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 Merck Announces Fourth-Quarter and Full-Year 2017 Financial Results
   Friday, February 02, 2018 6:45:01 AM ET

--Fourth-Quarter 2017 GAAP EPS Was $(0.32), Reflecting a $2.6 Billion Provisional Charge Related to U.S. Tax Legislation; Fourth-Quarter Non-GAAP EPS Was $0.98

--Full-Year 2017 GAAP EPS Was $0.93, Reflecting a $2.6 Billion Provisional Charge Related to U.S. Tax Legislation and a $2.35 Billion Charge Related to the Formation of a Strategic Oncology Collaboration With AstraZeneca; Full-Year Non-GAAP EPS Was $3.98

--2018 Financial Outlook

--Anticipates Full-Year 2018 Worldwide Sales to Be Between $41.2 Billion and $42.7 Billion, Including an Approximately 1 Percent Positive Impact from Foreign Exchange

--Expects Full-Year 2018 GAAP EPS to Be Between $2.97 and $3.12; Expects Non-GAAP EPS to Be Between $4.08 and $4.23, Including an Approximately 1 Percent Negative Impact from Foreign Exchange



--KEYTRUDA Significantly Improved Overall Survival and Progression-Free Survival as First-Line Treatment in Combination with Pemetrexed and Platinum Chemotherapy for Patients With Metastatic Non-squamous Non-Small Cell Lung Cancer in KEYNOTE-189 Study

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

This press release features multimedia. View the full release here: http://www.businesswire.com/news/home/20180202005146/en/

"Our 2017 results reflect the underlying strength of our business and our ability to grow, despite significant headwinds," said Kenneth C. Frazier, chairman and chief executive officer, Merck. "We enter 2018 with strong operating momentum, based on our key pillars of growth that will enable us to deliver on our mission of improving patients’ lives."

Financial Summary

$ in millions, except EPS amounts                                                                                                     Fourth Quarter                                                                                                                                           Year Ended
                                                                           ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                                               ----------------------------------------------------------------------------------------------------------------------
                                                                                           2017                            2016                                                                                                   Dec. 31,                        Dec. 31,
                                                                                                                                                                                                                                                                                                                                     2017                                                                                     2016
                                                      ----------------------------------------  --------------------                                                                ----------------------  --------------------                                                                ----------------------------------------                                                                 ------------------------
Sales                                                                                     $10,433                                                               $10,115                                                                                 $40,122                                                  $39,807
-----------------------------------------------------                      -------------------- -------------------- --------------------                                              -------------------- -------------------- --------------------                                                                -------------------- --------------------                                                -------------------- -------
GAAP net (loss) income(1)                                                                    (872 )                                                                                   (594 )                                                                                                    2,568                                                    3,920
-----------------------------------------------------                      -------------------- -------------------- --------------------                                              -------------------- -------------------- --------------------                                                                -------------------- --------------------                                                -------------------- -------
Non-GAAP net income that excludes certain items(1,2)*                                       2,665                                                                 2,470                                                                                  10,933                                                   10,538
-----------------------------------------------------                      -------------------- -------------------- --------------------                                              -------------------- -------------------- --------------------                                                                -------------------- --------------------                                                -------------------- -------
GAAP EPS                                                                                    (0.32 )                                                                                  (0.22 )                                                                                                     0.93                                                     1.41
-----------------------------------------------------                      -------------------- -------------------- --------------------                                              -------------------- -------------------- --------------------                                                                -------------------- --------------------                                                -------------------- -------
Non-GAAP EPS that excludes certain items(2)                                                  0.98                                                                  0.89                                                                                    3.98                                                     3.78
-----------------------------------------------------                      -------------------- -------------------- --------------------                                              -------------------- -------------------- --------------------                                                                -------------------- --------------------                                                -------------------- -------
                                                                                                                                                                                                                                                                                                                *Refer to table on page 10.

Worldwide sales were $10.4 billion for the fourth quarter of 2017, an increase of 3 percent compared with the fourth quarter of 2016, including a 1 percent positive impact from foreign exchange. Full-year 2017 worldwide sales were $40.1 billion, an increase of 1 percent compared with the full year of 2016.

Sales in the fourth quarter and full year of 2017 reflect incremental sales of approximately $140 million and $400 million, respectively, 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.

In addition, sales in the fourth quarter of 2017 include approximately $115 million for the partial replenishment of doses of GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), a vaccine to prevent certain cancers and other diseases caused by HPV, that were borrowed from the U.S. Centers for Disease Control and Prevention (CDC) Pediatric Vaccine Stockpile in the third quarter. The effect of the borrowing and subsequent partial replenishment resulted in a net reduction in sales of $125 million for the full year of 2017.

Sales in the fourth quarter of 2017 compared with the fourth quarter of 2016 also reflect a favorable impact of approximately $150 million due to the timing of shipments in Japan in the prior year.

As expected, revenue in the fourth quarter and full year of 2017 was unfavorably affected by approximately $125 million and $260 million, respectively, from lost sales in certain markets related to the cyber-attack that occurred in June.

GAAP (generally accepted accounting principles) earnings (loss) per share assuming dilution (EPS) were $(0.32) for the fourth quarter and $0.93 for the full year of 2017, which reflect the impact of recently enacted U.S. tax legislation and for the full year also reflect a charge related to the formation of a strategic oncology collaboration with AstraZeneca. Non-GAAP EPS of $0.98 for the fourth quarter and $3.98 for the full year of 2017 excludes acquisition- and divestiture-related costs, restructuring costs, a $2.6 billion provisional charge related to the U.S. tax legislation and certain other items. Non-GAAP EPS for the full year of 2017 also excludes a $2.35 billion aggregate charge related to the formation of the collaboration with AstraZeneca.

Pipeline Highlights

Merck expanded its focus in oncology by further advancing the development program for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy, and Lynparza (olaparib), a PARP inhibitor co-developed and co-commercialized with AstraZeneca, and receiving key regulatory approvals.

