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As filed with the Securities and Exchange Commission on March 22, 1995
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
(MARK ONE)
/X/ Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 [Fee Required]
For the Fiscal Year Ended December 31, 1994
or
/ / Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 [No Fee Required]
For the transition period from __________ to __________
Commission File No. 1-3305
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MERCK & CO., INC.
P.O. Box 100
Whitehouse Station, N. J. 08889-0100
(908) 423-1000
Incorporated in New Jersey I.R.S. Employer
Identification No. 22-1109110
Securities Registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
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Common Stock New York and Philadelphia Stock Exchanges
(no par value)
Number of shares of Common Stock (no par value) outstanding as of
February 28, 1995: 1,240,402,835.
Aggregate market value of Common Stock (no par value) held by
non-affiliates on December 31, 1994 based on closing price on February 28,
1995: $52,862,000,000.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X]. No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Documents Incorporated by Reference:
Document Part of Form 10-K
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Annual Report to stockholders for the fiscal year Parts I and II
ended December 31, 1994
Proxy Statement for the Annual Meeting of Part III
Stockholders to be held April 25, 1995
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PART I
Item 1. Business.
Merck & Co., Inc. is a worldwide research-intensive health products company
that discovers, develops, produces and markets human and animal health products
and services. The Company's dominant industry segment is the Human and Animal
Health Products and Services segment, which includes Medco Containment Services,
Inc. ("Medco"), acquired in November 1993.
The following table shows the sales of various classes of the Company's
products and services:
($ in millions) 1994 1993 1992
--------------- ---- ---- ----
Cardiovasculars............................... $ 5,351.6 $ 4,820.8 $4,482.0
Anti-ulcerants................................ 1,565.7 1,324.0 1,043.9
Antibiotics................................... 827.4 868.7 942.2
Vaccines/biologicals.......................... 485.3 522.9 485.3
Ophthalmologicals............................. 482.3 454.6 457.2
Anti-inflammatories/analgesics................ 270.6 336.8 430.5
Other Merck human health...................... 433.4 446.8 373.4
Other human health............................ 4,103.9 296.6 ---
Animal health/crop protection................. 1,027.4 916.7 853.1
Specialty chemical............................ 422.2 510.3 594.9
--------- --------- --------
Total.................................... $14,969.8 $10,498.2 $9,662.5
========= ========= ========
Human health products include therapeutic and preventive agents, generally
sold by prescription, for the treatment of human disorders. Among these are
cardiovascular products, of which Vasotec (enalapril maleate), Mevacor
(lovastatin), Zocor (simvastatin), Prinivil (lisinopril) and Vaseretic
(enalapril maleate-hydrochlorothiazide) are the largest-selling;
anti-ulcerants, of which Pepcid (famotidine) and Prilosec (omeprazole) (through
October 31, 1994) are the largest-selling; antibiotics, of which Primaxin
(imipenem-cilastatin sodium), Noroxin (norfloxacin) and Mefoxin (cefoxitin
sodium) are the largest-selling; vaccines/biologicals, of which M-M-R II
(measles, mumps and rubella virus vaccine live) and Recombivax HB (hepatitis B
vaccine recombinant) are the largest-selling; ophthalmologicals, of which
Timoptic (timolol maleate) is the largest-selling; anti-inflammatory/ analgesic
products, of which Indocin (indomethacin), Clinoril (sulindac) and Dolobid
(diflunisal) are the largest-selling; and other Merck human health products
which include Proscar (finasteride), a treatment for symptomatic benign prostate
enlargement, antiparkinsonism products, psychotherapeutics and a muscle
relaxant. "Other human health" primarily includes Medco sales of non-Merck
products and Medco human health services, principally managed prescription drug
programs.
Animal health/crop protection products include animal medicinals used for
control and alleviation of disease in livestock, small animals and poultry.
These products are primarily antiparasitics, of which Ivomec (ivermectin) for
the control of internal and external parasites in livestock and Heartgard-30
(ivermectin) for the prevention of canine heartworm disease are the
largest-selling; crop protection products, of which abamectin-based
miticides/insecticides are the largest-selling; coccidiostats for the treatment
of poultry disease; and poultry breeding stock.
Specialty chemical products are used in health care, food processing, oil
exploration, paper, textiles and personal care.
In 1994, the Federal Food and Drug Administration ("FDA") cleared Trusopt
(dorzolamide hydrochloride), the first topical carbonic anhydrase inhibitor for
treatment of elevated intraocular pressure in patients with ocular hypertension
or open-angle glaucoma, for marketing in the United States. The drug has also
been cleared for marketing in Sweden, the United Kingdom and New Zealand. In
addition, Fosamax (alendronate sodium), for treatment of osteoporosis in
postmenopausal women, was cleared for marketing in Italy in 1993 and in Mexico
in 1994. Regulatory filings for Fosamax have been made in 35 countries and are
planned in the United States in 1995. Fosamax is licensed to the Company by
Istituto Gentili of Italy. Also during 1994, the Company submitted licensing
applications for Vaqta, a highly purified vaccine for the prevention of
hepatitis A, in Canada, China, Germany and the United Kingdom and the Product
License Application for Vaqta was filed in the United States. On March 17, 1995,
the FDA licensed Varivax [varicella virus vaccine live (Oka/Merck)] for use
against chickenpox in healthy children, adolescents and adults.
1
In June 1993, the Company sold its Calgon Water Management business for
$307.5 million to English China Clays plc. In August 1994, the Company announced
its intention to sell its remaining specialty chemical units, Kelco and Calgon
Vestal Laboratories. The decision reflects the Company's intention to focus its
resources more fully on its core human and animal health business. In January
1995, the Company sold its Calgon Vestal Laboratories business to Bristol-Myers
Squibb for $261.5 million. In February 1995, the Company sold its Kelco business
to Monsanto Company for $1.075 billion. These businesses were not significant to
the Company's financial position, liquidity or results of operations. Following
these divestitures, the Company is no longer engaged in the specialty chemical
business.
In November 1993, the Company acquired all of the outstanding shares of
Medco for approximately $6.6 billion. The purchase price consisted of $2.4
billion in cash, 114.0 million common shares with a market value of $3.8 billion
and 36.1 million options valued at $387.1 million, net of tax. Medco principally
provides services designed to reduce prescription drug benefit costs through
managed prescription drug programs.
In May 1993, the Company and Pasteur Merieux Serums & Vaccins ("Pasteur
Merieux"), which is part of the Rhone-Poulenc group, signed an agreement to form
a joint venture to market human vaccines and to collaborate in the development
of new combination vaccines for distribution in the European Union ("EU") and
the European Free Trade Association. In November 1994, after receiving the
approval of the EU, the Company and Pasteur Merieux contributed their European
vaccine businesses for equal shares in the joint venture, known as Pasteur
Merieux MSD, S.N.C. The joint venture is subject to monitoring by the EU, to
which the partners agreed to certain undertakings in return for an exemption
from European Competition Law, effective until December 2007. The joint venture
is active through affiliates in Belgium, Denmark, Italy, Germany, Spain and the
United Kingdom, and through distributors throughout the rest of Europe.
