|
|
|
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
New Jersey
|
22-1918501
|
|
(State or other jurisdiction of incorporation)
|
(I.R.S Employer Identification No.)
|
|
|
|
|
2000 Galloping Hill Road
|
||
Kenilworth
|
New Jersey
|
07033
|
(Address of principal executive offices) (zip code)
|
|
Not Applicable
|
|
(Former name, former address and former fiscal year, if changed since last report.)
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
|
|
|
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
|
|
|
|
|
|
Emerging growth company
|
☐
|
|
|
|
|
|
Page No.
|
PART I
|
||||
|
|
|
||
Item 1.
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
|
|
||
Item 2.
|
||||
|
|
|
||
Item 4.
|
||||
|
|
|
||
|
||||
|
|
|
||
PART II
|
||||
|
|
|
||
Item 1.
|
||||
|
|
|
||
Item 1A.
|
||||
|
|
|
||
Item 2.
|
||||
|
|
|
||
Item 6.
|
||||
|
|
|
||
|
|
|
||
|
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Sales
|
$
|
12,057
|
|
|
$
|
10,816
|
|
Costs, Expenses and Other
|
|
|
|
||||
Cost of sales
|
3,312
|
|
|
3,052
|
|
||
Selling, general and administrative
|
2,555
|
|
|
2,425
|
|
||
Research and development
|
2,209
|
|
|
1,931
|
|
||
Restructuring costs
|
72
|
|
|
153
|
|
||
Other (income) expense, net
|
71
|
|
|
188
|
|
||
|
8,219
|
|
|
7,749
|
|
||
Income Before Taxes
|
3,838
|
|
|
3,067
|
|
||
Taxes on Income
|
619
|
|
|
205
|
|
||
Net Income
|
3,219
|
|
|
2,862
|
|
||
Less: Net Loss Attributable to Noncontrolling Interests
|
—
|
|
|
(53
|
)
|
||
Net Income Attributable to Merck & Co., Inc.
|
$
|
3,219
|
|
|
$
|
2,915
|
|
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders
|
$
|
1.27
|
|
|
$
|
1.13
|
|
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders
|
$
|
1.26
|
|
|
$
|
1.12
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Net Income Attributable to Merck & Co., Inc.
|
$
|
3,219
|
|
|
$
|
2,915
|
|
Other Comprehensive (Loss) Income Net of Taxes:
|
|
|
|
||||
Net unrealized gain (loss) on derivatives, net of reclassifications
|
104
|
|
|
(48
|
)
|
||
Net unrealized (loss) gain on investments, net of reclassifications
|
(18
|
)
|
|
82
|
|
||
Benefit plan net gain and prior service credit, net of amortization
|
60
|
|
|
15
|
|
||
Cumulative translation adjustment
|
(344
|
)
|
|
150
|
|
||
|
(198
|
)
|
|
199
|
|
||
Comprehensive Income Attributable to Merck & Co., Inc.
|
$
|
3,021
|
|
|
$
|
3,114
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
7,425
|
|
|
$
|
9,676
|
|
Short-term investments
|
7
|
|
|
774
|
|
||
Accounts receivable (net of allowance for doubtful accounts of $89 in 2020
and $86 in 2019)
|
8,182
|
|
|
6,778
|
|
||
Inventories (excludes inventories of $1,630 in 2020 and $1,480 in 2019
classified in Other assets - see Note 6)
|
5,846
|
|
|
5,978
|
|
||
Other current assets
|
4,714
|
|
|
4,277
|
|
||
Total current assets
|
26,174
|
|
|
27,483
|
|
||
Investments
|
555
|
|
|
1,469
|
|
||
Property, Plant and Equipment, at cost, net of accumulated depreciation of $17,706
in 2020 and $17,686 in 2019
|
15,269
|
|
|
15,053
|
|
||
Goodwill
|
19,767
|
|
|
19,425
|
|
||
Other Intangibles, Net
|
16,096
|
|
|
14,196
|
|
||
Other Assets
|
7,052
|
|
|
6,771
|
|
||
|
$
|
84,913
|
|
|
$
|
84,397
|
|
Liabilities and Equity
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Loans payable and current portion of long-term debt
|
$
|
6,361
|
|
|
$
|
3,610
|
|
Trade accounts payable
|
3,572
|
|
|
3,738
|
|
||
Accrued and other current liabilities
|
10,932
|
|
|
12,549
|
|
||
Income taxes payable
|
1,033
|
|
|
736
|
|
||
Dividends payable
|
1,585
|
|
|
1,587
|
|
||
Total current liabilities
|
23,483
|
|
|
22,220
|
|
||
Long-Term Debt
|
21,637
|
|
|
22,736
|
|
||
Deferred Income Taxes
|
1,943
|
|
|
1,470
|
|
||
Other Noncurrent Liabilities
|
11,550
|
|
|
11,970
|
|
||
Merck & Co., Inc. Stockholders’ Equity
|
|
|
|
||||
Common stock, $0.50 par value
Authorized - 6,500,000,000 shares
Issued - 3,577,103,522 shares in 2020 and 2019
|
1,788
|
|
|
1,788
|
|
||
Other paid-in capital
|
39,697
|
|
|
39,660
|
|
||
Retained earnings
|
48,272
|
|
|
46,602
|
|
||
Accumulated other comprehensive loss
|
(6,391
|
)
|
|
(6,193
|
)
|
||
|
83,366
|
|
|
81,857
|
|
||
Less treasury stock, at cost:
1,053,090,194 shares in 2020 and 1,038,087,496 shares in 2019
|
57,161
|
|
|
55,950
|
|
||
Total Merck & Co., Inc. stockholders’ equity
|
26,205
|
|
|
25,907
|
|
||
Noncontrolling Interests
|
95
|
|
|
94
|
|
||
Total equity
|
26,300
|
|
|
26,001
|
|
||
|
$
|
84,913
|
|
|
$
|
84,397
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Cash Flows from Operating Activities
|
|
|
|
||||
Net income
|
$
|
3,219
|
|
|
$
|
2,862
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
821
|
|
|
898
|
|
||
Intangible asset impairment charges
|
—
|
|
|
104
|
|
||
Deferred income taxes
|
82
|
|
|
194
|
|
||
Share-based compensation
|
108
|
|
|
93
|
|
||
Other
|
143
|
|
|
120
|
|
||
Net changes in assets and liabilities
|
(3,666
|
)
|
|
(2,935
|
)
|
||
Net Cash Provided by Operating Activities
|
707
|
|
|
1,336
|
|
||
Cash Flows from Investing Activities
|
|
|
|
||||
Capital expenditures
|
(986
|
)
|
|
(595
|
)
|
||
Purchases of securities and other investments
|
(49
|
)
|
|
(974
|
)
|
||
Proceeds from sales of securities and other investments
|
1,816
|
|
|
1,899
|
|
||
Acquisition of ArQule, Inc., net of cash acquired
|
(2,545
|
)
|
|
—
|
|
||
Other
|
136
|
|
|
38
|
|
||
Net Cash (Used in) Provided by Investing Activities
|
(1,628
|
)
|
|
368
|
|
||
Cash Flows from Financing Activities
|
|
|
|
||||
Net change in short-term borrowings
|
3,583
|
|
|
(4,135
|
)
|
||
Payments on debt
|
(1,951
|
)
|
|
—
|
|
||
Proceeds from issuance of debt
|
—
|
|
|
4,958
|
|
||
Purchases of treasury stock
|
(1,281
|
)
|
|
(1,090
|
)
|
||
Dividends paid to stockholders
|
(1,551
|
)
|
|
(1,428
|
)
|
||
Proceeds from exercise of stock options
|
26
|
|
|
173
|
|
||
Other
|
(316
|
)
|
|
(92
|
)
|
||
Net Cash Used in Financing Activities
|
(1,490
|
)
|
|
(1,614
|
)
|
||
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
|
(63
|
)
|
|
20
|
|
||
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash
|
(2,474
|
)
|
|
110
|
|
||
Cash, Cash Equivalents and Restricted Cash at Beginning of Year (includes restricted
cash of $258 million at January 1, 2020 included in Other Assets)
|
9,934
|
|
|
7,967
|
|
||
Cash, Cash Equivalents and Restricted Cash at End of Period (includes restricted cash
of $35 million at March 31, 2020 included in Other Assets)
|
$
|
7,460
|
|
|
$
|
8,077
|
|
1.
