默克藥廠 (MRK) 2001 Q1 法說會逐字稿

MERCK & COMPANY FIRST QUARTER EARNINGS RELEASE CONFERENCE CALL

Good morning ladies and gentlemen, and welcome to your Merck & Company first quarter earnings release. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments following the presentation. It is now my pleasure to hand this over to your host, Ms. Laura Jordan. Ma'am the floor is yours.

Thank you very much. Good morning everyone, and welcome to Merck's first quarter earnings call. I am Laura Jordan, the Senior Director of Investor Relations here at Merck, and I would like to welcome all of those listening to the call this morning, those via the telephone here on the teleconference as well as through the live webcast. In terms of the results this quarter, let me start by saying that overall it was another strong quarter at Merck. As you can see, Merck's earnings per share for the first quarter were ¢71, up 13%, and clearly in line with the Street's mean earnings expectation. As you will see when we will walk through the discussion of the P&L and the product performance, the result this quarter continue to reflect solid revenue growth coupled with our continued investments in selling and marketing, as well as investments in research and development. If you could pull out the first quarter P&L sheet from your fax that is where we will first spend our time. Starting with sales for the quarter 2001, as you can see 11.3 billion, that's up 28% over the first quarter of last year. Cost in expenses totaled 8977.6. First, looking at materials and production or cost of goods sold, as you can see here, 7046.5, which results in a growth margin of 37.9%. As you would expect they are down this quarter in total company gross margins, just like last quarter continued to primarily be the result of two items at the Medco level. First, we have the integration of the additional 10 million lives under the United HealthCare Contract, which were fully reflected in the first quarter of this year 2001, and we are not in the first quarter of

2000. And second, at the Medco level, the 5 million lives under the ProVantage acquisition, which as most of you know occurred in June of 2000, are in the first quarter '01 numbers, again fully reflected first quarter of this year and not part of the business in the first quarter of last year. As you well know, as we've talked about over the years when Medco revenues grow faster than the Pharma business, the gross margins as reported are indeed impacted. I can't tell you that coupled with the Medco impact this quarter on the gross margins, the product mix within the Merck business had an impact to the gross margins this quarter as well. Included here would be things like the soft trends in Prilosec, which are quite evident in the IMS data. The Cozaar equalization with DuPont, which as we all know began this quarter, began on February 1, 2001, and wholesaler buying patterns on specific products, which we'll certainly talk more about those in a moment. Although as you know, on a quarterly basis, we don't disclose margins by business, I can tell you that I have looked at the numbers on a buy-business basis, and clearly the margins are holding in both segments of a company. In terms of guidance for gross margins for the full year of 2001, that guidance remains the guidance that we gave to you in February, on February 15th, as part of our 2001 financial guidance conference call and press release. Just to remind you our guidance then, which continues to be today, that we estimate the 2001 full-year product gross margin for Merck & Company, and total company to be approximately 4

percentage points lower than the full-year 2000 rate. Moving down the page in cost and expenses, marketing and administration, or SG&A for the quarter, you can see there 1.506. Full-year guidance here on SG&A remains as well and that is that we expect our marketing and administration growth to be in the low double-digits over the full-year 2000 expense. Like 2000, our 2001 SG&A expenditures will reflect the ongoing promotional support for Vioxx as well as strong support for our other key products including Zocor, Singulair, and Fosamax. Also based into the 2001 spend, as you know, we're hiring an additional 1500 sales representatives in the United States over the next year, and I can tell you that only a portion of those new hirers are now on board, and clearly, there is still some hiring yet to go throughout 2001. Moving down to Research and Development on your sheet, you can see coming in this quarter at $547 million, and our full-year guidance here remains as well, that's R&D for 2001 of $2.8 billion. Next on your sheet, looking at equity income from affiliates this quarter, we had income of about $179 million, slightly less than first quarter last year reflected in this line this quarter, likely from the fourth quarter, R&D from expenses associated with our two joint ventures that we have with Sherring-Plough, as you know that both on the cholesterol side as well as the respiratory side, and basically these partnerships have been incurring expenses, continued setup cost, as well as in conducting clinical trials, and these

expenses are reflected in our equity income line this quarter, 1Q 2001, and not in the base here of 1Q 2000. As you know, no revenues have yet been generated by either of those partnerships. Turning to other income expense net, we have provided the detail for this line to you on the other financial disclosures page that should be with your fax, if you could pull that out. As you can see from the first column on the first table of this page, there was a total this quarter of $56.1 million of expense, very much in line with prior year expense of $71.5 million. Moving down that page, you'll see [________________] joint venture sales detail for both Merial as well as Aventis Pasteur MSD our vaccine joint venture in Europe, and at the bottom of this page, you will see the Medco prescription data. The prescription volume and related growth rate on the bottom of your page there, 39%, clearly reflecting the additional United HealthCare lives as well as the activity from the 5 million lives under ProVantage that came on last summer. This prescription grew 39%, mere that, which we saw on the fourth quarter of 2000, where prescriptions were up in that quarter 39% as well. Flipping back to the quarterly P&L page if we could, looking at the tax rate, tax rate for the quarter as you can see and in line with our guidance of 30%. As you may recall, the full-year tax rate for this quarter is estimated to be approximately 30% to 30.5%, and we remain comfortable with that guidance. The resulting net income this quarter is 1657 and EPS is ¢71

per share. Average shares outstanding is down 1% versus 1Q '00 coming in at 2345.9. In terms of the treasury stock programs as you know, we're involved in a $10 billion treasury stock program that the board approved early last year. In the first quarter of this year, we spent approximately $1 billion on that program, and at this point, we have approximately 6.5 billion remaining under the $10 billion program. Looking at the bottom of the P&L page, first row of data here as I mentioned, sales for the quarter 11.3 billion, gains of 28%, essentially all volumes of plus 24%. Focusing on the total US and foreign sales line, here you see sales this quarter of nearly 5 billion, that's up 10% on a volume basis over 1Q '00. Basically, the growth this quarter captured two competing forces. If you will, first off, Merck is clearly in the throes of the pattern expiration period, which as you know began with the Vasotec pattern. I think it's important to realize that that is more than offset by the continued strong product performance of our five key growth drivers including Zocor, Singulair, and Vioxx. We'll talk more of course about the specific products in a moment, but I think it's important at this point to mention that this quarter, first quarter of '01, those five key growth drivers posted a cumulative worldwide sales growth rate of 30%. Moving to other Medco sales, as you can see of a very robust 51%, clearly reflecting the additional 15 million lives that I mentioned

earlier from United HealthCare and ProVantage. Before moving any further, I would like to mention that this morning during the remainder of the call, I may discuss certain subjects that may contain forward-looking information defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements may include items like guidance on earnings and guidance on other income statement components, statements related to our growth rate expectations, and product positioning relative to the competition. I caution you that actual results could differ materially from those that may be projected in this discussion. Additional information concerning a number of factors that could cause actual results to differ materially from the information that we will provide here today is available in our most recent 10-K. Now, before moving into the discussion of the individual products, on February 15th, of this year, Merck issued a press release providing the full-year 2001 financial guidance, and I would like to reiterate that we remain comfortable with the estimates of the income statement component cited in that release including the sales forecast, the R&D budget, and the marketing and admin expense growth rate as I mentioned. Additionally, I would like to reiterate that we are comfortable with the first call range of EPS analyst estimates of $3.15 to $3.25. In terms of quarterly EPS growth pattern, it would be reasonable to assume that the first quarter growth rate of 13% that we reported here today may be stronger than the growth rate for the remaining three quarters of this year. It would be also reasonable to expect that the growth rate for each of those three quarters to be consistent

