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 Merck Announces Fourth-Quarter and Full-Year 2015 Financial Results
   Wednesday, February 03, 2016 6:45:05 AM ET

--Fourth-Quarter 2015 Worldwide Sales Were $10.2 Billion, a Decrease of 3 Percent, Including a 7 Percent Negative Impact from Foreign Exchange and 3 Percent Net Favorable Impact from Acquisitions and Divestitures

--Full-Year 2015 Worldwide Sales Were $39.5 Billion, a Decrease of 6 Percent, Reflecting a 6 Percent Negative Impact from Foreign Exchange and a 3 Percent Net Unfavorable Impact from Acquisitions and Divestitures

--2016 Financial Outlook Expects Full-Year 2016 GAAP EPS to be Between $1.96 and $2.23; Expects Non-GAAP EPS to be Between $3.60 and $3.75, Including an Approximately 4 Percent Negative Impact from Foreign Exchange

--Anticipates Full-Year 2016 Worldwide Sales to be Between $38.7 Billion and $40.2 Billion, Including an Approximately 3 Percent Negative Impact from Foreign Exchange



--Advanced KEYTRUDA Program sBLA Approval for Treatment of Previously Treated Patients with Metastatic Non-Small Cell Lung Cancer Whose Tumors Express PD-L1

--Expanded Indication for First-Line Treatment of Patients with Unresectable or Metastatic Melanoma

--Obtained FDA Approval of ZEPATIER in the Treatment of Chronic Hepatitis C

Merck (MRK ), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2015.

This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20160203005708/en/

"The past year was one of considerable progress and execution for Merck," said Kenneth C. Frazier, chairman and chief executive officer, Merck. "I’m excited by the near-term opportunities, as we continue launching important new products like ZEPATIER and KEYTRUDA while augmenting and advancing our pipeline."

                                                                                 
                                                                               --------------------------------------------------------- ---------------------------------------
Financial Summary                                                                         Fourth Quarter                            Year Ended
                                                                               --------------------------------------------------------- ---------------------------------------
                                                                                                   Dec. 31,   Dec. 31,
$ in millions, except EPS amounts                             2015      2014      2015       2014
--------------------------------------------------------- -------------------- ------- -------------------- ------- -------------------- -------- -------------------- --------
Sales                                                       $10,215   $10,482    $39,498    $42,237
--------------------------------------------------------- -------------------- ------- -------------------- ------- -------------------- -------- -------------------- --------
GAAP EPS                                                       0.35      2.54       1.56       4.07
--------------------------------------------------------- -------------------- ------- -------------------- ------- -------------------- -------- -------------------- --------
Non-GAAP EPS that excludes items listed below(1)               0.93      0.87       3.59       3.49
--------------------------------------------------------- -------------------- ------- -------------------- ------- -------------------- -------- -------------------- --------
GAAP net income(2)                                              976     7,316      4,442     11,920
--------------------------------------------------------- -------------------- ------- -------------------- ------- -------------------- -------- -------------------- --------
Non-GAAP net income that excludes items listed below(1,2)     2,608     2,504     10,195     10,215
--------------------------------------------------------- -------------------- ------- -------------------- ------- -------------------- -------- -------------------- --------
                                                                                                                                                                                 

Non-GAAP (generally accepted accounting principles) earnings per share (EPS) of $0.93 for the fourth quarter and $3.59 for the full year of 2015 exclude acquisition- and divestiture-related costs, restructuring costs and certain other items, as well as a net charge to settle Vioxx shareholder class action litigation.

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow.

                                                                                                                         
                                                                                             ----------------------------------------------------------------------------------- ---------------------------------------------------------------
                                                                                                                     Fourth Quarter                                                     Year Ended
                                                                                             ----------------------------------------------------------------------------------- ---------------------------------------------------------------
                                                                                                                                                 Dec. 31,               Dec. 31,
$ in millions, except EPS amounts                                                                    2015                   2014                   2015                   2014
                                                                                             -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
EPS                                                                                    
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
GAAP EPS                                                                                 $0.35                  $2.54                  $1.56                  $4.07
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Difference(3)                                                                             0.58                 (1.67)                   2.03                 (0.58)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Non-GAAP EPS that excludes items listed below(1)                                        $ 0.93                  $0.87                  $3.59                  $3.49
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                 
Net Income                                                                             
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
GAAP net income(2)                                                                        $976                 $7,316                 $4,442                $11,920
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Difference                                                                               1,632                (4,812)                  5,753                (1,705)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Non-GAAP net income that excludes items listed below(1,2)                               $2,608                 $2,504                $10,195                $10,215
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                 
Decrease (Increase) in Net Income Due to Excluded Items:                               
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                       $ 1,264                 $1,394                 $5,398                 $5,946
  Acquisition- and divestiture-related costs(4)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Restructuring costs                                                                      340                    619                  1,110                  1,978
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Net charge to settle Vioxx shareholder class action litigation                           680         -                    680         -
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Foreign exchange losses related to Venezuela                                             161         -                    876         -
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Loss on extinguishment of debt                                                -                    628         -                    628
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Additional year of health care reform fee                                     -         -         -                    193
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Gain on divestiture of certain ophthalmic products                                     (147)                   (84)                  (147)                  (480)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Gain on divestiture of certain migraine clinical development programs         -         -                  (250)         -
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Gain on sale of Merck Consumer Care                                           -               (11,209)         -               (11,209)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Gain on AstraZeneca option exercise                                           -         -         -                  (741)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Other                                                                                     13                   (14)                   (34)                    (9)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Net decrease (increase) in income before taxes                                           2,311                (8,666)                  7,633                (3,694)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Income tax (benefit) expense(5)                                                          (679)                  3,854                (1,880)                  2,045
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Acquisition- and divestiture-related costs attributable to                      -         -         -                   (56)
non-controlling interests
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Decrease (increase) in net income                                                       $1,632               $(4,812)                 $5,753               $(1,705)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------

(1) Merck is providing certain 2015 and 2014 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP. For description of the items, see Tables 2a and 2b, including the related footnotes, attached to this release.