|
Basis of Presentation
|
2.
|
Acquisitions, Research Collaborations and License Agreements
|
|
|
||
($ in millions)
|
January 16, 2020
|
||
Cash and cash equivalents
|
$
|
145
|
|
IPR&D MK-1026 (formerly ARQ 531) (1)
|
2,280
|
|
|
IPR&D MK-7075 (formerly ARQ 092) (1)
|
170
|
|
|
Licensing arrangement for ARQ 087
|
80
|
|
|
Deferred income tax liabilities
|
(434
|
)
|
|
Other assets and liabilities, net
|
35
|
|
|
Total identifiable net assets
|
2,276
|
|
|
Goodwill (2)
|
414
|
|
|
Consideration transferred
|
$
|
2,690
|
|
(1)
|
The fair values of the identifiable intangible assets related to in-process research and development (IPR&D) were determined using an income approach. The future net cash flows were discounted to present value utilizing a discount rate of 12.5%. Actual cash flows are likely to be different than those assumed.
|
(2)
|
The goodwill was allocated to the Pharmaceutical segment and is not deductible for tax purposes.
|
|
|
Three Months Ended
March 31, |
||||||
($ in millions)
|
2020
|
|
2019
|
||||
Alliance revenue
|
$
|
145
|
|
|
$
|
79
|
|
|
|
|
|
||||
Cost of sales (1)
|
28
|
|
|
19
|
|
||
Selling, general and administrative
|
33
|
|
|
27
|
|
||
Research and development
|
36
|
|
|
45
|
|
||
|
|
|
|
||||
($ in millions)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Receivables from AstraZeneca included in Other current assets
|
$
|
142
|
|
|
$
|
128
|
|
Payables to AstraZeneca included in Accrued and other current liabilities (2)
|
326
|
|
|
577
|
|
|
Three Months Ended
March 31, |
||||||
($ in millions)
|
2020
|
|
2019
|
||||
Alliance revenue
|
$
|
128
|
|
|
$
|
74
|
|
|
|
|
|
||||
Cost of sales (1)
|
35
|
|
|
51
|
|
||
Selling, general and administrative
|
11
|
|
|
19
|
|
||
Research and development
|
64
|
|
|
47
|
|
||
|
|
|
|
||||
($ in millions)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Receivables from Eisai included in Other current assets
|
$
|
140
|
|
|
$
|
150
|
|
Payables to Eisai included in Accrued and other current liabilities (2)
|
425
|
|
|
700
|
|
||
Payables to Eisai included in Other Noncurrent Liabilities (3)
|
300
|
|
|
525
|
|
|
Three Months Ended
March 31, |
||||||
($ in millions)
|
2020
|
|
2019
|
||||
Net sales of Adempas recorded by Merck
|
$
|
56
|
|
|
$
|
48
|
|
Alliance revenue
|
53
|
|
|
42
|
|
||
Total sales
|
109
|
|
|
90
|
|
||
|
|
|
|
||||
Cost of sales (1)
|
28
|
|
|
29
|
|
||
Selling, general and administrative
|
15
|
|
|
8
|
|
||
Research and development
|
25
|
|
|
30
|
|
||
|
|
|
|
||||
($ in millions)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Receivables from Bayer included in Other current assets
|
$
|
50
|
|
|
$
|
49
|
|
Payables to Bayer included in Other Noncurrent Liabilities (2)
|
375
|
|
|
375
|
|
4.
|
Restructuring
|
|
Three Months Ended March 31, 2020
|
||||||||||||||
($ in millions)
|
Separation
Costs
|
|
Accelerated
Depreciation
|
|
Other
|
|
Total
|
||||||||
Cost of sales
|
$
|
—
|
|
|
$
|
25
|
|
|
$
|
43
|
|
|
$
|
68
|
|
Selling, general and administrative
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
||||
Research and development
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
||||
Restructuring costs
|
47
|
|
|
—
|
|
|
25
|
|
|
72
|
|
||||
|
$
|
47
|
|
|
$
|
53
|
|
|
$
|
68
|
|
|
$
|
168
|
|
|
Three Months Ended March 31, 2019
|
||||||||||||||
($ in millions)
|
Separation
Costs
|
|
Accelerated
Depreciation
|
|
Other
|
|
Total
|
||||||||
Cost of sales
|
$
|
—
|
|
|
$
|
34
|
|
|
$
|
—
|
|
|
$
|
34
|
|
Restructuring costs
|
128
|
|
|
—
|
|
|
25
|
|
|
153
|
|
||||
|
$
|
128
|
|
|
$
|
34
|
|
|
$
|
25
|
|
|
$
|
187
|
|
($ in millions)
|
Separation
Costs
|
|
Accelerated
Depreciation
|
|
Other
|
|
Total
|
||||||||
Restructuring reserves January 1, 2020
|
$
|
690
|
|
|
$
|
—
|
|
|
$
|
69
|
|
|
$
|
759
|
|
Expense
|
47
|
|
|
53
|
|
|
68
|
|
|
168
|
|
||||
(Payments) receipts, net
|
(168
|
)
|
|
—
|
|
|
(122
|
)
|
|
(290
|
)
|
||||
Non-cash activity
|
—
|
|
|
(53
|
)
|
|
42
|
|
|
(11
|
)
|
||||
Restructuring reserves March 31, 2020 (1)
|
$
|
569
|
|
|
$
|
—
|
|
|
$
|
57
|
|
|
$
|
626
|
|
(1)
|
The remaining cash outlays are expected to be substantially completed by the end of 2023.
|
5.