Effective April 1992, the Company, through the Merck Vaccine Division, and
Connaught Laboratories, Inc. ("Connaught"), an affiliate of Pasteur Merieux,
agreed to collaborate on the development and marketing of combination pediatric
vaccines and to promote selected vaccines in the United States. The research and
marketing collaboration enables the companies to pool their resources to
expedite the development of vaccines combining several different antigens to
protect children against a variety of diseases, including Haemophilus influenzae
type B, hepatitis B, diphtheria, tetanus, pertussis and poliomyelitis. In
addition, the Company and Connaught have agreed to promote a number of each
other's vaccine products.
In 1989, the Company and E. I. du Pont de Nemours and Company ("DuPont")
agreed to form a long-term research and marketing collaboration to develop a new
class of therapeutic agents for high blood pressure and heart disease,
discovered and developed by DuPont, called angiotensin II receptor antagonists.
In return, the Company provided DuPont marketing rights in the United States and
Canada to its prescription medicines, Sinemet (carbidopa-levodopa) and Sinemet
CR (sustained-release formulation).
Effective January 1991, the Company and DuPont entered into a joint venture
to form a worldwide pharmaceutical company for the research, marketing,
manufacturing and sale of pharmaceutical and imaging agent products. DuPont
contributed its entire worldwide pharmaceutical and radiopharmaceutical imaging
agents businesses to the joint venture and is providing administrative services.
The Company is providing research and development expertise, development funds,
certain European marketing rights to several of its prescription medicines,
international industry expertise and cash. In January 1995, the joint venture
began co-promotion of the Company's prescription medicines, Prinivil and
Prinzide (lisinopril and hydrochlorothiazide), in the United States.
Under separate agreements between the Company and DuPont, the Company has
an exclusive license to market Cozaar (losartan potassium) and Hyzaar (losartan
potassium and hydrochlorothiazide), the first of a new class of drugs for
treatment of high blood pressure and heart failure. Commencing in 1993,
marketing applications were submitted worldwide for Cozaar and in the United
States and France for Hyzaar. In 1994, Cozaar was cleared for marketing in
Denmark, Norway, Sweden, Switzerland and the United Kingdom for the treatment of
hypertension.
In December 1994, the Company agreed to arrangements that, among other
things, eliminated the Company's right to offset the consequences of
disproportionate allocations of the DuPont Merck joint venture
2
income and expense against the Company's right to receive a disproportionate
share of income arising from its 1989 long-term research and marketing agreement
with DuPont. Accordingly, the Company recorded a $499.6 million provision for an
obligation to the joint venture. This obligation is a function of the favorable
performance of assets contributed by DuPont to the joint venture through
December 31, 1994 and certain contractual commitments of the Company. It is
anticipated that this obligation will be discharged over a period of six years
beginning in 1995.
In January 1993, the Company and Johnson & Johnson finalized an agreement
to extend into Europe the U.S. joint venture that was formed in 1989. This
European extension currently markets and sells over-the-counter pharmaceutical
products in France, Germany, Italy, Spain and the United Kingdom. In January
1994, the Company and Johnson & Johnson acquired all of the stock of
Laboratoires J.P. Martin, a leading self-medication business in France.
In January 1993, the Company submitted a New Drug Application ("NDA") to
the FDA for Pepcid AC, an over-the-counter form of the Company's ulcer
medication Pepcid, to be marketed in the United States by the joint venture.
Beginning January 1993, marketing approval applications for over-the-counter
Pepcid have also been filed in 16 European countries and 6 other countries. In
1994, the marketing licenses for Pepcid AC were cleared in the United Kingdom,
New Zealand and Cyprus.
In 1982, the Company entered into an agreement with Astra AB ("Astra") to
develop and market Astra products in the United States. Under the first phase of
the agreement, the Company marketed three Astra products, Prilosec, Plendil
(felodipine) and Tonocard (tocainide hydrochloride), in exchange for a royalty.
In July 1993, the Company's total sales of Astra products reached the level that
triggered the first step in the establishment of a separate entity for
operations related to Astra products in the United States. On November 1, 1994,
Astra paid the Company $820.0 million for an interest in a joint venture that
will be carried on in a company called Astra Merck Inc., in which the Company
and Astra each own a 50 percent share. This joint venture will develop and
market most new prescription medicines from Astra's research.
In 1994, the Company established new subsidiaries in South Korea, Cyprus,
Peru, Holland and Germany, and established new branch offices in Chile, the
Philippines and Slovenia. The Company also established new representation
offices in Latvia, Croatia, Estonia and Sri Lanka, and established a new joint
venture company in China for manufacturing, sales and promotion of certain
products of the Company.
Competition -- The markets in which the Company's business is conducted are
highly competitive. Such competition involves an intensive search for
technological innovations and the ability to market these innovations
effectively. With its long-standing emphasis on research and development, the
Company is well prepared to compete in the search for technological innovations.
Additional resources to meet competition include quality control, flexibility to
meet exact customer specifications, an efficient distribution system and a
strong technical information service. The Company is active in acquiring and
marketing products through joint ventures and licenses and has been expanding
its sales and marketing efforts to further address changing industry conditions.
However, the introduction of new products and processes by competitors may
result in price reductions and product replacements, even for products protected
by patents. For example, the number of compounds available to treat each disease
entity has increased during the past several years and has resulted in slowing
the growth in sales of certain of the Company's products.
In addition, particularly in the area of human pharmaceutical products,
legislation enacted in all states allows, encourages or, in a few instances, in
the absence of specific instructions from the prescribing physician, mandates
the use of "generic" products (those containing the same active chemical as an
innovator's product) rather than "brand-name" products. Governmental and other
pressures toward the dispensing of generic products have significantly reduced
the sales of certain of the Company's products no longer protected by patents,
such as Clinoril and Aldomet (methyldopa), and slowed the growth of certain
other products. In 1992, the Company formed a new division, West Point Pharma,
to market the generic form of its product Dolobid. In 1993, West Point Pharma
began marketing an additional 11 off-patent Company drugs in more than 20
different packages. In December 1994, the Company entered into a distribution
agreement with Endo Laboratories, L.L.C. ("Endo"), a
3
wholly-owned subsidiary of The DuPont Merck Pharmaceutical Company, effectively
transferring most of its generics business to Endo.
Medco's pharmacy benefit management business is highly competitive. Medco
competes with other pharmacy benefit managers, retail prescription drug claims
processors, insurance companies and other providers of health care and/or
administrators of health-care programs. Medco competes primarily on the basis of
its ability to design and administer innovative programs which contain a plan
sponsor's overall prescription drug costs, its flexibility in handling
integrated prescription drug programs resulting from its ability to dispense
drugs through mail service and act as retail prescription drug manager, and the
sophistication and quality of its systems, procedures and services.
See also the description of the effect upon competition of the Drug Price
Competition and Patent Term Restoration Act of 1984 ("PTRA") on page 6.
