##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 1-3305
 MERCK & CO., INC.
    Incorporated in New Jersey
    
    I.R.S. Employer Identification
No. 22-1109110
  Class
    
    Number of Shares OutstandingCommon Stock
    
    2,146,528,024
 þ o
 
 Large accelerated filer
þ
    
    Accelerated filer
o
    
    Non-accelerated filer  
o
(Do not check if a smaller reporting company)
    
    Smaller reporting company
o
 o þ




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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 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 EndedMarch 31,2008
    
    2007Sales
    
    $
    5,822.1
    
    
    $
    5,769.4Costs, Expenses and OtherMaterials and production
    
    
    1,238.1
    
    
    
    1,525.8Marketing and administrative
    
    
    1,854.4
    
    
    
    1,802.0Research and development
    
    
    1,078.3
    
    
    
    1,030.0Restructuring costs
    
    
    69.7
    
    
    
    65.8Equity income from affiliates
    
    
    (652.1
    )
    
    
    (652.6
    )Other (income) expense, net
    
    
    (2,177.3
    )
    
    
    (256.0
    )1,411.1
    
    
    
    3,515.0Income Before Taxes
    
    
    4,411.0
    
    
    
    2,254.4Taxes on Income
    
    
    1,108.4
    
    
    
    550.1Net Income
    
    $
    3,302.6
    
    
    $
    1,704.3Basic Earnings per Common Share
    
    $
    1.53
    
    
    $
    0.79Earnings per Common Share Assuming Dilution
    
    $
    1.52
    
    
    $
    0.78Dividends Declared per Common Share
    
    $
    0.38
    
    
    $
    0.38
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##### Table of Contents



March 31,
    
    December 31,2008
    
    2007AssetsCurrent AssetsCash and cash equivalents
    
    $
    6,289.4
    
    
    $
    5,336.1Short-term investments
    
    
    2,874.3
    
    
    
    2,894.7Accounts receivable
    
    
    3,760.8
    
    
    
    3,636.2Inventories (excludes inventories of $366.4 in 2008 and $345.2
in 2007 classified in Other assets  see Note 4)
    
    
    2,076.5
    
    
    
    1,881.0Prepaid expenses and taxes
    
    
    2,046.0
    
    
    
    1,297.4Total current assets
    
    
    17,047.0
    
    
    
    15,045.4Investments
    
    
    6,909.1
    
    
    
    7,159.2Property, Plant and Equipment, at cost, net of allowance for
depreciation of $11,728.2 in 2008 and $12,457.1 in 2007
    
    
    12,290.9
    
    
    
    12,346.0Goodwill
    
    
    1,454.8
    
    
    
    1,454.8Other Intangibles, Net
    
    
    653.8
    
    
    
    713.2Other Assets
    
    
    8,685.5
    
    
    
    11,632.1$
    47,041.1
    
    
    $
    48,350.7Liabilities and Stockholders EquityCurrent LiabilitiesLoans payable and current portion of long-term debt
    
    $
    421.5
    
    
    $
    1,823.6Trade accounts payable
    
    
    626.9
    
    
    
    624.5Accrued and other current liabilities
    
    
    6,580.5
    
    
    
    8,534.9Income taxes payable
    
    
    1,346.3
    
    
    
    444.1Dividends payable
    
    
    821.8
    
    
    
    831.1Total current liabilities
    
    
    9,797.0
    
    
    
    12,258.2Long-Term Debt
    
    
    3,965.0
    
    
    
    3,915.8Deferred Income Taxes and Noncurrent Liabilities
    
    
    11,320.2
    
    
    
    11,585.3Minority Interests
    
    
    2,437.4
    
    
    
    2,406.7Stockholders EquityCommon stock, one cent par value

Authorized - 5,400,000,000 shares

Issued - 2,983,508,675 shares
    
    
    29.8
    
    
    
    29.8Other paid-in capital
    
    
    8,076.5
    
    
    
    8,014.9Retained earnings
    
    
    41,622.0
    
    
    
    39,140.8Accumulated other comprehensive loss
    
    
    (764.4
    )
    
    
    (826.1
    )48,963.9
    
    
    
    46,359.4Less treasury stock, at cost836,980,651 shares at March 31, 2008811,005,791 shares at December 31, 2007
    
    
    29,442.4
    
    
    
    28,174.7Total stockholders equity
    
    
    19,521.5
    
    
    
    18,184.7$
    47,041.1
    
    
    $
    48,350.7
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##### Table of Contents



Three Months EndedMarch 31,2008
    
    2007Cash Flows from Operating ActivitiesNet income
    
    $
    3,302.6
    
    
    $
    1,704.3Adjustments to reconcile net income to net cash provided by operating activities:Gain on distribution from AstraZeneca LP
    
    
    (2,222.7
    )
    
    
    Equity income from affiliates
    
    
    (652.1
    )
    
    
    (652.6
    )Dividends and distributions from equity affiliates
    
    
    2,669.8
    
    
    
    440.3Depreciation and amortization
    
    
    391.1
    
    
    
    500.4Deferred income taxes
    
    
    (227.4
    )
    
    
    40.9Share-based compensation
    
    
    91.0
    
    
    
    97.0Other
    
    
    (82.0
    )
    
    
    (28.3
    )Taxes paid for Internal Revenue Service settlement
    
    
    
    
    
    
    (2,788.1
    )Net changes in assets and liabilities
    
    
    (742.0
    )
    
    
    (642.8
    )Net Cash Provided by (Used by) Operating Activities
    
    
    2,528.3
    
    
    
    (1,328.9
    )Cash Flows from Investing ActivitiesCapital expenditures
    
    
    (341.4
    )
    
    
    (200.7
    )Purchases of securities and other investments
    
    
    (3,088.4
    )
    
    
    (3,005.1
    )Acquisitions of subsidiaries, net of cash acquired
    
    
    
    
    
    
    (1,134.0
    )Proceeds from sales of securities and other investments
    
    
    3,269.4
    
    
    
    3,880.9Distribution from AstraZeneca LP
    
    
    1,899.3
    
    
    
    Decrease (increase) in restricted assets
    
    
    167.9
    
    
    
    (820.0
    )Other
    
    
    (4.0
    )
    
    
    (2.5
    )Net Cash Provided by (Used by) Investing Activities
    
    
    1,902.8
    
    
    
    (1,281.4
    )Cash Flows from Financing ActivitiesNet change in short-term borrowings
    
    
    (22.6
    )
    
    
    497.2Payments on debt
    
    
    (1,382.6
    )
    
    
    (854.8
    )Purchases of treasury stock
    
    
    (1,377.8
    )
    
    
    (244.4
    )Dividends paid to stockholders
    
    
    (830.8
    )
    
    
    (826.6
    )Proceeds from exercise of stock options
    
    
    79.7
    
    
    
    44.9Other
    
    
    (49.5
    )
    
    
    167.4Net Cash Used by Financing Activities
    
    
    (3,583.6
    )
    
    
    (1,216.3
    )Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    105.8
    
    
    
    13.8Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    953.3
    
    
    
    (3,812.8
    )Cash and Cash Equivalents at Beginning of Year
    
    
    5,336.1
    
    
    
    5,914.7Cash and Cash Equivalents at End of Period
    
    $
    6,289.4
    
    
    $
    2,101.9
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##### Table of Contents



Notes to Consolidated Financial Statements (unaudited)
 1.
    
