offs.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses declined 3% in the second quarter of 2025 primarily due to lower administrative, restructuring, and promotional costs. SG&A expenses in the first six months of 2025 were comparable with the corresponding period of 2024 as lower restructuring costs and the favorable effect of foreign exchange were largely offset by higher administrative and promotional costs.

Research and Development

Research and development (R&D) expenses increased 16% in the second quarter of 2025 primarily due to a $200 million charge for an upfront payment made in connection with the closing of a license agreement with Hengrui Pharma, increased clinical development spending, higher compensation and benefit costs (reflecting in part increased headcount), and higher restructuring costs.

R&D expenses increased 2% in the first six months of 2025 primarily due to increased clinical development spending, higher compensation and benefit costs (reflecting in part increased headcount), and higher restructuring costs. The increase in R&D expenses for first six months of 2025 was partially offset by lower charges for business development transactions, which in 2025 include a $200 million charge related to the closing of a license agreement with Hengrui Pharma and a $100 million charge associated with the achievement of a developmental milestone related to the 2024 acquisition of Eyebiotech Limited (EyeBio), compared with a $656 million charge in the first six months of 2024 for the acquisition of Harpoon Therapeutics, Inc. (Harpoon).

R&D expenses are comprised of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $2.8 billion and $2.5 billion for the second quarter of 2025 and 2024, respectively, and $5.3 billion and $4.9 billion for the first six months of 2025 and 2024, respectively. Also included in R&D expenses are Animal Health research costs, upfront and milestone payments for collaboration and licensing agreements (including the charges related to Hengrui Pharma and EyeBio noted above), charges for transactions accounted for as asset acquisitions (including the charge for the acquisition of Harpoon noted above), and costs incurred by other divisions in support of R&D activities, including depreciation, production and general and administrative, which in the aggregate were $1.2 billion and $955 million for the second quarter of 2025 and 2024, respectively, and $2.3 billion and $2.5 billion for the first six months of 2025 and 2024, respectively.

Restructuring Costs

In July 2025, the Company approved a new restructuring program (2025 Restructuring Program) designed to position the Company for its next chapter of growth and to successfully advance its pipeline and launch new products across multiple therapeutic areas. As part of this program, the Company expects to eliminate certain positions in sales and administrative organizations, as well as research and development. The Company will, however, continue to hire employees into new roles across all strategic growth areas of the business. In addition, the Company will reduce its global real estate footprint and

- 38 -

continue to optimize its manufacturing network, aligning the geography of its global manufacturing footprint to its customers and reflecting changes in the Company’s business. Most actions contemplated under the 2025 Restructuring Program are expected to be largely completed by the end of 2027, with the exception of certain manufacturing actions, which are expected to be substantially completed by the end of 2029. The cumulative pretax costs to be incurred by the Company to implement the program are estimated to be approximately $3.0 billion, of which approximately 60% will be cash, relating primarily to employee separation expense and contractual termination costs. The remainder of the costs will be non-cash, relating primarily to the accelerated depreciation of facilities. The Company expects the actions under the 2025 Restructuring Program to result in annual cost savings of approximately $1.7 billion, which will be substantially realized by the end of 2027. The 2025 Restructuring Program is part of the Company’s multiyear optimization initiative anticipated to achieve $3.0 billion in annual cost savings by the end of 2027, which will be fully reinvested into strategic growth areas of the business.

In January 2024, the Company approved a restructuring program (2024 Restructuring Program) intended to continue the optimization of the Company’s Human Health global manufacturing network as the future pipeline shifts to new modalities and also optimize the Animal Health global manufacturing network to improve supply reliability and increase efficiency. The actions contemplated under the 2024 Restructuring Program are expected to be substantially completed by the end of 2031, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $4.0 billion. Approximately 60% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. The remainder of the costs will result in cash outlays, relating primarily to facility shut-down costs. The Company expects the actions under the 2024 Restructuring Program will result in cumulative annual net cost savings of approximately $750 million by the end of 2031.