(2) Net income attributable to Merck & Co., Inc.

(3) Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the period.

(4) Includes expenses for the amortization of intangible assets recognized as a result of acquisitions, intangible asset impairment charges and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also includes integration costs, as well as transaction and certain other costs related to business acquisitions and divestitures.

(5) Includes the estimated tax impact on the reconciling items. In addition, amounts for fourth-quarter and full-year 2015 include net benefits of $40 million and $410 million, respectively, related to the settlement of certain federal income tax issues. Additionally, amount for full-year 2014 includes a net benefit of $517 million recorded in connection with AstraZeneca’s option exercise, as well as a benefit of approximately $300 million associated with a capital loss generated in the first quarter.

Additional Executive Commentary

"In 2016 we will build upon the strong foundation we established last year. We will continue to invest resources to launch and grow our strongest brands, support the most promising internal assets, enhance our pipeline with the best available external science and maintain a balanced and differentiated portfolio, with the goal of delivering long-term growth and shareholder value," said Frazier.

"Global Human Health delivered a solid performance in 2015," said Adam Schechter, president, Global Human Health, Merck. "In 2016 we will continue to prioritize resources focusing on JANUVIA, on our key launches, including KEYTRUDA and ZEPATIER, and on our hospital acute care and vaccines businesses."

"We will pursue numerous filings and approvals in 2016," said Dr. Roger M. Perlmutter, president, Merck Research Laboratories. "For example, we view KEYTRUDA as foundational in the next-generation treatment of malignant disease, and hence have embarked upon an exceptionally broad development program for this agent, with registration-enabling studies underway in more than a dozen tumor types. We will also pursue more than 100 studies involving combinations of KEYTRUDA with other drugs."

"The fourth quarter was a strong finish to a solid year of execution. We expect this momentum to continue into 2016, as we further innovate in our labs, invest behind our launches and continue our focus on disciplined resource allocation and continuous productivity to deliver a leveraged P&L and shareholder returns," said Robert Davis, chief financial officer, Merck.

Select Business Highlights

Worldwide sales were $10.2 billion for the fourth quarter of 2015, a decrease of 3 percent compared with the fourth quarter of 2014, including a 7 percent negative impact from foreign exchange and a 3 percent net positive impact primarily from the acquisition of Cubist Pharmaceuticals, Inc. (Cubist). Full-year 2015 worldwide sales were $39.5 billion, a decrease of 6 percent compared with the full year of 2014, including a 6 percent negative impact from foreign exchange and a 3 percent net negative impact resulting from the divestiture of the Consumer Care business and select products, partially offset by the Cubist acquisition.

The following table reflects sales of the company’s top pharmaceutical products, as well as total sales of Animal Health and Consumer Care products.

                                                                                                                               
                                                      ----------------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ---------------------------------------------------------------------- -------------------- -------------------- --------------------
                                                           Fourth Quarter                                  Change                 Change                              Year Ended                             Change                 Change
$ in millions                                                                                                                                                                                Ex-                                                                                                                                                        Ex-
                                                                                                                                                                                          Exchange                                                                                                                                                   Exchange
                                                      ------------------------------------------------------------                                                                                                            -----------------------------------------------
                                         2015                   2014                                        Dec. 31,                                  Dec. 31,          
                                                                                                                                                                       2015                                      2014
                                 -------------------- -------------------- -------------------- -------------------- --------------------                      --------------------                      -------------------- -------------------- --------------------
Total Sales                                     $10,215                $10,482                    -3%                     4%                $39,498   $42,237                    -6%                     0%
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
Pharmaceutical                                    9,027                  9,370                    -4%                     4%                 34,782    36,042                    -3%                     4%
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                  1,447                  1,652                   -12%                    -6%                  6,014     6,002                     0%                     7%
   JANUVIA /
   JANUMET
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                    999                  1,032                    -3%                     4%                  3,777     4,166                    -9%                    -2%
   ZETIA /
   VYTORIN
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                    497                    356                    40%                    42%                  1,908     1,738                    10%                    11%
   GARDASIL /
   GARDASIL 9
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
   PROQUAD, M-M-R II and VARIVAX                    409                    366                    12%                    14%                  1,505     1,394                     8%                    10%
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
   REMICADE                                         396                    557                   -29%                   -18%                  1,794     2,372                   -24%                   -10%
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
   ISENTRESS                                        374                    418                   -11%                    -4%                  1,511     1,673                   -10%                    -2%
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
   CUBICIN                                          322                     7*                     **                     **                  1,127       25*                     **                     **
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
   SINGULAIR                                        273                    319                   -14%                    -7%                    931     1,092                   -15%                    -5%
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
   ZOSTAVAX                                         246                    285                   -14%                   -11%                    749       765                    -2%                     0%
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
   NASONEX                                          231                    268                   -14%                    -8%                    858     1,099                   -22%                   -16%
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
   KEYTRUDA                                         214                     50                     **                     **                    566        55                     **                     **
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
Animal Health                                       830                    885                    -6%                     8%                  3,324     3,454                    -4%                     9%
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
Consumer Care***                         -                     16                     **                     **                      3     1,547                     **                     **
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
Other Revenues                                      358                    211                    69%                    19%                  1,389     1,194                    16%                   -33%
-------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                     *Reflects licensing agreement with Cubist in Japan prior to
                                                                                                                                                                                                                                     acquisition by Merck on Jan. 21, 2015
                                                                                                                                                                                                                                     **greater-than or equal to100%
                                                                                                                                                                                                                                     ***divested on Oct. 1, 2014

Commercial and Pipeline Highlights

The company continued to make steady progress in advancing its late-stage pipeline, achieving key regulatory approvals and expanded indications for multiple products across its portfolio.

