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(MARK ONE) | ||
þ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
For the Fiscal Year Ended December 31, 2009 | ||
or | ||
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
For the transition period from to |
One Merck Drive
Whitehouse Station, N. J.08889-0100
(908) 423-1000
Incorporated in New Jersey | I.R.S. Employer Identification No. 22-1918501 |
Name of Each Exchange | ||
Title of Each Class | on which Registered | |
Common Stock ($0.50 par value) | New York Stock Exchange | |
Mandatory Convertible Preferred Stock | New York Stock Exchange |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Document | Part of Form 10-K | |
Proxy Statement for the Annual Meeting of Shareholders to be held May 25, 2010, to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this report | Part III |
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Item 1. | Business. |
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($ in millions) | 2009 | 2008 | 2007 | |||||||||
Pharmaceutical: | ||||||||||||
Bone, Respiratory, Immunology and Dermatology | ||||||||||||
Singulair | $ | 4,659.7 | $ | 4,336.9 | $ | 4,266.3 | ||||||
Fosamax | 1,099.8 | 1,552.7 | 3,049.0 | |||||||||
Propecia | 440.3 | 429.1 | 405.4 | |||||||||
Remicade | 430.7 | — | — | |||||||||
Arcoxia | 357.5 | 377.3 | 329.1 | |||||||||
Nasonex | 164.9 | — | — | |||||||||
Clarinex | 100.6 | — | — | |||||||||
Asmanex | 37.0 | — | — | |||||||||
Cardiovascular | ||||||||||||
Vytorin | 440.8 | 84.2 | 84.3 | |||||||||
Zetia | 402.9 | 6.4 | 6.5 | |||||||||
Integrilin | 45.9 | — | — | |||||||||
Diabetes and Obesity | ||||||||||||
Januvia | 1,922.1 | 1,397.1 | 667.5 | |||||||||
Janumet | 658.4 | 351.1 | 86.4 | |||||||||
Infectious Disease | ||||||||||||
Isentress | 751.8 | 361.1 | 41.3 | |||||||||
Primaxin | 688.9 | 760.4 | 763.5 | |||||||||
Cancidas | 616.7 | 596.4 | 536.9 | |||||||||
Invanz | 292.9 | 265.0 | 190.2 | |||||||||
Crixivan/Stocrin | 206.1 | 275.1 | 310.2 | |||||||||
PegIntron | 148.7 | — | — | |||||||||
Avelox | 66.2 | — | — | |||||||||
Rebetol | 36.1 | — | — | |||||||||
Mature Brands | ||||||||||||
Cozaar/Hyzaar | 3,560.7 | 3,557.7 | 3,350.1 | |||||||||
Zocor | 558.4 | 660.1 | 876.5 | |||||||||
Vasotec/Vaseretic | 310.8 | 356.7 | 494.6 | |||||||||
Proscar | 290.9 | 323.5 | 411.0 | |||||||||
Claritin Rx | 71.1 | — | — | |||||||||
Proventil | 26.2 | — | — | |||||||||
Neurosciences and Ophthalmology | ||||||||||||
Maxalt | 574.5 | 529.2 | 467.3 | |||||||||
Cosopt/Trusopt | 503.5 | 781.2 | 786.8 | |||||||||
Remeron | 38.5 | — | — | |||||||||
Subutex/Suboxone | 36.3 | — | — | |||||||||
Oncology | ||||||||||||
Emend | 313.1 | 259.7 | 201.7 | |||||||||
Temodar | 188.1 | — | — | |||||||||
Caelyx | 46.5 | — | — | |||||||||
Intron A | 38.4 | — | — | |||||||||
Vaccines(2) | ||||||||||||
ProQuad/M-M-R II/Varivax | 1,368.5 | 1,268.5 | 1,347.1 | |||||||||
Gardasil | 1,118.4 | 1,402.8 | 1,480.6 | |||||||||
RotaTeq | 521.9 | 664.5 | 524.7 | |||||||||
Pneumovax | 345.6 | 249.3 | 233.2 | |||||||||
Zostavax | 277.4 | 312.4 | 236.0 | |||||||||
Women’s Health and Endocrine | ||||||||||||
Follistim/Puregon | 96.5 | — | — | |||||||||
NuvaRing | 88.3 | — | — | |||||||||
Other Pharmaceutical(3) | 1,294.9 | 922.9 | 1,136.6 | |||||||||
25,236.5 | 22,081.3 | 22,282.8 | ||||||||||
Other segment revenues(4) | 2,114.0 | 1,694.1 | 1,848.1 | |||||||||
Total segment revenues | 27,350.5 | 23,775.4 | 24,130.9 | |||||||||
Other(5) | 77.8 | 74.9 | 66.8 | |||||||||
$ | 27,428.3 | $ | 23,850.3 | $ | 24,197.7 | |||||||
(1) | Sales of legacy Schering-Plough products only reflect results for the post-Merger period through December 31, 2009. Sales of MSP Partnership productsZetiaand Vytorinrepresent sales for the post-Merger period through December 31, 2009. Prior to the Merger, sales ofZetiaandVytorinwere primarily recognized by the MSP Partnership and the results of Old Merck’s interest in the MSP Partnership were recorded inEquity income from affiliates.Sales ofZetia andVytorin in 2008 and 2007 reflect Old Merck’s sales of these products in Latin America which was not part of the MSP Partnership. |
(2) | These amounts do not reflect sales of vaccines sold in most major European markets through the Company’s joint venture, Sanofi Pasteur MSD, the results of which are reflected inEquity income from affiliates.These amounts do, however, reflect supply sales to Sanofi Pasteur MSD. |
(3) | Other pharmaceutical primarily includes sales of other human pharmaceutical products, including products within the franchises not listed separately. |
(4) | Reflects other non-reportable segments, including animal health and consumer health care, and revenue from the Company’s relationship with AZLP primarily relating to sales ofNexium,as well asPrilosec.Revenue from AZLP was $1.4 billion, $1.6 billion and $1.7 billion in 2009, 2008 and 2007, respectively. |
(5) | Other revenues are primarily comprised of miscellaneous corporate revenues, third party manufacturing sales, sales related to divested products or businesses and other supply sales not included in segment results. |
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Product(1) | Year of Expiration (in U.S.) | |
Cozaar | 2010 | |
Hyzaar | 2010 | |
Crixivan | 2012 (compound)/2018 (formulation) | |
Maxalt | 2012 (compound)/2014 (other) | |
Singulair | 2012 | |
Cancidas | 2013 (compound)/2015 (composition) | |
Propecia(2) | 2013 (formulation/use) | |
Asmanex | 2014 (use)/2018 (formulation) | |
Avelox | 2014 | |
Integrilin | 2014 (compound)/2015 (use/formulation) | |
Nasonex | 2014 (use/formulation)/2018(formulation) | |
Temodar(3) | 2014 | |
Emend | 2015 | |
Follistim/Puregon | 2015 | |
PegIntron | 2015 (conjugates)/2020 (Mature IFN-alpha) | |
Zolinza | 2015 | |
Invanz | 2016 (compound)/2017 (composition) | |
Zostavax | 2016 | |
Zetia/Vytorin | 2017 | |
NuvaRing | 2018 (delivery system) | |
Noxafil | 2019 | |
RotaTeq | 2019 | |
Clarinex(4) | 2020 (formulation) | |
Comvax | 2020 (method of making/vectors) | |
Intron A | 2020 | |
Recombivax | 2020 (method of making/vectors) | |
Saphris/Sycrest | 2020 (use/formulation) (subject to pending Patent Term Restoration application) | |
Januvia/Janumet | 2022 (compound)/2026 (salt) | |
Isentress | 2023 | |
Gardasil | 2026 (method of making/use/product by process) |
(1) | Compound patent unless otherwise noted. |
(2) | By agreement, Dr. Reddy’s Laboratories may launch a generic on January 1, 2013. |
(3) | In January 2010, a court held the patent forTemodarto be unenforceable. That decision is being appealed. See Item 3. “Legal Proceedings — Patent Litigation” below. |
(4) | By virtue of litigation settlement, generics have been given the right to enter the market as of 2012. |
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SCH 900776
niacin/ laropiprant) (U.S.)(3)
niacin/ laropiprant/simvastin)
injection) (U.S.)(3)
(1) | Exclusive rights outside of the United States, Canada and Mexico to vernakalant (IV) |
(2) | North American rights only |
(3) | Approved in certain countries in Europe |
(4) | Approved in certain countries in Europe and Japan |
(5) | Japanese rights only |
(6) | MK-0653C fixed dose combination of ezetimibe and atorvastatin is anticipated to be submitted to the U.S. FDA in 2011 and commercialized when regulatory and legal requirements have been satisfied |
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Item 1A. | Risk Factors. |
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• | findings of ineffectiveness, superior safety or efficacy of competing products, or harmful side effects in clinical or pre-clinical testing; |
• | failure to receive the necessary regulatory approvals, including delays in the approval of new products and new indications, and increasing uncertainties about the time required to obtain regulatory approvals and the benefit/risk standards applied by regulatory agencies in determining whether to grant approvals; |
• | lack of economic feasibility due to manufacturing costs or other factors; and |
• | preclusion from commercialization by the proprietary rights of others. |
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• | the re-review of products that are already marketed; | |
• | new scientific information and evolution of scientific theories; | |
• | the recall or loss of marketing approval of products that are already marketed; | |
• | changing government standards or public expectations regarding safety, efficacy or labeling changes; and | |
• | greater scrutiny in advertising and promotion. |
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• | There may be limited access to and supply of normal and diseased tissue samples, cell lines, pathogens, bacteria, viral strains and other biological materials. In addition, government regulations in multiple jurisdictions, such as the United States and European states within the EU, could result in restricted access to, or transport or use of, such materials. If the Company loses access to sufficient sources of such materials, or if tighter restrictions are imposed on the use of such materials, the Company may not be able to conduct research activities as planned and may incur additional development costs. | |
• | The development, manufacturing and marketing of biologics are subject to regulation by the FDA, the EMEA and other regulatory bodies. These regulations are often more complex and extensive than the regulations applicable to other pharmaceutical products. For example, in the United States, a BLA, including both preclinical and clinical trial data and extensive data regarding the manufacturing |
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procedures, is required for human vaccine candidates and FDA approval is required for the release of each manufactured lot. |
• | Manufacturing biologics, especially in large quantities, is often complex and may require the use of innovative technologies to handle living micro-organisms. Each lot of an approved biologic must undergo thorough testing for identity, strength, quality, purity and potency. Manufacturing biologics requires facilities specifically designed for and validated for this purpose, and sophisticated quality assurance and quality control procedures are necessary. Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping and quality control and testing, may result in lot failures, product recalls or spoilage. When changes are made to the manufacturing process, the Company may be required to provide pre-clinical and clinical data showing the comparable identity, strength, quality, purity or potency of the products before and after such changes. | |
• | Biologics are frequently costly to manufacture because production ingredients are derived from living animal or plant material, and most biologics cannot be made synthetically. In particular, keeping up with the demand for vaccines may be difficult due to the complexity of producing vaccines. | |
• | The use of biologically derived ingredients can lead to allegations of harm, including infections or allergic reactions, or closure of product facilities due to possible contamination. Any of these events could result in substantial costs. | |
• | There currently is no process in the United States for the submission or approval of generic biologics based upon abbreviated data packages or a showing of sameness to another approved biologic, but there is public dialogue at the FDA and in Congress regarding the scientific and statutory basis upon which such products, known as biosimilars or follow-on biologics, could be approved and marketed in the United States. The Company cannot be certain when Congress will create a statutory pathway for the approval of biosimilars, and the Company cannot predict what impact, if any, the approval of biosimilars would have on the sales of Company products in the United States. In Europe, however, the EMEA has issued guidelines for approving biological products through an abbreviated pathway, and biosimilars have been approved in Europe. If a biosimilar version of one of the Company’s products were approved in Europe, it could have a negative effect on sales of the product. |
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• | integrating the research and development, manufacturing, distribution, marketing and promotion activities and information technology systems of Old Merck and Schering-Plough; | |
• | conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the companies; | |
• | identifying and eliminating redundant and underperforming operations and assets; and | |
• | managing tax costs or inefficiencies associated with integrating the operations of the combined company. |
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• | changes in medical reimbursement policies and programs and pricing restrictions in key markets; | |
• | multiple regulatory requirements that could restrict the Company’s ability to manufacture and sell its products in key markets; | |
• | trade protection measures and import or export licensing requirements; | |
• | foreign exchange fluctuations; | |
• | diminished protection of intellectual property in some countries; and | |
• | possible nationalization and expropriation. |
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• | Competition from generic products as the Company’s products lose patent protection. |
• | Increased “brand” competition in therapeutic areas important to the Company’s long-term business performance. |
• | The difficulties and uncertainties inherent in new product development. The outcome of the lengthy and complex process of new product development is inherently uncertain. A drug candidate can fail at any stage of the process and one or more late-stage product candidates could fail to receive regulatory approval. New product candidates may appear promising in development but fail to reach the market because of efficacy or safety concerns, the inability to obtain necessary regulatory approvals, the difficulty or excessive cost to manufactureand/or the infringement of patents or intellectual property rights of others. Furthermore, the sales of new products may prove to be disappointing and fail to reach anticipated levels. |
• | Pricing pressures, both in the United States and abroad, including rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and health care reform, pharmaceutical reimbursement and pricing in general. |
• | Changes in government laws and regulations and the enforcement thereof affecting the Company’s business. |
• | Efficacy or safety concerns with respect to marketed products, whether or not scientifically justified, leading to product recalls, withdrawals or declining sales. |
• | Significant litigation related toVioxx, andVytorinandZetia. |
• | The arbitration proceeding involving the Company’s right to distributeRemicadeandSimponi. |
• | Legal factors, including product liability claims, antitrust litigation and governmental investigations, including tax disputes, environmental concerns and patent disputes with branded and generic competitors, any of which could preclude commercialization of products or negatively affect the profitability of existing products. |
• | Lost market opportunity resulting from delays and uncertainties in the approval process of the FDA and foreign regulatory authorities. |
• | Increased focus on privacy issues in countries around the world, including the United States and the EU. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing amount of focus on privacy and data protection issues with the potential to affect directly the Company’s business, including recently enacted laws in a majority of states in the United States requiring security breach notification. |
• | Changes in tax laws including changes related to the taxation of foreign earnings. |
• | Changes in accounting pronouncements promulgated by standard-setting or regulatory bodies, including the Financial Accounting Standards Board and the SEC, that are adverse to the Company. |
• | Economic factors over which the Company has no control, including changes in inflation, interest rates and foreign currency exchange rates. |
Item 1B. | Unresolved Staff Comments. |
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Item 2. | Properties. |
Item 3. | Legal Proceedings. |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Year | 4th Q | 3rd Q | 2nd Q | 1st Q | ||||||||||||||||
2009 | $ | 0.26 | $ | 0.065 | $ | 0.065 | $ | 0.065 | $ | 0.065 | ||||||||||
2008 | $ | 0.26 | $ | 0.065 | $ | 0.065 | $ | 0.065 | $ | 0.065 | ||||||||||
2009 | 4th Q | 3rd Q | 2nd Q | 1st Q | ||||||||||||
High | $ | 38.42 | $ | 28.68 | $ | 25.12 | $ | 24.42 | ||||||||
Low | $ | 27.97 | $ | 24.34 | $ | 21.67 | $ | 16.32 | ||||||||
2008 | ||||||||||||||||
High | $ | 18.48 | $ | 22.32 | $ | 20.72 | $ | 27.73 | ||||||||
Low | $ | 12.76 | $ | 17.51 | $ | 13.86 | $ | 14.41 | ||||||||
(1) | In each of 2009 and 2008, Old Merck paid quarterly cash dividends per common share of $0.38 for an annual amount of $1.52. |
Number of | ||||||||||||
securities | ||||||||||||
Number of | remaining available | |||||||||||
securities to be | for future issuance | |||||||||||
issued upon | Weighted-average | under equity | ||||||||||
exercise of | exercise price of | compensation plans | ||||||||||
outstanding | outstanding | (excluding | ||||||||||
options, warrants | options, warrants | securities | ||||||||||
and rights | and rights | reflected in column (a)) | ||||||||||
Plan Category | (a) | (b) | (c) | |||||||||
Equity compensation plans approved by security holders(1) | 313,784,854 | (2) | $ | 43.01 | 134,004,583 | |||||||
Equity compensation plans not approved by security holders(3) | — | — | — | |||||||||
Total | 313,784,854 | $ | 43.01 | 134,004,583 |
(1) | Includes options to purchase shares of Company Common Stock and other rights under the following shareholder-approved plans: the Merck Sharp & Dohme 1996, 2001, 2004 and 2007 Incentive Stock Plans, the Merck & Co., Inc. 1996, 2001 and 2006 Non-Employee Directors Stock Option Plans, and the Schering-Plough Corporation 1997, 2002 and 2006 Stock Incentive Plans. |
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(2) | Excludes approximately 7,453,426 shares of restricted stock units and 3,695,024 performance share units (assuming maximum payouts) under the Merck Sharp & Dohme 2004 and 2007 Incentive Stock Plans and 7,665,296 shares of restricted stock units and 475,077 performance share units (excluding accrued dividends) under the Schering-Plough Corporation 2006 Stock Incentive Plan. Also excludes 350,473 shares of phantom stock deferred under the Merck & Co., Inc. Deferral Program. | |
(3) | The table does not include information for equity compensation plans and options and other warrants and rights assumed by the Company in connection with mergers and acquisitions and pursuant to which there remain outstanding options or other warrants or rights (collectively, “Assumed Plans”), which include the Rosetta Inpharmatics, Inc. 1997 and 2000 Employee Stock Option Plans. A total of 69,934 shares of Merck Common Stock may be purchased under the Assumed Plans, at a weighted average exercise price of $37.90. No further grants may be made under any Assumed Plans. |
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Merck & Co., Inc., Composite Peer Group and S&P 500 Index
End of | 2009/2004 | |||||||
Period Value | CAGR** | |||||||
MERCK | $ | 170 | 11 | % | ||||
PEER GRP.*** | 104 | 1 | ||||||
S&P 500 | 102 | 0 |
2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||||||||||||
MERCK | 100.00 | 100.91 | 115.48 | 131.36 | 85.26 | 169.87 | ||||||||||||||||||||||||
PEER GRP. | 100.00 | 93.24 | 105.85 | 107.91 | 96.21 | 103.80 | ||||||||||||||||||||||||
S&P 500 | 100.00 | 104.91 | 121.46 | 128.13 | 80.73 | 102.10 | ||||||||||||||||||||||||
* | The Performance Graph reflects Schering-Plough’s stock performance from December 31, 2004 through the close of the Merger and New Merck’s stock performance from November 3, 2009 through December 31, 2009. Assumes the cash component of the merger consideration was reinvested in New Merck stock at the closing price on November 3, 2009. |
** | Compound Annual Growth Rate | |
*** | On October 15, 2009, Wyeth and Pfizer Inc. completed its previously announced merger (the “Pfizer/Wyeth Merger”) where Wyeth became a wholly-owned subsidiary of Pfizer Inc. As discussed, on November 3, 2009, Old Merck and Schering-Plough completed the Merger (together with the Pfizer/Wyeth Merger, the “Transactions”) where Old Merck (subsequently renamed Merck Sharp & Dohme Corp.) became a wholly-owned subsidiary of Schering-Plough (subsequently renamed Merck & Co., Inc.). As a result of the Transactions, Wyeth and Old Merck no longer exist as publicly traded entities and ceased all trading of their common stock as of the close of business on their respective merger dates. Wyeth and Old Merck have been permanently removed from the peer group index. |
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Item 6. | Selected Financial Data. |
