Merck & Co. Inc.

Previous wording

In July 2024, Merck acquired the aqua business of Elanco Animal Health Incorporated (Elanco) for approximately $1.3 billion. The Elanco aqua business consists of an innovative portfolio of medicines and vaccines, nutritionals and supplements for aquatic species; two related aqua manufacturing facilities in Canada and Vietnam; as well as a research facility in Chile. The acquisition broadens Animal Health’s aqua portfolio with products such as Clynav, a new generation DNA-based vaccine that protects Atlantic salmon against pancreas disease, and Imvixa, an anti-parasitic sea lice treatment. This acquisition also brings a portfolio of water treatment products for warm water production, complementing Animal Health’s warm water vaccine portfolio. In addition to these products, the DNA-based vaccine technology that is a part of the business has the potential to accelerate the development of novel vaccines to address the unmet needs of the aqua industry. The Company is in the process of determining the preliminary fair value of assets acquired, liabilities assumed and total consideration transferred in this transaction, which will be accounted for as a business combination.

Current wording

In July 2024, Merck acquired the aqua business of Elanco Animal Health Incorporated (Elanco aqua business) for total consideration of $1.3 billion. The Elanco aqua business consists of an innovative portfolio of medicines and vaccines, nutritionals and supplements for aquatic species; two related aqua manufacturing facilities in Canada and Vietnam; as well as a research facility in Chile. The acquisition broadens Animal Health’s aqua portfolio with products such as Clynav, a new generation DNA-based vaccine that protects Atlantic salmon against pancreas disease, and Imvixa, an anti-parasitic sea lice treatment. This acquisition also brings a portfolio of water treatment products for warm water production, complementing Animal Health’s warm water vaccine portfolio. In addition to these products, the DNA-based vaccine technology that is a part of the business has the potential to accelerate the development of novel vaccines to address the unmet needs of the aqua industry. There are no contingent payments associated with the acquisition, which was accounted for as a business combination.

Previous wording

Also in July 2024, Merck acquired Eyebiotech Limited (EyeBio), a privately held ophthalmology-focused biotechnology company for an upfront payment of $1.3 billion. The acquisition agreement also provides for a further $1.7 billion in potential developmental, regulatory and sales-based milestone payments. EyeBio’s development work focused on candidates for the prevention and treatment of vision loss associated with retinal vascular leakage, a known risk factor for retinal diseases. EyeBio’s lead candidate, Restoret/MK-3000 (formerly EYE103), is an investigational, potentially first-in-class tetravalent, tri-specific antibody that acts as an agonist of the Wingless-related integration site signaling pathway, which is in clinical development for the treatment of diabetic macular edema and neovascular age-related macular degeneration. The transaction will be accounted for as an asset acquisition. Merck will record a charge of approximately $1.3 billion to Research and development expenses, or approximately $0.51 per share, in the third quarter of 2024.

Current wording

Also in July 2024, Merck acquired Eyebiotech Limited (EyeBio), a privately held ophthalmology-focused biotechnology company for $1.2 billion (including payments to settle share-based equity awards) and also incurred $207 million of transaction costs. The acquisition agreement also provides for former EyeBio shareholders to receive future contingent developmental, regulatory and sales-based milestone payments. EyeBio’s development work focused on candidates for the prevention and treatment of vision loss associated with retinal vascular leakage, a known risk factor for retinal diseases. EyeBio’s lead candidate, Restoret (MK-3000, formerly EYE103), is an investigational, potentially first-in-class tetravalent, tri-specific antibody that acts as an agonist of the Wingless-related integration site signaling pathway, which is in clinical development for the treatment of diabetic macular edema and neovascular age-related macular degeneration. The transaction was accounted for as an asset acquisition. Merck recorded net assets of $21 million, as well as a charge of $1.35 billion to Research and development expenses, or $0.52 per share, in the third quarter and first nine months of 2024 related to the acquisition. Additionally, a $100 million developmental milestone was triggered in the third quarter of 2024 upon initiation of a Phase 2/3 clinical trial evaluating Restoret for the treatment of diabetic macular edema, which was also recorded to Research and development expenses.

Previous wording

Additionally in July 2024, Merck and Orion Corporation (Orion) announced the mutual exercise of an option to convert the companies’ ongoing co-development and co-commercialization agreement for opevesostat (MK-5684/ODM-208), an investigational cytochrome P450 11A1 (CYP11A1) inhibitor, and other candidates targeting CYP11A1, into an exclusive global license for Merck. With the exercise of the option, Merck will assume full responsibility for all past and future development and commercialization expenses associated with the candidates covered by the original agreement. In addition, Orion will become eligible to receive developmental, regulatory and sales-based milestone payments, as well as annually tiered royalty payments ranging from a low double-digit rate up to a rate in the low twenties on net sales for any commercialized licensed product. Orion will retain responsibility for the manufacture of clinical and commercial supply for Merck. No payment was associated with the exercise of the option. The exclusive global license is expected to become effective in the third quarter of 2024, but is subject to certain conditions, including approval under the Hart-Scott-Rodino Antitrust Improvements Act, and other customary conditions.

Current wording

Additionally in July 2024, Merck and Orion Corporation (Orion) announced the mutual exercise of an option to convert the companies’ ongoing co-development and co-commercialization agreement for opevesostat (MK-5684/ODM-208), an investigational cytochrome P450 11A1 (CYP11A1) inhibitor, and other candidates targeting CYP11A1, into an exclusive global license for Merck. With the exercise of the option, Merck assumed full responsibility for all past and future development and commercialization expenses associated with the candidates covered by the original agreement. In addition, Orion became eligible to receive developmental, regulatory and sales-based milestone payments, as well as annually tiered royalties on net sales for any commercialized licensed product. Orion retained responsibility for the manufacture of clinical and commercial supply for Merck. No payment was associated with the exercise of the option, which became effective in September of 2024.

