Merck Announces Full-Year and Fourth-Quarter 2012 Financial Results

February 1, 2013 7:00 am ET

2012 Full-Year Non-GAAP EPS of $3.82, Excluding Certain Items; GAAP EPS of $2.16; Fourth-Quarter Non-GAAP EPS of $0.83, Excluding Certain Items; GAAP EPS of $0.46
2012 Full-Year Worldwide Sales Were $47.3 Billion, a Decrease of 2 Percent, Including a 3 Percent Unfavorable Impact from Foreign Exchange; Fourth-Quarter Worldwide Sales Were $11.7 Billion, a Decline of 5 Percent, Including a 2 Percent Unfavorable Impact from Foreign Exchange
Full-Year and Fourth-Quarter Double-Digit Global Sales Growth for JANUVIA, JANUMET, GARDASIL, VICTRELIS and ZOSTAVAX Offset the Decline in SINGULAIR Sales Following Patent Expiry in the United States
Provides Update on Odanacatib Program; Now Anticipates Filing in 2014
2013 Full-Year Non-GAAP EPS Target of $3.60 to $3.70, Excluding Certain Items; GAAP EPS Range of $2.03 to $2.26

Merck (NYSE: MRK), known as MSD outside the United States and Canada,
today announced financial results for the fourth quarter and full year
of 2012.


$ in millions, except EPS amounts	Fourth Quarter 2012	Fourth Quarter 2011	Year Ended Dec. 31, 2012	Year Ended Dec. 31, 2011
Sales	$11,738	$12,294	$47,267	$48,047
GAAP EPS	0.46	0.49	2.16	2.02
Non-GAAP EPS that excludes items listed below¹	0.83	0.97	3.82	3.77
GAAP Net Income²	1,401	1,512	6,661	6,272
Non-GAAP Net Income that excludes items listed below ^1,2	2,540	2,978	11,743	11,697

Non-GAAP (generally accepted accounting principles) earnings per share
(EPS) for the fourth quarter of $0.83 and $3.82 for the full year of
2012 exclude acquisition-related costs and restructuring costs.

A reconciliation of GAAP to non-GAAP net income and EPS is provided in
the tables that follow.


$ in millions, except EPS amounts	Fourth Quarter		Year Ended
	2012	2011	Dec. 31, 2012	Dec. 31, 2011
EPS
GAAP EPS	$0.46	$0.49	$2.16	$2.02
Difference³	0.37	0.48	1.66	1.75
Non-GAAP EPS that excludes items listed below¹	$0.83	$0.97	$3.82	$3.77

Net Income
GAAP net income²	$1,401	$1,512	$6,661	$6,272
Difference	1,139	1,466	5,082	5,425
Non-GAAP net income that excludes items listed below^1,2	$2,540	$2,978	$11,743	$11,697

Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition-related costs⁴	$1,298	$1,479	$5,344	$5,939
Restructuring costs	254	692	999	1,911
Arbitration settlement charge	–	–	–	500
Other⁵	–	6	–	(258)
Net decrease (increase) in income before taxes	1,552	2,177	6,343	8,092
Income tax (benefit) expense⁶	(413)	(711)	(1,261)	(2,667)
Decrease (increase) in net income	$1,139	$1,466	$5,082	$5,425

“Merck overcame significant challenges last year and delivered strong
results in 2012 by successfully growing our businesses, expanding
geographically and reducing our expenses. As we begin 2013, we are
well-positioned to further execute on our business strategy,” said
Kenneth C. Frazier, chairman and chief executive officer of Merck. “We
remain committed to investing for future growth and innovation to
deliver value over the long term. Merck is rapidly advancing many
compounds that are potentially first-in-class or best-in-class.
Additionally, we will continue to pursue external opportunities that
have the potential to deliver value to the company and its shareholders.”

Select Revenue Highlights

Full-year 2012 worldwide sales were $47.3 billion, a decrease of 2
percent, which includes a 3 percent negative impact from foreign
exchange, compared to full-year 2011. Worldwide sales were $11.7 billion
for the fourth quarter of 2012, a decrease of 5 percent, which includes
a 2 percent negative impact from foreign exchange compared with the
fourth quarter of 2011. Strong sales growth of key products helped
offset the impact of the August 2012 loss of market exclusivity for
SINGULAIR (montelukast sodium) in the United States.

The following table reflects sales of the company’s top pharmaceutical
products, as well as total sales of animal health and consumer care
products.


