Merck & Co., Inc.

Previous wording

In March 2026, Merck entered into a definitive agreement to acquire Terns Pharmaceuticals, Inc. (Terns), a clinical-stage oncology company, for $53 per share, for a total transaction value of approximately $6.7 billion. Through this acquisition, Merck will acquire Terns’ lead candidate, TERN-701, a novel investigational oral allosteric BCR::ABL1 tyrosine kinase inhibitor (TKI) currently being evaluated in a Phase 1/2 trial for patients with Philadelphia chromosome-positive, chronic phase chronic myeloid leukemia previously treated with at least one prior TKI and who experienced treatment failure, suboptimal response or treatment intolerance. The transaction has been approved by both Merck’s and Terns’ Boards of Directors. The acquisition is subject to a majority of Terns’ stockholders tendering their shares in the tender offer initiated by Merck in April 2026. The consummation of the proposed transaction is also subject to customary closing conditions. Merck anticipates the transaction will be accounted for as an asset acquisition since TERN-701 is expected to account for substantially all of the fair value of the gross assets to be acquired (excluding cash and deferred income taxes). Upon closing of the transaction, which is anticipated in May 2026, Merck expects to record a charge of approximately $5.8 billion to Research and development expenses, or approximately $2.35 per share. There are no future contingent payments associated with the acquisition. In addition, taking into consideration operational investment to advance TERN-701, as well as the cost of financing the transaction, the Company also anticipates a negative impact of approximately $0.12 per share over the remainder of 2026 following the closing of the transaction.

Current wording

In May 2026, Merck acquired Terns Pharmaceuticals, Inc. (Terns), a clinical-stage oncology company, for $6.8 billion (including $606 million of payments to settle share-based equity awards of which $433 million related to unvested equity awards). Through this acquisition, Merck acquired Terns’ lead candidate, MK-4208 (formerly TERN-701), a novel investigational oral allosteric BCR::ABL1 tyrosine kinase inhibitor (TKI) currently being evaluated in a Phase 1/2 trial for patients with Philadelphia chromosome-positive, chronic phase chronic myeloid leukemia previously treated with at least one prior TKI and who experienced treatment failure, suboptimal response or treatment intolerance. The transaction was accounted for as an asset acquisition because MK-4208 accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes). Merck recorded a charge of $5.7 billion to Research and development expenses (which primarily represented acquired in-process research and development [IPR&D] with no alternative future use), or $2.31 per share, in the second quarter and first six months of 2026, as well as net assets of $1.1 billion, including cash of $505 million, investments of $487 million, deferred tax assets of $190 million, and other net liabilities of $105 million. There are no future contingent payments associated with the acquisition.

Previous wording

In January 2026, Merck acquired Cidara Therapeutics, Inc. (Cidara), a biotechnology company developing drug-Fc conjugate (DFC) therapeutics, for $9.2 billion (including $570 million of payments to settle share-based equity awards of which $406 million related to unvested equity awards). Cidara’s lead DFC candidate, MK-1406 (formerly CD388), is a long-acting antiviral designed to prevent seasonal and pandemic influenza. MK-1406 is currently being evaluated in a Phase 3 trial among adult and adolescent participants who are at higher risk of developing complications from influenza. The transaction was accounted for as an asset acquisition since MK-1406 accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes). Merck recorded a charge of $9.0 billion to Research and development expenses, or $3.62 per share, (which primarily represented acquired in-process research and development with no alternative future use), as well as net assets of $332 million in the first quarter of 2026. Under a previous license agreement between Cidara and J&J Innovative Medicine (a Johnson & Johnson company, previously Janssen Pharmaceuticals, Inc.), which was assumed by Merck, J&J Innovative Medicine is eligible to receive regulatory and sales-based milestones related to MK-1406.

Current wording

In January 2026, Merck acquired Cidara Therapeutics, Inc. (Cidara), a biotechnology company developing drug-Fc conjugate (DFC) therapeutics, for $9.2 billion (including $570 million of payments to settle share-based equity awards of which $406 million related to unvested equity awards). Cidara’s lead DFC candidate, MK-1406 (formerly CD388), is a long-acting antiviral designed to prevent seasonal and pandemic influenza. MK-1406 is currently being evaluated in a Phase 3 trial among adult and adolescent participants who are at higher risk of developing complications from influenza. The transaction was accounted for as an asset acquisition because MK-1406 accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes). Merck recorded a charge of $9.0 billion to Research and development expenses (which primarily represented acquired IPR&D with no alternative future use), or $3.62 per share, in the first six months of 2026, as well as net assets of $332 million. Under a previous license agreement between Cidara and J&J Innovative Medicine (a Johnson & Johnson company, previously Janssen Pharmaceuticals, Inc.), which was assumed by Merck, J&J Innovative Medicine is eligible to receive regulatory and sales-based milestones related to MK-1406.

Previous wording

In 2022, the U.S. Congress passed the Inflation Reduction Act (IRA), which made 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 (which went into effect in 2025), and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028). The U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), selected Januvia(sitagliptin) in 2023 for the first year of the IRA’s “Drug Price Negotiation Program” (Program), and selected Janumet (sitagliptin and metformin HCl) and Janumet XR (sitagliptin and metformin HCl extended release) in 2025 for the second year of the IRA’s Program. Pursuant to the IRA’s Program, the government set a price for Januvia, which became effective on January 1, 2026, and set a price for Janumet and Janumet XR, which will become effective on January 1, 2027. In addition, in January 2026, HHS announced that Lenvima (lenvatinib) has been selected for government price setting, the set price for which will become effective on January 1, 2028. Furthermore, the Company expects that Keytruda (pembrolizumab) will be selected in 2027 for government price setting, which would become effective on January 1, 2029. Government price setting may also impact pricing in the private market negatively affecting the Company’s performance. The Company has sued the U.S. government regarding the IRA’s Program.

Current wording

In 2022, the U.S. Congress passed the Inflation Reduction Act (IRA), which made 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 (which went into effect in 2025), and government price-setting for certain Medicare Part D drugs (which went into effect in 2026) and Medicare Part B drugs (starting in 2028). The U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), selected Januvia(sitagliptin) in 2023 for the first year of the IRA’s “Drug Price Negotiation Program” (Program), and selected Janumet (sitagliptin and metformin HCl) and Janumet XR (sitagliptin and metformin HCl extended release) in 2025 for the second year of the IRA’s Program. Pursuant to the IRA’s Program, the government set a price for Januvia, which became effective on January 1, 2026, and set a price for Janumet and Janumet XR, which will become effective on January 1, 2027. In addition, in January 2026, HHS announced that Lenvima (lenvatinib) has been selected for government price setting, the set price for which will become effective on January 1, 2028. Furthermore, the Company expects that Keytruda (pembrolizumab) will be selected in 2027 for government price setting, which would become effective on January 1, 2029; a pending CMS proposed rule may subject Keytruda Qlex (pembrolizumab and berahyaluronidase alfa) to price setting at the same time. Government price setting may also impact pricing in the private market negatively affecting the Company’s performance. The Company has sued the U.S. government regarding the IRA’s Program.

