10-KPeriod: FY2009

Merck & Co., Inc. Annual Report, Year Ended Dec 31, 2009

Filed March 1, 2010For Securities:MRK

Summary

Merck & Co., Inc. (MRK) completed a significant merger with Schering-Plough Corporation in November 2009, creating a larger, more diversified pharmaceutical entity. This merger is the defining event for the 2009 fiscal year, impacting the company's operational structure, financial results, and strategic outlook. The combined company benefits from an expanded product portfolio and research and development pipeline, aiming for significant cost synergies and enhanced market presence. Financially, the merger and the sale of the Merial animal health business contributed significantly to the company's results in 2009, including substantial one-time gains. While the company faced challenges such as patent expirations for key products like Cozaar and Hyzaar, the strategic integration and pipeline development signal a focus on long-term growth and a strengthened market position.

Financial Highlights

52 data points
Beta

Revenue

$27.43B

67.1% Gross Margin

Net Income

$12.90B

47.0% Net Margin

EPS (Diluted)

$5.65

Total Assets

$112.31B

Cash & Equivalents

$9.31B

Free Cash Flow

$3.39B

Financial Statements
Beta
Revenue$27.43B
Cost of Revenue$9.02B
Gross Profit$18.41B
R&D Expenses$5.84B
SG&A Expenses$8.54B
Interest Expense$460.00M
Net Income$12.90B
EPS (Basic)$5.67
EPS (Diluted)$5.65
Shares Outstanding (Basic)2.27B
Shares Outstanding (Diluted)2.27B

Key Highlights

  • 1The company completed a merger with Schering-Plough Corporation on November 3, 2009, significantly altering its structure and operations.
  • 2Merck reported total revenues of $27.4 billion for 2009, a 15% increase driven largely by the inclusion of Schering-Plough's post-merger results.
  • 3Significant one-time gains were recorded in 2009: $7.5 billion from remeasuring its interest in the Merck/Schering-Plough partnership and $3.2 billion from the sale of its interest in Merial Limited.
  • 4The company announced a global restructuring program in February 2010 to optimize the cost structure of the combined entity, including a workforce reduction of approximately 15%.
  • 5Key products like Singulair, Januvia, and Isentress showed strong sales growth, contributing positively to the financial results.
  • 6Several major products, including Cozaar and Hyzaar, are expected to face patent expirations in 2010, with Singulair's patent expiration in the U.S. anticipated in August 2012.
  • 7The company is managing substantial ongoing litigation, most notably related to Vioxx, with significant settlements and reserves established.

Frequently Asked Questions

The most significant strategic development for Merck in 2009 was the completion of its merger with Schering-Plough Corporation on November 3, 2009. This merger created a larger, combined entity with an expanded product portfolio and research and development pipeline, aimed at achieving substantial cost synergies and enhancing market competitiveness.

The merger had a substantial impact on Merck's 2009 financial results. Revenues increased by 15% to $27.4 billion, largely due to the inclusion of Schering-Plough's operations for the period after the merger. Additionally, Merck recognized significant one-time gains totaling over $10 billion from the remeasurement of its stake in the Merck/Schering-Plough partnership and the sale of its interest in Merial Limited.

A primary challenge is the upcoming patent expiration for several key products, including Cozaar and Hyzaar in 2010 and Singulair in 2012, which are expected to lead to significant sales declines due to generic competition. The company is also managing substantial litigation, particularly the ongoing Vioxx-related legal matters, which have resulted in significant settlements and ongoing legal defense costs. Furthermore, the integration of two large companies presents operational and cost-saving challenges that need to be effectively managed.

Merck's outlook emphasizes the strengthened research and development pipeline resulting from the merger, with a significant number of candidates in Phase III development. The company plans to leverage the combined entity's capabilities to invest in promising pipeline candidates and external opportunities. Key growth drivers mentioned include Januvia and Janumet for diabetes, Isentress for HIV, and vaccines like Gardasil, alongside the integration of Schering-Plough's expertise in oncology and neuroscience.