Merck Sharp & Dohme 10-Q 2 Nov 09 2009 Q3 Quarterly report Financial data

Document and Company Informatio

Document and Company Information (USD $)
	9 Months Ended Sep. 30, 2009	Jun. 30, 2008
Document and Company Information [Abstract]
Entity Registrant Name	MERCK & CO INC
Entity Central Index Key	0000064978
Document Type	10-Q
Document Period End Date	2009-09-30
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float		$80,729,000,000
Entity Common Stock, Shares Outstanding	2,109,178,112

Interim Consolidated Statement

Interim Consolidated Statement of Income (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Sep. 30, 2009	3 Months Ended Sep. 30, 2008	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
Sales	6049.7	5943.9	17334.8	17817.9
Costs, Expenses and Other
Materials and production	1430.3	1477.9	4,118	4112.5
Marketing and administrative	1725.5	1730.3	5,088	5,515
Research and development	1,254	1171.1	3873.5	3418.7
Restructuring costs	42.4	757.5	144.1	929.4
Equity income from affiliates	-688.2	-665.6	-1861.2	-1840.7
Other (income) expense, net	-2791.1	30.6	-2854.7	-2291.3
Total Costs, Expenses and Other	972.9	4501.8	8507.7	9843.6
Income Before Taxes	5076.8	1442.1	8827.1	7974.3
Taxes on Income	1621.5	318.2	2327.7	1716.8
Net Income	3455.3	1123.9	6499.4	6257.5
Less: Net Income Attributable to Noncontrolling Interests	31	31.2	93.8	93.9
Net Income Attributable to Merck & Co., Inc.	3424.3	1092.7	6405.6	6163.6
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders	1.62	0.51	3.03	2.87
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders	1.61	0.51	3.03	2.85
Dividends Declared per Common Share	0.38	0.38	1.14	1.14

Consolidated Balance Sheet (Una

Consolidated Balance Sheet (Unaudited) (USD $)
In Millions	Sep. 30, 2009	Dec. 31, 2008
Current Assets
Cash and cash equivalents	21816.9	4368.3
Short-term investments	439.4	1118.1
Accounts receivable (including non-trade receivables of $571.0 in 2009 and $871.2 in 2008)	3803.9	3778.9
Inventories (excludes inventories of $846.7 in 2009 and $587.3 in 2008 classified in Other assets - see Note 8)	2096.3	2,091
Deferred income taxes and other current assets	1512.3	7756.3
Total current assets	29668.8	19112.6
Investments	464.6	6491.3
Property, Plant and Equipment, at cost, net of allowance for depreciation of $12,358.0 in 2009 and $12,128.6 in 2008	11613.8	11999.6
Goodwill	1,439	1438.7
Other Intangibles, Net	555.9	525.4
Other Assets	4997.3	7628.1
Total Assets	48739.4	47195.7
Current Liabilities
Loans payable and current portion of long-term debt	866.8	2297.1
Trade accounts payable	568.4	617.6
Accrued and other current liabilities	5311.3	9174.1
Income taxes payable	474.8	1426.4
Dividends payable	804.4	803.5
Total current liabilities	8025.7	14318.7
Long-Term Debt	8204.7	3943.3
Deferred Income Taxes and Noncurrent Liabilities	7159.7	7766.6
Merck & Co., Inc. Stockholders' Equity
Common stock, one cent par value Authorized - 5,400,000,000 shares Issued - 2,983,508,675 shares	29.8	29.8
Other paid-in capital	8542.4	8319.1
Retained earnings	47693.1	43698.8
Accumulated other comprehensive loss	-2674.8	-2553.9
Stockholders' equity before deduction for treasury stock	53590.5	49493.8
Less treasury stock, at cost 874,330,563 shares at September 30, 2009 875,818,333 shares at December 31, 2008	30683.3	30735.5
Total Merck & Co., Inc. stockholders' equity	22907.2	18758.3
Noncontrolling Interests	2442.1	2408.8
Total Equity	25349.3	21167.1
Total Liabilities and Stockholders' Equity	48739.4	47195.7

Consolidated Balance Sheet (Par

Consolidated Balance Sheet (Parenthetical) (Unaudited) (USD $)
In Millions, except Share data	Sep. 30, 2009	Dec. 31, 2008
Current Assets
Non-trade receivables	$571	871.2
Inventories classified in Other assets	846.7	587.3
Allowance for depreciation	$12,358	12128.6
Merck & Co., Inc. Stockholders' Equity
Common stock, par value	0.01	0.01
Common stock, shares authorized	5,400,000,000	5,400,000,000
Common stock, shares issued	2,983,508,675	2,983,508,675
Treasury stock, shares	874,330,563	875,818,333

