Merck & Co. 8K Results of Operations and Financial Condition | MRK 3 Feb 16

Exhibit 99.2

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1a

	2015															2014															% Change
	1Q			2Q			3Q			4Q			Full Year			1Q			2Q			3Q			4Q			Full Year			4Q		Full Year
Sales	$	9,425		$	9,785		$	10,073		$	10,215		$	39,498		$	10,264		$	10,934		$	10,557		$	10,482		$	42,237		-3	%	-6	%

Costs, Expenses and Other
Materials and production	3,569			3,754			3,761			3,850			14,934			3,903			4,893			4,223			3,749			16,768			3	%	-11	%
Marketing and administrative	2,601			2,624			2,472			2,615			10,313			2,734			2,973			2,975			2,924			11,606			-11	%	-11	%
Research and development	1,737			1,670			1,500			1,797			6,704			1,574			1,664			1,659			2,283			7,180			-21	%	-7	%
Restructuring costs	82			191			113			233			619			125			163			376			349			1,013			-33	%	-39	%
Other (income) expense, net (1)	55			739			(170		)	905			1,527			(163		)	(650		)	(166		)	(10,634		)	(11,613		)	*		*
Income Before Taxes	1,381			807			2,397			815			5,401			2,091			1,891			1,490			11,811			17,283			-93	%	-69	%
Income Tax Provision (Benefit)	423			119			566			(166		)	942			360			(142		)	648			4,484			5,349
Net Income	958			688			1,831			981			4,459			1,731			2,033			842			7,327			11,934			-87	%	-63	%
Less: Net Income (Loss) Attributable to Noncontrolling Interests	5			1			5			5			17			26			29			(53		)	11			14
Net Income Attributable to Merck & Co., Inc.	$	953		$	687		$	1,826		$	976		$	4,442		$	1,705		$	2,004		$	895		$	7,316		$	11,920		-87	%	-63	%
Earnings per Common Share Assuming Dilution	$	0.33		$	0.24		$	0.64		$	0.35		$	1.56		$	0.57		$	0.68		$	0.31		$	2.54		$	4.07		-86	%	-62	%
Average Shares Outstanding Assuming Dilution	2,865			2,850			2,836			2,813			2,841			2,971			2,949			2,911			2,880			2,928
Tax Rate	30.6		%	14.7		%	23.6		%	-20.4		%	17.4		%	17.2		%	-7.5		%	43.5		%	38.0		%	30.9		%

* 100% or greater

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

(1) Other (income) expense, net includes equity income from affiliates. Prior periods have been reclassified to conform to the current presentation.

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME

GAAP TO NON-GAAP RECONCILIATION

FOURTH QUARTER 2014

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2c

				Acquisition and
				Divestiture-		Restructuring		Certain Other		Adjustment
	GAAP			Related Costs (1)		Costs (2)		Items (3)		Subtotal		Non-GAAP
Sales	$	10,482										$	10,482

Costs, Expenses and Other
Materials and production	3,749			984		105				1,089		2,660
Marketing and administrative	2,924			81		57				138		2,786
Research and development	2,283			329		108				437		1,846
Restructuring costs	349					349				349		—
Other (income) expense, net (4)	(10,634		)					(10,679	)	(10,679	)	45
Income Before Taxes	11,811			(1,394	)	(619	)	10,679		8,666		3,145
Taxes on Income	4,484									3,854	(5)	630
Net Income	7,327									4,812		2,515
Less: Net Income Attributable to Noncontrolling Interests	11											11
Net Income Attributable to Merck & Co., Inc.	$	7,316								4,812		$	2,504
Earnings per Common Share Assuming Dilution	$	2.54										$	0.87

Average Shares Outstanding Assuming Dilution	2,880											2,880
Tax Rate	38.0		%									20.0		%

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 for the amortization of intangible assets recognized as a result of acquisitions. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions, including severance costs which are not part of the company’s formal restructuring programs, as well as transaction and certain other costs related to divestitures. Amounts included in research and development expenses reflect a $316 million charge resulting from an increase in the estimated fair value of a liability for contingent consideration, as well as in-process research and development (IPR&D) impairment charges of $13 million.

