As filed with the Securities and Exchange Commission on February 25, 2025
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
_________________________________
FORM 10-K
☒
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2024
OR
☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File No. 1-6571
Merck & Co., Inc.
126 East Lincoln Avenue
Rahway
New Jersey
07065
(908) 740-4000
New Jersey
22-1918501
(State or other jurisdiction of incorporation)
(I.R.S. Employer Identification No.)
Securities Registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on which Registered
Common Stock ($0.50 par value)
MRK
New York Stock Exchange
1.875% Notes due 2026
MRK/26
New York Stock Exchange
3.250% Notes due 2032
MRK/32
New York Stock Exchange
2.500% Notes due 2034
MRK/34
New York Stock Exchange
1.375% Notes due 2036
MRK 36A
New York Stock Exchange
3.500% Notes due 2037
MRK/37
New York Stock Exchange
3.700% Notes due 2044
MRK/44
New York Stock Exchange
3.750% Notes due 2054
MRK/54
New York Stock Exchange
Securities Registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously
issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of Common Stock ($0.50 par value) outstanding as of January 31, 2025: 2,526,036,240.
Aggregate market value of Common Stock ($0.50 par value) held by non-affiliates on June 28, 2024 based on the closing price on June 28, 2024, the last business day of the registrant’s most recently
completed second fiscal quarter: approximately $313,799,000,000.
Documents Incorporated by Reference:
Document
Part of Form 10-K
Proxy Statement for the Annual Meeting of Shareholders to be held May 27, 2025, to be filed with the
Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this report
Part III
Table of Contents
Table of Contents
Page
Part I
Item 1.
Business
1
Item 1A.
Risk Factors
26
Cautionary Factors that May Affect Future Results
40
Item 1B.
Unresolved Staff Comments
41
Item 1C.
Cybersecurity
41
Item 2.
Properties
41
Item 3.
Legal Proceedings
42
Item 4.
Mine Safety Disclosures
42
Executive Officers of the Registrant
43
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
44
Item 6.
[Reserved]
45
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
46
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
74
Item 8.
Financial Statements and Supplementary Data
75
(a) Financial Statements
75
Notes to Consolidated Financial Statements
79
Report of Independent Registered Public Accounting Firm
131
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
133
Item 9A.
Controls and Procedures
133
Management’s Report
133
Item 9B.
Other Information
134
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
134
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
135
Item 11.
Executive Compensation
135
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
136
Item 13.
Certain Relationships and Related Transactions, and Director Independence
136
Item 14.
Principal Accountant Fees and Services
136
Part IV
Item 15.
Exhibits and Financial Statement Schedules
137
Item 16.
Form 10-K Summary
141
Signatures
142
Table of Contents
PART I
Item 1.
Business.
Merck & Co., Inc. (Merck or the Company) is a global health care company that delivers innovative health solutions through its prescription medicines,
including biologic therapies, vaccines and animal health products. The Company’s operations are principally managed on a product basis and include two operating
segments, Pharmaceutical and Animal Health, both of which are reportable segments.
The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic
and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily
to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit
managers and other institutions. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines. The Company sells these human
health vaccines primarily to physicians, wholesalers, distributors and government entities.
The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceutical and vaccine products, as well as
health management solutions and services, for the prevention, treatment and control of disease in all major livestock and companion animal species. The Company
also offers an extensive suite of digitally connected identification, traceability and monitoring products. The Company sells its products to veterinarians, distributors,
animal producers, farmers and pet owners.
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.
Product Sales
Total Company sales, including sales of the Company’s top pharmaceutical products, as well as sales of animal health products, were as follows:
($ in millions)
2024
2023
2022
Total Sales
$
64,168
$
60,115
$
59,283
Pharmaceutical
57,400
53,583
52,005
Keytruda
29,482
25,011
20,937
Gardasil/Gardasil 9
8,583
8,886
6,897
ProQuad/M-M-R II/Varivax
2,485
2,368
2,241
Januvia/Janumet
2,268
3,366
4,513
Bridion
1,764
1,842
1,685
Alliance revenue - Lynparza
1,311
1,199
1,116
Alliance revenue - Lenvima
1,010
960
876
Lagevrio
964
1,428
5,684
Vaxneuvance
808
665
170
Prevymis
785
605
428
RotaTeq
711
769
783
Animal Health
5,877
5,625
5,550
Livestock
3,462
3,337
3,300
Companion Animal
2,415
2,288
2,250
Other Revenues
891
907
1,728
Alliance revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.
Other revenues are primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as revenue from third-party manufacturing arrangements.
Pharmaceutical
The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic
and preventive agents, generally sold by prescription, for the treatment of human disorders. Human health vaccine products consist of preventive pediatric, adolescent
and adult vaccines. Certain of the products within the Company’s franchises are as follows:
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(1)
(2)
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Oncology
Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved as monotherapy for the treatment of certain patients with cervical
cancer, classical Hodgkin lymphoma (cHL), cutaneous squamous cell carcinoma, esophageal or gastroesophageal junction (GEJ) carcinoma, head and neck
squamous cell carcinoma (HNSCC), hepatocellular carcinoma (HCC), melanoma, Merkel cell carcinoma, microsatellite instability-high (MSI-H) or mismatch repair
deficient (dMMR) solid tumors (including MSI-H/dMMR colorectal cancer and endometrial carcinoma), non-small-cell lung cancer (NSCLC), primary mediastinal large
B-cell lymphoma (PMBCL), tumor mutational burden-high (TMB-H) solid tumors, and urothelial cancer including non-muscle invasive bladder cancer. Keytruda is also
approved as monotherapy for the adjuvant treatment of certain patients with melanoma, and for certain patients with renal cell carcinoma (RCC) post-surgery.
Keytruda is approved for adjuvant treatment following resection and platinum-based chemotherapy for certain patients with NSCLC. Additionally, Keytruda is approved
for patients with certain types of resectable NSCLC in combination with chemotherapy as neoadjuvant treatment, and then continued as a single agent as adjuvant
treatment after surgery. Keytruda is also approved for certain patients with high-risk early stage triple-negative breast cancer (TNBC) in combination with
chemotherapy as neoadjuvant treatment, and then continued as a single agent as adjuvant treatment after surgery. In addition, Keytruda is approved in combination
with chemotherapy for the treatment of certain patients with advanced NSCLC, advanced malignant pleural mesothelioma, HNSCC, advanced biliary tract cancer,
advanced esophageal cancer, advanced TNBC, and advanced or recurrent endometrial carcinoma; in combination with chemotherapy with or without bevacizumab,
and in combination with chemoradiotherapy, for the treatment of certain patients with advanced cervical cancer; in combination with trastuzumab and chemotherapy
for the treatment of certain patients with advanced human epidermal growth factor receptor 2 (HER2)-positive gastric or GEJ adenocarcinoma with programmed
death-ligand 1 (PD-L1) (CPS ≥1), and in combination with chemotherapy for the treatment of certain patients with advanced HER2-negative gastric or GEJ
adenocarcinoma; in combination with axitinib for the treatment of certain patients with advanced RCC; in combination with Lenvima (lenvatinib) for the treatment of
certain patients with advanced RCC or advanced endometrial carcinoma; and in combination with enfortumab vedotin for certain patients with locally advanced or
metastatic urothelial cancer. Welireg (belzutifan) is a medication for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors not
requiring immediate surgery, and for the treatment of adult patients with advanced RCC following a PD-1 or PD-L1 inhibitor and a vascular endothelial growth factor
tyrosine kinase inhibitor. In addition, the Company recognizes alliance revenue related to sales of Lynparza (olaparib), an oral poly (ADP-ribose) polymerase (PARP)
inhibitor, for certain types of advanced or recurrent ovarian, early or metastatic breast, metastatic pancreatic, and metastatic castration-resistant prostate cancers;
alliance revenue related to sales of Lenvima, an oral receptor tyrosine kinase inhibitor, for 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; and alliance
revenue related to Reblozyl (luspatercept-aamt) for the treatment of certain types of anemia.
Vaccines
Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant)/Gardasil 9 (Human Papillomavirus 9-valent Vaccine,
Recombinant), vaccines to help prevent certain cancers and diseases caused by certain types of human papillomavirus (HPV); ProQuad (Measles, Mumps, Rubella
and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella; M−M−R II (Measles, Mumps and
Rubella Virus Vaccine Live), a vaccine to help prevent measles, mumps and rubella; Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox
(varicella); Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help prevent invasive pneumococcal disease in individuals 6 weeks of age and
older; RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children; and Pneumovax 23
(pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease.
Hospital Acute Care
Bridion (sugammadex), a medication for the reversal of two types of neuromuscular blocking agents used during surgery; Prevymis (letermovir) for the
prophylaxis of cytomegalovirus (CMV) infection and disease, or of CMV disease, in certain high risk adult and pediatric recipients of an allogeneic hematopoietic stem
cell transplant or of a kidney transplant, respectively; Dificid (fidaxomicin) for the treatment of C. difficile-associated diarrhea; Zerbaxa (ceftolozane and tazobactam)
for injection, a combination antibacterial and beta-lactamase inhibitor for the treatment of certain bacterial infections; and Noxafil (posaconazole), an antifungal agent
for the prevention of certain invasive fungal infections.
Cardiovascular
Winrevair (sotatercept-csrk), an activin signaling inhibitor indicated for the treatment of adults with pulmonary arterial hypertension (PAH) (World Health
Organization [WHO] Group 1) to increase exercise capacity,
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improve WHO functional class and reduce the risk of clinical worsening events; Adempas (riociguat), a cardiovascular drug for the treatment of chronic
thromboembolic pulmonary hypertension or pulmonary arterial hypertension in certain patients; and Verquvo (vericiguat), a medicine to reduce the risk of
cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous diuretics in certain adults with
symptomatic chronic heart failure and reduced ejection fraction.
Virology
Lagevrio (molnupiravir), an investigational oral antiviral COVID-19 medicine available in the U.S. under Emergency Use Authorization (EUA);
Isentress/Isentress HD (raltegravir), an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection; Delstrigo
(doravirine/lamivudine/tenofovir disoproxil fumarate), a complete regimen for the treatment of HIV-1 infection in adult patients with no prior antiretroviral treatment
history or to replace the current antiretroviral regime in certain patients who are virologically suppressed on a stable antiretroviral regimen; and Pifeltro (doravirine), a
non-nucleoside reverse transcriptase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection in adult patients with no prior
antiretroviral treatment history or to replace the current antiretroviral regime in certain patients who are virologically suppressed on a stable antiretroviral regimen.
Neuroscience
Belsomra (suvorexant), an orexin receptor antagonist, indicated for the treatment of insomnia, characterized by difficulties with sleep onset and/or sleep
maintenance.
Diabetes
Januvia (sitagliptin) and Janumet (sitagliptin/metformin HCl) for the treatment of type 2 diabetes.
Animal Health
The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceuticals, vaccines and health management
solutions and services, as well as an extensive suite of digitally connected identification, traceability and monitoring products. Principal products in this segment
include:
Livestock Products
Nuflor (Florfenicol) antibiotic range for use in cattle and swine; Bovilis/Vista vaccine lines for infectious diseases in cattle, including Bovilis Cryptium for
protection against Cryptosporidium parvum; Banamine (Flunixin meglumine) bovine and swine anti-inflammatory; Estrumate (cloprostenol sodium) for the treatment of
fertility disorders in cattle; Matrix (altrenogest) fertility management for swine; Resflor (florfenicol and flunixin meglumine), a combination broad-spectrum antibiotic and
non-steroidal anti-inflammatory drug for bovine respiratory disease; Zuprevo (tildipirosin) for bovine respiratory disease; Revalor (trenbolone acetate and estradiol) to
improve production efficiencies in beef cattle; Safe-Guard (fenbendazole) de-wormer for cattle; M+Pac (Mycoplasma Hyopneumoniae Bacterin) swine pneumonia
vaccine; Porcilis (Lawsonia intracellularis baterin) and Circumvent (Porcine Circovirus Vaccine, Type 2, Killed Baculovirus Vector) vaccine lines for infectious diseases
in swine; Nobilis/Innovax (Live Marek’s Disease Vector), vaccine lines for poultry; Paracox and Coccivac coccidiosis vaccines; Exzolt, a systemic treatment for poultry
red mite infestations; Slice (emamectin benzoate) parasiticide and Imvixa (lufenuron) for sea lice control in salmon; Clynav vaccine for protection against pancreas
disease in salmon; Aquavac (Avirulent Live Culture)/Norvax vaccines against bacterial and viral disease in fish; Aquaflor (florfenicol) antibiotic for farm-raised fish;
Flexolt (fluralaner) against lice in sheep; and Allflex Livestock Intelligence solutions for animal identification, monitoring and traceability.
Companion Animal Products
Bravecto, a line of oral, topical and injectable parasitic control products, including the original Bravecto (fluralaner) products for dogs and cats that last up to
12 weeks; Bravecto (fluralaner) One-Month, a monthly product for dogs, Bravecto (fluralaner) Injectable/Quantum, an injectable product for dogs that lasts up to one-
year, and Bravecto Plus (fluralaner/moxidectin), a two-month product for cats; Sentinel, a line of oral parasitic products for dogs including Sentinel Spectrum
(milbemycin oxime, lufenuron, and praziquantel) and Sentinel Flavor Tabs (milbemycin oxime, lufenuron); Optimmune (cyclosporine), an ophthalmic ointment; Nobivac
vaccine lines for flexible dog and cat vaccination, including Nobivac NXT for canine flu and feline leukemia virus; GilvetMab, an immune checkpoint inhibitor
monoclonal antibody conditionally licensed for melanoma and mastocytoma tumors; Otomax (gentamicin sulfate, USP; Betamethasone valerate USP; and
Clotrimazole USP ointment)/Mometamax (gentamicin sulfate, USP, Mometasone Furoate Monohydrate and Clotrimazole, USP, Otic Suspension)/Mometamax Ultra
(gentamicin sulfate, mometasone furoate monohydrate and posaconazole suspension)/Posatex (orbifloxacin, mometasone furoate monohydrate and posaconazole,
suspension) ear ointments for acute and chronic otitis; Caninsulin/Vetsulin (porcine insulin zinc suspension) diabetes mellitus treatment for dogs and cats; Panacur
(fenbendazole)/Safeguard (fenbendazole) broad-spectrum anthelmintic (de-wormer) for use in many animals; Regumate (altrenogest) fertility management for horses;
Prestige vaccine line for horses; Scalibor (Deltamethrin)/Exspot for protecting against bites
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from fleas, ticks, mosquitoes and sandflies; and Sure Petcare products for companion animal identification and well-being, including the microchip and pet recovery
system Home Again.
For a further discussion of sales of the Company’s products, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” below.
Product Approvals
Set forth below is a summary of significant product approvals received by the Company in 2024 and, to date, in 2025.
Product
Date
Approval
Keytruda
January 2024
U.S. Food and Drug Administration (FDA) approval in combination with chemoradiotherapy for the treatment
of patients with FIGO (International Federation of Gynecology and Obstetrics) 2014 Stage III-IVA cervical
cancer, based on the KEYNOTE-A18 trial.
January 2024
FDA full approval for the treatment of patients with HCC secondary to hepatitis B who have received prior
systemic therapy other than a PD-1/PD-L1 containing regimen. The conversion from an accelerated to full
(regular) approval is based on the KEYNOTE-394 trial.
February 2024
China’s National Medical Products Administration (NMPA) approval in combination with gemcitabine and
cisplatin for the first-line treatment of patients with locally advanced or metastatic biliary tract carcinoma,
based on the KEYNOTE-966 trial.
March 2024
European Commission (EC) approval in combination with platinum-containing chemotherapy as neoadjuvant
treatment, and then continued as monotherapy as adjuvant treatment, for resectable NSCLC at high risk of
recurrence in adults, based on the KEYNOTE-671 trial.
May 2024
Japan’s Ministry of Health, Labor and Welfare (MHLW) approval in combination with fluoropyrimidine and
platinum-containing chemotherapy for the first-line treatment of patients with locally advanced unresectable
or metastatic gastric or GEJ adenocarcinoma, based on the KEYNOTE-859 trial.
May 2024
Japan’s MHLW approval in combination with standard of care chemotherapy (gemcitabine and cisplatin) for
the treatment of patients with locally advanced unresectable or metastatic biliary tract cancer, based on the
KEYNOTE-966 trial.
June 2024
FDA approval in combination with carboplatin and paclitaxel, followed by Keytruda as a single agent, for the
treatment of adult patients with primary advanced or recurrent endometrial carcinoma, based on the
KEYNOTE-868 trial.
June 2024
China’s NMPA approval in combination with trastuzumab, fluoropyrimidine and platinum-containing
chemotherapy for the first-line treatment of patients with locally advanced unresectable or metastatic HER2
positive gastric or GEJ adenocarcinoma whose tumors express PD-L1 as determined by a fully validated
test, based on the KEYNOTE-811 trial.
September 2024
EC approval in combination with Padcev (enfortumab vedotin-ejfv), an antibody-drug conjugate, for the first-
line treatment of unresectable or metastatic urothelial carcinoma in adults, based on the KEYNOTE-A39 trial
that was conducted in collaboration with Seagen (now Pfizer Inc.) and Astellas.
September 2024
FDA approval in combination with pemetrexed and platinum chemotherapy for the first-line treatment of adult
patients with unresectable advanced or metastatic malignant pleural mesothelioma, based on the
IND.227/KEYNOTE-483 trial.
September 2024
Japan’s MHLW approval in combination with chemotherapy as a neoadjuvant treatment, then continued as
monotherapy as an adjuvant treatment for patients with NSCLC, based on the KEYNOTE-671 trial.
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Keytruda
September 2024
Japan’s MHLW approval in combination with Padcev for the first-line treatment of patients with radically
unresectable urothelial carcinoma, based on the KEYNOTE-A39 trial.
September 2024
Japan’s MHLW approval as monotherapy in patients with radically unresectable urothelial carcinoma who are
not eligible for any platinum-containing chemotherapy, based on the KEYNOTE-052 trial.
September 2024
China’s NMPA approval for the first-line treatment of adult patients with unresectable or metastatic
melanoma, and conversion from conditional to full approval for the second-line treatment of adult patients
with unresectable or metastatic melanoma following failure of one prior line of therapy, based on the LEAP-
003 trial.
October 2024
EC approval in combination with chemoradiotherapy for the treatment of FIGO 2014 Stage III-IVA locally
advanced cervical cancer in adults who have not received prior definitive therapy, based on the KEYNOTE-
A18 trial.
October 2024
EC approval in combination with carboplatin and paclitaxel followed by Keytruda as a single agent for the
first-line treatment of primary advanced or recurrent endometrial carcinoma in adults who are candidates for
systemic therapy, based on the KEYNOTE-868 trial.
November 2024
Japan’s MHLW approval in combination with chemoradiotherapy as treatment for patients with locally
advanced cervical cancer, based on the KEYNOTE-A18 trial.
December 2024
Japan’s MHLW approval in combination with carboplatin and paclitaxel as treatment for adult patients with
advanced or recurrent endometrial carcinoma, based on the KEYNOTE-868 trial.
December 2024
China’s NMPA approval in combination with platinum-containing chemotherapy as neoadjuvant treatment
and then continued as monotherapy as adjuvant treatment after surgery for patients with resectable stage II,
IIIA, or IIIB NSCLC, based on the KEYNOTE-671 trial.
December 2024
China’s NMPA approval in combination with chemoradiotherapy for the treatment of patients with FIGO 2014
Stage III-IVA cervical cancer, based on the KEYNOTE-A18 trial.
January 2025
China’s NMPA approval in combination with Padcev for adult patients with locally advanced or metastatic
urothelial cancer, based on the KEYNOTE-A39 trial.
Bravecto
January 2024
EC approval of injectable formulation for dogs for the persistent killing of fleas and ticks for 12 months after
treatment.
Capvaxive
June 2024
FDA approval for the prevention of invasive pneumococcal disease and pneumococcal pneumonia caused
by certain serotypes in individuals 18 years of age and older.
Gardasil
January 2025
China’s NMPA approval for use in males 9-26 years of age to help prevent certain HPV-related cancers and
diseases.
Lynparza
January 2025
China’s NMPA approval for the adjuvant treatment of adult patients with deleterious or suspected deleterious
germline BRCA-mutated, HER2-negative high-risk early breast cancer who have been previously treated
with neoadjuvant or adjuvant chemotherapy, based on the OlympiA trial.
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Welireg
November 2024
China’s NMPA approval for the treatment of adult patients with VHL disease who require therapy for
associated RCC, central nervous system hemangioblastomas or pancreatic neuroendocrine tumors.
February 2025
EC conditional approval as monotherapy both for the treatment of adult patients with VHL disease who
require therapy for associated, localized RCC, central nervous system hemangioblastomas, or pancreatic
neuroendocrine tumors, and for whom localized procedures are unsuitable, and for the treatment of adult
patients with advanced clear cell RCC that progressed following two or more lines of therapy that included a
PD-1 or PD-L1 inhibitor and at least two VEGF targeted therapies. The EC approval of these two indications
is based on results from the LITESPARK-004 and LITESPARK-005 trials.
Winrevair
March 2024
FDA approval for the treatment of adults with PAH (WHO Group 1) to increase exercise capacity, improve
WHO functional class (FC), and reduce the risk of clinical worsening events.
August 2024
EC approval in combination with other PAH therapies, for the treatment of PAH in adult patients with WHO
FC II to III, to improve exercise capacity.
Being jointly developed and commercialized in a worldwide collaboration with AstraZeneca.
Competition and the Health Care Environment
Competition
The markets in which the Company conducts its business and the pharmaceutical industry in general are highly competitive and highly regulated. The
Company’s competitors include other worldwide research-based pharmaceutical companies, smaller research companies with more limited therapeutic focus, generic
drug manufacturers, and animal health care companies. The Company’s operations may be adversely affected by generic and biosimilar competition as the
Company’s products mature, as well as technological advances of competitors, industry consolidation, patents granted to competitors, competitive combination
products, new products of competitors, the generic availability of competitors’ branded products, and new information from clinical trials of marketed products or post-
marketing surveillance. In addition, patent rights are increasingly being challenged by competitors, and the outcome can be highly uncertain. An adverse result in a
patent dispute can preclude commercialization of products or negatively affect sales of existing products and could result in the payment of royalties or in the
recognition of an impairment charge with respect to intangible assets associated with certain products.
Pharmaceutical competition involves a rigorous search for technological innovations and the ability to market these innovations effectively. With its long-
standing emphasis on research and development, the Company is well-positioned to compete in the search for technological innovations. The Company is active in
acquiring and marketing products through external alliances, such as licensing arrangements and collaborations, and has been refining its sales and marketing efforts
to address changing industry conditions. However, the introduction of new products and processes by competitors may result in price reductions and product
displacements, even for products protected by patents. For example, the number of compounds available to treat a particular disease typically increases over time and
can result in slowed sales growth or reduced sales of the Company’s products in that therapeutic category.
The highly competitive animal health business is affected by several factors including regulatory and legislative issues, scientific and technological
advances, product innovation, the quality and price of the Company’s products as well as competitors’ products, effective promotional efforts and the frequent
introduction of generic products by competitors.
Health Care Environment and Government Regulation
Global efforts toward health care cost containment continue to exert pressure on product pricing and market access. Changes to the U.S. health care
system as part of health care reform, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector
beneficiaries, have contributed to pricing pressure. In several international markets, government-mandated pricing actions have reduced prices of generic and
patented drugs. In addition, the Company’s sales performance in 2024 was negatively affected by other cost-reduction measures taken by governments and other
third parties to lower health care costs. In the U.S., the Executive Branch and Congress continue to discuss legislation designed to control health care costs, including
the cost of drugs. The Company anticipates all of these actions and additional actions in the future will continue to negatively affect sales and profits.
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In addressing global cost containment pressures, the Company engages in public policy advocacy with policymakers and continues to work to demonstrate
that its medicines provide value to patients and to those who pay for health care. The Company advocates with government policymakers to encourage a long-term
approach to sustainable health care financing that ensures access to innovative medicines and does not disproportionately target pharmaceuticals as a source of
budget savings. In markets with historically low rates of health care spending, the Company encourages those governments to increase their investments and adopt
market reforms in order to improve their citizens’ access to appropriate health care, including medicines.
Operating conditions have become more challenging under the global pressures of competition, industry regulation and cost containment efforts. Although
no one can predict the effect of these and other factors on the Company’s business, the Company continually takes measures to evaluate, adapt and improve the
organization and its business practices to better meet customer needs and believes that it is well-positioned to respond to the evolving health care environment and
market forces.
United States
The Company faces increasing pricing pressure from managed care organizations, government agencies and programs that could negatively affect the
Company’s sales and profit margins, including, through (i) practices of managed care organizations, federal and state exchanges, and institutional and governmental
purchasers, and (ii) federal laws and regulations related to Medicare and Medicaid, including the Medicare Prescription Drug, Improvement, and Modernization Act of
2003, the Patient Protection and Affordable Care Act of 2010 (ACA), the American Rescue Plan Act of 2021 (American Rescue Plan Act), and the Inflation Reduction
Act of 2022 (IRA). 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.
In the U.S., federal and state governments for many years have pursued methods to reduce the cost of drugs and vaccines for which they pay. For
example, federal and state laws require the Company to pay specified rebates for medicines reimbursed by Medicaid and to provide discounts for medicines
purchased by certain state and federal entities such as the Department of Defense, Veterans Affairs, Public Health Service entities and hospitals serving a
disproportionate share of low income or uninsured patients.
Additionally in the U.S., consolidation and integration among health care entities is a major factor in the competitive marketplace for pharmaceutical
products. Health plans and pharmacy benefit managers have been consolidating into fewer, larger entities, thus enhancing their purchasing strength and importance.
Private third-party insurers, as well as governments, employ formularies to control costs by negotiating discounted prices in exchange for formulary inclusion. Failure
to obtain timely or adequate pricing or formulary placement for Merck’s products or obtaining such placement at unfavorable pricing could adversely affect revenue. In
addition to formulary tier co-pay differentials, private health insurance companies and self-insured employers have been increasing the cost-sharing required from
beneficiaries, particularly for branded pharmaceuticals and biotechnology products. Private health insurance companies, as well as governments, also are increasingly
imposing utilization management tools, such as clinical protocols, requiring prior authorization for a branded product or requiring the patient to first fail on one or more
generic products before permitting access to a branded medicine. These same management tools are also used in treatment areas in which the payor has taken the
position that multiple branded products are therapeutically comparable. As the U.S. payor market concentrates further, the Company may face greater pricing pressure
from private third-party payors.
Legislative Changes
In 2022, Congress passed the 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, which has taken effect in 2025, and government price setting for certain Medicare Part D drugs, starting in 2026, and
Medicare Part B drugs starting in 2028. Government price setting may also impact pricing in the private market negatively affecting the Company’s performance. In
August 2023, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), selected Januvia for the first
year of the IRA’s “Drug Price Negotiation Program” (Program). Pursuant to the IRA’s Program, a government price was set for Januvia, which will become effective on
January 1, 2026. In January 2025, HHS announced that Janumet and Janumet XR have been selected for government price setting, which will become effective on
January 1, 2027. In addition, the Company expects that Keytruda will be selected in 2026 for government price setting, which would become effective on January 1,
2028 and the Company expects that, as a result, U.S. sales of Keytruda will decline after that time. The Company has sued the U.S. government regarding the IRA’s
Program (see Item 8 “Financial Statements and Supplementary Data,” Note 10. “Contingencies and Environmental Liabilities” below). Furthermore,
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the Executive Branch and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs.
The long-term implications of the IRA remain uncertain and subject to various factors, including the manner in which HHS decides to implement the statute.
Many experts and analysts, both within the industry and outside, have predicted that the law will harm innovation in the pharmaceutical industry and result in fewer
new treatments being developed and approved over time. Merck is working to mitigate the potentially harmful effects that the law could have, which could include a
detrimental impact on innovation.
In addition, in 2021, 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. These rebates act as a discount off the list price and eliminating the cap means that manufacturer
discounts paid to Medicaid can increase. Prior to this change, manufacturers have not been required to pay more than 100% of the Average Manufacturer Price (AMP)
in rebates to state Medicaid programs for Medicaid-covered drugs. As a result of this provision, manufacturers may have to pay state Medicaid programs more in
rebates than they received on sales of particular products. This change presents a risk to Merck for drugs that have high Medicaid utilization and rebate exposure that
is more than 100% of the AMP.
The Company also faces increasing pricing pressure in the states, which are looking to exert greater influence over the price of prescription drugs. A
number of states have passed pharmaceutical price and cost transparency laws. These laws typically require manufacturers to report certain product price information
or other financial data to the state. Some laws also require manufacturers to provide advance notification of price increases. The Company expects that states will
continue their focus on pharmaceutical pricing and will increasingly shift to more aggressive price control tools such as Prescription Drug Affordability Boards that have
the authority to conduct affordability reviews and establish upper payment limits and that Company products may be selected for such reviews. In addition, in 2024,
the FDA authorized, for a two-year period, Florida’s application to import prescription drugs from Canada.
Regulatory Changes
The pharmaceutical industry also could be considered a potential source of savings via other legislative and administrative proposals that have been
debated but not enacted. These types of revenue generating or cost saving proposals include additional direct price controls.
European Union
Efforts toward health care cost containment remain intense in the European Union (EU). The Company faces competitive pricing pressure resulting from
generic and biosimilar drugs. In addition, a majority of countries in the EU attempt to contain drug costs by engaging in reference pricing in which authorities examine
pre-determined markets for published prices of drugs. Reference pricing may either compare a product’s prices in other markets (external reference pricing), or
compare a product’s price with those of other products in a national class (internal reference pricing). The authorities then use the price data to set new local prices for
brand-name drugs, including the Company’s drugs. Reference pricing mechanisms are usually set at the national level and can be changed pursuant to local
regulations or guidance.
Some EU Member States have established free-pricing systems, but regulate the pricing for drugs through profit control plans. Others seek to negotiate or
set prices based on the cost-effectiveness of a product or an assessment of whether it offers a therapeutic benefit over other products in the relevant class.
The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are
being erected to the entry of new products. In some EU Member States, cross-border imports from low-priced markets also exert competitive pressure that may
reduce pricing within an EU Member State.
Additionally, EU Member States have the power to restrict the range of pharmaceutical products for which their national health insurance systems provide
reimbursement. In the EU, pricing and reimbursement plans vary widely from Member State to Member State. Some EU Member States provide that drug products
may be marketed only after a reimbursement price has been agreed. Some EU Member States may require the completion of additional studies that compare the
cost-effectiveness of a particular product candidate to already available therapies or a so-called health technology assessment (HTA), in order to obtain
reimbursement or pricing approval. The HTA of pharmaceutical products is becoming an increasingly common part of the pricing and reimbursement procedures in
most EU Member States. The HTA process, which is currently governed by the national laws of these countries, involves the assessment of the cost-effectiveness,
public health impact, therapeutic impact and/or the economic and social impact of use of a given pharmaceutical product in the national health care system of the
individual country in
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which it is conducted. Ultimately, an HTA measures the added value of a new health technology compared to existing ones.
The EU Health Technology Assessment Regulation 2021/2282 (HTAR) applies in 2025. This provides for the conduct of an EU level comparative Joint
Clinical Assessment (JCA) of a new product versus relevant comparators identified by the EU Member States. JCAs will be carried out in parallel with the review of a
marketing authorization application, so that a JCA report is available shortly after the product is authorized. The HTAR applies to all new active substance oncology
products and advanced therapy medicinal products, including cell and gene therapies, beginning January 1, 2025; to new active substance orphan medicinal products
beginning January 1, 2028; and to all products approved via the centralized procedure beginning in 2030.
EU Member States remain responsible for pricing and reimbursement decisions but must take “due consideration” of JCA reports when making national
market access decisions. This means that EU Member State pricing and reimbursement processes are likely to evolve and more EU Member States may use HTAs as
part of their decision-making.
The outcome of HTAs regarding specific pharmaceutical products will increasingly influence the pricing and reimbursement status granted to these
pharmaceutical products by the market access authorities of individual EU Member States. A negative HTA of one of the Company’s products may mean that the
product is not reimbursable or may force the Company to reduce its reimbursement price or offer discounts or rebates.
A negative HTA by a leading and recognized HTA body could also undermine the Company’s ability to obtain reimbursement for the relevant product
outside a jurisdiction. For example, EU Member States that have not yet developed HTA mechanisms may rely to some extent on JCAs under the HTAR or an HTA
performed in other countries with a developed HTA framework, to inform their pricing and reimbursement decisions. HTA procedures require additional data, reviews
and administrative processes, all of which increase the complexity, timing and costs of obtaining product reimbursement and exert downward pressure on available
reimbursement.
To obtain reimbursement or pricing approval in some EU Member States, the Company may be required to conduct studies that compare the cost-
effectiveness of the Company’s product candidates to other therapies that are considered the local standard of care. There can be no assurance that any EU Member
State will allow favorable pricing, reimbursement and market access conditions for any of the Company’s products, or that it will be feasible to conduct additional cost-
effectiveness studies, if required.
Japan
In Japan, the pharmaceutical industry is subject to government-mandated annual price reductions of pharmaceutical products and certain vaccines.
Furthermore, the government can order re-pricings for specific products if it determines that use of such product will exceed certain thresholds defined under
applicable re-pricing rules. In addition, if a Merck product has the same medical action or composition of another product that is subject to market expansion re-pricing,
the Merck product could also be subject to re-pricing unless it meets exception criteria. The next government-mandated price reduction is scheduled to occur in April
2025.
China
The Company’s business in China has grown in the past few years, and the importance of China to the Company’s overall pharmaceutical and vaccines
business has increased accordingly. Continued growth of the Company’s business in China is dependent upon ongoing development of a favorable environment for
innovative pharmaceutical products and vaccines, sustained access for the Company’s currently marketed products, and the absence of trade impediments or adverse
pricing controls. In recent years, the Chinese government has introduced and implemented a number of structural reforms to accelerate the shift to innovative products
and reduce costs. There have been multiple new policies introduced by the government to improve access to new innovation, reduce the complexity of regulatory
filings, and accelerate the review and approval process. This has led to a significant increase in the number of new products being approved each year. While the
mechanism for drugs being added to the government’s National Reimbursement Drug List (NRDL) evolves, inclusion may require a price negotiation which could
impact the outlook in the market for selected brands. A new NRDL was recently completed in which new entries averaged 63% price reductions. While pricing pressure
has always existed in China, health care reform has increased this pressure in part due to the acceleration of generic substitution through volume-based procurement
(VBP). In 2019, the government implemented the VBP program through a tendering process for mature products which have generic substitutes with a Generic Quality
Consistency Evaluation approval. Mature products that have entered into the last five rounds of VBP had, on average, a price reduction of more than 50%. The
Company expects VBP to be a semi-annual process that will have a significant impact on mature products moving forward.
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Emerging Markets
The Company’s focus on emerging markets, in addition to China, has continued. Governments in many emerging markets are also focused on constraining
health care costs and have enacted price controls and measures impacting intellectual property, including in exceptional cases, threats of compulsory licenses, that
aim to put pressure on the price of innovative pharmaceuticals or result in constrained market access to innovative medicine. The Company anticipates that pricing
pressures and market access challenges will continue in the future to varying degrees in the emerging markets.
Beyond pricing and market access challenges, other conditions in emerging market countries can affect the Company’s efforts to continue to grow in these
markets, including potential political instability, changes in trade sanctions and embargoes, significant currency fluctuation and controls, financial crises, limited or
changing availability of funding for health care, credit worthiness of health care partners, such as hospitals, and other developments that may adversely impact the
business environment for the Company. Further, the Company may engage third-party agents to assist in operating in emerging market countries, which may affect its
ability to realize continued growth and may also increase the Company’s risk exposure.
Regulation
The pharmaceutical industry is also subject to regulation by regional, country, state and local agencies around the world focused on standards and
processes for determining drug safety and effectiveness, as well as conditions for sale or reimbursement.
Of particular importance is the FDA in the U.S., which administers requirements covering the testing, approval, safety, effectiveness, manufacturing,
labeling, and marketing of prescription pharmaceuticals. In some cases, the FDA requirements and practices have increased the amount of time and resources
necessary to develop new products and bring them to market in the U.S. At the same time, the FDA has committed to expediting the development and review of
products bearing the “breakthrough therapy” designation, which has accelerated the regulatory review process for medicines with this designation. The FDA has also
undertaken efforts to bring generic competition to market more efficiently and in a more timely manner.
The EU has adopted directives and other legislation concerning the classification, approval for marketing, labeling, advertising, manufacturing, wholesale
distribution, integrity of the supply chain, pharmacovigilance and safety monitoring of medicinal products for human use. These provide mandatory standards
throughout the EU, which may be supplemented or implemented with additional regulations by the EU Member States. In particular, EU regulators may approve
products subject to a number of post-authorization conditions. Examples of typical post-authorization commitments include additional pharmacovigilance, the conduct
of clinical trials, the establishment of patient registries, physician or patient education and controlled distribution and prescribing arrangements. Non-compliance with
post-authorization conditions, pharmacovigilance and other obligations can lead to regulatory action, including the variation, suspension or withdrawal of the marketing
authorizations, or other enforcement or regulatory actions, including the imposition of financial penalties. The Company’s policies and procedures are already
consistent with the substance of these directives; consequently, it is believed that they will not have any material effect on the Company’s business.
The Company believes that it will continue to be able to conduct its operations, including launching new drugs, in this regulatory environment. (See
“Research and Development” below for a discussion of the regulatory approval process.)
Access to Medicines
As a global health care company, Merck’s primary role is to discover and develop innovative medicines and vaccines. The Company also recognizes that,
in collaboration with key stakeholders, it has a role to play in helping to ensure that its science advances health care, and its products are accessible and affordable
globally. The Company is committed to ensuring a high-quality, safe, reliable, supply of its medicines and vaccines, and to implementing innovative solutions that
address barriers to sustainable access to its products.
Merck’s approach is designed to enable it to serve the greatest number of patients today, while meeting the needs of patients in the future. The Company's
wide-ranging efforts to expand access to health encompass a set of principles embedded in its business strategies and operations. These principles guide its global
approach to addressing significant public health burdens and unmet medical needs. The Company systematically evaluates its pipeline candidates to assess their
potential in low and middle-income countries and underserved health care settings. Throughout the life cycle of its products, Merck seeks to evaluate their potential
and adapt to changes in the external environment. Collaborating with various stakeholders, including private, governmental, multilateral, and non-profit organizations,
the Company seeks to design and deliver sustainable access solutions at the payer, provider,
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and patient levels. Furthermore, the Company incorporates access to health metrics in its scorecard, making it a component of calculating annual incentive pay for the
majority of its global employees.
In addition, through social investments, including philanthropic programs and impact investing, Merck is helping to strengthen health systems and build
capacity, particularly in communities underserved by health care. The Merck Patient Assistance Program provides certain medicines and adult vaccines for free to
people in the U.S. and U.S. territories who do not have prescription drug or health insurance coverage and who, without the Company’s assistance, cannot afford their
Merck medicines and vaccines. Globally, Merck has made substantial contributions to access to health through key initiatives, including product donations for
humanitarian assistance in low-income countries through the Medical Outreach Program. The Mectizan Donation Program, the longest running disease-specific drug
donation program of its kind, supports the elimination of two neglected tropical diseases – onchocerciasis and lymphatic filariasis. Additionally, through Merck for
Mothers, the Company provides funding, and scientific and business acumen to help global health partners strengthen health systems, expand access to critical
maternal health services, and end preventable deaths from complications of pregnancy and childbirth. Merck also supports the Merck Foundation, an independent
grantmaking organization helping to address systemic barriers to access to health care.
Privacy and Data Protection
The Company is subject to a significant number of privacy and data protection laws and regulations globally, many of which place restrictions on the
Company’s ability to collect, transfer, access and use personal data across its business. The legislative and regulatory landscape for privacy and data protection
continues to evolve. There has been increased attention to privacy and data protection issues in both developed and emerging markets with the potential to affect
directly the Company’s business, including the EU General Data Protection Regulation (GDPR), which imposes penalties of up to 4% of global revenue.
The GDPR and related implementing laws in individual EU Member States govern the collection and use of personal health data and other personal data in
the EU. The GDPR increased responsibility and liability in relation to personal data that the Company processes. It also imposes a number of strict obligations and
restrictions on the ability to process (which includes collection, analysis and transfer of) personal data, including health data from clinical trials and adverse event
reporting. The GDPR also includes requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the
individuals prior to processing their personal data or personal health data, notification of data processing obligations to the national data protection authorities, and the
security and confidentiality of the personal data. Further, the GDPR prohibits the transfer of personal data to countries outside of the EU that are not considered by the
EC to provide an adequate level of data protection, including to the U.S., except if the data controller meets very specific requirements. Following the Schrems II
decision of the Court of Justice of the EU in 2020, uncertainty has existed as to the permissibility of international data transfers under the GDPR. In light of the
implications of this decision, the Company may face difficulties regarding the transfer of personal data from the EU to third countries. Since then, the Company entered
into the EU-approved Standard Contractual Clauses with its vendors, suppliers, collaboration partners and clinical trial sites in order to facilitate the lawful transfer of
personal data from the EU to the U.S. In addition, former President Biden issued Executive Order 14086 in October 2022 to address the data privacy concerns raised
in the Schrems II decision through introducing, among other measures, further safeguards and oversight of personal data collection by U.S. signals intelligence
activities and providing individuals with a redress mechanism in the U.S. for their data protection concerns. Further certainty for the international transfer of personal
data from the EU via the EU-U.S. Data Privacy Framework (successor to the invalidated EU-U.S. Privacy Shield) came about by way of a new EU Adequacy Decision,
issued by the EC in July 2023. However, the new Adequacy Decision has already been contested by privacy advocates and is subject to legal review.
Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States may result in significant
monetary fines and other administrative penalties as well as civil liability claims from individuals whose personal data was processed. Data protection authorities from
the different EU Member States may still implement certain variations, enforce the GDPR and national data protection laws differently, and introduce additional
national regulations and guidelines, which adds to the complexity of processing personal data in the EU. Guidance developed at both the EU level and at the national
level in individual EU Member States concerning implementation and compliance practices is often updated or otherwise revised.
There is, moreover, a growing trend towards required public disclosure of clinical trial data in the EU which adds to the complexity of obligations relating to
processing health data from clinical trials. Failing to comply with these obligations could lead to government enforcement actions and significant penalties against the
Company, harm to its reputation, and adversely impact its business and operating results. The uncertainty regarding the interplay between
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different regulatory frameworks further adds to the complexity that the Company faces with regard to data protection regulation.
In 2021, China passed the Personal Information Protection Law (PIPL) that aims to standardize the handling of personal information in China. The PIPL
currently applies to the processing of personal information of natural persons in China, the processing of personal information outside China where the purpose is to
provide products and services in China, and to analyze the activities of individuals in China. While similar to the GDPR, the PIPL contains unique requirements not
found in the GDPR. The Company has developed and implemented comprehensive plans to ensure compliance with the PIPL, including plans relating to data
localization and cross-border transfers.
Additional laws and regulations enacted in Canada, Europe, Asia, Latin America, the Middle East and 19 states in the U.S. have increased enforcement
and litigation activity in the U.S. and other developed markets, as well as increased regulatory cooperation among privacy authorities globally. The Company has
adopted a comprehensive global privacy program to manage these evolving requirements and risks and to facilitate the transfer of personal information across
international borders.
Distribution
The Company sells its human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed
health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions. Human health vaccines are sold primarily to
physicians, wholesalers, distributors and government entities. The Company’s professional representatives communicate the effectiveness, safety and value of the
Company’s pharmaceutical and vaccine products to health care professionals in private practice, group practices, hospitals and managed care organizations. The
Company sells its animal health products to veterinarians, distributors, animal producers, farmers and pet owners.
Raw Materials
The Company obtains raw materials essential to its business from numerous suppliers worldwide. Most of the principal materials the Company uses in its
manufacturing operations are available from more than one source. However, the Company obtains certain raw or intermediate materials primarily from only one
source. The Company attempts, if possible, to mitigate the potential risk associated with raw materials, components and supplies through inventory and appropriate
supplier management.
Patents, Trademarks and Licenses
Patent protection is considered, in the aggregate, to be of material importance to the Company’s marketing of its products in the U.S. and in most major
foreign markets. Patents may not only cover a product per se, but also pharmaceutical formulations of a product, processes for making a product, including
intermediates useful in those processes, and methods of treatment or other uses of a product. Patent protection for individual products extends for varying periods in
accordance with the legal life of patents in individual countries. The protection afforded, which may also vary from country to country, depends upon the type of patent
and its scope of coverage.
Patent portfolios developed for products introduced by the Company normally provide varying degrees of market exclusivity. Key patents, which generally
cover the product per se, may be subject to a patent term restoration (also known as patent term extension or PTE) of up to five years in the U.S., Japan, and certain
other jurisdictions. In Europe, up to five years of extended term may be available in the form of a Supplementary Protection Certificate (SPC). PTEs and SPCs are
awarded to offset a portion of the patent term lost during the clinical testing and regulatory review process of a product prior to approval. The Food and Drug
Administration Modernization Act includes a Pediatric Exclusivity Provision that may provide an additional six months of market exclusivity (added to the patent term
for all Orange Book-listed patents, and to the regulatory data exclusivity term for small molecule and biologic products) in the U.S. for indications of new or currently
marketed drugs if certain agreed upon pediatric studies are completed by the applicant. The EU also provides an additional six months of pediatric market exclusivity
attached to a product’s SPC term for both small molecule and biologic products. Japan attaches the additional term for pediatric studies to market exclusivity and this
extension is unrelated to patent term. In some countries, one or more regulatory exclusivities, including data exclusivity, may provide parallel market protection that is
complementary to patent protection and, in some cases, may provide more effective or longer lasting marketing exclusivity than a product’s patent portfolio. In the
U.S., the regulatory data/marketing protection term generally runs five years from first marketing approval of a new chemical entity, extended to seven years for an
orphan drug indication, and twelve years from first marketing approval of a biological product.
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The table below provides a list of expiration dates, which include any pending PTE and SPC periods where indicated, for the key patent protection in the
U.S., the EU, Japan and China for the following marketed products:
Product
Year of Expiration (U.S.)
Year of Expiration (EU)
Year of Expiration (Japan)
Year of Expiration (China)
Januvia
2026
Expired
2025-2026
Expired
Janumet
2026
Expired
N/A
Expired
Janumet XR
2026
N/A
N/A
Expired
Isentress
Expired
Expired
2026
Expired
Lenvima
2026
2026
2026
Expired
Bridion
2026
Expired
Expired
Expired
Bravecto
2027
2029
2029
2025
Gardasil
2028
Expired
Expired
Expired
Gardasil 9
2028
2030
2030
2025
Keytruda
2028
2031
2032-2033
2028
Lynparza
2027
(with pending PTE)
2029
2028-2029
Expired
Winrevair
2027
2026
N/A
N/A
Adempas
N/A
2028
2027-2028
Expired
Belsomra
2029
N/A
2031
N/A
Prevymis
2029
2029
2029
Expired
Vaxneuvance
2031
No Patent
No Patent
N/A
Welireg
2035 (with pending PTE)
N/A
N/A
N/A
Capvaxive
2038
N/A
N/A
N/A
Note: Compound patent unless otherwise noted. Certain of the products listed may be the subject of patent litigation. See Item 8. “Financial Statements and Supplementary Data,” Note 10. “Contingencies and
Environmental Liabilities” below.
N/A: Currently no marketing approval.
The EU date represents the expiration date for the following four countries: France, Germany, Italy, and Spain (Major EU Markets). If SPC applications have been filed but have not been granted in all Major EU
Markets, both the patent expiry date and the SPC expiry date are listed.
The PTE system in Japan allows for a patent to be extended more than once provided the later approval is directed to a different indication from that of the previous approval. This may result in multiple PTE
approvals for a given patent, each with its own expiration date.
As a result of settlement agreements related to a patent directed to the specific sitagliptin salt form of the products, exclusivity will extend through May 2026 for Januvia and Janumet, and through July 2026 for
Janumet XR.
Generic entry is not anticipated in 2025.
Expiry date reflects granted PTE for the 600 mg tablet in Japan.
Part of a global strategic oncology collaboration with Eisai Co., Ltd.
Eligible for six months pediatric market exclusivity.
The compound patent family contains two additional patents that expire in 2029 due to patent term adjustment resulting from patent office delay. These patents are based on the initial discovery of the active
ingredient in Keytruda. While these patents may provide additional protection, the Company expects that they will be the subject of litigation in the future.
Part of a global strategic oncology collaboration with AstraZeneca.
Eligible for 12 years of data exclusivity in the U.S. and 10 years in the EU, which will expire in 2036 and 2034, respectively. Granted patents covering methods of treating pulmonary arterial hypertension with
Winrevair, which will expire in 2037 (absent PTE or SPC), may provide additional exclusivity.
Commercialized under a worldwide collaboration with Bayer AG.
The Company has no marketing rights in the U.S.
Data exclusivity has also been granted in the EU and expires in January 2028; eligible for two additional years of market exclusivity based on pediatric studies for an orphan product.
PTE pending but is not included in the listed patent expiry date. Data exclusivity has been granted in the U.S. and expires in July 2033.
Data exclusivity has been granted in the EU and Japan, and expires in December 2031 and September 2030, respectively.
(1)
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(10)
(10)
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(15)
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(2)
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The Company has the following key U.S. patent protection for drug candidates under review in the U.S. by the FDA:
Under Review in the U.S.
Currently Anticipated
Year of Expiration (in the U.S.)
MK-1022 (patritumab deruxtecan)
2035
MK-1654 (clesrovimab)
2036
Being developed in a collaboration with Daiichi Sankyo. The FDA issued a Complete Response Letter for the application in June 2024.
The Company also has the following key U.S. patent protection for drug candidates in Phase 3 development:
Phase 3 Drug Candidate
Currently Anticipated
Year of Expiration (in the U.S.)
MK-8591A (doravirine + islatravir)
2032
MK-2400 (ifinatamab deruxtecan)
2034
MK-1308A (quavonlimab + pembrolizumab)
2035
MK-1026 (nemtabrutinib)
2035
V940
2036
MK-3543 (bomedemstat)
2036
MK-5684 (opevesostat)
2037
MK-8591D (islatravir + lenacapavir)
2037 (with pending PTE for lenacapavir patent)
MK-2140 (zilovertamab vedotin)
2038
MK-4482 Lagevrio
2038
MK-2870 (sacituzumab tirumotecan)
2040
MK-3475A (pembrolizumab + hyaluronidase subcutaneous)
2039
MK-0616 (enlicitide decanoate)
2040
MK-1084
2040
MK-7240 (tulisokibart)
2040
MK-3000
2041
On partial clinical hold for higher doses of islatravir than those used in current clinical trials.
Being developed in a collaboration.
Available in the U.S. under Emergency Use Authorization.
Program is in a Phase 2/3 study.
Unless otherwise noted, the patents in the above tables cover the product per se (also known as compound patents). For those drug candidates under
review or in development, the key U.S. patents may be subject to a future PTE of up to five years and/or six months of pediatric market exclusivity. In addition,
depending on the circumstances surrounding any final regulatory approval of the product, there may be other granted patents or pending patent applications that could
have relevance to the product as finally approved.
While the expiration of the compound patent generally results in loss of market exclusivity for the covered pharmaceutical product, other patents may
provide additional market exclusivity associated with certain aspects of the product that extends beyond the compound patent expiration, including those derived from
the initial discovery of the product’s active ingredient(s) or from product-related innovation that occurs after this initial discovery. These include later-expiring patents
directed to (i) processes and intermediates related to methods of manufacture of the active ingredient(s), (ii) use(s) of the product, and (iii) novel compositions and
formulations of the product. The effect of product patent expiration on pharmaceutical product sales may also depend upon many other factors such as the nature of
the market and the position of the product in it, the growth of the market, the complexities and economics of the process for manufacture of the active ingredient(s) of
the product and the requirements of new drug provisions of the Federal Food, Drug and Cosmetic Act or similar laws and regulations in other countries. In addition, in
the U.S. and certain other countries, a variety of different regulatory exclusivities that impact market exclusivity may be available under relevant law.
For further information with respect to the Company’s patents, see Item 1A. “Risk Factors” and Item 8. “Financial Statements and Supplementary Data,”
Note 10. “Contingencies and Environmental Liabilities” below.
(1)
(1)
(1)
(2)
(2)
(1)(2)
(2)(3)
(2)
(4)
(1)
(2)
(3)
(4)
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Worldwide, all of the Company’s important products are sold under trademarks that are considered in the aggregate to be of material importance.
Trademark protection continues in some countries as long as used; in other countries, as long as registered. Registration is for fixed terms and can be renewed
indefinitely.
Royalty income in 2024 on patent and know-how licenses and other rights amounted to $1.1 billion. Merck also incurred royalty expenses amounting to
$1.9 billion in 2024 under patent and know-how licenses it holds.
Research and Development
The Company’s business is characterized by the introduction of new products or new uses for existing products through a strong research and
development program. At December 31, 2024, approximately 23,500 people were employed in the Company’s research activities. The Company prioritizes its
research and development efforts and focuses on candidates that it believes represent breakthrough science for unmet medical needs that will make a difference for
patients and payers.
The Company maintains a number of long-term exploratory and fundamental research programs in biology and chemistry as well as research programs
directed toward product development. The Company’s research and development model is designed to increase productivity and improve the probability of success by
prioritizing the Company’s research and development resources on candidates the Company believes are capable of providing unambiguous, promotable advantages
to patients and payers and delivering the maximum value of its approved medicines and vaccines through new indications and new formulations. Merck is pursuing
emerging product opportunities independent of therapeutic area or modality. The Company is committed to ensuring that externally sourced programs remain an
important component of its pipeline strategy, with a focus on supplementing its internal research through acquisitions as well as a licensing and external alliance
strategy focused on the entire spectrum of collaborations from early research to late-stage compounds, as well as access to new technologies.
The Company’s clinical pipeline includes candidates in multiple disease areas, including cancer, cardiovascular diseases, metabolic diseases, infectious
diseases, neurosciences, immunology, ophthalmology, respiratory diseases, and vaccines.
In the development of human health products, industry practice and government regulations in the U.S. and most foreign countries provide for the
determination of effectiveness and safety of new chemical compounds through preclinical tests and controlled clinical evaluation. Before a new drug or vaccine may be
marketed in the U.S., recorded data on preclinical and clinical experience are included in the New Drug Application (NDA) for a drug or the Biologics License
Application (BLA) for a vaccine or biologic submitted to the FDA for the required approval.
Once the Company’s scientists discover a new small molecule compound or biologic that they believe has promise to treat a medical condition, the
Company commences preclinical testing with that compound. Preclinical testing includes laboratory testing and animal safety studies to gather data on chemistry,
pharmacology, immunogenicity and toxicology. Pending acceptable preclinical data, the Company will initiate clinical testing in accordance with established regulatory
requirements. The clinical testing begins with Phase 1 studies, which are designed to assess safety, tolerability, pharmacokinetics, and preliminary pharmacodynamic
activity of the compound in humans. If favorable, additional, larger Phase 2 studies are initiated to determine the efficacy of the compound in the affected population,
define appropriate dosing for the compound, as well as identify any adverse effects that could limit the compound’s usefulness. In some situations, the clinical program
incorporates adaptive design methodology to use accumulating data to decide how to modify aspects of the ongoing clinical study as it continues, without undermining
the validity and integrity of the trial. One type of adaptive clinical trial is an adaptive Phase 2a/2b trial design, a two-stage trial design consisting of a Phase 2a proof-of-
concept stage and a Phase 2b dose-optimization finding stage. If data from the Phase 2 trials are satisfactory, the Company commences large-scale Phase 3 trials to
confirm the compound’s efficacy and safety. Another type of adaptive clinical trial is an adaptive Phase 2/3 trial design, a study that includes an interim analysis and an
adaptation that changes the trial from having features common in a Phase 2 study (e.g., multiple dose groups) to a design similar to a Phase 3 trial. An adaptive Phase
2/3 trial design reduces timelines by eliminating activities which would be required to start a separate study. Upon completion of Phase 3 trials, if satisfactory, the
Company submits regulatory filings with the appropriate regulatory agencies around the world to have the product candidate approved for marketing. There can be no
assurance that a compound that is the result of any particular program will obtain the regulatory approvals necessary for it to be marketed.
Vaccine development follows the same general pathway as for drugs. Preclinical testing focuses on the vaccine’s safety and ability to elicit a protective
immune response (immunogenicity). Pre-marketing vaccine clinical trials are typically done in three phases. Initial Phase 1 clinical studies are conducted in normal
subjects to evaluate the safety, tolerability and immunogenicity of the vaccine candidate. Phase 2 studies are dose-ranging studies and provide additional data on
safety, immunogenicity and/or effectiveness. Finally, Phase 3 trials are conducted in the
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intended population for licensure and provide data on immunogenicity and/or effectiveness, as well as safety, to support applications for regulatory approvals. If
successful, the Company submits regulatory filings with the appropriate regulatory agencies.
United States
In the U.S., the FDA review process begins once a complete NDA or BLA is submitted, received and accepted for review by the agency. Within 60 days
after receipt, the FDA determines if the application is sufficiently complete to permit a substantive review. The FDA also assesses, at that time, whether the application
will be granted a priority review or standard review. Pursuant to the Prescription Drug User Fee Act VII (PDUFA), the FDA review period target for NDAs or original
BLAs is either six months, for priority review, or ten months, for a standard review, from the time the application is deemed sufficiently complete. For original efficacy
supplements to an NDA or BLA, the FDA review period target is six months, for priority review, or ten months, for a standard review, from the time the supplemental
application is received. Once the review timelines are determined, the FDA will generally act upon the application within those timeline goals, unless a major
amendment has been submitted (either at the Company’s own initiative or the FDA’s request) to the pending application. If this occurs, the FDA may extend the review
period to allow for review of the new information, but by no more than three months. Extensions to the review period are communicated to the Company. The FDA can
act on an application either by issuing an approval letter or by issuing a Complete Response Letter (CRL) stating that the application will not be approved in its present
form and describing all deficiencies that the FDA has identified. Should the Company wish to pursue an application after receiving a CRL, it can resubmit the
application with information that addresses the questions or issues identified by the FDA in order to support approval. Resubmissions are subject to review period
targets, which vary depending on the underlying submission type and the content of the resubmission.
The FDA has four program designations — Fast Track, Breakthrough Therapy, Accelerated Approval, and Priority Review — to facilitate and expedite
development and review of new drugs to address unmet medical needs in the treatment of serious or life-threatening conditions. The Fast Track designation provides
pharmaceutical manufacturers with opportunities for frequent interactions with FDA reviewers during the product’s development and the ability for the manufacturer to
do a rolling submission of the NDA/BLA. A rolling submission allows completed portions of the application to be submitted and reviewed by the FDA on an ongoing
basis. The Breakthrough Therapy designation provides manufacturers with all of the features of the Fast Track designation as well as intensive guidance on
implementing an efficient development program for the product and a commitment by the FDA to involve senior managers and experienced staff in the review. The
Accelerated Approval designation allows the FDA to approve a product based on an effect on a surrogate or intermediate endpoint that is reasonably likely to predict a
product’s clinical benefit and generally requires the manufacturer to conduct required post-approval confirmatory trials to verify the clinical benefit. The Priority Review
designation means that the FDA’s goal is to take action on the NDA/BLA within six months, compared to ten months under standard review. More than one of these
special designations can be granted for a given application (i.e., a product designated as a Breakthrough Therapy may also be eligible for Priority Review).
Due to the COVID-19 public health crisis, in 2020, the U.S. Secretary of Health and Human Services (Secretary) exercised statutory authority to determine
that a public health emergency existed, and declared those circumstances justified the emergency use of drugs and biological products as authorized by the FDA. In
2023, the Secretary issued an amended determination that a public health emergency or a significant potential for a public health emergency existed, and declared
that circumstances continued to justify authorization of emergency use of these products. While in effect, this declaration (as amended) enables the FDA to issue
Emergency Use Authorizations (EUAs) permitting distribution and use of specific medical products absent NDA/BLA submission or approval, including products to
treat or prevent diseases or conditions caused by the SARS-CoV-2 virus, subject to the terms of any such EUAs. The Company is currently marketing Lagevrio in the
U.S. pursuant to an EUA. The FDA must make certain findings to grant an EUA, including that it is reasonable to believe based on the totality of evidence that the drug
or biologic may be effective, and that known or potential benefits when used under the terms of the EUA outweigh known or potential risks. Additionally, the FDA must
find that there is no adequate, approved and available alternative to the emergency use of the authorized drug or biologic. The FDA may revise or revoke an EUA if the
circumstances justifying its issuance no longer exist, the criteria for its issuance are no longer met, or other circumstances make a revision or revocation appropriate to
protect the public health or safety.
European Union
The primary method the Company uses to obtain marketing authorization of pharmaceutical products in the EU is through the “centralized procedure.” This
procedure is compulsory for certain pharmaceutical products, in particular those using biotechnological processes, and is also available for certain new chemical
compounds and products. A company seeking to market an innovative pharmaceutical product through the centralized procedure must file a complete set of safety
data and efficacy data as part of a Marketing Authorization Application (MAA) with the
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European Medicines Agency (EMA). After the EMA evaluates the MAA, it provides a recommendation to the EC and the EC then approves or denies the MAA. It is
also possible for new chemical products to obtain marketing authorization in the EU through a “mutual recognition procedure” in which an application is made to a
single member state and, if the member state approves the pharmaceutical product under a national procedure, the applicant may submit that approval to the mutual
recognition procedure of some or all other EU Member States.
Japan
In Japan, the Company submits new drug applications to the PMDA for its pharmaceutical regulatory review. The PMDA is an independent administrative
agency which is under the jurisdiction of the Ministry of Health, Labor and Welfare (MHLW). The PMDA considers multiple factors in its review process, including the
drug’s safety, efficacy, quality, and manufacturing process in accordance with the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals
and Medical Devices. In addition, there are various other regulations and guidelines issued by the MHLW or the PMDA that must also be complied with in order to
secure approval. The length of the PMDA review process can vary, but it typically takes around one year for a new drug to be approved in Japan. The review period
may be shortened if the drug candidate is designated by the MHLW as an innovative drug satisfying certain conditions.
China
In China, the Company submits marketing applications to the NMPA for an independent review. The NMPA considers multiple factors in its review process,
including the drug‘s safety, efficacy, quality, and manufacturing process. Moreover, the NMPA implements strict regulations to ensure that all drugs meet the same
standards as those set by the WHO. The agency establishes stringent safety and efficacy requirements for drug approval. The length of the NMPA review process can
vary, but it typically takes around one to two years for a new drug to be approved in China.
Other Markets
Outside of the U.S., the EU, Japan and China, the Company submits marketing applications to national regulatory authorities. Examples of such are Health
Canada, Agência Nacional de Vigilância Sanatária in Brazil, Korea Food and Drug Administration in South Korea, and the Therapeutic Goods Administration in
Australia. Each country has a separate and independent review process and timeline. In many markets, approval times can be longer as the regulatory authority
requires approval in a major market, such as the U.S. or the EU, and issuance of a Certificate of Pharmaceutical Product from that market before initiating their local
review process.
Research and Development Update
The Company currently has several candidates under regulatory review in the U.S. and internationally or in late-stage clinical development.
MK-1022, patritumab deruxtecan, is a potential first-in-class HER3 directed DXd antibody drug conjugate (ADC), under review by the FDA for the treatment
of adult patients with locally advanced or metastatic EGFR-mutated NSCLC previously treated with two or more systemic therapies. The BLA is based on the primary
results from the HERTHENA-Lung01 pivotal Phase 2 trial and data results presented at the IASLC 2023 World Conference on Lung Cancer, which were
simultaneously published in the Journal of Clinical Oncology. In June 2024, the FDA issued a CRL for the BLA due to findings pertaining to an inspection of a third-
party manufacturing facility. The CRL did not identify any issues with the efficacy or safety data submitted. Patritumab deruxtecan (HER3-DXd) was discovered by
Daiichi Sankyo and is being jointly developed by Daiichi Sankyo and Merck. Merck is working with Daiichi Sankyo to address FDA feedback.
MK-6482, Welireg, is under review in Japan both for the treatment of adults with VHL disease based on the LITESPARK-004 clinical trial and for the
treatment of certain adults with previously treated advanced RCC based on the LITESPARK-005 clinical trial. Additionally, in January 2025, the FDA accepted for
priority review a supplemental NDA seeking approval of Welireg for the treatment of adult and pediatric patients (12 years and older) with advanced, unresectable, or
metastatic pheochromocytoma and paraganglioma, based on the LITESPARK-015 trial. The FDA set a PDUFA, or target action, date of May 26, 2025.
V116, Capvaxive, a 21-valent pneumococcal conjugate vaccine designed to help prevent invasive pneumococcal disease and pneumococcal pneumonia
caused by certain serotypes in adults, is under review in the EU and Japan. The applications are supported by results from multiple Phase 3 clinical studies evaluating
V116 in both vaccine-naïve and vaccine-experienced adult patient populations. In January 2025, the Committee for Medicinal Products for Human Use (CHMP) of the
EMA recommended the approval of Capvaxive for active immunization for the prevention of invasive disease and pneumonia caused by certain types of Streptococcus
pneumoniae in individuals 18 years of age and older. The CHMP’s recommendation will now be reviewed by the EC for marketing authorization in the EU, and a final
decision is expected by the second quarter of 2025.
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MK-7962, Winrevair, Merck’s novel activin signaling inhibitor, is under review in Japan for the treatment of adult patients with PAH based on the Phase 3
STELLAR trial. In November 2024, Merck announced positive topline results from the Phase 3 ZENITH study, evaluating Winrevair in adults with PAH with WHO
Group 1 FC III or IV at high risk of mortality. Based on the positive results of an interim analysis, an independent data monitoring committee recommended that the
study be stopped early due to overwhelming efficacy. In addition, in January 2025, Merck announced the Phase 3 HYPERION study evaluating Winrevair in newly
diagnosed adults with PAH FC II or III at intermediate or high risk of disease progression was also stopped early based on the positive results from the interim analysis
of the ZENITH trial and a review of the totality of data from the Winrevair clinical program to date. All participants in both the ZENITH and HYPERION studies will be
offered the opportunity to receive Winrevair as part of the open-label, long-term extension study, SOTERIA.
MK-1654, clesrovimab, is an investigational prophylactic long-acting monoclonal antibody designed to protect infants from respiratory syncytial virus (RSV)
disease during their first RSV season. In December 2024, the FDA accepted the BLA for clesrovimab and set a PDUFA date of June 10, 2025. Clesrovimab is also
under review in the EU.
MK-3475, Keytruda, is an anti-PD-1 therapy approved for the treatment of many cancers that is in clinical development for expanded indications. These
studies encompass more than 30 cancer types including: biliary, estrogen receptor positive breast, triple-negative breast, cervical, colorectal, endometrial, esophageal,
gastric, glioblastoma, head and neck, hepatocellular, Hodgkin lymphoma, non-Hodgkin lymphoma, non-small-cell lung, small-cell lung, melanoma, malignant pleural
mesothelioma, ovarian, prostate, renal, and urothelial, several of which are currently in Phase 3 clinical development. Further trials are being planned for other
cancers.
Keytruda is under review in the EU and Japan for the first-line treatment of adult patients with unresectable advanced or metastatic malignant pleural
mesothelioma, based on the Phase 2/3 IND.227/KEYNOTE-483 trial. In November 2024, the EMA’s CHMP adopted a positive opinion recommending approval of
Keytruda in combination with pemetrexed and platinum chemotherapy for the first-line treatment of adult patients with unresectable non-epithelioid malignant pleural
mesothelioma. In December 2024, the Company requested a re-examination from the EMA’s CHMP for an extension of the indication to include approval in
combination with pemetrexed and platinum chemotherapy for the first-line treatment of adults and adolescents aged 12 years and older with unresectable advanced or
metastatic malignant pleural mesothelioma, based on final results from the KEYNOTE-483 trial.
The Company is diversifying its oncology portfolio and executing on its strategy which is broadly based on three strategic pillars: immuno-oncology,
precision molecular targeting and tissue targeting. Merck has numerous Phase 3 oncology programs within these pillars.
Immuno-oncology
•
MK-1308A is the coformulation of quavonlimab, Merck’s novel investigational anti-CTLA-4 antibody, in combination with pembrolizumab, being evaluated for
the treatment of RCC.
•
MK-3475, Keytruda, is being evaluated in the therapeutic areas of hepatocellular, ovarian and small-cell lung cancers.
•
MK-3475A is the subcutaneous coformulation of pembrolizumab in combination with hyaluronidase being evaluated for comparability with intravenous
pembrolizumab in metastatic NSCLC.
•
V940 (mRNA-4157) is an investigational individualized neoantigen therapy being evaluated in combination with Keytruda as an adjuvant treatment in patients
with certain types of melanoma. The FDA and EMA granted Breakthrough Therapy designation and Priority Medicines (PRIME) scheme designation,
respectively, for V940 (mRNA-4157) in combination with Keytruda for the adjuvant treatment of patients with certain stages of high-risk melanoma following
complete resection. V940 (mRNA-4157) is also being evaluated as adjuvant and perioperative treatment for certain patients with NSCLC. V940 is being
developed as part of a collaboration with Moderna, Inc.
Precision molecular targeting
•
MK-1026, nemtabrutinib, is an oral, reversible, non-covalent Bruton’s tyrosine kinase (BTK) inhibitor, being evaluated for the treatment of hematological
malignancies, including chronic lymphocytic leukemia and small lymphocytic lymphoma.
•
MK-1084 is an investigational oral selective KRAS G12C inhibitor being evaluated in combination with Keytruda for the first-line treatment of certain patients
with metastatic NSCLC.
•
MK-3543, bomedemstat, is an investigational orally available lysine-specific demethylase 1 inhibitor, being evaluated for the treatment of certain patients with
essential thrombocythemia. Bomedemstat has FDA
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Orphan Drug and Fast Track Designation for the treatment of essential thrombocythemia and myelofibrosis, Orphan Drug Designation for the treatment of
acute myeloid leukemia and PRIME scheme designation by the EMA for the treatment of myelofibrosis.
•
MK-5684, opevesostat, is an investigational cytochrome P450 11A1 (CYP11A1) inhibitor being evaluated for the treatment of certain patients with metastatic
castration-resistant prostate cancer.
•
MK-7339, Lynparza, is an oral PARP inhibitor being evaluated in combination with Keytruda for expanded indications in the therapeutic areas of NSCLC and
SCLC. Lynparza is being developed as part of a collaboration with AstraZeneca PLC.
•
MK-7902, Lenvima, is an oral receptor tyrosine kinase inhibitor being evaluated in combination with Keytruda for expanded indications in the therapeutic area
of esophageal cancer. Lenvima is being developed as part of a collaboration with Eisai Co., Ltd.
Tissue targeting
•
MK-1022, patritumab deruxtecan, is being evaluated in the therapeutic area of NSCLC as noted above.
•
MK-2140, zilovertamab vedotin, is an ADC targeting receptor tyrosine kinase-like orphan receptor 1 (ROR1) being evaluated for the treatment of
hematological malignancies, including diffuse large B cell lymphoma.
•
MK-2400, ifinatamab deruxtecan, is an ADC being evaluated in patients with relapsed SCLC versus chemotherapy. MK-2400 is being developed as part of a
collaboration with Daiichi Sankyo.
•
MK-2870, sacituzumab tirumotecan, is an investigational trophoblast cell-surface antigen 2 (TROP2)-directed ADC being evaluated for certain patients with
breast, cervical, endometrial, gastric and non-small-cell lung cancers. The FDA granted Breakthrough Therapy designation to sacituzumab tirumotecan for
the treatment of patients with advanced or metastatic nonsquamous NSCLC with EGFR mutations whose disease progressed on or after tyrosine kinase
inhibitor and platinum-based chemotherapy. Sacituzumab tirumotecan is being developed as part of a collaboration with Kelun-Biotech.
Additionally, the Company currently has candidates in Phase 3 clinical development in several other therapeutic areas.
•
MK-3000 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. MK-3000 was
obtained in connection with the July 2024 acquisition of Eyebiotech Limited.
•
MK-8591A is a once-daily oral combination of doravirine and islatravir, an investigational nucleoside reverse transcriptase translocation inhibitor (NRTTI),
being evaluated for the treatment of HIV infection in previously untreated adults and as a switch in antiretroviral therapy in virologically suppressed adults.
MK-8591D is an oral once-weekly combination of islatravir and Gilead Sciences Inc.’s lenacapavir being evaluated for the treatment of HIV infection in
virologically suppressed adults. In 2021, the FDA placed clinical holds on the islatravir investigational NDAs based on observations of decreases in total
lymphocyte and CD4+ T-cell counts in some participants receiving islatravir in clinical studies. The investigational NDAs for the doravirine/islatravir and the
islatravir/lenacapavir once-weekly treatment regimens remain under a partial clinical hold for any studies that would use islatravir doses higher than the doses
considered for the revised clinical programs.
•
MK-0616, enlicitide decanoate, is an investigational, oral proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitor being evaluated for
hypercholesterolemia, including in studies evaluating low-density lipoprotein cholesterol reduction and a cardiovascular outcomes study.
•
MK-7240, tulisokibart, is a humanized monoclonal antibody directed to tumor necrosis factor-like ligand 1A, a target associated with both intestinal
inflammation and fibrosis, being evaluated for the treatment of Crohn’s disease and ulcerative colitis.
•
MK-4482, Lagevrio, is an investigational oral antiviral medicine for the treatment of mild to moderate COVID-19 in adults who are at risk for progressing to
severe disease. Merck is developing Lagevrio in collaboration with Ridgeback Biotherapeutics LP (Ridgeback). The FDA granted Emergency Use
Authorization for Lagevrio in December 2021, which was last reissued in November 2023. Lagevrio is authorized for the treatment of adults with a current
diagnosis of mild to moderate COVID-19, and who are at high risk for progression to severe COVID-19, including hospitalization or death, and for whom
alternative COVID-19 treatment options approved or authorized by the FDA are not accessible or clinically appropriate. Lagevrio is not approved for any use
in the U.S. and is authorized only for the duration of the declaration that circumstances exist justifying the authorization of its emergency use under the Food,
Drug and Cosmetic Act, unless the authorization is terminated or revoked sooner. In 2024, an additional Phase 3 clinical trial
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(MOVe-NOW) was initiated to evaluate Lagevrio for the treatment of adults with COVID-19 at high risk for disease progression. MOVe-NOW will build on
existing Lagevrio data to assess efficacy in the current COVID-19 environment and support applications for licensure.
The Company also terminated certain of its development programs in 2024.
•
MK-7264, gefapixant, is a non-narcotic, oral selective P2X3 receptor antagonist for the treatment of refractory or unexplained chronic cough in adults. In
December 2023, the FDA issued a second CRL regarding the resubmission of Merck’s NDA for gefapixant. In the CRL, the FDA concluded that Merck’s
application did not meet substantial evidence of effectiveness for treating refractory or unexplained chronic cough. The CRL was not related to the safety of
gefapixant. Merck has withdrawn its application for gefapixant from the FDA and does not plan to refile.
•
In December 2024, Merck announced the discontinuation of the Phase 3 KeyVibe-003 and KeyVibe-007 trials, which were evaluating MK-7684A, the fixed-
dose combination of vibostolimab, an anti-TIGIT antibody, and pembrolizumab, in certain patients with NSCLC, based on the recommendation of an
independent data monitoring committee. In a pre-planned analysis, both trials met the pre-specified futility criteria for the primary endpoint of overall survival.
Considering the totality of data from the Phase 3 KeyVibe studies, including the efficacy outcomes from KeyVibe-003 and KeyVibe-007, the Company
decided to discontinue the Phase 3 KeyVibe-006 trial and other vibostolimab studies.
•
Also in December 2024, Merck announced the discontinuation of the clinical development program for favezelimab, an anti-LAG-3 antibody, and will stop
enrollment in the Phase 3 KEYFORM-008 trial evaluating the fixed-dose combination of favezelimab and pembrolizumab (MK-4280A) in patients with
relapsed or refractory cHL whose disease has progressed following prior anti-PD-1 therapy. The Company made this decision after a thorough evaluation of
data from the favezelimab clinical program. Data analyses for the Phase 3 trials are ongoing, and the results will be shared with the scientific community.
•
Based on the topline results of the MK-2060 Phase 2 study, Merck will not proceed to Phase 3 clinical development. The Phase 2 study results will be
presented at a scientific meeting later in 2025.
•
The Phase 2b clinical trial for MK-8189 as a monotherapy for acute schizophrenia did not meet its primary efficacy endpoint and further development in
schizophrenia, bipolar, and dementia indications has stopped. Potential alternative indications for MK-8189 are being explored.
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The chart below reflects the Company’s research pipeline as of February 21, 2025. Candidates shown in Phase 3 include the date such candidate entered
into Phase 3 development. Candidates shown in Phase 2 include the most advanced compound with a specific mechanism or, if listed compounds have the same
mechanism, they are each currently intended for commercialization in a given therapeutic area. Small molecules and biologics are given MK-number designations and
vaccine candidates are given V-number designations. Except as otherwise noted, candidates in Phase 1, additional indications in the same therapeutic area (other
than with respect to cancer and immunology) and additional claims, line extensions or formulations for in-line products are not shown.
Phase 2
Alzheimer’s
MK-1167
Cancer
MK-1022 (patritumab deruxtecan)
Biliary
Bladder
Cervical
Colorectal
Endometrial
Esophageal
Gastric
Head and Neck
Hepatocellular
Melanoma
Ovarian
Pancreatic
Prostate
MK-1308 (quavonlimab)
Non-Small-Cell Lung
MK-1308A (quavonlimab+pembrolizumab)
Colorectal
MK-2400 (ifinatamab deruxtecan)
Biliary
Bladder
Breast
Cervical
Colorectal
Endometrial
Esophageal
Head and Neck
Hepatocellular
Melanoma
Ovarian
Pancreatic
MK-2870 (sacituzumab tirumotecan)
Biliary
Colorectal
Neoplasm Malignant
Pancreatic
MK-3475 Keytruda
Advanced Solid Tumors
Prostate
MK-3475A (pembrolizumab+hyaluronidase subcutaneous)
Cutaneous Squamous Cell
Hematological Malignancies
Cancer
MK-5890 (boserolimab)
Neoplasm Malignant
MK-5909 (raludotatug deruxtecan)
Bladder
Cervical
Endometrial
Ovarian
Renal Cell
MK-6482 Welireg
Breast
Endometrial
Esophageal
Hepatocellular
MK-7339 Lynparza
Advanced Solid Tumors
Cancer
V940
Bladder
Renal Cell
Dengue Fever Virus Vaccine
V181
HIV-1 Infection
MK-8591B (islatravir+MK-8507)
HIV-1 Pre-Exposure Prophylaxis
MK-8527
Immunology
MK-6194
Lupus
Vitiligo
MK-7240 (tulisokibart)
Systemic Sclerosis
Metabolic Dysfunction-Associated Steatohepatitis (MASH)
MK-6024 (efinopegdutide)
Pulmonary Hypertension-Chronic Obstructive Pulmonary Disease
MK-5475
Pulmonary Hypertension Due To Left Heart Disease
MK-7962 Winrevair
(1)
(2)
(1)
(1)(3)
(2)
(1)
(3)
(1)(3)
(1)(2)
(4)
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Phase 3 (Phase 3 entry date)
Under Review
Antiviral COVID-19
MK-4482 Lagevrio (U.S.) (May 2021)
Cancer
MK-1022 (patritumab deruxtecan)
Non-Small-Cell Lung (May 2022) (EU)
MK-1026 (nemtabrutinib)
Hematological Malignancies (March 2023)
MK-1084
Non-Small-Cell Lung (May 2024)
MK-1308A (quavonlimab+pembrolizumab)
Renal Cell (April 2021)
MK-2140 (zilovertamab vedotin)
Hematological Malignancies (September 2024)
MK-2400 (ifinatamab deruxtecan)
Small-Cell Lung (July 2024)
MK-2870 (sacituzumab tirumotecan)
Breast (April 2024)
Cervical (July 2024)
Endometrial (December 2023)
Gastric (May 2024)
Non-Small-Cell Lung (November 2023)
MK-3475 Keytruda
Hepatocellular (May 2016) (EU)
Ovarian (December 2018)
Small-Cell Lung (May 2017)
MK-3475A (pembrolizumab+hyaluronidase subcutaneous)
Non-Small-Cell Lung (February 2023)
MK-3543 (bomedemstat)
Myeloproliferative Disorders (December 2023)
MK-5684 (opevesostat)
Prostate (December 2023)
MK-7339 Lynparza
Non-Small-Cell Lung (June 2019)
Small-Cell Lung (December 2020)
MK-7902 Lenvima
Esophageal (July 2021)
V940
Melanoma (July 2023)
Non-Small-Cell Lung (December 2023)
Diabetic Macular Edema
MK-3000
HIV-1 Infection
MK-8591A (doravirine+islatravir) (February 2020)
MK-8591D (islatravir+lenacapavir) (October 2024)
Hypercholesterolemia
MK-0616 (enlicitide decanoate) (August 2023)
Immunology
MK-7240 (tulisokibart)
Crohn’s Disease (June 2024)
Ulcerative Colitis (October 2023)
New Molecular Entities
Cancer
MK-1022 (patritumab deruxtecan)
Non-Small-Cell Lung (U.S.)
MK-6482 Welireg
Renal Cell (JPN)
Von Hippel-Lindau (VHL)
Disease (JPN)
Pneumococcal Vaccine Adult
V116 Capvaxive (EU) (JPN)
Pulmonary Arterial Hypertension
MK-7962 Winrevair (JPN)
Respiratory Syncytial Virus
MK-1654 (clesrovimab) (U.S.) (EU)
Certain Supplemental Filings
Cancer
MK-3475 Keytruda
• First-Line Unresectable Advanced or Metastatic Malignant
Pleural Mesothelioma
(KEYNOTE-483) (EU) (JPN)
MK-6482 Welireg
• Advanced, Unresectable, or Metastatic Pheochromocytoma
and Paraganglioma
(LITESPARK-015) (U.S.)
Footnotes:
Being developed in a collaboration.
Being developed in combination with Keytruda.
Being developed as monotherapy and/or in combination with Keytruda.
FDA lifted clinical hold on December 4, 2024.
On FDA partial clinical hold for higher doses of islatravir than those used in current clinical trials.
Available in the U.S. under Emergency Use Authorization.
Program is in a Phase 2/3 study that commenced in August 2024.
In June 2024, the FDA issued a CRL for the BLA for patritumab deruxtecan. Merck is working with Daiichi Sankyo to address
FDA feedback.
Human Capital
As of December 31, 2024, the Company had approximately 75,000 employees worldwide, with approximately 31,000 employed in the U.S., including
Puerto Rico, and approximately 15,000 third-party contractors globally. Third-party contractors include the Company’s temporary workers, independent contractors,
and freelancers who are viewed as full-time equivalent employees; they exclude outsourced service providers. Approximately 73,000 of the Company’s employees are
full-time employees. Globally, women comprise 52% of employees, and in the U.S. individuals from underrepresented ethnic groups comprise 37% of its workforce
(the Company defines workforce as its employees). Women comprise 46% of the members of the Board of Directors. Additionally, the Company’s senior management
team is made up of 39% women. Approximately 21% of the Company’s employees are represented by various collective bargaining groups. The Company’s voluntary
turnover rate was approximately 4.6% and 5.6%, in 2024 and 2023, respectively.
The Company recognizes that its employees are critical to meet the needs of its patients and customers and that its ability to excel depends on the
integrity, skill, and collaboration of its employees.
Talent Acquisition
The Company uses a comprehensive approach to ensure recruiting, retention and leadership development goals are systematically executed throughout
the Company and that it hires talented leaders with a wide
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range of knowledge, skills, backgrounds and perspectives. In addition, the Company utilizes a comprehensive communications strategy, employee branding and
marketing outreach, social media and strategic alliance partnerships to reach a broad pool of talent in its critical business areas. In 2024, the Company hired
approximately 7,300 employees across the globe through various channels including the Company’s external career site, direct passive candidate sourcing, employee
referrals, universities and other external sources.
Enabling a Collaborative Work Environment
Fostering a collaborative environment is fundamental to the Company’s success and core to future innovation. The Company strives to create an
environment of acceptance, engagement and empowerment. The Company seeks to hire and develop the best talent by providing equal opportunity to all people. The
Company creates competitive advantages by leveraging practices which help to meet the needs of all our patients worldwide. This includes evaluating social
determinants of health when developing commercialization strategies and leveraging employee insights to improve performance.
Compensation and Benefits
The Company provides a valuable suite of compensation and benefits programs that reflect its commitment to attract, retain and motivate its talent, and
support its employees and their families in every stage of life. The Company continuously monitors and adjusts its compensation and benefit programs to ensure they
are competitive, contemporary, helpful and engaging, and that they support strategic imperatives such as fairness, flexibility, quality, security and affordability. For
example, the Company regularly monitors and evaluates its pay practices and policies to ensure that it is paying employees fairly. The Company offers a personal
health care concierge service to assist U.S. employees participating in the Company medical plan with their health care needs. Aligned with its business and in support
of its cancer care strategy, the Company provides enhanced cancer screening benefits with cash incentives, immediate access to two leading cancer centers of
excellence for U.S. employees and high value cancer support resources (e.g., caregiving and mental health) for employees and their families. Globally, the Company
implemented a minimum standard of 12 weeks of paid parental leave. In the U.S., the Company’s benefits rank in the top quartile of Fortune 100 companies under the
Aon 2024 Benefits Index. The Company has been included in the Seramount (previously the Working Mother) 100 Best Companies ranking for 38 consecutive years
and was named a top ten Best Company for Moms in 2024.
Employee Well-being
The Company is committed to helping its employees and their families improve their own health and well-being, whether physical, mental, financial, or
social. The Company’s programs ensure quality, competitive value, protection from significant financial hardship and access to tools and resources to support
employees and their families in all stages of their career and their lives, earning the Company accolades such as the Business Group on Health’s Best Employers
Excellence in Health & Well-being and the CEO Roundtable on Cancer’s Global Gold Standard Employer accreditation in 2024. As part of the Company’s overall
culture of well-being, the Company fosters an array of flexible work arrangements and offers onsite services so employees can thrive. For example, in the U.S., these
include onsite health care professionals at many major sites, cafeterias committed to healthy menu offerings, onsite childcare, onsite gyms, and the convenient option
to bank through an employee credit union.
Engaging Employees
The Company strengthens employee engagement by fostering a safe, positive, and supportive workplace. Merck encourages candid employee feedback
through global employee surveys and peer feedback processes. The Company encourages professional networking and collaboration, enabling employees to connect
and grow. Additionally, Merck provides community volunteering opportunities, reflecting its commitment to social responsibility. By building strong relationships with its
employees, the Company strives to ensure that every voice is heard, fostering an engaging employee experience that drives Merck forward.
Talent Management and Development
As the Company pursues its goal of becoming the world’s premier research-based biopharmaceutical company, there is a consistent focus on the
importance of continuously developing its motivated and talented people. The Company is committed to talent growth for all, allowing its employees to move more
fluidly across the organization, unlocking an environment that allows them to shape their career pathways via non-linear and wide-ranging opportunities and
experience. Merck’s current talent management system supports company-wide performance management, leadership development, talent reviews and succession
planning. Annual performance reviews help further the professional development of the Company’s employees and ensure that the Company’s workforce is aligned
with the Company’s objectives. The Company seeks to continuously build the skills and capabilities of its workforce to accelerate talent, improve performance and
mitigate risk through relevant continuous learning experiences. This includes, but is not limited to, building leadership and management skills, as well as providing
technical and functional training to all employees.
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Environmental Matters
Environmental Sustainability
The Company is committed to enabling a safe, sustainable and healthy future and strives to be a strong environmental steward, evolving its efforts in the
face of a changing world. The Company’s environmental sustainability strategy has three focus areas:
•
Driving operational efficiency;
•
Designing new products to minimize environmental impact; and
•
Reducing any impacts in the Company’s upstream and downstream value chain.
The Company ensures its ongoing commitment to these areas through thoughtful governance. Its Environmental, Health and Safety Council (EHS Council)
is a cross-functional body with leadership representation from each area of the Company’s business and is responsible for overseeing its environmental sustainability
strategy, policy, and risk mitigation controls. The EHS Council monitors performance against the Company’s goals and increases transparency on environmental
issues within the Company, senior management, and the Board of Directors (the Board). The Global Safety and Environment (GSE) vice president communicates
progress on environmental sustainability goals, objectives and other important issues to the Board, senior management and the EHS Council. Additionally, the head of
the Environmental Sustainability Center of Excellence is a member of the Environmental, Social and Governance Strategy Management Team, a group of functional
experts that advises, shapes, and drives the Company’s long-term sustainability strategy with guidance from an internal cross divisional forum of senior leaders. The
Company’s cross-functional Environmental Sustainability Implementation Steering Committee was designated by the EHS Council to oversee the progress of
initiatives that support the achievement of the Company’s public goals and provide guidance on resourcing of the Company’s environmental sustainability strategy.
Merck believes that climate change could present risks to its business, as discussed in further detail in Item 1A. “Risk Factors” below under the headings
“Climate change or legal, regulatory or market measures to address climate change may negatively affect the Company’s business, results of operations, cash flows
and prospects” and “Environmental, social and governance matters may impact the Company’s business and reputation.” Some of the potential impacts of climate
change to the Company’s business include increased operating costs due to additional regulatory requirements, physical risks to the Company’s facilities, water
limitations and disruptions to its supply chain. These potential risks are integrated into the Company’s business planning, including investment in reducing energy
usage, water use and greenhouse gas (GHG) emissions.
The Company has adopted a set of climate goals to help position it to succeed in an increasingly resource-constrained world. These goals address the
rising expectations of the Company’s customers, investors, external stakeholders and employees regarding the environmental impact of its operations and supply
chain. The Company’s climate goals include reducing Scope 1 and 2 operational GHG emissions 46% by 2030 (from a 2019 baseline), sourcing 100% of its
purchased electricity from renewable sources by 2025, and reducing Scope 3 GHG emissions 30% by 2030 (from a 2019 baseline). In 2024, the Company committed
to a net-zero target for its GHG emissions across its global operations (Scopes 1, 2 and 3) by 2045, aligned with the guidelines of the Science Based Targets initiative
(SBTi). Other environmental sustainability initiatives of the Company include:
•
Partnering for progress across the Company’s value chain. The Company is working to reduce its Scope 3 emissions through a robust supplier
engagement approach to drive collaboration upstream and downstream in its value chain. By engaging with its suppliers, the Company can identify
key ways to reduce its GHG emissions and pinpoint additional tangible benefits for the business.
•
Playbooks for a sustainable environment. To help direct and track projects in support of its goals, the Company has developed a series of guidance
documents for its global sites. In 2021, the Company launched its Low Carbon Transition Playbook (LCTP), a common platform that includes a gap
assessment to help the Company’s global sites evaluate the maturity of their energy programs and help create short- and long-term plans to reduce
sites’ carbon intensity and build toward a low-carbon future. Based on learnings from use, the Company issued LCTP 2.0 in 2022 with a capability to
facilitate knowledge sharing across sites. In 2022, the Company also created the Waste Diversion Playbook, which takes a similar approach to guide
sites on developing a roadmap to their and the Company’s shared 2025 goals on waste diversion, including local waste-diversion strategies and
environmentally responsible procurement practices. In 2024, the Company expanded this list with the addition of a Water Conservation Playbook. This
approach guides projects consistently across the Company’s global network of sites and enables continuous improvement toward meetings its goals.
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•
Realizing the benefits of green and sustainable science. The Company believes that meeting its environmental sustainability goals is intrinsically
linked to the creation of innovative, cost-efficient manufacturing processes with low environmental impact. The Company aims to develop efficient and
sustainable processes at product launch, with the goal of minimizing material use and waste from its commercial manufacturing. The Company utilizes
an innovative “green-by-design” development strategy with a goal to progress from an initial early clinical supply route to a fully optimized and
sustainable commercial manufacturing process. In 2024, for the fifth year in a row, the Company received the Peter J. Dunn Award for Green
Chemistry and Engineering Impact, an award given by the American Chemical Society in recognition of outstanding implementation of novel green
chemistry in the pharmaceutical industry.
•
Waste diversion. The Company continuously evaluates its sites’ waste disposal methods to gain a better understanding of its network and changes
therein, as well as to identify risks and opportunities in its value chain. Based on its evaluation, the Company implemented programs to divert non-
hazardous landfill waste from its two highest landfill-generating sites. The Company remains committed to its 2025 public waste diversion goals of no
more than 20% of the Company’s global operational waste sent to landfills or incinerators (without energy recovery) and that 50% of its sites will send
zero waste to landfills by 2025.
•
Water as a shared resource. As water is a key input to the Company’s manufacturing operations, the Company assesses water risk throughout its
network as a standard business practice. Both of the Company’s priority water-stress risk sites have conservation plans in place, and site staff are
actively working on water use reduction and recycling improvement projects. These projects are consistent with the Company’s ongoing commitment
to achieving its stated goal of maintaining global water use at or below 2015 levels by 2025. The Company’s sites are employing various technologies
and techniques aimed at reducing its water footprint and improving operational performance. The Company’s endorsement of the United Nations CEO
Water Mandate enables alignment of the Company’s water program with the mandate’s principles. The Company has continued to identify
partnerships to help it advance its water stewardship priorities in the areas in which it operates.
The Company continues to review and explore other opportunities to further its environmental strategy and will evaluate potential impacts and
commitments.
Management does not believe that expenditures related to these initiatives should have a material adverse effect on the Company’s financial condition,
results of operations, liquidity or capital resources for any year.
Environmental Regulation and Remediation
The Company believes that there are no compliance issues associated with applicable environmental laws and regulations that would have a material
adverse effect on the Company. The Company is also remediating environmental contamination resulting from past industrial activity at certain of its sites.
Expenditures for remediation and environmental liabilities were $4 million in 2024 and are estimated to be $26 million in the aggregate for the years 2025 through
2029. These amounts do not consider potential recoveries from other parties. The Company has taken an active role in identifying and accruing for these costs and, in
management’s opinion, the liabilities for all environmental matters that are probable and reasonably estimable have been accrued and totaled $41 million and $42
million at December 31, 2024 and 2023, respectively. Although it is not possible to predict with certainty the outcome of these matters, or the ultimate costs of
remediation, management does not believe that any reasonably possible expenditures that may be incurred in excess of the liabilities accrued should exceed
approximately $46 million in the aggregate. Management also does not believe that these expenditures should result in a material adverse effect on the Company’s
financial condition, results of operations or liquidity for any year.
Geographic Area Information
The Company’s operations outside the U.S. are conducted primarily through subsidiaries. Sales worldwide by subsidiaries outside the U.S. as a
percentage of total Company sales was 50% in 2024, 53% in 2023 and 54% in 2022.
The Company’s worldwide business is subject to risks of currency fluctuations, governmental actions and other governmental proceedings abroad. The
Company does not regard these risks as a deterrent to further expansion of its operations abroad. However, the Company closely reviews its methods of operations
and adopts strategies responsive to changing economic and political conditions.
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Merck has operations in countries located in Latin America, the Middle East, Africa, Eastern Europe and Asia Pacific. Business in these developing areas,
while sometimes less stable, offers important opportunities for growth over time.
Available Information
The Company’s Internet website address is merck.com. The Company will make available, free of charge at the “Investors” portion of its website, its Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are electronically filed with, or
furnished to, the U.S. Securities and Exchange Commission (SEC). The address of that website is sec.gov. In addition, the Company will provide without charge a
copy of its Annual Report on Form 10-K, including financial statements and schedules, upon the written request of any shareholder to the Office of the Secretary,
Merck & Co., Inc., 126 East Lincoln Avenue, Rahway, NJ 07065 U.S.A.
The Company’s corporate governance guidelines and the charters of the Board of Directors’ four standing committees are available on the Company’s
website at www.merck.com/company-overview/leadership/board-of-directors/ and all such information is available in print to any shareholder who requests it from the
Company.
The Company’s 2023/2024 Impact Report, which provides enhanced sustainability disclosures, is available in the Sustainability section of the Company’s
website at www.merck.com. Information in the Company’s Impact Report is not incorporated by reference into this Form 10-K.
Item 1A.
Risk Factors.
Summary Risk Factors
The Company is subject to a number of risks that if realized could materially adversely affect its business, results of operations, cash flows, financial
condition or prospects. The following is a summary of the principal risk factors facing the Company:
•
The Company is dependent on its patent rights, and if its patent rights are invalidated or circumvented, its business could be materially adversely
affected.
•
As the Company’s products lose market exclusivity, the Company generally experiences a significant and rapid loss of sales from those products.
•
Key products generate a significant amount of the Company’s profits and cash flows, and any events that adversely affect the markets for its leading
products could have a material adverse effect on the Company’s results of operations and financial condition.
•
The Company’s research and development efforts may not succeed in developing commercially successful products and the Company may not be
able to acquire commercially successful products in other ways; consequently, the Company may not be able to replace sales of successful products
that lose patent protection.
•
The Company’s success is dependent on the successful development and marketing of new products, which are subject to substantial risks.
•
The Company faces continued pricing pressure with respect to its products.
•
Unfavorable or uncertain economic conditions, together with cost-reduction measures being taken by certain governments, could negatively affect the
Company’s operating results.
•
The Company faces intense competition from both lower cost generic and biosimilar products and competitors’ products.
•
The Company has significant global operations, which expose it to additional risks, and any adverse event could have a material adverse effect on the
Company’s results of operations and financial condition.
•
Climate change or legal, regulatory or market measures to address climate change may negatively affect the Company’s business, results of
operations, cash flows and prospects.
•
Environmental, social and governance matters may impact the Company’s business and reputation.
•
Failure to attract and retain highly qualified personnel could affect the Company’s ability to successfully develop and commercialize products.
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•
The Company may experience difficulties and delays in manufacturing certain of its products, including vaccines.
•
The Company’s business in China has grown in the past few years, and the importance of China to the Company’s overall pharmaceutical and
vaccines business has increased accordingly. In 2024, the Company experienced lower sales of Gardasil/Gardasil 9 in China and expects that sales of
Gardasil/Gardasil 9 in China will decline significantly in 2025.
•
The Company may not be able to realize the expected benefits of its investments in emerging markets.
•
The Company is exposed to market risk from fluctuations in currency exchange rates and interest rates.
•
Pharmaceutical products can develop unexpected safety or efficacy concerns.
•
Reliance on third-party relationships and outsourcing arrangements could materially adversely affect the Company’s business.
•
Negative events in the animal health industry could have a material adverse effect on future results of operations and financial condition of the
Company or its Animal Health business.
•
Biologics and vaccines carry unique risks and uncertainties, which could have a material adverse effect on the Company’s future results of operations
and financial condition.
•
The health care industry in the U.S. has been, and will continue to be, subject to increasing regulation and political action.
•
The Company’s products, including products in development, cannot be marketed unless the Company obtains and maintains regulatory approval.
•
Developments following regulatory approval may adversely affect sales of the Company’s products.
•
The Company is subject to a variety of U.S. and international laws and regulations.
•
The Company is subject to evolving and complex tax laws, which may result in additional liabilities that may affect results of operations and financial
condition.
•
Adverse outcomes in current or future legal matters could negatively affect Merck’s business.
•
Product liability insurance for products may be limited, cost prohibitive or unavailable.
•
The Company is increasingly dependent on sophisticated software applications and computing infrastructure, including the use of cloud-based
applications and environments. The Company continues to be a target of cyber-attacks that could lead to a disruption of its worldwide operations,
including manufacturing, research and sales operations.
•
The Company is increasing its use of artificial intelligence (AI) systems to automate processes, analyze data, and support decision-making which
poses inherent risks.
•
Social media and mobile messaging platforms present risks and challenges.
The above list is not exhaustive, and the Company faces additional challenges and risks. Investors should carefully consider all of the information set forth
in this Form 10-K, including the following risk factors, before deciding to invest in any of the Company’s securities.
Risk Factors
The risks below are not the only ones the Company faces. Additional risks not currently known to the Company or that the Company presently deems
immaterial may also impair its business operations. The Company’s business, financial condition, results of operations, cash flows or prospects could be materially
adversely affected by any of these risks. This Form 10-K also contains forward-looking statements that involve risks and uncertainties. The Company’s results could
materially differ from those anticipated in these forward-looking statements as a result of certain factors, including the risks it faces described below and elsewhere.
See “Cautionary Factors that May Affect Future Results” below.
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Risks Related to the Company’s Business
The Company is dependent on its patent rights, and if its patent rights are invalidated or circumvented, its business could be materially
adversely affected.
Patent protection is considered, in the aggregate, to be of material importance to the Company’s marketing of human health and animal health products in
the U.S. and in most major foreign markets. Patents covering products that it has introduced normally provide market exclusivity, which is important for the successful
marketing and sale of its products. The Company seeks patents covering each of its products in each of the markets where it intends to sell the products and where
meaningful patent protection is available.
Even if the Company succeeds in obtaining patents covering its products, third parties or government authorities may challenge or seek to invalidate or
circumvent its patents and patent applications. It is important for the Company’s business to successfully assert and defend the patent rights that provide market
exclusivity for its products. The Company is often involved in patent disputes relating to challenges to its patents or claims by third parties of infringement against the
Company. The Company asserts and defends its patents both within and outside the U.S., including by filing claims of infringement against other parties. See Item 8.
“Financial Statements and Supplementary Data,” Note 10. “Contingencies and Environmental Liabilities” below. In particular, manufacturers of generic or biosimilar
pharmaceutical products from time to time file abbreviated NDAs or BLAs with the FDA seeking to market generic/biosimilar forms of the Company’s products prior to
the expiration of relevant patents owned or licensed by the Company. The Company normally responds by asserting one or more of its patents with a lawsuit alleging
patent infringement. Patent litigation and other challenges to the Company’s patents are costly and unpredictable and may deprive the Company of market exclusivity
for a patented product or, in some cases, third-party patents may prevent the Company from marketing and selling a product in a particular geographic area.
Additionally, certain foreign governments have indicated that compulsory licenses to patents may be granted in the case of national emergencies or in other
circumstances, which could diminish or eliminate sales and profits from those regions and negatively affect the Company’s results of operations. Further, court
decisions relating to other companies’ patents, potential legislation in both the U.S. and certain foreign markets relating to patents, as well as regulatory initiatives may
result in a more general weakening of intellectual property protection.
If one or more important products lose patent protection in profitable markets, sales of those products are likely to decline significantly as a result of generic
versions of those products becoming available. The Company’s results of operations may be adversely affected by the lost sales unless and until the Company has
launched commercially successful products that replace the lost sales. In addition, if products that were measured at fair value and capitalized in connection with
acquisitions experience difficulties in the market that negatively affect product cash flows, the Company may recognize material non-cash impairment charges with
respect to the value of those products.
A chart listing the key patent protection for certain of the Company’s marketed products, and U.S. patent protection for candidates in Phase 3 clinical
development is set forth above in Item 1. “Business — Patents, Trademarks and Licenses.”
As the Company’s products lose market exclusivity, the Company generally experiences a significant and rapid loss of sales from those
products.
The Company depends upon patents to provide it with exclusive marketing rights for its products for some period of time. Loss of patent protection for one
of the Company’s products typically leads to a significant and rapid loss of sales for that product as lower priced generic versions of that drug become available. In the
case of products that contribute significantly to the Company’s sales, the loss of market exclusivity can have a material adverse effect on the Company’s business,
cash flows, results of operations, financial condition and prospects. The Company lost market exclusivity for Bridion in Europe and Japan in 2023 and 2024,
respectively, and the Company has experienced a substantial decline in Bridion sales in those markets. Bridion will lose market exclusivity in the U.S. in 2026 (subject
to patent litigation discussed below) and the Company expects that sales of Bridion in the U.S. will decline substantially thereafter. In addition, the Company expects
U.S. sales of Keytruda to decline beginning in January 2028 upon implementation of government pricing under the IRA, and to further decline upon loss of market
exclusivity following expiration of the U.S. compound patent in December 2028. The Company expects to lose market exclusivity in Europe for Keytruda in 2031
following compound patent expiration. There may, however, be attempts by one or more companies to challenge the patent or launch a biosimilar product despite the
patent in some European jurisdictions following the expiration of data exclusivity in Europe in July 2026.
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Key products generate a significant amount of the Company’s profits and cash flows, and any events that adversely affect the markets for its
leading products could have a material adverse effect on the Company’s results of operations and financial condition.
The Company’s ability to generate profits and operating cash flows depends largely upon the continued profitability of the Company’s key products, such
as Keytruda, Gardasil/Gardasil 9, Lynparza, Bravecto, and Bridion. In 2024, the Company’s oncology portfolio, led by Keytruda, represented substantially all of the
Company’s revenue growth. In particular, in the aggregate, in 2024, sales of Keytruda represented 46% of the Company’s total sales. As a result of the Company’s
dependence on key products, any event that adversely affects any of these products or the markets for any of these products, such as the slowing demand for
Gardasil/Gardasil 9 in China which the Company has experienced, could have a significant adverse impact on results of operations and financial condition. Other
events could include loss of patent protection, increased costs associated with manufacturing, generic or over-the-counter availability of the Company’s product or a
competitive product, the discovery of previously unknown side effects, results of post-approval trials, increased competition from the introduction of new, more effective
treatments and discontinuation or removal from the market of the product for any reason. Such events could have a material adverse effect on the sales of any such
products.
The Company’s research and development efforts may not succeed in developing commercially successful products and the Company may not
be able to acquire commercially successful products in other ways; consequently, the Company may not be able to replace sales of successful products
that lose patent protection.
In order to remain competitive, the Company, like other major pharmaceutical companies, must continue to launch new products. Expected declines in
sales of products after the loss of market exclusivity mean that the Company’s future success is dependent on its pipeline of new products, including new products that
it may develop through collaborations and joint ventures and products that it is able to obtain through license or acquisition. To accomplish this, the Company commits
substantial effort, funds and other resources to research and development, both through its own dedicated resources and through various collaborations with third
parties. There is a high rate of failure inherent in the research and development process for new drugs and vaccines. As a result, there is a high risk that funds
invested by the Company in research programs will not generate financial returns. This risk profile is compounded by the fact that this research has a long investment
cycle. To bring a pharmaceutical compound from the discovery phase to market may take a decade or more and failure can occur at any point in the process, including
later in the process after significant funds have been invested.
For a description of the research and development process, see Item 1. “Business — Research and Development” above. Each phase of testing is highly
regulated and during each phase there is a substantial risk that the Company will encounter serious obstacles or will not achieve its goals. Therefore, the Company
may abandon a product in which it has invested substantial amounts of time and resources. Some of the risks encountered in the research and development process
include the following: preclinical testing of a new compound may yield disappointing results; competing products from other manufacturers may reach the market first;
clinical trials of a new drug may not be successful; a new drug may not be effective or may have harmful side effects; a new drug may not be approved by the
regulators for its intended use; it may not be possible to obtain a patent for a new drug; payers may refuse to cover or reimburse the new product; or sales of a new
product may be disappointing.
The Company cannot state with certainty when or whether any of its products now under development will be approved or launched; whether it will be able
to develop, license or otherwise acquire compounds, product candidates or products; or whether any products, once launched, will be commercially successful. The
Company must maintain a continuous flow of successful new products and successful new indications for existing products sufficient both to cover its substantial
research and development costs and to replace sales that are lost as profitable products lose market exclusivity or are displaced by competing products or therapies.
Failure to do so in the short term or long term would have a material adverse effect on the Company’s business, results of operations, cash flows, financial condition
and prospects.
The Company’s success is dependent on the successful development and marketing of new products, which are subject to substantial risks.
Products that appear promising in development may fail to reach the market or fail to succeed for numerous reasons, including the following:
•
findings of ineffectiveness, superior safety or efficacy of competing products, or harmful side effects in clinical or preclinical testing;
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•
failure to receive the necessary regulatory approvals, including delays in the approval of new products and new indications, or the anticipated labeling,
and uncertainties about the time required to obtain regulatory approvals and the benefit/risk standards applied by regulatory agencies in determining
whether to grant approvals;
•
failure in certain markets to obtain reimbursement commensurate with the level of innovation and clinical benefit presented by the product;
•
lack of economic feasibility due to manufacturing costs or other factors; and
•
preclusion from commercialization by the proprietary rights of others.
In the future, if certain pipeline programs are cancelled or if the Company believes that their commercial prospects have been reduced, the Company may
recognize material non-cash impairment charges for those programs that were measured at fair value and capitalized in connection with acquisitions or certain
collaborations.
Failure to successfully develop and market new products in the short term or long term would have a material adverse effect on the Company’s business,
results of operations, cash flows, financial condition and prospects.
The Company faces continued pricing pressure with respect to its products.
The Company faces continued pricing pressure globally and, particularly in mature markets, from managed care organizations, government agencies and
programs that could negatively affect the Company’s sales and profit margins. In the U.S., these include (i) U.S. federal laws and regulations related to Medicare and
Medicaid, including the Medicare Prescription Drug Improvement and Modernization Act of 2003, the ACA, and the IRA, (ii) practices of managed care groups and
institutional and governmental purchasers, and (iii) state activities aimed at increasing price transparency, including new laws as noted above in Item 1. “Competition
and the Health Care Environment.” Changes to the health care system enacted as part of health care reform in the U.S., as well as increased purchasing power of
entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, could result in further pricing pressures. As noted in Item 1. “Competition and
the Health Care Environment,” in 2023, HHS selected Januvia for the first year of the IRA’s price setting program, which will result in a government set price becoming
effective on January 1, 2026. Government price setting may also impact pricing in the private market, negatively affecting the Company’s performance. In January
2025, HHS announced that Janumet and Janumet XR have been selected for government price setting, which will become effective on January 1, 2027. Furthermore,
the Company expects that in 2026 HHS will include Keytruda in a subsequent selection of products to undergo IRA price setting, with such price to become effective
on January 1, 2028 and the Company expects that, as a result, U.S. sales of Keytruda will decline after that time. In addition, in the U.S., larger customers have
received higher rebates on drugs in certain highly competitive categories. The Company must also compete to be placed on formularies of managed care
organizations. Exclusion of a product from a formulary can lead to reduced usage in the managed care organization. The Company is also facing pricing pressure from
purchasers of certain vaccines in highly competitive categories.
Outside the U.S., numerous major markets, including the EU, Japan and China have pervasive government involvement in funding health care and, in that
regard, fix the pricing and reimbursement of pharmaceutical and vaccine products. Consequently, in those markets, the Company is subject to government decision
making and budgetary actions with respect to its products. In Japan, the pharmaceutical industry is subject to government-mandated annual price reductions of
pharmaceutical products and certain vaccines. Furthermore, the Japanese government can order re-pricing for specific products if it determines that use of such
product will exceed certain thresholds defined under applicable re-pricing rules.
The Company expects pricing pressures to continue in the future.
Unfavorable or uncertain economic conditions, together with cost-reduction measures being taken by certain governments, could negatively
affect the Company’s operating results.
The Company’s business may be adversely affected by local and global economic conditions, including with respect to inflation, interest rates, and costs of
raw materials and packaging. Uncertainty in global economic and geopolitical conditions may result in a slowdown to the global economy that could affect the
Company’s business by reducing the prices that drug wholesalers and retailers, hospitals, government agencies and managed health care providers may be able or
willing to pay for the Company’s products or by reducing the demand for the Company’s products, which could in turn negatively impact the Company’s sales and
result in a material adverse effect on the Company’s business, cash flows, results of operations, financial condition and prospects.
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As discussed above in Item 1. “Competition and the Health Care Environment,” 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 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 several international markets,
government-mandated pricing actions have reduced prices of generic and patented drugs. In addition, the Company’s sales performance in 2024 was negatively
affected by other cost-reduction measures taken by governments and other third parties to lower health care costs, including in the U.S., the expansion of the Federal
340B Drug Discount Program. The Company anticipates all of these actions, and additional actions in the future, will continue to negatively affect sales and profits.
If credit and economic conditions worsen, the resulting economic and currency impacts in the affected markets and globally could have a material adverse
effect on the Company’s results.
The Company faces intense competition from both lower cost generic and biosimilar products and competitors’ products.
In general, the Company faces increasing competition from lower-cost generic and biosimilar products. The patent rights that protect its products are of
varying strengths and durations. In addition, in some countries, patent protection is significantly weaker than in the U.S. or in the EU. In the U.S. and the EU, political
pressure to reduce spending on prescription drugs has led to legislation and other measures that encourage the use of generic and biosimilar products. Although it is
the Company’s policy to actively protect its patent rights, generic challenges to the Company’s products can arise at any time, and the Company’s patents may not
prevent the emergence of generic competition for its products.
Loss of patent protection for a product typically is followed promptly by generic or biosimilar substitutes, reducing the Company’s sales of that product.
Availability of generic substitutes for the Company’s drugs may adversely affect its results of operations and cash flows. In addition, proposals emerge from time to
time in the U.S. and other countries for legislation to further encourage the early and rapid approval of generic drugs. Any such proposal that is enacted into law could
worsen this substantial negative effect on the Company’s sales, business, cash flows, results of operations, financial condition and prospects.
Also, the Company’s products face intense competition from competitors’ products. This competition may increase as new products enter the market. In
such an event, the competitors’ products may be safer or more effective, more convenient to use, have better insurance coverage or reimbursement levels or be more
effectively marketed and sold than the Company’s products. Alternatively, in the case of generic competition, including the generic availability of competitors’ branded
products, they may be equally safe and effective products that are sold at a substantially lower price than the Company’s products. As a result, if the Company fails to
maintain its competitive position, this could have a material adverse effect on its business, cash flows, results of operations, financial condition and prospects. In
addition, if products that were measured at fair value and capitalized in connection with acquisitions experience difficulties in the market that negatively impact product
cash flows, the Company may recognize material non-cash impairment charges with respect to the value of those products.
The Company has significant global operations, which expose it to additional risks, and any adverse event could have a material adverse effect
on the Company’s results of operations and financial condition.
The extent of the Company’s operations outside the U.S. is significant. Risks inherent in conducting a global business include:
•
changes in medical reimbursement policies and programs and pricing restrictions in key markets;
•
multiple regulatory requirements that could restrict the Company’s ability to manufacture and sell its products in key markets;
•
trade protection measures and import or export licensing requirements, including the imposition of trade sanctions or similar restrictions by the U.S. or
other governments;
•
foreign exchange fluctuations;
•
diminished protection of intellectual property in some countries; and
•
possible nationalization and expropriation.
The U.S. government has announced plans to significantly increase tariffs on foreign imports into the U.S., particularly from Canada and Mexico and has
already increased tariffs on imports from China. It is too early for the
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Company to assess if, or to what extent, such policies will be implemented or continue to be implemented, and the extent of any measures that have been or will be
taken by any impacted countries. In addition, there may be changes to the Company’s business if there is instability, disruption or destruction in a significant
geographic region, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest; and natural or man-made disasters, including famine, flood, fire,
earthquake, storm or disease. Events like these, such as the ongoing war between Russia and Ukraine, and the conflict in the Middle East, and/or policy changes with
respect to international trade protection measures, could result in material adverse effects on macroeconomic conditions, currency exchange rates and financial
markets, and may adversely affect the Company’s business, results of operations, cash flows and financial condition.
Climate change or legal, regulatory or market measures to address climate change may negatively affect the Company’s business, results of
operations, cash flows and prospects.
The Company believes that climate change has the potential to negatively affect its business, results of operations, cash flows and prospects. The Company
is exposed to physical risks (such as extreme weather conditions, inland flooding or rising sea levels), risks in transitioning to a low-carbon economy (such as
additional legal or regulatory requirements, changes in technology, market risk and reputational risk) and social and human effects (such as population dislocations
and harm to health and well-being) associated with climate change. These risks can be either acute (short-term) or chronic (long-term).
The adverse impacts of climate change include increased frequency and severity of natural disasters and extreme weather events such as hurricanes,
tornados, wildfires (exacerbated by drought), flooding, and extreme heat. Extreme weather, inland flooding and sea-level rise pose physical risks to the Company’s
facilities as well as those of its suppliers. Such risks include losses incurred as a result of physical damage to facilities, loss or spoilage of inventory, and business
interruption caused by such natural disasters and extreme weather events. Other potential physical impacts due to climate change include reduced access to high-
quality water in certain regions and the loss of biodiversity, which could impact future product development. These risks could disrupt the Company’s operations and its
supply chain, which may result in increased costs.
New legal and regulatory requirements are being enacted to prevent, mitigate, or adapt to the implications of a changing climate and its effects on the
environment. These regulations, which may differ across jurisdictions, could result in the Company being subject to new or expanded carbon pricing or taxes,
increased compliance costs, restrictions on GHG emissions, investment in new technologies, increased GHG emission disclosure (including costs resulting from
mandatory or voluntary reporting, diligence or disclosure) and transparency, recurring investments in data gathering and reporting systems, upgrades of facilities to
meet new building codes, and the redesign of utility systems, which could increase the Company’s operating costs, including the cost of electricity and energy used by
the Company. The Company’s supply chain would likely be subject to these same transitional risks and would likely pass along any increased costs to the Company,
which may affect the Company’s ability to procure raw materials or other supplies required for the operation of the Company’s business at the quantities and levels
required.
Environmental, social and governance matters may impact the Company’s business and reputation.
Governmental authorities, non-governmental organizations, customers, investors, external stakeholders and employees are sensitive to environmental,
social and governance concerns, such as human capital, climate change, water use, recyclability or recoverability of packaging, and plastic waste. The focus on these
concerns may lead to new requirements that could result in increased costs associated with developing, manufacturing and distributing the Company’s products, and
related reporting obligations. The Company’s ability to compete could also be affected by changing customer preferences and requirements, such as growing demand
for validated net zero GHG emission targets and more environmentally friendly products, packaging or supplier practices, or by failure to meet such customer
expectations or demand. The Company risks negative shareholder reaction, including from proxy advisory services, as well as damage to its brand and reputation and
inability to attract and retain employee talent, if the Company fails to act responsibly, or if the Company is perceived to not be acting responsibly, in key areas,
including equitable access to medicines and vaccines, product quality and safety, environmental stewardship, reduction of GHG emissions, support for local
communities, corporate governance and transparency, and addressing human capital factors in the Company’s operations. Responding to these considerations as
well as any applicable regulatory requirements and implementation of the Company’s goals and initiatives involves risks and uncertainties, requires investments, and
depends in part on third-party performance or data that is outside of the Company’s control. In addition, some governmental authorities, non-governmental
organizations, and stakeholders may disagree with the Company’s goals and initiatives. If the Company does not meet the evolving and varied regulatory
requirements and expectations of its investors, customers and other stakeholders, the Company could experience negative impacts to the Company’s business and
results of operations. In addition, the Company is subject to expanding mandatory and voluntary reporting, diligence and disclosure requirements, including the EU’s
Corporate
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Sustainability Reporting Directive (CSRD) and potentially the SEC’s climate-related reporting requirements (which are currently stayed), the legislation in California
requiring reporting of GHG emissions and climate risk, and similar regulatory requirements in other jurisdictions outside the U.S. These evolving regulatory
requirements are likely to result in increased costs and complexities of compliance in order to collect, measure and report on the relevant information.
Failure to attract and retain highly qualified personnel could affect the Company’s ability to successfully develop and commercialize products.
The Company’s success is largely dependent on its continued ability to attract and retain highly qualified scientific, technical and management personnel,
as well as personnel with expertise in clinical research and development, governmental regulation and commercialization. Competition for qualified personnel in the
pharmaceutical industry, both in the U.S. and internationally, is intense. The Company cannot be sure that it will be able to attract and retain qualified personnel or that
the costs of doing so will not materially increase.
The Company may experience difficulties and delays in manufacturing certain of its products, including vaccines.
Merck from time to time experiences difficulties in manufacturing certain of its products, including vaccines. For example, the Company is currently
experiencing manufacturing delays related to Varivax and ProQuad which will result in supply constraints in 2025. The Company may, in the future, experience other
difficulties and delays in manufacturing its products, such as (i) failure of the Company or any of its vendors or suppliers to comply with Current Good Manufacturing
Practices and other applicable regulations and quality assurance guidelines that could lead to manufacturing shutdowns, product shortages and delays in product
manufacturing; (ii) delays related to the construction of new facilities or the expansion of existing facilities, including those intended to support future demand for the
Company’s products; and (iii) other manufacturing or distribution problems including supply chain delays, shortages in raw materials, changes in manufacturing
production sites and limits to manufacturing capacity due to regulatory requirements, changes in types of products produced, or physical limitations that could impact
continuous supply. In addition, the Company could experience difficulties or delays in manufacturing its products caused by natural disasters, such as hurricanes.
Manufacturing difficulties can result in product shortages, leading to lost sales and reputational harm to the Company.
The Company’s business in China has grown in the past few years, and the importance of China to the Company’s overall pharmaceutical and
vaccines business has increased accordingly. In 2024, the Company experienced lower sales of Gardasil/Gardasil 9 in China and expects that sales of
Gardasil/Gardasil 9 in China will decline significantly in 2025.
The Company’s business in China has grown in the past few years, and the importance of China to the Company’s overall pharmaceutical and vaccines
business has increased accordingly. Beginning in mid-2024, the Company observed a significant decline in shipments from its distributor and commercialization
partner in China, Chongqing Zhifei Biological Products Co., Ltd. (Zhifei), to disease and control prevention institutions and correspondingly into the points of
vaccination, resulting in above normal inventory levels at Zhifei. Accordingly, the Company shipped less than its contracted doses to Zhifei in the latter part of 2024.
Lower demand in China persisted and, at the end of 2024, overall channel inventory levels in China remained elevated at above normal levels. Therefore, the
Company made a decision to temporarily pause shipments to China beginning in February 2025 through at least the middle of the year and as a result, combined
sales of Gardasil/Gardasil 9 will decline significantly in 2025 compared with 2024. Furthermore, the government's anti-corruption campaign, particularly the increased
number of inspections and audits, could substantially increase the administrative burden on health care institutions and health care professionals throughout the whole
industry in China and potentially have a negative impact on the Company's sales. In addition to its commercial operations, the Company has significant research and
manufacturing operations in China, including working with Chinese entities such as Wuxi Apptech Co., Ltd. If geopolitical tensions were to increase and disrupt the
Company’s operations in China, such disruption could result in a material adverse effect on the Company’s product development, sales, business, cash flows, results
of operations, financial condition and prospects.
Also, continued growth of the Company’s business in China is dependent upon ongoing development of a favorable environment for innovative
pharmaceutical products and vaccines, sustained access for the Company’s currently marketed products, and the absence of trade impediments or adverse pricing
controls. As noted above in Item 1. “Competition and the Health Care Environment,” pricing pressure in China has increased as the Chinese government has been
taking steps to reduce costs, including implementing health care reform that has led to the acceleration of generic substitution, where available. While the mechanism
for drugs being added to the NRDL evolves, inclusion may require a price negotiation which could impact the outlook in the market for selected brands. A
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new NRDL was recently completed in which new entries averaged 63% price reductions. While pricing pressure has always existed in China, health care reform has
increased this pressure in part due to the acceleration of generic substitution through the government’s VBP program. In 2019, the government implemented the VBP
program through a tendering process for mature products which have generic substitutes with a Generic Quality Consistency Evaluation approval. Mature products
that have entered into the last five rounds of VBP had, on average, a price reduction of more than 50%. The Company expects VBP to be a semi-annual process that
will have a significant impact on mature products moving forward.
The Company may not be able to realize the expected benefits of its investments in emerging markets.
The Company has been taking steps to increase its sales in emerging markets. However, there is no guarantee that the Company’s efforts to expand sales
in these markets will succeed. Some countries within emerging markets may be especially vulnerable to periods of global financial instability or may have very limited
resources to spend on health care. In order for the Company to operate successfully in emerging markets, it must attract and retain qualified personnel. The Company
may also be required to increase its reliance on third-party agents within less developed markets, which may affect its ability to realize continued growth and may also
increase the Company’s risk exposure. In addition, many of these countries have currencies that fluctuate substantially and, if such currencies devalue and the
Company cannot offset the devaluations, the Company’s financial performance within such countries could be adversely affected.
For all these reasons, sales within emerging markets carry significant risks. However, at the same time, macro-economic growth of selected emerging
markets is expected to lead to significant increased health care spending in those countries and access to innovative medicines for patients. A failure to maintain the
Company’s presence in emerging markets could therefore have a material adverse effect on the Company’s business, cash flows, results of operations, financial
condition and prospects.
The Company is exposed to market risk from fluctuations in currency exchange rates and interest rates.
The Company operates in multiple jurisdictions and virtually all sales are denominated in currencies of the local jurisdiction. Additionally, the Company has
entered and will enter into business development transactions, borrowings or other financial transactions that may give rise to currency and interest rate exposure.
Since the Company cannot, with certainty, foresee and mitigate against such adverse changes, fluctuations in currency exchange rates, interest rates and
inflation could negatively affect the Company’s business, cash flows, results of operations, financial condition and prospects. For example, Argentina is currently
experiencing hyperinflation, which is affecting the Company’s operations in that market.
In order to mitigate against the adverse impact of these market fluctuations, the Company will from time to time enter into hedging agreements. While
hedging agreements, such as currency options and forwards, and interest rate swaps, may limit some of the exposure to exchange rate and interest rate fluctuations,
such attempts to mitigate these risks may be costly and not always successful.
Pharmaceutical products can develop unexpected safety or efficacy concerns.
Unexpected safety or efficacy concerns can arise with respect to marketed products, whether or not scientifically justified, leading to product recalls,
withdrawals, or declining sales, as well as product liability, consumer fraud and/or other claims, including potential civil or criminal governmental actions.
Reliance on third-party relationships and outsourcing arrangements could materially adversely affect the Company’s business.
The Company depends on third parties, including suppliers, distributors, alliances with other pharmaceutical and biotechnology companies, and third-party
service providers, for key aspects of its business including development, manufacture and commercialization of its products and support for its information technology
(IT) systems. Failure of these third parties to meet their contractual, regulatory and other obligations to the Company or the development of factors that materially
disrupt the relationships between the Company and these third parties could have a material adverse effect on the Company’s business.
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Negative events in the animal health industry could have a material adverse effect on future results of operations and financial condition of the
Company or its Animal Health business.
Future sales of key animal health products could be adversely affected by a number of risk factors including certain risks that are specific to the animal
health business. For example, the outbreak of disease carried by animals, such as Avian Influenza or African Swine Fever, could lead to their widespread death and
precautionary destruction as well as the reduced consumption and demand for animals, which could adversely affect the Company’s results of operations. Also, the
outbreak of any highly contagious diseases near the Company’s main production sites could require the Company to immediately halt the manufacture of its animal
health products at such sites or force the Company to incur substantial expenses in procuring raw materials or products elsewhere. Other risks specific to animal
health include epidemics and pandemics affecting livestock, government procurement and pricing practices, weather and global agribusiness economic events. In
addition, in 2024, sales of Bravecto were $1.1 billion, which represented 19% of the Company’s Animal Health segment sales. Any negative event with respect to
Bravecto could have a material adverse effect on the Company’s Animal Health sales. If the Animal Health segment of the Company’s business becomes more
significant, the impact of any such events on future results of operations could also become more significant.
Biologics and vaccines carry unique risks and uncertainties, which could have a material adverse effect on the Company’s future results of
operations and financial condition.
The successful development, testing, manufacturing and commercialization of biologics and vaccines, particularly human and animal health vaccines, is a
long, complex, expensive and uncertain process. There are unique risks and uncertainties related to biologics and vaccines, including:
•
There may be limited access to, and supply of, normal and diseased tissue samples, cell lines, pathogens, bacteria, viral strains and other biological
materials. In addition, government regulations in multiple jurisdictions, such as the U.S. and the EU, could result in restricted access to, or transport or
use of, such materials. If the Company loses access to sufficient sources of such materials, or if tighter restrictions are imposed on the use of such
materials, the Company may not be able to conduct research activities as planned and may incur additional development costs.
•
The development, manufacturing and marketing of biologics and vaccines are subject to regulation by the FDA, the EMA and other regulatory bodies.
These regulations are often more complex and extensive than the regulations applicable to other pharmaceutical products. For example, in the U.S., a
BLA, including both preclinical and clinical trial data and extensive data regarding the manufacturing procedures, is required for human vaccine
candidates, and FDA approval is generally required for the release of each manufactured commercial human vaccine lot.
•
Manufacturing biologics and vaccines, especially in large quantities, is complex and may require the use of innovative technologies to handle living
micro-organisms. Each lot of an approved biologic and vaccine must undergo thorough testing for identity, strength, quality, purity and potency.
Manufacturing biologics requires facilities specifically designed for and validated for this purpose, and sophisticated quality assurance and quality
control procedures are necessary. Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping,
and quality control and testing, may result in lot failures, product recalls or spoilage. When changes are made to the manufacturing process, the
Company may be required to provide preclinical and clinical data showing the comparable identity, strength, quality, purity or potency of the biologics
and vaccines before and after such changes.
•
Biologics and vaccines are costly to manufacture because production ingredients are derived from living animal or plant material, and most biologics
and vaccines cannot be made synthetically. In particular, keeping up with the demand for vaccines may be difficult due to the complexity of producing
vaccines.
•
The use of biologically derived ingredients can lead to variability in the manufacturing process and could lead to allegations of harm, including
infections or allergic reactions, which allegations would be reviewed through a standard investigation process that could lead to closure of product
facilities due to possible contamination. Any of these events could result in substantial costs.
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Risks Relating to Government Regulation and Legal Proceedings
The health care industry in the U.S. has been, and will continue to be, subject to increasing regulation and political action.
As discussed above in Item 1. “Competition and the Health Care Environment,” the Company believes that the health care industry will continue to be
subject to increasing regulation as well as political and legal action, as future proposals to reform the health care system are considered by the Executive Branch,
Congress and state legislatures.
