##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to
  MERCK
& CO., INC.
 
 Incorporated in New Jersey
    
    I.R.S. Employer IdentificationNo. 22-1109110
  Class
    
    Number of Shares OutstandingCommon Stock
    
    2,195,582,795
  Yesþ
    
    Noo
  Yesþ
    
    Noo




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TABLE OF CONTENTS  Part I  Financial InformationItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 4. Controls and ProceduresPART II   Other InformationItem 1. Legal ProceedingsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 4. Submission of Matters to a Vote of Security HoldersItem 6. ExhibitsSignaturesEXHIBIT INDEXEX-12: COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGESEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION    Table of Contents  
 Part I  Financial Information
 
 Item 1. Financial Statements
  THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004
 Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Sales
    
    $
    5,467.5
    
    
    $
    6,021.7
    
    
    $
    10,829.8
    
    
    $
    11,652.6Costs, Expenses and OtherMaterials and production
    
    
    1,160.6
    
    
    
    1,163.7
    
    
    
    2,432.0
    
    
    
    2,311.9Marketing and administrative
    
    
    1,755.3
    
    
    
    1,616.2
    
    
    
    3,368.6
    
    
    
    3,227.6Research and development
    
    
    946.8
    
    
    
    986.0
    
    
    
    1,793.4
    
    
    
    1,982.3Equity income from affiliates
    
    
    (334.1
    )
    
    
    (220.5
    )
    
    
    (650.4
    )
    
    
    (415.2
    )Other (income) expense, net
    
    
    14.0
    
    
    
    37.5
    
    
    
    40.6
    
    
    
    (235.7
    )3,542.6
    
    
    
    3,582.9
    
    
    
    6,984.2
    
    
    
    6,870.9Income Before Taxes
    
    
    1,924.9
    
    
    
    2,438.8
    
    
    
    3,845.6
    
    
    
    4,781.7Taxes on Income
    
    
    1,204.3
    
    
    
    670.7
    
    
    
    1,754.9
    
    
    
    1,395.0Net Income
    
    $
    720.6
    
    
    $
    1,768.1
    
    
    $
    2,090.7
    
    
    $
    3,386.7Basic Earnings per Common Share
    
    
    $.33
    
    
    
    $.80
    
    
    
    $.95
    
    
    
    $1.52Earnings per Common Share Assuming Dilution
    
    
    $.33
    
    
    
    $.79
    
    
    
    $.95
    
    
    
    $1.52Dividends Declared per Common Share
    
    
    $.38
    
    
    
    $.37
    
    
    
    $.76
    
    
    
    $.74
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JUNE 30, 2005 AND DECEMBER 31, 2004
 June 30
    
    December 312005
    
    2004ASSETSCurrent AssetsCash and cash equivalents
    
    $
    1,917.6
    
    
    $
    2,878.8Short-term investments
    
    
    11,113.1
    
    
    
    4,211.1Accounts receivable
    
    
    3,506.7
    
    
    
    3,627.7Inventories (excludes inventories of $756.5 in 2005 and $638.7 in 2004
classified in Other assets-see Note 4)
    
    
    1,811.2
    
    
    
    1,898.7Prepaid expenses and taxes
    
    
    780.7
    
    
    
    858.9Total current assets
    
    
    19,129.3
    
    
    
    13,475.2Investments
    
    
    1,358.4
    
    
    
    6,727.1Property, Plant and Equipment, at cost,
net of allowance for depreciation of
$8,673.5 in 2005 and $8,094.9 in 2004
    
    
    14,670.3
    
    
    
    14,713.7Goodwill
    
    
    1,085.7
    
    
    
    1,085.7Other Intangibles, net
    
    
    589.3
    
    
    
    679.2Other Assets
    
    
    6,173.3
    
    
    
    5,891.9$
    43,006.3
    
    
    $
    42,572.8LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesLoans payable and current portion of long-term debt
    
    $
    1,494.4
    
    
    $
    2,181.2Trade accounts payable
    
    
    409.1
    
    
    
    421.4Accrued and other current liabilities
    
    
    4,956.0
    
    
    
    5,288.1Income taxes payable
    
    
    3,497.6
    
    
    
    3,012.3Dividends payable
    
    
    836.3
    
    
    
    841.1Total current liabilities
    
    
    11,193.4
    
    
    
    11,744.1Long-Term Debt
    
    
    5,672.4
    
    
    
    4,691.5Deferred Income Taxes and Noncurrent Liabilities
    
    
    6,347.0
    
    
    
    6,442.1Minority Interests
    
    
    2,408.4
    
    
    
