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 Merck Announces Fourth-Quarter and Full-Year 2016 Financial Results
   Thursday, February 02, 2017 6:45:02 AM ET

--Fourth-Quarter 2016 GAAP EPS Was $0.42; Fourth-Quarter Non-GAAP EPS Was $0.89; Full-Year 2016 GAAP EPS Was $2.04; Full-Year Non-GAAP EPS Was $3.78

--2017 Financial Outlook Expects Full-Year 2017 GAAP EPS to be Between $2.47 and $2.62; Expects Non-GAAP EPS to be Between $3.72 and $3.87, Including an Approximately 2 Percent Negative Impact from Foreign Exchange

--Anticipates Full-Year 2017 Worldwide Sales to be Between $38.6 Billion and $40.1 Billion, Including an Approximately 2 Percent Negative Impact from Foreign Exchange

--Advanced KEYTRUDA Development Program U.S. Food and Drug Administration (FDA) Approved KEYTRUDA for Previously Untreated Patients with Metastatic Non-Small Cell Lung Cancer (NSCLC) Whose Tumors Have High PD-L1 Expression (Tumor Proportion Score of 50 Percent or More) Without EGFR or ALK Genomic Tumor Aberrations

--FDA Granted Priority Review for Three Supplemental Biologics License Applications for KEYTRUDA

Merck (MRK ), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2016.

This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20170202005556/en/

"The performance of Merck’s broad and balanced portfolio allows us to remain committed to biomedical innovation that saves and improves lives and delivers long-term value to shareholders," said Kenneth C. Frazier, chairman and chief executive officer, Merck. "The momentum behind our pipeline and key product launches, including the continued growth and expansion of KEYTRUDA into new indications and markets around the world, further reinforces our company’s strategic direction."

Financial Summary
-------------------------------------------------------------------------------------------------------------------------------------------------------------------
$ in millions, except EPS amounts                                  Fourth Quarter                            Year Ended
                                                                                                                  Dec. 31,   Dec. 31,
                                                                              2016                         2015                          2016                          2015
Sales                                                                      $10,115                      $10,215                       $39,807                       $39,498
GAAP EPS                                                                      0.42                         0.35                          2.04                          1.56
Non-GAAP EPS that excludes certain items(1)*                                  0.89                         0.93                          3.78                          3.59
GAAP net income(2)                                                           1,177                          976                         5,691                         4,442
Non-GAAP net income that excludes certain items(1,2)*     2,470     2,608     10,538     10,195
----------------------------------------------------- -------------------- ------- -------------------- ------- -------------------- -------- -------------------- --------
                                                                                                                                                 *Refer to table on page 8.

Worldwide sales were $10.1 billion for the fourth quarter of 2016, a decrease of 1 percent compared with the fourth quarter of 2015, including a 1 percent negative impact from foreign exchange. Sales in the fourth quarter of 2016 reflect the unfavorable impact of approximately $150 million of sales in Japan, which occurred in the third quarter of 2016 rather than in the fourth quarter due to the implementation of a resource planning system. Full-year 2016 worldwide sales were $39.8 billion, an increase of 1 percent compared with the full year of 2015, including a 2 percent negative impact from foreign exchange.

GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) were $0.42 for the fourth quarter and $2.04 for the full year of 2016. Non-GAAP EPS of $0.89 for the fourth quarter and $3.78 for the full year of 2016 excludes acquisition- and divestiture-related costs, restructuring costs and certain other items, which include a charge to settle the worldwide KEYTRUDA patent litigation.

Pipeline Highlights

Merck significantly advanced the clinical development program for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy.

-- The FDA approved a supplemental Biologics License Application (sBLA) for KEYTRUDA for the first-line treatment of patients with metastatic NSCLC whose tumors have high PD-L1 expression (Tumor Proportion Score [TPS] of 50 Percent or More) as determined by an FDA-approved test, with no EGFR or ALK genomic tumor aberrations.

-- The FDA granted Priority Review for three additional sBLAs for KEYTRUDA, including: -- Use in combination with chemotherapy as a first-line treatment for patients with metastatic or advanced NSCLC regardless of PD-L1 expression and with no EGFR or ALK genomic tumor aberrations. The PDUFA action date is May 10, 2017.

-- The treatment of previously treated patients with advanced microsatellite instability-high cancer. The PDUFA action date is March 8, 2017.

-- The treatment of patients with refractory classical Hodgkin lymphoma (cHL) or for patients with cHL who have relapsed after three or more prior lines of therapy. The PDUFA action date is March 15, 2017.

-- KEYTRUDA received Breakthrough Therapy Designations from the FDA for the second-line treatment of patients with urothelial carcinoma with disease progression on or after platinum-containing chemotherapy and for the treatment of patients with primary mediastinal B-cell lymphoma that is refractory to or has relapsed after two prior lines of therapy.

-- The European Commission approved KEYTRUDA for the first-line treatment of metastatic NSCLC in adults whose tumors have high PD-L1 expression (TPS of 50 percent or more) with no EGFR or ALK positive tumor mutations.