1_Interim Consolidated Statemen

Interim Consolidated Statement of Cash Flows (Unaudited) (USD $)
In Millions	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
Cash Flows from Operating Activities
Net income	6499.4	6257.5
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of interest in Merial Limited	-2762.5	0
Gain on distribution from AstraZeneca LP	0	-2222.7
Equity income from affiliates	-1861.2	-1840.7
Dividends and distributions from equity affiliates	1478.4	3750.9
Depreciation and amortization	1326.3	1157.2
Deferred income taxes	1909.2	-163.8
Share-based compensation	281.8	285.5
Other	-531.3	367.2
Net changes in assets and liabilities	-5190.6	-2030.2
Net Cash Provided by Operating Activities	1149.5	5560.9
Cash Flows from Investing Activities
Capital expenditures	-903.6	-914.3
Purchases of securities and other investments	-2751.7	-9154.8
Proceeds from sales of securities and other investments	10345.7	8456.8
Acquisitions of businesses, net of cash acquired	(130)	0
Proceeds from sale of interest in Merial Limited	4,000	0
Distribution from AstraZeneca LP	0	1899.3
Decrease (increase) in restricted assets	5,467	-1662.3
Other	-6.9	-8.9
Net Cash Provided by (Used by) Investing Activities	16020.5	-1384.2
Cash Flows from Financing Activities
Net change in short-term borrowings	-1403.8	2553.3
Proceeds from issuance of debt, net	4,228	0
Payments on debt	-24.7	-1391.7
Purchases of treasury stock	0	-2515.4
Dividends paid to stockholders	-2410.8	-2469.6
Proceeds from exercise of stock options	7.8	100.5
Other	-185.4	-44.2
Net Cash Provided by (Used by) Financing Activities	211.1	-3767.1
Effect of Exchange Rate Changes on Cash and Cash Equivalents	67.5	-25.6
Net Increase in Cash and Cash Equivalents	17448.6	384
Cash and Cash Equivalents at Beginning of Year	4368.3	5336.1
Cash and Cash Equivalents at End of Period	21816.9	5720.1

Basis of Presentation

Basis of Presentation
	9 Months Ended Sep. 30, 2009 USD / shares
Basis of Presentation [Abstract]
Basis of Presentation	1. Basis of Presentation 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 (Merck or the Company) Form 8-K filed on May20, 2009. 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 On January1, 2009, the Company adopted new guidance on business combinations which expands the scope of acquisition accounting to all transactions under which control of a business is obtained. This guidance requires an acquirer to recognize the assets acquired and liabilities assumed at the acquisition date fair values with limited exceptions. Additionally, the guidance requires that contingent consideration be recorded at fair value on the acquisition date, that acquired in-process research and development be capitalized and recorded as intangible assets at the acquisition date, and also requires transaction costs and costs to restructure the acquired company be expensed. Transactions are now being accounted for under this new guidance. On April1, 2009, additional guidance was issued further amending the accounting for business combinations to require that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can reasonably be estimated. If the acquisition date fair value of an asset acquired or liability assumed that arises from a contingency cannot be determined, the asset or liability would be recognized if probable and reasonably estimable; if these criteria are not met, no asset or liability would be recognized. On January1, 2009, the Company adopted new guidance for the accounting, reporting and disclosure of noncontrolling interests which requires, among other things, that noncontrolling interests be recorded as equity in the consolidated financial statements. The adoption of this new guidance resulted in the reclassification of $2.4billion of minority interests (now referred to as noncontrolling interests) to a separate component of Stockholders Equity on the Consolidated Balance Sheet (see also Note 12). Additionally, net income attributable to noncontrolling interests is now shown separately from parent net income in the Consolidated Statement of Income. Prior periods have been restated to reflect the presentation and disclosure requirements of the new guidance. On January1, 2009, the Company adopted new

Merger Agreement

Merger Agreement
	9 Months Ended Sep. 30, 2009 USD / shares
Merger Agreement [Abstract]
Merger Agreement with Schering-Plough Corporation	2. Merger Agreement with Schering-Plough Corporation In March2009, Merck and Schering-Plough Corporation (Schering-Plough) announced that their Boards of Directors unanimously approved a definitive merger agreement under which Merck and Schering-Plough will combine in a stock and cash transaction. The transaction is structured as a reverse merger in which Schering-Plough, renamed Merck, will continue as the surviving public corporation (New Merck). Under the terms of the agreement, each issued and outstanding share of Schering-Plough common stock will be converted into the right to receive a combination of $10.50 in cash and 0.5767 of a share of the common stock of New Merck. Each issued and outstanding share of Merck common stock will automatically be converted into a share of the common stock of New Merck. Based on the closing price of Merck stock on September30, 2009, the value of the cash and stock consideration to be received by Schering-Plough shareholders is estimated to be $50 billion in the aggregate. The cash portion of the consideration, which is estimated to be approximately $18 billion, will be funded with a combination of existing cash, the sale or redemption of short-term investments and the issuance of debt (see Note 10). Upon completion of the merger, each issued and outstanding share of Schering-Plough 6% Mandatory Convertible Preferred Stock not converted in accordance with the preferred stock designations shall remain outstanding as one share of 6% Mandatory Convertible Preferred Stock of the newly combined company having the rights set forth in the New Merck certificate of incorporation. The transaction, which was approved by Merck and Schering-Plough shareholders, remains subject to the satisfaction of customary closing conditions and regulatory approvals. The transaction is expected to close in the fourth quarter of 2009.