    2,406.9Stockholders EquityCommon stockAuthorized - 5,400,000,000 sharesIssued - 2,976,230,393 shares
    
    
    29.8
    
    
    
    29.8Other paid-in capital
    
    
    6,824.3
    
    
    
    6,869.8Retained earnings
    
    
    37,041.6
    
    
    
    36,626.3Accumulated other comprehensive income (loss)
    
    
    5.3
    
    
    
    (45.9
    )43,901.0
    
    
    
    43,480.0Less treasury stock, at cost778,175,068 shares - June 30, 2005767,591,491 shares - December 31, 2004
    
    
    26,515.9
    
    
    
    26,191.8Total stockholders equity
    
    
    17,385.1
    
    
    
    17,288.2$
    43,006.3
    
    
    $
    42,572.8
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SIX MONTHS ENDED JUNE 30, 2005 AND 2004
 Six MonthsEnded June 302005
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet Income
    
    $
    2,090.7
    
    
    $
    3,386.7Adjustments to reconcile net income to cash provided from operations:Depreciation and amortization
    
    
    779.1
    
    
    
    700.5Deferred income taxes
    
    
    (26.1
    )
    
    
    188.0Other
    
    
    100.4
    
    
    
    (67.0
    )Net changes in assets and liabilities
    
    
    172.0
    
    
    
    (31.9
    )NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    3,116.1
    
    
    
    4,176.3CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (662.4
    )
    
    
    (762.1
    )Purchase of securities, subsidiaries and other investments
    
    
    (59,787.2
    )
    
    
    (26,708.0
    )Proceeds from sale of securities, subsidiaries and other investments
    
    
    58,221.1
    
    
    
    25,869.3Banyu acquisition
    
    
    
    
    
    
    (10.1
    )Other
    
    
    (0.8
    )
    
    
    (1.5
    )NET CASH USED BY INVESTING ACTIVITIES
    
    
    (2,229.3
    )
    
    
    (1,612.4
    )CASH FLOWS FROM FINANCING ACTIVITIESNet change in short-term borrowings
    
    
    (169.2
    )
    
    
    (548.1
    )Proceeds from issuance of debt
    
    
    1,000.0
    
    
    
    405.1Payments on debt
    
    
    (508.1
    )
    
    
    (4.0
    )Purchase of treasury stock
    
    
    (508.7
    )
    
    
    (444.0
    )Dividends paid to stockholders
    
    
    (1,680.2
    )
    
    
    (1,645.8
    )Other
    
    
    142.6
    
    
    
    75.9NET CASH USED BY FINANCING ACTIVITIES
    
    
    (1,723.6
    )
    
    
    (2,160.9
    )EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
    
    
    (124.4
    )
    
    
    (4.2
    )NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (961.2
    )
    
    
    398.8CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    2,878.8
    
    
    
    1,201.0CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    1,917.6
    
    
    $
    1,599.8
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Notes to Consolidated Financial Statements
 1.
    
    The accompanying unaudited interim consolidated financial statements have been prepared
pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain
information and disclosures required by accounting principles generally accepted in the
United States for complete consolidated financial statements are not included herein. The
interim statements should be read in conjunction with the financial statements and notes
thereto included in the Companys latest Annual Report on Form 10-K.The results of operations of any interim period are not necessarily indicative of the results
of operations for the full year. In the Companys opinion, all adjustments necessary for a
fair presentation of these interim statements have been included and are of a normal and
recurring nature.Certain reclassifications have been made to prior year amounts to conform with current year
presentation.2.
    
    In September 2004, the Company announced a voluntary worldwide withdrawal of Vioxx, its
arthritis and acute pain medication. The Companys decision, which was effective
immediately, was based on new three-year data from a prospective, randomized,
placebo-controlled clinical trial, APPROVe (Adenomatous Polyp Prevention on Vioxx).In connection with the withdrawal, the Company recorded an unfavorable adjustment to net
income of $552.6 million, or $.25 per share, in the third quarter 2004. The adjustment to
pre-tax income was $726.2 million. Of this amount, $491.6 million related to estimated
customer returns of product previously sold and was recorded as a reduction of Sales, $93.2
million related to write-offs of inventory held by the Company and was recorded in Materials
and production expense, and $141.4 million related to estimated costs to undertake the
withdrawal of the product and was recorded in Marketing and administrative expense. The tax
benefit of this adjustment was $173.6 million, which reflects the geographical mix of Vioxx
returns and the cost of the withdrawal. The adjustment did not include charges for future
legal defense costs (see Note 6). As of June 30, 2005, the Vioxxwithdrawal process was
substantially complete and the costs associated with the withdrawal were in line with the
original amounts estimated by the Company.3.
    