with Merck's full-year 2001 EPS guidance. Now, if you could pull out the first quarter products sales sheet that I sent you this morning, we'll spend some time on this page. Before we walk to the individual product discussion cell, I would like to mention that as you will hear when we're walking through the page, wholesaler buying patterns did have an impact this quarter on some products clearly. I can tell you that these fine patterns were all within the normal course of business as customers tried to time their purchases from Merck, based on the timing of Merck's price increases. I can also tell you that in total this quarter, i.e., in the first quarter of 2001, we had a net buy-out, and that the amount of that buy-out is comparable in total to the net buy-out we saw in the first quarter of last year, in the first quarter of 2000. So, in total, although these buying patterns are not really impacting to the total quarter-on-quarter sales growth rate, on an individual product basis, like obviously in the case of Vioxx, there are clearly some sequential impacts from the fourth quarter of '00 into the first quarter of '01, and we'll talk more about those. In fact, lets start with Vioxx, the first product on your sheet. As you know, this is Merck's COX-2 inhibitor for osteoarthritis and pain. First quarter '01 sales of Vioxx on a worldwide basis were 485 million, if you just take a moment and scan down your sheet you'll see that Vioxx has quickly become Merck's second largest selling product. In terms of performance this quarter in the United States, it's clear that Vioxx was

impacted by wholesaler buying patterns, which resulted from the timing of our fourth quarter 2000 price increase. I can tell you that about $150 million of Vioxx was bought out this quarter, in the first quarter of 2001. With that being said, the fundamental business where the prescription trends for Vioxx remain quite healthy. In fact, total prescriptions in the first quarter of 2001, were about 5.5 million total prescriptions, that's up 55% over the first quarter of 2000, where we saw total prescriptions of about 3.5 million on Vioxx. As you know, prescriptions reflect the true underlying demand for a product, and our sales forecast are based on prescriptions. The worldwide Vioxx growth sales forecast that we gave you on February 15, of 3 billion to 3.5 billion for the full year, still holds. These buying patterns merely reflect pushes and pulls in any given quarter and occur in the normal course of business. The impact to the US sales this quarter on Vioxx is just a timing issue. With that in mind, Vioxx continues to be the fastest growing COX-2 on the market, capturing 51% of the US market, and leading the market in virtually all countries throughout the world. In terms of future growth drivers of the product, I am sure most of you are aware that on April 6th, we received an approvable letter from the FDA on the VIGOR filings. As most of you know, VIGOR is an 8000-patient gastrointestinal outcome study, which showed that Vioxx significantly reduced GI

events both on its primary endpoint and its secondary endpoint. We are quite confident in our data from VIGOR, and we will continue to work closely with the FDA to include data from that study in the Vioxx label. Next, just a quick moment on Prinivil - two quick items here with respect to the US sales of Prinivil of 340 million. First, this quarter, like last year first quarter, we have these semiannual purchases of a very large managed care customer, and I suggest that you keep in mind that those sales are aggressively priced. Second, on Prinivil, we did see some buy-in in the normal course of business from the wholesalers in addition to that very large managed care customer purchases, and those sales also are aggressively priced. Moving to Cozaar and Hyzaar, worldwide sales for the quarter were 385 million. If you recall, in the fourth quarter call that we had back in January, we talked about a buy-in on Cozaar in advance of its November 17th, price increase then a buy-in in the fourth quarter of 2000. This quarter, we see the reverse of that. We see a buy-out on Cozaar in the United States. It is clearly impacting the growth rates on Cozaar and Hyzaar in the US this quarter, as well as a sequential absolute sale. In fact if you adjust for the buy-out, Cozaar delivered double-digit growth this quarter in the United States. Clearly, the longer-term promise of Cozaar rests with our three mega-trials Life, Optimal and Renal. The anticipated completion for Life in Optimal is

next year 2002. I can tell you that Renal has been completed, and we are currently in the process of analyzing that data, and we will be presenting the study at a scientific meeting in the near future. On a different note as you all know, on February 1, 2001, we began accounting for the Cozaar payments with DuPont in equalized basis. And just to remind you as we've discussed in the past, in North America, existing royalties on sales of the losartan products of Cozaar and Hyzaar remain unchanged. In addition, DuPont's share of operating profits in North America increased to 50%. That is the only piece that has changed, and recall that I mentioned that during the gross margin discussion. In strategic Europe, which includes the UK, France, Italy, Spain, and Germany, and in all other countries of the world including Japan, Cozaar is doing quite well. The financial terms between DuPont and Merck on the losartan products continue unchanged. If you recall during the February 15th financial guidance conference call that we had, I mentioned that the impact of this new accounting with the North America profits on Merck's total company growth margins would be a decline to those growth margins of less than 1 percentage point, and I can tell you that this quarter that holds true. Turing to Zocor - this is Merck's largest selling product. Sales this quarter were 1.5 billion of a very robust 31%, with US sales growing 48% this quarter. In terms of the growth of Zocor, certainly a number of factors to consider. First, reflected in the Zocor US sales is wholesaler buy-in. If you

recall, Zocor had a 4.7 price increase at the end of 2000, and as a result of our inventory management program that we have, wholesalers were allowed to buy a certain quantity of product at the historic pre-price increased price, which I can tell you that some wholesalers did indeed participate in that program this quarter. It's also important to remind you that the first quarter of last year, i.e., first quarter of 2000, Zocor did have a slight buy-out that was Y2K related, and if you adjust for these buying pattern, i.e., the buy-in this year in the first quarter of '01, and the buyout last year in the first quarter of '00, the sales growth for Zocor in the US is more like 30%. With all this being said, I can tell you that we are still comfortable with the worldwide growth sales forecast for Zocor that we gave you on February 15th, which was 5.8 billion to 6.2 billion for the full year of 2001. Again, these buying fluctuations are just timing of purchases and do not reflect the true underlying demand. Second, on Zocor, as you know, there is a strong presence in a number of markets that are not included in the IMS prescription data that a number of you study and analyze, that is what we call the Federal Sector or the non-retail market. As we talked about that includes places like The Department of Defense, The Veteran's Administration, as well as the hospital market. Those markets, the non-retail markets, for Zocor continue to deliver strong result. Putting the performance there in perspective, I can tell you that the sales from this segment continue to represent slightly more than 20% of the US base

