Merck & Co., Inc.

Company Overview

Business Model: Merck & Co., Inc. is a global health care company that delivers innovative health solutions through its prescription medicines, including biologic therapies, vaccines, and animal health products. The Company's operations are managed through two reportable segments: Pharmaceutical and Animal Health. The Pharmaceutical segment focuses on human health pharmaceutical and vaccine products, sold primarily to drug wholesalers, retailers, hospitals, government agencies, and managed health care providers. The Animal Health segment discovers, develops, manufactures, and markets veterinary pharmaceutical and vaccine products, health management solutions, and digitally connected identification, traceability, and monitoring products for livestock and companion animals, sold to veterinarians, distributors, animal producers, farmers, and pet owners.

Market Position: Merck & Co., Inc. operates in highly competitive and regulated markets. Its competitive position is driven by a long-standing emphasis on research and development, external alliances (licensing, collaborations), and refined sales and marketing efforts. The Company's oncology portfolio, led by Keytruda, represented substantially all of its revenue growth in 2024. In the animal health sector, the Company offers a wide range of veterinary products and solutions, with Bravecto being a key product. The Company faces intense competition from other research-based pharmaceutical companies, smaller research firms, generic drug manufacturers, biosimilar products, and animal health care companies.

Recent Strategic Developments:

• Business Development:
  • Acquired Eyebiotech Limited in July 2024 for $1.2 billion, gaining MK-3000 (an investigational tetravalent, tri-specific antibody) for diabetic macular edema and neovascular age-related macular degeneration.
  • Acquired Harpoon Therapeutics, Inc. in March 2024 for $765 million, adding MK-6070 (a T-cell engager targeting DLL3) for small-cell lung cancer and neuroendocrine tumors.
  • Acquired the aqua business of Elanco Animal Health Incorporated in July 2024 for $1.3 billion, expanding its aqua portfolio with products like Clynav and Imvixa.
  • Entered exclusive global license agreements in December 2024 for MK-2010 (a PD-1/VEGF bispecific antibody) from LaNova Medicines Ltd for $588 million upfront, and for MK-4082 (an oral small molecule GLP-1 receptor agonist) from Hansoh Pharma for $112 million upfront.
  • Acquired global rights to MK-1045 (a bispecific antibody for B-cell associated diseases) from Curon Pharmaceutical for $700 million upfront in September 2024.
  • Expanded collaboration with Daiichi Sankyo in August 2024 to include MK-6070, receiving an upfront payment of $170 million.
• Product Launches & Approvals (2024-2025):
  • Winrevair: FDA approved in March 2024 for adults with pulmonary arterial hypertension (PAH) (WHO Group 1) to increase exercise capacity, improve WHO functional class, and reduce clinical worsening events. EC approval in August 2024 for PAH in adult patients with WHO FC II to III.
  • Capvaxive: FDA approved in June 2024 for prevention of invasive pneumococcal disease and pneumococcal pneumonia in individuals 18 years and older. EMA's CHMP recommended approval in January 2025.
  • Keytruda: Received numerous expanded approvals in 2024 and early 2025 across various cancer types (e.g., cervical cancer, HCC, biliary tract cancer, NSCLC, endometrial carcinoma, gastric/GEJ adenocarcinoma, malignant pleural mesothelioma, urothelial carcinoma, melanoma) in the U.S., EU, Japan, and China.
  • Welireg: Approved in China in November 2024 for VHL disease-associated tumors. EC conditionally approved in February 2025 for VHL disease and advanced clear cell RCC.
  • Lynparza: Approved in China in January 2025 for adjuvant treatment of germline BRCA-mutated, HER2-negative high-risk early breast cancer.
  • Bravecto: EC approved injectable formulation for dogs for 12-month flea and tick killing in January 2024.
• Pipeline Advancements: Initiated over 20 Phase 3 studies in 2024 across cardiometabolic, immunology, infectious diseases, oncology, ophthalmology, and vaccines. Key Phase 3 oncology programs include MK-1308A (quavonlimab + pembrolizumab), MK-1026 (nemtabrutinib), MK-1084 (KRAS G12C inhibitor), MK-3543 (bomedemstat), MK-5684 (opevesostat), MK-7339 (Lynparza + Keytruda), MK-7902 (Lenvima + Keytruda), MK-1022 (patritumab deruxtecan), MK-2140 (zilovertamab vedotin), MK-2400 (ifinatamab deruxtecan), and MK-2870 (sacituzumab tirumotecan).

Geographic Footprint: Merck & Co., Inc. is a global company with significant international operations. In 2024, sales outside the U.S. represented 50% of total Company sales. Key international markets include Europe, Middle East and Africa (22% of total sales), China (9%), Latin America (5%), and Japan (5%). The Company has principal research facilities in the U.S., United Kingdom, Switzerland, and China, and manufacturing plants in the U.S., Puerto Rico, Western Europe, Africa, and Asia.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 76.3% (2024) vs. 73.2% (2023)
• Operating Margin: 31.1% (2024) vs. 3.1% (2023)
• Net Margin: 26.7% (2024) vs. 0.6% (2023)

Investment in Growth:

• R&D Expenditure: $17.938 billion (28.0% of revenue)
• Capital Expenditures: $3.372 billion
• Strategic Investments:
  • $1.35 billion for the acquisition of Eyebiotech Limited and $100 million for a related developmental milestone.
  • $750 million for the acquisition of MK-1045 from Curon Biopharmaceutical.
  • $656 million for the acquisition of Harpoon Therapeutics, Inc.
  • $588 million for a global license agreement with LaNova Medicines Ltd.
  • $112 million for a global license agreement with Hansoh Pharma.
  • $1.3 billion for the acquisition of the aqua business of Elanco Animal Health Incorporated.