2009(1) | 2008(2) | 2007(3) | 2006(4) | 2005(5) | ||||||||||||||||
Results for Year: | ||||||||||||||||||||
Sales | $27,428.3 | $23,850.3 | $24,197.7 | $22,636.0 | $22,011.9 | |||||||||||||||
Materials and production costs | 9,018.9 | 5,582.5 | 6,140.7 | 6,001.1 | 5,149.6 | |||||||||||||||
Marketing and administrative expenses | 8,543.2 | 7,377.0 | 7,556.7 | 8,165.4 | 7,155.5 | |||||||||||||||
Research and development expenses | 5,845.0 | 4,805.3 | 4,882.8 | 4,782.9 | 3,848.0 | |||||||||||||||
Restructuring costs | 1,633.9 | 1,032.5 | 327.1 | 142.3 | 322.2 | |||||||||||||||
Equity income from affiliates | (2,235.0 | ) | (2,560.6 | ) | (2,976.5 | ) | (2,294.4 | ) | (1,717.1 | ) | ||||||||||
U.S.VioxxSettlement Agreement charge | — | — | 4,850.0 | — | — | |||||||||||||||
Other (income) expense, net | (10,669.5 | ) | (2,318.1 | ) | (75.2 | ) | (503.2 | ) | (232.0 | ) | ||||||||||
Income before taxes | 15,291.8 | 9,931.7 | 3,492.1 | 6,341.9 | 7,485.7 | |||||||||||||||
Taxes on income | 2,267.6 | 1,999.4 | 95.3 | 1,787.6 | 2,732.6 | |||||||||||||||
Net income | 13,024.2 | 7,932.3 | 3,396.8 | 4,554.3 | 4,753.1 | |||||||||||||||
Net income attributable to noncontrolling interests | 122.9 | 123.9 | 121.4 | 120.5 | 121.8 | |||||||||||||||
Net income attributable to Merck & Co., Inc. | 12,901.3 | 7,808.4 | 3,275.4 | 4,433.8 | 4,631.3 | |||||||||||||||
Preferred stock dividends | 2.1 | — | — | — | — | |||||||||||||||
Net income available to common shareholders | 12,899.2 | 7,808.4 | 3,275.4 | 4,433.8 | 4,631.3 | |||||||||||||||
Basic earnings per common share available to common shareholders | $5.67 | $3.65 | $1.51 | $2.03 | $2.10 | |||||||||||||||
Earnings per common share assuming dilution available to common shareholders | $5.65 | $3.63 | $1.49 | $2.02 | $2.10 | |||||||||||||||
Cash dividends declared | 3,599.8 | 3,250.4 | 3,310.7 | 3,318.7 | 3,338.7 | |||||||||||||||
Cash dividends paid per common share | $1.52 | (6) | $1.52 | $1.52 | $1.52 | $1.52 | ||||||||||||||
Capital expenditures | 1,460.6 | 1,298.3 | 1,011.0 | 980.2 | 1,402.7 | |||||||||||||||
Depreciation | 1,654.3 | 1,445.1 | 1,752.4 | 2,098.1 | 1,544.2 | |||||||||||||||
Average common shares outstanding (millions) | 2,268.2 | 2,135.8 | 2,170.5 | 2,177.6 | 2,197.0 | |||||||||||||||
Average common shares outstanding assuming dilution (millions) | 2,273.2 | 2,142.5 | 2,189.8 | 2,184.1 | 2,199.2 | |||||||||||||||
Year-End Position: | ||||||||||||||||||||
Working capital | 12,677.9 | $4,793.9 | $2,787.2 | $2,507.5 | $7,806.9 | |||||||||||||||
Property, plant and equipment, net | 18,273.5 | 11,999.6 | 12,346.0 | 13,194.1 | 14,398.2 | |||||||||||||||
Total assets | 112,089.7 | 47,195.7 | 48,350.7 | 44,569.8 | 44,845.8 | |||||||||||||||
Long-term debt | 16,074.9 | 3,943.3 | 3,915.8 | 5,551.0 | 5,125.6 | |||||||||||||||
Total equity | 61,492.6 | 21,167.1 | 20,591.4 | 19,965.8 | 20,384.9 | |||||||||||||||
Year-End Statistics: | ||||||||||||||||||||
Number of stockholders of record | 175,600 | 165,700 | 173,000 | 184,200 | 198,200 | |||||||||||||||
Number of employees | 100,000 | 55,200 | 59,800 | 60,000 | 61,500 | |||||||||||||||
(1) | Amounts for 2009 include the impact of the merger with Schering-Plough Corporation on November 3, 2009, including the recognition of a gain representing the fair valuestep-up of Merck’s previously held interest in the Merck/Schering-Plough partnership as a result of obtaining a controlling interest and increased materials and production costs as a result of the amortization of intangible assets and inventory step-up. Also included in 2009, is a gain on the sale of Merck’s interest in Merial Limited, the favorable impact of certain tax items, the impact of restructuring actions and additional legal defense costs. |
(2) | Amounts for 2008 include a gain on distribution from AstraZeneca LP, a gain related to the sale of the remaining worldwide rights toAggrastat, the favorable impact of certain tax items, the impact of restructuring actions, additional legal defense costs and an expense for a contribution to the Merck Company Foundation. |
(3) | Amounts for 2007 include the impact of the U.S.VioxxSettlement Agreement charge, restructuring actions, a civil governmental investigations charge, an insurance arbitration settlement gain, in-process research and development expense resulting from an acquisition, additionalVioxxlegal defense costs, gains on sales of assets and product divestitures, as well as a net gain on the settlements of certain patent disputes. |
(4) | Amounts for 2006 include the impact of restructuring actions, in-process research and development expenses resulting from acquisitions, additionalVioxxlegal defense costs and the adoption of a new accounting standard requiring the expensing of stock options. |
(5) | Amounts for 2005 include the impact of the net tax charge primarily associated with the American Jobs Creation Act repatriation, restructuring actions and additionalVioxxlegal defense costs. |
(6) | Amount reflects dividends paid to common shareholders of Old Merck. In addition, approximately $144 million of dividends were paid subsequent to the merger with Schering-Plough, and $431 million were paid prior to the merger, relating to common stock and preferred stock dividends declared by Schering-Plough in 2009. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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($ in millions) | 2009 | 2008 | 2007 | |||||||||
Pharmaceutical: | ||||||||||||
Bone, Respiratory, Immunology and Dermatology | ||||||||||||
Singulair | $ | 4,659.7 | $ | 4,336.9 | $ | 4,266.3 | ||||||
Fosamax | 1,099.8 | 1,552.7 | 3,049.0 | |||||||||
Propecia | 440.3 | 429.1 | 405.4 | |||||||||
Remicade | 430.7 | — | — | |||||||||
Arcoxia | 357.5 | 377.3 | 329.1 | |||||||||
Nasonex | 164.9 | — | — | |||||||||
Clarinex | 100.6 | — | — | |||||||||
Asmanex | 37.0 | — | — | |||||||||
Cardiovascular | ||||||||||||
Vytorin | 440.8 | 84.2 | 84.3 | |||||||||
Zetia | 402.9 | 6.4 | 6.5 | |||||||||
Integrilin | 45.9 | — | — | |||||||||
Diabetes and Obesity | ||||||||||||
Januvia | 1,922.1 | 1,397.1 | 667.5 | |||||||||
Janumet | 658.4 | 351.1 | 86.4 | |||||||||
Infectious Disease | ||||||||||||
Isentress | 751.8 | 361.1 | 41.3 | |||||||||
Primaxin | 688.9 | 760.4 | 763.5 | |||||||||
Cancidas | 616.7 | 596.4 | 536.9 | |||||||||
Invanz | 292.9 | 265.0 | 190.2 | |||||||||
Crixivan/Stocrin | 206.1 | 275.1 | 310.2 | |||||||||
PegIntron | 148.7 | — | — | |||||||||
Avelox | 66.2 | — | — | |||||||||
Rebetol | 36.1 | — | — | |||||||||
Mature Brands | ||||||||||||
Cozaar/Hyzaar | 3,560.7 | 3,557.7 | 3,350.1 | |||||||||
Zocor | 558.4 | 660.1 | 876.5 | |||||||||
Vasotec/Vaseretic | 310.8 | 356.7 | 494.6 | |||||||||
Proscar | 290.9 | 323.5 | 411.0 | |||||||||
Claritin Rx | 71.1 | — | — | |||||||||
Proventil | 26.2 | — | — | |||||||||
Neurosciences and Ophthalmology | ||||||||||||
Maxalt | 574.5 | 529.2 | 467.3 | |||||||||
Cosopt/Trusopt | 503.5 | 781.2 | 786.8 | |||||||||
Remeron | 38.5 | — | — | |||||||||
Subutex/Suboxone | 36.3 | — | — | |||||||||
Oncology | ||||||||||||
Emend | 313.1 | 259.7 | 201.7 | |||||||||
Temodar | 188.1 | — | — | |||||||||
Caelyx | 46.5 | — | — | |||||||||
Intron A | 38.4 | — | — | |||||||||
Vaccines(2) | ||||||||||||
ProQuad/M-M-R II/Varivax | 1,368.5 | 1,268.5 | 1,347.1 | |||||||||
Gardasil | 1,118.4 | 1,402.8 | 1,480.6 | |||||||||
RotaTeq | 521.9 | 664.5 | 524.7 | |||||||||
Pneumovax | 345.6 | 249.3 | 233.2 | |||||||||
Zostavax | 277.4 | 312.4 | 236.0 | |||||||||
Women’s Health and Endocrine | ||||||||||||
Follistim/Puregon | 96.5 | — | — | |||||||||
NuvaRing | 88.3 | — | — | |||||||||
Other Pharmaceutical(3) | 1,294.9 | 922.9 | 1,136.6 | |||||||||
25,236.5 | 22,081.3 | 22,282.8 | ||||||||||
Other segment revenues(4) | 2,114.0 | 1,694.1 | 1,848.1 | |||||||||
Total segment revenues | 27,350.5 | 23,775.4 | 24,130.9 | |||||||||
Other(5) | 77.8 | 74.9 | 66.8 | |||||||||
$ | 27,428.3 | $ | 23,850.3 | $ | 24,197.7 | |||||||
(1) | Sales of legacy Schering-Plough products only reflect results for the post-Merger period through December 31, 2009. Sales of MSP Partnership productsZetiaand Vytorinrepresent sales for the post-Merger period through December 31, 2009. Prior to the Merger, sales ofZetiaandVytorinwere primarily recognized by the MSP Partnership and the results of Old Merck’s interest in the MSP Partnership were recorded inEquity income from affiliates.Sales ofZetia andVytorin in 2008 and 2007 reflect Old Merck’s sales of these products in Latin America which was not part of the MSP Partnership. |
(2) | These amounts do not reflect sales of vaccines sold in most major European markets through the Company’s joint venture, Sanofi Pasteur MSD, the results of which are reflected inEquity income from affiliates. These amounts do, however, reflect supply sales to Sanofi Pasteur MSD. |
(3) | Other pharmaceutical primarily includes sales of other human pharmaceutical products, including products within the franchises not listed separately. |
(4) | Reflects other non-reportable segments, including animal health and consumer health care, and revenue from the Company’s relationship with AZLP primarily relating to sales ofNexium,as well asPrilosec.Revenue from AZLP was $1.4 billion, $1.6 billion and $1.7 billion in 2009, 2008 and 2007, respectively. |
(5) | Other revenues are primarily comprised of miscellaneous corporate revenues, third-party manufacturing sales, sales related to divested products or businesses and other supply sales not included in segment results. |
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($ in millions) | 2009 | Change | 2008 | Change | 2007 | |||||||||||||||
Materials and production | $ | 9,018.9 | 62 | % | $ | 5,582.5 | -9 | % | $ | 6,140.7 | ||||||||||
Marketing and administrative | 8,543.2 | 16 | % | 7,377.0 | -2 | % | 7,556.7 | |||||||||||||
Research and development | 5,845.0 | 22 | % | 4,805.3 | -2 | % | 4,882.8 | |||||||||||||
Restructuring costs | 1,633.9 | 58 | % | 1,032.5 | * | 327.1 | ||||||||||||||
Equity income from affiliates | (2,235.0 | ) | −13 | % | (2,560.6 | ) | -14 | % | (2,976.5 | ) | ||||||||||
U.S.VioxxSettlement Agreement charge | — | — | — | * | 4,850.0 | |||||||||||||||
Other (income) expense, net | (10,669.5 | ) | * | (2,318.1 | ) | * | (75.2 | ) | ||||||||||||
$ | 12,136.5 | −13 | % | $ | 13,918.6 | -33 | % | $ | 20,705.6 | |||||||||||
* | 100% or greater. |
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($ in millions) | 2009 | 2008 | 2007 | |||||||||
Pharmaceutical segment profits | $ | 15,714.6 | $ | 14,110.3 | $ | 14,558.7 | ||||||
Other non-reportable segment profits | 1,735.1 | 1,691.0 | 2,027.6 | |||||||||
Other | (2,157.9 | ) | (5,869.6 | ) | (13,094.2 | ) | ||||||
Income before income taxes | $ | 15,291.8 | $ | 9,931.7 | $ | 3,492.1 | ||||||
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($ in millions) | 2009 | 2008 | 2007 | |||||||||
Pretax income as reported under GAAP | $ | 15,292 | $ | 9,932 | $ | 3,492 | ||||||
Increase (decrease) for excluded items: | ||||||||||||
Purchase accounting | 2,286 | — | — | |||||||||
Restructuring activities | 1,981 | 1,284 | 810 | |||||||||
Merger-related costs | 544 | — | — | |||||||||
Other items: | ||||||||||||
Gain related to the MSP Partnership | (7,530 | ) | — | — | ||||||||
Gain on Merial | (3,163 | ) | — | — | ||||||||
Gain on distribution from AZLP | — | (2,223 | ) | |||||||||
U.S.Vioxxsettlement agreement charge | — | — | 4,850 | |||||||||
Civil governmental investigations charge | — | — | 671 | |||||||||
Insurance arbitration gain | — | — | (455 | ) | ||||||||
9,410 | 8,993 | 9,368 | ||||||||||
Taxes on income as reported under GAAP | 2,268 | 1,999 | 95 | |||||||||
Tax (benefit) expense on excluded items | (390 | ) | (472 | ) | 2,134 | |||||||
Non-GAAP taxes on income | 1,878 | 1,527 | 2,229 | |||||||||
Non-GAAP net income | $ | 7,532 | $ | 7,466 | $ | 7,139 | ||||||
2009 | 2008 | 2007 | ||||||||||
EPS assuming dilution as reported under GAAP | $ | 5.65 | $ | 3.63 | $ | 1.49 | ||||||
EPS impact of excluded items | (2.40 | ) | (0.21 | ) | 1.71 | |||||||
Non-GAAP EPS assuming dilution | $ | 3.25 | $ | 3.42 | $ | 3.20 | ||||||
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2009 | ||||||||||||||||||||
($ in millions) | Pre-Merger | Post-Merger | Total | 2008 | 2007 | |||||||||||||||
Vytorin | $ | 1,689.5 | $ | 370.6 | $ | 2,060.1 | $ | 2,360.0 | $ | 2,779.1 | ||||||||||
Zetia | 1,697.7 | 370.3 | 2,068.0 | 2,201.1 | 2,407.1 | |||||||||||||||
$ | 3,387.2 | $ | 740.9 | $ | 4,128.1 | $ | 4,561.1 | $ | 5,186.2 | |||||||||||
(1) | Amounts exclude sales of these products by the Partners outside of the MSP Partnership. |
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($ in millions) | 2009(1) | 2008 | 2007 | |||||||||
Fipronil products | $ | 783.9 | $ | 1,053.0 | $ | 1,033.3 | ||||||
Biological products | 524.5 | 789.7 | 674.9 | |||||||||
Avermectin products | 341.4 | 511.8 | 478.4 | |||||||||
Other products | 199.7 | 288.2 | 262.2 | |||||||||
$ | 1,849.5 | $ | 2,642.7 | $ | 2,448.8 | |||||||
($ in millions) | 2009 | 2008 | 2007 | |||||||||
Gardasil | $ | 549.2 | $ | 865.3 | $ | 476.0 | ||||||
Influenza vaccines | 249.4 | 229.9 | 232.5 | |||||||||
Other viral vaccines | 112.1 | 105.1 | 86.8 | |||||||||
Hepatitis vaccines | 44.2 | 72.6 | 72.9 | |||||||||
RotaTeq | 42.2 | 28.4 | 15.7 | |||||||||
Other vaccines | 591.5 | 583.5 | 554.1 | |||||||||
$ | 1,588.6 | $ | 1,884.8 | $ | 1,438.0 | |||||||
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($ in millions) | 2009 | 2008 | 2007 | |||||||||
Gastrointestinal products | $ | 202.0 | $ | 210.7 | $ | 218.5 | ||||||
Other products | 1.2 | 1.4 | 1.2 | |||||||||
$ | 203.2 | $ | 212.1 | $ | 219.7 | |||||||
($ in millions) | 2009 | 2008 | 2007 | |||||||||
Working capital | $ | 12,677.9 | $ | 4,793.9 | $ | 2,787.2 | ||||||
Total debt to total liabilities and equity | 15.6 | % | 13.2 | % | 11.9 | % | ||||||
Cash provided by operations to total debt | 0.2:1 | 1.1:1 | 1.2:1 | |||||||||
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($ in millions) | Total | 2010 | 2011 - 2012 | 2013 -2014 | Thereafter | |||||||||||||||
Purchase obligations | $ | 3,734.9 | $ | 2,380.8 | $ | 730.4 | $ | 523.0 | $ | 100.7 | ||||||||||
Loans payable and current portion of long-term debt | 1,362.3 | 1,362.3 | — | — | — | |||||||||||||||
Long-term debt | 15,329.1 | — | 2,378.5 | 3,966.5 | 8,984.1 | |||||||||||||||
Interest related to debt obligations | 9,665.4 | 778.3 | 1,422.1 | 1,243.3 | 6,221.7 | |||||||||||||||
Unrecognized tax benefits(1) | 324.0 | 324.0 | — | — | — | |||||||||||||||
Operating leases | 944.8 | 281.6 | 393.4 | 195.1 | 74.7 | |||||||||||||||
$ | 31,360.5 | $ | 5,127.0 | $ | 4,924.4 | $ | 5,927.9 | $ | 15,381.2 | |||||||||||
(1) | As of December 31, 2009, the Company’s Consolidated Balance Sheet reflects liabilities for unrecognized tax benefits, interest and penalties of $5.7 billion, including $324.0 million reflected as a current liability. Due to the high degree of uncertainty regarding the timing of future cash outflows of liabilities for unrecognized tax benefits beyond one year, a reasonable estimate of the period of cash settlement for years beyond 2010 can not be made. |
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($ in millions) | 2009 | 2008 | ||||||
Balance, January 1 | $ | 616.3 | $ | 699.4 | ||||
Current provision | 2,541.9 | 2,037.5 | ||||||
Schering-Plough accrual assumed in the Merger | 584.1 | — | ||||||
Adjustments to prior years | (22.3 | ) | (13.7 | ) | ||||
Payments | (2,347.4 | ) | (2,106.9 | ) | ||||
Balance, December 31 | $ | 1,372.6 | $ | 616.3 | ||||
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Item 7A. | Quantitative and Qualitative Disclosures about Market Risk. |
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Item 8. | Financial Statements and Supplementary Data. |
(a) | Financial Statements |
2009 | 2008 | 2007 | ||||||||||
Sales | $ | 27,428.3 | $ | 23,850.3 | $ | 24,197.7 | ||||||
Costs, Expenses and Other | ||||||||||||
Materials and production | 9,018.9 | 5,582.5 | 6,140.7 | |||||||||
Marketing and administrative | 8,543.2 | 7,377.0 | 7,556.7 | |||||||||
Research and development | 5,845.0 | 4,805.3 | 4,882.8 | |||||||||
Restructuring costs | 1,633.9 | 1,032.5 | 327.1 | |||||||||
Equity income from affiliates | (2,235.0 | ) | (2,560.6 | ) | (2,976.5 | ) | ||||||
U.S.VioxxSettlement Agreement charge | - | - | 4,850.0 | |||||||||
Other (income) expense, net | (10,669.5 | ) | (2,318.1 | ) | (75.2 | ) | ||||||
12,136.5 | 13,918.6 | 20,705.6 | ||||||||||
Income Before Taxes | 15,291.8 | 9,931.7 | 3,492.1 | |||||||||
Taxes on Income | 2,267.6 | 1,999.4 | 95.3 | |||||||||
Net Income | 13,024.2 | 7,932.3 | 3,396.8 | |||||||||
Less: Net Income Attributable to Noncontrolling Interests | 122.9 | 123.9 | 121.4 | |||||||||
Net Income Attributable to Merck & Co., Inc. | 12,901.3 | 7,808.4 | 3,275.4 | |||||||||
Preferred Stock Dividends | 2.1 | - | - | |||||||||
Net Income Available to Common Shareholders | $ | 12,899.2 | $ | 7,808.4 | $ | 3,275.4 | ||||||
Basic Earnings per Common Share Available to Common Shareholders | $5.67 | $3.65 | $1.51 | |||||||||
Earnings per Common Share Assuming Dilution Available to Common Shareholders | $5.65 | $3.63 | $1.49 | |||||||||
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2009 | 2008 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 9,311.4 | $ | 4,368.3 | ||||
Short-term investments | 293.1 | 1,118.1 | ||||||
Accounts receivable (net of allowance for doubtful accounts of $112.6 in 2009 and $58.5 in 2008) | 6,602.9 | 2,907.7 | ||||||
Inventories (excludes inventories of $1,157.2 in 2009 and $587.3 in | ||||||||
2008 classified in Other assets — see Note 8) | 8,055.3 | 2,091.0 | ||||||
Deferred income taxes and other current assets | 4,165.9 | 8,627.5 | ||||||
Total current assets | 28,428.6 | 19,112.6 | ||||||
Investments | 432.3 | 6,491.3 | ||||||
Property, Plant and Equipment (at cost) | ||||||||
Land | 666.7 | 386.1 | ||||||
Buildings | 12,210.3 | 9,767.4 | ||||||
Machinery, equipment and office furnishings | 16,173.6 | 13,103.7 | ||||||
Construction in progress | 1,817.5 | 871.0 | ||||||
30,868.1 | 24,128.2 | |||||||
Less allowance for depreciation | 12,594.6 | 12,128.6 | ||||||
18,273.5 | 11,999.6 | |||||||
Goodwill | 11,923.1 | 1,438.7 | ||||||
Other Intangibles, Net | 47,655.8 | 525.4 | ||||||
Other Assets | 5,376.4 | 7,628.1 | ||||||
$ | 112,089.7 | $ | 47,195.7 | |||||
Liabilities and Equity | ||||||||
Current Liabilities | ||||||||
Loans payable and current portion of long-term debt | 1,379.2 | $ | 2,297.1 | |||||
Trade accounts payable | 2,236.9 | 617.6 | ||||||
Accrued and other current liabilities | 9,453.8 | 9,174.1 | ||||||
Income taxes payable | 1,285.2 | 1,426.4 | ||||||
Dividends payable | 1,189.0 | 803.5 | ||||||
6% Mandatory convertible preferred stock, $1 par value | ||||||||
Authorized — 11,500,000 shares; issued and outstanding — 855,422 shares | 206.6 | - | ||||||
Total current liabilities | 15,750.7 | 14,318.7 | ||||||
Long-Term Debt | 16,074.9 | 3,943.3 | ||||||
Deferred Income Taxes and Noncurrent Liabilities | 18,771.5 | 7,766.6 | ||||||
Merck & Co., Inc. Stockholders’ Equity | ||||||||
Common stock, $0.50 par value — 2009; $0.01 par value — 2008 | ||||||||
Authorized — 6,500,000,000 shares — 2009; 5,400,000,000 shares — 2008 | ||||||||
Issued — 3,562,528,536 shares — 2009; 2,983,508,675 — 2008 | 1,781.3 | 29.8 | ||||||
Other paid-in capital | 39,682.6 | 8,319.1 | ||||||
Retained earnings | 41,404.9 | 43,698.8 | ||||||
Accumulated other comprehensive loss | (2,766.5 | ) | (2,553.9 | ) | ||||
80,102.3 | 49,493.8 | |||||||
Less treasury stock, at cost: | ||||||||
454,305,985 shares — 2009; | ||||||||
875,818,333 shares — 2008 | 21,044.3 | 30,735.5 | ||||||
Total Merck & Co., Inc. stockholders’ equity | 59,058.0 | 18,758.3 | ||||||
Noncontrolling Interests | 2,434.6 | 2,408.8 | ||||||
Total equity | 61,492.6 | 21,167.1 | ||||||
$ | 112,089.7 | $ | 47,195.7 | |||||
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Accumulated | ||||||||||||||||||||||||||||
Other | Other | Non- | ||||||||||||||||||||||||||
Common | Paid-In | Retained | Comprehensive | Treasury | controlling | |||||||||||||||||||||||