|
Financial Instruments
|
|
Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1)
|
|
Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing
|
||||||||||||
|
Three Months Ended March 31,
|
|
Three Months Ended March 31,
|
||||||||||||
($ in millions)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net Investment Hedging Relationships
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
$
|
(3
|
)
|
|
$
|
(11
|
)
|
|
$
|
(8
|
)
|
|
$
|
(8
|
)
|
Euro-denominated notes
|
(51
|
)
|
|
(30
|
)
|
|
—
|
|
|
—
|
|
|
March 31, 2020
|
|||||||||
($ in millions)
|
Par Value of Debt
|
|
Number of Interest Rate Swaps Held
|
|
Total Swap Notional Amount
|
|||||
3.875% notes due 2021
|
$
|
1,150
|
|
|
5
|
|
|
$
|
1,150
|
|
2.40% notes due 2022
|
1,000
|
|
|
4
|
|
|
1,000
|
|
||
2.35% notes due 2022
|
1,250
|
|
|
5
|
|
|
1,250
|
|
|
Carrying Amount of Hedged Liabilities
|
|
Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount
|
||||||||||||
($ in millions)
|
March 31, 2020
|
|
December 31, 2019
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||
Balance Sheet Line Item in which Hedged Item is Included
|
|
|
|
|
|
|
|
||||||||
Loans payable and current portion of long-term debt
|
$
|
1,160
|
|
|
$
|
1,249
|
|
|
$
|
11
|
|
|
$
|
(1
|
)
|
Long-Term Debt
|
2,315
|
|
|
3,409
|
|
|
69
|
|
|
14
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
|
Fair Value of Derivative
|
|
U.S. Dollar
Notional
|
|
Fair Value of Derivative
|
|
U.S. Dollar
Notional
|
||||||||||||||||
($ in millions)
|
Balance Sheet Caption
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
|
|||||||||||||||
Derivatives Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate swap contracts
|
Other current assets
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
1,150
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest rate swap contracts
|
Other Assets
|
70
|
|
|
—
|
|
|
2,250
|
|
|
15
|
|
|
—
|
|
|
3,400
|
|
||||||
Interest rate swap contracts
|
Accrued and other current liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1,250
|
|
||||||
Foreign exchange contracts
|
Other current assets
|
194
|
|
|
—
|
|
|
6,546
|
|
|
152
|
|
|
—
|
|
|
6,117
|
|
||||||
Foreign exchange contracts
|
Other Assets
|
88
|
|
|
—
|
|
|
2,064
|
|
|
55
|
|
|
—
|
|
|
2,160
|
|
||||||
Foreign exchange contracts
|
Accrued and other current liabilities
|
—
|
|
|
7
|
|
|
734
|
|
|
—
|
|
|
22
|
|
|
1,748
|
|
||||||
Foreign exchange contracts
|
Other Noncurrent Liabilities
|
—
|
|
|
1
|
|
|
5
|
|
|
—
|
|
|
1
|
|
|
53
|
|
||||||
|
|
$
|
363
|
|
|
$
|
8
|
|
|
$
|
12,749
|
|
|
$
|
222
|
|
|
$
|
24
|
|
|
$
|
14,728
|
|
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
Other current assets
|
$
|
347
|
|
|
$
|
—
|
|
|
$
|
10,039
|
|
|
$
|
66
|
|
|
$
|
—
|
|
|
$
|
7,245
|
|
Foreign exchange contracts
|
Accrued and other current liabilities
|
—
|
|
|
85
|
|
|
4,665
|
|
|
—
|
|
|
73
|
|
|
8,693
|
|
||||||
|
|
$
|
347
|
|
|
$
|
85
|
|
|
$
|
14,704
|
|
|
$
|
66
|
|
|
$
|
73
|
|
|
$
|
15,938
|
|
|
|
$
|
710
|
|
|
$
|
93
|
|
|
$
|
27,453
|
|
|
$
|
288
|
|
|
$
|
97
|
|
|
$
|
30,666
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||
($ in millions)
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
||||||||
Gross amounts recognized in the condensed consolidated balance sheet
|
$
|
710
|
|
|
$
|
93
|
|
|
$
|
288
|
|
|
$
|
97
|
|
Gross amounts subject to offset in master netting arrangements not offset in the condensed consolidated balance sheet
|
(89
|
)
|
|
(89
|
)
|
|
(84
|
)
|
|
(84
|
)
|
||||
Cash collateral received
|
(216
|
)
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
||||
Net amounts
|
$
|
405
|
|
|
$
|
4
|
|
|
$
|
170
|
|
|
$
|
13
|
|
|
Sales
|
|
Other (income) expense, net (1)
|
|
Other comprehensive income (loss)
|
||||||||||||||||||
|
Three Months Ended March 31,
|
|
Three Months Ended March 31,
|
|
Three Months Ended March 31,
|
||||||||||||||||||
($ in millions)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||||||
Financial Statement Line Items in which Effects of Fair Value or Cash Flow Hedges are Recorded
|
$
|
12,057
|
|
|
$
|
10,816
|
|
|
$
|
71
|
|
|
$
|
188
|
|
|
$
|
(198
|
)
|
|
$
|
199
|
|
(Gain) loss on fair value hedging relationships
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate swap contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Hedged items
|
—
|
|
|
—
|
|
|
67
|
|
|
33
|
|
|
—
|
|
|
—
|
|
||||||
Derivatives designated as hedging instruments
|
—
|
|
|
—
|
|
|
(67
|
)
|
|
(23
|
)
|
|
—
|
|
|
—
|
|
||||||
Impact of cash flow hedging relationships
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amount of gain (loss) recognized in OCI on derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
178
|
|
|
(13
|
)
|
||||||
Increase (decrease) in Sales as a result of AOCI reclassifications
|
46
|
|
|
44
|
|
|
—
|
|
|
—
|
|
|
(46
|
)
|
|
(44
|
)
|
||||||
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amount of gain recognized in Other (income) expense, net on derivatives
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||||
Amount of loss recognized in OCI on derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(4
|
)
|
|
|
|
Amount of Derivative Pretax (Gain) Loss Recognized in Income
|
||||||
|
|
|
Three Months Ended March 31,
|
||||||
($ in millions)
|
Income Statement Caption
|
|
2020
|
|
2019
|
||||
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
||||
Foreign exchange contracts (1)
|
Other (income) expense, net
|
|
$
|
(180
|
)
|
|
$
|
118
|
|
Foreign exchange contracts (2)
|
Sales
|
|
(7
|
)
|
|
10
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||||||||||
|
Amortized
Cost
|
|
Gross Unrealized
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Gross Unrealized
|
|
Fair
Value
|
||||||||||||||||||||
($ in millions)
|
Gains
|
|
Losses
|
|
Gains
|
|
Losses
|
|
|||||||||||||||||||||||
U.S. government and agency securities
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
266
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
269
|
|
Foreign government bonds
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Commercial paper
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
668
|
|
|
—
|
|
|
—
|
|
|
668
|
|
||||||||
Corporate notes and bonds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
608
|
|
|
13
|
|
|
—
|
|
|
621
|
|
||||||||
Asset-backed securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
226
|
|
|
1
|
|
|
—
|
|
|
227
|
|
||||||||
Total debt securities
|
$
|
64
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
64
|
|
|
$
|
1,768
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
1,785
|
|
Publicly traded equity securities (1)
|
|
|
|
|
|
|
779
|
|
|
|
|
|
|
|
|
|
|
|
838
|
|
|||||||||||
Total debt and publicly traded equity securities
|
|
|
|
|
|
|
|
|
|
$
|
843
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,623
|
|
|
Fair Value Measurements Using
|
|
Fair Value Measurements Using
