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As filed with the Securities and Exchange Commission on March 11, 2005   UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C.
20549
   FORM 10-K (MARK ONE) þ
    
    Annual Report Pursuant to Section 13 or 15(d)of
the Securities Exchange Act of 1934
 For
the Fiscal Year Ended December 31, 2004
 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
 Securities Registered pursuant to Section 12(b) of the Act: Name of Each ExchangeTitle of Each Class
    
    on which RegisteredCommon Stock
    
    New York and Philadelphia Stock Exchanges($0.01 par value)
 Number of shares of Common Stock ($0.01 par value) outstanding as of February 28, 2005:
2,208,052,404. Aggregate market value of Common Stock ($0.01 par value) held by non-affiliates on June 30,
2004 based on closing price on June 30, 2004: $105,392,000,000. Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yesþ        Noo Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange
Act Rule 12b-2). Yesþ      Noo Documents Incorporated by Reference: Document
    
    Part of Form 10-KAnnual Report to stockholders for the fiscal year
    
    Parts I and IIended December 31, 2004Proxy Statement for the Annual Meeting of
    
    Part IIIStockholders to be held April 26, 2005




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESEX-10.3: DEFERRAL PROGRAMEX-10.5: 1996 INCENTIVE STOCK PLANEX-10.6: 2001 INCENTIVE STOCK PLANEX-10.7: 2004 INCENTIVE STOCK PLANEX-10.14: PLAN FOR DEFERRED PAYMENT OF DIRECTORS' COMPENSATIONEX-12: COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGESEX-13: 2004 ANNUAL REPORTEX-21: SUBSIDIARIESEX-24.1: POWER OF ATTORNEYEX-24.2: CERTIFIED RESOLUTION OF BOARD OF DIRECTORSEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION    Table of Contents  
 PART I 
 Item 1. Business. Merck & Co., Inc. (Merck or the Company) is a global research-driven pharmaceutical
company that discovers, develops, manufactures and markets a broad range of innovative products to
improve human and animal health, directly and through its joint ventures. The Company sells its
products primarily to drug wholesalers and retailers, hospitals, clinics, government agencies and
managed health care providers such as health maintenance organizations and other institutions. The
Companys professional representatives communicate the effectiveness, safety and value of its
products to health care professionals in private practice, group practices and managed care
organizations. Product Sales Sales1 by category of the Companys products were as
follows: ($ in millions)
    
    2004
    
    
        2003
    
    
        2002Atherosclerosis
    
    $
    5,223.0
    
    
    $
    5,077.9
    
    
    $
    5,552.1Hypertension/heart failure
    
    
    3,646.7
    
    
    
    3,421.6
    
    
    
    3,477.8Osteoporosis
    
    
    3,159.6
    
    
    
    2,676.6
    
    
    
    2,243.1Respiratory
    
    
    2,622.0
    
    
    
    2,009.4
    
    
    
    1,489.8Anti-inflammatory/analgesics
    
    
    1,779.6
    
    
    
    2,677.3
    
    
    
    2,587.2Anti-bacterial/anti-fungal
    
    
    1,200.9
    
    
    
    1,028.5
    
    
    
    821.0Vaccines/biologicals
    
    
    1,036.1
    
    
    
    1,056.1
    
    
    
    1,028.3Urology
    
    
    733.1
    
    
    
    605.5
    
    
    
    547.3Ophthalmologicals
    
    
    726.5
    
    
    
    675.1
    
    
    
    621.5Human immunodeficiency virus (HIV)
    
    
    255.5
    
    
    
    290.6
    
    
    
    294.3Other
    
    
    2,555.6
    
    
    
    2,967.3
    
    
    
    2,783.4Total
    
    $
    22,938.6
    
    
    $
    22,485.9
    
    
    $
    21,445.8
   1Presented net of discounts and returns. The Companys products include therapeutic and preventive agents, generally sold by
prescription, for the treatment of human disorders. Among these are atherosclerosis products, of
which Zocor(simvastatin) is the largest-selling; hypertension/heart failure products, the most
significant of which are Cozaar(losartan potassium), Hyzaar(losartan potassium and
hydrochlorothiazide), and Vasotec(enalapril maleate); an osteoporosis product, Fosamax
(alendronate sodium), for treatment and prevention of osteoporosis; a respiratory product,
Singulair(montelukast sodium), a leukotriene receptor antagonist for treatment of asthma and for
relief of symptoms of seasonal allergic rhinitis; anti-inflammatory/analgesics, which include Vioxx
(rofecoxib), which was voluntarily withdrawn from the market worldwide on September 30, 2004, and
Arcoxia(etoricoxib), agents that specifically inhibit the COX-2 enzyme, which is responsible for
pain and inflammation (coxib); anti-bacterial/anti-fungal products, which includes Primaxin
(imipenem and cilastatin sodium), Cancidas(caspofungin acetate) and Invanz(ertapenem sodium);
vaccines/biologicals, of which Varivax(varicella virus vaccine live), a live virus vaccine for the
prevention of chickenpox, M-M-RII (measles, mumps and rubella virus vaccine live), a pediatric
vaccine for measles, mumps and rubella, Pneumovax(pneumococcal vaccine polyvalent), a vaccine for
the prevention of pneumococcal disease and Recombivax HB(hepatitis B vaccine [recombinant]) are
the largest-selling; a urology product, Proscar(finasteride), for treatment of symptomatic benign
prostate enlargement; ophthalmologicals, of which Cosopt(dorzolamide hydrochloride and timolol
maleate ophthalmic solution) and Trusopt(dorzolamide hydrochloride ophthalmic solution) are the
largest-selling; and HIV products, which include Stocrin(efavirenz) and Crixivan(indinavir
sulfate) for the treatment of human immunodeficiency viral infection in adults. Other primarily includes sales of other human pharmaceuticals, pharmaceutical and animal
health supply sales to the Companys joint ventures and revenue from the Companys relationship
with AstraZeneca LP, primarily relating to sales of Nexium(esomeprazole magnesium) and Prilosec
(omeprazole). 2




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In August 2004, the Company announced that the U.S. Food and Drug Administration (FDA)
granted a new indication for Hyzaarfor initial use in appropriate patients with severe
hypertension. In October 2004, the indications for Cancidaswere expanded with FDA approval for empirical
therapy for presumed fungal infections in febrile neutropenic patients. Voluntary Withdrawal of Vioxx On September 30, 2004, Merck 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). The trial, which was stopped, was designed to evaluate the efficacy of Vioxx25 mg in
preventing the recurrence of colorectal polyps in patients with a history of colorectal adenomas
and to further assess the cardiovascular safety of Vioxx. In this study, there was an increased
relative risk for confirmed cardiovascular events, such as heart attack and stroke, beginning after
18 months of treatment in the patients taking Vioxxcompared to those taking placebo. The results
for the first 18 months of the APPROVe study did not show any increased risk of confirmed
cardiovascular events on Vioxx, and in this respect, were similar to the results of two
placebo-controlled studies described in the most recent U.S. labeling for Vioxx. Merck presented data from APPROVe at the American College of Rheumatology (ACR) Annual
Scientific Meeting in San Antonio on October 18, 2004. The Company had requested the opportunity
to present the data at the ACR meeting. The Company estimates that there were 105 million U.S. prescriptions written for Vioxxfrom
May 1999 through August 2004. Based on this estimate, the Company estimates that the number of
patients who have taken Vioxxin the United States since its 1999 launch is approximately 20
million. The number of patients outside the United States who have taken Vioxxis undetermined at
this time. In October 2004, the Company received a letter from Senator Charles Grassley, Chairman of the
Senate Committee on Finance, requesting certain documents and information related to Vioxx. The
Company also received requests for information from other Congressional committees. The Company
intends to cooperate with these inquiries so that the Company can continue to describe the reasons
for the Companys voluntary withdrawal of Vioxxand to answer any questions related to the
Companys development and extensive testing of the medicine and its disclosures of the results of
its studies. Also, in October 2004, the Company received a letter from a group of five state Attorneys
General raising concerns that the Companys return and refund program for unused Vioxxwill not
provide consumers with adequate notice and will be unduly burdensome. The Company is cooperating
with the Attorneys General to respond to their concerns. On February 16-18, 2005, the FDA held a joint meeting of the Arthritis Advisory Committee and
the Drug Safety and Risk Management Advisory Committee. The committees discussed the overall
benefit to risk considerations (including cardiovascular and gastrointestinal safety concerns) for
COX-2 selective nonsteroidal anti-inflammatory drugs and related agents. On February 18, 2005, the
members of the committees were asked to vote on whether the overall risk versus benefit profile for
Vioxxsupports marketing in the United States. The members of the committees voted 17 to 15 in
support of the marketing of Vioxxin the United States. The Company looks forward to discussions
with the FDA and other regulatory authorities about Vioxx. As previously announced, the Board of Directors of the Company appointed a Special Committee
to review the Companys actions prior to its voluntary withdrawal of Vioxx,to act for the Board in
responding to shareholder litigation matters related to the withdrawal of Vioxxand to advise the
Board with respect to any action that should be taken as a result of the review. 3




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Arcoxia- Arcoxiahas been launched in 51 countries in Europe, Latin America and Asia. On
October 29, 2004, the Company confirmed that it had received an approvable letter from the FDA
for the Companys New Drug Application (NDA) for Arcoxia. The FDA informed Merck in the letter
that before approval of the NDA can be issued, additional safety and efficacy data for Arcoxiaare
required. On October 22, 2004, the European Medicines Evaluation Agency (EMEA) announced that it
would conduct a review of all COX-2 inhibitors, including Arcoxia, in light of the worldwide
withdrawal of Vioxx. The EMEA said that it had been asked to conduct the review by the European
Commission as a precautionary measure and that it would look at all aspects of the cardiovascular
safety of COX-2 inhibitors, including thrombotic and cardio-renal events. On January 18, 2005, the
EMEAs Committee on Medicinal Products for Human Use (CHMP) held hearings in connection with its
review. Additional meetings were held by the CHMP in mid-February to continue its review to
determine whether there is a need to make European Union (EU)-wide changes to the products
marketing authorizations, including labeling, and to determine whether additional studies are
needed. On February 17, 2005, CHMP announced that it had concluded that the available data show an
increased risk of cardiovascular adverse events for COX-2 inhibitors as a class relative to placebo
and some NSAIDS. According to CHMP, the data also suggested an association between duration of use
and dose and the probability of suffering a cardiovascular event and therefore recommended use of
the lowest effective dose of COX-2 inhibitors for the shortest possible duration of treatment.
Further, CHMP introduced a contra-indication for all COX-2 inhibitors in patients with ischemic
heart disease or stroke, and expanded the contra-indication for certain patients having higher
classes of congestive heart failure. Specifically with respect to Arcoxia,CHMP also introduced a
contra-indication in patients with hypertension whose blood pressure is not under control, and
advised that Arcoxiamay be associated with more frequent and severe effects on blood pressure,
particularly at higher doses, than some other COX-2 inhibitors, and recommended monitoring of blood
pressure for all patients taking Arcoxia.CHMP stated that these are interim measures pending the
finalization of the class review which is expected in April 2005. Finally, CHMP concluded that
more research is needed in the field to evaluate the cardiovascular safety of COX-2 inhibitors, and
that ongoing cardiovascular trials should continue as planned. Merck is working with other regulatory agencies in the countries where Arcoxiais approved to
assess whether changes to the prescribing information for the coxib class of drugs, including
Arcoxia,are warranted. Acquisitions3⁄4 In March 2004, the Company acquired Aton Pharma, Inc. (Aton), a
privately held biotechnology company focusing on the development of novel treatments for cancer and
other serious diseases. Atons clinical pipeline of histone deacetylase inhibitors represents a
class of anti-tumor agents with potential for efficacy based on a novel mechanism of action. The
lead product candidate, suberoylanilide hydroxamic acid (SAHA), is currently in Phase II clinical
trials for the treatment of cutaneous T-cell lymphoma. In 2003, the Company, through its wholly owned subsidiary, MSD (Japan) Co., Ltd., completed
tender offers to acquire the remaining 49% of the common shares of Banyu Pharmaceutical Co., Ltd.
(Banyu) that it did not already own for an aggregate purchase price of approximately $1.5
billion. On March 30, 2004, Merck completed its acquisition of Banyu. Full ownership of Banyu
enhances Mercks position in Japan, the worlds second-largest pharmaceutical market. Joint Ventures3⁄4 In 2000, the Company and Schering-Plough Corporation
(Schering-Plough) entered into agreements to create separate equally-owned partnerships to
develop and market in the United States new prescription medicines in the cholesterol-management
and respiratory therapeutic areas. In December 2001, the cholesterol-management partnership
agreements were expanded to include all the countries of the world, excluding Japan. In October
2002, Zetia (ezetimibe) (branded Ezetroloutside the United States), the first in a new class of
cholesterol-lowering agents, was launched in the United States. As of December 31, 2004, Ezetrol
has been launched in more than 50 countries outside the United States. In July 2004, Vytorin
(ezetimibe/simvastatin) (marketed as Inegyin many countries outside the United States), a
combination product containing the active ingredients of both Zetiaand Zocor,was approved in the
United States. As of December 31, 2004, in addition to the United States, Vytorinhad been
approved in 15 countries. 4




