Merck & Co. (MRK) 10-K risk factor changes: FY2020 vs FY2019

The Company’s business, financial condition, results of [removed: operations] [added: operations, cash flow] or prospects could be materially adversely affected by any of these risks.

Patents covering products that it has introduced normally provide market exclusivity, which is important for the successful marketing [added: and sale of its products.]

The Company normally responds by defending its patent, including by filing lawsuits alleging patent [removed: infringement.]

Further, court decisions relating to other companies’ patents, potential legislation in both the [removed: U.S.] [added: United States] and certain foreign markets relating to patents, as well as regulatory initiatives may result in a more general weakening of intellectual property protection.

[removed: Also,] [added: For example,] the patent that provided U.S. market exclusivity for *NuvaRing* expired in April 2018 and generic competition began in December 2019.

The Company [removed: anticipates] [added: experienced] a rapid and substantial decline in U.S. *NuvaRing* sales in 2020 as a result of this generic competition.

The Company anticipates sales of *Januvia* and *Janumet* in these markets will decline substantially after [removed: these patent expiries.][added: the loss of market exclusivity.]

In particular, in [removed: 2019,] [added: 2020,] the Company’s oncology portfolio, led by *Keytruda,* represented the [added: vast] majority of the Company’s revenue [removed: and earnings] growth.

[removed: The] [added: - The] Company’s research and development efforts may not succeed in developing commercially successful products and the Company may not be able to acquire commercially successful products in other ways; in consequence, the Company may not be able to replace sales of successful products that [removed: have lost] [added: lose] patent [removed: protection.][added: protection.]

[removed: Like other major pharmaceutical companies, in] [added: In] order to remain competitive, the [removed: Company] [added: Company, like other major pharmaceutical companies,] must continue to launch new products.

There is a high rate of failure inherent in the research and development process for new [removed: drugs.][added: drugs and vaccines.]

The Company must maintain a continuous flow of successful new products and successful new indications [removed: or brand extensions] for existing products sufficient both to cover its substantial research and development costs and to replace sales that are lost as profitable products lose market exclusivity or are displaced by competing products or therapies.

[removed: | • |] [added: -] findings of ineffectiveness, superior safety or efficacy of competing products, or harmful side effects in clinical or pre-clinical testing; [removed: |]

[removed: | • |] [added: -] failure to receive the necessary regulatory approvals, including delays in the approval of new products and new indications, or the anticipated labeling, and uncertainties about the time required to obtain regulatory approvals and the benefit/risk standards applied by regulatory agencies in determining whether to grant approvals; [removed: |]

[removed: | • |] [added: -] failure in certain markets to obtain reimbursement commensurate with the level of innovation and clinical benefit presented by the product; [removed: |]

[removed: | • |] [added: -] lack of economic feasibility due to manufacturing costs or other factors; and [removed: |]

[removed: | • |] [added: -] preclusion from commercialization by the proprietary rights of others. [removed: |]

[removed: | • |] [added: -] results in post-approval Phase 4 trials or other studies; [removed: |]

[removed: | • |] [added: -] the re-review of products that are already marketed; [removed: |]

[removed: | • |] [added: -] the recall or loss of marketing approval of products that are already marketed; [removed: |]

[removed: | • |] [added: -] changing government standards or public expectations regarding safety, efficacy, quality or labeling changes; and [removed: |]

[removed: | • |] [added: -] scrutiny of advertising and promotion. [removed: |]

In the [removed: past several years,] [added: past,] clinical trials and post-marketing surveillance of certain marketed drugs of the Company and of competitors within the industry have raised concerns that have led to recalls, withdrawals or adverse [added: labeling of marketed products.]

[removed: Care Environment] [added: “Competition] and [removed: Government Regulations.”] [added: the Health Care Environment.”] Changes to the health care system enacted as part of health care reform in the United States, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, could result in further pricing pressures.

In [removed: 2019,] [added: 2020,] the Company’s gross U.S. sales were reduced by [removed: approximately 44%] [added: 45.5%] as a result of rebates, discounts and returns.

In Japan, the pharmaceutical industry is subject to government-mandated biennial price reductions of pharmaceutical products and certain [removed: vaccines, which will occur again in 2020.][added: vaccines.]

[removed: The] [added: As discussed above “Competition and the Health Care Environment,” the] Company believes that the health care industry will continue to be subject to increasing regulation as well as political and legal action, as future proposals to reform the health care system are considered by the Executive branch, Congress and state legislatures.

The ACA also requires pharmaceutical manufacturers to pay [removed: a point] [added: 70%] of [removed: service discount to] [added: the cost of medicine, including biosimilar products, when] Medicare Part D beneficiaries [removed: when they] are in the Medicare Part D coverage gap (i.e., the so-called “donut [removed: hole”) which increased to 70% in 2019 and was extended to biosimilar products.][added: hole”).]

In [removed: 2019,] [added: 2020,] the Company’s revenue was reduced by approximately [removed: $615] [added: $700] million due to this requirement.

In [removed: 2019,] [added: 2020,] the Company recorded [removed: $112] [added: $85] million of costs for this annual fee.

In [added: February] 2016, the Centers for Medicare & Medicaid Services (CMS) issued the Medicaid rebate final rule that [removed: implements] [added: implemented] provisions of the ACA effective April 1, 2016.

[removed: Adoption of one or both] [added: Implementation] of the [removed: proposed rules] [added: MFN Rule] could have a material adverse effect on the Company’s business, [added: cash flow,] results of [removed: operations and] [added: operations,] financial [removed: condition.][added: condition and prospects.]

The Company cannot predict the likelihood of [added: these regulations becoming effective or what] additional future changes in the health care industry in general, or the pharmaceutical industry in particular, [removed: or what impact they may] [added: will occur, however, these changes could] have [added: a material adverse effect] on the Company’s business, cash flow, results of operations, financial condition and prospects.

The Company is increasingly dependent on sophisticated software [removed: applications and] [added: applications,] complex information technology [removed: systems and] [added: systems,] computing [removed: infrastructure] [added: infrastructure, and cloud service providers] (collectively, IT systems) to conduct critical operations.

The Company monitors its data, information technology and personnel usage of Company IT systems to reduce these risks and continues to do so on an ongoing [removed: basis for any current or potential threats.]

The costs of compliance with such laws and regulations, or the negative results of non-compliance, could adversely affect the business, cash flow, results of operations, financial condition and prospects of the Company; these laws and regulations include (i) additional [removed: healthcare] [added: health care] reform initiatives in the United States or in other countries, including additional mandatory discounts or fees; (ii) the U.S. Foreign Corrupt Practices Act or other anti-bribery and corruption laws; (iii) new laws, regulations and judicial or other governmental decisions affecting pricing, drug reimbursement, and access or marketing within or across jurisdictions; (iv) changes in intellectual property laws; (v) changes in accounting standards; (vi) new and increasing data privacy regulations and enforcement, particularly in the EU and the United States; (vii) legislative mandates or preferences for local manufacturing of pharmaceutical or vaccine products; (viii) emerging and new global regulatory requirements for reporting payments and other value transfers to [removed: healthcare] [added: health care] professionals; (ix) environmental regulations; and (x) the potential impact of importation restrictions, embargoes, trade sanctions and legislative and/or other regulatory changes.

[removed: Global] [added: As discussed above in “Competition and the Health Care Environment,” global] efforts toward health care cost containment continue to exert pressure on product pricing and market access worldwide.

In addition, the Company’s revenue performance in [removed: 2019] [added: 2020] was negatively affected by other cost-reduction measures taken by governments and other third-parties to lower health care costs.

[removed: | • |] [added: -] changes in medical reimbursement policies and programs and pricing restrictions in key markets; [removed: |]

[removed: | • |] [added: -] multiple regulatory requirements that could restrict the Company’s ability to manufacture and sell its products in key markets; [removed: |]

Summary Risk Factors

The Company is subject to a number of risks that if realized could materially adversely affect its business, results of operations, cash flow, financial condition or prospects.

The following is a summary of the principal risk factors facing the Company:

- The Company is dependent on its patent rights, and if its patent rights are invalidated or circumvented, its business could be materially adversely affected.

- As the Company’s products lose market exclusivity, the Company generally experiences a significant and rapid loss of sales from those products.

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

- Key products generate a significant amount of the Company’s profits and cash flows, and any events that adversely affect the markets for its leading products could have a material adverse effect on the Company’s results of operations and financial condition.

- The Company’s success is dependent on the successful development and marketing of new products, which are subject to substantial risks.

- The Company faces continued pricing pressure with respect to its products.

- The uncertainty in global economic conditions together with cost-reduction measures being taken by certain governments could negatively affect the Company’s operating results.

- The Company faces intense competition from lower cost generic products.

- The Company faces intense competition from competitors’ products.

- The global COVID-19 pandemic is having an adverse impact on the Company’s business, operations and financial performance.

The Company is unable to predict the full extent to which the COVID-19 pandemic or any future pandemic, epidemic or similar public health threat will adversely impact its business, operations, financial performance, results of operations, and financial condition.

- The Company has significant global operations, which expose it to additional risks, and any adverse event could have a material adverse effect on the Company’s results of operations and financial condition.

- Failure to attract and retain highly qualified personnel could affect the Company’s ability to successfully develop and commercialize products.

- In the past, the Company has experienced difficulties and delays in manufacturing certain of its products, including vaccines.

- The Company may not be able to realize the expected benefits of its investments in emerging markets.

- The Company is exposed to market risk from fluctuations in currency exchange rates and interest rates.

- Pharmaceutical products can develop unexpected safety or efficacy concerns.

- Reliance on third-party relationships and outsourcing arrangements could materially adversely affect the Company’s business.

- Negative events in the animal health industry could have a material adverse effect on future results of operations and financial condition.

- Biologics and vaccines carry unique risks and uncertainties, which could have a material adverse effect on the Company’s future results of operations and financial condition.

- The health care industry in the United States has been, and will continue to be, subject to increasing regulation and political action.

- The Company’s products, including products in development, cannot be marketed unless the Company obtains and maintains regulatory approval.

- Developments following regulatory approval may adversely affect sales of the Company’s products.

- The Company is subject to a variety of U.S. and international laws and regulations.

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

- The Company is subject to evolving and complex tax laws, which may result in additional liabilities that may affect results of operations and financial condition.

- Product liability insurance for products may be limited, cost prohibitive or unavailable.

- The Company is increasingly dependent on sophisticated software applications, computing infrastructure and cloud service providers.

The Company could be a target of future cyber-attacks.

- Social media platforms present risks and challenges.

- The costs to complete the proposed Spin-Off will be significant.

- Following the Spin-Off, the price of shares of the Company’s common stock may fluctuate significantly.

- There could be significant income tax liability if the Spin-Off or certain related transactions are determined to be taxable for U.S. federal income tax purposes.

The above list is not exhaustive, and the Company faces additional challenges and risks.

Risk Factors

Risks Related to the Company’s Business

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

and sale of its products.

For example, the patents that provided U.S. and EU market exclusivity for certain forms of *Noxafil* expired in July 2019 and December 2019, respectively, and the Company anticipates a significant decline in U.S. and EU *Noxafil* sales.

In addition, the patents that provide market exclusivity for *Januvia* and *Janumet* in the U.S. expire in July 2022 (although six-month pediatric exclusivity may extend this date).

The patent that provides market exclusivity for *Januvia* in the EU expires in July 2022 (although pediatric exclusivity may extend this date to September 2022).

| | |

| --- | --- |

labeling of marketed products.

“Competition and the Health Care Environment — Health

For example, pursuant to a re-pricing rule, the Japanese government reduced the price of *Keytruda* by 17.5%, effective February 2020.

Additionally, *Keytruda* will be subject to another significant price reduction in April 2020 under a provision of the Japanese pricing rules.

The impact of changes resulting from the issuance of the rule is not material to Merck at this time.

However, the Company is still awaiting guidance from CMS on two aspects of the rule that were deferred for later implementation.

These include a definition of what constitutes a product ‘line extension’ and a delay in the participation of the U.S. Territories in the Medicaid Drug Rebate Program until April 1, 2022.

The Company will evaluate the financial impact of these two elements when they become effective.

In addition, as discussed above in “Competition and the Health Care Environment,” the administration has recently proposed a draft rule that would allow importation of certain lower-cost prescription drugs from Canada.

If the rule is finalized as proposed, states or certain other non-federal governmental entities would be able to submit importation program proposals to the FDA for review and authorization of two-year programs (with the opportunity to extend for two more years).

There will be a public comment period on the proposed rule which will expire on March 9, 2020.

Following the comment period, the FDA will have to review and finalize its proposal before any states or other

parties can submit their plans to comply with the federal rule.

If the proposed rule is adopted, it likely will be some time before states or other parties can actually implement importation plans.