Restructuring costs, primarily representing separation and other costs associated with these restructuring activities, were $560 million and $80 million for the second quarter of 2025 and 2024, respectively, and $629 million and $202 million for the first six months of 2025 and 2024, respectively. Separation costs incurred were associated with actual headcount reductions, as well as estimated expenses under existing severance programs for involuntary headcount reductions that were probable and could be reasonably estimated. Other expenses in Restructuring costs include facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement, and termination charges associated with pension and other postretirement benefit plans and share-based compensation plan costs. For segment reporting, restructuring costs are unallocated expenses.

Additional costs associated with the Company’s restructuring activities are included in Cost of sales, Selling, general and administrative expenses and Research and development costs. The Company recorded aggregate pretax costs of $779 million and $177 million in the second quarter of 2025 and 2024, respectively, and $884 million and $422 million for the first six months of 2025 and 2024, respectively, related to restructuring program activities. See Note 4 to the condensed consolidated financial statements for additional details.

Other (Income) Expense, Net

Other (income) expense, net was $7 million of income in the second quarter of 2025 compared with $42 million of expense in the second quarter of 2024. The favorable quarter-over-quarter change was primarily due to higher income from investments in equity securities. Other (income) expense, net was $43 million of income in the first six months of 2025 compared with $12 million of expense in the first six months of 2024. The favorable period-over-period change primarily reflects lower net interest expense.

For details on the components of Other (income) expense, net see Note 10 to the condensed consolidated financial statements.


Segment Profits
	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2025		2024		2025		2024
Pharmaceutical segment profits	$	11,014	$	11,200	$	21,726	22,104
Animal Health segment profits	593		508		1,226		1,064
Non-segment activity	(6,608)		(5,702)		(12,050)		(11,493)
Income Before Taxes	$	4,999	$	6,006	$	10,902	$	11,675

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as SG&A expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as SG&A and R&D expenses directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, R&D expenses incurred by MRL, or general and administrative expenses not directly incurred by the segments, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. Also excluded from the determination of segment profits are costs related to restructuring activities and acquisition- and divestiture-related costs, including the amortization of intangible assets and amortization of purchase accounting adjustments, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Additionally, segment profits do not reflect other expenses from corporate and manufacturing cost

- 39 -

centers and other miscellaneous income or expense. These unallocated items are reflected in “Non-segment activity” in the above table. Also included in “Non-segment activity” are miscellaneous corporate profits (losses), as well as operating profits (losses) related to third-party manufacturing arrangements.

Pharmaceutical segment profits declined 2% in the second quarter of 2025, primarily due to lower sales, partially offset by lower administrative and selling costs, and the favorable effect of foreign exchange. Pharmaceutical segment profits declined 2% in the first six months of 2025, primarily due to lower sales and the unfavorable effect of foreign exchange, partially offset by lower administrative and selling costs. Animal Health segment profits rose 17% and 15% in the second quarter and first six months of 2025, respectively, primarily due to higher sales, partially offset by higher R&D, selling and administrative costs. The increase in Animal Health segment profits for the first six months of 2025 was also partially offset by the unfavorable effect of foreign exchange.

Taxes on Income

The effective income tax rates of 11.4% and 12.7% for the second quarter and first six months of 2025, respectively, reflect a 2.9 percentage point favorable impact and a 1.4 percentage point favorable impact, respectively, due to $146 million of tax benefits resulting primarily from favorable audit adjustments. The effective income tax rates in both the second quarter and first six months of 2025 also reflect the favorable impacts of geographical mix of income and expense, as well as certain discrete items.

The effective income tax rates of 9.1% and 12.4% for the second quarter and first six months of 2024, respectively, reflect a 4.3 percentage point favorable impact and a 2.2 percentage point favorable impact, respectively, due to a $259 million reduction in reserves for unrecognized income tax benefits resulting from the expiration in June 2024 of the statute of limitations for assessments related to the 2019 federal tax return year. The effective income tax rate for the first six months of 2024 also reflects a 0.7 percentage point unfavorable impact of a charge for the acquisition of Harpoon for which no tax benefit was recognized.

