|
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
For the quarterly period ended
June 30, 2013
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
For the transition period from ______ to ______
|
Incorporated in New Jersey
|
|
I.R.S. Employer
|
|
|
Identification No. 22-1918501
|
Large accelerated filer
x
|
|
Accelerated filer
¨
|
|
Non-accelerated filer
¨
|
|
Smaller reporting company
¨
|
|
|
(Do not check if a smaller reporting company)
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Sales
|
$
|
11,010
|
|
|
$
|
12,311
|
|
|
$
|
21,681
|
|
|
$
|
24,041
|
|
Costs, Expenses and Other
|
|
|
|
|
|
|
|
||||||||
Materials and production
|
4,284
|
|
|
4,112
|
|
|
8,243
|
|
|
8,150
|
|
||||
Marketing and administrative
|
3,140
|
|
|
3,249
|
|
|
6,126
|
|
|
6,322
|
|
||||
Research and development
|
2,101
|
|
|
2,165
|
|
|
4,008
|
|
|
4,026
|
|
||||
Restructuring costs
|
155
|
|
|
144
|
|
|
274
|
|
|
363
|
|
||||
Equity income from affiliates
|
(116
|
)
|
|
(142
|
)
|
|
(249
|
)
|
|
(253
|
)
|
||||
Other (income) expense, net
|
201
|
|
|
103
|
|
|
484
|
|
|
247
|
|
||||
|
9,765
|
|
|
9,631
|
|
|
18,886
|
|
|
18,855
|
|
||||
Income Before Taxes
|
1,245
|
|
|
2,680
|
|
|
2,795
|
|
|
5,186
|
|
||||
Taxes on Income
|
310
|
|
|
860
|
|
|
244
|
|
|
1,599
|
|
||||
Net Income
|
$
|
935
|
|
|
$
|
1,820
|
|
|
$
|
2,551
|
|
|
$
|
3,587
|
|
Less: Net Income Attributable to Noncontrolling Interests
|
29
|
|
|
27
|
|
|
52
|
|
|
56
|
|
||||
Net Income Attributable to Merck & Co., Inc.
|
$
|
906
|
|
|
$
|
1,793
|
|
|
$
|
2,499
|
|
|
$
|
3,531
|
|
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders
|
$
|
0.30
|
|
|
$
|
0.59
|
|
|
$
|
0.83
|
|
|
$
|
1.16
|
|
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders
|
$
|
0.30
|
|
|
$
|
0.58
|
|
|
$
|
0.82
|
|
|
$
|
1.15
|
|
Dividends Declared per Common Share
|
$
|
0.43
|
|
|
$
|
0.42
|
|
|
$
|
0.86
|
|
|
$
|
0.84
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net Income Attributable to Merck & Co., Inc.
|
$
|
906
|
|
|
$
|
1,793
|
|
|
$
|
2,499
|
|
|
$
|
3,531
|
|
Other Comprehensive Income (Loss) Net of Taxes:
|
|
|
|
|
|
|
|
||||||||
Net unrealized gain on derivatives, net of reclassifications
|
35
|
|
|
102
|
|
|
271
|
|
|
44
|
|
||||
Net unrealized (loss) gain on investments, net of reclassifications
|
(81
|
)
|
|
1
|
|
|
(80
|
)
|
|
30
|
|
||||
Benefit plan net gain and prior service cost, net of amortization
|
51
|
|
|
18
|
|
|
212
|
|
|
18
|
|
||||
Cumulative translation adjustment
|
(136
|
)
|
|
(30
|
)
|
|
(481
|
)
|
|
(86
|
)
|
||||
|
(131
|
)
|
|
91
|
|
|
(78
|
)
|
|
6
|
|
||||
Comprehensive Income Attributable to Merck & Co., Inc.
|
$
|
775
|
|
|
$
|
1,884
|
|
|
$
|
2,421
|
|
|
$
|
3,537
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
15,090
|
|
|
$
|
13,451
|
|
Short-term investments
|
3,008
|
|
|
2,690
|
|
||
Accounts receivable (net of allowance for doubtful accounts of $137 in 2013
and $163 in 2012) (excludes accounts receivable of $490 in 2013 and $473
in 2012 classified in Other assets - see Note 4)
|
7,779
|
|
|
7,672
|
|
||
Inventories (excludes inventories of $1,515 in 2013 and $1,606
in 2012 classified in Other assets - see Note 5)
|
6,766
|
|
|
6,535
|
|
||
Deferred income taxes and other current assets
|
4,352
|
|
|
4,509
|
|
||
Total current assets
|
36,995
|
|
|
34,857
|
|
||
Investments
|
8,555
|
|
|
7,305
|
|
||
Property, Plant and Equipment, at cost, net of accumulated depreciation of $17,594
in 2013 and $17,385 in 2012
|
15,683
|
|
|
16,030
|
|
||
Goodwill
|
12,198
|
|
|
12,134
|
|
||
Other Intangibles, Net
|
26,333
|
|
|
29,083
|
|
||
Other Assets
|
7,112
|
|
|
6,723
|
|
||
|
$
|
106,876
|
|
|
$
|
106,132
|
|
Liabilities and Equity
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Loans payable and current portion of long-term debt
|
$
|
5,582
|
|
|
$
|
4,315
|
|
Trade accounts payable
|
2,253
|
|
|
1,753
|
|
||
Accrued and other current liabilities
|
8,872
|
|
|
9,737
|
|
||
Income taxes payable
|
409
|
|
|
1,200
|
|
||
Dividends payable
|
1,286
|
|
|
1,343
|
|
||
Total current liabilities
|
18,402
|
|
|
18,348
|
|
||
Long-Term Debt
|
22,526
|
|
|
16,254
|
|
||
Deferred Income Taxes and Noncurrent Liabilities
|
15,843
|
|
|
16,067
|
|
||
Merck & Co., Inc. Stockholders’ Equity
|
|
|
|
||||
Common stock, $0.50 par value
Authorized - 6,500,000,000 shares
Issued - 3,577,103,522 shares in 2013 and 2012
|
1,788
|
|
|
1,788
|
|
||
Other paid-in capital
|
39,891
|
|
|
40,646
|
|
||
Retained earnings
|
39,915
|
|
|
39,985
|
|
||
Accumulated other comprehensive loss
|
(4,760
|
)
|
|
(4,682
|
)
|
||
|
76,834
|
|
|
77,737
|
|
||
Less treasury stock, at cost:
650,630,672 shares in 2013 and 550,468,221 shares in 2012
|
29,334
|
|
|
24,717
|
|
||
Total Merck & Co., Inc. stockholders’ equity
|
47,500
|
|
|
53,020
|
|
||
Noncontrolling Interests
|
2,605
|
|
|
2,443
|
|
||
Total equity
|
50,105
|
|
|
55,463
|
|
||
|
$
|
106,876
|
|
|
$
|
106,132
|
|
|
Six Months Ended
June 30, |
||||||
|
2013
|
|
2012
|
||||
Cash Flows from Operating Activities
|
|
|
|
||||
Net income
|
$
|
2,551
|
|
|
$
|
3,587
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
3,329
|
|
|
3,594
|
|
||
Intangible asset impairment charges
|
594
|
|
|
136
|
|
||
Equity income from affiliates
|
(249
|
)
|
|
(253
|
)
|
||
Dividends and distributions from equity affiliates
|
68
|
|
|
122
|
|
||
Deferred income taxes
|
(319
|
)
|
|
(365
|
)
|
||
Share-based compensation
|
142
|
|
|
169
|
|
||
Other
|
372
|
|
|
143
|
|
||
Net changes in assets and liabilities
|
(1,809
|
)
|
|
(2,059
|
)
|
||
Net Cash Provided by Operating Activities
|
4,679
|
|
|
5,074
|
|
||
Cash Flows from Investing Activities
|
|
|
|
||||
Capital expenditures
|
(764
|
)
|
|
(762
|
)
|
||
Purchases of securities and other investments
|
(8,818
|
)
|
|
(4,001
|
)
|
||
Proceeds from sales of securities and other investments
|
7,195
|
|
|
4,174
|
|
||
Other
|
99
|
|
|
21
|
|
||
Net Cash Used in Investing Activities
|
(2,288
|
)
|
|
(568
|
)
|
||
Cash Flows from Financing Activities
|
|
|
|
||||
Net change in short-term borrowings
|
1,702
|
|
|
1,637
|
|
||
Proceeds from issuance of debt
|
6,467
|
|
|
—
|
|
||
Payments on debt
|
(515
|
)
|
|
(2
|
)
|
||
Purchases of treasury stock
|
(6,105
|
)
|
|
(985
|
)
|
||
Dividends paid to stockholders
|
(2,638
|
)
|
|
(2,559
|
)
|
||
Proceeds from exercise of stock options
|
641
|
|
|
601
|
|
||
Other
|
(3
|
)
|
|
(3
|
)
|
||
Net Cash Used in Financing Activities
|
(451
|
)
|
|
(1,311
|
)
|
||
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
(301
|
)
|
|
26
|
|
||
Net Increase in Cash and Cash Equivalents
|
1,639
|
|
|
3,221
|
|
||
Cash and Cash Equivalents at Beginning of Year
|
13,451
|
|
|
13,531
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
15,090
|
|
|
$
|
16,752
|
|
1.
|
Basis of Presentation
|
2.