Business Segment Analysis

Pharmaceutical Segment

Financial Performance:

• Revenue: $57.400 billion (+7.1% YoY, or +6.9% excluding foreign exchange)
• Operating Margin: Not directly provided, but segment profits were $44.533 billion.
• Key Growth Drivers: Strong growth in oncology (Keytruda, Welireg, Lynparza, Lenvima), cardiovascular (Winrevair, Adempas/Verquvo), and certain hospital acute care products (Prevymis).
• Offsetting Factors: Declines in diabetes (Januvia/Janumet), virology (Lagevrio), immunology (Simponi, Remicade due to marketing rights reversion), and vaccines (Gardasil/Gardasil 9 due to lower demand in China).

Product Portfolio:

• Oncology:
  • Keytruda: $29.482 billion (+18% YoY, or +22% excluding foreign exchange). Approved for over 40 indications in the U.S. across 18 tumor types and 2 tumor-agnostic indications. Growth driven by demand in metastatic indications (bladder, endometrial, MSI-H, RCC) and increased uptake in earlier-stage indications (TNBC, NSCLC, RCC), plus higher pricing in the U.S.
  • Lynparza (Alliance Revenue): $1.311 billion (+9% YoY, or +11% excluding foreign exchange). Growth from higher demand in most international markets.
  • Lenvima (Alliance Revenue): $1.010 billion (+5% YoY, or +6% excluding foreign exchange). Growth from higher demand and pricing in the U.S.
  • Welireg: $509 million (>+100% YoY). Growth from higher demand in the U.S., reflecting uptake of the RCC indication.
  • Reblozyl (Alliance Revenue): $371 million (+75% YoY). Growth from strong underlying sales performance.
• Vaccines:
  • Gardasil/Gardasil 9: $8.583 billion (-3% YoY, or -2% excluding foreign exchange). Decline primarily due to lower demand in China, partially offset by strong growth in other international markets (Japan) and the U.S. (public sector buying, higher pricing). Shipments to China paused from February 2025 due to elevated inventory.
  • ProQuad/M-M-R II/Varivax: $2.485 billion (+5% YoY). ProQuad sales grew 6% due to higher U.S. pricing. M-M-R II sales grew 8% due to higher international demand. Varivax sales grew 3% due to higher U.S. pricing, partially offset by supply constraints in Latin America. Manufacturing delays for ProQuad and Varivax are expected to cause international supply constraints in 2025.
  • Vaxneuvance: $808 million (+22% YoY, or +23% excluding foreign exchange). Growth from continued uptake in pediatric indications in Europe, Japan, and Asia Pacific, partially offset by lower U.S. demand due to competition.
  • RotaTeq: $711 million (-7.5% YoY).
  • Pneumovax 23: $263 million (-36% YoY, or -34% excluding foreign exchange). Decline due to lower global demand as the market shifts to newer adult pneumococcal conjugate vaccines.
  • Capvaxive: $97 million (new launch in 2024).
• Hospital Acute Care:
  • Bridion: $1.764 billion (-4% YoY, or -3% excluding foreign exchange). Decline due to generic competition in international markets (EU, Asia Pacific, Japan), partially offset by higher U.S. demand and pricing. U.S. market exclusivity expected to be lost in January 2026.
  • Prevymis: $785 million (+30% YoY, or +33% excluding foreign exchange). Growth from higher global demand, particularly in the U.S.
  • Dificid: $340 million (+12.6% YoY).
  • Zerbaxa: $252 million (+15.6% YoY).
  • Noxafil: $177 million (-16.9% YoY).
• Cardiovascular:
  • Winrevair: $419 million (new launch in 2024).
  • Adempas/Verquvo (Alliance Revenue): $415 million (+13% YoY). Growth from higher demand in Bayer’s marketing territories.
  • Adempas (Merck territories): $287 million (+12% YoY). Growth from higher demand.
• Virology:
  • Lagevrio: $964 million (-33% YoY, or -28% excluding foreign exchange). Decline due to lower demand and pricing in Asia Pacific (Japan), partially offset by U.S. commercial distribution under EUA.
• Immunology:
  • Simponi: $543 million (-24% YoY, or -23% excluding foreign exchange). Decline due to marketing rights reverting to Johnson & Johnson on October 1, 2024.
  • Remicade: $114 million (-39% YoY, or -36% excluding foreign exchange). Decline due to marketing rights reverting to Johnson & Johnson on October 1, 2024.
• Diabetes:
  • Januvia/Janumet: $2.268 billion (-33% YoY, or -29% excluding foreign exchange). Decline due to lower U.S. pricing and demand from competitive pressures, and loss of exclusivity in most markets in Europe, Asia Pacific, and Canada. U.S. market exclusivity for Januvia and Janumet is expected to be lost in May 2026, and Janumet XR in July 2026. Januvia was selected for government price setting under the IRA, effective January 1, 2026. Janumet and Janumet XR were selected for government price setting, effective January 1, 2027.

