Merck & Co. (MRK) 10-Q 29 Oct 09 2009 Q3 Quarterly report Financial data

Document and Company Informatio

Document and Company Information (USD $)
	9 Months Ended Sep. 30, 2009	Jun. 30, 2008
Document And Company Information [Abstract]
Entity Registrant Name	SCHERING PLOUGH CORP
Entity Central Index Key	0000310158
Document Type	10-Q
Document Period End Date	2009-09-30
Amendment Flag	false
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)	1,639,151,392

Statements of Condensed Consoli

Statements of Condensed Consolidated Operations (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Sep. 30, 2009	3 Months Ended Sep. 30, 2008	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
Net sales	$4,499	$4,576	$13,539	$14,154
Cost of sales	1,719	1,737	4,738	5,782
Selling, general and administrative	1,511	1,660	4,629	5,208
Research and development	913	893	2,580	2,679
Other expense/(income), net	102	(39)	297	189
Special, merger and acquisition-related charges	29	101	133	218
Equity income	(387)	(434)	(1,157)	(1,444)
Income before income taxes	612	658	2,319	1,522
Income tax expense	97	44	328	133
Net income	515	614	1,991	1,389
Preferred stock dividends	38	38	113	113
Net income available to common shareholders	$477	$576	$1,878	$1,276
Diluted earnings per common share	0.29	0.35	1.13	0.78
Basic earnings per common share	0.29	0.35	1.14	0.78
Dividends per common share	0.065	0.065	0.195	0.195

1_Statements of Condensed Conso

Statements of Condensed Consolidated Cash Flows (Unaudited) (USD $)
In Millions	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
Operating Activities:
Net income	$1,991	$1,389
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	929	1,813
Accrued share-based compensation	135	170
Special, merger and acquisition-related charges and payments	(54)	115
Gain on sale of divested products	0	(160)
Changes in assets and liabilities:
Accounts receivable	(179)	(132)
Inventories	(129)	(135)
Prepaid expenses and other assets	120	(22)
Accounts payable	28	16
Other liabilities	(217)	(479)
Net cash provided by operating activities	2,624	2,575
Investing Activities:
Capital expenditures	(522)	(542)
Dispositions of property and equipment	48	33
Contributions to benefit-related trusts	(367)	0
Proceeds from divested products, net	23	241
Purchases of short-term investments	(2,035)	0
Maturities of short-term investments	1,554	27
Other, net	(10)	(3)
Net cash used for investing activities	(1,309)	(244)
Financing Activities:
Payments of long-term debt	(71)	(791)
Cash dividends paid to common shareholders	(318)	(317)
Cash dividends paid to preferred shareholders	(113)	(113)
Net change in short-term borrowings	(122)	(207)
Stock option exercises	167	15
Other, net	0	(3)
Net cash used for financing activities	(457)	(1,416)
Effect of exchange rates on cash and cash equivalents	81	(35)
Net increase in cash and cash equivalents	939	880
Cash and cash equivalents, beginning of period	3,373	2,279
Cash and cash equivalents, end of period	$4,312	$3,159

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions	Sep. 30, 2009	Dec. 31, 2008
Current Assets:
Cash and cash equivalents	$4,312	$3,373
Short-term investments	487	5
Accounts receivable, net	3,127	2,816
Inventories	3,459	3,114
Deferred income taxes	578	435
Prepaid expenses and other current assets	1,203	1,228
Total current assets	13,166	10,971
Property, plant and equipment	11,012	10,440
Less accumulated depreciation	4,088	3,607
Property, net	6,924	6,833
Goodwill	2,879	2,778
Other intangible assets, net	5,981	6,154
Other assets	1,597	1,381
Total assets	30,547	28,117
Current Liabilities:
Accounts payable	1,709	1,677
Short-term borrowings and current portion of long-term debt	185	245
Income taxes	232	183
Accrued compensation	967	1,010
Other accrued liabilities	1,996	2,078
Total current liabilities	5,089	5,193
Long-term Liabilities:
Long-term debt, net of current portion	8,033	7,931
Deferred income taxes	1,523	1,551
Other long-term liabilities	3,002	2,913
Total long-term liabilities	12,558	12,395
Shareholders' Equity:
2007 Mandatory convertible preferred shares - $1 par value; $250 per share face value; issued: 10 at September 30, 2009 and December 31, 2008	2,500	2,500
Common shares - authorized: 2,400, $.50 par value; issued: 2,132 at September 30, 2009 and 2,118 at December 31, 2008	1,066	1,059
Paid-in capital	5,340	5,045
Retained earnings	10,737	9,181
Accumulated other comprehensive loss	(1,360)	(1,913)
Total	18,283	15,872
Less treasury shares: 493 at September 30, 2009 and 492 at December 31, 2008; at cost	5,383	5,343
Total shareholders' equity	12,900	10,529
Total liabilities and shareholders' equity	$30,547	$28,117

