Item 1. Business.

Merck & Co., Inc. (Merck or the Company) is a global health care company that delivers innovative health solutions through its prescription medicines, including biologic therapies, vaccines and animal health products. The Company’s operations are principally managed on a product basis and include two operating segments, Pharmaceutical and Animal Health, both of which are reportable segments.

The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines. The Company sells these human health vaccines primarily to physicians, wholesalers, distributors and government entities.

The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceutical and vaccine products, as well as health management solutions and services, for the prevention, treatment and control of disease in all major livestock and companion animal species. The Company also offers an extensive suite of digitally connected identification, traceability and monitoring products. The Company sells its products to veterinarians, distributors, animal producers, farmers and pet owners.

On June 2, 2021, Merck completed the spin-off (the Spin-Off) of products from its women’s health, biosimilars and established brands businesses into a new, independent, publicly traded company named Organon & Co. (Organon) through a distribution of Organon’s publicly traded stock to Company shareholders. The established brands included in the transaction consisted of dermatology, non-opioid pain management, respiratory, select cardiovascular products, as well as the rest of Merck’s diversified brands franchise.

All product or service marks appearing in type form different from that of the surrounding text are trademarks or service marks owned, licensed to, promoted or distributed by Merck, its subsidiaries or affiliates, except as noted. All other trademarks or services marks are those of their respective owners.

Product Sales

Total Company sales, including sales of the Company’s top pharmaceutical products, as well as sales of animal health products, were as follows:

($ in millions)	2023		2022		2021
Total Sales	$	60,115	$	59,283	$	48,704
Pharmaceutical	53,583		52,005		42,754
Keytruda	25,011		20,937		17,186
Gardasil/Gardasil 9	8,886		6,897		5,673
Januvia/Janumet	3,366		4,513		5,288
ProQuad/M-M-R II/Varivax	2,368		2,241		2,135
Bridion	1,842		1,685		1,532
Lagevrio	1,428		5,684		952
Alliance revenue - Lynparza(1)	1,199		1,116		989
Alliance revenue - Lenvima(1)	960		876		704
RotaTeq	769		783		807
Vaxneuvance	665		170		3
Animal Health	5,625		5,550		5,568
Livestock	3,337		3,300		3,295
Companion Animal	2,288		2,250		2,273
Other Revenues(2)	907		1,728		382

(1)Alliance revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

(2)Other revenues are primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as revenue from third-party manufacturing arrangements.

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Pharmaceutical

The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines. Certain of the products within the Company’s franchises are as follows:

Oncology

Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved as monotherapy for the treatment of certain patients with cervical cancer, classical Hodgkin lymphoma, cutaneous squamous cell carcinoma, esophageal or gastroesophageal junction (GEJ) carcinoma, head and neck squamous cell carcinoma (HNSCC), hepatocellular carcinoma (HCC), melanoma, Merkel cell carcinoma, microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) solid tumors (including MSI-H/dMMR colorectal cancer and endometrial carcinoma), non-small-cell lung cancer (NSCLC), primary mediastinal large B-cell lymphoma (PMBCL), tumor mutational burden-high (TMB-H) solid tumors, and urothelial cancer including non-muscle invasive bladder cancer. Keytruda is also approved as monotherapy for the adjuvant treatment of certain patients with melanoma, and for certain patients with renal cell carcinoma (RCC) post-surgery. Keytruda is approved for adjuvant treatment following resection and platinum-based chemotherapy for certain patients with NSCLC. Additionally, Keytruda is approved for patients with certain types of resectable NSCLC in combination with chemotherapy as neoadjuvant treatment, and then continued as a single agent as adjuvant treatment after surgery. Keytruda is also approved for patients with high-risk early stage triple-negative breast cancer (TNBC) in combination with chemotherapy as neoadjuvant treatment, and then continued as a single agent as adjuvant treatment after surgery. In addition, Keytruda is approved in combination with chemotherapy for the treatment of certain patients with advanced NSCLC, in combination with chemotherapy for certain types of advanced biliary tract cancer, in combination with chemotherapy with or without bevacizumab for advanced cervical cancer, in combination with chemotherapy for advanced esophageal cancer, in combination with trastuzumab and chemotherapy for certain patients with advanced human epidermal growth factor receptor 2 (HER2)-positive gastric or GEJ adenocarcinoma with PD-L1 (CPS ≥1) and in combination with chemotherapy for advanced HER2-negative gastric or GEJ adenocarcinoma, in combination with chemotherapy for HNSCC, in combination with chemotherapy for advanced TNBC, in combination with axitinib for advanced RCC, in combination with Lenvima (lenvatinib) for patients with advanced RCC or certain types of advanced endometrial carcinoma, and in combination with enfortumab vedotin for adult patients with locally advanced or metastatic urothelial cancer. Welireg (belzutifan) is a medication for the treatment of adult patients with certain von Hippel-Lindau disease-associated tumors and for the treatment of adult patients with advanced RCC following a PD-1 or programmed death-ligand 1 (PD-L1) inhibitor and a vascular endothelial growth factor tyrosine kinase inhibitor. In addition, the Company recognizes alliance revenue related to sales of Lynparza (olaparib), an oral poly (ADP-ribose) polymerase (PARP) inhibitor, for certain types of advanced or recurrent ovarian, early or metastatic breast, metastatic pancreatic, and metastatic castration-resistant prostate cancers; alliance revenue related to sales of Lenvima, an oral receptor tyrosine kinase inhibitor, for certain types of thyroid cancer, RCC, HCC, in combination with everolimus for certain patients with advanced RCC, and in combination with Keytruda for certain patients with advanced endometrial carcinoma or advanced RCC; and alliance revenue related to Reblozyl (luspatercept-aamt) for the treatment of certain types of anemia.

Vaccines

Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant)/Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), vaccines to help prevent certain cancers and diseases caused by certain types of human papillomavirus (HPV); ProQuad (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella; M−M−R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help prevent measles, mumps and rubella; Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella); RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children; Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help prevent invasive pneumococcal disease in individuals 6 weeks of age and older; Pneumovax 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease; and Vaqta (hepatitis A vaccine, inactivated) indicated for the prevention of disease caused by hepatitis A virus in persons 12 months of age and older.

Hospital Acute Care

Bridion (sugammadex), a medication for the reversal of two types of neuromuscular blocking agents used during surgery; Prevymis (letermovir) for the prophylaxis of cytomegalovirus (CMV) infection and disease, or of CMV disease, in certain high risk adult recipients of an allogeneic hematopoietic stem cell transplant or of a kidney transplant, respectively; Dificid (fidaxomicin) for the treatment of C. difficile-associated diarrhea; Zerbaxa (ceftolozane and tazobactam) for injection, a combination antibacterial and beta-lactamase inhibitor for the treatment of certain

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bacterial infections; Noxafil (posaconazole), an antifungal agent for the prevention of certain invasive fungal infections; and Primaxin (imipenem and cilastatin) for injection, an antibiotic for the treatment of certain bacterial infections.

Cardiovascular

Adempas (riociguat), a cardiovascular drug for the treatment of chronic thromboembolic pulmonary hypertension or pulmonary arterial hypertension in certain patients; Verquvo (vericiguat), a medicine to reduce the risk of cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous diuretics in certain adults with symptomatic chronic heart failure and reduced ejection fraction.

Virology

Lagevrio, an investigational oral antiviral COVID-19 medicine available in the U.S. under Emergency Use Authorization (EUA); Isentress/Isentress HD (raltegravir), an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection.

Neuroscience

Belsomra (suvorexant), an orexin receptor antagonist, indicated for the treatment of insomnia, characterized by difficulties with sleep onset and/or sleep maintenance.

Immunology

Simponi (golimumab), a once-monthly subcutaneous treatment for certain inflammatory diseases; and Remicade (infliximab), a treatment for inflammatory diseases, both of which the Company markets in Europe, Russia and Türkiye.

Diabetes

Januvia (sitagliptin) and Janumet (sitagliptin/metformin HCl) for the treatment of type 2 diabetes.

Animal Health

The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceuticals, vaccines and health management solutions and services, as well as an extensive suite of digitally connected identification, traceability and monitoring products. Principal products in this segment include:

Livestock Products

Nuflor (Florfenicol) antibiotic range for use in cattle and swine; Bovilis/Vista vaccine lines for infectious diseases in cattle; Banamine (Flunixin meglumine) bovine and swine anti-inflammatory; Estrumate (cloprostenol sodium) for the treatment of fertility disorders in cattle; Matrix (altrenogest) fertility management for swine; Resflor (florfenicol and flunixin meglumine), a combination broad-spectrum antibiotic and non-steroidal anti-inflammatory drug for bovine respiratory disease; Zuprevo (Tildipirosin) for bovine respiratory disease; Revalor (trenbolone acetate and estradiol) to improve production efficiencies in beef cattle; Safe-Guard (fenbendazole) de-wormer for cattle; M+Pac (Mycoplasma Hyopneumoniae Bacterin) swine pneumonia vaccine; Porcilis (Lawsonia intracellularis baterin) and Circumvent (Porcine Circovirus Vaccine, Type 2, Killed Baculovirus Vector) vaccine lines for infectious diseases in swine; Nobilis/Innovax (Live Marek’s Disease Vector), vaccine lines for poultry; Paracox and Coccivac coccidiosis vaccines; Exzolt, a systemic treatment for poultry red mite infestations; Slice (Emamectin benzoate) parasiticide for sea lice in salmon; Aquavac (Avirulent Live Culture)/Norvax vaccines against bacterial and viral disease in fish; Aquaflor (Florfenicol) antibiotic for farm-raised fish; Flexolt (fluralaner) against lice in sheep; and Allflex Livestock Intelligence solutions for animal identification, monitoring and traceability.

Companion Animal Products

Bravecto, a line of oral and topical parasitic control products, including the original Bravecto (fluralaner) products for dogs and cats that last up to 12 weeks; Bravecto (fluralaner) One-Month, a monthly product for dogs, and Bravecto Plus (fluralaner/moxidectin), a two-month product for cats; Sentinel, a line of oral parasitic products for dogs including Sentinel Spectrum (milbemycin oxime, lufenuron, and praziquantel) and Sentinel Flavor Tabs (milbemycin oxime, lufenuron); Optimmune (cyclosporine), an ophthalmic ointment; Nobivac vaccine lines for flexible dog and cat vaccination; GilvetMab, an immune checkpoint inhibitor monoclonal antibody conditionally licensed for melanoma and mastocytoma tumors; Otomax (Gentamicin sulfate, USP; Betamethasone valerate USP; and Clotrimazole USP ointment)/Mometamax (Gentamicin sulfate, USP, Mometasone Furoate Monohydrate and Clotrimazole, USP, Otic Suspension)/Mometamax Ultra (gentamicin sulfate, mometasone furoate monohydrate and posaconazole suspension)/Posatex (Orbifloxacin, Mometasone Furoate Monohydrate and Posaconazole, Suspension) ear ointments for acute and chronic otitis; Caninsulin/Vetsulin (porcine insulin zinc suspension) diabetes mellitus treatment for dogs and cats; Panacur (fenbendazole)/Safeguard (fenbendazole) broad-spectrum anthelmintic (de-wormer) for use in many animals; Regumate (altrenogest) fertility management for horses; Prestige vaccine line

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for horses; Scalibor (Deltamethrin)/Exspot for protecting against bites from fleas, ticks, mosquitoes and sandflies; and Sure Petcare products for companion animal identification and well-being, including the microchip and pet recovery system Home Again.

For a further discussion of sales of the Company’s products, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.

Product Approvals

Set forth below is a summary of significant product approvals received by the Company in 2023 and, to date, in 2024.

