Merck & Co. (MRK) 8-K Merck Announces Fourth-Quarter and Full-Year 2018 Financial Results

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			3Q			4Q			Full Year			1Q			2Q			3Q			4Q			Full Year			4Q		Full Year
Sales	$	10,037		$	10,465		$	10,794		$	10,998		$	42,294		$	9,434		$	9,930		$	10,325		$	10,433		$	40,122		5	%	5	%
Costs, Expenses and Other
Cost of sales	3,184			3,417			3,619			3,289			13,509			3,049			3,116			3,307			3,440			12,912			-4	%	5	%
Selling, general and administrative	2,508			2,508			2,443			2,643			10,102			2,472			2,500			2,459			2,643			10,074			—		—
Research and development	3,196			2,274			2,068			2,214			9,752			1,830			1,782			4,413			2,314			10,339			-4	%	-6	%
Restructuring costs	95			228			171			138			632			151			166			153			306			776			-55	%	-19	%
Other (income) expense, net	(291		)	(48		)	(172		)	110			(402		)	(71		)	(73		)	(207		)	(149		)	(500		)	*		-20	%
Income Before Taxes	1,345			2,086			2,665			2,604			8,701			2,003			2,439			200			1,879			6,521			39	%	33	%
Taxes on Income	604			370			707			826			2,508			447			488			251			2,917			4,103
Net Income (Loss)	741			1,716			1,958			1,778			6,193			1,556			1,951			(51		)	(1,038		)	2,418			*		*
Less: Net Income (Loss) Attributable to Noncontrolling Interests	5			9			8			(49		)	(27		)	5			5			5			8			24
Net Income (Loss) Attributable to Merck & Co., Inc.	$	736		$	1,707		$	1,950		$	1,827		$	6,220		$	1,551		$	1,946		$	(56	)	$	(1,046	)	$	2,394		*		*
Earnings (Loss) per Common Share Assuming Dilution (1)	$	0.27		$	0.63		$	0.73		$	0.69		$	2.32		$	0.56		$	0.71		$	(0.02	)	$	(0.39	)	$	0.87		*		*
Average Shares Outstanding Assuming Dilution (1)	2,710			2,696			2,678			2,634			2,679			2,766			2,752			2,727			2,715			2,748
Tax Rate	44.9		%	17.8		%	26.5		%	31.7		%	28.8		%	22.3		%	20.0		%	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 Cost of sales, Selling, general 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) 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

FOURTH 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
Cost of sales	$	3,440		737		17				754		$	2,686
Selling, general and administrative	2,643			4		(1	)			3		2,640
Research and development	2,314			221						221		2,093
Restructuring costs	306					306				306		—
Other (income) expense, net	(149		)	1				(7	)	(6	)	(143		)
Income Before Taxes	1,879			(963	)	(322	)	7		(1,278	)	3,157
Income Tax Provision (Benefit)	2,917			(140	)(3)	(50	)(3)	2,623	(4)	2,433		484
Net (Loss) Income	(1,038		)	(823	)	(272	)	(2,616	)	(3,711	)	2,673
Net (Loss) Income Attributable to Merck & Co., Inc.	(1,046		)	(823	)	(272	)	(2,616	)	(3,711	)	2,665
(Loss) Earnings per Common Share Assuming Dilution	$	(0.39	)	(0.31	)	(0.10	)	(0.96	)	(1.37	)	$	0.98
Tax Rate	155.2		%									15.3		%

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 cost of sales primarily reflect expenses for the amortization of intangible assets recognized as a result of business acquisitions.  Amounts included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures.  Amounts included in research and development expenses reflect $230 million of in-process research and development (IPR&D) impairment charges, partially offset by a reduction of expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration.  Amounts included in other (income) expense, net reflect goodwill and intangible asset impairment charges related to a business in the Healthcare Services segment, largely 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) Includes 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 $2.6 billion provisional charge related to the enactment of U.S. tax legislation.

