Merck & Co. 8K Results of Operations and Financial Condition | MRK 27 Jul 18

Exhibit 99.2

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1a

	2018									2017																		% Change
	1Q			2Q			June YTD			1Q			2Q			June YTD			3Q			4Q			Full Year			2Q		June YTD
Sales	$	10,037		$	10,465		$	20,502		$	9,434		$	9,930		$	19,365		$	10,325		$	10,433		$	40,122		5	%	6	%

Costs, Expenses and Other
Materials and production	3,184			3,417			6,601			3,049			3,116			6,165			3,307			3,440			12,912			10	%	7	%
Marketing and administrative	2,508			2,508			5,016			2,472			2,500			4,972			2,459			2,643			10,074			—		1	%
Research and development	3,196			2,274			5,470			1,830			1,782			3,612			4,413			2,314			10,339			28	%	51	%
Restructuring costs	95			228			323			151			166			317			153			306			776			37	%	2	%
Other (income) expense, net	(291		)	(48		)	(340		)	(71		)	(73		)	(143		)	(207		)	(149		)	(500		)	-34	%	*
Income Before Taxes	1,345			2,086			3,432			2,003			2,439			4,442			200			1,879			6,521			-14	%	-23	%
Taxes on Income	604			370			975			447			488			935			251			2,917			4,103
Net Income (Loss)	741			1,716			2,457			1,556			1,951			3,507			(51		)	(1,038		)	2,418			-12	%	-30	%
Less: Net Income Attributable to Noncontrolling Interests	5			9			14			5			5			11			5			8			24
Net Income (Loss) Attributable to Merck & Co., Inc.	$	736		$	1,707		$	2,443		$	1,551		$	1,946		$	3,496		$	(56	)	$	(1,046	)	$	2,394		-12	%	-30	%
Earnings (Loss) per Common Share Assuming Dilution (1)	$	0.27		$	0.63		$	0.90		$	0.56		$	0.71		$	1.27		$	(0.02	)	$	(0.39	)	$	0.87		-11	%	-29	%

Average Shares Outstanding Assuming Dilution (1)	2,710			2,696			2,702			2,766			2,752			2,759			2,727			2,715			2,748
Tax Rate	44.9		%	17.8		%	28.4		%	22.3		%	20.0		%	21.0		%	125.5		%	155.2		%	62.9		%

* 100% or greater

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

On January 1, 2018, the company adopted a new accounting standard related to defined benefit plans that requires the components of net benefit cost/credit (other than service costs) be presented in the statement of income outside of operating expenses. Upon adoption, net periodic benefit cost/credit other than service cost was reclassified to Other (income) expense, net from the previous classifications within Materials and production costs, Marketing and administrative expenses and Research and development costs. Previously reported amounts have been reclassified to conform to the new presentation. There was no impact to net income as a result of adopting the new standard.

(1) Because the company recorded a net loss in the third and fourth quarters of 2017, no potential dilutive common shares were used in the computations of loss per common share assuming dilution as the effects would have been anti-dilutive.

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

SECOND QUARTER 2017

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2c

	GAAP			Acquisition and Divestiture-Related Costs (1)		Restructuring Costs (2)		Certain Other Items		Adjustment Subtotal		Non-GAAP

Materials and production	$	3,116		827		33				860		$	2,256
Marketing and administrative	2,500			9		2				11		2,489
Research and development	1,782			7		9				16		1,766
Restructuring costs	166					166				166		—
Other (income) expense, net	(73		)	39						39		(112		)
Income Before Taxes	2,439			(882	)	(210	)			(1,092	)	3,531
Income Tax Provision (Benefit)	488			(127	)(3)	(45	)(3)	(88	)(4)	(260	)	748
Net Income	1,951			(755	)	(165	)	88		(832	)	2,783
Net Income Attributable to Merck & Co., Inc.	1,946			(755	)	(165	)	88		(832	)	2,778
Earnings per Common Share Assuming Dilution	$	0.71		(0.27	)	(0.06	)	0.03		(0.30	)	$	1.01

Tax Rate	20.0		%									21.2		%

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

Merck is providing certain 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 results as it permits investors to understand how management assesses performance. Management uses these measures 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 $779 million of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as an intangible asset impairment charge of $47 million. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures. Amounts included in research and development expenses primarily reflect an increase in the estimated fair value measurement of liabilities for contingent consideration. Amounts included in other (income) expense, net reflect an increase in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD joint venture.