    Basis of PresentationThe 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.On January 1, 2008, the Company adopted Financial Accounting Standards Board (FASB) Statement
No. 157, Fair Value Measurements(FAS 157), which clarifies the definition of fair value,
establishes a framework for measuring fair value, and expands the disclosures on fair value
measurements. In February 2008, the FASB issued Staff Position 157-2, Effective Date of FASB
Statement No. 157(FSP 157-2),that deferred the effective date of FAS 157 for one year for
nonfinancial assets and liabilities recorded at fair value on a non-recurring basis. The effect
of adoption of FAS 157 for financial assets and liabilities recognized at fair value on a
recurring basis did not have a material impact on the Companys financial position and results
of operations (see Note 3). The Company is assessing the impact of FAS 157 for nonfinancial
assets and liabilities.On January 1, 2008, the Company adopted Emerging Issues Task Force (EITF) Issue No. 07-3,
Accounting for Advance Payments for Goods or Services Received for Use in Future Research and
Development Activities(EITF 07-3), which is being applied prospectively for new contracts.
EITF 07-3 addresses nonrefundable advance payments for goods or services that will be used or
rendered for future research and development activities. EITF 07-3 requires these payments be
deferred and capitalized and recognized as an expense as the related goods are delivered or the
related services are performed. The effect of adoption of EITF 07-3 on the Companys financial
position and results of operations was not material.On January 1, 2008, the Company adopted FASB Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115
(FAS 159). FAS 159 permits companies to choose an irrevocable election to measure certain
financial assets and financial liabilities at fair value. Unrealized gains and losses on items
for which the fair value option has been elected are reported in earnings at each subsequent
reporting date. The Company did not elect the fair value option under FAS 159 for any of its
financial assets or liabilities upon adoption.In December 2007, the FASB issued Statements No. 141R, Business Combinations(FAS 141R), and
No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No.
51(FAS 160). FAS 141R expands the scope of acquisition accounting to all transactions under
which control of a business is obtained. Among other things, FAS 141R requires that contingent
consideration as well as contingent assets and liabilities be recorded at fair value on the
acquisition date, that acquired in-process research and development be capitalized and recorded
as intangible assets at the acquisition date, and also requires transaction costs and costs to
restructure the acquired company be expensed. FAS 160 requires, among other things, that
noncontrolling interests be recorded as equity in the consolidated financial statements. FAS
141R and FAS 160 are both effective, on a prospective basis, January 1, 2009 with the exception
of the presentation and disclosure requirements of FAS 160 which must be applied
retrospectively. The Company is assessing the impacts of these standards on its financial
position and results of operations.In December 2007, the FASB ratified the consensus reached by the EITF on Issue No. 07-1 (EITF
07-1), Accounting for Collaborative Arrangements. EITF 07-1 is effective for the Company
beginning January 1, 2009 and will be applied retrospectively to all prior periods presented for
all collaborative arrangements existing as of the effective date. EITF 07-1 defines
collaborative arrangements and establishes reporting requirements for transactions between
participants in a collaborative arrangement and between participants in the arrangement and
third parties. The Company is assessing the impact of adoption of EITF 07-1 on its financial
position and results of operations.
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Notes to Consolidated Financial Statements (unaudited)
 In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and
Hedging Activities(FAS 161), which is effective January 1, 2009. FAS 161 requires enhanced
disclosures about derivative instruments and hedging activities to allow for a better
understanding of their effects on an entitys financial position, financial performance, and
cash flows. Among other things, FAS 161 requires disclosure of the fair values of derivative
instruments and associated gains and losses in a tabular format. Since FAS 161 requires only
additional disclosures about the Companys derivatives and hedging activities, the adoption of
FAS 161 will not affect the Companys financial position or results of operations.2.
    
    RestructuringIn November 2005, the Company announced the initial phase of its global restructuring program
designed to reduce the Companys cost structure, increase efficiency and enhance
competitiveness. As part of this program, as of March 31, 2008, Merck has sold or closed five
manufacturing sites and two preclinical sites. The Company also has, and may continue to, sell
or close certain other facilities and related assets in connection with the restructuring
program. As of March 31, 2008, the Company has eliminated approximately 8,100 positions
company-wide and will continue to identify opportunities for further headcount reductions. The
Company, however, continues to hire new employees as the business requires. Through the end of
2008, when the initial phase of the global restructuring program is expected to be substantially
complete, the cumulative pretax costs of the program are expected to be approximately $2.2
billion to $2.4 billion. Approximately 70% of the cumulative pretax costs are non-cash,
relating primarily to accelerated depreciation for facilities closed or scheduled for closure.
Since the inception of the global restructuring program through March 31, 2008, the Company has
recorded total pretax accumulated costs of $2.2 billion. For segment reporting purposes,
restructuring charges are unallocated expenses.The following table summarizes the charges related to restructuring activities by type of cost:
 Three Months Ended March 31,2008
    
    2007Separation
    
    Accelerated
    
    
    
    
    
    
    
    
    
    Separation
    
    Accelerated($ in millions)
    
    Costs
    
    Depreciation
    
    Other
    
    Total
    
    Costs
    
    Depreciation
    
    Other
    
    TotalMaterials and production
    
    $
    
    
    
    $
    15.3
    
    
    $
    (0.4
    )
    
    $
    14.9
    
    
    $
    
    
    
    $
    118.1
    
    
    $
    
    
    
    $
    118.1Research and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.3
    
    
    
    (0.1
    )
    
    
    2.2Restructuring costs
    
    
    101.4
    
    
    
    
    
    
    
    (31.7
    )
    
    
    69.7
    
    
    
    46.9
    
    
    
    
    
    
    
    18.9
    
    
    
    65.8$
    101.4
    
    
    $
    15.3
    
    
    $
    (32.1
    )
    
    $
    84.6
    
    
    $
    46.9
    
    
    $
    120.4
    
    
    $
    18.8
    
    
    $
    186.1
     Separation
    
    Accelerated($ in millions)
    
    Costs
    
    Depreciation
    
    Other
    
    TotalRestructuring reserves as of January 1, 2008
    
    $
    231.5
    
    
    $
    
    
    
    $
    
    
    
    $
    231.5Expense
    
    
    101.4
    
    
    
    15.3
    
    
    
    (32.1
    )
    
    
    84.6(Payments) receipts, net
    
    
    (91.5
    )
    
    
    
    
    
    
    35.5
    
    
    
    (56.0
    )Non-cash activity
    
    
    
    
    
    
    (15.3
    )
    
    
    (3.4
    )
    
    
    (18.7
    )Restructuring reserves as of March 31, 2008(1)
    
    $
    241.4
    
    
    $
    
    
    
    $
    
    
    
    $
    241.4
 (1)
    
    The cash outlays associated with the remaining restructuring reserve are
expected to be largely completed by the end of 2009.
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Notes to Consolidated Financial Statements (unaudited)
 3.
    
