MERCK...Q2 PERFORMANCE HIGHLIGHTS 1 3 +15 % $ 11.8B +25% $ 1.30 GAAP $1.03 2 1. All growth rates...

MERCKQ2 2019 EARNINGS

2

FORWARD-LOOKING STATEMENTOF MERCK & Co., Inc., Kenilworth, N.J., USA

This presentation from Merck & Co., Inc., Kenilworth, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2018 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s internet site (www.sec.gov).

2Q 2019 Earnings

Q2 PERFORMANCE HIGHLIGHTS1

3

+15%$11.8B

+25%

$1.30GAAP $1.032

1. All growth rates exclude impact of exchange2. The GAAP to non-GAAP reconciliation is available in the Supplemental Tables to Merck’s Q2 2019 earnings release.

DELIVERED WORLDWIDE SALES GROWTH

DROVE NON-GAAPEPS GROWTH

CREATED SHAREHOLDER

VALUE

ADVANCED THE PIPELINE

• Returned $2.6 billion to shareholders through dividends and share repurchases

• Executed on value-enhancing business development, including acquisitions of Peloton Therapeutics and TilosTherapeutics and close of Immune Design and Antelliq

• Announced 1L H&N, 3L SCLC approvals for KEYTRUDA including filing acceptance for Q6W dosing in the U.S.

• Announced new 24 and 48-week data as well as early implantable data for islatravir (formerly MK-8591) at IAS 2019

• Presented new V114 data at ECCMID 2019 in pediatrics

• RECARBRIO and additional indication for ZERBAXA approved

2Q 2019 Earnings

ONCOLOGY: STRONG GROWTH FOR KEYTRUDA, LYNPARZA AND LENVIMA

1. All growth rates exclude the impact of foreign exchange.

• KEYTRUDA growth of +63%1 year-over-year• +73%1 international growth, driven by lung performance, particularly in Europe, China and Japan• Early uptake in RCC and adjuvant melanoma indications in the U.S.• Lynparza revenues more than doubled this quarter and continues to lead PARP class with nearly

60% of patients on Lynparza, driven by 1L ovarian maintenance launch (SOLO-1)• Lenvima revenues also more than doubled, driven by HCC launch

2Q18 2Q19KEYTRUDA Performance

4

2Q 2019 Earnings

REPEATED OVERALL SURVIVAL BENEFITS IN MONOTHERAPY AND IN COMBINATION DEMONSTRATES SUCCESS OF KEYTRUDA

5

Ipi-Naive Melanoma, Any PD-L1

KEYNOTE-006Pembro vs Ipi

2L+ NSCLC, TPS ≥50%KEYNOTE-010

Pembro vs Docetaxel

2L+ NSCLC, TPS ≥1%KEYNOTE-010

Pembro vs Docetaxel

2L Bladder, Any PD-L1KEYNOTE-045

Pembro vs Chemo

1L NSCLC, TPS ≥50%KEYNOTE-024

Pembro vs Chemo


Pembro vs Chemo


Pembro vs Chemo


Pembro vs Chemo

1L Esophageal, CPS ≥10

KEYNOTE-181Pembro vs Chemo

1L HNSCC, CPS ≥20KEYNOTE-048

Pembro vsEXTREME


Pembro vsEXTREME

0 1 0 2 0 3 0 4 0 5 0 6 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k2 9 0 1 7 8 1 3 1 1 0 1 11 5 2 5 8 2 9 2 1 1

5 01 0

00

0 1 0 2 0 3 0 4 0 5 0 6 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k6 9 0 3 7 4 2 4 8 1 7 1 53 4 3 1 3 5 5 7 4 0 2

8 62 0

00

0 6 1 2 1 8 2 4 3 0 3 6

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k1 5 4 1 2 1 1 0 6 8 9 51 5 1 1 0 7 8 0 6 1 5

5 23 1

00

0 6 1 2 1 8 2 4 3 0 3 6 4 2

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k2 9 9 2 2 4 1 8 9 1 0 7 2 23 0 0 2 3 1 1 4 9 7 5 1 1

5 94 0

00

21

0 6 1 2 1 8 2 4 3 0 3 6 4 2

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k4 1 3 3 0 5 2 5 1 1 4 4 2 44 0 5 3 1 3 2 1 0 1 0 6 1 4

7 35 3

00

21

0 6 1 2 1 8 2 4 3 0 3 6 4 2

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k6 3 7 4 6 3 3 6 5 2 1 4 3 53 6 7 4 8 5 3 1 6 1 6 6 2 4

1 1 28 8

00

21

0 4 8 1 2 1 6 2 0 2 4 2 8 3 2

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k1 0 7 8 6 5 9 4 5 1 31 1 5 7 6 4 8 2 3 4