Product	Date	Approval
Keytruda	January 2023	U.S. Food and Drug Administration (FDA) approval as a single agent for adjuvant treatment following surgical resection and platinum-based chemotherapy for adult patients with stage IB (T2a ≥4 cm), II, or IIIA NSCLC, based on the KEYNOTE-091 trial.
	March 2023	FDA full approval for the treatment of adult and pediatric patients with unresectable or metastatic MSI-H or dMMR solid tumors that have progressed following prior treatment and who have no satisfactory alternative treatment options. The conversion from an accelerated to a full (regular) approval is based on the KEYNOTE-158, KEYNOTE-164 and KEYNOTE-051 trials.
	April 2023	FDA accelerated approval in combination with Padcev (enfortumab vedotin-ejfv) for the treatment of adult patients with locally advanced or metastatic urothelial carcinoma who are not eligible for cisplatin-containing chemotherapy, based on the KEYNOTE-869 trial dose escalation cohort, Cohort A and Cohort K, which was conducted in collaboration with Seagen (now Pfizer Inc. (Pfizer)) and Astellas.
	June 2023	Japan’s Ministry of Health, Labor and Welfare (MHLW) approval for the treatment of patients with relapsed or refractory PMBCL, based on the KEYNOTE-170 and the KEYNOTE-A33 trials.
	August 2023	European Commission (EC) approval in combination with trastuzumab, fluoropyrimidine- and platinum-containing chemotherapy, for the first-line treatment of locally advanced unresectable or metastatic HER2-positive gastric or GEJ adenocarcinoma in adults whose tumors express PD-L1, based on the KEYNOTE-811 trial.
	September 2023	China’s National Medical Products Administration (NMPA) approval as monotherapy for the treatment of adult patients with advanced unresectable or metastatic MSI-H or dMMR solid tumors, including patients with colorectal cancer that have progressed following treatment with fluoropyrimidine, oxaliplatin or irinotecan, or those with other solid tumors that have progressed following prior therapy and who have no satisfactory alternative treatment options, based on the KEYNOTE-158 and KEYNOTE-164 trials.
	October 2023	EC approval as a monotherapy for the adjuvant treatment of adults with NSCLC who are at high risk of recurrence following complete resection and platinum-based chemotherapy, based on the KEYNOTE-091 trial.
	October 2023	FDA approval for the treatment of patients with resectable (tumors >=4cm or node positive) NSCLC in combination with platinum-containing chemotherapy as neoadjuvant treatment, and then continued as a single agent as adjuvant treatment after surgery, based on the KEYNOTE-671 trial.
	October 2023	FDA full approval for the treatment of adult and pediatric patients with recurrent locally advanced or metastatic Merkel cell carcinoma. The conversion from an accelerated to a full (regular) approval is based on the KEYNOTE-913 and KEYNOTE-017 trials.
	October 2023	FDA approval in combination with gemcitabine and cisplatin for the treatment of patients with locally advanced unresectable or metastatic biliary tract cancer, based on the KEYNOTE-966 trial.

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Keytruda	November 2023	FDA approval in combination with fluoropyrimidine- and platinum-containing chemotherapy, for the first-line treatment of adults with locally advanced unresectable or metastatic HER2-negative gastric or GEJ adenocarcinoma, based on the KEYNOTE-859 trial.
	December 2023	FDA full approval in combination with Padcev (enfortumab vedotin-ejfv), an antibody-drug conjugate, for the treatment of adult patients with locally advanced or metastatic urothelial cancer. The conversion from an accelerated to a full (regular) approval is based on the KEYNOTE-A39 trial that was conducted in collaboration with Seagen (now Pfizer) and Astellas.
	December 2023	EC approval in combination with fluoropyrimidine- and platinum-containing chemotherapy, for the first-line treatment of locally advanced unresectable or metastatic HER2-negative gastric or GEJ adenocarcinoma in adults whose tumors express PD-L1, based on the KEYNOTE-859 trial.
	December 2023	EC approval in combination with gemcitabine and cisplatin for the first-line treatment of locally advanced unresectable or metastatic biliary tract carcinoma in adults, based on the KEYNOTE-966 trial.
	December 2023	China’s NMPA approval in combination with fluoropyrimidine- and platinum-containing chemotherapy for the first-line treatment of patients with locally advanced unresectable or metastatic HER2-negative gastric or GEJ adenocarcinoma, based on the KEYNOTE-859 trial.
	January 2024	FDA approval in combination with chemoradiotherapy for the treatment of patients with FIGO (International Federation of Gynecology and Obstetrics) stage III-IVA cervical cancer, based on the KEYNOTE-A18 trial.
	January 2024	FDA full approval for the treatment of patients with HCC secondary to hepatitis B who have received prior systemic therapy other than a PD-1/PD-L1 containing regimen. The conversion from an accelerated to full (regular) approval is based on the KEYNOTE-394 trial.
	February 2024	China’s NMPA approval in combination with gemcitabine and cisplatin for the first-line treatment of patients with locally advanced or metastatic biliary tract carcinoma, based on the KEYNOTE-966 trial.
Lynparza(1)	May 2023	FDA approval in combination with abiraterone and prednisone or prednisolone for the treatment of adult patients with deleterious or suspected deleterious BRCA-mutated (BRCAm) metastatic castration-resistant prostate cancer (mCRPC), based on the PROpel trial.
	August 2023	Japan’s MHLW approval in combination with abiraterone and prednisolone for treatment of adult patients with BRCAm mCRPC with distant metastasis, based on the PROpel trial.
Prevymis	June 2023	FDA approval for CMV prophylaxis in Donor CMV-seropositive/Recipient CMV-seronegative adult kidney transplant recipients, based on the P002 trial.
	November 2023	EC approval for CMV prophylaxis Donor CMV-seropositive/Recipient CMV-seronegative adult kidney transplant recipients, based on the P002 trial.
Ervebo	August 2023	FDA approval of an expanded indication for the prevention of disease caused by Zaire ebolavirus in individuals 12 months of age and older. The vaccine was previously approved for use in individuals 18 years of age and older.
	September 2023	EC approval of an expanded indication for active immunization of individuals one year of age or older to protect against Ebola Virus Disease caused by Zaire ebolavirus. The vaccine was previously approved for use in the EU for individuals 18 years of age or older.
Welireg	December 2023	FDA approval for the treatment of adult patients with advanced RCC following both a PD-1 or PD-L1 inhibitor and a vascular endothelial growth factor tyrosine kinase inhibitor, based on the LITESPARK-005 trial.
Bravecto	January 2024	EC approval of injectable formulation for dogs for the persistent killing of fleas and ticks for 12 months after treatment.

(1) Being jointly developed and commercialized in a worldwide collaboration with AstraZeneca.

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Competition and the Health Care Environment

Competition

The markets in which the Company conducts its business and the pharmaceutical industry in general are highly competitive and highly regulated. The Company’s competitors include other worldwide research-based pharmaceutical companies, smaller research companies with more limited therapeutic focus, generic drug manufacturers, and animal health care companies. The Company’s operations may be adversely affected by generic and biosimilar competition as the Company’s products mature, as well as technological advances of competitors, industry consolidation, patents granted to competitors, competitive combination products, new products of competitors, the generic availability of competitors’ branded products, and new information from clinical trials of marketed products or post-marketing surveillance. In addition, patent rights are increasingly being challenged by competitors, and the outcome can be highly uncertain. An adverse result in a patent dispute can preclude commercialization of products or negatively affect sales of existing products and could result in the payment of royalties or in the recognition of an impairment charge with respect to intangible assets associated with certain products.

Pharmaceutical competition involves a rigorous search for technological innovations and the ability to market these innovations effectively. With its long-standing emphasis on research and development, the Company is well-positioned to compete in the search for technological innovations. The Company is active in acquiring and marketing products through external alliances, such as licensing arrangements and collaborations and has been refining its sales and marketing efforts to address changing industry conditions. However, the introduction of new products and processes by competitors may result in price reductions and product displacements, even for products protected by patents. For example, the number of compounds available to treat a particular disease typically increases over time and can result in slowed sales growth or reduced sales of the Company’s products in that therapeutic category.

The highly competitive animal health business is affected by several factors including regulatory and legislative issues, scientific and technological advances, product innovation, the quality and price of the Company’s products as well as competitors’ products, effective promotional efforts and the frequent introduction of generic products by competitors.

Health Care Environment and Government Regulation

Global efforts toward health care cost containment continue to exert pressure on product pricing and market access. Changes to the U.S. health care system as part of health care reform enacted in prior years, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, have contributed to pricing pressure. In several international markets, government-mandated pricing actions have reduced prices of generic and patented drugs. In addition, the Company’s sales performance in 2023 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs. In the U.S., the Biden Administration and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs. The Company anticipates all of these actions and additional actions in the future will continue to negatively affect sales and profits.

United States

The Company faces increasing pricing pressure from managed care organizations, government agencies and programs that could negatively affect the Company’s sales and profit margins, including, through (i) practices of managed care organizations, federal and state exchanges, and institutional and governmental purchasers, and (ii) federal laws and regulations related to Medicare and Medicaid, including the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the Patient Protection and Affordable Care Act of 2010 (ACA), the American Rescue Plan Act of 2021 (American Rescue Plan Act), and the Inflation Reduction Act of 2022 (IRA).

In the U.S., federal and state governments for many years have pursued methods to reduce the cost of drugs and vaccines for which they pay. For example, federal and state laws require the Company to pay specified rebates for medicines reimbursed by Medicaid and to provide discounts for medicines purchased by certain state and federal entities such as the Department of Defense, Veterans Affairs, Public Health Service entities and hospitals serving a disproportionate share of low income or uninsured patients.

Additionally in the U.S., consolidation and integration among health care providers is a major factor in the competitive marketplace for pharmaceutical products. Health plans and pharmacy benefit managers (PBMs) have been consolidating into fewer, larger entities, thus enhancing their purchasing strength and importance. Private third-party insurers, as well as governments, employ formularies to control costs by negotiating discounted prices in exchange for formulary inclusion. Failure to obtain timely or adequate pricing or formulary placement for Merck’s products or obtaining such placement at unfavorable pricing could adversely affect revenue. In addition to formulary

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tier co-pay differentials, private health insurance companies and self-insured employers have been increasing the cost-sharing required from beneficiaries, particularly for branded pharmaceuticals and biotechnology products. Private health insurance companies also are increasingly imposing utilization management tools, such as clinical protocols, requiring prior authorization for a branded product or requiring the patient to first fail on one or more generic products before permitting access to a branded medicine. These same management tools are also used in treatment areas in which the payor has taken the position that multiple branded products are therapeutically comparable. As the U.S. payor market concentrates further, the Company may face greater pricing pressure from private third-party payors.

In order to provide information about the Company’s pricing practices, the Company annually posts on its website its Pricing Transparency Report for the U.S. The report provides the Company’s average annual list price, net price increases, and average discounts across the Company’s U.S. portfolio dating back to 2010. In 2023, the Company’s gross U.S. sales were reduced by 37% as a result of rebates, discounts and returns.

Legislative Changes

In 2022, Congress passed the IRA, which makes significant changes to how drugs are covered and paid for under the Medicare program, including the creation of financial penalties for drugs whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits, and government price-setting for certain Medicare Part D drugs, starting in 2026, and Medicare Part B drugs starting in 2028. In August 2023, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), announced that Januvia will be included in the first year of the IRA’s “Drug Price Negotiation Program” (Program). Pursuant to the IRA’s Program, discussions with the government occurred in 2023 and will continue in 2024, with government price setting becoming effective on January 1, 2026. The Company has sued the U.S. government regarding the IRA’s Program (see Item 8 “Financial Statements and Supplementary Data,” Note 11. “Contingencies and Environmental Liabilities” below). Furthermore, the Biden Administration and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs.

