Restructuring

9 Months Ended

Sep. 30, 2024

Restructuring and Related Activities [Abstract]

In January 2024, the Company 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 optimize the Animal Health global manufacturing network to improve supply reliability and increase efficiency. The actions contemplated under the 2024 Restructuring Program are expected to be substantially completed by the end of 2031, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $4.0 billion. Approximately 60% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. The remainder of the costs will result in cash outlays, relating primarily to facility shut-down costs. The Company recorded total pretax costs of $279 million and $701 million in the third quarter and first nine months of 2024, respectively, related to the 2024 Restructuring Program, bringing total cumulative pretax costs incurred through September 30, 2024 to $892 million.

In 2019, Merck approved a global restructuring program (2019 Restructuring Program) as part of a worldwide initiative focused on optimizing the Company’s manufacturing and supply network, as well as reducing its global real estate footprint. The Company recorded total pretax costs of $199 million and $532 million in the third quarter and first nine months of 2023, respectively, related to the 2019 Restructuring Program. The actions under the 2019 Restructuring Program were substantially complete at the end of 2023 and, as of January 1, 2024, any remaining activities are being accounted for as part of the 2024 Restructuring Program.

For segment reporting, restructuring charges are unallocated expenses.

The following tables summarize the charges related to the restructuring programs by type of cost:


	Three Months Ended September 30, 2024								Nine Months Ended September 30, 2024
($ in millions)	Accelerated Depreciation		Separation Costs		Other Exit Costs		Total		Accelerated Depreciation		Separation Costs		Other		Total
2024 Restructuring Program
Cost of sales	$	40	$	—	$	152	$	192	$	171	$	—	$	203	$	374
Selling, general and administrative	—		—		31		31		—		—		67		67
Research and development	—		—		—		—		—		—		2		2
Restructuring costs	—		11		45		56		—		122		136		258
	$	40	$	11	$	228	$	279	$	171	$	122	$	408	$	701


	Three Months Ended September 30, 2023								Nine Months Ended September 30, 2023
($ in millions)	Accelerated Depreciation		Separation Costs		Other Exit Costs		Total		Accelerated Depreciation		Separation Costs		Other		Total
2019 Restructuring Program
Cost of sales	$	31	$	—	$	2	$	33	$	74	$	—	$	20	$	94
Selling, general and administrative	5		—		35		40		5		—		88		93
Research and development	—		—		—		—		—		—		1		1
Restructuring costs	—		95		31		126		—		246		98		344
	$	36	$	95	$	68	$	199	$	79	$	246	$	207	$	532

Accelerated depreciation costs primarily relate to manufacturing, research and administrative facilities and equipment to be sold or closed as part of the programs. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. All the sites will continue to operate up through the respective closure dates and, since future undiscounted cash flows are sufficient to recover the respective book values, Merck is recording accelerated depreciation over the revised useful life of the site assets. Anticipated site closure dates, particularly related to manufacturing locations, have been and may continue to be adjusted to reflect changes resulting from regulatory or other factors.

Separation costs are associated with actual headcount reductions, as well as involuntary headcount reductions which were probable and could be reasonably estimated.

Other exit costs in 2024 and 2023 include asset impairment, facility shut-down and other related costs, as well as pretax gains and losses resulting from the sales of facilities and related assets. Additionally, other activity includes certain

employee-related costs associated with pension and other postretirement benefit plans (see Note 10) and share-based compensation.

The following table summarizes the charges and spending relating to restructuring program activities for the nine months ended September 30, 2024:


($ in millions)	Accelerated Depreciation		Separation Costs		Other Exit Costs		Total
Restructuring reserves January 1, 2024	$	—	$	681	$	31	$	712
Expenses	171		122		408		701
(Payments) receipts, net	—		(177)		(122)		(299)
Non-cash activity	(171)		—		(292)		(463)
Restructuring reserves September 30, 2024	$	—	$	626	$	25	$	651