|
Restructuring
|
|
Three Months Ended June 30, 2013
|
|
Six Months Ended June 30, 2013
|
||||||||||||||||||||||||||||
($ in millions)
|
Separation
Costs
|
|
Accelerated
Depreciation
|
|
Other
|
|
Total
|
|
Separation
Costs
|
|
Accelerated
Depreciation
|
|
Other
|
|
Total
|
||||||||||||||||
Merger Restructuring Program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Materials and production
|
$
|
—
|
|
|
$
|
30
|
|
|
$
|
62
|
|
|
$
|
92
|
|
|
$
|
—
|
|
|
$
|
61
|
|
|
$
|
71
|
|
|
$
|
132
|
|
Marketing and administrative
|
—
|
|
|
9
|
|
|
5
|
|
|
14
|
|
|
—
|
|
|
24
|
|
|
5
|
|
|
29
|
|
||||||||
Research and development
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
29
|
|
||||||||
Restructuring costs
|
129
|
|
|
—
|
|
|
16
|
|
|
145
|
|
|
194
|
|
|
—
|
|
|
34
|
|
|
228
|
|
||||||||
|
129
|
|
|
53
|
|
|
83
|
|
|
265
|
|
|
194
|
|
|
114
|
|
|
110
|
|
|
418
|
|
||||||||
2008 Restructuring Program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Materials and production
|
—
|
|
|
(2
|
)
|
|
3
|
|
|
1
|
|
|
—
|
|
|
(2
|
)
|
|
6
|
|
|
4
|
|
||||||||
Marketing and administrative
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||||||
Restructuring costs
|
2
|
|
|
—
|
|
|
8
|
|
|
10
|
|
|
34
|
|
|
—
|
|
|
12
|
|
|
46
|
|
||||||||
|
2
|
|
|
—
|
|
|
11
|
|
|
13
|
|
|
34
|
|
|
2
|
|
|
18
|
|
|
54
|
|
||||||||
|
$
|
131
|
|
|
$
|
53
|
|
|
$
|
94
|
|
|
$
|
278
|
|
|
$
|
228
|
|
|
$
|
116
|
|
|
$
|
128
|
|
|
$
|
472
|
|
|
Three Months Ended June 30, 2012
|
|
Six Months Ended June 30, 2012
|
||||||||||||||||||||||||||||
($ in millions)
|
Separation
Costs
|
|
Accelerated
Depreciation
|
|
Other
|
|
Total
|
|
Separation
Costs
|
|
Accelerated
Depreciation
|
|
Other
|
|
Total
|
||||||||||||||||
Merger Restructuring Program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Materials and production
|
$
|
—
|
|
|
$
|
58
|
|
|
$
|
20
|
|
|
$
|
78
|
|
|
$
|
—
|
|
|
$
|
37
|
|
|
$
|
37
|
|
|
$
|
74
|
|
Marketing and administrative
|
—
|
|
|
20
|
|
|
1
|
|
|
21
|
|
|
—
|
|
|
43
|
|
|
2
|
|
|
45
|
|
||||||||
Research and development
|
—
|
|
|
41
|
|
|
—
|
|
|
41
|
|
|
—
|
|
|
82
|
|
|
4
|
|
|
86
|
|
||||||||
Restructuring costs
|
124
|
|
|
—
|
|
|
29
|
|
|
153
|
|
|
304
|
|
|
—
|
|
|
63
|
|
|
367
|
|
||||||||
|
124
|
|
|
119
|
|
|
50
|
|
|
293
|
|
|
304
|
|
|
162
|
|
|
106
|
|
|
572
|
|
||||||||
2008 Restructuring Program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Materials and production
|
—
|
|
|
1
|
|
|
4
|
|
|
5
|
|
|
—
|
|
|
3
|
|
|
11
|
|
|
14
|
|
||||||||
Restructuring costs
|
(13
|
)
|
|
—
|
|
|
4
|
|
|
(9
|
)
|
|
(11
|
)
|
|
—
|
|
|
7
|
|
|
(4
|
)
|
||||||||
|
(13
|
)
|
|
1
|
|
|
8
|
|
|
(4
|
)
|
|
(11
|
)
|
|
3
|
|
|
18
|
|
|
10
|
|
||||||||
|
$
|
111
|
|
|
$
|
120
|
|
|
$
|
58
|
|
|
$
|
289
|
|
|
$
|
293
|
|
|
$
|
165
|
|
|
$
|
124
|
|
|
$
|
582
|
|
($ in millions)
|
Separation
Costs
|
|
Accelerated
Depreciation
|
|
Other
|
|
Total
|
||||||||
Merger Restructuring Program
|
|
|
|
|
|
|
|
||||||||
Restructuring reserves January 1, 2013
|
$
|
699
|
|
|
$
|
—
|
|
|
$
|
19
|
|
|
$
|
718
|
|
Expense
|
194
|
|
|
114
|
|
|
110
|
|
|
418
|
|
||||
(Payments) receipts, net
|
(227
|
)
|
|
—
|
|
|
(56
|
)
|
|
(283
|
)
|
||||
Non-cash activity
|
—
|
|
|
(114
|
)
|
|
(67
|
)
|
|
(181
|
)
|
||||
Restructuring reserves June 30, 2013
(1)
|
$
|
666
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
672
|
|
2008 Restructuring Program
|
|
|
|
|
|
|
|
||||||||
Restructuring reserves January 1, 2013
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
77
|
|
Expense
|
34
|
|
|
2
|
|
|
18
|
|
|
54
|
|
||||
(Payments) receipts, net
|
(49
|
)
|
|
—
|
|
|
(11
|
)
|
|
(60
|
)
|
||||
Non-cash activity
|
—
|
|
|
(2
|
)
|
|
(7
|
)
|
|
(9
|
)
|
||||
Restructuring reserves June 30, 2013
(1)
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
62
|
|
(1)
|
The cash outlays associated with the Merger Restructuring Program are expected to be substantially completed by the end of 2013 with the exception of certain actions, principally manufacturing-related, which are expected to be substantially completed by 2016. The cash outlays associated with the remaining restructuring reserves for the 2008 Restructuring Program are primarily manufacturing-related and are expected to be completed by the end of 2015.
|
3.
|
Acquisitions, Research Collaborations and License Agreements
|
4.
|
Financial Instruments
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||||||||||
|
|
Fair Value of Derivative
|
|
U.S. Dollar
Notional
|
|
Fair Value of Derivative
|
|
U.S. Dollar
Notional
|
||||||||||||||||
($ in millions)
|
Balance Sheet Caption
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
|
|||||||||||||||
Derivatives Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate swap contracts (non-current)
|
Other assets
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest rate swap contracts (non-current)
|
Deferred income taxes and noncurrent liabilities
|
—
|
|
|
33
|
|
|
2,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign exchange contracts (current)
|
Deferred income taxes and other current assets
|
544
|
|
|
—
|
|
|
5,721
|
|
|
281
|
|
|
—
|
|
|
6,646
|
|
||||||
Foreign exchange contracts (non-current)
|
Other assets
|
603
|
|
|
—
|
|
|
6,103
|
|
|
387
|
|
|
—
|
|
|
5,989
|
|
||||||
Foreign exchange contracts (current)
|
Accrued and other current liabilities
|
—
|
|
|
3
|
|
|
659
|
|
|
—
|
|
|
13
|
|
|
938
|
|
||||||
Foreign exchange contracts (non-current)
|
Deferred income taxes and noncurrent liabilities
|
—
|
|
|
4
|
|
|
440
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
$
|
1,148
|
|
|
$
|
40
|
|
|
$
|
15,123
|
|
|
$
|
668
|
|
|
$
|
13
|
|
|
$
|
13,573
|
|
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts (current)
|
Deferred income taxes and other current assets
|
$
|
144
|
|
|
$
|
—
|
|
|
$
|
5,504
|
|
|
$
|
55
|
|
|
$
|
—
|
|
|
$
|
4,548
|
|
Foreign exchange contracts (non-current)
|
Other assets
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
232
|
|
||||||
Foreign exchange contracts (current)
|
Accrued and other current liabilities
|
—
|
|
|
58
|
|
|
3,288
|
|
|
—
|
|
|
216
|
|
|
8,203
|
|
||||||
|
|
$
|
144
|
|
|
$
|
58
|
|
|
$
|
8,792
|
|
|
$
|
63
|
|
|
$
|
216
|
|
|
$
|
12,983
|
|
|
|
$
|
1,292
|
|
|
$
|
98
|
|
|
$
|
23,915
|
|
|
$
|
731
|
|
|
$
|
229
|
|
|
$
|
26,556
|
|
|
June 30, 2013
|
|
December 31, 2012
|
|
||||||||||||
($ in millions)
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
|
||||||||
Gross amounts recognized in the consolidated balance sheet
|
$
|
1,292
|
|
|
$
|
98
|
|
|
$
|
731
|
|
|
$
|
229
|
|
|
Gross amount subject to offset in master netting arrangements
not offset in the consolidated balance sheet
|
(94
|
)
|
|
(92
|
)
|
|
(195
|
)
|
|
(195
|
)
|
|
||||
Cash collateral (received) posted
|
(855
|
)
|
|
—
|
|
|
(305
|
)
|
|
—
|
|
|
||||
Net amounts
|
$
|
343
|
|
|
$
|
6
|
|
|
$
|
231
|
|
|
$
|
34
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Derivatives designated in a fair value hedging relationship
|
|
|
|
|
|
|
|
||||||||
Interest rate swap contracts
|
|
|
|
|
|
|
|
||||||||
Amount of loss recognized in
Other (income) expense, net
on derivatives
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
—
|
|
Amount of gain recognized in
Other (income) expense, net
on hedged item
|
(33
|
)
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
||||
Derivatives designated in foreign currency cash flow hedging relationships
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
||||||||
Amount of loss reclassified from
AOCI
to
Sales
|
2
|
|
|
26
|
|
|
34
|
|
|
53
|
|
||||
Amount of gain recognized in
OCI
on derivatives
|
(36
|
)
|
|
(154
|
)
|
|
(385
|
)
|
|
(34
|
)
|
||||
Derivatives designated in foreign currency net investment hedging relationships
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
||||||||
Amount of gain recognized in
Other (income) expense, net
on derivatives
(1)
|
(1
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
(11
|
)
|
||||
Amount of (gain) loss recognized in
OCI
on derivatives
|
(65
|
)
|
|
86
|
|
|
(244
|
)
|
|
(56
|
)
|
||||
Derivatives not designated in a hedging relationship
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
||||||||
Amount of gain recognized in
Other (income) expense, net
on derivatives
(2)
|
(32
|
)
|
|
(279
|
)
|
|
(8
|
)
|
|
(26
|
)
|
||||
Amount of loss (gain) recognized in
Sales
on hedged item
|
7
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
(1)
|
There was no ineffectiveness on the hedge. Represents the amount excluded from hedge effectiveness testing.
|
(2)
|
These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates.