Stock | Capital | Earnings | Loss | Stock | Interests | Total | ||||||||||||||||||||||
Balance at January 1, 2007 | $ | 29.8 | $ | 7,166.5 | $ | 39,095.1 | $ | (1,164.3 | ) | $ | (27,567.4 | ) | $ | 2,406.1 | $ | 19,965.8 | ||||||||||||
Net income attributable to Merck & Co., Inc. | 3,275.4 | 3,275.4 | ||||||||||||||||||||||||||
Total other comprehensive income, net of tax | 338.2 | 338.2 | ||||||||||||||||||||||||||
Comprehensive income, net of tax | 3,613.6 | |||||||||||||||||||||||||||
Cumulative effect of adoption of guidance on accounting for unrecognized tax benefits | 81.0 | 81.0 | ||||||||||||||||||||||||||
Cash dividends declared on common stock ($1.52 per share) | (3,310.7 | ) | (3,310.7 | ) | ||||||||||||||||||||||||
Treasury stock shares purchased | (1,429.7 | ) | (1,429.7 | ) | ||||||||||||||||||||||||
Acquisition of NovaCardia, Inc. | 366.4 | 366.4 | ||||||||||||||||||||||||||
Net income attributable to noncontrolling interests | 121.4 | 121.4 | ||||||||||||||||||||||||||
Distributions attributable to noncontrolling interests | (120.8 | ) | (120.8 | ) | ||||||||||||||||||||||||
Share-based compensation plans and other | 482.0 | 822.4 | 1,304.4 | |||||||||||||||||||||||||
Balance at December 31, 2007 | 29.8 | 8,014.9 | 39,140.8 | (826.1 | ) | (28,174.7 | ) | 2,406.7 | 20,591.4 | |||||||||||||||||||
Net income attributable to Merck & Co., Inc. | 7,808.4 | 7,808.4 | ||||||||||||||||||||||||||
Total other comprehensive loss, net of tax | (1,727.8 | ) | (1,727.8 | ) | ||||||||||||||||||||||||
Comprehensive income, net of tax | 6,080.6 | |||||||||||||||||||||||||||
Cash dividends declared on common stock ($1.52 per share) | (3,250.4 | ) | (3,250.4 | ) | ||||||||||||||||||||||||
Treasury stock shares purchased | (2,725.0 | ) | (2,725.0 | ) | ||||||||||||||||||||||||
Net income attributable to noncontrolling interests | 123.9 | 123.9 | ||||||||||||||||||||||||||
Distributions attributable to noncontrolling interests | (121.8 | ) | (121.8 | ) | ||||||||||||||||||||||||
Share-based compensation plans and other | 304.2 | 164.2 | 468.4 | |||||||||||||||||||||||||
Balance at December 31, 2008 | 29.8 | 8,319.1 | 43,698.8 | (2,553.9 | ) | (30,735.5 | ) | 2,408.8 | 21,167.1 | |||||||||||||||||||
Net income attributable to Merck & Co., Inc. | 12,901.3 | 12,901.3 | ||||||||||||||||||||||||||
Total other comprehensive loss, net of tax | (212.6 | ) | (212.6 | ) | ||||||||||||||||||||||||
Comprehensive income, net of tax | 12,688.7 | |||||||||||||||||||||||||||
Schering-Plough merger | 1,752.0 | 30,860.7 | (1,964.1 | ) | 22.3 | 30,670.9 | ||||||||||||||||||||||
Cancellations of treasury stock | (4.9 | ) | (11,595.4 | ) | 11,600.3 | - | ||||||||||||||||||||||
Preferred stock conversions | 0.1 | 5.4 | 5.5 | |||||||||||||||||||||||||
Cash dividends declared on common stock ($1.52 per share) | (3,597.7 | ) | (3,597.7 | ) | ||||||||||||||||||||||||
Net income attributable to noncontrolling | ||||||||||||||||||||||||||||
interests | 122.9 | 122.9 | ||||||||||||||||||||||||||
Distributions attributable to noncontrolling interests | (119.4 | ) | (119.4 | ) | ||||||||||||||||||||||||
Share-based compensation plans and other | 4.3 | 497.4 | (2.1 | ) | 55.0 | 554.6 | ||||||||||||||||||||||
Balance at December 31, 2009 | $ | 1,781.3 | $ | 39,682.6 | $ | 41,404.9 | $ | (2,766.5 | ) | $ | (21,044.3 | ) | $ | 2,434.6 | $ | 61,492.6 | ||||||||||||
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2009 | 2008 | 2007 | ||||||||||
Cash Flows from Operating Activities | ||||||||||||
Net income | $ | 13,024.2 | $ | 7,932.3 | $ | 3,396.8 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Gain related to Merck/Schering-Plough partnership | (7,529.6 | ) | - | - | ||||||||
Gain on disposition of interest in Merial Limited | (3,162.5 | ) | - | - | ||||||||
Gain on distribution from AstraZeneca LP | - | (2,222.7 | ) | - | ||||||||
Equity income from affiliates | (2,235.0 | ) | (2,560.6 | ) | (2,976.5 | ) | ||||||
Dividends and distributions from equity affiliates | 1,724.3 | 4,289.6 | 2,485.6 | |||||||||
U.S.VioxxSettlement Agreement charge | - | - | 4,850.0 | |||||||||
Depreciation and amortization | 2,576.0 | 1,631.2 | 1,988.2 | |||||||||
Deferred income taxes | 1,820.2 | 530.1 | (1,781.9 | ) | ||||||||
Share-based compensation | 415.5 | 348.0 | 330.2 | |||||||||
In-process research and development | - | - | 325.1 | |||||||||
Taxes paid for Internal Revenue Service settlement | - | - | (2,788.1 | ) | ||||||||
Other | (534.2 | ) | 607.8 | (186.1 | ) | |||||||
Net changes in assets and liabilities: | ||||||||||||
Accounts receivable | 165.2 | (889.4 | ) | (290.7 | ) | |||||||
Inventories | 1,211.3 | (452.1 | ) | (40.7 | ) | |||||||
Trade accounts payable | (45.2 | ) | - | 117.7 | ||||||||
Accrued and other current liabilities | (4,003.5 | ) | (1,710.9 | ) | 451.1 | |||||||
Income taxes payable | (364.8 | ) | (465.3 | ) | 987.2 | |||||||
Noncurrent liabilities | 231.3 | (108.0 | ) | 26.2 | ||||||||
Other | 98.8 | (358.3 | ) | 105.1 | ||||||||
Net Cash Provided by Operating Activities | 3,392.0 | 6,571.7 | 6,999.2 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Capital expenditures | (1,460.6 | ) | (1,298.3 | ) | (1,011.0 | ) | ||||||
Purchases of securities and other investments | (3,070.8 | ) | (11,967.3 | ) | (10,132.7 | ) | ||||||
Proceeds from sales of securities and other investments | 10,941.9 | 11,065.8 | 10,860.2 | |||||||||
Proceeds from sale of interest in Merial Limited | 4,000.0 | - | - | |||||||||
Schering-Plough merger, net of cash acquired | (12,842.6 | ) | - | - | ||||||||
Acquisitions of businesses, net of cash acquired | (130.0 | ) | - | (1,135.9 | ) | |||||||
Distribution from AstraZeneca LP | - | 1,899.3 | - | |||||||||
Increase in restricted assets | 5,547.6 | (1,629.7 | ) | (1,401.1 | ) | |||||||
Other | 170.5 | 95.8 | 10.5 | |||||||||
Net Cash Provided by (Used by) Investing Activities | 3,156.0 | (1,834.4 | ) | (2,810.0 | ) | |||||||
Cash Flows from Financing Activities | ||||||||||||
Net change in short-term borrowings | (2,422.0 | ) | 1,859.9 | 11.4 | ||||||||
Proceeds from issuance of debt | 4,228.0 | - | - | |||||||||
Payments on debt | (25.3 | ) | (1,392.0 | ) | (1,195.3 | ) | ||||||
Purchases of treasury stock | - | (2,725.0 | ) | (1,429.7 | ) | |||||||
Dividends paid to stockholders | (3,215.0 | ) | (3,278.5 | ) | (3,307.3 | ) | ||||||
Other dividends paid | (264.1 | ) | (121.8 | ) | (120.8 | ) | ||||||
Proceeds from exercise of stock options | 186.4 | 102.3 | 898.6 | |||||||||
Other | (126.3 | ) | 32.6 | 277.0 | ||||||||
Net Cash Used by Financing Activities | (1,638.3 | ) | (5,522.5 | ) | (4,866.1 | ) | ||||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | 33.4 | (182.6 | ) | 98.3 | ||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 4,943.1 | (967.8 | ) | (578.6 | ) | |||||||
Cash and Cash Equivalents at Beginning of Year | 4,368.3 | 5,336.1 | 5,914.7 | |||||||||
Cash and Cash Equivalents at End of Year | $ | 9,311.4 | $ | 4,368.3 | $ | 5,336.1 | ||||||
Supplemental Cash Flow Information (See Note 3) | ||||||||||||
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1. | Nature of Operations |
2. | Summary of Accounting Policies |
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3. | Merger with Schering-Plough Corporation |
Schering-Plough common stock shares outstanding at November 3, 2009 (net of treasury shares) | 1,641.1 | |||
Units of merger consideration arising from conversion of 6% preferred stock | 74.7 | (1) | ||
Shares and units eligible | 1,715.8 | |||
Cash per share/unit | $ | 10.50 | ||
Cash consideration for outstanding shares/units | $ | 18,015.6 | ||
6% preferred stock make-whole dividend payments | 98.5 | (2) | ||
Value of Schering-Plough deferred stock units settled in cash | 155.9 | (3) | ||
Total cash consideration | $ | 18,270.0 | ||
Shares and units eligible | 1,715.8 | |||
Common stock exchange ratio per share/unit | 0.5767 | |||
Equivalent New Merck shares | 989.5 | |||
Shares issued to settle certain performance-based awards | 0.7 | |||
New Merck shares issued | 990.2 | |||
Old Merck common stock share price on November 3, 2009 | $ | 30.67 | ||
Common stock equity consideration | $ | 30,370.0 | ||
Fair value of 6% preferred stock not converted | 214.7 | |||
Fair value of other share-based compensation awards | 525.2 | (4) | ||
Employee benefit related amounts payable as a result of the Merger | 191.9 | |||
Total consideration transferred | $ | 49,571.8 | ||
(1) | Upon completion of the Merger and for a period of 15 days thereafter, holders of 6% preferred stock were entitled to convert each share of 6% preferred stock into a number of units of merger consideration equal to the “make-whole” conversion rate of 8.2021 determined in |
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accordance with the terms of the preferred stock. This amount represents the units of merger consideration relating to the 6% preferred stock converted by those holders in the15-day period following the Merger. |
(2) | Represents the present value of all remaining future dividend payments (from the conversion date through the mandatory conversion date on August 13, 2010) paid to holders of 6% preferred stock that elected to convert in connection with the Merger using the discount rate as stipulated in the terms of the preferred stock. |
(3) | Represents the cash consideration paid to holders of Schering-Plough deferred stock units issued in 2007 and prior which were converted into the right to receive cash as specified in the Merger agreement attributable to precombination services. |
(4) | Represents the fair value of Schering-Plough stock option, performance share unit and deferred stock unit replacement awards attributable to precombination service issued to holders of these awards in the Merger. The fair value of outstanding Schering-Plough stock options and performance share units for 2007 awards and prior, which immediately vested at the effective time of the Merger, was attributed to precombination service and included in the consideration transferred. Stock option, performance share unit and deferred stock unit awards for 2008 and 2009, did not immediately vest upon completion of the Merger. For these awards, the fair value of the awards attributed to precombination services was included as part of the consideration transferred and the fair value attributed to postcombination service is being recognized as compensation cost over the requisite service period in the postcombination financial statements of New Merck. |
Cash and cash equivalents | $ | 5,427.4 | ||
Inventories | 7,371.8 | |||
Other current assets | 4,815.5 | |||
Property, plant and equipment | 6,677.6 | |||
Other identifiable intangible assets:(1) | ||||
Products and product rights(10-year weighted average useful life) | 32,955.8 | |||
In-process research and development (“IPR&D”)(2) | 6,344.5 | |||
Tradenames(26-year weighted average useful life) | 1,538.0 | |||
Other | 74.0 | |||
Other noncurrent assets | 982.1 | |||
Current liabilities | (6,864.0 | ) | ||
Deferred income tax liabilities | (8,907.6 | ) | ||
Long-term debt | (8,089.2 | ) | ||
Other noncurrent liabilities | (3,238.2 | ) | ||
Total identifiable net assets | 39,087.7 | |||
Goodwill(3) | 10,484.1 | |||
Estimated consideration transferred | $ | 49,571.8 | ||
(1) | In connection with the Merger, the Company obtained a controlling interest in the Merck/Schering-Plough partnership. The table above reflects Schering-Plough’s share of the fair value of the Merck/Schering-Plough partnership’s net assets including intangibles and inventories. Not reflected in this table are Merck’s share of the fair value of the Merck/Schering-Plough partnership’s net assets recorded in connection with the fair value adjustment to Merck’s previously held equity interest in the partnership (see “Merck/Schering-Plough Partnership” below). |
(2) | IPR&D represents the fair value assigned to incomplete research projects, which at the time of the Merger, had not reached technological feasibility. The amounts were capitalized and are being accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, Merck will make a determination as to the useful life of the asset and begin amortization (see “In-Process Research and Development” below). |
(3) | The goodwill recognized is largely attributable to anticipated synergies expected to arise after the Merger. Approximately $8.7 billion of the goodwill has been allocated to the Pharmaceutical segment. The remainder of the goodwill was allocated to other non-reportable segments. The goodwill is not deductible for tax purposes. |
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Years Ended December 31 | 2009 | 2008 | ||||||
(Unaudited) | ||||||||
Sales | $ | 45,970.7 | $ | 46,749.6 | ||||
Earnings attributable to Merck & Co., Inc. | 6,069.7 | 3,020.4 | ||||||
Earnings available to Merck & Co., Inc. common shareholders | 5,934.7 | 2,883.2 | ||||||
Basic earnings per common share available to common shareholders | 1.91 | 0.92 | ||||||
Earning per common share assuming dilution available to common shareholders | 1.90 | 0.92 | ||||||
• | The consolidation of the MSP Partnership which is now owned 100% by the Company and the corresponding gain resulting from the Company’s remeasurement of its previously held equity interest in the MSP Partnership; |
• | Additional depreciation and amortization expense that would have been recognized assuming fair value adjustments to inventory, property, plant and equipment and intangible assets; |
• | Additional interest expense and financing costs that would have been incurred on borrowing arrangements and loss of interest income on cash and short-term investments used to fund the Merger; |
• | Transaction costs associated with the Merger; and |
• | Conversion of a portion of outstanding 6% preferred stock |
4. | Restructuring |
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Separation | Accelerated | |||||||||||||||
Year Ended December 31, 2009 | Costs | Depreciation | Other | Total | ||||||||||||
Merger Restructuring Program | ||||||||||||||||
Materials and production | $ | - | $ | 42.6 | $ | - | $ | 42.6 | ||||||||
Research and development | - | - | - | - | ||||||||||||
Restructuring costs | 1,338.3 | - | 78.7 | 1,417.0 | ||||||||||||
1,338.3 | 42.6 | 78.7 | 1,459.6 | |||||||||||||
2008 Restructuring Program | ||||||||||||||||
Materials and production | - | 70.5 | (5.6 | ) | 64.9 | |||||||||||
Research and development | - | 227.8 | 3.8 | 231.6 | ||||||||||||
Restructuring costs | 13.6 | - | 164.6 | 178.2 | ||||||||||||
13.6 | 298.3 | 162.8 | 474.7 | |||||||||||||
$ | 1,351.9 | $ | 340.9 | $ | 241.5 | $ | 1,934.3 | |||||||||
Year Ended December 31, 2008 | ||||||||||||||||
2008 Restructuring Program | ||||||||||||||||
Materials and production | $ | - | $ | 33.7 | $ | 25.0 | $ | 58.7 | ||||||||
Research and development | - | 127.1 | - | 127.1 | ||||||||||||
Restructuring costs | 684.9 | - | 50.6 | 735.5 | ||||||||||||
684.9 | 160.8 | 75.6 | 921.3 | |||||||||||||
2005 Restructuring Program | ||||||||||||||||
Materials and production | - | 55.0 | 9.5 | 64.5 | ||||||||||||
Research and development | - | 0.9 | 0.4 | 1.3 | ||||||||||||
Restructuring costs | 272.4 | - | 24.6 | 297.0 | ||||||||||||
272.4 | 55.9 | 34.5 | 362.8 | |||||||||||||
$ | 957.3 | $ | 216.7 | $ | 110.1 | $ | 1,284.1 | |||||||||
Year Ended December 31, 2007 | ||||||||||||||||
2005 Restructuring Program | ||||||||||||||||
Materials and production | $ | - | $ | 460.6 | $ | 22.5 | $ | 483.1 | ||||||||
Research and development | - | - | (0.1 | ) | (0.1 | ) | ||||||||||
Restructuring costs | 251.4 | - | 75.7 | 327.1 | ||||||||||||
$ | 251.4 | $ | 460.6 | $ | 98.1 | $ | 810.1 | |||||||||
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Separation | Accelerated | |||||||||||||||
Costs | Depreciation | Other | Total | |||||||||||||
Merger Restructuring Program | ||||||||||||||||
Restructuring reserves as of January 1, 2009 | $ | - | $ | - | $ | - | $ | - | ||||||||
Expense | 1,338.3 | 42.6 | 78.7 | 1,459.6 | ||||||||||||
(Payments) receipts, net | (34.9 | ) | - | (58.4 | ) | (93.3 | ) | |||||||||
Non-cash activity | - | (42.6 | ) | (20.3 | ) | (62.9 | ) | |||||||||
Restructuring reserves as of December 31, 2009(1) | $ | 1,303.4 | $ | - | $ | - | $ | 1,303.4 | ||||||||
2008 Restructuring Program | ||||||||||||||||
Restructuring reserves as of January 1, 2008 | $ | - | $ | - | $ | - | $ | - | ||||||||
Expense | 684.9 | 160.8 | 75.6 | 921.3 | ||||||||||||
(Payments) receipts, net | (77.2 | ) | - | (37.3 | ) | (114.5 | ) | |||||||||
Non-cash activity | - | (160.8 | ) | (38.3 | ) | (199.1 | ) | |||||||||
Restructuring reserves as of December 31, 2008 | $ | 607.7 | $ | - | $ | - | $ | 607.7 | ||||||||
Expense | $ | 13.6 | $ | 298.3 | $ | 162.8 | $ | 474.7 | ||||||||
(Payments) receipts, net | (372.0 | ) | - | (154.5 | )(2) | (526.5 | ) | |||||||||
Non-cash activity | - | (298.3 | ) | (8.3 | ) | (306.6 | ) | |||||||||
Restructuring reserves as of December 31, 2009(1) | $ | 249.3 | $ | - | $ | - | $ | 249.3 | ||||||||
2005 Restructuring Program | ||||||||||||||||
Restructuring reserves as of January 1, 2008 | $ | 231.5 | $ | - | $ | - | $ | 231.5 | ||||||||
Expense | $ | 272.4 | $ | 55.9 | $ | 34.5 | $ | 362.8 | ||||||||
(Payments) receipts, net | (389.1 | ) | - | (23.2 | )(2) | (412.3 | ) | |||||||||
Non-cash activity | - | (55.9 | ) | (11.3 | ) | (67.2 | ) | |||||||||
Restructuring reserves as of December 31, 2008 | $ | 114.8 | $ | - | $ | - | $ | 114.8 | ||||||||
(Payments) receipts, net | (77.2 | ) | - | - | (77.2 | ) | ||||||||||
Restructuring reserves as of December 31, 2009(1) | $ | 37.6 | $ | - | $ | - | $ | 37.6 | ||||||||
(1) | The cash outlays associated with the first phase of the Merger Restructuring Program are expected to be substantially completed by the end of 2012. The cash outlays associated with the remaining restructuring reserve for the 2008 Restructuring Program are expected to be completed by the end of 2011. The cash outlays associated with the remaining restructuring reserve for the 2005 Restructuring Program are expected to be completed by the end of 2010. |
(2) | Includes proceeds from the sales of facilities in connection with restructuring actions. |
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5. | Acquisitions, Research Collaborations and License Agreements |
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6. | Collaborative Arrangements |
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7. | Financial Instruments |
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Fair Value of Derivative | U.S. Dollar | |||||||||||||
Balance Sheet Caption | Asset | Liability | Notional | |||||||||||
Derivatives Designated as Hedging Instruments | ||||||||||||||
Foreign Exchange Contracts (current) | Deferred income taxes and other current assets | $ | 139.3 | $ | - | $ | 3,050.5 | |||||||
Foreign Exchange Contracts (non-current) | Other assets | 152.6 | - | 2,118.1 | ||||||||||
Foreign Exchange Contracts (current) | Accrued and other current liabilities | - | 34.0 | 658.6 | ||||||||||
Interest Rate Swaps (non-current) | Other assets | 26.7 | - | 1,000.0 | ||||||||||
$ | 318.6 | $ | 34.0 | $ | 6,827.2 | |||||||||
Derivatives Not Designated as Hedging Instruments | ||||||||||||||
Foreign Exchange Contracts (current) | Deferred income taxes and other current assets | $ | 60.3 | $ | - | $ | 2,841.7 | |||||||
Foreign Exchange Contracts (current) | Accrued and other current liabilities | - | 38.6 | 2,104.3 | ||||||||||
$ | 60.3 | $ | 38.6 | $ | 4,946.0 | |||||||||
$ | 378.9 | $ | 72.6 | $ | 11,773.2 | |||||||||
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Amount of | Amount of | |||||||||||||||
Amount of | Amount of | Pretax | Pretax | |||||||||||||
Gain (Loss) | Gain (Loss) | (Gain) Loss | (Gain) Loss | |||||||||||||
Recognized in | Recognized in | Reclassified | Recognized | |||||||||||||
Earnings on | Earnings on | from AOCI | in OCI on | |||||||||||||
Derivatives(1) | Hedged Item(1) | into Earnings(2) | Derivatives | |||||||||||||
Derivatives designated in fair value hedging relationships: | ||||||||||||||||
Interest rate swap contracts | $ | 2.8 | $ | (2.8 | ) | $ | - | $ | - | |||||||
Foreign exchange contracts | 5.2 | (9.1 | ) | - | - | |||||||||||
$ | 8.0 | $ | (11.9 | ) | $ | - | $ | - | ||||||||
Derivatives designated in cash flow hedging relationships: | ||||||||||||||||
Foreign exchange contracts | $ | - | $ | - | $ | 60.5 | $ | 310.1 | ||||||||
Derivatives not designated in a hedging relationship: | ||||||||||||||||
Foreign exchange contracts(3) | $ | (40.8 | ) | $ | - | $ | - | $ | - | |||||||
(1) | Recognized in Other (income) expense, net. |