The long-term implications of the IRA remain uncertain and subject to various factors, including the manner in which the U.S. Department of Health and Human Services decides to implement the statute. Many experts and analysts, both within the industry and outside, have predicted that the law will harm innovation in the pharmaceutical industry and result in fewer new treatments being developed and approved over time. Merck is working to mitigate the potentially harmful effects that the law could have, which could include a detrimental impact on innovation.

In addition, in 2021, Congress passed the American Rescue Plan Act, which included a provision that eliminates the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. These rebates act as a discount off the list price and eliminating the cap means that manufacturer discounts paid to Medicaid can increase. Prior to this change, manufacturers have not been required to pay more than 100% of the Average Manufacturer Price (AMP) in rebates to state Medicaid programs for Medicaid-covered drugs. As a result of this provision, beginning in 2024, manufacturers may have to pay state Medicaid programs more in rebates than they received on sales of particular products. This change presents a risk to Merck for drugs that have high Medicaid utilization and rebate exposure that is more than 100% of the AMP.

The Company also faces increasing pricing pressure in the states, which are looking to exert greater influence over the price of prescription drugs. A number of states have passed pharmaceutical price and cost transparency laws. These laws typically require manufacturers to report certain product price information or other financial data to the state. Some laws also require manufacturers to provide advance notification of price increases. The Company expects that states will continue their focus on pharmaceutical pricing and will increasingly shift to more aggressive price control tools such as Prescription Drug Affordability Boards that have the authority to conduct affordability reviews and establish upper payment limits. In addition, recently, the FDA authorized, for a two-year period, Florida’s application to import prescription drugs from Canada.

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Regulatory Changes

The pharmaceutical industry also could be considered a potential source of savings via other legislative and administrative proposals that have been debated but not enacted. These types of revenue generating or cost saving proposals include additional direct price controls.

European Union

Efforts toward health care cost containment remain intense in the European Union (EU). The Company faces competitive pricing pressure resulting from generic and biosimilar drugs. In addition, a majority of countries in the EU attempt to contain drug costs by engaging in reference pricing in which authorities examine pre-determined markets for published prices of drugs. Reference pricing may either compare a product’s prices in other markets (external reference pricing), or compare a product’s price with those of other products in a national class (internal reference pricing). The authorities then use the price data to set new local prices for brand-name drugs, including the Company’s drugs. Guidelines for examining reference pricing are usually set in local markets and can be changed pursuant to local regulations. Some EU Member States have established free-pricing systems, but regulate the pricing for drugs through profit control plans. Others seek to negotiate or set prices based on the cost-effectiveness of a product or an assessment of whether it offers a therapeutic benefit over other products in the relevant class. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. In some EU Member States, cross-border imports from low-priced markets also exert competitive pressure that may reduce pricing within an EU Member State.

Additionally, EU Member States have the power to restrict the range of pharmaceutical products for which their national health insurance systems provide reimbursement. In the EU, pricing and reimbursement plans vary widely from Member State to Member State. Some EU Member States provide that drug products may be marketed only after a reimbursement price has been agreed. Some EU Member States may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to already available therapies or a so-called health technology assessment (HTA), in order to obtain reimbursement or pricing approval. The HTA of pharmaceutical products is becoming an increasingly common part of the pricing and reimbursement procedures in most EU Member States. The HTA process, which is governed by the national laws of these countries, involves the assessment of the cost-effectiveness, public health impact, therapeutic impact and/or the economic and social impact of use of a given pharmaceutical product in the national health care system of the individual country in which it is conducted. Ultimately, an HTA measures the added value of a new health technology compared to existing ones. The outcome of HTAs regarding specific pharmaceutical products will often influence the pricing and reimbursement status granted to these pharmaceutical products by the regulatory authorities of individual EU Member States. A negative HTA of one of the Company’s products may mean that the product is not reimbursable or may force the Company to reduce its reimbursement price or offer discounts or rebates.

A negative HTA by a leading and recognized HTA body could also undermine the Company’s ability to obtain reimbursement for the relevant product outside a jurisdiction. For example, EU Member States that have not yet developed HTA mechanisms may rely to some extent on the HTA performed in other countries with a developed HTA framework, to inform their pricing and reimbursement decisions. HTA procedures require additional data, reviews and administrative processes, all of which increase the complexity, timing and costs of obtaining product reimbursement and exert downward pressure on available reimbursement.

To obtain reimbursement or pricing approval in some EU Member States, the Company may be required to conduct studies that compare the cost-effectiveness of the Company’s product candidates to other therapies that are considered the local standard of care. There can be no assurance that any EU Member State will allow favorable pricing, reimbursement and market access conditions for any of the Company’s products, or that it will be feasible to conduct additional cost-effectiveness studies, if required.

Japan

In Japan, the pharmaceutical industry is subject to government-mandated annual price reductions of pharmaceutical products and certain vaccines. Furthermore, the government can order re-pricings for specific products if it determines that use of such product will exceed certain thresholds defined under applicable re-pricing rules. In addition, if a Merck product has the same medical action or composition of another product that is subject to market expansion re-pricing, the Merck product could also be subject to re-pricing unless it meets exception criteria. The next government-mandated price reduction will occur in April 2024.

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China

The Company’s business in China has grown rapidly in the past few years, and the importance of China to the Company’s overall pharmaceutical and vaccines business has increased accordingly. Continued growth of the Company’s business in China is dependent upon ongoing development of a favorable environment for innovative pharmaceutical products and vaccines, sustained access for the Company’s currently marketed products, and the absence of trade impediments or adverse pricing controls. In recent years, the Chinese government has introduced and implemented a number of structural reforms to accelerate the shift to innovative products and reduce costs. Since 2017, there have been multiple new policies introduced by the government to improve access to new innovation, reduce the complexity of regulatory filings, and accelerate the review and approval process. This has led to a significant increase in the number of new products being approved each year. While the mechanism for drugs being added to the government’s National Reimbursement Drug List (NRDL) evolves, inclusion may require a price negotiation which could impact the outlook in the market for selected brands. A new NRDL was recently completed in which new entries averaged 60% price reductions. While pricing pressure has always existed in China, health care reform has increased this pressure in part due to the acceleration of generic substitution through volume based procurement (VBP). In 2019, the government implemented the VBP program through a tendering process for mature products which have generic substitutes with a Generic Quality Consistency Evaluation approval. Mature products that have entered into the last five rounds of VBP had, on average, a price reduction of more than 50%. The Company expects VBP to be a semi-annual process that will have a significant impact on mature products moving forward.

Emerging Markets

The Company’s focus on emerging markets, in addition to China, has continued. Governments in many emerging markets are also focused on constraining health care costs and have enacted price controls and measures impacting intellectual property, including in exceptional cases, threats of compulsory licenses, that aim to put pressure on the price of innovative pharmaceuticals or result in constrained market access to innovative medicine. The Company anticipates that pricing pressures and market access challenges will continue in the future to varying degrees in the emerging markets.

Beyond pricing and market access challenges, other conditions in emerging market countries can affect the Company’s efforts to continue to grow in these markets, including potential political instability, changes in trade sanctions and embargoes, significant currency fluctuation and controls, financial crises, limited or changing availability of funding for health care, credit worthiness of health care partners, such as hospitals, and other developments that may adversely impact the business environment for the Company. Further, the Company may engage third-party agents to assist in operating in emerging market countries, which may affect its ability to realize continued growth and may also increase the Company’s risk exposure.

In addressing global cost containment pressures, the Company engages in public policy advocacy with policymakers and continues to work to demonstrate that its medicines provide value to patients and to those who pay for health care. The Company advocates with government policymakers to encourage a long-term approach to sustainable health care financing that ensures access to innovative medicines and does not disproportionately target pharmaceuticals as a source of budget savings. In markets with historically low rates of health care spending, the Company encourages those governments to increase their investments and adopt market reforms in order to improve their citizens’ access to appropriate health care, including medicines.

Operating conditions have become more challenging under the global pressures of competition, industry regulation and cost containment efforts. Although no one can predict the effect of these and other factors on the Company’s business, the Company continually takes measures to evaluate, adapt and improve the organization and its business practices to better meet customer needs and believes that it is well-positioned to respond to the evolving health care environment and market forces.

Regulation

The pharmaceutical industry is also subject to regulation by regional, country, state and local agencies around the world focused on standards and processes for determining drug safety and effectiveness, as well as conditions for sale or reimbursement.

Of particular importance is the FDA in the U.S., which administers requirements covering the testing, approval, safety, effectiveness, manufacturing, labeling, and marketing of prescription pharmaceuticals. In some cases, the FDA requirements and practices have increased the amount of time and resources necessary to develop new products and bring them to market in the U.S. At the same time, the FDA has committed to expediting the development and review of products bearing the “breakthrough therapy” designation, which has accelerated the

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regulatory review process for medicines with this designation. The FDA has also undertaken efforts to bring generic competition to market more efficiently and in a more timely manner.

The EU has adopted directives and other legislation concerning the classification, approval for marketing, labeling, advertising, manufacturing, wholesale distribution, integrity of the supply chain, pharmacovigilance and safety monitoring of medicinal products for human use. These provide mandatory standards throughout the EU, which may be supplemented or implemented with additional regulations by the EU Member States. In particular, EU regulators may approve products subject to a number of post-authorization conditions. Examples of typical post-authorization commitments include additional pharmacovigilance, the conduct of clinical trials, the establishment of patient registries, physician or patient education and controlled distribution and prescribing arrangements. Non-compliance with post-authorization conditions, pharmacovigilance and other obligations can lead to regulatory action, including the variation, suspension or withdrawal of the marketing authorizations, or other enforcement or regulatory actions, including the imposition of financial penalties. The Company’s policies and procedures are already consistent with the substance of these directives; consequently, it is believed that they will not have any material effect on the Company’s business.

The Company believes that it will continue to be able to conduct its operations, including launching new drugs, in this regulatory environment. (See “Research and Development” below for a discussion of the regulatory approval process.)

Access to Medicines

As a global health care company, Merck’s primary role is to discover and develop innovative medicines and vaccines. The Company also recognizes that, in collaboration with key stakeholders, it has a role to play in helping to ensure that its science advances health care, and its products are accessible and affordable. The Company is committed to ensuring a reliable, safe global supply of its quality medicines and vaccines, and to developing, testing and implementing innovative solutions that address barriers to access and affordability of its medicines and vaccines. The Company’s approach is designed to enable it to serve the greatest number of patients today, while meeting the needs of patients in the future. The Company's wide-ranging efforts to expand access to health encompass a set of principles embedded in its business strategies and operations. These principles guide the Company's global approach to addressing significant public health burdens and unmet medical needs. The Company systematically evaluates its pipeline candidates to assess their potential in low-resource settings. Throughout the life cycle of its products, the Company seeks to continually evaluate their potential and adapt to changes in the external environment. Collaborating with various stakeholders, including private, governmental, multilateral, and non-profit organizations, the Company seeks to design and deliver sustainable solutions to address access challenges at the payer, provider, and patient levels. Furthermore, the Company incorporates access to health metrics in its scorecard, making it a component of calculating annual incentive pay for the majority of its global employees.

In addition, through social investments, including philanthropic programs and impact investing, Merck is helping to strengthen health systems and build capacity, particularly in under-resourced communities. The Merck Patient Assistance Program provides certain medicines and adult vaccines for free to people in the U.S. who do not have prescription drug or health insurance coverage and who, without the Company’s assistance, cannot afford their Merck medicines and vaccines. Globally, Merck has made substantial contributions to access to health through key initiatives, including product donations for humanitarian assistance in low-income countries through the Medical Outreach Program. The Mectizan Donation Program, the longest running disease-specific drug donation program of its kind, supports the elimination of two neglected tropical diseases – onchocerciasis and lymphatic filariasis. Additionally, through Merck for Mothers, the Company provides funding, and scientific and business acumen to help global health partners end preventable deaths from complications of pregnancy and childbirth. Merck has also provided funds to the Merck Foundation, an independent grantmaking organization, which supports a variety of organizations dedicated to addressing systemic barriers to health equity.

