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February 2, 2018 6:45 am ET

• Fourth-Quarter 2017 Worldwide Sales Were $10.4 Billion, an Increase of 3 Percent, Including a 1 Percent Positive Impact from Foreign Exchange; Full-Year 2017 Worldwide Sales Were $40.1 Billion, an Increase of 1 Percent
• 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 (NYSE: MRK), known as MSD outside the United States and Canada,
today announced financial results for the fourth quarter and full year
of 2017.

“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

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 Eisai. This
  marks the 12^th 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.

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.

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.

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.

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.

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