Previous wording

In March 2024, Merck acquired Harpoon Therapeutics, Inc. (Harpoon), a clinical-stage immunotherapy company developing a novel class of T-cell engagers designed to harness the power of the body’s immune system to treat patients suffering from cancer and other diseases, for $765 million and also incurred $56 million of transaction costs. Harpoon’s lead candidate, MK-6070 (formerly HPN328), is a T-cell engager targeting delta-like ligand 3 (DLL3), an inhibitory canonical Notch ligand that is expressed at high levels in small-cell lung cancer (SCLC) and neuroendocrine tumors. MK-6070 is currently being evaluated as monotherapy in a Phase 1/2 clinical trial in certain patients with advanced cancers associated with expression of DLL3. The study is also evaluating MK-6070 in combination with atezolizumab in certain patients with SCLC. The transaction was accounted for as an asset acquisition. Merck recorded net assets of $165 million, as well as a charge of $656 million, or $0.26 per share, to Research and development expenses in the first six months of 2024 related to the transaction. There are no future contingent payments associated with the acquisition.

Current wording

In March 2024, Merck acquired Harpoon Therapeutics, Inc. (Harpoon), a clinical-stage immunotherapy company developing a novel class of T-cell engagers designed to harness the power of the body’s immune system to treat patients suffering from cancer and other diseases, for $765 million and also incurred $56 million of transaction costs. Harpoon’s lead candidate, MK-6070 (formerly HPN328), is a T-cell engager targeting delta-like ligand 3 (DLL3), an inhibitory canonical Notch ligand that is expressed at high levels in small-cell lung cancer (SCLC) and neuroendocrine tumors. MK-6070 is currently being evaluated as monotherapy in a Phase 1/2 clinical trial in certain patients with advanced cancers associated with expression of DLL3. The study is also evaluating MK-6070 in combination with atezolizumab in certain patients with SCLC. The transaction was accounted for as an asset acquisition. Merck recorded net assets of $165 million, as well as a charge of $656 million, or $0.26 per share, to Research and development expenses in the first nine months of 2024 related to the transaction. There are no future contingent payments associated with the acquisition. In August 2024, Merck and Daiichi Sankyo expanded their existing global co-development and co-commercialization agreement to include MK-6070.

Previous wording

Global efforts toward health care cost containment continue to exert pressure on product pricing and market access worldwide. Changes to the U.S. health care system enacted in prior years 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, have contributed to pricing pressure. In 2021, the U.S. Congress passed the American Rescue Plan Act, which included a provision that eliminates the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. Accordingly, manufacturers may have to pay state Medicaid programs more in rebates than they receive on sales of particular products. As a result of this provision, the Company has recognized increased discounts for Januvia(sitagliptin) and Janumet (sitagliptin and metformin HCl)in the firstsix months of 2024. In 2022, the U.S. Congress passed the Inflation Reduction Act (IRA), which makes significant changes to how drugs are covered and paid for under the Medicare program, including the creation of financial penalties for drugs whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits, and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028). In August 2023, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), announced that Januvia would be included in the first year of the IRA’s “Drug Price Negotiation Program” (Program). Pursuant to the IRA’s Program, discussions with the government have now concluded, with government price-setting becoming effective on January 1, 2026. The Company has sued the U.S. government regarding the IRA’s Program. Furthermore, the Biden Administration 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 six months of 2024

Current wording

Global efforts toward health care cost containment continue to exert pressure on product pricing and market access worldwide. Changes to the U.S. health care system enacted in prior years 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, have contributed to pricing pressure. In 2021, the U.S. Congress passed the American Rescue Plan Act, which included a provision that eliminates the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. Accordingly, manufacturers may have to pay state Medicaid programs more in rebates than they receive on sales of particular products. As a result of this provision, the Company has recognized increased discounts for Januvia(sitagliptin) and Janumet (sitagliptin and metformin HCl)in the first nine months of 2024. 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, and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028). In August 2023, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), announced that Januvia would be included in the first year of the IRA’s “Drug Price Negotiation Program” (Program). Pursuant to the IRA’s Program, discussions with the government have now concluded, with government price-setting becoming effective on January 1, 2026. The Company has sued the U.S. government regarding the IRA’s Program. 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 Biden Administration 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 nine months of 2024 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs. The Company anticipates all of these actions and additional actions in the future will negatively affect sales and profits.

Previous wording

Worldwide sales were $16.1 billion in the second quarter of 2024, representing growth of 7% compared with the second quarter of 2023, or 11% excluding the unfavorable effect of foreign exchange. Global sales were $31.9 billion in the first six months of 2024, an increase of 8% compared with the same period of 2023, or 11% excluding the unfavorable effect of foreign exchange. Approximately 2 percentage points of the negative impact of foreign exchange in both periods was due to the devaluation of the Argentine peso, which was largely offset by inflation-related price increases consistent with practice in that market. Global sales growth in both periods was primarily due to higher sales in the oncology franchise, largely due to strong growth of Keytruda (pembrolizumab) and Welireg (belzutifan). Higher sales in the vaccines franchise also contributed to revenue growth in the second quarter and first six months of 2024, reflecting increased combined sales of Gardasil(Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant)/Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) and continued uptake of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine) for pediatric use. Revenue growth in the second quarter and first six months of 2024 also benefited from higher sales in the cardiovascular franchise largely attributable to the launch of Winrevair (sotatercept-csrk). Revenue growth in the second quarter and first six months of 2024 was partially offset by lower sales in the diabetes franchise attributable to Januvia and Janumet, as well as lower sales in the virology franchise largely due to Lagevrio(molnupiravir).