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||||||||||||||||||
|
Fair
Value
|
|
Amortized
Cost
|
|
Gross Unrealized
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Gross Unrealized
|
||||||||||||||||||||
($ in millions)
|
Gains
|
|
Losses
|
|
Gains
|
|
Losses
|
||||||||||||||||||||||||
Corporate notes and bonds
|
$
|
6,222
|
|
|
$
|
6,243
|
|
|
$
|
20
|
|
|
$
|
(41
|
)
|
|
$
|
5,063
|
|
|
$
|
5,013
|
|
|
$
|
52
|
|
|
$
|
(2
|
)
|
Commercial paper
|
2,240
|
|
|
2,240
|
|
|
—
|
|
|
—
|
|
|
2,150
|
|
|
2,150
|
|
|
—
|
|
|
—
|
|
||||||||
U.S. government and agency securities
|
1,339
|
|
|
1,351
|
|
|
—
|
|
|
(12
|
)
|
|
1,206
|
|
|
1,204
|
|
|
2
|
|
|
—
|
|
||||||||
Asset-backed securities
|
931
|
|
|
935
|
|
|
1
|
|
|
(5
|
)
|
|
837
|
|
|
835
|
|
|
3
|
|
|
(1
|
)
|
||||||||
Mortgage-backed securities
|
538
|
|
|
543
|
|
|
1
|
|
|
(6
|
)
|
|
435
|
|
|
436
|
|
|
2
|
|
|
(3
|
)
|
||||||||
Foreign government bonds
|
81
|
|
|
82
|
|
|
—
|
|
|
(1
|
)
|
|
108
|
|
|
107
|
|
|
1
|
|
|
—
|
|
||||||||
Equity securities
|
444
|
|
|
393
|
|
|
51
|
|
|
—
|
|
|
403
|
|
|
370
|
|
|
33
|
|
|
—
|
|
||||||||
|
$
|
11,795
|
|
|
$
|
11,787
|
|
|
$
|
73
|
|
|
$
|
(65
|
)
|
|
$
|
10,202
|
|
|
$
|
10,115
|
|
|
$
|
93
|
|
|
$
|
(6
|
)
|
|
Fair Value Measurements Using
|
|
Fair Value Measurements Using
|
||||||||||||||||||||||||||||
|
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
|
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
||||||||||||||||
($ in millions)
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate notes and bonds
|
$
|
—
|
|
|
$
|
6,222
|
|
|
$
|
—
|
|
|
$
|
6,222
|
|
|
$
|
—
|
|
|
$
|
5,063
|
|
|
$
|
—
|
|
|
$
|
5,063
|
|
Commercial paper
|
—
|
|
|
2,240
|
|
|
—
|
|
|
2,240
|
|
|
—
|
|
|
2,150
|
|
|
—
|
|
|
2,150
|
|
||||||||
U.S. government and agency securities
|
—
|
|
|
1,339
|
|
|
—
|
|
|
1,339
|
|
|
—
|
|
|
1,206
|
|
|
—
|
|
|
1,206
|
|
||||||||
Asset-backed securities
(1)
|
—
|
|
|
931
|
|
|
—
|
|
|
931
|
|
|
—
|
|
|
837
|
|
|
—
|
|
|
837
|
|
||||||||
Mortgage-backed securities
(1)
|
—
|
|
|
538
|
|
|
—
|
|
|
538
|
|
|
—
|
|
|
435
|
|
|
—
|
|
|
435
|
|
||||||||
Foreign government bonds
|
—
|
|
|
81
|
|
|
—
|
|
|
81
|
|
|
—
|
|
|
108
|
|
|
—
|
|
|
108
|
|
||||||||
Equity securities
|
212
|
|
|
—
|
|
|
—
|
|
|
212
|
|
|
196
|
|
|
—
|
|
|
—
|
|
|
196
|
|
||||||||
|
212
|
|
|
11,351
|
|
|
—
|
|
|
11,563
|
|
|
196
|
|
|
9,799
|
|
|
—
|
|
|
9,995
|
|
||||||||
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Securities held for employee compensation
|
193
|
|
|
39
|
|
|
—
|
|
|
232
|
|
|
169
|
|
|
38
|
|
|
—
|
|
|
207
|
|
||||||||
Derivative assets
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Purchased currency options
|
—
|
|
|
953
|
|
|
—
|
|
|
953
|
|
|
—
|
|
|
546
|
|
|
—
|
|
|
546
|
|
||||||||
Forward exchange contracts
|
—
|
|
|
338
|
|
|
—
|
|
|
338
|
|
|
—
|
|
|
185
|
|
|
—
|
|
|
185
|
|
||||||||
Interest rate swaps
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
|
—
|
|
|
1,292
|
|
|
—
|
|
|
1,292
|
|
|
—
|
|
|
731
|
|
|
—
|
|
|
731
|
|
||||||||
Total assets
|
$
|
405
|
|
|
$
|
12,682
|
|
|
$
|
—
|
|
|
$
|
13,087
|
|
|
$
|
365
|
|
|
$
|
10,568
|
|
|
$
|
—
|
|
|
$
|
10,933
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivative liabilities
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Forward exchange contracts
|
$
|
—
|
|
|
$
|
63
|
|
|
$
|
—
|
|
|
$
|
63
|
|
|
$
|
—
|
|
|
$
|
216
|
|
|
$
|
—
|
|
|
$
|
216
|
|
Written currency options
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
||||||||
Interest rate swaps
|
—
|
|
|
33
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total liabilities
|
$
|
—
|
|
|
$
|
98
|
|
|
$
|
—
|
|
|
$
|
98
|
|
|
$
|
—
|
|
|
$
|
229
|
|
|
$
|
—
|
|
|
$
|
229
|
|
(1)
|
Primarily all of the asset-backed securities are highly-rated (Standard & Poor’s rating of AAA and Moody’s Investors Service rating of Aaa), secured primarily by credit card, auto loan, and home equity receivables, with weighted-average lives of primarily 5 years or less. Mortgage-backed securities represent AAA-rated securities issued or unconditionally guaranteed as to payment of principal and interest by U.S. government agencies.
|
(2)
|
The fair value determination of derivatives includes the impact of the credit risk of counterparties to the derivatives and the Company’s own credit risk, the effects of which were not significant.
|
5.
|
Inventories
|
($ in millions)
|
June 30, 2013
|
|
December 31, 2012
|
||||
Finished goods
|
$
|
2,214
|
|
|
$
|
1,924
|
|
Raw materials and work in process
|
5,783
|
|
|
5,921
|
|
||
Supplies
|
235
|
|
|
244
|
|
||
Total (approximates current cost)
|
8,232
|
|
|
8,089
|
|
||
Increase to LIFO costs
|
49
|
|
|
52
|
|
||
|
$
|
8,281
|
|
|
$
|
8,141
|
|
Recognized as:
|
|
|
|
||||
Inventories
|
$
|
6,766
|
|
|
$
|
6,535
|
|
Other assets
|
1,515
|
|
|
1,606
|
|
6.
|
Other Intangibles
|
7.
|
Joint Ventures and Other Equity Method Affiliates
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
AstraZeneca LP
|
$
|
105
|
|
|
$
|
140
|
|
|
$
|
230
|
|
|
$
|
253
|
|
Other
(1)
|
11
|
|
|
2
|
|
|
19
|
|
|
—
|
|
||||
|
$
|
116
|
|
|
$
|
142
|
|
|
$
|
249
|
|
|
$
|
253
|
|
(1)
|
Includes results from Sanofi Pasteur MSD.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Sales
|
$
|
1,142
|
|
|
$
|
1,150
|
|
|
$
|
2,300
|
|
|
$
|
2,192
|
|
Materials and production costs
|
575
|
|
|
520
|
|
|
1,126
|
|
|
959
|
|
||||
Other expense, net
|
419
|
|
|
350
|
|
|
801
|
|
|
732
|
|
||||
Income before taxes
(1)
|
$
|
148
|
|
|
$
|
280
|
|
|
$
|
373
|
|
|
$
|
501
|
|
(1)
|
Merck’s partnership returns from AZLP are generally contractually determined and are not based on a percentage of income from AZLP, other than with respect to Merck’s
1%
limited partnership interest.
|
8.
|
Loans Payable, Long-Term Debt and Other Commitments
|
9.
|
Contingencies and Environmental Liabilities
|
10.
|
Equity
|
|
Common Stock
|
Other
Paid-In
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Treasury Stock
|
Non-
Controlling
Interests
|
Total
|
||||||||||||||||||
($ and shares in millions)
|
Shares
|
Par Value
|
Shares
|
Cost
|
|||||||||||||||||||||
Balance January 1, 2012
|
3,577
|
|
$
|
1,788
|
|
$
|
40,663
|
|
$
|
38,990
|
|
$
|
(3,132
|
)
|
536
|
|
$
|
(23,792
|
)
|
$
|
2,426
|
|
$
|
56,943
|
|
Net income attributable to Merck & Co., Inc.
|
—
|
|
—
|
|
—
|
|
3,531
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,531
|
|
|||||||
Cash dividends declared on common stock
|
—
|
|
—
|
|
—
|
|
(2,571
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,571
|
)
|
|||||||
Treasury stock shares purchased
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
26
|
|
(985
|
)
|
—
|
|
(985
|
)
|
|||||||
Share-based compensation plans and other
|
—
|
|
—
|
|
(113
|
)
|
—
|
|
—
|
|
(24
|
)
|
809
|
|
—
|
|
696
|
|
|||||||
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
—
|
|
6
|
|
—
|
|
—
|
|
—
|
|
6
|
|
|||||||
Net income attributable to noncontrolling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
56
|
|
56
|
|
|||||||
Distributions attributable to noncontrolling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
(3
|
)
|
|||||||
Balance at June 30, 2012
|
3,577
|
|
$
|
1,788
|
|
$
|
40,550
|
|
$
|
39,950
|
|
$
|
(3,126
|
)
|
538
|
|
$
|
(23,968
|
)
|
$
|
2,479
|
|
$
|
57,673
|
|
Balance January 1, 2013
|
3,577
|
|
$
|
1,788
|
|
$
|
40,646
|
|
$
|
39,985
|
|
$
|
(4,682
|
)
|
550
|
|
$
|
(24,717
|
)
|
$
|
2,443
|
|
$
|
55,463
|
|
Net income attributable to Merck & Co., Inc.