(2) | Recognized in Sales. |
(3) | These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates. |
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Fair Value Measurements Using | Fair Value Measurements Using | |||||||||||||||||||||||||||||||
Quoted Prices | Significant | Quoted Prices | Significant | |||||||||||||||||||||||||||||
In Active | Other | Significant | In Active | Other | Significant | |||||||||||||||||||||||||||
Markets for | Observable | Unobservable | Markets for | Observable | Unobservable | |||||||||||||||||||||||||||
Identical Assets | Inputs | Inputs | Identical Assets | Inputs | Inputs | |||||||||||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||||||||||||||
December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||
U.S. government and agency securities | $ | - | $ | 215.6 | $ | - | $ | 215.6 | $ | - | $ | 2,885.7 | $ | - | $ | 2,885.7 | ||||||||||||||||
Corporate notes and bonds | - | 205.2 | - | 205.2 | - | 3,093.2 | - | 3,093.2 | ||||||||||||||||||||||||
Municipal securities | - | 186.7 | - | 186.7 | - | - | - | - | ||||||||||||||||||||||||
Mortgage-backed securities(1) | - | - | - | - | - | 723.9 | - | 723.9 | ||||||||||||||||||||||||
Commercial paper | - | - | - | - | - | 133.0 | - | 133.0 | ||||||||||||||||||||||||
Asset-backed securities(1) | - | 36.0 | - | 36.0 | - | 306.7 | - | 306.7 | ||||||||||||||||||||||||
Foreign government bonds | - | - | - | - | - | 319.4 | - | 319.4 | ||||||||||||||||||||||||
Equity securities | 39.4 | 39.1 | - | 78.5 | 71.1 | 73.6 | - | 144.7 | ||||||||||||||||||||||||
Other debt securities | - | 3.4 | - | 3.4 | - | 2.8 | - | 2.8 | ||||||||||||||||||||||||
39.4 | 686.0 | - | 725.4 | 71.1 | 7,538.3 | - | 7,609.4 | |||||||||||||||||||||||||
Other assets | ||||||||||||||||||||||||||||||||
Securities held for employee compensation | 107.7 | 14.2 | - | 121.9 | - | - | - | - | ||||||||||||||||||||||||
Other assets(2) | - | 55.1 | 71.5 | 126.6 | - | 2,877.9 | 96.6 | 2,974.5 | ||||||||||||||||||||||||
107.7 | 69.3 | 71.5 | 248.5 | - | 2,877.9 | 96.6 | 2,974.5 | |||||||||||||||||||||||||
Derivative assets(3) | ||||||||||||||||||||||||||||||||
Purchased currency options | - | 291.9 | - | 291.9 | - | 451.3 | - | 451.3 | ||||||||||||||||||||||||
Forward exchange contracts | - | 60.3 | - | 60.3 | - | 73.2 | - | 73.2 | ||||||||||||||||||||||||
Interest rate swaps | - | 26.7 | - | 26.7 | - | 23.9 | - | 23.9 | ||||||||||||||||||||||||
- | 378.9 | - | 378.9 | - | 548.4 | - | 548.4 | |||||||||||||||||||||||||
Total assets | $ | 147.1 | $ | 1,134.2 | $ | 71.5 | $ | 1,352.8 | $ | 71.1 | $ | 10,964.6 | $ | 96.6 | $ | 11,132.3 | ||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Derivative liabilities(3) | ||||||||||||||||||||||||||||||||
Written currency options | $ | - | $ | 0.3 | $ | - | $ | 0.3 | $ | - | $ | 1.9 | $ | - | $ | 1.9 | ||||||||||||||||
Forward exchange contracts | - | 72.3 | - | 72.3 | - | 273.1 | - | 273.1 | ||||||||||||||||||||||||
Total liabilities | $ | - | $ | 72.6 | $ | - | $ | 72.6 | $ | - | $ | 275.0 | $ | - | $ | 275.0 | ||||||||||||||||
(1) | Substantially all of the asset-backed securities are highly-rated (Standard & Poor’s rating of AAA and Moody’s Investors Service rating of Aaa), secured primarily by credit card, auto loan, and home equity receivables, with weighted-average lives of primarily 5 years or less. Mortgage-backed securities represent AAA-rated securities issued or unconditionally guaranteed as to payment of principal and interest by U.S. government agencies. |
(2) | Other assets represent a portion of the pledged collateral discussed below and in Note 17. At December 31, 2009, Level 2 other assets are comprised of $39.5 million of asset-backed securities, $11.6 million of mortgage backed securities and $4.0 million of corporate notes and bonds. At December 31, 2008, Level 2 other assets are comprised of $987.4 million of corporate notes and bonds, $792.5 million of municipal securities, $357.3 million of commercial paper, $276.0 million of mortgage-backed securities, $240.1 million of U.S. government and agency securities and $224.6 million of asset-backed securities. |
(3) | The fair value determination of derivatives includes an assessment of the credit risk of counterparties to the derivatives and the Company’s own credit risk, the effects of which were not significant. |
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2009 | 2008 | |||||||||||||||||||||||
Available- | Other | |||||||||||||||||||||||
for-Sale | Other | Debt | Other | |||||||||||||||||||||
Investments | Assets | Total | Securities | Assets | Total | |||||||||||||||||||
Beginning balance January 1 | $ | - | $ | 96.6 | $ | 96.6 | $ | 314.5 | $ | 958.6 | $ | 1,273.1 | ||||||||||||
Net transfers in to (out of) Level 3(1) | 26.7 | 14.5 | 41.2 | (314.5 | ) | (684.5 | ) | (999.0 | ) | |||||||||||||||
Purchases, sales, settlements, net | (26.9 | ) | (48.8 | ) | (75.7 | ) | - | (132.8 | ) | (132.8 | ) | |||||||||||||
Total realized and unrealized gains (losses) | ||||||||||||||||||||||||
Included in: | ||||||||||||||||||||||||
Earnings(2) | 0.5 | (4.5 | ) | (4.0 | ) | - | (43.6 | ) | (43.6 | ) | ||||||||||||||
Comprehensive income | (0.3 | ) | 13.7 | 13.4 | - | (1.1 | ) | (1.1 | ) | |||||||||||||||
Ending balance at December 31 | $ | - | $ | 71.5 | $ | 71.5 | $ | - | $ | 96.6 | $ | 96.6 | ||||||||||||
Losses recorded in earnings for Level 3 assets still held at December 31 | $ | - | $ | 3.3 | $ | 3.3 | $ | - | $ | (44.3 | ) | $ | (44.3 | ) | ||||||||||
(1) | Transfers in and out of Level 3 are deemed to occur at the beginning of the quarter in which the transaction takes place. |
(2) | Amounts are recorded in Other (income) expense, net. |
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December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||||||||||
Fair | Amortized | Gross Unrealized | Fair | Amortized | Gross Unrealized | |||||||||||||||||||||||||||
Value | Cost | Gains(1) | Losses(1) | Value | Cost | Gains(1) | Losses(1) | |||||||||||||||||||||||||
U.S. government and agency securities | $ | 215.6 | $ | 215.7 | $ | 1.1 | $ | (1.2 | ) | $ | 3,125.8 | $ | 3,061.6 | $ | 67.4 | $ | (3.2 | ) | ||||||||||||||
Corporate notes and bonds | 209.2 | 207.1 | 3.3 | (1.2 | ) | 4,124.7 | 4,158.4 | 31.6 | (65.3 | ) | ||||||||||||||||||||||
Municipal securities | 186.7 | 184.8 | 2.9 | (1.0 | ) | 792.5 | 764.4 | 28.4 | (0.3 | ) | ||||||||||||||||||||||
Mortgage-backed securities | 79.4 | 65.9 | 13.8 | (0.3 | ) | 1,031.9 | 1,024.4 | 12.5 | (5.0 | ) | ||||||||||||||||||||||
Asset-backed securities | 79.3 | 69.2 | 10.1 | - | 551.7 | 571.8 | 0.6 | (20.7 | ) | |||||||||||||||||||||||
Foreign government bonds | 0.4 | 0.4 | - | - | 319.4 | 305.9 | 13.5 | - | ||||||||||||||||||||||||
Commercial paper | - | - | - | - | 490.3 | 490.3 | - | - | ||||||||||||||||||||||||
Other debt securities | 21.7 | 19.3 | 9.4 | (7.0 | ) | 46.7 | 48.6 | 1.5 | (3.4 | ) | ||||||||||||||||||||||
Equity securities | 181.6 | 161.4 | 28.4 | (8.2 | ) | 100.9 | 86.3 | 17.7 | (3.1 | ) | ||||||||||||||||||||||
$ | 973.9 | $ | 923.8 | $ | 69.0 | $ | (18.9 | ) | $ | 10,583.9 | $ | 10,511.7 | $ | 173.2 | $ | (101.0 | ) | |||||||||||||||
(1) | At December 31, 2009, gross unrealized gains and gross unrealized losses related to amounts pledged as collateral (see below and Note 17) were $25.6 million and $(0.3) million, respectively. At December 31, 2008, gross unrealized gains and gross unrealized losses related to amounts pledged as collateral were $36.1 million and $(30.3) million, respectively. |
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8. | Inventories |
2009 | 2008 | |||||||
Finished goods | $ | 2,475.5 | $ | 432.6 | ||||
Raw materials and work in process | 6,580.9 | 2,147.1 | ||||||
Supplies | 322.8 | 98.6 | ||||||
Total (approximates current cost) | 9,379.2 | 2,678.3 | ||||||
Reduction to LIFO costs | (166.7 | ) | - | |||||
$ | 9,212.5 | $ | 2,678.3 | |||||
Recognized as: | ||||||||
Inventories | $ | 8,055.3 | $ | 2,091.0 | ||||
Other assets | 1,157.2 | 587.3 | ||||||
9. | Goodwill and Other Intangibles |
All | ||||||||||||
Pharmaceutical | Other | Total | ||||||||||
Goodwill balance as of January 1, 2008 | $ | 1,115.2 | $ | 339.6 | $ | 1,454.8 | ||||||
Other | (16.1 | ) | - | (16.1 | ) | |||||||
Goodwill balance as of December 31, 2008 | 1,099.1 | 339.6 | 1,438.7 | |||||||||
Additions | 8,736.0 | 1,748.4 | 10,484.4 | |||||||||
Goodwill balance as of December 31, 2009 | $ | 9,835.1 | $ | 2,088.0 | $ | 11,923.1 | ||||||
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2009 | 2008 | |||||||||||||||||||||||
Gross | Gross | |||||||||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||
Amount | Amortization | Net | Amount | Amortization | Net | |||||||||||||||||||
Products and product rights | $ | 41,413.8 | $ | 2,301.5 | $ | 39,112.3 | $ | 1,629.1 | $ | 1,501.2 | $ | 127.9 | ||||||||||||
In-process research and development(1) | 6,650.7 | — | 6,650.7 | — | — | — | ||||||||||||||||||
Tradenames | 1,599.8 | 52.1 | 1,547.7 | 64.0 | 37.5 | 26.5 | ||||||||||||||||||
Other | 816.3 | 471.2 | 345.1 | 742.5 | 371.5 | 371.0 | ||||||||||||||||||
Total identifiable intangible assets | $ | 50,480.6 | $ | 2,824.8 | $ | 47,655.8 | $ | 2,435.6 | $ | 1,910.2 | $ | 525.4 | ||||||||||||
(1) | Amounts capitalized as in-process research and development are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, the Company will make a separate determination as to the useful life of the assets and begin amortization. |
10. | Joint Ventures and Other Equity Method Affiliates |
Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||
Merck/Schering-Plough | $ | 1,195.5 | $ | 1,536.3 | $ | 1,830.8 | ||||||
AstraZeneca LP | 674.3 | 598.4 | 820.1 | |||||||||
Other(1) | 365.2 | 425.9 | 325.6 | |||||||||
$ | 2,235.0 | $ | 2,560.6 | $ | 2,976.5 | |||||||
(1) | Primarily reflects results from Merial Limited until disposition on September 17, 2009, Sanofi Pasteur MSD and Johnson & Johnson°Merck Consumer Pharmaceuticals Company. |
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Period from | ||||||||||||
January 1, | ||||||||||||
through | Years Ended | |||||||||||
November 3, | December 31, | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Sales | $ | 3,387.2 | $ | 4,561.1 | $ | 5,186.2 | ||||||
Vytorin | 1,689.5 | 2,360.0 | 2,779.1 | |||||||||
Zetia | 1,697.7 | 2,201.1 | 2,407.1 | |||||||||
Materials and production costs | 144.4 | 176.3 | 216.0 | |||||||||
Other expense, net | 848.7 | 1,230.1 | 1,307.2 | |||||||||
Income before taxes | $ | 2,394.1 | $ | 3,154.7 | $ | 3,663.0 | ||||||
Merck’s share of income before taxes(1) | $ | 1,197.7 | $ | 1,489.5 | $ | 1,832.5 | ||||||
December 31, | ||||||||||||
2008 | ||||||||||||
Total assets(2) | $ | 608.0 | ||||||||||
Total liabilities(2) | 488.0 | |||||||||||
(1) | Old Merck’s share of the MSP Partnership’s income before taxes differs from the equity income recognized from the MSP Partnership primarily due to the timing of recognition of certain transactions between Old Merck and the MSP Partnership during the periods presented, including milestone payments. |
(2) | Amounts are comprised almost entirely of current balances. |
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Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||
Sales | $ | 5,743.6 | $ | 5,450.4 | $ | 6,345.4 | ||||||
Materials and production costs | 3,136.6 | 2,682.4 | 3,364.0 | |||||||||
Other expense, net | 1,194.2 | 1,408.1 | 1,090.1 | |||||||||
Income before taxes | 1,412.8 | 1,359.9 | 1,891.3 | |||||||||
December 31 | 2009 | 2008 | ||||||
Current assets | $ | 2,956.2 | $ | 2,023.9 | ||||
Noncurrent assets | 294.5 | 359.0 | ||||||
Total liabilities (all current) | 3,489.3 | 3,054.4 | ||||||
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Years Ended December 31 | 2009(1) | 2008 | 2007 | |||||||||
Sales | $ | 3,767.0 | $ | 4,860.4 | $ | 4,218.6 | ||||||
Materials and production costs | 1,225.3 | 1,553.6 | 1,346.9 | |||||||||
Other expense, net | 1,564.1 | 2,297.9 | 1,995.2 | |||||||||
Income before taxes | 977.6 | 1,008.9 | 876.5 | |||||||||
December 31 | 2009 | 2008 | ||||||
Current assets | $ | 757.2 | $ | 1,935.8 | ||||
Noncurrent assets | 270.7 | 1,174.4 | ||||||
Current liabilities | 601.3 | 1,152.6 | ||||||
Noncurrent liabilities | 84.3 | 266.5 | ||||||
(1) | Includes information for Merial until divestiture on September 17, 2009. |
11. | Loans Payable, Long-Term Debt and Other Commitments |
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2009 | 2008 | |||||||
5.375% euro-denominated notes due 2014 | $ | 2,349.6 | $ | — | ||||
5.30% notes due 2013 | 1,362.7 | — | ||||||
6.50% notes due 2033 | 1,314.4 | — | ||||||
1.875% notes due 2011 | 1,249.8 | — | ||||||
5.00% notes due 2019 | 1,242.5 | — | ||||||
6.55% notes due 2037 | 1,147.3 | — | ||||||
6.00% notes due 2017 | 1,118.3 | — | ||||||
4.75% notes due 2015 | 1,065.5 | 1,078.3 | ||||||
4.00% notes due 2015 | 1,004.4 | — | ||||||
5.85% notes due 2039 | 748.5 | — | ||||||
Floating rate euro-denominated term loan due 2012 | 650.0 | — | ||||||
4.375% notes due 2013 | 522.7 | 530.0 | ||||||
6.4% debentures due 2028 | 499.4 | 499.3 | ||||||
5.75% notes due 2036 | 497.8 | 497.8 | ||||||
5.95% debentures due 2028 | 497.4 | 497.2 | ||||||
5.125% notes due 2011 | 268.5 | 273.7 | ||||||
6.3% debentures due 2026 | 248.2 | 248.0 | ||||||
Other | 287.9 | 319.0 | ||||||
$ | 16,074.9 | $ | 3,943.3 | |||||
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12. | Contingencies and Environmental Liabilities |
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13. | Equity |
2009 | 2008 | 2007 | ||||||||||||||||||||||
Common | Treasury | Common | Treasury | Common | Treasury | |||||||||||||||||||
Stock | Stock | Stock | Stock | Stock | Stock | |||||||||||||||||||
Balance as of January 1 | 2,983.5 | 875.8 | 2,983.5 | 811.0 | 2,976.2 | 808.4 | ||||||||||||||||||
Issuances of shares in connection with the Merger | 1,054.3 | 64.0 | — | — | — | — | ||||||||||||||||||
Issuances of shares in connection with the acquisition of NovaCardia, Inc. | — | — | — | — | 7.3 | — | ||||||||||||||||||
Other issuances(1) | 8.7 | (1.5 | ) | — | (4.7 | ) | — | (23.9 | ) | |||||||||||||||
Purchases of treasury stock | — | — | — | 69.5 | — | 26.5 | ||||||||||||||||||
Cancellations of treasury stock(2) | (484.0 | ) | (484.0 | ) | — | — | — | — | ||||||||||||||||
Balance as of December 31 | 3,562.5 | 454.3 | 2,983.5 | 875.8 | 2,983.5 | 811.0 | ||||||||||||||||||
(1) | Issuances primarily reflect activity under share-based compensation plans. |
(2) | Pursuant to the Merger agreement, certain of Old Merck’s treasury shares were cancelled. |
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14. | Share-Based Compensation Plans |
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Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||
Expected dividend yield | 6.3 | % | 3.5 | % | 3.4 | % | ||||||
Risk-free interest rate | 2.2 | % | 2.7 | % | 4.4 | % | ||||||
Expected volatility | 33.8 | % | 31.0 | % | 24.6 | % | ||||||
Expected life (years) | 6.1 | 6.1 | 5.7 | |||||||||
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Number | Exercise | Contractual | Intrinsic | |||||||||||||
of Options | Price | Term | Value | |||||||||||||
Balance as of January 1, 2009 | 247,651.3 | $ | 51.50 | |||||||||||||
Granted | 34,279.2 | 24.31 | ||||||||||||||
Replacement awards | 66,611.8 | 28.23 | ||||||||||||||
Exercised | (8,548.1 | ) | 21.80 | |||||||||||||
Forfeited | (26,139.4 | ) | 68.10 | |||||||||||||
Outstanding as of December 31, 2009 | 313,854.8 | $ | 43.02 | 4.95 | $ | 1,102.7 | ||||||||||
Exercisable as of December 31, 2009 | 235,353.6 | $ | 46.48 | 3.90 | $ | 531.4 | ||||||||||
Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||
Total intrinsic value of stock options exercised | $ | 119.1 | $ | 40.3 | $ | 301.2 | ||||||
Fair value of stock options vested(1) | $ | 311.2 | $ | 259.0 | $ | 251.1 | ||||||
Cash received from the exercise of stock options | $ | 186.4 | $ | 102.3 | $ | 898.6 | ||||||
(1) | The fair value of stock options vested excludes the fair value of options that vested as a result of the Merger attributable to precombination service. |
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RSUs | PSUs | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Number | Grant Date | Number | Grant Date | |||||||||||||
of Shares | Fair Value | of Shares | Fair Value | |||||||||||||
Nonvested as of January 1, 2009 | 6,292.2 | $ | 39.41 | 1,621.4 | $ | 41.86 | ||||||||||
Granted | 2,818.5 | 26.78 | 726.4 | 24.20 | ||||||||||||
Replacement awards | 8,105.6 | 30.67 | 2,049.9 | 30.67 | ||||||||||||
Vested | (1,896.6 | ) | 34.18 | (1,063.7 | ) | 32.10 | ||||||||||
Forfeited | (201.0 | ) | 36.81 | (1,011.4 | ) | 31.46 | ||||||||||
Nonvested at December 31, 2009 | 15,118.7 | $ | 33.06 | 2,322.6 | $ | 35.46 | ||||||||||
15. | Pension and Other Postretirement Benefit Plans |
Other Postretirement | ||||||||||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||||||||||
Years Ended December 31 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||||
Service cost | $ | 398.4 | $ | 344.1 | $ | 377.2 | $ | 75.3 | $ | 73.2 | $ | 90.8 | ||||||||||||
Interest cost | 449.7 | 414.2 | 379.9 | 108.3 | 113.8 | 107.7 | ||||||||||||||||||
Expected return on plan assets | (649.2 | ) | (559.4 | ) | (491.4 | ) | (98.0 | ) | (129.0 | ) | (130.5 | ) | ||||||||||||
Net amortization | 122.8 | 70.4 | 149.4 | 18.9 | (22.6 | ) | (16.8 | ) | ||||||||||||||||
Termination benefits | 88.7 | 62.3 | 25.6 | 9.6 | 11.2 | 7.7 | ||||||||||||||||||
Curtailments | (6.2 | ) | 5.7 | 1.1 | (9.9 | ) | (15.9 | ) | (16.8 | ) | ||||||||||||||
Settlements | 2.7 | 8.6 | 5.4 | - | - | - | ||||||||||||||||||
Net pension and other postretirement cost | $ | 406.9 | $ | 345.9 | $ | 447.2 | $ | 104.2 | $ | 30.7 | $ | 42.1 | ||||||||||||
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Pension Benefits | Other Postretirement Benefits | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Fair value of plan assets at January 1 | $ | 5,887.6 | $ | 7,385.4 | $ | 1,088.4 | $ | 1,577.6 | ||||||||
Actual return on plan assets | 1,450.2 | (1,959.4 | ) | 311.4 | (512.0 | ) | ||||||||||
Company contributions | 868.7 | 1,190.8 | 88.8 | 99.5 | ||||||||||||
Schering-Plough merger | 3,041.2 | - | 107.2 | - | ||||||||||||
Effects of exchange rate changes | 72.9 | (90.3 | ) | - | - | |||||||||||
Benefits paid | (511.0 | ) | (643.2 | ) | (73.2 | ) | (76.7 | ) | ||||||||
Other | 25.1 | 4.3 | - | - | ||||||||||||
Fair value of plan assets at December 31 | $ | 10,834.7 | $ | 5,887.6 | $ | 1,522.6 | $ | 1,088.4 | ||||||||
Benefit obligation at January 1 | $ | 7,140.1 | $ | 7,049.4 | $ | 1,747.3 | $ | 1,936.8 | ||||||||
Service cost | 398.4 | 344.1 | 75.3 | 73.2 | ||||||||||||
Interest cost | 449.7 | 414.2 | 108.3 | 113.8 | ||||||||||||
Schering-Plough merger | 5,029.7 | - | 586.1 | - | ||||||||||||
Actuarial losses (gains) | 517.9 | 325.8 | 121.1 | (129.8 | ) | |||||||||||
Benefits paid | (511.0 | ) | (643.2 | ) | (73.2 | ) | (76.7 | ) | ||||||||
Effects of exchange rate changes | 88.2 | (158.0 | ) | 5.9 | (6.6 | ) | ||||||||||
Plan amendments | 1.8 | - | - | (180.6 | ) | |||||||||||
Curtailments | (32.6 | ) | (249.6 | ) | 33.7 | 6.0 | ||||||||||
Termination benefits | 88.7 | 62.3 | 9.6 | 11.2 | ||||||||||||
Other | 12.4 | (4.9 | ) | - | - | |||||||||||
Benefit obligation at December 31 | $ | 13,183.3 | $ | 7,140.1 | $ | 2,614.1 | $ | 1,747.3 | ||||||||
Funded status at December 31 | $ | (2,348.6 | ) | $ | (1,252.5 | ) | $ | (1,091.5 | ) | $ | (658.9 | ) | ||||
Recognized as: | ||||||||||||||||
Other assets | $ | 402.0 | $ | 142.4 | $ | 220.1 | $ | 147.7 | ||||||||
Accrued and other current liabilities | (248.7 | ) | (46.8 | ) | (9.2 | ) | (3.4 | ) | ||||||||
Deferred income taxes and noncurrent liabilities | (2,501.9 | ) | (1,348.1 | ) | (1,302.4 | ) | (803.2 | ) | ||||||||
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Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | Significant | |||||||||||||||
In Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 95.9 | $ | 544.1 | $ | - | $ | 640.0 | ||||||||
Securities lending collaterial in short-term investments | - | 280.5 | - | 280.5 | ||||||||||||
Equity securities | ||||||||||||||||
U.S. large cap | 469.6 | 1,805.5 | - | 2,275.1 | ||||||||||||
U.S. small/mid cap | 625.3 | 744.5 | - | 1,369.8 | ||||||||||||
Non-U.S. developed markets | 1,274.2 | 1,077.3 | - | 2,351.5 | ||||||||||||
Emerging markets | 93.3 | 449.0 | - | 542.3 | ||||||||||||
Fixed income securities | ||||||||||||||||
Government and agency obligations | 70.3 | 1,599.7 | - | 1,670.0 | ||||||||||||