While many jurisdictions in which Merck operates have adopted the global minimum tax provision of the Organization for Economic Cooperation and Development (OECD) Pillar 2, effective for tax years beginning in January 2024, it resulted in a minimal impact to the Company’s 2024 effective income tax rate due to the accounting for the tax effects of intercompany transactions. The Company expects the impact of the global minimum tax to be approximately 2% for full year 2025. In addition, in July 2025, the OBBBA was enacted into law. The Company is currently evaluating the effects of the OBBBA but does not expect a material tax impact.

The Internal Revenue Service (IRS) is currently conducting examinations of the Company’s tax returns for the years 2017 and 2018, including the one-time transition tax enacted under the Tax Cuts and Jobs Act of 2017 (TCJA). In April 2025, Merck received Notices of Proposed Adjustment (NOPAs) that would increase the amount of the one-time transition tax on certain undistributed earnings of foreign subsidiaries by approximately $1.3 billion. In addition, the NOPAs included penalties of approximately $260 million. These amounts are exclusive of any interest that may be due. The Company disagrees with the proposed adjustments and will vigorously contest the NOPAs through all available administrative and, if necessary, judicial proceedings. It is expected to take a number of years to reach resolution of this matter. If the Company is ultimately unsuccessful in defending its position, the impact could be material to its financial statements. The statute of limitations for assessments with respect to the 2019 and 2020 federal tax return years expired in June 2024 and October 2024, respectively. The IRS is also currently conducting examinations of the Company’s tax returns for the years 2021 and 2022. In addition, various state and foreign examinations are in progress.

Non-GAAP Income and Non-GAAP EPS

Non-GAAP income and non-GAAP earnings per share (EPS) are alternative views of the Company’s performance that Merck is providing because management believes this information enhances investors’ understanding of the Company’s results since management uses non-GAAP measures to assess performance. Non-GAAP income and non-GAAP EPS exclude certain items because of the nature of these items and the impact that they have on the analysis of underlying business performance and trends. The excluded items (which should not be considered non-recurring) consist of acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities, and certain other items. These excluded items are significant components in understanding and assessing financial performance.

Non-GAAP income and non-GAAP EPS are important internal measures for the Company. Senior management receives a monthly analysis of operating results that includes a non-GAAP EPS metric. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the performance of the Company along with other metrics. In addition, annual employee compensation, including senior management’s compensation, is derived in part using a non-GAAP pretax income metric. Since non-GAAP income and non-GAAP EPS are not measures determined in accordance with GAAP, they have no standardized meaning prescribed by GAAP and, therefore, may not be comparable to the calculation of similar measures of other companies. The information on non-GAAP income and non-GAAP EPS should be considered in addition to, but not as a substitute for or superior to, net income and EPS prepared in accordance with generally accepted accounting principles in the U.S. (GAAP).

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A reconciliation between GAAP financial measures and non-GAAP financial measures is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions except per share amounts)	2025		2024		2025		2024
Income before taxes as reported under GAAP	$	4,999	$	6,006	$	10,902	$	11,675
Increase (decrease) for excluded items:
Acquisition- and divestiture-related costs	594		633		1,241		1,129
Restructuring costs	779		177		884		422
Income from investments in equity securities, net	(61)		(49)		(168)		(165)
Non-GAAP income before taxes	6,311		6,767		12,859		13,061
Income tax provision as reported under GAAP	571		545		1,388		1,447
Estimated tax benefit on excluded items (1)	227		148		340		257
Tax benefits resulting primarily from favorable audit adjustments	146		—		146		—
Tax benefit resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year	—		259		—		259
Non-GAAP income tax provision	944		952		1,874		1,963
Non-GAAP net income	5,367		5,815		10,985		11,098
Less: Net income attributable to noncontrolling interests as reported under GAAP	1		6		8		11
Non-GAAP net income attributable to Merck & Co., Inc.	$	5,366	$	5,809	$	10,977	$	11,087
EPS assuming dilution as reported under GAAP (2)	$	1.76	$	2.14	$	3.77	$	4.02
EPS difference	0.37		0.14		0.58		0.34
Non-GAAP EPS assuming dilution (2)	$	2.13	$	2.28	$	4.35	$	4.36

(1) The estimated tax impact on the excluded items is determined by applying the statutory rate of the originating territory of the non-GAAP adjustments.