Privacy and Data Protection

The Company is subject to a significant number of privacy and data protection laws and regulations globally, many of which place restrictions on the Company’s ability to transfer, access and use personal data across its business. The legislative and regulatory landscape for privacy and data protection continues to evolve. There has been increased attention to privacy and data protection issues in both developed and emerging markets with the potential to affect directly the Company’s business, including the EU General Data Protection Regulation (GDPR), which imposes penalties of up to 4% of global revenue.

The GDPR and related implementing laws in individual EU Member States govern the collection and use of personal health data and other personal data in the EU. The GDPR increased responsibility and liability in relation to personal data that the Company processes. It also imposes a number of strict obligations and restrictions on the

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ability to process (which includes collection, analysis and transfer of) personal data, including health data from clinical trials and adverse event reporting. The GDPR also includes requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals prior to processing their personal data or personal health data, notification of data processing obligations to the national data protection authorities, and the security and confidentiality of the personal data. Further, the GDPR prohibits the transfer of personal data to countries outside of the EU that are not considered by the EC to provide an adequate level of data protection, including to the U.S., except if the data controller meets very specific requirements. Following the Schrems II decision of the Court of Justice of the EU in 2020, there is considerable uncertainty as to the permissibility of international data transfers under the GDPR. In light of the implications of this decision, the Company may face difficulties regarding the transfer of personal data from the EU to third countries. Since then, the Company entered into the EU-approved Standard Contractual Clauses with its vendors, suppliers, collaboration partners and clinical trial sites in order to facilitate the lawful transfer of personal data from the EU to the U.S. In addition, President Biden issued Executive Order 14086 on October 7, 2022 to address the data privacy concerns raised in the Schrems II decision through introducing, among other measures, further safeguards and oversight of personal data collection by U.S. signals intelligence activities and providing individuals with a redress mechanism in the U.S. for their data protection concerns. Further certainty for the international transfer of personal data from the EU via the EU-U.S. Data Privacy Framework (successor to the invalidated EU-U.S. Privacy Shield) came about by way of a new EU Adequacy Decision, issued by the EC on July 10, 2023. However, the new Adequacy Decision has already been contested by privacy advocates and is subject to legal review.

Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States may result in significant monetary fines and other administrative penalties as well as civil liability claims from individuals whose personal data was processed. Data protection authorities from the different EU Member States may still implement certain variations, enforce the GDPR and national data protection laws differently, and introduce additional national regulations and guidelines, which adds to the complexity of processing personal data in the EU. Guidance developed at both the EU level and at the national level in individual EU Member States concerning implementation and compliance practices is often updated or otherwise revised.

There is, moreover, a growing trend towards required public disclosure of clinical trial data in the EU which adds to the complexity of obligations relating to processing health data from clinical trials. Failing to comply with these obligations could lead to government enforcement actions and significant penalties against the Company, harm to its reputation, and adversely impact its business and operating results. The uncertainty regarding the interplay between different regulatory frameworks further adds to the complexity that the Company faces with regard to data protection regulation.

In August 2021, China passed the Personal Information Protection Law (PIPL) that aims to standardize the handling of personal information in China which became effective in November 2021. The PIPL currently applies to the processing of personal information of natural persons in China, the processing of personal information outside China where the purpose is to provide products and services in China, and to analyze the activities of individuals in China. While similar to the GDPR, the PIPL contains unique requirements not found in the GDPR.

The Company has developed and implemented comprehensive plans to ensure compliance with the PIPL, with plans relating to data localization and cross-border transfers pending forthcoming guidance from the Cyberspace Administration of China.

Additional laws and regulations enacted in certain states in the U.S., Canada, Europe, Asia, and Latin America, have increased enforcement and litigation activity in the U.S. and other developed markets, as well as increased regulatory cooperation among privacy authorities globally. The Company has adopted a comprehensive global privacy program to manage these evolving requirements and risks and to facilitate the transfer of personal information across international borders.

Distribution

The Company sells its human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers, such as health maintenance organizations, PBMs and other institutions. Human health vaccines are sold primarily to physicians, wholesalers, distributors and government entities. The Company’s professional representatives communicate the effectiveness, safety and value of the Company’s pharmaceutical and vaccine products to health care professionals in private practice, group practices, hospitals and managed care organizations. The Company sells its animal health products to veterinarians, distributors, animal producers, farmers and pet owners.

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Raw Materials

The Company obtains raw materials essential to its business from numerous suppliers worldwide. Most of the principal materials the Company uses in its manufacturing operations are available from more than one source. However, the Company obtains certain raw or intermediate materials primarily from only one source. The Company attempts, if possible, to mitigate the potential risk associated with raw materials, components and supplies through inventory and appropriate supplier management.

Patents, Trademarks and Licenses

Patent protection is considered, in the aggregate, to be of material importance to the Company’s marketing of its products in the U.S. and in most major foreign markets. Patents may cover products per se, pharmaceutical formulations, processes for, or intermediates useful in, the manufacture of products, or the uses of products. Patent protection for individual products extends for varying periods in accordance with the legal life of patents in the various countries. The protection afforded, which may also vary from country to country, depends upon the type of patent and its scope of coverage.

Patent portfolios developed for products introduced by the Company normally provide market exclusivity. Key patents may be subject to a patent term restoration (also known as patent term extension or PTE) of up to five years in the U.S., Japan, and certain other jurisdictions, or in Europe, up to five years of extended term may be available in the form of a Supplementary Protection Certificate (SPC). PTEs and SPCs are awarded to offset a portion of the patent term lost during the clinical testing and regulatory review process of a product prior to approval. The Food and Drug Administration Modernization Act includes a Pediatric Exclusivity Provision that may provide an additional six months of market exclusivity (added to the patent term for all Orange Book-listed patents, and to the regulatory data exclusivity term for small molecule and biologic products) in the U.S. for indications of new or currently marketed drugs if certain agreed upon pediatric studies are completed by the applicant. The EU also provides an additional six months of pediatric market exclusivity attached to a product’s SPC term. Japan attaches the additional term for pediatric studies to market exclusivity and this extension is unrelated to patent term. Regulatory data exclusivity tied to the protection of clinical data is complementary to patent protection and, in some cases, may provide more effective or longer lasting marketing exclusivity than a product’s patent portfolio. In the U.S., the regulatory data protection term generally runs five years from first marketing approval of a new chemical entity, extended to seven years for an orphan drug indication, and twelve years from first marketing approval of a biological product.

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The table below provides a list of expiration dates, which include any pending PTE and SPC periods where indicated, for the key patent protection in the U.S., the EU, Japan and China for the following marketed products:

Product	Year of Expiration (U.S.)	Year of Expiration (EU)(1)	Year of Expiration (Japan)(2)	Year of Expiration(China)
Januvia	2026(3)	Expired	2025-2026	Expired
Janumet	2026(3)	Expired	N/A	Expired
Janumet XR	2026(3)	N/A	N/A	Expired
Isentress	2024(4)	Expired	2026(5)	Expired
Simponi	N/A(6)	2024(7)	N/A(6)	N/A(6)
Lenvima(8)	2025(9)	2026(9)	2026	Expired
Bridion	2026(9)	Expired	Expired	Expired
Bravecto	2026 (with pending PTE)	2029	2029	2025
Gardasil	2028	Expired	Expired	Expired
Gardasil 9	2028	2030(9)	2030	2025
Keytruda	2028	2031	2032-2033	2028
Lynparza(10)	2027(9) (with pending PTE)	2029(9)	2028-2029	2024
Zerbaxa	2028(9)	2028(9)	2028	N/A
Adempas(11)	N/A(12)	2028(9)	2027-2028	Expired
Belsomra	2029	N/A	2031	N/A
Prevymis	2029(9) (with pending PTE)	2029(9)	2029	2024
Vaxneuvance	2031(13)	No Patent(14)	No Patent(14)	N/A
Delstrigo	2032 (with pending PTE)	2033(9)	N/A	2031
Pifeltro	2032 (with pending PTE)	2033(9)	2036	2031
Welireg	2035 (with pending PTE)	N/A	N/A	N/A

Note: Compound patent unless otherwise noted. Certain of the products listed may be the subject of patent litigation. See Item 8. “Financial Statements and Supplementary Data,” Note 11. “Contingencies and Environmental Liabilities” below.

N/A: Currently no marketing approval.

(1)The EU date represents the expiration date for the following four countries: France, Germany, Italy, and Spain (Major EU Markets). If SPC applications have been filed but have not been granted in all Major EU Markets, both the patent expiry date and the SPC expiry date are listed.

(2)The PTE system in Japan allows for a patent to be extended more than once provided the later approval is directed to a different indication from that of the previous approval. This may result in multiple PTE approvals for a given patent, each with its own expiration date.

(3)As a result of settlement agreements related to a patent directed to the specific sitagliptin salt form of the products, exclusivity will extend through May 2026 for Januvia and Janumet, and through July 2026 for Janumet XR.

(4)Generic entry is not anticipated in 2024.

(5)Expiry date reflects granted PTE for the 600 mg tablet in Japan.

(6)The Company has no marketing rights in the U.S., Japan or China.

(7)The distribution agreement with Johnson & Johnson Innovative Medicine expires on October 1, 2024.

(8)Part of a global strategic oncology collaboration with Eisai Co., Ltd.

(9)Eligible for six months pediatric market exclusivity.

(10)Part of a global strategic oncology collaboration with AstraZeneca.

(11)Commercialized under a worldwide collaboration with Bayer AG.

(12)The Company has no marketing rights in the U.S.

(13)PTE pending but is not included in the listed patent expiry date. Data exclusivity has been granted in the U.S. and expires July 16, 2033.

(14)Data exclusivity has been granted in the EU and Japan, and expires on December 13, 2031 and September 25, 2030, respectively.

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The Company has the following key U.S. patent protection for drug candidates under review in the U.S. by the FDA:

Under Review in the U.S.			Currently AnticipatedYear of Expiration (in the U.S.)
MK-7264 (gefapixant)(1)			2027
MK-7962 (sotatercept)			2027(2)
MK-1022 (patritumab deruxtecan)			2035
V116 (pneumococcal vaccine)			2038

(1) Received a Complete Response Letter from the FDA in December 2023.

(2) As a biologic product, MK-7962 (sotatercept) will be eligible for 12 years of data exclusivity upon approval in the U.S. Granted patents covering methods of treating pulmonary arterial hypertension with MK-7962 (sotatercept), which will expire in 2037 (absent PTE), may also provide additional exclusivity.

The Company also has the following key U.S. patent protection for drug candidates in Phase 3 development:

Phase 3 Drug Candidate			Currently AnticipatedYear of Expiration (in the U.S.)
MK-8591A (doravirine + islatravir)			2032 (with pending PTE for doravirine patent)
MK-1308A (quavonlimab + pembrolizumab)			2035
MK-1026 (nemtabrutinib)			2035
MK-7684A (vibostolimab + pembrolizumab)			2035
MK-4280A (favezelimab + pembrolizumab)			2035
V940(1)			2035
MK-1654 (clesrovimab)			2036
MK-3543 (bomedemstat)			2036
MK-5684(1)			2037
MK-4482 Lagevrio(2)			2038
MK-2870(1)			2038
MK-3475A (pembrolizumab + hyaluronidase subcutaneous)			2039
MK-0616			2040
MK-7240 (tulisokibart)			2040

(1)Being developed in a collaboration.