Restructuring

Restructuring
	9 Months Ended Sep. 30, 2009 USD / shares
Restructuring [Abstract]
Restructuring	3. Restructuring 2008 Global Restructuring Program As previously disclosed, in October2008, the Company 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 the total reductions will occur in the United States. As part of the 2008 Restructuring Program, the Company is streamlining management layers by reducing its total number of senior and mid-level executives globally by approximately 25%. As of September30, 2009, the Company has eliminated approximately 4,310 positions in connection with this program, comprised of employee separations and the elimination of contractors and vacant positions. Merck is rolling out a new, more customer-centric selling model designed to provide Merck with a meaningful competitive advantage and help physicians, patients and payers improve patient outcomes. The Company is now operating its new commercial selling models in the United States and other markets around the world. The Company also will make greater use of outside technology resources, centralize common sales and marketing activities, and consolidate and streamline its operations. Mercks manufacturing division will further focus its capabilities on core products and outsource non-core manufacturing. Also, Merck is expanding its access to worldwide external science through a basic research global operating strategy, which is designed to provide a sustainable pipeline and is focused on translating basic research productivity into late-stage clinical success. To increase efficiencies, basic research operations will consolidate work in support of a given therapeutic area into one of four locations. This will provide a more efficient use of research facilities. As a result, to date, the Company has sold its basic research facilities in Pomezia, Italy and Tsukuba, Japan and sold or closed the operations conducted at its basic research facility in Seattle. The Company has also sold or closed certain other facilities and sold related assets in connection with the program. In connection with the 2008 Restructuring Program, separation costs under the Companys existing severance programs worldwide were recorded in the third quarter of 2008 to the extent such costs were probable and estimable. The Company commenced accruing costs related to one-time termination benefits offered to employees under the 2008 Restructuring Program in the fourth quarter of 2008 as that is when the necessary criteria were met. The Company recorded pretax restructuring costs of $117.4million and $720.0million in the third quarter of 2009 and 2008, respectively, related to the 2008 Restructuring Program. For the first nine months of 2009, the Company recorded pretax restructuring costs of $484.3million related to this program. The Company anticipates that total costs for 2009 will be in the range of $400million to $600 million. The

Research Collaborations, Acquis

Research Collaborations, Acquisitions and License Agreements
	9 Months Ended Sep. 30, 2009 USD / shares
Research Collaborations, Acquisitions and License Agreements [Abstract]
Research Collaborations, Acquisitions and License Agreements	4. Research Collaborations, Acquisitions and License Agreements In September2009, Merck announced that it had entered into an exclusive agreement with CSL Biotherapies (CSL), a subsidiary of CSL Limited, to market and distribute Afluria, CSLs seasonal influenza (flu)vaccine, in the United States, for the 2010/2011-2015/2016 flu seasons. Under the terms of the agreement, Merck will assume responsibility for all aspects of commercialization of Afluria in the United States. CSL will supply Afluria to Merck and will retain responsibility for marketing the vaccine outside the United States. Afluria is indicated for the active immunization of persons age 18years and older against influenza disease caused by influenza virus subtypes A and type B present in the vaccine. This indication is based on immune response elicited by Afluria, and there have been no controlled trials demonstrating a decrease in influenza disease after vaccination with Afluria. In July2009, Merck and Portola Pharmaceuticals, Inc. (Portola) signed an exclusive global collaboration and license agreement for the development and commercialization of betrixaban (MK-4448), an investigational oral Factor Xa inhibitor anticoagulant currently in Phase II clinical development for the prevention of stroke in patients with atrial fibrillation. In return for an exclusive worldwide license to betrixaban, Merck paid Portola an initial fee of $50million at closing, which the Company recorded as research and development expense in the third quarter of 2009. Portola is eligible to receive additional cash payments totaling up to $420million upon achievement of certain development, regulatory and commercialization milestones, as well as double-digit royalties on worldwide sales of betrixaban, if approved. Merck will assume all development and commercialization costs, including the costs of Phase III clinical trials. Portola has retained an option to co-fund Phase III clinical trials in return for additional royalties and to co-promote betrixaban with Merck in the United States. The term of the agreement commenced on the closing date and, unless terminated earlier, will continue until there are no remaining royalty payment obligations in a country, at which time the agreement will expire in its entirety in such country. The agreement may be terminated by either party in the event of a material uncured breach or bankruptcy of a party. The agreement may be terminated by Merck in the event that the parties or Merck decide to cease development of betrixaban for safety or efficacy. In addition, Merck may terminate the agreement at any time upon 180days prior written notice. Portola may terminate the agreement in the event that Merck challenges any Portola patent covering betrixaban. Upon termination of the agreement, depending upon the circumstances, the parties have varying rights and obligations with respect to the continued development and commercialization of betrixaban and, in the case of termination for cause by Merck, certain royalty obligations. In April2009, Merck, Medarex, Inc. (Medarex) and Massachusetts Biologic Laboratories (MBL) of the University of Massac

Collaborative Arrangements

Collaborative Arrangements
	9 Months Ended Sep. 30, 2009 USD / shares
Collaborative Arrangements [Abstract]
Collaborative Arrangements	5. Collaborative Arrangements Merck continues its strategy of establishing strong external alliances to complement its substantial internal research capabilities, including research collaborations, acquisitions, 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. The Company executes a number of external arrangements including research and development collaborations, preclinical and clinical compounds, and technology platforms across a broad range of therapeutic categories. 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. As discussed in Note 1, on January1, 2009, the Company adopted new guidance which defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. The Company reviewed its third party arrangements to determine if any arrangement is within the scope of this new guidance. Each arrangement is unique in nature and the Companys most significant arrangement is discussed below. Cozaar/Hyzaar In 1989, the Company 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, the Company 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.