of Zocor. So baked into the 1 billion is 50 million, slightly more than 20% of that are these non-retail market customers. I can also tell you that growth in the non-retail sector was in excess of 30% in the first quarter of this year. All that growth is still quite strong, it's somewhat less than the growth which we saw in the full year of 2000, which is as you would expect, the contracts are beginning to annualize. But net-net, the Federal Sector non-retail market continues to have a nice sales base and a nice growth rate. In terms of market share, it's important to recognize that Zocor's share of the class; statin continues to be stable, and finally in looking at the HMG market, the statin market as whole, here we continue to see strong growth with rolling 12 months total prescriptions up nearly 20%. Certainly, this contributes to the growth in Zocor's wealth. This market still provides significant opportunity as a large number of people with high cholesterol continue to remain untreated. Further, I think it's important to recognize that the new MCET Treatment guidelines are likely to be published this summer, and depending upon how they come out, there is clearly the potential that the number of people defined as having cholesterol problems, and therefore, eligible for drug treatments - that is clearly the potential for that number to increase. On the international side of Zocor, the reported results here are not quite as robust as those we see in the US. However, I do think it's important to remind you that the individual product sales reported on your sheet here as always reflect the impact of exchange in this quarter that is a negative

impact of exchange. If we look at Zocor international on an ex-exchange basis, the product does indeed continue to deliver solid volumes gains. Moving to Singulair - one of Merck's five key growth drivers, sales this quarter - 300 million. The performance of Singulair worldwide continues to be quite strong. Within the leukotriene modifier class, Singulair is by far the market leader holding over 80% of that market. If we look more broadly to the controller market, a larger market, this includes a number of other respiratory products like long-acting beta-agonist and inhaled steroids. I'm pleased to report that in United States, Singulair is now the #1 controller in terms of total prescription. We are the most prescribed asthma controller after only three years on the market, and total prescriptions continue to support future growth. If you look at the last three months of data versus the same period, prior year, total prescriptions in the United States are up over 60%. The product has been rapidly adopted because it offers physicians and patients, both effective asthma control as well as the convenience of a nonsteroid, once-a-day tablet that has demonstrated safety in adults, adolescents, and children as young as the age of 2. In terms of medical meetings for Singulair at the Quad AI Meeting that was held in New Orleans in March of 2001. Data was released which demonstrated that Singulair is effective as a monotherapy in the treatment of allergic rhinitis. Merck's Singulair Monotherapy Program

for allergic rhinitis continues to proceed. If you recall on a different note, we are working with Sherring-Plough vis-a-vis a joint venture to look at the combination tablet of Singulair and Claritin to treat allergic rhinitis, and that program continues to proceed as well. Next, if we could skip down on your sheet to Fosamax, worldwide sales this quarter is 350 million. In terms of current indications for Fosamax, as most of you know, the product is indicated for the treatment and prevention of osteoporosis in both men and women. Also as most of you know, during the fourth quarter of last year, the FDA approved the once weekly formulation of Fosamax, and in a matter of just a few short months, the Fosamax prescription base has accelerated. Prior to the launch of once weekly, Fosamax was gaining about 200,000 to 225,000 total prescriptions in a given week, 200,000 to 225,000, and post the launch of once weekly, we are now running about 270,000 to 280,000 total prescriptions on a weekly basis. About 60% of our new prescriptions, that are written for Fosamax in the United States are for the once weekly dose and that number continues to ramp up as clearly this formulation provides us with an important competitive advantage in terms of patient convenience and compliance. In terms of market share, we see strong results here as well. We look at something we call the FAME market, which includes Fosamax, Actonel, Miacalcin and Evista, and prior to the launch of once weekly, Fosamax had about 45% of what we

call the FAME market within the osteoporosis market, 45%. So, based on the most recent IMS data that I have seen, Fosamax has now captured about 55% of that market. The once weekly dose is clearly fueling to grow. In terms of the source of business for Fosamax once weekly, I can tell you that about 35% of the base is currently coming from the previous once-daily users, 25% of the base of once weekly comes from switches from other products within the osteoporosis category, and the remaining 40% of the base are those patients that are new to market. So that's the mix as this now will continue to provide you with updates of this mix on a quarterly basis, but currently, we're seeing 35% from previous once daily, 25% in switches, and the remaining 40 are those new to market. Outside of the US, I'm pleased to report that earlier this month, the 16 countries of the European Union approved Fosamax once weekly. As you know, of course, this is not pricing approval, so it does not mean immediate launch, but it is clearly positive for the future of the brand. Net-net, Fosamax continues to deliver robust results. We continue to be very pleased with its performance, and we continue to see significant opportunity with this product in the future. And finally, just to summarize before starting the Q&A, I'd like to reiterate that this quarter's results were driven primarily by the strong performance of Merck's five key growth drivers. As I mentioned, these products posted a cumulative growth rate of 30% this quarter versus first quarter of 2000. The bottom

line growth reflects a strong product performance and reflect our continued investments behind our growth drivers through appropriate sales and marketing efforts, as well as through R&D initiative. Once again, just to remind you, before you move into the Q&A, I would like to reiterate that we remain comfortable with the estimates of the income statement components that we cited in our February 15th press release, that includes the sales forecast for Zocor and Vioxx and the other products on that sheet, the R&D budget of 2.8 billion, and the marketing and admin expense growth rate. Additionally, I would like to remind you that we are comfortable with the first call range of $3.15 to $3.25, and again, it would be reasonable to expect the growth rates for each of the remaining three quarters in 2001 to be consistent with Merck's full-year 2001 EPS guidance, and with that, I'll open the floor to your questions.

Thank-you. The floor is now open for question. If you have a question or a comment please press the numbers 1 followed by 4 on your touch-tone telephone at this time. If at any point your question has been answered, you may remove yourself from the queue by pressing the # key. All questions will be taken in the order they are received. We direct all participants to please pick up their handset while posing their question to ensure optimum sound quality. Again, that's 1 followed by 4 for any questions or comments at this time. Thank-you. Our first question is coming from Jeff Chaffkin. Please state your affiliation.

Yes. Thank-you. It is Jeff Chaffkin from UBS. Good Morning Laura. One thing I wanted to look at was, really kind of the other revenue. If you look at the key product sales page you provide, that is in the US, about $3.205 billion, it looks like, it's your reported revenue of about $3.155 in the US. So if you take the 3.205, you have to add on your revenue stream from Prilosec, add on the revenue stream from Nexium, and add on the other Astra products, other Merck products, and yet the number is negative, which implies a very, I think, unusually large rebate discount number. Can you comment on that at all? Is that unusual for the year? Is there some, as you mentioned some semi-annual [_______________] here or should that negative swing be consistent for the year? It seems unusually high.

Right. Sure. I believe what, for those of you who may not have followed all the math, what Jeff is just...

Sorry.

