Filariasis

DULUTH, Ga., March 15, 2024 /PRNewswire/ -- The Boehringer Ingelheim Cares Foundation, through its Product Donation Program, has made a significant contribution to animal shelters across the country. The Product Donation Program donates Boehringer Ingelheim medicines to approved nonprofit partners who distribute the medicines around the world where there is tremendous unmet need. Continue Reading The Foundation has donated 1.9 million doses of NexGard® PLUS chews, a delicious beef-flavored soft chew, designed to protect dogs from fleas and ticks, prevent heartworm disease, and treat and control roundworms and hookworms. Over 6 million doses of NexGard® PLUS chews have been sold since its launch in 2023. The Boehringer Ingelheim Cares Foundation has donated 1.9 million doses of NexGard® PLUS to animal shelters in need. Post this The donation, valued at $42.6 million, is part of Boehringer's ongoing commitment to support animal health and wellbeing. The company partnered with Greater Good Charities, a renowned organization dedicated to improving the health and well-being of people, pets and the planet, to distribute the products to animal shelters in need. This substantial donation will significantly impact the lives of countless dogs in shelters, providing them with essential protection against harmful parasites. Parasiticides play a crucial role in the adoption of shelter dogs by ensuring they are protected from parasites, thus enhancing their health and making them more appealing to potential adopters. "Boehringer Ingelheim is deeply committed to safeguarding the health and wellbeing of animals in shelters," said Randolph Legg, President and Head of Commercial Business, Boehringer Ingelheim Animal Health USA and board member of the Boehringer Ingelheim Cares Foundation. "Our mission is to ensure they receive the best care possible while they patiently wait for their forever homes. This donation is a testament to our commitment and we hope it will make a significant difference in the lives of animals in need." NexGard® PLUS Important Safety Information NexGard® PLUS (afoxolaner, moxidectin, and pyrantel chewable tablets) are for use in dogs only. The most frequently reported adverse reactions reported in clinical trials were diarrhea, vomiting, lethargy, and itching. Use with caution in dogs with a history of seizures or neurologic disorders. The safe use of NexGard® PLUS has not been evaluated in breeding, pregnant, or lactating dogs. Dogs should be tested for existing heartworm infection prior to starting a heartworm disease preventive. For more information, click here for full prescribing information, or visit NexGardPLUSClinic.com. About Boehringer Ingelheim Animal Health USA Boehringer Ingelheim Animal Health is working on first-in-class innovation for the prediction, prevention, and treatment of diseases in animals. For veterinarians, pet owners, producers, and governments in more than 150 countries, we offer a large and innovative portfolio of products and services to improve the health and well-being of companion animals and livestock. As a global leader in the animal health industry and as part of the family-owned Boehringer Ingelheim, we take a long- term perspective. The lives of animals and humans are interconnected in deep and complex ways. We know that when animals are healthy, humans are healthier too. By using the synergies between our Animal Health and Human Pharma businesses and by delivering value through innovation, we enhance the health and well-being of both. Learn more about Boehringer Ingelheim Animal Health USA at bi-animalhealth.com About Boehringer Ingelheim Cares Foundation Boehringer Ingelheim Cares Foundation is an independent nonprofit organization with a mission to strengthen the communities where our employees live and work by improving the health and well-being of people and animals, with a focus on helping the underserved. The programs we support align with our goals to improve access to healthcare, enhance STEM education, and strengthen the human-animal bond. NexGard® is a registered trademark of Boehringer Ingelheim Animal Health France, used under license. ©2024 Boehringer Ingelheim Animal Health USA Inc., Duluth, GA. All rights reserved. US-PET-0135-2024. SOURCE Boehringer Ingelheim

PARSIPPANY, N.J.--( BUSINESS WIRE )-- Zoetis Inc . (NYSE: ZTS) today reported its financial results for the fourth quarter and full year 2023 as well as provided full year guidance for 2024. The company reported revenue of $2.2 billion for the fourth quarter of 2023, which was an increase of 8% compared with the fourth quarter of 2022, on both a reported and operational 1 basis. Net income for the fourth quarter of 2023 was $525 million, or $1.14 per diluted share, an increase of 14% and 15%, respectively, on a reported basis. Adjusted net income 2 for the fourth quarter of 2023 was $569 million, or $1.24 per diluted share, an increase of 6% and 8%, respectively, on a reported and operational basis. Adjusted net income for the fourth quarter of 2023 excludes the net impact of $44 million for purchase accounting adjustments, acquisition-related costs and certain significant items. For full year 2023, the company reported revenue of $8.5 billion, an increase of 6% compared with full year 2022. On an operational basis, revenue for full year 2023 increased 7%, excluding the impact of foreign currency. Net income for full year 2023 was $2.3 billion, or $5.07 per diluted share, an increase of 11% and 13%, respectively, on a reported basis. Adjusted net income for full year 2023 was $2.5 billion, or $5.32 per diluted share, an increase of 7% and 9%, respectively, on a reported and operational basis. Adjusted net income for full year 2023 excludes the net impact of $113 million for purchase accounting adjustments, acquisition-related costs and certain significant items. EXECUTIVE COMMENTARY “ Zoetis delivered another strong performance in 2023 thanks to our diverse portfolio across markets and species and our dedicated colleagues,” said Kristin Peck, Chief Executive Officer of Zoetis. “ We grew revenue 7% operationally, driven by our innovative companion animal franchises across pain, dermatology and parasiticides. We also grew our adjusted net income 7% operationally, while continuing to support investments in R&D, supply chain, and commercial excellence capabilities that will drive our next phase of growth.” “ We are excited by the momentum of Librela in the U.S. and around the world as we work to build our next billion-dollar franchise. In addition to OA pain, we are well-positioned for growth in our other key franchises, including dermatology, parasiticides and diagnostics, and will continue to invest in solutions that will shape and expand the future of animal health. We are committed to continuing our track record of innovation and growing faster than the market, even during times of global uncertainty, and are guiding to full-year operational growth of 7% to 9% in revenue in 2024,” said Peck. QUARTERLY HIGHLIGHTS Zoetis organizes and manages its commercial operations across two regional segments: United States (U.S.) and International. Within these segments, the company delivers a diverse portfolio of products for companion animals and livestock, tailored to local trends and customer needs. In the fourth quarter of 2023: Revenue in the U.S. segment was $1.2 billion, an increase of 9% compared with the fourth quarter of 2022. Sales of companion animal products increased 10%, driven by the company’s monoclonal antibody (mAb) products for osteoarthritis (OA) pain, Librela ™ for dogs and Solensia ® for cats, as well as the company's flea, tick and heartworm combination product for dogs, Simparica Trio ® . Also contributing to growth in the quarter was the company's dermatology portfolio, including Apoquel ® and Cytopoint ® . Sales of livestock products increased 4% in the quarter. Growth in the poultry product portfolio was the result of favorable rotations back to certain medicated feed additives (MFAs) and the expanded use of Zoamix ® . Sales of both swine and cattle products increased in the quarter, primarily as a result of increased supply of vaccines that were limited in the same quarter the year prior. Revenue in the International segment was $982 million, reflecting a 9% increase on a reported basis and an increase of 8% operationally compared with the fourth quarter of 2022. Sales of companion animal products grew 13% on a reported basis and 10% operationally. Growth in the quarter was driven by the company’s monoclonal antibody products for OA pain, Librela for dogs and Solensia for cats, as well as key dermatology products, Apoquel and Cytopoint. Also contributing to growth in the quarter were Simparica ® and Simparica Trio. Sales of livestock products increased 5% on a reported basis and 7% operationally. Growth in both the company’s cattle and poultry product portfolios were driven largely by price increases across the broader international segment. The fish product portfolio grew as a result of a new vaccine launch in Norway. Sales in the sheep product portfolio declined due to unfavorable market conditions in Australia and New Zealand, while sales in the swine product portfolio decreased in China primarily due to unfavorable market conditions and a difficult comparative period versus the same quarter of the prior year. INVESTMENTS IN GROWTH Zoetis continues to advance innovation and care for animals across the globe. Since its last quarterly earnings announcement, Solensia (frunevetmab injection), the first injectable monoclonal antibody for the alleviation of pain associated with osteoarthritis in cats, received approval in Brazil. Additionally, Simparica Trio (sarolaner/moxidectin/pyrantel), the company’s triple combination oral parasiticide for dogs, was approved in China. The company expanded its Vetscan Imagyst ™ diagnostics platform in the U.S. to include new applications for artificial intelligence (AI) urine sediment analysis for dogs and cats. On the livestock side of the business, Zoetis received approval in Mexico for Poulvac ® Procerta ® HVT-IBD-ND , a part of the