(2) GAAP and non-GAAP EPS were negatively affected in the second quarter of 2025 by $0.07 per share, and for the first six months of 2025 and 2024 by $0.07 and $0.26 per share, respectively, of charges for certain upfront payments related to collaborations and licensing arrangements, as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions.

Acquisition- and Divestiture-Related Costs

Non-GAAP income and non-GAAP EPS exclude the impact of certain amounts recorded in connection with acquisitions and divestitures of businesses. These amounts include the amortization of intangible assets, as well as intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also excluded are integration, transaction, and certain other costs associated with acquisitions and divestitures. Non-GAAP income and non-GAAP EPS also exclude amortization of intangible assets related to collaborations and licensing arrangements.

Restructuring Costs

Non-GAAP income and non-GAAP EPS exclude costs related to restructuring actions (see Note 4 to the condensed consolidated financial statements). These amounts include employee separation costs and accelerated depreciation associated with facilities to be fully or partially closed or divested. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. Restructuring costs also include asset impairment, facility shut-down, contractual termination, and other related costs, as well as employee-related costs such as curtailment, settlement, and termination charges associated with pension and other postretirement benefit plans and share-based compensation costs.

Income and Losses from Investments in Equity Securities

Non-GAAP income and non-GAAP EPS exclude realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds.

Certain Other Items

Non-GAAP income and non-GAAP EPS exclude certain other items. These items are adjusted for after evaluating them on an individual basis, considering their quantitative and qualitative aspects. Typically, these items are unusual in nature, significant to the results of a particular period or not indicative of future operating results. Excluded from non-GAAP income and non-GAAP EPS in 2025 are tax benefits resulting primarily from favorable audit adjustments. Excluded from non-GAAP income and non-GAAP EPS in 2024 is a benefit due to a reduction in reserves for unrecognized income tax benefits resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year.

Research and Development Update

The Company currently has several candidates under regulatory review in the U.S. and internationally.

MK-3475A, pembrolizumab with berahyaluronidase alfa (MK-5180) for subcutaneous administration (subcutaneous pembrolizumab), is being evaluated for noninferiority with respect to pharmacokinetics to intravenous Keytruda in metastatic NSCLC. The FDA accepted for review a Biologics License Application (BLA) seeking approval of MK-3475A across all previously

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approved solid tumor indications for Keytruda and set a Prescription Drug User Fee Act (PDUFA), or target action, date of September 23, 2025. The application is supported by data from the pivotal 3475A-D77 Phase 3 trial. Additionally, the European Medicines Agency (EMA) has validated an extension application to introduce a new pharmaceutical form and new route of administration for Keytruda.

MK-8591A, doravirine/islatravir, is an investigational, once-daily, oral, two-drug regimen for adults with HIV-1 infection that is virologically suppressed on antiretroviral therapy under review by the FDA. The FDA set a PDUFA date of April 28, 2026 for the new drug application, which is based on findings of the Phase 3 MK-8591A-051 and MK-8591A-052 clinical trials. MK-8591A is also under review in Japan.

V116, Capvaxive, a 21-valent pneumococcal conjugate vaccine designed to help prevent invasive pneumococcal disease and pneumococcal pneumonia caused by certain serotypes in adults, is under review in Japan. The application is supported by results from the STRIDE clinical program, which evaluated V116 in both vaccine-naïve and vaccine-experienced adult patient populations.

MK-1654, Enflonsia, a prophylactic long-acting monoclonal antibody designed to protect infants from respiratory syncytial virus (RSV) disease during their first RSV season is under review in the EU and Japan.

MK-3475, Keytruda, is an anti-PD-1 therapy approved for the treatment of many cancers that is in clinical development for expanded indications. These studies encompass more than 30 cancer types including: biliary, estrogen receptor positive breast, triple-negative breast, cervical, colorectal, endometrial, esophageal, gastric, glioblastoma, head and neck, hepatocellular, Hodgkin lymphoma, non-Hodgkin lymphoma, non-small-cell lung, small-cell lung, melanoma, malignant pleural mesothelioma, ovarian, prostate, renal, and urothelial, several of which are currently in Phase 3 clinical development.