-- KEYTRUDA was approved in Japan as a first- and second-line treatment of certain patients with PD-L1-positive unresectable advanced/recurrent NSCLC.

-- Merck and Incyte Corporation recently announced the expansion of the clinical development program investigating KEYTRUDA in combination with epacadostat, Incyte’s investigational oral selective IDO1 inhibitor, to include pivotal studies for NSCLC, renal cell carcinoma, bladder cancer and squamous cell carcinoma of the head and neck.

The company recently completed enrollment in its Phase 3 APECS study (NCT01953601) evaluating the safety and efficacy of verubecestat (MK-8931) in people with prodromal, or mild, Alzheimer’s disease. Estimated primary completion date for the trial is February 2019.

Fourth-Quarter and Full-Year Revenue Performance

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

                                                                                                    
------------------------------- -------------------- --------------------------------------------------------------------------------------------------------------------- -------------------- -------------------- ---------------------------------------------------------------------------------------------------
$ in millions                                                              Fourth Quarter                                                                                            Year Ended
                                                                                  Change Ex-                                                                Dec. 31,   Dec. 31,            Change Ex-
                                                        2016                         2015                      Change                        Exchange                                                                    2016                          2015                      Change                        Exchange
Total Sales                                          $10,115                      $10,215                         -1%                              0%                                                                 $39,807                       $39,498                          1%                              3%
Pharmaceutical                                         8,904                        9,027                         -1%                             -1%                                                                  35,151                        34,782                          1%                              2%
  JANUVIA/JANUMET                                      1,509                        1,447                          4%                              4%                                                                   6,109                         6,014                          2%                              2%
  ZETIA/VYTORIN                                          873                          999                        -13%                            -13%                                                                   3,701                         3,777                         -2%                             -1%
  GARDASIL/GARDASIL 9                                    542                          497                          9%                              9%                                                                   2,173                         1,908                         14%                             14%
  PROQUAD, M-M-R II and VARIVAX                          405                          409                         -1%                             -1%                                                                   1,640                         1,505                          9%                             10%
  KEYTRUDA                                               483                          214                        125%                            128%                                                                   1,402                           566                        148%                            151%
  ISENTRESS                                              337                          374                        -10%                             -9%                                                                   1,387                         1,511                         -8%                             -6%
  REMICADE                                               269                          396                        -32%                            -31%                                                                   1,268                         1,794                        -29%                            -28%
  CUBICIN                                                119                          322                        -63%                            -63%                                                                   1,087                         1,127                         -4%                             -4%
  SINGULAIR                                              210                          273                        -23%                            -26%                                                                     915                           931                         -2%                             -4%
                                                         238                          188                         27%                             25%                                                                     641                           542                         18%                             17%
  PNEUMOVAX 23
Animal Health                                            884                          832                          6%                              7%                                                                   3,478                         3,331                          4%                              8%
Other Revenues                        327       356      -8%          30%          1,178      1,385     -15%          15%
------------------------------- -------------------- ------- -------------------- ------- -------------------- ------ -------------------- ---------- -------------------- -------------------- -------------------- -------- -------------------- -------- -------------------- ------ -------------------- ----------

Pharmaceutical Revenue

Fourth-quarter pharmaceutical sales decreased 1 percent to $8.9 billion. The decline was driven primarily by the loss of U.S. market exclusivity in 2016 for CUBICIN (daptomycin for injection), an I.V. antibiotic; NASONEX (mometasone furoate monohydrate), an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms; and ZETIA (ezetimibe), a medicine for lowering LDL cholesterol; as well as by the ongoing impact of biosimilar competition in the company’s marketing territories in Europe for REMICADE (infliximab), a treatment for inflammatory diseases. In the aggregate, sales of these products declined $564 million during the fourth quarter of 2016 compared to the fourth quarter of 2015.

These declines were largely offset by growth in oncology, hepatitis C, diabetes and vaccines, which include the ongoing launches of KEYTRUDA and ZEPATIER (elbasvir and grazoprevir), a medicine for the treatment of chronic hepatitis C virus genotypes 1 or 4 infection. Additionally, the ongoing launch of BRIDION (sugammadex) Injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery, generated sales of $139 million during the fourth quarter of 2016.

Growth of KEYTRUDA reflects the company’s continued efforts to launch the product with new indications, particularly as a first-line treatment for NSCLC and for previously treated recurrent or metastatic head and neck cancer in the United States, and as a second-line treatment for NSCLC globally.

ZEPATIER sales growth was primarily driven by the ongoing launch in the United States, as well as ongoing launches in emerging markets and the launches in Europe and Japan. In the fourth quarter of 2016, sales of ZEPATIER were $229 million.

Pharmaceutical sales also reflect an increase in the diabetes franchise of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCl), medicines that help lower blood sugar in adults with type 2 diabetes, driven by sales growth in the United States, partially offset by lower sales in Japan due to the timing of shipments.