company’s recombinant vector vaccine portfolio for poultry, which provides early, robust protection against Marek’s, infectious bursal and Newcastle disease viruses with one dose. Poulvac Procerta HVT-IBD , which provides protection against Marek’s and infectious bursal viruses, was approved in the EU. Zoetis also continues to grow key product franchises through additional claim extensions in major markets. In the fourth quarter, Simparica Trio received approval in Japan for claims related to efficacy against sarcoptic and demodectic manges. Revolution ® Plus (selamectin/sarolaner), the company’s topical combination product that treats ticks, fleas, ear mites, lice and gastrointestinal worms and prevents heartworm disease in cats, received approval in the U.S. for claims related to the treatment and control of lone star tick infestations, making it the only parasiticide for cats on the market to defend against four types of ticks. FINANCIAL GUIDANCE Zoetis is providing full year 2024 guidance, which includes: Revenue between $9.075 billion to $9.225 billion ( operational growth of 7% to 9%) Reported net income between $2.468 billion to $2.513 billion Adjusted net income between $2.650 billion to $2.700 billion ( operational growth of 9% to 11%) Reported diluted EPS between $5.34 to $5.44 Adjusted diluted EPS between $5.74 to $5.84 This guidance reflects foreign exchange rates as of late January 2024. Additional details on guidance are included in the financial tables and will be discussed on the company's conference call this morning. WEBCAST & CONFERENCE CALL DETAILS Zoetis will host a webcast and conference call at 8:30 a.m. (ET) today, during which company executives will review fourth quarter and full year 2023 results, discuss financial guidance and respond to questions from financial analysts. Investors and the public may access the live webcast by visiting the Zoetis website at http://investor.zoetis.com/events-presentations . A replay of the webcast will be archived and made available on February 13, 2024. About Zoetis As the world’s leading animal health company, Zoetis is driven by a singular purpose: to nurture our world and humankind by advancing care for animals. After innovating ways to predict, prevent, detect, and treat animal illness for more than 70 years, Zoetis continues to stand by those raising and caring for animals worldwide – from veterinarians and pet owners to livestock farmers and ranchers. The company’s leading portfolio and pipeline of medicines, vaccines, diagnostics and technologies make a difference in over 100 countries. A Fortune 500 company, Zoetis generated revenue of $8.5 billion in 2023 with approximately 14,100 employees. For more information, visit www.zoetis.com . 1 Operational growth (a non-GAAP financial measure) is defined as growth excluding the impact of foreign exchange. 2 Adjusted net income and its components and adjusted diluted earnings per share (non-GAAP financial measures) are defined as reported net income and reported diluted earnings per share, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. DISCLOSURE NOTICES Forward-Looking Statements : This press release contains forward-looking statements, which reflect the current views of Zoetis with respect to: business plans or prospects, future operating or financial performance, future guidance, future operating models; R&D costs; timing and likelihood of success; expectations regarding products, product approvals or products under development and expected timing of product launches; disruptions in our global supply chain; expectations regarding the performance of acquired companies and our ability to integrate new businesses; expectations regarding the financial impact of acquisitions; future use of cash, dividend payments and share repurchases; tax rates and tax regimes and any changes thereto; and other future events. These statements are not guarantees of future performance or actions. Forward-looking statements are subject to risks and uncertainties. If one or more of these risks or uncertainties materialize, or if management's underlying assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. Forward-looking statements speak only as of the date on which they are made. Zoetis expressly disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. A further list and description of risks, uncertainties and other matters can be found in our most recent Annual Report on Form 10-K, including in the sections thereof captioned “ Forward-Looking Statements and Factors That May Affect Future Results” and “Item 1A. Risk Factors,” in our Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K. These filings and subsequent filings are available online at www.sec.gov , www.zoetis.com , or on request from Zoetis. Use of Non-GAAP Financial Measures: We use non-GAAP financial measures, such as adjusted net income, adjusted diluted earnings per share and operational results (which exclude the impact of foreign exchange), to assess and analyze our results and trends and to make financial and operational decisions. We believe these non-GAAP financial measures are also useful to investors because they provide greater transparency regarding our operating performance. The non-GAAP financial measures included in this press release should not be considered alternatives to measurements required by GAAP, such as net income, operating income, and earnings per share, and should not be considered measures of liquidity. These non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. Reconciliations of non-GAAP financial measures and the most directly comparable GAAP financial measures are included in the tables accompanying this press release and are posted on our website at www.zoetis.com . Internet Posting of Information: We routinely post information that may be important to investors on the 'Investor Relations' section of our website at www.zoetis.com , as well as on LinkedIn, Facebook, X (formerly Twitter) and YouTube. We encourage investors and potential investors to consult our website regularly and to follow us on social media for company news and information. ZTS-COR ZTS-IR ZTS-FIN ZOETIS INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (a) (UNAUDITED) (millions of dollars, except per share data) Three Months Ended December 31, % Change Twelve Months Ended December 31, % Change 2023 2022 2023 2022 Revenue $ 2,213 $ 2,040 8 $ 8,544 $ 8,080 6 Costs and expenses: Cost of sales 728 653 11 2,561 2,454 4 Selling, general and administrative expenses 565 514 10 2,151 2,009 7 Research and development expenses 174 148 18 614 539 14 Amortization of intangible assets 37 35 6 149 150 (1 ) Restructuring charges and certain acquisition-related costs 8 2 * 53 11 * Interest expense 59 62 (5 ) 239 221 8 Other (income)/deductions–net (8 ) 34 * (159 ) 40 * Income before provision for taxes on income 650 592 10 2,936 2,656 11 Provision for taxes on income 127 132 (4 ) 596 545 9 Net income before allocation to noncontrolling interests 523 460 14 2,340 2,111 11 Less: Net loss attributable to noncontrolling interests (2 ) (1 ) * (4 ) (3 ) 33 Net income attributable to Zoetis $ 525 $ 461 14 $ 2,344 $ 2,114 11 Earnings per share—basic $ 1.14 $ 0.99 15 $ 5.08 $ 4.51 13 Earnings per share—diluted $ 1.14 $ 0.99 15 $ 5.07 $ 4.49 13 Weighted-average shares used to calculate earnings per share Basic 459.0 465.6 461.2 468.9 Diluted 460.1 466.8 462.3 470.4 (a) The Condensed Consolidated Statements of Income present the three and twelve months ended December 31, 2023 and 2022. Subsidiaries operating outside the U.S. are included for the three and twelve months ended November 30, 2023 and 2022. * Calculation not meaningful. ZOETIS INC. RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION CERTAIN LINE ITEMS (UNAUDITED) (millions of dollars, except per share data) Three Months Ended December 31, 2023 GAAP Reported (a) Purchase Accounting Adjustments Acquisition- Related Costs (1) Certain Significant Items (2) Non-GAAP Adjusted (b) Cost of sales $ 728 $ — $ — $ (1 ) $ 727 Gross profit 1,485 — — 1 1,486 Selling, general and administrative expenses 565 (3 ) — — 562 Research and development expenses 174 — — — 174 Amortization of intangible assets 37 (32 ) — — 5 Restructuring charges and certain acquisition-related costs 8 — (1 ) (7 ) — Other (income)/deductions–net (8 ) — — (4 ) (12 ) Income before provision for taxes on income 650 35 1 12 698 Provision for taxes on income 127 6 1 (3 ) 131 Net income attributable to Zoetis 525 29 — 15 569 Earnings per common share attributable to Zoetis–diluted 1.14 0.07 — 0.03 1.24 Three Months Ended December 31, 2022 GAAP Reported (a) Purchase Accounting Adjustments Acquisition- Related Costs (1) Certain Significant Items (2) Non-GAAP Adjusted (b) Cost of sales $ 653 $ (3 ) $ — $ — $ 650 Gross profit 1,387 3 — — 1,390 Selling, general and administrative expenses 514 (7 ) — — 507 Research and development expenses 148 (1 ) — — 147 Amortization of intangible assets 35 (29 ) — — 6 Restructuring charges and certain acquisition-related costs 2 — (1 ) (1 ) — Other (income)/deductions–net 34 — — (45 ) (11 ) Income before provision for taxes on income 592 40 1 46 679 Provision for taxes on income 132 12 — (3 ) 141 Net income attributable to Zoetis 461 28 1 49 539 Earnings per common share attributable to Zoetis–diluted 0.99 0.06 — 0.10 1.15 (a) The Condensed Consolidated Statements of Income present the three months ended December 31, 2023 and 2022. Subsidiaries operating outside the U.S. are included for the three months ended November 30, 2023 and 2022. (b) Non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP adjusted net income and its components, and non-GAAP adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance. See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for notes (1) and (2). ZOETIS INC. RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION CERTAIN LINE ITEMS (UNAUDITED) (millions of dollars, except per share data) Twelve Months Ended December 31, 2023 GAAP Reported (a) Purchase Accounting Adjustments Acquisition- Related Costs (1) Certain Significant Items (2) Non-GAAP Adjusted (b) Cost of sales $ 2,561 $ (10 ) $ — $ (3 ) $ 2,548 Gross profit 5,983 10 — 3 5,996 Selling, general and administrative expenses 2,151 (21 ) — — 2,130 Research and development expenses 614 (1 ) — — 613 Amortization of intangible assets 149 (127 ) — — 22 Restructuring charges and certain acquisition-related costs 53 — (9 ) (44 ) — Other (income)/deductions–net (159 ) — — 80 (79 ) Income before provision for taxes on income 2,936 159 9 (33 ) 3,071 Provision for taxes on income 596 32 2 (12 ) 618 Net income attributable to Zoetis 2,344 127 7 (21 ) 2,457 Earnings per common share attributable to Zoetis–diluted 5.07 0.28 0.02 (0.05 ) 5.32 Twelve Months Ended December 31, 2022 GAAP Reported (a) Purchase Accounting Adjustments Acquisition- Related Costs (1) Certain Significant Items (2) Non-GAAP Adjusted (b) Cost of sales $ 2,454 $ (6 ) $ — $ (8 ) $ 2,440 Gross profit 5,626 6 — 8 5,640 Selling, general and administrative expenses 2,009 (29 ) — — 1,980 Research and development expenses 539 (1 ) — — 538 Amortization of intangible assets 150 (124 ) — — 26 Restructuring charges and certain acquisition-related costs 11 — (5 ) (6 ) — Other (income)/deductions–net 40 — — (42 ) (2 ) Income before provision for taxes on income 2,656 160 5 56 2,877 Provision for taxes on income 545 40 1 (3 ) 583 Net income attributable to Zoetis 2,114 120 4 59 2,297 Earnings per common share attributable to Zoetis–diluted 4.49 0.26 0.01 0.12 4.88 (a) The Condensed Consolidated Statements of Income present the twelve months ended December 31, 2023 and 2022. Subsidiaries operating outside the U.S. are included for the twelve months ended November 30, 2023 and 2022. (b) Non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP adjusted net income and its components, and non-GAAP adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance. See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for notes (1) and (2). ZOETIS INC. NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION CERTAIN LINE ITEMS (UNAUDITED) (millions of dollars) (1) Acquisition-related costs include the following: Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 Transaction costs (a) $ — $ 1 $ 4 $ 1 Integration costs (b) — — 3 4 Restructuring charges (c) 1 — 2 — Total acquisition-related costs—pre-tax 1 1 9 5 Income taxes (d) 1 — 2 1 Total acquisition-related costs—net of tax $ — $ 1 $ 7 $ 4 (a) Transaction costs represent external costs directly related to acquiring businesses and primarily includes expenditures for banking, legal, accounting and other similar services. Included in Restructuring charges and certain acquisition-related costs . (b) Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for consulting and the integration of systems and processes. Included in Restructuring charges and certain acquisition-related costs . (c) Restructuring charges represent employee termination costs, included in Restructuring charges and certain acquisition-related costs. (d) Included in Provision for taxes on income . Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction's applicable tax rate. (2) Certain significant items include the following: Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 Other restructuring charges and cost-reduction/productivity initiatives (a) $ 8 $ 1 $ 44 $ 8 Certain asset impairment charges (b) 3 41 24 47 Net gain on sale of businesses (c) — — (101 ) — Other 1 4 — 1 Total certain significant items—pre-tax 12 46 (33 ) 56 Income taxes (d) (3 ) (3 ) (12 ) (3 ) Total certain significant items—net of tax $ 15 $ 49 $ (21 ) $ 59 (a) For the three and twelve months ended December 31, 2023, primarily represents employee termination and exit costs related to organizational structure refinements and other cost-reduction and productivity initiatives, primarily included in Restructuring charges and certain acquisition-related costs. For the twelve months ended December 31, 2022, primarily represents employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets, included in Restructuring charges and certain acquisition-related costs , as well as product transfer costs, included in Cost of sales. (b) For the twelve months ended December 31, 2023, primarily represents certain asset impairment charges related to our precision animal health and diagnostics businesses, primarily included in Other (income)/deductions–net . For the three and twelve months ended December 31, 2022, primarily represents asset impairment charges related to customer relationships, developed technology rights and property, plant and equipment in our diagnostics, poultry, cattle and swine businesses, included in Other (income)/deductions-net. (c) Primarily represents a net gain on the sale of a majority interest in our pet insurance business, included in Other (income)/deductions–net . (d) Included in Provision for taxes on income . Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction's applicable tax rate. Income taxes in Certain significant items also includes: For the three and twelve months ended December 31, 2023, includes a tax expense related to changes to prior years' tax positions with regard to the one-time mandatory deemed repatriation tax under the Tax Cuts and Jobs Act. For the twelve months ended December 31, 2023, also includes a benefit from the tax loss on the divestiture of Performance Livestock Analytics. For the three and twelve months ended December 31, 2022, includes a tax charge related to changes in uncertain tax positions. For the twelve months ended December 31, 2022, also includes a tax charge related to changes in valuation allowances related to impairment of certain assets. ZOETIS INC. ADJUSTED SELECTED COSTS AND EXPENSES (a) (UNAUDITED) (millions of dollars) Three Months Ended December 31, % Change 2023 2022 Total Foreign Exchange Operational (b) Adjusted cost of sales $ 727 $ 650 12 % 3 % 9 % As a percent of revenue 32.9 % 31.9 % NA NA NA Adjusted SG&A expenses 562 507 11 % 1 % 10 % Adjusted R&D expenses 174 147 18 % 1 % 17 % Adjusted net income attributable to Zoetis 569 539 6 % — % 6 % Twelve Months Ended December 31, % Change 2023 2022 Total Foreign Exchange Operational (b) Adjusted cost of sales $ 2,548 $ 2,440 4 % (4 )% 8 % As a percent of revenue 29.8 % 30.2 % NA NA NA Adjusted SG&A expenses 2,130 1,980 8 % (1 )% 9 % Adjusted R&D expenses 613 538 14 % — % 14 % Adjusted net income attributable to Zoetis 2,457 2,297 7 % — % 7 % (a) Adjusted cost of sales, adjusted selling, general, and administrative (SG&A) expenses, adjusted research and development (R&D) expenses, and adjusted net income (non-GAAP financial measures) are defined as the corresponding reported U.S. GAAP income statement line items excluding purchase accounting adjustments, acquisition-related costs, and certain significant items. These adjusted income statement line item measures are not, and should not be viewed as, substitutes for the corresponding U.S. GAAP line items. The corresponding GAAP line items and reconciliations of reported to adjusted information are provided in Condensed Consolidated Statements of Income and Reconciliation of GAAP Reported to Non-GAAP Adjusted Information. (b) Operational growth (a non-GAAP financial measure) is defined as growth excluding the impact of foreign exchange. ZOETIS INC. 2024 GUIDANCE Selected Line Items (millions of dollars, except per share amounts) Full Year 2024 Revenue $9,075 to $9,225 Operational growth (a) 7% to 9% Adjusted cost of sales as a percentage of revenue (b) Approximately 29.5% Adjusted SG&A expenses (b) $2,170 to $2,220 Adjusted R&D expenses (b) $665 to $675 Adjusted interest expense and other (income)/deductions-net (b) Approximately $210 Effective tax rate on adjusted income (b) 20.0% to 21.0% Adjusted diluted EPS (b) $5.74 to $5.84 Adjusted net income (b) $2,650 to $2,700 Operational growth (a)(c) 9% to 11% Certain significant items and acquisition-related costs (d) $70 - $75 The guidance reflects foreign exchange rates as of late January 2024. Reconciliations of 2024 reported guidance to 2024 adjusted guidance follows: (millions of dollars, except per share amounts) Reported Certain significant items and acquisition-related costs (d) Purchase accounting Adjusted (b) Cost of sales as a percentage of revenue ~ 29.6% ~ (0.1%) ~ 29.5% SG&A expenses $2,191 to $2,241 ~ $(21) $2,170 to $2,220 R&D expenses $666 to $676 ~ $(1) $665 to $675 Interest expense and other (income)/deductions ~ $240 ~ $30 ~ $270 Effective tax rate 20.0% to 21.0% 20.0% to 21.0% Diluted EPS $5.34 to $5.44 ~ $0.16 ~ $0.24 $5.74 to $5.84 Net income attributable to Zoetis $2,468 to $2,513 $70 - $75 ~ $112 $2,650 to $2,700 (a) Operational growth (a non-GAAP financial measure) excludes the impact of foreign exchange. (b) Adjusted net income and its components and adjusted diluted EPS are defined as reported U.S. GAAP net income and its components and reported diluted EPS excluding purchase accounting adjustments, acquisition-related costs and certain significant items. Adjusted cost of sales, adjusted SG&A expenses, adjusted R&D expenses, and adjusted interest expense and other (income)/deductions-net are income statement line items prepared on the same basis, and, therefore, components of the overall adjusted income measure. Despite the importance of these measures to management in goal setting and performance measurement, adjusted net income and its components and adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, adjusted net income and its components and adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Adjusted net income and its components and adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance. Adjusted net income and its components and adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. (c) We do not provide a reconciliation of forward-looking non-GAAP adjusted net income operational growth to the most directly comparable U.S. GAAP reported financial measure because we are unable to calculate with reasonable certainty the foreign exchange impact of unusual gains and losses, acquisition-related expenses, potential future asset impairments and other certain significant items, without unreasonable effort. The foreign exchange impacts of these