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October 25, 2016 5:45 am ET

• Third-Quarter 2016 Worldwide Sales Were $10.5 Billion, an Increase of 5 Percent, Including a 1 Percent Negative Impact from Foreign Exchange
• Third-Quarter 2016 GAAP EPS Was $0.78; Third-Quarter Non-GAAP EPS Was $1.07
• Company Updates EPS Guidance: Full-Year 2016 GAAP EPS to be Between $2.02 and $2.09; Full-Year 2016 Non-GAAP EPS to be Between $3.71 and $3.78
• Advanced KEYTRUDA Development Program
  • FDA Approved KEYTRUDA for Previously Untreated Patients with Metastatic Non-Small Cell Lung Cancer (NSCLC) Whose Tumors Have High PD-L1 Expression (Tumor Proportion Score [TPS] of 50 Percent or More)
  • New Data Were Included in Labeling for KEYTRUDA Showing Improved Survival Compared to Chemotherapy in Previously Treated Patients with NSCLC Whose Tumors Express PD-L1 (TPS of 1 Percent or More)
  • FDA Approved KEYTRUDA to Treat Previously Treated Recurrent or Metastatic Head and Neck Cancer
  • KEYNOTE-045 Study Evaluating KEYTRUDA in Previously Treated Advanced Bladder Cancer (Urothelial Cancer) Met Primary Endpoint of Overall Survival and Stopped Early

Merck (NYSE:MRK), known as MSD outside the United States and Canada,
today announced financial results for the third quarter of 2016.

“The latest achievements for KEYTRUDA and other recent regulatory
approvals across our portfolio show that our innovation strategy is
working,” said Kenneth C. Frazier, chairman and chief executive officer,
Merck. “We are confident that our focus on the science, along with
continued commercial execution, will drive long-term results for the
company and our shareholders.”

Financial Summary

Worldwide sales were $10.5 billion for the third quarter of 2016, an
increase of 5 percent compared with the third quarter of 2015, including
a 1 percent negative impact from foreign exchange. Sales in the third
quarter of 2016 include an estimated benefit of approximately $150
million of additional sales in Japan resulting from the timing of
shipments in anticipation of a resource planning system Merck is
implementing in the fourth quarter of 2016.

GAAP (generally accepted accounting principles) earnings per share (EPS)
assuming dilution were $0.78 for the third quarter. Non-GAAP EPS of
$1.07 for the third quarter excludes acquisition- and
divestiture-related costs and restructuring costs. GAAP and non-GAAP EPS
in the third quarter include an estimated benefit of approximately $0.04
from the timing of shipments in Japan noted above.

Pipeline Highlights

Merck significantly advanced the clinical development program for
KEYTRUDA (pembrolizumab), an anti-PD-1 therapy. KEYTRUDA is now approved
in the United States for the treatment of previously untreated
metastatic NSCLC in patients whose tumors express high levels of PD-L1
(TPS of 50 percent or more) and previously treated metastatic NSCLC in
patients whose tumors express PD-L1 (TPS of 1 percent or more), as well
as advanced melanoma and previously treated recurrent or metastatic head
and neck cancer (HNSCC). Earlier this month at the European Society for
Medical Oncology (ESMO) 2016 Congress, data were presented from 30
studies evaluating the use of KEYTRUDA as a monotherapy and in
combination in 23 cancers.

Lung Cancer

• Yesterday the U.S. Food and Drug Administration (FDA) approved
  two supplemental Biologics License Applications (sBLA) for KEYTRUDA in
  lung cancer.
  • Based on the KEYNOTE-024 study, KEYTRUDA was approved for the
    first-line treatment of patients with metastatic NSCLC whose
    tumors have high PD-L1 expression (TPS of 50 percent or more) as
    determined by an FDA-approved test, with no EGFR or ALK genomic
    tumor aberrations. The data from KEYNOTE-024 were
    published in The New England Journal of Medicine and
    highlighted at ESMO.
  • The FDA also approved a sBLA to include data from the pivotal
    KEYNOTE-010 study in which KEYTRUDA showed superior overall
    survival compared to chemotherapy in patients with previously
    treated advanced NSCLC whose tumors express PD-L1 (TPS of 1
    percent or more) as determined by an FDA-approved test.
• Data were
  presented at ESMO from KEYNOTE-021, Cohort G, showing superior
  efficacy of KEYTRUDA plus chemotherapy compared to chemotherapy alone
  as a first-line treatment for patients with metastatic non-squamous
  NSCLC regardless of PD-L1 expression. These data were simultaneously
  published in The Lancet Oncology.
• The European Commission approved
  KEYTRUDA for the treatment of locally advanced or
  metastatic NSCLC in patients whose tumors express PD-L1 and who have
  received at least one prior chemotherapy regimen.