Growth in vaccines resulted from higher sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent) in the United States due to the adoption of recently issued vaccination guidelines from the Centers for Disease Control and Prevention; and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) and GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16, and 18) Vaccine, Recombinant], vaccines to prevent certain cancers and other diseases caused by HPV, due to increased pricing and demand in the United States. On Dec. 31, 2016, Merck and Sanofi Pasteur ended the Sanofi Pasteur MSD vaccines joint venture. As a result, beginning in 2017, Merck will operate its vaccines business in Europe and will record vaccine sales in the 19 European countries previously part of the joint venture.

In April 2017 the company will lose market exclusivity in the United States for VYTORIN (ezetimibe/simvastatin), a medicine for lowering LDL cholesterol, and anticipates a significant decline in U.S. VYTORIN sales thereafter. Full-year 2016 U.S. sales of VYTORIN were $473 million.

Full-year 2016 pharmaceutical sales increased 1 percent to $35.2 billion, including a 1 percent negative impact from foreign exchange. Growth was driven by sales in oncology, vaccines and hepatitis C products, partially offset by sales declines of $887 million due to the loss of U.S. market exclusivity for NASONEX and CUBICIN, and the impact of biosimilar competition for REMICADE in the company’s marketing territories in Europe.

Animal Health Revenue

Animal Health sales totaled $884 million for the fourth quarter of 2016, an increase of 6 percent compared with the fourth quarter of 2015, including a 1 percent negative impact from foreign exchange. Worldwide sales for the full year of 2016 were $3.5 billion, an increase of 4 percent, including a 4 percent negative impact from foreign exchange. Sales growth in both periods was primarily driven by an increase in sales of companion animal products, particularly the BRAVECTO (fluralaner) line of products that kill fleas and ticks in dogs and cats for up to 12 weeks.

Fourth-Quarter and Full-Year Expense, EPS and Related Information

The tables below present selected expense information.

                             
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
$ in millions                                             Acquisition- and                                                
                                                                                                    Divestiture-                             Restructuring                             Certain Other
Fourth-Quarter 2016                                               GAAP                          Related Costs(3)                                     Costs                                     Items                               Non-GAAP(1)
Materials and production                                        $3,332                                      $756                                       $32                           $-                                    $2,544
Marketing and administrative                                     2,593                                        22                                         4                            -                                     2,567
Research and development                                         1,720                                      (33)                                         9                            -                                     1,744
Restructuring costs                                                265                            -                                       265                            -                            -
Other (income) expense, net                                        721                                        35                            -                                       654                                        32
                                                                                                                                                                                                                                                
Fourth-Quarter 2015
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                            -                            -
Other (income) expense, net                     905                     47         -                    707                    151
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                             
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
$ in millions                                             Acquisition- and                                                
                                                                                                    Divestiture-                             Restructuring                             Certain Other
Year Ended Dec. 31, 2016                                          GAAP                          Related Costs(3)                                     Costs                                     Items                               Non-GAAP(1)
Materials and production                                       $13,891                                    $4,035                                      $181                           $-                                    $9,675
Marketing and administrative                                     9,762                                        78                                        95                            -                                     9,589
Research and development                                         7,194                                       222                                       142                            -                                     6,830
Restructuring costs                                                651                            -                                       651                            -                            -
Other (income) expense, net                                        810                                        47                            -                                       648                                       115
                                                                                                                                                                                                                                                
Year Ended Dec. 31, 2015
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                            -                            -
Other (income) expense, net                   1,527                     54         -                  1,125                    348
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------

GAAP Expense, EPS and Related Information

On a GAAP basis, the gross margin was 67.1 percent for the fourth quarter of 2016 compared to 62.3 percent for the fourth quarter of 2015. The increase in gross margin for the fourth quarter of 2016 was primarily driven by lower acquisition- and divestiture-related costs and restructuring costs noted above, which negatively affected gross margin by 7.7 percentage points in the fourth quarter of 2016 compared with 12.5 percentage points for the fourth quarter of 2015. The gross margin was 65.1 percent for the full year of 2016 compared to 62.2 percent for the full year of 2015. The increase in gross margin for the full year of 2016 was primarily driven by lower acquisition- and divestiture-related costs and restructuring costs, which negatively affected gross margin by 10.6 percentage points in the full year of 2016 compared with 13.2 percentage points for the full year of 2015.

Marketing and administrative expenses were $2.6 billion in the fourth quarter of 2016, a 1 percent decrease compared to the fourth quarter of 2015. The decline primarily reflects lower acquisition- and divestiture-related costs. Full-year 2016 marketing and administrative expenses were $9.8 billion, a 5 percent decrease compared to the full year of 2015. The decline reflects lower acquisition- and divestiture-related costs, the favorable impact of foreign exchange and lower direct selling costs.

Research and development (R&D) expenses were $1.7 billion in the fourth quarter of 2016, a 4 percent decrease compared to the fourth quarter of 2015. The decline reflects a reduction in expenses resulting from a decrease in the estimated fair value of liabilities for contingent consideration, partially offset by higher in-process research and development (IPR&D) impairment charges. R&D expenses were $7.2 billion for the full year of 2016, a 7 percent increase compared to the full year of 2015. The increase primarily reflects higher IPR&D impairment charges, clinical development spending and restructuring costs, partially offset by a reduction in expenses resulting from a decrease in the estimated fair value of liabilities for contingent consideration.