It is generally the Company's position to limit individual product price
increases of its pharmaceutical products in the United States to the Consumer
Price Index ("CPI") plus 1 percent on an annual basis and to limit the net
weighted average price increase for the full human health pharmaceutical product
line to the general rate of inflation as measured by the CPI.
Distribution -- Promotion of the Company's human and animal health products
and services are generally made by professional representatives. Customers for
human health products include drug wholesalers and retailers, hospitals,
clinics, governmental agencies, managed health-care providers such as health
maintenance organizations and other institutions. Customers for human health
services include corporations, labor unions, insurance companies, Blue Cross and
Blue Shield organizations, Federal and state employee plans, health maintenance
and similar organizations. Customers for animal health/crop protection products
include veterinarians, distributors, wholesalers, retailers, feed
manufacturers, veterinary suppliers and laboratories.
Raw Materials -- Raw materials and supplies are normally available in
quantities adequate to meet the needs of the Company's business.
Government Regulation and Investigation -- The pharmaceutical industry is
subject to global regulation by country, state and local agencies. Of particular
importance is the FDA in the United States, which administers requirements
covering the testing, approval, safety, effectiveness, manufacturing, labeling
and marketing of prescription pharmaceuticals. In many cases, the FDA
requirements have increased the amount of time and money necessary to develop
new products and bring them to market in the United States, although revised
regulations are designed to reduce somewhat the time for approval of new
products. In 1992, the Prescription Drug User Fee Act was passed, under which
the FDA will collect revenues through user fees. The FDA has pledged to devote
these revenues to its process for reviewing and approving applications for new
drugs, antibiotics and biological products.
In recent years, an increasing number of legislative proposals have been
introduced or proposed in Congress and in some state legislatures that would
effect major changes in the health-care system, either nationally or at the
state level. Although a Federal reform bill was not enacted during the last
Congress, some states have passed reform legislation and further Federal and
state developments are expected. The debate to reform the health-care system is
expected to be protracted and intense. Although the Company is positioned to
respond to evolving market forces, it cannot predict the outcome or effect of
legislation resulting from the reform process.
For some years the pharmaceutical industry has been under Federal and state
oversight with the new drug approval system, drug safety, advertising and
promotion, drug purchasing and reimbursement programs and formularies variously
under review. The Company believes that it will continue to be able to bring new
drugs to market in this regulatory environment. One Federal initiative to
contain costs is the prospective payment system, established under the Social
Security Amendments of 1983 to hold down the growth of Medicare payments to
hospitals, which provides a flat rate for reimbursement to hospitals in advance
of the care for patients. The system establishes a number of patient
classifications -- Diagnosis Related Groups ("DRG's"). A hospital receives the
flat rate as full payment for each Medicare patient treated within a given DRG
regardless of whether the hospital's
4
actual costs are higher or lower than the flat rate. This system and other
cost-cutting programs have caused hospitals and other customers of the Company
to be more cost conscious in their treatment programs and to implement
cost-containment measures, including cost containment for the drugs they
administer.
Additionally, Congress and the regulatory agencies have sought to reduce
the cost of drugs paid for with Federal funds. In 1990, the Company initiated
its Equal Access to Medicines Program ("EAMP") on its single source products,
under which it generally offered its "best price" discount to state Medicaid
programs that grant open access to the Company's products. The Omnibus Budget
Reconciliation Act of 1990 ("OBRA") largely reflects the Company's best price
approach. As a result of a national agreement, effective January 1, 1991, signed
by the Company with the Secretary of Health and Human Services and administered
by the Health Care Financing Administration ("HCFA") pursuant to OBRA, Medicaid
received a minimum rebate of 12.5 percent off average manufacturer's price
("AMP") through September 30, 1992, and will receive a minimum rebate of 15.4
percent off AMP through 1995, on the Company's outpatient drugs reimbursed under
Medicaid. In conjunction with implementation of the Federal program under OBRA,
the Company's separate EAMP agreements with individual states have been
permitted to lapse or have been terminated. Effective in 1992, the terms of the
Federal HCFA rebate agreement were generally substituted for the EAMP
agreements.
In January 1992, the Company announced that it would provide discounts on
its single-source prescription medicines to non-profit health centers for the
poor that are Federally funded under sections 329-330 of the Public Health
Service Act that qualify for the Company's program and agree to assure access to
the Company's drugs. The discounts were largely based on those that the Company
provided Medicaid under the Federal "best price" legislation. The discounts were
ultimately provided to such centers for single-source, outpatient prescription
drugs (not reimbursed by Medicaid) purchased directly from the Company by the
centers for their patients.
The Federal Veterans Health Care Act of 1992 was enacted on November 4,
1992, superceding the Company's Public Health Service initiative and mandating
Medicaid rebate-equivalent discounts on covered outpatient drugs purchased by
certain Public Health Service entities and "disproportionate share hospitals"
(hospitals meeting certain qualification criteria). The Act further mandates
minimum discounts of 24 percent off non-Federal AMP to the Veterans
Administration, Federal Supply Schedule and certain other Federal sector
purchasers on their pharmaceutical drug purchases.
The Omnibus Budget Reconciliation Act of 1993 established a new Federal
Vaccines for Children entitlement program, under which the U.S. Centers for
Disease Control and Prevention ("CDC") funds and purchases recommended pediatric
vaccines at a capped public sector price for the immunization of
Medicaid-eligible, uninsured native American and certain underinsured children.
The Company was awarded three CDC contracts in September 1994 for the supply of
its pediatric vaccines for this program, and is currently negotiating an
agreement with CDC for distribution of these vaccines to participating
physicians.
The Company encounters similar regulatory and legislative issues in most of
the foreign countries where it does business. There, too, the primary thrust of
governmental inquiry and action is toward determining drug safety and
effectiveness, often with mechanisms for controlling the prices of prescription
drugs and the profits of prescription drug companies. The EU has adopted
directives concerning the classification, labeling, advertising and wholesale
distribution of medicinal products for human use. The Company's policies and
procedures are already consistent with the substance of these directives;
consequently, it is believed that they will not have any material effect on the
Company's business.
The Company is subject to the jurisdiction of various regulatory agencies
and is, therefore, subject to potential administrative action. Such actions may
include product recalls, seizures of products and other civil and criminal
sanctions. Under certain circumstances, the Company may deem it advisable to
initiate product recalls voluntarily. Although it is difficult to predict the
ultimate effect of these activities and legislative, administrative and
regulatory requirements and proposals, the Company believes that its development
of new and improved products should enable it to compete effectively within this
environment.
There are extensive Federal and state regulations applicable to the
practice of pharmacy and the administration of managed health-care programs.
Each state in which Medco operates a pharmacy has laws and regulations governing
its operation and the licensing of and standards of professional practice by its
pharmacists.
5
These regulations are issued by an administrative body in each state (typically,
a pharmacy board), which is empowered to impose sanctions for non-compliance.
Patents, Trademarks and Licenses -- Patent protection is considered, in the
aggregate, to be of material importance in the Company's marketing of human and
animal health products in the United States and in most major foreign markets.
Patents may cover products per se, pharmaceutical formulations, processes for or
intermediates useful in the manufacture of products or the uses of products.