Corporate obligations | 71.2 | 819.0 | 0.9 | 891.1 | ||||||||||||
Mortgage and asset backed securities | - | 287.8 | 3.0 | 290.8 | ||||||||||||
Other fixed income obligations | - | 22.6 | - | 22.6 | ||||||||||||
Other types of investments | ||||||||||||||||
Insurance contracts | - | 139.2 | 310.0 | 449.2 | ||||||||||||
Real estate | - | 8.7 | 190.4 | 199.1 | ||||||||||||
Derivatives | - | 70.6 | - | 70.6 | ||||||||||||
Other | - | 2.2 | 63.9 | 66.1 | ||||||||||||
$ | 2,699.8 | $ | 7,850.7 | $ | 568.2 | $ | 11,118.7 | |||||||||
Liabilities | ||||||||||||||||
Liability for the return of collateral for securities loaned | $ | - | $ | 280.5 | $ | - | $ | 280.5 | ||||||||
Actual Return on Plan Assets | ||||||||||||||||||||||||
Relating to | ||||||||||||||||||||||||
Beginning | Assets Still | Ending | ||||||||||||||||||||||
Balance at | Held at | Relating to | Purchases, | Schering- | Balance at | |||||||||||||||||||
January 1, | December 31, | Assets Sold | Sales, | Plough | December 31, | |||||||||||||||||||
2009 | 2009 | During 2009 | Settlements, Net | Merger | 2009 | |||||||||||||||||||
Insurance Contracts | $ | 182.0 | $ | 19.5 | $ | - | $ | (18.0 | ) | $ | 126.5 | $ | 310.0 | |||||||||||
Real Estate | 52.6 | (9.4 | ) | - | (0.3 | ) | 147.5 | 190.4 | ||||||||||||||||
Other | 0.2 | 1.2 | 0.1 | 1.1 | 65.2 | 67.8 | ||||||||||||||||||
Total | $ | 234.8 | $ | 11.3 | $ | 0.1 | $ | (17.2 | ) | $ | 339.2 | $ | 568.2 | |||||||||||
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Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | Significant | |||||||||||||||
In Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 1.7 | $ | 58.1 | $ | - | $ | 59.8 | ||||||||
Securites lending collateral in short-term investments | - | 65.0 | - | 65.0 | ||||||||||||
Equity securities | ||||||||||||||||
U.S. large cap | 25.2 | 436.4 | - | 461.6 | ||||||||||||
U.S. small/mid cap | 85.5 | 271.6 | - | 357.1 | ||||||||||||
Non-U.S. developed markets | 187.3 | 95.5 | - | 282.8 | ||||||||||||
Emerging markets | 31.2 | 80.7 | - | 111.9 | ||||||||||||
Fixed income securities | ||||||||||||||||
Corporate obligations | 1.6 | 137.9 | - | 139.5 | ||||||||||||
Government and agency obligations | 4.3 | 66.5 | - | 70.8 | ||||||||||||
Mortgage and asset backed securities | 3.4 | 27.8 | - | 31.2 | ||||||||||||
Other fixed income obligations | - | 6.0 | - | 6.0 | ||||||||||||
Total investments | $ | 340.2 | $ | 1,245.5 | $ | - | $ | 1,585.7 | ||||||||
Liabilities | ||||||||||||||||
Liability for the return of collateral for securities loaned | $ | - | $ | 65.0 | $ | - | $ | 65.0 | ||||||||
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Other | ||||||||
Pension | Postretirement | |||||||
Benefits | Benefits | |||||||
2010 | $ | 639.6 | $ | 119.3 | ||||
2011 | 521.3 | 127.4 | ||||||
2012 | 565.7 | 134.2 | ||||||
2013 | 593.1 | 142.7 | ||||||
2014 | 617.0 | 151.2 | ||||||
2015 — 2019 | 4,018.4 | 898.6 | ||||||
Other Postretirement | ||||||||||||||||||||||||
Pension Plans | Benefit Plans | |||||||||||||||||||||||
Years Ended December 31 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net gain (loss) arising during the period | $ | 302.5 | $ | (2,586.0 | ) | $ | 269.1 | $ | 70.9 | $ | (509.3 | ) | $ | (16.5 | ) | |||||||||
Prior service (cost) credit arising during the period | (0.5 | ) | 10.6 | 21.4 | (23.5 | ) | 157.7 | (21.2 | ) | |||||||||||||||
$ | 302.0 | $ | (2,575.4 | ) | $ | 290.5 | $ | 47.4 | $ | (351.6 | ) | $ | (37.7 | ) | ||||||||||
Net loss amortization included in benefit cost | $ | 127.5 | $ | 50.8 | $ | 139.3 | $ | 67.7 | $ | 26.1 | $ | 26.6 | ||||||||||||
Prior service cost (credit) amortization | ||||||||||||||||||||||||
included in benefit cost | 8.7 | 7.6 | 12.1 | (48.8 | ) | (48.7 | ) | (43.4 | ) | |||||||||||||||
$ | 136.2 | $ | 58.4 | $ | 151.4 | $ | 18.9 | $ | (22.6 | ) | $ | (16.8 | ) | |||||||||||
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U.S. Pension and Other | ||||||||||||||||||||||||
Postretirement | ||||||||||||||||||||||||
Pension Plans | Benefit Plans | |||||||||||||||||||||||
December 31 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net cost | ||||||||||||||||||||||||
Discount rate | 5.80% | 5.90% | 5.35% | 6.15% | 6.50% | 6.00% | ||||||||||||||||||
Expected rate of return | ||||||||||||||||||||||||
on plan assets | 7.90% | 7.65% | 7.65% | 8.75% | 8.75% | 8.75% | ||||||||||||||||||
Salary growth rate | 4.30% | 4.30% | 4.20% | 4.50% | 4.50% | 4.50% | ||||||||||||||||||
Benefit obligation | ||||||||||||||||||||||||
Discount rate | 5.50% | 5.75% | 5.90% | 5.90% | 6.20% | 6.50% | ||||||||||||||||||
Salary growth rate | 4.15% | 4.25% | 4.30% | 4.50% | 4.50% | 4.50% | ||||||||||||||||||
December 31 | 2009 | 2008 | ||||||
Health care cost trend rate assumed for next year | 8.6 | % | 9.0 | % | ||||
Rate to which the cost trend rate is assumed to decline | 5.0 | % | 5.0 | % | ||||
Year that the trend rate reaches the ultimate trend rate | 2018 | 2016 | ||||||
One Percentage | ||||||||
Point | ||||||||
Increase | Decrease | |||||||
Effect on total service and interest cost components | $ | 33.5 | $ | (26.5 | ) | |||
Effect on benefit obligation | $ | 387.9 | $ | (315.8 | ) | |||
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16. | Other (Income) Expense, Net |
Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||
Interest income | $ | (210.2 | ) | $ | (631.4 | ) | $ | (741.1 | ) | |||
Interest expense | 458.0 | 251.3 | 384.3 | |||||||||
Exchange (gains) losses | (12.4 | ) | 147.4 | (54.3 | ) | |||||||
Other, net | (10,904.9 | ) | (2,085.4 | ) | 335.9 | |||||||
$ | (10,669.5 | ) | $ | (2,318.1 | ) | $ | (75.2 | ) | ||||
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17. | Taxes on Income |
2009 | 2008 | 2007 | ||||||||||||||||||||||
Amount | Tax Rate | Amount | Tax Rate | Amount | Tax Rate | |||||||||||||||||||
U.S. statutory rate applied to income before taxes | $ | 5,352.2 | 35.0 | % | $ | 3,476.1 | 35.0 | % | $ | 1,222.3 | 35.0 | % | ||||||||||||
Differential arising from: | ||||||||||||||||||||||||
Gain on equity investments | (2,539.7 | ) | (16.6 | ) | 29.0 | 0.3 | — | — | ||||||||||||||||
Foreign earnings | (1,189.0 | ) | (7.8 | ) | (1,269.9 | ) | (12.9 | ) | (1,196.0 | ) | (34.3 | ) | ||||||||||||
Tax rate change | (198.0 | ) | (1.3 | ) | — | — | — | — | ||||||||||||||||
State tax settlements | (108.0 | ) | (0.7 | ) | (191.6 | ) | (2.0 | ) | — | — | ||||||||||||||
Foreign tax credit utilization | — | — | (192.0 | ) | (2.0 | ) | — | — | ||||||||||||||||
Amortization of purchase accounting adjustments | 760.0 | 5.0 | — | — | — | — | ||||||||||||||||||
Restructuring | 264.0 | 1.7 | 114.7 | 1.2 | — | — | ||||||||||||||||||
State taxes | 185.1 | 1.2 | 310.9 | 3.2 | 11.6 | 0.3 | ||||||||||||||||||
In-process research and development | — | — | — | — | 113.8 | 3.3 | ||||||||||||||||||
Other(1) | (259.0 | ) | (1.7 | ) | (277.8 | ) | (2.7 | ) | (56.4 | ) | (1.6 | ) | ||||||||||||
$ | 2,267.6 | 14.8 | % | $ | 1,999.4 | 20.1 | % | $ | 95.3 | 2.7 | % | |||||||||||||
(1) | Other includes the tax effect of contingency reserves, research credits, export incentives and miscellaneous items. |
Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||
Domestic | $ | 5,319.5 | $ | 5,210.1 | $ | (2,525.8 | ) | |||||
Foreign | 9,972.3 | 4,721.6 | 6,017.9 | |||||||||
$ | 15,291.8 | $ | 9,931.7 | $ | 3,492.1 | |||||||
Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||
Current provision | ||||||||||||
Federal | $ | (55.2 | ) | $ | 1,053.6 | $ | 988.1 | |||||
Foreign | 495.4 | 292.4 | 687.0 | |||||||||
State | 7.2 | 123.3 | 202.2 | |||||||||
447.4 | 1,469.3 | 1,877.3 | ||||||||||
Deferred provision | ||||||||||||
Federal | 2,094.7 | 419.0 | (1,671.5 | ) | ||||||||
Foreign | (437.3 | ) | 55.8 | 157.2 | ||||||||
State | 162.8 | 55.3 | (267.7 | ) | ||||||||
1,820.2 | 530.1 | (1,782.0 | ) | |||||||||
$ | 2,267.6 | $ | 1,999.4 | $ | 95.3 | |||||||
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2009 | 2008 | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
Other intangibles | $ | - | $ | 8,503.6 | $ | - | $ | 124.9 | ||||||||
Inventory related | 509.9 | 176.7 | 248.6 | - | ||||||||||||
Accelerated depreciation | 46.5 | 1,458.2 | - | 1,045.1 | ||||||||||||
Unremitted foreign earnings | - | 2,991.1 | - | 16.7 | ||||||||||||
Equity investments | - | 177.9 | - | 75.1 | ||||||||||||
Pensions and other postretirement benefits | 1,345.7 | 103.1 | 796.5 | 129.9 | ||||||||||||
Compensation related | 735.8 | - | 347.5 | - | ||||||||||||
VioxxLitigation reserve | 42.0 | - | 1,755.1 | - | ||||||||||||
Unrecognized tax benefits | 730.0 | - | 984.1 | - | ||||||||||||
Net operating losses and other tax credit carryforwards | 1,247.3 | - | 224.7 | - | ||||||||||||
Other | 2,201.1 | 58.4 | 1,012.9 | 95.9 | ||||||||||||
Subtotal | 6,858.3 | 13,469.0 | 5,369.4 | 1,487.6 | ||||||||||||
Valuation allowance | (195.6 | ) | (94.2 | ) | ||||||||||||
Total deferred taxes | $ | 6,662.7 | $ | 13,469.0 | $ | 5,275.2 | $ | 1,487.6 | ||||||||
Net deferred income taxes | $ | 6,806.3 | $ | 3,787.6 | ||||||||||||
Recognized as: | ||||||||||||||||
Deferred income taxes and other current assets | $ | 1,657.9 | $ | 2,436.9 | ||||||||||||
Other assets | 500.8 | 1,666.7 | ||||||||||||||
Income taxes payable | $ | 167.8 | $ | 3.8 | ||||||||||||
Deferred income taxes and noncurrent liabilities | 8,797.2 | 312.2 | ||||||||||||||
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2009 | 2008 | 2007 | ||||||||||
Balance as of January 1 | $ | 3,665.0 | $ | 3,689.5 | $ | 5,008.4 | ||||||
Additions related to current year positions | 333.0 | 269.4 | 284.5 | |||||||||
Additions related to prior year positions | 48.9 | 64.2 | 187.8 | |||||||||
Additons related to the merger with Schering-Plough | 1,176.0 | - | - | |||||||||
Reductions for tax positions of prior years | (547.4 | ) | (310.5 | ) | (87.0 | ) | ||||||
Settlements(1) | (331.8 | ) | (38.8 | ) | (1,703.5 | ) | ||||||
Lapse of statute of limitations | (2.6 | ) | (8.8 | ) | (0.7 | ) | ||||||
Balance as of December 31 | $ | 4,341.1 | $ | 3,665.0 | $ | 3,689.5 | ||||||
(1) | Reflects the settlement with the Internal Revenue Service in 2007 discussed below. |
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18. | Earnings per Share |
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Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||
Basic Earnings per Common Share | ||||||||||||
Net income available to Merck & Co., Inc. common shareholders | $ | 12,899.2 | $ | 7,808.4 | $ | 3,275.4 | ||||||
Less: Income allocated to participating securities | 46.3 | 20.8 | 8.6 | |||||||||
Net income allocated to common shareholders | $ | 12,852.9 | $ | 7,787.6 | $ | 3,266.8 | ||||||
Average common shares outstanding | 2,268.2 | 2,135.8 | 2,170.5 | |||||||||
$ | 5.67 | $ | 3.65 | $ | 1.51 | |||||||
Earnings per Common Share Assuming Dilution | ||||||||||||
Net income available to Merck & Co., Inc. common shareholders | $ | 12,899.2 | $ | 7,808.4 | $ | 3,275.4 | ||||||
Less: Income allocated to participating securities | 46.2 | 20.8 | 8.6 | |||||||||
Net income allocated to common shareholders | $ | 12,853.0 | $ | 7,787.6 | $ | 3,266.8 | ||||||
Average common shares outstanding | 2,268.2 | 2,135.8 | 2,170.5 | |||||||||
Common shares issuable(1) | 5.0 | 6.7 | 19.3 | |||||||||
Average common shares outstanding assuming dilution | 2,273.2 | 2,142.5 | 2,189.8 | |||||||||
$ | 5.65 | $ | 3.63 | $ | 1.49 | |||||||
(1) | Issuable primarily under share-based compensation plans. |
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19. | Comprehensive Income |
Year Ended December 31, 2009 | Pretax | Tax | After Tax | |||||||||
Net unrealized loss on derivatives | $ | (316.1 | ) | $ | 124.9 | $ | (191.2 | ) | ||||
Net loss realization | 61.2 | (24.1 | ) | 37.1 | ||||||||
Derivatives | (254.9 | ) | 100.8 | (154.1 | ) | |||||||
Net unrealized gain on investments | 208.3 | (31.2 | ) | 177.1 | ||||||||
Net gain realization | (230.5 | ) | 23.6 | (206.9 | ) | |||||||
Investments | (22.2 | ) | (7.6 | ) | (29.8 | ) | ||||||
Benefit plan net (loss) gain and prior service cost (credit), net of amortization | 504.5 | (219.0 | ) | 285.5 | ||||||||
Cumulative translation adjustment(1) | (314.2 | ) | - | (314.2 | ) | |||||||
$ | (86.8 | ) | $ | (125.8 | ) | $ | (212.6 | ) | ||||
Year Ended December 31, 2008 | ||||||||||||
Net unrealized gain on derivatives | $ | 291.0 | $ | (116.0 | ) | $ | 175.0 | |||||
Net gain realization | (38.8 | ) | 15.4 | (23.4 | ) | |||||||
Derivatives | 252.2 | (100.6 | ) | 151.6 | ||||||||
Net unrealized loss on investments | (212.9 | ) | 79.2 | (133.7 | ) | |||||||
Net loss realization | 116.9 | (63.7 | ) | 53.2 | ||||||||
Investments | (96.0 | ) | 15.5 | (80.5 | ) | |||||||
Benefit plan net (loss) gain and prior service cost (credit), net of amortization | (2,891.2 | ) | 1,129.5 | (1,761.7 | ) | |||||||
Cumulative translation adjustment(1) | (37.2 | ) | - | (37.2 | ) | |||||||
$ | (2,772.2 | ) | $ | 1,044.4 | $ | (1,727.8 | ) | |||||
Year Ended December 31, 2007 | ||||||||||||
Net unrealized loss on derivatives | $ | (50.5 | ) | $ | 20.7 | $ | (29.8 | ) | ||||
Net loss realization | 43.0 | (17.6 | ) | 25.4 | ||||||||
Derivatives | (7.5 | ) | 3.1 | (4.4 | ) | |||||||
Net unrealized gain on investments | 106.2 | (24.5 | ) | 81.7 | ||||||||
Net gain realization | (36.1 | ) | 12.4 | (23.7 | ) | |||||||
Investments | 70.1 | (12.1 | ) | 58.0 | ||||||||
Benefit plan net gain (loss) and prior service cost (credit), net of amortization | 387.4 | (147.1 | ) | 240.3 | ||||||||
Cumulative translation adjustment(1) | 34.4 | 9.9 | 44.3 | |||||||||
$ | 484.4 | $ | (146.2 | ) | $ | 338.2 | ||||||
(1) | The increase in the cumulative translation adjustment in 2009 is due to the Merger. Amounts in 2008 and 2007 represent cumulative translation adjustments related to equity investees. |
December 31 | 2009 | 2008 | ||||||
Net unrealized (loss) gain on derivatives | $ | (42.2 | ) | $ | 111.9 | |||
Net unrealized gain on investments | 33.3 | 63.1 | ||||||
Pension plan net loss | (2,191.3 | ) | (2,440.7 | ) | ||||
Other postretirement benefit plan net loss | (521.4 | ) | (596.5 | ) | ||||
Pension plan prior service cost | (20.7 | ) | (26.4 | ) | ||||
Other postretirement benefit plan prior service cost | 264.3 | 309.0 | ||||||
Cumulative translation adjustment | (288.5 | ) | 25.7 | |||||
$ | (2,766.5 | ) | $ | (2,553.9 | ) | |||
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20. | Segment Reporting |
Pharmaceutical | All Other | Total | ||||||||||
Year Ended December 31, 2009 | ||||||||||||
Segment revenues | $ | 25,236.5 | $ | 2,114.0 | $ | 27,350.5 | ||||||
Segment profits | 15,714.6 | 1,735.1 | 17,449.7 | |||||||||
Included in segment profits: | ||||||||||||
Equity income from affiliates | 1,330.1 | 751.7 | 2,081.8 | |||||||||
Depreciation and amortization | (92.6 | ) | - | (92.6 | ) | |||||||
Year Ended December 31, 2008 | ||||||||||||
Segment revenues | $ | 22,081.3 | $ | 1,694.1 | $ | 23,775.4 | ||||||
Segment profits | 14,110.3 | 1,691.0 | 15,801.3 | |||||||||
Included in segment profits: | ||||||||||||
Equity income from affiliates | 1,655.8 | 668.4 | 2,324.2 | |||||||||
Depreciation and amortization | (101.4 | ) | - | (101.4 | ) | |||||||
Year Ended December 31, 2007 | ||||||||||||
Segment revenues | $ | 22,282.8 | $ | 1,848.1 | $ | 24,130.9 | ||||||
Segment profits | 14,558.7 | 2,027.6 | 16,586.3 | |||||||||
Included in segment profits: | ||||||||||||
Equity income from affiliates | 1,895.9 | 820.0 | 2,715.9 | |||||||||
Depreciation and amortization | (137.1 | ) | - | (137.1 | ) | |||||||
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($ in millions) | 2009 | 2008 | 2007 | |||||||||
Pharmaceutical: | ||||||||||||
Bone, Respiratory, Immunology and Dermatology | ||||||||||||
Singulair | $ | 4,659.7 | $ | 4,336.9 | $ | 4,266.3 | ||||||
Fosamax | 1,099.8 | 1,552.7 | 3,049.0 | |||||||||
Propecia | 440.3 | 429.1 | 405.4 | |||||||||
Remicade | 430.7 | - | - | |||||||||
Arcoxia | 357.5 | 377.3 | 329.1 | |||||||||
Nasonex | 164.9 | - | - | |||||||||
Clarinex | 100.6 | - | - | |||||||||
Asmanex | 37.0 | - | - | |||||||||
Cardiovascular | ||||||||||||
Vytorin | 440.8 | 84.2 | 84.3 | |||||||||
Zetia | 402.9 | 6.4 | 6.5 | |||||||||
Integrilin | 45.9 | - | - | |||||||||
Diabetes and Obesity | ||||||||||||
Januvia | 1,922.1 | 1,397.1 | 667.5 | |||||||||
Janumet | 658.4 | 351.1 | 86.4 | |||||||||
Infectious Disease | ||||||||||||
Isentress | 751.8 | 361.1 | 41.3 | |||||||||
Primaxin | 688.9 | 760.4 | 763.5 | |||||||||
Cancidas | 616.7 | 596.4 | 536.9 | |||||||||
Invanz | 292.9 | 265.0 | 190.2 | |||||||||
Crixivan/Stocrin | 206.1 | 275.1 | 310.2 | |||||||||
PegIntron | 148.7 | - | - | |||||||||
Avelox | 66.2 | - | - | |||||||||
Rebetol | 36.1 | - | - | |||||||||
Mature Brands | ||||||||||||
Cozaar/Hyzaar | 3,560.7 | 3,557.7 | 3,350.1 | |||||||||
Zocor | 558.4 | 660.1 | 876.5 | |||||||||
Vasotec/Vaseretic | 310.8 | 356.7 | 494.6 | |||||||||
Proscar | 290.9 | 323.5 | 411.0 | |||||||||
Claritin Rx | 71.1 | - | - | |||||||||
Proventil | 26.2 | - | - | |||||||||
Neurosciences and Ophthalmology | ||||||||||||
Maxalt | 574.5 | 529.2 | 467.3 | |||||||||
Cosopt/Trusopt | 503.5 | 781.2 | 786.8 | |||||||||
Remeron | 38.5 | - | - | |||||||||
Subutex/Suboxone | 36.3 | - | - | |||||||||
Oncology | ||||||||||||
Emend | 313.1 | 259.7 | 201.7 | |||||||||
Temodar | 188.1 | - | - | |||||||||
Caelyx | 46.5 | - | - | |||||||||
Intron A | 38.4 | - | - | |||||||||
Vaccines(2) | ||||||||||||
ProQuad/M-M-R II/Varivax | 1,368.5 | 1,268.5 | 1,347.1 | |||||||||
Gardasil | 1,118.4 | 1,402.8 | 1,480.6 | |||||||||
RotaTeq | 521.9 | 664.5 | 524.7 | |||||||||
Pneumovax | 345.6 | 249.3 | 233.2 | |||||||||
Zostavax | 277.4 | 312.4 | 236.0 | |||||||||
Women’s Health and Endocrine | ||||||||||||
Follistim/Puregon | 96.5 | - | - | |||||||||
NuvaRing | 88.3 | - | - | |||||||||
Other Pharmaceutical(3) | 1,294.9 | 922.9 | 1,136.6 | |||||||||
25,236.5 | 22,081.3 | 22,282.8 | ||||||||||
Other segment revenues(4) | 2,114.0 | 1,694.1 | 1,848.1 | |||||||||
Total segment revenues | 27,350.5 | 23,775.4 | 24,130.9 | |||||||||
Other(5) | 77.8 | 74.9 | 66.8 | |||||||||
$ | 27,428.3 | $ | 23,850.3 | $ | 24,197.7 | |||||||
(1) | Sales of legacy Schering-Plough products only reflect results for the post-merger period through December 31, 2009. Sales of MSP Partnership productsZetiaand Vytorinrepresent sales for the post-Merger period through December 31, 2009. Prior to the Merger, sales ofZetiaandVytorinwere primarily recognized by the MSP Partnership and the results of Old Merck’s interest in the MSP Partnership were recorded inEquity income from affiliates.Sales ofZetia andVytorin in 2008 and 2007 reflect Old Merck’s sales of these products in Latin America which was not part of the MSP Partnership. | |
(2) | These amounts do not reflect sales of vaccines sold in most major European markets through the Company’s joint venture, Sanofi Pasteur MSD, the results of which are reflected inEquity income from affiliates. These amounts do, however, reflect supply sales to Sanofi Pasteur MSD. | |
(3) | Other pharmaceutical primarily includes sales of other human pharmaceutical products, including products within the franchises not listed separately. | |
(4) | Reflects other non-reportable segments, including animal health and consumer health care, and revenue from the Company’s relationship with AZLP primarily relating to sales ofNexium,as well as Prilosec.Revenue from AZLP was $1.4 billion, $1.6 billion and $1.7 billion in 2009, 2008 and 2007, respectively. | |
(5) | Other revenues are primarily comprised of miscellaneous corporate revenues, third-party manufacturing sales, sales related to divested products or businesses and other supply sales not included in segment results. |
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Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||
United States | $ | 14,401.2 | $ | 13,370.5 | $ | 14,690.9 | ||||||
Europe, Middle East and Africa | 7,093.1 | 5,773.8 | 5,159.0 | |||||||||
Japan | 2,425.6 | 1,823.5 | 1,533.2 | |||||||||
Other | 3,508.4 | 2,882.5 | 2,814.6 | |||||||||
$ | 27,428.3 | $ | 23,850.3 | $ | 24,197.7 | |||||||
Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||
Segment profits | $ | 17,449.7 | $ | 15,801.3 | $ | 16,586.3 | ||||||
Other profits | (136.7 | ) | (92.3 | ) | (56.2 | ) | ||||||
Adjustments | 372.0 | 424.7 | 367.7 | |||||||||
Unallocated: | ||||||||||||
Interest income | 210.2 | 631.4 | 741.1 | |||||||||
Interest expense | (458.0 | ) | (251.3 | ) | (384.3 | ) | ||||||
Equity income from affiliates | 153.2 | 236.5 | 260.6 | |||||||||
Depreciation and amortization | (1,569.6 | ) | (1,529.8 | ) | (1,851.0 | ) | ||||||