Keytruda is under review in the EU and Japan for the treatment of patients with resectable locally advanced head and neck squamous cell carcinoma as neoadjuvant treatment, then continued as adjuvant treatment in combination with standard of care radiotherapy with or without cisplatin and then as a single agent. The applications are based on data from the Phase 3 KEYNOTE-689 trial.

In July 2025, Merck announced the FDA granted priority review for a new supplemental BLA seeking approval to update the Winrevair U.S. product label based on the Phase 3 ZENITH trial. The FDA set a PDUFA date of October 25, 2025. In ZENITH, Winrevair demonstrated a 76% reduction in the risk of a composite of all-cause death, lung transplantation, and hospitalization for PAH ≥24 hours compared to placebo. Improvement was observed early in treatment with increasing benefit throughout the study. The ZENITH trial was stopped early by an independent data monitoring committee for overwhelming efficacy.

In June 2025, Merck announced positive topline results from the first two of three Phase 3 clinical trials evaluating the safety and efficacy of MK-0616, enlicitide decanoate, an investigational, oral proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitor being evaluated for the treatment of adults with hyperlipidemia on lipid-lowering therapies, including at least a statin. The CORALreef HeFH and CORALreef AddOn trials successfully met their primary and all key secondary endpoints, demonstrating statistically significant and clinically meaningful greater reductions in low-density lipoprotein cholesterol (LDL-C) for enlicitide compared to placebo (CORALreef HeFH) and compared to other oral non-statin therapies (CORALreef AddOn). Results from the three Phase 3 trials in the CORALreef clinical development program will be presented at a future scientific congress.

In May 2025, Merck and Daiichi Sankyo announced that the BLA seeking accelerated approval in the U.S. for MK-1022, patritumab deruxtecan (HER3-DXd), based on the HERTHENA-Lung01 Phase 2 trial for the treatment of adult patients with locally advanced or metastatic EGFR-mutated NSCLC previously treated with two or more systemic therapies, was voluntarily withdrawn. The decision to withdraw the BLA was based on topline overall survival results from the confirmatory HERTHENA-Lung02 Phase 3 trial where overall survival did not meet statistical significance, as well as discussions with the FDA. The decision is unrelated to the Complete Response Letter that was received in June 2024 outlining findings pertaining to an inspection of a third-party manufacturing facility. Patritumab deruxtecan is a specifically engineered HER3 directed DXd antibody drug conjugate (ADC) discovered by Daiichi Sankyo and being developed jointly with Merck. A comprehensive global clinical development program is underway evaluating the efficacy and safety of patritumab deruxtecan across cancers. Trials in combination with other anticancer treatments are also underway.

A pre-specified interim analysis of the Phase 3 KEYNOTE-937 study found that compared to placebo, Keytruda did not show a statistically significant improvement in the primary endpoint of recurrence-free survival for certain patients with HCC. Also, a pre-specified interim analysis of the Phase 3 LEAP-014 trial found that Keytruda plus Lenvima, in combination with platinum-based chemotherapy, did not show a statistically significant improvement in its primary endpoint of overall survival compared to Keytruda plus chemotherapy for the first-line treatment of patients with metastatic esophageal squamous cell carcinoma.

The chart below reflects the Company’s research pipeline as of August 1, 2025. Candidates shown in Phase 3 include the date such candidate entered into Phase 3 development. Candidates shown in Phase 2 include the most advanced compound with a specific mechanism or, if listed compounds have the same mechanism, they are each currently intended for commercialization in a given therapeutic area. Small molecules and biologics are given MK-number designations and vaccine candidates are given V-number designations. Except as otherwise noted, candidates in Phase 1, additional indications in the same therapeutic area (other than with respect to cancer and immunology) and additional claims, line extensions or formulations for in-line products are not shown.

