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

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

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

Business Wire

WHITEHOUSE STATION, N.J. -- February 1, 2013

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

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

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

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

                                        
$ in millions, except EPS amounts        Fourth Quarter   Year Ended
                                         2012    2011    Dec. 31,  Dec. 31,
                                                           2012       2011
EPS                                                            
GAAP EPS                                $0.46   $0.49   $2.16     $2.02
Difference^3                            0.37    0.48    1.66      1.75
Non-GAAP EPS that excludes items        $0.83   $0.97   $3.82     $3.77
listed below^1
                                                                  
Net Income                                                     
GAAP net income^2                       $1,401  $1,512  $6,661    $6,272
Difference                              1,139   1,466   5,082     5,425
Non-GAAP net income that excludes       $2,540  $2,978  $11,743   $11,697
items listed below^1,2
                                                                      
Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition-related costs^4             $1,298  $1,479  $5,344    $5,939
Restructuring costs                     254     692     999       1,911
Arbitration settlement charge           –       –       –         500
Other^5                                 –       6       –         (258)
Net decrease (increase) in income       1,552   2,177   6,343     8,092
before taxes
Income tax (benefit) expense^6          (413)   (711)   (1,261)   (2,667)
Decrease (increase) in net income       $1,139  $1,466  $5,082    $5,425

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

Select Revenue Highlights

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

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

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

Pharmaceutical Revenue Performance

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

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

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

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

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

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

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

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

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

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

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

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

Animal Health Revenue Performance

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

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

Consumer Care Revenue Performance

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

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

Other Revenue Performance

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

Fourth-Quarter and Full-Year Expense and Other Information

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

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

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

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

                
$ in millions    Included in expenses for the period
Year Ended                Acquisition-   Restructuring   Certain   
Dec. 31, 2012            Related       Costs          Other   
                 GAAP      Costs^4                        Items     Non-GAAP^1
Materials and   $16,446  $4,872        $188           –        $11,386
production
Marketing and   12,776   272           90             –        12,414
administrative
Research and    8,168    200           57             –        7,911
development
Restructuring   664      –             664            –        –
costs

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

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

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

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

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

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

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

Recent Key Developments

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

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

Financial Targets

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

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

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

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

                                                
$ in millions, except EPS amounts               Full Year 2013
GAAP EPS                                        $2.03 to $2.26
Difference^3                                    1.57 to 1.44
Non-GAAP EPS that excludes items listed below   $3.60 to $3.70


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

Total Employees

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

Earnings Conference Call

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

About Merck

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

Forward-Looking Statement

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

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

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

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

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

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

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

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

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

                                                                       
                                                                              
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1
                                                                              
                                                                           
                 GAAP                      %        GAAP                      %
                 4Q12        4Q11         Change   Full Year   Full Year    Change
                                                    2012         2011
                                                                              
Sales            $ 11,738     $ 12,294     -5%      $ 47,267     $ 48,047     -2%
                                                                              
Costs,
Expenses and
Other
Materials and
production         4,160        4,176      -          16,446       16,871     -3%
^(1)
Marketing and
administrative     3,390        3,704      -8%        12,776       13,733     -7%
^(1)
Research and
development        2,224        2,419      -8%        8,168        8,467      -4%
^(1)
Restructuring      191          533        -64%       664          1,306      -49%
costs ^(2)
Equity income
from               (231   )     (257   )   -10%       (642   )     (610   )   5%
affiliates
^(3)
Other (income)
expense, net       176          139        27%        623          946        -34%
^(1)(4)
                                                                              
Income Before      1,828        1,580      16%        9,232        7,334      26%
Taxes
Income Tax         385          37                    2,440        942
Provision
Net Income         1,443        1,543      -6%        6,792        6,392      6%
Less: Net
Income
Attributable       42           31                    131          120
to
Noncontrolling
Interests
Net Income
Attributable     $ 1,401      $ 1,512      -7%      $ 6,661      $ 6,272      6%
to Merck &
Co., Inc.
Earnings per
Common Share     $ 0.46       $ 0.49       -6%      $ 2.16       $ 2.02       7%
Assuming
Dilution ^(5)
                                                                       
