Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Spin-Off of Organon & Co.

On June 2, 2021, Merck completed the spin-off of products from its women’s health, biosimilars and established brands businesses into a new, independent, publicly traded company named Organon & Co. (Organon) through a distribution of Organon’s publicly traded stock to Company shareholders. The distribution is expected to qualify and has been treated as tax-free to the Company and its shareholders for U.S. federal income tax purposes. The established brands included in the transaction consisted of dermatology, non-opioid pain management, respiratory, select cardiovascular products, as well as the rest of Merck’s diversified brands franchise. Merck’s existing research pipeline programs continue to be owned and developed within Merck as planned. The historical results of the businesses that were contributed to Organon in the spin-off have been reflected as discontinued operations in the Company’s consolidated financial statements through the date of the spin-off (see Note 2 to the condensed consolidated financial statements).

Other Developments

War in Ukraine

In February 2022, Russia invaded Ukraine. The Company’s primary concerns are the safety and well-being of its employees and ensuring patients and customers have continued access to medicines and vaccines needed for patient and public health. The Company is working cross-functionally across the globe to monitor and mitigate interruptions to business continuity resulting from the war, including its impact on Merck’s supply chain, operations and clinical trials. For humanitarian reasons, the Company is continuing to supply essential medicines and vaccines in Russia while working to maintain compliance with evolving international sanctions. Merck plans to donate profits resulting from its operations in Russia to humanitarian causes. The Company does not have research or manufacturing facilities in Russia, currently does not plan to make further investments in Russia, and has suspended screening and enrollment in ongoing clinical trials as well as planning for new studies in Russia, although the Company continues to treat patients already enrolled in existing clinical trials and collect data from these studies. The Company is also using its resources to help alleviate the humanitarian crisis in Ukraine, including through donations of funds and products. The financial impacts of the war were immaterial to the Company’s consolidated financial statements for the first quarter of 2022. Combined sales to Russia and Ukraine were approximately 1% of total Merck consolidated sales for the full year of 2021.

The combination of the Russian government’s invasion of Ukraine, as well as the resultant economic sanctions imposed by the U.S., the European Union (EU) and other governments are having pervasive effects in markets worldwide. The Company is unable to determine at this time the future impacts of this conflict either directly or indirectly on the Company’s business.

COVID-19 Update

Although COVID-19-related disruptions had some negative effects on sales for the first quarter of 2022, Merck continues to believe that global health systems and patients have largely adapted to the impacts of the COVID-19 pandemic. Merck’s sales of Lagevrio (molnupiravir), an investigational oral antiviral COVID-19 medicine, were $3.2 billion in the first quarter of 2022. In the first quarter of 2021, COVID-19-related disruptions resulted in an estimated negative impact to Pharmaceutical segment sales of approximately $500 million because a substantial portion of Merck’s Pharmaceutical segment revenue is comprised of physician-administered products, which were unfavorably affected by social distancing measures and fewer well visits.

In April 2021, Merck announced it was discontinuing the development of MK-7110 for the treatment of hospitalized patients with COVID-19, which was obtained as part of Merck’s acquisition of OncoImmune (see Note 3 to the condensed consolidated financial statements). This decision resulted in charges of $170 million to Cost of sales in the first quarter of 2021.

The COVID-19 pandemic has caused some disruption and volatility in the Company’s global supply chain network, and the Company may in the future experience disruptions in availability and delays in shipments of raw materials and packaging, as well as related cost inflation.

In March 2021, Merck announced it had entered into multiple agreements to support efforts to expand manufacturing capacity and supply of SARS-CoV-2/COVID-19 medicines and vaccines. The Biomedical Advanced Research and Development Authority (BARDA), a division of the Office of the Assistant Secretary for Preparedness and Response within the U.S. Department of Health and Human Services, provided Merck with $102 million of funding in the first quarter of 2022 to adapt and make available a number of existing manufacturing facilities for the production of SARS-CoV-2/COVID-19 vaccines and medicines. The funding will be recognized as a reduction to Cost of sales over the production period, offsetting the depreciation expense related to the amounts that were capitalized in connection with the modification of the manufacturing facilities. Merck has also entered into agreements to support the manufacturing and supply of Johnson & Johnson’s SARS-

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CoV-2/COVID-19 vaccine. Merck is using certain of its facilities in the U.S. to produce drug substance, formulate and fill vials of Johnson & Johnson’s vaccine.

Pricing

Global efforts toward health care cost containment continue to exert pressure on product pricing and market access worldwide. Changes to the U.S. health care system enacted in prior years as part of health care reform, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, have contributed to pricing pressure. In several international markets, government-mandated pricing actions have reduced prices of generic and patented drugs. In addition, the Company’s sales performance in the first quarter of 2022 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs. In the U.S., the Biden Administration and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs. The Company anticipates all of these actions and additional actions in the future will continue to negatively affect sales performance.

Operating Results

Sales

			Three Months Ended March 31,																		% Change Excluding Foreign Exchange
($ in millions)			2022						2021						% Change
United States			$	7,339					$	4,790					53		%				53		%
International			8,563						5,837						47		%				52		%
Total			$	15,901					$	10,627					50		%				52		%

U.S. plus international may not equal total due to rounding.

Worldwide sales grew 50% to $15.9 billion in the first quarter of 2022. Revenue performance primarily reflects higher sales in the virology franchise attributable to $3.2 billion of Lagevrio (molnupiravir) sales, higher sales in the oncology franchise largely driven by strong growth of Keytruda (pembrolizumab) and increased alliance revenue from Lenvima (lenvatinib) and Lynparza (olaparib), as well as higher sales in the vaccines franchise, primarily attributable to growth in Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant)/Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) and RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent). Higher sales of hospital acute care products, including Bridion (sugammadex) Injection, higher third-party manufacturing sales and higher sales of Animal Health products also drove revenue growth in the first quarter of 2022. As discussed above, COVID-19-related disruptions had some negative effects on sales in the first quarter of 2022, but to a lesser extent than in the first quarter of 2021 which benefited year-over-year sales growth.

