Merck & Co. (MRK) 10-Q 24 Jul 09 2009 Q2 Quarterly report Financial data

Document and Company Informatio

Document and Company Information (USD $)
	6 Months Ended Jun. 30, 2009	Jun. 30, 2008
Document And Company Information [Abstract]
Entity Registrant Name	SCHERING-PLOUGH CORPORATION
Entity Central Index Key	0000310158
Document Type	10-Q
Document Period End Date	2009-06-30
Amendment Flag	false
Amendment Description	N/A
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float (actual number)		$31,979,690,761
Entity Common Stock, Shares Outstanding (actual number)	0

Statements of Condensed Consoli

Statements of Condensed Consolidated Operations (USD $)
In Millions, except Per Share data	3 Months Ended Jun. 30, 2009	3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Net sales	$4,647	$4,921	$9,040	$9,577
Cost of sales	1,620	1,908	3,019	4,044
Selling, general and administrative	1,626	1,870	3,119	3,547
Research and development	863	906	1,667	1,786
Other expense/(income), net	106	134	194	229
Special, merger and acquisition-related charges	29	94	104	117
Equity income	(370)	(493)	(770)	(1,010)
Income before income taxes	773	502	1,707	864
Income tax expense	102	40	231	89
Net income	671	462	1,476	775
Preferred stock dividends	38	38	75	75
Net income available to common shareholders	$633	$424	$1,401	$700
Diluted earnings per common share	0.38	0.26	0.85	0.43
Basic earnings per common share	0.38	0.26	0.85	0.43
Dividends per common share	0.065	0.065	0.13	0.13

1_Statements of Condensed Conso

Statements of Condensed Consolidated Cash Flows (USD $)
In Millions	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Operating Activities:
Net income	$1,476	$775
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	582	1,419
Accrued share-based compensation	81	118
Special, merger and acquisition-related charges and payments	(32)	58
Changes in assets and liabilities:
Accounts receivable	(303)	(407)
Inventories	(277)	(112)
Prepaid expenses and other assets	104	(14)
Accounts payable	89	(21)
Other liabilities	(138)	(432)
Net cash provided by operating activities	1,582	1,384
Investing Activities:
Capital expenditures	(333)	(370)
Dispositions of property and equipment	4	31
Purchases of short-term investments	(1,813)	0
Maturities of short-term investments	407	10
Other, net	14	0
Net cash used for investing activities	(1,721)	(329)
Financing Activities:
Payments of long-term debt	(71)	(325)
Cash dividends paid to common shareholders	(212)	(211)
Cash dividends paid to preferred shareholders	(75)	(75)
Net change in short-term borrowings	(8)	(40)
Stock option exercises	74	4
Other, net	0	(2)
Net cash used for financing activities	(292)	(649)
Effect of exchange rates on cash and cash equivalents	47	20
Net (decrease) / increase in cash and cash equivalents	(384)	426
Cash and cash equivalents, beginning of period	3,373	2,279
Cash and cash equivalents, end of period	$2,989	$2,705

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (USD $)
In Millions	Jun. 30, 2009	Dec. 31, 2008
Current Assets:
Cash and cash equivalents	$2,989	$3,373
Short-term investments	1,411	5
Accounts receivable, net	3,164	2,816
Inventories	3,478	3,114
Deferred income taxes	515	435
Prepaid expenses and other current assets	1,119	1,228
Total current assets	12,676	10,971
Property, plant and equipment	10,785	10,440
Less accumulated depreciation	3,912	3,607
Property, net	6,873	6,833
Goodwill	2,802	2,778
Other intangible assets, net	5,947	6,154
Other assets	1,247	1,381
Total assets	29,545	28,117
Current Liabilities:
Accounts payable	1,755	1,677
Short-term borrowings and current portion of long-term debt	261	245
Income taxes	202	183
Accrued compensation	828	1,010
Other accrued liabilities	2,148	2,078
Total current liabilities	5,194	5,193
Long-term Liabilities:
Long-term debt, net of current portion	7,908	7,931
Deferred income taxes	1,498	1,551
Other long-term liabilities	2,910	2,913
Total long-term liabilities	12,316	12,395
Shareholders' Equity:
2007 Mandatory convertible preferred shares - $1 par value; $250 per share face value; issued: 10 at June 30, 2009 and December 31, 2008	2,500	2,500
Common shares - authorized: 2,400, $.50 par value; issued: 2,127 at June 30, 2009 and 2,118 at December 31, 2008	1,064	1,059
Paid-in capital	5,196	5,045
Retained earnings	10,368	9,181
Accumulated other comprehensive loss	(1,710)	(1,913)
Total	17,418	15,872
Less treasury shares: 493 at June 30, 2009 and 492 at December 31, 2008; at cost	5,383	5,343
Total shareholders' equity	12,035	10,529
Total liabilities and shareholders' equity	$29,545	$28,117

