Merck & Co. (MRK) 8-K Results of Operations and Financial Condition

Exhibit 99.2

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1a

	2014															2013															% Change
	1Q			2Q			3Q			4Q			Dec YTD			1Q			2Q			3Q			4Q			Dec YTD			4Q		Dec YTD
Sales	$	10,264		$	10,934		$	10,557		$	10,482		$	42,237		$	10,671		$	11,010		$	11,032		$	11,319		$	44,033		-7	%	-4	%
Costs, Expenses and Other
Materials and production	3,903			4,893			4,223			3,749			16,768			3,959			4,284			4,104			4,607			16,954			-19	%	-1	%
Marketing and administrative	2,734			2,973			2,975			2,924			11,606			2,987			3,140			2,803			2,982			11,911			-2	%	-3	%
Research and development	1,574			1,664			1,659			2,283			7,180			1,907			2,101			1,660			1,836			7,503			24	%	-4	%
Restructuring costs	125			163			376			349			1,013			119			155			870			565			1,709			-38	%	-41	%
Equity income from affiliates	(124		)	(92		)	(24		)	(16		)	(257		)	(133		)	(116		)	(102		)	(53		)	(404		)	-70	%	-36	%
Other (income) expense, net	(39		)	(558		)	(142		)	(10,618		)	(11,356		)	282			201			172			157			815			*		*
Income Before Taxes	2,091			1,891			1,490			11,811			17,283			1,550			1,245			1,525			1,225			5,545			*		*
Income Tax Provision (Benefit)	360			(142		)	648			4,484			5,349			(66		)	310			375			410			1,028
Net Income	1,731			2,033			842			7,327			11,934			1,616			935			1,150			815			4,517			*		*
Less: Net Income (Loss) Attributable to Noncontrolling Interests	26			29			(53		)	11			14			23			29			26			34			113
Net Income Attributable to Merck & Co., Inc.	$	1,705		$	2,004		$	895		$	7,316		$	11,920		$	1,593		$	906		$	1,124		$	781		$	4,404		*		*
Earnings per Common Share Assuming Dilution	$	0.57		$	0.68		$	0.31		$	2.54		$	4.07		$	0.52		$	0.30		$	0.38		$	0.26		$	1.47		*		*
Average Shares Outstanding Assuming Dilution	2,971			2,949			2,911			2,880			2,928			3,053			3,010			2,960			2,959			2,996
Tax Rate	17.2		%	-7.5		%	43.5		%	38.0		%	30.9		%	-4.3		%	24.9		%	24.6		%	33.5		%	18.5		%

* 100% or greater

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME
GAAP TO NON-GAAP RECONCILIATION
FOURTH QUARTER 2013
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2c

				Acquisition and
				Divestiture-		Restructuring		Adjustment
	GAAP			Related Costs (1)		Costs (2)		Subtotal			Non-GAAP
Sales	$	11,319									$	11,319
Costs, Expenses and Other
Materials and production	4,607			1,301		253		1,554			3,053
Marketing and administrative	2,982			32		81		113			2,869
Research and development	1,836			15		63		78			1,758
Restructuring costs	565					565		565			—
Equity income from affiliates	(53		)								(53		)
Other (income) expense, net	157										157
Income Before Taxes	1,225			(1,348	)	(962	)	(2,310		)	3,535
Taxes on Income	410							(492		)(3)	902
Net Income	815							(1,818		)	2,633
Less: Net Income Attributable to Noncontrolling Interests	34										34
Net Income Attributable to Merck & Co., Inc.	$	781						$	(1,818	)	$	2,599
Earnings per Common Share Assuming Dilution	$	0.26									$	0.88
Average Shares Outstanding Assuming Dilution	2,959										2,959
Tax Rate	33.5		%								25.5		%

Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

(1) Amounts included in materials and production costs reflect expenses of $1.1 billion for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as $156 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect merger integration costs. Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company’s formal restructuring programs.