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In November 2004, Merck and Schering-Plough announced a new clinical trial for Vytorin,
IMPROVE IT (Improved Reduction of Outcomes: VytorinEfficacy International Trial). This trial
will evaluate Vytorinin reducing major cardiovascular events through intensive lipid lowering of
LDL cholesterol in 10,000 patients with acute coronary syndrome. IMPROVE IT is the fourth
large-scale outcomes trial being conducted on Vytorin. In 1982, the Company entered into an agreement with Astra AB (Astra) to develop and market
Astra products in the United States. In 1994, the Company and Astra formed an equally owned joint
venture that developed and marketed most of Astras new prescription medicines in the United States
including Prilosec, the first of a class of medications known as proton pump inhibitors, which
slows the production of acid from the cells of the stomach lining. In 1998, the Company and Astra restructured the joint venture whereby the Company acquired
Astras interest in the joint venture, renamed KBI Inc. (KBI), and contributed KBIs operating
assets to a new U.S. limited partnership named Astra Pharmaceuticals, L.P. (the Partnership), in
which the Company maintains a limited partner interest. The Partnership, renamed AstraZeneca LP,
became the exclusive distributor of the products for which KBI retained rights. The Company earns
certain Partnership returns as well as ongoing revenue based on sales of current and future KBI
products. The Partnership returns include a priority return provided for in the Partnership
Agreement, variable returns based, in part, upon sales of certain former Astra USA, Inc. products,
and a preferential return representing the Companys share of undistributed Partnership GAAP
earnings. In conjunction with the 1998 restructuring, for a payment of $443.0 million, Astra
purchased an option to buy the Companys interest in the KBI products, excluding the Companys
interest in the gastrointestinal medicines Nexiumand Prilosec. The Company also granted Astra an
option (the Shares Option) to buy the Companys common stock interest in KBI, at an exercise
price based on the net present value of estimated future net sales of Nexiumand Prilosec. In April 1999, Astra merged with Zeneca Group Plc, forming AstraZeneca AB (AstraZeneca). As
a result of the merger, in exchange for the Companys relinquishment of rights to future Astra
products with no existing or pending U.S. patents at the time of the merger, Astra paid $967.4
million, which is subject to a true-up calculation in 2008 that may require repayment of all or a
portion of this amount. The merger also triggers a partial redemption of the Companys limited
partner interest in 2008. Furthermore, as a result of the merger, AstraZenecas option to buy the
Companys interest in the KBI products is exercisable in 2010 and the Company has the right to
require AstraZeneca to purchase such interest in 2008. In addition, the Shares Option is
exercisable two years after Astras purchase of the Companys interest in the KBI products. In 1989, the Company formed a joint venture with Johnson & Johnson to develop, market and
manufacture consumer health care products in the United States. This 50% owned joint venture was
expanded into Europe in 1993, and into Canada in 1996. Significant joint venture products are
Pepcid AC(famotidine), an over-the-counter form of the Companys ulcer medication Pepcid
(famotidine), as well as Pepcid Complete,an over-the-counter product which combines the Companys
ulcer medication with antacids (calcium carbonate and magnesium hydroxide). In March 2004, the
Company sold to Johnson & Johnson its interest in the European joint venture which is discussed
further on page 9 under Divestitures. Effective April 1992, the Company, through the Merck Vaccine Division, and Connaught
Laboratories, Inc. (now Sanofi Pasteur S.A.), agreed to collaborate on the development and
marketing of combination pediatric vaccines and to promote selected vaccines in the United States.
The research and marketing collaboration enables the companies to pool their resources to expedite
the development of vaccines combining several different antigens to protect children against a
variety of diseases, including Haemophilus influenzae type b, hepatitis B,
diphtheria, tetanus, pertussis and poliomyelitis. While combination vaccine development efforts
continue under this agreement, no vaccines are currently being promoted. In 1994, the Company, through the Merck Vaccine Division, and Pasteur Mérieux Connaught (now
Sanofi Pasteur S.A.) formed a joint venture to market human vaccines in Europe and to collaborate
in the development of combination vaccines for distribution in the then existing EU and the
European Free Trade Association. The 5




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Company and Sanofi Pasteur contributed, among other things, their European vaccine businesses for
equal shares in the joint venture, known as Pasteur Mérieux MSD, S.N.C. (now Sanofi Pasteur MSD,
S.N.C.). The joint venture is subject to monitoring by the EU, to which the partners made certain
undertakings in return for an exemption from European Competition Law, effective until December
2006. The joint venture maintains a presence, directly or through affiliates or branches in
Belgium, Italy, Germany, Spain, France, Austria, Ireland, Sweden and the United Kingdom, and
through distributors in the rest of its territory. In 1997, the Company and Rhône-Poulenc S.A. (now Sanofi-Aventis S.A.) combined their
respective animal health and poultry genetics businesses to form Merial Limited (Merial), a fully
integrated animal health company, which is a stand-alone joint venture, equally owned by each
party. Merial provides a comprehensive range of pharmaceuticals and vaccines to enhance the
health, well-being and performance of a wide range of animal species. Competition3⁄4 The markets in which the Companys pharmaceutical business is conducted
are highly competitive and often highly regulated. Global efforts toward health care cost
containment continue to exert pressure on product pricing and access. Such competition involves an intensive search for technological innovations and the ability to
market these innovations effectively. With its long-standing emphasis on research and development,
the Company is well prepared to compete in the search for technological innovations. Additional
resources to meet competition include quality control, flexibility to meet customer specifications,
an efficient distribution system and a strong technical information service. The Company is active
in acquiring and marketing products through joint ventures and licenses and has been refining its
sales and marketing efforts to further address changing industry conditions. To enhance its
product portfolio, the Company continues to pursue external alliances, from early-stage to
late-stage product opportunities, including joint ventures and targeted acquisitions. However, the
introduction of new products and processes by competitors may result in price reductions and
product replacements, even for products protected by patents. For example, the number of compounds
available to treat diseases typically increases over time and has resulted in slowing the growth in
sales of certain of the Companys products. Legislation enacted in all states in the United States, particularly in the area of human
pharmaceutical products, allows, encourages or, in a few instances, in the absence of specific
instructions from the prescribing physician, mandates the use of generic products (those
containing the same active chemical as an innovators product) rather than brand-name products.
Governmental and other pressures toward the dispensing of generic products have significantly
reduced the sales of certain of the Companys products no longer protected by patents, such as
Vasotecand Vaseretic(enalapril maleate in combination with hydrochlorothiazide),the U.S. rights
to which have been sold. In addition, Zocorhas lost patent protection in certain countries
outside the United States and the Company has experienced a decline in Zocorsales in those
countries. Distribution3⁄4 The Company sells its human health products primarily to drug wholesalers
and retailers, hospitals, clinics, government agencies and managed health care providers such as
health maintenance organizations and other institutions. Vaccines are also sold directly to
physicians. The Companys professional representatives communicate the effectiveness, safety and
value of the Companys products to health care professionals in private practice, group practices
and managed care organizations. In the fourth quarter of 2003, the Company implemented a new distribution program for U.S.
wholesalers to moderate the fluctuations in sales caused by wholesaler investment buying and
improve efficiencies in the distribution of Company pharmaceutical products. The new program
lowered previous limits on average monthly purchases of Company pharmaceutical products by U.S.
customers. Following the implementation of the program, fluctuations in 2004 sales caused by
wholesaler investment buying have significantly moderated. Raw Materials3⁄4 Raw materials and supplies, which are generally available from multiple
sources, are purchased worldwide and are normally available in quantities adequate to meet the
needs of the Companys business. 6




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Government Regulation and Investigation3⁄4 The pharmaceutical industry is subject to
global regulation by regional, country, state and local agencies. Of particular importance is the
FDA in the United States, which administers requirements covering the testing, approval, safety,
effectiveness, manufacturing, labeling and marketing of prescription pharmaceuticals. In many
cases, the FDA requirements have increased the amount of time and money necessary to develop new
products and bring them to market in the United States. In 1997, the Food and Drug Administration
Modernization Act (the FDA Modernization Act) was passed and was the culmination of a
comprehensive legislative reform effort designed to streamline regulatory procedures within the FDA
and to improve the regulation of drugs, medical devices and food. The legislation was principally
designed to ensure the timely availability of safe and effective drugs and biologics by expediting
the premarket review process for new products. A key provision of the legislation is the
re-authorization of the Prescription Drug User Fee Act of 1992, which permits the continued
collection of user fees from prescription drug manufacturers to augment FDA resources earmarked for
the review of human drug applications. This helps provide the resources necessary to ensure the
prompt approval of safe and effective new drugs. In the United States, the government made significant progress in expanding health care access
by enacting the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which was
signed into law in December 2003. This statute added a voluntary drug discount card for Medicare
beneficiaries in June 2004 and will add prescription drug coverage on January 1, 2006.
Implementation of the new benefit will support the Companys goal of improving access to medicines
by expanding insurance coverage, while preserving market-based incentives for pharmaceutical
innovation. At the same time, the benefit is designed to assure that prescription drug costs will
be controlled by competitive pressures and by encouraging the appropriate use of medicines. The
Company has taken a leadership role in contributing to the success of the new Medicare-endorsed
discount cards by providing its medicines free for low-income Medicare beneficiaries who exhaust
their $600 transitional assistance allowance in Medicare-endorsed drug discount cards. This action
is consistent with the Companys long-standing Patient Assistance Program, which provides free
medicines to patients in the United States who lack drug coverage and cannot afford their
medicines. During 2005, the Company will be negotiating with prescription drug plans under the new
Medicare drug benefit to offer Merck products to Medicare beneficiaries beginning January 1, 2006
under the terms of the new benefit. In addressing cost containment outside of Medicare, the Company has made a continuing effort
to demonstrate that its medicines can help save costs in overall patient health care. In addition,
pricing flexibility across the Companys product portfolio has encouraged growing use of its
medicines and mitigated the effects of increasing cost pressures. For many years, the pharmaceutical industry has been under federal and state oversight with
the approval process for new drugs, drug safety, advertising and promotion, drug purchasing and
reimbursement programs and formularies variously under review. The Company believes that it will
continue to be able to conduct its operations, including the introduction of new drugs to the
market, in this regulatory environment. One type of federal initiative to contain federal health
care spending is the prospective or capitated payment system, first implemented to reduce the
rate of growth in Medicare reimbursement to hospitals. Such a system establishes in advance a flat
rate for reimbursement for health care for those patients for whom
the payor is fiscally
responsible. This type of payment system and other cost containment systems are now widely used by
public and private payors and have caused hospitals, health maintenance organizations and other
customers of the Company to be more cost-conscious in their treatment decisions, including
decisions regarding the medicines to be made available to their patients. The Company continues to
work with private and federal employers to slow increases in health care costs. Further, the
Companys efforts to demonstrate that its medicines can help save costs in other areas, and pricing
flexibility across its product portfolio, have encouraged the use of the Companys medicines and
have helped offset the effects of increasing cost pressures. Also, federal and state governments have pursued methods to directly reduce the cost of drugs
and vaccines for which they pay. For example, federal laws require the Company to pay specified
rebates for medicines reimbursed by Medicaid, to provide discounts for outpatient medicines
purchased by certain Public Health Service entities and disproportionate share hospitals
(hospitals meeting certain criteria), and to provide minimum 7




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discounts of 24% off of a defined non-federal average manufacturer price for purchases by certain
components of the federal government such as the Department of Veterans Affairs and the Department
of Defense. Initiatives in some states seek rebates beyond the minimum required by Medicaid legislation,
in some cases for patients beyond those who are eligible for Medicaid. Under the Federal Vaccines
for Children entitlement program, the U.S. Centers for Disease Control and Prevention (CDC) funds
and purchases recommended pediatric vaccines at a public sector price for the immunization of
Medicaid-eligible, uninsured, native American and certain underinsured children. The Company was
awarded a CDC contract in 2004 for the supply of $322 million of pediatric vaccines for the
Vaccines for Children program. As of January 1, 2006, patients previously eligible for Medicaid
who are also Medicare beneficiaries (65 years and older or disabled) will leave the
state-administered Medicaid system to be covered by the new Medicare prescription drug benefit. Outside the United States, the Company encounters similar regulatory and legislative issues in
most of the countries where it does business. There, too, the primary thrust of governmental
inquiry and action is toward determining drug safety and effectiveness, often with mechanisms for
controlling the prices of prescription drugs and the profits of prescription drug companies. The
EU has adopted directives concerning the classification, labeling, advertising, wholesale
distribution and approval for marketing of medicinal products for human use. The Companys
policies and procedures are already consistent with the substance of these directives;
consequently, it is believed that they will not have any material effect on the Companys business. The Company is subject to the jurisdiction of various regulatory agencies and is, therefore,
subject to potential administrative actions. Such actions may include seizures of products and
other civil and criminal sanctions. Under certain circumstances, the Company on its own may deem
it advisable to initiate product recalls. The Company believes that it should be able to compete
effectively within this environment. In addition, certain countries within the EU, recognizing the economic importance of the
research-based pharmaceutical industry and the value of innovative medicines to society, are
working with industry representatives and the European Commission on proposals to complete the
Single Market in pharmaceuticals and improve the competitive climate through a variety of means
including market deregulation. There has been an increasing amount of focus on privacy issues in countries around the world,
including the United States and the EU. In the United States and the EU, governments have pursued
legislative and regulatory initiatives regarding privacy, including federal privacy regulations and
recently enacted state privacy laws concerning health and other personal information, which have
affected the Companys operations. Patents, Trademarks and Licenses3⁄4 Patent protection is considered, in the aggregate, to
be of material importance in the Companys marketing of human health products in the United States
and in most major foreign markets. Patents may cover products per se, pharmaceutical formulations,
processes for or intermediates useful in the manufacture of products or the uses of products.
Protection for individual products extends for varying periods in accordance with the date of grant
and the legal life of patents in the various countries. The protection afforded, which may also
vary from country to country, depends upon the type of patent and its scope of coverage. Patent portfolios developed for products introduced by the Company normally provide market
exclusivity. Basic patents are in effect for the following major products in the United States:
Arcoxia, Cancidas, Comvax(Haemophilus b conjugate and hepatitis B [recombinant] vaccine), Cosopt,
Cozaar, Crixivan, Emend(aprepitant), Fosamax, Hyzaar, Invanz, Maxalt(rizatriptan benzoate),
PedvaxHIB(Haemophilus b conjugate vaccine), Primaxin, Propecia(finasteride), Proscar,
Recombivax HB, Singulair, Timoptic-XE(timolol maleate ophthalmic gel forming solution), Trusopt,
Vioxx and Zocor. Basic patents are also in effect in the United States for Zetiaand Vytorin,
which were developed by the Merck/Schering-Plough partnership. A basic patent is also in effect
for Sustiva/Stocrin. Bristol-Myers Squibb, under an exclusive license from the
Company, sells Sustivain the United States, Canada and certain European countries. The Company
markets Stocrinin other countries throughout the world. The basic patent for Aggrastat(tirofiban
hydrochloride) in the United States was divested with the product in 2003. The Company retains
basic patents for Aggrastatoutside the United States. 8