Revenue growth in the first quarter of 2022 was partially offset by lower combined sales of diabetes products Januvia (sitagliptin) and Janumet (sitagliptin and metformin HCl) and lower sales of virology products Isentress/Isentress HD (raltegravir).

See Note 15 to the condensed consolidated financial statements for details on sales of the Company’s products. A discussion of performance for select products in the franchises follows.

Pharmaceutical Segment

Oncology

			Three Months Ended March 31,																		% Change Excluding Foreign Exchange
($ in millions)			2022						2021						% Change
Keytruda			$	4,809					$	3,899					23		%				27		%
Alliance Revenue - Lynparza (1)			266						228						17		%				20		%
Alliance Revenue - Lenvima (1)			227						130						75		%				77		%

(1) Alliance revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 4 to the condensed consolidated financial statements).

Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved as monotherapy for the treatment of certain patients with cervical cancer, classical Hodgkin lymphoma, cutaneous squamous cell carcinoma, endometrial carcinoma, esophageal or gastroesophageal junction (GEJ) carcinoma, head and neck squamous cell carcinoma (HNSCC), hepatocellular carcinoma (HCC), non-small-cell lung cancer (NSCLC), melanoma, Merkel cell carcinoma, microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) cancer (solid tumors) including MSI-H/dMMR colorectal cancer, primary mediastinal large B-cell lymphoma, tumor mutational burden-high (TMB-H) cancer (solid tumors),

- 31 -

and urothelial carcinoma including non-muscle invasive bladder cancer. Additionally, Keytruda is approved as monotherapy for the adjuvant treatment of certain patients with renal cell carcinoma (RCC). Keytruda is also approved for certain patients with high-risk early-stage TNBC in combination with chemotherapy as neoadjuvant treatment, and then continued as a single agent as adjuvant treatment after surgery. In addition, Keytruda is approved for the treatment of certain patients in combination with chemotherapy for metastatic squamous and nonsquamous NSCLC, in combination with chemotherapy, with or without bevacizumab for cervical cancer, in combination with chemotherapy for esophageal cancer, in combination with trastuzumab, fluoropyrimidine- and platinum-containing chemotherapy for human epidermal growth factor 2 (HER-2)-positive gastric or GEJ adenocarcinoma, in combination with chemotherapy for HNSCC, in combination with chemotherapy for TNBC, in combination with axitinib for advanced RCC, and in combination with Lenvima for both endometrial carcinoma and RCC. The Keytruda clinical development program includes studies across a broad range of cancer types. See “Research and Development Update” below.

Global sales of Keytruda grew 23% in the first quarter of 2022. Sales growth was primarily driven by higher demand as the Company continues to launch Keytruda with multiple new indications globally. Sales in the U.S. continue to build across the multiple approved indications, in particular for the treatment of advanced NSCLC as monotherapy, and in combination with chemotherapy for both nonsquamous and squamous metastatic NSCLC, along with continued uptake in the TNBC, RCC, HNSCC, and MSI-H cancer indications. Keytruda sales growth in international markets reflects continued uptake predominately for the NSCLC, HNSCC and RCC indications, particularly in Europe.

Keytruda received the following regulatory approvals thus far in 2022.

Date			Approval
January 2022			European Commission (EC) approval as monotherapy for the adjuvant treatment of adults with RCC at increased risk of recurrence following nephrectomy, or following nephrectomy and resection of metastatic lesions based on the KEYNOTE-564 trial.
February 2022			Japan Ministry of Health, Labour and Welfare approval of the combination of Keytruda plus Lenvima for radically unresectable or metastatic RCC based on the CLEAR (Study 307)/KEYNOTE-581 trial.
February 2022			Japan Pharmaceuticals and Medical Devices Agency approval for the treatment of adult patients with advanced or recurrent TMB-H solid tumors that have progressed after chemotherapy (limited to use when difficult to treat with standard of care) based on the KEYNOTE-158 trial.
March 2022			U.S. Food and Drug Administration (FDA) approval as a single agent for the treatment of patients with advanced endometrial carcinoma that is MSI-H or dMMR who have disease progression following prior systemic therapy in any setting and are not candidates for curative surgery or radiation based on the KEYNOTE-158 trial (Cohorts D & K).
April 2022			EC approval in combination with chemotherapy, with or without bevacizumab, for the treatment of persistent, recurrent or metastatic cervical cancer in certain adults whose tumors express PD-L1 based on the KEYNOTE-826 trial.
April 2022			EC approval as monotherapy for the treatment of certain patients with unresectable or metastatic MSI-H/dMMR colorectal, gastric, small intestine or biliary cancer, as well as advanced or recurrent MSI-H/dMMR endometrial cancer based on data from KEYNOTE-164 and KEYNOTE-158.

Lynparza is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see Note 4 to the condensed consolidated financial statements). Lynparza is approved for the treatment of certain types of advanced ovarian, breast, pancreatic and prostate cancers. Alliance revenue related to Lynparza increased 17% in the first quarter of 2022 largely driven by continued uptake across the multiple approved indications globally, particularly in the U.S. In March 2022, Lynparza was approved by the FDA for the adjuvant treatment of adult patients with deleterious or suspected deleterious germline BRCA-mutated, HER2-negative high-risk early breast cancer who have been treated with neoadjuvant or adjuvant chemotherapy based on the OlympiA trial.

Lenvima is an oral receptor tyrosine kinase inhibitor being developed as part of a collaboration with Eisai Co., Ltd. (Eisai) (see Note 4 to the condensed consolidated financial statements). Lenvima is approved for the treatment of certain types of thyroid cancer, RCC, HCC, in combination with everolimus for certain patients with RCC, and in combination with Keytruda for both endometrial carcinoma and RCC. Alliance revenue related to Lenvima grew 75% in the first quarter of 2022 primarily reflecting higher demand in the U.S. and China. The growth in alliance revenue in the first quarter of 2022 also benefited from lower shared expenses.

