Merck Reports Double-Digit Revenue and Earnings-Per-Share Growth for Third-Quarter 2007

Business Wire, Oct 22, 2007

* Company Announces Third-Quarter 2007 Earnings Per Share (EPS) of $0.75, Excluding Restructuring Charges; Third-Quarter Reported EPS of $0.70

* Twelve Percent Revenue Growth Driven by Key Products SINGULAIR, JANUVIA, GARDASIL and VARIVAX

* Equity-Income Growth Driven by Strong Performance of VYTORIN and ZETIA

* ISENTRESS, Merck's First-in-Class HIV Integrase Inhibitor, Approved by U.S. Food and Drug Administration (FDA)

* Merck Raises Full-Year 2007 EPS Guidance and Now Anticipates EPS Range of $3.08 to $3.14, Excluding Restructuring Charges; Reported 2007 EPS Range of $2.87 to $2.93

WHITEHOUSE STATION, N.J. -- Merck & Co., Inc. today announced third-quarter 2007 earnings per share of $0.75, excluding restructuring charges, and third-quarter reported EPS of $0.70. Worldwide sales were $6.1 billion for the quarter, an increase of 12 percent from the third quarter of 2006. Net income for the third quarter of 2007 was $1,525.5 million compared with $940.6 million in the third quarter of 2006. Net income and EPS for the third quarter of 2007 include the impact of an acquired research charge of $325 million or $0.15 per share related to the purchase of NovaCardia, Inc. and a net gain of approximately $100 million resulting from the settlement during the quarter of certain patent disputes. Net income and EPS for the third quarter of 2007 and 2006 also include the impact of reserving an additional $70 million and $598 million, respectively, solely for future VIOXX legal defense costs.

Net income was $4,906.3 million, and worldwide sales were $18 billion for the first nine months of 2007. Total sales increased 8 percent for the same period.

A reconciliation of EPS as reported in accordance with generally accepted accounting principles (GAAP) to EPS, adjusted for certain significant items, is provided in the table that follows.

[TABLE OMITTED]

"Our third-quarter results reflect the continued progress Merck is making to deliver on our strategy," said Richard T. Clark, chairman, president and chief executive officer. "Merck again delivered strong results, including 12 percent sales growth and double-digit earnings-per-share growth, fueled by the performance of SINGULAIR, JANUVIA, GARDASIL, VARIVAX, VYTORIN and ZETIA."

In addition, Mr. Clark said, "We were very pleased to gain FDA approval of our groundbreaking HIV treatment, ISENTRESS. The approval of this novel HIV integrase inhibitor further underscores the Company's ongoing commitment to developing truly innovative new medicines to meet unmet medical needs."

Materials and production costs were $1.5 billion for the quarter, a decrease of 2 percent from the third quarter of 2006. The third-quarter 2007 and third-quarter 2006 costs include $129 million and $200 million, respectively, for costs associated with the global restructuring program. The gross margin was 75.0 percent for the third quarter of 2007 and 71.5 percent for the third quarter of 2006, reflecting 2.1 and 3.7 percentage point unfavorable impacts, respectively, relating to the restructuring costs noted above.

Marketing and administrative expenses were $2.0 billion for the third quarter of 2007. Included in marketing and administrative expenses is an additional $70 million reserve solely for future VIOXX legal defense costs. Excluding this cost and the additional $598 million reserve for VIOXX legal defense costs recorded in the third quarter of 2006, marketing and administrative expenses increased 6 percent from the third quarter of 2006. The increase largely reflects the necessary support for new and anticipated product launches.

Research and development expenses were $1.4 billion for the quarter, an increase of 52 percent from the third quarter of 2006. The amount for the third quarter of 2007 includes a $325 million acquired research charge associated with the purchase of San Diego-based NovaCardia, Inc., which included that company's investigational Phase III compound for acute heart failure, rolofylline (MK-7418). Excluding the NovaCardia acquired research charge, research and development expenses increased 18 percent from the third quarter of 2006. That increase in research and development expense was driven in part by a $75 million initial milestone payment associated with the licensing of deforolimus (MK-8669), a Phase III compound the Company is developing through collaboration with ARIAD Pharmaceuticals, Inc.

Restructuring costs, primarily representing separation costs associated with the Company's global restructuring program, were $49 million for the third quarter of 2007. Total costs associated with the Company's global restructuring program included in materials and production, research and development, and restructuring costs were $178 million and $249 million for the third quarter of 2007 and 2006, respectively, primarily related to separations, accelerated depreciation and asset impairment costs.

Financial Guidance

Merck raises full-year 2007 EPS guidance and now anticipates EPS range of $3.08 to $3.14, excluding the restructuring charges related to site closures and position eliminations. Merck anticipates reported full-year 2007 EPS of $2.87 to $2.93. Please see pages 10 -11 of this news release for details of Merck's full-year 2007 financial guidance.