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 Merck Announces Third-Quarter 2017 Financial Results
   Friday, October 27, 2017 6:45:00 AM ET

--KEYTRUDA as well as Animal Health Business Achieved Quarterly Sales of $1.0 Billion

--Third-Quarter 2017 GAAP EPS was $(0.02), Reflecting a $2.35 Billion Charge Related to the Formation of a Strategic Oncology Collaboration with AstraZeneca; Third-Quarter Non-GAAP EPS was $1.11

--Company Narrows and Raises 2017 Full-Year Revenue Range to be Between $40.0 Billion and $40.5 Billion, Including a Less Than 1 Percent Negative Impact from Foreign Exchange

--Company Narrows and Raises 2017 Full-Year GAAP EPS Range to be Between $1.78 and $1.84; Narrows and Raises 2017 Full-Year Non-GAAP EPS Range to be Between $3.91 and $3.97, Including a Less Than 1 Percent Negative Impact from Foreign Exchange

--KEYTRUDA Development Program Advances with Key Regulatory Approvals



Merck (MRK ), known as MSD outside the United States and Canada, today announced financial results for the third quarter of 2017.

This press release features multimedia. View the full release here: http://www.businesswire.com/news/home/20171027005199/en/

"Our performance in the third quarter demonstrates the strength of our underlying business, with growth from key product launches, good global demand for vaccines, as well as strength from our Animal Health business," said Kenneth C. Frazier, chairman and chief executive officer, Merck. "We will continue augmenting our pipeline through value-creating business development like our oncology collaboration with AstraZeneca to address unmet medical need and drive future growth."

Financial Summary

                                                                 
                                                                                                                         ----------------------------------------------------------
                                                                                                                                                Third Quarter
                                                                                                                         ----------------------------------------------------------
$ in millions, except EPS amounts                                  2017        2016
--------------------------------------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------
Sales                                                           $10,325     $10,536
--------------------------------------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------
GAAP net (loss) income(1)                                          (56)       2,184
--------------------------------------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------
Non-GAAP net income that excludes items listed below(1,2)         3,054       2,989
--------------------------------------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------
GAAP EPS                                                         (0.02)        0.78
--------------------------------------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------
Non-GAAP EPS that excludes items listed below(2)                   1.11        1.07
--------------------------------------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------
                                                                                                                                    

Worldwide sales were $10.3 billion for the third quarter of 2017, a decrease of 2 percent compared with the third quarter of 2016, including a 1 percent positive impact from foreign exchange.

Sales in the third quarter of 2017 were reduced by approximately $240 million due to a borrowing from the U.S. Centers for Disease Control and Prevention Pediatric Vaccine Stockpile of GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), a vaccine to prevent certain cancers and other diseases caused by HPV, driven in part by the temporary production shutdown resulting from the cyber-attack, as well as overall higher demand than originally planned.

Additionally, as expected, revenue was unfavorably impacted by approximately $135 million from lost sales in certain markets related to the cyber-attack. Sales in the third quarter of 2017 compared with the third quarter of 2016 were also unfavorably impacted by approximately $150 million of additional sales in Japan in the third quarter of 2016 resulting from the timing of shipments. Sales in the third quarter of 2017 reflect incremental sales of approximately $130 million due to the recording of vaccine sales from 19 European countries that were part of the Sanofi Pasteur MSD (SPMSD) vaccines joint venture, which was terminated on Dec. 31, 2016.

GAAP (generally accepted accounting principles) earnings (loss) per share assuming dilution (EPS) were $(0.02) for the third quarter of 2017, which reflects a $2.35 billion aggregate charge related to the formation of a strategic oncology collaboration with AstraZeneca. Non-GAAP EPS of $1.11 for the third quarter of 2017 excludes acquisition- and divestiture-related costs, restructuring costs, the charge related to the AstraZeneca collaboration referenced above and certain other items. Year-to-date results can be found in the attached tables.

Pipeline Highlights

Merck expanded its focus in oncology by further advancing the development program for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy, receiving key regulatory approvals and through business development transactions.

-- The U.S. Food and Drug Administration (FDA) approved KEYTRUDAunder its Accelerated Approval program for the treatment of patients with recurrent locally advanced or metastatic gastric or gastroesophageal junction adenocarcinoma whose tumors express PD-L1 and who have already received two or more lines of chemotherapy.

-- The European Commission approved KEYTRUDA for the treatment of certain patients with locally advanced or metastatic urothelial carcinoma.

-- At the European Society for Medical Oncology 2017 Congress, data were presented from studies evaluating the use of KEYTRUDA as a monotherapy and combination therapy in 12 cancers.

-- Merck is amending the KEYNOTE-189 study to include overall survival as a co-primary endpoint. The updated completion date is Feb. 2019 and there will be opportunities for the company to conduct interim analyses. KEYNOTE-189 is a Phase 3 study of platinum-pemetrexed chemotherapy with or without KEYTRUDA in patients with first line metastatic non-squamous non-small cell lung cancer (NSCLC).

-- Merck entered into an oncology collaboration with AstraZeneca to co-develop and co-commercialize AstraZeneca’s Lynparza (olaparib), a PARP inhibitor, and investigational medicine selumetinib, a MEK inhibitor, as monotherapy and in combination treatments for multiple cancer types.