Head and Neck Cancer

• The FDA approved
  a sBLA for KEYTRUDA for the treatment of patients with recurrent or
  metastatic HNSCC with disease progression on or after
  platinum-containing chemotherapy.

Bladder Cancer

• On Friday the company announced
  that the KEYNOTE-045 trial investigating the use of KEYTRUDA in
  patients with previously treated advanced bladder cancer (urothelial
  cancer) met its primary endpoint. In the study, KEYTRUDA met the
  primary endpoint of overall survival and was superior compared to
  investigator choice chemotherapy.
• Interim Phase 2 data were
  presented at ESMO for the first time investigating the use of
  KEYTRUDA in previously untreated patients with advanced bladder cancer.

Last week the U.S. Centers for Disease Control and Prevention’s (CDC)
Advisory Committee on Immunization Practices voted to recommend a 2-dose
vaccination regimen for GARDASIL 9 (Human Papillomavirus 9-valent
Vaccine, Recombinant), a vaccine to prevent certain cancers and other
diseases caused by HPV, in certain girls and boys 9 through 14 years of
age, which followed the FDA’s approval
of a 2-dose regimen in this adolescent population earlier this month.

The FDA accepted
for review the New Drug Application (NDA) for MK-1293, an
investigational follow-on biologic insulin glargine candidate for the
treatment of people with type 1 and type 2 diabetes that is being
developed in collaboration with and partially funded by Samsung Bioepis.

The FDA accepted for review a supplemental NDA for a once-daily
formulation of ISENTRESS (raltegravir) in combination with other
antiretroviral therapies for the treatment of HIV-1 infection in
previously untreated patients or patients whose virus remains suppressed
after treatment with an initial regimen of 400 mg of ISENTRESS
twice-daily. The FDA granted a PDUFA action date of May 27, 2017.

Merck announced
last week that the pivotal Phase 3 study of letermovir, an
investigational antiviral medicine for prevention of cytomegalovirus
infection in high-risk bone marrow transplant patients, met its primary
endpoint; Merck will submit results from the study for presentation at a
future scientific conference.

Third-Quarter Revenue Performance

The following table reflects sales of the company’s top pharmaceutical
products, as well as total sales of Animal Health products.

Pharmaceutical Revenue

Third-quarter pharmaceutical sales increased 6 percent to $9.4 billion,
reflecting higher sales in vaccines, oncology, the cardiovascular
franchise and hospital acute care.

Growth in vaccines resulted from higher sales of GARDASIL 9 and GARDASIL
[Human Papillomavirus Quadrivalent (Types 6, 11, 16, and 18) Vaccine,
Recombinant], vaccines to prevent certain cancers and other diseases
caused by HPV, primarily due to the timing of public sector purchases
and increased pricing and demand in the United States; and higher sales
of PROQUAD (Measles, Mumps, Rubella and Varicella Vaccine Live), driven
by the timing of sales activity in the third quarter of 2015 related to
the Pediatric Vaccine Stockpile of the U.S. CDC.

Growth in oncology was driven by KEYTRUDA as the company continues to
launch the product with new indications globally.

Higher sales in the cardiovascular portfolio were driven by an increase
in sales of ADEMPAS (riociguat), a medicine for treating pulmonary
arterial hypertension and chronic thromboembolic pulmonary hypertension,
which the company is now promoting and distributing in Europe; and ZETIA
(ezetimibe), a medicine for lowering LDL cholesterol, primarily driven
by higher sales in Japan due to the timing of shipments. U.S. sales of
ZETIA were $411 million for the third quarter of 2016; in December 2016
the company will lose market exclusivity in the United States for ZETIA
and anticipates a significant decline in U.S. ZETIA sales thereafter.

Growth in hospital acute care primarily resulted from higher sales of
BRIDION (sugammadex) Injection 100 mg/mL, a medicine for the reversal of
neuromuscular blockade induced by rocuronium bromide or vecuronium
bromide in adults undergoing surgery, which had worldwide sales of $139
million for the quarter that were driven by the ongoing launch in the
United States, higher sales in Europe and the timing of shipments in
Japan.