In 2022, Congress passed the 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, which has taken effect in 2025, and government price setting for certain Medicare Part D drugs, starting in 2026, and
Medicare Part B drugs starting in 2028. Furthermore, government price setting may also impact pricing in the private market, negatively affecting the Company’s
performance. As noted in Item 1. “Competition and the Health Care Environment,” in 2023, HHS selected Januvia for the first year of the IRA’s price setting program,
which will result in a government set price becoming effective on January 1, 2026. On January 17, 2025, HHS announced that Janumet and Janumet XR have been
selected for government price setting, which will become effective on January 1, 2027. Furthermore, the Company expects that in 2026 HHS will include Keytruda in a
subsequent selection of products to undergo IRA price setting, with such price to become effective on January 1, 2028 and the Company expects that, as a result,
U.S. sales of Keytruda will decline after that time.
In addition, in 2021, 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. These rebates act as a discount off the list price and eliminating the cap means that manufacturer
discounts paid to Medicaid can increase. Prior to this change, manufacturers have not been required to pay more than 100% of the Average Manufacturer Price (AMP)
in rebates to state Medicaid programs for Medicaid-covered drugs. As a result of this provision, manufacturers may have to pay state Medicaid programs more in
rebates than they received on sales of particular products. This change presents a risk to Merck for drugs that have high Medicaid utilization and rebate exposure that
is more than 100% of the AMP. 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 the Company’s performance. Also, the Company expects that states will continue their focus on
pharmaceutical pricing and will increasingly shift to more aggressive price control tools such as Prescription Drug Affordability Boards that have the authority to
conduct affordability reviews and establish upper payment limits and that Company products may be selected for such reviews.
In the U.S., members of the government have made public statements in favor of, and may take steps to implement, various regulatory changes that could
negatively impact the pharmaceutical industry, including the Company. Those potential changes include some related to vaccines and vaccine development, as well as
personnel and policy changes at the FDA and other government agencies and programs. For example, HHS could undergo changes that could make it more difficult
for the FDA to grant regulatory approvals for drugs and vaccines and the U.S. Centers for Disease Control and Prevention (CDC) to issue or maintain
recommendations for vaccines. Additionally, if the FDA drug user fee programs were eliminated, that could cause significant delays to facility inspections and
approvals of new products. It is too early for the Company to assess which, if any, of the policy changes that have been publicly referenced would be implemented,
and the Company cannot predict what additional future changes in the health care industry in general, or the pharmaceutical industry in particular, will occur; however,
any changes could have a material adverse effect on the Company’s business, cash flows, results of operations, financial condition and prospects.
The Company’s products, including products in development, cannot be marketed unless the Company obtains and maintains regulatory
approval.
The Company’s activities, including research, preclinical testing, clinical trials and the manufacturing and marketing of its products, are subject to extensive
regulation by numerous federal, state and local governmental authorities in the U.S., including the FDA, and by foreign regulatory authorities, including in the EU,
Japan and China. In the U.S., the FDA administers requirements covering the testing, approval, safety, effectiveness, manufacturing, labeling and marketing of
prescription pharmaceuticals and vaccines. In some cases, the FDA requirements have increased the amount of time and resources necessary to develop new
products and bring them to market in the U.S. Regulation outside the U.S. also is primarily focused on drug safety and effectiveness and, in many cases, reduction in
the cost of drugs. The FDA and foreign regulatory authorities, including in the EU, Japan and China, have substantial discretion to require additional testing, to delay or
withhold registration and marketing approval and to otherwise preclude distribution and sale of a product.
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Even if the Company is successful in developing new products, it will not be able to market any of those products unless and until it has obtained all
required regulatory approvals (which in limited circumstances may include authorizations for emergency use) in each jurisdiction where it proposes to market the new
products. Once obtained, the Company must maintain approval as long as it plans to market its new products in each jurisdiction where approval is required. The
Company’s failure to obtain approval, significant delays in the approval process, or its failure to maintain approval in any jurisdiction will prevent it from selling the
products in that jurisdiction and realizing sales.
Developments following regulatory approval may adversely affect sales of the Company’s products.
Even after a product reaches the market, certain developments following regulatory approval may decrease demand for the Company’s products, including
the following:
•
results in post-approval Phase 4 trials or other studies;
•
the re-review of products that are already marketed;
•
the recall or loss of marketing approval of products that are already marketed;
•
changing government standards or public expectations regarding safety, efficacy, quality or labeling changes;
•
scrutiny of advertising and promotion; and
•
the withdrawal of indications granted pursuant to accelerated approvals.
In the past, clinical trials and post-marketing surveillance of certain marketed drugs of the Company and of competitors within the industry have raised
concerns that have led to recalls, withdrawals or adverse labeling of marketed products. Clinical trials and post-marketing surveillance of certain marketed drugs also
have raised concerns among some prescribers and patients relating to the safety or efficacy of pharmaceutical products in general that have negatively affected the
sales of such products. In addition, increased scrutiny of the outcomes of clinical trials has led to increased volatility in market reaction. Further, these matters often
attract litigation and, even where the basis for the litigation is groundless, considerable resources may be needed to respond.
In addition, following in the wake of product withdrawals and other significant safety issues, health authorities such as the FDA, the EMA, Japan’s PMDA
and China’s NMPA have increased their focus on safety when assessing the benefit/risk balance of drugs. Some health authorities appear to have become more
cautious when making decisions about approvability of new products or indications.
If previously unknown side effects are discovered or if there is an increase in negative publicity regarding known side effects of any of the Company’s
products, it could significantly reduce demand for the product or require the Company to take actions that could negatively affect sales, including removing the product
from the market, restricting its distribution or applying for labeling changes. Further, in the environment in which all pharmaceutical companies operate, the Company
is at risk for product liability and consumer protection claims and civil and criminal governmental actions related to its products, research and/or marketing activities. In
addition, dissemination of promotional materials through evolving digital channels serves to increase visibility and scrutiny in the marketplace.
The Company is subject to a variety of U.S. and international laws and regulations.
The Company is currently subject to a number of government laws and regulations and, in the future, could become subject to new government laws and
regulations. The costs of compliance with such laws and regulations, or the negative results of non-compliance, could adversely affect the business, cash flows,
results of operations, financial condition and prospects of the Company; these laws and regulations include (i) additional health care reform initiatives in the U.S. or in
other countries, including additional mandatory discounts or fees; (ii) the U.S. Foreign Corrupt Practices Act (FCPA) or other anti-bribery and corruption laws; (iii) new
laws, regulations and judicial or other governmental decisions affecting pricing, drug reimbursement, and access or marketing within or across jurisdictions; (iv)
changes in intellectual property laws; (v) changes in accounting standards; (vi) new and increasing data privacy regulations and enforcement, particularly in the EU,
the U.S., and China; (vii) legislative mandates or preferences for local manufacturing of pharmaceutical or vaccine products; (viii) emerging and new global regulatory
requirements for reporting payments and other value transfers to health care professionals; (ix) sustainability regulations, such as the EU’s CSRD; and (x) the potential
impact of importation restrictions, embargoes, trade sanctions and legislative and/or other regulatory changes.
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The Company is subject to evolving and complex tax laws, which may result in additional liabilities that may affect results of operations and
financial condition.
The Company is subject to evolving and complex tax laws in the jurisdictions in which it operates. Significant judgment is required for determining the
Company’s tax liabilities, and the Company’s tax returns are routinely examined by various tax authorities. The Internal Revenue Service (IRS) is currently conducting
examinations of the Company’s tax returns for the years 2017 and 2018, including the one-time transition tax enacted under the Tax Cuts and Jobs Act of 2017
(TCJA). If the IRS disagrees with the Company’s transition tax position, it may result in a significant tax liability. The IRS is also currently conducting examinations of
the Company’s tax returns for the years 2021 and 2022. In addition, various state and foreign tax examinations are in progress. In connection with the Organization for
Economic Cooperation and Development (OECD) Base Erosion and Profit Shifting project, companies are required to disclose more information to tax authorities on
operations around the world, which may lead to greater audit scrutiny of profits earned in other countries. The Company believes that its accrual for tax contingencies
is adequate for all open years based on past experience, interpretations of tax law, and judgments about potential actions by tax authorities; however, due to the
complexity of tax contingencies, the ultimate resolution of any tax matters may result in payments greater or less than amounts accrued. In addition, the Company may
be negatively affected by changes in tax laws, or new tax laws, affecting, for example, tax rates, and/or revised tax law interpretations in domestic or foreign
jurisdictions, including, among others, any potential changes to the existing U.S. tax law by the Executive Branch and Congress, as well as any changes in tax law
resulting from the implementation of the OECD’s two-pillar solution to reform the international tax landscape.
The Company has taken the position, based on the opinions of tax counsel, that its distribution of Organon & Co. (Organon) common stock in connection
with the 2021 spin-off (Spin-Off) qualifies as a transaction that is tax-free for U.S. federal income tax purposes. If any facts, assumptions, representations, and
undertakings from the Company and Organon regarding the past and future conduct of their respective businesses and other matters are incorrect or not otherwise
satisfied, the Spin-Off may not qualify for tax-free treatment, which could result in significant U.S. federal income tax liabilities for the Company and its shareholders.
Adverse outcomes in current or future legal matters could negatively affect Merck’s business.
Current or future litigation, claims, proceedings and government investigations could preclude or delay the commercialization of Merck’s products or could
adversely affect Merck’s business, results of operations, cash flows, financial condition and prospects. Such legal matters may include, but are not limited to: (i)
intellectual property disputes; (ii) adverse decisions in litigation, including product safety and liability matters, such as the litigation involving Gardasil, consumer
protection and commercial cases; (iii) anti-bribery regulations, such as the FCPA, including compliance with ongoing reporting obligations to the government resulting
from any settlements; (iv) recalls or withdrawals of pharmaceutical products or forced closings of manufacturing plants; (v) product pricing and promotional matters;
(vi) lawsuits, claims and administrative proceedings asserting, or investigations into, violations of securities, antitrust, federal and state pricing, consumer protection,
data privacy and other laws and regulations; (vii) environmental, health, safety and sustainability matters, including regulatory actions in response to climate change;
and (viii) tax liabilities resulting from assessments from tax authorities.
See Item 8. “Financial Statements and Supplementary Data,” Note 10, “Contingencies and Environmental Liabilities” for more information on the
Company’s legal matters.
Product liability insurance for products may be limited, cost prohibitive or unavailable.
As a result of a number of factors, product liability insurance has become less available while the cost of such insurance has increased significantly. The
Company is subject to a substantial number of product liability claims. See Item 8. “Financial Statements and Supplementary Data,” Note 10. “Contingencies and
Environmental Liabilities” below for more information on the Company’s current product liability litigation. With respect to product liability, the Company self-insures
substantially all of its risk, as the availability of commercial insurance has become more restrictive. The Company has evaluated its risks and has determined that the
cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, has no insurance for most product liabilities.
The Company will continually assess the most efficient means to address its risk; however, there can be no guarantee that insurance coverage will be obtained or, if
obtained, will be sufficient to fully cover product liabilities that may arise.
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Risks Related to Technology
The Company is increasingly dependent on sophisticated software applications and computing infrastructure, including the use of cloud-based
applications and environments. The Company continues to be a target of cyber-attacks that could lead to a disruption of its worldwide operations,
including manufacturing, research and sales operations.
The Company is increasingly dependent on sophisticated software applications, complex information technology systems, computing infrastructure, and
cloud service providers (collectively, IT systems) to conduct critical operations and financial reporting. Certain of these systems are managed, hosted, provided or used
by third parties to assist in conducting the Company’s business. Disruption, degradation, or manipulation of these IT systems through intentional or accidental means
by the Company’s employees, third parties with authorized access or unauthorized third parties could adversely affect key business processes. Cyber-attacks against
the Company’s IT systems or third-party providers’ IT systems, such as cloud-based systems, could result in exposure of confidential information, the modification of
critical data, and/or the failure of critical operations. Misuse of any of these IT systems could result in the disclosure of sensitive personal information or the theft of
trade secrets, intellectual property, or other confidential business information. The Company continues to leverage new and innovative technologies across the
enterprise to replace outmoded technology and improve the efficacy and efficiency of its business processes, including data acquisition, the use of which can create
new risks. In addition, the Company’s Animal Health business sells technology products that, when deployed, could potentially be compromised by a third party and
cause disruption both internally and externally.
Although the aggregate impact of cyber-attacks and network disruptions on the Company’s operations and financial condition has not been material to
date, the Company continues to be a target of events of this nature and expects them to continue. The Company monitors its data, information technology and
personnel usage of Company IT systems to identify and attempt to reduce these risks and continues to do so on an ongoing basis for any current or potential threats.
There can be no assurance that the Company’s efforts to protect its data and IT systems or the efforts of third-party providers to protect their IT systems will be
successful in preventing disruptions to the Company’s operations, including its manufacturing, research, and sales operations. Such disruptions have in the past and
could in the future result in loss of revenue, or the loss of critical or sensitive information from the Company’s or the Company’s third-party providers’ databases or IT
systems and have in the past and could in the future also result in financial, legal, business or reputational harm to the Company and substantial remediation costs.
The Company is increasing its use of artificial intelligence (AI) systems to automate processes, analyze data, and support decision-making
which poses inherent risks.
The Company’s growing use of artificial intelligence (AI) systems to automate processes, analyze data, and support decision-making poses inherent risks.
Flaws, biases, or malfunctions in these systems could lead to operational disruptions, data loss, or erroneous decision-making, impacting the Company’s business
operations, financial condition, and reputation. Ethical and legal challenges may arise, including biases or discrimination in AI outcomes, non-compliance with data
protection regulations and laws specifically governing the use of AI systems and tools, and lack of transparency. Furthermore, the deployment of AI systems could
expose the Company to increased cybersecurity threats, such as data breaches and unauthorized access leading to financial losses, legal liabilities, and reputational
damage. The Company also faces competitive risks if it fails to adopt AI or other machine learning technologies in a timely fashion.
Social media and mobile messaging platforms present risks and challenges.
The inappropriate and/or unauthorized use of certain social media and mobile messaging channels could cause brand damage or information leakage or
could lead to legal implications, including from the improper collection and/or dissemination of personally identifiable information. In addition, negative or inaccurate
posts or comments about the Company or its products on any social networking platforms could damage the Company’s reputation, brand image and goodwill.
Further, the disclosure of non-public Company-sensitive information by the Company’s workforce or others through external media channels could lead to information
loss. Although there are internal Company Social Media and Mobile Messaging Policies that guide employees on appropriate personal and professional use of these
platforms for communication about the Company, the processes in place may not completely secure and protect information. Identifying potential new points of
unauthorized entry as new communication tools expand also presents new challenges.
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Cautionary Factors that May Affect Future Results
(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)
This report and other written reports and oral statements made from time to time by the Company may contain so-called “forward-looking statements,” all of
which are based on management’s current expectations and are subject to risks and uncertainties which may cause results to differ materially from those set forth in
the statements. One can identify these forward-looking statements by their use of words such as “anticipates,” “expects,” “plans,” “will,” “estimates,” “forecasts,”
“projects” and other words of similar meaning, or negative variations of any of the foregoing. One can also identify them by the fact that they do not relate strictly to
historical or current facts. These statements are likely to address the Company’s growth strategy, financial results, product approvals, product potential, development
programs, environmental or other sustainability initiatives. One must carefully consider any such statement and should understand that many factors could cause
actual results to differ materially from the Company’s forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and
uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially.
The Company does not assume the obligation to update any forward-looking statement. The Company cautions you not to place undue reliance on these forward-
looking statements. Although it is not possible to predict or identify all such factors, they may include the following:
•
Competition from generic and/or biosimilar products as the Company’s products lose patent protection.
•
Increased “brand” competition in therapeutic areas important to the Company’s long-term business performance.
•
The difficulties and uncertainties inherent in new product development. The outcome of the lengthy and complex process of new product
development is inherently uncertain. A drug candidate can fail at any stage of the process and one or more late-stage product candidates could fail to receive
regulatory approval. New product candidates may appear promising in development but fail to reach the market because of efficacy or safety concerns, the inability to
obtain necessary regulatory approvals, the difficulty or excessive cost to manufacture and/or the infringement of patents or intellectual property rights of others.
Furthermore, the sales of new products may prove to be disappointing and fail to reach anticipated levels.
•
Pricing pressures, both in the U.S. and abroad, including rules and practices of managed care groups, judicial decisions and governmental laws and
regulations related to Medicare, Medicaid and health care reform, pharmaceutical reimbursement and pricing in general.
•
Changes in government laws and regulations, including laws governing intellectual property, and the enforcement thereof affecting the Company’s
business.
•
Efficacy or safety concerns with respect to marketed products, whether or not scientifically justified, leading to product recalls, withdrawals or
declining sales.
•
Significant changes in customer relationships or changes in the behavior and spending patterns of purchasers of health care products and services,
including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and foregoing health care insurance coverage.
•
Legal factors, including product liability claims, antitrust litigation and governmental investigations, including tax disputes, environmental concerns
and patent disputes with branded and generic competitors, any of which could preclude commercialization of products or negatively affect the profitability of existing
products.
•
Cyber-attacks on the Company’s or third-party providers’ IT systems, which could disrupt the Company’s operations.
•
Lost market opportunity resulting from delays and uncertainties in the approval process of the FDA and/or foreign regulatory authorities.
•
Increased focus on privacy issues in countries around the world, including the U.S., the EU, and China. The legislative and regulatory landscape for
privacy and data protection continues to evolve, and there has been an increasing amount of focus on privacy and data protection issues with the potential to affect
directly the Company’s business, including laws in a majority of states in the U.S. requiring security breach notification.
•
Changes in tax laws including changes related to the taxation of foreign earnings.
•
Changes in accounting pronouncements promulgated by standard-setting or regulatory bodies, including the Financial Accounting Standards Board
and the SEC, that are adverse to the Company.
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•
Economic factors over which the Company has no control, including changes in inflation, interest rates and foreign currency exchange rates.
This list should not be considered an exhaustive statement of all potential risks and uncertainties. See “Risk Factors” above.
Item 1B.
Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
The Company’s cybersecurity measures are primarily focused on ensuring the security and protection of its IT systems and data. The Company’s
information security program is managed by a dedicated Chief Information Security Officer (CISO), whose group is responsible for leading enterprise-wide
cybersecurity risk management, strategy, policy, standards, architecture, and processes. The CISO has worked in the cybersecurity and national security fields for
more than 30 years. He has a Master of Science in Telecommunications and Computers. He has served as a board member of the Health Information Sharing and
Analysis Center for 10 years. Oversight of the information security program has been integrated into the Company’s overall enterprise risk management program.
The CISO provides periodic reports to the Audit Committee (Audit Committee) of the Board of Directors (Board), the full Board, as well as to the Company’s
Chief Executive Officer and other members of senior management, as appropriate. These reports include updates on the Company’s cybersecurity risks and threats,
the status of projects intended to strengthen its information security systems, assessments of the information security program (including remediation, mitigation, and
management of identified vulnerabilities), and the emerging threat landscape. The information security program is regularly evaluated by internal and external
consultants and auditors with the results of those reviews reported to senior management and the Audit Committee, which is comprised entirely of independent
directors and has oversight responsibility for these risks.
The Company’s information security group monitors the Company’s information systems to prevent, detect, mitigate, and remediate cybersecurity incidents.
The Company uses tools and techniques to continually assess and monitor, manage and mitigate cybersecurity threats to its IT systems in a manner consistent with
industry practice. The Company engages with key vendors, industry participants, and intelligence and law enforcement communities as part of its continuing efforts to
obtain current threat intelligence, collaborate on security enhancements, and evaluate and improve the effectiveness of its information security program. As part of this
program, the Company conducts periodic tabletop and red-teaming exercises to assess its cybersecurity incident response processes and defenses. The Company
also maintains vendor management diligence and oversight processes to identify and monitor potential risks from cybersecurity threats attendant to its use of third-
party service providers. Additionally, the Company monitors cybersecurity threat intelligence received from key third-party service providers associated with the
Company.
In the event of a cybersecurity incident, the Company has a process in place whereby members of the information security group will alert the CISO and
the CISO will alert the appropriate levels of management, including an incident assessment team, as well as the legal and finance departments so that the materiality
of any such event can be assessed in furtherance of fulfilling any reporting requirements. If warranted, senior management will notify the Audit Committee or the full
Board, as appropriate.
The Company has been and continues to be the target of cyber-attacks and network disruptions. To date, the risks posed by such cybersecurity threats
have not materially affected the Company and its business strategy, results of operations and financial condition, and as of the date of this report, the Company is not
aware of any material risks from cybersecurity threats that are reasonably likely to do so, but there can be no assurance that the Company will not be materially
affected by such risks in the future. For further information, see Item 1A. “Risk Factors — The Company is increasingly dependent on sophisticated software
applications and computing infrastructure. The Company continues to be a target of cyber-attacks that could lead to a disruption of its worldwide operations, including
manufacturing, research and sales operations.”
Item 2.
Properties.
The Company’s corporate headquarters are located in Rahway, New Jersey. The Company also maintains divisional headquarters in Upper Gwynedd,
Pennsylvania. Principal U.S. research facilities are located in Rahway, New Jersey; West Point, Pennsylvania; Boston and Cambridge, Massachusetts; South San
Francisco, California; and Elkhorn, Nebraska (Animal Health). Principal research facilities outside the U.S. are located in the United Kingdom, Switzerland and China.
Merck’s manufacturing operations are currently headquartered in Rahway, New Jersey. The Company also has production facilities for human health products at six
locations in the U.S. and Puerto Rico.
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Outside the U.S., through subsidiaries, the Company owns or has an interest in manufacturing plants or other properties in Western Europe, Africa and Asia.
The Company and its subsidiaries own their principal facilities and manufacturing plants under titles that they consider to be satisfactory. The Company
believes that its properties are in good operating condition and that its machinery and equipment have been well maintained. The Company believes that its plants for
the manufacture of products are suitable for their intended purposes and have capacities and projected capacities, including previously disclosed capital expansion
projects, that will be adequate for current and projected needs for existing Company products. Some capacity of the plants is being converted, with any needed
modification, to the requirements of newly introduced and future products.
Item 3.
Legal Proceedings.
The information called for by this Item is incorporated herein by reference to Item 8. “Financial Statements and Supplementary Data,” Note 10.
“Contingencies and Environmental Liabilities.”
Item 4.
Mine Safety Disclosures.
Not Applicable.
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Executive Officers of the Registrant (ages as of February 1, 2025)
All officers listed below serve at the pleasure of the Board of Directors. None of these officers was elected pursuant to any arrangement or understanding
between the officer and any other person(s).
Name
Age
Offices and Business Experience
Robert M. Davis
58
Chairman, Chief Executive Officer and President (since December 2022); Chief Executive Officer and
President (July 2021-December 2022); Executive Vice President, Global Services, and Chief Financial
Officer (April 2016-July 2021)
Sanat Chattopadhyay
65
Executive Vice President and President, Merck Manufacturing Division (since March 2016)
Richard R. DeLuca, Jr.
62
Executive Vice President and President, Merck Animal Health (since September 2011)
Cristal Downing
56
Executive Vice President and Chief Communications & Public Affairs Officer (since August 2021); Prior
to that, Vice President Medical Devices, Global Communications and Public Affairs Johnson &
Johnson (December 2020-August 2021); Vice President Financial Communication, Johnson &
Johnson (January 2018-December 2020)
Chirfi Guindo
59
Senior Vice President, Chief Marketing Officer, Human Health (since July 2022); Prior to that,
Executive Vice President, Head of Global Product Strategy and Commercialization, Biogen Inc. (July
2018-July 2022)
Betty D. Larson
49
Executive Vice President and Chief Human Resources Officer (since April 2024); Prior to that, Chief
People Officer, GE HealthCare (February 2022-April 2024); Executive Vice President and Chief
Human Resources Officer, Becton Dickinson (June 2018-February 2022)
Dean Li
62
Executive Vice President, President, Merck Research Laboratories (since January 2021); Senior Vice
President, Discovery Sciences and Translational Medicine, Merck Research Laboratories (November
2017-January 2021)
Caroline Litchfield
56
Executive Vice President and Chief Financial Officer (since April 2021); Senior Vice President,
Corporate Treasurer (January 2018-March 2021)
Johannes J. Oosthuizen
57
Senior Vice President and President Merck U.S. Human Health (since January 2022); Senior Vice
President and Head of Global Oncology Commercial (January 2021-December 2021); Senior Vice
President and President of MSD K.K. (July 2016-December 2020)
Joseph Romanelli
51
Senior Vice President and President MSD International Human Health (since July 2022); Prior to that,
Chief Executive Officer JiXing Pharmaceuticals (July 2021-July 2022); President MSD China
(December 2016-July 2021)
Dalton Smart
58
Senior Vice President Finance – Global Controller (since December 2023); Vice President, Assistant
Controller (September 2023-December 2023); Vice President, Internal Audit (March 2015-September
2023)
David M. Williams
56
Executive Vice President, Chief Information and Digital Officer (since August 2020); Acting Chief
Information and Digital Officer (December 2019-August 2020)
Jennifer Zachary
47
Executive Vice President and General Counsel (since April 2018)
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PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The principal market for trading of the Company’s Common Stock is the New York Stock Exchange (NYSE) under the symbol MRK.
As of January 31, 2025, there were approximately 85,700 shareholders of record of the Company’s Common Stock.
Issuer purchases of equity securities for the three months ended December 31, 2024 were as follows:
Issuer Purchases of Equity Securities
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
($ in millions)
Period
Total Number
of Shares
Purchased
Average Price
Paid Per
Share
Approximate Dollar Value of Shares
That May Yet Be Purchased
Under the Plans or Programs
October 1 — October 31
2,428,680
$108.45
2,428,680
$2,620
November 1 — November 30
993,250
$99.29
993,250
$2,522
December 1 — December 31
1,215,000
$99.51
1,215,000
$2,401
Total
4,636,930
$104.15
4,636,930
All 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 in Merck shares for its treasury. In January 2025, the Board
of Directors approved a plan to purchase up to an additional $10 billion in Merck shares for its treasury.
(1)
(1)
(1)
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Performance Graph
The following graph assumes a $100 investment on December 31, 2019, and reinvestment of all dividends, in each of the Company’s Common Stock, the
S&P 500 Index, and a composite peer group of major U.S. and European-based pharmaceutical companies, which are: AbbVie Inc., Amgen Inc., AstraZeneca plc,
Bristol-Myers Squibb Company, Johnson & Johnson, Eli Lilly and Company, Gilead Sciences Inc., GlaxoSmithKline plc, Novartis AG, Pfizer Inc., Roche Holding AG,
and Sanofi SA.
Comparison of Five-Year Cumulative Total Return
Merck & Co., Inc., Composite Peer Group and S&P 500 Index
End of
Period Value
2024/2019
CAGR*
MERCK
$134
6%
PEER GROUP**
154
9%
S&P 500
197
15%
2019
2020
2021
2022
2023
2024
MERCK
$
100.0 $
92.8 $
94.5 $
141.1 $
142.5 $
133.6
PEER GROUP
100.0
106.5
130.4
138.1
142.0
153.7
S&P 500
100.0
118.4
152.3
124.7
157.5
196.8
* Compound Annual Growth Rate
** Peer group average was calculated on a market cap weighted basis as of December 31, 2019.
This Performance Graph will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent that the Company specifically incorporates it by reference. In addition, the Performance Graph will not be deemed to be “soliciting
material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Regulation S-K, or to the liabilities of section 18 of the Securities
Exchange Act of 1934, except to the extent that the Company specifically requests that such information be treated as soliciting material or specifically incorporates it
by reference into a filing under the Securities Act or the Exchange Act.
Item 6. [Reserved]
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Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following section of this Form 10-K generally discusses 2024 and 2023 results and year-to-year comparisons between 2024 and 2023. Discussion of
2022 results and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in Part II, Item 7. “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed on
February 26, 2024.
Description of Merck’s Business
Merck & Co., Inc. (Merck or the Company) is a global health care company that delivers innovative health solutions through its prescription medicines,
including biologic therapies, vaccines and animal health products. The Company’s operations are principally managed on a product basis and include two operating
segments, Pharmaceutical and Animal Health, both of which are reportable segments.
The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic
and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily
to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit
managers and other institutions. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines. The Company sells these human
health vaccines primarily to physicians, wholesalers, distributors and government entities.
The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceutical and vaccine products, as well as
health management solutions and services, for the prevention, treatment and control of disease in all major livestock and companion animal species. The Company
also offers an extensive suite of digitally connected identification, traceability and monitoring products. The Company sells its products to veterinarians, distributors,
animal producers, farmers and pet owners.
Overview
Financial Highlights
($ in millions except per share amounts)
2024
% Change
% Change
Excluding
Foreign
Exchange
2023
% Change
% Change
Excluding Foreign
Exchange
2022
Sales
$
64,168
7 %
10 %
$
60,115
1 %
4 %
$
59,283
Net Income Attributable to Merck & Co., Inc.:
GAAP
$
17,117
*
*
$
365
(97)%
(95)%
$
14,519
Non-GAAP
$
19,444
*
*
$
3,837
(80)%
(75)%
$
19,005
Earnings per Common Share Assuming Dilution Attributable to
Merck & Co., Inc. Common Shareholders:
GAAP
$
6.74
*
*
$
0.14
(98)%
(95)%
$
5.71
Non-GAAP
$
7.65
*
*
$
1.51
(80)%
(75)%
$
7.48
* > 100%
Non-GAAP net income and non-GAAP earnings per share (EPS) exclude acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities, and certain other
items from Merck’s results prepared in accordance with generally accepted accounting principles in the U.S. (GAAP). For further discussion and a reconciliation of GAAP to non-GAAP net income and EPS, see
“Non-GAAP Income and Non-GAAP EPS” below.
Executive Summary
Merck’s performance during 2024 was driven by continued demand across its innovative portfolio, including for recently launched products, enabled by the
operational and commercial execution of its science-led strategy. The Company maintained its focus on the pursuit of breakthrough science and innovation, making
disciplined investments in compelling science to drive long-term value for patients, customers, and shareholders. Merck advanced its robust early- and late-phase
pipeline which includes growing diversity across new therapeutic areas and modalities and completed several promising business development transactions. The
Company continued to return capital to shareholders, primarily through dividends.
(1)
(1)
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Worldwide sales were $64.2 billion in 2024, an increase of 7% compared with 2023, or 10% excluding the unfavorable effect of foreign exchange. The
sales increase was primarily due to growth in oncology, cardiovascular and animal health, partially offset by declines in diabetes, virology (driven largely by lower sales
of COVID-19 medication Lagevrio), immunology (as Merck’s marketing rights to these products ended in 2024) and vaccines.
Merck continues to execute value creating business development opportunities focused on innovation to augment its robust internal pipeline with
compelling external science. Highlights of 2024 activity include the following:
• Closed an exclusive global license to develop, manufacture and commercialize MK-2010 (LM-299), a novel investigational programmed death receptor-1
(PD-1)/vascular endothelial growth factor (VEGF) bispecific antibody from LaNova Medicines Ltd (LaNova).
• Closed an exclusive global license to develop, manufacture and commercialize MK-4082 (HS-10535), an investigational preclinical oral small molecule
GLP-1 receptor agonist from Hansoh Pharma (Hansoh).
• Acquired global rights to MK-1045 (formerly CN201), a novel investigational clinical-stage bispecific antibody for the treatment of B-cell associated
diseases from Curon Pharmaceutical (Curon).
• Acquired Eyebiotech Limited (EyeBio), a privately held ophthalmology-focused biotechnology company developing candidates for the prevention and
treatment of vision loss.
• 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.
During 2024, Merck continued its efforts to address unmet medical needs by launching new products with significant patient benefit, including the U.S.
launches of Winrevair, for the treatment of certain adults with pulmonary arterial hypertension (PAH), and Capvaxive, for the prevention of invasive pneumococcal
disease and pneumococcal pneumonia in adults. Winrevair was also approved in the EU.
The Company received more than 25 regulatory approvals in major markets in 2024, including the Winrevair and Capvaxive approvals noted above, along
with numerous approvals in oncology. Keytruda received approval for additional indications in the U.S. and/or internationally as monotherapy in the therapeutic areas
of hepatocellular carcinoma (HCC), melanoma and urothelial carcinoma, in combination with chemotherapy in the therapeutic areas of biliary tract cancer, cervical
cancer, endometrial carcinoma, gastric or gastroesophageal junction (GEJ) adenocarcinoma, malignant pleural mesothelioma and non-small-cell lung cancer
(NSCLC), as well as in combination with Padcev (enfortunab vedotin-ejfv) for advanced urothelial carcinoma. Also in 2024, Welireg was approved in China for the
treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors not requiring immediate surgery. Lynparza, which is being developed in
collaboration with AstraZeneca PLC (AstraZeneca), received approval in China for the treatment of certain adult patients with germline BRCA-mutated, human
epidermal growth factor receptor 2 (HER2)-negative high-risk early breast cancer.
In addition to the regulatory approvals discussed above, the Company advanced its late-stage pipeline with several regulatory submissions.
• MK-1022, patritumab deruxtecan, is a potential first-in-class HER3 directed DXd antibody drug conjugate (ADC), under review by the U.S. Food and
Drug Administration (FDA) for the treatment of adult patients with locally advanced or metastatic epidermal growth factor receptor (EGFR)-mutated
NSCLC previously treated with two or more systemic therapies. In June 2024, the FDA issued a complete response letter (CRL) for the Biologics License
Application (BLA) due to findings pertaining to an inspection of a third-party manufacturing facility. The CRL did not identify any issues with the efficacy or
safety data submitted. Patritumab deruxtecan (HER3-DXd) was discovered by Daiichi Sankyo and is
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being jointly developed by Daiichi Sankyo and Merck. Merck is working with Daiichi Sankyo to address FDA feedback.
• MK-6482, Welireg, is under review in Japan both for the treatment of adults with VHL disease and for the treatment of certain adults with previously
treated advanced renal cell carcinoma (RCC). Welireg is also under priority review in the U.S. for the treatment of certain patients with advanced,
unresectable or metastatic pheochromocytoma and paraganglioma.
• V116, Capvaxive, a 21-valent pneumococcal conjugate vaccine designed to help prevent invasive pneumococcal disease and pneumococcal pneumonia
caused by certain serotypes in adults, is under review in the EU and Japan.
• MK-7962, Winrevair, Merck’s novel activin signaling inhibitor, is under review in Japan for the treatment of adult patients with PAH.
• MK-1654, clesrovimab, is an investigational prophylactic long-acting monoclonal antibody designed to protect infants from respiratory syncytial virus
(RSV) disease during their first RSV season under review by the FDA. Clesrovimab is also under review in the EU.
• Additionally, Keytruda is under review in the EU and Japan for a supplemental indication for the treatment of certain patients with malignant pleural
mesothelioma.
During 2024, the Company initiated more than 20 Phase 3 studies spanning cardiometabolic, immunology, infectious diseases, oncology, ophthalmology
and vaccines.
The Company is diversifying its oncology portfolio and executing on its strategy which is broadly based on three strategic pillars: immuno-oncology,
precision molecular targeting and tissue targeting. Merck’s Phase 3 oncology programs within these pillars are as follows:
Immuno-oncology
• MK-1308A, the coformulation of quavonlimab, Merck’s novel investigational anti-CTLA-4 antibody, in combination with pembrolizumab for RCC;
• MK-3475, Keytruda, in the therapeutic areas of hepatocellular, ovarian and small-cell lung cancers;
• MK-3475A, the subcutaneous coformulation of pembrolizumab in combination with hyaluronidase, being evaluated for comparability with intravenous
pembrolizumab in metastatic NSCLC; and
• V940 (mRNA-4157), an investigational individualized neoantigen therapy, in combination with Keytruda, as an adjuvant treatment in patients with certain
types of melanoma and NSCLC, being developed as part of a collaboration with Moderna, Inc.
Precision molecular targeting
• MK-1026, nemtabrutinib, an oral, reversible, non-covalent Bruton’s tyrosine kinase (BTK) inhibitor, for hematological malignancies, including chronic
lymphocytic leukemia and small lymphocytic lymphoma;
• MK-1084, an investigational oral selective KRAS G12C inhibitor, in combination with Keytruda, for metastatic NSCLC;
• MK-3543, bomedemstat, an investigational orally available lysine-specific demethylase 1 inhibitor for myeloproliferative disorders;
• MK-5684, opevesostat, an investigational cytochrome P450 11A1 (CYP11A1) inhibitor for metastatic castration-resistant prostate cancer;
• MK-7339, Lynparza, in combination with Keytruda, for non-small-cell lung and small-cell lung cancers; and
• MK-7902, Lenvima, being developed as part of a collaboration with Eisai Co., Ltd. (Eisai), in combination with Keytruda, for esophageal cancer.
Tissue targeting
• MK-1022, patritumab deruxtecan, being developed in collaboration wtih Daiichi Sankyo, for NSCLC as noted above;
• MK-2140, zilovertamab vedotin, an ADC targeting receptor tyrosine kinase-like orphan receptor 1 (ROR1) for hematological malignancies, including
diffuse large B cell lymphoma;
• MK-2400, ifinatamab deruxtecan, an ADC being evaluated in patients with relapsed SCLC versus chemotherapy, being developed as part of a
collaboration with Daiichi Sankyo; and
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• MK-2870, sacituzumab tirumotecan, an investigational trophoblast cell-surface antigen 2 (TROP2)-directed ADC, being developed as part of a
collaboration with Kelun-Biotech for breast, cervical, endometrial, gastric and non-small-cell lung cancers.
Additionally, the Company currently has candidates in Phase 3 clinical development in several other therapeutic areas:
• MK-3000, an investigational, potentially first-in-class tetravalent, tri-specific antibody that acts as an agonist of the Wingless-related integration site
signaling pathway, for the treatment of diabetic macular edema and neovascular age-related macular degeneration;
• MK-8591A, a once-daily oral combination of doravirine and islatravir, an investigational nucleoside reverse transcriptase translocation inhibitor, for the
treatment of HIV-1 infection (which is on partial clinical hold for higher doses of islatravir than those used in current clinical trials);
• MK-8591D, islatravir in combination with lenacapavir for the treatment of HIV-1 infection (which is on partial clinical hold for higher doses of islatravir than
those used in current clinical trials), being developed in collaboration with Gilead Sciences Inc.;
• MK-0616, enlicitide decanoate, an investigational, oral proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitor for hypercholesterolemia, including
in studies evaluating low-density lipoprotein cholesterol reduction and a cardiovascular outcomes study;
• MK-7240, tulisokibart, a humanized monoclonal antibody directed to tumor necrosis factor-like ligand 1A, a target associated with both intestinal
inflammation and fibrosis, for Crohn’s disease and ulcerative colitis; and
• MK-4482, Lagevrio, which is reflected in Phase 3 development in the U.S. as it remains investigational following Emergency Use Authorization (EUA) in
2021.
Merck’s capital allocation strategy continues to prioritize investments in its business to drive near- and long-term growth, including investing in the
Company’s key growth drivers and expansive pipeline of novel candidates, each of which has potential to address important unmet medical needs. Research and
development expenses in 2024 reflect increased development spending particularly in the therapeutic areas of oncology, immunology and cardiometabolic. In addition,
Merck remains committed to its dividend and will continue to pursue the most compelling external science and technologies through value-enhancing business
development transactions.
In November 2024, Merck’s Board of Directors approved an increase to the Company’s quarterly dividend, raising it to $0.81 per share from $0.77 per
share on the Company’s outstanding common stock. During 2024, the Company returned $9.1 billion to shareholders through dividends of $7.8 billion and share
repurchases of $1.3 billion. In January 2025, Merck’s Board of Directors authorized a new share repurchase program of up to an additional $10 billion of Merck’s
common stock for its treasury.
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GAAP and non-GAAP EPS were negatively affected in 2024, 2023 and 2022 by $1.28, $6.21, and $0.22, respectively, of charges for certain upfront and pre-approval milestone payments related to collaborations
and licensing agreements, as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions.
Pricing
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 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 eliminated the
statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. As a result of this provision, the Company paid state Medicaid programs
more in rebates than it received on Medicaid sales of Januvia, Janumet and Janumet XR in 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 (which has taken effect in 2025), and government price setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in
2028). Government price setting may also impact pricing in the private market negatively affecting the Company’s performance. In 2023, the U.S. Department of
Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), selected Januvia for the first year of the IRA’s “Drug Price
Negotiation Program” (Program). Pursuant to the IRA’s Program, a government price was set for Januvia, which will become effective on January 1, 2026. In January
2025, the U.S. Department of HHS, through the CMS, announced that Janumet and Janumet XR would be in included in the second year of the IRA’s Program, with
government price setting to become effective on January 1, 2027. The Company has sued the U.S. government regarding the IRA’s Program (see Note 10 to the
consolidated financial statements). Additionally, increased utilization of the 340B Federal Drug Discount Program and restrictions on the Company’s ability to identify
inappropriate discounts are having a negative impact on Company performance. Furthermore, the Executive Branch and Congress continue to discuss legislation
designed to control health care costs, including the cost of drugs. In several international markets, government-mandated pricing actions have reduced prices of
generic and patented drugs. In addition, the Company’s sales performance in 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 continue to negatively affect
sales and profits.
Operating Results
Sales
($ in millions)
2024
% Change
% Change
Excluding Foreign
Exchange
2023
% Change
% Change
Excluding Foreign
Exchange
2022
United States
$
32,277
13 %
13 %
$
28,480
5 %
5 %
$
27,206
International
31,891
1 %
6 %
31,635
(1)%
4 %
32,077
Total
$
64,168
7 %
10 %
$
60,115
1 %
4 %
$
59,283
Worldwide sales were $64.2 billion in 2024, representing growth of 7% compared with 2023, or 10% excluding the unfavorable effect of foreign exchange.
The devaluation of the Argentine peso contributed approximately 2 percentage points of the negative impact of foreign exchange, which was largely offset by inflation-
related price increases consistent with practice in that market. Global sales growth was primarily due to higher sales in the oncology franchise, largely due to strong
growth of Keytruda and Welireg, as well as increased alliance revenue from Reblozyl and Lynparza. Also contributing to revenue growth were higher sales in the
cardiovascular
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franchise, largely attributable to the launch of Winrevair, higher sales of certain hospital acute care products, particularly Prevymis, as well as higher sales of animal
health products. Sales growth in 2024 was partially offset by lower sales in the diabetes franchise, due to Januvia and Janumet, and lower sales in the virology
franchise largely attributable to Lagevrio. Lower sales in the immunology franchise due to the return of the marketing rights for Remicade and Simponi in former Merck
territories to Johnson & Johnson on October 1, 2024, and lower sales in the vaccines franchise primarily due to Gardasil/Gardasil 9 also offset sales growth in 2024.
Sales in the U.S. grew 13% to $32.3 billion in 2024 primarily driven by higher sales of Keytruda, Winrevair, Gardasil 9, Welireg, Bridion, Lagevrio, and
Prevymis, as well as higher alliance revenue from Reblozyl, partially offset by lower sales of Januvia and Vaxneuvance.
International sales grew 1% in 2024, or 6% excluding the unfavorable effect of foreign exchange. The devaluation of the Argentine peso contributed
approximately 3 percentage points of the negative impact of foreign exchange, which was largely offset by inflation-related price increases consistent with practice in
that market. International sales growth was primarily due to higher sales of Keytruda, Vaxneuvance, Prevymis, as well as higher sales of animal health products,
partially offset by lower sales of Gardasil/Gardasil 9, Lagevrio, Bridion, Janumet, Januvia, and Simponi. International sales represented 50% and 53% of total sales in
2024 and 2023, respectively.
See Note 18 to the consolidated financial statements for details on sales of the Company’s products. A discussion of performance for select products in the
franchises follows.
Pharmaceutical Segment
Oncology
($ in millions)
2024
% Change
% Change
Excluding Foreign
Exchange
2023
% Change
% Change
Excluding Foreign
Exchange
2022
Keytruda
$
29,482
18 %
22 %
$
25,011
19 %
21 %
$
20,937
Alliance Revenue - Lynparza
1,311
9 %
11 %
1,199
7 %
9 %
1,116
Alliance Revenue - Lenvima
1,010
5 %
6 %
960
10 %
11 %
876
Welireg
509
*
*
218
77 %
77 %
123
Alliance Revenue - Reblozyl
371
75 %
75 %
212
28 %
28 %
166
* > 100%
Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 4 to the consolidated financial statements).
Alliance revenue for Reblozyl represents royalties and, for 2022, also includes a payment received related to the achievement of a regulatory approval milestone (see Note 4 to the consolidated financial
statements).
Keytruda is an anti-PD-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.
Global sales of Keytruda grew 18% in 2024, or 22% excluding the unfavorable effect of foreign exchange. The negative impact of foreign exchange was
primarily 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 higher demand across the multiple approved metastatic indications, in particular for the treatment of certain types of bladder,
endometrial, microsatellite instability-high (MSI-H) and renal cell cancers, as well as increased uptake across earlier-stage indications, including in certain types of
high-risk early-stage triple-negative breast cancer (TNBC), NSCLC and RCC, 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 cell cancer metastatic indications.
The Company expects that the 2025 launch and reimbursement of new indications for Keytruda in the EU will have a negative impact on pricing in those markets.
Summarized below are the Keytruda regulatory approvals received in 2024 and, to date, in 2025.
Date
Approval
January 2024
FDA approval in combination with chemoradiotherapy for the treatment of patients with FIGO (International Federation of Gynecology and
Obstetrics) 2014 Stage III-IVA cervical cancer, based on the KEYNOTE-A18 trial.
(1)
(1)
(2)
(1)
(2)
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January 2024
FDA full approval for the treatment of patients with HCC secondary to hepatitis B who have received prior systemic therapy other than a PD-
1/programmed death-ligand 1 (PD-L1) containing regimen. The conversion from an accelerated to full (regular) approval is based on the
KEYNOTE-394 trial.
February 2024
China’s National Medical Products Administration (NMPA) approval in combination with gemcitabine and cisplatin for the first-line treatment of
patients with locally advanced or metastatic biliary tract carcinoma, based on the KEYNOTE-966 trial.
March 2024
European Commission (EC) approval in combination with platinum-containing chemotherapy as neoadjuvant treatment, and then continued as
monotherapy as adjuvant treatment, for resectable NSCLC at high risk of recurrence in adults, based on the KEYNOTE-671 trial.
May 2024
Japan’s Ministry of Health, Labor and Welfare (MHLW) approval in combination with fluoropyrimidine- and platinum-containing chemotherapy for
the first-line treatment of patients with locally advanced unresectable or metastatic gastric or GEJ adenocarcinoma, based on the KEYNOTE-859
trial.
May 2024
Japan’s MHLW approval in combination with standard of care chemotherapy (gemcitabine and cisplatin) for the treatment of patients with locally
advanced unresectable or metastatic biliary tract cancer, based on the KEYNOTE-966 trial.
June 2024
FDA approval in combination with carboplatin and paclitaxel, followed by Keytruda as a single agent, for the treatment of adult patients with primary
advanced or recurrent endometrial carcinoma, based on the KEYNOTE-868 trial.
June 2024
China’s NMPA approval in combination with trastuzumab, fluoropyrimidine- and platinum-containing chemotherapy for the first-line treatment of
patients with locally advanced unresectable or metastatic HER2 positive gastric or GEJ adenocarcinoma whose tumors express PD-L1 as
determined by a fully validated test, based on the KEYNOTE-811 trial.
September2024 EC approval in combination with Padcev, an ADC, for the first-line treatment of unresectable or metastatic urothelial carcinoma in adults, based on
the KEYNOTE-A39 trial that was conducted in collaboration with Seagen (now Pfizer Inc.) and Astellas.
September 2024 FDA approval in combination with pemetrexed and platinum chemotherapy for the first-line treatment of adult patients with unresectable advanced
or metastatic malignant pleural mesothelioma, based on the IND.227/KEYNOTE-483 trial.
September 2024 Japan’s MHLW approval in combination with chemotherapy as a neoadjuvant treatment, then continued as monotherapy as an adjuvant treatment,
for patients with NSCLC, based on the KEYNOTE-671 trial.
September 2024 Japan’s MHLW approval in combination with Padcev for the first-line treatment of patients with radically unresectable urothelial carcinoma, based
on the KEYNOTE-A39 trial.
September 2024 Japan’s MHLW approval as monotherapy in patients with radically unresectable urothelial carcinoma who are not eligible for any platinum-
containing chemotherapy, based on the KEYNOTE-052 trial.
September 2024
China’s NMPA approval for the first-line treatment of adult patients with unresectable or metastatic melanoma, and conversion from conditional to
full approval for the second-line treatment of adult patients with unresectable or metastatic melanoma following failure of one prior line of therapy,
based on the LEAP-003 trial.
October 2024
EC approval in combination with chemoradiotherapy for the treatment of FIGO 2014 Stage III-IVA locally advanced cervical cancer in adults who
have not received prior definitive therapy, based on the KEYNOTE-A18 trial.
October 2024
EC approval in combination with carboplatin and paclitaxel followed by Keytruda as a single agent for the first-line treatment of primary advanced
or recurrent endometrial carcinoma in adults who are candidates for systemic therapy, based on the KEYNOTE-868 trial.
November 2024 Japan’s MHLW approval in combination with chemoradiotherapy as treatment for patients with locally advanced cervical cancer, based on the
KEYNOTE-A18 trial.
December 2024 China’s NMPA approval in combination with platinum-containing chemotherapy as neoadjuvant treatment and then continued as monotherapy as
adjuvant treatment after surgery for patients with resectable stage II, IIIA, or IIIB NSCLC, based on the KEYNOTE-671 trial.
December 2024 Japan’s MHLW approval in combination with carboplatin and paclitaxel as a treatment for adult patients with advanced or recurrent endometrial
carcinoma, based on the KEYNOTE-868 trial.
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December 2024 China’s NMPA approval in combination with chemoradiotherapy for the treatment of patients with FIGO 2014 Stage III-IVA cervical cancer, based
on the KEYNOTE-A18 trial.
January 2025
China’s NMPA approval in combination with Padcev for adult patients with locally advanced or metastatic urothelial cancer, based on the
KEYNOTE-A39 trial.
The Company is a party to 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.
Lynparza is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed and commercialized as part of a collaboration with AstraZeneca (see
Note 4 to the consolidated financial statements). Lynparza is approved for the treatment of certain types of advanced or recurrent ovarian, early or metastatic breast,
metastatic pancreatic and metastatic castration-resistant prostate cancers. Alliance revenue related to Lynparza grew 9% in 2024 largely due to higher demand in
most international markets. In January 2025, China’s NMPA approved Lynparza as adjuvant treatment for adult patients with germline BRCA-mutated, HER2-negative
high-risk early breast cancer, based on the OlympiA trial.
Lenvima is an oral receptor tyrosine kinase inhibitor being developed and commercialized as part of a collaboration with Eisai (see Note 4 to the
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 5% in 2024 primarily reflecting higher demand and pricing in the U.S.
Sales of Welireg, for the treatment of adult patients with certain VHL disease-associated tumors and certain adult patients with previously treated advanced
RCC, more than doubled in 2024 primarily due to higher demand in the U.S. reflecting in part continued uptake of the RCC indication following approval by the FDA in
December 2023. In November 2024, Welireg was approved in China for the treatment of adult patients with certain VHL disease-associated tumors not requiring
immediate surgery based on the LITESPARK-004 clinical trial. In February 2025, the EC conditionally approved Welireg as monotherapy both for the treatment of
adult patients with VHL disease who require therapy for associated, localized RCC, central nervous system hemangioblastomas, or pancreatic neuroendocrine tumors,
and for whom localized procedures are unsuitable, and for the treatment of adult patients with advanced clear cell RCC that progressed following two or more lines of
therapy that included a PD-1 or PD-L1 inhibitor and at least two VEGF targeted therapies. The EC approval of these two indications is based on results from the
LITESPARK-004 and LITESPARK-005 trials. The conditional approval of Welireg will be valid for one year, subject to yearly renewal, pending certain additional clinical
data. Timing for commercial availability of Welireg in individual EU countries will depend on multiple factors, including the completion of national reimbursement
procedures.
Reblozyl 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 4 to the 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 75% in 2024 due to strong underlying sales performance.
Vaccines
($ in millions)
2024
% Change
% Change
Excluding Foreign
Exchange
2023
% Change
% Change
Excluding Foreign
Exchange
2022
Gardasil/Gardasil 9
$
8,583
(3)%
(2)%
$
8,886
29 %
33 %
$
6,897
ProQuad
920
6 %
6 %
870
4 %
4 %
839
M-M-R II
464
8 %
9 %
430
5 %
4 %
411
Varivax
1,102
3 %
4 %
1,068
8 %
8 %
991
Vaxneuvance
808
22 %
23 %
665
*
*
170
Pneumovax 23
263
(36)%
(34)%
412
(32)%
(31)%
602
* > 100%
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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), declined 3% in 2024 primarily driven by lower demand in China. Outside of China, Gardasil/Gardasil 9 achieved strong growth in most other
international markets due to higher demand, particularly in Japan due to a national catch-up immunization program, and in the U.S. due to public sector buying
patterns, higher pricing and demand. Beginning in mid-2024, the Company observed a significant decline in shipments from its distributor and commercialization
partner in China, Chongqing Zhifei Biological Products Co., Ltd. (Zhifei), to disease and control prevention institutions and correspondingly into the points of
vaccination, resulting in above normal inventory levels at Zhifei. Accordingly, the Company shipped less than its contracted doses to Zhifei in the latter part of 2024.
Lower demand in China persisted and, at the end of 2024, overall channel inventory levels in China remained elevated at above normal levels. Therefore, the
Company made a decision to temporarily pause shipments to China beginning in February 2025 through at least the middle of the year and, as a result,
Gardasil/Gardasil 9 sales will decline significantly in 2025 compared with 2024. In January 2025, China’s NMPA approved Gardasil for use in males 9-26 years of age
to help prevent certain HPV-related cancers and diseases.
The Company is a party to license agreements pursuant to which the Company pays royalties on sales of Gardasil/Gardasil 9. Under the terms of the more
significant of these agreements, Merck pays a 7% royalty on sales of Gardasil/Gardasil 9 in the U.S. to one third party (this royalty expires in December 2028). Merck
paid an additional 7% royalty on worldwide sales of Gardasil/Gardasil 9 to another third party; this royalty expired in December 2023. The royalty expenses are
included in Cost of sales.
Global sales of ProQuad, a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella, grew 6% in 2024 primarily due to
higher pricing in the U.S. Worldwide sales of M-M-R II, a vaccine to help protect against measles, mumps and rubella, grew 8% in 2024 primarily due to higher
demand in certain international markets, partially offset by lower demand in the U.S. Global sales of Varivax, a vaccine to help prevent chickenpox (varicella), grew 3%
in 2024 primarily attributable to higher pricing in the U.S., partially offset by lower sales in Latin America due to supply constraints. The Company is experiencing
manufacturing delays related to ProQuad and Varivax. As a result, the Company anticipates that some international markets will experience supply constraints during
2025. In order to ensure consistent supply in the U.S., in January 2025, the Company borrowed doses of ProQuad from the U.S. Centers for Disease Control and
Prevention (CDC) Pediatric Vaccine Stockpile. The borrowing will reduce sales of ProQuad in the first quarter of 2025 by approximately $70 million. These doses will
be used to support routine vaccination in the U.S.
Worldwide sales of Vaxneuvance, a vaccine to help protect against invasive pneumococcal disease caused by certain serotypes, rose 22% in 2024
primarily due to continued uptake following launches in the pediatric indication in Europe, Japan, and other countries in the Asia Pacific region, partially offset by lower
demand in the U.S. due to competition. Merck is a party to license agreements pursuant to which the Company pays royalties on sales of Vaxneuvance. Under the
most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Vaxneuvance through 2026; this royalty will decline to 2.5% on net sales from
2027 through 2035. The royalty expenses are included in Cost of sales.
Worldwide sales of Pneumovax 23, a vaccine to help prevent pneumococcal disease, declined 36% in 2024 due to lower global demand, particularly in the
U.S. as the market has shifted toward newer adult pneumococcal conjugate vaccines.
In June 2024, the FDA approved Capvaxive (Pneumococcal 21-valent Conjugate Vaccine) for the prevention of invasive pneumococcal disease and
pneumococcal pneumonia caused by certain serotypes 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.
Sales of Capvaxive were $97 million in 2024. Merck is a party to license agreements pursuant to which the Company pays royalties on sales of Capvaxive. Under the
most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Capvaxive through 2026; this royalty will decline to 2.5% on net sales from 2027
through 2035. The royalty expenses are included in Cost of sales.
Hospital Acute Care
($ in millions)
2024
% Change
% Change
Excluding Foreign
Exchange
2023
% Change
% Change
Excluding Foreign
Exchange
2022
Bridion
$
1,764
(4)%
(3)%
$
1,842
9 %
11 %
$
1,685
Prevymis
785
30 %
33 %
605
41 %
43 %
428
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Global sales of Bridion, for the reversal of two types of neuromuscular blocking agents used during surgery, declined 4% in 2024 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. The Bridion sales decline
was partially 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.
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 30% in 2024 largely due to higher global demand, particularly in the U.S.
Cardiovascular
($ in millions)
2024
% Change
% Change
Excluding Foreign
Exchange
2023
% Change
% Change
Excluding Foreign
Exchange
2022
Winrevair
$
419
— %
— %
$
—
— %
— %
$
—
Alliance Revenue - Adempas/Verquvo
415
13 %
13 %
367
8 %
8 %
341
Adempas
287
12 %
14 %
255
7 %
8 %
238
Alliance revenue for Adempas and Verquvo 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 4 to
the consolidated financial statements).
In March 2024, the FDA approved Winrevair for the treatment of adults with pulmonary arterial hypertension (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 is expected to occur in most other major EU markets in the
second half of 2025. Winrevair is the subject of a licensing agreement pursuant to which Merck pays a 22% royalty on sales of Winrevair to BMS. The royalty
expenses are included in Cost of sales.
Adempas and Verquvo are part of a worldwide collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators
(see Note 4 to the consolidated financial statements). Adempas is approved for the treatment of certain types of 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 13% in 2024
reflecting 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 12% in 2024 primarily due to higher demand.
Virology
($ in millions)
2024
% Change
% Change
Excluding Foreign
Exchange
2023
% Change
% Change
Excluding Foreign
Exchange
2022
Lagevrio
964
(33)%
(28)%
1,428
(75)%
(74)%
5,684
Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback Biotherapeutics LP (Ridgeback) (see
Note 4 to the consolidated financial statements). Sales of Lagevrio declined 33% in 2024 primarily due to lower demand and pricing in several markets in the Asia
Pacific region, particularly in Japan, partially offset by uptake from commercial distribution in the U.S. under Emergency Use Authorization.
(1)
(1)
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Immunology
($ in millions)
2024
% Change
% Change
Excluding Foreign
Exchange
2023
% Change
% Change
Excluding Foreign
Exchange
2022
Simponi
$
543
(24)%
(23)%
$
710
1 %
— %
$
706
Remicade
114
(39)%
(36)%
187
(9)%
(8)%
207
Simponi and Remicade 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 on October 1, 2024 resulting in sales declines for these products versus prior year.
Diabetes
($ in millions)
2024
% Change
% Change
Excluding Foreign
Exchange
2023
% Change
% Change
Excluding Foreign
Exchange
2022
Januvia/Janumet
$
2,268
(33)%
(29)%
$
3,366
(25)%
(23)%
$
4,513
Worldwide combined sales of Januvia and Janumet, medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 33% in 2024
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, the Asia Pacific region, and in Canada.
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. As a result of this provision, the Company paid state Medicaid programs more in rebates than it received on Medicaid sales of
Januvia, Janumet and Janumet XR in 2024.
In early 2025, Merck lowered the list price of the Januvia family of products to more closely align them with net prices. The lower list price will reduce the
rebate amount Merck pays to Medicaid, resulting in higher realized net pricing, which will be partially offset by continuing volume declines. The Company expects
higher U.S. net sales of these products in 2025 compared with 2024.
While the key U.S. patent for Januvia, Janumet and Janumet XR claiming the sitagliptin compound expired in January 2023, as a result of favorable court
rulings and settlement agreements related to a later expiring patent directed to the specific sitagliptin salt form of the products (see Note 10 to the consolidated
financial statements), the Company expects that Januvia and Janumet will not lose market exclusivity in the U.S. until May 2026 and Janumet XR will not lose market
exclusivity in the U.S. until July 2026, although a non-automatically substitutable form of sitagliptin that differs from the form in the Company’s sitagliptin products has
been approved by the FDA. Additionally, in 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, a government price was set for Januvia, which will become effective on January 1, 2026. Also, in January 2025, the
U.S. Department of HHS, through the CMS, announced that Janumet and Janumet XR would be in included in the second year of the IRA’s Program, with government
price setting to become effective on January 1, 2027. The Company has sued the U.S. government regarding the IRA’s Program (see Note 10 to the consolidated
financial statements). As a result of the anticipated patent expiries in 2026, the government price setting in 2026 and 2027 noted above, as well as ongoing
competitive pressures, the Company anticipates significant sales declines for Januvia, Janumet and Janumet XR in the U.S. in 2026 and thereafter.
The Company lost market exclusivity for Januvia in all of the EU and for Janumet in some European countries in September 2022. Exclusivity for Janumet
was lost in other European countries in April 2023. Accordingly, the Company is experiencing sales declines in these markets and expects the declines to continue.
Generic equivalents of Januvia and Janumet have also launched in China.
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Animal Health Segment
($ in millions)
2024
% Change
% Change
Excluding Foreign
Exchange
2023
% Change
% Change
Excluding Foreign
Exchange
2022
Livestock
$
3,462
4 %
9 %
$
3,337
1 %
4 %
$
3,300
Companion Animal
2,415
6 %
7 %
2,288
2 %
3 %
2,250
$
5,877
4 %
8 %
$
5,625
1 %
3 %
$
5,550
Animal Health sales grew 4% in 2024, or 8% excluding the unfavorable effect of foreign exchange. The devaluation of the Argentine peso contributed
approximately 2 percentage points of the negative impact of foreign exchange, which was largely offset by inflation-related price increases consistent with practice in
that market.
Sales of livestock products grew 4% in 2024 primarily due to higher pricing, increased demand for poultry and swine products, as well as the inclusion of
sales from the July 2024 acquisition of the aqua business of Elanco Animal Health Incorporated (Elanco aqua business). See Note 3 to the consolidated financial
statements for additional information related to the acquisition of the Elanco aqua business.
Sales of companion animal products grew 6% in 2024 reflecting higher pricing. Sales of the Bravecto line of products were $1.1 billion in 2024, an increase
of 6% compared with 2023, or 8% excluding the impact of foreign exchange.
Costs, Expenses and Other
($ in millions)
2024
% Change
2023
% Change
2022
Cost of sales
$
15,193
(6)%
$
16,126
(7)%
$
17,411
Selling, general and administrative
10,816
3 %
10,504
5 %
10,042
Research and development
17,938
(41)%
30,531
*
13,548
Restructuring costs
309
(48)%
599
78 %
337
Other (income) expense, net
(24)
*
466
(69)%
1,501
$
44,232
(24)%
$
58,226
36 %
$
42,839
* >100%
Cost of Sales
Cost of sales was $15.2 billion in 2024 and $16.1 billion in 2023. Cost of sales includes the amortization of intangible assets recorded in connection with
acquisitions, collaborations, and licensing arrangements, which totaled $2.4 billion in 2024 and $2.0 billion in 2023. Amortization expense in 2024 and 2023 includes
$48 million and $154 million, respectively, of cumulative catch-up amortization related to Merck’s collaborations with AstraZeneca and Eisai, respectively. (See Note 4
to the consolidated financial statements for more information on Merck’s collaborative arrangements). Also included in cost of sales are expenses associated with
restructuring activities, which amounted to $495 million in 2024 and $211 million in 2023, primarily reflecting accelerated depreciation and asset impairment charges
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.
Gross margin was 76.3% in 2024 compared with 73.2% in 2023. The gross margin improvement was primarily due to the favorable effects of product mix
(including lower royalty rates related to Keytruda and Gardasil/Gardasil 9 sales) and foreign exchange, partially offset by increased amortization of intangible assets,
higher restructuring costs (primarily reflecting asset impairment charges), and increased manufacturing-related costs (including inventory write-offs).
Selling, General and Administrative
Selling, general and administrative (SG&A) expenses were $10.8 billion in 2024, an increase of 3% compared with 2023. The increase was primarily due to
higher administrative costs (including compensation and benefits), and increased promotional costs (reflecting prioritization in support of key growth drivers including
new product launches), as well as higher selling and acquisition-related costs, partially offset by the favorable effect of foreign exchange and lower restructuring costs.
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Research and Development
Research and development (R&D) expenses were $17.9 billion in 2024, a decline of 41% compared with 2023. The decline was primarily due to lower
charges for business development activity and the favorable effect of foreign exchange.
Significant business development transactions in 2024 include 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 (formerly CN201) from Curon
• $656 million for the acquisition of Harpoon
• $588 million for a global license agreement with LaNova
• $112 million for a global license agreement with Hansoh
Significant business development transactions in 2023 include charges of:
• $10.2 billion for the acquisition of Prometheus
• $5.5 billion related to the formation of a collaboration with Daiichi Sankyo
• $1.2 billion for the acquisition of Imago
• $175 million for a license and collaboration agreement with Kelun-Biotech
The decline in R&D expenses was partially offset by higher compensation and benefit costs (reflecting in part increased headcount) and increased clinical
development spending, including for recently acquired programs.
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 $10.1 billion in 2024 and $9.0 billion in 2023. Also included in R&D expenses are Animal Health research
costs, upfront payments for collaboration and licensing agreements (including charges for the transactions with LaNova, Hansoh, Daiichi Sankyo and Kelun-Biotech
noted above), charges for transactions accounted for as asset acquisitions (including charges for the acquisitions of EyeBio, MK-1045, Harpoon, Prometheus and
Imago 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 $7.7 billion in 2024 and $20.7 billion in 2023. R&D expenses also include an impairment charge of $779 million in 2023 (related to gefapixant). See
Note 8 to the consolidated financial statements for additional information related to this impairment charge. The Company may recognize additional impairment
charges in the future related to the cancellation or delay of other pipeline programs that were measured at fair value and capitalized in connection with business
combinations and such charges could be material.
Restructuring Costs
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 $550 million in
2025 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.
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.
Restructuring costs of $309 million in 2024 and $599 million in 2023 include separation and other costs associated with these restructuring activities.
Separation costs incurred were associated with actual headcount reductions, as well as estimated expenses under existing severance programs for involuntary
headcount reductions that were probable and could be reasonably estimated. Other expenses in Restructuring costs include facility shut-down and other related costs,
as well as employee-related costs such as curtailment, settlement and termination
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charges associated with pension and other postretirement benefit plans and share-based compensation plan costs. For segment reporting, restructuring costs are
unallocated expenses.
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 related to restructuring program activities of $888 million in 2024 and $933 million in
2023 (of which $190 million related to the 2024 Restructuring Program). See Note 5 to the consolidated financial statements for additional details.
Other (Income) Expense, Net
Other (income) expense, net, was $24 million of income in 2024 compared with $466 million of expense in 2023 primarily reflecting a $572.5 million charge
in 2023 related to settlements with certain plaintiffs in the Zetia antitrust litigation. The favorability was also due to $170 million of income in 2024 related to the
expansion of an existing development and commercialization agreement with Daiichi Sankyo, as well as lower foreign exchange losses in 2024. Other (income)
expense, net, was unfavorably affected in 2024 by lower income from investments in equity securities and higher net interest expense compared with 2023.
For details on the components of Other (income) expense, net, see Note 14 to the consolidated financial statements.
Segment Profits
($ in millions)
2024
2023
2022
Pharmaceutical segment profits
$
44,533
$
38,880
$
36,852
Animal Health segment profits
1,938
1,737
1,963
Non-segment activity
(26,535)
(38,728)
(22,371)
Income Before Taxes
$
19,936
$
1,889
$
16,444
Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as SG&A expenses directly incurred by the segment. Animal
Health segment profits are comprised of segment sales, less all cost of sales, as well as SG&A and R&D expenses directly incurred by the segment. For internal
management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as
described above, R&D expenses incurred by MRL, or general and administrative expenses not directly incurred by the segments, nor the cost of financing these
activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions
and, therefore, they are not included in segment profits. Also excluded from the determination of segment profits are costs related to restructuring activities and
acquisition- and divestiture-related costs, including the amortization of intangible assets and amortization of purchase accounting adjustments, intangible asset
impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Additionally,
segment profits do not reflect other expenses from corporate and manufacturing cost centers and other miscellaneous income or expense. These unallocated items
are reflected in “Non-segment activity” in the above table. Also included in “Non-segment activity” are miscellaneous corporate profits (losses), as well as operating
profits (losses) related to third-party manufacturing arrangements.
Pharmaceutical segment profits grew 15% in 2024 primarily due to higher sales, partially offset by higher administrative and promotional costs, as well as
the unfavorable effect of foreign exchange. Animal Health segment profits increased 12% in 2024 primarily due to higher sales and lower manufacturing-related costs,
partially offset by increased administrative costs, as well as the unfavorable effect of foreign exchange.
Taxes on Income
The effective income tax rate of 14.1% in 2024 reflects a favorable mix of income and expense, as well as a 2.6 percentage point favorable impact due to a
$519 million reduction in reserves for unrecognized income tax benefits resulting from the expiration in 2024 of the statute of limitations for assessments related to the
2019 and 2020 federal tax return years. The effective income tax rate in 2024 also reflects a 1.5 percentage point combined unfavorable impact of charges for the
acquisition of Harpoon, for which no tax benefit was recognized, and the acquisitions of EyeBio and MK-1045 for which minimal tax benefits were realized.
While many jurisdictions in which Merck operates have adopted the global minimum tax provision of the Organization for Economic Cooperation and
Development (OECD) Pillar 2, effective for tax years beginning in January 2024, it resulted in a minimal impact to the Company’s 2024 effective income tax rate due to
the accounting
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for the tax effects of intercompany transactions. The Company expects the impact of the global minimum tax will increase its effective income tax rate by
approximately 2% in 2025. In addition, beginning in 2026, the tax rates on foreign earnings and export income are scheduled to increase under existing provisions of
the Tax Cuts and Jobs Act of 2017 (TCJA) and may result in an increase to the Company’s effective income tax rate. Also, in the event that the provision of the TCJA
requiring capitalization and amortization of R&D expenses for tax purposes is repealed along the lines proposed in the Tax Relief for American Families and Workers
Act of 2024, the Company will again be able to realize the benefit of U.S. R&D expenses as incurred, but expects no material impact to its effective income tax rate.
The effective income tax rate of 80.0% in 2023 includes a 65.6 percentage point combined unfavorable impact of charges for the acquisitions of
Prometheus and Imago (for which no tax benefits were recognized) and the Daiichi Sankyo collaboration. These charges reduced domestic pretax income by
approximately $16.9 billion in 2023. In addition, the effective income tax rate in 2023 reflects higher foreign taxes and the impact of the R&D capitalization provision of
the TCJA on the Company’s U.S. global intangible low-taxed income inclusion, partially offset by a favorable mix of income and expense, as well as higher foreign tax
credits.
The Internal Revenue Service (IRS) is currently conducting examinations of the Company’s tax returns for the years 2017 and 2018, including the one-time
transition tax enacted under the TCJA. If the IRS disagrees with the Company’s transition tax position, it may result in a significant tax liability. The IRS is also currently
conducting examinations of the Company’s tax returns for the years 2021 and 2022. In addition, various state and foreign tax examinations are in progress.
Non-GAAP Income and Non-GAAP EPS
Non-GAAP income and non-GAAP EPS are alternative views of the Company’s performance that Merck is providing because management believes this
information enhances investors’ understanding of the Company’s results since management uses non-GAAP measures to assess performance. Non-GAAP income
and non-GAAP EPS exclude certain items because of the nature of these items and the impact that they have on the analysis of underlying business performance and
trends. The excluded items (which should not be considered non-recurring) consist of acquisition- and divestiture-related costs, restructuring costs, income and losses
from investments in equity securities, and certain other items. These excluded items are significant components in understanding and assessing financial
performance.
Non-GAAP income and non-GAAP EPS are important internal measures for the Company. Senior management receives a monthly analysis of operating
results that includes a non-GAAP EPS metric. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the
performance of the Company along with other metrics. In addition, annual employee compensation, including senior management’s compensation, is derived in part
using a non-GAAP pretax income metric. Since non-GAAP income and non-GAAP EPS are not measures determined in accordance with GAAP, they have no
standardized meaning prescribed by GAAP and, therefore, may not be comparable to the calculation of similar measures of other companies. The information on non-
GAAP income and non-GAAP EPS should be considered in addition to, but not as a substitute for or superior to, net income and EPS prepared in accordance with
GAAP.
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A reconciliation between GAAP financial measures and non-GAAP financial measures is as follows:
($ in millions except per share amounts)
2024
2023
2022
Income before taxes as reported under GAAP
$
19,936
$
1,889
$
16,444
Increase (decrease) for excluded items:
Acquisition- and divestiture-related costs
2,519
2,876
3,704
Restructuring costs
888
933
666
Loss (income) from investments in equity securities, net
45
(279)
1,348
Other items:
Charge for Zetia antitrust litigation settlements
—
573
—
Non-GAAP income before taxes
23,388
5,992
22,162
Taxes on income as reported under GAAP
2,803
1,512
1,918
Estimated tax benefit on excluded items
606
631
1,232
Tax benefit resulting from the expiration of the statute of limitations for assessments related to the 2019 and 2020
federal tax return years
519
—
—
Non-GAAP taxes on income
3,928
2,143
3,150
Non-GAAP net income
19,460
3,849
19,012
Less: Net income attributable to noncontrolling interests as reported under GAAP
16
12
7
Non-GAAP net income attributable to Merck & Co., Inc.
$
19,444
$
3,837
$
19,005
EPS assuming dilution as reported under GAAP
$
6.74
$
0.14
$
5.71
EPS difference
0.91
1.37
1.77
Non-GAAP EPS assuming dilution
$
7.65
$
1.51
$
7.48
Amounts in 2024, 2023 and 2022 include $39 million, $792 million and $1.7 billion, respectively, of intangible asset impairment charges.
The estimated tax impact on the excluded items is determined by applying the statutory rate of the originating territory of the non-GAAP adjustments.
GAAP and non-GAAP EPS were negatively affected in 2024, 2023 and 2022 by $1.28, $6.21, and $0.22, respectively, of charges for certain upfront and pre-approval milestone payments related to collaborations
and licensing agreements, as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions.
Acquisition- and Divestiture-Related Costs
Non-GAAP income and non-GAAP EPS exclude the impact of certain amounts recorded in connection with acquisitions and divestitures of businesses.
These amounts include the amortization of intangible assets and amortization of purchase accounting adjustments to inventories, as well as intangible asset
impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also excluded are
integration, transaction, and certain other costs associated with acquisitions and divestitures. Non-GAAP income and non-GAAP EPS also exclude amortization of
intangible assets related to collaborations and licensing arrangements.
Restructuring Costs
Non-GAAP income and non-GAAP EPS exclude costs related to restructuring actions (see Note 5 to the consolidated financial statements). These
amounts include employee separation costs and accelerated depreciation associated with facilities to be closed or divested. Accelerated depreciation costs represent
the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or
divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. Restructuring costs also
include other exits costs, such as asset impairment, 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 costs.
Income and Losses from Investments in Equity Securities
Non-GAAP income and non-GAAP EPS exclude realized and unrealized gains and losses from investments in equity securities either owned directly or
through ownership interests in investment funds.
Certain Other Items
Non-GAAP income and non-GAAP EPS exclude certain other items. These items are adjusted for after evaluating them on an individual basis, considering
their quantitative and qualitative aspects. Typically, these items
(1)
(2)
(3)
(3)
(1)
(2)
(3)
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are unusual in nature, significant to the results of a particular period or not indicative of future operating results. Excluded from non-GAAP income and non-GAAP EPS
in 2024 is a benefit due to reductions in reserves for unrecognized income tax benefits resulting from the expiration of the statute of limitations for assessments related
to the 2019 and 2020 federal tax return years (see Note 15 to the consolidated financial statements). Excluded from non-GAAP income and non-GAAP EPS in 2023 is
a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation (see Note 10 to the consolidated financial statements).
Research and Development
Research Pipeline
The Company currently has several candidates under regulatory review in the U.S. and internationally, as well as in late-stage clinical development. A chart
reflecting the Company’s current research pipeline as of February 21, 2025 and related discussion is set forth in Item 1. “Business — Research and Development”
above.
Acquisitions, Research Collaborations and Licensing Agreements
Merck continues to remain focused on pursuing opportunities that have the potential to drive both near- and long-term growth. Certain recent transactions
are summarized below; additional details are included in Note 3 to the consolidated financial statements. Merck actively monitors the landscape for growth
opportunities that meet the Company’s strategic criteria.
In December 2024, Merck closed an exclusive global license to develop, manufacture and commercialize MK-2010 (LM-299), a novel investigational PD-
1/VEGF bispecific antibody from LaNova. Merck recorded a charge of $588 million to Research and development expenses in 2024, or $0.18 per share, for the upfront
payment, which was made in January 2025. LaNova is also eligible to receive milestone payments associated with the technology transfer, development, regulatory
approval and commercialization of MK-2010 (LM-299) across multiple indications.
Also in December 2024, Merck closed an exclusive global license to develop, manufacture and commercialize MK-4082 (HS-10535), an investigational
preclinical oral small molecule GLP-1 receptor agonist from Hansoh. Merck recorded a charge of $112 million to Research and development expenses in 2024, or
$0.04 per share, for the upfront payment, which was made in February 2025. Hansoh is also eligible to receive future contingent milestone payments associated with
the development, regulatory approval and commercialization of MK-4082 (HS-10535) as well as tiered royalties on future net sales of MK-4082 (HS-10535), if
approved. Under the agreement, Hansoh may co-promote or solely commercialize MK-4082 (HS-10535) in Chinese mainland, Hong Kong and Macau, subject to
certain conditions.
In September 2024, Merck acquired MK-1045 (formally CN201), a novel investigational clinical-stage bispecific antibody for the treatment of B-cell
associated diseases, from Curon Biopharmaceutical (Curon) for an upfront payment of $700 million. In addition, Curon is eligible to receive future contingent
developmental and regulatory milestone payments. The transaction was accounted for as an asset acquisition. Merck recorded a charge of $750 million (reflecting the
upfront payment and other related costs) to Research and development expenses, or $0.29 per share, in 2024 related to the execution of the transaction. In
connection with the agreement, Merck is also obligated to pay a third party future contingent developmental, regulatory and sales-based milestone payments, as well
as tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on future net sales of MK-1045, if approved.
In July 2024, Merck acquired 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 lead candidate, 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 2024 related to the acquisition.
Additionally, a $100 million developmental milestone was triggered and paid in 2024 upon initiation of a Phase 2/3 clinical trial evaluating MK-3000 for the treatment of
diabetic macular edema, which was also recorded as a charge to Research and development expenses ($0.04 per share).
In March 2024, Merck acquired 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
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canonical Notch ligand that is expressed at high levels in small-cell lung cancer and neuroendocrine tumors. The transaction was accounted for as an asset
acquisition. The Company recorded net assets of $165 million, as well as a charge of $656 million to Research and development expenses, or $0.26 per share, in
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. Merck recognized income (recorded within Other (income) expense, net) of
$170 million, or $0.05 per share, due to the receipt of an upfront cash payment from Daiichi Sankyo and has also satisfied a contingent quid obligation from the
original collaboration agreement.
Acquired In-Process Research and Development
In connection with business combinations, the Company records the fair value of in-process research projects which, at the time of acquisition, had not yet
reached technological feasibility. At December 31, 2024, the balance of in-process research and development (IPR&D) was $430 million, primarily consisting of MK-
1026 (nemtabrutinib), $418 million, which is in Phase 3 clinical development.
The IPR&D projects that remain in development are subject to the inherent risks and uncertainties in drug development and it is possible that the Company
will not be able to successfully develop and complete the IPR&D programs and profitably commercialize the underlying product candidates. The time periods to
receive approvals from the FDA and other regulatory agencies are subject to uncertainty. Significant delays in the approval process, or the Company’s failure to obtain
approval at all, would delay or prevent the Company from realizing revenues from these products. Additionally, if the IPR&D programs require additional clinical trial
data than previously anticipated, or if the programs fail or are abandoned during development, then the Company will not recover the fair value of the IPR&D recorded
as an asset as of the acquisition date. If such circumstances were to occur, the Company’s future operating results could be adversely affected and the Company may
recognize impairment charges, which could be material.
In 2023 and 2022, the Company recorded IPR&D impairment charges within Research and development expenses of $779 million and $1.6 billion,
respectively (see Note 8 to the consolidated financial statements).
Additional research and development will be required before any of the remaining programs reach technological feasibility. The costs to complete the
research projects will depend on whether the projects are brought to their final stages of development and are ultimately submitted to the FDA or other regulatory
agencies for approval.
Capital Expenditures
Capital expenditures were $3.4 billion in 2024, $3.9 billion in 2023 and $4.4 billion in 2022. Expenditures in the U.S. were $2.4 billion in 2024, $2.5 billion in
2023 and $2.7 billion in 2022. The Company plans to invest approximately $20 billion in capital projects from 2024-2028, more than $11 billion of which relates to
investments in the U.S., including expanding manufacturing capacity for oncology, vaccine and animal health products.
Depreciation expense was $2.1 billion in 2024, $1.8 billion in 2023 and $1.8 billion in 2022, of which $1.4 billion in 2024, $1.2 billion in 2023 and $1.3 billion
in 2022, related to locations in the U.S. Total depreciation expense in 2024, 2023 and 2022 included accelerated depreciation of $254 million, $140 million and $120
million, respectively, associated with restructuring activities (see Note 5 to the consolidated financial statements).
Analysis of Liquidity and Capital Resources
Merck’s strong financial profile enables it to fund research and development, finance acquisitions and external alliances, support in-line products and
maximize upcoming launches while providing significant cash returns to shareholders.
Selected Data
($ in millions)
2024
2023
2022
Working capital
$
10,362
$
6,474
$
11,483
Total debt to total liabilities and equity
31.7 %
32.9 %
28.1 %
Cash provided by operating activities to total debt
0.6:1
0.4:1
0.6:1
Cash provided by operating activities was $21.5 billion in 2024 compared with $13.0 billion in 2023 reflecting stronger operating performance. Cash
provided by operating activities was reduced by upfront, milestone, option and continuation payments related to certain collaborations of $1.1 billion in 2024 compared
with $4.2 billion in 2023 (including payments related to the formation of a collaboration with Daiichi Sankyo). Cash provided by operating activities in 2023 was also
reduced by a payment of $572.5 million for the previously disclosed Zetia antitrust settlement. Cash provided by operating activities continues to be the Company’s
primary source of funds to finance
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operating needs, with excess cash serving as the primary source of funds to finance business development transactions, capital expenditures, dividends paid to
shareholders and treasury stock purchases.
Cash used in investing activities was $7.7 billion in 2024 compared with $14.1 billion in 2023. The lower use of cash in investing activities was primarily due
to lower cash used for acquisitions, lower capital expenditures, as well as lower purchases of securities and other investments, partially offset by lower proceeds from
sales of securities and other investments.
Cash used in financing activities was $7.0 billion in 2024 compared with $4.8 billion in 2023. The higher use of cash in financing activities was primarily due
to lower proceeds from the issuance debt (see below) and higher dividends paid to shareholders, partially offset by lower payments on long-term debt (see below),
higher proceeds from the exercise of stock options and lower purchases of treasury stock.
In May 2024, MSD Netherlands Capital B.V., a wholly owned finance subsidiary of Merck, completed a registered public offering of €3.4 billion in aggregate
principal amount of euro-dominated senior notes. The net cash proceeds from the offering were used for general corporate purposes. In May 2023, the Company
issued $6.0 billion in aggregate principal amount of senior unsecured notes. The Company used a portion of the $5.9 billion net proceeds from this offering to fund a
portion of the cash consideration paid for the acquisition of Prometheus, including related fees and expenses, and used the remaining net proceeds for general
corporate purposes including to repay commercial paper borrowings and other indebtedness with upcoming maturities.
In 2024, the Company’s $750 million, 2.90% notes and the Company’s €500 million, 0.50% euro-denominated notes matured in accordance with their
terms and were repaid. In 2023, the Company’s $1.75 billion, 2.80% notes matured in accordance with their terms and were repaid. In 2022, the Company’s $1.25
billion, 2.35% notes and the Company’s $1.0 billion, 2.40% notes matured in accordance with their terms and were repaid.
The Company has a $6.0 billion credit facility that matures in May 2028. The facility provides backup liquidity for the Company’s commercial paper
borrowing facility and is to be used for general corporate purposes. The Company has not drawn funding from this facility.
In March 2024, the Company filed a securities registration statement with the U.S. Securities and Exchange Commission (SEC) under the automatic shelf
registration process available to “well-known seasoned issuers” which is effective for three years.
Effective as of November 3, 2009, the Company executed a full and unconditional guarantee of the then existing debt of its subsidiary Merck Sharp &
Dohme Corp. (MSD) and MSD executed a full and unconditional guarantee of the then existing debt of the Company (excluding commercial paper), including for
payments of principal and interest. These guarantees do not extend to debt issued subsequent to that date.
In November 2024, Merck’s Board of Directors increased the quarterly dividend, declaring a quarterly dividend of $0.81 per share on the Company’s
outstanding common stock for the first quarter of 2025 that was paid in January 2025. In January 2025, the Board of Directors declared a quarterly dividend of $0.81
per share on the Company’s outstanding common stock for the second quarter of 2025 payable in April 2025.
In 2018, Merck’s Board of Directors authorized purchases of up to $10 billion of Merck’s common stock for its treasury. The treasury stock purchase
authorization has no time limit and will be made over time in open-market transactions, block transactions on or off an exchange, or in privately negotiated
transactions. In 2024, the Company purchased $1.3 billion (approximately 11 million shares) of its common stock for its treasury under this program. As
of December 31, 2024, the Company’s remaining share repurchase authorization was $2.4 billion. The Company purchased $1.3 billion of its common stock during
2023 under the authorized share repurchase program. The Company did not purchase any shares of its common stock under this program in 2022. In January 2025,
Merck’s Board of Directors authorized purchases of up to an additional $10 billion of Merck’s common stock for its treasury.
The Company believes it maintains a conservative financial profile. The Company places its cash and investments in instruments that meet high credit
quality standards, as specified in its investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issuer. The Company does not
participate in any off-balance sheet arrangements involving unconsolidated subsidiaries that provide financing or potentially expose the Company to unrecorded
financial obligations.
The Company expects foreseeable liquidity and capital resource requirements to be met through existing cash and cash equivalents and anticipated cash
flows from operations, as well as commercial paper borrowings and long-term borrowings if needed. Merck believes that its sources of financing will be adequate to
meet its future requirements. The Company’s material cash requirements arising in the normal course of business primarily include:
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Debt Obligations and Interest Payments — See Note 9 to the consolidated financial statements for further detail of the Company’s debt obligations and the
timing of expected future principal and interest payments.
Tax Liabilities — In connection with the enactment of the TCJA, the Company is required to pay a one-time transition tax, which the Company has elected
to pay over a period of eight years through 2025 as permitted under the TCJA. Additionally, the Company has liabilities for unrecognized tax benefits, including interest
and penalties. See Note 15 to the consolidated financial statements for further information pertaining to the transition tax and liabilities for unrecognized tax benefits.
Operating Leases — See Note 9 to consolidated financial statements for further details of the Company’s lease obligations and the timing of expected
future lease payments.
Collaboration-Related Payments — At December 31, 2024, the Company has accrued liabilities for contingent sales-based milestone payments related to a
collaboration with AstraZeneca where the related sales-based milestones were achieved, but payment was not yet due according to the payment terms. These sales-
based milestones were subsequently paid in January 2025. Additionally, the Company has an accrued liability for a future continuation payment related to a
collaboration with Daiichi Sankyo. See Note 4 to the consolidated financial statements for additional information related to these payments.
Purchase Obligations — Purchase obligations are enforceable and legally binding obligations for purchases of goods and services including minimum
inventory contracts, research and development and advertising. Purchase obligations also include future inventory purchases the Company has committed to in
connection with certain divestitures. As of December 31, 2024, the Company had total purchase obligations of $7.2 billion, of which $2.8 billion is estimated to be
payable in 2025.
Financial Instruments Market Risk Disclosures
The Company manages the impact of foreign exchange rate movements and interest rate movements on its earnings, cash flows and fair values of assets
and liabilities through operational means and through the use of various financial instruments, including derivative instruments.
A significant portion of the Company’s revenues and earnings in foreign affiliates is exposed to changes in foreign exchange rates. The objectives of and
accounting related to the Company’s foreign currency risk management program, as well as its interest rate risk management activities are discussed below.
Foreign Currency Risk Management
The Company has established revenue hedging, balance sheet risk management, and net investment hedging programs to protect against volatility of
future foreign currency cash flows and changes in fair value caused by changes in foreign exchange rates.
The objective of the revenue hedging program is to reduce the variability caused by changes in foreign exchange rates that would affect the U.S. dollar
value of future cash flows derived from foreign currency denominated sales, primarily the euro, Japanese yen and Chinese renminbi. To achieve this objective, the
Company will hedge a portion of its forecasted foreign currency denominated third-party and intercompany distributor entity sales (forecasted sales) that are expected
to occur over its planning cycle, typically no more than two years into the future. The Company will layer in hedges over time, increasing the portion of forecasted sales
hedged as it gets closer to the expected date of the forecasted sales. The portion of forecasted sales hedged is based on assessments of cost-benefit profiles that
consider natural offsetting exposures, revenue and foreign exchange rate volatilities and correlations, and the cost of hedging instruments. The Company manages its
anticipated transaction exposure principally with purchased local currency put options, forward contracts, and purchased collar options.
The fair values of these derivative contracts are recorded as either assets (gain positions) or liabilities (loss positions) in the Consolidated Balance Sheet.
Changes in the fair value of derivative contracts are recorded each period in either current earnings or Other Comprehensive Income (Loss) (OCI), depending on
whether the derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. For derivatives that are designated as cash flow hedges,
the unrealized gains or losses on these contracts are recorded in Accumulated Other Comprehensive Loss (AOCL) and reclassified into Sales when the hedged
anticipated revenue is recognized. The amount reclassified into earnings as a result of the discontinuation of cash flow hedges because it was no longer deemed
probable the forecasted hedged transactions would occur was not material for the years ended December 31, 2024, 2023 or 2022. For those derivatives which are not
designated as cash flow hedges, but serve as economic hedges of forecasted sales, unrealized gains or losses are recorded in Sales each period. The cash flows
from both designated and non-designated contracts are reported as operating activities in the Consolidated Statement of Cash Flows. The Company does not enter
into derivatives for trading or speculative purposes.
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Because Merck principally sells foreign currency in its revenue hedging program, a uniform weakening of the U.S. dollar would yield the largest overall
potential loss in the market value of these hedge instruments. The market value of Merck’s hedges would have declined by an estimated $569 million and $754 million
at December 31, 2024 and 2023, respectively, from a uniform 10% weakening of the U.S. dollar. The market value was determined using a foreign exchange option
pricing model and holding all factors except exchange rates constant. Although not predictive in nature, the Company believes that a 10% threshold reflects
reasonably possible near-term changes in Merck’s major foreign currency exposures relative to the U.S. dollar.
The Company manages operating activities and net asset positions at each local subsidiary in order to mitigate the effects of foreign exchange on
monetary assets and liabilities. Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at
spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Other (income) expense, net. The Company also uses a balance
sheet risk management program to mitigate the exposure of such assets and liabilities from the effects of volatility in foreign exchange. Merck principally utilizes
forward exchange contracts to offset the effects of foreign exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that
considers the magnitude of the exposure, the volatility of the foreign exchange rate and the cost of the hedging instrument (primarily the euro, Swiss franc, Japanese
yen, and Chinese renminbi). The forward contracts are not designated as hedges and are marked to market through Other (income) expense, net. Accordingly, fair
value changes in the forward contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency
exchange rates, except to the extent of the spot-forward differences. These differences are not significant due to the short-term nature of the contracts, which typically
have average maturities at inception of less than six months. The cash flows from these contracts are reported as operating activities in the Consolidated Statement of
Cash Flows.
A sensitivity analysis to changes in the value of the U.S. dollar on foreign currency denominated derivatives, investments and monetary assets and
liabilities indicated that if the U.S. dollar uniformly weakened by 10% against all currency exposures of the Company at December 31, 2024 and 2023, Income Before
Taxes would have declined by approximately $239 million and $221 million in 2024 and 2023, respectively. Because the Company was in a net short (payable)
position relative to its major foreign currencies after consideration of forward contracts, a uniform weakening of the U.S. dollar will yield the largest overall potential net
loss in earnings due to exchange. This measurement assumes that a change in one foreign currency relative to the U.S. dollar would not affect other foreign
currencies relative to the U.S. dollar. Although not predictive in nature, the Company believes that a 10% threshold reflects reasonably possible near-term changes in
Merck’s major foreign currency exposures relative to the U.S. dollar. The cash flows from these contracts are reported as operating activities in the Consolidated
Statement of Cash Flows.
The Company also uses forward exchange contracts to hedge a portion of its net investment in foreign operations against movements in foreign exchange
rates. The forward contracts are designated as hedges of the net investment in a foreign operation. The unrealized gains or losses on these contracts are recorded in
foreign currency translation adjustment within OCI and remain in AOCL until either the sale or complete or substantially complete liquidation of the subsidiary. The
Company excludes certain portions of the change in fair value of its derivative instruments from the assessment of hedge effectiveness (excluded components).
Changes in fair value of the excluded components are recognized in OCI. The Company recognizes in earnings the initial value of the excluded components on a
straight-line basis over the life of the derivative instrument, rather than using the mark-to-market approach. The cash flows from these contracts are reported as
investing activities in the Consolidated Statement of Cash Flows.
Foreign exchange risk is also managed through the use of foreign currency debt. Certain of the Company’s senior unsecured euro-denominated notes
have been designated as, and are effective as, economic hedges of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses
due to spot rate fluctuations on the euro-denominated debt instruments are included in foreign currency translation adjustment within OCI.
Interest Rate Risk Management
The Company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rate changes
and to reduce its overall cost of borrowing. The Company does not use leveraged swaps and, in general, does not leverage any of its investment activities that would
put principal at risk.
At December 31, 2024, the Company was a party to six pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of the fixed-
rate notes as detailed in the table below.
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($ in millions)
2024
Debt Instrument
Par Value of Debt
Number of Interest Rate Swaps
Held
Total Swap Notional Amount
4.50% notes due 2033
$
1,500
6
$
1,500
The interest rate swap contracts are designated hedges of the fair value changes in the notes attributable to changes in the benchmark Secured Overnight
Financing Rate (SOFR) swap rate. The fair value changes in the notes attributable to changes in the SOFR swap rate are recorded in interest expense along with the
offsetting fair value changes in the swap contracts. In January 2025, the Company entered into an additional interest rate swap with a notional amount of $250 million
related to its 5.00% notes due 2053. The cash flows from these contracts are reported as operating activities in the Consolidated Statement of Cash Flows.
The Company’s investment portfolio includes cash equivalents and short-term investments, the market values of which are not significantly affected by
changes in interest rates. The market value of the Company’s medium- to long-term fixed-rate investments is modestly affected by changes in U.S. interest rates.
Changes in medium- to long-term U.S. interest rates have a more significant impact on the market value of the Company’s fixed-rate borrowings, which generally have
longer maturities. A sensitivity analysis to measure potential changes in the market value of Merck’s investments and debt from a change in interest rates indicated
that a one percentage point increase in interest rates at December 31, 2024 and 2023 would have positively affected the net aggregate market value of these
instruments by $2.4 billion and $2.5 billion, respectively. A one percentage point decrease at December 31, 2024 and 2023 would have negatively affected the net
aggregate market value by $2.9 billion and $3.0 billion, respectively. The fair value of Merck’s debt was determined using pricing models reflecting one percentage
point shifts in the appropriate yield curves. The fair values of Merck’s investments were determined using a combination of pricing and duration models.
Critical Accounting Estimates
The Company’s consolidated financial statements are prepared in conformity with GAAP and, accordingly, include certain amounts that are based on
management’s best estimates and judgments. Estimates are used when accounting for amounts recorded in connection with acquisitions, including initial fair value
determinations of assets and liabilities in a business combination (primarily IPR&D, other intangible assets and contingent consideration), as well as subsequent fair
value measurements. Additionally, estimates are used in determining such items as provisions for sales discounts, rebates and returns, depreciable and amortizable
lives, recoverability of inventories, including those produced in preparation for product launches, amounts recorded for contingencies, environmental liabilities,
accruals for contingent sales-based milestone payments and other reserves, pension and other postretirement benefit plan assumptions, share-based compensation
assumptions, restructuring costs, impairments of long-lived assets (including intangible assets and goodwill) and investments, and taxes on income. Because of the
uncertainty inherent in such estimates, actual results may differ from these estimates. Application of the following accounting policies result in accounting estimates
having the potential for the most significant impact on the financial statements.
Acquisitions and Dispositions
To determine whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses, the Company makes certain judgments,
which include assessment of the inputs, processes, and outputs associated with the acquired set of activities. If the Company determines that substantially all of the
fair value of gross assets included in a transaction is concentrated in a single asset (or a group of similar assets), the assets would not represent a business. To be
considered a business, the assets in a transaction need to include an input and a substantive process that together significantly contribute to the ability to create
outputs.
In a business combination, the acquisition method of accounting requires that the assets acquired and liabilities assumed be recorded as of the date of the
acquisition at their respective fair values with limited exceptions. The fair values of intangible assets are determined utilizing information available near the acquisition
date based on expectations and assumptions that are deemed reasonable by management. Given the considerable judgment involved in determining fair values, the
Company typically obtains assistance from third-party valuation specialists for significant items. Assets acquired and liabilities assumed in a business combination that
arise from contingencies are generally recognized at fair value. If fair value cannot be determined, the asset or liability is recognized if probable and reasonably
estimable; if these criteria are not met, no asset or liability is recognized. Fair value is defined as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date. Accordingly, the Company may be required to value assets at fair value measures that do not reflect the Company’s intended use of those assets.
Any excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill. Transaction costs and costs
to
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restructure the acquired company are expensed as incurred. The operating results of the acquired business are reflected in the Company’s consolidated financial
statements after the date of the acquisition.
The judgments made in determining estimated fair values assigned to assets acquired and liabilities assumed in a business combination, as well as asset
lives, can materially affect the Company’s results of operations.
The fair values of identifiable intangible assets related to currently marketed products are primarily determined by using an income approach through which
fair value is estimated based on each asset’s discounted projected net cash flows. The Company’s estimates of market participant net cash flows consider historical
and projected pricing, margins and expense levels; the performance of competing products where applicable; relevant industry and therapeutic area growth drivers
and factors; current and expected trends in technology and product life cycles; the time and investment that will be required to develop products and technologies; the
ability to obtain additional marketing and regulatory approvals; the ability to manufacture and commercialize the products; the extent and timing of potential new
product introductions by the Company’s competitors; and the life of each asset’s underlying patent and related patent term extension, if any. The net cash flows are
then probability-adjusted where appropriate to consider the uncertainties associated with the underlying assumptions, as well as the risk profile of the net cash flows
utilized in the valuation. The probability-adjusted future net cash flows of each product are then discounted to present value utilizing an appropriate discount rate.
The fair values of identifiable intangible assets related to IPR&D are also determined using an income approach, through which fair value is estimated
based on each asset’s probability-adjusted future net cash flows, which reflect the different stages of development of each product and the associated probability of
successful completion. The net cash flows are then discounted to present value using an appropriate discount rate. Amounts allocated to acquired IPR&D are
capitalized and accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful
completion of each IPR&D project, Merck will make a determination as to the then-useful life of the intangible asset, generally determined by the period in which the
substantial majority of the cash flows are expected to be generated, and begin amortization.
Certain of the Company’s business combinations involve the potential for future payment of consideration that is contingent upon the achievement of
performance milestones, including product development milestones and royalty payments on future product sales. The fair value of contingent consideration liabilities
is determined at the acquisition date using unobservable inputs. These inputs include the estimated amount and timing of projected cash flows, the probability of
success (achievement of the contingent event) and the risk-adjusted discount rate used to present value the probability-weighted cash flows. Subsequent to the
acquisition date, at each reporting period until the contingency is resolved, the contingent consideration liability is remeasured at current fair value with changes (either
expense or income) recorded in earnings. Changes in any of the inputs may result in a significantly different fair value adjustment.
If the Company determines the transaction will not be accounted for as an acquisition of a business, the transaction will be accounted for as an asset
acquisition rather than a business combination and, therefore, no goodwill will be recorded. In an asset acquisition, acquired IPR&D with no alternative future use is
charged to expense and contingent consideration is not recognized at the acquisition date.
Contingent Sales-Based Milestones
The terms of certain business development transactions, including collaborative arrangements, licensing agreements and asset acquisitions, require the
Company to make payments contingent upon the achievement of sales-based milestones. Sales-based milestones payable by Merck are accrued and capitalized,
subject to cumulative amortization catch-up, when determined by the Company to be probable of being achieved based on future sales forecasts. The amortization
catch-up is calculated either from the time of the first regulatory approval for products that were unapproved at the time the transaction was completed or, for new
indications of products that were approved prior to the transaction, from the time the transaction was completed. The related intangible asset that is recognized is
amortized over its remaining useful life, subject to impairment testing.
Revenue Recognition
Recognition of revenue requires evidence of a contract, probable collection of sales proceeds and completion of substantially all performance obligations.
Merck acts as the principal in substantially all of its customer arrangements and therefore records revenue on a gross basis. The majority of the Company’s contracts
related to the Pharmaceutical and Animal Health segments have a single performance obligation - the promise to transfer goods. Shipping is considered immaterial in
the context of the overall customer arrangement and damages or loss of goods in transit are rare. Therefore, shipping is not deemed a separately recognized
performance obligation.
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The vast majority of revenues from sales of products are recognized at a point in time when control of the goods is transferred to the customer, which the
Company has determined is when title and risks and rewards of ownership transfer to the customer and the Company is entitled to payment. For certain services in
the Animal Health segment, revenue is recognized over time, generally ratably over the contract term as services are provided. These service revenues are not
material.
The nature of the Company’s business gives rise to several types of variable consideration including discounts and returns, which are estimated at the time
of sale generally using the expected value method, although the most likely amount method is used for prompt pay discounts.
In the U.S., sales discounts are issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of
rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and
returns, which are established at the time of sale. In addition, if collection of accounts receivable is expected to be in excess of one year, sales are recorded net of time
value of money discounts, which have not been material.
The U.S. provision for aggregate customer discounts covers chargebacks and rebates. Chargebacks are discounts that occur when a contracted customer
purchases through an intermediary wholesaler. The wholesaler then charges the Company back for the difference between the price initially paid by the wholesaler
and the contract price agreed to between Merck and the customer. The provision for chargebacks is based on expected sell-through levels by the Company’s
wholesale customers to contracted customers, as well as estimated wholesaler inventory levels. Rebates are amounts owed based upon definitive contractual
agreements or legal requirements with private sector and public sector (Medicaid and Medicare Part D) benefit providers after the final dispensing of the product to a
benefit plan participant. The provision for rebates is based on expected patient usage, as well as inventory levels in the distribution channel to determine the
contractual obligation to the benefit providers. The Company uses historical customer segment utilization mix, sales forecasts, changes to product mix and price,
inventory levels in the distribution channel, government pricing calculations and prior payment history in order to estimate the expected provision. Amounts accrued for
aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations,
pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. Merck remains committed to the 340B Program and to
providing 340B discounts to eligible covered entities. See Note 10 to the consolidated financial statements for information regarding 340B legal proceedings.
Summarized information about changes in the aggregate customer discount accrual related to U.S. sales is as follows:
($ in millions)
2024
2023
Balance January 1
$
2,486
$
2,918
Current provision
13,450
12,540
Adjustments to prior years
(139)
(70)
Payments
(13,334)
(12,902)
Balance December 31
$
2,463
$
2,486
Accruals for chargebacks are reflected as a direct reduction to accounts receivable and accruals for rebates as current liabilities. The accrued balances
relative to these provisions included in Accounts receivable and Accrued and other current liabilities were $293 million and $2.2 billion, respectively, at December 31,
2024 and were $188 million and $2.3 billion, respectively, at December 31, 2023.
Outside of the U.S., variable consideration in the form of discounts and rebates are a combination of commercially-driven discounts in highly competitive
product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. In certain European countries, legislatively mandated
rebates are calculated based on an estimate of the government’s total unbudgeted spending and the Company’s specific payback obligation. Rebates may also be
required based on specific product sales thresholds. The Company applies an estimated factor against its actual invoiced sales to represent the expected level of
future discount or rebate obligations associated with the sale.
The Company maintains a returns policy that allows its U.S. pharmaceutical customers to return product within a specified period prior to and subsequent
to the expiration date (generally, three to six months before and 12 months after product expiration). The estimate of the provision for returns is based upon historical
experience with actual returns. Additionally, the Company considers factors such as levels of inventory in the distribution channel, product dating and expiration period,
whether products have been discontinued, entrance in the market of generic or other competition, changes in formularies or launch of over-the-counter products,
among others. The product returns
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provision for U.S. pharmaceutical sales as a percentage of U.S. net pharmaceutical sales was 0.8% in 2024, 1.0% in 2023 and 1.1% in 2022. Outside of the U.S.,
returns are only allowed in certain countries on a limited basis.
Merck’s payment terms for U.S. pharmaceutical customers are typically 36 days from receipt of invoice and for U.S. animal health customers are typically
30 days from receipt of invoice; however, certain products have longer payment terms, including Keytruda, which has payment terms of 90 days. Payment terms for
vaccine sales in the U.S. typically range from 30 days to 60 days. Outside of the U.S., payment terms are typically 30 days to 90 days, although certain markets have
longer payment terms.
Through its distribution programs with U.S. wholesalers, the Company encourages wholesalers to align purchases with underlying demand and maintain
inventories below specified levels. The terms of the programs allow the wholesalers to earn fees upon providing visibility into their inventory levels, as well as by
achieving certain performance parameters such as inventory management, customer service levels, reducing shortage claims and reducing product returns.
Information provided through the wholesaler distribution programs includes items such as sales trends, inventory on-hand, on-order quantity and product returns.
Inventories Produced in Preparation for Product Launches
The Company capitalizes inventories produced in preparation for product launches sufficient to support estimated initial market demand. Capitalization of
such inventory does not begin until regulatory approval is considered by the Company to be probable. The Company monitors the status of each respective product
during the research and regulatory approval process. If the Company is aware of any specific risks or contingencies other than the normal regulatory approval process
or if there are any specific issues identified during the research process relating to safety, efficacy, manufacturing, marketing or labeling, the related inventory would
generally not be capitalized. Expiry dates of the inventory are affected by the stage of completion. The Company manages the levels of inventory at each stage to
optimize the shelf life of the inventory in relation to anticipated market demand in order to avoid product expiry issues. For inventories that are capitalized, anticipated
future sales and shelf lives support the realization of the inventory value as the inventory shelf life is sufficient to meet initial product launch requirements. Inventories
produced in preparation for product launches capitalized at December 31, 2024 and 2023 were $412 million and $790 million, respectively.
Contingencies and Environmental Liabilities
The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual
property, commercial litigation and securities litigation, as well as certain additional matters, including governmental and environmental matters (see Note 10 to the
consolidated financial statements). The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be
reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Generally, for product liability
claims, a portion of the overall accrual is actuarially determined and considers such factors as past experience, number of claims reported and estimates of claims
incurred but not yet reported. Individually significant contingent losses are accrued when probable and reasonably estimable.
Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the
significant factors considered in the review of these legal defense reserves are as follows: the actual costs incurred by the Company; the development of the
Company’s legal defense strategy and structure in light of the scope of its litigation; the number of cases being brought against the Company; the costs and outcomes
of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated
litigation. The amount of legal defense reserves as of December 31, 2024 and 2023 of approximately $225 million and $210 million, respectively, represents the
Company’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation; however, events such as additional trials
and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by the Company. The Company will
continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if,
based upon the factors set forth, it believes it would be appropriate to do so.
The Company and its subsidiaries are parties to a number of proceedings brought under the Comprehensive Environmental Response, Compensation and
Liability Act, commonly known as Superfund, and other federal and state equivalents. When a legitimate claim for contribution is asserted, a liability is initially accrued
based upon the estimated transaction costs to manage the site. Accruals are adjusted as site investigations, feasibility studies and related cost assessments of
remedial techniques are completed, and as the extent to which other potentially responsible parties who may be jointly and severally liable can be expected to
contribute is determined.
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The Company is also remediating environmental contamination resulting from past industrial activity at certain of its sites and takes an active role in
identifying and accruing for these costs. In the past, Merck performed a worldwide survey to assess all sites for potential contamination resulting from past industrial
activities. Where assessment indicated that physical investigation was warranted, such investigation was performed, providing a better evaluation of the need for
remedial action. Where such need was identified, remedial action was then initiated. As definitive information became available during the course of investigations
and/or remedial efforts at each site, estimates were refined and accruals were established or adjusted accordingly. These estimates and related accruals continue to
be refined annually.
The Company believes that there are no compliance issues associated with applicable environmental laws and regulations that would have a material
adverse effect on the Company. Expenditures for remediation and environmental liabilities were $4 million in 2024 and are estimated to be $26 million in the aggregate
for the years 2025 through 2029. In management’s opinion, the liabilities for all environmental matters that are probable and reasonably estimable have been accrued
and totaled $41 million and $42 million at December 31, 2024 and 2023, respectively. These liabilities are undiscounted, do not consider potential recoveries from
other parties and will be paid out over the periods of remediation for the applicable sites, which are expected to occur primarily over the next 15 years. Although it is
not possible to predict with certainty the outcome of these matters, or the ultimate costs of remediation, management does not believe that any reasonably possible
expenditures that may be incurred in excess of the liabilities accrued should exceed approximately $46 million in the aggregate. Management also does not believe
that these expenditures should result in a material adverse effect on the Company’s financial condition, results of operations or liquidity for any year.
Share-Based Compensation
The Company expenses all share-based payment awards to employees, including grants of stock options, over the requisite service period based on the
grant date fair value of the awards. The Company determines the fair value of certain share-based awards using the Black-Scholes option-pricing model which uses
both historical and current market data to estimate the fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility,
expected dividend yield and expected life of the options. Total pretax share-based compensation expense was $761 million in 2024, $645 million in 2023 and $541
million in 2022. At December 31, 2024, there was $1.1 billion of total pretax unrecognized compensation expense related to nonvested stock option, restricted stock
unit and performance share unit awards which will be recognized over a weighted-average period of 1.9 years. For segment reporting, share-based compensation
costs are unallocated expenses.
Pensions and Other Postretirement Benefit Plans
Net periodic benefit cost for pension plans totaled $107 million in 2024, $126 million in 2023 and $554 million in 2022. Net periodic benefit credit for other
postretirement benefit plans was $84 million in 2024, $61 million in 2023 and $93 million in 2022. Pension and other postretirement benefit plan information for
financial reporting purposes is calculated using actuarial assumptions including a discount rate for plan benefit obligations and an expected rate of return on plan
assets. The changes in net periodic benefit cost year over year for pension plans are primarily attributable to lower settlement charges incurred by certain plans in
2024 and 2023 compared with 2022, as well as changes in expected returns and the discount rates.
The Company reassesses its benefit plan assumptions on a regular basis. For both the pension and other postretirement benefit plans, the discount rate is
evaluated on measurement dates and modified to reflect the prevailing market rate of a portfolio of high-quality fixed-income debt instruments that would provide the
future cash flows needed to pay the benefits included in the benefit obligation as they come due. The discount rates for the Company’s U.S. pension and other
postretirement benefit plans ranged from 5.50% to 5.70% at December 31, 2024, compared with a range of 5.25% to 5.45% at December 31, 2023.
The expected rate of return for both the pension and other postretirement benefit plans represents the average rate of return to be earned on plan assets
over the period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, the Company considers long-term compound
annualized returns of historical market data, current market conditions and actual returns on the Company’s plan assets. Using this reference information, the
Company develops forward-looking return expectations for each asset category and a weighted-average expected long-term rate of return for a target portfolio
allocated across these investment categories. The expected portfolio performance reflects the contribution of active management as appropriate. For 2025, the
expected rate of return for the Company’s U.S. pension and other postretirement benefit plans will be 7.70% compared with 7.75% in 2024.
The Company has established investment guidelines for its U.S. pension and other postretirement plans to create an asset allocation that is expected to
deliver a rate of return sufficient to meet the long-term obligation of each plan, given an acceptable level of risk. The target investment portfolio of the Company’s
U.S. pension and other
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postretirement benefit plans is allocated 25% to 40% in U.S. equities, 15% to 30% in international equities, 40% to 50% in fixed-income investments, and up to 8% in
cash and other investments. The portfolio’s equity weighting is consistent with the long-term nature of the plans’ benefit obligations. The expected annual standard
deviation of returns of the target portfolio, which approximates 12%, reflects both the equity allocation and the diversification benefits among the asset classes in which
the portfolio invests. For international pension plans, the targeted investment portfolio varies based on the duration of pension liabilities and local government rules
and regulations. Although a significant percentage of plan assets are invested in U.S. equities, concentration risk is mitigated through the use of strategies that are
diversified within management guidelines.
Actuarial assumptions are based upon management’s best estimates and judgment. A reasonably possible change of plus (minus) 25 basis points in the
discount rate assumption, with other assumptions held constant, would have had an estimated $45 million favorable (unfavorable) impact on the Company’s net
periodic benefit cost in 2024. A reasonably possible change of plus (minus) 25 basis points in the expected rate of return assumption, with other assumptions held
constant, would have had an estimated $57 million favorable (unfavorable) impact on Merck’s net periodic benefit cost in 2024. Required funding obligations for 2025
relating to the Company’s pension and other postretirement benefit plans are not expected to be material. The preceding hypothetical changes in the discount rate and
expected rate of return assumptions would not impact the Company’s funding requirements.
Net gain/loss amounts, which primarily reflect differences between expected and actual returns on plan assets as well as the effects of changes in actuarial
assumptions, are recorded as a component of AOCL. Expected returns for pension plans are based on a calculated market-related value of assets. Net gain/loss
amounts in AOCL in excess of certain thresholds are amortized into net periodic benefit cost over the average remaining service life of employees.
Restructuring Costs
Restructuring costs have been recorded in connection with restructuring program activities. As a result, the Company has made estimates and judgments
regarding its future plans, including future employee termination costs to be incurred in conjunction with involuntary separations when such separations are probable
and estimable. When accruing termination costs, the Company will recognize the amount within a range of costs that is the best estimate within the range. When no
amount within the range is a better estimate than any other amount, the Company recognizes the minimum amount within the range. In connection with these actions,
management also assesses the recoverability of long-lived assets employed in the business. In certain instances, asset lives have been shortened based on changes
in the expected useful lives of the affected assets. Severance and employee-related costs, as well as other costs, such as facility shut-down costs, are reflected within
Restructuring costs. Asset-related charges are reflected within Cost of sales, Selling, general and administrative expenses and Research and development expenses
depending upon the nature of the asset.
Impairments of Long-Lived Assets
The Company assesses changes in economic, regulatory and legal conditions and makes assumptions regarding estimated future cash flows in evaluating
the value of the Company’s property, plant and equipment, goodwill and other intangible assets.
The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its long-lived assets to be held and used
may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset
groupings, is compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the
difference between the asset’s fair value and its carrying value. If quoted market prices are not available, the Company will estimate fair value using a discounted
value of estimated future cash flows approach.
Goodwill represents the excess of the consideration transferred over the fair value of net assets acquired in a business combination. Goodwill is assigned
to reporting units and evaluated for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Some of the factors considered in the assessment include
general macroeconomic conditions, conditions specific to the industry and market, cost factors which could have a significant effect on earnings or cash flows, the
overall financial performance of the reporting unit, and whether there have been sustained declines in the Company’s share price. If the Company concludes it is more
likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed. If the carrying value of a reporting unit is
greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill).
Other acquired intangible assets (excluding IPR&D) are initially recorded at fair value, assigned an estimated useful life, and amortized primarily on a
straight-line basis over their estimated useful lives. When events or
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circumstances warrant a review, the Company will assess recoverability from future operations using pretax undiscounted cash flows derived from the lowest
appropriate asset groupings. Impairments are recognized in operating results to the extent that the carrying value of the intangible asset exceeds its fair value, which
is determined based on the net present value of estimated future cash flows.
IPR&D that the Company acquires in conjunction with a business combination represents the fair value assigned to incomplete research projects which, at
the time of acquisition, have not reached technological feasibility. The amounts are capitalized and accounted for as indefinite-lived intangible assets, subject to
impairment testing until completion or abandonment of the projects. The Company evaluates IPR&D for impairment at least annually, or more frequently if impairment
indicators exist (such as unfavorable clinical trial data, changes in the commercial landscape or delays in the clinical development program and related regulatory filing
and approval timelines), by performing a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value. For impairment testing
purposes, the Company may combine separately recorded IPR&D intangible assets into one unit of account based on the relevant facts and circumstances. Generally,
the Company will combine IPR&D intangible assets for testing purposes if they operate as a single asset and are essentially inseparable. If the fair value is less than
the carrying amount, an impairment loss is recognized in operating results.
The judgments made in evaluating impairment of long-lived intangibles can materially affect the Company’s results of operations.
Taxes on Income
The Company’s effective tax rate is based on pretax income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which
the Company operates. An estimated effective tax rate for a year is applied to the Company’s quarterly operating results. In the event that there is a significant unusual
or one-time item recognized, or expected to be recognized, in the Company’s quarterly operating results, the tax attributable to that item would be separately
calculated and recorded at the same time as the unusual or one-time item. The Company considers the resolution of prior year tax matters to be such items.
Significant judgment is required in determining the Company’s tax provision and in evaluating its tax positions. The recognition and measurement of a tax position is
based on management’s best judgment given the facts, circumstances and information available at the reporting date. The Company evaluates tax positions to
determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax
positions that are more likely than not of being sustained upon audit, the Company recognizes the amount of the benefit that is greater than 50% likely of being
realized upon ultimate settlement in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, the Company does not
recognize any portion of the benefit in the financial statements. If the more likely than not threshold is not met in the period for which a tax position is taken, the
Company may subsequently recognize the benefit of that tax position if the tax matter is effectively settled, the statute of limitations expires, or if the more likely than
not threshold is met in a subsequent period (see Note 15 to the consolidated financial statements).
Tax regulations require items to be included in the tax return at different times than the items are reflected in the financial statements. Timing differences
create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in the tax return in future years for
which the Company has already recorded the tax benefit in the financial statements. The Company establishes valuation allowances for its deferred tax assets when
the amount of expected future taxable income is not likely to support the use of the deduction or credit. Deferred tax liabilities generally represent tax expense
recognized in the financial statements for which payment has been deferred or expense for which the Company has already taken a deduction on the tax return, but
has not yet recognized as expense in the financial statements.
Recently Issued Accounting Standards
For a discussion of recently issued accounting standards, see Note 2 to the consolidated financial statements.
Cautionary Factors That May Affect Future Results
This report and other written reports and oral statements made from time to time by the Company may contain so-called “forward-looking statements,” all of
which are based on management’s current expectations and are subject to risks and uncertainties which may cause results to differ materially from those set forth in
the statements. One can identify these forward-looking statements by their use of words such as “anticipates,” “expects,” “plans,” “will,” “estimates,” “forecasts,”
“projects” and other words of similar meaning, or negative variations of any of the foregoing. One can also identify them by the fact that they do not relate strictly to
historical or current facts. These statements are likely to address the Company’s growth strategy, financial results, product approvals, product potential, development
programs, environmental or other sustainability initiatives. One must carefully consider any
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such statement and should understand that many factors could cause actual results to differ materially from the Company’s forward-looking statements. These factors
include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking
statement can be guaranteed and actual future results may vary materially.
The Company does not assume the obligation to update any forward-looking statement. One should carefully evaluate such statements in light of factors,
including risk factors, described in the Company’s filings with the Securities and Exchange Commission, especially on this Form 10-K and Forms 10-Q and 8-K. In
Item 1A. “Risk Factors” of this annual report on Form 10-K the Company discusses in more detail various important risk factors that could cause actual results to differ
from expected or historic results. The Company notes these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. One should
understand that it is not possible to predict or identify all such factors. Consequently, the reader should not consider any such list to be a complete statement of all
potential risks or uncertainties.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk.
The information required by this Item is incorporated by reference to the discussion under “Financial Instruments Market Risk Disclosures” in Item 7.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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Item 8.
Financial Statements and Supplementary Data.
(a)
Financial Statements
The consolidated balance sheet of Merck & Co., Inc. and subsidiaries as of December 31, 2024 and 2023, and the related consolidated statements of
income, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2024, the notes to consolidated
financial statements, and the report dated February 25, 2025 of PricewaterhouseCoopers LLP, independent registered public accounting firm, are as follows:
Consolidated Statement of Income
Merck & Co., Inc. and Subsidiaries
Years Ended December 31
($ in millions except per share amounts)
2024
2023
2022
Sales
$
64,168
$
60,115
$
59,283
Costs, Expenses and Other
Cost of sales
15,193
16,126
17,411
Selling, general and administrative
10,816
10,504
10,042
Research and development
17,938
30,531
13,548
Restructuring costs
309
599
337
Other (income) expense, net
(24)
466
1,501
44,232
58,226
42,839
Income Before Taxes
19,936
1,889
16,444
Taxes on Income
2,803
1,512
1,918
Net Income
17,133
377
14,526
Less: Net Income Attributable to Noncontrolling Interests
16
12
7
Net Income Attributable to Merck & Co., Inc.
$
17,117
$
365
$
14,519
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders
$
6.76
$
0.14
$
5.73
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders
$
6.74
$
0.14
$
5.71
Consolidated Statement of Comprehensive Income (Loss)
Merck & Co., Inc. and Subsidiaries
Years Ended December 31
($ in millions)
2024
2023
2022
Net Income Attributable to Merck & Co., Inc.
$
17,117
$
365
$
14,519
Other Comprehensive Income (Loss) Net of Taxes:
Net unrealized income (loss) on derivatives, net of reclassifications
266
(97)
(71)
Benefit plan net gain (loss) and prior service credit (cost), net of amortization
466
(385)
335
Cumulative translation adjustment
(516)
89
(603)
216
(393)
(339)
Comprehensive Income (Loss) Attributable to Merck & Co., Inc.
$
17,333
$
(28)
$
14,180
The accompanying notes are an integral part of these consolidated financial statements.
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Consolidated Balance Sheet
Merck & Co., Inc. and Subsidiaries
December 31
($ in millions except per share amounts)
2024
2023
Assets
Current Assets
Cash and cash equivalents
$
13,242
$
6,841
Short-term investments
447
252
Accounts receivable (net of allowance for doubtful accounts of $89 in 2024
and $88 in 2023)
10,278
10,349
Inventories (excludes inventories of $4,193 in 2024 and $3,348 in 2023
classified in Other assets - see Note 7)
6,109
6,358
Other current assets
8,706
8,368
Total current assets
38,782
32,168
Investments
463
252
Property, Plant and Equipment (at cost)
Land
307
326
Buildings
16,360
14,966
Machinery, equipment and office furnishings
18,283
17,763
Construction in progress
7,984
8,262
42,934
41,317
Less: accumulated depreciation
19,155
18,266
23,779
23,051
Goodwill
21,668
21,197
Other Intangibles, Net
16,370
18,011
Other Assets
16,044
11,996
$
117,106
$
106,675
Liabilities and Equity
Current Liabilities
Loans payable and current portion of long-term debt
$
2,649
$
1,372
Trade accounts payable
4,079
3,922
Accrued and other current liabilities
15,694
15,766
Income taxes payable
3,914
2,649
Dividends payable
2,084
1,985
Total current liabilities
28,420
25,694
Long-Term Debt
34,462
33,683
Deferred Income Taxes
1,387
871
Other Noncurrent Liabilities
6,465
8,792
Merck & Co., Inc. Stockholders’ Equity
Common stock, $0.50 par value
Authorized - 6,500,000,000 shares
Issued - 3,577,103,522 shares in 2024 and 2023
1,788
1,788
Other paid-in capital
44,704
44,509
Retained earnings
63,069
53,895
Accumulated other comprehensive loss
(4,945)
(5,161)
104,616
95,031
Less treasury stock, at cost: 1,049,466,187 shares in 2024 and 1,045,470,249 shares in 2023
58,303
57,450
Total Merck & Co., Inc. stockholders’ equity
46,313
37,581
Noncontrolling Interests
59
54
Total equity
46,372
37,635
$
117,106
$
106,675
The accompanying notes are an integral part of this consolidated financial statement.
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Consolidated Statement of Equity
Merck & Co., Inc. and Subsidiaries
Years Ended December 31
($ in millions except per share amounts)
Common
Stock
Other
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Non-
controlling
Interests
Total
Balance January 1, 2022
$
1,788
$
44,238
$
53,696
$
(4,429)
$
(57,109)
$
73
$
38,257
Net income attributable to Merck & Co., Inc.
—
—
14,519
—
—
—
14,519
Other comprehensive loss, net of taxes
—
—
—
(339)
—
—
(339)
Cash dividends declared on common stock ($2.80 per share)
—
—
(7,134)
—
—
—
(7,134)
Net income attributable to noncontrolling interests
—
—
—
—
—
7
7
Distributions attributable to noncontrolling interests
—
—
—
—
—
(13)
(13)
Share-based compensation plans and other
—
141
—
—
620
—
761
Balance December 31, 2022
1,788
44,379
61,081
(4,768)
(56,489)
67
46,058
Net income attributable to Merck & Co., Inc.
—
—
365
—
—
—
365
Other comprehensive loss, net of taxes
—
—
—
(393)
—
—
(393)
Cash dividends declared on common stock ($2.96 per share)
—
—
(7,551)
—
—
—
(7,551)
Treasury stock shares purchased
—
—
—
—
(1,346)
—
(1,346)
Net income attributable to noncontrolling interests
—
—
—
—
—
12
12
Distributions attributable to noncontrolling interests
—
—
—
—
—
(25)
(25)
Share-based compensation plans and other
—
130
—
—
385
—
515
Balance December 31, 2023
1,788
44,509
53,895
(5,161)
(57,450)
54
37,635
Net income attributable to Merck & Co., Inc.
—
—
17,117
—
—
—
17,117
Other comprehensive income, net of taxes
—
—
—
216
—
—
216
Cash dividends declared on common stock ($3.12 per share)
—
—
(7,943)
—
—
—
(7,943)
Treasury stock shares purchased
—
—
—
—
(1,306)
—
(1,306)
Net income attributable to noncontrolling interests
—
—
—
—
—
16
16
Distributions attributable to noncontrolling interests
—
—
—
—
—
(12)
(12)
Share-based compensation plans and other
—
195
—
—
453
1
649
Balance December 31, 2024
$
1,788
$
44,704
$
63,069
$
(4,945)
$
(58,303)
$
59
$
46,372
The accompanying notes are an integral part of this consolidated financial statement.
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Consolidated Statement of Cash Flows
Merck & Co., Inc. and Subsidiaries
Years Ended December 31
($ in millions)
2024
2023
2022
Cash Flows from Operating Activities
Net income
$
17,133
$
377
$
14,526
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization
2,395
2,044
2,085
Depreciation
2,104
1,828
1,824
Intangible asset impairment charges
39
792
1,749
(Income) loss from investments in equity securities, net
(14)
(340)
1,419
Charges for certain research and development asset acquisitions
3,456
11,409
—
Deferred income taxes
(1,249)
(1,899)
(1,568)
Share-based compensation
761
645
541
Other
510
355
1,301
Net changes in assets and liabilities:
Accounts receivable
(244)
(1,148)
(644)
Inventories
(835)
(816)
(161)
Trade accounts payable
182
(380)
(289)
Accrued and other current liabilities
(2,328)
1,783
(50)
Income taxes payable
1,023
214
380
Noncurrent liabilities
(49)
456
(545)
Other
(1,416)
(2,314)
(1,473)
Net Cash Provided by Operating Activities
21,468
13,006
19,095
Cash Flows from Investing Activities
Capital expenditures
(3,372)
(3,863)
(4,388)
Purchases of securities and other investments
(519)
(955)
(1,204)
Proceeds from sale of Seagen Inc. common stock
—
1,145
—
Proceeds from sales of securities and other investments
377
1,658
721
Acquisition of Eyebiotech Limited, net of cash acquired
(1,344)
—
—
Acquisition of Elanco Animal Health Incorporated aqua business
(1,303)
—
—
Acquisition of Harpoon Therapeutics, Inc., net of cash acquired
(746)
—
—
Acquisition of MK-1045 from Curon Pharmaceutical
(700)
—
—
Acquisition of Prometheus Biosciences, Inc., net of cash acquired
—
(10,705)
—
Acquisition of Imago BioSciences Inc., net of cash acquired
—
(1,327)
—
Other
(127)
(36)
(89)
Net Cash Used in Investing Activities
(7,734)
(14,083)
(4,960)
Cash Flows from Financing Activities
Payments on debt
(1,290)
(1,755)
(2,251)
Proceeds from issuance of debt
3,599
5,939
—
Purchases of treasury stock
(1,306)
(1,346)
—
Dividends paid to stockholders
(7,840)
(7,445)
(7,012)
Proceeds from exercise of stock options
177
125
384
Other
(372)
(328)
(240)
Net Cash Used in Financing Activities
(7,032)
(4,810)
(9,119)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
(293)
23
(410)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
6,409
(5,864)
4,606
Cash, Cash Equivalents and Restricted Cash at Beginning of Year (includes $68, $79 and $71 of restricted cash at January 1, 2024, 2023 and 2022,
respectively, included in Other current assets)
6,909
12,773
8,167
Cash, Cash Equivalents and Restricted Cash at End of Year (includes $76, $68 and $79 of restricted cash at December 31, 2024, 2023 and 2022,
respectively, included in Other current assets)
$
13,318
$
6,909
$
12,773
The accompanying notes are an integral part of this consolidated financial statement.
