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

	2016												2015																		% Change
	1Q			2Q			3Q			Sep YTD			1Q			2Q			3Q			Sep YTD			4Q			Dec YTD			3Q		Sep YTD
Sales	$	9,312		$	9,844		$	10,536		$	29,692		$	9,425		$	9,785		$	10,073		$	29,283		$	10,215		$	39,498		5	%	1	%
Costs, Expenses and Other
Materials and production	3,572			3,578			3,409			10,559			3,569			3,754			3,761			11,084			3,850			14,934			-9	%	-5	%
Marketing and administrative	2,318			2,458			2,393			7,169			2,601			2,624			2,472			7,698			2,615			10,313			-3	%	-7	%
Research and development	1,659			2,151			1,664			5,475			1,737			1,670			1,500			4,906			1,797			6,704			11	%	12	%
Restructuring costs	91			134			161			386			82			191			113			386			233			619			42	%	—
Other (income) expense, net	48			19			22			88			55			739			(170		)	624			905			1,527			*		-86	%
Income Before Taxes	1,624			1,504			2,887			6,015			1,381			807			2,397			4,585			815			5,401			20	%	31	%
Income Tax Provision (Benefit)	494			295			699			1,487			423			119			566			1,108			(166		)	942
Net Income	1,130			1,209			2,188			4,528			958			688			1,831			3,477			981			4,459			19	%	30	%
Less: Net Income Attributable to Noncontrolling Interests	5			4			4			13			5			1			5			12			5			17
Net Income Attributable to Merck & Co., Inc.	$	1,125		$	1,205		$	2,184		$	4,515		$	953		$	687		$	1,826		$	3,465		$	976		$	4,442		20	%	30	%
Earnings per Common Share Assuming Dilution	$	0.40		$	0.43		$	0.78		$	1.62		$	0.33		$	0.24		$	0.64		$	1.22		$	0.35		$	1.56		22	%	33	%
Average Shares Outstanding Assuming Dilution	2,795			2,789			2,786			2,791			2,865			2,850			2,836			2,850			2,813			2,841
Tax Rate	30.4		%	19.6		%	24.2		%	24.7		%	30.6		%	14.7		%	23.6		%	24.2		%	-20.4		%	17.4		%

* 100% or greater

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

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

THIRD QUARTER 2015

(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
Materials and production	$	3,761		1,184		70				1,254		$	2,507
Marketing and administrative	2,472			26		17				43		2,429
Research and development	1,500			(71	)	17				(54	)	1,554
Restructuring costs	113					113				113		—
Other (income) expense, net	(170		)	7				(283	)	(276	)	106
Income Before Taxes	2,397			(1,146	)	(217	)	283		(1,080	)	3,477
Tax Provision (Benefit)	566			(248	)(4)	(57	)(4)	119	(4)	(186	)	752
Net Income	1,831			(898	)	(160	)	164		(894	)	2,725
Net Income Attributable to Merck & Co., Inc.	1,826			(898	)	(160	)	164		(894	)	2,720
Earnings per Common Share Assuming Dilution	$	0.64		(0.32	)	(0.06	)	0.06		(0.32	)	$	0.96
Tax Rate	23.6		%									21.6		%

Only the line items that are affected by non-GAAP adjustments are shown.

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.  Management uses this information internally for planning and forecasting purposes and to measure the performance of the company along with other metrics.  Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS.  This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

(1) Amounts included in materials and production costs primarily reflect $1.2 billion of 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.  Amount included in research and development expenses represents income resulting from a reduction in the estimated fair value of liabilities for contingent consideration.

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

(3) Primarily reflects a $250 million gain on the divestiture of certain migraine clinical development programs.