Fair Value Measurements

Fair Value Measurements
	9 Months Ended Sep. 30, 2009 USD / shares
Fair Value Measurements [Abstract]
Fair Value Measurements	6. Fair Value Measurements On January1, 2008, the Company adopted new guidance on fair value measurements, which clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures of fair value measurements. In February2008, the FASB deferred the effective date of the new guidance for one year for nonfinancial assets and liabilities recorded at fair value on a nonrecurring basis. The effect of adoption on January1, 2009 of the new guidance for nonfinancial assets and liabilities recorded at fair value on a nonrecurring basis did not have a material impact on the Companys financial position and results of operations. There are three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. The Companys Level 1 assets include equity securities that are traded in an active exchange market. Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Companys Level 2 assets and liabilities primarily include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, corporate notes and bonds, U.S. and foreign government and agency securities, certain mortgage-backed and asset-backed securities, municipal securities, commercial paper and derivative contracts whose values are determined using pricing models with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Level 3 - Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. The Companys Level 3 assets mainly include mortgage-backed and asset-backed securities, as well as certain corporate notes and bonds with limited market activity. At September30, 2009, $35.7million, or approximately 3.4%, of the Companys investment securities were categorized as Level 3 fair value assets (all of which were pledged under certain collateral arrangements (see Note 16)). All of the assets classified as Level 3 at September30, 2009 were acquired when the Company elected to be redeemed-in-kind from a short-term fixed income fund that restricted cash redemptions as described below. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis Financial assets and liabilities measured at fair value on a recurring basis are summarized below:

Derivative Instruments and Hedg

Derivative Instruments and Hedging Activities
	9 Months Ended Sep. 30, 2009 USD / shares
Derivative Instruments and Hedging Activities [Abstract]
Derivative Instruments and Hedging Activities	7. Derivative Instruments and Hedging Activities As discussed in Note 1, on January1, 2009, the Company adopted new guidance requiring expanded disclosures on (i)how and why an entity uses derivative instruments, (ii)how derivative instruments and related hedged items are accounted for, and (iii)how derivative instruments and related hedged items affect the Companys financial statements. The Company uses derivative instruments to manage certain risks relating to its ongoing business operations, including risks relating to foreign currencies as well as interest rate changes. 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. The Company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rate changes and to reduce its overall cost of borrowing. The Company does not use leveraged swaps and, in general, does not leverage any of its investment activities that would put principal capital at risk. The objectives and accounting related to the Companys foreign currency risk management and interest rate risk management programs are discussed below. Foreign Currency Risk Management 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 anticipated third-party 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 sales hedged as it gets closer to the expected date of the transaction, such that it is probable that 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. Merck manages its anticipated transaction exposure 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 options value reduces to zero, but the Company benefits from the increase in the value of the anticipated foreign currency cash flows. The Company also utilizes forward contracts in its revenue hedging program. If the U.S. dollar str

Inventories

Inventories
	9 Months Ended Sep. 30, 2009 USD / shares
Inventories [Abstract]
Inventories	8. Inventories Inventories consisted of: September 30, December 31, ($ in millions) 2009 2008 Finished goods $ 513.1 $ 432.6 Raw materials and work in process 2,384.2 2,147.1 Supplies 94.8 98.6 Total (approximates current cost) 2,992.1 2,678.3 Reduction to LIFO cost for domestic inventories (49.1 ) $ 2,943.0 $ 2,678.3 Recognized as: Inventories $ 2,096.3 $ 2,091.0 Other assets 846.7 587.3 Amounts recognized as Other assets are comprised entirely of raw materials and work in process inventories, the majority of which are noncurrent vaccine inventories.

Joint Ventures and Other Equity

Joint Ventures and Other Equity Method Affiliates
	9 Months Ended Sep. 30, 2009 USD / shares
Joint Ventures and Other Equity Method Affiliates [Abstract]
Joint Ventures and Other Equity Method Affiliates	9. 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 Nine Months Ended September 30, September 30, ($ in millions) 2009 2008 2009 2008 Merck/Schering-Plough $ 391.3 $ 400.2 $ 1,044.5 $ 1,158.2 AstraZeneca LP 191.4 139.1 482.6 331.6 Other (1) 105.5 126.3 334.1 350.9 $ 688.2 $ 665.6 $ 1,861.2 $ 1,840.7 (1) Primarily reflects results from Sanofi Pasteur MSD, Johnson JohnsonMerck Consumer Pharmaceuticals Company and Merial Limited (until disposition on September17, 2009). Merck/Schering-Plough In 2000, the Company and Schering-Plough (collectively the Partners) entered into agreements to create an equally-owned partnership to develop and market in the United States new prescription medicines in the cholesterol-management therapeutic area. These agreements generally provide for equal sharing of development costs and for co-promotion of approved products by each company. In 2001, the cholesterol-management partnership agreements were expanded to include all the countries of the world, excluding Japan. In 2002, ezetimibe, the first in a new class of cholesterol-lowering agents, was launched in the United States as Zetia (marketed as Ezetrol outside the United States). In 2004, a combination product containing the active ingredients of both Zetia and Zocor was approved in the United States as Vytorin (marketed as Inegy outside of the United States). The cholesterol agreements provide for the sharing of operating income generated by the Merck/Schering-Plough cholesterol partnership (the MSP Partnership) based upon percentages that vary by product, sales level and country. In the U.S. market, the Partners share profits on Zetia and Vytorin sales equally, with the exception of the first $300million of annual Zetia sales on which Schering-Plough receives a greater share of profits. Operating income includes expenses that the Partners have contractually agreed to share, such as a portion of manufacturing costs, specifically identified promotion costs (including direct-to-consumer advertising and direct and identifiable out-of-pocket promotion) and other agreed upon costs for specific services such as on-going clinical research, market support, market research, market expansion, as well as a specialty sales force and physician education programs. Expenses incurred in support of the MSP Partnership but not shared between the Partners, such as marketing and administrative expenses (including certain sales force costs), as well as certain manufacturing costs, are not included in Equity income from affiliates. However, these costs are reflected in the overall results of the Company. Certain research and development expenses are generally shared equally by the Partners, after adjusting for earned milestones. See Note 11 for information with respect to litigation involving the MSP Partners