-- The U.S. Food and Drug Administration (FDA) approved ZEPATIER (elbasvir and grazoprevir), a once-daily, fixed-dose combination tablet for the treatment of adult patients with chronic hepatitis C virus (HCV) genotype (GT) 1 or GT4 infection, with or without ribavirin. ZEPATIER was approved for use in a broad range of chronic HCV patients, including those with compensated cirrhosis, renal impairment of any degree and HIV-1/HCV co-infection.

-- Merck significantly advanced its development program for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy for the treatment of metastatic non-small cell lung cancer (NSCLC) in previously treated patients whose tumors express PD-L1, as well as advanced melanoma. -- The FDA approved KEYTRUDA for the treatment of patients with metastatic NSCLC whose tumors express PD-L1 as determined by an FDA-approved test and who have disease progression on or after platinum-containing chemotherapy across both squamous and non-squamous metastatic NSCLC.

-- The FDA approved an expanded indication for KEYTRUDA for the first-line treatment of patients with unresectable or metastatic melanoma regardless of BRAF status and an update to the product labeling for KEYTRUDA for the treatment of patients with ipilimumab-refractory advanced melanoma.

-- KEYTRUDA received a third Breakthrough Therapy Designation from the FDA for the treatment of patients with microsatellite instability high metastatic colorectal cancer.

-- Results from the pivotal KEYNOTE-010 study were published in The Lancet and presented at the European Society for Medical Oncology Asia 2015 Congress, showing superior overall survival compared to chemotherapy in patients with previously treated advanced NSCLC whose tumors express PD-L1. Based on these data, the company has submitted a supplemental Biologics License Application to the FDA and a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA).

-- During the fourth quarter of 2015, the company entered into collaborations with GSK and Amgen. Additionally, the company extended an existing collaboration with Eli Lilly and Company (Lilly) and entered into a new collaboration with Lilly to study KEYTRUDA in combination settings.

-- The KEYTRUDA clinical trials program currently includes more than 30 tumor types in more than 200 clinical trials, including more than 100 trials that combine KEYTRUDA with other cancer treatments. Registration-enabling trials of KEYTRUDA are currently enrolling patients with melanoma, NSCLC, head and neck cancer, bladder cancer, gastric cancer, colorectal cancer, esophageal cancer, Hodgkin lymphoma, multiple myeloma and breast cancer, and further trials are being planned for other malignancies.

-- The company strengthened its oncology pipeline by acquiring IOmet Pharma Ltd (IOmet) in early 2016. IOmet is a drug discovery company focused on the development of innovative medicines for the treatment of cancer, with a particular emphasis on the fields of cancer immunotherapy and cancer metabolism.

-- BRIDION (sugammadex) Injection 100 mg/mL was approved by the FDA for the reversal of neuromuscular blockade induced by rocuronium bromide and vecuronium bromide in adults undergoing surgery.

-- The Biologics License Application for bezlotoxumab, an investigational antitoxin for the prevention of Clostridium difficile (C. difficile) infection recurrence, was accepted by the FDA for priority review with a PDUFA action date of July 23, 2016. The company also has filed a MAA for bezlotoxumab with the EMA that is currently under review.

Pharmaceutical Revenue Performance

Fourth-quarter pharmaceutical sales declined 4 percent to $9.0 billion, including an 8 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by sales in hospital acute care, oncology and vaccines. Growth in hospital acute care was driven by the addition of the Cubist portfolio and sales growth of certain inline brands. Growth in oncology reflects higher sales of KEYTRUDA. Growth in vaccines reflects higher sales of GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), a vaccine to prevent cancers and other diseases caused by HPV, reflecting an increase in sales in the United States primarily due to public sector purchases, and higher sales of PROQUAD (Measles, Mumps, Rubella and Varicella Vaccine Live) driven by the timing of sales activity related to the Pediatric Vaccine Stockpile of the U.S. Centers for Disease Control and Prevention.

Fourth-quarter pharmaceutical sales reflect a decrease in PNEUMOVAX 23 (pneumococcal vaccine polyvalent), due to near-term market dynamics in the United States and the timing of vaccinations linked to the National Immunization Program in Japan, as well as lower sales in the diabetes franchise of JANUVIA (sitagliptin)/JANUMET (sitagliptin and metformin HCl), medicines that help lower blood sugar in adults with type 2 diabetes, driven in large part by an expected decline due to the timing of customer purchases in the third quarter of 2015. Pharmaceutical sales also reflect declines in REMICADE (infliximab), a treatment for inflammatory diseases, due to loss of exclusivity and the accelerating impact of biosimilar competition in the company’s marketing territories in Europe, and PEGINTRON (peginterferon alfa-2b), a medicine to treat chronic HCV.

Full-year 2015 pharmaceutical sales declined 3 percent to $34.8 billion, including a 7 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by sales in hospital acute care, oncology, diabetes and vaccines.

Animal Health Revenue Performance

Animal Health sales totaled $830 million for the fourth quarter of 2015, a decrease of 6 percent compared with the fourth quarter of 2014, including a 14 percent negative impact from foreign exchange. Worldwide sales for the full year of 2015 were $3.3 billion, a decrease of 4 percent, including a 13 percent negative impact from foreign exchange. Excluding the impact of exchange, growth in both periods was primarily driven by an increase in sales of companion animal products, including continued strong growth from BRAVECTO (fluralaner), a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks, and aqua and swine products.

Fourth-Quarter and Full-Year 2015 Expense and Other Information

The tables below present selected expense information for the fourth quarter and full year of 2015.