Previous wording

Additionally, increased utilization of the 340B Federal Drug Discount Program and restrictions on the Company’s ability to identify inappropriate discounts are having a negative impact on Company performance. Furthermore, the Executive Branch and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs. In several international markets, government-mandated pricing actions have reduced prices of generic and patented drugs. In addition, the Company’s sales performance in the first three months of 2026 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs.

Current wording

Additionally, increased utilization of the 340B Federal Drug Discount Program and restrictions on the Company’s ability to identify inappropriate discounts are having a negative impact on Company performance. Furthermore, the Executive Branch and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs.

Previous wording

2025, the Company and other pharmaceutical companies received letters from the U.S. presidential administration with a request to agree to the administration’s “most-favored-nation” drug pricing goals by September 29, 2025. Further to the letter received from the administration, in December 2025, the Company announced that it had entered into a three-year agreement (MFN Agreement) with the U.S government that addressed the four policy goals of the administration’s July letter. Included within the MFN Agreement is an obligation by the Company to provide key products through a direct-to-patient program at affordable prices for eligible patients in the U.S. This will initially include Januvia, Janumet and Janumet XR, and will be expanded in the future to include enlicitide decanoate pending FDA approval. The Company also agreed to offer its existing medicines at discounted prices to Medicaid, excluding certain products. Additionally, the Company agreed that products launched during the term of the MFN Agreement (with certain exceptions) will be subject to “most-favored-nation” pricing in reference to prices for such products in a specified group of countries (MFN Countries). Finally, the Company agreed to repatriate and share with the Federal government a portion of foreign revenue received by the Company as a result of the government’s successful trade policy efforts. Additionally, 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.

Current wording

In May 2025, the U.S. presidential administration issued an executive order intended to encourage or impose the use of “most-favored-nation” pricing to tie U.S. prescription drug prices to prices in selected comparably developed nations. In July 2025, the Company and other pharmaceutical companies received letters from the U.S. presidential administration with a request to agree to the administration’s “most-favored-nation” drug pricing goals by September 29, 2025. Further to the letter received from the administration, in December 2025, the Company announced that it had entered into a three-year agreement (MFN Agreement) with the U.S government that addressed the four policy goals of the administration’s July letter. The Company is providing Januvia, Janumet and Janumet XR through a direct-to-patient program at affordable prices for eligible patients in the U.S., and will be expanding the program in the future to include Lipfendra (enlicitide). The Company also agreed to offer its existing medicines at discounted prices to Medicaid (excluding certain products) and in June 2026 signed an agreement with CMS to participate in the GENErating cost Reductions fOr U.S. Medicaid (GENEROUS) Model, a voluntary program through which participating state Medicaid agencies receive pricing for certain medications aligned to prices paid in select countries. Additionally, the Company agreed that products launched during the term of the MFN Agreement (with certain exceptions) will be subject to “most-favored-nation” pricing in reference to prices for such products in a specified group of countries (MFN Countries). Finally, the Company agreed to repatriate and share with the Federal government a portion of foreign revenue received by the Company as a result of the government’s successful trade policy efforts. Additionally, 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.

Previous wording

Worldwide sales were $16.3 billion in the first quarter of 2026, an increase of 5% compared with the first quarter of 2025, reflecting growth in oncology, cardiometabolic and respiratory, and animal health, partially offset by declines in vaccines, diabetes, and infectious diseases.

Current wording

Worldwide sales were $16.6 billion and $32.9 billion in the second quarter and first six months of 2026, respectively, representing increases of 5% compared with the same periods of 2025, reflecting growth in oncology, cardiometabolic and respiratory, and animal health, partially offset by declines in diabetes and infectious diseases. Lower sales in vaccines also partially offset revenue growth in the year-to-date period.

Previous wording

Growth in the oncology franchise in the first quarter of 2026 was largely due to the performance of Keytrudaand Welireg (belzutifan), as well as higher alliance revenue from Koselugo (selumetinib) resulting from an amendment to the collaboration agreement. Sales growth in the cardiometabolic and respiratory franchise was largely attributable to the continued uptake of Winrevair (sotatercept-csrk), as well as the inclusion of sales of Ohtuvayre (ensifentrine) (which was obtained as part of the October 2025 acquisition of Verona Pharma plc [Verona Pharma]). Animal health sales growth was due to the performance of both livestock and companion animal products. The vaccines revenue decline was primarily due to lower combined Gardasil(Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine Recombinant) and Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) sales. The decline in diabetes was primarily due to lower sales of Januvia, and the decline in infectious diseases was largely due to lower sales of Lagevrio (molnupiravir).

Current wording

Growth in the oncology franchise in the second quarter and first six months of 2026 was largely due to the performance of Keytruda/Keytruda Qlexand Welireg (belzutifan). Higher alliance revenue from Koselugo (selumetinib) resulting from an amendment to the collaboration agreement also contributed to oncology sales growth in the year-to-date period. Sales growth in the cardiometabolic and respiratory franchise was largely attributable to the continued uptake of Winrevair (sotatercept-csrk), as well as the inclusion of sales of Ohtuvayre (ensifentrine) (which was obtained as part of the October 2025 acquisition of Verona Pharma plc [Verona Pharma]). Animal health sales growth was due to the performance of both livestock and companion animal products. The decline in diabetes was primarily due to lower sales of Januviaand Janumet, and the decline in infectious diseases was largely due to lower sales of Lagevrio (molnupiravir) and Dificid (fidaxomicin). The vaccines revenue decline in the year-to-date period was primarily due to lower combined sales of Gardasil(Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine Recombinant) and Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant). Additionally, the overall U.S. vaccines market has experienced a contraction negatively affecting sales.

Previous wording

(3)Alliance revenue for Reblozyl represents royalties (see Note 3 to the condensed consolidated financial statements).

Current wording

(2)Alliance revenue for Reblozyl represents royalties (see Note 3 to the condensed consolidated financial statements).