|
||||||||||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
($ in millions)
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Foreign government bonds
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
668
|
|
|
—
|
|
|
668
|
|
||||||||
Corporate notes and bonds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
621
|
|
|
—
|
|
|
621
|
|
||||||||
Asset-backed securities (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
227
|
|
|
—
|
|
|
227
|
|
||||||||
U.S. government and agency securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
209
|
|
|
—
|
|
|
209
|
|
||||||||
Publicly traded equity securities
|
560
|
|
|
—
|
|
|
—
|
|
|
560
|
|
|
518
|
|
|
—
|
|
|
—
|
|
|
518
|
|
||||||||
|
560
|
|
|
2
|
|
|
—
|
|
|
562
|
|
|
518
|
|
|
1,725
|
|
|
—
|
|
|
2,243
|
|
||||||||
Other assets (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. government and agency securities
|
62
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
60
|
|
||||||||
Publicly traded equity securities
|
219
|
|
|
—
|
|
|
—
|
|
|
219
|
|
|
320
|
|
|
—
|
|
|
—
|
|
|
320
|
|
||||||||
|
281
|
|
|
—
|
|
|
—
|
|
|
281
|
|
|
380
|
|
|
—
|
|
|
—
|
|
|
380
|
|
||||||||
Derivative assets (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Forward exchange contracts
|
—
|
|
|
455
|
|
|
—
|
|
|
455
|
|
|
—
|
|
|
169
|
|
|
—
|
|
|
169
|
|
||||||||
Purchased currency options
|
—
|
|
|
174
|
|
|
—
|
|
|
174
|
|
|
—
|
|
|
104
|
|
|
—
|
|
|
104
|
|
||||||||
Interest rate swaps
|
—
|
|
|
81
|
|
|
—
|
|
|
81
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
||||||||
|
—
|
|
|
710
|
|
|
—
|
|
|
710
|
|
|
—
|
|
|
288
|
|
|
—
|
|
|
288
|
|
||||||||
Total assets
|
$
|
841
|
|
|
$
|
712
|
|
|
$
|
—
|
|
|
$
|
1,553
|
|
|
$
|
898
|
|
|
$
|
2,013
|
|
|
$
|
—
|
|
|
$
|
2,911
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
694
|
|
|
$
|
694
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
767
|
|
|
$
|
767
|
|
Derivative liabilities (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Forward exchange contracts
|
—
|
|
|
90
|
|
|
—
|
|
|
90
|
|
|
—
|
|
|
95
|
|
|
—
|
|
|
95
|
|
||||||||
Written currency options
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||||
Interest rate swaps
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||||
|
—
|
|
|
93
|
|
|
—
|
|
|
93
|
|
|
—
|
|
|
97
|
|
|
—
|
|
|
97
|
|
||||||||
Total liabilities
|
$
|
—
|
|
|
$
|
93
|
|
|
$
|
694
|
|
|
$
|
787
|
|
|
$
|
—
|
|
|
$
|
97
|
|
|
$
|
767
|
|
|
$
|
864
|
|
(1)
|
Primarily all of the asset-backed securities were highly-rated (Standard & Poor’s rating of AAA and Moody’s Investors Service rating of Aaa), secured primarily by auto loan, credit card and student loan receivables, with weighted-average lives of primarily 5 years or less.
|
(2)
|
Investments included in other assets are restricted as to use, including for the payment of benefits under employee benefit plans.
|
(3)
|
The fair value determination of derivatives includes the impact of the credit risk of counterparties to the derivatives and the Company’s own credit risk, the effects of which were not significant.
|
|
Three Months Ended March 31,
|
||||||
($ in millions)
|
2020
|
|
2019
|
||||
Fair value January 1
|
$
|
767
|
|
|
$
|
788
|
|
Changes in estimated fair value (1)
|
33
|
|
|
(36
|
)
|
||
Payments
|
(106
|
)
|
|
(85
|
)
|
||
Fair value March 31 (2)(3)
|
$
|
694
|
|
|
$
|
667
|
|
6.
|
Inventories
|
($ in millions)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Finished goods
|
$
|
1,753
|
|
|
$
|
1,772
|
|
Raw materials and work in process
|
5,629
|
|
|
5,650
|
|
||
Supplies
|
232
|
|
|
207
|
|
||
Total (approximates current cost)
|
7,614
|
|
|
7,629
|
|
||
Decrease to LIFO cost
|
(138
|
)
|
|
(171
|
)
|
||
|
$
|
7,476
|
|
|
$
|
7,458
|
|
Recognized as:
|
|
|
|
||||
Inventories
|
$
|
5,846
|
|
|
$
|
5,978
|
|
Other assets
|
1,630
|
|
|
1,480
|
|
7.
|
Contingencies
|
8.
|
Equity
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||||
|
Common Stock
|
Other
Paid-In
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Treasury Stock
|
Non-
controlling
Interests
|
Total
|
||||||||||||||||||
($ and shares in millions except per share amounts)
|
Shares
|
Par Value
|
Shares
|
Cost
|
|||||||||||||||||||||
Balance at January 1, 2019
|
3,577
|
|
$
|
1,788
|
|
$
|
38,808
|
|
$
|
42,579
|
|
$
|
(5,545
|
)
|
985
|
|
$
|
(50,929
|
)
|
$
|
181
|
|
$
|
26,882
|
|
Net income attributable to Merck & Co., Inc.
|
—
|
|
—
|
|
—
|
|
2,915
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,915
|
|
|||||||
Other comprehensive income, net of taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
199
|
|
—
|
|
—
|
|
—
|
|
199
|
|
|||||||
Cash dividends declared on common stock ($0.55 per share)
|
—
|
|
—
|
|
—
|
|
(1,429
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,429
|
)
|
|||||||
Treasury stock shares purchased
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
14
|
|
(1,090
|
)
|
—
|
|
(1,090
|
)
|
|||||||
Share-based compensation plans and other
|
—
|
|
—
|
|
(40
|
)
|
—
|
|
—
|
|
(5
|
)
|
283
|
|
—
|
|
243
|
|
|||||||
Net loss attributable to noncontrolling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(53
|
)
|
(53
|
)
|
|||||||
Other changes in noncontrolling ownership interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
3
|
|
|||||||
Balance at March 31, 2019
|
3,577
|
|
$
|
1,788
|
|
$
|
38,768
|
|
$
|
44,065
|
|
$
|
(5,346
|
)
|
994
|
|
$
|
(51,736
|
)
|
$
|
131
|
|
$
|
27,670
|
|
Balance at January 1, 2020
|
3,577
|
|
$
|
1,788
|
|
$
|
39,660
|
|
$
|
46,602
|
|
$
|
(6,193
|
)
|
1,038
|
|
$
|
(55,950
|
)
|
$
|
94
|
|
$
|
26,001
|
|
Net income attributable to Merck & Co., Inc.
|
—
|
|
—
|
|
—
|
|
3,219
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,219
|
|
|||||||
Other comprehensive loss, net of taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
(198
|
)
|
—
|
|
—
|
|
—
|
|
(198
|
)
|
|||||||
Cash dividends declared on common stock ($0.61 per share)
|
—
|
|
—
|
|
—
|
|
(1,549
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,549
|
)
|
|||||||
Treasury stock shares purchased
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16
|
|
(1,281
|
)
|
—
|
|
(1,281
|
)
|
|||||||
Share-based compensation plans and other
|
—
|
|
—
|
|
37
|
|
—
|
|
—
|
|
(1
|
)
|
70
|
|
—
|
|
107
|
|
|||||||
Other changes in noncontrolling ownership interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
1
|
|
|||||||
Balance at March 31, 2020
|
3,577
|
|
$
|
1,788
|
|
$
|
39,697
|
|
$
|
48,272
|
|
$
|
(6,391
|
)
|
1,053
|
|
$
|
(57,161
|
)
|
$
|
95
|
|
$
|
26,300
|
|
|
9.
|
Share-Based Compensation Plans
|
|
Three Months Ended
March 31, |
||||||
($ in millions)
|
2020
|
|
2019
|
||||
Pretax share-based compensation expense
|
$
|
108
|
|
|
$
|
93
|
|
Income tax benefit
|
(15
|
)
|
|
(14
|
)
|
||
Total share-based compensation expense, net of taxes
|
$
|
93
|
|
|
$
|
79
|
|
|
10.