Animal Health Segment

Financial Performance:

• Revenue: $5.877 billion (+4% YoY, or +8% excluding foreign exchange)
• Operating Margin: Not directly provided, but segment profits were $1.938 billion.
• Key Growth Drivers: Higher pricing, increased demand for poultry and swine products, and sales from the acquisition of the Elanco aqua business.

Product Portfolio:

• Livestock Products: $3.462 billion (+4% YoY, or +9% excluding foreign exchange).
• Companion Animal Products: $2.415 billion (+6% YoY, or +7% excluding foreign exchange).
  • Bravecto: $1.1 billion (+6% YoY, or +8% excluding foreign exchange).

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $1.306 billion (11 million shares) in 2024. Remaining authorization of $2.4 billion as of December 31, 2024. An additional $10 billion share repurchase program was authorized in January 2025.
• Dividend Payments: $7.840 billion in 2024. Quarterly dividend increased to $0.81 per share for Q1 2025.
• Future Capital Return Commitments: The Board of Directors authorized an additional $10 billion share repurchase program in January 2025.

Balance Sheet Position:

• Cash and Equivalents: $13.242 billion
• Total Debt: $37.111 billion (Loans payable: $2.649 billion; Long-Term Debt: $34.462 billion)
• Net Cash Position: -$23.869 billion
• Credit Rating: Not disclosed in the provided text.
• Debt Maturity Profile: Aggregate maturities of long-term debt: $2.6 billion (2025), $2.2 billion (2026), $1.5 billion (2027), $2.1 billion (2028), $1.7 billion (2029). Interest payments: $1.2 billion (2025), $1.2 billion (2026), $1.1 billion (2027), $1.1 billion (2028), $1.0 billion (2029).

Cash Flow Generation:

• Operating Cash Flow: $21.468 billion (2024) vs. $13.006 billion (2023), reflecting stronger operating performance.
• Free Cash Flow: Not explicitly stated.
• Cash Conversion Metrics: Not explicitly stated.

Operational Excellence

Production & Service Model: The Company's operations are principally managed on a product basis. It manufactures human health pharmaceutical and vaccine products, and a wide range of veterinary pharmaceutical and vaccine products. The Company also offers health management solutions and services, and digitally connected identification, traceability, and monitoring products in Animal Health. The Company aims to develop efficient and sustainable processes at product launch, utilizing a "green-by-design" development strategy to minimize material use and waste.

Supply Chain Architecture: Key Suppliers & Partners: The Company obtains raw materials essential to its business from numerous suppliers worldwide, with most principal materials available from more than one source. However, certain raw or intermediate materials are obtained primarily from a single source. The Company mitigates potential risks through inventory and appropriate supplier management.

• [Manufacturing Partners]: WuXi Vaccines (wholly owned subsidiary of WuXi Biologics) – Merck & Co., Inc. will acquire WuXi Vaccines’ facility in Dundalk, Ireland for approximately $440 million in Q1 2025.
• [Distribution Partners]: Chongqing Zhifei Biological Products Co., Ltd. (Zhifei) – Distributor and commercialization partner for Gardasil/Gardasil 9 in China.
• [Technology Partners]: Daiichi Sankyo, AstraZeneca PLC, Eisai Co., Ltd., Ridgeback Biotherapeutics LP, Moderna, Inc., Bayer AG, Bristol Myers Squibb Company, Curon Biopharmaceutical, Hansoh Pharma, LaNova Medicines Ltd, Orion Corporation, Kelun-Biotech, Gilead Sciences Inc. (collaborations for R&D and/or commercialization).

Facility Network:

• Manufacturing: Headquartered in Rahway, New Jersey. Production facilities for human health products at six locations in the U.S. and Puerto Rico. Owns or has interest in manufacturing plants in Western Europe, Africa, and Asia. The Company is optimizing its Human Health and Animal Health global manufacturing networks.
• Research & Development: Principal U.S. research facilities in Rahway, New Jersey; West Point, Pennsylvania; Boston and Cambridge, Massachusetts; South San Francisco, California; and Elkhorn, Nebraska (Animal Health). Principal research facilities outside the U.S. are in the United Kingdom, Switzerland, and China.
• Distribution: Not explicitly detailed beyond general sales channels.