Debt and Financial Instruments

Debt and Financial Instruments
	9 Months Ended Sep. 30, 2009 USD / shares
Debt and Financial Instrument [Abstract]
Debt and Financial Instruments	10. Debt and Financial Instruments On June25, 2009, the Company closed an underwritten public offering of $4.25billion senior unsecured notes consisting of $1.25billion aggregate principal amount of 1.875% notes due 2011, $1.0billion aggregate principal amount of 4.00% notes due 2015, $1.25billion aggregate principal amount of 5.00% notes due 2019 and $750million aggregate principal amount of 5.850% notes due 2039. Proceeds from the notes will be used for general corporate purposes and/or to fund a portion of the cash consideration of the proposed Schering-Plough merger. In connection with the planned merger with Schering-Plough (see Note 2), on March8, 2009, Merck entered into a financing commitment letter with JPMorgan Chase Bank, N.A. and J.P. Morgan Securities Inc. (collectively JPMorgan), under which JPMorgan committed to provide $7billion of financing. On May6, 2009, Merck entered into a $3billion 364-day senior unsecured interim term loan facility (the bridge loan facility); a $3billion 364-day asset sale revolving credit facility (the asset sale facility); and a $1billion 364-day corporate revolving credit facility (the incremental facility). In addition, in April2009, Merck amended its existing $1.5billion five-year revolving credit facility maturing in 2013 which will allow this existing facility to remain in place after the merger. In connection with the above $4.25billion offering, the bridge loan facility was terminated and the commitment of the lenders under the 364-day asset sale facility was reduced. Upon completion of the sale of Merial to sanofi-aventis (see Note 9), the asset sale facility was terminated. The incremental facility will be used to fund, or backstop commercial paper used to fund, the merger and for other general corporate purposes. The funding of the incremental facility and the effectiveness of the amendment to Mercks existing credit facility is subject to the consummation of the proposed Schering-Plough merger. Merck has incurred commitment fees of approximately $120million associated with these facilities which are being amortized over the commitment period. The Company may incur up to an additional approximately $40million in commitment fees. The commitment under the incremental facility described above and the ability to draw under that facility or render the amendment of Mercks existing revolving credit facility effective expire on a drop-dead date of December8, 2009. However, this drop-dead date will be automatically extended to March8, 2010, if the drop-dead date under the Schering-Plough merger agreement is extended to March8, 2010. In August2008, the Company executed a $4.1billion letter of credit agreement with a financial institution which satisfied certain conditions set forth in the U.S. Vioxx Settlement Agreement (see Note 11). The Company pledged collateral to the financial institution of approximately $5.1billion pursuant to the terms of the letter of credit agreement. Although the amount of assets pledged as collateral was set by the letter of credit agreement and such assets were held in custody by a third party, the assets were managed by the Compa

Contingencies

Contingencies
	9 Months Ended Sep. 30, 2009 USD / shares
Contingencies [Abstract]
Contingencies	11. 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 the Company 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 September30, 2009, the Company had been served or was aware that it had been named as a defendant in approximately 10,000 lawsuits, which include approximately 22,950 plaintiff groups, alleging personal injuries resulting from the use of Vioxx, and in approximately 53 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 8,025 lawsuits representing approximately 18,525 plaintiff groups are or are slated to be in the federal MDL and approximately 135 lawsuits representing approximately 135 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 September30, 2009, approximately 60 plaintiff groups who were otherwise eligible for the Settlement Program have not participated and their claims remain pending against Merck. In addition, the claims of approximately 250 plaintiff groups who are not eligible for the Settlement Program remain pending against Merck. A number of these 250 plaintiff groups are subject to various motions to dismiss for failure to comply with court-ordered deadlines. In addition to the Vioxx Product Liability Lawsuits discussed above, the claims of over 31,700 plaintiffs had been dismissed as of September30, 2009. Of these, there have been over 10,000 plaintiffs whose claims were dismissed with prejudice (i.e., they cannot be brought again) either by plaintiffs themselves or by the courts. Over 21,700 additional plaintiffs have had their claims dismissed without prejudice (i.e., subject to the applicable statute of limitations, they can be brought again). Of these, approximately 13,750 plaintiff groups represent plaintiffs who had lawsuits pending in the New Jersey Superior Court at the time of the Settlement Agreement described below and who enrolled in the program established by the Settlement Agreement (the Settlement Program). Judge Higbee h