    Fair Value MeasurementsOn January 1, 2008, the Company adopted FAS 157, which clarifies the definition of fair value,
establishes a framework for measuring fair value, and expands the disclosures on fair value
measurements. In February 2008, the FASB issued FSP 157-2 that deferred the effective date of
FAS 157 for one year for nonfinancial assets and liabilities recorded at fair value on a
non-recurring basis. FAS 157 defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. FAS 157 also establishes a fair value hierarchy which
requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. FAS 157 describes three levels of inputs that may be used to
measure fair value:Level 1- Quoted prices in active markets for identical assets or liabilities. The Companys
Level 1 assets include short-term investments in time deposits and equity securities that are
traded in an active exchange market.Level 2- Observable inputs other than Level 1 prices, such as quoted prices for similar assets
or liabilities; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities. The Companys Level 2 assets
and liabilities primarily include debt securities with quoted prices that are traded less
frequently than exchange-traded instruments, corporate notes and bonds, U.S. and foreign
government and agency securities, certain mortgage-backed and asset-backed securities, municipal
securities, and derivative contracts whose value is determined using a pricing model with inputs
that are observable in the market or can be derived principally from or corroborated by
observable market data.Level 3- Unobservable inputs that are supported by little or no market activity and that are
financial instruments whose value is determined using pricing models, discounted cash flow
methodologies, or similar techniques, as well as instruments for which the determination of fair
value requires significant judgment or estimation. The Companys Level 3 assets mainly include
mortgage-backed and asset-backed securities, as well as certain corporate notes and bonds with
limited market activity. At March 31, 2008, approximately $161.2 million, or approximately
1.5%, of the Companys investment securities were categorized as Level 3 fair value assets (all
of which were pledged under certain collateral arrangements (see Note 11)).If the inputs used to measure the financial assets and liabilities fall within the different
levels described above, the categorization is based on the lowest level input that is
significant to the fair value measurement of the instrument.Financial assets and liabilities measured at fair value on a recurring basis as of March 31,
2008 are summarized below:
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Notes to Consolidated Financial Statements (unaudited)
 Fair Value Measurements UsingQuoted Prices
    
    SignificantIn Active
    
    Other
    
    SignificantMarkets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    Inputs($ in millions)
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    TotalAssetsInvestmentsCorporate notes and bonds
    
    $
    
    
    
    $
    5,404.8
    
    
    $
    
    
    
    $
    5,404.8U.S. government and agency securities
    
    
    
    
    
    
    1,890.8
    
    
    
    
    
    
    
    1,890.8Municipal securities
    
    
    
    
    
    
    761.7
    
    
    
    
    
    
    
    761.7Mortgage-backed securities (1)
    
    
    
    
    
    
    717.4
    
    
    
    
    
    
    
    717.4Asset-backed securities(2)
    
    
    
    
    
    
    366.6
    
    
    
    
    
    
    
    366.6Foreign government bonds
    
    
    
    
    
    
    366.3
    
    
    
    
    
    
    
    366.3Time deposits
    
    
    118.6
    
    
    
    
    
    
    
    
    
    
    
    118.6Equity securities
    
    
    61.8
    
    
    
    90.7
    
    
    
    
    
    
    
    152.5Other debt securities
    
    
    
    
    
    
    4.7
    
    
    
    
    
    
    
    4.7Total investments
    
    $
    180.4
    
    
    $
    9,603.0
    
    
    $
    
    
    
    $
    9,783.4Other assets(3)
    
    $
    
    
    
    $
    896.9
    
    
    $
    161.2
    
    
    $
    1,058.1Derivative assets
    
    
    
    
    
    
    223.7
    
    
    
    
    
    
    
    223.7Total Assets
    
    $
    180.4
    
    
    $
    10,723.6
    
    
    $
    161.2
    
    
    $
    11,065.2LiabilitiesDerivative liabilities
    
    $
    
    
    
    $
    168.8
    
    
    $
    
    
    
    $
    168.8
 (1)
    
    Represents AAA-rated mortgage-backed securities issued or unconditionally
guaranteed as to payment of principal and interest by U.S. government agencies.(2)
    
    Substantially 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.(3)
    
    These investment securities represent a portion of the pledged collateral
discussed in Note 11.
 Level 3 Valuation Techniques:
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Notes to Consolidated Financial Statements (unaudited)
 Total Realized andUnrealized Losses
    
    
    
    
    
    
    Losses RecordedNet
    
    Purchases,
    
    Included in:
    
    
    
    
    
    
    in Earnings forTransfers
    
    Sales,
    
    
    
    
    
    Compre-
    
    
    
    
    
    
    Level 3 AssetsBeginning
    
    (Out) of
    
    Settlements,
    
    
    
    
    
    hensive
    
    Ending
    
    
    Still Held at($ in millions)
    
    Balance
    
    Level 3
    
    net
    
    Earnings (1)
    
    Income
    
    Balance
    
    
    March 31, 2008Other assets
    
    $
    958.6
    
    
    $
    (785.2
    )
    
    $
    (8.8
    )
    
    $
    (2.3
    )
    
    $
    (1.1
    )
    
    $
    161.2
    
    
    
    $
    (2.3
    )Other debt securities
    
    
    314.5
    
    
    
    (314.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    1,273.1
    
    
    $
    (1,099.7
    )
    
    $
    (8.8
    )
    
    $
    (2.3
    )
    
    $
    (1.1
    )
    
    $
    161.2
    
    
    
    $
    (2.3
    )
 (1)
    
    Amounts are recorded in Other (income) expense, net, in the Consolidated
Statement of Income.
 On January 1, 2008, the Company had $1,273.1 million invested in a short-term fixed income fund
(the Fund). Due to market liquidity conditions, cash redemptions from the Fund were
restricted. As a result of this restriction on cash redemptions, the Company did not consider
the Fund to be traded in an active market with observable pricing on January 1, 2008 and these
amounts were categorized as Level 3. On January 7, 2008, the Company elected to be
redeemed-in-kind from the Fund and received its share of the
underlying securities of the Fund. As a result,
$1,099.7 million of the underlying securities were transferred out of Level 3 as it was
determined these securities had observable markets.
On March 31, 2008, $161.2 million of the investment securities associated with the
redemption-in-kind remained classified in Level 3 as the securities contained at least one
significant input which was unobservable.4.
    
    InventoriesInventories consisted of:
 March 31,
    
    December 31,($ in millions)
    
    2008
    
    2007Finished goods
    
    $
    421.8
    
    
    $
    382.9Raw materials and work in process
    
    
    1,900.8
    
    
    
    1,732.2Supplies
    
    
    120.3
    
    
    
    111.1Total (approximates current cost)
    
    
    2,442.9
    
    
    
    2,226.2Reduction to LIFO cost for domestic inventories
    
    
    
    
    
    
    $
    2,442.9
    
    
    $
    2,226.2Recognized as:Inventories
    
    $
    2,076.5
    
    
    $
    1,881.0Other assets
    
    $
    366.4
    
    
    $
    345.2
 Amounts recognized as Other assets are comprised entirely of raw materials and work in process
inventories, representing inventories for products not expected to be sold within one year, the
majority of which are vaccines.5.
    