    The Company grants performance share units (PSUs) and restricted stock units (RSUs), in
addition to stock options, to certain management level employees. Both PSU and RSU payouts
will be in shares of Company stock after the end of a three-year period, subject to the
terms applicable to such awards. Additionally, PSU payouts will be contingent on the
Companys performance against a pre-set objective or set of objectives.Employee stock-based compensation is recognized using the intrinsic value method. Generally,
employee stock options are granted to purchase shares of Company stock at the fair market
value at the time of grant. Accordingly, no compensation expense is recognized for the
Companys stock-based compensation plans other than for its employee performance-based awards
(including PSUs), RSUs and options granted to employees of certain equity method investees.The effect on net income and earnings per common share if the Company had applied the fair
value method for recognizing employee stock-based compensation is as follows:
 ($ in millions)Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Net income, as reported
    
    $
    720.6
    
    
    $
    1,768.1
    
    
    $
    2,090.7
    
    
    $
    3,386.7Compensation expense, net of tax:Reported
    
    
    7.8
    
    
    
    5.9
    
    
    
    14.1
    
    
    
    10.3Fair value method
    
    
    (80.4
    )
    
    
    (122.5
    )
    
    
    (188.8
    )
    
    
    (239.5
    )Pro forma net income
    
    $
    648.0
    
    
    $
    1,651.5
    
    
    $
    1,916.0
    
    
    $
    3,157.5Earnings per common share:Basic  as reported
    
    
    $.33
    
    
    
    $.80
    
    
    
    $.95
    
    
    
    $1.52Basic  pro forma
    
    
    $.29
    
    
    
    $.74
    
    
    
    $.87
    
    
    
    $1.42Assuming dilution  as reported
    
    
    $.33
    
    
    
    $.79
    
    
    
    $.95
    
    
    
    $1.52Assuming dilution  pro forma
    
    
    $.29
    
    
    
    $.74
    
    
    
    $.87
    
    
    
    $1.41
 -4-




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Notes to Consolidated Financial Statements
  4.
    
    Inventories consisted of:
 ($ in millions)June 30
    
    December 312005
    
    2004Finished goods
    
    $
    457.4
    
    
    $
    376.8Raw materials and work in process
    
    
    2,066.7
    
    
    
    2,166.8Supplies
    
    
    85.5
    
    
    
    94.7Total (approximates current cost)
    
    
    2,609.6
    
    
    
    2,638.3Reduction to LIFO cost for domestic inventories
    
    
    (41.9
    )
    
    
    (100.9
    )$
    2,567.7
    
    
    $
    2,537.4Recognized as:Inventories
    
    $
    1,811.2
    
    
    $
    1,898.7Other assets
    
    
    756.5
    
    
    
    638.7
 Arcoxia
 5.
    
    In February 2005, the Company issued $1.0 billion of 4.75% ten-year notes. In addition,
the Company established a $1.5 billion, 5-year revolving credit facility to provide backup
liquidity for its commercial paper borrowing facility and for general corporate purposes.
The Company has not drawn funding from this facility.6.
    
    The Company is involved in various claims and legal proceedings of a nature considered
normal to its business, including product liability, intellectual property and commercial
litigation, as well as additional matters such as antitrust actions. The following updates
previous disclosures.
 Vioxx
Litigation  Product Liability Lawsuits
 Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx
 Vioxx
 Vioxx
 -5-




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Notes to Consolidated Financial Statements
  Vioxx Vioxx Vioxx
 Shareholder Lawsuits
 Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx
 Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx
 Vioxx
 Vioxx
 -6-




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Notes to Consolidated Financial Statements
 Vioxx Vioxx Vioxx Vioxx Vioxx
 Vioxx Vioxx Vioxx
 International
Lawsuits  Vioxx Vioxx
 Additional
Lawsuits  Vioxx Vioxx Vioxx Vioxx
 Insurance  Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx
 Vioxx Vioxx
 Investigations  Vioxx Vioxx Vioxx. Vioxx Vioxx
 -7-




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Notes to Consolidated Financial Statements
 Reserves  Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx
 Commercial
Litigation
    -8-




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Notes to Consolidated Financial Statements
 Pepcid
  Governmental
Proceedings  Pepcid
  Tienam Tienam Tienam Tienam Tienam Tienam
  Vaccine
Litigation  M-M-R
 -9-




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Notes to Consolidated Financial Statements
   M-M-R
 Patent
Litigation  Fosamax Prilosec Propecia Prilosec Prilosec
 -10-




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Notes to Consolidated Financial Statements
 Fosamax Fosamax Fosamax Fosamax Fosamax
        Propecia
 -11-




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Notes to Consolidated Financial Statements
 Environmental Matters
 Other Litigation
     7.
    
