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February 21, 2018 4:00 am ET

Proposed Acquisition of Viralytics Would Add Investigational Oncolytic Immunotherapy, CAVATAK ^® , Supporting Merck’s Strategy to Broaden Its Pipeline with the Best Scientific Assets

Merck (NYSE: MRK), known as MSD outside the United States and Canada,
and Viralytics Limited (ASX: VLA, OTC: VRACY) today announced that the
companies have signed a definitive agreement under which it is proposed
that Merck, through a subsidiary, will acquire Viralytics, an Australian
publicly traded company focused on oncolytic immunotherapy treatments
for a range of cancers by way of a scheme of arrangement (Scheme) for
AUD 1.75 cash per Viralytics share. The proposed acquisition values the
total issued shares in Viralytics at approximately AUD 502 million (USD
394 million). The cash consideration of AUD 1.75 per share represents a
premium of 160% to the one month volume weighted average price (VWAP) of
Viralytics shares.

On completion of the transaction, Viralytics will become a wholly-owned
subsidiary of Merck, and Merck will gain full rights to CAVATAK^® (CVA21),
Viralytics’s investigational oncolytic immunotherapy. CAVATAK is based
on Viralytics’s proprietary formulation of an oncolytic virus
(Coxsackievirus Type A21) that has been shown to preferentially infect
and kill cancer cells.

CAVATAK is currently being evaluated in multiple Phase 1 and Phase 2
clinical trials, both as an intratumoral and intravenous agent,
including in combination with Merck’s KEYTRUDA^® (pembrolizumab),
an anti-PD-1 therapy. Under an agreement between Viralytics and a
subsidiary of Merck, announced in November 2015, a study is
investigating the use of the CAVATAK and KEYTRUDA combination in
melanoma, prostate, lung and bladder cancers.

“Viralytics’s approach of engaging the innate immune system to target
and kill cancer cells complements our immuno-oncology strategy, which is
focused on the rapid advancement of innovative monotherapy approaches
and synergistic combinations to help the broadest range of cancer
patients,” said Dr. Roy Baynes, senior vice president and head of global
clinical development, chief medical officer, Merck Research
Laboratories. “We are eager to further build on Viralytics’s science as
we continue our efforts to harness the immune system to improve
long-term disease control and survival outcomes for people with cancer.”

“This proposed acquisition culminates years of dedicated work by the
Viralytics team and represents an opportunity for significant value
creation for our shareholders. Viralytics is proud to have progressed
its lead investigational candidate CAVATAK to Phase 1 and Phase 2
clinical trials and, we believe that Merck, the leader in
immuno-oncology, is best suited to advance CAVATAK for the benefit of
patients globally, and to realize its potential,” said Dr. Malcolm
McColl, managing director and chief executive officer, Viralytics.

The board of directors of Viralytics unanimously recommends that its
company’s shareholders vote in favor of the Scheme, subject to there
being no superior proposal and an independent expert concluding that the
Scheme is in the best interest of the company’s shareholders. It is the
intention of Viralytics’s directors to vote all the shares of Viralytics
held or controlled by them in favor of the Scheme, subject to those same
qualifications. Merck and Viralytics anticipate the transaction will be
implemented by the second quarter of 2018. Implementation of the
transaction is subject to a Viralytics’s shareholder vote and customary
regulatory approvals.

Viralytics’s largest shareholder, Lepu Medical Group, which currently
holds voting power in 13 percent of the Viralytics’s shares, has
informed Viralytics that it intends to vote the shares it holds at the
time of the Scheme meeting in favor of the Scheme, in the absence of a
superior proposal and subject to the Viralytics directors maintaining
their recommendation to vote in favor of the Scheme.

Chairman of Lepu Medical Group, Dr. Pu stated, “Lepu Medical Group
acknowledges this is an attractive opportunity for Viralytics and, as
such, is supportive of the transaction. In line with its existing
strategy, Lepu Medical Group intends to continue to focus on developing
immuno-oncology therapies, including in collaboration with companies
globally.”

Transaction Terms and Implementation Process

The Scheme proposes that Merck acquires 100 percent of the issued shares
in Viralytics. Implementation of the Scheme will be subject to customary
conditions, including Viralytics shareholder approval, court approval,
regulatory approval, an independent expert concluding, and continuing to
conclude, that the Scheme is in the best interest of shareholders, and
no material adverse change or prescribed event occurring.

More information on the Scheme and conditions is provided in a copy of
the scheme implementation agreement which has been appended to this
announcement. The agreement also contains exclusivity provisions that
are customary in Australia, including “no shop”, “no talk” and “no due
diligence” provisions, a break fee, as well as a notification obligation
and matching right. The “no talk”, “no due diligence” and notification
obligation provisions are subject to the directors’ fiduciary
obligations.

A scheme booklet is expected to be dispatched to Viralytics shareholders
in April 2018. The scheme booklet will contain information relating to
the Scheme, the independent expert’s report on whether the Scheme is in
the best interests of Viralytics shareholders, the reasons for the
directors’ unanimous recommendation and details of the Scheme meeting
and other matters relevant to Viralytics shareholders’ vote on the
Scheme.