2_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Share data in Millions	Jun. 30, 2009	Dec. 31, 2008
Mandatory convertible preferred shares, par value	1	1
Mandatory convertible preferred shares, face value	$250	$250
Mandatory convertible preferred shares, shares issued	10	10
Common shares, par value	0.5	0.5
Common shares, shares authorized	2,400	2,400
Common shares, shares issued	2,127	2,118
Treasury shares, at cost	493	492

Basis of Presentation

Basis of Presentation
	6 Months Ended Jun. 30, 2009 USD / shares
Basis of Presentation [Abstract]
BASIS OF PRESENTATION	1. BASIS OF PRESENTATION These unaudited Condensed Consolidated Financial Statements of Schering-Plough Corporation and subsidiaries (Schering-Plough), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for reporting on Form10-Q. Certain information and disclosures normally included in financial statements prepared in accordance with U.S.Generally Accepted Accounting Principles have been condensed or omitted pursuant to such SEC rules and regulations. These statements should be read in conjunction with the accounting policies and notes to the consolidated financial statements included in Schering-Ploughs 2008 10-K. In the opinion of Schering-Ploughs management, these financial statements reflect all adjustments necessary, including normal recurring accruals, for a fair presentation of the statements of operations, cash flows and financial position for the interim periods presented. Second quarter and six months ended June30, 2008, income tax expense has been revised from the prior year 10-Q which reflected an overstatement of income tax expense relating to the accounting for the purchase of Organon BioSciences N.V. (OBS). This change resulted in a reduction of income tax expense and a corresponding increase in net income and net income available to common shareholders of $26million for the second quarter of 2008 and $49million for the six months ended June30, 2008, along with an associated increase in per share amounts. In November 2007, Schering-Plough acquired OBS, a company that discovers, develops and manufactures human prescription and animal health products. Schering-Plough has evaluated all subsequent events through July24, 2009, the date of filing of this 10-Q. Impact of Recently Issued Accounting Standards As of January1, 2009, Schering-Plough implemented Financial Accounting Standards Board (FASB) Staff Position (FSP) Emerging Issues Task Force (EITF) No.03-6-1 (FSP EITF03-6-1), Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. FSP EITF03-6-1 requires Schering-Plough to treat unvested deferred stock units as participating securities in accordance with the two-class method in the calculation of both basic and diluted earnings per share. FSP EITF03-6-1 must be applied retrospectively. The effect of the retrospective application of FSP EITF03-6-1 was not material to Schering-Ploughs earnings per share in 2008, 2007 or 2006. As of June30, 2009, Schering-Plough implemented FASB Staff Position FAS107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, (FSP FAS107-1 and APB 28-1). FSP FAS107-1 and APB 28-1, amends FASB Statement No.107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments in interim as well as in annual financial statements. This FSP also amends APB Opinion No.28, Interim Financial Reporting, to require those disclosures in all interim financial statements. The FSP is effective for periods ending after June15, 2009. In the second quarter of 2009, Schering-Plough implem