-- The FDA approved Lynparza for new and additional uses in ovarian cancer, including as a maintenance treatment for recurrent epithelial ovarian, fallopian tube or primary peritoneal adult cancer patients who are in response to platinum-based chemotherapy, regardless of BRCA status, and in tablets for the use in patients with deleterious or suspected deleterious germline BRCA-mutated advanced ovarian cancer, who have been treated with three or more prior lines of chemotherapy.

-- The FDA accepted for review the supplemental New Drug Application (NDA) for the use of Lynparza tablets in patients with germline BRCA-mutated, HER2-negative metastatic breast cancer who have been previously treated with chemotherapy either in the neoadjuvant, adjuvant or metastatic settings. The FDA granted Priority Review with a PDUFA action date in the first quarter of 2018. A NDA was also submitted to Japan’s Pharmaceuticals and Medical Devices Agency.

-- Merck acquired Rigontec, a pioneer in accessing the retinoic acid-inducible gene I (RIG-I) pathway, part of the innate immune system, as a novel and distinct approach in cancer immunotherapy to induce both immediate and long-term anti-tumor immunity. Rigontec’s lead candidate, RGT100, is currently in Phase I development evaluating treatment in patients with various tumors. The acquisition closed in October.

Merck presented results at the European Research Organization on Genital Infection and Neoplasia Congress from the final analyses of the pivotal Phase 3 efficacy, immunogenicity and safety clinical trial for GARDASIL 9 showing sustained efficacy for up to six years in the per protocol population.

Merck presented data at ID Week 2017 from the pivotal Phase 3 clinical study of letermovir, an investigational antiviral medicine for prophylaxis of cytomegalovirus (CMV) infection or disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant. Data were also presented from the Phase 1 trial for V160, an investigational vaccine for human CMV, evaluating safety, tolerability and immunogenicity in healthy adults.

Merck announced it will not submit applications for regulatory approval for anacetrapib, the investigational cholesteryl ester transfer protein inhibitor, following a thorough review of the clinical profile of anacetrapib, including discussions with external experts.

Merck announced the strategic decision to discontinue the development of the investigational combination regimens MK-3682B (grazoprevir/ruzasvir/uprifosbuvir) and MK-3682C (ruzasvir/uprifosbuvir) for the treatment of chronic hepatitis C virus (HCV) infection. This decision was made based on a review of available Phase 2 efficacy data and in consideration of the evolving marketplace and the growing number of treatment options available for patients with chronic HCV infection, including ZEPATIER (elbasvir and grazoprevir).

Third-Quarter 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                                                                                                    Third Quarter
                                                                                              2017        2016     Change                   Change
                                                                                                                                                                                                                                                         Ex-Exchange
Total Sales                                                                                $10,325                                           $10,536                                              -2%                                                            -3%
Pharmaceutical                                                                               9,156                                             9,443                                              -3%                                                            -4%
   JANUVIA / JANUMET                                                                         1,525                                             1,554                                              -2%                                                            -2%
   KEYTRUDA                                                                                  1,047                                               356                                             194%                                                           192%
   GARDASIL / GARDASIL 9                                                                       675                                               860                                             -22%                                                           -22%
   PROQUAD,                                                                                    519                                               496                                               4%                                                             5%
   M-M-R II and VARIVAX
   ZEPATIER                                                                                    468                                               164                                             185%                                                           184%
   ZETIA / VYTORIN                                                                             462                                               944                                             -51%                                                           -52%
   ISENTRESS / ISENTRESS HD                                                                    310                                               372                                             -17%                                                           -18%
   ZOSTAVAX                                                                                    234                                               190                                              23%                                                            23%
   PNEUMOVAX 23                                                                                229                                               175                                              31%                                                            31%
Animal Health                                                                                1,000                                               865                                              16%                                                            14%
Other Revenues                        169         228       -26%                     -13%
--------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------ -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                 

Pharmaceutical Revenue

Third-quarter pharmaceutical sales decreased 3 percent to $9.2 billion, including a 1 percent positive impact from foreign exchange. In addition to the factors mentioned in the Financial Summary above, sales in the third quarter of 2017 reflect the loss of market exclusivity for several products, as well as lower sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCl), medicines that help lower blood sugar in adults with type 2 diabetes. These declines were partially offset by significant growth in KEYTRUDA and from other product launches, as well as from growth in certain in-line brands.

The pharmaceutical sales decline was largely driven by the loss of U.S. market exclusivity for ZETIA (ezetimibe) in late 2016 and VYTORIN (ezetimibe/simvastatin) in April 2017, medicines for lowering LDL cholesterol, and the ongoing impacts of generic competition for CUBICIN (daptomycin for injection), an I.V. antibiotic, and biosimilar competition for REMICADE (infliximab), a treatment for inflammatory diseases, in the company’s marketing territories in Europe. In the aggregate, sales of these products declined approximately $800 million during the third quarter of 2017 compared to the third quarter of 2016.

Additionally, the decline reflects lower sales of GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and GARDASIL 9, vaccines to prevent certain cancers and other diseases caused by HPV, largely attributable to lower sales in the United States as described previously, partially offset by growth in Europe due to the termination of the SPMSD vaccines joint venture noted above, and growth in Asia Pacific reflecting strong demand.