Operational Metrics:

• Capacity Utilization: Plants are suitable for intended purposes and have capacities adequate for current and projected needs, with some conversion for new products.
• Efficiency Measures: The 2024 Restructuring Program aims to optimize manufacturing networks and improve supply reliability and efficiency, expecting cumulative annual net cost savings of approximately $750 million by the end of 2031.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Professional representatives communicate product effectiveness, safety, and value to health care professionals in private practice, group practices, hospitals, and managed care organizations.
• Channel Partners: Drug wholesalers and retailers, hospitals, government agencies, managed health care providers (HMOs, PBMs), physicians, distributors, animal producers, farmers, and pet owners.
• Digital Platforms: Not explicitly detailed beyond general sales channels.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: McKesson Corporation (21% of total accounts receivable at Dec 31, 2024), Cencora, Inc. (21%), and Cardinal Health, Inc. (13%).
• Strategic Partnerships: Collaborations with AstraZeneca PLC, Eisai Co., Ltd., Bayer AG, Ridgeback Biotherapeutics LP, Daiichi Sankyo, Moderna, Inc., Bristol Myers Squibb Company, Curon Biopharmaceutical, Hansoh Pharma, LaNova Medicines Ltd, Orion Corporation, Kelun-Biotech, Gilead Sciences Inc.
• Customer Concentration: Significant concentration in U.S. drug wholesalers. Sales of vaccines to the U.S. Centers for Disease Control and Prevention Vaccines for Children program are a large component of pediatric and adolescent vaccine sales. Vaccines distributed by Chongqing Zhifei Biological Products Co., Ltd. represent a substantial portion of total sales in China.

Geographic Revenue Distribution:

• United States: $32.277 billion (50% of total revenue)
• Europe, Middle East and Africa: $14.041 billion (22% of total revenue)
• China: $5.494 billion (9% of total revenue)
• Latin America: $3.459 billion (5% of total revenue)
• Japan: $3.280 billion (5% of total revenue)
• Asia Pacific (other than China and Japan): $3.058 billion (5% of total revenue)
• Growth Markets: Emerging markets (Latin America, Middle East, Africa, Eastern Europe, Asia Pacific) are a focus for growth, despite potential political instability, currency fluctuations, and limited healthcare funding.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The pharmaceutical industry is highly competitive and highly regulated, characterized by a rigorous search for technological innovations. Global efforts toward health care cost containment exert pressure on product pricing and market access. Consolidation among health care entities (health plans, PBMs) enhances purchasing strength. Governments and private insurers increasingly use formularies and utilization management tools to control costs. Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Other worldwide research-based pharmaceutical companies, smaller research companies with more limited therapeutic focus, generic drug manufacturers, biosimilar manufacturers, and animal health care companies.

• Johnson & Johnson: Marketing rights for Remicade and Simponi reverted to Johnson & Johnson in October 2024.
• AstraZeneca PLC: Collaborates on Lynparza and Koselugo.
• Eisai Co., Ltd.: Collaborates on Lenvima.
• Bayer AG: Collaborates on Adempas and Verquvo.
• Bristol Myers Squibb Company (BMS): Collaborates on Reblozyl.
• Daiichi Sankyo: Collaborates on DXd ADC candidates (patritumab deruxtecan, ifinatamab deruxtecan, raludotatug deruxtecan) and MK-6070.
• Moderna, Inc.: Collaborates on V940 (mRNA-4157).
• Gilead Sciences Inc.: Collaborates on MK-8591D (islatravir + lenacapavir).
• Pfizer Inc. (formerly Seagen): Collaborates on Keytruda in combination with Padcev.
• Elanco Animal Health Incorporated: Merck acquired its aqua business.
• Sanofi S.A.: Involved in patent litigation regarding Lantus.
• Generic/Biosimilar Manufacturers: Natco Pharma Limited, Sandoz Inc., Cipla USA, Inc., Cipla Limited, Zydus Worldwide DMCC, Zydus Pharmaceuticals (USA) Inc., Cadila Healthcare Ltd. (for Januvia/Janumet, Lynparza, Bridion).

Emerging Competitive Threats: New entrants, disruptive technologies (e.g., AI systems), alternative solutions, and increased challenges to patent rights.

Competitive Response Strategy: The Company focuses on rigorous R&D for technological innovations, acquiring and marketing products through external alliances, refining sales and marketing efforts, and actively protecting its patent rights. It also engages in public policy advocacy to ensure access to innovative medicines and adapt to evolving healthcare environments.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Pricing Pressure: Global efforts toward health care cost containment, U.S. health care reform (IRA, American Rescue Plan Act, 340B Program), managed care organizations, and government-mandated pricing actions in international markets (EU, Japan, China) negatively affect sales and profit margins. Januvia, Janumet, and Janumet XR are subject to IRA price setting, and Keytruda is expected to be selected in 2026.
• Generic & Biosimilar Competition: Loss of patent protection leads to significant and rapid sales decline (e.g., Bridion in EU/Japan, Keytruda in U.S. post-2028). Patent challenges are costly and unpredictable.
• Key Product Dependence: Significant reliance on Keytruda (46% of total sales in 2024) and other key products (Gardasil/Gardasil 9, Lynparza, Bravecto, Bridion). Adverse events affecting these products could materially impact financial results.
• R&D Failure: High rate of failure in drug and vaccine development, long investment cycles, and substantial risk that funds invested will not generate financial returns.
• Product Approvals & Commercialization: Products may fail to reach market or succeed due to ineffectiveness, harmful side effects, failure to receive regulatory approvals, lack of economic feasibility, or proprietary rights of others.
• Economic Conditions: Unfavorable or uncertain global economic conditions (inflation, interest rates, raw material costs) could reduce product demand and pricing.
• China Market: Lower sales of Gardasil/Gardasil 9 in China in 2024, with significant declines expected in 2025 due to inventory levels and paused shipments. Increased government anti-corruption campaigns and volume-based procurement (VBP) programs exert pricing pressure and accelerate generic substitution. Geopolitical tensions could disrupt operations.
• Emerging Markets: Vulnerability to global financial instability, limited healthcare spending, currency fluctuations, political instability, and intellectual property challenges.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Manufacturing Difficulties: Experiences manufacturing delays (e.g., Varivax and ProQuad supply constraints in 2025). Risks include non-compliance with regulations, construction delays, raw material shortages, and capacity limits.
• Geographic Concentration: Not explicitly detailed as a risk category, but manufacturing facilities are globally distributed.
• Capacity Constraints: Manufacturing delays can result in product shortages and lost sales.