Stockholders Equity

Stockholders Equity
	1/1/2009 - 9/30/2009 USD / shares
Stockholders' Equity [Abstract]
Stockholders' Equity	12. 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, 2008 2,983.5 $ 29.8 $ 8,014.9 811.0 $ 28,174.7 Employee share-based compensation plans 254.6 (3.9 ) (138.1 ) Purchases of treasury stock 62.2 2,515.4 Balance at September30, 2008 2,983.5 $ 29.8 $ 8,269.5 $ 869.3 $ 30,552.0 Balance at January1, 2009 2,983.5 $ 29.8 $ 8,319.1 875.8 $ 30,735.5 Employee share-based compensation plans 223.3 (1.5 ) (52.2 ) Purchases of treasury stock Balance at September30, 2009 2,983.5 $ 29.8 $ 8,542.4 $ 874.3 $ 30,683.3 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, 2008 $ (39.7 ) $ 143.6 $ (992.9 ) $ 62.9 $ (826.1 ) Other comprehensive income (loss) 103.2 (139.9 ) (160.6 ) (10.2 ) (207.5 ) Balance at September30, 2008 $ 63.5 $ 3.7 $ (1,153.5 ) $ 52.7 $ (1,033.6 ) Balance at January1, 2009 $ 111.9 $ 63.1 $ (2,754.6 ) $ 25.7 $ (2,553.9 ) Other comprehensive income (loss) (214.3 ) (15.0 ) 130.4 (22.0 ) (120.9 ) Balance at September30, 2009 $ (102.4 ) $ 48.1 $ (2,624.2 ) $ 3.7 $ (2,674.8 ) Comprehensive income was $3,299.3million and $994.7million for the three months ended September30, 2009 and 2008, respectively, and was $6,284.7million and $5,956.1million for the nine months ended September30, 2009 and 2008, respectively. A reconciliation of noncontrolling interests was as follows: ($ in millions) 2009 2008 Balance at January 1 $ 2,408.8 $ 2,406.7 Net income attributable to noncontrolling interests 93.8 93.9 Distributions (61.0 ) (61.2 ) Other 0.5 0.3 Balance at September 30 $ 2,442.1 $ 2,439.7 In connection with the 1998 restructuring of Astra Merck Inc., the Company assumed $2.4billion par value preferred stock with a dividend rate of 5% per annum, which is carried by KBI and included in Noncontrolling Interests with Stockholders Equity on the Consolidated Balance Sheet. While a small portion of the preferred stock carried by KBI is convertible into KBI common shares, none of the preferred securities are convertible into the Companys common shares and, therefore, are not included as common shares issuable for purposes of

Share Based Compensation

Share Based Compensation
	9 Months Ended Sep. 30, 2009 USD / shares
Share-Based Compensation [Abstract]
Share-Based Compensation	13. 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 Nine Months Ended September 30, September 30, ($ in millions) 2009 2008 2009 2008 Pretax share-based compensation expense $ 84.7 $ 86.8 $ 281.8 $ 285.5 Income tax benefits (26.7 ) (26.7 ) (89.6 ) (88.8 ) Total share-based compensation expense, net of tax $ 58.0 $ 60.1 $ 192.2 $ 196.7 During the first nine months of 2009 and 2008, the Company granted 33.0million options and 34.5 million options, respectively, related to its annual grant and other grants. The weighted average fair value of options granted for the first nine months of 2009 and 2008 was $3.95 and $9.89 per option, respectively, and was determined using the following assumptions: Nine Months Ended September 30, 2009 2008 Expected dividend yield 6.4 % 3.5 % Risk-free interest rate 2.2 % 2.7 % Expected volatility 34.0 % 30.8 % Expected life (years) 6.1 6.1 At September30, 2009, there was $397.2million 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 2.0years. For segment reporting, share-based compensation costs are unallocated expenses. Upon completion of the pending merger with Schering-Plough, holders of Schering-Plough stock options and performance-based deferred stock units will receive replacement awards. Holders of Schering-Plough deferred stock units issued after 2007 will receive replacement awards and holders of deferred stock units issued in 2007 and prior will be converted into the right to receive cash as specified in the merger agreement.

