Merck & Co., Inc. Annual Report (Amendment), Year Ended Dec 31, 2007

Schering-Plough reported consolidated net sales of $12.7 billion for the year ended December 31, 2007, a 20% increase over the prior year, largely driven by the acquisition of Organon BioSciences N.V. (OBS) and growth in key pharmaceutical products like REMICADE, TEMODAR, and NASONEX. However, the company incurred a net loss of $1.6 billion, primarily due to significant purchase accounting charges, including $3.8 billion for acquired in-process research and development related to the OBS acquisition. The company's cholesterol franchise, managed through a joint venture with Merck, continued to show strong sales growth in 2007, though early 2008 saw negative media scrutiny and prescription declines for VYTORIN and ZETIA following the release of ENHANCE clinical trial results, leading to investigations and litigation. Schering-Plough's R&D spending increased significantly, reflecting investments in its pipeline and the OBS acquisition, with continued expected increases to support late-stage development. Investors should note the substantial impact of the OBS acquisition on both sales and reported losses, the ongoing legal and regulatory scrutiny surrounding the cholesterol joint venture products, and the company's reliance on key products like REMICADE and the joint venture products for future profitability. The company's financial position was strengthened by significant debt and equity issuance to finance the OBS acquisition. Despite the net loss in 2007, operating cash flow remained positive.