|
—
|
|
—
|
|
—
|
|
2,499
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,499
|
|
|||||||
Cash dividends declared on common stock
|
—
|
|
—
|
|
—
|
|
(2,569
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,569
|
)
|
|||||||
Treasury stock shares purchased
|
—
|
|
—
|
|
(500
|
)
|
—
|
|
—
|
|
124
|
|
(5,605
|
)
|
—
|
|
(6,105
|
)
|
|||||||
Share-based compensation plans and other
|
—
|
|
—
|
|
(371
|
)
|
—
|
|
—
|
|
(23
|
)
|
988
|
|
1
|
|
618
|
|
|||||||
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
—
|
|
(78
|
)
|
—
|
|
—
|
|
—
|
|
(78
|
)
|
|||||||
Supera joint venture
|
—
|
|
—
|
|
116
|
|
—
|
|
—
|
|
—
|
|
—
|
|
112
|
|
228
|
|
|||||||
Net income attributable to noncontrolling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
52
|
|
52
|
|
|||||||
Distributions attributable to noncontrolling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
(3
|
)
|
|||||||
Balance at June 30, 2013
|
3,577
|
|
$
|
1,788
|
|
$
|
39,891
|
|
$
|
39,915
|
|
$
|
(4,760
|
)
|
651
|
|
$
|
(29,334
|
)
|
$
|
2,605
|
|
$
|
50,105
|
|
11.
|
Share-Based Compensation Plans
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Pretax share-based compensation expense
|
$
|
75
|
|
|
$
|
93
|
|
|
$
|
142
|
|
|
$
|
169
|
|
Income tax benefit
|
(23
|
)
|
|
(29
|
)
|
|
(43
|
)
|
|
(53
|
)
|
||||
Total share-based compensation expense, net of taxes
|
$
|
52
|
|
|
$
|
64
|
|
|
$
|
99
|
|
|
$
|
116
|
|
|
Six Months Ended
June 30, |
||||
|
2013
|
|
2012
|
||
Expected dividend yield
|
4.2
|
%
|
|
4.4
|
%
|
Risk-free interest rate
|
1.2
|
%
|
|
1.3
|
%
|
Expected volatility
|
25.0
|
%
|
|
25.3
|
%
|
Expected life (years)
|
7.0
|
|
|
7.0
|
|
12.
|
Pension and Other Postretirement Benefit Plans
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Service cost
|
$
|
170
|
|
|
$
|
141
|
|
|
$
|
345
|
|
|
$
|
283
|
|
Interest cost
|
165
|
|
|
166
|
|
|
331
|
|
|
332
|
|
||||
Expected return on plan assets
|
(272
|
)
|
|
(244
|
)
|
|
(547
|
)
|
|
(488
|
)
|
||||
Net amortization
|
82
|
|
|
48
|
|
|
166
|
|
|
96
|
|
||||
Termination benefits
|
3
|
|
|
4
|
|
|
5
|
|
|
9
|
|
||||
Curtailments
|
(2
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
(1
|
)
|
||||
|
$
|
146
|
|
|
$
|
114
|
|
|
$
|
298
|
|
|
$
|
231
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Service cost
|
$
|
24
|
|
|
$
|
21
|
|
|
$
|
48
|
|
|
$
|
42
|
|
Interest cost
|
27
|
|
|
31
|
|
|
54
|
|
|
62
|
|
||||
Expected return on plan assets
|
(32
|
)
|
|
(34
|
)
|
|
(63
|
)
|
|
(68
|
)
|
||||
Net amortization
|
(12
|
)
|
|
(8
|
)
|
|
(24
|
)
|
|
(16
|
)
|
||||
Termination benefits
|
2
|
|
|
3
|
|
|
2
|
|
|
5
|
|
||||
Curtailments
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
(4
|
)
|
||||
|
$
|
7
|
|
|
$
|
11
|
|
|
$
|
15
|
|
|
$
|
21
|
|
13.
|
Other (Income) Expense, Net
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Interest income
|
$
|
(65
|
)
|
|
$
|
(76
|
)
|
|
$
|
(122
|
)
|
|
$
|
(129
|
)
|
Interest expense
|
201
|
|
|
172
|
|
|
385
|
|
|
346
|
|
||||
Exchange losses
|
55
|
|
|
13
|
|
|
267
|
|
|
80
|
|
||||
Other, net
|
10
|
|
|
(6
|
)
|
|
(46
|
)
|
|
(50
|
)
|
||||
|
$
|
201
|
|
|
$
|
103
|
|
|
$
|
484
|
|
|
$
|
247
|
|
14.
|
Taxes on Income
|
15.
|
Earnings Per Share
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ and shares in millions except per share amounts)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Basic Earnings per Common Share
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Merck & Co., Inc.
|
$
|
906
|
|
|
$
|
1,793
|
|
|
$
|
2,499
|
|
|
$
|
3,531
|
|
Less: Income allocated to participating securities
|
—
|
|
|
1
|
|
|
—
|
|
|
3
|
|
||||
Net income allocated to common shareholders
|
$
|
906
|
|
|
$
|
1,792
|
|
|
$
|
2,499
|
|
|
$
|
3,528
|
|
Average common shares outstanding
|
2,977
|
|
|
3,041
|
|
|
3,000
|
|
|
3,042
|
|
||||
|
$
|
0.30
|
|
|
$
|
0.59
|
|
|
$
|
0.83
|
|
|
$
|
1.16
|
|
Earnings per Common Share Assuming Dilution
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Merck & Co., Inc.
|
$
|
906
|
|
|
$
|
1,793
|
|
|
$
|
2,499
|
|
|
$
|
3,531
|
|
Less: Income allocated to participating securities
|
—
|
|
|
1
|
|
|
—
|
|
|
3
|
|
||||
Net income allocated to common shareholders
|
$
|
906
|
|
|
$
|
1,792
|
|
|
$
|
2,499
|
|
|
$
|
3,528
|
|
Average common shares outstanding
|
2,977
|
|
|
3,041
|
|
|
3,000
|
|
|
3,042
|
|
||||
Common shares issuable
(1)
|
33
|
|
|
31
|
|
|
30
|
|
|
32
|
|
||||
Average common shares outstanding assuming dilution
|
3,010
|
|
|
3,072
|
|
|
3,030
|
|
|
3,074
|
|
||||
|
$
|
0.30
|
|
|
$
|
0.58
|
|
|
$
|
0.82
|
|
|
$
|
1.15
|
|
(1)
|
Issuable primarily under share-based compensation plans.
|
16.
|
Other Comprehensive Income (Loss)
|
($ in millions)
|
Derivatives
|
|
Investments
|
|
Employee
Benefit
Plans
|
|
Cumulative
Translation
Adjustment
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
||||||||||
Balance January 1, 2012, net of taxes
|
$
|
4
|
|
|
$
|
21
|
|
|
$
|
(2,346
|
)
|
|
$
|
(811
|
)
|
|
$
|
(3,132
|
)
|
Other comprehensive income (loss), net of taxes
|
44
|
|
|
30
|
|
|
18
|
|
|
(86
|
)
|
|
6
|
|
|||||
Balance June 30, 2012, net of taxes
|
$
|
48
|
|
|
$
|
51
|
|
|
$
|
(2,328
|
)
|
|
$
|
(897
|
)
|
|
$
|
(3,126
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance January 1, 2013, net of taxes
|
$
|
(97
|
)
|
|
$
|
73
|
|
|
$
|
(3,667
|
)
|
|
$
|
(991
|
)
|
|
$
|
(4,682
|
)
|
Other comprehensive income (loss) before reclassification adjustments, pretax
|
413
|
|
|
(44
|
)
|
|
144
|
|
|
(378
|
)
|
|
135
|
|
|||||
Tax
|
(163
|
)
|
|
(8
|
)
|
|
(30
|
)
|
|
(103
|
)
|
|
(304
|
)
|
|||||
Other comprehensive income (loss) before reclassification adjustments, net of taxes
|
250
|
|
|
(52
|
)
|
|
114
|
|
|
(481
|
)
|
|
(169
|
)
|
|||||
Reclassification adjustments, pretax
|
33
|
|
|
(34
|
)
|
|
142
|
|
|
—
|
|
|
141
|
|
|||||
Tax
|
(12
|
)
|
|
6
|
|
|
(44
|
)
|
|
—
|
|
|
(50
|
)
|
|||||
Reclassification adjustments, net of taxes
|
21
|
|
(1)
|
(28
|
)
|
(2)
|
98
|
|
(3)
|
—
|
|
|
91
|
|
|||||
Other comprehensive income (loss), net of taxes
|
271
|
|
|
(80
|
)
|
|
212
|
|
|
(481
|
)
|
|
(78
|
)
|
|||||
Balance June 30, 2013, net of taxes
|
$
|
174
|
|
|
$
|
(7
|
)
|
|
$
|
(3,455
|
)
|
|
$
|
(1,472
|
)
|
|
$
|
(4,760
|
)
|
(1)
|
Relates to foreign currency cash flow hedges that were reclassified from
AOCI
to
Sales
.
|
(2)
|
Represents net realized gains on the sales of available-for-sale investments that were reclassified from
AOCI
to
Other (income) expense, net
.
|
(3)
|
Includes net amortization of prior service cost and actuarial gains and losses included in net periodic benefit cost (see note 12).
|
17.