2_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)
Share data in Millions	Sep. 30, 2009	Dec. 31, 2008
Shareholders' Equity:
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	2,132	2,118
Treasury shares, at cost	493	492

Basis of Presentation

Basis of Presentation
	9 Months Ended Sep. 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. Third quarter and nine months ended September30, 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 $25million for the third quarter of 2008 and $74million for the nine months ended September30, 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 October29, 2009, the date of filing of this 10-Q. Impact of Recently Issued Accounting Standards In June 2009, the Financial Accounting Standards Board (FASB) issued guidance which is included in the Codification in FASB Accounting Standards Codification (ASC) 105, Generally Accepted Accounting Principles. This guidance modifies the Generally Accepted Accounting Principles (GAAP) hierarchy by establishing only two levels of GAAP, authoritative and nonauthoritative accounting literature. Effective July 2009, the FASB ASC, also known collectively as the Codification, is considered the single source of authoritative U.S.accounting and reporting standards, except for additional authoritative rules and interpretive releases issued by the SEC. This guidance is effective for financial statements issued for reporting periods that end after September15, 2009. Where possible, FASB references have been replaced with ASC references. As of January1, 2009, Schering-Plough implemented the transition guidance related to FASB Staff Position (FSP) Emerging Issues Task Force (EITF)03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, which is included in the codification in ASC 260-10, Earnings Per Share (ASC 260-10). ASC 260-10 requires Schering-Plough to treat unvested deferred stock units as participating securities in accordance with the two-class method in the calc

Productivity Transformation Pro

Productivity Transformation Program
	9 Months Ended Sep. 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 nine months ended September30, 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 $ $ $ 98 $ 98 $ (156 ) $ (58 ) Asset write-offs 5 5 5 Inventory write-offs 38 38 38 Accelerated depreciation 12 2 14 14 Foreign exchange and other (4 ) (4 ) Total $ 55 $ 2 $ 98 $ 155 $ (156 ) $ 53 Accrued liability at September30, 2009 $ 93 For the three months ended September30, 2009, special, merger and acquisition-related costs totaled $29million, of which $24million related to employee termination costs and $5million related to the planned merger with Merck Co., Inc (Merck). Planned merger costs are not included in the table above. For the nine months ended September30, 2009, special, merger and acquisition-related costs totaled $133million, of which $98million related to employee termination costs and $35million 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 nine months ended September30, 2008: Special, and Acquisition- Related Total Cash Non-cash Accrued Charges Charges Payments Charges Liability (Dollars in millions) Accrued liability at

Equity Income

Equity Income
	9 Months Ended Sep. 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 of

Share Based Compensation

Share Based Compensation
	9 Months Ended Sep. 30, 2009 USD / shares
Share-Based Compensation [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 nine months ended September30, 2009 and 2008 is as follows: Three Months Ended September30, Nine Months Ended September30, 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 9 $ 8.53 13 $ 6.58 7,829 $ 7.67 13,597 $ 5.35 Deferred stock units 9 25.55 64 19.79 4,618 22.89 4,772 18.93 Performance-based deferred stock units 1,043 27.93 1,064 19.35 Total Awards 18 77 13,490 19,433 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 nine months ended September30, 2009 and 2008, were as follows: Three Months Ended Nine Months Ended September30, September30, 2009 2008 2009 2008 Dividend yield 1.1 % 1.1 % 1.1 % 1.1 % Volatility 40.6 % 37.0 % 41.5 % 31.4 % Risk-free interest rate 2.4 % 3.2 % 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 nine months ended September30, 2009 was $53million and $135million, respectively. Total compensation expense related to stock options, deferred stock units and performance-based deferred stock units for the three and nine months ended September30, 2008 was $52million and $171million, respectively. At Sept