Previous wording

(2)Alliance revenue for Koselugo in 2026 primarily includes a $150 million payment received in connection with an amendment to the collaboration agreement with AstraZeneca in August 2025, which revised the payment structure. Alliance revenue in the first quarter of 2025 represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. (See Note 3 to the condensed consolidated financial statements for more information on this collaboration, including the above referenced amendment.)

Current wording

(3)Alliance revenue for Koselugo in the first six months of 2026 primarily includes a $150 million payment received in connection with an amendment to the collaboration agreement with AstraZeneca in August 2025, which revised the payment structure. Alliance revenue for Koselugo in the second quarter and first six months of 2025 represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. (See Note 3 to the condensed consolidated financial statements for more information on this collaboration, including the above referenced amendment.)

Previous wording

Keytruda Qlex, which was initially approved by the FDA in September 2025, is approved in the U.S. in solid tumor indications approved for Keytruda. In November 2025, the European Commission (EC) approved a new subcutaneous (SC) route of administration and a new pharmaceutical form (solution for injection) of Keytruda (to be marketed as Keytruda SC) for use across Keytruda indications for adults in Europe. Timing for commercial availability of Keytruda SC in individual European Union (EU) countries for approved indications will vary by country and depend on multiple factors, including the completion of reimbursement procedures and the outcome of litigation with Halozyme, Inc. as discussed in Note 8 to the condensed consolidated financial statements. The Keytruda and Keytruda Qlex clinical development programs include studies across a broad range of cancer types. See “Research and Development Update” below.

Current wording

Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved in over 45 indications in the U.S., including 19 tumor types and 2 tumor-agnostic indications, and has similarly been approved in markets worldwide for many of these indications. Keytruda Qlex is a subcutaneously-administered fixed combination of pembrolizumab and berahyaluronidase alfa, which enhances dispersion and permeability to enable subcutaneous administration of pembrolizumab. Keytruda Qlex, which was initially approved by the FDA in September 2025, is approved in the U.S. in solid tumor indications approved for Keytruda. In November 2025, the European Commission (EC) approved a new subcutaneous (SC) route of administration and a new pharmaceutical form (solution for injection) of Keytruda (to be marketed as Keytruda SC) for use across Keytruda indications for adults in Europe. Timing for commercial availability of Keytruda SC in individual European Union (EU) countries for approved indications will vary by country and depend on multiple factors, including the completion of reimbursement procedures and the outcome of litigation with Halozyme, Inc. as discussed in Note 8 to the condensed consolidated financial statements. The Keytruda and Keytruda Qlex clinical development programs include studies across a broad range of cancer types. See “Research and Development Update” below.

Previous wording

Combined global sales of Keytruda/Keytruda Qlex grew 12% in the first quarter of 2026. Sales growth in the U.S. reflects an approximate $250 million favorable impact due to the timing of wholesaler purchases, higher net pricing, and increased demand. Demand in the U.S. was driven by higher utilization across earlier-stage indications, including in certain types of cervical cancer, triple-negative breast cancer (TNBC), and renal cell carcinoma (RCC), as well as higher demand across multiple metastatic indications, in particular for the treatment of certain types of urothelial and cervical cancers. Sales growth in international markets reflects higher demand in urothelial, non-small cell lung cancer (NSCLC), gastric, cervical, and endometrial cancer metastatic indications, as well as increased uptake predominately for the TNBC, NSCLC, melanoma, and RCC earlier-stage indications. The launch and reimbursement of new indications for Keytruda in the EU continues to have a negative impact on pricing in those markets. In addition, a biosimilar of Keytruda launched in Argentina in 2025 and the Company expects further launches in smaller international markets during 2026. The Company anticipates the impact of biosimilar erosion to Keytruda sales will be immaterial in 2026.

Current wording

Combined global sales of Keytruda/Keytruda Qlex grew 5% and 8% in the second quarter and first six months of 2026, respectively. Sales growth in the U.S. in both periods reflects higher net pricing and increased demand. Additionally, the year-to-date period in 2026 reflects an approximate $250 million favorable impact due to the timing of wholesaler purchases. Demand in the U.S. was driven by higher utilization across earlier-stage indications, including in certain types of triple-negative breast cancer (TNBC), bladder cancer, head and neck squamous cell carcinoma, and cervical cancer, as well as higher demand across multiple metastatic indications, in particular for the treatment of certain types of urothelial cancer. Sales growth in international markets reflects higher demand in urothelial and endometrial cancer metastatic indications, as well as increased uptake in earlier-stage indications, predominately for TNBC, cervical, non-small cell lung cancer (NSCLC), and renal cell carcinoma (RCC). The launch and reimbursement of new indications for Keytruda in the EU continues to have a negative impact on pricing in those markets. In addition, a biosimilar of Keytruda launched in Argentina in 2025 and the Company expects further launches in smaller international markets during 2026. The Company anticipates the impact of biosimilar erosion to Keytruda sales will be immaterial in 2026.

Previous wording

Lynparza (olaparib) is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed and commercialized as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see Note 3 to the condensed consolidated financial statements). Lynparza is approved for the treatment of certain types of advanced or recurrent ovarian, early or metastatic breast, metastatic pancreatic and metastatic castration-resistant prostate cancers. Alliance revenue related to Lynparza grew 9% in the first quarter of 2026 largely due to higher demand in the U.S. and many international markets.

Current wording

Lynparza (olaparib) is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed and commercialized as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see Note 3 to the condensed consolidated financial statements). Lynparza is approved for the treatment of certain types of advanced or recurrent ovarian, early or metastatic breast, metastatic pancreatic and metastatic castration-resistant prostate cancers. Alliance revenue related to Lynparza grew 4% in the first six months of 2026 largely due to higher demand in the U.S. and many international markets, partially offset by lower net pricing.

Previous wording

Sales of Welireg, for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors, certain adult patients with previously treated advanced RCC, and certain patients with pheochromocytoma and paraganglioma, rose 45% in the first quarter of 2026 primarily due to higher demand in the U.S. for the RCC indication and continued launch uptake in several international markets, particularly in Japan and certain European markets.

Current wording

Welireg is approved for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors, certain adult patients with previously treated advanced RCC, and certain patients with pheochromocytoma and paraganglioma. Welireg is also approved in combination with Keytruda or Keytruda Qlex for the adjuvant treatment of certain adult patients with clear cell RCC following nephrectomy. Sales of Welireg rose 67% and 57% in the second quarter and first six months of 2026, respectively, primarily due to higher demand in the U.S. for the advanced RCC indication and continued launch uptake in several international markets, particularly in Japan. Favorable wholesaler purchasing patterns in the U.S. also contributed to sales growth in the second quarter of 2026.