Other (income) expense, net, was $721 million of expense in the fourth quarter of 2016 compared to $905 million of expense in the fourth quarter of 2015 and was $810 million of expense for the full year of 2016 compared to $1.5 billion of expense for the full year of 2015. Other (income) expense, net for the fourth quarter and full year of 2016 includes a $625 million charge to settle the worldwide KEYTRUDA patent litigation. 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 devaluation of the company’s net monetary assets in Venezuela and a $680 million net charge to settle the Vioxx shareholder class action litigation.

GAAP EPS was $0.42 for the fourth quarter of 2016 compared with $0.35 for the fourth quarter of 2015. GAAP EPS was $2.04 for the full year of 2016 compared with $1.56 for the full year of 2015.

Non-GAAP Expense, EPS and Related Information

The non-GAAP gross margin was 74.8 percent for the fourth quarter of 2016, the same as the fourth quarter of 2015. The non-GAAP gross margin was 75.7 percent for the full year of 2016 compared to 75.4 percent for the full year of 2015. The increase in GAAP gross margin for the full year of 2016 reflects lower inventory write-offs.

Non-GAAP marketing and administrative expenses were $2.6 billion in the fourth quarter of 2016, comparable to the fourth quarter of 2015. Non-GAAP marketing and administrative expenses were $9.6 billion for the full year of 2016, a 2 percent decrease compared to the full year of 2015. The decline reflects the favorable impact of foreign exchange and lower direct selling costs.

Non-GAAP R&D expenses were $1.7 billion in the fourth quarter of 2016, a 3 percent decline compared to the fourth quarter of 2015. The decline reflects lower licensing costs. Non-GAAP R&D expenses were $6.8 billion for the full year of 2016, a 3 percent increase compared to the full year of 2015 reflecting increased clinical development spending.

Non-GAAP EPS was $0.89 for the fourth quarter of 2016 compared with $0.93 for the fourth quarter of 2015. Non-GAAP EPS was $3.78 for the full year of 2016 compared with $3.59 for the full year of 2015.

Non-GAAP other (income) expense, net, was $32 million of expense in the fourth quarter of 2016 compared to $151 million of expense in the fourth quarter of 2015, primarily reflecting the receipt of a milestone payment. Non-GAAP other (income) expense, net, for the full year of 2016 was $115 million of expense compared to $348 million of expense for the full year of 2015, reflecting lower foreign exchange losses.

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

                                                                                          
----------------------------------------------------------------------- -------------------- ----------------------------------------------------------------------- ---------------------------------------------------
$ in millions, except EPS amounts                                                           Fourth Quarter                                         Year Ended
                                                                                                                                                        Dec. 31,         Dec. 31,
                                                                                                       2016                                2015                                2016                                2015
EPS
GAAP EPS                                                                                              $0.42                               $0.35                               $2.04                               $1.56
Difference(4)                                                                                          0.47                                0.58                                1.74                                2.03
Non-GAAP EPS that excludes items listed below(1)                                                      $0.89                               $0.93                               $3.78                               $3.59
                                                                                                                                                                                                                         
Net Income
GAAP net income(2)                                                                                   $1,177                                $976                              $5,691                              $4,442
Difference                                                                                            1,293                               1,632                               4,847                               5,753
Non-GAAP net income that excludes items listed below(1,2)                                            $2,470                              $2,608                             $10,538                             $10,195
                                                                                                                                                                                                                         
Decrease (Increase) in Net Income Due to Excluded Items:
  Acquisition- and divestiture-related costs(3)                                                        $780                              $1,264                              $4,382                              $5,398
  Restructuring costs                                                                                   310                                 340                               1,069                               1,110
  Charge to settle worldwide KEYTRUDA patent litigation                                                 625                      -                                 625                      -
  Net charge to settle Vioxx shareholder class action litigation                             -                                 680                      -                                 680
  Foreign exchange losses related to Venezuela                                               -                                 161                      -                                 876
  Gain on divestiture of certain ophthalmic products                                         -                               (147)                      -                               (147)
  Gain on divestiture of certain migraine clinical development programs                      -                      -                      -                               (250)
  Other                                                                                                  29                                  13                                  23                                (34)
Net decrease (increase) in income before taxes                                                        1,744                               2,311                               6,099                               7,633
Income tax (benefit) expense(5)                                                                       (451)                               (679)                             (1,252)                             (1,880)
Decrease (increase) in net income                                                 $1,293           $1,632           $4,847           $5,753
----------------------------------------------------------------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- --------------

Financial Outlook

Merck expects its full-year 2017 GAAP EPS to be between $2.47 and $2.62. Merck expects its full-year 2017 non-GAAP EPS to be between $3.72 and $3.87, including an approximately 2 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 2017 exchange rates, Merck anticipates full-year 2017 revenues to be between $38.6 billion and $40.1 billion, including an approximately 2 percent negative impact from foreign exchange.

The following table summarizes the company’s 2017 financial guidance.