                                
                                                  ---------------------------------------------------------------------------------------------------------------------------------------------------
$ in millions                                                                          Included in expenses for the period
---------------------------- -------------------- ---------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Acquisition- and                           
Fourth Quarter                                                                                  Divestiture-                              Restructuring
2015                                   GAAP             Related Costs(4)             Costs               Non-GAAP(1)
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Materials and production                     $3,850                 $1,194                    $81                 $2,575
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Marketing and administrative                  2,615                     47                      8                  2,560
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Research and development                      1,797                   (24)                     18                  1,803
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Restructuring costs                             233         -                    233         -
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Fourth Quarter                              
2014
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Materials and production                     $3,749                   $984                   $105                 $2,660
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Marketing and administrative                  2,924                     81                     57                  2,786
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Research and development                      2,283                    329                    108                  1,846
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Restructuring costs                             349         -                    349         -
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                      
                                    
                                                  -------------------- -------------------- ---------------------------------------------------------------------------------------------------------------------------------------------------
$ in millions                                                                                               Included in expenses for the period
---------------------------- -------------------- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Acquisition-                                                    
                                                                                              and Divestiture-
Year Ended                                                                                         Related                                Restructuring                                Certain
Dec. 31, 2015                          GAAP                 Costs(4)                 Costs               Other Items            Non-GAAP(1)
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Materials and production                    $14,934                 $4,869                   $361        $-                 $9,704
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Marketing and administrative                 10,313                    436                     78         -                  9,799
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Research and development                      6,704                     39                     52         -                  6,613
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Restructuring costs                             619         -                    619         -         -
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Year Ended                                      
Dec. 31, 2014
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Materials and production                    $16,768                 $5,254                   $482        $-               $ 11,032
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Marketing and administrative                 11,606                    234                    200                    193                 10,979
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Research and development                      7,180                    365                    283         -                  6,532
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Restructuring costs                           1,013         -                  1,013         -         -
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                

The gross margin was 62.3 percent for the fourth quarter of 2015 compared to 64.2 percent for the fourth quarter of 2014, reflecting 12.5 and 10.4 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs and restructuring costs noted above. The gross margin was 62.2 percent for the full year of 2015 compared to 60.3 percent for the full year of 2014, reflecting 13.2 and 13.6 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs and restructuring costs noted above. The rate increases in non-GAAP gross margin for the fourth quarter and full year of 2015 reflect the favorable impact of foreign exchange and lower inventory write-offs.

Marketing and administrative expenses, on a non-GAAP basis, were $2.6 billion in the fourth quarter of 2015, a decrease from $2.8 billion in the same period of 2014, which was primarily driven by the favorable impact of foreign exchange and operational efficiencies, partially offset by investments in key brands. Full-year 2015 marketing and administrative expenses, on a non-GAAP basis, were $9.8 billion, a decrease from $11.0 billion in 2014, which was primarily driven by the favorable impact of foreign exchange and the sale of the Consumer Care business, partially offset by investments in key brands.

Research and development (R&D) expenses, on a non-GAAP basis, were $1.8 billion in the fourth quarter of 2015, a 2 percent decrease compared to the fourth quarter of 2014. Full-year R&D expenses in 2015, on a non-GAAP basis, were $6.6 billion, an increase from $6.5 billion in 2014.

Other (income) expense, net, was $905 million of expense in the fourth quarter of 2015 compared to $10.6 billion of income in the fourth quarter of 2014 and $1.5 billion of expense for the full year of 2015 compared to $11.6 billion of income for the full year of 2014. Other (income) expense, net for the fourth quarter and full year of 2015 includes $161 million and $876 million, respectively, of foreign exchange losses related to the revaluation of the company’s net monetary assets in Venezuela and a $680 million net charge to settle Vioxx shareholder class action litigation. Other (income) expense, net in both the fourth quarter and full year of 2014 includes an $11.2 billion gain on the divestiture of the Consumer Care business and a $628 million loss on the extinguishment of debt.

The GAAP effective tax rates of (20.4) percent for the fourth quarter of 2015 and 17.4 percent for the full year of 2015 reflect the impacts of acquisition- and divestiture-related costs, restructuring costs and certain other items, including the impact of the net charge to settle Vioxx shareholder class action litigation being fully deductible at combined U.S. federal and state tax rates, as well as the unfavorable impact of non-deductible foreign exchange losses related to Venezuela. In addition, the GAAP effective tax rates for the fourth quarter and full year of 2015 include net benefits of $40 million and $410 million, respectively, related to the settlement of certain federal tax issues. The non-GAAP effective tax rates, which exclude these items, were 16.4 percent for the fourth quarter and 21.7 percent for the full year of 2015. Both the GAAP and non-GAAP effective tax rates for the fourth quarter and full year of 2015 include the favorable impact of tax legislation, including the renewal of the R&D tax credit, enacted in the fourth quarter of 2015.

Financial Outlook

Merck expects its full-year 2016 GAAP EPS to be between $1.96 and $2.23. Merck expects its full-year 2016 non-GAAP EPS to be between $3.60 and $3.75, including an approximately 4 percent negative impact from foreign exchange. The non-GAAP range excludes acquisition- and divestiture-related costs and costs related to restructuring programs.

At mid-January 2016 exchange rates, Merck anticipates full-year 2016 revenues to be between $38.7 billion and $40.2 billion, including an approximately 3 percent negative impact from foreign exchange.

In addition, the company expects full-year 2016 non-GAAP marketing and administrative expenses to be below 2015 levels and R&D expenses to be modestly above 2015 levels.

The company anticipates its full-year 2016 non-GAAP tax rate will be in the range of 21.5 to 22.5 percent, including a 2016 R&D tax credit.

A reconciliation of anticipated 2016 EPS, as reported in accordance with GAAP to non-GAAP EPS that excludes certain items, is provided in the table below.