Also, in October 2018, the administration issued an advance notice of proposed rulemaking to implement an “International Pricing Index” (IPI) model in the United States for products covered under Medicare Part B.

The proposal would: (1) reduce Medicare Part B payments for drugs based on a market basket of international prices; (2) allow private sector vendors to negotiate prices for drugs, take title to drugs, and compete for physician and hospital business; and (3) change the physician reimbursement under Medicare Part B from the current model to eliminate the buy and bill system and instead pay physicians based on a flat fee that approximates the revenue they currently receive from drugs.

Public comments on the IPI proposal were accepted through late 2018 and it is unclear when the agency may issue a proposed rule on the IPI model.

The Company has insurance coverage insuring against losses resulting from cyber-attacks and has received proceeds in connection with the 2017 cyber-attack.

However, there are disputes with certain of the insurers about the availability of some of the insurance coverage for claims related to the 2017 cyber-attack.

In 2016, the United Kingdom (UK) held a referendum in which voters approved an exit from the EU, commonly referred to as “Brexit.” As a result of that referendum and subsequent negotiations, the UK left the EU on January 31, 2020.

A transitional period will apply from January 31, 2020 until December 31, 2020, and during this period the EU will treat the UK as if it were an EU Member State, and the UK will continue to participate in the EU Customs Union allowing for the freedom of movement for people and goods.

During the transitional period the EU and the UK will continue to negotiate a trade agreement to formalize the terms of the UK’s future relationship with the EU.

The Company has taken actions and made certain contingency plans for scenarios in which the UK and the EU do not reach a mutually satisfactory understanding as to a future trade agreement.

It is not possible at this time to predict whether there will be any such understanding before the end of 2020, or if such an understanding is reached, whether its terms will vary in ways that result in greater restrictions on imports and exports between the UK and EU countries, increased regulatory complexities, and/or cross border labor issues that could materially adversely impact the Company’s business operations in the UK.

For example, in 2017, the Company’s lone manufacturing plant in Puerto Rico was negatively affected by Hurricane Maria.

substitution, where available.

The expansion of the VBP program remains to be seen.

Also, in December 2019, a new Coronavirus, now known as COVID-19, which has proved to be highly contagious, emerged in Wuhan, China.

The outbreak of the virus has caused material disruptions to the Chinese economy, including its health care system, which will have a negative effect on the Company’s first quarter 2020 results which, at this time, is not expected to be material.

Since the future course and duration of the COVID-19 outbreak are unknown, the Company is currently unable to determine whether the outbreak will have a further negative effect on the Company’s results in 2020.

The outbreak of COVID-19 currently has also had a limited effect on the Company’s supply chain of drugs into and raw materials out of China.

The outbreak has also negatively affected certain of the Company’s clinical trials.

| • | Manufacturing biologics and vaccines, especially in large quantities, is often complex and may require the use of innovative technologies to handle living micro-organisms. Each lot of an approved biologic and vaccine must undergo thorough testing for identity, strength, quality, purity and potency. Manufacturing biologics requires facilities specifically designed for and validated for this purpose, and sophisticated quality assurance and quality control procedures are necessary. Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping and quality control and testing, may result in lot failures, product recalls or spoilage. When changes are made to |

The following section of this Form 10-K generally discusses [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] results and year-to-year comparisons between [removed: 2019] [added: 2020] and [removed: 2018.][added: 2019.]

Discussion of [removed: 2017] [added: 2018] results and year-to-year comparisons between [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2018] [added: 2019] filed on February [removed: 27, 2019.][added: 26, 2020.]

The Company’s operations are principally managed on a products basis and include [removed: four] [added: two] operating segments, which are the [removed: Pharmaceutical, Animal Health, Healthcare Services] [added: Pharmaceutical] and [removed: Alliances] [added: Animal Health segments, both of which are reportable] segments.

The [added: Company previously had a] Healthcare Services segment [removed: provides] [added: that provided] services and solutions [removed: that focus] [added: focused] on engagement, health analytics and clinical services to improve the value of care delivered to patients.

The [added: Company previously had an] Alliances segment [added: that] primarily [removed: includes] [added: included] activity from the Company’s relationship with AstraZeneca LP related to sales of Nexium and Prilosec, which concluded in 2018.

*Planned Spin-Off of Women’s Health, [removed: Legacy Brands and] Biosimilars [added: and Established Brands] into [added: a] New Company*

In February 2020, Merck announced its intention to spin-off products from its women’s health, [removed: trusted legacy brands and] biosimilars [added: and established brands] businesses into a new, [removed: yet-to-be-named,] independent, publicly traded company [removed: (NewCo)] [added: named Organon & Co. (Organon)] through a distribution of [removed: NewCo’s] [added: Organon’s] publicly traded stock to Company shareholders.

The [removed: legacy] [added: established] brands included in the transaction consist of dermatology, [removed: pain,] [added: non-opioid pain management,] respiratory, and select cardiovascular products including *Zetia* and *Vytorin*, as well as the rest of Merck’s diversified brands franchise.

[removed: NewCo] [added: Organon] will have development capabilities initially focused on late-stage development and life-cycle [removed: management,] [added: management] and is expected over time to develop research capabilities in selected therapeutic areas.

The spin-off is expected to be completed [added: late] in the [removed: first half] [added: second quarter] of 2021, subject to market and certain other conditions.

[removed: In 2019, Merck enhanced its portfolio and pipeline with external innovation,] [added: The] increased [added: capital expenditures in 2020 and 2019 reflect] investment in new capital projects focused primarily on [removed: expanding] [added: increasing] manufacturing capacity [removed: across] [added: for] Merck’s key [removed: businesses, and returned capital to shareholders.][added: products.]

Worldwide sales were [removed: $46.8] [added: $48.0] billion in [removed: 2019,] [added: 2020,] an increase of [removed: 11%] [added: 2%] compared with [removed: 2018, including a 2%] [added: 2019, or 4% excluding the] unfavorable effect from foreign exchange.

The sales increase was driven primarily by [removed: Merck’s growth pillars of] oncology, [removed: human health vaccines,] certain hospital acute care [removed: products,] [added: products] and animal health.

Growth in these areas was [removed: partially] [added: largely] offset by the [removed: ongoing] [added: negative] effects of [added: the coronavirus disease 2019 (COVID-19) pandemic as discussed below, the effects of] generic competition, particularly in the diversified brands and [removed: cardiovascular] [added: women’s health] franchises, [removed: as well as by] competitive [removed: pressure, particularly] [added: pressure] in the [removed: diabetes and] virology [removed: franchises.][added: franchise and pricing pressure in the diabetes franchise.]

[added: In January 2020,] Merck [removed: also announced an agreement to acquire] [added: acquired] ArQule, [removed: Inc. (ArQule),] a [added: publicly traded] biopharmaceutical company focused on kinase inhibitor discovery and development for the treatment of [added: patients with] cancer and other [removed: diseases; the acquisition closed in January 2020.][added: diseases for $2.7 billion.]

[removed: The FDA and EC also approved expanded indications for *Zerbaxa* for the treatment of patients with hospital-acquired] bacterial pneumonia and ventilator-associated bacterial pneumonia [removed: (HABP/VABP)] caused by certain susceptible Gram-negative microorganisms.

In addition to the recent regulatory approvals discussed above, the Company advanced its late-stage [removed: pipeline, particularly in oncology,] [added: pipeline] with several regulatory [removed: submissions for *Keytruda*, Lynparza and Lenvima in the United States and internationally.][added: submissions.]

The Company’s Phase 3 oncology programs include *Keytruda* in the therapeutic areas of biliary tract, [removed: breast,] cervical, [removed: colorectal,] cutaneous squamous cell, endometrial, [removed: esophageal,] gastric, hepatocellular, mesothelioma, [removed: nasopharyngeal,] ovarian, prostate and small-cell lung cancers; Lynparza [added: as monotherapy for colorectal cancer and] in combination with *Keytruda* for [removed: non-small cell] [added: non-small-cell] lung [removed: cancer;] and [added: small-cell lung cancers; and] Lenvima in combination with *Keytruda* for bladder, endometrial, [added: gastric,] head and neck, melanoma and non-small-cell lung cancers.

Additionally, the Company has candidates in Phase 3 clinical development in several other therapeutic areas, including [removed: V114, an investigational polyvalent conjugate vaccine for the prevention of pneumococcal disease that received Breakthrough Therapy designation from the FDA for the prevention of invasive pneumococcal disease caused by the vaccine serotypes in pediatric patients (6 weeks to 18 years of age) and in adults;] MK-7264, gefapixant, a selective, non-narcotic, [removed: orally-administered] [added: orally-administered, investigational] P2X3-receptor antagonist being developed for the treatment of refractory, chronic cough; [added: MK-7110, an investigational treatment for patients hospitalized with COVID-19;] MK-8591A, islatravir, an investigational nucleoside reverse transcriptase translocation inhibitor (NRTTI) in combination with doravirine for the treatment of HIV-1 infection; and [removed: MK-1242, vericiguat, an investigational treatment for heart failure] [added: V114, which is] being [removed: developed] [added: evaluated for the prevention of pneumococcal disease] in [removed: a collaboration (see “Research and Development” below).][added: pediatric patients.]

The Company is allocating resources to [removed: effectively] support its commercial opportunities in the near term while making the necessary investments to support long-term growth.

Research and development expenses in [removed: 2019] [added: 2020] reflect higher [added: costs related to business development activity, higher] clinical development spending and increased investment in discovery research and early drug development.

In November [removed: 2019,] [added: 2020,] Merck’s Board of Directors approved an increase to the Company’s quarterly dividend, raising it to [removed: $0.61] [added: $0.65] per share from [removed: $0.55] [added: $0.61] per share on the Company’s outstanding common stock.

During [removed: 2019,] [added: 2020,] the Company returned [removed: $10.5] [added: $7.5] billion to shareholders through dividends and share repurchases.

[added: |] Earnings per [removed: common share assuming dilution attributable] [added: Common Share Assuming Dilution Attributable] to [removed: common shareholders (EPS) for 2019 were] [added: Merck & Co., Inc. Common Shareholders | | | $2.78 | | | | | | (27) | | % | | | | (24) | | % |] $3.81 [removed: compared with $2.32 in 2018.][added: | | |]

[removed: EPS in both years reflects the impact of] [added: *(1)* *Non-GAAP net income and non-GAAP earnings per share (EPS) exclude] acquisition and divestiture-related costs, [removed: as well as] restructuring costs and certain other items.

[removed: In addition, the Company’s revenue performance in 2019 was negatively] affected by other cost-reduction measures taken by governments and other third-parties to lower health care costs.

[removed: Sales][added: *Sales*]

| *($ in millions)* | [removed: 2019] | | [added: 2020] | | [added: | | | |] % Change | | | [added: | | |] % [removed: Change Excluding Exchange] [added: Change Excluding Foreign Exchange] | | | [removed: 2018] | | | [added: 2019] | [added: | | | | |] % Change | | | [added: | | |] % Change Excluding [added: Foreign] Exchange | | | [removed: 2017] | | | [added: 2018 | | |]

| Total | [added: | |] $ | [removed: 46,840] [added: 47,994] | | | [removed: 11] | [added: | 2 | |] % | | [removed: 13] | [added: | 4 | |] % | | [added: | |] $ | [removed: 42,294] [added: 46,840] | | | [removed: 5] | [added: | 11 | |] % | | [removed: 5] | [added: | 13 | |] % | | [added: | |] $ | [removed: 40,122] [added: 42,294] | |

Worldwide sales grew [removed: 11%] [added: 2%] in [removed: 2019 driven primarily by] [added: 2020 due to] higher sales in the oncology franchise reflecting strong growth of *Keytruda*, as well as increased alliance revenue [removed: related to] [added: from] Lynparza and Lenvima.

Also contributing to revenue growth were higher sales of [added: certain] vaccines, including *Gardasil/Gardasil* [removed: 9, *Varivax*, *ProQuad*] [added: 9] and [removed: *M‑M‑R* II,] [added: *Pneumovax* 23,] as well as increased sales of certain hospital acute care products, including [added: *Prevymis* and] *Bridion.* Higher sales of animal health products also drove revenue growth in [removed: 2019.][added: 2020.]

Sales growth in [removed: 2019] [added: 2020] was partially offset by the effects of generic competition for [removed: cardiovascular] [added: certain] products [removed: *Zetia* and *Vytorin*,] [added: including women’s health product *NuvaRing*,] hospital acute care products [removed: *Invanz*, *Cubicin*] [added: *Noxafil*] and [removed: *Noxafil*,] [added: *Cubicin*,] oncology [removed: product *Emend*,] [added: products *Emend*/*Emend* for Injection, cardiovascular products *Zetia*] and [added: *Vytorin*, and] products within the diversified brands franchise, [removed: as well as biosimilar competition for immunology product *Remicade.*] [added: particularly *Singulair.*] The diversified brands franchise includes certain products that are approaching the expiration of their marketing exclusivity or that are no longer protected by patents in developed markets.