                                        
-------------------- -------------------- -------------------- -------------------- ------------------------------------------- -------------------- -------------------- -------------------- -------------------------------------------
                                                                  GAAP                                       Non-GAAP(1)
                                                                                                                                                                                                                                            
Revenue                                                                                                  $38.6 to $40.1 billion                                                                                   $38.6 to $40.1 billion**
Operating expenses                                                                  Higher than 2016 by a low-single digit rate                                                                Higher than 2016 by a low-single digit rate
Effective tax rate                                                                                               22.0% to 23.0%                                                                                            21.0 % to 22.0%
EPS                                                     $2.47 to $2.62                                    $3.72 to $3.87
-------------------- -------------------- -------------------- -------------------- ------------------------------------------- -------------------- -------------------- -------------------- -------------------------------------------
                                                                                                                                                                          **The company does not have any non-GAAP adjustments to revenue.

A reconciliation of anticipated 2017 GAAP EPS to non-GAAP EPS and the items excluded from non-GAAP EPS are provided in the table below.

                                     
------------------------------------------------ -------------------- -------------------- -------------------- --------------------
$ in millions, except EPS amounts                            Full-Year 2017
                                                                                                                 
GAAP EPS                                                                                                              $2.47 to $2.62
Difference(4)                                                                                                                   1.25
Non-GAAP EPS that excludes items listed below(1)                                                                      $3.72 to $3.87
                                                                                                                 
  Acquisition- and divestiture-related costs                                                                                  $3,600
  Restructuring costs                                                                                                            600
Net decrease (increase) in income before taxes                                                                                 4,200
Estimated income tax (benefit) expense                                                                                         (750)
Decrease (increase) in net income                                    $3,450
------------------------------------------------ -------------------- -------------------- -------------------- --------------------

The expected full-year 2017 GAAP effective tax rate of 22.0 to 23.0 percent reflects an unfavorable impact of approximately 1 percentage point from the above items.

Total Employees

As of Dec. 31, 2016, 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://investors.merck.com/events-and-presentations/default.aspx . Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 32136167. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 32136167. 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

For over a century, Merck has been 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. You can also follow our Twitter conversation at $MRK.

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 2015 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).

###

(1) Merck is providing certain 2016 and 2015 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 results and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the items, see Tables 2a and 2b attached to this release.

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

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

(4) 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.

(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.

                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                           MERCK & CO., INC.
                                                                                                                                                                                                CONSOLIDATED STATEMENT OF INCOME - GAAP
                                                                                                                                                                                            (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
                                                                                                                                                                                                              (UNAUDITED)
                                                                                                                                                                                                                Table 1
                                                                                                                                                                                                                                                                                                                                                         
                                                                               -----------------------------------------------------------------------------------------------------------------------                     ---------------------                     -----------------------------------------------------------------------------------------------------------------------                     ---------------------
                                                                                                                                        GAAP                                                                                                                                                               GAAP                                                                                
                                                                               ----------------------------------------------------------------------------------------------------------------                                                                      ----------------------------------------------------------------------------------------------------------------
                                                                                                     4Q16                                                                  4Q15                                                  % Change                                                Full Year                                                             Full Year                                               % Change
                                                                                                                                                                                                               2016                                               2015                                             
                                                                               --------------------------------------------------------------------- -------------------------------------------------                     ---------------------                     --------------------------------------------------------------------- -------------------------------------------------                     ---------------------
                                                                                                                                                                                                                                                                             
                                                                               --------------------------------------------------------------------- -------------------------------------------------                     ---------------------                     --------------------------------------------------------------------- -------------------------------------------------                     ---------------------
Sales                                                                                             $ 10,115                                                              $ 10,215                                                   -1 %                                                 $ 39,807                                                              $ 39,498                                                    1 %
                                                                                                                                                                                                                                                                                                                                                                                                                                       
Costs, Expenses and Other
  Materials and production (1)                                                                       3,332                                                                 3,850                                                  -13 %                                                   13,891                                                                14,934                                                   -7 %
  Marketing and administrative (1)                                                                   2,593                                                                 2,615                                                   -1 %                                                    9,762                                                                10,313                                                   -5 %
  Research and development (1)                                                                       1,720                                                                 1,797                                                   -4 %                                                    7,194                                                                 6,704                                                    7 %
  Restructuring costs (2)                                                                              265                                                                   233                                                   14 %                                                      651                                                                   619                                                    5 %
  Other (income) expense, net (1) (3)                                                                  721                                                                   905                                                  -20 %                                                      810                                                                 1,527                                                  -47 %
Income Before Taxes                                                                                  1,484                                                                   815                                                   82 %                                                    7,499                                                                 5,401                                                   39 %
Income Tax Provision (Benefit)                                                                         300                                                                  (166 )                                                                                                         1,787                                                                   942
Net Income                                                                                           1,184                                                                   981                                                   21 %                                                    5,712                                                                 4,459                                                   28 %
Less: Net Income Attributable to Noncontrolling Interests                                                7                                                                     5                                                                                                              21                                                                    17
Net Income Attributable to Merck & Co., Inc.                                                      $  1,177                                                              $    976                                                   21 %                                                 $  5,691                                                              $  4,442                                                   28 %
Earnings per Common Share Assuming Dilution                                                       $   0.42                        $   0.35                                20 %                                                 $   2.04                        $   1.56                                31 %
                                                                               -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------                      ---------- ---------                      -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------                      ---------- ---------
                                                                                                                                                                                                                                                                                   
