Merck & Co. (MRK) 10-Q 7 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information (USD $)
	3 Months Ended Mar. 31, 2010	Apr. 30, 2010	Jun. 30, 2009
Document and Entity Information [Abstract]
Entity Registrant Name	Merck & Co. Inc.
Entity Central Index Key	0000310158
Document Type	10-Q
Document Period End Date	2010-03-31
Amendment Flag	false
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$41,003,000,000
Entity Common Stock, Shares Outstanding		3,118,252,244

Interim Consolidated Statement

Interim Consolidated Statement of Income (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Interim Consolidated Statement of Income [Abstract]
Sales	11422.2	5385.2
Costs, Expenses and Other
Materials and production	5215.6	1333.8
Marketing and administrative	3246.2	1632.9
Research and development	2026.7	1224.2
Restructuring costs	287.7	64.3
Equity income from affiliates	-137.5	-585.8
Other (income) expense, net	167.7	-67.2
Total Costs, Expenses and Other	10806.4	3602.2
Income Before Taxes	615.8	1,783
Taxes on Income	285.6	327.2
Net Income	330.2	1455.8
Less: Net Income Attributable to Noncontrolling Interests	31.4	30.8
Net Income Attributable to Merck & Co., Inc.	298.8	$1,425
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders	0.1	0.67
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders	0.09	0.67
Dividends Declared per Common Share	0.38	0.38

Consolidated Balance Sheet (Una

Consolidated Balance Sheet (Unaudited) (USD $)
In Millions	Mar. 31, 2010	Dec. 31, 2009
Current Assets
Cash and cash equivalents	$8,236	9311.4
Short-term investments	1541.3	293.1
Accounts receivable (net of allowance for doubtful accounts of $106.2 in 2010 and $112.6 in 2009)	7497.7	6602.9
Inventories (excludes inventories of $1,312.6 in 2010 and $1,157.2 in 2009 classified in Other assets - see Note 7)	6825.4	8057.5
Deferred income taxes and other current assets	4144.5	4199.9
Total current assets	28244.9	28464.8
Investments	1,995	432.3
Property, Plant and Equipment, at cost, net of allowance for depreciation of $12,220.3 in 2010 and $12,594.7 in 2009	17,985	18257.9
Goodwill	12266.2	12,140
Other Intangibles, Net	45574.9	47778.3
Other Assets	5527.8	5376.4
Total Assets	111593.8	112449.7
Current Liabilities
Loans payable and current portion of long-term debt	3822.4	1379.3
Trade accounts payable	2074.9	2239.1
Accrued and other current liabilities	8,439	9457.8
Income taxes payable	723	1258.2
Dividends payable	1189.8	1,189
6% Mandatory convertible preferred stock, $1 par value Authorized - 11,500,000 shares Issued and outstanding - 853,896 shares in 2010 and 855,422 shares in 2009	206.2	206.6
Total current liabilities	16455.3	15,730
Long-Term Debt	15281.1	16095.1
Deferred Income Taxes and Noncurrent Liabilities	19514.2	19,132
Merck & Co., Inc. Stockholders' Equity
Common stock, $0.50 par value Authorized - 6,500,000,000 shares Issued - 3,571,947,847 shares in 2010; 3,562,528,536 shares in 2009	1,786	1781.3
Other paid-in capital	40196.6	39682.6
Retained earnings	40511.4	41404.9
Accumulated other comprehensive loss	-3571.6	-2766.5
Stockholders' equity before deduction for treasury stock	78922.4	80102.3
Less treasury stock, at cost 454,305,985 shares in 2010 and 2009	21044.3	21044.3
Total Merck & Co., Inc. stockholders' equity	57878.1	59,058
Noncontrolling Interests	2465.1	2434.6
Total equity	60343.2	61492.6
Total Liabilities and Stockholders' Equity	111593.8	112449.7

1_Consolidated Balance Sheet (U

Consolidated Balance Sheet (Unaudited) (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified	Mar. 31, 2010	Dec. 31, 2009
Current Assets
Allowance for doubtful accounts	106.2	112.6
Inventories classified in Other assets	1312.6	1157.2
Allowance for depreciation	12220.3	12594.7
Current Liabilities
Mandatory convertible preferred stock, dividend rate	0.06	0.06
Mandatory convertible preferred stock, par value	1	1
Mandatory convertible preferred stock, shares authorized	11,500,000	11,500,000
Mandatory convertible preferred stock, shares issued	853,896	855,422
Mandatory convertible preferred stock, shares outstanding	853,896	855,422
Merck & Co., Inc. Stockholders' Equity
Common stock, par value	0.5	0.5
Common stock, shares authorized	6,500,000,000	6,500,000,000
Common stock, shares issued	3,571,947,847	3,562,528,536
Treasury stock, shares	454,305,985	454,305,985

