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<div style="font-family: 'Times New Roman',Times,serif"> <div align="left"> </div>  <div align="left" style="font-size: 10pt; margin-top: 0pt"><b></b> </div> <div align="left" style="font-size: 10pt"></div> <div align="left" style="font-size: 10pt"><i></i></div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>1. Nature of Operations</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On November 3, 2009, Merck & Co., Inc. (“MSD”) and Schering-Plough Corporation (“Schering-Plough”) completed their previously-announced merger (the “Merger”). In the Merger, Schering-Plough acquired all of the shares of MSD, which became a wholly-owned subsidiary of Schering-Plough and was renamed Merck Sharp & Dohme Corp. Schering-Plough continued as the surviving public company and was renamed Merck & Co., Inc. (“MSD’s Parent Company”). MSD is a global health care company that delivers innovative health solutions through its medicines and vaccines, which are marketed directly and through joint ventures. Human health pharmaceutical products consist of therapeutic and preventive agents, sold by prescription, for the treatment of human disorders. These human health pharmaceutical products are sold primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. These human health vaccines are sold primarily to physicians, wholesalers, physician distributors and government entities. MSD’s professional representatives communicate the effectiveness, safety and value of its pharmaceutical and vaccine products to health care professionals in private practice, group practices and managed care organizations. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>2. Summary of Accounting Policies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Principles of Consolidation — </i>The consolidated financial statements include the accounts of MSD and all of its subsidiaries in which a controlling interest is maintained. Intercompany balances and transactions are eliminated. Controlling interest is determined by majority ownership interest and the absence of substantive third-party participating rights or, in the case of variable interest entities, by majority exposure to expected losses, residual returns or both. For those consolidated subsidiaries where MSD ownership is less than 100%, the outside shareholders’ interests are shown as <i>Noncontrolling interests </i>in equity. Investments in affiliates over which MSD has significant influence but not a controlling interest, such as interests in entities owned equally by MSD and a third party that are under shared control, are carried on the equity basis. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Mergers and Acquisitions — </i>On January 1, 2009, new guidance issued by the Financial Accounting Standards Board (“FASB”) was adopted which changes the way in which the acquisition method is to be applied in a business combination. The acquisition method of accounting requires that the assets acquired and liabilities assumed be recorded at the date of the merger or acquisition at their respective fair values with limited exceptions. Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if fair value can reasonably be estimated. If the acquisition date fair value of an asset acquired or liability assumed that arises from a contingency cannot be determined, the asset or liability is recognized if probable and reasonably estimable; if these criteria are not met, no asset or liability is recognized. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Accordingly, MSD may be required to value assets at fair value measures that do not reflect MSD’s intended use of those assets. Any excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill. Transaction costs and costs to restructure the acquired company are expensed as incurred. The operating results of the acquired business are reflected in MSD’s consolidated financial statements and results of operations after the date of the merger or acquisition. If MSD determines the assets acquired do not meet the definition of a business under the acquisition method of accounting, the transaction will be accounted for as an acquisition of assets rather than a business combination, and therefore, no goodwill will be recorded. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Foreign Currency Translation — </i>The U.S. dollar is the functional currency for MSD’s foreign subsidiaries. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Cash Equivalents — </i>Cash equivalents are comprised of certain highly liquid investments with original maturities of less than three months. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Inventories — </i>Inventories are valued at the lower of cost or market. The cost of a substantial majority of domestic pharmaceutical and vaccine inventories is determined using the last-in, first-out (“LIFO”) method for both financial reporting and tax purposes. The cost of all other inventories is determined using the first-in, first-out (“FIFO”) method. Inventories consist of currently marketed products and certain products awaiting regulatory approval. In evaluating the recoverability of inventories produced in preparation for product launches, MSD considers the probability that revenue will be obtained from the future sale of the related inventory together with the status of the product within the regulatory approval process. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Investments </i>— Investments in marketable debt and equity securities classified as available-for-sale are reported at fair value. Fair value of MSD’s investments is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Changes in fair value that are considered temporary are reported net of tax in Accumulated other comprehensive income (loss) (“<i>AOCI</i>”). For declines in the fair value of equity securities that are considered other-than-temporary, impairment losses are charged to <i>Other (income) expense, net</i>. MSD considers available evidence in evaluating potential impairments of its investments, including the duration and extent to which fair value is less than cost, and for equity securities, MSD’s ability and intent to hold the investment. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On April 1, 2009, new guidance issued by the FASB was adopted which amended the other-than-temporary recognition guidance for debt securities. Pursuant to this new guidance, an other-than-temporary impairment has occurred if MSD does not expect to recover the entire amortized cost basis of the debt security. If MSD does not intend to sell the impaired debt security, and it is not more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis, the amount of the other-than-temporary impairment recognized in earnings, recorded in <i>Other (income) expense, net</i>, is limited to the portion attributed to credit loss. The remaining portion of the other-than-temporary impairment related to other factors is recognized in <i>AOCI</i>. Realized gains and losses for both debt and equity securities are included in <i>Other (income) expense, net.