-- Merck announced the pivotal Phase 3 KEYNOTE-189 trial investigating KEYTRUDA in combination with pemetrexed (Alimta) and cisplatin or carboplatin, for the first-line treatment of patients with metastatic non-squamous non-small cell lung cancer (NSCLC), met its dual primary endpoints of overall survival (OS) and progression-free survival (PFS). Based on an interim analysis conducted by the independent Data Monitoring Committee, treatment with KEYTRUDA in combination with pemetrexed plus platinum chemotherapy resulted in significantly longer OS and PFS than pemetrexed plus platinum chemotherapy alone. Results from the trial will be presented at an upcoming medical meeting and submitted to regulatory authorities. KEYTRUDA, in combination with pemetrexed and platinum chemotherapy, is the first immuno-oncology combination to show improved OS for the first-line treatment of patients with metastatic non-squamous NSCLC.

-- The Japanese Ministry of Health, Labour and Welfare approved KEYTRUDA for the treatment of patients with radically unresectable urothelial carcinoma who progressed after cancer chemotherapy.

-- The company announced the pivotal Phase 3 KEYNOTE-061 trial investigating KEYTRUDA as a second-line treatment for patients with advanced gastric or gastroesophageal junction adenocarcinoma did not meet its primary endpoint of overall survival in patients whose tumors expressed PD-L1.

-- The company and The European Organisation for Research and Treatment of Cancer (EORTC) announced the Phase 3 EORTC1325/KEYNOTE-054 trial investigating KEYTRUDA as monotherapy for surgically resected high-risk melanoma met the primary endpoint of recurrence-free survival and, based on an interim analysis and following review by the Independent Data Monitoring Committee, resulted in significantly longer recurrence-free survival than placebo.

-- The U.S. Food and Drug Administration (FDA) accepted for review the supplemental Biologics License Application (sBLA) for KEYTRUDA for the treatment of adult and pediatric patients with refractory primary mediastinal B-cell lymphoma, or who have relapsed after two or more prior lines of therapy. The FDA granted Priority Review status with a PDUFA date of April 3, 2018, and previously granted Breakthrough Therapy Designation to KEYTRUDA in January 2017 for this indication.

-- The FDA granted Breakthrough Therapy Designation for KEYTRUDA in combination with Eisai’s multiple receptor tyrosine kinase inhibitor Lenvima (lenvatinib) for the potential treatment of patients with advanced and/or metastatic renal cell carcinoma, which is being jointly developed as part of a collaboration between Merck and Esai. This marks the 12th Breakthrough Therapy Designation granted to KEYTRUDA.

-- The FDA approved Lynparza for use 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. Lynparza is the first PARP inhibitor approved for breast cancer. A supplemental New Drug Application (NDA) was submitted to Japan’s Pharmaceuticals and Medical Devices Agency for the same use.

-- The Japanese Ministry of Health, Labour and Welfare approved Lynparza for use as a maintenance therapy for patients with platinum-sensitive relapsed ovarian cancer, regardless of their BRCA mutation status, who responded to their last platinum-based chemotherapy. Lynparza is the first PARP inhibitor approved in Japan.

Merck and Pfizer announced that the FDA approved STEGLATRO(ertugliflozin) tablets, an oral sodium-glucose cotransporter 2 (SGLT2) inhibitor, the fixed-dose combination STEGLUJAN (ertugliflozin and sitagliptin) and the fixed-dose combination SEGLUROMET (ertugliflozin and metformin hydrochloride) to help improve glycemic control in adults with type 2 diabetes. Additionally, the Committee for Medicinal Products for Human Use of the European Medicines Agency adopted a positive opinion for these medicines.

The FDA and European Commission approved PREVYMIS (letermovir), once-daily tablets for oral use and injection for intravenous infusion, indicated for prevention of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant.

The FDA accepted for review two NDAs for doravirine, the company’s investigational non-nucleoside reverse transcriptase inhibitor, for the treatment of HIV-1 infection in adults. The NDAs include data for doravirine as a once-daily tablet for use in combination with other antiretroviral agents and for use of doravirine with lamivudine and tenofovir disoproxil fumarate in a once-daily fixed-dose combination single tablet as a complete regimen. The PDUFA date for both applications is Oct. 23, 2018.

The FDA approved ISENTRESS (raltegravir), the company’s integrase inhibitor, for use in combination with other antiretroviral agents for the treatment of HIV-1 in newborn patients from birth to four weeks of age weighing at least 2 kg.

Fourth-Quarter and Full-Year Revenue Performance

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

$ in millions                                                                                                                                                Fourth Quarter                                                                                                                                                                                                                                                                    Year Ended
                                    2017            2016        Change       Change Ex-                                                                                    Dec. 31,                           Dec. 31,        Change       Change Ex-
                                                                                                                                                                                                                                                                                                Exchange                                                                                        2017                                                                                        2016                                                                                                                                         Exchange
Total Sales                      $10,433                                                                  $10,115                                                                  3 %                                                                      2 %                                                                     $40,122                                                                  $39,807                                                                  1 %                                                                      1 %
Pharmaceutical                                        9,290                                                                                       8,904                                                                  4 %                                                                      3 %                                                                                         35,390                                                                                      35,151                                                                  1 %                                                                      1 %
 JANUVIA / JANUMET                                    1,524                                                                                       1,509                                                                  1 %                                                                      0 %                                                                                          5,896                                                                                       6,109                                                                 -3 %                                                                     -4 %
 KEYTRUDA                                             1,297                                                                                         483                                                                169 %                                                                    166 %                                                                                          3,809                                                                                       1,402                                                                172 %                                                                    171 %
                                                        633                                                                                         542                                                                 17 %                                                                     15 %                                                                                          2,308                                                                                       2,173                                                                  6 %                                                                      6 %
 GARDASIL / GARDASIL 9
 ZETIA / VYTORIN                                        509                                                                                         873                                                                -42 %                                                                    -44 %                                                                                          2,095                                                                                       3,701                                                                -43 %                                                                    -44 %
 PROQUAD, M-M-R II and VARIVAX                          403                                                                                         405                                                                  0 %                                                                     -1 %                                                                                          1,676                                                                                       1,640                                                                  2 %                                                                      2 %
 ISENTRESS / ISENTRESS HD                               308                                                                                         337                                                                 -9 %                                                                    -11 %                                                                                          1,204                                                                                       1,387                                                                -13 %                                                                    -14 %
 ZEPATIER                                               296                                                                                         229                                                                 29 %                                                                     27 %                                                                                          1,660                                                                                         555                                                                199 %                                                                    199 %
 PNEUMOVAX 23                                           263                                                                                         238                                                                 11 %                                                                     11 %                                                                                            821                                                                                         641                                                                 28 %                                                                     29 %
                                                        217                                                                                         186                                                                 17 %                                                                     10 %                                                                                            819                                                                                         766                                                                  7 %                                                                      6 %
 SIMPONI
 BRIDION                                                209                                                                                         139                                                                 50 %                                                                     49 %                                                                                            704                                                                                         482                                                                 46 %                                                                     46 %
Animal Health                                           981                                                                                         884                                                                 11 %                                                                      8 %                                                                                          3,875                                                                                       3,478                                                                 11 %                                                                     11 %
Other Revenues                       162                                                                      327                                                                -51 %                                                                    -27 %                                                                         857                                                                    1,178                                                                -27 %                                                                    -13 %
------------------------------ -------------------- -------                                                                -------------------- -------                                                                --- ---                                                                ----- ----                                                                -------------------- -------                                                                -------------------- -------                                                                --- ---                                                                ----- ----