2_Interim Consolidated Statemen

Interim Consolidated Statement of Cash Flows (Unaudited) (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cash Flows from Operating Activities
Net income	330.2	1455.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1687.4	443.3
Equity income from affiliates	-137.5	-585.8
Dividends and distributions from equity affiliates	77.4	456.6
Deferred income taxes	152.2	153.6
Share-based compensation	132.4	113.3
Other	188	90.5
Net changes in assets and liabilities	(1,064)	-1414.7
Net Cash Provided by Operating Activities	1366.1	712.6
Cash Flows from Investing Activities
Capital expenditures	-342.8	-235.1
Purchases of securities and other investments	-2932.7	(2,045)
Proceeds from sales of securities and other investments	272.7	3119.1
Acquisitions of businesses, net of cash acquired	-131.3	(130)
(Increase) decrease in restricted assets	-25.1	684.5
Other	11.1	-3.4
Net Cash (Used by) Provided by Investing Activities	-3148.1	1390.1
Cash Flows from Financing Activities
Net change in short-term borrowings	2620.4	511.7
Payments on debt	-622.3	-7.5
Dividends paid to stockholders	-1188.6	-803.5
Proceeds from exercise of stock options	195.3	0.4
Other	-62.6	(93)
Net Cash Provided by (Used by) Financing Activities	942.2	-391.9
Effect of Exchange Rate Changes on Cash and Cash Equivalents	-235.6	(62)
Net (Decrease) Increase in Cash and Cash Equivalents	-1075.4	1648.8
Cash and Cash Equivalents at Beginning of Year	9311.4	4368.3
Cash and Cash Equivalents at End of Period	$8,236	6017.1

Basis of Presentation

Basis of Presentation
	3 Months Ended Mar. 31, 2010
Basis of Presentation [Abstract]
Basis of Presentation	1.Basis of Presentation The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements are not included herein. The interim statements should be read in conjunction with the audited financial statements and notes thereto included in Merck Co., Inc.s Form 10-K filed on March1, 2010. On November3, 2009, Merck Co., Inc. (Old Merck) and Schering-Plough Corporation (Schering-Plough) completed their previously-announced merger (the Merger). In the Merger, Schering-Plough acquired all of the shares of Old Merck, which became a wholly-owned subsidiary of Schering-Plough and was renamed Merck Sharp Dohme Corp. Schering-Plough continued as the surviving public company and was renamed Merck Co., Inc. (New Merck or the Company). However, for accounting purposes only, the Merger was treated as an acquisition with Old Merck considered the accounting acquirer. The results of Schering-Ploughs business have been included in New Mercks financial statements only for periods subsequent to the completion of the Merger. Accordingly, the accompanying financial statements reflect Old Mercks stand-alone operations as they existed prior to the completion of the Merger. References in these financial statements to Merck for periods prior to the Merger refer to Old Merck and for periods after the completion of the Merger to New Merck. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. In the Companys opinion, all adjustments necessary for a fair presentation of these interim statements have been included and are of a normal and recurring nature. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. Recently Adopted Accounting Standards In June2009, the Financial Accounting Standards Board (FASB) issued an amendment to the accounting and disclosure requirements for transfers of financial assets, which is effective January1, 2010. The amendment eliminates the concept of a qualifying special-purpose entity, changes the requirements for derecognizing financial assets and requires enhanced disclosures to provide financial statement users with greater transparency about transfers of financial assets, including securitization transactions, and an entitys continuing involvement in and exposure to the risks related to transferred financial assets. The effect of adoption on the Companys financial position and results of operations was not material. Also, in June2009, the FASB amended the existing accounting and disclosure guidance for the consolidation of variable interest entities, which is effective January1, 2010. The amended guidance requires enhanced disclosures intended to provide users of financial statements with more transparent information about an enterprises involvement in a variable interest entity. The effect of adoption on the Co

Merger

Merger
	3 Months Ended Mar. 31, 2010
Merger [Abstract]
Merger	2.Merger On November3, 2009, Old Merck and Schering-Plough completed the Merger for aggregate consideration of $49.6billion. The Merger expanded the Companys pipeline of product candidates, broadened the Companys commercial portfolio, expanded its global presence and increased its manufacturing capabilities. Additionally, the Company expects to realize substantial cost savings and synergies, including opportunities for consolidation in both sales and marketing and research and development. A preliminary allocation of the consideration transferred to the net assets of Schering-Plough was made as of the Merger date. During the first quarter of 2010, the Company adjusted the preliminary values assigned to certain assets and liabilities in order to reflect additional information obtained since the Merger date. The opening balance has been adjusted to reflect these changes the most significant of which included an increase to Other intangibles, net of $122.5 million, an increase to Deferred income taxes and noncurrent liabilities of $360.5million and an increase to Goodwill of $216.9million. Additional adjustments to the preliminary values of assets and liabilities recognized in the Merger may occur as the allocation of the consideration transferred is finalized during 2010. Under business combinations accounting guidance, the Company has up to one year from the date of the Merger to finalize the allocation of the consideration transferred. Also, during the first quarter of 2010, the Company recorded $27million of impairment charges associated with in-process research and development (IPRD) for previously in-licensed projects capitalized in connection with the Merger that were subsequently abandoned in connection with Companys pipeline prioritization review and returned to the respective licensors. Schering-Ploughs results of operations have been included in New Mercks financial statements for periods subsequent to the completion of the Merger. The following unaudited supplemental pro forma data presents consolidated information as if the Merger had been completed on January1, 2009: Three Months Ended March 31, 2009 Sales $ 10,683.0 Net income attributable to Merck Co., Inc. 6,884.1 Basic earnings per common share attributable to Merck Co., Inc. common shareholders 2.22 Earnings per common share assuming dilution attributable to Merck Co., Inc. common shareholders 2.22 The unaudited supplemental pro forma data reflect the application of the following adjustments: The consolidation of the Merck/Schering-Plough partnership (the MSP Partnership) which is now owned 100% by the Company and the corresponding gain resulting from the Companys 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 c