The decrease in the diabetes franchise of JANUVIA and JANUMET was primarily due to pricing pressure partially offset by continued volume growth globally.

Higher sales of KEYTRUDA reflect the company’s continued launch with new indications globally. Strong momentum from the treatment of patients with NSCLC contributed significantly to KEYTRUDA’s overall growth, as KEYTRUDA is the only anti-PD-1 approved in the first-line setting.

Growth in ZEPATIER is due to ongoing launches globally. The company anticipates that future sales of ZEPATIER will be unfavorably affected by increasing competition and declining patient volumes.

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 $185 million in the quarter driven largely by strong growth in the United States.

Growth in PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, was largely due to higher demand and pricing in the United States.

Animal Health Revenue

Animal Health sales totaled $1.0 billion for the third quarter of 2017, an increase of 16 percent compared with the third quarter of 2016, including a 2 percent positive impact from foreign exchange. Growth was driven by sales increases in companion animal products, primarily the BRAVECTO (fluralaner) line of products that kill fleas and ticks in dogs and cats for up to 12 weeks, and companion animal vaccines. Additionally, higher sales of ruminants products, including the positive impact of the Vallee S.A. acquisition which closed in March, swine products and poultry products all contributed to growth.

Third-Quarter Expense, EPS and Related Information

The table below presents selected expense information.

 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$ in millions
Third-Quarter 2017                       Acquisition- and     Restructuring     Certain Other          
                                                                                                            GAAP                                               Divestiture-                                                   Costs                                                   Items                                                                                              Non-GAAP(2)
                                                                                                                                                                    Related
                                                                                                                                                                   Costs(3)
Materials and production                                                                                  $3,274                                                       $768                                                     $25                                                     $--                                                                                                   $2,481
Marketing and administrative                                                                               2,401                                                         11                                                      --                                                      --                                                                                                    2,390
Research and development                                                                                   4,383                                                        271                                                       2                                                   2,350                                                                                                    1,760
Restructuring costs                                                                                          153                                                         --                                                     153                                                      --                                                                                                       --
Other (income) expense, net                                                                                 (86)                                                       (18)                                                      --                                                      --                                                                                                     (68)
                                                                                                                                                                                                                                                                                                                                                                                 
Third-Quarter 2016
Materials and production                                                                                  $3,409                                                       $773                                                     $36                                                     $--                                                                                                   $2,600
Marketing and administrative                                                                               2,393                                                         36                                                       1                                                      --                                                                                                    2,356
Research and development                                                                                   1,664                                                         13                                                      14                                                      --                                                                                                    1,637
Restructuring costs                                                                                          161                                                         --                                                     161                                                      --                                                                                                       --
Other (income) expense, net                          22                   12                --               (6)                           16
---------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------------- -------------------- -------------------- ------------- -------------------- -------------------- ------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                 

GAAP Expense, EPS and Related Information

On a GAAP basis, the gross margin was 68.3 percent for the third quarter of 2017 compared to 67.6 percent for the third quarter of 2016. The increase in gross margin for the third quarter of 2017 was primarily driven by the favorable effects of product mix partially offset by costs related to the cyber-attack.

Marketing and administrative expenses were $2.4 billion in the third quarter of 2017, essentially flat as compared to the third quarter of 2016. Lower acquisition- and divestiture-related costs were offset by costs associated with the company now operating its European vaccines business in the countries that were previously part of the SPMSD vaccines joint venture, higher promotion expenses related to product launches and remediation costs related to the cyber-attack.

Research and development (R&D) expenses were $4.4 billion in the third quarter of 2017 compared with $1.7 billion in the third quarter of 2016. The increase primarily reflects a $2.35 billion aggregate charge related to the formation of the collaboration with AstraZeneca, higher in-process research and development (IPR&D) impairment charges driven by a $240 million charge resulting from the decision to discontinue the development of investigational HCV combination regimens MK-3682B and MK-3682C noted above, and increased investment in early drug development.

The GAAP effective income tax rate of 125.5 percent for the third quarter of 2017 reflects the unfavorable impact of a $2.35 billion aggregate charge related to the formation of the AstraZeneca collaboration for which no tax benefit has been recognized, partially offset by the favorable impact of a net tax benefit of $234 million related to the settlement of certain federal income tax issues.

GAAP EPS was $(0.02) for the third quarter of 2017 compared with $0.78 for the third quarter of 2016.

Non-GAAP Expense, EPS and Related Information

The non-GAAP gross margin was 76.0 percent for the third quarter of 2017 compared to 75.3 percent for the third quarter of 2016. The increase in non-GAAP gross margin was largely driven by the favorable effects of product mix partially offset by costs related to the cyber-attack.

Non-GAAP marketing and administrative expenses were $2.4 billion in the third quarter of 2017, an increase of 1 percent compared to the third quarter of 2016. The increase in non-GAAP marketing and administrative expenses was driven primarily by costs associated with the company now operating its European vaccines business in the countries that were previously part of the SPMSD vaccines joint venture, higher promotion expenses related to product launches and remediation costs related to the cyber-attack.

Non-GAAP R&D expenses were $1.8 billion in the third quarter of 2017, an 8 percent increase compared to the third quarter of 2016. The increase reflects increased investment in early drug development.