(4) Represents the estimated tax impact of the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

NINE MONTHS ENDED SEPTEMBER 30, 2015

(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
Materials and production	$	11,084		3,675		280				3,955		$	7,129
Marketing and administrative	7,698			389		70				459		7,239
Research and development	4,906			63		34				97		4,809
Restructuring costs	386					386				386		—
Other (income) expense, net	624			7				418		425		199
Income Before Taxes	4,585			(4,134	)	(770	)	(418	)	(5,322	)	9,907
Tax Provision (Benefit)	1,108			(805	)(4)	(145	)(4)	(251	)(5)	(1,201	)	2,309
Net Income	3,477			(3,329	)	(625	)	(167	)	(4,121	)	7,598
Net Income Attributable to Merck & Co., Inc.	3,465			(3,329	)	(625	)	(167	)	(4,121	)	7,586
Earnings per Common Share Assuming Dilution	$	1.22		(1.16	)	(0.22	)	(0.06	)	(1.44	)	$	2.66
Tax Rate	24.2		%									23.3		%

Only the line items that are affected by non-GAAP adjustments are shown.

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.  Management uses this information internally for planning and forecasting purposes and to measure the performance of the company along with other metrics.  Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS.  This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

(1) Amounts included in materials and production costs reflect $3.6 billion of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as $76 million of amortization of purchase accounting adjustments to inventories related to the Cubist Pharmaceuticals, Inc. acquisition.  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 primarily reflect 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 activities under the company’s formal restructuring programs.

(3) Primarily reflects foreign exchange losses of $715 million to devalue the company’s net monetary assets in Venezuela and a $250 million gain on the divestiture of certain migraine clinical development programs.

(4) Represents the estimated tax impact of the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

(5) Includes the estimated tax impact of the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments, as well as a net benefit of $370 million on the settlement of certain federal income tax issues.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

THIRD QUARTER 2016

(AMOUNTS IN MILLIONS)

Table 3a

	Global					U.S.					International
	3Q 2016		3Q 2015		% Change	3Q 2016		3Q 2015		% Change	3Q 2016		3Q 2015		% Change
TOTAL SALES (1)	$	10,536	$	10,073	5	$	5,063	$	4,749	7	$	5,474	$	5,324	3
PHARMACEUTICAL	9,443		8,925		6	4,710		4,382		7	4,733		4,543		4
Primary Care and Women’s Health
Cardiovascular
Zetia	671		633		6	411		406		1	261		228		15
Vytorin	273		302		-10	109		122		-11	164		180		-9
Diabetes
Januvia	1,006		1,014		-1	568		628		-10	438		386		13
Janumet	548		562		-2	241		274		-12	307		288		7
General Medicine & Women’s Health
NuvaRing	195		190		3	144		135		7	51		56		-7
Implanon / Nexplanon	148		176		-16	97		107		-10	51		69		-26
Follistim AQ	101		95		6	49		37		31	52		57		-10
Dulera	97		133		-27	92		128		-28	6		5		21
Hospital and Specialty
Hepatitis
Zepatier	164					152					13
HIV
Isentress	372		377		-1	215		204		5	157		173		-9
Hospital Acute Care
Cubicin	320		325		-2	264		291		-9	56		35		60
Invanz	152		153		-1	93		89		4	59		64		-7
Noxafil	147		132		11	65		61		7	82		71		15
Cancidas	142		139		2	8		6		48	134		133		0
Bridion	139		89		56	24					115		89		29
Primaxin	77		75		3	1		1		-39	76		74		4
Immunology
Remicade	311		442		-30						311		442		-30
Simponi	193		178		8						193		178		8
Oncology
Keytruda	356		159		124	188		109		72	168		50		237
Emend	137		141		-3	91		88		4	46		53		-13
Temodar	78		83		-6	5		6		-22	73		77		-5
Diversified Brands
Respiratory
Singulair	239		201		19	6		10		-44	233		191		22
Nasonex	94		121		-22	20		41		-51	74		80		-7
Other
Cozaar / Hyzaar	131		150		-12	4		7		-41	128		143		-11
Arcoxia	114		123		-7						114		123		-7
Fosamax	68		86		-21	2		4		-47	66		83		-20
Zocor	54		56		-3	3		5		-43	51		51		1
Vaccines
Gardasil / Gardasil 9	860		625		38	737		556		33	124		69		78
ProQuad / M-M-R II / Varivax	496		390		27	419		327		28	77		64		21
Zostavax	190		179		6	138		145		-5	52		34		54
Pneumovax 23	175		138		27	122		103		19	53		35		51
RotaTeq	171		160		7	123		115		7	48		45		8
Other Pharmaceutical (2)	1,224		1,298		-8	319		377		-15	900		917		-2
ANIMAL HEALTH (3)	865		827		5	237		226		5	628		601		4
Other Revenues (3)(4)	228		321		-29	116		141		-18	113		180		-37

(1)  Only select products are shown.