Restructuring

Restructuring
	3 Months Ended Mar. 31, 2010
Restructuring [Abstract]
Restructuring	3.Restructuring Merger Restructuring Program In February2010, the Company announced the first phase of a new global restructuring program (the Merger Restructuring Program) in conjunction with the integration of the legacy Merck and legacy Schering-Plough businesses. This Merger Restructuring Program is intended to optimize the cost structure of the combined Company. As part of the first phase of the Merger Restructuring Program, by the end of 2012, the Company expects to reduce its total workforce by approximately 15% across all areas of the Company worldwide. The Company also plans to eliminate 2,500 vacant positions as part of the first phase of the program. These workforce reductions will primarily come from the elimination of duplicative positions in sales, administrative and headquarters organizations, as well as from the consolidation of certain manufacturing facilities and research and development operations. The Company will continue to hire new employees in strategic growth areas of the business during this period. As of March31, 2010, approximately 5,290 positions have been eliminated in connection with the Merger Restructuring Program, comprised of employee separations, and the elimination of contractors and vacant positions. Certain actions, such as the ongoing reevaluation of manufacturing and research and development facilities worldwide have not yet been completed, but will be included later in 2010 in other phases of the Merger Restructuring Program. In connection with the Merger Restructuring Program, separation costs under the Companys existing severance programs worldwide were recorded in the fourth quarter of 2009 to the extent such costs were probable and reasonably estimable. The Company commenced accruing costs related to enhanced termination benefits offered to employees under the Merger Restructuring Program in the first quarter of 2010 when the necessary criteria were met. The Company recorded total pretax restructuring costs of $283.2million in the first quarter of 2010. Since inception of the Merger Restructuring Program through March31, 2010, Merck has recorded total pretax accumulated costs of $1.7billion. This first phase of the Merger Restructuring Program is expected to be completed by the end of 2012 with the total pretax costs estimated to be $2.6billion to $3.3billion. The Company estimates that approximately 85% of the cumulative pretax costs relate to cash outlays, primarily related to employee separation expense. Approximately 15% of the cumulative pretax costs are non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. 2008 Global Restructuring Program In October2008, Old Merck announced a global restructuring program (the 2008 Restructuring Program) to reduce its cost structure, increase efficiency, and enhance competitiveness. As part of the 2008 Restructuring Program, the Company expects to eliminate approximately 7,200 positions 6,800 active employees and 400 vacancies across all areas of the Company worldwide by the end of 2011. About 40% of these total reductions will occur in the United States. As of March31, 2010

Acquisitions

Acquisitions
	3 Months Ended Mar. 31, 2010
Acquisitions [Abstract]
Acquisitions	4.Acquisitions In February2010, the Company completed the acquisition of Avecia Biologics Limited (Avecia) for a total purchase price of approximately $190million. Avecia is a contract manufacturing organization with specific expertise in microbial-derived biologics. Under the terms of the agreement, the Company acquired Avecia and all of its assets, including all of Avecias process development and scale-up, manufacturing, quality and business support operations located in Billingham, United Kingdom. The transaction was accounted for as a business combination; accordingly, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date. The determination of fair value requires management to make significant estimates and assumptions. In connection with the acquisition, substantially all of the purchase price was allocated to Avecias property, plant and equipment and goodwill. The remaining net assets acquired were not material. This transaction closed on February1, 2010, and accordingly, the results of operations of the acquired business have been included in the Companys results of operations beginning after the acquisition date. Pro forma financial information has not been included because Avecias historical financial results are not significant when compared with the Companys financial results.