Pension and Other Postretiremen

Pension and Other Postretirement Benefit Plans
	9 Months Ended Sep. 30, 2009 USD / shares
Pension and Other Postretirement Benefit Plans [Abstract]
Pension and Other Postretirement Benefits Plans	14. 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 Nine Months Ended September 30, September 30, ($ in millions) 2009 2008 2009 2008 Service cost $ 76.7 $ 90.1 $ 266.6 $ 263.4 Interest cost 96.9 105.4 300.7 318.8 Expected return on plan assets (154.1 ) (142.8 ) (457.0 ) (427.7 ) Net amortization 25.2 19.3 87.7 62.1 Termination benefits 2.9 24.4 28.5 42.9 Curtailments (5.5 ) 8.1 (9.0 ) 11.3 Settlements (0.6 ) 2.5 2.4 2.5 $ 41.5 $ 107.0 $ 219.9 $ 273.3 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 Nine Months Ended September 30, September 30, ($ in millions) 2009 2008 2009 2008 Service cost $ 16.8 $ 18.4 $ 53.4 $ 55.9 Interest cost 26.7 28.2 77.1 84.5 Expected return on plan assets (25.4 ) (33.2 ) (72.5 ) (97.7 ) Net amortization 4.2 (5.2 ) 14.1 (16.6 ) Termination benefits 1.7 2.9 8.0 7.1 Curtailments (1.7 ) (12.3 ) (8.8 ) (12.9 ) $ 22.3 $ (1.2 ) $ 71.3 $ 20.3 In connection with restructuring actions (see Note 3), the Company recorded termination charges for the three and nine months ended September30, 2009 and 2008 on its pension and other postretirement benefit plans related to expanded eligibility for certain employees exiting the Company. Also, in connection with these restructuring actions, the Company recorded curtailments on its pension and other postretirement benefit plans for the three and nine months ended September30, 2009 and 2008. In addition, the Company recorded settlements on its pension plans for the three and nine months ended September30, 2009 and 2008.

Other

Other (Income) Expense, Net
	9 Months Ended Sep. 30, 2009 USD / shares
Other (Income) Expense, Net [Abstract]
Other (Income) Expense, Net	15. Other (Income) Expense, Net Other (income)expense, net, consisted of: Three Months Ended Nine Months Ended September 30, September 30, ($ in millions) 2009 2008 2009 2008 Interest income $ (33.4 ) $ (171.3 ) $ (199.6 ) $ (484.2 ) Interest expense 130.7 71.4 290.9 194.6 Exchange losses (gains) 0.5 52.3 (3.0 ) 73.6 Other, net (2,888.9 ) 78.2 (2,943.0 ) (2,075.3 ) $ (2,791.1 ) $ 30.6 $ (2,854.7 ) $ (2,291.3 ) The change in Other (income)expense, net in the third quarter of 2009 as compared with the third quarter of 2008 primarily reflects a $2.76billion gain in 2009 on the sale of the Companys interest in Merial (see Note 9). Additionally, the Company recognized net gains of $127million in the Companys investment portfolio in the third quarter of 2009 compared with net losses of $88million in the third quarter of 2008. Partially offsetting these increases was lower interest income, resulting from lower interest rates and a change in the Companys investment portfolio mix toward cash and shorter-dated securities in anticipation of the pending Schering-Plough merger, and higher interest expense driven largely by $88million of commitment fees and incremental interest expense related to the financing of the proposed Schering-Plough merger. Included in Other (income)expense, net in the first nine months of 2009 was a $2.76billion gain on the sale of the Companys interest in Merial, $226million of recognized net gains in the Companys investment portfolio, $151million of commitment fees and incremental interest expense related to the financing of the proposed Schering-Plough merger and an $80million charge related to the settlement of the Companys Vioxx third-party payor litigation in the United States. Included in Other (income)expense, net for the first nine months of 2008 was an aggregate gain from AZLP of $2.22billion (see Note 9), a gain of $249million related to the sale of the Companys remaining worldwide rights to Aggrastat, a $300million expense for a contribution to the Merck Company Foundation, $108million of recognized net losses in the Companys investment portfolio and a $58million charge related to the resolution of an investigation into whether the Company violated state consumer protection laws with respect to the sales and marketing of Vioxx. In addition, during the first nine months of 2009 the Company has recognized lower interest income resulting from lower interest rates and a change in the Companys investment portfolio mix toward cash and shorter-dated securities in anticipation of the pending Schering-Plough merger. Interest paid for the nine months ended September30, 2009 and 2008 was $163.3million and $181.2million, respectively, which excludes commitment fees.

Taxes on Income

Taxes on Income
	9 Months Ended Sep. 30, 2009 USD / shares
Taxes on Income [Abstract]
Taxes on Income	16. Taxes on Income The effective tax rate of 31.9% for the third quarter of 2009 is higher than the Companys normal effective tax rate and includes a net unfavorable rate impact of approximately 5percentage points reflecting the unfavorable rate impact of the gain on the sale of the Companys interest in Merial (see Note 9) being taxable in the United States at a combined federal and state rate of approximately 38.4%, partially offset by the favorable impact of the closing of a tax exam. The effective tax rate of 26.4% for the first nine months of 2009 is higher than the Companys normal effective tax rate and includes a net unfavorable rate impact of approximately 1percentage point reflecting the unfavorable impact of the gain on the sale of the Companys interest in Merial, partially offset by the favorable impact of 2009 tax settlements, including the previously disclosed settlement reached with the Canada Revenue Agency (CRA) in the first quarter of 2009 (see below), as well as the closing of a tax exam. The effective tax rate of 22.1% for the third quarter of 2008 reflects the favorable impact of restructuring charges. The effective tax rate of 21.5% for the first nine months of 2008 reflects a net favorable impact of approximately 2percentage points that includes favorable impacts relating to second quarter 2008 tax settlements, which resulted in a reduction of the Companys liability for unrecognized tax benefits of approximately $200million, the first quarter 2008 realization of foreign tax credits, as well as restructuring costs, largely offset by an unfavorable impact of the AZLP gain (see Note 9) being fully taxable in the United States at a combined federal and state tax rate of approximately 36.3%. In the first quarter of 2008, the Company decided to distribute certain prior years foreign earnings to the United States which resulted in the utilization of foreign tax credits. These foreign tax credits arose as a result of tax payments made outside of the United States in prior years that became realizable based on a change in the Companys decision to distribute these foreign earnings. As previously disclosed, in October2006, the CRA issued the Company a notice of reassessment containing adjustments related to certain intercompany pricing matters. In February2009, Merck and the CRA negotiated a settlement agreement in regard to these matters. In accordance with the settlement, 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. The Company 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 the Companys 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 int