Research and development | (5,845.0 | ) | (4,805.3 | ) | (4,882.8 | ) | ||||||
Amortization of purchase accounting adjustments | (2,285.9 | ) | - | - | ||||||||
Gain related to MSP Partnership | 7,529.5 | - | - | |||||||||
Gain on Merial divestiture | 3,162.5 | - | - | |||||||||
Gain on distribution from AstraZeneca LP | - | 2,222.7 | - | |||||||||
U.S.VioxxSettlement Agreement charge | - | - | (4,850.0 | ) | ||||||||
Other expenses, net | (3,290.1 | ) | (2,706.2 | ) | (2,439.3 | ) | ||||||
$ | 15,291.8 | $ | 9,931.7 | $ | 3,492.1 | |||||||
December 31 | 2009 | 2008 | 2007 | |||||||||
United States | $ | 11,785.2 | $ | 9,023.2 | $ | 9,249.1 | ||||||
Europe, Middle East and Africa | 2,863.3 | 1,649.0 | 1,625.0 | |||||||||
Japan | 283.9 | 362.0 | 459.0 | |||||||||
Other | 3,341.1 | 965.4 | 1,012.9 | |||||||||
$ | 18,273.5 | $ | 11,999.6 | $ | 12,346.0 | |||||||
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(b) | Supplementary Data |
($ in millions except per share amounts) | 4th Q(1),(2),(3) | 3rd Q(3),(4) | 2nd Q(3),(5) | 1st Q(3),(6) | ||||||||||||
2009(7) | ||||||||||||||||
Sales | $10,093.5 | $6,049.7 | $5,899.9 | $5,385.2 | ||||||||||||
Materials and production costs | 4,900.8 | 1,430.3 | 1,353.9 | 1,333.8 | ||||||||||||
Marketing and administrative expenses | 3,455.2 | 1,725.5 | 1,729.5 | 1,632.9 | ||||||||||||
Research and development expenses | 1,971.5 | 1,254.0 | 1,395.3 | 1,224.2 | ||||||||||||
Restructuring costs | 1,489.8 | 42.4 | 37.4 | 64.3 | ||||||||||||
Equity income from affiliates | (373.8 | ) | (688.2 | ) | (587.1 | ) | (585.8 | ) | ||||||||
Other (income) expense, net | (7,814.8 | ) | (2,791.1 | ) | 3.6 | (67.2 | ) | |||||||||
Income before taxes | 6,464.8 | 5,076.8 | 1,967.3 | 1,783.0 | ||||||||||||
Net income available to common shareholders | 6,493.6 | 3,424.3 | 1,556.3 | 1,425.0 | ||||||||||||
Basic earnings per common share available to common shareholders | $2.36 | $1.62 | $0.74 | $0.67 | ||||||||||||
Earnings per common share assuming dilution available to common shareholders | $2.35 | $1.61 | $0.74 | $0.67 | ||||||||||||
2008(7) | ||||||||||||||||
Sales | $6,032.4 | $5,943.9 | $6,051.8 | $5,822.1 | ||||||||||||
Materials and production costs | 1,470.0 | 1,477.9 | 1,396.5 | 1,238.1 | ||||||||||||
Marketing and administrative expenses | 1,862.1 | 1,730.3 | 1,930.2 | 1,854.4 | ||||||||||||
Research and development expenses | 1,386.6 | 1,171.1 | 1,169.3 | 1,078.3 | ||||||||||||
Restructuring costs | 103.1 | 757.5 | 102.2 | 69.7 | ||||||||||||
Equity income from affiliates | (720.0 | ) | (665.6 | ) | (523.0 | ) | (652.1 | ) | ||||||||
Other (income) expense, net | (26.8 | ) | 30.6 | (112.8 | ) | (2,209.2 | ) | |||||||||
Income before taxes | 1,957.4 | 1,442.1 | 2,089.4 | 4,442.9 | ||||||||||||
Net income available to common shareholders | 1,644.8 | 1,092.7 | 1,768.3 | 3,302.6 | ||||||||||||
Basic earnings per common share available to common shareholders | $0.78 | $0.51 | $0.82 | $1.52 | ||||||||||||
Earnings per common share assuming dilution available to common shareholders | $0.78 | $0.51 | $0.82 | $1.52 | ||||||||||||
(1) | Amounts for 2009 include a gain on the fair value adjustment to Merck’s previously held interest in the MSP Partnership (see Note 3). | |
(2) | The fourth quarter 2008 tax provision reflects the favorable impact of foreign exchange rate changes and a benefit relating to the U.S. research and development tax credit. | |
(3) | Amounts for third and fourth quarter 2009 and fourth quarter 2008 include the impact of additionalVioxxlegal defense reserves (see Note 12). Amounts for third quarter and second quarter 2009 and first quarter 2008 include the impact of additionalFosamaxlegal defense reserves (see Note 12). | |
(4) | Amounts for 2009 include a gain on the sale of Old Merck’s interest in Merial Limited (see Note 10). | |
(5) | Amounts for 2008 reflect the favorable impact of tax settlements. | |
(6) | Amounts for 2008 include a gain on distribution from AstraZeneca LP (see Note 10), a gain related to the sale of the remaining worldwide rights toAggrastat, the realization of foreign tax credits and an expense for a contribution to the Merck Company Foundation. | |
(7) | Amounts for 2009 include the impacts of the Merger, including amortization of intangible assets and merger-related costs (see Note 3). Amounts for 2009 and 2008 include the impact of restructuring actions (see Note 4). |
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Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Item 9A. | Controls and Procedures. |
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Richard T. Clark Chairman, President and Chief Executive Officer | Peter N. Kellogg Executive Vice President and Chief Financial Officer |
Item 9B. | Other Information. |
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Item 10. | Directors, Executive Officers and Corporate Governance. |
Item 11. | Executive Compensation. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
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Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Item 14. | Principal Accountant Fees and Services. |
Item 15. | Exhibits and Financial Statement Schedules. |
1. | Financial Statements |
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2. | Financial Statement Schedules |
Merck/Schering-Plough Cholesterol Partnership Combined Financial Statements |
Combined Statements of Net Sales and Contractual Expenses
Years Ended December 31,
($ in millions)
2008 | 2007 | |||||||
Net sales | $ | 4,561 | $ | 5,186 | ||||
Cost of sales | 176 | 216 | ||||||
Selling, general and administrative | 1,062 | 1,151 | ||||||
Research and development | 168 | 156 | ||||||
1,406 | 1,523 | |||||||
Income from operations | $ | 3,155 | $ | 3,663 | ||||
Combined Balance Sheet
December 31,
($ in millions)
2008 | ||||
Assets | ||||
Cash and cash equivalents | $ | 204 | ||
Accounts receivable, net | 311 | |||
Inventories | 79 | |||
Prepaid expenses and other assets | 14 | |||
Total assets | $ | 608 | ||
Liabilities and Partners’ Capital | ||||
Rebates payable | $ | 263 | ||
Payable to Merck, net | 81 | |||
Payable to Schering-Plough, net | 100 | |||
Accrued expenses and other liabilities | 44 | |||
Total liabilities | 488 | |||
Commitments and contingent liabilities (notes 3 and 5) | ||||
Partners’ capital | 120 | |||
Total liabilities and Partners’ capital | $ | 608 | ||
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Combined Statements of Cash Flows
Years Ended December 31,
($ in millions)
2008 | 2007 | |||||||
Operating Activities: | ||||||||
Income from operations | $ | 3,155 | $ | 3,663 | ||||
Adjustments to reconcile income from operations to net cash provided by operating activities: | ||||||||
Accounts receivable, net | 91 | (109 | ) | |||||
Inventories | 26 | (18 | ) | |||||
Prepaid expenses and other assets | 2 | (2 | ) | |||||
Rebates payable | (114 | ) | 106 | |||||
Payable to Merck and Schering-Plough, net | (53 | ) | 1 | |||||
Accrued expenses and other liabilities | (1 | ) | 38 | |||||
Non-cash charges | 68 | 60 | ||||||
Net cash provided by operating activities | 3,174 | 3,739 | ||||||
Financing Activities: | ||||||||
Contributions from Partners | 407 | 722 | ||||||
Distributions to Partners | (3,868 | ) | (4,006 | ) | ||||
Net cash used for financing activities | (3,461 | ) | (3,284 | ) | ||||
Net increase/(decrease) in cash and cash equivalents | (287 | ) | 455 | |||||
Cash and cash equivalents, beginning of period | 491 | 36 | ||||||
Cash and cash equivalents, end of period | $ | 204 | $ | 491 | ||||
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Combined Statements of Partners’ Capital (Deficit)
($ in millions)
Schering- | ||||||||||||
Plough | Merck | Total | ||||||||||
Balance, January 1, 2007 | 2 | (83 | ) | (81 | ) | |||||||
Contributions from Partners | 276 | 506 | 782 | |||||||||
Income from operations | 1,831 | 1,832 | 3,663 | |||||||||
Distributions to Partners | (1,944 | ) | (2,062 | ) | (4,006 | ) | ||||||
Balance, December 31, 2007 | 165 | 193 | 358 | |||||||||
Contributions from Partners | 143 | 264 | 407 | |||||||||
Income from operations | 1,665 | 1,490 | 3,155 | |||||||||
Distributions to Partners | (1,964 | ) | (1,836 | ) | (3,800 | ) | ||||||
Balance, December 31, 2008 | $ | 9 | $ | 111 | $ | 120 | ||||||
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Notes to Combined Financial Statements
1. | Description of Business and Basis of Presentation |
• | Ezetimibe, a once daily CAI, non-statin cholesterol reducing medicine used alone or co-administered with any statin drug, and | |
• | Ezetimibe and simvastatin (Merck’s existing ZOCOR statin cholesterol modifying medicine) combined into one tablet (marketed today in the United States as VYTORIN and as INEGY in most other countries). |
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• | Manufacturing costs and expenses — All contractually agreed upon manufacturing plant costs and expenses incurred by the Partners related to the manufacture of the Cholesterol Products are included as Cost of sales in the accompanying combined statements of net sales and contractual expenses, including direct production costs, certain production variances, expenses for plant services and administration, warehousing, distribution, materials management, technical services, quality control, and asset utilization. All other manufacturing costs and expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are not invoiced to the Partnership and, therefore, are excluded from the accompanying combined financial statements. These costs and expenses include, but are not limited to, yield gains and losses in excess of jointly agreed upon yield rates and excess/idle capacity of manufacturing plant assets. |
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• | Direct promotion expenses — Direct promotion represents direct and identifiable out-of-pocket expenses incurred by the Partners on behalf of the Partnership including, but not limited to, contractually agreed upon expenses related to market research, detailing aids, agency fees, direct-to-consumer advertising, meetings and symposia, trade programs, launch meetings, special sales force incentive programs and product samples. All such contractually agreed upon expenses are included in Selling, general and administrative in the accompanying combined statements of net sales and contractual expenses. All other promotion expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are excluded from the accompanying combined financial statements. | |
• | Selling expenses — In the United States, Canada, Puerto Rico and other markets outside the United States (primarily Italy), the general sales forces of the Partners provide a majority of the physician detail activity at an agreed upon cost which is included in Selling, general and administrative in the accompanying combined statements of net sales and contractual expenses. In addition, the agreed upon costs of a limited specialty sales force for the United States market that calls on opinion leaders in the field of cholesterol medicine are also included in Selling, general and administrative. All other selling expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are excluded from the accompanying combined financial statements. These expenses include the total costs of the general sales forces of the Partners detailing the Cholesterol Products in most countries other than the United States, Canada, Puerto Rico and Italy. | |
• | Administrative expenses — Administrative support is primarily provided by one of the Partners. The contractually agreed upon expenses for support are determined based on a percentage of the net sales of the Cholesterol Products. Such amounts are included in Selling, general and administrative in the accompanying combined statements of net sales and contractual expenses. Selected contractually agreed upon direct costs of employees of the Partners for support services and out-of-pocket expenses incurred by the Partners on behalf of the Partnership are also included in Selling, general and administrative. All other expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are excluded from the accompanying combined financial statements. These expenses include, but are not limited to, certain U.S. managed care services, Partners’ subsidiary management in most international markets, and other indirect expenses such as corporate overhead and interest. | |
• | Research and development (“R&D”) expenses — R&D activities are performed by the Partners and agreed upon costs and expenses are invoiced to the Partnership. These agreed upon expenses generally represent an allocation of each Partner’s estimate of full time equivalents devoted to pre-clinical and post-marketing clinical development and regulatory activities and include grants and other third-party expenses. These contractually agreed upon allocated costs are included in Research and development in the accompanying combined statements of net sales and contractual expenses. All other R&D costs that are incurred by the Partners but not jointly agreed upon, are excluded from the accompanying combined financial statements. |
2. | Summary of Significant Accounting Policies |
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$ in millions | 2008 | 2007 | ||||||
Vytorin/Inegy | $ | 2,360 | $ | 2,779 | ||||
Zetia/Ezetrol | 2,201 | 2,407 | ||||||
Total | $ | 4,561 | $ | 5,186 | ||||
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Percent of Net Sales | ||||||||
2008 | 2007 | |||||||
McKesson Drug Company | 24 | % | 28 | % | ||||
Cardinal Health, Inc. | 21 | % | 26 | % | ||||
Amerisourcebergen Corp. | 16 | % | 17 | % |
3. | Inventories |
$ in millions | 2008 | |||
Finished goods | $ | 31 | ||
Raw materials and work in process | 48 | |||
Total | $ | 79 | ||
4. | Related Party Transactions |
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5. | Legal and Other Matters |
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3. | Exhibits |
Exhibit | ||||||
Number | Description | |||||
2 | .1 | — | Master Restructuring Agreement dated as of June 19, 1998 between Astra AB, Merck & Co., Inc., Astra Merck Inc., Astra USA, Inc., KB USA, L.P., Astra Merck Enterprises, Inc., KBI Sub Inc., Merck Holdings, Inc. and Astra Pharmaceuticals, L.P. (Portions of this Exhibit are subject to a request for confidential treatment filed with the Commission) — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
2 | .2 | — | Agreement and Plan of Merger by and among Merck & Co., Inc., Spinnaker Acquisition Corp., a wholly owned subsidiary of Merck & Co., Inc. and Sirna Therapeutics, Inc., dated as of October 30, 2006 — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated October 30, 2006 | |||
2 | .3 | — | Agreement and Plan of Merger by and among Merck & Co., Inc., Schering-Plough Corporation, Blue, Inc. and Purple, Inc. dated as of March 8, 2009 — Incorporated by reference to Schering-Plough’s Current Report onForm 8-K filed March 11, 2009 | |||
2 | .4 | — | Share Purchase Agreement, dated July 29, 2009, by and among Merck & Co., Inc., Merck SH Inc., Merck Sharp & Dohme (Holdings) Limited and sanofi-aventis — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated July 31, 2009 | |||
3 | .1 | — | Restated Certificate of Incorporation of Merck & Co., Inc. (November 3, 2009) — Incorporated by reference to Current Report onForm 8-K filed November 4, 2009 | |||
3 | .2 | — | By-Laws of Merck & Co., Inc. (effective November 3, 2009) — Incorporated by reference to Current Report onForm 8-K filed November 4, 2009 | |||
4 | .1 | — | Indenture, dated as of April 1, 1991, between Merck & Co., Inc. and Morgan Guaranty Trust Company of New York, as Trustee — Incorporated by reference to Exhibit 4 to Old Merck’s Registration Statement onForm S-3(No. 33-39349) | |||
4 | .2 | — | First Supplemental Indenture between Merck & Co., Inc. and First Trust of New York, National Association, as Trustee — Incorporated by reference to Exhibit 4(b) to Old Merck’s Registration Statement onForm S-3(No. 333-36383) | |||
4 | .3 | — | Second Supplemental Indenture, dated November 3, 2009, among Merck Sharp & Dohme Corp., Merck & Co., Inc. and U.S. Bank Trust National Association, as Trustee — Incorporated by reference to Exhibit 4.3 to Current Report onForm 8-K filed November 4, 2009 | |||
4 | .4 | — | 1.875% Notes due 2011 Officers’ Certificate of the Company dated June 25, 2009, including form of the 2011 Notes — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated June 25, 2009 | |||
4 | .5 | — | 4.000% Notes due 2015 Officers’ Certificate of the Company dated June 25, 2009, including form of the 2015 Notes — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated June 25, 2009 | |||
4 | .6 | — | 5.000% Notes due 2019 Officers’ Certificate of the Company dated June 25, 2009, including form of the 2019 Notes — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated June 25, 2009 | |||
4 | .7 | — | 5.850% Notes due 2039 Officers’ Certificate of the Company dated June 25, 2009, including form of the 2039 Notes — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated June 25, 2009 | |||
4 | .8 | — | Indenture, dated November 26, 2003, between Schering-Plough and The Bank of New York as Trustee — Incorporated by reference to Exhibit 4.1 to Schering-Plough’s Current Report onForm 8-K filed November 28, 2003 |
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Exhibit | ||||||
Number | Description | |||||
4 | .9 | — | First Supplemental Indenture (including Form of Note), dated November 26, 2003 — Incorporated by reference to Exhibit 4.2 to Schering-Plough’s Current Report onForm 8-K filed November 28, 2003 | |||
4 | .10 | — | Second Supplemental Indenture (including Form of Note), dated November 26, 2003 — Incorporated by reference to Exhibit 4.3 to Schering-Plough’s Current Report onForm 8-K filed November 28, 2003 | |||
4 | .11 | — | 5.30% Global Senior Note, due 2013 — Incorporated by reference to Exhibit 4(c)(iv) to Schering-Plough’sForm 10-K Annual Report for the fiscal year ended December 31, 2003 | |||
4 | .12 | — | 6.50% Global Senior Note, due 2033 — Incorporated by reference to Exhibit 4(c)(v) to Schering-Plough’sForm 10-K Annual Report for the fiscal year ended December 31, 2003 | |||
4 | .13 | — | Third Supplemental Indenture (including Form of Note), dated September 17, 2007 — Incorporated by reference to Exhibit 4.1 to Schering-Plough’s Current Report onForm 8-K filed September 17, 2007 | |||
4 | .14 | — | Fourth Supplemental Indenture (including Form of Note), dated October 1, 2007 — Incorporated by reference to Exhibit 4.1 to Schering-Plough’s Current Report onForm 8-K filed October 2, 2007 | |||
4 | .15 | — | Fifth Supplemental Indenture, dated November 3, 2009, among Merck Sharp & Dohme Corp., Merck & Co., Inc. and The Bank of New York Mellon, as Trustee — Incorporated by reference to Exhibit 4.4 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .1 | — | Executive Incentive Plan (as amended effective February 27, 1996) — Incorporated by reference to Old Merck’sForm 10-K Annual Report for the fiscal year ended December 31, 1995 | |||
*10 | .2 | — | Merck Sharp & Dohme Corp. Deferral Program, including Base Salary Deferral Plan (effective as amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.15 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .3 | — | Merck Sharp & Dohme Corp. 1996 Incentive Stock Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.10 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .4 | — | Merck Sharp & Dohme Corp. 2001 Incentive Stock Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.9 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .5 | — | Merck Sharp & Dohme Corp. 2004 Incentive Stock Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.8 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .6 | — | Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan (effective as amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.7 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .7 | — | Amendment One to the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan (effective February 15, 2010) — Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed February 18, 2010 | |||
*10 | .8 | — | Merck & Co., Inc. Change in Control Separation Benefits Plan — Incorporated by reference to Current Report onForm 8-K dated November 23, 2009 | |||
*10 | .9 | — | Amendment One to Merck & Co., Inc. Change in Control Separation Benefits Plan (effective February 15, 2010) — Incorporated by reference to Exhibit 10.1 to Current Report onForm 8-K filed February 18, 2010 | |||