Productivity Transformation Pro

Productivity Transformation Program
	6 Months Ended Jun. 30, 2009 USD / shares
Productivity Transformation Program [Abstract]
PRODUCTIVITY TRANSFORMATION PROGRAM	2. PRODUCTIVITY TRANSFORMATION PROGRAM Schering-Ploughs Productivity Transformation Program (PTP) is designed to reduce and avoid costs and increase productivity. The following table summarizes activities reflected in the condensed consolidated financial statements related to the Productivity Transformation Program, for the six months ended June30, 2009: Charges Included in Special, Merger and Acquisition- Non-cash Research and Related Total Cash Charges Accrued Cost of Sales Development Charges Charges Payments /(Credits) Liability (Dollars in millions) Accrued liability at January1, 2009 $ 155 Employee termination costs $ $ $ 74 $ 74 $ (113 ) $ (39 ) Accelerated depreciation 7 2 9 9 Foreign exchange and other (1 ) (4 ) (5 ) Total $ 7 $ 2 $ 74 $ 83 $ (114 ) $ 5 Accrued liability at June30, 2009 $ 111 For the three months ended June30, 2009, special, merger and acquisition-related costs totaled $29million, of which $18million related to employee termination costs and $11million related to the planned merger with Merck Co., Inc (Merck). Planned merger costs are not included in the table above. For the six months ended June30, 2009, special, merger and acquisition-related costs totaled $104million, of which $74million related to employee termination costs and $30million related to the planned merger with Merck. The following table summarizes activities reflected in the condensed consolidated financial statements related to the Productivity Transformation Program, for the six months ended June30, 2008: Special, and Acquisition- Related Total Cash Non-cash Accrued Charges Charges Payments Charges Liability (Dollars in millions) Accrued liability at January1, 2008 $ 174 Employee termination costs $ 84 $ 84 $ (97 ) $ 42 29

Equity Income

Equity Income
	6 Months Ended Jun. 30, 2009 USD / shares
Equity Income [Abstract]
EQUITY INCOME	3. EQUITY INCOME In May 2000, Schering-Plough and Merck entered into two separate sets of agreements to jointly develop and market certain products in the U.S.including (1)two cholesterol-lowering drugs and (2)an allergy/asthma drug. In December 2001, the cholesterol agreements were expanded to include all countries of the world except Japan. In general, the companies agreed that the collaborative activities under these agreements would operate in a virtual joint venture to the maximum degree possible by relying on the respective infrastructures of the two companies. These agreements generally provide for equal sharing of development costs and for co-promotion of approved products by each company. The cholesterol agreements provide for Schering-Plough and Merck to jointly develop and commercialize ezetimibe in the cholesterol management field: i.as a once-daily monotherapy (managed as ZETIA in the U.S.and Asia and EZETROL in Europe); ii.in co-administration with various approved statin drugs;and iii.as a fixed-combination tablet of ezetimibe and simvastatin (Zocor), Mercks cholesterol-modifying medicine. This combination medication (ezetimibe/simvastatin) is managed as VYTORIN in the U.S.and as INEGY in many international countries. ZETIA/EZETROL (ezetimibe) and VYTORIN/INEGY (the combination of ezetimibe/simvastatin) are approved for use in the U.S.and have been launched in many international markets. Schering-Plough utilizes the equity method of accounting in recording its share of activity from the Merck/Schering-Plough cholesterol joint venture. As such, Schering-Ploughs net sales do not include the sales of the joint venture. The cholesterol joint venture agreements provide for the sharing of operating income generated by the joint venture based upon percentages that vary by product, sales level and country. In the U.S.market, Schering-Plough receives a greater share of profits on the first $300million of annual ZETIA sales. Above $300million of annual ZETIA sales, Merck and Schering-Plough generally share profits equally. Schering-Ploughs allocation of the joint venture income is increased by milestones recognized. Further, either companys share of the joint ventures income from operations is subject to a reduction if that company fails to perform a specified minimum number of physician details in a particular country. The companies agree annually to the minimum number of physician details by country. The companies bear the costs of their own general sales forces and commercial overhead in marketing joint venture products around the world. In the U.S., Canada and Puerto Rico, the cholesterol agreements provide for a reimbursement to each company for physician details that are set on an annual basis, and in Italy, a contractual amount is included in the profit sharing calculation that is not reimbursed. In the U.S., Canada and Puerto Rico this amount is equal to each companys agreed physician details multiplied by a contractual fixed fee. Schering-Plough reports these amounts as part of equity income from the cholesterol joint venture. These amounts do not represent a reimbursement