Protection for individual products extends for varying periods in accordance
with the date of grant and the legal life of patents in the various countries.
The protection afforded, which may also vary from country to country, depends
upon the type of patent and its scope of coverage.
Patent portfolios developed for products introduced by the Company normally
provide marketing exclusivity. This is the case with the following major
products in the United States: Chibroxin (norfloxacin), Enacard (enalapril
maleate for use in dogs), ivermectin-containing products, Mefoxin, Mevacor,
Noroxin, PedvaxHIB (the Company's pediatric vaccine for prevention of
Haemophilus influenzae type B infections), Pepcid, Primaxin, Proscar, Timoptic,
Trusopt, Vaseretic, Vasotec and Zocor. Prinivil is subject to a license to a
third party and is not marketed exclusively by the Company.
Product patent protection in the United States has expired for the
following human and animal pharmaceutical products: Aldomet, Aldoril (methyldopa
and hydrochlorothiazide), Amprol (amprolium), Blocadren (timolol maleate),
Clinoril, Decadron (dexamethasone), Diuril (chlorothiazide), Dolobid, Flexeril
(cyclobenzaprine hydrochloride), HydroDiuril (hydrochlorothiazide), Indocin,
Moduretic (amiloride HCl-hydrochlorothiazide), Sinemet, and TBZ and Thibenzole
(thiabendazole).
While the expiration of a product patent normally results in the loss of
marketing exclusivity for the covered product, commercial benefits may continue
to be derived from: (i) later-granted patents on processes and intermediates
related to the most economical method of manufacture of the active ingredient of
such product; (ii) patents relating to the use of such product; (iii) patents
relating to special compositions and formulations; and (iv) marketing
exclusivity that may be available under the PTRA. The effect of product patent
expiration also depends upon many other factors such as the nature of the market
and the position of the product in it, the growth of the market, the
complexities and economics of the process for manufacture of the active
ingredient of the product and the requirements of new drug provisions of the
Federal Food, Drug and Cosmetic Act or similar laws and regulations in other
countries.
The PTRA in the United States permits restoration of up to five years of
the patent term for new products to compensate for patent term lost during the
regulatory review process. Additionally, under the PTRA new chemical entities
approved after September 24, 1984 receive a period of five years' exclusivity
from the date of NDA approval, during which time an "abbreviated NDA" or "paper
NDA" may not be submitted to the FDA. Similarly, in the case of non-new chemical
entities approved after September 24, 1984, the applications for which include
the new data of clinical investigations conducted or sponsored by the applicant
essential to approval, no abbreviated NDA or paper NDA may become effective
before three years from NDA approval. However, the PTRA has also resulted in a
general increase in the number and use of generic products marketed in the
United States because the regulatory requirements for approval of generic
versions of off-patent pioneer drugs have significantly lessened. Additionally,
the PTRA has increased the incentive for abbreviated NDA applicants to challenge
the validity of U.S. patents claiming pioneer drugs because such a challenge
could result in an earlier effective approval date for the generic version of
the pioneer drug and a six-month period during which other generic versions of
the pioneer drug could not be marketed.
In Japan, a patent term restoration law enacted in 1988 provides, under
specific conditions, up to five years of additional patent life for
pharmaceuticals. In 1992, the Council of the European Communities published a
regulation which created supplementary protection certificates for medicinal
products. Thus, as of January 1993, certain medicinal products sold in the EU
became eligible for up to five years of market exclusivity after patent
expiration. However, this market exclusivity will expire throughout the EU 15
years after the first product approval in the EU. In February 1993, Canada
enacted Bill C91 which significantly modified Canadian patent
6
law by eliminating compulsory licensing of pharmaceutical products after
December 20, 1991. Thus, patented pharmaceutical products will have market
exclusivity for the full 20-year patent life in Canada.
The North American Free Trade Agreement was passed in November 1993.
Pursuant to the agreement, Mexico improved its patent law to meet international
standards and to provide full patent protection to pharmaceutical products. The
General Agreement on Tariff and Trade negotiations were concluded in December
1993 and the U.S. implementing legislation was enacted in December 1994,
requiring certain changes in U.S. law by June 1995. This agreement requires
developing countries to upgrade their intellectual property laws to meet minimum
international standards and to provide full patent protection for pharmaceutical
products not later than the end of a ten-year transition period.
The Generic Animal Drug and Patent Term Restoration Act, enacted in
November 1988, provides for the extension of term of patents claiming new animal
drugs approved after enactment. This legislation also establishes a process by
which generic versions of new animal drugs can be approved via an Abbreviated
New Animal Drug Application procedure. The provisions of this legislation, in
general, are parallel to those found in the PTRA covering human health products.
Worldwide, all of the Company's important products are sold under
trademarks that are considered in the aggregate to be of material importance.
Trademark protection continues in some countries as long as used; in other
countries, as long as registered. Registration is for fixed terms and can be
renewed indefinitely.
Royalties received during 1994 on patent and know-how licenses and other
rights amounted to $76.0 million. The Company also paid royalties amounting to
$272.5 million in 1994 under patent and know-how licenses it holds.
Research and Development
The Company's business is characterized by the introduction of new products
or new uses for existing products through a strong research and development
program. Approximately 6,300 people are employed in the Company's research
activities. Expenditures for the Company's research and development programs
were $1,230.6 million in 1994, $1,172.8 million in 1993 and $1,111.6 million in
1992 and will be close to $1.3 billion in 1995. The Company maintains its
ongoing commitment to research over a broad range of therapeutic areas and
clinical development in support of new products. Total expenditures for the
period 1980 through 1994 exceeded $9.8 billion with a compound annual growth
rate of 13 percent. Costs incurred by the joint ventures in which the Company
participates, totaling $319.4 million in 1994, are not included in the Company's
consolidated research and development expenses.
The Company maintains a number of long-term exploratory and fundamental
research programs in biology and chemistry as well as research programs directed
toward product development. Projects related to human and animal health are
being carried on in various fields such as bacterial and viral infections,
cardiovascular functions, cancer, diabetes, inflammation, ulcer therapy, kidney
function, mental health, the nervous system, ophthalmic research, prostate
therapy, the respiratory system, bone diseases, animal nutrition and production
improvement, endoparasitic and ectoparasitic diseases and poultry genetics.
In the development of human and animal health products, industry practice
and government regulations in the United States and most foreign countries
provide for the determination of effectiveness and safety of new chemical
compounds through pre-clinical tests and controlled clinical evaluation. Before
a new drug may be marketed in the United States, recorded data on the experience
so gained are included in the NDA, the biological Product License Application or
the New Animal Drug Application to the FDA for the approval required. The
development of certain other products, such as insecticides, is also subject to
government regulations covering safety and efficacy in the United States and
many foreign countries. There can be no assurance that a compound that is the
result of any particular program will obtain the regulatory approvals necessary
for it to be marketed.