$ in millions	Fourth Quarter 2012	Fourth Quarter 2011	Change	Year Ended Dec. 31, 2012	Year Ended Dec. 31, 2011	Change
Total Sales	$11,738	$12,294	-5%	$47,267	$48,047	-2%
Pharmaceutical	10,085	10,755	-6%	40,601	41,289	-2%
JANUVIA	1,134	960	18%	4,086	3,324	23%
SINGULAIR	480	1,461	-67%	3,853	5,479	-30%
ZETIA	676	640	6%	2,567	2,428	6%
REMICADE	549	511	8%	2,076	2,667	-22%
VYTORIN	435	475	-8%	1,747	1,882	-7%
JANUMET	452	386	17%	1,659	1,363	22%
GARDASIL	442	274	61%	1,631	1,209	35%
ISENTRESS	381	387	-2%	1,515	1,359	11%
COZAAR/HYZAAR	315	427	-26%	1,284	1,663	-23%
PROQUAD, M-M-R II and VARIVAX	306	276	11%	1,273	1,202	6%
Animal Health	898	868	3%	3,399	3,253	4%
Consumer Care	395	361	9%	1,952	1,840	6%
Other Revenues	360	310	16%	1,315	1,666	-21%

Pharmaceutical Revenue Performance

Fourth-quarter pharmaceutical sales declined 6 percent to $10.1 billion,
including a 1 percent negative impact due to foreign exchange. Strong
sales growth for JANUVIA (sitagliptin), GARDASIL [Human Papillomavirus
Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant], ZOSTAVAX
(zoster vaccine live) and JANUMET (sitagliptin/metformin hydrochloride)
partially offset the expected declines in sales of SINGULAIR, COZAAR
(losartan potassium) and HYZAAR (losartan potassium and
hydrochlorothiazide).

Full-year pharmaceutical sales declined 2 percent to $40.6 billion,
including a 3 percent negative impact due to foreign exchange.

Sales from emerging markets grew 9 percent and accounted for
approximately 20 percent of pharmaceutical sales in the fourth quarter.
Sales growth in the emerging markets is being driven by vaccines,
primary care, women’s health and diversified brands. China continues to
be a key driver with 35 percent growth for the fourth quarter, including
a 3 percent benefit from foreign exchange.

Worldwide sales of the combined diabetes franchise of JANUVIA/JANUMET,
medicines that help lower blood sugar levels in adults with type 2
diabetes, grew 18 percent to $1.6 billion in the fourth quarter of 2012
primarily driven by growth in the United States and Japan. The combined
franchise had sales of $5.7 billion for the full year of 2012, an
increase of 23 percent.

Worldwide sales of SINGULAIR, a once-a-day oral medicine for the chronic
treatment of asthma and the relief of symptoms of allergic rhinitis,
declined 67 percent to $480 million in the fourth quarter. SINGULAIR
sales declined $932 million, or 97 percent, in the United States in the
fourth quarter. Full-year 2012 worldwide sales for SINGULAIR were $3.9
billion, a 30 percent decrease compared to the prior year. The patent
for SINGULAIR expired in the United States on Aug. 3, 2012, and will
expire in major European markets later this month. The company continues
to experience a significant and rapid reduction in sales in the United
States and expects a similar decline in Europe following patent expiry
there. SINGULAIR will retain marketing exclusivity in Japan until 2016.

Sales of ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin),
medicines for lowering LDL cholesterol, were $1.1 billion in the fourth
quarter, comparable to the prior year, driven by global growth of ZETIA
that was offset by lower sales of VYTORIN. The combined ZETIA/VYTORIN
franchise had sales of $4.3 billion for the full year of 2012,
comparable to the prior year.

Combined sales of REMICADE (infliximab) and SIMPONI (golimumab),
treatments for inflammatory diseases, increased 13 percent to $645
million for the fourth quarter of 2012. The combined sales grew 18
percent excluding foreign exchange. Global combined sales for the full
year decreased 18 percent over the prior year. In Europe, Russia and
Turkey, where Merck retained exclusive marketing rights, the combined
sales of REMICADE and SIMPONI increased 2 percent for the full year of
2012 or 10 percent excluding foreign exchange. In July 2011, the company
transferred exclusive marketing rights for REMICADE and SIMPONI to
Johnson & Johnson in Canada, Central and South America, the Middle East,
Africa and Asia Pacific.

Sales recorded by Merck for GARDASIL, a vaccine to help prevent certain
diseases caused by four types of human papillomavirus (HPV), increased
61 percent to $442 million for the fourth quarter driven by higher sales
in the United States, reflecting continued strong uptake in males and
higher public sector purchases, as well as favorable performance in
Japan and the emerging markets. Worldwide sales of GARDASIL recorded by
Merck for the year were $1.6 billion, a 35 percent increase compared to
the prior year.