Previous wording

Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein that is being commercialized through a global collaboration with Bristol-Myers Squibb Company (BMS) (see Note 3 to the condensed consolidated financial statements). Reblozyl is approved for the treatment of anemia in certain rare blood disorders. Alliance revenue related to this collaboration (consisting of royalties) increased 25% in the first quarter of 2026 primarily due to strong underlying sales performance.

Current wording

Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein that is being commercialized through a global collaboration with Bristol-Myers Squibb Company (BMS) (see Note 3 to the condensed consolidated financial statements). Reblozyl is approved for the treatment of anemia in certain rare blood disorders. Alliance

Previous wording

Koselugo is an oral, selective MEK inhibitor approved for the treatment of patients with neurofibromatosis type 1 who have symptomatic inoperable plexiform neurofibromas. Koselugo is part of a collaboration with AstraZeneca. The increase in alliance revenue in the first quarter of 2026 is due to a $150 million payment received in connection with an amendment to the collaboration agreement in August 2025 that (subject to an annual election by AstraZeneca) discontinued the revenue and cost sharing provisions of the collaboration, and changed the payment structure. See Note 3 to the condensed consolidated financial statements for additional information.

Current wording

Koselugo is an oral, selective MEK inhibitor approved for the treatment of patients with neurofibromatosis type 1 who have symptomatic inoperable plexiform neurofibromas. Koselugo is part of a collaboration with AstraZeneca. Alliance revenue related to Koselugo declined 76% in the second quarter of 2026 due to an amendment to the collaboration agreement with AstraZeneca in August 2025 that (subject to an annual election by AstraZeneca) discontinued the revenue and cost sharing provisions of the collaboration, and revised the payment structure. The increase in alliance revenue in the first six months of 2026 was due to a $150 million payment received in the first quarter of 2026 in connection with the above reference amendment to the collaboration agreement, partially offset by the related discontinuation of the profit sharing. See Note 3 to the condensed consolidated financial statements for additional information.

Previous wording

In January 2026, the acting director of the U.S. Centers for Disease Control and Prevention (CDC) announced changes to the child and adolescent immunization schedule (January announcement), reducing the number of routinely recommended vaccinations and creating three new categories: immunizations recommended for all children; immunizations recommended for certain high-risk groups or populations; and immunizations based on shared clinical decision-making. Immunizations recommended for all children include vaccines for measles, mumps, rubella, polio, pertussis, tetanus, diphtheria, Haemophilus influenzae type B (Hib), pneumococcal disease, human papillomavirus (HPV), and varicella (chickenpox). Immunizations recommended for certain high-risk groups or populations include respiratory syncytial virus (RSV), hepatitis A, hepatitis B, and dengue. Immunizations recommended based on shared clinical decision-making include rotavirus, hepatitis A, and hepatitis B. HHS has stated that immunizations for all of the diseases covered by the previous immunization schedule will still be available to anyone who wants them through Affordable Care Act insurance plans and federal insurance programs, including Medicaid, the Children’s Health Insurance Program, and the Vaccines For Children (VFC) program. Additionally, in September 2025, the trade association representing U.S. health insurers (AHIP) announced that its member health plans would continue to cover all immunizations that had been recommended by the CDC’s Advisory Committee on Immunization Practices (ACIP) as of September 1, 2025, with no cost-sharing for patients through the end of 2026. On March 16, 2026, a federal district court in Massachusetts issued a preliminary injunction staying, among other things, the immunization schedule changes in the CDC’s January announcement. The government is appealing the district court ruling to the U.S. Court of Appeals for the First Circuit.

Current wording

In January 2026, the acting director of the U.S. Centers for Disease Control and Prevention (CDC) announced changes to the child and adolescent immunization schedule (January announcement), reducing the number of routinely recommended vaccinations and creating three new categories: immunizations recommended for all children; immunizations recommended for certain high-risk groups or populations; and immunizations based on shared clinical decision-making. Immunizations recommended for all children include vaccines for measles, mumps, rubella, polio, pertussis, tetanus, diphtheria, Haemophilus influenzae type B (Hib), pneumococcal disease, human papillomavirus (HPV), and chickenpox (varicella). Immunizations recommended for certain high-risk groups or populations include respiratory syncytial virus (RSV), hepatitis A, hepatitis B, and dengue. Immunizations recommended based on shared clinical decision-making include rotavirus, hepatitis A, and hepatitis B. HHS has stated that immunizations for all of the diseases covered by the previous immunization schedule will still be available to anyone who wants them through Affordable Care Act insurance plans and federal insurance programs, including Medicaid, the Children’s Health Insurance Program, and the Vaccines For Children (VFC) program. Additionally, the trade association representing U.S. health insurers (AHIP) announced that its member health plans would continue to cover all immunizations that had been recommended by the CDC’s Advisory Committee on Immunization Practices (ACIP) as of September 1, 2025, with no cost-sharing for patients through the end of 2027. On March 16, 2026, a federal district court in Massachusetts issued a preliminary injunction staying, among other things, the immunization schedule changes in the CDC’s January announcement. The government is appealing the district court ruling to the U.S. Court of Appeals for the First Circuit.

Previous wording

Combined worldwide sales of Gardasil and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of HPV, declined 19% in the first quarter of 2026. The sales decline was primarily driven by lower demand in China (discussed below) and in Japan, reflecting in part that the last date to initiate the first dose in Japan’s national immunization program catch-up cohort was in March 2025. The decline also reflects lower sales in the U.S. primarily due to unfavorable CDC purchasing patterns, partially offset by higher net pricing. As previously disclosed, the Company suspended shipments to China beginning in February 2025 given lower demand and elevated channel inventory levels in China. In April 2026, the Company entered into a revised supply contract with its distributor and commercialization partner in China, Chongqing Zhifei Biological Products Co., Ltd. (Zhifei). Subject to agreement between the parties, the Company may make shipments to China in the latter part of 2026; if so, any associated revenue in 2026 is expected to be immaterial.