Share Based Compensation

Share Based Compensation
	6 Months Ended Jun. 30, 2009 USD / shares
Share Based Compensation Disclosure [Abstract]
SHARE-BASED COMPENSATION	4. SHARE-BASED COMPENSATION A summary of the options, deferred stock units and performance-based deferred stock units granted during the three and six months ended June30, 2009 and 2008 is as follows: Three Months Ended June30, Six Months Ended June30, 2009 2008 2009 2008 Weighted- Weighted- Weighted- Weighted- Number of Average Average Average Average Underlying Shares Underlying Grant-Date Underlying Grant-Date Underlying Grant-Date Underlying Grant-Date in Thousands Shares Fair Value Shares Fair Value Shares Fair Value Shares Fair Value Stock options 7,818 $ 7.67 7,747 $ 6.00 7,820 $ 7.67 13,584 $ 5.35 Deferred stock units 4,591 22.91 4,613 18.87 4,610 22.89 4,708 18.49 Performance-based deferred stock units 30 16.57 1,043 27.93 1,064 19.35 Total Awards 12,409 12,390 13,473 19,356 Options generally become exercisable in equal annual installments over a three-year period. The deferred stock units generally vest at the end of a three-year period from the date they were granted. The performance-based deferred stock units vest at the end of a three-year performance period if specific pre-established levels of performance, market conditions and service are met. The weighted-average assumptions used in the Black-Scholes option pricing model for the three and six months ended June30, 2009 and 2008, were as follows: Three Months Ended Six Months Ended June30, June30, 2009 2008 2009 2008 Dividend yield 1.1 % 1.1 % 1.1 % 1.1 % Volatility 41.5 % 36.7 % 41.5 % 31.4 % Risk-free interest rate 1.9 % 3.0 % 1.9 % 2.8 % Expected term of options (in years) 4.5 4.5 4.5 4.5 Total compensation expense related to stock options, deferred stock units and performance-based deferred stock units for the three and six months ended June30, 2009 was $34million and $81million, respectively. Total compensation expense related to stock options, deferred stock units and performance-based deferred stock units for the three and six months ended June30, 2008 was $59million and $119million, respectively. At

Other Expense

Other Expense (Income), Net
	6 Months Ended Jun. 30, 2009 USD / shares
Other Expense / (Income), Net [Abstract]
OTHER EXPENSE/(INCOME), NET	5. OTHER EXPENSE/(INCOME), NET The components of other expense/(income), net are as follows: Three Months Ended Six Months Ended June30, June30, 2009 2008 2009 2008 (Dollars in millions) Interest cost incurred $ 113 $ 145 $ 229 $ 288 Less: amount capitalized on construction (3 ) (5 ) (10 ) (10 ) Interest expense 110 140 219 278 Interest income (7 ) (17 ) (11 ) (39 ) Foreign exchange losses/(gains) 3 11 (14 ) 7 Other, net (17 ) Total other expense/(income), net $ 106 $ 134 $ 194 $ 229 For the six months ended June30, 2008, Schering-Plough recognized a gain of $17million ($12million after tax) on the sale of a manufacturing site.

Income Taxes

Income Taxes
	6 Months Ended Jun. 30, 2009 USD / shares
Income Taxes [Abstract]
INCOME TAXES	6. INCOME TAXES Schering-Plough expects to report a U.S.Net Operating Loss (NOL) carryforward of approximately $1.3billion on its 2008 tax return, which will be available to offset future U.S.taxable income, in varying amounts, through 2028. This U.S.NOL carryforward could be materially reduced after examination of Schering-Ploughs income tax returns by the Internal Revenue Service (IRS). Schering-Plough continues to maintain a valuation allowance against its U.S.deferred tax assets, as management cannot conclude that it is more likely than not the benefit of the U.S.net deferred tax assets can be realized.

Retirement Plans and Other Post

Retirement Plans and Other Post Retirement Benefits
	6 Months Ended Jun. 30, 2009 USD / shares
Retirement Plans and Other Post-Retirement Benefits [Abstract]
RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS	7. RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS Schering-Plough has defined benefit pension plans covering eligible employees in the U.S.and certain foreign countries. In addition, Schering-Plough provides post-retirement medical and life insurance benefits primarily to its eligible U.S.retirees and their dependents through its post-retirement benefit plans. The components of net pension expense were as follows: Three Months Ended Six Months Ended June30, June30, 2009 2008 2009 2008 (Dollars in millions) Service cost $ 52 $ 55 $ 103 $ 108 Interest cost 59 59 116 118 Expected return on plan assets (57 ) (60 ) (113 ) (119 ) Amortization, net 10 7 21 13 Settlement Net pension expense $ 64 $ 61 $ 127 $ 120 The components of other post-retirement benefits expense were as follows: Three Months Ended Six Months Ended June30, June30, 2009 2008 2009 2008 (Dollars in millions) Service cost $ 6 $ 7 $ 12 $ 14 Interest cost 9 9 18 19 Expected return on plan assets (3 ) (3 ) (6 ) (6 ) Amortization, net (1 ) 1 (2 ) 3 Net other post-retirement benefits expense $ 11 $ 14 $ 22 $ 30 For the three and six months ended June30, 2009, Schering-Plough contributed $45million and $185million, respectively, to its retirement plans. For the three and six months ended June30, 2008, Schering-Plough contributed $48million and $96million, respectively, to its retirement plans. Schering-Plough expects to contribute approximately $420million to its retirement plans during the remainder of 2009.