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Vaccines

			Three Months Ended March 31,																		% Change Excluding Foreign Exchange
($ in millions)			2022						2021						% Change
Gardasil/Gardasil 9			$	1,460					$	917					59		%				60		%
ProQuad			162						165						(2)		%				(1)		%
M-M-R II			103						80						29		%				31		%
Varivax			204						204						—		%				1		%
RotaTeq			216						158						36		%				38		%
Pneumovax 23			173						171						1		%				3		%

Combined worldwide sales of Gardasil and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of human papillomavirus (HPV), grew 59% in the first quarter of 2022 driven primarily by strong demand outside of the U.S., particularly in China, which also benefited from increased supply. Additionally, sales increased in the U.S. due to public sector buying patterns.

Worldwide sales of M‑M‑R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella, grew 29% in the first quarter of 2022 primarily due to public sector buying patterns in the U.S. and higher demand in Latin America.

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), were flat in the first quarter of 2022 as higher demand and pricing in the U.S. were offset by lower government tenders in Brazil.

Global sales of RotaTeq, a vaccine to help protect against rotavirus gastroenteritis in infants and children, grew 36% in the first quarter of 2022 due to public sector buying patterns in the U.S.

Worldwide sales of Pneumovax 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, grew 1% in the first quarter of 2022 primarily reflecting higher demand in the U.S. that was largely offset by lower demand in Europe and Japan attributable in part to the COVID-19 pandemic.

Hospital Acute Care

			Three Months Ended March 31,																		% Change Excluding Foreign Exchange
($ in millions)			2022						2021						% Change
Bridion			$	395					$	340					16		%				20		%
Zerbaxa			30						(8)						*						*

*Calculation not meaningful.

Worldwide sales of Bridion, for the reversal of two types of neuromuscular blocking agents used during surgery, grew 16% in the first quarter of 2022 due to higher demand globally, particularly in the U.S. and Europe, largely attributable to an increase in surgical procedures resulting from the ongoing COVID-19 pandemic recovery.

In December 2020, the Company temporarily suspended sales of Zerbaxa (ceftolozane and tazobactam), a combination antibacterial and beta-lactamase inhibitor for the treatment of certain bacterial infections, and subsequently issued a product recall, following the identification of product sterility issues. A phased resupply for Zerbaxa was initiated in the fourth quarter of 2021 and was expanded to additional markets in the first quarter of 2022.

Cardiovascular

			Three Months Ended March 31,																		% Change Excluding Foreign Exchange
($ in millions)			2022						2021						% Change
Alliance Revenue - Adempas/Verquvo (1)			$	72					$	74					(3)		%				(3)		%
Adempas			61						55						11		%				20		%

(1) Alliance revenue represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 4 to the condensed consolidated financial statements).

Adempas (riociguat) and Verquvo (vericiguat) are part of a worldwide collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators (see Note 4 to the condensed consolidated financial statements). Adempas is approved for the treatment of certain types of pulmonary arterial hypertension. Verquvo was

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approved in the U.S. in January 2021 to reduce the risk of cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous diuretics in adults with symptomatic chronic heart failure and reduced ejection fraction. Verquvo was also approved in Japan in June 2021 and in the EU in July 2021. Alliance revenue from the collaboration was nearly flat in the first quarter of 2022. Revenue also includes sales of Adempas and Verquvo in Merck’s marketing territories. Sales of Adempas in Merck’s marketing territories grew 11% in the first quarter of 2022 primarily reflecting higher demand.

Virology

			Three Months Ended March 31,																		% Change Excluding Foreign Exchange
($ in millions)			2022						2021						% Change
Lagevrio			$	3,247					$	—					—						—
Isentress/Isentress HD			158						209						(24)		%				(21)		%

Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback (see Note 4 to the condensed consolidated financial statements). Lagevrio has received multiple authorizations or approvals worldwide, including in the United Kingdom (UK) (under Conditional Marketing Authorization), the U.S. (under Emergency Use Authorization), and Japan (under Special Approval for Emergency). Sales of Lagevrio were $3.2 billion in the first quarter of 2022 primarily consisting of sales in the U.S., the UK, Japan and Australia. Merck has entered into advance purchase and supply agreements for Lagevrio in more than 30 markets. The Company expects that sales of Lagevrio in each of the remaining quarters of 2022 will be lower than sales in the first quarter of 2022, with full-year 2022 Lagevrio sales anticipated to be between $5.0 billion to $5.5 billion.

Global combined sales of Isentress/Isentress HD, an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, declined 24% in the first quarter of 2022 due to lower global demand, reflecting competitive pressure particularly in Europe and the U.S., as well as the timing of a government tender. The Company expects competitive pressure for Isentress/Isentress HD to continue.

Diabetes

			Three Months Ended March 31,																		% Change Excluding Foreign Exchange
($ in millions)			2022						2021						% Change
Januvia/Janumet			$	1,233					$	1,295					(5)		%				(1)		%

Worldwide combined sales of Januvia and Janumet, medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 5% in the first quarter of 2022 primarily due to lower demand in the U.S., partially offset by higher demand in China, as well as Latin America reflecting in part the timing of government tenders. The Company anticipates U.S. pricing pressure will unfavorably affect sales of Januvia and Janumet in future periods. Januvia and Janumet will lose market exclusivity in China in July 2022, in the EU in September 2022, and in the U.S. in January 2023. The Company anticipates sales of Januvia and Janumet in these markets will decline substantially after the loss of exclusivity. Combined sales of Januvia and Janumet in China, Europe and the U.S. represented 11%, 23% and 31%, respectively, of total combined Januvia and Janumet sales in the first quarter of 2022.

Animal Health Segment

			Three Months Ended March 31,																		% Change Excluding Foreign Exchange
($ in millions)			2022						2021						% Change
Livestock			$	832					$	819					2		%				7		%
Companion Animal			650						599						9		%				13		%

Sales of livestock products grew 2% in the first quarter of 2022 primarily due to higher demand globally for ruminant and poultry products. Sales of companion animal products grew 9% in the first quarter of 2022 primarily due to higher demand for the Bravecto (fluralaner) line of products, as well as higher demand for vaccines. Sales of the Bravecto line of products represented approximately 20% of animal health sales in the first quarter of 2022.