    As previously disclosed, in October 2004, the American Jobs Creation Act of 2004 (the AJCA)
was signed into law. The AJCA creates temporary incentives for U.S. multinationals to
repatriate accumulated income earned outside the United States as of December 31, 2002. In
accordance with the AJCA, the Company will repatriate $15 billion during 2005. The Company
has recorded an income tax charge of $740 million in Taxes on Income in the second
 -12-




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Notes to Consolidated Financial Statements
 quarter related to this repatriation. This charge was partially offset by a $100 million
benefit associated with a decision to implement certain tax planning
strategies.The Company has not changed its intention to indefinitely reinvest accumulated earnings earned
subsequent to December 31, 2002. No provision will be made for income taxes that would be
payable upon the distributions of such earnings and it is not practicable to determine the
amount of the related unrecognized deferred income tax liability.8.
    
    As previously disclosed, the IRS has substantially completed its examination of the
Companys tax returns for the years 1993 to 1996 and on April 28, 2004 issued a preliminary
notice of deficiency with respect to a partnership transaction entered into in 1993.
Specifically, the IRS is proposing to disallow certain royalty and other expenses claimed as
deductions on the 1993-1996 tax returns of the Company. The Company anticipates receiving a
similar notice for 1997-1999, shortly. If the IRS ultimately prevails in its positions, the
Companys income tax due for the years 1993-1999 would increase by approximately $970
million plus interest of approximately $580 million. The IRS will likely make similar
claims for years subsequent to 1999 in future audits with respect to this transaction. The
potential disallowance for these later years, computed on a similar basis to the 1993-1999
disallowances, would be approximately $540 million plus interest of approximately $60
million. The IRS has proposed penalties on the Company with respect to all periods that
have been examined and the Company anticipates the IRS would seek to impose penalties on all
other periods.The Company vigorously disagrees with the proposed adjustments and intends to aggressively
contest this matter through applicable IRS and judicial procedures, as appropriate. Although
the final resolution of the proposed adjustments is uncertain and involves unsettled areas of
the law, based on currently available information, the Company has provided for the best
estimate of the probable tax liability for this matter. While the resolution of the issue may
result in tax liabilities which are significantly higher or lower than the reserves
established for this matter, management currently believes that the resolution will not have a
material effect on the Companys financial position or liquidity. However, an unfavorable
resolution could have a material effect on the Companys results of operations or cash flows
in the quarter in which an adjustment is recorded or the tax is due or paid.9.
    
    The Company has defined benefit pension plans covering eligible employees in the United
States and in certain of its international subsidiaries. The net cost of such plans
consisted of the following components:
 ($ in millions)Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Service cost
    
    $
    80.7
    
    
    $
    82.1
    
    
    $
    165.6
    
    
    $
    152.6Interest cost
    
    
    78.3
    
    
    
    80.0
    
    
    
    157.3
    
    
    
    143.9Expected return on plan assets
    
    
    (100.0
    )
    
    
    (100.7
    )
    
    
    (201.2
    )
    
    
    (181.6
    )Net amortization
    
    
    38.1
    
    
    
    30.1
    
    
    
    76.6
    
    
    
    60.0Termination benefits
    
    
    
    
    
    
    1.6
    
    
    
    
    
    
    
    7.1$
    97.1
    
    
    $
    93.1
    
    
    $
    198.3
    
    
    $
    182.0
 The Company provides medical, dental and life insurance benefits, principally to its eligible
U.S. retirees and similar benefits to their dependents, through its other postretirement
benefits plans. The net cost of such plans consisted of the following
components: ($ in millions)Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Service cost
    
    $
    21.6
    
    
    $
    14.9
    
    
    $
    44.9
    
    
    $
    40.8Interest cost
    
    
    26.1
    
    
    
    18.4
    
    
    
    52.8
    
    
    
    50.5Expected return on plan assets
    
    
    (25.8
    )
    
    
    (15.3
    )
    
    
    (51.7
    )
    
    
    (38.8
    )Net amortization
    
    
    5.2
    
    
    
    4.6
    
    
    
    10.8
    
    
    
    14.4Curtailments
    
    
    
    
    
    
    (12.3
    )
    
    
    
    
    
    
    (12.3
    )Termination benefits
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    1.5$
    27.1
    
    
    $
    11.1
    
    
    $
    56.8
    
    
    $
    56.1
 While the Company is recognizing the federal subsidy under the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the Act) in accordance with current accounting
requirements, it will continue to evaluate the Act and regulations that follow to determine
the optimal approach to incorporating the impact of the Act.
 -13-




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Notes to Consolidated Financial Statements
   10.
    