(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) Included in other (income) expense, net is an $11.2 billion gain on the divestiture of Merck’s Consumer Care business, an additional gain of $84 million on the divestiture of certain ophthalmic products in several international markets and a $628 million loss on the extinguishment of debt.

(4) Other (income) expense, net includes equity income from affiliates.

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

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME

GAAP TO NON-GAAP RECONCILIATION

YEAR ENDED DECEMBER 31, 2014

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2d

				Acquisition and
				Divestiture-		Restructuring		Certain Other		Adjustment
	GAAP			Related Costs (1)		Costs (2)		Items (3)		Subtotal		Non-GAAP
Sales	$	42,237										$	42,237

Costs, Expenses and Other
Materials and production	16,768			5,254		482				5,736		11,032
Marketing and administrative	11,606			234		200		193		627		10,979
Research and development	7,180			365		283				648		6,532
Restructuring costs	1,013					1,013				1,013		—
Other (income) expense, net (4)	(11,613		)	93				(11,811	)	(11,718	)	105
Income Before Taxes	17,283			(5,946	)	(1,978	)	11,618		3,694		13,589
Taxes on Income	5,349									2,045	(5)	3,304
Net Income	11,934									1,649		10,285
Less: Net Income Attributable to Noncontrolling Interests	14			(56	)					(56	)	70
Net Income Attributable to Merck & Co., Inc.	$	11,920								1,705		$	10,215
Earnings per Common Share Assuming Dilution	$	4.07										$	3.49

Average Shares Outstanding Assuming Dilution	2,928											2,928
Tax Rate	30.9		%									24.3		%

(1) Amounts included in materials and production costs reflect expenses of $4.2 billion for the amortization of intangible assets recognized as a result of acquisitions, as well as $1.1 billion of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions, including severance costs which are not part of the company’s formal restructuring programs, as well as transaction and certain other costs related to divestitures. Amounts included in research and development expenses reflect a charge of $316 million resulting from an increase in the estimated fair value of a liability for contingent consideration, as well as in-process research and development (IPR&D) impairment charges of $49 million primarily related to the company’s joint venture with Supera Farma Laboratorios S.A. (Supera). Amount included in other (income) expense, net represents a goodwill impairment charge related to the joint venture with Supera. Amount included in net income attributable to noncontrolling interests represents the portion of intangible asset and goodwill impairment charges related to the joint venture with Supera that are attributable to noncontrolling interests.

(3) Amount included in marketing and administrative expenses represents an additional year of expense related to the healthcare reform fee in accordance with final regulations issued in the third quarter by the Internal Revenue Service. Included in other (income) expense, net is an $11.2 billion gain on the divestiture of Merck’s Consumer Care business, a $741 million gain related to AstraZeneca’s option exercise, a gain of $480 million on the divestiture of certain ophthalmic products in several international markets and a $628 million loss on the extinguishment of debt.

(4) Other (income) expense, net includes equity income from affiliates.

(5) Represents the estimated tax impact on the reconciling items, including a net benefit of $517 million recorded in connection with AstraZeneca’s option exercise, as well as a benefit of approximately $300 million associated with a capital loss generated in the first quarter.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

FOURTH QUARTER 2015

(AMOUNTS IN MILLIONS)

Table 3a

	Global					U.S.						International
	4Q 2015		4Q 2014		% Change	4Q 2015			4Q 2014		% Change	4Q 2015		4Q 2014		% Change
TOTAL SALES (1)	$	10,215	$	10,482	-3	$	4,672		$	4,088	14	$	5,543	$	6,394	-13
PHARMACEUTICAL	9,027		9,370		-4	4,285			3,786		13	4,742		5,584		-15