    Joint Ventures and Other Equity Method AffiliatesEquity income from affiliates reflects the performance of the Companys joint ventures and other
equity method affiliates and was comprised of the following:
 Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Merck/Schering-Plough
    
    $
    392.8
    
    
    $
    347.2AstraZeneca LP
    
    
    131.1
    
    
    
    211.9Other (1)
    
    
    128.2
    
    
    
    93.5$
    652.1
    
    
    $
    652.6
 (1)
    
    Primarily reflects results from Merial Limited, Sanofi Pasteur MSD and Johnson &
Johnson°Merck Consumer Pharmaceuticals Company.
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Notes to Consolidated Financial Statements (unaudited)
 Merck/Schering-Plough
 Zetia Ezetrol Zetia Zocor Vytorin Inegy
 Zetia Vytorin Zetia
 Zetia Vytorin.
 Singulair
  Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Sales
    
    $
    1,232.9
    
    
    $
    1,167.8Vytorin
    
    
    651.2
    
    
    
    623.8Zetia
    
    
    581.7
    
    
    
    544.0Materials and production costs
    
    
    52.4
    
    
    
    50.0Other expense, net
    
    
    326.8
    
    
    
    322.6Income before taxes
    
    $
    853.7
    
    
    $
    795.2Mercks share of income before taxes (1)
    
    $
    394.6
    
    
    $
    362.5
 (1)
    
    Mercks share of the MSP Partnerships income before taxes differs from the
equity income recognized from the MSP Partnership primarily due to the timing of
recognition of certain transactions between the Company and the MSP Partnership.
 AstraZeneca LP
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Notes to Consolidated Financial Statements (unaudited)
   Nexium Prilosec
   Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Sales
    
    $
    1,326.8
    
    
    $
    1,704.0Materials and production costs
    
    
    696.3
    
    
    
    1,012.5Other expense, net
    
    
    384.7
    
    
    
    273.7Income before taxes
    
    $
    245.8
    
    
    $
    417.8
 6.
    
    Debt and Financial InstrumentsIn January and February 2008, the Company terminated four interest rate swap contracts with
notional amounts of $250 million each, which effectively converted its $1.0 billion, 4.75%
fixed-rate notes due 2015 to variable rate debt. As a result of the swap terminations, the
Company received $96.2 million in cash excluding accrued interest which was not material. The
corresponding gains related to the basis adjustment of the debt associated with the terminated
swap contracts were deferred and are being amortized as a reduction of interest expense over the
remaining term of the notes. The cash flows from these contracts are reported as operating
activities in the Consolidated Statement of Cash Flows.In March 2008, the Company entered into a
$4.1 billion letter of credit agreement with a financial institution, which
provides that if participation conditions under the U.S. VioxxSettlement Agreement (see Note 7) are met
or waived, a letter of credit will be executed and the Company will pledge collateral to the
financial institution of approximately $5.0 billion pursuant to the terms of the agreement. The
letter of credit will satisfy certain conditions stipulated by the Settlement Agreement. The letter of
credit amount and required collateral balances will decline as payments (after the first $750
million) under the Settlement Agreement are made.Also in March 2008, the Company settled the $1.38 billion Astra Note due in 2008 (see Note 5).
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Notes to Consolidated Financial Statements (unaudited)
 7.
    
    ContingenciesThe 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.VioxxLitigationProduct Liability LawsuitsAs previously disclosed, individual and putative class actions have been filed against the
Company in state and federal courts alleging personal injury and/or economic loss with respect
to the purchase or use of Vioxx. All such actions filed in federal court are coordinated in a
multidistrict litigation in the U.S. District Court for the Eastern District of Louisiana (the
MDL) before District Judge Eldon E. Fallon. A number of such actions filed in state court are
coordinated in separate coordinated proceedings in state courts in New Jersey, California and
Texas, and the counties of Philadelphia, Pennsylvania and Washoe and Clark Counties, Nevada. As
of March 31, 2008, the Company had been served or was aware that it had been named as a
defendant in approximately 14,450 lawsuits, which include approximately 32,925 plaintiff groups,
alleging personal injuries resulting from the use of Vioxx, and in approximately 260 putative
class actions alleging personal injuries and/or economic loss. (All of the actions discussed in
this paragraph are collectively referred to as the VioxxProduct Liability Lawsuits.) Of these
lawsuits, approximately 9,200 lawsuits representing approximately 24,325 plaintiff groups are or
are slated to be in the federal MDL and approximately 3,350 lawsuits representing approximately
3,350 plaintiff groups are included in a coordinated proceeding in New Jersey Superior Court
before Judge Carol E. Higbee.In addition to the VioxxProduct Liability Lawsuits discussed above, the claims of over 21,000
plaintiffs had been dismissed as of March 31, 2008. Of these, there have been over 2,250
plaintiffs whose claims were dismissed with prejudice (i.e., they cannot be brought again)
either by plaintiffs themselves or by the courts. Over 18,750 additional plaintiffs have had
their claims dismissed without prejudice (i.e., subject to the applicable statute of
limitations, they can be brought again). Of these, 11,800 plaintiff groups represent plaintiffs
who had lawsuits pending in the New Jersey Superior Court at the time of the Settlement
Agreement described below and who have expressed an intent to enter the program established by
the Settlement Agreement; Judge Higbee has dismissed these cases without prejudice for
administrative reasons.Merck entered into a tolling agreement (the Tolling Agreement) with the MDL Plaintiffs
Steering Committee (PSC) that established a procedure to halt the running of the statute of
limitations (tolling) as to certain categories of claims allegedly arising from the use of Vioxx
by non-New Jersey citizens. The Tolling Agreement applied to individuals who have not filed
lawsuits and may or may not eventually file lawsuits and only to those claimants who seek to
toll claims alleging injuries resulting from a thrombotic cardiovascular event that results in a
myocardial infarction (MI) or ischemic stroke (IS). The Tolling Agreement provided counsel
additional time to evaluate potential claims. The Tolling Agreement required any tolled claims
to be filed in federal court. As of March 31, 2008, approximately 12,760 claimants had entered
into Tolling Agreements. The parties agreed that April 9, 2007 was the deadline for filing
Tolling Agreements and no additional Tolling Agreements are being accepted.On November 9, 2007, Merck announced that it had entered into an agreement (the Settlement
Agreement) with the law firms that comprise the executive committee of the PSC of the federal
VioxxMDL as well as representatives of plaintiffs counsel in the Texas, New Jersey and
California state coordinated proceedings to resolve state and federal MI and IS claims filed as
of that date in the United States. The Settlement Agreement, which also applies to tolled
claims, was signed by the parties after several meetings with three of the four judges
overseeing the coordination of more than 95 percent of the U.S. Vioxx
Product Liability Lawsuits. The Settlement Agreement applies only to U.S. legal residents and those who allege
that their MI or IS occurred in the United States.If certain participation conditions under the Settlement Agreement are met, which conditions may
be waived by Merck, Merck will pay a fixed aggregate amount of $4.85 billion into two funds for
qualifying claims that enter into the resolution process (the Settlement Program). Individual
claimants will be examined by administrators of the Settlement Program to determine
qualification based on objective, documented facts provided by claimants, including records
sufficient for a scientific evaluation of independent risk factors. The conditions in the
Settlement Agreement also require claimants to pass three gates: an injury gate requiring
objective, medical proof of an MI or IS (each as defined in the Settlement Agreement), a
duration gate based on documented receipt of at least 30 Vioxxpills, and a proximity gate
requiring receipt of pills in sufficient number and proximity to the event to support a
presumption of ingestion of Vioxxwithin 14 days before the claimed injury.
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Notes to Consolidated Financial Statements (unaudited)
        Vioxx
 Vioxx
 Vioxx
 - 13 -