    Other (income) expense, net, consisted of:
 ($ in millions)Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Interest income
    
    $
    (98.7
    )
    
    $
    (68.5
    )
    
    $
    (192.5
    )
    
    $
    (134.2
    )Interest expense
    
    
    93.1
    
    
    
    71.6
    
    
    
    177.6
    
    
    
    144.4Exchange (gains)/losses
    
    
    (8.4
    )
    
    
    14.9
    
    
    
    (9.1
    )
    
    
    7.1Minority interests
    
    
    30.3
    
    
    
    36.8
    
    
    
    60.7
    
    
    
    76.4Other, net
    
    
    (2.3
    )
    
    
    (17.3
    )
    
    
    3.9
    
    
    
    (329.4
    )$
    14.0
    
    
    $
    37.5
    
    
    $
    40.6
    
    
    $
    (235.7
    )
   11.
    
    The weighted average common shares used in the computations of basic earnings per common
share and earnings per common share assuming dilution (shares in millions) are as follows:
 Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Average common shares outstanding
    
    
    2,201.8
    
    
    
    2,221.4
    
    
    
    2,204.4
    
    
    
    2,221.9Common shares issuable(1)
    
    
    4.3
    
    
    
    8.7
    
    
    
    3.7
    
    
    
    9.3Average common shares outstanding assuming dilution
    
    
    2,206.1
    
    
    
    2,230.1
    
    
    
    2,208.1
    
    
    
    2,231.2
 
 (1)
    
    Issuable primarily under stock-based compensation plans.For the three and six months ended June 30, 2005 and 2004, 215.3 million and 205.2
million, respectively, common shares issuable under the Companys stock-based compensation
plans were excluded from the computation of earnings per common share assuming dilution
because the effect would have been antidilutive.12.
    
    Comprehensive income for the three months ended June 30, 2005 and 2004, representing all
changes in stockholders equity during the period other than changes resulting from the
Companys stock, was $798.8 million and $1,638.1 million, respectively. Comprehensive
income for the six months ended June 30, 2005 and 2004 was $2,141.9 and $3,271.6,
respectively.13.
    
    The Companys operations are principally managed on a products basis. The Merck
Pharmaceutical segment includes products marketed either directly or through joint ventures.
These products consist of therapeutic and preventive agents, sold by prescription, for the
treatment of human disorders. Other segment revenues include non-reportable human and
animal health segments.
 -14-




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Notes to Consolidated Financial Statements
  ($ in millions)Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Segment revenues:Merck Pharmaceutical
    
    $
    5,166.2
    
    
    $
    5,727.7
    
    
    $
    10,238.5
    
    
    $
    11,039.8Other segment revenues
    
    
    260.7
    
    
    
    241.2
    
    
    
    493.6
    
    
    
    496.9$
    5,426.9
    
    
    $
    5,968.9
    
    
    $
    10,732.1
    
    
    $
    11,536.7Segment profits:Merck Pharmaceutical
    
    $
    3,234.9
    
    
    $
    3,786.2
    
    
    $
    6,397.4
    
    
    $
    7,203.1Other segment profits
    
    
    264.2
    
    
    
    242.6
    
    
    
    504.6
    
    
    
    496.4$
    3,499.1
    
    
    $
    4,028.8
    
    
    $
    6,902.0
    
    
    $
    7,699.5
  ($ in millions)Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Segment revenues
    
    $
    5,426.9
    
    
    $
    5,968.9
    
    
    $
    10,732.1
    
    
    $
    11,536.7Other revenues
    
    
    40.6
    
    
    
    52.8
    
    
    
    97.7
    
    
    
    115.9$
    5,467.5
    
    
    $
    6,021.7
    
    
    $
    10,829.8
    
    
    $
    11,652.6
   ($ in millions)Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Atherosclerosis
    
    $
    1,155.5
    
    
    $
    1,376.2
    
    
    $
    2,266.0
    
    
    $
    2,680.5Hypertension/heart failure
    
    
    979.5
    
    
    
    953.8
    
    
    
    1,887.5
    
    
    
    1,781.0Osteoporosis
    
    
    852.7
    
    
    
    791.9
    
    
    
    1,624.6
    
    
    
    1,550.9Respiratory
    
    
    729.6
    
    
    
    642.6
    
    
    
    1,464.6
    
    
    
    1,265.5Anti-bacterial/anti-fungal
    
    
    371.8
    
    
    
    286.7
    
    
    
    729.2
    
    
    
    555.0Vaccines/biologicals
    
    
    247.3
    
    
    