Lower sales of [added: pediatric vaccines, including *ProQuad*, *M-M-R* II, and *Varivax*, as well as lower sales of] diabetes products *Januvia* and [removed: *Janumet*] [added: *Janumet*,] and [removed: HIV] [added: virology] products [added: *Zepatier* and] *Isentress/Isentress HD* also partially offset revenue growth in [removed: 2019.][added: 2020.]

Sales in the United States grew [removed: 12%] [added: 2%] in [removed: 2019 driven] [added: 2020] primarily [added: driven] by higher sales of *Keytruda*, [removed: combined sales of *ProQuad*, *M-M-R* II and *Varivax*, and *Bridion*, as well as higher] [added: increased] alliance revenue from [removed: Lenvima] [added: Lynparza] and [removed: Lynparza.][added: Lenvima, and higher sales of animal health products.]

Revenue growth was [removed: partially] [added: largely] offset by lower sales of [removed: *Januvia, Janumet*, *Invanz*, *Emend*, *Isentress/Isentress HD*, *Cubicin*] [added: *NuvaRing*, *Januvia*, *Noxafil*, *Emend/Emend* for Injection, *M-M-R* II, *Janumet*, *Varivax*] and [removed: *Noxafil*.][added: *Implanon/Nexplanon*.]

International sales grew [removed: 10%] [added: 2%] in [removed: 2019.][added: 2020.]

The increase in international sales primarily reflects growth in *Keytruda*, *Gardasil/Gardasil* 9, [removed: combined sales of *ProQuad*, *M-M-R* II and *Varivax*,] [added: increased alliance revenue from Lynparza,] as well as higher [removed: alliance revenue from Lynparza] [added: sales of *Pneumovax* 23, *Prevymis*, *Januvia*] and [removed: Lenvima.][added: animal health products.]

Sales growth was partially offset by lower sales of [removed: *Zetia*,] [added: *Zepatier*,] *Vytorin*, [removed: *Zepatier,*] [added: *Noxafil*, *Zetia*,] *Remicade*, [added: *Emend/Emend* for Injection] and products within the diversified brands [removed: franchise.][added: franchise, particularly *Singulair* and *Nasonex*.]

International sales represented [removed: 57%] [added: 56%] of total sales in both [removed: 2019] [added: 2020] and [removed: 2018.][added: 2019.]

| *Keytruda* | [added: | |] $ | [removed: 11,084] [added: 14,380] | | | [removed: 55] | [added: | 30 | |] % | | [removed: 58] | [added: | 30 | |] % | | [added: | |] $ | [removed: 7,171] [added: 11,084] | | | [removed: 88] | [added: | 55 | |] % | | [removed: 88] | [added: | 58 | |] % | | [added: | |] $ | [removed: 3,809] [added: 7,171] | |

The Company divested the remaining businesses in this segment in the first quarter of 2020.

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

*Financial Highlights*

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| *($ in millions)* | | | 2020 | | | | | | % Change | | | | | | % Change Excluding Foreign Exchange | | | 2019 | | |

| Sales | | | $ | 47,994 | | | | | 2 | | % | | | | 4 | | % | $ | 46,840 | |

| | | | | | | | | | | | | | | | | | | | | |

| Net Income Attributable to Merck & Co., Inc. | | | 7,067 | | | | | | (28) | | % | | | | (25) | | % | 9,843 | | |

| Non-GAAP Net Income Attributable to Merck & Co., Inc. *(1)* | | | 15,082 | | | | | | 13 | | % | | | | 16 | | % | 13,382 | | |

| | | | | | | | | | | | | | | | | | | | | |

| Non-GAAP Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders *(1)* | | | $5.94 | | | | | | 14 | | % | | | | 17 | | % | $5.19 | | |

For further discussion and a reconciliation of GAAP to non-GAAP net income and EPS (see “Non-GAAP Income and Non-GAAP EPS” below)*.

*Executive Summary*

During 2020, Merck continued executing on its strategic priorities reporting year-over-year sales growth despite the business challenges posed by the COVID-19 pandemic.

Roughly two-thirds of Merck’s Pharmaceutical segment revenue is comprised of physician-administered products, sales of which were negatively affected in 2020 by patients’ inability to access health care providers, fewer well visits, and social distancing measures.

However, in the latter part of the year, the Company experienced a partial recovery in the underlying demand for products across its key growth pillars.

Despite the pandemic, Merck employees across the organization continued their important work, enrolling and maintaining clinical studies, progressing the pipeline and ensuring the supply of and patient access to the Company’s portfolio of medically important medicines and vaccines.

The Company also executed on Merck’s capital allocation priorities by completing business development transactions and investing in its pipeline.

Additionally, the Company remains on track to complete the spin-off of Organon late in the second quarter of 2021 thereby creating two companies, each focused on their strengths and portfolios allowing them to pursue their respective market opportunities and business strategies.

In 2020, the products that will comprise Organon had total sales of $6.5 billion.

Merck actively monitors the business development landscape for growth opportunities that meet the Company’s strategic criteria.

To expand its oncology presence, Merck completed the acquisitions of ArQule, Inc. (ArQule), a biopharmaceutical company focused on kinase inhibitor discovery and development for the treatment of cancer and other diseases; and VelosBio Inc. (VelosBio), a clinical-stage biopharmaceutical company committed to developing first-in-class cancer therapies targeting receptor tyrosine kinase-like orphan receptor 1 (ROR1) currently being evaluated for the treatment of patients with hematologic malignancies and solid tumors.

Additionally, Merck entered into strategic collaboration agreements with Seagen to gain access to ladiratuzumab vedotin, an investigational antibody-drug conjugate targeting LIV-1, and Tukysa (tucatinib), a small molecule tyrosine kinase inhibitor for the treatment of human epidermal growth factor receptor 2 (HER2)-positive cancers.

To augment Merck’s animal health business, the Company acquired the U.S. rights to Sentinel Flavor Tabs and Sentinel Spectrum Chews.

As part of industry-wide efforts to develop solutions to the pandemic, the Company acquired OncoImmune, a company developing a therapeutic candidate for the treatment of patients hospitalized with COVID-19; and Themis Bioscience GmbH (Themis), a company focused on vaccines and immune-modulation therapies for infectious diseases, including a COVID-19 vaccine candidate.

Additionally, Merck entered into

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

strategic collaborations with Ridgeback Biotherapeutics LP (Ridgeback Bio) to develop an orally available antiviral candidate in clinical development for the treatment of patients with COVID-19; and with the International AIDS Vaccine Initiative, Inc. (IAVI) to develop an investigational vaccine against SARS-CoV-2 being studied for the prevention of COVID-19.

In January 2021, the Company announced it was discontinuing development of the COVID-19 vaccine candidates (see Note 3 to the consolidated financial statements).

During 2020, the Company received numerous regulatory approvals within oncology.

*Keytruda* received approval in the United States as monotherapy in the therapeutic areas of cutaneous squamous cell carcinoma (cSCC), metastatic microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) colorectal cancer, non-muscle invasive bladder cancer (NMIBC) and tumor mutational burden-high (TMB-H) solid tumors, as well as in combination with chemotherapy for the treatment of triple-negative breast cancer (TNBC).

Merck also received approval in the United States for an every six weeks (Q6W) dosing regimen across all adult indications.

Additionally, *Keytruda* received approval in China for the treatment of certain patients with head and neck squamous cell carcinoma (HNSCC) and in both China and Japan for the treatment of certain patients with esophageal squamous cell carcinoma (ESCC).

Lynparza, which is being developed in collaboration with AstraZeneca PLC (AstraZeneca), received approval in the United States: in combination with bevacizumab as a first-line maintenance treatment of certain adult patients with advanced epithelial ovarian, fallopian tube or primary peritoneal cancer who are in complete or partial response to first-line platinum-based chemotherapy; and for the treatment of certain adult patients with metastatic castration-resistant prostate cancer (mCRPC) following progression on prior treatment.

Additionally, Lynparza was approved in the European Union (EU): as monotherapy for the treatment of adult patients with mCRPC and *BRCA*1/2 mutations who have progressed following a prior therapy; and for the maintenance treatment of certain adult patients with metastatic adenocarcinoma of the pancreas.

Lynparza was also approved in Japan for the treatment of three types of advanced cancer: ovarian, prostate and pancreatic cancer.

Lenvima, which is being developed in collaboration with Eisai Co., Ltd. (Eisai), received approval in China as monotherapy for the treatment of differentiated thyroid cancer.

Also in 2020, *Gardasil* 9 was approved for use in women and girls in Japan where it is marketed as *Silgard* 9.

Additionally, in 2020, the U.S. Food and Drug and Administration (FDA) granted accelerated approval for an expanded indication for *Gardasil* 9 for the prevention of oropharyngeal and other head and neck cancers caused by certain HPV types.

The Pharmaceutical and Animal Health segments are the only reportable segments.

The Company has recently sold certain businesses in the Healthcare Services segment and is in the process of divesting the remaining businesses.

While the Company continues to look for investment opportunities in this area of health care, the approach to these investments has shifted toward venture capital investments in third parties as opposed to wholly-owned businesses.

Merck’s performance during 2019 demonstrates execution in both commercial and research operations driven by a focus on key growth drivers and innovative pipeline investment reinforcing the Company’s science-led strategy.

Merck continued to prioritize business development aimed at enhancing its portfolio and strengthening its pipeline by executing several business development transactions in 2019.

To expand its oncology presence, Merck completed the acquisitions of Peloton Therapeutics, Inc. (Peloton), a clinical-stage biopharmaceutical company focused on the development of novel small molecule therapeutic candidates for the treatment of cancer and other diseases, and Immune Design, a late-stage immunotherapy company employing next-generation *in vivo* approaches to enable the body’s immune system to fight disease.

To augment Merck’s animal health business, the Company acquired Antelliq Group (Antelliq), a leader in digital animal identification, traceability and monitoring solutions.

During 2019, the Company received numerous regulatory approvals and progressed many important pipeline candidates through clinical development.

Within oncology, *Keytruda* received multiple additional approvals in the United States, European Union (EU), China and Japan as monotherapy in the therapeutic areas of non-small-cell lung cancer (NSCLC), small-cell lung cancer (SCLC), esophageal cancer and in combination with axitinib for the treatment of renal cell carcinoma (RCC), in combination with chemotherapy for head and neck squamous cell carcinoma (HNSCC), and in combination with Lenvima for endometrial carcinoma.

Lynparza, which is being developed in collaboration with AstraZeneca PLC (AstraZeneca), received U.S. Food and Drug Administration (FDA) approval for the treatment of appropriate patients with germline *BRCA*\-mutated (g*BRCA*m) pancreatic cancer and European Commission (EC) approval for use in certain patients with advanced ovarian cancer and advanced or metastatic breast cancer.

In addition to oncology, the Company received regulatory approvals in the hospital acute care and vaccines therapeutic areas.

The FDA approved *Recarbrio* (imipenem, cilastatin, and relebactam) for injection, a new combination antibacterial for the treatment of certain patients with complicated urinary tract infections caused by certain Gram-negative microorganisms.

*Recarbrio* was approved by the EC in February 2020.

Additionally, *Ervebo* (Ebola Zaire Vaccine, Live), a vaccine for the prevention of disease caused by *Zaire ebolavirus* in adults, was approved in the United States and received conditional approval in the EU*.*

Certain other items in 2019 include a charge related to the acquisition of Peloton and in 2018 include a charge related to the formation of a collaboration with Eisai Co., Ltd. (Eisai).

Non-GAAP EPS, which excludes these items, was $5.19 in 2019 and $4.34 in 2018 (see “Non-GAAP Income and Non-GAAP EPS” below).

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| United States | $ | 20,325 | | | 12 | % | | 12 | % | | $ | 18,212 | | | 5 | % | | 5 | % | | $ | 17,424 | |

| International | 26,515 | | | | 10 | % | | 13 | % | | 24,083 | | | | 6 | % | | 6 | % | | 22,698 | | |

Performance in international markets was led by China, which had total sales of $3.2 billion in 2019, representing growth of 47% compared with 2018, including a 7% unfavorable effect from foreign exchange.

*Keytruda* was initially approved for HNSCC under the FDA’s accelerated approval process based on data from the Phase 1b KEYNOTE-012 trial.

*Keytruda* was approved for these indications by the EC in November 2019 and by Japan’s Ministry of Health, Labour and Welfare (MHLW) in December 2019.