The non-GAAP effective income tax rate was 18.7 percent compared to 23.8 percent in the third quarter of 2016.

Non-GAAP EPS was $1.11 for the third quarter of 2017 compared with $1.07 for the third quarter of 2016.

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

                                                           
---------------------------------------------------------------------- -------------------- -------------------- -------------------- -----------------------------------------------------------------------
$ in millions, except EPS amounts                                                                         Third Quarter
                                                                                                                                         2017                     2016
EPS
GAAP EPS                                                                                                                              $(0.02)                                                          $0.78
Difference(4)                                                                                                                            1.13                                                           0.29
Non-GAAP EPS that excludes items listed below(2)                                                                                        $1.11                                                          $1.07
                                                                                                                                                                                         
Net Income
GAAP net (loss) income(1)                                                                                                               $(56)                                                         $2,184
Difference                                                                                                                              3,110                                                            805
Non-GAAP net income that excludes items listed below(1,2)                                                                              $3,054                                                         $2,989
                                                                                                                                                                                         
Decrease (Increase) in Net Income Due to Excluded Items:
   Acquisition- and divestiture-related costs(3)                                                                                       $1,032                                                           $834
   Restructuring costs                                                                                                                    180                                                            212
   Aggregate charge related to the formation of the collaboration with                                                                  2,350                                                             --
   AstraZeneca
   Other                                                                                                                                   --                                                            (6)
Net decrease (increase) in income before taxes                                                                                          3,562                                                          1,040
Income tax (benefit) expense(5)                                                                                                         (452)                                                          (235)
Decrease (increase) in net income                                             $3,110                     $805
---------------------------------------------------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- --------------------
                                                                                                                                                                                         

Financial Outlook

Merck has narrowed and raised its full-year 2017 GAAP EPS range to be between $1.78 and $1.84. Merck narrowed and raised its full-year 2017 non-GAAP EPS range to be between $3.91 and $3.97, including a less than 1 percent negative impact from foreign exchange at current exchange rates. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs, a charge related to the formation of the collaboration with AstraZeneca and certain other items.

Merck has narrowed and raised its full-year 2017 revenue range to be between $40.0 billion and $40.5 billion, including a less than 1 percent negative impact from foreign exchange at current exchange rates.

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

               
-------------------- -------------------- -------------------- ---------------------- -------------------- -------------------- -------------------------------------------
                                           GAAP                                     Non-GAAP(2)
                                                                                                                                 
Revenue                                                        $40.0 to $40.5 billion                                                               $40.0 to $40.5 billion*
Operating expenses                                                    Lower than 2016                                           Higher than 2016 by a mid-single digit rate
Effective tax rate                                                     24.5% to 25.5%                                                                        20.0% to 21.0%
EPS                              $1.78 to $1.84                                  $3.91 to $3.97
-------------------- -------------------- -------------------- ---------------------- -------------------- -------------------- -------------------------------------------
                                                                                                            *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                                                                                                               $1.78 to $1.84
Difference(4)                                                                                                                    2.13
Non-GAAP EPS that excludes items listed below(2)                                                                       $3.91 to $3.97
                                                                                                                  
   Acquisition- and divestiture-related costs                                                                                  $3,800
   Restructuring costs                                                                                                            850
   Aggregate charge related to the formation of the collaboration with                                                          2,350
   AstraZeneca
Net decrease (increase) in income before taxes                                                                                  7,000
Estimated income tax (benefit) expense                                                                                        (1,130)
Decrease (increase) in net income                                                        $5,870
---------------------------------------------------------------------- -------------------- -------------------- --------------------
                                                                                                                  

The expected full-year 2017 GAAP effective tax rate of 24.5 to 25.5 percent reflects an unfavorable impact of approximately 4.5 percentage points from the above items.

Total Employees

As of Sept. 30, 2017, Merck had approximately 69,500 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. EDT 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 83569475. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 83569475. 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 more than a century, Merck, a leading global biopharmaceutical company known as MSD outside of the United States and Canada, has been inventing for life, bringing forward medicines and vaccines for many of the world’s most challenging diseases. 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. Today, Merck continues to be at the forefront of research to advance the prevention and treatment of diseases that threaten people and communities around the world - including cancer, cardio-metabolic diseases, emerging animal diseases, Alzheimer’s disease and infectious diseases including HIV and Ebola. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.

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

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

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

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2016 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)Net (loss) income attributable to Merck & Co., Inc.

(2) Merck is providing certain 2017 and 2016 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 as it 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 Table 2a attached to this release.