|
Segment Reporting
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Primary Care and Women’s Health
|
|
|
|
|
|
|
|
||||||||
Cardiovascular
|
|
|
|
|
|
|
|
||||||||
Zetia
|
$
|
650
|
|
|
$
|
632
|
|
|
$
|
1,279
|
|
|
$
|
1,246
|
|
Vytorin
|
417
|
|
|
445
|
|
|
810
|
|
|
889
|
|
||||
Diabetes and Obesity
|
|
|
|
|
|
|
|
||||||||
Januvia
|
1,072
|
|
|
1,058
|
|
|
1,956
|
|
|
1,977
|
|
||||
Janumet
|
474
|
|
|
411
|
|
|
883
|
|
|
802
|
|
||||
Respiratory
|
|
|
|
|
|
|
|
||||||||
Nasonex
|
325
|
|
|
293
|
|
|
711
|
|
|
668
|
|
||||
Singulair
|
281
|
|
|
1,431
|
|
|
618
|
|
|
2,771
|
|
||||
Dulera
|
79
|
|
|
50
|
|
|
147
|
|
|
89
|
|
||||
Asmanex
|
49
|
|
|
51
|
|
|
89
|
|
|
99
|
|
||||
Women’s Health and Endocrine
|
|
|
|
|
|
|
|
||||||||
NuvaRing
|
171
|
|
|
157
|
|
|
322
|
|
|
303
|
|
||||
Fosamax
|
144
|
|
|
186
|
|
|
281
|
|
|
370
|
|
||||
Follistim AQ
|
134
|
|
|
125
|
|
|
257
|
|
|
241
|
|
||||
Implanon
|
102
|
|
|
85
|
|
|
187
|
|
|
161
|
|
||||
Cerazette
|
48
|
|
|
72
|
|
|
108
|
|
|
139
|
|
||||
Other
|
|
|
|
|
|
|
|
||||||||
Arcoxia
|
121
|
|
|
117
|
|
|
242
|
|
|
229
|
|
||||
Avelox
|
29
|
|
|
44
|
|
|
65
|
|
|
117
|
|
||||
Hospital and Specialty
|
|
|
|
|
|
|
|
||||||||
Immunology
|
|
|
|
|
|
|
|
||||||||
Remicade
|
527
|
|
|
518
|
|
|
1,076
|
|
|
1,037
|
|
||||
Simponi
|
120
|
|
|
76
|
|
|
228
|
|
|
150
|
|
||||
Infectious Disease
|
|
|
|
|
|
|
|
||||||||
Isentress
|
412
|
|
|
398
|
|
|
775
|
|
|
735
|
|
||||
Cancidas
|
163
|
|
|
166
|
|
|
326
|
|
|
311
|
|
||||
PegIntron
|
142
|
|
|
183
|
|
|
268
|
|
|
345
|
|
||||
Invanz
|
120
|
|
|
110
|
|
|
230
|
|
|
211
|
|
||||
Victrelis
|
116
|
|
|
126
|
|
|
226
|
|
|
238
|
|
||||
Noxafil
|
71
|
|
|
66
|
|
|
136
|
|
|
125
|
|
||||
Oncology
|
|
|
|
|
|
|
|
||||||||
Temodar
|
219
|
|
|
225
|
|
|
434
|
|
|
461
|
|
||||
Emend
|
135
|
|
|
145
|
|
|
250
|
|
|
247
|
|
||||
Other
|
|
|
|
|
|
|
|
||||||||
Cosopt/Trusopt
|
103
|
|
|
105
|
|
|
209
|
|
|
229
|
|
||||
Bridion
|
69
|
|
|
60
|
|
|
131
|
|
|
118
|
|
||||
Integrilin
|
48
|
|
|
60
|
|
|
95
|
|
|
113
|
|
||||
Diversified Brands
|
|
|
|
|
|
|
|
||||||||
Cozaar/Hyzaar
|
255
|
|
|
337
|
|
|
522
|
|
|
674
|
|
||||
Primaxin
|
85
|
|
|
104
|
|
|
168
|
|
|
192
|
|
||||
Zocor
|
74
|
|
|
96
|
|
|
156
|
|
|
199
|
|
||||
Propecia
|
67
|
|
|
100
|
|
|
135
|
|
|
208
|
|
||||
Clarinex
|
64
|
|
|
140
|
|
|
125
|
|
|
273
|
|
||||
Claritin Rx
|
40
|
|
|
48
|
|
|
115
|
|
|
134
|
|
||||
Remeron
|
53
|
|
|
66
|
|
|
106
|
|
|
123
|
|
||||
Proscar
|
58
|
|
|
55
|
|
|
98
|
|
|
106
|
|
||||
Maxalt
|
43
|
|
|
154
|
|
|
83
|
|
|
310
|
|
||||
Vaccines
(1)
|
|
|
|
|
|
|
|
||||||||
Gardasil
|
383
|
|
|
324
|
|
|
773
|
|
|
608
|
|
||||
ProQuad/M-M-R II/Varivax
|
339
|
|
|
316
|
|
|
611
|
|
|
571
|
|
||||
Zostavax
|
141
|
|
|
148
|
|
|
309
|
|
|
224
|
|
||||
RotaTeq
|
144
|
|
|
142
|
|
|
306
|
|
|
284
|
|
||||
Pneumovax 23
|
108
|
|
|
101
|
|
|
219
|
|
|
213
|
|
||||
Other pharmaceutical
(2)
|
1,115
|
|
|
1,034
|
|
|
2,136
|
|
|
2,102
|
|
||||
Total Pharmaceutical segment sales
|
9,310
|
|
|
10,560
|
|
|
18,201
|
|
|
20,642
|
|
||||
Other segment sales
(3)
|
1,631
|
|
|
1,680
|
|
|
3,343
|
|
|
3,273
|
|
||||
Total segment sales
|
10,941
|
|
|
12,240
|
|
|
21,544
|
|
|
23,915
|
|
||||
Other
(4)
|
69
|
|
|
71
|
|
|
137
|
|
|
126
|
|
||||
|
$
|
11,010
|
|
|
$
|
12,311
|
|
|
$
|
21,681
|
|
|
$
|
24,041
|
|
(1)
|
These amounts do not reflect sales of vaccines sold in most major European markets through the Company’s joint venture, Sanofi Pasteur MSD, the results of which are reflected in
Equity income from affiliates
. These amounts do, however, reflect supply sales to Sanofi Pasteur MSD
.
|
(2)
|
Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately
.
|
(3)
|
Represents the non-reportable segments of Animal Health, Consumer Care and Alliances. The Alliances segment includes revenue from the Company’s relationship with AZLP.
|
(4)
|
Other revenues are primarily comprised of miscellaneous corporate revenues, third-party manufacturing sales, sales related to divested products or businesses and supply sales not included in segment results
.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Segment profits:
|
|
|
|
|
|
|
|
||||||||
Pharmaceutical segment
|
$
|
5,693
|
|
|
$
|
6,906
|
|
|
$
|
11,039
|
|
|
$
|
13,502
|
|
Other segments
|
793
|
|
|
774
|
|
|
1,693
|
|
|
1,578
|
|
||||
Total segment profits
|
6,486
|
|
|
7,680
|
|
|
12,732
|
|
|
15,080
|
|
||||
Other profits (losses)
|
4
|
|
|
45
|
|
|
(19
|
)
|
|
(28
|
)
|
||||
Unallocated:
|
|
|
|
|
|
|
|
||||||||
Interest income
|
65
|
|
|
76
|
|
|
122
|
|
|
129
|
|
||||
Interest expense
|
(201
|
)
|
|
(172
|
)
|
|
(385
|
)
|
|
(346
|
)
|
||||
Equity income from affiliates
|
(12
|
)
|
|
11
|
|
|
(15
|
)
|
|
(9
|
)
|
||||
Depreciation and amortization
|
(458
|
)
|
|
(567
|
)
|
|
(937
|
)
|
|
(1,118
|
)
|
||||
Research and development
|
(1,875
|
)
|
|
(1,930
|
)
|
|
(3,567
|
)
|
|
(3,573
|
)
|
||||
Amortization of purchase accounting adjustments
|
(1,185
|
)
|
|
(1,226
|
)
|
|
(2,369
|
)
|
|
(2,455
|
)
|
||||
Restructuring costs
|
(155
|
)
|
|
(144
|
)
|
|
(274
|
)
|
|
(363
|
)
|
||||
Other unallocated, net
|
(1,424
|
)
|
|
(1,093
|
)
|
|
(2,493
|
)
|
|
(2,131
|
)
|
||||
|
$
|
1,245
|
|
|
$
|
2,680
|
|
|
$
|
2,795
|
|
|
$
|
5,186
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Primary Care and Women’s Health
|
|
|
|
|
|
|
|
||||||||
Cardiovascular
|
|
|
|
|
|
|
|
||||||||
Zetia
|
$
|
650
|
|
|
$
|
632
|
|
|
$
|
1,279
|
|
|
$
|
1,246
|
|
Vytorin
|
417
|
|
|
445
|
|
|
810
|
|
|
889
|
|
||||
Diabetes and Obesity
|
|
|
|
|
|
|
|
||||||||
Januvia
|
1,072
|
|
|
1,058
|
|
|
1,956
|
|
|
1,977
|
|
||||
Janumet
|
474
|
|
|
411
|
|
|
883
|
|
|
802
|
|
||||
Respiratory
|
|
|
|
|
|
|
|
||||||||
Nasonex
|
325
|
|
|
293
|
|
|
711
|
|
|
668
|
|
||||
Singulair
|
281
|
|
|
1,431
|
|
|
618
|
|
|
2,771
|
|
||||
Dulera
|
79
|
|
|
50
|
|
|
147
|
|
|
89
|
|
||||
Asmanex
|
49
|
|
|
51
|
|
|
89
|
|
|
99
|
|
||||
Women’s Health and Endocrine
|
|
|
|
|
|
|
|
||||||||
NuvaRing
|
171
|
|
|
157
|
|
|
322
|
|
|
303
|
|
||||
Fosamax
|
144
|
|
|
186
|
|
|
281
|
|
|
370
|
|
||||
Follistim AQ
|
134
|
|
|
125
|
|
|
257
|
|
|
241
|
|
||||
Implanon
|
102
|
|
|
85
|
|
|
187
|
|
|
161
|
|
||||
Cerazette
|
48
|
|
|
72
|
|
|
108
|
|
|
139
|
|
||||
Other
|
|
|
|
|
|
|
|
||||||||
Arcoxia
|
121
|
|
|
117
|
|
|
242
|
|
|
229
|
|
||||
Avelox
|
29
|
|
|
44
|
|
|
65
|
|
|
117
|
|
||||
Hospital and Specialty
|
|
|
|
|
|
|
|
||||||||
Immunology
|
|
|
|
|
|
|
|
||||||||
Remicade
|
527
|
|
|
518
|
|
|
1,076
|
|
|
1,037
|
|
||||
Simponi
|
120
|
|
|
76
|
|
|
228
|
|
|
150
|
|
||||
Infectious Disease
|
|
|
|
|
|
|
|
||||||||
Isentress
|
412
|
|
|
398
|
|
|
775
|
|
|
735
|
|
||||
Cancidas
|
163
|
|
|
166
|
|
|
326
|
|
|
311
|
|
||||
PegIntron
|
142
|
|
|
183
|
|
|
268
|
|
|
345
|
|
||||
Invanz
|
120
|
|
|
110
|
|
|
230
|
|
|
211
|
|
||||
Victrelis
|
116
|
|
|
126
|
|
|
226
|
|
|
238
|
|
||||
Noxafil
|
71
|
|
|
66
|
|
|
136
|
|
|
125
|
|
||||
Oncology
|
|
|
|
|
|
|
|
||||||||
Temodar
|
219
|
|
|
225
|
|
|
434
|
|
|
461
|
|
||||
Emend
|
135
|
|
|
145
|
|
|
250
|
|
|
247
|
|
||||
Other
|
|
|
|
|
|
|
|
||||||||
Cosopt/Trusopt
|
103
|
|
|
105
|
|
|
209
|
|
|
229
|
|
||||
Bridion
|
69
|
|
|
60
|
|
|
131
|
|
|
118
|
|
||||
Integrilin
|
48
|
|
|
60
|
|
|
95
|
|
|
113
|
|
||||
Diversified Brands
|
|
|
|
|
|
|
|
||||||||
Cozaar/Hyzaar
|
255
|
|
|
337
|
|
|
522
|
|
|
674
|
|
||||
Primaxin
|
85
|
|
|
104
|
|
|
168
|
|
|
192
|
|
||||
Zocor
|
74
|
|
|
96
|
|
|
156
|
|
|
199
|
|
||||
Propecia
|
67
|
|
|
100
|
|
|
135
|
|
|
208
|
|
||||
Clarinex
|
64
|
|
|
140
|
|
|
125
|
|
|
273
|
|
||||
Claritin Rx
|
40
|
|
|
48
|
|
|
115
|
|
|
134
|
|
||||
Remeron
|
53
|
|
|
66
|
|
|
106
|
|
|
123
|
|
||||
Proscar
|
58
|
|
|
55
|
|
|
98
|
|
|
106
|
|
||||
Maxalt
|
43
|
|
|
154
|
|
|
83
|
|
|
310
|
|
||||
Vaccines
(1)
|
|
|
|
|
|
|
|
||||||||
Gardasil
|
383
|
|
|
324
|
|
|
773
|
|
|
608
|
|
||||
ProQuad/M-M-R II/Varivax
|
339
|
|
|
316
|
|
|
611
|
|
|
571
|
|
||||
Zostavax
|
141
|
|
|
148
|
|
|
309
|
|
|
224
|
|
||||
RotaTeq
|
144
|
|
|
142
|
|
|
306
|
|
|
284
|
|
||||
Pneumovax 23
|
108
|
|
|
101
|
|
|
219
|
|
|
213
|
|
||||
Other pharmaceutical
(2)
|
1,115
|
|
|
1,034
|
|
|
2,136
|
|
|
2,102
|
|
||||
Total Pharmaceutical segment sales
|
9,310
|
|
|
10,560
|
|
|
18,201
|
|
|
20,642
|
|
||||
Other segment sales
(3)
|
1,631
|
|
|
1,680
|
|
|
3,343
|
|
|
3,273
|
|
||||
Total segment sales
|
10,941
|
|
|
12,240
|
|
|
21,544
|
|
|
23,915
|
|
||||
Other
(4)
|
69
|
|
|
71
|
|
|
137
|
|
|
126
|
|
||||
|
$
|
11,010
|
|
|
$
|
12,311
|
|
|
$
|
21,681
|
|
|
$
|
24,041
|
|
(1)
|
These amounts do not reflect sales of vaccines sold in most major European markets through the Company’s joint venture, Sanofi Pasteur MSD, the results of which are reflected in Equity income from affiliates. These amounts do, however, reflect supply sales to Sanofi Pasteur MSD.