Pharmaceutical sales growth also reflects the continued launch of
ZEPATIER (elbasvir and grazoprevir), a medicine for the treatment of
chronic hepatitis C virus genotypes 1 or 4 infection, which had sales of
$164 million in the third quarter.

Third-quarter pharmaceutical sales reflect a decline in REMICADE
(infliximab), a treatment for inflammatory diseases, due to the impact
of biosimilar competition in the company’s marketing territories in
Europe.

U.S. sales of CUBICIN (daptomycin for injection), an I.V. antibiotic,
were $264 million in the third quarter. The company has lost U.S. patent
protection for CUBICIN and anticipates a significant decline in U.S.
CUBICIN sales going forward.

Animal Health Revenue

Animal Health sales totaled $865 million for the third quarter of 2016,
an increase of 5 percent compared with the third quarter of 2015,
including a 2 percent negative impact from foreign exchange. Sales
growth was primarily driven by an increase in sales of companion animal
and poultry products, particularly the BRAVECTO (fluralaner) line of
products that kill fleas and ticks in dogs and cats for up to 12 weeks.

Earlier this month, the company announced
that the U.S. Department of Agriculture approved a license for Nobivac
Canine Flu Bivalent vaccine, the first vaccine to aid in the control of
disease associated with both canine influenza virus H3N2 and canine
influenza virus H3N8.

Third-Quarter Expense, EPS and Related Information

The table below presents selected expense information.

GAAP Expense, EPS and Related Information

On a GAAP basis, the gross margin was 67.6 percent for the third quarter
of 2016 compared to 62.7 percent for the third quarter of 2015. The
increase in gross margin for the third quarter of 2016 was primarily
driven by lower acquisition- and divestiture-related costs, which
negatively affected gross margin by 7.7 percentage points in the third
quarter of 2016 compared with 12.4 percentage points for the third
quarter of 2015. The increase in gross margin also reflects the
favorable effects of product mix.

Marketing and administrative expenses were $2.4 billion in the third
quarter of 2016, a 3 percent decrease compared to the third quarter of
2015. The decline primarily reflects lower selling and promotional
expenses as a result of prioritizing investments in key brands, the
favorable impact of foreign exchange and lower restructuring costs,
partially offset by higher acquisition- and divestiture-related costs.

Research and development (R&D) expenses were $1.7 billion in the third
quarter of 2016, an 11 percent increase compared to the third quarter of
2015. The increase primarily reflects higher clinical development
spending, as well as a reduction in the third quarter of 2015 of the
estimated fair value of liabilities for contingent consideration.

Other (income) expense, net, was $22 million of expense in the third
quarter of 2016 compared to $170 million of income in the third quarter
of 2015, reflecting a gain of $250 million in the third quarter of 2015
on the divestiture of certain migraine clinical development programs, as
well as lower foreign exchange losses in the third quarter of 2016.

GAAP EPS was $0.78 for the third quarter of 2016 compared with $0.64 for
the third quarter of 2015.

Non-GAAP Expense, EPS and Related Information

The non-GAAP gross margin was 75.3 percent for the third quarter of 2016
compared to 75.1 percent for the third quarter of 2015. The increase in
non-GAAP gross margin for the third quarter of 2016 reflects the
favorable impact of product mix.

Non-GAAP marketing and administrative expenses were $2.4 billion in the
third quarter of 2016, a 3 percent decline compared to the third quarter
of 2015. The decline reflects lower selling costs and promotional
spending as a result of prioritizing investments in key brands and the
favorable impact of foreign exchange.

Non-GAAP R&D expenses were $1.6 billion in the third quarter of 2016, a
5 percent increase compared to the third quarter of 2015. The increase
primarily reflects higher clinical development spending.

Non-GAAP EPS was $1.07 for the third quarter of 2016 compared with $0.96
for the third quarter of 2015.

Non-GAAP other (income) expense, net, was $16 million of expense in the
third quarter of 2016 compared to $106 million of expense in the third
quarter of 2015, reflecting lower foreign exchange losses.

A reconciliation of GAAP to non-GAAP net income and EPS is provided in
the table that follows. Year-to-date results can be found in the
attached tables.