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Phase 2
Alzheimer’s Disease MK-1167 MK-2214 Cancer MK-1022 (patritumab deruxtecan)(1)(3) Biliary Bladder Cervical Colorectal Endometrial Esophageal Gastric Head and Neck Hepatocellular Melanoma Non-Small-Cell lung Ovarian Pancreatic Prostate MK-2400 (ifinatamab deruxtecan)(1) Biliary Bladder Breast Cervical Colorectal Endometrial Head and Neck Hepatocellular Melanoma Non-Small-Cell Lung Ovarian Pancreatic	Cancer MK-2870 (sacituzumab tirumotecan)(1)(3) Biliary Bladder Colorectal Neoplasm Malignant Pancreatic MK-3475 Keytruda Prostate MK-3475A (subcutaneous pembrolizumab) Cutaneous Squamous Cell Hematological Malignancies MK-5909 (raludotatug deruxtecan)(1) Biliary Bladder Cervical Colorectal Endometrial Gastric Non-Small-Cell Lung Ovarian Pancreatic Renal Cell Small-Cell Lung MK-6482 Welireg Breast V940 (intismeran autogene)(1)(2) Bladder Renal Cell	Eye Disorders MK-8748 HIV-1 Infection MK-8591B (islatravir+ulonivirine) Immunology MK-7240 (tulisokibart) Hidradenitis Suppurativa Systemic Sclerosis Metabolic Dysfunction-Associated Steatohepatitis (MASH) MK-6024 (efinopegdutide) Pulmonary Hypertension-Chronic Obstructive Pulmonary Disease MK-5475 Pulmonary Hypertension Due To Left Heart Disease MK-7962 Winrevair


Phase 3 (Phase 3 entry date)	Under Review
Antiviral COVID-19 MK-4482 Lagevrio (U.S.) (May 2021)(1)(4) Cancer MK-1022 (patritumab deruxtecan)(1) Breast (July 2025) MK-1026 (nemtabrutinib) Hematological Malignancies (March 2023) MK-1084(2) Colorectal (July 2025) Non-Small-Cell Lung (May 2024) MK-1308A (quavonlimab+pembrolizumab) Renal Cell (April 2021) MK-2140 (zilovertamab vedotin) Hematological Malignancies (September 2024) MK-2400 (ifinatamab deruxtecan)(1) Esophageal (March 2025) Prostate (May 2025) Small-Cell Lung (July 2024) MK-2870 (sacituzumab tirumotecan)(1)(3) Breast (April 2024) Cervical (July 2024) Endometrial (December 2023) Gastric (May 2024) Non-Small-Cell Lung (November 2023) Ovarian (April 2025) MK-3475 Keytruda Hepatocellular (May 2016) (EU) Ovarian (December 2018) Small-Cell Lung (May 2017) MK-3543 (bomedemstat) Myeloproliferative Disorders (December 2023) MK-5684 (opevesostat) Prostate (December 2023) MK-7339 Lynparza(1)(2) Non-Small-Cell Lung (June 2019) Small-Cell Lung (December 2020) V940 (intismeran autogene)(1)(2) Melanoma (July 2023) Non-Small-Cell Lung (December 2023) Dengue Fever Virus Vaccine V181 (June 2025) Diabetic Macular Edema MK-3000(5) HIV-1 Infection MK-8591A (doravirine+islatravir) (February 2020) (EU) MK-8591D (islatravir+lenacapavir) (October 2024)(1)(6) HIV-1 Pre-Exposure Prophylaxis MK-8527 (July 2025) Hypercholesterolemia MK-0616 (enlicitide decanoate) (August 2023) Immunology MK-7240 (tulisokibart) Crohn’s Disease (June 2024) Ulcerative Colitis (October 2023)	New Molecular Entities Cancer MK-3475A (subcutaneous pembrolizumab) Previously Approved Solid Tumors (U.S.) Previously Approved Tumors (EU) HIV-1 Infection MK-8591A (doravirine+islatravir) (U.S.) (JPN) Pneumococcal Vaccine Adult V116 Capvaxive (JPN) Respiratory Syncytial Virus MK-1654 Enflonsia (EU) (JPN)	Certain Supplemental Filings Cancer MK-3475 Keytruda • Resectable Locally Advanced Head and Neck Squamous Cell Carcinoma (KEYNOTE-689) (EU) (JPN) Pulmonary Arterial Hypertension MK-7962 Winrevair (ZENITH) (U.S.)
	Footnotes: (1) Being developed in a collaboration. (2) Being developed in combination with Keytruda. (3) Being developed as monotherapy and/or in combination with Keytruda. (4) Available in the U.S. under Emergency Use Authorization. (5) Program is in a Phase 2/3 study that commenced in August 2024. (6) On FDA partial clinical hold for higher doses of islatravir than those used in current clinical trials.