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In 2003, Zocorlost its basic patent protection in Canada and certain countries in Europe,
including the United Kingdom and Germany, and the Company experienced a decline in Zocorsales in
those countries. In June 2006, Zocorwill lose its market exclusivity in the United States and the
Company expects a decline in U.S. Zocorsales. The FDA Modernization Act includes a Pediatric Exclusivity Provision that may provide an
additional six months of market exclusivity in the United States for indications of new or
currently marketed drugs if certain agreed upon pediatric studies are completed by the applicant.
These exclusivity provisions were re-authorized until October 1, 2007 by the Best Pharmaceuticals
for Children Act passed in January 2002. In 2004, the FDA granted an additional six months of
market exclusivity in the United States to Trusoptuntil October 2008. In 2003, the FDA granted an
additional six months of market exclusivity in the United States to Fosamaxuntil February 2008,
and FosamaxOnce Weekly until January 2019. However, on January 28, 2005, the U.S. Court of
Appeals for the Federal Circuit in Washington, D.C. found the Companys patent claims for
once-weekly administration of Fosamaxto be invalid. Based on the Court of Appeals decision,
Fosamaxwill lose its market exclusivity in the United States in February 2008 and the Company
expects a decline in U.S. Fosamaxsales at that time. Prior to the decision, Mercks patent for
once-weekly administration of Fosamaxwas set to expire in July 2018. Merck disagrees with the
decision of the Court of Appeals and has requested reconsideration by the Court of Appeals. For
further information with respect to the Companys patents, see
Patent Litigation on page 22. While the expiration of a product patent normally results in a loss of market exclusivity for
the covered pharmaceutical product, commercial benefits may continue to be derived from: (i)
later-granted patents on processes and intermediates related to the most economical method of
manufacture of the active ingredient of such product; (ii) patents relating to the use of such
product; (iii) patents relating to novel compositions and formulations; and (iv) in the United
States, market exclusivity that may be available under federal law. The effect of product patent
expiration on pharmaceutical products also depends upon many other factors such as the nature of
the market and the position of the product in it, the growth of the market, the complexities and
economics of the process for manufacture of the active ingredient of the product and the
requirements of new drug provisions of the Federal Food, Drug and Cosmetic Act or similar laws and
regulations in other countries. Additions to market exclusivity are sought in the United States and other countries through
all relevant laws, including laws increasing patent life. Some of the benefits of increases in
patent life have been partially offset by a general increase in the number of, incentives for and
use of generic products. Additionally, improvements in intellectual property laws are sought in
the United States and other countries through reform of patent and other relevant laws and
implementation of international treaties. Worldwide, all of the Companys important products are sold under trademarks that are
considered in the aggregate to be of material importance. Trademark protection continues in some
countries as long as used; in other countries, as long as registered. Registration is for fixed
terms and can be renewed indefinitely. Royalties received during 2004 on patent and know-how licenses and other rights amounted to
$113.9 million. The Company also paid royalties amounting to $734.1 million in 2004 under patent
and know-how licenses it holds. Discontinued Operations On August 19, 2003, the Company completed the spin-off of Medco
Health Solutions, Inc. (Medco Health) as a separate, publicly-traded company. The spin-off was
effected by way of a pro rata dividend to Company stockholders of all the outstanding shares of
common stock of Medco Health. Based on a letter ruling the Company received from the U.S. Internal
Revenue Service, receipt of Medco Health shares in the distribution was tax-free for U.S. federal
income tax purposes, but any cash received in lieu of fractional shares was taxable. Divestitures3⁄4 In March 2004, the Company completed the sale to Johnson & Johnson of the
Companys 50% equity stake in its European non-prescription pharmaceuticals joint venture with
Johnson & Johnson. 9




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In 2003, the Company sold its U.S. rights in Aggrastat(tirofiban hydrochloride injection) to
Guilford Pharmaceuticals Inc., including the basic U.S. product patents (but not
process patents) for the product. In 2002, the Company sold its U.S. rights in Vasotec, Vasereticand Vasotec I.V. Injection
(enalaprilat) to Biovail Laboratories Incorporated (Biovail), a subsidiary of Biovail
Corporation. At the same time, the Companys Canadian subsidiary, Merck Frosst Canada & Co.
(Merck Frosst) and Biovail entered into a supply agreement under which Merck Frosst agreed to
supply Biovail for a minimum of five years with bulk tablets of formulated enalapril maleate and
enalapril maleate in combination with hydrochlorothiazide for distribution by Biovail in the United
States as Vasotecand Vaseretic. The basic product patents on Vasotecand Vaseretichad expired in
the United States prior to these transactions. Research and Development The Companys business is characterized by the introduction of new products or new uses for
existing products through a strong research and development program. Approximately 13,100 people
are employed in the Companys research activities. Expenditures for the Companys research and
development programs were $4.0 billion in 2004, $3.2 billion in 2003 and $2.7 billion in 2002 and
are estimated to continue at the same level as the full-year 2004 expense in 2005. The Company
maintains its ongoing commitment to research over a broad range of therapeutic areas and clinical
development in support of new products. Total expenditures for the period 1995 through 2004
exceeded $23.1 billion with a compound annual growth rate of 13%. The Company maintains a number of long-term exploratory and fundamental research programs in
biology and chemistry as well as research programs directed toward product development. Projects
related to human health are being carried on in various fields such as bacterial, fungal, and viral
infections, cardiovascular disease and atherosclerosis, cancer, depression, diabetes, obesity,
neurodegenerative disease, psychiatric disease, pain and inflammation, immunology, respiratory
diseases, ophthalmology, respiratory diseases, osteoporosis and men/women health programs,
endoparasitic and ectoparasitic diseases, companion animal diseases, and production improvement. In the development of human health products, industry practice and government regulations in
the United States and most foreign countries provide for the determination of effectiveness and
safety of new chemical compounds through preclinical tests and controlled clinical evaluation.
Before a new drug may be marketed in the United States, recorded data on preclinical and clinical
experience are included in the NDA or the biological Product License Application (PLA) to the FDA
for the required approval. The development of certain other products is also subject to government
regulations covering safety and efficacy in the United States and many foreign countries. There
can be no assurance that a compound that is the result of any particular program will obtain the
regulatory approvals necessary for it to be marketed. As
stated above, the Company maintains basic research programs in a number of areas directed toward product development. Once
the Companys scientists discover a new compound that they believe has promise to treat a medical
condition, the Company commences preclinical testing with that compound. Preclinical testing
includes laboratory testing and animal safety studies to gather data on chemistry, pharmacology
and toxicology. Compounds that are selected for study in humans then must undergo further testing
to determine how they are metabolized and excreted in animals and then prepared in a stable dose
form that is bioavailable. The preclinical testing phase takes about six years on average. If the
compound continues to show promise, the Company will initiate clinical testing in accordance with
established regulatory requirements. The three phases of clinical
testing take a total of six years on average
to complete. The clinical testing begins with Phase I studies which are used to determine that the
compound is safe in humans, usually using healthy volunteers. Phase I studies are concerned with
detecting adverse effects and usually do not provide data on the
efficacy of the compound to treat the
targeted medical condition. If Phase I studies do not identify human tolerability problems, the
compound then enters Phase II which is the first time the compound is studied in patients with the disease
that the compound is being studied to treat. Phase II dose and efficacy trials are commenced to
determine the appropriate dosing for the compound, to confirm the compounds efficacy and to
determine whether any adverse effects will limit the compounds usefulness. If the results from the
Phase II trials are satisfactory, the Company commences large-scale Phase III trials to confirm the compounds efficacy and safety. Upon completion of those trials, if
satisfactory, the 10




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Company submits regulatory filings with the appropriate regulatory agencies
around the world to have the product candidate approved for marketing. In the United States, the
FDA approval process begins once a complete NDA is submitted and received by the FDA. Pursuant to
the Prescription Drug User Fee Act, the FDA review period targets for
efficacy NDAs or supplemental
NDAs is either six months, for priority review, or ten months, for a standard review. Within 60
days after receipt of an NDA, the FDA determines if the application is sufficiently complete to
permit a substantive review. The FDA also assesses, at that time, whether the application will be
granted a priority review or standard review. According to FDA guidelines, a priority review is
granted if the compound is considered to constitute a significant improvement, compared to
marketed products, including non-drug products/therapies in the treatment, diagnosis, or prevention
of a disease. The determination of whether the application is filable and type of review (i.e.,
standard or priority) are then communicated to the Company. Once the review timelines are defined,
it is generally assumed that the FDA will act upon the application within those timelines, unless a
major amendment has been submitted (either at the Companys own initiative or the FDAs request) to
the pending application. If this occurs, the FDA may extend the review period to allow for review
of the new information, but by no more than 180 days. Extensions to the review period are
communicated to the Company. The average time period from the start of preclinical testing to FDA
approval is approximately 14 years. In November 2004, the Company announced it had filed a Biologics License Application for
ProQuad(measles, mumps, rubella and varicella (Oka/Merck) virus vaccine live) with the FDA.
ProQuadis an investigational vaccine for simultaneous vaccination against measles, mumps, rubella
and varicella in children 12 months to 12 years of age. ProQuadcombines two established Merck
vaccines, M-M-RII and Varivax. The Companys late-stage pipeline includes three Phase III vaccines which are expected to be
submitted for FDA approval in 2005. The three vaccines are
Gardasil,a vaccine to prevent human papillomavirus (HPV) infection and the associated development of cervical
cancer and genital warts; a vaccine for the prevention of zoster (shingles) and the reduction of
pain associated with it; and RotaTeq, a vaccine to protect against rotavirus, a highly contagious
virus that is the most common cause of severe gastroenteritis in infants and young children. The
Company expects to file PLAs with the FDA for the zoster vaccine and RotaTeqin the second quarter
of 2005 and for Gardasilin the second half of 2005. On February 2, 2005, the Company announced that it and GlaxoSmithKline plc (GSK) entered
into a cross-license and settlement agreement for certain patent rights related to HPV vaccines.
Pursuant to the agreement, GSK will receive an upfront payment and
royalties from the Company based on
sales of Gardasil,upon development and launch. The agreement resolves competing intellectual
property claims related to the Companys and GSKs vaccine candidates. The Company will continue
with its research, development and, after appropriate regulatory reviews, commercialization
activities, if approved, for Gardasil. The Company is also studying a DPP-IV inhibitor, a glucose-lowering mechanism, used alone and
in combination for the treatment of Type 2 diabetes. The compound is currently in Phase III
clinical studies and the Company expects to submit an NDA to the FDA in 2006. The Companys early-stage pipeline includes candidates in each of the following areas:
Alzheimers disease, arthritis, atherosclerosis, cancer, diabetes, endocrine disorders, glaucoma,
infectious diseases, obesity, osteoporosis, psychiatric disease, neurodegenerative disease, pain,
respiratory disease, urogenital disorders and vaccines. The Company supplements its internal
research with an aggressive licensing and external alliance strategy focused on the entire spectrum
of collaborations from early research to late-stage compounds, as well as new technologies. In
2004, the Company completed 50 transactions, including research collaborations, preclinical and
clinical compounds, and technology transactions. Transactions completed in 2004 include agreements
with the following companies: H. Lundbeck A/S (Lundbeck) for the treatment of sleep disorders,
Bristol-Myers Squibb (BMS) for the treatment of Type 2 diabetes, Vertex Pharmaceuticals
Incorporated (Vertex) for the treatment of cancer; DOV Pharmaceutical, Inc. (DOV) for the
treatment of depression and related psychiatric disorders, Nastech Pharmaceutical Inc. (Nastech)
for the treatment of obesity and Ono Pharmaceutical Co., Ltd. (Ono) for the treatment of acute
stroke. 11




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In February 2004, the Company announced that it entered into an agreement with Lundbeck for
the exclusive development and commercialization in the United States of gaboxadol, a compound
licensed to Lundbeck by a third party that is currently in Phase III development for the treatment
of sleep disorders. Merck and Lundbeck will jointly complete the ongoing Phase III clinical
program. The companies anticipate that Merck will file an NDA with the FDA between late 2006 and
early 2007. Following FDA approval, the companies plan to co-promote gaboxadol in the United
States. In June 2004, Merck and Lundbeck announced an extension of their agreement for the
exclusive development and commercialization of gaboxadol to Japan. In March 2004, the Company acquired Aton, a privately held biotechnology company focusing on
the development of novel treatments for cancer and other serious diseases. Atons clinical
pipeline of histone deacetylase inhibitors represents a class of anti-tumor agents with potential
for efficacy based on a novel mechanism of action. Atons lead product candidate, suberoylanilide
hydroxamic acid (SAHA), is currently in Phase II clinical trials for the treatment of cutaneous
T-cell lymphoma. In April 2004, Merck and BMS entered into a worldwide collaborative agreement for
muraglitazar, BMSs product for use in treating patients with Type 2 diabetes. Merck and BMS will
globally develop and market muraglitazar. In December 2004, BMS submitted an NDA to the FDA for
muraglitazar. Muraglitazar has the potential to be the first in a novel class of drugs known as
glitazars. This class of dual alpha/gamma PPAR agonists, including muraglitazar, is thought to
control blood sugar. In clinical trials, muraglitazar has reduced blood glucose levels, decreased
triglyceride levels and increased high-density lipoprotein (HDL) cholesterol levels in Type 2
diabetes patients and has been generally well tolerated. In June 2004, Merck and Vertex entered into a global collaboration to develop and
commercialize VX-680, Vertexs lead Aurora kinase inhibitor that is in Phase I clinical development
for the treatment of cancer. Aurora kinases are implicated in the onset and progression of many
different human cancers and novel Aurora kinase inhibitors, such as VX-680, have the potential to
play an important future role in the treatment and management of a wide range of tumor types. In August 2004, Merck and DOV announced an agreement for the development and commercialization
of DOVs novel triple-uptake inhibitors being developed for depression and related psychiatric
disorders. Merck has licensed exclusive worldwide rights to DOV 21,947, which is in Phase I, for
all therapeutic indications. In September 2004, Merck and Nastech announced a global alliance to develop and commercialize
Peptide YY (PYY) 3-36 Nasal Spray, Nastechs product for the treatment of obesity, which is
currently in Phase I development. The investigational PYY 3-36 Nasal Spray is designed to deliver
the natural, appetite-regulating hormone PYY directly to the bloodstream. In November 2004, Merck and Ono announced that they signed an agreement granting Merck the
worldwide license for ONO-2506 ((2R)-2-propyloctanoic acid), a novel intravenous compound currently
in Phase II development for the treatment of acute stroke. In addition, Ono received exclusive
rights in Japan to develop and market Emend(aprepitant), Mercks drug for use in combination with
other antiemetic agents for prevention of acute and delayed nausea and vomiting associated with
initial and repeat courses of highly emetogenic cancer chemotherapy, including cisplatin. Ono also
received rights in Japan to co-market a second brand of MK-431, Mercks investigational oral
compound for the treatment of diabetes, under a yet to be determined trademark. The chart below reflects the Companys research pipeline as of February 15, 2005. Candidates
shown in Phase III include specific products. Candidates shown in Phase I and II include the most
advanced compound with a specific mechanism in a given therapeutic area. Back-up compounds,
regardless of their phase of development, additional indications in the same therapeutic areas and
additional line extensions or formulations for in-line products are not shown. Preclinical areas
shown are those where the Company has initiated Good Laboratory Practices studies in compounds with
mechanisms distinct from those in Phase I and II. The Companys programs are generally designed to
focus on the development of novel medicines to address large, unmet medical needs. 12




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Preclinical
    
    
    
    
    
    Phase I
    
    
    
    
    
    Phase II
    
    
    
    
    
    Phase IIIAlzheimers DiseaseAntibacterialsAntiviralArthritisAtherosclerosisCancerCardiovascular DiseaseDiabetesGlaucomaImmunologyInsomniaOsteoporosisPainRespiratory DiseaseVaccines
    
    
    
    
    
    Alzheimers Disease
     c-7617Arthritis
     c-7198
     c-9101Cancer
     c-8585
     VX-680*CINV
     c-9280Diabetes
     c-0730Endocrine
     c-0239
     c-0302
     c-7717Glaucoma
     c-3859Obesity
     Nastech PYY3-36*Osteoporosis
     c-3578Pain
     c-8928
     c-6740
     c-1246Parkinsons Disease
     c-6161Psychiatric Disease
     DOV*Urinary Incontinence
     c-4699
    