                                                            
Average Shares
Outstanding        3,074        3,069                 3,076        3,094
Assuming
Dilution
Tax Rate ^(6)     21.1   %   2.3    %             26.4   %   12.8   %

(1) Amounts include the impact of acquisition-related costs, restructuring
costs and certain other items. See accompanying tables for details.
(2) Represents separation and other related costs associated with
restructuring activities under the company's formal restructuring programs.
(3) Primarily reflects equity income from the AstraZeneca LP and Sanofi
Pasteur MSD partnerships.
(4) Other (income) expense, net in the full year of 2011 includes a charge of
$500 million related to the resolution of the arbitration proceeding with
Johnson & Johnson, a $136 million gain on the divestiture of the company's
interest in the Johnson & JohnsonºMerck Consumer Pharmaceuticals Company joint
venture and a $127 million gain on the sale of certain manufacturing
facilities and related assets.
(5) The company calculates earnings per share pursuant to the two-class method
which requires the allocation of net income between common shareholders and
participating security holders. Net income attributable to Merck & Co., Inc.
common shareholders used to calculate earnings per common share assuming
dilution was $1,401 million and $1,510 million for the fourth quarter of 2012
and 2011, respectively, and was $6,658 million and $6,257 million for the full
year of 2012 and 2011, respectively.
(6) The GAAP effective tax rates for the fourth quarter and full year of 2012
were 21.1% and 26.4%, respectively. Excluding the impact of the non-GAAP
reconciling items detailed in the accompanying tables, the effective tax rates
were 23.6% and 23.8% for the fourth quarter and full year of 2012,
respectively. Both the GAAP and non-GAAP effective tax rates for the fourth
quarter and full year of 2012 reflect a favorable ruling on a state tax
matter. In addition, both the GAAP and non-GAAP effective tax rates for the
full year of 2012 reflect the favorable impacts of a settlement with a foreign
tax authority and the realization of foreign tax credits. The GAAP effective
tax rates for the fourth quarter and full year of 2011 were 2.3% and 12.8%,
respectively. Excluding the impact of the non-GAAP reconciling items detailed
in the accompanying tables, the effective tax rates were 19.9% and 23.4% for
the fourth quarter and full year of 2011, respectively.

                                                                                
                                                                                                        
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
FOURTH QUARTER 2012
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a
                                                                                         
                                    Acquisition-       Restructuring       Adjustment
                   GAAP             Related            Costs^(2)           Subtotal          Non-GAAP
                                    Costs ^(1)
                                                                                            
Sales              $ 11,738                                                $ -               $ 11,738
                                                                                                        
Costs,
Expenses and
Other
Materials and        4,160          1,185              40                    1,225             2,935
production
                                                                                                        
Marketing and        3,390          89                 20                    109               3,281
administrative
                                                                                                        
Research and         2,224          24                 3                     27                2,197
development
                                                                                                        
Restructuring        191                               191                   191               -
costs
                                                                                                        
Equity income
from                 (231   )                                                -                 (231   )
affiliates
                                                                                                        
Other (income)       176                                                     -                 176
expense, net
                                                                                                        
Income Before        1,828          (1,298   )         (254     )            (1,552 )          3,380
Taxes
                                                                                                        
Taxes on             385                                                     (413   ) ^(3)     798
Income
                                                                                                        
Net Income           1,443                                                   (1,139 )          2,582
                                                                                                        
Less: Net
Income
Attributable         42                                                      -                 42
to
Noncontrolling
Interests
                                                                                                        
Net Income
Attributable       $ 1,401                                                 $ (1,139 )        $ 2,540
to Merck &
Co., Inc.
                                                                                                        