... take our US sales of the product sales detail and those consumed with a number of approximately, slightly over 3 billion. Add to it numbers that are included in our US sales which is our alliance revenues, the funds that we received from AstraZeneca, we get a rate of 32% on Prilosec in the United States, plus participate in some of their other products. There are some other supply sales too, for example, to Merial on the animal health products etc., and then a number of other older and/or smaller products that we don't disclose on that sheet. All of those, of course, would be positive numbers that you would add into revenue. Then in order to get to our sales on the P&L sheet on the bottom, the US number there of 3.155, you can see that there would need to be a negative, and that is exactly right. Its rebates, discounts, and allowances on all products in total are then backed out and the math results in a 3.155 for the US in total. A couple of things to keep in mind with respect to rebates and that number, I wouldn't say that it's overly growing versus, you know, the product's growth rate or anything like that. It continues to step up a little bit each year. But keep in mind, it's the mix of products that you sell that is going to impact the absolute amount of rebates in any given quarter, and keep in mind that Prinivil, which is aggressively priced, i.e., significant discounts, rebates, and allowances, a lot of Prinivil was sold.

There was a buy-in by wholesalers, as well as there is a semi-annual purchases from the large managed care customer. That's going to be in your rebates number this quarter, again its pushes and pulls is based upon the timing of the purchases in any given quarter and how that's going to impact the numbers. In terms of the amount of discounts and rebates and allowances, as we all know and we've talked about over the years, Prinivil is aggressively priced, Pepcid is aggressively priced. We've always said, since about at 6, 9, 12 months into the launch of Lipitor by our competitor, that we were not losing Zocor business, Zocor prescriptions due to price. So keep that in mind. The other newly launched products, those four are within our five key growth drivers, you know the list, as well as other products like, that we've launched since 1995 including Propecia, Maxalt, and Aggrastat. Those types of products, relatively speaking, don't carry a large relative discount compared to maybe some of the other products. So keep that in mind. Product mix is always at play. It's always at play there as well. One other point that I will mention, as you noted, it's the US sales on the product sales detail sheet, then you added in Prilosec, etc., to come up with the total credit if you will. Keep in mind the softening of the Prilosec trend that are quite evident in IMS, that we've all seen over the past few months, and we're getting 32% of their sales, but as prescription softens, so might sales. Next question please.

Thank-you. Our next question is coming from Steve Scala. Please state your affiliation.

SG Cowen. Laura, I just want to make sure I understand the Vioxx dynamics. On the Q4 conference call, you mentioned that there was no buy-in in Q4, no unusual inventory in the trade at that time, that Q4 reflected true demand. So, it doesn't appear that there was a buy-in in Q4, which lead to the weaker trends in Q1. So, the inventory now must be dramatically depleted, implying a second quarter number which is likely to exceed a billion. Could you, maybe speak to the validity of those facts, as best you can? And secondly, it does raise the question, why would wholesalers want to be depleted on a drug, which is rapidly growing such as this one?

Okay. Sure. Just for some history here for all of those on the call as well as visiting on the webcast, Vioxx was launched in the United States in June of 1999, and typically, although clearly not a guarantee, companies have flexibility in terms of timing of their price increases. But typically, we see that pharmaceutical companies may increase their prices on a 12-month cycle. So June 2000 was a year after the launch of Vioxx, that June 2000 came and went so to speak, and Vioxx did not have a price increase in the United States. Subsequent to that point though, it appears that wholesalers began to buy into Vioxx. We saw sequential growth, quarter-over-quarter through that period of time, through the rest of 2000. Finally in the fourth quarter of 2000, on November 17th of 2000, in the United States, we did have our first price increase on Vioxx, that was November 17th, and it was a 3.9% price increase. We now have access to, or we have always had, but the data [is on a lag], access to this IMS pipeline data, and it appears that wholesalers had been purchasing and holding more inventory than we had anticipated in advance to that price increase. They had been purchasing and building up before June of 2000, because they were anticipating a one-year anniversary price increase. Since Vioxx is a newly launched product and growing extremely rapidly on a prescription basis, we didn't have a history of wholesaler buying patterns to follow, nor did the trade have a history of our price increase pattern, and we didn't follow the one-year anniversary typical-type timing of a price

increase. Hence we have the buy-out this quarter, post to November 17, 2000, price increase, and I did quantify it for you, of course, as being about a $150 million this quarter. Again, let me reiterate that we are comfortable with the worldwide growth sales forecast for Vioxx, at $3 billion to $3.5 billion for the full year of 2001. This is just timing. In terms of the second quarter of 2001 and what are sales going to be in that quarter? As you know, we don't provide sales on a bi-quarter basis other than to tell you that on a worldwide growth basis, we anticipate this $3 billion to $3.5 billion, that's where we see the year coming in. That of course, rolls through to our bottom line EPS comfort range of $3.15 to $3.25 for the full year of 2001. Our wholesalers depleted nothing on their shelf? No, that's not what's happening out their in the marketplace. There is sufficient inventory and the product, as it's quite evident from the prescription data, and it's quite evident from our market share of 51%. The patient demand is clearly still in full force. Next question please?

Thank-you. Our next question is coming from Tony Butler. Please state your affiliation.

Lehman Brothers. Thank you for taking the question Laura. Again on Vioxx, the guidance given, does it also include any potential changes to the label for the FDA? That's the first questions. Second question is involving the 1500 additional sales reps, could you perhaps provide us with percent of those reps that have been added thus far?

Sure, on your second question first with respect to the 1500 sales reps - as many of you know, in December of 2000, at our analysts business briefing, David Anstice and Judy Lewent as well as other members of management committee presented to a number of you that day, and it was announced as part of that briefing that we would be adding 1500 sales reps in the United States over the next 18 months. So, with that of course means is 2001 and into 2002. At this point, we've added a portion of those. I can tell you that there has been about one-third of those, somewhere in the neighborhood of 500 of those folks came on during the first quarter. Clearly, the remaining one thousandish of those will come on through this year and you'll begin to see those numbers roll through the sales and marketing, marketing and administration line in growth rate as the numbers will be in the 2001 expenses and not in the 2000 expenses of course, and would be reflected in the growth rate on that. With respect to VIGOR, the approvable letter, as you know, we got in April from the FDA, we are quite confident in our data in that regard, and we'll continue to have discussion with the FDA to include the appropriate language in our label for Vioxx. I think that it's important to recognize that a number of physicians clearly understand the GI benefit of using a product like Vioxx and the benefits that it provides to the patients on the GI side, and I think that the rapid uptake we've seen of the product, the rapid sales on an absolute basis that we've seen, prescriptions, etc., clearly reflect the fact that the marketplace appreciates the products and appreciates the GI safety profiled thus far, and I think at this point I'll leave it at that. Next question please.

Thank-you, our next question is coming from Carl Seiden. Please state your affiliation.

I am with JP Morgan. Thanks, you very much. Laura, two quick questions. I know you said that the guidance you've given for the year for SG&A spending and for R&D spending remain intact, but first quarter growth of both of those were way, way below that annual guidance. Can you tell us what it was about the fourth quarter or the first quarter rather, that made spending in those two areas so low? And separately, just as a quick followup for Vioxx, knowing that the data isn't great because it's a new product, is your best guess at the end of the first quarter that stocking levels would be what you would consider normal? Thanks very much.