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Notes to Consolidated Financial Statements (unaudited)
 Vioxx
 Vioxx
 Vioxx
  Other Lawsuits
 Vioxx Vioxx Vioxx
  Vioxx
 Vioxx Vioxx
 - 14 -




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Notes to Consolidated Financial Statements (unaudited)
 Vioxx Vioxx
 Shareholder Lawsuits
 Vioxx Vioxx Vioxx Vioxx Vioxx
 Vioxx Vioxx
  Vioxx
 Vioxx Vioxx Vioxx Vioxx
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Notes to Consolidated Financial Statements (unaudited)
 Vioxx Vytorin
 Vioxx Vioxx
 International Lawsuits
 Vioxx Vioxx
 Additional Lawsuits
 Vioxx Vioxx Vioxx Vioxx
 Insurance
 Vioxx Vioxx Vioxx
 Vioxx Vioxx Vioxx Vioxx
 Vioxx Vioxx Vioxx
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Notes to Consolidated Financial Statements (unaudited)
 Investigations
 Vioxx. Vioxx Vioxx Vioxx
 Vioxx
 Vioxx
 Reserves
 Vioxx Vioxx
 Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx
 Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx
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Notes to Consolidated Financial Statements (unaudited)
 Vioxx Vioxx Vioxx
  Other Product Liability Litigation
 Fosamax Fosamax Fosamax Fosamax Fosamax Fosamax Fosamax
 Fosamax Fosamax Fosamax Fosamax Fosamax Fosamax
 Commercial/Securities Litigation
 Vytorin Vytorin Zetia Vytorin.
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Notes to Consolidated Financial Statements (unaudited)
 Vytorin Zetia
 Vytorin Vytorin Vytorin Vytorin
 Patent Litigation
 Fosamax, Propecia, Prilosec, Nexium,
Singulair, Trusopt, Cosopt Primaxin Prilosec Nexium Zetia Prilosec. Fosamax Propecia Trusopt Singulair Cosopt Primaxin Prilosec Nexium Zetia
 Nexium
 Nexium
 Other Litigation
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Notes to Consolidated Financial Statements (unaudited)
 There are various other legal proceedings, principally product liability and intellectual
property suits involving the Company, which are pending. While it is not feasible to predict the
outcome of such proceedings or the proceedings discussed in this Note, in the opinion of the
Company, all such proceedings are either adequately covered by insurance or, if not so covered,
should not ultimately result in any liability that would have a material adverse effect on the
financial position, liquidity or results of operations of the Company, other than proceedings
for which a separate assessment is provided in this Note.8.
    
    Share-Based CompensationThe Company has share-based compensation plans under which employees, non-employee directors and
employees of certain of the Companys equity method investees may be granted options to purchase
shares of Company
common stock at the fair market value at the time of grant. In addition to stock options, the
Company grants performance share units (PSUs) and restricted stock units (RSUs) to certain
management-level employees. The Company recognizes the fair value of share-based compensation
in net income on a straight-line basis over the requisite service period.The following table provides amounts of share-based compensation cost recorded in the
Consolidated Statement of Income:
 Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Pretax share-based compensation expense
    
    $
    91.0
    
    
    $
    97.0Income tax benefits
    
    
    (28.7
    )
    
    
    (30.4
    )Total share-based compensation expense, net of tax
    
    $
    62.3
    
    
    $
    66.6
  Three Months EndedMarch 31,2008
    
    2007Expected dividend yield
    
    
    3.4
    %
    
    
    3.4
    %Risk-free interest rate
    
    
    2.7
    %
    
    
    4.4
    %Expected volatility
    
    
    30.8
    %
    
    
    24.3
    %Expected life (years)
    
    
    6.1
    
    
    
    5.7
 At March 31, 2008, there was $730.4 million of total pretax unrecognized compensation expense
related to nonvested stock options, RSU and PSU awards which will be recognized over a weighted
average period of 2.4 years. For segment reporting, share-based compensation costs are
unallocated expenses.9.
    
    Pension and Other Postretirement Benefit PlansThe 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:
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Notes to Consolidated Financial Statements (unaudited)
 Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Service cost
    
    $
    92.7
    
    
    $
    92.1Interest cost
    
    
    107.3
    
    
    
    92.0Expected return on plan assets
    
    
    (148.0
    )
    
    
    (121.4
    )Net amortization
    
    
    22.6
    
    
    
    34.2Termination benefits
    
    
    5.5
    
    
    
    7.1$
    80.1
    
    
    $
    104.0
 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 benefit
plans. The net cost of such plans consisted of the following components:
 Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Service cost
    
    $
    22.2
    
    
    $
    21.1Interest cost
    
    
    30.8
    
    
    
    25.9Expected return on plan assets
    
    
    (34.6
    )
    
    
    (30.3
    )Net amortization
    
    
    (3.8
    )
    
    
    (2.5
    )Termination benefits
    
    
    1.2
    
    
    
    0.9Curtailments
    
    
    (0.6
    )
    
    
    $
    15.2
    
    
    $
    15.1
 In connection with restructuring actions (see Note 2), the Company recorded termination charges
for the three months ended March 31, 2008 and 2007 on its pension and other postretirement
benefit plans related to expanded eligibility for certain employees exiting the Company. Also,
in connection with these restructuring actions, the Company recorded curtailment gains on its
other postretirement benefit plans for the three months ended March 31, 2008.
 10.
    
    Other (Income) Expense, NetOther (income) expense, net, consisted of:
 Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Interest income
    
    $
    (169.5
    )
    
    $
    (181.7
    )Interest expense
    
    
    72.6
    
    
    
    102.4Exchange losses (gains)
    
    
    12.6
    
    
    
    (19.6
    )Minority interests
    
    
    31.9
    
    
    
    30.6Other, net
    
    
    (2,124.9
    )
    
    
    (187.7
    )$
    (2,177.3
    )
    
    $
    (256.0
    )
 Other, net in 2008 primarily reflects an aggregate gain from AZLP of $2.2 billion (see Note 5)
and a gain of $249 million related to the sale of the Companys remaining worldwide rights to
Aggrastat, partially offset by a $300 million expense for a contribution to the Merck Company
Foundation and a $55 million charge related to the anticipated resolution of an investigation
into whether the Company violated consumer protection laws with respect to the sales and
marketing of Vioxx(see Note 7). Other, net in 2007 primarily reflects the favorable impact of
gains on sales of assets and product divestitures. Interest paid for the three months ended
March 31, 2008 and 2007 was $68.9 million and $101.7 million, respectively.
 11.
    