Current wording

Worldwide sales were $16.7 billion in the third quarter of 2024, representing growth of 4% compared with the third quarter of 2023, or 7% excluding the unfavorable effect of foreign exchange. Approximately 2 percentage points of the negative impact of foreign exchange was due to the devaluation of the Argentine peso, which was largely offset by inflation-related price increases consistent with practice in that market. Global sales growth in the third quarter of 2024 was primarily due to higher sales in the oncology franchise, largely due to strong growth of Keytruda (pembrolizumab) and Welireg (belzutifan). Also contributing to revenue growth were higher sales in the cardiovascular franchise, largely attributable to the launch of Winrevair (sotatercept-csrk), and increased sales in the hospital acute care franchise, reflecting in part strong performance of Prevymis(letermovir). Higher sales of animal health products also contributed to revenue growth in the third quarter of 2024. Sales growth in the third quarter of 2024 was partially offset by lower sales in the diabetes franchise attributable to Januvia and Janumet, and lower sales in the vaccines franchise largely due to combined Gardasil(Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine and Recombinant)/Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) sales. Lower sales in the virology franchise largely due to Lagevrio(molnupiravir) also partially offset revenue growth in the third quarter of 2024.

Previous wording

See Note 15 to the condensed consolidated financial statements for details on sales of the Company’s products. A discussion of performance for select products in the franchises follows. All product or service marks appearing in type form different from that of the surrounding text are trademarks or service marks owned, licensed to, promoted or distributed by Merck, its subsidiaries or affiliates, except as noted. All other trademarks or services marks are those of their respective owners.

Current wording

See Note 15 to the condensed consolidated financial statements for details on sales of the Company’s products. A discussion of performance for select products in the franchises follows. All product or service marks appearing in type form different from that of the surrounding text are trademarks or service marks owned, licensed to, promoted or distributed by Merck, its subsidiaries or affiliates, except as noted. All other trademarks or service marks are those of their respective owners.

Previous wording

Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved in 40 indications in the U.S., including 17 tumor types and 2 tumor-agnostic indications, and has similarly been approved in markets worldwide for many of these indications. The Keytruda clinical development program includes 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 40 indications in the U.S., including 18 tumor types and 2 tumor-agnostic indications, and has similarly been approved in markets worldwide for many of these indications. The Keytruda clinical development program includes studies across a broad range of cancer types. See “Research and Development Update” below.

Previous wording

Global sales of Keytruda grew 16% in the second quarter of 2024 and rose 18% in the first six months of 2024, or 21% and 22%, respectively, excluding the unfavorable effect of foreign exchange. Approximately 4 percentage points of the negative impact of foreign exchange in both periods was due to the devaluation of the Argentine peso, which was largely offset by inflation-related price increases consistent with practice in that market. Keytruda sales growth in the U.S. reflects increased uptake across earlier-stage indications, including in certain types of non-small-cell lung cancer (NSCLC), high-risk early-stage triple-negative breast cancer (TNBC), and certain types of renal cell carcinoma (RCC), as well as higher demand across the multiple approved metastatic indications, in particular for the treatment of certain types of urothelial, endometrial, microsatellite instability-high (MSI-H) and renal cell cancers, as well as higher pricing. Keytruda sales growth in international markets reflects higher demand predominately for the TNBC, melanoma and RCC earlier-stage indications, as well as uptake in cervical, renal and gastric cancer metastatic indications, particularly in Europe and Latin America.

Current wording

Global sales of Keytruda grew 17% in the third quarter of 2024 and rose 18% in the first nine months of 2024, or 21% and 22%, respectively, excluding the unfavorable effect of foreign exchange. Approximately 3 percentage points and 4 percentage points of the negative impact of foreign exchange in the third quarter and first nine months of 2024, respectively, was due to the devaluation of the Argentine peso, which was largely offset by inflation-related price increases consistent with practice in that market. Keytruda sales growth in the U.S. reflects increased uptake across earlier-stage indications, including in certain types of non-small-cell lung cancer (NSCLC), high-risk early-stage triple-negative breast cancer (TNBC), and certain types of renal cell carcinoma (RCC), as well as higher demand across the multiple approved metastatic indications, in particular for the treatment of certain types of urothelial, endometrial, and head and neck cancers, and higher pricing. Keytruda sales growth in international markets reflects higher demand predominately for the TNBC, melanoma and RCC earlier-stage indications, as well as uptake in cervical, gastric and renal cancer metastatic indications, particularly in Europe and Latin America.

Previous wording

The Company is a party to certain third-party license agreements pursuant to which the Company pays royalties on sales of Keytruda. Under the terms of the more significant of these agreements, Merck paid a royalty of 6.5% on worldwide sales of Keytruda through December 2023 to one third party; this royalty declined to 2.5% in 2024 and will continue through 2026, terminating thereafter. The Company pays an additional 2% royalty on worldwide sales of Keytruda to another third party, the termination date of which varies by country; this royalty will expire in the U.S. in September 2024 and on varying dates in major European markets in the second half of 2025. The royalty expenses are included in Cost of sales.

Current wording

The Company is a party to certain third-party license agreements pursuant to which the Company pays royalties on sales of Keytruda. Under the terms of the more significant of these agreements, Merck paid a royalty of 6.5% on worldwide sales of Keytruda through December 2023 to one third party; this royalty declined to 2.5% in 2024 and will continue through 2026, terminating thereafter. The Company pays an additional 2% royalty on worldwide sales of Keytruda to another third party, the termination date of which varies by country; this royalty expired in the U.S. in September 2024 and will expire on varying dates in major European markets in the second half of 2025. The royalty expenses are included in Cost of sales.