                                                                               -------------------------------------------------                     -------------------------------------------------                                                               -------------------------------------------------                     -------------------------------------------------
Average Shares Outstanding Assuming Dilution                                                         2,776                                                                 2,813                                                                                                           2,787                                                                 2,841
Tax Rate (4)                                                                       20.2 %                         -20.4 %                                                                                       23.8 %                          17.4 %
                                                                               -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------                                                                -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                       
* 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 2016 includes a $625 million charge to settle worldwide patent litigation related to KEYTRUDA. Other (income) expense, net in the fourth quarter and full year of 2015 includes a $680 million net charge related to the settlement of 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. In addition, 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 devalue 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.

(4) The effective income tax rates for the fourth quarter and full year of 2015 reflect the impact of the net charge related to the settlement of VIOXX shareholder class action litigation being fully deductible at combined U.S. federal and state tax rates, the favorable impact of tax legislation enacted in the fourth quarter of 2015, as well as the unfavorable effect of non-tax deductible foreign exchange losses related to 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.

 
                                                                                                                                                  MERCK & CO., INC.
                                                                                                                                           GAAP TO NON-GAAP RECONCILIATION
                                                                                                                                                 FOURTH QUARTER 2016
                                                                                                                                   (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
                                                                                                                                                     (UNAUDITED)
                                                                                                                                                      Table 2a
                                                                                
                                                                  --------------------                      --------------------                          --------------------                          --------------------                          --------------------                      --------------------
                                                                                                               Acquisition and                                Restructuring                                 Certain Other                                  Adjustment
                                                                          GAAP                                  Divestiture-                                    Costs (2)                                     Items (3)                                     Subtotal                                  Non-GAAP
                                                                                           Related Costs (1)                                                                                                         
                                                                  --------------------                      --------------------                          --------------------                          --------------------                          --------------------                      --------------------
                                                                                                                                                                                                                                                                              
                                                                  --------------------                                                                                                                                                                                                          --------------------
Materials and production                                                       $ 3,332                                       756                                            32                                                                                         788                                   $ 2,544
Marketing and administrative                                                     2,593                                        22                                             4                                                                                          26                                     2,567
Research and development                                                         1,720                                      (33)                                             9                                                                                        (24)                                     1,744
Restructuring costs                                                                265                                                                                     265                                                                                         265                                         -
Other (income) expense, net                                                        721                                        35                                                                                         654                                           689                                        32
Income Before Taxes                                                              1,484                                     (780)                                         (310)                                         (654)                                       (1,744)                                     3,228
Income Tax Provision (Benefit)                                                     300                                     (253) (4)                                      (60) (4)                                     (138) (4)                                     (451)                                       751
Net Income                                                                       1,184                                     (527)                                         (250)                                         (516)                                       (1,293)                                     2,477
Net Income Attributable to Merck & Co., Inc.                                     1,177                                     (527)                                         (250)                                         (516)                                       (1,293)                                     2,470
Earnings per Common Share Assuming Dilution                                     $ 0.42                                    (0.19)                                        (0.09)                                        (0.19)                                        (0.47)                                    $ 0.89
                                                                  --------------------                                                                                                                                                                                                          --------------------
                                                                                                                                                                                                                                                                              
                                                                  --------------------                                                                                                                                                                                                          --------------------
Tax Rate                                                                         20.2%                                                                                                                                                                                                                         23.3%
                                                                  --------------------                                                                                                                                                                                                          --------------------

Only the line items that are affected by non-GAAP adjustments are shown.

Merck is providing certain 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 results and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

(1) Amounts included in materials and production costs reflect expenses for the amortization of intangible assets recognized as a result of acquisitions. 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 business divestitures. Amounts included in research and development expenses reflect a reduction of expenses of $432 million related to decreases in the estimated fair value measurement of liabilities for contingent consideration, largely offset by $399 million of in-process research and development (IPR&D) impairment charges. Amount included in other (income) expense, net represents a goodwill impairment charge related to a business within the Healthcare Services segment.

(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 $625 million charge to settle worldwide patent litigation related to KEYTRUDA.

(4) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

 
                                                                                                                                        MERCK & CO., INC.
                                                                                                                                 GAAP TO NON-GAAP RECONCILIATION
                                                                                                                                         FULL YEAR 2016
                                                                                                                         (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
                                                                                                                                           (UNAUDITED)
                                                                                                                                            Table 2b
                                                                               
                                              --------------------                      --------------------                          --------------------                          --------------------                          --------------------                      --------------------
                                                                                           Acquisition and                                Restructuring                                 Certain Other                                  Adjustment
                                                      GAAP                                  Divestiture-                                    Costs (2)                                     Items (3)                                     Subtotal                                  Non-GAAP
                                                                       Related Costs (1)                                                                                                         
                                              --------------------                      --------------------                          --------------------                          --------------------                          --------------------                      --------------------
                                                                                                                                                                                                                                                          