(2)Received Emergency Use Authorization from the FDA for the treatment of high-risk adults with mild to moderate COVID-19.

Unless otherwise noted, the patents in the above tables are compound patents. For those drug candidates under review or in development, the key U.S. patents may be subject to a future PTE of up to five years and/or six month pediatric market exclusivity. In addition, depending on the circumstances surrounding any final regulatory approval of the product, there may be other granted patents or pending patent applications that could have relevance to the product as finally approved.

While the expiration of a compound patent generally results in a loss of market exclusivity for the covered pharmaceutical product, commercial benefits may continue to be derived from: (i) later-expiring patents on processes and intermediates related to the most economical method of manufacture of the active ingredient of such product; (ii) patents relating to the use of such product; (iii) patents relating to novel compositions and formulations; and (iv) in the U.S. and certain other countries, market exclusivity that may be available under relevant law. The effect of product patent expiration on pharmaceutical product sales may also depend upon many other factors such as the nature of the market and the position of the product in it, the growth of the market, the complexities and economics of the process for manufacture of the active ingredient of the product and the requirements of new drug provisions of the Federal Food, Drug and Cosmetic Act or similar laws and regulations in other countries.

Additions to market exclusivity are sought in the U.S. and other countries through all relevant laws, including laws increasing patent life. Some of the benefits of increases in patent life have been partially offset by an increase in the number of incentives for and use of generic products. Additionally, improvements in intellectual property laws are sought in the U.S. and other countries through reform of patent and other relevant laws and implementation of international treaties.

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For further information with respect to the Company’s patents, see Item 1A. “Risk Factors” and Item 8. “Financial Statements and Supplementary Data,” Note 11. “Contingencies and Environmental Liabilities” below.

Worldwide, all of the Company’s important products are sold under trademarks that are considered in the aggregate to be of material importance. Trademark protection continues in some countries as long as used; in other countries, as long as registered. Registration is for fixed terms and can be renewed indefinitely.

Royalty income in 2023 on patent and know-how licenses and other rights amounted to $723 million. Merck also incurred royalty expenses amounting to $3.3 billion in 2023 under patent and know-how licenses it holds.

Research and Development

The Company’s business is characterized by the introduction of new products or new uses for existing products through a strong research and development program. At December 31, 2023, approximately 21,800 people were employed in the Company’s research activities. The Company prioritizes its research and development efforts and focuses on candidates that it believes represent breakthrough science for unmet medical needs that will make a difference for patients and payers.

The Company maintains a number of long-term exploratory and fundamental research programs in biology and chemistry as well as research programs directed toward product development. The Company’s research and development model is designed to increase productivity and improve the probability of success by prioritizing the Company’s research and development resources on candidates the Company believes are capable of providing unambiguous, promotable advantages to patients and payers and delivering the maximum value of its approved medicines and vaccines through new indications and new formulations. Merck is pursuing emerging product opportunities independent of therapeutic area or modality. The Company is committed to ensuring that externally sourced programs remain an important component of its pipeline strategy, with a focus on supplementing its internal research through acquisitions as well as a licensing and external alliance strategy focused on the entire spectrum of collaborations from early research to late-stage compounds, as well as access to new technologies.

The Company’s clinical pipeline includes candidates in multiple disease areas, including cancer, cardiovascular diseases, metabolic diseases, infectious diseases, neurosciences, immunology, respiratory diseases, and vaccines.

In the development of human health products, industry practice and government regulations in the U.S. and most foreign countries provide for the determination of effectiveness and safety of new chemical compounds through preclinical tests and controlled clinical evaluation. Before a new drug or vaccine may be marketed in the U.S., recorded data on preclinical and clinical experience are included in the New Drug Application (NDA) for a drug or the Biologics License Application (BLA) for a vaccine or biologic submitted to the FDA for the required approval.

Once the Company’s scientists discover a new small molecule compound or biologic that they believe has promise to treat a medical condition, the Company commences preclinical testing with that compound. Preclinical testing includes laboratory testing and animal safety studies to gather data on chemistry, pharmacology, immunogenicity and toxicology. Pending acceptable preclinical data, the Company will initiate clinical testing in accordance with established regulatory requirements. The clinical testing begins with Phase 1 studies, which are designed to assess safety, tolerability, pharmacokinetics, and preliminary pharmacodynamic activity of the compound in humans. If favorable, additional, larger Phase 2 studies are initiated to determine the efficacy of the compound in the affected population, define appropriate dosing for the compound, as well as identify any adverse effects that could limit the compound’s usefulness. In some situations, the clinical program incorporates adaptive design methodology to use accumulating data to decide how to modify aspects of the ongoing clinical study as it continues, without undermining the validity and integrity of the trial. One type of adaptive clinical trial is an adaptive Phase 2a/2b trial design, a two-stage trial design consisting of a Phase 2a proof-of-concept stage and a Phase 2b dose-optimization finding stage. If data from the Phase 2 trials are satisfactory, the Company commences large-scale Phase 3 trials to confirm the compound’s efficacy and safety. Another type of adaptive clinical trial is an adaptive Phase 2/3 trial design, a study that includes an interim analysis and an adaptation that changes the trial from having features common in a Phase 2 study (e.g., multiple dose groups) to a design similar to a Phase 3 trial. An adaptive Phase 2/3 trial design reduces timelines by eliminating activities which would be required to start a separate study. Upon completion of Phase 3 trials, if satisfactory, the Company submits regulatory filings with the appropriate regulatory agencies around the world to have the product candidate approved for marketing. There can be no assurance that a compound that is the result of any particular program will obtain the regulatory approvals necessary for it to be marketed.

Vaccine development follows the same general pathway as for drugs. Preclinical testing focuses on the vaccine’s safety and ability to elicit a protective immune response (immunogenicity). Pre-marketing vaccine clinical trials are typically done in three phases. Initial Phase 1 clinical studies are conducted in normal subjects to evaluate

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the safety, tolerability and immunogenicity of the vaccine candidate. Phase 2 studies are dose-ranging studies and provide additional data on safety, immunogenicity and/or effectiveness. Finally, Phase 3 trials are conducted in the intended population for licensure and provide data on immunogenicity and/or effectiveness, as well as safety, to support applications for regulatory approvals. If successful, the Company submits regulatory filings with the appropriate regulatory agencies.

United States

In the U.S., the FDA review process begins once a complete NDA or BLA is submitted, received and accepted for review by the agency. Within 60 days after receipt, the FDA determines if the application is sufficiently complete to permit a substantive review. The FDA also assesses, at that time, whether the application will be granted a priority review or standard review. Pursuant to the Prescription Drug User Fee Act VII (PDUFA), the FDA review period target for NDAs or original BLAs is either six months, for priority review, or ten months, for a standard review, from the time the application is deemed sufficiently complete. For original efficacy supplements to an NDA or BLA, the FDA review period target is six months, for priority review, or ten months, for a standard review, from the time the supplemental application is received. Once the review timelines are determined, the FDA will generally act upon the application within those timeline goals, unless a major amendment has been submitted (either at the Company’s own initiative or the FDA’s request) to the pending application. If this occurs, the FDA may extend the review period to allow for review of the new information, but by no more than three months. Extensions to the review period are communicated to the Company. The FDA can act on an application either by issuing an approval letter or by issuing a Complete Response Letter (CRL) stating that the application will not be approved in its present form and describing all deficiencies that the FDA has identified. Should the Company wish to pursue an application after receiving a CRL, it can resubmit the application with information that addresses the questions or issues identified by the FDA in order to support approval. Resubmissions are subject to review period targets, which vary depending on the underlying submission type and the content of the resubmission.

The FDA has four program designations — Fast Track, Breakthrough Therapy, Accelerated Approval, and Priority Review — to facilitate and expedite development and review of new drugs to address unmet medical needs in the treatment of serious or life-threatening conditions. The Fast Track designation provides pharmaceutical manufacturers with opportunities for frequent interactions with FDA reviewers during the product’s development and the ability for the manufacturer to do a rolling submission of the NDA/BLA. A rolling submission allows completed portions of the application to be submitted and reviewed by the FDA on an ongoing basis. The Breakthrough Therapy designation provides manufacturers with all of the features of the Fast Track designation as well as intensive guidance on implementing an efficient development program for the product and a commitment by the FDA to involve senior managers and experienced staff in the review. The Accelerated Approval designation allows the FDA to approve a product based on an effect on a surrogate or intermediate endpoint that is reasonably likely to predict a product’s clinical benefit and generally requires the manufacturer to conduct required post-approval confirmatory trials to verify the clinical benefit. The Priority Review designation means that the FDA’s goal is to take action on the NDA/BLA within six months, compared to ten months under standard review. More than one of these special designations can be granted for a given application (i.e., a product designated as a Breakthrough Therapy may also be eligible for Priority Review).

Due to the COVID-19 public health crisis, in 2020, the U.S. Secretary of Health and Human Services (Secretary) exercised statutory authority to determine that a public health emergency existed, and declared those circumstances justified the emergency use of drugs and biological products as authorized by the FDA. In 2023, the Secretary issued an amended determination that a public health emergency or a significant potential for a public health emergency existed, and declared that circumstances continued to justify authorization of emergency use of these products. While in effect, this declaration (as amended) enables the FDA to issue Emergency Use Authorizations (EUAs) permitting distribution and use of specific medical products absent NDA/BLA submission or approval, including products to treat or prevent diseases or conditions caused by the SARS-CoV-2 virus, subject to the terms of any such EUAs. The FDA must make certain findings to grant an EUA, including that it is reasonable to believe based on the totality of evidence that the drug or biologic may be effective, and that known or potential benefits when used under the terms of the EUA outweigh known or potential risks. Additionally, the FDA must find that there is no adequate, approved and available alternative to the emergency use of the authorized drug or biologic. The FDA may revise or revoke an EUA if the circumstances justifying its issuance no longer exist, the criteria for its issuance are no longer met, or other circumstances make a revision or revocation appropriate to protect the public health or safety.

European Union

The primary method the Company uses to obtain marketing authorization of pharmaceutical products in the EU is through the “centralized procedure.” This procedure is compulsory for certain pharmaceutical products, in particular those using biotechnological processes, and is also available for certain new chemical compounds and

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products. A company seeking to market an innovative pharmaceutical product through the centralized procedure must file a complete set of safety data and efficacy data as part of a Marketing Authorization Application (MAA) with the European Medicines Agency (EMA). After the EMA evaluates the MAA, it provides a recommendation to the EC and the EC then approves or denies the MAA. It is also possible for new chemical products to obtain marketing authorization in the EU through a “mutual recognition procedure” in which an application is made to a single member state and, if the member state approves the pharmaceutical product under a national procedure, the applicant may submit that approval to the mutual recognition procedure of some or all other EU Member States.

Other Markets

Outside of the U.S. and the EU, the Company submits marketing applications to national regulatory authorities. Examples of such are the Ministry of Health, Labour and Welfare in Japan, the National Medical Products Administration in China, Health Canada, Agência Nacional de Vigilância Sanatária in Brazil, Korea Food and Drug Administration in South Korea, and the Therapeutic Goods Administration in Australia. Each country has a separate and independent review process and timeline. In many markets, approval times can be longer as the regulatory authority requires approval in a major market, such as the U.S. or the EU, and issuance of a Certificate of Pharmaceutical Product from that market before initiating their local review process.

Research and Development Update

The Company currently has several candidates under regulatory review in the U.S. and internationally or in late-stage clinical development.