    Taxes on IncomeThe effective tax rate of 25.1% for the first quarter of 2008 reflects the unfavorable impact of
the AZLP gain being fully taxable in the United States at a combined federal and state tax rate
of approximately 36.3%, partially offset by the
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Notes to Consolidated Financial Statements (unaudited)
 favorable impact of approximately 4 percentage
points relating to the first quarter realization of foreign tax credits. In the first quarter
of 2008, the Company decided to repatriate certain prior years foreign earnings which will
result in a utilization of foreign tax credits. These foreign tax credits arose as a result of
tax payments made outside of the United States in prior years that became realizable in the
current period based on a change in the Companys repatriation plans. The effective tax rate of
24.4% for the first quarter of 2007 reflects the impact of costs associated with the global
restructuring program.
 As previously disclosed, Mercks Canadian tax returns for the years 1998 through 2004 are being
examined by the Canada Revenue Agency (CRA). In October 2006, the CRA issued the Company a
notice of reassessment containing adjustments related to certain intercompany pricing matters,
which result in additional Canadian and provincial tax due of approximately $1.6 billion (U.S.
dollars) plus interest of approximately $910 million (U.S. dollars). In addition, in July 2007,
the CRA proposed additional adjustments for 1999 relating to another intercompany pricing
matter. The adjustments would increase Canadian tax due by approximately $22 million (U.S.
dollars) plus $22 million (U.S. dollars) of interest. It is possible that the CRA will propose
similar adjustments for later years. The Company disagrees with the positions taken by the CRA
and believes they are without merit. The Company intends to contest the assessments through the
CRA appeals process and the courts if necessary. In connection with the appeals process, during
2007, the Company pledged collateral to two financial institutions, one of which provided a
guarantee to the CRA and the other to the Quebec Ministry of Revenue representing a portion of
the tax and interest assessed. The collateral is included in Other Assets in the Consolidated
Balance Sheet and totaled approximately $1.4 billion at March 31, 2008. The Company has
previously established reserves for these matters. While the resolution of these matters may
result in liabilities higher or lower than the reserves, management believes that resolution of
these matters will not have a material effect on the Companys financial position or liquidity.
However, an unfavorable resolution could have a material adverse effect on the Companys results
of operations or cash flows in the quarter in which an adjustment is recorded or tax is due.In July 2007, the CRA notified the Company that it is in the process of proposing a penalty of
$160 million (U.S. dollars) in connection with the 2006 notice. The penalty is for failing to
provide information on a timely basis. The Company vigorously disagrees with the penalty and
feels it is inapplicable and that appropriate information was provided on a timely basis. The
Company is pursuing all appropriate remedies to avoid having the penalty assessed and was
notified in early August 2007 that the CRA is holding the imposition of a penalty in abeyance
pending a review of the Companys submissions as to the inapplicability of a penalty.
 12.
    
    Earnings Per ShareThe 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 EndedMarch 31,2008
    
    2007Average common shares outstanding
    
    
    2,160.3
    
    
    
    2,166.1Common shares issuable(1)
    
    
    14.4
    
    
    
    13.9Average common shares outstanding assuming dilution
    
    
    2,174.7
    
    
    
    2,180.0
 (1)
    
    Issuable primarily under share-based compensation plans.
 For the three months ended March 31, 2008 and 2007, 202.8 million and 207.0 million,
respectively, of common shares issuable under the Companys share-based compensation plans were
excluded from the computation of earnings per common share assuming dilution because the effect
would have been antidilutive.
 13.
    
    Comprehensive IncomeComprehensive income was $3,364.3 million and $1,776.0 million for the three months ended March
31, 2008 and 2007, respectively.
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Notes to Consolidated Financial Statements (unaudited)
 14.
    
    Segment Reporting
 The Companys operations are principally managed on a products basis and are comprised of two
reportable segments: the Pharmaceutical segment and the Vaccines and Infectious Diseases
segment. Segment composition reflects certain managerial changes that were implemented in early
2008. In addition, in the first quarter of 2008, the Company revised the calculation of segment
profits to include a greater allocation of costs to the segments. Segment disclosures for 2007
have been recast on a comparable basis with 2008.
 The Pharmaceutical segment includes human health pharmaceutical 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. Merck sells these human
health pharmaceutical products primarily to drug wholesalers and retailers, hospitals,
government agencies and managed health care providers such as health maintenance organizations,
pharmacy benefit managers and other institutions. The Vaccines and Infectious Diseases segment
includes human health vaccine and infectious disease products marketed either directly or
through joint ventures. Vaccine products consist of preventive pediatric, adolescent and adult
vaccines, primarily administered at physician offices. Merck sells these human health vaccines
primarily to physicians, wholesalers, physician distributors and government entities. A large
component of pediatric and adolescent vaccines is sold to the U.S. Centers for Disease Control
and Prevention Vaccines for Children program, which is funded by the U.S. government.
Infectious disease products consist of therapeutic agents for the treatment of infection sold
primarily to drug wholesalers, retailers, hospitals and government agencies. The Vaccines and
Infectious Diseases segment includes the aggregate majority of the Companys vaccine and infectious
disease product sales, but excludes  sales of these products by
non-U.S. subsidiaries, which are
included in the Pharmaceutical segment.
 Other segments include other non-reportable human and animal health segments.Revenues and profits for these segments are as follows:
 Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Segment revenues:Pharmaceutical segment
    
    $
    4,811.4
    
    
    $
    4,774.1Vaccines and Infectious Diseases segment
    
    
    985.6
    
    
    
    931.5Other segment revenues
    
    
    25.0
    
    
    
    36.7$
    5,822.0
    
    
    $
    5,742.3Segment profits:(1)Pharmaceutical segment
    
    $
    3,119.3
    
    
    $
    3,241.5Vaccines and Infectious Diseases segment
    
    
    624.6
    
    
    
    510.5Other segment profits
    
    
    145.9
    
    
    
    154.1$
    3,889.8
    
    
    $
    3,906.1
 (1)

    Includes the majority of Equity income from affiliates.
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Notes to Consolidated Financial Statements (unaudited)
 
 Sales (1) of the Companys products were as follows: Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Pharmaceutical:Singulair
    
    $
    1,103.8
    
    
    $
    1,002.0Cozaar/Hyzaar
    
    
    846.9
    
    
    
    798.0Fosamax
    
    
    469.8
    
    
    
    742.2Januvia
    
    
    272.1
    
    
    
    87.0Cosopt/Trusopt
    
    
    201.3
    
    
    
    186.1Zocor
    
    
    179.1
    
    
    
    258.4Maxalt
    
    
    121.6
    
    
    
    107.4Propecia
    
    
    105.0
    
    
    
    95.3Vasotec/Vaseretic
    
    
    95.7
    
    
    
    121.6Arcoxia
    
    
    93.4
    
    
    
    80.4Proscar
    
    
    85.0
    
    
    
    125.3Emend
    
    
    59.6
    
    
    
    47.6Janumet
    
    
    58.4
    
    
    
    Other pharmaceutical(2)
    
    
    589.9
    
    
    
    693.9Vaccine and infectious disease product sales
included in the Pharmaceutical segment (3)
    
    
    529.8
    
    
    
    428.9Pharmaceutical segment revenues
    
    
    4,811.4
    
    
    
    4,774.1Vaccines(4)and Infectious Diseases:Gardasil
    
    
    390.4
    
    
    
    365.4RotaTeq
    
    
    190.1
    
    
    
    85.0Zostavax
    
    
    73.5
    
    
    