Current wording

Combined worldwide sales of Gardasil and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of HPV, grew 4% in the second quarter of 2026 due to higher demand in Asia Pacific and Europe, as well as favorable timing of tenders in Europe, partially offset by lower demand in certain other international markets. Combined worldwide sales of Gardasil and Gardasil 9 declined 9% in the first six months of 2026 primarily driven by lower demand in China (discussed below) and in Japan, reflecting in part that the last date to initiate the first dose in Japan’s national immunization program catch-up cohort was in March 2025. The year-to-date sales decline also reflects lower sales in the U.S. primarily due to unfavorable CDC purchasing patterns and lower demand, partially offset by higher net pricing. The sales decline in the first six months of 2026 was partially offset by higher demand in Europe and other markets in the Asia Pacific region. As previously disclosed, the Company suspended shipments to China in February 2025 given lower demand and elevated channel inventory levels in China. In April 2026, the Company entered into a revised supply contract with its distributor and commercialization partner in China, Chongqing Zhifei Biological Products Co., Ltd. In the second quarter of 2026, the Company began making limited shipments to China; however, revenue associated with the revised supply contract is expected to be immaterial in 2026.

Previous wording

The Company is a party to license agreements pursuant to which the Company pays royalties on net sales of Gardasil/Gardasil 9. Under the terms of the more significant of these agreements, Merck pays a 7% royalty on net sales of

Current wording

The Company is a party to license agreements pursuant to which the Company pays royalties on net sales of Gardasil/Gardasil 9. Under the terms of the more significant of these agreements, Merck pays a 7% royalty on net sales of Gardasil/Gardasil 9 in the U.S. to one third party (this royalty expires in December 2028). The royalty expenses are included in Cost of sales.

Previous wording

Global sales of ProQuad (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella, increased 64% in the first quarter of 2026 primarily due to higher sales in the U.S. As a result of manufacturing delays, in January 2025, the Company borrowed doses of ProQuad from the CDC Pediatric Vaccine Stockpile, which reduced sales of ProQuad by approximately $70 million in the first quarter of 2025. The Company replenished the borrowing later in 2025. Higher demand in certain European markets also contributed to the growth in ProQuad sales in the first quarter of 2026. Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella declined 38% in the first quarter of 2026 primarily due to lower sales in the U.S. largely reflecting unfavorable private sector purchasing patterns and lower demand. Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), declined 6% in the first quarter of 2026 primarily due to lower sales in the U.S. largely driven by lower demand, partially offset by higher net pricing.

Current wording

Global sales of ProQuad (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella, decreased 14% in the second quarter of 2026 and increased 10% in the first six months of 2026. As a result of manufacturing delays, in January 2025, the Company borrowed doses of ProQuad from the CDC Pediatric Vaccine Stockpile. The Company partially replenished the borrowing in the second quarter of 2025 resulting in a benefit to U.S. ProQuad sales of $24 million in that period; the net effect of the borrowing and partial replenishment resulted in a net reduction to U.S. ProQuad sales of $49 million for the first six months of 2025. The Company replenished the remainder of the borrowing later in 2025. Additionally, lower demand in the U.S. in the second quarter and first six months of 2026 was partially offset by higher demand in certain European markets. Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella declined 24% in the first six months of 2026 primarily due to lower demand in the U.S. Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), increased 8% and 1% in the second quarter and first six months of 2026, respectively, primarily due to unfavorable CDC stockpile activity in the prior year as noted below, higher net pricing in the U.S., and higher demand in several international markets, partially offset by lower demand in the U.S. and Latin America.

Previous wording

Worldwide sales of Vaxneuvance(Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help protect against invasive pneumococcal disease caused by certain serotypes, declined 12% in the first quarter of 2026 primarily due to lower demand in the U.S. and most international markets due to competition. Merck is a party to license agreements pursuant to which the Company pays royalties on net sales of Vaxneuvance. Under the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Vaxneuvance through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales.

Current wording

Worldwide sales of Vaxneuvance(Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help protect against invasive pneumococcal disease (IPD) caused by certain serotypes, declined 35% and 24% in the second quarter and first six months of 2026, respectively, primarily due to $60 million of favorable CDC stockpile activity in the U.S. in the prior year. The impact to Vaxneuvance sales from CDC stockpile activity in 2025 was offset by a drawdown of CDC stockpile inventory for Varivax (noted above) and RotaTeq(Rotavirus Vaccine, Live Oral, Pentavalent), which resulted in a net neutral transaction. Lower demand in the U.S. and the Asia Pacific region due to competition also contributed to the sales declines in the second quarter and first six months of 2026. Merck is a party to license agreements pursuant to which the Company pays royalties on net sales of Vaxneuvance. Under the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Vaxneuvance through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales.

Previous wording

Sales of Capvaxive (Pneumococcal 21-valent Conjugate Vaccine), a vaccine for the prevention of invasive pneumococcal disease and pneumococcal pneumonia caused by certain serotypes in individuals 18 years of age and older, grew 33% in the first quarter of 2026 largely due to launch uptake in certain international markets, particularly in the EU, and continued uptake in the U.S. Sales growth in the U.S. was negatively impacted by a reduction in wholesaler inventory. Capvaxivewas approved in the U.S. in June 2024, in the EU in March 2025 and in Japan in August 2025. Merck is a party to license agreements pursuant to which the Company pays royalties on net sales of Capvaxive. Under the terms of the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Capvaxive through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales.

Current wording

Sales of Capvaxive (Pneumococcal 21-valent Conjugate Vaccine), a vaccine for the prevention of IPD and pneumococcal pneumonia caused by certain serotypes in individuals 18 years of age and older, and for the prevention of IPD caused by those serotypes in certain children and adolescents 2 to 17 years of age at increased risk, grew 42% and 38% in the second quarter and first six months of 2026, respectively. Sales growth was largely due to launch uptake in certain international markets, particularly in Europe and the Asia Pacific region, as well as continued uptake in the U.S. Sales growth in the U.S. in the year-to-date period was negatively impacted by a reduction in wholesaler inventory. Capvaxivewas approved in the U.S. in June 2024, in the EU in March 2025 and in Japan in August 2025 for use in adults. In June 2026, the FDA approved an expanded IPD indication for Capvaxive to include children and adolescents aged 2 through 17 years who have completed a primary pediatric pneumococcal vaccination series and have one or more chronic medical conditions that put them at an increased risk for pneumococcal disease. The EC approved a similar indication expansion in April 2026. The expanded approvals were based on data from the STRIDE-13 trial. Merck is a party to license agreements pursuant to which the Company pays royalties on net sales of Capvaxive. Under the terms of the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Capvaxive through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales.

Previous wording

Enflonsia (clesrovimab-cfor) is a preventive, long-acting monoclonal antibody, for the prevention of RSV lower respiratory tract disease in neonates (newborns) and infants who are born during or entering their first RSV season. Enflonsia was approved in the U.S. in June 2025 and in the EU in April 2026 based on results from the CLEVER and SMART clinical trials. The timing for availability of Enflonsia in individual EU countries will vary by country and depend on multiple factors, including the completion of reimbursement procedures. Sales of Enflonsia were $1 million in the first quarter of 2026 and the Company expects minimal sales of Enflonsia in the second quarter of 2026 given the seasonal nature of the product and continued high levels of RSV monoclonal antibody inventory in the market; however, the Company anticipates that shipments will increase in the second half of 2026.