    223.5
    
    
    
    471.1
    
    
    
    452.5Ophthalmologicals
    
    
    191.4
    
    
    
    175.1
    
    
    
    364.7
    
    
    
    347.0Urology
    
    
    188.1
    
    
    
    184.5
    
    
    
    363.2
    
    
    
    359.3Human immunodeficiency virus (HIV)
    
    
    88.6
    
    
    
    64.3
    
    
    
    167.3
    
    
    
    128.5Anti-inflammatory/analgesics
    
    
    72.0
    
    
    
    731.4
    
    
    
    142.9
    
    
    
    1,437.0Other
    
    
    591.0
    
    
    
    591.7
    
    
    
    1,348.7
    
    
    
    1,095.4$
    5,467.5
    
    
    $
    6,021.7
    
    
    $
    10,829.8
    
    
    $
    11,652.6
 Vioxx
  -15-




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Notes to Consolidated Financial Statements
  ($ in millions)Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Segment profits
    
    $
    3,499.1
    
    
    $
    4,028.8
    
    
    $
    6,902.0
    
    
    $
    7,699.5Other profits
    
    
    46.6
    
    
    
    (14.9
    )
    
    
    112.0
    
    
    
    24.6Adjustments
    
    
    129.4
    
    
    
    117.9
    
    
    
    249.8
    
    
    
    233.7Unallocated:Interest income
    
    
    98.7
    
    
    
    68.5
    
    
    
    192.5
    
    
    
    134.2Interest expense
    
    
    (93.1
    )
    
    
    (71.6
    )
    
    
    (177.6
    )
    
    
    (144.4
    )Equity income from affiliates
    
    
    11.0
    
    
    
    17.6
    
    
    
    73.8
    
    
    
    60.0Depreciation and amortization
    
    
    (359.8
    )
    
    
    (314.1
    )
    
    
    (700.0
    )
    
    
    (624.0
    )Research and development
    
    
    (946.8
    )
    
    
    (986.0
    )
    
    
    (1,793.4
    )
    
    
    (1,982.3
    )Other expenses, net
    
    
    (460.2
    )
    
    
    (407.4
    )
    
    
    (1,013.5
    )
    
    
    (619.6
    )$
    1,924.9
    
    
    $
    2,438.8
    
    
    $
    3,845.6
    
    
    $
    4,781.7
  -16-




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Management
  Summary
 Vioxx
 Vioxx
     -17-




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##### Table of Contents



Sales
 ($ in millions)Three Months
    
    Six MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Atherosclerosis
    
    $
    1,155.5
    
    
    $
    1,376.2
    
    
    $
    2,266.0
    
    
    $
    2,680.5Hypertension/heart failure
    
    
    979.5
    
    
    
    953.8
    
    
    
    1,887.5
    
    
    
    1,781.0Osteoporosis
    
    
    852.7
    
    
    
    791.9
    
    
    
    1,624.6
    
    
    
    1,550.9Respiratory
    
    
    729.6
    
    
    
    642.6
    
    
    
    1,464.6
    
    
    
    1,265.5Anti-bacterial/anti-fungal
    
    
    371.8
    
    
    
    286.7
    
    
    
    729.2
    
    
    
    555.0Vaccines/biologicals
    
    
    247.3
    
    
    
    223.5
    
    
    
    471.1
    
    
    
    452.5Ophthalmologicals
    
    
    191.4
    
    
    
    175.1
    
    
    
    364.7
    
    
    
    347.0Urology
    
    
    188.1
    
    
    
    184.5
    
    
    
    363.2
    
    
    
    359.3Human immunodeficiency virus (HIV)
    
    
    88.6
    
    
    
    64.3
    
    
    
    167.3
    
    
    
    128.5Anti-inflammatory/analgesics
    
    
    72.0
    
    
    
    731.4
    
    
    
    142.9
    
    
    
    1,437.0Other
    
    
    591.0
    
    
    
    591.7
    
    
    
    1,348.7
    
    
    
    1,095.4$
    5,467.5
    
    
    $
    6,021.7
    
    
    $
    10,829.8
    
    
    $
    11,652.6
 Vioxx
 Singulair Singulair
 Singulair Singulair Singulair Singulair
 -18-




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##### Table of Contents



Fosamax Fosamax Plus D Fosamax Fosamax Plus D
 Fosamax Plus D Fosavance Fosamax Plus D Fosavance Fosamax
 Cozaar Hyzaar Cozaar Hyzaar
 Hyzaar
 Zocor Zocor
  Emend Emend
 Zetia Vytorin
 Zetia Ezetrol Zetia
 Vytorin Inegy
 