Other Expense

Other Expense (Income), Net
	9 Months Ended Sep. 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 Nine Months Ended September30, September30, 2009 2008 2009 2008 (Dollars in millions) Interest cost incurred $ 119 $ 140 $ 348 $ 428 Less: amount capitalized on construction (6 ) (4 ) (16 ) (14 ) Interest expense 113 136 332 414 Interest income (6 ) (19 ) (17 ) (58 ) Foreign exchange (gains)/losses (5 ) 4 (18 ) 10 Gain on sales of assets (160 ) (177 ) Total other expense/(income), net $ 102 $ (39 ) $ 297 $ 189 In September 2008, Schering-Plough completed its previously announced divestitures of certain Animal Health products as required by regulatory agencies in the U.S.and Europe in connection with the acquisition of OBS. As a result of these divestitures, Schering-Plough recognized a gain of $160million ($149million after tax). In addition, during the nine months ended September30, 2008, Schering-Plough recognized a gain of $17million ($12million after tax) on the sale of a manufacturing site. These gains were included in Gain on sales of assets. Net cash proceeds from the divested animal health products were $210million. During 2008, Schering-Plough participated in health care refinancing programs adopted by local government fiscal authorities in a major European market. During the three and nine months ended September30, 2008, Schering-Plough transferred $47million of its trade accounts receivables owned by a foreign subsidiary to third-party financial institutions without recourse. The transfer of trade accounts receivable qualified as sales of accounts receivable under SFASNo.140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. For the three and nine months ended September30, 2008, the transfer of these trade accounts receivable did not have a material impact on Schering-Ploughs Statements of Condensed Consolidated Operations. Cash flows from these transactions are included in the change in accounts receivable in operating activities.

Income Taxes

Income Taxes
	9 Months Ended Sep. 30, 2009 USD / shares
Income Taxes [Abstract]
INCOME TAXES	6. INCOME TAXES Schering-Plough reported 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
	9 Months Ended Sep. 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 Nine Months Ended September30, September30, 2009 2008 2009 2008 (Dollars in millions) Service cost $ 54 $ 54 $ 157 $ 162 Interest cost 61 58 177 176 Expected return on plan assets (59 ) (59 ) (172 ) (178 ) Amortization, net 11 7 32 20 Settlement 1 1 Net pension expense $ 68 $ 60 $ 195 $ 180 The components of other post-retirement benefits expense were as follows: Three Months Ended Nine Months Ended September30, September30, 2009 2008 2009 2008 (Dollars in millions) Service cost $ 6 $ 7 $ 18 $ 21 Interest cost 9 10 27 29 Expected return on plan assets (2 ) (3 ) (8 ) (9 ) Amortization, net (1 ) 1 (3 ) 3 Net other post-retirement benefits expense $ 12 $ 15 $ 34 $ 44 For the three and nine months ended September30, 2009, Schering-Plough made regular contributions of $30million and $216million, respectively, to its retirement plans. For the three and nine months ended September30, 2008, Schering-Plough contributed $57million and $153million, respectively, to its retirement plans. Schering-Plough expects to make regular contributions of approximately $40million to its retirement plans during the remainder of 2009. In addition, in 2009 Schering-Plough contributed an aggregate of $367million of cash equivalents to non-qualified trusts designated to fund certain pension and other employee benefit payments related to the planned combination with Merck. These amounts are included in Other assets in the Condensed Consolidated Balance Sheets. Further, Schering-Plough expects to fund certain deferred compensation plan requirements in the approximate amount of $170million during the remainder of 2009.

Earnings Per Common Share

Earnings Per Common Share
	9 Months Ended Sep. 30, 2009 USD / shares
Earnings Per Common Share [Abstract]
EARNINGS PER COMMON SHARE	8. EARNINGS PER COMMON SHARE As of January1, 2009, Schering-Plough began 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. This was also applied retrospectively. The effect of the retrospective application of this method 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 Nine Months Ended September30, September30, 2009 2008 2009 2008 (Dollars in millions) Reconciliation of undistributed earnings: Net income available to common shareholders $ 477 $ 576 $ 1,878 $ 1,276 Less: Dividends on common stock 106 106 318 317 Less: Dividends on unvested participating securities 1 1 4 3 Undistributed earnings(1) $ 370 $ 469 $ 1,556 $ 956 Three Months Ended Nine Months Ended September30, September30, 2009 2008 2009 2008 (Dollars and shares in millions) Basic earnings per common share computation: Net income available to common shareholders $ 477 $ 576 $ 1,878 $ 1,276 Less: Dividend equivalents on unvested participating securities 1 1 4 3 Less: Undistributed earnings allocated to unvested participating securities(1) 4 5 17 11 Undistributed earnings allocated to common shareholders $ 472 $ 570 $ 1,857 $ 1,262 EPS denominator: Weighted-average shares outstanding for basic earnings per common share 1,637 1,626 1,632 1,623 Basic earnings per common share $ 0.29 $ 0.35 $ 1.14 $ 0.78 Three Months Ended Nine Months Ended September30, September30, 2009 2008 2009 2008 (Dollars and shares in millions) Diluted earnings per common share computation: Net income available to common shareholders $ 477 $ 576 $ 1,878 $ 1,276 Add: Preferred stock dividends(3) Less: Dividend equivalents on unvested participating securities 1 1 4 3 Less: Undistributed earnings allocated to