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Costs, Expenses and Other

			Three Months Ended March 31,
($ in millions)			2022						2021						% Change
Cost of sales			$	5,380					$	3,199					68		%
Selling, general and administrative			2,323						2,187						6		%
Research and development			2,576						2,412						7		%
Restructuring costs			53						297						(82)		%
Other (income) expense, net			708						(455)						*
			$	11,040					$	7,640					45		%

*Calculation not meaningful.

Cost of Sales

Cost of sales increased 68% in the first quarter of 2022. Cost of sales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations and licensing arrangements, which totaled $683 million and $495 million in the first quarter of 2022 and 2021, respectively. Amortization expense in the first quarter of 2022 and 2021 includes $250 million and $153 million, respectively, of cumulative catch-up amortization related to Merck’s collaborations with AstraZeneca and Bayer, respectively, (see Note 4 to the condensed consolidated financial statements). Additionally, costs in the first quarter of 2021 include a charge of $188 million related to the discontinuation of COVID-19 development programs. Also included in cost of sales are expenses associated with restructuring activities which amounted to $46 million and $27 million in the first quarter of 2022 and 2021, respectively, including accelerated depreciation and asset write-offs related to the planned sale or closure of manufacturing facilities. Separation costs associated with manufacturing-related headcount reductions have been incurred and are reflected in Restructuring costs as discussed below.

Gross margin was 66.2% in the first quarter of 2022 compared with 69.9% in the first quarter of 2021. The gross margin decline reflects the impact of Lagevrio (which has a lower gross margin due to profit sharing with Ridgeback as discussed in Note 4 to the condensed consolidation financial statements), as well as higher manufacturing costs and higher amortization of intangible assets (noted above). The gross margin decline in 2022 was partially offset by the favorable effects of product mix and a charge in 2021 related to the discontinuation of COVID-19 development programs.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses increased 6% in the first quarter of 2022 primarily due to higher acquisition-related costs and higher administrative costs, including compensation and benefits, partially offset by the favorable effect of foreign exchange.

Research and Development

Research and development (R&D) expenses increased 7% in the first quarter of 2022 primarily due to higher clinical development spending, including compensation and benefit costs, as well as increased investments in technology in support of the digital enablement of Merck’s research operations, partially offset by the favorable effect of foreign exchange.

R&D expenses are comprised of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $1.8 billion and $1.7 billion in the first quarter of 2022 and 2021, respectively. Also included in R&D expenses are Animal Health research costs, licensing costs and costs incurred by other divisions in support of R&D activities, including depreciation, production and general and administrative, which in the aggregate were approximately $750 million and $665 million for the first quarter of 2022 and 2021, respectively.

Restructuring Costs

In 2019, Merck approved a global restructuring program (Restructuring Program) as part of a worldwide initiative focused on further optimizing the Company’s manufacturing and supply network, as well as reducing its global real estate footprint. This program is a continuation of the Company’s plant rationalization and builds on prior restructuring programs. The actions currently contemplated under the Restructuring Program are expected to be substantially completed by the end of 2023, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $3.5 billion. Merck expects to record charges of approximately $400 million for the full year of 2022 related to the Restructuring Program. The Company anticipates the actions under the Restructuring Program will result in annual net cost savings of approximately $900 million by the end of 2023.

Restructuring costs, primarily representing separation and other related costs associated with these restructuring activities, were $53 million and $297 million for the first quarter of 2022 and 2021, respectively. Separation costs incurred

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were associated with actual headcount reductions, as well as estimated expenses under existing severance programs for headcount reductions that were probable and could be reasonably estimated. Also included in restructuring costs are asset abandonment, facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement and termination charges associated with pension and other postretirement benefit plans and share-based compensation plan costs. For segment reporting, restructuring costs are unallocated expenses.

Additional costs associated with the Company’s restructuring activities are included in Cost of sales, Selling, general and administrative expenses and Research and development costs. The Company recorded aggregate pretax costs of $127 million and $334 million in the first quarter of 2022 and 2021, respectively, related to restructuring program activities (see Note 5 to the condensed consolidated financial statements).

Other (Income) Expense, Net

Other (income) expense, net, was $708 million of expense in the first quarter of 2022 compared with $455 million of income in the first quarter of 2021 primarily due to net losses from investments in equity securities recorded in the first quarter of 2022, related to net unrealized losses, compared with net income from investments in equity securities recorded in the first quarter of 2021, related both to higher net realized and unrealized gains.

For details on the components of Other (income) expense, net, see Note 11 to the condensed consolidated financial statements.

Segment Profits
			Three Months Ended March 31,
($ in millions)			2022						2021
Pharmaceutical segment profits			$	9,501					$	6,589
Animal Health segment profits			585						572
Other			(5,225)						(4,174)
Income from Continuing Operations Before Taxes			$	4,861					$	2,987

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as SG&A expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as SG&A and R&D expenses directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, R&D expenses incurred by MRL, or general and administrative expenses, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. Also excluded from the determination of segment profits are costs related to restructuring activities and acquisition and divestiture-related costs, including the amortization of intangible assets and amortization of purchase accounting adjustments, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Additionally, segment profits do not reflect other expenses from corporate and manufacturing cost centers and other miscellaneous income or expense. These unallocated items are reflected in “Other” in the above table. Also included in “Other” are miscellaneous corporate profits (losses), as well as operating profits (losses) related to third-party manufacturing sales.

Pharmaceutical segment profits increased 44% in the first quarter of 2022 reflecting higher sales, partially offset by higher administrative costs and the unfavorable effect of foreign exchange. Animal Health segment profits grew 2% in the first quarter of 2022 reflecting higher sales, partially offset by higher selling and administrative costs, higher R&D costs and the unfavorable effect of foreign exchange.