Okay, sure. First, with respect to the expense growth rate. SG&A was up 6% for the quarter, and we remain comfortable with the fact that for the full year, we'll see a low double-digit growth there, that's the guidance we gave you on February 15th, and we remain comfortable with that. First spending just a moment on SG&A, first of the sales force expansion will continue to roll through the numbers. It's important to look at the numbers on a sequential basis and what our SG&A has been over the past five quarters - the four quarters of 2000 and the first quarter of 2001. I have those numbers here, I'll just give them to you on a rounded basis. The four quarters of 2000 last

1.4, 1.5, 1.5, and 1.8. First quarter of this year of course is 1.5. You can see the trends there in terms of timing. Again, the first quarter growth rate is 6%. We remain comfortable with the low double-digit growth rate as we see the numbers at this point on April 20th. I would look for some timing impacts there. On R&D for the quarter, we were up 5%. Again, I would look at the absolute dollars spend was about 550 million, and if you follow some, look back to numbers of last year, you'll see that first quarter of last year was the lowest of the four quarters. Not to imply what is our spends going to be in each of the four quarters of this year, but just to give you some background as to how the spends has been over the past five quarters. The 2.8 billion, we remain comfortable with that. That is just an estimate, if you recall last year for 2000, we talked about a number of R&D spend of 2.4

billion. The actual for the year 2000 came in at 2345. You do see a little bit of exchange in there sometimes because we have research facilities, of course, in Japan, as well as in Europe and Canada. So, from time to time that can impact the number in that regard. So for expense growth rate, I would look at this as timing in terms of the numbers, in terms of the spend, in terms of the promotional programs, in terms of the sales force expansion, in terms of on the R&D side, and again, and in terms of the roll out of spends. In terms of Vioxx, and where do we stand in terms of if it is going to trickle through or what have, I mean, I can't comment on what's going to happen in the second quarter on a byproduct basis. Clearly, the demand from our prescription basis is there. Would I think that second quarter of '01 US sales be a number greater than 350 million? Yes, I would think that that would indeed be the case. Again, the full-year number, worldwide, for Vioxx that we're looking at is 3 billion to 3.5 billion and that's the guidance there and the comfort with that number does not change based on first quarter results. Next question please.

Thank-you. Our next question is coming from Neil Zweig. Please state your affiliation.

Ryan, Beck & Co. Good morning everyone. Laura, I want to make sure that we're all on the same wavelength with the percentage growth that will be needed in the case of Vioxx sales to meet the minimum expectation by the company of $3 billion and then say something in the Zocor area. If it's a minimum of $3 billion that means that the growth in the remaining 9 months of this year has to be at 72%? I am sure that you recognize that, and of course, that might leave relatively little room for any error, let alone moving up to $3.4 or $3.5 billion. That's one issue. Second issue, in Zocor's case, given the huge growth in the first quarter, might you, let's say, in the second quarter, release narrow the Zocor sales range, which is now 5.8 billion to 6.2 billion for the simple reason that the product will practically go flat in trend for the remaining 9 months to get to the 5.8 billion. It has to grow at only 4% to get the 5.8, and let alone to the 6.2 billion number the top end of the Zocor range would be some 14% growth. So, I am wondering if at the mid-year review or sooner however you planned these disclosure releases that you would begin to narrow the product sales expectations for this year on Vioxx, Zocor, and some other products. Sorry for the long question.

Oh! no, it's a good question. First of all, we have provided guidance on February 15th, that is the first time Merck has done something like that. So, for me to tell you here today on April 20th, what are we going to do in July, in terms of these numbers, I can't comment on that. Clearly, we will, as we did today, either express comfort with the February 15th numbers or there are certain components in there that we might feel more strongly about or less strongly about. We will modify it as appropriate on our earnings call in July, just like we would do in October for third quarter, and in January of next year, probably not January of next year because the fourth quarter there would be no further guidance. But clearly in July and October, we'll comment back on our full-year guidance, and certain areas may go up, certain areas may go down, and certain areas may stay the same. As of right now though, the numbers on the February 15th release are still good, and they're still what we see as coming in for the full year. Of course, each day brings something new. We move up in more prescriptions, more once weekly is sold. Singular sells more as the #1 controller in the market. Those types of numbers move in different directions from time to time. With respect to your specific questions on Vioxx and Zocor, a couple of points to note here - the 3 billion to 3.5 billion is worldwide, I think the first thing that one would do in their math, is to take if they want to use the bottom end of the range, take the 3 billion and subtract out the worldwide number that we have this quarter of 485. And from there you get a number of about 2.5 billion.

You then have to compare that to Q2, plus Q3, plus Q4 of last year, which those three quarters in total came in to about $1.8 billion, and you get a 40% growth rate. So, you may have only been doing the US, I think you mentioned somewhere another 70%, I'm not exactly sure where that was calculated from and its mood. But the fact of the matter is, clearly, let's not forget the foreign business, contributing and continuing to contribute a nice piece of the business, this quarter coming in a $135 million. With respect to Zocor in the math there, its important to remember that in the first quarter in the United States, that 48% growth includes a buy-in as I mentioned, and last year, first quarter, includes a buy-out and that if you adjust for those, the growth rate is something more like 30% for Zocor in the US. So again, I don't think you could just annualize the 1.5 billion and surmise that one may need to change the sales range because of the results we saw in the first quarter. These wholesaler buying patterns, as I mentioned, occur in the normal course of business. They occur across the product line, they're related to timing of price increases and speculation by the wholesalers as to when those price increases may or may not occur, and it happens across companies. Merck is not alone and it's not one specific product. Each quarter, it can be a different product. But in total, generally if you see a buy-in you see a buy-out and vice versa. Sometimes if price increases don't occur, the trade may continue to buy-in, and once you have that price increase, then they buy-out.

So again, it's just a timing issue, and what really matters is prescription trends and our sales forecast internally, all the analysis and calculations that we do, our internal sales forecast are built on prescription and patient population sizes and penetration into those patient population sizes. That's how our forecasts are built and that's how we end up with the numbers at the bottom, so to speak, of $3.15 to $3.25 for this year. Next question please.

Thank-you. Our next question is coming from David Woodyard. Please state your affiliation.

[________________] Bank. I noticed that Medco's competitor Express Scripts announced yesterday that they had won a major contract from United Health to supply pharmacy services to the AARP membership. Is Medco going to be affected by that?

No, we are not, in direct response to your question, that's a good question. There was an announcement yesterday. You are correct that the Express Script had some business with UHG related to the AARP. I can tell you that this is for the AARP consumer-funded program; it has nothing at all to do with Merck-Medco's business with United HealthCare. The 10 million lives that we have with United HealthCare, stake in there are, you know, less than 500,000 AARP people. We were asked to look at the, you know, they send out RFPs, request for proposals or what have you, and we did look at it, and we chose not to participate in that transaction. Next question please.

Thank-you. Our next question is coming from Mark Striker. Please state your affiliation.

Hi, it's Salomon Smith Barney. Hi, Laura. I have two quick COX-2 questions. One, could you update us on the status of the Vioxx RA claim for rheumatoid arthritis, and if that has any impact on, I guess, your discussions with the FDA to get the VIGOR data on the label, because I think the VIGOR data was in a primarily RA population. And then, could you update us on the NDA status of Etoricoxib, if you still plan a submission, I believe it is in the second half of this year. Thank-you.