items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP reported results for the guidance period. (d) Primarily includes certain nonrecurring costs related to acquisitions and other charges. ZOETIS INC. CONSOLIDATED REVENUE BY SEGMENT (a) AND SPECIES (UNAUDITED) (millions of dollars) Three Months Ended December 31, % Change 2023 2022 Total Foreign Exchange Operational (b) Revenue: Companion Animal $ 1,448 $ 1,303 1 % 1 % 10 % Livestock 745 710 5 % (1 )% 6 % Contract Manufacturing & Human Health 20 27 (26 )% 1 % (27 )% Total Revenue $ 2,213 $ 2,040 8 % — % 8 % U.S. Companion Animal $ 941 $ 853 10 % — % 10 % Livestock 270 259 4 % — % 4 % Total U.S. Revenue $ 1,211 $ 1,112 9 % — % 9 % International Companion Animal $ 507 $ 450 13 % 3 % 10 % Livestock 475 451 5 % (2 )% 7 % Total International Revenue $ 982 $ 901 9 % 1 % 8 % Companion Animal: Dogs and Cats $ 1,360 $ 1,224 11 % 1 % 10 % Horses 88 79 11 % — % 11 % Total Companion Animal Revenue $ 1,448 $ 1,303 11 % 1 % 10 % Livestock: Cattle $ 401 $ 377 6 % (1 )% 7 % Swine 139 138 1 % 1 % — % Poultry 127 115 10 % (3 )% 13 % Fish 62 61 2 % (3 )% 5 % Sheep and other 16 19 (16 )% 1 % (17 )% Total Livestock Revenue $ 745 $ 710 5 % (1 )% 6 % (a) For a description of each segment, see Zoetis' most recent Annual Report on Form 10-K. (b) Operational revenue growth (a non-GAAP financial measure) is defined as revenue growth excluding the impact of foreign exchange. ZOETIS INC. CONSOLIDATED REVENUE BY SEGMENT (a) AND SPECIES (UNAUDITED) (millions of dollars) Twelve Months Ended December 31, % Change 2023 2022 Total Foreign Exchange Operational (b) Revenue: Companion Animal $ 5,576 $ 5,203 7 % (1 )% 8 % Livestock 2,890 2,791 4 % (2 )% 6 % Contract Manufacturing & Human Health 78 86 (9 )% 1 % (10 )% Total Revenue $ 8,544 $ 8,080 6 % (1 )% 7 % U.S. Companion Animal $ 3,529 $ 3,341 6 % — % 6 % Livestock 1,026 972 6 % — % 6 % Total U.S. Revenue $ 4,555 $ 4,313 6 % — % 6 % International Companion Animal $ 2,047 $ 1,862 10 % (2 )% 12 % Livestock 1,864 1,819 2 % (5 )% 7 % Total International Revenue $ 3,911 $ 3,681 6 % (3 )% 9 % Companion Animal: Dogs and Cats $ 5,291 $ 4,939 7 % (1 )% 8 % Horses 285 264 8 % (1 )% 9 % Total Companion Animal Revenue $ 5,576 $ 5,203 7 % (1 )% 8 % Livestock: Cattle $ 1,503 $ 1,440 4 % (3 )% 7 % Swine 543 565 (4 )% (2 )% (2 )% Poultry 524 476 10 % (3 )% 13 % Fish 220 212 4 % (4 )% 8 % Sheep and other 100 98 2 % (6 )% 8 % Total Livestock Revenue $ 2,890 $ 2,791 4 % (2 )% 6 % (a) For a description of each segment, see Zoetis' most recent Annual Report on Form 10-K. (b) Operational revenue growth (a non-GAAP financial measure) is defined as revenue growth excluding the impact of foreign exchange. ZOETIS INC. CONSOLIDATED REVENUE BY KEY INTERNATIONAL MARKETS (UNAUDITED) (millions of dollars) Three Months Ended December 31, % Change 2023 2022 Total Foreign Exchange Operational (a) Total International $ 982.1 $ 901.3 9 % 1 % 8 % Australia 75.0 64.2 17 % (2 )% 19 % Brazil 117.2 96.2 22 % 7 % 15 % Canada 71.1 65.2 9 % (2 )% 11 % Chile 31.4 34.8 (10 )% 1 % (11 )% China 64.7 91.4 (29 )% (1 )% (28 )% France 40.5 35.1 15 % 8 % 7 % Germany 54.1 44.0 23 % 8 % 15 % Italy 33.9 25.6 32 % 9 % 23 % Japan 38.0 36.1 5 % (4 )% 9 % Mexico 43.3 35.6 22 % 14 % 8 % Spain 27.3 21.3 28 % 9 % 19 % United Kingdom 67.9 60.3 13 % 9 % 4 % Other Developed 138.3 114.6 21 % 4 % 17 % Other Emerging 179.4 176.9 1 % (13 )% 14 % Twelve Months Ended December 31, % Change 2023 2022 Total Foreign Exchange Operational (a) Total International $ 3,911.2 $ 3,680.8 6 % (3 )% 9 % Australia 322.7 288.7 12 % (5 )% 17 % Brazil 392.7 329.5 19 % 4 % 15 % Canada 254.6 237.5 7 % (5 )% 12 % Chile 140.2 141.1 (1 )% 1 % (2 )% China 320.0 382.4 (16 )% (5 )% (11 )% France 142.4 126.1 13 % 2 % 11 % Germany 202.4 176.3 15 % 3 % 12 % Italy 120.8 111.2 9 % 3 % 6 % Japan 157.9 173.1 (9 )% (8 )% (1 )% Mexico 162.4 136.2 19 % 13 % 6 % Spain 121.6 117.8 3 % 1 % 2 % United Kingdom 277.0 234.5 18 % (1 )% 19 % Other Developed 512.2 468.4 9 % (2 )% 11 % Other Emerging 784.3 758.0 3 % (13 )% 16 % (a) Operational revenue growth (a non-GAAP financial measure) is defined as revenue growth excluding the impact of foreign exchange. ZOETIS INC. SEGMENT (a) EARNINGS (UNAUDITED) (millions of dollars) Three Months Ended December 31, % Change 2023 2022 Total Foreign Exchange Operational (b) U.S.: Revenue $ 1,211 $ 1,112 9 % — % 9 % Cost of sales 255 216 18 % — % 18 % Gross profit 956 896 7 % — % 7 % Gross margin 78.9 % 80.6 % Operating expenses 184 187 (2 )% — % (2 )% Other (income)/deductions-net 6 (12 ) * * * U.S. Earnings $ 766 $ 721 6 % — % 6 % International: Revenue $ 982 $ 901 9 % 1 % 8 % Cost of sales 322 274 18 % 1 % 17 % Gross profit 660 627 5 % — % 5 % Gross margin 67.2 % 69.6 % Operating expenses 165 155 6 % 1 % 5 % Other (income)/deductions-net 1 2 * * * International Earnings $ 494 $ 470 5 % — % 5 % Total Reportable Segments $ 1,260 $ 1,191 6 % — % 6 % Other business activities (c) (142 ) (109 ) 30 % Reconciling Items: Corporate (d) (320 ) (302 ) 6 % Purchase accounting adjustments (e) (35 ) (40 ) (13 )% Acquisition-related costs (f) (1 ) (1 ) — % Certain significant items (g) (12 ) (46 ) (74 )% Other unallocated (h) (100 ) (101 ) (1 )% Total Earnings (i) $ 650 $ 592 10 % (a) For a description of each segment, see Zoetis' most recent Annual Report on Form 10-K. (b) Operational growth (a non-GAAP financial measure) is defined as growth excluding the impact of foreign exchange. (c) Other business activities reflect the research and development costs managed by our research and development organization, as well as our contract manufacturing business and human health business. (d) Corporate includes, among other things, certain costs associated with information technology, administration expenses, interest income and expense, certain compensation costs and other costs not charged to our operating segments. (e) Purchase accounting adjustments include certain charges related to the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment not charged to our operating segments. (f) Acquisition-related costs include costs associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs. (g) Certain significant items includes substantive, unusual items that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such items primarily include certain asset impairment charges, restructuring charges and implementation costs associated with cost-reduction/productivity initiatives that are not associated with an acquisition and the impact of divestiture-related gains and losses. (h) Includes overhead expenses associated with our global manufacturing and supply operations not directly attributable to an operating segment, as well as certain procurement costs. (i) Defined as income before provision for taxes on income. * Calculation not meaningful. ZOETIS INC. SEGMENT (a) EARNINGS (UNAUDITED) (millions of dollars) Twelve Months Ended December 31, % Change 2023 2022 Total Foreign Exchange Operational (b) U.S.: Revenue $ 4,555 $ 4,313 6 % — % 6 % Cost of sales 900 803 12 % — % 12 % Gross profit 3,655 3,510 4 % — % 4 % Gross margin 80.2 % 81.4 % Operating expenses 786 765 3 % — % 3 % Other (income)/deductions-net 6 (18 ) * * * U.S. Earnings $ 2,863 $ 2,763 4 % — % 4 % International: Revenue $ 3,911 $ 3,681 6 % (3 )% 9 % Cost of sales 1,234 1,083 14 % (5 )% 19 % Gross profit 2,677 2,598 3 % (2 )% 5 % Gross margin 68.4 % 70.6 % Operating expenses 638 611 4 % (4 )% 8 % Other (income)/deductions-net 2 (3 ) * * * International Earnings $ 2,037 $ 1,990 2 % (2 )% 4 % Total Reportable Segments $ 4,900 $ 4,753 3 % (1 )% 4 % Other business activities (c) (496 ) (424 ) 17 % Reconciling Items: Corporate (d) (1,042 ) (1,073 ) (3 )% Purchase accounting adjustments (e) (159 ) (160 ) (1 )% Acquisition-related costs (f) (9 ) (5 ) 80 % Certain significant items (g) 33 (56 ) * Other unallocated (h) (291 ) (379 ) (23 )% Total Earnings (i) $ 2,936 $ 2,656 11 % (a) For a description of each segment, see Zoetis' most recent Annual Report on Form 10-K. (b) Operational growth (a non-GAAP financial measure) is defined as growth excluding the impact of foreign exchange. (c) Other business activities reflect the research and development costs managed by our research and development organization, as well as our contract manufacturing business and human health business. (d) Corporate includes, among other things, certain costs associated with information technology, administration expenses, interest income and expense, certain compensation costs and other costs not charged to our operating segments. (e) Purchase accounting adjustments include certain charges related to the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment not charged to our operating segments. (f) Acquisition-related costs include costs associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs. (g) Certain significant items includes substantive, unusual items that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such items primarily include certain asset impairment charges, restructuring charges and implementation costs associated with cost-reduction/productivity initiatives that are not associated with an acquisition and the impact of divestiture-related gains and losses. (h) Includes overhead expenses associated with our global manufacturing and supply operations not directly attributable to an operating segment, as well as certain procurement costs. (i) Defined as income before provision for taxes on income. * Calculation not meaningful.