Current wording

Enflonsia (clesrovimab-cfor) is a preventive, long-acting monoclonal antibody, for the prevention of RSV lower respiratory tract disease in neonates (newborns) and infants who are born during or entering their first RSV season. Enflonsia was approved in the U.S. in June 2025, in the EU in April 2026, and in Japan and China in June 2026, based on results from the CLEVER and SMART clinical trials. The timing for availability of Enflonsia in individual EU countries will vary by country and depend on multiple factors, including the completion of reimbursement procedures. Sales of Enflonsia were $2 million and $3 million in the second quarter and first six months of 2026, respectively, reflecting the seasonal nature of the product and continued high levels of RSV monoclonal antibody inventory in the market; however, the Company anticipates that shipments will increase in the second half of 2026.

Previous wording

Winrevair is an activin signaling inhibitor indicated for the treatment of adults with pulmonary arterial hypertension (PAH) (World Health Organization [WHO] Group 1 pulmonary hypertension) to improve exercise capacity and WHO functional class, and reduce the risk of clinical worsening events including hospitalization for PAH, lung transplantation and death. Sales of Winrevair rose to $525 million in the first quarter of 2026 largely due to continued uptake in the U.S. and early launch uptake in certain international markets, particularly in Japan and Europe. Winrevair was originally approved in the U.S. in March 2024, in the EU in August 2024, and in Japan in June 2025 (where it is being marketed as Airwin). Winrevair was approved for expanded indications in PAH based on the ZENITH trial in the U.S. in October 2025 and in the EU in January 2026. Winrevair is the subject

Current wording

Winrevair is an activin signaling inhibitor indicated for the treatment of adults with pulmonary arterial hypertension (PAH) (World Health Organization [WHO] Group 1 pulmonary hypertension) to improve exercise capacity and WHO functional class, and reduce the risk of clinical worsening events including hospitalization for PAH, lung transplantation and death. Sales of Winrevair rose 75% and 81% in the second quarter and first six months of 2026, respectively, largely due to continued uptake in the U.S. and early launch uptake in certain international markets, particularly in Japan and Europe. Winrevair was originally approved in the U.S. in March 2024, in the EU in August 2024, and in Japan in June 2025 (where it is being marketed as Airwin). Winrevair was approved for expanded indications in PAH based on the ZENITH trial in the U.S. in October 2025 and in the EU in January 2026. Winrevair is the subject of a licensing agreement pursuant to which Merck pays a 22% royalty on net sales of Winrevair to BMS. The royalty expenses are included in Cost of sales.

Previous wording

Ohtuvayre is an inhaled phosphodiesterases 3 and 4 (PDE3 and PDE4) inhibitor, which was approved in the U.S. in June 2024 for the maintenance treatment of chronic obstructive pulmonary disease (COPD) in adults. Ohtuvayre was obtained in conjunction with Merck’s October 2025 acquisition of Verona Pharma.

Current wording

Ohtuvayre is an inhaled phosphodiesterases 3 and 4 (PDE3 and PDE4) inhibitor, which was approved in the U.S. in June 2024 for the maintenance treatment of chronic obstructive pulmonary disease (COPD) in adults. Ohtuvayre was obtained in conjunction with Merck’s October 2025 acquisition of Verona Pharma. Sales in the second quarter of 2026 reflect a benefit from the timing of specialty pharmacy purchases in the U.S., which is expected to unwind in the third quarter of 2026.

Previous wording

Adempas (riociguat) and Verquvo (vericiguat) are part of a worldwide collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators (see Note 3 to the condensed consolidated financial statements). Adempas is approved for the treatment of certain types of PAH and chronic pulmonary hypertension. Verquvo is approved to reduce the risk of cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous diuretics in adults with symptomatic chronic heart failure and reduced ejection fraction. Alliance revenue from the collaboration grew 3% in the first quarter of 2026 primarily reflecting higher demand in Bayer’s marketing territories. The Company expects alliance revenue to decline for the full year of 2026 reflecting the loss of market exclusivity for Adempas in the U.S. Revenue also includes sales of Adempas and Verquvo in Merck’s marketing territories. Sales of Adempas in Merck’s marketing territories increased 15% in the first quarter of 2026 largely due to higher demand.

Current wording

Adempas (riociguat) and Verquvo (vericiguat) are part of a worldwide collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators (see Note 3 to the condensed consolidated financial statements). Adempas is approved for the treatment of certain types of PAH and chronic pulmonary hypertension. Verquvo is approved to reduce the risk of cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous diuretics in adults with symptomatic chronic heart failure and reduced ejection fraction. Alliance revenue from the collaboration grew 3% in the first six months of 2026 primarily reflecting higher demand in Bayer’s marketing territories. The Company expects alliance revenue to decline for the full year of 2026 reflecting the loss of market exclusivity for Adempas in the U.S. Revenue also includes sales of Adempas and Verquvo in Merck’s marketing territories. Sales of Adempas in Merck’s marketing territories increased 6% in the first six months of 2026 largely due to higher demand.

Previous wording

Global sales of Bridion(sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, grew 7% in the first quarter of 2026, as higher demand in the U.S. was partially offset by lower demand in most international markets due to generic competition. Bridion will lose market exclusivity in the U.S. in July 2026. The Company anticipates U.S. sales of Bridion to decline thereafter, depending upon the availability of generic supply. The Company expects to discontinue U.S. sales of Bridion as market supply stabilizes, potentially into 2027.

Current wording

Global sales of Bridion(sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, grew 8% and 7% in the second quarter and first six months of 2026, respectively, as higher demand and pricing in the U.S. was partially offset by lower demand in most international markets due to generic competition. Bridion lost market exclusivity in the U.S. in July 2026. The Company anticipates U.S. sales of Bridion to decline in future periods, depending upon the availability of generic supply. The Company expects to discontinue U.S. sales of Bridion in 2027 as generic market supply stabilizes.

Previous wording

Worldwide sales of Prevymis(letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in certain high risk adult and pediatric recipients of an allogenic hematopoietic stem cell transplant and for prophylaxis of CMV disease in certain high risk adult and pediatric recipients of a kidney transplant, grew 31% in the first quarter of 2026 primarily due to higher demand in the U.S. and certain European markets, reflecting in part the launch of new indications.