Earnings per
Common Share       $ 0.46                                                                   $ 0.83    ^(4)
Assuming
Dilution
                                                                                            
Average Shares
Outstanding          3,074                                                                     3,074
Assuming
Dilution
Tax Rate            21.1   %                                                                 23.6   %

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

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

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

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

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

                                                              
                                                                                                    
                                                                                                    
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
FULL YEAR 2012
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2b
                                                                                     
                                  Acquisition-       Restructuring       Adjustment
                 GAAP             Related            Costs ^(2)          Subtotal        Non-GAAP
                                  Costs ^(1)
                                                                                        
Sales            $ 47,267                                                $ -             $ 47,267
                                                                                                    
Costs,
Expenses and
Other
Materials and      16,446         4,872              188                   5,060           11,386
production
                                                                                                    
Marketing and      12,776         272                90                    362             12,414
administrative
                                                                                                    
Research and       8,168          200                57                    257             7,911
development
                                                                                                    
Restructuring      664                               664                   664             -
costs
                                                                                                    
Equity income
from               (642   )                                                -               (642   )
affiliates
                                                                                                    
Other (income)     623                                                     -               623
expense, net
                                                                                                    
Income Before      9,232          (5,344   )         (999     )            (6,343 )        15,575
Taxes
                                                                                                    
Taxes on           2,440                                                   (1,261 ) ^(3)   3,701
Income
                                                                                                    
Net Income         6,792                                                   (5,082 )        11,874
                                                                                                    
Less: Net
Income
Attributable       131                                                     -               131
to
Noncontrolling
Interests
                                                                                                    
Net Income
Attributable     $ 6,661                                                 $ (5,082 )      $ 11,743
to Merck &
Co., Inc.
                                                                                                    
Earnings per
Common Share     $ 2.16                                                                 $ 3.82    ^(4)
Assuming
Dilution
                                                                                        
Average Shares
Outstanding        3,076                                                                   3,076
Assuming
Dilution
Tax Rate          26.4   %                                                               23.8   %

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

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

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

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

(4) The company calculates earnings per share pursuant to the two-class method
which requires the allocation of net income between common shareholders and
participating security holders. Net income attributable to Merck & Co., Inc.
common shareholders used to calculate non-GAAP earnings per common share
assuming dilution was $11,738 million for the full year of 2012.

                                                                                                                 
                                                                                                                              
                                                                                                                              
MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3
                                                                                                                   
                 2012                                              2011                                              %        %
                                                                                                                     Change   Change
                 1Q       2Q       3Q       4Q       Full      1Q       2Q       3Q       4Q       Full      4Q      Full
                                                         Year                                              Year               Year
                                                                                                                              
TOTAL SALES      $11,731  $12,311  $11,488  $11,738  $47,267   $11,580  $12,151  $12,022  $12,294  $48,047   -5      -2
^(1)
PHARMACEUTICAL   10,082    10,560    9,875     10,085    40,601    9,820     10,360    10,354    10,755    41,289    -6       -2
                                                                                                                              
Primary Care
and Women's
Health
Cardiovascular
Zetia            614       632       645       676       2,567     582       592       614       640       2,428     6        6
Vytorin          444       445       423       435       1,747     480       459       469       475       1,882     -8       -7
                                                                                                                              
Diabetes &
Obesity
Januvia          919       1,058     975       1,134     4,086     739       779       846       960       3,324     18       23
Janumet          392       411       405       452       1,659     305       321       350       386       1,363     17       22
                                                                                                                              
Respiratory
Singulair        1,340     1,431     602       480       3,853     1,328     1,354     1,336     1,461     5,479     -67      -30
Nasonex          375       293       292       308       1,268     373       323       266       325       1,286     -5       -1
Clarinex         134       140       64        56        393       155       209       128       129       621       -57      -37
Dulera           39        50        52        67        207       13        25        22        37        96        83       *
Asmanex          48        51        42        44        185       60        47        42        57        206       -23      -10
                                                                                                                              