|
Pension and Other Postretirement Benefit Plans
|
|
Three Months Ended
March 31, |
||||||||||||||
|
2020
|
|
2019
|
||||||||||||
($ in millions)
|
U.S.
|
|
International
|
|
U.S.
|
|
International
|
||||||||
Service cost
|
$
|
86
|
|
|
$
|
74
|
|
|
$
|
71
|
|
|
$
|
60
|
|
Interest cost
|
109
|
|
|
34
|
|
|
114
|
|
|
45
|
|
||||
Expected return on plan assets
|
(194
|
)
|
|
(103
|
)
|
|
(206
|
)
|
|
(108
|
)
|
||||
Amortization of unrecognized prior service credit
|
(12
|
)
|
|
(3
|
)
|
|
(12
|
)
|
|
(3
|
)
|
||||
Net loss amortization
|
75
|
|
|
31
|
|
|
35
|
|
|
16
|
|
||||
Termination benefits
|
3
|
|
|
1
|
|
|
2
|
|
|
—
|
|
||||
Curtailments
|
2
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||
|
$
|
69
|
|
|
$
|
33
|
|
|
$
|
4
|
|
|
$
|
10
|
|
|
Three Months Ended
March 31, |
||||||
($ in millions)
|
2020
|
|
2019
|
||||
Service cost
|
$
|
13
|
|
|
$
|
12
|
|
Interest cost
|
14
|
|
|
17
|
|
||
Expected return on plan assets
|
(19
|
)
|
|
(18
|
)
|
||
Amortization of unrecognized prior service credit
|
(22
|
)
|
|
(21
|
)
|
||
|
$
|
(14
|
)
|
|
$
|
(10
|
)
|
11.
|
Other (Income) Expense, Net
|
|
Three Months Ended
March 31, |
||||||
($ in millions)
|
2020
|
|
2019
|
||||
Interest income
|
$
|
(25
|
)
|
|
$
|
(89
|
)
|
Interest expense
|
212
|
|
|
209
|
|
||
Exchange losses
|
54
|
|
|
101
|
|
||
(Income) loss from investments in equity securities, net (1)
|
(52
|
)
|
|
25
|
|
||
Net periodic defined benefit plan (credit) cost other than service cost
|
(90
|
)
|
|
(141
|
)
|
||
Other, net
|
(28
|
)
|
|
83
|
|
||
|
$
|
71
|
|
|
$
|
188
|
|
(1)
|
Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds.
|
12.
|
Taxes on Income
|
13.
|
Earnings Per Share
|
|
Three Months Ended
March 31, |
||||||
($ and shares in millions except per share amounts)
|
2020
|
|
2019
|
||||
Net income attributable to Merck & Co., Inc.
|
$
|
3,219
|
|
|
$
|
2,915
|
|
Average common shares outstanding
|
2,533
|
|
|
2,585
|
|
||
Common shares issuable (1)
|
14
|
|
|
18
|
|
||
Average common shares outstanding assuming dilution
|
2,547
|
|
|
2,603
|
|
||
Basic earnings per common share attributable to Merck & Co., Inc. common shareholders
|
$
|
1.27
|
|
|
$
|
1.13
|
|
Earnings per common share assuming dilution attributable to Merck & Co., Inc. common shareholders
|
$
|
1.26
|
|
|
$
|
1.12
|
|
(1)
|
Issuable primarily under share-based compensation plans.
|
14.
|
Other Comprehensive Income (Loss)
|
|
Three Months Ended March 31,
|
||||||||||||||||||
($ in millions)
|
Derivatives
|
|
Investments
|
|
Employee
Benefit
Plans
|
|
Cumulative
Translation
Adjustment
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
||||||||||
Balance January 1, 2019, net of taxes
|
$
|
166
|
|
|
$
|
(78
|
)
|
|
$
|
(3,556
|
)
|
|
$
|
(2,077
|
)
|
|
$
|
(5,545
|
)
|
Other comprehensive income (loss) before reclassification adjustments, pretax
|
(13
|
)
|
|
76
|
|
|
(1
|
)
|
|
156
|
|
|
218
|
|
|||||
Tax
|
3
|
|
|
—
|
|
|
6
|
|
|
(6
|
)
|
|
3
|
|
|||||
Other comprehensive income (loss) before reclassification adjustments, net of taxes
|
(10
|
)
|
|
76
|
|
|
5
|
|
|
150
|
|
|
221
|
|
|||||
Reclassification adjustments, pretax
|
(48
|
)
|
(1)
|
6
|
|
(2)
|
14
|
|
(3)
|
—
|
|
|
(28
|
)
|
|||||
Tax
|
10
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
6
|
|
|||||
Reclassification adjustments, net of taxes
|
(38
|
)
|
|
6
|
|
|
10
|
|
|
—
|
|
|
(22
|
)
|
|||||
Other comprehensive income (loss), net of taxes
|
(48
|
)
|
|
82
|
|
|
15
|
|
|
150
|
|
|
199
|
|
|||||
Balance March 31, 2019, net of taxes
|
$
|
118
|
|
|
$
|
4
|
|
|
$
|
(3,541
|
)
|
|
$
|
(1,927
|
)
|
|
$
|
(5,346
|
)
|
Balance January 1, 2020, net of taxes
|
$
|
31
|
|
|
$
|
18
|
|
|
$
|
(4,261
|
)
|
|
$
|
(1,981
|
)
|
|
$
|
(6,193
|
)
|
Other comprehensive income (loss) before reclassification adjustments, pretax
|
178
|
|
|
3
|
|
|
—
|
|
|
(333
|
)
|
|
(152
|
)
|
|||||
Tax
|
(37
|
)
|
|
—
|
|
|
5
|
|
|
(11
|
)
|
|
(43
|
)
|
|||||
Other comprehensive income (loss) before reclassification adjustments, net of taxes
|
141
|
|
|
3
|
|
|
5
|
|
|
(344
|
)
|
|
(195
|
)
|
|||||
Reclassification adjustments, pretax
|
(47
|
)
|
(1)
|
(21
|
)
|
(2)
|
69
|
|
(3)
|
—
|
|
|
1
|
|
|||||
Tax
|
10
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
(4
|
)
|
|||||
Reclassification adjustments, net of taxes
|
(37
|
)
|
|
(21
|
)
|
|
55
|
|
|
—
|
|
|
(3
|
)
|
|||||
Other comprehensive income (loss), net of taxes
|
104
|
|
|
(18
|
)
|
|
60
|
|
|
(344
|
)
|
|
(198
|
)
|
|||||
Balance March 31, 2020, net of taxes
|
$
|
135
|
|
|
$
|
—
|
|
|
$
|
(4,201
|
)
|
|
$
|
(2,325
|
)
|
|
$
|
(6,391
|
)
|
(1)
|
Relates to foreign currency cash flow hedges that were reclassified from AOCI to Sales.
|
|
15.
|
Segment Reporting
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
2020
|
|
2019
|
||||||||||||||||||||
($ in millions)
|
U.S.
|
|
Int’l
|
|
Total
|
|
U.S.