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

FULL YEAR 2017

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2d

	GAAP			Acquisition and Divestiture-Related Costs (1)		Restructuring Costs (2)		Certain Other Items (3)		Adjustment Subtotal		Non-GAAP
Cost of sales	$	12,912		3,187		138				3,325		$	9,587
Selling, general and administrative	10,074			44		2				46		10,028
Research and development	10,339			510		11		2,350		2,871		7,468
Restructuring costs	776					776				776		—
Other (income) expense, net	(500		)	19				(16	)	3		(503		)
Income Before Taxes	6,521			(3,760	)	(927	)	(2,334	)	(7,021	)	13,542
Income Tax Provision (Benefit)	4,103			(604	)(4)	(182	)(4)	2,304	(5)	1,518		2,585
Net Income	2,418			(3,156	)	(745	)	(4,638	)	(8,539	)	10,957
Net Income Attributable to Merck & Co., Inc.	2,394			(3,156	)	(745	)	(4,638	)	(8,539	)	10,933
Earnings per Common Share Assuming Dilution	$	0.87		(1.15	)	(0.27	)	(1.69	)	(3.11	)	$	3.98
Tax Rate	62.9		%									19.1		%

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 cost of sales primarily reflect $3.1 billion of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as intangible asset impairment charges of $134 million.  Amounts included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures.  Amounts included in research and development expenses reflect $483 million of in-process research and development (IPR&D) impairment charges, as well as $27 million of expenses related to an increase in the estimated fair value measurement of liabilities for contingent consideration.  Amounts included in other (income) expense, net reflect goodwill and intangible asset impairment charges related to a business in the Healthcare Services segment, as well as expenses related to changes 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) Amount included in research and development expenses represents a charge related to the formation of a collaboration with AstraZeneca PLC.

(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.

(5) Includes the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. Also includes a $2.6 billion provisional charge related to the enactment of U.S. tax legislation, as well as a $234 million net tax benefit related to the settlement of certain federal income tax issues and an $88 million tax benefit related to the settlement of a state income tax issue.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

FOURTH QUARTER 2018

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3a

	Global					U.S.							International
	4Q 2018		4Q 2017		% Change	4Q 2018			4Q 2017			% Change	4Q 2018		4Q 2017		% Change
TOTAL SALES (1)	$	10,998	$	10,433	5	$	4,787		$	4,328		11	$	6,211	$	6,105	2
PHARMACEUTICAL	9,830		9,290		6	4,402			3,967			11	5,427		5,323		2
Oncology
Keytruda	2,151		1,297		66	1,243			787			58	907		510		78
Emend	126		143		-12	73			85			-14	53		58		-7
Temodar	56		73		-24	3			12			-72	52		62		-15
Alliance Revenue - Lenvima	71					46							25
Alliance Revenue - Lynparza	62		16		*	39							24		16		51
Vaccines (2)
Gardasil / Gardasil 9	835		633		32	450			370			22	384		262		47
ProQuad / M-M-R II / Varivax	455		403		13	333			316			5	122		88		39
Pneumovax 23	322		263		22	232			189			23	89		74		21
RotaTeq	188		160		17	112			104			7	76		56		35
Zostavax	54		121		-55	6			66			-90	48		55		-13
Hospital Acute Care
Bridion	256		209		23	114			76			49	142		132		7
Noxafil	191		179		7	96			89			8	95		90		6
Cubicin	80		92		-13	41			40			1	39		52		-25
Cancidas	69		95		-27	2			3			-33	67		92		-27
Invanz	59		157		-62	1			93			-99	58		64		-8
Primaxin	53		74		-28	1			3			-75	52		71		-26
Immunology
Simponi	220		217		1								220		217		1
Remicade	123		186		-34								123		186		- 34
Neuroscience
Belsomra	69		60		16	20			26			-23	49		33		47
Virology
Isentress / Isentress HD	280		308		-9	130			143			-9	150		165		-9
Zepatier	108		296		-64				88			-100	108		208		-48
Cardiovascular
Zetia	162		323		-50	11			54			-80	151		269		-44
Vytorin	83		186		-55	(1		)	11			-109	84		176		-52
Atozet	89		54		64								89		54		64
Adempas	91		79		16								91		79		16
Diabetes (3)
Januvia	930		938		-1	503			508			-1	427		430		-1
Janumet	535		586		-9	185			223			-17	350		363		-4
Women’s Health
NuvaRing	216		188		15	171			139			23	45		49		-8
Implanon / Nexplanon	169		183		-8	120			129			-7	48		54		-11
Diversified Brands
Singulair	187		182		3	4			12			-65	183		170		8
Cozaar / Hyzaar	105		125		-16	4			3			24	101		121		-17
Nasonex	102		120		-15	15			37			-60	87		83		5
Arcoxia	86		91		-5								86		91		- 5
Follistim AQ	70		66		6	33			19			72	37		47		-20
Dulera	65		77		-16	57			70			-18	8		7		5
Fosamax	50		62		-18	1			(1		)	*	49		62		-21
Other Pharmaceutical (4)	1,062		1,048		1	357			273			31	708		777		-9
ANIMAL HEALTH	1,036		981		6	314			248			26	722		733		-1
Livestock	684		668		2	144			112			29	540		556		-3
Companion Animals	352		313		12	170			136			24	183		177		3
Other Revenues (5)	132		162		-18	71			113			-37	62		49		26