Pharmaceutical Revenue

Fourth-quarter pharmaceutical sales increased 4 percent to $9.3 billion, including a 1 percent positive impact from foreign exchange. The increase was driven primarily by significant growth of KEYTRUDA, reflecting the company’s continued launches with new indications globally. Strong momentum for the treatment of patients with NSCLC contributed significantly to KEYTRUDA’s overall growth, as it is the only anti-PD-1 approved in the first-line setting.

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, increased in the fourth quarter driven primarily by the commercial launch in China and growth in Europe due to the termination of the SPMSD joint venture noted above, partially offset by lower sales in the United States. The decline in U.S. sales reflects the timing of public sector purchasing that was largely offset by the partial replenishment of borrowed doses into the CDC stockpile noted above.

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, also contributed to growth in the quarter driven by strong global demand.

Pharmaceutical sales also reflect higher sales of ZEPATIER (elbasvir and grazoprevir), a medicine for the treatment of chronic hepatitis C virus genotypes 1 or 4 infection, due to ongoing launches across Europe and Asia Pacific. The company anticipates that future sales of ZEPATIER will be unfavorably affected by increasing competition and declining patient volumes.

Performance of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI), medicines that help lower blood sugar in adults with type 2 diabetes, reflects pricing pressure offset by continued volume growth globally.

Sales growth for the quarter was partially offset by impacts from 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; biosimilar competition for REMICADE (infliximab), a treatment for inflammatory diseases, in the company’s marketing territories in Europe; and the 2017 loss of exclusivity for CANCIDAS (caspofungin acetate for injection), an antifungal, in Europe. In the aggregate, sales of these products declined approximately $500 million during the fourth quarter of 2017 compared to the fourth quarter of 2016.

Sales of ZOSTAVAX (zoster vaccine live), a vaccine for the prevention of herpes zoster, declined significantly in the quarter, primarily due to the approval of a competitor product that received a preferential recommendation from the U.S. Advisory Committee on Immunization Practices on Oct. 25, 2017. The company anticipates that future sales of ZOSTAVAX will be unfavorably affected by this competition.

Full-year 2017 pharmaceutical sales increased 1 percent to $35.4 billion. Growth was driven by the ongoing global launches of KEYTRUDA, ZEPATIER and BRIDION. In the aggregate, sales of these products increased $3.7 billion in 2017 compared to 2016. These increases were mostly offset by sales declines of the products affected by loss of exclusivity as described above for the quarter, as well as CUBICIN (daptomycin for injection), an I.V. antibiotic, SINGULAIR (montelukast sodium), a once-a-day oral medicine for the chronic treatment of asthma and the relief of symptoms of allergic rhinitis, NASONEX (mometasone furoate monohydrate), an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms, and other products which together totaled $3.3 billion. Additionally, sales growth was offset by declines in the diabetes franchise due to pricing pressure partially offset by continued volume growth globally.

Animal Health Revenue

Animal Health sales totaled $981 million for the fourth quarter of 2017, an increase of 11 percent compared with the fourth quarter of 2016, including a 3 percent positive impact from foreign exchange. Worldwide sales for the full year of 2017 were $3.9 billion, also an increase of 11 percent. Growth in both periods 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, swine products and poultry products all contributed to growth.

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

The tables below present selected expense information.