(2)  Includes Pharmaceutical products not individually shown above.  Other Vaccines sales included in Other Pharmaceutical were $135 million and $99 million on a global basis for third quarter 2016 and 2015, respectively.

(3)  Amounts reflect a reclassification of certain revenues between Animal Health and Other Revenues.

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

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

SEPTEMBER YEAR-TO-DATE 2016

(AMOUNTS IN MILLIONS)

Table 3b

	Global						U.S.					International
	Sep YTD			Sep YTD			Sep YTD		Sep YTD			Sep YTD		Sep YTD
	2016			2015		% Change	2016		2015		% Change	2016		2015		% Change
TOTAL SALES (1)	$	29,692		$	29,283	1	$	13,792	$	12,907	7	$	15,899	$	16,376	-3
PHARMACEUTICAL	26,247			25,755		2	12,792		11,953		7	13,455		13,802		-3
Primary Care and Women’s Health
Cardiovascular			��
Zetia	1,985			1,836		8	1,253		1,160		8	731		676		8
Vytorin	843			942		-11	341		356		-4	502		586		-14
Diabetes
Januvia	2,976			2,942		1	1,748		1,777		-2	1,228		1,165		5
Janumet	1,624			1,625			724		749		-3	899		877		3
General Medicine & Women’s Health
NuvaRing	571			538		6	421		373		13	150		165		-9
Implanon / Nexplanon	446			437		2	308		265		16	138		172		-20
Dulera	331			383		-14	314		369		-15	18		15		19
Follistim AQ	268			288		-7	121		123		-1	146		164		-11
Hospital and Specialty
Hepatitis
Zepatier	326						308					18
HIV
Isentress	1,050			1,137		-8	546		603		-9	504		534		-6
Hospital Acute Care
Cubicin (2)	969			805		20	824		722		14	145		83		76
Noxafil	434			360		21	202		156		30	232		204		14
Invanz	409			424		-4	239		235		2	170		189		-10
Cancidas	406			436		-7	18		19		-2	388		417		-7
Bridion	343			262		31	42					301		262		15
Primaxin	231			228		2	3		5		-42	228		222		3
Immunology
Remicade	999			1,398		-29						999		1,398		-29
Simponi	581			505		15						581		505		15
Oncology
Keytruda	919			352		161	481		261		84	438		90		386
Emend	405			396		2	266		245		8	140		151		-7
Temodar	216			238		-9	10		6		60	207		232		-11
Diversified Brands
Respiratory
Singulair	705			658		7	30		26		14	675		632		7
Nasonex	425			625		-32	161		308		-48	264		317		-17
Other
Cozaar / Hyzaar	389			524		-26	13		23		-43	376		501		-25
Arcoxia	342			361		-5						342		361		-5
Fosamax	217			277		-22	3		10		-69	214		267		-20
Zocor	150			168		-11	9		15		-43	141		153		-7
Vaccines
Gardasil / Gardasil 9	1,631			1,410		16	1,371		1,159		18	259		252		3
ProQuad / M-M-R II / Varivax	1,236			1,096		13	1,053		936		13	182		160		14
RotaTeq	489			441		11	356		320		11	133		121		10
Zostavax	464			503		-8	363		402		-10	102		101		1
Pneumovax 23	403			354		14	267		250		7	136		104		31
Other Pharmaceutical (3)	3,464			3,806		-11	997		1,080		-8	2,468		2,726		-9
ANIMAL HEALTH (4)	2,594			2,499		4	726		643		13	1,868		1,856		1
Other Revenues (4)(5)	851			1,029		-17	274		311		-12	576		718		-20

(1)  Only select products are shown.