A new product for the Human and Animal Health segment resulting from this
research and development program for which a Product License Application was
submitted to the FDA in 1992 is Varivax, a vaccine for the prevention of
chickenpox. On March 17, 1995, the FDA
7
licensed Varivax for use against chickenpox. In 1993, the Company submitted an
NDA for Pepcid AC, an over-the-counter form of the Company's ulcer medication
Pepcid, to be marketed by the Johnson & Johnson--Merck Consumer Pharmaceuticals
Co.
Employees
At the end of 1994, the Company had 47,500 employees worldwide, with 30,400
employed in the United States, including Puerto Rico. Approximately 25 percent
of the Company's worldwide employees are represented by various collective
bargaining groups.
Environmental Matters
The Company believes that it is in compliance in all material respects with
applicable environmental laws and regulations. The Company has maintained a
leadership role in supporting environmental initiatives and fostering pollution
prevention by actions including the elimination of, or application of best
available technology to, air emissions of carcinogens or suspect carcinogens by
the Company, which was accomplished in 1993. Projects are currently underway to
reduce all environmental releases of toxic chemicals by 90 percent by the end of
1995. In 1994, the Company incurred capital expenditures of approximately $76.2
million for environmental control facilities. Capital expenditures for this
purpose are forecasted to exceed $300.0 million for the years 1995 through 1999.
In addition, the Company's operating and maintenance expenditures for pollution
control were approximately $64.8 million in 1994. Expenditures for this purpose
for the years 1995 through 1999 are forecasted to exceed $380.0 million. The
Company is also remediating environmental contamination resulting from past
industrial activity at certain of its sites. Remediation expenditures were $24.1
million in 1994 and are estimated at $160.0 million for the years 1995 through
1999. The Company has been accruing for these costs. Management does not believe
that these expenditures should ultimately result in a material adverse effect on
the Company's financial position, results of operations, liquidity or capital
resources.
Geographic Area Information
The Company's operations outside the United States are conducted primarily
through subsidiaries. Sales by subsidiaries outside the United States were 32
percent of sales in 1994, 44 percent of sales in 1993 and 46 percent of sales in
1992. The decline in the percentage of sales outside the United States in 1994
is due to higher domestic sales resulting from the Medco acquisition.
The Company's worldwide business is subject to risks of currency
fluctuations, governmental actions and other governmental proceedings abroad.
The Company does not regard these risks as a deterrent to further expansion of
its operations abroad. However, the Company closely reviews its methods of
operations, particularly in less developed countries, and adopts strategies
responsive to changing economic and political conditions.
The ongoing integration of the European market is impacting businesses
operating within the EU, particularly on businesses such as the Company, which
maintain research facilities, manufacturing plants and marketing and sales
organizations in several different countries in the EU. The Company is in the
process of rationalizing its EU operations.
Over the years, the Company has divested and restructured to reduce its
operational exposure in countries where economic conditions or government
policies make it difficult to earn fair returns. At the same time, the Company
is actively pursuing opportunities in Latin America, Eastern Europe, Asia
Pacific and other regions where changes in government, fiscal and regulatory
policies are making it possible for the Company to earn fair economic returns.
While none of these actions individually has significantly affected operations,
the overall impact has been favorable.
Financial information about geographic areas of the Company's business is
incorporated by reference to page 48 of the Company's 1994 Annual Report to
stockholders.
8
Item 2. Properties.
The Company's corporate headquarters is located in Whitehouse Station, New
Jersey. The human and animal health business is conducted through divisional or
subsidiary headquarters located in Montvale, New Jersey; Rahway, New Jersey;
Walpole, New Hampshire; West Point, Pennsylvania; and Woodbridge, New Jersey.
Principal research facilities for human and animal health products are located
in Rahway and West Point. The Company also has production facilities for human
and animal health products at 12 locations in the United States. Branch
warehouses are conveniently located to serve markets throughout the country.
Medco operates its primary businesses through owned or leased facilities in
various locations throughout the United States. Outside the United States,
through subsidiaries, the Company owns or has an interest in manufacturing
plants or other properties in most major countries of the free world.
Capital expenditures for 1994 were $1,009.3 million compared with $1,012.7
million for 1993. In the United States, these amounted to $772.1 million for
1994 and $759.7 million for 1993. Abroad, such expenditures amounted to $237.2
million for 1994 and $253.0 million for 1993.
The Company and its subsidiaries own their principal facilities and the
manufacturing plants under titles which they consider to be satisfactory. The
Company considers that its properties are in good operating condition and that
its machinery and equipment have been well maintained. Plants for the
manufacture of products are suitable for their intended purposes and have
capacities adequate for current and projected needs for existing Company
products. Some capacity of the plants is being converted, with any needed
modification, to the requirements of newly introduced and future products.
Item 3. Legal Proceedings.
The Company, including Medco, is party to in excess of 40 antitrust suits,
two of which are class actions, instituted by retail pharmacies alleging
conspiracies in restraint of trade and challenging the pricing and purchasing
practices of the Company and Medco, respectively. A significant number of other
pharmaceutical companies have also been sued in the same or similar litigation.
Most of these actions, except for several actions pending in California, Alabama
and Wisconsin state courts, have been consolidated for pre-trial purposes in the
United States District Court for the Northern District of Illinois. While it is
not feasible to predict the outcome of these proceedings, in the opinion of the
Company, such proceedings should not ultimately result in any liability which
would have a material adverse effect on the financial position, liquidity or
results of operations of the Company. In addition, prior to the Company's merger
with Medco, the Company and Medco were named in an action by a retail pharmacy
seeking to enjoin such merger. This proceeding was settled by the Company in
March 1995. The settlement includes a consent order that imposes certain
restrictions on the exchange of information between the Company and Medco and
requires that Medco offer an open formulary. In the opinion of the Company,
compliance with the consent order will not have a material adverse effect on the
financial position, liquidity or results of operations of the Company.
The Company is a party to a number of proceedings brought under the
Comprehensive Environmental Response, Compensation and Liability Act, commonly
known as Superfund. These proceedings seek to require the operators of hazardous
waste disposal facilities, transporters of waste to the sites and generators of
hazardous waste disposed of at the sites to clean up the sites or to reimburse
the government for cleanup costs. The Company has been made a party to these
proceedings as an alleged generator of waste disposed of at the sites. In each
case, the government alleges that the defendants are jointly and severally
liable for the cleanup costs. Although joint and several liability is alleged,
these proceedings are frequently resolved so that the allocation of cleanup
costs among the parties more nearly reflects the relative contributions of the
parties to the site situation. The Company's potential liability varies greatly
from site to site. For some sites the potential liability is de minimis and for
others the costs of cleanup have not yet been determined. While it is not
feasible to predict the outcome of many of these proceedings brought by state
agencies or private litigants, in the opinion of the Company, such proceedings
should not ultimately result in any liability which would have a material
adverse effect on the financial position, results of operations, liquidity or
capital resources of the Company. The Company has accrued for these costs and
such accruals do not include any reduction for anticipated recoveries of cleanup
costs from former site owners or operators or other recalcitrant potentially
responsible parties.