                                                  
                                                                    --------------------
                                                                          Full Year
$ in millions, except EPS amounts                        2016
---------------------------------------------- -------------------- --------------------
GAAP EPS                                            $1.96 to $2.23
---------------------------------------------- -------------------- --------------------
Difference(3)                                        1.64 to 1.52
---------------------------------------------- -------------------- --------------------
Non-GAAP EPS that excludes items listed below       $3.60 to $3.75
---------------------------------------------- -------------------- --------------------
                                                                     
Acquisition- and divestiture-related costs         $4,600 to $4,400
---------------------------------------------- -------------------- --------------------
Restructuring costs                                   900 to 700
---------------------------------------------- -------------------- --------------------
Net decrease (increase) in income before taxes      5,500 to 5,100
---------------------------------------------- -------------------- --------------------
Estimated income tax (benefit) expense              (935) to (860)
---------------------------------------------- -------------------- --------------------
Decrease (increase) in net income                  $4,565 to $4,240
---------------------------------------------- -------------------- --------------------
                                                                     

Total Employees

As of Dec. 31, 2015, Merck had approximately 68,000 employees worldwide.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EST on Merck’s website at http://www.merck.com/investors/events-and-presentations/home.html . Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 4404803. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 4404803. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

About Merck

Today’s Merck is a global health care leader working to help the world be well. Merck is known as MSD outside the United States and Canada. Through our prescription medicines, vaccines, biologic therapies and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to health care through far-reaching policies, programs and partnerships. For more information, visit www.merck.com and connect with us on Twitter, Facebook, YouTube and LinkedIn.

Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA

This news release of Merck & Co., Inc., Kenilworth, N.J., USA (the "company") includes "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2014 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

 
                                                                                                                                                   MERCK & CO., INC.
                                                                                                                                        CONSOLIDATED STATEMENT OF INCOME - GAAP
                                                                                                                                    (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
                                                                                                                                                      (UNAUDITED)
                                                                                                                                                        Table 1
                                                                                                                                                             
                                                                               ---------------------------------------------------------------                     --------------------                      ---------------------------------------------------------------                     --------------------
                                                                                                            GAAP                                                                                                                          GAAP
                                                                               ------------------------------------------------------------                                                                  ------------------------------------------------------------
                                                                                       4Q15                   4Q14                                    % Change                                  Full Year              Full Year                                 % Change
                                                                                                                                                                                                                     2015                                      2014
                                                                                                                                                                                                                                         
                                                                               ---------------------------------------------------------------                     --------------------                      ---------------------------------------------------------------                     --------------------
                                                                                                                                                                                                                                         
                                                                               ---------------------------------------------------------------                     --------------------                      ---------------------------------------------------------------                     --------------------
Sales                                                                                      $ 10,215                                  $ 10,482                               -3%                                          $ 39,498                                  $ 42,237                               -6%
                                                                                                                                                                                                                                                                                                  
Costs, Expenses and Other
   Materials and production (1)                                                               3,850                                     3,749                               3%                                             14,934                                    16,768                              -11%
   Marketing and administrative (1)                                                           2,615                                     2,924                              -11%                                            10,313                                    11,606                              -11%
   Research and development (1)                                                               1,797                                     2,283                              -21%                                             6,704                                     7,180                               -7%
   Restructuring costs (2)                                                                      233                                       349                              -33%                                               619                                     1,013                              -39%
   Other (income) expense, net (1) (3)                                                          905                                  (10,634)                                *                                              1,527                                  (11,613)                                *
Income Before Taxes                                                                             815                                    11,811                              -93%                                             5,401                                    17,283                              -69%
Income Tax (Benefit) Provision                                                                (166)                                     4,484                                                                                 942                                     5,349
Net Income                                                                                      981                                     7,327                              -87%                                             4,459                                    11,934                              -63%
Less: Net Income Attributable to Noncontrolling Interests                                         5                                        11                                                                                  17                                        14
Net Income Attributable to Merck & Co., Inc.                                                  $ 976                                   $ 7,316                              -87%                                           $ 4,442                                  $ 11,920                              -63%
Earnings per Common Share Assuming Dilution                                                  $ 0.35                 $ 2.54                              -86%                                            $ 1.56                                    $ 4.07                              -62%
                                                                               -------------------- -------------------- --------------------                      --------------------                      --------------------                      --------------------                      --------------------
                                                                                                                                                         
                                                                               -------------------- -------------------- --------------------                                                                -------------------- -------------------- --------------------
Average Shares Outstanding Assuming Dilution                                                  2,813                                     2,880                                                                               2,841                                     2,928
Tax Rate (4)                                                                                 -20.4%                  38.0%                                                                               17.4%                  30.9%
                                                                               -------------------- -------------------- --------------------                                                                -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                  

* 100% or greater

(1) Amounts include the impact of acquisition and divestiture-related costs, restructuring costs and certain other items. See accompanying tables for details.

(2) Represents separation and other related costs associated with restructuring activities under the company’s formal restructuring programs.

(3) Other (income) expense, net in the fourth quarter and full year of 2015 includes a $680 million net charge to settle VIOXX shareholder class action litigation, as well as a $147 million gain on the divestiture of the company’s remaining ophthalmics business in international markets. Other (income) expense, net in the fourth quarter and full year of 2015 includes foreign exchange losses of $161 million and $876 million, respectively, to revalue the company’s net monetary assets in Venezuela. Other (income) expense, net for the full year of 2015 also includes a $250 million gain on the sale of certain migraine clinical development programs.

Other (income) expense, net in the fourth quarter and full year of 2014 includes an $11.2 billion gain on the divestiture of Merck’s Consumer Care business and a $628 million loss on the extinguishment of debt. Other (income) expense, net for the full year of 2014 also includes a gain of $741 million related to AstraZeneca’s option exercise, a gain of $480 million on the divestiture of certain ophthalmic products in several international markets, and a gain of $204 million related to the divestiture of the company’s Sirna Therapeutics, Inc. subsidiary, as well as a $93 million goodwill impairment charge related to the company’s joint venture with Supera Farma Laboratorios S.A.

Other (income) expense, net includes equity income from affiliates. Prior period amounts have been reclassified to conform to the current presentation.

(4) The effective income tax rates for the fourth quarter and full year of 2015 reflect the impact of the net charge to settle VIOXX shareholder class action litigation being fully deductible at combined U.S. federal and state tax rates, as well as the favorable impact of tax legislation enacted in the fourth quarter of 2015, partially offset by the unfavorable impact of non-deductible foreign exchange losses recorded in connection with the revaluation of the company’s net monetary assets in Venezuela. The effective income tax rates for the fourth quarter and full year of 2015 also reflect net benefits of $40 million and $410 million, respectively, related to the settlement of certain federal income tax issues.