Previous wording

Lynparza (olaparib) is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed 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 increased 2% in the second quarter of 2024 primarily driven by higher demand in the U.S. and certain international markets, particularly in China and Europe. Alliance revenue related to Lynparza grew 4% in the first six months of 2024 primarily due to higher demand in certain international markets, particularly in Latin America, China and Europe.

Current wording

Lynparza (olaparib) is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed 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 increased 13% and 7% in the third quarter and first nine months of 2024, respectively, primarily due to higher global demand.

Previous wording

Lenvima (lenvatinib) is an oral receptor tyrosine kinase inhibitor being developed as part of a collaboration with Eisai Co., Ltd. (Eisai) (see Note 3 to the condensed consolidated financial statements). Lenvima is approved for the treatment of certain types of thyroid cancer, RCC, HCC, in combination with everolimus for certain patients with advanced RCC, and in combination with Keytruda for certain patients with advanced endometrial carcinoma or advanced RCC. Alliance revenue related to Lenvima grew 3% and 6% in the second quarter and first six months of 2024, respectively, primarily reflecting higher demand in the U.S.

Current wording

Lenvima (lenvatinib) is an oral receptor tyrosine kinase inhibitor being developed as part of a collaboration with Eisai Co., Ltd. (Eisai) (see Note 3 to the condensed consolidated financial statements). Lenvima is approved for the treatment of certain types of thyroid cancer, RCC, HCC, in combination with everolimus for certain patients with advanced RCC, and in combination with Keytruda for certain patients with advanced endometrial carcinoma or advanced RCC. Alliance revenue related to Lenvima declined 3% in the third quarter of 2024 primarily reflecting the timing of sales in China in the prior year, partially offset by higher demand in the U.S. Alliance revenue related to Lenvima grew 3% in the first nine months of 2024 primarily reflecting higher demand and pricing in the U.S., partially offset by the timing of sales in China in the prior year.

Previous wording

Sales of Welireg, for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors and certain adult patients with previously treated advanced RCC, more than doubled in both the second quarter and first six months of 2024. Sales growth in both periods was primarily due to higher demand in the U.S. largely attributable to the launch of a new indication for previously treated advanced RCC following approval by the FDA in December 2023. Welireg is under review in the European Union (EU) and Japan for the treatment of previously treated advanced RCC based on the LITESPARK-005 clinical trial and in the EU for the treatment of VHL disease based on the LITESPARK-004 clinical trial.

Current wording

Sales of Welireg, for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors and certain adult patients with previously treated advanced RCC, more than doubled in both the third quarter and first nine months of 2024. Sales growth in both periods was primarily due to higher demand in the U.S. largely attributable to the continued uptake of a new indication for previously treated advanced RCC following approval by the FDA in December 2023. Welireg is under review in the European Union (EU) and Japan both for the treatment of previously treated advanced RCC based on the LITESPARK-005 clinical trial and for the treatment of VHL disease based on the LITESPARK-004 clinical trial.

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 92% and 80% in the second quarter and first six months of 2024, respectively, 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 revenue related to this collaboration (consisting of royalties) increased 91% and 84% in the third quarter and first nine months of 2024, respectively, due to strong underlying sales performance.

Previous wording

Combined worldwide sales of Gardasil and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of human papillomavirus (HPV), grew 1% in the second quarter of 2024 primarily driven by higher sales in the U.S. due to higher pricing, demand and public sector buying patterns, as well as higher demand in several ex-U.S. markets. Sales growth of Gardasil/Gardasil 9 in the second quarter of 2024 was largely offset by lower sales in China due to the timing of shipments compared with prior year. Combined worldwide sales of Gardasil and Gardasil 9 grew 7% in the first six months of 2024 primarily due to higher global demand, as well as public sector buying patterns in the U.S., and higher pricing. In the second quarter of 2024, the Company observed a significant decline in shipments from its distributor and commercialization partner in China, Zhifei Biological Products Co., Ltd. (Zhifei), into the points of vaccination compared with prior quarters, resulting in above normal inventory levels at Zhifei. If shipments from Zhifei into the points of vaccination do not increase, it is likely that the Company will ship less than its full year 2024 contracted doses by the end of 2024.

Current wording

34 - first nine months of 2024 primarily due to higher sales in the U.S. reflecting public sector buying patterns, higher pricing and demand, as well as higher demand in most international regions, offset by lower demand in China. In the second quarter of 2024, the Company observed a significant decline in shipments from its distributor and commercialization partner in China, Zhifei Biological Products Co., Ltd. (Zhifei), to disease and control prevention institutions and correspondingly into the points of vaccination compared with prior quarters, resulting in above normal inventory levels in China. This lower level of Zhifei shipments continued in the third quarter of 2024. Accordingly, the Company will ship less than its full year 2024 contracted doses to Zhifei and combined sales of Gardasil/Gardasil 9 in China will decline in 2024 compared with 2023, and such sales are also expected to decline in 2025 compared with 2024.

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, grew 7% and 8% in the second quarter and first six months of 2024, respectively, primarily reflecting higher pricing and demand in the U.S.

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, grew 3% and 6% in the third quarter and first nine months of 2024, respectively, primarily reflecting higher pricing in the U.S.

Previous wording

Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help prevent measles, mumps and rubella, grew 8% and 5% in the second quarter and first six months of 2024, respectively, largely reflecting higher demand in several ex-U.S. markets.

Current wording

Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help prevent measles, mumps and rubella, grew 5% in both the third quarter and first nine months of 2024 largely reflecting timing of tenders in certain international markets, partially offset by lower demand and pricing in the U.S.