(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, as well as a $234 million net tax benefit 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                                                                                                           % Change                                                                                                                     GAAP                                                                                                                    % Change
                                                                                                                         -----------------------------------------------------------------------------------------------------------------                                                                                                                 ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      3Q17                                       3Q16                                                                                                                                Sep YTD                                              Sep YTD
                                                                                                                                                                                                                                                                                                                                                            2017                                                                                       2016
                                                                                                                         ---------------------------   -------------------- -------------------- ----------------------------------------------                                                                                       ----------------------------------------------   -------------------- -------------------- ----------------------------------------------
                                                                                                                                                                                                                                                                                                                                                                       
                                                                                                                         -------------------------------------------------- -------------------- -------------------------------------------------                                          --------------------                                           --------------------------------------------------------------------- -------------------- -------------------------------------------------                                          --------------------
Sales                                                                                                                                       $ 10,325                          $ 10,536                                                                         -2%                                                                      $ 29,689                                             $ 29,692                                                                         --
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
Costs, Expenses and Other
   Materials and production (1)                                                                                                                3,274                                                                   3,409                                                                         -4%                                                                         9,369                                                                                     10,559                                                                        -11%
   Marketing and administrative (1)                                                                                                            2,401                                                                   2,393                                                                         --                                                                          7,251                                                                                      7,169                                                                         1%
   Research and development (1) (2)                                                                                                            4,383                                                                   1,664                                                                          *                                                                          7,927                                                                                      5,475                                                                         45%
   Restructuring costs (3)                                                                                                                       153                                                                     161                                                                         -5%                                                                           470                                                                                        386                                                                         22%
   Other (income) expense, net (1)                                                                                                               (86 )                                                                    22                                                                          *                                                                             30                                                                                         88                                                                        -66%
Income Before Taxes                                                                                                                              200                                                                   2,887                                                                        -93%                                                                         4,642                                                                                      6,015                                                                        -23%
Taxes on Income (1)                                                                                                                              251                                                                     699                                                                                                                                                     1,186                                                                                      1,487
Net (Loss) Income                                                                                                                                (51 )                                                                 2,188                                                                          *                                                                          3,456                                                                                      4,528                                                                        -24%
Less: Net Income Attributable to Noncontrolling Interests                                                                                          5                                                                       4                                                                                                                                                        16                                                                                         13
Net (Loss) Income Attributable to Merck & Co., Inc.                                                                                         $    (56 )                                                              $  2,184                                                                          *                                                                       $  3,440                                                                                   $  4,515                                                                        -24%
(Loss) Earnings per Common Share Assuming Dilution (4)                                                                                      $  (0.02 )                        $   0.78                                                       *                                                                       $   1.25                          $   1.62                                                     -23%
                                                                                                                         -------------------- ------ - -------------------- -------------------- -------------------- ------ --------------------                                           --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------                                           --------------------
                                                                                                                                                                                                                                                                                                                  
                                                                                                                         -------------------------------------------------- -------------------- -------------------------------------------------                                                                                                         --------------------------------------------------------------------- -------------------- -------------------------------------------------
Average Shares Outstanding Assuming Dilution (4)                                                                                               2,727                                                                   2,786                                                                                                                                                     2,754                                                                                      2,791
Tax Rate (5)                                                                                                                125.5 %         24.2 %                                                                                                                                 25.5 %                            24.7 %
                                                                                                                         -------------------- ------ - -------------------- -------------------- -------------------- ------ --------------------                                                                                                          -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

* 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) Research and development expenses for the third quarter and first nine months of 2017 include a $2.35 billion aggregate charge recorded in conjunction with the formation of a collaboration with AstraZeneca.

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

(4) Because the company recorded a net loss in the third quarter of 2017, no potential dilutive common shares were used in the computation of loss per common share assuming dilution as the effect would have been anti-dilutive.

(5) The effective income tax rates for the third quarter and first nine months of 2017 reflect the unfavorable impact of a $2.35 billion aggregate pretax charge recorded in conjunction with the formation of a collaboration with AstraZeneca for which no tax benefit has been recognized, partially offset by the favorable impact of a net tax benefit of $234 million related to the settlement of certain federal income tax issues.

 
                                                                                                                                                                                                                                     MERCK & CO., INC.
                                                                                                                                                                                                                                     GAAP TO NON-GAAP RECONCILIATION
                                                                                                                                                                                                                                     THIRD QUARTER 2017
                                                                                                                                                                                                                                     (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
                                                                                                                                                                                                                                     (UNAUDITED)
                                                                                                                                                                                                                                     Table 2a
 