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

(4) Represents a tax benefit related to the settlement of a state income tax issue.

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

SIX MONTHS ENDED JUNE 30, 2017

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2d

	GAAP			Acquisition and Divestiture-Related Costs (1)		Restructuring Costs (2)		Certain Other Items		Adjustment Subtotal		Non-GAAP

Materials and production	$	6,165		1,682		96				1,778		$	4,387
Marketing and administrative	4,972			29		3				32		4,940
Research and development	3,612			18		9				27		3,585
Restructuring costs	317					317				317		—
Other (income) expense, net	(143		)	36				(9	)	27		(170		)
Income Before Taxes	4,442			(1,765	)	(425	)	9		(2,181	)	6,623
Income Tax Provision (Benefit)	935			(285	)(3)	(93	)(3)	(85	)(4)	(463	)	1,398
Net Income	3,507			(1,480	)	(332	)	94		(1,718	)	5,225
Net Income Attributable to Merck & Co., Inc.	3,496			(1,480	)	(332	)	94		(1,718	)	5,214
Earnings per Common Share Assuming Dilution	$	1.27		(0.53	)	(0.12	)	0.03		(0.62	)	$	1.89

Tax Rate	21.0		%									21.1		%

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

(1) Amounts included in materials and production costs primarily reflect $1.6 billion of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as intangible asset impairment charges of $123 million. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures. Amounts included in research and development expenses primarily reflect an increase in the estimated fair value measurement of liabilities for contingent consideration. Amounts included in other (income) expense, net reflect an increase in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD joint venture.

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

(4) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments, as well as a tax benefit of $88 million related to the settlement of a state income tax issue.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

SECOND QUARTER 2018
(AMOUNTS IN MILLIONS)

(UNAUDITED)
Table 3a

	Global					U.S.						International
	2Q 2018		2Q 2017		% Change	2Q 2018			2Q 2017		% Change	2Q 2018			2Q 2017		% Change
TOTAL SALES (1)	$	10,465	$	9,930	5	$	4,243		$	4,308	-2	$	6,222		$	5,623	11
PHARMACEUTICAL	9,282		8,759		6	3,822			3,929		-3	5,461			4,830		13
Oncology
Keytruda	1,667		881		89	959			556		73	707			325		118
Emend	148		143		3	89			83		7	59			60		-3
Temodar	56		65		-13	1			3		-60	54			61		-11
Alliance Revenue - Lynparza	44					31						13
Alliance Revenue - Lenvima	35											35
Vaccines (2)
Gardasil / Gardasil 9	608		469		30	302			312		-3	306			156		96
ProQuad / M-M-R II / Varivax	426		399		7	356			341		4	70			58		20
Pneumovax 23	193		166		16	122			104		17	71			61		16
RotaTeq	156		123		27	99			72		38	57			51		11
Zostavax	44		160		-73	1			107		-99	43			52		-18
Hospital Acute Care
Bridion	240		163		48	95			54		78	145			109		33
Noxafil	188		155		21	87			77		13	100			78		29
Invanz	149		150		-1	87			93		-7	63			57		9
Cubicin	94		103		-9	48			53		-9	46			50		-8
Cancidas	87		112		-23	4			6		-36	83			106		-22
Primaxin	68		71		-4				1		-90	68			70		-3
Immunology
Simponi	233		199		17							233			199		17
Remicade	157		208		-24							157			208		-24
Neuroscience
Belsomra	71		52		35	29			25		16	42			28		52
Virology
Isentress / Isentress HD	305		282		8	132			136		-3	174			146		19
Zepatier	113		517		-78	(10		)	256		-104	123			261		-53
Cardiovascular
Zetia	226		367		-39	8			122		-93	218			246		-11
Vytorin	155		182		-15	3			30		-91	152			152		1
Atozet	101		63		62							101			63		62
Adempas	75		67		13							75			67		13
Diabetes (3)
Januvia	949		948			503			541		-7	446			407		10
Janumet	585		563		4	209			248		-16	377			315		20
Women’s Health
NuvaRing	236		199		18	187			153		22	49			47		4
Implanon / Nexplanon	174		178		-3	114			125		-9	60			53		14
Diversified Brands
Singulair	185		203		-9	5			6		-20	180			197		-9
Cozaar / Hyzaar	125		119		5	7			3		170	118			116		1
Arcoxia	84		89		-6							84			89		-6
Nasonex	81		85		-5				21		-98	81			64		26
Follistim AQ	70		79		-11	27			32		-16	43			47		-8
Fosamax	59		66		-11	3			2		74	56			65		-13
Dulera	42		69		-39	35			63		-46	7			5		39
Other Pharmaceutical (4)	1,053		1,064		-1	289			304		-5	765			761		1
ANIMAL HEALTH	1,090		955		14	311			270		15	779			685		14
Livestock	633		582		9	107			103		4	526			479		10
Companion Animals	457		373		23	204			167		22	253			206		23
Other Revenues (5)	93		216		-57	110			109		1	(18		)	106		-117