Reliance on Third Parties: Dependence on suppliers, distributors, alliances, and third-party service providers for development, manufacturing, commercialization, and IT systems. Failure of these parties could adversely affect business.

Biologics and Vaccines: Unique risks include limited access to biological materials, complex and extensive regulatory requirements, manufacturing complexity (handling living micro-organisms, thorough testing, facility design), high manufacturing costs, and potential for variability or contamination.

Financial & Regulatory Risks

Market & Financial Risks:

• Foreign Exchange: Exposure to currency fluctuations (e.g., Argentine peso devaluation) and interest rate movements. Hedging strategies may not always be successful.
• Credit & Liquidity: Not explicitly detailed as a risk category, but the Company monitors credit risk of issuers and financial institutions.

Regulatory & Compliance Risks:

• Increasing Regulation: Subject to extensive regulation by FDA, EMA, PMDA (Japan), NMPA (China), and other global agencies covering testing, approval, safety, manufacturing, labeling, and marketing.
• Post-Approval Developments: Unexpected safety/efficacy concerns post-approval can lead to recalls, withdrawals, declining sales, product liability claims, or adverse labeling. Increased scrutiny of clinical trial outcomes.
• Legal & Regulatory Changes: Subject to new laws and regulations (e.g., healthcare reform, anti-bribery, IP, data privacy, sustainability regulations, trade controls). Non-compliance can lead to significant penalties.
• Legal Proceedings: Involved in product liability (Dr. Scholl’s Foot Powder, Gardasil/Gardasil 9), governmental proceedings (Civil Investigative Demands, IRA litigation), securities litigation, commercial litigation (Zetia antitrust, RotaTeq antitrust, Bravecto), and patent litigation (Bridion, Januvia/Janumet, Keytruda, Lynparza). Outcomes are uncertain and can be costly.
• Product Liability Insurance: Substantially self-insures product liability risk due to limited availability and high cost of commercial insurance.

Geopolitical & External Risks

Geopolitical Exposure: Significant global operations expose the Company to risks from changes in medical reimbursement policies, regulatory requirements, trade protection measures, foreign exchange fluctuations, diminished IP protection, nationalization, and expropriation. Geopolitical instability (e.g., Russia-Ukraine war, Middle East conflict) and policy changes can materially affect macroeconomic conditions and business. Climate Change: Potential negative impacts from physical risks (extreme weather, flooding), transition risks (new regulations, carbon pricing, increased compliance costs, GHG emission restrictions), and social/human effects. These risks could disrupt operations, supply chain, and increase costs.

Innovation & Technology Leadership

Research & Development Focus: Merck & Co., Inc. prioritizes breakthrough science for unmet medical needs, making disciplined investments to drive long-term value. The R&D model focuses on candidates with unambiguous, promotable advantages and maximizing value from approved medicines through new indications and formulations. The Company pursues emerging product opportunities independent of therapeutic area or modality. External sourcing (acquisitions, licensing, alliances) is a key component of its pipeline strategy. Core Technology Areas:

• Oncology: Immuno-oncology (anti-PD-1, anti-CTLA-4, individualized neoantigen therapy), precision molecular targeting (BTK inhibitors, KRAS G12C inhibitors, LSD1 inhibitors, CYP11A1 inhibitors, PARP inhibitors, RTK inhibitors), and tissue targeting (HER3-directed ADCs, ROR1-targeting ADCs, TROP2-directed ADCs, DLL3-targeting T-cell engagers).
• Cardiovascular: Activin signaling inhibitors (Winrevair), sGC modulators (Adempas, Verquvo), PCSK9 inhibitors (enlicitide decanoate).
• Infectious Diseases: Antivirals (Lagevrio for COVID-19, HIV integrase inhibitors, NRTTIs), vaccines (pneumococcal, HPV, measles, mumps, rubella, varicella, rotavirus, RSV).
• Immunology: TNF-like ligand 1A inhibitors (tulisokibart for Crohn’s disease and ulcerative colitis).
• Ophthalmology: Tetravalent, tri-specific antibodies (MK-3000 for diabetic macular edema and neovascular age-related macular degeneration).
• Neuroscience: Orexin receptor antagonists (Belsomra for insomnia).
• Metabolic Diseases: GLP-1 receptor agonists (MK-4082). Innovation Pipeline: The clinical pipeline includes candidates in cancer, cardiovascular diseases, metabolic diseases, infectious diseases, neurosciences, immunology, ophthalmology, respiratory diseases, and vaccines. Several candidates are under regulatory review or in late-stage clinical development, including MK-1022 (patritumab deruxtecan), Welireg, Capvaxive, Winrevair, MK-1654 (clesrovimab), and expanded indications for Keytruda.