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Analysis of Liquidity and Capital Resources


($ in millions)	June 30, 2025			December 31, 2024
Cash and investments	$	9,396		$	14,152
Working capital	11,028			10,362
Total debt to total liabilities and equity	30.1		%	31.7		%

Cash provided by operating activities was $5.8 billion in the first six months of 2025 compared with $8.7 billion in the first six months of 2024. Cash provided by operating activities was reduced by $1.7 billion and $370 million for upfront and milestone payments related to certain collaborations, licensing agreements, and acquisitions in the first six months of 2025 and 2024, respectively. Cash provided by operating activities continues to be the Company’s primary source of funds to finance operating needs, with excess cash serving as the primary source of funds to finance business development transactions, capital expenditures, dividends paid to shareholders and treasury stock purchases.

Cash used in investing activities was $2.3 billion in the first six months of 2025 compared with $2.4 billion in the first six months of 2024. The lower use of cash in investing activities was primarily due to lower cash used for acquisitions and higher proceeds from sales of securities and other investments, partially offset by higher purchases of securities and other investments, and higher capital expenditures (including the acquisition of a facility from WuXi Vaccines discussed in Note 2 to the condensed consolidated financial statements).

Cash used in financing activities was $9.3 billion in the first six months of 2025 compared with $1.6 billion in the first six months of 2024. The higher use of cash in financing activities was primarily due to lower proceeds from long-term debt, higher purchases of treasury stock, higher payments on long-term debt, higher dividends paid to shareholders and lower proceeds from the exercise of stock options.

The Company has accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. The Company factored $1.6 billion and $2.1 billion of accounts receivable at June 30, 2025 and December 31, 2024, respectively, under these factoring arrangements, which reduced outstanding accounts receivable. The cash received from the financial institutions is reported within operating activities in the Condensed Consolidated Statement of Cash Flows. In certain of these factoring arrangements, for ease of administration, the Company will collect customer payments related to the factored receivables, which it then remits to the financial institutions. The net cash flows relating to these collections are reported as financing activities in the Condensed Consolidated Statement of Cash Flows.

In February 2025, the Company’s $2.5 billion, 2.75% notes matured in accordance with their terms and were repaid. In March 2024, the Company’s $750 million, 2.90% notes matured in accordance with their terms and were repaid.

Dividends paid to stockholders were $4.1 billion and $3.9 billion for the first six months of 2025 and 2024, respectively. In January 2025, Merck’s Board of Directors declared a quarterly dividend of $0.81 per share on the Company’s outstanding common stock for the second quarter that was paid in April 2025. In May 2025, Merck’s Board of Directors declared a quarterly dividend of $0.81 per share on the Company’s outstanding common stock for the third quarter that was paid in July 2025.

In 2018, Merck’s Board of Directors authorized purchases of up to $10 billion of Merck’s common stock for its treasury. In January 2025, Merck’s Board of Directors authorized purchases of up to an additional $10 billion of Merck’s common stock for its treasury. The treasury stock purchase authorizations have no time limit and will be made over time in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions. During the first six months of 2025, the Company purchased $2.5 billion (29 million shares) of its common stock for its treasury under these programs. The Company expects the pace of share repurchases to continue at this level for the remainder of 2025. As of June 30, 2025, the Company’s remaining share repurchase authorization was $9.9 billion.

The Company has a $6.0 billion credit facility that matures in May 2030. The facility provides backup liquidity for the Company’s commercial paper borrowing facility and is to be used for general corporate purposes. The Company has not drawn funding from this facility.