ISENTRESS (raltegravir), an HIV integrase inhibitor for use in
combination with other antiretroviral agents for the treatment of HIV-1
infection, decreased 2 percent to $381 million in the fourth quarter.
ISENTRESS sales in the United States grew 11 percent in the fourth
quarter. Global sales of ISENTRESS for the full year of 2012 were $1.5
billion, an 11 percent increase compared to 2011.

Global sales of Merck’s antihypertensive medicines COZAAR and HYZAAR
declined 26 percent to $315 million in the fourth quarter and 23 percent
to $1.3 billion for the full year of 2012 due to the loss of market
exclusivity in major markets in prior years.

Sales of ZOSTAVAX, a vaccine for the prevention of herpes zoster, grew
to $225 million in the fourth quarter compared to $78 million in the
prior year, driven by a positive response to supply availability and
increased promotional efforts in the United States. Global sales for the
full year of 2012 were $651 million.

Sales of VICTRELIS (boceprevir), the company’s oral hepatitis C virus
protease inhibitor, grew to $115 million in the quarter versus $87
million last year as the product continues to launch. Global sales for
the full year of 2012 were $502 million. VICTRELIS is approved in 69
countries and has launched in 34 of those markets.

Animal Health Revenue Performance

Merck Animal Health sales totaled $898 million for the fourth quarter of
2012, a 3 percent increase compared with the same period last year,
including a 3 percent negative impact due to foreign exchange. Growth
was seen across major species, particularly cattle and poultry.

Animal Health global sales for the full year of 2012 were $3.4 billion,
a 4 percent increase compared with the prior year, including a 5 percent
negative impact due to foreign exchange.

Consumer Care Revenue Performance

Fourth-quarter global sales of Consumer Care were $395 million, an
increase of 9 percent compared to the fourth quarter of 2011. This
increase was primarily driven by CLARITIN, COPPERTONE and the DR.
SCHOLL’S footcare line. Full-year 2012 global sales were $2.0 billion, a
6 percent increase compared to full-year 2011, including a 1 percent
negative impact due to foreign exchange.

Last week, the U.S. Food and Drug Administration (FDA) approved OXYTROL
FOR WOMEN (oxybutynin transdermal system), the first and only
over-the-counter treatment for overactive bladder in women. Merck
anticipates that OXYTROL FOR WOMEN will be available to customers in
fall 2013.

Other Revenue Performance

Other revenues – primarily comprised of alliance revenue, miscellaneous
corporate revenues and third-party manufacturing sales – increased 16
percent to $360 million in the fourth quarter and decreased 21 percent
to $1.3 billion for the full year of 2012. The full-year decline was
driven largely by lower revenue from AstraZeneca LP (AZLP) recorded by
Merck, which declined 23 percent to $915 million, as well as by lower
third-party manufacturing sales.

Fourth-Quarter and Full-Year Expense and Other Information

The costs detailed below totaled $10.0 billion on a GAAP basis during
the fourth quarter of 2012 and include $1.6 billion of
acquisition-related costs and restructuring costs.


$ in millions	Included in expenses for the period
Fourth Quarter 2012	GAAP	Acquisition- Related Costs⁴	Restructuring Costs	Certain Other Items	Non-GAAP¹
Materials and production	$4,160	$1,185	$40	–	$2,935
Marketing and administrative	3,390	89	20	–	3,281
Research and development	2,224	24	3	–	2,197
Restructuring costs	191	–	191	–	–

Fourth Quarter 2011
Materials and production	$4,176	$1,212	$68	$7	$2,889
Marketing and administrative	3,704	86	42	–	3,576
Research and development	2,419	244	49	–	2,126
Restructuring costs	533	–	533	–	–

The costs detailed below totaled $38.1 billion on a GAAP basis for
full-year 2012 and include $6.3 billion of acquisition-related costs and
restructuring costs.


$ in millions	Included in expenses for the period
Year Ended Dec. 31, 2012	GAAP	Acquisition- Related Costs⁴	Restructuring Costs	Certain Other Items	Non-GAAP¹
Materials and production	$16,446	$4,872	$188	–	$11,386
Marketing and administrative	12,776	272	90	–	12,414
Research and development	8,168	200	57	–	7,911
Restructuring costs	664	–	664	–	–

Year Ended Dec. 31, 2011
Materials and production	$16,871	$5,137	$348	$7	$11,379
Marketing and administrative	13,733	278	119	–	13,336
Research and development	8,467	587	138	–	7,742
Restructuring costs	1,306	–	1,306	–	–

The gross margin was 64.6 percent for the fourth quarter of 2012 and
66.0 percent for the fourth quarter of 2011, reflecting 10.4 and 10.5
percentage point unfavorable impacts, respectively, from the
acquisition-related costs and restructuring costs noted above. The
non-GAAP gross margin decline primarily reflects the impact of the
SINGULAIR patent expiry in the United States.