Taxes on Income

The effective income tax rates from continuing operations were 11.4% and 8.0% for the first quarter of 2022 and 2021, respectively, which reflect the beneficial impact of foreign earnings. The effective income tax rate from continuing operations in the first quarter of 2022 also includes the impact of lower U.S. income reflecting net unrealized losses from investments in equity securities. The effective income tax rate from continuing operations for the first quarter of 2021 also reflects a net tax benefit of $208 million related to the settlement of certain federal income tax matters as discussed below.

In the first quarter of 2021, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2015-2016 U.S. federal income tax returns. As a result, the Company was required to make a payment of $190 million (of which $172 million related to continuing operations and $18 million related to discontinued operations). The Company’s reserves for unrecognized tax benefits for the years under examination exceeded the adjustments relating to this examination period and

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therefore the Company recorded a $237 million net tax benefit in the first quarter of 2021 (of which $208 million related to continuing operations and $29 million related to discontinued operations). This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination.

Non-GAAP Income and Non-GAAP EPS from Continuing Operations

Non-GAAP income and non-GAAP EPS are alternative views of the Company’s performance that Merck is providing because management believes this information enhances investors’ understanding of the Company’s results since management uses non-GAAP measures to assess performance. Non-GAAP income and non-GAAP EPS exclude certain items because of the nature of these items and the impact that they have on the analysis of underlying business performance and trends. The excluded items (which should not be considered non-recurring) consist of acquisition and divestiture-related costs, restructuring costs, income and losses from investments in equity securities, and certain other items. These excluded items are significant components in understanding and assessing financial performance. Non-GAAP income and non-GAAP EPS are important internal measures for the Company. Senior management receives a monthly analysis of operating results that includes a non-GAAP EPS metric. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the performance of the Company along with other metrics. In addition, senior management’s annual compensation is derived in part using a non-GAAP pretax income metric. Since non-GAAP income and non-GAAP EPS are not measures determined in accordance with GAAP, they have no standardized meaning prescribed by GAAP and, therefore, may not be comparable to the calculation of similar measures of other companies. The information on non-GAAP income and non-GAAP EPS should be considered in addition to, but not as a substitute for or superior to, net income and EPS prepared in accordance with generally accepted accounting principles in the U.S. (GAAP).

In 2022, the Company changed the treatment of certain items for purposes of its non-GAAP reporting. Historically, Merck’s non-GAAP results excluded expenses for upfront and milestone payments related to collaborations and licensing agreements, as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions, to the extent the charges were considered by the Company to be significant to the results of a particular period (as well as any related adjustments recorded in a subsequent period). Beginning in 2022, Merck’s non-GAAP results will no longer exclude charges related to these items. This change did not affect non-GAAP results reported in the first quarter of 2022, nor did it affect previously reported first quarter 2021 non-GAAP results because the Company had no significant charges related to those items during these periods.

A reconciliation between GAAP financial measures and non-GAAP financial measures (from continuing operations) is as follows:

			Three Months Ended March 31,
($ in millions except per share amounts)			2022						2021
Income from continuing operations before taxes as reported under GAAP			$	4,861					$	2,987
Increase (decrease) for excluded items:
Acquisition and divestiture-related costs			637						497
Restructuring costs			127						334
Loss (income) from investments in equity securities, net			684						(561)
Other items:
Charge for the discontinuation of COVID-19 development programs			—						188
Non-GAAP income from continuing operations before taxes			6,309						3,445
Taxes on income from continuing operations as reported under GAAP			554						238
Estimated tax benefit on excluded items (1)			329						48
Net tax benefit from the settlement of certain federal income tax matters			—						208
Non-GAAP taxes on income from continuing operations			883						494
Non-GAAP net income from continuing operations			5,426						2,951
Less: Net (loss) income attributable to noncontrolling interests as reported under GAAP			(3)						4
Non-GAAP net income from continuing operations attributable to Merck & Co., Inc.			$	5,429					$	2,947
EPS assuming dilution from continuing operations as reported under GAAP			$	1.70					$	1.08
EPS difference			0.44						0.08
Non-GAAP EPS assuming dilution from continuing operations			$	2.14					$	1.16

(1) The estimated tax impact on the excluded items is determined by applying the statutory rate of the originating territory of the non-GAAP adjustments.

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Acquisition and Divestiture-Related Costs

Non-GAAP income and non-GAAP EPS exclude the impact of certain amounts recorded in connection with acquisitions and divestitures of businesses. These amounts include the amortization of intangible assets and amortization of purchase accounting adjustments to inventories, as well as intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also excluded are integration, transaction, and certain other costs associated with acquisitions and divestitures of businesses. Non-GAAP income and non-GAAP EPS also exclude amortization of intangible assets related to collaborations and licensing arrangements.

Restructuring Costs

Non-GAAP income and non-GAAP EPS exclude costs related to restructuring actions (see Note 5 to the condensed consolidated financial statements). These amounts include employee separation costs and accelerated depreciation associated with facilities to be closed or divested. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. Restructuring costs also include asset abandonment, facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement and termination charges associated with pension and other postretirement benefit plans and share-based compensation costs.

Income and Losses from Investments in Equity Securities

Non-GAAP income and non-GAAP EPS exclude realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds.

Certain Other Items

Non-GAAP income and non-GAAP EPS exclude certain other items. These items are adjusted for after evaluating them on an individual basis, considering their quantitative and qualitative aspects. Typically, these consist of items that are unusual in nature, significant to the results of a particular period or not indicative of future operating results. Excluded from non-GAAP income and non-GAAP EPS in 2021 is a charge related to the discontinuation of COVID-19 development programs (see Note 3 to the condensed consolidated financial statements) and a net tax benefit related to the settlement of certain federal income tax matters (see Note 12 to the condensed consolidated financial statements).

Research and Development Update

The Company currently has several candidates under regulatory review in the U.S. and internationally.