MK-1022, patritumab deruxtecan, a potential first-in-class HER3 directed DXd antibody drug conjugate (ADC), is under priority review by the FDA for the treatment of adult patients with locally advanced or metastatic EGFR-mutated NSCLC previously treated with two or more systemic therapies. The BLA is based on the primary results from the HERTHENA-Lung01 pivotal Phase 2 trial and data results presented at the IASLC 2023 World Conference on Lung Cancer, which were simultaneously published in the Journal of Clinical Oncology. The FDA set a PDUFA date of June 26, 2024 for the BLA. The priority review follows receipt of Breakthrough Therapy designation granted by the FDA in December 2021. The BLA is being reviewed under the Real-Time Oncology Review program. Patritumab deruxtecan (HER3-DXd) was discovered by Daiichi Sankyo and is being jointly developed by Daiichi Sankyo and Merck.

MK-7962, sotatercept, Merck’s novel investigational activin signaling inhibitor, is under priority review by the FDA for the treatment of adult patients with pulmonary arterial hypertension (World Health Organization Group 1). The application is based on the results from the Phase 3 STELLAR trial. The FDA set a PDUFA date of March 26, 2024. Sotatercept is also under review by the EMA. Sotatercept was granted Breakthrough Therapy designation and Orphan Drug designation by the FDA, as well as Priority Medicines (PRIME) scheme and Orphan Drug designation by the EMA for the treatment of pulmonary arterial hypertension. Sotatercept is the subject of a licensing agreement with Bristol-Myers Squibb Company (BMS).

V116, the Company’s investigational 21-valent pneumococcal conjugate vaccine specifically designed to help prevent invasive pneumococcal disease and pneumococcal pneumonia in adults, is under priority review by the FDA. The BLA for V116 is supported by results from multiple Phase 3 clinical studies evaluating V116 in both vaccine-naïve and vaccine-experienced adult patient populations, including STRIDE-3, STRIDE-4, STRIDE-5 and STRIDE-6. The FDA set a PDUFA date of June 17, 2024. V116 was granted Breakthrough Therapy designation from the FDA for the prevention of invasive pneumococcal disease and pneumococcal pneumonia caused by Streptococcus pneumoniae serotypes 3, 6A/C, 7F, 8, 9N, 10A, 11A, 12F, 15A, 15B/C, 16F, 17F, 19A, 20, 22F, 23A, 23B, 24F, 31, 33F, 35B in adults 18 years of age and older.

MK-7264, gefapixant, is a non-narcotic, oral selective P2X3 receptor antagonist, for the treatment of refractory or unexplained chronic cough in adults. In December 2023, the FDA issued a second CRL regarding the resubmission of Merck’s NDA for gefapixant. In the CRL, the FDA concluded that Merck’s application did not meet substantial evidence of effectiveness for treating refractory chronic cough and unexplained chronic cough. The CRL was not related to the safety of gefapixant. Merck is reviewing the FDA’s feedback to determine next steps.

MK-3475, Keytruda, is an anti-PD-1 therapy approved for the treatment of many cancers that is in clinical development for expanded indications. These studies encompass more than 30 cancer types including: biliary, estrogen receptor positive breast cancer, cervical, colorectal, cutaneous squamous cell, endometrial, esophageal, gastric, glioblastoma, head and neck, hepatocellular, Hodgkin lymphoma, non-Hodgkin lymphoma, non-small-cell lung, small-cell lung, melanoma, mesothelioma, ovarian, prostate, renal, triple-negative breast, and urothelial, many of which are currently in Phase 3 clinical development. Further trials are being planned for other cancers.

Keytruda is under priority review by the FDA in combination with standard of care chemotherapy (carboplatin and paclitaxel), followed by Keytruda as a single agent for the treatment of patients with primary

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advanced or recurrent endometrial carcinoma, based on the KEYNOTE-868 trial. The FDA set a PDUFA date of June 21, 2024 for the supplemental BLA.

Keytruda is under review in the EU and Japan as a perioperative treatment regimen for patients with resectable stage II, IIIA or IIIB NSCLC based on the KEYNOTE-671 study. A perioperative treatment regimen includes treatment before surgery (neoadjuvant) and continued after surgery (adjuvant). In February 2024, the EMA’s Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending approval of Keytruda in combination with platinum-containing chemotherapy as neoadjuvant treatment, then continued as a monotherapy as adjuvant treatment, for the treatment of resectable NSCLC at high risk of recurrence in adults, based on the KEYNOTE-671 trial. The CHMP’s recommendation will now be reviewed by the EC for marketing authorization in the EU, and a final decision is expected in the first half of 2024.

In addition, Keytruda is under review in the EU and Japan in combination with Padcev (enfortumab vedotin-ejfv), an ADC, for the treatment of adult patients with locally advanced or metastatic urothelial carcinoma, based on the KEYNOTE-A39 trial that was conducted in collaboration with Seagen (now Pfizer) and Astellas.

Keytruda is also under review in the EU in combination with chemoradiotherapy for the treatment of patients with high-risk locally advanced cervical cancer, based on the KEYNOTE-A18 trial.

Additionally, Keytruda is under review in Japan in combination with fluoropyrimidine- and platinum-containing chemotherapy for the first-line treatment of patients with locally advanced unresectable or metastatic gastric or GEJ adenocarcinoma, based on the KEYNOTE-859 trial.

Keytruda is also under review in Japan in combination with standard of care chemotherapy (gemcitabine and cisplatin) for the treatment of patients with locally advanced unresectable or metastatic biliary tract cancer, based on the KEYNOTE-966 trial.

Welireg is under review in the EU for the treatment of previously treated advanced renal cell carcinoma based on the LIGHTSPARK-005 clinical trial and for the treatment of von Hippel-Lindau disease based on the LIGHTSPARK-004 clinical trial.

The Company is diversifying its oncology portfolio and executing on its strategy which is broadly based on three strategic pillars: immuno-oncology, precision molecular targeting and tissue targeting. Merck has numerous Phase 3 oncology programs within these pillars.

Immuno-oncology

• Keytruda in the therapeutic areas of cutaneous squamous cell, hepatocellular, mesothelioma, ovarian and small-cell lung cancers.

• MK-1308A is the coformulation of quavonlimab, Merck’s novel investigational anti-CTLA-4 antibody, with pembrolizumab, being evaluated for the treatment of RCC.

• Subcutaneous MK-3475A, the coformulation of pembrolizumab with hyaluronidase, is being evaluated for comparability with the intravenous formulation of pembrolizumab in certain types of NSCLC.

• MK-4280A is the coformulation of favezelimab, Merck’s novel investigational anti-LAG3 therapy, with pembrolizumab, being evaluated for the treatment of colorectal cancer and hematological malignancies.

• MK-7684A is the coformulation of vibostolimab, an anti-TIGIT therapy, with pembrolizumab being evaluated for the treatment of certain types of melanoma, NSCLC and SCLC.

• V940 (mRNA-4157) is an investigational individualized neoantigen therapy being evaluated in combination with Keytruda as an adjuvant treatment in patients with certain types of melanoma in the INTerpath-001 clinical trial. The FDA and EMA granted Breakthrough Therapy designation and PRIME scheme, respectively, for V940 (mRNA-4157) in combination with Keytruda for the adjuvant treatment of patients with certain stages of high-risk melanoma following complete resection. V940 (mRNA-4157) is also being evaluated in the Phase 3 INTerpath-002 clinical trial as adjuvant treatment for certain patients with NSCLC. V940 is being developed as part of a collaboration with Moderna.

Precision molecular targeting

• MK-7339, Lynparza, is an oral PARP inhibitor being developed as part of a collaboration with AstraZeneca PLC. The Company is currently evaluating Lynparza in combination with pembrolizumab for expanded indications in the therapeutic areas of NSCLC and SCLC.

• MK-7902, Lenvima, is an oral receptor tyrosine kinase inhibitor being evaluated in combination with Keytruda for expanded indications in the therapeutic areas of esophageal and gastric cancers. Lenvima is being developed as part of a collaboration with Eisai Co., Ltd.

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• MK-1026, nemtabrutinib, is an oral, reversible, non-covalent Bruton’s tyrosine kinase (BTK) inhibitor, being evaluated for the treatment of hematological malignancies, including chronic lymphocytic leukemia and small lymphocytic lymphoma.

• MK-3543, bomedemstat, is an investigational orally available lysine-specific demethylase 1 inhibitor, being evaluated for the treatment of certain patients with essential thrombocythemia. Bomedemstat has FDA Orphan Drug and Fast Track Designation for the treatment of essential thrombocythemia and myelofibrosis, Orphan Drug Designation for the treatment of acute myeloid leukemia and Priority Medicines (PRIME) scheme designation by the EMA for the treatment of myelofibrosis.

• MK-5684 is an investigational cytochrome P450 11A1 (CYP11A1) inhibitor being evaluated for the treatment of certain patients with metastatic castration-resistant prostate cancer. MK-5684 is being developed as part of a collaboration with Orion Corporation.

Tissue targeting

• MK-2870, is an investigational trophoblast cell-surface antigen 2 (TROP2)-directed ADC, which is being evaluated for certain patients with NSCLC and certain patients with previously treated endometrial carcinoma. MK-2870 is being developed as part of a collaboration with Kelun-Biotech.

The Company also terminated certain of its Phase 3 oncology development programs.

• The Company has discontinued development of ladiratuzumab vedotin, an ADC targeting LIV-1 which was being developed in collaboration with Seagen Inc. (now Pfizer). Additionally, in December 2023, the Company and Pfizer terminated their license and co-development agreement for Tukysa (tucatinib).

• In December 2023, Merck announced it was stopping the Phase 3 KEYLYNK-008 trial evaluating Keytruda in combination with maintenance Lynparza for the treatment of patients with metastatic squamous NSCLC. Merck discontinued the study based on the recommendation of an independent Data Monitoring Committee, which reviewed data from a planned interim analysis. At the interim analysis, Keytruda in combination with chemotherapy followed by Keytruda plus Lynparzadid not demonstrate an improvement in overall survival, one of the study’s dual primary endpoints, compared to Keytruda in combination with chemotherapy followed by Keytruda plus placebo.

• Also in December 2023, Merck and Eisai announced that the Phase 3 LEAP-001 trial evaluating Keytruda plus Lenvima did not meet its dual primary endpoints of overall survival and progression-free survival for the first-line treatment of patients with advanced or recurrent endometrial carcinoma whose disease is mismatch repair proficient (pMMR)/not microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR)/MSI-H. At the final analysis, Keytruda plus Lenvima did not improve overall survival or progression-free survival sufficiently to meet the study’s prespecified statistical criteria versus a standard of care, platinum-based chemotherapy doublet (carboplatin plus paclitaxel). The companies will work with investigators to share the results with the scientific community.

Additionally, the Company currently has candidates in Phase 3 clinical development in several other therapeutic areas.

• MK-0616 is an investigational, oral proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitor being evaluated for hypercholesterolemia. In 2023, the first participants enrolled in two registrational Phase 3 studies evaluating low-density lipoprotein (LDL) cholesterol reduction and a Phase 3 cardiovascular outcomes study.

• MK-1654, clesrovimab, is a respiratory syncytial virus (RSV) monoclonal antibody that is being evaluated for the prevention of RSV medically attended lower respiratory tract infection in infants and certain children over one year of age.

• MK-7240, tulisokibart, is a humanized monoclonal antibody directed to tumor necrosis factor-like ligand 1A, a target associated with both intestinal inflammation and fibrosis, being evaluated for the treatment of ulcerative colitis.

• MK-8591A is a new doravirine/islatravir once-daily oral combination of doravirine 100 mg and a lower dose of islatravir being evaluated, beginning in 2023, in a Phase 3 program in previously untreated adults and as a switch in antiretroviral therapy in virologically suppressed adults. MK-8591, islatravir, is an investigational nucleoside reverse transcriptase translocation inhibitor (NRTTI) being evaluated for the treatment of HIV-1 infection. In December 2021, the FDA placed clinical holds on the islatravir investigational new drug applications based on observations of decreases in total lymphocyte and CD4+ T-cell counts in some participants receiving islatravir in clinical studies. In 2023, the Phase 2 clinical trial evaluating an oral once-weekly combination of a lower dose of islatravir and Gilead Sciences’ lenacapavir in virologically suppressed adults completed enrollment. The investigational NDAs for the doravirine/islatravir and the islatravir +

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lenacapavir once-weekly treatment regimens remain under a partial clinical hold for any studies that would use islatravir doses higher than the doses considered for the revised clinical programs.