* 200% or greater

(1) Only select products are shown.

(2) Total Vaccines sales were $2,008 million and $1,704 million on a global basis for fourth quarter 2018 and 2017, respectively.

(3) Total Diabetes sales were $1,485 million and $1,533 million on a global basis for fourth 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

FULL YEAR 2018

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3b

	Global					U.S.					International
	Full Year		Full Year			Full Year		Full Year			Full Year		Full Year
	2018		2017		% Change	2018		2017		% Change	2018		2017		% Change
TOTAL SALES (1)	$	42,294	$	40,122	5	$	18,212	$	17,424	5	$	24,083	$	22,698	6
PHARMACEUTICAL	37,689		35,390		6	16,608		15,854		5	21,081		19,536		8
Oncology
Keytruda	7,171		3,809		88	4,150		2,309		80	3,021		1,500		101
Emend	522		556		-6	312		342		-9	210		213		-2
Temodar	214		271		-21	6		16		-64	209		256		-18
Alliance Revenue - Lynparza	187		20		*	127					61		20		196
Alliance Revenue - Lenvima	149					95					54
Vaccines (2)
Gardasil / Gardasil 9	3,151		2,308		37	1,873		1,565		20	1,279		743		72
ProQuad / M-M-R II / Varivax	1,798		1,676		7	1,430		1,374		4	368		303		21
Pneumovax 23	907		821		10	627		581		8	281		240		17
RotaTeq	728		686		6	496		481		3	232		204		14
Zostavax	217		668		-68	22		422		-95	195		246		-21
Hospital Acute Care
Bridion	917		704		30	386		239		61	531		465		14
Noxafil	742		636		17	353		309		14	389		327		19
Invanz	496		602		-18	253		361		-30	243		241		1
Cubicin	367		382		-4	191		189		1	176		193		-9
Cancidas	326		422		-23	12		20		-43	314		402		-22
Primaxin	265		280		-5	7		10		-30	258		270		-4
Immunology
Simponi	893		819		9						893		819		9
Remicade	582		837		-31						582		837		-31
Neuroscience
Belsomra	260		210		24	96		98		-2	164		112		47
Virology
Isentress / Isentress HD	1,410		1,204		-5	513		565		-9	627		639		-2
Zepatier	455		1,660		-73	8		771		-99	447		888		-50
Cardiovascular
Zetia	857		1,344		-36	45		352		-87	813		992		-18
Vytorin	497		751		-34	10		124		-92	487		627		-22
Atozet	347		225		54						347		225		54
Adempas	329		300		10						329		300		10
Diabetes (3)
Januvia	3,686		3,737		-1	1,969		2,153		-9	1,718		1,584		8
Janumet	2,228		2,158		3	811		863		-6	1,417		1,296		9
Women’s Health
NuvaRing	902		761		19	722		564		28	180		197		-8
Implanon / Nexplanon	703		686		2	495		496			208		191		9
Diversified Brands
Singulair	708		732		-3	20		40		-50	688		692		-1
Cozaar / Hyzaar	453		484		-6	23		18		26	431		466		-8
Nasonex	376		387		-3	23		54		-57	353		333		6
Arcoxia	335		363		-8						335		363		-8
Follistim AQ	268		298		-10	115		123		-7	153		174		-12
Dulera	214		287		-25	186		261		-29	28		26		8
Fosamax	209		241		-13	4		6		-33	205		235		-13
Other Pharmaceutical (4)	4,090		4,065		1	1,228		1,148		7	2,855		2,917		-2
ANIMAL HEALTH	4,212		3,875		9	1,238		1,090		14	2,974		2,785		7
Livestock	2,630		2,484		6	528		471		12	2,102		2,013		4
Companion Animals	1,582		1,391		14	710		619		15	872		772		13
Other Revenues (5)	393		857		-54	366		480		-24	28		377		-93

