. First Results for Combined Company Reflect Strong Sales Growth of Key Products
. Fourth-Quarter 2009 Non-GAAP EPS of $0.79, Excluding Certain Items; Fourth-Quarter GAAP EPS of $2.35
. Full-Year 2009 Non-GAAP EPS of $3.25, Excluding Certain Items; Full-Year 2009 GAAP EPS of $5.65
. Significant Progress Made Integrating Operations; Reiterates Commitment to Achieving $3.5 Billion of Annual Savings in 2012
. Target Reaffirmed for High Single-Digit Non-GAAP EPS Compound Annual Growth Rate from 2009 to 2013
WHITEHOUSE STATION, N.J., Feb. 16, 2010 - Merck & Co., Inc. today announced financial results for the fourth quarter and the full year of 2009 which include the results of legacy Schering-Plough operations from the close of the merger on Nov. 3, 2009 through Dec. 31, 2009. The company reported non-GAAP (generally accepted accounting principles) earnings per share (EPS) for the fourth quarter of $0.79, which excludes certain impacts of the merger, including a $7.5 billion pretax gain associated with obtaining the controlling interest in the Merck/Schering-Plough partnership, purchase accounting adjustments, merger-related expenses as well as all restructuring costs. Fourth-quarter GAAP EPS was $2.35. Merck also announced full-year 2009 non-GAAP EPS of $3.25, excluding certain items, and full-year GAAP EPS of $5.65.

Worldwide sales for the fourth quarter of 2009 were $10.1 billion. Net income available to common shareholders for the fourth quarter was $6,494 million. For the full year of 2009, worldwide sales were $27.4 billion and net income available to common shareholders was $12,899 million. Foreign exchange for the quarter favorably affected global sales performance by 1 percent, while the full year of 2009 was negatively affected by 2 percent.

"The new Merck is off to an excellent start," said Richard T. Clark, chairman, president and chief executive officer. "Our performance last quarter was characterized by strong growth in key brands and continued investment in our newest products and promising late-stage pipeline.

"We're building momentum in our business while making great progress on integration," Mr. Clark added. "Each of our top 10 selling brands from an expanded product portfolio exceeded $1 billion in annual sales. At the same time, we have a number of product launches underway in major global markets with more to come this year.

"We stand firmly behind the financial targets we provided at the time of our initial merger announcement," said Mr. Clark. "The real value drivers of our merger will be science and innovation because Merck's long-term strength will come from our ability to develop critical medicines and vaccines. But what will set this merger apart is not just the 'what' but the 'how' — the clarity of our vision, our ability to hit the ground running, and the thoughtfulness with which we are managing the integration of our businesses, our operations and our people."

Select Business Highlights

Launches underway for SIMPONI, SAPHRIS, SAFLUTAN, TREDAPTIVE and BRIDION in major markets around the world; BRIDION recently approved for use in Japan and ELONVA now approved in the European Union (EU); four products with filings under review in the EU and/or the United States; nearly 20 promising research programs in late-stage development.


Strong business development activity continues with acquisition of Avecia Biologics, expanding Merck's existing biologics expertise and manufacturing capacity, and 50 other licensing and alliance agreements signed during 2009 that complement the company's substantial internal research capabilities.


Well-respected leaders expand the capabilities and strength of the new Merck's senior leadership team including Dr. Julie Gerberding, leader of the vaccine business, who previously served as Centers for Disease Control (CDC) director; Michael Kamarck to lead vaccine and biologics manufacturing as well as Merck BioVentures from Wyeth; Dr. Michael Rosenblatt, chief medical officer, who was previously Dean of Tufts School of Medicine; and Bridgette P. Heller, leader of the Consumer Health Care business, who was formerly with Johnson & Johnson.

Fourth-Quarter and Full-Year 2009 Financial Results
The company's financial performance for the fourth quarter and the full year of 2009 discussed below reflects legacy Schering-Plough results as of the merger date through Dec. 31, 2009 plus legacy Merck's results for the quarter and the full year. The increases noted are largely due to the addition of legacy Schering-Plough.

Materials and production costs were $4.9 billion for the quarter and $9.0 billion for the full year of 2009. In 2008, these costs were $1.5 billion for the quarter and $5.6 billion for the full year. The fourth quarter and full year of 2009 include $2.3 billion of additional costs related to purchase accounting adjustments. Additionally, the fourth quarter of 2009 and 2008 include costs associated with restructuring programs of $19 million and $33 million, respectively. For the full-year of 2009 and 2008, materials and production include $115 million and $123 million, respectively, of costs associated with the restructuring programs. The gross margin was 51.4 percent for the fourth quarter of 2009 and 67.1 percent for the full year of 2009, reflecting 22.9 and 8.8 percentage point unfavorable impacts, respectively, from the purchase accounting adjustments and restructuring costs noted above. In 2008, gross margin was 75.6 percent for the fourth quarter and 76.6 percent for the full year, reflecting 0.6 and 0.5 percentage point unfavorable impacts, respectively, due to restructuring costs.