9
In March 1991, the Company reached agreement with the New Jersey Department
of Environmental Protection ("DEP") to settle a proceeding, commenced in
September 1989, regarding alleged violations by the Company of discharge
limitations in two permits for its Rahway, New Jersey site. The Administrative
Consent Order ("ACO") settling this matter provided that improvements to the
site's wastewater and stormwater discharge systems be completed no later than
November 1, 1994. In addition to equipment improvements made to the site's
wastewater discharge system, the Company also initiated a comprehensive
stormwater investigation to determine the causes for the alleged stormwater
contamination. In response to the study's findings that some of the limits set
in the original permit were not technically achievable, DEP issued a new
discharge permit to the Rahway site on November 1, 1994, effective January 1,
1995. Issuance of the new permit satisfies the remaining requirements of the
ACO.
A consent decree was entered into in July 1993 between Kelco Division and
the State of California in settlement of allegations by the State that Kelco's
San Diego facility had violated its wastewater discharge permit pH limits. The
consent decree provided that Kelco pay penalties of $200,000 for alleged past
violations and that the San Diego facility continuously monitor its wastewater
discharges to the sewerage authority and demonstrate continuous compliance with
its permit pH limits for a period of one year. Kelco recently satisfied the
terms of the consent decree and the Court entered an order terminating the
consent decree on December 23, 1994.
In May 1994, Kelco received a Notice of Violation from Environmental
Protection Agency Region 9 alleging that Kelco failed to obtain agency
pre-construction approvals required by the Clean Air Act for physical and/or
process modifications made at its San Diego facility. It is likely that any
final settlement of these and other possible violations will require the
installation of additional pollution reduction equipment as well as the payment
of a fine of approximately $1.5 million.
In December 1994, the Federal Trade Commission requested the Company to
produce documents and information in connection with a non-public investigation
concerning the pharmacy benefit management business. Although it is not feasible
to predict the outcome of this proceeding, it is the opinion of management that
its outcome will not have a material adverse effect on the financial position,
liquidity or results of operations of the Company.
There are various other legal proceedings, principally product liability
and intellectual property suits, which are pending against the Company. While it
is not feasible to predict the outcome of these proceedings, in the opinion of
the Company, all such proceedings are either adequately covered by insurance or,
if not so covered, should not ultimately result in any liability which would
have a material adverse effect on the financial position, liquidity or results
of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
-----------------
10
Executive Officers of the Registrant (as of March 1, 1995)
RAYMOND V. GILMARTIN -- Age 54
November, 1994 -- Chairman of the Board, President and Chief Executive
Officer
June, 1994 -- President and Chief Executive Officer
Prior to June, 1994, Mr. Gilmartin was President and Chief Executive
Officer (1989 to 1992) and Chairman, President and Chief Executive
Officer (1992 to 1994) of Becton Dickinson and Company (medical
supplies and devices and diagnostic systems).
DAVID W. ANSTICE -- Age 46
September, 1994 -- President, Human Health-U.S./Canada--responsible for
the Company's prescription drug business in the United States and
Canada, worldwide coordination of marketing policies and medical and
scientific affairs
January, 1994 -- President, Human Health-Europe
January, 1993 -- Senior Vice President, Merck Human Health Division
(MHHD)-Europe
April, 1991 -- Senior Vice President, MHHD and President, U.S. Human
Health
July, 1989 -- Vice President, Marketing, Merck Sharp & Dohme Division
CELIA A. COLBERT -- Age 38
November, 1993 -- Secretary and Assistant General Counsel
September, 1993 -- Secretary
February, 1993 -- Secretary, New Products Committee
October, 1992 -- Counsel, Corporate Staff
May, 1991 -- Associate Counsel, Corporate Staff
November, 1988 -- Senior Attorney, Corporate Staff
CLIFFORD S. CRAMER -- Age 43
July, 1993 -- Vice President, Planning and Development -- responsible
for strategic planning and external growth activities
April, 1990 -- Executive Director, Corporate Development
June, 1987 -- Senior Director, Corporate Development
STEVEN M. DARIEN -- Age 52
April, 1990 -- Vice President, Human Resources
May, 1989 -- Vice President, Worldwide Personnel
11
CAROLINE DORSA -- Age 35
January, 1994 -- Treasurer
July, 1993 -- Executive Director, Customer Marketing, U. S. Human Health
(USHH)
June, 1992 -- Executive Director, Pricing and Strategic Planning, USHH
April, 1990 -- Executive Director, Financial Evaluation and Analysis
June, 1989 -- Director, Pension and Benefits Investment
R. GORDON DOUGLAS JR. -- Age 60
January, 1994 -- President, Merck Vaccines--responsible for all
functional areas, including development, manufacture and marketing, of
the vaccines business
April, 1991 -- President, Merck Vaccine Division
October, 1989 -- Senior Vice President, Medical & Scientific Affairs
KENNETH C. FRAZIER -- Age 40
April, 1994 -- Vice President, Public Affairs
May, 1992 -- Vice President, General Counsel and Secretary, Astra/Merck
Group
Prior to May, 1992, Mr. Frazier was a partner at the law firm Drinker,
Biddle & Reath for more than five years.
BERNARD J. KELLEY -- Age 53
December, 1993 -- President, Merck Manufacturing Division (MMD)
August, 1993 -- Senior Vice President, Operations, MMD
September, 1991 -- Senior Vice President, Administration, Planning and
Quality, MMD
September, 1989 -- Vice President, Business Affairs, Merck AgVet Division
JUDY C. LEWENT -- Age 46
September, 1994 -- Senior Vice President and Chief Financial Officer--
responsible for financial and public affairs functions, The Merck
Company Foundation, internal auditing and the Company's joint venture
relationships
December, 1993 -- Senior Vice President and Chief Financial Officer--
responsible for financial and public affairs functions and The Merck
Company Foundation
June, 1993 -- Senior Vice President, Chief Financial Officer and
Controller
January, 1993--Senior Vice President and Chief Financial Officer
April, 1990 -- Vice President, Finance and Chief Financial Officer
October, 1987 -- Vice President and Treasurer
12
HENRI LIPMANOWICZ -- Age 56
January, 1995 -- President, Human Health-Intercontinental Region and
Japan--responsible for the Company's prescription drug operations in
the Near East, the Far East, Eastern Europe, Africa, Latin America,
Australia, New Zealand and Japan
January, 1994 -- President, Human Health-Merck Intercontinental Region
(MIR)/Japan
June, 1991 -- Senior Vice President, MIR, Merck Human Health Division
April, 1989 -- Vice President, Mid-Europe, Merck Sharp & Dohme
International Division
PER G. H. LOFBERG -- Age 47
January, 1994 -- President, Merck-Medco Managed Care Division
April, 1991 -- Senior Executive Vice President, Strategic Planning and
Marketing, Medco Containment Services, Inc. (Medco)
Prior to April, 1991, Mr. Lofberg was an executive officer of Medco for
more than five years.