(3) Represents the estimated tax impact on the reconciling items.

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME
GAAP TO NON-GAAP RECONCILIATION
FULL YEAR 2013
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2d

				Acquisition and
				Divestiture-		Restructuring		Certain Other		Adjustment
	GAAP			Related Costs (1)		Costs (2)		Items		Subtotal			Non-GAAP
Sales	$	44,033											$	44,033
Costs, Expenses and Other
Materials and production	16,954			5,176		446				5,622			11,332
Marketing and administrative	11,911			94		145				239			11,672
Research and development	7,503			279		101				380			7,123
Restructuring costs	1,709					1,709				1,709			—
Equity income from affiliates	(404		)										(404		)
Other (income) expense, net	815							(13	)	(13		)	828
Income Before Taxes	5,545			(5,549	)	(2,401	)	13		(7,937		)	13,482
Taxes on Income	1,028									(1,898		)(3)	2,926
Net Income	4,517									(6,039		)	10,556
Less: Net Income Attributable to Noncontrolling Interests	113												113
Net Income Attributable to Merck & Co., Inc.	$	4,404								$	(6,039	)	$	10,443
Earnings per Common Share Assuming Dilution	$	1.47											$	3.49
Average Shares Outstanding Assuming Dilution	2,996												2,996
Tax Rate	18.5		%										21.7		%

Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

(1) Amounts included in materials and production costs reflect expenses of $4.7 billion for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as $486 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect merger integration costs. Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company’s formal restructuring programs.

(3) Represents the estimated tax impact on the reconciling items, as well as net benefits of approximately $325 million related to the settlements of certain federal income tax issues.

MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
FOURTH QUARTER 2014
(AMOUNTS IN MILLIONS)
Table 3a

	Global					U.S.					International
	4Q 2014		4Q 2013		% Change	4Q 2014		4Q 2013		% Change	4Q 2014		4Q 2013			% Change
TOTAL SALES (1)	$	10,482	$	11,319	-7	$	4,088	$	4,519	-10	$	6,394	$	6,800		-6
PHARMACEUTICAL	9,370		9,760		-4	3,786		3,761		1	5,584		5,999			-7
Primary Care and Women’s Health
Cardiovascular
Zetia	662		716		-8	382		400		-4	281		317			-11
Vytorin	370		436		-15	145		182		-21	225		253			-11
Diabetes
Januvia	1,082		1,121		-3	570		552		3	512		569			-10
Janumet	570		503		13	255		228		12	315		275			14
General Medicine & Women’s Health
NuvaRing	191		193		-1	127		123		4	64		70			-9
Implanon / Nexplanon	123		120		2	71		62		15	52		59			-11
Dulera	132		95		39	125		91		38	7		5			58
Follistim AQ	102		101		1	38		23		68	64		78			-18
Hospital and Specialty
Hepatitis
Peglntron	81		124		-34	2		11		-79	79		113			-30
Victrelis	21		81		-74			25		*	21		57			-63
HIV
Isentress	418		442		-5	218		249		-13	201		192			4
Acute Care
Cancidas	175		183		-4	8		9		-14	168		175			-4
Invanz	139		128		9	70		66		6	69		62			12
Noxafil	122		98		25	54		43		24	69		55			26
Bridion	95		82		15						95		82			15
Primaxin	86		79		9	2		3		-35	84		76			11
Immunology
Remicade	557		620		-10						557		620			-10
Simponi	188		146		29						188		146			29
Other
Cosopt / Trusopt	25		103		-76	4		3		25	21		100			-79
Oncology
Emend	151		134		13	84		80		6	67		54			24
Temodar	86		111		-23	3		17		-82	83		95			-12
Keytruda	50		0		*	44		0		*	6		0			*
Diversified Brands
Respiratory
Nasonex	268		327		-18	148		174		-15	120		153			-21
Singulair	319		298		7	21		16		32	298		282			6
Clarinex	52		55		-6	6		5		31	46		50			-9
Other
Cozaar / Hyzaar	192		246		-22	8		9		-10	184		237			-22
Arcoxia	118		131		-9						118		131			-9
Fosamax	112		139		-20	4		4		-15	108		135			-20
Propecia	67		77		-13	5		6		-28	62		70			-12
Zocor	64		79		-19	6		7		-14	58		73			-20
Remeron	56		56		-1	1		3		-61	55		54			2
Vaccines
Gardasil	356		394		-10	244		248		-1	112		146			-23
ProQuad, M-M-R II and Varivax	366		273		34	296		238		24	70		35			*
Zostavax	285		264		8	225		210		7	60		54			11
Pneumovax 23	346		241		44	199		176		13	148		65			*
RotaTeq	169		129		31	119		88		34	51		41			24
Other Pharmaceutical (2)	1,174		1,435		-18	302		410		-26	869		1,023			-15
ANIMAL HEALTH	885		871		2	211		198		7	674		673
CONSUMER CARE (3)	16		390		-96			254		*	16		137			-88
Claritin OTC	1		92		-99			66		*	1		26			-96
Other Revenues (4)	211		298		-29	92		307		-70	119		(9		)	*
Astra			193		*			193		*