$ in millions                                                                Acquisition- and                                                 Restructuring                                                  Certain Other                                                          
                                                     GAAP                                                                                               Divestiture-Related                                                                                                            Costs                                                                                                                   Items                                                                                                                           Non-GAAP(2)
Fourth-Quarter 2017                                                                                                                                                             Costs(3)
Materials and production                            $3,406                                                                                                 $737                                                                                                  $17                                                                                       $-                                                                                               $2,652
Marketing and administrative                                            2,580                                                                                                                       4                                                                                                                      (1 )                                                                                                         -                                                                                                                   2,577
Research and development                                                2,055                                                                                                                      (5 )                                                                                                        -                                                                                                           -                                                                                                                   2,060
Restructuring costs                                                       306                                                                                                          -                                                                                                                     306                                                                                                           -                                                                                                          -
Other (income) expense, net                                               (19 )                                                                                                                     1                                                                                                          -                                                                                                                       (7 )                                                                                                                   (13 )
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
Fourth-Quarter 2016
Materials and production                            $3,332                                                                                                 $756                                                                                                  $32                                                                                       $-                                                                                               $2,544
Marketing and administrative                                            2,593                                                                                                                      22                                                                                                                       4                                                                                                           -                                                                                                                   2,567
Research and development                                                4,650                                                                                                                   2,897                                                                                                                       9                                                                                                           -                                                                                                                   1,744
Restructuring costs                                                       265                                                                                                          -                                                                                                                     265                                                                                                           -                                                                                                          -
Other (income) expense, net                            631                                                                                35                                                                    -                                                                                564                                                                                32  
----------------------------                      -------------------- ------ --------------------                                                                -------------------- -------------- --------------------                                                                -------------------- -------------- --------------------                                                                -------------------- --------------- --------------------                                                                -------------------- -------------- --------------------
$ in millions                                               Acquisition- and                              Restructuring                                          Certain Other                                       
                                             GAAP                                                                                      Divestiture-Related                                                                                                            Costs                                                                                                                              Items                                                                                                                           Non-GAAP(2)
Year Ended Dec. 31, 2017                                                                                                                                       Costs(3)
Materials and production                               $12,775                                                                          $3,187                                                                                                 $138                                                                                       $-                                                                                                                    $9,450
Marketing and administrative                                                9,830                                                                                                 44                                                                                                                       2                                                                                                           -                                                                                                                                        9,784
Research and development                                                    9,982                                                                                                284                                                                                                                      11                                                                                                                    2,350                                                                                                                                        7,337
Restructuring costs                                                           776                                                                                     -                                                                                                                     776                                                                                                           -                                                                                                                               -
Other (income) expense, net                                                    12                                                                                                 19                                                                                                          -                                                                                                                      (16 )                                                                                                                                          9
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Year Ended Dec. 31, 2016
Materials and production                               $13,891                                                                          $4,035                                                                                                 $181                                                                                       $-                                                                                                                    $9,675
Marketing and administrative                                                9,762                                                                                                 78                                                                                                                      95                                                                                                           -                                                                                                                                        9,589
Research and development                                                   10,124                                                                                              3,152                                                                                                                     142                                                                                                           -                                                                                                                                        6,830
Restructuring costs                                                           651                                                                                     -                                                                                                                     651                                                                                                           -                                                                                                                               -
Other (income) expense, net                                720                                                                              47                                                                                       -                                                                                                   558                                                                                                    115
----------------------------                      -------------------- ----------                                                                -------------------- --------------                                                                                     -------------------- --------------                                                                                     -------------------- --------------- --------------------                                                                                     -------------------- --------------

GAAP Expense, EPS and Related Information

Gross margin was 67.4 percent for the fourth quarter of 2017 compared to 67.1 percent for the fourth quarter of 2016. The gross margin was 68.2 percent for the full year of 2017 compared to 65.1 percent for the full year of 2016. The increase in gross margin for the full year of 2017 was primarily driven by lower acquisition- and divestiture-related costs and restructuring costs which negatively affected gross margin by 8.2 percentage points in the full year of 2017 compared with 10.6 percentage points for the full year of 2016. In addition, gross margin was impacted by the favorable effects of product mix partially offset by costs related to the cyber-attack.

Marketing and administrative expenses were $2.6 billion in the fourth quarter of 2017, a 1 percent decrease compared to the fourth quarter of 2016. The decrease primarily reflects lower acquisition- and divestiture-related costs. Full-year 2017 marketing and administrative expenses were $9.8 billion, a 1 percent increase compared to the full year of 2016. The increase reflects higher administrative costs, including costs associated with the company now operating its European vaccines business in the countries that were previously part of the SPMSD vaccines joint venture, remediation costs related to the cyber-attack and higher promotion expenses related to product launches, partially offset by lower restructuring costs and acquisition- and divestiture-related costs.

Research and development (R&D) expenses were $2.1 billion in the fourth quarter of 2017 compared with $4.7 billion in the fourth quarter of 2016. The decline was driven primarily by lower in-process research and development (IPR&D) impairment charges, partially offset by higher expenses related to business development transactions, clinical development spending and investment in early drug development. R&D expenses were $10.0 billion for the full year of 2017, a 1 percent decrease compared to the full year of 2016. The decline reflects lower IPR&D impairment charges and restructuring costs. These were offset by a $2.35 billion aggregate charge recorded in 2017 related to the formation of the collaboration with AstraZeneca, as well as a reduction in prior year expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration and higher clinical development spending.

Other (income) expense, net, was $19 million of income in the fourth quarter of 2017 compared to $631 million of expense in the fourth quarter of 2016 and was $12 million of expense for the full year of 2017 compared to $720 million of expense for the full year of 2016. Other (income) expense, net, in 2017 reflects the favorable impacts of foreign exchange and gains on sales of securities, partially offset by a loss on the extinguishment of debt. Other (income) expense, net, for the fourth quarter and full year of 2016 includes a $625 million charge to settle worldwide KEYTRUDA patent litigation.

The effective income tax rates of 141.0 percent for the fourth quarter and 61.6 percent for full year of 2017 include the unfavorable impact of a $2.6 billion provisional charge related to U.S. tax legislation. The provisional tax charge includes a one-time repatriation transition tax of approximately $5.0 billion, which will be paid over eight years. The transition tax was partially offset by adjustments to deferred tax liabilities, including taxes previously provided on foreign earnings and remeasurement of net U.S. deferred tax liabilities. The provisional tax charge may change in 2018 based on further analysis and regulatory guidance. In addition, the effective income tax rate for the full year of 2017 reflects the unfavorable impact of a $2.35 billion aggregate charge related to the formation of the 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.

GAAP EPS was $(0.32) for the fourth quarter of 2017 compared with $(0.22) for the fourth quarter of 2016. GAAP EPS was $0.93 for the full year of 2017 compared with $1.41 for the full year of 2016.

Non-GAAP Expense, EPS and Related Information

The non-GAAP gross margin was 74.6 percent for the fourth quarter of 2017, compared to 74.8 percent for the fourth quarter of 2016. The non-GAAP gross margin was 76.4 percent for the full year of 2017 compared to 75.7 percent for the full year of 2016. The increase in non-GAAP gross margin for the full year of 2017 reflects the favorable effects of product mix partially offset by costs related to the cyber-attack.

Non-GAAP marketing and administrative expenses were $2.6 billion in the fourth quarter of 2017, comparable to the fourth quarter of 2016. Non-GAAP marketing and administrative expenses were $9.8 billion for the full year of 2017, a 2 percent increase compared to the full year of 2016. The increase reflects higher administrative costs, including 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 costs related to product launches and remediation costs related to the cyber-attack.