Financial Outlook

Merck has narrowed and raised its full-year 2016 GAAP EPS to be between
$2.02 and $2.09. The company has narrowed and raised its full-year 2016
non-GAAP EPS to be between $3.71 to $3.78, including an approximately 1
percent negative impact from foreign exchange at mid-October exchange
rates. The non-GAAP range excludes acquisition- and divestiture-related
costs and costs related to restructuring programs.

Merck has narrowed and raised its full-year 2016 revenue range to be
between $39.7 billion and $40.2 billion, including an approximately 2
percent negative impact from foreign exchange at mid-October exchange
rates.

The following table summarizes the company’s 2016 financial guidance.

A reconciliation of anticipated 2016 GAAP EPS to non-GAAP EPS and the
items excluded from non-GAAP EPS are provided in the table below.

The expected full-year 2016 GAAP effective tax rate of 26.0 to 27.0
percent reflects an unfavorable impact of approximately 4.5 percentage
points from the above items.

Total Employees

As of Sept. 30, 2016, Merck had approximately 68,000 employees worldwide.

Earnings Conference Call

Investors, journalists and the general public may access a live audio
webcast of the call today at 8:00 a.m. EDT on Merck’s website at http://investors.merck.com/investors/webcasts-and-presentations/default.aspx.
Institutional investors and analysts can participate in the call by
dialing (706) 758-9927 or (877) 381-5782 and using ID code number
87561377. Members of the media are invited to monitor the call by
dialing (706) 758-9928 or (800) 399-7917 and using ID code number
87561377. Journalists who wish to ask questions are requested to contact
a member of Merck’s Media Relations team at the conclusion of the call.

About Merck

For 125 years, Merck has been a global health care leader working to
help the world be well. Merck is known as MSD outside the United States
and Canada. Through our prescription medicines, vaccines, biologic
therapies and animal health products, we work with customers and operate
in more than 140 countries to deliver innovative health solutions. We
also demonstrate our commitment to increasing access to health care
through far-reaching policies, programs and partnerships. For more
information, visit www.merck.com
and connect with us on Twitter,
Facebook,
YouTube
and LinkedIn.
You can also follow our Twitter conversation at $MRK.

Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA

This news release of Merck & Co., Inc., Kenilworth, N.J., USA (the
“company”) includes “forward-looking statements” within the meaning of
the safe harbor provisions of the U.S. Private Securities Litigation
Reform Act of 1995. These statements are based upon the current beliefs
and expectations of the company’s management and are subject to
significant risks and uncertainties. There can be no guarantees with
respect to pipeline products that the products will receive the
necessary regulatory approvals or that they will prove to be
commercially successful. If underlying assumptions prove inaccurate or
risks or uncertainties materialize, actual results may differ materially
from those set forth in the forward-looking statements.

Risks and uncertainties include but are not limited to, general industry
conditions and competition; general economic factors, including interest
rate and currency exchange rate fluctuations; the impact of
pharmaceutical industry regulation and health care legislation in the
United States and internationally; global trends toward health care cost
containment; technological advances, new products and patents attained
by competitors; challenges inherent in new product development,
including obtaining regulatory approval; the company’s ability to
accurately predict future market conditions; manufacturing difficulties
or delays; financial instability of international economies and
sovereign risk; dependence on the effectiveness of the company’s patents
and other protections for innovative products; and the exposure to
litigation, including patent litigation, and/or regulatory actions.

The company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events or otherwise. Additional factors that could cause results
to differ materially from those described in the forward-looking
statements can be found in the company’s 2015 Annual Report on Form 10-K
and the company’s other filings with the Securities and Exchange
Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

###

¹ Merck is providing certain 2016 and 2015 non-GAAP
information that excludes certain items because of the nature of these
items and the impact they have on the analysis of underlying business
performance and trends. Management believes that providing this
information enhances investors’ understanding of the company’s
performance. Management uses these measures internally for planning and
forecasting purposes and to measure the performance of the company along
with other metrics. Senior management’s annual compensation is derived
in part using non-GAAP income and non-GAAP EPS. This information should
be considered in addition to, but not as a substitute for or superior
to, information prepared in accordance with GAAP. For a description of
the items, see Table 2a attached to this release.

² Net income attributable to Merck & Co., Inc.

³ Includes expenses for the amortization of intangible assets
and purchase accounting adjustments to inventories recognized as a
result of acquisitions, intangible asset impairment charges and expense
or income related to changes in the estimated fair value measurement of
contingent consideration. Also includes integration, transaction and
certain other costs related to business acquisitions and divestitures.