Comprehensive Income

Comprehensive Income
	9 Months Ended Sep. 30, 2009 USD / shares
Comprehensive Income [Abstract]
COMPREHENSIVE INCOME	9. COMPREHENSIVE INCOME Comprehensive income is comprised of the following: Three Months Ended Nine Months Ended September30, September30, 2009 2008 2009 2008 (Dollars in millions) Net income $ 515 $ 614 $ 1,991 $ 1,389 Foreign currency translation adjustment 341 (732 ) 535 (282 ) Unrealized gain (loss) on investments available for sale 8 (10 ) 18 (15 ) Total comprehensive income/(loss) $ 864 $ (128 ) $ 2,544 $ 1,092

Inventories

Inventories
	9 Months Ended Sep. 30, 2009 USD / shares
Inventories [Abstract]
INVENTORIES	10. INVENTORIES Inventories consisted of the following: September30, December31, 2009 2008 (Dollars in millions) Finished products $ 1,126 $ 1,212 Goods in process 1,948 1,428 Raw materials and supplies 622 679 Total inventories and inventory classified in other non-current assets $ 3,696 $ 3,319 For the nine months ended September30, 2008, $840million 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 September30, 2009 and December31, 2008 was $237million and $205million, respectively, of inventory not expected to be sold within one year.

Goodwill and Other Intangible A

Goodwill and Other Intangible Assets
	9 Months Ended Sep. 30, 2009 USD / shares
Goodwill and Other Intangible Assets [Abstract]
GOODWILL AND OTHER INTANGIBLE ASSETS	11. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill was $2,879million at September30, 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: September30, 2009 December31, 2008 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Net Amount Amortization Net (Dollars in millions) Patents $ 3,983 $ 725 $ 3,258 $ 3,803 $ 418 $ 3,385 Trademarks and other 2,854 294 2,560 2,756 180 2,576 Licenses and other 806 643 163 796 603 193 Total other intangible assets $ 7,643 $ 1,662 $ 5,981 $ 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 September30, 2009 and 2008 was $139million and $148million, respectively and $401million and $439million for the nine months ended September30, 2009 and 2008, respectively. Annual amortization expenses related to these intangible assets for the years 2009 to 2013 is expected to be approximately $535million.

Borrowings

Borrowings
	9 Months Ended Sep. 30, 2009 USD / shares
Borrowings [Abstract]
BORROWINGS	12. BORROWINGS Schering-Ploughs outstanding borrowings at September30, 2009 and December31, 2008 were as follows: September30, December31, 2009 2008 (Dollars in millions) Short-term Short-term borrowings and current portion of long-term debt $ 184 $ 244 Current portion of capital leases 1 1 Total short-term borrowings and current portion of long-term debt $ 185 $ 245 Long-term 5.00%senior unsecured Euro-denominated notes due 2010 $ 732 $ 698 Floating rate Euro-denominated term loan due 2012 659 698 5.30%senior unsecured notes due 2013 1,248 1,247 5.375%senior unsecured Euro-denominated notes due 2014 2,194 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 21 19 Other long-term borrowings 46 47 Total long-term borrowings, net of current portion $ 8,033 $ 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 September30, 2009 were due to foreign currency translation on Euro-denominated debt balances.