|
(2)
|
Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.
|
(3)
|
Represents the non-reportable segments of Animal Health, Consumer Care and Alliances. The Alliances segment includes revenue from the Company’s relationship with AZLP.
|
(4)
|
Other revenues are primarily comprised of miscellaneous corporate revenues, third-party manufacturing sales, sales related to divested products or businesses and supply sales not included in segment results.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Pharmaceutical segment profits
|
$
|
5,693
|
|
|
$
|
6,906
|
|
|
$
|
11,039
|
|
|
$
|
13,502
|
|
Other non-reportable segment profits
|
793
|
|
|
774
|
|
|
1,693
|
|
|
1,578
|
|
||||
Other
|
(5,241
|
)
|
|
(5,000
|
)
|
|
(9,937
|
)
|
|
(9,894
|
)
|
||||
Income before income taxes
|
$
|
1,245
|
|
|
$
|
2,680
|
|
|
$
|
2,795
|
|
|
$
|
5,186
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions except per share amounts)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Pretax income as reported under GAAP
|
$
|
1,245
|
|
|
$
|
2,680
|
|
|
$
|
2,795
|
|
|
$
|
5,186
|
|
Increase (decrease) for excluded items:
|
|
|
|
|
|
|
|
||||||||
Acquisition-related costs
|
1,768
|
|
|
1,417
|
|
|
3,005
|
|
|
2,706
|
|
||||
Restructuring costs
|
278
|
|
|
289
|
|
|
472
|
|
|
582
|
|
||||
Certain other items
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
||||
|
3,278
|
|
|
4,386
|
|
|
6,259
|
|
|
8,474
|
|
||||
Taxes on income as reported under GAAP
|
310
|
|
|
860
|
|
|
244
|
|
|
1,599
|
|
||||
Estimated tax benefit on excluded items
|
409
|
|
|
272
|
|
|
688
|
|
|
548
|
|
||||
Net tax benefit from resolution of legacy Schering-Plough federal income tax issue
|
—
|
|
|
—
|
|
|
160
|
|
|
—
|
|
||||
|
719
|
|
|
1,132
|
|
|
1,092
|
|
|
2,147
|
|
||||
Non-GAAP net income
|
2,559
|
|
|
3,254
|
|
|
5,167
|
|
|
6,327
|
|
||||
Less: Net income attributable to noncontrolling interests
|
29
|
|
|
27
|
|
|
52
|
|
|
56
|
|
||||
Non-GAAP net income attributable to Merck & Co., Inc.
|
$
|
2,530
|
|
|
$
|
3,227
|
|
|
$
|
5,115
|
|
|
$
|
6,271
|
|
|
|
|
|
|
|
|
|
||||||||
EPS assuming dilution as reported under GAAP
|
$
|
0.30
|
|
|
$
|
0.58
|
|
|
$
|
0.82
|
|
|
$
|
1.15
|
|
EPS difference
(1)
|
0.54
|
|
|
0.47
|
|
|
0.87
|
|
|
0.89
|
|
||||
Non-GAAP EPS assuming dilution
|
$
|
0.84
|
|
|
$
|
1.05
|
|
|
$
|
1.69
|
|
|
$
|
2.04
|
|
(1)
|
Represents 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 applicable period.
|
|
|
|
|||
Phase II
|
Phase III (Phase III entry date)
|
Under Review
|
|||
Allergy
|
Atherosclerosis
|
Allergy
|
|||
MK-8237, Immunotherapy
(1)
|
MK-0859 (anacetrapib) (May 2008)
|
MK-7243, Grass pollen (U.S.)
(1)
|
|||
Alzheimer’s Disease
|
Clostridium difficile
Infection
|
MK-3641, Ragweed (U.S.)
(1)
|
|||
MK-8931
(2)
|
MK-3415A (actoxumab/bezlotoxumab) (November 2011)
|
Insomnia
|
|||
Asthma
|
Contraception
|
MK-4305 (suvorexant) (U.S.)
(6)
|
|||
MK-1029
|
MK-8175A (NOMAC/E2) (U.S.) (June 2006)
(4)
|
Neuromuscular Blockade Reversal
|
|||
Bacterial Infection
|
Diabetes Mellitus
|
MK-8616 (sugammadex sodium
|
|||
MK-7655
|
MK-3102 (omarigliptin) (September 2012)
|
injection) (U.S.)
(7)
|
|||
Cancer
|
Fertility
|
Platinum-Resistant Ovarian Cancer
|
|||
MK-0646 (dalotuzumab)
|
MK-8962 (corifollitropin alfa injection) (U.S.) (July 2006)
|
MK-8109 (vintafolide) (EU)
|
|||
MK-1775
|
Hepatitis C
|
Thrombosis
|
|||
MK-2206
|
MK-7009 (vaniprevir) (June 2011)
(5)
|
MK-5348 (vorapaxar) (U.S.)
|
|||
MK-8669 (ridaforolimus)
|
Herpes Zoster
|
|
|||
CMV Prophylaxis in Transplant Patients
|
V212 (inactivated VZV vaccine) (December 2010)
|
|
|||
MK-8228 (letermovir)
|
HPV-Related Cancers
|
|
|||
Contraception, Medicated IUS
|
V503 (HPV vaccine (9 valent)) (September 2008)
|
|
|||
MK-8342
|
Osteoporosis
|
Footnotes:
|
|||
Contraception, Next Generation Ring
|
MK-0822 (odanacatib) (September 2007)
|
(1)
North American rights only.
|
|||
MK-8175A
|
Pediatric Hexavalent Combination Vaccine
|
(2)
Phase II/III adaptive design.
|
|||
MK-8342B
|
V419 (April 2011)
|
(3)
A new nonproprietary generic name for MK-3475 is under review by the United States Adopted Names Council.
|
|||
Diabetes
|
Platinum-Resistant Ovarian Cancer
|
||||
MK-8835 (ertugliflozin)
|
MK-8109 (vintafolide) (U.S.) (April 2011)
|
||||
Hepatitis C
|
Psoriasis
|
(4)
In November 2011, Merck received a Complete Response Letter (“CRL”) from the FDA for NOMAC/E2 (MK-8175A). The Company is conducting an additional clinical study requested by the FDA and plans to update the application in the future.
|
|||
MK-5172
|
MK-3222 (tildrakizumab) (December 2012)
|
||||
MK-8742
|
Thrombosis
|
||||
HIV
|
MK-5348 (vorapaxar) (EU) (September 2007)
|
||||
MK-1439
|
|
||||
Insomnia
|
|
(5)
For development in Japan only.
|
|||
MK-6096
|
|
(6)
In June 2013, Merck received a CRL from the FDA for suvorexant (MK-4305). The Company is evaluating the requests in the CRL and plans to submit definitive data in response to the FDA in the first half of 2014.
|
|||
Melanoma
|
|
||||
MK-3475
(3)
|
|
||||
Migraine
|
|
||||
MK-1602
|
|
(7)
In July 2013, in connection with the FDA's review, the FDA advised the Company that the agency needed additional time to assess the results of the FDA's recently completed inspection of a clinical trial site.