Collaborative Arrangements

Collaborative Arrangements
	3 Months Ended Mar. 31, 2010
Collaborative Arrangements [Abstract]
Collaborative Arrangements	5.Collaborative Arrangements The Company continues its strategy of establishing external alliances to complement its substantial internal research capabilities, including research collaborations, licensing preclinical and clinical compounds and technology platforms to drive both near- and long-term growth. The Company supplements its internal research with an aggressive licensing and external alliance strategy focused on the entire spectrum of collaborations from early research to late-stage compounds, as well as new technologies across a broad range of therapeutic areas. These arrangements often include upfront payments and royalty or profit share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development, as well as expense reimbursements or payments to the third party. Cozaar/Hyzaar In 1989, Old Merck and E.I. duPont de Nemours and Company (DuPont) agreed to form a long-term research and marketing collaboration to develop a class of therapeutic agents for high blood pressure and heart disease, discovered by DuPont, called angiotensin II receptor antagonists, which include Cozaar and Hyzaar. In return, Old Merck provided DuPont marketing rights in the United States and Canada to its prescription medicines, Sinemet and Sinemet CR. Pursuant to a 1994 agreement with DuPont, the Company has an exclusive licensing agreement to market Cozaar and Hyzaar, which are both registered trademarks of DuPont, in return for royalties and profit share payments to DuPont. The patents that provided U.S. marketing exclusivity for Cozaar and Hyzaar expired in April2010. In addition, Cozaar and Hyzaar lost patent protection in a number of major European markets in March and February2010, respectively. Remicade/Simponi In 1998, a subsidiary of Schering-Plough entered into a licensing agreement with Centocor, Inc. (Centocor), now a Johnson Johnson company, to market Remicade, which is prescribed for the treatment of inflammatory diseases. In 2005, Schering-Ploughs subsidiary exercised an option under its contract with Centocor for license rights to develop and commercialize Simponi (golimumab), a fully human monoclonal antibody. The Company has exclusive marketing rights to both products outside the United States, Japan and certain Asian markets. In December2007, Schering-Plough and Centocor revised their distribution agreement regarding the development, commercialization and distribution of both Remicade and Simponi, extending the Companys rights to exclusively market Remicade to match the duration of the Companys exclusive marketing rights for Simponi. In addition, Schering-Plough and Centocor agreed to share certain development costs relating to Simponis auto-injector delivery system. On October6, 2009, the European Commission approved Simponi as a treatment for rheumatoid arthritis and other immune system disorders in two presentations a novel auto-injector and a prefilled syringe. As a result, the Companys marketing rights for both products extend for 15years from the first commercial sale of Simponi in the European Union (EU) following the receipt of p

Financial Instruments

Financial Instruments
	3 Months Ended Mar. 31, 2010
Financial Instruments [Abstract]
Financial Instruments	6.Financial Instruments Derivative Instruments and Hedging Activities The Company manages the impact of foreign exchange rate movements and interest rate movements on its earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments. A significant portion of the Companys revenues and earnings in foreign affiliates is exposed to changes in foreign exchange rates. The objectives and accounting related to the Companys foreign currency risk management program, as well as its interest rate risk management activities are discussed below. Foreign Currency Risk Management A significant portion of the Companys revenues are denominated in foreign currencies. Merck relies on sustained cash flows generated from foreign sources to support its long-term commitment to U.S. dollar-based research and development. To the extent the dollar value of cash flows is diminished as a result of a strengthening dollar, the Companys ability to fund research and other dollar-based strategic initiatives at a consistent level may be impaired. The Company has established revenue hedging and balance sheet risk management programs to protect against volatility of future foreign currency cash flows and changes in fair value caused by volatility in foreign exchange rates at its U.S. functional currency entities. The objective of the revenue hedging program is to reduce the potential for longer-term unfavorable changes in foreign exchange to decrease the U.S. dollar value of future cash flows derived from foreign currency denominated sales, primarily the euro and Japanese yen. To achieve this objective, the Company will partially hedge forecasted foreign currency denominated third-party and intercompany distributor entity sales that are expected to occur over its planning cycle, typically no more than three years into the future. The Company will layer in hedges over time, increasing the portion of third-party and intercompany distributor entity sales hedged as it gets closer to the expected date of the forecasted foreign currency denominated sales, such that it is probable the hedged transaction will occur. The portion of sales hedged is based on assessments of cost-benefit profiles that consider natural offsetting exposures, revenue and exchange rate volatilities and correlations, and the cost of hedging instruments. The hedged anticipated sales are a specified component of a portfolio of similarly denominated foreign currency-based sales transactions, each of which responds to the hedged risk in the same manner. The Company manages its anticipated transaction exposure principally with purchased local currency put options, which provide the Company with a right, but not an obligation, to sell foreign currencies in the future at a predetermined price. If the U.S. dollar strengthens relative to the currency of the hedged anticipated sales, total changes in the options cash flows offset the decline in the expected future U.S. dollar cash flows of the hedged foreign currency sales. Conversely, if the U.S. dollar weakens, the o

Inventories

Inventories
	3 Months Ended Mar. 31, 2010
Inventories [Abstract]
Inventories	7.Inventories Inventories consisted of: March 31, December 31, ($ in millions) 2010 2009 Finished goods $ 2,033.8 $ 2,475.5 Raw materials and work in process 5,941.7 6,583.1 Supplies 321.3 322.8 Total (approximates current cost) 8,296.8 9,381.4 Reduction to LIFO cost for domestic inventories (158.8 ) (166.7 ) $ 8,138.0 $ 9,214.7 Recognized as: Inventories $ 6,825.4 $ 8,057.5 Other assets 1,312.6 1,157.2 As of March31, 2010, $1.1billion of purchase accounting adjustments to inventories remained which will be recognized as a component of Materials and production costs as the related inventories are sold. Amounts recognized as Other assets are comprised almost entirely of raw materials and work in process inventories.