    
    
    
    
    AIDS
      c-1605Alzheimers Disease
     c-9136Arthritis
     c-4462
     c-9787Atherosclerosis
     c-8834
     c-1602Cancer (CTCL)
     SAHA*Diabetes
     c-3347HIV Vaccine
Multiple Sclerosis
     c-6448Obesity
     c-2624
     c-2735
     c-5093Pediatric Vaccine
Psychiatric Disease
     c-9054Respiratory Disease
     c-3193
     c-3885Stroke
     ONO 2506*
    
    
    
    
    
    HPV and Related Cervical
Cancer and Genital Warts
     GardasilDiabetes
     MK-431Rotavirus Gastroenteritis
      RotaTeqInsomnia
     Gaboxadol *Shingles
     Zoster Vaccinec-01722004 U.S. SubmissionsOsteoporosis
     FosamaxPlus Vitamin DPediatric Vaccine
     ProQuad
    
    
    
    
    
    Diabetes
     Muraglitazar**Licensed
 All product or service marks appearing in type form different from that of the surrounding
text are trademarks or service marks owned by or licensed to Merck, its subsidiaries or
affiliates (including Zetiaand Vytorin, trademarks owned by entities of the Merck/Schering-Plough
partnership), except as noted. Cozaarand Hyzaarare registered trademarks of E.I. du Pont de
Nemours and Company, Wilmington, DE and Prilosecand Nexiumare trademarks of the AstraZeneca
group. The U.S. trademarks for Vasotecand Vasereticare owned by Biovail Laboratories
Incorporated. The U.S. trademark for Aggrastatis owned by Guilford Pharmaceuticals Inc. Employees At the end of 2004, the Company had approximately 63,000 employees worldwide, with
approximately 32,700 employed in the United States, including Puerto Rico. Approximately 22% of
worldwide employees of the Company are represented by various collective bargaining groups. In 2003, the Company announced plans to eliminate 4,400 positions as part of a cost-reduction
initiative that was completed at the end of 2004. As of December 31, 2004, the Company had
eliminated 5,100 positions, as the Company identified additional opportunities to eliminate
positions and reduce costs. Most of the additional eliminations came from contractor positions.
This action is expected to result in approximately $300 million in savings in 2005 without
impacting either key productivity initiatives or the Companys ability to meet its business
objectives. Environmental Matters The Company believes that it is in compliance in all material respects with applicable
environmental laws and regulations. In 2004, the Company incurred capital expenditures of
approximately $50.2 million for environmental protection facilities. The Company is also remediating environmental contamination
resulting from 13




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past industrial activity at certain of its sites. Expenditures for remediation and
environmental liabilities were $24.5 million in 2004, and are estimated at $65.6 million for the
years 2005 through 2009. These amounts do not consider potential recoveries from insurers or other
parties. The Company has taken an active role in identifying and providing for these costs, and in
managements opinion, the liabilities for all environmental matters which are probable and
reasonably estimable have been accrued. Although it is not possible to predict with certainty the
outcome of these environmental matters, or the ultimate costs of remediation, management does not
believe that any reasonably possible expenditures that may be incurred in excess of those provided
should result in a material adverse effect on the Companys financial position, results of
operations, liquidity or capital resources. Cautionary Factors that May Affect Future Results
(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995) This report and other written reports and oral statements made from time to time by the
Company may contain so-called forward-looking statements, all of which are subject to risks and
uncertainties. One can identify these forward-looking statements by their use of words such as
expects, plans, will, estimates, forecasts, projects and other words of similar
meaning. One can also identify them by the fact that they do not relate strictly to historical or
current facts. These statements are likely to address the Companys growth strategy, financial
results, product approvals and development programs. One must carefully consider any such
statement and should understand that many factors could cause actual results to differ materially
from the Companys forward-looking statements. These factors include inaccurate assumptions and a
broad variety of other risks and uncertainties, including some that are known and some that are
not. No forward-looking statement can be guaranteed and actual future results may vary materially.
Although it is not possible to predict or identify all such factors, they may include the
following:  
    On September 30, 2004, Merck voluntarily withdrew Vioxxfrom the
market. Numerous product liability lawsuits as well as a number
of putative class actions have been filed against the Company in
state and federal courts relating to the sale and use of Vioxx.
In addition to these lawsuits, a number of purported class actions
have been brought against the Company and several current and
former officers and directors of the Company alleging that the
Company made false and misleading statements regarding Vioxxin
violation of the federal securities laws and the Employee
Retirement Income Security Act (ERISA). In addition, a number
of shareholders have filed derivative suits asserting claims
against the Board members and Company officers. The Company has
also been named as a defendant in actions in various countries
outside the United States. The Company anticipates that
additional lawsuits relating to Vioxxwill be filed against it.
The Company is also being investigated by the Securities and
Exchange Commission (SEC), the U.S. Department of Justice,
certain Congressional committees and the District Attorneys
Office in Munich, Germany. The Company has stated that it is
reasonably possible that its insurance coverage will not be
adequate to cover its defensive costs and any losses.
Unfavorable outcomes in the VioxxLawsuits (as defined on page
18) or resulting from the
VioxxInvestigations (as defined on page 19) could have a material adverse effect on the
Companys financial position, liquidity and results of operations.  
    As noted above, Arcoxiais currently marketed in 51 countries
outside the United States and it has received an approvable
letter from the FDA. The Company is currently unable at this time
to predict any future action that the FDA will take with respect
to Arcoxia. The FDA held a hearing on February 16-18 to discuss
safety issues related to COX-2 inhibitors. In addition, the CHMP
in Europe is conducting a review of all aspects of the
cardiovascular safety of COX-2 inhibitors. In connection with
that review, as interim measures, the summary of product
characteristics for COX-2 inhibitors was revised, including adding
new contra-indications for COX-2 inhibitors generally and for
Arcoxiaspecifically. The Company is unable at this time to
predict the final outcome of CHMPs review. The outcomes of each
of these reviews could materially, negatively affect the market
potential of Arcoxia.  
    Generic competition as product patents for several products have
recently expired in the United States and other countries. In
2003, Zocorlost its basic patent protection in Canada and certain
countries in Europe, including the United Kingdom and Germany, and
the Company experienced a decline in Zocorsales in those
countries. In June 2006, Zocorwill lose its market exclusivity in the United States and the Company expects a
decline in 14




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U.S. Zocorsales. In 2003, the FDA granted an additional six months of market
exclusivity in the United States to Fosamaxuntil February 2008, and FosamaxOnce Weekly until
January 2019. However, on January 28, 2005, the U.S. Court of Appeals for the Federal Circuit
in Washington, D.C. found the Companys patent claims for once-weekly administration of Fosamax
to be invalid. Based on the Court of Appeals decision, Fosamaxwill lose its market
exclusivity in the United States in February 2008 and the Company expects a decline in U.S.
Fosamaxsales at that time. Prior to the decision, Mercks patent for once-weekly
administration of Fosamaxwas set to expire in July 2018. Merck disagrees with the decision of
the Court of Appeals and has requested reconsideration by the Court of Appeals.  
    In July 2004, the Opposition Division of the European Patent Office rendered an oral decision to revoke the Companys
patent in Europe that covers the weekly administration of alendronate. The Company has appealed this decision;
however, based on that decision, Fosamaxwill lose its market
exclusivity in most major European markets after 2007.  
    Increased brand competition in therapeutic areas important to the Companys long-term business performance.  
    The difficulties and uncertainties inherent in new product development. The outcome of the lengthy and complex process
of new product development is inherently uncertain. A candidate can fail at any stage of the process and one or more
late-stage product candidates could fail to receive regulatory approval. New product candidates may appear promising
in development but fail to reach the market because of efficacy or safety concerns, the inability to obtain necessary
regulatory approvals, the difficulty or excessive cost to manufacture and/or the infringement of patents or
intellectual property rights of others. Furthermore, the sales of new products may prove to be disappointing and fail
to reach anticipated levels.  
    Pricing pressures, both in the United States and abroad, including rules and practices of managed care groups, judicial
decisions and governmental laws and regulations related to Medicare, Medicaid and health care reform, pharmaceutical
reimbursement and pricing in general.  
    Changes in government laws and regulations and the enforcement thereof affecting the Companys business.  
    Efficacy or safety concerns with respect to marketed products, whether or not scientifically justified, leading to
product recalls, withdrawals or declining sales.  
    Legal factors, including product liability claims, antitrust litigation and governmental investigations, environmental
concerns and patent disputes with branded and generic competitors, any of which could preclude commercialization of
products or negatively affect the profitability of existing products.  
    Lost market opportunity resulting from delays and uncertainties in the approval process of the FDA and foreign
regulatory authorities.  
    Increased focus on privacy issues in countries around the world, including the United States and the EU. In the United
States, federal and state governments have pursued legislative and regulatory initiatives regarding patient privacy,
including federal and recently issued state privacy regulations concerning health information, which have affected the
Companys operations.  
    Changes in tax laws including changes related to the taxation of foreign earnings, as well as the impact of legislation
capping and ultimately repealing Section 936 of the Internal Revenue Code (relating to earnings from the Companys
Puerto Rican operations).  
    Changes in accounting pronouncements promulgated by standard-setting or regulatory bodies, including the Financial
Accounting Standards Board and the SEC, that are adverse to the Company.  
    Economic factors over which the Company has no control, including changes in inflation, interest rates and foreign
currency exchange rates. This list should not be considered an exhaustive statement of all potential risks and
uncertainties. 15




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Geographic Area and Segment Information The Companys operations are principally managed on a products basis with one reportable
segment: The Merck Pharmaceutical segment which includes products marketed either directly or
through joint ventures. Merck Pharmaceutical products consist of therapeutic and preventive
agents, sold by prescription, for the treatment and prevention of human disorders. The Companys operations outside the United States are conducted primarily through
subsidiaries. Sales worldwide by subsidiaries outside the United States were 41% of sales in 2004,
41% of sales in 2003 and 39% in 2002. The Companys worldwide business is subject to risks of currency fluctuations, governmental
actions and other governmental proceedings abroad. The Company does not regard these risks as a
deterrent to further expansion of its operations abroad. However, the Company closely reviews its
methods of operations and adopts strategies responsive to changing economic and political
conditions. In recent years, the Company has been expanding its operations in countries located in Latin
America, the Middle East, Africa, Eastern Europe and Asia Pacific where changes in government
policies and economic conditions are making it possible for the Company to earn fair returns.
Business in these developing areas, while sometimes less stable, offers important opportunities for
growth over time. Financial information about geographic areas and operating segments of the Companys business
is incorporated by reference to pages 56 (beginning with the caption Segment Reporting) and 57 of
the Companys 2004 Annual Report to stockholders. Available Information The
Companys Internet website address is www.merck.com. The Company will make available,
free of charge at the Investor Information portion of its website, its Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, as soon as reasonably practicable after such reports are electronically filed
with, or furnished to, the SEC. The Companys corporate governance guidelines and the charters of the Board of Directors
seven standing committees are available on the Companys website at
www.merck.com/about/corporategovernanceand all such information is available in print to any
stockholder who requests it from the Company. 
  Item 2.
    Properties. The Companys corporate headquarters is located in Whitehouse Station, New Jersey. The
Companys U.S. pharmaceutical business is conducted through divisional headquarters located in
Upper Gwynedd and West Point, Pennsylvania. The Companys vaccines business is conducted through
divisional headquarters located in West Point. Principal research facilities for human health
products are located in Rahway, New Jersey and West Point. The Company also has production
facilities for human health products at nine locations in the United States and Puerto Rico.
Branch warehouses provide services throughout the country. Outside the United States, through
subsidiaries, the Company owns or has an interest in manufacturing plants or other properties in
Australia, Canada, Japan, Singapore, South Africa, and other countries in Western Europe, Central
and South America, and Asia. Capital expenditures for 2004 were $1,726.1 million compared with $1,915.9 million for 2003.
In the United States, these amounted to $1,143.6 million for 2004 and $1,307.8 million for 2003.
Abroad, such expenditures amounted to $582.5 million for 2004 and $608.1 million for 2003. 16




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The Company and its subsidiaries own their principal facilities and manufacturing plants under
titles which they consider to be satisfactory. The Company considers that its properties are in
good operating condition and that its machinery and equipment have been well maintained. Plants for the manufacture of products are
suitable for their intended purposes and have capacities and projected capacities adequate for
current and projected needs for existing Company products. Some capacity of the plants is being
converted, with any needed modification, to the requirements of newly introduced and future
products. 
  Item 3.
    Legal Proceedings. 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. VioxxLitigation Product Liability Lawsuits As previously disclosed, federal and state product liability lawsuits involving individual
claims, as well as several putative class actions have been filed against the Company with respect
to Vioxx. As of January 31, 2005, the Company has been served or is aware that it has been named
as a defendant in approximately 850 lawsuits, which include approximately 2,425 plaintiff groups
alleging personal injuries resulting from the use of Vioxx. Certain of these lawsuits include
allegations regarding gastrointestinal bleeding, cardiovascular events, thrombotic events or kidney
damage. The Company has also been named as a defendant in approximately 90 putative class actions
alleging personal injuries or seeking (i) medical monitoring as a result of the putative class
members use of Vioxx, (ii) disgorgement of certain profits under common law unjust enrichment
theories, and/or (iii) various remedies under state consumer fraud and fair business practice
statutes, including recovering the cost of Vioxxpurchased by individuals and third-party payors
such as union health plans (all of the actions discussed in this paragraph are collectively
referred to as the VioxxProduct Liability Lawsuits). The actions filed in the state courts of
California and New Jersey, respectively, have been transferred to a single judge in each state for
coordinated proceedings. In addition, the Company filed a motion with the Judicial Panel on
Multidistrict Litigation (the JPML) seeking to transfer to a single federal judge and coordinate
for pretrial purposes all federal cases alleging personal injury and/or economic loss relating to
the purchase or use of Vioxx; several plaintiffs in certain VioxxProduct Liability Lawsuits
pending in federal court have made similar requests. On February 16, 2005, the JPML granted the
motions to transfer all VioxxProduct Liability Lawsuits pending in federal courts nationwide into
one Multidistrict Litigation (MDL) for coordinated pre-trial proceedings. The MDL has been
transferred to the United States District Court for the Eastern District of Louisiana before
District Judge Eldon E. Fallon. Shareholder Lawsuits As previously disclosed, in addition to the VioxxProduct Liability Lawsuits, a number of
purported class action lawsuits were filed in late 2003 and early 2004 by several shareholders in
the United States District Court for the Eastern District of Louisiana naming as defendants the
Company and several current or former officers and directors of the Company. These cases have
been consolidated. After the announcement of the withdrawal of Vioxx, the Company was named as a
defendant in additional purported securities class action lawsuits filed in federal courts in New
Jersey, Pennsylvania and Louisiana. These actions allege that the defendants made false and
misleading statements regarding Vioxxin violation of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, including with respect to the withdrawal of Vioxx,and seek unspecified
compensatory damages and the costs of suit, including attorneys fees. Plaintiffs request
certification of a class of purchasers of Company stock during various periods between May 21,
1999 and October 29, 2004. In addition, two shareholders filed an individual securities action
in the United States District Court for the Central District of Illinois seeking compensatory
damages and costs. Certain complaints include allegations under Sections 11, 12 and 15 of the
Securities Act of 1933 that certain officers and directors made incomplete and misleading
statements in a registration statement and certain prospectuses filed in connection with the
Merck Stock Investment Plan, a dividend reinvestment plan (all of the actions discussed in this
paragraph are collectively referred to as the VioxxSecurities Lawsuits). Several plaintiffs
have dismissed their complaints without prejudice. As of January 31, 2005, a total of 14 Vioxx
Securities Lawsuits were pending in various federal courts. 17