 **
    
    COZAAR and HYZAAR are registered trademarks of E.I. DuPont de Nemours & Company,
Wilmington, Del. -19-




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##### Table of Contents



Vytorin Inegy
  Research
and Development
 ProQuad ProQuad ProQuad M-M-R II Varivax
 RotaTeq RotaTeq
 Zostavax  Zostavax New England Journal of Medicine Zostavax
 Gardasil Gardasil Gardasil Gardasil
 th
 Pargluva Pargluva
 -20-




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Pargluva Pargluva
 A
       -21-




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##### Table of Contents



Preclinical
    
    Phase I
    
    Phase II
    
    Phase IIIAlzheimers Disease
    
    Alzheimers Disease
    
    AIDS
    
    HPV and related cervicalc-7617
    
    c-1605
    
    cancer and genital wartsAntibacterials
    
    Arthritis
    
    Alzheimers Disease
    
    Gardasilc-7198
    
    c-9136
    
    DiabetesAntiviral
    
    c-9101
    
    Arthritis
    

MK-0431
(sitagliptin)Atherosclerosis
    
    c-9787
    
    InsomniaArthritis
    
    c-6100
    
    Atherosclerosis
    
    Gaboxadol*c-6872
    
    c-8834
    
    CINVAtherosclerosis
    
    Cancer
    
    Cancer, CTCL
    
    MK-0517 (c-9280)***c-5889
    
    SAHA*Cancer
    
    c-8585
    
    Endocrinec-4251
    
    c-9136Cardiovascular Disease
    
    VX-680*
    
    HIV VaccineDiabetes
    
    Multiple SclerosisDiabetes
    
    c-0730
    
    c-6448
    
    2004 U.S. Submissionsc-0740
    
    Obesity
    
    DiabetesEndocrine
    
    c-4247
    
    c-5093
    
    Pargluva*Endocrine
    
    c-2624
    
    Pediatric VaccineGlaucoma
    
    c-0302
    
    Osteoporosis
    
    ProQuadFlu Vaccine
    
    c-3578Immunology
    
    Glaucoma
    
    Pediatric Vaccinec-9993
    
    Psychiatric DiseaseInsomnia
    
    c-3859
    
    lurasidone*Hypertension
    
    c-9054Pain
    
    c-2617
    
    Respiratory Disease
    
    2005 U.S. SubmissionsObesity
    
    c-3193
    
    Rotavirus GastroenteritisPsychiatric Disease
    
    PYY3-36*
    
    Stroke
    
    RotaTeqc-1913
    
    ONO 2506**
    
    ShinglesRespiratory Disease
    
    Osteoporosis
    
    
    
    Zostavaxc-8500Vaccines
    
    Painc-1246c-8928c-6740Parkinsons Disease
    
    
    
    2005 U.S. Approvalsc-6161
    
    
    
    OsteoporosisPsychiatric Disease
    
    
    
    Fosamax Plus DDOV**Urinary Incontinencec-0172c-4699
 
 *
    
    Licensed, alliance, or acquisition**
    
    Merck is in discussions with its licensing partner regarding
further plans for this compound.***
    
    MK-0517, an intravenous prodrug of an NK-1 antagonist for CINV, has entered Phase III with
filing anticipated in 2006. -22-




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##### Table of Contents



Vioxx  Vioxx Vioxx Vioxx
 Vioxx
 Vioxx
 Liquidity and Capital Resources
 ($
in millions)
    
    June 30, 2005
    
    December 31, 2004Cash and Investments
    
    $
    14,389.1
    
    
    $
    13,817.0Working capital
    
    $
    7,935.9
    
    
    $
    1,731.1Total debt to total liabilities and equity
    
    
    16.7
    %
    
    
    16.1
    %
      Recently
Issued Accounting Standards
  -23-




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Legal
Proceedings
 
 Item 4. Controls and Procedures
   CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
   -24-




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##### Table of Contents



PART II   Other Information
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   ($ in millions)Approximate Dollar ValueTotal Number
    
    
    
    

    
    of Shares That May Yetof Shares
    
    Average Price
    
    Be Purchased Under thePeriod
    
    Purchased (1)
    
    Paid Per Share
    
    Plans or Programs (1)April 1
 April 30, 2005
    
    
    2,494,000
    
    
    $
    33.69
    
    
    $
    8,207.9May 1  May 31, 2005
    
    
    2,510,000
    
    
    $
    33.38
    
    
    $
    8,124.1June 1  June 30, 2005
    
    
    2,771,799
    
    
    $
    31.64
    
    
    $
    8,036.4Total
    
    
    7,775,799
    
    
    $
    32.86
    
    
    $
    8,036.4
 
 (1)
    
    All shares purchased during the period were made as part of a plan announced in July
2002 to purchase $10 billion in Merck shares. 
 Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    All of the following persons nominated were elected to serve as directors and received the
number of votes set opposite their respective names:
 Names
    
    For
    
    WithheldWilliam G. Bowen, Ph.D.
    