Joint Ventures and Other Equity

Joint Ventures and Other Equity Method Affiliates
	3 Months Ended Mar. 31, 2010
Joint Ventures and Other Equity Method Affiliates [Abstract]
Joint Ventures and Other Equity Method Affiliates	8.Joint Ventures and Other Equity Method Affiliates Equity income from affiliates reflects the performance of the Companys joint ventures and other equity method affiliates and was comprised of the following: Three Months Ended March 31, ($ in millions) 2010 2009 AstraZeneca LP $ 124.9 $ 168.3 Merck/Schering-Plough(1) 290.9 Other (2) 12.6 126.6 $ 137.5 $ 585.8 (1) Upon completion of the Merger, the Merck/Schering-Plough partnership became wholly-owned by the Company (see below). (2) Primarily reflects results from Merial Limited (which was disposed of on September 17, 2009), Sanofi Pasteur MSD and Johnson JohnsonMerck Consumer Pharmaceuticals Company. AstraZeneca LP In 1998, Old Merck and Astra completed the restructuring of the ownership and operations of their existing joint venture whereby Old Merck acquired Astras interest in KBI Inc. (KBI), and contributed KBIs operating assets to a new U.S. limited partnership, Astra Pharmaceuticals L.P. (the Partnership), in exchange for a 1% limited partner interest. Astra contributed the net assets of its wholly owned subsidiary, Astra USA, Inc., to the Partnership in exchange for a 99% general partner interest. The Partnership, renamed AstraZeneca LP (AZLP) upon Astras 1999 merger with Zeneca Group Plc (the AstraZeneca merger), became the exclusive distributor of the products for which KBI retained rights. As previously disclosed, in 1998, Astra purchased an option (the Asset Option) for a payment of $443.0million, which was recorded as deferred income, to buy Old Mercks interest in the KBI Inc. (KBI) products, excluding the gastrointestinal medicines Nexium and Prilosec (the Non-PPI Products). On February26, 2010, AstraZeneca notified the Company that it was exercising the Asset Option. Upon consummation of the exercise on April30, 2010, Merck received $647million from AstraZeneca representing the net present value as of March31, 2008 of projected future pretax revenue to be received by Old Merck from the Non-PPI Products. In addition, in 1998 Old Merck granted Astra an option (the Shares Option) to buy Old Mercks common stock interest in KBI, and, therefore, Old Mercks interest in Nexium and Prilosec, exercisable two years after Astras exercise of the Asset Option. Astra can also exercise the Shares Option in 2017 or if combined annual sales of the two products fall below a minimum amount provided, in each case, only so long as AstraZenecas Asset Option has been exercised in 2010. The exercise price for the Shares Option is based on the net present value of estimated future net sales of Nexium and Prilosec as determined at the time of exercise, subject to certain true-up mechanisms. Summarized financial information for AZLP is as follows: Three Months Ended March 31, ($ in millions) 2010 2009 Sales $ 1,293.4 $ 1,315.7 Materials and production costs 652.6 620.6 Other expense, net 142.8 348.1 Income before taxes (1) $ 498.0 $ 347.0 (1) Mercks partnership ret

Loans Payable, Long-Term Debt a

Loans Payable, Long-Term Debt and Other Commitments
	3 Months Ended Mar. 31, 2010
Loans Payable Long Term Debt and Other Commitments [Abstract]
Loans Payable Long Term Debt and Other Commitments	9.Loans Payable, Long-Term Debt and Other Commitments During the first quarter of 2010, the Company repaid $610million of Euro-denominated notes due to mature in 2012. Funding to repay the notes was provided through the issuance of commercial paper.

Contingencies

Contingencies
	3 Months Ended Mar. 31, 2010
Contingencies [Abstract]
Contingencies	10.Contingencies The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, and commercial litigation, as well as additional matters such as antitrust actions. Vioxx Litigation Product Liability Lawsuits As previously disclosed, individual and putative class actions have been filed against Old Merck in state and federal courts alleging personal injury and/or economic loss with respect to the purchase or use of Vioxx. All such actions filed in federal court are coordinated in a multidistrict litigation in the U.S. District Court for the Eastern District of Louisiana (the MDL) before District Judge Eldon E. Fallon. A number of such actions filed in state court are coordinated in separate coordinated proceedings in state courts in New Jersey, California and Texas, and the counties of Philadelphia, Pennsylvania and Washoe and Clark Counties, Nevada. As of March31, 2010, the Company had been served or was aware that it had been named as a defendant in approximately 6,975 pending lawsuits, which include approximately 15,000 plaintiff groups, alleging personal injuries resulting from the use of Vioxx, and in approximately 41 putative class actions alleging personal injuries and/or economic loss. (All of the actions discussed in this paragraph and in Other Lawsuits below are collectively referred to as the Vioxx Product Liability Lawsuits.) Of these lawsuits, approximately 5,525 lawsuits representing approximately 11,800 plaintiff groups are or are slated to be in the federal MDL and approximately 10 lawsuits representing approximately 10 plaintiff groups are included in a coordinated proceeding in New Jersey Superior Court before Judge Carol E. Higbee. Of the plaintiff groups described above, most are currently in the Vioxx Settlement Program, described below. As of March31, 2010, 50 plaintiff groups who were otherwise eligible for the Settlement Program have not participated and their claims remain pending against Old Merck. In addition, the claims of approximately 150 plaintiff groups who are not eligible for the Settlement Program remain pending against Old Merck. A number of these 150 plaintiff groups are subject to various motions to dismiss for failure to comply with court-ordered deadlines. Since March31, 2010, certain of these plaintiff groups have since been dismissed. In addition, the claims of over 39,800 plaintiffs had been dismissed as of March31, 2010, the vast majority of which were dismissed as a result of the settlement process discussed below. On November9, 2007, Old Merck announced that it had entered into an agreement (the Settlement Agreement) with the law firms that comprise the executive committee of the Plaintiffs Steering Committee (PSC) of the federal Vioxx MDL, as well as representatives of plaintiffs counsel in the Texas, New Jersey and California state coordinated proceedings, to resolve state and federal myocardial infarction (MI) and ischemic stroke (IS) claims filed as of that date in the United States. The Settlement Agreement applies only to U.S. legal residents and