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As previously disclosed, in March 2004, two shareholder derivative actions were filed in the
United States District Court for the Eastern District of Louisiana naming the Company as a nominal
defendant and certain members of the Board (past and present), together with certain executive
officers, as defendants. The complaints arise out of substantially the same factual allegations
that are made in the VioxxSecurities Lawsuits. The derivative suits, which are purportedly
brought to assert rights of the Company, assert claims against the Board members and officers for
breach of fiduciary duty, waste of corporate assets, unjust enrichment, abuse of control and
gross mismanagement. After the withdrawal of Vioxx,additional shareholder derivative actions
were filed in the New Jersey Superior Court for Hunterdon County and in the United States
District Court for the District of New Jersey against the Company and certain officers and
members of the Board (past and present) (all of the actions discussed in this paragraph are
collectively referred to as the VioxxDerivative Lawsuits). Two of the VioxxDerivative
Lawsuits include allegations that certain directors made false and misleading statements in
connection with certain Proxy Statements filed with the SEC in violation of Section 14(a) of the
Securities Act of 1933. As of January 31, 2005, a total of seven VioxxDerivative Lawsuits were
pending. On October 29, 2004, two individual shareholders made a demand on the Board to take legal
action against Mr. Raymond Gilmartin, Chairman, President and Chief Executive Officer and other
individuals for allegedly causing damage to the Company with respect to the allegedly improper
marketing of Vioxx.In response to that demand letter, the Board of Directors determined at its
November 23, 2004 meeting that the Board would take the shareholders request under consideration
and it remains under consideration. In addition to these shareholder actions, since the announcement of the withdrawal of Vioxx,
putative class actions have been filed against the Company in the United States District Court
for the Eastern District of Louisiana and in the United States District Court for the District of
New Jersey (the VioxxERISA Lawsuits and, together with the VioxxSecurities Lawsuits and the
VioxxDerivative Lawsuits, the VioxxShareholder Lawsuits) on behalf of certain of the
Companys current and former employees who are participants in certain of the Companys
retirement plans asserting claims under the Employee Retirement Income Security Act (ERISA).
The lawsuits make similar allegations to the allegations contained in the VioxxSecurities
Lawsuits. As of January 31, 2005, a total of 11 VioxxERISA Lawsuits were pending. In October 2004, the plaintiff in one of the VioxxERISA Lawsuits filed a motion with the JPML
to transfer to a single federal judge and coordinate for pretrial purposes all of the VioxxERISA
Lawsuits. In November 2004, the Company responded to that motion and filed its own motion
seeking coordination of all of the VioxxShareholder Lawsuits. On February 23, 2005, the JPML
granted the motions to transfer all VioxxShareholder Lawsuits pending in federal courts nationwide
into one MDL for coordinated pre-trial proceedings. The MDL has been transferred to the United
States District Court for the District of New Jersey before District Judge Stanley R. Chesler. International Lawsuits In addition to the lawsuits discussed above, the Company has been named as a defendant in
actions in various countries in Europe, Australia, Canada, Brazil and Israel related to Vioxx. Additional Lawsuits Based on media reports and other sources, the Company anticipates that additional Vioxx
Product Liability Lawsuits and VioxxShareholder Lawsuits (collectively, the VioxxLawsuits)
will be filed against it and/or certain of its current and former officers and directors in the
future. Insurance The Company has product liability insurance for claims brought in the VioxxProduct
Liability Lawsuits of up to approximately $630 million after deductibles and co-insurance. This
insurance provides coverage for legal defense costs and potential damage amounts that have been
or will be incurred in connection with the VioxxProduct Liability Lawsuits. The Company
believes that this insurance coverage extends to additional VioxxProduct Liability Lawsuits that
may be filed in the future. The Company currently believes that it has at least approximately
$190 million of Directors and Officers insurance coverage for the VioxxSecurities Lawsuits and 18




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VioxxDerivative
Lawsuits. The Company has fiduciary and other insurance for the
VioxxERISA Lawsuits with stated upper limits of
$275 million. Additional insurance coverage for these claims may also be
available under upper level excess policies that provide coverage for a variety of risks. There are likely to be disputes with
insurers about the availability of some or all of this insurance coverage. At this time, the
Company believes it is reasonably possible its insurance coverage with respect to the Vioxx
Lawsuits will not be adequate to cover its defense costs and any losses. Recently,
Merck received notice that the Companys upper level excess
insurers (which provide excess insurance potentially applicable to
all of the Vioxx Lawsuits) commenced an arbitration seeking, among
other things, to cancel those policies and to void all of their
obligations under those policies with respect to the Vioxx Lawsuits,
and also to void their coverage obligations with respect to certain
other types of losses covered by those policies. The notice also
purports to reserve the right of the insurers to raise other coverage
defenses, including with respect to the application of exclusions,
the definition of loss, compliance with policy conditions, exhaustion
of applicable underlying and upper coverage limits, and satisfactory
proof of loss. As most of those insurers also issued
lower level excess policies to Merck, it is likely that such insurers will also dispute their
obligation to provide coverage under other policies. Merck intends to contest vigorously the
insurers claims and will attempt to enforce its rights under
applicable insurance policies. The amounts actually recovered under
the policies discussed in this section may be less than the amounts
specified in the preceding paragraph. The Company notes that the
discussion contained in this section updates the disclosure entitled Contingencies and Environmental
Liabilities  Vioxx Litigation  Insurance in
Note 11 to the Companys Consolidated Financial Statements
filed with the SEC on February 28, 2005 on Form 8-K and
contained in the Companys 2004 Annual Report to stockholders which is
incorporated by reference in this Form 10-K. Investigations In November 2004, the Company was advised by the staff of the SEC that it was commencing an
informal inquiry concerning Vioxx. On January 28, 2005, the Company announced that it received
notice that the SEC issued a formal notice of investigation. Also, the Company received a subpoena
from the U.S. Department of Justice requesting information related to the Companys research,
marketing and selling activities with respect to Vioxxin a federal health care investigation under
criminal statutes. There are also ongoing investigations by certain Congressional committees.
Also, the District Attorneys Office in Munich, Germany notified the Companys subsidiary in
Germany that it received complaints and commenced an investigation in order to determine whether
any criminal charges should be brought in Germany concerning Vioxx(together with the previously
mentioned investigations, the VioxxInvestigations). The Company will cooperate with all of the
VioxxInvestigations. The Company cannot predict the outcome of these inquiries; however, they
could result in a potential civil disposition from the SEC and/or potential civil or criminal
dispositions from the Justice Department. Reserves The Company currently anticipates that one or more of the VioxxProduct Liability Lawsuits
may go to trial in the first half of 2005. The Company cannot predict the timing of any trials
with respect to the VioxxShareholder Lawsuits. The Company believes that it has meritorious
defenses to the VioxxLawsuits and will vigorously defend against them. In view of the inherent
difficulty of predicting the outcome of litigation, particularly where there are many claimants
and the claimants seek indeterminate damages, the Company is unable to predict the outcome of
these matters, and at this time cannot reasonably estimate the possible loss or range of loss
with respect to the VioxxLawsuits. The Company has not established any reserves for any
potential liability relating to the VioxxLawsuits or the VioxxInvestigations (collectively, the
"VioxxLitigation). The Company has established a reserve of $675 million solely for its future
legal defense costs related to the VioxxLitigation. This reserve is based on certain
assumptions and is the minimum amount that the Company believes at this time it can reasonably
estimate will be spent over a multi-year period. The Company significantly increased the reserve
when it had the ability to reasonably estimate its future legal defense costs for the Vioxx
Litigation. Some of the significant factors that were considered in the establishment of the
reserve for the VioxxLitigation were as follows: the actual costs incurred by the Company up to
that time; the development of the Companys legal defense strategy and structure in light of the
expanded scope of the VioxxLitigation; the number of cases being brought against the Company;
and the anticipated timing, progression and related costs of pre-trial activities and trials in
the VioxxProduct Liability Lawsuits. The Company will continue to monitor its legal defense
costs and review the adequacy of the associated reserves. Unfavorable outcomes in the Vioxx
Lawsuits or resulting from the VioxxInvestigations could have a material adverse effect on the
Companys financial position, liquidity and results of operations. 19




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Commercial Litigation Beginning in 1993, the Company was named in a number of antitrust suits, certain of which were
certified as class actions, instituted by most of the nations retail pharmacies and consumers in
several states. In 1994, these actions, except for those pending in state courts, were
consolidated for pre-trial purposes in the federal court in Chicago, Illinois. In 1996, the
Company and several other defendants settled the federal class action, which represented the single
largest group of claims. Since that time, the Company has settled substantially all of the
remaining cases on satisfactory terms; the few remaining cases have been inactive for several
years. The Company has not engaged in any conspiracy and no admission of wrongdoing was made nor
was included in any settlement agreements. As previously disclosed, the Company was joined in ongoing litigation alleging manipulation by
pharmaceutical manufacturers of Average Wholesale Prices (AWP), which are sometimes used in
calculations that determine public and private sector reimbursement levels. In 2002, the JPML
ordered the transfer and consolidation of all pending federal AWP cases to federal court in Boston,
Massachusetts. Plaintiffs filed one consolidated class action complaint, which aggregated the
claims previously filed in various federal district court actions and also expanded the number of
manufacturers to include some which, like the Company, had not been defendants in any prior pending
case. In May 2003, the court granted the Companys motion to dismiss the consolidated class action
and dismissed the Company from the class action case. Subsequent to the Companys dismissal, the
plaintiffs filed an amended consolidated class action complaint, which did not name the Company as
a defendant. The Company and 30 other pharmaceutical manufacturers remain defendants in six
similar complaints pending in federal court in Massachusetts filed by the New York Counties of
Suffolk, Rockland, Nassau, Westchester, Onondaga and New York City and three cases pending in
Kentucky, Alabama and Wisconsin. The Company and the other defendants have filed and argued their
motion to dismiss the Suffolk case and are awaiting the courts final decision on the motion. In
addition, the Company is a defendant in cases brought on behalf of the citizens of Kentucky and
Wisconsin alleging fraudulent practices regarding AWP, which the Company will vigorously defend. As previously disclosed, the Company has been named as a defendant in antitrust cases in
federal court in Minnesota and in state court in California, each alleging an unlawful conspiracy
among different sets of pharmaceutical manufacturers to protect high prices in the United States by
impeding importation into the United States of lower-priced pharmaceuticals from Canada. The
Company and the other defendants have filed a motion to dismiss the action. As previously disclosed, a suit in federal court in Alabama by two providers of health
services to needy patients alleges that 15 pharmaceutical companies overcharged the plaintiffs and
a class of those similarly situated, for pharmaceuticals purchased by the plaintiffs under the
program established by Section 340B of the Public Health Service Act. The Company and the other
defendants have filed a motion to dismiss the complaint on numerous grounds. As previously disclosed, in January 2003, the U.S. Department of Justice notified the federal
court in New Orleans, Louisiana that it was not going to intervene at that time in a pending
Federal False Claims Act case that was filed under seal in December 1999 against the Company. The
court issued an order unsealing the complaint, which was filed by a physician in Louisiana, and
ordered that the complaint be served. The complaint, which alleged that the Companys discounting
of Pepcidin certain Louisiana hospitals led to increases in costs to Medicaid, was dismissed. An
amended complaint was filed under seal and the case has been administratively closed by the court
until the seal is lifted. The allegations contained in the amended complaint are unknown. Governmental Proceedings As previously disclosed, the Company has received a subpoena from the U.S. Department of
Justice in connection with its investigation of the Companys marketing and selling activities.
The Company has also reported that it has received a Civil Investigative Demand from the Attorney
General of Texas regarding the Companys 20




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marketing and selling activities relating to Texas. In April 2004, the Company received a subpoena from the office of the Inspector General for the District of Columbia in connection with an investigation of
the Companys interactions with physicians in the District of Columbia, Maryland and Virginia. In
November 2004, the Company received a letter request from the Department of Justice in connection
with its investigation of the Companys pricing of Pepcid. The Company is cooperating with all of
these investigations. The Company cannot predict the outcome of these investigations; however, it
is possible that unfavorable outcomes could have a material adverse effect on the Companys
financial position, liquidity and results of operations. In addition, from time to time, other
federal or state regulators may seek information about practices in the pharmaceutical industry in
inquiries other than the investigations discussed in this paragraph. It is not feasible to predict
the outcome of any such inquiries. Vaccine Litigation The Company is a party in claims brought under the Consumer Protection Act of 1987 in the
United Kingdom, which allege that certain children suffer from a variety of conditions as a result
of being vaccinated with various bivalent vaccines for measles and rubella and/or trivalent
vaccines for measles, mumps and rubella, including the Companys M-M-RII. The conditions include
autism, with or without inflammatory bowel disease, epilepsy, diabetes, encephalitis,
encephalopathy, deafness, chronic fatigue syndrome and transverse myelitis. In early September
2003, the Legal Services Commission (LSC) announced its decision to withdraw public funding of
the litigation brought by the claimants. This decision was confirmed on appeal by the Funding
Review Committee (FRC) on September 30, 2003. The claimants application for judicial review of
the decision to withdraw public funding was dismissed in February 2004 and the April 2004 trial
date was vacated. The lead claimants have decided not to apply to the Court of Appeals for
permission to appeal the decision. As a result, legal aid for all lead claimants has now been
discharged. The non-lead claimants were subject to a show cause procedure to withdraw legal aid
unless the claimants could show cause as to why it should not be withdrawn. The FRC heard 37 of
the show cause appeals by the non-lead claimants in October 2004. The appeals involving autism
(26) were unsuccessful, but funding was reinstated for 11 appeals involving other non-autism
conditions such as epilepsy, deafness, encephalitis and transverse myelitis. In light of the 11
successful appeals, the LSC has reconsidered the cases of some other claimants and, to date,
funding has been reinstated in an additional 86 non-lead, non-autism cases, to the limited extent
necessary to allow solicitors to provide a report on the individual cases to the LSC. It is not
yet known how many of the 97 appeals involve claimants suing the Company. All claimants for all
conditions had until February 28, 2005 to give notice of their intention to continue or discontinue
with their claims, irrespective of whether or not they had secured legal aid funding. Directions
for further conduct of the litigation will be made at a case management hearing scheduled to take
place on March 17 and 18, 2005. The Company will vigorously defend against these lawsuits. As previous disclosed, the Company is also a party to individual and class action product
liability lawsuits and claims in the United States involving pediatric vaccines (i.e., hepatitis B
vaccine and Haemophilus influenza type b vaccine) that contained thimerosal, a
preservative used in vaccines. Merck has not distributed thimerosal-containing pediatric vaccines
in the United States since the fall of 2001. As of December 31, 2004, there were approximately 300
active thimerosal related lawsuits with approximately 820 plaintiffs. Other defendants include
vaccine manufacturers who produced pediatric vaccines containing thimerosal as well as
manufacturers of thimerosal. In these actions, the plaintiffs allege, among other things, that
they have suffered neurological injuries as a result of exposure to thimerosal from pediatric
vaccines. Two state court cases and two federal district court cases are scheduled for trial in
2005. The Company will vigorously defend against these lawsuits; however, it is possible that
unfavorable outcomes could have a material adverse effect on the Companys financial position,
liquidity and results of operations. The Company has been successful in having cases of this type either dismissed or stayed on the
ground that the action is prohibited under the National Vaccine Injury Compensation Program
(NVICP). The NVICP prohibits any person from filing or maintaining a civil action (in state or
federal court) seeking damages against a vaccine manufacturer for vaccine-related injuries unless a
petition is first filed in the United States Court of Federal Claims (hereinafter the Vaccine
Court). Under the NVICP, before filing a civil action against a vaccine manufacturer, the
petitioner must either (a) pursue his or her petition to conclusion in Vaccine Court and then
timely 21