Earnings Per Share

Earnings Per Share
	9 Months Ended Sep. 30, 2009 USD / shares
Earnings Per Share [Abstract]
Earnings Per Share	17. Earnings Per Share As discussed in Note 1, effective January1, 2009, the Company adopted new guidance which clarifies that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common shareholders. The provisions of this new guidance are retrospective; therefore prior periods have been restated. RSUs granted by the Company to certain management level employees (see Note 13) participate in dividends on the same basis as common shares and are nonforfeitable by the holder. As a result, these RSUs meet the definition of a participating security. The calculations of earnings per share under the two-class method are as follows: Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Basic Earnings per Common Share Attributable Merck Co., Inc. Common Shareholders: Net Income Attributable to Merck Co., Inc. $ 3,424.3 $ 1,092.7 $ 6,405.6 $ 6,163.6 Less: Income allocated to participating securities 11.7 2.8 20.3 16.1 Net income available to common shareholders $ 3,412.6 $ 1,089.9 $ 6,385.3 $ 6,147.5 Average common shares outstanding 2,109.1 2,128.5 2,108.5 2,144.4 $ 1.62 $ 0.51 $ 3.03 $ 2.87 Earnings per Common Share Assuming Dilution Attributable to Merck Co., Inc. Common Shareholders: Net Income Attributable to Merck Co., Inc. $ 3,424.3 $ 1,092.7 $ 6,405.6 $ 6,163.6 Less: Income allocated to participating securities 11.7 2.8 20.2 16.1 Net income available to common shareholders $ 3,412.6 $ 1,089.9 $ 6,385.4 $ 6,147.5 Average common shares outstanding 2,109.1 2,128.5 2,108.5 2,144.4 Common shares issuable (1) 4.6 4.2 2.1 9.4 Average common shares outstanding assuming dilution 2,113.7 2,132.7 2,110.6 2,153.8 $ 1.61 $ 0.51 $ 3.03 $ 2.85 (1)Issuable primarily under share-based compensation plans. For the three months ended September30, 2009 and 2008, 223.9million and 227.5million, respectively, and for the nine months ended September30, 2009 and 2008, 226.8million and 202.1 million, respectively, of common shares issuable under the Companys 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
	9 Months Ended Sep. 30, 2009 USD / shares
Segment Reporting [Abstract]
Segment Reporting	18. Segment Reporting The Companys operations are principally managed on a products basis and are comprised of two reportable segments: the Pharmaceutical segment and the Vaccines and Infectious Diseases segment. The Pharmaceutical segment includes human health pharmaceutical products marketed either directly by Merck or through joint ventures. These products consist of therapeutic and preventive agents, sold by prescription, for the treatment of human disorders. Merck 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. The Vaccines and Infectious Diseases segment includes human health vaccine and infectious disease products marketed either directly by Merck or, in the case of vaccines, through a joint venture. Vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. Merck 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. Infectious disease products consist of therapeutic agents for the treatment of infection sold primarily to drug wholesalers and retailers, hospitals and government agencies. The Vaccines and Infectious Diseases segment includes the majority of the Companys vaccine and infectious disease product sales, but excludes sales of these products by non-U.S. subsidiaries which are included in the Pharmaceutical segment. Other segments include other non-reportable human and animal health segments. Revenues and profits for these segments are as follows: Three Months Ended Nine Months Ended September 30, September 30, ($ in millions) 2009 2008 2009 2008 Segment revenues: Pharmaceutical segment $ 4,793.4 $ 4,804.6 $ 14,209.0 $ 14,622.1 Vaccines and Infectious Diseases segment 1,216.3 1,085.9 2,990.9 3,098.1 Other segment revenues 21.6 21.2 47.2 65.3 $ 6,031.3 $ 5,911.7 $ 17,247.1 $ 17,785.5 Segment profits:(1) Pharmaceutical segment $ 3,286.1 $ 3,165.5 $ 9,609.0 $ 9,397.5 Vaccines and Infectious Diseases segment 887.6 772.7 2,064.3 2,042.9 Other segment profits 77.3 98.6 325.4 363.9 $ 4,251.0 $ 4,036.8 $ 11,998.7 $ 11,804.3 (1)Includes the majority of Equity income from affiliates. Sales of the Companys products were as follows: Three Months Ended Nine Months Ended September 30, September 30, ($ in millions) 2009 2008 2009 2008 Pharmaceutical: Singulair $ 1,085.0