Current wording

Worldwide sales of Prevymis(letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in certain high risk adult and pediatric recipients of an allogenic hematopoietic stem cell transplant and for prophylaxis of CMV disease in certain high risk adult and pediatric recipients of a kidney transplant, grew 29% and 30% in the second quarter and first six months of 2026, respectively, primarily due to higher demand in the U.S. and certain European markets, reflecting in part the launch of new indications.

Previous wording

Worldwide sales of Dificid (fidaxomicin), a medicine for the treatment of C. difficile-associated diarrhea, declined 59% in the first quarter of 2026 due to generic competition in the U.S. Dificid lost market exclusivity in the U.S. in July 2025; accordingly, the Company is experiencing a significant decline in U.S. sales of Dificid and expects the decline to continue.

Current wording

Worldwide sales of Dificid, a medicine for the treatment of C. difficile-associated diarrhea, declined 77% and 69% in the second quarter and first six months of 2026, respectively, due to generic competition in the U.S. Dificid lost market exclusivity in the U.S. in July 2025; accordingly, the Company is experiencing a significant decline in U.S. sales of Dificid and expects the decline to continue.

Previous wording

Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback Biotherapeutics LP (see Note 3 to the condensed consolidated financial statements). Sales of Lagevrio decreased 73% in the first quarter of 2026 largely due to lower demand in Japan and the U.S. driven primarily by declining COVID-19 cases. The Company expects the Lagevrio sales decline to continue during 2026.

Current wording

Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback Biotherapeutics LP (see Note 3 to the condensed consolidated financial statements). Sales of Lagevrio decreased 95% and 82% in the second quarter and first six months of 2026, respectively, largely due to lower demand in Japan and the U.S. driven primarily by declining COVID-19 cases. The Company expects the Lagevrio sales decline to continue during 2026. In the U.S., where Lagevrio remains in Phase 3 development and is marketed under an Emergency Use Authorization (EUA), the Secretary of HHS provided advance notice on June 29, 2026 that the declaration supporting the EUAs pursuant to which Lagevrio and certain other COVID-19 drug and biologic products are marketed will terminate, effective June 29, 2027. Based on the Secretary’s June 2026 determination and advance notice of termination, the Company is working with the FDA to develop a plan for disposition of Lagevrio in the U.S. by June 29, 2027. U.S. sales of Lagevrio were $18 million in the first six months of 2026.

Previous wording

In April 2026, the FDA approved Idvynso, a once-daily, two-drug single-tablet regimen of doravirine, a non-nucleoside reverse transcriptase inhibitor, and islatravir, a next-generation nucleoside analog reverse transcriptase inhibitor, for the treatment of HIV-1 infection in adults to replace the current antiretroviral regimen in those who are virologically suppressed (HIV-1 RNA less than 50 copies per mL) on a stable antiretroviral regimen with no history of virologic treatment failure and no known substitutions associated with resistance to doravarine. Idvynsowas also approved in Japan for these patients in March 2026. The approvals were based on the MK-8591A-051 and MK-8591A-052 clinical trials.

Current wording

In April 2026, the FDA approved Idvynso, a once-daily, two-drug single-tablet regimen of doravirine, a non-nucleoside reverse transcriptase inhibitor, and islatravir, a next-generation nucleoside analog reverse transcriptase inhibitor, for the treatment of HIV-1 infection in adults to replace the current antiretroviral regimen in those who are virologically suppressed (HIV-1 RNA less than 50 copies per mL) on a stable antiretroviral regimen with no history of virologic treatment failure and no known substitutions associated with resistance to doravirine. Idvynsowas also approved in Japan for these patients in March 2026. The approvals were based on the MK-8591A-051 and MK-8591A-052 clinical trials.

Previous wording

Worldwide combined sales of Januvia and Janumet, medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 28% in the first quarter of 2026 primarily due to lower sales in the U.S. reflecting lower net pricing and ongoing volume declines due to competitive pressure. The sales decline was also attributable to lower demand in China and ongoing generic competition in most other international markets.

Current wording

Worldwide combined sales of Januvia and Janumet, medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 31% and 29% in the second quarter and first six months of 2026, respectively, primarily due to lower sales in the U.S. reflecting ongoing volume declines due to competitive pressure and lower net pricing. The sales declines were also attributable to lower demand in China and ongoing generic competition in most other international markets. Januvia and Janumet lost market exclusivity in the U.S. in May 2026 and Janumet XR lost market exclusivity in the U.S. in July 2026. The Company expects that it will lose a substantial portion of U.S. sales of Januvia, Janumet and Janumet XRsales in future periods due to generic competition.

Previous wording

Sales of livestock products grew 15% in the first quarter of 2026 primarily due to higher demand for ruminant and poultry products, as well as higher pricing.

Current wording

Sales of livestock products grew 8% and 12% in the second quarter and first six months of 2026, respectively, primarily due to higher demand for ruminant and poultry products.

Previous wording

Sales of companion animal products grew 9% in the first quarter of 2026 primarily due to new product launches and higher pricing, partially offset by lower demand for other products in the portfolio, reflecting a reduction in veterinary visits. Sales of the Bravecto (fluralaner) line of products were $379 million in the first quarter of 2026, representing growth of 16%, or 9% excluding the effect of foreign exchange, compared with the first quarter of 2025.

Current wording

Sales of companion animal products grew 7% and 8% in the second quarter and first six months of 2026, respectively, primarily due to new product launches, partially offset by lower demand for other products in the portfolio. Sales of the Bravecto (fluralaner) line of products were $359 million in the second quarter of 2026, representing growth of 7%, or 4% excluding the effect of foreign exchange, compared with the second quarter of 2025. Sales of the Bravecto line of products were $738 million in the first six months of 2026, representing growth of 11%, or 7% excluding the effect of foreign exchange, compared with the same period of 2025.

Previous wording

Cost of sales increased 23% in the first quarter of 2026. Cost of sales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $931 million and $587 million in the first quarter of 2026 and 2025, respectively. Additionally, cost of sales in the first quarter of 2026 includes an $83 million impact for the recognition of fair value step-up of inventories related to the October 2025 acquisition of Verona Pharma. Also included in cost of sales are expenses associated with restructuring activities, which amounted to $237 million and $36 million in the first quarter of 2026 and 2025, respectively, primarily reflecting accelerated depreciation and asset impairment charges related to manufacturing facilities to be fully or partially closed or divested, as well as contractual termination costs. Separation costs associated with manufacturing-related headcount reductions have been incurred and are reflected in Restructuring costs as discussed below.