Marketing and administrative expenses, on a non-GAAP basis, were $3.3
billion in the fourth quarter of 2012, a decrease from $3.6 billion in
the fourth quarter of 2011. The decrease was primarily due to
productivity measures and the beneficial impact of foreign exchange.

Research and development (R&D) expenses, on a non-GAAP basis, were $2.2
billion in the fourth quarter of 2012, an increase from $2.1 billion in
the fourth quarter of 2011. The increase reflects an upfront payment
related to a worldwide licensing agreement for AiCuris’ novel portfolio
of investigational medicines targeting human cytomegalovirus.

Equity income from affiliates was $231 million for the fourth quarter
and $642 million for the full year, which primarily includes
partnerships with AZLP and Sanofi Pasteur MSD.

The GAAP effective tax rate of 21.1 percent for the fourth quarter of
2012 reflects the impact of acquisition-related costs and restructuring
costs. The non-GAAP effective tax rate, which excludes these items, was
23.6 percent for the quarter. Both the GAAP and non-GAAP effective tax
rates reflect a favorable ruling on a state tax matter in the fourth
quarter.

Additionally, the company has achieved the previously announced $3.5
billion in synergy targets related to the merger with Schering-Plough
Corporation.

Recent Key Developments

Merck recently received and is reviewing safety and efficacy data from
the pivotal Phase III trial of odanacatib, the company’s
investigational medicine for osteoporosis. As previously indicated,
the company has been conducting a blinded extension of the trial in
approximately 8,200 women, which will provide additional safety and
efficacy data. Merck now anticipates that it will file applications
for approval of odanacatib in 2014 with additional data from the
extension trial, rather than filing in the first half of 2013. The
company continues to believe that odanacatib will have the potential
to address unmet medical needs in patients with osteoporosis;
The New Drug Application (NDA) for suvorexant, the company’s
investigational insomnia medicine, was accepted for review by the FDA,
during which the medicine also will be evaluated by the FDA’s
Controlled Substance Staff. If approved by the FDA, suvorexant will
become available after a schedule assessment and determination has
been completed by the U.S. Drug Enforcement Administration. Also, the
company submitted an NDA for suvorexant to the health authorities in
Japan;
The marketing authorization application for vintafolide, an
investigational treatment for folate-receptor positive
platinum-resistant ovarian cancer in combination with pegylated
liposomal doxorubicin, was accepted for review by the European
Medicines Agency;
The NDA resubmissions for sugammadex, a neuromuscular blockade
reversal agent, and ezetimibe/atorvastatin tablets, an investigational
combination medicine for hyperlipidemia, separately were accepted for
review by the FDA. Merck expects the FDA’s review of both candidates
to be completed in the first half of 2013; and
In January, the company submitted a Biologics License Application to
the FDA for MK-7243, an investigational allergy immunotherapy tablet
for grass pollen.

Merck is on track to file five products for regulatory approval in 2013.
The company also recently started several key clinical trials including:
Phase III trials of MK-3102, an investigational once-weekly DPP-4
inhibitor in development for treatment of type 2 diabetes; a Phase III
study of MK-3222, an investigational biologic therapy for treatment of
psoriasis; a Phase II/III trial of MK-8931, an investigational β-amyloid
precursor protein site-cleaving enzyme (BACE) inhibitor, to evaluate
safety and efficacy in patients with mild-to-moderate Alzheimer’s
disease; and a Phase II study of MK-3475, an investigational therapy for
the treatment of patients with advanced melanoma.

Financial Targets

Merck expects full-year 2013 non-GAAP EPS to be between $3.60 and $3.70,
and the 2013 GAAP EPS range to be $2.03 to $2.26. The 2013 non-GAAP
range excludes acquisition-related costs and costs related to
restructuring programs.

Merck expects full-year 2013 revenues to be near 2012 levels on a
constant currency basis. At current exchange rates, sales would be
affected unfavorably by approximately 1 to 2 percent for the full year.

In addition, the company expects full-year 2013 non-GAAP R&D expense to
be about the same level as in 2012. The company expects its full-year
2013 non-GAAP tax rate to be in the range of 21 to 23 percent, including
the impact of the recently re-enacted tax law related to the R&D tax
credits.