Previous wording

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), increased 4% and 7% in the second quarter and first six months of 2024, respectively, primarily attributable to higher pricing in the U.S. Sales growth in the second quarter of 2024 was partially offset by the timing of sales in Latin America.

Current wording

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), declined 7% in the third quarter of 2024 primarily attributable to the timing of sales in Latin America. Global sales of Varivax grew 2% in the first nine months of 2024 primarily due to higher pricing in the U.S., partially offset by the timing of sales in Latin America.

Previous wording

Worldwide sales of Vaxneuvance, a vaccine to help protect against invasive pneumococcal disease, grew 13% in the second quarter of 2024 primarily reflecting continued uptake following launches in the pediatric indication in Japan and Europe, partially offset by lower sales in the U.S. due to lower demand and public sector buying patterns. Worldwide sales of Vaxneuvance grew 49% in the first six months of 2024 primarily reflecting higher demand in Europe and Japan, as well as the beneficial impact of public sector buying patterns in the U.S.

Current wording

Worldwide sales of Vaxneuvance, a vaccine to help protect against invasive pneumococcal disease, grew 12% and 33% in the third quarter and first nine months of 2024, respectively, primarily reflecting continued uptake following launches in the pediatric indication in Europe, Japan, and other countries in the Asia Pacific region. Lower demand in the U.S. due to competition partially offset Vaxneuvance sales growth in both periods.

Previous wording

Global sales of RotaTeq(Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children, grew 25% in the second quarter of 2024 largely due to the timing of sales in China, as well as higher sales in the U.S. reflecting a benefit from public sector buying patterns that was partially offset by lower demand. Worldwide sales of RotaTeq declined 11% first six months of 2024 primarily due to lower sales in China reflecting first quarter 2023 inventory stocking, as well as lower sales in the U.S. due to lower demand and public sector buying patterns, partially offset by higher pricing.

Current wording

Global sales of RotaTeq(Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children, grew 24% in the third quarter of 2024 largely due to the beneficial impact of public sector buying patterns in the U.S. coupled with the timing of sales in China. Worldwide sales of RotaTeq declined 2% in the first nine months of 2024 primarily due to lower tenders in Europe and the timing of sales in China. The sales decline in the year-to-date period was partially offset by higher sales in the U.S. due to public sector buying patterns and higher pricing, offset in part by lower demand.

Previous wording

Worldwide sales of Pneumovax 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, declined 36% in both the second quarter and first six months of 2024 driven by lower demand in most markets, particularly in the U.S. as the market has shifted toward newer adult pneumococcal conjugate vaccines.

Current wording

Worldwide sales of Pneumovax 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, declined 51% and 42% in the third quarter and first nine months of 2024, respectively, driven by lower global demand, particularly in the U.S. as the market has shifted toward newer adult pneumococcal conjugate vaccines.

Previous wording

In June 2024, the FDA approved Capvaxive (Pneumococcal 21-valent Conjugate Vaccine) for the prevention of invasive pneumococcal disease and pneumococcal pneumonia in individuals 18 years of age and older. The approval was supported by results from multiple Phase 3 clinical studies evaluating Capvaxive in both vaccine-naïve and vaccine-experienced adult patient populations, including STRIDE-3, STRIDE-4, STRIDE-5 and STRIDE-6. In June 2024, the U.S. Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices unanimously voted to recommend Capvaxive as an option for certain adults for pneumococcal vaccination. These provisional recommendations were adopted by the CDC director and are now official. Merck is a party to certain third-party license agreements pursuant to which the Company will pay royalties on sales of Capvaxive. Under the more significant of these agreements, Merck will pay 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.

Current wording

In June 2024, the FDA approved Capvaxive (Pneumococcal 21-valent Conjugate Vaccine) for the prevention of invasive pneumococcal disease and pneumococcal pneumonia in individuals 18 years of age and older. The approval was supported by results from multiple Phase 3 clinical studies evaluating Capvaxive in both vaccine-naïve and vaccine-experienced adult patient populations, including STRIDE-3, STRIDE-4, STRIDE-5 and STRIDE-6. In June 2024, the U.S. Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP) unanimously voted to recommend Capvaxive as an option for adults age 65 and older, among other cohorts, for pneumococcal vaccination. In October 2024, the CDC’s ACIP voted to update the adult age-based pneumococcal vaccination guidelines and recommended Capvaxive for pneumococcal vaccination in adults 50 years of age and older. These provisional recommendations were adopted by the CDC director and are now official. Merck is a party to certain third-party license agreements pursuant to which the Company pays royalties on sales of Capvaxive. Under the more 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.

Previous wording

Worldwide sales of Bridion(sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, declined 9% in both the second quarter and first six months of 2024 primarily driven by lower demand in certain ex-U.S. markets due to generic competition, particularly in the EU and the Asia Pacific region, partially offset by higher demand in the U.S. The patent that provided market exclusivity for Bridion in the EU expired in July 2023. Accordingly, the Company is experiencing sales declines of Bridion in these markets and expects the declines to continue. The patent that provided market exclusivity for Bridion in Japan expired in January 2024; the Company anticipates sales of Bridion in Japan will decline in future periods.

Current wording

Worldwide sales of Bridion(sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, declined 1% and 7% in the third quarter and first nine months of 2024, respectively, primarily driven by lower demand in certain international markets due to generic competition, particularly in the EU and the Asia Pacific region including in Japan, largely offset by higher demand and pricing in the U.S. The patents that provided market exclusivity for Bridion in the EU and Japan expired in July 2023 and January 2024, respectively. Accordingly, the Company is experiencing sales declines of Bridion in these markets and expects the declines to continue.