(2)  Reflects sales following the acquisition of Cubist Pharmaceuticals, Inc. by Merck on January 21, 2015.

(3)  Includes Pharmaceutical products not individually shown above.  Other Vaccines sales included in Other Pharmaceutical were $329 million and $253 million on a global basis for September YTD 2016 and 2015, respectively.

(4)  Amounts reflect a reclassification of certain revenues between Animal Health and Other Revenues.

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

MERCK & CO., INC.

PHARMACEUTICAL GEOGRAPHIC SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3c

																															%
	2016												2015																		Change
	1Q			2Q			3Q			Sep YTD			1Q			2Q			3Q			Sep YTD			4Q			Full Year			3Q
TOTAL PHARMACEUTICAL	$	8,104		$	8,700		$	9,443		$	26,247		$	8,266		$	8,564		$	8,925		$	25,755		$	9,027		$	34,782		6
United States	3,913			4,169			4,710			12,792			3,637			3,934			4,382			11,953			4,285			16,238			7
% Pharmaceutical Sales	48.3		%	47.9		%	49.9		%	48.7		%	44.0		%	45.9		%	49.1		%	46.4		%	47.5		%	46.7		%
Europe (1)	1,914			1,997			1,935			5,846			2,024			1,896			1,920			5,841			1,873			7,714			1
% Pharmaceutical Sales	23.6		%	23.0		%	20.5		%	22.3		%	24.5		%	22.1		%	21.5		%	22.7		%	20.8		%	22.2		%
Japan	620			673			812			2,105			627			629			564			1,820			785			2,605			44
% Pharmaceutical Sales	7.7		%	7.7		%	8.6		%	8.0		%	7.6		%	7.3		%	6.3		%	7.1		%	8.7		%	7.5		%
Asia Pacific	806			890			914			2,611			809			822			854			2,485			946			3,431			7
% Pharmaceutical Sales	9.9		%	10.2		%	9.7		%	9.9		%	9.8		%	9.6		%	9.6		%	9.6		%	10.5		%	9.9		%
China	337			353			350			1,040			318			335			353			1,005			339			1,344			-1
Latin America	359			430			448			1,237			630			676			585			1,891			512			2,403			-23
% Pharmaceutical Sales	4.4		%	4.9		%	4.7		%	4.7		%	7.6		%	7.9		%	6.5		%	7.3		%	5.7		%	6.9		%
Eastern Europe/Middle East Africa	272			314			364			950			321			372			380			1,074			402			1,476			-4
% Pharmaceutical Sales	3.4		%	3.6		%	3.9		%	3.6		%	3.9		%	4.3		%	4.3		%	4.2		%	4.5		%	4.2		%
Canada	147			170			184			501			170			167			159			496			172			668			16
% Pharmaceutical Sales	1.8		%	2.0		%	1.9		%	1.9		%	2.1		%	2.0		%	1.8		%	1.9		%	1.9		%	1.9		%
Other	73			57			76			205			48			68			81			195			52			247			-6
% Pharmaceutical Sales	0.9		%	0.7		%	0.8		%	0.8		%	0.6		%	0.8		%	0.9		%	0.8		%	0.6		%	0.7		%

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

MERCK & CO., INC.

OTHER (INCOME) EXPENSE, NET - GAAP

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 4

OTHER (INCOME) EXPENSE, NET

							SEP YTD			SEP YTD
	3Q16			3Q15			2016			2015
INTEREST INCOME	$	(87	)	$	(68	)	$	(244	)	$	(214	)
INTEREST EXPENSE	170			165			513			503
EXCHANGE LOSSES (1)	3			228			79			1,038
EQUITY INCOME FROM AFFILIATES	(21		)	(63		)	(59		)	(210		)
Other, net (2)	(43		)	(432		)	(201		)	(493		)
TOTAL	$	22		$	(170	)	$	88		$	624

(1) Included in foreign exchange losses for the first nine months of 2015 is a $715 million charge recorded in the second quarter in connection with the devaluation of the company’s net monetary assets in Venezuela.

(2) Other, net in the third quarter and first nine months of 2015 includes a $250 million gain on the divestiture of certain migraine clinical development programs.