A reconciliation of anticipated 2013 EPS as reported in accordance with
GAAP to non-GAAP EPS that excludes certain items is provided in the
table below.


$ in millions, except EPS amounts		Full Year 2013
GAAP EPS		$2.03 to $2.26
Difference³		1.57 to 1.44
Non-GAAP EPS that excludes items listed below		$3.60 to $3.70


Acquisition-related costs⁴		$5,125 to $4,800
Restructuring costs		700 to 500
Net decrease (increase) in income before taxes		5,825 to 5,300
Estimated income tax (benefit) expense		(1,020) to (910)
Decrease (increase) in net income		$4,805 to $4,390

Total Employees

As of Dec. 31, 2012, Merck had approximately 83,000 employees worldwide.

Earnings Conference Call

Investors are invited to a live audio webcast of Merck’s fourth-quarter
earnings conference call today at 8:00 a.m. EST by visiting Merck’s
website, www.merck.com/investors/events-and-presentations/home.html.
Institutional investors and analysts can participate in the call by
dialing (706) 758-9927 or (877) 381-5782. Journalists are invited to
monitor the call by dialing (706) 758-9928 or (800) 399-7917. A replay
of the call will be available for approximately one week starting at
11:00 a.m. EST today. To listen to the replay, dial (404) 537-3406 or
(855) 859-2056 and enter ID No. 81283478.

About Merck

Today’s Merck is a global healthcare leader working to help the world be
well. Merck is known as MSD outside the United States and Canada.
Through our prescription medicines, vaccines, biologic therapies, and
consumer care and animal health products, we work with customers and
operate in more than 140 countries to deliver innovative health
solutions. We also demonstrate our commitment to increasing access to
healthcare through far-reaching policies, programs and partnerships. For
more information, visit www.merck.com
and connect with us on Twitter, Facebook and YouTube.

Forward-Looking Statement

This news release includes “forward-looking statements” within the
meaning of the safe harbor provisions of the United States Private
Securities Litigation Reform Act of 1995. These statements are based
upon the current beliefs and expectations of Merck’s management and are
subject to significant risks and uncertainties. If underlying
assumptions prove inaccurate or risks or uncertainties materialize,
actual results may differ materially from those set forth in the
forward-looking statements.

Risks and uncertainties include but are not limited to, general industry
conditions and competition; general economic factors, including interest
rate and currency exchange rate fluctuations; the impact of
pharmaceutical industry regulation and health care legislation in the
United States and internationally; global trends toward health care cost
containment; technological advances, new products and patents attained
by competitors; challenges inherent in new product development,
including obtaining regulatory approval; Merck’s ability to accurately
predict future market conditions; manufacturing difficulties or delays;
financial instability of international economies and sovereign risk;
dependence on the effectiveness of Merck’s patents and other protections
for innovative products; and the exposure to litigation, including
patent litigation, and/or regulatory actions.

Merck undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or
otherwise. Additional factors that could cause results to differ
materially from those described in the forward-looking statements can be
found in Merck’s 2011 Annual Report on Form 10-K and the company’s other
filings with the Securities and Exchange Commission (SEC) available at
the SEC’s Internet site (www.sec.gov).

¹Merck is providing certain 2012 and 2011 non-GAAP
information that excludes certain items because of the nature of these
items and the impact they have on the analysis of underlying business
performance and trends. Management believes that providing this
information enhances investors’ understanding of the company’s
performance. This information should be considered in addition to, but
not in lieu of, information prepared in accordance with GAAP. For a
description of the items, see Tables 2a and 2b, including the related
footnotes, attached to this release.

²Net income attributable to Merck & Co., Inc.

³Represents the difference between calculated GAAP EPS and
calculated non-GAAP EPS, which may be different than the amount
calculated by dividing the impact of the excluded items by the
weighted-average shares for the period.

⁴ Includes expenses for the amortization of intangible assets
and amortization of purchase accounting adjustments to inventories
recognized as a result of mergers and acquisitions, as well as
intangible asset impairment charges. Also includes integration and other
costs associated with mergers and acquisitions.

⁵Amount for full-year 2011 includes a gain on the
divestiture of the company’s interest in the Johnson & Johnson°Merck
Consumer Pharmaceuticals Company joint venture and a gain on the sale of
certain manufacturing facilities and related assets.