Primary Care and Women’s Health
Cardiovascular
Zetia	691		662		4	452			382		18	239		281		-15
Vytorin	308		370		-17	123			145		-15	185		225		-18

Diabetes
Januvia	921		1,082		-15	486			570		-15	435		512		-15
Janumet	526		570		-8	227			255		-11	299		315		-5

General Medicine & Women’s Health
NuvaRing	193		191		1	142			127		12	51		64		-20
Dulera	153		132		16	146			125		17	7		7		3
Implanon / Nexplanon	151		123		23	102			71		44	49		52		-6
Follistim AQ	95		102		-7	37			38		-4	58		64		-8

Hospital and Specialty
Hepatitis
PegIntron	34		81		-58	(1		)	2		*	35		79		-56

HIV
Isentress	374		418		-11	194			218		-11	180		201		-10

Hospital Acute Care
Cubicin(2)	322		7		*	308					*	14		7		*
Invanz	144		139		4	87			70		24	57		69		-17
Cancidas	137		175		-22	5			8		-29	132		168		-21
Noxafil	128		122		4	56			54		4	72		69		4
Bridion	92		95		-3							92		95		-3
Primaxin	86		86			3			2		50	83		84		-2

Immunology
Remicade	396		557		-29							396		557		-29
Simponi	185		188		-2							185		188		-2

Oncology
Keytruda	214		50		*	132			44		*	82		6		*
Emend	139		151		-8	80			84		-4	59		67		-11
Temodar	75		86		-14	1			3		-81	74		83		-11

Diversified Brands
Respiratory
Singulair	273		319		-14	14			21		-37	259		298		-13
Nasonex	231		268		-14	140			148		-5	91		120		-24
Clarinex	42		52		-20	5			6		-22	37		46		-19

Other
Cozaar / Hyzaar	143		192		-25	6			8		-18	137		184		-26
Arcoxia	110		118		-7							110		118		-7
Fosamax	82		112		-27	2			4		-32	80		108		-26
Propecia	50		67		-26	4			5		-18	46		62		-26
Zocor	49		64		-22	5			6		-15	44		58		-25

Vaccines
Gardasil / Gardasil 9	497		356		40	361			244		48	136		112		21
ProQuad, M-M-R II and Varivax	409		366		12	354			296		19	55		70		-21
Zostavax	246		285		-14	190			225		-16	56		60		-6
Pneumovax 23	188		346		-46	128			199		-36	60		148		-59
RotaTeq	169		169			126			119		6	43		51		-14

Other Pharmaceutical (3)	1,174		1,269		-7	370			307		21	804		959		-16

ANIMAL HEALTH	830		885		-6	237			211		12	593		674		-12

CONSUMER CARE (4)			16		*									16		*

Other Revenues (5)	358		211		69	90			92		-2	267		119		*

* 100% or greater

(1) Only select products are shown.

(2) Cubicin sales for 2014 represent the previous licensing agreement in Japan prior to the acquisition.

(3) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $148 million and $88 million on a global basis for fourth quarter 2015 and 2014, respectively.

(4) On October 1, 2014, the company divested the Consumer Care business.

(5) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. 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.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

DECEMBER YEAR-TO-DATE 2015

(AMOUNTS IN MILLIONS)

Table 3b

	Global					U.S.						International
	Full Year 2015		Full Year 2014		% Change	Full Year 2015			Full Year 2014		% Change	Full Year 2015		Full Year 2014		% Change
TOTAL SALES (1)	$	39,498	$	42,237	-6	$	17,519		$	17,071	3	$	21,979	$	25,166	-13
PHARMACEUTICAL	34,782		36,042		-3	16,238			14,214		14	18,544		21,827		-15

Primary Care and Women’s Health
Cardiovascular
Zetia	2,526		2,650		-5	1,612			1,475		9	914		1,175		-22
Vytorin	1,251		1,516		-17	479			555		-14	771		961		-20