Non-GAAP R&D expenses were $2.1 billion in the fourth quarter of 2017, an 18 percent increase compared to the fourth quarter of 2016. The increase reflects higher expenses related to business development transactions, clinical development spending and investment in early drug development. Non-GAAP R&D expenses were $7.3 billion for the full year of 2017, a 7 percent increase compared to the full year of 2016, reflecting increased clinical development spending.

Non-GAAP other (income) expense, net, was $13 million of income in the fourth quarter of 2017 compared to $32 million of expense in the fourth quarter of 2016. Non-GAAP other (income) expense, net, for the full year of 2017 was $9 million of expense compared to $115 million of expense for the full year of 2016. Non-GAAP other (income) expense, net, in 2017 reflects the favorable impact of foreign exchange and realized gains on sales of equity securities, partially offset by a loss on extinguishment of debt.

The non-GAAP effective income tax rate for the fourth quarter of 2017 was 15.3 percent compared with 23.3 percent for the fourth quarter of 2016 and was 19.1 percent for the full year of 2017 compared with 22.3 percent for the full year of 2016.

Non-GAAP EPS was $0.98 for the fourth quarter of 2017 compared with $0.89 for the fourth quarter of 2016. Non-GAAP EPS was $3.98 for the full year of 2017 compared with $3.78 for the full year 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                                                                                        Fourth Quarter                                                                                                              Year Ended
                                                                                            2017                            2016                                                                                    Dec. 31,                        Dec. 31,
                                                                                                                                                                                                                                                                                 2017                                             2016
EPS
GAAP EPS                                                                                  $(0.32 )                                           $(0.22 )                                             $0.93                                               $1.41
Difference(4)                                                                                                  1.30                                                                  1.11                                                                   3.05                                                                   2.37
Non-GAAP EPS that excludes items listed below(2)                                           $0.98                                              $0.89                                               $3.98                                               $3.78
                                                                                                                                                                                                                                                                                                            
Net Income
GAAP net (loss) income(1)                                                                  $(872 )                                            $(594 )                                            $2,568                                              $3,920
Difference                                                                                                    3,537                                                                 3,064                                                                  8,365                                                                  6,618
Non-GAAP net income that excludes items listed below(1,2)                                 $2,665                                             $2,470                                             $10,933                                             $10,538
                                                                                                                                                                                                                                                                                                            
Decrease (Increase) in Net Income Due to Excluded Items:
 Acquisition- and divestiture-related costs(3)                                              $737                                             $3,710                                              $3,534                                              $7,312
 Restructuring costs                                                                                            322                                                                   310                                                                    927                                                                  1,069
 Aggregate charge related to the formation of a collaboration with                                               --                                                                    --                                                                  2,350                                                                     --
 AstraZeneca
 Charge to settle worldwide KEYTRUDA patent litigation                                                           --                                                                   625                                                                     --                                                                    625
 Other                                                                                                           (7 )                                                                 (61 )                                                                  (16 )                                                                  (67 )
Net decrease (increase) in income before taxes                                                                1,052                                                                 4,584                                                                  6,795                                                                  8,939
Income tax (benefit) expense(5)                                                                               2,485                                                                (1,520 )                                                                1,570                                                                 (2,321 )
Decrease (increase) in net income                                                         $3,537                          $3,064                           $8,365                           $6,618  
------------------------------------------------------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------                      -------------------- ------- --------------------                      -------------------- ------- --------------------

Financial Outlook

At mid-January 2018 exchange rates, Merck anticipates full-year 2018 revenue to be between $41.2 billion and $42.7 billion, including an approximately 1 percent positive impact from foreign exchange.

Merck expects its full-year 2018 GAAP EPS to be between $2.97 and $3.12. Merck expects its full-year 2018 non-GAAP EPS to be between $4.08 and $4.23, including an approximately 1 percent negative impact from foreign exchange. The non-GAAP range excludes acquisition- and divestiture-related costs and costs related to restructuring programs.

The following table summarizes the company’s full year 2018 financial guidance.

                                                              GAAP                                                 Non-GAAP(2)
                                                                                                                                                                                              
Revenue                                                                           $41.2 to $42.7 billion                                                                                                                $41.2 to $42.7 billion**
Operating expenses                                           Lower than 2017 by a high-single digit rate                                                                                     Higher than 2017 by a low- to mid-single digit rate
Effective tax rate                                                                        19.0% to 20.0%                                                                                                                          19.0% to 20.0%
EPS                                                                                       $2.97 to $3.12                                                                                                                          $4.08 to $4.23
------------------                                           -------------------------------------------                                                                                     ---------------------------------------------------
                                                                                                                                                                                **The company does not have any non-GAAP adjustments to revenue.

The guidance for both GAAP and non-GAAP operating expenses reflects the adoption of new accounting guidance on Jan. 1, 2018, related to defined benefit plans that requires a retroactive reclassification of certain components of net benefit cost/credit within the consolidated statement of income. There is no impact to net income as a result of adopting the new guidance. See supplemental information on the Investors section of Merck’s website (http://investors.merck.com) for additional details on the 2017 reclassification.

A reconciliation of anticipated 2018 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 2018
                                                                                                                 
GAAP EPS                                                                                                                                          $2.97 to $3.12
Difference(4)                                                                                                       1.11
Non-GAAP EPS that excludes items listed below(2)                                                                                                  $4.08 to $4.23
                                                                                                                 
 Acquisition- and divestiture-related costs                                                                       $3,200
 Restructuring costs                                                                                                                    500
Net decrease (increase) in income before taxes                                                                                        3,700
Estimated income tax (benefit) expense                                                                                                 (715 )
Decrease (increase) in net income                                                                                 $2,985  
------------------------------------------------                                                                -------------------- ------ --------------------

Capital Allocation

The recently enacted U.S. tax legislation improves Merck’s financial flexibility to invest in sustainable long-term value creating opportunities. In addition to the company’s ongoing investment in R&D, business development and continued support of the dividend, as well as share repurchases, the company also:

-- Plans to invest approximately $12 billion over 5 years in capital projects including approximately $8 billion in the United States

-- Made a contribution to the Merck Foundation in the fourth quarter of 2017

-- Plans to provide a one-time, long-term incentive award for its eligible non-executive employees in the second quarter of 2018

Total Employees

As of Dec. 31, 2017, Merck had approximately 69,000 employees worldwide.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EST on Merck’s website at http://investors.merck.com/events-and-presentations/default.aspx . Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 9899537. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 9899537. 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, 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 and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the items, see Tables 2a and 2b attached to this release.