*10 | .10 | — | MSD Separation Benefits Plan for Nonunion Employees (amended and restated effective as of November 3, 2009) | |||
*10 | .11 | — | MSD Special Separation Program for “Separated” Employees (effective as of November 3, 2009) | |||
*10 | .12 | — | MSD Special Separation Program for “Bridged” Employees (effective as of November 3, 2009) | |||
*10 | .13 | — | MSD Special Separation Program for “Separated Retirement Eligible” Employees (effective as of November 3, 2009) |
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Exhibit | ||||||
Number | Description | |||||
*10 | .14 | — | Merck & Co., Inc. 1996 Non-Employee Directors Stock Option Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.12 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .15 | — | Merck & Co., Inc. 2001 Non-Employee Directors Stock Option Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.11 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .16 | — | Merck & Co., Inc. 2006 Non-Employee Directors Stock Option Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.5 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .17 | — | Retirement Plan for the Directors of Merck & Co., Inc. (amended and restated June 21, 1996) — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1996 | |||
*10 | .18 | — | Merck & Co., Inc. Plan for Deferred Payment of Directors’ Compensation (effective as amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.6 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .19 | — | Merck & Co., Inc. Schering-Plough 2006 Stock Incentive Plan (amended and restated as of November 3, 2009 — Incorporated by reference to Exhibit 10.13 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .20 | — | Offer Letter between Merck & Co., Inc. and Peter S. Kim, dated December 15, 2000 — Incorporated by reference to Old Merck’sForm 10-K Annual Report for the fiscal year ended December 31, 2003 | |||
*10 | .21 | — | Offer Letter between Merck & Co., Inc. and Peter N. Kellogg, dated June 18, 2007 — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated June 28, 2007 | |||
*10 | .22 | — | 1997 Stock Incentive Plan — Incorporated by reference to Exhibit 10 to Schering-Plough’s10-Q for the period ended September 30, 1997 | |||
*10 | .23 | — | Amendment to 1997 Stock Incentive Plan (effective February 22, 1999) — Incorporated by reference to Exhibit 10(a) to Schering-Plough’s10-Q for the period ended March 31, 1999 | |||
*10 | .24 | — | Amendment to the 1997 Stock Incentive Plan (effective February 25, 2003) — Incorporated by reference to Exhibit 10(c) to Schering-Plough’s10-K for the year ended December 31, 2002 | |||
*10 | .25 | — | 2002 Stock Incentive Plan (as amended to February 25, 2003) — Incorporated by reference to Exhibit 10(d) to Schering-Plough’s10-K for the year ended December 31, 2002 | |||
*10 | .26 | — | Merck & Co., Inc. Schering-Plough 2006 Stock Incentive Plan (as amended and restated, effective November 3, 2009) — Incorporated by reference to Exhibit 10.13 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .27 | — | Letter agreement dated November 4, 2003 between Robert Bertolini and Schering-Plough — Incorporated by reference to Exhibit 10(e)(iii) to Schering-Plough’s10-K for the year ended December 31, 2003 | |||
*10 | .28 | — | Employment Agreement effective upon a change of control dated as of December 19, 2006 between Robert Bertolini and Schering-Plough Corporation — Incorporated by reference to Exhibit 99.1 to Schering-Plough’s8-K filed December 21, 2006 | |||
*10 | .29 | — | Amendment to Letter Agreement and Employment Agreement between Schering-Plough Corporation and Robert J. Bertolini, dated December 9, 2008 — Incorporated by reference to Exhibit 99.1 to Schering-Plough’s8-K filed December 12, 2008 | |||
*10 | .30 | — | Employment Agreement dated as of May 12, 2003 between Carrie Cox and Schering-Plough — Incorporated by reference to Exhibit 99.6 to Schering-Plough’s8-K filed May 13, 2003 | |||
*10 | .31 | — | Amendment to Employment Agreement between Schering-Plough Corporation and Carrie S. Cox, dated December 9, 2008 — Incorporated by reference to Exhibit 99.2 to Schering-Plough’s8-K filed December 12, 2008 | |||
*10 | .32 | — | Employment Agreement dated as of April 20, 2003 between Fred Hassan and Schering-Plough — Incorporated by reference to Exhibit 99.2 to Schering-Plough’s8-K filed April 21, 2003 |
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Exhibit | ||||||
Number | Description | |||||
*10 | .33 | — | Amendment to Employment Agreement between Schering-Plough Corporation and Fred Hassan, dated December 9, 2008 — Incorporated by reference to Exhibit 99.3 to Schering-Plough’s8-K filed December 12, 2008 | |||
*10 | .34 | — | Employment Agreement dated as of December 19, 2006 between Thomas P. Koestler, Ph.D. and Schering-Plough — Incorporated by reference to Exhibit 10(e)(v) to Schering-Plough’s10-K for the year ended December 31, 2006 | |||
*10 | .35 | — | Amendment to Employment Agreement between Schering-Plough Corporation and Thomas P. Koestler, dated December 9, 2008 — Incorporated by reference to Exhibit 99.4 to Schering-Plough’s8-K filed December 12, 2008 | |||
*10 | .36 | — | Form of employment agreement effective upon a change of control between Schering-Plough and certain executives for new agreements beginning in January 1, 2008 — Incorporated by reference to Exhibit 10(e)(xv) to Schering-Plough’s10-K for the year ended December 31, 2008 | |||
*10 | .37 | — | Operations Management Team Incentive Plan (as amended and restated effective June 26, 2006) — Incorporated by reference to Exhibit 10(m)(ii) to Schering-Plough’s10-Q for the period ended September 30, 2006 | |||
*10 | .38 | — | Cash Long-Term Incentive Plan (as amended and restated effective January 24, 2005) — Incorporated by reference to Exhibit 10(n) to Schering-Plough’s10-K for the year ended December 31, 2004 | |||
*10 | .39 | — | Long-Term Performance Share Unit Incentive Plan (as amended and restated effective January 24, 2005) — Incorporated by reference to Exhibit 10(o) to Schering-Plough’s10-K for the year ended December 31, 2004 | |||
*10 | .40 | — | Transformational Performance Contingent Shares Program — Incorporated by reference to Exhibit 10(p) to Schering-Plough’s10-K for the year ended December 31, 2003 | |||
*10 | .41 | — | Schering-Plough Corporation Severance Benefit Plan (as amended and restated effective November 3, 2009) | |||
*10 | .42 | — | Schering-Plough Corporation Savings Advantage Plan (as amended and restated effective November 4, 2009) | |||
*10 | .43 | — | Schering-Plough Corporation Supplemental Executive Retirement Plan (as amended and restated effective November 4, 2009) | |||
*10 | .44 | — | Schering-Plough Retirement Benefits Equalization Plan (as amended and restated effective November 4, 2009) | |||
*10 | .45 | — | Executive Incentive Plan (as amended and restated to October 1, 2000) — Incorporated by reference to Exhibit 10(a)(i) to Schering-Plough’s10-K for the year ended December 31, 2000 | |||
*10 | .46 | — | Schering-Plough Corporation Executive Life Insurance Direct Payment Program (as amended and restated effective November 4, 2009) | |||
*10 | .47 | — | Amended and Restated Defined Contribution Trust — Incorporated by reference to Exhibit 10(a)(ii) to Schering-Plough’s10-K for the year ended December 31, 2000 | |||
*10 | .48 | — | Amended and Restated SERP Rabbi Trust Agreement — Incorporated by reference to Exhibit 10(g) to Schering-Plough’s10-K for the year ended December 31, 1998 | |||
10 | .49 | — | Share Purchase Agreement between Akzo Nobel N.V., Schering-Plough International C.V., and Schering-Plough Corporation — Incorporated by reference to Exhibit 10.1 to Schering-Plough’s8-K filed October 2, 2007 | |||
10 | .50 | — | Amended and Restated License and Option Agreement dated as of July 1, 1998 between Astra AB and Astra Merck Inc. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .51 | — | KBI Shares Option Agreement dated as of July 1, 1998 by and among Astra AB, Merck & Co., Inc. and Merck Holdings, Inc. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .52 | — | KBI-E Asset Option Agreement dated as of July 1, 1998 by and among Astra AB, Merck & Co., Inc., Astra Merck Inc. and Astra Merck Enterprises Inc. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 |
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Exhibit | ||||||
Number | Description | |||||
10 | .53 | — | KBI Supply Agreement dated as of July 1, 1998 between Astra Merck Inc. and Astra Pharmaceuticals, L.P. (Portions of this Exhibit are subject to a request for confidential treatment filed with the Commission). — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .54 | — | Second Amended and Restated Manufacturing Agreement dated as of July 1, 1998 among Merck & Co., Inc., Astra AB, Astra Merck Inc. and Astra USA, Inc. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .55 | — | Limited Partnership Agreement dated as of July 1, 1998 between KB USA, L.P. and KBI Sub Inc. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .56 | — | Distribution Agreement dated as of July 1, 1998 between Astra Merck Enterprises Inc. and Astra Pharmaceuticals, L.P. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .57 | — | Agreement to Incorporate Defined Terms dated as of June 19, 1998 between Astra AB, Merck & Co., Inc., Astra Merck Inc., Astra USA, Inc., KB USA, L.P., Astra Merck Enterprises Inc., KBI Sub Inc., Merck Holdings, Inc. and Astra Pharmaceuticals, L.P. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .58 | — | Master Agreement, dated as of December 18, 2001, by and among MSP Technology (U.S.) Company LLC, MSP Singapore Company, LLC, Schering Corporation, Schering-Plough Corporation, and Merck & Co., Inc. (Portions of this Exhibit are subject to a request for confidential treatment filed with the Commission) — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 2008 | |||
10 | .59 | — | Form of Voting Agreement made and entered into as of October 30, 2006 by and between Merck & Co., Inc. and Sirna Therapeutics, Inc. — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated October 30, 2006 | |||
10 | .60 | — | Settlement Agreement, dated November 9, 2007, by and between Merck & Co., Inc. and The Counsel Listed on the Signature Pages Hereto, including the exhibits thereto — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated November 9, 2007 | |||
10 | .61 | — | Commitment Letter by and among Merck & Co., Inc., J.P. Morgan Securities Inc. and JPMorgan Chase Bank, N.A. dated as of March 8, 2009 — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated March 8, 2009 | |||
10 | .62 | — | Stock option terms for a non-qualified stock option under the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan and the Schering-Plough 2006 Stock Incentive Plan — Incorporated by reference to Exhibit 10.3 to Current Report onForm 8-K filed February 15, 2010 | |||
10 | .63 | — | Restricted stock unit terms for annual grant under the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan and the Schering-Plough 2006 Stock Incentive Plan — Incorporated by reference to Exhibit 10.4 to Current Report onForm 8-K filed February 15, 2010 | |||
10 | .64 | — | Restricted stock unit terms for Leader Shares grant under the Merck & Co., Inc. 2007 Incentive Stock Plan — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended March 31, 2009 | |||
10 | .65 | — | Incremental Credit Agreement dated as of May 6, 2009, among Merck & Co., Inc., the Guarantors and Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated May 6, 2009 | |||
10 | .66 | — | Asset Sale Facility Agreement dated as of May 6, 2009, among Merck & Co., Inc., the Guarantors and Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated May 6, 2009 | |||
10 | .67 | — | Bridge Loan Agreement dated as of May 6, 2009, among Merck & Co., Inc., the Guarantors and Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated May 6, 2009 |
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Exhibit | ||||||
Number | Description | |||||
10 | .68 | — | Amendment No. 1 to Amended and Restated Five-Year Credit Agreement dated as of April 20, 2009 among Merck & Co., Inc., the Lenders party thereto and Citicorp USA, Inc., as Administrative Agent — Incorporated by reference to Exhibit 10.1 to Current Report onForm 8-K filed November 4, 2009 | |||
10 | .69 | — | Guarantee and Joinder Agreement dated as of November 3, 2009 by Merck & Co., Inc., the Guarantor, for the benefit of the Guaranteed Parties — Incorporated by reference to Exhibit 10.3 to Current Report onForm 8-K filed November 4, 2009 | |||
10 | .70 | — | Guarantor Joinder Agreement dated as of November 3, 2009, by Merck & Co., Inc., the Guarantor and JPMorgan Chase Bank, N.A., as Administrative Agent — Incorporated by reference to Exhibit 10.4 to Current Report onForm 8-K filed November 4, 2009 | |||
10 | .71 | — | Call Option Agreement, dated July 29, 2009, by and among Merck & Co., Inc., Schering-Plough Corporation and sanovi-aventis — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated July 31, 2009 | |||
10 | .72 | — | Termination Agreement, dated as of September 17, 2009, by and among Merck & Co., Inc., Merck SH Inc., Merck Sharp & Dohme (Holdings) Limited, sanofi-aventis, sanofi 4 and Merial Limited — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated September 21, 2009 | |||
10 | .73 | — | Cholesterol Governance Agreement, dated as of May 22, 2000, by and among Schering-Plough, Merck & Co., Inc. and the other parties signatory thereto — Incorporated by reference to Exhibit 99.2 to Schering-Plough’s Current Report onForm 8-K dated October 21, 2002† | |||
10 | .74 | — | First Amendment to the Cholesterol Governance Agreement, dated as of December 18, 2001, by and among Schering-Plough, Merck & Co., Inc. and the other parties signatory thereto — Incorporated by reference to Exhibit 99.3 to Schering-Plough’s Current Report onForm 8-K filed October 21, 2002† | |||
10 | .75 | — | Master Agreement, dated as of December 18, 2001, by and among Schering-Plough, Merck & Co., Inc. and the other parties signatory thereto — Incorporated by reference to Exhibit 99.4 to Schering-Plough’s Current Report onForm 8-K filed October 21, 2002† | |||
10 | .76 | — | Letter Agreement dated April 14, 2003 relating to Consent Decree — Incorporated by reference to Exhibit 99.3 to Schering-Plough’s10-Q for the period ended March 31, 2003 | |||
10 | .77 | — | Distribution agreement between Schering-Plough and Centocor, Inc., dated April 3, 1998 — Incorporated by reference to Exhibit 10(u) to Schering-Plough’s Amended10-K for the year ended December 31, 2003, filed May 3, 2004† | |||
10 | .78 | — | Amendment Agreement to the Distribution Agreement between Centocor, Inc., CAN Development, LLC, and Schering-Plough (Ireland) Company — Incorporated by reference to Exhibit 10.1 to Schering-Plough’s Current Report onForm 8-K filed December 21, 2007† | |||
12 | — | Computation of Ratios of Earnings to Fixed Charges | ||||
21 | — | Subsidiaries of Merck & Co., Inc. | ||||
23 | .1 | — | Consent of Independent Registered Public Accounting Firm — Contained on page 206 of this Report | |||
23 | .2 | — | Independent Auditor’s Consent — Contained on page 207 of this Report | |||
31 | .1 | — | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | |||
31 | .2 | — | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | |||
32 | .1 | — | Section 1350 Certification of Chief Executive Officer | |||
32 | .2 | — | Section 1350 Certification of Chief Financial Officer | |||
101 | — | The following materials from Merck & Co., Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2009, formatted in XBRL (Extensible Business Reporting Language):(i) the Consolidated Statement of Income, (ii) the Consolidated Balance Sheet, (iii) the Consolidated Statement of Cash Flow, and (iv) Notes to Consolidated Financial Statements, tagged as blocks of text. |
* | Management contract or compensatory plan or arrangement. | |
† | Certain portions of the exhibit have been omitted pursuant to a request for confidential treatment. The non-public information has been filed separately with the Securities and Exchange Commission pursuant torule 24b-2 under the Securities Exchange Act of 1934, as amended. |
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By: | /s/ Richard T. Clark |
Signatures | Title | Date | ||||
/s/ Richard T. Clark Richard T. Clark | Chairman, President, Chief Executive Officer; Principal Executive Officer; Director | March 1, 2010 | ||||
/s/ Peter N. Kellogg Peter N. Kellogg | Executive Vice President and Chief Financial Officer; Principal Financial Officer | March 1, 2010 | ||||
/s/ John Canan John Canan | Senior Vice President and Global Controller; Principal Accounting Officer | March 1, 2010 | ||||
/s/ Leslie A. Brun Leslie A. Brun | Director | March 1, 2010 | ||||
/s/ Thomas R. Cech Thomas R. Cech | Director | March 1, 2010 | ||||
/s/ Thomas H. Glocer Thomas H. Glocer | Director | March 1, 2010 | ||||
/s/ Steven F. Goldstone Steven F. Goldstone | Director | March 1, 2010 | ||||
/s/ William B. Harrison, Jr. William B. Harrison, Jr. | Director | March 1, 2010 | ||||
Harry R. Jacobson | Director | March 1, 2010 | ||||
/s/ William N. Kelley William N. Kelley | Director | March 1, 2010 | ||||
/s/ C. Robert Kidder C. Robert Kidder | Director | March 1, 2010 |
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Signatures | Title | Date | ||||
/s/ Rochelle B. Lazarus Rochelle B. Lazarus | Director | March 1, 2010 | ||||
Carlos E. Represas | Director | March 1, 2010 | ||||
/s/ Patricia F. Russo Patricia F. Russo | Director | March 1, 2010 | ||||
/s/ Thomas E. Shenk Thomas E. Shenk | Director | March 1, 2010 | ||||
/s/ Anne M. Tatlock Anne M. Tatlock | Director | March 1, 2010 | ||||
/s/ Samuel O. Thier Samuel O. Thier | Director | March 1, 2010 | ||||
/s/ Craig B. Thompson Craig B. Thompson | Director | March 1, 2010 | ||||
/s/ Wendell P. Weeks Wendell P. Weeks | Director | March 1, 2010 | ||||
/s/ Peter C. Wendell Peter C. Wendell | Director | March 1, 2010 |
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Exhibit | ||||||
Number | Description | |||||
2 | .1 | — | Master Restructuring Agreement dated as of June 19, 1998 between Astra AB, Merck & Co., Inc., Astra Merck Inc., Astra USA, Inc., KB USA, L.P., Astra Merck Enterprises, Inc., KBI Sub Inc., Merck Holdings, Inc. and Astra Pharmaceuticals, L.P. (Portions of this Exhibit are subject to a request for confidential treatment filed with the Commission) — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
2 | .2 | — | Agreement and Plan of Merger by and among Merck & Co., Inc., Spinnaker Acquisition Corp., a wholly owned subsidiary of Merck & Co., Inc. and Sirna Therapeutics, Inc., dated as of October 30, 2006 — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated October 30, 2006 | |||
2 | .3 | — | Agreement and Plan of Merger by and among Merck & Co., Inc., Schering-Plough Corporation, Blue, Inc. and Purple, Inc. dated as of March 8, 2009 — Incorporated by reference to Schering-Plough’s Current Report onForm 8-K filed March 11, 2009 | |||
2 | .4 | — | Share Purchase Agreement, dated July 29, 2009, by and among Merck & Co., Inc., Merck SH Inc., Merck Sharp & Dohme (Holdings) Limited and sanofi-aventis — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated July 31, 2009 | |||
3 | .1 | — | Restated Certificate of Incorporation of Merck & Co., Inc. (November 3, 2009) — Incorporated by reference to Current Report onForm 8-K filed November 4, 2009 | |||
3 | .2 | — | By-Laws of Merck & Co., Inc. (effective November 3, 2009) — Incorporated by reference to Current Report onForm 8-K filed November 4, 2009 | |||
4 | .1 | — | Indenture, dated as of April 1, 1991, between Merck & Co., Inc. and Morgan Guaranty Trust Company of New York, as Trustee — Incorporated by reference to Exhibit 4 to Old Merck’s Registration Statement onForm S-3(No. 33-39349) | |||
4 | .2 | — | First Supplemental Indenture between Merck & Co., Inc. and First Trust of New York, National Association, as Trustee — Incorporated by reference to Exhibit 4(b) to Old Merck’s Registration Statement onForm S-3(No. 333-36383) | |||
4 | .3 | — | Second Supplemental Indenture, dated November 3, 2009, among Merck Sharp & Dohme Corp., Merck & Co., Inc. and U.S. Bank Trust National Association, as Trustee — Incorporated by reference to Exhibit 4.3 to Current Report onForm 8-K filed November 4, 2009 | |||
4 | .4 | — | 1.875% Notes due 2011 Officers’ Certificate of the Company dated June 25, 2009, including form of the 2011 Notes — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated June 25, 2009 | |||