Sure. Absolutely. The Vioxx rheumatoid arthritis filing is imminent. We will have a package there with Vioxx at 25 mg for rheumatoid arthritis. The trials are clearly done, and again the filing is imminent. Is there any impact between the Vioxx RA and VIGOR? No. Was the VIGOR population RA patients, that's a very good point you bring up. Yes, it was in RA patients, but I was looking for two separately, you know, if we were to look out a year from now, or you know, what have you what might be in the label some day for Vioxx, an indication for osteoarthritis, rheumatoid arthritis, and pain, as well as appropriate language surrounding the GI piece of VIGOR included in the Vioxx label. So, ultimately, our goal is to have both the RA claim as well as the VIGOR results, which were in an RA population included in the label. However, the VIGOR study, as you know, was a safety study in RA patients looking at the safety on the GI tract as opposed to an efficacy study of the condition of rheumatoid arthritis. Although clearly we look at that data, that wasn't primary or secondary end point efficacy side of that. So in terms of FDA actions to include I would say VIGOR, Vioxx rheumatoid arthritis Etoricoxib or MK-663 our second COX-2 inhibitor, you had mentioned that. Yes, that is in osteoarthritis, rheumatoid arthritis, and pain. We have presented data from that package.

The phase III is nearly complete for all three indications, and we would be looking to file that at some point of this year. Clearly, significant market opportunity for another COX-2 and in this case, the most selective COX-2 in development. So, that is something to look forward to, in terms of Merck and FDA filings. Speaking about FDA filings, I mentioned a couple of other items. Our antifungal Cancidas, as many of you may know, was launched in early 2001, so that's a FDA approval from the first quarter of 2001. Invanz, our once-a-day injectable antibiotic, MK-826, was filed in November of 2000. So, it's currently with the FDA, and, we expect some action there by the end of this year. In terms of other programs that we have in developments that we've talked about, these data, of course, are not yet at the FDA, but I will mention, as I did mention the Singulair, monotherapy, and allergic rhinitis, that's in phase III and continues to move along nicely and very robust data that we had at Quad AI Meeting in the first quarter. The Singulair and Claritin deal we have with Sherring-Plough continues to proceed through phase III. The Zocor and Cetamide cholesterol side, phase III, those trials continue to move along in concomitant use of the two products, and we're in the process of formulating a combination tablet for that. Cozaar, I mentioned the [Renal] trial is complete and data from that will be presented in the near future. Optimal and Life, of course, are

underway. The Zocor heart protection study, which we talked about for a few years with you, this is a 20,000 patient study to determine the effects of Zocor and vitamins, individually as well as concomitantly, on survival in patients at high risk from myocardial infarction. We're looking at a number of pieces of that in point in terms of survival, and a number of different patient types, diabetics, women, the elderly, etc. That study, we are now targeting for a medical meeting later this year to start to present that data. So, a number of things clearly going on in the pipeline, those would be what I call, the later stage, not to mention, of course, substance P and chemo-induced emesis and in depression and the vaccines that we have, as well as other products that we have, for example, Kyorin with KRP 297 in diabetes. So, a number of other products both at the FDA, planning go to the FDA and then in late stage development and as well as in early stage. Next question please.

Thank-you. Our next question is coming from Rachael Loper. Please state your affiliation.

Thank-you. Regent Investor Services a division of Alliance Capital. I am assuming that everyone saw the front page of the New York Times today, and the article about Merck and a few other companies deciding to drop their lawsuit in South Africa, and I was wondering if you could talk a little bit about this? I saw your press release, and to see from that, that the prices that the anti-AIDS drugs are going to be offered at is going to mean no profits for Merck? I know that the lawsuit didn't go through so there won't be any precedent set by the outcome of a lawsuit, but this certainly sets a precedent in the developing world, and as Africa is really the largest market for AIDS drugs, what does this mean for Merck's future profits, and can you talk a little bit about the company's' decision to do this?

Okay, sure. Certainly a couple of questions in there and a couple of things to talk about. First, with respect to the New York Times article and South Africa, I can tell you that, as many of you probably know, the government of South Africa and the pharmaceutical industry, which includes Merck, has decided to settle out of court rather than litigate the suit that was brought by the industry some 3 years ago to defend our intellectual property rights. The South African government confirmed that a new law will be implemented in a way that's compliant with TRIPS, which is the International Trade Related Intellectual Property Rights Agreement and that, of course, is important to us that our inner intellectual property rights are indeed protected. The pharmaceutical industry, including Merck, has always said that we would prefer a negotiated settlement to litigation, and that we believe that accelerating access to care and treatment for the diseases that affect the health of the South African population requires cooperation and partnership from all stakeholders. Clearly, it's not just the industry so to speak. The agreement that was reported today is good for those South Africans that have HIV and have AIDS, as clearly they are the role winners here. It balances the health needs of the population there, the needs on our side for intellectual property protection, and then, of course, the government interest in preserving the option of taking advantage of the flexibility and the TRIP to address their public health concern. But, again the winners here are those patients who are most directly affected by

the disease. That's on the court case and the settlement. In terms of what we announced back last month or so, that was that we were lowering prices in developing countries, many of those countries, of course, were in Africa, for Crixivan and Stocrin, and we announced that we will not profit in the sale of those medicines in the developing world to help speed access to those countries. Our new prices in those countries - Crixivan will be $600 per patient per year, and for Stocrin, it is $500 per patient per year, and that is significantly less than what the price here is in the United States. I am sure you all know prior to this announcement, the sales of these medicines in the developing world were virtually nonexistent. So, its not as if we're losing sales that we had, these will be incremental sales now and will be able to provide access to those patients in those countries. It's clearly, you know, it's not just getting them the drugs. Crixivan and the antiretroviral medicines require more than just a medicine in their hand. There is an entire health care infrastructure that needs to be in place, there needs to be clean water for the people to drink when they take Crixivan so they don't end up with other types of complications. So, there is an entire infrastructure, healthcare restructure being key there, but other pieces as well that are all part of this. Looking further though down the pipe would be our HIV vaccine.

For those of you who have followed our different discussions that Dr. Scolnick, for example, our head of our research, presented in December, publications in Science Journal etc., as well as some data that we have recently presented at a meeting out in Colorado, our HIV vaccine, although clearly in very early stage clinical trials, very early, a far way off, is looking good thus far, but again very early. We presented data in Colorado recently from a study in rhesus monkeys, and the data is quite positive, but again, keeping in mind that its monkeys and it was a small number of monkeys. So, that's ultimately where we need to go to for this disease, I think, the piece with the government in South Africa and the lowering of prices in developing countries are steps along that path to ultimately to get access to care and treatment for those patients in those countries who need it. Next question please.

Thank-you. Our next question is coming from Jim Kelly. Please state your affiliation.

Goldman Sachs. Good morning. I just wanted to ask about the R&D and SG&A lines. Was there any currency impact to either, and can you give us some sort of growth rate ex-currency, and also given the path and challenge this year, are there other cost control initiatives in place that we can point to and possibly quantify to get a number reference, some sort of underlying growth for these items? Thanks.

Can you repeat your second question?