Previous wording

Worldwide sales of Prevymis(letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in certain high risk adult recipients of an allogenic hematopoietic stem cell transplant and for prophylaxis of CMV disease in certain high risk adult recipients of a kidney transplant, grew 31% and 33% in the second quarter and first six months of 2024, respectively, largely due to higher global demand, particularly in the U.S., China and Europe.

Current wording

Worldwide sales of Prevymis, 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 32% and 33% in the third quarter and first nine months of 2024, respectively, largely due to higher global demand, particularly in the U.S., China, Europe and Japan.

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 pulmonary arterial hypertension (PAH) and chronic pulmonary hypertension (PH). 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 56% and 22% in the second quarter and first six months of 2024, respectively, due to higher demand in Bayer’s marketing territories. Revenue also includes sales of Adempas and Verquvo in Merck’s marketing territories. Sales of Adempas in Merck’s marketing territories grew 11% and 14% in the second quarter and first six months of 2024, respectively, primarily 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 pulmonary arterial hypertension (PAH) and chronic pulmonary hypertension (PH). 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 11% and 18% in the third quarter and first nine months of 2024, respectively, primarily due to higher demand in Bayer’s marketing territories. Revenue also includes sales of Adempas and Verquvo in Merck’s marketing territories. Sales of Adempas in Merck’s marketing territories grew 11% and 13% in the third quarter and first nine months of 2024, respectively, primarily due to higher demand.

Previous wording

In March 2024, the FDA approved Winrevair for the treatment of adults with PAH (World Health Organization [WHO] Group 1) to increase exercise capacity, improve WHO functional class, and reduce the risk of clinical worsening events. The approval is based on the STELLAR trial. Additional worldwide regulatory filings for Winrevair are underway. Winrevair is the subject of a licensing agreement with BMS pursuant to which Merck pays a 22% royalty on sales of Winrevair to BMS. Merck estimates approximately 40% of Winrevair sales in the second quarter 2024 were attributable to doses administered to patients, with the remainder due to distributors building inventory in support of increasing demand.

Current wording

In March 2024, the FDA approved Winrevair for the treatment of adults with PAH (World Health Organization [WHO] Group 1) to increase exercise capacity, improve WHO functional class (FC), and reduce the risk of clinical worsening events. In August 2024, the EC approved Winrevair, in combination with other PAH therapies, for the treatment of PAH in adult patients with WHO FC II to III, to improve exercise capacity. The FDA and EC approvals were based on the STELLAR trial. Winrevair has since launched in Germany. Timing for commercial availability of Winrevair in the remaining EU countries will depend on multiple factors, including the completion of national reimbursement procedures, which should occur in most other major EU markets in the second half of 2025. Additional worldwide regulatory filings for Winrevair are underway. Winrevair is the subject of a licensing agreement with BMS pursuant to which Merck pays a 22% royalty on sales of Winrevair to BMS. The royalty expenses are included in Cost of sales.

Previous wording

Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback Biotherapeutics LP (Ridgeback) (see Note 3 to the condensed consolidated financial statements). Sales of Lagevrio declined 46% and 23% in the second quarter and first six months of 2024, respectively, primarily due to lower demand and pricing in certain markets in the Asia Pacific region, partially offset by uptake from commercial distribution in the U.S. and higher demand in Japan.

Current wording

Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback Biotherapeutics LP (Ridgeback) (see Note 3 to the condensed consolidated financial statements). Sales of Lagevrio declined 40% in the third quarter of 2024 primarily due to lower demand and pricing in Japan, partially offset by uptake from commercial distribution in the U.S. Sales of Lagevrio declined 32% in the first nine months of 2024 primarily due to lower demand and pricing in several markets in the Asia Pacific region, particularly in Japan and China, partially offset by uptake from commercial distribution in the U.S.

Previous wording

Simponi (golimumab) and Remicade (infliximab) are treatments for certain inflammatory diseases that the Company markets in Europe, Russia and Türkiye. The Company’s marketing rights with respect to these products will revert to Johnson & Johnson Innovative Medicine on October 1, 2024.

Current wording

Simponi (golimumab) and Remicade (infliximab) are treatments for certain inflammatory diseases that the Company marketed in Europe, Russia and Türkiye. The Company’s marketing rights with respect to these products reverted to Johnson & Johnson Innovative Medicine on October 1, 2024.

Previous wording

Worldwide combined sales of Januvia and Janumet, medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 27% and 26% in the second quarter and first six months of 2024, respectively, primarily due to lower sales in the U.S., largely reflecting lower pricing and lower demand due to competitive pressures, as well as the ongoing impact of the loss of exclusivity in most markets in Europe and the Asia Pacific region, as well as in Canada.

Current wording

Worldwide combined sales of Januvia and Janumet, medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 42% and 31% in the third quarter and first nine months of 2024, respectively, primarily due to lower sales in the U.S., largely reflecting lower pricing and lower demand due to competitive pressures, as well as the ongoing impact of the loss of exclusivity in most markets in Europe and the Asia Pacific region, as well as in Canada.

Previous wording

The American Rescue Plan Act enacted in the U.S. in 2021 included a provision that eliminated the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. Accordingly, manufacturers may have to pay state Medicaid programs more in rebates than they receive on sales of particular products. As a result of this provision, the Company has recognized increased discounts for Januviaand Janumet in the firstsix months of 2024. In August 2023, the U.S. Department of HHS, through the CMS, announced that Januvia would be included in the first year of the IRA’s Program. Pursuant to the IRA’s Program, discussions with the government have now concluded, with government price-setting becoming effective on January 1, 2026. The Company has sued the U.S. government regarding the IRA’s Program.