(1) Only select products are shown.

(2) Total Vaccines sales were $1,533 million and $1,404 million on a global basis for second quarter 2018 and 2017, respectively.

(3) Total Diabetes sales were $1,571 million and $1,520 million on a global basis for second quarter 2018 and 2017, respectively.

(4) Includes Pharmaceutical products not individually shown above.

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

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

JUNE YEAR-TO-DATE 2018
(AMOUNTS IN MILLIONS)

(UNAUDITED)
Table 3b

	Global					U.S.						International
	June YTD		June YTD			June YTD			June YTD			June YTD			June YTD
	2018		2017		% Change	2018			2017		% Change	2018			2017		% Change
TOTAL SALES (1)	$	20,502	$	19,365	6	$	8,376		$	8,503	-1	$	12,126		$	10,862	12
PHARMACEUTICAL	18,201		16,944		7	7,538			7,690		-2	10,663			9,255		15
Oncology
Keytruda	3,131		1,465		114	1,797			917		96	1,333			547		144
Emend	273		276		-1	168			169			105			107		-2
Temodar	113		130		-13	2			4		-42	111			126		-12
Alliance Revenue - Lynparza	76					55						22
Alliance Revenue - Lenvima	35											35
Vaccines (2)
Gardasil / Gardasil 9	1,269		1,001		27	682			711		-4	586			290		102
ProQuad / M-M-R II / Varivax	818		754		8	668			639		5	150			115		30
Pneumovax 23	372		329		13	234			219		7	137			110		24
RotaTeq	349		347		1	250			251			99			96		3
Zostavax	108		313		-65	17			216		-92	91			97		-6
Hospital Acute Care
Bridion	444		310		43	175			99		77	269			211		27
Noxafil	363		296		23	168			142		19	195			154		26
Invanz	300		286		5	177			175		1	123			111		10
Cubicin	192		198		-3	95			107		-11	97			92		6
Cancidas	178		233		-24	7			11		-35	171			222		-23
Primaxin	140		133		5	5			2		*	135			132		2
Immunology
Simponi	464		383		21							464			383		21
Remicade	324		437		-26							324			437		-26
Neuroscience
Belsomra	125		94		33	52			45		15	73			49		50
Virology
Isentress / Isentress HD	586		587			260			279		-7	326			308		6
Zepatier	243		895		-73	(10		)	455		-102	253			440		-42
Cardiovascular
Zetia	531		701		-24	25			233		-89	505			468		8
Vytorin	322		423		-24	11			120		-91	311			303		3
Atozet	174		112		55							174			112		55
Adempas	143		151		-5							143			151		-5
Diabetes (3)
Januvia	1,829		1,787		2	968			1,048		-8	862			740		17
Janumet	1,129		1,059		7	401			442		-9	729			617		18
Women’s Health
NuvaRing	452		359		26	357			265		35	95			94		1
Implanon / Nexplanon	348		349			242			257		-6	106			92		16
Diversified Brands
Singulair	360		389		-7	11			12		-11	350			377		-7
Cozaar / Hyzaar	245		231		6	14			6		150	231			226		2
Nasonex	203		224		-9	2			39		-95	201			185		9
Arcoxia	166		192		-13							166			192		-13
Follistim AQ	138		160		-14	56			74		-24	81			86		-5
Fosamax	114		127		-10	1			3		-63	113			124		-9
Dulera	99		151		-35	85			139		-39	14			12		18
Other Pharmaceutical (4)	2,045		2,062		-1	563			611		-8	1,483			1,449		2
ANIMAL HEALTH	2,155		1,894		14	618			553		12	1,537			1,341		15
Livestock	1,286		1,161		11	231			223		4	1,055			938		12
Companion Animals	869		733		18	387			330		17	482			403		20
Other Revenues (5)	146		527		-72	220			260		-15	(74		)	266		-128