Marketing and administrative expenses were $3.5 billion for the fourth quarter of 2009 and $8.5 billion for the full year. Costs for the fourth quarter and full year of 2009 include $265 million and $371 million, respectively, of merger-related costs. Marketing and administrative costs were $1.9 billion for the fourth quarter of 2008 and $7.4 billion for the full year.

Research and development expenses were $2.0 billion for the quarter and $5.8 billion for the year. The full year of 2009 includes $232 million of costs associated with the company's 2008 global restructuring program. Research and development costs for 2008 were $1.4 billion for the quarter and $4.8 billion for the year which included $97 million and $128 million, respectively, of costs for restructuring activities.

Restructuring costs, primarily related to employee separations, were $1.5 billion for the fourth quarter of 2009, compared with $103 million for the fourth quarter of 2008. The increase for the fourth quarter of 2009 is largely associated with the merger restructuring program discussed below. Costs for the year were $1.6 billion, an increase of 58 percent from the full year of 2008.

Total overall costs associated with the company's global restructuring programs included in materials and production, research and development, and restructuring costs were $1.5 billion and $2.0 billion for the fourth quarter and the full year of 2009, respectively, primarily comprised of employee separations and accelerated depreciation.

Equity income from affiliates was $374 million in the fourth quarter of 2009, a decrease of 48 percent from the fourth quarter of 2008 primarily as a result of a lower contribution from the Merck/Schering-Plough partnership, which became wholly-owned by Merck as a result of the merger and is no longer reflected in equity income from affiliates as of the date of the merger. Fourth quarter was also affected by lower contributions from AstraZeneca LP and from Merial due to the sale of Merck's interest in this joint venture to sanofi-aventis in the third quarter of 2009. Revenue from AstraZeneca LP recorded by Merck was $332 million in the fourth quarter. For the full year of 2009, equity income from affiliates was $2.2 billion, a 13 percent decline from the full year of 2008.

Other (income) expense, net, for the fourth quarter of 2009 was $7.8 billion of income primarily reflecting a $7.5 billion gain associated with obtaining the controlling interest in the Merck/Schering-Plough partnership. The fourth quarter also reflects $400 million of additional gain on the divestiture of Merck's interest in Merial which had been deferred. The full-year of 2009 included the $7.5 billion gain associated with obtaining the controlling interest in the Merck/Schering-Plough partnership, a $3.2 billion gain from the sale of Merck's interest in Merial, $231 million of recognized net gains in the company's investment portfolio as well as $173 million of merger-related costs. Other (income) expense, net, for the full year of 2008 was $2.3 billion of income which included a $2.2 billion gain on a distribution from AstraZeneca LP.

Merger Restructuring Program
Merck said it is committed to achieving its previously announced synergy target of $3.5 billion in ongoing annual savings in 2012. Today, the company announced the first phase of a new global Merger Restructuring Program designed to integrate and optimize the organization and its cost structure. Merck expects this first phase of its restructuring program to yield annual savings in 2012 of approximately $2.6 billion to $3.0 billion — a significant portion of the overall synergy target. The company also expects additional savings towards the synergy target to be generated in subsequent phases of its Merger Restructuring Program that will be announced later this year. Also, other savings through non-restructuring related activities, such as procurement savings initiatives will contribute to the $3.5 billion synergy target.

As of Dec. 31, 2009, Merck had approximately 100,000 employees. As part of the first phase of its Merger Restructuring Program, by the end of 2012, Merck expects to reduce its total workforce by approximately 15 percent across all areas of the combined company worldwide. The company also plans to eliminate approximately 2,500 vacant positions as part of the first phase of the program. The 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.

Merck said that 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 this year in other phases of the Merger Restructuring Program. Merck also said it will continue to hire new employees in strategic growth areas of the business throughout this period.

The first phase of the Merger Restructuring Program is expected to be completed by the end of 2012 with total pretax costs estimated at $2.6 billion to $3.3 billion. Costs of $1.5 billion related to these actions, which are primarily employee separation costs, were recorded in the fourth quarter of 2009. The company estimates that approximately 85 percent of the cumulative pretax costs will result in future cash outlays, primarily related to employee separation expense. Approximately 15 percent relate to the accelerated depreciation of facilities that will be closed or divested and are non-cash.

The company noted that the Merger Restructuring Program savings are in addition to the previously announced ongoing cost reduction initiatives at both Merck and Schering-Plough, which were announced in 2008.

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