The effective income tax rates for the fourth quarter and full year of 2014 include the impact of the gain on the divestiture of Merck’s Consumer Care business being taxed primarily at combined U.S. federal and state tax rates. The effective income tax rates for the fourth quarter and full year of 2014 also reflect the favorable impact of tax legislation enacted in the fourth quarter of 2014. In addition, the effective income tax rate for the full year of 2014 reflects a net benefit of $517 million recorded in connection with AstraZeneca’s option exercise, as well as a benefit of approximately $300 million associated with a capital loss generated in the first quarter of 2014.

 
                                                                                                                                                                                 MERCK & CO., INC.
                                                                                                                                                                         CONSOLIDATED STATEMENT OF INCOME
                                                                                                                                                                          GAAP TO NON-GAAP RECONCILIATION
                                                                                                                                                                                FOURTH QUARTER 2015
                                                                                                                                                                  (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
                                                                                                                                                                                    (UNAUDITED)
                                                                                                                                                                                     Table 2a
                                                                                                                 
                                                                               -------------------------------------------------                     ---------------------                     ---------------------                     ---------------------                     ---------------------                         -------------------------------------------------
                                                                                                     GAAP                                               Acquisition and                            Restructuring                             Certain Other                              Adjustment                                                   Non-GAAP
                                                                                                                                                         Divestiture-                                Costs (2)                                 Items (3)                                 Subtotal
                                                                                                                                                            Related
                                                                                                                                                           Costs (1)
                                                                                                                                                                                                                                   
                                                                               -------------------------------------------------                     ---------------------                     ---------------------                     ---------------------                     ---------------------                         -------------------------------------------------
                                                                                                                                                                                                                                                                                                               
                                                                               -------------------------------------------------                                                                                                                                                                                                 -------------------------------------------------
Sales                                                                                             $ 10,215                                                                                                                                                                                                                                          $ 10,215
                                                                                                                                                                                                                                                                                                                                  
Costs, Expenses and Other
   Materials and production                                                                          3,850                                                1,194                                        81                                                                               1,275                                                          2,575
   Marketing and administrative                                                                      2,615                                                   47                                         8                                                                                  55                                                          2,560
   Research and development                                                                          1,797                                                  (24 )                                      18                                                                                  (6 )                                                        1,803
   Restructuring costs                                                                                 233                                                                                            233                                                                                 233                                                              -
   Other (income) expense, net (4)                                                                     905                                                   47                                                                                 707                                       754                                                            151
Income Before Taxes                                                                                    815                                               (1,264 )                                    (340 )                                    (707 )                                  (2,311 )                                                        3,126
Income Tax (Benefit) Provision                                                                        (166 )                                                                                                                                                                             (679 )         (5)                                              513
Net Income                                                                                             981                                                                                                                                                                             (1,632 )                                                        2,613
Less: Net Income Attributable to Noncontrolling Interests                                                5                                                                                                                                                                                                                                                 5
Net Income Attributable to Merck & Co., Inc.                                                      $    976                                                                                                                                                                             (1,632 )                                                     $  2,608
Earnings per Common Share Assuming Dilution                                                       $   0.35                                                                                                                                                                                                                       $   0.93  
                                                                               -------------------- ------ --------------------                                                                                                                                                                                                  -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                               
                                                                               -------------------------------------------------                                                                                                                                                                                                 -------------------------------------------------
Average Shares Outstanding Assuming Dilution                                                         2,813                                                                                                                                                                                                                                             2,813
Tax Rate                                                                          -20.4 %                                                                                                                                                                                                                         16.4 %
                                                                               -------------------- ------ --------------------                                                                                                                                                                                                  -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                              

Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

(1) Amounts included in materials and production costs reflect $1.1 billion of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as $29 million of amortization of purchase accounting adjustments to inventories as a result of the Cubist acquisition, and $33 million of impairment charges on intangible assets. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions, including severance costs which are not part of the company’s formal restructuring programs, as well as transaction and certain other costs related to divestitures. Amounts included in research and development expenses primarily reflect income of $25 million resulting from a reduction in the estimated fair value of liabilities for contingent consideration. Amounts included in other (income) expense, net represent goodwill impairment charges related to certain of Merck’s Healthcare Services businesses.

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company’s formal restructuring programs.

(3) Primarily reflects a $680 million net charge to settle VIOXX shareholder class action litigation, foreign exchange losses of $161 million to revalue the company’s net monetary assets in Venezuela and a $147 million gain on the divestiture of the company’s remaining ophthalmics business in international markets.

(4) Other (income) expense, net includes equity income from affiliates.

(5) Represents the estimated tax impact on the reconciling items, as well as a net benefit of $40 million on the settlement of certain federal income tax issues.

                                                                                                                                                                                                              
                                                                                                                                                                                 MERCK & CO., INC.
                                                                                                                                                                         CONSOLIDATED STATEMENT OF INCOME
                                                                                                                                                                          GAAP TO NON-GAAP RECONCILIATION
                                                                                                                                                                           YEAR ENDED DECEMBER 31, 2015
                                                                                                                                                                  (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
                                                                                                                                                                                    (UNAUDITED)
                                                                                                                                                                                     Table 2b
                                                                                                                                                                                                                                   
                                                                               -------------------------------------------------                     ---------------------                     ---------------------                     ---------------------                     ---------------------                         -------------------------------------------------
                                                                                                     GAAP                                               Acquisition and                            Restructuring                             Certain Other                              Adjustment                                                   Non-GAAP
                                                                                                                                                         Divestiture-                                Costs (2)                                 Items (3)                                 Subtotal
                                                                                                                                                            Related
                                                                                                                                                           Costs (1)
                                                                               ----------------------------------------------                        -------------------                       -------------------                       -------------------                       -------------------                           ----------------------------------------------
                                                                                                                                                                                                                                                                                                               