* 100% or greater

(1) Only select products are shown.

(2) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $88 million and $101 million on a global basis for fourth quarter 2014 and 2013, respectively.

(3) On October 1, 2014, the company divested the Consumer Care business to Bayer. Fourth quarter 2014 reflect sales in Mexico and Korea. These markets had not yet received regulatory approval of the divestiture.

(4) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. On October 1, 2013, the company divested a substantial portion of its third-party manufacturing sales. On June 30, 2014, AstraZeneca exercised its option to buy Merck’s interest in a subsidiary and through it, Merck’s interest in Nexium and Prilosec. As a result, the company no longer records supply sales for these products. Fourth quarter 2013 includes $50 million of revenue for the out-license of a pipeline compound.

MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
FULL YEAR 2014
(AMOUNTS IN MILLIONS)
Table 3b

	Global					U.S.					International
	Full Year 2014		Full Year 2013		% Change	Full Year 2014		Full Year 2013		% Change	Full Year 2014		Full Year 2013		% Change
TOTAL SALES (1)	$	42,237	$	44,033	-4	$	17,071	$	18,246	-6	$	25,166	$	25,787	-2
PHARMACEUTICAL	36,042		37,437		-4	14,214		14,854		-4	21,827		22,582		-3
Primary Care and Women’s Health
Cardiovascular
Zetia	2,650		2,658			1,475		1,454		1	1,175		1,204		-2
Vytorin	1,516		1,643		-8	555		673		-18	961		970		-1
Diabetes
Januvia	3,931		4,004		-2	2,123		2,068		3	1,809		1,935		-7
Janumet	2,071		1,829		13	931		878		6	1,140		951		20
General Medicine & Women’s Health
NuvaRing	723		686		5	461		426		8	262		260		1
Implanon / Nexplanon	502		403		25	291		205		42	211		197		7
Dulera	460		324		42	437		309		42	24		15		54
Follistim AQ	412		481		-14	142		181		-22	270		300		-10
Hospital and Specialty
Hepatitis
PegIntron	381		496		-23	18		43		-57	363		453		-20
Victrelis	153		428		-64	1		158		*	153		270		-43
HIV
Isentress	1,673		1,643		2	843		882		-4	830		761		9
Acute Care
Cancidas	681		660		3	22		31		-28	659		630		5
Invanz	529		488		8	265		252		6	263		236		11
Noxafil	402		309		30	148		106		40	254		203		25
Bridion	340		288		18						340		288		18
Primaxin	329		335		-2	6		18		-69	323		317		2
Immunology