                                                                                                                                               
                                                                                                                   ------------------------------                                          ------------------------------------                                          ------------------------------------                                          ------------------------------------                                          ---------------------                                          -------------------------------------------------
                                                                                                                                GAAP                                                                  Acquisition and                                                                Restructuring                                                                 Certain Other                                                          Adjustment                                                                    Non-GAAP
                                                                                                                                                                                                    Divestiture-Related                                                                Costs (2)                                                                     Items (3)                                                             Subtotal
                                                                                                                                                                                                           Costs
                                                                                                                                                                                                            (1)
                                                                                                                   ---------------------------                                             ----------------------------------                                            ----------------------------------                                            ----------------------------------                                            -------------------                                            ----------------------------------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
                                                                                                                   ------------------------------                                                                                                                                                                                                                                                                                                                                                   -------------------------------------------------
Materials and production                                                                                                              $  3,274                                                    768                                                                            25                                                                                                                                                         793                                                                        $  2,481
Marketing and administrative                                                                                                             2,401                                                     11                                                                                                                                                                                                                                        11                                                                           2,390
Research and development                                                                                                                 4,383                                                    271                                                                             2                                                                         2,350                                                                         2,623                                                                           1,760
Restructuring costs                                                                                                                        153                                                                                                                                  153                                                                                                                                                         153                                                                               -
Other (income) expense, net                                                                                                                (86 )                                                  (18 )                                                                                                                                                                                                                                     (18 )                                                                           (68 )
Income Before Taxes                                                                                                                        200                                                 (1,032 )                                                                        (180 )                                                                      (2,350 )                                                                      (3,562 )                                                                         3,762
Income Tax Provision (Benefit)                                                                                                             251                                                   (179 ) (4)                                                  (39 ) (4)                                                 (234 ) (5)                                                 (452 )                                                                           703
Net (Loss) Income                                                                                                                          (51 )                                                 (853 )                                                                        (141 )                                                                      (2,116 )                                                                      (3,110 )                                                                         3,059
Net (Loss) Income Attributable to Merck & Co., Inc.                                                                                        (56 )                                                 (853 )                                                                        (141 )                                                                      (2,116 )                                                                      (3,110 )                                                                         3,054
(Loss) Earnings per Common Share Assuming Dilution                                                                                    $  (0.02 )                                                (0.31 )                                                                       (0.05 )                                                                       (0.77 )                                                                       (1.13 )                                                                      $   1.11  
                                                                                                                   -------------------- ------ -                                                                                                                                                                                                                                                                                                                                                    -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
                                                                                                                   ------------------------------                                                                                                                                                                                                                                                                                                                                                   -------------------------------------------------
Tax Rate                                                                                                              125.5 %                                                                                                                                                                                                                                                                                                                                                        18.7 %
                                                                                                                   -------------------- ------ -                                                                                                                                                                                                                                                                                                                                                    -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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 as it 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 expenses for the amortization of intangible assets recognized as a result of business acquisitions. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures. Amounts included in research and development expenses reflect $245 million of in-process research and development (IPR&D) impairment charges and $26 million of expenses related to an increase in the estimated fair value measurement of liabilities for contingent consideration. Amount included in other (income) expense, net represents royalty income in connection with the termination of the Sanofi-Pasteur MSD joint venture.

(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) Amount included in research and development expenses represents an aggregate charge recorded in conjunction with the formation of a collaboration with AstraZeneca.

(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.

(5) Represents a net tax benefit related to the settlement of certain federal income tax issues.

 
                                                                                                                                                                                                                                     MERCK & CO., INC.
                                                                                                                                                                                                                                     GAAP TO NON-GAAP RECONCILIATION
                                                                                                                                                                                                                                     NINE MONTHS ENDED SEPTEMBER 30, 2017
                                                                                                                                                                                                                                     (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
                                                                                                                                                                                                                                     (UNAUDITED)
                                                                                                                                                                                                                                     Table 2b
 
                                                                                                                                                           
                                                                                                            -------------------------------------------------                                          ------------------------------------                                          ------------------------------------                                          ------------------------------------                                          ---------------------                                          -------------------------------------------------
                                                                                                                                  GAAP                                                                            Acquisition and                                                                Restructuring                                                                 Certain Other                                                          Adjustment                                                                    Non-GAAP
                                                                                                                                                                                                                Divestiture-Related                                                                Costs (2)                                                                     Items (3)                                                             Subtotal
                                                                                                                                                                                                                       Costs
                                                                                                                                                                                                                        (1)
                                                                                                            ----------------------------------------------                                             ----------------------------------                                            ----------------------------------                                            ----------------------------------                                            -------------------                                            ----------------------------------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                            -------------------------------------------------                                                                                                                                                                                                                                                                                                                                                   -------------------------------------------------
Materials and production                                                                                                       $  9,369                                                                     2,450                                                                           121                                                                                                                                                       2,571                                                                        $  6,798
Marketing and administrative                                                                                                      7,251                                                                        40                                                                             3                                                                                                                                                          43                                                                           7,208
Research and development                                                                                                          7,927                                                                       289                                                                            11                                                                         2,350                                                                         2,650                                                                           5,277
Restructuring costs                                                                                                                 470                                                                                                                                                     470                                                                                                                                                         470                                                                               -
Other (income) expense, net                                                                                                          30                                                                        18                                                                                                                                                          (9 )                                                                           9                                                                              21
Income Before Taxes                                                                                                               4,642                                                                    (2,797 )                                                                        (605 )                                                                      (2,341 )                                                                      (5,743 )                                                                        10,385
Income Tax Provision (Benefit)                                                                                                    1,186                                                                      (464 ) (4)                                                 (132 ) (4)                                                 (319 ) (5)                                                 (915 )                                                                         2,101
Net Income                                                                                                                        3,456                                                                    (2,333 )                                                                        (473 )                                                                      (2,022 )                                                                      (4,828 )                                                                         8,284
Net Income Attributable to Merck & Co., Inc.                                                                                      3,440                                                                    (2,333 )                                                                        (473 )                                                                      (2,022 )                                                                      (4,828 )                                                                         8,268
Earnings per Common Share Assuming Dilution                                                                                    $   1.25                                                  (0.85 )                                                                       (0.17 )                                                                       (0.73 )                                                                       (1.75 )                                                                      $   3.00  
                                                                                                            -------------------- ------ --------------------                                                                                                                                                                                                                                                                                                                                                    -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                            -------------------------------------------------                                                                                                                                                                                                                                                                                                                                                   -------------------------------------------------
Tax Rate                                                                                                        25.5 %                                                                                                                                                                                                                                                                                                                                                                           20.2 %
                                                                                                            -------------------- ------ --------------------                                                                                                                                                                                                                                                                                                                                                    -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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 as it 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 $2.3 billion of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as intangible asset impairment charges of $123 million. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures. Amounts included in research and development expenses reflect $253 million of in-process research and development (IPR&D) impairment charges and $36 million of expenses related to an increase in the estimated fair value measurement of liabilities for contingent consideration. Amounts included in other (income) expense, net reflect changes in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income in connection with the termination of the Sanofi-Pasteur MSD joint venture.