                                                                               -------------------------------------------------                                                                                                                                                                                                 -------------------------------------------------
Sales                                                                                             $ 39,498                                                                                                                                                                                                                                          $ 39,498
                                                                                                                                                                                                                                                                                                                                  
Costs, Expenses and Other
   Materials and production                                                                         14,934                                                4,869                                       361                                                                               5,230                                                          9,704
   Marketing and administrative                                                                     10,313                                                  436                                        78                                                                                 514                                                          9,799
   Research and development                                                                          6,704                                                   39                                        52                                                                                  91                                                          6,613
   Restructuring costs                                                                                 619                                                                                            619                                                                                 619                                                              -
   Other (income) expense, net (4)                                                                   1,527                                                   54                                                                               1,125                                     1,179                                                            348
Income Before Taxes                                                                                  5,401                                               (5,398 )                                  (1,110 )                                  (1,125 )                                  (7,633 )                                                       13,034
Taxes on Income                                                                                        942                                                                                                                                                                             (1,880 )         (5)                                            2,822
Net Income                                                                                           4,459                                                                                                                                                                             (5,753 )                                                       10,212
Less: Net Income Attributable to Noncontrolling Interests                                               17                                                                                                                                                                                                                                                17
Net Income Attributable to Merck & Co., Inc.                                                      $  4,442                                                                                                                                                                             (5,753 )                                                     $ 10,195
Earnings per Common Share Assuming Dilution                                                       $   1.56                                                                                                                                                                                                                       $   3.59  
                                                                               -------------------- ------ --------------------                                                                                                                                                                                                  -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                               
                                                                               -------------------------------------------------                                                                                                                                                                                                 -------------------------------------------------
Average Shares Outstanding Assuming Dilution                                                         2,841                                                                                                                                                                                                                                             2,841
Tax Rate                                                                           17.4 %                                                                                                                                                                                                                         21.7 %
                                                                               -------------------- ------ --------------------                                                                                                                                                                                                  -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                              

Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

(1) Amounts included in materials and production costs reflect $4.7 billion of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as $105 million of amortization of purchase accounting adjustments to inventories as a result of the Cubist acquisition, and $45 million of impairment charges on intangible assets. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions, including severance costs which are not part of the company’s formal restructuring programs, as well as transaction and certain other costs related to divestitures. Amounts included in research and development expenses reflect $63 million of in-process research and development (IPR&D) impairment charges and income of $24 million resulting from a reduction in the estimated fair value of liabilities for contingent consideration. Amounts included in other (income) expense, net represent goodwill impairment charges related to certain of Merck’s Healthcare Services businesses.

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company’s formal restructuring programs.

(3) Primarily reflects foreign exchange losses of $876 million to revalue the company’s net monetary assets in Venezuela, a $680 million net charge to settle VIOXX shareholder class action litigation, a $250 million gain on the divestiture of certain migraine clinical development programs and a $147 million gain on the divestiture of the company’s remaining ophthalmics business in international markets.

(4) Other (income) expense, net includes equity income from affiliates.

(5) Represents the estimated tax impact on the reconciling items, as well as a net benefit of $410 million on the settlement of certain federal income tax issues.

                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                     MERCK & CO., INC.
                                                                                                                                                                                                                                     FRANCHISE / KEY PRODUCT SALES
                                                                                                                                                                                                                                     (AMOUNTS IN MILLIONS)
                                                                                                                                                                                                                                     Table 3
                                                                                                                                                                                                                                                                                              