In April 2019, the FDA approved *Keytruda* in combination with Inlyta (axitinib), a tyrosine kinase inhibitor, for the first-line treatment of patients with advanced RCC, the most common type of kidney cancer, based on findings from the pivotal Phase 3 KEYNOTE-426 trial.

*Keytruda* was approved for this indication by the EC in September 2019 and by Japan’s MHLW in December 2019.

Also in April 2019, the FDA approved an expanded label for *Keytruda* as monotherapy for the first-line treatment of patients with NSCLC expressing PD-L1 (Tumor Proportion Score \[TPS\] ≥1%) as determined by an FDA-approved test, with no EGFR or ALK genomic tumor aberrations, in stage III disease where patients are not candidates for surgical resection or definitive chemoradiation, and in metastatic disease.

In September 2019, the FDA approved the combination of *Keytruda* plus Lenvima for the treatment of certain patients with advanced endometrial carcinoma that is not MSI-H or mismatch repair deficient.

In March 2019, the EC approved *Keytruda* in combination with carboplatin and either paclitaxel or nab-paclitaxel for the first-line treatment of adults with metastatic squamous NSCLC based on data from the Phase 3 KEYNOTE-407 trial.

*Keytruda* was approved for this indication by the FDA in October 2018.

In April 2019, the EC approved a new extended dosing schedule of 400 mg every six weeks (Q6W) delivered as an intravenous infusion over 30 minutes for all approved monotherapy indications in the EU.

Additionally, in 2019, *Keytruda* received the following approvals from China’s National Medical Products Administration (NMPA): in combination with pemetrexed and platinum chemotherapy for the first-line treatment of patients with metastatic nonsquamous NSCLC, with no EGFR or ALK genomic tumor aberrations, based on data from the pivotal Phase 3 KEYNOTE-189 trial; as monotherapy for the first-line treatment of patients with locally advanced or metastatic NSCLC whose tumors express PD-L1 as determined by a NMPA-approved test, with no EGFR or ALK genomic tumor aberrations, based on the results from the Phase 3 KEYNOTE-042 trial; and in combination with carboplatin and paclitaxel for the first-line treatment of patients with metastatic squamous NSCLC based on findings from the pivotal Phase 3 KEYNOTE-407 trial.

Other indications contributing to U.S. sales growth include HNSCC, urothelial carcinoma, melanoma, and MSI-H cancer.

*Keytruda* sales growth in international markets was driven primarily by performance in Europe, Japan and China reflecting increased use in the treatment of NSCLC, as well as for the more recently approved indications as described above.

The increase in alliance revenue related to Lynparza in 2019 was driven primarily by expanded use in the United States, the EU, Japan and China reflecting in part the ongoing launch of new indications.

Lynparza received approval for the treatment of certain types of advanced ovarian cancer in the United States in December 2018, in the EU and in Japan in June 2019, and in China in December 2019 based on the results of the Phase 3 SOLO-1 trial.

Also, in April 2019, the EC approved Lynparza for the treatment of certain adult patients with advanced breast cancer based on the results of the Phase 3 OlympiAD trial.

Additionally, in December 2019, the FDA approved Lynparza for the maintenance treatment of certain adult patients with advanced pancreatic cancer based on the results of the Phase 3 POLO trial.

Additionally, in September 2019, the FDA approved the combination of *Keytruda* plus Lenvima for the treatment of certain patients with advanced endometrial carcinoma that is not MSI-H or mismatch repair deficient.

This marks the first U.S. approval for the combination of *Keytruda* plus Lenvima.

The increase in alliance revenue related to Lenvima in 2019 reflects strong performance in the treatment of HCC following recent worldwide launches, as well as a full year of collaboration activity in 2019.

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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The Company’s operations are principally managed on a products basis and include [removed: four] [added: two] operating segments, which are the [removed: Pharmaceutical, Animal Health, Healthcare Services] [added: Pharmaceutical] and [removed: Alliances] [added: Animal Health segments, both of which are reportable] segments.

The [added: Company previously had a] Healthcare Services segment [removed: provides] [added: that provided] services and solutions [removed: that focus] [added: focused] on engagement, health analytics and clinical services to improve the value of care delivered to patients.

The [added: Company previously had an] Alliances segment [added: that] primarily [removed: includes] [added: included] activity from the Company’s relationship with AstraZeneca LP related to sales of Nexium and Prilosec, which concluded in 2018.

Planned Spin-Off of Women’s Health, [removed: Legacy Brands and] Biosimilars [added: and Established Brands] into a New Company

In February 2020, Merck announced its intention to spin-off (the Spin-Off) products from its women’s health, [removed: trusted legacy brands and] biosimilars [added: and established brands] businesses into a new, [removed: yet-to-be-named,] independent, publicly traded company [removed: (NewCo)] [added: named Organon & Co. (Organon)] through a distribution of [removed: NewCo’s] [added: Organon’s] publicly traded stock to Company shareholders.

The [removed: legacy] [added: established] brands included in the transaction consist of dermatology, [removed: pain,] [added: non-opioid pain management,] respiratory, and select cardiovascular products including *Zetia* [added: (ezetimibe)] and [removed: *Vytorin*,] [added: *Vytorin* (ezetimibe/simvastatin),] as well as the rest of Merck’s diversified brands franchise.

[removed: NewCo] [added: Organon] will have development capabilities initially focused on late-stage development and life-cycle management, and is expected over time to develop research capabilities in selected therapeutic areas.

The Spin-Off is expected to be completed [added: late] in the [removed: first half] [added: second quarter] of 2021, subject to market and certain other conditions.

See “Risk Factors - Risks Related to the Proposed Spin-Off of [removed: NewCo.”][added: Organon.”]

| *($ in millions)* | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | | [removed: 2017] [added: 2019] | | | [added: | | | 2018 | | |]

| Total Sales | [added: | |] $ | [removed: 46,840] [added: 47,994] | | | [removed: $] | [removed: 42,294] | [added: $] | [added: 46,840] | [added: | | | |] $ | [removed: 40,122] [added: 42,294] | |

| Pharmaceutical | [removed: 41,751] | | [added: 43,021] | | [removed: 37,689] | | | | [removed: 35,390] [added: 41,751] | | | [added: | | | 37,689 | | |]

| *Keytruda* | [removed: 11,084] | | [added: 14,380] | | [removed: 7,171] | | | | [removed: 3,809] [added: 11,084] | | | [added: | | | 7,171 | | |]

| *Januvia/Janumet* | [removed: 5,524] | | [added: 5,276] | | [removed: 5,914] | | | | [removed: 5,896] [added: 5,524] | | | [added: | | | 5,914 | | |]

| *Gardasil/Gardasil* 9 | [removed: 3,737] | | [added: 3,938] | | [removed: 3,151] | | | | [removed: 2,308] [added: 3,737] | | | [added: | | | 3,151 | | |]

| *ProQuad/M-M-R* II*/Varivax* | [removed: 2,275] | | [added: 1,878] | | [removed: 1,798] | | | | [removed: 1,676] [added: 2,275] | | | [added: | | | 1,798 | | |]

| *Bridion* | [removed: 1,131] | | [added: 1,198] | | [removed: 917] | | | | [removed: 704] [added: 1,131] | | | [added: | | | 917 | | |]

| *Isentress/Isentress HD* | [removed: 975] | | [added: 857] | | [removed: 1,140] | | | | [removed: 1,204] [added: 975] | | | [added: | | | 1,140 | | |]

| *Pneumovax* 23 | [removed: 926] | | [added: 1,087] | | [removed: 907] | | | | [removed: 821] [added: 926] | | | [added: | | | 907 | | |]

| *Zetia/Vytorin* | [removed: 874] | | [added: 664] | | [removed: 1,355] | | | | [removed: 2,095] [added: 874] | | | [added: | | | 1,355 | | |]

| *Simponi* | [removed: 830] | | [added: 838] | | [removed: 893] | | | | [removed: 819] [added: 830] | | | [added: | | | 893 | | |]

| Animal Health | [removed: 4,393] | | [added: 4,703] | | [removed: 4,212] | | | | [removed: 3,875] [added: 4,393] | | | [added: | | | 4,212 | | |]

| Livestock | [removed: 2,784] | | [added: 2,939] | | [removed: 2,630] | | | | [removed: 2,484] [added: 2,784] | | | [added: | | | 2,630 | | |]

| Companion Animals | [removed: 1,609] | | [added: 1,764] | | [removed: 1,582] | | | | [removed: 1,391] [added: 1,609] | | | [added: | | | 1,582 | | |]

| Other [removed: Revenues*(1)*] [added: Revenues*(2)*] | [removed: 696] | | [added: 270] | | [removed: 393] | | | | [removed: 857] [added: 696] | | | [added: | | | 393 | | |]

[removed: | *(1)* | *Other] [added: *(2)Other] revenues are primarily comprised of [removed: Healthcare Services segment revenue,] third-party manufacturing [removed: sales,] [added: sales] and miscellaneous corporate revenues, including revenue hedging activities.* [removed: |]

*Keytruda* (pembrolizumab), the Company’s anti-PD-1 (programmed death receptor-1) therapy, as monotherapy for the treatment of certain patients with [removed: melanoma,] [added: cervical cancer, classical Hodgkin Lymphoma (cHL), cutaneous squamous cell carcinoma (cSCC), esophageal cancer, gastric or gastroesophageal junction adenocarcinoma, head and neck squamous cell carcinoma (HNSCC), hepatocellular carcinoma (HCC),] non-small-cell lung cancer (NSCLC), small-cell lung cancer (SCLC), [removed: head and neck squamous] [added: melanoma, Merkel] cell [removed: carcinoma (HNSCC), classical Hodgkin Lymphoma (cHL), primary mediastinal large B-cell lymphoma (PMBCL), urothelial] carcinoma, microsatellite instability-high (MSI-H) or mismatch repair deficient [added: (dMMR)] cancer, [removed: gastric or gastroesophageal junction adenocarcinoma, esophageal] [added: including MSI-H/dMMR colorectal] cancer, [removed: cervical] [added: primary mediastinal large B-cell lymphoma (PMBCL), tumor mutational burden-high (TMB-H)] cancer, [removed: hepatocellular carcinoma,] and [removed: merkel cell carcinoma.][added: urothelial carcinoma, including non-muscle invasive bladder cancer.]

*Keytruda* is also [removed: used] [added: approved] for the treatment of certain patients in combination with chemotherapy for metastatic squamous and non-squamous NSCLC, in combination with chemotherapy for HNSCC, in combination with [added: chemotherapy for triple-negative breast cancer, in combination with] axitinib for renal cell carcinoma, and in combination with lenvatinib for endometrial carcinoma; and *Emend* (aprepitant) for the prevention of [added: certain] chemotherapy-induced [removed: and post-operative] nausea and vomiting.

In addition, the Company recognizes alliance revenue related to sales of Lynparza (olaparib), an oral poly (ADP-ribose) polymerase (PARP) inhibitor, for certain types of advanced ovarian, [removed: breast] [added: breast, pancreatic,] and [removed: pancreatic] [added: prostate] cancers; and Lenvima (lenvatinib) for certain types of thyroid cancer, hepatocellular carcinoma, in combination with everolimus for certain patients with renal cell carcinoma, and in combination with *Keytruda* for certain patients with endometrial carcinoma.

[removed: *Gardasil* (Human Papillomavirus Quadrivalent \[Types 6, 11, 16 and 18\] Vaccine, Recombinant)/*Gardasil* 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), vaccines to help prevent certain diseases] caused by certain types of human papillomavirus (HPV); *ProQuad* (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella; [removed: *M-M-R*] [added: *M−M−R*] II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help prevent measles, mumps and rubella; *Varivax* (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella); *Pneumovax* 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease; *RotaTeq* (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children; and *Vaqta* (hepatitis A vaccine, inactivated) indicated for the prevention of disease caused by hepatitis A virus in persons 12 months of age and older.

*Bridion* (sugammadex) Injection, a medication for the reversal of two types of neuromuscular blocking agents used during surgery; *Noxafil* [removed: (posaconazole)] [added: (posaconazole), an antifungal agent] for the prevention of [added: certain] invasive fungal infections; [added: *Prevymis* (letermovir) for the prophylaxis of cytomegalovirus (CMV) reactivation and disease in adult CMV-seropositive recipients \[R+\] of an allogeneic hematopoietic stem cell transplant;] *Primaxin* (imipenem and [removed: cilastatin sodium)] [added: cilastatin) for injection,] an [removed: anti-bacterial product;] [added: antibiotic for the treatment of certain bacterial infections; *Cancidas* (caspofungin acetate) for injection, an anti-fungal agent for the treatment of certain fungal infections;] *Invanz* [removed: (ertapenem sodium)] [added: (ertapenem)] for [added: injection, an antibiotic for] the treatment of certain [added: bacterial] infections; *Cubicin* (daptomycin for injection), an [removed: I.V.] antibiotic for [removed: complicated skin] [added: the treatment of certain bacterial infections;] and [removed: skin structure infections or bacteremia, when caused by designated susceptible organisms; *Cancidas* (caspofungin acetate), an anti-fungal product;] [added: *Zerbaxa* (ceftolozane] and [removed: *Prevymis* (letermovir)] [added: tazobactam)] for [removed: the prophylaxis of cytomegalovirus (CMV) reactivation] [added: injection, a combination antibacterial] and [removed: disease in adult CMV-seropositive recipients \[R+\]] [added: beta-lactamase inhibitor for the treatment] of [removed: an allogeneic hematopoietic stem cell transplant.][added: certain bacterial infections.]