    42.7ProQuad/M-M-R II/Varivax
    
    
    225.6
    
    
    
    246.1Hepatitis vaccines
    
    
    33.9
    
    
    
    71.5Other vaccines
    
    
    72.6
    
    
    
    92.1Primaxin
    
    
    202.6
    
    
    
    197.0Cancidas
    
    
    148.9
    
    
    
    134.1Crixivan/Stocrin
    
    
    75.3
    
    
    
    82.3Invanz
    
    
    55.5
    
    
    
    41.6Isentress
    
    
    46.5
    
    
    
    2.5Other infectious disease
    
    
    0.5
    
    
    
    0.1Vaccine and infectious disease product sales
included in the Pharmaceutical segment (3)
    
    
    (529.8
    )
    
    
    (428.9
    )Vaccines and Infectious Diseases segment revenues
    
    
    985.6
    
    
    
    931.5Other segment (5)
    
    
    25.0
    
    
    
    36.7Total segment revenues
    
    
    5,822.0
    
    
    
    5,742.3Other (6)
    
    
    0.1
    
    
    
    27.1$
    5,822.1
    
    
    $
    5,769.4
 
 (1)
    
    Presented net of discounts and returns.(2)
    
    Other pharmaceutical primarily includes sales of other human pharmaceutical
products and revenue from the Companys relationship with AstraZeneca LP primarily relating
to sales ofNexium, as well asPrilosec. Revenue from AstraZeneca LP was $404.7 million
and $497.6 million for the first quarter of 2008 and 2007, respectively.(3)
    
    Sales of vaccine and infectious disease products by non-U.S. subsidiaries are
included in the Pharmaceutical segment.(4)
    
    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 reflect supply sales to
Sanofi Pasteur MSD.(5)
    
    Includes other non-reportable human and animal health segments.(6)
    
    Other revenues are primarily comprised of miscellaneous corporate revenues, sales
related to divested products or businesses and other supply sales not included in segment
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Notes to Consolidated Financial Statements (unaudited)
  Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Segment profits
    
    $
    3,889.8
    
    
    $
    3,906.1Other profits
    
    
    (12.1
    )
    
    
    0.2Adjustments
    
    
    98.8
    
    
    
    82.9Unallocated:Interest income
    
    
    169.5
    
    
    
    181.7Interest expense
    
    
    (72.6
    )
    
    
    (102.4
    )Equity income from affiliates
    
    
    15.1
    
    
    
    47.7Depreciation and amortization
    
    
    (363.1
    )
    
    
    (466.4
    )Research and development
    
    
    (1,078.3
    )
    
    
    (1,030.0
    )Gain on distribution from AstraZeneca LP
    
    
    2,222.7
    
    
    
    Other expenses, net
    
    
    (458.8
    )
    
    
    (365.4
    )$
    4,411.0
    
    
    $
    2,254.4
 Segment profits are comprised of segment revenues less certain elements of materials and
production costs and operating expenses, including the majority of equity income from affiliates
and components of depreciation and amortization expenses. For internal management reporting
presented to the chief operating decision maker, the Company does not allocate the vast majority
of research and development expenses, general and administrative expenses, depreciation related
to fixed assets utilized by nonmanufacturing divisions, as well as the cost of financing these
activities. Separate divisions maintain responsibility for monitoring and managing these costs
and, therefore, they are not included in segment profits.Other profits are primarily comprised of miscellaneous corporate profits as well as operating
profits related to divested products or businesses and other supply sales. Adjustments
represent the elimination of the effect of double counting certain items of income and expense.
Equity income from affiliates includes taxes paid at the joint venture level and a portion of
equity income that is not reported in segment profits. Other expenses, net, includes expenses
from corporate and manufacturing cost centers and other miscellaneous income (expense), net.
 - 25 -




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Operating Results
 Sales
 Januvia Janumet Singulair RotaTeq Varivax Zostavax Gardasil Cozaar/Hyzaar* Isentress Fosamax Fosamax Fosamax Plus D Zocor
 
 *
    
    Cozaarand Hyzaarare registered trademarks of E.I. duPont de Nemours & Company, Wilmington,
Delaware. - 26 -




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##### Table of Contents



Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Pharmaceutical:Singulair
    
    $
    1,103.8
    
    
    $
    1,002.0Cozaar/Hyzaar
    
    
    846.9
    
    
    
    798.0Fosamax
    
    
    469.8
    
    
    
    742.2Januvia
    
    
    272.1
    
    
    
    87.0Cosopt/Trusopt
    
    
    201.3
    
    
    
    186.1Zocor
    
    
    179.1
    
    
    
    258.4Maxalt
    
    
    121.6
    
    
    
    107.4Propecia
    
    
    105.0
    
    
    
    95.3Vasotec/Vaseretic
    
    
    95.7
    
    
    
    121.6Arcoxia
    
    
    93.4
    
    
    
    80.4Proscar
    
    
    85.0
    
    
    
    125.3Emend
    
    
    59.6
    
    
    
    47.6Janumet
    
    
    58.4
    
    
    
    Other pharmaceutical(1)
    
    
    589.9
    
    
    
    693.9Vaccine and infectious disease product sales
included in the Pharmaceutical segment (2)
    
    
    529.8
    
    
    
    428.9Pharmaceutical segment revenues
    
    
    4,811.4
    
    
    
    4,774.1Vaccines(3)and Infectious Diseases:Gardasil
    
    
    390.4
    
    
    
    365.4RotaTeq
    
    
    190.1
    
    
    
    85.0Zostavax
    
    
    73.5
    
    
    
    42.7ProQuad/M-M-R II/Varivax
    
    
    225.6
    
    
    
    246.1Hepatitis vaccines
    
    
    33.9
    
    
    
    71.5Other vaccines
    
    
    72.6
    
    
    
    92.1Primaxin
    
    
    202.6
    
    
    
    197.0Cancidas
    
    
    148.9
    
    
    
    134.1Crixivan/Stocrin
    
    
    75.3
    
    
    
    82.3Invanz
    
    
    55.5
    
    
    
    41.6Isentress
    
    
    46.5
    
    
    
    2.5Other infectious disease
    
    
    0.5
    
    
    
    0.1Vaccine and infectious disease product sales
included in the Pharmaceutical segment(2)
    
    
    (529.8
    )
    
    
    (428.9
    )Vaccines and Infectious Diseases segment revenues
    
    
    985.6
    
    
    
    931.5Other segment (4)
    
    
    25.0
    
    
    
    36.7Total segment revenues
    
    
    5,822.0
    
    
    
    5,742.3Other (5)
    
    
    0.1
    
    
    
    27.1$
    5,822.1
    
    
    $
    5,769.4
 
 (1)
    
    Other pharmaceutical primarily includes sales of other human pharmaceutical products
and revenue from the Companys relationship with AZLP primarily relating to sales ofNexium,
as well asPrilosec. Revenue from AZLP was $404.7 million and $497.6 million for the first
quarter of 2008 and 2007, respectively.(2)
    
    Sales of vaccine and infectious disease products by non-U.S. subsidiaries are
included in the Pharmaceutical segment.(3)
    
    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 reflect supply sales to Sanofi Pasteur MSD.(4)
    