(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) Amount included in research and development expense represents an aggregate charge recorded in conjunction with the formation of a collaboration with AstraZeneca.

(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.

(5) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments, as well as a $234 million net tax benefit related to the settlement of certain federal income tax issues and an $88 million tax benefit related to the settlement of a state income tax issue.

 
                                                                                                                                                                                                                                     MERCK & CO., INC.
                                                                                                                                                                                                                                     FRANCHISE / KEY PRODUCT SALES
                                                                                                                                                                                                                                     (AMOUNTS IN MILLIONS)
                                                                                                                                                                                                                                     Table 3
 
                                                                                                             
                                                                                                           -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                                           -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                                           -------------------- -------------------- --------------------                                           -------------------- -------------------- --------------------
                                                                                                                                                                                  2017                                                                                                                                                                                                                                   2016                                                                                                                                                                                          3Q                                                                                                     Sep YTD
                                                                                                           ---------------------------------------------------------------------------------------------------------------------------------------------------                                          ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                          ---------------------------------------------------------------                                          ---------------------------------------------------------------
                                                                                                                    1Q                     2Q                     3Q                   Sep YTD                                                          1Q                     2Q                     3Q                   Sep YTD                  4Q                  Full Year                                                        Nom %                Ex-Exch %                                                        Nom %                Ex-Exch %
                                                                                                           -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                                           -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                                           -------------------- -------------------- --------------------                                           -------------------- -------------------- --------------------
TOTAL SALES (1)                                                                                                          $9,434                 $9,930                $10,325                $29,689                                                         $9,312                 $9,844                $10,536                $29,692                $10,115                $39,807                                                             -2                     -3                                                              0                      1
                                                                                                           -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                                           -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                                           -------------------- -------------------- --------------------                                           -------------------- -------------------- --------------------
   PHARMACEUTICAL                                                                                                         8,185                  8,759                  9,156                 26,101                                                          8,104                  8,700                  9,443                 26,247                  8,904                 35,151                                                             -3                     -4                                                             -1                      0
      Primary Care and Women’s Health
         Cardiovascular
            Zetia                                                                                                           334                                       367                                       320                                     1,021                                                            612                                       702                                       671                                     1,985                                       575                                     2,560                                                            -52                                       -53                                                            -49                                       -48
            Vytorin                                                                                                         241                                       182                                       142                                       565                                                            277                                       293                                       273                                       843                                       299                                     1,141                                                            -48                                       -51                                                            -33                                       -33
            Atozet                                                                                                           49                                        63                                        59                                       171                                                             23                                        33                                        39                                        96                                        50                                       146                                                             50                                        43                                                             78                                        77
            Adempas                                                                                                          84                                        67                                        70                                       221                                                             33                                        40                                        48                                       120                                        49                                       169                                                             46                                        45                                                             84                                        84
         Diabetes
           Januvia                                                                                                          839                                       948                                     1,012                                     2,799                                                            906                                     1,064                                     1,006                                     2,976                                       932                                     3,908                                                              1                                         1                                                             -6                                        -5
           Janumet                                                                                                          496                                       563                                       513                                     1,572                                                            506                                       569                                       548                                     1,624                                       577                                     2,201                                                             -6                                        -8                                                             -3                                        -3
         General Medicine & Women’s Health
            NuvaRing                                                                                                        160                                       199                                       214                                       573                                                            175                                       200                                       195                                       571                                       207                                       777                                                             10                                         8                                                              0                                         0
            Implanon / Nexplanon                                                                                            170                                       178                                       155                                       503                                                            134                                       164                                       148                                       446                                       160                                       606                                                              5                                         4                                                             13                                        13
            Follistim AQ                                                                                                     81                                        79                                        72                                       232                                                             94                                        73                                       101                                       268                                        87                                       355                                                            -29                                       -29                                                            -13                                       -13
      Hospital and Specialty
         Hepatitis
            Zepatier                                                                                                        378                                       517                                       468                                     1,363                                                             50                                       112                                       164                                       326                                       229                                       555                                                            185                                       184                                                              *                                         *
         HIV
            Isentress / Isentress HD                                                                                        305                                       282                                       310                                       896                                                            340                                       338                                       372                                     1,050                                       337                                     1,387                                                            -17                                       -18                                                            -15                                       -14
         Hospital Acute Care
            Bridion                                                                                                         148                                       163                                       185                                       495                                                             90                                       113                                       139                                       343                                       139                                       482                                                             33                                        33                                                             44                                        45
            Noxafil                                                                                                         141                                       155                                       162                                       458                                                            145                                       143                                       147                                       434                                       161                                       595                                                             10                                         9                                                              5                                         6
            Invanz                                                                                                          136                                       150                                       159                                       445                                                            114                                       143                                       152                                       409                                       152                                       561                                                              5                                         3                                                              9                                         8
            Cancidas                                                                                                        121                                       112                                        94                                       327                                                            133                                       131                                       142                                       406                                       152                                       558                                                            -34                                       -35                                                            -19                                       -18
