Merck & Co., Inc.

Merck & Co., Inc. 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, while 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. The markets in which the Company conducts its business and the pharmaceutical industry in general are highly competitive and highly regulated, with competitors including other worldwide research-based pharmaceutical companies, smaller research companies with more limited therapeutic focus, generic drug manufacturers, and animal health care companies. Global efforts toward health care cost containment continue to exert pressure on product pricing and market access, with changes to the U.S. health care system as part of health care reform, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, having contributed to pricing pressure.

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 availability of generic or biosimilar versions of competitors' branded products, and new information from clinical trials of marketed products or post-marketing surveillance. With its long-standing emphasis on research and development, the Company is well-positioned to compete in the search for technological innovations, and it is active in acquiring and marketing products through external alliances, such as licensing arrangements and collaborations. The Company believes that it is well-positioned to respond to the evolving health care environment and market forces.

The Company generates revenue primarily through the sale of prescription pharmaceutical products, vaccines, and animal health products. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders, sold primarily to drug wholesalers and retailers, hospitals, government agencies, and managed health care providers. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines, sold primarily to physicians, wholesalers, distributors and government entities. The Animal Health segment sells its products to veterinarians, distributors, animal producers, farmers and pet owners. The Company also recognizes alliance revenue, which represents Merck's share of profits from collaborations, which are product sales net of cost of sales and commercialization costs, as well as royalties from licensing agreements.

Within the Pharmaceutical segment, the oncology franchise includes Keytruda, an anti-PD-1 therapy approved for numerous cancer indications, with combined global sales of Keytruda/Keytruda Qlex of $31.680 billion ¹ in 2025. Keytruda Qlex is a subcutaneously-administered fixed combination of pembrolizumab and berahyaluronidase alfa. Other oncology products include Welireg, with sales of $716 million ², and alliance revenue from Lynparza of $1.450 billion ³, Lenvima of $1.053 billion ⁴, Reblozyl of $525 million ⁵, and Koselugo of $436 million ⁶. The vaccines franchise includes Gardasil/Gardasil 9, with sales of $5.233 billion ⁷, ProQuad at $930 million ⁸, M-M-R II at $480 million ⁹, Varivax at $1.041 billion ¹⁰, Vaxneuvance at $825 million ¹¹, Capvaxive at $759 million ¹², Pneumovax 23 at $166 million ¹³, and Enflonsia at $100 million ¹⁴. Hospital Acute Care products include Bridion at $1.841 billion ¹⁵, Prevymis at $978 million ¹⁶, and Dificid at $247 million ¹⁷. The cardiometabolic and respiratory franchise includes Winrevair at $1.443 billion ¹⁸, alliance revenue from Adempas/Verquvo of $470 million ¹⁹, Adempas at $312 million ²⁰, and Ohtuvayre at $178 million ²¹. The virology franchise includes Lagevrio at $380 million ²². The diabetes franchise includes Januvia/Janumet at $2.544 billion ²³. Immunology products Simponi and Remicade had no sales in 2025 as marketing rights reverted to Johnson & Johnson on October 1, 2024.

The Animal Health segment had total sales of $6.354 billion ²⁴ in 2025, comprising Livestock sales of $3.896 billion ²⁵ and Companion Animal sales of $2.458 billion ²⁶. Livestock products include Nuflor, Bovilis/Vista, Banamine, Estrumate, Matrix, Resflor, Zuprevo, Revalor, Safe-Guard, M+Pac, Porcilis, Circumvent, Nobilis/Innovax, Paracox, Coccivac, Exzolt, Exzolt 5%, Slice, Imvixa, Clynav, Aquavac/Norvax, Aquaflor, Flexolt, and Allflex Livestock Intelligence solutions. Companion Animal products include the Bravecto line of products, with sales of $1.1 billion ²⁷ in 2025, Sentinel, Numelvi, Optimmune, Nobivac, Gilvetmab, Otomax/Mometamax/Mometamax Ultra/Posatex, Caninsulin/Vetsulin, Panacur/Safeguard, Regumate, Prestige, Scalibor/Exspot, and Sure Petcare products.

In 2025, the Company entered into an agreement to acquire Cidara Therapeutics, Inc., a biotechnology company developing drug-Fc conjugate therapeutics, including a long-acting antiviral designed to prevent seasonal and pandemic influenza; this transaction closed in January 2026. The Company acquired Verona Pharma plc, a biopharmaceutical company focused on respiratory diseases, through which Merck obtained Ohtuvayre, a product approved for the maintenance treatment of chronic obstructive pulmonary disease. The Company closed an exclusive license agreement for MK-7262 (HRS-5346), an investigational oral small molecule Lipoprotein(a) inhibitor from Jiangsu Hengrui Pharmaceuticals Co., Ltd. The Company also closed an agreement with Dr. Falk Pharma GmbH to acquire sole global rights to MK-8690, an investigational anti-CD30 ligand monoclonal antibody. During 2025, Merck launched Enflonsia in the U.S. for the prevention of respiratory syncytial virus lower respiratory tract disease in neonates and infants, and launched Keytruda Qlex, which was approved by the FDA for subcutaneous administration across all solid tumor indications for Keytruda in the U.S. The Company also launched an expanded indication for Winrevair in the U.S. based on the results of the ZENITH trial.