MK-4482, Lagevrio, is an investigational oral antiviral medicine for the treatment of mild to moderate COVID-19 in adults who are at risk for progressing to severe disease. Merck is developing Lagevrio in collaboration with Ridgeback. The FDA granted Emergency Use Authorization for Lagevrio in December 2021; as updated in February 2022, to authorize Lagevrio for the treatment of mild to moderate COVID-19 in adults with positive results of direct SARS-CoV-2 viral testing, and who are at high risk for progression to severe COVID-19, including hospitalization or death, and for whom alternative COVID-19 treatment options approved or authorized by the FDA are not accessible or clinically appropriate. The authorization is based on the Phase 3 MOVe-OUT trial. Lagevrio is not approved for any use in the U.S. and is authorized only for the duration of the declaration that circumstances exist justifying the authorization of its emergency use under the Food, Drug and Cosmetic Act, unless the authorization is terminated or revoked sooner. Lagevrio has also received Conditional Marketing Authorization in the UK and Special Approval for Emergency in Japan. In November 2021, the European Medicines Agency (EMA) issued a positive scientific opinion for Lagevrio, which is intended to support national decision-making on the possible use of Lagevrio prior to marketing authorization. In October 2021, the EMA initiated a rolling review for Lagevrio for the treatment of COVID-19 in adults. Merck plans to work with the Committee for Medicinal Products for Human Use (CHMP) of the EMA to complete the rolling review process to facilitate initiating the formal review of the Marketing Authorization Application. Applications to other regulatory bodies are underway. Lagevrio is also being evaluated for post-exposure prophylaxis in the Phase 3 MOVe-AHEAD trial, which is evaluating the efficacy and safety of Lagevrio for the prevention of COVID-19 in adults who reside with a person with COVID-19.

MK-7264, gefapixant, is an investigational, orally administered, selective P2X3 receptor antagonist, for the treatment of refractory chronic cough or unexplained chronic cough in adults under review by the FDA. The New Drug Application (NDA) for gefapixant is based on results from the COUGH-1 and COUGH-2 clinical trials. In January 2022, the FDA issued a Complete Response Letter (CRL) regarding Merck’s NDA for gefapixant. In the CRL, the FDA requested additional information related to measurement of efficacy. The CRL was not related to the safety of gefapixant. Merck is reviewing the letter and considering next steps. Gefapixant is also under review in the EU, although the review period has been extended pending the receipt of additional information from the Company.

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V114, (Pneumococcal 15-valent Conjugate Vaccine), is an investigational 15-valent pneumococcal conjugate vaccine under review in Japan for use in adults. V114 was approved in the U.S. in 2021 for use in adults where it is marketed as Vaxneuvance. Vaxneuvance is also under priority review by the FDA for the prevention of invasive pneumococcal disease in children 6 weeks through 17 years of age. The FDA grants priority review to medicines and vaccines that, if approved, would provide a significant improvement in the safety or effectiveness of the treatment or prevention of a serious condition. The supplemental biologics license application (BLA) is supported by results from Phase 2 and Phase 3 clinical studies in pediatric populations including infants, children, and adolescents. In April 2022, Merck announced that the FDA extended the Prescription Drug User Fee Act (PDUFA) date of the supplemental BLA for Vaxneuvance in infants and children to July 1, 2022. The FDA requested additional analyses of data from the pediatric studies, which Merck has submitted to the FDA. No new studies have been requested by the FDA.

MK-3475, Keytruda, is an anti-PD-1 therapy approved for the treatment of many cancers that is in clinical development for expanded indications. These approvals were the result of a broad clinical development program that currently consists of more than 1,750 clinical trials, including more than 1,300 trials that combine Keytruda with other cancer treatments. These studies encompass more than 30 cancer types including: biliary, estrogen receptor positive breast cancer, cervical, colorectal, cutaneous squamous cell, endometrial, esophageal, gastric, glioblastoma, head and neck, hepatocellular, Hodgkin lymphoma, non-Hodgkin lymphoma, non-small-cell lung, small-cell lung, melanoma, mesothelioma, ovarian, prostate, renal, triple-negative breast, and urothelial, many of which are currently in Phase 3 clinical development. Further trials are being planned for other cancers.

In April 2022, the CHMP adopted a positive opinion recommending approval of Keytruda in combination with chemotherapy as neoadjuvant treatment, and then continued as monotherapy as adjuvant treatment after surgery for adults with locally advanced, or early-stage TNBC at high risk of recurrence. The CHMP’s recommendation was based on results from the Phase 3 KEYNOTE-522 trial. The CHMP’s recommendation will now be reviewed by the EC for marketing authorization in the EU, and a final decision is expected in the second quarter of 2022. Keytruda is also under review for this indication in Japan.

Keytruda is also under review in the EU for the adjuvant treatment of adult and pediatric (12 years and older) patients with Stage IIB or IIC melanoma following complete resection based on data from the Phase 3 KEYNOTE-716 trial.

Keytruda is under review in Japan in combination with chemotherapy, with or without bevacizumab, for the treatment of persistent, recurrent or metastatic cervical cancer in adults whose tumors express PD-L1 based on results from the Phase 3 KEYNOTE-826 trial.

Keytruda is also under review in Japan for the adjuvant treatment of patients with RCC at intermediate-high or high risk of recurrence following nephrectomy (surgical removal of a kidney) based on data from the Phase 3 KEYNOTE-564 trial.

Keytruda is under review by the FDA for the treatment of patients with previously treated advanced HCC. This submission is based on data from the Phase 3 KEYNOTE-394 trial along with supportive data from KEYNOTE-240 and KEYNOTE-224.

MK-7339, Lynparza, is an oral PARP inhibitor currently approved for certain types of advanced ovarian, breast, pancreatic and prostate cancers being co-developed for multiple cancer types as part of a collaboration with AstraZeneca. Lynparza is under review in the EU and Japan for the adjuvant treatment of patients with BRCA-mutated, HER2-negative high-risk, early-stage breast cancer who have already been treated with chemotherapy either before or after surgery based on the results from the Phase 3 OlympiA trial. Lynparza is also under review in the EU for the treatment of certain patients with metastatic castration-resistant prostate cancer based on the PROpel clinical trial.