⁴ Represents the difference between calculated GAAP EPS and
calculated non-GAAP EPS, which may be different than the amount
calculated by dividing the impact of the excluded items by the
weighted-average shares for the period.

⁵ Includes the estimated tax impact on the reconciling items.

* 100% or greater

(1) Amounts include the impact of acquisition and divestiture-related
costs, restructuring costs and certain other items. See accompanying
tables for details.

(2) Represents separation and other related costs associated with
restructuring activities under the company’s formal restructuring
programs.

(3) Other (income) expense, net in the first nine months of 2016
includes a $117 million gain related to the settlement of certain patent
litigation.  Other (income) expense, net in the third quarter and first
nine months of 2015 includes a $250 million gain on the sale of certain
migraine clinical development programs.  Other (income) expense, net in
the first nine months of 2015 also includes foreign exchange losses of
$715 million recorded in the second quarter to devalue the company’s net
monetary assets in Venezuela.

(4)  The effective income tax rate for the first nine months of 2015
reflects a net benefit of $370 million related to the settlement of
certain federal income tax issues, partially offset by the unfavorable
impact of non-tax deductible foreign exchange losses recorded in
connection with the devaluation of the company’s net monetary assets in
Venezuela.

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

Merck is providing non-GAAP information that excludes certain items
because of the nature of these items and the impact they have on the
analysis of underlying business performance and trends.  Management
believes that providing this information enhances investors’
understanding of the company’s performance.  Management uses this
information internally for planning and forecasting purposes and to
measure the performance of the company along with other metrics.  Senior
management’s annual compensation is derived in part using non-GAAP
income and non-GAAP EPS.  This information should be considered in
addition to, but not as a substitute for or superior to, information
prepared in accordance with GAAP.

(1) Amounts included in materials and production costs reflect expenses
for the amortization of intangible assets recognized as a result of
acquisitions. Amounts included in marketing and administrative expenses
reflect integration, transaction and certain other costs related to
business acquisitions, including severance costs which are not part of
the company’s formal restructuring programs, as well as transaction and
certain other costs related to divestitures. Amounts included in
research and development expenses primarily reflect expenses related to
an increase in the estimated fair value measurement of liabilities for
contingent consideration and in-process research and development
(“IPR&D”) impairment charges. Amount included in other (income) expense,
net represents a goodwill impairment charge related to a business within
the Healthcare Services segment.

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

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

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

Merck is providing non-GAAP information that excludes certain items
because of the nature of these items and the impact they have on the
analysis of underlying business performance and trends. Management
believes that providing this information enhances investors’
understanding of the company’s performance. Management uses this
information internally for planning and forecasting purposes and to
measure the performance of the company along with other metrics. Senior
management’s annual compensation is derived in part using non-GAAP
income and non-GAAP EPS. This information should be considered in
addition to, but not as a substitute for or superior to, information
prepared in accordance with GAAP.

(1) Amounts included in materials and production costs primarily reflect
$2.9 billion of expenses for the amortization of intangible assets
recognized as a result of acquisitions, as well as $347 million of
impairment charges on product intangibles. Amounts included in marketing
and administrative expenses reflect integration, transaction and certain
other costs related to business acquisitions, including severance costs
which are not part of the company’s formal restructuring programs, as
well as transaction and certain other costs related to divestitures.
Amounts included in research and development expenses reflect $225
million of in-process research and development (“IPR&D”) impairment
charges and $30 million of expenses to increase the estimated fair value
of liabilities for contingent consideration. Amount included in other
(income) expense, net represents a goodwill impairment charge related to
a business within the Healthcare Services segment.

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

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

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

(1) Only select products are shown.

(2) First quarter of 2015 reflects approximately two months of sales
following the acquisition of Cubist Pharmaceuticals, Inc. by Merck on
January 21, 2015.

(3) Includes Pharmaceutical products not individually shown above. Other
Vaccines sales included in Other Pharmaceutical were $103 million, $91
million and $135 million for the first, second and third quarters of
2016, respectively. Other Vaccines sales included in Other
Pharmaceutical were $78 million, $76 million, $99 million and $148
million for the first, second, third and fourth quarters of 2015,
respectively.

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

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

Merck
Media:
Lainie Keller, 908-236-5036
or
Investors:
Teri Loxam, 908-740-1986
Amy Klug, 908-740-1898