*Simponi* (golimumab), a once-monthly subcutaneous treatment for certain inflammatory diseases; and *Remicade* (infliximab), a treatment for inflammatory diseases, [added: both of] which the Company markets in Europe, Russia and Turkey.

[removed: *NuvaRing* (etonogestrel/ethinyl estradiol vaginal ring), a vaginal contraceptive product; and] *Implanon* (etonogestrel implant), a single-rod subdermal contraceptive implant/*Nexplanon* (etonogestrel implant), a single, radiopaque, rod-shaped subdermal contraceptive [removed: implant.][added: implant; and *NuvaRing* (etonogestrel/ethinyl estradiol vaginal ring), a vaginal contraceptive product.]

[removed: *Nuflor* (Florfenicol) antibiotic range for use in cattle and swine; *Bovilis*/*Vista* vaccine lines for infectious diseases in cattle; *Banamine* (Flunixin meglumine) bovine and swine anti-inflammatory; *Estrumate* (cloprostenol sodium) for the treatment of fertility disorders in cattle; *Matrix* (altrenogest) fertility management for swine; *Resflor* (florfenicol and flunixin meglumine)*,* a combination broad-spectrum antibiotic and non-steroidal anti-inflammatory] drug for bovine respiratory disease; *Zuprevo* (Tildipirosin) for bovine respiratory disease; *Zilmax* (zilpaterol hydrochloride) and *Revalor* (trenbolone acetate and estradiol) to improve production efficiencies in beef cattle; *Safe-Guard* (fenbendazole) de-wormer for cattle; *M+Pac* (Mycoplasma Hyopneumoniae Bacterin) swine pneumonia vaccine; *Porcilis* (Lawsonia intracellularis baterin) and *Circumvent* (Porcine Circovirus Vaccine, Type 2, Killed Baculovirus Vector) vaccine lines for infectious diseases in swine; *Nobilis*/*Innovax* (Live Marek’s Disease Vector)*,* vaccine lines for poultry; *Paracox* and *Coccivac* coccidiosis vaccines; *Exzolt*, a systemic treatment for poultry red mite infestations; *Slice* (Emamectin benzoate) parasiticide for sea lice in salmon; *Aquavac* (Avirulent Live Culture)/*Norvax* vaccines against bacterial and viral disease in fish; *Compact PD* vaccine for salmon; *Aquaflor* (Florfenicol) antibiotic for farm-raised fish; and *Allflex Livestock Intelligence* solutions for animal identification, monitoring and traceability.

[removed: *Bravecto* (fluralaner),] [added: *Bravecto*,] a line of oral and topical parasitic control [added: products, including the original *Bravecto* (fluralaner)] products for dogs and cats that last up to 12 weeks; [added: *Bravecto* (fluralaner) *One-Month*, a monthly product for dogs, and *Bravecto Plus* (fluralaner/moxidectin), a two-month product for cats; *Sentinel,* a line of oral parasitic products for dogs including *Sentinel Spectrum* (milbemycin oxime, lufenuron, and praziquantel) and *Sentinel Flavor Tabs* (milbemycin oxime, lufenuron); *Optimmune* (cyclosporine), an ophthalmic ointment;] *Nobivac* vaccine lines for flexible dog and cat vaccination; *Otomax* (Gentamicin sulfate, USP; Betamethasone valerate USP; and Clotrimazole USP ointment)/*Mometamax* (Gentamicin sulfate, USP, Mometasone Furoate Monohydrate and Clotrimazole, USP, Otic Suspension)/*Posatex* (Orbifloxacin, Mometasone Furoate Monohydrate and Posaconazole, Suspension) ear ointments for acute and chronic otitis; *Caninsulin*/*Vetsulin* (porcine insulin zinc suspension) diabetes mellitus treatment for dogs and cats; *Panacur* (fenbendazole)/*Safeguard* (fenbendazole) broad-spectrum anthelmintic (de-wormer) for use in many animals; *Regumate* (altrenogest) fertility management for horses; *Prestige* vaccine line for horses; [removed: and] *Scalibor* (Deltamethrin)*/Exspot* for protecting against bites from fleas, ticks, mosquitoes and [removed: sandflies.][added: sandflies; and *Sure Petcare* products for companion animal identification and well-being, including the microchip and pet recovery system *Home Again*.]

[removed: 2019] [added: 2020] Product Approvals

Set forth below is a summary of significant product approvals received by the Company in [removed: 2019.][added: 2020.]

| Product | [added: | |] Date | [added: | |] Approval | [added: | |]

| [removed: June 2019] [added: *Keytruda*] | [removed: FDA] [added: | | December 2020 | | | NMPA] approved [removed: two indications for] *Keytruda* [added: as monotherapy] for [added: the] first-line treatment of patients with metastatic or with unresectable, recurrent HNSCC [removed: as monotherapy for patients] whose tumors express PD-L1 [added: (Combined Positive Score] CPS [removed: ≥1 or in combination with platinum and fluorouracil regardless of PD-L1 expression.] [added: ≥20) as determined by a fully validated test.] | | [added: |]

| [added: *Recarbrio* | | |] June [removed: 2019] [added: 2020] | [added: | |] FDA approved [removed: *Zerbaxa* 3g dose] [added: *Recarbrio*] for the treatment of patients 18 years [added: of age] and older with hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP). | | [added: |]

The Company divested the remaining businesses in this segment in the first quarter of 2020.

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| *RotaTeq* | | | 797 | | | | | | 791 | | | | | | 728 | | |

| Alliance revenue - Lynparza*(1)* | | | 725 | | | | | | 444 | | | | | | 187 | | |

| *Implanon/Nexplanon* | | | 680 | | | | | | 787 | | | | | | 703 | | |

| Alliance revenue - Lenvima*(1)* | | | 580 | | | | | | 404 | | | | | | 149 | | |

*(1)* *Alliance revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.*

*Gardasil* (Human Papillomavirus Quadrivalent \[Types 6, 11, 16 and 18\] Vaccine, Recombinant)/*Gardasil* 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), vaccines to help prevent certain diseases

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

*Nuflor* (Florfenicol) antibiotic range for use in cattle and swine; *Bovilis*/*Vista* vaccine lines for infectious diseases in cattle; *Banamine* (Flunixin meglumine) bovine and swine anti-inflammatory; *Estrumate* (cloprostenol sodium) for the treatment of fertility disorders in cattle; *Matrix* (altrenogest) fertility management for swine; *Resflor* (florfenicol and flunixin meglumine)*,* a combination broad-spectrum antibiotic and non-steroidal anti-inflammatory

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| *Dificid* *(1)* | | | January 2020 | | | U.S. Food and Drug Administration (FDA) approved *Dificid* as an oral suspension, and *Dificid* tablets for the treatment of Clostridioides (formerly Clostridium) difficile-associated diarrhea in children aged six months and older. | | |

| *Gardasil* | | | November 2020 | | | China’s National Medical Products Administration (NMPA) granted expanded approval for *Gardasil* for use in girls and women from 9 to 45 years of age. | | |

| *Gardasil* 9 | | | December 2020 | | | Japan’s Ministry of Health, Labour and Welfare (MHLW) approved additional indication, dosage and administrations of *Gardasil 9* (marketed as *Silgard* 9) for the prevention of anal cancer (squamous cell cancer) and precursor lesions (anal intraepithelial neoplasia (AIN) grade 1/2/3) caused by HPV types 6, 11, 16 and 18 for individuals 9 years and older and for Genital Warts (condyloma acuminate) for men 9 years and older. | | |

| July 2020 | | | Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) approved *Gardasil* 9 for use in girls and women 9 years and older for the prevention of cervical cancer, certain cervical, vaginal and vulvar precancers, and genital warts caused by the HPV types covered by the vaccine. | | | | | |

| June 2020 | | | FDA granted accelerated approval for an expanded indication for *Gardasil 9* for the prevention of oropharyngeal and other head and neck cancers caused by HPV Types 16, 18, 31, 33, 45, 52, and 58. | | | | | |

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| November 2020 | | | FDA granted accelerated approval for *Keytruda* in combination with chemotherapy for patients with locally recurrent unresectable or metastatic triple‑negative breast cancer whose tumors express PD-L1 (CPS ≥10). | | | | | |

| October 2020 | | | FDA approved an expanded label for *Keytruda*, as monotherapy for the treatment of adult patients with relapsed or refractory cHL. | | | | | |

| August 2020 | | | PMDA approved *Keytruda* for use at an additional recommended dosage of 400 mg every six weeks (Q6W) administered as an intravenous infusion over 30 minutes across all adult indications, including *Keytruda* monotherapy and combination therapy. | | | | | |

| August 2020 | | | PMDA approved *Keytruda* for the treatment of patients whose tumors are PD-L1-positive, and have radically unresectable, advanced or recurrent esophageal squamous cell carcinoma (ESCC) who have progressed after chemotherapy. | | | | | |

| June 2020 | | | FDA approved *Keytruda* as monotherapy for the first-line treatment of patients with unresectable or metastatic MSI-H or dMMR colorectal cancer. | | | | | |

| June 2020 | | | FDA approved *Keytruda* as monotherapy for the treatment of patients with recurrent or metastatic cSCC that is not curable by surgery or radiation. | | | | | |

| June 2020 | | | NMPA approved *Keytruda* as monotherapy for the treatment of patients with locally advanced or metastatic ESCC whose tumors express PD-L1 (CPS ≥10) as determined by a fully validated test, following failure of one prior line of systemic therapy. | | | | | |

| June 2020 | | | FDA granted accelerated approval for *Keytruda* as monotherapy for the treatment of adult and pediatric patients with unresectable or metastatic TMB-H \[≥10 mutations/megabase (mut/Mb)\] solid tumors, as determined by an FDA-approved test, that have progressed following prior treatment and who have no satisfactory alternative treatment options. | | | | | |

| April 2020 | | | FDA granted accelerated approval for *Keytruda* for use at an additional recommended dose of 400 mg every six weeks (Q6W) for all approved adult indications. | | | | | |

| January 2020 | | | FDA approved *Keytruda* for patients with Bacillus Calmette-Guerin (BCG)-unresponsive, high-risk, non-muscle invasive bladder cancer with carcinoma in situ with or without papillary tumors who are ineligible for or have elected not to undergo cystectomy. | | | | | |

| Lenvima | | | November 2020 | | | NMPA approved Lenvima as a monotherapy for the treatment of differentiated thyroid cancer. | | |

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| Lynparza*(2)* | | | December 2020 | | | PMDA approved Lynparza for the treatment of patients with *BRCA* gene-mutated (*BRCA*m) castration-resistant prostate cancer with distant metastasis. | | |

| December 2020 | | | PMDA approved Lynparza as maintenance treatment after platinum-based chemotherapy for patients with *BRCA*m curatively unresectable pancreas cancer. | | | | | |

| December 2020 | | | PMDA approved Lynparza as maintenance treatment after first-line chemotherapy containing bevacizumab (genetical recombination) in patients with homologous recombination repair deficient (HRD) ovarian cancer. | | | | | |

The Company has recently sold certain businesses in the Healthcare Services segment and is in the process of divesting the remaining businesses.

While the Company continues to look for investment opportunities in this area of health care, the approach to these investments has shifted toward venture capital investments in third parties as opposed to wholly-owned businesses.

The Company was incorporated in New Jersey in 1970.