Earnings Per Common Share

Earnings Per Common Share
	6 Months Ended Jun. 30, 2009 USD / shares
Earnings Per Common Share [Abstract]
EARNINGS PER COMMON SHARE	8. EARNINGS PER COMMON SHARE As of January1, 2009, Schering-Plough implemented FSP EITF03-6-1. The provisions of FSP EITF03-6-1 require Schering-Plough to treat unvested deferred stock units as participating securities in accordance with the two-class method in the calculation of both basic and diluted earnings per share. FSP EITF03-6-1 must be applied retrospectively. The effect of the retrospective application of FSP EITF03-6-1 was not material to Schering-Ploughs earnings per share in 2008. The following tables summarize the components of basic and diluted earnings per common share computations. Three Months Ended Six Months Ended June30, June30, 2009 2008 2009 2008 (Dollars in millions) Reconciliation of undistributed earnings: Net income available to common shareholders $ 633 $ 424 $ 1,401 $ 700 Less: Dividends on common stock 106 106 212 211 Less: Dividends on unvested participating securities 1 1 2 3 Undistributed earnings(1) $ 526 $ 317 $ 1,187 $ 486 Three Months Ended Six Months Ended June30, June30, 2009 2008 2009 2008 (Dollars and shares in millions) Basic earnings per common share computation: Net income available to common shareholders $ 633 $ 424 $ 1,401 $ 700 Less: Dividend equivalents on unvested participating securities 1 1 2 2 Less: Undistributed earnings allocated to unvested participating securities(1) 6 4 13 6 Undistributed earnings allocated to common shareholders $ 626 $ 419 $ 1,386 $ 692 EPS denominator: Weighted-average shares outstanding for basic earnings per common share 1,632 1,624 1,630 1,623 Basic earnings per common share $ 0.38 $ 0.26 $ 0.85 $ 0.43 Three Months Ended Six Months Ended June30, June30, 2009 2008 2009 2008 (Dollars and shares in millions) Diluted earnings per common share computation: Net income available to common shareholders $ 633 $ 424 $ 1,401 $ 700 Add: Preferred stock dividends 75 Less: Dividend equivalents on unvested participating securities 1 1 2

Comprehensive Income

Comprehensive Income
	6 Months Ended Jun. 30, 2009 USD / shares
Comprehensive Income [Abstract]
COMPREHENSIVE INCOME	9. COMPREHENSIVE INCOME Comprehensive income is comprised of the following: Three Months Ended Six Months Ended June30, June30, 2009 2008 2009 2008 (Dollars in millions) Net income $ 671 $ 462 $ 1,476 $ 775 Foreign currency translation adjustment 629 (1 ) 194 450 Unrealized gain (loss) on investments available for sale 13 4 9 (5 ) Total comprehensive income $ 1,313 $ 465 $ 1,679 $ 1,220

Inventories

Inventories
	6 Months Ended Jun. 30, 2009 USD / shares
Inventories [Abstract]
INVENTORIES	10. INVENTORIES Inventories consisted of the following: June30, December31, 2009 2008 (Dollars in millions) Finished products $ 1,150 $ 1,212 Goods in process 1,928 1,428 Raw materials and supplies 606 679 Total inventories and inventory classified in other non-current assets $ 3,684 $ 3,319 For the six months ended June30, 2008, $762million of amortization of the fair value step-up recorded as part of the OBS acquisition are included in Depreciation and amortization in the condensed consolidated statements of cash flows. Included in Other assets (non-current) at June30, 2009 and December31, 2008 was $206million and $205million, respectively, of inventory not expected to be sold within one year.