                                              --------------------                                                                                                                                                                                                          --------------------
Materials and production                                  $ 13,891                                     4,035                                           181                                                                                       4,216                                   $ 9,675
Marketing and administrative                                 9,762                                        78                                            95                                                                                         173                                     9,589
Research and development                                     7,194                                       222                                           142                                                                                         364                                     6,830
Restructuring costs                                            651                                                                                     651                                                                                         651                                         -
Other (income) expense, net                                    810                                        47                                                                                         648                                           695                                       115
Income Before Taxes                                          7,499                                   (4,382)                                       (1,069)                                         (648)                                       (6,099)                                    13,598
Income Tax Provision (Benefit)                               1,787                                     (886) (4)                                     (229) (4)                                     (137) (4)                                   (1,252)                                     3,039
Net Income                                                   5,712                                   (3,496)                                         (840)                                         (511)                                       (4,847)                                    10,559
Net Income Attributable to Merck & Co., Inc.                 5,691                                   (3,496)                                         (840)                                         (511)                                       (4,847)                                    10,538
Earnings per Common Share Assuming Dilution                 $ 2.04                                    (1.26)                                        (0.30)                                        (0.18)                                        (1.74)                                    $ 3.78
                                              --------------------                                                                                                                                                                                                          --------------------
                                                                                                                                                                                                                                                          
                                              --------------------                                                                                                                                                                                                          --------------------
Tax Rate                                                     23.8%                                                                                                                                                                                                                         22.3%
                                              --------------------                                                                                                                                                                                                          --------------------

Only the line items that are affected by non-GAAP adjustments are shown.

Merck is providing certain 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 results and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

(1) Amounts included in materials and production costs primarily reflect $3.7 billion of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as $347 million of intangible asset impairment charges. 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 business divestitures. Amounts included in research and development expenses reflect $624 million of in-process research and development (IPR&D) impairment charges, partially offset by a reduction of expenses of $402 million related to a decrease in the estimated fair value measurement of liabilities for contingent consideration. Amounts included in other (income) expense, net represent goodwill impairment charges related to businesses within the Healthcare Services segment.

(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 $625 million charge to settle worldwide patent litigation related to KEYTRUDA.

