Merck & Co., Inc.

Reputation and brand · Social media and digital reputation

Social media and mobile messaging platforms present risks and challenges. The inappropriate and/or unauthorized use of certain social media and mobile messaging channels could cause brand damage or information leakage or could lead to legal implications, including from the improper collection and/or dissemination of personally identifiable information.

Reputation and brand · Brand damage and negative publicity

Environmental, social and governance matters may impact the Company's business and reputation. The Company risks negative shareholder reaction, including from proxy advisory services, as well as damage to its brand and reputation and inability to attract and retain employee talent, if the Company fails to act responsibly.

Market position and competition · Pricing pressure and margin compression

The Company faces continued pricing pressure with respect to its products in the public and private sectors. The Company faces continued pricing pressure globally and, particularly in mature markets, from managed care organizations, government agencies and programs that could negatively affect the Company's sales and profit margins.

Innovation and product development · Time to market and commercialization risks

The Company's success is dependent on the successful development and marketing of new products, which are subject to substantial risks. Product candidates or uses that appear promising in development may fail to reach the market or fail to succeed for numerous reasons, including findings of ineffectiveness, superior safety or efficacy of competing products, or harmful side effects in clinical or preclinical testing.

Innovation and product development · Product development and randd investment risks

The Company's research and development efforts may not succeed in developing commercially successful products and the Company may not be able to acquire commercially successful products in other ways; consequently, the Company may not be able to replace sales of successful products that lose patent protection. There is a high rate of failure inherent in the research and development process for new drugs and vaccines.

Innovation and product development · Clinical trial and regulatory approval risks

Pharmaceutical products can develop unexpected safety or efficacy concerns. Unexpected safety or efficacy concerns can arise with respect to marketed products, whether or not scientifically justified, leading to product recalls, withdrawals, or declining sales, as well as product liability, consumer fraud and/or other claims, including potential civil or criminal governmental actions.

Market position and competition · Disruptive competitors and new market entrants

The Company faces intense competition from both lower cost generic and biosimilar products and competitors' products. This competition may increase as new products enter the market. In such an event, the competitors' products may be safer or more effective, more convenient to use, have better insurance coverage or reimbursement levels or be more effectively marketed and sold than the Company's products.

Innovation and product development · Intellectual property protection and infringement

The Company is dependent on its patent rights, and if its patent rights are invalidated or circumvented, its business could be materially adversely affected. Patent protection is considered, in the aggregate, to be of material importance to the Company's marketing of human health and animal health products in the U.S. and in most major foreign markets.

Natural and catastrophic events · Climate change and environmental impact

Climate change or legal, regulatory or market measures to address climate change may negatively affect the Company's business, results of operations, cash flows, financial condition, and prospects. The Company is exposed to physical risks (such as extreme weather conditions, inland flooding or rising sea levels), risks in transitioning to a low-carbon economy (such as additional legal or regulatory requirements, changes in technology, market risk and reputational risk).

Geopolitical and trade · Regulatory and policy uncertainty

In the U.S., members of the government have made public statements in favor of, and may take steps to implement, various regulatory or policy changes that could negatively impact the pharmaceutical industry, including the Company. Those potential changes include some related to vaccines and vaccine development, as well as personnel and policy changes at the FDA and other government agencies.

Technology infrastructure · Technology systems and infrastructure failure

The Company is increasingly dependent on sophisticated software applications, complex information technology systems, computing infrastructure, and cloud service providers (collectively, IT systems) to conduct critical operations and financial reporting. Disruption, degradation, or manipulation of these IT systems through intentional or accidental means by the Company's employees, third parties with authorized access or unauthorized third parties could adversely affect key business processes.

Digital transformation and innovation · Artificial intelligence and automation

The Company is increasing its use of artificial intelligence (AI) systems to automate processes, analyze data, and support decision-making, which poses inherent risks. Flaws, biases, or malfunctions in these systems could lead to operational disruptions, data loss, or erroneous decision-making, impacting the Company's business operations, financial condition, and reputation.

Human capital and workforce · Talent acquisition and retention

Failure to attract and retain highly qualified personnel could affect the Company's ability to successfully develop and commercialize products. The Company's success is largely dependent on its continued ability to attract and retain highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical research and development, governmental regulation and commercialization.

Core operations · Quality control and product defects

Biologics and vaccines carry unique risks and uncertainties. Manufacturing biologics and vaccines, especially in large quantities, is complex and may require the use of innovative technologies to handle living micro-organisms. Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping, and quality control and testing, may result in lot failures, product recalls or spoilage.

Supply chain and procurement · Supplier operation and dependance

Reliance on third-party relationships and outsourcing arrangements could materially adversely affect the Company's business. The Company depends on third parties, including suppliers, distributors, alliances with other pharmaceutical and biotechnology companies, and third-party service providers, for key aspects of its business including development, manufacture and commercialization of its products.

Core operations · Capacity utilization and efficiency

The Company may experience difficulties and delays in manufacturing certain of its products, including vaccines. The Company may, in the future, experience other difficulties and delays in manufacturing its products, such as failure of the Company or any of its vendors or suppliers to comply with Current Good Manufacturing Practices and other applicable regulations and quality assurance guidelines that could lead to manufacturing shutdowns, product shortages and delays in product manufacturing.

Industry regulation · Fda drug and device approval

The Company's products, including products in development, cannot be marketed unless the Company obtains and maintains regulatory approval or authorization. The Company's activities, including research, preclinical testing, clinical trials and the manufacturing and marketing of its products, are subject to extensive regulation by numerous federal, state and local governmental authorities in the U.S., including the FDA.

Legal and litigation · Litigation and legal proceedings

Adverse outcomes in current or future legal matters could negatively affect the Company's business. Current or future litigation, claims, proceedings and government investigations could preclude or delay the commercialization of the Company's products or could adversely affect the Company's business, results of operations, cash flows, financial condition and prospects.

Industry regulation · Regulatory compliance and changes

The health care industry in the U.S. has been, and will continue to be, subject to increasing regulation and political action. The Company believes that the health care industry will continue to be subject to increasing regulation as well as political and legal action, as future proposals to reform the health care system are considered by the Executive Branch, Congress and state legislatures.

International and currency · Foreign exchange and currency exposure

The Company is exposed to market risk from fluctuations in currency exchange rates and interest rates. The Company operates in multiple jurisdictions and virtually all sales are denominated in currencies of the local jurisdiction. Fluctuations in currency exchange rates, interest rates and inflation could negatively affect the Company's business, cash flows, results of operations, financial condition and prospects.