Goodwill and Other Intangible A

Goodwill and Other Intangible Assets
	6 Months Ended Jun. 30, 2009 USD / shares
Goodwill and Other Intangible Assets [Abstract]
GOODWILL AND OTHER INTANGIBLE ASSETS	11. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill was $2,802million at June30, 2009 as compared to $2,778million at December31, 2008. The increase was due to foreign currency translation. The components of other intangible assets, net are as follows: June30, 2009 December31, 2008 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Net Amount Amortization Net (Dollars in millions) Patents $ 3,852 $ 609 $ 3,243 $ 3,803 $ 418 $ 3,385 Trademarks and other 2,782 251 2,531 2,756 180 2,576 Licenses and other 800 627 173 796 603 193 Total other intangible assets $ 7,434 $ 1,487 $ 5,947 $ 7,355 $ 1,201 $ 6,154 These intangible assets are amortized on the straight-line method over their respective useful lives. The residual value of intangible assets is estimated to be zero. Amortization expense for the three months ended June30, 2009 and 2008 was $133million and $148million, respectively and $262million and $291million for the six months ended June30, 2009 and 2008, respectively. Annual amortization expenses related to these intangible assets for the years 2009 to 2013 is expected to be approximately $524million.

Borrowings

Borrowings
	6 Months Ended Jun. 30, 2009 USD / shares
Borrowings [Abstract]
BORROWINGS	12. BORROWINGS Schering-Ploughs outstanding borrowings at June30, 2009 and December31, 2008 were as follows: June30, December31, 2009 2008 (Dollars in millions) Short-term Short-term borrowings and current portion of long-term debt $ 260 $ 244 Current portion of capital leases 1 1 Total short-term borrowings and current portion of long-term debt $ 261 $ 245 Long-term 5.00%senior unsecured Euro-denominated notes due 2010 $ 707 $ 698 Floating rate Euro-denominated term loan due 2012 636 698 5.30%senior unsecured notes due 2013 1,248 1,247 5.375%senior unsecured Euro-denominated notes due 2014 2,118 2,090 6.00%senior unsecured notes due 2017 996 995 6.50%senior unsecured notes due 2033 1,143 1,143 6.55%senior unsecured notes due 2037 994 994 Capital leases 20 19 Other long-term borrowings 46 47 Total long-term borrowings, net of current portion $ 7,908 $ 7,931 The decrease in the Floating rate Euro-denominated term loan due 2012 was due to an early principal repayment of Euro50million in the first quarter of 2009. No prepayment penalty was incurred relating to this principal repayment. The other changes in outstanding Euro-denominated borrowings at June30, 2009 were due to foreign currency translation on Euro-denominated debt balances.

Financial Instruments

Financial Instruments
	6 Months Ended Jun. 30, 2009 USD / shares
Financial Instruments [Abstract]
FINANCIAL INSTRUMENTS	13. FINANCIAL INSTRUMENTS Schering-Plough adopted FSP FAS107-1 and APB Opinion 28-1 in the second quarter of 2009. The guidance requires disclosures about fair value of financial instruments in interim as well as annual financial statements. The table below presents the carrying values and estimated fair values for certain of Schering-Ploughs financial instruments at June30, 2009 and December31, 2008. Estimated fair values were determined based on market prices, where available, or dealer quotes. The carrying values of all other financial instruments, including cash and cash equivalents, approximated their estimated fair values at June30, 2009 and December31, 2008. June30, 2009 December31, 2008 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value (Dollars in millions) ASSETS: Short-term investments $ 1,411 $ 1,411 $ 5 $ 5 Long-term investments(1) 159 159 157 157 LIABILITIES: Short-term borrowings and current portion of long-term debt $ 261 $ 261 $ 245 $ 245 Long-term debt 7,908 8,386 7,931 7,891 .(1) Long-term investments, which are included in other non-current assets, primarily consist of debt and equity securities held in non-qualified trusts to fund long-term employee benefit obligations. The long-term employee benefit obligations are included as liabilities in the condensed consolidated balance sheets. These assets can only be used to fund the related employee benefit obligations.