Stockholders' Equity

Stockholders' Equity
	3 Months Ended Mar. 31, 2010
Stockholders' Equity [Abstract]
Stockholders' Equity	11.Stockholders Equity Common Stock Common Other Treasury Treasury Shares Stock Paid-In Stock Stock ($ in millions) Issued at Cost Capital Shares at Cost Balance at January1, 2009 2,983.5 $ 29.8 $ 8,319.1 875.8 $ 30,735.5 Employee share-based compensation plans 67.7 (1.0 ) (34.3 ) Balance at March31, 2009 2,983.5 $ 29.8 $ 8,386.8 874.8 $ 30,701.2 Balance at January1, 2010 3,562.5 $ 1,781.3 $ 39,682.6 454.3 $ 21,044.3 Employee share-based compensation plans 9.4 4.7 513.8 Conversions 0.2 Balance at March31, 2010 3,571.9 $ 1,786.0 $ 40,196.6 454.3 $ 21,044.3 A reconciliation of retained earnings is as follows: ($ in millions) 2010 2009 Balance at January1 $ 41,404.9 $ 43,698.8 Net income 298.8 1,425.0 Dividends declared on common stock (1,192.3 ) (803.4 ) Balance at March31 $ 40,511.4 $ 44,320.4 The accumulated balances related to each component of other comprehensive income (loss), net of taxes, were as follows: Accumulated Employee Cumulative Other Benefit Translation Comprehensive ($ in millions) Derivatives Investments Plans Adjustment Income (Loss) Balance at January1, 2009 $ 111.9 $ 63.1 $ (2,754.6 ) $ 25.7 $ (2,553.9 ) Other comprehensive income (loss) 43.6 20.9 24.8 (8.2 ) 81.1 Balance at March31, 2009 $ 155.5 $ 84.0 $ (2,729.8 ) $ 17.5 $ (2,472.8 ) Balance at January1, 2010 $ (42.2 ) $ 33.3 $ (2,469.1 ) $ (288.5 ) $ (2,766.5 ) Other comprehensive income (loss) 68.3 (6.4 ) 58.7 (925.7 ) (805.1 ) Balance at March31, 2010 $ 26.1 $ 26.9 $ (2,410.4 ) $ (1,214.2 ) $ (3,571.6 ) Comprehensive (loss)income was $(506.3) million and $1,506.1million for the three months ended March31, 2010 and 2009, respectively. Included in the cumulative translation adjustment are gains of $233.7 million for the first quarter of 2010 from euro-denominated notes which have been designated as, and are effective as, economic hedges of the net investment in a foreign operation. A reconciliation of noncontrolling interests was as follows: ($ in millions) 2010 2009 Balance at January 1 $ 2,434.6 $ 2,408.8 Net income attributable to noncontrolling interests 31.4 30.8 Distributions (1.5 ) (1.4 ) Other 0.6 0.3 Balance at March 31 $ 2,465.1 $ 2,438.5 In connection with the 1998 restructuring of Astra Merck Inc., the Company assumed $2.4 billion par value preferred stock with a dividend rate of 5% per annum, which is carried by KBI and inc

Share-Based Compensation

Share-Based Compensation
	3 Months Ended Mar. 31, 2010
Share-Based Compensation [Abstract]
Share-Based Compensation	12.Share-Based Compensation The Company has share-based compensation plans under which employees, non-employee directors and employees of certain of the Companys equity method investees may be granted options to purchase shares of Company common stock at the fair market value at the time of grant. In addition to stock options, the Company grants performance share units (PSUs) and restricted stock units (RSUs) to certain management-level employees. The Company recognizes the fair value of share-based compensation in net income on a straight-line basis over the requisite service period. The following table provides amounts of share-based compensation cost recorded in the Consolidated Statement of Income: Three Months Ended March 31, ($ in millions) 2010 2009 Pretax share-based compensation expense $ 132.4 $ 113.3 Income tax benefits (44.9 ) (36.4 ) Total share-based compensation expense, net of tax $ 87.5 $ 76.9 During the first three months of 2010 and 2009, the Company granted 1.3million options and 1.5million options, respectively. The weighted average fair value of options granted for the first three months of 2010 and 2009 was $6.68 and $5.87 per option, respectively, and was determined using the following assumptions: Three Months Ended March 31, 2010 2009 Expected dividend yield 4.1 % 5.1 % Risk-free interest rate 2.7 % 2.1 % Expected volatility 26.8 % 34.0 % Expected life (years) 6.0 6.0 At March31, 2010, there was $428.1million of total pretax unrecognized compensation expense related to nonvested stock options, RSU and PSU awards which will be recognized over a weighted average period of 1.6years. For segment reporting, share-based compensation costs are unallocated expenses.