* 200% or greater

(1) Only select products are shown.

(2) Total Vaccines sales were $7,262 million and $6,547 million on a global basis for December YTD 2018 and 2017, respectively.

(3) Total Diabetes sales were $5,994 million and $5,922 million on a global basis for December 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	% Change
	1Q			2Q			3Q			4Q			Full Year			1Q			2Q			3Q			4Q			Full Year			4Q	Full Year
TOTAL PHARMACEUTICAL	$	8,919		$	9,282		$	9,658		$	9,830		$	37,689		$	8,185		$	8,759		$	9,156		$	9,290		$	35,390		6	6
United States	3,716			3,841			4,649			4,402			16,608			3,761			3,929			4,197			3,967			15,854			11	5
% Pharmaceutical Sales	41.7		%	41.4		%	48.1		%	44.8		%	44.1		%	45.9		%	44.9		%	45.8		%	42.7		%	44.8		%
Europe (1)	2,402			2,322			2,114			2,237			9,076			1,977			2,082			2,174			2,290			8,522			-2	7
% Pharmaceutical Sales	26.9		%	25.0		%	21.9		%	22.8		%	24.1		%	24.2		%	23.8		%	23.7		%	24.7		%	24.1		%
Japan	718			834			740			835			3,127			688			818			756			780			3,043			7	3
% Pharmaceutical Sales	8.1		%	9.0		%	7.7		%	8.5		%	8.3		%	8.4		%	9.3		%	8.3		%	8.4		%	8.6		%
Asia Pacific	1,112			1,224			1,054			1,199			4,589			889			946			994			1,054			3,883			14	18
% Pharmaceutical Sales	12.5		%	13.2		%	10.9		%	12.2		%	12.2		%	10.9		%	10.8		%	10.9		%	11.3		%	11.0		%
China	459			530			488			601			2,077			328			353			377			439			1,497			37	39
Latin America	398			459			493			530			1,880			375			462			451			547			1,836			-3	2
% Pharmaceutical Sales	4.5		%	4.9		%	5.1		%	5.4		%	5.0		%	4.6		%	5.3		%	4.9		%	5.9		%	5.2		%
Eastern Europe/Middle East Africa	335			356			347			349			1,388			255			314			349			397			1,314			-12	6
% Pharmaceutical Sales	3.8		%	3.8		%	3.6		%	3.6		%	3.7		%	3.1		%	3.6		%	3.8		%	4.3		%	3.7		%
Canada	196			192			177			211			776			182			171			193			193			739			9	5
% Pharmaceutical Sales	2.2		%	2.1		%	1.8		%	2.1		%	2.1		%	2.2		%	2.0		%	2.1		%	2.1		%	2.1		%
Other	42			54			84			67			245			58			37			42			62			199			8	23
% Pharmaceutical Sales	0.5		%	0.6		%	0.9		%	0.7		%	0.7		%	0.7		%	0.4		%	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

	4Q18			4Q17			FULL YEAR 2018			FULL YEAR 2017
Interest income	$	(86	)	$	(101	)	$	(343	)	$	(385	)
Interest expense	203			191			772			754
Exchange losses (gains)	25			(17		)	145			(11		)
Equity income from affiliates	(34		)	(32		)	(127		)	(42		)
Net periodic defined benefit plan (credit) cost other than service cost	(128		)	(130		)	(512		)	(512		)
Other, net	130			(60		)	(337		)	(304		)
Total	$	110		$	(149	)	$	(402	)	$	(500	)

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 Cost of sales, Selling, general 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.