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

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

(5) Includes the estimated tax impact on the reconciling items. In addition, amounts for fourth-quarter and full-year 2017 include a $2.6 billion provisional charge related to U.S. tax legislation. Amount for full year 2017 also includes a $234 million net benefit related to the settlement of certain federal income tax issues, as well as a benefit of $88 million related to the settlement of a state income tax issue.

                                                                                                                                                                        MERCK & CO., INC.
                                                                                                                                                             CONSOLIDATED STATEMENT OF INCOME - GAAP
                                                                                                                                                         (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
                                                                                                                                                                           (UNAUDITED)
                                                                                                                                                                             Table 1
                                                                                                                                                                      
                                                                               -------------------------------------------------- ------------------------------                     --------------------------------                     --------------------------------------------------------------------- -------------------------------------------------                     --------------------------------
                                                                                                                     GAAP                                                             % Change                                                                                  GAAP                                                                                % Change   
                                                                               ---------------------------------------------------------------------------------                     ---------- --------------------                      -----------------------------------------------------------------------------------------------------------------------                     ---------- --------------------
                                                                                            4Q17                            4Q16                                                                                                           Full Year                                          Full Year
                                                                                                                                                                                                                                                                2017                                                                  2016
                                                                               ---------------------------                        ---------------------------                                                                             ----------------------------------------------                        ----------------------------------------------
Sales                                                                                             $ 10,433                                           $ 10,115                                       3%                                                       $ 40,122                                                              $ 39,807                                                          1%
                                                                                                                                                                                                                                                                                                                                                                                       
Costs, Expenses and Other
  Materials and production (1)                                                                       3,406                                              3,332                                       2%                                                         12,775                                                                13,891                                                          -8%
  Marketing and administrative (1)                                                                   2,580                                              2,593                                       -1%                                                         9,830                                                                 9,762                                                          1%
  Research and development (1) (2)                                                                   2,055                                              4,650                                      -56%                                                         9,982                                                                10,124                                                          -1%
  Restructuring costs (3)                                                                              306                                                265                                       15%                                                           776                                                                   651                                                          19%
  Other (income) expense, net (1) (4)                                                                  (19 )                                              631                                        *                                                             12                                                                   720                                                         -98%
Income (Loss) Before Taxes                                                                           2,105                                             (1,356 )                                      *                                                          6,747                                                                 4,659                                                          45%
Income Tax Provision (Benefit) (1)                                                                   2,969                                               (769 )                                                                                                 4,155                                                                   718
Net (Loss) Income                                                                                     (864 )                                             (587 )                                     47%                                                         2,592                                                                 3,941                                                         -34%
Less: Net Income Attributable to Noncontrolling Interests                                                8                                                  7                                                                                                      24                                                                    21
Net (Loss) Income Attributable to Merck & Co., Inc.                                               $   (872 )                                         $   (594 )                                     47%                                                      $  2,568                                                              $  3,920                                                         -34%
(Loss) Earnings per Common Share Assuming Dilution (5)                                            $  (0.32 )                                         $  (0.22 )                                     45%                                                      $   0.93                                           $   1.41                                      -34%
                                                                               -------------------- ------ -                      -------------------- ------ -                      --------------------------------                     -------------------- ------ --------------------                      -------------------- ------ --------------------                      --------------------------------
                                                                                                                                                                                                                                                        
                                                                               ------------------------------                     ------------------------------                                                                          -------------------------------------------------                     -------------------------------------------------
Average Shares Outstanding Assuming Dilution (5)                                                     2,715                                              2,755                                                                                                   2,748                                                                 2,787
Tax Rate (6)                                                                      141.0 %                          56.7 %                                                                               61.6 %                                             15.4 %
                                                                               -------------------- ------ -                      -------------------- ------ -                                                                           -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                       
* 100% or greater
 (1)  Amounts include the impact of acquisition and divestiture-related
                         costs, restructuring costs and certain other items. See
                         accompanying tables for details.
                          
 (2)                     Research and development expenses for full year 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)                     Other (income) expense, net in the fourth quarter and full year of
                         2016 includes a $625 million charge to settle worldwide patent
                         litigation related to KEYTRUDA.
                          
 (5)                     Because the company recorded a net loss in the fourth quarter of
                         2017 and 2016, 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.
                          
 (6)                     The effective income tax rates for the fourth quarter and full
                         year of 2017 reflect the net unfavorable impact of a $2.6 billion
                         provisional charge related to the enactment of U.S. tax
                         legislation. The effective income tax rate for the full year of
                         2017 also reflects 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. Additionally, the effective income tax rate for
                         the full year of 2017 reflects 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
                                                                                                                                                                                      FOURTH 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                                      Subtotal
                                                                                                                                             Costs (1)
                                                                         ---------------------------                        ---------------------------------------                         -------------------------------                         --------------------------------                         ---------                        ----------------------------------------------
Materials and production                                                                    $  3,406                          737                                                              17                                                                                                               754                                              $  2,652
Marketing and administrative                                                                   2,580                            4                                                              (1 )                                                                                                               3                                                 2,577
Research and development                                                                       2,055                           (5 )                                                             -                                                                                                                (5 )                                               2,060
Restructuring costs                                                                              306                                                                                          306                                                                                                               306                                                     -
Other (income) expense, net                                                                      (19 )                          1                                                                                                                       (7 )                                                     (6 )                                                 (13 )
Income Before Taxes                                                                            2,105                         (737 )                                                          (322 )                                                      7                                                   (1,052 )                                               3,157
Income Tax Provision (Benefit)                                                                 2,969                          (88 )           (3)                          (50 )   (3)                         2,623     (4)                         2,485                                                   484
Net (Loss) Income                                                                               (864 )                       (649 )                                                          (272 )                                                 (2,616 )                                                 (3,537 )                                               2,673
Net (Loss) Income Attributable to Merck & Co., Inc.                                             (872 )                       (649 )                                                          (272 )                                                 (2,616 )                                                 (3,537 )                                               2,665
(Loss) Earnings per Common Share Assuming Dilution                                          $  (0.32 )                      (0.24 )                                                         (0.10 )                                                  (0.96 )                                                  (1.30 )                                            $   0.98  
                                                                         -------------------- ------ -                                                                                                                                                                                                                                        -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                            
                                                                         ------------------------------                                                                                                                                                                                                                                       -------------------------------------------------
Tax Rate                                                                    141.0 %                                                                                                                                                                                                                                            15.3 %
                                                                         -------------------- ------ -                                                                                                                                                                                                                                        -------------------- ------ --------------------
Only the line items that are affected by non-GAAP adjustments are
shown.
 