Remicade	2,372		2,271		4						2,372		2,271		4
Simponi	689		500		38						689		500		38
Other
Cosopt / Trusopt	257		416		-38	6		16		-66	251		400		-37
Oncology
Emend	553		507		9	312		293		7	240		214		13
Temodar	350		708		-51	8		304		-97	342		404		-15
Keytruda	55		0		*	48		0		*	7		0		*
Diversified Brands
Respiratory
Nasonex	1,099		1,335		-18	577		681		-15	522		654		-20
Singulair	1,092		1,196		-9	39		61		-36	1,053		1,135		-7
Clarinex	232		235		-1	24		19		32	208		216		-4
Other
Cozaar / Hyzaar	806		1,006		-20	28		35		-20	778		971		-20
Arcoxia	519		484		7						519		484		7
Fosamax	470		560		-16	16		20		-20	454		540		-16
Propecia	264		283		-7	19		25		-23	245		258		-5
Zocor	258		301		-14	21		24		-15	237		276		-14
Remeron	193		206		-6	4		6		-38	189		200		-5
Vaccines
Gardasil	1,738		1,831		-5	1,319		1,295		2	419		536		-22
ProQuad, M-M-R II and Varivax	1,394		1,306		7	1,191		1,172		2	203		134		52
Zostavax	765		758		1	619		653		-5	146		105		39
Pneumovax 23	746		653		14	516		491		5	230		162		42
RotaTeq	659		636		4	476		471		1	183		166		11
Other Pharmaceutical (2)	4,778		5,570		-14	1,273		1,603		-21	3,503		3,966		-12
ANIMAL HEALTH	3,454		3,362		3	788		856		-8	2,666		2,506		6
CONSUMER CARE (3)	1,547		1,894		-18	1,058		1,326		-20	489		568		-14
Claritin OTC	434		471		-8	324		410		-21	110		61		79
Other Revenues (4)	1,194		1,340		-11	1,011		1,209		-16	183		131		40
Astra	465		920		-50	465		920		-50

* 100% or greater

(1) Only select products are shown.

(2) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $379 million and $368 million on a global basis for full year 2014 and 2013, respectively.

(3) On October 1, 2014, the company divested the Consumer Care business to Bayer.

(4) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. On October 1, 2013, the company divested a substantial portion of its third-party manufacturing sales. On June 30, 2014, AstraZeneca exercised its option to buy Merck’s interest in a subsidiary and through it, Merck’s interest in Nexium and Prilosec. As a result, the company no longer records supply sales for these products. Other revenues in full year 2014 include $232 million of revenue recognized in connection with the sale of U.S. Saphris rights. Full year 2013 includes $50 million of revenue for the out-license of a pipeline compound.