Intellectual Property Portfolio:

• Patent Strategy: Patent protection is material to marketing products in the U.S. and major foreign markets, covering products, formulations, processes, and methods of treatment. Patents are subject to term restoration (PTE, SPC) and pediatric exclusivity provisions.
• Licensing Programs: Royalty income of $1.1 billion in 2024 from patent and know-how licenses. Incurred royalty expenses of $1.9 billion in 2024 under licenses held.
• IP Litigation: Actively involved in patent disputes, including challenges from generic/biosimilar manufacturers (e.g., Bridion, Januvia/Janumet, Lynparza) and other parties (e.g., The Johns Hopkins University regarding Keytruda).

Technology Partnerships: Strategic alliances and research collaborations are important for supplementing internal research and accessing new technologies. Examples include collaborations with Daiichi Sankyo, AstraZeneca PLC, Eisai Co., Ltd., Moderna, Inc., Bristol Myers Squibb Company, Bayer AG, Ridgeback Biotherapeutics LP, Curon Biopharmaceutical, Hansoh Pharma, LaNova Medicines Ltd, Orion Corporation, Kelun-Biotech, and Gilead Sciences Inc.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Not explicitly detailed beyond the executive officer list.

Board Composition: Women comprise 46% of the members of the Board of Directors. The Audit Committee is comprised entirely of independent directors.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 75,000 worldwide as of December 31, 2024.
• Headcount Growth Trends: Not explicitly detailed, but R&D expenses reflect increased headcount in 2024.
• Geographic Distribution: Approximately 31,000 employees in the U.S. (including Puerto Rico).
• Skill Mix: Not explicitly detailed.
• Workforce Demographics: Women comprise 52% of employees globally. Individuals from underrepresented ethnic groups comprise 37% of the U.S. workforce.
• Union Representation: Approximately 21% of employees are represented by collective bargaining groups.
• Turnover: Voluntary turnover rate was approximately 4.6% in 2024 (5.6% in 2023).

Talent Management: Acquisition & Retention:

• Hiring Strategy: Comprehensive approach to recruiting, retention, and leadership development, focusing on diverse knowledge, skills, backgrounds, and perspectives. Utilizes external career sites, direct sourcing, employee referrals, universities, and strategic alliance partnerships. Hired approximately 7,300 employees globally in 2024.
• Retention Strategies: Provides a competitive suite of compensation and benefits programs, continuously monitored and adjusted.
• Employee Value Proposition: Compensation philosophy, benefits (e.g., personal health care concierge, enhanced cancer screening, 12 weeks paid parental leave globally), and culture. Ranked in the top quartile of Fortune 100 companies for U.S. benefits. Diversity & Development:
• Diversity Metrics: Women comprise 52% of global employees, 37% of U.S. workforce from underrepresented ethnic groups, 46% of Board members, and 39% of senior management.
• Development Programs: Talent management system supports company-wide performance management, leadership development, talent reviews, and succession planning. Focus on continuous learning experiences to build skills and capabilities.
• Culture & Engagement: Fosters a safe, positive, and supportive workplace, encouraging candid employee feedback through global surveys and peer feedback. Promotes professional networking, collaboration, and community volunteering.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: Reduce Scope 1 and 2 operational GHG emissions 46% by 2030 (from a 2019 baseline). Reduce Scope 3 GHG emissions 30% by 2030 (from a 2019 baseline).
• Carbon Neutrality: Committed to a net-zero target for GHG emissions across global operations (Scopes 1, 2, and 3) by 2045, aligned with SBTi guidelines.
• Renewable Energy: Source 100% of purchased electricity from renewable sources by 2025. Supply Chain Sustainability:
• Supplier Engagement: Robust supplier engagement approach to reduce Scope 3 emissions.
• Responsible Sourcing: Not explicitly detailed beyond general supplier engagement. Other Environmental Initiatives:
• Operational Efficiency: Driving operational efficiency, designing new products to minimize environmental impact, and reducing impacts in upstream and downstream value chain.
• Green & Sustainable Science: Utilizes a "green-by-design" development strategy for innovative, cost-efficient manufacturing processes with low environmental impact. Received the Peter J. Dunn Award for Green Chemistry and Engineering Impact for five consecutive years.
• Waste Diversion: Goals include no more than 20% of global operational waste sent to landfills or incinerators (without energy recovery) by 2025, and 50% of sites sending zero waste to landfills by 2025. Implemented programs to divert non-hazardous landfill waste from highest-generating sites.
• Water Conservation: Goal of maintaining global water use at or below 2015 levels by 2025. Assesses water risk, implements conservation plans at priority water-stress sites, and endorses the United Nations CEO Water Mandate.