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file an election to proceed with a civil action in lieu of accepting the Vaccine Courts
adjudication of the petition or (b) timely exercise a right to withdraw the petition prior to Vaccine Court adjudication in
accordance with certain statutorily prescribed time periods. The Company is aware that there are
numerous cases pending in Vaccine Court involving allegations that thimerosal-containing vaccines
and/or the M-M-RII vaccine cause autism spectrum disorders. The Company is not a party to these
Vaccine Court proceedings because the petitions are brought against the Department of Health and
Human Services. Patent Litigation From time to time, generic manufacturers of pharmaceutical products file Abbreviated New Drug
Applications (ANDAs) with the FDA seeking to market generic forms of the Companys products prior
to the expiration of relevant patents owned by the Company. Generic pharmaceutical manufacturers
have submitted ANDAs to the FDA seeking to market in the United States generic forms of Fosamax,
Prilosecand Propeciaprior to the expiration of the Companys (and AstraZenecas in the case of
Prilosec)patents concerning these products. The generic companies ANDAs generally include
allegations of non-infringement, invalidity and unenforceability of the patents. Generic
manufacturers have received FDA approval to market a generic form of Prilosec. The Company has
filed patent infringement suits in federal court against companies filing ANDAs for generic
alendronate and finasteride, and AstraZeneca and the Company have filed patent infringement suits
in federal court against companies filing ANDAs for generic omeprazole. Similar patent challenges
exist in certain foreign jurisdictions. The Company intends to vigorously defend its patents,
which it believes are valid, against infringement by generic companies attempting to market
products prior to the expiration dates of such patents. As with any litigation, there can be no
assurance of the outcomes, which, if adverse, could result in significantly shortened periods of
exclusivity for these products. A trial in the United States with respect to the alendronate daily product concluded in
November 2001. In November 2002, a decision was issued by the U.S. District Court in Delaware
finding the Companys patent valid and infringed. On October 30, 2003, the U.S. Court of Appeals
for the Federal Circuit affirmed the validity and infringement of the Companys basic U.S. patent
covering the use of alendronate in any form. A request for rehearing was denied. A trial in the
United States involving the alendronate weekly product was held in March 2003. On August 28, 2003,
the U.S. District Court in Delaware upheld the validity of the Companys U.S. patent covering the
weekly administration of alendronate. However, on January 28, 2005, the U.S. Court of Appeals for
the Federal Circuit in Washington, D.C. found the Companys patent claims for once-weekly
administration of Fosamaxto be invalid. Based on the Court of Appeals decision, Fosamaxwill
lose its market exclusivity in the United States in February 2008 and the Company expects a decline
in U.S. Fosamaxsales at that time. Prior to the decision, Mercks patent for once-weekly
administration of Fosamaxwas set to expire in July 2018. Merck disagrees with the decision of the
Court of Appeals and has requested reconsideration by the Court of Appeals. In January 2003, the High Court of Justice for England and Wales held that patents of the
Company protecting the alendronate daily and weekly products were invalid in the United Kingdom.
On November 6, 2003, the Court of Appeals of England and Wales affirmed the ruling by the High
Court of Justice for England and Wales. European countries permit companies seeking approval of a
generic product to reference data of the innovative product in certain circumstances under data
exclusivity regulations. The Company has been granted leave to appeal a decision of the U.K.
regulatory authority that its data for weekly alendronate may be referenced by companies seeking
approval of generic weekly alendronate products. The Company has also filed an appeal of a grant
by the Swedish regulatory authority of approval of generic weekly alendronate products which
referenced the Companys data on weekly alendronate for their approval. As previously announced by the Company, on July 20, 2004, the Opposition Division of the
European Patent Office rendered an oral decision to revoke the Companys patent in Europe that
covers the weekly administration of alendronate. On August 19, 2004, the written opinion was
issued confirming the oral decision revoking the Companys patent. On September 16, 2004, the
Company filed an appeal of this decision. Based on other patents, the alendronate weekly product
is protected in most major European markets until at least 2007. 22




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On October 5, 2004, in an action in Australia challenging the validity of the Companys
Australian patent for the weekly administration of alendronate, the patent was found to be invalid.
The Company has appealed the decision. In addition, in Japan a proceeding has been filed challenging the validity of the Companys
Japanese patent for the weekly administration of alendronate. In the case of omeprazole, the trial court in the United States rendered an opinion in October
2002 upholding the validity of the Companys and AstraZenecas patents covering the stabilized
formulation of omeprazole and ruling that one defendants omeprazole product did not infringe those
patents. The other three defendants products were found to infringe the formulation patents. In
December 2003, the U.S. Court of Appeals for the Federal Circuit affirmed the decision of the trial
court. With respect to certain other generic manufacturers omeprazole products, no trial date has
yet been set. In the case of finasteride, an ANDA has been filed seeking approval of a generic version of
Propeciaand alleging invalidity of the Companys patents. The Company filed a patent infringement
lawsuit in the District Court of Delaware in September 2004. A trial is not anticipated before
2006. Other Litigation As previously disclosed, on July 6, 2004, the United States District Court for the District of
New Jersey granted a motion by the Company, Medco Health and certain officers and directors to
dismiss a purported class action complaint involving claims related to the Companys revenue
recognition practice for retail co-payments paid by individuals to whom Medco Health provides
pharmaceutical benefits as well as other allegations. The complaint was dismissed with prejudice.
On August 20, 2004, the same court granted the Companys motion to dismiss with prejudice a related
shareholder derivative action. Plaintiffs in both actions have appealed the decisions. Prior to the spin-off of Medco Health, the Company and Medco Health agreed to settle, on a
class action basis, a series of lawsuits asserting violations of ERISA (the Gruer Cases). The
Company, Medco Health and certain plaintiffs counsel filed the settlement agreement with the
federal district court in New York, where cases commenced by a number of plaintiffs, including
participants in a number of pharmaceutical benefit plans for which Medco Health is the pharmacy
benefit manager, as well as trustees of such plans, have been consolidated. The proposed class
settlement has been agreed to by plaintiffs in five of the cases filed against Medco Health and the
Company. Under the proposed settlement, the Company and Medco Health have agreed to pay a total of
$42.5 million, and Medco Health has agreed to modify certain business practices or to continue
certain specified business practices for a period of five years. The financial compensation is
intended to benefit members of the settlement class, which includes ERISA plans for which Medco
Health administered a pharmacy benefit at any time since December 17, 1994. In 2003, the district
court preliminarily approved the settlement and held hearings to hear objections to the fairness of
the proposed settlement. The district court approved the settlement in 2004, but has not yet
determined the number of class member plans that have properly elected not to participate in the
settlement. The settlement becomes final only if and when all appeals have been resolved. Three
notices of appeal have been filed and the appellate court is expected to hear arguments regarding
the appeals in March 2005 and decide the appeals thereafter. Currently, certain class member plans
have indicated that they will not participate in the settlement. Cases initiated by three such
plans and two individuals remain pending in the Southern District of New York. Plaintiffs in these
cases have asserted claims based on ERISA as well as other federal and state laws that are the same
as or similar to the claims that had been asserted by settling class members in the Gruer Cases.
The Company and Medco Health are named as defendants in these cases. Medco Health and the Company
agreed to the proposed settlement in order to avoid the significant cost and distraction of
prolonged litigation. After the spin-off of Medco Health, Medco Health assumed substantially all of the liability
exposure for the matters discussed in the foregoing paragraph. These cases are being defended by
Medco Health. 23




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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 above, 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. Environmental Matters As previously disclosed, in December 2003, the Virginia Department of Environmental Quality
(VADEQ) issued a Notice of Violation to the Companys Elkton, Virginia facility for air permit
limit exceedances reported by the facility as a result of performance testing of a process train.
The Company is currently in discussions with VADEQ and believes that its discussions will result in
capital improvements together with monetary sanctions which will be immaterial but will exceed
$100,000. The Company is a party to a number of proceedings brought under the Comprehensive
Environmental Response, Compensation and Liability Act, commonly known as Superfund, and other
federal and state equivalents. These proceedings seek to require the operators of hazardous waste
disposal facilities, transporters of waste to the sites and generators of hazardous waste disposed
of at the sites to clean up the sites or to reimburse the government for cleanup costs. The
Company has been made a party to these proceedings as an alleged generator of waste disposed of at
the sites. In each case, the government alleges that the defendants are jointly and severally
liable for the cleanup costs. Although joint and several liability is alleged, these proceedings
are frequently resolved so that the allocation of cleanup costs among the parties more nearly
reflects the relative contributions of the parties to the site situation. The Companys potential
liability varies greatly from site to site. For some sites the potential liability is de minimis
and for others the costs of cleanup have not yet been determined. While it is not feasible to
predict the outcome of many of these proceedings brought by federal or state agencies or private
litigants, in the opinion of the Company, such proceedings should not ultimately result in any
liability which would have a material adverse effect on the financial position, results of
operations, liquidity or capital resources of the Company. The Company has taken an active role in
identifying and providing for these costs and such amounts do not include any reduction for
anticipated recoveries of cleanup costs from insurers, former site owners or operators or other
recalcitrant potentially responsible parties. 
  Item 4.
    Submission of Matters to a Vote of Security Holders. Not applicable. 24




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##### Table of Contents



Executive Officers of the Registrant (as of March 10, 2005) RAYMOND V. GILMARTIN 3⁄4 Age 64 June, 1994 3⁄4 Chairman of the Board (since November, 1994), President and Chief
Executive Officer DAVID W. ANSTICE 3⁄4 Age 56 January, 2003 3⁄4 President, Human Health 3⁄4 responsible for the Companys
prescription drug business in Japan, Latin America, Canada, Australia, New Zealand and
the Companys joint venture relationship with Schering-Plough March, 2001 3⁄4 President, The Americas and U.S. Human Health 3⁄4 responsible for one
of the two prescription drug divisions comprising U.S. Human Health, as well as the
Companys prescription drug business in Canada and Latin America, and the Companys
joint venture relationship with Schering-Plough January, 1997 3⁄4 President, Human Health-The Americas 3⁄4 responsible for the
Companys human health business in the United States, Canada and Latin America MARCIA J. AVEDON 3⁄4 Age 43 January, 2003 3⁄4 Senior Vice President, Human Resources September, 2002 3⁄4 Vice President, Talent Management and Organization Effectiveness Prior to September, 2002, Dr. Avedon held several senior human resources positions
(1995 to 2002) at Honeywell International (diversified manufacturing and technology
company) RICHARD T. CLARK 3⁄4 Age 59 June, 2003 3⁄4 President, Merck Manufacturing Division 3⁄4 responsible for the
Companys manufacturing, information services and operational excellence organizations
worldwide January, 2003 3⁄4 Chairman, President and Chief Executive Officer, Medco Health
Solutions, Inc. (Medco Health), formerly a wholly-owned subsidiary of the Company January, 2000 3⁄4 President, Medco Health June, 1997 3⁄4 Executive Vice President/Chief Operating Officer, Medco Health CELIA A. COLBERT 3⁄4 Age 48 January, 1997 3⁄4 Vice President, Secretary (since September, 1993) and Assistant General
Counsel (since November, 1993) CAROLINE DORSA 3⁄4 Age 45 August, 2002 3⁄4 Vice President and Treasurer 3⁄4 responsible for the Companys
treasury and tax functions, and for providing financial support for the Merck
Manufacturing and Merck Research Laboratories Divisions as well as Human Resources September, 1999 3⁄4 Vice President and Treasurer 3⁄4 responsible for the Companys
treasury and tax functions and for providing financial support for the Asia Pacific
Division 25




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##### Table of Contents



KENNETH C. FRAZIER 3⁄4 Age 50 December, 1999 3⁄4 Senior Vice President and General Counsel 3⁄4 responsible for
legal and public affairs functions and The Merck Company Foundation (a not-for-profit
charitable organization affiliated with the Company) January, 1999 3⁄4 Vice President and Deputy General Counsel RICHARD C. HENRIQUES JR. 3⁄4 Age 49 August, 2002 3⁄4 Vice President, Controller 3⁄4 responsible for the Corporate
Controllers Group and providing financial support for the Human Health operations in
the United States, Canada, Latin America, Europe, the Middle East, Africa, Japan, and
Australia/New Zealand and the Merck Vaccine Division (MVD) November, 2000 3⁄4 Vice President, Controller 3⁄4 responsible for the Corporate
Controllers Group and providing financial support for U.S. Human Health, Canada and
Latin America (The Americas) and MVD February, 1999 3⁄4 Vice President, Controller 3⁄4 responsible for the Corporate
Controllers Group and providing financial support for The Americas PETER S. KIM 3⁄4 Age 46 January, 2003 3⁄4 President, Merck Research Laboratories (MRL) February, 2001 3⁄4 Executive Vice President, Research and Development, MRL Prior to February, 2001, Dr. Kim served as Member of the Whitehead Institute (1985 -
2001), Professor of Biology at the Massachusetts Institute of Technology (1988  2001),
and Investigator of the Howard Hughes Medical Institute (1990  2001) JUDY C. LEWENT 3⁄4 Age 56 January, 2003 3⁄4 Executive Vice President, Chief Financial Officer and President, Human
Health Asia 3⁄4 responsible for financial and corporate development functions,
internal auditing, corporate licensing, the Companys prescription drug business in Asia
North and Asia South, the Companys joint venture relationships, and Merck Capital
Ventures, LLC, a subsidiary of the Company February, 2001 3⁄4 Executive Vice President and Chief Financial Officer 3⁄4
responsible for financial and corporate development functions, internal auditing,
corporate licensing, the Companys joint venture relationships, and Merck Capital
Ventures, LLC November, 2000 3⁄4 Senior Vice President and Chief Financial Officer 3⁄4 responsible
for financial and corporate development functions, internal auditing, corporate
licensing, the Companys joint venture relationships, and Merck Capital Ventures, LLC January, 1997 3⁄4 Senior Vice President (since January, 1993) and Chief Financial Officer
(since April, 1990) 3⁄4 responsible for financial and corporate development
functions, internal auditing and the Companys joint venture relationships ADEL MAHMOUD 3⁄4 Age 63 May, 1999 3⁄4 President, Merck Vaccines 26