Pension and Other Postretiremen

Pension and Other Postretirement Benefit Plans
	3 Months Ended Mar. 31, 2010
Pension and Other Postretirement Benefit Plans[Abstract]
Pension and Other Postretirement Benefit Plans	13.Pension and Other Postretirement Benefit Plans The Company has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The net cost of such plans consisted of the following components: Three Months Ended March 31, ($ in millions) 2010 2009 Service cost $ 153.6 $ 95.3 Interest cost 176.5 101.9 Expected return on plan assets (217.2 ) (151.1 ) Net amortization 44.7 30.9 Termination benefits 19.3 22.6 Curtailments (35.7 ) (3.5 ) Settlements (0.5 ) 3.0 $ 140.7 $ 99.1 The Company provides medical, dental and life insurance benefits, principally to its eligible U.S. retirees and similar benefits to their dependents, through its other postretirement benefit plans. The net cost of such plans consisted of the following components: Three Months Ended March 31, ($ in millions) 2010 2009 Service cost $ 25.8 $ 18.9 Interest cost 37.8 25.7 Expected return on plan assets (32.1 ) (23.8 ) Net amortization 2.5 5.6 Termination benefits 19.6 6.4 Curtailments 0.3 $ 53.6 $ 33.1 The increase in pension and other postretirement benefit costs in the first quarter of 2010 as compared with the first quarter of 2009 is primarily due to the inclusion of costs associated with Schering-Plough benefit plans as a result of the Merger. In connection with restructuring actions (see Note 3), termination charges for the three months ended March31, 2010 and 2009 were recorded on pension and other postretirement benefit plans related to expanded eligibility for certain employees exiting Merck. Also, in connection with these restructuring actions, curtailments were recorded on pension plans for the three months ended March31, 2010 and 2009 and on other postretirement benefit plans for the three months ended March31, 2009. In addition, settlements were recorded on pension plans for the three months ended March31, 2010 and 2009.

Other

Other (Income) Expense, Net
	3 Months Ended Mar. 31, 2010
Other (Income) Expense, Net [Abstract]
Other (Income) Expense, Net	14.Other (Income) Expense, Net Other (income)expense, net, consisted of: Three Months Ended March 31, ($ in millions) 2010 2009 Interest income $ (12.0 ) $ (96.3 ) Interest expense 181.2 60.7 Exchange losses 80.1 16.5 Other, net (81.6 ) (48.1 ) $ 167.7 $ (67.2 ) The decline in interest income and increase in interest expense in the first quarter of 2010 as compared with the first quarter of 2009 is largely attributable to the financing of the Merger. In addition, during the first quarter of 2010, the Company recognized higher exchange losses of $80 million due to the Venezuelan currency devaluation. Effective January11, 2010, the Venezuelan government devalued its currency from at BsF 2.15 per U.S. dollar to a two-tiered official exchange rate at (1) the essentials rate at BsF 2.60 per U.S. dollar and (2) the non-essentials rate at BsF 4.30 per U.S. dollar. The Company anticipates that its transactions will be settled at the essentials rate. The Company was required to remeasure its local currency operations in Venezuela to U.S. dollars as the Venezuelan economy was determined to be hyperinflationary. Other, net in the first quarter of 2010 includes $102 million of income recognized on the settlement of certain disputed royalties. Interest paid for the three months ended March31, 2010 and 2009 was $128.5million and $59.7million, respectively, which excludes commitment fees.