(4) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                     MERCK & CO., INC.
                                                                                                                                                                                                                                     FRANCHISE / KEY PRODUCT SALES
                                                                                                                                                                                                                                     (AMOUNTS IN MILLIONS)
                                                                                                                                                                                                                                     Table 3
                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
                                                             ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     -------------------- -------------------- --------------------
                                                                                                                                                                          2016                                                                                                                                                                                                                                               2015                                                                                                                                                             % Change
                                                             ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                   ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                   ------------------------------------------------------------
                                                                         1Q                           2Q                            3Q                            4Q                         Full Year                                          1Q                           2Q                            3Q                            4Q                         Full Year                                       4Q                  Full Year
                                                             ----------------------------------------------- ----------------------------------------------- ------------------------------------------------ ------------------------------------------------ ----------------------------                     ----------------------------------------------- ----------------------------------------------- ------------------------------------------------ ------------------------------------------------ ----------------------------                     -------------------- -------------------- --------------------
TOTAL SALES (1)                                                                 $ 9,312                                         $ 9,844                                         $ 10,536                                         $ 10,115                                         $ 39,807                                         $ 9,425                                         $ 9,785                                         $ 10,073                                         $ 10,215                                         $ 39,498                                        -1                                         1
                                                             -------------------- -----                      -------------------- -----                      -------------------- ------                      -------------------- ------                      -------------------- ------                      -------------------- -----                      -------------------- -----                      -------------------- ------                      -------------------- ------                      -------------------- ------                      --------------------                      --------------------
  PHARMACEUTICAL                                                                  8,104                                           8,700                                            9,443                                            8,904                                           35,151                                           8,266                                           8,564                                            8,925                                            9,027                                           34,782                                        -1                                         1
    Primary Care and Women’s Health
      Cardiovascular
        Zetia                                                                       612                                             702                                              671                                              575                                            2,560                                             568                                             635                                              633                                              691                                            2,526                                       -17                                         1
        Vytorin                                                                     277                                             293                                              273                                              299                                            1,141                                             320                                             320                                              302                                              308                                            1,251                                        -3                                        -9
      Diabetes
        Januvia                                                                     906                                           1,064                                            1,006                                              932                                            3,908                                             884                                           1,044                                            1,014                                              921                                            3,863                                         1                                         1
        Janumet                                                                     506                                             569                                              548                                              577                                            2,201                                             509                                             554                                              562                                              526                                            2,151                                        10                                         2
      General Medicine & Women’s Health
        NuvaRing                                                                    175                                             200                                              195                                              207                                              777                                             166                                             182                                              190                                              193                                              732                                         7                                         6
        Implanon / Nexplanon                                                        134                                             164                                              148                                              160                                              606                                             137                                             124                                              176                                              151                                              588                                         6                                         3
        Dulera                                                                      113                                             121                                               97                                              105                                              436                                             130                                             120                                              133                                              153                                              536                                       -31                                       -19
        Follistim AQ                                                                 94                                              73                                              101                                               87                                              355                                              82                                             111                                               95                                               95                                              383                                        -9                                        -7
    Hospital and Specialty
    Hepatitis
        Zepatier                                                                     50                                             112                                              164                                              229                                              555
      HIV
        Isentress                                                                   340                                             338                                              372                                              337                                            1,387                                             385                                             375                                              377                                              374                                            1,511                                       -10                                        -8
      Hospital Acute Care
        Cubicin (2)                                                                 292                                             357                                              320                                              119                                            1,087                                             187                                             293                                              325                                              322                                            1,127                                       -63                                        -4
        Noxafil                                                                     145                                             143                                              147                                              161                                              595                                             111                                             117                                              132                                              128                                              487                                        26                                        22
        Invanz                                                                      114                                             143                                              152                                              152                                              561                                             132                                             139                                              153                                              144                                              569                                         6                                        -1
        Cancidas                                                                    133                                             131                                              142                                              152                                              558                                             163                                             134                                              139                                              137                                              573                                        11                                        -3
        Bridion                                                                      90                                             113                                              139                                              139                                              482                                              85                                              87                                               89                                               92                                              353                                        52                                        37
        Primaxin                                                                     73                                              81                                               77                                               66                                              297                                              65                                              88                                               75                                               86                                              313                                       -23                                        -5
      Immunology
        Remicade                                                                    349                                             339                                              311                                              269                                            1,268                                             501                                             455                                              442                                              396                                            1,794                                       -32                                       -29
        Simponi                                                                     188                                             199                                              193                                              186                                              766                                             158                                             169                                              178                                              185                                              690                                         0                                        11
    Oncology
      Keytruda                                                                      249                                             314                                              356                                              483                                            1,402                                              83                                             110                                              159                                              214                                              566                                       125                                       148
      Emend                                                                         126                                             143                                              137                                              144                                              549                                             122                                             134                                              141                                              139                                              535                                         4                                         3
      Temodar                                                                        66                                              73                                               78                                               67                                              283                                              74                                              80                                               83                                               75                                              312                                       -11                                        -9
    Diversified Brands
      Respiratory
        Singulair                                                                   237                                             229                                              239                                              210                                              915                                             245                                             212                                              201                                              273                                              931                                       -23                                        -2
        Nasonex                                                                     229                                             101                                               94                                              112                                              537                                             289                                             215                                              121                                              231                                              858                                       -52                                       -37
      Other
        Cozaar / Hyzaar                                                             126                                             132                                              131                                              121                                              511                                             185                                             189                                              150                                              143                                              667                                       -15                                       -23
        Arcoxia                                                                     111                                             117                                              114                                              108                                              450                                             123                                             115                                              123                                              110                                              471                                        -2                                        -4
        Fosamax                                                                      75                                              73                                               68                                               68                                              284                                              94                                              96                                               86                                               82                                              359                                       -18                                       -21
        Zocor                                                                        46                                              50                                               54                                               37                                              186                                              49                                              63                                               56                                               49                                              217                                       -26                                       -14
    Vaccines
      Gardasil / Gardasil 9                                                         378                                             393                                              860                                              542                                            2,173                                             359                                             427                                              625                                              497                                            1,908                                         9                                        14
      ProQuad / M-M-R II / Varivax                                                  357                                             383                                              496                                              405                                            1,640                                             348                                             358                                              390                                              409                                            1,505                                        -1                                         9
      Zostavax                                                                      125                                             149                                              190                                              221                                              685                                             175                                             149                                              179                                              246                                              749                                       -10                                        -9
      RotaTeq                                                                       188                                             130                                              171                                              162                                              652                                             192                                              89                                              160                                              169                                              610                                        -4                                         7
      Pneumovax 23                                                                  107                                             120                                              175                                              238                                              641                                             110                                             106                                              138                                              188                                              542                                        27                                        18
    Other Pharmaceutical (3)                                                      1,093                                           1,151                                            1,224                                            1,234                                            4,703                                           1,235                                           1,274                                            1,298                                            1,300                                            5,105                                        -5                                        -8
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
  ANIMAL HEALTH (4)                                                                 829                                             900                                              865                                              884                                            3,478                                             831                                             842                                              827                                              832                                            3,331                                         6                                         4
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
  Other Revenues (4)(5)                                          379       244        228        327      1,178                          328       379        321        356      1,385                                        -8                    -15
                                                             -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------                      -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------                      -------------------- -------------------- --------------------

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

(1) Only select products are shown.

(2) First quarter of 2015 reflects approximately two months of sales following the acquisition of Cubist Pharmaceuticals, Inc. by Merck on January 21, 2015.

(3) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $103 million, $91 million, $135 million and $126 million for the first, second, third and fourth quarters of 2016, respectively. 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.

(4) Amounts reflect a reclassification of certain revenues between Animal Health and Other Revenues.

(5) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.

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SOURCE: Merck"> <Property FormalName="PrimaryTwitterHandle" Value="@Merck

Merck 
Media: 
Lainie Keller, 908-236-5036 
or 
Investors: 
Teri Loxam, 908-740-1986 
Amy Klug, 908-740-1898


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