MARY M. MCDONALD -- Age 50
January, 1993 -- Senior Vice President and General Counsel
April, 1991 -- Vice President and General Counsel
May, 1990 -- Assistant General Counsel and Counsel, Merck Sharp & Dohme
International Division
November, 1986 -- Assistant General Counsel, Corporate Staff
PETER E. NUGENT -- Age 52
September, 1993 -- Vice President, Controller
July, 1989 -- Vice President, Corporate Taxes
JOHN M. PRESTON -- Age 48
April, 1993 -- President, Merck AgVet Division
July, 1992 -- Executive Vice President, Merck AgVet Division
September, 1991 -- Vice President, Business Affairs, MSD AGVET Division
February, 1991 -- Executive Director, Technical Services, MSD AGVET
Division
September, 1987 -- Executive Director, Animal Science Research, Merck
Sharp & Dohme Research Laboratories
13
EDWARD M. SCOLNICK -- Age 54
September, 1994 -- Executive Vice President, Science and Technology and
President, Merck Research Laboratories (MRL) -- responsible for
worldwide research function and activities of Merck Manufacturing
Division, computer resources and corporate licensing
December, 1993 -- Executive Vice President, Science and Technology and
President, MRL -- responsible for worldwide research function and
activities of Merck Manufacturing Division and computer resources
January, 1993 -- Executive Vice President and President, MRL --
responsible for worldwide research function and activities of Merck
AgVet Division and computer resources
April, 1991 -- Senior Vice President and President, MRL -- responsible
for worldwide research function and activities of Merck Frosst Canada,
Inc.
May, 1985 -- President, Merck Sharp & Dohme Research Laboratories
Division
BENNETT M. SHAPIRO -- Age 55
September, 1990 -- Executive Vice President, Worldwide Basic Research,
Merck Research Laboratories
Prior to September, 1990, Dr. Shapiro was Professor, Department of
Biochemistry, University of Washington for more than five years.
PER WOLD-OLSEN -- Age 47
September, 1994 -- President, Human Health-Europe -- responsible for the
Company's European prescription drug business
January, 1994 -- Senior Vice President, Worldwide Human Health Marketing
September, 1991 -- Senior Vice President, Human Health Marketing, Merck
Human Health Division (MHHD)
June, 1991 -- Vice President, Human Health Marketing, MHHD
January, 1990 -- Regional Director-Scandinavia and Vice President, MSD
Europe
All officers listed above serve at the pleasure of the Board of Directors.
None of these officers was elected pursuant to any arrangement or understanding
between the officer and the Board. There are no family relationships among the
officers listed above.
14
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
The information required for this item is incorporated by reference to
pages 37 and 50 of the Company's 1994 Annual Report to stockholders.
Item 6. Selected Financial Data.
The information required for this item is incorporated by reference to the
data for the last five fiscal years of the Company included under Results for
Year and Year-End Position in the Selected Financial Data included on page 50 of
the Company's 1994 Annual Report to stockholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The information required for this item is incorporated by reference to
pages 29 through 37 of the Company's 1994 Annual Report to stockholders.
Item 8. Financial Statements and Supplementary Data.
(a) Financial Statements
The consolidated balance sheet of Merck & Co., Inc. and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of income,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1994 and the report dated January 24, 1995 of Arthur Andersen LLP,
independent public accountants, are incorporated by reference to pages 38
through 48 and page 49 of the Company's 1994 Annual Report to stockholders.
(b) Supplementary Data
Selected quarterly financial data for 1994 and 1993 are incorporated by
reference to page 37 of the Company's 1994 Annual Report to stockholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The required information on directors and nominees is incorporated by
reference to pages 2 (beginning with the caption "Election of Directors") -5 of
the Company's Proxy Statement for the Annual Meeting of Stockholders to be held
April 25, 1995. Information on executive officers is set forth in Part I of this
document on pages 11-14.
Item 11. Executive Compensation.
The information required for this item is incorporated by reference to
pages 7 and 13-19 of the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held April 25, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required for this item is incorporated by reference to
pages 8-9 of the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held April 25, 1995.
15
Item 13. Certain Relationships and Related Transactions.
The information required for this item is incorporated by reference to page
7 (under the caption "Relationships with Outside Firms") of the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held April 25, 1995.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this Form 10-K
Financial Statements:
Consolidated statement of income for the years ended December 31,
1994, 1993 and 1992
Consolidated statement of retained earnings for the years ended
December 31, 1994, 1993 and 1992
Consolidated balance sheet, December 31, 1994 and 1993
Consolidated statement of cash flows for the years ended December
31, 1994, 1993 and 1992
Notes to financial statements
Report of independent public accountants
This information is incorporated by reference to the Company's 1994 Annual
Report to stockholders, as noted on page 15 of this document.
The registrant is primarily an operating company and all of the
subsidiaries included in the consolidated financial statements filed are wholly
owned except for minority interests in six consolidated subsidiaries.
Schedules are omitted because they are either not required or not
applicable.
16
(b) Exhibits
Exhibit
Number Description Method of Filing
------ ----------- ----------------
2 -- Agreement and Plan of Merger By and Incorporated by reference to Regis-
Among Merck & Co., Inc., M Acquisition tration Statement on Form S-4
Corp. and Medco Containment Services, (No. 33-50667)
Inc., as amended
3(a) -- Restated Certificate of Incorporation of *
Merck & Co., Inc. (May 6, 1992)
3(b) -- By-Laws of Merck & Co., Inc. (as amended Filed with this document
effective June 9, 1994)
10(a) -- Executive Incentive Plan (as amended Filed with this document
effective February 23, 1994)
10(b) -- 1981 Incentive Stock Option Plan *
(as amended effective May 6, 1992)
10(c) -- 1981 Nonqualified Stock Option Plan (as *
amended effective May 6, 1992)
10(d) -- 1987 Incentive Stock Plan (as amended *
effective May 6, 1992)
10(e) -- 1991 Incentive Stock Plan (as amended Filed with this document
effective February 23, 1994)
10(f) -- Non-Employee Directors Stock Option Plan *
(as adopted on April 28, 1992 and
restated May 6, 1992)
10(g) -- Supplemental Retirement Plan (as amended Filed with this document
effective January 1, 1995)
10(h) -- Retirement Plan for the Directors of *
Merck & Co., Inc. (as adopted on
September 22, 1987, effective
April 29, 1987)
10(i) -- Plan for Deferred Payment of Directors' Filed with this document
Compensation (as amended effective
April 1, 1994)
10(j) -- Medco 1991 Class B Stock Option Plan, as **
amended
10(k) -- Medco Class A 1983 Non-Qualified Stock **
Option Plan
10(l) -- Form of Stock Option Agreement **
dated October 14, 1992 between Medco
and Per G.H. Lofberg (together with a list
showing the number of options held)
10(m) -- Employment Agreement between Per G.H. ***
Lofberg and Medco dated April 1, 1993
10(n) -- Employment Agreement between Raymond V. Incorporated by reference to Form
Gilmartin and the Company dated 10-Q Quarterly Report for the
June 9, 1994 period ended June 30, 1994
11 -- Computation of Earnings per Common Share Filed with this document
12 -- Computation of Ratios of Earnings to Fixed Filed with this document
Charges
17
Exhibit
Number Description Method of Filing
------ ----------- ----------------
13 -- 1994 Annual Report to stockholders (only Filed with this document
those portions incorporated by reference in
this document are deemed "filed")
21 -- List of subsidiaries Filed with this document
24 -- Power of Attorney and Certified Resolution Filed with this document
of Board of Directors
27 -- Financial Data Schedule Filed with this document
- --------------
* Incorporated by reference to Form 10-K Annual Report for the fiscal year ended December 31, 1992
** Incorporated by reference to Post Effective Amendment No. 1 to Registration Statement on Form S-8 to
Form S-4 Registration Statement (No. 33-50667)
*** Incorporated by reference to Form 10-K Annual Report of Medco Containment Services, Inc. for the fiscal
year ended June 30, 1993
None of the instruments defining the rights of holders of long-term debt of
the Company and its subsidiaries (Exhibit Number 4) are being filed since the
total amount of securities authorized under any of such instruments taken
individually does not exceed 10 percent of the total assets of the Company and
its subsidiaries on a consolidated basis. The Company agrees to furnish a copy
of such instruments to the Commission upon request.