Worldwide sales were $65.011 billion ²⁸ in 2025, an increase of 1% compared with 2024, or 2% excluding the unfavorable effect of foreign exchange. Net income attributable to Merck & Co., Inc. on a GAAP basis was $18.254 billion ²⁹ in 2025, compared to $17.117 billion ³⁰ in 2024. Non-GAAP net income attributable to Merck & Co., Inc. was $22.513 billion ³¹ in 2025, compared to $19.444 billion ³² in 2024. GAAP earnings per share assuming dilution was $7.28 ³³ in 2025, compared to $6.74 ³⁴ in 2024. Non-GAAP EPS assuming dilution was $8.98 ³⁵ in 2025, compared to $7.65 ³⁶ in 2024.

However, management disclosed that the Company expects a significant decline in sales of Januvia in the first half of 2026 reflecting the impact of government price setting and, following loss of market exclusivity in May 2026, the Company anticipates it will lose nearly all U.S. sales of Januvia and Janumet. The Company also expects that sales of Keytruda will be materially negatively impacted by biosimilar competition between 2028 and 2029, and that U.S. sales of Keytruda will decline materially after 2029 when government price setting becomes effective. The Company expects that sales of Gardasil/Gardasil 9 in China will not materially increase in 2026. The Company expects to discontinue U.S. sales of Bridion by the end of 2026 following loss of market exclusivity in July 2026. The Company expects the Lagevrio sales decline to continue in 2026.

A key growth vector is the continued expansion of Keytruda and Keytruda Qlex into new indications and markets. Keytruda received multiple regulatory approvals in 2025 and early 2026, including in China for combination with enfortumab vedotin for urothelial carcinoma, in the EU for malignant pleural mesothelioma and HNSCC, in Japan for HER2-positive gastric cancer and HNSCC, and in the U.S. for HNSCC and MIBC. Keytruda Qlex was approved by the FDA in September 2025 across most adult solid tumor indications for Keytruda, and by the EC in November 2025 for all adult indications in Europe. The Company is also advancing its oncology pipeline with numerous Phase 3 programs across three strategic pillars: immuno-oncology, precision molecular targeting, and tissue targeting, including V940 (intismeran autogene) in collaboration with Moderna, and multiple antibody-drug conjugates in collaboration with Daiichi Sankyo and Kelun-Biotech.

Another growth vector is the expansion of the cardiometabolic and respiratory franchise, particularly Winrevair for pulmonary arterial hypertension. Winrevair sales rose to $1.443 billion ³⁷ in 2025, reflecting continued uptake since launch. The Company received FDA approval of an expanded indication for Winrevair in October 2025 based on the ZENITH trial, and EC approval of an expanded indication in January 2026. The Company also announced positive Phase 2 results from the CADENCE trial of Winrevair in combined post- and precapillary pulmonary hypertension due to heart failure with preserved ejection fraction and intends to proceed with Phase 3 development. Additionally, the Company is developing enlicitide decanoate, an investigational oral PCSK9 inhibitor for hypercholesterolemia, which was selected for the FDA's Commissioner's National Priority Voucher pilot program in December 2025, with plans to submit an NDA to the FDA in early 2026.

The Company's 2025 Restructuring Program, approved in July 2025, is designed to position the Company for its next chapter of growth and to successfully advance its pipeline and launch new products across multiple therapeutic areas. The cumulative pretax costs to be incurred to implement the program are estimated to be approximately $3.0 billion ³⁸, of which approximately 60% will be cash, relating primarily to employee separation expense and contractual termination costs. The remainder of the costs will be non-cash, relating primarily to the accelerated depreciation of facilities. The Company expects the actions under the 2025 Restructuring Program to result in annual cost savings of approximately $1.7 billion ³⁹, which will be substantially realized by the end of 2027. The 2025 Restructuring Program is part of the Company's multiyear optimization initiative anticipated to achieve $3.0 billion ⁴⁰ in annual cost savings by the end of 2027, which will be fully reinvested into strategic growth areas of the business. The 2024 Restructuring Program is expected to result in cumulative annual net cost savings of approximately $750 million ⁴¹ by the end of 2031.

The Company's manufacturing operations are currently headquartered in Rahway, New Jersey, with production facilities for human health products at five locations in the U.S. and Puerto Rico, and outside the U.S., through subsidiaries, the Company owns or has an interest in manufacturing plants or other properties in Western Europe, Africa and Asia. The Company believes that its plants for the manufacture of products are suitable for their intended purposes and have capacities and projected capacities, including previously disclosed capital expansion projects, that will be adequate for current and projected needs for existing Company products. The Company reached an agreement with the U.S. Department of Commerce to delay Section 232 tariffs for three years, enabling the Company to make investments in the U.S. to reshore manufacturing for American patients. As of December 31, 2025, the Company had approximately 75,000 employees worldwide, including approximately 30,000 people in the U.S., including Puerto Rico.