Diabetes
Januvia	3,863		3,931		-2	2,263			2,123		7	1,601		1,809		-12
Janumet	2,151		2,071		4	976			931		5	1,175		1,140		3

General Medicine & Women’s Health
NuvaRing	732		723		1	515			461		12	216		262		-17
Implanon / Nexplanon	588		502		17	367			291		26	221		211		5
Dulera	536		460		16	515			437		18	21		24		-10
Follistim AQ	383		412		-7	160			142		13	223		270		-17

Hospital and Specialty
Hepatitis
PegIntron	182		381		-52	(4		)	18		*	186		363		-49

HIV
Isentress	1,511		1,673		-10	797			843		-5	714		830		-14

Hospital Acute Care
Cubicin(2)	1,127		25		*	1,030						97		25		*
Cancidas	573		681		-16	24			22		8	548		659		-17
Invanz	569		529		8	322			265		21	247		263		-6
Noxafil	487		402		21	212			148		43	275		254		9
Bridion	353		340		4							353		340		4
Primaxin	313		329		-5	8			6		46	305		323		-6

Immunology
Remicade	1,794		2,372		-24							1,794		2,372		-24
Simponi	690		689									690		689

Oncology
Keytruda	566		55		*	393			48		*	173		7		*
Emend	535		553		-3	326			312		4	209		240		-13
Temodar	312		350		-11	7			8		-17	306		342		-11

Diversified Brands
Respiratory
Singulair	931		1,092		-15	39			39			892		1,053		-15
Nasonex	858		1,099		-22	449			577		-22	409		522		-22
Clarinex	187		232		-20	22			24		-11	165		208		-21

Other
Cozaar / Hyzaar	667		806		-17	30			28		5	637		778		-18
Arcoxia	471		519		-9							471		519		-9
Fosamax	359		470		-24	12			16		-25	347		454		-24
Zocor	217		258		-16	20			21		-3	197		237		-17
Propecia	183		264		-31	15			19		-18	168		245		-32

Vaccines
Gardasil / Gardasil 9	1,908		1,738		10	1,520			1,319		15	388		419		-7
ProQuad, M-M-R II and Varivax	1,505		1,394		8	1,290			1,191		8	214		203		6
Zostavax	749		765		-2	592			619		-4	157		146		8
RotaTeq	610		659		-7	447			476		-6	163		183		-11
Pneumovax 23	542		746		-27	378			516		-27	164		230		-29

Other Pharmaceutical (3)	4,553		5,356		-15	1,422			1,284		11	3,133		4,071		-23

ANIMAL HEALTH	3,324		3,454		-4	880			788		12	2,444		2,666		-8

CONSUMER CARE (4)	3		1,547		*	0			1,058		*	3		489		*

Other Revenues (5)	1,389		1,194		16	401			1,011		-60	988		183		*

* 100% or greater

(1) Only select products are shown.

(2) Cubicin results for the December YTD 2015 period represent sales for the eleven months following Merck’s acquisition of Cubist. Cubicin sales for 2014 represent the previous licensing agreement in Japan prior to the acquisition.

(3) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $401 million and $379 million on a global basis for December YTD 2015 and 2014, respectively.

(4) On October 1, 2014, the company divested the Consumer Care business.

(5) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. Other revenues in 2014 include $232 million of revenue recognized in connection with the sale of U.S. Saphris rights. 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.

MERCK & CO., INC.