    
    1,719,045,407
    
    
    
    136,552,194Raymond V. Gilmartin
    
    
    1,780,143,874
    
    
    
    75,453,727Rochelle B. Lazarus
    
    
    1,806,995,552
    
    
    
    48,602,049Thomas E. Shenk, Ph.D.
    
    
    1,808,404,258
    
    
    
    47,193,343Anne M. Tatlock
    
    
    1,800,590,373
    
    
    
    55,007,228Samuel O. Thier, M.D.
    
    
    1,794,325,235
    
    
    
    61,272,366Wendell P. Weeks
    
    
    1,807,653,080
    
    
    
    47,944,521Peter C. Wendell
    
    
    1,808,591,108
    
    
    
    47,006,493
 2.
    
    A proposal to ratify the appointment of independent registered public accounting firm for
2005 received 1,823,736,466 votes FOR and 12,664,587 votes AGAINST, with 19,196,548
abstentions.
 3.
    
    A stockholder proposal concerning stock option awards received 131,647,746 votes FOR and
1,215,632,164 votes AGAINST, with 43,081,333 abstentions and 465,236,358 broker non-votes.
 4.
    
    A stockholder proposal concerning subjecting non-deductible executive compensation to
shareholder vote received 93,514,638 votes FOR and 1,265,712,676 votes AGAINST, with
31,131,541 abstentions and 465,238,746 broker non-votes.
 5.
    
    A stockholder proposal concerning elimination of animal-based test methods received
34,673,393 votes FOR and 1,209,048,462 votes AGAINST, with 146,640,113 abstentions and
465,235,633 broker non-votes.
 -25-




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##### Table of Contents



6.
    
    A stockholder proposal concerning separating the roles of board chair and CEO received
635,030,523 votes FOR and 728,174,284 votes AGAINST, with 27,177,928 abstentions and
465,214,866 broker non-votes.
 7.
    
    A stockholder proposal concerning availability of Company products to Canadian wholesalers
received 308,251,674 votes FOR and 948,609,205 votes AGAINST, with 130,280,260 abstentions
and 468,456,462 broker non-votes.
 8.
    
    A stockholder proposal concerning use of shareholder resources for political purposes
received 110,541,885 votes FOR and 1,149,541,401 votes AGAINST, with 130,453,900 abstentions
and 465,060,415 broker non-votes.
 9.
    
    A stockholder proposal concerning a report related to the global HIV/AIDS-TB-Malaria
pandemics received 113,455,283 votes FOR and 1,144,624,439 votes AGAINST, with 132,457,118
abstentions and 465,060,761 broker non-votes.
 
 Item 6. Exhibits
 Exhibits
 Number
    
    Description3.1
    
    Restated Certificate of
Incorporation of Merck & Co., Inc. (October 1, 2004) 
Incorporated by reference to Form 10-Q Quarterly Report for the period ended September 30,
20043.2
    
    By-Laws of Merck & Co., Inc.
(as amended effective May 24, 2005)  Incorporated by
reference to Current Report on Form 8-K dated May 24, 200512
    
    Computation of Ratios of Earnings to Fixed Charges31.1
    
    Rule 13a  14(a)/15d  14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a  14(a)/15d  14(a) Certification of Chief Financial Officer32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Chief Financial Officer
 -26-




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##### Table of Contents



Signatures
  MERCK & CO., INC.Date: August 8, 2005
    
    /s/ Kenneth C. FrazierKENNETH C. FRAZIERSenior Vice President and General CounselDate: August 8, 2005
    
    /s/ Richard C. HenriquesRICHARD C. HENRIQUESVice President, Controller
 -27-




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##### Table of Contents



EXHIBIT INDEX
 Number
    
    Description3.1
    
    Restated Certificate of Incorporation of Merck & Co., Inc. (October 1, 2004) 
Incorporated by reference to Form 10-Q Quarterly Report for the period ended September 30,
20043.2
    
    By-Laws of Merck & Co., Inc. (as amended effective May 24, 2005)  Incorporated by
reference to Current Report on Form 8-K dated May 24, 200512
    
    Computation of Ratios of Earnings to Fixed Charges31.1
    
    Rule 13a  14(a)/15d  14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a  14(a)/15d  14(a) Certification of Chief Financial Officer32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Chief Financial Officer
 -28-