Research and development expenses were $15.789 billion ⁴² in 2025. The Company's capital allocation strategy continues to prioritize investments in its business to drive near- and long-term growth, including investing in the Company's key growth drivers and its broad and diverse pipeline of novel candidates. In November 2025, Merck's Board of Directors approved an increase to the Company's quarterly dividend, raising it to $0.85 per share ⁴³ from $0.81 per share ⁴⁴ on the Company's outstanding common stock. During 2025, the Company returned $13.3 billion ⁴⁵ to shareholders through dividends of $8.2 billion ⁴⁶ and share repurchases of $5.1 billion ⁴⁷. In January 2025, Merck's Board of Directors authorized a new share repurchase program of up to $10 billion ⁴⁸ of Merck's common stock for its treasury.

The Company faces significant headwinds from the loss of market exclusivity for several key products. Bridion will lose market exclusivity in the U.S. in July 2026, at which time the Company anticipates a significant and rapid decline in U.S. sales. Januvia and Janumet will lose market exclusivity in the U.S. in May 2026 and Janumet XR in July 2026, with the Company anticipating it will lose nearly all U.S. sales of these products. The Company expects that sales of Keytruda will be materially negatively impacted by biosimilar competition between 2028 and 2029, with the primary compound patent expiring in December 2028. The Company also expects to lose market exclusivity in Europe for Keytruda in 2031 following compound patent expiration, with potential biosimilar challenges following the expiration of data exclusivity in Europe in July 2026. The Company's business in China experienced significantly lower sales of Gardasil/Gardasil 9 in 2025, and the Company expects that sales of Gardasil/Gardasil 9 in China will not materially increase in 2026.

The Company faces continued pricing pressure globally from government-mandated pricing actions, health care reform, and cost-containment measures. The Inflation Reduction Act of 2022 has resulted in government price setting for Januvia effective January 1, 2026, and for Janumet and Janumet XR effective January 1, 2027. In January 2026, HHS announced that Lenvima has been selected for government price setting, effective January 1, 2028. The Company expects that Keytruda will be selected in 2027 for government price setting, effective January 1, 2029, and that U.S. sales of Keytruda will decline materially after that time. The Company entered into a three-year MFN Agreement with the U.S. government in December 2025, which includes obligations to provide key products through a direct-to-patient program at affordable prices and to subject certain products to most-favored-nation pricing. The Company also faces pricing pressure from the elimination of the statutory cap on Medicaid rebates under the American Rescue Plan Act, increased utilization of the 340B Drug Discount Program, and state-level price control initiatives.

The Company is dependent on its patent rights, and if its patent rights are invalidated or circumvented, its business could be materially adversely affected. Key products generate a significant amount of the Company's profits and cash flows, with sales of Keytruda representing 49% ⁴⁹ of the Company's total sales in 2025, and any events that adversely affect the markets for its leading products could have a material adverse effect. The Company faces continued pricing pressure, including from the Inflation Reduction Act's Drug Price Negotiation Program, which has selected Januvia, Janumet, Janumet XR, and Lenvima for government price setting, with the Company expecting Keytruda to be selected in 2027. The Company's business in China experienced significantly lower sales of Gardasil/Gardasil 9 in 2025, and the Company expects that sales of Gardasil/Gardasil 9 in China will not materially increase in 2026. The Company is subject to evolving and complex tax laws, and the IRS is currently conducting examinations of the Company's tax returns for the years 2017 and 2018, including the one-time transition tax, and in April 2025, Merck received Notices of Proposed Adjustment that would increase the amount of the one-time transition tax by approximately $1.3 billion ⁵⁰, plus penalties of approximately $260 million ⁵¹.

Management's message emphasizes the successful advancement of Merck's science-led strategy through new product approvals and launches, strong clinical execution, important data readouts, and the addition of novel innovation through business development efforts. The Company highlighted that in 2025, it announced positive late-stage results from 18 Phase 3 trials and initiated 21 new Phase 3 trials, with approximately 80 Phase 3 studies now underway. Management noted that the Company's capital allocation strategy continues to prioritize investments in its business to drive near- and long-term growth, including investing in the Company's key growth drivers and its broad and diverse pipeline of novel candidates, enabled in part by the benefits of the Company's multiyear optimization initiative. The strategic priorities emphasized for the period ahead include: (1) continuing to execute science-led business development transactions to augment the internal pipeline and portfolio with compelling external science; (2) advancing the late-stage pipeline, including regulatory submissions for MK-8591A, Enflonsia, Winrevair, Keytruda, Keytruda Qlex, and Welireg; and (3) implementing the 2025 Restructuring Program to achieve annual cost savings of approximately $1.7 billion ⁵² by the end of 2027 as part of a multiyear optimization initiative anticipated to achieve $3.0 billion ⁵³ in annual cost savings.