Fair Value Measurements

Fair Value Measurements
	6 Months Ended Jun. 30, 2009 USD / shares
Fair Value Measurements [Abstract]
FAIR VALUE MEASUREMENTS	14. FAIR VALUE MEASUREMENTS Schering-Ploughs condensed consolidated balance sheet at June30, 2009 includes the following assets that are measured at fair value on a recurring basis: Quoted Prices in Active Markets for Identical Significant Significant Total Assets and Other Observable Unobservable Fair Value at Liabilities Inputs Inputs June30, 2009 (Level 1) (Level 2) (Level 3) (Dollars in millions) Assets Securities held for employee compensation $ 104 $ 104 $ $ Other 8 5 3 Total assets $ 112 $ 109 $ 3 $ At June30, 2009 there were no liabilities that were subject to fair value measurement. The majority of Schering-Ploughs assets measured at fair value on a recurring basis are measured using unadjusted quoted prices in active markets for identical items (Level1)as inputs, multiplied by the number of units held at the balance sheet date. As of June30, 2009, assets with fair values measured using significant other observable inputs (Level2)include measurements using quoted prices for identical items in markets that are not active and measurements using inputs that are derived principally from or corroborated by observable market data.

Segment Data

Segment Data
	6 Months Ended Jun. 30, 2009 USD / shares
Segement Data [Abstract]
SEGMENT DATA	15. SEGMENT DATA Schering-Plough has three reportable segments: Prescription Pharmaceuticals, Animal Health and Consumer Health Care. The segment sales and profit data that follow are consistent with Schering-Ploughs current management reporting structure. The Prescription Pharmaceuticals segment discovers, develops, manufactures and markets human pharmaceutical products. The Animal Health segment discovers, develops, manufactures and markets animal health products. The Consumer Health Care segment develops, manufactures and markets over-the-counter, foot care and sun care products, primarily in the U.S. Net sales by segment: Three Months Ended Six Months Ended June30, June30, 2009 2008 2009 2008 (Dollars in millions) Prescription Pharmaceuticals $ 3,589 $ 3,702 $ 6,968 $ 7,259 Animal Health 677 818 1,307 1,540 Consumer Health Care 381 401 765 778 Consolidated net sales $ 4,647 $ 4,921 $ 9,040 $ 9,577 Profit by segment: Three Months Ended Six Months Ended June30, June30, 2009 2008(1) 2009 2008(1) (Dollars in millions) Prescription Pharmaceuticals $ 813 $ 746 $ 1,766 $ 1,260 Animal Health 117 4 244 (82 ) Consumer Health Care 60 63 177 169 Corporate and other(2) (217 ) (311 ) (480 ) (483 ) Income before income taxes $ 773 $ 502 $ 1,707 $ 864 (1) For the three months ended June30, 2009, the Prescription Pharmaceuticals and the Animal Health segments profits include expense of $102million and $33million, respectively, primarily related to the amortization of fair values of intangible assets acquired as part of the OBS transaction. For the six months ended June30, 2009, the Prescription Pharmaceuticals and the Animal Health segments profits includes expense of $199million and $65million, respectively, related to the amortization of fair values of intangible assets acquired as part of the OBS transaction. For the three months ended June30, 2008, the Prescription Pharmaceuticals and the Animal Health segments profits include expense of $171million and $186million, respectively, related to purchase accounting items from the OBS transaction. For the six months ended June30, 2008, the Prescription Pharmaceuticals segments profit and the Animal Health segments loss includes expense of $603million and $445million, respectively, related to purchase accounting items from the OBS transaction. (2) For the three and six mont

Product Licenses

Product Licenses
	6 Months Ended Jun. 30, 2009 USD / shares
Product Licenses [Abstract]
PRODUCT LICENSES	16. PRODUCT LICENSES In December 2007, Schering-Plough and Centocor revised their distribution agreement regarding the development, commercialization and distribution of both REMICADE and golimumab, extending Schering-Ploughs rights to exclusively market REMICADE to match the duration of Schering-Ploughs exclusive marketing rights for golimumab. Effective upon regulatory approval of golimumab in the EU, Schering-Ploughs marketing rights for both products will now extend for 15years after the first commercial sale of golimumab within the EU. After operating expenses and subject to certain adjustments, Schering-Plough currently is entitled to receive an approximately 60percent share of profits on Schering-Ploughs distribution in the Schering-Plough marketing territory. Beginning in 2010, subject to the approval of golimumab within the EU, share of profits will change over time to a 50percent share of profits by 2014 for both products and the share of profits will remain fixed thereafter for the remainder of the term. The changes to the duration of REMICADE marketing rights and the profit sharing arrangement for the products are all conditioned on approval of golimumab being granted in the EU prior to September1, 2014. Schering-Plough may independently develop and market golimumab for a Crohns disease indication in its territories, with an option for Centocor to participate. In addition, Schering-Plough and Centocor agreed to utilize an autoinjector device in the commercialization of golimumab and further agreed to share its development costs.