⁶ Includes an estimated income tax (benefit) expense on the
reconciling items. In addition, the full year amount for 2011 includes
the net favorable impact of approximately $700 million relating to the
settlement of a federal income tax audit, as well as $270 million of net
tax benefits from changes in tax rates that resulted in a reduction of
deferred tax liabilities on intangibles established in purchase
accounting.



MERCK & CO., INC. CONSOLIDATED STATEMENT OF OPERATIONS – GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 1


	GAAP						% Change	GAAP						% Change
	4Q12			4Q11			% Change	Full Year 2012			Full Year 2011			% Change

Sales	$	11,738		$	12,294		-5%	$	47,267		$	48,047		-2%

Costs, Expenses and Other
Materials and production ⁽¹⁾		4,160			4,176		–		16,446			16,871		-3%
Marketing and administrative ⁽¹⁾		3,390			3,704		-8%		12,776			13,733		-7%
Research and development ⁽¹⁾		2,224			2,419		-8%		8,168			8,467		-4%
Restructuring costs ⁽²⁾		191			533		-64%		664			1,306		-49%
Equity income from affiliates ⁽³⁾		(231	)		(257	)	-10%		(642	)		(610	)	5%
Other (income) expense, net ⁽¹⁾⁽⁴⁾		176			139		27%		623			946		-34%

Income Before Taxes		1,828			1,580		16%		9,232			7,334		26%
Income Tax Provision		385			37				2,440			942
Net Income		1,443			1,543		-6%		6,792			6,392		6%
Less: Net Income Attributable to Noncontrolling Interests		42			31				131			120
Net Income Attributable to Merck & Co., Inc.	$	1,401		$	1,512		-7%	$	6,661		$	6,272		6%
Earnings per Common Share Assuming Dilution ⁽⁵⁾	$	0.46		$	0.49		-6%	$	2.16		$	2.02		7%


Average Shares Outstanding Assuming Dilution		3,074			3,069				3,076			3,094
Tax Rate ⁽⁶⁾		21.1	%		2.3	%			26.4	%		12.8	%

(1) Amounts include the impact of acquisition-related costs,
restructuring costs and certain other items. See accompanying tables
for details.

(2) Represents separation and other related costs associated with
restructuring activities under the company’s formal restructuring
programs.

(3) Primarily reflects equity income from the AstraZeneca LP and
Sanofi Pasteur MSD partnerships.

(4) Other (income) expense, net in the full year of 2011 includes a
charge of $500 million related to the resolution of the arbitration
proceeding with Johnson & Johnson, a $136 million gain on the
divestiture of the company’s interest in the Johnson & JohnsonºMerck
Consumer Pharmaceuticals Company joint venture and a $127 million
gain on the sale of certain manufacturing facilities and related
assets.

(5) The company calculates earnings per share pursuant to the
two-class method which requires the allocation of net income between
common shareholders and participating security holders. Net income
attributable to Merck & Co., Inc. common shareholders used to
calculate earnings per common share assuming dilution was $1,401
million and $1,510 million for the fourth quarter of 2012 and 2011,
respectively, and was $6,658 million and $6,257 million for the full
year of 2012 and 2011, respectively.

(6) The GAAP effective tax rates for the fourth quarter and full
year of 2012 were 21.1% and 26.4%, respectively. Excluding the
impact of the non-GAAP reconciling items detailed in the
accompanying tables, the effective tax rates were 23.6% and 23.8%
for the fourth quarter and full year of 2012, respectively. Both the
GAAP and non-GAAP effective tax rates for the fourth quarter and
full year of 2012 reflect a favorable ruling on a state tax matter.
In addition, both the GAAP and non-GAAP effective tax rates for the
full year of 2012 reflect the favorable impacts of a settlement with
a foreign tax authority and the realization of foreign tax credits.
The GAAP effective tax rates for the fourth quarter and full year of
2011 were 2.3% and 12.8%, respectively. Excluding the impact of the
non-GAAP reconciling items detailed in the accompanying tables, the
effective tax rates were 19.9% and 23.4% for the fourth quarter and
full year of 2011, respectively.