Financial Instruments

Financial Instruments
	9 Months Ended Sep. 30, 2009 USD / shares
Financial Instruments [Abstract]
FINANCIAL INSTRUMENTS	13. FINANCIAL INSTRUMENTS The table below presents the carrying values and estimated fair values for certain of Schering-Ploughs financial instruments at September30, 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 September30, 2009 and December31, 2008. September30, 2009 December31, 2008 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value (Dollars in millions) ASSETS: Short-term investments $ 487 $ 487 $ 5 $ 5 Long-term investments(1) 557 557 157 157 LIABILITIES: Short-term borrowings and current portion of long-term debt $ 185 $ 185 $ 245 $ 245 Long-term debt 8,033 8,926 7,931 7,891 . (1) Long-term investments, which are included in other non-current assets, primarily consist of cash, debt and equity securities held in non-qualified trusts to fund employee benefit obligations. The related 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
	9 Months Ended Sep. 30, 2009 USD / shares
Fair Value Measurements [Abstract]
FAIR VALUE MEASUREMENTS	14. FAIR VALUE MEASUREMENTS Schering-Ploughs condensed consolidated balance sheet at September30, 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 September30, 2009 (Level 1) (Level 2) (Level 3) (Dollars in millions) Assets Securities held for employee compensation $ 115 $ 115 $ $ Other 10 7 3 Total assets $ 125 $ 122 $ 3 $ At September30, 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 September30, 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
	9 Months Ended Sep. 30, 2009 USD / shares
Segment 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 Nine Months Ended September30, September30, 2009 2008 2009 2008 (Dollars in millions) Prescription Pharmaceuticals $ 3,548 $ 3,539 $ 10,515 $ 10,798 Animal Health 669 759 1,976 2,299 Consumer Health Care 282 278 1,048 1,057 Consolidated net sales $ 4,499 $ 4,576 $ 13,539 $ 14,154 Profit by segment: Three Months Ended Nine Months Ended September30, September30, 2009 2008 2009 2008 (Dollars in millions) Prescription Pharmaceuticals(1) $ 705 $ 653 $ 2,471 $ 1,916 Animal Health(1)/(2) 76 222 320 141 Consumer Health Care 58 75 235 243 Corporate and other(3) (227 ) (292 ) (707 ) (778 ) Income before income taxes $ 612 $ 658 $ 2,319 $ 1,522 (1) For the three months ended September30, 2009, the Prescription Pharmaceuticals and the Animal Health segments profits include expense of $108million and $35million, respectively, primarily related to the amortization of fair values of intangible assets acquired as part of the OBS transaction. For the nine months ended September30, 2009, the Prescription Pharmaceuticals and the Animal Health segments profits includes expense of $307million and $99million, respectively, related to the amortization of fair values of intangible assets acquired as part of the OBS transaction. For the three months ended September30, 2008, the Prescription Pharmaceuticals and the Animal Health segments profits include expense of $112million and $113million, respectively, related to purchase accounting items from the OBS transaction. For the nine months ended September30, 2008, the Prescription Pharmaceuticals segments profit and the Animal Health segments profits include expense of $715million and $559million, respectively, related to purchase accounting items from the OBS

Product Licenses

Product Licenses
	9 Months Ended Sep. 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 SIMPONI (golimumab), extending Schering-Ploughs rights to exclusively market REMICADE to match the duration of Schering-Ploughs exclusive marketing rights for SIMPONI. On October6, 2009 the European Commission approved SIMPONI as a treatment for rheumatoid arthritis and other immune system disorders in two presentations a novel auto-injector and pre-filled syringe. As a result, Schering-Ploughs marketing rights for both products extend for 15years from the first commercial sale of SIMPONI in the EU following the receipt of pricing and reimbursement approval 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, 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. Schering-Plough may independently develop and market SIMPONI for a Crohns disease indication in its territories, with an option for Centocor to participate. In addition, Schering-Plough and Centocor agreed to share certain development costs relating to SIMPONIs auto-injector delivery system .

Legal, Environmental and Regula

Legal, Environmental and Regulatory Matters
	9 Months Ended Sep. 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 September30, 2009, and the related expenses incurred during the three and nine months ended September30, 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 i

Merger Agreement With Merck & C

Merger Agreement With Merck & Co., Inc.
	9 Months Ended Sep. 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. The merger was approved by shareholders of Schering-Plough and Merck on August7, 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 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 certain other foreign jurisdictions. On October22, 2009 Merck and Schering-Plough received clearance for the transaction from the European Commission under the EC Merger Regulation. Merck and Schering-Plough expect to complete the transaction in the fourth quarter of 2009.