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Notes to Consolidated Financial Statements
Merck & Co., Inc. and Subsidiaries
($ in millions except per share amounts)
1. Nature of Operations
Merck & Co., Inc. (Merck or the Company) is a global health care company that delivers innovative health solutions through its prescription medicines,
including biologic therapies, vaccines and animal health products. The Company’s operations are principally managed on a product basis and include two operating
segments, Pharmaceutical and Animal Health, both of which are reportable segments.
The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic
and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily
to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit
managers and other institutions. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines. The Company sells these human
health vaccines primarily to physicians, wholesalers, distributors and government entities.
The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceutical and vaccine products, as well as
health management solutions and services, for the prevention, treatment and control of disease in all major livestock and companion animal species. The Company
also offers an extensive suite of digitally connected identification, traceability and monitoring products. The Company sells its products to veterinarians, distributors,
animal producers, farmers and pet owners.
2. Summary of Accounting Policies
Principles of Consolidation — The consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling
interest is maintained. Intercompany balances and transactions are eliminated. Controlling interest is determined by majority ownership interest and the absence of
substantive third-party participating rights or, in the case of variable interest entities, by majority exposure to expected losses, residual returns or both. For those
consolidated subsidiaries where Merck ownership is less than 100%, the outside shareholders’ interests are shown as Noncontrolling interests in equity. Investments
in affiliates over which the Company has significant influence but not a controlling interest, such as interests in entities owned equally by the Company and a third
party that are under shared control, are carried on the equity method basis.
Acquisitions — In a business combination, the acquisition method of accounting requires that the assets acquired and liabilities assumed be recorded as of
the date of the acquisition at their respective fair values with limited exceptions. Assets acquired and liabilities assumed in a business combination that arise from
contingencies are generally recognized at fair value. If fair value cannot be determined, the asset or liability is recognized if probable and reasonably estimable; if
these criteria are not met, no asset or liability is recognized. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Accordingly, the Company may be required to value assets at fair value measures that do not reflect the Company’s intended use of those assets. Any excess of the
purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill. Transaction costs and costs to restructure the
acquired company are expensed as incurred. The operating results of the acquired business are reflected in the Company’s consolidated financial statements after the
date of the acquisition.
If the Company determines the assets acquired do not meet the definition of a business under the acquisition method of accounting, the transaction will be
accounted for as an acquisition of assets rather than a business combination and, therefore, no goodwill will be recorded. In an asset acquisition, acquired in-process
research and development (IPR&D) with no alternative future use is charged to expense and contingent consideration is not recognized at the acquisition date.
Foreign Currency Translation — The net assets of international subsidiaries where the local currencies have been determined to be the functional
currencies are translated into U.S. dollars using current exchange rates and results of operations are translated at average exchange rates. The U.S. dollar effects that
arise from translating the net assets of these subsidiaries at changing rates are recorded in Other Comprehensive Income (OCI) and remain in Accumulated other
comprehensive loss (AOCL) until either the sale or complete or substantially complete liquidation of the subsidiary. For those subsidiaries that operate in highly
inflationary economies and for those subsidiaries where the U.S. dollar has been determined to be the functional currency, non-monetary foreign currency
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assets and liabilities are translated using historical rates, while monetary assets and liabilities are translated at current rates, with the U.S. dollar effects of rate
changes included in Other (income) expense, net.
Cash Equivalents — Cash equivalents are comprised of certain highly liquid investments with original maturities of less than three months.
Inventories — Inventories are valued at the lower of cost or net realizable value. The cost of a substantial majority of U.S. human health inventories is
determined using the last-in, first-out (LIFO) method for both financial reporting and tax purposes. The cost of all other inventories is determined using the first-in, first-
out (FIFO) method. Inventories consist of currently marketed products, as well as certain inventories produced in preparation for product launches that are considered
by the Company to be probable of obtaining regulatory approval. In evaluating the recoverability of inventories produced in preparation for product launches, the
Company considers the likelihood that revenue will be obtained from the future sale of the related inventory together with the status of the product during the research
and regulatory approval process.
Investments — Investments in marketable debt securities classified as available-for-sale are reported at fair value. Fair values of the Company’s
investments in marketable debt securities are determined using quoted market prices in active markets for identical assets or quoted prices for similar assets or other
inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Changes in fair value that are not
impairment related are reported net of taxes in OCI. The Company considers available evidence in evaluating potential impairments of its investments in marketable
debt securities, including the extent to which fair value is less than cost, whether an allowance for credit loss is required, as well as adverse factors that could affect
the value of the securities. An impairment has occurred if the Company does not expect to recover the entire amortized cost basis of the marketable debt security. If
the Company does not intend to sell the impaired debt security, and it is not more likely than not it will be required to sell the debt security before the recovery of its
amortized cost basis, the amount of the impairment recognized in earnings, recorded in Other (income) expense, net, is limited to the portion attributed to credit loss.
The remaining portion of the impairment related to other factors is recognized in OCI. Realized gains and losses for debt securities are included in Other (income)
expense, net.
Investments in publicly traded equity securities are reported at fair value as determined using quoted market prices in active markets for identical assets or
quoted prices for similar assets or other inputs that are observable or can be corroborated by observable market data. Changes in fair value are included in Other
(income) expense, net. Unrealized gains and losses from investments that are directly owned are determined at the end of the reporting period. Gains and losses from
ownership interests in investment funds, which are accounted for as equity method investments, are reported on a one quarter lag. Investments in equity securities
without readily determinable fair values are recorded at cost, plus or minus subsequent observable price changes in orderly transactions for identical or similar
investments, minus impairments. Such adjustments are recognized in Other (income) expense, net. Realized gains and losses for equity securities are included in
Other (income) expense, net.
Revenue Recognition — Recognition of revenue requires evidence of a contract, probable collection of sales proceeds and completion of substantially all
performance obligations. Merck acts as the principal in substantially all of its customer arrangements and therefore records revenue on a gross basis. The majority of
the Company’s contracts related to the Pharmaceutical and Animal Health segments have a single performance obligation - the promise to transfer goods. Shipping is
considered immaterial in the context of the overall customer arrangement and damages or loss of goods in transit are rare. Therefore, shipping is not deemed a
separately recognized performance obligation.
The vast majority of revenues from sales of products are recognized at a point in time when control of the goods is transferred to the customer, which the
Company has determined is when title and risks and rewards of ownership transfer to the customer and the Company is entitled to payment. The Company recognizes
revenue from the sales of vaccines to the U.S. federal government for placement into vaccine stockpiles in accordance with Securities and Exchange Commission
(SEC) Interpretation, Commission Guidance Regarding Accounting for Sales of Vaccines and BioTerror Countermeasures to the Federal Government for Placement
into the Pediatric Vaccine Stockpile or the Strategic National Stockpile. This interpretation allows companies to recognize revenue for sales of vaccines into U.S.
government stockpiles even though these sales might not meet the criteria for revenue recognition under other accounting guidance. For certain services in the Animal
Health segment, revenue is recognized over time, generally ratably over the contract term as services are provided. These service revenues are not material.
The nature of the Company’s business gives rise to several types of variable consideration including discounts and returns, which are estimated at the time
of sale generally using the expected value method, although the most likely amount method is used for prompt pay discounts.
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In the U.S., sales discounts are issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of
rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and
returns, which are established at the time of sale. In addition, if collection of accounts receivable is expected to be in excess of one year, sales are recorded net of time
value of money discounts, which have not been material.
The U.S. provision for aggregate customer discounts covering chargebacks and rebates was $13.3 billion in 2024, $12.5 billion in 2023 and $12.3 billion in
2022. Chargebacks are discounts that occur when a contracted customer purchases through an intermediary wholesaler. The wholesaler then charges the Company
back for the difference between the price initially paid by the wholesaler and the contract price agreed to between Merck and the customer. The provision for
chargebacks is based on expected sell-through levels by the Company’s wholesale customers to contracted customers, as well as estimated wholesaler inventory
levels. Rebates are amounts owed based upon definitive contractual agreements or legal requirements with private sector and public sector (Medicaid and Medicare
Part D) benefit providers after the final dispensing of the product to a benefit plan participant. The provision for rebates is based on expected patient usage, as well as
inventory levels in the distribution channel to determine the contractual obligation to the benefit providers. The Company uses historical customer segment utilization
mix, sales forecasts, changes to product mix and price, inventory levels in the distribution channel, government pricing calculations and prior payment history in order
to estimate the expected provision. Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided
by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. The
accrued balances relative to the provisions for chargebacks and rebates included in Accounts receivable and Accrued and other current liabilities were $293 million
and $2.2 billion, respectively, at December 31, 2024 and were $188 million and $2.3 billion, respectively, at December 31, 2023.
Outside of the U.S., variable consideration in the form of discounts and rebates are a combination of commercially-driven discounts in highly competitive
product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. In certain European countries, legislatively mandated
rebates are calculated based on an estimate of the government’s total unbudgeted spending and the Company’s specific payback obligation. Rebates may also be
required based on specific product sales thresholds. The Company applies an estimated factor against its actual invoiced sales to represent the expected level of
future discount or rebate obligations associated with the sale.
The Company maintains a returns policy that allows its U.S. pharmaceutical customers to return product within a specified period prior to and subsequent
to the expiration date (generally, three to six months before and 12 months after product expiration). The estimate of the provision for returns is based upon historical
experience with actual returns. Additionally, the Company considers factors such as levels of inventory in the distribution channel, product dating and expiration period,
whether products have been discontinued, entrance in the market of generic or other competition, changes in formularies or launch of over-the-counter products,
among others. Outside of the U.S., returns are only allowed in certain countries on a limited basis.
Merck’s payment terms for U.S. pharmaceutical customers are typically 36 days from receipt of invoice and for U.S. animal health customers are typically
30 days from receipt of invoice; however, certain products have longer payment terms, including Keytruda (pembrolizumab), which has payment terms of 90 days.
Payment terms for vaccine sales in the U.S. typically range from 30 days to 60 days. Outside of the U.S., payment terms are typically 30 days to 90 days, although
certain markets have longer payment terms.
See Note 18 for disaggregated revenue disclosures.
Depreciation — Depreciation is provided over the estimated useful lives of the assets, principally using the straight-line method. For tax purposes,
accelerated tax methods are used. The estimated useful lives primarily range from 25 to 45 years for Buildings, and from 3 to 15 years for Machinery, equipment and
office furnishings. Depreciation expense was $2.1 billion in 2024, $1.8 billion in 2023 and $1.8 billion in 2022.
Advertising and Promotion Costs — Advertising and promotion costs are expensed as incurred. The Company recorded advertising and promotion
expenses of $2.4 billion in 2024, $2.3 billion in 2023 and $2.2 billion in 2022.
Software Capitalization — The Company capitalizes certain costs incurred in connection with obtaining or developing internal-use software including
external direct costs of material and services, and payroll costs for employees directly involved with the software development. These costs are included in Property,
plant and equipment. In addition, the Company capitalizes certain costs incurred to implement a cloud computing arrangement
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that is considered a service agreement, which are included in Other Assets. Capitalized software costs are being amortized over periods ranging from 2 to 10 years,
with the longer lives generally associated with enterprise-wide projects implemented over multiple years. Costs incurred during the preliminary project stage and post-
implementation stage, as well as maintenance and training costs, are expensed as incurred.
Goodwill — Goodwill represents the excess of the consideration transferred over the fair value of net assets acquired in a business combination. Goodwill
is assigned to reporting units and evaluated for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes it is more likely than not
that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed. If the carrying value of a reporting unit is greater than its
fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill).
Acquired Intangibles — Intangibles acquired in a business combination include product rights, trade names and patents, licenses and other, which are
initially recorded at fair value, assigned an estimated useful life, and amortized primarily on a straight-line basis over their estimated useful lives ranging from 2 to
24 years. The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its acquired intangibles may not be
recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is
compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference
between the carrying value of the intangible asset and its fair value, which is determined based on the net present value of estimated future cash flows.
Acquired In-Process Research and Development — IPR&D that the Company acquires in conjunction with a business combination represents the fair
value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are
accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each
IPR&D project, Merck will make a determination as to the then-useful life of the intangible asset, generally determined by the period in which the substantial majority of
the cash flows are expected to be generated, and begin amortization. The Company evaluates IPR&D for impairment at least annually, or more frequently if
impairment indicators exist, by performing a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value. If the fair value is less
than the carrying amount, an impairment loss is recognized in operating results.
Contingent Consideration for Business Combinations — Certain of the Company’s acquisitions involve the potential for future payment of consideration that
is contingent upon the achievement of performance milestones, including product development milestones and royalty payments on future product sales. If the
transaction is accounted for as a business combination, the fair value of contingent consideration liabilities is determined at the acquisition date using unobservable
inputs. These inputs include the estimated amount and timing of projected cash flows, the probability of success (achievement of the contingent event) and the risk-
adjusted discount rate used to present value the probability-weighted cash flows. Subsequent to the acquisition date, at each reporting period until the contingency is
resolved, the contingent consideration liability is remeasured at current fair value with changes (either expense or income) recorded in earnings. Significant events that
increase or decrease the probability of achieving development and regulatory milestones or that increase or decrease projected cash flows will result in corresponding
increases or decreases in the fair values of the related contingent consideration obligations.
Research and Development — Research and development is expensed as incurred. Nonrefundable advance payments for goods and services that will be
used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the
payment is made. Research and development expenses include restructuring costs and IPR&D impairment charges. In addition, research and development expenses
include expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration associated with IPR&D assets.
Research and development expenses also include upfront and milestone payments related to asset acquisitions and licensing transactions involving clinical
development programs that have not yet received regulatory approval.
Collaborative Arrangements — Merck has entered into collaborative arrangements that provide the Company with varying rights to develop, produce and
market products together with its collaborative partners. When Merck is the principal on sales transactions with third parties, the Company recognizes sales, cost of
sales and selling, general and administrative expenses on a gross basis. Profit sharing amounts it pays to its collaborative partners are recorded within Cost of sales.
When the collaborative partner is the principal on sales transactions with third parties, the Company records profit sharing amounts received from its collaborative
partners as alliance revenue
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(within Sales). Alliance revenue is recorded net of cost of sales and includes an adjustment to share commercialization costs between the partners in accordance with
the collaboration agreement. The adjustment is determined by comparing the commercialization costs Merck has incurred directly and reported within Selling, general
and administrative expenses with the costs the collaborative partner has incurred. Research and development costs Merck incurs related to collaborations are
recorded within Research and development expenses. Cost reimbursements to the collaborative partner or payments received from the collaborative partner to share
these costs pursuant to the terms of the collaboration agreements are recorded as increases or decreases to Research and development expenses.
In addition, the terms of the collaboration agreements may require the Company to make payments based upon the achievement of certain developmental,
regulatory approval or commercial milestones. Upfront and milestone payments payable by Merck to collaborative partners prior to regulatory approval are expensed
as incurred and included in Research and development expenses. Payments due to collaborative partners upon or subsequent to regulatory approval are capitalized
and amortized to Cost of sales over the estimated useful life of the corresponding intangible asset, provided that future cash flows support the amounts
capitalized. Sales-based milestones payable by Merck to collaborative partners are accrued and capitalized, subject to cumulative amortization catch-up, when
determined by the Company to be probable of being achieved based on future sales forecasts. The amortization catch-up is calculated either from the time of the first
regulatory approval for products that were unapproved at the time the collaboration was formed or, for new indications of approved products, from the time of the
formation of the collaboration. The related intangible asset that is recognized is amortized to Cost of sales over its remaining useful life, subject to impairment testing.
Share-Based Compensation — The Company expenses all share-based payments to employees over the requisite service period based on the grant-date
fair value of the awards.
Restructuring Costs — The Company records liabilities for costs associated with exit or disposal activities in the period in which the liability is incurred. In
accordance with existing benefit arrangements, future employee termination costs to be incurred in conjunction with involuntary separations are accrued when such
separations are probable and estimable. When accruing these costs, the Company will recognize the amount within a range of costs that is the best estimate within
the range. When no amount within the range is a better estimate than any other amount, the Company recognizes the minimum amount within the range. Costs for
one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the
future service period.
Contingencies and Legal Defense Costs — The Company records accruals for contingencies and legal defense costs expected to be incurred in
connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Taxes on Income — Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on
enacted tax laws and rates. The Company evaluates tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon
audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the
amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not more likely
than not of being sustained upon audit, the Company does not recognize any portion of the benefit in the financial statements. The Company recognizes interest and
penalties associated with uncertain tax positions as a component of Taxes on Income. The Company accounts for the tax effects of the tax on global intangible low-
taxed income (GILTI) of certain foreign subsidiaries in the income tax provision in the period the tax arises. The Company’s policy for releasing disproportionate
income tax effects from AOCL is to utilize the item-by-item approach.
Reclassifications — Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
Use of Estimates — The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the U.S. (GAAP)
and, accordingly, include certain amounts that are based on management’s best estimates and judgments. Estimates are used when accounting for amounts recorded
in connection with acquisitions, including initial fair value determinations of assets and liabilities in a business combination (primarily IPR&D, other intangible assets
and contingent consideration), as well as subsequent fair value measurements. Additionally, estimates are used in determining such items as provisions for sales
discounts, rebates and returns, depreciable and amortizable lives, recoverability of inventories, including those produced in preparation for product launches, amounts
recorded for contingencies, environmental liabilities, accruals for contingent sales-
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based milestone payments and other reserves, pension and other postretirement benefit plan assumptions, share-based compensation assumptions, restructuring
costs, impairments of long-lived assets (including intangible assets and goodwill) and investments, and taxes on income. Because of the uncertainty inherent in such
estimates, actual results may differ from these estimates.
Recently Adopted Accounting Standards — In August 2023, the Financial Accounting Standards Board (FASB) issued amended guidance that requires a
newly formed joint venture to recognize and initially measure its assets and liabilities at fair value upon formation. The amended guidance includes exceptions to fair
value measurement that are consistent with the accounting for business combinations guidance. The Company adopted the guidance effective July 1, 2024 on a
prospective basis. There was no impact to the Company’s consolidated financial statements upon adoption.
In November 2023, the FASB issued guidance intended to improve reportable segment disclosure requirements, primarily through expanded disclosures
for significant segment expenses. The Company adopted the guidance effective for the 2024 annual period. The guidance resulted in incremental disclosures to the
Company’s segment reporting disclosures. See Note 18 for further details.
Recently Issued Accounting Standards Not Yet Adopted — In December 2023, the FASB issued guidance intended to improve the transparency of income
tax disclosures by requiring consistent categories and disaggregation of information in the effective income tax rate reconciliation and income taxes paid disclosures
by jurisdiction. The guidance also includes other amendments to improve the effectiveness of income tax disclosures by removing certain previously required
disclosures. The guidance is effective for 2025 annual reporting. The guidance will result in incremental disclosures within the footnotes to the Company’s financial
statements.
In November 2024, the FASB issued guidance intended to improve financial reporting by requiring entities to disclose additional information about specific
expense categories at interim and annual reporting periods. The guidance is effective for 2027 annual reporting and 2028 interim reporting. Early adoption is
permitted. The guidance, which can be applied on a prospective or retrospective basis, will result in incremental disclosures within the footnotes to the Company’s
financial statements.
3. Acquisitions, Divestitures, Research Collaborations and Licensing Agreements
The Company continues to pursue acquisitions and the establishment of external alliances such as research collaborations and licensing agreements to
complement its internal research capabilities. These arrangements often include upfront payments; expense reimbursements or payments to the third party; milestone,
royalty or profit share arrangements contingent upon the occurrence of certain future events linked to the success of the asset in development; and can also include
option and continuation payments. The Company also reviews its marketed products and pipeline to examine candidates which may provide more value through out-
licensing and, as part of its portfolio assessment process, may also divest certain assets. Pro forma financial information for acquired businesses is not presented if
the historical financial results of the acquired entity are not significant when compared with the Company’s financial results.
Recent Transactions
In January 2025, Merck and WuXi Vaccines, a wholly owned subsidiary of WuXi Biologics, entered into a definitive agreement pursuant to which Merck will
acquire WuXi Vaccines’ facility in Dundalk, Ireland for a payment of approximately $440 million at closing. The transaction is expected to close in the first quarter of
2025, subject to the satisfaction of customary closing conditions. There are no future contingent payments associated with the acquisition.
2024 Transactions
In December 2024, Merck closed an exclusive global license to develop, manufacture and commercialize MK-2010 (LM-299), a novel investigational PD-
1/vascular endothelial growth factor (VEGF) bispecific antibody from LaNova Medicines Ltd (LaNova). Merck recorded a charge of $588 million to Research and
development expenses in 2024 for the upfront payment, which was made in January 2025. LaNova is also eligible to receive $300 million upon technology transfer,
which is anticipated to be completed in 2025, as well as future contingent developmental milestone payments of up to $140 million, regulatory milestone payments of
up to $860 million and sales-based milestone payments of up to $1.4 billion.
Also in December 2024, Merck closed an exclusive global license to develop, manufacture and commercialize MK-4082 (HS-10535), an investigational
preclinical oral small molecule GLP-1 receptor agonist from Hansoh Pharma (Hansoh). Merck recorded a charge of $112 million to Research and development
expenses in 2024 for the upfront payment, which was made in February 2025. Hansoh is also eligible to receive future contingent
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development-related milestone payments of up to $115 million, regulatory milestone payments of up to $315 million and sales-based milestone payments of up to
$1.47 billion, as well as tiered royalties ranging from a high-single-digit rate to a low-double-digit rate on future net sales of MK-4082 (HS-10535), if approved. Under
the agreement, Hansoh may co-promote or solely commercialize MK-4082 (HS-10535) in Chinese mainland, Hong Kong and Macau, subject to certain conditions.
In September 2024, Merck acquired MK-1045 (formally CN201), a novel investigational clinical-stage bispecific antibody for the treatment of B-cell
associated diseases, from Curon Biopharmaceutical (Curon) for an upfront payment of $700 million. In addition, Curon is eligible to receive future contingent
developmental milestone payments of up to $300 million and regulatory milestone payments of up to $300 million. The transaction was accounted for as an asset
acquisition. Merck recorded a charge of $750 million (reflecting the upfront payment and other related costs) to Research and development expenses in 2024 related
to the execution of the transaction. In connection with the agreement, Merck is also obligated to pay a third party future contingent developmental, regulatory and
sales-based milestone payments of up to $128 million in the aggregate, as well as tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on
future net sales of MK-1045, if approved.
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.
The estimated fair values of assets acquired and liabilities assumed from the Elanco aqua business are as follows:
July 9, 2024
Inventories
$
65
Property, plant and equipment
66
Product rights - Clynav (useful life 15 years)
340
Other product rights (useful lives 15 years)
291
Other assets and liabilities, net
23
Total identifiable net assets
785
Goodwill
518
Consideration transferred
$
1,303
The estimated fair values of Clynav and other product rights were determined using an income approach, specifically the multi-period excess earnings method. The future probability-weighted net cash flows were
discounted to present value utilizing a discount rate of 8.5%. Actual cash flows are likely to be different than those assumed.
The goodwill recognized is largely attributable to anticipated synergies expected to arise after the acquisition and was allocated to the Animal Health segment. The goodwill is expected to be deductible for tax
purposes.
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 milestone payments of up to $200 million (of which $100 million was triggered and paid in 2024 as noted
below), regulatory milestone payments of up to $1.0 billion and sales-based milestone payments of up to $500 million. 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,
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 since MK-3000 accounted for substantially all of the fair value of the gross assets acquired (excluding cash and
deferred income taxes). Merck recorded net assets of $21 million, as well as a charge of $1.35 billion to Research and development expenses in 2024 related to the
acquisition. Additionally, a $100 million developmental milestone was triggered and paid in 2024 upon initiation of a Phase 2/3 clinical trial
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(2)
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evaluating MK-3000 for the treatment of diabetic macular edema, which was also recorded as a charge to Research and development expenses.
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 in Phase 3
clinical development, 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 entered into in
2022 as discussed below. In addition, Orion became eligible to receive developmental milestone payments of up to $30 million, regulatory milestone payments of up to
$625 million and sales-based milestone payments of up to $975 million, as well as annually tiered royalties ranging from a low double-digit rate up to a rate in the low
twenties 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 2024.
Also in July 2024, Merck notified Kelun-Biotech (a holding subsidiary of Sichuan Kelun Pharmaceutical Co., Ltd.) it was terminating the license and
collaboration agreement entered into in July 2022 in which Merck gained exclusive worldwide rights for the development, manufacture and commercialization of an
investigational antibody drug conjugate (ADC) MK-1200 (SKB315) for the treatment of solid tumors. As a result of this termination, which became effective in
September 2024, all rights to SKB315 have reverted to Kelun-Biotech.
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 and neuroendocrine tumors. The transaction was accounted for as an asset acquisition since
MK-6070 represented substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes). Merck recorded net assets of $165
million, as well as a charge of $656 million to Research and development expenses in 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. See Note 4 for more information on Merck’s collaboration with Daiichi Sankyo.
2023 Transactions
In October 2023, Merck and Daiichi Sankyo entered into a global development and commercialization agreement for three of Daiichi Sankyo’s deruxtecan
(DXd) ADC candidates: patritumab deruxtecan (HER3-DXd) (MK-1022), ifinatamab deruxtecan (I-DXd) (MK-2400) and raludotatug deruxtecan (R-DXd) (MK-5909).
See Note 4 for additional information related to this collaboration.
In June 2023, Merck acquired Prometheus Biosciences, Inc. (Prometheus), a clinical-stage biotechnology company pioneering a precision medicine
approach for the discovery, development, and commercialization of novel therapeutic and companion diagnostic products for the treatment of immune-mediated
diseases. Total consideration paid of $11.0 billion included $1.2 billion of costs to settle share-based equity awards (including $700 million to settle unvested equity
awards). Prometheus’ lead candidate, tulisokibart (MK-7240, formerly PRA023), is a humanized monoclonal antibody directed to tumor necrosis factor-like ligand 1A, a
target associated with both intestinal inflammation and fibrosis. Tulisokibart is being developed for the treatment of immune-mediated diseases including ulcerative
colitis, Crohn’s disease, and other autoimmune conditions. Phase 3 clinical trials evaluating tulisokibart for Crohn’s disease and ulcerative colitis are underway. The
transaction was accounted for as an asset acquisition since tulisokibart accounted for substantially all of the fair value of the gross assets acquired (excluding cash
and deferred income taxes). Merck recorded net assets of $877 million, including cash of $368 million, investments of $296 million, deferred tax assets of $218 million
and other net liabilities of $5 million, as well as a charge of $10.2 billion to Research and development expenses in 2023 related to the transaction. There are no future
contingent payments associated with the acquisition.
In February 2023, Merck and Kelun-Biotech closed a license and collaboration agreement expanding their relationship in which Merck gained exclusive
rights for the research, development, manufacture and commercialization of up to seven investigational preclinical ADCs for the treatment of cancer. Kelun-Biotech
retained the right to research, develop, manufacture and commercialize certain licensed and option ADCs for Chinese mainland, Hong Kong and Macau. Merck made
an upfront payment of $175 million, which was recorded as a charge to Research and development expenses in 2023. In October 2023, Merck notified Kelun-Biotech
it was terminating two of the seven candidates under the agreement. Subsequently, in April 2024, Merck notified Kelun-Biotech it was terminating one additional
candidate under the agreement. In July 2024, Merck notified Kelun-Biotech that it was
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exercising an existing license option for one of the candidates under the agreement, granting Merck a license for the development, manufacture and commercialization
worldwide excluding China. There are now three candidates licensed under the original agreement and one candidate for which the license option remains
unexercised. Merck paid Kelun-Biotech $38 million in connection with the July option exercise, following which Kelun-Biotech remains eligible to receive future
contingent payments aggregating up to $540 million in development-related payments, $1.5 billion in regulatory milestones, and $3.1 billion in sales-based milestones,
if Kelun-Biotech does not retain Chinese mainland, Hong Kong and Macau rights for the remaining option ADC and all remaining candidates achieve regulatory
approval. In addition, Kelun-Biotech is eligible to receive tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on future net sales for any
commercialized ADC product. Also, in connection with the agreement, Merck invested $100 million in Kelun-Biotech shares in January 2023.
In January 2023, Merck acquired Imago BioSciences, Inc. (Imago), a clinical-stage biopharmaceutical company developing new medicines for the
treatment of myeloproliferative neoplasms and other bone marrow diseases, for $1.35 billion (including payments to settle share-based equity awards) and also
incurred approximately $60 million of transaction costs. Imago’s lead candidate, bomedemstat (MK-3543, formerly IMG-7289), which is in Phase 3 clinical
development, is an investigational orally available lysine-specific demethylase 1 inhibitor currently being evaluated in multiple clinical trials for the treatment of
essential thrombocythemia, myelofibrosis, and polycythemia vera, in addition to other indications. The transaction was accounted for as an asset acquisition since
bomedemstat represented substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes). Merck recorded net assets of
$219 million, as well as a charge of $1.2 billion to Research and development expenses in 2023 related to the transaction. There are no future contingent payments
associated with the acquisition.
2022 Transactions
In October 2022, Merck and Royalty Pharma plc (Royalty Pharma) entered into a funding arrangement under which Royalty Pharma paid Merck $50 million
to co-fund Merck’s development costs for a Phase 2b trial of MK-8189, an investigational oral phosphodiesterase 10A (PDE10A) inhibitor, which was being evaluated
for the treatment of schizophrenia. As Royalty Pharma was sharing the risk of technical and regulatory success with Merck, the development funding was recognized
by Merck as an obligation to perform contractual services. Accordingly, the payment received was recognized by Merck as a reduction to Research and development
expenses ratably over the estimated Phase 2b research period. In 2024, it was determined the Phase 2b clinical trial for MK-8189 as a monotherapy for acute
schizophrenia did not meet its primary efficacy endpoint; therefore, further development in schizophrenia, bipolar, and dementia indications has stopped, and the
funding arrangement was terminated.
In September 2022, Merck exercised its option to jointly develop and commercialize V940 (mRNA-4157), an investigational individualized neoantigen
therapy, pursuant to the terms of an existing collaboration and license agreement with Moderna, Inc. (Moderna). See Note 4 for additional information related to this
collaboration.
In August 2022, Merck and Orna Therapeutics (Orna), a biotechnology company pioneering a new investigational class of engineered circular RNA (oRNA)
therapies, entered into a collaboration agreement to discover, develop, and commercialize multiple programs, including vaccines and therapeutics in the areas of
infectious disease and oncology. Under the terms of the agreement, Merck made an upfront payment to Orna of $150 million, which was recorded as a charge to
Research and development expenses in 2022. In addition, Orna is eligible to receive future contingent payments aggregating up to $440 million in development-
related payments, $675 million in regulatory milestones, and $2.4 billion in sales-based milestones associated with the progress of the multiple vaccine and
therapeutic programs, as well as royalties ranging from a high-single-digit rate to a low-double-digit rate on any approved products derived from the collaboration.
Merck also invested $100 million in Orna’s Series B preferred shares in 2022.
In July 2022, Merck and Orion Corporation (Orion) announced a global co-development and co-commercialization agreement for Orion’s investigational
candidate opevesostat (MK-5684/ODM-208) and other drugs targeting cytochrome P450 11A1 (CYP11A1), an enzyme important in steroid production. Merck made an
upfront payment to Orion of $290 million, which was recorded as a charge to Research and development expenses in 2022. Orion is responsible for the manufacture
of clinical and commercial supply of opevesostat. In addition, the contract provided both parties with an option to convert the initial co-development and co-
commercialization agreement into a global exclusive license to Merck, which was mutually exercised in July 2024 (as noted above).
In May 2022, in connection with an existing arrangement, Merck exercised its option to obtain an exclusive license outside of Chinese mainland, Hong
Kong, Macau and Taiwan for the development, manufacture and commercialization of Kelun-Biotech’s trophoblast antigen 2 (TROP2)-targeting ADC programs,
including its lead compound, sacituzumab tirumotecan (MK-2870/SKB-264), which is currently in Phase 3 clinical development. Under the terms of the agreement,
Merck and Kelun-Biotech are collaborating on certain early clinical development plans,
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including evaluating the potential of sacituzumab tirumotecan as a monotherapy and in combination with Keytruda for advanced solid tumors. Upon option exercise,
Merck made a payment of $30 million, which was recorded as a charge to Research and development expenses in 2022. Additionally, Merck made an additional
payment of $25 million upon technology transfer in 2023. Merck has also made all contingent developmental milestone payments under the agreement, which
aggregated $90 million, nearly all of which were paid in 2024 and were recorded to Research and development expenses. In addition, Kelun-Biotech is eligible to
receive future contingent milestone payments (which include all program compounds) aggregating up to $290 million in first commercial sale milestones, and
$780 million in sales-based milestones. The agreement also provides for Merck to pay tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on
future net sales.
Spin-Off of Organon & Co.
In connection with the 2021 spin-off of Organon & Co. (Organon), Merck and Organon entered into a series of interim operating agreements pursuant to
which in various jurisdictions where Merck held licenses, permits and other rights in connection with marketing, import and/or distribution of Organon products prior to
the separation, Merck continued to market, import and distribute such products on behalf of Organon until such time as the relevant licenses and permits transferred to
Organon, with Organon receiving all of the economic benefits and burdens of such activities. As of December 31, 2024, only one jurisdiction remains under an interim
operating agreement. Additionally, Merck and Organon entered into a number of manufacturing and supply agreements (MSAs) with terms ranging from four years to
ten years. The amounts included in the consolidated statement of income for the above MSAs include sales of $392 million, $394 million and $383 million in 2024,
2023 and 2022, respectively, and related cost of sales of $390 million, $422 million and $404 million in 2024, 2023 and 2022, respectively. The amounts due from
Organon under all spin-off related agreements were $330 million and $632 million at December 31, 2024 and 2023, respectively, and are reflected in Other current
assets. The amounts due to Organon under these agreements were $113 million and $598 million at December 31, 2024 and 2023, respectively, and are included in
Accrued and other current liabilities.
4. Collaborative Arrangements
Merck has entered into collaborative arrangements that provide the Company with varying rights to develop, produce and market products together with its
collaborative partners. Both parties in these arrangements are active participants and exposed to significant risks and rewards dependent on the commercial success
of the activities of the collaboration. Merck’s more significant collaborative arrangements are discussed below.
AstraZeneca PLC
In 2017, Merck and AstraZeneca PLC (AstraZeneca) entered into a global strategic oncology collaboration to co-develop and co-commercialize
AstraZeneca’s Lynparza (olaparib) for multiple cancer types. Independently, Merck and AstraZeneca are developing and commercializing Lynparza in combinations
with their respective PD-1 and PD-L1 medicines, Keytruda and Imfinzi. The companies are also jointly developing and commercializing AstraZeneca’s Koselugo
(selumetinib) for multiple indications. Under the terms of the agreement, AstraZeneca and Merck share the development and commercialization costs for Lynparza and
Koselugo monotherapy and non-PD-1/PD-L1 combination therapy opportunities.
Profits from Lynparza and Koselugo product sales generated through monotherapies or combination therapies are shared equally. AstraZeneca is the
principal on Lynparza and Koselugo sales transactions. Merck records its share of Lynparza and Koselugo product sales, net of cost of sales and commercialization
costs, as alliance revenue, and its share of development costs associated with the collaboration as part of Research and development expenses. Reimbursements
received from AstraZeneca for research and development expenses are recognized as reductions to Research and development costs.
As part of the agreement, Merck made an upfront payment to AstraZeneca and also made payments over a multi-year period for certain license options. In
addition, the agreement provides for contingent payments from Merck to AstraZeneca related to the successful achievement of sales-based and regulatory milestones.
In 2024, sales of Koselugo triggered a $100 million sales-based milestone payment from Merck to AstraZeneca. Accordingly, Merck recorded a $100 million
liability (which remained accrued at December 31, 2024 and was subsequently paid in January 2025) and a corresponding increase to the intangible asset related to
Koselugo. Merck also recognized $48 million of cumulative amortization catch-up expense related to the recognition of this milestone in 2024. Merck made a sales-
based milestone payment to AstraZeneca of $400 million in 2022 (which had been previously accrued for). Additionally, in 2022, Merck determined it was probable that
sales of Lynparza in the future would trigger a $600 million sales-based milestone payment from Merck to AstraZeneca. Accordingly, Merck recorded a $600 million
liability (which remained accrued at December 31, 2024 and was
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subsequently paid in January 2025) and a corresponding increase to the intangible asset related to Lynparza. Merck also recognized $250 million of cumulative
amortization catch-up expense related to the recognition of this milestone in 2022. Potential future sales-based milestone payments of $2.0 billion have not yet been
accrued as they are not deemed by the Company to be probable at this time.
Lynparza received regulatory approvals triggering capitalized milestone payments from Merck to AstraZeneca of $245 million, $105 million and $250 million
in 2024, 2023 and 2022, respectively (each of which had been previously accrued for). In 2024, the partners agreed that no future regulatory milestone payments from
Merck to AstraZeneca are likely under the agreement.
The intangible asset balances related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) and Koselugo (which
reflects the 2024 capitalized sales-based milestone payment) were $1.2 billion and $49 million, respectively, at December 31, 2024 and are included in Other
Intangibles, Net. The assets are being amortized over their estimated useful lives (through 2028 for Lynparza and through 2029 for Koselugo) as supported by
projected future cash flows, subject to impairment testing.
Summarized financial information related to this collaboration is as follows:
Years Ended December 31
2024
2023
2022
Alliance revenue - Lynparza
$
1,311
$
1,199
$
1,116
Alliance revenue - Koselugo
170
97
54
Total alliance revenue
$
1,481
$
1,296
$
1,170
Cost of sales
378
311
492
Selling, general and administrative
165
192
185
Research and development
77
79
106
December 31
2024
2023
Receivables from AstraZeneca included in Other current assets
$
424
$
341
Payables to AstraZeneca included in Accrued and other current liabilities
713
256
Payables to AstraZeneca included in Other Noncurrent Liabilities
—
600
Represents amortization of capitalized milestone payments. Amounts in 2024 and 2022 include $48 million and $250 million, respectively, of cumulative amortization catch-up expense as noted above.
Includes accrued milestone payments.
Eisai Co., Ltd.
In 2018, Merck and Eisai Co., Ltd. (Eisai) announced a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima
(lenvatinib), an orally available tyrosine kinase inhibitor discovered by Eisai. Under the agreement, Merck and Eisai are developing and commercializing Lenvima
jointly, both as monotherapy and in combination with Keytruda. Eisai records Lenvima product sales globally (Eisai is the principal on Lenvima sales transactions) and
Merck and Eisai share applicable profits equally. Merck records its share of Lenvima product sales, net of cost of sales and commercialization costs, as alliance
revenue. Expenses incurred during co-development are shared by the two companies in accordance with the collaboration agreement and reflected in Research and
development expenses. Certain expenses incurred solely by Merck or Eisai are not shareable under the collaboration agreement, including costs incurred in excess of
agreed upon caps and costs related to certain combination studies of Keytruda and Lenvima.
Under the agreement, Merck made an upfront payment to Eisai and also made payments over a multi-year period for certain option rights. In addition, the
agreement provides for contingent payments from Merck to Eisai related to the successful achievement of sales-based and regulatory milestones.
Merck made sales-based milestone payments to Eisai aggregating $125 million, $125 million and $600 million in 2024, 2023 and 2022, respectively. In
2023, Merck determined it was probable that sales of Lenvima in the future would trigger $250 million of sales-based milestone payments from Merck to Eisai.
Accordingly, Merck recorded $250 million of liabilities (of which $125 million was subsequently paid in each of 2024 and 2023 as noted above) and corresponding
increases to the intangible asset related to Lenvima. Merck also recognized $154 million of cumulative amortization catch-up expense related to the recognition of
these milestones in 2023. Potential future sales-based milestone payments of $2.3 billion have not yet been accrued as they are not deemed by the Company to be
probable at this time.
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In 2022, Lenvima received regulatory approvals triggering capitalized milestone payments of $50 million from Merck to Eisai. There are no regulatory
milestone payments remaining under the agreement.
The intangible asset balance related to Lenvima (which includes capitalized sales-based and regulatory milestone payments) was $442 million at
December 31, 2024 and is included in Other Intangibles, Net. The amount is being amortized over its estimated useful life through 2026 as supported by projected
future cash flows, subject to impairment testing.
Summarized financial information related to this collaboration is as follows:
Years Ended December 31
2024
2023
2022
Alliance revenue - Lenvima
$
1,010
$
960
$
876
Cost of sales
241
381
212
Selling, general and administrative
159
189
158
Research and development
21
66
136
December 31
2024
2023
Receivables from Eisai included in Other current assets
$
257
$
226
Payables to Eisai included in Accrued and other current liabilities
—
125
Represents amortization of capitalized milestone payments. Amount in 2023 includes $154 million of cumulative amortization catch-up expense as noted above.
Represents an accrued milestone payment.
Bayer AG
In 2014, the Company entered into a worldwide clinical development collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase
(sGC) modulators including Bayer’s Adempas (riociguat) and Verquvo (vericiguat). The two companies have implemented a joint development and commercialization
strategy. Under the agreement, Bayer commercializes Adempas in the Americas, while Merck commercializes in the rest of the world. For Verquvo, Merck
commercializes in the U.S. and Bayer commercializes in the rest of the world. Both companies share in development costs and profits on sales. Merck records sales
of Adempas and Verquvo in its marketing territories, as well as alliance revenue. Alliance revenue represents Merck’s share of profits from sales of Adempas and
Verquvo in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs. Cost of sales includes Bayer’s share of profits from
sales in Merck’s marketing territories.
In addition, the agreement provided for contingent payments from Merck to Bayer related to the successful achievement of sales-based milestones. In
2022, Merck made the final $400 million sales-based milestone payment under this collaboration to Bayer.
The intangible asset balances related to Adempas (which includes the acquired intangible asset balance, as well as capitalized sales-based milestone
payments attributed to Adempas) and Verquvo (which reflects the portion of the final sales-based milestone payment that was attributed to Verquvo) were $372 million
and $42 million, respectively, at December 31, 2024 and are included in Other Intangibles, Net. The assets are being amortized over their estimated useful lives
(through 2027 for Adempas and through 2031 for Verquvo) as supported by projected future cash flows, subject to impairment testing.
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Summarized financial information related to this collaboration is as follows:
Years Ended December 31
2024
2023
2022
Alliance revenue - Adempas/Verquvo
$
415
$
367
$
341
Net sales of Adempas recorded by Merck
287
255
238
Net sales of Verquvo recorded by Merck
37
36
22
Total sales
$
739
$
658
$
601
Cost of sales
244
224
210
Selling, general and administrative
111
131
153
Research and development
102
90
75
December 31
2024
2023
Receivables from Bayer included in Other current assets
$
160
$
156
Payables to Bayer included in Accrued and other current liabilities
82
80
Includes amortization of intangible assets, cost of products sold by Merck, as well as Bayer’s share of profits from sales in Merck’s marketing territories.
Ridgeback Biotherapeutics LP
In 2020, Merck and Ridgeback Biotherapeutics LP (Ridgeback), a closely held biotechnology company, entered into a collaboration agreement to develop
Lagevrio (molnupiravir), an investigational orally available antiviral candidate for the treatment of patients with COVID-19. Merck gained exclusive worldwide rights to
develop and commercialize Lagevrio and related molecules. Following initial authorizations in certain markets in 2021, Lagevrio has since received multiple additional
authorizations.
Under the terms of the agreement, Ridgeback received an upfront payment and is eligible to receive future contingent payments dependent upon the
achievement of certain developmental and regulatory approval milestones. The agreement also provides for Merck to reimburse Ridgeback for a portion of certain
third-party contingent milestone payments and royalties on net sales, which is part of the profit-sharing calculation. Merck is the principal on sales transactions,
recognizing sales and related costs, with profit-sharing amounts recorded within Cost of sales. Profits from the collaboration are split equally between the partners.
Reimbursements from Ridgeback for its share of research and development costs (deducted from Ridgeback’s share of profits) are reflected as decreases to
Research and development expenses.
Summarized financial information related to this collaboration is as follows:
Years Ended December 31
2024
2023
2022
Net sales of Lagevrio recorded by Merck
$
964
$
1,428
$
5,684
Cost of sales
554
852
3,038
Selling, general and administrative
57
97
147
Research and development
13
60
88
December 31
2024
2023
Payables to Ridgeback included in Accrued and other current liabilities
$
68
$
113
Includes cost of products sold by Merck, Ridgeback’s share of profits, royalty expense, amortization of capitalized milestone payments and inventory reserves.
Includes accrued royalties.
Daiichi Sankyo
In October 2023, Merck and Daiichi Sankyo entered into a global development and commercialization agreement for three of Daiichi Sankyo’s DXd ADC
candidates: patritumab deruxtecan (HER3-DXd) (MK-1022), ifinatamab deruxtecan (I-DXd) (MK-2400) and raludotatug deruxtecan (R-DXd) (MK-5909). All three
potentially first-in-class DXd ADCs are in various stages of clinical development for the treatment of multiple solid tumors both as monotherapy and/or in combination
with other treatments. The companies will jointly develop and potentially commercialize these ADC candidates worldwide, except in Japan where Daiichi Sankyo will
maintain exclusive rights. Daiichi Sankyo will be solely responsible for manufacturing and supply.
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(2)
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(2)
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Under the terms of the agreement, Merck made payments to Daiichi Sankyo totaling $4.0 billion in 2023. These payments included $1.0 billion
($500 million each for patritumab deruxtecan and ifinatamab deruxtecan) which may be refundable on a pro-rated basis in the event of early termination of
development with respect to either program. In addition, the agreement provided for a continuation payment of $750 million related to patritumab deruxtecan, which
Merck paid in October 2024, and a continuation payment of $750 million related to raludotatug deruxtecan due from Merck in October 2025. If Merck does not make
the remaining continuation payment for raludotatug deruxtecan, the rights for that program will revert to Daiichi Sankyo and the non-refundable upfront payments
already paid will be retained by Daiichi Sankyo. The agreement also provides for contingent payments from Merck to Daiichi Sankyo of up to an additional $5.5 billion
for each DXd ADC upon the successful achievement of certain sales-based milestones.
In conjunction with this transaction, Merck recorded an aggregate pretax charge of $5.5 billion to Research and development expenses in 2023 for the
$4.0 billion of upfront payments and the $1.5 billion of continuation payments. Merck determined it was appropriate to expense the $1.0 billion refundable portion of
the consideration in 2023 because of the significant number of clinical studies that were underway and planned in the near future, as well as certain studies in
advanced stages, making it highly likely that the programs would continue to progress and incur substantial expenses, and therefore the likelihood of the programs
terminating before the end of the refundable period was deemed remote. Merck also determined that it was appropriate to expense the continuation payments upon
execution of the agreement because such payments do not result in the Company gaining any additional intellectual property rights. In addition, the significant number
of ongoing and planned clinical studies and the short-term nature of the option period makes the likelihood of Merck not making these payments remote.
Merck and Daiichi Sankyo equally share research and development costs, except for raludotatug deruxtecan, where Merck is responsible for 75% of the
first $2.0 billion of research and development expenses. Merck includes its share of development costs associated with the collaboration as part of Research and
development expenses. Following regulatory approval, Daiichi Sankyo will generally record sales worldwide (Daiichi Sankyo will be the principal on sales transactions)
and the companies will equally share expenses as well as profits worldwide except for Japan where Daiichi Sankyo retains exclusive rights and Merck will receive a
5% sales-based royalty. Merck will record its share of product sales, net of cost of sales and commercialization costs, as alliance revenue.
In August 2024, Merck and Daiichi Sankyo expanded their agreement to include MK-6070, an investigational delta-like ligand 3 (DLL3) targeting T-cell
engager, which Merck obtained through its acquisition of Harpoon (see Note 3). The companies are planning to evaluate MK-6070 in combination with ifinatamab
deruxtecan in certain patients with SCLC, as well as other potential combinations. Merck received an upfront cash payment of $170 million from Daiichi Sankyo
(recorded within Other (income) expense, net) and has also satisfied a contingent quid obligation from the original collaboration agreement. The companies will jointly
develop and commercialize MK-6070 worldwide and share research and development and commercialization expenses. Research and development expenses related
to MK-6070 in combination with ifinatamab deruxtecan will be shared in a manner consistent with the original agreement for ifinatamab deruxtecan. Merck will be
solely responsible for manufacturing and supply of MK-6070. If approved, Merck will generally record sales for MK-6070 worldwide (Merck will be the principal on
sales transactions) and the companies will equally share expenses as well as profits worldwide, except for Japan where Merck retains exclusive rights and Daiichi
Sankyo will receive a 5% sales-based royalty.
Summarized financial information related to this collaboration is as follows:
Years Ended December 31
2024
2023
Selling, general and administrative
$
26
$
3
Research and development
351
5,549
December 31
2024
2023
Receivables from Daiichi Sankyo included in Other current assets
$
8
$
—
Payables to Daiichi Sankyo included in Accrued and other current liabilities
817
800
Payables to Daiichi Sankyo included in Other Noncurrent Liabilities
—
750
Expenses in 2023 include the $5.5 billion charge for the upfront and continuing option payments noted above.
Includes accrued continuation payment.
(1)
(2)
(2)
(1)
(2)
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Moderna, Inc.
In 2022, Merck exercised its option to jointly develop and commercialize V940 (mRNA-4157), an investigational individualized neoantigen therapy, pursuant
to the terms of an existing collaboration and license agreement with Moderna, Inc. (Moderna), which resulted in a $250 million payment that was charged to Research
and development expenses in 2022. V940 (mRNA-4157) is currently being evaluated in combination with Keytruda in multiple Phase 3 clinical trials. Merck and
Moderna share costs and will share any profits equally under this worldwide collaboration. Merck records its share of development costs associated with the
collaboration as part of Research and development expenses. Any reimbursements received from Moderna for research and development expenses are recognized
as reductions to Research and development costs. Merck has also capitalized certain of the shared costs, mainly related to facility costs, which aggregated
$198 million at December 31, 2024 and will be amortized over the assets’ estimated useful lives.
Summarized financial information related to this collaboration is as follows:
Years Ended December 31
2024
2023
2022
Selling, general and administrative
$
16
$
5
$
—
Research and development
358
218
288
December 31
2024
2023
Payables to Moderna included in Accrued and other current liabilities
$
57
$
63
Expenses in 2022 include the $250 million option exercise payment noted above.
Bristol-Myers Squibb Company
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). Reblozyl is approved in the U.S., Europe, and certain other markets for the treatment of anemia in certain rare blood
disorders and is also being evaluated for additional indications for hematology therapies. BMS is the principal on sales transactions for Reblozyl; however, Merck co-
promotes Reblozyl (and may co-promote any future products approved under this collaboration) in North America, which is reimbursed by BMS. Merck receives tiered
royalties ranging from 20% to 24% based on sales levels. This royalty will be reduced by 50% upon the earlier of patent expiry or generic entry on an indication-by-
indication basis in each market. Additionally, Merck is eligible to receive future contingent sales-based milestone payments of up to $80 million. Alliance revenue
related to this collaboration (recorded within Sales) consists of royalties and, for 2022, also includes the receipt of a regulatory approval milestone payment of $20
million. Merck recorded alliance revenue related to this collaboration of $371 million in 2024, $212 million in 2023 and $166 million in 2022.
5. Restructuring
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 recorded total pretax costs of $888 million and $190
million in 2024 and 2023, respectively, related to the 2024 Restructuring Program, bringing total cumulative pretax costs incurred through December 31, 2024 to $1.1
billion.
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 Company recorded total pretax costs of $743 million in 2023
and $666 million in 2022 related to the 2019 Restructuring Program. 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.
For segment reporting, restructuring charges are unallocated expenses.
(1)
(1)
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The following table summarizes the charges related to the restructuring programs by type of cost:
Accelerated
Depreciation
Separation
Costs
Other Exit Costs
Total
Year Ended December 31, 2024
2024 Restructuring Program
Cost of sales
$
254
$
—
$
241
$
495
Selling, general and administrative
—
—
83
83
Research and development
—
—
1
1
Restructuring costs
—
122
187
309
$
254
$
122
$
512
$
888
Year Ended December 31, 2023
2024 Restructuring Program
Cost of sales
$
—
$
—
$
62
$
62
Restructuring costs
—
115
13
128
—
115
75
190
2019 Restructuring Program
Cost of sales
131
—
18
149
Selling, general and administrative
9
—
113
122
Research and development
—
—
1
1
Restructuring costs
—
339
132
471
140
339
264
743
$
140
$
454
$
339
$
933
Year Ended December 31, 2022
2019 Restructuring Program
Cost of sales
$
72
$
—
$
133
$
205
Selling, general and administrative
19
—
75
94
Research and development
29
—
1
30
Restructuring costs
—
212
125
337
$
120
$
212
$
334
$
666
Accelerated depreciation costs primarily relate to manufacturing, research and administrative facilities and equipment to be sold or closed as part of the
programs. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based
upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the
restructuring actions. All the sites will continue to operate up through the respective closure dates and, since future undiscounted cash flows are sufficient to recover
the respective book values, Merck is recording accelerated depreciation over the revised useful life of the site assets. Anticipated site closure dates, particularly related
to manufacturing locations, have been and may continue to be adjusted to reflect changes resulting from regulatory or other factors.
Separation costs are associated with actual headcount reductions, as well as involuntary headcount reductions which were probable and could be
reasonably estimated.
Other exit costs in 2024, 2023 and 2022 include asset impairment, facility shut-down and other related costs, as well as pretax gains and losses resulting
from the sales of facilities and related assets. Additionally, other activity includes certain employee-related costs associated with pension and other postretirement
benefit plans (see Note 13) and share-based compensation.
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The following table summarizes the charges and spending relating to restructuring program activities:
Accelerated
Depreciation
Separation
Costs
Other Exit Costs
Total
Restructuring reserves January 1, 2023
$
—
$
479
$
34
$
513
Expenses
140
454
339
933
(Payments) receipts, net
—
(252)
(158)
(410)
Non-cash activity
(140)
—
(184)
(324)
Restructuring reserves December 31, 2023
—
681
31
712
Expenses
254
122
512
888
(Payments) receipts, net
—
(239)
(206)
(445)
Non-cash activity
(254)
—
(337)
(591)
Restructuring reserves December 31, 2024
$
—
$
564
$
—
$
564
6. Financial Instruments
Derivative Instruments and Hedging Activities
The Company manages the impact of foreign exchange rate movements and interest rate movements on its earnings, cash flows and fair values of assets
and liabilities through operational means and through the use of various financial instruments, including derivative instruments.
A significant portion of the Company’s revenues and earnings in foreign affiliates is exposed to changes in foreign exchange rates. The objectives of and
accounting related to the Company’s foreign currency risk management program, as well as its interest rate risk management activities are discussed below.
Foreign Currency Risk Management
The Company has established revenue hedging, balance sheet risk management and net investment hedging programs to protect against volatility of
future foreign currency cash flows and changes in fair value caused by changes in foreign exchange rates.
The objective of the revenue hedging program is to reduce the variability caused by changes in foreign exchange rates that would affect the U.S. dollar
value of future cash flows derived from foreign currency denominated sales, primarily the euro, Japanese yen and Chinese renminbi. To achieve this objective, the
Company will hedge a portion of its forecasted foreign currency denominated third-party and intercompany distributor entity sales (forecasted sales) that are expected
to occur over its planning cycle, typically no more than two years into the future. The Company will layer in hedges over time, increasing the portion of forecasted sales
hedged as it gets closer to the expected date of the forecasted sales. The portion of forecasted sales hedged is based on assessments of cost-benefit profiles that
consider natural offsetting exposures, revenue and foreign exchange rate volatilities and correlations, and the cost of hedging instruments. The Company manages its
anticipated transaction exposure principally with purchased local currency put options, forward contracts, and purchased collar options.
The fair values of these derivative contracts are recorded as either assets (gain positions) or liabilities (loss positions) in the Consolidated Balance Sheet.
Changes in the fair value of derivative contracts are recorded each period in either current earnings or OCI depending on whether the derivative is designated as part
of a hedge transaction and, if so, the type of hedge transaction. For derivatives that are designated as cash flow hedges, the unrealized gains or losses on these
contracts are recorded in AOCL and reclassified into Sales when the hedged anticipated revenue is recognized. The amount reclassified into earnings as a result of
the discontinuation of cash flow hedges because it was no longer deemed probable the forecasted hedged transactions would occur was not material for the years
ended December 31, 2024, 2023 or 2022. For those derivatives which are not designated as cash flow hedges, but serve as economic hedges of forecasted sales,
unrealized gains or losses are recorded in Sales each period. The cash flows from both designated and non-designated contracts are reported as operating activities
in the Consolidated Statement of Cash Flows. The Company does not enter into derivatives for trading or speculative purposes.
The Company manages operating activities and net asset positions at each local subsidiary in order to mitigate the effects of foreign exchange on
monetary assets and liabilities. Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at
spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Other (income) expense, net. The Company also uses a balance
sheet risk management program to mitigate the exposure of such assets and liabilities from the effects of volatility in foreign exchange. Merck principally utilizes
forward exchange contracts to
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offset the effects of foreign exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the
exposure, the volatility of the foreign exchange rate and the cost of the hedging instrument (primarily the euro, Swiss franc, Japanese yen, and Chinese renminbi). The
forward contracts are not designated as hedges and are marked to market through Other (income) expense, net. Accordingly, fair value changes in the forward
contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency exchange rates, except to the
extent of the spot-forward differences. These differences are not significant due to the short-term nature of the contracts, which typically have average maturities at
inception of less than six months. The cash flows from these contracts are reported as operating activities in the Consolidated Statement of Cash Flows.
The Company also uses forward exchange contracts to hedge a portion of its net investment in foreign operations against movements in foreign exchange
rates. The forward contracts are designated as hedges of the net investment in a foreign operation. The unrealized gains or losses on these contracts are recorded in
foreign currency translation adjustment within OCI, and remain in AOCL until either the sale or complete or substantially complete liquidation of the subsidiary. The
Company excludes certain portions of the change in fair value of its derivative instruments from the assessment of hedge effectiveness (excluded components).
Changes in fair value of the excluded components are recognized in OCI. The Company recognizes in earnings the initial value of the excluded components on a
straight-line basis over the life of the derivative instrument, rather than using the mark-to-market approach. The cash flows from these contracts are reported as
investing activities in the Consolidated Statement of Cash Flows.
Foreign exchange risk is also managed through the use of foreign currency debt. Certain of the Company’s senior unsecured euro-denominated notes
have been designated as, and are effective as, economic hedges of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses
due to spot rate fluctuations on the euro-denominated debt instruments are included in foreign currency translation adjustment within OCI.
The effects of the Company’s net investment hedges on OCI and the Consolidated Statement of Income are shown below:
Amount of Pretax (Gain) Loss Recognized in Other
Comprehensive Income
Amount of Pretax (Gain) Loss Recognized in Other (income)
expense, net for Amounts Excluded from Effectiveness
Testing
Years Ended December 31
2024
2023
2022
2024
2023
2022
Net Investment Hedging Relationships
Foreign exchange contracts
$
(30)
$
—
$
(48)
$
(4)
$
1
$
(1)
Euro-denominated notes
(192)
105
(162)
—
—
—
No amounts were reclassified from AOCL into income related to the sale of a subsidiary.
Interest Rate Risk Management
The Company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rate changes
and to reduce its overall cost of borrowing. The Company does not use leveraged swaps and, in general, does not leverage any of its investment activities that would
put principal at risk.
At December 31, 2024, the Company was a party to six pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of the fixed-
rate notes as detailed in the table below.
Par Value of Debt
Number of Interest Rate Swaps
Held
Total Swap Notional Amount
4.50% notes due 2033
$
1,500
6
$
1,500
The interest rate swap contracts are designated hedges of the fair value changes in the notes attributable to changes in the benchmark Secured Overnight
Financing Rate (SOFR) swap rate. The fair value changes in the notes attributable to changes in the SOFR swap rate are recorded in interest expense along with the
offsetting fair value changes in the swap contracts. In January 2025, the Company entered into an additional interest rate swap contract with a notional amount of
$250 million related to its 5.00% notes due 2053. The cash flows from these contracts are reported as operating activities in the Consolidated Statement of Cash
Flows.
(1)
(1)
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The table below presents the location of amounts recorded in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value
hedges as of December 31:
Carrying Amount of Hedged Liabilities
Cumulative Amount of Fair Value Hedging
Adjustment Increase Included in the Carrying
Amount
2024
2023
2024
2023
Balance Sheet Caption
Long-Term Debt
$
1,509
$
1,056
$
17
$
56
Presented in the table below is the fair value of derivatives on a gross basis segregated between those derivatives that are designated as hedging
instruments and those that are not designated as hedging instruments as of December 31:
2024
2023
Fair Value of
Derivative
U.S. Dollar
Notional
Fair Value of
Derivative
U.S. Dollar
Notional
Asset
Liability
Asset
Liability
Derivatives Designated as Hedging
Instruments
Balance Sheet Caption
Interest rate swap contracts
Other Assets
$
17
$
—
$
1,500
$
57
$
—
$
1,000
Foreign exchange contracts
Other current assets
323
—
8,662
106
—
6,138
Foreign exchange contracts
Other Assets
66
—
2,125
26
—
1,929
Foreign exchange contracts
Accrued and other current liabilities
—
1
162
—
76
3,680
Foreign exchange contracts
Other Noncurrent Liabilities
—
1
16
—
1
7
$
406
$
2
$
12,465
$
189
$
77
$
12,754
Derivatives Not Designated as Hedging
Instruments
Balance Sheet Caption
Foreign exchange contracts
Other current assets
$
323
$
—
$
12,544
$
153
$
—
$
9,693
Foreign exchange contracts
Accrued and other current liabilities
—
343
13,551
—
162
8,104
$
323
$
343
$
26,095
$
153
$
162
$
17,797
$
729
$
345
$
38,560
$
342
$
239
$
30,551
As noted above, the Company records its derivatives on a gross basis in the Consolidated Balance Sheet. The Company has master netting agreements
with several of its financial institution counterparties (see Concentrations of Credit Risk below). The following table provides information on the Company’s derivative
positions subject to these master netting arrangements as if they were presented on a net basis, allowing for the right of offset by counterparty and cash collateral
exchanged per the master agreements and related credit support annexes as of December 31:
2024
2023
Asset
Liability
Asset
Liability
Gross amounts recognized in the consolidated balance sheet
$
729
$
345
$
342
$
239
Gross amounts subject to offset in master netting arrangements not offset in the consolidated balance sheet
(299)
(299)
(215)
(215)
Cash collateral received
(165)
—
(3)
—
Net amounts
$
265
$
46
$
124
$
24
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The table below provides information regarding the location and amount of pretax gains and losses of derivatives designated in fair value or cash flow
hedging relationships:
Years Ended December 31
2024
2023
2022
2024
2023
2022
2024
2023
2022
Financial Statement Caption in which Effects of
Fair Value or Cash Flow Hedges are Recorded
Sales
Other (income) expense, net
Other comprehensive income (loss)
$
64,168
$
60,115
$
59,283
$
(24)
$
466
$
1,501
$
216
$
(393)
$
(339)
(Gain) loss on fair value hedging relationships:
Interest rate swap contracts
Hedged items
—
—
—
(39)
56
(13)
—
—
—
Derivatives designated as hedging
instruments
—
—
—
39
(57)
4
—
—
—
Impact of cash flow hedging relationships:
Foreign exchange contracts
Amount of gain recognized in OCI on
derivatives
—
—
—
—
—
—
508
114
684
Increase in Sales as a result of AOCL
reclassifications
167
249
773
—
—
—
(167)
(249)
(773)
Interest rate contracts
Amount of gain recognized in Other (income)
expense, net on derivatives
—
—
—
(1)
(1)
(2)
—
—
—
Amount of (loss) gain recognized in OCI on
derivatives
—
—
—
—
—
—
(1)
13
(2)
Interest expense is a component of Other (income) expense, net.
The table below provides information regarding the income statement effects of derivatives not designated as hedging instruments:
Amount of Derivative Pretax Loss (Gain) Recognized in Income
Years Ended December 31
2024
2023
2022
Derivatives Not Designated as Hedging Instruments
Income Statement Caption
Foreign exchange contracts
Other (income) expense, net
$
251
$
(6)
$
(49)
Foreign exchange contracts
Sales
(28)
5
(37)
These derivative contracts primarily mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates.
These derivative contracts serve as economic hedges of forecasted transactions.
At December 31, 2024, the Company estimates $262 million of pretax net unrealized gains on derivatives maturing within the next 12 months that hedge
foreign currency denominated sales over that same period will be reclassified from AOCL to Sales. The amount ultimately reclassified to Sales may differ as foreign
exchange rates change. Realized gains and losses are ultimately determined by actual foreign exchange rates at maturity.
(1)
(1)
(1)
(2)
(1)
(2)
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Investments in Debt and Equity Securities
Information on investments in debt and equity securities at December 31 is as follows:
2024
2023
Amortized
Cost
Gross Unrealized
Fair
Value
Amortized
Cost
Gross Unrealized
Fair
Value
Gains
Losses
Gains
Losses
Commercial paper
$
348
$
—
$
—
$
348
$
252
$
—
$
—
$
252
U.S. government and agency securities
188
—
—
188
72
—
—
72
Corporate notes and bonds
—
—
—
—
13
—
—
13
Total debt securities
$
536
$
—
$
—
$
536
$
337
$
—
$
—
$
337
Publicly traded equity securities
920
764
Total debt and publicly traded equity securities
$
1,456
$
1,101
Unrealized net losses of $30 million were recorded in Other (income) expense, net in 2024 on equity securities still held at December 31, 2024. Unrealized net gains of $411 million were recorded in Other
(income) expense, net in 2023 on equity securities still held at December 31, 2023.
At December 31, 2024 and 2023, the Company also had $863 million and $832 million, respectively, of equity investments without readily determinable fair
values included in Other Assets. The Company records unrealized gains on these equity investments based on favorable observable price changes from transactions
involving similar investments of the same investee and records unrealized losses based on unfavorable observable price changes, which are included in Other
(income) expense, net. During 2024, the Company recorded unrealized gains of $19 million and unrealized losses of $51 million related to certain of these equity
investments still held at December 31, 2024. During 2023, the Company recorded unrealized gains of $10 million and unrealized losses of $61 million related to
certain of these equity investments still held at December 31, 2023. Cumulative unrealized gains and cumulative unrealized losses based on observable price changes
for investments in equity investments without readily determinable fair values still held at December 31, 2024 were $309 million and $107 million, respectively.
At December 31, 2024, 2023 and 2022, the Company also had $267 million, $417 million and $598 million, respectively, recorded in Other Assets for equity
securities held through ownership interests in investment funds. Losses recorded in Other (income) expense, net relating to these investment funds were $29 million,
$106 million and $1.0 billion for the years ended December 31, 2024, 2023 and 2022, respectively.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses a fair value
hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs
used to measure fair value with Level 1 having the highest priority and Level 3 having the lowest:
Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity. Level 3 assets or liabilities are those whose values are determined using
pricing models, discounted cash flow methodologies, or similar techniques with significant unobservable inputs, as well as assets or liabilities for which the
determination of fair value requires significant judgment or estimation.
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest
level input that is significant to the fair value measurement of the instrument.
(1)
(1)
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Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
Financial assets and liabilities measured at fair value on a recurring basis at December 31 are summarized below:
Fair Value Measurements Using
Fair Value Measurements Using
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
2024
2023
Assets
Investments
Commercial paper
$
—
$
348
$
—
$
348
$
—
$
252
$
—
$
252
U.S. government and agency securities
—
99
—
99
—
—
—
—
Publicly traded equity securities
463
—
—
463
252
—
—
252
463
447
—
910
252
252
—
504
Other assets
U.S. government and agency securities
89
—
—
89
72
—
—
72
Corporate notes and bonds
—
—
—
—
13
—
—
13
Publicly traded equity securities
457
—
—
457
512
—
—
512
546
—
—
546
597
—
—
597
Derivative assets
Forward exchange contracts
—
499
—
499
—
202
—
202
Purchased currency options
—
213
—
213
—
83
—
83
Interest rate swaps
—
17
—
17
—
57
—
57
—
729
—
729
—
342
—
342
Total assets
$
1,009
$
1,176
$
—
$
2,185
$
849
$
594
$
—
$
1,443
Liabilities
Other liabilities
Contingent consideration
$
—
$
—
$
193
$
193
$
—
$
—
$
354
$
354
Derivative liabilities
Forward exchange contracts
—
338
—
338
—
239
—
239
Written currency options
—
7
—
7
—
—
—
—
—
345
—
345
—
239
—
239
Total liabilities
$
—
$
345
$
193
$
538
$
—
$
239
$
354
$
593
Investments included in other assets are restricted as to use, including for the payment of benefits under employee benefit plans.
Balance at December 31, 2024 includes securities with a fair value of $81 million, which are subject to a contractual sale restriction that expires in March 2025. Balance at December 31, 2023 includes securities
with a fair value of $177 million, which were subject to a contractual sale restriction that expired in July 2024.
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.
As of December 31, 2024 and 2023, Cash and cash equivalents included $12.3 billion and $6.0 billion of cash equivalents, respectively (which would be
considered Level 2 in the fair value hierarchy).
Contingent Consideration
Summarized information about the changes in the fair value of liabilities for contingent consideration associated with business combinations is as follows:
2024
2023
Fair value January 1
$
354
$
456
Changes in estimated fair value
(10)
15
Payments
(151)
(117)
Fair value December 31
$
193
$
354
Recorded in Cost of sales, Research and development expenses, and Other (income) expense, net. Includes cumulative translation adjustments.
Balance at December 31, 2024 includes $148 million of current liabilities, of which $123 million relates to the termination of the Sanofi Pasteur MSD joint venture in 2016. As part of the termination, Merck
recorded a liability for contingent future royalty payments of 11.5% on net sales of all Merck products that were previously sold by the joint venture through December 31, 2024. The fair value of this liability is
determined utilizing the estimated amount and timing of projected cash flows using a risk-adjusted discount rate to present value the cash flows.
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The payments of contingent consideration in 2024 include $126 million related to the Sanofi Pasteur MSD liabilities described above and $25 million related
to the first commercial sale of Lyfnua (gefapixant) in the European Union (EU). The payments of contingent consideration in 2023 relate to the Sanofi Pasteur MSD
liabilities.
Other Fair Value Measurements
Some of the Company’s financial instruments, such as cash and cash equivalents, receivables and payables, are reflected in the balance sheet at carrying
value, which approximates fair value due to their short-term nature.
The estimated fair value of loans payable and long-term debt (including current portion) at December 31, 2024, was $32.6 billion compared with a carrying
value of $37.1 billion and at December 31, 2023, was $32.0 billion compared with a carrying value of $35.1 billion. Fair value was estimated using recent observable
market prices and would be considered Level 2 in the fair value hierarchy.
Concentrations of Credit Risk
On an ongoing basis, the Company monitors concentrations of credit risk associated with corporate and government issuers of securities and financial
institutions with which it conducts business. Credit exposure limits are established to limit a concentration with any single issuer or institution. Cash and investments
are placed in instruments that meet high credit quality standards, as specified in the Company’s investment policy guidelines.
The majority of the Company’s accounts receivable arise from product sales in the U.S., Europe and China and are primarily due from drug wholesalers,
distributors and retailers, hospitals and government agencies. The Company monitors the financial performance and creditworthiness of its customers so that it can
properly assess and respond to changes in their credit profile. The Company also continues to monitor global economic conditions, including the volatility associated
with international sovereign economies, and associated impacts on the financial markets and its business.
The Company’s customers with the largest accounts receivable balances are: McKesson Corporation, Cencora, Inc. and Cardinal Health, Inc., which
represented approximately 21%, 21% and 13%, respectively, of total accounts receivable at December 31, 2024. Vaccines distributed by Chongqing Zhifei Biological
Products Co., Ltd. (Zhifei) represent a substantial portion of total sales in China; however, nearly all of the accounts receivable for Zhifei were factored as of
December 31, 2024, as part of the Company’s factoring program discussed below. The Company monitors the creditworthiness of its customers to which it grants
credit terms in the normal course of business. Bad debts have been minimal. The Company does not normally require collateral or other security to support credit
sales.
The Company has accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. The Company
factored $2.1 billion and $3.0 billion of accounts receivable as of December 31, 2024 and 2023, respectively, under these factoring arrangements, which reduced
outstanding accounts receivable. The cash received from the financial institutions is reported within operating activities in the Consolidated Statement of Cash Flows.
In certain of these factoring arrangements, for ease of administration, the Company will collect customer payments related to the factored receivables, which it then
remits to the financial institutions, generally within thirty days after receipt. At December 31, 2024 and 2023, the Company had collected $55 million and $44 million,
respectively, on behalf of the financial institutions, which is reflected as restricted cash in Other current assets, and the related obligation to remit the cash is recorded
in Accrued and other current liabilities. The net cash flows related to these collections are reported as financing activities in the Consolidated Statement of Cash
Flows. The cost of factoring such accounts receivable was de minimis.
Derivative financial instruments are executed under International Swaps and Derivatives Association master agreements. The master agreements with
several of the Company’s financial institution counterparties also include credit support annexes. These annexes contain provisions that require collateral to be
exchanged depending on the value of the derivative assets and liabilities, the Company’s credit rating, and the credit rating of the counterparty. Cash collateral
received by the Company from various counterparties was $165 million and $3 million at December 31, 2024 and 2023, respectively. The obligation to return such
collateral is recorded in Accrued and other current liabilities.
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7. Inventories
Inventories at December 31 consisted of:
2024
2023
Finished goods
$
2,022
$
1,954
Raw materials and work in process
8,831
8,037
Supplies
289
277
11,142
10,268
Decrease to LIFO cost
(840)
(562)
$
10,302
$
9,706
Recognized as:
Inventories
$
6,109
$
6,358
Other Assets
4,193
3,348
Inventories valued under the LIFO method comprised approximately $3.4 billion and $3.1 billion at December 31, 2024 and 2023, respectively, after
reflecting the decrease to LIFO cost. Amounts recognized as Other Assets are comprised almost entirely of raw materials and work in process inventories. At
December 31, 2024 and 2023, these amounts included $3.8 billion and $2.6 billion, respectively, of inventories not expected to be sold within one year. In addition,
these amounts included $412 million and $790 million at December 31, 2024 and 2023, respectively, of inventories produced in preparation for product launches.
8. Goodwill and Other Intangibles
The following table summarizes goodwill activity by segment:
Pharmaceutical
Animal Health
Total
Balance January 1, 2023
$
17,936
$
3,268
$
21,204
Other
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7
(7)
Balance December 31, 2023
17,922
3,275
21,197
Acquisitions
—
518
518
Other
(19)
(28)
(47)
Balance December 31, 2024
$
17,903
$
3,765
$
21,668
Includes cumulative translation adjustments on goodwill balances.
Accumulated goodwill impairment losses were $531 million at both December 31, 2024 and 2023.
Other acquired intangibles at December 31 consisted of:
2024
2023
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
Product rights
$
29,988
$
19,066
$
10,922
$
23,643
$
17,765
$
5,878
IPR&D
430
—
430
6,816
—
6,816
Trade names
2,881
954
1,927
2,881
776
2,105
Licenses and other
8,863
5,772
3,091
8,263
5,051
3,212
$
42,162
$
25,792
$
16,370
$
41,603
$
23,592
$
18,011
Some of the more significant acquired intangibles included in product rights, on a net basis, related to human health marketed products at December 31,
2024 were Winrevair, $5.9 billion; Reblozyl, $2.8 billion; and Zerbaxa, $260 million. Additionally, the Company had $4.3 billion of net acquired intangibles related to
animal health at December 31, 2024, of which $1.7 billion related to product rights and $1.9 billion was attributable to trade names, primarily related to Allflex. At
December 31, 2024, IPR&D primarily relates to MK-1026 (nemtabrutinib), obtained through the acquisition of ArQule, Inc. (ArQule), which had a balance of $418
million. Some of the more significant net intangible assets included in licenses and other above at December 31, 2024 include Lynparza, $1.2 billion, related to a
collaboration with AstraZeneca; Lenvima, $442 million, related to a collaboration with Eisai; and Adempas, $372 million, related to a collaboration with Bayer. See
Note 4 for additional information related to the intangible assets associated with these collaborations.
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IPR&D that the Company acquires through business combinations represents the fair value assigned to incomplete research projects which, at the time of
acquisition, have not reached technological feasibility. Amounts capitalized as IPR&D are accounted for as indefinite-lived intangible assets, subject to impairment
testing until completion or abandonment of the projects. Upon successful completion of each IPR&D project, the Company will make a separate determination as to
the then-useful life of the asset and begin amortization.
In 2023, the Company recorded a $779 million IPR&D impairment charge within Research and development expenses related to MK-7264, gefapixant, a
non-narcotic, oral selective P2X3 receptor antagonist, that was in development for the treatment of refractory or unexplained chronic cough in adults. In December
2023, the FDA issued a Complete Response Letter (CRL) regarding the resubmission of Merck’s New Drug Application (NDA) for gefapixant. In the CRL, the FDA
concluded that Merck’s application did not meet substantial evidence of effectiveness for treating refractory chronic cough and unexplained chronic cough. The CRL
was not related to the safety of gefapixant. The marketing application for gefapixant was based on results from the COUGH-1 and COUGH-2 clinical trials. In January
2022, the FDA issued a CRL regarding Merck’s original NDA for gefapixant. In that CRL, the FDA requested additional information related to the cough counting
system that was used to assess efficacy. Receipt of the second CRL from the FDA constituted a triggering event that required the evaluation of the gefapixant
intangible asset for impairment. The Company estimated the current fair value of gefapixant utilizing an income approach, which calculates the present value of
projected future cash flows. The market participant assumptions used to derive the forecasted cash flows were updated to reflect revised market launch plans,
resulting in a reduction in the estimated fair value. The revised estimated fair value of gefapixant when compared with its related carrying value resulted in the
impairment charge noted above. The remaining intangible asset balance related to Lyfnua (gefapixant) at December 31, 2024 of $21 million is included in product
rights in the table above and is being amortized over its expected useful life as supported by projected future cash flows in the markets where it is approved including
Japan and the EU.
In 2022, the Company recorded $1.7 billion of intangible asset impairment charges within Research and development expenses, of which $1.6 billion
represents IPR&D impairment charges related to nemtabrutinib (MK-1026), an oral, reversible, non-covalent Bruton’s tyrosine kinase (BTK) inhibitor currently being
evaluated for the treatment of hematological malignancies that was obtained through the 2020 acquisition of ArQule. Following discussions with regulatory authorities
in the third quarter of 2022, the development period for nemtabrutinib was extended, which constituted a triggering event that required the evaluation of the
nemtabrutinib intangible asset for impairment. The Company estimated the current fair value of nemtabrutinib utilizing an income approach which calculates the
present value of projected future cash flows. The market participant assumptions used to derive the forecasted cash flows were updated to reflect a delay in the
anticipated launch date for nemtabrutinib, which resulted in lower cumulative revenue forecasts and a reduction in the estimated fair value. The revised estimated fair
value of nemtabrutinib when compared with its related carrying value resulted in a $807 million impairment charge recorded in the third quarter of 2022. In December
2022, regulatory authorities provided additional feedback with respect to clinical study design that led to a further reassessment of the development plan for
nemtabrutinib, which was expected to result in changes to the clinical study design, and corresponding delays in the anticipated approval and launch timelines, which
constituted a triggering event. Utilizing an income approach, the forecasted cash flows were updated to reflect a decline in forecasted revenue coupled with an
increase in development cost forecasts, which reduced projected cash flows lowering the estimated fair value of nemtabrutinib. The revised estimated fair value of
nemtabrutinib when compared with its then-related carrying value resulted in a $780 million impairment charge. The remaining IPR&D intangible asset related to
nemtabrutinib is $418 million. If the assumptions used to estimate the fair value of nemtabrutinib prove to be incorrect and the development of nemtabrutinib does not
progress as anticipated thereby adversely affecting projected future cash flows, the Company may record an additional impairment charge in the future and such
charge could be material. The Company also recorded an $80 million intangible asset impairment charge in 2022 related to derazantinib resulting from the termination
of the out-licensing agreement and the decision by Merck not to pursue development of derazantinib.
The IPR&D projects that remain in development are subject to the inherent risks and uncertainties in drug development and it is possible that the Company
will not be able to successfully develop and complete the IPR&D programs and profitably commercialize the underlying product candidates.
The Company may recognize additional non-cash impairment charges in the future related to marketed products or pipeline programs and such charges
could be material.
Aggregate amortization expense primarily recorded within Cost of sales was $2.4 billion in 2024, $2.0 billion in 2023 and $2.1 billion in 2022. The estimated
aggregate amortization expense for each of the next five years is as follows: 2025, $2.4 billion; 2026, $2.3 billion; 2027, $2.1 billion; 2028, $1.8 billion; 2029, $1.5
billion.
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9. Loans Payable, Long-Term Debt and Leases
Loans Payable
Loans payable at December 31, 2024 included $2.5 billion of notes due in 2025 and $149 million of long-dated notes that are subject to repayment at the
option of the holders. Loans payable at December 31, 2023 included $1.3 billion of notes due in 2024 and $69 million of long-dated notes that are subject to
repayment at the option of the holders. The weighted-average interest rate of commercial paper borrowings was 5.18% and 5.14% for the years ended December 31,
2024 and 2023, respectively. There were no commercial paper borrowings outstanding at December 31, 2024 or 2023.
Long-Term Debt
Long-term debt at December 31 consisted of:
2024
2023
2.15% notes due 2031
$
1,989
$
1,988
2.75% notes due 2051
1,980
1,980
3.70% notes due 2045
1,980
1,979
3.40% notes due 2029
1,742
1,740
4.50% notes due 2033
1,509
1,547
1.70% notes due 2027
1,497
1,495
2.90% notes due 2061
1,484
1,484
5.00% notes due 2053
1,482
1,481
4.00% notes due 2049
1,474
1,473
4.15% notes due 2043
1,240
1,240
1.45% notes due 2030
1,240
1,238
2.45% notes due 2050
1,216
1,214
1.875% euro-denominated notes due 2026
1,041
1,103
0.75% notes due 2026
998
996
1.90% notes due 2028
996
995
5.15% notes due 2063
987
987
3.90% notes due 2039
987
986
2.35% notes due 2040
986
985
3.25% euro-denominated notes due 2032
880
—
3.50% euro-denominated notes due 2037
877
—
3.70% euro-denominated notes due 2044
876
—
3.75% euro-denominated notes due 2054
873
—
4.30% notes due 2030
746
745
4.90% notes due 2044
740
740
6.50% notes due 2033
702
707
1.375% euro-denominated notes due 2036
517
548
2.50% euro-denominated notes due 2034
517
548
4.05% notes due 2028
498
497
3.60% notes due 2042
492
492
6.55% notes due 2037
404
406
5.75% notes due 2036
339
339
5.95% debentures due 2028
307
307
5.85% notes due 2039
271
271
6.40% debentures due 2028
251
250
6.30% debentures due 2026
135
135
2.75% notes due 2025
—
2,498
Other
209
289
$
34,462
$
33,683
Other (as presented in the table above) includes borrowings at variable rates that resulted in effective interest rates of 5.02% and 4.82% for 2024 and
2023, respectively.
With the exception of the 6.30% debentures due 2026, the notes listed in the table above are redeemable in whole or in part, at Merck’s option at any time,
at varying redemption prices. Effective as of November 3, 2009, the Company executed a full and unconditional guarantee of the then existing debt of its subsidiary
Merck Sharp & Dohme LLC. (MSD) and MSD executed a full and unconditional guarantee of the then existing debt of the Company
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(excluding commercial paper), including for payments of principal and interest. These guarantees do not extend to debt issued subsequent to that date.
In May 2024, MSD Netherlands Capital B.V., a wholly owned finance subsidiary of Merck, completed a registered public offering of €3.4 billion in aggregate
principal amount of euro-dominated senior notes comprised of €850 million of 3.25% senior notes due 2032, €850 million of 3.50% senior notes due 2037, €850 million
of 3.70% senior notes due 2044 and €850 million of 3.75% senior notes due 2054 (collectively, the Euronotes). The Company has fully and unconditionally guaranteed
all of MSD Netherlands Capital B.V.’s obligations under the Euronotes and no other subsidiary of the Company will guarantee these obligations. MSD Netherlands
Capital B.V. is a “finance subsidiary” as defined in Rule 13-01(a)(4)(vi) of Regulation S-X of the Exchange Act, with no assets or operations other than those related to
the issuance, administration and repayment of the Euronotes. The financial condition, results of operations and cash flows of MSD Netherlands Capital B.V. are
consolidated in the financial statements of the Company. The net cash proceeds from the offering were used for general corporate purposes.
Certain of the Company’s borrowings require that Merck comply with covenants and, at December 31, 2024, the Company was in compliance with these
covenants.
The aggregate maturities of long-term debt for each of the next five years are as follows: 2025, $2.6 billion; 2026, $2.2 billion; 2027, $1.5 billion; 2028, $2.1
billion; 2029, $1.7 billion. Interest payments related to these debt obligations are as follows: 2025, $1.2 billion; 2026, $1.2 billion; 2027, $1.1 billion; 2028, $1.1 billion;
2029, $1.0 billion.
The Company has a $6.0 billion credit facility that matures in May 2028. The facility provides backup liquidity for the Company’s commercial paper
borrowing facility and is to be used for general corporate purposes. The Company has not drawn funding from this facility.
Leases
The Company has operating leases primarily for manufacturing facilities, research and development facilities, corporate offices, employee housing,
vehicles and certain equipment. The Company determines if an arrangement is a lease at inception. When evaluating contracts for embedded leases, the Company
exercises judgment to determine if there is an explicit or implicit identified asset in the contract and if Merck controls the use of that asset. Embedded leases, primarily
associated with contract manufacturing organizations, are immaterial. The lease term includes options to extend or terminate the lease when it is reasonably certain
that Merck will exercise that option. Real estate leases for facilities have an average remaining lease term of approximately six years, which include options to extend
the leases for up to five years where applicable. Vehicle leases are generally in effect for four years. The Company elected to exclude short-term leases (leases with
an initial term of 12 months or less) from the lease assets and liabilities on the balance sheet.
Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Operating lease assets and liabilities are
recognized based on the present value of lease payments over the lease term. Since the Company’s leases do not have a readily determinable implicit discount rate,
the Company uses its incremental borrowing rate to calculate the present value of lease payments by asset class. On a quarterly basis, an updated incremental
borrowing rate is determined based on the average remaining lease term of each asset class and the Company’s pretax cost of debt for that same term. The updated
rates for each asset class are applied prospectively to new leases. The Company does not separate lease components (e.g., payments for rent, real estate taxes and
insurance costs) from non-lease components (e.g. common-area maintenance costs) in the event that the agreement contains both. Merck includes both the lease
and non-lease components for purposes of calculating the right-of-use asset and related lease liability (if the non-lease components are fixed). For vehicle leases and
employee housing, the Company applies a portfolio approach to account for the operating lease assets and liabilities.
Certain of the Company’s lease agreements contain variable lease payments that are adjusted periodically for inflation or for actual operating expense true-
ups compared with estimated amounts; however, these amounts are immaterial. Sublease income was immaterial and there were no sale and leaseback transactions
in 2024. Merck’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Operating lease cost was $348 million in 2024, $339 million in 2023 and $334 million in 2022. Cash paid for amounts included in the measurement of
operating lease liabilities was $357 million in 2024, $347 million in 2023 and $335 million in 2022. Operating lease assets obtained in exchange for lease obligations
were $47 million in 2024, $122 million in 2023 and $57 million in 2022.
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Supplemental balance sheet information related to operating leases is as follows:
December 31
2024
2023
Assets
Other Assets
$
1,370
$
1,437
Liabilities
Accrued and other current liabilities
282
285
Other Noncurrent Liabilities
877
928
$
1,159
$
1,213
Weighted-average remaining lease term (years)
6.0
7.0
Weighted-average discount rate
3.2 %
3.3 %
Includes prepaid leases that have no related lease liability.
Maturities of operating leases liabilities are as follows:
2025
$
329
2026
292
2027
235
2028
146
2029
116
Thereafter
403
Total lease payments
1,521
Less: Imputed interest
362
$
1,159
At December 31, 2024, the Company had entered into additional real estate operating leases that had not yet commenced; the obligations associated with
these leases total $183 million.
10. Contingencies and Environmental Liabilities
The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual
property, commercial litigation, and securities litigation, as well as certain additional matters including governmental and environmental matters. In the opinion of the
Company, it is unlikely that the resolution of these matters will be material to the Company’s financial condition, results of operations or cash flows.
Given the nature of the litigation discussed below and the complexities involved in these matters, the Company is unable to reasonably estimate a possible
loss or range of possible loss for such matters until the Company knows, among other factors, (i) what claims, if any, will survive dispositive motion practice, (ii) the
extent of the claims, including the size of any potential class, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will
affect the litigation, (iv) the settlement posture of the other parties to the litigation and (v) any other factors that may have a material effect on the litigation.
The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These
accruals are adjusted periodically as assessments change or additional information becomes available. Generally, for product liability claims, a portion of the overall
accrual is actuarially determined and considers such factors as past experience, number of claims reported and estimates of claims incurred but not yet reported.
Individually significant contingent losses are accrued when probable and reasonably estimable. Legal defense costs expected to be incurred in connection with a loss
contingency are accrued when probable and reasonably estimable.
The Company’s decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such
decisions are made. The Company has evaluated its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the
coverage that is available and, as such, has no insurance for most product liabilities.
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Product Liability Litigation
Dr Scholl’s Foot Powder
As previously disclosed, Merck is a defendant in product liability lawsuits in the U.S. arising from consumers’ alleged exposure to talc in Dr. Scholl’s foot
powder, which Merck acquired through its merger with Schering-Plough Corporation and sold as part of the divestiture of Merck’s consumer care business to Bayer in
2014. In these actions, plaintiffs allege that they were exposed to asbestos-contaminated talc and developed mesothelioma as a result. As of December 31, 2024,
approximately 415 cases were pending against Merck in various state courts.
Gardasil/Gardasil 9
As previously disclosed, Merck is a defendant in product liability lawsuits in the U.S. involving Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11,
16 and 18] Vaccine, Recombinant) and Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant). As of December 31, 2024, approximately 225 cases were
filed and pending against Merck in either federal or state court. In these actions, plaintiffs allege, among other things, that they suffered various personal injuries after
vaccination with Gardasil or Gardasil 9, with postural orthostatic tachycardia syndrome (POTS) as a predominate alleged injury. In August 2022, the U.S. Judicial
Panel on Multidistrict Litigation ordered that Gardasil/Gardasil 9 product liability cases pending in federal courts nationwide be transferred to Judge Robert J. Conrad in
the Western District of North Carolina for coordinated pre-trial proceedings. In February 2024, the multidistrict litigation was reassigned to Judge Kenneth D. Bell. As
previously disclosed, there are fewer than 15 product liability cases pending outside the U.S.
On January 28, 2025, a trial commenced in California state court. Plaintiff claims that she suffers from POTS and fibromyalgia as a result of her Gardasil
vaccinations. On February 14, 2025, after four weeks of trial and an opportunity to litigate plaintiff’s claims before a jury, plaintiff’s counsel approached Merck and
proposed that the jury be discharged and the case adjourned. Merck agreed, subject to an explicit stipulation that Merck would provide no financial or other
consideration in exchange for the agreement to adjourn. The case has thus been adjourned until a new trial date of September 15, 2025. Merck is vigorously
defending this case and believes that evidence presented in court will show that Gardasil had no role in causing any of plaintiff’s conditions.
Governmental Proceedings
Civil Investigative Demands
As previously disclosed, in June 2024, Merck received a Civil Investigative Demand (CID) from the U.S. Department of Justice, pursuant to a False Claims
Act investigation, seeking documents and materials related to Steglatro, Januvia and certain related drugs. The CID states that it is investigating Merck’s price
reporting under the Medicaid Drug Rebate Program as well as compliance with anti-kickback requirements in connection with patient assistance programs. The
Company is cooperating with the investigation.
As previously disclosed, in June 2020, Merck received a CID from the U.S. Department of Justice. The CID requests answers to interrogatories, as well as
various documents, regarding temperature excursions at a third-party storage facility containing certain Merck products. Merck is cooperating with the government’s
investigation and intends to produce information and/or documents as necessary in response to the CID.
Inflation Reduction Act
As previously disclosed, in June 2023, Merck filed a complaint in the U.S. District Court for the District of Columbia against the U.S. government regarding
the Inflation Reduction Act’s “Drug Price Negotiation Program” for Medicare (the Program). This litigation seeks relief from the Program by challenging its
constitutionality as violative of the First and Fifth Amendments to the U.S. Constitution.
Other Matters
As previously disclosed, in April 2019, Merck received a set of investigative interrogatories from the California Attorney General’s Office pursuant to its
investigation of conduct and agreements that allegedly affected or delayed competition to Lantus in the insulin market. The interrogatories seek information concerning
Merck’s development of an insulin glargine product, and its subsequent termination, as well as Merck’s patent litigation against Sanofi S.A. concerning Lantus and the
resolution of that litigation. Merck is cooperating with the California Attorney General’s investigation.
As previously disclosed, from time to time, the Company’s subsidiaries in China receive inquiries regarding their operations from various Chinese
governmental agencies. Some of these inquiries may be related to matters involving other multinational pharmaceutical companies, as well as Chinese entities doing
business with such companies. The Company’s policy is to cooperate with these authorities and to provide responses as appropriate.
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As previously disclosed, from time to time, the Company receives inquiries and is the subject of preliminary investigation activities from competition and
other governmental authorities in markets outside the U.S. These authorities may include regulators, administrative authorities, and law enforcement and other similar
officials, and these preliminary investigation activities may include site visits, formal or informal requests or demands for documents or materials, inquiries or interviews
and similar matters. Certain of these preliminary inquiries or activities may lead to the commencement of formal proceedings. Should those proceedings be
determined adversely to the Company, monetary fines and/or remedial undertakings may be required.
Securities Litigation
In February 2025, a putative class action was filed against Merck and certain of its officers in the U.S. District Court for the District of New Jersey
purportedly on behalf of all purchasers of Merck common stock between February 2022 and February 2025. Plaintiff alleges that Merck violated federal securities laws
by making materially false and misleading statements and material omissions regarding demand for Gardasil/Gardasil 9 in China. Plaintiff seeks unspecified monetary
damages, pre-judgment and post-judgment interest, and fees and costs.
Commercial and Other Litigation
Zetia Antitrust Litigation
As previously disclosed, Merck, MSD, Schering Corporation, Schering-Plough Corporation, and MSP Singapore Company LLC (collectively, the Merck
Defendants) were defendants in a number of lawsuits filed in 2018 on behalf of direct and indirect purchasers of Zetia (ezetimibe) alleging violations of federal and
state antitrust laws, as well as other state statutory and common law causes of action. The cases were consolidated in a federal multidistrict litigation (Zetia MDL)
before Judge Rebecca Beach Smith in the Eastern District of Virginia. In April 2023, the Merck Defendants reached settlements with the direct purchaser and retailer
plaintiffs and a settlement with the indirect purchaser class that the court approved in October 2023.
As previously disclosed, in 2020 and 2021, United Healthcare Services, Inc. (United Healthcare), Humana Inc. (Humana), Centene Corporation and others
(Centene), and Kaiser Foundation Health Plan, Inc. (Kaiser) (collectively, the Insurer Plaintiffs), each filed a lawsuit in a jurisdiction outside of the Eastern District of
Virginia against the Merck Defendants and others, making similar allegations as those made in the Zetia MDL, as well as additional allegations about Vytorin. These
cases were transferred to the Eastern District of Virginia to proceed with the Zetia MDL.
In December 2023, the U.S. Judicial Panel on Multidistrict Litigation remanded the four Insurer Plaintiff cases to the transferor courts in the Northern District
of California (Kaiser), the District of Minnesota (United Healthcare), and the District of New Jersey (Humana and Centene). The Merck Defendants filed motions to
dismiss in each of the Insurer Plaintiff cases. On December 30, 2024, the court granted in part and denied in part the motions to dismiss in the Humana and Centene
cases, and on January 29, 2025, Humana and Centene filed amended complaints.
RotaTeq Antitrust Litigation
As previously disclosed, in March 2023, the Mayor and City Council of Baltimore filed a putative class action against MSD in the Eastern District of
Pennsylvania on behalf of all third-party payors in 35 states that indirectly purchased, paid, and/or provided reimbursement for some or all of the purchase price of
RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), other than for resale, from March 3, 2019 to the present. Plaintiff alleges that MSD violated federal and state
antitrust laws and state consumer protection laws. Plaintiff alleges that MSD has implemented an anticompetitive vaccine bundling scheme whereby MSD leverages
its alleged monopoly power in certain pediatric vaccine markets to maintain its alleged monopoly power in the U.S. market for rotavirus vaccines in order to charge
supracompetitive prices for RotaTeq. Plaintiff seeks permanent injunctive relief and unspecified monetary damages on purchases of RotaTeq, trebled, and fees and
costs. In May 2023, MSD moved to dismiss the complaint. In November 2023, the court granted in part and denied in part the motion to dismiss, dismissing plaintiff’s
Idaho and Utah consumer law claims and allowing all other claims to proceed.
Bravecto Litigation
As previously disclosed, in January 2020, the Company was served with a complaint in the U.S. District Court for the District of New Jersey. Following
motion practice, the plaintiffs filed a third amended complaint in August 2024, seeking to certify a nationwide class action of purchasers or users of Bravecto
(fluralaner) products in the U.S. or its territories between May 1, 2014 and July 1, 2021. Plaintiffs contend Bravecto causes neurological events in dogs and cats and
alleges violations of the New Jersey Consumer Fraud Act, Breach of Warranty, Product Liability, and related theories. The Company moved to dismiss or, alternatively,
to strike the class allegations from the third amended complaint, and that motion is pending. A similar case was filed in Quebec, Canada in May 2019. The
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Superior Court certified a class of dog owners in Quebec who gave Bravecto Chew to their dogs between February 16, 2017 and November 2, 2018 whose dogs
experienced one of the conditions in the post-marketing adverse reactions section of the labeling approved on November 2, 2018. The Company and plaintiffs each
appealed the class certification decision. The Court of Appeal of Quebec amended the class period to start July 2, 2014, allowed the second plaintiff to serve as a
class representative, and modified the list of conditions in the class definition. The Company sought leave to appeal to the Supreme Court of Canada, which was
denied. The case is proceeding in the Superior Court.
340B Program Litigation
As previously disclosed, Merck filed a complaint in the U.S. District Court for the District of Columbia to challenge the letter Merck received from the U.S.
Health Resources and Services Administration (HRSA) in May 2022 regarding Merck’s 340B Program integrity initiative. On September 17, 2024, the court entered a
consent judgment granting Merck the relief it had sought in the litigation, including declarations that HRSA’s May 2022 letter was unlawful and that the version of
Merck’s 340B Program integrity initiative at issue in the litigation did not violate Section 340B on its face.
Qui Tam Litigation
As previously disclosed, in June 2012, the U.S. District Court for the Eastern District of Pennsylvania unsealed a complaint that had been filed against the
Company under the federal False Claims Act by two former employees alleging, among other things, that the Company defrauded the U.S. government by falsifying
data in connection with a clinical study conducted on the mumps component of the Company’s M-M-R II vaccine. The complaint alleges the fraud took place between
1999 and 2001. The U.S. government had the right to participate in and take over the prosecution of this lawsuit but notified the court that it declined to exercise that
right. The two former employees pursued the lawsuit without the involvement of the U.S. government. In July 2023, the court denied relators’ motion for summary
judgment, granted two of the Company’s motions for summary judgment, and denied the Company’s remaining motions for summary judgment as moot. The court
entered judgment in favor of the Company and dismissed relators’ amended complaint in full with prejudice. Relators appealed that decision, and in August 2024, the
Third Circuit affirmed the district court’s decision.
In addition, as previously disclosed, two putative class action lawsuits on behalf of direct purchasers of the M‑M‑R II vaccine, which charge that the
Company misrepresented the efficacy of the M-M-R II vaccine in violation of federal antitrust laws and various state consumer protection laws, are pending in the
Eastern District of Pennsylvania. The court granted the Company’s motion for summary judgment as to plaintiffs’ state law claims and denied the motion as to plaintiffs’
antitrust claim. The Company appealed, and on October 7, 2024, the Third Circuit reversed-in-part the district court’s order and remanded the case with instructions to
enter summary judgment for the Company. On November 20, 2024, plaintiffs-appellees filed a petition for rehearing and rehearing en banc, and on February 10, 2025,
the court denied the petition.
Merck KGaA Litigation
As previously disclosed, in January 2016, to protect its long-established brand rights in the U.S., the Company filed a lawsuit against Merck KGaA,
Darmstadt, Germany (KGaA), historically operating as the EMD Group in the U.S., alleging it improperly uses the name “Merck” in the U.S. KGaA has filed suit against
the Company in a number of jurisdictions outside of the U.S. alleging, among other things, unfair competition, trademark infringement and/or corporate name
infringement. In certain of those jurisdictions, KGaA also alleges breach of the parties’ coexistence agreement. The litigation is ongoing in the U.S. with no trial date
set, and also ongoing in jurisdictions outside of the U.S.
Patent Litigation
From time to time, generic manufacturers of pharmaceutical products file abbreviated New Drug Applications (ANDAs) with the U.S. Food and Drug
Administration (FDA) seeking to market generic forms of the Company’s products prior to the expiration of relevant patents owned by the Company. To protect its
patent rights, the Company may file patent infringement lawsuits against such generic companies. Similar lawsuits defending the Company’s patent rights may exist in
other countries. The Company intends to vigorously defend its patents, which it believes are valid, against infringement by companies attempting to market products
prior to the expiration of such patents. As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened
periods of exclusivity for these products and, with respect to products acquired through acquisitions accounted for as business combinations, potentially significant
intangible asset impairment charges.
Bridion — As previously disclosed, between January and November 2020, the Company received multiple Paragraph IV Certification Letters under the
Hatch-Waxman Act notifying the Company that generic drug companies had filed applications to the FDA seeking pre-patent expiry approval to sell generic versions of
Bridion (sugammadex)
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Injection. In March, April and December 2020, the Company filed patent infringement lawsuits in the U.S. District Courts for the District of New Jersey and the Northern
District of West Virginia against those generic companies. All actions in the District of New Jersey were consolidated. The West Virginia case was jointly dismissed
with prejudice in August 2022 in favor of proceeding in New Jersey. The remaining defendants in the New Jersey action have stipulated to infringement of the asserted
claims and withdrew all remaining claims and defenses other than a defense seeking to shorten the patent term extension (PTE) of the sugammadex patent to
December 2022. The U.S. District Court for the District of New Jersey held a one-day trial in December 2022 on this remaining PTE calculation defense. The court
ordered a post-trial briefing on this defense and held closing arguments in February 2023.
As previously disclosed, in June 2023, the U.S. District Court for the District of New Jersey ruled in Merck’s favor. The court held that Merck’s calculation of
PTE for the sugammadex patent covering the compound is not invalid and that the U.S. Patent & Trademark Office correctly granted a full five-year extension. This
ruling affirms and validates Merck’s U.S. patent protection for Bridion through at least January 2026. Also in June 2023, the U.S. District Court for the District of New
Jersey issued a final judgment prohibiting the FDA from approving any of the pending or tentatively approved generic applications until January 27, 2026, except for
any subsequent agreements between defendants and Merck or further order by the court.
In July 2023, defendants filed a notice of appeal with the U.S. Court of Appeals for the Federal Circuit. The appeal is currently pending. Oral argument took
place on February 4, 2025.
While the New Jersey action was pending, the Company settled with five generic companies providing that these generic companies can bring their generic
versions of Bridion to the market in January 2026 (which may be delayed by any applicable pediatric exclusivity) or earlier under certain circumstances. The Company
agreed to stay the lawsuit filed against two generic companies, which in exchange agreed to be bound by a judgment on the merits of the consolidated action in the
District of New Jersey. One of the generic companies in the consolidated action requested dismissal of the action against it and the Company did not oppose this
request, which was subsequently granted by the court. The Company does not expect this company to bring its generic version of Bridion to the market before
January 2026 or later, depending on any applicable pediatric exclusivity.
In February 2024, the Company received another Paragraph IV Certification Letter under the Hatch-Waxman Act notifying the Company that Hikma
Pharmaceuticals USA Inc. (Hikma) had filed an application to the FDA seeking pre-patent expiry approval to sell a generic version of Bridion Injection. In March 2024,
the Company filed a patent infringement lawsuit in the U.S. District Court for the District of New Jersey against Hikma, postponing FDA approval of the Hikma generic
drug for 30 months or until expiration of the sugammadex patent (January 27, 2026) and any potentially applicable pediatric exclusivity or an adverse court decision, if
any, whichever may occur earlier. Expiration of the patent, and any potentially applicable pediatric exclusivity, will occur earlier than expiry of the 30-month stay. On
April 16, 2024, the district court stayed the case during the pendency of the Federal Circuit appeal noted above.
Januvia, Janumet, Janumet XR — As previously disclosed, the FDA granted pediatric exclusivity with respect to Januvia (sitagliptin), Janumet
(sitagliptin/metformin HCl), and Janumet XR (sitagliptin and metformin HCl extended-release), which provides a further six months of exclusivity in the U.S. beyond the
expiration of all patents listed in the FDA’s Orange Book. Adding this exclusivity to the term of the key patent protection extended exclusivity on these products to
January 2023. However, Januvia, Janumet, and Janumet XR contain sitagliptin phosphate monohydrate and the Company has another patent covering certain
phosphate salt and polymorphic forms of sitagliptin that expires in May 2027, including pediatric exclusivity (salt/polymorph patent).
As previously disclosed, beginning in 2019, a number of generic drug companies filed ANDAs seeking approval of generic forms of Januvia and Janumet
along with paragraph IV certifications challenging the validity of the salt/polymorph patent. The Company responded by filing infringement suits which have all been
settled. The Company has settled with a total 26 generic companies providing that these generic companies can bring their generic versions of Januvia and Janumet
to the market in the U.S. in May 2026 or earlier under certain circumstances, and their generic versions of Janumet XR to the market in July 2026 or earlier under
certain circumstances.
In March 2021, the Company filed a patent infringement lawsuit in the U.S. District Court for the District of Delaware against Zydus Worldwide DMCC,
Zydus Pharmaceuticals (USA) Inc., and Cadila Healthcare Ltd. (collectively, Zydus). In that lawsuit, the Company alleged infringement of the salt/polymorph patent
based on the filing of Zydus’s NDA seeking approval of a form of sitagliptin that is a different from than that used in Januvia. In December 2022, the parties reached
settlement that included dismissal of the case without prejudice enabling Zydus to seek final approval of a non-automatically substitutable product.
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In January 2023, the Company received a Paragraph IV Certification Letter under the Hatch-Waxman Act notifying the Company that Zydus filed an ANDA
seeking approval of sitagliptin/metformin HCl tablets and certifying that no valid or enforceable claim of any of the patents listed in FDA’s Orange Book for Janumet will
be infringed by the proposed Zydus product. In March 2023, the parties reached settlement enabling Zydus to seek final approval of a non-automatically substitutable
product containing a different form of sitagliptin than that used in Janumet. In November 2023, the Company received a Paragraph IV Certification Letter under the
Hatch-Waxman Act notifying the Company that Zydus filed an ANDA seeking approval of sitagliptin/metformin HCl Extended Release tablets. In January 2024, the
parties reached settlement enabling Zydus to seek final approval of a non-automatically substitutable version containing a different form of sitagliptin than that used in
Janumet XR.
As a result of these settlement agreements related to the later expiring salt/polymorph patent directed to the specific sitagliptin salt form of the products, the
Company expects that Januvia and Janumet will not lose market exclusivity in the U.S. until May 2026 and Janumet XR will not lose market exclusivity in the U.S. until
July 2026, although Zydus has received FDA approval for a non-automatically substitutable form of sitagliptin that differs from the form in the Company’s sitagliptin
products.
In March 2024, the Company received another Paragraph IV Certification Letter under the Hatch-Waxman Act from Azurity Pharmaceuticals, Inc. (Azurity)
asserting that a different sitagliptin product subject to its ANDA does not infringe the salt/polymorph patent. In May 2024, Merck filed a civil action in the U.S. District
Court of Delaware alleging infringement. The case was dismissed without prejudice in July 2024. Following the dismissal, the Company granted Azurity a covenant not
to assert the salt/polymorph patent against the Azurity product that is the subject of such ANDA.
Supplementary Protection Certificates (SPCs) for Janumet expired in April 2023 for the majority of European countries. Prior to expiration, generic
companies sought revocation of the Janumet SPCs in a number of European countries. In February 2022, a Finnish court referred certain questions to the Court of
Justice of the European Union that could impact the validity of the Janumet SPCs in Europe. A decision was rendered on December 19, 2024. The decision provides
guidance on points of law and does not directly apply these to the Janumet SPCs. Thus, additional proceedings in certain countries where generic companies were
prevented from launching products during the SPC period may be necessary to determine whether the SPCs are valid and if not, whether damages are appropriate.
Those countries include Belgium, Czech Republic, Ireland, Finland, France, Slovakia and Switzerland. If the Janumet SPCs are ultimately upheld, the Company has
reserved its rights related to the pursuit of damages for those countries where a generic launched prior to expiry of the Janumet SPC.
In October 2023, the Company filed a patent infringement lawsuit against Sawai Pharmaceuticals Co., Ltd. and Medisa Shinyaku Co., Ltd (collectively,
Defendants) in the Tokyo District Court seeking an injunction to stop the manufacture, sale and offer for sale of the Defendants’ sitagliptin dihydrogen phosphate
product, while the Company’s patents and patent term extensions are in force. The lawsuit is in response to the Defendants’ application for marketing authorization to
sell a generic sitagliptin dihydrogen phosphate product, in the anhydrate form, which was approved in August 2023. Merck asserts that the Defendants’ activity
infringes a patent term extension associated with Merck’s patent directed to the sitagliptin compound patent.
Keytruda — As previously disclosed, in November 2022, the Company filed a complaint against The Johns Hopkins University (JHU) in the U.S. District
Court of Maryland. This action concerns patents emerging from a joint research collaboration between Merck and JHU regarding the use of pembrolizumab, which
Merck sells under the trade name Keytruda. Merck and JHU partnered to design and conduct a clinical study administering Keytruda to cancer patients having tumors
that had the genetic biomarker known as microsatellite instability-high (MSI-H). After the conclusion of the study, JHU secured U.S. patents citing the joint research
study. Merck alleges that JHU has breached the collaboration agreement by filing and obtaining these patents without informing or involving Merck and then licensing
the patents to others. Merck therefore brought this action for breach of contract, declaratory judgment of noninfringement, and promissory estoppel. JHU answered the
complaint in April and May 2023, denying Merck’s claims, and counterclaiming for willful infringement of nine issued U.S. patents, including a demand for damages.
Between November 30, 2023 and March 13, 2024, the Company filed inter partes review petitions with the United States Patent & Trademark Office Patent Trial and
Appeal Board (PTAB), challenging the validity of all nine patents asserted in the case. Between June 2024 and October 2024, the PTAB instituted a review of all nine
asserted patents. In July 2024, the district court granted Merck’s motion to stay the case in its entirety pending the outcome of the PTAB proceeding instituted in June
2024.
Lynparza — As previously disclosed, in December 2022, AstraZeneca Pharmaceuticals LP received a Paragraph IV Certification Letter under the Hatch-
Waxman Act notifying AstraZeneca that Natco Pharma Limited (Natco) has filed an application to the FDA seeking pre-patent expiry approval to sell generic versions
of Lynparza (olaparib) tablet. In February 2023, AstraZeneca and the Company filed a patent infringement lawsuit in the U.S.
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District Court for the District of New Jersey against Natco. This lawsuit, which asserts one or more patents covering olaparib, automatically stays FDA approval of the
generic application until June 2025 or until an adverse court decision, if any, whichever may occur earlier. In May, June, July, and November 2024, AstraZeneca and
the Company filed additional patent infringement lawsuits in the U.S. District Court for the District of New Jersey against Natco asserting additional patents covering
olaparib.
In December 2023, AstraZeneca Pharmaceuticals LP received a second Paragraph IV Certification Letter under the Hatch-Waxman Act notifying
AstraZeneca that Sandoz Inc. has filed an application to the FDA seeking pre-patent expiry approval to sell generic versions of Lynparza (olaparib) tablet. In February
2024, AstraZeneca and the Company filed a patent infringement lawsuit in the U.S. District Court for the District of New Jersey against Sandoz. This lawsuit, which
asserts one or more patents covering olaparib, automatically stays FDA approval of the generic application until June 2026 or until an adverse court decision, if any,
whichever may occur earlier. In May, July, and November 2024, AstraZeneca and the Company filed additional patent infringement lawsuits in the U.S. District Court
for the District of New Jersey against Sandoz asserting additional patents covering olaparib.
In May 2024, AstraZeneca Pharmaceuticals LP received a third Paragraph IV Certification Letter under the Hatch-Waxman Act notifying AstraZeneca that
Cipla USA, Inc. and Cipla Limited (collectively, Cipla) filed an application to the FDA seeking pre-patent expiry approval to sell generic versions of Lynparza (olaparib)
tablet. In June 2024, AstraZeneca and the Company filed a patent infringement lawsuit in the U.S. District Court for the District of New Jersey against Cipla. This
lawsuit, which asserts one or more patents covering olaparib, automatically stays FDA approval of the generic application until November 2026 or until an adverse
court decision, if any, whichever may occur earlier. In June, July, and November 2024, AstraZeneca and the Company filed additional patent infringement lawsuits in
the U.S. District Court for the District of New Jersey against Cipla asserting additional patents covering olaparib.
In November 2024, AstraZeneca Pharmaceuticals LP received another Paragraph IV Certification Letter under the Hatch-Waxman Act notifying
AstraZeneca that Zydus Pharmaceuticals (USA) Inc. filed an application to the FDA seeking pre-patent expiry approval to sell generic versions of Lynparza (olaparib)
tablet. In November 2024, AstraZeneca and the Company filed a patent infringement lawsuit in the U.S. District Court for the District of New Jersey against Zydus.
This lawsuit, which asserts one or more patents covering olaparib, automatically stays FDA approval of the generic application until May 2027 or until an adverse court
decision, if any, whichever may occur earlier. In November 2024, AstraZeneca and the Company filed an additional patent infringement lawsuit in the U.S. District
Court for the District of New Jersey against Zydus asserting an additional patent covering olaparib.
Other Litigation
There are various other pending legal proceedings involving the Company, principally product liability and intellectual property lawsuits. While it is not
feasible to predict the outcome of such proceedings, in the opinion of the Company, either the likelihood of loss is remote or any reasonably possible loss associated
with the resolution of such proceedings is not expected to be material to the Company’s financial condition, results of operations or cash flows either individually or in
the aggregate.
Legal Defense Reserves
Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the
significant factors considered in the review of these legal defense reserves are as follows: the actual costs incurred by the Company; the development of the
Company’s legal defense strategy and structure in light of the scope of its litigation; the number of cases being brought against the Company; the costs and outcomes
of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated
litigation. The amount of legal defense reserves as of December 31, 2024 and 2023 of approximately $225 million and $210 million, respectively, represents the
Company’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation; however, events such as additional trials
and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by the Company. The Company will
continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if,
based upon the factors set forth, it believes it would be appropriate to do so.
Environmental Matters
The Company and its subsidiaries are parties to a number of proceedings brought under the Comprehensive Environmental Response, Compensation and
Liability Act, commonly known as Superfund, and other federal and state equivalents. These proceedings seek to require the operators of hazardous waste disposal
facilities, transporters of waste to the sites and generators of hazardous waste disposed of at the sites to clean up the sites or
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to reimburse the government for cleanup costs. The Company has been made a party to these proceedings as an alleged generator of waste disposed of at the sites.
In each case, the government alleges that the defendants are jointly and severally liable for the cleanup costs. Although joint and several liability is alleged, these
proceedings are frequently resolved so that the allocation of cleanup costs among the parties more nearly reflects the relative contributions of the parties to the site
situation. The Company’s potential liability varies greatly from site to site. For some sites the potential liability is de minimis and for others the final costs of cleanup
have not yet been determined. While it is not feasible to predict the outcome of many of these proceedings brought by federal or state agencies or private litigants, in
the opinion of the Company, such proceedings should not ultimately result in any liability which would have a material adverse effect on the financial condition, results
of operations or liquidity of the Company. The Company has taken an active role in identifying and accruing for these costs and such amounts do not include any
reduction for anticipated recoveries of cleanup costs from former site owners or operators or other recalcitrant potentially responsible parties.
In management’s opinion, the liabilities for all environmental matters that are probable and reasonably estimable have been accrued and totaled $41 million
and $42 million at December 31, 2024 and 2023, respectively. These liabilities are undiscounted, do not consider potential recoveries from other parties and will be
paid out over the periods of remediation for the applicable sites, which are expected to occur primarily over the next 15 years. Although it is not possible to predict with
certainty the outcome of these matters, or the ultimate costs of remediation, management does not believe that any reasonably possible expenditures that may be
incurred in excess of the liabilities accrued should exceed approximately $46 million in the aggregate. Management also does not believe that these expenditures
should result in a material adverse effect on the Company’s financial condition, results of operations or liquidity for any year.
11. Equity
The Merck certificate of incorporation authorizes 6,500,000,000 shares of common stock and 20,000,000 shares of preferred stock.
Capital Stock
A summary of common stock and treasury stock transactions (shares in millions) is as follows:
2024
2023
2022
Common
Stock
Treasury
Stock
Common
Stock
Treasury
Stock
Common
Stock
Treasury
Stock
Balance January 1
3,577
1,045
3,577
1,039
3,577
1,049
Purchases of treasury stock
—
11
—
13
—
—
Issuances
—
(7)
—
(7)
—
(10)
Balance December 31
3,577
1,049
3,577
1,045
3,577
1,039
Issuances primarily reflect activity under share-based compensation plans.
12. Share-Based Compensation Plans
The Company has share-based compensation plans under which the Company grants restricted stock units (RSUs) and performance share units (PSUs)
to certain management level employees. In addition, employees and non-employee directors may be granted options to purchase shares of Company common stock
at the fair market value at the time of grant. These plans were approved by the Company’s shareholders.
At December 31, 2024, 75 million shares collectively were authorized for future grants under the Company’s share-based compensation plans. These
awards are settled with treasury shares.
Employee stock options are granted to purchase shares of Company stock at the fair market value at the time of grant. These awards generally vest one-
third each year over a three-year period, with a contractual term of 7-10 years. RSUs are stock awards that are granted to employees and entitle the holder to shares
of common stock as the awards vest. The fair value of the stock option and RSU awards is determined and fixed on the grant date based on the Company’s stock
price. PSUs are stock awards where the ultimate number of shares issued will be contingent on the Company’s performance against a pre-set objective or set of
objectives. The fair value of each PSU is determined on the date of grant based on the Company’s stock price. For RSUs and PSUs, dividends declared during the
vesting period are payable to the employees only upon vesting. Over the PSU performance period, the number of shares of stock that are expected to be issued will
be adjusted based on the probability of achievement of a performance target and final compensation expense will be recognized based on the ultimate number of
shares issued. RSU and PSU distributions will be in shares of Company stock after the end of the vesting or performance
(1)
(1)
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period, subject to the terms applicable to such awards. PSU awards generally vest after three years. RSU awards generally vest one-third each year over a three-year
period.
Total pretax share-based compensation cost recorded in 2024, 2023 and 2022 was $761 million, $645 million and $541 million, respectively. Income tax
benefits for share-based compensation expense recognized in 2024, 2023 and 2022 were $117 million, $96 million and $78 million, respectively.
The Company uses the Black-Scholes option pricing model for determining the fair value of option grants. In applying this model, the Company uses both
historical data and current market data to estimate the fair value of its options. The Black-Scholes model requires several assumptions including expected dividend
yield, risk-free interest rate, volatility, and term of the options. The expected dividend yield is based on historical patterns of dividend payments. The risk-free interest
rate is based on the rate at grant date of zero-coupon U.S. Treasury Notes with a term equal to the expected term of the option. Expected volatility is estimated using a
blend of historical and implied volatility. The historical component is based on historical monthly price changes. The implied volatility is obtained from market data on
the Company’s traded options. The expected life represents the amount of time that options granted are expected to be outstanding, based on historical and
forecasted exercise behavior.
The weighted average exercise price of options granted in 2024, 2023 and 2022 was $129.22, $117.89 and $87.10 per option, respectively. The weighted
average fair value of options granted in 2024, 2023 and 2022 was $25.60, $21.69 and $15.45 per option, respectively, and were determined using the following
assumptions:
Years Ended December 31
2024
2023
2022
Expected dividend yield
3.0 %
3.1 %
3.1 %
Risk-free interest rate
4.7 %
3.4 %
3.0 %
Expected volatility
20.5 %
22.4 %
22.5 %
Expected life (years)
5.8
5.8
5.9
Summarized information relative to stock option plan activity (options in thousands) is as follows:
Number
of Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
Outstanding January 1, 2024
13,527
$
77.54
Granted
1,753
129.22
Exercised
(2,581)
68.90
Forfeited
(199)
111.48
Outstanding December 31, 2024
12,500
$
86.04
5.9
$
249
Vested and expected to vest December 31, 2024
12,201
$
85.10
5.9
$
249
Exercisable December 31, 2024
9,084
$
74.00
4.9
$
241
Additional information pertaining to stock option plans is provided in the table below:
Years Ended December 31
2024
2023
2022
Total intrinsic value of stock options exercised
$
144
$
95
$
225
Fair value of stock options vested
32
30
30
Cash received from the exercise of stock options
177
125
384
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A summary of nonvested RSU and PSU activity (shares in thousands) is as follows:
RSUs
PSUs
Number
of Shares
Weighted
Average
Grant Date
Fair Value
Number
of Shares
Weighted
Average
Grant Date
Fair Value
Nonvested January 1, 2024
12,542
$
100.10
1,966
$
90.80
Granted
6,356
128.79
968
121.91
Vested
(6,091)
92.97
(1,109)
73.50
Forfeited
(575)
113.18
(59)
121.12
Nonvested December 31, 2024
12,232
$
117.94
1,766
$
117.57
Expected to vest December 31, 2024
10,976
$
117.25
1,669
$
116.26
At December 31, 2024, there was $1.1 billion of total pretax unrecognized compensation expense related to nonvested stock options, RSU and PSU
awards which will be recognized over a weighted average period of 1.9 years. For segment reporting, share-based compensation costs are unallocated expenses.
13. Pension and Other Postretirement Benefit Plans
The Company has defined benefit pension plans covering eligible employees in the U.S. and in certain of its international subsidiaries. In addition, the
Company provides medical benefits, principally to its eligible U.S. retirees and their dependents, through its other postretirement benefit plans. The Company uses
December 31 as the year-end measurement date for all of its pension plans and other postretirement benefit plans.
Net Periodic Benefit Cost
The net periodic benefit cost (credit) for pension and other postretirement benefit plans consisted of the following components:
Pension Benefits
U.S.
International
Other Postretirement Benefits
Years Ended December 31
2024
2023
2022
2024
2023
2022
2024
2023
2022
Service cost
$
373
$
326
$
372
$
243
$
196
$
283
$
30
$
32
$
48
Interest cost
537
526
457
294
299
145
56
63
46
Expected return on plan assets
(826)
(735)
(753)
(554)
(517)
(383)
(80)
(64)
(86)
Amortization of unrecognized prior service
(credit) cost
—
(1)
(32)
(13)
2
(14)
(43)
(49)
(57)
Net loss (gain) amortization
43
—
128
5
(3)
96
(51)
(42)
(43)
Termination benefits
5
3
2
1
—
1
4
—
—
Curtailments
—
8
12
—
(1)
—
—
(1)
(1)
Settlements
—
28
239
(1)
(5)
1
—
—
—
Net periodic benefit cost (credit)
$
132
$
155
$
425
$
(25)
$
(29)
$
129
$
(84)
$
(61)
$
(93)
In connection with restructuring actions (see Note 5), termination charges were recorded in 2024, 2023 and 2022 on pension and other postretirement
benefit plans related to expanded eligibility for certain employees exiting Merck. Also, in connection with these restructuring activities, curtailments and settlements
were recorded on certain pension plans. Lump sum payments to U.S. pension plan participants also contributed to the settlements recorded during 2023 and 2022.
The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 14), with
the exception of certain amounts for termination benefits, curtailments and settlements, which are recorded in Restructuring costs if the event giving rise to the
termination benefits, curtailment or settlement is related to restructuring actions.
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Obligations and Funded Status
Summarized information about the changes in plan assets and benefit obligations, the funded status and the amounts recorded at December 31 is as
follows:
Pension Benefits
Other
Postretirement
Benefits
U.S.
International
2024
2023
2024
2023
2024
2023
Fair value of plan assets January 1
$
9,804
$
9,094
$
9,562
$
8,473
$
1,045
$
947
Actual return on plan assets
266
1,077
637
832
35
115
Company contributions
262
307
198
249
46
74
Effects of exchange rate changes
—
—
(522)
283
—
—
Benefits paid
(615)
(497)
(250)
(256)
(89)
(95)
Settlements
—
(177)
(14)
(53)
—
(2)
Other
—
—
36
34
3
6
Fair value of plan assets December 31
$
9,717
$
9,804
$
9,647
$
9,562
$
1,040
$
1,045
Benefit obligation January 1
$
10,446
$
9,854
$
9,042
$
7,755
$
1,104
$
1,157
Service cost
373
326
243
196
30
32
Interest cost
537
526
294
299
56
63
Actuarial (gains) losses
(595)
403
(549)
766
32
(58)
Benefits paid
(615)
(497)
(250)
(256)
(89)
(95)
Effects of exchange rate changes
—
—
(473)
288
(4)
1
Plan amendments
—
—
(56)
14
—
—
Curtailments
—
8
—
(1)
—
—
Termination benefits
5
3
1
—
4
—
Settlements
—
(177)
(14)
(53)
—
(2)
Other
—
—
36
34
3
6
Benefit obligation December 31
$
10,151
$
10,446
$
8,274
$
9,042
$
1,136
$
1,104
Funded status December 31
$
(434)
$
(642)
$
1,373
$
520
$
(96)
$
(59)
Recognized as:
Other Assets
$
26
$
—
$
1,785
$
1,019
$
51
$
107
Accrued and other current liabilities
(55)
(49)
(18)
(19)
(7)
(8)
Other Noncurrent Liabilities
(405)
(593)
(394)
(480)
(140)
(158)
Actuarial (gains) losses primarily reflect changes in discount rates.
At December 31, 2024 and 2023, the accumulated benefit obligation was $18.1 billion and $19.1 billion, respectively, for all pension plans, of which $10.0
billion and $10.3 billion, respectively, related to U.S. pension plans.
(1)
(1)
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Table of Contents
Information related to the funded status of selected pension plans at December 31 is as follows:
U.S.
International
2024
2023
2024
2023
Pension plans with a projected benefit obligation in excess of plan assets
Projected benefit obligation
$
9,517
$
10,446
$
1,847
$
2,961
Fair value of plan assets
9,057
9,804
1,435
2,462
Pension plans with an accumulated benefit obligation in excess of plan assets
Accumulated benefit obligation
$
442
$
9,700
$
1,768
$
1,791
Fair value of plan assets
—
9,186
1,385
1,336
Plan Assets
Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when
measuring fair value. There are three levels of inputs used to measure fair value with Level 1 having the highest priority and Level 3 having the lowest:
Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity. The Level 3 assets are those whose values are determined using pricing
models, discounted cash flow methodologies, or similar techniques with significant unobservable inputs, as well as instruments for which the determination of fair
value requires significant judgment or estimation. At December 31, 2024 and 2023, $700 million and $788 million, respectively, or approximately 4% of the
Company’s pension investments were categorized as Level 3 assets.
If the inputs used to measure the financial assets fall within more than one level described above, the categorization is based on the lowest level input that
is significant to the fair value measurement of the instrument.
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The fair values of the Company’s pension plan assets at December 31 by asset category are as follows:
Fair Value Measurements Using
Fair Value Measurements Using
Level 1
Level 2
Level 3
NAV
Total
Level 1
Level 2
Level 3
NAV
Total
2024
2023
U.S. Pension Plans
Cash and cash equivalents
$
43
$
—
$
—
$
121
$
164
$
34
$
—
$
—
$
124
$
158
Investment funds
Developed markets equities
170
—
—
2,385
2,555
224
—
—
2,573
2,797
Emerging markets equities
—
—
—
1,265
1,265
—
—
—
740
740
Real estate
—
—
—
174
174
—
—
—
113
113
Equity securities
Developed markets
2,171
—
—
—
2,171
2,071
—
—
—
2,071
Fixed income securities
Government and agency obligations
—
2,101
—
—
2,101
—
2,307
—
—
2,307
Corporate obligations
—
1,293
—
—
1,293
—
1,485
—
—
1,485
Mortgage and asset-backed securities
—
21
—
—
21
—
21
—
—
21
Other investments (liabilities)
Derivatives
(29)
—
—
—
(29)
109
—
—
—
109
Other
—
—
2
—
2
—
—
3
—
3
Plan assets at fair value
$
2,355
$
3,415
$
2
$
3,945
$
9,717
$
2,438
$
3,813
$
3
$
3,550
$
9,804
International Pension Plans
Cash and cash equivalents
$
112
$
—
$
—
$
11
$
123
$
98
$
—
$
—
$
20
$
118
Investment funds
Developed markets equities
599
3,537
—
96
4,232
507
3,257
—
106
3,870
Government and agency obligations
262
2,974
—
149
3,385
234
3,123
—
166
3,523
Corporate obligations
23
8
—
149
180
23
8
—
166
197
Emerging markets equities
54
—
—
91
145
44
—
—
66
110
Other fixed income obligations
8
7
—
4
19
9
8
—
3
20
Real estate
—
—
—
12
12
—
—
—
10
10
Equity securities
Developed markets
287
—
—
—
287
278
—
—
—
278
Fixed income securities
Government and agency obligations
—
368
—
—
368
—
423
—
—
423
Corporate obligations
—
141
—
—
141
—
160
—
—
160
Mortgage and asset-backed securities
—
54
—
—
54
—
61
—
—
61
Other investments
Insurance contracts
—
1
698
2
701
—
1
785
2
788
Other
—
—
—
—
—
4
—
—
—
4
Plan assets at fair value
$
1,345
$
7,090
$
698
$
514
$
9,647
$
1,197
$
7,041
$
785
$
539
$
9,562
Certain investments that were measured at net asset value (NAV) per share or its equivalent have not been classified in the fair value hierarchy. The NAV amounts presented in this table are intended to permit
reconciliation of the fair value hierarchy to the fair value of plan assets at December 31, 2024 and 2023.