MERCK & CO., INC. CONSOLIDATED STATEMENT OF OPERATIONS GAAP TO NON-GAAP RECONCILIATION FOURTH QUARTER 2012 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2a

	GAAP			Acquisition- Related Costs ⁽¹⁾		Restructuring Costs⁽²⁾		Adjustment Subtotal				Non-GAAP

Sales	$	11,738						$	–			$	11,738

Costs, Expenses and Other
Materials and production		4,160		1,185		40			1,225				2,935

Marketing and administrative		3,390		89		20			109				3,281

Research and development		2,224		24		3			27				2,197

Restructuring costs		191				191			191				–

Equity income from affiliates		(231	)						–				(231	)

Other (income) expense, net		176							–				176

Income Before Taxes		1,828		(1,298	)	(254	)		(1,552	)			3,380

Taxes on Income		385							(413	)	⁽³⁾		798

Net Income		1,443							(1,139	)			2,582

Less: Net Income Attributable to Noncontrolling Interests		42							–				42

Net Income Attributable to Merck & Co., Inc.	$	1,401						$	(1,139	)		$	2,540

Earnings per Common Share Assuming Dilution	$	0.46										$	0.83		⁽⁴⁾

Average Shares Outstanding Assuming Dilution		3,074											3,074
Tax Rate		21.1	%										23.6	%

Merck is providing non-GAAP information that excludes certain items
because of the nature of these items and the impact they have on the
analysis of underlying business performance and trends. Management
believes that providing this information enhances investors’
understanding of the company’s performance. This information should
be considered in addition to, but not in lieu of, information
prepared in accordance with GAAP.

(1) Amounts included in materials and production costs reflect
expenses for the amortization of intangible assets recognized as a
result of mergers and acquisitions. Amounts included in marketing
and administrative expenses reflect merger integration costs.
Amounts included in research and development expenses represent
in-process research and development (“IPR&D”) impairment charges.

(2) Amounts primarily include employee separation costs and
accelerated depreciation associated with facilities to be closed or
divested related to actions under the company’s formal restructuring
programs.

(3) Represents the estimated tax impact on the reconciling items.

(4) The company calculates earnings per share pursuant to the
two-class method which requires the allocation of net income between
common shareholders and participating security holders. Net income
attributable to Merck & Co., Inc. common shareholders used to
calculate non-GAAP earnings per common share assuming dilution was
$2,540 million for the fourth quarter of 2012.




MERCK & CO., INC. CONSOLIDATED STATEMENT OF OPERATIONS GAAP TO NON-GAAP RECONCILIATION FULL YEAR 2012 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2b

	GAAP			Acquisition- Related Costs ⁽¹⁾		Restructuring Costs ⁽²⁾		Adjustment Subtotal				Non-GAAP

Sales	$	47,267						$	–			$	47,267

Costs, Expenses and Other
Materials and production		16,446		4,872		188			5,060				11,386

Marketing and administrative		12,776		272		90			362				12,414

Research and development		8,168		200		57			257				7,911

Restructuring costs		664				664			664				–

Equity income from affiliates		(642	)						–				(642	)

Other (income) expense, net		623							–				623

Income Before Taxes		9,232		(5,344	)	(999	)		(6,343	)			15,575

Taxes on Income		2,440							(1,261	)	⁽³⁾		3,701

Net Income		6,792							(5,082	)			11,874

Less: Net Income Attributable to Noncontrolling Interests		131							–				131

Net Income Attributable to Merck & Co., Inc.	$	6,661						$	(5,082	)		$	11,743

Earnings per Common Share Assuming Dilution	$	2.16										$	3.82		⁽⁴⁾

Average Shares Outstanding Assuming Dilution		3,076											3,076
Tax Rate		26.4	%										23.8	%

(3) Represents the estimated tax impact on the reconciling items.




MERCK & CO., INC. FRANCHISE / KEY PRODUCT SALES (AMOUNTS IN MILLIONS) (UNAUDITED) Table 3

	2012					2011					% Change	% Change
	1Q	2Q	3Q	4Q	Full Year	1Q	2Q	3Q	4Q	Full Year	4Q	Full Year

TOTAL SALES ⁽¹⁾	$11,731	$12,311	$11,488	$11,738	$47,267	$11,580	$12,151	$12,022	$12,294	$48,047	-5	-2
PHARMACEUTICAL	10,082	10,560	9,875	10,085	40,601	9,820	10,360	10,354	10,755	41,289	-6	-2

Primary Care and Women’s Health
Cardiovascular
Zetia	614	632	645	676	2,567	582	592	614	640	2,428	6	6
Vytorin	444	445	423	435	1,747	480	459	469	475	1,882	-8	-7

Diabetes & Obesity
Januvia	919	1,058	975	1,134	4,086	739	779	846	960	3,324	18	23
Janumet	392	411	405	452	1,659	305	321	350	386	1,363	17	22

Respiratory
Singulair	1,340	1,431	602	480	3,853	1,328	1,354	1,336	1,461	5,479	-67	-30
Nasonex	375	293	292	308	1,268	373	323	266	325	1,286	-5	-1
Clarinex	134	140	64	56	393	155	209	128	129	621	-57	-37
Dulera	39	50	52	67	207	13	25	22	37	96	83	*
Asmanex	48	51	42	44	185	60	47	42	57	206	-23	-10