Merck is providing certain non-GAAP information that excludes
certain items because of the nature of these items and the impact
they have on the analysis of underlying business performance and
trends. Management believes that providing this information enhances
investors’ understanding of the company’s results 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 primarily reflect a reduction of expenses related to a
decrease in the estimated fair value measurement of liabilities for
contingent consideration. Amounts included in other (income)
expense, net reflect goodwill and intangible asset impairment
charges related to a business in the Healthcare Services segment,
largely 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) Represents the estimated tax impact on the reconciling items
based on applying the statutory rate of the originating territory of
the non-GAAP adjustments.
 
(4) Includes 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 $2.6 billion provisional charge
related to the enactment of U.S. tax legislation.
                                                                                                                                                                                MERCK & CO., INC.
                                                                                                                                                                         GAAP TO NON-GAAP RECONCILIATION
                                                                                                                                                                                 FULL YEAR 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                                        $ 12,775                                            3,187                                                       138                                                                                                             3,325                                              $  9,450
Marketing and administrative                                       9,830                                               44                                                         2                                                                                                                46                                                 9,784
Research and development                                           9,982                                              284                                                        11                                                    2,350                                                    2,645                                                 7,337
Restructuring costs                                                  776                                                                                                        776                                                                                                               776                                                     -
Other (income) expense, net                                           12                                               19                                                                                                                (16 )                                                      3                                                     9
Income Before Taxes                                                6,747                                           (3,534 )                                                    (927 )                                                 (2,334 )                                                 (6,795 )                                              13,542
Income Tax Provision (Benefit)                                     4,155                                             (552 )     (4)                         (182 )   (4)                         2,304     (5)                         1,570                                                 2,585
Net Income                                                         2,592                                           (2,982 )                                                    (745 )                                                 (4,638 )                                                 (8,365 )                                              10,957
Net Income Attributable to Merck & Co., Inc.                       2,568                                           (2,982 )                                                    (745 )                                                 (4,638 )                                                 (8,365 )                                              10,933
Earnings per Common Share Assuming Dilution                     $   0.93                         (1.09 )                                                   (0.27 )                                                  (1.69 )                                                  (3.05 )                                            $   3.98  
                                             -------------------- ------ --------------------                                                                                                                                                                                                                                   -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                              
                                             -------------------------------------------------                                                                                                                                                                                                                                  -------------------------------------------------
Tax Rate                                         61.6 %                                                                                                                                                                                                                                                          19.1 %
                                             -------------------- ------ --------------------                                                                                                                                                                                                                                   -------------------- ------ --------------------
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 $3.1 billion of expenses for the amortization of intangible
assets recognized as a result of business acquisitions, as well as
$134 million of intangible asset impairment charges. 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 $257 million of in-process research and
development (IPR&D) impairment charges and $27 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 goodwill and intangible asset
impairment charges related to a business in the Healthcare Services
segment, as well as expenses related to 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 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) Includes the estimated tax impact on the reconciling items based
on applying the statutory rate of the originating territory of the
non-GAAP adjustments. Also includes a $2.6 billion provisional
charge related to the enactment of U.S. tax legislation, 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                                                                                                                                                    4Q                                                           Full Year
                                                          -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     -------------------------------------                     ------------------------------------------------
                                                                      1Q                                              2Q                                               3Q                                               4Q                                            Full Year                                           1Q                                              2Q                                               3Q                                               4Q                                            Full Year                                Nom %                      Ex-Exch %                      Nom %                           Ex-Exch %
                                                          ---------------------------                     ---------------------------                     ----------------------------                     ----------------------------                     -----------------------------                     ---------------------------                     ---------------------------                     ----------------------------                     ----------------------------                     -----------------------------                     -----                      ----------                     -----                      --------------------
TOTAL SALES (1)                                                              $ 9,434                                         $ 9,930                                         $ 10,325                                         $ 10,433                                         $ 40,122                                          $ 9,312                                         $ 9,844                                         $ 10,536                                         $ 10,115                                         $ 39,807                           3                         2                               1                                         1
                                                          -------------------- -----                      -------------------- -----                      -------------------- ------                      -------------------- ------                      -------------------- ------                       -------------------- -----                      -------------------- -----                      -------------------- ------                      -------------------- ------                      -------------------- ------                       -----                      ----                           -----                      --------------------
 PHARMACEUTICAL                                                                8,185                                           8,759                                            9,156                                            9,290                                           35,390                                            8,104                                           8,700                                            9,443                                            8,904                                           35,151                           4                         3                               1                                         1
  Primary Care and Women’s Health
   Cardiovascular
    Zetia                                                                        334                                             367                                              320                                              323                                            1,344                                              612                                             702                                              671                                              575                                            2,560                         -44                       -45                             -48                                       -47
    Vytorin                                                                      241                                             182                                              142                                              186                                              751                                              277                                             293                                              273                                              299                                            1,141                         -38                       -41                             -34                                       -35
    Atozet                                                                        49                                              63                                               59                                               54                                              225                                               23                                              33                                               39                                               50                                              146                           7                         2                              54                                        51
    Adempas                                                                       84                                              67                                               70                                               79                                              300                                               33                                              40                                               48                                               49                                              169                          63                        60                              78                                        77
   Diabetes
    Januvia                                                                      839                                             948                                            1,012                                              938                                            3,737                                              906                                           1,064                                            1,006                                              932                                            3,908                           1                         1                              -4                                        -4
    Janumet                                                                      496                                             563                                              513                                              586                                            2,158                                              506                                             569                                              548                                              577                                            2,201                           2                        -1                              -2                                        -3
   General Medicine & Women’s Health
    NuvaRing                                                                     160                                             199                                              214                                              188                                              761                                              175                                             200                                              195                                              207                                              777                          -9                       -10                              -2                                        -3
    Implanon / Nexplanon                                                         170                                             178                                              155                                              183                                              686                                              134                                             164                                              148                                              160                                              606                          14                        13                              13                                        13
    Follistim AQ                                                                  81                                              79                                               72                                               66                                              298                                               94                                              73                                              101                                               87                                              355                         -25                       -27                             -16                                       -16
  Hospital and Specialty
   Hepatitis
    Zepatier                                                                     378                                             517                                              468                                              296                                            1,660                                               50                                             112                                              164                                              229                                              555                          29                        27                             199                                       199
   HIV