            Cubicin                                                                                                          96                                       103                                        91                                       290                                                            292                                       357                                       320                                       969                                       119                                     1,087                                                            -71                                       -72                                                            -70                                       -70
            Primaxin                                                                                                         62                                        71                                        73                                       206                                                             73                                        81                                        77                                       231                                        66                                       297                                                             -5                                        -5                                                            -11                                        -8
         Immunology
            Remicade                                                                                                        229                                       208                                       214                                       651                                                            349                                       339                                       311                                       999                                       269                                     1,268                                                            -31                                       -34                                                            -35                                       -34
            Simponi                                                                                                         184                                       199                                       219                                       602                                                            188                                       199                                       193                                       581                                       186                                       766                                                             13                                         9                                                              4                                         5
         Oncology
               Keytruda                                                                                                     584                                       881                                     1,047                                     2,512                                                            249                                       314                                       356                                       919                                       483                                     1,402                                                            194                                       192                                                            173                                       174
               Emend                                                                                                        133                                       143                                       137                                       413                                                            126                                       143                                       137                                       405                                       144                                       549                                                              0                                        -1                                                              2                                         2
               Temodar                                                                                                       66                                        65                                        68                                       198                                                             66                                        73                                        78                                       216                                        67                                       283                                                            -13                                       -12                                                             -8                                        -8
         Diversified Brands
            Respiratory
               Singulair                                                                                                    186                                       203                                       161                                       550                                                            237                                       229                                       239                                       705                                       210                                       915                                                            -33                                       -32                                                            -22                                       -21
               Nasonex                                                                                                      139                                        85                                        42                                       266                                                            229                                       101                                        94                                       425                                       112                                       537                                                            -55                                       -56                                                            -37                                       -38
               Dulera                                                                                                        82                                        69                                        59                                       210                                                            113                                       121                                        97                                       331                                       105                                       436                                                            -39                                       -40                                                            -37                                       -37
            Other
               Cozaar / Hyzaar                                                                                              112                                       119                                       128                                       360                                                            126                                       132                                       131                                       389                                       121                                       511                                                             -3                                        -1                                                             -8                                        -6
               Arcoxia                                                                                                      103                                        89                                        80                                       272                                                            111                                       117                                       114                                       342                                       108                                       450                                                            -30                                       -32                                                            -20                                       -20
               Fosamax                                                                                                       61                                        66                                        53                                       180                                                             75                                        73                                        68                                       217                                        68                                       284                                                            -23                                       -23                                                            -17                                       -16
         Vaccines (2)
               Gardasil / Gardasil 9                                                                                        532                                       469                                       675                                     1,675                                                            378                                       393                                       860                                     1,631                                       542                                     2,173                                                            -22                                       -22                                                              3                                         3
               ProQuad / M-M-R II / Varivax                                                                                 355                                       399                                       519                                     1,273                                                            357                                       383                                       496                                     1,236                                       405                                     1,640                                                              4                                         5                                                              3                                         4
               Pneumovax 23                                                                                                 163                                       166                                       229                                       558                                                            107                                       120                                       175                                       403                                       238                                       641                                                             31                                        31                                                             38                                        39
               Zostavax                                                                                                     154                                       160                                       234                                       547                                                            125                                       149                                       190                                       464                                       221                                       685                                                             23                                        23                                                             18                                        17
               RotaTeq                                                                                                      224                                       123                                       179                                       525                                                            188                                       130                                       171                                       489                                       162                                       652                                                              4                                         4                                                              7                                         7
         Other Pharmaceutical (3)                                                                                         1,037                                     1,116                                     1,013                                     3,172                                                          1,083                                     1,128                                     1,191                                     3,398                                     1,172                                     4,574                                                            -15                                       -15                                                             -7                                        -7
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
   ANIMAL HEALTH                                                                                                            939                                       955                                     1,000                                     2,894                                                            829                                       900                                       865                                     2,594                                       884                                     3,478                                                             16                                        14                                                             12                                        11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
   Other Revenues (4)                                                                                                       310                    216                    169                    694                                                            379                    244                    228                    851                    327                  1,178                                                            -26                    -13                                                            -18                     -7
                                                                                                           -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                                           -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                                           -------------------- -------------------- --------------------                                           -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

* 200% or greater

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

(1) Only select products are shown.

(2) Vaccine sales in 2017 include sales in the European markets that were previously part of the Sanofi Pasteur MSD (SPMSD) joint venture that was terminated on December 31, 2016. Amounts for 2016 reflect supply sales to SPMSD.

(3) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $88 million in the first quarter, $87 million in the second quarter and $89 million in the third quarter of 2017 and $103 million, $91 million, $135 million and $126 million for the first, second, third and fourth quarters of 2016, respectively.

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

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20171027005199r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20171027005199/en/

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

Merck 
Media: 
Tracy Ogden, 908-740-1747 
or 
Claire Gillespie, 267-305-0932 
or 
Investors: 
Teri Loxam, 908-740-1986 
or 
Amy Klug, 908-740-1898


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