|
|||
Overactive Bladder
|
|
||||
MK-4618
|
|
||||
Pneumoconjugate Vaccine
|
|
||||
V114
|
|
|
|||
Rheumatoid Arthritis
|
|
|
|||
MK-8457
|
|
|
($ in millions)
|
June 30, 2013
|
|
December 31, 2012
|
||||
Cash and investments
|
$
|
26,653
|
|
|
$
|
23,446
|
|
Working capital
|
18,593
|
|
|
16,509
|
|
||
Total debt to total liabilities and equity
|
26.3
|
%
|
|
19.4
|
%
|
|
|
|
|
|
($ in millions)
|
|
Period
|
Total Number
of Shares
Purchased
(1)
|
|
Average Price
Paid Per
Share
|
|
Approximate Dollar Value of Shares
That May Yet Be Purchased
Under the Plans or Programs
(1)
|
|
April 1 - April 30
|
4,184,900
|
|
|
$46.02
|
|
$1,122
|
May 1 - May 31
|
103,546,792
|
|
|
$45.25
|
|
$10,937
(2)
|
June 1 - June 30
|
3,088,424
|
|
|
$47.65
|
|
$10,790
|
Total
|
110,820,116
|
|
|
$45.35
|
|
$10,790
|
(1)
|
All shares purchased during the period were made as part of plans approved by the Board of Directors in April 2011 to purchase up to $5 billion in Merck shares and in May 2013 to purchase up to $15 billion in Merck shares.
|
(2)
|
Amount reflects an increase of $15 billion approved by the Board of Directors in May 2013, a $4.7 billion decrease as a result of shares purchased in May at the average price indicated, including $4.5 billion in conjunction with an accelerated share repurchase agreement (“ASR”), and a $500 million decrease relating to the stock held back pending final settlement of the ASR.
|
Number
|
|
Description
|
|
|
|
||
3.1
|
|
|
Restated Certificate of Incorporation of Merck & Co., Inc. (November 3, 2009) – Incorporated by reference to Current Report on Form 8-K filed on November 4, 2009
|
|
|
||
3.2
|
|
|
By-Laws of Merck & Co., Inc. (effective January 1, 2012) – Incorporated by reference to Current Report on Form 8-K filed December 21, 2011
|
|
|
||
10
|
|
|
Accelerated Share Purchase Agreement between Merck & Co., Inc. and Goldman, Sachs & Co. dated May 20, 2013
|
|
|
|
|
31.1
|
|
|
Rule 13a – 14(a)/15d – 14(a) Certification of Chief Executive Officer
|
|
|
||
31.2
|
|
|
Rule 13a – 14(a)/15d – 14(a) Certification of Chief Financial Officer
|
|
|
||
32.1
|
|
|
Section 1350 Certification of Chief Executive Officer
|
|
|
||
32.2
|
|
|
Section 1350 Certification of Chief Financial Officer
|
|
|
||
101
|
|
|
The following materials from Merck & Co., Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Interim Consolidated Statement of Income, (ii) the Interim Consolidated Statement of Comprehensive Income, (iii) the Interim Consolidated Balance Sheet, (iv) the Consolidated Statement of Cash Flows, and (v) Notes to Interim Consolidated Financial Statements.
|
|
|
MERCK & CO., INC.
|
|
|
|
Date: August 7, 2013
|
|
/s/ Bruce N. Kuhlik
|
|
|
BRUCE N. KUHLIK
|
|
|
Executive Vice President and General Counsel
|
|
|
|
Date: August 7, 2013
|
|
/s/ John Canan
|
|
|
JOHN CANAN
|
|
|
Senior Vice President Finance - Global Controller
|
Number
|
|
Description
|
|
|
|
||
3.1
|
|
|
Restated Certificate of Incorporation of Merck & Co., Inc. (November 3, 2009) – Incorporated by reference to Current Report on Form 8-K filed on November 4, 2009
|
|
|
||
3.2
|
|
|
By-Laws of Merck & Co., Inc. (effective January 1, 2012) – Incorporated by reference to Current Report on Form 8-K filed December 21, 2011
|
|
|
||
10
|
|
|
Accelerated Share Purchase Agreement between Merck & Co., Inc. and Goldman, Sachs & Co. dated May 20, 2013
|
|
|
|
|
31.1
|
|
|
Rule 13a – 14(a)/15d – 14(a) Certification of Chief Executive Officer
|
|
|
||
31.2
|
|
|
Rule 13a – 14(a)/15d – 14(a) Certification of Chief Financial Officer
|
|
|
||
32.1
|
|
|
Section 1350 Certification of Chief Executive Officer
|
|
|
||
32.2
|
|
|
Section 1350 Certification of Chief Financial Officer
|
|
|
||
101
|
|
|
The following materials from Merck & Co., Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Interim Consolidated Statement of Income, (ii) the Interim Consolidated Statement of Comprehensive Income, (iii) the Interim Consolidated Balance Sheet, (iv) the Interim Consolidated Statement of Cash Flows, and (v) Notes to Interim Consolidated Financial Statements.
|
To:
|
Merck & Co., Inc.
|
A/C:
|
46115226
|
From:
|
Goldman, Sachs & Co.
|
Re:
|
Accelerated Stock Buyback
|
Ref. No:
|
As provided in the Supplemental Confirmation
|
Date:
|
May 20, 2013
|
|
|
Trade Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
Buyer:
|
Counterparty
|
Seller:
|
GS&Co.
|
Shares:
|
Common stock, par value $0.50 per share, of Counterparty (Ticker: MRK)
|
Exchange:
|
New York Stock Exchange.
|
Related Exchange(s):
|
All Exchanges.
|
Obligation:
|
Applicable
|
Prepayment Amount:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
Prepayment Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
VWAP Price:
|
For any Exchange Business Day, as determined by the Calculation Agent based on the 10b-18 Volume Weighted Average Price per Share for the regular trading session (including any extensions thereof) of the Exchange on such Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session for such Exchange Business Day), as published by Bloomberg at 4:15 p.m. New York time (or 15 minutes following the end of any extension of the regular trading session) on such Exchange Business Day, on Bloomberg page “MRK <Equity> AQR_SEC” (or any successor thereto), or if such price is not so reported on such Exchange Business Day for any reason or is, in the Calculation Agent’s determination, erroneous, such VWAP Price shall be as determined by the Calculation Agent.
For purposes of calculating the VWAP Price for such Exchange Business Day, the Calculation Agent will include only those trades that are reported during the period of time during which Counterparty could purchase its own shares under Rule 10b-18(b)(2) and are effected pursuant to the conditions of Rule 10b-18(b)(3), each under the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”) (such trades, “
Rule 10b-18 eligible transactions
”).
|
Forward Price:
|
The average of the VWAP Prices for the Exchange Business Days in the Calculation Period, subject to “Valuation Disruption” below.
|
Adjustment Amount:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
Calculation Period:
|
The period from and including the Calculation Period Start Date to and including the Termination Date.
|
Calculation Period Start Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
Termination Date:
|
The Scheduled Termination Date;
provided
that GS&Co. shall have the right to designate any Exchange Business Day on or after the First Acceleration Date to be the Termination Date (the “
Accelerated Termination Date
”) by delivering notice to Counterparty of any such designation prior to 11:59 p.m. New York City time on the Exchange Business Day immediately following the designated Accelerated Termination Date.
|
Scheduled Termination Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation, subject to postponement as provided in “Valuation Disruption” below.
|
First Acceleration Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
Valuation Disruption:
|
The definition of “Market Disruption Event” in Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words “at any time during the one-hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be” and inserting the words “at any time on any Scheduled Trading Day during the Calculation Period or Settlement Valuation Period” after the word “material,” in the third line thereof.
|
Settlement Procedures:
|
If the Number of Shares to be Delivered is positive, Physical Settlement shall be applicable;
provided
that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representation therein relating to restrictions, obligations, limitations or requirements under applicable securities laws arising as a result of the fact that Counterparty is the Issuer of the Shares. If the Number of Shares to be Delivered is negative, then the Counterparty Settlement Provisions in Annex A shall apply.
|
to be Delivered:
|
A number of Shares equal to (x)(a) the Prepayment Amount
divided by
(b) the Divisor Amount
minus
(y) the number of Initial Shares.
|
Divisor Amount:
|
The greater of (i) the Forward Price
minus
the Forward Price Adjustment Amount and (ii) USD 1.00.
|
Excess Dividend Amount:
|
For the avoidance of doubt, all references to the Excess Dividend Amount shall be deleted from Section 9.2(a)(iii) of the Equity Definitions.
|
Settlement Date:
|
If the Number of Shares to be Delivered is positive, the date that is one Settlement Cycle immediately following the Termination Date.
|
Settlement Currency:
|
USD
|
Initial Share Delivery:
|
GS&Co. shall deliver a number of Shares equal to the Initial Shares to Counterparty on the Initial Share Delivery Date in accordance with Section 9.4 of the Equity Definitions, with the Initial Share Delivery Date deemed to be a “Settlement Date” for purposes of such Section 9.4.
|
Initial Share Delivery Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
Initial Shares:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
Potential Adjustment Event:
|
Notwithstanding anything to the contrary in Section 11.2(e) of the Equity Definitions, an Extraordinary Dividend shall not constitute a Potential Adjustment Event.
|
Extraordinary Dividend:
|
For any calendar quarter, any dividend or distribution on the Shares with an ex-dividend date occurring during such calendar quarter (other than any dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) of the Equity Definitions) (a “
Dividend
”) the amount or value of which (as determined by the Calculation Agent), when aggregated with the amount or value (as determined by the Calculation Agent) of any and all previous Dividends with ex-dividend dates occurring in the same calendar quarter, exceeds the Ordinary Dividend Amount.
|
Ordinary Dividend Amount:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
Method of Adjustment:
|
Calculation Agent Adjustment
|
Payment:
|
If an ex-dividend date for any Dividend that is not an Extraordinary Dividend occurs during any calendar quarter occurring (in whole or in part) during the Relevant Period (as defined below) and is prior to the Scheduled Ex-Dividend Date for such calendar quarter, the Calculation Agent shall make such adjustment to the exercise, settlement, payment or any other terms of the relevant Transaction as the Calculation Agent determines appropriate to account for the economic effect on such Transaction of such event.
|
Dates:
|
For each Transaction for each calendar quarter, as set forth in the related Supplemental Confirmation.