RAHWAY, N.J.--( BUSINESS WIRE )--Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2023. “ 2023 was another very strong year for Merck. I am extremely pleased by the progress we’ve made to develop and deliver transformative therapies and vaccines that will help save and improve lives around the world. We reached more than 500 million people with our medicines last year alone, over half of which were donations, including through our program to treat river blindness,” said Robert M. Davis, chairman and chief executive officer, Merck. “ We also made investments of approximately $30 billion in research and development in our ongoing effort to discover, develop and collaborate to propel the next generation of impactful innovations. As we move forward, I’m confident that our strong momentum will continue, underpinned by the unwavering dedication of our talented global team.” Financial Summary $ in millions, except EPS amounts Fourth Quarter Year Ended 2023 2022 Change Change Ex-Exchange Dec. 31, 2023 Dec. 31, 2022 Change Change Ex-Exchange Sales $14,630 $13,830 6% 7% $60,115 $59,283 1% 4% GAAP net (loss) income 1 (1,226) 3,017 N/M N/M 365 14,519 -97% -95% Non-GAAP net income that excludes certain items 1,2* 66 4,129 -98% N/M 3,837 19,005 -80% -75% GAAP EPS (0.48) 1.18 N/M N/M 0.14 5.71 -98% -95% Non-GAAP EPS that excludes certain items 2* 0.03 1.62 -98% N/M 1.51 7.48 -80% -75% *Refer to table on page 9. N/M - Not meaningful Generally Accepted Accounting Principles (GAAP) loss/earnings per share (EPS) assuming dilution was a loss per share of $0.48 for the fourth quarter and EPS of $0.14 for the full year of 2023. Non-GAAP EPS was $0.03 for the fourth quarter and $1.51 for the full year of 2023. GAAP loss per share and non-GAAP EPS in the fourth quarter of 2023 include a charge of $1.69 per share related to the collaboration with Daiichi Sankyo. GAAP and non-GAAP EPS for the full years of 2023 and 2022 include charges of $6.21 and $0.22 per share, respectively, related to certain collaborations, licensing agreements and asset acquisitions. Non-GAAP EPS excludes acquisition- and divestiture-related costs, including pretax intangible asset impairment research and development (R&D) charges of $779 million in the fourth quarter and full year of 2023 related to gefapixant, and $780 million and $1.7 billion in the fourth quarter and full year of 2022, respectively, primarily related to nemtabrutinib. Non-GAAP EPS also excludes restructuring costs, including costs for the recently approved 2024 Restructuring Program, as well as income and losses from investments in equity securities. Fourth-Quarter Sales Performance The following table reflects sales of the company’s top products and significant performance drivers. Fourth Quarter $ in millions 2023 2022 Change Change Ex-Exchange Commentary Total Sales $14,630 $13,830 6% 7% Pharmaceutical 13,141 12,180 8% 8% Increase driven by growth in oncology, vaccines and hospital acute care, partially offset by a decline in virology, due to LAGEVRIO, and diabetes. Excluding LAGEVRIO and impact of foreign exchange, growth of 14%. KEYTRUDA 6,608 5,450 21% 22% Growth driven by increased global uptake in earlier-stage indications, including triple-negative breast cancer and renal cell carcinoma (RCC), and continued strong global demand from metastatic indications. GARDASIL/GARDASIL 9 1,871 1,470 27% 27% Growth due to strong global demand, particularly in China, and public-sector buying patterns in the U.S. JANUVIA/JANUMET 787 913 -14% -13% Decline primarily due to generic competition in several international markets, particularly in Europe, and lower demand in the U.S. PROQUAD, M-M-R II and VARIVAX 545 526 4% 3% Growth largely due to higher pricing in the U.S. BRIDION 429 441 -3% -3% Decline primarily due to generic competition in certain ex-U.S. markets, particularly in Europe, partially offset by higher demand in the U.S. Lynparza* 315 292 8% 8% Growth driven primarily by higher pricing in the U.S. Lenvima* 226 216 5% 5% Growth primarily due to higher demand in the U.S., partially offset by timing of shipments in China. LAGEVRIO 193 825 -77% -76% Decline due to nonrecurrence of sales in the U.K. and lower demand in Japan and Australia. ROTATEQ 185 139 34% 33% Growth primarily due to public-sector buying patterns in the U.S. and timing of shipments in China. VAXNEUVANCE 176 138 28% 26% Growth largely driven by launches in Europe and continued uptake for the pediatric indication in the U.S. Prior-year quarter benefited from inventory stocking in the U.S. in preparation for pediatric launch. Animal Health 1,278 1,230 4% 4% Growth primarily driven by higher demand for Companion Animal products. Livestock 808 814 -1% 0% Decline primarily due to timing of shipments for ruminant products, largely offset by higher pricing across the product portfolio and higher demand for swine products. Companion Animal 470 416 13% 12% Growth primarily due to higher demand and timing of shipments for BRAVECTO line of products, as well as higher pricing. Sales of BRAVECTO were $197 million and $168 million in the current and prior-year quarters, respectively, which represented growth of 18%, or 19% excluding the impact of foreign exchange. Other Revenues** 211 420 -50% -1% Decline primarily due to impact of revenue hedging activities. *Alliance revenue for this product represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. **Other revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities. Full-Year Revenue Performance The following table reflects sales of the company’s top pharmaceutical products, as well as sales of Animal Health products. Year Ended $ in millions Dec. 31, 2023 Dec. 31, 2022 Change Change Ex-Exchange Total Sales $60,115 $59,283 1% 4% Pharmaceutical 53,583 52,005 3% 5% KEYTRUDA 25,011 20,937 19% 21% GARDASIL/GARDASIL 9 8,886 6,897 29% 33% JANUVIA/JANUMET 3,366 4,513 -25% -23% PROQUAD, M-M-R II and VARIVAX 2,368 2,241 6% 6% BRIDION 1,842 1,685 9% 11% LAGEVRIO 1,428 5,684 -75% -74% Lynparza* 1,199 1,116 7% 9% Lenvima* 960 876 10% 11% ROTATEQ 769 783 -2% -1% VAXNEUVANCE 665 170 N/M N/M Animal Health 5,625 5,550 1% 3% Livestock 3,337 3,300 1% 4% Companion Animal 2,288 2,250 2% 3% Other Revenues** 907 1,728 -48% -15% *Alliance revenue for this product represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. **Other revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities. N/M - Not meaningful Full-year 2023 pharmaceutical sales grew 3% to $53.6 billion. Pharmaceutical sales growth was primarily driven by higher sales in oncology, particularly KEYTRUDA, higher sales of vaccines, reflecting strong growth of combined sales of GARDASIL/GARDASIL 9 and VAXNEUVANCE, as well as growth in hospital acute care products, including PREVYMIS and BRIDION. Pharmaceutical sales growth in 2023 was partially offset by lower sales of the COVID-19 medication LAGEVRIO, as well as lower sales of JANUVIA and JANUMET, primarily reflecting generic competition in many ex-U.S. markets and lower demand in the U.S., and lower sales of PNEUMOVAX 23 as the market continues to shift toward newer adult pneumococcal conjugate vaccines. Pharmaceutical sales growth for the full year of 2023 was 14% excluding LAGEVRIO and the unfavorable impact of foreign exchange. Full-year 2023 Animal Health sales grew 1% to $5.6 billion. Excluding the unfavorable impact of foreign exchange, Animal Health sales grew 3%, primarily due to higher pricing. Full-year sales growth was also driven by higher demand for livestock products, led by poultry and swine products, partially offset by lower demand for ruminant products. Sales of BRAVECTO were $1.1 billion in 2023, which represented growth of 4%, or 5% excluding the impact of foreign exchange, primarily reflecting higher pricing. Fourth-Quarter and Full-Year Expense, EPS and Related Information The table below presents selected expense information. $ in millions GAAP Acquisition- and Divestiture- Related Costs 3 Restructuring Costs (Income) Loss From Investments in Equity Securities Non- GAAP 2 Fourth Quarter 2023 Cost of sales $3,911 $454 $117 $- $3,340 Selling, general and administrative 2,804 24 29 - 2,751 Research and development 9,628 790 - - 8,838 Restructuring costs 255 - 255 - - Other (income) expense, net 78 (35) - (61) 174 Fourth Quarter 2022 Cost of sales $3,881 $482 $38 $- $3,361 Selling, general and administrative 2,687 39 20 - 2,628 Research and development 3,775 740 - - 3,035 Restructuring costs 49 - 49 - - Other (income) expense, net (75) (69) - 80 (86) $ in millions GAAP Acquisition- and Divestiture- Related Costs 3 Restructuring Costs (Income) Loss From Investments in Equity Securities Certain Other Items Non- GAAP 2 Year Ended Dec. 31, 2023 Cost of sales $16,126 $2,018 $211 $- $- $13,897 Selling, general and administrative 10,504 86 122 - - 10,296 Research and development 30,531 819 1 - - 29,711 Restructuring costs 599 - 599 - - - Other (income) expense, net 466 (47) - (279) 573 219 Year Ended Dec. 31, 2022 Cost of sales $17,411 $2,059 $205 $- $- $15,147 Selling, general and administrative 10,042 176 94 - - 9,772 Research and development 13,548 1,676 30 - - 11,842 Restructuring costs 337 - 337 - - - Other (income) expense, net 1,501 (207) - 1,348 - 360 GAAP Expense, EPS and Related Information Gross margin was 73.3% for the fourth quarter of 2023 compared with 71.9% for the fourth quarter of 2022. The increase was primarily due to the favorable impacts of lower LAGEVRIO sales, which have a low gross margin, lower manufacturing facilities costs and product mix, partially offset by the unfavorable impacts of foreign exchange and higher restructuring costs. Gross margin was 73.2% for the full year of 2023 compared with 70.6% for the full year of 2022. The increase was primarily due to the favorable impacts of lower LAGEVRIO sales, product mix, lower manufacturing facilities costs, and lower revenue from third-party manufacturing arrangements, partially offset by the unfavorable impact of foreign exchange. Selling, general and administrative (SG&A) expenses were $2.8 billion in the fourth quarter of 2023, an increase of 4% compared with the fourth quarter of 2022. The increase was primarily due to higher administrative costs, including higher compensation and benefit costs, partially offset by lower promotional spending. Full-year 2023 SG&A expenses were $10.5 billion, an increase of 5% compared with the full year of 2022. The increase was primarily due to higher administrative costs, including higher compensation and benefit costs, and higher promotional spending, partially offset by the favorable impact of foreign exchange and lower acquisition- and divestiture-related costs. R&D expenses were $9.6 billion in the fourth quarter of 2023 compared with $3.8 billion in the fourth quarter of 2022. R&D expenses were $30.5 billion for the full year of 2023 compared