|
|
Int’l
|
|
Total
|
||||||||||||
Pharmaceutical:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Oncology
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Keytruda
|
$
|
1,906
|
|
|
$
|
1,378
|
|
|
$
|
3,284
|
|
|
$
|
1,284
|
|
|
$
|
985
|
|
|
$
|
2,269
|
|
Alliance revenue - Lynparza (1)
|
85
|
|
|
60
|
|
|
145
|
|
|
50
|
|
|
29
|
|
|
79
|
|
||||||
Alliance revenue - Lenvima (1)
|
90
|
|
|
38
|
|
|
128
|
|
|
50
|
|
|
24
|
|
|
74
|
|
||||||
Emend
|
5
|
|
|
38
|
|
|
43
|
|
|
63
|
|
|
53
|
|
|
117
|
|
||||||
Vaccines
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gardasil/Gardasil 9
|
461
|
|
|
636
|
|
|
1,097
|
|
|
362
|
|
|
476
|
|
|
838
|
|
||||||
ProQuad/M-M-R II/Varivax
|
333
|
|
|
102
|
|
|
435
|
|
|
343
|
|
|
153
|
|
|
496
|
|
||||||
Pneumovax 23
|
182
|
|
|
75
|
|
|
256
|
|
|
125
|
|
|
59
|
|
|
185
|
|
||||||
RotaTeq
|
140
|
|
|
82
|
|
|
222
|
|
|
154
|
|
|
57
|
|
|
211
|
|
||||||
Vaqta
|
30
|
|
|
30
|
|
|
60
|
|
|
29
|
|
|
18
|
|
|
47
|
|
||||||
Hospital Acute Care
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Bridion
|
143
|
|
|
157
|
|
|
299
|
|
|
119
|
|
|
136
|
|
|
255
|
|
||||||
Noxafil
|
8
|
|
|
87
|
|
|
94
|
|
|
91
|
|
|
99
|
|
|
190
|
|
||||||
Invanz
|
6
|
|
|
59
|
|
|
64
|
|
|
14
|
|
|
58
|
|
|
72
|
|
||||||
Prevymis
|
26
|
|
|
33
|
|
|
60
|
|
|
18
|
|
|
14
|
|
|
32
|
|
||||||
Cancidas
|
3
|
|
|
52
|
|
|
55
|
|
|
1
|
|
|
60
|
|
|
61
|
|
||||||
Primaxin
|
—
|
|
|
51
|
|
|
51
|
|
|
—
|
|
|
59
|
|
|
59
|
|
||||||
Cubicin
|
15
|
|
|
31
|
|
|
46
|
|
|
42
|
|
|
46
|
|
|
88
|
|
||||||
Zerbaxa
|
20
|
|
|
16
|
|
|
37
|
|
|
12
|
|
|
14
|
|
|
26
|
|
||||||
Immunology
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Simponi
|
—
|
|
|
215
|
|
|
215
|
|
|
—
|
|
|
208
|
|
|
208
|
|
||||||
Remicade
|
—
|
|
|
88
|
|
|
88
|
|
|
—
|
|
|
123
|
|
|
123
|
|
||||||
Neuroscience
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Belsomra
|
27
|
|
|
53
|
|
|
79
|
|
|
24
|
|
|
44
|
|
|
67
|
|
||||||
Virology
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Isentress/Isentress HD
|
75
|
|
|
170
|
|
|
245
|
|
|
108
|
|
|
147
|
|
|
255
|
|
||||||
Zepatier
|
18
|
|
|
37
|
|
|
55
|
|
|
33
|
|
|
81
|
|
|
114
|
|
||||||
Cardiovascular
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Zetia
|
(2
|
)
|
|
147
|
|
|
145
|
|
|
—
|
|
|
140
|
|
|
140
|
|
||||||
Vytorin
|
3
|
|
|
50
|
|
|
53
|
|
|
3
|
|
|
94
|
|
|
97
|
|
||||||
Atozet
|
—
|
|
|
122
|
|
|
122
|
|
|
—
|
|
|
94
|
|
|
94
|
|
||||||
Adempas
|
—
|
|
|
56
|
|
|
56
|
|
|
—
|
|
|
48
|
|
|
48
|
|
||||||
Alliance revenue - Adempas (2)
|
49
|
|
|
5
|
|
|
53
|
|
|
40
|
|
|
2
|
|
|
42
|
|
||||||
Diabetes
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Januvia
|
355
|
|
|
419
|
|
|
774
|
|
|
384
|
|
|
440
|
|
|
824
|
|
||||||
Janumet
|
113
|
|
|
390
|
|
|
503
|
|
|
167
|
|
|
364
|
|
|
530
|
|
||||||
Women’s Health
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Implanon/Nexplanon
|
149
|
|
|
45
|
|
|
195
|
|
|
149
|
|
|
50
|
|
|
199
|
|
||||||
NuvaRing
|
26
|
|
|
37
|
|
|
63
|
|
|
185
|
|
|
34
|
|
|
219
|
|
||||||
Diversified Brands
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Singulair
|
5
|
|
|
151
|
|
|
155
|
|
|
5
|
|
|
186
|
|
|
191
|
|
||||||
Cozaar/Hyzaar
|
7
|
|
|
95
|
|
|
102
|
|
|
4
|
|
|
99
|
|
|
103
|
|
||||||
Nasonex
|
6
|
|
|
65
|
|
|
71
|
|
|
(1
|
)
|
|
97
|
|
|
96
|
|
||||||
Arcoxia
|
—
|
|
|
70
|
|
|
70
|
|
|
—
|
|
|
75
|
|
|
75
|
|
||||||
Follistim AQ
|
21
|
|
|
21
|
|
|
41
|
|
|
29
|
|
|
28
|
|
|
57
|
|
||||||
Other pharmaceutical (3)
|
409
|
|
|
780
|
|
|
1,194
|
|
|
328
|
|
|
754
|
|
|
1,082
|
|
||||||
Total Pharmaceutical segment sales
|
4,714
|
|
|
5,941
|
|
|
10,655
|
|
|
4,215
|
|
|
5,448
|
|
|
9,663
|
|
||||||
Animal Health:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Livestock
|
162
|
|
|
577
|
|
|
739
|
|
|
117
|
|
|
494
|
|
|
611
|
|
||||||
Companion Animals
|
222
|
|
|
253
|
|
|
475
|
|
|
177
|
|
|
237
|
|
|
414
|
|
||||||
Total Animal Health segment sales
|
384
|
|
|
830
|
|
|
1,214
|
|
|
294
|
|
|
731
|
|
|
1,025
|
|
||||||
Other segment sales (4)
|
23
|
|
|
—
|
|
|
23
|
|
|
39
|
|
|
—
|
|
|
39
|
|
||||||
Total segment sales
|
5,121
|
|
|
6,771
|
|
|
11,892
|
|
|
4,548
|
|
|
6,179
|
|
|
10,727
|
|
||||||
Other (5)
|
16
|
|
|
149
|
|
|
165
|
|
|
7
|
|
|
82
|
|
|
89
|
|
||||||
|
$
|
5,137
|
|
|
$
|
6,920
|
|
|
$
|
12,057
|
|
|
$
|
4,555
|
|
|
$
|
6,261
|
|
|
$
|
10,816
|
|
(1)
|
Alliance revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 3).
|
(2)
|
Alliance revenue represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 3).
|
(3)
|
Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.
|
(4)
|
Represents sales for the Healthcare Services segment. All the businesses in the Healthcare Services segment were divested as of March 31, 2020.
|
(5)
|
Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales. Other in the first quarter of 2020 and 2019 also includes approximately $75 million and $15 million, respectively, related to the sale of the marketing rights for certain products.