|
(a)
|
Share-for-Share:
|
Modified Calculation Agent Adjustment
|
|
|
|
(b)
|
Share-for-Other:
|
Cancellation and Payment
|
|
|
|
(c)
|
Share-for-Combined:
|
Component Adjustment
|
Tender Offer:
|
Applicable;
provided
that (i) Section 12.1(d) of the Equity Definitions shall be amended by replacing “10%” in the third line thereof with “15%,” (ii) Section 12.1(l) of the Equity Definitions shall be amended (x) by deleting the parenthetical in the fifth line thereof, (y) by replacing “that” in the fifth line thereof with “whether or not such announcement” and (z) by adding immediately after the words “Tender Offer” in the fifth line thereof “, and any publicly announced change or amendment to such an announcement (including the announcement of an abandonment of such intention)” and (ii) Sections 12.3(a) and 12.3(d) of the Equity Definitions shall each be amended by replacing each occurrence of the words “Tender Offer Date” by “Announcement Date.”
|
(a)
|
Share-for-Share:
|
Modified Calculation Agent Adjustment
|
|
|
|
(b)
|
Share-for-Other:
|
Modified Calculation Agent Adjustment
|
|
|
|
(c)
|
Share-for-Combined:
|
Modified Calculation Agent Adjustment
|
Insolvency or Delisting:
|
Cancellation and Payment;
provided
that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is
|
(a) Change in Law:
|
Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “, or public announcement of, the formal interpretation”, (ii) by replacing the word “Shares” where it appears in clause (X) thereof with the words “Hedge Position” and (iii) by immediately following the word “Transaction” in clause (X) thereof, adding the phrase “in the manner contemplated by the Hedging Party on the Trade Date”; provided further that (i) any determination as to whether (A) the adoption of or any change in any applicable law or regulation (including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute) or (B) the promulgation of or any change in the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law or regulation (including any action taken by a taxing authority), in each case, constitutes a “Change in Law” shall be made without regard to Section 739 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 or any similar legal certainty provision in any legislation enacted, or rule or regulation promulgated, on or after the Trade Date, and (ii) Section 12.9(a)(ii) of the Equity Definitions is hereby amended by replacing the parenthetical beginning after the word “regulation” in the second line thereof the words “(including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute)”.
|
(b) Failure to Deliver:
|
Applicable
|
(c) Insolvency Filing:
|
Applicable
|
(d) Loss of Stock Borrow:
|
Applicable
|
Maximum Stock Loan Rate:
|
150 basis points per annum
|
(e) Increased Cost of Stock Borrow:
|
Applicable
|
Initial Stock Loan Rate:
|
50 basis points per annum
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Hedging Party:
|
GS&Co.
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Determining Party:
|
GS&Co.
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Additional Termination Event(s):
|
Notwithstanding anything to the contrary in the Equity Definitions, if, as a result of an Extraordinary Event, any Transaction would be cancelled or terminated (whether in whole or in part) pursuant to Article 12 of the Equity Definitions, an Additional Termination Event (with such terminated Transaction(s) (or portions thereof) being the Affected Transaction(s) and Counterparty being the sole Affected Party) shall be deemed to occur, and, in lieu of Sections 12.7, 12.8 and 12.9 of the Equity Definitions, Section 6 of the Agreement shall apply to such Affected Transaction(s).
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Relevant Dividend Period:
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The period from and including the Calculation Period Start Date to and including the Relevant Dividend Period End Date.
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End Date:
|
If the Number of Shares to be Delivered is negative, the last day of the Settlement Valuation Period; otherwise, the Termination Date.
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Acknowledgements:
|
Applicable
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Transfer:
|
Notwithstanding anything to the contrary in the Agreement, GS&Co. may assign, transfer and set over all rights, title and interest, powers, privileges and remedies of GS&Co. under any Transaction, in whole or in part, to an affiliate of GS&Co. whose obligations are guaranteed by The Goldman Sachs Group, Inc. without the consent of Counterparty, but only if (i) Counterparty will not be required to pay (including a payment in kind) to the transferee an amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) of the Agreement (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e) of the Agreement) greater than the amount in respect of which Counterparty would have been required to pay to GS&Co. in the absence of such transfer; (ii) Counterparty will not receive a payment (including a payment in kind) from which an amount had been withheld or deducted, on account of a Tax under Section 2(d)(i) of the Agreement (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e) of the Agreement), in excess of that which GS&CO. would have been required to so withhold or deduct in the absence of such transfer, unless the transferee will be required to make additional payments pursuant to Section 2(d)(i)(4) of the Agreement in respect of such excess; (iii) GS&Co. shall have caused the transferee to make such Payee Tax Representations and to provide such tax documentation as may be reasonably requested by Counterparty to permit Counterparty to determine that the results described in (i) above will not occur upon or after such transfer; and (iv) such transferee is a “dealer” within the meaning of Treasury Regulation Section 1.1001-4T(b)(1).
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Tax Form Deliverables:
|
For purposes of Section 3(f) of the Agreement, GS&Co. represents that it is a “U.S. person” (as that term is used in Sections 1.1441-1(c) and 1-1441-4(a)(3)(ii) of the United States Treasury Regulations) for U.S. federal income tax purposes.
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GS&Co. Payment Instructions:
|
Chase Manhattan Bank New York
|
for Purpose of Giving Notice:
|
To be provided by Counterparty
|
Purpose of Giving Notice:
|
Goldman, Sachs & Co.
|
By:
|
/s/ Mark E. McDonough
|
To:
|
Merck & Co., Inc.
|
From:
|
Goldman, Sachs & Co.
|
Subject:
|
Accelerated Stock Buyback
|
Ref. No:
|
[Insert Reference No.]
|
Date:
|
[Insert Date]
|
Trade Date:
|
[ ]
|
Forward Price Adjustment Amount:
|
USD [ ]
|
Calculation Period Start Date:
|
[ ]
|
Scheduled Termination Date:
|
[ ]
|
First Acceleration Date:
|
[ ]
|
Prepayment Amount:
|
USD [ ]
|
Prepayment Date:
|
[ ]
|
Initial Shares:
|
[ ] Shares;
provided
that if, in connection with the Transaction, GS&Co. is unable, after using commercially reasonable efforts, to borrow or otherwise acquire a number of Shares equal to the Initial Shares for delivery to Counterparty on the Initial Share Delivery Date, the Initial Shares delivered on the Initial Share Delivery Date shall be reduced to such number of Shares that GS&Co. is able to so borrow or otherwise acquire;
provided further
that (i) if the Initial Shares are reduced as provided in the preceding proviso, then GS&Co. shall use commercially reasonable efforts to borrow or otherwise acquire an additional number of Shares equal to the shortfall in the Initial Shares delivered on the Initial Share Delivery Date and shall deliver such additional Shares as promptly as practicable, and all Shares so delivered shall be considered Initial Shares, and (ii) if fewer than [same number as above] Initial Shares are so delivered in the aggregate on or prior to the second Exchange Business Day following the Initial Share Delivery Date, then (A) the Prepayment Amount shall be reduced by an amount equal to (x)(I) [same number as above]
minus
(II) the aggregate number of Initial Shares so delivered on or prior to such second Exchange Business Day
multiplied by
(y) USD [insert closing price on the Trade Date]
divided by
(z) [ ], and (B) GS&Co. shall return to Counterparty on such second Exchange Business Day the amount by which the Prepayment Amount is so reduced.
|
Initial Share Delivery Date:
|
[ ]
|
Ordinary Dividend Amount:
|
For any calendar quarter, USD [ ]
|
Scheduled Ex-Dividend Dates:
|
[ ]
|
Termination Price:
|
USD [ ] per Share
|
Additional Relevant Days:
|
The [ ] Exchange Business Days immediately following the Calculation Period.
|
Concurrent OMR Parameters:
|
Up to USD [ ] total repurchase price, up to [ ]% of ADTV (as defined in Rule 10b-18) daily repurchase amount;
provided
that in no event shall the number of Shares purchased in Open Market Repurchases on any Exchange Business Day exceed the excess, if any, of (x) 25% of ADTV calculated as of such Exchange Business Day over (y) 15% of ADTV calculated as of the Trade Date.
|
By:
|
_______________________________
|
Settlement Currency:
|
USD
|
Settlement Method Election:
|
Applicable;
provided
that Section 7.1 of the Equity Definitions is hereby amended by deleting the word “Physical” in the sixth line thereof and replacing it with the words “Net Share”.
|
Electing Party:
|
Counterparty
|
Election Date:
|
The Exchange Business Day immediately following the date on which Counterparty receives notice of the last Scheduled Trading Day of the Settlement Valuation Period.
|
Default Settlement Method:
|
Cash Settlement
|
Amount:
|
The Number of Shares to be Delivered
multiplied by
the Settlement Price.
|
Settlement Price:
|
The average of the VWAP Prices for the Exchange Business Days in the Settlement Valuation Period, subject to Valuation Disruption as specified in the Master Confirmation.
|
Settlement Valuation Period:
|
A number of Scheduled Trading Days selected by GS&Co. in its reasonable discretion by notice to Counterparty on or prior to the second Scheduled Trading Day prior to the last Scheduled Trading Day thereof, beginning on the Scheduled Trading Day immediately following the earlier of (i) the Scheduled Termination Date or (ii) the Exchange Business Day immediately following the Termination Date.
|
Cash Settlement:
|
If Cash Settlement is applicable, then Buyer shall pay to Seller the absolute value of the Forward Cash Settlement Amount on the Cash Settlement Payment Date.
|
Payment Date:
|
The date one Settlement Cycle following the last day of the Settlement Valuation Period.
|
Procedures:
|
If Net Share Settlement is applicable, Net Share Settlement shall be made in accordance with paragraphs 2 through 7 below.
|
Where
|
A = the number of authorized but unissued shares of the Counterparty that are not reserved for future issuance on the date of the determination of the Capped Number; and
|
By:
|
/s/ Kenneth C. Frazier
|
|
KENNETH C. FRAZIER
Chairman, President and Chief Executive Officer
|
By:
|
/s/ Peter N. Kellogg
|
|
PETER N. KELLOGG
|
|
Executive Vice President & Chief Financial Officer
|
|
|
|
Dated: August 7, 2013
|
/s/ Kenneth C. Frazier
|
|
|
Name:
|
KENNETH C. FRAZIER
|
|
Title:
|
Chairman, President and Chief Executive Officer
|
|
|
|
Dated: August 7, 2013
|
/s/ Peter N. Kellogg
|
|
|
Name:
|
PETER N. KELLOGG
|
|
Title:
|
Executive Vice President & Chief Financial Officer
|