Indicative timetable

A number of expected key dates relevant to the proposed acquisition have
been outlined below.

Advisors

Credit Suisse Securities (USA) LLC is serving as financial advisor to
Merck, and Baker & McKenzie is serving as Merck’s legal counsel. Lazard
is serving as financial advisor and McCullough Robertson is serving as
legal counsel to Viralytics.

About CAVATAK

Viralytics is developing oncolytic immunotherapy treatments for a range
of cancers. The company’s lead investigational product, CAVATAK^®,
is currently being studied in clinical trials for the treatment of
melanoma, as well as bladder and lung cancers. CAVATAK is a proprietary
formulation of the Coxsackievirus Type A21 (CVA21) that preferentially
binds to specific ‘receptor’ proteins highly expressed on multiple
cancer types. CAVATAK acts to kill both local and metastatic cancer
cells through cell lysis and the potential generation of an immune
response against the cancer cells – a two-pronged mechanism of action
known as oncolytic immunotherapy.

About Viralytics Limited

Viralytics is focused on the development and commercialization of
oncolytic immunotherapies that harness the power of specific viruses to
preferentially infect and kill cancer cells. Based in Sydney Australia,
the company is listed on the Australian Securities Exchange (ASX: VLA)
while Viralytics’s ADRs also trade under VRACY on the US OTCQX
International market. For more information, please visit www.viralytics.com.

Merck’s Focus on Cancer

Merck’s goal is to translate breakthrough science into innovative
oncology medicines to help people with cancer worldwide. At Merck,
helping people fight cancer is our passion and supporting accessibility
to our cancer medicines is our commitment. Our focus is on pursuing
research in immuno-oncology and we are accelerating every step in the
journey – from lab to clinic – to potentially bring new hope to people
with cancer.

As part of our focus on cancer, Merck is committed to exploring the
potential of immuno-oncology with one of the fastest-growing development
programs in the industry. We are currently executing an expansive
research program evaluating our anti-PD-1 therapy across more than 30
tumor types. We also continue to strengthen our immuno-oncology
portfolio through strategic acquisitions and are prioritizing the
development of several promising immunotherapeutic candidates with the
potential to improve the treatment of advanced cancers.

For more information about our oncology clinical trials, visit www.merck.com/clinicaltrials.

About Merck

For more than a century, Merck, a leading global biopharmaceutical
company known as MSD outside of the United States and Canada, has been
inventing for life, bringing forward medicines and vaccines for many of
the world’s most challenging diseases. Through our prescription
medicines, vaccines, biologic therapies and animal health products, we
work with customers and operate in more than 140 countries to deliver
innovative health solutions. We also demonstrate our commitment to
increasing access to health care through far-reaching policies, programs
and partnerships. Today, Merck continues to be at the forefront of
research to advance the prevention and treatment of diseases that
threaten people and communities around the world – including cancer,
cardio-metabolic diseases, emerging animal diseases, Alzheimer’s disease
and infectious diseases including HIV and Ebola. For more information,
visit www.merck.com
and connect with us on Twitter, Facebook, Instagram,
YouTube
and LinkedIn.

Viralytics Forward-Looking Statements

Certain statements made in this presentation are forward looking
statements within the meaning of the safe harbor provisions of the
United States Private Securities Litigation Reform Act of 1995. These
forward-looking statements are not historical facts but rather are based
on Viralytics’s current expectations, estimates, assumptions and
projections about the industry in which Viralytics operates. Material
referred to in this document that use the words ‘estimate’, ‘project’,
‘intend’, ‘expect’, ‘plan’, ‘believe’, ‘guidance’ and similar
expressions are intended to identify forward looking statements and
should be considered an at-risk statement. These forward-looking
statements are not a guarantee of future performance and involve known
and unknown risks and uncertainties, some of which are beyond the
control of Viralytics or which are difficult to predict, which could
cause the actual results, performance or achievements of Viralytics to
be materially different from those which may be expressed or implied by
these statements. These statements are based on our management’s current
expectations and are subject to a number of uncertainties and risks that
could change the results described in the forward-looking
statements. Risks and uncertainties include, but are not limited to,
general industry conditions and competition, general economic factors,
the impact of pharmaceutical industry regulation and health care
legislation in the United States and internationally, and challenges
inherent in new product development. Investors should be aware that
there are no assurances that results will not differ from those
projected and Viralytics cautions shareholders and prospective
shareholders not to place undue reliance on these forward-looking
statements, which reflect the view of Viralytics only as of the date of
this presentation. Viralytics is not under a duty to update any
forward-looking statement as a result of new information, future events
or otherwise, except as required by law or by any appropriate regulatory
authority.

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).

Media Contacts:
Merck
Pamela Eisele, 267-305-3558
or
Merck
Teresa Mueller, 908-740-1884
or
Investor Contacts:
Merck
Mike DeCarbo, 908-740-1807
or
Viralytics
Dr. Malcolm McColl, +61 (0)2 9988 4000