Taxes on Income

Taxes on Income
	3 Months Ended Mar. 31, 2010
Taxes on Income [Abstract]
Taxes on Income	15.Taxes on Income The effective tax rate of 46.4% for the first quarter of 2010 reflects the impact of a charge of $146.5million, or approximately 24percentage points, associated with a change in tax law that requires taxation of the prescription drug subsidy of the Companys retiree health benefit plans which was enacted in the first quarter of 2010 as part of U.S. health care reform legislation, as well by the impacts of purchase accounting adjustments and restructuring charges. The effective tax rate of 18.4% for the first quarter of 2009 reflects a favorable impact of approximately 5 percentage points resulting from the previously disclosed settlement reached with the Canada Revenue Agency (CRA) and restructuring charges. As previously disclosed, in October2006, the CRA issued Old Merck a notice of reassessment containing adjustments related to certain intercompany pricing matters. In February2009, Old Merck and the CRA negotiated a settlement agreement in regard to these matters. In accordance with the settlement, Old Merck paid an additional tax of approximately $300million (U.S. dollars) and interest of approximately $360million (U.S. dollars) with no additional amounts or penalties due on this assessment. The settlement was accounted for in the first quarter of 2009. Old Merck had previously established reserves for these matters. A significant portion of the taxes paid is expected to be creditable for U.S. tax purposes. The resolution of these matters did not have a material effect on Old Mercks financial position or liquidity, other than with respect to the associated collateral as discussed below. In addition, in July2007 and November2008, the CRA proposed additional adjustments for 1999 and 2000, respectively, relating to other intercompany pricing matters. The adjustments would increase Canadian tax due by approximately $318million (U.S. dollars) plus approximately $328 million (U.S. dollars) of interest through March31, 2010. It is possible that the CRA will propose similar adjustments for later years. The Company disagrees with the positions taken by the CRA and believes they are without merit. The Company intends to contest the assessments through the CRA appeals process and the courts if necessary. Management believes that resolution of these matters will not have a material effect on the Companys financial position or liquidity. In connection with the appeals process for the matters discussed above, during 2007, Old Merck pledged collateral to two financial institutions, one of which provided a guarantee to the CRA and the other to the Quebec Ministry of Revenue representing a portion of the tax and interest assessed. As a result of the settlement noted above, guarantees required to appeal the disputes were reduced or eliminated and a portion of associated collateral was released. Certain of the cash and investments continue to be collateralized for guarantees required to appeal other Canadian tax disputes. The collateral is included in Deferred income taxes and other current assets and Other assets in the Consolidated Balance Sheet and totaled approximately $320million and $290 million at March3

Earnings Per Share

Earnings Per Share
	3 Months Ended Mar. 31, 2010
Earnings Per Share [Abstract]
Earnings Per Share	16.Earnings Per Share The Company calculates earnings per share pursuant to the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. RSUs and certain PSUs granted before December31, 2009 to certain management level employees participate in dividends on the same basis as common shares and are nonforfeitable by the holder. As a result, these RSUs and PSUs meet the definition of a participating security. For RSUs and PSUs issued on or after January1, 2010, dividends will be payable to the employees only upon vesting and therefore such RSUs and PSUs do not meet the definition of a participating security. The calculations of earnings per share under the two-class method are as follows: Three Months Ended March 31, 2010 2009 Basic Earnings per Common Share Net income attributable to Merck Co., Inc. common shareholders $ 298.8 $ 1,425.0 Less: Income allocated to participating securities 1.1 4.1 Net income allocated to common shareholders $ 297.7 $ 1,420.9 Average common shares outstanding 3,114.3 2,107.9 $ 0.10 $ 0.67 Earnings per Common Share Assuming Dilution Net income attributable to Merck Co., Inc. common shareholders $ 298.8 $ 1,425.0 Less: Income allocated to participating securities 1.1 4.1 Net income allocated to common shareholders $ 297.7 $ 1,420.9 Average common shares outstanding 3,114.3 2,107.9 Common shares issuable (1) 26.7 1.3 Average common shares outstanding assuming dilution 3,141.0 2,109.2 $ 0.09 $ 0.67 (1) Issuable primarily under share-based compensation plans. For the three months ended March31, 2010 and 2009, 181.5million and 229.8million, respectively, of common shares issuable under share-based compensation plans were excluded from the computation of earnings per common share assuming dilution because the effect would have been antidilutive.

Segment Reporting

Segment Reporting
	3 Months Ended Mar. 31, 2010
Segment Reporting [Abstract]
Segment Reporting	17.Segment Reporting The Companys operations are principally managed on a products basis and are comprised of four operating segments Pharmaceutical, Animal Health, Consumer Care and Alliances (which includes revenue and equity income from the Companys relationship with AZLP). The Animal Health, Consumer Care and Alliances segments are not material for separate reporting and are included in All Other in the table below. The Pharmaceutical segment includes human health pharmaceutical and vaccine products marketed either directly by the Company or through joint ventures. Human health pharmaceutical products consist of therapeutic and preventive agents, sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. The Company sells these human health vaccines primarily to physicians, wholesalers, physician distributors and government entities. A large component of pediatric and adolescent vaccines is sold to the U.S. Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the U.S. government. The Company also has animal health operations that discover, develop, manufacture and market animal health products, including vaccines. Additionally, the Company has consumer care operations that develop, manufacture and market over-the-counter, foot care and sun care products in the United States and Canada. Revenues and profits for these segments are as follows: Three Months Ended March 31, ($ in millions) 2010 2009 Segment revenues: Pharmaceutical segment $ 9,793.4 $ 5,019.0 All other segment revenues 1,460.2 366.8 $ 11,253.6 $ 5,385.8 Segment profits: Pharmaceutical segment $ 5,779.5 $ 3,251.6 All other segment profits 680.5 468.1 $ 6,460.0 $ 3,719.7 Segment profits are comprised of segment revenues less certain elements of materials and production costs and operating expenses, including components of equity income (loss)from affiliates and depreciation and amortization expenses. For internal management reporting presented to the chief operating decision maker, Merck does not allocate production costs, other than standard costs, research and development expenses and general and administrative expenses, as well as the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. Sales(1) of the Companys products were as follows: Three Months Ended March 31, ($ in millions) 2010 2009 Pharmaceutical: Bone, Respi