|
|
Three Months Ended
March 31, |
||||||
($ in millions)
|
2020
|
|
2019
|
||||
United States
|
$
|
5,137
|
|
|
$
|
4,555
|
|
Europe, Middle East and Africa
|
3,534
|
|
|
3,103
|
|
||
China
|
864
|
|
|
746
|
|
||
Japan
|
811
|
|
|
799
|
|
||
Asia Pacific (other than China and Japan)
|
728
|
|
|
745
|
|
||
Latin America
|
556
|
|
|
561
|
|
||
Other
|
427
|
|
|
307
|
|
||
|
$
|
12,057
|
|
|
$
|
10,816
|
|
|
Three Months Ended
March 31, |
||||||
($ in millions)
|
2020
|
|
2019
|
||||
Segment profits:
|
|
|
|
||||
Pharmaceutical segment
|
$
|
7,477
|
|
|
$
|
6,574
|
|
Animal Health segment
|
478
|
|
|
415
|
|
||
Other segment
|
1
|
|
|
2
|
|
||
Total segment profits
|
7,956
|
|
|
6,991
|
|
||
Other profits
|
139
|
|
|
30
|
|
||
Unallocated:
|
|
|
|
||||
Interest income
|
25
|
|
|
89
|
|
||
Interest expense
|
(212
|
)
|
|
(209
|
)
|
||
Depreciation and amortization
|
(381
|
)
|
|
(359
|
)
|
||
Research and development
|
(2,097
|
)
|
|
(1,843
|
)
|
||
Amortization of purchase accounting adjustments
|
(295
|
)
|
|
(397
|
)
|
||
Restructuring costs
|
(72
|
)
|
|
(153
|
)
|
||
Other unallocated, net
|
(1,225
|
)
|
|
(1,082
|
)
|
||
|
$
|
3,838
|
|
|
$
|
3,067
|
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
United States
|
$
|
5,137
|
|
|
$
|
4,555
|
|
|
13
|
%
|
|
13
|
%
|
International
|
6,920
|
|
|
6,261
|
|
|
11
|
%
|
|
13
|
%
|
||
Total
|
$
|
12,057
|
|
|
$
|
10,816
|
|
|
11
|
%
|
|
13
|
%
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
Keytruda
|
$
|
3,284
|
|
|
$
|
2,269
|
|
|
45
|
%
|
|
46
|
%
|
Alliance Revenue - Lynparza (1)
|
145
|
|
|
79
|
|
|
84
|
%
|
|
86
|
%
|
||
Alliance Revenue - Lenvima (1)
|
128
|
|
|
74
|
|
|
72
|
%
|
|
73
|
%
|
||
Emend
|
43
|
|
|
117
|
|
|
(63
|
)%
|
|
(63
|
)%
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
Gardasil/Gardasil 9
|
$
|
1,097
|
|
|
$
|
838
|
|
|
31
|
%
|
|
33
|
%
|
ProQuad
|
157
|
|
|
152
|
|
|
3
|
%
|
|
3
|
%
|
||
M-M-R II
|
100
|
|
|
123
|
|
|
(18
|
)%
|
|
(18
|
)%
|
||
Varivax
|
179
|
|
|
221
|
|
|
(19
|
)%
|
|
(19
|
)%
|
||
Pneumovax 23
|
256
|
|
|
185
|
|
|
39
|
%
|
|
40
|
%
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
Bridion
|
$
|
299
|
|
|
$
|
255
|
|
|
17
|
%
|
|
19
|
%
|
Noxafil
|
94
|
|
|
190
|
|
|
(50
|
)%
|
|
(49
|
)%
|
||
Cubicin
|
46
|
|
|
88
|
|
|
(48
|
)%
|
|
(46
|
)%
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
Simponi
|
$
|
215
|
|
|
$
|
208
|
|
|
3
|
%
|
|
7
|
%
|
Remicade
|
88
|
|
|
123
|
|
|
(28
|
)%
|
|
(27
|
)%
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
Isentress/Isentress HD
|
$
|
245
|
|
|
$
|
255
|
|
|
(4
|
)%
|
|
(2
|
)%
|
Zepatier
|
55
|
|
|
114
|
|
|
(52
|
)%
|
|
(51
|
)%
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
Zetia/Vytorin
|
$
|
198
|
|
|
$
|
238
|
|
|
(17
|
)%
|
|
(15
|
)%
|
Atozet
|
122
|
|
|
94
|
|
|
30
|
%
|
|
34
|
%
|
||
Rosuzet
|
32
|
|
|
14
|
|
|
126
|
%
|
|
133
|
%
|
||
Adempas
|
56
|
|
|
48
|
|
|
18
|
%
|
|
20
|
%
|
||
Alliance Revenue - Adempas (1)
|
53
|
|
|
42
|
|
|
26
|
%
|
|
26
|
%
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
Januvia/Janumet
|
$
|
1,277
|
|
|
$
|
1,354
|
|
|
(6
|
)%
|
|
(4
|
)%
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
Implanon/Nexplanon
|
$
|
195
|
|
|
$
|
199
|
|
|
(2
|
)%
|
|
(1
|
)%
|
NuvaRing
|
63
|
|
|
219
|
|
|
(71
|
)%
|
|
(71
|
)%
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
Biosimilars
|
$
|
68
|
|
|
$
|
43
|
|
|
57
|
%
|
|
59
|
%
|
|
Three Months Ended
March 31, |
|
|
|
% Change
Excluding
Foreign
Exchange
|
||||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|
|||||||
Livestock
|
$
|
739
|
|
|
$
|
611
|
|
|
21
|
%
|
|
24
|
%
|
Companion Animal
|
475
|
|
|
414
|
|
|
15
|
%
|
|
17
|
%
|
|
Three Months Ended
March 31, |
|
|
|||||||
($ in millions)
|
2020
|
|
2019
|
|
% Change
|
|||||
Cost of sales
|
$
|
3,312
|
|
|
$
|
3,052
|
|
|
9
|
%
|
Selling, general and administrative
|
2,555
|
|
|
2,425
|
|
|
5
|
%
|
||
Research and development
|
2,209
|
|
|
1,931
|
|
|
14
|
%
|
||
Restructuring costs
|
72
|
|
|
153
|
|
|
(53
|
)%
|
||
Other (income) expense, net
|
71
|
|
|
188
|
|
|
(62
|
)%
|
Segment Profits
|
|
|
|
||||
|
Three Months Ended
March 31, |
||||||
($ in millions)
|
2020
|
|
2019
|
||||
Pharmaceutical segment profits
|
$
|
7,477
|
|
|
$
|
6,574
|
|
Animal Health segment profits
|
478
|
|
|
415
|
|
||
Other non-reportable segment profits
|
1
|
|
|
2
|
|
||
Other
|
(4,118
|
)
|
|
(3,924
|
)
|
||
Income before taxes
|
$
|
3,838
|
|
|
$
|
3,067
|
|
|
Three Months Ended
March 31, |
||||||
($ in millions except per share amounts)
|
2020
|
|
2019
|
||||
Income before taxes as reported under GAAP
|
$
|
3,838
|
|
|
$
|
3,067
|
|
Increase (decrease) for excluded items:
|
|
|
|
||||
Acquisition and divestiture-related costs
|
600
|
|
|
548
|
|
||
Restructuring costs
|
168
|
|
|
187
|
|
||
Non-GAAP income before taxes
|
4,606
|
|
|
3,802
|
|
||
Taxes on income as reported under GAAP
|
619
|
|
|
205
|
|
||
Estimated tax benefit on excluded items (1)
|
165
|
|
|
129
|
|
||
Net tax benefit from the settlement of certain federal income tax matters
|
—
|
|
|
360
|
|
||
Tax charge related to finalization of treasury regulations for the Tax Cuts and Job Act of 2017
|
—
|
|
|
(67
|
)
|
||
Non-GAAP taxes on income
|
784
|
|
|
627
|
|
||
Non-GAAP net income
|
3,822
|
|
|
3,175
|
|
||
Less: Net loss attributable to noncontrolling interests as reported under GAAP
|
—
|
|
|
(53
|
)
|
||
Acquisition and divestiture-related costs attributable to noncontrolling interests
|
—
|
|
|
53
|
|
||
Non-GAAP net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
||
Non-GAAP net income attributable to Merck & Co., Inc.