Absolutely. Is there any cost control initiatives that are going on so we can get a notion for organic growth for either the R&D or the SG&A line?

Okay, sure. Your first question with respect to exchange impacts on the SG&A line and the R&D line. We don't disclose that detail in particular. However, if you look at the sales line for example, on the foreign lines, we had a volume growth. On the P&L, you can see volume growth in the foreign business at 15% on sales and exchange had a -8 impact. So, exchange clearly was impacting the sales line. With that in mind, as you know, we have businesses both sales reps, SG&A-line related, promotional expenditures, etc., as well as R&D initiatives in countries throughout the world which would have had an impact of exchange. In other words I, can't quantify it for you, but topline soften impact. So, it's safe to assume that R&D and SG&A had some impact as well. As we know, the status with the euro as well as the yen continues to roll through our numbers. With respect to cost control initiatives for 2001, I wouldn't look in that direction. I mean, clearly, we are in full support of all of our franchises, specifically our five key growth drivers which as you know were up 30% 1Q '01 versus 1Q '00. You have to, in order to get those types of sales growth rates, you need to invest behind the growth drivers of the business through promotional programs. The additional sales reps we've talked about, R&D initiatives both on those five key growth drivers, additional programs, clearly on Vioxx there is a number of things as well as Singulair and Zocor. We talked about those. So, all of that will continue.

We'll continue to invest behind the growth drivers of the business as appropriate, I mean, we spent behind the programs, used the resources appropriately. We don't, as you know, have a direct consumer campaign on every product. But those products, where it make sense and we feel that we're getting the payback in the topline then we'll do those. Also on the R&D piece, clearly that, it's over the long term that we have our R&D spend. The clinical programs when we opt to take a product from basic research into phase I, and then progress from phase II and phase III, that's a long-term commitment. I wouldn't look at it as a quarter-to-quarter management of the spend if you will. Next question please.

Thank-you. Our next question is coming from Len Yaffe. Please state your affiliation.

Len Yaffe, Banc of America Securities. Could you just run through with us if there were any additional price increases in the quarter and what products they were on?

Sure. Price increases February 28th, 2001 - Aggrastat 5%, Proscar 4%, Singulair 4.9%, February 28th, 2001, as well as on that date there were number of vaccines that had an price increase of approximately 4.5%. Although it's not a first quarter item, I would tell you the December 29th, 2000, price increases because that would impact here as well. The most important of which is on Zocor, a price increase on December 29th, 2000, of 4.7%, ophthalmology products approximately 2.6%, and while round the fourth quarter, I'll go back to November 17th, because that was an important day - Vioxx, as I mentioned 3.9%, and Cozaar and Hyzaar 4.9%. So, again in reverse order we had February 28th, Singulair there 4.9%, December 29th, Zocor there 4.7%, and November 17th, Vioxx 3.9%, Cozaar and Hyzaar 4.9% in terms of the five key growth drivers. Next question please.

Thank-you. Our next question is coming from Allen [________________]. Please state your affiliation.

Lincoln Capital Management. Laura, just to go back to Jeff's question on the other item. Given the patent expiration on Vasotec, was there any impact on the rebate discount line from the disappearance of discounts or rebates from Vasotec?

Good question, and I would say not enough or you would see it in the numbers. Vasotec as an ACE Inhibitor was never really aggressively priced. In that category, Prinivil was our product in that offering to have the more robust discounts if you will. So the fact that Vasotec is not in the bucket, there will be a little bit of impact there. Those rebates wouldn't be occurring but it's not enough, where it would impact any of these rates or just maths really for that matter. Next question please.

Thank-you. Our next question is coming from Steve Tighe. Please state your affiliation.

That's Merrill Lynch, and good morning. Just two quick questions. I am wondering if you could talk about how you plan on countered detailing Singulair versus Glaxo's Advair, which is entering in the market. It seems like you're kind of focused on Singulair, and I was wondering if you could just review the FDA guidelines for the response time for approval letters so that we might have a sense of the window in which we expect to hear a response on Vioxx? Thanks.

Sure, first with respect to the Glaxo Product, couple of things to point out here. Their product Advair, which was recently launched for those of you who may not know, is a six-dose combination of two of their current products, i.e., Flovent which is an enhanced steroid, and Serevent which is a long acting beta-agonists, both agents have been on the market separately for years. The Flovent is an anti-inflammatory, and Serevent was called a bronchodilator, it causes to smooth muscle in the lung to relax. The goal of asthma treatment as is stated in the treatment guidelines and as physician follow, is to control the underlying inflammation, and again, Serevent as a bronchodilator does not have any anti-inflammatory properties. It's really just used to control symptoms. The Singulair, as you know, blocks Leukotriene, and it's well known that Leukotriene cause inflammation. So, again according to the guidelines, if you treat the underlying inflammation or the underlying disease, then the symptoms will subside. So, Singulair is a once-a-day tablet as opposed to this Advair is a combination to be used twice a day as an inhaler. That's one key point to keep in mind. We're also, as you know, indicated down as young as 2 years old, for children as young as 2. In that market, I can tell you it's certainly contributing to the growth that we see in the product on a quarterly basis. Keep that in mind. Also you might want to take a look at what has happened in Europe with their products.

In Europe, it has a different branded name, but it's largely cannibalizing the sales from the existing business to those people who are on Flovent and then the physician-added Serevent, they're already on the dual combination therapy. Mostly cannibalization is occurring and that those people are the ones using the new product offering from Glaxo. So, we're clearly ready for this launch. I think it's important to keep in mind, as I mentioned, that Singulair is now the #1 controller in the United States in terms of total prescriptions. Total prescriptions of course are key in that. It talks to the refill rate that we see with Singulair, the refill rate for a product like Singulair is clearly better than a product like Flovent, an inhaled steroid, because people are more willing to take a once-a-day pill than a twice-a-day inhaler. We have better [persistency], better compliance, and then ultimately a better refill rate. So, it will be interesting in the marketplace, but clearly we're ready and we're fully confident that our product attributes will continue to prevail in the marketplace. In terms of timing of approvable letters, for those of you who may not be aware, we filed the VIGOR data for Vioxx back in June of 2000, and was called to PDUFA date, the Prescription Drug User Fee Act date, they'll give you 12 months where by they will either approve your product, not approve your product, or provide an approvable letter on your product, and that would have been in June of 2001. The FDA also has a goal though, where they try and meet a

10-month deadline. Our 10-month deadline to hear about VIGOR from the FDA was, therefore, April 29th, 2001, because we had filed it in June in 2000. Now, in terms of what's the time line for the FDA? There are none in the guidelines per se that you can say, you know, 6 months prior to review, 10 month goal, 12 month standard, what have you? Now we have received the approvable letter. We are continuing to work closely with the FDA to include the data in our label, and we're confident of the comprehensive data that we have from VIGOR support our excellent safety profile, both on a GI basis as well as in the overall safety profile of the product, and we'll continue to work with the FDA to have that reflected in our label as appropriate. In terms of timing though, there is nothing I can provide for you on that. There are no written guidelines per se, and we don't speculate on FDAs timing with respect to any product really. Next question please.