In March 2022, Merck announced that it will stop the Phase 3 KEYLYNK-010 trial investigating Keytruda in combination with Lynparza for the treatment of patients with metastatic castration-resistant prostate cancer who progressed after treatment with chemotherapy and either abiraterone acetate or enzalutamide. Merck is discontinuing the study following the recommendation of an independent Data Monitoring Committee (DMC) after the DMC reviewed data from a planned interim analysis. At the interim analysis, the combination of Keytruda and Lynparza did not demonstrate a benefit in overall survival, one of the study’s dual primary endpoints, compared to the control arm of either abiraterone acetate or enzalutamide. The trial’s other dual primary endpoint, radiographic progression free survival, was evaluated at an earlier interim analysis and did not demonstrate improvement compared to the control arm. Data from this study will be presented at an upcoming scientific congress.

In April 2022, Merck announced that V116, the Company’s investigational 21-valent pneumococcal conjugate vaccine, has received Breakthrough Therapy Designation from the FDA for the prevention of invasive pneumococcal disease and pneumococcal pneumonia caused by Streptococcus pneumoniae serotypes 3, 6A/C, 7F, 8, 9N, 10A, 11A, 12F, 15A, 15B/C, 16F, 17F, 19A, 20, 22F, 23A, 23B, 24F, 31, 33F, 35B in adults 18 years of age and older. Phase 3 clinical trials for V116 are expected to be initiated later this year. The Breakthrough Therapy Designation is an FDA program designed to expedite the

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development and review of products intended for serious or life-threatening conditions. To qualify for this designation, preliminary clinical evidence must indicate that the product may demonstrate substantial improvement over currently available options on at least one clinically significant endpoint.

The charts below reflect the Company’s research pipeline as of May 3, 2022. Candidates shown in Phase 3 include specific products and the date such candidate entered into Phase 3 development. Candidates shown in Phase 2 include the most advanced compound with a specific mechanism or, if listed compounds have the same mechanism, they are each currently intended for commercialization in a given therapeutic area. Small molecules and biologics are given MK-number designations and vaccine candidates are given V-number designations. Except as otherwise noted, candidates in Phase 1, additional indications in the same therapeutic area (other than with respect to cancer) and additional claims, line extensions or formulations for in-line products are not shown.

Phase 2
Cancer MK-0482*(3)* Non-Small-Cell Lung MK-1026 (nemtabrutinib) Hematological Malignancies MK-1308 (quavonlimab)(2) Non-Small-Cell Lung MK-1308A (quavonlimab+pembrolizumab) Advanced Solid Tumors Colorectal Hepatocellular Melanoma Small-Cell Lung MK-2140 (zilovertamab vedotin) Breast Hematological Malignancies Non-Small-Cell Lung Solid Tumors MK-3475 Keytruda Advanced Solid Tumors MK-4280 (favezelimab)(2) Hematological Malignancies Non-Small-Cell Lung MK-4280A (favezelimab+pembrolizumab) Renal Cell Small-Cell Lung MK-4830*(2)* Colorectal Non-Small-Cell Lung Renal Cell Small-Cell Lung MK-5890*(3)* Non-Small-Cell Lung Small-Cell Lung			Cancer MK-6440 (ladiratuzumab vedotin)(1)(3) Breast Esophageal Gastric Head and Neck Melanoma Non-Small-Cell Lung Prostate Small-Cell Lung MK-6482 Welireg*(3)* Biliary Colorectal Hepatocellular Pancreatic Rare cancers Von Hippel-Lindau Disease-Associated Tumors (EU) MK-7119 Tukysa*(1)* Advanced Solid Tumors Biliary Bladder Cervical Colorectal Endometrial Gastric Non-Small-Cell Lung MK-7339 Lynparza*(1)(3)* Advanced Solid Tumors MK-7684 (vibostolimab)(2) Melanoma MK-7684A (vibostolimab+pembrolizumab) Biliary Breast Cervical Endometrial Esophageal Head and Neck Hematological Malignancies Hepatocellular Prostate			Cancer MK-7902 Lenvima*(1)(2)* Biliary Glioblastoma Pancreatic Prostate Small-Cell Lung V937 Breast Cutaneous Squamous Cell Head and Neck Melanoma Solid Tumors Cardiovascular MK-2060 Chikungunya Virus Vaccine V184 HIV-1 Infection MK-8591B (islatravir+MK-8507)(4) MK-8591D (islatravir+lenacapavir)(1)(4) Hypercholesterolemia MK-0616 Nonalcoholic Steatohepatitis (NASH) MK-3655 MK-6024 Overgrowth Syndrome MK-7075 (miransertib) Pneumococcal Vaccine Adult V116 Pulmonary Arterial Hypertension MK-5475 Schizophrenia MK-8189 Treatment Resistant Depression MK-1942

