Segment Reporting

The Company’s operations are principally managed on a products basis and include the Pharmaceutical, Animal Health, Healthcare Services and Alliances operating segments. The Animal Health, Healthcare Services and Alliances segments are not material for separate reporting.

The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. The Company sells these human health vaccines primarily to physicians, wholesalers, physician distributors and government entities. A large component of pediatric and adolescent vaccine sales are made to the U.S. Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the U.S. government. Additionally, the Company sells vaccines to the Federal government for placement into vaccine stockpiles. Sales of vaccines in most major European markets were marketed through the Company’s SPMSD joint venture until its termination on December 31, 2016.

The Company also has an Animal Health segment that discovers, develops, manufactures and markets animal health products, including vaccines, which the Company sells to veterinarians, distributors and animal producers. The Company’s Healthcare Services segment provides services and solutions that focus on engagement, health analytics and clinical services to improve the value of care delivered to patients.

Sales of the Company’s products were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions)	2017		2016		2017		2016
Primary Care and Women’s Health
Cardiovascular
Zetia	$	320	$	671	$	1,021	$	1,985
Vytorin	142		273		565		843
Atozet	59		39		171		96
Adempas	70		48		221		120
Diabetes
Januvia	1,012		1,006		2,799		2,976
Janumet	513		548		1,572		1,624
General Medicine and Women’s Health
NuvaRing	214		195		573		571
Implanon/Nexplanon	155		148		503		446
Follistim AQ	72		101		232		268
Hospital and Specialty
Hepatitis
Zepatier	468		164		1,363		326
HIV
Isentress/Isentress HD	310		372		896		1,050
Hospital Acute Care
Bridion	185		139		495		343
Noxafil	162		147		458		434
Invanz	159		152		445		409
Cancidas	94		142		327		406
Cubicin	91		320		290		969
Primaxin	73		77		206		231
Immunology
Remicade	214		311		651		999
Simponi	219		193		602		581
Oncology
Keytruda	1,047		356		2,512		919
Emend	137		137		413		405
Temodar	68		78		198		216
Diversified Brands
Respiratory
Singulair	161		239		550		705
Nasonex	42		94		266		425
Dulera	59		97		210		331
Other
Cozaar/Hyzaar	128		131		360		389
Arcoxia	80		114		272		342
Fosamax	53		68		180		217
Vaccines ⁽¹⁾
Gardasil/Gardasil 9	675		860		1,675		1,631
ProQuad/M-M-R II/Varivax	519		496		1,273		1,236
Pneumovax 23	229		175		558		403
Zostavax	234		190		547		464
RotaTeq	179		171		525		489
Other pharmaceutical ⁽²⁾	1,013		1,191		3,172		3,398
Total Pharmaceutical segment sales	9,156		9,443		26,101		26,247
Other segment sales ⁽³⁾	1,100		977		3,188		2,862
Total segment sales	10,256		10,420		29,289		29,109
Other ⁽⁴⁾	69		116		400		583
	$	10,325	$	10,536	$	29,689	$	29,692

⁽¹⁾

On December 31, 2016, Merck and Sanofi terminated their equally-owned joint venture, SPMSD, which marketed vaccines in most major European markets. Accordingly, vaccine sales in 2017 include sales in the European markets that were previously part of SPMSD. Amounts for 2016 do not include sales of vaccines sold through SPMSD, the results of which are reflected in equity income from affiliates which is included in Other (income) expense, net. Amounts for 2016 do, however, include supply sales to SPMSD.


⁽²⁾	Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.


⁽³⁾	Represents the non-reportable segments of Animal Health, Healthcare Services and Alliances.


⁽⁴⁾	Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales. Other in the first nine months of 2017 and 2016 also includes $60 million and $75 million, respectively, related to the sale of the marketing rights to certain products.

A reconciliation of segment profits to Income before taxes is as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2017			2016			2017			2016
Segment profits:
Pharmaceutical segment	$	5,929		$	6,162		$	16,722		$	16,698
Other segments	482			389			1,442			1,129
Total segment profits	6,411			6,551			18,164			17,827
Other profits	(78		)	21			107			341
Unallocated:
Interest income	90			87			284			244
Interest expense	(189		)	(170		)	(564		)	(513		)
Equity income from affiliates	23			(27		)	16			(13		)
Depreciation and amortization	(334		)	(365		)	(1,036		)	(1,228		)
Research and development	(1,829		)	(1,444		)	(4,955		)	(4,651		)
Aggregate charge related to the formation of an oncology collaboration with AstraZeneca	(2,350		)	—			(2,350		)	—
Amortization of purchase accounting adjustments	(765		)	(772		)	(2,322		)	(2,933		)
Restructuring costs	(153		)	(161		)	(470		)	(386		)
Gain on sale of certain migraine clinical development programs	—			40			—			40
Other unallocated, net	(626		)	(873		)	(2,232		)	(2,713		)
	$	200		$	2,887		$	4,642		$	6,015

Segment profits are comprised of segment sales less standard costs and certain operating expenses directly incurred by the segments. For internal management reporting presented to the chief operating decision maker, Merck does not allocate materials and production costs, other than standard costs, the majority of research and development expenses or general and administrative expenses, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. In addition, costs related to restructuring activities, as well as the amortization of purchase accounting adjustments are not allocated to segments.

Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits related to third-party manufacturing sales.

Other unallocated, net includes expenses from corporate and manufacturing cost centers, goodwill and intangible asset impairment charges, gains or losses on sales of businesses, expense or income related to changes in the estimated fair value of contingent consideration, and other miscellaneous income or expense items.