Critical Accounting Estimates

The Company’s significant accounting policies, which include management’s best estimates and judgments, are included in Note 2 to the consolidated financial statements for the year ended December 31, 2024 included in Merck’s Form 10‑K filed on February 25, 2025. A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates is included in the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Merck’s Form 10-K. There have been no significant changes in the Company’s critical accounting estimates since December 31, 2024.

Recently Issued Accounting Standards

For a discussion of recently issued accounting standards, see Note 1 to the condensed consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in market risk exposures that affect the disclosures presented in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s 2024 Form 10-K filed on February 25, 2025.

Item 4. Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures over financial reporting. Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2025, the Company’s disclosure controls and procedures are effective. For the second quarter of 2025, there were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

This report and other written reports and oral statements made from time to time by the Company may contain so-called “forward-looking statements,” all of which are based on management’s current expectations and are subject to risks and uncertainties which may cause results to differ materially from those set forth in the statements. One can identify these forward-looking statements by their use of words such as “anticipates,” “expects,” “plans,” “will,” “estimates,” “forecasts,” “projects” and other words of similar meaning, or negative variations of any of the foregoing. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address the Company’s growth strategy, financial results, product approvals, product potential, or development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ materially from the Company’s forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially.

The Company does not assume the obligation to update any forward-looking statement. One should carefully evaluate such statements in light of factors, including risk factors, described in the Company’s filings with the Securities and Exchange Commission, especially on Forms 10-K, 10-Q and 8-K. In Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10‑K for the year ended December 31, 2024, filed on February 25, 2025, the Company discusses in more detail various important risk factors that could cause actual results to differ from expected or historic results. The Company notes these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. One should understand that it is not possible to predict or identify all such factors. Consequently, the reader should not consider any such list to be a complete statement of all potential risks or uncertainties.

PART II - Other Information

Item 1. Legal Proceedings

The information called for by this Item is incorporated herein by reference to Note 7 included in Part I, Item 1, Financial Statements (unaudited) — Notes to Condensed Consolidated Financial Statements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer purchases of equity securities for the three months ended June 30, 2025 were as follows:

ISSUER PURCHASES OF EQUITY SECURITIES


				($ in millions)
Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
April 1 - April 30	5,233,310	$80.96	5,233,310	$10,813
May 1 - May 31	6,028,900	$78.29	6,028,900	$10,341
June 1 - June 30	5,623,624	$79.14	5,623,624	$9,896
Total	16,885,834	$79.40	16,885,834

(1) Shares purchased during the period were made as part of a plans approved by the Board of Directors in both October 2018 and January 2025, each to purchase up to $10 billion of Merck’s common stock for its treasury.

Item 5. Other Information

Insider Trading Arrangements

During the three months ended June 30, 2025, none of the Company’s directors or executive officers or any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements.

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Item 6. Exhibits


Number		Description

3.1	—	Restated Certificate of Incorporation of Merck & Co., Inc. (November 3, 2009) – Incorporated by reference to Merck & Co., Inc.'s Current Report on Form 8-K filed on November 4, 2009 (No. 1-6571)

3.2	—	By-Laws of Merck & Co., Inc. (effective November 19. 2024) – Incorporated by reference to Merck & Co., Inc.'s Current Report on Form 8-K filed on November 22, 2024 (No. 1-6571)

31.1	—	Rule 13a – 14(a)/15d – 14(a) Certification of Chief Executive Officer

31.2	—	Rule 13a – 14(a)/15d – 14(a) Certification of Chief Financial Officer

32.1	—	Section 1350 Certification of Chief Executive Officer

32.2	—	Section 1350 Certification of Chief Financial Officer

101.INS	—	XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

101.SCH	—	XBRL Taxonomy Extension Schema Document.

101.CAL	—	XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	—	XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	—	XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	—	XBRL Taxonomy Extension Presentation Linkbase Document.

104	—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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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 thereunto duly authorized.


						MERCK & CO., INC.

Date: August 5, 2025						/s/ Jennifer Zachary
						JENNIFER ZACHARY
						Executive Vice President and General Counsel

Date: August 5, 2025						/s/ Dalton Smart
						DALTON SMART
						Senior Vice President Finance - Global Controller

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Merck & Co., Inc. - Quarter Report: 2025 June (Form 10-Q)

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