Social Impact Initiatives:

• Community Investment: Philanthropic programs and impact investing to strengthen health systems and build capacity in underserved communities.
• Product Impact: Merck Patient Assistance Program provides free medicines and adult vaccines to uninsured/underinsured in the U.S. Medical Outreach Program provides product donations for humanitarian assistance in low-income countries. Mectizan Donation Program supports elimination of onchocerciasis and lymphatic filariasis. Merck for Mothers strengthens maternal health services. Supports the Merck Foundation.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Not explicitly detailed.
• Economic Sensitivity: Business may be adversely affected by local and global economic conditions, including inflation, interest rates, and raw material costs.
• Industry Cycles: Not explicitly detailed.

Planning & Forecasting: The Company hedges a portion of its forecasted foreign currency denominated sales over its planning cycle, typically no more than two years into the future.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• U.S. (FDA): Administers requirements for testing, approval, safety, effectiveness, manufacturing, labeling, and marketing. Expedited development and review for "breakthrough therapy" designations.
• EU (EMA, EC): Directives and legislation for classification, marketing approval, labeling, advertising, manufacturing, distribution, pharmacovigilance, and safety monitoring. EU Health Technology Assessment Regulation 2021/2282 (HTAR) applies from 2025, requiring Joint Clinical Assessments (JCAs) for new products.
• Japan (MHLW, PMDA): Government-mandated annual price reductions and re-pricings for specific products.
• China (NMPA): Structural reforms to accelerate innovative product shift, reduce regulatory complexity, and accelerate review/approval. National Reimbursement Drug List (NRDL) inclusion may require price negotiation. Volume-based procurement (VBP) program accelerates generic substitution for mature products.
• International Compliance: Multi-jurisdictional requirements and harmonization challenges. Trade & Export Controls:
• Export Restrictions: Not explicitly detailed beyond general mention of trade protection measures and import/export licensing requirements.
• Sanctions Compliance: Not explicitly detailed beyond general mention of trade sanctions and embargoes.

Legal Proceedings:

• Product Liability: Dr. Scholl’s Foot Powder (mesothelioma claims, ~415 cases pending), Gardasil/Gardasil 9 (various personal injuries, ~225 cases pending, multidistrict litigation in U.S. federal court, one California state court trial adjourned to Sept 2025).
• Governmental Proceedings: Civil Investigative Demands from U.S. Department of Justice (False Claims Act investigation related to Steglatro, Januvia, price reporting, anti-kickback; temperature excursions at third-party storage facility). Litigation against U.S. government regarding Inflation Reduction Act's "Drug Price Negotiation Program." Inquiries from California Attorney General's Office regarding Lantus competition. Inquiries from Chinese governmental agencies.
• Securities Litigation: Putative class action filed in February 2025 alleging federal securities law violations related to Gardasil/Gardasil 9 demand in China.
• Commercial Litigation: Zetia antitrust litigation (settlements reached with direct/indirect purchasers, ongoing litigation with Insurer Plaintiffs). RotaTeq antitrust litigation (alleging anticompetitive vaccine bundling scheme). Bravecto litigation (alleging neurological events in dogs/cats, class action pending in U.S. and Quebec).
• Patent Litigation: Ongoing patent infringement lawsuits against generic manufacturers for Bridion (U.S. patent protection through at least January 2026, appeal pending), Januvia/Janumet (U.S. market exclusivity through May/July 2026, generic approvals for non-automatically substitutable forms), Keytruda (litigation with The Johns Hopkins University regarding patents from joint research), and Lynparza (multiple lawsuits against generic companies).

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 14.1% in 2024 (vs. 80.0% in 2023).
• Rate Drivers: Favorable mix of income and expense, $519 million reduction in unrecognized income tax benefits (expiration of statute of limitations for 2019/2020 federal tax years). Unfavorable impact from charges for certain asset acquisitions (Harpoon, EyeBio, MK-1045) for which minimal or no tax benefit was recognized.
• Geographic Tax Planning: Foreign earnings tax rate differentials reflect operations in jurisdictions with different effective tax rates (Ireland, Netherlands, Switzerland, Singapore, Puerto Rico) operating under tax incentive grants.
• Tax Reform Impact: Expects global minimum tax provision of OECD Pillar 2 to increase effective income tax rate by approximately 2% in 2025. Tax rates on foreign earnings and export income are scheduled to increase under TCJA beginning in 2026. Potential repeal of TCJA provision requiring R&D capitalization for tax purposes is not expected to materially impact effective tax rate.

Tax Examinations:

• IRS is examining tax returns for 2017, 2018 (including TCJA transition tax), 2021, and 2022.
• Various state and foreign tax examinations are in progress, with income tax returns open for examination for 2009 through 2024.
• Unrecognized tax benefits totaled $2.261 billion at December 31, 2024.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Self-insures substantially all product liability risk due to limited availability and high cost of commercial insurance.
• Risk Transfer Mechanisms: Uses derivative instruments (foreign currency options, forward contracts, collar options, interest rate swaps) to manage foreign exchange rate and interest rate movements on earnings, cash flows, and fair values of assets/liabilities. Also uses foreign currency debt to hedge net investment in foreign operations.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Not explicitly detailed.
• Economic Sensitivity: The Company's business may be adversely affected by local and global economic conditions, including inflation, interest rates, and costs of raw materials and packaging.
• Industry Cycles: Not explicitly detailed.