                                                             ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                          2015                                                                                                                                                                                                                                                2014                                                                                                                                              % Change
                                                             ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     ------------------------------
                                                                                                                                                                                                                                                                           Full                                                                                                                                                                                                                                                 Full                                                          Full
                                                                         1Q                           2Q                            3Q                            4Q                           Year                                              1Q                            2Q                            3Q                            4Q                           Year                                  4Q   Year
                                                             ----------------------------------------------- ----------------------------------------------- ------------------------------------------------ ------------------------------------------------ ----------------------------                     ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ ----------------------------                     --- -------------------- ----
TOTAL SALES (1)                                                                 $ 9,425                      $ 9,785                      $ 10,073                      $ 10,215                      $ 39,498                                         $ 10,264                      $ 10,934                      $ 10,557                      $ 10,482                      $ 42,237                       -3     -6
                                                             -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------                      -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------                      --- -------------------- ----
  PHARMACEUTICAL                                                                  8,266                                           8,564                                            8,925                                            9,027                                           34,782                                            8,451                                            9,087                                            9,134                                            9,370                                           36,042                       -4                        -3
    Primary Care & Women’s Health
      Cardiovascular
        Zetia                                                                       568                                             635                                              633                                              691                                            2,526                                              611                                              717                                              660                                              662                                            2,650                        4                        -5
        Vytorin                                                                     320                                             320                                              302                                              308                                            1,251                                              361                                              417                                              369                                              370                                            1,516                      -17                       -17
      Diabetes
        Januvia                                                                     884                                           1,044                                            1,014                                              921                                            3,863                                              858                                            1,058                                              933                                            1,082                                            3,931                      -15                        -2
        Janumet                                                                     509                                             554                                              562                                              526                                            2,151                                              476                                              519                                              505                                              570                                            2,071                       -8                         4
      General Medicine & Women’s Health
        NuvaRing                                                                    166                                             182                                              190                                              193                                              732                                              168                                              178                                              186                                              191                                              723                        1                         1
        Implanon / Nexplanon                                                        137                                             124                                              176                                              151                                              588                                              102                                              119                                              158                                              123                                              502                       23                        17
        Dulera                                                                      130                                             120                                              133                                              153                                              536                                              102                                              103                                              124                                              132                                              460                       16                        16
        Follistim AQ                                                                 82                                             111                                               95                                               95                                              383                                              110                                              102                                               97                                              102                                              412                       -7                        -7
    Hospital and Specialty
      Hepatitis
        PegIntron                                                                    56                                              52                                               40                                               34                                              182                                              112                                              103                                               84                                               81                                              381                      -58                       -52
      HIV
        Isentress                                                                   385                                             375                                              377                                              374                                            1,511                                              390                                              453                                              412                                              418                                            1,673                      -11                       -10
      Hospital Acute Care
        Cubicin(2)                                                                  187                                             293                                              325                                              322                                            1,127                                                5                                                6                                                7                                                7                                               25                        *                         *
        Cancidas                                                                    163                                             134                                              139                                              137                                              573                                              166                                              156                                              183                                              175                                              681                      -22                       -16
        Invanz                                                                      132                                             139                                              153                                              144                                              569                                              114                                              134                                              141                                              139                                              529                        4                         8
        Noxafil                                                                     111                                             117                                              132                                              128                                              487                                               74                                               98                                              107                                              122                                              402                        4                        21
        Bridion                                                                      85                                              87                                               89                                               92                                              353                                               73                                               82                                               90                                               95                                              340                       -3                         4
        Primaxin                                                                     65                                              88                                               75                                               86                                              313                                               71                                               81                                               91                                               86                                              329                        0                        -5
      Immunology
        Remicade                                                                    501                                             455                                              442                                              396                                            1,794                                              604                                              607                                              604                                              557                                            2,372                      -29                       -24
        Simponi                                                                     158                                             169                                              178                                              185                                              690                                              157                                              174                                              170                                              188                                              689                       -2                         0
    Oncology
        Keytruda                                                                     83                                             110                                              159                                              214                                              566                                                0                                                0                                                4                                               50                                               55                        *                         *
        Emend                                                                       122                                             134                                              141                                              139                                              535                                              122                                              144                                              136                                              151                                              553                       -8                        -3
        Temodar                                                                      74                                              80                                               83                                               75                                              312                                               83                                               93                                               88                                               86                                              350                      -14                       -11
    Diversified Brands
      Respiratory
        Singulair                                                                   245                                             212                                              201                                              273                                              931                                              271                                              284                                              218                                              319                                            1,092                      -14                       -15
        Nasonex                                                                     289                                             215                                              121                                              231                                              858                                              312                                              258                                              261                                              268                                            1,099                      -14                       -22
        Clarinex                                                                     51                                              55                                               39                                               42                                              187                                               62                                               69                                               49                                               52                                              232                      -20                       -20
      Other
        Cozaar / Hyzaar                                                             185                                             189                                              150                                              143                                              667                                              205                                              214                                              195                                              192                                              806                      -25                       -17
        Arcoxia                                                                     123                                             115                                              123                                              110                                              471                                              128                                              141                                              132                                              118                                              519                       -7                        -9
        Fosamax                                                                      94                                              96                                               86                                               82                                              359                                              123                                              121                                              114                                              112                                              470                      -27                       -24
        Zocor                                                                        49                                              63                                               56                                               49                                              217                                               64                                               69                                               61                                               64                                              258                      -22                       -16
        Propecia                                                                     53                                              39                                               41                                               50                                              183                                               74                                               58                                               66                                               67                                              264                      -26                       -31
    Vaccines
        Gardasil / Gardasil 9                                                       359                                             427                                              625                                              497                                            1,908                                              383                                              409                                              590                                              356                                            1,738                       40                        10
        ProQuad, M-M-R II and Varivax                                               348                                             358                                              390                                              409                                            1,505                                              280                                              326                                              421                                              366                                            1,394                       12                         8
        Zostavax                                                                    175                                             149                                              179                                              246                                              749                                              142                                              156                                              181                                              285                                              765                      -14                        -2
        RotaTeq                                                                     192                                              89                                              160                                              169                                              610                                              169                                              147                                              174                                              169                                              659                        0                        -7
        Pneumovax 23                                                                110                                             106                                              138                                              188                                              542                                              101                                              102                                              197                                              346                                              746                      -46                       -27
    Other Pharmaceutical (3)                                                      1,075                                           1,128                                            1,178                                            1,174                                            4,553                                            1,378                                            1,389                                            1,326                                            1,269                                            5,356                       -7                       -15
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
  ANIMAL HEALTH                                                                     829                                             840                                              825                                              830                                            3,324                                              813                                              872                                              885                                              885                                            3,454                       -6                        -4
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
  CONSUMER CARE (4)                                                                   2                                               0                                                0                                                0                                                3                                              546                                              583                                              401                                               16                                            1,547                        *                         *
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
  Other Revenues (5)                                             328       381        323        358      1,389                           454        392        137        211      1,194                       69     16
                                                             -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------                      -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------                      --- -------------------- ----
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

* 100% or greater

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.

(1) Only select products are shown.

(2) Cubicin results for the first quarter 2015 represent sales for the two months following Merck’s acquisition of Cubist. Cubicin sales for 2014 represent the previous licensing agreement in Japan prior to the acquisition.

(3) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $78 million, $76 million, $99 million, and $148 million for the first, second, third, and fourth quarters of 2015, respectively. Other Vaccines sales included in Other Pharmaceutical were $98 million, $76 million, $116 million and $88 million for the first, second, third and fourth quarters of 2014, respectively.

(4) On October 1, 2014, the company divested the Consumer Care business.

(5) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. On June 30, 2014, AstraZeneca exercised its option to buy Merck’s interest in a subsidiary and through it, Merck’s interest in Nexium and Prilosec. As a result, the company no longer records supply sales for these products. Other revenues in the first quarter 2014 include $232 million of revenue recognized in connection with the sale of U.S. Saphris rights.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20160203005708r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20160203005708/en/

SOURCE: Merck

Merck 
Media: 
Lainie Keller, 908-236-5036 
Steven Cragle, 908-740-1801 
or 
Investors: 
Teri Loxam, 908-740-1986 
Justin Holko, 908-740-1879


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