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| *NuvaRing* | 879 | | | | 902 | | | | 761 | | |

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| *Ervebo* | December 2019 | The U.S. Food and Drug Administration (FDA) approved *Ervebo* for the prevention of disease caused by *Zaire ebolavirus* in individuals 18 years of age and older. |

| November 2019 | The European Commission (EC) granted a conditional marketing authorization for *Ervebo* for active immunization of individuals 18 years of age or older to protect against Ebola Virus Disease caused by Zaire Ebola virus. | |

| *Keytruda* | December 2019 | The Japanese Ministry of Health, Labour and Welfare (MHLW) approved *Keytruda* for three new first-line indications across advanced renal cell carcinoma (RCC) and recurrent or distant metastatic head and neck cancer. |

| November 2019 | EC approved two new regimens of *Keytruda* as first-line treatment for metastatic or unresectable recurrent head and neck squamous cell carcinoma (HNSCC). | |

| November 2019 | The China National Medical Products Administration (NMPA) approved *Keytruda* for first-line treatment of metastatic squamous non-small cell lung cancer (NSCLC) in combination with chemotherapy. | |

| October 2019 | NMPA approved *Keytruda* as monotherapy for first-line treatment of certain patients with advanced NSCLC whose tumors express PD-L1. | |

| September 2019 | FDA approved *Keytruda* plus Lenvima combination treatment for patients with certain types of endometrial carcinoma. | |

| September 2019 | EC approved *Keytruda* in combination with axitinib as first-line treatment for patients with advanced RCC. | |

| July 2019 | FDA approved *Keytruda* for recurrent locally advanced or metastatic squamous cell carcinoma of the esophagus in patients whose tumors express PD-L1 combined positive score \[CPS\] (CPS ≥10) with disease progression after one of more prior lines of systemic therapy. | |

| *Keytruda* | June 2019 | FDA approved *Keytruda* as monotherapy for patients with metastatic small-cell lung cancer (SCLC) with disease progression on or after platinum-based chemotherapy and at least one other prior line of therapy. |

| April 2019 | FDA approved *Keytruda* in combination with axitinib for first-line treatment of patients with advanced RCC. | |

| April 2019 | FDA approved an expanded label for *Keytruda* as monotherapy for the first-line treatment of patients with stage III NSCLC who are not candidates for surgical resection or definitive chemoradiation, or metastatic NSCLC, and whose tumors express PD-L1 (tumor proportion score \[TPS\] ≥1%) as determined by an FDA-approved test, with no epidermal growth factor receptor​ (EGFR) or anaplastic lymphoma kinase positive (ALK) genomic tumor aberrations. | |

| April 2019 | EC approved new extended dosing schedule for *Keytruda* for all approved monotherapy indications. | |

| April 2019 | NMPA approved *Keytruda* for first-line treatment of metastatic nonsquamous NSCLC in combination with chemotherapy. | |

| March 2019 | EC approved *Keytruda* in combination with chemotherapy for first-line treatment of adults with metastatic squamous NSCLC. | |

| February 2019 | FDA approved *Keytruda* for the adjuvant treatment of patients with melanoma with involvement of lymph node(s) following complete resection. | |

| January 2019 | MHLW approved *Keytruda* for five indications, including three expanded uses in advanced NSCLC, one in melanoma, as well as a new indication in advanced microsatellite instability-high tumors. | |

| Lynparza*(1)* | December 2019 | FDA approved Lynparza for first-line maintenance therapy for patients with germline *BRCA*\-mutated (g*BRCA*\-m) metastatic pancreatic cancer whose disease has not progressed for at least 16 weeks of a first-line, platinum-based chemotherapy regimen. |

| December 2019 | NMPA approved Lynparza as a first-line maintenance therapy in *BRCA*\-m advanced ovarian cancer. | |

| July 2019 | EC approved Lynparza as monotherapy for the maintenance treatment of adult patients with advanced *BRCA*\-m, high-grade epithelial ovarian, fallopian tube or primary peritoneal cancer. | |

| June 2019 | MHLW approved Lynparza as first-line maintenance therapy in patients with *BRCA*\-m advanced ovarian cancer. | |

| June 2019 | EC approved Lynparza for use as first-line maintenance therapy in patients with *BRCA*\-m advanced ovarian cancer. | |

| April 2019 | EC approved Lynparza for the treatment of g*BRCA*\-m HER2-negative advanced breast cancer. | |

| *Pifeltro* and *Delstrigo* | September 2019 | FDA approved supplemental New Drug Applications (sNDAs) for *Pifeltro* (doravirine) in combination with other antiretroviral agents, and *Delstrigo* (doravirine, lamivudine, and tenofovir disoproxil fumarate) as a complete regimen, for use in appropriate adults with HIV-1 infection who are virologically suppressed on a stable antiretroviral regimen. |

| *Recarbrio* | July 2019 | FDA approved *Recarbrio* (imipenem, cilastatin, and relebactam) for the treatment of adults with complicated urinary tract and complicated intra-abdominal bacterial infections where limited or no alternative treatment options are available. |

| *Zerbaxa* | August 2019 | EC approved *Zerbaxa* for the treatment of adults with hospital-acquired pneumonia, including ventilator-associated pneumonia (to be used in combination with an antibacterial agent active against Gram-positive pathogens when these are known or suspected to be contributing to the infectious process.) |

| *Bravecto* | November 2019 | FDA approved *Bravecto Plus* topical solution for cats indicated for both external and internal parasite infestations. |

Competitive pressures have intensified as pressures in the industry have grown.

Additional resources required to meet market challenges include quality control, flexibility to meet customer specifications, an efficient distribution system and a strong technical information service.

As a result of the Balanced Budget Act of 2018 and effective at the beginning of 2019, the 50% point of service discount increased to a 70% point of service discount in the coverage gap.

In addition, this point of service discount was extended to biosimilar products.

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As filed with the Securities and Exchange Commission [removed: on February 26, 2020][added: on February 25, 2021]

[removed: FORM 10-K][added: FORM 10-K]

| | [added: | |] ☒ | [added: | |] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | [added: | |]

For the Fiscal Year [removed: Ended December] [added: Ended December] 31, [removed: 2019][added: 2020]

| | [added: | |] ☐ | [added: | |] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | [added: | |]

Commission File [removed: No. 1-6571][added: No. 1-6571]

| 2000 Galloping Hill Road | | | | | [added: | | | | | | | | | |]

| Kenilworth | | [added: | | | |] New Jersey | [added: | |] 07033 | | [added: | | | |]

| New Jersey | [added: | |] 22-1918501 | | [added: | | | |]

| (State or other jurisdiction of incorporation) | [added: | |] (I.R.S Employer Identification No.) | | [added: | | | |]

| Securities Registered pursuant to Section 12(b) of the Act: | | | [added: | | | | | |]

| *Title of Each Class* | [added: | |] *Trading Symbol(s)* | [added: | |] *Name of Each Exchange on which Registered* | [added: | |]

| Common Stock ($0.50 par value) | [added: | |] MRK | [added: | |] New York Stock Exchange | [added: | |]

| 1.125% Notes due 2021 | [added: | |] MRK/21 | [added: | |] New York Stock Exchange | [added: | |]

| 0.500% Notes due 2024 | [added: | |] MRK 24 | [added: | |] New York Stock Exchange | [added: | |]

| 1.875% Notes due 2026 | [added: | |] MRK/26 | [added: | |] New York Stock Exchange | [added: | |]

| 2.500% Notes due 2034 | [added: | |] MRK/34 | [added: | |] New York Stock Exchange | [added: | |]

| 1.375% Notes due 2036 | [added: | |] MRK 36A | [added: | |] New York Stock Exchange | [added: | |]

Number of shares of Common Stock ($0.50 par value) outstanding as of January 31, [removed: 2020: 2,536,268,760.][added: 2021: 2,530,315,668.]

Aggregate market value of Common Stock ($0.50 par value) held by non-affiliates on June 30, [removed: 2019] [added: 2020] based on closing price on June 30, [removed: 2019: $215,106,000,000.][added: 2020: $195,461,000,000.]

| Large accelerated filer | [added: | |] ☒ | [added: | |] Accelerated filer | [added: | |] ☐ | [added: | |]

| Non-accelerated filer | [added: | |] ☐ | [added: | |] Smaller reporting company | [added: | |] ☐ | [added: | |]

| | | [added: | | | |] Emerging growth company | [added: | |] ☐ | [added: | |]

| Documents Incorporated by Reference: | | | [added: | | | | | |]

| *Document* | | [added: | | | |] *Part of Form 10-K* | [added: | |]

| Proxy Statement for the Annual Meeting of Shareholders to be held May [removed: 26, 2020,] [added: 25, 2021,] to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this report | | [added: | | | |] Part III | [added: | |]

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| Item 1. | [removed: [Business](#sCB423C45679851FEA3A43AA500AA616F)] | | [removed: [1](#sCB423C45679851FEA3A43AA500AA616F)] [added: [Business](#iab6577be4c3840fd8181bdedf457fba5_13)] | [added: | | | | | [1](#iab6577be4c3840fd8181bdedf457fba5_13) | | |]

| Item 1A. | [added: | |] [Risk [removed: Factors](#sE9B972E881AD5C9DAA9800B4D3483A27)] [added: Factors](#iab6577be4c3840fd8181bdedf457fba5_55)] | | [removed: [20](#sE9B972E881AD5C9DAA9800B4D3483A27)] | [added: | | | [26](#iab6577be4c3840fd8181bdedf457fba5_55) | | |]

| | [added: | |] [Cautionary Factors that May Affect Future [removed: Results](#sDC622EA46C155D9F9E2814520C520DF1)] [added: Results](#iab6577be4c3840fd8181bdedf457fba5_58)] | | [removed: [32](#sDC622EA46C155D9F9E2814520C520DF1)] | [added: | | | [41](#iab6577be4c3840fd8181bdedf457fba5_58) | | |]

| Item 1B. | [added: | |] [Unresolved Staff [removed: Comments](#s239C152AE6655C9DB87BC57E5E78D186)] [added: Comments](#iab6577be4c3840fd8181bdedf457fba5_61)] | | [removed: [33](#s239C152AE6655C9DB87BC57E5E78D186)] | [added: | | | [42](#iab6577be4c3840fd8181bdedf457fba5_61) | | |]

| Item 2. | [removed: [Properties](#s61A7DF13241B5F718241F9BC2CD6F964)] | | [removed: [33](#s61A7DF13241B5F718241F9BC2CD6F964)] [added: [Properties](#iab6577be4c3840fd8181bdedf457fba5_64)] | [added: | | | | | [42](#iab6577be4c3840fd8181bdedf457fba5_64) | | |]

| Item 3. | [added: | |] [Legal [removed: Proceedings](#s3CC4F3BD691856F08C1270879ED66EC1)] [added: Proceedings](#iab6577be4c3840fd8181bdedf457fba5_67)] | | [removed: [34](#s3CC4F3BD691856F08C1270879ED66EC1)] | [added: | | | [43](#iab6577be4c3840fd8181bdedf457fba5_67) | | |]

| Item 4. | [added: | |] [Mine Safety [removed: Disclosures](#sF7810EB33F5A540DB8BB2A354399BB60)] [added: Disclosures](#iab6577be4c3840fd8181bdedf457fba5_70)] | | [removed: [34](#sF7810EB33F5A540DB8BB2A354399BB60)] | [added: | | | [43](#iab6577be4c3840fd8181bdedf457fba5_70) | | |]

| | [added: | |] [Executive Officers of the [removed: Registrant](#s2EF721C6780054F080BC6B38D7CE66B0)] [added: Registrant](#iab6577be4c3840fd8181bdedf457fba5_73)] | | [removed: [35](#s2EF721C6780054F080BC6B38D7CE66B0)] | [added: | | | [44](#iab6577be4c3840fd8181bdedf457fba5_73) | | |]

| Item 5. | [added: | |] [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sCF6997477EE951F78C935AC9CFDF35CC)] [added: Securities](#iab6577be4c3840fd8181bdedf457fba5_79)] | | [removed: [36](#sCF6997477EE951F78C935AC9CFDF35CC)] | [added: | | | [45](#iab6577be4c3840fd8181bdedf457fba5_79) | | |]

| Item 7. | [added: | |] [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s8D90CB03CD405A16B15708FB556986E1)] [added: Operations](#iab6577be4c3840fd8181bdedf457fba5_85)] | | [removed: [39](#s8D90CB03CD405A16B15708FB556986E1)] | [added: | | | [47](#iab6577be4c3840fd8181bdedf457fba5_85) | | |]

| Item 7A. | [added: | |] [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sDE92AB87A0E95861A12D31B583D16DB0)] [added: Risk](#iab6577be4c3840fd8181bdedf457fba5_127)] | | [removed: [69](#sDE92AB87A0E95861A12D31B583D16DB0)] | [added: | | | [78](#iab6577be4c3840fd8181bdedf457fba5_127) | | |]

| Item 8. | [added: | |] [Financial Statements and Supplementary [removed: Data](#s4B35B4705F9C5271806FF1FE0730232D)] [added: Data](#iab6577be4c3840fd8181bdedf457fba5_130)] | | [removed: [70](#s4B35B4705F9C5271806FF1FE0730232D)] | [added: | | | [79](#iab6577be4c3840fd8181bdedf457fba5_130) | | |]

| | [added: | |] (a) | [added: | |] [Financial [removed: Statements](#sC61737D75CD15C809708443C2A4C20A7)] [added: Statements](#iab6577be4c3840fd8181bdedf457fba5_133)] | [removed: [70](#sC61737D75CD15C809708443C2A4C20A7)] | [added: | [79](#iab6577be4c3840fd8181bdedf457fba5_133) | | |]