2 91 4

00

53

12

0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k1 3 3 1 0 6 8 5 6 5 2 41 2 2 1 0 0 6 4 4 2 1 2

4 72 2

00

1 15

20

0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k2 5 7 1 9 6 1 5 2 1 1 0 3 42 5 5 2 0 7 1 3 1 8 9 2 1

7 44 7

00

1 79

21

0 4 8 1 2 1 6 2 0 2 4 2 8 3 2 3 6

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k2 7 0 1 9 5 1 4 8 1 1 6 8 02 7 2 1 7 3 1 0 9 7 3 4 2

9 85 9

00

6 73 4

3 31 8

74

0 1 0 2 0 3 0 4 0 5 0 6 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k5 5 6 4 1 6 3 1 7 2 6 42 7 8 1 5 8 1 1 1 9 4

00

2 3 38 5

00

0 6 1 2 1 8 2 4 3 0 3 6 4 20

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k2 5 6 1 6 2 1 2 02 5 0 1 9 2 1 1 4

9 47 5

00

5 93 8

2 31 5

42

0 6 1 2 1 8 2 4 3 0 3 6 4 20

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k9 2 6 2 5 29 0 7 0 4 2

4 52 8

00

3 21 6

1 37

40

0 4 8 1 2 1 6 2 0 2 4 2 8 3 20

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k2 7 8 2 3 7 1 9 0 1 1 01 3 5 1 1 3 8 4 4 2

1 5 26 5

00

5 72 3

1 68

11

0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 0 4 5 5 00

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k3 0 1 2 2 6 1 7 2 1 2 5 7 53 0 0 2 4 5 1 5 8 1 0 7 5 1

9 97 2

00

4 62 8

2 21 1

1 36

10

0 5 1 0 1 5 2 0 2 5 3 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k2 4 7 1 6 0 1 0 32 4 8 1 5 1 8 2

4 83 4

00

1 41 0

21

2L+ HNSCC, Any PD-L1KEYNOTE-040

Pembro vs SOC

2L HCC, Any PD-L1KEYNOTE-240

Pembro vs Placebo

1L HNSCC, Any PD-L1KEYNOTE-048

Pembro vs EXTREME

1L Gastric, CPS ≥1KEYNOTE-062

Pembro vs Chemo

1L Gastric, CPS ≥10KEYNOTE-062

Pembro vs Chemo

1L NSQ NSCLC, Any PD-L1KEYNOTE-189

Pembro + Pem/Platinum vsPlacebo + Pem/Platinum

0 3 6 9 1 2 1 5 1 8 2 1

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k4 1 0 3 7 7 3 4 7 2 7 8 7 12 0 6 1 8 3 1 4 9 1 0 4 2 5

1 6 35 9

00

1 88

0 4 8 1 2 1 6 2 0 2 4

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k4 3 2 4 1 7 3 7 8 2 5 6 1 84 2 9 4 0 1 3 4 1 2 1 1 2 0

1 3 61 1 0

00

1L RCC, Any PD-L1KEYNOTE-426

Pembro + Axitinib vsSunitinib

1L SQ NSCLC, Any PD-L1KEYNOTE-407

Pembro + Carboplatin/Taxane vsPlacebo + Carboplatin/Taxane

0 3 6 9 1 2 1 5 1 8 2 1

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k2 7 8 2 5 6 1 8 8 1 2 4 1 72 8 1 2 4 6 1 7 5 9 3 1 6

6 24 5

00

24


Pembro + Platinum vsEXTREME

0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

M o n t h s

OS

, %

N o . a t R is k2 8 1 2 2 7 1 6 9 1 2 2 4 02 7 8 2 2 7 1 4 7 1 0 0 2 0

7 55 1

00

1 05

11

2Q 2019 Earnings

VACCINES: GARDASIL GLOBAL UPTAKE REMAINS ROBUST

• Vaccines sales growth of +36%1 driven by GARDASIL as well as certain pediatric vaccines• Strong underlying demand for GARDASIL in China, Europe and the U.S.• Pediatric vaccines, including PROQUAD / MMR-II / VARIVAX, also contributed to vaccines

growth


2Q18 2Q19

GARDASIL Performance

2Q 2019 Earnings

6

HOSPITAL ACUTE CARE: BRIDION DEMAND REMAINS STRONG

• BRIDION on track to reach over $1 billion in annual sales globally - growth in the U.S. reflects increased utilization in procedures where neuromuscular blockade reversal agents are used

• Ongoing PREVYMIS launch contributing to performance• Commitment to the development of novel antibiotics and antivirals highlighted by recent

approvals


2Q18 2Q19

BRIDION Performance

2Q 2019 Earnings

7

ANIMAL HEALTH: SUSTAINED PERFORMANCE


• Growth was driven by livestock, predominantly due to products acquired from the Antelliq acquisition • Companion animal sales reflect volume growth in vaccine and insulin products• Broad and innovative portfolio enables continued growth for our business

2Q18 2Q19

Animal Health Performance

2Q 2019 Earnings

8

CONTINUED ROBUST INTERNATIONAL PHARMACEUTICAL GROWTH LED BY CHINA1

9

UnitedStates

CanadaEurope2

LatinAmerica

Eastern Europe / Middle East

Africa

Japan

+17%

1 All growth rates exclude the impact of foreign exchange.2 Europe primarily represents all European Union countries and the European Union accession markets.