Current wording

Cost of sales increased 24% and 23% in the second quarter and first six months of 2026, respectively. Cost of sales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $984 million and $599 million in the second quarter of 2026 and 2025, respectively, and $1.9 billion and $1.2 billion in the first six months of 2026 and 2025, respectively. Additionally, cost of sales in the second quarter and first six months of 2026 include an $83 million and $166 million impact, respectively, for the recognition of fair value step-up of inventories related to the October 2025 acquisition of Verona Pharma. Also included in cost of sales are expenses associated with restructuring activities, which amounted to $184 million and $165 million in the second quarter of 2026 and 2025, respectively, and $421 million and $201 million in the first six months of 2026 and 2025, respectively, primarily reflecting accelerated depreciation and asset impairment charges related to manufacturing facilities to be fully or partially closed or divested, as well as contractual termination costs. Separation costs associated with manufacturing-related headcount reductions have been incurred and are reflected in Restructuring costs as discussed below.

Previous wording

Gross margin was 74.2% in the first quarter of 2026 compared with 78.0% in the first quarter of 2025. The gross margin decline was primarily due to higher amortization of intangible assets, higher restructuring costs, the recognition of fair value step-up of inventories related to the October 2025 acquisition of Verona Pharma, and the unfavorable effect of foreign exchange, partially offset by the favorable effect of product mix.

Current wording

Gross margin was 73.5% in the second quarter of 2026 compared with 77.5% in the second quarter of 2025. Gross margin was 73.9% in the first six months of 2026 compared with 77.7% in the first six months of 2025. The gross margin decline in both periods was primarily due to higher amortization of intangible assets, higher inventory write-downs (primarily vaccines), increased restructuring costs, and the recognition of fair value step-up of inventories related to the October 2025 acquisition of Verona Pharma, partially offset by the favorable effect of product mix.

Previous wording

Selling, general and administrative (SG&A) expenses increased 6% in the first quarter of 2026 primarily due to higher administrative costs and the unfavorable impact of foreign exchange.

Current wording

Selling, general and administrative (SG&A) expenses increased 10% and 8% in the second quarter and first six months of 2026, respectively, primarily due to higher administrative costs (including investments in IT), higher promotional and selling costs in support of product launches, and the unfavorable impact of foreign exchange.

Previous wording

Research and development (R&D) expenses increased to $12.6 billion in the first quarter of 2026 from $3.6 billion in the first quarter of 2025 primarily due to a $9.0 billion charge for the acquisition of Cidara, increased clinical development spending, the unfavorable effect of foreign exchange, and restructuring costs, partially offset by a $200 million reduction in R&D expenses as part of the funding agreement with Blackstone Life Sciences (Blackstone) and a $100 million charge in the first quarter of 2025 for the achievement of a developmental milestone related to the 2024 EyeBiotech Limited (EyeBio) acquisition. See Note 2 to the condensed consolidated financial statements for more information on the acquisition of Cidara and the Blackstone funding agreement.

Current wording

The increase in R&D expenses in both the second quarter and first six months of 2026 was also attributable to higher clinical development spending and the unfavorable effect of foreign exchange. The increases were partially offset by a $200 million and $400 million reduction in R&D expenses in the second quarter and first six months of 2026, respectively, as part of the funding agreement with Blackstone Life Sciences (Blackstone). See Note 2 to the condensed consolidated financial statements for more information on the acquisitions of Terns and Cidara, the license agreement with Hengrui Pharma, as well as the Blackstone funding agreement.

Previous wording

R&D expenses consist of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $2.5 billion the first quarter of 2026 (inclusive of a $200 million benefit from the Blackstone funding agreement noted above) and $2.5 billion for the first quarter of 2025. Also included in R&D expenses are Animal Health research costs, upfront and milestone payments for collaboration and licensing agreements (including the charge for the EyeBio developmental milestone noted above), charges for transactions accounted for as asset acquisitions (including the charge for the acquisition of Cidara noted above), and costs incurred by other divisions in support of R&D activities, including depreciation, production, and general and administrative, which in the aggregate were $10.0 billion and $1.1 billion for the first quarter of 2026 and 2025, respectively. R&D expenses also include restructuring costs of $34 million in the first quarter of 2026 primarily associated with contractual termination costs.

Current wording

R&D expenses consist of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $2.8 billion and $5.3 billion in the second quarter and first six months of 2026, respectively, (inclusive of a $200 million and $400 million benefit, respectively, from the Blackstone funding agreement noted above) and $2.8 billion and $5.3 billion for the second quarter and first six months of 2025, respectively. Also included in R&D expenses are Animal Health research costs, upfront and milestone payments for collaboration and licensing agreements (including the charges related to Hengrui Pharma and EyeBio noted above), charges for transactions

Previous wording

Restructuring costs of $195 million and $69 million for the first quarter of 2026 and 2025, respectively, primarily include separation and other costs associated with these restructuring activities. Separation costs incurred were associated with actual headcount reductions, as well as estimated expenses under existing severance programs for involuntary headcount reductions that were probable and could be reasonably estimated. Other expenses in Restructuring costs include facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement, and termination charges associated with pension and other postretirement benefit plans and share-based compensation plan costs. For segment reporting, restructuring costs are unallocated expenses.

Current wording

Restructuring costs of $151 million and $560 million for the second quarter of 2026 and 2025, respectively, and $346 million and $629 million in the first six months of 2026 and 2025, respectively, primarily include separation and other costs associated with these restructuring activities. Separation costs incurred were associated with actual headcount reductions, as well as estimated expenses under existing severance programs for involuntary headcount reductions that were probable and could be reasonably estimated. Other expenses in Restructuring costs include facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement, and termination charges associated with pension and other postretirement benefit plans and share-based compensation plan costs. For segment reporting, restructuring costs are unallocated expenses.

Previous wording

Additional costs associated with the Company’s restructuring activities are included in Cost of sales, Selling, general and administrative expenses and Research and development costs. The Company recorded aggregate pretax costs of $466 million and $105 million in the first quarter of 2026 and 2025, respectively, related to restructuring program activities. See Note 4 to the condensed consolidated financial statements for additional details.

Current wording

Additional costs associated with the Company’s restructuring activities are included in Cost of sales, Selling, general and administrative expenses and Research and development costs. The Company recorded aggregate pretax costs of $334 million and $779 million in the second quarter of 2026 and 2025, respectively, and $800 million and $884 million in the first six months of 2026 and 2025, respectively, related to restructuring program activities. See Note 4 to the condensed consolidated financial statements for additional details.