with $13.5 billion for the full year of 2022. The increase in the fourth quarter and full year of 2023 reflects a $5.5 billion charge for the collaboration with Daiichi Sankyo, and higher development costs due to spending on clinical programs, including newly acquired programs, as well as higher compensation and benefit costs (reflecting in part increased headcount). The increase in R&D expenses for the full year was also due to charges of $11.4 billion in the aggregate for the acquisitions of Prometheus Biosciences, Inc. (Prometheus) and Imago BioSciences, Inc. (Imago). The increase in R&D expenses for the full year was partially offset by lower intangible asset impairment charges in 2023 and charges of $690 million in the aggregate in 2022 for collaboration and licensing agreements with Moderna, Inc. (Moderna), Orna Therapeutics (Orna) and Orion Corporation (Orion). Other (income) expense, net, was $78 million of expense in the fourth quarter of 2023 compared with $75 million of income in the fourth quarter of 2022, primarily due to higher exchange losses and higher net interest expense, partially offset by net gains from investments in equity securities for the fourth quarter of 2023 compared with net losses from investments in equity securities for the fourth quarter of 2022, and lower pension settlement costs. Other (income) expense, net, was $466 million of expense in the full year of 2023 compared with $1.5 billion of expense in the full year of 2022, primarily due to net gains from investments in equity securities in 2023 compared with net losses from investments in equity securities in 2022, and lower pension settlement costs, partially offset by a $572.5 million charge in 2023 related to settlements with certain plaintiffs in the Zetia antitrust litigation. The effective tax rate was 40.1% for the fourth quarter of 2023 compared with 14.1% in the fourth quarter of 2022. The effective tax rate for the fourth quarter of 2023 includes a 29.2 percentage point impact resulting from the charge for the Daiichi Sankyo collaboration. The effective tax rate was 80.0% for the full year of 2023 compared with 11.7% for the full year of 2022. The full-year 2023 effective tax rate reflects an aggregate 65.6 percentage point unfavorable impact, resulting from charges for asset acquisitions (for which no tax benefits were recognized) as well as the charge for the Daiichi Sankyo collaboration. GAAP loss per share was $0.48 for the fourth quarter of 2023 compared with EPS of $1.18 for the fourth quarter of 2022, primarily driven by the charge in 2023 related to the collaboration with Daiichi Sankyo, the unfavorable impact of foreign exchange and higher restructuring costs, partially offset by a beneficial impact from the tax rate and operational strength in the business. GAAP EPS was $0.14 for the full year of 2023 compared with EPS of $5.71 for the full year of 2022. The EPS decline in 2023 was primarily due to higher charges for certain business development transactions, the unfavorable impact of foreign exchange and the tax rate, as well as a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation, partially offset by the beneficial impacts of operational strength in the business, better performance from equity investments and lower intangible asset impairment charges. Non-GAAP Expense, EPS and Related Information Non-GAAP gross margin was 77.2% for the fourth quarter of 2023 compared with 75.7% for the fourth quarter of 2022. Non-GAAP gross margin was 76.9% for the full year of 2023 compared with 74.4% for the full year of 2022. The non-GAAP gross margin improvement in the fourth quarter and full year of 2023 was primarily due to the favorable impacts of lower LAGEVRIO sales, which have a low gross margin, product mix, and lower manufacturing facilities costs. The increase in non-GAAP gross margin for the full year was also due to lower revenue from third-party manufacturing arrangements. The non-GAAP gross margin improvement in the fourth quarter and full year of 2023 was partially offset by the unfavorable impact of foreign exchange. Non-GAAP SG&A expenses were $2.8 billion for the fourth quarter of 2023 compared with $2.6 billion for the fourth quarter of 2022. The increase was primarily due to higher administrative costs, including higher compensation and benefit costs, partially offset by lower promotional spending. Full-year 2023 non-GAAP SG&A expenses were $10.3 billion, an increase of 5% compared with the full year of 2022. The increase was primarily due to higher administrative costs, including higher compensation and benefit costs, and higher promotional spending, partially offset by the favorable impact of foreign exchange. Non-GAAP R&D expenses were $8.8 billion in the fourth quarter of 2023 compared with $3.0 billion in the fourth quarter of 2022. Non-GAAP R&D expenses were $29.7 billion for the full year of 2023 compared with $11.8 billion for the full year of 2022. The increase in the fourth quarter and full year of 2023 reflects a $5.5 billion charge for the collaboration with Daiichi Sankyo, and higher development costs due to spending on clinical programs, including newly acquired programs, as well as higher compensation and benefit costs (reflecting in part increased headcount). The increase in non-GAAP R&D expenses for the full year was also due to charges of $11.4 billion in the aggregate for the acquisitions of Prometheus and Imago. The increase in R&D expenses for the full year was partially offset by charges of $690 million in the aggregate in 2022 for collaboration and licensing agreements with Moderna, Orna and Orion. Non-GAAP other (income) expense, net, was $174 million of expense in the fourth quarter of 2023 compared with $86 million of income in the fourth quarter of 2022, primarily due to higher exchange losses and higher net interest expense, partially offset by lower pension settlement costs. Non-GAAP other (income) expense, net, was $219 million of expense in the full year of 2023 compared with $360 million of expense in the full year of 2022, primarily due to lower pension settlement costs. The non-GAAP effective tax rate was 114.2% for the fourth quarter of 2023 compared with 15.6% in the fourth quarter of 2022. The non-GAAP effective tax rate for the fourth quarter of 2023 includes a 101.1 percentage point unfavorable impact resulting from the charge for the Daiichi Sankyo collaboration. The non-GAAP effective tax rate was 35.8% for the full year of 2023 compared with 14.2% for the full year of 2022. The full-year 2023 non-GAAP effective tax rate reflects an aggregate 21.2 percentage point unfavorable impact, resulting from charges for asset acquisitions (for which no benefits were recognized) as well as the charge for the Daiichi Sankyo collaboration. Non-GAAP EPS was $0.03 for the fourth quarter of 2023 compared with $1.62 for the fourth quarter of 2022. The non-GAAP EPS decline in the fourth quarter was primarily due to the charge in 2023 related to the collaboration with Daiichi Sankyo and the unfavorable impact of foreign exchange, partially offset by a beneficial impact from the tax rate and operational strength in the business. Non-GAAP EPS was $1.51 for the full year of 2023 compared with $7.48 for the full year of 2022. The non-GAAP EPS decline for the full year was primarily due to higher charges for certain business development transactions, the unfavorable impact of foreign exchange and the tax rate, partially offset by operational strength in the business. A reconciliation of GAAP to non-GAAP net (loss) income and (loss) earnings per share is provided in the table that follows. Fourth Quarter Year Ended $ in millions, except EPS amounts 2023 2022 Dec. 31, 2023 Dec. 31, 2022 EPS GAAP EPS $(0.48) $1.18 $0.14 $5.71 Difference 0.51 0.44 1.37 1.77 Non-GAAP EPS that excludes items listed below 2 $0.03 $1.62 $1.51 $7.48 Net (Loss) Income GAAP net (loss) income 1 $(1,226) $3,017 $365 $14,519 Difference 1,292 1,112 3,472 4,486 Non-GAAP net income that excludes items listed below 1,2 $66 $4,129 $3,837 $19,005 Excluded Items: Acquisition- and divestiture-related costs 3 $1,233 $1,192 $2,876 $3,704 Restructuring costs 401 107 933 666 (Income) loss from investments in equity securities (61) 80 (279) 1,348 Charge for Zetia antitrust litigation settlements - - 573 - Increase to net loss/decrease to net income before taxes 1,573 1,379 4,103 5,718 Estimated income tax (benefit) expense (281) (267) (631) (1,232) Increase to net loss/decrease to net income $1,292 $1,112 $3,472 $4,486 2024 Restructuring Program Merck recently approved a new restructuring program (2024 Restructuring Program) intended to continue the optimization of the company’s Human Health global manufacturing network as the future pipeline shifts to new modalities, and also to optimize the Animal Health global manufacturing network to improve supply reliability and increase efficiency. The company recorded charges in its GAAP results of $190 million related to the 2024 Restructuring Program for the fourth quarter and full year of 2023. Pipeline and Portfolio Highlights In the fourth quarter, Merck continued to make significant progress advancing its broad portfolio and pipeline across key therapeutic areas, representing continued momentum toward addressing patient needs. In oncology, Merck received multiple U.S. Food and Drug Administration (FDA) approvals, including KEYTRUDA plus Padcev for the first-line treatment of adult patients with locally advanced or metastatic urothelial cancer and WELIREG for the treatment of certain patients with previously treated advanced RCC, among other approvals. The FDA also accepted and granted Priority Review to Merck and Daiichi Sankyo’s Biologics License Application (BLA) for patritumab deruxtecan for the treatment of certain patients with previously treated locally advanced or metastatic EGFR-mutated non-small cell lung cancer (NSCLC). The FDA set a Prescription Drug User Fee Act (PDUFA), or target action, date of June 26, 2024. In addition, Merck showed meaningful progress in its robust oncology pipeline, initiating Phase 3 trials for four investigational medicines, including