    Includes other non-reportable human and animal health segments.(5)
    
    Other revenues are primarily comprised of miscellaneous corporate revenues, sales
related to divested products or businesses and other supply sales not included in segment
results.  - 27 -




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Pharmaceutical Segment Revenues
 Januvia, Singulair, Cozaar/Hyzaar Janumet Fosamax, Nexium Zocor.
 Singulair Singulair
 Cozaar Hyzaar Cozaar Hyzaar
 Fosamax Fosamax Plus D Fosavance Fosamac Fosamax Fosamax Plus D
 Januvia Januvia
 Janumet Januvia Janumet, Janumet
 Janumet Tredaptive Tredaptive Janumet
 Zocor
 Maxalt Cosopt Arcoxia Emend Propecia
 Aggrastat
 - 28 -




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Nexium
 Vaccines and Infectious Diseases Segment Revenues
 RotaTeq, Varivax, Zostavax Isentress, ProQuad .
  Gardasil Gardasil Gardasil,
 Gardasil Gardasil
 RotaTeq
 ProQuad M-M-R Varivax ProQuad
 Varivax Varivax ProQuad M-M-R Varivax M-M-R ProQuad ProQuad M-M-R Varivax
 Isentress Isentress Isentress Isentress Isentress
 - 29 -




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Zostavax Cancidas, Invanz
  Costs, Expenses and Other
     Fosamax
    - 30 -




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Cordaptive Tredaptive
  1
  - 31 -




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Aggrastat Vioxx
 Segment Profits
 Three Months EndedMarch 31,($ in millions)
    
    2008
    
    2007Pharmaceutical segment
    
    $
    3,119.3
    
    
    $
    3,241.5Vaccines and Infectious Diseases segment
    
    
    624.6
    
    
    
    510.5Other segment
    
    
    145.9
    
    
    
    154.1Other
    
    
    521.2
    
    
    
    (1,651.7
    )Income before income taxes
    
    $
    4,411.0
    
    
    $
    2,254.4
  Fosamax Nexium
 Isentress
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Selected Joint Venture and Affiliate Information
 Merck/Schering-Plough Partnership
 Zetia Vytorin Zetia Ezetrol Vytorin Inegy
 Vytorin
  Zetia Vytorin.
 Singulair
 AstraZeneca LP
  - 33 -




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Nexium Prilosec
  Sanofi Pasteur MSD
 Gardasil Gardasil
  Liquidity and Capital Resources
 March 31,
    
    December 31,($ in millions)
    
    2008
    
    2007Cash and investments
    
    $
    16,072.8
    
    
    $
    15,390.0Working capital
    
    $
    7,250.0
    
    
    $
    2,787.2Total debt to total liabilities and equity
    
    
    9.3
    %
    
    
    11.9
    %
   Vioxx
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Vioxx
       Critical Accounting Policies
  - 35 -




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Fair Value Measurements
  Recently Issued Accounting Standards
 Disclosures about Derivative Instruments and
Hedging Activities
 Accounting for Collaborative Arrangements
 Business Combinations Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51
 Legal Proceedings
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Vioxx Litigation
 Product Liability Lawsuits
 Vioxx Vioxx Vioxx
 Vioxx
 Vioxx
 Vioxx Vioxx
 www.merck.com Vioxx Vioxx
  - 37 -




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Vioxx www.merck.com
 Vioxx
 Vioxx
 Vioxx
 - 38 -




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Vioxx
 Vioxx
 Vioxx
  Other Lawsuits
 Vioxx Vioxx Vioxx
  Vioxx
 Vioxx Vioxx Vioxx
 - 39 -




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Vioxx
 Shareholder Lawsuits
 Vioxx Vioxx Vioxx Vioxx Vioxx
 Vioxx Vioxx
  Vioxx
 Vioxx Vioxx Vioxx Vioxx Vioxx
 - 40 -




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##### Table of Contents



Vytorin
 Vioxx Vioxx
 International Lawsuits
 Vioxx Vioxx
 Additional Lawsuits
 Vioxx Vioxx Vioxx Vioxx
 Insurance
 Vioxx Vioxx Vioxx
 Vioxx Vioxx Vioxx Vioxx
 Vioxx Vioxx Vioxx
 Investigations
 Vioxx. Vioxx
 - 41 -




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Vioxx Vioxx
 Vioxx
 Vioxx
 Reserves
 Vioxx Vioxx
 Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx
 Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx Vioxx
 Vioxx Vioxx Vioxx
 - 42 -




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##### Table of Contents



Other Product Liability Litigation
 Fosamax Fosamax Fosamax Fosamax Fosamax Fosamax Fosamax
 Fosamax Fosamax Fosamax Fosamax Fosamax Fosamax
 Commercial/Securities Litigation
 Vytorin Vytorin Zetia Vytorin. Vytorin Zetia
 Vytorin Vytorin Vytorin Vytorin
 - 43 -




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##### Table of Contents



Patent Litigation
 Fosamax, Propecia, Prilosec, Nexium,
Singulair, Trusopt, Cosopt Primaxin Prilosec Nexium Zetia Prilosec. Fosamax Propecia Trusopt Singulair Cosopt Primaxin Prilosec Nexium Zetia
 Nexium
 Nexium
 Other Litigation
    - 44 -




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- 45 -




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Item 4. Controls and Procedures
  CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
   - 46 -




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PART II   Other Information
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   ($ in millions)Total Number
    
    Average Price
    
    Approximate Dollar Value of Sharesof Shares
    
    Paid Per
    
    That May Yet Be PurchasedPeriod
    
    Purchased(1)
    
    Share
    
    Under the Plans or Programs(1)January 1 - January 31, 2008
    
    
    8,787,600
    
    
    $
    53.98
    
    
    $
    4,623.4February 1 - February 29, 2008
    
    
    9,760,966
    
    
    $
    46.25
    
    
    $
    4,171.9March 1 - March 31, 2008
    
    
    10,569,140
    
    
    $
    42.77
    
    
    $
    3,719.9Total
    
    
    29,117,706
    
    
    $
    47.32
    
    
    $
    3,719.9
 
 (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 6. Exhibits
 Number
    
    Description3.1
    
    Restated Certificate of Incorporation of Merck & Co., Inc. (May 17, 2007) -
Incorporated by reference to Current Report on Form 8-K dated May 17, 20073.2
    
    By-Laws of Merck & Co., Inc. (as amended effective May 31, 2007) -
Incorporated by reference to Current Report on Form 8-K dated May 31, 200712
    
    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
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Signatures
  MERCK & CO., INC.Date: May 5, 2008
    /s/ Bruce N. KuhlikBRUCE N. KUHLIKExecutive Vice President and General Counsel Date: May 5, 2008
    /s/ John CananJOHN CANANSenior Vice President and Controller - 48 -




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EXHIBIT INDEX
 Number
    
    Description3.1
    
    Restated Certificate of Incorporation of Merck & Co., Inc. (May 17, 2007) -
Incorporated by reference to Current Report on Form 8-K dated May 17, 20073.2
    
    By-Laws of Merck & Co., Inc. (as amended effective May 31, 2007) -
Incorporated by reference to Current Report on Form 8-K dated May 31, 200712
    
    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
 - 49 -