• MK-4482, Lagevrio, is an investigational oral antiviral medicine for the treatment of mild to moderate COVID-19 in adults who are at risk for progressing to severe disease. Merck is developing Lagevrio in collaboration with Ridgeback Biotherapeutics LP (Ridgeback). The FDA granted Emergency Use Authorization for Lagevrio in December 2021, which was last reissued in October 2023. Lagevrio is authorized for the treatment of adults with a current diagnosis of mild to moderate COVID-19, and who are at high risk for progression to severe COVID-19, including hospitalization or death, and for whom alternative COVID-19 treatment options approved or authorized by the FDA are not accessible or clinically appropriate. The authorization is based on the Phase 3 MOVe-OUT trial. Lagevrio is not approved for any use in the U.S. and is authorized only for the duration of the declaration that circumstances exist justifying the authorization of its emergency use under the Food, Drug and Cosmetic Act, unless the authorization is terminated or revoked sooner. In November 2021, the EMA issued a positive scientific opinion for Lagevrio, which was intended to support national decision-making on the possible use of Lagevrio prior to marketing authorization. In October 2021, the EMA initiated a rolling review for Lagevrio for the treatment of COVID-19 in adults. In February 2023, Merck and Ridgeback announced that the Committee for Medicinal Products for Human Use (CHMP) of the EMA recommended the refusal of the marketing authorization application (MAA) for Lagevrio. Merck and Ridgeback appealed the decision and requested a re-examination of the MAA. In June 2023, Merck and Ridgeback announced that they have withdrawn the EU application for marketing authorization of Lagevrio based on the CHMP’s view that the data submitted are not sufficient to satisfy EU regulatory requirements for marketing authorization of Lagevrio. Applications to other regulatory bodies are under review.

The chart below reflects the Company’s research pipeline as of February 23, 2024. Candidates shown in Phase 3 include the date such candidate entered into Phase 3 development. Candidates shown in Phase 2 include the most advanced compound with a specific mechanism or, if listed compounds have the same mechanism, they are each currently intended for commercialization in a given therapeutic area. Small molecules and biologics are given MK-number designations and vaccine candidates are given V-number designations. Except as otherwise noted, candidates in Phase 1, additional indications in the same therapeutic area (other than with respect to cancer) and additional claims, line extensions or formulations for in-line products are not shown.

Phase 2
Cancer MK-1308 (quavonlimab)(2) Non-Small-Cell Lung MK-1308A (quavonlimab+pembrolizumab) Colorectal MK-2140 (zilovertamab vedotin) Hematological Malignancies MK-2400 (ifinatamab deruxtecan)(1) Small-Cell Lung MK-2870(1)(3) Neoplasm Malignant MK-3475 Keytruda Advanced Solid Tumors Prostate MK-3475A (pembrolizumab+hyaluronidase subcutaneous) Cutaneous Squamous Cell MK-4280 (favezelimab)(2) Non-Small-Cell Lung MK-4280A (favezelimab+pembrolizumab) Bladder Cutaneous Squamous Cell Endometrial Esophageal Melanoma Renal Cell			Cancer MK-5890 (boserolimab)(2) Neoplasm Malignant MK-6482 Welireg(3) Endometrial Esophageal Hepatocellular Prostate Rare cancers MK-7339 Lynparza(1)(3) Advanced Solid Tumors MK-7684A (vibostolimab+pembrolizumab) Biliary Bladder Breast Cervical Colorectal Endometrial Esophageal Gastric Head and Neck Hepatocellular Ovarian Prostate			Cancer MK-7902 Lenvima(1)(2) Head and Neck Dengue Fever Virus Vaccine V181 HIV-1 Infection MK-8591B (islatravir+MK-8507)(4) MK-8591D (islatravir+lenacapavir)(1)(5) HIV-1 Prevention MK-8527 Nonalcoholic Steatohepatitis (NASH) MK-6024 (efinopegdutide) Pulmonary Arterial Hypertension MK-5475 Pulmonary Hypertension Due To Left Heart Disease MK-7962 (sotatercept) Schizophrenia MK-8189(6) Systemic Lupus Erythematosus MK-6194 Thrombosis MK-2060

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Phase 3 (Phase 3 entry date)	Under Review
Antiviral COVID-19 MK-4482 Lagevrio (U.S.) (May 2021)(1)(7) Cancer MK-1022 (patritumab deruxtecan)(1) Non-Small-Cell Lung (May 2022) (EU) MK-1026 (nemtabrutinib) Hematological Malignancies (March 2023) MK-1308A (quavonlimab+pembrolizumab) Renal Cell (April 2021) MK-2870(1)(3) Endometrial (December 2023) Non-Small-Cell Lung (November 2023) MK-3475 Keytruda Cutaneous Squamous Cell (August 2019) (EU) Hepatocellular (May 2016) (EU) Mesothelioma (May 2018) Ovarian (December 2018) Small-Cell Lung (May 2017) MK-3475A (pembrolizumab+hyaluronidase subcutaneous) Non-Small-Cell Lung (February 2023) MK-3543 (bomedemstat) Myeloproliferative Disorders MK-4280A (favezelimab+pembrolizumab) Colorectal (November 2021) Hematological Malignancies (October 2022) MK-5684(1) Prostate (December 2023) MK-7339 Lynparza(1)(2) Non-Small-Cell Lung (June 2019) Small-Cell Lung (December 2020) MK-7684A (vibostolimab+pembrolizumab) Melanoma (January 2023) Non-Small-Cell Lung (April 2021) Small-Cell Lung (March 2022) MK-7902 Lenvima(1)(2) Esophageal (July 2021) Gastric (December 2020) V940(1)(2) Melanoma (July 2023) Non-Small-Cell Lung (December 2023) HIV-1 Infection MK-8591A (doravirine+islatravir) (February 2020)(5) Hypercholesterolemia MK-0616 (August 2023) Pneumococcal Vaccine Adult V116 (July 2022) (EU) Respiratory Syncytial Virus MK-1654 (clesrovimab) (November 2021) Ulcerative Colitis MK-7240 (tulisokibart) (October 2023)	New Molecular Entities Cancer MK-1022 (patritumab deruxtecan)(1) Non-Small-Cell Lung (U.S.) MK-6482 Welireg Von Hippel-Lindau (VHL) Disease (EU) Cough MK-7264 (gefapixant) (U.S.)(8) Pneumococcal Vaccine Adult V116 (U.S.) Pulmonary Arterial Hypertension MK-7962 (sotatercept) (U.S.) (EU)	Certain Supplemental Filings Cancer MK-3475 Keytruda • Primary Advanced or Recurrent Endometrial Carcinoma (KEYNOTE-868) (U.S.) • Resectable Stage II, IIIA or IIIB NSCLC (KEYNOTE-671) (EU) (JPN) • First-Line Locally Advanced or Metastatic Urothelial Cancer (KEYNOTE-A39) (EU) (JPN) • High-Risk Locally Advanced Cervical Cancer (KEYNOTE-A18) (EU) • First-Line HER2 Negative Locally Advanced Unresectable or Metastatic Gastric Cancer (KEYNOTE-859) (JPN) • First-Line Locally Advanced Unresectable or Metastatic Biliary Tract Cancer (KEYNOTE-966) (JPN) MK-6482 Welireg • Previously Treated Advanced Renal Cell Carcinoma (LIGHTSPARK-005) (EU)
	Footnotes: (1)Being developed in a collaboration. (2) Being developed in combination with Keytruda. (3) Being developed as monotherapy and/or in combination with Keytruda. (4) On FDA clinical hold. (5) On FDA partial clinical hold for higher doses than those used in current clinical trials. (6) Phase 2b development costs are being co-funded. (7) Available in the U.S. under Emergency Use Authorization. (8) In December 2023, the FDA issued a CRL for the NDA for gefapixant. Merck is reviewing the FDA’s feedback to determine next steps.

Human Capital

As of December 31, 2023, the Company had approximately 72,000 employees worldwide, with approximately 29,000 employed in the U.S., including Puerto Rico, and, additionally, approximately 15,000 third-party contractors globally.(1) Approximately 70,000 of the Company’s employees are full-time employees. Globally, women comprise 51% of employees, and in the U.S. individuals from underrepresented ethnic groups comprise 35% of its workforce (the Company defines workforce as its employees). Women comprise 46% of the members of the Board of Directors. Additionally, the Company’s senior management team is made up of 37% women. Approximately 18% of the Company’s employees are represented by various collective bargaining groups. The Company’s voluntary turnover rate was approximately 5.6% and 8.5%, respectively, in 2023 and 2022.

The Company recognizes that its employees are critical to meet the needs of its patients and customers and that its ability to excel depends on the integrity, skill, and diversity of its employees.

(1)Third party contractors include the Company’s temporary workers, independent contractors, and freelancers who are viewed as full-time equivalent employees. They exclude outsourced service providers.

Talent Acquisition

The Company uses a comprehensive approach to ensure recruiting, retention and leadership development goals are systematically executed throughout the Company and that it hires talented leaders to achieve improved gender parity and representation across all dimensions of diversity. The Company provides training to its

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managers and external recruiting organizations on strategies to mitigate unconscious bias in the candidate selection and hiring process. In addition, the Company utilizes a comprehensive communications strategy, employee branding and marketing outreach, social media and strategic alliance partnerships to reach a broad pool of talent in its critical business areas. In 2023, the Company hired approximately 8,200 employees across the globe through various channels including the Company’s external career site, direct passive candidate sourcing, diversity partnerships, employee referrals, universities and other external sources.

Global Diversity and Inclusion

Diversity and inclusion are fundamental to the Company’s success and core to future innovation. The Company fosters a globally diverse and inclusive workforce for its employees by creating an environment of belonging, engagement, equity, and empowerment. The Company is proactive and intentional about diversity hiring and development programs to advance talent. The Company creates competitive advantages by leveraging diversity and inclusion to accelerate business performance. This includes fostering global supplier diversity, integrating diversity and inclusion into the Company’s commercialization strategies and leveraging employee insights to improve performance. In addition to these efforts, the Company has ten Employee Business Resource Groups that provide opportunities for employees to take an active part in contributing to the Company’s inclusive culture through their work in talent acquisition and development, business and customer insights and social and community outreach.

Gender and Ethnicity Data(1)	2023	2022	2021
Women on the Board of Directors	46%	46%	46%
Women in senior management roles(2)	37%	34%	36%
Women in management roles(3)	46%	45%	44%
Women in the workforce	51%	50%	50%
New hires that were women	53%	52%	53%
Members of underrepresented ethnic groups on the Board of Directors	15%	15%	23%
Members of underrepresented ethnic groups in senior management roles (U.S.)(2)	26%	28%	25%
Members of underrepresented ethnic groups in management roles (U.S.)(3)	29%	27%	26%
Members of underrepresented ethnic groups in the workforce (U.S.)	35%	34%	32%
New hires that were members of underrepresented ethnic groups (U.S.)	47%	47%	46%

(1) As of 12/31. As self-identified to the Company.

(2) “Senior management role” is defined as an individual holding either a Vice President or Senior Vice President title.

(3) “Management role” is defined as all managers with direct reports.