Legal, Environmental and Regula

Legal, Environmental and Regulatory Matters
	6 Months Ended Jun. 30, 2009 USD / shares
Legal, Environmental and Regulatory Matters [Abstract]
LEGAL, ENVIRONMENTAL AND REGULATORY MATTERS	17. LEGAL, ENVIRONMENTAL AND REGULATORY MATTERS Schering-Plough is involved in various claims, investigations and legal proceedings. Schering-Plough records a liability for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. Schering-Plough adjusts its liabilities for contingencies to reflect the current best estimate of probable loss or minimum liability, as the case may be. Where no best estimate is determinable, Schering-Plough records the minimum amount within the most probable range of its liability. Expected insurance recoveries have not been considered in determining the amounts of recorded liabilities for environmental related matters. If Schering-Plough believes that a loss contingency is reasonably possible, rather than probable, or the amount of loss cannot be estimated, no liability is recorded. However, where a liability is reasonably possible, disclosure of the loss contingency is made. Schering-Plough reviews the status of all claims, investigations and legal proceedings on an ongoing basis, including related insurance coverages. From time to time, Schering-Plough may settle or otherwise resolve these matters on terms and conditions management believes are in the best interests of Schering-Plough. Resolution of any or all claims, investigations and legal proceedings, individually or in the aggregate, could have a material adverse effect on Schering-Ploughs condensed consolidated results of operations, cash flows or financial condition. Except for the matters discussed in the remainder of this Note, the recorded liabilities for contingencies at June30, 2009, and the related expenses incurred during the three and six months ended June30, 2009, were not material. In the opinion of management, based on the advice of legal counsel, the ultimate outcome of these matters, except matters discussed in the remainder of this Note, is not expected to have a material impact on Schering-Ploughs consolidated results of operations, cash flows or financial condition. AWP Litigation and Investigations Schering-Plough continues to respond to existing and new litigation by certain states and private payors and investigations by the Department of Health and Human Services, the Department of Justice and several states into industry and Schering-Plough practices regarding average wholesale price (AWP). Schering-Plough is cooperating with these investigations. These litigations and investigations relate to whether the AWP used by pharmaceutical companies for certain drugs improperly exceeds the average prices paid by providers and, as a consequence, results in unlawful inflation of certain reimbursements for drugs by state programs and private payors that are based on AWP. The complaints allege violations of federal and state law, including fraud, Medicaid fraud and consumer protection violations, among other claims. In the majority of cases, the plaintiffs are seeking class certifications. In some cases, classes have been certified. The outcome of these litigations and investigations could include substantial damages, the imposition

Merger Agreement With Merck & C

Merger Agreement With Merck & Co., Inc.
	6 Months Ended Jun. 30, 2009 USD / shares
Merger Agreement [Abstract]
MERGER AGREEMENT WITH MERCK & CO., INC.	18. MERGER AGREEMENT WITH MERCK CO., INC. On March9, 2009 Merck Co., Inc. (Merck) and Schering-Plough announced that their Boards of Directors had unanimously approved a definitive merger agreement under which Merck and Schering-Plough will combine, under the name Merck, in a stock and cash transaction. The merger agreement was filed as an exhibit to Schering-Ploughs Form8-K dated March11, 2009. Under the terms of the agreement, Schering-Plough shareholders will receive 0.5767shares and $10.50 in cash for each share of Schering-Plough. Each Merck share will automatically become a share of the combined company. The transaction is subject to approval by Merck and Schering-Plough shareholders and the satisfaction of customary closing conditions and regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as clearance by the European Commission (EC) under the EC Merger Regulation and certain other foreign jurisdictions. Merck and Schering-Plough expect to complete the transaction in the fourth quarter of 2009.