The plans’ Level 3 investments in insurance contracts are generally valued using a crediting rate that approximates market returns and invest in underlying securities whose market values are unobservable and
determined using pricing models, discounted cash flow methodologies, or similar techniques.
(1)
(1)
(2)
(1)
(2)
118
Table of Contents
The table below provides a summary of the changes in fair value, including transfers in and/or out, of all financial assets measured at fair value using
significant unobservable inputs (Level 3) for the Company’s pension plan assets:
2024
2023
Insurance
Contracts
Other
Total
Insurance
Contracts
Other
Total
U.S. Pension Plans
Balance January 1
$
—
$
3
$
3
$
—
$
4
$
4
Actual return on plan assets:
Relating to assets still held at December 31
—
(2)
(2)
—
(2)
(2)
Relating to assets sold during the year
—
2
2
—
2
2
Purchases and sales, net
—
(1)
(1)
—
(1)
(1)
Balance December 31
$
—
$
2
$
2
$
—
$
3
$
3
International Pension Plans
Balance January 1
$
785
$
—
$
785
$
761
$
—
$
761
Actual return on plan assets:
Relating to assets still held at December 31
(26)
—
(26)
77
—
77
Purchases and sales, net
(61)
—
(61)
(53)
—
(53)
Balance December 31
$
698
$
—
$
698
$
785
$
—
$
785
The fair values of the Company’s other postretirement benefit plan assets at December 31 by asset category are as follows:
Fair Value Measurements Using
Fair Value Measurements Using
Level 1
Level 2
Level 3
NAV
Total
Level 1
Level 2
Level 3
NAV
Total
2024
2023
Cash and cash equivalents
$
—
$
—
$
—
$
5
$
5
$
—
$
—
$
—
$
13
$
13
Investment funds
Developed markets equities
3
—
—
46
49
24
—
—
277
301
Emerging markets equities
—
—
—
24
24
—
—
—
80
80
Real estate
—
—
—
3
3
—
—
—
12
12
Equity securities
Developed markets
41
—
—
41
223
—
—
—
223
Fixed income securities
Corporate obligations
—
598
—
598
—
157
—
—
157
Government and agency obligations
—
266
—
266
—
245
—
—
245
Mortgage and asset-backed securities
—
54
—
—
54
—
2
—
—
2
Other Investments (liabilities)
Derivatives
—
—
—
—
—
12
—
—
—
12
Plan assets at fair value
$
44
$
918
$
—
$
78
$
1,040
$
259
$
404
$
—
$
382
$
1,045
Certain investments that were measured at net asset value (NAV) per share or its equivalent have not been classified in the fair value hierarchy. The NAV amounts presented in this table are intended to permit
reconciliation of the fair value hierarchy to the fair value of plan assets at December 31, 2024 and 2023.
The Company has established investment guidelines for its U.S. pension and other postretirement plans to create an asset allocation that is expected to
deliver a rate of return sufficient to meet the long-term obligation of each plan, given an acceptable level of risk. The target investment portfolio of the Company’s
U.S. pension and other postretirement benefit plans is allocated 25% to 40% in U.S. equities, 15% to 30% in international equities, 40% to 50% in fixed-income
investments, and up to 8% in cash and other investments. The portfolio’s equity weighting is consistent with the long-term nature of the plans’ benefit obligations. The
expected annual standard deviation of returns of the target portfolio, which approximates 12%, reflects both the equity allocation and the diversification benefits among
the asset classes in which the portfolio invests. For international pension plans, the targeted investment portfolio varies based on the duration of pension liabilities and
local government rules and regulations.
(1)
(1)
(1)
119
Table of Contents
Although a significant percentage of plan assets are invested in U.S. equities, concentration risk is mitigated through the use of strategies that are diversified within
management guidelines.
Expected Contributions
Contributions during 2025 are expected to be approximately $270 million for U.S. pension plans, approximately $180 million for international pension plans
and approximately $70 million for other postretirement benefit plans.
Expected Benefit Payments
Expected benefit payments are as follows:
U.S. Pension Benefits
International Pension
Benefits
Other
Postretirement
Benefits
2025
$
771
$
291
$
86
2026
775
275
87
2027
789
286
89
2028
799
300
91
2029
822
314
96
2030 — 2034
4,386
1,792
515
Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service.
Amounts Recognized in Other Comprehensive Income (Loss)
Net gain/loss amounts reflect differences between expected and actual returns on plan assets as well as the effects of changes in actuarial assumptions.
Net gain/loss amounts in excess of certain thresholds are amortized into net periodic benefit cost over the average remaining service life of employees. The following
amounts were reflected as components of OCI:
Pension Plans
Other Postretirement
Benefit Plans
U.S.
International
Years Ended December 31
2024
2023
2022
2024
2023
2022
2024
2023
2022
Net gain (loss) arising during the period
$
35
$
(69)
$
(42)
$
634
$
(438)
$
116
$
(78)
$
110
$
—
Prior service credit (cost) arising during the period
—
—
—
56
(16)
(4)
—
—
—
$
35
$
(69)
$
(42)
$
690
$
(454)
$
112
$
(78)
$
110
$
—
Net loss (gain) amortization included in benefit cost
$
43
$
—
$
128
$
5
$
(3)
$
96
$
(51)
$
(42)
$
(43)
Prior service (credit) cost amortization included in
benefit cost
—
(1)
(32)
(13)
2
(14)
(43)
(49)
(57)
Settlements and curtailments
—
36
251
(1)
(6)
1
—
(1)
(1)
$
43
$
35
$
347
$
(9)
$
(7)
$
83
$
(94)
$
(92)
$
(101)
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Table of Contents
Actuarial Assumptions
The Company reassesses its benefit plan assumptions on a regular basis. The weighted average assumptions used in determining U.S. pension and other
postretirement benefit plan and international pension plan information are as follows:
U.S. Pension and Other
Postretirement Benefit Plans
International Pension Plans
December 31
2024
2023
2022
2024
2023
2022
Net periodic benefit cost
Discount rate
5.30 %
5.50 %
3.00 %
3.40 %
3.90 %
1.50 %
Expected rate of return on plan assets
7.75 %
7.00 %
6.70 %
5.20 %
5.00 %
3.70 %
Salary growth rate
4.60 %
4.60 %
4.60 %
3.20 %
3.20 %
2.90 %
Interest crediting rate
5.30 %
5.30 %
5.00 %
3.40 %
3.30 %
3.00 %
Benefit obligation
Discount rate
5.70 %
5.30 %
5.50 %
3.70 %
3.40 %
3.90 %
Salary growth rate
4.80 %
4.60 %
4.60 %
3.10 %
3.20 %
3.20 %
Interest crediting rate
5.40 %
5.30 %
5.30 %
3.50 %
3.40 %
3.30 %
For both the pension and other postretirement benefit plans, the discount rate is evaluated on measurement dates and modified to reflect the prevailing
market rate of a portfolio of high-quality fixed-income debt instruments that would provide the future cash flows needed to pay the benefits included in the benefit
obligation as they come due. The expected rate of return for both the pension and other postretirement benefit plans represents the average rate of return to be
earned on plan assets over the period the benefits included in the benefit obligation are to be paid and is determined on a plan basis. The expected rate of return for
each plan is developed considering long-term historical returns data, current market conditions, and actual returns on the plan assets. Using this reference information,
the long-term return expectations for each asset category and a weighted-average expected return for each plan’s target portfolio is developed according to the
allocation among those investment categories. The expected portfolio performance reflects the contribution of active management as appropriate. For 2025, the
expected rate of return for the Company’s U.S. pension and other postretirement benefit plans will be 7.70%, as compared to 7.75% in 2024.
The health care cost trend rate assumptions for other postretirement benefit plans are as follows:
December 31
2024
2023
Health care cost trend rate assumed for next year
7.90 %
7.80 %
Rate to which the cost trend rate is assumed to decline
4.50 %
4.50 %
Year that the trend rate reaches the ultimate trend rate
2040
2038
Savings Plans
The Company also maintains defined contribution savings plans in the U.S. The Company matches a percentage of each employee’s contributions
consistent with the provisions of the plan for which the employee is eligible. Total employer contributions to these plans in 2024, 2023 and 2022 were $215 million,
$199 million and $175 million, respectively.
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14. Other (Income) Expense, Net
Other (income) expense, net, consisted of:
Years Ended December 31
2024
2023
2022
Interest income
$
(415)
$
(365)
$
(157)
Interest expense
1,271
1,146
962
Exchange losses
227
370
237
(Income) loss from investments in equity securities, net
(14)
(340)
1,419
Net periodic defined benefit plan (credit) cost other than service cost
(633)
(498)
(279)
Other, net
(460)
153
(681)
$
(24)
$
466
$
1,501
Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds. Unrealized gains and losses from investments
that are directly owned are determined at the end of the reporting period, while gains and losses from ownership interests in investment funds are accounted for on a one quarter lag.
Other, net (as reflected in the table above) in 2024 includes $170 million of income related to the expansion of a collaboration agreement with Daiichi
Sankyo (see Note 4). Other, net, in 2023 includes a $572.5 million charge related to settlements with certain plaintiffs in the Zetia antitrust litigation (see Note 10).
Interest paid was $1.3 billion in 2024, $1.1 billion in 2023 and $937 million in 2022.
15. Taxes on Income
A reconciliation between the effective tax rate and the U.S. statutory rate is as follows:
2024
2023
2022
Amount
Tax Rate
Amount
Tax Rate
Amount
Tax Rate
U.S. statutory rate applied to income before taxes
$
4,186
21.0 %
$
397
21.0 %
$
3,453
21.0 %
Differential arising from:
Foreign earnings
(1,301)
(6.5)
(941)
(49.8)
(1,821)
(11.1)
Tax settlements and statute lapses
(557)
(2.8)
—
—
(10)
(0.1)
R&D tax credit
(202)
(1.0)
(214)
(11.3)
(117)
(0.7)
Inventory donations
(71)
(0.4)
(65)
(3.5)
(52)
(0.3)
State taxes
(39)
(0.2)
(117)
(6.2)
(110)
(0.7)
Charges for certain research and development asset
acquisitions
554
2.8
253
13.4
—
—
Valuation allowances
54
0.3
70
3.7
108
0.7
Restructuring
52
0.3
41
2.2
11
0.1
GILTI and the foreign-derived intangible income
deduction
29
0.1
(80)
(4.3)
462
2.8
Acquisition-related costs, including amortization
18
0.1
42
2.2
(3)
—
Acquisition of Prometheus
—
—
2,139
113.3
—
—
Other
80
0.4
(13)
(0.7)
(3)
—
$
2,803
14.1 %
$
1,512
80.0 %
$
1,918
11.7 %
Where applicable, the impact of changes in uncertain tax positions is reflected in the reconciling items above.
The Company’s remaining transition tax liability under the Tax Cuts and Jobs Act (TCJA) of 2017, which has been reduced by payments and the expected
utilization of foreign tax credits, was a net liability of $518 million at December 31, 2024, which is comprised of a $1.2 billion tax liability included in Income taxes
payable, offset by $702 million of foreign tax credits included in Other Assets that Merck expects to be applied upon the completion of the IRS’s examination of the
Company’s tax returns for the 2017 and 2018 federal tax years. As a result of the transition tax under the TCJA, the Company is no longer indefinitely reinvested with
respect to its undistributed earnings from foreign subsidiaries and has provided a deferred tax liability for foreign withholding taxes that would apply. The
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Company remains indefinitely reinvested with respect to its financial statement basis in excess of tax basis of its foreign subsidiaries. A determination of the net
deferred tax liability with respect to this basis difference is not practicable.
The foreign earnings tax rate differentials in the tax rate reconciliation above primarily reflect the impacts of operations in jurisdictions with different effective
tax rates than the U.S., particularly Ireland, the Netherlands and Switzerland, as well as Singapore and Puerto Rico which operate under tax incentive grants (which
begin to expire in 2025), thereby yielding a favorable impact on the effective tax rate compared with the U.S. statutory rate of 21%. The Company has an additional
Cantonal tax holiday in Switzerland that provides for a tax rate reduction and is effective through 2032. The Company’s income that is subject to tax incentive grants
and the Cantonal tax holiday in Switzerland is subject to the global minimum tax provision of the Organization for Economic Cooperation and Development (OECD)
Pillar 2, effective in 2024.
Income before taxes consisted of:
Years Ended December 31
2024
2023
2022
Domestic
$
(1,849)
$
(15,622)
$
1,011
Foreign
21,785
17,511
15,433
$
19,936
$
1,889
$
16,444
Taxes on income consisted of:
Years Ended December 31
2024
2023
2022
Current provision
Federal
$
944
$
928
$
2,265
Foreign
3,123
2,435
1,164
State
(15)
48
57
4,052
3,411
3,486
Deferred provision
Federal
(1,475)
(1,559)
(1,510)
Foreign
212
(233)
71
State
14
(107)
(129)
(1,249)
(1,899)
(1,568)
$
2,803
$
1,512
$
1,918
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Deferred income taxes at December 31 consisted of:
2024
2023
Assets
Liabilities
Assets
Liabilities
Product intangibles and licenses
$
71
$
978
$
—
$
1,308
R&D capitalization
3,062
—
2,099
—
Inventory related
84
413
86
370
Accelerated depreciation
—
645
—
626
Undistributed foreign earnings
275
371
76
118
Equity investments
—
90
—
73
Pensions and other postretirement benefits
224
400
323
249
Compensation related
400
—
357
—
Unrecognized tax benefits
152
—
147
—
Net operating losses and other tax credit carryforwards
910
—
868
—
Other
802
159
755
214
Subtotal
5,980
3,056
4,711
2,958
Valuation allowance
(710)
(656)
Total deferred taxes
$
5,270
$
3,056
$
4,055
$
2,958
Net deferred income taxes
$
2,214
$
1,097
Recognized as:
Other Assets
$
3,601
$
1,968
Deferred Income Taxes
$
1,387
$
871
The Company has net operating loss (NOL) carryforwards in several jurisdictions. As of December 31, 2024, $324 million of deferred tax assets on NOL
carryforwards relate to foreign jurisdictions. Valuation allowances of $264 million have been established on these foreign NOL carryforwards and other foreign deferred
tax assets. In addition, the Company has $586 million of deferred tax assets relating to various U.S. tax credit carryforwards and NOL carryforwards. Valuation
allowances of $446 million have been established on these U.S. tax credit carryforwards and NOL carryforwards.
Income taxes paid in 2024, 2023 and 2022 consisted of:
Years Ended December 31
2024
2023
2022
Domestic
$
974
$
2,258
$
1,891
Foreign
2,954
2,080
1,348
$
3,928
$
4,338
$
3,239
Includes TCJA transition tax payments.
Tax benefits relating to stock option exercises were $26 million in 2024, $12 million in 2023 and $45 million in 2022.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
2024
2023
2022
Balance January 1
$
2,384
$
1,835
$
1,529
Additions related to current year positions
421
553
344
Additions related to prior year positions
35
91
48
Reductions for tax positions of prior years
(33)
(20)
(40)
Settlements
(18)
(23)
(6)
Lapse of statute of limitations
(528)
(52)
(40)
Balance December 31
$
2,261
$
2,384
$
1,835
Amount in 2024 reflects a reduction of $451 million resulting from the expiration of the statute of limitations related to the 2019 and 2020 federal tax return years.
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If the Company were to recognize the unrecognized tax benefits of $2.3 billion at December 31, 2024, the income tax provision would reflect a favorable
net impact of $2.2 billion.
The Company is under examination by numerous tax authorities in various jurisdictions globally. The Company believes that it is reasonably possible that
the total amount of unrecognized tax benefits as of December 31, 2024 could decrease by up to approximately $22 million in the next 12 months as a result of various
audit closures, settlements or the expiration of the statute of limitations. The ultimate finalization of the Company’s examinations with relevant taxing authorities can
include formal administrative and legal proceedings, which could have a significant impact on the timing of the reversal of unrecognized tax benefits. The Company
believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures.
Interest and penalties associated with uncertain tax positions amounted to an expense of $51 million in 2024, $131 million in 2023 and $54 million in 2022.
These amounts reflect the beneficial impacts of various tax settlements. Liabilities for accrued interest and penalties were $437 million and $388 million as of
December 31, 2024 and 2023, respectively.
In 2024, the Company recorded a benefit of $519 million due to a reduction in reserves for unrecognized income tax benefits resulting from the expiration in
2024 of the statute of limitations for assessments related to the 2019 and 2020 federal tax return years. The Internal Revenue Service (IRS) is currently conducting
examinations of the Company’s tax returns for the years 2017 and 2018, including the one-time transition tax enacted under the TCJA. If the IRS disagrees with the
Company’s transition tax position, it may result in a significant tax liability. The IRS is also currently conducting examinations of the Company’s tax returns for the years
2021 and 2022. In addition, various state and foreign tax examinations are in progress and for these jurisdictions, the Company’s income tax returns are open for
examination for the period 2009 through 2024.
16. Earnings per Share
The calculations of earnings per share (shares in millions) are as follows:
Years Ended December 31
2024
2023
2022
Net Income Attributable to Merck & Co., Inc.
$
17,117
$
365
$
14,519
Average common shares outstanding
2,532
2,537
2,532
Common shares issuable
9
10
10
Average common shares outstanding assuming dilution
2,541
2,547
2,542
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders
$
6.76
$
0.14
$
5.73
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders
$
6.74
$
0.14
$
5.71
Issuable primarily under share-based compensation plans.
In 2024, 2023 and 2022, 6 million, 5 million and 2 million, respectively, of common shares issuable under share-based compensation plans were excluded
from the computation of earnings per common share assuming dilution because the effect would have been antidilutive.
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17. Other Comprehensive Income (Loss)
Changes in each component of other comprehensive income (loss) are as follows:
Derivatives
Employee
Benefit
Plans
Foreign Currency
Translation
Adjustment
Accumulated Other
Comprehensive Loss
Balance at January 1, 2022, net of taxes
$
144
$
(2,743)
$
(1,830)
$
(4,429)
Other comprehensive income (loss) before reclassification adjustments, pretax
684
70
(584)
170
Tax
(143)
12
(19)
(150)
Other comprehensive income (loss) before reclassification adjustments, net of taxes
541
82
(603)
20
Reclassification adjustments, pretax
(775)
329
—
(446)
Tax
163
(76)
—
87
Reclassification adjustments, net of taxes
(612)
253
—
(359)
Other comprehensive income (loss), net of taxes
(71)
335
(603)
(339)
Balance at December 31, 2022, net of taxes
73
(2,408)
(2,433)
(4,768)
Other comprehensive income (loss) before reclassification adjustments, pretax
114
(413)
17
(282)
Tax
(24)
86
63
125
Other comprehensive income (loss) before reclassification adjustments, net of taxes
90
(327)
80
(157)
Reclassification adjustments, pretax
(237)
(64)
9
(292)
Tax
50
6
—
56
Reclassification adjustments, net of taxes
(187)
(58)
9
(236)
Other comprehensive income (loss), net of taxes
(97)
(385)
89
(393)
Balance at December 31, 2023, net of taxes
(24)
(2,793)
(2,344)
(5,161)
Other comprehensive income (loss) before reclassification adjustments, pretax
508
647
(559)
596
Tax
(109)
(138)
23
(224)
Other comprehensive income (loss) before reclassification adjustments, net of taxes
399
509
(536)
372
Reclassification adjustments, pretax
(168)
(60)
20
(208)
Tax
35
17
—
52
Reclassification adjustments, net of taxes
(133)
(43)
20
(156)
Other comprehensive income (loss), net of taxes
266
466
(516)
216
Balance at December 31, 2024, net of taxes
$
242
$
(2,327)
$
(2,860)
$
(4,945)
Primarily relates to foreign currency cash flow hedges that were reclassified from AOCL to Sales (see Note 6).
Includes net amortization of prior service cost, actuarial gains and losses, settlements and curtailments included in net periodic benefit cost (see Note 13).
Includes pension plan net loss of $3.0 billion and $3.5 billion at December 31, 2024 and 2023, respectively, and other postretirement benefit plan net gain of $400 million and $500 million at December 31, 2024
and 2023, respectively, as well as pension plan prior service credit of $174 million and $141 million at December 31, 2024 and 2023, respectively, and other postretirement benefit plan prior service credit of $61
million and $95 million at December 31, 2024 and 2023, respectively.
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18. Segment Reporting
The Company’s operations are principally managed on a product basis and include two operating segments, Pharmaceutical and Animal Health, both of
which are reportable segments.
The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic
and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily
to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit
managers and other institutions. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines. The Company sells these human
health vaccines primarily to physicians, wholesalers, distributors and government entities. A large component of pediatric and adolescent vaccine sales are made to
the U.S. Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the U.S. government. Additionally, the Company sells vaccines
to the Federal government for placement into vaccine stockpiles.
The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceutical and vaccine products, as well as
health management solutions and services, for the prevention, treatment and control of disease in all major livestock and companion animal species. The Company
also offers an extensive suite of digitally connected identification, traceability and monitoring products. The Company sells its products to veterinarians, distributors,
animal producers, farmers and pet owners.
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Sales of the Company’s products were as follows:
Years Ended December 31
2024
2023
2022
U.S.
Int’l
Total
U.S.
Int’l
Total
U.S.
Int’l
Total
Pharmaceutical:
Oncology
Keytruda
$
17,872
$
11,610
$
29,482
$
15,114
$
9,897
$
25,011
$
12,686
$
8,251
$
20,937
Alliance revenue - Lynparza
626
685
1,311
607
592
1,199
584
532
1,116
Alliance revenue - Lenvima
705
305
1,010
657
303
960
579
297
876
Welireg
466
43
509
209
10
218
123
—
123
Alliance revenue - Reblozyl
303
68
371
168
43
212
123
43
166
Vaccines
Gardasil/Gardasil 9
2,425
6,158
8,583
2,083
6,803
8,886
2,065
4,832
6,897
ProQuad/M-M-R II/Varivax
1,919
566
2,485
1,837
531
2,368
1,724
518
2,241
Vaxneuvance
461
347
808
561
103
665
163
7
170
RotaTeq
472
239
711
493
276
769
508
275
783
Pneumovax 23
56
207
263
127
285
412
346
256
602
Hospital Acute Care
Bridion
1,401
363
1,764
1,156
686
1,842
922
762
1,685
Prevymis
371
414
785
264
341
605
188
240
428
Dificid
303
37
340
274
28
302
241
22
263
Zerbaxa
146
106
252
119
100
218
89
79
169
Noxafil
7
170
177
32
181
213
51
187
238
Cardiovascular
Winrevair
408
11
419
—
—
—
—
—
—
Alliance revenue - Adempas/Verquvo
388
27
415
350
16
367
329
12
341
Adempas
—
287
287
—
255
255
—
238
238
Virology
Lagevrio
176
787
964
10
1,418
1,428
1,523
4,161
5,684
Isentress/Isentress HD
185
209
394
215
268
483
274
359
633
Delstrigo
56
193
249
49
152
201
39
111
151
Pifeltro
113
50
163
101
41
142
87
30
118
Neuroscience
Belsomra
72
150
222
81
150
231
79
179
258
Immunology
Simponi
—
543
543
—
710
710
—
706
706
Remicade
—
114
114
—
187
187
—
207
207
Diabetes
Januvia
469
865
1,334
1,151
1,039
2,189
1,248
1,565
2,813
Janumet
161
774
935
223
954
1,177
355
1,344
1,700
Other pharmaceutical
729
1,782
2,510
658
1,675
2,333
663
1,803
2,462
Total Pharmaceutical segment sales
30,290
27,110
57,400
26,539
27,044
53,583
24,989
27,016
52,005
Animal Health:
Livestock
732
2,729
3,462
700
2,637
3,337
710
2,590
3,300
Companion Animal
1,129
1,287
2,415
1,104
1,184
2,288
1,112
1,138
2,250
Total Animal Health segment sales
1,861
4,016
5,877
1,804
3,821
5,625
1,822
3,728
5,550
Total segment sales
32,151
31,126
63,277
28,343
30,865
59,208
26,811
30,744
57,555
Other
126
765
891
137
770
907
395
1,333
1,728
$
32,277
$
31,891
$
64,168
$
28,480
$
31,635
$
60,115
$
27,206
$
32,077
$
59,283
U.S. plus international may not equal total due to rounding.
Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 4).
Alliance revenue for Reblozyl represents royalties and, for 2022, also includes a payment received related to the achievement of a regulatory approval milestone (see Note 4).
Alliance revenue for Adempas/Verquvo 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 4).
Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.
Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which increased sales by $195 million, $244 million and $810 million in 2024, 2023 and 2022, respectively,
as well as revenue from third-party manufacturing arrangements (including sales to Organon). Other for 2024, 2023 and 2022 also includes $106 million, $118 million and $165 million, respectively, related to
upfront and milestone payments received by Merck for out-licensing arrangements.
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Consolidated sales by geographic area where derived are as follows:
Years Ended December 31
2024
2023
2022
United States
$
32,277
$
28,480
$
27,206
Europe, Middle East and Africa
14,041
13,254
14,493
China
5,494
6,802
5,191
Latin America
3,459
3,086
2,582
Japan
3,280
3,164
3,629
Asia Pacific (other than China and Japan)
3,058
3,225
3,614
Other
2,559
2,104
2,568
$
64,168
$
60,115
$
59,283
A reconciliation of segment profits to Income Before Taxes is as follows:
Years Ended December 31
2024
2023
2022
Pharma-
ceutical
Animal Health
Total
Pharma-
ceutical
Animal Health
Total
Pharma-
ceutical
Animal Health
Total
Segment sales
$
57,400
$
5,877
$
63,277
$
53,583
$
5,625
$
59,208
$
52,005
$
5,550
$
57,555
Less segment costs:
Cost of sales
6,828
2,469
8,849
2,498
9,678
2,259
Selling, general and administrative
6,128
1,084
5,903
1,038
5,474
999
Research and development
—
385
—
353
—
329
Other segment items
(89)
1
(49)
(1)
1
—
Total segment profits
44,533
1,938
46,471
38,880
1,737
40,617
36,852
1,963
38,815
Other profits
492
474
1,160
Unallocated:
Interest income
415
365
157
Interest expense
(1,271)
(1,146)
(962)
Amortization
(2,395)
(2,044)
(2,085)
Depreciation
(1,843)
(1,625)
(1,642)
Research and development
(17,350)
(30,008)
(13,011)
Restructuring costs
(309)
(599)
(337)
Charge for Zetia antitrust litigation settlements
—
(573)
—
Other unallocated, net
(4,274)
(3,572)
(5,651)
$
19,936
$
1,889
$
16,444
The significant expense categories and amounts align with the segment level information that is regularly provided to the chief operating decision maker.
Human health-related research and development expenses incurred by Merck Research Laboratories are not allocated to segment profits as noted below.
Includes equity (income) loss from affiliates and other miscellaneous non-operating expenses.
Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as selling, general and administrative expenses directly
incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses
and research and development costs directly incurred by the segment. The chief operating decision maker (Merck’s Chief Executive Officer) uses segment profit to
allocate resources predominately during the planning and forecasting process. For internal management reporting presented to the chief operating decision maker,
Merck does not allocate the remaining cost of sales not included in segment profits as described above, research and development expenses incurred by Merck
Research Laboratories, the Company’s research and development division that focuses on human health-related activities, or general and administrative expenses not
directly incurred by the segments, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs,
including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. In addition, costs related to
restructuring activities, as well as the amortization of intangible assets and amortization of purchase accounting adjustments are not allocated to segments.
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Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits (losses) related to third-party manufacturing
arrangements.
Other unallocated, net, includes expenses from corporate and manufacturing cost centers, intangible asset impairment charges, gains or losses on sales of
businesses, expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration, and other miscellaneous income
or expense items.
Equity income from affiliates and depreciation included in segment profits is as follows:
Pharmaceutical
Animal Health
Total
Year Ended December 31, 2024
Equity income from affiliates
$
144
$
—
$
144
Depreciation
5
256
261
Year Ended December 31, 2023
Equity income from affiliates
$
111
$
—
$
111
Depreciation
5
198
203
Year Ended December 31, 2022
Equity income from affiliates
$
39
$
—
$
39
Depreciation
5
177
182
Property, plant and equipment, net, by geographic area where located is as follows:
December 31
2024
2023
2022
United States
$
14,724
$
13,915
$
12,891
Europe, Middle East and Africa
7,548
7,562
6,993
Asia Pacific (other than China and Japan)
982
1,022
966
China
202
193
207
Japan
143
133
135
Latin America
133
222
225
Other
47
4
5
$
23,779
$
23,051
$
21,422
The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is not
presented.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Merck & Co., Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheet of Merck & Co., Inc. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the
related consolidated statements of income, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31,
2024, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over
financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31,
2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing
under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control
over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
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Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or
required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
U.S. Rebate Accruals - Medicaid, Managed Care and Medicare Part D
As described in Note 2 to the consolidated financial statements, the Company records certain variable consideration including discounts, which are estimated at the
time of sale generally using the expected value method. Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of
information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the
amounts accrued. Certain of these discounts representing a portion of the accrual take the form of rebates, which are amounts owed based upon definitive contractual
agreements or legal requirements with private sector (Managed Care) and public sector (Medicaid and Medicare Part D) benefit providers, after the final dispensing of
the product to a benefit plan participant. The provision for rebates is based on expected patient usage, as well as inventory levels in the distribution channel to
determine the contractual obligation to the benefit providers. Management uses historical customer segment utilization mix, sales forecasts, changes to product mix
and price, inventory levels in the distribution channel, government pricing calculations and prior payment history in order to estimate the expected provision. The
accrued balance relative to the provision for rebates included in accrued and other current liabilities was $2.2 billion as of December 31, 2024, of which the majority
relates to U.S. rebate accruals – Medicaid, Managed Care and Medicare Part D.
The principal considerations for our determination that performing procedures relating to U.S. rebate accruals - Medicaid, Managed Care and Medicare Part D is a
critical audit matter are the significant judgment by management due to the significant measurement uncertainty involved in developing the rebate accruals, as the
accruals are based on assumptions developed using pricing information and historical customer segment utilization mix, and a high degree of auditor judgment,
subjectivity and effort in performing procedures and evaluating evidence related to these assumptions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial
statements. These procedures included testing the effectiveness of controls relating to U.S. rebate accruals - Medicaid, Managed Care and Medicare Part D, including
management’s controls over the assumptions used to estimate the corresponding rebate accruals. These procedures also included, among others (i) developing an
independent estimate of the rebate accruals by utilizing third party data on historical customer segment utilization mix in the U.S., pricing information, the terms of the
specific rebate programs, and the historical trend of actual rebate claims paid, (ii) comparing the independent estimate to the rebate accruals recorded by
management, and (iii) testing rebate claims paid, including evaluating those claims for consistency with the contractual terms of the Company’s rebate agreements.
PricewaterhouseCoopers LLP
Florham Park, New Jersey
February 25, 2025
We have served as the Company’s auditor since 2002.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company’s disclosure controls and procedures. Based on their evaluation, as of the end of the period covered by this Form 10-K, the Company’s Chief Executive
Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the Act)) are effective. For the fourth quarter of 2024, there have been no changes in internal control over financial
reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Act. Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated
Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that
internal control over financial reporting was effective as of December 31, 2024. PricewaterhouseCoopers LLP, an independent registered public accounting firm, has
performed its own assessment of the effectiveness of the Company’s internal control over financial reporting and its attestation report is included in this Form 10-K
filing.
Management’s Report
Management’s Responsibility for Financial Statements
Responsibility for the integrity and objectivity of the Company’s financial statements rests with management. The financial statements report on
management’s stewardship of Company assets. These statements are prepared in conformity with generally accepted accounting principles and, accordingly, include
amounts that are based on management’s best estimates and judgments. Nonfinancial information included in the Annual Report on Form 10-K has also been
prepared by management and is consistent with the financial statements.
To assure that financial information is reliable and assets are safeguarded, management maintains an effective system of internal controls and procedures,
important elements of which include: careful selection, training and development of operating and financial managers; an organization that provides appropriate
division of responsibility; and communications aimed at assuring that Company policies and procedures are understood throughout the organization. A staff of internal
auditors regularly monitors the adequacy and application of internal controls on a worldwide basis.
To ensure that personnel continue to understand the system of internal controls and procedures, and policies concerning good and prudent business
practices, annually all employees of the Company are required to complete Code of Conduct training. This training reinforces the importance and understanding of
internal controls by reviewing key corporate policies, procedures and systems. In addition, the Company has compliance programs, including an ethical business
practices program to reinforce the Company’s long-standing commitment to high ethical standards in the conduct of its business.
The financial statements and other financial information included in the Annual Report on Form 10-K fairly present, in all material respects, the Company’s
financial condition, results of operations and cash flows. Our formal certification to the Securities and Exchange Commission is included in this Form 10-K filing.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f)
under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the
United States of America. Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal
Control — Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management
concluded that internal control over financial reporting was effective as of December 31, 2024.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls
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may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, has been audited by PricewaterhouseCoopers LLP,
an independent registered public accounting firm, as stated in their report which appears herein.
Robert M. Davis
Caroline Litchfield
Chairman, Chief Executive Officer and President
Executive Vice President and Chief Financial Officer
Item 9B. Other Information.
Insider Trading Arrangements
During the three months ended December 31, 2024, none of the Company’s directors or executive officers adopted or terminated any Rule 10b5-1 trading
arrangements or non-Rule 10b5-1 trading arrangements.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not Applicable.
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PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
The required information on directors and nominees is incorporated by reference from the discussion under Proposal 1. Election of Directors of the
Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 27, 2025. Information on executive officers is set forth in Part I of this
document on page 43.
The required information on compliance with Section 16(a) of the Securities Exchange Act of 1934, if applicable, is incorporated by reference from the
discussion under the heading “Stock Ownership Information” of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 27, 2025.
The Company has a Code of Conduct — Our Values and Standards applicable to all employees, including the principal executive officer, principal financial
officer, and principal accounting officer. The Code of Conduct is available on the Company’s website at www.merck.com/company-overview/culture-and-values/code-
of-conduct/values-and-standards/. The Company intends to disclose future amendments to certain provisions of the Code of Conduct, and waivers of the Code of
Conduct granted to executive officers and directors, if any, on the website within four business days following the date of any amendment or waiver. Every Merck
employee is responsible for adhering to business practices that are in accordance with the law and with ethical principles that reflect the highest standards of
corporate and individual behavior.
The required information on the identification of the audit committee and the audit committee financial expert is incorporated by reference from the
discussion under the heading “Board Meetings and Committees” of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 27,
2025.
The required information about the Company’s insider trading policy is incorporated by reference from the discussion under the heading “Insider Trading
Policy” of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 27, 2025.
Item 11.
Executive Compensation.
The information required on executive compensation is incorporated by reference from the discussion under the headings “Compensation Discussion and
Analysis,” “Summary Compensation Table,” “All Other Compensation” table, “CEO Pay Ratio,” “Pay versus Performance” table, “Grants of Plan-Based Awards” table,
“Outstanding Equity Awards” table, “Option Exercises and Stock Vested” table, “Pension Benefits” table, “Nonqualified Deferred Compensation” table, and “Potential
Payments Upon Termination or a Change in Control”, as well as all footnote information to the various tables, of the Company’s Proxy Statement for the Annual
Meeting of Shareholders to be held on May 27, 2025.
The required information on director compensation is incorporated by reference from the discussion under the heading “Director Compensation” and
related “2024 Schedule of Director Fees” table and “2024 Director Compensation” table of the Company’s Proxy Statement for the Annual Meeting of Shareholders to
be held on May 27, 2025.
The required information under the headings “Compensation and Management Development Committee Interlocks and Insider Participation” and
“Compensation and Management Development Committee Report” is incorporated by reference from the Company’s Proxy Statement for the Annual Meeting of
Shareholders to be held on May 27, 2025.
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Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information with respect to security ownership of certain beneficial owners and management is incorporated by reference from the discussion under the
heading “Stock Ownership Information” of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 27, 2025.
Equity Compensation Plan Information
The following table summarizes information about the options, warrants and rights and other equity compensation under the Company’s equity
compensation plans as of the close of business on December 31, 2024. The table does not include information about tax qualified plans such as the Merck U.S.
Savings Plan.
Plan Category
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(a)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b)
Number of
securities remaining
available for future
issuance under equity
compensation plans
(excluding
securities
reflected in column (a))
(c)
Equity compensation plans approved by security holders
12,500,010
$
86.04
74,988,831
Equity compensation plans not approved by security holders
—
—
—
Total
12,500,010
$
86.04
74,988,831
Includes options to purchase shares of Company Common Stock and other rights under the following shareholder-approved plans: the Merck & Co., Inc. 2010 and 2019 Incentive Stock Plans, and the Merck &
Co., Inc. 2010 Non-Employee Directors Stock Option Plan.
Excludes approximately 12,232,051 shares of restricted stock units and 3,531,246 performance share units (assuming maximum payouts) under the Merck Sharp & Dohme 2010 and 2019 Incentive Stock Plans.
Also excludes 153,540 shares of phantom stock deferred under the MSD Employee Deferral Program and 518,423 shares of phantom stock deferred under the Merck & Co., Inc. Plan for Deferred Payment of
Directors’ Compensation.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
The required information on transactions with related persons is incorporated by reference from the discussion under the heading “Related Person
Transactions” of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 27, 2025.
The required information on director independence is incorporated by reference from the discussion under the heading “Independence of Directors” of the
Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 27, 2025.
Item 14.
Principal Accountant Fees and Services.
The information required for this item is incorporated by reference from the discussion under Proposal 3. Ratification of Appointment of Independent
Registered Public Accounting Firm for 2025 beginning with the caption “Pre-Approval Policy for Services of Independent Registered Public Accounting Firm” through
“Fees for Services Provided by the Independent Registered Public Accounting Firm” of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be
held on May 27, 2025.
(1)
(2)
(1)
(2)
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PART IV
Item 15.
Exhibits and Financial Statement Schedules.
(a) The following documents are filed as part of this Form 10-K
1. Financial Statements
Consolidated statement of income for the years ended December 31, 2024, 2023 and 2022
Consolidated statement of comprehensive income (loss) for the years ended December 31, 2024, 2023 and 2022
Consolidated balance sheet as of December 31, 2024 and 2023
Consolidated statement of equity for the years ended December 31, 2024, 2023 and 2022
Consolidated statement of cash flows for the years ended December 31, 2024, 2023 and 2022
Notes to consolidated financial statements
Report of PricewaterhouseCoopers LLP, independent registered public accounting firm (PCAOB ID 238)
2. Financial Statement Schedules
Schedules are omitted because they are either not required or not applicable.
Financial statements of affiliates carried on the equity basis have been omitted because, considered individually or in the aggregate, such affiliates do not
constitute a significant subsidiary.
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3. Exhibits
Exhibit
Number
Description
3.1
—
Restated Certificate of Incorporation of Merck & Co., Inc. (November 3, 2009) — Incorporated by reference to Merck & Co., Inc.’s Current
Report on Form 8-K filed November 4, 2009 (No. 1-6571)
3.2
—
By-Laws of Merck & Co., Inc. (effective March 22, 2022) — Incorporated by reference to Merck & Co., Inc.’s Current Report on Form 8-K
filed March 25, 2022 (No. 1-6571)
4.1
—
Indenture, dated as of April 1, 1991, between Merck Sharp & Dohme Corp. (f/k/a Schering Corporation) and U.S. Bank Trust National
Association (as successor to Morgan Guaranty Trust Company of New York), as Trustee (the 1991 Indenture) — Incorporated by reference
to Exhibit 4 to MSD’s Registration Statement on Form S-3 (No. 33-39349)
4.2
—
First Supplemental Indenture to the 1991 Indenture, dated as of October 1, 1997 — Incorporated by reference to Exhibit 4(b) to MSD’s
Registration Statement on Form S-3 filed September 25, 1997 (No. 333-36383)
4.3
—
Second Supplemental Indenture to the 1991 Indenture, dated November 3, 2009 — Incorporated by reference to Exhibit 4.3 to Merck &
Co., Inc.’s Current Report on Form 8-K filed November 4, 2009 (No.1-6571)
4.4
—
Third Supplemental Indenture to the 1991 Indenture, dated May 1, 2012 — Incorporated by reference to Exhibit 4.1 to Merck & Co., Inc.’s
Form 10-Q Quarterly Report for the period ended March 31, 2012 (No. 1-6571)
4.5
—
Indenture, dated November 26, 2003, between Merck & Co., Inc. (f/k/a Schering-Plough Corporation) and The Bank of New York as
Trustee (the 2003 Indenture) — Incorporated by reference to Exhibit 4.1 to Schering-Plough’s Current Report on Form 8‑K filed
November 28, 2003 (No. 1-6571)
4.6
—
Second Supplemental Indenture to the 2003 Indenture (including Form of Note), dated November 26, 2003 — Incorporated by reference to
Exhibit 4.3 to Schering-Plough’s Current Report on Form 8‑K filed November 28, 2003 (No. 1-6571)
4.7
—
Third Supplemental Indenture to the 2003 Indenture (including Form of Note), dated September 17, 2007 — Incorporated by reference to
Exhibit 4.1 to Schering-Plough’s Current Report on Form 8‑K filed September 17, 2007 (No. 1-6571)
4.8
—
Fifth Supplemental Indenture to the 2003 Indenture, dated November 3, 2009 — Incorporated by reference to Exhibit 4.4 to Merck & Co.,
Inc.’s Current Report on Form 8-K filed November 4, 2009 (No. 1-6571)
4.9
—
Indenture, dated as of January 6, 2010, between Merck & Co., Inc. and U.S. Bank Trust National Association, as Trustee — Incorporated
by reference to Exhibit 4.1 to Merck & Co., Inc.’s Current Report on Form 8-K filed December 10, 2010 (No. 1-6571)
4.10
—
Indenture, dated as of May 30, 2024, among MSD Netherlands Capital B.V., Merck & Co., Inc. and U.S. Bank Trust National Association,
as Trustee — Incorporated by reference to Exhibit 4.1 to Merck & Co., Inc.’s Current Report on Form 8-K filed May 30, 2024 (No. 1-6571)
4.11
—
Description of the Registrant’s Securities
*10.1
—
Merck & Co., Inc. Executive Incentive Plan (as amended and restated effective January 1, 2025)
*10.2
—
Merck & Co., Inc. Deferral Program Including the Base Salary Deferral Plan (Amended and Restated effective December 1, 2019) —
Incorporated by reference to Exhibit 10.2 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2019 filed
February 26, 2020 (No. 1-6571)
*10.3
—
Merck & Co., Inc. 2010 Incentive Stock Plan (as amended and restated June 1, 2015) — Incorporated by reference to Merck & Co., Inc.’s
Schedule 14A filed April 13, 2015 (No. 1-6571)
*10.4
—
Form of stock option terms for 2013 quarterly and annual non-qualified option grants under the Merck & Co., Inc. 2010 Incentive Stock
Plan — Incorporated by reference to Exhibit 10.19 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31,
2012 filed February 28, 2013 (No. 1-6571)
*10.5
—
Form of stock option terms for 2014 quarterly and annual non-qualified option grants under the Merck & Co., Inc. 2010 Incentive Stock
Plan — Incorporated by reference to Exhibit 10.18 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31,
2014 filed February 27, 2015 (No. 1-6571)
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*10.6
—
Form of stock option terms for 2015 quarterly and annual non-qualified option grants under the Merck & Co., Inc. 2010 Incentive Stock
Plan — Incorporated by reference to Exhibit 10.20 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31,
2015 filed February 26, 2016 (No. 1-6571)
*10.7
—
Form of stock option terms for 2017 annual non-qualified option grants under the Merck & Co., Inc. 2010 Incentive Stock Plan —
Incorporated by reference to Exhibit 10.7 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2022 filed
February 24, 2023 (No. 1-6571)
*10.8
—
Form of stock option terms for 2019 annual non-qualified option grants under the Merck & Co., Inc. 2010 Incentive Stock Plan —
Incorporated by reference to Exhibit 10.8 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2022 filed
February 24, 2023 (No. 1-6571)
*10.9
—
Form of stock option terms for 2018 quarterly and annual non-qualified option grants under the Merck & Co., Inc. 2010 Incentive Stock Plan
— Incorporated by reference to Exhibit 10.12 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2017
filed February 27, 2018 (No. 1-6571)
*10.10
—
Form of stock option terms for 2016 quarterly and annual non-qualified option grants under the Merck & Co., Inc. 2010 Incentive Stock Plan
— Incorporated by reference to Exhibit 10.19 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2016
filed February 28, 2017 (No. 1-6571)
*10.11
—
Merck & Co., Inc. 2019 Incentive Stock Plan — Incorporated by reference to Appendix C to Merck & Co., Inc.’s Schedule 14A filed April 8,
2019 (No. 1-6571) and to the Registration Statement on Form S-8 filed August 12, 2019 to register 111,000,000 shares under the 2019
Incentive Stock Plan (File No. 333-233226)
*10.12
—
Merck & Co., Inc. Change in Control Separation Benefits Plan (effective as amended and restated, as of January 1, 2013) — Incorporated
by reference to Exhibit 10.1 to Merck & Co., Inc.’s Current Report on Form 8‑K filed November 29, 2012 (No. 1-6571)
*10.13
—
Merck & Co., Inc. U.S. Separation Benefits Plan (amended and restated as of January 1, 2019) as further amended by Amendments 2019-
1 (as of December 19, 2019), 2020-1 (as of February 25, 2020), 2020-2 (as of December 10, 2020), 2021-1 (as of March 31, 2021), 2021-2
(as of December 16, 2021), 2022-1 (as of December 14, 2022), 2022-2 (as of December 13, 2021), 2023-1 (as of December 15, 2023) and
2024-1 (as of October 22, 2024)
*10.14
—
Retirement Plan for the Directors of Merck & Co., Inc. (amended and restated June 21, 1996) —Incorporated by reference to Exhibit 10.C
to MSD’s Form 10-Q Quarterly Report for the period ended June 30, 1996 filed August 13, 1996 (No. 1-3305)
*10.15
—
Merck & Co., Inc. Plan for Deferred Payment of Directors’ Compensation (Amended and Restated effective as of January 1, 2022) —
Incorporated by reference to Exhibit 10.17 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2021
filed February 25, 2022 (No. 1-6571)
*10.16
—
Offer Letter between Merck & Co., Inc. and Jennifer Zachary, dated March 16, 2018 — Incorporated by reference to Exhibit 10.28 to Merck
& Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2018 filed February 27, 2019 (No. 1-6571)
*10.17
—
Form of stock option terms for 2021 annual non-qualified option grants under the Merck & Co., Inc. 2019 Incentive Stock Plan —
Incorporated by reference to Exhibit 10.23 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2020
filed February 25, 2021 (No. 1-6571)
*10.18
—
Form of restricted stock unit terms for 2021 annual grants under the Merck & Co., Inc. 2019 Incentive Stock Plan - Incorporated by
reference to Exhibit 10.24 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2020 filed February 25,
2021 (No. 1-6571)
*10.19
—
Form of stock option terms for 2022 annual non-qualified option grants under the Merck & Co., Inc. 2019 Incentive Stock Plan —
Incorporated by reference to Exhibit 10.24 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2021
filed February 25, 2022 (No. 1-6571)
*10.20
—
Form of restricted stock unit terms for 2022 annual grants under the Merck & Co., Inc. 2019 Incentive Stock Plan — Incorporated by
reference to Exhibit 10.25 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2021 filed February 25,
2022 (No. 1-6571)
*10.21
—
Form of stock option terms for 2020 annual non-qualified option grants under the Merck & Co., Inc. 2019 Incentive Stock Plan —
Incorporated by reference to Exhibit 10.25 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2022
filed February 24, 2023 (No. 1-6571)
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*10.22
—
Form of restricted stock unit terms for 2020 annual grants under the Merck & Co., Inc. 2019 Incentive Stock Plan — Incorporated by
reference to Exhibit 10.27 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2022 filed February 24,
2023 (No. 1-6571)
*10.23
—
2021 Performance Share Unit terms for grants under the Merck & Co., Inc. 2019 Incentive Stock Plan — Incorporated by reference to
Exhibit 10.31 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2022 filed February 24, 2023 (No. 1-
6571)
*10.24
—
Terms for Restricted Stock Unit Grants under the Merck & Co., Inc. 2019 Incentive Stock Plan — Incorporated by reference to Exhibit 10.33
to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2022 filed February 24, 2023 (No. 1-6571)
*10.25
—
Restricted stock unit terms for August 3, 2022 grant to Chirfi Guindo under the Merck & Co., Inc. 2019 Incentive Stock Plan — Incorporated
by reference to Exhibit 10.35 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2022 filed February
24, 2023 (No. 1-6571)
*10.26
—
Performance share unit terms for August 3, 2022 grant to Chirfi Guindo under the Merck & Co., Inc. 2019 Incentive Stock Plan —
Incorporated by reference to Exhibit 10.36 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2022
filed February 24, 2023 (No. 1-6571)
*10.27
—
Form of stock option terms for 2023 annual non-qualified option grants under the Merck & Co., Inc. 2019 Incentive Stock Plan —
Incorporated by reference to Exhibit 10.27 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2023
filed February 26, 2024 (No. 1-6571)
*10.28
—
2022 Performance Share Unit terms for grant under the Merck & Co., Inc. 2019 Incentive Stock Plan — Incorporated by reference to
Exhibit 10.28 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2023 filed February 26, 2024 (No. 1-
6571)
*10.29
—
2023 Performance Share Unit terms for grant under the Merck & Co., Inc. 2019 Incentive Stock Plan — Incorporated by reference to
Exhibit 10.29 to Merck & Co., Inc.’s Form 10-K Annual Report for the fiscal year ended December 31. 2023 filed February 26, 2024 (No. 1-
6571)
*10.30
—
Offer Letter between Merck & Co., Inc. and Chirfi Guindo, dated June 8, 2022 — Incorporated by reference to Exhibit 10.37 to Merck & Co.,
Inc.’s Form 10-K Annual Report for the fiscal year ended December 31, 2022 filed February 24, 2023 (No. 1-6571)
*10.31
—
Form of restricted stock unit terms for 2024 annual grants under the Merck & Co., Inc. 2019 Incentive Stock Plan
*10.32
—
2024 Performance Share Unit terms for grants under the Merck & Co., Inc. 2019 Incentive Stock Plan
*10.33
—
Form of stock option terms for 2024 annual non-qualified option grants under the Merck & Co., Inc. 2019 Incentive Stock Plan
*10.34
—
Restricted stock unit terms for April 30, 2024 grant to Richard DeLuca under the Merck & Co., Inc. 2019 Incentive Stock Plan
*10.35
—
Offer Letter between Merck & Co., Inc. and Betty Larson, dated January 16, 2024
*10.36
—
Restricted stock unit terms for April 30, 2024 grant to Betty Larson under the Merck & Co., Inc. 2019 Incentive Stock Plan
19
—
Insider Trading Policy
21
—
Subsidiaries of Merck & Co., Inc.
23
—
Consent of Independent Registered Public Accounting Firm
24.1
—
Power of Attorney
24.2
—
Certified Resolution of Board of Directors
31.1
—
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2
—
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1
—
Section 1350 Certification of Chief Executive Officer
32.2
—
Section 1350 Certification of Chief Financial Officer
97
—
Policy and Procedures for Recoupment of Incentive-Based Compensation — Incorporated by reference to Exhibit 97 to Merck & Co, Inc.’s
Form 10-K Annual Report for the fiscal year ended December 31, 2023 filed February 26, 2024 (No. 1-6571)
140
Table of Contents
Exhibit 101:
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).
*
Management contract or compensatory plan or arrangement.
Long-term debt instruments under which the total amount of securities authorized does not exceed 10% of Merck & Co., Inc.’s total consolidated assets are not filed as exhibits to this report. Merck & Co.,
Inc. will furnish a copy of these agreements to the Securities and Exchange Commission on request.
Item 16. Form 10-K Summary
Not applicable.
141
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: February 25, 2025
MERCK & CO., INC.
By:
ROBERT M. DAVIS
(Chairman, Chief Executive Officer and President)
By:
/s/ JENNIFER ZACHARY
Jennifer Zachary
(Attorney-in-Fact)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures
Title
Date
ROBERT M. DAVIS
Chairman, Chief Executive Officer and President; Principal
Executive Officer
February 25, 2025
CAROLINE LITCHFIELD
Executive Vice President and Chief Financial
Officer; Principal Financial Officer
February 25, 2025
DALTON SMART
Senior Vice President Finance-Global Controller; Principal
Accounting Officer
February 25, 2025
DOUGLAS M. BAKER, JR.
Director
February 25, 2025
MARY ELLEN COE
Director
February 25, 2025
PAMELA J. CRAIG
Director
February 25, 2025
THOMAS H. GLOCER
Director
February 25, 2025
SURENDRALAL L. KARSANBHAI
Director
February 25, 2025
RISA J. LAVIZZO-MOUREY
Director
February 25, 2025
STEPHEN L. MAYO
Director
February 25, 2025
PAUL B. ROTHMAN
Director
February 25, 2025
PATRICIA F. RUSSO
Director
February 25, 2025
CHRISTINE E. SEIDMAN
Director
February 25, 2025
INGE G. THULIN
Director
February 25, 2025
KATHY J. WARDEN
Director
February 25, 2025
Jennifer Zachary, by signing her name hereto, does hereby sign this document pursuant to powers of attorney duly executed by the persons named, filed
with the Securities and Exchange Commission as an exhibit to this document, on behalf of such persons, all in the capacities and on the date stated, such persons
including a majority of the directors of the Company.
By:
/S/ JENNIFER ZACHARY
Jennifer Zachary
(Attorney-in-Fact)
142
Exhibit 4.11
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF
1934
As of February 25, 2025, Merck & Co., Inc. had eight classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended:
(i) Common Stock, (ii), 1.875% Notes due 2026, (iii) 3.250% Notes due 2032, (iv) 2.500% Notes due 2034, (v) 1.375% Notes due 2036, (vi) 3.500% Notes due
2037, (vii) 3.700% Notes due 2044 and (viii) 3.750% Notes due 2054.
Description of the Registrant’s Common Stock
Registered under Section 12 of the Securities Exchange Act of 1934
The following sets forth a description of the material terms of the common stock of Merck & Co., Inc. (“Merck”). The description is qualified in its entirety
by reference to Merck’s certificate of incorporation and by-laws, copies of which are included or incorporated by reference as exhibits to Merck’s most recently filed
Annual Report on Form 10-K. You are encouraged to read Merck’s certificate of incorporation and by-laws and the applicable provisions of the New Jersey Business
Corporation Act for additional information.
Under its certificate of incorporation, Merck is authorized to issue an aggregate of 6,520,000,000 shares of capital stock, divided into classes as follows:
•
6,500,000,000 shares of common stock, par value $0.50 per share; and
•
20,000,000 shares of preferred stock, par value $1.00 per share, issuable in one or more series.
Subject to the preferences, qualifications, limitations, voting and other rights and restrictions with respect to each class of Merck’s capital stock having any
preference or priority over Merck’s common stock, the holders of the common stock shall have and possess all rights appertaining to Merck’s capital stock. The
holders of shares of Merck’s common stock are entitled to one vote per share for each share held of record on all matters voted on by shareholders, including the
election of directors.
A majority of votes cast by shares of Merck’s common stock entitled to vote is required for:
•
adoption of a proposed amendment to the certificate of incorporation;
•
approval of a proposed plan of merger or consolidation;
•
approval of a sale, lease, exchange or other disposition of all, or substantially all, of Merck’s assets, not in the usual and regular course of business;
•
approval of a proposed plan of exchange; and
•
approval of a proposed plan of dissolution.
In addition, unless approved by the affirmative vote of holders of at least two-thirds of the shares of Merck’s common stock voted thereon by disinterested
shareholders, Merck is generally prohibited from purchasing shares of Merck’s common stock at a price in excess of a fair market price from a person known to
Merck to be the beneficial owner of more than 5% of the voting power of the then outstanding shares of Merck’s common stock, subject to exceptions for certain
open market transactions, certain public transactions, purchases pursuant to an offer to purchase made on the same terms and conditions to all holders of Merck’s
common stock and shares held by such a beneficial owner for longer than two years.
1
Holders of Merck’s common stock are entitled to participate equally in dividends when and as such dividends may be declared by Merck’s board of
directors out of funds legally available therefor. As a New Jersey corporation, Merck is subject to statutory limitations on the declaration and payment of dividends.
In the event of Merck’s liquidation, dissolution or winding up, holders of Merck’s common stock have the right to a ratable portion of assets remaining after
satisfaction in full of the prior rights of creditors, including holders of Merck’s indebtedness, all liabilities and the aggregate liquidation preferences of any
outstanding shares of Merck’s preferred stock. The holders of Merck’s common stock have no conversion, redemption, preemptive or cumulative voting rights. All of
the shares of Merck’s common stock issued by Merck are validly issued, fully paid and non-assessable.
The transfer agent and registrar for Merck’s common stock is Equinity Trust Company.
Takeover Defense
Certain provisions of Merck’s certificate of incorporation and by-laws and of the New Jersey Business Corporation Act (the “NJBCA”) may have anti-
takeover effects and could delay, defer or prevent a tender offer or takeover attempt that a shareholder might consider to be in such shareholder’s best interests,
including attempts that might result in a premium over the market price for the shares held by shareholders, and may make removal of the incumbent management
and directors more difficult.
Authorized Shares; Undesignated Preferred Stock. Merck’s certificate of incorporation authorizes the issuance of up to 6,500,000,000 shares of common
stock and 20,000,000 shares of preferred stock. These additional authorized shares may be used by Merck’s board of directors, to the extent consistent with its
fiduciary duty, to deter future attempts to gain control of Merck, and may discourage attempts by others to attempt to acquire control of Merck without negotiation
with Merck’s board of directors.
Merck’s board of directors has the sole authority, subject to the rights of any outstanding series of Merck’s preferred stock, to fix the numbers, designations,
rights, preferences and limitations of any one or more series of preferred stock, including with respect to voting, dividends, conversion, redemption and liquidation
preferences. As a result of the ability to fix voting rights for a series of preferred stock, Merck’s board of directors has the power, to the extent consistent with its
fiduciary duty, to issue a series of preferred stock to persons friendly to management in order to attempt to block a tender offer, merger or other transaction by which
a third party seeks control of Merck, and thereby assist members of management to retain their positions.
No Shareholder Action by Written Consent. Merck’s certificate of incorporation provides that shareholders may not act by written consent. Any shareholder
action must be taken at a duly called annual or special meeting.
Special Meetings of Shareholders. In addition to what is provided by the NJBCA, a special meeting may be called at any time by Merck’s board of directors
and, subject to the rights of the holders of any class or series of preferred stock then outstanding, generally may be called at any time upon the written request, in the
form prescribed in Merck’s by-laws, of the holders of record of at least 15% or more of the capital stock entitled to vote in the election of directors.
Notification of Proposed Business and Nominations for Annual Meetings. Merck’s by-laws require that written notice of any shareholder proposal for
business at an annual meeting of shareholders, or any shareholder director nomination for an annual meeting of shareholders, be received at least 120 days but no
more than 150 days prior to the anniversary date of the preceding year’s annual meeting; provided, however, in the event that the date of the annual meeting is more
than 30 days earlier or later than the anniversary date of the most recent annual meeting of shareholders, the shareholders’ notice must be so delivered not later than
the close of business on the later of (i) the 120th day prior to such annual meeting of shareholders or (ii) the 10th day following the day on which a public
announcement of the annual meeting date is first made. Also, Merck’s by-laws allow a shareholder or a group of no more than 20 shareholders, who or which has
maintained continuous qualifying ownership of at least 3% of Merck’s
2
outstanding common stock for at least three years and has complied with the other requirements set forth in the by-laws, to include director nominees constituting up
to 20% of the board of directors in Merck’s proxy materials for an annual meeting of shareholders. A request to include such a nominee must be received at least 120
days but no more than 150 days prior to the anniversary of the date Merck commenced mailing of its proxy materials in connection with the most recent annual
meeting of shareholders.
No Cumulative Voting. Merck’s certificate of incorporation does not permit cumulative voting in the election of directors.
Business Combinations with Interested Shareholder. The NJBCA provides that no corporation organized under the laws of New Jersey (a “resident domestic
corporation”) may engage in any “business combination” (as defined in the NJBCA) with any interested shareholder (generally a 10% or greater shareholder) of such
corporation for a period of five years following such interested shareholder’s stock acquisition, unless either (i) such stock acquisition is approved by the board of
directors of such corporation prior to the stock acquisition and any subsequent business combinations with the interested shareholder are approved by (A) members
of the board of directors independent of the interested shareholder and (B) the holders of a majority of the voting stock not beneficially owned by the interested
shareholder or (ii) such business combination is approved by the board of directors of such corporation prior to the stock acquisition.
In addition, no resident domestic corporation may engage, at any time, in any business combination with any interested shareholder of such corporation
other than: (i) a business combination approved by the board of directors prior to the stock acquisition, (ii) a business combination approved by the affirmative vote
of the holders of two-thirds of the voting stock not beneficially owned by such interested shareholder at a meeting called for such purpose, (iii) a business
combination in which the interested shareholder pays a formula price designed to ensure that all other shareholders receive at least the highest price per share paid by
such interested shareholder or (iv) a business combination approved (A) by the board of directors independent of the interested shareholder prior to the
consummation of the business combination and (B) the holders of a majority of the voting stock not beneficially owned by the interested shareholder at a meeting
called for such purpose if the interested shareholder’s stock acquisition was approved by the board of directors prior to the consummation of such stock acquisition.
Board of Directors. Merck’s certificate of incorporation provides that, subject to the rights of the holders of shares of any series of preferred stock then
outstanding, the number of directors composing Merck’s board of directors will not exceed eighteen, and that a director can only be removed by shareholder vote if
there is cause for the director’s removal. A majority of the directors then constituting Merck’s board of directors are authorized to fill vacancies on the board of
directors, whether created by removal for cause, resignation or otherwise.
3
Description of the Registrant’s 1.875% Notes due 2026, 2.500% Notes due 2034 and 1.375% Notes due 2036
Registered under Section 12 of the Securities Exchange Act of 1934
In this description, unless the context requires otherwise:
•
“2026 notes” means the 1.875% Notes due 2026 of Merck & Co., Inc.;
•
“2034 notes” means the 2.500% Notes due 2034 of Merck & Co., Inc.;
•
“2036 notes” means the 1.375% Notes due 2034 of Merck & Co., Inc.;
•
“holder” means a direct holder and not a street name or other indirect holder of notes;
•
“notes” means the 2026 notes, 2034 notes and 2036 notes, collectively; and
•
“we,” “our” and “us” refer to Merck & Co., Inc., but not to any of Merck & Co., Inc.’s subsidiaries.
The following sets forth a description of the material terms of the notes. The description is qualified in its entirety by reference to the indenture, dated as of
January 6, 2010, between us and U.S. Bank Trust National Association, as trustee (a copy of which is included as Exhibit 4.1 to our Current Report on Form 8-K
filed on December 10, 2010) and, as applicable, the officers’ certificate pursuant to such indenture with respect to the 2026 notes, dated October 15, 2014, including
the form of the 2026 notes (a copy of which is included as Exhibit 4.2 to our Current Report on Form 8-K filed on October 15, 2014), the officers’ certificate
pursuant to such indenture with respect to the 2034 notes, dated October 15, 2014, including the form of the 2034 notes (a copy of which is included as Exhibit 4.3 to
our Current Report on Form 8-K filed on October 15, 2014) or the officers’ certificate pursuant to such indenture with respect to the 2036 notes, dated November 2,
2016, including the form of the 2036 notes (a copy of which is included as Exhibit 4.2 to our Current Report on Form 8-K filed on November 2, 2016). You are
encouraged to read such indenture and officers’ certificates for additional information.
The 2026 notes, the 2034 notes and the 2036 notes are each a separate series of notes under the indenture.
The 2026 notes are initially limited to €1,000,000,000 aggregate principal amount, which amount remains outstanding as of February 25, 2025, and will
mature on October 15, 2026. The 2034 notes are initially limited to €500,000,000 aggregate principal amount, which amount remains outstanding as of February 25,
2025, and will mature on October 15, 2034. The 2036 notes are initially limited to €500,000,000 aggregate principal amount, which amount remains outstanding as
of February 25, 2025, and will mature on November 2, 2036.
The notes are unsecured and rank equally with all our other unsecured and unsubordinated indebtedness from time to time outstanding. The notes are not
guaranteed by any of our subsidiaries and are therefore structurally subordinated to all liabilities of our subsidiaries from time to time outstanding, including any
guarantees provided by our subsidiaries. The notes also are effectively subordinated to any secured debt we or our subsidiaries incur to the extent of the value of any
assets securing such debt.
The notes were issued in denominations of €100,000 and integral multiples of €1,000 in excess thereof.
We may issue as many distinct series of debt securities under the indenture as we wish. A series of debt securities may be guaranteed by one or more of our
subsidiaries. There is no limit on the amount of debt securities we may issue under the indenture and the provisions of the indenture allow us to issue debt securities
with terms different from those previously issued under the indenture. Also, as discussed below under “—Further Issues,” we
4
may “reopen” a previous issue of a series of debt securities and issue additional debt securities of that series. We also may issue other debt under other indentures or
documentation, containing provisions different from those included in the indenture or applicable to the notes.
The notes are listed on the New York Stock Exchange. We have no obligation to maintain such listing and we may delist the notes at any time.
Elavon Financial Services DAC, UK Branch initially acts as principal paying agent (the “paying agent”) (and with respect to the 2026 notes and the 2034
notes, also serves as the transfer agent). Elavon Financial Services DAC initially acts as security registrar (the “security registrar”) (and with respect to the 2036
notes, also serves as the transfer agent) and U.S. Bank Trust National Association initially acts as trustee (“trustee”) for the notes. We have entered into an issuing
and paying agency agreement in relation to the notes between us, U.S. Bank Trust National Association, as trustee, Elavon Financial Services DAC, UK Branch, as
principal paying agent (and with respect to the 2026 notes and the 2034 notes, as transfer agent) and Elavon Financial Services DAC as security registrar (and with
respect to the 2036 notes, as transfer agent). Payment of principal of and interest on the notes is made through the office of the principal paying agent in London. The
terms “principal paying agent” and “paying agent” shall include any successors appointed from time to time in accordance with the provisions of the issuing and
paying agency agreement, and any reference to an “agent” or “agents” shall mean any or all (as applicable) of such persons.
Interest
The 2026 notes bear interest at a rate of 1.875% per annum, the 2034 notes bear interest at a rate of 2.500% per annum and the 2036 notes bear interest at a
rate of 1.375% per annum. Interest on the 2026 notes and the 2034 notes is payable annually on October 15 of each year and interest on the 2036 notes is payable
annually on November 2 of each year to the person in whose name such notes were registered at the close of business on the fifteenth calendar day before the next
interest payment date. If any payment date for the notes is not a business day, payment is made on the next business day, but we are not liable for any additional
interest as a result of the delay in payment. With respect to the notes, by business day, we mean any Monday, Tuesday, Wednesday, Thursday or Friday which is not a
day when banking institutions are authorized or obligated by law or executive order to be closed in The City of New York or London and, for any place of payment
outside of The City of New York or London, in such place of payment, and on which the Trans-European Automated Real-time Gross Settlement Express Transfer
system (the TARGET2 system), or any successor thereto, operates.
With respect to each series of notes, we compute the amount of interest payable on the basis of (i) the actual number of days in the period for which interest
is being calculated and (ii) the actual number of days from (and including) the last date on which interest was paid on the notes of such series (or October 15, 2014
with respect to the 2026 notes and the 2034 notes, and November 2, 2016 with respect to the 2036 notes, if no interest has been paid on the notes of such series) to
(but excluding) the next scheduled interest payment date. This payment convention is referred to as ACTUAL/ACTUAL (ICMA) as defined in the rulebook of the
International Capital Market Association.
Payments in Euros
All payments of interest and principal, including payments made upon any redemption of the notes, are payable in euros. If, at any time, the euro is
unavailable to us due to the imposition of exchange controls or other circumstances beyond our control or if the euro is no longer being used by the then member
states of the European Monetary Union that have adopted the euro as their currency or for the settlement of transactions by public institutions of or within the
international banking community, then all payments in respect of the notes will be made in U.S. dollars until the euro is again available to us or so used. In such
circumstances, the amount payable on any date in euros will be converted into U.S. dollars on the basis of the most recently available market exchange rate for
5
euros. Any payment in respect of the notes so made in U.S. dollars will not constitute an event of default under the notes or the indenture governing the notes.
Neither the trustee nor the paying agent shall have any responsibility for any calculation or conversion in connection with the foregoing.
Investors are subject to foreign exchange risks as to payments of principal and interest that may have important economic and tax consequences to them.
Optional Redemption
Each series of notes is redeemable in whole or in part, at our option at any time or from time to time, at a redemption price equal to the greater of (i) 100%
of the principal amount of the notes to be redeemed or (ii) the sum of the present values of the Remaining Scheduled Payments (as defined below) (not including any
portion of such payment of interest accrued as of the date of redemption) discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the
applicable Comparable Government Bond Rate (as defined below), plus 15 basis points with respect to the 2026 notes, the Comparable Government Bond Rate plus
15 basis points with respect to the 2034 notes and the Comparable Government Bond Rate plus 15 basis points with respect to the 2036 notes, plus, in each case,
accrued and unpaid interest on the principal amount being redeemed to, but excluding, the redemption date.
On or after July 15, 2026 for the 2026 notes, July 15, 2034 for the 2034 notes and August 2, 2036 for the 2036 notes (three months prior to the maturity date
of the 2026 notes, the 2034 notes or the 2036 notes, as applicable), we may redeem in whole or in part the 2026 notes, the 2034 notes or the 2036 notes, as
applicable, at any time or from time to time, at our option, at a redemption price equal to 100% of the principal amount of the applicable notes being redeemed, plus
accrued and unpaid interest on the principal amount being redeemed to, but excluding, the redemption date.
We are required to give notice of redemption at least 30 days, but no more than 60 days, prior to the redemption date. The notice will be mailed to the
registered address of each holder of that series of notes. The principal amount of a note remaining outstanding after a redemption in part shall be €100,000 or an
integral multiple of €1,000 in excess thereof.
“Comparable Government Bond Rate” means, with respect to any redemption date, the price, expressed as a percentage (rounded to three decimal places,
with 0.0005 being rounded upwards), at which the gross redemption yield on the notes to be redeemed, if they were to be purchased at such price on the third
business day prior to the date fixed for redemption, would be equal to the gross redemption yield on such business day of the Comparable Government Bond (as
defined below) on the basis of the middle market price of the Comparable Government Bond prevailing at 11:00 a.m. (London time) on such business day as
determined by an independent investment bank selected by us.
“Comparable Government Bond” means, in relation to any Comparable Government Bond Rate calculation, at the discretion of an independent investment
bank selected by us, a German federal government bond whose maturity is closest to the maturity of the notes to be redeemed, or if such independent investment
bank in its discretion determines that such similar bond is not in issue, such other German government bond as such independent investment bank may, with the
advice of three brokers of, and/or market makers in, German government bonds selected by us, determine to be appropriate for determining the Comparable
Government Bond Rate.
“Remaining Scheduled Payments” means, with respect to each note to be redeemed, the remaining scheduled payments of principal of and interest on the
note that would be due after the related redemption date but for the redemption. If that redemption date is not an interest payment date with respect to a note, the
amount of the
6
next succeeding scheduled interest payment on the note will be reduced by the amount of interest accrued on the note to the redemption date.
If fewer than all of the notes of any series are to be redeemed, the trustee will select the particular notes or portions thereof for redemption from the
outstanding notes not previously called, pro rata or by lot, or in such other manner as we direct each in accordance with the depositary’s procedures.
Unless we default in payment of the redemption price, on and after the redemption date interest will cease to accrue on the notes or portions thereof called
for redemption.
The notes are also subject to redemption if certain events occur involving United States taxation. See “—Taxation Redemption.”
Additional Amounts
All payments of principal and interest in respect of the notes are made free and clear of, and without deduction or withholding for or on account of any
present or future taxes, duties, assessments or other governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by the United States
or any political subdivision or taxing authority of or in the United States (collectively, “Taxes”), unless such withholding or deduction is required by law.
In the event such withholding or deduction of Taxes is required by law, subject to the limitations described below, we will pay to the holder of any note that
is not beneficially owned by a U.S. Holder (as defined below) such additional amounts (“Additional Amounts”) as may be necessary in order that every net payment
received by the beneficial owner of such note of principal of or interest or any other amount payable on the notes (including upon redemption), after deduction or
withholding for or on account of such Taxes, will not be less than the amount provided for in such note to be then due and payable before deduction or withholding
for or on account of such Taxes.
However, our obligation to pay Additional Amounts shall not apply to:
(a)
any Taxes which would not have been so imposed but for:
(1)
the existence of any present or former connection between such holder or beneficial owner (or between a fiduciary, settlor, beneficiary,
member or shareholder or other equity owner of, or a person having a power over, such holder or beneficial owner, if such holder or
beneficial owner is an estate, a trust, a limited liability company, a partnership, a corporation or other entity) and the United States,
including, without limitation, such holder or beneficial owner (or such fiduciary, settlor, beneficiary, member, shareholder or other equity
owner or person having such a power) being or having been a citizen or resident or treated as a resident of the United States or being or
having been engaged in a trade or business in the United States or being or having been present in the United States or having or having
had a permanent establishment in the United States;
(2)
the failure of such holder or beneficial owner to comply with any certification, information or other reporting requirement, if compliance
is required under United States tax laws and regulations to establish entitlement to a partial or complete exemption from such Taxes
(including, but not limited to, the requirement to provide Internal Revenue Service Form W-8BEN, Form W-8BEN-E, Form W-8ECI, or
any subsequent versions thereof or successor thereto); or
7
(3)
such holder’s or beneficial owner’s present or former status as a personal holding company or a foreign personal holding company with
respect to the United States, as a controlled foreign corporation with respect to the United States, as a passive foreign investment company
with respect to the United States, as a foreign tax exempt organization with respect to the United States or as a corporation which
accumulates earnings to avoid United States federal income tax;
(b)
any Taxes imposed by reason of the holder or beneficial owner:
(1)
owning or having owned, directly or indirectly, actually or constructively, 10% or more of the total combined voting power of all classes
of our stock, as described in section 871(h)(3) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”),
(2)
being a bank receiving interest described in section 881(c)(3)(A) of the Internal Revenue Code, or
(3)
being a controlled foreign corporation with respect to the United States that is related to us by stock ownership;
(c)
any Taxes which would not have been so imposed but for the presentation by the holder or beneficial owner of such note for payment on a date
more than 30 days after the date on which such payment became due and payable or the date on which payment of the note is duly provided for and
notice is given to holders, whichever occurs later, except to the extent that the holder or beneficial owner would have been entitled to such
Additional Amounts on presenting such note on any date during such 30-day period;
(d)
any estate, inheritance, gift, sales, excise, transfer, personal property, wealth or similar Taxes;
(e)
any Taxes which are payable otherwise than by withholding from a payment on such note;
(f)
any Taxes which are payable by a holder that is not the beneficial owner of the note, or a portion of the note, or that is a fiduciary, partnership,
limited liability company or other similar entity, but only to the extent that a beneficial owner, a beneficiary or settlor with respect to such fiduciary
or member of such partnership, limited liability company or similar entity would not have been entitled to the payment of an additional amount had
such beneficial owner, settlor, beneficiary or member received directly its beneficial or distributive share of the payment;
(g)
any Taxes required to be withheld by any paying agent from any payment on any note, if such payment can be made without such withholding by
at least one other paying agent;
(h)
any Taxes imposed under Sections 1471 through 1474 of the Internal Revenue Code (or any amended or successor provisions), any current or
future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code or any fiscal or regulatory
legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such
sections of the Code; or
(i)
any combination of items (a), (b), (c), (d), (e), (f), (g) and (h).
For purposes of this section, the acquisition, ownership, enforcement, or holding of or the receipt of any payment with respect to a note will not constitute a
connection (1) between the holder or beneficial owner and the
8
United States or (2) between a fiduciary, settlor, beneficiary, member or shareholder or other equity owner of, or a person having a power over, such holder or
beneficial owner if such holder or beneficial owner is an estate, a trust, a limited liability company, a partnership, a corporation or other entity and the United States.
Any reference in this description, in the indenture or in the notes to principal or interest or other payment on the notes shall be deemed to refer also to
Additional Amounts which may be payable under the provisions of this section.
We will pay all stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority therein
with respect to the issuance of the notes pursuant to this offering.
Except as specifically provided under the heading “—Additional Amounts,” we will not be required to make any payment with respect to any tax, duty,
assessment or other governmental charge imposed by any government or any political subdivision or taxing authority of or in the United States.
A “U.S. Holder” is a beneficial owner of a note or notes that is for U.S. federal income tax purposes:
•
an individual who is a citizen or resident of the United States;
•
a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
•
an estate, the income of which is subject to U.S. federal income taxation regardless of the source of that income; or
•
a trust, if (1) a U.S. court is able to exercise primary supervision over the trust’s administration and one or more “United States persons” (within the
meaning of the Internal Revenue Code) have the authority to control all of the trust’s substantial decisions, or (2) the trust has a valid election in
effect under applicable Treasury regulations to be treated as a “United States person.”
Taxation Redemption
The notes may be redeemed at our option, in whole but not in part, at a redemption price equal to 100% of the principal amount of the notes to be redeemed,
together with interest accrued and unpaid to, but excluding, the redemption date, at any time, on giving not less than 30 nor more than 60 days’ notice in accordance
with “Notices” below if:
(a)
we have or will become obligated to pay Additional Amounts as a result of (i) any change in or amendment to the laws, regulations or rulings of the
United States or any political subdivision or any taxing authority of or in the United States affecting taxation, or (ii) any change in or amendment to
an official application, interpretation, administration or enforcement of such laws, regulations or rulings, which change or amendment is announced
or becomes effective, with respect to the 2026 notes and the 2034 notes, on or after October 6, 2014, and with respect to the 2036 notes, on or after
October 26, 2016; provided we reasonably determine that such obligation cannot be avoided by our taking reasonable measures available to us
without significant difficulty, cost or expense, or
(b)
any action shall have been taken by a taxing authority, or any action has been brought in a court of competent jurisdiction, in the United States or
any political subdivision or taxing authority of or in the United States, including any of those actions specified in (a) above, whether or not such
action was taken or brought with respect to us, or any change, clarification, amendment, application or
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interpretation of such laws, regulations or rulings shall be officially proposed, in any such case, with respect to the 2026 notes and the 2034 notes,
on or after October 6, 2014, and with respect to the 2036 notes, on or after October 26, 2016, which results in a substantial likelihood that we will
be required to pay Additional Amounts on the next interest payment date.
However, no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which we would be, in the case of a redemption for
the reasons specified in (a) above, or there would be a substantial likelihood that we would be, in the case of a redemption for the reasons specified in (b) above,
obligated to pay such Additional Amounts if a payment in respect of the notes were then due and, at the time such notification of redemption is given, such
circumstance remains in effect.
Prior to the publication of any notice of redemption pursuant to this section, in the case of a redemption for the reasons specified in (a) or (b) above, we will
deliver to the trustee:
(1)
a certificate signed by one of our duly authorized officers stating that we are entitled to effect such redemption and setting forth a
statement of facts showing that the conditions precedent to our right so to redeem have occurred, and
(2)
a written opinion of independent legal counsel of recognized standing to the effect that we have or will become obligated to pay such
Additional Amounts as a result of such change or amendment or that there is a substantial likelihood that we will be required to pay such
Additional Amounts as a result of such action or proposed change, clarification, amendment, application or interpretation, as the case may
be.
Such notice, once delivered by us to the trustee, will be irrevocable.
Modification and Waiver
There are three types of changes we can make to the indenture and the notes.
Changes Requiring Holder Approval. First, there are changes that cannot be made to the notes of any series without specific approval by each holder of the
notes of such series affected thereby. Following is a list of those types of changes:
•
change the payment due date of any installment of the principal or any premium or interest on a note stated in the note;
•
reduce any amounts due on a note;
•
change the place or currency of payment on a note;
•
impair the holders’ right to sue for payment;
•
reduce the percentage of notes of any series the holders of which must consent to modify or amend the indenture;
•
reduce the percentage of notes of any series the holders of which must consent to waive compliance with certain provisions of the indenture or to
waive certain defaults; and
•
modify any other aspect of the provisions dealing with modification and waiver of the indenture except to increase any such percentage or to
provide that certain other provisions of the indenture
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cannot be modified or waived without the consent of the holder of each outstanding security affected thereby.
Changes Requiring a Majority Vote. The second type of change to the indenture and the notes is the kind that requires a vote in favor by holders owning not
less than a majority of the principal amount of the notes of the particular series affected. Most changes fall into this category, such as if we wish to obtain a waiver of
all or part of the restrictive covenants described below, or a waiver of a past default. However, we cannot obtain a waiver of a payment default or any other aspect of
the indenture or the notes listed in the first category above under “—Changes Requiring Holder Approval” unless we obtain the individual consent of each holder of
the notes of such series affected thereby to the waiver.
Changes Not Requiring Approval. The third type of change does not require any vote by holders of notes. This type is limited to the addition or release of a
guarantee, corrections and clarifications and other changes that would not adversely affect holders of the notes.
Further Details Concerning Voting. When taking a vote, we use the U.S. dollar equivalent to decide how much principal amount to attribute to a note.
Notes will not be considered outstanding and therefore will not carry voting rights if we have deposited or set aside in trust for the holders thereof money
for their payment or redemption. Notes will also not be eligible to vote if they have been fully defeased as described under “—Defeasance—Full Defeasance.”
We may set any day as a record date for the purpose of determining the holders of outstanding notes that are entitled to vote or take other action under the
indenture. In some circumstances, the trustee may set a record date for action by holders.
Street name and other indirect holders should consult their banks or brokers for information on how approval may be granted or denied if we seek to
change the indenture or the notes or request a waiver.
Mergers and Similar Events
We may consolidate or merge with another company or firm. We may also convey, transfer or lease all of our properties and assets substantially as an
entirety to another firm, or buy or lease substantially all of the assets of another firm. However, we may not take any of these actions unless the following conditions,
among others, are met:
•
We are the surviving entity or, when we merge out of existence or convey, transfer or lease all of our properties and assets substantially as an
entirety, the other firm must be a corporation, limited liability company, partnership or trust organized under the laws of a U.S. state or the District
of Columbia or under federal law and it must agree to be legally responsible for the notes.
•
The merger, sale of assets or other transaction must not cause a default on the notes, and we must not already be in default unless the merger or
other transaction would cure the default. For purposes of this no-default test, a default would include an event of default, as described under “—
Events of Default,” that has occurred and not been cured. A default for this purpose would also include the occurrence of any event that would be
an event of default if we received the required notice of our default or if under the indenture the default would become an event of default after
existing for a specific period of time.
•
It is possible that the merger, sale of assets or other transaction would cause some of our property to become subject to a mortgage or other legal
mechanism giving lenders preferential rights in that property over other lenders or over our general creditors if we fail to pay them back. We have
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promised to limit these preferential rights, as discussed under “—Restrictive Covenants.” If a merger or other transaction would create any liens on
any of our property, we must comply with those restrictive covenants. We would do this either by deciding that the liens were permitted, or by
following the requirements of the restrictive covenants to grant an equivalent or higher-ranking lien to the holders of the notes on the same property
that we own.
If the conditions described above are satisfied with respect to any series of notes, we do not need to obtain the approval of the holders of those notes in order
to merge or consolidate or to sell our assets. Also, these conditions apply only if we wish to merge or consolidate with another entity or convey, transfer or lease all
of our properties and assets substantially as an entirety. We do not need to satisfy these conditions if we enter into other types of transactions, including any
transaction in which we acquire the stock or assets of another entity, any transaction that involves a change of control but in which we do not merge or consolidate
and any transaction in which we convey, transfer or lease less than all of our properties and assets substantially as an entirety. It is possible that these other types of
transactions may result in a reduction in our credit rating, may reduce our operating results or may impair our financial condition. However, the holders of notes have
no approval right with respect to any transaction of this type.
Restrictive Covenants
Restrictions on Secured Debt. Some of our property may be subject to a mortgage or other legal mechanism that gives our lenders preferential rights in that
property over other lenders, including the holders of the notes, or over our general creditors if we fail to pay them back. These preferential rights are called liens.
Debt which is protected by these preferential rights is called secured debt. In the indenture, we promise that neither we nor our domestic subsidiaries (as defined
below) will incur any new secured debt that is secured by a lien on any of our or our domestic subsidiaries’ principal domestic manufacturing properties (as defined
below), or on any shares of stock of any of our domestic subsidiaries that own or lease a principal domestic manufacturing property, unless we grant an equivalent or
higher-ranking lien on the same property to the holders of the notes and other outstanding debt securities issued under the indenture.
We do not need to comply with this restriction if the amount of all debt that would be secured by liens on principal domestic manufacturing properties,
including the new debt, the notes and other outstanding debt securities issued under the indenture which we would so secure as described in the previous sentence,
and all attributable debt (as defined below) that results from a sale and leaseback transaction involving principal domestic manufacturing properties, is less than 10%
of our consolidated net tangible assets (as defined below).
This restriction on secured debt does not apply to debt secured by certain types of liens, and we can disregard this secured debt when we calculate the limits
imposed by this restriction. These types of liens are:
•
liens on the property of any of our domestic subsidiaries, or on their shares of stock, if those liens existed at the time the corporation became our
domestic subsidiary;
•
with respect to any series of notes, any lien existing on the date of issuance of such notes;
•
liens in favor of us or our domestic subsidiaries;
•
liens in favor of U.S. governmental bodies that we granted in order to assure our payments to such bodies that we owe by law or because of a
contract we entered into;
•
liens in favor of any customer arising in respect of payments made by or on behalf of a customer for goods produced for, or services rendered to,
customers in the ordinary course of business not exceeding the amount of those payments;
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•
statutory liens, liens for taxes or assessments or governmental charges or levies not yet due or delinquent or which can be paid without penalty or
are being contested in good faith, landlord’s liens on leased property, easements and other liens of a similar nature;
•
liens on property or shares of stock that existed at the time we acquired them, including property we may acquire through a merger or similar
transaction, or that we granted in order to purchase the property, which are sometimes called purchase money mortgages; and
•
debt secured by liens that extend, renew or replace any of these types of liens.
We and our subsidiaries may have as much unsecured debt as we may choose.
Restrictions on Sales and Leasebacks. We promise that neither we nor any of our domestic subsidiaries will enter into any sale and leaseback transaction
involving a principal domestic manufacturing property, unless we comply with this restrictive covenant. A sale and leaseback transaction generally is an arrangement
between us or a domestic subsidiary and a bank, insurance company or other lender or investor where we or the domestic subsidiary sell a property to a lender or
investor more than 120 days after the acquisition of the property or the completion of construction of the property and the beginning of its full operation and we lease
the property back from the lender.
We can comply with this restrictive covenant in either of two ways:
•
First, we will be in compliance if we or our domestic subsidiary could grant a lien on the principal domestic manufacturing property in an amount
equal to the attributable debt for the sale and leaseback transaction without being required to grant an equivalent or higher-ranking lien to the
holders of the notes and other outstanding debt securities issued under the indenture under the restriction on secured debt described above.
•
Second, we can comply if we retire an amount of our or any domestic subsidiary’s funded debt (as defined below) which is not subordinated in
right of payment to any outstanding notes or other outstanding debt securities issued under the indenture, within 120 days of the transaction, equal
to the greater of the net proceeds of the sale of the principal domestic manufacturing property that we lease in the transaction or the fair market
value of that property, subject to credits for voluntary retirements of notes and other outstanding debt securities issued under the indenture and
funded debt we or the domestic subsidiary may make.
This restriction on sales and leasebacks does not apply to any sale and leaseback transaction that is between us and one of our domestic subsidiaries or
between domestic subsidiaries, or that involves a lease for a period of three years or less.
Definitions Relating to our Restrictive Covenants. Following are summaries of the meanings of the terms that are important in understanding the restrictive
covenants previously described:
“Attributable debt” means the total net amount of rent, discounted at 1% per annum over the weighted average yield to maturity of the outstanding notes and
other outstanding debt securities issued under the indenture compounded semi-annually, that is required to be paid during the remaining term of any lease.
“Consolidated net tangible assets” is the total amount of assets, less reserves and certain other permitted deductible items, after subtracting all current
liabilities and all goodwill, trade names, trademarks, patents, unamortized debt discounts and expenses and similar intangible assets, as such amounts appear on our
most recent consolidated balance sheet and computed in accordance with generally accepted accounting principles.
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A “domestic subsidiary” means any of our subsidiaries which transacts substantially all of its business in the United States, has substantially all of its fixed
assets located in the United States, or owns or leases principal domestic manufacturing property. However, a subsidiary whose principal business is financing our
operations outside of the United States is not a domestic subsidiary. A subsidiary is a corporation in which we and/or one or more of our other subsidiaries owns at
least 50% of the voting stock (generally defined as stock that ordinarily permits its owners to vote for the election of directors).
“Funded debt” means all debt for borrowed money that either has a maturity of 12 months or more from the date on which the calculation of funded debt is
made or has a maturity of less than 12 months from that date but is by its terms renewable or extendible beyond 12 months from that date at the option of the
borrower.
A “principal domestic manufacturing property” is any building or other structure or facility, and the land on which it sits and its associated fixtures, that we
use primarily for manufacturing, processing or warehousing, that is located in the United States and that has a gross book value in excess of 1% of our consolidated
net tangible assets, other than a building, structure or other facility that our board of directors has determined is not of material importance to the total business that
we and our subsidiaries conduct or a building or structure which is financed by obligations issued by a state, a territory, or a possession of the United States, or any
political subdivision of any of the foregoing, or the District of Columbia, the interest of which is excludable from gross income of the holders under provisions of the
tax code.
Further Issues
We may, without the consent of holders of any series of the notes, issue additional notes having the same ranking and the same interest rate, maturity and
other terms as the notes of that series. Any additional notes of any series, together with the outstanding notes of the applicable series, will constitute a single series of
notes under the indenture. No additional notes may be issued if an event of default has occurred and is continuing with respect to the applicable series of notes.
Additional notes cannot be issued under the same CUSIP, ISIN or Common Code number unless the additional notes and original notes are fungible for U.S. federal
income tax purposes.
Defeasance
Full Defeasance. If there is a change in federal tax law, as described below, we can legally release ourselves from any payment or other obligations on the
notes of a series if we put in place other arrangements for the holders of such notes to be repaid. This is called full defeasance. In order to achieve full defeasance, we
must do the following, among other things:
•
We must deposit in trust for the benefit of all holders of the notes of the series any combination of money (in euros) and Federal Republic of
Germany obligations (as defined below) that will generate enough cash to make interest, principal and any other payments on the notes of that
series on their various due dates.
•
There must be a change in current federal tax law or an IRS ruling that lets us make the above deposit without causing holders or beneficial owners
of the notes of the series to be taxed on such notes any differently than if we did not make the deposit and just repaid such notes ourselves. (Under
current federal tax law, the deposit and our legal release from such notes would be treated as though we took back beneficial owners’ notes and
gave them their share of the cash and notes or bonds deposited in trust. In that event, beneficial owners could recognize gain or loss on the notes
they give back to us.)
•
We must deliver to the trustee a legal opinion of our counsel confirming the tax law change described above.
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If we ever did accomplish full defeasance, as described above, holders of defeased notes would have to rely solely on the trust deposit for repayment on
such notes. Holders of such notes could not look to us for repayment in the unlikely event of any shortfall.
Covenant Defeasance. Under current federal tax law, we can make the same type of deposit described above and be released from some of the restrictive
covenants in the notes. This is called covenant defeasance. In that event, holders of notes would lose the protection of those restrictive covenants but would gain the
protection of having money and securities set aside in trust to repay the notes. In order to achieve covenant defeasance of the notes of a series, we must do the
following:
•
We must deposit in trust for the benefit of all holders of the notes of the series any combination of money (in euros) and Federal Republic of
Germany obligations that will generate enough cash to make interest, principal and any other payments on the notes on their various due dates.
•
We must deliver to the trustee a legal opinion of our counsel confirming that under current federal income tax law we may make the above deposit
without causing holders or beneficial owners of the notes to be taxed on the notes any differently than if we did not make the deposit and just
repaid the notes ourselves.
If we accomplish covenant defeasance, the following provisions of the indenture and the notes would no longer apply:
•
Our promises regarding conduct of our business previously described under “—Restrictive Covenants.”
•
Restrictions regarding mergers or similar transactions, as described under “—Mergers and Similar Events.”
•
The events of default relating to mergers or similar transactions and either of the restrictive covenants described under “—Restrictive Covenants.”
If we accomplish covenant defeasance, holders of notes can still look to us for repayment of the notes if there were a shortfall in the trust deposit. In fact, if
one of the remaining events of default occurred, such as our bankruptcy, and the notes become immediately due and payable, there may be such a shortfall in the
trust deposit.
“Federal Republic of Germany obligations” means (1) securities that are direct obligations of the Federal Republic of Germany for the payment of which its
full faith and credit is pledged or (2) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the Federal Republic of
Germany, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the Federal Republic of Germany, which, in either case under
clauses (1) or (2) are not callable or redeemable at the option of the issuer thereof.
Events of Default
Holders of notes have special rights if an event of default occurs and is not cured, as described later in this subsection.
The term event of default with respect to each series of notes means any of the following:
•
We do not pay the principal or any premium on such series of notes on its due date.
15
•
We do not pay interest on such series of notes within 30 days of its due date.
•
We remain in breach of either of the restrictive covenants described under “—Restrictive Covenants” or any other covenant or warranty in the
indenture for 90 days after we receive a notice of default stating we are in breach. The notice must be sent by either the trustee or holders of at least
25% of the principal amount of notes of the affected series.
•
We file for bankruptcy or other specific events of bankruptcy, insolvency or reorganization occur.
•
We do not pay Additional Amounts on such series of notes within 30 days after such payment is due.
Any payment in respect of the notes made in U.S. dollars due to the unavailability or nonuse of the euro as discussed under “—Payments in Euros” will not
constitute an event of default under the notes or the indenture governing the notes.
If an event of default has occurred and has not been cured, the trustee or the holders of at least 25% in principal amount of the outstanding notes of the
affected series may declare the entire principal amount of all the notes of that series to be due and immediately payable. This is called a declaration of acceleration.
The holders of at least a majority in principal amount of the notes of the affected series may cancel a declaration of acceleration of maturity.
Except in cases of default, where the trustee has some special duties, the trustee is not required to take any action under the indenture at the request of any
holders unless such holders offer the trustee reasonable protection, called an indemnity, against expenses and liability. If reasonable indemnity is provided, the
holders of a majority in principal amount of the outstanding notes of the relevant series may direct the time, method and place of conducting any lawsuit or other
formal legal action seeking any remedy available to the trustee. These majority holders may also direct the trustee in performing any other action under the indenture
with respect to the notes of the applicable series.
Before a holder of notes of any series bypasses the trustee and brings its own lawsuit or other formal legal action or takes other steps to enforce its rights or
protect its interests relating to the notes of such series, the following must occur:
•
The holder must give the trustee written notice that an event of default has occurred and remains uncured.
•
The holders of at least 25% in principal amount of all outstanding notes of the relevant series must make a written request that the trustee take
action because of the default, and must offer indemnity reasonably satisfactory to the trustee against the cost and other liabilities of taking that
action.
•
The trustee must have not received from holders of a majority in principal amount of the outstanding notes of that series a direction inconsistent
with the written notice.
•
The trustee must have not taken action for 60 days after receipt of the above notice and offer of indemnity.
However, a holder of notes is entitled at any time to bring a lawsuit for the payment of money due on its notes on or after their due date.
16
Street name and other indirect holders should consult their banks or brokers for information on how to give notice or direction to or make a request of the
trustee and to make or cancel a declaration of acceleration.
We furnish to the trustee every year a written statement of our principal executive, financial or accounting officer certifying that to the best of such signer’s
knowledge we are in compliance with the indenture and the notes, or else specifying any default.
Form, Exchange and Registration of Transfer
We issued the notes only in fully registered form and without interest coupons.
A holder of notes may have its notes broken into more notes of smaller denominations of not less than €100,000 or combined into fewer notes of larger
denominations, as long as the total principal amount is not changed. This is called an exchange.
A holder of notes may exchange or register a transfer of notes at the office of the trustee. The trustee acts as our agent for registering notes in the names of
holders and registering transfers of notes. We may change this appointment to another entity or perform it ourselves. The entity performing the role of maintaining
the list of registered holders is called the security registrar. It also registers transfers. A holder of notes may also replace lost, stolen or mutilated notes at that office.
The trustee’s agent may require an indemnity before replacing any notes.
A holder of notes is not required to pay a service charge to register a transfer of notes or to exchange notes, but may be required to pay for any tax or other
governmental charge associated with the transfer or exchange. The security registrar makes the registration of transfer or exchange only if it is satisfied with such
holder’s proof of ownership.
We may cancel the designation of any trustee. We may also approve a change in the office through which any trustee acts.
If we redeem less than all of the notes of a particular series, we may block the issuance of, registration of transfer or exchange of notes during the period
beginning 15 days before the day we mail the notice of redemption and ending on the day of that mailing, in order to freeze the list of holders to prepare the mailing.
We may also refuse to register transfers or exchanges of notes selected for redemption, except that we will continue to permit transfers and exchanges of the
unredeemed portion of any note being partially redeemed.
The rules for exchange described above apply to exchange of notes for other notes of the same series and tenor.
Payment and Paying Agents
We pay interest to a holder of notes on each date interest is due if the holder is a direct holder listed in the trustee’s records at the close of business on the
fifteenth calendar day before the next interest payment date, even if such holder no longer owns the note on the interest due date. That particular day is called the
regular record date. Holders buying and selling notes must work out between them how to compensate for the fact that we pay all the interest for an interest period to
the one who is the registered holder on the regular record date.
We pay interest, principal and any other money due on the notes at the office of the paying agent in London, UK. That office is currently located at 125 Old
Broad Street, Fifth Floor, London EC2N 1AR United Kingdom. A holder of notes must make arrangements to have its payments picked up at or wired from that
office. We may also choose to pay interest by mailing checks.
17
Street name and other indirect holders should consult their banks or brokers for information on how they may receive payments.
We may also arrange for additional payment offices, and may cancel or change these offices. These offices are called paying agents. We may also choose to
act as our own paying agent. We must notify holders of notes of changes in the paying agents for any particular notes of the series.
Notices
We and the trustee send notices regarding the notes only to holders, using their addresses as listed in the trustee’s records.
All paying agents must return to us upon our request all money paid by us that remains unclaimed two years after the amount is due to holders. After that
two-year period, holders of notes may look only to us for payment and not to the trustee, any other paying agent or anyone else.
Book-Entry System
Upon issuance, the notes of each series are represented by one or more global notes. Each global note is deposited with, or on behalf of, a common
depositary, and registered in the name of the nominee of the common depositary for the accounts of Clearstream and Euroclear.
Investors may elect to hold interests in the global notes held by the depository through Clearstream Banking, société anonyme, “Clearstream,” or Euroclear
Bank SA/NV, as operator of the Euroclear System, “Euroclear,” if they are participants of such systems, or indirectly through organizations that are participants in
such systems. Clearstream and Euroclear hold interests on behalf of their participants through customers’ securities accounts in Clearstream’s and Euroclear’s names
on the books of their respective depositories. Book-entry interests in the notes and all transfers relating to the notes are reflected in the book-entry records of
Clearstream and Euroclear. Because holders acquire, hold and transfer security entitlements with respect to the notes through Clearstream, Euroclear and their
participants, a beneficial holder’s rights with respect to the notes is subject to the laws (including Article 8 of the Uniform Commercial Code) and contractual
provisions governing a holder’s relationship with its securities intermediary and the relationship between its securities intermediary and each other securities
intermediary and between it and us, as the issuer. Except as set forth below, the global notes may be transferred, in whole and not in part, only to another nominee of
the depository or to a successor of the depository or its nominee.
No global note may be exchanged in whole or in part for notes registered, and no transfer of a global note in whole or in part may be registered, in the name
of any person other than the depository or any nominee of the depository unless (i) the depository has notified us that it is unwilling or unable to continue as
depository for such global note or has ceased to be qualified to act as such as required by the indenture, (ii) there has occurred and is continuing an event of default
with respect to the notes or (iii) we determine in our sole discretion at any time that the global note shall be so exchangeable.
Any global note that is exchangeable pursuant to the preceding sentence shall be exchangeable in whole for separate notes in registered form of any
authorized denomination and of like tenor and aggregate principal amount. These notes shall be registered in the name or names of such person or persons as the
depository instructs the trustee. We expect that these instructions would be based upon directions received by the depository from its participants with respect to
ownership of beneficial interests in such global note.
Except in the limited circumstances referred to above, owners of beneficial interests in a global note are not entitled to have such global note registered in
their names, will not receive and are not entitled to receive physical delivery of notes in exchange therefor and are not considered to be the owners or holders of such
global note for any
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purpose under the notes or the indenture. Accordingly, each person owning a beneficial interest in the global note must rely on the procedures of the participant
through which such person owns its interest to exercise any rights of a holder under the indenture.
The indenture provides that the depository, as a holder, may appoint agents and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver, or other action which a holder is entitled to give or take under the indenture.
Governing Law
The indenture and the notes are governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to agreements
made or instruments entered into and performed in New York State.
Relationship with Trustee
U.S. Bank Trust National Association is the trustee under the indenture. U.S. Bank Trust National Association performs services for us in the ordinary
course of business and serves as the trustee with respect to certain of our other outstanding debt securities.
Open Market Purchases
We may at any time and from time to time purchase notes in the open market or otherwise.
The Paying Agent, Transfer Agent and Security Registrar
Elavon Financial Services DAC, UK Branch is the paying agent to the notes (and with respect to the 2026 notes and the 2034 notes, is also the transfer
agent). Elavon Financial Services DAC is the security registrar with respect to the notes (and with respect to the 2036 notes, is also the transfer agent).
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Description of MSD Netherlands Capital B.V.’s 3.250% Notes due 2032, 3.500% Notes due 2037, 3.700% Notes due 2044 and 3.750% Notes due 2054,
Guaranteed by the Registrant
Registered under Section 12 of the Securities Exchange Act of 1934
In this description, unless the context requires otherwise:
“2032 notes” means the 3.250% Notes due 2032 of MSD Netherlands Capital B.V.;
“2037 notes” means the 3.500% Notes due 2037 of MSD Netherlands Capital B.V.;
“2044 notes” means the 3.700% Notes due 2044 of MSD Netherlands Capital B.V.;
“2054 notes” means the 3.750% Notes due 2054 of MSD Netherlands Capital B.V.;
“holder” means a direct holder and not a street name or other indirect holder of notes;
“notes” means the 2032 notes, 2037 notes, 2044 notes and 2054 notes, collectively;
“we,” “our,” “us” and the “Issuer” refer to MSD Netherlands Capital B.V.; and
“Parent” refers to Merck & Co., Inc., but not to any of Merck & Co., Inc.’s consolidated subsidiaries.
The following sets forth a description of the material terms of the notes. The description is qualified in its entirety by reference to the indenture, dated as of
May 30, 2024, among the Issuer, Parent and U.S. Bank Trust National Association, as trustee (a copy of which is included as Exhibit 4.1 to our Current Report on
Form 8-K filed on May 30, 2024) and, as applicable, the officers’ certificate pursuant to such indenture with respect to the 2032 notes, dated May 30, 2024, including
the form of the 2032 notes (a copy of which is included as Exhibit 4.2 to our Current Report on Form 8-K filed on May 30, 2024), the officers’ certificate pursuant to
such indenture with respect to the 2037 notes, dated May 30, 2024, including the form of the 2037 notes (a copy of which is included as Exhibit 4.3 to our Current
Report on Form 8-K filed on May 30, 2024), the officers’ certificate pursuant to such indenture with respect to the 2044 notes, dated May 30, 2024, including the
form of the 2044 notes (a copy of which is included as Exhibit 4.4 to our Current Report on Form 8-K filed on May 30, 2024) or the officers’ certificate pursuant to
such indenture with respect to the 2054 notes, dated May 30, 2024, including the form of the 2054 notes (a copy of which is included as Exhibit 4.5 to our Current
Report on Form 8-K filed on May 30, 2024). You are encouraged to read such indenture and officers’ certificates for additional information.
The 2032 notes, the 2037 notes, the 2044 notes and the 2054 notes are each a separate series of notes under the indenture.
The 2032 notes are initially limited to €850,000,000 aggregate principal amount, which amount remains outstanding as of February 25, 2025, and will
mature on May 30, 2032. The 2037 notes are initially limited to €850,000,000 aggregate principal amount, which amount remains outstanding as of February 25,
2025, and will mature on May 30, 2037. The 2044 notes are initially limited to €850,000,000 aggregate principal amount, which amount remains outstanding as of
February 25, 2025, and will mature on May 30, 2044. The 2054 notes are initially limited to €850,000,000 aggregate principal amount, which amount remains
outstanding as of February 25, 2025, and will mature on May 30, 2054.
The notes are fully and unconditionally guaranteed (the “note guarantee”) on an unsecured senior basis by Parent.
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The notes are unsecured and rank equally with all our other unsecured and unsubordinated indebtedness from time to time outstanding. The note guarantee
is unsecured and ranks equally with all of Parent’s other unsecured and unsubordinated indebtedness from time to time outstanding. The notes are obligations of the
Issuer and are not guaranteed by any of Parent’s other subsidiaries and therefore the notes and the note guarantee are structurally subordinated to all liabilities of
Parent’s subsidiaries other than the Issuer from time to time outstanding, including any guarantees provided by Parent’s subsidiaries other than the Issuer. The notes
also are effectively subordinated to any secured debt Parent or its subsidiaries incur to the extent of the value of any assets securing such debt.
The notes were issued in denominations of €100,000 and integral multiples of €1,000 in excess thereof.
We may issue as many distinct series of debt securities under the indenture as we wish. There is no limit on the amount of debt securities we may issue
under the indenture and the provisions of the indenture allow us to issue debt securities with terms different from those previously issued under the indenture. Also,
as discussed below under “—Further Issues,” we may “reopen” a previous issue of a series of debt securities and issue additional debt securities of that series. We
also may issue other debt under other indentures or documentation, containing provisions different from those included in the indenture or applicable to the notes.
The notes are listed on the New York Stock Exchange. The Issuer has no obligation to maintain such listing and may delist the notes at any time.
Elavon Financial Services DAC initially acts as principal paying agent (the “paying agent”) and U.S. Bank Trust National Association initially acts as
transfer agent (the “transfer agent”), security registrar (the “security registrar”) and trustee (“trustee”) for the notes. We have entered into an issuing and paying
agency agreement in relation to the notes between us, U.S. Bank Trust National Association, as trustee, transfer agent and security registrar and Elavon Financial
Services DAC, as principal paying agent. Payment of principal of and interest on the notes is made through the office of the principal paying agent in Dublin. The
terms “principal paying agent” and “paying agent” shall include any successors appointed from time to time in accordance with the provisions of the issuing and
paying agency agreement, and any reference to an “agent” or “agents” shall mean any or all (as applicable) of such persons.
Interest
The 2032 notes bear interest at a rate of 3.250% per annum, the 2037 notes will bear interest at a rate of 3.500% per annum, the 2044 notes bear interest at a
rate of 3.700% per annum and the 2054 notes bear interest at a rate of 3.750% per annum. Interest on the notes is payable annually in arrears on May 30 of each year
to the person in whose name such notes were registered at the close of business on the preceding May 15. If any payment date for the notes is not a business day,
payment is made on the next business day, but we are not liable for any additional interest as a result of the delay in payment. With respect to the notes, by business
day, we mean any Monday, Tuesday, Wednesday, Thursday or Friday which is not a day when banking institutions are authorized or obligated by law or executive
order to be closed in The City of New York, London or the Netherlands and, for any place of payment outside of The City of New York, London or the Netherlands,
in such place of payment, and on which the Trans-European Automated Real-time Gross Settlement Express Transfer system (the TARGET2 system), or any
successor thereto, operates.
With respect to each series of notes, we compute the amount of interest payable on the basis of (i) the actual number of days in the period for which interest
is being calculated and (ii) the actual number of days from (and including) the last date on which interest was paid on the notes of such series (or May 30, 2024 if no
interest has been paid on the notes of such series) to (but excluding) the next scheduled interest payment date. This payment convention is referred to as
ACTUAL/ACTUAL (ICMA) as defined in the rulebook of the International Capital Market Association.
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Payments in Euros
All payments of interest and principal, including payments made upon any redemption of the notes, are payable in euros. If, at any time, the euro is
unavailable to us or Parent due to the imposition of exchange controls or other circumstances beyond our or Parent’s control or if the euro is no longer being used by
the then member states of the European Monetary Union that have adopted the euro as their currency or for the settlement of transactions by public institutions of or
within the international banking community, then all payments in respect of the notes and the note guarantee will be made in U.S. dollars until the euro is again
available to us or Parent, as applicable, or so used. In such circumstances, the amount payable on any date in euros will be converted into U.S. dollars on the basis of
the most recently available market exchange rate for euros, as determined by us or Parent, as applicable, in our or Parent’s sole discretion. Any payment in respect of
the notes or the note guarantee so made in U.S. dollars will not constitute an event of default under the notes or the indenture governing the notes. Neither the trustee
nor the paying agent shall have any responsibility for any calculation or conversion in connection with the foregoing.
Investors are subject to foreign exchange risks as to payments of principal and interest that may have important economic and tax consequences to them.
Optional Redemption
Prior to the applicable Par Call Date with respect to a series of notes, each such series of notes is redeemable in whole or in part, at our option at any time or
from time to time, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed or (ii) the sum of the present values of
the Remaining Scheduled Payments (as defined below) (not including any portion of such payment of interest accrued as of the date of redemption) discounted to the
redemption date (assuming the notes matured on the applicable Par Call Date) on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable
Government Bond Rate (as defined below), plus 15 basis points with respect to the 2032 notes, the Comparable Government Bond Rate plus 15 basis points with
respect to the 2037 notes, the Comparable Government Bond Rate plus 20 basis points with respect to the 2044 notes and the Comparable Government Bond Rate
plus 20 basis points with respect to the 2054 notes, plus, in each case, accrued and unpaid interest on the principal amount being redeemed to, but excluding, the
redemption date.
On or after the Par Call Date with respect to a series of notes, we may redeem in whole or in part the notes of such series at any time or from time to time, at
our option, at a redemption price equal to 100% of the principal amount of the applicable notes being redeemed, plus accrued and unpaid interest on the principal
amount being redeemed to, but excluding, the redemption date.
“Par Call Date” means February 29, 2032, the date that is three months prior to the maturity of the 2032 notes, February 28, 2037, the date that is three
months prior to the maturity of the 2037 notes, November 30, 2043, the date that is six months prior to the maturity of the 2044 notes and November 30, 2053, the
date that is six months prior to the maturity of the 2054 notes.
We are required to give notice of redemption at least 10 days’, but no more than 60 days’, prior to the redemption date. The notice will be delivered
electronically or mailed to the registered address of each holder of that series of notes. The principal amount of a note remaining outstanding after a redemption in
part shall be €100,000 or an integral multiple of €1,000 in excess thereof. Subject to the following paragraph, once notice of redemption is delivered, the notes called
for redemption will become due and payable on the redemption date at the applicable redemption price, plus accrued and unpaid interest applicable to such notes to,
but excluding, the redemption date.
Any redemption notice may, at the Issuer’s discretion, be subject to one or more conditions precedent, including completion of a corporate transaction. In
such event, the related notice of redemption shall describe each such condition and, if applicable, shall state that, at our discretion, the date of redemption may be
delayed until such
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time (including more than 60 days after the notice of redemption was given) as any or all such conditions shall be satisfied or waived, or such redemption may not
occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied (or waived by the Issuer in its sole discretion) by the
date of redemption, or by the date of redemption as so delayed.
“Comparable Government Bond Rate” means, with respect to any redemption date, the price, expressed as a percentage (rounded to three decimal places,
with 0.0005 being rounded upwards), at which the gross redemption yield on the notes to be redeemed, if they were to be purchased at such price on the third
business day prior to the date fixed for redemption, would be equal to the gross redemption yield on such business day of the Comparable Government Bond (as
defined below) on the basis of the middle market price of the Comparable Government Bond prevailing at 11:00 a.m. (London time) on such business day as
determined by an independent investment bank selected by us.
“Comparable Government Bond” means, in relation to any Comparable Government Bond Rate calculation, at the discretion of an independent investment
bank selected by us, a German federal government bond whose maturity is closest to the maturity of the notes to be redeemed (assuming the notes matured on the
applicable Par Call Date), or if such independent investment bank in its discretion determines that such similar bond is not in issue, such other German government
bond as such independent investment bank may, with the advice of three brokers of, and/or market makers in, German government bonds selected by us, determine
to be appropriate for determining the Comparable Government Bond Rate.
“Remaining Scheduled Payments” means, with respect to each note to be redeemed, the remaining scheduled payments of principal of and interest on the
note that would be due after the related redemption date but for the redemption. If that redemption date is not an interest payment date with respect to a note, the
amount of the next succeeding scheduled interest payment on the note will be reduced by the amount of interest accrued on the note to the redemption date.
If fewer than all of the notes of any series are to be redeemed, the trustee will select the particular notes or portions thereof for redemption from the
outstanding notes not previously called, pro rata or by lot, or in such other manner as we direct each in accordance with the depositary’s procedures.
Unless we default in payment of the redemption price, on and after the redemption date interest will cease to accrue on the notes or portions thereof called
for redemption.
The notes are also subject to redemption if certain events occur involving United States and Dutch taxation. See “—Taxation Redemption.”
Additional Amounts
All payments of principal and interest in respect of the notes are made free and clear of, and without deduction or withholding for or on account of any
present or future taxes, duties, assessments or other governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by the United States
or the Netherlands or any political subdivision or taxing authority of or in the United States or the Netherlands (collectively, “Taxes”), unless such withholding or
deduction is required by law.
In the event such withholding or deduction of Taxes is required by law, subject to the limitations described below, we will pay to the holder of any note such
additional amounts (“Additional Amounts”) as may be necessary in order that every net payment received by the beneficial owner of such note of principal of or
interest or any other amount payable on the notes (including upon redemption), after deduction or withholding for or on account of such Taxes, will not be less than
the amount provided for in such note to be then due and payable before deduction or withholding for or on account of such Taxes.
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However, our obligation to pay Additional Amounts shall not apply to:
(a)
any Taxes which would not have been so imposed but for:
(1)
the existence of any present or former connection between such holder or beneficial owner (or between a fiduciary, settlor, beneficiary,
member or shareholder or other equity owner of, or a person having a power over, such holder or beneficial owner, if such holder or
beneficial owner is an estate, a trust, a limited liability company, a partnership, a corporation or other entity) and the United States or the
Netherlands, including, without limitation, such holder or beneficial owner (or such fiduciary, settlor, beneficiary, member, shareholder or
other equity owner or person having such a power) being or having been a citizen or resident or treated as a resident of the United States
or the Netherlands or being or having been engaged in a trade or business in the United States or the Netherlands or being or having been
present in the United States or the Netherlands or having or having had a permanent establishment in the United States or the Netherlands;
(2)
the failure of such holder or beneficial owner to comply with any certification, information or other reporting requirement, if compliance
is required under United States or Dutch tax laws and regulations to establish entitlement to a partial or complete exemption from such
Taxes (including, but not limited to, the requirement to provide Internal Revenue Service Form W-8BEN, Form W-8BEN-E, Form W-
8ECI, or any subsequent versions thereof or successor thereto); or
(3)
such holder’s or beneficial owner’s present or former status as a personal holding company or a foreign personal holding company with
respect to the United States, as a controlled foreign corporation with respect to the United States, as a passive foreign investment company
with respect to the United States, as a foreign tax exempt organization with respect to the United States or as a corporation which
accumulates earnings to avoid United States federal income tax;
(b)
any Taxes imposed by reason of the holder or beneficial owner:
(1)
owning or having owned, directly or indirectly, actually or constructively, 10% or more of the total combined voting power of all classes
of our stock or the stock of Parent, as described in section 871(h)(3) of the Internal Revenue Code of 1986, as amended (the “Internal
Revenue Code”),
(2)
being a bank receiving interest described in section 881(c)(3)(A) of the Internal Revenue Code, or
(3)
being a controlled foreign corporation with respect to the United States that is related to us or Parent by stock ownership;
(c)
any Taxes which would not have been so imposed but for the presentation by the holder or beneficial owner of such note for payment on a date
more than 30 days after the date on which such payment became due and payable or the date on which payment of the note is duly provided for and
notice is given to holders, whichever occurs later, except to the extent that the holder or beneficial owner would have been entitled to such
Additional Amounts on presenting such note on any date during such 30-day period;
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(d)
any estate, inheritance, gift, sales, excise, transfer, personal property, wealth or similar Taxes;
(e)
any Taxes which are payable otherwise than by withholding from a payment on such note;
(f)
any Taxes which are payable by a holder that is not the beneficial owner of the note, or a portion of the note, or that is a fiduciary, partnership,
limited liability company or other similar entity, but only to the extent that a beneficial owner, a beneficiary or settlor with respect to such fiduciary
or member of such partnership, limited liability company or similar entity would not have been entitled to the payment of an additional amount had
such beneficial owner, settlor, beneficiary or member received directly its beneficial or distributive share of the payment;
(g)
any Taxes required to be withheld by any paying agent from any payment on any note, if such payment can be made without such withholding by
at least one other paying agent;
(h)
any Taxes imposed under Sections 1471 through 1474 of the Internal Revenue Code (or any amended or successor provisions), any current or
future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code or any fiscal or regulatory
legislation, rules or practices adopted pursuant to any intergovernmental agreements or treaties (and any related legislation, rules, or official
administrative practices) implementing the foregoing;
(i)
any U.S. federal backup withholding Taxes imposed pursuant to Section 3406 of the Internal Revenue Code;
(j)
any Taxes imposed under or in connection with the Dutch Withholding Tax Act 2021 (Wet bronbelasting 2021) as amended from time to time; or
(k)
any combination of items (a), (b), (c), (d), (e), (f), (g), (h), (i) and (j).
For purposes of this section, the acquisition, ownership, disposition, enforcement, or holding of, or the receipt of any payment with respect to, a note will
not constitute a connection (1) between the holder or beneficial owner and the United States or the Netherlands or (2) between a fiduciary, settlor, beneficiary,
member or shareholder or other equity owner of, or a person having a power over, such holder or beneficial owner if such holder or beneficial owner is an estate, a
trust, a limited liability company, a partnership, a corporation or other entity and the United States or the Netherlands.
Any reference in this description, in the indenture or in the notes to principal or interest or other payment on the notes shall be deemed to refer also to
Additional Amounts which may be payable under the provisions of this section.
We will pay all stamp and other duties, if any, which may be imposed by the United States or the Netherlands, or any political subdivision thereof or taxing
authority therein, with respect to the issuance of the notes pursuant to this offering.
Except as specifically provided under the heading “—Additional Amounts,” we will not be required to make any payment with respect to any tax, duty,
assessment or other governmental charge imposed by any government or any political subdivision or taxing authority of or in the United States or the Netherlands.
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Taxation Redemption
The notes of any series may be redeemed at our option, in whole but not in part, at a redemption price equal to 100% of the principal amount of the notes of
the applicable series to be redeemed, together with interest accrued and unpaid to, but excluding, the redemption date, at any time, on giving not less than 10 nor
more than 60 days’ notice in accordance with “Notices” below if:
(a)
we have or will become obligated to pay Additional Amounts as a result of (i) any change in or amendment to the laws, regulations or rulings of the
United States or the Netherlands or any political subdivision or any taxing authority of or in the United States or the Netherlands affecting taxation,
or (ii) any change in or amendment to an official application, interpretation, administration or enforcement of such laws, regulations or rulings,
which change or amendment is announced or becomes effective on or after May 16, 2024; or
(b)
any action shall have been taken by a taxing authority, or any action has been brought in a court of competent jurisdiction, in the United States or
the Netherlands or any political subdivision or taxing authority of or in the United States or the Netherlands, including any of those actions
specified in (a) above, whether or not such action was taken or brought with respect to us, or any change, clarification, amendment, application or
interpretation of such laws, regulations or rulings shall be officially proposed, in any such case on or after May 16, 2024, which results in a
substantial likelihood that we will be required to pay Additional Amounts on the next interest payment date.
However, no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which we would be, in the case of a redemption for
the reasons specified in (a) above, or there would be a substantial likelihood that we would be, in the case of a redemption for the reasons specified in (b) above,
obligated to pay such Additional Amounts if a payment in respect of the notes were then due and, at the time such notification of redemption is given, such
circumstance remains in effect.
Prior to the publication of any notice of redemption pursuant to this section, in the case of a redemption for the reasons specified in (a) or (b) above, we will
deliver to the trustee:
(1) a certificate signed by one of our duly authorized officers stating that we are entitled to effect such redemption and setting forth a statement of facts
showing that the conditions precedent to our right so to redeem have occurred, and
(2) a written opinion of independent legal counsel of recognized standing to the effect that we have or will become obligated to pay such Additional
Amounts as a result of such change or amendment or that there is a substantial likelihood that we will be required to pay such Additional Amounts
as a result of such action or proposed change, clarification, amendment, application or interpretation, as the case may be.
Such notice, once delivered by us to the trustee, will be irrevocable.
Modification and Waiver
There are three types of changes we can make to the indenture and the notes.
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Changes Requiring Holder Approval. First, there are changes that cannot be made to the notes of any series without specific approval by each holder of the
notes of such series affected thereby. Following is a list of those types of changes:
•
change the payment due date of any installment of the principal or any premium or interest on a note stated in the note;
•
reduce any amounts due on a note;
•
release Parent from its obligations in respect of the guarantee of any note or modify Parent’s obligations thereunder in any manner materially
adverse to holders of such note, in each case other than in accordance with the indenture;
•
change the place or currency of payment on a note;
•
impair the holders’ right to sue for payment;
•
reduce the percentage of notes of any series the holders of which must consent to modify or amend the indenture;
•
reduce the percentage of notes of any series the holders of which must consent to waive compliance with certain provisions of the indenture or to
waive certain defaults; and
•
modify any other aspect of the provisions dealing with modification and waiver of the indenture except to increase any such percentage or to
provide that certain other provisions of the indenture cannot be modified or waived without the consent of the holder of each outstanding security
affected thereby.
Changes Requiring a Majority Vote. The second type of change to the indenture and the notes is the kind that requires a vote in favor by holders owning not
less than a majority of the principal amount of the notes of the particular series affected. Most changes fall into this category, such as if we wish to obtain a waiver of
all or part of the restrictive covenants described below, or a waiver of a past default. However, we cannot obtain a waiver of a payment default or any other aspect of
the indenture or the notes listed in the first category above under “—Changes Requiring Holder Approval” unless we obtain the individual consent of each holder of
the notes of such series affected thereby to the waiver.
Changes Not Requiring Approval. The third type of change does not require any vote by holders of notes. This type is limited to the addition of a guarantee,
the release of a guarantee (other than the Parent guarantee), corrections and clarifications and other changes that would not adversely affect holders of the notes.
Further Details Concerning Voting. When taking a vote, we use the U.S. dollar equivalent to decide how much principal amount to attribute to a note.
Notes will not be considered outstanding and therefore will not carry voting rights if we have deposited or set aside in trust for the holders thereof money
for their payment or redemption. Notes will also not be eligible to vote if they have been fully defeased as described under “—Defeasance—Full Defeasance.”
We may set any day as a record date for the purpose of determining the holders of outstanding notes that are entitled to vote or take other action under the
indenture. In some circumstances, the trustee may set a record date for action by holders.
Street name and other indirect holders should consult their banks or brokers for information on how approval may be granted or denied if we seek to
change the indenture or the notes or request a waiver.
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Mergers and Similar Events
We or Parent may consolidate or merge with another company or firm. We or Parent may also convey, transfer or lease all of our or Parent’s properties and
assets substantially as an entirety to another firm, or buy or lease substantially all of the assets of another firm. However, we and Parent may not take any of these
actions unless the following conditions, among others, are met:
•
In the case of the Issuer, we are the surviving entity or, when we merge out of existence or convey, transfer or lease all of our properties and assets
substantially as an entirety, the other firm must be Parent or a corporation, limited liability company, partnership or trust organized under the laws
of a U.S. state or the District of Columbia or under federal law or under the laws of Switzerland, the United Kingdom, The Netherlands or any
other member state of the European Union as of the date of the indenture and it must agree to be legally responsible for the notes.
•
In the case of Parent, Parent is the surviving entity or, when Parent merges out of existence or conveys, transfers or leases all of its properties and
assets substantially as an entirety, the other firm must be a corporation, limited liability company, partnership or trust organized under the laws of a
U.S. state or the District of Columbia or under Federal law and it must agree to be legally responsible for the guarantees of the notes.
•
The merger, sale of assets or other transaction must not cause a default on the notes, and we and Parent must not already be in default unless the
merger or other transaction would cure the default. For purposes of this no-default test, a default would include an event of default, as described
under “—Events of Default,” that has occurred and not been cured. A default for this purpose would also include the occurrence of any event that
would be an event of default if we or Parent received the required notice of our or Parent’s default or if under the indenture the default would
become an event of default after existing for a specific period of time.
•
It is possible that the merger, sale of assets or other transaction would cause some of our or Parent’s property to become subject to a mortgage or
other legal mechanism giving lenders preferential rights in that property over other lenders or over our or Parent’s, as the case may be, general
creditors if we or Parent, as the case may be, fail to pay them back. Parent has promised to limit these preferential rights, as discussed under “—
Restrictive Covenants.” If a merger or other transaction would create any liens on any of Parent’s property, Parent must comply with those
restrictive covenants. Parent would do this either by deciding that the liens were permitted, or by following the requirements of the restrictive
covenants to grant an equivalent or higher-ranking lien to the holders of the notes on the same property that Parent owns.
If the conditions described above are satisfied with respect to any series of notes, we and Parent do not need to obtain the approval of the holders of those
notes in order to merge or consolidate or to sell assets. Also, these conditions apply only if we or Parent, as the case may be, wish to merge or consolidate with
another entity or convey, transfer or lease all of our or Parent’s properties and assets substantially as an entirety. We and Parent will not need to satisfy these
conditions if we or Parent enter into other types of transactions, including any transaction in which we or Parent, as the case may be, acquire the stock or assets of
another entity, any transaction that involves a change of control but in which we or Parent, as the case may be, do not merge or consolidate and any transaction in
which we or Parent, as the case may be, convey, transfer or lease less than all of our or Parent’s, as the case may be, properties and assets substantially as an entirety.
It is possible that these other types of transactions may result in a reduction in our or Parent’s credit rating, may reduce Parent’s operating results or may impair
Parent’s financial condition. However, the holders of notes have no approval right with respect to any transaction of this type.
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Restrictive Covenants
Restrictions on Secured Debt. Some of Parent’s property may be subject to a mortgage or other legal mechanism that gives Parent’s lenders preferential
rights in that property over other lenders, including the holders of the notes, or over Parent’s general creditors if Parent fails to pay them back. These preferential
rights are called liens. Debt which is protected by these preferential rights is called secured debt. In the indenture, Parent promises that neither Parent nor its domestic
subsidiaries (as defined below) will incur any new secured debt that is secured by a lien on any of Parent’s or its domestic subsidiaries’ principal domestic
manufacturing properties (as defined below), or on any shares of stock of any of Parent’s domestic subsidiaries that own or lease a principal domestic manufacturing
property, unless Parent grants an equivalent or higher-ranking lien on the same property to the holders of the notes and other outstanding debt securities issued under
the indenture.
Parent does not need to comply with this restriction if the amount of all debt that would be secured by liens on principal domestic manufacturing properties,
including the new debt and all attributable debt (as defined below) that results from a sale and leaseback transaction involving principal domestic manufacturing
properties, is less than 10% of Parent’s consolidated net tangible assets (as defined below).