Current wording

The American Rescue Plan Act enacted in the U.S. in 2021 included a provision that eliminated the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. Accordingly, manufacturers may have to pay state Medicaid programs more in rebates than they receive on sales of particular products. As a result of this provision, the Company has recognized increased discounts for Januviaand Janumet in the first nine months of 2024. In August 2023, the U.S. Department of HHS, through the CMS, announced that Januvia would be included in the first year of the IRA’s Program. Pursuant to the IRA’s Program, discussions with the government have now concluded, with government price-setting becoming effective on January 1, 2026. The Company has sued the U.S. government regarding the IRA’s Program.

Previous wording

Animal Health sales grew 2% in the second quarter of 2024, or 6% excluding the unfavorable effect of foreign exchange, and increased 2% in the first six months of 2024, or 5% excluding the unfavorable effect of foreign exchange. Approximately 3 percentage points of the negative impact of foreign exchange in both periods was due to the devaluation of the Argentine peso, which was largely offset by inflation-related price increases consistent with practice in that market.

Current wording

Animal Health sales grew 6% in the third quarter of 2024, or 11% excluding the unfavorable effect of foreign exchange, and increased 3% in the first nine months of 2024, or 7% excluding the unfavorable effect of foreign exchange. Approximately 2 percentage points and 3 percentage points of the negative impact of foreign exchange in the third quarter and first nine months of 2024, respectively, was due to the devaluation of the Argentine peso, which was largely offset by inflation-related price increases consistent with practice in that market.

Previous wording

Sales of livestock products grew 4% and 2% in the second quarter and first six months of 2024, respectively, primarily due to higher pricing, as well as increased demand for poultry products. Higher demand for ruminant products also contributed to sales growth in the second quarter of 2024. Sales of companion animal products were relatively flat in the second quarter of 2024. Sales of companion animal products grew 1% in the first six months of 2024 due to higher pricing, largely offset by lower volumes reflecting a reduction in distributor inventory. Sales of Bravecto(fluralaner), a line of oral, topical and injectable parasitic control products, were $331 million for the second quarter of 2024, representing growth of 2% compared with the second quarter of 2023, or 3% excluding the unfavorable effect of foreign exchange. Sales of Bravecto were $663 million for the first six months of 2024, representing growth of 4% compared with the corresponding prior year period, or 5% excluding the unfavorable effect of foreign exchange.

Current wording

Sales of companion animal products grew 14% in the third quarter of 2024 primarily due to uptake from new product launches, including the injectable formulation of Bravecto (fluralaner) in certain international markets, as well as higher pricing across the product portfolio. Sales of companion animal products grew 5% in the first nine months of 2024 primarily due to higher pricing. Sales of Bravecto, a line of oral, topical and injectable parasitic control products, were $266 million for the third quarter of 2024, representing growth of 13% compared with the third quarter of 2023, or 16% excluding the unfavorable effect of foreign exchange. Sales of Bravecto were $929 million for the first nine months of 2024, representing growth of 6% compared with the corresponding prior year period, or 8% excluding the unfavorable effect of foreign exchange.

Previous wording

Cost ofsales declined 7% and 8% in the second quarter and first six months of 2024, respectively. Cost ofsales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $603 million and $468 million in the second quarter of 2024 and 2023, respectively, and $1.1 billion and $1.0 billion in the first six months of 2024 and 2023, respectively. Amortization expense in the first six months of 2023 includes $72 million of cumulative catch-up amortization related to Merck’s collaboration with Eisai. See Note 3 to the condensed consolidated financial statements for more information on Merck’s collaborative arrangements. Also included in Cost ofsalesare expenses associated with restructuring activities, which amounted to $66 million and $32 million in the second quarter of 2024 and 2023, respectively, and $182 million and $61 million in the first six months of 2024 and 2023, respectively, primarily reflecting accelerated depreciation and asset write-offs related to the planned sale or closure of manufacturing facilities. Separation costs associated with manufacturing-related headcount reductions have been incurred and are reflected in Restructuring costs as discussed below.

Current wording

Cost ofsales declined 4% and 7% in the third quarter and first nine months of 2024, respectively. Cost ofsales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $625 million and $552 million in the third quarter of 2024 and 2023, respectively, and $1.7 billion and $1.6 billion in the first nine months of 2024 and 2023, respectively. Amortization expense in the third quarter and first nine months of 2023 includes $81 million and $154 million, respectively, of cumulative catch-up amortization related to Merck’s collaboration with Eisai. See Note 3 to the condensed consolidated financial statements for more information on Merck’s collaborative arrangements. Also included in Cost ofsalesare expenses associated with restructuring activities, which amounted to $192 million and $33 million in the third quarter of 2024 and 2023, respectively, and $374 million and $94 million in the first nine months of 2024 and 2023, respectively, primarily reflecting accelerated depreciation and asset impairments related to the planned sale or closure of manufacturing facilities. 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 76.8% in the second quarter of 2024 compared with 73.2% in the second quarter of 2023. Gross margin was 77.2% in the first six months of 2024 compared with 73.1% in the first six months of 2023. The gross margin improvement in both periods was primarily due to the favorable effect of product mix (including lower royalty rates related to Keytruda and Gardasil/Gardasil 9 sales), partially offset by higher restructuring costs and amortization of intangible assets.

Current wording

Gross margin was 75.5% in the third quarter of 2024 compared with 73.3% in the third quarter of 2023. Gross margin was 76.6% in the first nine months of 2024 compared with 73.1% in the first nine months of 2023. The gross margin improvement in both periods was primarily due to the favorable effect of product mix (including lower royalty rates related to Keytruda and Gardasil/Gardasil 9 sales), partially offset by higher restructuring costs (primarily reflecting asset impairment charges), as well as increased amortization of intangible assets.