MERCK & CO., INC.
PHARMACEUTICAL GEOGRAPHIC SALES

(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3c

	2014															2013															% Change	% Change
	1Q 2014			2Q 2014			3Q 2014			4Q 2014			Full Year			1Q 2013			2Q 2013			3Q 2013			4Q 2013			Full Year			4Q	Full Year
TOTAL PHARMACEUTICAL	$	8,451		$	9,087		$	9,134		$	9,370		$	36,042		$	8,891		$	9,310		$	9,475		$	9,760		$	37,437		-4	-4
United States	3,130			3,462			3,837			3,786			14,214			3,256			3,689			4,148			3,761			14,854			1	-4
% Pharmaceutical Sales	37.0		%	38.1		%	42.0		%	40.4		%	39.4		%	36.6		%	39.6		%	43.8		%	38.5		%	39.7		%
Europe (1)	2,478			2,537			2,297			2,269			9,581			2,465			2,343			2,276			2,535			9,619			-10	0
% Pharmaceutical Sales	29.3		%	27.9		%	25.2		%	24.2		%	26.6		%	27.7		%	25.2		%	24.0		%	26.0		%	25.7		%
Japan	835			859			730			965			3,389			1,034			948			893			1,074			3,949			-10	-14
% Pharmaceutical Sales	9.9		%	9.5		%	8.0		%	10.3		%	9.4		%	11.6		%	10.2		%	9.4		%	11.0		%	10.5		%
Asia Pacific	809			840			878			910			3,438			822			874			799			870			3,365			5	2
% Pharmaceutical Sales	9.6		%	9.2		%	9.6		%	9.7		%	9.5		%	9.2		%	9.4		%	8.4		%	8.9		%	9.0		%
China	282			309			318			332			1,242			271			297			242			293			1,103			13	13
Latin America	538			668			673			678			2,557			596			676			628			667			2,567			2	0
% Pharmaceutical Sales	6.4		%	7.3		%	7.4		%	7.2		%	7.1		%	6.7		%	7.3		%	6.6		%	6.8		%	6.9		%
Eastern Europe/Middle East Africa	415			459			443			500			1,817			439			479			431			534			1,883			-7	-4
% Pharmaceutical Sales	4.9		%	5.1		%	4.9		%	5.3		%	5.0		%	4.9		%	5.1		%	4.5		%	5.5		%	5.0		%
Canada	200			218			218			218			854			245			257			253			276			1,030			-21	-17
% Pharmaceutical Sales	2.4		%	2.4		%	2.4		%	2.3		%	2.4		%	2.8		%	2.8		%	2.7		%	2.8		%	2.8		%
Other	46			44			58			44			192			34			45			47			43			170			2	13
% Pharmaceutical Sales	0.5		%	0.5		%	0.6		%	0.5		%	0.5		%	0.4		%	0.5		%	0.5		%	0.4		%	0.5		%

(1) Europe primarily represents all European Union countries and the European Union accession markets.

MERCK & CO., INC.
FOURTH QUARTER AND FULL YEAR 2014
EQUITY INCOME / JV SALES / OTHER (INCOME) EXPENSE, NET - GAAP
(AMOUNTS IN MILLIONS)

(UNAUDITED)
Table 4

EQUITY INCOME FROM AFFILIATES

	4Q14		4Q13		Dec YTD 2014		Dec YTD 2013
ASTRAZENECA LP (1)	$	—	$	50	$	192	$	352
Other (2)	16		3		65		52
TOTAL	$	16	$	53	$	257	$	404

(1) Effective July 1, 2014, the company no longers records equity income from AstraZeneca LP.

(2) Includes results for Sanofi Pasteur MSD.

SANOFI PASTEUR MSD JOINT VENTURE SALES DETAIL

All sales reported here are end-market JV sales, presented on a “NET” basis.

	4Q14		4Q13		Dec YTD 2014		Dec YTD 2013
GARDASIL	$	56	$	70	$	248	$	291
FLU VACCINES	67		69		159		162
ZOSTAVAX	6		27		103		68
OTHER VIRAL VACCINES	20		25		87		104
ROTATEQ	17		14		65		55
HEPATITIS VACCINES	11		8		38		31
Other Vaccines	126		122		430		453
TOTAL SANOFI PASTEUR MSD SALES	$	303	$	335	$	1,130	$	1,164

OTHER (INCOME) EXPENSE, NET

	4Q14			4Q13			Dec YTD 2014			Dec YTD 2013
INTEREST INCOME	$	(76	)	$	(75	)	$	(266	)	$	(264	)
INTEREST EXPENSE	164			201			732			801
EXCHANGE LOSSES	65			12			180			290
Other, net (1)	(10,771		)	19			(12,002		)	(12		)
TOTAL	$	(10,618	)	$	157		$	(11,356	)	$	815

(1) Other, net in the fourth quarter and full year of 2014 includes an $11.2 billion gain on the divestiture of Merck’s Consumer Care business and a $628 million loss on the extinguishment of debt. Other, net for the full year of 2014 also includes a $741 million gain on AstraZeneca’s option exercise and gains of $480 million on the sale of certain ophthalmic products in several international markets.