bomedemstat (LSD1 inhibitor), nemtabrutinib (BTK inhibitor), MK-2870 (anti-TROP2 antibody-drug conjugate) and MK-5684 (CYP11A1 inhibitor). In vaccines, Merck received Priority Review from the FDA for a BLA for V116, the company’s investigational, 21-valent pneumococcal conjugate vaccine specifically designed to protect adults, based on results from multiple Phase 3 trials. The FDA set a PDUFA date of June 17, 2024. If approved, V116 would be the first pneumococcal conjugate vaccine to include serotypes responsible for approximately 83 percent of adult invasive pneumococcal disease in individuals 65 and older, according to U.S. Centers for Disease Control and Prevention data from 2018-2021. In hospital acute care, the European Commission (EC) approved PREVYMIS for prevention of cytomegalovirus (CMV) disease in high-risk adult kidney transplant recipients and extended 200-day dosing in adult hematopoietic stem cell transplant (HSCT) recipients who are at high risk for late CMV infection and disease. Merck continued to augment its pipeline through business development, and in January 2024, entered into a definitive agreement to acquire Harpoon Therapeutics, Inc. (Harpoon), for an approximate total equity value of $680 million, further diversifying its oncology pipeline. Notable recent news releases on Merck’s pipeline and portfolio are provided in the table that follows. Oncology FDA Approved Expanded Indication for KEYTRUDA Plus Padcev as First-Line Treatment for Adult Patients With Locally Advanced or Metastatic Urothelial Cancer, Based on Results From Phase 3 KEYNOTE-A39 Trial (Read Announcement) FDA Approved Merck’s WELIREG as Treatment for Patients With Advanced RCC Following a PD-1 or PD-L1 Inhibitor and a VEGF-TKI, Based on Results From LITESPARK-005 Trial (Read Announcement) FDA Approved Merck’s KEYTRUDA Plus Chemoradiotherapy as Treatment for Patients With FIGO 2014 Stage III-IVA Cervical Cancer, Based on Results From Phase 3 KEYNOTE-A18 Trial (Read Announcement) FDA Approved Merck’s KEYTRUDA Plus Chemotherapy as First-Line Treatment for Locally Advanced Unresectable or Metastatic HER2-Negative Gastric or Gastroesophageal Junction (GEJ) Adenocarcinoma, Based on Results From Phase 3 KEYNOTE-859 Trial (Read Announcement) FDA Approved Merck’s KEYTRUDA Plus Gemcitabine and Cisplatin as Treatment for Patients With Locally Advanced Unresectable or Metastatic Biliary Tract Cancer, Based on Results From Phase 3 KEYNOTE-966 Trial (Read Announcement) EC Approved KEYTRUDA Plus Chemotherapy for New First-Line Indications in Advanced HER2-Negative Gastric or GEJ Adenocarcinoma in Tumors Expressing PD-L1 (CPS ≥1) and Advanced Biliary Tract Cancer, Based on Results From Phase 3 KEYNOTE-859 and KEYNOTE-966 Trials (Read Announcement) FDA Granted Priority Review to Merck and Daiichi Sankyo’s BLA for Patritumab Deruxtecan for the Treatment of Certain Patients With Previously Treated Locally Advanced or Metastatic EGFR-Mutated NSCLC, Based on Results From Phase 2 HERTHENA-Lung01 Trial; FDA Set PDUFA Date of June 26, 2024 (Read announcement) Merck Announced Phase 3 Trial Initiations for Bomedemstat, Nemtabrutinib, MK-2870 and MK-5684, Four Investigational Candidates From Promising Hematology and Oncology Pipeline (Read announcement) Merck and Moderna Initiated INTerpath-002, a Phase 3 Study Evaluating V940 (mRNA-4157) in Combination With KEYTRUDA for Adjuvant Treatment of Patients With Certain Types of Resected NSCLC (Read Announcement) KEYTRUDA Reduced the Risk of Death by 38% Versus Placebo as Adjuvant Therapy for Patients With RCC at an Increased Risk of Recurrence Following Nephrectomy, Based on Results From Phase 3 KEYNOTE-564 Trial (Read Announcement) KEYTRUDA Significantly Improved Disease-Free Survival as Adjuvant Therapy Versus Observation in High-Risk Patients With Localized Muscle-Invasive and Locally Advanced Urothelial Carcinoma After Surgery, Based on Results From Phase 3 AMBASSADOR/KEYNOTE-123 Trial (Read Announcement) Moderna and Merck Announced V940 (mRNA-4157) in Combination With KEYTRUDA Demonstrated Continued Improvement in Recurrence-Free Survival and Distant Metastasis-Free Survival in Patients With High-Risk Stage III/IV Melanoma Following Complete Resection Versus KEYTRUDA at Three Years, Based on Results From Phase 2b Randomized KEYNOTE-942/mRNA-4157-P201 Study (Read Announcement) Vaccines FDA Granted Priority Review to Merck’s New BLA for V116, an Investigational, 21-valent Pneumococcal Conjugate Vaccine Specifically Designed to Protect Adults, Based on Results From Multiple Phase 3 Trials; FDA Set PDUFA Date of June 17, 2024 (Read Announcement) Merck’s V116, an Investigational, 21-valent Pneumococcal Conjugate Vaccine Specifically Designed to Protect Adults, Demonstrated Superior Immunogenicity for 10 of 11 Unique Serotypes Compared to PCV20 in Adults 50 Years of Age and Older, Based on Results From Phase 3 STRIDE-3 Trial (Read Announcement) Full-Year 2024 Financial Outlook The following table summarizes the company’s full-year financial outlook. Full Year 2024 Sales * $62.7 to $64.2 billion Non-GAAP gross margin 2 Approximately 80.5% Non-GAAP operating expenses 2** $25.1 to $26.1 billion Non-GAAP other (income) expense, net 2 Approximately $200 million expense Non-GAAP effective tax rate 2 14.5% to 15.5% Non-GAAP EPS 2*** $8.44 to $8.59 Share count (assuming dilution) Approximately 2.54 billion *The company does not have any non-GAAP adjustments to sales. **Includes approximately $650 million of R&D expense related to the recently announced Harpoon acquisition, which is expected to close in the first half of 2024. Outlook does not assume any additional significant potential business development transactions. ***Includes a one-time charge of approximately $0.26 per share related to the Harpoon acquisition. Merck has not provided a reconciliation of forward-looking non-GAAP gross margin, non-GAAP operating expenses, non-GAAP other (income) expense, net, non-GAAP effective tax rate and non-GAAP EPS to the most directly comparable GAAP measures, given it cannot predict with reasonable certainty the amounts necessary for such a reconciliation, including intangible asset impairment charges, legal settlements, and income and losses from investments in equity securities either owned directly or through ownership interests in investment funds, without unreasonable effort. These items are inherently difficult to forecast and could have a significant impact on the company’s future GAAP results. Merck anticipates full-year 2024 sales to be between $62.7 billion and $64.2 billion, including a negative impact of foreign exchange of approximately 2% at mid-January 2024 exchange rates. The negative impact is primarily due to the devaluation of the Argentine peso, which the company expects will largely be offset by inflation-related price increases, consistent with market practice. The outlook for operating expenses reflects incremental R&D spending expected to be incurred to advance the development of promising programs related to the acquisitions of Prometheus, Imago and Harpoon, as well as the collaborations with Daiichi Sankyo and Kelun-Biotech. Merck’s full-year non-GAAP effective income tax rate is expected to be between 14.5% and 15.5%. Merck expects full-year 2024 non-GAAP EPS to be between $8.44 and $8.59, including a negative impact of foreign exchange of approximately $0.25 per share. In 2023, non-GAAP EPS of $1.51 was negatively impacted by charges of $6.21 per share related to certain acquisitions and collaboration agreements. In early January 2024, Merck announced the acquisition of Harpoon, which is expected to close in the first half of 2024, and result in a non-tax deductible charge of approximately $650 million of R&D expense included in non-GAAP results. The impact of the transaction on expected full-year non-GAAP EPS is approximately $0.26 per share, which is included in the 2024 outlook. Consistent with past practice, the financial outlook does not assume additional significant potential business development transactions. Earnings Conference Call Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Thursday, Feb. 1, at 9 a.m. ET via this weblink . A replay of the webcast, along with the sales and earnings news release, supplemental financial disclosures, prepared remarks and slides highlighting the results, will be available at www.merck.com . All participants may join the call by dialing (800) 779-6561 (U.S. and Canada Toll-Free) or (773) 756-4619 and using the access code 5958465. About Merck At Merck, known as MSD outside of the United States and Canada, we are unified around our purpose: We use the power of leading-edge science to save and improve lives around the world. For more than 130 years, we have brought hope to humanity through the development of important medicines and vaccines. We aspire to be the premier research-intensive biopharmaceutical company in the world – and today, we are at the forefront of research to deliver innovative health solutions that advance the prevention and treatment of diseases in people and animals. We foster a diverse and inclusive global workforce and operate responsibly every day to enable a safe, sustainable and healthy future for all people and communities. For more information, visit www.merck.com and connect with us on X (formerly Twitter ) , Facebook , Instagram , YouTube and LinkedIn . Forward-Looking Statement of Merck & Co., Inc., Rahway, N.J., USA This news release of Merck & Co., Inc., Rahway, 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 candidates that the candidates 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 the global outbreak of novel coronavirus disease (COVID-19); 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 Annual Report on Form 10-K for the year ended December 31, 2022, and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site ( www.sec.gov ). Appendix Generic product names are provided below. Pharmaceutical BRIDION (sugammadex) GARDASIL ( Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant ) GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) JANUMET (sitagliptin and metformin HCl) JANUVIA (sitagliptin) KEYTRUDA (pembrolizumab) LAGEVRIO (molnupiravir) Lenvima (lenvatinib) Lynparza ( olaparib) M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live) PNEUMOVAX 23 (Pneumococcal Vaccine Polyvalent) PREVYMIS ( letermovir ) PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live) ROTATEQ (Rotavirus Vaccine, Live, Oral, Pentavalent) VARIVAX (Varicella Virus Vaccine Live) VAXNEUVANCE ( Pneumococcal 15-valent Conjugate Vaccine ) WELIREG ( belzutifan ) Animal Health BRAVECTO (fluralaner) ________________________________ 1 Net (loss) income attributable to Merck & Co., Inc. 2 Merck is providing certain 2023 and 2022 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results because management uses non-GAAP results to assess performance. 