Previous wording

Research and development (R&D) expenses were $3.5 billion in the second quarter of 2024 compared with $13.3 billion in the second quarter of 2023. The decline was primarily due to a $10.2 billion charge in the second quarter of 2023 for the acquisition of Prometheus. R&D expenses were $7.5 billion in the first six months 2024 compared with $17.6 billion in the first six months of 2023. The decline was primarily due to lower charges for business development transactions, which included a $656 million charge for the acquisition of Harpoon in the first six months of 2024, compared with charges of $10.2 billion for the acquisition of Prometheus, $1.2 billion for the acquisition of Imago and $175 million for a license and collaboration agreement with Kelun-Biotech in the first six months of 2023. The declines in R&D expenses for both the second quarter and first six months of 2024 were partially offset by increased clinical development spending, as well as higher compensation and benefit costs in 2024.

Current wording

R&D expenses declined 36% in the first nine months 2024 primarily due to lower charges related business development transactions, which in 2024 included charges of $1.35 billion for the acquisition of EyeBio and $100 million for a related developmental milestone, $750 million for the acquisition of MK-1045, as well as $656 million for the acquisition of Harpoon, compared with charges in 2023 of $10.2 billion for the acquisition of Prometheus Biosciences, Inc. (Prometheus), $1.2 billion for the acquisition of Imago BioSciences, Inc. (Imago) and $175 million for a license and collaboration agreement with Kelun-Biotech. The favorable effect of foreign exchange also contributed to the decline in R&D expenses in the first nine months of 2024. The decline in R&D expenses in the first nine months of 2024 was partially offset by increased clinical development spending, as well as higher compensation and benefit costs.

Previous wording

R&D expenses are comprised 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 and $2.3 billion for the second quarter of 2024 and 2023, respectively, and $4.9 billion and $4.3 billion for the first six months of 2024 and 2023, respectively. Also included in R&D expenses are Animal Health research costs, upfront payments for collaboration and licensing agreements, charges for transactions accounted for as asset acquisitions (including the charges for the Harpoon, Prometheus and Imago acquisitions as 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 approximately $955 million and $11.1 billion for the second quarter of 2024 and 2023, respectively, and $2.5 billion and $13.3 billion for the first six months of 2024 and 2023, respectively.

Current wording

R&D expenses are comprised 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 and $2.3 billion for the third quarter of 2024 and 2023, respectively, and $7.4 billion and $6.6 billion for the first nine months of 2024 and 2023, respectively. Also included in R&D expenses are Animal Health research costs, upfront payments for collaboration and licensing agreements, charges for transactions accounted for as asset acquisitions (including charges for the acquisitions of EyeBio, MK-1045, Harpoon, Prometheus and Imago as 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 $3.3 billion and $1.0 billion for the third quarter of 2024 and 2023, respectively, and $5.9 billion and $14.3 billion for the first nine months of 2024 and 2023, respectively.

Previous wording

37 - modalities and also optimize the Animal Health global manufacturing network to improve supply reliability and increase efficiency. The actions contemplated under the 2024 Restructuring Program are expected to be substantially completed by the end of 2031, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $4.0 billion. Approximately 60% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. The remainder of the costs will result in cash outlays, relating primarily to facility shut-down costs. The Company expects to record charges of approximately $800 million in 2024 related to the 2024 Restructuring Program. The Company anticipates the actions under the 2024 Restructuring Program will result in cumulative annual net cost savings of approximately $750 million by the end of 2031.

Current wording

In January 2024, the Company approved a new restructuring program (2024 Restructuring Program) intended to continue the optimization of the Company’s Human Health global manufacturing network as the future pipeline shifts to new modalities and also optimize the Animal Health global manufacturing network to improve supply reliability and increase efficiency. The actions contemplated under the 2024 Restructuring Program are expected to be substantially completed by the end of 2031, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $4.0 billion. Approximately 60% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. The remainder of the costs will result in cash outlays, relating primarily to facility shut-down costs. The Company expects to record charges of approximately $900 million in 2024 related to the 2024 Restructuring Program. The Company anticipates the actions under the 2024 Restructuring Program will result in cumulative annual net cost savings of approximately $750 million by the end of 2031.

Previous wording

In 2019, Merck approved a global restructuring program (2019 Restructuring Program) as part of a worldwide initiative focused on optimizing the Company’s manufacturing and supply network, as well as reducing its global real estate footprint. The actions under the 2019 Restructuring Program were substantially complete at the end of 2023 and, as of January 1, 2024, any remaining activities are now being accounted for as part of the 2024 Restructuring Program.

Current wording

In 2019, Merck approved a global restructuring program (2019 Restructuring Program) as part of a worldwide initiative focused on optimizing the Company’s manufacturing and supply network, as well as reducing its global real estate footprint. The actions under the 2019 Restructuring Program were substantially complete at the end of 2023 and, as of January 1, 2024, any remaining activities are being accounted for as part of the 2024 Restructuring Program.

Previous wording

Restructuring costs, primarily representing separation and other costs associated with these restructuring activities, were $80 million and $151 million for the second quarter of 2024 and 2023, respectively, and $202 million and $218 million for the first six months of 2024 and 2023, respectively. 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, primarily representing separation and other costs associated with these restructuring activities, were $56 million and $126 million for the third quarter of 2024 and 2023, respectively, and $258 million and $344 million for the first nine months of 2024 and 2023, respectively. 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 $177 million and $236 million in the second quarter of 2024 and 2023, respectively, and $422 million and $333 million for the first six months of 2024 and 2023, respectively, related to restructuring program activities (see Note 4 to the condensed consolidated financial statements).

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 $279 million and $199 million in the third quarter of 2024 and 2023, respectively, and $701 million and $532 million for the first nine months of 2024 and 2023, respectively, related to restructuring program activities (see Note 4 to the condensed consolidated financial statements).