Merck & Co.

Analyst Listing

The following analysts provide coverage for the subject firm as of May 2016:

Broker	Analyst	Analyst Email
BMO Capital Markets	Alex Arfaei	alex.arfaei@bmo.com
Berenberg	Alistair Campbell	alistair.campbell@berenberg.com
Morningstar	Damien Conover	damien.conover@morningstar.com
Argus Research	David Toung	dtoung@argusresearch.com
Societe Generale	Florent Cespedes	florent.cespedes@sgcib.com
Deutsche Bank Research	Gregg Gilbert	tony.butler@guggenheimpartners.com
Erste Group	Hans Engel	hans.engel@erstegroup.com
Jefferies	Jeffrey Holford	jholford@jefferies.com
SunTrust Robinson Humphrey	John T. Boris	john.t.boris@suntrust.com
Evercore ISI	Mark Schoenebaum	mark.schoenebaum@evercoreisi.com
Piper Jaffray	Richard J. Purkiss	richard.j.purkiss@pjc.com
Leerink Partners	Seamus Fernandez	seamus.fernandez@leerink.com
Cowen & Company	Steve Scala	steve.scala@cowen.com
Bernstein Research	Tim Anderson	tim.anderson@bernstein.com
Guggenheim Securities	Tony Butler	tony.butler@guggenheimpartners.com
Credit Suisse	Vamil Divan	vamil.divan@credit-suisse.com

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Primary Input Data

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Derived Input Data

Derived Input	Label	2015 Value	2016 Value	Equational Form
Net Operating Profit Less Adjusted Taxes	NOPLAT	4,813	6,819	$NOPLAT\, =\, EBIT\, x\, (1 \,-\, Avg \,\,Tax\,\, Rate\,\, on\,\, EBIT)$
Free Cash Flow	FCF	2,129	1,769	$FCF\,=NOPLAT\,+\,Non-Cash\,Expenses-\Delta NWC\,-\,NCS$
Tax Shield	TS	118	107	$TS\,=\,Interest\,\,Paid\,\,x\,\, Avg \,\,Tax\,\,Rate\,\, on\,\, Pre-Tax\,\, Income$
Invested Capital	IC	82,576	78,173	$IC\,=\,Fixed\,\,Operating\,\,Assets\,\,+\,\,Net\,\, Working\,\, Capital$
Return on Invested Capital	ROIC	5.83%	8.72%	$ROIC\,=\,\frac { NOPLAT }{ IC }$
Net Investment	NetInv	9,382	1,038	$NetInv\,=\,{ {IC}_{1}}-{{IC}_{0}}+Depreciation$
Investment Rate	IR	194.92%	15.22%	$IR\,=\,\frac {NetInv}{NOPLAT}$
Weighted Average Cost of Capital	WACC_Market	12.97%	10.79%	$WACC\,=\,\frac { E }{ V } { R }_{ E }\,+\,\frac { P }{ V } { R }_{ P }\,+\,\frac { D }{ V } { R }_{ D }\left( 1- Avg\,\, Tax\,\,Rate\,\,on\,\,Pre-Tax\,\,Income \right)$
Weighted Average Cost of Capital	WACC_Book	7.73%	7.21%
Enterprise value	EV_Market	159,459	171,639	$EV\,=\,Market\,\,Cap\,\,Equity\,+\,\,Long\,\,Term\,\,Debt\,-\,Cash$
Enterprise value	EV_Book	156,487	171,751
Long-Run Growth	g = IR x ROIC	11.36%	1.33%	Long-run growth rates of the income variable are used in the Continuing Value portion of the valuation models.
Long-Run Growth	g = % $\Delta$ GDP	2.50%	2.50%
Margin from Operations	M	19.10%	26.56%	$M\,\,=\,\,\frac{EBIT}{SALES}$
Depreciation/Amortization Rate	D	46.26%	34.15%	$D\,\,=\,\,\frac{D+A}{EBITDA}$

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Valuation Multiple Outcomes

The outcomes presented in this study are the result of original input data, derived data, and synthesized inputs.

Equational Form	Observed Value		Single-stage multiple g solution		Two-stage valuation model g solution
Equational Form	12/31/2015	12/31/2016	12/31/2015	12/31/2016	12/31/2015	12/31/2016
EV/SALES $\frac {EV}{Sales} \,= \,\frac{ROIC\, -\, g}{ROIC\,(WACC\,-\,g)}\,(1\,-\,T)\,(M)$	4.11	4.35	20.64%	12.52%	17.39%	11.57%
EV/EBITDA $\frac {EV}{EBITDA} \,= \,\frac{ROIC\, -\, g}{ROIC\,(WACC\,-\,g)}\,(1\,-\,T)\,(1\,-\,D)$	11.57	10.77	20.64%	12.52%	17.39%	11.57%
EV/NOPLAT $\frac {EV}{NOPLAT} \,= \,\frac{ROIC\, -\, g}{ROIC\,(WACC\,-\,g)}$	33.13	25.17	20.64%	12.52%	17.39%	11.57%
EV/FCF_OPS $\frac {EV}{FCF_{OPS}} \,= \,\frac{ROIC\, -\, g}{ROIC\,(WACC\,-\,g)}\,(1\,-\,T)$	74.91	97.03	20.64%	12.52%	17.39%	11.57%
EV/EBIT $\frac {EV}{EBIT} \,= \,\frac{ROIC\, -\, g}{ROIC\,(WACC\,-\,g)}\,(1\,-\,T)$	21.53	16.36	20.64%	12.52%	17.39%	11.57%
EV/IC $\frac {EV}{IC} \,= \,\frac{ROIC\, -\, g}{WACC\,-\,g}$	1.93	2.20	20.64%	12.52%	17.39%	11.57%

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