|
$
|
3,822
|
|
|
$
|
3,175
|
|
EPS assuming dilution as reported under GAAP
|
$
|
1.26
|
|
|
$
|
1.12
|
|
EPS difference
|
0.24
|
|
|
0.10
|
|
||
Non-GAAP EPS assuming dilution
|
$
|
1.50
|
|
|
$
|
1.22
|
|
(1)
|
The estimated tax impact on the excluded items is determined by applying the statutory rate of the originating territory of the non-GAAP adjustments.
|
Phase 2
|
Phase 3 (Phase 3 entry date)
|
Under Review
|
Cancer
MK-1026
Hematological Malignancies
MK-1308(1)
Melanoma
Non-Small-Cell Lung
MK-1454(1)
Head and Neck
MK-3475 Keytruda
Advanced Solid Tumors
MK-4280(1)
Hematological Malignancies
Non-Small-Cell Lung
MK-5890(1)
Non-Small-Cell Lung
MK-7339 Lynparza(2)(3)
Advanced Solid Tumors
MK-7684(1)
Non-Small-Cell Lung
MK-7902 Lenvima(1)(2)
Advanced Solid Tumors
V937
Melanoma
Cytomegalovirus
V160
HIV-1 Infection
MK-8591 (islatravir)
Overgrowth Syndrome
MK-7075
Respiratory Syncytial Virus
MK-1654
Schizophrenia
MK-8189
|
Cancer
MK-3475 Keytruda
Biliary Tract (September 2019)
Breast (October 2015)
Cervical (October 2018) (EU)
Colorectal (November 2015)
Cutaneous Squamous Cell (August 2019) (EU)
Endometrial (August 2019) (EU)
Esophageal (December 2015) (EU)
Gastric (May 2015) (EU)
Hepatocellular (May 2016) (EU)
Mesothelioma (May 2018)
Nasopharyngeal (April 2016)
Ovarian (December 2018)
Prostate (May 2019)
Small-Cell Lung (May 2017) (EU)
MK-6482
Renal Cell (February 2020)
MK-7339 Lynparza(1)(2)
Non-Small-Cell Lung (June 2019)
MK-7902 Lenvima(1)(2)
Bladder (May 2019)
Endometrial (June 2018) (EU)
Head and Neck (February 2020)
Melanoma (March 2019)
Non-Small-Cell Lung (March 2019)
Cough
MK-7264 (gefapixant) (March 2018)
Heart Failure
MK-1242 (vericiguat) (September 2016)(2)
HIV-1 Infection
MK-8591A (doravirine/islatravir) (February 2020)
Pneumoconjugate Vaccine
V114 (June 2018)
|
New Molecular Entities/Vaccines
Pediatric Neurofibromatosis Type 1
MK-5618 (selumetinib)(2) (EU)
HPV Vaccine
V503 Human Papillomavirus 9-valent Vaccine,
Recombinant (JPN)
Certain Supplemental Filings
Cancer
MK-3475 Keytruda
• First-Line Metastatic Gastric Cancer
(KEYNOTE-062) (JPN)
• Recurrent Locally Advanced or Metastatic Esophageal
Cancer (KEYNOTE-180/KEYNOTE-181) (JPN)
• Recurrent and/or Metastatic Cutaneous Squamous Cell
Carcinoma (KEYNOTE-629) (U.S.)
• Previously Treated Tumor Mutational Burden-High
(KEYNOTE-158) (U.S.)
MK-7339 Lynparza(2)
• First-Line gBRCAm Metastatic Pancreatic Cancer
(POLO) (EU)
• First-Line Maintenance Newly Diagnosed Advanced
Ovarian Cancer (PAOLA) (U.S.) (EU)
• Metastatic Prostate Cancer (PROfound) (U.S.) (EU)
MK-7902 Lenvima(1)(2)
• First-Line Metastatic Hepatocellular Carcinoma
(KEYNOTE-524) (U.S.)
|
Footnotes:
(1) Being developed in combination with Keytruda.
(2) Being developed in a collaboration.
(3) Being developed as monotherapy and in combination with Keytruda.
|
($ in millions)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Cash and investments
|
$
|
7,987
|
|
|
$
|
11,919
|
|
Working capital
|
2,691
|
|
|
5,263
|
|
||
Total debt to total liabilities and equity
|
33.0
|
%
|
|
31.2
|
%
|
|
|
|
|
|
($ in millions)
|
|
Period
|
Total Number
of Shares
Purchased (1)
|
|
Average Price
Paid Per
Share
|
|
Approximate Dollar Value of Shares
That May Yet Be Purchased
Under the Plans or Programs (1)
|
|
January 1 - January 31
|
2,940,290
|
|
|
$89.35
|
|
$6,906
|
February 1 - February 29
|
4,170,086
|
|
|
$83.67
|
|
$6,557
|
March 1 - March 31
|
9,050,466
|
|
|
$74.00
|
|
$5,888
|
Total
|
16,160,842
|
|
|
$79.29
|
|
$5,888
|
(1)
|
Shares purchased during the period were made as part of a plan approved by the Board of Directors in October 2018 to purchase up to $10 billion of Merck’s common stock for its treasury.
|
Number
|
|
Description
|
|
|
|
||
3.1
|
|
—
|
|
|
|
||
3.2
|
|
—
|
|
|
|
|
|
31.1
|
|
—
|
|
|
|
||
31.2
|
|
—
|
|
|
|
||
32.1
|
|
—
|
|
|
|
||
32.2
|
|
—
|
|
|
|
||
101.INS
|
|
—
|
XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
|
|
101.SCH
|
|
—
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
101.CAL
|
|
—
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
101.DEF
|
|
—
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
101.LAB
|
|
—
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
101.PRE
|
|
—
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
104
|
|
—
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
|
|
|
MERCK & CO., INC.
|
|
|
|
Date: May 6, 2020
|
|
/s/ Jennifer Zachary
|
|
|
JENNIFER ZACHARY
|
|
|
Executive Vice President and General Counsel
|
|
|
|
Date: May 6, 2020
|
|
/s/ Rita A. Karachun
|
|
|
RITA A. KARACHUN
|
|
|
Senior Vice President Finance - Global Controller
|
By:
|
/s/ Kenneth C. Frazier
|
|
KENNETH C. FRAZIER
Chairman, President and Chief Executive Officer
|
By:
|
/s/ Robert M. Davis
|
|
ROBERT M. DAVIS
Executive Vice President, Global Services
and Chief Financial Officer
|
|
|
|
Dated: May 6, 2020
|
/s/ Kenneth C. Frazier
|
|
|
Name:
Title:
|
KENNETH C. FRAZIER
Chairman, President and Chief Executive Officer
|
|
|
|
Dated: May 6, 2020
|
/s/ Robert M. Davis
|
|
|
Name:
Title:
|
ROBERT M. DAVIS
Executive Vice President, Global Services
and Chief Financial Officer
|