This restriction on secured debt does not apply to debt secured by certain types of liens, and Parent can disregard this secured debt when Parent calculates the limits
imposed by this restriction. These types of liens are:
•
liens on the property of any of Parent’s domestic subsidiaries, or on their shares of stock, if those liens existed at the time the corporation became
Parent’s domestic subsidiary;
•
with respect to any series of notes, any lien existing on the date of issuance of such notes;
•
liens in favor of Parent or its domestic subsidiaries;
•
liens in favor of U.S. governmental bodies that Parent granted in order to assure Parent’s payments to such bodies that Parent owes by law or
because of a contract Parent entered into;
•
liens in favor of any customer arising in respect of payments made by or on behalf of a customer for goods produced for, or services rendered to,
customers in the ordinary course of business not exceeding the amount of those payments;
•
statutory liens, liens for taxes or assessments or governmental charges or levies not yet due or delinquent or which can be paid without penalty or
are being contested in good faith, landlord’s liens on leased property, easements and other liens of a similar nature;
•
liens on property or shares of stock that existed at the time Parent acquired them, including property Parent may acquire through a merger or
similar transaction, or that Parent granted in order to purchase the property, which are sometimes called purchase money mortgages; and
•
debt secured by liens that extend, renew or replace any of these types of liens.
Parent and its subsidiaries may have as much unsecured debt as they may choose.
Restrictions on Sales and Leasebacks. Parent promises that neither Parent nor any of its domestic subsidiaries will enter into any sale and leaseback
transaction involving a principal domestic manufacturing property, unless Parent complies with this restrictive covenant. A sale and leaseback transaction generally is
an arrangement between Parent or a domestic subsidiary and a bank, insurance company or other lender or investor where Parent or the domestic subsidiary sells a
property to a lender or investor more than 120 days after the acquisition of the property or the completion of construction of the property and the beginning of its full
operation and Parent or any of its domestic subsidiaries’ leases the property back from the lender.
29
Parent can comply with this restrictive covenant in either of two ways:
•
First, Parent will be in compliance if Parent or its domestic subsidiary could grant a lien on the principal domestic manufacturing property in an
amount equal to the attributable debt for the sale and leaseback transaction without being required to grant an equivalent or higher-ranking lien to
the holders of the notes and other outstanding debt securities issued under the indenture under the restriction on secured debt described above.
•
Second, Parent can comply if Parent retires an amount of Parent’s or any of its domestic subsidiaries’ funded debt (as defined below) which is not
subordinated in right of payment to any outstanding notes or other outstanding debt securities issued under the indenture, within 120 days of the
transaction, equal to the greater of the net proceeds of the sale of the principal domestic manufacturing property that Parent or any of its domestic
subsidiaries leases in the transaction or the fair market value of that property, subject to credits for voluntary retirements of notes and other
outstanding debt securities issued under the indenture and funded debt Parent or the domestic subsidiary may make.
This restriction on sales and leasebacks does not apply to any sale and leaseback transaction that is between Parent and one of its domestic subsidiaries or
between domestic subsidiaries, or that involves a lease for a period of three years or less.
Definitions Relating to the Restrictive Covenants. Following are summaries of the meanings of the terms that are important in understanding the restrictive
covenants previously described:
“Attributable debt” means the total net amount of rent, discounted at 1% per annum over the weighted average yield to maturity of the outstanding notes and
other outstanding debt securities issued under the indenture compounded semi-annually, that is required to be paid during the remaining term of any lease.
“Consolidated net tangible assets” is the total amount of assets, less reserves and certain other permitted deductible items, after subtracting all current
liabilities and all goodwill, trade names, trademarks, patents, unamortized debt discounts and expenses and similar intangible assets, as such amounts appear on
Parent’s most recent consolidated balance sheet and computed in accordance with generally accepted accounting principles.
A “domestic subsidiary” means any of Parent’s subsidiaries which transacts substantially all of its business in the United States, has substantially all of its
fixed assets located in the United States, or owns or leases any principal domestic manufacturing property. However, a subsidiary whose principal business is
financing Parent’s operations outside of the United States is not a domestic subsidiary. A subsidiary is a corporation in which Parent and/or one or more of its other
subsidiaries owns at least 50% of the voting stock (generally defined as stock that ordinarily permits its owners to vote for the election of directors).
“Funded debt” means all debt for borrowed money that either has a maturity of 12 months or more from the date on which the calculation of funded debt is
made or has a maturity of less than 12 months from that date but is by its terms renewable or extendible beyond 12 months from that date at the option of the
borrower.
A “principal domestic manufacturing property” is any building or other structure or facility, and the land on which it sits and its associated fixtures, that
Parent uses primarily for manufacturing, processing or warehousing, that is located in the United States and that has a gross book value in excess of 1% of Parent’s
consolidated net tangible assets, other than a building, structure or other facility that Parent’s board of directors has determined is not of material importance to the
total business that Parent and its subsidiaries conduct or a building or structure which is financed by obligations issued by a state, a territory, or a possession of the
United States, or any political subdivision of any of the foregoing, or the District of Columbia, the interest of which is excludable from gross income of the holders
under provisions of the tax code.
30
Further Issues
We may, without the consent of holders of any series of the notes, issue additional notes having the same ranking and the same interest rate, maturity and
other terms as the notes of that series. Any additional notes of any series, together with the outstanding notes of the applicable series, will constitute a single series of
notes under the indenture. No additional notes may be issued if an event of default has occurred and is continuing with respect to the applicable series of notes.
Additional notes cannot be issued under the same CUSIP, ISIN or Common Code number unless the additional notes and original notes are fungible for U.S. federal
income tax purposes.
Defeasance
Full Defeasance. We can legally release ourselves and Parent from any payment or other obligations on the notes of a series and Parent’s related guarantee thereof if
we put in place other arrangements for the holders of such notes to be repaid. This is called full defeasance. In order to achieve full defeasance, we or Parent must do
the following, among other things:
•
We or Parent must deposit or cause to be deposited in trust for the benefit of all holders of the notes of the series any combination of money (in
euros) and Federal Republic of Germany obligations (as defined below) that will generate enough cash to make interest, principal and any other
payments on the notes of that series on their various due dates.
•
We or Parent must deliver to the trustee a legal opinion of counsel confirming that (x) there has been a change in the applicable U.S. federal
income tax law or (y) we or Parent have received from, or there has been published by, the IRS a ruling, in either case, to the effect that, and based
thereon such opinion shall confirm that, holders or beneficial owners of the notes of the series will not be subject to U.S. federal income tax on the
notes any differently than if we or Parent did not make or cause to be made the deposit and just repaid the notes ourselves.
If we ever did accomplish full defeasance, as described above, holders of defeased notes would have to rely solely on the trust deposit for repayment on
such notes. Holders of such notes could not look to us or Parent for repayment in the unlikely event of any shortfall.
Covenant Defeasance. We or Parent can make or cause to be made the same type of deposit described above and we and Parent can be released from some
of the restrictive covenants in the notes. This is called covenant defeasance. In that event, holders of notes would lose the protection of those restrictive covenants but
would gain the protection of having money and securities set aside in trust to repay the notes. In order to achieve covenant defeasance of the notes of a series, we or
Parent must do or cause to be done the following:
•
We or Parent must deposit or cause to be deposited in trust for the benefit of all holders of the notes of the series any combination of money (in
euros) and Federal Republic of Germany obligations that will generate enough cash to make interest, principal and any other payments on the notes
on their various due dates.
•
We or Parent must deliver to the trustee a legal opinion of counsel confirming that holders or beneficial owners of the notes will not be subject to
U.S. federal income tax on the notes any differently than if we or Parent did not make or cause to be made the deposit and just repaid the notes
ourselves.
If we accomplish covenant defeasance, the following provisions of the indenture and the notes would no longer apply:
•
Parent’s promises regarding conduct of its business previously described under “—Restrictive Covenants.”
31
•
Restrictions regarding mergers or similar transactions, as described under “—Mergers and Similar Events.”
•
The events of default relating to mergers or similar transactions and either of the restrictive covenants described under “—Restrictive Covenants.”
If we accomplish covenant defeasance, holders of notes can still look to us and Parent for repayment of the notes if there were a shortfall in the trust deposit.
In fact, if one of the remaining events of default occurred, such as our or Parent’s bankruptcy, and the notes become immediately due and payable, there may be such
a shortfall in the trust deposit.
“Federal Republic of Germany obligations” means (1) securities that are direct obligations of the Federal Republic of Germany for the payment of which its
full faith and credit is pledged or (2) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the Federal Republic of
Germany, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the Federal Republic of Germany, which, in either case under
clauses (1) or (2) are not callable or redeemable at the option of the issuer thereof.
Events of Default
Holders of notes have special rights if an event of default occurs and is not cured, as described later in this subsection.
The term event of default with respect to each series of notes means any of the following:
•
Failure to pay the principal or any premium on such series of notes on its due date.
•
Failure to pay interest on such series of notes within 30 days of its due date.
•
We or Parent, as the case may be, remain in breach of either of the restrictive covenants described under “—Restrictive Covenants” or any other
covenant or warranty in the indenture for 90 days after we or Parent, as applicable, receive a notice of default stating we are or Parent is in breach.
The notice must be sent by either the trustee or holders of at least 25% of the principal amount of notes of the affected series.
•
We or Parent file for bankruptcy or other specific events of bankruptcy, insolvency or reorganization occur.
•
Parent’s guarantee of the notes is determined in a final, non-appealable judgment to be unenforceable or invalid or Parent denies or disaffirms in
writing its obligations under its guarantee, other than in accordance with the terms thereof or upon release of the guarantee in accordance with the
indenture.
•
Failure to pay Additional Amounts on such series of notes within 30 days after such payment is due.
Any payment in respect of the notes made in U.S. dollars due to the unavailability or nonuse of the euro as discussed under “—Payments in Euros” will not
constitute an event of default under the notes or the indenture governing the notes.
If an event of default has occurred and has not been cured, the trustee or the holders of at least 25% in principal amount of the outstanding notes of the
affected series may declare the entire principal amount of all the notes of that series to be due and immediately payable. This is called a declaration of acceleration.
The holders of at
32
least a majority in principal amount of the notes of the affected series may cancel a declaration of acceleration of maturity.
Except in cases of default, where the trustee has some special duties, the trustee is not required to take any action under the indenture at the request of any
holders unless such holders offer the trustee reasonable protection, called an indemnity, against costs, expenses and liability. If reasonable indemnity is provided, the
holders of a majority in principal amount of the outstanding notes of the relevant series may direct the time, method and place of conducting any lawsuit or other
formal legal action seeking any remedy available to the trustee. These majority holders may also direct the trustee in performing any other action under the indenture
with respect to the notes of the applicable series.
Before a holder of notes of any series bypasses the trustee and brings its own lawsuit or other formal legal action or takes other steps to enforce its rights or
protect its interests relating to the notes of such series, the following must occur:
•
The holder must give the trustee written notice that an event of default has occurred and remains uncured.
•
The holders of at least 25% in principal amount of all outstanding notes of the relevant series must make a written request that the trustee take
action because of the default, and must offer indemnity reasonably satisfactory to the trustee against the cost, expenses and other liabilities of
taking that action.
•
The trustee must have not received from holders of a majority in principal amount of the outstanding notes of that series a direction inconsistent
with the written notice.
•
The trustee must have not taken action for 60 days after receipt of the above notice and offer of indemnity.
However, a holder of notes is entitled at any time to bring a lawsuit for the payment of money due on its notes on or after their due date.
Street name and other indirect holders should consult their banks or brokers for information on how to give notice or direction to or make a request of the
trustee and to make or cancel a declaration of acceleration.
We furnish to the trustee every year a written statement of one of our officers certifying that to the best of such signer’s knowledge we are in compliance
with the indenture and the notes, or else specifying any default.
Form, Exchange and Registration of Transfer
We issued the notes only in fully registered form and without interest coupons.
A holder of notes may have its notes broken into more notes of smaller denominations of not less than €100,000 or combined into fewer notes of larger
denominations, as long as the total principal amount is not changed. This is called an exchange.
A holder of notes may exchange or register a transfer of notes at the office of the trustee. The trustee acts as our agent for registering notes in the names of
holders and registering transfers of notes. We may change this appointment to another entity or perform it ourselves. The entity performing the role of maintaining
the list of registered holders is called the security registrar. It also registers transfers. A holder of notes may also replace lost, stolen or mutilated notes at that
office. The trustee’s agent may require an indemnity before replacing any notes.
33
A holder of notes is not required to pay a service charge to register a transfer of notes or to exchange notes, but may be required to pay for any tax or other
governmental charge associated with the transfer or exchange. The security registrar makes the registration of transfer or exchange only if it is satisfied with such
holder’s proof of ownership.
We may cancel the designation of any trustee. We may also approve a change in the office through which any trustee acts.
If we redeem less than all of the notes of a particular series, we may block the issuance of, registration of transfer or exchange of notes during the period
beginning 15 days before the day we transmit the notice of redemption and ending on the day of that transmission, in order to freeze the list of holders to prepare the
transmission. We may also refuse to register transfers or exchanges of notes selected for redemption, except that we will continue to permit transfers and exchanges
of the unredeemed portion of any note being partially redeemed.
The rules for exchange described above apply to exchange of notes for other notes of the same series and tenor.
Payment and Paying Agents
We pay interest to a holder of notes on each date interest is due if the holder is a direct holder listed in the trustee’s records at the close of business on the
May 15 preceding the next interest payment date, even if such holder no longer owns the note on the interest due date. That particular day is called the regular record
date. Holders buying and selling notes must work out between them how to compensate for the fact that we pay all the interest for an interest period to the one who is
the registered holder on the regular record date.
We pay interest, principal and any other money due on the notes at the office of the paying agent in Dublin, Ireland. That office is currently located at Block
F1, Cherrywood Business Park, Cherrywood, Dublin 18, Ireland D18 W2X7. A holder of notes must make arrangements to have its payments picked up at or wired
from that office. We may also choose to pay interest by mailing checks.
Street name and other indirect holders should consult their banks or brokers for information on how they may receive payments.
We may also arrange for additional payment offices, and may cancel or change these offices. These offices are called paying agents. We may also choose to
act as our own paying agent. We must notify holders of notes of changes in the paying agents for any particular notes of the series.
Notices
We and the trustee send notices regarding the notes only to holders, using their addresses as listed in the trustee’s records.
All paying agents must return to us upon our request all money paid by us that remains unclaimed two years after the amount is due to holders. After that
two-year period, holders of notes may look only to us or Parent for payment and not to the trustee, any other paying agent or anyone else.
Prescription
Under New York’s statute of limitations, any legal action to enforce our payment obligations evidenced by the notes or the note guarantee must be
commenced within six years after the payment thereof is due; thereafter our and Parent’s payment obligations will generally become unenforceable.
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Book-Entry System
Upon issuance, the notes of each series are represented by one or more global notes. Each global note is deposited with, or on behalf of, a common
depositary, and registered in the name of the nominee of the common depositary for the accounts of Clearstream and Euroclear.
Investors may elect to hold interests in the global notes held by the depository through Clearstream Banking, société anonyme, “Clearstream,” or Euroclear
Bank SA/NV, as operator of the Euroclear System, “Euroclear,” if they are participants of such systems, or indirectly through organizations that are participants in
such systems. Clearstream and Euroclear hold interests on behalf of their participants through customers’ securities accounts in Clearstream’s and Euroclear’s names
on the books of their respective depositories. Book-entry interests in the notes and all transfers relating to the notes are reflected in the book-entry records of
Clearstream and Euroclear. Because holders acquire, hold and transfer security entitlements with respect to the notes through Clearstream, Euroclear and their
participants, a beneficial holder’s rights with respect to the notes is subject to the laws (including Article 8 of the Uniform Commercial Code) and contractual
provisions governing a holder’s relationship with its securities intermediary and the relationship between its securities intermediary and each other securities
intermediary and between it and us, as the issuer. Except as set forth below, the global notes may be transferred, in whole and not in part, only to another nominee of
the depository or to a successor of the depository or its nominee.
No global note may be exchanged in whole or in part for notes registered, and no transfer of a global note in whole or in part may be registered, in the name
of any person other than the depository or any nominee of the depository unless (i) the depository has notified us that it is unwilling or unable to continue as
depository for such global note or has ceased to be qualified to act as such as required by the indenture, (ii) there has occurred and is continuing an event of default
with respect to the notes or (iii) we determine in our sole discretion at any time that the global note shall be so exchangeable.
Any global note that is exchangeable pursuant to the preceding sentence shall be exchangeable in whole for separate notes in registered form of any
authorized denomination and of like tenor and aggregate principal amount. These notes shall be registered in the name or names of such person or persons as the
depository instructs the trustee. We expect that these instructions would be based upon directions received by the depository from its participants with respect to
ownership of beneficial interests in such global note.
Except in the limited circumstances referred to above, owners of beneficial interests in a global note are not entitled to have such global note registered in
their names, will not receive and are not entitled to receive physical delivery of notes in exchange therefor and are not considered to be the owners or holders of such
global note for any purpose under the notes or the indenture. Accordingly, each person owning a beneficial interest in the global note must rely on the procedures of
the participant through which such person owns its interest to exercise any rights of a holder under the indenture.
The indenture provides that the depository, as a holder, may appoint agents and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver, or other action which a holder is entitled to give or take under the indenture.
Governing Law
The indenture, the notes and the note guarantee are governed by, and construed and enforced in accordance with, the laws of the State of New York
applicable to agreements made or instruments entered into and performed in New York State.
35
Consent to Jurisdiction and Service of Process
The indenture provides that the Issuer will appoint Parent as agent for service of process in any suit, action or proceeding with respect to the indenture, the
notes or the note guarantee brought in any federal or state court located in the Borough of Manhattan in the City, County and State of New York and the Issuer and
Parent will submit to such jurisdiction.
Open Market Purchases
We may at any time and from time to time purchase notes in the open market or otherwise.
The Trustee, Paying Agent, Transfer Agent and Security Registrar
U.S. Bank Trust National Association is the trustee, transfer agent and security registrar with respect to the notes. U.S. Bank Trust National Association
currently serves as the trustee with respect to certain of Parent’s other outstanding notes.
Elavon Financial Services DAC is the paying agent with respect to the notes.
36
I.
INTRODUCTION
The Plan is designed to provide for awards to selected salaried employees in managerial or other important positions, who, individually or as
members of a group, contribute in a substantial degree to the success of the Company, and who are in a position to have a direct and
significant impact on the growth and success of the Company, thus affording to them a means of participating in that success and an
incentive to contribute further to that success. This amendment and restatement of the Plan is effective as of January 1, 2025. Unless
otherwise defined herein, capitalized terms in this Plan have the meanings set forth in Section X.
II.
ADMINISTRATION
The Plan shall be administered by the Committee. The Committee may, by majority vote, establish the Administrative Regulations it deems
necessary for the proper administration of the Plan and make such determinations and take such action in connection with or in relation to
the Plan as it deems necessary. Each determination made by the Committee shall be final, binding and conclusive for all purposes and upon
all persons.
III.
ELIGIBILITY
A.
Generally. Only those Employees who are Section 16 Officers are eligible to participate in the Plan.
B.
New Hires. An Employee newly hired or rehired during the Plan Year must be actively employed on or before October 1 of the Plan
Year to be a Participant with respect to such Plan Year. An Employee newly hired or rehired after October 1 of the Plan Year is not
eligible to be a Participant with respect to such Plan Year. If an Employee is rehired, such Employee’s eligibility to participate in the
Plan is based on such Employee’s date of rehire and does not include prior service in the same Plan Year.
C.
Promotions. An Employee who becomes a Section 16 Officer due to a promotion during the Plan Year is eligible to receive a
prorated EIP Award based on the time such Employee is active at each of the Employee’s applicable bonus target and annual
salary levels during the Plan Year. If an Employee is a Participant as of the end of the Plan Year, such Employee’s annual cash
incentive payment for the Plan Year will be paid under the Plan (i.e., any incentive payment will not be split between the Plan and
any other annual bonus plan of the Company, a Subsidiary or affiliate).
D.
Leaves of Absence. Subject to applicable law, the Committee may determine the effect of any leave of absence on an Employee’s
eligibility for an EIP Award and the amount of any EIP Award in its discretion.
E.
Termination of Employment; Ceasing to be a Section 16 Officer. Except as otherwise determined by the Committee in its discretion
(including pursuant to Administrative Regulations), an individual must be an Employee and a Section 16 Officer on December 31 of
a Plan Year to be eligible for an EIP Award. Notwithstanding anything contained in the Plan to the contrary, if a Participant’s
employment is terminated by the Company, a Subsidiary, or affiliate for cause after the end of a Plan Year but before the payment of
an EIP Award, the Committee may cause the Participant to forfeit all or a portion of such EIP Award. Whether the Participant’s
employment is terminated for cause and the amount of EIP Award forfeited will be determined by the Committee in its discretion.
IV.
AWARD DETERMINATION
A.
EIP Target. A Participant’s target award under the Plan (such Participant’s “EIP Target”) will be a percentage of EIP-Eligible Pay, as
determined by the Committee each Plan Year.
B.
Company Scorecard. A Participant’s EIP Award will be determined based on achievement of the Company’s performance
objectives, as reflected in the Company Scorecard. The Company Scorecard will be expressed as a percentage, ranging from 0% to
200%, provided that the Company Scorecard must equal at least 50% before any EIP Awards will be paid for a Plan Year. The
Committee may adjust the Company Scorecard based on compliance, health, safety outcomes, and any other factors deemed
2
appropriate by the Committee.
C.
Individual Performance. EIP Awards for the Chief Executive Officer of the Company and Executive Team members will not be
subject to an individual performance modifier. The Committee may apply an individual performance modifier in determining the EIP
Award of any other Participant, based on the recommendation of such Participant’s manager during the Company’s compensation
planning process and any other factors deemed appropriate by the Committee.
D.
EIP Award Calculation. A Participant’s EIP Award for a Plan Year will be determined by multiplying such Participant’s EIP-Eligible
Pay (as of December 31 of the Plan Year), EIP Target for the Plan Year, the Company Scorecard result, and, if applicable, the
individual performance modifier.
E.
Proration. If a Participant transfers during the Plan Year between two positions that are eligible under the Plan or a Participant’s EIP
Target changes during a Plan Year, such Participant’s EIP Award will be based on the number of days worked at each EIP Target
and the Participant’s EIP-Eligible Pay as of the last day at each applicable EIP Target during the Plan Year.
F.
Committee Discretion. Notwithstanding anything herein to the contrary, the Committee may increase or decrease a Participant’s EIP
Award in its discretion.
V.
TIME AND FORM OF PAYMENT
A Participant may elect, subject to the approval of, and within limits established by, the Committee, to designate all or any portion of an EIP Award
as a “Deferred Award” as defined under the Merck & Co., Inc. Deferral Program (the “Deferral Program”). Such election shall be subject to the
requirements for deferral set forth in the Deferral Program and pursuant to the requirements, if any, of Section 409A of the Code. Any portion of a
Participant’s EIP Award which is not so deferred shall be paid no later than March 15 of the year following the Plan Year for which the EIP Award
is paid. Each EIP Award will be paid in cash.
VI.
RECOUPMENT; OFFSET
A.
Recoupment. EIP Awards are subject to the Company’s right to reclaim benefits for compliance violations or in the event of a
restatement of financial results pursuant to the processes described in the “Policy and Procedures for Discretionary Recoupment of
Compensation for Compliance Violations” and the “Policy and Procedures for Recoupment of Incentive-Based Compensation” (or
any other recovery, recoupment, clawback and/or other forfeiture policy maintained by the Company from time to time).
B.
Offset. The Company may offset against any payments to be made to a Participant or his/her beneficiary under this Plan any
amounts owing to the Company, its Subsidiaries or affiliates from the Participant for any reason.
VII. GOVERNING LAW; SEVERABILITY
A.
Governing Law. The Plan and all rights thereunder shall be governed and construed in accordance with the laws of the state of New
Jersey, wherein venue shall lie for any dispute arising hereunder. This Plan shall also be subject to all applicable non-U.S. laws as
to Participants employed by Subsidiaries or affiliates located outside of the United States.
B.
Severability. In the event any provision of the Plan is held illegal or invalid for any reason, the illegality or invalidity will not affect the
remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provision had not been included.
VIII. PLAN AMENDMENT, SUSPENSION OR TERMINATION
Each of the Board of Directors of the Company and the Committee has the right by resolution to amend, suspend, or terminate the Plan at any
time.
3
IX.
GENERAL PROVISIONS
A.
Tax Withholding. All EIP Awards are subject to any applicable U.S. and non-U.S. federal, state or local tax withholding requirements.
Each Participant will bear the cost of any taxes not withheld on payments provided under the Plan, regardless of whether
withholding is required.
C.
Code Section 409A. Payments under the Plan are intended to be exempt from, or comply with, Section 409A, and the Plan will be
interpreted to achieve this result. If an EIP Award is subject to Section 409A, any payment to a Participant who is a “specified
employee” (within the meaning of Section 409A) of the Company or any Subsidiary or affiliate and that is payable upon such
Participant’s “separation from service” (within the meaning of Section 409A), shall not be made before the date that is six months
after the Participant’s separation from service, to the extent required to avoid the adverse consequences of Section 409A. Nothing
in the Plan shall be interpreted or construed to transfer any liability for any tax (including a tax or penalty due as a result of a failure
to comply with Section 409A) to the Company or to any other individual or entity, and the Company shall have no liability to a
Participant, or any other party, if an EIP Award that is intended to be exempt from, or compliant with, Section 409A is not so exempt
or compliant.
B.
No Rights to Assets. Benefits under the Plan will be paid from the Company’s general assets. Participation in the Plan does not
create, in favor of any Employee, any right or lien in or against any asset of the Company. Nothing contained in the Plan, and no
action taken under its provisions, will create or be construed to create a trust of any kind, or a fiduciary relationship, between the
Company and an Employee or any other person. The Company’s promise to pay benefits under the Plan will at all times remain
unfunded as to each Employee, whose rights under the Plan are limited to those of a general and unsecured creditor of the
Company.
C.
No Right to Transfer Interest. EIP Awards are not transferable by a Participant except upon a death by will or the laws of descent
and distribution and will not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any such attempted action will be void.
D.
No Employment Rights. Neither the action of the Company in establishing the Plan nor any action taken by it or by the Committee
under the provisions hereof, nor any provision of the Plan, shall be construed as giving to any Employee the right to be retained in
the employ of the Company, its Subsidiaries or affiliates.
E.
Effect on Other Employee Benefit Plans; Nonduplication. Nothing contained in the Plan shall prevent the Company from adopting
other or additional compensation arrangements for its employees or other service providers; provided, however, that no other
annual incentive cash payment shall be made under another incentive plan or arrangement of the Company or its Subsidiaries or
affiliates in addition to payment under this Plan, unless expressly stated under the terms of such other arrangement. The value of
any EIP Award shall not be included as compensation, earnings, salaries, or other similar terms used when calculating any
Participant’s benefits under any employee benefit plan sponsored by the Company or any Subsidiary or affiliate, except as such
plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s
employee benefit plans.
F.
Headings. The headings used in this document are for convenience of reference only and may not be given any weight in
interpreting any provision of the Plan.
X.
TERMS
The following words and phrases used herein have the meanings set forth below:
A.
“Administrative Regulations” means any procedures and regulations established by the Committee pursuant to Section II hereof
for the purpose of administering the Plan.
B.
“Code” means the Internal Revenue Code of 1986, as amended, or any successor thereto.
4
C.
“Committee” means the Compensation and Management Development Committee of the Board of Directors of the Company.
D.
“Company” means Merck & Co., Inc. or any successor thereto.
E.
“Company Scorecard” means the Company’s overall performance, based on the performance objectives established by the
Committee.
F.
“EIP Award” means an award under the Plan.
G. “EIP-Eligible Pay” means a Participant’s annual base salary, as reflected in the Company’s books and records.
H.
“Employee” means any salaried employee of the Company, a Subsidiary or an affiliate, whether full-time or part-time and whether
or not an officer or director, excluding, however, any temporary employee or any person serving the Company only in the capacity of
director. An “Employee” does not include any person who is an independent contractor, or agrees or has agreed that he/she is an
independent contractor, or has any agreement or understanding with the Company, Subsidiary or an affiliate that he/she is not an
employee or an eligible employee, even if he/she previously had been an employee or eligible employee or is employed by a
temporary or other employment agency, regardless of the amount of control, supervision or training provided by the Company,
Subsidiary or an affiliate, or he/she is a “leased employee” as defined under section 414(n) of the Code, as amended. Such a
person is not eligible to participate in the Plan even if a court, agency or other authority rules that he/she is a common-law employee
of the Company, a Subsidiary or an affiliate.
I.
“Executive Team” means the Executive Team of the Company, as reflected in the Company’s books and records.
J.
“Participant” means an Employee who is a Section 16 Officer eligible to participate in the Plan pursuant to Section III hereof.
K.
“Plan” means this Merck & Co., Inc. Executive Incentive Plan, as amended from time to time.
L.
“Plan Year” means the calendar year.
M. “Section 16 Officer” means an officer designated by the Company as such for purposes of Section 16 of the Securities Exchange Act of
1934, as amended.
N.
“Section 409A” means Section 409A of the Code.
O. “Subsidiary” means any corporation, domestic or foreign (other than the Company), 50% or more of the total voting power of which is
held by the Company and/or a Subsidiary or Subsidiaries.
MERCK & CO. INC. U.S. SEPARATION BENEFITS PLAN
Amended and Restated as of January 1, 2019
5
MERCK & CO., INC., U.S. SEPARATION BENEFITS PLAN
SECTION 1
PREAMBLE
Merck Sharp & Dohme Corp. established the MSD Separation Benefits Plan (the "MSD Plan"), as amended from time to time, to
provide benefits to eligible non-union employees whose employment with Merck Sharp & Dohme Corp. or a participating
wholly owned subsidiary (collectively, "MSD") was terminated under certain circumstances at the initiative of MSD.
Schering-Plough Corporation established the Schering-Plough Separation Benefits Plan (the "Schering Plan"), as amended from
time to time, for the purpose of providing severance benefits to eligible union and non-union employees whose employment with
Schering Corporation and certain of its U.S. affiliated companies was terminated under certain circumstances.
Effective January 1, 2012, the Schering Plan merged into the MSD Plan with the MSD Plan being renamed the Merck & Co.,
Inc. U.S. Separation Benefits Plan (the "Plan"). The Plan was amended and restated in its entirety at that time. Effective January
1, 2013, September 1, 2013, October 1, 2013, November 15, 2014 and January 1, 2017, the Plan was reinstated in its entirety.
Effective January 1, 2019, the Plan is again being amended and restated in its entirety as set forth herein.
The purpose of the Plan is to provide benefits to eligible employees whose employment with an Employer is terminated at the
initiative of the Employer for reasons described below. This Plan is part of the MSD Separation Allowance Plan (Plan No. 514).
1
SECTION 2
DEFINITIONS
For the purposes of this Plan, the following terms shall have the following meanings:
2.1
“Annual Base Salary” means
(a) With respect to a Participant who is exempt as of his or her Separation Date, his or her annual base salary in
effect as of his or her Separation Date, according to the Employer’s payroll records, without reduction for any
contributions to Employer-sponsored benefit plans. For the avoidance of doubt, (i) with respect to a Participant who is
exempt and regularly scheduled to work less than full-time as of his or her Separation Date, Annual Base Salary is the
reduced annual base salary in effect on his or her Separation Date applicable to the less than full time position, according
to the Employer’s payroll records, without reduction for any contributions to the Employer-sponsored benefit plans and
(ii) no adjustment is made to Annual Base Salary if the Participant’s annual base salary in effect during any period prior to
his or her Separation Date is higher or lower (for any reason, including promotion/demotion or a move to or from full-time
or part-time status) than his or her annual base salary in effect as of his or her Separation Date, according to the
Employer’s payroll records.
(b) With respect to a Participant who is non-exempt as of his or her Separation Date, the hourly rate according to
the Employer’s payroll records in effect as of his or her Separation Date multiplied by the number of hours the Eligible
Employee is regularly scheduled to work as of his or her Separation Date (up to a maximum of 2080 hours).
Annual Base Salary does not include bonuses, commissions, overtime pay, shift pay, premium pay, lump sum
merit increases, cost of living allowances, income from stock options or other incentives under an Incentive Stock Plan
of the Employer (or the Parent or any of its subsidiaries), stock grants or other incentives, or other pay not specifically
included above.
For example, a Participant who is regularly scheduled to work less than full-time on his Separation Date has 10
Complete Years of Continuous Service (9 at full-time and 1 at less than full-time), had an annual base salary of $100,000
as a full-time employee but on his Separation Date has an annual base salary of $50,000 according to the Employer’s
payroll records because it was reduced as applicable for the less than full-time position. The Participant’s Separation Pay
will be calculated using 10 Complete Years of Continuous Service and an Annual Base Salary of $50,000. There is no
adjustment in Annual Base Salary for prior years of higher annual base salary due to full-time service.
2.2
“Base Pay Rate” means
(a) With respect to an Eligible Employee who is exempt, his/her annual base pay according to the Employer’s
payroll records in effect as of the date the Eligible Employee is offered a Qualified Alternative Position or a Negotiated
Job Offer. For an Eligible Employee who is regularly scheduled to work less than full-time, annual base pay is the reduced
annual base pay to the less than full-time position.
(b) With respect to an Eligible Employee who is non-exempt, the hourly rate according to the Employer’s
payroll records in effect as of the date the Eligible Employee is
2
offered a Qualified Alternative Position or a Negotiated Job Offer multiplied by the number of hours the Eligible
Employee is regularly scheduled to work (up to a maximum of 2080 hours).
Base Pay Rate is calculated without reduction for any contributions to Employer-sponsored benefit plans. Base Pay Rate
includes applicable shift pay and premium pay but does not include bonuses, commissions, overtime pay, lump sum merit
increases, cost of living allowances, income from awards granted under an Incentive Stock Plan of the Employer (or the
Parent or its subsidiaries), or other pay not specifically included above.
2.3
“Basic Life Insurance” means life insurance provided to an Eligible Employee under a plan sponsored by
Parent or a subsidiary of Parent equal to 1x "base pay" as defined under the life insurance plan in which the Eligible
Employee participates, as it may be amended from time to time.
2.4
“Benefits Continuation Period” means the period of time, as set forth on Schedule B-2, during which a
Participant is eligible to receive Separation Benefits, provided, however that the Participant may elect to end the period
earlier than indicated on Schedule B-2 by notifying the Employer's health and insurance plan administrator (i) within the
later of thirty (30) days from the Participant's Separation Date or the date by which the Participant is provided to review
the Separation Letter so that the Benefit Continuation Period ends on the date it would have otherwise begun, or (ii) during
the Employer's annual open enrollment period for health and insurance benefits so that the Benefit Continuation Period
ends the following January 1 (provided that date is not beyond the period set forth on Schedule B-2), or (iii) mid-year with
a qualified status change that otherwise permits the Participant to make a change to the Participant's healthcare coverage in
accordance with the terms of the Employer's healthcare plan so that the Benefits Continuation Period ends on the date the
mid-year change would otherwise be effective under the terms of the Employer's healthcare plan (provided that date is not
beyond the period set forth on Schedule B- 2).
2.5
“Change in Control” shall have the meaning set forth in the CIC Plan (and, for avoidance of doubt, a valid
amendment of that definition under the CIC Plan shall constitute an amendment of this Plan without further action).
2.6
“CIC Plan” means the Merck & Co., Inc. Change in Control Separation Benefits Plan, as amended and
restated effective January 1, 2013 and as it may be further amended from time to time, and any successor thereto.
2.7
“Claims Reviewer” means the Merck & Co., Inc. Employee Benefits Committee (or its delegate) whose
members are appointed by the Parent's Executive Vice President of Human Resources or his or her delegate; provided,
however, for Section 16 Officers, Claims Reviewer means the Compensation and Benefits Committee of the Board of
Directors of Parent or its delegate.
2.8
“Code” means the Internal Revenue Code of 1986, as amended and the regulations promulgated
thereunder.
2.9
“Complete Years of Continuous Service” means (a) for a Legacy Schering Employee, a year from the
Participant’s Most Recent Hire Date with a Legacy Schering Entity to its anniversary, and thereafter from each
anniversary to the next, (b) for a Legacy Merck Employee, a year from the Participant's Most Recent Hire Date
with a Legacy Merck
3
Entity to its anniversary, and thereafter from each anniversary to the next, (c) for a Legacy Inspire Employee, a
year from the Participant’s Most Recent Hire Date with a Merck Entity to its anniversary, and thereafter from each
anniversary to the next, and (d) for a Non-Legacy Company Employee, from the Participant’s Most Recent Hire
Date with a Merck Entity, and thereafter from each anniversary to the next.
2.10
“Continuous Service” means (a) for a Legacy Schering Employee, the period of a Participant's continuous
employment with a Legacy Schering Entity commencing on the Participant's Most Recent Hire Date with a
Legacy Schering Entity and ending on the Separation Date as reflected on the Employer’s employee database, (b)
for a Legacy Merck Employee, the period of a Participant's continuous employment with a Legacy Merck Entity
commencing on the Participant's Most Recent Hire Date with a Legacy Merck Entity and ending on the
Separation Date as reflected on the Employer’s employee database, (c) for a Legacy Inspire Employee, the period
of a Participant's continuous employment with a Merck Entity commencing on the Participant's Most Recent Hire
Date with a Merck Entity and ending on the Separation Date as reflected on the Employer’s employee database,
and (d) for a Non-Legacy Company Employee, the period of a Participant's continuous employment with a Merck
Entity commencing on the Participant's Most Recent Hire Date with a Merck Entity and ending on the Separation
Date as reflected on the Employer’s employee database. For the avoidance of doubt, service prior to November 4,
2009 by a Legacy Schering Employee with a Legacy Merck Entity or a Legacy Merck Employee with a Legacy
Schering Entity is excluded from “Continuous Service.” Notwithstanding anything contained in this Plan to the
contrary, employment with a Legacy Schering Entity, Legacy Merck Entity or a Merck Entity as an Excluded
Person does not count as "Continuous Service".
2.11
“Eligible Employee” means (a) any regular full-time or regular part-time employee of an Employer who is on
the Employer's normal U.S. payroll and as to whom the terms and conditions of employment are not covered by a
collective bargaining agreement unless the collective bargaining agreement specifically provides for coverage under the
Plan; or (b) a U.S. Expatriate on an Employer's normal U.S. payroll.
The term “Eligible Employee” shall not include:
(i)
an employee (x) who is a party to an employment agreement with the Employer or with the Parent (or any of its
subsidiaries) or (y) who is entitled, upon termination of employment with the Employer, to separation, severance,
termination or other similar payments (1) under another plan or program sponsored by the Employer or Parent (or any
of its subsidiaries); or (2) pursuant to a separate agreement with the Employer or Parent (or any of its subsidiaries) or
(z) who is a party to an agreement with the Employer or Parent (or any of its subsidiaries) that provides that no
payment or benefits are due to the employee in connection with his or her termination of employment; provided,
however, in each case under the foregoing clauses (x), (y) and (z) unless the plan, program or agreement expressly
provides for benefits under this Plan;
(ii)
a participant in the CIC Plan (but this clause shall only apply during the Protection Period (as defined in
Section 8.1));
(iii)
temporary employees (including college coops, summer employees, high school coops, flexible workforce
employees, post-doctorate research fellows and any other such
4
temporary classifications ) and/or employees called by the Employer at any time for employment in the U.S. on a
non-scheduled and non-recurring basis, and who becomes an employee of the Employer only after reporting to work
for the period of time during which the person is working;
(iv) an Excluded Person;
(v)
employees of a non-US subsidiary of an Employer (or who are dual employees of a non- US subsidiary of an
Employer) who are on assignment in the US;
(vi)
employees whose employment ends for any reason while on unapproved leaves of absence;
(vii)
employees whose employment ends for any reason while on approved leaves of absence for a period equal to
or more than six continuous months regardless of the reason(s) for the leave excluding the following approved leaves
of absence: medical disability leaves, military leaves and family medical leaves under federal or state family medical
leave laws;
(viii)
employees whose employment ends for any reason while on approved leaves of absence for medical disability
for a period equal to or more than one year;
(ix)
employees who are covered by the IAM Agreement at the Kenilworth, NJ site who elect to retain their recall
rights.
For purposes of the foregoing clauses (vii) and (viii), a series of leaves of absence is considered one continuous
leave for purposes of calculating the six-month or one-year requirement if the employee does not return to active
employment for any reason, including but not limited to because the employee’s former position is unavailable and
the employee is unable to secure a new position.
Whether an individual is an Eligible Employee or not is determined as of the date of his/her Termination due to Workforce
Restructuring or for Rebadged Employees as of the date of his/her termination of employment due to an outsource transaction
.
2.12
“Employer” means individually and collectively, the entities identified on Schedule A attached hereto.
2.13
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations
promulgated thereunder.
2.14
“Excluded Person” means a person who (i) is an independent contractor, or agrees or has agreed that he/she is
an independent contractor, or (ii) has any agreement or understanding with the Employer, or any of its affiliates that he/she
is not an employee or an Eligible Employee, or (iii) is employed by a temporary or other employment agency, regardless
of the amount of control, supervision or training provided by the Employer or its affiliates, or (iv) is a “leased employee”
as defined under Section 414(n) of the Internal Revenue Code of 1986, as amended, or (v) is not treated by the Employer
as an employee for purposes of withholding federal income taxes, regardless of any contrary Internal Revenue Service,
governmental or judicial determination
5
relating to such employment status or tax withholding. An Excluded Person is not eligible to participate in the Plan even if
a court, agency or other authority rules that he/she is a common-law employee of the Employer or its affiliates.
2.15
Intentionally Omitted.
2.16
Intentionally Omitted.
2.17
“IAM Agreement” means a collective bargaining agreement between Merck Sharp & Dohme Corp. and
District 15, Lodge 315 of the International Association of Machinists and Aerospace Workers.
2.18
“Legacy Inspire Employee” means an Eligible Employee who (a) as of December 31, 2012 is employed by a
Merck Entity and either continues to be employed by such entity until his/her Separation Date or is rehired or transferred
to such entity after December 31, 2012, and (b) as of his/her Separation Date is (i) employed by an Employer, and (ii)
coded in the employee data base of Parent as S6 (Legacy Inspire) under infotype 35, and (iii) not covered by a collective
bargaining agreement.
2.19
"Legacy Merck Employee" means an Eligible Employee who (a) as of December 31, 2012 is employed by a
Merck Entity and either continues to be employed by such entity until his/her Separation Date or is rehired or transferred
to such entity after December 31, 2012, and (b) as of his/her Separation Date is (i) employed by an Employer, and (ii)
coded in the employee data base of Parent with a blank indicator under infotype 35, and (iii) not covered by a collective
bargaining agreement, other than one of the IAM Agreements. For the avoidance of doubt, “Legacy Merck Employee”
excludes employees who are covered by the IAM Agreement at the Kenilworth, NJ site who elect to retain their recall
rights.
2.20
"Legacy Merck Entity" means (a) for the period prior to November 4, 2009, Old Merck and its direct or
indirect wholly owned subsidiaries and (b) for the period beginning November 4, 2009, New Merck and its direct or
indirect wholly owned subsidiaries.
2.21
"Legacy Schering Employee" means an Eligible Employee who (a) as of December 31, 2012 is employed by
a Merck Entity and either continues to be employed by such entity until his/her Separation Date or is rehired by or
transferred to such entity after December 31, 2012, and
(b) as of his/her Separation Date is (i) employed by an Employer, (ii) coded in the employee data base of Parent as S1
(Legacy Organon), S2 (Legacy Intervet) or S5 (Legacy Schering-Plough) under infotype 35, and (iii) not covered by a
collective bargaining agreement other than one of the IAM Agreements or an agreement that specifically provides for
benefits under this Plan. For the avoidance of doubt, “Legacy Schering Employee” excludes employees who are covered
by the IAM Agreement at the Kenilworth, NJ site who elect to retain their recall rights.
2.22
"Legacy Schering Entity" means (a) for the period prior to November 4, 2009, Schering- Plough Corporation
and its direct or indirect wholly owned subsidiaries and (b) for the period beginning November 4, 2009, New Merck and
its direct or indirect wholly owned subsidiaries.
2.23
“Merck Entity” means for the period beginning November 4, 2009, New Merck and its direct or indirect
wholly owned subsidiaries.
6
2.24
“Merck Retiree Medical Plan” means the retiree medical plan sponsored by Merck Sharp & Dohme which
includes the following components: (i) the Merck Group Retiree Medical Plan which provides group retiree medical and
prescription drug benefits to eligible retirees and their eligible dependents, in each case who are under age 65 or not
Medicare-eligible as more fully described in the Merck Group Retiree Medical Plan SPD, and (ii) the Merck Retiree HRA
which provides reimbursement benefits to eligible retirees and their eligible dependents who are eligible for subsidized
retiree medical benefits and, in each case ,who are age 65 or older and Medicare- eligible as more fully described in the
Merck Retiree Health Reimbursement Account SPD.
2.25
“Misconduct” means conduct which includes (a) falsification of an Employer's or Parent's
records/misrepresentation; (b) theft; (c) acts or threats of violence; (d) refusal to carry out assigned work; (e) unauthorized
possession of alcohol or illegal drugs on an Employer's or Parent's premises; (f) being under the influence of alcohol or
illegal drugs during work hours; (g) willful intent to damage or destroy an Employer's or Parent's property; (h) violation of
the Parent's "Our Values and Standards"; (i) acts of discrimination/harassment; (j) conduct jeopardizing the integrity of the
products of an Employer, Parent or one or more of its subsidiaries; (k) violation of rules, policies, and/or practices of an
Employer or Parent; or (l) other conduct considered to be detrimental to an Employer, the Parent or one or more of its
subsidiaries.
2.26
“Most Recent Hire Date” means (a) for a Legacy Schering Employee, his or her most recent hire date at a
Legacy Schering Entity or an entity acquired by a Legacy Schering Entity as reflected on the Employer’s employee data
system, (b) for a Legacy Merck Employee, his or her most recent hire date at a Legacy Merck Entity or an entity acquired
by a Legacy Merck Entity as reflected on the Employer’s employee data system, (c) for a Legacy Inspire Employee, his or
her most recent hire date at a Merck Entity or an entity acquired by a Merck Entity as reflected on the Employer’s
employee data system, and (d) for a Non-Legacy Company Employee, his or her most recent hire date at a Merck Entity or
an entity acquired by a Merck Entity as reflected on the Employer’s employee data system. Notwithstanding the
foregoing, the most recent hire date for a Legacy Merck Employee who was employed by a Legacy Merck Entity on
December 31, 1997, transferred from that entity to Merial as of January 1, 1998, remained continuously employed by
Merial through the date he or she transferred employment from Merial to a Legacy Merck Entity and whose transfer to a
Legacy Merck Entity occurred between October 1, 2000 and June 1, 2001, is his or her most recent hire date on the
Employer's employee data system at a Legacy Merck Entity prior to his or her transfer to Merial. Notwithstanding the
foregoing, the most recent hire date for a Legacy Merck Employee who was employed by a Legacy Merck Entity on
December 31, 2007, transferred from that entity to PRWT as of January 1, 2008, remained continuously employed by
PRWT through September 3, 2010 and who was rehired by a Legacy Merck Entity as of September 3, 2010, is his or her
most recent hire date on the Employer’s employee data system at a Legacy Merck Entity prior to his or her transfer to
PRWT. For the avoidance of doubt, the most recent hire date at an acquired entity may occur before the date the entity was
acquired by a Legacy Schering Entity, Legacy Merck Entity or Merck Entity, provided such date is reflected on the
Employer’s employee data system.
2.27
"Negotiated Job Offer" means an offer of employment (or an offer of continued employment) with a
successor employer or outsource vendor the terms and conditions of which are negotiated by an Employer, Parent or
one of its subsidiaries or affiliates and may include, among other things, a reduction in Base Pay Rate.
7
2.28
“New Merck” means Merck & Co., Inc. (formerly known as Schering-Plough Corporation) on and
after November 4, 2009.
2.29
“Non-Legacy Company Employee” means an Eligible Employee who (a) is first hired by a Merck Entity on
or after January 1, 2013, and (b) as of his/her Separation Date is (i) employed by an Employer, and (ii) coded in the
employee data base of Parent with a blank indicator under infotype 35, and (iii) not covered by a collective bargaining
agreement. For purposes of determining whether an Eligible Employee is a “Non-Legacy Company Employee” only, an
Eligible Employee who was an employee of an entity on the date that it was acquired by a Merck Entity is considered to
be first hired by a Merck Entity on the date the entity became a wholly owned subsidiary of New Merck or one of its
wholly owned subsidiaries.
2.30
"Offer Outside Geographic Parameters" means (A) for an Eligible Employee who is not eligible to
participate in the Company’s sales incentive plan and who does not qualify as other field-based personnel, a Negotiated
Job Offer that results in the relocation of the Eligible Employee's principal business location to a new principal business
location (x) where the distance between the Eligible Employee’s residence immediately prior to the extension of the
Negotiated Job Offer and his/her new principal business location is more than 50 miles greater than the distance between
the Eligible Employee's residence and his/her principal business location at the time the Negotiated Job Offer is extended
or (y) more than 75 miles from the Eligible Employee's residence at the time the Negotiated Job Offer is extended and not
closer to the Eligible Employee's residence at that time, and (B) for an Eligible Employee who is eligible to participate in
the Company’s sales incentive plan or who qualifies as other field-based personnel, a Negotiated Job Offer that results in
the relocation of the Eligible Employee's geographic workload center location to a new geographic workload center
location (x) where the distance between the Eligible Employee’s residence immediately prior to the extension of the
Negotiated Job Offer and his/her new geographic workload center location is more than 50 miles greater than the distance
between the Eligible Employee's residence and his/her geographic workload center location at the time the Negotiated Job
Offer is extended and (y) more than 75 miles from the Eligible Employee's residence at the time the Negotiated Job Offer
is extended and not closer to the Eligible Employee's residence at that time.
The Employer, in its sole and absolute discretion, will determine (i) whether an Eligible Employee qualifies as other field-
based personnel, (ii) distance using a nationally recognized mapping service, (iii) principal business location, and (iv) the
geographic workload center.
Whether a position is an Offer Outside Geographic Parameters shall be determined at the time a Negotiated Job Offer is
offered or communicated to the Eligible Employee by the Employer.
2.31
“Old Merck” means Merck & Co., Inc. prior to November 4, 2009 (subsequently known as Merck Sharp &
Dohme Corp).
2.32
“Outplacement Benefits” means benefits for outplacement counseling or other outplacement services made
available to a Participant as provided pursuant to Section 4.4 of this Plan.
2.33
“Parent” means New Merck.
2.34
“Participant” means an Eligible Employee who has experienced a Termination due to Workforce
Restructuring and who has signed, and, if a revocation period is applicable, not
8
revoked, a Release of Claims in a form that is satisfactory to the Employer in its sole and absolute discretion.
The term "Participant" shall also include, where and as applicable a Rebadged Employee who has signed and, if a
revocation period is applicable, not revoked a Release of Claims in a form that is satisfactory to the Employer in its sole
and absolute discretion.
2.35
“Plan” means the Merck & Co., Inc., U.S. Separation Benefits Plan as set forth herein, and as may be amended
from time to time.
2.36
“Plan Administrator” means the Parent or its delegate.
2.37
“Plan Year” means the calendar year January 1 through December 31 on which the records of the Plan
are kept.
2.38
“Qualified Alternative Position” means a position with an Employer, the Parent or any of its subsidiaries
which does not result in either of the following:
(i) a reduction in the Eligible Employee's Base Pay Rate; or
(ii)
(A) for an Eligible Employee who is not eligible to participate in the Company’s sales incentive plan,
relocation of the Eligible Employee's principal business location to a new principal business location (x) where the
distance between the Eligible Employee’s residence immediately prior to the relocation and his/her new principal
business location is more than 50 miles greater than the distance between the the Eligible Employee's residence and
his/her principal business location immediately prior to the relocation or (y) that is more than 75 miles from the
Eligible Employee's residence immediately prior to the relocation and not closer to the Eligible Employee's residence
at that time, and (B) for an Eligible Employee who is eligible to participate in the Company’s sales incentive plan or
who qualifies as other field- based personnel, relocation of the Eligible Employee's geographic workload center
location to a new geographic workload center location (x) where the distance between the Eligible Employee’s
residence immediately prior to the relocation and his/her new geographic workload center location is more than 50
miles greater than the distance between the Eligible Employee's residence and his/her geographic workload center
location immediately prior to the relocation and (y) more than 75 miles from the Eligible Employee's residence at the
time the Negotiated Job Offer is extended and not closer to the Eligible Employee's residence at that time.
The Employer, in its sole and absolute discretion, will determine (i) whether an Eligible Employee qualifies as other
field-based personnel, (ii) distance using a nationally recognized mapping service, (iii) principal business location,
and (iv) the geographic workload center.
Whether a position is a Qualified Alternative Position shall be determined at the time such position is offered or
communicated to the Eligible Employee by his/her manager.
2.39
"Rebadged Employee” means an Eligible Employee whose employment with the Employer is
terminated by the Employer in connection with the outsourcing of work by
9
the Employer in a transaction with a third-party vendor where the Eligible Employee is offered a Negotiated Job
Offer and:
(a) (i) accepts the Negotiated Job Offer; or (ii) declines the Negotiated Job Offer, provided the Negotiated Job
Offer is not an Offer Outside Geographic Parameters; and
(b) remains employed with the Employer through the date established by the Employer as the employee's
Separation Date unless the Employer expressly waives this provision.
Whether an Eligible Employee is a Rebadged Employee shall be determined by the Employer or Parent in its sole
discretion. An Eligible Employee shall not be considered to be a Rebadged Employee if his or her employment with the
Employer (i) does not end as set forth in this Section 2.38 (ii) ends due to the declination of a Negotiated Job Offer that is
an Offer Outside Geographic Parameters, or (iii) ends as a result of any of the events described in Section 3.1(e).
For the avoidance of doubt, a Rebadged Employee shall not be considered to have experienced a Termination due to
Workforce Restructuring for purposes of the Plan.
2.40
“Release of Claims” means the agreement that an Eligible Employee must execute in order to become a
Participant and to receive Separation Plan Benefits, which shall be prepared by the Employer or the Parent and shall
contain such terms and conditions as determined by the Employer or the Parent, including but not limited to a general
release of claims, known or unknown, that the Eligible Employee may have against the Employer (and the Parent and
any of its subsidiaries and/or affiliates), including claims related to the employment and termination of employment of
the Eligible Employee; such Release of Claims may also contain, in the Employer’s or the Parent's discretion, other terms
and conditions including, without limitation, cooperation in litigation, non-disclosure, confidentiality, non-
disparagement, non-solicitation and/or non-competition provisions.
2.41
“Section 16 Officer” means an “officer” as such term is defined in Rule 16(a)-1(f) of the Securities Exchange
Act of 1934 of the Parent who is also an Eligible Employee of an Employer.
2.42
“Separation Benefits” means the benefits provided pursuant to Sections 4.2 and 4.3 of this Plan.
2.43
“Separation Date” means the Eligible Employee’s last day of employment with the Employer due to a
Termination due to Workforce Restructuring or, in the case of a Rebadged Employee, due to the outsourcing transaction.
The Separation Date of an Eligible Employee who dies prior to his or her scheduled Separation Date but after he or she
was notified of a scheduled Separation Date shall be deemed to have occurred on the day before his/her date of death.
2.44
“Separation Pay” means the cash benefit payable under this Plan pursuant to Section 4.1 or to a Rebadged
Employee pursuant to Section 4.5.
2.45
“Separation Plan Benefits” means, collectively, Separation Pay, Separation Benefits and Outplacement
Benefits.
10
2.46
"Termination Due to Non-Performance" means a termination of an Eligible Employee's employment as
determined and caused by the Employer due to the Eligible Employee's failure to perform his or her job assignments in a
satisfactory manner.
2.47
“Termination due to Workforce Restructuring ” means the termination of an Eligible Employee's
employment as determined and caused by the Employer due to:
(a)
the elimination of an Eligible Employee's job;
(b)
organizational changes; or
(c)
a general reduction of the workforce.
Whether an Eligible Employee's job is eliminated is determined by the Employer but excludes the maintenance of the
position with the elimination of a part-time or job share arrangement or other flexible work arrangement.
Organizational changes are determined by the Employer and include the following actions: discontinuance of operations,
location closings, corporate restructuring but exclude a reduction in job title, grade or band level, Base Pay Rate, short
term incentive opportunity (e.g., cash bonuses under any bonus or incentive plan or program of the Parent), long-term
incentive compensation opportunity, equity compensation opportunity and/or other forms of remuneration of an Eligible
Employee with or without a change in the Eligible Employee's job duties where such reduction is due to (i) a general
change in the Employer’s or the Parent’s compensation framework as it applies to similarly situated Eligible Employees
(e.g., a change in the general compensation framework applicable to similar jobs with the Employer, or an identifiable
segment of the Employer such as a subsidiary, division or department); (ii) an action to align the Eligible Employee with
the Employer's or the Parent's compensation and career framework as it applies to similarly situated Eligible Employees;
or (iii) a demotion or other action taken as a result of the Eligible Employee's performance or behaviors.
An Eligible Employee shall not be considered to have incurred a Termination due to Workforce Restructuring if his or her
employment with the Employer (i) does not end due to this Section 2.46 (a), (b) or (c) or (ii) ends as a result of any of the
events described in Section 3.1(d).
For the avoidance of doubt with respect to outsourcing transactions, (x) an Eligible Employee whose employment with the
Employer is terminated by the Employer in connection with the outsourcing of work by the Employer in a transaction with
a third-party vendor where the individual is offered a Negotiated Job Offer and declines the Negotiated Job Offer because
it is an Offer Outside Geographic Parameters, is considered to have incurred a Termination due to Workforce Restructuring
provided his or her employment with the Employer does not end as a result of any of the events described in Section 3.1
(d), and (y) a Rebadged Employee shall not be considered to have experienced a Termination due to Workforce
Restructuring for purposes the Plan.
2.48
“U.S. Expatriate” means a U.S. citizen or individual with U.S. Permanent Resident status who is employed by
the Employer and on assignment outside the U.S. and who is not an Excluded Person.
11
SECTION 3 ELIGIBILITY FOR BENEFITS
3.1
Eligibility.
a)
(a) An Eligible Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section
4.5) when he/she experiences a Termination due to Workforce Restructuring; provided, however, that a Legacy Inspire
Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) only if he/she
experiences a Termination due to Workforce Restructuring on or after May 17, 2013. Separation Plan Benefits shall be
provided under this Plan to an Eligible Employee who experiences a Termination due to Workforce Restructuring only if
the Eligible Employee has executed and, if a revocation period is applicable, not revoked a Release of Claims in a form
satisfactory to the Employer or Parent in its sole and nonreviewable discretion. An Eligible Employee who has executed
and, if a revocation period is applicable, not revoked a Release of Claims is a Participant.
(b) A Rebadged Employee will be eligible for Separation Pay described in Section 4.5; provided, however, that a
Rebadged Employee who is a Legacy Inspire Employee will be eligible for Separation Pay described in Section 4.5 only
if his/her employment with an Employer is terminated by the Employer in connection with the outsourcing of work on or
after May 17, 2013. Separation Pay shall be provided under this Plan to a Rebadged Employee only if the Rebadged
Employee has executed and, if a revocation period is applicable, not revoked a Release of Claims in a form satisfactory to
the Employer or Parent in its sole and nonreviewable discretion. A Rebadged Employee who has executed and, if a
revocation period is applicable, not revoked a Release of Claims is a Participant. A Rebadged Employee is not eligible for
Separation Benefits or Outplacement Benefits.
(c) An Eligible Employee will also be entitled to receive those pension benefits set forth in Schedule D (Change in
Control/Pension) and retiree medical benefits set forth in Schedule E (Change in Control/Retiree Medical) if (i) a Change
in Control has occurred and (ii) within two years thereafter, the Eligible Employee’s employment with the Employer (or
successor employer) is terminated by the Employer (or successor employer) for any reason other than for Misconduct,
death or "Permanent Disability" (as such term is defined in the CIC Plan), and (iii) the Eligible Employee signs and returns
the release of claims in use under the CIC Plan and in accordance with the process established under the CIC Plan.
(d) Notwithstanding anything herein to the contrary, an Eligible Employee shall not be considered to have incurred
a Termination due to Workforce Restructuring under the Plan if his or her employment ends as a result of any of the
following events:
(i) a divestiture of a subsidiary, division or other identifiable segment of the Employer or Parent or a
transfer of the Eligible Employee to a joint venture or other business entity in which the Employer or the Parent
directly or indirectly will own some outstanding voting or other ownership interest, in each case where either
(x) the Eligible Employee is offered and accepts, or continues in, a Negotiated Job Offer; or
12
(y) the Eligible Employee is offered and declines a Negotiated Job Offer, unless the Negotiated Job
Offer is an Offer Outside Geographic Parameters with the acquiring entity or vendor;
(ii) the Employer's decision to outsource work to a third-party vendor where the Eligible Employee is a
Rebadged Employee;
(iii)
the Eligible Employee's voluntary resignation for any reason including after reaching early or
normal retirement age under the retirement plan applicable to the Eligible Employee;
(iv)
a termination for Misconduct;
(v) death (unless the Eligible Employee dies after he/she has been notified of his/her scheduled Separation
Date but before the Separation Date occurs and a valid Release of Claims is executed by the Eligible Employee's
estate) in which case the Eligible Employee's Separation Date shall be deemed to have occurred on the day before
his/her date of death;
(vi)the Eligible Employee terminating employment with the Employer prior to the date identified as the
date the employee would experience a Termination due to Workforce Restructuring unless the Employer expressly
agreed to waive this provision;
(vii)
failure by the Eligible Employee to return to work at the Employer (or the Parent or any of its
subsidiaries) for any reason, including, but not limited to the Eligible Employee’s failure to secure a position at
the Employer (or the Parent or any of its subsidiaries) upon a return from a leave of absence for any reason; or
(viii)
Intentionally Omitted;
(ix)the Eligible Employee's decision to decline a Qualified Alternative Position for any reason (including,
but not limited to because the employee is a part-time employee and is offered a full-time position, is a shift-
worker and the position offered is on a different shift or has a job share or other flexible work arrangement and the
position offered is not a job share or does not include a flexible work arrangement) that is offered to the Eligible
Employee prior to the Eligible Employee's Separation Date; or
(x) the Eligible Employee's decision to accept an alternate position with the Employer, Parent or any of
its subsidiaries (whether or not the position is a Qualified Alternative Position) and to later decline it; or
(xi)
Termination Due to Non-Performance.
(e) Notwithstanding anything herein to the contrary, an Eligible Employee shall not be considered to be a
Rebadged Employee under the Plan if his or her employment ends as a result of any of the following events:
(i) a divestiture of a subsidiary, division or other identifiable segment of the Employer or Parent or a
transfer of the Eligible Employee to a joint venture or other business entity in which the Employer or the Parent
directly or indirectly will own some outstanding voting or other ownership interest;
(ii) the Employer's decision to outsource work to a third-party vendor where the Eligible Employee is
offered a Negotiated Job Offer and declines it because it is an Offer Outside Geographic Parameters;
13
(iii)
the Eligible Employee's voluntary resignation for any reason including after reaching early or
normal retirement age under the retirement plan applicable to the Eligible Employee;
(iv)
a termination for Misconduct;
(v) death (unless the Eligible Employee dies after he/she has been notified of his/her scheduled Separation
Date but before the Separation Date occurs and a valid Release of Claims is executed by the Eligible Employee's
estate) in which case the Eligible Employee's Separation Date shall be deemed to have occurred on the day before
his/her date of death;
(vi)the Eligible Employee terminating employment with the Employer prior to the date identified by the
Employer as the Separation Date unless the Employer expressly agreed to waive this provision;
(vii)
failure by the Eligible Employee to return to work at the Employer (or the Parent or any of its
subsidiaries) for any reason, including, but not limited to the Eligible Employee’s failure to secure a position at
the Employer (or the Parent or any of its subsidiaries) upon a return from a leave of absence for any reason; or
Intentionally Omitted
(viii)
Termination Due to Non-Performance.
3.2
Termination of Eligibility for Benefits. A Participant shall cease to participate in the Plan, and all Separation
Plan Benefits shall cease upon the occurrence of the earliest of:
(a)
Termination of the Plan prior to, or more than two years following, a Change in Control;
(b) Inability of the Employer to pay Separation Plan Benefits when due;
(c)
Completion of payment to the Participant of the Separation Plan Benefits for which the
Participant is eligible; and
(d)
The Claims Reviewer's determination, in its sole discretion, of the occurrence of the Eligible
Employee’s Misconduct, regardless of whether such determination occurs before or after the Eligible Employee’s
Separation Date, unless the Claims Reviewer determines in its sole discretion that Misconduct shall not cause the
cessation of Separation Plan Benefits in a particular case.
14
SECTION 4
BENEFITS
4.1
Separation Pay. Separation Pay shall be payable under this Plan to a Participant who is not a Rebadged
Employee as set forth on Schedule B-1. The terms of Schedule B-1 are hereby fully incorporated into and shall be
considered as part of Section 4 of this Plan. For Separation Pay payable under this Plan to a Rebadged Employee, see
Section 4.5 of this Plan.
4.2
(a) A Participant who is covered under any of the Employer's group employee medical and dental plans as of his
or her Separation Date will be provided the opportunity to continue such employee coverage during his or her Benefits
Continuation Period, as determined in accordance with Schedule B-2 of this SPD. as such coverage may be amended from
time to time, in accordance with the terms and conditions of such plans, provided the Participant timely pays the required
contribution to continue coverage. The required contribution is calculated at active employee rates, as the same may be
changed from time to time, during his or her Benefits Continuation Period.
(b) A Participant who, prior to his or her Separation Date, had elected no employee medical or dental coverage
under the applicable employee medical or dental plan will not be permitted to change from no medical and/or dental
coverage to coverage as a result of a Termination due to Workforce Restructuring.
(c) Employee medical and dental continuation coverage, as it may be amended from time to time, at active rates
shall continue during the Benefits Continuation Period. The Benefits Continuation Period begins on the first day of the
month following the Participant's Separation Date and shall end on the last day of the month in which the Benefits
Continuation Period ends as determined in accordance with Schedule B-2 of this SPD, provided the Participant pays the
required contributions for coverage in the time and manner required. If the Participant fails to pay the required
contributions for coverage in the time and manner required, or the Participant elects to terminate active medical and/or
dental coverage, coverage will end as of the last day of the month for which the contribution was paid and it will not be
reinstated during the Benefits Continuation Period. If the Participant has medical and/or dental coverage on the last day of
the Benefits Continuation Period, the Participant may be eligible to continue coverage in effect at the end of the Benefits
Continuation Period in accordance with COBRA by timely electing and paying the full COBRA premium.
(d) If, as of his or her Separation Date, a Participant is eligible to participate in the Merck Retiree Medical Plan at
subsidized rates, then he or she (i) shall be eligible to continue employee medical and dental benefits in accordance with
this Section 4.2 and, (ii) following the completion of the Benefits Continuation Period, shall be eligible for retiree medical
benefits at subsidized rates under the Merck Retiree Medical Plan, as it may be amended from time to time, provided that
those eligible dependents who are age 65 or older and Medicare-eligible will only be eligible to participate in the Merck
HRA component of the Merck Retiree Medical Plan. If a Participant is not eligible to continue active medical coverage
during the Benefits Continuation Period (i.e., because the Participant had no employee coverage on his/her Separation) or
the Participant's
15
employee medical coverage ends during the Benefits Continuation Period (for any reason, including non-payment), the
Participant cannot enroll for medical coverage as a retiree until the end of the Benefits Continuation Period. If the
Participant elects to end the Benefits Continuation Period earlier than the period set forth on Schedule B-2 as permitted in
Section 2.4, all employee medical and/or dental benefit coverage that the Participant would otherwise have been eligible
to receive during the maximum Benefits Continuation Period will be permanently and irrevocably forfeited. A Participant
cannot be covered as an employee and as a retiree (even under the retiree no coverage option, if available) in a medical
plan of an Employer (or Parent) during the same period; provided, however, that a Participant may be covered through
COBRA at full COBRA rates for dental coverage even if during that period the Participant is also covered as a retiree for
medical coverage.
(e) Rebadged Employees are not eligible for continuation of employee medical and dental benefits at active
contribution rates during the Benefits Continuation Period described in this Section 4.2.
4.3
Life Insurance Benefits
(a) A Participant shall be eligible to continue Basic Life Insurance coverage at no cost to the Participant during his
or her Benefits Continuation Period, as determined in accordance with Schedule B-2, subject to and in accordance with the
terms of the applicable life insurance plan as they may be amended from time to time. The Participant is responsible for
paying applicable tax on imputed income, if any, for Basic Life Insurance coverage during his or her Benefits
Continuation Period. The terms of such Schedule B-2 are hereby fully incorporated into and shall be considered as part of
Section 4 of this Plan.
(b) Basic Life Insurance coverage shall end on the last day of the month in which the Benefits Continuation
Period ends. If the Participant elects to end the Benefits Continuation Period earlier than the period set forth on Schedule
B-2 as permitted in Section 2.4, all Basic Life Insurance coverage that the Participant would otherwise have been eligible
to receive during the maximum Benefits Continuation Period will be permanently and irrevocably forfeited.
(c) Rebadged Employees are not eligible for the life insurance benefits described in this Section 4.3.
4.4
Outplacement Benefits. Benefits for outplacement counseling or other outplacement services, as set forth in
Schedule C, will be made available to a Participant. The terms of such Schedule C are hereby fully incorporated into and
shall be considered as part of Section 4 of this Plan. Outplacement benefits shall be provided in kind; cash shall not be
paid in lieu of outplacement benefits nor will Separation Pay be increased if a Participant declines or does not use the
outplacement benefits. Rebadged Employees are not eligible for outplacement benefits described in this Section 4.4.
4.5
Separation Pay for Rebadged Employees. A Rebadged Employee who is a Participant shall be eligible for
Separation Pay under this Plan in an amount equal to 50% of the Separation Pay that would be payable had he or she
experienced a Termination due to Workforce Restructuring.
For the avoidance of doubt, a Rebadged Employee shall not be eligible for any Separation Plan Benefits other than the
Separation Pay described in this Section 4.5.
16
4.6
Reduction of Benefits. Notwithstanding anything in this Plan to the contrary, a Participant's Separation Pay
(including Separation Pay described in Section 4.5) and Separation Benefits, if applicable, shall be reduced by:
(a) any amount the Plan Administrator reasonably concludes the Participant owes the Employer (or the Parent or
any subsidiary or affiliate of the Parent) including, without limitation, unpaid bills under the corporate credit card
program, and for vacation used, but not earned;
(b) any severance or severance type benefits that the Employer (or the Parent or any subsidiary or affiliate of
the Parent) must pay to a Participant under applicable law;
(c) where permitted by law, any payments received by the Participant pursuant to state workers compensation
laws;
(d) short-term disability benefits where state law does not permit Separation Pay to be offset from short-term
disability benefits (or where the Employer in its sole and absolute discretion determines it is administratively easier for
the Employer to reduce Separation Pay by short-term disability benefits in lieu of reducing short-term disability benefits
by Separation Pay);
(e) For Participants whose employment ends on or after January 1, 2017 who experienced one or more one-way
transfers from a non-U.S. subsidiary to another non-U.S. subsidiary and/or to a U.S. subsidiary, any severance or
severance type benefits paid by the Parent or any subsidiary or affiliate of the Parent to the Participant as a result of such
transfer(s), provided such amount is determined using the exchange rate on the date(s) of the one-way transfer(s) or the
Separation Date, whichever provides the lowest amount.
Notwithstanding anything in the Plan to the contrary, a Participant’s Separation Pay (including Separation Pay described
in Section 4.5) and Separation Benefits are not meant to duplicate pay and benefits provided by the Employer (or the
Parent or any of its subsidiaries) in connection with any Participant's Termination due to Workforce Restructuring or in
connection with a Participant's termination due to the outsourcing of work to a third-party vendor, including pay and
benefits under the federal Worker Adjustment Retraining and Notification Act and any state or local equivalent
(collectively, the "WARN Act"). If the Plan Administrator determines that a Participant is entitled to WARN Act damages
or WARN Act notice, the Plan Administrator in its sole and absolute discretion may reduce the Participant's Separation
Pay and Separation Benefits under the Plan by the WARN Act damages or pay and benefits after receiving WARN Act
notice, but not below $500, with the remaining Separation Pay and Separation Benefits provided to the Participant in
accordance with the terms of the Plan in satisfaction of the Participant's WARN Act notice rights or damages. In all other
cases, Separation Pay paid under the Plan in excess of $500 will be treated as having been paid to satisfy any WARN Act
damages, if applicable.
17
SECTION 5
FORM AND TIMING OF BENEFITS; FORFEITURE AND REPAYMENT
OF BENEFITS
5.1
Form and Time of Payment
(a) Except as otherwise provided in subsection (b), Separation Pay, less taxes and applicable deductions shall be
paid in a lump sum as soon as practicable after the Participant's Termination due to Workforce Restructuring (or in the
case of a Rebadged Employee, after termination of employment due to the outsourcing transaction) and the expiration of
any period during which the Participant may consider, sign and, if a revocation period is applicable, revoke the Release
of Claims, but in no event later than March 15 of the calendar year following the year of a Participant's Separation Date.
(b) If it is determined by the Employer or Parent in its discretion, that (i) the Participant is, as of his or her
Separation Date, a "specified employee" (as such term is defined in Section 409A(2)(B) of the Code); and (ii) the
Separation Pay payable pursuant to the terms of the Plan constitutes nonqualified deferred compensation that would
subject the Participant to “additional tax” under Section 409A(a)(1)(B) of the Code (the "409A Tax"), then the payment
of Separation Pay will be postponed to the first business day of the seventh month following the Separation Date or, if
earlier, the date of the Participant's death.
5.2
Taxes. Separation Pay payable under this Plan shall be subject to the withholding of appropriate federal,
state and local taxes.
Notwithstanding anything in this Plan to the contrary, the Employer or Parent will take such actions as it deems necessary,
in its sole and absolute discretion, to avoid the imposition of a 409A Tax at such time and in such manner as permitted
under Section 409A of the Code, including, but not limited to, reducing or eliminating benefits and changing the time or
form of payment of benefits.
5.3
Forfeiture of Benefits. The Employer reserves the right, in its sole and absolute discretion, to cancel all
Separation Plan Benefits and seek the return of Separation Pay in the event a Participant engages in any activity that the
Employer considers detrimental to its interests (or the interests of the Parent or any of its subsidiaries) as determined by
the Parent’s Executive Vice President and General Counsel and the Parent’s Executive Vice President, Human Resources.
Activities that the Employer considers detrimental to its interest (or the interests of the Parent or any of its subsidiaries)
include, but are not limited to:
(a)
breach of any obligations of the Participant's terms and conditions of employment;
(b) making false or misleading statements about the Employer, the Parent or any of its subsidiaries or their
products, officers or employees to competitors, customers, potential customers of the Employer, the Parent or any of its
subsidiaries or to current or former employees of the Employer, the Parent or any of its subsidiaries; and
(c) breaching any terms of the Release of Claims, including any non-solicitation or non-competition
provisions, if applicable.
18
5.4
Cessation of Separation Pay and Separation Benefits. Separation Pay, Outplacement Benefits and
Separation Benefits shall cease in the event a Participant is rehired by the Employer, the Parent or one of its subsidiaries
or affiliates.
5.5
Return of Separation Pay. Upon the occurrence of an event described in Section 5.3 or 5.4 of this Plan, the
Participant shall repay to the Employer that portion of the lump sum amount that would not have been paid had the
Separation Pay been paid in weekly installments from the Participant's Separation Date. If the Participant receives
short-term disability benefits from the Employer after his or her Separation Date, the Employer reserves the right to
seek repayment by the Participant of that portion of the Separation Pay that would not have been paid in accordance
with Section 4.6 had the Separation Pay been paid in installments.
5.6
Death of Participant.
For Participants Who Die Before January 1, 2017:
If a Participant dies before January 1, 2017 following his or her Separation Date and a valid Release of Claims was
signed by the Participant or is signed by the Participant's estate then
(a) any unpaid Separation Pay will be paid to the Participant's estate; and
(b) if the Participant was eligible to continue medical and/or dental coverage during the Benefits Continuation
Period on the Participant's date of death and the Participant’s surviving dependents were covered under the Participant's
medical and dental coverages (other than coverages applicable to retirees and their dependents) on that date, they may
continue such employee coverage for the balance of the Benefits Continuation Period, provided they continue to remain
eligible dependents and they pay the applicable contributions at active employee rates, as they may change from time to
time, to continue coverage. Thereafter, if, as of his or her Separation Date, such Participant (i) was eligible to participate in
the Merck Retiree Medical Plan at subsidized rates, then following the completion of the Benefits Continuation Period,
surviving eligible dependents shall be eligible for retiree medical benefits at subsidized rates under the terms of the Merck
Retiree Medical Plan applicable to such Participant, as may be amended from time to time, provided that those eligible
dependents who are age 65 or older and Medicare-eligible will only be eligible to participate in the Merck HRA
component of the Merck Retiree Medical Plan, or (ii) was eligible to participate in the Merck Retiree Medical Plan at
unsubsidized rates, then following the completion of the Benefits Continuation Period the surviving dependents may be
eligible to continue coverage in effect at the end of the Benefits Continuation Period for the remaining COBRA period, if
any, in accordance with COBRA by paying the full COBRA premium and thereafter may be eligible for retiree medical
benefits at unsubsidized rates under the terms of the Merck Retiree Medical Plan applicable to such Participant, as may be
amended from time to time, provided that those eligible dependents who are age 65 or older and Medicare- eligible will
not be eligible to participate in the Merck Retiree Medical Plan or (iii) was not eligible to participate in the Merck Retiree
Medical Plan at subsidized or unsubsidized rates, then following the completion of the Benefits Continuation Period the
surviving dependents may be eligible to continue coverage in effect at the end of the Benefits Continuation Period for the
remaining COBRA period, if any, in accordance with COBRA by paying the full COBRA premium, or (iv) was not
eligible to participate in the Merck Retiree Medical Plan at subsidized or unsubsidized rates but had at least 25 years of
service as of his/her date of death, then following the completion of the Benefits Continuation Period, surviving eligible
dependents shall be eligible
19
for medical benefits at subsidized rates under the terms of medical plan that would have been applicable to such
Participant if he/she had been eligible for long term disability benefits, as may be amended from time to time; and
(c) if the if the Participant was eligible to continue medical coverage during the Benefits Continuation Period on
the Participant's date of death and the Participant’s surviving dependents were not covered under the Participant's medical
coverage at the time of the Participant’s death or if the Participant was not eligible to continue medical coverage during the
Benefits Continuation Period and, in either case, if as of his or her Separation Date, such Participant (i) was eligible to
participate in the Merck Retiree Medical Plan at subsidized or unsubsidized rates, then following the date of death,
surviving eligible dependents who were not then enrolled for coverage under the Participant’s medical coverage shall be
eligible to enroll for retiree medical benefits at the subsidized or unsubsidized rates, as applicable, under the terms of the
Merck Retiree Medical Plan applicable to such Participant, as may be amended from time to time, provided that those
eligible dependents who are age 65 or older and Medicare-eligible will only be eligible to participate in the Merck HRA
component of the Merck Retiree Medical Plan and will only be eligible for such coverage if they are eligible for
subsidized coverage (dependents eligible for unsubsidized coverage are not eligible to participate in the Merck HRA
component of the Merck Retiree Medical Plan), or (ii) was not eligible to participate in the Merck Retiree Medical Plan at
subsidized or unsubsidized rates but had at least 25 years of service as of his/her date of death, then following the date of
death, surviving eligible dependents who were not then enrolled for coverage under the Participant’s medical coverage
shall be eligible to enroll for medical benefits at subsidized rates under the terms of medical plan that would have been
applicable to such Participant if he/she had been eligible for long term disability benefits, as may be amended from time to
time.
Medical and dental coverage under this Section 5.6 shall be subject to and in accordance with the terms of the applicable
plans as they may be amended from time to time.
The Separation Date of an Eligible Employee who dies prior to his or her scheduled Separation Date but after he or she
was notified of a scheduled Separation Date shall be deemed to have occurred on the day before his/her date of death.
For Participants Who Die On or After January 1, 2017:
If a Participant dies on or after January 1, 2017 following his or her Separation Date and a valid Release of Claims was
signed by the Participant or is signed by the Participant's estate then
(a) any unpaid Separation Pay will be paid to the Participant's estate; and
(b) if the Participant was eligible to continue medical and/or dental coverage during the Benefits Continuation Period on
the Participant's date of death and the Participant’s surviving dependents were covered under the Participant's medical
and dental coverages at the time of the Participant’s death, they may continue such employee coverage for the balance of
the Benefits Continuation Period, provided they continue to remain eligible dependents and they pay the applicable
contributions at active employee rates, as they may change from time to time, to continue coverage. Thereafter, if, as of
his or her Separation Date, such Participant (i) was eligible to participate in the Merck Retiree Medical Plan at subsidized
rates, then following the completion of the Benefits Continuation Period, surviving eligible dependents shall be eligible
for retiree medical benefits at subsidized rates under the terms of Merck Retiree Medical Plan, as may be
20
amended from time to time, provided that those eligible dependents who are age 65 or older and Medicare-eligible will
only be eligible to participate in the Merck HRA component of the Merck Retiree Medical Plan, or (ii) was not eligible to
participate in the Merck Retiree Medical Plan at subsidized rates, then following the completion of the Benefits
Continuation Period the surviving dependents may be eligible to continue coverage in effect at the end of the Benefits
Continuation Period in accordance with COBRA by timely electing COBRA coverage and paying the full COBRA
premium; or (iii) was not eligible to participate in the Merck Retiree Medical Plan at subsidized rates but had at least 25
years of service as of his/her Separation Date, then following the completion of the Benefits Continuation Period,
surviving eligible dependents shall be eligible for retiree medical benefits at subsidized rates under the terms of the Merck
Retiree Medical Plan, as may be amended from time to time, provided that those eligible dependents who are age 65 or
older and Medicare-eligible will only be eligible to participate in the Merck HRA component of the Merck Retiree
Medical Plan; and
(c) if the Participant was eligible to continue medical coverage during the Benefits Continuation Period on the Participant's
date of death and the Participant’s surviving dependents were not covered under the Participant's medical coverage at
the time of the Participant’s death or if the Participant was not eligible to continue medical coverage during the Benefits
Continuation Period and, in either case, if as of his or her Separation Date, such Participant (i) was eligible to participate in
the Merck Retiree Medical Plan at subsidized rates, then following the date of death, surviving eligible dependents who
were not then enrolled for coverage under the Participant’s medical coverage shall be eligible to enroll for retiree medical
benefits at subsidized rates under the terms of Merck Retiree Medical Plan, as may be amended from time to time,
provided that those eligible dependents who are age 65 or older and Medicare-eligible will only be eligible to participate
in the Merck HRA component of the Merck Retiree Medical Plan; or (ii) was not eligible to participate in the Merck
Retiree Medical Plan at subsidized rates but had at least 25 years of service as of his/her Separation Date, then following
the date of death, surviving eligible dependents who were not then enrolled for coverage under the Participant’s medical
coverage shall be eligible to enroll for medical benefits at subsidized rates under the terms of the Merck Retiree Medical
Plan, as may be amended from time to time, provided that those eligible dependents who are age 65 or older and
Medicare-eligible will only be eligible to participate in the Merck HRA component of the Merck Retiree Medical Plan.
Medical and dental coverage under this Section 5.6 shall be subject to and in accordance with the terms of the applicable
plans as they may be amended from time to time.
The Separation Date of an Eligible Employee who dies prior to his or her scheduled Separation Date but after he or she
was notified of a scheduled Separation Date shall be deemed to have occurred on the day before his/her date of death.
21
SECTION 6
PLAN ADMINISTRATION
6.1
Plan Administrator. Parent or its delegate is the Plan Administrator for purposes of ERISA.
6.2
Powers and Duties of Plan Administrator. The Plan Administrator or its delegate shall have the full
discretionary power and authority to: (i) construe and interpret the Plan (including, without limitation, supplying
omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of the Plan); (ii)
determine all questions of fact arising under the Plan, including questions as to eligibility for and the amount of benefits;
(iii) establish such rules and regulations (consistent with the terms of the Plan) as it deems necessary or appropriate for
administration of the Plan; (iv) delegate responsibilities to others to assist in administering the Plan; and (v) perform all
other acts it believes reasonable and proper in connection with the administration of the Plan. The Plan Administrator or its
delegate shall be entitled to rely on the records of the Employer in determining any Participant's entitlement to and the
amount of benefits payable under the Plan. Any determination of the Plan Administrator or its delegate, including
interpretations of the Plan and determinations of questions of fact, shall be final and binding on all parties.
With respect to determining claims and appeals for benefits under this Plan, the Claims Reviewer (and its delegate) shall
be deemed to be the delegate of the Plan Administrator and shall have all of the powers and duties of the Plan
Administrator described above.
6.3
Additional Discretionary Authority. The Plan Administrator may, upon written approval of the Parent’s
Executive Vice President, Human Resources (written approval of the Compensation and Benefits Committee of the Board
of Directors of the Parent or its delegate with respect to Section 16 Officers), take the following actions under the Plan:
(a) grant some, all or any portion of the benefits under this Plan to an employee who would not otherwise be
eligible for such benefits under Section 3 above;
(b) waive the requirement set forth in Section 3 for any individual Eligible Employee or group of Eligible
Employees to execute a Release of Claims; and
(c)
grant additional Separation Plan Benefits to a Participant.
22
SECTION 7
CLAIMS AND APPEALS PROCEDURES
7.1
Claims.
(a) Any request or claim for benefits under the Plan must be filed by a claimant or the claimant’s authorized
representative within 60 days after the date claimant’s employment with an Employer ends; provided, however, for
claims under Section 5.3, claims must be filed within 60 days after the date Separation Plan Benefits are cancelled.
(b) Any request or claim for benefits under the Plan shall be deemed to be filed when a written request made by the
claimant or the claimant's authorized representative addressed to the Claims Reviewer at the address below is received by
the Claims Reviewer.
Claims Reviewer for the Separation Benefits Plan
c/o Secretary of the Merck & Co., Inc. Employee Benefits Committee Merck & Co., Inc.
2000 Galloping Hill Road Mailstop K-1 3029
Kenilworth, NJ 07033
The claim for benefits shall be reviewed by, and a determination shall be made by, the Claims Reviewer, within the
timeframe required for notice of adverse benefit determinations described below.
(c) The Claims Reviewer shall provide written or electronic notification to the claimant or the claimant’s
authorized representative of any “adverse benefit determination.” Such notice shall be provided within a reasonable time
but not later than 90 days after the receipt by the Claims Reviewer of the claimant's claim, unless the Claims Reviewer
determines that special circumstances require an extension of time for processing the claim. If the Claims Reviewer
determines that an extension of time for processing is required, written notice of the extension shall be furnished to the
claimant before the expiration of the initial 90-day period indicating the special circumstances requiring an extension and
the date by which the Claims Reviewer expects to render the benefit determination. No extension can exceed 90 days from
the end of the initial 90-day period (i.e., 180 days from the receipt of the claim by the Claims Reviewer) without the
consent of the claimant or the claimant’s authorized representative.
(d) An “adverse benefit determination” is a denial, reduction, or termination of, or a failure to provide or make
payment (in whole or part) for a benefit, including one that is based on a determination of a claimant’s eligibility to
participate in the Plan.
(e) The notice of adverse benefit determination shall be written in a manner calculated to be understood by the
claimant and shall:
(i) set forth the specific reasons for the adverse benefit determination;
(ii) contain specific references to Plan provisions on which the determination is based;
(iii) describe any material or information necessary for the claim for benefits to be allowed and an explanation
of why such information is necessary; and
23
(iv) describe the Plan’s appeal procedures and the time limits applicable to such procedures, including a
statement of the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit
determination on review.
7.2
Appeals of Adverse Benefit Determinations.
(a) Any request to review the Claims Reviewer’s adverse benefit determination under the Plan must be filed by a
claimant or the claimant’s authorized representative in writing within 60 days after receipt by the claimant of written
notification of adverse benefit determination by the Claims Reviewer. If the claimant or the claimant’s authorized
representative fails to file a request for review of the Claims Reviewer’s adverse benefit determination in writing within
60 days after receipt by the claimant of written notification of adverse benefit determination, the Claims Reviewer’s
determination shall become final and conclusive.
(b) Any request to review an adverse benefit determination under the Plan shall be deemed to be filed when a
written request is made by the claimant or the claimant's authorized representative addressed to the Employee Benefits
Committee at the address below is received by the Secretary of the Employee Benefits Committee.
Merck & Co., Inc. Employee Benefits Committee c/o Secretary
Employee Benefits Committee Merck & Co., Inc.
2000 Galloping Hill Road Mailstop K-1 3029
Kenilworth, NJ 07033
(c) If the claimant or the claimant’s authorized representative timely files a request for review of the Claims
Reviewer’s adverse benefit determination as specified in this Section 7.2, the Employee Benefits Committee shall re-
examine all issues relevant to the original adverse benefit determination taking into account all comments, documents,
records, and other information submitted by the claimant or the claimant’s authorized representative relating to the claim,
without regard to whether such information was submitted or considered in the initial benefit determination. Any such
claimant or his or her duly authorized representative may:
(i) upon request and free of charge have reasonable access to, and copies of, all documents, records, and
other information relevant to the claimant’s claim for benefits; whether an item is relevant shall be determined by
the Employee Benefits Committee in accordance with 29 CFR 2560.503-1 (m)(8); and
(ii) submit in writing any comments, documents, records, and other information relating to the claim for
benefits.
(d) The Claims Reviewer shall provide written or electronic notice to the claimant or the claimant’s authorized
representative of its benefit determination on review. Such notice shall be provided within a reasonable time but not later
than 60 days after the receipt by the Claims Reviewer of the claimant's request for review, unless the Claims Reviewer
determines that special circumstances require an extension of time for processing the request for review. If the Claims
Reviewer determines that an extension of time for processing is required, written notice of the extension shall be
furnished to the claimant before the expiration of the initial 60-day period indicating the special circumstances requiring
an extension and the date by which the Claims
24
Reviewer expects to render the benefit determination. No extension can exceed 60 days from the end of the initial 60-day
period (i.e., 120 days from the date the request for review is received by the Claims Reviewer) without the consent of the
claimant or the claimant’s authorized representative.
(e) If the claimant’s appeal is denied, the notice of adverse benefit determination on review shall be written in a
manner calculated to be understood by the claimant and shall:
(i) set forth the specific reasons for the adverse benefit determination on review;
(ii) contain specific references to Plan provisions on which the benefit determination is based;
(iii)
contain a statement that the claimant is entitled to receive,
upon request and free of charge, reasonable access to, and copies of, all documents, records, and other
information relevant to the claimant’s claim for benefits; whether an item is relevant shall be determined by the
Claims Reviewer in accordance with 29 CFR 2560.503-1 (m)(8); and
(iv)
include a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA.
25
SECTION 8
AMENDMENT AND TERMINATION
8.1
Amendment and Termination.
(a) Except as otherwise set forth in subsection (b) below, Parent or its delegate has the right to amend, suspend or
terminate the Plan at any time without prior notice to or the consent of any employee; provided, however, that amendments
that apply only to Section 16 Officers must also be approved by the Compensation and Benefits Committee of the Board
of Directors of Parent or its delegate. No such amendment shall give the Employer or Parent the right to recover any
amount paid to a Participant prior to the date of such amendment. Any such amendment, however, may cause the cessation
and discontinuance of payments of Separation Plan Benefits to any person or persons under the Plan. Parent may delegate
the authority to amend, suspend or terminate the Plan to the person, entity or committee selected by the Chief Executive
Officer and as set forth in the applicable written corporate grant signed by the Chief Executive Officer (the “Corporate
Grant”). Such Corporate Grant shall allow for the delegation of the authority to an individual, entity or committee;
provided the financial impact of such amendment, suspension or termination does not exceed certain predetermined
thresholds identified in the applicable Corporate Grant. The person, entity or committee provide with the authority to
amend, suspend or terminate the Plan by the Corporate Grant, may further delegate the authority to amend, suspend or
terminate the Plan to an individual, entity or committee, in accordance with the appropriate corporate action. Amendments
to the Plan must be in writing and approved in accordance with the Corporate Grant.
(b) Except to the extent required by applicable law, for the entirety of the Protection Period, the material terms
of the Plan, including this Section 8.1, shall not be modified in any manner that is materially adverse to a Qualifying
Participant.
(c)Parent or any such successor to Parent, shall pay all legal fees and related expenses (including the costs of
experts, evidence and counsel) reasonably and in good faith incurred by a Qualifying Participant if the Qualifying
Participant prevails on at least one material item of his or her claim for relief in an action (x) by the Qualifying Participant
claiming that the provisions of this Section 8.1 have been violated (but, for the avoidance of doubt, excluding claims for
plan benefits in the ordinary course) and (y) if applicable, by the Employer, Parent or its successor to enforce post-
termination covenants against the Qualifying Participant.
(d)
Definitions. For purposes of this Section 8.1:
(i) “Protection Period” shall mean the period beginning on the date of the Change in Control and
ending on the second anniversary of the date of the Change in Control; and
(ii) “Qualifying Participant” shall mean an individual who is an Eligible Employee or a Participant as
of the date immediately prior to the Change in Control.
26
SECTION 9
GENERAL PROVISIONS
9.1
Unfunded Obligation. Separation Plan Benefits provided under this Plan shall constitute an unfunded
obligation of the Employer. Payments shall be made, as due, from the general funds of the Employer. This Plan shall
constitute solely an unsecured promise by the Employer to pay such benefits to Participants to the extent provided herein.
9.2
Applicable Law. It is intended that the Plan be an "employee welfare benefit plan" within the meaning of
Section 3(1) of ERISA, and the Plan shall be administered in a manner consistent with such intent. The Plan and all rights
thereunder shall be governed and construed in accordance with ERISA and, to the extent not preempted by federal law,
with the laws of the state of New Jersey, wherein venue shall lie for any dispute arising hereunder.
9.3
Severability. If any provision of this Plan shall be held illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining parts of this Plan, but this Plan shall be construed and enforced as if said illegal
or invalid provision had never been included herein.
9.4
Employment at Will. Nothing contained in this Plan shall give an employee the right to be retained in the
employment of the Employer or shall otherwise modify the employee's at will employment relationship with the
Employer. This Plan is not a contract of employment between the Employer and any employee.
9.5
Heirs, Assigns, and Personal Representatives. The Plan shall be binding upon the heirs, executors,
administrators, successors, and assigns of the parties, including each Participant, present and future.
9.6
Payments to Incompetent Persons, Etc. Any benefit payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefore shall be deemed paid when paid to such person’s guardian or to
the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully
discharge the Employer, Parent, the Plan Administrator, the Claims Administrator and all other parties with respect
thereto.
9.7
Lost Payees. Benefits shall be deemed forfeited if the Plan Administrator is unable to locate a Participant to
whom Separation Plan Benefits are due. Such Separation Plan Benefits shall be reinstated if application is made by the
Participant for the forfeited Separation Plan Benefits within one year of the Participant’s Separation Date and while the
Plan is in operation.
27
SCHEDULE A
List of participating Employers:
All U.S. direct and indirect wholly owned subsidiaries of Merck & Co. Inc. excluding the following and their subsidiaries, successors
and assigns:
•
Comsort, Inc.
•
Merck Global Health Innovation Fund, LLC
•
HMR Weight Management Services Corp.
•
ILUM Health Solutions, LLC (formerly known as Healthcare Services and Solutions, LLC)
28
SCHEDULE B-1
Separation Pay for Participants with a Separation Date Occurring on
or after January 1, 2013
Amount of Separation Pay in weeks (Annual Base Salary divided by 52)
Complete
Years of
Continuous
Service at
Separation
Date
BAND LEVEL
Band 200
Band 300
Band 400
Band 500
Band 600
Band 700/800
0
10
12
18
24
26
26
1
10
12
18
24
32
40
2
10
12
18
24
32
40
3
10
12
18
24
32
40
4
10
12
18
24
32
40
5
12
14
20
26
34
42
6
14
16
22
28
36
44
7
16
18
24
30
38
46
8
18
20
26
32
40
48
9
20
22
28
34
42
50
10
22
24
30
36
44
52
11
24
26
32
38
46
54
12
26
28
34
40
48
56
13
28
30
36
42
50
58
14
30
32
38
44
52
60
15
32
34
40
46
54
62
16
34
36
42
48
56
64
17
36
38
44
50
58
66
18
38
40
46
52
60
68
19
40
42
48
54
62
70
20
42
44
50
56
64
72
21
44
46
52
58
66
74
22
46
48
54
60
68
76
23
48
50
56
62
70
78
24
50
52
58
64
72
78
25
52
54
60
66
74
78
26
54
56
62
68
76
78
27
56
58
64
70
78
78
28
58
60
66
72
78
78
29
60
62
68
74
78
78
30
62
64
70
76
78
78
31
64
66
72
78
78
78
32
66
68
74
78
78
78
33
68
70
76
78
78
78
34
70
72
78
78
78
78
35
72
74
78
78
78
78
36
74
76
78
78
78
78
37
76
78
78
78
78
78
38+
78
78
78
78
78
78
29
SCHEDULE B-2
MEDICAL / DENTAL AND LIFE INSURANCE CONTINUATION
COMPLETE YEARS OF
CONTINUOUS SERVICE AT
SEPARATION DATE
BENEFITS CONTINUATION PERIOD
< 5
26 weeks
5 – 9.9
39 weeks*
10 – 19.9
52 weeks*
20+
78 weeks*
*For Participants who are eligible for subsidized retiree medical benefits under the Merck Retiree Medical Plan on their
Separation Date, the Benefits Continuation Period shall continue to the last day of the month in which the number of weeks set
forth above occurs.
30
SCHEDULE C
OUTPLACEMENT BENEFITS
BAND LEVEL
BENEFIT
DURATION
Band 200
Quick Start Plus
3 Months
Band 300
Professional--Career
Assistance
3 Months
Band 400
Professional--Career
Transition
6 Months
Band 600/500
Executive
12 Months
Band 800/700
Executive Premium
12 Months
The Outplacement Benefits are provided through a third party vendor. The vendor and/or the programs may change from time to
time.
31
SCHEDULE D (Change in Control/Pension) Description of Change-in-
Control Benefits under the Pension Plan
This Schedule describes benefits under the Pension Plan and the Supplemental Plan (as each is defined below)
provided to an Eligible Employee under the Plan if such Eligible Employee signs and returns the Release of Claims in use
under the CIC Plan and in accordance with the process established under the CIC Plan.
I.
If an Eligible Employee’s employment is terminated in circumstances entitling him or her to the benefits provided in
Section 3.1 (c) of the Plan:
1. For an Eligible Employee who participates in the Retirement Plan for Salaried Employees of MSD or
its successor (the “MSD Pension Plan) and on his or her Separation Date is not at least age 55 with at least ten
years of Credited Service under the MSD Pension Plan but would attain at least age 50 and have at least ten years
of Credited Service under the MSD Pension Plan within two years following the date of the Change in Control
(assuming continued employment during the entirety of such two-year period), then the Eligible Employee shall
be deemed to be eligible for a subsidized early retirement benefit on his “Prior Plan Formula” (as defined in the
MSD Pension Plan) under the MSD Pension Plan commencing in accordance with the terms of the MSD Plan.
2. For an Eligible Employee who participates in the MSD Pension Plan or the Legacy Schering
Retirement Plan, or their successors (collectively the “Pension Plan”) and on his or her Separation Date is not at
least age 65 but would attain at least age 65 within two years following the date of the Change in Control
(assuming continued employment during the entirety of such two-year period), then the Eligible Employee shall be
deemed to be eligible for a Prior Plan Formula benefit unreduced for early commencement under the Pension Plan
commencing in accordance with the terms of the Pension Plan.
3. For an Eligible Employee who participates in the MSD Pension Plan and on his or her Separation Date
is not eligible for the “Rule of 85 Transition Benefit” (as such term is defined in the MSD Pension Plan) but would
have been eligible for the Rule of 85 Transition Benefit within two years following the date of the Change in
Control (assuming continued employment during the entirety of such two-year period), then the Eligible Employee
shall be deemed to be eligible for the Rule of 85 Transition Benefit upon commencement of his or her pension
benefit under the MSD Pension Plan.
4. For an Eligible Employee who participates in the Pension Plan on his or her Separation Date who is
not vested in his or her accrued benefit under the Pension Plan, he or she shall be vested in his accrued benefit
under the Pension Plan on his or her Separation Date.
II. The benefits described in this Schedule D shall be payable from the Pension Plan and, to the extent that such benefits
cannot be paid from the Pension Plan the Employer may, to the extent it deems necessary or appropriate (including to
comply with applicable law and to preserve grandfathered status of arrangements subject to Section 409A of the Code),
cause such benefits to be paid under a Supplemental Retirement Plan of MSD or the Legacy Schering Benefits Excess
Plan, as applicable and any successors thereto (collectively, the “Supplemental Plan”) or under new arrangements or from
the Employer's general assets.
32
SCHEDULE E (Change in Control/Retiree Medical)
Description of Change-in-Control Benefits under Health Plan
This Schedule describes benefits under the Health Plan provided to an Eligible Employee under the Plan if such
Eligible Employee signs and returns the Release of Claims in use under the CIC Plan and in accordance with the process
established under the CIC Plan.
I.
If an Eligible Employee’s employment is terminated in circumstances entitling him or her to the benefits provided in
Section 3.1 (c) of the Plan:
If the Eligible Employee is eligible to participate in the Health Plan and on his or her Separation
Date is not at least age 55 with the requisite amount of service with an Employer to satisfy the requirements to be
considered a retiree eligible for subsidized retiree medical benefits under the Health Plan but would attain at least age 50
and meet the service requirements to be considered a retiree eligible for subsidized retiree medical benefits under the
Health Plan within two years following the date of the Change in Control (assuming continued employment during the
entirety of such two-year period), then the Eligible Employee shall be eligible for subsidized retiree medical benefits
under the Health Plan on the date his or her Benefits Continuation Period Ends on the same terms and conditions
applicable to salaried U.S.- based employees of the Employer whose employment terminated the last day of the month
prior to the Eligible Employee’s Separation Date who were treated as retirees eligible for subsidized retiree medical
benefits under the Health Plan as of that date.
II. The Employer may, to the extent it deems necessary or appropriate (including to comply with applicable law and to
preserve grandfathered status of arrangements subject to Section 409A of the Code), cause the benefits set forth in this
Schedule E to be provided from insured arrangements, or pursuant to new arrangements, individual arrangements or
otherwise. Further, notwithstanding anything to the contrary, to the extent any benefits to which an Eligible Employee is
entitled under this Schedule E would reasonably be likely to constitute a discriminatory benefit under Section 105(h) of
the Code or a similar law or regulation at the time the benefit is to be provided to the Eligible Employee, as determined in
the sole discretion of the Parent, the Employer may, to the extent it deems necessary or appropriate (including to comply
with applicable law), modify the benefit so that the benefit would no longer constitute a discriminatory benefit under
Section 105(h) of the Code or such similar law, including, but not limited to, eliminating all subsidy from the Parent or the
Employer, requiring that the Eligible Employee pay for participation in the benefit program with after-tax funds or causing
the full employer and employee portions of the cost of the benefit to be imputed as gross income to the Eligible Employee.
III. For purposes of this Schedule E, “Health Plan” means one or more plans sponsored by the Parent or one of its
subsidiaries that provide medical benefits to Eligible Employees and to former Eligible Employees who are considered
retirees thereunder and to the eligible dependents of each of the foregoing.
AMENDMENT 2019-1
MERCK & CO., INC. U.S. SEPARATION BENEFITS PLAN
(as Amended and Restated as of January 1, 2019)
WHEREAS, Merck, Sharp & Dohme Corp. (the "Company"), a subsidiary of Merck & Co., Inc. ("Merck"), sponsors the
Merck & Co., Inc. U.S. Separation Benefits Plan (as Amended and Restated as of January 1, 2019) (the "Plan");
WHEREAS, pursuant to Article 8.1 of the Plan, the Company (or its duly authorized representative) has reserved the right to
amend or terminate the Plan at any time;
WHEREAS, pursuant to the grant of authority of Merck's Chief Executive Officer, the Company has delegated the authority
to amend the Plan to the Merck & Co., Inc. Executive Oversight Committee (the "Executive Committee") in accordance with its
charter;
WHEREAS, in accordance with its charter the Executive Committee has delegated to the Merck & Co., Inc. Oversight
Committee (the "Committee"} the authority to make certain amendments to the Plan in accordance with the charter of the
Committee; and
WHEREAS, the Committee desires to ratify and adopt the amendment to the Plan described herein.
NOW, THEREFORE, an amendment to the Plan be and hereby is ratified and adopted and is incorporated as follows:
1.
Section 2.7 of the Plan is hereby amended in its entirety to read as follows:
"2.7 "Claims Reviewer" means the Merck & Co., Inc. Employee Benefits Committee(or its delegate); provided, however,
for Section 16 Officers, Claims Reviewer means the Compensation and Benefits Committee of the Board of Directors of Parent or
its delegate."
2.
The first paragraph of Section 5.3 is hereby amended and restated to read as follows:
"5.3 Forfeiture of Benefits. The Employer reserves the right, in its sole and absolute discretion, to cancel all
Separation Plan Benefits and seek the return of Separation Pay in the event a Participant engages in any activity that
the Employer considers detrimental to its interests(or the interests of the Parent or any of its subsidiaries) as determined
by the Parent's Executive Vice President and General Counsel and the Parent's Executive Vice President & Chief Human
Resources Officer or by such other individual who acts as the successor or equivalent thereto of either of the
aforementioned positions. Activities that the Employer considers detrimental to its interest (or the interests of the Parent
or any of its subsidiaries) include, but are not limited to:"
3.
The first paragraph of Section 6.3 is hereby amended to read as follows:
"6.3 Additional Discretionary Authority. The Plan Administrator may, upon written approval of the Parent's Executive
Vice President & Chief Human Resources Officer, or by such other individual who acts as the successor or equivalent thereto of
such position, (written approval of the Compensation and Benefits Committee of the Board of Directors of the Parent orits delegate
with respect to Section 16 Officers), take the following actions under the Plan
2
4.
Schedule A of the Plan is hereby updated to read as follows:
"SCHEDULE A
List of Participating Employers:
All U. S. direct and indirect wholly owned subsidiaries of Merck & Co., Inc. excluding the following and their subsidiaries:
•
Comsort, Inc. (and its subsidiaries)
•
Merck Global Health Innovation Fund LLC (and its subsidiaries)
•
HMR Weight Management Services Corp. (and its subsidiaries)
•
ILUM Health Solutions, LLC (and its subsidiaries)
•
Peloton Therapeutics, Inc. (and its subsidiaries) for the period of time after the date Peloton Therapeutics, Inc. became a
subsidiary of the Company and before January 1,2020
•
Tilos Therapeutics (and its subsidiaries) for the period of time after the date TilosTherapeutics became a subsidiary
of the Company and before January 1, 2020
•
Antelliq Corporation (and its subsidiaries) for the period of time after the date Antelliq Corporation became a
subsidiary of the Company and before such date in2020 as of which the Plan Administrator determines Antelliq
Corporation shall become an Employer."
IN WITNESS WHEREOF, the Committee has caused this Amendment 2019-1 to thePlan to be executed by the
undersigned on this 19th day of December, 2019.
By
Michael Arseneault
Executive Director, Managing Counsel
Global Compensation and Benefits
3
AMENDMENT 2020-1
MERCK & CO., INC. U.S. SEPARATION BENEFITS PLAN
(as Amended and Restated as of January 1, 2019)
WHEREAS, Merck, Sharp & Dohme Corp. (the "Company"), a subsidiary of Merck & Co., Inc. ("Merck"), sponsors
the Merck & Co., Inc. U.S. Separation Benefits Plan (as Amended and Restated as of January 1, 2019) (the "Plan");
WHEREAS, pursuant to Article 8.1 of the Plan, the Company (or its duly authorized representative) has reserved the
right to amend or terminate the Plan at any time;
WHEREAS, pursuant to the grant of authority of Merck's Chief Executive Officer, the Company has delegated the
authority to amend the Plan to the Merck & Co., Inc. Executive Oversight Committee (the "Executive Committee") in
accordance with its charter;
WHEREAS, in accordance with its charter the Executive Committee has delegated to the Merck & Co., Inc. Oversight
Committee (the "Committee") the authority to make certain amendments to the Plan in accordance with the charter of the
Committee; and
WHEREAS, the Committee desires to ratify and adopt the amendment to the Plan described herein.
NOW, THEREFORE, an amendment to the Plan be and hereby is ratified and adopted and is incorporated as
follows:
1.
The first paragraph of Section 6.3 is hereby amended to read as follows:
"6.3 Additional Discretionary Authority. The Plan Administrator may, upon written approval of the Parent's
Executive Vice President & Chief Human Resources Officer (or his or her delegate), or by such other individual who acts as
the successor or equivalent thereto of suchposition (or his or her delegate), (written approval of the Compensation and
Benefits Committeeof the Board of Directors of the Parent or its delegate with respect to Section 16 Officers), take the
following actions under the Plan:"
IN WITNESS WHEREOF, the Committee has caused this Amendment 2020-1 to thePlan to be executed by the
undersigned on this 25th day of February. 2020.
By
Michael Arseneault
Executive Director, Managing Counsel Global
Compensation and Benefits
AMENDMENT 2020-2
MERCK & CO. INC. U.S. SEPARATION BENEFITS PLAN
(Amended and Restated as of January 1, 2019)
WHEREAS, Merck & Co, Inc. (the “Company”), a subsidiary of Merck & Co., Inc. (“Merck”), sponsors the
Merck & Co., Inc. U.S. Separation Benefits Plan (Amended and Restated as of January 1, 2019) (the “Plan”);
WHEREAS, pursuant to Article 8.1 of the Plan, the Company (or its duly authorized representative) has
reserved the right to amend or terminate the Plan at any time;
WHEREAS, pursuant to the grant of authority of Merck’s Chief Executive Officer, the Company has delegated
the authority to amend the Plan to the Merck & Co., Inc. Executive Oversight Committee (the “Executive Committee”)
in accordance with its charter;
WHEREAS, in accordance with its charter the Executive Committee has delegated to the Merck & Co., Inc.
Oversight Committee (the “Committee”) the authority to make certain amendments to the Plan in accordance with the
charter of the Committee; and
WHEREAS, the Committee desires to ratify and adopt the amendment to the Plan described herein.
NOW, THEREFORE, an amendment to the Plan be and hereby is ratified and adopted and is incorporated as
follows:
1.
A new definition of Legacy Quantified Ag, Antelliq Corporation, or ArQule, Inc. Employee is hereby added to the
Plan’s Article II in the correct alphabetical order to read as follows:
“Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee” means an Eligible Employee who
was formerly an employee of Quantified Ag, Antelliq Corporation, or ArQule, Inc. respectively who became an
employee of Merck & Co, Inc. or one of its subsidiaries in 2019 or 2020 and continues to be employed by such
entity until his/her Separation Date, and as of his/her Separation Date is employed by an Employer.”
2.
Section 2.9 “Complete Years of Continuous Service” of the Plan is hereby amended in its entirety to read as
follows:
“2.9 “Complete Years of Continuous Service” means (a) for a Legacy Schering Employee, a year from the
Participant’s Most Recent Hire Date with a Legacy Schering Entity to its anniversary, and thereafter from each
anniversary to the next, (b) for a Legacy Merck Employee, a year from the Participant's Most Recent Hire Date
with a Legacy Merck Entity to its anniversary, and thereafter from each anniversary to the next, (c) for a Legacy
Inspire Employee, a year from the Participant’s Most Recent Hire Date with a Merck Entity to its anniversary,
and thereafter from each anniversary to the next, (d) for a Legacy Quantified Ag, Antelliq Corporation or
ArQule, Inc., Employee a year from the Participant’s Most Recent Hire Date with a Merck Entity to its
anniversary, and thereafter from each anniversary to the next, and (e) for a Non-Legacy Company Employee,
from the
Participant’s Most Recent Hire Date with a Merck Entity, and thereafter from each anniversary to the next.”
3.
Section 2.10 “Continuous Service” of the Plan is hereby amended in its entirety to read as follows:
“2.10 “Continuous Service” means (a) for a Legacy Schering Employee, the period of a Participant's
continuous employment with a Legacy Schering Entity commencing on the Participant's Most Recent Hire Date
with a Legacy Schering Entity and ending on the Separation Date as reflected on the Employer’s employee
database, (b) for a Legacy Merck Employee, the period of a Participant's continuous employment with a Legacy
Merck Entity commencing on the Participant's Most Recent Hire Date with a Legacy Merck Entity and ending on
the Separation Date as reflected on the Employer’s employee database, (c) for a Legacy Inspire Employee, the
period of a Participant's continuous employment with a Merck Entity commencing on the Participant's Most
Recent Hire Date with a Merck Entity and ending on the Separation Date as reflected on the Employer’s
employee database, (d) for a Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee the period
of a Participant's continuous employment with a Merck Entity commencing on the Participant's Most Recent
Hire Date with a Merck Entity and ending on the Separation Date as reflected on the Employer’s employee
database, and (e) for a Non-Legacy Company Employee, the period of a Participant's continuous employment
with a Merck Entity commencing on the Participant's Most Recent Hire Date with a Merck Entity and ending on
the Separation Date as reflected on the Employer’s employee database. For the avoidance of doubt, service prior
to November 4, 2009 by a Legacy Schering Employee with a Legacy Merck Entity or a Legacy Merck
Employee with a Legacy Schering Entity is excluded from “Continuous Service.” Notwithstanding anything
contained in this Plan to the contrary, employment with a Legacy Schering Entity, Legacy Merck Entity or a
Merck Entity as an Excluded Person does not count as "Continuous Service".
4.
Section 2.24 “Most Recent Hire Date” of the Plan is hereby amended in its entirety to read as follows:
“2.24 Most Recent Hire Date” means (a) for a Legacy Schering Employee, his or her most recent hire date at a
Legacy Schering Entity or an entity acquired by a Legacy Schering Entity as reflected on the Employer’s
employee data system, (b) for a Legacy Merck Employee, his or her most recent hire date at a Legacy Merck
Entity or an entity acquired by a Legacy Merck Entity as reflected on the Employer’s employee data system,
(c)
for a Legacy Inspire Employee, his or her most recent hire date at a Merck Entity or an entity acquired by a
Merck Entity as reflected on the Employer’s employee data system,
(d)
for a Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee his or her most recent hire date
at a Merck Entity or an entity acquired by a Merck Entity as reflected on the Employer’s employee data system,
and (e) for a Non-Legacy Company Employee, his or her most recent hire date at a Merck Entity or an entity
acquired by a Merck Entity as reflected on the Employer’s employee data system. Notwithstanding the
2
foregoing, the most recent hire date for a Legacy Merck Employee who was employed by a Legacy Merck Entity
on December 31, 1997, transferred from that entity to Merial as of January 1, 1998, remained continuously
employed by Merial through the date he or she transferred employment from Merial to a Legacy Merck Entity
and whose transfer to a Legacy Merck Entity occurred between October 1, 2000 and June 1, 2001, is his or her
most recent hire date on the Employer's employee data system at a Legacy Merck Entity prior to his or her
transfer to Merial. Notwithstanding the foregoing, the most recent hire date for a Legacy Merck Employee who
was employed by a Legacy Merck Entity on December 31, 2007, transferred from that entity to PRWT as of
January 1, 2008, remained continuously employed by PRWT through September 3, 2010 and who was rehired
by a Legacy Merck Entity as of September 3, 2010, is his or her most recent hire date on the Employer’s
employee data system at a Legacy Merck Entity prior to his or her transfer to PRWT.”
5.
Section 3.1(a) Eligibility of the Plan is hereby amended in its entirety to read as follows: “3.1(a) Eligibility.
(a) An Eligible Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section
4.5) when he/she experiences a Termination due to Workforce Restructuring; provided, however, that (1) a Legacy
Inspire Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5)
only if he/she experiences a Termination due to Workforce Restructuring on or after May 17, 2013 and (2) a
Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee will be eligible for Separation Plan
Benefits described in Section 4 (excluding Section 4.5) only if he/she experiences a Termination due to
Workforce Restructuring after the date in 2020 as of which he/she first became entitled to benefits under the Plan
and which is set forth on Schedule A to the Plan and provided further that in no case shall an eligible Legacy
ArQule, Inc. Employee receive benefits under the Plan equal to less than six months of Annul Base Salary. A
Grandfathered Legacy Schering Employee will be eligible for Separation Plan Benefits described in Section 4
(excluding Section 4.5) if he or she experiences a Grandfathered Legacy Schering Termination. Separation Plan
Benefits shall be provided under this Plan to an Eligible Employee who experiences a Termination due to
Workforce Restructuring or to a Grandfathered Legacy Schering Employee who experiences a Grandfathered
Legacy Schering Termination, in each case only if the Eligible Employee or Grandfathered Legacy Schering
Employee has executed and, if a revocation period is applicable, not revoked a Release of Claims in a form
satisfactory to the Employer or Parent in its sole and nonreviewable discretion. An Eligible Employee or a
Grandfathered Legacy Schering Employee who has executed and, if a revocation period is applicable, not revoked
a Release of Claims is a Participant.”
3
6.
Schedule A of the Plan is hereby updated to read as follows:
“SCHEDULE A
List of participating Employers:
All U. S. direct and indirect wholly owned subsidiaries of Merck & Co. Inc. excluding the following and their
subsidiaries:
•
Comsort, Inc. (and its subsidiaries)
•
Merck Global Health Innovation Fund LLC (and its subsidiaries)
•
HMR Weight Management Services Corp. (and its subsidiaries)
•
ILUM Health Solutions, LLC (and its subsidiaries)
•
Peloton Therapeutics, Inc. (and its subsidiaries) for the period of time after the date Peloton Therapeutics,
Inc. became a subsidiary of the Company and before January 1, 2020
•
Effective for the period between June 17, 2020 through October 1, 2020, Quantified Ag. Effective as of
October 1, 2020, Quantified Ag became an employer under the Plan.
•
Effective for the period between April 1, 2019, through July 1, 2020 Antelliq Corporation. Effective as of
July 1, 2020, Antelliq Corporation became an employer under the Plan.
•
Effective for the period between January 1, 2020, through January 31, 2020 ArQule, Inc. Effective as of
February 1, 2020, ArQule, Inc. became an employer under the Plan.”
IN WITNESS WHEREOF, the Merck & Co, Inc. Oversight Committee has caused this Amendment 2020-2 of
the Merck & Co., Inc. U.S. Separation Benefits Plan (Amended and Restated as of January 1, 2019) (the “Plan”); to be
executed as of the 10th day of December, 2020.
By
Michael Arseneault
Exec. Dir., Managing Counsel Global
Compensation & Employee
Benefits/Merck Office of General Counsel
4
AMENDMENT 2021-1 TO THE
MERCK & CO., INC., U.S. SEPARATION BENEFITS PLAN
(Amended and Restated as of January 1, 2019)
WHEREAS, Merck & Co, Inc. (the “Company”), a subsidiary of Merck & Co., Inc. (“Merck”), sponsors the
Merck & Co., Inc., U.S. Separation Benefits Plan (Amended and Restated as of January 1, 2019) (the “Plan”);
WHEREAS, pursuant to Article 8.1 of the Plan, the Company (or its duly authorized representative) has
reserved the right to amend or terminate the Plan at any time;
WHEREAS, pursuant to the grant of authority of Merck’s Chief Executive Officer, the Company has delegated
the authority to amend the Plan to the Merck & Co., Inc. Executive Oversight Committee (the “Executive Committee”)
in accordance with its charter;
WHEREAS, in accordance with its charter the Executive Committee has delegated to the Merck & Co., Inc.
Oversight Committee (the “Committee”) the authority to make certain amendments to the Plan in accordance with the
charter of the Committee; and
WHEREAS, the Committee desires to ratify and adopt the amendment to the Plan described herein.
NOW, THEREFORE, an amendment to the Plan be and hereby is ratified and adopted and is incorporated as
follows:
1.
A new definition of Legacy Pandion Employee is hereby added to the Plan’s Article II in the correct alphabetical
order to read as follows:
“Legacy Pandion Employee” means an Eligible Employee who was formerly an employee of Pandion
Therapeutics, Inc. who became an employee of Merck & Co, Inc. or one of its subsidiaries in 2021 and continues
to be employed by such entity until his/her Separation Date, and as of his/her Separation Date is employed by an
Employer.”
2.
Section 2.9 “Complete Years of Continuous Service” of the Plan is hereby amended in its entirety to read as
follows:
“2.9 “Complete Years of Continuous Service” means (a) for a Legacy Schering Employee, a year from the
Participant’s Most Recent Hire Date with a Legacy Schering Entity to its anniversary, and thereafter from each
anniversary to the next, (b) for a Legacy Merck Employee, a year from the Participant's Most Recent Hire Date
with a Legacy Merck Entity to its anniversary, and thereafter from each anniversary to the next, (c) for a Legacy
Inspire Employee, a year from the Participant’s Most Recent Hire Date with a Merck Entity to its anniversary,
and thereafter from each anniversary to the next, (d) for a Legacy Quantified Ag, Antelliq Corporation or
ArQule, Inc., Employee a year from the Participant’s Most Recent Hire Date with a Merck Entity to its
anniversary, and thereafter from each anniversary to the next, (e) for a Legacy Pandion Employee a year from
the Participant’s Most Recent Hire Date with a Merck Entity to its anniversary, and thereafter
from each anniversary to the next, and (f) for a Non-Legacy Company Employee, from the Participant’s Most
Recent Hire Date with a Merck Entity, and thereafter from each anniversary to the next.”
3.
Section 2.10 “Continuous Service” of the Plan is hereby amended in its entirety to read as follows:
“2.10 “Continuous Service” means (a) for a Legacy Schering Employee, the period of a Participant's
continuous employment with a Legacy Schering Entity commencing on the Participant's Most Recent Hire Date
with a Legacy Schering Entity and ending on the Separation Date as reflected on the Employer’s employee
database, (b) for a Legacy Merck Employee, the period of a Participant's continuous employment with a Legacy
Merck Entity commencing on the Participant's Most Recent Hire Date with a Legacy Merck Entity and ending on
the Separation Date as reflected on the Employer’s employee database, (c) for a Legacy Inspire Employee, the
period of a Participant's continuous employment with a Merck Entity commencing on the Participant's Most
Recent Hire Date with a Merck Entity and ending on the Separation Date as reflected on the Employer’s
employee database, (d) for a Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee the period
of a Participant's continuous employment with a Merck Entity commencing on the Participant's Most Recent
Hire Date with a Merck Entity and ending on the Separation Date as reflected on the Employer’s employee
database, (d) for a Legacy Pandion Employee the period of a Participant's continuous employment with a Merck
Entity commencing on the Participant's Most Recent Hire Date with a Merck Entity and ending on the
Separation Date as reflected on the Employer’s employee database, and (f) for a Non-Legacy Company
Employee, the period of a Participant's continuous employment with a Merck Entity commencing on the
Participant's Most Recent Hire Date with a Merck Entity and ending on the Separation Date as reflected on the
Employer’s employee database. For the avoidance of doubt, service prior to November 4, 2009 by a Legacy
Schering Employee with a Legacy Merck Entity or a Legacy Merck Employee with a Legacy Schering Entity is
excluded from “Continuous Service.” Notwithstanding anything contained in this Plan to the contrary,
employment with a Legacy Schering Entity, Legacy Merck Entity or a Merck Entity as an Excluded Person does
not count as "Continuous Service."
4.
Section 2.27 “Most Recent Hire Date” of the Plan is hereby amended in its entirety to read as follows:
“2.27 Most Recent Hire Date” means (a) for a Legacy Schering Employee, his or her most recent hire date at a
Legacy Schering Entity or an entity acquired by a Legacy Schering Entity as reflected on the Employer’s
employee data system, (b) for a Legacy Merck Employee, his or her most recent hire date at a Legacy Merck
Entity or an entity acquired by a Legacy Merck Entity as reflected on the Employer’s employee data system, (c)
for a Legacy Inspire Employee, his or her most recent hire date at a Merck Entity or an entity acquired by a
Merck Entity as reflected on the Employer’s employee data system, (d) for a Legacy Quantified Ag, Antelliq
Corporation or ArQule, Inc. Employee his or her most recent hire date at a Merck Entity or an entity acquired by
a Merck Entity as reflected
2
on the Employer’s employee data system, (d) for a Legacy Pandion Employee his or her most recent hire date at
a Merck Entity or an entity acquired by a Merck Entity as reflected on the Employer’s employee data system, and
(e) for a Non-Legacy Company Employee, his or her most recent hire date at a Merck Entity or an entity
acquired by a Merck Entity as reflected on the Employer’s employee data system. Notwithstanding the
foregoing, the most recent hire date for a Legacy Merck Employee who was employed by a Legacy Merck Entity
on December 31, 1997, transferred from that entity to Merial as of January 1, 1998, remained continuously
employed by Merial through the date he or she transferred employment from Merial to a Legacy Merck Entity
and whose transfer to a Legacy Merck Entity occurred between October 1, 2000 and June 1, 2001, is his or her
most recent hire date on the Employer's employee data system at a Legacy Merck Entity prior to his or her
transfer to Merial. Notwithstanding the foregoing, the most recent hire date for a Legacy Merck Employee who
was employed by a Legacy Merck Entity on December 31, 2007, transferred from that entity to PRWT as of
January 1, 2008, remained continuously employed by PRWT through September 3, 2010 and who was rehired
by a Legacy Merck Entity as of September 3, 2010, is his or her most recent hire date on the Employer’s
employee data system at a Legacy Merck Entity prior to his or her transfer to PRWT.”
5.
Section 3.1(a) Eligibility of the Plan is hereby amended in its entirety to read as follows: “3.1(a) Eligibility.
(a)
An Eligible Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding
Section 4.5) when he/she experiences a Termination due to Workforce Restructuring; provided, however, that (1) a
Legacy Inspire Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section
4.5) only if he/she experiences a Termination due to Workforce Restructuring on or after May 17, 2013, (2) a
Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee will be eligible for Separation Plan
Benefits described in Section 4 (excluding Section 4.5) only if he/she experiences a Termination due to
Workforce Restructuring after the date in 2020 as of which he/she first became entitled to benefits under the
Plan and which is set forth on Schedule A to the Plan and provided further that in no case shall an eligible Legacy
ArQule, Inc. Employee receive benefits under the Plan equal to less than six months of Annual Base Salary, and
(3) a Legacy Pandion Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding
Section 4.5) only if he/she experiences a Termination due to Workforce Restructuring after the date in 2021 as of
which he/she first became entitled to benefits under the Plan and which is set forth on Schedule A to the Plan
and provided further that in the case of a Termination due to Workforce Restructuring that occurs on or before
April 1, 2022 (i) an eligible Legacy Pandion Employee shall receive benefits under the Plan equal to no less than
26 weeks of Annual Base Salary and (ii) notwithstanding the foregoing clause (iii), the two individuals specified
in Section 7.1(a) of the Company Disclosure Letter to the Agreement and Plan of Merger, dated as of February 24,
2021 among Merck Sharp & Dohme Corp., Panama Merger Sub, Inc. and Pandion Therapeutics, Inc. shall
receive benefits under the Plan equal to no less than 39 weeks of Annual Base Salary if and only if such
individuals otherwise qualify as eligible Legacy Pandion Employees. A Grandfathered Legacy Schering
Employee will be
3
eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) if he or she experiences a
Grandfathered Legacy Schering Termination. Separation Plan Benefits shall be provided under this Plan to an
Eligible Employee who experiences a Termination due to Workforce Restructuring or to a Grandfathered Legacy
Schering Employee who experiences a Grandfathered Legacy Schering Termination, in each case only if the
Eligible Employee or Grandfathered Legacy Schering Employee has executed and, if a revocation period is
applicable, not revoked a Release of Claims in a form satisfactory to the Employer or Parent in its sole and
nonreviewable discretion. An Eligible Employee or a Grandfathered Legacy Schering Employee who has
executed and, if a revocation period is applicable, not revoked a Release of Claims is a Participant.”
6.
IN WITNESS WHEREOF, the Merck & Co, Inc. Oversight Committee has caused this Amendment
2021-1 of the Merck & Co., Inc., U.S. Separation Benefits Plan (Amended and Restated as of January 1, 2019) (the
“Plan”); to be executed as of the 31st day of March, 2021.
By
Michael Arseneault
Exec. Dir., Managing Counsel Global
Compensation & Employee
Benefits/Merck Office of General Counsel
4
AMENDMENT 2021-2
TO THE
MERCK & CO., INC., U.S. SEPARATION BENEFITS PLAN
(Amended and Restated as of January 1, 2019)
WHEREAS, Merck & Co, Inc. (the “Company”), a subsidiary of Merck & Co., Inc. (“Merck”), sponsors the Merck & Co., Inc.,
U.S. Separation Benefits Plan (Amended and Restated as of January 1, 2019) (the “Plan”);
WHEREAS, pursuant to Article 8.1 of the Plan, the Company (or its duly authorized representative) has reserved the right to
amend or terminate the Plan at any time;
WHEREAS, pursuant to the grant of authority of Merck’s Chief Executive Officer, the Company has delegated the authority to
amend the Plan to the Merck & Co., Inc. Executive Oversight Committee (the “Executive Committee”) in accordance with its
charter;
WHEREAS, in accordance with its charter the Executive Committee has delegated to the Merck & Co., Inc. Oversight Committee
(the “Committee”) the authority to make certain amendments to the Plan in accordance with the charter of the Committee; and
WHEREAS, the Committee desires to ratify and adopt the amendment to the Plan described herein.
NOW, THEREFORE, an amendment to the Plan be and hereby is ratified and adopted and is incorporated as follows:
1.
A new definition of Legacy Pandion Employee is hereby added to the Plan’s Article II in the correct alphabetical order to
read as follows:
“Legacy IdentiGEN Employee” means an Eligible Employee who was formerly an employee of IdentiGEN who became an
employee of Merck & Co, Inc. or one of its subsidiaries in 2020 and continues to be employed by such entity until his/her
Separation Date, and as of his/her Separation Date is employed by an Employer.”
2.