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 pre-tax income metric. 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 non-GAAP adjustments, see Table 2a attached to this release. 3 Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions of businesses, intangible asset impairment charges and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. R&D expenses include intangible asset impairment charges of $779 million in both the fourth quarter and full year of 2023 related to gefapixant and $780 million and $1.7 billion in the fourth quarter and full year of 2022, respectively, largely related to nemtabrutinib. Also includes integration, transaction and certain other costs associated with acquisitions and divestitures, as well as amortization of intangible assets related to collaborations and licensing arrangements. MERCK & CO., INC. CONSOLIDATED STATEMENT OF OPERATIONS - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 1 GAAP % Change GAAP % Change 4Q23 4Q22 Full Year 2023 Full Year 2022 Sales $ 14,630 $ 13,830 6 % $ 60,115 $ 59,283 1 % Costs, Expenses and Other Cost of sales 3,911 3,881 1 % 16,126 17,411 -7 % Selling, general and administrative 2,804 2,687 4 % 10,504 10,042 5 % Research and development 9,628 3,775 * 30,531 13,548 * Restructuring costs 255 49 * 599 337 78 % Other (income) expense, net 78 (75 ) * 466 1,501 -69 % (Loss) Income Before Taxes (2,046 ) 3,513 * 1,889 16,444 -89 % Income Tax (Benefit) Provision (821 ) 495 1,512 1,918 Net (Loss) Income (1,225 ) 3,018 * 377 14,526 -97 % Less: Net Income Attributable to Noncontrolling Interests 1 1 12 7 Net (Loss) Income Attributable to Merck & Co., Inc. $ (1,226 ) $ 3,017 * $ 365 $ 14,519 -97 % (Loss) Earnings per Common Share Assuming Dilution (1) $ (0.48 ) $ 1.18 * $ 0.14 $ 5.71 -98 % Average Shares Outstanding Assuming Dilution (1) 2,533 2,548 2,547 2,542 Tax Rate 40.1 % 14.1 % 80.0 % 11.7 % * 100% or greater (1) Because the company recorded a net loss in the fourth quarter of 2023, no potential dilutive common shares were used in the computation of loss per common share assuming dilution as the effect would have been anti-dilutive. MERCK & CO., INC. FOURTH QUARTER AND FULL YEAR 2023 GAAP TO NON-GAAP RECONCILIATION (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2a GAAP Acquisition and Divestiture-Related Costs (1) Restructuring Costs (2) (Income) Loss from Investments in Equity Securities Certain Other Items Adjustment Subtotal Non-GAAP Fourth Quarter Cost of sales $ 3,911 454 117 571 $ 3,340 Selling, general and administrative 2,804 24 29 53 2,751 Research and development 9,628 790 790 8,838 Restructuring costs 255 255 255 – Other (income) expense, net 78 (35 ) (61 ) (96 ) 174 Loss Before Taxes (2,046 ) (1,233 ) (401 ) 61 (1,573 ) (473 ) Income Tax Provision (Benefit) (821 ) (227 ) (4 ) (67 ) (4 ) 13 (4 ) (281 ) (540 ) Net (Loss) Income (1,225 ) (1,006 ) (334 ) 48 (1,292 ) 67 Net (Loss) Income Attributable to Merck & Co., Inc. (1,226 ) (1,006 ) (334 ) 48 (1,292 ) 66 (Loss) Earnings per Common Share Assuming Dilution (5) $ (0.48 ) (0.40 ) (0.13 ) 0.02 (0.51 ) $ 0.03 Tax Rate 40.1 % 114.2 % Full Year Cost of sales $ 16,126 2,018 211 2,229 $ 13,897 Selling, general and administrative 10,504 86 122 208 10,296 Research and development 30,531 819 1 820 29,711 Restructuring costs 599 599 599 – Other (income) expense, net 466 (47 ) (279 ) 573 (3 ) 247 219 Income Before Taxes 1,889 (2,876 ) (933 ) 279 (573 ) (4,103 ) 5,992 Income Tax Provision (Benefit) 1,512 (476 ) (4 ) (155 ) (4 ) 60 (4 ) (60 ) (4 ) (631 ) 2,143 Net Income 377 (2,400 ) (778 ) 219 (513 ) (3,472 ) 3,849 Net Income Attributable to Merck & Co., Inc. 365 (2,400 ) (778 ) 219 (513 ) (3,472 ) 3,837 Earnings per Common Share Assuming Dilution $ 0.14 (0.94 ) (0.31 ) 0.08 (0.20 ) (1.37 ) $ 1.51 Tax Rate 80.0 % 35.8 % Only the line items that are affected by non-GAAP adjustments are shown. Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing non-GAAP information enhances investors’ understanding of the company’s results because management uses non-GAAP measures to assess performance. 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. The non-GAAP information presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. (1) Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets. Amounts included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to acquisitions and divestitures. Amounts included in research and development expenses primarily reflect a $779 million in-process research and development (IPR&D) impairment charge related to gefapixant, which was obtained as part of the 2016 Afferent Pharmaceuticals acquisition, and expenses for the amortization of intangible assets. Amounts included in other (income) expense, net, primarily reflect royalty income related to the prior termination of the Sanofi-Pasteur MSD joint venture. Additionally, other (income) expense, net, for the full year includes a $37 million loss on the sale of a business. (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) Reflects a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation. (4) Represents the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. (5) Because the company recorded a net loss in the fourth quarter of 2023, no potential dilutive common shares were used in the computation of loss per common share assuming dilution as the effect would have been anti-dilutive. MERCK & CO., INC. FRANCHISE / KEY PRODUCT SALES (AMOUNTS IN MILLIONS) (UNAUDITED) Table 3 2023 2022 4Q Full Year 1Q 2Q 3Q 4Q Full Year 1Q 2Q 3Q 4Q Full Year Nom % Ex-Exch % Nom % Ex-Exch % TOTAL SALES (1) $14,487 $15,035 $15,962 $14,630 $60,115 $15,901 $14,593 $14,959 $13,830 $59,283 6 7 1 4 PHARMACEUTICAL 12,721 13,457 14,263 13,141 53,583 14,107 12,756 12,963 12,180 52,005 8 8 3 5 Oncology Keytruda 5,795 6,271 6,338 6,608 25,011 4,809 5,252 5,426 5,450 20,937 21 22 19 21 Alliance Revenue – Lynparza (2) 275 310 299 315 1,199 266 275 284 292 1,116 8 8 7 9 Alliance Revenue – Lenvima (2) 232 242 260 226 960 227 231 202 216 876 5 5 10 11 Welireg 42 50 54 72 218 18 27 38 40 123 79 78 77 77 Alliance Revenue – Reblozyl (3) 43 47 52 70 212 52 33 39 41 166 69 69 28 28 Vaccines (4) Gardasil / Gardasil 9 1,972 2,458 2,585 1,871 8,886 1,460 1,674 2,294 1,470 6,897 27 27 29 33 ProQuad / M-M-R II / Varivax 528 582 713 545 2,368 470 578 668 526 2,241 4 3 6 6 RotaTeq 297 131 156 185 769 216 173 256 139 783 34 33 -2 -1 Vaxneuvance 106 168 214 176 665 5 12 16 138 170 28 26 * * Pneumovax 23 96 92 140 85 412 173 153 131 145 602 -42 -43 -32 -31 Vaqta 40 42 69 29 180 36 35 64 39 173 -24 -25 4 4 Hospital Acute Care Bridion 487 502 424 429 1,842 395 426 423 441 1,685 -3 -3 9 11 Prevymis 129 143 157 175 605 94 103 114 118 428 49 49 41 43 Dificid 65 76 74 87 302 52 66 77 67 263 30 30 15 15 Zerbaxa 50 54 53 61 218 30 46 43 49 169 25 23 29 30 Noxafil 60 55 51 46 213 57 60 62 58 238 -21 -16 -11 -4 Primaxin 80 53 41 39 213 58 64 63 54 239 -28 -28 -11 -6 Cardiovascular Alliance Revenue - Adempas/Verquvo (5) 99 68 92 108 367 72 98 88 82 341 31 31 8 8 Adempas (6) 59 65 65 66 255 61 63 57 57 238 15 11 7 8 Virology Lagevrio 392 203 640 193 1,428 3,247 1,177 436 825 5,684 -77 -76 -75 -74 Isentress / Isentress HD 123 136 119 105 483 158 147 161 167 633 -37 -37 -24 -23 Neuroscience Belsomra 56 63 58 54 231 69 69 62 59 258 -8 -6 -11 -6 Immunology Simponi 180 180 179 171 710 186 181 173 166 706 3 -2 1 - Remicade 51 48 45 43 187 61 53 49 44 207 -1 -2 -9 -8 Diabetes (7) Januvia 551 511 581 547 2,189 779 756 717 561 2,813 -2 -2 -22 -20 Janumet 329 354 255 240 1,177 454 476 417 353 1,700 -32 -32 -31 -29 Other Pharmaceutical (8) 584 553 549 595 2,283 602 528 603 583 2,319 2 2 -2 - ANIMAL HEALTH 1,491 1,456 1,400 1,278 5,625 1,482 1,467 1,371 1,230 5,550 4 4 1 3 Livestock 849 807 874 808 3,337 832 826 829 814 3,300 -1 - 1 4 Companion Animal 642 649 526 470 2,288 650 641 542 416 2,250 13 12 2 3 Other Revenues (9) 275 122 299 211 907 312 370 625 420 1,728 -50 -1 -48 -15 *200% or greater Sum of quarterly amounts may not equal year-to-date amounts due to rounding. (1) Only select products are shown. (2) Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. (3) Alliance Revenue represents royalties and a milestone payment of $20 million received in the first quarter of 2022. (4) Total Vaccines sales were $3,133 million, $3,557 million, $4,002 million and $2,962 million in the first, second, third and fourth quarter of 2023, respectively, and $2,481 million, $2,709 million, $3,552 million and $2,554 million in the first, second, third and fourth quarter of 2022, respectively. (5) 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. (6) Net product sales in Merck's marketing territories. (7) Total Diabetes sales were $950 million, $951 million, $924 million and $876 million in the first, second, third and fourth quarter of 2023, respectively, and $1,305 million, $1,300 million, $1,231 million and $1,012 million in the first, second, third and fourth quarter of 2022, respectively. (8) Includes Pharmaceutical products not individually shown above. (9) Other Revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities. Other Revenues related to the receipt of upfront and milestone payments for out-licensed products were $51 million, $3 million and $65 million in the first, second and third quarter of 2023, respectively, and $114 million, $32 million, $10 million and $10 million in the first, second, third and fourth quarter of 2022, respectively.