Planning & Forecasting: The Company hedges a portion of its forecasted foreign currency denominated sales over its planning cycle, typically no more than two years into the future.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• U.S. (FDA): Administers requirements covering testing, approval, safety, effectiveness, manufacturing, labeling, and marketing of prescription pharmaceuticals. Expedited development and review for "breakthrough therapy" designation.
• EU (EMA, EC): Directives and legislation concerning classification, approval for marketing, labeling, advertising, manufacturing, wholesale distribution, supply chain integrity, pharmacovigilance, and safety monitoring. EU Health Technology Assessment Regulation 2021/2282 (HTAR) applies from 2025, requiring EU-level comparative Joint Clinical Assessments (JCAs) for new products.
• Japan (MHLW, PMDA): Subject to government-mandated annual price reductions and re-pricings for specific products.
• China (NMPA): Structural reforms to accelerate shift to innovative products, reduce regulatory complexity, and accelerate review/approval. Inclusion on the National Reimbursement Drug List (NRDL) may require price negotiation. Volume-based procurement (VBP) program accelerates generic substitution for mature products.
• International Compliance: Multi-jurisdictional requirements and harmonization challenges. Trade & Export Controls:
• Export Restrictions: Not explicitly detailed beyond general mention of trade protection measures and import/export licensing requirements.
• Sanctions Compliance: Not explicitly detailed beyond general mention of trade sanctions and embargoes.

Legal Proceedings:

• Product Liability: Dr. Scholl’s Foot Powder (mesothelioma claims, ~415 cases pending). Gardasil/Gardasil 9 (various personal injuries, ~225 cases pending, multidistrict litigation in U.S. federal court, one California state court trial adjourned to Sept 2025).
• Governmental Proceedings: Civil Investigative Demands from U.S. Department of Justice (False Claims Act investigation related to Steglatro, Januvia, price reporting, anti-kickback; temperature excursions at third-party storage facility). Litigation against U.S. government regarding Inflation Reduction Act's "Drug Price Negotiation Program." Inquiries from California Attorney General's Office regarding Lantus competition. Inquiries from Chinese governmental agencies.
• Securities Litigation: Putative class action filed in February 2025 alleging federal securities law violations related to Gardasil/Gardasil 9 demand in China.
• Commercial Litigation: Zetia antitrust litigation (settlements reached with direct/indirect purchasers, ongoing litigation with Insurer Plaintiffs). RotaTeq antitrust litigation (alleging anticompetitive vaccine bundling scheme). Bravecto litigation (alleging neurological events in dogs/cats, class action pending in U.S. and Quebec).
• Patent Litigation: Ongoing patent infringement lawsuits against generic manufacturers for Bridion (U.S. patent protection through at least January 2026, appeal pending), Januvia/Janumet (U.S. market exclusivity through May/July 2026, generic approvals for non-automatically substitutable forms), Keytruda (litigation with The Johns Hopkins University regarding patents from joint research), and Lynparza (multiple lawsuits against generic companies).

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 14.1% in 2024 (vs. 80.0% in 2023).
• Rate Drivers: Favorable mix of income and expense, $519 million reduction in unrecognized income tax benefits (expiration of statute of limitations for 2019/2020 federal tax years). Unfavorable impact from charges for certain asset acquisitions (Harpoon, EyeBio, MK-1045) for which minimal or no tax benefit was recognized.
• Geographic Tax Planning: Foreign earnings tax rate differentials reflect operations in jurisdictions with different effective tax rates (Ireland, Netherlands, Switzerland, Singapore, Puerto Rico) operating under tax incentive grants.
• Tax Reform Impact: Expects global minimum tax provision of OECD Pillar 2 to increase effective income tax rate by approximately 2% in 2025. Tax rates on foreign earnings and export income are scheduled to increase under TCJA beginning in 2026. Potential repeal of TCJA provision requiring R&D capitalization for tax purposes is not expected to materially impact effective tax rate.

Tax Examinations:

• IRS is currently conducting examinations of the Company’s tax returns for the years 2017 and 2018 (including the one-time transition tax enacted under the TCJA), 2021, and 2022.
• Various state and foreign tax examinations are in progress, and for these jurisdictions, the Company’s income tax returns are open for examination for the period 2009 through 2024.
• Unrecognized tax benefits totaled $2.261 billion at December 31, 2024. The Company believes it is reasonably possible that this amount could decrease by up to approximately $22 million in the next 12 months.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: The Company self-insures substantially all of its product liability risk, as the availability of commercial insurance has become more restrictive and its cost outweighs likely benefits.
• Risk Transfer Mechanisms: The Company uses various financial instruments, including derivative instruments (foreign currency options, forward contracts, collar options, interest rate swaps), to manage the impact of foreign exchange rate movements and interest rate movements on its earnings, cash flows, and fair values of assets and liabilities. It also uses foreign currency debt to hedge a portion of its net investment in foreign operations.