Women's Health
& Endocrine
Fosamax          184       186       152       154       676       208       221       215       211       855       -27      -21
NuvaRing         146       157       156       164       623       142       154       159       168       623       -2       --
Follistim AQ     116       125       111       116       468       133       143       129       126       530       -8       -12
Implanon         76        85        93        94        348       60        81        80        74        294       27       18
Cerazette        67        72        64        68        271       59        66        74        69        268       -1       1
                                                                                                                              
Other
Maxalt           156       154       166       162       638       173       131       156       178       639       -9       --
Arcoxia          112       117       109       115       453       114       100       108       110       431       5        5
Avelox           73        44        30        55        201       106       61        59        95        322       -42      -37
                                                                                                                              
Hospital and
Specialty
                                                                                                                              
Immunology
Remicade         519       518       490       549       2,076     753       842       561       511       2,667     8        -22
Simponi          74        76        86        95        331       54        75        74        61        264       56       25
                                                                                                                              
Infectious
Disease
Isentress        337       398       399       381       1,515     292       337       343       387       1,359     -2       11
PegIntron        162       183       165       143       653       166       154       163       175       657       -18      -1
Cancidas         145       166       163       145       619       158       168       150       164       640       -11      -3
Victrelis        111       126       149       115       502       1         21        31        87        140       32       *
Invanz           101       110       118       116       445       87        103       107       110       406       6        10
Primaxin         88        104       109       83        384       136       136       124       119       515       -30      -25
Noxafil          59        66        66        68        258       55        56        61        59        230       15       13
                                                                                                                              
Oncology
Temodar          237       225       227       229       917       248       234       223       230       935       -1       -2
Emend            102       145       111       131       489       87        120       98        114       419       16       17
                                                                                                                              
Other
Cosopt /         124       105       102       113       444       114       122       124       117       477       -3       -7
Trusopt
Bridion          58        60        68        75        261       41        47        52        60        201       26       30
Integrilin       53        60        48        51        211       64        56        53        57        230       -11      -8
                                                                                                                              
Diversified
Brands
Cozaar /         336       337       295       315       1,284     426       406       404       427       1,663     -26      -23
Hyzaar
Propecia         108       100       104       112       424       106       112       112       117       447       -4       -5
Zocor            103       96        86        98        383       127       107       110       111       456       -12      -16
Claritin Rx      87        48        47        63        244       120       65        55        74        314       -15      -22
Remeron          57        66        52        57        232       60        57        65        59        241       -4       -4
Proscar          51        55        55        56        217       60        53        58        52        223       7        -3
Vasotec /        53        49        42        48        192       57        59        57        58        231       -17      -17
Vaseretic
                                                                                                                              
Vaccines
Gardasil         284       324       581       442       1,631     214       277       445       274       1,209     61       35
ProQuad, M-M-R   255       316       396       306       1,273     244       291       391       276       1,202     11       6
II and Varivax
Zostavax         76        148       202       225       651       24        122       108       78        332       *        96
RotaTeq          142       142       150       168       601       125       148       184       195       651       -14      -8
Pneumovax        112       101       160       208       580       79        64        133       222       498       -7       17
                                                                                                                              
Other
Pharmaceutical   1,013     985       1,023     1,113     4,141     892       1,064     1,015     1,064     4,035     5        3
^(2)
                                                                                                                              
                                                                                                                              
ANIMAL HEALTH    821       865       815       898       3,399     758       802       826       868       3,253     3        4
                                                                                                                              
CONSUMER CARE    554       552       451       395       1,952     517       541       421       361       1,840     9        6
Claritin OTC     169       145       118       100       532       167       134       118       92        511       9        4
                                                                                                                              
Other Revenues   274       333       347       360       1,315     486       448       421       310       1,666     16       -21
^(3)
Astra            186      223      255      251      915       322      306      299      256      1,184     -2      -23
                                                                                                                              
* 100% or greater

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

Contact:

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