China

EX-U.S. GLOBAL PHARMACEUTICAL SALES +12%

$343M

+7%+51% +11%

+30%

+24%

-3%

2Q 2019 Earnings

Q2 2019 FINANCIAL RESULTS SUMMARYDELIVERED +15% REVENUE GROWTH AND +25% NON-GAAP EPS GROWTH (BOTH EX-FX)

1. Net income attributable to Merck & Co., Inc.2. Merck is providing certain 2019 and 2018 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information

enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the items, see Table 2a of the company’s Q2 2019 earnings press release.

Q2 2019 Q2 2018 Change Change Ex-FX

Sales $11.8 $10.5 12% 15%

GAAP net income1 $2.7 $1.7 56% 61%

Non-GAAP net income that excludes certain items 1,2 $3.4 $2.9 18% 20%

GAAP EPS $1.03 $0.63 63% 67%

Non-GAAP EPS that excludes certain items 2 $1.30 $1.06 23% 25%

GAAP Gross Margin 71.1% 67.3% 3.7pts 3.9pts

Non-GAAP Gross Margin2 75.4% 74.4% 1.1pts 1.1pts

$ in millions, except EPS amounts

2Q 2019 Earnings

10

BALANCED APPROACH TO CAPITAL ALLOCATIONINVESTING IN THE BUSINESS AND CREATING VALUE FOR SHAREHOLDERS

11

• $14 billion in dividend and share repurchases - Completed $5 billion accelerated share repurchase

program- 2019 dividend increased 15%

• $7 billion invested in R&D• $4 billion for Antelliq and Immune Design acquisitions

Capital Investments2019 to 2023

>$16.0B Over 5 years, including expanding manufacturing capacity for Oncology, Vaccines, and Animal Health. Includes >$9B in the U.S.

Balanced Capital Allocation to Return Cash to Shareholders While Investing in Growth Over Past 12 Months

Over the Past 12 Months

$0

$2

$4

$6

$8

After-Tax R&D CapEx BusinessDevelopment -Ex Divestitures

Dividends Paid ShareRepurchase (net

of OptionsProceeds)

$6.7

$3.0 $5.7$5.5 $8.7

Billions ORDER OF PRIORITY

2Q 2019 Earnings

Commitment to the Dividend

$1.68 $1.72 $1.76 $1.80 $1.84 $1.88

$1.92

$2.20

$1.40

$1.70

$2.00

$2.30

2012 2013 2014 2015 2016 2017 2018 2019 E

Dol

lars

per

sha

re

+11% +2% +2%+2% +2% +2%

+2%

+15%

UPDATED FULL-YEAR 2019 GUIDANCE

12

2Q 2019 Earnings

PRIOR GUIDANCE 2019 UPDATED GUIDANCE 2019 KEY ASSUMPTIONS

Revenue $43.9B - $45.1B+4% to +7% (+5% to +8% ex-FX) $45.2B - $46.2B+7% to +9% (+8% to +10% ex-FX)

• Narrowed and Raised; Assumes slightly over 1% negative FX impact

Non-GAAP Gross Margin Rate 1 Roughly in line with 2018 Roughly in line with 2018

• Improved product mix and favorable FX offset by price, royalties, and collaboration milestones

Non-GAAP Operating Expenses 2 Low to mid single-digit increase Mid single-digit increase • Increased R&D investment

Other (Income) / Expense Roughly zero Roughly zero• Assumes significantly lower gains

from equity investments• Higher net interest expense

Tax Rate3 18.5% - 19.5% 18.5% - 19.5%

Shares Outstanding ~2.6B ~2.6B

GAAP EPS 4 $4.02 - $4.14 $3.78 - $3.88 • Reflecting charge related to Peloton acquisition

Non-GAAP EPS 4$4.67 - $4.79+8% to +10% (+8% to +10% ex-FX)

$4.84 to $4.94+12% to +14% (+12% to +14% ex-FX)

• Narrowed and Raised; Assumes slightly negative FX impact

1. GAAP Gross Margin Rate: Low single digit increase compared to 20182. GAAP Operating Expenses: Higher than 2018 by a low-single digit rate3. GAAP Tax Rate: 16.0% - 17.0%4 The GAAP to non-GAAP reconciliation is available in Merck’s Q2 2019 earnings release