Compensation and Benefits

The Company provides a valuable suite of compensation and benefits programs that reflect its commitment to attract, retain and motivate its talent, and support its employees and their families in every stage of life. The Company continuously monitors and adjusts its compensation and benefit programs to ensure they are competitive, contemporary, helpful and engaging, and that they support strategic imperatives such as diversity and inclusion, equity, flexibility, quality, security and affordability. For example, the Company regularly monitors and evaluates its pay practices and policies to ensure that it is paying employees equitably across all genders, races and ethnicities. The Company offers a personal health care concierge service to assist U.S. employees participating in the Company medical plan with their health care needs. Aligned with its business and in support of its cancer care strategy, the Company provides enhanced cancer screening benefits with cash incentives, immediate access to a leading cancer center of excellence for U.S. employees and high value cancer support resources (e.g., caregiving and mental health) for employees and their families. Globally, the Company implemented a minimum standard of 12 weeks of paid parental leave, which inclusively applies to all parents. In the U.S., the Company’s benefits rank in the top quartile of Fortune 100 companies under the Aon 2023 Benefits Index. The Company has been included in the Seramount (previously the Working Mother) 100 Best Companies ranking for 37 consecutive years and was named a top ten Best Company for Moms in 2023.

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Employee Well-being

The Company is committed to helping its employees and their families improve their own health and well-being, whether physical, mental, financial, or social. The Company’s programs ensure quality, competitive value, protection from significant financial hardship and access to tools and resources to support employees and their families in all stages of their career and their lives, earning the Company accolades such as the Business Group on Health’s Best Employers Excellence in Health & Well-being and the CEO Roundtable on Cancer’s Global Gold Standard Employer accreditation in 2023. The Company fosters an array of flexible work arrangements that includes flextime, summer hours, remote work, telework, job sharing and part-time work to help employees succeed personally as well as professionally. As part of the Company’s overall culture of well-being, it also offers onsite services so employees can thrive. For example, in the U.S., these include onsite health care professionals at many major sites, cafeterias committed to healthy menu offerings, onsite childcare, onsite gyms, and the convenient option to bank through the two employee credit unions.

Engaging Employees

The Company strives to foster employee engagement by promoting a safe, positive, diverse, and inclusive work environment that provides numerous opportunities for two-way communication with employees. Some of the Company’s key programs and initiatives include promoting global employee engagement surveys, ongoing pulse checks to the organization for interim feedback on specific topics, fostering professional networking and collaboration, identifying and providing opportunities for volunteering and establishing positive, cooperative business relations with designated employee representatives.

Talent Management and Development

As the Company pursues its goal of becoming the world’s premier research-based biopharmaceutical company, there is a consistent focus on the importance of continuously developing its diverse and talented people. The Company is committed to talent growth for all, allowing its employees to move more fluidly across the organization, unlocking an environment that allows them to shape their career pathways via non-linear and inclusive opportunities and experience. Merck’s current talent management system supports company-wide performance management, leadership development, talent reviews and succession planning. Annual performance reviews help further the professional development of the Company’s employees and ensure that the Company’s workforce is aligned with the Company’s objectives. The Company seeks to continuously build the skills and capabilities of its workforce to accelerate talent, improve performance and mitigate risk through relevant continuous learning experiences. This includes, but is not limited to, building leadership and management skills, as well as providing technical and functional training to all employees.

Environmental Matters

Environmental Sustainability

The Company is committed to enabling a safe, sustainable and healthy future and strives to be a strong environmental steward, evolving its efforts in the face of a changing world. The Company’s environmental sustainability strategy has three focus areas:

• Driving operational efficiency;

• Designing new products to minimize environmental impact; and

• Reducing any impacts in the Company’s upstream and downstream value chain.

The Company ensures its ongoing commitment to these areas through thoughtful governance. The Company’s efforts in this area are overseen by its Environmental Health and Safety (EHS) Council. The Company’s EHS Council is a cross-functional body with leadership representation from each area of the Company’s business including top-level executives. The EHS Council provides enterprise leadership and sponsorship for the Company’s environmental sustainability strategy, monitors progress towards the Company’s public targets and influences decisions for environmental sustainability strategy implementation, while increasing visibility and transparency internally to the business, executive team and the Board of Directors. In addition, the Company’s Environmental Sustainability Implementation Steering Committee, also comprising top-level executives, oversees progress of initiatives at the enterprise level and provides support and guidance on the implementation plans and resourcing of the Company’s environmental sustainability strategy globally. This steering committee is informed by leaders from the Environmental Sustainability Center of Excellence (CoE), Global Energy & Sustainability CoE and Energy Procurement CoE, who develop the Company’s goals in alignment with stakeholder expectations, track their progress, and develop and provide continuous improvement on plans to achieve and sustain the Company’s public commitments.

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Merck believes that climate change could present risks to its business, as discussed in further detail in Item 1A. “Risk Factors” below under the headings “Climate change or legal, regulatory or market measures to address climate change may negatively affect the Company’s business, results of operations, cash flows and prospects” and “Environmental, social and governance (ESG) matters may impact the Company’s business and reputation.” Some of the potential impacts of climate change to the Company’s business include increased operating costs due to additional regulatory requirements, physical risks to the Company’s facilities, water limitations and disruptions to its supply chain. These potential risks are integrated into the Company’s business planning, including investment in reducing energy usage, water use and greenhouse gas emissions.

The Company has adopted a set of climate goals to help position it to succeed in an increasingly resource-constrained world. These goals were developed to align with the latest climate science and address the rising expectations of the Company’s customers, investors, external stakeholders and employees regarding the environmental impact of its operations and supply chain. The Company’s climate goals include reducing Scope 1 and 2 operational greenhouse gas emissions 46% by 2030 (from a 2019 baseline), achieving carbon neutrality for Scope 1 and 2 greenhouse emissions across operations by 2025, sourcing 100% of its purchased electricity from renewable sources by 2025, and reducing Scope 3 greenhouse gas emissions 30% by 2030 (from a 2019 baseline). The Company has also committed to the Science-Based Targets initiative (SBTi) to set a net-zero target for its greenhouse gas emissions across its global operations (Scopes 1, 2, and 3). Other environmental sustainability initiatives of the Company include:

• Playbooks for a sustainable environment. The Company’s local sites are crucial to achieving its ambitious environmental sustainability goals, and the Company continues to launch tools to assist them, particularly for its climate and waste targets. In 2021, the Company launched its Low Carbon Transition Playbook (LCTP), a common platform that includes a gap assessment to help the Company’s global sites evaluate the maturity of their energy programs and help create short- and long-term plans to reduce sites’ carbon intensity and build toward a low-carbon future. Based on learnings from use, the Company issued LCTP 2.0 in 2022 with a capability to facilitate knowledge sharing across sites. In 2022, the Company also created the Waste Diversion Playbook, which takes a similar approach to guide sites on developing a roadmap to their and the Company’s shared 2025 goals on waste diversion, including local waste-diversion strategies and environmentally responsible procurement practices. These tools aid in the reporting and tracking of projects that support achievements towards meeting the Company’s corporate targets.

• Realizing the benefits of green and sustainable science. The Company believes that meeting its environmental sustainability goals is intrinsically linked to the creation of innovative, cost-efficient manufacturing processes with low environmental impact. The Company aims to develop efficient and sustainable processes at product launch, with the goal of minimizing material use and waste from its commercial manufacturing. The Company utilizes an innovative “green-by-design” development strategy with a goal to progress from an initial early clinical supply route to a fully optimized and sustainable commercial manufacturing process. In 2023, for the fourth year in a row, the Company received the Peter J. Dunn Award for Green Chemistry and Engineering Impact, an award given by the American Chemical Society in recognition of outstanding implementation of novel green chemistry in the pharmaceutical industry.

• Partnering for progress across the Company’s value chain. The Company is engaging with its strategic suppliers to identify ways to reduce greenhouse gas emissions in its supply chain.

• Waste diversion. The Company continuously evaluates its sites’ waste disposal methods to gain a better understanding of its network and changes therein, as well as to identify risks and opportunities in its value chain. Based on its evaluation, the Company implemented programs to divert non-hazardous landfill waste from its two highest landfill-generating sites. The Company remains committed to its 2025 public waste diversion goals of no more than 20% of the Company’s global operational waste sent to landfills or incinerators (without energy recovery) and that 50% of its sites will send zero waste to landfills by 2025.

• Water as a shared resource. As water is a key input to the Company’s manufacturing operations, the Company assesses water risk throughout its network as a standard business practice. Both of the Company’s priority water-stress risk sites have conservation plans in place and are actively working on water use reduction and recycling improvement projects. These projects are consistent with the Company’s ongoing commitment to achieving its stated target of maintaining global water use at or below 2015 levels by 2025. The Company’s sites are employing various technologies and techniques aimed at reducing its water footprint and improving operational performance. The Company’s

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continued endorsement of the United Nations CEO Water Mandate enables continued alignment of the Company’s water program with the mandate’s principles directly in the Company’s operations. The Company has continued to identify partnerships to help it advance its water stewardship priorities in the areas in which it operates.

The Company continues to review and explore other opportunities to further its environmental strategy and will evaluate potential impacts and commitments.

Management does not believe that expenditures related to these initiatives should have a material adverse effect on the Company’s financial condition, results of operations, liquidity or capital resources for any year.

Environmental Regulation and Remediation

The Company believes that there are no compliance issues associated with applicable environmental laws and regulations that would have a material adverse effect on the Company. The Company is also remediating environmental contamination resulting from past industrial activity at certain of its sites. Expenditures for remediation and environmental liabilities were $6 million in 2023 and are estimated to be $27 million in the aggregate for the years 2024 through 2028. These amounts do not consider potential recoveries from other parties. The Company has taken an active role in identifying and accruing for these costs and, in management’s opinion, the liabilities for all environmental matters that are probable and reasonably estimable have been accrued and totaled $42 million and $39 million at December 31, 2023 and 2022, respectively. Although it is not possible to predict with certainty the outcome of these matters, or the ultimate costs of remediation, management does not believe that any reasonably possible expenditures that may be incurred in excess of the liabilities accrued should exceed approximately $40 million in the aggregate. Management also does not believe that these expenditures should result in a material adverse effect on the Company’s financial condition, results of operations or liquidity for any year.

Geographic Area Information

The Company’s operations outside the U.S. are conducted primarily through subsidiaries. Sales worldwide by subsidiaries outside the U.S. as a percentage of total Company sales was 53% in 2023 and 54% in both 2022 and 2021.

The Company’s worldwide business is subject to risks of currency fluctuations, governmental actions and other governmental proceedings abroad. The Company does not regard these risks as a deterrent to further expansion of its operations abroad. However, the Company closely reviews its methods of operations and adopts strategies responsive to changing economic and political conditions.

Merck has operations in countries located in Latin America, the Middle East, Africa, Eastern Europe and Asia Pacific. Business in these developing areas, while sometimes less stable, offers important opportunities for growth over time.

Available Information

The Company’s Internet website address is merck.com. The Company will make available, free of charge at the “Investors” portion of its website, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (SEC). The address of that website is sec.gov. In addition, the Company will provide without charge a copy of its Annual Report on Form 10-K, including financial statements and schedules, upon the written request of any shareholder to the Office of the Secretary, Merck & Co., Inc., 126 East Lincoln Avenue, Rahway, NJ 07065 U.S.A.

The Company’s corporate governance guidelines and the charters of the Board of Directors’ four standing committees are available on the Company’s website at www.merck.com/company-overview/leadership/board-of-directors/ and all such information is available in print to any shareholder who requests it from the Company.

The Company’s 2022/2023 Impact Report, which provides enhanced ESG disclosures, is available on the Company’s website at www.merck.com/company-overview/esg/esg-resources/. Information in the Company’s Impact Report is not incorporated by reference into this Form 10-K.

MRK - Merck & Co., Inc.

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