* 200% or greater

(1) Only select products are shown.

(2) Total Vaccines sales were $3,094 million and $2,919 million on a global basis for June YTD 2018 and 2017, respectively.

(3) Total Diabetes sales were $3,003 million and $2,858 million on a global basis for June YTD 2018 and 2017, respectively.

(4) Includes Pharmaceutical products not individually shown above.

(5) Other Revenues are comprised primarily of Healthcare Services segment 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

	2018									2017																		% Change
	1Q			2Q			June YTD			1Q			2Q			June YTD			3Q			4Q			Full Year			2Q
TOTAL PHARMACEUTICAL	$	8,919		$	9,282		$	18,201		$	8,185		$	8,759		$	16,944		$	9,156		$	9,290		$	35,390		6

United States	3,716			3,822			7,538			3,761			3,929			7,690			4,197			3,967			15,854			-3
% Pharmaceutical Sales	41.7		%	41.2		%	41.4		%	45.9		%	44.9		%	45.4		%	45.8		%	42.7		%	44.8		%

Europe (1)	2,402			2,322			4,724			1,977			2,082			4,059			2,174			2,290			8,522			12
% Pharmaceutical Sales	26.9		%	25.0		%	26.0		%	24.2		%	23.8		%	24.0		%	23.7		%	24.7		%	24.1		%

Japan	718			834			1,552			688			818			1,507			756			780			3,043			2
% Pharmaceutical Sales	8.1		%	9.0		%	8.5		%	8.4		%	9.3		%	8.9		%	8.3		%	8.4		%	8.6		%

Asia Pacific	1,112			1,224			2,336			889			946			1,835			994			1,054			3,883			29
% Pharmaceutical Sales	12.5		%	13.2		%	12.8		%	10.9		%	10.8		%	10.8		%	10.9		%	11.3		%	11.0		%

China	459			530			989			328			353			681			377			439			1,497			50

Latin America	398			459			856			375			462			837			451			547			1,836			-1
% Pharmaceutical Sales	4.5		%	4.9		%	4.7		%	4.6		%	5.3		%	4.9		%	4.9		%	5.9		%	5.2		%

Eastern Europe/Middle East Africa	335			356			691			255			314			569			349			397			1,314			13
% Pharmaceutical Sales	3.8		%	3.8		%	3.8		%	3.1		%	3.6		%	3.4		%	3.8		%	4.3		%	3.7		%

Canada	196			192			388			182			171			353			193			193			739			12
% Pharmaceutical Sales	2.2		%	2.1		%	2.1		%	2.2		%	2.0		%	2.1		%	2.1		%	2.1		%	2.1		%

Other	42			73			116			58			37			94			42			62			199			97
% Pharmaceutical Sales	0.5		%	0.8		%	0.6		%	0.7		%	0.4		%	0.6		%	0.5		%	0.7		%	0.6		%

(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

	2Q18			2Q17			June YTD 2018			June YTD 2017
Interest income	$	(81	)	$	(96	)	$	(165	)	$	(194	)
Interest expense	194			193			379			375
Exchange losses	71			19			77			11
Equity (income) losses from affiliates	(64		)	(5		)	(12		)	8
Net periodic defined benefit plan (credit) cost other than service cost	(130		)	(131		)	(265		)	(260		)
Other, net	(38		)	(53		)	(354		)	(83		)
Total	$	(48	)	$	(73	)	$	(340	)	$	(143	)

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