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##### Table of Contents



MARGARET G. MCGLYNN 3⁄4 Age 45 January, 2003 3⁄4 President, U.S. Human Health 3⁄4 responsible for one of the two
prescription drug divisions (hospital and specialty product franchises) comprising U.S.
Human Health (USHH), and the Managed Care Group of USHH August, 2001 3⁄4 Executive Vice President, Customer Marketing and Sales, USHH November, 1998 3⁄4 Senior Vice President, Worldwide Human Health Marketing BRADLEY T. SHEARES 3⁄4 Age 48 January, 2003 3⁄4 President, U.S. Human Health 3⁄4 responsible for one of the two
prescription drug divisions (primary care product franchises) comprising U.S. Human
Health (USHH) March, 2001 3⁄4 President, U.S. Human Health 3⁄4 responsible for one of the two
prescription drug divisions (hospital and specialty product franchises) comprising USHH July, 1998 3⁄4 Vice President, Hospital Marketing and Sales, USHH JOAN E. WAINWRIGHT 3⁄4 Age 44 January, 2001 3⁄4 Vice President, Public Affairs June, 2000 3⁄4 Vice President, Corporate Communications, Public Affairs Prior to June, 2000, Ms. Wainwright was Deputy Commissioner for Communications at the
U.S. Social Security Administration (1994  2000) PER WOLD-OLSEN 3⁄4 Age 57 January, 1997 3⁄4 President, Human Health-Europe, Middle East & Africa 3⁄4
responsible for the Companys prescription drug business in Europe, the Middle East and
Africa and worldwide human health marketing All officers listed above serve at the pleasure of the Board of Directors. None of these
officers was elected pursuant to any arrangement or understanding between the officer and the
Board. 27




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##### Table of Contents



PART II 
  Item 5.
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities. The required information on market information and dividends is incorporated by reference to
page 35 of the Companys 2004 Annual Report to stockholders and the required information on the
number of holders of the Companys common stock is incorporated
by reference to page 60 of the
Companys 2004 Annual Report to Stockholders. Issuer
purchases of equity securities for the three month period ended
December 31, 2004 are as
follows: Issuer Purchases of Equity Securities Total Number of
    
    
    ($ in millions)Total
    
    
    
    
    
    
    Shares Purchased
    
    
    Approx. Dollar ValueNumber
    
    
    Average
    
    
    as Part of
    
    
    Of Shares That May YetOf Shares
    
    
    Price Paid
    
    
    Publicly Announced
    
    
    Be Purchased Under thePeriod
    
    Purchased
    
    
    Per Share
    
    
    Plans or Programs
    
    
    Plans or ProgramsOctober 1 -
October 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,831.6November 1 -
November 30, 2004
    
    
    4,915,000
    
    
    $
    27.05
    
    
    
    4,915,000
    
    
    $
    8,698.6December 1 -
December 31, 2004
    
    
    5,083,000
    
    
    $
    30.22
    
    
    
    5,083,000
    
    
    $
    8,545.0Total(Quarter to Date 2004)
    
    
    9,998,000
    
    
    $
    28.66
    
    
    
    9,998,000
    
    
    $
    8,545.0
 
  Item 6.
    Selected Financial Data. The information required for this item is incorporated by reference to the data for the last
five fiscal years of the Company included under Results for Year and Year-End Position in the
Selected Financial Data table on page 60 of the Companys 2004 Annual Report to stockholders. 
  Item 7.
    Managements Discussion and Analysis of Financial Condition and Results of Operations. The information required for this item is incorporated by reference to pages 20 through 35 of
the Companys 2004 Annual Report to stockholders. 
  Item 7A.
    Quantitative and Qualitative Disclosures About Market Risk. The information required for this item is incorporated by reference to pages 30 (beginning
with the caption Financial Instruments Market Risk Disclosures) to 31 of the Companys 2004
Annual Report to stockholders. 28




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##### Table of Contents



Item 8.
    Financial Statements and Supplementary Data. (a) Financial Statements The consolidated balance sheet of Merck & Co., Inc. and subsidiaries as of December 31, 2004
and 2003, and the related consolidated statements of income, of retained earnings, of comprehensive
income and of cash flows for each of the three years in the period ended December 31, 2004, and the
report dated February 22, 2005 of PricewaterhouseCoopers LLP, independent registered public
accounting firm, are incorporated by reference to pages 36 through 57 and page 59, respectively, of
the Companys 2004 Annual Report to stockholders. (b) Supplementary Data Selected quarterly financial data for 2004 and 2003 are incorporated by reference to the data
contained in the Condensed Interim Financial Data table on page 35 of the Companys 2004 Annual
Report to stockholders. 
  Item 9.
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. 
  Item 9A.
    Controls and Procedures. Management of the Company, with the participation of its Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the Companys disclosure controls and procedures.
Based on their evaluation, as of the end of the period covered by this Form 10-K, the Companys
Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended) are effective. Management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Management conducted
an evaluation of the effectiveness of internal control over financial reporting based on the
framework in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded
that internal control over financial reporting was effective as of December 31, 2004 based on
criteria in Internal Control  Integrated Frameworkissued by COSO. Managements assessment of the
effectiveness of internal control over financial reporting as of December 31, 2004 has been audited
by PricewaterhouseCoopers LLP, an independent registered public accounting firm, and
PricewaterhouseCoopers LLP has issued an attestation report on managements assessment of the
effectiveness of the Companys internal control over financial reporting, which is incorporated by
reference to page 59 of the Companys 2004 Annual Report to stockholders. There have been no significant changes in internal control over financial reporting for the
period covered by this report that have materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting. 
  Item 9B.
    Other Information None. 
 PART III 
  Item 10.
    Directors and Executive Officers of the Registrant. The required information on directors and nominees is incorporated by reference to pages 8
through 11 of the Companys Proxy Statement for the Annual Meeting of Stockholders to be held April
26, 2005. Information on executive officers is set forth in Part I of this document on pages 25
through 27. 29




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##### Table of Contents



The required information on the audit committee financial expert is incorporated by reference
to page 13 (under the heading Financial Expert on Audit Committee) of the Companys Proxy
Statement for the Annual Meeting of Stockholders to be held April 26, 2005. The required information on the identification of the audit committee is incorporated by
reference to pages 12 (under the caption Board Committees) to 13 of the Companys Proxy Statement
for the Annual Meeting of Stockholders to be held April 26, 2005. The required information on compliance with Section 16(a) of the Securities Exchange Act of
1934 is incorporated by reference to page 50 (under the caption Section 16(a) Beneficial Ownership
Reporting Compliance) of the Companys Proxy Statement for the Annual Meeting of Stockholders to
be held April 26, 2005. The Company has adopted a Code of Conduct  Our Values and Standardsapplicable to all
employees, including the principal executive officer, principal financial officer, and principal
accounting officer. The Code of Conduct is available on the Companys website at
www.merck.com/about/corporategovernance. The Company intends to post on this website any
amendments to, or waivers from, its Code of Conduct. A printed copy will be sent, without charge,
to any stockholder who requests it by writing to the Chief Ethics Officer of Merck & Co., Inc., One
Merck Drive, Whitehouse Station, NJ 08889-0100. 
  Item 11.
    Executive Compensation. The information required for this item is incorporated by reference to pages 16 (under the
caption Compensation of Directors) through 17; pages 25 (beginning with the caption Summary
Compensation Table) through 27; pages 29 (beginning with the caption Annual Benefits Payable
Under Merck & Co., Inc. Retirement Plans) to 35; page 15 (under the caption Compensation
Committee Interlocks and Insider Participation); pages 19 (under the caption Compensation and
Benefits Committee Report on Executive Compensation) through 24; and page 36 (under the caption
Performance Graph) of the Companys Proxy Statement for the Annual Meeting of Stockholders to be
held April 26, 2005. 
  Item 12.
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters. Information with respect to securities authorized for issuance under equity compensation plans
is incorporated by reference to page 28 (under the caption Equity Compensation Plan Information)
of the Companys Proxy Statement for the Annual Meeting of Stockholders to be held April 26, 2005.
Information with respect to security ownership of certain beneficial owners and management is
incorporated by reference to pages 18 (under the caption Security Ownership of Certain Beneficial
Owners and Management) to 19 of the Companys Proxy Statement for the Annual Meeting of
Stockholders to be held April 26, 2005. 
  Item 13.
    Certain Relationships and Related Transactions. The information required for this item is incorporated by reference to page 12 (under the
caption Relationships with Outside Firms) and page 35 (under the caption Indebtedness of
Management) of the Companys Proxy Statement for the Annual Meeting of Stockholders to be held
April 26, 2005. 
  Item 14.
    Principal Accountant Fees and Services. The information required for this item is incorporated by reference to pages 37 (beginning
with the caption Pre-Approval Policy for Services of Independent Registered Public Accounting
Firm) to 38 of the Companys Proxy Statement for the Annual Meeting of Stockholders to be held
April 26, 2005. 30




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##### Table of Contents



PART IV 
  Item 15.
    Exhibits and Financial Statement Schedules. Documents filed as part of this Form 10-K  1.
    Financial StatementsThe following consolidated financial statements and report of independent registered
public accounting firm are incorporated herein by reference to the Companys 2004
Annual Report to stockholders, as noted on page 29 of this document:Consolidated statement of income for the years ended December 31, 2004, 2003 and 2002Consolidated statement of retained earnings for the years ended December 31, 2004,
2003 and 2002Consolidated statement of comprehensive income for the years ended December 31, 2004,
2003 and 2002Consolidated balance sheet as of December 31, 2004 and 2003Consolidated statement of cash flows for the years ended December 31, 2004, 2003 and
2002Notes to consolidated financial statementsReport of PricewaterhouseCoopers LLP, independent registered public accounting firm2.
    Financial Statement SchedulesSchedules are omitted because they are either not required or not applicable. Financial statements of affiliates carried on the equity basis have been omitted because,
considered individually or in the aggregate, such affiliates do not constitute a significant
subsidiary.  3.
    Exhibits ExhibitNumber
    
    
    
    Description2.1
    
    3⁄4
    
    Master Restructuring Agreement dated as of June 19, 1998 between Astra AB, Merck &
Co., Inc., Astra Merck Inc., Astra USA, Inc., KB USA, L.P., Astra Merck Enterprises,
Inc., KBI Sub Inc., Merck Holdings, Inc. and Astra Pharmaceuticals, L.P. (Portions of
this Exhibit are subject to a request for confidential treatment filed with the Commission)
3⁄4 Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 19983.1
    
    3⁄4
    
    Restated Certificate of Incorporation of Merck & Co., Inc. (October 1, 2004) 3⁄4
Incorporated by reference to Form 10-Q Quarterly Report for the period ended
September 30, 20043.2
    
    3⁄4
    
    By-Laws of Merck & Co., Inc. (as amended effective September 28, 2004) 3⁄4
Incorporated by reference to Current Report on Form 8-K dated September 28, 20044.1
    
    3⁄4
    
    Indenture, dated as of April 1,
1991, between Merck & Co., Inc. and Morgan Guaranty Trust
Company of New York, as Trustee  Incorporated by reference to
Exhibit 4 to Registration Statement on Form S-3 (No. 33-39349)4.2
    
    3⁄4
    
    First Supplemental Indenture
between Merck & Co., Inc. and First Trust of New York, National
Association, as Trustee  Incorporated by reference to Exhibit 4(b)
to Registration Statement on Form S-3 (No. 333-36383)*10.1
    
    3⁄4
    
    Executive Incentive Plan (as amended effective February 27, 1996) 3⁄4 Incorporated by
reference to Form 10-K Annual Report for the fiscal year ended December 31, 1995
   *
    
    Management contract or compensatory plan or
arrangement. 31




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##### Table of Contents



ExhibitNumber
    
    
    
    Description*10.2
    
    3⁄4
    
    Base Salary Deferral Plan (as adopted on October 22, 1996, effective January 1, 1997)
3⁄4 Incorporated by reference to Form 10-K Annual Report for the fiscal year ended
December 31, 1996*10.3
    
    3⁄4
    
    Merck & Co., Inc. Deferral Program (amended and restated as of January 1, 2005)*10.4
    
    3⁄4
    
    1991 Incentive Stock Plan (as amended effective February 23, 1994) 3⁄4
Incorporated by reference to Form 10-K Annual Report for the fiscal year ended December 31, 1994*10.5
    
    3⁄4
    
    1996 Incentive Stock Plan (amended and restated as of February 22, 2005)*10.6
    
    3⁄4
    
    2001 Incentive Stock Plan (amended and restated as of February 22, 2005)*10.7
    
    3⁄4
    
    2004 Incentive Stock Plan (amended and restated as of February 22, 2005)*10.8
    
    3⁄4
    
    Merck & Co., Inc. Change in Control Separation Benefits Plan 
Incorporated by reference to Current Report on Form 8-K dated November 23, 2004*10.9
    
    3⁄4
    
    Non-Employee Directors Stock Option Plan (as amended and restated
February 24, 1998) 3⁄4 Incorporated by reference to Form 10-K Annual Report for the
fiscal year ended December 31, 1997*10.10
    
    3⁄4
    
    1996 Non-Employee Directors Stock Option Plan (as amended April 27, 1999) 3⁄4
Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 1999*10.11
    
    3⁄4
    
    2001 Non-Employee Directors Stock Option Plan (as amended April 19, 2002) 3⁄4
Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 2002*10.12
    
    3⁄4
    
    Supplemental Retirement Plan (as amended effective January 1, 1995) 3⁄4 Incorporated
by reference to Form 10-K Annual Report for the fiscal year ended December 31, 1994*10.13
    
    3⁄4
    
    Retirement Plan for the Directors of Merck & Co., Inc. (amended and restated
June 21, 1996) 3⁄4 Incorporated by reference to Form 10-Q Quarterly Report for the
period ended June 30, 1996*10.14
    
    3⁄4
    
    Plan for Deferred Payment of Directors Compensation (amended and restated
as of January 1, 2005)10.15
    