CORPORATE RESPONSIBILITY THAT CREATES SUSTAINABLE VALUE

13

Increasing access to health advances Merck’s efforts to serve more patients • Long history of making medicines and vaccines accessible and affordable through responsible pricing practices and industry-leading patient support

programs• Addressing 88% of the top 20 global burdens of disease with products and pipeline• Merck for Mothers - 10-year, $500 million initiative to prevent maternal deaths has reached more than 9 million women worldwide• Our 30+ year old MECTIZAN® Donation Program for river blindness and lymphatic filariasis that is making progress to eliminate these diseases in endemic

countries: eliminated river blindness in 4 Latin American countries and in parts of 6 African countries so far, and we have eliminated lymphatic filariasis in 2 countries in Africa and the Middle East

• Rolling submission to FDA for V920, Merck’s investigational vaccine for Ebola Zaire disease (over 160,000 patients vaccinated to-date)

Fostering diverse and gender-balanced workforce essential to performance as a research-intensive company and to attracting most talented scientists

• Numerous programs to engage employees and promote positive work environment (including female mentorship by female Board members) - 40% of new hires in 2017 were female- 40% of management roles in 2017 held by women - 36% of new U.S. hires in 2017 were members of underrepresented ethnic groups- 23% of U.S. executive roles in 2017 were held by members of underrepresented ethnic groups

Executing sustainability strategy to take advantage of opportunities to reduce environmental impact across operations and supply chain

• Energy-conservation and water-use-reduction initiatives• Reducing environmental impacts of new products, packaging, buildings and equipment• Purchasing electricity from renewable energy sources to reduce greenhouse gas emissions• Collaborating with suppliers and customers to address shared needs and interests in environmentally beneficial ways

Earning trust and confidence of stakeholders is critical for a company in the business of marketing and selling medicines and vaccines

• Demonstrated commitment to transparency through disclosures about our business and how we operate, including being first pharmaceutical company to publish a multi-year report about pricing practices

• Work with broad range of stakeholders to help develop and advance innovative financing and payment models to improve access• Integrating the SDGs into our reporting to demonstrate our commitment to sustainable development

Access to Health

Employees

Environmental Sustainability

Ethics and Transparency

2Q 2019 Earnings

CREATING LONG-TERM VALUE FOR PATIENTS, EMPLOYEES AND SHAREHOLDERS

14

Next 5 YearsStrong execution driving sustainable revenue growth, meaningful margin expansion and accelerated bottom-line growth

5-10 YearsRich pipeline addressing areas of high unmet need to drive performance over the next 5 to 10 years

10+ YearsRevitalized discovery efforts and increased expertise in biology to deliver ongoing scientific breakthroughs for decades to come

Anchored by our deep bench of talent and commitment to our mission

2Q 2019 Earnings

Slide Number 1FORWARD-LOOKING STATEMENT�OF MERCK & Co., Inc., Kenilworth, N.J., USAQ2 PERFORMANCE HIGHLIGHTS1ONCOLOGY: STRONG GRoWTH for KEYTRUDA, LYNPARZA AND LENVIMAREPEATED OVERALL SURVIVAL BENEFITS IN MONOTHERAPY AND IN COMBINATION DEMONSTRATES SUCCESS OF KEYTRUDAVACCINES: GARDASIL GLOBAL UPTAKE REMAINS ROBUSTHOSPITAL acute care: BRIDION DEMAND REMAINS STRONGANIMAL HEALTH: SUSTAINED PERFORMANCECONTINUED ROBUST INTERNATIONAL PHARMACEUTICAL GROWTH LED BY CHINA1Q2 2019 FINANCIAL RESULTS SUMMARY�DELIVERED +15% REVENUE GROWTH AND +25% NON-GAAP EPS GROWTH (BOTH EX-FX)BALANCED APPROACH TO CAPITAL ALLOCATION�INVESTING IN THE BUSINESS AND CREATING VALUE FOR SHAREHOLDERSUPDATED FULL-YEAR 2019 GUIDANCECORPORATE RESPONSIBILITY THAT CREATES SUSTAINABLE VALUECREATING LONG-TERM VALUE FOR PATIENTS, EMPLOYEES AND SHAREHOLDERS

MERCK...Q2 PERFORMANCE HIGHLIGHTS 1 3 +15 % $ 11.8B +25% $ 1.30 GAAP $1.03 2 1. All growth rates...

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Transcript of MERCK...Q2 PERFORMANCE HIGHLIGHTS 1 3 +15 % $ 11.8B +25% $ 1.30 GAAP $1.03 2 1. All growth rates...