Women’s Health & Endocrine
Fosamax	184	186	152	154	676	208	221	215	211	855	-27	-21
NuvaRing	146	157	156	164	623	142	154	159	168	623	-2	—
Follistim AQ	116	125	111	116	468	133	143	129	126	530	-8	-12
Implanon	76	85	93	94	348	60	81	80	74	294	27	18
Cerazette	67	72	64	68	271	59	66	74	69	268	-1	1

Other
Maxalt	156	154	166	162	638	173	131	156	178	639	-9	—
Arcoxia	112	117	109	115	453	114	100	108	110	431	5	5
Avelox	73	44	30	55	201	106	61	59	95	322	-42	-37

Hospital and Specialty

Immunology
Remicade	519	518	490	549	2,076	753	842	561	511	2,667	8	-22
Simponi	74	76	86	95	331	54	75	74	61	264	56	25

Infectious Disease
Isentress	337	398	399	381	1,515	292	337	343	387	1,359	-2	11
PegIntron	162	183	165	143	653	166	154	163	175	657	-18	-1
Cancidas	145	166	163	145	619	158	168	150	164	640	-11	-3
Victrelis	111	126	149	115	502	1	21	31	87	140	32	*
Invanz	101	110	118	116	445	87	103	107	110	406	6	10
Primaxin	88	104	109	83	384	136	136	124	119	515	-30	-25
Noxafil	59	66	66	68	258	55	56	61	59	230	15	13

Oncology
Temodar	237	225	227	229	917	248	234	223	230	935	-1	-2
Emend	102	145	111	131	489	87	120	98	114	419	16	17

Other
Cosopt / Trusopt	124	105	102	113	444	114	122	124	117	477	-3	-7
Bridion	58	60	68	75	261	41	47	52	60	201	26	30
Integrilin	53	60	48	51	211	64	56	53	57	230	-11	-8

Diversified Brands
Cozaar / Hyzaar	336	337	295	315	1,284	426	406	404	427	1,663	-26	-23
Propecia	108	100	104	112	424	106	112	112	117	447	-4	-5
Zocor	103	96	86	98	383	127	107	110	111	456	-12	-16
Claritin Rx	87	48	47	63	244	120	65	55	74	314	-15	-22
Remeron	57	66	52	57	232	60	57	65	59	241	-4	-4
Proscar	51	55	55	56	217	60	53	58	52	223	7	-3
Vasotec / Vaseretic	53	49	42	48	192	57	59	57	58	231	-17	-17

Vaccines
Gardasil	284	324	581	442	1,631	214	277	445	274	1,209	61	35
ProQuad, M-M-R II and Varivax	255	316	396	306	1,273	244	291	391	276	1,202	11	6
Zostavax	76	148	202	225	651	24	122	108	78	332	*	96
RotaTeq	142	142	150	168	601	125	148	184	195	651	-14	-8
Pneumovax	112	101	160	208	580	79	64	133	222	498	-7	17

Other Pharmaceutical ⁽²⁾	1,013	985	1,023	1,113	4,141	892	1,064	1,015	1,064	4,035	5	3


ANIMAL HEALTH	821	865	815	898	3,399	758	802	826	868	3,253	3	4

CONSUMER CARE	554	552	451	395	1,952	517	541	421	361	1,840	9	6
Claritin OTC	169	145	118	100	532	167	134	118	92	511	9	4

Other Revenues ⁽³⁾	274	333	347	360	1,315	486	448	421	310	1,666	16	-21
Astra	186	223	255	251	915	322	306	299	256	1,184	-2	-23

* 100% or greater

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
⁽¹⁾ Only select products are shown.
⁽²⁾ Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $60 million, $75 million, $116 million, and $69 million for the first, second, third, and fourth quarters of 2012, respectively. Other Vaccines sales included in Other Pharmaceutical were $54 million, $67 million, $100 million and $62 million for the first, second, third and fourth quarters of 2011, respectively.
(3) Other revenues are primarily comprised of alliance revenue, miscellaneous corporate revenues and third party manufacturing sales.

Merck
Media Contacts:
Ron Rogers, 908-423-6449
Steve Cragle, 908-423-3461
or
Investor Contacts:
Carol Ferguson, 908-423-4465
Justin Holko, 908-423-5088

Merck Announces Full-Year and Fourth-Quarter 2012 Financial Results

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Forward-looking statement of Merck & Co., Inc., Rahway, N.J., USA

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