    3⁄4
    
    Limited Liability Company Agreement of Merck Capital Ventures, LLC (Dated as of
November 27, 2000) 3⁄4 Incorporated by reference to Form 10-K Annual Report for the
fiscal year ended December 31, 2000*10.16
    
    3⁄4
    
    Offer Letter between Merck & Co., Inc. and Peter S. Kim, dated December 15, 2000 
Incorporated by reference to Form 10-K Annual Report for the fiscal year
ended December 31, 2003
   *
    
    Management contract or compensatory plan or
arrangement. 32




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##### Table of Contents



ExhibitNumber
    
    
    
    Description10.17
    
    3⁄4
    
    Amended and Restated License and Option Agreement dated as of July 1, 1998
between Astra AB and Astra Merck Inc. 3⁄4 Incorporated by reference to Form 10-Q Quarterly
Report for the period ended June 30, 199810.18
    
    3⁄4
    
    KBI Shares Option Agreement dated as of July 1, 1998 by and among Astra
AB, Merck & Co., Inc. and Merck Holdings, Inc. 3⁄4 Incorporated by reference to Form 10-Q
Quarterly Report for the period ended June 30, 199810.19
    
    3⁄4
    
    KBI-E Asset Option Agreement dated as of July 1, 1998 by and
among Astra AB, Merck & Co., Inc., Astra Merck Inc. and Astra Merck Enterprises Inc.
3⁄4 Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 199810.20
    
    3⁄4
    
    KBI Supply Agreement dated as of July 1, 1998 between Astra Merck Inc. and Astra
Pharmaceuticals, L.P. (Portions of this Exhibit are subject to a request for confidential
treatment filed with the Commission) 3⁄4 Incorporated by reference to Form 10-Q
Quarterly Report for the period ended June 30, 199810.21
    
    3⁄4
    
    Second Amended and Restated Manufacturing Agreement dated as of July 1, 1998
among Merck & Co., Inc., Astra AB, Astra Merck Inc. and Astra USA, Inc. 3⁄4
Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 199810.22
    
    3⁄4
    
    Limited Partnership Agreement dated as of July 1, 1998 between KB USA, L.P. and
KBI Sub Inc. 3⁄4 Incorporated by reference to Form 10-Q Quarterly Report for the period
ended June 30, 199810.23
    
    3⁄4
    
    Distribution Agreement dated as of July 1, 1998 between Astra Merck Enterprises Inc.
and Astra Pharmaceuticals, L.P. 3⁄4 Incorporated by reference to Form 10-Q Quarterly
Report for the period ended June 30, 199810.24
    
    3⁄4
    
    Agreement to Incorporate Defined Terms dated as of June 19, 1998 between Astra AB,
Merck & Co., Inc., Astra Merck Inc., Astra USA, Inc., KB USA, L.P., Astra Merck
Enterprises Inc., KBI Sub Inc., Merck Holdings, Inc. and Astra Pharmaceuticals, L.P. 3⁄4
Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 199812
    
    3⁄4
    
    Computation of Ratios of Earnings to Fixed Charges13
    
    3⁄4
    
    2004 Annual Report to stockholders (only those portions incorporated by reference in
this document are deemed filed)14
    
    3⁄4
    
    Code of Conduct  Our Values and Standards 3⁄4 Incorporated
by reference to Form 10-K Annual Report for the fiscal year ended December 31, 200321
    
    3⁄4
    
    Subsidiaries of Merck & Co., Inc.23
    
    3⁄4
    
    Consent of Independent Registered Public Accounting Firm 3⁄4
Contained on page 36 of this Report24.1
    
    3⁄4
    
    Power of Attorney24.2
    
    3⁄4
    
    Certified Resolution of Board of Directors31.1
    
    3⁄4
    
    Rule 13a  14(a)/15d-14(a) Certification of Chief Executive Officer
 33




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##### Table of Contents



ExhibitNumber
    
    
    
    Description31.2
    
    3⁄4
    
    Rule 13a  14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    3⁄4
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    3⁄4
    
    Section 1350 Certification of Chief Financial Officer
 Copies of the exhibits may be obtained by stockholders upon written request directed to the
Stockholder Services Department, Merck & Co., Inc., P.O. Box 100WS 3AB-40, Whitehouse Station, New
Jersey 08889-0100. 34




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or15(d)of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. MERCK & CO., INC.Dated: March 11, 2005By
    
    RAYMOND V. GILMARTIN(Chairman of the Board,President and Chief Executive Officer)By
    
    CELIA A. COLBERTCelia A. Colbert(Attorney-in-Fact)
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated. Signatures
    
    Title
    
    DateRAYMOND V. GILMARTIN
    
    Chairman of the Board, President and
    
    March 11, 2005Chief Executive Officer; PrincipalExecutive Officer; DirectorJUDY C. LEWENT
    
    Executive Vice President, Chief
    
    March 11, 2005Financial Officer and President, HumanHealth Asia; Principal Financial OfficerRICHARD C. HENRIQUES, JR.
    
    Vice President, Controller;
    
    March 11, 2005Principal Accounting OfficerLAWRENCE A. BOSSIDY
    
    Director
    
    March 11, 2005WILLIAM G. BOWEN
    
    Director
    
    March 11, 2005JOHNNETTA B. COLE
    
    Director
    
    March 11, 2005WILLIAM B. HARRISON, JR.
    
    Director
    
    March 11, 2005WILLIAM N. KELLEY
    
    Director
    
    March 11, 2005ROCHELLE B. LAZARUS
    
    Director
    
    March 11, 2005THOMAS E. SHENK
    
    Director
    
    March 11, 2005ANNE M. TATLOCK
    
    Director
    
    March 11, 2005SAMUEL O. THIER
    
    Director
    
    March 11, 2005PETER C. WENDELL
    
    Director
    
    March 11, 2005
 Celia A. Colbert, by signing her name hereto, does hereby sign this document pursuant to
powers of attorney duly executed by the persons named, filed with the Securities and Exchange
Commission as an exhibit to this document, on behalf of such persons, all in the capacities and on
the date stated, such persons including a majority of the directors of the Company. By
    
    CELIA A. COLBERTCelia A. Colbert(Attorney-in-Fact)
 35




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##### Table of Contents



Exhibit 23 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-3
(Nos. 33-39349, 33-60322, 33-51785, 33-57421, 333-17045, 333-36383, 333-77569, 333-72546, 333-87034
and 333-118186) and on Form S-8 (Nos. 33-21087, 33-21088, 33-40177, 33-51235, 33-53463, 33-64273,
33-64665, 333-91769, 333-30526, 333-31762, 333-40282, 333-53246, 333-56696, 333-72206, 333-65796,
333-101519, 333-109296, 333-117737 and 333-117738) of Merck & Co., Inc. of our report dated
February 22, 2005, relating to the consolidated financial statements, managements assessment of
the effectiveness of internal control over financial reporting and the effectiveness of internal
control over financial reporting, which appears in the Annual Report to stockholders, which is
incorporated in this Annual Report on Form 10-K. PricewaterhouseCoopers LLP Florham Park, New Jersey
March 11, 2005 36




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    
    
    Description2.1
    
    3⁄4
    
    Master Restructuring Agreement dated as of June 19, 1998
between Astra AB, Merck & Co., Inc., Astra Merck Inc., Astra USA, Inc., KB USA,
L.P., Astra Merck Enterprises, Inc., KBI Sub Inc., Merck Holdings, Inc. and Astra
Pharmaceuticals, L.P. (Portions of this Exhibit are subject to a request for
confidential treatment filed with the Commission) 3⁄4 Incorporated by
reference to Form 10-Q Quarterly Report for the period ended June 30, 19983.1
    
    3⁄4
    
    Restated Certificate of Incorporation of Merck & Co., Inc. (October 1, 2004) 3⁄4
Incorporated by reference to Form 10-Q Quarterly Report for the period ended
September 30, 20043.2
    
    3⁄4
    
    By-Laws of Merck & Co., Inc. (as amended effective September 28, 2004) 3⁄4 Incorporated by
reference to Current Report on Form 8-K dated September 28, 20044.1
    
    3⁄4
    
    Indenture, dated as of April 1,
1991, between Merck & Co., Inc. and Morgan Guaranty Trust Company
of New York, as Trustee  Incorporated by reference to Exhibit 4 to
Registration Statement on Form S-3 (No. 33-39349)4.2
    
    3⁄4
    
    First Supplemental Indenture
between Merck & Co., Inc. and First Trust of New York, National
Association, as Trustee  Incorporated by reference to Exhibit 4(b) to
Registration Statement on Form S-3 (No. 333-36383)*10.1
    
    3⁄4
    
    Executive Incentive Plan (as amended effective February 27, 1996) 3⁄4
Incorporated by reference to Form 10-K Annual Report for the fiscal year ended December 31, 1995*10.2
    
    3⁄4
    
    Base Salary Deferral Plan (as adopted on October 22, 1996, effective January 1, 1997) 3⁄4
Incorporated by reference to Form 10-K Annual Report for the fiscal year ended December 31, 1996*10.3
    
    3⁄4
    
    Merck & Co., Inc. Deferral Program (amended and restated as of January 1, 2005)*10.4
    
    3⁄4
    
    1991 Incentive Stock Plan (as amended effective February 23, 1994) 3⁄4 Incorporated by
reference to Form 10-K Annual Report for the fiscal year ended December 31, 1994*10.5
    
    3⁄4
    
    1996 Incentive Stock Plan (amended
and restated as of February 22, 2005)*10.6
    
    3⁄4
    
    2001 Incentive Stock Plan (amended
and restated as of February 22, 2005)*10.7
    
    3⁄4
    
    2004 Incentive Stock Plan (amended
and restated as of February 22, 2005)*10.8
    
    3⁄4
    
    Merck & Co., Inc. Change in Control Separation Benefits Plan  Incorporated by reference to Current Report on Form 8-K dated November 23, 2004*10.9
    
    3⁄4
    
    Non-Employee Directors Stock Option Plan (as amended and restated February 24, 1998) 3⁄4 Incorporated by reference to Form 10-K Annual Report for the
fiscal year ended December 31, 1997*10.10
    
    3⁄4
    
    1996 Non-Employee Directors Stock Option Plan (as amended April 27, 1999) 3⁄4
Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 1999*10.11
    
    3⁄4
    
    2001 Non-Employee Directors Stock Option Plan (as amended April 19, 2002) 3⁄4
Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 2002
   *
    
    Management contract or compensatory plan or arrangement.




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##### Table of Contents



ExhibitNumber
    
    
    
    Description*10.12
    
    3⁄4
    
    Supplemental Retirement Plan (as amended effective January 1, 1995) 3⁄4
Incorporated by reference to Form 10-K Annual Report for the fiscal year ended December 31, 1994*10.13
    
    3⁄4
    
    Retirement Plan for the Directors of Merck & Co., Inc. (amended and restated
June 21, 1996) 3⁄4 Incorporated by reference to Form 10-Q Quarterly Report for the
period ended June 30, 1996*10.14
    
    3⁄4
    
    Plan for Deferred Payment of Directors Compensation (amended and restated
as of January 1, 2005)10.15
    
    3⁄4
    
    Limited Liability Company Agreement of Merck Capital Ventures, LLC (Dated as of
November 27, 2000) 3⁄4 Incorporated by reference to Form 10-K Annual Report for the
fiscal year ended December 31, 2000*10.16
    
    3⁄4
    
    Offer Letter between Merck & Co., Inc. and Peter S. Kim, dated December 15, 2000 3⁄4
Incorporated by reference to Form 10-K Annual Report for the fiscal year
ended December 31, 200310.17
    
    3⁄4
    
    Amended and Restated License and Option Agreement dated as of July 1, 1998 between
Astra AB and Astra Merck Inc. 3⁄4 Incorporated by reference to Form 10-Q Quarterly
Report for the period ended June 30, 199810.18
    
    3⁄4
    
    KBI Shares Option Agreement dated as of July 1, 1998 by and among
Astra AB, Merck & Co., Inc. and Merck Holdings, Inc.
3⁄4 Incorporated by reference to Form 10-Q Quarterly Report for the period ended June 30, 199810.19
    
    3⁄4
    
    KBI-E Asset Option Agreement dated as of July 1, 1998 by and
among Astra AB, Merck & Co., Inc., Astra Merck Inc. and Astra Merck Enterprises Inc.
3⁄4 Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 199810.20
    
    3⁄4
    
    KBI Supply Agreement dated as of July 1, 1998 between Astra Merck Inc. and Astra
Pharmaceuticals, L.P. (Portions of this Exhibit are subject to a request for confidential
treatment filed with the Commission) 3⁄4 Incorporated by reference to Form 10-Q
Quarterly Report for the period ended June 30, 199810.21
    
    3⁄4
    
    Second Amended and Restated Manufacturing Agreement dated as of July 1, 1998
among Merck & Co., Inc., Astra AB, Astra Merck Inc. and Astra USA, Inc. 3⁄4
Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 199810.22
    
    3⁄4
    
    Limited Partnership Agreement dated as of July 1, 1998 between KB USA, L.P. and KBI
Sub Inc. 3⁄4 Incorporated
by reference to Form 10-Q Quarterly Report for the period ended June 30, 199810.23
    
    3⁄4
    
    Distribution Agreement dated as of July 1, 1998 between Astra Merck Enterprises Inc.
and Astra Pharmaceuticals, L.P. 3⁄4 Incorporated by reference to Form 10-Q Quarterly
Report for the period ended June 30, 199810.24
    
    3⁄4
    
    Agreement to Incorporate Defined Terms dated as of June 19, 1998 between Astra AB,
Merck & Co., Inc., Astra Merck Inc., Astra USA, Inc., KB USA, L.P., Astra Merck
Enterprises Inc., KBI Sub Inc., Merck Holdings, Inc. and Astra Pharmaceuticals, L.P. 3⁄4
Incorporated by reference to Form 10-Q Quarterly Report for the period ended
June 30, 1998
   *
    
    Management contract or compensatory plan or arrangement.




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##### Table of Contents



ExhibitNumber
    
    
    
    Description12
    
    3⁄4
    
    Computation of Ratios of Earnings to Fixed Charges13
    
    3⁄4
    
    2004 Annual Report to stockholders (only those portions incorporated by reference in
this document are deemed filed)14
    
    3⁄4
    
    Code of Conduct  Our Values and Standards 3⁄4
Incorporated by reference to Form 10-K Annual Report for the fiscal year ended
December 31, 200321
    
    3⁄4
    
    Subsidiaries of Merck & Co., Inc.23
    
    3⁄4
    
    Consent of Independent Registered
Public Accounting Firm
3⁄4 Contained on page 36 of this Report24.1
    
    3⁄4
    
    Power of Attorney24.2
    
    3⁄4
    
    Certified Resolution of Board of Directors31.1
    
    3⁄4
    
    Rule 13a  14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    3⁄4
    
    Rule 13a  14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    3⁄4
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    3⁄4
    
    Section 1350 Certification of Chief Financial Officer