Thank-you. Our next question is coming from David Saks. Please state your affiliation.

Yes, thank you, David Saks, MedScience. Laura, you had mentioned that you are in the throes of a patent situation. Possibly three questions, could you review again those dates, because I have some of them, but I am not sure if anything has changed about those key products? The second question is, are any of those products have a special barrier or special formulation that might prevent the so called 50% loss of unit share in the first year? And the third question related to the patent, is there any product among them that have an overseas issue that would parallel or would also be at loss to patents? Thank-you.

Sure. Yes, we are in the throes of the patent expiration period absolutely. I would say it started in December of 1999, with Vasotec in the UK and Germany. A country like UK has generic erosion, similar to that in the United States, which we see it more as a loss of about 80% in the first 12 months sales. So, started December 1999, Vasotec UK and Germany, UK like the US. The US patent on Vasotec expired in February of 2000. However, as many of you know, we were granted the pediatric exclusivity, and we did not see generic competition on that product for 6 months thereafter, which would have been August of 2000. It was when the first and the biggest, I would say, of our patent expirations portfolio started, in August of 2000, and we have seen sales deterioration there exactly as expected and it has fully baked in all of our plans and strategies for many years. The next patent that expired was Pepcid, and that was in October of 2000, we received the pediatric exclusivity for that as well, which took us up through mid-April. So, in the first quarter, there were still no generic competitors to Pepcid, but clearly in the second quarter starting now actually last week, there are generic competitors in the United States on Pepcid. Internationally speaking on Vasotec, I mentioned UK and Germany. A product like Pepcid doesn't have much international sales at all anyway. So, that's not going to be an

issue. The next product at Mercks, which has a patent to expire, i.e., this year, Mevacor in June of 2001, again primarily a US product. The pediatric studies for that product are well under way, and so, we would look for an additional 6 months on that product, Mevacor, to carry us through December of 2001 on that product. Prinivil is a December 2001 patent expiration. Again, pediatric studies are underway there to take us through June 2002. Another patent, which is not our product precisely, but we certainly participate in it, and that would be Prilosec. It has an April 2001 patent. AstraZeneca has said that they have filed the pediatric exclusivity there, and of course, if granted that would provide no generic competition through October as the patent goes in April 2001, and we would have no generics until October of 2001, and of course, that's what's included in our assumptions here and in our forecasts. In terms of special formulations, no, I would say nothing there on this batch of products that we just spoke about, but I can tell you that on products like Fosamax for example, although clearly not to be included in the patent expirations of 2000 to 2002, the initial patent on Fosamax expired in 2007ish, and the once weekly we had a patent that we received which we have talked about over the past year or so that takes us through 2018. So, that's on the once-weekly formulation of this Fosamax used for osteoporosis. So that is a, I would call, special formulation patent. It takes us beyond the patent expiration period.

Another one I would mention is on Zocor. Zocor is Cetamide combination, once that's formulated, etc., will go though 2015. So, again a different formulation, but clearly simvastatin is baked in there, and the other five key growth drivers, of course, have patent dates well beyond any current or intermediate timing. Next question please.

Thank-you. Our next question is coming from Mark Becker. Please state your affiliation.

Government Investment Corporation of Singapore. Hi, Laura. I have two questions. One is on your guidance for earnings for the year of 315 to 325. I believe that's based under the assumption that generic Losec does appear in October. Could you comment on, whether the bottom end of that range or top end of the range would adjust upwards and by how much if that assumption is incorrect, and that there are no generics? And just as a follow up to your recent answer to David, do you want to confirm or retract your statement that there are no formulation patents from Merck's viewpoint that protect Losec past the October date?

Okay. I won't retract anything that AstraZeneca is proceeding on with respect to Prilosec and Prilosec patent is you would need to speak to them about. We participate in 32% of the topline sales. We have baked into our guidance of 315 to 325, and generics coming on in October. If Astra/Zeneca prevails in keeping generics at bay or keeping the number of generics at bay or what have you, that is, it would be up by basically 32% of whatever they sell in November and December, whether they sell a $1 or $100, we'll participate in that. In terms of how we would change our guidance, 315 to 325, I wouldn't comment on that nor quantify that, and our numbers baked into 315 to 325 is October pediatric exclusivity expiration which, therefore, implies generic competition coming on line, and each of those numbers, whether its 315, 316, 317, up through and including 325, each and everyone of those numbers we're comfortable with it as the next. So, again if, however, AstraZeneca comes out on those formulation patents or other types of patents that they may have is really something we would need to speak to them about. In terms of the special formulation patents that I believe David Saks was talking about and interested in their had to do with, do we have seen that on products like Vasotec, Pepcid, Mevacor, Prinivil, etc., that may be similar to what other types of pharmaceutical companies have tried to do in the past, specifically, over the past year or so, on other large products that had patent expiration dates upcoming in order to try and extend their exclusivity on the market, and in that case, we do not have those types of actions in place.

Clearly, our approach is to continue to fund the pipeline and continue to promote our product, primarily the five key growth drivers, and it's that which is going to continue to provide the growth for the company and the innovation and the medicines to patients as appropriate to combat the diseases and conditions that are out there. I think we have time for one more question.

Thank-you. Our last question is coming from Mara Goldstein. Please state your affiliation

Thanks. It's CIBC World Markets. Just a quick clarification, Laura. The Singulair monotherapy NDA for allergy, is that a Merck finding or is that in control of the Sherring-Plough joint venture, and if you could just also comment on the development program for the combination Singulair/Claritin product given that we've seen some data that looks like at least the studies that have been already done? I guess it's just as equivalent as monotherapy?

Sure, first I'll talk to your first question, you know, may be absolutely clear on this one, this is key. Singulair monotherapy for allergic rhinitis is 100% Merck, that is not in the joint venture at all. What's in the joint venture is a combination tablet of loratadine, i.e., Claritin, and montelukast, i.e., Singulair, to look at the combination tablet as well as the concomitant use of the two products, but ultimately, a combination tablet of those two chemicals within one tablet to be used to treat allergic rhinitis. The data that was recently presented at the Quad AI that we had, and for those of you who are interested we can certainly send you the abstracts on that, were from two different studies, fall of 1999 study, as well as the spring of 2000 study. And in both of those cases, our monotherapy arm, again a 100% Merck, looked very good in treatment of symptoms of allergic rhinitis, different daytime nasal scores, nasal congestion, etc. There was a combination arm in one of those studies, again this was in the fall of 1999, and so, well before the joint venture was formed. The joint venture itself, which in the respiratory side is led by, the general manager of that joint venture is actually a Sherring person, while on the cholesterol side, the general manager of that is a Merck person. But that joint venture is now pursuing it's own combination tablet concomitant use of studies, phase III studies, to look at montelukast and loratadine in the treatment of allergic rhinitis and those trials continue to proceed. I think that in the interest of time, we will wrap it up here.

I thank you all very much for participating, and if you have any further questions, please don't hesitate to call. Have a nice day and a great weekend. Thank-you.

Thank you for your participation. This does concludes today's teleconference. You may disconnect your lines at this time.