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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| [Part I](#iab6577be4c3840fd8181bdedf457fba5_10) | | | | | | | | | | | |

| [Part II](#iab6577be4c3840fd8181bdedf457fba5_76) | | | | | | | | | | | |

| | | | [Management’s Report](#iab6577be4c3840fd8181bdedf457fba5_244) | | | | | | [138](#iab6577be4c3840fd8181bdedf457fba5_244) | | |

| [Part IV](#iab6577be4c3840fd8181bdedf457fba5_268) | | | | | | | | | | | |

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| | | | [Signatures](#iab6577be4c3840fd8181bdedf457fba5_286) | | | | | | [147](#iab6577be4c3840fd8181bdedf457fba5_286) | | |

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| [Part I](#s136F2F8A16C850E082D5B205CFAF1717) | | | |

| [Part II](#s932D96E9BF335DCFB59C6D3CED5B87D2) | | | |

| Item 6. | [Selected Financial Data](#sAFC1B109C20C55B69F5DD92C4C143F48) | | [38](#sAFC1B109C20C55B69F5DD92C4C143F48) |

| | (b) | [Supplementary Data](#s861C70342C1A541DA234FFCA8BEF85EB) | [126](#s861C70342C1A541DA234FFCA8BEF85EB) |

| | [Management’s Report](#sB307FBBCB40A54F4886BB50577442037) | | [127](#sB307FBBCB40A54F4886BB50577442037) |

| [Part IV](#s52DA60400892586290239EA7B53E77A6) | | | |

| | [Signatures](#sE27A07C789045540A53C899FB52090BB) | | [136](#sE27A07C789045540A53C899FB52090BB) |

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The Company’s corporate headquarters is [added: currently] located in Kenilworth, New Jersey.

The Company also maintains operational or divisional headquarters in Kenilworth, New [removed: Jersey,] [added: Jersey;] Madison, New Jersey and Upper Gwynedd, Pennsylvania.

Principal U.S. research facilities are located in Rahway and Kenilworth, New [removed: Jersey,] [added: Jersey;] West Point, [removed: Pennsylvania, Palo Alto, California,] [added: Pennsylvania;] Boston, [removed: Massachusetts,] [added: Massachusetts;] South San Francisco, [removed: California] [added: California;] and Elkhorn, Nebraska (Animal Health).

Principal research facilities outside the United States are located in the United Kingdom, Switzerland [added: and China.]

Merck’s manufacturing operations are [added: currently] headquartered in Whitehouse Station, New Jersey.

Capital expenditures were [removed: $3.5] [added: $4.7] billion in [removed: 2019, $2.6] [added: 2020, $3.5] billion in [removed: 2018] [added: 2019] and [removed: $1.9] [added: $2.6] billion in [removed: 2017.][added: 2018.]

In the United States, these amounted to [removed: $1.9] [added: $2.7] billion in [removed: 2019, $1.5] [added: 2020, $1.9] billion in [removed: 2018] [added: 2019] and [removed: $1.2] [added: $1.5] billion in [removed: 2017.][added: 2018.]

Abroad, such expenditures amounted to [added: $2.0 billion in 2020,] $1.6 billion in 2019, [added: and] $1.1 billion in [removed: 2018 and $728 million in 2017.][added: 2018.]

The Company has previously announced that it intends to consolidate its New Jersey campuses into a single corporate headquarters location in Rahway, New Jersey by the end of 2023.

A number of properties will be transferred to Organon in the Spin-Off.

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

and China.

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Executive Officers of the Registrant (ages as of February 1, [removed: 2020)][added: 2021)]

| Name | [added: | |] Age | [added: | |] Offices and Business Experience | [added: | |]

| Kenneth C. Frazier | [removed: 65] | [added: | 66 | | |] Chairman, President and Chief Executive Officer (since December 2011) | [added: | |]

| Sanat Chattopadhyay | [removed: 60] | [added: | 61 | | |] Executive Vice President and President, Merck Manufacturing Division (since March [removed: 2016); Senior Vice President, Operations, Merck Manufacturing Division (November 2009-March] 2016) | [added: | |]

| Frank Clyburn | [removed: 55] | [added: | 56 | | |] Executive Vice President, Chief Commercial Officer (since January 2019); President, Global Oncology Business Unit (October 2013-December 2018) | [added: | |]

| Robert M. Davis | [removed: 53] | [added: | 54 | | |] Executive Vice President, Global Services, and Chief Financial Officer (since April 2016); Executive Vice President and Chief Financial Officer (April 2014-April 2016) | [added: | |]

| Richard R. DeLuca, Jr. | [removed: 57] | [added: | 58 | | |] Executive Vice President and President, Merck Animal Health (since September 2011) | [added: | |]

| Michael W. Fleming | [removed: 61] | [added: | 62 | | |] Senior Vice President, Chief Ethics and Compliance Officer (since March 2019); Senior Vice President, International Legal and Compliance (January 2017-March 2019); Vice President, International Legal and Compliance (July 2008-January 2017) | [added: | |]

| Julie L. Gerberding | [removed: 64] | [added: | 65 | | |] Executive Vice President and Chief Patient Officer, Strategic Communications, Global Public Policy and Population Health (since July 2016); Executive Vice President for Strategic Communications, Global Public Policy and Population Health (January 2015-July 2016) | [added: | |]

| Rita A. Karachun | [removed: 56] | [added: | 57 | | |] Senior Vice President Finance - Global Controller (since March 2014) | [added: | |]

| Steven C. Mizell | [removed: 59] | [added: | 60 | | |] Executive Vice President, Chief Human Resources Officer (since [removed: October 2018); Executive Vice President, Chief Human Resources Officer (December 2016-October 2018) and] [added: December 2016);] Executive Vice President, Human Resources, Monsanto Company (August 2011-December 2016) | [added: | |]

| Michael T. Nally | [removed: 44] | [added: | 45 | | |] Executive Vice President, Chief Marketing Officer (since January 2019); President, Global Vaccines, Global Human Health (September 2016-January 2019); Managing Director, United Kingdom and Ireland, Global Human Health (January 2014-September 2016) | [added: | |]

| Jennifer Zachary | [removed: 42] | [added: | 43 | | |] Executive Vice President, General Counsel and Corporate Secretary (since January 2020); Executive Vice President and General Counsel (April 2018-January 2020); Partner, Covington & Burling LLP (January 2013-March 2018) | [added: | |]

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| Dean Li | | | 58 | | | President, Merck Research Laboratories (since January 2021); Senior Vice President, Discovery Sciences and Translational Medicine, Merck Research Laboratories (November 2017-January 2020); Vice President, Translational Medicine (March 2017-November 2017); Prior to that, Chief Scientific Officer and Associate Vice President, University of Utah Health Sciences | | |

In February 2021, Merck announced that Kenneth C.

Frazier, chairman and chief executive officer, will retire as chief executive officer, effective June 30, 2021.

Mr. Frazier will continue to serve on Merck’s Board of Directors as executive chairman, for a transition period to be determined by the board.

The Merck Board of Directors has unanimously elected Robert M.

Davis, Merck’s current executive vice president, global services and chief financial officer, as chief executive officer, as well as a member of the board, effective July 1, 2021.

Mr. Davis will become president of Merck, effective April 1, 2021, at which time the Company’s operating divisions—Human Health, Animal Health, Manufacturing, and Merck Research Laboratories—will begin reporting to Mr. Davis.

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| Roger M. Perlmutter, M.D., Ph.D. | 67 | Executive Vice President and President, Merck Research Laboratories (since April 2013) |

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As of January 31, [removed: 2020,] [added: 2021,] there were approximately [removed: 109,500] [added: 104,900] shareholders of record of the Company’s Common Stock.

Issuer purchases of equity securities for the three months ended December 31, [removed: 2019] [added: 2020] were as follows:

| | | | | | | [added: | | | | | | | | | | | |] ($ in millions) | [added: | |]

| Period | | [added: | | | |] Total Number of Shares Purchased*(1)* | | [added: | | | |] Average Price Paid Per Share | | [added: | | | |] Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs*(1)* | [added: | |]

[removed: | *(1)* | *All] [added: *(1)The Company did not purchase any] shares [removed: purchased] during the [removed: period were made as part of a] [added: three months ended December 31, 2020 under the] plan approved by the Board of Directors in October 2018 to purchase up to $10 billion in Merck shares for its treasury.* [removed: |]

The following graph assumes a $100 investment on December 31, [removed: 2014,] [added: 2015,] and reinvestment of all dividends, in each of the Company’s Common Shares, the S&P 500 Index, and a composite peer group of major U.S. and European-based pharmaceutical companies, which are: AbbVie Inc., Amgen Inc., AstraZeneca plc, Bristol-Myers Squibb Company, Johnson & Johnson, Eli Lilly and Company, GlaxoSmithKline plc, Novartis AG, Pfizer Inc., Roche Holding AG, and Sanofi SA.

| | [added: | |] End [removed: of Period] [added: of Period] Value | | [removed: 2019/2014 CAGR*] | [added: | | | 2020/2015 CAGR* | | |]

| PEER GRP. | [removed: 152] | | [added: 157 | | | | | |] 9% | [added: | |]

[removed: ][added: ]

| | [removed: 2014] | [added: |] 2015 | [added: | |] 2016 | [added: | |] 2017 | [added: | |] 2018 | [added: | |] 2019 | [added: | | 2020 | | |]

[removed: | * | *Compound] [added: Compound] Annual Growth Rate* [removed: |]

[removed: | | *Peer] [added: * Peer] group average was calculated on a market cap weighted basis.* [removed: |]

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| October 1 — October 31 | | | | | | — | | | | | | $0.00 | | | | | | $5,888 | | |

| November 1 — November 30 | | | | | | — | | | | | | $0.00 | | | | | | $5,888 | | |

| December 1 — December 31 | | | | | | — | | | | | | $0.00 | | | | | | $5,888 | | |

| Total | | | | | | — | | | | | | $0.00 | | | | | | $5,888 | | |

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| MERCK | | | $180 | | | | | | 12% | | |

| S&P 500 | | | 203 | | | | | | 15% | | |

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| MERCK | | | 100.0 | | | 115.1 | | | 113.4 | | | 158.9 | | | 194.3 | | | 180.1 | | |

| PEER GRP. | | | 100.0 | | | 96.9 | | | 116.1 | | | 124.1 | | | 147.2 | | | 157.2 | | |

| S&P 500 | | | 100.0 | | | 112.0 | | | 136.4 | | | 130.4 | | | 171.4 | | | 203.0 | | |

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| October 1 — October 31 | | 5,064,526 | | $83.63 | | $7,796 |

| November 1 — November 30 | | 4,182,277 | | $84.72 | | $7,441 |

| December 1 — December 31 | | 3,053,800 | | $89.16 | | $7,169 |

| Total | | 12,300,603 | | $85.37 | | $7,169 |

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| MERCK | $187 | | 13% |

| S&P 500 | 174 | | 12% |

| MERCK | 100.0 | 96.0 | 110.5 | 108.8 | 152.5 | 186.5 |

| PEER GRP. | 100.0 | 103.0 | 99.9 | 119.6 | 127.8 | 151.6 |

| S&P 500 | 100.0 | 101.4 | 113.5 | 138.3 | 132.2 | 173.8 |

[removed: | (a) | Financial] [added: (a)Financial] Statements [removed: |]