    Isentress / Isentress HD                                                     305                                             282                                              310                                              308                                            1,204                                              340                                             338                                              372                                              337                                            1,387                          -9                       -11                             -13                                       -14
   Hospital Acute Care
    Bridion                                                                      148                                             163                                              185                                              209                                              704                                               90                                             113                                              139                                              139                                              482                          50                        49                              46                                        46
    Noxafil                                                                      141                                             155                                              162                                              179                                              636                                              145                                             143                                              147                                              161                                              595                          11                         8                               7                                         7
    Invanz                                                                       136                                             150                                              159                                              157                                              602                                              114                                             143                                              152                                              152                                              561                           3                         2                               7                                         7
    Cancidas                                                                     121                                             112                                               94                                               95                                              422                                              133                                             131                                              142                                              152                                              558                         -37                       -39                             -24                                       -24
    Cubicin                                                                       96                                             103                                               91                                               92                                              382                                              292                                             357                                              320                                              119                                            1,087                         -22                       -23                             -65                                       -65
    Primaxin                                                                      62                                              71                                               73                                               74                                              280                                               73                                              81                                               77                                               66                                              297                          12                        10                              -6                                        -4
   Immunology
    Remicade                                                                     229                                             208                                              214                                              186                                              837                                              349                                             339                                              311                                              269                                            1,268                         -31                       -35                             -34                                       -34
    Simponi                                                                      184                                             199                                              219                                              217                                              819                                              188                                             199                                              193                                              186                                              766                          17                        10                               7                                         6
   Oncology
    Keytruda                                                                     584                                             881                                            1,047                                            1,297                                            3,809                                              249                                             314                                              356                                              483                                            1,402                         169                       166                             172                                       171
    Emend                                                                        133                                             143                                              137                                              143                                              556                                              126                                             143                                              137                                              144                                              549                          -1                        -2                               1                                         1
    Temodar                                                                       66                                              65                                               68                                               73                                              271                                               66                                              73                                               78                                               67                                              283                          10                        11                              -4                                        -4
  Diversified Brands
   Respiratory
    Singulair                                                                    186                                             203                                              161                                              182                                              732                                              237                                             229                                              239                                              210                                              915                         -13                       -14                             -20                                       -19
    Nasonex                                                                      139                                              85                                               42                                              120                                              387                                              229                                             101                                               94                                              112                                              537                           8                         7                             -28                                       -29
    Dulera                                                                        82                                              69                                               59                                               77                                              287                                              113                                             121                                               97                                              105                                              436                         -26                       -27                             -34                                       -34
   Other
    Cozaar / Hyzaar                                                              112                                             119                                              128                                              125                                              484                                              126                                             132                                              131                                              121                                              511                           3                         2                              -5                                        -4
    Arcoxia                                                                      103                                              89                                               80                                               91                                              363                                              111                                             117                                              114                                              108                                              450                         -16                       -19                             -19                                       -20
    Fosamax                                                                       61                                              66                                               53                                               62                                              241                                               75                                              73                                               68                                               68                                              284                          -9                       -10                             -15                                       -15
  Vaccines (2)
    Gardasil / Gardasil 9                                                        532                                             469                                              675                                              633                                            2,308                                              378                                             393                                              860                                              542                                            2,173                          17                        15                               6                                         6
    ProQuad / M-M-R II / Varivax                                                 355                                             399                                              519                                              403                                            1,676                                              357                                             383                                              496                                              405                                            1,640                           0                        -1                               2                                         2
    Pneumovax 23                                                                 163                                             166                                              229                                              263                                              821                                              107                                             120                                              175                                              238                                              641                          11                        11                              28                                        29
    RotaTeq                                                                      224                                             123                                              179                                              160                                              686                                              188                                             130                                              171                                              162                                              652                          -1                        -2                               5                                         5
    Zostavax                                                                     154                                             160                                              234                                              121                                              668                                              125                                             149                                              190                                              221                                              685                         -45                       -46                              -2                                        -3
  Other Pharmaceutical (3)                                                     1,037                                           1,116                                            1,013                                            1,124                                            4,295                                            1,083                                           1,128                                            1,191                                            1,172                                            4,574                          -4                        -5                              -6                                        -6
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
ANIMAL HEALTH                                                                    939                                             955                                            1,000                                              981                                            3,875                                              829                                             900                                              865                                              884                                            3,478                          11                         8                              11                                        11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Other Revenues (4)                                            310                          216                           169                           162                           857                           379                          244                           228                           327                         1,178                         -51                       -27                             -27                                       -13
                                                          -------------------- -----                      -------------------- -----                      -------------------- ------                      -------------------- ------                      -------------------- ------                       -------------------- -----                      -------------------- -----                      -------------------- ------                      -------------------- ------                      -------------------- ------                       -----                      ----                           -----                      --------------------
* 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, $89 million in the third quarter, and $123 million in the
fourth 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=20180202005146r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20180202005146/en/

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

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


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