Section 2.9 “Complete Years of Continuous Service” of the Plan is hereby amended in its entirety to read as follows:
“2.9 “Complete Years of Continuous Service” means (a) for a Legacy Schering Employee, a year from the Participant’s
Most Recent Hire Date with a Legacy Schering Entity to its anniversary, and thereafter from each anniversary to the next, (b)
for a Legacy Merck Employee, a year from the Participant's Most Recent Hire Date with a Legacy Merck Entity to its
anniversary, and thereafter from each anniversary to the next, (c) for a Legacy Inspire Employee, a year from the
Participant’s Most Recent Hire Date with a Merck Entity to its anniversary, and thereafter from each anniversary to the next,
(d) for a Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc., Employee a year from the Participant’s Most Recent
Hire Date with a Merck Entity to its anniversary, and thereafter from each anniversary to the next, (e) for a Legacy Pandion
Employee a year from the Participant’s Most Recent Hire Date with a Merck Entity to its anniversary, and thereafter from
each anniversary to the next, (f) for a Legacy IdentiGEN Employee a year from the
5
Participant’s Most Recent Hire Date with a Merck Entity to its anniversary, and thereafter from each anniversary to the next,
and (g) for a Non-Legacy Company Employee, from the Participant’s Most Recent Hire Date with a Merck Entity, and
thereafter from each anniversary to the next.”
3.
Section 2.10 “Continuous Service” of the Plan is hereby amended in its entirety to read as follows:
“2.10 “Continuous Service” means (a) for a Legacy Schering Employee, the period of a Participant's continuous
employment with a Legacy Schering Entity commencing on the Participant's Most Recent Hire Date with a Legacy Schering
Entity and ending on the Separation Date as reflected on the Employer’s employee database, (b) for a Legacy Merck
Employee, the period of a Participant's continuous employment with a Legacy Merck Entity commencing on the Participant's
Most Recent Hire Date with a Legacy Merck Entity and ending on the Separation Date as reflected on the Employer’s
employee database, (c) for a Legacy Inspire Employee, the period of a Participant's continuous employment with a Merck
Entity commencing on the Participant's Most Recent Hire Date with a Merck Entity and ending on the Separation Date
as reflected on the Employer’s employee database, (d) for a Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc.
Employee the period of a Participant's continuous employment with a Merck Entity commencing on the Participant's Most
Recent Hire Date with a Merck Entity and ending on the Separation Date as reflected on the Employer’s employee database,
(d) for a Legacy Pandion Employee the period of a Participant's continuous employment with a Merck Entity commencing
on the Participant's Most Recent Hire Date with a Merck Entity and ending on the Separation Date as reflected on the
Employer’s employee database, (e) for a Legacy IdentiGEN Employee the period of a Participant's continuous employment
with a Merck Entity commencing on the Participant's Most Recent Hire Date with a Merck Entity and ending on the
Separation Date as reflected on the Employer’s employee database, and (f) for a Non-Legacy Company Employee, the
period of a Participant's continuous employment with a Merck Entity commencing on the Participant's Most Recent Hire
Date with a Merck Entity and ending on the Separation Date as reflected on the Employer’s employee database. For the
avoidance of doubt, service prior to November 4, 2009 by a Legacy Schering Employee with a Legacy Merck Entity or a
Legacy Merck Employee with a Legacy Schering Entity is excluded from “Continuous Service.” Notwithstanding anything
contained in this Plan to the contrary, employment with a Legacy Schering Entity, Legacy Merck Entity or a Merck Entity as
an Excluded Person does not count as "Continuous Service."
4.
Section 2.27 “Most Recent Hire Date” of the Plan is hereby amended in its entirety to read as follows:
“2.27 Most Recent Hire Date” means (a) for a Legacy Schering Employee, his or her most recent hire date at a Legacy
Schering Entity or an entity acquired by a Legacy Schering Entity as reflected on the Employer’s employee data system, (b)
for a Legacy Merck Employee, his or her most recent hire date at a Legacy Merck Entity or an entity acquired by a Legacy
Merck Entity as reflected on the Employer’s employee data system, (c)or a Legacy Inspire Employee, his or her most recent
hire date at a Merck Entity or an entity acquired by
6
a Merck Entity as reflected on the Employer’s employee data system, (d) for a Legacy Quantified Ag, Antelliq Corporation
or ArQule, Inc. Employee his or her most recent hire date at a Merck Entity or an entity acquired by a Merck Entity as
reflected on the Employer’s employee data system, (d) for a Legacy Pandion Employee his or her most recent hire date at a
Merck Entity or an entity acquired by a Merck Entity as reflected on the Employer’s employee data system, (e) for a Legacy
IdentiGEN Employee his or her most recent hire date at a Merck Entity or an entity acquired by a Merck Entity as reflected
on the Employer’s employee data system and (f) for a Non-Legacy Company Employee his or her most recent hire date at a
Merck Entity or an entity acquired by a Merck Entity as reflected on the Employer’s employee data system.
Notwithstanding the foregoing, the most recent hire date for a Legacy Merck Employee who was employed by a Legacy
Merck Entity on December 31, 1997, transferred from that entity to Merial as of January 1, 1998,remained continuously
employed by Merial through the date he or she transferred employment from Merial to a Legacy Merck Entity and whose
transfer to a Legacy Merck Entity occurred between October 1, 2000 and June 1, 2001, is his or her most recent hire date on
the Employer's employee data system at a Legacy Merck Entity prior to his or her transfer to Merial. Notwithstanding the
foregoing, the most recent hire date for a Legacy Merck Employee who was employed by a Legacy Merck Entity on
December 31, 2007, transferred from that entity to PRWT as of January 1, 2008, remained continuously employed by PRWT
through September 3, 2010 and who was rehired by a Legacy Merck Entity as of September 3, 2010, is his or her most recent
hire date on the Employer’s employee data system at a Legacy Merck Entity prior to his or her transfer to PRWT.”
5.
Section 3.1(a) Eligibility of the Plan is hereby amended in its entirety to read as follows: “3.1(a) Eligibility.
(a) An Eligible Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) when
he/she experiences a Termination due to Workforce Restructuring; provided, however, that (1) a Legacy Inspire Employee
will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) only if he/she experiences a
Termination due to Workforce Restructuring on or after May 17, 2013, (2) a Legacy Quantified Ag, Antelliq Corporation or
ArQule, Inc. Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) only if
he/she experiences a Termination due to Workforce Restructuring after the date in 2020 as of which he/she first became
entitled to benefits under the Plan and which is set forth on Schedule A to the Plan and provided further that in no case shall
an eligible Legacy ArQule, Inc. Employee receive benefits under the Plan equal to less than six months of Annual Base Salary,
(3) a Legacy Pandion Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5)
only if he/she experiences a Termination due to Workforce Restructuring after the date in 2021 as of which he/she first
became entitled to benefits under the Plan and which is set forth on Schedule A to the Plan and provided further that in the
case of a Termination due to Workforce Restructuring that occurs on or before April 1, 2022 (i) an eligible Legacy Pandion
Employee shall receive benefits under the Plan equal to no less than 26 weeks of Annual Base Salary and (ii)
notwithstanding the foregoing clause (iii), the two individuals specified in Section 7.1(a) of the Company
7
Disclosure Letter to the Agreement and Plan of Merger, dated as of February 24, 2021 among Merck Sharp & Dohme Corp.,
Panama Merger Sub, Inc. and Pandion Therapeutics, Inc. shall receive benefits under the Plan equal to no less than 39 weeks
of Annual Base Salary if and only if such individuals otherwise qualify as eligible Legacy Pandion Employees, and (4) a
Legacy IdentiGEN Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) only
if he/she experiences a Termination due to Workforce Restructuring after the date in 2021 as of which he/she first became
entitled to benefits under the Plan and which is set forth on Schedule A to the Plan A Grandfathered Legacy Schering
Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) if he or she
experiences a Grandfathered Legacy Schering Termination. Separation Plan Benefits shall be provided under this Plan to an
Eligible Employee who experiences a Termination due to Workforce Restructuring or to a Grandfathered Legacy Schering
Employee who experiences a Grandfathered Legacy Schering Termination, in each case only if the Eligible Employee or
Grandfathered Legacy Schering Employee has executed and, if a revocation period is applicable, not revoked a Release of
Claims in a form satisfactory to the Employer or Parent in its sole and nonreviewable discretion. An Eligible Employee or a
Grandfathered Legacy Schering Employee who has executed and, if a revocation period is applicable, not revoked a Release
of Claims is a Participant.”
6.
Schedule A of the Plan is hereby updated to read as follows:
SCHEDULE A
List of participating Employers:
All U. S. direct and indirect wholly owned subsidiaries of Merck & Co. Inc. excluding the following and their subsidiaries:
•
Antimicrobial Stewardship, LLC
•
Merck Global Health Innovation Fund LLC (and its subsidiaries)
•
Peloton Therapeutics, Inc. (and its subsidiaries) for the period of time after the date Peloton Therapeutics, Inc. became a
subsidiary of the Company and before January 1, 2020
•
Effective for the period between June 17, 2020 through September 30, 2020, Quantified Ag. Effective as of October 1, 2020,
Quantified Ag became an employer under the Plan.
•
Effective for the period between April 1, 2019, through June 30, 2020 Antelliq Corporation. Effective as of July 1, 2020,
Antelliq Corporation became an employer under the Plan.
•
Effective for the period between January 1, 2020, through January 31, 2020 ArQule, Inc. Effective as of February 1,
2020, ArQule, Inc. became an employer under the Plan.
•
Effective February 25, 2021, Pandion, Inc. became an employer under the Plan
•
Effective for the period between August 5, 2020, through December 31, 2021 IdentiGEN Effective as of January 1, 2022,
IdentiGEN, Inc. became an employer under the Plan”
8
IN WITNESS WHEREOF, the Merck & Co, Inc. Oversight Committee has caused this Amendment 2021-2 of the Merck & Co., Inc.
U.S. Separation Benefits Plan (Amended and Restated as of January 1, 2019)(the “Plan”); to be executed as of the 16th day of December,
2021.
By
Michael Arseneault
Exec. Dir., Managing Counsel Global
Compensation &
Employee Benefits/Merck Office of General
Counsel
9
AMENDMENT NUMBER 2022-1 TO
MERCK & CO. INC. U.S. SEPARATION BENEFITS PLAN
As Amended and Restated effective January 1, 2013
The Merck & Co., Inc. U.S. Separation Benefits Plan (the “Plan”) is hereby amended effective as of May 1, 2022, as follows:
1.
The Preamble of the Plan is hereby amended to insert the following new paragraph after the 3 paragraph to read as
follows:
“On May 1, 2022, Merck Sharp & Dohme Corp. converted to a limited liability company named Merck Sharp & Dohme
LLC.”
2.
Section 2.16 of the Plan is amended in its entirety to read as follows:
“’IAM Agreement” means a collective bargaining agreement between Merck Sharp & Dohme LLC or Merck Sharp &
Dohme Corp., and District 15, Lodge 315 of the InternaƟonal AssociaƟon of Machinists and Aerospace Workers.”
3.
Section 2.26 of the Plan is amended to add “LLC” after the words “Merck Sharp & Dohme”
4.
SecƟon 2. 33 of the Plan is amended in its enƟrety to read as follows:
“Old Merck” means Merck & Co., Inc. prior to November 4, 2009 (subsequently known on and aŌer November 4,
2009 and prior to May 1, 2022 as Merck Sharp & Dohme Corp., and on and aŌer May 1, 2022 as Merck Sharp &
Dohme LLC).”
5.
SecƟon 3.1 Paragraph #4 of the Plan is amended in its enƟrety to read as follows:
“#4. notwithstanding the foregoing sub-clause (A), the two individuals specified in SecƟon 7.1(a) of the Company
Disclosure LeƩer to the Agreement and Plan of Merger, dated as of February 24, 2021 among Merck Sharp &
Dohme LLC, Panama Merger Sub, Inc. and Pandion TherapeuƟcs, Inc. shall receive benefits under Schedule B-1
of the Plan equal to no less than 39 weeks of Annual Base Salary if and only if such individuals otherwise qualify as
eligible Legacy Pandion Employees; and”
6.
Schedule A of the Plan is amended in its enƟrety to read as follows:
“All U. S. direct and indirect wholly owned subsidiaries of Merck & Co., Inc. excluding the following and their
subsidiaries:
•
Comsort Inc. (and its subsidiaries)
•
Merck Global Health InnovaƟon Fund LLC (and its subsidiaries)
•
AnƟmicrobrial Stewardship LLC (and its subsidiaries)
•
Peloton TherapeuƟcs, Inc. (and its subsidiaries) for the period of Ɵme aŌer the date Peloton TherapeuƟcs,
Inc. became a subsidiary of the Company and before January 1, 2020
rd
•
Tilos TherapeuƟcs (and its subsidiaries) for the period of Ɵme aŌer the date Tilos TherapeuƟcs became a
subsidiary of the Company and before January 1, 2020
•
Antelliq CorporaƟon (and its subsidiaries) for the period of Ɵme aŌer the date Antelliq CorporaƟon became a
subsidiary of the Company and before such date in 2020 as of which the Plan Administrator determines Antelliq
CorporaƟon shall become an Employer.”
IN WITNESS WHEREOF, the Director, Global CompensaƟon & Employee Benefits, Merck Office of General Counsel on behalf of
the Merck & Co, Inc. Oversight CommiƩee has caused this Amendment 2022- 1 of the Plan to be executed as of this 14 day of
December, 2022.
By
Michael Arseneault
Dir., Global CompensaƟon & Employee Benefits
Merck Office of General Counsel
th
AMENDMENT 2022-2
TO THE
MERCK & CO., INC., U.S. SEPARATION BENEFITS PLAN
(Amended and Restated as of January 1, 2019)
WHEREAS, Merck & Co, Inc. (the “Company”), a subsidiary of Merck & Co., Inc. (“Merck”), sponsors the Merck & Co.,
Inc., U.S. Separation Benefits Plan (Amended and Restated as of January 1, 2019) (the “Plan”);
WHEREAS, pursuant to Article 8.1 of the Plan, the Company (or its duly authorized representative) has reserved the right to
amend or terminate the Plan at any time;
WHEREAS, pursuant to the grant of authority of Merck’s Chief Executive Officer, the Company has delegated the authority
to amend the Plan to the Merck & Co., Inc. Executive Oversight Committee (the “Executive Committee”) in accordance with its
charter;
WHEREAS, in accordance with its charter the Executive Committee has delegated to the Merck & Co., Inc. Oversight
Committee (the “Committee”) the authority to make certain amendments to the Plan in accordance with the charter of the
Committee; and
WHEREAS, the Committee desires to ratify and adopt the amendment to the Plan described herein.
NOW, THEREFORE, an amendment to the Plan be and hereby is ratified and adopted and is incorporated as follows:
1.
A new definition of Acceleron Pharma Inc. Employee and Vence employee is hereby added to the Plan’s
Article II in the correct alphabetical order to read as follows:
“Acceleron Pharma Inc. Employee” means an Eligible Employee who was formerly an employee of Acceleron Pharma Inc.
who became an employee of Merck & Co, Inc. or one of its subsidiaries in 2021 and continues to be employed by such entity
until his/her Separation Date, and as of his/her Separation Date is employed by an Employer.”
“Vence Employee” means an Eligible Employee who was formerly an employee of Vence who became an employee of
Merck & Co, Inc. or one of its subsidiaries in 2022 and continues to be employed by such entity until his/her Separation
Date, and as of his/her Separation Date is employed by an Employer.”
2.
Section 2.10 “Complete Years of Continuous Service” of the Plan is hereby amended In its entirety to read as
follows:
“2.10 “Complete Years of Continuous Service” means (a) for a Legacy Schering Employee, a year from the Participant’s
Most Recent Hire Date with a Legacy Schering Entity to its anniversary, and thereafter from each anniversary to the next, (b)
for a Legacy Merck Employee, a year from the Participant's Most Recent Hire Date with a Legacy Merck Entity to its
anniversary, and thereafter from each anniversary to the next, (c) for a Legacy Inspire Employee, a year from the Participant’s
Most Recent Hire Date with a Merck Entity to its anniversary, and thereafter from each anniversary to the next, (d) for a
Legacy Quantified Ag, Antelliq Corporation, ArQule, Inc., Pandion Employee, IdentiGEN, Acceleron Pharma Inc. or Vence
from the Participant’s Most Recent Hire Date with a Merck Entity, and thereafter from each anniversary to the next and (e)
for a Non-Legacy Company
Employee, from the Participant’s Most Recent Hire Date with a Merck Entity, and thereafter from each anniversary to the
next.”
3.
Section 2.11 “Continuous Service” of the Plan is hereby amended in its entirety to read asfollows:
“2.11 “Continuous Service” means (a) for a Legacy Schering Employee, the period of a Participant's continuous
employment with a Legacy Schering Entity commencing on the Participant's Most Recent Hire Date with a Legacy Schering
Entity and ending on the Separation Date as reflected on the Employer’s employee database, (b) for a Legacy Merck Employee,
the period of a Participant's continuous employment with a Legacy Merck Entity commencing on the Participant's Most
Recent Hire Date with a Legacy Merck Entity and ending on the Separation Date as reflected on the Employer’s employee
database, (c) for a Legacy Inspire Employee, the period of a Participant's continuous employment with a Merck Entity
commencing on the Participant's Most Recent Hire Date with a Merck Entity and ending on the Separation Date as
reflected on the Employer’s employee database, (d) for a Legacy Quantified Ag, Antelliq Corporation, ArQule, Inc.,
Pandion, IdentiGEN, Acceleron Pharma or Vence Employee, the period of a Participant's continuous employment with a
Legacy and Merck Entity commencing on the Participant's Most Recent Hire Date with a Merck Entity and ending on the
Separation Date as reflected on the Employer’s employee database, and (e) for a Non-Legacy Company Employee, the
period of a Participant's continuous employment with a Merck Entity commencing on the Participant's Most Recent Hire Date
with a Merck Entity and ending on the Separation Date as reflected on the Employer’s employee database. For the
avoidance of doubt, service prior to November 4, 2009 by a Legacy Schering Employee with a Legacy Merck Entity or a
Legacy Merck Employee with a Legacy Schering Entity is excluded from “Continuous Service.” Notwithstanding anything
contained in this Plan to the contrary, employment with a Legacy Schering Entity, Legacy Merck Entity or a Merck Entity as
an Excluded Person does not count as "Continuous Service."
4.
Section 2.29 “Most Recent Hire Date” of the Plan is hereby amended in its entirety to read as follows:
“2.29 Most Recent Hire Date” means (a) for a Legacy Schering Employee, his or her most recent hire date at a Legacy
Schering Entity or an entity acquired by a Legacy Schering Entity as reflected on the Employer’s employee data system, (b)
for a Legacy Merck Employee, his or her most recent hire date at a Legacy Merck Entity or an entity acquired by a Legacy
Merck Entity as reflected on the Employer’s employee data system, (c) for a Legacy Inspire Employee, his or her most recent
hire date at a Merck Entity or an entity acquired by a Merck Entity as reflected on the Employer’s employee data system, (d)
for a Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee his or her most recent hire date at a Merck Entity
or an entity acquired by a Merck Entity as reflected on the Employer’s employee data system, (d) for a Legacy Pandion,
IdentiGEN, Acceleron Pharma, Inc. or Vence Employee his or her most recent hire date at a Merck Entity or an entity
acquired by a Merck Entity as reflected on the Employer’s employee data system, and (e) for a Non-Legacy Company
Employee, his or her most recent hire date at a Merck Entity or an entity acquired by a Merck Entity as reflected on the
Employer’s employee data system. Notwithstanding the foregoing, the most recent hire date for a Legacy Merck Employee
who was employed by a Legacy Merck Entity on December 31, 1997, transferred from that entity to Merial as of January 1,
1998, remained continuously employed by Merial through the date he or she transferred employment from Merial to a Legacy
Merck Entity and whose transfer to a Legacy Merck Entity occurred between October 1, 2000 and June 1, 2001, is his or her
most recent hire date on the Employer's employee data system at a Legacy Merck Entity prior to his or her transfer to Merial.
Notwithstanding the
foregoing, the most recent hire date for a Legacy Merck Employee who was employed by a Legacy Merck Entity on
December 31, 2007, transferred from that entity to PRWT as of January 1, 2008, remained continuously employed by PRWT
through September 3, 2010 and who was rehired by a Legacy Merck Entity as of September 3, 2010, is his or her most recent
hire date on the Employer’s employee data system at a Legacy Merck Entity prior to his or her transfer to PRWT.”
5. Section 3.1(a) Eligibility of the Plan is hereby amended in its entirety to read as follows: “3.1(a) Eligibility.
(a) An Eligible Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) when
he/she experiences a Termination due to Workforce Restructuring; provided, however, that (1) a Legacy Inspire Employee will
be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) only if he/she experiences a
Termination due to Workforce Restructuring on or after May 17, 2013, (2) a Legacy Quantified Ag, Antelliq Corporation or
ArQule, Inc. Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) only if
he/she experiences a Termination due to Workforce Restructuring after the date in 2020 as of which he/she first became
entitled to benefits under the Plan and which is set forth on Schedule A to the Plan and provided further that in no case shall an
eligible Legacy ArQule, Inc. Employee receive benefits under the Plan equal to less than six months of Annual Base Salary, (3)
a Legacy Pandion, IdentiGEN, Acceleron or Vence Employee will be eligible for Separation Plan Benefits described in
Section 4 (excluding Section 4.5) only if he/she experiences a Termination due to Workforce Restructuring after the date as of
which he/she first became entitled to benefits under the Plan and which is set forth on Schedule A to the Plan and provided
further that in the case of a Termination due to Workforce Restructuring that occurs on or before April 1, 2022 (i) an eligible
Legacy Pandion Employee shall receive benefits under the Plan equal to no less than 26 weeks of Annual Base Salary and (ii)
notwithstanding the foregoing clause (iii), the two individuals specified in Section 7.1(a) of the Company Disclosure Letter to
the Agreement and Plan of Merger, dated as of February 24, 2021 among Merck Sharp & Dohme Corp., Panama Merger Sub,
Inc. and Pandion Therapeutics, Inc. shall receive benefits under the Plan equal to no less than 39 weeks of Annual Base
Salary if and only if such individuals otherwise qualify as eligible Legacy Pandion Employees, and (4) a Legacy IdentiGEN
Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) only if he/she
experiences a Termination due to Workforce Restructuring after the date in 2021 as of which he/she first became entitled to
benefits under the Plan and which is set forth on Schedule A to the Plan A Grandfathered Legacy Schering Employee will
be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) if he or she experiences a
Grandfathered Legacy Schering Termination. Separation Plan Benefits shall be provided under this Plan to an Eligible
Employee who experiences a Termination due to Workforce Restructuring or to a Grandfathered Legacy Schering Employee
who experiences a Grandfathered Legacy Schering Termination, in each case only if the Eligible Employee or Grandfathered
Legacy Schering Employee has executed and, if a revocation period is applicable, not revoked a Release of Claims in a form
satisfactory to the Employer or Parent in its sole and nonreviewable discretion. An Eligible Employee or a Grandfathered
Legacy Schering Employee who has executed and, if a revocation period is applicable, not revoked a Release of Claims is a
Participant.”
6.Schedule A of the Plan is hereby updated to read as follows:
“SCHEDULE A
List of participating Employers:
All U. S. direct and indirect wholly owned subsidiaries of Merck & Co. Inc. excluding the following and their subsidiaries:
•
Antimicrobial Stewardship, LLC
•
Merck Global Health Innovation Fund LLC (and its subsidiaries)
•
Peloton Therapeutics, Inc. (and its subsidiaries) for the period of time after the date Peloton Therapeutics, Inc. became a
subsidiary of the Company and before January 1, 2020
•
Effective for the period between June 17, 2020 through September 30, 2020, Quantified Ag. Effective as of October 1, 2020,
Quantified Ag became an employer under the Plan.
•
Effective for the period between April 1, 2019, through June 30, 2020 Antelliq Corporation. Effective as of July 1, 2020,
Antelliq Corporation became an employer under the Plan.
•
Effective for the period between January 1, 2020, through January 31, 2020 ArQule, Inc. Effective as of February 1, 2020,
ArQule, Inc. became an employer under the Plan.
•
Effective February 25, 2021, Pandion, Inc. became an employer under the Plan
•
Effective for the period between August 5, 2020, through December 31, 2021 IdentiGEN Effective as of January 1, 2022,
IdentiGEN, Inc. became an employer under the Plan
•
Effective as of November 19, 2022, Acceleron Pharma Inc. became an employer under the Plan
•
Effective January 1, 2023, Vence shall become and employer under the Plan”
IN WITNESS WHEREOF, the Merck & Co, Inc. Oversight Committee has caused this Amendment 2022-2 of the Merck & Co., Inc.
U.S. Separation Benefits Plan (Amended and Restated as of January 1, 2019)(the “Plan”); to be executed as of the 13th day of December,
2021
By
Michael Arseneault
Counsel, Global Compensation &
Employee Benefits/Merck Office of
General Counsel
AMENDMENT 2023-1
TO THE
MERCK & CO., INC. U.S. SEPARATION BENEFITS PLAN
(Amended and Restated as of January 1, 2019)
WHEREAS, Merck Sharp & Dohme LLC (the “Company”), a subsidiary of Merck & Co., Inc. (“Merck”), sponsors the
Merck & Co., Inc. U.S. Separation Benefits Plan (Amended and Restated as of January 1, 2019) (the “Plan”);
WHEREAS, pursuant to Article 8.1 of the Plan, the Company (or its duly authorized representative) has reserved the
right to amend or terminate the Plan at any time;
WHEREAS, pursuant to the grant of authority of Merck’s Chief Executive Officer, the Company has delegated the
authority to amend the Plan to the Merck & Co., Inc. Executive Oversight Committee (the “Executive Committee”) in
accordance with its charter;
WHEREAS, in accordance with its charter the Executive Committee has delegated to the Merck & Co., Inc. Oversight
Committee (the “Committee”) the authority to make certain amendments to the Plan in accordance with the charter of the
Committee; and
WHEREAS, the Committee desires to amend the Plan to provide that: (i) Imago BioSciences, Inc. is not a participating
Employer under the Plan, effective as of January 11, 2023; (ii) Prometheus Biosciences, Inc. (“Prometheus”) will become a
participating Employer under the Plan 18 months after the closing of the merger between Merck and Prometheus, effective as of
December 17, 2024; and (iii) to make certain clarifying changes.
NOW, THEREFORE, the Plan is hereby amended, effective as of the dates set forth herein, as follows:
1.
Section 2.10 of the Plan (“Complete Years of Continuous Service”) is hereby amended in its entirety, effective as of
December 17, 2024, to read as follows:
“2.10 “Complete Years of Continuous Service” means (a) for a Legacy Schering Employee, a year from the Participant’s
Most Recent Hire Date with a Legacy Schering Entity to its anniversary, and thereafter from each anniversary to the next, (b)
for a Legacy Merck Employee, a year from the Participant’s Most Recent Hire Date with a Legacy Merck Entity to its
anniversary, and thereafter from each anniversary to the next, (c) for a Legacy Inspire Employee, a year from the
Participant’s Most Recent Hire Date with a Merck Entity to its anniversary, and thereafter from each anniversary to the next,
(d) for a Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee, Legacy Pandion Employee, Legacy IdentiGEN
Employee, Acceleron Pharma Inc. Employee, Vence Employee or Prometheus Biosciences, Inc. Employee from the
Participant’s Most Recent Hire Date with a Merck Entity, and thereafter from each anniversary to the next, and (e) for a
Non-Legacy Company Employee, from the Participant’s Most Recent Hire Date with a Merck Entity, and thereafter from
each anniversary to the next.”
2.
Section 2.11 of the Plan (“Continuous Service”) is hereby amended in its entirety, effective as of December 17, 2024, to read
as follows:
“2.11 “Continuous Service” means (a) for a Legacy Schering Employee, the period of a Participant's continuous
employment with a Legacy Schering Entity commencing on the Participant's Most Recent Hire Date with a Legacy Schering
Entity and ending on the Separation
Date as reflected on the Employer’s employee database, (b) for a Legacy Merck Employee, the period of a Participant's
continuous employment with a Legacy Merck Entity commencing on the Participant's Most Recent Hire Date with a Legacy
Merck Entity and ending on the Separation Date as reflected on the Employer’s employee database, (c) for a Legacy Inspire
Employee, the period of a Participant's continuous employment with a Merck Entity commencing on the Participant's Most
Recent Hire Date with a Merck Entity and ending on the Separation Date as reflected on the Employer’s employee database,
(d) for a Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee, Legacy Pandion Employee, Legacy
IdentiGEN Employee, Acceleron Pharma Inc. Employee, Vence Employee or Prometheus Biosciences, Inc. Employee, the
period of a Participant’s continuous employment with a Merck Entity commencing on the Participant's Most Recent Hire Date
with a Merck Entity and ending on the Separation Date as reflected on the Employer’s employee database, and (e) for a Non-
Legacy Company Employee, the period of a Participant's continuous employment with a Merck Entity commencing on the
Participant's Most Recent Hire Date with a Merck Entity and ending on the Separation Date as reflected on the
Employer’s employee database. For the avoidance of doubt, service prior to November 4, 2009 by a Legacy Schering
Employee with a Legacy Merck Entity or a Legacy Merck Employee with a Legacy Schering Entity is excluded from
“Continuous Service.” Notwithstanding anything contained in this Plan to the contrary, employment with a Legacy Schering
Entity, Legacy Merck Entity or a Merck Entity as an Excluded Person does not count as "Continuous Service."
3.
Section 2.31 of the Plan (“Most Recent Hire Date”) is hereby amended in its entirety, effective as of December 17, 2024, to
read as follows:
“2.31 “Most Recent Hire Date” means (a) for a Legacy Schering Employee, his or her most recent hire date at a Legacy
Schering Entity or an entity acquired by a Legacy Schering Entity as reflected on the Employer’s employee data system, (b)
for a Legacy Merck Employee, his or her most recent hire date at a Legacy Merck Entity or an entity acquired by a Legacy
Merck Entity as reflected on the Employer’s employee data system, (c) for a Legacy Inspire Employee, his or her most
recent hire date at a Merck Entity or an entity acquired by a Merck Entity as reflected on the Employer’s employee data
system, (d) for a Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee, Legacy Pandion Employee, Legacy
IdentiGen Employee, Acceleron Pharma, Inc. Employee, Vence Employee or Prometheus Bioscience, Inc. Employee, his or
her most recent hire date at a Merck Entity or an entity acquired by a Merck Entity as reflected on the Employer’s employee
data system, and (e) for a Non-Legacy Company Employee, his or her most recent hire date at a Merck Entity or an entity
acquired by a Merck Entity as reflected on the Employer’s employee data system. Notwithstanding the foregoing, the most
recent hire date for a Legacy Merck Employee who was employed by a Legacy Merck Entity on December 31, 1997,
transferred from that entity to Merial as of January 1, 1998, remained continuously employed by Merial through the date he
or she transferred employment from Merial to a Legacy Merck Entity and whose transfer to a Legacy Merck Entity occurred
between October 1, 2000 and June 1, 2001, is his or her most recent hire date on the Employer's employee data system at a
Legacy Merck Entity prior to his or her transfer to Merial. Notwithstanding the foregoing, the most recent hire date for a
Legacy Merck Employee who was employed by a Legacy Merck Entity on December 31, 2007, transferred from that entity
to PRWT as of January 1, 2008, remained continuously employed by PRWT through September 3, 2010 and who was
rehired by a Legacy Merck Entity as of September 3, 2010, is his or her most recent hire date on the Employer’s employee
data system at a Legacy Merck Entity prior to his or her transfer to PRWT.”
4.
Section II of the Plan (“Definitions”) is hereby amended, effective as of December 17, 2024, to add a new definition of
“Prometheus Biosciences, Inc. Employee,” in the correct alphabetical order, to read as follows:
“2.42 “Prometheus Biosciences, Inc. Employee” means an Eligible Employee who was formerly an employee of
Prometheus Biosciences, Inc. who became an employee of Merck & Co., Inc. or one of its subsidiaries in 2023 and continues
to be employed by such entity until his/her Separation Date, and as of his/her Separation Date is employed by an Employer.”
5.
Section 3.1(a) of the Plan (“Eligibility”) is hereby amended in its entirety, effective as of December 17, 2024, to read as
follows:
“3.1 Eligibility.
(a) An Eligible Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5)
when he/she experiences a Termination due to Workforce Restructuring; provided, however, that:
(i) a Legacy Inspire Employee will be eligible for Separation Plan Benefits described in Section 4
(excluding Section 4.5) only if he/she experiences a Termination due to Workforce Restructuring on or after May 17, 2013,
(ii) a Legacy Quantified Ag, Antelliq Corporation or ArQule, Inc. Employee will be eligible for Separation
Plan Benefits described in Section 4 (excluding Section 4.5) only if he/she experiences a Termination due to Workforce
Restructuring after the date in 2020 as of which he/she first became entitled to benefits under the Plan and which is set forth
on Schedule A to the Plan and provided further that in no case shall an eligible Legacy ArQule, Inc. Employee receive benefits
under the Plan equal to less than six months of Annual Base Salary,
(iii) a Legacy Pandion Employee will be eligible for Separation Plan Benefits described in Section 4
(excluding Section 4.5) only if he/she experiences a Termination due to Workforce Restructuring after the date in 2021 as of
which he/she first became entitled for benefits under the Plan and which is set forth on Schedule A to the Plan and provided
further that in the case of a Termination due to Workforce Restructuring that occurs on or before April 1, 2022 (i) an eligible
Legacy Pandion Employee shall receive benefits under the Plan equal to no less than 26 weeks of Annual Base Salary and
(ii) notwithstanding the foregoing sub-clause (i), the two individuals specified in Section 7.1(a) of the Company Disclosure
Letter to the Agreement and Plan of Merger, dated as of February 24, 2021 among Merck Sharp & Dohme LLC, Panama
Merger Sub, Inc. and Pandion Therapeutics, Inc. shall receive benefits under Schedule B-1 of the Plan equal to no less than
39 weeks of Annual Base Salary if and only if such individuals otherwise qualify as eligible Legacy Pandion Employees,
and
(iii) a Legacy IdentiGEN Employee, Acceleron Pharma Inc. Employee, Vence Employee and Prometheus
Biosciences, Inc. Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding Section 4.5) only
if he/she experiences a Termination due to Workforce Restructuring after the date as of which he/she first became eligible for
benefits under the Plan and which is set forth on Schedule A to the Plan.
A Grandfathered Legacy Schering Employee will be eligible for Separation Plan Benefits described in Section 4 (excluding
Section 4.5) if he or she experiences a Grandfathered Legacy Schering Termination.
Separation Plan Benefits shall be provided under this Plan to an Eligible Employee who experiences a Termination due to
Workforce Restructuring or to a Grandfathered Legacy Schering Employee who experiences a Grandfathered Legacy Schering
Termination, in each case only if the Eligible Employee or Grandfathered Legacy Schering Employee has executed and, if a
revocation period is applicable, not revoked a Release of Claims in a form satisfactory to the Employer or Parent in its sole
and nonreviewable discretion. An Eligible Employee or a Grandfathered Legacy Schering Employee who has executed and,
if a revocation period is applicable, not revoked a Release of Claims is a Participant.”
6.
Schedule A of the Plan (“List of participating Employers”) is hereby amended in its entirety, effective as of January 1, 2023, to read
as follows:
“SCHEDULE A
List of participating Employers:
All U.S. direct and indirect wholly owned subsidiaries of Merck & Co., Inc. excluding the following and their subsidiaries:
•
Antimicrobial Stewardship, LLC
•
Merck Global Health Innovation Fund LLC (and its subsidiaries)
•
Peloton Therapeutics, Inc. (and its subsidiaries) for the period of time after the date Peloton Therapeutics, Inc. became a
subsidiary of the Company and before January 1, 2020
•
Effective for the period between June 17, 2020 and September 30, 2020, Quantified Ag. Effective as of October 1, 2020,
Quantified Ag became an Employer under the Plan.
•
Effective for the period between April 1, 2019 and June 30, 2020, Antelliq Corporation. Effective as of July 1, 2020,
Antelliq Corporation became an Employer under the Plan.
•
Effective for the period between January 1, 2020 and January 31, 2020, ArQule, Inc. Effective as of February 1, 2020,
ArQule, Inc. became an Employer under the Plan.
•
Effective February 25, 2021, Pandion, Inc. became an Employer under the Plan
•
Effective for the period between August 5, 2020 and December 31, 2021, IdentiGEN, Inc. Effective as of January 1,
2022, IdentiGEN, Inc. became an Employer under the Plan
•
Effective as of November 19, 2022, Acceleron Pharma Inc. became an Employer under the Plan
•
Effective as of January 1, 2023, Vence Corp. become an Employer under the Plan
•
Effective as of January 11, 2023, Imago BioSciences, Inc.
•
Effective for the period between June 16, 2023 and December 16, 2024, Prometheus Biosciences, Inc. Effective as of December
17, 2024, Prometheus Biosciences, Inc. will become a participating Employer under the Plan”
IN WITNESS WHEREOF, the Merck & Co., Inc. Oversight Committee approved this Amendment 2023-1 of the Merck & Co.,
Inc. U.S. Separation Benefits Plan as of the 15th day of December, 2023.
By
Thea Davis
Executive Director, Managing Counsel –
Global Compensation & Employee
Benefits
Merck Office of General Counsel
AMENDMENT 2024-1
TO THE
MERCK & CO., INC. U.S. SEPARATION BENEFITS PLAN
(Amended and Restated as of January 1, 2019)
WHEREAS, Merck Sharp & Dohme LLC (the “Company”), a subsidiary of Merck & Co., Inc. (“Merck”), sponsors the
Merck & Co., Inc. U.S. Separation Benefits Plan (Amended and Restated as of January 1, 2019) (the “Plan”);
WHEREAS, pursuant to Article 8.1 of the Plan, the Company (or its duly authorized representative) has reserved the
right to amend or terminate the Plan at any time;
WHEREAS, pursuant to the grant of authority of Merck’s Chief Executive Officer, the Company has delegated the
authority to amend the Plan to the Merck & Co., Inc. Executive Oversight Committee (the “Executive Committee”) in
accordance with its charter;
WHEREAS, in accordance with its charter the Executive Committee has delegated to the Merck & Co., Inc. Oversight
Committee (the “Committee”) the authority to make certain amendments to the Plan in accordance with the charter of the
Committee; and
WHEREAS, the Committee desires to amend the Plan to provide that Caraway Therapeutics, Inc. is not a participating Employer under the
Plan.
NOW, THEREFORE, the Plan is hereby amended, effective as of the dates set forth herein, as follows:
1.
Schedule A of the Plan (“List of participating Employers”) is hereby amended in its entirety to read as follows:
“SCHEDULE A
List of participating Employers:
All U.S. direct and indirect wholly owned subsidiaries of Merck & Co., Inc. excluding the following and their subsidiaries:
•
Antimicrobial Stewardship, LLC
•
Merck Global Health Innovation Fund LLC (and its subsidiaries)
•
Peloton Therapeutics, Inc. (and its subsidiaries) for the period of time after the date Peloton Therapeutics, Inc. became a
subsidiary of the Company and before January 1, 2020
•
Effective for the period between June 17, 2020 and September 30, 2020, Quantified Ag. Effective as of October 1, 2020,
Quantified Ag became an Employer under the Plan.
•
Effective for the period between April 1, 2019 and June 30, 2020, Antelliq Corporation. Effective as of July 1, 2020,
Antelliq Corporation became an Employer under the Plan.
•
Effective for the period between January 1, 2020 and January 31, 2020, ArQule, Inc. Effective as of February 1, 2020,
ArQule, Inc. became an Employer under the Plan.
•
Effective February 25, 2021, Pandion, Inc. became an Employer under the Plan
•
Effective for the period between August 5, 2020 and December 31, 2021, IdentiGEN, Inc. Effective as of January 1,
2022, IdentiGEN, Inc. became an Employer under the Plan
•
Effective as of November 19, 2022, Acceleron Pharma Inc. became an Employer under the Plan
•
Effective as of January 1, 2023, Vence Corp. become an Employer under the Plan
•
Effective as of January 11, 2023, Imago BioSciences, Inc.
•
Effective for the period between June 16, 2023 and December 16, 2024, Prometheus Biosciences, Inc. Effective as of December
17, 2024, Prometheus Biosciences, Inc. will become a participating Employer under the Plan
•
Effective as of November 20, 2023, Caraway Therapeutics, Inc.”
IN WITNESS WHEREOF, the Merck & Co., Inc. Oversight Committee approved this Amendment 2024-1 of the Merck & Co.,
Inc. U.S. Separation Benefits Plan as of the 22th day of October, 2024.
By
Thea Davis
Executive Director, Managing Counsel –
Global Compensation & Employee
Benefits
Merck Office of General Counsel
GLOBAL TERMS AND CONDITIONS
2024 RESTRICTED STOCK UNIT GRANTS
UNDER THE MERCK & CO., INC. 2019 INCENTIVE STOCK PLAN
I.
GENERAL. Merck & Co., Inc. (the “Company”) has granted to
you the Restricted Stock Unit (“RSU”) award specified in this
document (“RSU Award”) pursuant to the Merck & Co., Inc. 2019
Incentive Stock Plan, including any sub-plan thereto for your
country (the “Plan”). This RSU Award is subject to the terms and
conditions of the Plan and these Global Terms and Conditions,
including any additional terms and conditions for your country in
Appendix B (the “Terms”). Unless otherwise defined in this
document, capitalized terms used in these Terms are as defined in
the Plan.
Grant Type:
RSU - Annual
Grant Date:
April 30, 2024
Vesting Dates
Portion that Vests
April 30, 2025
First: 33.333%
April 30, 2026
Second: 33.333%
April 30, 2027
Third: Balance
IMPORTANT NOTICE: This grant requires you to affirmatively accept it. You MUST log onto the Morgan Stanley
website
at
(http://www.morganstanley.com/spc/knowledge/managing-equity/managing-your-existing-awards/accepting-
awards-grants/) to accept the grant.
Follow the procedures described on the Morgan Stanley website to accept your RSU Award within 90 days. Failure to
accept the terms and conditions of your RSU Award within 90 days may result in Forfeiture of the RSU Award.
A. Restricted (Vesting) Period. The Restricted Period is the period during which this RSU Award is subject to forfeiture and is eligible to
vest. The RSU Award will vest with respect to one-third of this RSUs subject to the RSU Award on each of the First, Second, and Third
anniversaries of the Grant Date (each a “Vesting Date”) as shown in the box above, except as otherwise provided in Article II below. No
voting rights apply to this RSU Award. No fractional shares will be issued upon settlement of the RSU Award; all calculations are subject
to rounding.
B. Dividend Equivalents. During the period commencing on the Grant Date and ending on the date immediately prior to the date the RSU
Awards are settled in accordance with paragraph I(C), dividend equivalents will be accrued for the holder (“you”) if and to the extent
dividends are paid by the Company on Merck Common Stock. Payment of such dividends will be made in cash via local payroll, without
interest or earnings, at or around the time of distribution of the shares of Common Stock in settlement of the underlying RSUs. If any
portion of this RSU Award lapses, is forfeited or expires, no dividend equivalents will be credited or paid on such portion. Any payment
of dividend equivalents will be reduced to the extent necessary for the Company to satisfy any tax or other withholding obligations in
accordance with paragraph IV.
C. Distribution (Settlement of RSU Award). Upon vesting of the RSU Award (including as a result of the events set forth in Article II), you
(or your estate, in the event the RSU Award vests pursuant to paragraph II(E)) will be issued a number of shares of Merck Common Stock
equal to the number of RSUs (unless otherwise provided in paragraph II(H)) with respect to which the RSU Award has vested and the
dividend equivalents that accrued on that portion; provided, however, that in the event the RSU Awards vests upon a Change in Control
(as defined below) pursuant to paragraph II(H) that does not constitute a “change in control event” within the meaning of U.S. Treasury
Regulations Section 1.409A-3(i)(5), the RSU Awards will instead be settled on the original Vesting Dates set forth in paragraph I(A). Any
amount required to be withheld, including amounts required to satisfy Tax-Related Items, in connection with the distribution of the
RSU Award (or otherwise arising from your participation in the Plan) will be recovered from you as described in paragraph IV.
D. 409A Compliance. Anything to the contrary notwithstanding, no distribution of RSUs may be made unless in compliance with Section
409A of the Code or any successor thereto. Specifically, distributions made upon or by reference to the date of an employment
termination shall not be paid unless such termination constitutes a “separation from service (as defined in Section 409A)” and any such
payment to a “Specified Employee” as defined in Treas. Reg. Sec. 1.409A-1(i) or any successor thereto, to the extent required by Section
409A of the Code will instead be made on the first day the seventh month following the separation from service, in the same form as they
would have been made had this restriction not applied; provided further, that dividend equivalents that otherwise would have accrued will
accrue during the period during which distribution is suspended.
E. Subject to Recoupment. This RSU Award will be subject to recoupment in the event of certain violations of Company policy in
accordance with the Company’s Policy and Procedures for Discretionary Recoupment of Compensation for Compliance Violations, as set
forth in Appendix A.1, and with the Company’s Policy and Procedures for Recoupment of Incentive-Based Compensation, applicable
only for Section 16 Officers, as set forth in Appendix A.2 (as may be amended from time to time).
II.
TERMINATION OF EMPLOYMENT
If your employment with the Company or, if different, the subsidiary, affiliate or joint venture (“JV”) of the Company by which you are
employed (the “Employer”) is terminated during the Restricted Period described in paragraph I(A), your right to the RSU Award will be
determined according to the terms in this Article II and for grantees outside the United States, also in paragraph 12 of Section A (“Nature of
Grant”) of Appendix B, Part I. For avoidance of doubt, if your employment terminates on a Vesting Date not for misconduct, you will be
entitled to vest in that unvested portion of the RSU Award that is scheduled to vest on that Vesting Date.
A. General Rule. If your employment is terminated during the Restricted Period for any reason other than those specified in the following
paragraphs, the unvested portion of this RSU Award (and any accrued dividend equivalents) will be forfeited on the date your
employment terminates. If your employment is terminated as described in this paragraph and you are later rehired by the Company or the
Employer, as applicable, this grant nevertheless will expire according to this paragraph notwithstanding such rehire.
B. Involuntary Termination. If the Company determines that your employment is involuntarily terminated during the Restricted Period on
or after the first anniversary of the Grant Date, the RSU Award will vest on the next subsequent Vesting Date following your employment
termination with respect to a pro rata portion of your unvested RSU Award and dividend equivalents that have accrued through the
corresponding Vesting Date equal to (i) the total number of RSUs subject to the RSU Award (whether or not vested), multiplied by (ii) a
fraction, numerator of which is equal to the number of completed monthly periods during the period commencing on the Grant Date and
ending the date employment terminates, and the denominator of which is 36, (iii) reduced by the number of RSUs that have vested
pursuant to paragraph A. The remaining portion, if any, of the RSU Award and any accrued dividends will be forfeited on the date your
employment terminates. An “involuntary termination” includes termination of your employment by the Company or the Employer, as
applicable, as the result of a restructuring or job elimination, but excludes non-performance of your duties and the reasons listed under
paragraphs C through H of this section. If your employment is terminated as described in this paragraph and you are later rehired by the
Company or the Employer, as applicable, this RSU Award nevertheless will be forfeited according to this paragraph notwithstanding such
rehire.
C. Sale. If your employment is terminated during the Restricted Period and the Company determines that such termination resulted from the
sale of your subsidiary, affiliate, division or JV, the RSU Award will continue to vest on the following original Vesting Date(s) set forth in
paragraph I(A) with respect to the following unvested portion of your RSU Award and dividend equivalents that have accrued through the
corresponding Vesting Dates: if employment terminates on or after the Grant Date but before the first anniversary thereof, then one-third
of your RSU Award will vest on the first Vesting Date; if employment terminates on or after the first anniversary of the Grant Date, the
portion of your RSU Award that was eligible to vest on the
second and third Vesting Dates, respectively, will vest on the corresponding Vesting Dates. The remaining portion, if any, of the RSU
Award that does not vest pursuant to the foregoing sentence will be forfeited on the date your employment terminates. Notwithstanding
the foregoing, the Committee may determine, for purposes of this RSU Award, whether employment with an entity that is established
from the Company’s spin off, split off, split up or distribution of equity securities in connection with that entity constitutes a termination
of employment, and may make adjustments, if any, as it deems appropriate, and to the extent not inconsistent with the Plan, at the time of
the distribution of such equity securities, in the kind and/or number of shares subject to this RSU Award. If your employment is
terminated as described in this paragraph and you are later rehired by the Company or the Employer, as applicable, this RSU Award
nevertheless will be forfeited according to this paragraph notwithstanding such rehire.
D. Retirement. If your employment terminates by retirement during the Restricted Period, the RSU Award will vest on the next subsequent
Vesting Date following your termination with respect to a pro rata portion of your unvested RSU Award and dividend equivalents that
have accrued through the corresponding Vesting Date equal to (i) the total number of RSUs subject to this RSU Award (whether or not
vested), multiplied by (ii) a fraction, the numerator of which is equal to the number of completed monthly periods during the period
commencing on the Grant Date and ending on the date employment terminates, and the denominator of which is 36, (iii) reduced by the
number of RSUs that have vested pursuant to paragraph A. The remaining portion of the RSU Award and any accrued dividends will be
forfeited on the date your employment terminates. For grantees who are employed in the U.S., “retirement” means a termination of
employment after attaining the earliest of (a) age 55 with at least 10 years of service (b) such age and service that provides eligibility for
subsidized retiree medical coverage or (c) age 65 without regard to years of service. For other grantees, “retirement” is determined by the
Company. If your employment is terminated as described in this paragraph and you are later rehired by the Company or the Employer, as
applicable, this grant nevertheless will expire according to this paragraph notwithstanding such rehire.
E. Death. If your employment terminates due to your death during the Restricted Period but prior to an employment termination
contemplated under paragraphs B, C, D, G or H, the RSU Award will immediately vest with respect to any portion of this RSU Award that
has not vested as of your death and dividend equivalents that have accrued though such date. If you die during the Restricted Period, but
after your employment terminates for the reasons listed under paragraphs B, C, D, G or H of this section, the RSU Award will
immediately vest with respect to the remaining, non-forfeited portion of this RSU Award and dividend equivalents that have accrued
through the date of death.
F.
Misconduct. If your employment is terminated as a result of your deliberate, willful or gross misconduct, this RSU Award and accrued
dividend equivalents will be forfeited immediately upon your receipt of notice of such termination.
G. Disability. If your employment is terminated during the Restricted Period and the Company determines that such termination resulted
from inability to perform the material duties of your role by reason of a physical or mental infirmity that is expected to last for at least six
months or to result in your death, whether or not you are eligible for disability benefits from any applicable disability program, then the
RSU Award will continue to vest on the original Vesting Dates set forth in paragraph I(A) with respect to the unvested portion of RSU
Award and dividend equivalents that have accrued through the corresponding Vesting Date. If your employment is terminated as
described in this paragraph and you are later rehired by the Company or the Employer, as applicable, this RSU Award nevertheless will
expire according to this paragraph notwithstanding such rehire.
H. Change in Control. If this RSU Award is assumed, converted or otherwise remains outstanding in connection with a Change in Control
and your employment is terminated during the Restricted Period without Cause before the second anniversary of the closing of the
Change in Control, then the RSU Award will continue to vest on the original Vesting Dates set forth in paragraph I(A) with respect to the
unvested portion of the RSU Award and dividend equivalents that have accrued through the corresponding Vesting Date. If this RSU
Award does not remain outstanding following the Change in Control and is not converted into a successor RSU, then the RSU Award will
immediately vest with respect to the portion of the RSU
Award that is unvested as of the Change in Control and dividend equivalents that have accrued though such date and, at the election of the
Company, you will be entitled to receive cash for such portion of this RSU Award in an amount equal to the fair market value of the
consideration paid to Merck stockholders for a share of Merck Common Stock in the Change in Control. On the second anniversary of the
closing of the Change in Control, this paragraph shall expire. “Cause” and “Change in Control” are defined in the Merck & Co., Inc.
Change in Control Separation Benefits Plan (excluding an MSD Change in Control).
I.
Transfer of Employment. Transfer of employment between the Company, a subsidiary, affiliate, JV, JV partner or affiliate of the
Company who provides services to the JV with such partner or affiliate or other entity in which the Company has determined that it has a
significant business or ownership interest (together, the “Company Group”) is not considered termination of employment for purposes of
this RSU Award. Such employment must be approved by the Company and contiguous with employment by the entity in the Company
Group you were employed by immediately prior to the relevant transfer. The terms set out in paragraphs A through H above shall continue
to apply to this RSU Award following a transfer of employment accordance with this section.
III.
TRANSFERABILITY
Prior to distribution pursuant to Article I(C), the RSU Award and any interest therein shall not be sold, assigned, transferred, pledged or
otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily, other than by will or the laws of descent and distribution
in connection with your death.
IV.
TAX WITHHOLDING
Regardless of any action the Company and/or the Employer take with respect to any or all income tax, social insurance, payroll tax, payment
on account or other tax-related items arising out of your participation in the Plan and legally applicable or deemed applicable to you (“Tax-
Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the
amount actually withheld by the Company and/or the Employer, if any. You further acknowledge that the Company and/or the Employer (i)
make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSU Award or
underlying shares of Common Stock, including, but not limited to, the grant, vesting or settlement of the RSU, the subsequent sale of shares
of Common Stock acquired upon the lapsing of the Restricted Period and the receipt of any dividends and/or dividend equivalents; and (ii) do
not commit and are under no obligation to structure the terms of the grant or any aspect of the RSU Award to reduce or eliminate your liability
for Tax-Related Items or achieve any particular tax result. Furthermore, if you have become subject to tax in more than one jurisdiction, you
acknowledge that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-
Related Items in more than one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, you shall pay or make arrangements satisfactory to the Company and/or
the Employer to satisfy any applicable withholding obligations or rights with regard to all Tax-Related Items. In this regard, you authorize the
Company and/or the Employer, or their respective agents, at their discretion, to satisfy the Tax-Related Items by one or a combination of the
following: (i) withholding from your wages or other cash compensation paid to you by the Company, the Employer and/or any subsidiary,
affiliate or JV of the Company; or (ii) withholding from proceeds of the sale of shares of Common Stock acquired at lapsing of the Restricted
Period either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization);
or (iii) withholding in shares of Common Stock to be issued upon lapsing of the Restricted Period; provided, however, that if you are a
Section 16 officer of the Company under the Exchange Act, then the Company will satisfy the Tax-Related Items (other than U.S. Federal
Insurance Contribution Act taxes or other Tax-Related Items which become payable in a year prior to the year in which shares of Common
Stock are issued upon settlement of the RSUs) by withholding in shares of Common Stock pursuant to (iii) above, unless the use of such
withholding method is problematic under applicable tax or securities law or has materially adverse accounting consequences, in which case,
the obligation for Tax-Related Items may be satisfied by a one or a combination of (i) or (ii) above.
The Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other
applicable withholding rates, including maximum applicable rates in your jurisdiction(s). In the event of over-withholding, you may receive a
refund of any over-withheld amount in cash (with no entitlement to the equivalent in Common Stock), or if not refunded, you may seek a
refund from the local tax authorities. In the event of under-withholding, you may be required to pay additional Tax-Related Items directly to
the applicable tax authority or to the Company and/or the Employer. If the obligation for Tax-Related Items is satisfied by withholding in
shares of Common Stock, for tax purposes, you will be deemed to have been issued the full number of shares of Common Stock subject to the
vested RSUs, notwithstanding that a number of the shares is held back solely for the purpose of paying the Tax-Related Items due as a result
of any aspect of your participation in the Plan.
You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to
withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described in this section.
The Company may refuse to issue or deliver the shares of Common Stock or the proceeds of the sale of shares if you fail to comply with your
obligations in connection with the Tax-Related Items.
V.
DATA PRIVACY
The Company is located at 126 East Lincoln Avenue, Rahway, NJ 07065, U.S.A. and grants employees of the Company and any subsidiary,
affiliate or JV of the Company, the opportunity to participate in the Plan, at the Company's sole discretion. If you would like to participate in
the Plan, you understand that you should review the following information about the Company’s data processing practices and declare your
consent.
A. Data Collection and Usage. The Company collects, processes and uses your personal data, including, name, home address, email address
and telephone number, date of birth, social insurance number or other identification number, salary, citizenship, job title, any shares of
Common Stock or directorships held in the Company, and details of all awards, canceled, vested, or outstanding in your favor, which the
Company receives from you or your Employer. If the Company offers you the opportunity to participate in the Plan, then the Company
will collect your personal data for purposes of allocating Common Stock and implementing, administering and managing the Plan. The
Company’s legal basis for the processing of your personal data would be your consent.
B. Stock Plan Administration Service Providers. The Company transfers participant data to Morgan Stanley, an independent service provider
based in the United States, which assists the Company with the implementation, administration and management of the Plan. In the future,
the Company may select a different service provider and share your data with another company that serves in a similar manner. The
Company’s service provider will open an account for you. You will be asked to agree on separate terms and data processing practices with
the service provider, which is a condition to your ability to participate in the Plan.
C. International Data Transfers. The Company and its service providers are based in the United States. If you are outside of the United
States, you should note that your country has enacted data privacy laws that are different from the United States. The Company’s legal
basis for the transfer of your personal data is your consent.
D. Voluntariness and Consequences of Consent Denial or Withdrawal. Your participation in the Plan and your grant of consent is purely
voluntary. You may deny or withdraw your consent at any time. If you do not consent, or if you withdraw your consent, you cannot
participate in the Plan. This would not affect your salary as an employee; you would merely forfeit the opportunities associated with the
Plan.
E. Data Subject Rights. You have a number of rights under data privacy laws in your country. Depending on where you are based, your
rights may include the right to (i) request access or copies of personal data the Company processes, (ii) rectification of incorrect data, (iii)
deletion of data, (iv) restrictions on processing, (v) portability of data, (vi) to lodge complaints with competent authorities in your country,
and/or (vii) a list with the names and addresses of any potential recipients of the your personal data. To receive clarification
regarding your rights or to exercise your rights please contact the Company at Attn: Global Privacy Office, 351 N. Sumneytown Pike,
North Wales, Pennsylvania, U.S.A. 19454.
F.
The collection, use and transfer of your personal data for the purpose of implementing, administering and managing your participation in
the Plan is conducted in accordance with the Company’s Global Privacy and Data Protection Policy. You also understand that the
Company may, in the future, request you to provide another data privacy consent. If applicable and upon request of the Company, you
agree to provide an executed acknowledgement or data privacy consent form to the Company or the Employer (or any other
acknowledgements, agreements or consents) that the Company and/or the Employer may deem necessary to obtain under the data privacy
laws in your country, either now or in the future. You understand that you will not be able to participate in the Plan if you fail to execute
any such acknowledgement, agreement or consent requested by the Company and/or the Employer.
If you agree with the data processing practices described in this Article, you will declare your consent by clicking to "Accept" these Terms on
the Morgan Stanley website.
VI.
GOVERNING LAW
This document may be amended only by another written agreement between the parties. This document will be interpreted and enforced under
the laws of the State of New Jersey, United States (without regard to its choice-of-law provisions). For purposes of litigating any dispute that
arises directly or indirectly from the relationship of the parties evidenced by this grant or this document, the parties hereby submit to and
consent to the exclusive jurisdiction of the State of New Jersey and agree that such litigation shall be conducted only in the courts of Union
County, New Jersey, or the federal courts for the United States for the District of New Jersey, and no other courts, where this grant is made
and/or to be performed.
VII.
SEVERABILITY
The provisions of this document are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
VIII.
WAIVER
You acknowledge that a waiver by the Company of breach of any provision of these Terms shall not operate or be construed as a waiver of
any other provision of these Terms or of any subsequent breach by you or any other grantee.
IX.
ELECTRONIC ACCEPTANCE
The Company may, in its sole discretion, decide to deliver any documents related to the RSU or future RSUs that may be granted under the
Plan by electronic means or request your consent to participate in the Plan by electronic means. You hereby consent to receive such
documents by electronic delivery and agree to participate in the Plan through an online or electronic system established and maintained by the
Company or a third party designated by the Company.
X.
COUNTY-SPECIFIC APPENDIX
The RSU Award shall be subject to any additional provisions set forth in Appendix B for your country, if any. If you relocate to one of the
countries included in Appendix B during the life of the RSU Award, the additional provisions for such country shall apply to you, to the extent
the Company determines that the application of such provisions is necessary or advisable in order to comply with local law or facilitate the
administration of the Plan.
XI.
ADMINISTRATION
The Committee is responsible for construing and interpreting this grant, including the right to construe disputed or doubtful Plan provisions,
and may establish, amend and construe such rules and regulations as it may deem
necessary or desirable for the proper administration of this RSU Award. Any decision or action taken or to be taken by the Committee, arising
out of or in connection with the construction, administration, interpretation and effect of this RSU Award shall, to the maximum extent
permitted by applicable law, be within its absolute discretion (except as otherwise specifically provided herein) and shall be final, binding and
conclusive upon the Company, all Eligible Employees and any person claiming under or through any Eligible Employee. All determinations
by the Committee including, without limitation, determinations of the Eligible Employees, the form, amount and timing of Incentives, the
terms and provisions of Incentives and the writings evidencing Incentives, need not be uniform and may be made selectively among eligible
employees who receive, or are eligible to receive, Incentives hereunder, whether or not such Eligible Employees are similarly situated.
This RSU Award is subject to the provisions of the 2019 Incentive Stock Plan. For further information regarding your RSU Award, you may
access the Merck Global Long-Term Incentives homepage via Sync > HR > Money > Long-Term Incentive Program
APPENDIX A.1
Policy and Procedures for DiscreƟonary Recoupment of
CompensaƟon for Compliance ViolaƟons
Policy
It is the policy of the CompensaƟon and Management Development CommiƩee (the “CommiƩee”) of the Board of Directors (the “Board”) of Merck
& Co., Inc. (the “Company”) that the CommiƩee will exercise its discreƟon to determine whether to seek Recoupment of any Covered CompensaƟon
paid or awarded to an Affected Employee, where it determines, in consultaƟon with the Audit CommiƩee, that: a) the Affected Employee engaged in
misconduct, or failed to reasonably supervise an employee who engaged in misconduct, that resulted in a Material ViolaƟon; and b) the CommiƩee
concludes that the Material ViolaƟon caused Significant Harm to the Company.
DefiniƟons
An “Affected Employee” is an employee in Band 600 or higher who (i) engaged in misconduct that results in a Material ViolaƟon; or (ii) failed in his or
her supervisory responsibiliƟes to reasonably manage or monitor the conduct of an employee who engaged in misconduct that results in a Material
ViolaƟon.
“Covered CompensaƟon” means all (a) incenƟve-based cash compensaƟon granted to an Affected Employee, including, without limitaƟon, any
annual bonuses and other short- and long-term cash incenƟves, (b) equity-based compensaƟon, including, without limitaƟon, stock opƟons,
restricted stock, restricted stock units, performance share units (“PSUs”), (c) any proceeds or earnings received in respect of (a) and (b), and (d) any
other forms of compensaƟon that the CommiƩee determines to be subject to this policy. For the avoidance of doubt, the foregoing includes any
compensaƟon that was previously paid, earned, vested, deferred or paid or payable as a component of severance or terminaƟon compensaƟon.
“ExecuƟve” means current and former execuƟve officers of the Company, as “execuƟve officer” is defined for the purposes of the SecuriƟes
Exchange Act of 1934, as amended.
A “Material ViolaƟon” is defined as (i) a material violaƟon of a wriƩen Company policy relaƟng to the research, development, manufacturing, sales,
or markeƟng of Company products or (ii) conduct detrimental to the Company, including the Company’s overall goodwill or reputaƟon.
“Recoupment” is defined to include any and all of the following acƟons to the extent permiƩed by law: (a) reducing the amount of a current or
future bonus or other cash or noncash incenƟve compensaƟon award, (b) requiring reimbursement of a bonus or other cash-based incenƟve
compensaƟon award paid with respect to the most recently completed performance period, (c) cancelling all or a porƟon of a future-vesƟng equity
award, (d) cancelling all or a porƟon of an equity award that vested within the previous twelve-month period, (e) requiring return of shares paid
upon vesƟng and/or reimbursement of any proceeds received from the sale of an equity award, in each case that vested within the previous twelve-
month period, and (f) any other method of reducing the total compensaƟon paid to an employee for any prior twelve-month period or any current
or future period.
“Significant Harm” means a significant negaƟve impact on the Company’s financial operaƟng results or reputaƟon.
Procedures
Subject to any delegaƟon to the Chief ExecuƟve Officer, as discussed below, the CommiƩee, acƟng in consultaƟon with the Audit CommiƩee, shall
administer this policy and have full discreƟon to interpret and to make any and all determinaƟons under this policy. Any determinaƟons made by the
CommiƩee shall be final, binding, and conclusive on all parƟes. Notwithstanding the foregoing, the full Board shall approve any determinaƟon to
seek or waive Recoupment from the Chief ExecuƟve Officer.
The General Counsel, in consultaƟon with the Chief Ethics and Compliance Officer and the ExecuƟve Vice President, Human Resources, is responsible
for determining whether to refer a maƩer to the CommiƩee for review under this policy and for assisƟng the CommiƩee with its review. In
administering this policy, the CommiƩee may consult with other commiƩees of the Board and any external or internal advisors as it deems
appropriate.
If the CommiƩee, acƟng in consultaƟon with the Audit CommiƩee, determines that there is a basis for seeking Recoupment under this policy, the
CommiƩee shall exercise its discreƟon to determine for each Affected Employee, on an individual basis, whether, and to what extent and in which
manner, to seek Recoupment.
In exercising its discreƟon, the CommiƩee may take into consideraƟon, as it deems appropriate, all of the facts and circumstances of the parƟcular
maƩer and the general interests of the Company.
DelegaƟon to Management for Recoupment Decisions
The CommiƩee may delegate to the Chief ExecuƟve Officer (who may further delegate as deemed appropriate) the authority to administer this
policy and to make any and all decisions under it regarding Affected Employees who are not ExecuƟves of the Company. Management shall report to
the CommiƩee on any affirmaƟve decisions to seek Recoupment pursuant to this delegaƟon of authority.
Public Disclosures
The Company will comply with all applicable securiƟes laws and regulaƟons, including SecuriƟes and Exchange Commission disclosure requirements
regarding execuƟve compensaƟon and any applicable New York Stock Exchange lisƟng standard or requirements, with respect to this policy. The
Company may also, but is not obligated to, provide addiƟonal disclosure beyond that required by law when the Company deems it to be appropriate
and determines that such disclosure is in the best interest of the Company and its shareholders.
Miscellaneous
Nothing in this policy shall limit or otherwise affect any of the following: 1) management’s ability to take any disciplinary acƟon with respect to any
Affected Employee; 2) the CommiƩee’s ability to use its negaƟve discreƟon with respect to any incenƟve compensaƟon performance target at any
Ɵme; or 3) the CommiƩee’s or management’s ability to reduce the amount (in whole or in part) of a current or future bonus or other cash or non-
cash incenƟve compensaƟon award to any Affected Employee for any reason as they may deem appropriate and to the extent permiƩed by law. Any
right of Recoupment under this policy is in addiƟon to, and not in lieu of, any other remedies or rights of Recoupment that may be available to the
Company pursuant to the terms of any similar policy in any incenƟve plan, employment agreement, equity award agreement, or similar agreement,
including, without limitaƟon, the Company’s Policy and Procedures for Recoupment of IncenƟve-Based CompensaƟon, and any other legal remedies
available to the Company. The Company shall not indemnify or agree to indemnify any current or former ExecuƟve against the loss of incenƟve
compensaƟon subject to this policy nor shall the Company pay or reimburse or agree to pay or reimburse any insurance premium to cover the loss of
such incenƟve compensaƟon. The CommiƩee may amend, modify, or terminate this policy in whole or in part at any Ɵme and from Ɵme to Ɵme in
its sole discreƟon.
APPENDIX A.2
Policy and Procedures for Recoupment of
IncenƟve-Based CompensaƟon
Policy
The CompensaƟon and Management Development CommiƩee (the “CommiƩee”) of the Board of Directors (the “Board”) has adopted this
IncenƟve-Based CompensaƟon Recoupment Policy (the “Policy”) to comply with SecƟon 10D of the SecuriƟes Exchange Act of 1934, as amended
(the “Exchange Act”), Rule 10D-1 promulgated thereunder (“Rule 10D-1”) and Paragraph 303A.14 of the LisƟng Standards Manual of the New York
Stock Exchange (“NYSE”), which require the recovery of certain IncenƟve-Based CompensaƟon in the event of an accounƟng restatement resulƟng
from a material error in the consolidated financial statements of Merck & Co, Inc. (the “Company”). This Policy shall be administered by the
CommiƩee, which shall have express discreƟonary authority to interpret and construe this Policy and to make all determinaƟons with respect to this
Policy, in its sole discreƟon. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of SecƟon 10D of the
Exchange Act and Rule 10D-1 (or any successor statute or rule) and any other applicable rules or lisƟng standards adopted by the U.S. SecuriƟes and
Exchange Commission (the “SEC”) or NYSE. All interpretaƟons, construcƟons and determinaƟons made by the CommiƩee under this Policy shall be
final and binding on all parƟes. This Policy may be amended with the approval of the CommiƩee and may be amended from Ɵme to Ɵme as
necessary to reflect changes in applicable regulaƟons and/or lisƟng standards adopted by the SEC or NYSE. Compliance with this Policy cannot be
waived.
DefiniƟons
"AccounƟng Restatement” is the restatement of the Company’s financial statements due to material noncompliance with any financial reporƟng
requirement under the federal securiƟes laws, including any required accounƟng restatement to correct an error in previously issued financial
statements (i) that is material to the previously issued financial statements, or (ii) that would result in a material misstatement if the error were
corrected in the current period only or leŌ uncorrected in the current period.
A “Covered Officer” is anyone who serves or has served as an execuƟve officer of the Company at any Ɵme during the performance period for
IncenƟve-Based CompensaƟon.
“ExecuƟve officer” is the equivalent to an “officer” as defined under SecƟon 16a-1(f) of the Exchange Act (“SecƟon 16 officer”).
“Financial reporƟng measure” is a measure that is (i) determined and presented in accordance with the accounƟng principles used in preparing the
Company’s financial statements, or (ii) derived wholly or in part from such measures. For purposes of this Policy, the term “financial reporƟng
measure” includes the Company’s stock price and total shareholder return, whether expressed as an absolute or relaƟve metric. For the avoidance
of doubt, a financial reporƟng measure need not be presented in the Company’s financial statements or included in a filing with the SEC.
“IncenƟve-Based CompensaƟon” is any compensaƟon that is granted, earned, or vested based wholly or in part upon the aƩainment of a financial
reporƟng measure. IncenƟve-Based CompensaƟon may include awards under the ExecuƟve IncenƟve Plan and Performance Share Units under the
Merck & Co., Inc. 2019 Stock IncenƟve Plan, or any successor thereto. IncenƟve-Based CompensaƟon does not include (i) base salary; (ii) “sign-on”
bonuses or other compensaƟon granted solely due to the commencement of employment with the Company; (iii) compensaƟon exclusively based
on compleƟon of a specific period of employment or service, without any performance condiƟon; or (iv) compensaƟon awarded based on
subjecƟve, non-financial, strategic, or operaƟonal measures that are not financial reporƟng measures.
IncenƟve-Based CompensaƟon is deemed to be “received” in the fiscal period during which the financial reporƟng measure specified in the
IncenƟve-Based CompensaƟon award is aƩained, even if the payment or grant of the IncenƟve-Based CompensaƟon occurs aŌer the end of that
fiscal period. IncenƟve-Based CompensaƟon in the form of an equity award that vests solely upon the basis of a financial reporƟng measure
performance condiƟon will be deemed to be received in the fiscal period in which it vests.
“Recoupment Period” is the three completed fiscal years of the Company immediately preceding the date, and any transiƟon period of less than
nine months that results from a change in the Company’s fiscal year within or immediately following those three completed fiscal years, on which
the Company is required to perform an AccounƟng Restatement, which date is the earlier of (i) the date the Board, or a commiƩee of the Board,
concludes, or reasonably should have
concluded, that the Company is required to perform an AccounƟng Restatement; or (ii) a date that a court, regulator or other legallyauthorized body
directs the Company to perform an AccounƟng Restatement.
Procedures for Recoupment of IncenƟve-Based CompensaƟon
In the event the Company is required to perform an AccounƟng Restatement, the Company shall, as promptly as reasonably possible, recoup any
IncenƟve-Based CompensaƟon erroneously received by a Covered Officer during the Recoupment Period. The amount of erroneously received
IncenƟve-Based CompensaƟon will be the excess of the IncenƟve-Based CompensaƟon received by the Covered Officer (whether in cash or in
shares) based on the erroneous data in the original financial statements over the IncenƟve-Based CompensaƟon (whether in cash or in shares) that
would have been received by the Covered Officer had it been based on the restated results, without respect to any tax liabiliƟes incurred or paid by
the Covered Officer. For IncenƟve-Based CompensaƟon based on total shareholder return or Company stock price, where the amount of erroneously
awarded compensaƟon is not subject to mathemaƟcal recalculaƟon directly from the informaƟon in the AccounƟng Restatement, the amount shall
be based on the CommiƩee’s reasonable esƟmate of the effect of the AccounƟng Restatement on the applicable measure and the CommiƩee shall
maintain documentaƟon of the determinaƟon of that reasonable esƟmate and provide it to the NYSE. Notwithstanding the foregoing, IncenƟve-
Based CompensaƟon shall not be recouped under this Policy to the extent received by any person before the date such person served as a Covered
Officer.
The CommiƩee shall determine, in its sole discreƟon, the method of recouping any erroneously received IncenƟve-Based CompensaƟon pursuant to
this Policy.
No recoupment shall be required if any of the following condiƟons are met and the CommiƩee determines that, on such basis, recovery would be
impracƟcable: (i) the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recouped, which
determinaƟon must be made only aŌer a reasonable and documented aƩempt by the Company to recoup the IncenƟve-Based CompensaƟon (with
documentaƟon of such reasonable aƩempt to recover to be provided to the NYSE); (ii) recovery would violate home country law where that law was
adopted prior to November 28, 2022, which determinaƟon must be made only aŌer the Company has obtained an opinion of home country counsel,
acceptable to the NYSE, that recovery would result in such violaƟon (with a copy of such opinion to be provided to the NYSE); or (iii) recoupment
would likely cause an otherwise tax-qualified reƟrement plan, under which benefits are broadly available to Company employees, to fail to meet the
requirements of SecƟon 401(a)(13) or SecƟon 411(a) of the Internal Revenue Code of 1986, as amended, and U.S. Treasury regulaƟons promulgated
thereunder.
IndemnificaƟon Not PermiƩed
The Company shall not indemnify any current or former Covered Officer against the loss of erroneously awarded compensaƟon, and shall not pay, or
reimburse any Covered Officer for, premiums incurred or paid for any insurance policy to fund such Covered Officer’s potenƟal recoupment
obligaƟons.
Disclosure of Recoupment Decisions
The Company will comply with all applicable securiƟes laws and regulaƟons, including SEC disclosure requirements, with respect to this Policy, and
any applicable NYSE lisƟng standard or requirements. The Company may also, but is not obligated to, provide addiƟonal disclosure beyond that
required by law when the Company deems it to be appropriate and determines that such disclosure is in the best interest of the Company and its
shareholders.
EffecƟve Date
This Policy shall be effecƟve as of December 1, 2023 (the “EffecƟve Date”). The terms of this Policy shall apply to any IncenƟve-Based CompensaƟon
that is received by Covered Officers on or aŌer the EffecƟve Date, even if such IncenƟve-Based CompensaƟon was approved, awarded, granted, or
paid to Covered Officers prior to the EffecƟve Date.
Miscellaneous
Nothing in this Policy shall limit or otherwise affect any of the following: 1) management’s ability to take any disciplinary acƟon with respect to any
Covered Officer; 2) the CommiƩee’s ability to use its negaƟve discreƟon with respect to any IncenƟve-Based CompensaƟon performance target at
any Ɵme; or 3) the CommiƩee’s or management’s ability to reduce the amount (in whole or in part) of a current or future bonus or other cash or
non-cash incenƟve compensaƟon award to any execuƟve or other employee for any reason as they may deem appropriate and to the extent
permiƩed by law. Any right of recoupment under this Policy is in addiƟon to, and not in lieu of, any other
remedies or rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any incenƟve plan,
employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company. This Policy shall be
binding and enforceable against all Covered Officers and their beneficiaries, heirs, executors, administrators, or other legal representaƟves.
APPENDIX B
ADDITIONAL TERMS AND CONDITIONS FOR GRANTEES OUTSIDE THE U.S.
This Appendix, which is part of the Global Terms and Conditions for 2024 Restricted Stock Unit Grants under the Merck & Co., Inc. 2019 Incentive
Stock Plan, contains additional “terms and conditions” that will apply to you if you reside outside the United States.
The terms and conditions in Part I of this Appendix apply to all grantees who reside outside the United States. The additional terms and
conditions in Part II of this Appendix will also apply to you if you reside in one of the countries referenced in Part II.
The information in this Appendix is based on the laws in effect in the respective countries as of November 2023. Such laws are often complex and
change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix B as the only source of
information relating to the consequences of your participation in the Plan because the information may be out of date at the time that the Restricted
Period lapses and shares of Common Stock are issued to you or you sell shares of Common Stock acquired under the Plan.
In addition, the information contained in this Appendix is general in nature and may not apply to your particular situation, and the Company is not in a
position to assure you of a particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country
may apply to your situation.
Finally, if you are a citizen or resident of a country, or are considered a resident of a country, other than that in which you are currently working, or
transfer residence and/or employment after the Grant Date, the information contained herein may not apply to you in the same manner. The Company
shall, in its sole discretion, determine to what extent the terms and conditions included herein will apply under these circumstances.
APPENDIX B - PART I: ADDITIONAL TERMS AND CONDITIONS FOR ALL COUNTRIES OUTSIDE OF THE UNITED STATES
The following additional terms and conditions will apply to you if you reside in any country outside the United States.
A. Nature of Grant
In accepting the RSU Award, you acknowledge and agree that:
1.
the Plan is established voluntarily by the Company, is discretionary in nature, and may be amended, suspended, or terminated by the
Company at any time;
2.
the grant of the RSU Award is exceptional, voluntary, and occasional and does not create any contractual or other right to receive future grants
of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted in the past;
3.
all decisions with respect to future RSU grants, if any, will be at the sole discretion of the Company;
4.
your participation in the Plan is voluntary;
5.
your participation in the Plan shall not create a right to employment or be interpreted as forming or amending an employment or service
contract with the Company and shall not interfere with the ability of the Employer to terminate your employment or service relationship (if
any) at any time;
6.
the RSU Award and any shares of Common Stock acquired under the Plan, and income from and value of same, are extraordinary items that
do not constitute compensation of any kind for services of any kind rendered to the Employer, the Company, or any subsidiary, affiliate or JV
of the Company, and that are outside the scope of your employment or service contract, if any;
7.
unless otherwise agreed with the Company in writing, the RSU Award and any shares of Common Stock acquired under the Plan, and the
income from and value of same, are not granted as consideration for, or in connection with, the service you may provide as a director of a
subsidiary, affiliate or JV of the Company;
8.
the RSU Award and any shares of Common Stock acquired under the Plan, and the income from and value of same, are not intended to
replace any pension rights or compensation;
9.
the RSU Award and any shares of Common Stock acquired under the Plan, and the income and value of same, are not part of normal or
expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination,
redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments,
and in no event should be considered as compensation for, or relating in any way to, past services for the Employer, the Company or any
subsidiary, affiliate or JV of the Company;
10. the future value of the shares of Common Stock underlying the RSU is unknown, indeterminable and cannot be predicted with certainty;
11. no claim or entitlement to compensation or damages shall arise from (a) termination of the RSU Award resulting from termination of your
employment by the Company or the Employer (for any reason whatsoever and whether or not in breach of employment laws in the
jurisdiction where you are employed or the terms of your employment agreement, if any) and/or (b) termination of the RSU Award or
recoupment of any shares of Common Stock, cash or other benefits acquired upon settlement of the RSU Award resulting from the application
of Article I(E) of the Terms;
12. for purposes of the RSU Award, your employment relationship will be considered terminated as of the date you are no longer providing
services to the Employer or the Company or any subsidiary, affiliate or JV (regardless of the reason for such termination and whether or not
later found to be invalid or in breach of the employment laws in the jurisdiction where you are employed or the terms of your employment
agreement, if any), and unless otherwise expressly provided in the Terms, your right to vest in the RSU under the Plan, if any, will terminate
effective as of such date and will not be extended by any notice period or any period of “garden leave” or similar period mandated under local
law; the Committee shall have the exclusive discretion to determine when you are no longer providing services for purposes of the grant
(including whether you may still be considered to be providing services while on a leave of absence);
13. the RSU Award and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a merger, take-over or
transfer of liability;
14. the Company is not providing any tax, legal, or financial advice, nor is the Company making any recommendation regarding your
participation in the Plan, or the acquisition or sale of underlying shares; you should consult with your personal tax, legal and financial
advisors regarding the decision to participate in the Plan and before taking any action related to the Plan; and
15. neither the Employer, nor the Company or any subsidiary, affiliate or JV shall be liable for any foreign exchange rate fluctuation between your
local currency and the United States Dollar that may affect the value of the RSU Award or any amounts due to you pursuant to the vesting of
the RSU Award, the subsequent sale of shares acquired under the Plan or the receipt of any dividends and/or dividend equivalents.
B. Insider Trading/Market Abuse Laws
You acknowledge that, depending on your or your broker’s country of residence or where shares of Common Stock are listed, you may be subject
to insider trading restrictions and/or market abuse laws, which may affect your ability to accept, acquire, sell or otherwise dispose of shares of
Common Stock, rights to shares of Common Stock (e.g., RSUs) or rights linked to the value of shares of Common Stock under the Plan during
such times that you are considered to have “inside information” regarding the Company (as defined by the laws or regulations in the applicable
jurisdictions or your country). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you placed before
you possessed inside information. Furthermore, you could be prohibited from (i) disclosing the inside information to any third party and (ii)
“tipping” third parties or causing them otherwise to buy or sell securities. You should keep in mind that third parties include fellow employees.
Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable
Company insider trading policy. You understand you are responsible for ensuring compliance with any restrictions and should consult with your
personal legal advisor on this matter.
C. Foreign Asset/Account, Exchange Control and Tax Obligations
You acknowledge that, depending on your country, you may be subject to foreign asset/account, exchange control and/or tax reporting
requirements as the result of the acquisition of shares of Common Stock or cash (including dividend equivalents, dividends, and the proceeds of
the sale of shares of Common Stock) derived from your participation in the Plan, in, to and/or from a brokerage/bank account or legal entity
located outside your country. The applicable laws of your country may require that you report such accounts, assets, the
balances therein, the value thereof and/or the transactions related thereto to the applicable authorities in your country. You may also be required to
repatriate cash received from participating in the Plan to your country within a certain time after receipt. You acknowledge that you are
responsible for ensuring compliance with any applicable foreign asset/account, exchange control and tax reporting requirements and should
consult your personal tax, legal and/or financial advisors regarding the same.
D. Language
You acknowledge that you are proficient in the English language or have consulted with an advisor who is sufficiently proficient, to allow you to
understand the terms and conditions of this document. If you have received this document, or any other document related to the RSU Award
and/or the Plan translated into a language other than English, and if the translated version is different than the English version, the English version
will control unless otherwise required by local law.
E. Imposition of Other Requirements and Issuance of Shares
The Company reserves the right to impose other requirements on this RSU Award and the shares of Common Stock acquired pursuant to the RSU
Award, to the extent the Company determines it is necessary or advisable to comply with local laws or facilitate the administration of the Plan,
and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
In particular, if advisable due to local law requirements, the Committee, in its sole and absolute discretion, may require the immediate forced sale
of the shares of Common Stock issuable upon vesting of the RSUs. Alternatively, unless otherwise set forth in this Appendix, the Committee, in
its sole and absolute discretion, may determine to pay out the RSUs in cash equal to the fair market value of the shares of Common Stock
underlying the RSUs.
APPENDIX B - PART II: COUNTRY-SPECIFIC ADDITIONAL TERMS AND CONDITIONS AND NOTIFICATIONS
Country
Additional Terms and Conditions and Notifications
Algeria
Payment of Award
Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive
in cash the value of the underlying shares of Common Stock at vesting, less any Tax-Related Items and broker’s fees or
commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares
of Common Stock and to force the immediate sale of such shares of Common Stock depending on the development of
applicable exchange control laws and regulations.
Argentina
Securities Law Information
Neither the Award nor the underlying shares of Common Stock are publicly offered, listed on any stock exchange in Argentina
or registered with the Argentine Securities Commission (Comisión Nacional de Valores).
Labor Law Acknowledgement
This provision supplements the “Nature of Grant” section in Part I of this Appendix B:
In accepting the grant of the RSU Award, you acknowledge and agree that the grant of the RSU Award is made by the Company,
not the Employer, in its sole discretion and the value of any RSU Award and shares of Common Stock acquired under the Plan
shall not constitute salary or wages for any purpose under Argentine labor law, including, but not limited to, the calculation of (i)
any labor benefits including, without limitation, vacation pay, thirteenth salary, compensation in lieu of notice, annual bonus,
disability, and leave of absence payments, or (ii) any termination or severance indemnities.
If, notwithstanding the foregoing, any benefits under the Plan are considered as salary or wages for any purpose under Argentine
labor law, you acknowledge and agree that such benefits shall not accrue more frequently than on an annual basis.
Australia
Securities Law Information
The offer of the RSU Award is being made under Division 1A Part 7.12 of the Corporations Act 2001 (Cth). If you offer shares
of Common Stock acquired under the Plan for sale to a person or entity resident in Australia, your offer may be subject to
disclosure requirements under Australian law. You should obtain legal advice on applicable disclosure obligations prior to
making any such offer.
Tax Information
The Plan is a plan to which Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) (the “Tax Assessment Act”)
applies (subject to the conditions in the Tax Assessment Act).
Austria
There are no country-specific provisions.
Belgium
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Bermuda
Securities Law Information
The Plan and the Terms, including this Appendix B, are not subject to, and have not received approval from either the Bermuda
Monetary Authority or the Registrar of Companies in Bermuda and no statement to the contrary, explicit or implicit, is
authorized to be made in this regard. If any shares of Common Stock acquired under the Plan are offered or sold in Bermuda, the
offer or sale must comply with the provisions of the Investment Business Act 2003 of Bermuda. Alternatively, the shares may be
sold on the New York Stock Exchange on which they are listed.
Brazil
Compliance with Law
By accepting the RSU Award, you acknowledge that you agree to comply with applicable Brazilian laws and pay any and all
applicable taxes associated with the expiration of the Restricted Period, the sale of shares obtained pursuant to the expiration of
the Restricted Period, and the receipt of any dividends or dividend equivalents.
Labor Law Acknowledgment
By accepting the RSU Award, you agree that you are (i) making an investment decision and (ii) the value of the underlying
shares of Common Stock is not fixed and may increase or decrease in value over the Restricted Period without compensation to
you.
Further, you acknowledge and agree that, for all legal purposes, (i) any benefits provided to you under the Plan are unrelated to
your employment or service; (ii) the Plan is not a part of the terms and conditions of your employment or service; and (iii) the
income from your participation in the Plan, if any, is not part of your remuneration from employment or service.
Bulgaria
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Canada
Termination of Employment
This provision replaces paragraph (9) of the “Nature of Grant” section in Part I of this Appendix B:
Except to the extent explicitly required under local employment standards legislation, the RSU Award and any shares of
Common Stock acquired under the Plan, and the income and value of same, are not part of normal or expected compensation or
salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal,
end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments, and in no
event should be considered as compensation for, or relating in any way to, past services for the Employer, the Company or any
parent, subsidiary, affiliate or JV of the Company;
This provision replaces paragraph (11) of the “Nature of Grant” section in Part I of this Appendix B:
Except to the extent explicitly required under local employment standards legislation, no claim or entitlement to compensation
or damages shall arise from (a) termination of the RSU Award resulting from termination of your employment by the Company
or the Employer (for any reason whatsoever and whether or not in breach of employment laws in the jurisdiction where you are
employed or the terms of your employment agreement, if any) and/or (b) termination of the RSU Award or recoupment of any
shares of Common Stock, cash or other benefits acquired upon settlement of the RSU Award resulting from the application of
Article I(E) of the Terms;
This provision replaces paragraph (12) of the “Nature of Grant” section in Part I of this Appendix B:
For purposes of the RSU Award, except to the extent expressly provided in your Terms or expressly required by applicable
legislation, your employment relationship will be considered terminated (regardless of the reason for such termination) and your
right to vest in the RSU Award under the Plan, if any, will terminate as of the date that is the earliest of (a) the date you are no
longer employed or providing services to the Company or any parent, subsidiary, affiliate or JV, (b) the date you receive written
notice of termination of employment, or (c) the date written notice of termination is delivered to your last known address
(together, the “Termination Date”). Except to the extent explicitly required by applicable legislation, the Termination Date will
exclude any notice period or period of pay in lieu of such notice required under statute, contract, common/civil law or otherwise.
You will not earn, or be entitled to earn, any pro-rated vesting for that portion of time before the date on which your right to vest
terminates, nor will you be entitled to any compensation for lost vesting. In case of any dispute as to whether termination of
employment has occurred that cannot be reasonably determined under your Terms and the Plan, the Committee shall have the
sole discretion, subject to applicable legislation, to determine whether such termination of employment has occurred and the
effective date of such termination.
Country
Additional Terms and Conditions and Notifications
Notwithstanding the foregoing, if applicable employment standards legislation explicitly requires continued entitlement to
vesting during a statutory notice period, your right to vest in the RSU Award under the Plan, if any, will terminate effective as of
the last day of your minimum statutory notice period, but you will not earn or be entitled to pro-rated vesting if the vesting date
falls after the end of your statutory notice period, nor will you be entitled to any compensation for lost vesting.
Securities Law Information
You are permitted to sell shares of Common Stock acquired through the Plan through the broker designated by the Company
under the Plan, if any, provided the resale of shares of Common Stock acquired under the Plan takes place outside of Canada
through the facilities of a stock exchange on which the shares of Common Stock are listed. The shares are currently listed on the
New York Stock Exchange.
Payment of Award
Notwithstanding any discretion contained in Section 11(d) of the Plan, the grant of the RSU Award does not provide any right
for you to receive a cash payment and the RSU Award is payable in shares of Common Stock only.
The following provisions will apply to you if you are a resident of Quebec:
Language. A French translation of the Plan and the Terms will be made available to you. Unless you indicate otherwise, the
French translation of the Plan and the Terms will govern your participation in the Plan.
Langue. Une traduction française du Régime et de la Convention sera mise à votre disposition. À moins que vous n'indiquiez le
contraire, la traduction française du Régime et de la Convention régira votre participation au Régime.
Data Privacy
This provision supplements the “Data Privacy” section in the Terms:
You hereby authorize the Company and the Company’s representatives to discuss with and obtain all relevant information from
all personnel, professional or not, involved in the administration and operation of the Plan. You further authorize the Company,
and its subsidiaries, affiliates or JVs and Morgan Stanley Smith Barney and any other stock plan service provider that may be
selected by the Company to assist with the Plan to disclose and discuss the Plan with their respective advisors. You further
authorize the Company and its subsidiaries, affiliates and JVs to record such information and to keep such information in your
employee file. You acknowledge and agree that your personal information, including any sensitive personal information, may be
transferred or disclosed outside the province of Quebec, including to the U.S. If applicable, you also acknowledge and authorize
the Company and its subsidiaries, affiliates and JVs, the administrator of the Plan and any third party brokers/administrators that
are assisting the Company with the operation and administration of the Plan to use technology for profiling purposes and to
make automated decisions that may have an impact on you or the administration of the Plan.
Country
Additional Terms and Conditions and Notifications
Chile
Securities Law Information
The offer of this RSU Award will be effective as of the Grant Date. The offer is made subject to general ruling N° 345 (“NCG
345”) of the Chilean Commission for the Financial Market (“CMF”). The offer refers to securities not registered at the securities
registry or at the foreign securities registry of the CMF, and, therefore, such securities are not subject to oversight of the CMF.
Given that the Plan is not registered in Chile, the Company is not required to provide public information about the Plan or the
shares of Common Stock in Chile. Unless the securities and/or the shares of Common Stock are registered with the CMF, a
public offering of such securities cannot be made in Chile, unless the offer complies with the conditions set forth in NCG 345.
Country
Additional Terms and Conditions and Notifications
The People's
Republic of
China
The following terms and conditions apply only to grantees who are citizens of the PRC or are otherwise determined to be
subject to the requirements imposed by the State Administration of Foreign Exchange (“SAFE”) as determined by the
Company.
The following terms and conditions apply only if you are classified as Band 600 and higher on the Grant Date.
Payment of Award and Termination of Employment
You will be permitted to hold shares of Common Stock issued to you at the end of the Restricted Period. Notwithstanding
anything to the contrary in the Plan or Terms, due to exchange control laws in China, you agree that any shares of Common
Stock acquired under the Plan and held by you at the time of your termination of employment with the Company or the
Employer will be sold on your behalf, pursuant to this authorization, as soon as administratively practicable following the
termination of your employment, but no later than six-months following termination of employment. The Company is under no
obligation to arrange for such sale at any particular price. You will receive the sale proceeds, less any broker’s fees or
commissions and subject to satisfaction of any Tax-Related Items. If the Terms provide that all or a portion of your outstanding
RSU Award will become distributable at some time following your termination of employment, that portion will automatically
vest and be sold on your behalf as described above. Any other portion of your RSU Award that is not vested as described above
will expire immediately upon your termination of employment.
Due to local regulatory requirements, you agree that the Company may force the sale of any shares of Common Stock issued
under the Plan. The sale may occur (i) immediately upon vesting or (ii) within any other time frame as the Company determines
to be necessary or advisable for legal or administrative reasons.
Broker Account
Any shares of Common Stock issued to you at expiration of the Restricted Period must be maintained in an account with
Morgan Stanley Smith Barney or such other stock plan service provider as may be selected by the Company in the future until
the shares of Common Stock are sold through that broker.
Exchange Control Compliance
You understand and agree that, to comply with exchange control laws in the PRC, any cash dividends, dividend equivalents and
the proceeds from the sale of the shares of Common Stock will be immediately repatriated to China through a special exchange
control account established by the Company (or any subsidiary, affiliate or JV) or the Employer prior to being delivered to you.
The funds may be paid to you in U.S. dollars or local currency at the Company’s discretion. To the extent the funds are paid to
you in U.S. dollars, you understand that you will be required to set up a U.S. dollar bank account in China and provide the bank
account details to the Employer and/or the Company so that the funds may be deposited into this account. In the more likely
event that the Company converts cash received under the Plan into local currency, the Company is under no obligation to secure
any exchange conversion rate and the Company may face delays in converting
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Additional Terms and Conditions and Notifications
the proceeds to local currency due to exchange control restrictions in China. You agree to bear any currency fluctuation risk
between that time and the time the funds are distributed through any such special exchange account. You further agree to comply
with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange
control requirements in China.
The following terms and conditions apply only if you are classified as below Band 600 on the Grant Date.
Payment of Award
To facilitate compliance with exchange control laws in China, any RSU Award granted to you will be settled in cash only. This
means that upon vesting of your RSU Award, you will receive in cash the value of the underlying shares of Common Stock at
expiration of the Restricted Period, less any broker’s fees or commissions and Tax-Related Items, which will be remitted to you
in accordance with applicable exchange control laws and regulations. You will not be permitted to hold shares of Common Stock
after vesting. The Company reserves the right to settle the RSU Award in shares of Common Stock and to force the immediate
sale of such shares of Common Stock depending on the development of applicable exchange control laws and regulations.
Exchange Control Compliance
You understand and agree that, to comply with exchange control laws in the PRC, the cash payable to you at expiration of the
Restricted Period will be immediately repatriated to China through a special exchange control account established by the
Company (or any subsidiary, affiliate or JV) or the Employer prior to being delivered to you. The funds may be paid to you in
U.S. dollars or local currency at the Company’s discretion. To the extent the funds are paid to you in U.S. dollars, you
understand that you will be required to set up a U.S. dollar bank account in China and provide the bank account details to the
Employer and/or the Company so that the funds may be deposited into this account. In the more likely event that the Company
converts cash received under the Plan into local currency, the Company is under no obligation to secure any exchange
conversion rate and the Company may face delays in converting the proceeds to local currency due to exchange control
restrictions in China. You agree to bear any currency fluctuation risk between that time and the time the funds are distributed
through any such special exchange account. You further agree to comply with any other requirements that may be imposed by
the Company in the future in order to facilitate compliance with exchange control requirements in China.
Termination of Employment
Notwithstanding any terms or conditions of the Plan or the “Termination of Employment” section of the Terms to the contrary,
the cash equivalent of any shares of Common Stock that vest upon termination of your employment will be distributed to you no
later than six months from the date of termination of your employment, as determined by the Company in accordance with the
Terms, or within any other such timeframe as may be required by SAFE. If the Terms provide that all or a portion of your
outstanding RSU Award will become distributable at some time following your termination of employment, that portion will
automatically vest and become distributable immediately upon your termination of employment as described above. Any other
portion of your RSU Award that is not vested as described above will expire immediately upon your termination of employment.
Country
Additional Terms and Conditions and Notifications
Colombia
Securities Law Information.
The shares of Common Stock are not and will not be registered with the Colombian registry of publicly traded securities
(Registro Nacional de Valores y Emisores) and therefore the shares of Common Stock may not be offered to the public in
Colombia. Nothing in this Appendix B should be construed as the making of a public offer of securities in Colombia.
Labor Law Acknowledgment
This provision supplements the “Nature of Grant” section in Part I of this Appendix B:
You acknowledge that pursuant to Article 128 of the Colombian Labor Code, the Plan, the RSU Award and any income realized
under the Plan do not constitute a component of your “salary” for any legal purpose. Therefore, they will not be included and/or
considered for purposes of calculating any and all labor benefits, such as legal/fringe benefits, vacations, indemnities, payroll
taxes, social insurance contributions and/or any other labor-related amount which may be payable.
Costa Rica
There are no country-specific provisions.
Croatia
There are no country-specific provisions.
Cyprus
There are no country-specific provisions.
Czech Republic
There are no country-specific provisions.
Denmark
Labor Law Acknowledgment
This provision supplements the “Nature of Grant” section Part I of this Appendix B:
By accepting the RSU Award, you understand and agree that this grant relates to future services to be performed and is not a
bonus or compensation for past services.
Stock Option Act
You acknowledge that you received the Employer Statement (attached as Appendix C below) which summarizes select terms of
your RSUs.
As set forth in Section 1 of the Stock Option Act, the Stock Option Act only applies to “employees” as that term is defined in
Section 2 of the Stock Option Act and to the extent you are subject to Danish law. If you are a member of the registered
management of the Company's subsidiary, affiliate or JV in Denmark or otherwise do not satisfy the definition of employee or
are not subject to Danish law, you will not be subject to the Stock Option Act and the Employer Statement will not apply to you.
Please note the Stock Option Act was revised as of January 1, 2019. The standard termination provisions in the Terms will
apply for any grants made under the Plan. The relevant termination provisions are detailed in the “Termination of
Employment” section in your Terms.
Ecuador
There are no country-specific provisions.
Egypt
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Estonia
Language Consent
By accepting the grant of the RSU Award, you confirm having read and understood the documents related to the grant (the
Terms and the Plan), which were provided in the English language, and that you do not need the translation thereof into the
Estonian language. You accept the terms of those documents accordingly.
Võttes vastu Award-de pakkumise kinnitad, et oled ingliskeelsena esitatud pakkumisega seotud dokumendid (Tingimused ja
Plaan) läbi lugenud ja nendest aru saanud ning et ei vaja nende tõlkimist eesti keelde. Sellest tulenevalt nõustud viidatud
dokumentide tingimustega
Finland
There are no country-specific provisions.
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Additional Terms and Conditions and Notifications
France
Language Consent
By accepting the RSU Award, you confirm having read and understood the Plan and your Terms, which were provided in the
English language. You accept the terms of those documents accordingly.
En acceptant l’attribution, vous confirmez avoir lu et compris le Plan de travail et vos conditions générales et dispositions, qui
ont été transmis en langue anglaise. Vous acceptez les termes de ces documents en connaissance de cause.
French-Qualified RSUs
The following provisions apply only if you are eligible to be granted French-Qualified RSUs under the French Sub-Plan (defined
below). If you are ineligible to be granted French-Qualified RSUs under the French Sub-Plan, the RSU Award will not qualify
for the special French tax and social security treatment under Sections L. 225-197-1 to L. 225-197-5 and Sections L. 22-10-59
to L. 22-10-60 of the French Commercial Code, as amended.
Type of Grant. The RSUs are granted as French-Qualified RSUs and are intended to qualify for the special tax and social
security treatment applicable to shares of Common Stock granted for no consideration under Sections L. 225-197-1 to L. 225-
197-5 and Sections L. 22-10-59 to L. 22-10-60 of the French Commercial Code, as amended. The French-Qualified RSUs are
granted subject to the terms and conditions of the Sub-Plan for RSU Awards to French Participants (the “French Sub-Plan”).
Certain events may affect the status of the RSUs as French-Qualified RSUs or the underlying shares of Common Stock, and the
French-Qualified RSUs or the underlying shares of Common Stock may be disqualified in the future. The Company does not
make any undertaking or representation to maintain the qualified status of the French-Qualified RSUs or of the underlying
shares of Common Stock.
Capitalized terms not defined herein, in the Terms or in the Plan shall have the meanings ascribed to them in the French Sub-
Plan.
Restrictions on Sale or Transfer of Shares.
(a) Minimum Mandatory Vesting Period. No vesting shall occur prior to the first anniversary of the Grant Date, or such
other minimum vesting period appliable to French-Qualified RSUs under Section L. 225-197-1 of the French
Commercial Code, as amended, or by the French Tax Code or the French Social Security Code, as amended, to benefit
from the special tax and social security regime in France.
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Additional Terms and Conditions and Notifications
(b) Minimum Mandatory Holding Period. You may not sell or transfer any shares of Common Stock issued at vesting until
the second anniversary of the Grant Date, or such other period as is required to comply with the minimum mandatory
holding period applicable to shares underlying French-Qualified RSUs under Section L. 225-197-1 of the French
Commercial Code, as amended, or by the French Tax Code or the French Social Security Code, as amended, to benefit
from the special tax and social security regime in France.
(c) Closed Periods. You may not sell any shares of Common Stock issued upon vesting of the French-Qualified RSUs
during certain Closed Periods, to the extent applicable to the shares underlying the French-Qualified RSUs granted by
the Company, as described in the French Sub-Plan.
(d) Effect of Termination of Service. Except in the case of your termination due to death or Disability, the restrictions
described in provisions (a), (b) and (c) above will continue to apply even if you are no longer an employee or managing
corporate officer of the Company or a French Entity.
No Transfer of French-Qualified RSUs. French-Qualified RSUs may not be sold, assigned, transferred, pledged, hypothecated,
or otherwise disposed of in any manner during a French Participant's lifetime and upon death only in accordance with Section 6
of the French Sub-Plan, and only to the extent required by applicable laws (including the provisions of Sections L. 225-197-1 to
L. 225-197-6 of the French Commercial Code, as amended).
Termination of Service Due to Death. The following provision replaces paragraph II(E) of the Terms:
If your employment terminates due to your death during the Restricted Period but prior to an employment termination
contemplated under paragraphs B, C, D, G or H, the French-Qualified RSUs that have not vested as of such date and dividend
equivalents that have accrued through such date may be requested by your legal heirs within six months of the date of death and,
if so requested, the shares of Common Stock subject to the French-Qualified RSUs will be issued to your legal heirs.
Germany
There are no country-specific provisions.
Greece
There are no country-specific provisions.
Guatemala
Consent to Receive Information in English
By participating in the Plan, you acknowledge that you have reviewed the Terms and are sufficiently proficient in English, or,
alternatively, you will seek appropriate assistance, to understand the terms and conditions of this RSU Award.
Honduras
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Hong Kong
Securities Law Information
Warning: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You should exercise
caution in relation to the offer. If you are in any doubt about any of the contents of the Plan and the Terms, including this
Appendix B, you should obtain independent professional advice. The RSU Award and any shares of Common Stock issued
pursuant to the RSU Award do not constitute a public offering of securities under Hong Kong law and are available only to
Eligible Employees of the Company or its subsidiaries, affiliates and JVs. The Terms, including this Appendix B, the Plan and
other incidental communication materials distributed in connection with the RSU Award (i) have not been prepared in
accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable
securities legislation in Hong Kong and (ii) are intended only for the personal use of each Eligible Employee of the Employer,
the Company or its subsidiaries, affiliates and JVs and may not be distributed to any other person.
Payment of Award
Notwithstanding any discretion contained in Section 11(d) of the Plan, the grant of the RSU Award does not provide any right
for you to receive a cash payment and the RSU Award is payable in shares of Common Stock only.
Sale of Shares
Shares of Common Stock received at vesting are accepted as a personal investment. In the event the Restricted Period on your
RSU Award expires within six months of the Grant Date and shares of Common Stock are issued to you, you agree that you will
not offer to the public or otherwise dispose of the shares of Common Stock prior to the six-month anniversary of the Grant Date.
Hungary
Payment of Award
Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive
in cash the value of the underlying shares of Common Stock at vesting, less any Tax-Related Items and broker’s fees or
commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares
of Common Stock and to force the immediate sale of such shares of Common Stock depending on the development of
applicable securities laws and regulations.
Iceland
There are no country-specific provisions.
India
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Indonesia
Language Acknowledgment
A translation of the documents relating to this grant into Bahasa Indonesia can be provided to you
upon request to mellisa.riana.dewi@merck.com. By accepting the RSU Award, you (i) confirm
having read and understood the documents relating to this grant (i.e., your Terms, including this
Appendix B, and the Plan) which were provided in the English language, (ii) accept the terms of
these documents accordingly, and (iii) agree not to challenge the validity of this document based on
Law No. 24 of 2009 on National Flag, Language, Coat of Arms and National Anthem or the
implementing Presidential Regulation (when issued).
Persetujuan dan Pemberitahuan Bahasa.
Terjemahan dari dokumen-dokumen terkait dengan pemberian ini ke Bahasa Indonesia dapat
disediakan untuk anda berdasarkan permintaan kepada mellisa.riana.dewi@merck.com. Dengan
menerima Penghargaan ini, anda (i) mengkonfirmasi bahwa telah membaca dan memahami
dokumen-dokumen berkaitan dengan pemberian ini (yaitu, Syarat-syarat anda, termasuk suplemen
ini dan Program) yang disediakan dalam Bahasa Inggris, (ii) menerima persyaratan di dalam
dokumen-dokumen tersebut, dan (iii) setuju untuk tidak mengajukan keberatan atas keberlakuan dari
dokumen ini berdasarkan Undang-Undang No. 24 Tahun 2009 tentang Bendera, Bahasa dan
Lambang Negara serta Lagu Kebangsaan ataupun Peraturan Presiden sebagai pelaksanaannya
(ketika diterbitkan).
Ireland
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Israel
Securities Law Information
The grant of the RSU Award under the Plan is being made pursuant to an exemption from the requirement to file and publish a
prospectus in Israel regarding the Plan obtained from the Israeli Securities Authority. Copies of the Plan and the Form S-8
registration statement for the Plan filed with the U.S. Securities and Exchange Commission will be sent to you, at no charge, on
written request being mailed to Investor Relations at Merck & Co., Inc., 126 East Lincoln Avenue, P.O. Box 2000, Rahway, NJ
07065, U.S.A. The telephone number at the executive offices is 1-908-740-4000. Alternatively, copies of the Plan and the Form
S-8 registration statement for the Plan filed with the U.S. Securities and Exchange Commission are available by searching the
Company’s filings on the following web site: http://www.sec.gov/edgar/searchedgar/companysearch.html.
Trust Arrangement
You understand and agree that the RSU Award is offered subject to and in accordance with the terms of the Plan, the Addendum
A - Israel to the Plan (the “Israeli Sub-Plan”), the Trust Agreement (the “Trust Agreement”) between the Company and the
Company’s trustee appointed by the Company or its subsidiary or affiliate in Israel, currently ESOP Management and Trust
Services Ltd. (the “Trustee”), and the Terms. In the event of any inconsistencies between the Israeli Sub-Plan, the Terms and/or
the Plan, the Israeli Sub-Plan will govern the RSU Award granted to you in Israel. Capitalized terms used but not defined in this
Appendix B for Israel, the Plan or the Terms have the meanings set forth in the Israeli Sub-Plan.
Requirement to Return Signed Confirmation Letter
If requested by the Employer or the Trustee, you are required to execute the Confirmation Letter - Trustee 102 Awards
(“Confirmation Letter”) provided to you in connection with Awards granted to you under the Israeli Sub-Plan. In particular, you
must print, sign and deliver a signed copy of the Confirmation Letter to the Trustee within thirty (30) days of the Grant Date, or
by such other date as may be determined by your Employer or the Trustee not to exceed ninety (90) days from the Grant Date,
for the RSU Award to qualify for preferential tax treatment. By accepting this RSU Award, you acknowledge and agree that the
terms and conditions of the Confirmation Letter are hereby incorporated by reference into the Terms and shall apply to shares of
Common Stock acquired upon expiration of the Restricted Period of the RSU Award. If the Trustee does not receive the signed
Confirmation Letter within 30 days of the Grant Date, or by such other date as may be determined by your Employer or the
Trustee not to exceed ninety (90) days from the Grant Date, the RSU Award may not qualify for favorable tax treatment. For
more details, please contact Daphna Ben-Ari at daphna.ben-ari@merck.com or +972 9533306.
Confirmation of Section 102 Capital Gains Award Terms
The RSU Award is intended to be Capital Gain Awards that qualify for the tax treatment for Approved 102 Awards that are
designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)
(2) of the Ordinance. Notwithstanding the foregoing, by accepting the RSU Award, you acknowledge that the Company cannot
guarantee that the Capital Gain Award tax treatment will apply to the Awards granted to you.
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Additional Terms and Conditions and Notifications
By accepting the RSU Award, you: (a) acknowledge receipt of and represent that you have read and understand the Plan, the
Israeli Sub-Plan, the Confirmation Letter and the Terms; (b) accept the RSU Award subject to all of the terms and conditions of
the Plan, the Israeli Sub-Plan, the Confirmation Letter and the Terms; and (c) agree that the shares of Common Stock issued to
upon expiration of the Restricted Period of the RSU Award will be issued to and deposited with the Trustee and shall be held in
trust for your benefit as required by the Ordinance, the Israeli Sub-Plan and any approval by the Israeli Tax Authority pursuant
to the terms of the Ordinance, the Israeli Sub-Plan and the Trust Agreement. Furthermore, by accepting the RSU Award, you
confirm that you understand the terms and provisions of Section 102 of the Ordinance, particularly the capital gains track
described in subsection (b)(2) and (b)(3) thereof, and agree that you will not require the Trustee to release the shares of Common
Stock acquired upon expiration of the Restricted Period of the RSU Award to you or sell the shares of Common Stock to a third
party, during the Holding Period, unless permitted to do so by the Ordinance or the Israeli Sub-Plan.
Italy
Plan Document Acknowledgment
By accepting the RSU Award, you further acknowledge that you have received a copy of the Plan, have reviewed the Plan and
the Terms in their entirety and fully understand and accept all provisions of the Plan and the Terms; in particular, you
acknowledge that you have read and specifically and expressly approve the following provisions in the Plan and the Terms: (a)
your RSU Award cannot be transferred other than by will or the laws of descent and distribution; (b) in the event of involuntary
termination of your employment, your right to receive Awards and to receive distributions from Awards, if any, will terminate as
of the date that you are no longer actively employed by the Employer, unless otherwise expressly provided in the Terms; (c) the
Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (d) you are responsible for all
Tax-Related Items; (e) if a reorganization, recapitalization, reclassification or other corporate event that results in an adjustment
of the shares of Common Stock described in the Plan occurs, your RSU Award may be adjusted; (f) if a Change in Control, as
described in the Plan, occurs, your RSU Award may immediately vest; (g) all decisions with respect to future grants will be at
the sole discretion of the Company; and (h) the “Data Privacy” section of your Terms.
Japan
There are no country-specific provisions.
Jordan
There are no country-specific provisions.
Korea
Domestic Broker Requirement for Selling Shares
Korean residents are not permitted to sell foreign securities (including shares of Common Stock) through non-Korean brokers
(such as Morgan Stanley Smith Barney) or deposit funds resulting from the sale of shares of Common Stock in an account with
an overseas financial institution. If you wish to sell shares of Common Stock acquired under the Plan, you may be required to
transfer the shares to a domestic investment broker in Korea and to effect the sale through such broker. You are solely
responsible for engaging the domestic broker in Korea, and non-compliance with the requirement to sell shares of Common
Stock through a domestic broker can result in significant penalties. You should consult your personal advisor(s) prior to selling
any shares of Common Stock acquired under the Plan to ensure compliance.
Latvia
There are no country-specific provisions.
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Additional Terms and Conditions and Notifications
Lebanon
Securities Law Information
The grant of Awards and distribution of the Plan and the Terms, including this Appendix B, to Eligible Employees does not
constitute the marketing or offering of securities to the public in Lebanon pursuant to Law No. 161 (2011), the Capital Markets
Law. Offers under the Plan are being made only to Eligible Employees of the Employer or the Company or any other subsidiary,
affiliate or JV of the Company.
Lithuania
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Malaysia
Director Notification
If you are a director of the Company’s Malaysian subsidiary, affiliate or JV, you are subject to certain notification requirements
under the Malaysian Companies Act. Among these requirements is an obligation to notify the Malaysian subsidiary, affiliate or
JV in writing when you receive or dispose of an interest (e.g., RSU Awards or shares of Common Stock) in the Company or any
related company. Such notifications must be made within 14 days of receiving or disposing of any interest in the Company or
any related company.
Data Privacy
This provision replaces the “Data Privacy” section in your Terms:
You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal
data as described in the Terms and any other grant materials by and among, as applicable, the Employer, the Company and its
subsidiaries, affiliates and JVs for the exclusive purpose of implementing, administering and managing your participation in the
Plan.
You understand that the Company and the Employer may hold certain personal information about you, including, but not limited
to, your name, home address and telephone number, date of birth, social insurance number or other identification number,
salary, nationality, job title, any shares of Common Stock or directorships held in the Company, details of all Awards or any
other entitlement to shares of Common Stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the
exclusive purpose of implementing, administering and managing the Plan (“Data”). The Data is supplied by the Employer and
also by you through information collected in connection with the Terms and the Plan.
You understand that Data will be transferred to Morgan Stanley Smith Barney or such other stock plan service provider as may
be selected by the Company in the future, which is assisting the Company with the implementation, administration and
management of the Plan. You understand that the recipients of the Data may be located in the United States or elsewhere, and
that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than your country. You
understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting your
local human resources representative at kon.li.yoong@merck.com. You authorize the Company, Morgan Stanley Smith Barney
and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering
and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of
implementing, administering and managing your participation in the Plan. You understand that Data will be held only as long
as is necessary to implement, administer and manage your participation in the Plan. You understand that you may, at any time,
view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data
or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources
representative. Further, you understand that you are providing the consents herein on a purely voluntary basis. If you do not
consent, or if you later seek to revoke your consent, your employment status or service with the Employer will not be adversely
affected; the only adverse consequence of refusing or withdrawing your consent is that the Company would not be able to grant
RSU Awards to the you or administer or maintain such RSU Awards. Therefore, you
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Additional Terms and Conditions and Notifications
understand that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information
on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human
resources representative.
Privasi Data
Peruntukan ini menggantikan bahagian “Privasi Data” dalam Terma-terma anda:
Anda dengan ini secara eksplisit dan tanpa sebarang keraguan mengizinkan pengumpulan, penggunaan dan pemindahan,
dalam bentuk elektronik atau lain-lain, data peribadi anda seperti yang diterangkan dalam Terma-terma atau apa-apa bahan
geran oleh dan di antara, seperti mana yang terpakai, Majikan, Syarikat dan mana-mana anak syarikat, syarikat sekutu atau
usahasamanya untuk tujuan ekslusif bagi melaksanakan, mentadbir dan menguruskan penyertaan anda dalam Pelan.
Anda memahami bahawa Syarikat dan Majikan mungkin memegang maklumat peribadi tertentu tentang anda, termasuk, tetapi
tidak terhad kepada, nama anda, alamat rumah dan nombor telefon, tarikh lahir, nombor insurans sosial atau nombor
pengenalan lain, gaji, kewarganegaraan, jawatan, apa-apa saham atau jawatan pengarah yang dipegang dalam Syarikat, butir-
butir tentang semua Anugerah atau apa-apa hak lain untuk saham biasa yang dianugerahkan, dibatalkan, dilaksanakan,
terletak hak, tidak diletak hak ataupun yang belum dijelaskan bagi faedah anda, untuk tujuan eksklusif bagi melaksanakan,
mentadbir dan menguruskan Pelan tersebut ("“Data"”). Data tersebut dibekalkan oleh Majikan dan juga oleh anda melalui
maklumat yang dikumpul berkenaan dengan Terma-terma dan Pelan.
Anda memahami bahawa Data ini akan dipindahkan kepada Morgan Stanley Smith Barney atau pembekal perkhidmatan pelan
saham lain yang mungkin dipilih oleh Syarikat pada masa depan, yang membantu Syarikat dengan pelaksanaan, pentadbiran
dan pengurusan Pelan. Anda memahami bahawa penerima-penerima Data mungkin berada di Amerika Syarikat atau di tempat
lain, dan bahawa negara penerima (contohnya, Amerika Syarikat) mungkin mempunyai undang-undang privasi data dan
perlindungan yang berbeza daripada negara anda. Anda memahami bahawa anda boleh meminta satu senarai yang
mengandungi nama dan alamat penerima-penerima Data yang berpotensi dengan menghubungi wakil sumber manusia
tempatan di kon.li.yoong@merck.com. Anda memberi kuasa kepada Syarikat, Morgan Stanley Smith Barney dan mana-mana
penerima lain yang mungkin membantu Syarikat (pada masa kini atau masa depan) untuk melaksanakan, mentadbir dan
menguruskan Pelan untuk menerima, memiliki, menggunakan, mengekalkan dan memindahkan Data, dalam bentuk elektronik
atau lain-lain, semata-mata dengan tujuan untuk melaksanakan, mentadbir dan menguruskan penyertaan anda dalam Pelan.
Anda memahami bahawa Data hanya akan disimpan untuk tempoh yang perlu bagi melaksanakan, mentadbir, dan menguruskan
penyertaan anda dalam Pelan. Anda memahami bahawa anda boleh, pada bila-bila masa, melihat data, meminta maklumat
tambahan mengenai penyimpanan dan pemprosesan Data, meminta bahawa pindaan-pindaan dilaksanakan ke atas Data atau
menolak atau menarik balik persetujuan dalam ini, dalam mana-mana kes, tanpa kos, dengan menghubungi secara bertulis
wakil sumber manusia tempatan. Selanjutnya, anda memahami bahawa anda memberikan persetujuan di sini secara sukarela.
Jika anda tidak bersetuju, atau jika anda kemudian membatalkan persetujuan anda, status pekerjaan atau perkhidmatan anda
dengan Majikan tidak akan terjejas; satu-satunya akibat buruk jika anda tidak bersetuju atau menarik balik persetujuan anda
adalah bahawa Syarikat tidak akan dapat
Country
Additional Terms and Conditions and Notifications
memberikan Anugerah kepada anda atau mentadbir atau mengekalkan anugerah tersebut. Oleh itu, anda memahami bahawa
keengganan atau penarikan balik persetujuan anda boleh menjejaskan keupayaan anda untuk mengambil bahagian dalam
Pelan. Untuk maklumat lanjut mengenai akibat keengganan anda untuk memberikan keizinan atau penarikan balik keizinan,
anda memahami bahawa anda boleh menghubungi wakil sumber manusia tempatan.
Mexico
Securities Law Information
Any RSU Award offered under the Plan and the shares of Common Stock underlying the RSU Award have not been registered
with the National Register of Securities maintained by the Mexican National Banking and Securities Commission and cannot be
offered or sold publicly in Mexico. In addition, the Plan and any other document relating to any Award may not be publicly
distributed in Mexico. These materials are addressed to you only because of your existing relationship with the Company and its
subsidiaries, affiliates and JVs and these materials should not be reproduced or copied in any form. The offer contained in these
materials does not constitute a public offering of securities but rather constitutes a private placement of securities addressed
specifically to individuals who are present Employees of the Company or one of its subsidiaries, affiliates and JVs, made in
accordance with the provisions of the Mexican Securities Market Law, and any rights under such offering shall not be assigned
or transferred.
Labor Law Acknowledgement
These provisions supplement the “Nature of Grant” section in Part I of this Appendix B:
By accepting the RSU Award, you understand and agree that: (i) the RSU Award is not related to the salary and other contractual
benefits granted to you by the Employer and (ii) any modification of the Plan or its termination shall not constitute a change or
impairment of the terms and conditions of your employment.
Policy Statement
The invitation the Company is making under the Plan is unilateral and discretionary and, therefore, the Company reserves the
absolute right to amend it and discontinue it at any time without any liability to you.
The Company, with registered offices at 126 East Lincoln Avenue, P.O. Box 2000, Rahway, NJ 07065, U.S.A., is solely
responsible for the administration of the Plan and your participation in the Plan and the acquisition of shares of Common Stock
does not, in any way, establish an employment relationship between you and the Company since you are participating in the Plan
on a wholly commercial basis. Based on the foregoing, you expressly recognize that the Plan and the benefits that you may
derive from participating in the Plan do not establish any rights between you and the Employer and do not form part of the
employment conditions and/or benefits provided by the Employer, and any modification of the Plan or its termination shall not
constitute a change or impairment of the terms and conditions of your employment.
Finally, you hereby declare that you do not reserve to yourself any action or right to bring any claim against the Company for
any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and you therefore grant
a full and broad release to the Company, its subsidiaries, affiliates, JVs, branches, representation offices, shareholders, officers,
agents or legal representatives, with respect to any claim that may arise.
Country
Additional Terms and Conditions and Notifications
Plan Document Acknowledgment
By accepting the RSU Award, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the
Terms, including this Appendix B, in their entirety and fully understand and accept all provisions of the Plan and the Terms.
In addition, by accepting the benefits under this grant, you further acknowledge that you have read and specifically and
expressly approve the terms and conditions in the “Nature of Grant” section in Part I of this Appendix B, in which the following
is clearly described and established: (i) your participation in the Plan does not constitute an acquired right; (ii) the Plan and your
participation in the Plan is offered by the Company on a wholly discretionary basis; (iii) your participation in the Plan is
voluntary; and (iv) the Company and its subsidiaries, affiliates and JVs are not responsible for any decrease in the value of the
shares of Common Stock underlying your RSU Award.
Morocco
Payment of Award
Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive
in cash the value of the underlying shares of Common Stock at vesting, less any Tax-Related Items and broker’s fees or
commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares
of Commons Stock and to force the immediate sale of such shares of Common Stock depending on the development of
applicable exchange control laws and regulations.
Netherlands
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
New Zealand
Securities Law Information
WARNING: This is an offer of rights to receive shares of Common Stock upon vesting of the RSU
Award subject to the terms of the Plan and the Terms. The RSU Award gives you a stake in the
ownership of the Company. You may receive a return if dividends are paid on the shares of Common
Stock.
If the Company runs into financial difficulties and is wound up, you will be paid only after all
creditors have been paid. You may lose some or all of your investment.
The shares of Common Stock are listed on the New York Stock Exchange. If you acquire shares of
Common Stock under the Plan, you may be able to sell them on the New York Stock Exchange if
there are interested buyers. The price of the shares of Common Stock is subject to fluctuation and
will depend on the demand for the shares of Common Stock.
New Zealand law normally requires people who offer financial products to give information to
investors before they invest. This information is designed to help investors to make an informed
decision. The usual rules do not apply to this offer because it is made under an employee share
purchase scheme. As a result, you may not be given all the information usually required. You will
also have fewer other legal protections for this investment.
You should ask questions, read all documents carefully, and seek independent financial advice before
committing to participate in the Plan.
In addition, you are hereby notified that the documents listed below are available for review at
http://one.merck.com/sites/hr/Lists/ChannelContent/CustDispForm.aspx?ID=63&Channel=Money.
Filings made with the U.S. SEC can also be found at www.sec.gov.
(i) this Appendix B which together with the Terms and the Plan sets forth the terms and conditions
of your participation in the Plan;
(ii) a copy of the Company’s most recent annual report (i.e., Form 10-K);
(iii) a copy of the Company’s most recent published financial statements;
(iv) a copy of the Plan; and
(v) a copy of the Plan Prospectus.
A copy of the above documents will be sent to you free of charge on written request being mailed to
Investor Relations at Merck & Co., Inc., 126 East Lincoln Avenue, P.O. Box 2000, Rahway, NJ
07065, U.S.A. The telephone number at the executive offices is 1-908-740-4000.
As noted above, you are advised to carefully read the materials provided before making a decision
whether to participate in the Plan. You are also encouraged to contact your tax advisor for specific
information concerning your personal tax situation with regard to Plan participation.
Country
Additional Terms and Conditions and Notifications
Norway
There are no country-specific provisions.
Panama
Securities Law Information
Your RSU Award is granted pursuant to the Plan and the shares of Common Stock which may be issued on the expiration of the
Restricted Period are offered in a private transaction. This is not an offer to the public and the offer is not subject to the
protections established by Panamanian securities laws, nor registration requirements.
Peru
Securities Law Notification
The offering of the RSU Award is considered a private offering in Peru; therefore, neither the grant
of the RSU Award, nor the issuance of shares at the expiration of the Restricted Period, is subject to
securities registration in Peru. For more information concerning this offer, please refer to the Plan,
the Terms, the Plan Prospectus and any other grant documents made available to you by the
Company. For more information regarding the Company, please refer to the Company’s most recent
annual report on Form 10-K and quarterly report on Form 10-Q available at www.sec.gov, as well as
the Company’s “Investor Relations” website at http://investors.merck.com.
Philippines
Payment of Award
Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive
in cash the value of the underlying shares of Common Stock at vesting, less any Tax-Related Items and broker’s fees or
commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares
of Common Stock and to force the immediate sale of such shares of Common Stock depending on the development of
applicable securities laws and regulations.
Poland
There are no country-specific provisions.
Portugal
Language Consent
You hereby expressly declare that you have full knowledge of the English language and have read, understood and fully accept
and agree with the terms and conditions established in the Plan and the Terms.
Conhecimento da Lingua.
O Contratado, pelo presente instrumento, declara expressamente que tem pleno conhecimento da língua inglesa e que leu,
compreendeu e livremente aceitou e concordou com os termos e condições estabelecidas no Plano e no Acordo de Atribuição
(Terms em inglês).
Puerto Rico
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Romania
Language Consent
By accepting the RSU Award, you acknowledge that you are proficient in reading and understanding English or have consulted
with an advisor who is sufficiently proficient in English as to allow you to fully understood the terms of the documents related to
the grant (the Terms, including this Appendix B and the Plan), which were provided in the English language. You accept the
terms of these documents accordingly.
Consimtamant cu privire la limba
Prin acceptarea de aceasta Acordare, confirmati ca aveti un nivel adecvat de cunoastere in ce priveste cititirea si intelegerea
limbii engleze sau ati consultat un consultant care este suficient de competent in limba engleza pentru a va permite sa intelegeti
pe deplin termenii documentelor referitoare la acordare (anuntul, Acordul si Planul), care au fost furnizate in limba engleza.
Acceptati termenii acestor documente in consecinta.
Russia
Payment of Award
If the Company in its sole discretion determines that the issuance of shares of Common Stock pursuant to this RSU Award
would not comply with applicable laws, rules and regulations and/or that the approval of a governmental agency that it deems
necessary or appropriate has not been obtained or has lapsed for whatever reason by the relevant Vesting Date, the Company
will settle this RSU Award in cash only. Alternatively, the Company may permit this RSU Award to vest on the Vesting Date but
delay settlement of this RSU Award until such time as it determines it is permissible to issuance shares of Common Stock as
determined in accordance with Section 23 of the Plan. In the event that this RSU Award is settled in cash, upon settlement of
your RSU Award, you will receive in cash the value of the underlying shares of Common Stock at vesting, less any Tax-Related
Items and broker’s fees or commissions, which will be remitted to you via local payroll.
Securities Law Information and U.S. Transaction
The Terms, the Plan and all other materials that may be distributed regarding participation in the Plan do not constitute
advertising or an offering of securities in Russia, and your acceptance of the RSU Award results in an agreement between the
Company and you that is completed in the United States and is governed by the laws of the State of New Jersey. Any securities
issued under the Plan have not and will not be registered in Russia, nor will they be admitted for listing on any Russian
exchange for trading within Russia. Thus, the securities described in the Terms, the Plan and all other materials that may be
distributed regarding participation in the Plan may not be used for an offering or private or public circulation in Russia. In no
event will the shares of Common Stock to be issued pursuant to the RSU Award be delivered to you in Russia and all shares of
Common Stock will be maintained on your behalf in a brokerage account outside of Russia. You will not be permitted to sell or
otherwise transfer the shares of Common Stock directly to a Russian legal entity or resident. You are permitted to sell the shares
of Common Stock only on the New York Stock Exchange and only through a United States broker.
Country
Additional Terms and Conditions and Notifications
Saudi Arabia
Payment of Award
Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive
in cash the value of the underlying shares of Common Stock at vesting, less any Tax-Related Items and broker’s fees or
commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares
of Common Stock and to force the immediate sale of such shares of Common Stock depending on the development of
applicable securities laws and regulations.