Copies of the exhibits may be obtained by stockholders upon written request
directed to the Stockholder Services Department, Merck & Co., Inc., P.O. Box
100--WS 3AB-40, Whitehouse Station, New Jersey 08889-0100 accompanied by check
in the amount of $5.00 payable to Merck & Co., Inc. to cover processing and
mailing costs.
(c) Reports on Form 8-K
During the three-month period ended December 31, 1994, the Company filed
two Current Reports on Form 8-K:
(i) In a report dated November 1, 1994 and filed November 7, 1994, the
Company announced (1) Astra AB paid the Company $820 million for an
interest in a joint venture, to be carried on in Astra Merck Inc. and (2)
the signing of a definitive agreement for the sale of the Company's Calgon
Vestal Laboratories business to Bristol-Myers Squibb.
(ii) In a report dated December 20, 1994 and filed December 28, 1994,
the Company announced the signing of a definitive agreement for the sale of
its Kelco business to Monsanto Company.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MERCK & CO., INC.
Dated: March 21, 1995
By RAYMOND V. GILMARTIN
(Chairman of the Board,
President and Chief
Executive Officer)
By /s/ CELIA A. COLBERT
--------------------
Celia A. Colbert
(Attorney-in-Fact)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
RAYMOND V. GILMARTIN Chairman of the Board, March 21, 1995
President and Chief Executive
Officer; Principal Executive
Officer; Director
JUDY C. LEWENT Senior Vice President and Chief March 21, 1995
Financial Officer; Principal
Financial Officer
PETER E. NUGENT Vice President, Controller; March 21, 1995
Principal Accounting Officer
H. BREWSTER ATWATER, JR. Director March 21, 1995
DEREK BIRKIN Director March 21, 1995
LAWRENCE A. BOSSIDY Director March 21, 1995
WILLIAM G. BOWEN Director March 21, 1995
JOHNNETTA B. COLE Director March 21, 1995
CAROLYNE K. DAVIS Director March 21, 1995
LLOYD C. ELAM Director March 21, 1995
CHARLES E. EXLEY, JR. Director March 21, 1995
WILLIAM N. KELLEY Director March 21, 1995
DENNIS WEATHERSTONE Director March 21, 1995
Celia A. Colbert, by signing her name hereto, does hereby sign this
document pursuant to powers of attorney duly executed by the persons named,
filed with the Securities and Exchange Commission as an exhibit to this
document, on behalf of such persons, all in the capacities and on the date
stated, such persons including a majority of the directors of the Company.
By /s/ CELIA A. COLBERT
--------------------
Celia A. Colbert
(Attorney-in-Fact)
19
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report, incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 (Nos. 33-21087, 33-21088,
33-36101, 33-40177, 33-51235 and 33-53463), on Form S-4 (No. 33-50667) and on
Form S-3 (Nos. 33-39349, 33-60322, 33-51785 and 33-57421). It should be noted
that we have not audited any financial statements of the Company subsequent to
December 31, 1994 or performed any audit procedures subsequent to the date of
our report.
ARTHUR ANDERSEN LLP
New York, New York
March 21, 1995
20
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
------- ----------- ----------------
2 -- Agreement and Plan of Merger By and Incorporated by reference to Regis-
Among Merck & Co., Inc., M Acquisition tration Statement on Form S-4
Corp. and Medco Containment Services, (No. 33-50667)
Inc., as amended
3(a) -- Restated Certificate of Incorporation of *
Merck & Co., Inc. (May 6, 1992)
3(b) -- By-Laws of Merck & Co., Inc. (as amended Filed with this document
effective June 9, 1994)
10(a) -- Executive Incentive Plan (as amended Filed with this document
effective February 23, 1994)
10(b) -- 1981 Incentive Stock Option Plan *
(as amended effective May 6, 1992)
10(c) -- 1981 Nonqualified Stock Option Plan (as *
amended effective May 6, 1992)
10(d) -- 1987 Incentive Stock Plan (as amended *
effective May 6, 1992)
10(e) -- 1991 Incentive Stock Plan (as amended Filed with this document
effective February 23, 1994)
10(f) -- Non-Employee Directors Stock Option Plan *
(as adopted on April 28, 1992 and
restated May 6, 1992)
10(g) -- Supplemental Retirement Plan (as amended Filed with this document
effective January 1, 1995)
10(h) -- Retirement Plan for the Directors of *
Merck & Co., Inc. (as adopted on
September 22, 1987, effective
April 29, 1987)
10(i) -- Plan for Deferred Payment of Directors' Filed with this document
Compensation (as amended effective
April 1, 1994)
10(j) -- Medco 1991 Class B Stock Option Plan, as **
amended
10(k) -- Medco Class A 1983 Non-Qualified Stock **
Option Plan
10(l) -- Form of Stock Option Agreement **
dated October 14, 1992 between Medco
and Per G.H. Lofberg (together with a list
showing the number of options held)
10(m) -- Employment Agreement between Per G.H. ***
Lofberg and Medco dated April 1, 1993
10(n) -- Employment Agreement between Raymond V. Incorporated by reference to Form
Gilmartin and the Company dated 10-Q Quarterly Report for the
June 9, 1994 period ended June 30, 1994
11 -- Computation of Earnings per Common Share Filed with this document
12 -- Computation of Ratios of Earnings to Fixed Filed with this document
Charges
1
Exhibit
Number Description Method of Filing
------- ----------- ----------------
13 -- 1994 Annual Report to stockholders (only Filed with this document
those portions incorporated by reference in
this document are deemed "filed")
21 -- List of subsidiaries Filed with this document
24 -- Power of Attorney and Certified Resolution Filed with this document
of Board of Directors
27 -- Financial Data Schedule Filed with this document
- ---------------
* Incorporated by reference to Form 10-K Annual Report for the fiscal year ended December 31, 1992
** Incorporated by reference to Post Effective Amendment No. 1 to Registration Statement on Form S-8 to
Form S-4 Registration Statement (No. 33-50667)
*** Incorporated by reference to Form 10-K Annual Report of Medco Containment Services, Inc. for the fiscal
year ended June 30, 1993
2