4 | .5 | — | 4.000% Notes due 2015 Officers’ Certificate of the Company dated June 25, 2009, including form of the 2015 Notes — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated June 25, 2009 | |||
4 | .6 | — | 5.000% Notes due 2019 Officers’ Certificate of the Company dated June 25, 2009, including form of the 2019 Notes — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated June 25, 2009 | |||
4 | .7 | — | 5.850% Notes due 2039 Officers’ Certificate of the Company dated June 25, 2009, including form of the 2039 Notes — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated June 25, 2009 | |||
4 | .8 | — | Indenture, dated November 26, 2003, between Schering-Plough and The Bank of New York as Trustee — Incorporated by reference to Exhibit 4.1 to Schering-Plough’s Current Report onForm 8-K filed November 28, 2003 | |||
4 | .9 | — | First Supplemental Indenture (including Form of Note), dated November 26, 2003 — Incorporated by reference to Exhibit 4.2 to Schering-Plough’s Current Report onForm 8-K filed November 28, 2003 | |||
4 | .10 | — | Second Supplemental Indenture (including Form of Note), dated November 26, 2003 — Incorporated by reference to Exhibit 4.3 to Schering-Plough’s Current Report onForm 8-K filed November 28, 2003 | |||
4 | .11 | — | 5.30% Global Senior Note, due 2013 — Incorporated by reference to Exhibit 4(c)(iv) to Schering-Plough’sForm 10-K Annual Report for the fiscal year ended December 31, 2003 |
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Exhibit | ||||||
Number | Description | |||||
4 | .12 | — | 6.50% Global Senior Note, due 2033 — Incorporated by reference to Exhibit 4(c)(v) to Schering-Plough’sForm 10-K Annual Report for the fiscal year ended December 31, 2003 | |||
4 | .13 | — | Third Supplemental Indenture (including Form of Note), dated September 17, 2007 — Incorporated by reference to Exhibit 4.1 to Schering-Plough’s Current Report onForm 8-K filed September 17, 2007 | |||
4 | .14 | — | Fourth Supplemental Indenture (including Form of Note), dated October 1, 2007 — Incorporated by reference to Exhibit 4.1 to Schering-Plough’s Current Report onForm 8-K filed October 2, 2007 | |||
4 | .15 | — | Fifth Supplemental Indenture, dated November 3, 2009, among Merck Sharp & Dohme Corp., Merck & Co., Inc. and The Bank of New York Mellon, as Trustee — Incorporated by reference to Exhibit 4.4 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .1 | — | Executive Incentive Plan (as amended effective February 27, 1996) — Incorporated by reference to Old Merck’sForm 10-K Annual Report for the fiscal year ended December 31, 1995 | |||
*10 | .2 | — | Merck Sharp & Dohme Corp. Deferral Program, including Base Salary Deferral Plan (effective as amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.15 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .3 | — | Merck Sharp & Dohme Corp. 1996 Incentive Stock Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.10 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .4 | — | Merck Sharp & Dohme Corp. 2001 Incentive Stock Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.9 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .5 | — | Merck Sharp & Dohme Corp. 2004 Incentive Stock Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.8 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .6 | — | Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan (effective as amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.7 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .7 | — | Amendment One to the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan (effective February 15, 2010) — Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed February 18, 2010 | |||
*10 | .8 | — | Merck & Co., Inc. Change in Control Separation Benefits Plan — Incorporated by reference to Current Report onForm 8-K dated November 23, 2009 | |||
*10 | .9 | — | Amendment One to Merck & Co., Inc. Change in Control Separation Benefits Plan (effective February 15, 2010) — Incorporated by reference to Exhibit 10.1 to Current Report onForm 8-K filed February 18, 2010 | |||
*10 | .10 | — | MSD Separation Benefits Plan for Nonunion Employees (amended and restated effective as of November 3, 2009) | |||
*10 | .11 | — | MSD Special Separation Program for “Separated” Employees (effective as of November 3, 2009) | |||
*10 | .12 | — | MSD Special Separation Program for “Bridged” Employees (effective as of November 3, 2009) | |||
*10 | .13 | — | MSD Special Separation Program for “Separated Retirement Eligible” Employees (effective as of November 3, 2009) | |||
*10 | .14 | — | Merck & Co., Inc. 1996 Non-Employee Directors Stock Option Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.12 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .15 | — | Merck & Co., Inc. 2001 Non-Employee Directors Stock Option Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.11 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .16 | — | Merck & Co., Inc. 2006 Non-Employee Directors Stock Option Plan (amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.5 to Current Report onForm 8-K filed November 4, 2009 |
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Exhibit | ||||||
Number | Description | |||||
*10 | .17 | — | Retirement Plan for the Directors of Merck & Co., Inc. (amended and restated June 21, 1996) — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1996 | |||
*10 | .18 | — | Merck & Co., Inc. Plan for Deferred Payment of Directors’ Compensation (effective as amended and restated as of November 3, 2009) — Incorporated by reference to Exhibit 10.6 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .19 | — | Merck & Co., Inc. Schering-Plough 2006 Stock Incentive Plan (amended and restated as of November 3, 2009 — Incorporated by reference to Exhibit 10.13 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .20 | — | Offer Letter between Merck & Co., Inc. and Peter S. Kim, dated December 15, 2000 — Incorporated by reference to Old Merck’sForm 10-K Annual Report for the fiscal year ended December 31, 2003 | |||
*10 | .21 | — | Offer Letter between Merck & Co., Inc. and Peter N. Kellogg, dated June 18, 2007 — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated June 28, 2007 | |||
*10 | .22 | — | 1997 Stock Incentive Plan — Incorporated by reference to Exhibit 10 to Schering-Plough’s10-Q for the period ended September 30, 1997 | |||
*10 | .23 | — | Amendment to 1997 Stock Incentive Plan (effective February 22, 1999) — Incorporated by reference to Exhibit 10(a) to Schering-Plough’s10-Q for the period ended March 31, 1999 | |||
*10 | .24 | — | Amendment to the 1997 Stock Incentive Plan (effective February 25, 2003) — Incorporated by reference to Exhibit 10(c) to Schering-Plough’s10-K for the year ended December 31, 2002 | |||
*10 | .25 | — | 2002 Stock Incentive Plan (as amended to February 25, 2003) — Incorporated by reference to Exhibit 10(d) to Schering-Plough’s10-K for the year ended December 31, 2002 | |||
*10 | .26 | — | Merck & Co., Inc. Schering-Plough 2006 Stock Incentive Plan (as amended and restated, effective November 3, 2009) — Incorporated by reference to Exhibit 10.13 to Current Report onForm 8-K filed November 4, 2009 | |||
*10 | .27 | — | Letter agreement dated November 4, 2003 between Robert Bertolini and Schering-Plough — Incorporated by reference to Exhibit 10(e)(iii) to Schering-Plough’s10-K for the year ended December 31, 2003 | |||
*10 | .28 | — | Employment Agreement effective upon a change of control dated as of December 19, 2006 between Robert Bertolini and Schering-Plough Corporation — Incorporated by reference to Exhibit 99.1 to Schering-Plough’s8-K filed December 21, 2006 | |||
*10 | .29 | — | Amendment to Letter Agreement and Employment Agreement between Schering-Plough Corporation and Robert J. Bertolini, dated December 9, 2008 — Incorporated by reference to Exhibit 99.1 to Schering-Plough’s8-K filed December 12, 2008 | |||
*10 | .30 | — | Employment Agreement dated as of May 12, 2003 between Carrie Cox and Schering-Plough — Incorporated by reference to Exhibit 99.6 to Schering-Plough’s8-K filed May 13, 2003 | |||
*10 | .31 | — | Amendment to Employment Agreement between Schering-Plough Corporation and Carrie S. Cox, dated December 9, 2008 — Incorporated by reference to Exhibit 99.2 to Schering-Plough’s8-K filed December 12, 2008 | |||
*10 | .32 | — | Employment Agreement dated as of April 20, 2003 between Fred Hassan and Schering-Plough — Incorporated by reference to Exhibit 99.2 to Schering-Plough’s8-K filed April 21, 2003 | |||
*10 | .33 | — | Amendment to Employment Agreement between Schering-Plough Corporation and Fred Hassan, dated December 9, 2008 — Incorporated by reference to Exhibit 99.3 to Schering-Plough’s8-K filed December 12, 2008 | |||
*10 | .34 | — | Employment Agreement dated as of December 19, 2006 between Thomas P. Koestler, Ph.D. and Schering-Plough — Incorporated by reference to Exhibit 10(e)(v) to Schering-Plough’s10-K for the year ended December 31, 2006 | |||
*10 | .35 | — | Amendment to Employment Agreement between Schering-Plough Corporation and Thomas P. Koestler, dated December 9, 2008 — Incorporated by reference to Exhibit 99.4 to Schering-Plough’s8-K filed December 12, 2008 |
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Exhibit | ||||||
Number | Description | |||||
*10 | .36 | — | Form of employment agreement effective upon a change of control between Schering-Plough and certain executives for new agreements beginning in January 1, 2008 — Incorporated by reference to Exhibit 10(e)(xv) to Schering-Plough’s10-K for the year ended December 31, 2008 | |||
*10 | .37 | — | Operations Management Team Incentive Plan (as amended and restated effective June 26, 2006) — Incorporated by reference to Exhibit 10(m)(ii) to Schering-Plough’s10-Q for the period ended September 30, 2006 | |||
*10 | .38 | — | Cash Long-Term Incentive Plan (as amended and restated effective January 24, 2005) — Incorporated by reference to Exhibit 10(n) to Schering-Plough’s10-K for the year ended December 31, 2004 | |||
*10 | .39 | — | Long-Term Performance Share Unit Incentive Plan (as amended and restated effective January 24, 2005) — Incorporated by reference to Exhibit 10(o) to Schering-Plough’s10-K for the year ended December 31, 2004 | |||
*10 | .40 | — | Transformational Performance Contingent Shares Program — Incorporated by reference to Exhibit 10(p) to Schering-Plough’s10-K for the year ended December 31, 2003 | |||
*10 | .41 | — | Schering-Plough Corporation Severance Benefit Plan (as amended and restated effective November 3, 2009) | |||
*10 | .42 | — | Schering-Plough Corporation Savings Advantage Plan (as amended and restated effective November 4, 2009) | |||
*10 | .43 | — | Schering-Plough Corporation Supplemental Executive Retirement Plan (as amended and restated effective November 4, 2009) | |||
*10 | .44 | — | Schering-Plough Retirement Benefits Equalization Plan (as amended and restated effective November 4, 2009) | |||
*10 | .45 | — | Executive Incentive Plan (as amended and restated to October 1, 2000) — Incorporated by reference to Exhibit 10(a)(i) to Schering-Plough’s10-K for the year ended December 31, 2000 | |||
*10 | .46 | — | Schering-Plough Corporation Executive Life Insurance Direct Payment Program (as amended and restated effective November 4, 2009) | |||
*10 | .47 | — | Amended and Restated Defined Contribution Trust — Incorporated by reference to Exhibit 10(a)(ii) to Schering-Plough’s10-K for the year ended December 31, 2000 | |||
*10 | .48 | — | Amended and Restated SERP Rabbi Trust Agreement — Incorporated by reference to Exhibit 10(g) to Schering-Plough’s10-K for the year ended December 31, 1998 | |||
10 | .49 | — | Share Purchase Agreement between Akzo Nobel N.V., Schering-Plough International C.V., and Schering-Plough Corporation — Incorporated by reference to Exhibit 10.1 to Schering-Plough’s8-K filed October 2, 2007 | |||
10 | .50 | — | Amended and Restated License and Option Agreement dated as of July 1, 1998 between Astra AB and Astra Merck Inc. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .51 | — | KBI Shares Option Agreement dated as of July 1, 1998 by and among Astra AB, Merck & Co., Inc. and Merck Holdings, Inc. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .52 | — | KBI-E Asset Option Agreement dated as of July 1, 1998 by and among Astra AB, Merck & Co., Inc., Astra Merck Inc. and Astra Merck Enterprises Inc. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .53 | — | KBI Supply Agreement dated as of July 1, 1998 between Astra Merck Inc. and Astra Pharmaceuticals, L.P. (Portions of this Exhibit are subject to a request for confidential treatment filed with the Commission). — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .54 | — | Second Amended and Restated Manufacturing Agreement dated as of July 1, 1998 among Merck & Co., Inc., Astra AB, Astra Merck Inc. and Astra USA, Inc. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 |
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Exhibit | ||||||
Number | Description | |||||
10 | .55 | — | Limited Partnership Agreement dated as of July 1, 1998 between KB USA, L.P. and KBI Sub Inc. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .56 | — | Distribution Agreement dated as of July 1, 1998 between Astra Merck Enterprises Inc. and Astra Pharmaceuticals, L.P. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .57 | — | Agreement to Incorporate Defined Terms dated as of June 19, 1998 between Astra AB, Merck & Co., Inc., Astra Merck Inc., Astra USA, Inc., KB USA, L.P., Astra Merck Enterprises Inc., KBI Sub Inc., Merck Holdings, Inc. and Astra Pharmaceuticals, L.P. — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 1998 | |||
10 | .58 | — | Master Agreement, dated as of December 18, 2001, by and among MSP Technology (U.S.) Company LLC, MSP Singapore Company, LLC, Schering Corporation, Schering-Plough Corporation, and Merck & Co., Inc. (Portions of this Exhibit are subject to a request for confidential treatment filed with the Commission) — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended June 30, 2008 | |||
10 | .59 | — | Form of Voting Agreement made and entered into as of October 30, 2006 by and between Merck & Co., Inc. and Sirna Therapeutics, Inc. — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated October 30, 2006 | |||
10 | .60 | — | Settlement Agreement, dated November 9, 2007, by and between Merck & Co., Inc. and The Counsel Listed on the Signature Pages Hereto, including the exhibits thereto — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated November 9, 2007 | |||
10 | .61 | — | Commitment Letter by and among Merck & Co., Inc., J.P. Morgan Securities Inc. and JPMorgan Chase Bank, N.A. dated as of March 8, 2009 — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated March 8, 2009 | |||
10 | .62 | — | Stock option terms for a non-qualified stock option under the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan and the Schering-Plough 2006 Stock Incentive Plan — Incorporated by reference to Exhibit 10.3 to Current Report onForm 8-K filed February 15, 2010 | |||
10 | .63 | — | Restricted stock unit terms for annual grant under the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan and the Schering-Plough 2006 Stock Incentive Plan — Incorporated by reference to Exhibit 10.4 to Current Report onForm 8-K filed February 15, 2010 | |||
10 | .64 | — | Restricted stock unit terms for Leader Shares grant under the Merck & Co., Inc. 2007 Incentive Stock Plan — Incorporated by reference to Old Merck’sForm 10-Q Quarterly Report for the period ended March 31, 2009 | |||
10 | .65 | — | Incremental Credit Agreement dated as of May 6, 2009, among Merck & Co., Inc., the Guarantors and Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated May 6, 2009 | |||
10 | .66 | — | Asset Sale Facility Agreement dated as of May 6, 2009, among Merck & Co., Inc., the Guarantors and Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated May 6, 2009 | |||
10 | .67 | — | Bridge Loan Agreement dated as of May 6, 2009, among Merck & Co., Inc., the Guarantors and Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated May 6, 2009 | |||
10 | .68 | — | Amendment No. 1 to Amended and Restated Five-Year Credit Agreement dated as of April 20, 2009 among Merck & Co., Inc., the Lenders party thereto and Citicorp USA, Inc., as Administrative Agent — Incorporated by reference to Exhibit 10.1 to Current Report onForm 8-K filed November 4, 2009 | |||
10 | .69 | — | Guarantee and Joinder Agreement dated as of November 3, 2009 by Merck & Co., Inc., the Guarantor, for the benefit of the Guaranteed Parties — Incorporated by reference to Exhibit 10.3 to Current Report onForm 8-K filed November 4, 2009 | |||
10 | .70 | — | Guarantor Joinder Agreement dated as of November 3, 2009, by Merck & Co., Inc., the Guarantor and JPMorgan Chase Bank, N.A., as Administrative Agent — Incorporated by reference to Exhibit 10.4 to Current Report onForm 8-K filed November 4, 2009 |
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Table of Contents
Exhibit | ||||||
Number | Description | |||||
10 | .71 | — | Call Option Agreement, dated July 29, 2009, by and among Merck & Co., Inc., Schering-Plough Corporation and sanovi-aventis — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated July 31, 2009 | |||
10 | .72 | — | Termination Agreement, dated as of September 17, 2009, by and among Merck & Co., Inc., Merck SH Inc., Merck Sharp & Dohme (Holdings) Limited, sanofi-aventis, sanofi 4 and Merial Limited — Incorporated by reference to Old Merck’s Current Report onForm 8-K dated September 21, 2009 | |||
10 | .73 | — | Cholesterol Governance Agreement, dated as of May 22, 2000, by and among Schering-Plough, Merck & Co., Inc. and the other parties signatory thereto — Incorporated by reference to Exhibit 99.2 to Schering-Plough’s Current Report onForm 8-K dated October 21, 2002† | |||
10 | .74 | — | First Amendment to the Cholesterol Governance Agreement, dated as of December 18, 2001, by and among Schering-Plough, Merck & Co., Inc. and the other parties signatory thereto — Incorporated by reference to Exhibit 99.3 to Schering-Plough’s Current Report onForm 8-K filed October 21, 2002† | |||
10 | .75 | — | Master Agreement, dated as of December 18, 2001, by and among Schering-Plough, Merck & Co., Inc. and the other parties signatory thereto — Incorporated by reference to Exhibit 99.4 to Schering-Plough’s Current Report onForm 8-K filed October 21, 2002† | |||
10 | .76 | — | Letter Agreement dated April 14, 2003 relating to Consent Decree — Incorporated by reference to Exhibit 99.3 to Schering-Plough’s10-Q for the period ended March 31, 2003 | |||
10 | .77 | — | Distribution agreement between Schering-Plough and Centocor, Inc., dated April 3, 1998 — Incorporated by reference to Exhibit 10(u) to Schering-Plough’s Amended10-K for the year ended December 31, 2003, filed May 3, 2004† | |||
10 | .78 | — | Amendment Agreement to the Distribution Agreement between Centocor, Inc., CAN Development, LLC, and Schering-Plough (Ireland) Company — Incorporated by reference to Exhibit 10.1 to Schering-Plough’s Current Report onForm 8-K filed December 21, 2007† | |||
12 | — | Computation of Ratios of Earnings to Fixed Charges | ||||
21 | — | Subsidiaries of Merck & Co., Inc. | ||||
23 | .1 | — | Consent of Independent Registered Public Accounting Firm — Contained on page 206 of this Report | |||
23 | .2 | — | Independent Auditor’s Consent — Contained on page 207 of this Report | |||
31 | .1 | — | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | |||
31 | .2 | — | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | |||
32 | .1 | — | Section 1350 Certification of Chief Executive Officer | |||
32 | .2 | — | Section 1350 Certification of Chief Financial Officer | |||
101 | — | The following materials from Merck & Co., Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2009, formatted in XBRL (Extensible Business Reporting Language):(i) the Consolidated Statement of Income, (ii) the Consolidated Balance Sheet, (iii) the Consolidated Statement of Cash Flow, and (iv) Notes to Consolidated Financial Statements, tagged as blocks of text. |
* | Management contract or compensatory plan or arrangement. | |
† | Certain portions of the exhibit have been omitted pursuant to a request for confidential treatment. The non-public information has been filed separately with the Securities and Exchange Commission pursuant torule 24b-2 under the Securities Exchange Act of 1934, as amended. |
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