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Phase 3 (Phase 3 entry date)			Under Review
Antiviral COVID-19 MK-4482 Lagevrio (U.S.) (May 2021)(1)(5) Cancer MK-1308A (quavonlimab+pembrolizumab) Renal Cell (April 2021) MK-3475 Keytruda Biliary (September 2019) Cutaneous Squamous Cell (August 2019) (EU) Gastric (May 2015) (EU) Hepatocellular (May 2016) (EU) Mesothelioma (May 2018) Ovarian (December 2018) Prostate (May 2019) Small-Cell Lung (May 2017) MK-3475 (pembrolizumab subcutaneous) Non-Small-Cell Lung (August 2021) MK-4280A (favezelimab+pembrolizumab) Colorectal (November 2021) MK-6482 Welireg*(3)* Renal Cell (February 2020) MK-7119 Tukysa*(1)* Breast (October 2019) MK-7339 Lynparza*(1)(3)* Colorectal (August 2020) Non-Small-Cell Lung (June 2019) Small-Cell Lung (December 2020) MK-7684A (vibostolimab+pembrolizumab) Non-Small-Cell Lung (April 2021) Small-Cell Lung (March 2022) MK-7902 Lenvima*(1)(2)* Colorectal (April 2021) Esophageal (July 2021) Gastric (December 2020) Head and Neck (February 2020) Melanoma (March 2019) Non-Small-Cell Lung (March 2019) HIV-1 Infection MK-8591A (doravirine+islatravir) (February 2020)(4) HIV-1 Prevention MK-8591 (islatravir) (February 2021)(4) Pulmonary Arterial Hypertension MK-7962 (sotatercept) (January 2021) Respiratory Syncytial Virus MK-1654 (clesrovimab) (November 2021)			New Molecular Entities/Vaccines Antiviral COVID-19 MK-4482 Lagevrio (EU)(1) Cough MK-7264 (gefapixant) (U.S.)(6) (EU) Pneumococcal Vaccine Adult V114 (JPN)			Certain Supplemental Filings Cancer MK-3475 Keytruda • High-Risk Early-Stage Triple-Negative Breast Cancer (KEYNOTE-522) (EU) (JPN) • Adjuvent Treatment of Stage IIB and IIC Melanoma (KEYNOTE-716) (EU) • Cervical Cancer (KEYNOTE-826) (JPN) • Adjuvent Renal Cell Cancer (KEYNOTE-564) (JPN) • Second-Line Hepatocellular Cancer (KEYNOTE-394) (U.S.) MK-7339 Lynparza*(1)* • BRCA-Mutated HER2-Negative Adjuvant Breast Cancer (OlympiA) (EU) (JPN) • First-Line Metastatic Prostate Cancer (PROpel) EU) MK-7902 Lenvima*(1)(2)* • First-Line Metastatic Hepatocellular Carcinoma (KEYNOTE-524) (U.S.)(7)
Footnotes: (1) Being developed in a collaboration. (2) Being developed in combination with Keytruda. (3) Being developed as monotherapy and/or in combination with Keytruda. (4) On FDA clinical hold. (5) Available in the U.S. under Emergency Use Authorization. (6) In January 2022, the FDA issued a CRL for this application. Merck is reviewing the CRL and considering next steps. (7) In July 2020, the FDA issued a CRL for Merck’s and Eisai’s applications. Merck and Eisai intend to submit additional data when available to the FDA.

Liquidity and Capital Resources

($ in millions)			March 31, 2022						December 31, 2021
Cash and investments			$	9,244					$	8,466
Working capital			8,868						6,394
Total debt to total liabilities and equity			29.8		%				31.3		%

Cash provided by operating activities of continuing operations was $4.8 billion in the first three months of 2022 compared with $1.2 billion in the first three months of 2021 reflecting stronger operating performance, including sales of Lagevrio for which the related profit sharing payment to Ridgeback will be made in the second quarter of 2022 (see Note 4 to the condensed consolidated financial statements). Cash provided by operating activities from continuing operations in the first three months of 2022 was reduced by $1.2 billion of milestone payments related to collaborations compared with $325 million of milestone and option payments related to collaborations in the first three months of 2021. Cash provided by operating activities from continuing operations continues to be the Company’s primary source of funds to finance operating needs, with excess cash serving as the primary source of funds to finance capital expenditures, treasury stock purchases and dividends paid to shareholders. As a result of the mandatory change in R&D capitalization rules that are effective for tax years beginning after December 31, 2021 (related to the Tax Cuts and Jobs Act of 2017), the Company expects taxes paid in the U.S. to increase significantly for the full year of 2022.

Cash used in investing activities of continuing operations was $1.2 billion in the first three months of 2022 compared with $686 million in the first three months of 2021. The higher use of cash in investing activities was primarily due to lower proceeds from sales of securities and other investments coupled with higher purchases of securities and other investments, partially offset by lower capital expenditures.

Cash used in financing activities of continuing operations was $3.1 billion in the first three months of 2022 compared with $2.1 billion in the first three months of 2021. The higher use of cash in financing activities was primarily due

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to a net increase in short-term borrowings in the prior period compared with no increase in short-term borrowings in the current period, higher dividends paid to stockholders and higher payments on debt (see below).

Capital expenditures totaled $1.0 billion and $1.1 billion for the first three months of 2022 and 2021, respectively.

The Company has accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. The Company factored $2.2 billion and $2.8 billion of accounts receivable at March 31, 2022 and December 31, 2021, respectively, under these factoring arrangements, which reduced outstanding accounts receivable. The cash received from the financial institutions is reported within operating activities in the Condensed Consolidated Statement of Cash Flows. In certain of these factoring arrangements, for ease of administration, the Company will collect customer payments related to the factored receivables, which it then remits to the financial institutions. The net cash flows relating to these collections are reported as financing activities in the Condensed Consolidated Statement of Cash Flows.

Dividends paid to stockholders were $1.7 billion and $1.6 billion for the first three months of 2022 and 2021, respectively. In January 2022, the Board of Directors declared a quarterly dividend of $0.69 per share on the Company’s stock for the second quarter that was paid in April 2022.

In February 2022, the Company’s $1.25 billion, 2.35% notes matured in accordance with their terms and were repaid. In January 2021, the Company’s $1.15 billion, 3.875% notes matured in accordance with their terms and were repaid.

In 2018, Merck’s Board of Directors authorized purchases of up to $10 billion of Merck’s common stock for its treasury. The treasury stock purchase authorization has no time limit and will be made over time in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions. The Company did not purchase any shares of its common stock during the first three months of 2022. As of March 31, 2022, the Company’s remaining share repurchase authorization was $5.0 billion.

The Company has a $6.0 billion credit facility that matures in June 2026. The facility provides backup liquidity for the Company’s commercial paper borrowing facility and is to be used for general corporate purposes. The Company has not drawn funding from this facility.

Critical Accounting Estimates

The Company’s significant accounting policies, which include management’s best estimates and judgments, are included in Note 2 to the consolidated financial statements for the year ended December 31, 2021 included in Merck’s Form 10‑K filed on February 25, 2022. See Note 1 to the condensed consolidated financial statements for information on the adoption of new accounting standards during 2022. A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates are disclosed in the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Merck’s Form 10-K. There have been no significant changes in the Company’s critical accounting estimates since December 31, 2021.

Recently Issued Accounting Standards

For a discussion of recently issued accounting standards, see Note 1 to the condensed consolidated financial statements.