Serbia
Securities Law Information
The RSU Award is not subject to the regulations concerning public offers and private placements under the Law on Capital
Market. As set forth in the Terms, the RSU Award is subject to the laws of the State of New Jersey, U.S.A. (without regard to its
conflict of law provisions).
Country
Additional Terms and Conditions and Notifications
Singapore
Restriction on Sale and Transferability
You hereby agree that any shares of Common Stock acquired pursuant to the RSU Award will not be offered for sale in
Singapore prior to the six-month anniversary of the Grant Date of the RSU Award, unless such sale or offer is made pursuant to
one or more exemptions under Part XII Division 1 Subdivision (4) (other than section 280) of the Securities and Futures Act
(Chap. 289, 2006 Ed.) (“SFA”) or pursuant to, and in accordance with, the conditions of any other applicable provision(s) of the
SFA.
Securities Law Information
The RSU Award is being granted to you pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the SFA, on
which basis it is exempt from the prospectus and registration requirements under the SFA, and is not made to you with a view of
the RSU Award being subsequently offered for sale to any other party. The Plan has not been lodged or registered as a
prospectus with the Monetary Authority of Singapore.
Director Notification
If you are a director (including an alternate, substitute, associate or shadow director) of a Singaporean subsidiary, affiliate or JV
of the Company, you are subject to certain notification requirements under the Singapore Companies Act. Among these
requirements is an obligation to notify the Singapore subsidiary, affiliate or JV in writing when you receive an interest (e.g.,
RSU Awards, shares of Common Stock) in the Company or any related companies. In addition, you must notify the Singaporean
subsidiary, affiliate or JV when you sell shares of the Company’s Common Stock or any related company (including when you
sell shares of Common Stock acquired upon the expiration of the Restricted Period). These notifications must be made within
two business days of acquiring or disposing of any interest in the Company or any related company. In addition, a notification
must be made of your interests in the Company or any related company within two days of either after the director becomes
aware of the change in respect of the particulars of any of the aforesaid, the date on which the director becomes a holder of, or
acquires an interest in, the shares, debentures, rights, contracts, participatory interests, other securities or securities-based
derivatives contacts, whichever last occurs. There is no prescribed form for such disclosure, although in practice, the company
secretary normally would prepare a formatted disclosure form that requests the following information: equity award granted,
number of shares acquired, description of consideration, if applicable, and the date of the transaction.
A director shall be deemed to have an interest in securities or securities-based derivative contracts referred to above if a family
member of the director (not being him or herself a director), holds or has an interest in those securities or securities-based
derivatives contract and any contract entered into by, or any grant made to, a family member of a director of a Company (not
being himself a director) shall be deemed to have been entered into by, made or exercised by or made to the director. A “family
member” means a spouse, or a son, adopted son, step-son, daughter, adopted daughter or step-daughter below the age of 21
years.
Slovak Republic
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Slovenia
Language Consent
By accepting the grant of the RSU Award, you acknowledge that you are proficient in reading and understanding English and
fully understand the terms of the documents related to the grant (this Appendix B, the Terms and the Plan), which were provided
in the English language. You accept the terms of those documents accordingly.
Soglasje za Uporabo Angleškega Jezika
S sprejetjem dodelitve Nagrade (the RSU Award) potrjujete in priznavate, da ste sposobni brati in razumeti angleški jezik ter da
v celoti razumete določila dokumentov, povezanih z dodelitvijo (ta dodatek, Določila (the Terms) in Načrt (the Plan)), ki so bili
posredovani v angleškem jeziku. Skladno s tem sprejemate določila teh dokumentov.
South Africa
Tax Notification
By accepting the RSU Award, you agree to notify your Employer of the amount of any gain you realize upon the expiration of
the Restricted Period. If you fail to advise your Employer of the gain realized upon expiration of the Restricted Period, you may
be liable for a fine. You will be responsible for paying any difference between the actual tax liability and the amount withheld.
Securities Law Information
In compliance with South African Securities Law, you acknowledge that you have been notified that the documents listed below
are available for your review on the Company intranet site at the web addresses listed below:
1. the Company’s most recent Annual Report (Form 10-K) – http://investors.merck.com/investors/financial-
reports/quarterly-financials/default.aspx
2. the Company’s most recent Plan Prospectus - http://one.merck.com/sites/hr/Lists/ChannelContent/CustDispForm.aspx?
ID=63&Channel=Money
You acknowledge that you may have copies of the above documents sent to you, at no charge, on written request being mailed to
Investor Relations at Merck & Co., Inc., 126 East Lincoln Avenue, P.O. Box 2000, Rahway, NJ 07065, U.S.A. The telephone
number at the executive offices is 1-908-740-4000.
Country
Additional Terms and Conditions and Notifications
Spain
Labor Law Acknowledgment
This provision supplements the “Nature of Grant” section in Part I of this Appendix B:
By accepting this RSU Award, you acknowledge that you understand and agree that you consent to participation in the Plan and
that you have received a copy of the Plan.
You understand that the Company, in its sole discretion, has unilaterally and gratuitously decided to distribute Awards under the
Plan to individuals who may be employees of the Company or its subsidiaries, affiliates or JVs throughout the world. The
decision is a limited decision that is entered into upon the express assumption and condition that any grant will not economically
or otherwise bind the Company or any of its subsidiaries, affiliates or JVs over and above the specific terms of the Plan on an
ongoing basis. Consequently, you understand that any RSU Award is given on the assumption and condition that it shall not
become a part of any employment contract (either with the Company or any of its subsidiaries, affiliates or JVs) and shall not be
considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever.
Further, you understand and freely accept that there is no guarantee that any benefit whatsoever shall arise from any gratuitous
and discretionary Award since the future value of the RSU Award and shares of Common Stock is unknown and unpredictable.
In addition, you understand that the RSU Award would not be made to you but for the assumptions and conditions referred to
above; thus, you acknowledge and freely accept that should any or all of the assumptions be mistaken or should any of the
conditions not be met for any reason, then any RSU Award shall be null and void.
You also understand and agree that, as a condition of the grant of the RSU Award, the termination of your employment for any
reason (including the reasons listed below), the RSU Award will cease vesting immediately effective on the date you are no
longer providing services to the Employer or the Company or any of its subsidiaries, affiliates or JVs, unless otherwise
specifically provided in the Terms. In particular, you understand and agree that the RSU Award will be forfeited without
entitlement to the underlying shares of Common Stock or to any amount as indemnification in the event of a termination of your
employment as described in the Terms prior to expiration of the Restricted Period by reason of, including but not limited to,
resignation, retirement, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be
without good cause (i.e., subject to “despido improcednte”), individual or collective dismissal on objective grounds, whether
adjudged or recognized to be with or without cause, material modification of the terms of employment under Article 41 of the
Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by
the Employer and under Article 10.3 of the Royal Decree 1382/1985.
Securities Law Information
No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory in
connection with the grant of the RSU Award. The Plan and the Terms have not been nor will they be registered with the
Comisión Nacional del Mercado de Valores, and do not constitute a public offering prospectus.
Country
Additional Terms and Conditions and Notifications
Sweden
Authorization to Withhold
The following provision supplements the “Tax Withholding” section of the Terms:
Without limiting the Company’s and the Employer’s authority to satisfy their withholding obligations for Tax-Related Items as
set forth in the “Tax Withholding” section of the Terms, in accepting the RSU Award, you authorize the Company and/or the
Employer to withhold shares of Common Stock or to sell shares of Common Stock otherwise deliverable to you upon vesting to
satisfy Tax-Related Items, regardless of whether the Company and/or the Employer have an obligation to withhold such Tax-
Related Items.
Switzerland
Securities Law Information
The offering of participation in the Plan is considered a private offering in Switzerland; therefore, it is not subject to registration
in Switzerland. Neither this document nor any other materials relating to the Plan (i) constitute a prospectus according to articles
35 et seq. of the Swiss Federal Act on Financial Services (“FinSA”), (ii) may be publicly distributed nor otherwise made
publicly available in Switzerland to any person other than an employee of the Company or Employer or (iii) has been or will be
filed with, approved or supervised by any Swiss reviewing body according to article 51 FinSA or any Swiss regulatory authority,
including the Swiss Financial Market Supervisory Authority.
Taiwan
Securities Law Information
The RSU Award and the shares of Common Stock to be issued pursuant to the Plan are available only to Eligible Employees of
the Company and its subsidiaries, affiliates and JVs. The grant of the RSU Award and offer of participation in the Plan do not
constitute a public offer of securities by a Taiwanese company.
Thailand
There are no country-specific provisions.
Türkiye
Securities Law Information
Under Turkish law, you are not permitted to sell shares of the Company’s Common Stock in Türkiye; instead, the sale must take
place outside Türkiye, which will be the case if the shares of Common Stock are sold on the New York Stock Exchange on
which the shares are currently listed.
You may be required to engage a Turkish financial intermediary to assist with the sale of shares of Common Stock acquired
under the Plan. While you should not need to engage a Turkish financial intermediary with respect to the acquisition of such
shares of Common Stock (as no consideration is paid for the RSU Award or underlying shares of Common Stock), this is less
certain. In light of this uncertainty, you should consult your personal legal advisor prior to the expiration of the Restricted Period
or any sale of shares of Common Stock to ensure compliance with the financial intermediary requirements.
Ukraine
Payment of Award
Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive
in cash the value of the underlying shares of Common Stock at vesting, less any Tax-Related Items and broker’s fees or
commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares
of Common Stock and to force the immediate sale of such shares of Common Stock depending on the development of
applicable tax laws and regulations.
Country
Additional Terms and Conditions and Notifications
United Arab
Emirates
Securities Law Information
The Plan is only being offered to Eligible Employees of the Company and its subsidiaries, affiliates and JVs and is in the nature
of an “exempt personal offer” of equity incentives to Eligible Employees of the Company’s subsidiary in the United Arab
Emirates. The Plan, the Terms and any other grant documents you may receive from the Company are intended for distribution
only to such Eligible Employees and must not be delivered to, or relied on by, any other person. Prospective recipients of the
securities offered (i.e., shares of the Company’s Common Stock) should conduct their own due diligence on the securities. If you
do not understand the contents of the Plan and the Terms, you should consult an authorized financial adviser. The Ministry of
Economy, the Dubai Department of Economic Development, Emirates Securities and Commodities Authority, Central Bank and
the Dubai Financial Services Authority, as applicable depending on your Employer’s location in the United Arab Emirates, have
not approved the Plan or the Terms or taken steps to verify the information set out therein, and have no responsibility for such
documents.
United Kingdom
Tax Acknowledgment
You agree that you are liable for all Tax-Related Items and hereby covenant to pay all such Tax-Related Items, as and when
requested by the Company or, if different, your Employer or by HM Revenue and Customs (“HRMC”) (or any other tax
authority or any other relevant authority). You also agree to indemnify and keep indemnified the Company and, if different, your
Employer against any Tax-Related Items that they are required to pay or withhold or have paid or will pay to HMRC (or any
other tax authority or any other relevant authority) on your behalf.
Notwithstanding the foregoing, if you are a director or executive officer of the Company (within the meaning of Section 13(k) of
the U.S. Securities Exchange Act of 1934, as amended), the amount of any income tax not collected from or paid by you within
ninety (90) days of the end of the U.K. tax year in which the event giving rise to the Tax-Related Items occurs may constitute a
benefit to you on which additional income tax and National Insurance contributions may be payable. You understand that you
will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-
assessment regime and for paying to the Company and/or the Employer (as appropriate) the amount of any employee National
Insurance contributions due on this additional benefit, which may also be recovered from you through any means set forth in the
“Tax Withholding” section of the Terms.
Uruguay
There are no country-specific provisions.
Vietnam
Payment of Award
Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive
in cash the value of the underlying shares of Common Stock at vesting, less any Tax-Related Items and broker’s fees or
commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares
of Common Stock and to force the immediate sale of such shares of Common Stock depending on the development of
applicable exchange control laws and regulations.
APPENDIX C
MERCK & CO., INC.
SPECIAL NOTICE FOR EMPLOYEES IN DENMARK
ARBEJDSGIVERERKLÆRING/EMPLOYER STATEMENT
I henhold til § 3, stk. 1, i lov om brug af køberet eller tegningsret til
aktier m.v. i ansættelsesforhold som ændret pr. 1 . januar 2019
("Aktieoptionsloven") er du berettiget til i en særskilt skriftlig erklæring
at
modtage
følgende
oplysninger
om
betingede
aktieenheder
("Tildeling") tildelt dig af Merck & Co., Inc. ("Selskabet") i henhold til
Selskabets 2019 Incentive Stock Plan (“Planen”).
Pursuant to Section 3(1) of the Danish Act on the Use of Rights to
Purchase or Subscribe for Shares etc. in Employment Relationships as
amended with effect from 1 January 2019 (the “Stock Option Act”), you
are entitled to receive the following information regarding restricted
stock units (the “Award”) granted to you by Merck & Co., Inc. (the
“Company”) under its 2019 Incentive Stock Plan (the “Plan”) in a
separate written statement.
Denne erklæring indeholder kun de oplysninger, der er nævnt i
Aktieoptionsloven. De fuldstændige vilkår og betingelser, der gælder for
din Tildeling, fremgår af Planen, vilkårene for 2019 tildeling af betingede
aktieenheder for ikke-amerikanske medarbejdere (Global Terms and
Conditions) (“Vilkårene”) og af landetillægget, som alle er udleveret til
dig.
This statement contains only the information mentioned in the Stock
Option Act. The terms and conditions of your Award are set forth in their
entirety in the Plan and the Global Terms and Conditions including
Appendix B thereto (the “Terms”), which have been made available to
you.
I tilfælde af uoverensstemmelse mellem indholdet af denne erklæring og
Planen, Vilkårene, har Planen of Vilkårene forrang.
In the event of any inconsistency between the contents of this statement
and the Plan and the Terms, the terms and conditions of the Plan and the
Terms will prevail.
1. Tidspunkt for tildeling af den vederlagsfri ret til at modtage
ordinære aktier mod opfyldelse af visse betingelser
1. Date of grant of unfunded right to receive shares of Common
Stock upon satisfying certain conditions
Tildelingstidspunktet er den dato, hvor Vederlagsudvalget under
Selskabets Bestyrelse eller et underudvalg under samme, eller et
eventuelt
andet
bestyrelsesudvalg,
der
måtte
efterfølge
dette,
("Udvalget") godkendte tildeling til dig og besluttede, at denne skulle
træde i kraft som anført i Vilkårene.
The Grant Date of your Award is the date that the Compensation and
Benefits Committee of the Board of Directors of the Company or
subcommittee thereof, or such other successor committee of the Board of
Directors (the “Committee”) approved a grant for you and determined it
would be effective, which is set forth in the Terms.
2. Vilkår for tildeling af ret til at modtage ordinære aktier mod
opfyldelse af visse betingelser
2. Terms or conditions for grant of a right to receive shares of
Common Stock upon satisfying certain conditions
Tildelinger i henhold til Planen sker alene efter Udvalgets eget frie skøn.
Selskabet har meget vide beføjelser til at bestemme, hvem der kan
modtage Tildelinger og hvornår, og til at fastsætte betingelserne for
Tildelingerne. Selskabet kan efter dets eget frie skøn vælge fremover
ikke at give Tildelinger. I henhold til bestemmelserne i Planen og
Vilkårene har du ikke nogen ret til eller noget krav på fremtidige
tildelinger i henhold til Planen.
The grant of Awards under the Plan is made at the sole discretion of the
Committee. The Company has very broad powers to determine who will
receive Awards and when, and to set the terms of the Awards. The
Company may decide, in its sole discretion, not to make any grants of
Awards in the future. Under the terms of the Plan and the Terms, you
have no entitlement or claim to receive future grants under the Plan.
3. Modningstidspunkt eller -periode
3. Vesting date or period
Din Tildeling modnes med 33,333 % på hhv. 1 og 2 årsdag for
Tildelingstidspunktet og balancen skal modnes på 3-årsdagen for
tildelingstidspunktet (hver af disse er en "Modningsdag"), medmindre
den af de i Vilkårene anførte årsager inden da er modnet eller ophørt. På
modningstidspunktet konverteres din Tildeling til et tilsvarende antal
ordinære aktier i Selskabet.
Your Award shall vest 33.333% on each of the first and second
anniversaries of the Grant Date and the balance shall vest on the third
anniversary of the Grant Date (each a “Vesting Date”), unless vested or
terminated earlier for the reasons set forth in the Terms. Your Award
shall be converted into an equivalent number of Company shares of
Common Stock upon vesting of the Award.
4. Udnyttelseskurs
4. Exercise price
Der betales ingen udnyttelseskurs i forbindelse med modning af din
Tildeling eller Selskabets udstedelse af ordinære aktier til dig i
overensstemmelse med den ovenfor beskrevne modningstidsplan.
No exercise price is payable upon the vesting of your Award or the
issuance of shares of the Company’s Common Stock to you in
accordance with the vesting schedule described above.
5. Din retsstilling i forbindelse med fratræden
5. Your rights upon termination of employment
Ved din fratræden vil din Tildeling blive behandlet i overensstemmelse
med bestemmelsen “Ansættelsesforholdets ophør” (defineret som
Termination of Employment i Vilkårene), hvilken bestemmelse er
opsummeret umiddelbart nedenfor.
The treatment of your Award upon termination of employment will be
determined in accordance with the “Termination of Employment” section
of the Terms summarized immediately below.
A. Generel regel. Hvis dit ansættelsesforhold inden for den Betingede
Periode (defineret som Restricted Period i Vilkårene) ophører af nogen
anden årsag end de nedenfor anførte, fortabes din Tildeling (og eventuelt
optjent udbyttemodværdi) på tidspunktet for ophøret af dit
ansættelsesforhold.
A. General Rule. If your employment is terminated during the Restricted
Period (as defined in the Terms), for any reason other than those
specified in the following paragraphs, your Award (and any accrued
dividend equivalents) will be forfeited on the date your employment
ends.
B. Ufrivilligt ophør af ansættelsesforholdet. Hvis Selskabet vurderer, at
dit ansættelsesforhold er ophørt ufrivilligt inden for den Betingede
Periode, men på eller efter 1-årsdagen for Tildelingen, vil en
forholdsmæssig andel af din umodnede Tildeling og eventuelt optjent
udbyttemodværdimodne på den efterfølgende Modningsdag.. Denne
forholdsmæssige andel vil være svarende til Tildelingens fulde beløb
(uanset om Tildelingen er modnet eller ej) gange antal fuldt forløbne
måneder inden for den Betingede Periode og forud for tidspunktet for
ansættelsesforholdets ophør, delt med 36; reduceret med antal modnede
betingede aktieenheder. Resten, inklusive eventuelt optjent
udbyttemodværdi, fortabes på tidspunktet for ansættelsesforholdets
ophør.
B. Involuntary Termination. If the Company determines that your
employment is involuntarily terminated during the Restricted Period but
on or after the first anniversary, a pro rata portion of your unvested
Award and accrued dividend equivalents will vest on the next subsequent
Vesting Date. The pro rata portion will equal the full amount of the
Award (whether or not vested) times the number of completed months
during the Restricted Period and prior to the date employment
terminates, divided by 36; reduced by the number of restricted stock
units that have vested. The remainder and any accrued dividend
equivalents will be forfeited on the date your employment ends.
C. Salg. Hvis dit ansættelsesforhold inden for den Betingede Periode
(som defineret i Vilkårene) ophører, og Selskabet vurderer, at ophøret
skyldes et salg af dit datterselskab, afdeling eller joint venture, vil
følgende del af din Tildeling og eventuelt optjent udbyttemodværdi blive
udbetalt til dig på det tidspunkt, hvor sådan udbetaling ville være sket,
hvis dit ansættelsesforhold ikke var ophørt: En tredjedel, hvis
ansættelsesforholdet ophører på eller efter Tildelingstidspunktet, men før
1-årsdagen for tildelingen; og hele Tildelingen, hvis ansættelsesforholdet
ophører på eller efter 1-årsdagen for tildelingen. Såfremt der består en
resterende andel af din Tildeling, der ikke modnet i henhold til fornævnte
sætning, vil en sådan andel bortfalde den dag din ansættelse ophører.
C. Sale. If your employment is terminated during the Restricted Period
and the Company determines that such termination resulted from the sale
of your subsidiary, affiliate, division or joint venture, the following
portion of your Award and accrued dividend equivalents will be
distributed to you at such time as it would have been paid if your
employment had continued: one-third if employment terminates on or
after the Grant Date but before the first anniversary thereof; and all if
employment terminates on or after the first anniversary of the Grant
Date. The remaining portion, if any, of the Award that does not vest
pursuant the foregoing sentence will be forfeited on the date your
employment ends.
D. Pensionering. Hvis dit ansættelsesforhold inden for den Betingede
Periode ophører som følge af pensionering, vil en forholdsmæssig andel
af din umodnede Tildeling og eventuelt optjent udbyttemodværdimodne
på den efterfølgende Modningsdag efter ophøret af dit
ansættelsesforhold. . Denne forholdsmæssige andel vil være svarende til
Tildelingens fulde beløb (uanset om Tildelingen er modnet eller ej)
gange antal fuldt forløbne måneder inden for den Betingede Periode og
forud for tidspunktet for ansættelsesforholdets ophør, delt med 36;
reduceret med antal modnede betingede aktieenheder. Resten, inklusive
eventuelt optjent udbyttemodværdi, fortabes på tidspunktet for
ansættelsesforholdets ophør.
D. Retirement. If your employment terminates by retirement during the
Restricted Period, a pro rata portion of your unvested Award and accrued
dividend equivalents will vest on the next subsequent Vesting Date
following your termination. The pro rata portion will equal the full
amount of the Award (whether or not vested) times the number of
completed months during the Restricted Period and prior to the date
employment terminates, divided by 36; reduced by the number of
restricted stock units that have vested. The remainder and any accrued
dividend equivalents will be forfeited on the date your employment ends.
E. Dødsfald. Død. Hvis din ansættelse opsiges på grund af din død i den
begrænsede periode, men forud for en ansættelsesopsigelse, som er
påtænkt i B, C, D, G eller H, vil hele denne tildeling og optjente
udbytteækvivalenter straks optjenes. Hvis du dør i den begrænsede
periode, men efter at dit ansættelsesforhold ophører af de årsager, der er
anført i B, C, D, G eller H, vil den resterende, ikke-fortabte del af denne
Award og optjente udbytteækvivalenter som er optjent indtil dødsdagen
straks optjenes.
E. Death. If your employment terminates due to your death during the
Restricted Period but prior to an employment termination contemplated
in B, C, D, G or H, all of this Award and accrued dividend equivalents
will immediately vest. If you die during the Restricted Period but after
your employment terminates for the reasons contemplated in B, C, D, G
or H, the remaining, non-forfeited portion of this Award and accrued
dividend equivalents that have accrued through the date of death will
immediately vest.
F. Uredelighed eller pligtforsømmelse. Hvis dit ansættelsesforhold
ophører som følge af bevidst uredelighed eller forsætlig eller grov
pligtforsømmelse fra din side, fortabes denne Tildeling og eventuelt
optjent udbyttemodværdi samtidig med din modtagelse af meddelelse om
ansættelsesforholdets ophør.
F. Misconduct. If your employment is terminated as a result of your
deliberate, willful or gross misconduct, this Award and accrued dividend
equivalents will be forfeited immediately upon your receipt of notice of
such termination.
G. Uarbejdsdygtighed. Hvis dit ansættelsesforhold inden for den
Betingede Periode ophører, og Selskabet vurderer, at ophøret skyldes din
manglende evne til at opfylde de forpligtelser, der påhviler dig i kraft af
din stilling, som følge af fysisk eller mental svagelighed, der forventes at
ville vare ved i mindst 6 måneder eller medføre din død, vil - uanset, om
du måtte være berettiget til invaliditetsydelser fra nogen
invaliditetsordning - denne Tildeling forblive i kraft og kvalificeret til
udbetaling i overensstemmelse med Vilkårene på samme måde, som hvis
ansættelsesforholdet ikke var ophørt, idet udbetaling i så fald vil ske
samtidig med tilsvarende udbetalinger til aktive medarbejdere.
G. Disability. If your employment is terminated during the Restricted
Period and the Company determines that such termination resulted from
inability to perform the material duties of your role by reason of a
physical or mental infirmity that is expected to last for at least six months
or to result in your death, whether or not you are eligible for disability
benefits from any applicable disability program, then this Award will
continue and be distributable in accordance with its terms as if
employment had continued and will be distributed at the time active
employees receive distributions with respect to this Award.
H. Kontrolskifte. Hvis Selskabet eller noget moderselskabs,
datterselskabs, tilknyttet parts eller joint venture af Selskabet inden for
den Betingede Periode uden Berettigelse bringer dit ansættelsesforhold
til ufrivillig opsigelse før den anden årsdag for gennemførelsen af et
hvilket som helst Kontrolskifte (defineret som Change in Control i
følgende plan: Merck & Co., Inc. Change in Control Separate Benefits
Plan (eksklusiv en MSD Change in Control)) , vil denne Tildeling
forblive i kraft i overensstemmelse med Vilkårene på samme måde, som
hvis ansættelsesforholdet ikke var ophørt, idet udbetaling i så fald vil ske
samtidig med tilsvarende udbetalinger til aktive medarbejdere. Hvis
denne Tildeling efter et kontrolskifte ikke længere er udestående og
heller ikke er konverteret til en anden Tildeling, vil denne Tildeling
straks modne for så vidt angår den andel af Tildelingen der er umodnet
på tidspunktet for Kontrolskifte og optjente udbytteækvivalenter som er
optjent indtil en sådan dag og, ved valget af Selskabet, vil du være
berettiget til for en sådan andel af denne Tildeling at modtage kontant
betaling med et beløb svarende fair markedsværdi af det vederlag,
kapitalejerne i Selskabet modtog i forbindelse medKontrolskiftet. . Dette
afsnit bortfalder, når der er gået 2 år fra Kontrolskiftets gennemførelse.
H. Change in Control. If the Company or a parent, subsidiary, affiliate or
joint venture of the Company involuntarily terminates your employment
during the Restricted Period without Cause before the second anniversary
of the closing of any Change in Control (as defined in the Merck & Co.,
Inc. Change in Control Separate Benefits Plan (excluding an MSD
Change in Control)), then this Award will continue in accordance with its
terms as if employment had continued and will be distributed at the time
active employees receive distributions with respect to this Award. If this
Award does not remain outstanding following the change in control and
is not converted into a successor Award, then this Award will
immediately vest with respect to the portion of the Award that is unvested
as of the Change in Control and dividend equivalents that have accrued
through such date and, at the election of the Company, you will be
entitled to receive cash for such portion of this Award in an amount equal
to the fair market value of the consideration paid to Company
stockholders for a share of Company Common Stock in the Change in
Control. On the second anniversary of the closing of the Change in
Control, this paragraph shall expire.
I. Transfer of Employment. Overførsel af ansættelsesforhold mellem
Selskabet, et datterselskab, tilknyttet part, Joint Venture, Joint Venture
partner eller tilknyttet part til Selskabet der yder ydelser til UV med en
sådan partner eller tilknyttet part eller enhver anden enhed, som
Selskabet har bestemt at Selskabet har en betydelig forretningsinteresse
eller ejerandel i (samlet: " Selskabsgruppen"), anses i forhold til denne
Tildeling ikke for ophør af ansættelsesforholdet. Sådan ansættelse skal
godkendes af Selskabet og være sammenhængende med ansættelsen i
enheden i Selskabsgruppen som du var ansat i umiddelbart inden den
pågældende overførsel. Vilkårene i punkt A til H ovenfor finder fortsat
anvendelse på denne Tildeling efter en overførsel af ansættelsesforhold i
overensstemmelse med dette punkt.
I. Transfer of Employment. Transfer of employment between the
Company, a subsidiary, affiliate, JV, JV partner or affiliate of the
Company who provides services to the UV with such partner or affiliate
or other entity in which the Company has determined that it has a
significant business or ownership interested (together, the “Company
Group”) is not considered termination of employment for purposes of
this Award. Such employment must be approved by the Company and
contiguous with employment by the entity in the Company Group you
were employed by immediately prior to the relevant transfer. The terms
set out in paragraphs A though H above shall continue to apply to this
Award following a transfer of employment in accordance with this
section.
6. Økonomiske aspekter ved deltagelse i Planen
6. Financial aspects of participating in the Plan
Tildelingen har ingen umiddelbare økonomiske konsekvenser for dig.
Det er først ved modning af Tildelingen og det efterfølgende salg af de
modtagne ordinære aktier ved modning, at du vil kunne realisere nogen
indtægt under Planen.
The grant of the Award has no immediate financial consequences for
you. It is not until vesting of the Award and the subsequent sale of shares
of Common Stock acquired at vesting that you may realize any income
under the Plan.
Værdien af Tildelingen indgår ikke i beregningen af feriepenge,
pensionsbidrag,
fratrædelsesgodtgørelse,
godtgørelser
eller
andre
lovpligtige, vederlagsafhængige ydelser.
The value of the Award is not taken into account when calculating
holiday allowances, pension contributions, severance pay, statutory
allowance, compensation or other statutory remuneration calculated on
the basis of salary.
Investering i aktier er ikke uden økonomisk risiko. Værdien af aktierne
på modningstidspunkterne afhænger ikke kun af Selskabets økonomiske
udvikling, men også af den generelle udvikling på aktiemarkedet. Der
kan derfor ikke gives nogen garanti for, at en investering i aktier vil være
overskudsgivende.
Investing in shares of Common Stock involves some financial risk. The
value of the shares at the time of vesting and sale will not only be
dependent on the Company's financial development, but also on the
general development on the stock market. Consequently, there is no
guarantee that investment in shares of Common Stock will yield a profit.
Denne erklæring berører ikke de skattemæssige konsekvenser af
deltagelse i Planen, modtagelse af eventuelt udbytte eller et efterfølgende
salg af de i medfør af Planen erhvervede ordinære aktier. Du anbefales at
drøfte dette med din personlige økonomiske rådgiver eller skatterådgiver.
This statement does not address the tax consequences of participating in
the Plan, the receipt of any dividends or the subsequent sale of any shares
of Common Stock acquired under the Plan. You are encouraged to
discuss this matter with your personal financial or tax advisor.
MERCK & CO., INC.
126 East Lincoln Avenue
Rahway, New Jersey
U.S.A. 07065
MERCK & CO., INC.
126 East Lincoln Avenue
Rahway, New Jersey
U.S.A. 07065
GLOBAL TERMS AND CONDITIONS
2024 PERFORMANCE SHARE UNIT GRANTS
UNDER THE MERCK & CO., INC. 2019 INCENTIVE STOCK PLAN
I.
GENERAL. Merck & Co., Inc. (the “Company”) has granted to you the award
of Performance Share Units (“PSUs”) specified in this document (“PSU Award”)
pursuant to the Merck & Co., Inc. 2019 Incentive Stock Plan, including any sub-plan
thereto for your country (the “Plan”). This PSU Award is subject to the terms and
conditions of the Plan and these Global Terms and Conditions, including any additional
terms and conditions for your country in Appendix B (the “Terms”). Unless otherwise
defined in this document, capitalized terms used in these Terms are as defined in the
Plan
Grant Type:
PSU - Annual
Grant Date:
March 28, 2024
Award
Period:
Jan. 1, 2024 –
Dec. 31, 2026
IMPORTANT NOTICE: This grant requires you to affirmatively accept it. You MUST log onto the Morgan Stanley website at
(http://www.morganstanley.com/spc/knowledge/managing-equity/managing-your-existing-awards/accepting-awards-grants/) to accept the grant.
Follow the procedure described on the Morgan Stanley website to accept your PSU Award within 90 days. Failure to accept the terms and conditions
of your PSU Award within 90 days may result in forfeiture of the PSU Award.
II.
DEFINITIONS. For the purpose of these Terms:
“Award Period” means the three-year period commencing on January 1, 2024 and ending on December 31, 2026.
“Earnings Per Share or EPS” means the Company’s net income divided by the weighted average of the number of shares of Company common stock
on a fully diluted basis during the Award Period.
The above result shall be adjusted to exclude charges or items from the measurement of performance relating to (1) restructurings, discontinued
operations, purchase accounting items, merger-related costs, the impact of significant acquisitions and/ or divestitures, extraordinary items and other
unusual or non-recurring charges and/ or events; (2) an event either not directly related to Company operations or not reasonably within the control
of Company management; (3) fluctuations in foreign exchange versus Plan rates; (4) the impact of Share Repurchases above or below planned
levels; and (5) the effects of accounting changes in accordance with U.S. generally accepted accounting principles, or other significant legislative
changes, including tax.
“EPS Performance Payout” means the percentage reflecting the attainment level of the Company’s EPS goal as determined under paragraph C of
Section III.
“Final Award” means the number of PSUs that become eligible to vest based on the attainment level of the goals for each performance metric, as
calculated in accordance with Section III hereof.
“Grant Date” means the date as of which a Performance Share Unit is granted.
“Peer Healthcare Companies” are the healthcare companies used by the Committee in evaluating the Company’s TSR performance for the entire
Award Period. For 2024 and for so long thereafter during the Award Period that such companies are publicly traded on a nationally recognized stock
exchange, the following are the Peer Healthcare Companies except as described below.
AbbVie
Eli Lilly
Novartis
Amgen
GlaxoSmithKline
Pfizer
Astra Zeneca
Roche
Sanofi-Aventis
Bristol-Myers Squibb
Johnson & Johnson
Gilead Sciences
The Committee intends that the list of Peer Healthcare Companies may be subject to such adjustment as may be necessary to reflect a merger,
reorganization, recapitalization, extraordinary cash dividend, combination of shares, consolidation, rights offering, spin off, split off, split up,
bankruptcy, liquidation, acquisition, or other similar change in any Peer Healthcare Company.
“Performance Share Unit” or “PSU” means an award representing the right to vest in shares of Common Stock based upon the attainment level of the
performance metrics in accordance with Section III and as otherwise described in these Terms. Until distributed pursuant to Section VI, these PSUs
shall not entitle the holder to any of the rights of a holder of Common Stock, including voting rights; provided, however, that the Committee retains
the right to make adjustments as described in Section 7 of the Plan.
“Target Shares” means the number of shares of Common Stock that would become eligible to vest if the performance metrics set forth in Section III
are each achieved at the level identified as “target” for the entire Award Period.
“Total Shareholder Return” or “TSR” means the change in value of one share of a company’s common stock over the Award Period, taking into
account both stock price appreciation (or depreciation) and the reinvestment of dividends. The beginning and ending stock prices will be based on the
average closing stock prices during the months of December as applicable. TSR will be calculated on a compound annualized basis over the Award
Period.
“TSR Performance Payout” means the percentage reflecting the attainment level of Company’s TSR performance as determined under paragraph B of
Section III.
III.
CALCULATION OF FINAL AWARD OF PERFORMANCE SHARE UNITS
You shall vest in the number of PSUs to the extent provided for in this Section III unless otherwise provided for in Section V (“Termination of
Employment”).
A.
Performance Metrics. The Final Award will equal the TSR Performance Payout plus the EPS Performance Payout in the proportions
determined in Paragraph D below.
B.
TSR Performance Payout. The TSR Performance Payout shall be determined as follows:
1.
If the Company’s annualized TSR is greater than the median of the annualized TSR of the Peer Healthcare Companies, then the TSR
Performance Payout will equal 100% plus five times the difference in percentage points up to a maximum of 200%; provided, however, that if the
Company’s annualized TSR is negative, then in no event will the TSR Performance Payout be greater than 100%.
For example, if the Company’s annualized TSR is 25% and the median annualized TSR of the Peer Healthcare Companies is 20%, then the TSR
Performance Payout would be 125% [100% + ((25% - 20%) x 5%)].
2.
If the Company’s TSR is less than the median of the annualized TSR among the Peer Healthcare Companies, then the TSR Performance
Payout will equal 100% minus five times the difference in percentage points; provided, however, that if such median exceeds the Company’s
annualized TSR by more than 10 percentage points, then the TSR Performance Payout will be 0%.
C.
EPS Performance Payout. The EPS Performance Payout shall be determined in accordance with the following performance schedule:
Earnings Per Share
Goals
Payout
Percentage
Less than $26.18
0%
$26.18 (Threshold)
25%
$28.77 (Target)
100%
$30.50
150%
$32.22 (Stretch)
200%
Payout Percentages corresponding to performance between two discrete values in the table will be interpolated.
D.
The Final Award will equal the sum of (x) TSR Payout Percent for the entire Award Period TIMES Target Shares TIMES 50 percent and
(y) EPS Payout Percentage TIMES Target Shares TIMES 50 percent.
E.
Maximum Award. Anything in these Terms to the contrary notwithstanding, the Final Award shall be reduced to the extent necessary to
reflect that the value of the Final Award, valued based on the closing price of the Common Stock as of the date the Final Award is determined, may
not exceed four times the value of the Target Shares, valued based on the closing price of the Common Stock as of the Grant Date.
IV.
DIVIDEND EQUIVALENTS
During the Award Period, dividend equivalents will be accrued on the PSUs if and to the extent dividends are paid by the Company in the Common
Stock. Payment of such dividend equivalents will be made, without interest or earnings, at the same time that the Final Award is paid. Such
dividend equivalents shall be paid as additional shares in an amount equal to the sum of the dividends paid during the period between the Grant
Date and the date immediately prior to the date the PSU Award is settled in accordance with Section VI divided by the price of a share of Common
Stock on the date the Final Award is determined. If any portion of this PSU Award lapses, is forfeited or expires, no dividend equivalents will be
credited or paid on such portion. Any payment of dividend equivalents will be reduced to the extent necessary for the Company to satisfy any tax
or other withholding obligations in accordance with Section X.
V.
TERMINATION OF EMPLOYMENT
If your employment with the Company or, if different, the subsidiary, affiliate or joint venture (“JV”) of the Company by which you are employed
(the “Employer”) is terminated during the Award Period, your right to the PSU Award, where references to the Final Award in this section include
any accrued dividend equivalents, will be determined according to the terms in this Section V and for grantees outside the United States, also in
paragraph 12 of Section A (“Nature of Grant”) of Appendix B, Part I. For avoidance of doubt, if your
employment terminates on the last day of the Award Period not for misconduct, you will be entitled to vest in this PSU Award.
A.
General Rule. If your employment is terminated during the Award Period for any reason other than those specified in the following
paragraphs, this PSU Award will be forfeited on the date your employment terminates. If your employment is terminated as described in this
paragraph and you are later rehired by the Company or the Employer, as applicable, this grant nevertheless will expire according to this paragraph
notwithstanding such rehire.
B.
Involuntary Termination. If your employment terminates during the Award Period and the Company determines that employment was
involuntarily terminated on or after the first anniversary of the first day of the Award Period, a pro rata portion of the Final Award will become
eligible to vest when the Final Award is determined. The pro rata portion shall be determined by multiplying the Final Award by a fraction, the
numerator of which is the number of completed months in the Award Period during which you were employed by the Company or the Employer, as
applicable, and the denominator of which is 36. The right to the remaining PSUs will be forfeited on the date your employment terminates. An
“involuntary termination” includes termination of employment by the Company as the result of a restructuring or job elimination, but excludes non-
performance of duties and the reasons listed under paragraphs C through G of this section. If your employment is terminated as described in this
paragraph and you are later rehired by the Company or the Employer, as applicable, this PSU Award nevertheless will be forfeited according to this
paragraph notwithstanding such rehire.
C.
Sale. If your employment is terminated during the Award Period and the Company determines that such termination resulted from the sale of
the subsidiary, affiliate, division or JV that employed you, the following portion of the Final Award will become eligible to vest on the date the Final
Award is determined: one third of the Final Award if employment terminates on or after the Grant Date but before the first anniversary of the first
day of the Award Period; and all of the Final Award if employment terminates on or after the first anniversary of the first day of the Award Period.
The right to the remaining PSUs underlying the Final Award will be forfeited on the date your employment terminates. Notwithstanding the
foregoing, the Committee may determine, for purposes of this PSU Award, whether employment with an entity that is established from the
Company’s spin off, split off, split up or distribution of equity securities in connection with that entity constitutes a termination of employment, and
may make adjustments, if any, as it deems appropriate, and to the extent not inconsistent with the Plan, at the time of the distribution of such equity
securities, in the kind and/or number of shares subject to this PSU Award. If your employment is terminated as described in this paragraph and you are
later rehired by the Company or the Employer, as applicable, this PSU Award nevertheless will be forfeited according to this paragraph notwithstanding
such rehire.
D.
Retirement. If you terminate employment during the Award Period by retirement (including early and disability retirement), a pro rata
portion of the Final Award will become eligible to vest on the date the Final Award is determined. The pro rata portion shall be determined by
multiplying the Final Award by a fraction, the numerator of which is the number of completed months in the Award Period during which you were
employed by the Company or the Employer, as applicable, and the denominator of which is 36. For grantees who are employed in the U.S.,
“retirement” means a termination of employment after attaining the earliest of (a) age 55 with at least 10 years of service (b) such age and service
that provides eligibility for subsidized retiree medical coverage or (c) age 65 without regard to years of service. For other grantees, “retirement” is
determined by the Company. The right to the remaining PSUs underlying the Final Award will be forfeited on the date your employment terminates. If
your employment is terminated as described in this paragraph and you are later rehired by the Company or the Employer, as applicable, this grant
nevertheless will expire according to this paragraph notwithstanding such rehire.
E.
Death. If your employment terminates due to death during the Award Period but prior to the date of an employment termination
contemplated under paragraphs B, C, D, G or H the Final Award will become eligible to vest on the date the Final Award is determined. If you die
during the Award Period, but after your employment terminates for the reasons listed under paragraphs B, C, D, G or H of this section, any portion
of the Final Award that remains outstanding at your death will become eligible to vest on the date the Final Award is determined.
F.
Misconduct. If your employment is terminated as a result of deliberate, willful or gross misconduct, this PSU Award will be forfeited
immediately upon your receipt of notice of such termination.
G.
Disability. If your employment is terminated during the Award Period and the Company determines that such termination resulted from
inability to perform the material duties of his or her role by reason of a physical or mental infirmity that is expected to last for at least six months or
to result in death, whether or not he or she is eligible for disability benefits from any applicable disability program, then the Final Award will
become eligible to vest on the date the Final Award is determined. If your employment is terminated as described in this paragraph and you are later
rehired by the Company or the Employer, as applicable, this PSU Award nevertheless will expire according to this paragraph notwithstanding such rehire.
H.
Change in Control. Upon the occurrence of a Change in Control (as such term is defined in the Plan), the Final Award shall mean a number
of PSUs equal to the Target Shares. If this PSU Award is assumed, converted or otherwise remains outstanding in connection with a Change in
Control and your employment is terminated during the Award Period without Cause before the second anniversary of the closing of the Change in
Control, then this PSU Award and dividend equivalents that have accrued through the end of the Award Period will continue to vest at the end of the
original Award Period. If this PSU Award does not remain outstanding following the Change in Control and is not assumed, converted, or otherwise
remains outstanding, then the PSU Award and dividend equivalents that have accrued through such date will immediately vest and, at the election
of the Company, you will be entitled to receive cash for such portion of this PSU Award in an amount equal to the fair market value of the
consideration paid to Merck stockholders for a share of Merck Common Stock in the Change in Control. On the second anniversary of the closing
of the Change in Control, this paragraph shall expire. “Cause” and “Change in Control” are defined in the Merck & Co., Inc. Change in Control
Separation Benefits Plan (excluding MSD Change in Control).
I.
Transfer of Employment. Transfer of employment between the Company, a subsidiary, affiliate, JV, JV partner or affiliate of the
Company who provides services to the JV with such partner or affiliate or other entity in which the Company has determined that it has a
significant business or ownership interest (together, the “Company Group”) is not considered termination of employment for purposes of this PSU
Award. Such employment must be approved by the Company and contiguous with employment by the entity in the Company Group you were
employed by immediately prior to the relevant transfer. The terms set out in paragraphs A through H above shall continue to apply to this PSU
Award following a transfer of employment accordance with this section.
VI.
DISTRIBUTION OF SHARES
Following the end of the Award Period, you (or your estate, in the case of PSUs that vest pursuant to Section V(E)) shall be entitled to receive a number
of shares of Common Stock equal to the Final Award (as modified to the extent provided under Section V and subject to Section X) plus the shares for
accrued dividend equivalents set forth in Section IV, rounded to the nearest whole number (no fractional shares shall be issued). Such distribution
shall be made as soon as administratively feasible following the last day of the Award Period, but in no event later than the end of the calendar year
immediately following the Award Period.
VII.
SECTION 409A COMPLIANCE
Anything in the Plan or these Terms to the contrary notwithstanding, no distribution of PSUs may be made unless in compliance with Section 409A
of the Code or any successor thereto. In addition, distributions, if any, made upon or by reference to the date of an employment termination shall
not be paid unless such termination constitutes a “separation from service (as defined in Section 409A of the Code)” and any such payment to a
“Specified Employee” as defined in Treas. Reg. Sec. 1.409A-1(i) or any successor thereto, to the extent required by Section 409A of the Code will
instead be made on the first day the seventh month following the separation from service, in the same form as they would have been made had this
restriction not applied; provided further, that no dividend or dividend equivalents will be paid, accrued or accumulated in respect of the period during
which distribution was suspended.
VIII.
SUBJECT TO RECOUPMENT
This PSU Award will be subject to recoupment in the event of certain violations of Company policy in accordance with the Company’s Policy and
Procedures for Discretionary Recoupment of Compensation for Compliance Violations, as set forth in Appendix A.1, and with the Company’s Policy
and Procedures for Recoupment of Incentive-Based Compensation, applicable only for Section 16 Officers, as set forth in Appendix A.2 (as may be
amended from time to time).
IX.
TRANSFERABILITY
Prior to distribution pursuant to Section VI, the PSU Award and any interest therein shall not be sold, assigned, transferred, pledged or otherwise
disposed of, alienated or encumbered, either voluntarily or involuntarily, other than by will or the laws of descent and distribution in connection with
your death.
X.
TAX WITHHOLDING
Regardless of any action the Company and/or the Employer take with respect to any or all income tax, social insurance, payroll tax, payment on
account or other tax-related items arising out of your participation in the Plan and legally applicable or deemed applicable to you (“Tax-Related
Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount
actually withheld by the Company and/or the Employer, if any. You further acknowledge that the Company and/or the Employer (i) make no
representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the PSU Award or underlying
shares of Common Stock, including, but not limited to, the grant, vesting or settlement of the PSU, the subsequent sale of shares of Common
Stock acquired upon the expiration of the Award Period and the receipt of any dividends and/or dividend equivalents; and (ii) do not commit and
are under no obligation to structure the terms of the grant or any aspect of the PSU to reduce or eliminate your liability for Tax-Related Items or
achieve any particular tax result. Furthermore, if you have become subject to tax in more than one jurisdiction, you acknowledge that the
Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than
one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, you shall pay or make arrangements satisfactory to the Company and/or the
Employer to satisfy any applicable withholding obligations or rights with regard to all Tax-Related Items. In this regard, you authorize the
Company and/or the Employer, or their respective agents, at their discretion, to satisfy the Tax-Related Items by one or a combination of the
following: (i) withholding from your wages or other cash compensation paid to you by the Company, the Employer and/or any subsidiary, affiliate
or JV of the Company; or (ii) withholding from proceeds of the sale of shares of Common Stock acquired at expiration of the Award Period either
through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization); or (iii)
withholding in shares of Common Stock to be issued upon expiration of the Award Period; provided, however, that if you are a Section 16 officer
of the Company under the Exchange Act, then the Company will satisfy the Tax-Related Items (other than U.S. Federal Insurance Contribution
Act taxes or other Tax-Related Items which become payable in a year prior to the year in which shares of Common Stock are issued upon
settlement of the PSUs) by withholding in shares of Common Stock pursuant to (iii) above, unless the use of such withholding method is
problematic under applicable tax or securities law or has materially adverse accounting consequences, in which case, the obligation for Tax-
Related Items may be satisfied by a one or a combination of (i) or (ii) above.
The Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other
applicable withholding rates, including maximum applicable rates in your jurisdiction(s). In the event of over-withholding, you may receive a
refund of any over-withheld amount in cash (with no entitlement to the equivalent in Common Stock), or if not refunded, you may seek a refund
from the local tax authorities. In the event of under-withholding, you may be required to pay additional Tax-Related Items directly to the
applicable tax authority or to the Company and/or the Employer. If the obligation for Tax-Related Items is satisfied by withholding in shares of
Common Stock, for tax purposes, you will be deemed to have been issued the full number of shares of Common Stock subject to the vested PSUs,
notwithstanding that a number of the shares is held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of
your participation in the Plan.
You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold
or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described in this section. The Company
may refuse to issue or deliver the shares of Common Stock or the proceeds of the sale of shares if you fail to comply with your obligations in
connection with the Tax-Related Items.
XI.
DATA PRIVACY
The Company is located at 126 East Lincoln Avenue, Rahway, NJ 07065, U.S.A. and grants employees of the Company and any subsidiary, affiliate
or JV of the Company, the opportunity to participate in the Plan, at the Company's sole discretion. If you would like to participate in the Plan, you
understand that you should review the following information about the Company’s data processing practices and declare your consent.
A. Data Collection and Usage. The Company collects, processes and uses your personal data, including, name, home address, email address and
telephone number, date of birth, social insurance number or other identification number, salary, citizenship, job title, any shares of Common
Stock or directorships held in the Company, and details of all awards, canceled, vested, or outstanding in your favor, which the Company
receives from you or your Employer. If the Company offers you the opportunity to participate in the Plan, then the Company will collect your
personal data for purposes of allocating Common Stock and implementing, administering and managing the Plan. The Company’s legal basis
for the processing of your personal data would be your consent.
B. Stock Plan Administration Service Providers. The Company transfers participant data to Morgan Stanley, an independent service provider
based in the United States, which assists the Company with the implementation, administration and management of the Plan. In the future, the
Company may select a different service provider and share your data with another company that serves in a similar manner. The Company’s
service provider will open an account for you. You will be asked to agree on separate terms and data processing practices with the service
provider, which is a condition to your ability to participate in the Plan.
C. International Data Transfers. The Company and its service providers are based in the United States. If you are outside of the United States,
you should note that your country has enacted data privacy laws that are different from the United States. The Company’s legal basis for the
transfer of your personal data is your consent.
D. Voluntariness and Consequences of Consent Denial or Withdrawal. Your participation in the Plan and your grant of consent is purely
voluntary. You may deny or withdraw your consent at any time. If you do not consent, or if you withdraw your consent, you cannot participate
in the Plan. This would not affect your salary as an employee; you would merely forfeit the opportunities associated with the Plan.
E. Data Subject Rights. You have a number of rights under data privacy laws in your country. Depending on where you are based, your rights
may include the right to (i) request access or copies of personal data the Company processes, (ii) rectification of incorrect data, (iii) deletion
of data, (iv) restrictions on processing, (v) portability of data, (vi) to lodge complaints with competent authorities in your country, and/or (vii)
a list with the names and addresses of any potential recipients of the your personal data. To receive clarification regarding your rights or to
exercise your rights please contact the Company at Attn: Global Privacy Office, 351 N. Sumneytown Pike, North Wales, Pennsylvania, U.S.A.
19454.
F.
The collection, use and transfer of your personal data for the purpose of implementing, administering and managing your participation in the
Plan is conducted in accordance with the Company’s Global Privacy and Data Protection Policy. You also understand that the Company may,
in the future, request you to provide another data privacy consent. If applicable and upon request of the Company, you agree to provide an
executed acknowledgement or data privacy consent form to the Company or the Employer (or any other acknowledgements, agreements or
consents) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in your country, either now or in
the future. You understand that you will not be able to participate in the Plan if you fail to execute any such acknowledgement, agreement or
consent requested by the Company and/or the Employer.
If you agree with the data processing practices described in this Section, you will declare your consent by clicking to "Accept" these Terms on the
Morgan Stanley website.
XII.
GOVERNING LAW
This document may be amended only by another written agreement between the parties. This document will be interpreted and enforced under the
laws of the State of New Jersey, United States (without regard to its choice-of-law provisions). For purposes of litigating any dispute that arises
directly or indirectly from the relationship of the parties evidenced by this grant or this document, the parties hereby submit to and consent to the
exclusive jurisdiction of the State of New Jersey and agree that such litigation shall be conducted only in the courts of Union County, New Jersey, or
the federal courts for the United States for the District of New Jersey, and no other courts, where this grant is made and/or to be performed.
XIII.
SEVERABILITY
The provisions of this document are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or
in part, the remaining provisions shall nevertheless be binding and enforceable.
XIV.
WAIVER
You acknowledge that a waiver by the Company of breach of any provision of these Terms shall not operate or be construed as a waiver of any other
provision of these Terms or of any subsequent breach by you or any other grantee.
XV.
ELECTRONIC ACCEPTANCE
The Company may, in its sole discretion, decide to deliver any documents related to the PSU or future PSUs that may be granted under the Plan
by electronic means or request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by
electronic delivery and agree to participate in the Plan through an online or electronic system established and maintained by the Company or a
third party designated by the Company.
XVI.
COUNTRY-SPECIFIC APPENDIX
The PSU Award shall be subject to any additional provisions set forth in Appendix B for your country, if any. If you relocate to one of the countries
included in Appendix B during the life of the PSU Award, the additional provisions for such country shall apply to you, to the extent the Company
determines that the application of such provisions is necessary or advisable in order to comply with local law or facilitate the administration of the
Plan.
XVII.
ADMINISTRATION
The Committee is responsible for construing and interpreting this PSU Award, including the right to construe disputed or doubtful Plan
provisions, and may establish, amend and construe such rules and regulations as it may deem necessary or desirable for the proper administration
of this PSU Award. Any decision or action taken or to be taken by the Committee, arising out of or in connection with the construction,
administration, interpretation and effect of this grant shall, to the maximum extent permitted by applicable law, be within its absolute discretion
(except as otherwise specifically provided herein) and shall be final, binding and conclusive upon the Company, all Eligible Employees and any
person claiming under or through any eligible employee. All determinations by the Committee including, without limitation, determinations of the
Eligible Employees, the form, amount and timing of Incentives, the terms and provisions of Incentives and the writings evidencing Incentives,
need not be uniform and may be made selectively among Eligible Employees who receive, or are eligible to receive, Incentives hereunder,
whether or not such Eligible Employees are similarly situated.
In addition to the Committee’s powers set forth in the Plan, anything in these Terms to the contrary notwithstanding, the Committee may revise the
terms of any PSU not yet granted or, granted but prior to the end of an Award Period if unforeseen events occur and which, in the judgment of the
Committee, make the application of the Terms of this PSU Award unfair and contrary to their intentions unless a revision is made.
This PSU Award is subject to the provisions of the 2019 Incentive Stock Plan. For further information regarding your PSU Award, you may access
the Merck Global Long-Term Incentives homepage via Sync > HR > Money > Long-Term Incentive Program
APPENDIX A.1
Policy and Procedures for DiscreƟonary Recoupment of
CompensaƟon for Compliance ViolaƟons
Policy
It is the policy of the CompensaƟon and Management Development CommiƩee (the “CommiƩee”) of the Board of Directors (the “Board”) of Merck
& Co., Inc. (the “Company”) that the CommiƩee will exercise its discreƟon to determine whether to seek Recoupment of any Covered CompensaƟon
paid or awarded to an Affected Employee, where it determines, in consultaƟon with the Audit CommiƩee, that: a) the Affected Employee engaged in
misconduct, or failed to reasonably supervise an employee who engaged in misconduct, that resulted in a Material ViolaƟon; and b) the CommiƩee
concludes that the Material ViolaƟon caused Significant Harm to the Company.
DefiniƟons
An “Affected Employee” is an employee in Band 600 or higher who (i) engaged in misconduct that results in a Material ViolaƟon; or (ii) failed in his or
her supervisory responsibiliƟes to reasonably manage or monitor the conduct of an employee who engaged in misconduct that results in a Material
ViolaƟon.
“Covered CompensaƟon” means all (a) incenƟve-based cash compensaƟon granted to an Affected Employee, including, without limitaƟon, any
annual bonuses and other short- and long-term cash incenƟves, (b) equity-based compensaƟon, including, without limitaƟon, stock opƟons,
restricted stock, restricted stock units, performance share units (“PSUs”), (c) any proceeds or earnings received in respect of (a) and (b), and (d) any
other forms of compensaƟon that the CommiƩee determines to be subject to this policy. For the avoidance of doubt, the foregoing includes any
compensaƟon that was previously paid, earned, vested, deferred or paid or payable as a component of severance or terminaƟon compensaƟon.
“ExecuƟve” means current and former execuƟve officers of the Company, as “execuƟve officer” is defined for the purposes of the SecuriƟes
Exchange Act of 1934, as amended.
A “Material ViolaƟon” is defined as (i) a material violaƟon of a wriƩen Company policy relaƟng to the research, development, manufacturing, sales,
or markeƟng of Company products or (ii) conduct detrimental to the Company, including the Company’s overall goodwill or reputaƟon.
“Recoupment” is defined to include any and all of the following acƟons to the extent permiƩed by law: (a) reducing the amount of a current or
future bonus or other cash or noncash incenƟve compensaƟon award, (b) requiring reimbursement of a bonus or other cash-based incenƟve
compensaƟon award paid with respect to the most recently completed performance period, (c) cancelling all or a porƟon of a future-vesƟng equity
award, (d) cancelling all or a porƟon of an equity award that vested within the previous twelve-month period, (e) requiring return of shares paid
upon vesƟng and/or reimbursement of any proceeds received from the sale of an equity award, in each case that vested within the previous twelve-
month period, and (f) any other method of reducing the total compensaƟon paid to an employee for any prior twelve-month period or any current
or future period.
“Significant Harm” means a significant negaƟve impact on the Company’s financial operaƟng results or reputaƟon.
Procedures
Subject to any delegaƟon to the Chief ExecuƟve Officer, as discussed below, the CommiƩee, acƟng in consultaƟon with the Audit CommiƩee, shall
administer this policy and have full discreƟon to interpret and to make any and all determinaƟons under this policy. Any determinaƟons made by the
CommiƩee shall be final, binding, and conclusive on all parƟes. Notwithstanding the foregoing, the full Board shall approve any determinaƟon to
seek or waive Recoupment from the Chief ExecuƟve Officer.
The General Counsel, in consultaƟon with the Chief Ethics and Compliance Officer and the ExecuƟve Vice President, Human Resources, is responsible
for determining whether to refer a maƩer to the CommiƩee for review under this policy and for assisƟng the CommiƩee with its review. In
administering this policy, the
CommiƩee may consult with other commiƩees of the Board and any external or internal advisors as it deems appropriate.
If the CommiƩee, acƟng in consultaƟon with the Audit CommiƩee, determines that there is a basis for seeking Recoupment under this policy, the
CommiƩee shall exercise its discreƟon to determine for each Affected Employee, on an individual basis, whether, and to what extent and in which
manner, to seek Recoupment.
In exercising its discreƟon, the CommiƩee may take into consideraƟon, as it deems appropriate, all of the facts and circumstances of the parƟcular
maƩer and the general interests of the Company.
DelegaƟon to Management for Recoupment Decisions
The CommiƩee may delegate to the Chief ExecuƟve Officer (who may further delegate as deemed appropriate) the authority to administer this
policy and to make any and all decisions under it regarding Affected Employees who are not ExecuƟves of the Company. Management shall report to
the CommiƩee on any affirmaƟve decisions to seek Recoupment pursuant to this delegaƟon of authority.
Public Disclosures
The Company will comply with all applicable securiƟes laws and regulaƟons, including SecuriƟes and Exchange Commission disclosure requirements
regarding execuƟve compensaƟon and any applicable New York Stock Exchange lisƟng standard or requirements, with respect to this policy. The
Company may also, but is not obligated to, provide addiƟonal disclosure beyond that required by law when the Company deems it to be appropriate
and determines that such disclosure is in the best interest of the Company and its shareholders.
Miscellaneous
Nothing in this policy shall limit or otherwise affect any of the following: 1) management’s ability to take any disciplinary acƟon with respect to any
Affected Employee; 2) the CommiƩee’s ability to use its negaƟve discreƟon with respect to any incenƟve compensaƟon performance target at any
Ɵme; or 3) the CommiƩee’s or management’s ability to reduce the amount (in whole or in part) of a current or future bonus or other cash or non-
cash incenƟve compensaƟon award to any Affected Employee for any reason as they may deem appropriate and to the extent permiƩed by law. Any
right of Recoupment under this policy is in addiƟon to, and not in lieu of, any other remedies or rights of Recoupment that may be available to the
Company pursuant to the terms of any similar policy in any incenƟve plan, employment agreement, equity award agreement, or similar agreement,
including, without limitaƟon, the Company’s Policy and Procedures for Recoupment of IncenƟve-Based CompensaƟon, and any other legal remedies
available to the Company. The Company shall not indemnify or agree to indemnify any current or former ExecuƟve against the loss of incenƟve
compensaƟon subject to this policy nor shall the Company pay or reimburse or agree to pay or reimburse any insurance premium to cover the loss of
such incenƟve compensaƟon. The CommiƩee may amend, modify, or terminate this policy in whole or in part at any Ɵme and from Ɵme to Ɵme in
its sole discreƟon.
APPENDIX A.2
Policy and Procedures for Recoupment of
IncenƟve-Based CompensaƟon
Policy
The CompensaƟon and Management Development CommiƩee (the “CommiƩee”) of the Board of Directors (the “Board”) has adopted this
IncenƟve-Based CompensaƟon Recoupment Policy (the “Policy”) to comply with SecƟon 10D of the SecuriƟes Exchange Act of 1934, as amended
(the “Exchange Act”), Rule 10D-1 promulgated thereunder (“Rule 10D-1”) and Paragraph 303A.14 of the LisƟng Standards Manual of the New York
Stock Exchange (“NYSE”), which require the recovery of certain IncenƟve-Based CompensaƟon in the event of an accounƟng restatement resulƟng
from a material error in the consolidated financial statements of Merck & Co, Inc. (the “Company”). This Policy shall be administered by the
CommiƩee, which shall have express discreƟonary authority to interpret and construe this Policy and to make all determinaƟons with respect to this
Policy, in its sole discreƟon. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of SecƟon 10D of the
Exchange Act and Rule 10D-1 (or any successor statute or rule) and any other applicable rules or lisƟng standards adopted by the U.S. SecuriƟes and
Exchange Commission (the “SEC”) or NYSE. All interpretaƟons, construcƟons and determinaƟons made by the CommiƩee under this Policy shall be
final and binding on all parƟes. This Policy may be amended with the approval of the CommiƩee and may be amended from Ɵme to Ɵme as
necessary to reflect changes in applicable regulaƟons and/or lisƟng standards adopted by the SEC or NYSE. Compliance with this Policy cannot be
waived.
DefiniƟons
"AccounƟng Restatement” is the restatement of the Company’s financial statements due to material noncompliance with any financial reporƟng
requirement under the federal securiƟes laws, including any required accounƟng restatement to correct an error in previously issued financial
statements (i) that is material to the previously issued financial statements, or (ii) that would result in a material misstatement if the error were
corrected in the current period only or leŌ uncorrected in the current period.
A “Covered Officer” is anyone who serves or has served as an execuƟve officer of the Company at any Ɵme during the performance period for
IncenƟve-Based CompensaƟon.
“ExecuƟve officer” is the equivalent to an “officer” as defined under SecƟon 16a-1(f) of the Exchange Act (“SecƟon 16 officer”).
“Financial reporƟng measure” is a measure that is (i) determined and presented in accordance with the accounƟng principles used in preparing the
Company’s financial statements, or (ii) derived wholly or in part from such measures. For purposes of this Policy, the term “financial reporƟng
measure” includes the Company’s stock price and total shareholder return, whether expressed as an absolute or relaƟve metric. For the avoidance
of doubt, a financial reporƟng measure need not be presented in the Company’s financial statements or included in a filing with the SEC.
“IncenƟve-Based CompensaƟon” is any compensaƟon that is granted, earned, or vested based wholly or in part upon the aƩainment of a financial
reporƟng measure. IncenƟve-Based CompensaƟon may include awards under the ExecuƟve IncenƟve Plan and Performance Share Units under the
Merck & Co., Inc. 2019 Stock IncenƟve Plan, or any successor thereto. IncenƟve-Based CompensaƟon does not include (i) base salary; (ii) “sign-on”
bonuses or other compensaƟon granted solely due to the commencement of employment with the Company; (iii) compensaƟon exclusively based
on compleƟon of a specific period of employment or service, without any performance condiƟon; or (iv) compensaƟon awarded based on
subjecƟve, non-financial, strategic, or operaƟonal measures that are not financial reporƟng measures.
IncenƟve-Based CompensaƟon is deemed to be “received” in the fiscal period during which the financial reporƟng measure specified in the
IncenƟve-Based CompensaƟon award is aƩained, even if the payment or grant of the IncenƟve-Based CompensaƟon occurs aŌer the end of that
fiscal period. IncenƟve-Based CompensaƟon in the form of an equity award that vests solely upon the basis of a financial reporƟng measure
performance condiƟon will be deemed to be received in the fiscal period in which it vests.
“Recoupment Period” is the three completed fiscal years of the Company immediately preceding the date, and any transiƟon period of less than nine
months that results from a change in the Company’s fiscal year within or immediately following those three completed fiscal years, on which the
Company is required to perform an AccounƟng Restatement, which date is the earlier of (i) the date the Board, or a commiƩee of the Board,
concludes, or reasonably should have concluded, that the Company is required to perform an AccounƟng Restatement; or (ii) a date that a court,
regulator or other legally authorized body directs the Company to perform an AccounƟng Restatement.
Procedures for Recoupment of IncenƟve-Based CompensaƟon
In the event the Company is required to perform an AccounƟng Restatement, the Company shall, as promptly as reasonably possible, recoup any
IncenƟve-Based CompensaƟon erroneously received by a Covered Officer during the Recoupment Period. The amount of erroneously received
IncenƟve-Based CompensaƟon will be the excess of the IncenƟve-Based CompensaƟon received by the Covered Officer (whether in cash or in
shares) based on the erroneous data in the original financial statements over the IncenƟve-Based CompensaƟon (whether in cash or in shares) that
would have been received by the Covered Officer had it been based on the restated results, without respect to any tax liabiliƟes incurred or paid by
the Covered Officer. For IncenƟve-Based CompensaƟon based on total shareholder return or Company stock price, where the amount of erroneously
awarded compensaƟon is not subject to mathemaƟcal recalculaƟon directly from the informaƟon in the AccounƟng Restatement, the amount shall
be based on the CommiƩee’s reasonable esƟmate of the effect of the AccounƟng Restatement on the applicable measure and the CommiƩee shall
maintain documentaƟon of the determinaƟon of that reasonable esƟmate and provide it to the NYSE. Notwithstanding the foregoing, IncenƟve-
Based CompensaƟon shall not be recouped under this Policy to the extent received by any person before the date such person served as a Covered
Officer.
The CommiƩee shall determine, in its sole discreƟon, the method of recouping any erroneously received IncenƟve-Based CompensaƟon pursuant to
this Policy.
No recoupment shall be required if any of the following condiƟons are met and the CommiƩee determines that, on such basis, recovery would be
impracƟcable: (i) the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recouped, which
determinaƟon must be made only aŌer a reasonable and documented aƩempt by the Company to recoup the IncenƟve-Based CompensaƟon (with
documentaƟon of such reasonable aƩempt to recover to be provided to the NYSE); (ii) recovery would violate home country law where that law was
adopted prior to November 28, 2022, which determinaƟon must be made only aŌer the Company has obtained an opinion of home country counsel,
acceptable to the NYSE, that recovery would result in such violaƟon (with a copy of such opinion to be provided to the NYSE); or (iii) recoupment
would likely cause an otherwise tax-qualified reƟrement plan, under which benefits are broadly available to Company employees, to fail to meet the
requirements of SecƟon 401(a)(13) or SecƟon 411(a) of the Internal Revenue Code of 1986, as amended, and U.S. Treasury regulaƟons promulgated
thereunder.
IndemnificaƟon Not PermiƩed
The Company shall not indemnify any current or former Covered Officer against the loss of erroneously awarded compensaƟon, and shall not pay, or
reimburse any Covered Officer for, premiums incurred or paid for any insurance policy to fund such Covered Officer’s potenƟal recoupment
obligaƟons.
Disclosure of Recoupment Decisions
The Company will comply with all applicable securiƟes laws and regulaƟons, including SEC disclosure requirements, with respect to this Policy, and
any applicable NYSE lisƟng standard or requirements. The Company may also, but is not obligated to, provide addiƟonal disclosure beyond that
required by law when the Company deems it to be appropriate and determines that such disclosure is in the best interest of the Company and its
shareholders.
EffecƟve Date
This Policy shall be effecƟve as of December 1, 2023 (the “EffecƟve Date”). The terms of this Policy shall apply to any IncenƟve-Based CompensaƟon
that is received by Covered Officers on or aŌer the EffecƟve Date, even if such IncenƟve-Based CompensaƟon was approved, awarded, granted, or
paid to Covered Officers prior to the EffecƟve Date.
Miscellaneous
Nothing in this Policy shall limit or otherwise affect any of the following: 1) management’s ability to take any disciplinary acƟon with respect to any
Covered Officer; 2) the CommiƩee’s ability to use its negaƟve discreƟon with respect to any IncenƟve-Based CompensaƟon performance target at
any Ɵme; or 3) the CommiƩee’s or management’s ability to reduce the amount (in whole or in part) of a current or future bonus or other cash or
non-cash incenƟve compensaƟon award to any execuƟve or other employee for any reason as they may deem appropriate and to the extent
permiƩed by law. Any right of recoupment under this Policy is in addiƟon to, and not in lieu of, any other remedies or rights of recoupment that may
be available to the Company pursuant to the terms of any similar policy in any incenƟve plan, employment agreement, equity award agreement, or
similar agreement and any other legal remedies available to the Company. This Policy shall be binding and enforceable against all Covered Officers
and their beneficiaries, heirs, executors, administrators, or other legal representaƟves.
GLOBAL TERMS AND CONDITIONS
2024 NON-QUALIFIED STOCK OPTION (NQSO) GRANTS
UNDER THE MERCK & CO., INC. 2019 INCENTIVE STOCK PLAN
I.
GENERAL. Merck & Co., Inc. (the “Company”) has granted
to you the stock option specified in this document pursuant to
the Merck & Co., Inc. 2019 Incentive Stock Plan, including
any sub-plan thereto for your country (the “Plan”). This stock
option is subject to the terms and conditions of the Plan and
these Global Terms and Conditions, including any additional
terms and conditions for your country in Appendix B (the
“Terms”). Unless otherwise defined in this document,
capitalized terms used in these Terms are as defined in the
Plan.
Grant Type:
NQSO – Annual
Option Price:
$XX.XX
Grant Date:
April 30, 2024
Expiration Date:
April 29, 2034
Vesting Dates
Portion that Vests
April 30, 2025
First: 33.333%
April 30, 2026
Second: 33.333%
April 30, 2027
Third: Balance
IMPORTANT NOTICE: This grant requires you to affirmatively accept it. You MUST log onto the Morgan Stanley
website at: (http://www.morganstanley.com/spc/knowledge/managing-equity/managing-your-existing-awards/accepting-
awards-grants/) to accept the grant.
Follow the procedures described on the Morgan Stanley website to accept your stock option within 90 days. Failure to
accept the terms and conditions of your stock option within 90 days may result in Forfeiture of the stock option.
A. Vesting & Expiration Dates. This stock option becomes exercisable in equal installments (subject to a rounding process) on the
Vesting Dates indicated in the box above. This stock option expires on its Expiration Date, which is the day before the tenth
anniversary of the Grant Date. If your employment with the Company or, if different, the subsidiary, affiliate or joint venture (“JV”)
of the Company by which you are employed (the “Employer”) is terminated, your right to exercise this stock option will be
determined according to the terms in Section II and for grantees outside the United States, also in paragraph 12 of Section A (“Nature
of Grant”) of Appendix B, Part I.
B. Subject to Recoupment. This stock option will be subject to recoupment in the event of certain violations of Company policy in
accordance with the Company’s Policy and Procedures for Discretionary Recoupment of Compensation for Compliance Violations, as
set forth in Appendix A.1, and with the Company’s Policy and Procedures for Recoupment of Incentive-Based Compensation,
applicable only for Section 16 Officers,, as set forth in Appendix A.2 (as may be amended from time to time).
II.
TERMINATION OF EMPLOYMENT
A. General Rule. If your employment is terminated for any reason other than those specified in the following paragraphs, the portion of
this stock option that is unvested will expire on the date your employment ends (for avoidance of doubt, if your employment
terminates on a Vesting Date not for misconduct, you will be entitled to vest in that unvested portion of the stock option that is
scheduled to vest on that Vesting Date); the portion of this stock option that is vested will expire unless exercised before the New
York Stock Exchange closes (the “Close of Business”) on the same day of the third month (“Within Three Months”) after the date of
the termination (but in no event after the expiration of the
Option Period). Close of Business for any day on which the New York Stock Exchange is not open means the close of business prior
to that date when the Exchange is open. Where there is no corresponding day of a month, the last day of the month is deemed to be
the same day as a later date (e.g., November 28, 29 and 30 all correspond to February 28 in non-leap years). If you are rehired by the
Company or the Employer, as applicable, this option nevertheless will expire unless exercised Within Three Months, or the original
Expiration Date if earlier.
B. Involuntary Termination. If the Company determines that your employment is involuntarily terminated, including the result of a
restructuring or job elimination, but excluding non-performance of your duties and the reasons listed under paragraphs C through H,
the portion of this stock option that is unvested will expire on the date your employment ends (for avoidance of doubt, if your
employment terminates on a Vesting Date not for misconduct, you will be entitled to vest in that unvested portion of the stock option
that is scheduled to vest on that Vesting Date); the portion of this stock option that is vested will expire on the one year anniversary of
the date your employment ends, but in no event later than the original Expiration Date. If your employment is terminated as described
in this paragraph and you are later rehired by the Company or the Employer, as applicable, this option nevertheless will expire
according to this paragraph notwithstanding such rehire.
C. Sale. If your employment is terminated and the Company determines that such termination resulted from the sale of your subsidiary,
affiliate, division or JV, the following portion of this stock option award will vest and become exercisable immediately upon such
termination: if employment terminates on or after the Grant Date but before the first anniversary thereof, then one-third of this stock
option award will vest and become exercisable; if employment terminates on or after the first anniversary of the Grant Date, then all
unvested stock options will vest and become exercisable. The remaining portion, if any, of this stock option that does not vest
pursuant to the foregoing sentence will be forfeited on the date your employment terminates. Whether already vested on the date your
employment terminates or vested as a result of such sale, this stock option will expire on the first anniversary of the date your
employment with the Company or the Employer, as applicable, ends, but in no event later than the original Expiration Date.
Notwithstanding the foregoing, the Committee may determine, for purposes of this stock option grant, whether employment with an
entity that is established from the Company’s spin off, split off, split up or distribution of equity securities in connection with that
entity constitutes a termination of employment, and may make adjustments, if any, as it deems appropriate, and not inconsistent with
the Plan, at the time of the distribution of such equity securities, in the kind and/or number of shares subject to this option, and/or in
the option price of such option. If your employment is terminated as described in this paragraph and you are later rehired by the
Company or the Employer, as applicable, this option nevertheless will expire according to this paragraph notwithstanding such rehire.
D. Retirement. If your employment terminates as the result of your retirement, the portion of this stock option that would have become
exercisable according to its original schedule within one year of the date your employment terminates will vest and become
exercisable on its applicable Vesting Date and the remainder will expire immediately. Whether already vested on the date your
employment terminates or vested as a result of such retirement, this option will expire on the earlier of (a) the fifth anniversary of the
termination date or (b) its original Expiration Date. For grantees who are employed in the U.S., “retirement” means a termination of
employment after attaining the earliest of (a) age 55 with at least 10 years of service (b) such age and service that provides eligibility
for subsidized retiree medical coverage or (c) age 65 without regard to years of service. For other grantees, “retirement” is determined
by the Company. If your employment is terminated as described in this paragraph and you are later rehired by the Company or the
Employer, as applicable, this option nevertheless will expire according to this paragraph notwithstanding such rehire.
E. Death. If your employment terminates as a result of your death, the portion of this stock option that is unvested will vest immediately
upon your death. Whether already vested on the date of your death or vested as a result of your death, this stock option will expire on
the second anniversary of your death, even if such date is later than the Original Expiration date. This stock option will expire on such
earlier date than otherwise specified in this paragraph as may be required under applicable non-U.S. law. If you die while any portion
of this stock option remains outstanding, but after your employment terminates for the reasons listed under paragraphs B, C, D, G or
H of this section, the portion that remains outstanding after such employment termination will become immediately exercisable and
will continue to be exercisable until the expiration date prescribed in paragraph B, C, D, G or H as applicable (and at least a year from
your death in those jurisdictions where such extension is required by law).
F.
Misconduct. If your employment is terminated as a result of your deliberate, willful or gross misconduct, this stock option (whether
vested or unvested) will expire immediately upon your receipt of notice of such termination.
G. Disability. If your employment is terminated and the Company determines that such termination resulted from your inability to
perform the material duties of your role by reason of a physical or mental infirmity that is expected to last for at least six months or to
result in your death, whether or not you are eligible for disability benefits from any applicable disability program, then this stock
option will continue to become exercisable on applicable Vesting Dates and will expire on the earlier of (a) the fifth anniversary of the
day your employment terminates and (b) its original Expiration Date. If your employment is terminated as described in this paragraph
and you are later rehired by the Company or the Employer, as applicable, this option nevertheless will expire according to this
paragraph notwithstanding such rehire.
H. Change in Control. If this stock option is assumed, converted or otherwise remains outstanding in connection with a Change in
Control and your employment is involuntarily terminated without Cause before the second anniversary after the closing of a Change
in Control, each unvested stock option that is outstanding immediately prior to the Change in Control will immediately become fully
vested and exercisable. All options, including options vested prior to such time, will expire on the fifth anniversary of the termination
of your employment following a Change in Control (but not beyond the Expiration Date). This extended exercise period does not
apply in the case of termination by reasons of retirement, involuntary termination, sale, misconduct, death or disability, as described
in paragraphs B through G above or termination prior to a Change in Control. If this stock option does not remain outstanding
following the Change in Control and is not converted into a successor stock option, then each unvested stock option that is
outstanding immediately prior to the Change in Control will lapse as of the Change in Control and at the election of the Company,
you will be entitled to receive cash for this stock option in an amount at least equal to the difference between the price paid to
stockholders in the Change in Control and the Option Price of this stock option. “Cause” and “Change in Control” are defined in the
Merck & Co., Inc. Change in Control Separation Benefits Plan (excluding an MSD Change in Control).
I.
Transfer of Employment. Transfer of employment between the Company, a subsidiary, affiliate, JV, JV partner or affiliate of the
Company who provides services to the JV with such partner or affiliate or other entity in which the Company has determined that it
has a significant business or ownership interest (together, the “Company Group”) is not considered termination of employment for
purposes of this stock option. Such employment must be approved by the Company and contiguous with employment by the entity in
the Company Group you were employed by immediately prior to the relevant transfer. The terms set out in paragraphs A through H
above shall continue to apply to this stock option following a transfer of employment accordance with this section.
III.
TRANSFERABILITY
This stock option and any interest therein shall not be sold, assigned, transferred, pledged or otherwise disposed of, alienated or
encumbered, either voluntarily or involuntarily, other than by will or the laws of descent and distribution in connection with your death.
IV.
TAX WITHHOLDING
Regardless of any action the Company and/or the Employer take with respect to any or all income tax, social insurance, payroll tax, payment
on account or other tax-related items arising out of your participation in the Plan and legally applicable or deemed applicable to you (“Tax-
Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the
amount actually withheld by the Company and/or the Employer, if any. You further acknowledge that the Company and/or the Employer (i)
make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the stock option
or underlying shares of Common Stock, including, but not limited to, the grant, vesting or exercise of the stock option, the subsequent sale of
shares of Common Stock acquired pursuant to such exercise and the receipt of any dividends; and (ii) do not commit and are under no
obligation to structure the terms of the grant or any aspect of the stock option to reduce or eliminate your liability for Tax-Related Items or
achieve any particular tax result. Furthermore, if you have become subject to tax in more than one jurisdiction, you acknowledge that the
Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more
than one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, you shall pay or make arrangements satisfactory to the Company and/or
the Employer to satisfy any applicable withholding obligations or rights with regard to all Tax-Related Items. In this regard, you authorize
the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the Tax-Related Items by one or a combination of
the following: (i) withholding from your wages or other cash compensation paid to you by the Company, the Employer and/or any
subsidiary, affiliate or JV of the Company; or (ii) withholding from proceeds of the sale of shares of Common Stock acquired at exercise of
the stock option either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this
authorization); or (iii) withholding in shares of Common Stock to be issued at exercise of the stock option; provided, however, that if you are
a Section 16 officer of the Company under the Exchange Act, then the Committee must approve any decision to satisfy the Tax-Related
Items by the method described in (iii) above.
The Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other
applicable withholding rates, including maximum applicable rates in your jurisdiction(s). In the event of over-withholding, you may receive a
refund of any over-withheld amount in cash (with no entitlement to the equivalent in common stock), or if not refunded, you may seek a
refund from the local tax authorities. In the event of under-withholding, you may be required to pay additional Tax-Related Items directly to
the applicable tax authority or to the Company and/or the Employer. If the obligation for Tax-Related Items is satisfied by withholding in
shares of Common Stock, for tax purposes, you will be deemed to have been issued the full number of shares of Common Stock subject to
the exercised stock options, notwithstanding that a number of the shares is held back solely for the purpose of paying the Tax-Related Items
due as a result of any aspect of your participation in the Plan.
You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to
withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described in this section.
The Company may refuse to issue or deliver the shares of Common Stock or the proceeds of the sale of shares, if you fail to comply with
your obligations in connection with the Tax-Related Items.
V.
DATA PRIVACY
The Company is located at 126 East Lincoln Avenue, Rahway, NJ 07065, U.S.A. and grants employees of the Company and any
subsidiary, affiliate or JV of the Company, the opportunity to participate in the Plan, at the Company's sole discretion. If you would like to
participate in the Plan, you understand that you should review the following information about the Company’s data processing practices
and declare your consent.
A. Data Collection and Usage. The Company collects, processes and uses your personal data, including, name, home address, email
address and telephone number, date of birth, social insurance number or other identification number, salary, citizenship, job title, any
shares of Common Stock or directorships held in the Company, and details of all awards, canceled, vested, or outstanding in your
favor, which the Company receives from you or your Employer. If the Company offers you the opportunity to participate in the Plan,
then the Company will collect your personal data for purposes of allocating Common Stock and implementing, administering and
managing the Plan. The Company’s legal basis for the processing of your personal data would be your consent.
B. Stock Plan Administration Service Providers. The Company transfers participant data to Morgan Stanley, an independent service
provider based in the United States, which assists the Company with the implementation, administration and management of the Plan.
In the future, the Company may select a different service provider and share your data with another company that serves in a similar
manner. The Company’s service provider will open an account for you. You will be asked to agree on separate terms and data
processing practices with the service provider, which is a condition to your ability to participate in the Plan.
C. International Data Transfers. The Company and its service providers are based in the United States. If you are outside of the United
States, you should note that your country has enacted data privacy laws that are different from the United States. The Company’s
legal basis for the transfer of your personal data is your consent.
D. Voluntariness and Consequences of Consent Denial or Withdrawal. Your participation in the Plan and your grant of consent is purely
voluntary. You may deny or withdraw your consent at any time. If you do not consent, or if you withdraw your consent, you cannot
participate in the Plan. This would not affect your salary as an employee; you would merely forfeit the opportunities associated with
the Plan.
E. Data Subject Rights. You have a number of rights under data privacy laws in your country. Depending on where you are based, your
rights may include the right to (i) request access or copies of personal data the Company processes, (ii) rectification of incorrect data,
(iii) deletion of data, (iv) restrictions on processing, (v) portability of data, (vi) to lodge complaints with competent authorities in your
country, and/or (vii) a list with the names and addresses of any potential recipients of the your personal data. To receive clarification
regarding your rights or to exercise your rights please contact the Company at Attn: Global Privacy Office, 351 N. Sumneytown Pike,
North Wales, Pennsylvania, U.S.A. 19454.
F.
The collection, use and transfer of your personal data for the purpose of implementing, administering and managing your participation
in the Plan is conducted in accordance with the Company’s Global Privacy and Data Protection Policy. You also understand that the
Company may, in the future, request you to provide another data privacy consent. If applicable and upon request of the Company,
you agree to provide an executed acknowledgement or data privacy consent form to the Company or the Employer (or any other
acknowledgements, agreements or consents) that the Company and/or the Employer may deem necessary to obtain under the data
privacy laws in your country, either now or in the future. You understand that you will not be able to participate in the Plan if you fail
to execute any such acknowledgement, agreement or consent requested by the Company and/or the Employer.
If you agree with the data processing practices described in this Section, you will declare your consent by clicking to "Accept" these
Terms on the Morgan Stanley website.
VI.
GOVERNING LAW
This document may be amended only by another written agreement between the parties. This document will be interpreted and enforced
under the laws of the State of New Jersey, United States (without regard to its choice-of-law provisions). For purposes of litigating any
dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or this document, the parties hereby
submit to and consent to the exclusive jurisdiction of the State of New Jersey and agree that such litigation shall be conducted only in the
courts of Union County, New Jersey, or the federal courts for the United States for the District of New Jersey, and no other courts, where
this grant is made and/or to be performed.
VII.
SEVERABILITY
The provisions of this document are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
VIII.
WAIVER
You acknowledge that a waiver by the Company of breach of any provision of these Terms shall not operate or be construed as a waiver
of any other provision of these Terms or of any subsequent breach by you or any other grantee.
IX.
ELECTRONIC ACCEPTANCE
The Company may, in its sole discretion, decide to deliver any documents related to the stock option or future options that may be granted
under the Plan by electronic means or request your consent to participate in the Plan by electronic means. You hereby consent to receive
such documents by electronic delivery and agree to participate in the Plan through an online or electronic system established and
maintained by the Company or a third party designated by the Company.
X.
COUNTY-SPECIFIC APPENDIX
This stock option shall be subject to any additional provisions set forth in Appendix B for your country, if any. If you relocate to one of
the countries included in Appendix B during the life of this stock option, the additional provisions for such country shall apply to you, to
the extent the Company determines that the application of such provisions is necessary or advisable in order to comply with local law or
facilitate the administration of the Plan.
XI.
ADMINISTRATION
The Committee is responsible for construing and interpreting this stock option, including the right to construe disputed or doubtful Plan
provisions, and may establish, amend and construe such rules and regulations as it may deem necessary or desirable for the proper
administration of this stock option grant. Any decision or action taken or to be taken by the Committee, arising out of or in connection
with the construction, administration, interpretation and effect of this stock option grant shall, to the maximum extent permitted by
applicable law, be within its absolute discretion (except as otherwise specifically provided herein) and shall be final, binding and
conclusive upon the Company, all Eligible Employees and any person claiming under or through any eligible employee. All
determinations by the Committee including, without limitation, determinations of the Eligible Employees, the form, amount and timing of
incentives, the terms and provisions of incentives and the writings evidencing incentives, need not be uniform and may be made
selectively among Eligible Employees who receive, or are eligible to receive, Incentives hereunder, whether or not such Eligible
Employees are similarly situated.
This stock option is subject to the provisions of the 2019 Incentive Stock Plan. For further information regarding your stock options, you
may access the Merck Global Long-Term Incentives homepage via Sync > HR > Money > Long-Term Incentive Program.
APPENDIX A.1
Policy and Procedures for DiscreƟonary Recoupment of
CompensaƟon for Compliance ViolaƟons
Policy
It is the policy of the CompensaƟon and Management Development CommiƩee (the “CommiƩee”) of the Board of Directors (the “Board”) of Merck
& Co., Inc. (the “Company”) that the CommiƩee will exercise its discreƟon to determine whether to seek Recoupment of any Covered CompensaƟon
paid or awarded to an Affected Employee, where it determines, in consultaƟon with the Audit CommiƩee, that: a) the Affected Employee engaged in
misconduct, or failed to reasonably supervise an employee who engaged in misconduct, that resulted in a Material ViolaƟon; and b) the CommiƩee
concludes that the Material ViolaƟon caused Significant Harm to the Company.
DefiniƟons
An “Affected Employee” is an employee in Band 600 or higher who (i) engaged in misconduct that results in a Material ViolaƟon; or (ii) failed in his or
her supervisory responsibiliƟes to reasonably manage or monitor the conduct of an employee who engaged in misconduct that results in a Material
ViolaƟon.
“Covered CompensaƟon” means all (a) incenƟve-based cash compensaƟon granted to an Affected Employee, including, without limitaƟon, any
annual bonuses and other short- and long-term cash incenƟves, (b) equity-based compensaƟon, including, without limitaƟon, stock opƟons,
restricted stock, restricted stock units, performance share units (“PSUs”), (c) any proceeds or earnings received in respect of (a) and (b), and (d) any
other forms of compensaƟon that the CommiƩee determines to be subject to this policy. For the avoidance of doubt, the foregoing includes any
compensaƟon that was previously paid, earned, vested, deferred or paid or payable as a component of severance or terminaƟon compensaƟon.
“ExecuƟve” means current and former execuƟve officers of the Company, as “execuƟve officer” is defined for the purposes of the SecuriƟes
Exchange Act of 1934, as amended.
A “Material ViolaƟon” is defined as (i) a material violaƟon of a wriƩen Company policy relaƟng to the research, development, manufacturing, sales,
or markeƟng of Company products or (ii) conduct detrimental to the Company, including the Company’s overall goodwill or reputaƟon.
“Recoupment” is defined to include any and all of the following acƟons to the extent permiƩed by law: (a) reducing the amount of a current or
future bonus or other cash or noncash incenƟve compensaƟon award, (b) requiring reimbursement of a bonus or other cash-based incenƟve
compensaƟon award paid with respect to the most recently completed performance period, (c) cancelling all or a porƟon of a future-vesƟng equity
award, (d) cancelling all or a porƟon of an equity award that vested within the previous twelve-month period, (e) requiring return of shares paid
upon vesƟng and/or reimbursement of any proceeds received from the sale of an equity award, in each case that vested within the previous twelve-
month period, and (f) any other method of reducing the total compensaƟon paid to an employee for any prior twelve-month period or any current
or future period.
“Significant Harm” means a significant negaƟve impact on the Company’s financial operaƟng results or reputaƟon.
Procedures
Subject to any delegaƟon to the Chief ExecuƟve Officer, as discussed below, the CommiƩee, acƟng in consultaƟon with the Audit CommiƩee, shall
administer this policy and have full discreƟon to interpret and to make any and all determinaƟons under this policy. Any determinaƟons made by the
CommiƩee shall be final, binding, and conclusive on all parƟes. Notwithstanding the foregoing, the full Board shall approve any determinaƟon to
seek or waive Recoupment from the Chief ExecuƟve Officer.
The General Counsel, in consultaƟon with the Chief Ethics and Compliance Officer and the ExecuƟve Vice President, Human Resources, is responsible
for determining whether to refer a maƩer to the CommiƩee for review under this policy and for assisƟng the CommiƩee with its review. In
administering this policy, the CommiƩee may consult with other commiƩees of the Board and any external or internal advisors as it deems
appropriate.
If the CommiƩee, acƟng in consultaƟon with the Audit CommiƩee, determines that there is a basis for seeking Recoupment under this policy, the
CommiƩee shall exercise its discreƟon to determine for each Affected Employee, on an individual basis, whether, and to what extent and in which
manner, to seek Recoupment.
In exercising its discreƟon, the CommiƩee may take into consideraƟon, as it deems appropriate, all of the facts and circumstances of the parƟcular
maƩer and the general interests of the Company.
DelegaƟon to Management for Recoupment Decisions
The CommiƩee may delegate to the Chief ExecuƟve Officer (who may further delegate as deemed appropriate) the authority to administer this
policy and to make any and all decisions under it regarding Affected Employees who are not ExecuƟves of the Company. Management shall report to
the CommiƩee on any affirmaƟve decisions to seek Recoupment pursuant to this delegaƟon of authority.
Public Disclosures
The Company will comply with all applicable securiƟes laws and regulaƟons, including SecuriƟes and Exchange Commission disclosure requirements
regarding execuƟve compensaƟon and any applicable New York Stock Exchange lisƟng standard or requirements, with respect to this policy. The
Company may also, but is not obligated to, provide addiƟonal disclosure beyond that required by law when the Company deems it to be appropriate
and determines that such disclosure is in the best interest of the Company and its shareholders.
Miscellaneous
Nothing in this policy shall limit or otherwise affect any of the following: 1) management’s ability to take any disciplinary acƟon with respect to any
Affected Employee; 2) the CommiƩee’s ability to use its negaƟve discreƟon with respect to any incenƟve compensaƟon performance target at any
Ɵme; or 3) the CommiƩee’s or management’s ability to reduce the amount (in whole or in part) of a current or future bonus or other cash or non-
cash incenƟve compensaƟon award to any Affected Employee for any reason as they may deem appropriate and to the extent permiƩed by law. Any
right of Recoupment under this policy is in addiƟon to, and not in lieu of, any other remedies or rights of Recoupment that may be available to the
Company pursuant to the terms of any similar policy in any incenƟve plan, employment agreement, equity award agreement, or similar agreement,
including, without limitaƟon, the Company’s Policy and Procedures for Recoupment of IncenƟve-Based CompensaƟon, and any other legal remedies
available to the Company. The Company shall not indemnify or agree to indemnify any current or former ExecuƟve against the loss of incenƟve
compensaƟon subject to this policy nor shall the Company pay or reimburse or agree to pay or reimburse any insurance premium to cover the loss of
such incenƟve compensaƟon. The CommiƩee may amend, modify, or terminate this policy in whole or in part at any Ɵme and from Ɵme to Ɵme in
its sole discreƟon.
APPENDIX A.2
Policy and Procedures for Recoupment of
IncenƟve-Based CompensaƟon
Policy
The CompensaƟon and Management Development CommiƩee (the “CommiƩee”) of the Board of Directors (the “Board”) has adopted this
IncenƟve-Based CompensaƟon Recoupment Policy (the “Policy”) to comply with SecƟon 10D of the SecuriƟes Exchange Act of 1934, as amended
(the “Exchange Act”), Rule 10D-1 promulgated thereunder (“Rule 10D-1”) and Paragraph 303A.14 of the LisƟng Standards Manual of the New York
Stock Exchange (“NYSE”), which require the recovery of certain IncenƟve-Based CompensaƟon in the event of an accounƟng restatement resulƟng
from a material error in the consolidated financial statements of Merck & Co, Inc. (the “Company”). This Policy shall be administered by the
CommiƩee, which shall have express discreƟonary authority to interpret and construe this Policy and to make all determinaƟons with respect to this
Policy, in its sole discreƟon. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of SecƟon 10D of the
Exchange Act and Rule 10D-1 (or any successor statute or rule) and any other applicable rules or lisƟng standards adopted by the U.S. SecuriƟes and
Exchange Commission (the “SEC”) or NYSE. All interpretaƟons, construcƟons and determinaƟons made by the CommiƩee under this Policy shall be
final and binding on all parƟes. This Policy may be amended with the approval of the CommiƩee and may be amended from Ɵme to Ɵme as
necessary to reflect changes in applicable regulaƟons and/or lisƟng standards adopted by the SEC or NYSE. Compliance with this Policy cannot be
waived.
DefiniƟons
"AccounƟng Restatement” is the restatement of the Company’s financial statements due to material noncompliance with any financial reporƟng
requirement under the federal securiƟes laws, including any required accounƟng restatement to correct an error in previously issued financial
statements (i) that is material to the previously issued financial statements, or (ii) that would result in a material misstatement if the error were
corrected in the current period only or leŌ uncorrected in the current period.
A “Covered Officer” is anyone who serves or has served as an execuƟve officer of the Company at any Ɵme during the performance period for
IncenƟve-Based CompensaƟon.
“ExecuƟve officer” is the equivalent to an “officer” as defined under SecƟon 16a-1(f) of the Exchange Act (“SecƟon 16 officer”).
“Financial reporƟng measure” is a measure that is (i) determined and presented in accordance with the accounƟng principles used in preparing the
Company’s financial statements, or (ii) derived wholly or in part from such measures. For purposes of this Policy, the term “financial reporƟng
measure” includes the Company’s stock price and total shareholder return, whether expressed as an absolute or relaƟve metric. For the avoidance
of doubt, a financial reporƟng measure need not be presented in the Company’s financial statements or included in a filing with the SEC.
“IncenƟve-Based CompensaƟon” is any compensaƟon that is granted, earned, or vested based wholly or in part upon the aƩainment of a financial
reporƟng measure. IncenƟve-Based CompensaƟon may include awards under the ExecuƟve IncenƟve Plan and Performance Share Units under the
Merck & Co., Inc. 2019 Stock IncenƟve Plan, or any successor thereto. IncenƟve-Based CompensaƟon does not include (i) base salary; (ii) “sign-on”
bonuses or other compensaƟon granted solely due to the commencement of employment with the Company; (iii) compensaƟon exclusively based
on compleƟon of a specific period of employment or service, without any performance condiƟon; or (iv) compensaƟon awarded based on
subjecƟve, non-financial, strategic, or operaƟonal measures that are not financial reporƟng measures.
IncenƟve-Based CompensaƟon is deemed to be “received” in the fiscal period during which the financial reporƟng measure specified in the
IncenƟve-Based CompensaƟon award is aƩained, even if the payment or grant of the IncenƟve-Based CompensaƟon occurs aŌer the end of that
fiscal period. IncenƟve-Based CompensaƟon in the form of an equity award that vests solely upon the basis of a financial reporƟng measure
performance condiƟon will be deemed to be received in the fiscal period in which it vests.
“Recoupment Period” is the three completed fiscal years of the Company immediately preceding the date, and any transiƟon period of less than nine
months that results from a change in the Company’s fiscal year within or immediately following those three completed fiscal years, on which the
Company is required to perform an AccounƟng Restatement,
which date is the earlier of (i) the date the Board, or a commiƩee of the Board, concludes, or reasonably should have concluded, that the Company
is required to perform an AccounƟng Restatement; or (ii) a date that a court, regulator or other legally authorized body directs the Company to
perform an AccounƟng Restatement.
Procedures for Recoupment of IncenƟve-Based CompensaƟon
In the event the Company is required to perform an AccounƟng Restatement, the Company shall, as promptly as reasonably possible, recoup any
IncenƟve-Based CompensaƟon erroneously received by a Covered Officer during the Recoupment Period. The amount of erroneously received
IncenƟve-Based CompensaƟon will be the excess of the IncenƟve-Based CompensaƟon received by the Covered Officer (whether in cash or in
shares) based on the erroneous data in the original financial statements over the IncenƟve-Based CompensaƟon (whether in cash or in shares) that
would have been received by the Covered Officer had it been based on the restated results, without respect to any tax liabiliƟes incurred or paid by
the Covered Officer. For IncenƟve-Based CompensaƟon based on total shareholder return or Company stock price, where the amount of erroneously
awarded compensaƟon is not subject to mathemaƟcal recalculaƟon directly from the informaƟon in the AccounƟng Restatement, the amount shall
be based on the CommiƩee’s reasonable esƟmate of the effect of the AccounƟng Restatement on the applicable measure and the CommiƩee shall
maintain documentaƟon of the determinaƟon of that reasonable esƟmate and provide it to the NYSE. Notwithstanding the foregoing, IncenƟve-
Based CompensaƟon shall not be recouped under this Policy to the extent received by any person before the date such person served as a Covered
Officer.
The CommiƩee shall determine, in its sole discreƟon, the method of recouping any erroneously received IncenƟve-Based CompensaƟon pursuant to
this Policy.
No recoupment shall be required if any of the following condiƟons are met and the CommiƩee determines that, on such basis, recovery would be
impracƟcable: (i) the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recouped, which
determinaƟon must be made only aŌer a reasonable and documented aƩempt by the Company to recoup the IncenƟve-Based CompensaƟon (with
documentaƟon of such reasonable aƩempt to recover to be provided to the NYSE); (ii) recovery would violate home country law where that law was
adopted prior to November 28, 2022, which determinaƟon must be made only aŌer the Company has obtained an opinion of home country counsel,
acceptable to the NYSE, that recovery would result in such violaƟon (with a copy of such opinion to be provided to the NYSE); or (iii) recoupment
would likely cause an otherwise tax-qualified reƟrement plan, under which benefits are broadly available to Company employees, to fail to meet the
requirements of SecƟon 401(a)(13) or SecƟon 411(a) of the Internal Revenue Code of 1986, as amended, and U.S. Treasury regulaƟons promulgated
thereunder.
IndemnificaƟon Not PermiƩed
The Company shall not indemnify any current or former Covered Officer against the loss of erroneously awarded compensaƟon, and shall not pay, or
reimburse any Covered Officer for, premiums incurred or paid for any insurance policy to fund such Covered Officer’s potenƟal recoupment
obligaƟons.
Disclosure of Recoupment Decisions
The Company will comply with all applicable securiƟes laws and regulaƟons, including SEC disclosure requirements, with respect to this Policy, and
any applicable NYSE lisƟng standard or requirements. The Company may also, but is not obligated to, provide addiƟonal disclosure beyond that
required by law when the Company deems it to be appropriate and determines that such disclosure is in the best interest of the Company and its
shareholders.
EffecƟve Date
This Policy shall be effecƟve as of December 1, 2023 (the “EffecƟve Date”). The terms of this Policy shall apply to any IncenƟve-Based CompensaƟon
that is received by Covered Officers on or aŌer the EffecƟve Date, even if such IncenƟve-Based CompensaƟon was approved, awarded, granted, or
paid to Covered Officers prior to the EffecƟve Date.
Miscellaneous
Nothing in this Policy shall limit or otherwise affect any of the following: 1) management’s ability to take any disciplinary acƟon with respect to any
Covered Officer; 2) the CommiƩee’s ability to use its negaƟve discreƟon with respect to any IncenƟve-Based CompensaƟon performance target at
any Ɵme; or 3) the CommiƩee’s or management’s ability to reduce the amount (in whole or in part) of a current or future bonus or other cash or
non-cash incenƟve
compensaƟon award to any execuƟve or other employee for any reason as they may deem appropriate and to the extent permiƩed by law. Any right
of recoupment under this Policy is in addiƟon to, and not in lieu of, any other remedies or rights of recoupment that may be available to the
Company pursuant to the terms of any similar policy in any incenƟve plan, employment agreement, equity award agreement, or similar agreement
and any other legal remedies available to the Company. This Policy shall be binding and enforceable against all Covered Officers and their
beneficiaries, heirs, executors, administrators, or other legal representaƟves.
APPENDIX B
ADDITIONAL TERMS AND CONDITIONS FOR GRANTEES OUTSIDE THE U.S.
This Appendix, which is part of the Global Terms and Conditions for 2024 Non-Qualified Stock Option Grants under the Merck & Co., Inc. 2019
Incentive Stock Plan, contains additional “terms and conditions” that will apply to you if you reside outside the United States.
The terms and conditions in Part I of this Appendix apply to all grantees who reside outside the United States. The additional terms and
conditions in Part II of this Appendix will also apply to you if you reside in one of the countries referenced in Part II.
The information in this Appendix is based on the laws in effect in the respective countries as of November 2023. Such laws are often complex and
change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix as the only source of
information relating to the consequences of your participation in the Plan because the information may be out of date at the time that the stock option
vests, you exercise the stock option and shares of Common Stock are issued to you or you sell shares of Common Stock acquired upon exercise of the
stock option under the Plan.
In addition, the information contained in this Appendix is general in nature and may not apply to your particular situation, and the Company is not in a
position to assure you of a particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country
may apply to your situation.
Finally, if you are a citizen or resident of a country, or are considered a resident of a country, other than that in which you are currently working, or
transfer residence and/or employment after the Grant Date, the information contained herein may not apply to you in the same manner. The Company
shall, in its sole discretion, determine to what extent the terms and conditions included herein will apply under these circumstances.
APPENDIX B - PART I: ADDITIONAL TERMS AND CONDITIONS FOR ALL COUNTRIES OUTSIDE OF THE UNITED
STATES
The following additional terms and conditions will apply to you if you reside in any country outside the United States.
A. Nature of Grant
In accepting the stock option, you acknowledge and agree that:
1.
the Plan is established voluntarily by the Company, is discretionary in nature, and may be amended, suspended, or terminated by the
Company at any time;
2.
the grant of the stock option is exceptional, voluntary, and occasional and does not create any contractual or other right to receive future
grants of stock options, or benefits in lieu of stock options, even if stock options have been granted in the past;
3.
all decisions with respect to future stock option grants, if any, will be at the sole discretion of the Company;
4.
your participation in the Plan is voluntary;
5.
your participation in the Plan shall not create a right to employment or be interpreted as forming or amending an employment or service
contract with the Company and shall not interfere with the ability of the Employer to terminate your employment or service relationship (if
any) at any time;
6.
the stock option and any shares of Common Stock acquired under the Plan, and the income from and value of same, are extraordinary items
that do not constitute compensation of any kind for services of any kind rendered to the Employer, the Company, or any subsidiary, affiliate,
or JV of the Company, and that are outside the scope of your employment or service contract, if any;
7.
unless otherwise agreed with the Company in writing, the stock option and any shares of Common Stock acquired under the Plan, and the
income and value of same, are not granted as consideration for, or in connection with, the service you may provide as a director of a
subsidiary, affiliate, or JV of the Company;
8.
the stock option and any shares of Common Stock acquired under the Plan, and the income from and value of same, are not intended to
replace any pension rights or compensation;
9.
the stock option and any shares of Common Stock acquired under the Plan, and the income from and value of same, are not part of normal or
expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination,
redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments
and in no event should be considered as compensation for, or relating in any way to, past services for the Employer, the Company or any
subsidiary, affiliate or JV of the Company;
10. the future value of the shares of Common Stock underlying the stock option is unknown, indeterminable and cannot be predicted with
certainty;
11. if the underlying shares of Common Stock do not increase in value, the stock option will have no value;
12. if you exercise the stock option and acquire shares of Common Stock, the value of such shares of Common Stock may increase or decrease in
value, even below the Option Price;
13. no claim or entitlement to compensation or damages shall arise from (a) termination of the stock option resulting from termination of your
employment by the Company or the Employer (for any reason whatsoever and whether or not in breach of the employment laws in the
jurisdiction where you are employed or the terms of your employment agreement, if any) and/or (b) termination of the stock option or
recoupment of any shares of Common Stock, cash or other benefits acquired at exercise of the stock option resulting from the application of
Section I(B) of the Terms;
14. for purposes of the stock option, your employment relationship will be considered terminated as of the date you are no longer providing
services to the Employer or the Company or any subsidiary, affiliate or JV of the Company (regardless of the reason for such termination and
whether or not later found to be invalid or in breach of the employment laws in the jurisdiction where you are employed or the terms of your
employment agreement, if any), and unless otherwise expressly provided in this document, your right to vest in the stock option under the
Plan, if any, will terminate effective as of such date and will not be extended by any notice period or any period of “garden leave” or similar
period mandated under local; similarly, any right to exercise the stock option after termination of employment will be measured as of the date
you are no longer providing services to the Employer or the Company or any subsidiary, affiliate or JV and will not be extended by any notice
period or any period of “garden leave” or similar period mandated under local law; the Committee shall have the exclusive discretion to
determine when you are no longer providing services for purposes of the grant (including whether you may still be considered to be providing
services while on a leave of absence);
15. the stock option and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a merger, take-over
or transfer of liability;
16. the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendation regarding your participation
in the Plan, or the acquisition or sale of underlying shares; you should consult with your personal tax, legal, and financial advisors regarding
the decision to participate in the Plan and before taking any action related to the Plan; and
17. neither the Employer, nor the Company or any subsidiary, affiliate, or JV shall be liable for any foreign exchange rate fluctuation between
your local currency and the United States Dollar that may affect the value of the stock option or any amounts due to you pursuant to the
exercise of the stock option, the subsequent sale of shares acquired under the Plan or the receipt of any dividends.
B. Insider Trading/Market Abuse Laws
You acknowledge that, depending on your or your broker’s country of residence or where shares of Common Stock are listed, you may be subject
to insider trading restrictions and/or market abuse laws, which may affect your ability to accept, acquire, sell or otherwise dispose of shares of
Common Stock, rights to shares of Common Stock (e.g., stock options) or rights linked to the value of shares of Common Stock under the Plan
during such times that you are considered to have “inside information” regarding the Company (as defined by the laws or regulations in the
applicable jurisdictions or your country). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you
placed before you possessed inside information. Furthermore, you could be prohibited from (i) disclosing the inside information to any third party
and (ii) “tipping” third parties or causing them otherwise to buy or sell securities. You should keep in mind that third parties include fellow
employees. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any
applicable Company insider trading policy. You understand you are responsible for ensuring compliance with any restrictions and should consult
with your personal legal advisor on this matter.
C. Foreign Asset/Account, Exchange Control and Tax Obligations
You acknowledge that, depending on your country, you may be subject to foreign asset/account, exchange control and/or tax reporting
requirements as the result of the acquisition of shares of Common Stock or cash (including dividends and the proceeds of the sale of shares of
Common Stock) derived from your participation in the Plan, in, to and/or from a brokerage/bank account or legal entity located outside your
country. The applicable laws of your country may require that you report such accounts, assets, the balances therein, the value thereof and/or the
transactions related thereto to the applicable authorities in your country. You may also be required to repatriate cash received from participating in
the Plan to your country within a certain time after receipt. You acknowledge that you are responsible for ensuring compliance with any applicable
foreign asset/account, exchange control and tax reporting requirements and should consult your personal tax, legal and/or financial advisors
regarding the same.
D. Language
You acknowledge that you are proficient in the English language, or have consulted with an advisor who is sufficiently proficient, to allow you to
understand the terms and conditions of this document. If you have received this document, or any other document related to the stock option
and/or the Plan translated into a language other than English, and if the translated version is different than the English version, the English version
will control unless otherwise required by local law.
E. Imposition of Other Requirements and Issuance of Shares
The Company reserves the right to impose other requirements on the stock option and the shares of Common Stock purchased upon exercise of
the stock options, to the extent the Company determines it is necessary or advisable to comply with local laws or facilitate the administration of
the Plan, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
In particular, if advisable due to local law requirements, the Committee, in its sole and absolute discretion, may restrict the methods of exercise
available such that, for example, you may be required to immediately sell all of the shares of Common Stock underlying the exercised stock
option and will receive only the sale proceeds less the Option Price and any applicable Tax-Related Items.
APPENDIX B - PART II: COUNTRY-SPECIFIC ADDITIONAL TERMS AND CONDITIONS AND NOTIFICATIONS
Country
Additional Terms and Conditions and Notifications
Australia
Tax Information
The Plan is a plan to which Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) (the “Tax Assessment Act”)
applies (subject to the conditions in the Tax Assessment Act).
Belgium
Acceptance
Stock options granted to you shall not be accepted earlier than the 61st day following the “Offer Date” for tax at exercise. The
Offer Date is the date on which the Company notifies you of the material terms and conditions of the stock option grant. Any
acceptance given by you before the 61st day following the Offer Date shall be null and void.
Brazil
Compliance with Law
By accepting the stock option, you acknowledge that you agree to comply with applicable Brazilian laws and pay any and all
applicable taxes associated with the exercise of stock options, the sale of shares, and the receipt of any dividends.
Labor Law Acknowledgment
By accepting the stock option, you agree that you are (i) making an investment decision and (ii) the value of the underlying
shares of Common Stock is not fixed and may increase or decrease in value without compensation to you.
Further, you acknowledge and agree that, for all legal purposes, (i) any benefits provided to you under the Plan are unrelated
to your employment or service; (ii) the Plan is not a part of the terms and conditions of your employment or service; and (iii)
the income from your participation in the Plan, if any, is not part of your remuneration from employment or service.
Country
Additional Terms and Conditions and Notifications
Canada
Termination of Employment
This provision replaces paragraph (9) of the “Nature of Grant” section in Part I of this Appendix B:
Except to the extent explicitly required under local employment standards legislation, the stock option and any shares of
Common Stock acquired under the Plan, and the income from and value of same, are not part of normal or expected
compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination,
redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or
similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the
Employer, the Company or any subsidiary, affiliate or JV of the Company;
This provision replaces paragraph (14) of the “Nature of Grant” section in Part I of this Appendix B:
Except to the extent explicitly required under local employment standards legislation, no claim or entitlement to compensation
or damages shall arise from (a) termination of the stock option resulting from termination of your employment by the
Company or the Employer (for any reason whatsoever and whether or not in breach of the employment laws in the jurisdiction
where you are employed or the terms of your employment agreement, if any) and/or (b) termination of the stock option or
recoupment of any shares of Common Stock, cash or other benefits acquired at exercise of the stock option resulting from the
application of Section I(B) of the Terms;
This provision replaces paragraph (14) of the “Nature of Grant” section in Part I of this Appendix B:
For purposes of the stock option, except to the extent expressly provided in your Terms or expressly required by applicable
legislation, your employment relationship will be considered terminated (regardless of the reason for such termination), your
right to vest in the stock option under the Plan, if any, will terminate as of the date that is the earliest of (a) the date you are no
longer employed or providing services to the Company or any parent, subsidiary, affiliate or JV, (b) the date you receive
written notice of termination of employment, or (c) the date written notice of termination is delivered to your last known
address (together, the “Termination Date”). Similarly, except to the extent expressly provided in your Terms or expressly
required by applicable legislation, any right to exercise the stock option after termination of employment will be measured as
of the Termination Date. Except to the extent explicitly required by applicable legislation, the Termination Date will exclude
any notice period or period of pay in lieu of such notice required under statute, contract, common/civil law or otherwise. You
will not earn, or be entitled to earn, any pro-rated vesting or extended exercisability for that portion of time before the date on
which your right to vest terminates, nor will you be entitled to any compensation for lost vesting or exercisability. In case of
any dispute as to whether termination of employment has occurred that cannot be reasonably determined under your Terms
and the Plan, the Committee shall have the sole discretion, subject to applicable legislation, to determine whether such
termination of employment has occurred and the effective date of such termination.
Notwithstanding the foregoing, if applicable employment standards legislation explicitly requires continued entitlement to
vesting or exercisability during a statutory notice period, your right to vest in or exercise the stock option under the Plan, if
any, will terminate effective as of the last day of your minimum statutory notice period, but you will not earn or be entitled to
pro-rated vesting or extended exercisability if the Vesting Date(s) or exercisability period falls after the end of your statutory
notice period, nor will you be entitled to any compensation for lost vesting or exercisability.
Securities Law Information
You are permitted to sell shares of Common Stock acquired through the Plan through the broker designated by the Company
under the Plan, if any, provided the resale of shares of Common Stock acquired under the Plan takes place outside of Canada
through the facilities of a stock exchange on
Country
Additional Terms and Conditions and Notifications
which the shares of Common Stock are listed. The shares are currently listed on the New York Stock Exchange.
Payment of Option Price
Notwithstanding anything in the Plan, you are prohibited from surrendering shares of Common Stock that you already own or
attesting to the ownership of shares of Common Stock to pay the option price of the shares or any Tax-Related Items in
connection with the stock option.
The
People's
Republic
of
China
The following terms and conditions apply only to grantees who are citizens of the PRC or are otherwise determined to
be subject to the requirements imposed by the State Administration of Foreign Exchange (“SAFE”) as determined by
the Company.
Exercise of Stock Option and Termination of Employment
You will be permitted to hold shares of Common Stock issued to you at exercise of the stock option. Notwithstanding anything
to the contrary in the Plan or Terms, due to exchange control laws in China, you agree that any shares of Common Stock
acquired under the Plan and held by you at the time of your termination of employment with the Company or the Employer
will be sold on your behalf, pursuant to this authorization, as soon as administratively practicable following the termination of
your employment, but no later than six-months following termination of employment. The Company is under no obligation to
arrange for such sale at any particular price. You will receive the sale proceeds, less any broker’s fees or commissions and
subject to satisfaction of any Tax-Related Items. If the Terms provide that all or a portion of your outstanding stock option will
vest and become exercisable at some time following your termination of employment, in no case will the post-termination
exercise period extend beyond six months after termination of employment. Any other portion of your stock option that is not
vested and exercisable as described above will expire immediately upon your termination of employment.
Due to local regulatory requirements, you agree that the Company may force the sale of any shares of Common Stock issued
under the Plan. The sale may occur (i) immediately upon exercise or (ii) within any other time frame as the Company
determines to be necessary or advisable for legal or administrative reasons.
Broker Account
Any shares of Common Stock issued to you upon exercise of your stock options must be maintained in an account with
Morgan Stanley Smith Barney or such other stock plan service provider as may be selected by the Company in the future until
the shares of Common Stock are sold through that broker.
Exchange Control Notification
You understand and agree that, to comply with exchange control laws in the PRC, any cash dividends and the proceeds from
the sale of the shares of Common Stock will be immediately repatriated to China through a special exchange control account
established by the Company (or any subsidiary, affiliate or JV) or the Employer prior to being delivered to you. The funds may
be paid to you in U.S. dollars or local currency at the Company’s discretion. To the extent the funds are paid to you in U.S.
dollars, you understand that you will be required to set up a U.S. dollar bank account in China and provide the bank account
details to the Employer and/or the Company so that the funds may be deposited into this account. In the more likely event that
the Company converts cash received under the Plan into local currency, the Company is under no obligation to secure any
exchange conversion rate and the Company may face delays in converting the proceeds to local currency due to exchange
control restrictions in China. You agree to bear any currency fluctuation risk between that time and the time the funds are
distributed through any such special exchange account. You further agree to comply with any other requirements that may be
imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.
Country
Additional Terms and Conditions and Notifications
Denmark
Labor Law Acknowledgment
This provision supplements the “Nature of Grant” section Part I of this Appendix B:
By accepting the stock option, you understand and agree that this grant relates to future services to be performed and is not a
bonus or compensation for past services.
France
Tax Notification
Your stock option is not intended to be French tax-qualified.
Language Consent
By accepting the stock option, you confirm having read and understood the Plan and your Terms, which were provided in the
English language. You accept the terms of those documents accordingly.
En acceptant l’attribution, vous confirmez avoir lu et compris le Plan de travail et vos conditions générales et dispositions,
qui ont été transmis en langue anglaise. Vous acceptez les termes de ces documents en connaissance de cause.
Germany
There are no country-specific provisions.
Ireland
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Israel
Securities Law Information
The grant of the stock option under the Plan is being made pursuant to an exemption from the requirement to file and publish a
prospectus in Israel regarding the Plan obtained from the Israeli Securities Authority. Copies of the Plan and the Form S-8
registration statement for the Plan filed with the U.S. Securities and Exchange Commission will be sent to you, at no charge,
on written request being mailed to Investor Relations at Merck & Co., Inc., 126 East Lincoln Avenue, Rahway, NJ 07065,
U.S.A. The telephone number at the executive offices is 1-908-740-4000. Alternatively, copies of the Plan and the Form S-8
registration statement for the Plan filed with the U.S. Securities and Exchange Commission are available by searching the
Company’s filings on the following web site: http://www.sec.gov/edgar/searchedgar/companysearch.html.
Trust Arrangement
You understand and agree that the stock option is offered subject to and in accordance with the terms of the Plan, the
Addendum A - Israel to the Plan (the “Israeli Sub-Plan”), the Trust Agreement (the “Trust Agreement”) between the Company
and the Company’s trustee appointed by the Company or its subsidiary or affiliate in Israel, currently ESOP Management and
Trust Services Ltd. (the “Trustee”), and the Terms. In the event of any inconsistencies between the Israeli Sub-Plan, the Terms
and/or the Plan, the Israeli Sub-Plan will govern the stock option granted to you in Israel. Capitalized terms used but not
defined in this Appendix B for Israel, the Plan or the Terms have the meanings set forth in the Israeli Sub-Plan.
Requirement to Return Signed Confirmation Letter
If requested by the Employer or the Trustee, you are required to execute the Section 102 Capital Gains Award Confirmation
Letter (“Confirmation Letter”) provided to you in connection with the stock option granted to you under the Israeli Sub-Plan.
In particular, you must print, sign and deliver a signed copy of the Confirmation Letter to the Trustee within thirty (30) days of
the Grant Date, or by such other date as may be determined by your Employer or the Trustee not to exceed ninety (90) days
from the Grant Date, for the stock option to qualify for preferential tax treatment. By accepting this stock option, you
acknowledge and agree that the terms and conditions of the Confirmation Letter are hereby incorporated by reference into the
Terms and shall apply to shares of Common Stock acquired upon exercise of the stock option. If the Trustee does not receive
the signed Confirmation Letter within 30 days of the Grant Date, or by such other date as may be determined by your
Employer or the Trustee not to exceed ninety (90) days from the Grant Date, the stock option may not qualify for favorable tax
treatment. For more details, please contact Daphna Ben-Ari at daphna.ben-ari@merck.com or +972 9533306.
Confirmation of Section 102 Capital Gains Award Terms
The stock option is intended to be a Capital Gain Award that qualifies for the tax treatment for Approved 102 Awards that are
designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)
(2) of the Ordinance. Notwithstanding the foregoing, by accepting the stock option, you acknowledge that the Company
cannot guarantee that the Capital Gain Award tax treatment will apply to the stock option granted to you.
Country
Additional Terms and Conditions and Notifications
By accepting the stock option, you: (a) acknowledge receipt of and represent that you have read and understand the Plan, the
Israeli Sub-Plan, the Confirmation Letter and the Terms; (b) accept the stock options subject to all of the terms and conditions
of the Plan, the Israeli Sub-Plan, the Confirmation Letter and the Terms; and (c) agree that the shares of Common Stock issued
to upon exercise of the stock option will be issued to and deposited with the Trustee and shall be held in trust for your benefit
as required by the Ordinance, the Israeli Sub-Plan and any approval by the Israeli Tax Authority pursuant to the terms of the
Ordinance, the Israeli Sub-Plan and the Trust Agreement. Furthermore, by accepting the stock option, you confirm that you
understand the terms and provisions of Section 102 of the Ordinance, particularly the capital gains track described in
subsection (b)(2) and (b)(3) thereof, and agree that you will not require the Trustee to release the shares of Common Stock
acquired upon exercise of the stock option to you or sell the shares of Common Stock to a third party, during the Holding
Period, unless permitted to do so by the Ordinance or the Israeli Sub-Plan.
Italy
Restriction on the Method of Exercise
Due to regulatory requirements in Italy, you will be restricted to the full cashless (also called the “cashless sell-all”) method of
exercising the stock option pursuant to which all shares of Common Stock subject to the exercised stock option will be sold
immediately upon exercise and the cash proceeds of the sale, less the Option Price, any Tax-Related Items and broker’s fees or
commissions, will be remitted to you. You will not be permitted to hold shares after exercise. You acknowledge that the
Company’s designated broker is under no obligation to arrange for the sale of shares of Common Stock at any particular price.
The Company reserves the right to provide additional methods of exercise depending on local developments.
Plan Document Acknowledgement
By accepting the stock option granted hereunder, you further acknowledge that you have received a copy of the Plan and the
Terms, have reviewed the Plan and the Terms in their entirety and fully understand and accept all provisions of the Plan and
the Terms; in particular, you acknowledge that you have read and specifically and expressly approve the following provisions
in the Plan and the Terms: (a) your stock option cannot be transferred other than by will or the laws of descent and
distribution; (b) in the event of involuntary termination of your employment, your right to exercise your stock option will
terminate as of the date that you are no longer actively employed by the Employer, unless otherwise expressly provided in the
Terms; (c) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (d) you are
responsible for all Tax-Related Items; (e) if a reorganization, recapitalization, reclassification or other corporate event that
results in an adjustment of the shares of Common Stock described in the Plan occurs, your stock option may be adjusted; (f) if
a Change in Control, as described in the Plan occurs, your stock option may immediately vest; (g) all decisions with respect to
future grants will be at the sole discretion of the Company; and (h) the “Data Privacy” section of your Terms.
Japan
There are no country-specific provisions.
Country
Additional Terms and Conditions and Notifications
Mexico
Securities Law Information
Any stock option offered under the Plan and the shares of Common Stock acquired at exercise of the stock option have not
been registered with the National Register of Securities maintained by the Mexican National Banking and Securities
Commission and cannot be offered or sold publicly in Mexico. In addition, the Plan and any other document relating to any
Award may not be publicly distributed in Mexico. These materials are addressed to you only because of your existing
relationship with the Company and its subsidiaries, affiliates and JVs and these materials should not be reproduced or copied
in any form. The offer contained in these materials does not constitute a public offering of securities but rather constitutes a
private placement of securities addressed specifically to individuals who are present Employees of the Company or one of its
subsidiaries, affiliates and JVs, made in accordance with the provisions of the Mexican Securities Market Law, and any rights
under such offering shall not be assigned or transferred.
Labor Law Acknowledgement
These provisions supplement the “Nature of Grant” section in Part I of this Appendix B:
By accepting the stock option, you understand and agree that: (i) the stock option is not related to the salary and other
contractual benefits granted to you by the Employer and (ii) any modification of the Plan or its termination shall not constitute
a change or impairment of the terms and conditions of your employment.
Policy Statement
The invitation the Company is making under the Plan is unilateral and discretionary and, therefore, the Company reserves the
absolute right to amend it and discontinue it at any time without any liability to you.
The Company, with registered offices at 126 East Lincoln Avenue, P.O. Box 2000, Rahway, NJ 07065, U.S.A., is solely
responsible for the administration of the Plan and your participation in the Plan and the acquisition of shares of Common
Stock does not, in any way, establish an employment relationship between you and the Company since you are participating in
the Plan on a wholly commercial basis. Based on the foregoing, you expressly recognize that the Plan and the benefits that you
may derive from participating in the Plan do not establish any rights between you and the Employer and do not form part of
the employment conditions and/or benefits provided by the Employer, and any modification of the Plan or its termination shall
not constitute a change or impairment of the terms and conditions of your employment.
Finally, you hereby declare that you do not reserve to yourself any action or right to bring any claim against the Company for
any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and you therefore
grant a full and broad release to the Company, its subsidiaries, affiliates, JVs, branches, representation offices, shareholders,
officers, agents or legal representatives, with respect to any claim that may arise.
Plan Document Acknowledgment
By accepting the stock option, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the
Terms, including this Appendix B, in their entirety and fully understand and accept all provisions of the Plan and the Terms.
Country
Additional Terms and Conditions and Notifications
In addition, by accepting the benefits under this grant, you further acknowledge that you have read and specifically and
expressly approve the terms and conditions in the “Nature of Grant” section in Part I of this Appendix B, in which the
following is clearly described and established: (i) your participation in the Plan does not constitute an acquired right; (ii) the
Plan and your participation in the Plan is offered by the Company on a wholly discretionary basis; (iii) your participation in
the Plan is voluntary; and (iv) the Company and its subsidiaries, affiliates and JVs are not responsible for any decrease in the
value of the shares of Common Stock acquired by you at exercise of the stock option.
Netherlands
There are no country-specific provisions.
Singapore
Restriction on Sale and Transferability
You hereby agree that any shares of Common Stock acquired pursuant to the stock option will not be offered for sale in
Singapore prior to the six-month anniversary of the Grant Date, unless such sale or offer is made pursuant to one or more
exemptions under Part XII Division 1 Subdivision (4) (other than section 280) of the Securities and Futures Act (Chap. 289,
2006 Ed.) (“SFA”) or pursuant to, and in accordance with, the conditions of any other applicable provision(s) of the SFA.
Securities Law Information
The stock option is being granted to you pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the SFA,
on which basis it is exempt from the prospectus and registration requirements under the SFA, and is not made to you with a
view of the stock option being subsequently offered for sale to any other party. The Plan has not been lodged or registered as a
prospectus with the Monetary Authority of Singapore.
Director Notification
If you are a director (including an alternate, substitute, associate or shadow director) of a Singaporean subsidiary, affiliate or
JV of the Company, you are subject to certain notification requirements under the Singapore Companies Act. Among these
requirements is an obligation to notify the Singapore subsidiary, affiliate or JV in writing when you receive an interest (e.g.,
stock options or shares of Common Stock) in the Company or any related companies. In addition, you must notify the
Singaporean subsidiary, affiliate or JV when you sell shares of the Company’s common stock or any related company
(including when you sell shares of Common Stock acquired under the Plan). These notifications must be made within two
business days of acquiring or disposing of any interest in the Company or any related company. In addition, a notification must
be made of your interests in the Company or any related company within two days of either after the director becomes aware
of the change in respect of the particulars of any of the aforesaid, the date on which the director becomes a holder of, or
acquires an interest in, the shares, debentures, rights, contracts, participatory interests, other securities or securities-based
derivatives contacts, whichever last occurs. There is no prescribed form for such disclosure, although in practice, the company
secretary normally would prepare a formatted disclosure form that requests the following information: equity award granted,
number of shares acquired, description of consideration, if applicable, and the date of the transaction.
A director shall be deemed to have an interest in securities or securities-based derivative contracts referred to above if a family
member of the director (not being him or herself a director), holds or has an interest in those securities or securities-based
derivatives contract and any contract entered into by, or any grant made to, a family member of a director of a corporation (not
being himself a director) shall be deemed to have been entered into by, made or exercised by or made to the director. A “family
member” means a spouse, or a son, adopted son, step-son, daughter, adopted daughter or step-daughter below the age of 21
years.
Country
Additional Terms and Conditions and Notifications
Spain
Labor Law Acknowledgment
This provision supplements the “Nature of Grant” section in Part I of this Appendix B:
By accepting your stock option grant, you acknowledge, understand and agree that you consent to participation in the Plan and
that you have received a copy of the Plan.