The consolidated balance sheet of Merck & Co., Inc. and subsidiaries as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] the notes to consolidated financial statements, and the report dated February [removed: 26, 2020] [added: 25, 2021] of PricewaterhouseCoopers LLP, independent registered public accounting firm, are as follows:

| | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | | [removed: 2017] [added: 2019] | | | [added: | | | 2018 | | |]

| Sales | [added: | |] $ | [removed: 46,840] [added: 47,994] | | | [added: | |] $ | [removed: 42,294] [added: 46,840] | | | [added: | |] $ | [removed: 40,122] [added: 42,294] | |

| Costs, Expenses and Other | | | | | | | | | | | | [added: | | | | | |]

| Cost of sales | [removed: 14,112] | | [added: 15,485] | | [removed: 13,509] | | | | [removed: 12,912] [added: 14,112] | | | [added: | | | 13,509 | | |]

| Selling, general and administrative | [removed: 10,615] | | [added: 10,468] | | [removed: 10,102] | | | | [removed: 10,074] [added: 10,615] | | | [added: | | | 10,102 | | |]

| Research and development | [removed: 9,872] | | [added: 13,558] | | [removed: 9,752] | | | | [removed: 10,339] [added: 9,872] | | | [added: | | | 9,752 | | |]

| Restructuring costs | [removed: 638] | | [added: 578] | | [removed: 632] | | | | [removed: 776] [added: 638] | | | [added: | | | 632 | | |]

| Other (income) expense, net | [removed: 139] | | [added: (886)] | | [removed: (402] | | [removed: )] | | [removed: (500] [added: 139] | | [removed: )] | [added: | | | (402) | | |]

| | [removed: 35,376] | | [added: 39,203] | | [removed: 33,593] | | | | [removed: 33,601] [added: 35,376] | | | [added: | | | 33,593 | | |]

| Income Before Taxes | [removed: 11,464] | | [added: 8,791] | | [removed: 8,701] | | | | [removed: 6,521] [added: 11,464] | | | [added: | | | 8,701 | | |]

| Taxes on Income | [removed: 1,687] | | [added: 1,709] | | [removed: 2,508] | | | | [removed: 4,103] [added: 1,687] | | | [added: | | | 2,508 | | |]

| Net Income | [removed: 9,777] | | [added: 7,082] | | [removed: 6,193] | | | | [removed: 2,418] [added: 9,777] | | | [added: | | | 6,193 | | |]

| Less: Net [removed: (Loss)] Income [added: (Loss)] Attributable to Noncontrolling Interests | [removed: (66] | | [removed: )] [added: 15] | | [removed: (27] | | [removed: )] | | [removed: 24] [added: (66)] | | | [added: | | | (27) | | |]

| Net Income Attributable to Merck & Co., Inc. | [added: | |] $ | [removed: 9,843] [added: 7,067] | | | [added: | |] $ | [removed: 6,220] [added: 9,843] | | | [added: | |] $ | [removed: 2,394] [added: 6,220] | |

| Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders | [added: | |] $ | [removed: 3.84] [added: 2.79] | | | [added: | |] $ | [removed: 2.34] [added: 3.84] | | | [added: | |] $ | [removed: 0.88] [added: 2.34] | |

| Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders | [added: | |] $ | [removed: 3.81] [added: 2.78] | | | [added: | |] $ | [removed: 2.32] [added: 3.81] | | | [added: | |] $ | [removed: 0.87] [added: 2.32] | |

| Other Comprehensive [removed: (Loss) Income] [added: Loss] Net of Taxes: | | | | | | | | | | | | [added: | | | | | |]

| Net unrealized (loss) gain on derivatives, net of reclassifications | [removed: (135] | | [removed: )] [added: (297)] | | [removed: 297] | | | | [removed: (446] [added: (135)] | | [removed: )] | [added: | | | 297 | | |]

| Net unrealized [removed: gain] (loss) [added: gain] on investments, net of reclassifications | [removed: 96] | | [added: (18)] | | [removed: (10] | | [removed: )] | | [removed: (58] [added: 96] | | [removed: )] | [added: | | | (10) | | |]

| Benefit plan net (loss) gain and prior service (cost) credit, net of amortization | [removed: (705] | | [removed: )] [added: (279)] | | [removed: (425] | | [removed: )] | | [removed: 419] [added: (705)] | | | [added: | | | (425) | | |]

| Cumulative translation adjustment | [removed: 96] | | [added: 153] | | [removed: (223] | | [removed: )] | | [removed: 401] [added: 96] | | | [added: | | | (223) | | |]

| | [removed: (648] | | [removed: )] [added: (441)] | | [removed: (361] | | [removed: )] | | [removed: 316] [added: (648)] | | | [added: | | | (361) | | |]

| Comprehensive Income Attributable to Merck & Co., Inc. | [added: | |] $ | [removed: 9,195] [added: 6,626] | | | [added: | |] $ | [removed: 5,859] [added: 9,195] | | | [added: | |] $ | [removed: 2,710] [added: 5,859] | |

| | [removed: 2019] | | [added: 2020] | | [added: | | | | 2019 | | | | | |] 2018 | | |

| Assets | | | | | | | | [added: | | | |]

| Current Assets | | | | | | | | [added: | | | |]

| Cash and cash equivalents | [added: | |] $ | [removed: 9,676] [added: 8,062] | | | [added: | |] $ | [removed: 7,965] [added: 9,676] | |

| Short-term investments | [removed: 774] | | [added: —] | | [removed: 899] | | | [added: | 774 | | |]

| Accounts receivable (net of allowance for doubtful accounts of [removed: $86] [added: $85] in [removed: 2019] [added: 2020] and [removed: $119] [added: $86] in [removed: 2018)] [added: 2019)] | [removed: 6,778] | | [added: 7,851] | | [removed: 7,071] | | | [added: | 6,778 | | |]

| Inventories (excludes inventories of [removed: $1,480] [added: $2,197] in [removed: 2019] [added: 2020] and [removed: $1,417] [added: $1,480] in [removed: 2018] [added: 2019] classified in Other assets - see Note 7) | [removed: 5,978] | | [added: 6,310] | | [removed: 5,440] | | | [added: | 5,978 | | |]

| Other current assets | [removed: 4,277] | | [added: 5,541] | | [removed: 4,500] | | | [added: | 4,277 | | |]

| Total current assets | [removed: 27,483] | | [added: 27,764] | | [removed: 25,875] | | | [added: | 27,483 | | |]

| Investments | [removed: 1,469] | | [added: 785] | | [removed: 6,233] | | | [added: | 1,469 | | |]

| Property, Plant and Equipment (at cost) | | | | | | | | [added: | | | |]

| Land | [removed: 343] | | [added: 350] | | [removed: 333] | | | [added: | 343 | | |]

| Buildings | [removed: 11,989] | | [added: 12,645] | | [removed: 11,486] | | | [added: | 11,989 | | |]

| Machinery, equipment and office furnishings | [removed: 15,394] | | [added: 16,649] | | [removed: 14,441] | | | [added: | 15,394 | | |]

| Construction in progress | [removed: 5,013] | | [added: 7,324] | | [removed: 3,355] | | | [added: | 5,013 | | |]

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

| | | | 36,968 | | | | | | 32,739 | | |

| | | | 17,986 | | | | | | 15,053 | | |

| | | | $ | 91,588 | | | | | $ | 84,397 | |

| | | | 82,104 | | | | | | 81,857 | | |

| | | | $ | 91,588 | | | | | $ | 84,397 | |

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| Balance December 31, 2020 | | | $ | 1,788 | | | | | $ | 39,588 | | | | | $ | 47,362 | | | | | $ | (6,634) | | | | | $ | (56,787) | | | | | $ | 87 | | | | | $ | 25,404 | |

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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| Amortization | | | 1,899 | | | | | | 1,973 | | | | | | 3,103 | | |

| Depreciation | | | 1,726 | | | | | | 1,679 | | | | | | 1,416 | | |

| Charge for the acquisition of VelosBio Inc. | | | 2,660 | | | | | | — | | | | | | — | | |

| Purchase of Seagen Inc. common stock | | | (1,000) | | | | | | — | | | | | | — | | |

| Acquisition of VelosBio Inc., net of cash acquired | | | (2,696) | | | | | | — | | | | | | — | | |

| Acquisition of ArQule, Inc., net of cash acquired | | | (2,545) | | | | | | — | | | | | | — | | |

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The Company divested the remaining businesses in this segment in the first quarter of 2020.

Investments in affiliates

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

to other factors is recognized in *OCI*.

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

See Note 18 for disaggregated revenue disclosures.

If such circumstances are determined to exist, an estimate of the undiscounted

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

The Company adopted the new guidance effective January 1, 2021.

There was no impact to the Company’s consolidated financial statements upon adoption.

The Company adopted the new guidance effective January 1, 2021.

There was no impact to the Company’s consolidated financial statements upon adoption.

*Recently Issued Accounting Standard Not Yet Adopted —* In March 2020, the FASB issued optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments.

The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform.

The optional guidance is effective upon issuance and can be applied on a prospective basis at any time between January 1, 2020 through December 31, 2022.

*2020 Transactions*

In December 2020, Merck acquired OncoImmune, a privately held, clinical-stage biopharmaceutical company, for an upfront payment of $423 million.

In addition, OncoImmune shareholders will be eligible to receive up to $255 million of future contingent regulatory approval milestone payments and tiered royalties ranging from 10% to 20%.

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| | 32,739 | | | | 29,615 | | |

| | $ | 84,397 | | | $ | 82,637 | |

| | 81,857 | | | | 77,630 | | |

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| Balance January 1, 2017 | | $1,788 | | | $ | 39,939 | | | $ | 44,133 | | | $ | (5,226 | ) | | $ | (40,546 | ) | | $ | 220 | | | $ | 40,308 | |

| Acquisition of Vallée S.A. | — | | | | — | | | | — | | | | — | | | | — | | | | 7 | | | | 7 | | |

| Depreciation and amortization | 3,652 | | | | 4,519 | | | | 4,676 | | |

| Provisional charge for one-time transition tax related to the enactment of U.S. tax legislation | — | | | | — | | | | 5,347 | | |

The Company has recently sold certain businesses in the Healthcare Services segment and is in the process of divesting the remaining businesses.

*Revenue Recognition —* On January 1, 2018, the Company adopted ASU 2014-09, *Revenue from Contracts with Customers*, and subsequent amendments (ASC 606 or new guidance), using the modified retrospective method.

Comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods.

Capitalized software costs are amortized beginning when the software project is substantially complete and the asset is ready for its intended use.

Capitalized software costs associated with projects that are being amortized over 6 to 10 years (including the Company’s on-going multi-year implementation of an enterprise-wide resource planning system) were $548 million and $439 million, net of accumulated amortization at December 31, 2019 and 2018, respectively.

be recoverable.

The new leasing guidance requires

that lessees recognize a right-of-use asset and a lease liability for each of its leases (other than leases that meet the definition of a short-term lease).

Leases are classified as either operating or finance.

Operating leases result in straight-line expense in the income statement (similar to previous operating leases), while finance leases result in more expense being recognized in the earlier years of the lease term (similar to previous capital leases).

The Company adopted the new standard on January 1, 2019 using a modified retrospective approach.

Merck elected the transition method that allows for application of the standard at the adoption date rather than at the beginning of the earliest comparative period presented in the financial statements.

The Company also elected available practical expedients.

Upon adoption, the Company recognized $1.1 billion of additional assets and related liabilities on its consolidated balance sheet (see Note 9).

The adoption of the new leasing guidance did not impact the Company’s consolidated statements of income or of cash flows.

In April 2018, the FASB issued new guidance on the accounting for costs incurred to implement a cloud computing arrangement that is considered a service arrangement.

The new guidance requires the capitalization of such costs, aligning it with the accounting for costs associated with developing or obtaining internal-use software.

The Company adopted the new standard in the third quarter of 2019 using prospective application for eligible costs, which were immaterial.

In August 2018, the FASB issued new guidance modifying the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The new guidance removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of certain disclosures, and adds disclosure requirements identified as relevant.

The Company elected to early adopt the new guidance in 2019 on a retrospective basis resulting in minor changes to its employee benefit plan disclosures (see Note 13).

Also, in August 2018, the FASB issued new guidance on fair value measurements that adds, removes, and modifies certain disclosure requirements.

The Company elected to early adopt the new guidance in 2019 resulting in minor changes to its fair value disclosures (see Note 6).

*Recently Issued Accounting Standards Not Yet Adopted —* In June 2016, the FASB issued new guidance on the accounting for credit losses on financial instruments.

The amended guidance is effective for interim and annual periods in 2021.

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For the fourth quarter of [removed: 2019,] [added: 2020,] there have been no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Based on this evaluation, management concluded that internal control over financial reporting was effective as of December 31, [removed: 2019.][added: 2020.]

Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in *Internal Control — [removed: Integrated Framework* issued][added: Integrated*]

[added: *Framework* issued] in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission.

The effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

| [removed: ] [added: ] | | | [added: | | |]

| [added: ] | [removed: ] | | [added: | | |]

| Kenneth C. Frazier | | [added: |] Robert M. Davis | [added: | |]

| *Chairman, [removed: President* *and] [added: President and] Chief Executive Officer* | | [added: |] *Executive Vice President, Global [removed: Services,* *and] [added: Services, and] Chief Financial Officer* | [added: | |]

[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

Based on this evaluation, management concluded that internal control over financial reporting was effective as of December 31, 2020.

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[Table of Content](#iab6577be4c3840fd8181bdedf457fba5_7)[s](#iab6577be4c3840fd8181bdedf457fba5_7)

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Election of Directors of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held May [removed: 26, 2020.][added: 25, 2021.]

Information on executive officers is set forth in Part I of this document on page [removed: 35.][added: 44.]