PHARMACEUTICAL GEOGRAPHIC SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3c

	2015															2014															% Change	% Change
	1Q			2Q			3Q			Q4			Full Year			1Q			2Q			3Q			4Q			Full Year			4Q	Full Year
TOTAL PHARMACEUTICAL	$	8,266		$	8,564		$	8,925		$	9,027		$	34,782		$	8,451		$	9,087		$	9,134		$	9,370		$	36,042		-4	-3

United States	3,637			3,934			4,382			4,285			16,238			3,130			3,462			3,837			3,786			14,214			13	14
% Pharmaceutical Sales	44.0		%	45.9		%	49.1		%	47.5		%	46.7		%	37.0		%	38.1		%	42.0		%	40.4		%	39.4		%

Europe (1)	2,024			1,896			1,920			1,873			7,714			2,478			2,537			2,297			2,269			9,581			-17	-19
% Pharmaceutical Sales	24.5		%	22.1		%	21.5		%	20.8		%	22.2		%	29.3		%	27.9		%	25.2		%	24.2		%	26.6		%

Japan	627			629			564			785			2,605			835			859			730			965			3,389			-19	-23
% Pharmaceutical Sales	7.6		%	7.3		%	6.3		%	8.7		%	7.5		%	9.9		%	9.5		%	8.0		%	10.3		%	9.4		%

Asia Pacific	809			822			854			946			3,431			809			840			878			910			3,438			4	0
% Pharmaceutical Sales	9.8		%	9.6		%	9.6		%	10.5		%	9.9		%	9.6		%	9.2		%	9.6		%	9.7		%	9.5		%

China	318			335			353			339			1,344			282			309			318			332			1,242			2	8

Latin America	630			676			585			512			2,403			538			668			673			678			2,557			-24	-6
% Pharmaceutical Sales	7.6		%	7.9		%	6.5		%	5.7		%	6.9		%	6.4		%	7.3		%	7.4		%	7.2		%	7.1		%

Eastern Europe/Middle East Africa	321			372			380			402			1,476			415			459			443			500			1,817			-19	-19
% Pharmaceutical Sales	3.9		%	4.3		%	4.3		%	4.5		%	4.2		%	4.9		%	5.1		%	4.9		%	5.3		%	5.0		%

Canada	170			167			159			172			668			200			218			218			218			854			-21	-22
% Pharmaceutical Sales	2.1		%	2.0		%	1.8		%	1.9		%	1.9		%	2.4		%	2.4		%	2.4		%	2.3		%	2.4		%

Other	48			68			81			52			247			46			44			58			44			192			18	29
% Pharmaceutical Sales	0.6		%	0.8		%	0.9		%	0.6		%	0.7		%	0.5		%	0.5		%	0.6		%	0.5		%	0.5		%

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

MERCK & CO., INC.

FOURTH QUARTER AND FULL YEAR 2015

OTHER (INCOME) EXPENSE, NET - GAAP

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 4

OTHER (INCOME) EXPENSE, NET

							Full Year			Full Year
	4Q15			4Q14			2015			2014
INTEREST INCOME	$	(75	)	$	(76	)	$	(289	)	$	(266	)
INTEREST EXPENSE	169			164			672			732
EXCHANGE LOSSES (1)	239			65			1,277			180
EQUITY LOSS (INCOME) FROM AFFILIATES (2)	5			(16		)	(205		)	(257		)
Other, net (3)	567			(10,771		)	72			(12,002		)
TOTAL	$	905		$	(10,634	)	$	1,527		$	(11,613	)

(1) Fourth quarter and full year of 2015 include foreign exchange losses of $161 million and $876 million, respectively, recorded in connection with the revaluation of the company’s net monetary assets in Venezuela.

(2) Includes the performance of the company’s joint ventures and other equity method affiliates, including the Sanofi Pasteur MSD partnership, certain investment funds, as well as AstraZeneca LP until the termination of that relationship on June 30, 2014. Equity income from AstraZeneca LP was $192 million in 2014.

(3) Other, net in the fourth quarter and full year of 2015 includes a $680 million charge to settle VIOXX shareholder class action litigation, as well as a $147 million gain on the divestiture of the company’s remaining ophthalmics business in international markets. Other, net for the full year of 2015 also includes a $250 million gain on the divestiture of certain migraine clinical development programs. 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 a gain of $480 million on the divestiture of certain ophthalmic products in several international markets.

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