You understand that the Company, in its sole discretion, has unilaterally and gratuitously decided to distribute stock options
under the Plan to individuals who may be employees of the Company or its subsidiaries, affiliates or JVs throughout the
world. The decision is a limited decision that is entered into upon the express assumption and condition that any grant will not
economically or otherwise bind the Company or any of its subsidiaries, affiliates or JVs on an ongoing basis over and above
the specific terms of the Plan. Consequently, you understand that any stock option is given on the assumption and condition
that it shall not become a part of any employment contract (either with the Company or any of its subsidiaries, affiliates or
JVs) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other
right whatsoever. Further, you understand and freely accept that there is no guarantee that any benefit whatsoever shall arise
from any gratuitous and discretionary stock option since the future value of the stock options and shares is unknown and
unpredictable. In addition, you understand that the grant would not be made to you but for the assumptions and conditions
referred to above; thus, you acknowledge and freely accept that should any or all of the assumptions be mistaken or should any
of the conditions not be met for any reason, then any stock option grant shall be null and void.
You also understand and agree that, as a condition of the stock option grant, the termination of your employment for any
reason (including the reasons listed below), the stock option will cease vesting and any entitlement to exercise vested stock
options will start to run immediately effective on the date you are no longer providing services to the Employer or the
Company or any of its subsidiaries, affiliates or JVs unless otherwise specifically provided in the Terms. In particular, you
understand and agree that any unvested stock option or any vested stock option not exercised within the period set forth in the
“Termination of Employment” section in the Terms will be forfeited without entitlement to the underlying shares of Common
Stock or to any amount as indemnification in the event of a termination of your employment as described in the Terms prior to
vesting of the stock option by reason of, including but not limited to, resignation, retirement, disciplinary dismissal adjudged
to be with cause, disciplinary dismissal adjudged or recognized to be without good cause (i.e., subject to a “despido
improcedente”), individual or collective dismissal on objective grounds, whether adjudged or recognized to be with or without
cause, material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40
of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the Employer and under Article 10.3 of the
Royal Decree 1382/1985.
Securities Law Information
No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory
in connection with the grant of the stock option. The Plan and the Terms have not been nor will they be registered with the
Comisión Nacional del Mercado de Valores, and do not constitute a public offering prospectus.
Country
Additional Terms and Conditions and Notifications
Sweden
Authorization to Withhold
The following provision supplements the “Tax Withholding” section of the Terms:
Without limiting the Company’s and the Employer’s authority to satisfy their withholding obligations for Tax-Related Items as
set forth in the “Tax Withholding” section of the Terms, in accepting the stock option, you authorize the Company and/or the
Employer to withhold shares of Common Stock or to sell shares of Common Stock otherwise deliverable to you upon exercise
to satisfy Tax-Related Items, regardless of whether the Company and/or the Employer have an obligation to withhold such
Tax-Related Items.
Switzerland
Securities Law Information
The offering of participation in the Plan is considered a private offering in Switzerland; therefore, it is not subject to
registration in Switzerland. Neither this document nor any other materials relating to the Plan (i) constitute a prospectus
according to articles 35 et seq. of the Swiss Federal Act on Financial Services (“FinSA”), (ii) may be publicly distributed nor
otherwise made publicly available in Switzerland to any person other than an employee of the Company or Employer or (iii)
has been or will be filed with, approved or supervised by any Swiss reviewing body according to article 51 FinSA or any
Swiss regulatory authority, including the Swiss Financial Market Supervisory Authority.
United Kingdom
Tax Acknowledgment
You agree that you are liable for all Tax-Related Items and hereby covenant to pay all such Tax-Related Items, as and when
requested by the Company or, if different, your Employer or by HM Revenue and Customs (“HRMC”) (or any other tax
authority or any other relevant authority). You also agree to indemnify and keep indemnified the Company and, if different,
your Employer against any Tax-Related Items that they are required to pay or withhold or have paid or will pay to HMRC (or
any other tax authority or any other relevant authority) on your behalf.
Notwithstanding the foregoing, if you are a director or executive officer of the Company (within the meaning of Section 13(k)
of the U.S. Securities Exchange Act of 1934, as amended), the amount of any income tax not collected from or paid by you
within ninety (90) days of the end of the U.K. tax year in which the event giving rise to the Tax-Related Items occurs may
constitute a benefit to you on which additional income tax and National Insurance contributions may be payable. You
understand that you will be responsible for reporting and paying any income tax due on this additional benefit directly to
HMRC under the self-assessment regime and for paying to the Company and/or the Employer (as appropriate) the amount of
any employee National Insurance contributions due on this additional benefit, which may also be recovered from you through
any means set forth in the “Tax Withholding” section of the Terms.
GLOBAL TERMS AND CONDITIONS
2024 RETENTION RESTRICTED STOCK UNIT GRANT FOR RICHARD DELUCA
UNDER THE MERCK & CO., INC. 2019 INCENTIVE STOCK PLAN
I.
GENERAL. Merck & Co., Inc. (the “Company”) has granted to you the
Restricted Stock Unit (“RSU”) award specified in this document (“RSU
Award”) pursuant to the Merck & Co., Inc. 2019 Incentive Stock Plan,
including any sub-plan thereto for your country (the “Plan”). This RSU
Award is subject to the terms and conditions of the Plan and these Global
Terms and Conditions (the “Terms”). Unless otherwise defined in this
document, capitalized terms used in these Terms are as defined in the Plan.
Grant Type:
RSU - Annual
Grant Date:
April 30, 2024
Vesting Dates
Portion that
Vests
April 30, 2027
100%
IMPORTANT NOTICE: This grant requires you to affirmatively accept it. You MUST log onto the Morgan Stanley
website at (http://www.morganstanley.com/spc/knowledge/managing-equity/managing-your-existing-awards/accepting-
awards-grants/) to accept the grant.
Follow the procedures described on the Morgan Stanley website to accept your RSU Award within 90 days. Failure to
accept the terms and conditions of your RSU Award within 90 days may result in Forfeiture of the RSU Award.
A. Restricted (Vesting) Period. The Restricted Period is the period during which this RSU Award is subject to forfeiture. The restricted
period begins on the Grant Date and ends on the third anniversary of the Grant Date unless ended earlier under article II below. No voting
rights apply to this RSU Award. No fractional shares will be issued upon settlement of the RSU Award; all calculations are subject to
rounding.
B. Dividend Equivalents. During the period commencing on the Grant Date and ending on the date immediately prior to the date the RSU
Awards are settled in accordance with paragraph I(C), dividend equivalents will be accrued for the holder (“you”) if and to the extent
dividends are paid by the Company on Merck Common Stock. Payment of such dividends will be made in cash via local payroll, without
interest or earnings, at or around the time of distribution of the shares of Common Stock in settlement of the underlying RSUs. If any
portion of this RSU Award lapses, is forfeited or expires, no dividend equivalents will be credited or paid on such portion. Any payment
of dividend equivalents will be reduced to the extent necessary for the Company to satisfy any tax or other withholding obligations in
accordance with paragraph IV.
C. Distribution (Settlement of RSU Award). Upon vesting of the RSU Award (including as a result of the events set forth in Article II), you
(or your estate, in the event the RSU Award vests pursuant to paragraph II(E)) will be issued a number of shares of Merck Common Stock
equal to the number of RSUs (unless otherwise provided in paragraph II(H)) with respect to which the RSU Award has vested and the
dividend equivalents that accrued on that portion; provided, however, that in the event the RSU Awards vests upon a Change in Control
(as defined below) pursuant to paragraph II(H) that does not constitute a “change in control event” within the meaning of U.S. Treasury
Regulations
Section 1.409A-3(i)(5), the RSU Awards will instead be settled on the original Vesting Dates set forth in paragraph I(A). Any amount
required to be withheld, including amounts required to satisfy Tax-Related Items, in connection with the distribution of the RSU Award
(or otherwise arising from your participation in the Plan) will be recovered from you as described in paragraph IV.
D. 409A Compliance. Anything to the contrary notwithstanding, no distribution of RSUs may be made unless in compliance with Section
409A of the Code or any successor thereto. Specifically, distributions made upon or by reference to the date of an employment
termination shall not be paid unless such termination constitutes a “separation from service (as defined in Section 409A)” and any such
payment to a “Specified Employee” as defined in Treas. Reg. Sec. 1.409A-1(i) or any successor thereto, to the extent required by Section
409A of the Code will instead be made on the first day the seventh month following the separation from service, in the same form as they
would have been made had this restriction not applied; provided further, that dividend equivalents that otherwise would have accrued will
accrue during the period during which distribution is suspended.
E. Subject to Recoupment. This RSU Award will be subject to recoupment in the event of certain violations of Company policy in
accordance with the Company’s Policy and Procedures for Discretionary Recoupment of Compensation for Compliance Violations, as set
forth in Appendix A.1, and with the Company’s Policy and Procedures for Recoupment of Incentive-Based Compensation, applicable
only for Section 16 Officers, as set forth in Appendix A.2 (as may be amended from time to time).
II.
TERMINATION OF EMPLOYMENT
If your employment with the Company or, if different, the subsidiary, affiliate or joint venture (“JV”) of the Company by which you are
employed (the “Employer”) is terminated during the Restricted Period described in paragraph I(A), your right to the RSU Award will be
determined according to the terms in this Article II. For avoidance of doubt, if your employment terminates on a Vesting Date
not for misconduct, you will be entitled to vest in that unvested portion of the RSU Award that is
scheduled to vest on that Vesting Date.
A. General Rule. If your employment is terminated during the Restricted Period for any reason other than those specified in the following
paragraphs, the unvested portion of this RSU Award (and any accrued dividend equivalents) will be forfeited on the date your
employment terminates. If your employment is terminated as described in this paragraph and you are later rehired by the Company or the
Employer, as applicable, this grant nevertheless will expire according to this paragraph notwithstanding such rehire.
B. Involuntary Termination. If the Company determines that your employment is involuntarily terminated during the Restricted Period on
or after the first anniversary of the Grant Date, the RSU Award will vest on the Vesting Date with respect to a pro rata portion of your
unvested RSU Award and dividend equivalents that have accrued through the corresponding Vesting Date equal to (i) the total number of
RSUs subject to the RSU Award, multiplied by (ii) a fraction, numerator of which is equal to the number of completed monthly periods
during the period commencing on the Grant Date and ending the date employment terminates, and the denominator of which is 36. The
remaining portion, if any, of the RSU Award and any accrued dividends will be forfeited on the date your employment terminates. An
“involuntary termination” includes termination of your employment by the Company or the Employer, as applicable, as the result of a
restructuring or job elimination, but excludes non-performance of your duties and the reasons listed under paragraphs C through H of this
section. If your employment is terminated as described in this paragraph and you are later rehired by
the Company or the Employer, as applicable, this RSU Award nevertheless will be forfeited according to this paragraph notwithstanding
such rehire.
C. Sale. If your employment is terminated during the Restricted Period and the Company determines that such termination resulted from the
sale of your subsidiary, affiliate, division or JV, the RSU Award will continue to vest on the original Vesting Date set forth in paragraph
I(A) with respect to the following unvested portion of your RSU Award and dividend equivalents that have accrued through the
corresponding Vesting Date: if employment terminates on or after the Grant Date but before the first anniversary thereof, then one-third of
your RSU Award will vest on the Vesting Date; if employment terminates on or after the first anniversary of the Grant Date, the entire
RSU Award will vest on the Vesting Date. The remaining portion, if any, of the RSU Award that does not vest pursuant to the foregoing
sentence will be forfeited on the date your employment terminates. Notwithstanding the foregoing, the Committee may determine, for
purposes of this RSU Award, whether employment with an entity that is established from the Company’s spin off, split off, split up or
distribution of equity securities in connection with that entity constitutes a termination of employment, and may make adjustments, if any,
as it deems appropriate, and to the extent not inconsistent with the Plan, at the time of the distribution of such equity securities, in the kind
and/or number of shares subject to this RSU Award. If your employment is terminated as described in this paragraph and you are later
rehired by the Company or the Employer, as applicable, this RSU Award nevertheless will be forfeited according to this paragraph
notwithstanding such rehire.
D. Retirement. If your employment terminates by retirement during the Restricted Period, the unvested portion of this RSU Award and any
accrued dividend equivalents will be forfeited on the date your employment terminates. For grantees who are employed in the U.S.,
“retirement” means a termination of employment after attaining the earliest of (a) age 55 with at least 10 years of service (b) such age and
service that provides eligibility for subsidized retiree medical coverage or (c) age 65 without regard to years of service. For other
grantees, “retirement” is determined by the Company. If your employment is terminated as described in this paragraph and you are later
rehired by the Company or the Employer, as applicable, this grant nevertheless will expire according to this paragraph notwithstanding
such rehire.
E. Death. If your employment terminates due to your death during the Restricted Period but prior to an employment termination
contemplated under paragraphs B, C, D, G or H, the RSU Award will immediately vest, including dividend equivalents that have accrued
though such date. If you die during the Restricted Period, but after your employment terminates for the reasons listed under paragraphs B,
C, G or H of this section, the RSU Award will immediately vest with respect to the remaining, non-forfeited portion of this RSU Award
and dividend equivalents that have accrued through the date of death.
F.
Misconduct. If your employment is terminated as a result of your deliberate, willful or gross misconduct, this RSU Award and accrued
dividend equivalents will be forfeited immediately upon your receipt of notice of such termination.
G. Disability. If your employment is terminated during the Restricted Period and the Company determines that such termination resulted
from inability to perform the material duties of your role by reason of a physical or mental infirmity that is expected to last for at least six
months or to result in your death, whether or not you are eligible for disability benefits from any applicable disability program, then the
RSU Award will continue to vest on the original Vesting Date set forth in paragraph I(A). If your employment is terminated as described
in this paragraph and you are later
rehired by the Company or the Employer, as applicable, this RSU Award nevertheless will expire according to this paragraph
notwithstanding such rehire.
H. Change in Control. If this RSU Award is assumed, converted or otherwise remains outstanding in connection with a Change in Control
and your employment is terminated during the Restricted Period without Cause before the second anniversary of the closing of the
Change in Control, then the RSU Award will continue to vest on the original Vesting Date set forth in paragraph I(A) with respect to the
unvested portion of the RSU Award and dividend equivalents that have accrued through the corresponding Vesting Date. If this RSU
Award does not remain outstanding following the Change in Control and is not converted into a successor RSU, then the RSU Award will
immediately vest with respect to the portion of the RSU Award that is unvested as of the Change in Control and dividend equivalents that
have accrued though such date and, at the election of the Company, you will be entitled to receive cash for such portion of this RSU
Award in an amount equal to the fair market value of the consideration paid to Merck stockholders for a share of Merck Common Stock
in the Change in Control. On the second anniversary of the closing of the Change in Control, this paragraph shall expire. “Cause” and
“Change in Control” are defined in the Merck & Co., Inc. Change in Control Separation Benefits Plan (excluding an MSD Change in
Control).
I.
Transfer of Employment. Transfer of employment between the Company, a subsidiary, affiliate, JV, JV partner or affiliate of the
Company who provides services to the JV with such partner or affiliate or other entity in which the Company has determined that it has a
significant business or ownership interest (together, the “Company Group”) is not considered termination of employment for purposes of
this RSU Award. Such employment must be approved by the Company and contiguous with employment by the entity in the Company
Group you were employed by immediately prior to the relevant transfer. The terms set out in paragraphs A through H above shall continue
to apply to this RSU Award following a transfer of employment accordance with this section.
III.
TRANSFERABILITY
Prior to distribution pursuant to Article I(C), the RSU Award and any interest therein shall not be sold, assigned, transferred, pledged or
otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily, other than by will or the laws of descent and distribution
in connection with your death.
IV.
TAX WITHHOLDING
Regardless of any action the Company and/or the Employer take with respect to any or all income tax, social insurance, payroll tax, payment
on account or other tax-related items arising out of your participation in the Plan and legally applicable or deemed applicable to you (“Tax-
Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the
amount actually withheld by the Company and/or the Employer, if any. You further acknowledge that the Company and/or the Employer (i)
make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSU Award or
underlying shares of Common Stock, including, but not limited to, the grant, vesting or settlement of the RSU, the subsequent sale of shares
of Common Stock acquired upon the lapsing of the Restricted Period and the receipt of any dividends and/or dividend equivalents; and (ii) do
not commit and are under no obligation to structure the terms of the grant or any aspect of the RSU Award to reduce or eliminate your liability
for Tax-Related Items or achieve any particular tax result. Furthermore, if you have become subject to tax in more than one jurisdiction, you
acknowledge that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-
Related Items in more than one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, you shall pay or make arrangements satisfactory to the Company and/or
the Employer to satisfy any applicable withholding obligations or rights with regard to all Tax-Related Items. In this regard, you authorize the
Company and/or the Employer, or their respective agents, at their discretion, to satisfy the Tax-Related Items by one or a combination of the
following: (i) withholding from your wages or other cash compensation paid to you by the Company, the Employer and/or any subsidiary,
affiliate or JV of the Company; or (ii) withholding from proceeds of the sale of shares of Common Stock acquired at lapsing of the Restricted
Period either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization);
or (iii) withholding in shares of Common Stock to be issued upon lapsing of the Restricted Period; provided, however, that if you are a
Section 16 officer of the Company under the Exchange Act, then the Company will satisfy the Tax-Related Items (other than U.S. Federal
Insurance Contribution Act taxes or other Tax-Related Items which become payable in a year prior to the year in which shares of Common
Stock are issued upon settlement of the RSUs) by withholding in shares of Common Stock pursuant to (iii) above, unless the use of such
withholding method is problematic under applicable tax or securities law or has materially adverse accounting consequences, in which case,
the obligation for Tax-Related Items may be satisfied by a one or a combination of (i) or (ii) above.
The Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other
applicable withholding rates, including maximum applicable rates in your jurisdiction(s). In the event of over-withholding, you may receive a
refund of any over-withheld amount in cash (with no entitlement to the equivalent in Common Stock), or if not refunded, you may seek a
refund from the local tax authorities. In the event of under-withholding, you may be required to pay additional Tax-Related Items directly to
the applicable tax authority or to the Company and/or the Employer. If the obligation for Tax-Related Items is satisfied by withholding in
shares of Common Stock, for tax purposes, you will be deemed to have been issued the full number of shares of Common Stock subject to the
vested RSUs, notwithstanding that a number of the shares is held back solely for the purpose of paying the Tax-Related Items due as a result
of any aspect of your participation in the Plan.
You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to
withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described in this section.
The Company may refuse to issue or deliver the shares of Common Stock or the proceeds of the sale of shares if you fail to comply with your
obligations in connection with the Tax-Related Items.
V.
DATA PRIVACY
The Company is located at 126 East Lincoln Avenue, Rahway, NJ 07065, U.S.A. and grants employees of the Company and any subsidiary,
affiliate or JV of the Company, the opportunity to participate in the Plan, at the Company's sole discretion. If you would like to participate in
the Plan, you understand that you should review the following information about the Company’s data processing practices and declare your
consent.
A. Data Collection and Usage. The Company collects, processes and uses your personal data, including, name, home address, email address
and telephone number, date of birth, social insurance number or other identification number, salary, citizenship, job title, any shares of
Common Stock or directorships held in the Company, and details of all awards, canceled, vested, or outstanding in your favor, which the
Company receives from you or your Employer. If the Company offers you the opportunity to participate in the Plan, then the Company
will collect your personal data for purposes
of allocating Common Stock and implementing, administering and managing the Plan. The Company’s legal basis for the processing of
your personal data would be your consent.
B. Stock Plan Administration Service Providers. The Company transfers participant data to Morgan Stanley, an independent service provider
based in the United States, which assists the Company with the implementation, administration and management of the Plan. In the future,
the Company may select a different service provider and share your data with another company that serves in a similar manner. The
Company’s service provider will open an account for you. You will be asked to agree on separate terms and data processing practices with
the service provider, which is a condition to your ability to participate in the Plan.
C. International Data Transfers. The Company and its service providers are based in the United States. If you are outside of the United
States, you should note that your country has enacted data privacy laws that are different from the United States. The Company’s legal
basis for the transfer of your personal data is your consent.
D. Voluntariness and Consequences of Consent Denial or Withdrawal. Your participation in the Plan and your grant of consent is purely
voluntary. You may deny or withdraw your consent at any time. If you do not consent, or if you withdraw your consent, you cannot
participate in the Plan. This would not affect your salary as an employee; you would merely forfeit the opportunities associated with the
Plan.
E. Data Subject Rights. You have a number of rights under data privacy laws in your country. Depending on where you are based, your
rights may include the right to (i) request access or copies of personal data the Company processes, (ii) rectification of incorrect data, (iii)
deletion of data, (iv) restrictions on processing, (v) portability of data, (vi) to lodge complaints with competent authorities in your country,
and/or (vii) a list with the names and addresses of any potential recipients of the your personal data. To receive clarification regarding
your rights or to exercise your rights please contact the Company at Attn: Global Privacy Office, 351 N. Sumneytown Pike, North Wales,
Pennsylvania, U.S.A. 19454.
F.
The collection, use and transfer of your personal data for the purpose of implementing, administering and managing your participation in
the Plan is conducted in accordance with the Company’s Global Privacy and Data Protection Policy. You also understand that the
Company may, in the future, request you to provide another data privacy consent. If applicable and upon request of the Company, you
agree to provide an executed acknowledgement or data privacy consent form to the Company or the Employer (or any other
acknowledgements, agreements or consents) that the Company and/or the Employer may deem necessary to obtain under the data privacy
laws in your country, either now or in the future. You understand that you will not be able to participate in the Plan if you fail to execute
any such acknowledgement, agreement or consent requested by the Company and/or the Employer.
If you agree with the data processing practices described in this Article, you will declare your consent by clicking to "Accept" these Terms on
the Morgan Stanley website.
VI.
GOVERNING LAW
This document may be amended only by another written agreement between the parties. This document will be interpreted and enforced under
the laws of the State of New Jersey, United States (without regard to its choice-of-law provisions). For purposes of litigating any dispute that
arises directly or indirectly from the relationship of the parties evidenced by this grant or this document, the parties hereby submit to
and consent to the exclusive jurisdiction of the State of New Jersey and agree that such litigation shall be conducted only in the courts of
Union County, New Jersey, or the federal courts for the United States for the District of New Jersey, and no other courts, where this grant is
made and/or to be performed.
VII.
SEVERABILITY
The provisions of this document are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
VIII.
WAIVER
You acknowledge that a waiver by the Company of breach of any provision of these Terms shall not operate or be construed as a waiver of
any other provision of these Terms or of any subsequent breach by you or any other grantee.
IX.
ELECTRONIC ACCEPTANCE
The Company may, in its sole discretion, decide to deliver any documents related to the RSU or future RSUs that may be granted under the
Plan by electronic means or request your consent to participate in the Plan by electronic means. You hereby consent to receive such
documents by electronic delivery and agree to participate in the Plan through an online or electronic system established and maintained by the
Company or a third party designated by the Company.
X.
ADMINISTRATION
The Committee is responsible for construing and interpreting this grant, including the right to construe disputed or doubtful Plan provisions,
and may establish, amend and construe such rules and regulations as it may deem necessary or desirable for the proper administration of this
RSU Award. Any decision or action taken or to be taken by the Committee, arising out of or in connection with the construction,
administration, interpretation and effect of this RSU Award shall, to the maximum extent permitted by applicable law, be within its absolute
discretion (except as otherwise specifically provided herein) and shall be final, binding and conclusive upon the Company, all Eligible
Employees and any person claiming under or through any Eligible Employee. All determinations by the Committee including, without
limitation, determinations of the Eligible Employees, the form, amount and timing of Incentives, the terms and provisions of Incentives and
the writings evidencing Incentives, need not be uniform and may be made selectively among eligible employees who receive, or are eligible
to receive, Incentives hereunder, whether or not such Eligible Employees are similarly situated.
This RSU Award is subject to the provisions of the 2019 Incentive Stock Plan. For further information regarding your RSU Award, you may
access the Merck Global Long-Term Incentives homepage via Sync > HR > Money > Long-Term Incentive Program
APPENDIX A.1
Policy and Procedures for DiscreƟonary Recoupment of
CompensaƟon for Compliance ViolaƟons
Policy
It is the policy of the CompensaƟon and Management Development CommiƩee (the “CommiƩee”) of the Board of Directors (the “Board”) of Merck
& Co., Inc. (the “Company”) that the CommiƩee will exercise its discreƟon to determine whether to seek Recoupment of any Covered CompensaƟon
paid or awarded to an Affected Employee, where it determines, in consultaƟon with the Audit CommiƩee, that: a) the Affected Employee engaged in
misconduct, or failed to reasonably supervise an employee who engaged in misconduct, that resulted in a Material ViolaƟon; and b) the CommiƩee
concludes that the Material ViolaƟon caused Significant Harm to the Company.
DefiniƟons
An “Affected Employee” is an employee in Band 600 or higher who (i) engaged in misconduct that results in a Material ViolaƟon; or (ii) failed in his or
her supervisory responsibiliƟes to reasonably manage or monitor the conduct of an employee who engaged in misconduct that results in a Material
ViolaƟon.
“Covered CompensaƟon” means all (a) incenƟve-based cash compensaƟon granted to an Affected Employee, including, without limitaƟon, any
annual bonuses and other short- and long-term cash incenƟves, (b) equity-based compensaƟon, including, without limitaƟon, stock opƟons,
restricted stock, restricted stock units, performance share units (“PSUs”), (c) any proceeds or earnings received in respect of (a) and (b), and (d) any
other forms of compensaƟon that the CommiƩee determines to be subject to this policy. For the avoidance of doubt, the foregoing includes any
compensaƟon that was previously paid, earned, vested, deferred or paid or payable as a component of severance or terminaƟon compensaƟon.
“ExecuƟve” means current and former execuƟve officers of the Company, as “execuƟve officer” is defined for the purposes of the SecuriƟes
Exchange Act of 1934, as amended.
A “Material ViolaƟon” is defined as (i) a material violaƟon of a wriƩen Company policy relaƟng to the research, development, manufacturing, sales,
or markeƟng of Company products or (ii) conduct detrimental to the Company, including the Company’s overall goodwill or reputaƟon.
“Recoupment” is defined to include any and all of the following acƟons to the extent permiƩed by law: (a) reducing the amount of a current or
future bonus or other cash or noncash incenƟve compensaƟon award, (b) requiring reimbursement of a bonus or other cash-based incenƟve
compensaƟon award paid with respect to the most recently completed performance period, (c) cancelling all or a porƟon of a future-vesƟng equity
award, (d) cancelling all or a porƟon of an equity award that vested within the previous twelve-month period, (e) requiring return of shares paid
upon vesƟng and/or reimbursement of any proceeds received from the sale of an equity award, in each case that vested within the previous twelve-
month period, and (f) any other method of reducing the total compensaƟon paid to an employee for any prior twelve-month period or any current
or future period.
“Significant Harm” means a significant negaƟve impact on the Company’s financial operaƟng results or reputaƟon.
Procedures
Subject to any delegaƟon to the Chief ExecuƟve Officer, as discussed below, the CommiƩee, acƟng in consultaƟon with the Audit CommiƩee, shall
administer this policy and have full discreƟon to interpret and to make any and all determinaƟons under this policy. Any determinaƟons made by the
CommiƩee shall be final, binding, and conclusive on all parƟes. Notwithstanding the foregoing, the full Board shall approve any determinaƟon to
seek or waive Recoupment from the Chief ExecuƟve Officer.
The General Counsel, in consultaƟon with the Chief Ethics and Compliance Officer and the ExecuƟve Vice President, Human Resources, is responsible
for determining whether to refer a maƩer to the CommiƩee for review under this policy and for assisƟng the CommiƩee with its review. In
administering this policy, the
CommiƩee may consult with other commiƩees of the Board and any external or internal advisors as it deems appropriate.
If the CommiƩee, acƟng in consultaƟon with the Audit CommiƩee, determines that there is a basis for seeking Recoupment under this policy, the
CommiƩee shall exercise its discreƟon to determine for each Affected Employee, on an individual basis, whether, and to what extent and in which
manner, to seek Recoupment.
In exercising its discreƟon, the CommiƩee may take into consideraƟon, as it deems appropriate, all of the facts and circumstances of the parƟcular
maƩer and the general interests of the Company.
DelegaƟon to Management for Recoupment Decisions
The CommiƩee may delegate to the Chief ExecuƟve Officer (who may further delegate as deemed appropriate) the authority to administer this
policy and to make any and all decisions under it regarding Affected Employees who are not ExecuƟves of the Company. Management shall report to
the CommiƩee on any affirmaƟve decisions to seek Recoupment pursuant to this delegaƟon of authority.
Public Disclosures
The Company will comply with all applicable securiƟes laws and regulaƟons, including SecuriƟes and Exchange Commission disclosure requirements
regarding execuƟve compensaƟon and any applicable New York Stock Exchange lisƟng standard or requirements, with respect to this policy. The
Company may also, but is not obligated to, provide addiƟonal disclosure beyond that required by law when the Company deems it to be appropriate
and determines that such disclosure is in the best interest of the Company and its shareholders.
Miscellaneous
Nothing in this policy shall limit or otherwise affect any of the following: 1) management’s ability to take any disciplinary acƟon with respect to any
Affected Employee; 2) the CommiƩee’s ability to use its negaƟve discreƟon with respect to any incenƟve compensaƟon performance target at any
Ɵme; or 3) the CommiƩee’s or management’s ability to reduce the amount (in whole or in part) of a current or future bonus or other cash or non-
cash incenƟve compensaƟon award to any Affected Employee for any reason as they may deem appropriate and to the extent permiƩed by law. Any
right of Recoupment under this policy is in addiƟon to, and not in lieu of, any other remedies or rights of Recoupment that may be available to the
Company pursuant to the terms of any similar policy in any incenƟve plan, employment agreement, equity award agreement, or similar agreement,
including, without limitaƟon, the Company’s Policy and Procedures for Recoupment of IncenƟve-Based CompensaƟon, and any other legal remedies
available to the Company. The Company shall not indemnify or agree to indemnify any current or former ExecuƟve against the loss of incenƟve
compensaƟon subject to this policy nor shall the Company pay or reimburse or agree to pay or reimburse any insurance premium to cover the loss of
such incenƟve compensaƟon. The CommiƩee may amend, modify, or terminate this policy in whole or in part at any Ɵme and from Ɵme to Ɵme in
its sole discreƟon.
APPENDIX A.2
Policy and Procedures for Recoupment of
IncenƟve-Based CompensaƟon
Policy
The CompensaƟon and Management Development CommiƩee (the “CommiƩee”) of the Board of Directors (the “Board”) has adopted this
IncenƟve-Based CompensaƟon Recoupment Policy (the “Policy”) to comply with SecƟon 10D of the SecuriƟes Exchange Act of 1934, as amended
(the “Exchange Act”), Rule 10D-1 promulgated thereunder (“Rule 10D-1”) and Paragraph 303A.14 of the LisƟng Standards Manual of the New York
Stock Exchange (“NYSE”), which require the recovery of certain IncenƟve-Based CompensaƟon in the event of an accounƟng restatement resulƟng
from a material error in the consolidated financial statements of Merck & Co, Inc. (the “Company”). This Policy shall be administered by the
CommiƩee, which shall have express discreƟonary authority to interpret and construe this Policy and to make all determinaƟons with respect to this
Policy, in its sole discreƟon. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of SecƟon 10D of the
Exchange Act and Rule 10D-1 (or any successor statute or rule) and any other applicable rules or lisƟng standards adopted by the U.S. SecuriƟes and
Exchange Commission (the “SEC”) or NYSE. All interpretaƟons, construcƟons and determinaƟons made by the CommiƩee under this Policy shall be
final and binding on all parƟes. This Policy may be amended with the approval of the CommiƩee and may be amended from Ɵme to Ɵme as
necessary to reflect changes in applicable regulaƟons and/or lisƟng standards adopted by the SEC or NYSE. Compliance with this Policy cannot be
waived.
DefiniƟons
"AccounƟng Restatement” is the restatement of the Company’s financial statements due to material noncompliance with any financial reporƟng
requirement under the federal securiƟes laws, including any required accounƟng restatement to correct an error in previously issued financial
statements (i) that is material to the previously issued financial statements, or (ii) that would result in a material misstatement if the error were
corrected in the current period only or leŌ uncorrected in the current period.
A “Covered Officer” is anyone who serves or has served as an execuƟve officer of the Company at any Ɵme during the performance period for
IncenƟve-Based CompensaƟon.
“ExecuƟve officer” is the equivalent to an “officer” as defined under SecƟon 16a-1(f) of the Exchange Act (“SecƟon 16 officer”).
“Financial reporƟng measure” is a measure that is (i) determined and presented in accordance with the accounƟng principles used in preparing the
Company’s financial statements, or (ii) derived wholly or in part from such measures. For purposes of this Policy, the term “financial reporƟng
measure” includes the Company’s stock price and total shareholder return, whether expressed as an absolute or relaƟve metric. For the avoidance
of doubt, a financial reporƟng measure need not be presented in the Company’s financial statements or included in a filing with the SEC.
“IncenƟve-Based CompensaƟon” is any compensaƟon that is granted, earned, or vested based wholly or in part upon the aƩainment of a financial
reporƟng measure. IncenƟve-Based CompensaƟon may include awards under the ExecuƟve IncenƟve Plan and Performance Share Units under the
Merck & Co., Inc. 2019 Stock IncenƟve Plan, or any successor thereto. IncenƟve-Based CompensaƟon does not include (i) base salary; (ii) “sign-on”
bonuses or other compensaƟon granted solely due to the commencement of employment with the Company; (iii) compensaƟon exclusively based
on compleƟon of a specific period of employment or service, without any performance condiƟon; or (iv) compensaƟon awarded based on
subjecƟve, non-financial, strategic, or operaƟonal measures that are not financial reporƟng measures.
IncenƟve-Based CompensaƟon is deemed to be “received” in the fiscal period during which the financial reporƟng measure specified in the
IncenƟve-Based CompensaƟon award is aƩained, even if the payment or grant of the IncenƟve-Based CompensaƟon occurs aŌer the end of that
fiscal period. IncenƟve-Based CompensaƟon in the form of an equity award that vests solely upon the basis of a financial reporƟng measure
performance condiƟon will be deemed to be received in the fiscal period in which it vests.
“Recoupment Period” is the three completed fiscal years of the Company immediately preceding the date, and any transiƟon period of less than nine
months that results from a change in the Company’s fiscal year within or immediately following those three completed fiscal years, on which the
Company is required to perform an AccounƟng Restatement, which date is the earlier of (i) the date the Board, or a commiƩee of the Board,
concludes, or reasonably should have concluded, that the Company is required to perform an AccounƟng Restatement; or (ii) a date that a court,
regulator or other legallyauthorized body directs the Company to perform an AccounƟng Restatement.
Procedures for Recoupment of IncenƟve-Based CompensaƟon
In the event the Company is required to perform an AccounƟng Restatement, the Company shall, as promptly as reasonably possible, recoup any
IncenƟve-Based CompensaƟon erroneously received by a Covered Officer during the Recoupment Period. The amount of erroneously received
IncenƟve-Based CompensaƟon will be the excess of the IncenƟve-Based CompensaƟon received by the Covered Officer (whether in cash or in
shares) based on the erroneous data in the original financial statements over the IncenƟve-Based CompensaƟon (whether in cash or in shares) that
would have been received by the Covered Officer had it been based on the restated results, without respect to any tax liabiliƟes incurred or paid by
the Covered Officer. For IncenƟve-Based CompensaƟon based on total shareholder return or Company stock price, where the amount of erroneously
awarded compensaƟon is not subject to mathemaƟcal recalculaƟon directly from the informaƟon in the AccounƟng Restatement, the amount shall
be based on the CommiƩee’s reasonable esƟmate of the effect of the AccounƟng Restatement on the applicable measure and the CommiƩee shall
maintain documentaƟon of the determinaƟon of that reasonable esƟmate and provide it to the NYSE. Notwithstanding the foregoing, IncenƟve-
Based CompensaƟon shall not be recouped under this Policy to the extent received by any person before the date such person served as a Covered
Officer.
The CommiƩee shall determine, in its sole discreƟon, the method of recouping any erroneously received IncenƟve-Based CompensaƟon pursuant to
this Policy.
No recoupment shall be required if any of the following condiƟons are met and the CommiƩee determines that, on such basis, recovery would be
impracƟcable: (i) the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recouped, which
determinaƟon must be made only aŌer a reasonable and documented aƩempt by the Company to recoup the IncenƟve-Based CompensaƟon (with
documentaƟon of such reasonable aƩempt to recover to be provided to the NYSE); (ii) recovery would violate home country law where that law was
adopted prior to November 28, 2022, which determinaƟon must be made only aŌer the Company has obtained an opinion of home country counsel,
acceptable to the NYSE, that recovery would result in such violaƟon (with a copy of such opinion to be provided to the NYSE); or (iii) recoupment
would likely cause an otherwise tax-qualified reƟrement plan, under which benefits are broadly available to Company employees, to fail to meet the
requirements of SecƟon 401(a)(13) or SecƟon 411(a) of the Internal Revenue Code of 1986, as amended, and U.S. Treasury regulaƟons promulgated
thereunder.
IndemnificaƟon Not PermiƩed
The Company shall not indemnify any current or former Covered Officer against the loss of erroneously awarded compensaƟon, and shall not pay, or
reimburse any Covered Officer for, premiums incurred or paid for any insurance policy to fund such Covered Officer’s potenƟal recoupment
obligaƟons.
Disclosure of Recoupment Decisions
The Company will comply with all applicable securiƟes laws and regulaƟons, including SEC disclosure requirements, with respect to this Policy, and
any applicable NYSE lisƟng standard or requirements. The Company may also, but is not obligated to, provide addiƟonal disclosure beyond that
required by law when the Company deems it to be appropriate and determines that such disclosure is in the best interest of the Company and its
shareholders.
EffecƟve Date
This Policy shall be effecƟve as of December 1, 2023 (the “EffecƟve Date”). The terms of this Policy shall apply to any IncenƟve-Based CompensaƟon
that is received by Covered Officers on or aŌer the EffecƟve Date, even if such IncenƟve-Based CompensaƟon was approved, awarded, granted, or
paid to Covered Officers prior to the EffecƟve Date.
Miscellaneous
Nothing in this Policy shall limit or otherwise affect any of the following: 1) management’s ability to take any disciplinary acƟon with respect to any
Covered Officer; 2) the CommiƩee’s ability to use its negaƟve discreƟon with respect to any IncenƟve-Based CompensaƟon performance target at
any Ɵme; or 3) the CommiƩee’s or management’s ability to reduce the amount (in whole or in part) of a current or future bonus or other cash or
non-cash incenƟve compensaƟon award to any execuƟve or other employee for any reason as they may deem appropriate and to the extent
permiƩed by law. Any right of recoupment under this Policy is in addiƟon to, and not in lieu of, any other remedies or rights of recoupment that may
be available to the Company pursuant to the terms of any similar policy in any incenƟve plan, employment agreement, equity award agreement, or
similar agreement and any other legal remedies available to the Company. This Policy shall be binding and enforceable against all Covered Officers
and their beneficiaries, heirs, executors, administrators, or other legal representaƟves.
Confidential
January 16, 2024
Dear Betty,
It is my pleasure to offer you a position with Merck Sharp & Dohme LLC (“MSD” or the “Company”), a wholly-owned subsidiary of Merck & Co., Inc. (“Merck”), as its
EVP. Chief Human Resources Officer (the “Position”) on the terms and conditions set forth in this offer letter (“letter” or “offer letter”). We are a global health care leader
with a diversified portfolio of prescription medicines, vaccines and animal health products. Today we are building a new kind of healthcare company - one that is ready to
help create a healthier future for all of us.
Our ability to excel depends on the integrity, knowledge, imagination, skill, diversity and teamwork of people like you. We strive to create an environment of mutual respect,
encouragement and teamwork that enables our employees to achieve our mission. As part of our global team, you'll have the opportunity to collaborate with talented and
dedicated colleagues while developing and expanding your career.
Your position is subject to the approval of your appointment by the full Board of Directors of Merck. If approved, you will report to me, will be a member of the Executive
Team and will be an Officer of Merck (as defined in Section 16 of the Securities Exchange Act of 1934). The Position will be based at our corporate headquarters in Rahway.
NJ.
Our offer includes the following:
Total Compensation
Base Salary: You will be paid a gross annual salary of $800,000. This will be paid (bi-weekly) at a rate of approximately $30,769 per pay period. Your base salary will
be subject to applicable payroll deductions and withholdings.
Executive Incentive Plan (EIP): You will be eligible to participate in the Executive Incentive Plan (EIP) as it applies to similarly situated employees, subject to the
terms of the plan. The target bonus for performance year 2024 for the Position is 100% of your annual base salary. The bonus is discretionary and the amount of the
bonus, if any, will be determined based on Merck performance. To be eligible for an EIP award, you must be actively employed on or before October I and remain
actively employed through December 31 of the plan year. Your EIP award, if any, will be pro-rated based on the time you were in an EIP-eligible position during that
plan year. Bonuses, if any, for the current performance year will be paid in or about March of the following year.
Long-Term Incentive (LTI) Program: You will be eligible for consideration for annual grants of stock based incentives under the Incentive Stock Plan beginning in
the year you begin employment and, for as long as you remain employed, for each annual cycle thereafter. For Executive Team members, annual grants generally
include a mix of non-qualified stock options and performance share units (PSUs), with the number and proportion of shares covered by such incentives determined by
the Compensation and Management Development Committee of the
Page 1 of 8
Confidential
Board of Directors of Merck (the "Committee"). The current annual grant value for the Position is $2,650,000, comprised of 70% PSUs and 30% non-qualified stock
options. The exact number of shares granted will be determined based on the value of Merck stock on the date of grant. Currently, annual grants of Merck & Co., Inc.
stock options vest in equal installments over three years and PSUs are subject to a 3-year performance period. For clarity, you will be eligible for a 2024 annual grant
provided that you commence employment on or before May 1,2024 and the grants will be made at the same time grants are made for similarly situated employees,
except that, in the event that your employment begins after the grant date for PSUs (generally the last business day in March), the PSU portion of your 2024 grant will
be made as soon as administratively feasible after your start date.
Distribution of shares in connection with PSUs and stock options is dependent on continued employment with Merck, MSD or one of Merck or MSD's subsidiaries
("Merck Entity"); additionally, the level of PSU payout is contingent on Merck performance. Please note that the value and terms and conditions of any future grants may
change from time to time. The specific terms and conditions of your grant(s) will be provided to you shortly after the grant(s) are made.
You will be subject to our stock ownership guidelines. The guidelines are intended to reinforce our philosophy concerning "ownership" and. in a concrete way, quantify
our expectations concerning ownership of Merck. The guidelines provide that you should acquire Merck stock, over time, equal in value to three times your annual base
salary. Importantly, the LTI program - and retention of shares earned in connection therewith - is intended to facilitate the acquisition of shares. Also, there is no required
time frame under which you will be required to achieve your stock ownership requirement, however, you will be subject to a 75% retention requirement until you
achieve the required base salary multiple.
Sign-On Incentives
Sign-On Cash: You will receive a cash sign-on bonus in the aggregate amount of $725,000, less applicable payroll deductions and withholdings, payable within thirty
days of your start date. Your right to retain the sign-on bonus is conditioned upon your continued employment with a Merck Entity for two years. By your signature
below, you agree that, if prior to completing two years of employment, you voluntarily terminate your employment with a Merck Entity without Good Reason, as defined
below, or if a Merck Entity terminates your employment for Cause, as defined below, you will reimburse the full amount of the sign-on bonus ("Repayment Obligation").
You further authorize the Company to withhold any and all monies otherwise owed to you, to the extent permitted by law, as payment against such Repayment
Obligation. In such case, such monies will be credited towards the Repayment Obligation, but will not relieve you of your obligation to pay the balance of any
Repayment Obligation.
"Cause" as used in this offer letter means an act or omission by you, which constitutes: (i) a deliberate (and not justified and appropriate in the performance of your
duties) or reckless disclosure of proprietary or other confidential information relating to a Merck Entity, its personnel, research or business; (ii) embezzlement, theft or
other misappropriation of the assets of a Merck Entity; (iii) deliberate or reckless falsification of records or reports; (iv) deliberate bad faith or reckless action that causes
actual or potential significant injury or loss to a Merck Entity and/or its and/or their employees; (v) insubordination (meaning the repeated refusal to carry out work
assignments and/or direction); (vi) willful or repeated failure to perform assigned job duties; (vii) an illegal act on the property of a Merck Entity or in representing a
Merck Entity; (viii) a material violation of a Company policy relating to the research, development, manufacturing, sales, or marketing of Company products or the
overall goodwill of reputation of he Company; (ix) any action that would trigger the claw back provisions of any Bonus or Long-Term Incentive Plans applicable to you;
or a (x) breach by you of your representations as set forth in this letter.
“Good Reason” is defined to include the following: a) a material reduction in your total direct compensation (base salary, target bonus and/or) target LTI) without your
consent, unless such reduction is part of an across-the-board
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Confidential
reduction affecting other Executive Team members in similar proportions, b) your involuntary reassignment to any position other than a position on the Executive Team
reporting to the Company's Chief Executive Officer within the period beginning on date of hire and ending when the Sign-on Equity Grant has vested fully, c) a demand
by the Company that you relocate to New jersey within the period beginning on date of hire and ending when the Sign-on Equity Grant has vested fully, or d) a material
breach of this letter, provided that you deliver written notice of n claim of Good Reason to the Company's Chief Executive Officer within thirty(30) days of the facts
giving rise to within Good Reason. MSD fails to cure the circumstances giving rise to Good Reason within thirty (30) days of receiving such notice and you actually
terminate employment within thirty (30) days after MSD's failure to cure.
Sign-On Equity: Yaw will receive total sign-on equity incentive valued at approximately $5,900,000.
Restricted Stock Unit (RSUs) Grant
You will receive an RSU grant valued at approximately $4,400,000. Merck & Co., Inc. RSU grants are currently scheduled to be made shortly after the release of
company earnings each quarter. The date of your grant will be the quarterly grant date immediately following your start date. Subject to is terms, this RSU grant will
vest one-third on each anniversary of the grant date. A summary of terms and conditions associated with this RSU grant will be provided to you shortly after she
grant is made*.
Stock Option Grant
You will receive a stock option grant valued at approximately $1,500,000. Merck & Co., Inc. stock option grants are currently scheduled to be made shortly after the
release of company earnings each quarter. The date of your grant will be the quarterly grant date immediately following your start date. Subject to is terms, thus
stock option grant will vest in equal installments on the first. second and third anniversaries of the grant date and expire on she day before she tenth anniversary of
the grant date. A summary of terms and conditions associated with this stock option grant will be provided to you shortly alter the grant is made.
Contingent Sign-On Bonus. It is our understanding that you believe that accepting our offer of employment may result in you being required to repay a sign-on bonus
and/or relocation monies provided so you by your current employer It is also our understanding that should your current employer terminate your employment, as a result
of your providing notice of your intent to accept our offer of employment. then you may forfeit a performance bonus for calender year 2023 should such termination
occur prior so the time such bonus is paid and you may forfeit certain equity compensation due to vest on March 1.2024 should such termination occur prior to March
1,2024. In the event of such repayment obligations and/or forfeitures, subject to the conditions act forth in Appendix I, MSD would provide you with an additional sign-
on bonus to cash, at its discretion.
Benefits
Health and Insurance Benefits Program: You will be eligible to participate in the Health and Insurance Benefits Program, which automatically provides you with basic life
insurance and short-term disability coverage. It also allows you to choose from various options including medical, dental, vision, voluntary and dependent life insurance,
long-term disability and flexible spending accounts. For most benefits, participation begins on your date of hire. The Benefits Service Center at Fidelity will mail a Benefits
New Hire Package to you within 2 weeks of your hire date. This Package provides important information and instructions for enrolling in your benefits. You will have 30
days from the date Fidelity mails your benefits information to enroll. If you do not enroll by the date indicated in the Package, you automatically will be enrolled in medical
coverage for you only in the Horizon BlueCross BlueShield PPO plan option (which includes prescription drug coverage), dental coverage for you only, company-provided
basic life insurance and short-term and long-term disability coverage. If you enroll dependents under your medical coverage, you will receive an e-mail and/or letter from
HMS Employer Solutions (an independent third-party vendor designated to conduct dependent eligibility
Page 3 of 8
Confidential
verifications) requesting documentation to verify your dependent eligibility. Failure to respond or provide required documentation within the required timeframe will result in
the removal of your dependent(s) from benefits coverage.
Pension Plan: You will be eligible to participate in the tax-qualified and non-qualified U.S. Pension Plan, which is a defined benefit pension plan that uses a cash balance
formula to calculate your benefit. Your benefit is expressed as a notional account balance that grows with annual Pay Credits ranging from 4.5% to 10.0% of your total pay
(based on age and service) and Interest Credits of 3% plus the annual rate of change in the Consumer Price Index (not less than 3.3%). You are 100% vested in your Pension
Plan benefit after three years of service.
401(k)/Savings Plan: You will be eligible to participate in the U.S. Savings Plan (“Savings Plan”). You will be mailed a separate enrollment kit for the Savings Plan from the
Company Benefits Service Center at Fidelity. You may contribute to the Savings Plan on a before-tax, Roth, and after-tax basis. The Savings Plan provides a 75% match of
the first 6% of total pay (4.5% of total pay) that you contribute per pay period (subject to plan limits and IRS limits). If you do not make an active election within 60 days of
your hire date, you automatically will be enrolled to contribute 6% base pay and 6% EIP on a before-tax basis, with an annual increase of 1% until you reach a contribution
rate of 10%. To maximize the company match, you must contribute at least 6% of your base pay and 6% of your EIP. You are always fully vested in your Savings Plan
account.
Deferral Program: Beginning in 2025. you will be eligible to defer (1) a portion of your base salary and or (2) all or part of your EIP bonus, if any. You will receive detailed
information just prior to the annual enrollment period in December 2024. In addition, the company will contribute 4.5% of your eligible pay exceeding the Internal Revenue
Code pay limit to an account established on your behalf.
Financial Planning: You will be eligible to participate in the executive financial planning program, which provides an annual cash allowance of $10,000 payable in
December of each calendar year. If your start date is on or before October 1 of this calendar year, you will be eligible to commence this benefit in the same calendar year. If
you start after October 1, you will be eligible to commence the benefit in the subsequent calendar year.
Vacation and Paid Holiday Policy: You will be eligible for 25 vacation days per year in accordance with Company policy, as well as 12 company paid holidays and 4 year-
end shutdown days between the Christmas and New Year’s Day holidays. The number of vacation days for which you are eligible in your first year of employment is
dependent upon your date of hire.
Military Reservists: Merck is a Military Friendly Employer and we proudly offer a generous military leave policy for those that are eligible.
Workplace Accommodations: We support employees of all abilities. The Company’s Workplace EnABLEment program offers employees the resources they need to
contribute at the highest level and to advance the business goals of the Company. If you need an accommodation, contact the Workplace Accommodation Team via email at
workacc@merck.com or by phone at 1-866-675-4748.
Relocation: You will be eligible for benefits under our Domestic Relocation Project Assignment Policy for a period of 36 months from your start date. As part of our standard
domestic relocation project assignment benefits. MSD will pay or reimburse you for certain expenses in accordance with this Policy including corporate housing, rental car
and two trips home per month. A global mobility representative will be assigned to you and will be available to explain your specific benefits as well as address any questions
you may have.
Page 4 of 8
Confidential
Severance: As an employee of MSD, you will be an employee at-will. This means that either you or MSD may terminate the employment relationship at any time for any
lawful reason or for no reason. In order to accommodate any concerns you may have in joining MSD, MSD agrees that in the event MSD terminates your employment for a
reason other than Cause (as defined above) or you terminate your employment for Good Reason (as defined above) prior to such time when all of your Sign-On Equity is
fully vested, then you will be entitled to continue to vest in the Sign-On Equity granted to you (“Severance Benefit”); provided that your right to receive the Severance
Benefit would be conditioned upon your signing and refraining from revoking a Severance Agreement in a format prescribed by MSD, which Agreement will contain a full
release, non-solicitation, non-disclosure, non-disparagement and cooperation in litigation covenants and such other reasonable and customary terms as MSD provides. This
Severance Benefit would be in addition to any other severance or separation pay that you may be entitled to under any applicable plan or policy of MSD or Merck.
Change in Control
Merck has adopted a “Change in Control” (CIC) Program. The Merck CIC Program specifies the types of compensation and benefits-related protections to be provided to
eligible Merck employees in the event of a change in control of Merck & Co., Inc. You will participate as an Executive Team member at the band level applicable under the
program.
Right to Amend or Terminate Plans, Programs and Policies
The compensation and benefits described in this letter are provided under and subject to the terms and conditions of the applicable plans, programs and policies of MSD,
Merck and/or the applicable Merck Entity. Nothing in this letter in any way limits the right of Merck & Co., Inc. and/or a Merck Entity to amend or terminate those plans,
programs or policies.
Section 409A
This offer letter shall be interpreted to comply with section 409A of the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder (“section
409A”) or an exemption thereto. Notwithstanding anything in this offer letter to the contrary, payments made pursuant to the offer letter may only be made in a manner and
upon an event permitted by section 409A, and all payments to be paid to you upon termination of employment may only be made upon a “separation from service” as defined
under section 409A. if section 409A applies to payments under this offer letter, this offer letter shall be administered in accordance with section 409A, including the six-
month delay for “specified employees,” if applicable. Each payment under this offer letter, that is part of a series of installment payments, shall be treated as a separate
payment for purposed of 409A. In no event may you, directly or indirectly, designate the calendar year of any payment. You are solely responsible for any taxes under this
offer letter and in no event will Merck have any liability with respect to any tax, interest or other penalty imposed under section 409A.
Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this offer letter (or otherwise referenced
herein) is determined to be subject to (and not exempt from) section 409A. the amount of any such expenses eligible for reimbursement, or the provision of any in-kind
benefit. in one calendar year will not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other calendar year, in no event will any
expenses be reimbursed after the last day of the calendar year following the calendar year Or which you incurred such expenses, and in no event will any right to
reimbursement or the provision of any in-kind benefit be subjected to liquidation or exchange for another benefit.
Representations
This offer is made to you based upon your representations that (i) your employment with Merck will not conflict with, or result in the breach of, or violation of, any other
agreement, instrument, order, judgment or decree to which you are a party
Page 5 of 8
Confidential
or by which you are bound, and (ii) you are not a party to or bound by any employment agreement, non-compete agreement or confidentiality agreement with any other
person or entity that would restrict your employment with Merck and not provided to Merck for its independent review.
The compensation and benefits described in this letter are provided under and subject to the terns and conditions of the applicable plans, programs and policies of Merck
Sharp & Dohme Corp. Nothing in this letter in any way limits the right of Merck Sharp & Dohme Corp . to amend or terminate those plans, programs or policies.
The Company does not require vaccination against COVID-19 as a condition of employment at this time. Company policy with respect to COVID-19 however, is subject to
change as the virus evolves. Where permitted by applicable law, the Company reserves the right to require COVID-19 (or other) vaccinations where the Company, in its
discretion, determines such a requirement is necessary to protect the health and safety of its workforce and/or the general public. Any such policy change will be accompanied
by an exemption process as required by law. All Company employees will be expected to abide by any such policies as they may be developed and implemented.
By your signature below, you affirm that these representations are true.
In addition to Board approval for your position appointment, this offer is contingent upon your successful completion of a pre-placement drug screen, satisfactory verification
of your employment, education, criminal check, satisfactory references and background check results and if applicable, proof of your eligibility to work in the United States.
(A List of Acceptable Documents that establishes your eligibility to work in the U.S., which you are required to bring with you on your first day of work, will be forwarded to
you upon your acceptance of the offer). Your employment with Merck is at-will (meaning that you and the Company remain free to end the employment relationship at any
time, for any lawful reason, either with or without prior notice) and additionally will be subject to certain terms and conditions of employment, which have been provided to
you with this offer. We advise you not to alter your current employment status until all of the shall be have been satisfied. Nothing herein shall be construed as contract
for a specific duration between you and the Company.
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Confidential
Please call Steve Mizell at 732-594-8888 upon receipt of this letter to acknowledge your acceptance of this offer and to begin your “on boarding” process for employment
based on the successful completion of the above contingencies. In addition, please print, sign, scan and return this offer letter via email to Steve at
steven.mizell@merck.com.
With your abilities and experience, I know you will be able to contribute to the Company and benefit from its growth. I believe this position offers an outstanding career
opportunity and look forward to your acceptance.
Sincerely
Robert Davis
I accept the employment offer and its terms contained in this letter.
Page 7 of 8
Confidential
Appendix 1
In the event of repayment obligations and/or forfeitures as described in the Contingent Sign-On Bonus section above. MSD would provide you with an additional sign-on
bonus in cash equal to the sum of:
(A) The amount of sign-on bonus you are required to repay your current employer but in no event more than S675,000, provided that you (i) provide to the Company
a copy of any and all correspondence demanding such repayment; (ii) have offered to stay at your current employer through the date that would relieve you of
any repayment obligation; (iii) have refrained from any conduct that would have made you otherwise ineligible for payment;; and (iv) provide the Company with
proof that you actually tendered any demanded repayment; plus
(B) The amount of relocation monies you are required to repay your current employer, provided that you (i) provide to the Company a copy of any and all
correspondence demanding such repayment; (ii) have offered to stay at your current employer through the date that would relieve you of any repayment
obligation; (iii) have refrained from any conduct that would have made you otherwise ineligible for payment; and (iv) provide the Company with proof that you
actually tendered any demanded repayment; plus
(C) The amount of your 2023 performance bonus forfeited because you were terminated due to our offer of employment prior to the time such bonus payment
became payable, provided that you (i) provide to the Company a copy of the applicable plan document as well as documentation establishing the amount of
bonus at issue; (ii) have offered to stay at your current employer through the date required for payment under the applicable plan; and (iii) have refrained from
any conduct that would have made you otherwise ineligible for payment; plus
(D) The amount of equity forfeited because you were terminated due to our offer of employment prior to March 1, 2024, as determined by number of shares that
would have vested multiplied by your current company's closing price as of March 1, 2024, provided that you (i) provide to the Company a copy of the
applicable equity terms; (ii) have offered to stay at your current employer through the date required for vesting under the applicable equity grant terms; and (iii)
have refrained from any conduct that would have made you otherwise ineligible to vest in the grant (collectively the “Contingent Bonus”).
Merck will pay the Contingent Sign on Bonus, if at all, in a reasonable period of time after it is satisfied that all conditions applicable to any element of the Contingent
Sign-On Bonus that may be at issue have been met. You acknowledge that your right to retain any portion of any Contingent Sign-On Bonus is conditioned upon your
continued employment with MSD or a Merck Entity for twenty-four months after such cash payment. By your signature above, you agree that, in the event that MSD or a
Merck Entity terminates your employment for Cause (as defined in the Offer Letter) or in the event that you terminate your employment for any reason other than Good
Reason within the twenty-four-month period following the payment of the Contingent Sign-On Bonus (such obligation also a “Repayment Obligation"), you will reimburse
the full amount of the Contingent Sign-On Bonus. You further authorize the Company to withhold any and all monies otherwise owed to you, to the extent permitted by
law, as payment against such Repayment Obligation. In such case, such monies will be credited towards the Repayment Obligation, but will not relieve you of your
obligation to pay the balance of any Repayment Obligation.
Page 8 of 8
GLOBAL TERMS AND CONDITIONS
2024 SIGN-ON EQUITY GRANT OF RESTRICTED STOCK UNIT GRANTS FOR BETTY LARSON
UNDER THE MERCK & CO., INC. 2019 INCENTIVE STOCK PLAN
I.
GENERAL. Merck & Co., Inc. (the “Company”) has granted to you the
Restricted Stock Unit (“RSU”) award specified in this document (“RSU
Award”) pursuant to the Merck & Co., Inc. 2019 Incentive Stock Plan,
including any sub-plan thereto for your country (the “Plan”). This RSU
Award is subject to the terms and conditions of the Plan and these
Global Terms and Conditions (the “Terms”). Unless otherwise defined in
this document, capitalized terms used in these Terms are as defined in
the Plan.
Grant
Type:
RSU - Annual
Grant
Date:
April 30, 2024
Vesting
Dates
Portion that Vests
April
30,
2025
First: 33.333%
April
30,
2026
Second: 33.333%
April
30,
2027
Third: Balance
IMPORTANT NOTICE: This grant requires you to affirmaƟvely accept it. You MUST log onto the Morgan Stanley website at
(hƩp://www.morganstanley.com/spc/knowledge/managing-equity/managing-your-exisƟng-awards/accepƟng-awards-
grants/) to accept the grant.
Follow the procedures described on the Morgan Stanley website to accept your RSU Award within 90 days. Failure to
accept the terms and condiƟons of your RSU Award within 90 days may result in Forfeiture of the RSU Award.
A.
Restricted (VesƟng) Period. The Restricted Period is the period during which this RSU Award is subject to forfeiture and is eligible to
vest. The RSU Award will vest with respect to one-third of this RSUs subject to the RSU Award on each of the First, Second, and Third
anniversaries of the Grant Date (each a “VesƟng Date”) as shown in the box above, except as otherwise provided in ArƟcle II below. No
voƟng rights apply to this RSU Award. No fracƟonal shares will be issued upon seƩlement of the RSU Award; all calculaƟons are subject
to rounding.
B.
Dividend Equivalents. During the period commencing on the Grant Date and ending on the date immediately prior to the date the RSU
Awards are seƩled in accordance with paragraph I(C), dividend equivalents will be accrued for the holder (“you”) if and to the extent
dividends are paid by the Company on Merck Common Stock. Payment of such dividends will be made in cash via local payroll, without
interest or earnings, at or around the Ɵme of distribuƟon of the shares of Common Stock in seƩlement of the underlying RSUs. If any
porƟon of this RSU Award lapses, is forfeited or expires, no dividend equivalents will be credited or paid on such porƟon. Any payment
of dividend equivalents will be reduced to the extent necessary for the Company to saƟsfy any tax or other withholding obligaƟons in
accordance with paragraph IV.
C.
DistribuƟon (SeƩlement of RSU Award). Upon vesƟng of the RSU Award (including as a result of the events set forth in ArƟcle II), you
(or your estate, in the event the RSU Award vests pursuant to paragraph II(E)) will be issued a number of shares of Merck Common Stock
equal to the number of RSUs (unless otherwise provided in paragraph II(H)) with respect to which the RSU Award has vested and the
dividend equivalents that accrued on that porƟon; provided, however, that in the event the RSU Awards vests upon a Change in Control
(as defined below) pursuant to paragraph II(H) that does not consƟtute a “change in control event” within the meaning of U.S. Treasury
RegulaƟons SecƟon 1.409A-3(i)(5), the RSU Awards will instead be seƩled on the original VesƟng Dates set forth in paragraph I(A). Any
amount required to be withheld, including amounts required to saƟsfy Tax-Related Items, in connecƟon with the distribuƟon of the RSU
Award (or otherwise arising from your parƟcipaƟon in the Plan) will be recovered from you as described in paragraph IV.
D. 409A Compliance. Anything to the contrary notwithstanding, no distribuƟon of RSUs may be made unless in compliance with SecƟon
409A of the Code or any successor thereto. Specifically, distribuƟons made upon or by reference to the date of an employment
terminaƟon shall not be paid unless such terminaƟon consƟtutes a “separaƟon from service (as defined in SecƟon 409A)” and any such
payment to a “Specified Employee” as defined in Treas. Reg. Sec. 1.409A-1(i) or any successor thereto, to the extent required by SecƟon
409A of the Code will instead be made on the first day the seventh month following the separaƟon from service, in the same form as
they would have been made had this restricƟon not applied; provided further, that dividend equivalents that otherwise would have
accrued will accrue during the period during which distribuƟon is suspended.
E.
Subject to Recoupment. This RSU Award will be subject to recoupment in the event of certain violaƟons of Company policy in
accordance with the Company’s Policy and Procedures for DiscreƟonary Recoupment of CompensaƟon for Compliance ViolaƟons, as set
forth in Appendix A.1, and with the Company’s Policy and Procedures for Recoupment of IncenƟve-Based CompensaƟon, applicable only
for SecƟon 16 Officers, as set forth in Appendix A.2 (as may be amended from Ɵme to Ɵme).
II.
TERMINATION OF EMPLOYMENT
If your employment with the Company or, if different, the subsidiary, affiliate or joint venture (“JV”) of the Company by which you are
employed (the “Employer”) is terminated during the Restricted Period described in paragraph I(A), your right to the RSU Award will be
determined according to the terms in this ArƟcle II. For avoidance of doubt, if your employment terminates on a VesƟng Date not for
misconduct, you will be enƟtled to vest in that unvested porƟon of the RSU Award that is scheduled to vest on that VesƟng Date.
A. General Rule. If your employment is terminated during the Restricted Period for any reason other than those specified in the following
paragraphs, the unvested porƟon of this RSU Award (and any accrued dividend equivalents) will be forfeited on the date your
employment terminates. If your employment is terminated as described in this paragraph and you are later rehired by the Company or
the Employer, as applicable, this grant nevertheless will expire according to this paragraph notwithstanding such rehire.
B. Involuntary TerminaƟon. If the Company determines that your employment is involuntarily terminated during the Restricted Period for
a reason other than Cause, the RSU Award, and any accrued dividends, will conƟnue to vest on the original VesƟng Date(s) set forth in
paragraph I(A), provided you sign and refrain from revoking a severance agreement in a format prescribed the Company, which
agreement will contain a full release, non-solicitaƟon, non-disclosure, non-disparagement and cooperaƟon in liƟgaƟon covenants and
such other reasonable and customary terms as the Company provides. If the Company determines that your employment is involuntarily
terminated during the Restricted Period and you do not sign and refrain from revoking a severance agreement as outlined above, and
you are involuntarily terminated on or aŌer the first anniversary of the Grant Date, the RSU Award will vest on the next subsequent
VesƟng Date following your employment terminaƟon with respect to a pro rata porƟon of your unvested RSU Award and dividend
equivalents that have accrued through the corresponding VesƟng Date equal to (i) the total number of RSUs subject to the RSU Award
(whether or not vested), mulƟplied by (ii) a fracƟon, numerator of which is equal to the number of completed monthly periods during
the period commencing on the Grant Date and ending the date employment terminates, and the denominator of which is 36, (iii)
reduced by the number of RSUs that have vested pursuant to paragraph A. The remaining porƟon, if any, of the RSU Award and any
accrued dividends will be forfeited on the date your employment terminates. An “involuntary terminaƟon” includes terminaƟon of your
employment by the Company or the Employer, as applicable, as the result of a restructuring or job eliminaƟon, but excludes non-
performance of your duƟes and the reasons listed under paragraphs C through I of this secƟon. If your employment is terminated as
described in this paragraph and
you are later rehired by the Company or the Employer, as applicable, this RSU Award nevertheless will be forfeited according to this
paragraph notwithstanding such rehire.
C. Sale. If your employment is terminated during the Restricted Period and the Company determines that such terminaƟon resulted from
the sale of your subsidiary, affiliate, division or JV, the RSU Award will conƟnue to vest on the following original VesƟng Date(s) set forth
in paragraph I(A) with respect to the following unvested porƟon of your RSU Award and dividend equivalents that have accrued through
the corresponding VesƟng Dates: if employment terminates on or aŌer the Grant Date but before the first anniversary thereof, then
one-third of your RSU Award will vest on the first VesƟng Date; if employment terminates on or aŌer the first anniversary of the Grant
Date, the porƟon of your RSU Award that was eligible to vest on the second and third VesƟng Dates, respecƟvely, will vest on the
corresponding VesƟng Dates. The remaining porƟon, if any, of the RSU Award that does not vest pursuant to the foregoing sentence will
be forfeited on the date your employment terminates. Notwithstanding the foregoing, the CommiƩee may determine, for purposes of
this RSU Award, whether employment with an enƟty that is established from the Company’s spin off, split off, split up or distribuƟon of
equity securiƟes in connecƟon with that enƟty consƟtutes a terminaƟon of employment, and may make adjustments, if any, as it deems
appropriate, and to the extent not inconsistent with the Plan, at the Ɵme of the distribuƟon of such equity securiƟes, in the kind and/or
number of shares subject to this RSU Award. If your employment is terminated as described in this paragraph and you are later rehired
by the Company or the Employer, as applicable, this RSU Award nevertheless will be forfeited according to this paragraph
notwithstanding such rehire.
D. ReƟrement. If your employment terminates by reƟrement during the Restricted Period, the RSU Award will vest on the next subsequent
VesƟng Date following your terminaƟon with respect to a pro rata porƟon of your unvested RSU Award and dividend equivalents that
have accrued through the corresponding VesƟng Date equal to (i) the total number of RSUs subject to this RSU Award (whether or not
vested), mulƟplied by (ii) a fracƟon, the numerator of which is equal to the number of completed monthly periods during the period
commencing on the Grant Date and ending on the date employment terminates, and the denominator of which is 36, (iii) reduced by
the number of RSUs that have vested pursuant to paragraph A. The remaining porƟon of the RSU Award and any accrued dividends will
be forfeited on the date your employment terminates. For grantees who are employed in the U.S., “reƟrement” means a terminaƟon of
employment aŌer aƩaining the earliest of (a) age 55 with at least 10 years of service (b) such age and service that provides eligibility for
subsidized reƟree medical coverage or (c) age 65 without regard to years of service. For other grantees, “reƟrement” is determined by
the Company. If your employment is terminated as described in this paragraph and you are later rehired by the Company or the
Employer, as applicable, this grant nevertheless will expire according to this paragraph notwithstanding such rehire.
E. Death. If your employment terminates due to your death during the Restricted Period but prior to an employment terminaƟon
contemplated under paragraphs B, C, D, G or H, the RSU Award will immediately vest with respect to any porƟon of this RSU Award that
has not vested as of your death and dividend equivalents that have accrued though such date. If you die during the Restricted Period,
but aŌer your employment terminates for the reasons listed under paragraphs B, C, D, G or H of this secƟon, the RSU Award will
immediately vest with respect to the remaining, non-forfeited porƟon of this RSU Award and dividend equivalents that have accrued
through the date of death.
F.
Misconduct. If your employment is terminated as a result of your deliberate, willful or gross misconduct, this RSU Award and accrued
dividend equivalents will be forfeited immediately upon your receipt of noƟce of such terminaƟon.
G. Disability. If your employment is terminated during the Restricted Period and the Company determines that such terminaƟon resulted
from inability to perform the material duƟes of your role by reason of a physical or mental infirmity that is expected to last for at least six
months or to result in your death, whether or not you are eligible for disability benefits from any applicable disability program, then the
RSU Award will
conƟnue to vest on the original VesƟng Dates set forth in paragraph I(A) with respect to the unvested porƟon of RSU Award and
dividend equivalents that have accrued through the corresponding VesƟng Date. If your employment is terminated as described in this
paragraph and you are later rehired by the Company or the Employer, as applicable, this RSU Award nevertheless will expire according to
this paragraph notwithstanding such rehire.
H. Change in Control. If this RSU Award is assumed, converted or otherwise remains outstanding in connecƟon with a Change in Control
and your employment is terminated during the Restricted Period without Cause before the second anniversary of the closing of the
Change in Control, then the RSU Award will conƟnue to vest on the original VesƟng Dates set forth in paragraph I(A) with respect to the
unvested porƟon of the RSU Award and dividend equivalents that have accrued through the corresponding VesƟng Date. If this RSU
Award does not remain outstanding following the Change in Control and is not converted into a successor RSU, then the RSU Award will
immediately vest with respect to the porƟon of the RSU Award that is unvested as of the Change in Control and dividend equivalents
that have accrued though such date and, at the elecƟon of the Company, you will be enƟtled to receive cash for such porƟon of this RSU
Award in an amount equal to the fair market value of the consideraƟon paid to Merck stockholders for a share of Merck Common Stock
in the Change in Control. On the second anniversary of the closing of the Change in Control, this paragraph shall expire. “Cause” and
“Change in Control” are defined in the Merck & Co., Inc. Change in Control SeparaƟon Benefits Plan (excluding an MSD Change in
Control).
I.
Good Reason. If you terminate your employment for Good Reason, the RSU Award, and any accrued dividends, will conƟnue to vest on
the original VesƟng Date(s) set forth in paragraph I(A). “Good Reason” is defined in your offer leƩer from the Company to include the
following: a) a material reducƟon in your total direct compensaƟon (base salary, target bonus and/or target LTI) without your consent,
unless such reducƟon is part of an across-the-board reducƟon affecƟng other ExecuƟve Team members in like proporƟons, b) your
involuntary reassignment to any posiƟon other than a posiƟon on the ExecuƟve Team reporƟng to the Company’s Chief ExecuƟve Officer
within the period beginning on date of hire and ending when the Sign-on Equity Grant has fully vested, or c) a demand by the Company
that you relocate to New Jersey within the period beginning on date of hire and ending on April 30, 2027, or d) a material breach of your
offer leƩer, provided that you deliver wriƩen noƟce of a claim of Good Reason to the Company’s Chief ExecuƟve Officer within thirty
(30) days of the facts giving rise to such Good Reason, the Company fails to cure the circumstances giving rise to Good Reason within
thirty (30) days of receiving such noƟce and you actually terminate employment within thirty (30) days aŌer the Company’s failure to
cure.
J.
Transfer of Employment. Transfer of employment between the Company, a subsidiary, affiliate, JV, JV partner or affiliate of the Company
who provides services to the JV with such partner or affiliate or other enƟty in which the Company has determined that it has a
significant business or ownership interest (together, the “Company Group”) is not considered terminaƟon of employment for purposes
of this RSU Award. Such employment must be approved by the Company and conƟguous with employment by the enƟty in the Company
Group you were employed by immediately prior to the relevant transfer. The terms set out in paragraphs A through H above shall
conƟnue to apply to this RSU Award following a transfer of employment accordance with this secƟon.
III.
TRANSFERABILITY
Prior to distribuƟon pursuant to ArƟcle I(C), the RSU Award and any interest therein shall not be sold, assigned, transferred, pledged or
otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily, other than by will or the laws of descent and distribuƟon
in connecƟon with your death.
IV.
TAX WITHHOLDING
Regardless of any acƟon the Company and/or the Employer take with respect to any or all income tax, social insurance, payroll tax, payment
on account or other tax-related items arising out of your parƟcipaƟon in the Plan
and legally applicable or deemed applicable to you (“Tax-Related Items”), you acknowledge that the ulƟmate liability for all Tax-Related
Items is and remains your responsibility and may exceed the amount actually withheld by the Company and/or the Employer, if any. You
further acknowledge that the Company and/or the Employer (i) make no representaƟons or undertakings regarding the treatment of any
Tax-Related Items in connecƟon with any aspect of the RSU Award or underlying shares of Common Stock, including, but not limited to, the
grant, vesƟng or seƩlement of the RSU, the subsequent sale of shares of Common Stock acquired upon the lapsing of the Restricted Period
and the receipt of any dividends and/or dividend equivalents; and (ii) do not commit and are under no obligaƟon to structure the terms of
the grant or any aspect of the RSU Award to reduce or eliminate your liability for Tax-Related Items or achieve any parƟcular tax result.
Furthermore, if you have become subject to tax in more than one jurisdicƟon, you acknowledge that the Company and/or the Employer (or
former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdicƟon.
Prior to the relevant taxable or tax withholding event, as applicable, you shall pay or make arrangements saƟsfactory to the Company and/or
the Employer to saƟsfy any applicable withholding obligaƟons or rights with regard to all Tax-Related Items. In this regard, you authorize the
Company and/or the Employer, or their respecƟve agents, at their discreƟon, to saƟsfy the Tax-Related Items by one or a combinaƟon of the
following: (i) withholding from your wages or other cash compensaƟon paid to you by the Company, the Employer and/or any subsidiary,
affiliate or JV of the Company; or (ii) withholding from proceeds of the sale of shares of Common Stock acquired at lapsing of the Restricted
Period either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this
authorizaƟon); or (iii) withholding in shares of Common Stock to be issued upon lapsing of the Restricted Period; provided, however, that if
you are a SecƟon 16 officer of the Company under the Exchange Act, then the Company will saƟsfy the Tax-Related Items (other than U.S.
Federal Insurance ContribuƟon Act taxes or other Tax-Related Items which become payable in a year prior to the year in which shares of
Common Stock are issued upon seƩlement of the RSUs) by withholding in shares of Common Stock pursuant to (iii) above, unless the use of
such withholding method is problemaƟc under applicable tax or securiƟes law or has materially adverse accounƟng consequences, in which
case, the obligaƟon for Tax-Related Items may be saƟsfied by a one or a combinaƟon of (i) or (ii) above.
The Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other
applicable withholding rates, including maximum applicable rates in your jurisdicƟon(s). In the event of over-withholding, you may receive a
refund of any over-withheld amount in cash (with no enƟtlement to the equivalent in Common Stock), or if not refunded, you may seek a
refund from the local tax authoriƟes. In the event of under-withholding, you may be required to pay addiƟonal Tax-Related Items directly to
the applicable tax authority or to the Company and/or the Employer. If the obligaƟon for Tax-Related Items is saƟsfied by withholding in
shares of Common Stock, for tax purposes, you will be deemed to have been issued the full number of shares of Common Stock subject to
the vested RSUs, notwithstanding that a number of the shares is held back solely for the purpose of paying the Tax-Related Items due as a
result of any aspect of your parƟcipaƟon in the Plan.
You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to
withhold or account for as a result of your parƟcipaƟon in the Plan that cannot be saƟsfied by the means previously described in this
secƟon. The Company may refuse to issue or deliver the shares of Common Stock or the proceeds of the sale of shares if you fail to comply
with your obligaƟons in connecƟon with the Tax-Related Items.
V.
DATA PRIVACY
The Company is located at 126 East Lincoln Avenue, Rahway, NJ 07065, U.S.A. and grants employees of the Company and any subsidiary,
affiliate or JV of the Company, the opportunity to parƟcipate in the Plan, at the Company's sole discreƟon. If you would like to parƟcipate in
the Plan, you understand that you should review the following informaƟon about the Company’s data processing pracƟces and declare your
consent.
A.
Data CollecƟon and Usage. The Company collects, processes and uses your personal data, including, name, home address, email address
and telephone number, date of birth, social insurance number or other idenƟficaƟon number, salary, ciƟzenship, job Ɵtle, any shares of
Common Stock or directorships held in the Company, and details of all awards, canceled, vested, or outstanding in your favor, which the
Company receives from you or your Employer. If the Company offers you the opportunity to parƟcipate in the Plan, then the Company
will collect your personal data for purposes of allocaƟng Common Stock and implemenƟng, administering and managing the Plan. The
Company’s legal basis for the processing of your personal data would be your consent.
B.
Stock Plan AdministraƟon Service Providers. The Company transfers parƟcipant data to Morgan Stanley, an independent service provider
based in the United States, which assists the Company with the implementaƟon, administraƟon and management of the Plan. In the
future, the Company may select a different service provider and share your data with another company that serves in a similar manner.
The Company’s service provider will open an account for you. You will be asked to agree on separate terms and data processing pracƟces
with the service provider, which is a condiƟon to your ability to parƟcipate in the Plan.
C.
InternaƟonal Data Transfers. The Company and its service providers are based in the United States. If you are outside of the United
States, you should note that your country has enacted data privacy laws that are different from the United States. The Company’s legal
basis for the transfer of your personal data is your consent.
D. Voluntariness and Consequences of Consent Denial or Withdrawal. Your parƟcipaƟon in the Plan and your grant of consent is purely
voluntary. You may deny or withdraw your consent at any Ɵme. If you do not consent, or if you withdraw your consent, you cannot
parƟcipate in the Plan. This would not affect your salary as an employee; you would merely forfeit the opportuniƟes associated with the
Plan.
E.
Data Subject Rights. You have a number of rights under data privacy laws in your country. Depending on where you are based, your
rights may include the right to (i) request access or copies of personal data the Company processes, (ii) recƟficaƟon of incorrect data, (iii)
deleƟon of data, (iv) restricƟons on processing, (v) portability of data, (vi) to lodge complaints with competent authoriƟes in your
country, and/or (vii) a list with the names and addresses of any potenƟal recipients of the your personal data. To receive clarificaƟon
regarding your rights or to exercise your rights please contact the Company at AƩn: Global Privacy Office, 351 N. Sumneytown Pike,
North Wales, Pennsylvania, U.S.A. 19454.
F.
The collecƟon, use and transfer of your personal data for the purpose of implemenƟng, administering and managing your parƟcipaƟon
in the Plan is conducted in accordance with the Company’s Global Privacy and Data ProtecƟon Policy. You also understand that the
Company may, in the future, request you to provide another data privacy consent. If applicable and upon request of the Company, you
agree to provide an executed acknowledgement or data privacy consent form to the Company or the Employer (or any other
acknowledgements, agreements or consents) that the Company and/or the Employer may deem necessary to obtain under the data
privacy laws in your country, either now or in the future. You understand that you will not be able to parƟcipate in the Plan if you fail to
execute any such acknowledgement, agreement or consent requested by the Company and/or the Employer.
If you agree with the data processing pracƟces described in this ArƟcle, you will declare your consent by clicking to "Accept" these Terms on
the Morgan Stanley website.
VI.
GOVERNING LAW
This document may be amended only by another wriƩen agreement between the parƟes. This document will be interpreted and enforced
under the laws of the State of New Jersey, United States (without regard to its choice-of-law provisions). For purposes of liƟgaƟng any
dispute that arises directly or indirectly from the relaƟonship of
the parƟes evidenced by this grant or this document, the parƟes hereby submit to and consent to the exclusive jurisdicƟon of the State of
New Jersey and agree that such liƟgaƟon shall be conducted only in the courts of Union County, New Jersey, or the federal courts for the
United States for the District of New Jersey, and no other courts, where this grant is made and/or to be performed.
VII.
SEVERABILITY
The provisions of this document are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
VIII.
WAIVER
You acknowledge that a waiver by the Company of breach of any provision of these Terms shall not operate or be construed as a waiver of
any other provision of these Terms or of any subsequent breach by you or any other grantee.
IX.
ELECTRONIC ACCEPTANCE
The Company may, in its sole discreƟon, decide to deliver any documents related to the RSU or future RSUs that may be granted under the
Plan by electronic means or request your consent to parƟcipate in the Plan by electronic means. You hereby consent to receive such
documents by electronic delivery and agree to parƟcipate in the Plan through an online or electronic system established and maintained by
the Company or a third party designated by the Company.
X.
ADMINISTRATION
The CommiƩee is responsible for construing and interpreƟng this grant, including the right to construe disputed or doubƞul Plan provisions,
and may establish, amend and construe such rules and regulaƟons as it may deem necessary or desirable for the proper administraƟon of
this RSU Award. Any decision or acƟon taken or to be taken by the CommiƩee, arising out of or in connecƟon with the construcƟon,
administraƟon, interpretaƟon and effect of this RSU Award shall, to the maximum extent permiƩed by applicable law, be within its absolute
discreƟon (except as otherwise specifically provided herein) and shall be final, binding and conclusive upon the Company, all Eligible
Employees and any person claiming under or through any Eligible Employee. All determinaƟons by the CommiƩee including, without
limitaƟon, determinaƟons of the Eligible Employees, the form, amount and Ɵming of IncenƟves, the terms and provisions of IncenƟves and
the wriƟngs evidencing IncenƟves, need not be uniform and may be made selecƟvely among eligible employees who receive, or are eligible
to receive, IncenƟves hereunder, whether or not such Eligible Employees are similarly situated.
This RSU Award is subject to the provisions of the 2019 IncenƟve Stock Plan. For further informaƟon regarding your RSU Award, you may
access the Merck Global Long-Term IncenƟves homepage via Sync > HR > Money > Long-Term IncenƟve Program
APPENDIX A.1
Policy and Procedures for DiscreƟonary Recoupment of
CompensaƟon for Compliance ViolaƟons
Policy
It is the policy of the CompensaƟon and Management Development CommiƩee (the “CommiƩee”) of the Board of Directors (the “Board”) of Merck
& Co., Inc. (the “Company”) that the CommiƩee will exercise its discreƟon to determine whether to seek Recoupment of any Covered CompensaƟon
paid or awarded to an Affected Employee, where it determines, in consultaƟon with the Audit CommiƩee, that: a) the Affected Employee engaged in
misconduct, or failed to reasonably supervise an employee who engaged in misconduct, that resulted in a Material ViolaƟon; and b) the CommiƩee
concludes that the Material ViolaƟon caused Significant Harm to the Company.
DefiniƟons
An “Affected Employee” is an employee in Band 600 or higher who (i) engaged in misconduct that results in a Material ViolaƟon; or (ii) failed in his or
her supervisory responsibiliƟes to reasonably manage or monitor the conduct of an employee who engaged in misconduct that results in a Material
ViolaƟon.
“Covered CompensaƟon” means all (a) incenƟve-based cash compensaƟon granted to an Affected Employee, including, without limitaƟon, any
annual bonuses and other short- and long-term cash incenƟves, (b) equity-based compensaƟon, including, without limitaƟon, stock opƟons,
restricted stock, restricted stock units, performance share units (“PSUs”), (c) any proceeds or earnings received in respect of (a) and (b), and (d) any
other forms of compensaƟon that the CommiƩee determines to be subject to this policy. For the avoidance of doubt, the foregoing includes any
compensaƟon that was previously paid, earned, vested, deferred or paid or payable as a component of severance or terminaƟon compensaƟon.
“ExecuƟve” means current and former execuƟve officers of the Company, as “execuƟve officer” is defined for the purposes of the SecuriƟes
Exchange Act of 1934, as amended.
A “Material ViolaƟon” is defined as (i) a material violaƟon of a wriƩen Company policy relaƟng to the research, development, manufacturing, sales,
or markeƟng of Company products or (ii) conduct detrimental to the Company, including the Company’s overall goodwill or reputaƟon.
“Recoupment” is defined to include any and all of the following acƟons to the extent permiƩed by law: (a) reducing the amount of a current or
future bonus or other cash or noncash incenƟve compensaƟon award, (b) requiring reimbursement of a bonus or other cash-based incenƟve
compensaƟon award paid with respect to the most recently completed performance period, (c) cancelling all or a porƟon of a future-vesƟng equity
award, (d) cancelling all or a porƟon of an equity award that vested within the previous twelve-month period, (e) requiring return of shares paid
upon vesƟng and/or reimbursement of any proceeds received from the sale of an equity award, in each case that vested within the previous twelve-
month period, and (f) any other method of reducing the total compensaƟon paid to an employee for any prior twelve-month period or any current
or future period.
“Significant Harm” means a significant negaƟve impact on the Company’s financial operaƟng results or reputaƟon.
Procedures
Subject to any delegaƟon to the Chief ExecuƟve Officer, as discussed below, the CommiƩee, acƟng in consultaƟon with the Audit CommiƩee, shall
administer this policy and have full discreƟon to interpret and to make any and all determinaƟons under this policy. Any determinaƟons made by the
CommiƩee shall be final, binding, and conclusive on all parƟes. Notwithstanding the foregoing, the full Board shall approve any determinaƟon to
seek or waive Recoupment from the Chief ExecuƟve Officer.
The General Counsel, in consultaƟon with the Chief Ethics and Compliance Officer and the ExecuƟve Vice President, Human Resources, is responsible
for determining whether to refer a maƩer to the CommiƩee for review under this policy and for assisƟng the CommiƩee with its review. In
administering this policy, the CommiƩee may consult with other commiƩees of the Board and any external or internal advisors as it deems
appropriate.
If the CommiƩee, acƟng in consultaƟon with the Audit CommiƩee, determines that there is a basis for seeking Recoupment under this policy, the
CommiƩee shall exercise its discreƟon to determine for each Affected Employee, on an individual basis, whether, and to what extent and in which
manner, to seek Recoupment.
In exercising its discreƟon, the CommiƩee may take into consideraƟon, as it deems appropriate, all of the facts and circumstances of the parƟcular
maƩer and the general interests of the Company.
DelegaƟon to Management for Recoupment Decisions
The CommiƩee may delegate to the Chief ExecuƟve Officer (who may further delegate as deemed appropriate) the authority to administer this
policy and to make any and all decisions under it regarding Affected Employees who are not ExecuƟves of the Company. Management shall report to
the CommiƩee on any affirmaƟve decisions to seek Recoupment pursuant to this delegaƟon of authority.
Public Disclosures
The Company will comply with all applicable securiƟes laws and regulaƟons, including SecuriƟes and Exchange Commission disclosure requirements
regarding execuƟve compensaƟon and any applicable New York Stock Exchange lisƟng standard or requirements, with respect to this policy. The
Company may also, but is not obligated to, provide addiƟonal disclosure beyond that required by law when the Company deems it to be appropriate
and determines that such disclosure is in the best interest of the Company and its shareholders.
Miscellaneous
Nothing in this policy shall limit or otherwise affect any of the following: 1) management’s ability to take any disciplinary acƟon with respect to any
Affected Employee; 2) the CommiƩee’s ability to use its negaƟve discreƟon with respect to any incenƟve compensaƟon performance target at any
Ɵme; or 3) the CommiƩee’s or management’s ability to reduce the amount (in whole or in part) of a current or future bonus or other cash or non-
cash incenƟve compensaƟon award to any Affected Employee for any reason as they may deem appropriate and to the extent permiƩed by law. Any
right of Recoupment under this policy is in addiƟon to, and not in lieu of, any other remedies or rights of Recoupment that may be available to the
Company pursuant to the terms of any similar policy in any incenƟve plan, employment agreement, equity award agreement, or similar agreement,
including, without limitaƟon, the Company’s Policy and Procedures for Recoupment of IncenƟve-Based CompensaƟon, and any other legal remedies
available to the Company. The Company shall not indemnify or agree to indemnify any current or former ExecuƟve against the loss of incenƟve
compensaƟon subject to this policy nor shall the Company pay or reimburse or agree to pay or reimburse any insurance premium to cover the loss of
such incenƟve compensaƟon. The CommiƩee may amend, modify, or terminate this policy in whole or in part at any Ɵme and from Ɵme to Ɵme in
its sole discreƟon.
APPENDIX A.2
Policy and Procedures for Recoupment of
IncenƟve-Based CompensaƟon
Policy
The CompensaƟon and Management Development CommiƩee (the “CommiƩee”) of the Board of Directors (the “Board”) has adopted this
IncenƟve-Based CompensaƟon Recoupment Policy (the “Policy”) to comply with SecƟon 10D of the SecuriƟes Exchange Act of 1934, as amended
(the “Exchange Act”), Rule 10D-1 promulgated thereunder (“Rule 10D-1”) and Paragraph 303A.14 of the LisƟng Standards Manual of the New York
Stock Exchange (“NYSE”), which require the recovery of certain IncenƟve-Based CompensaƟon in the event of an accounƟng restatement resulƟng
from a material error in the consolidated financial statements of Merck & Co, Inc. (the “Company”). This Policy shall be administered by the
CommiƩee, which shall have express discreƟonary authority to interpret and construe this Policy and to make all determinaƟons with respect to this
Policy, in its sole discreƟon. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of SecƟon 10D of the
Exchange Act and Rule 10D-1 (or any successor statute or rule) and any other applicable rules or lisƟng standards adopted by the U.S. SecuriƟes and
Exchange Commission (the “SEC”) or NYSE. All interpretaƟons, construcƟons and determinaƟons made by the CommiƩee under this Policy shall be
final and binding on all parƟes. This Policy may be amended with the approval of the CommiƩee and may be amended from Ɵme to Ɵme as
necessary to reflect changes in applicable regulaƟons and/or lisƟng standards adopted by the SEC or NYSE. Compliance with this Policy cannot be
waived.
DefiniƟons
"AccounƟng Restatement” is the restatement of the Company’s financial statements due to material noncompliance with any financial reporƟng
requirement under the federal securiƟes laws, including any required accounƟng restatement to correct an error in previously issued financial
statements (i) that is material to the previously issued financial statements, or (ii) that would result in a material misstatement if the error were
corrected in the current period only or leŌ uncorrected in the current period.
A “Covered Officer” is anyone who serves or has served as an execuƟve officer of the Company at any Ɵme during the performance period for
IncenƟve-Based CompensaƟon.
“ExecuƟve officer” is the equivalent to an “officer” as defined under SecƟon 16a-1(f) of the Exchange Act (“SecƟon 16 officer”).
“Financial reporƟng measure” is a measure that is (i) determined and presented in accordance with the accounƟng principles used in preparing the
Company’s financial statements, or (ii) derived wholly or in part from such measures. For purposes of this Policy, the term “financial reporƟng
measure” includes the Company’s stock price and total shareholder return, whether expressed as an absolute or relaƟve metric. For the avoidance
of doubt, a financial reporƟng measure need not be presented in the Company’s financial statements or included in a filing with the SEC.
“IncenƟve-Based CompensaƟon” is any compensaƟon that is granted, earned, or vested based wholly or in part upon the aƩainment of a financial
reporƟng measure. IncenƟve-Based CompensaƟon may include awards under the ExecuƟve IncenƟve Plan and Performance Share Units under the
Merck & Co., Inc. 2019 Stock IncenƟve Plan, or any successor thereto. IncenƟve-Based CompensaƟon does not include (i) base salary; (ii) “sign-on”
bonuses or other compensaƟon granted solely due to the commencement of employment with the Company; (iii) compensaƟon exclusively based
on compleƟon of a specific period of employment or service, without any performance condiƟon; or (iv) compensaƟon awarded based on
subjecƟve, non-financial, strategic, or operaƟonal measures that are not financial reporƟng measures.
IncenƟve-Based CompensaƟon is deemed to be “received” in the fiscal period during which the financial reporƟng measure specified in the
IncenƟve-Based CompensaƟon award is aƩained, even if the payment or grant of the IncenƟve-Based CompensaƟon occurs aŌer the end of that
fiscal period. IncenƟve-Based CompensaƟon in the form of an equity award that vests solely upon the basis of a financial reporƟng measure
performance condiƟon will be deemed to be received in the fiscal period in which it vests.
“Recoupment Period” is the three completed fiscal years of the Company immediately preceding the date, and any transiƟon period of less than nine
months that results from a change in the Company’s fiscal year within or immediately following those three completed fiscal years, on which the
Company is required to perform an AccounƟng Restatement,
which date is the earlier of (i) the date the Board, or a commiƩee of the Board, concludes, or reasonably should have concluded, that the Company
is required to perform an AccounƟng Restatement; or (ii) a date that a court, regulator or other legally authorized body directs the Company to
perform an AccounƟng Restatement.
Procedures for Recoupment of IncenƟve-Based CompensaƟon
In the event the Company is required to perform an AccounƟng Restatement, the Company shall, as promptly as reasonably possible, recoup any
IncenƟve-Based CompensaƟon erroneously received by a Covered Officer during the Recoupment Period. The amount of erroneously received
IncenƟve-Based CompensaƟon will be the excess of the IncenƟve-Based CompensaƟon received by the Covered Officer (whether in cash or in
shares) based on the erroneous data in the original financial statements over the IncenƟve-Based CompensaƟon (whether in cash or in shares) that
would have been received by the Covered Officer had it been based on the restated results, without respect to any tax liabiliƟes incurred or paid by
the Covered Officer. For IncenƟve-Based CompensaƟon based on total shareholder return or Company stock price, where the amount of erroneously
awarded compensaƟon is not subject to mathemaƟcal recalculaƟon directly from the informaƟon in the AccounƟng Restatement, the amount shall
be based on the CommiƩee’s reasonable esƟmate of the effect of the AccounƟng Restatement on the applicable measure and the CommiƩee shall
maintain documentaƟon of the determinaƟon of that reasonable esƟmate and provide it to the NYSE. Notwithstanding the foregoing, IncenƟve-
Based CompensaƟon shall not be recouped under this Policy to the extent received by any person before the date such person served as a Covered
Officer.
The CommiƩee shall determine, in its sole discreƟon, the method of recouping any erroneously received IncenƟve-Based CompensaƟon pursuant to
this Policy.
No recoupment shall be required if any of the following condiƟons are met and the CommiƩee determines that, on such basis, recovery would be
impracƟcable: (i) the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recouped, which
determinaƟon must be made only aŌer a reasonable and documented aƩempt by the Company to recoup the IncenƟve-Based CompensaƟon (with
documentaƟon of such reasonable aƩempt to recover to be provided to the NYSE); (ii) recovery would violate home country law where that law was
adopted prior to November 28, 2022, which determinaƟon must be made only aŌer the Company has obtained an opinion of home country counsel,
acceptable to the NYSE, that recovery would result in such violaƟon (with a copy of such opinion to be provided to the NYSE); or (iii) recoupment
would likely cause an otherwise tax-qualified reƟrement plan, under which benefits are broadly available to Company employees, to fail to meet the
requirements of SecƟon 401(a)(13) or SecƟon 411(a) of the Internal Revenue Code of 1986, as amended, and U.S. Treasury regulaƟons promulgated
thereunder.
IndemnificaƟon Not PermiƩed
The Company shall not indemnify any current or former Covered Officer against the loss of erroneously awarded compensaƟon, and shall not pay, or
reimburse any Covered Officer for, premiums incurred or paid for any insurance policy to fund such Covered Officer’s potenƟal recoupment
obligaƟons.
Disclosure of Recoupment Decisions
The Company will comply with all applicable securiƟes laws and regulaƟons, including SEC disclosure requirements, with respect to this Policy, and
any applicable NYSE lisƟng standard or requirements. The Company may also, but is not obligated to, provide addiƟonal disclosure beyond that
required by law when the Company deems it to be appropriate and determines that such disclosure is in the best interest of the Company and its
shareholders.
EffecƟve Date
This Policy shall be effecƟve as of December 1, 2023 (the “EffecƟve Date”). The terms of this Policy shall apply to any IncenƟve-Based CompensaƟon
that is received by Covered Officers on or aŌer the EffecƟve Date, even if such IncenƟve-Based CompensaƟon was approved, awarded, granted, or
paid to Covered Officers prior to the EffecƟve Date.
Miscellaneous
Nothing in this Policy shall limit or otherwise affect any of the following: 1) management’s ability to take any disciplinary acƟon with respect to any
Covered Officer; 2) the CommiƩee’s ability to use its negaƟve discreƟon with respect to any IncenƟve-Based CompensaƟon performance target at
any Ɵme; or 3) the CommiƩee’s or management’s ability to reduce the amount (in whole or in part) of a current or future bonus or other cash or
non-cash incenƟve compensaƟon
award to any execuƟve or other employee for any reason as they may deem appropriate and to the extent permiƩed by law. Any right of
recoupment under this Policy is in addiƟon to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company
pursuant to the terms of any similar policy in any incenƟve plan, employment agreement, equity award agreement, or similar agreement and any
other legal remedies available to the Company. This Policy shall be binding and enforceable against all Covered Officers and their beneficiaries, heirs,
executors, administrators, or other legal representaƟves.
Corporate Policy 11.0: Insider Trading Exhibit 19
What You Need to Know
As employees of Merck & Co., Inc., Rahway, NJ, USA known as MSD outside the United States and Canada (our Company), we, our
family members and related persons do not trade in our Company securities – or tip others to do so – based on material, non-public (or
“inside”) information. We recognize that insider trading undermines investor confidence in the fairness and integrity of the securities
markets, and is not only unethical, but also illegal.
What You Need to Do At a High Level...
Know the definition of inside information and the types of information that could be considered inside information. Be alert to situations
that are governed by this policy – it applies when buying or selling securities, including common stock, options for common stock, any
other securities that our Company may issue or that may be issued by other companies, or any instruments that may be based on
securities issued by our Company or other companies.
What You Need to Do In Your Everyday Work...
Protect inside information. Don’t trade on it and don’t tip others who could trade on it. Follow not only the letter, but the spirit of the laws
and policies in the countries where we do business and seek help anytime you have a question. Know and adhere to the following key
operating principles of this policy:
1. Inside Information.
Your work at our Company may expose you to inside information about our Company or companies with which we do business.
You may not trade in our Company stock (or make a gift of Company stock) if you possess inside information, and you may not
trade in the stock of other companies if your job exposes you to inside information about those companies.
2. Tipping.
Don’t disclose inside information to anyone, including family members as well as business associates (inside or outside of our
Company, intentionally or otherwise). This includes participation in investment clubs and communications in Internet forums and
any other social media. This policy does not prevent you from sharing information with other employees who have a need to
know the information and will keep that information confidential. If you are not sure whether you are allowed to share
information, ask.
3. Conflicts of Interest.
You may gain access to Company proprietary or other information that is not “inside information” but that would create a
potential conflict of interest if you were to acquire shares of the company discussed. For example, your job might require you to
be involved in a transaction involving Company X (e.g., conducting reviews of companies we are looking to acquire for
Corporate Transactions), ownership of stock in Company X may create a conflict of interest.
Whether a conflict is potential, actual or non-existent would depend on a variety of factors, including the size of the company you
are investing in, the relationship of that company to Merck’s business, your job at Merck, the size of the investment, the reason
1
Corporate Policy 11.0: Insider Trading Exhibit 19
for the investment, and other factors. If you have questions about whether an ownership position in a certain company could
create or has created a conflict of interest, you should consult with the Ethics & Compliance Office. All potential conflicts of
interest must be identified promptly by entering them in the WorkDay Potential Conflicts of Interest Tool.
4. Transaction Timing.
To ensure compliance and avoid liability, if you possess inside information, don’t trade until the beginning of the second full
trading day after information has been communicated to the public through an official announcement, even if you no longer work
at the Company. In addition, if your role at our Company exposes you to inside information regarding any matter reasonably
likely to be a focus of the Company’s quarterly or annual earnings releases or related earnings calls (e.g., the Company’s financial
or operating results or future outlook), don’t trade in our Company stock during any blackout period, other than automatic
purchases under Company-sponsored plans. Certain individuals may receive notification from Legal imposing additional
restrictions. You must follow the restrictions outlined in that notification. For your protection and the protection of our Company,
contact your Company Legal representative if you are unsure whether a transaction may be permissible, and all Section 16
officers and members of the Board of Directors must pre-clear all transactions in the Company’s securities with Corporate Legal.
5. Stock Options and Incentives.
The Merck Long-Term Incentive (LTI) Program provides an opportunity for eligible employees to share in the Company’s long-
term success by becoming shareholders. You are accountable for exercising LTI grants consistent with this policy. If you are in
doubt as to whether exercising rights granted under our Company’s stock option and incentive program (including stock acquired
through options or the vesting of Restricted Share or Performance Shares) would violate our insider trading standards, contact the
Office of the General Counsel or Assistant General Counsel-Corporate staff before exercising.
To ensure compliance with this policy, the Company reserves the right to institute a freeze on the trading of Company securities
held in accounts maintained by the Company’s stock option and incentive program administrator or designated broker. If you have
not worked at the Company for six months or longer, the Company has the discretion (but no obligation) to remove this freeze, in
which case you will still be responsible for determining if you possess inside information before trading in our Company
securities.
6. Hedging and Pledging.
All Section 16 officers, members of the Board of Directors and employees in Bands 400-700, as well as any of their family
members, are prohibited from engaging in: short sales, derivative transactions, hedging transactions and pledging of Company
securities.
7. Rule 10b5-1 Trading Plans.
Only Section 16 officers and members of the Board of Directors are permitted to enter into a Rule 10b5-1 trading plan and they
must contact Corporate Legal before entering
2
Corporate Policy 11.0: Insider Trading Exhibit 19
into, modifying or terminating any such plan. The Company requires any Rule 10b5-1 trading plan to comply with applicable law,
including any mandatory “cooling off” periods, restrictions on overlapping plans and requirements that these plans be entered
into, operated, modified and terminated in good faith.
8. Company Transactions.
The Company will not engage in transactions in its securities, such as share repurchases, while aware of inside information related
to the Company or its securities, other than pursuant to Rule 10b5-1 trading plans entered into while the Company is not aware of
inside information.
9. Speak up.
You are our Company. Protect the reputation we’ve earned as a company that operates with integrity and report any conduct that
could put our reputation at risk. If you see or suspect employee misconduct, unethical or illegal activity, talk to your manager,
another Company resource (e.g., Compliance, Legal, or Human Resources) or, where permitted by law, Speak Up at
msdethics.com to address your questions or concerns confidentially without fear of retaliation.
To uphold the Company’s commitment to ethics, integrity and compliance with laws, regulations, Company policy and the
Company’s Code of Conduct (Our Values and Standards), actions inconsistent with this policy shall be subject to Corporate Policy
15: Reporting and Responding to Misconduct.
Questions About this Policy?
Contact: [***]
Be aware that procedures for applying our policy may vary from location to location. Whenever a local law, regulation, or industry code
reflects a more restrictive standard, follow the more restrictive standard.
Terms You Need to Know
Blackout Period. Starting on the fifteenth calendar day of the last month of each fiscal quarter and continuing until the beginning of the
second full trading day after the Company’s quarterly or annual results have been communicated to the public through an official
announcement.
Derivative Transactions. Transactions in puts, calls or other derivative instruments that change in value based on the change in value of
any security, whether listed on an exchange or in any other organized market or in a private transaction.
Family Member. Includes people within your family who live with you, are financially dependent on you or whose transactions in
securities are directed by you or subject to your influence or control.
3
Corporate Policy 11.0: Insider Trading Exhibit 19
Hedging. Transactions, such as zero-cost dollars and forward-sale contracts, that allow the covered individual to lock in a portion of the
value of the securities in exchange for all or part of the potential upside appreciation.
Inside Information. Material, non-public information about a company that is not available to the public but, if it was, might influence a
reasonable investor to buy or sell company securities. Information is “material” if a reasonable investor would consider it important in
deciding whether to buy, sell or hold stock. Information is considered “nonpublic” if it has not been disseminated to the public (for
example, through a press release). Examples of inside information can include estimates of future earnings, information about planned
mergers or acquisitions, changes in executive management, significant new product plans, clinical trial results or regulatory approvals and
significant lawsuits or legal settlements.
Insider Trading. Using inside information to gain profits or avoid losses in the stock market.
Pledging. Buying securities or securing a loan using other securities (like Merck securities) as collateral. (This does not refer to employee
loans from a qualified savings plan sponsored by Merck or a subsidiary.)
Related Persons. Anyone else who lives in your household and any entities that you influence or control, including any corporations,
partnerships or trusts.
Rule 10b5-1 Trading Plan. A contract with a broker that authorizes purchases and sales of Company stock, even during a blackout
period, according to pre-established criteria satisfying applicable legal requirements.
Short Sale. Selling a security that is not currently owned.
4
Exhibit 21 - MERCK & CO., INC. SUBSIDIARIES
changes as 12/31/2024
The following is a list of subsidiaries of the Company, doing business under the name stated.
Name
Country or State of Incorporation
7728026 Canada Inc.
Canada
Abceutics, Inc.
Delaware
Abmaxis Inc.
Delaware
Acceleron Pharma Inc.
Delaware
Afferent Pharmaceuticals, Inc.
Delaware
Agrident GmbH
Germany
Allflex Argentina S.A.
Argentina
Allflex Australia Pty. Ltd.
Australia
Allflex (China) Intelligent Technology Co. Ltd.
China
Allflex dan-mark ApS
Denmark
Allflex Europe S.A.S.
France
Allflex Group Germany GmbH
Germany
Allflex Holdings 1 Inc.
Delaware
Allflex Holdings 2 Inc.
Delaware
Allflex Holdings 3 Inc.
Delaware
Allflex India Private Limited
India
Allflex International do Brasil Ltda.
Brazil
Allflex Maroc S.A.R.L.
Morocco
Allflex New Zealand Limited
New Zealand
Allflex Polska Spolka z ograniczona odpowiedzialnoscia
Poland
Allflex Romania S.R.L.
Romania
Allflex UK Group Limited
United Kingdom
Allflex USA LLC
Delaware
Antelliq Finance, Inc.
Delaware
ArQule, Inc.
Delaware
Biomark LLC
Idaho
BRC Ltd.
Bermuda
Burgwedel Biotech GmbH
Germany
Calporta Therapeutics, Inc.
Delaware
Canji, Inc.
Delaware
Caraway Therapeutics Inc.
Delaware
cCam Biotherapeutics Ltd.
Israel
Cherokee Pharmaceuticals LLC
Delaware
Controladora MSD Mexicana Sociedad de Responsabilidad Limitada de Capital Variable
Mexico
Cooper Veterinary Products (Proprietary) Limited
South Africa
Corporation Allflex ULC
Canada
Cosmas B.V.
Netherlands
Cubist Pharmaceuticals LLC
Delaware
Dialstat Trading 91 Pty Ltd T/A Allflex SA
South Africa
Diosynth Holding B.V.
Netherlands
Diosynth Produtos Farmo-quimicos Ltda.
Brazil
Elastec S.R.L
Argentina
Essex Pharmaceuticals, Inc.
Philippines
1
Eyebiotech Ltd.
UK
Eyebiotech Inc.
Delaware
Farmacox - Companhia Farmaceutica, Lda
Portugal
Farmasix-Produtos Farmaceuticos, Lda
Portugal
Financiere MSD
France
Fontelabor-Produtos Farmaceuticos, Lda.
Portugal
Frosst Laboratories, Inc.; ;
Delaware
Frosst Portuguesa - Produtos Farmaceuticos, Lda.
Portugal
GlycoFi, Inc.
Delaware
Hangzhou MSD Pharmaceutical Co., Ltd.
China
Harpoon Therapeutics Inc.
Delaware
Harrisvaccines LLC
Iowa
Hawk and Falcon L.L.C.
Delaware
Healthcare Services and Solutions, LLC
Delaware
Heptafarma Companhia Farmaceutica, Lda
Portugal
Hydrochemie GmbH
Germany
Idenix GmbH
Switzerland
IdentiGEN Limited
Ireland
IdentiGEN North America Inc.
Delaware
Imago Biosciences, Inc.
Delaware
Immune Design Corp.
Delaware
International Indemnity Ltd.
Bermuda
Intervet (Ireland) Limited
Ireland
Intervet (Israel) Ltd.
Israel
Intervet (M) Sdn. Bhd.
Malaysia
Intervet (Proprietary) Limited
South Africa
Intervet (Thailand) Ltd.
Thailand
Intervet Agencies B.V.
Netherlands
Intervet Animal Health Taiwan Limited
China
Intervet Argentina S.A.
Argentina
Intervet Australia Pty Limited
Australia
Intervet Canada Corp.
Canada
Intervet Central America S. de R.L.
Panama
Intervet Deutschland GmbH
Germany
Intervet Ecuador S.A.
Ecuador
Intervet Egypt for Animal Health SAE
Egypt
1
Intervet GesmbH
Austria
Intervet Hellas A.E.
Greece
Intervet Holding B.V.
Netherlands
Intervet Holdings France SAS
France
Intervet Hungaria Értékesítő Kft
Hungary
Intervet Inc.
Delaware
Intervet India Private Limited
India
Intervet International B.V.
Netherlands
Intervet International GmbH
Germany
Intervet International Sarl
France
Intervet LLC
Russian Federation
Intervet Maroc S.A.
Morocco
Intervet Mexico S.A. de C.V.
Mexico
2
Intervet Middle East Limited
Cyprus
Intervet Nederland B.V.
Netherlands
Intervet Philippines, Inc.
Philippines
Intervet Productions S.A.
France
Intervet Productions S.r.l.
Italy
Intervet Romania SRL
Romania
Intervet SAS
France
Intervet Schering-Plough Animal Health Pty. Ltd.
Australia
Intervet South Africa (Proprietary) Limited
South Africa
Intervet Sp. z.o.o.
Poland
Intervet UK Production Limited
United Kingdom
Intervet Venezolana S.A.
Venezuela
Intervet Veterinaria Chile Ltda
Chile
Intervet Veteriner Ilaclari Pazarlama ve Ticaret Ltd. Sirketi
Turkey
Intervet, s.r.o.
Czech Republic
Interveterinaria SA de CV
Mexico
IOmet Pharma Limited
Scotland
Laboratoires Merck Sharp & Dohme – Chibret SNC
France
Laboratorios Abello, S.A.
Spain
Laboratorios Quimico-Farmaceuticos Chibret, Lda
Portugal
Lemifar S. A.
Uruguay
Lexington Biopharma II Limited
Cayman Islands
Maya Tibbi Ürünler Ticaret Limited Sirketi
Turkey
MCM Vaccine B.V.
Netherlands
Merck and Company LLC
Delaware
Merck Canada Inc.
Canada
Merck Capital Ventures, LLC
Delaware
Merck Frosst Canada & Co.
Canada
Merck Frosst Company
Canada
Merck Global Health Innovation Fund, LLC
Delaware
Merck Global Health Innovation, Private Equity, LLC
Delaware
Merck HDAC Research, LLC
Delaware
Merck Holdings II Corp.
Delaware
Merck Holdings IV Corp.
Delaware
Merck Holdings LLC
Delaware
Merck Lumira Biosciences Fund L.P.
Canada
1
1
1
Merck Registry Holdings, Inc.
New Jersey
Merck Research Investments LLC
Delaware
Merck Research Laboratories Massachusetts, LLC
Delaware
Merck Sharp & Dohme (Argentina) LLC
Delaware
Merck Sharp & Dohme (Asia) Limited
Hong Kong
Merck Sharp & Dohme (Australia) Pty. Limited
Australia
Merck Sharp & Dohme (Chile) Ltda.
Chile
Merck Sharp & Dohme (China) Limited
Hong Kong
Merck Sharp & Dohme (Enterprises) B.V.
Netherlands
Merck Sharp & Dohme (Holdings) Pty Ltd
Australia
Merck Sharp & Dohme (I.A.) LLC
Delaware
Merck Sharp & Dohme (International) Limited
Bermuda
Merck Sharp & Dohme (Israel - 1996) Company Ltd.
Israel
3
Merck Sharp & Dohme (Malaysia) SDN. BHD.
Malaysia
Merck Sharp & Dohme (New Zealand) Limited
New Zealand
Merck Sharp & Dohme (Sweden) A.B.
Sweden
Merck Sharp & Dohme (Switzerland) GmbH
Switzerland
Merck Sharp & Dohme (UK) Limited
United Kingdom
Merck Sharp & Dohme Animal Health, S.L.
Spain
Merck Sharp & Dohme Asia Pacific Services Pte. Ltd.
Singapore
Merck Sharp & Dohme B.V.
Netherlands
Merck Sharp & Dohme BH d.o.o.
Bosnia
Merck Sharp & Dohme Bulgaria EOOD
Bulgaria
Merck Sharp & Dohme Colombia S.A.S.
Colombia
Merck Sharp & Dohme Comercializadora, S. de R.L. de C.V.
Mexico
Merck Sharp & Dohme Cyprus Limited
Cyprus
Merck Sharp & Dohme d.o.o.
Croatia
Merck Sharp & Dohme d.o.o. Belgrade
Serbia
Merck Sharp & Dohme de Espana, SAU
Spain
Merck Sharp & Dohme Farmaceutica Ltda.
Brazil
Merck Sharp & Dohme Finance Europe Limited
United Kingdom
Merck Sharp & Dohme Gesellschaft m.b.H.
Austria
Merck Sharp & Dohme Holdings Corp.
Delaware
Merck Sharp & Dohme IDEA GmbH
Switzerland
Merck Sharp & Dohme inovativna zdravila d.o.o.
Slovenia
Merck Sharp & Dohme International Services B.V.
Netherlands
Merck Sharp & Dohme Ireland (Human Health) Limited
Ireland
Merck Sharp & Dohme Latvija
Latvia
Merck Sharp & Dohme Limitada
Bolivia
Merck Sharp & Dohme LLC
New Jersey
Merck Sharp & Dohme OU
Estonia
Merck Sharp & Dohme Peru SRL
Peru
Merck Sharp & Dohme Pharmaceutical Industrial and Commercial Societe Anonyme
Greece
Merck Sharp & Dohme Research GmbH
Switzerland
Merck Sharp & Dohme Romania SRL
Romania
Merck Sharp & Dohme S.A.
Morocco
Merck Sharp & Dohme s.r.o.
Czech Republic
Merck Sharp & Dohme Salud Animal Perú S.A.
Peru
Merck Sharp & Dohme Salud Animal Colombia S.A.S.
Colombia
Merck Sharp & Dohme Saude Animal Ltda.
Brazil
Merck Sharp & Dohme Singapore Trading Pte. Ltd.
Singapore
Merck Sharp & Dohme Tunisie SARL
Tunisia
Merck Sharp & Dohme, Limitada
Portugal
Merck Sharp & Dohme, S. de R.L. de C.V.
Mexico
Merck Sharp & Dohme, s.r.o.
Slovakia
Merck Sharp Dohme Ilaclari Limited Sirketi
Turkey
Merck Teknika LLC
Delaware
Merko Acquisition S.A.
Belgium
Merko Dalton B.V.
Netherlands
Merko N.V.
Belgium
ML Holdings (Canada) Inc.
Canada
Modifi Biosciences, Inc.
Delaware
4
MRL San Francisco, LLC
Delaware
MRL Ventures Fund LLC
Delaware
MSD (Hainan) Innovative Healthcare Co., Ltd.
China
MSD (I.A.) B.V.
Netherlands
MSD (Ningbo) Animal Health Technology Co., Ltd.
China
MSD (Norge) AS
Norway
MSD (Proprietary) Limited
South Africa
MSD (Shanghai) Pharmaceuticals Consultancy Co., Ltd.
China
MSD (Thailand) Ltd.
Thailand
MSD Agencies B.V.
Netherlands
MSD Animal Health UK Limited
United Kingdom
MSD Animal Health (Phils.), Inc
Philippines
MSD Animal Health (Shanghai) Trading Co., Ltd.
China
MSD Animal Health A/S
Denmark
MSD Animal Health B.V.
Belgium
MSD Animal Health Danube Biotech GmbH
Austria
MSD Animal Health FZ-LLC
United Arab Emirates
MSD Animal Health GmbH
Switzerland
MSD Animal Health Holdings BV
Netherlands
MSD Animal Health Innovation AS
Norway
MSD Animal Health Innovation GmbH
Germany
MSD Animal Health Innovation Pte. Ltd.
Singapore
MSD Animal Health K.K.
Japan
MSD Animal Health Korea Ltd.
Korea
MSD Animal Health Norge AS
Norway
MSD Animal Health Oy
Finland
MSD Pensions Trustee Limited
United Kingdom
MSD Animal Health S.r.l.
Italy
MSD Animal Health Sweden AB
Sweden
MSD Animal Health Vietnam Company Limited
Vietnam
MSD Animal Health, Lda.
Portugal
MSD Argentina SRL
Argentina
MSD Asia Holdings Pte. Ltd.
Singapore
MSD BD-4 GmbH
Switzerland
MSD BD-5 GmbH
Switzerland
MSD Belgium BV – SRL
Belgium
MSD Biotech B.V.
Netherlands
MSD Brazil Investments B.V.
Netherlands
MSD Central America Services S. de R.L.
Panama
MSD Central America Services Guatemala
Guatemala
MSD China (Investments) B.V.
Netherlands
MSD China B.V.
Netherlands
MSD China Holding Co., Ltd.
China
MSD Cubist Holdings BV
Switzerland
MSD Cubist Holdings Unlimited Company
Ireland
MSD Czech Republic s.r.o.
Czech Republic
MSD Danmark ApS
Denmark
MSD Egypt LLC
Egypt
MSD Eurofinance
Bermuda
5
MSD Europe Belgium SRL
Belgium
MSD Farmaceutica C.A.
Venezuela
MSD FI BV
Netherlands
MSD Finland Oy
Finland
MSD France
France
MSD Global Holdings B.V.
Netherlands
MSD HH Vietnam Ltd
Vietnam
MSD Human Health Holding B.V.
Netherlands
MSD Human Health Holding II B.V.
Netherlands
MSD IDEA Algerie SPA
Algeria
MSD IDEA Pharmaceuticals Nigeria Limited
Nigeria
MSD IDEA Tunisie SARL
Tunisia
MSD Innovation and Development GmbH
Switzerland
MSD International B.V.
Netherlands
MSD International Business GmbH
Switzerland
MSD International Finance B.V.
Netherlands
MSD International GmbH
Switzerland
MSD International Manufacturing GmbH
Switzerland
MSD Italia s.r.l.
Italy
MSD Japan Holdings B.V.
Netherlands
MSD Japan Holdings GK
Japan
MSD K.K.
Japan
MSD KSA GmbH
Switzerland
MSD Korea Co., Ltd.
Korea
MSD Laboratories India LLC
Delaware
MSD Latin America Services S. de R.L.
Panama
MSD Latin America Services S. de R.L. de C.V.
Mexico
MSD Limited
United Kingdom
MSD Luxembourg S.a.r.l.
Luxembourg
MSD Merck Sharp & Dohme AG
Switzerland
MSD Netherlands Capital B.V.
Netherlands
MSD NL 4 B.V.
Netherlands
MSD Panama International Services S. de R.L.
Panama
MSD Participations B.V.
Netherlands
MSD Pharma (Singapore) Pte. Ltd.
Singapore
MSD Pharma GmbH
Germany
MSD Pharma Hungary Korlatolt Felelossegu Tarsasag
Hungary
MSD Pharmaceuticals LLC
Russian Federation
MSD Pharmaceuticals Private Limited
India
MSD Polska Dystrybucja Sp. z.o.o.
Poland
MSD Polska Sp.z.o.o.
Poland
MSD R&D (China) Co., Ltd.
China
MSD R&D Innovation Centre Limited
United Kingdom
MSD RDC Costa Rica Sociedad de Responsabilidad Limitada
Costa Rica
MSD Registry Holdings, Inc.
New Jersey
MSD Shared Business Services EMEA Limited
Ireland
MSD Sharp & Dohme Gesellschaft mit beschränkter Haftung
Germany
MSD Switzerland Investments 4 Unlimited Company
Ireland
MSD Ukraine Limited Liability Company
Ukraine
6
MSD Vaccins
France
MSD Vaccins Holdings
France
MSD Venezuela Holding GmbH
Switzerland
MSD Verwaltungs GmbH
Germany
MSD Vietnam Company Limited
Vietnam
MSD Vietnam Holdings B.V.
Netherlands
MSDIG Holdings Unlimited Company
Ireland
MSDIG Holdings 2 Unlimited Company
Ireland
MSP Vaccine Company
Pennsylvania
Multilan AG
Switzerland
Nihon MSD G.K.
Japan
Nourifarma - Produtos Quimicos e Farmaceuticos, Sociedade Uniperssoal, Lda
Portugal
O.PI.VI S.R.L.
Italy
OBS Holdings B.V.
Netherlands
Oncoethix GmbH
Switzerland
OncoImmune, Inc.
Delaware
Organon Latin America S.A.
Uruguay
OS ID AS
Norway
OSID Stallmästaren AB
Sweden
P.T. Merck Sharp & Dohme Indonesia
Indonesia
Pandion Operations, Inc.
Delaware
Pandion Therapeutics, Inc.
Delaware
Peloton Therapeutics, Inc.
Delaware
Polnet ID Spolka z ograniczona odpowiedzialnoscia
Poland
PrognostiX-Poultry Limited
United Kingdom
Prometheus Biosciences, Inc.
Delaware
Prondil Sociedad Anónima
Uruguay
PT Intervet Indonesia
Indonesia
Putexin Investments Limited
New Zealand
Rigontec GmbH
Germany
Rosetta Inpharmatics LLC
Delaware
S.C.R. (Engineers) Limited
Israel
Schering-Plough, S.A.S.
France
Schering-Plough (Ireland) Unlimited Company
Ireland
Schering-Plough Animal Health Limited
New Zealand
Schering-Plough Canada Inc.
Canada
1
Schering-Plough Corporation
Philippines
Schering-Plough Corporation, U.S.A.
Delaware
Schering-Plough Holdings Limited
United Kingdom
Schering-Plough S.A.S
France
Schering-Plough S.A.
Paraguay
Schering-Plough S.A.
Spain
SCR Allflex Management, Ltd
Israel
Servicios Veternarios Servet, Sociedad Anónima
Costa Rica
Shanghai MSD Pharmaceutical Trading Co., Ltd.
China
Sistemas de Identificacao Animal Ltda
Brazil
SmartCells, Inc.
Delaware
SOL Limited
Bermuda
SureFlap Limited
United Kingdom
7
Themis Bio Holdings LLC
Delaware
Theriak B.V.
Netherlands
Tilos Therapeutics, Inc.
Delaware
UAB Merck Sharp & Dohme
Lithuania
Vaki Fiskeldiskerfi ehf.
Iceland
VelosBio Inc.
Delaware
VelosBio Canada Inc.
Canada
Vence Corp
Delaware
Vence Corp AU Pty Ltd
Australia
Venco Farmaceutica S.A.
Venezuela
Venco Holding GmbH
Switzerland
Vet Pharma Friesoythe GmbH
Germany
Veterinaria Premium, Sociedad Anonima
Guatemala
VetInvent, LLC
Delaware
Vetrex B.V.
Netherlands
Vetrex Egypt L.L.C.
Egypt
Vree Health Italia S.r.l.
Italy
Werthenstein Biopharma GmbH
Switzerland
Zoöpharm B.V.
Netherlands
___________
own less than 100%
1
8
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-254700 and 333-254703) and on Form S-8 (Nos. 333-
173025, 333-173024, 333-162883, 333-162884, 333-162885, 333-162886, 333-121089, and 333-233226) of Merck & Co., Inc. of our report dated February 25,
2025 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
February 25, 2025
Exhibit 24.1
POWER OF ATTORNEY
Each of the undersigned does hereby appoint JENNIFER ZACHARY as his/her true and lawful attorney to execute on behalf of the undersigned (whether on
behalf of the Company, or as an officer or director thereof, or by attesting the seal of the Company, or otherwise) the Annual Report on Form 10-K of Merck & Co.,
Inc. for the fiscal year ended December 31, 2024 under the Securities Exchange Act of 1934, including amendments thereto and all exhibits and other documents in
connection therewith.
IN WITNESS WHEREOF, this instrument has been duly executed as of the 25 day of February 2025.
MERCK & CO., INC.
/s/ Robert M. Davis
Chairman, Chief Executive Officer and President
Robert M. Davis
(Principal Executive Officer; Director)
/s/ Caroline Litchfield
Executive Vice President and Chief Financial Officer
Caroline Litchfield
(Principal Financial Officer)
/s/ Dalton Smart
Senior Vice President Finance—Global Controller
Dalton Smart
(Principal Accounting Officer)
DIRECTORS
/s/ Douglas M. Baker, Jr.
/s/ Stephen L. Mayo
Douglas M. Baker, Jr.
Stephen L. Mayo
/s/ Mary Ellen Coe
/s/ Paul B. Rothman
Mary Ellen Coe
Paul B. Rothman
/s/ Pamela J. Craig
/s/ Patricia F. Russo
Pamela J. Craig
Patricia F. Russo
/s/ Thomas H. Glocer
/s/ Christine E. Seidman
Thomas H. Glocer
Christine E. Seidman
/s/ Surendralal L. Karsanbhai
/s/ Inge G. Thulin
Surendralal L. Karsanbhai
Inge G. Thulin
/s/ Risa J. Lavizzo-Mourey
/s/ Kathy J. Warden
Risa J. Lavizzo-Mourey
Kathy J. Warden
th
Exhibit 24.2
I, Kelly Grez, Corporate Secretary of Merck & Co., Inc. (the “Company”), a corporation duly organized and existing under the laws of the State of
New Jersey, do hereby certify that the following is a true copy of a resolution adopted by unanimous written consent of the Board of Directors of the
Company on February 25, 2025 in accordance with the provisions of the By-Laws of the Company:
“Special Resolution No. [13] – 2025
RESOLVED, that the proposed form of the Annual Report on Form 10-K of the Company for the fiscal year ended
December 31, 2024, attached hereto, is hereby approved with such changes as the proper officers of the Company, with the
advice of counsel, deem appropriate;
FURTHER RESOLVED, that each officer and director who may be required to execute the aforesaid Annual Report on
Form 10-K or any amendments thereto (whether on behalf of the Company or as an officer or director thereof, or by attesting the
seal of the Company, or otherwise) is hereby authorized to execute a power of attorney appointing Jennifer Zachary as his/her true
and lawful attorney to execute in his/her name, place and stead (in any such capacity) such Annual Report on Form 10‑K and any
and all amendments thereto and any and all exhibits and other documents necessary or incidental in connection therewith and to
file the same with the Securities and Exchange Commission, the attorney to have power to act and to have full power and authority
to do and perform in the name and on behalf of each of said officers and directors, or both, as the case may be, every act
whatsoever necessary or advisable to be done in the premises as fully and to all intents and purposes as any such officer or
director might or could do in person; and
FURTHER RESOLVED that an executed copy of the Action by Unanimous Written Consent be filed with the minutes of
the meetings of the Board of Directors of the Company."
IN WITNESS WHEREOF, I have hereunto subscribed my signature and affixed the seal of the Company this 25 day of February 2025.
[Corporate Seal]
/s/ Kelly Grez
Kelly Grez
Corporate Secretary
th
Exhibit 31.1
CERTIFICATION
I, Robert M. Davis, certify that:
1. I have reviewed this annual report on Form 10-K of Merck & Co., Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 25, 2025
By: /s/ Robert M. Davis
ROBERT M. DAVIS
Chairman, Chief Executive Officer and President
Exhibit 31.2
CERTIFICATION
I, Caroline Litchfield, certify that:
1. I have reviewed this annual report on Form 10-K of Merck & Co., Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 25, 2025
By: /s/ Caroline Litchfield
CAROLINE LITCHFIELD
Executive Vice President, Chief Financial Officer
Exhibit 32.1
Section 1350
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Merck & Co., Inc. (the “Company”), hereby certifies that the Company’s Annual
Report on Form 10-K for the year ended December 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: February 25, 2025
/s/ Robert M. Davis
Name: ROBERT M. DAVIS
Title: Chairman, Chief Executive Officer and President
Exhibit 32.2
Section 1350
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Merck & Co., Inc. (the “Company”), hereby certifies that the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: February 25, 2025
/s/ Caroline Litchfield
Name: CAROLINE LITCHFIELD
Title: Executive Vice President, Chief Financial Officer