</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Revenue Recognition — </i>Revenues from sales of products are recognized at the time of delivery and when title and risk of loss passes to the customer. Recognition of revenue also requires reasonable assurance of collection of sales proceeds and completion of all performance obligations. Domestically, sales discounts are issued to customers as direct discounts at the point-of-sale or indirectly through an intermediary wholesaler, known as chargebacks, or indirectly in the form of rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and returns, which are established at the time of sale. Accruals for chargebacks are reflected as a direct reduction to accounts receivable and accruals for rebates are recorded as current liabilities. The accrued balances relative to these provisions included in <i>Accounts receivable </i>and <i>Accrued and other current liabilities </i>were $50.4 million and $677.7 million, respectively, at December 31, 2009 and $55.6 million and $560.7 million, respectively, at December 31, 2008. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD recognizes revenue from the sales of vaccines to the Federal government for placement into stockpiles related to the Pediatric Vaccine Stockpile in accordance with Securities and Exchange Commission (“SEC”) Interpretation<i>, Commission Guidance Regarding Accounting for Sales of Vaccines and BioTerror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile.</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Depreciation — </i>Depreciation is provided over the estimated useful lives of the assets, principally using the straight-line method. For tax purposes, accelerated methods are used. The estimated useful lives primarily range from 10 to 50 years for Buildings, and from 3 to 15 years for Machinery, equipment and office furnishings. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Software Capitalization — </i>MSD capitalizes certain costs incurred in connection with obtaining or developing internal-use software including external direct costs of material and services, and payroll costs for employees directly involved with the software development. Capitalized software costs are included in <i>Property, plant and equipment </i>and amortized beginning when the asset is substantially ready for use. Capitalized software costs associated with MSD’s multi-year implementation of an enterprise-wide resource planning system are being amortized over 6 to 10 years. At December 31, 2009 and 2008, there was approximately $428 million and $330 million, respectively, of remaining unamortized capitalized software costs associated with this initiative. All other capitalized software costs are being amortized over periods ranging from 3 to 5 years. Costs incurred during the preliminary project stage and post-implementation stage, as well as maintenance and training costs, are expensed as incurred. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Goodwill — </i>Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses purchased. Goodwill is assigned to reporting units and evaluated for impairment on at least an annual basis, using a fair value based test. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Acquired Intangibles — </i>Acquired intangibles include products and product rights, tradenames and patents, which are recorded at fair value and assigned an estimated useful life, are amortized primarily on a straight-line basis over their estimated useful lives ranging from 3 to 20 years. When events or circumstances warrant a review, MSD will assess recoverability from future operations of acquired intangibles using pretax undiscounted cash flows derived from the lowest appropriate asset groupings. Impairments are recognized in operating results to the extent that carrying value of the intangible asset exceeds its fair value, which is determined based on the net present value of estimated future cash flows. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>In-Process Research and Development — </i>In-process research and development (“IPR&D”) represents the fair value assigned to incomplete research projects that MSD acquires through business combinations, which at the time of acquisition, have not reached technological feasibility. For transactions that closed prior to 2009, the fair value of such projects was expensed upon acquisition. For transactions that closed during 2009, the fair value of the research projects were recorded as intangible assets on the Consolidated Balance Sheet rather than expensed. The amounts capitalized are being accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, MSD will make a determination as to the useful life of the intangible asset and begin amortization. MSD tests its indefinite-lived intangibles, including in-process research and development, for impairment at least annually, through a one-step test that compares the fair value of the indefinite-lived intangible asset with the asset’s carrying value. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Research and Development — </i>Research and development is expensed as incurred. Upfront and milestone payments due to third parties in connection with research and development collaborations prior to regulatory approval are expensed as incurred. Payments due to third parties upon or subsequent to regulatory approval are capitalized and amortized over the shorter of the remaining license or product patent life. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Share-Based Compensation — </i>MSD expenses all share-based payments to employees, including grants of stock options, over the requisite service period based on the grant-date fair value of the awards. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Restructuring Costs — </i>MSD records liabilities for costs associated with exit or disposal activities in the period in which the liability is incurred. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period. Employee termination costs are primarily recorded when actions are probable and estimable. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Contingencies and Legal Defense Costs — </i>MSD records accruals for contingencies and legal defense costs expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Taxes on Income — </i>Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. MSD evaluates tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, MSD recognizes the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, MSD does not recognize any portion of the benefit in the financial statements. MSD recognizes interest and penalties and exchange gains and losses associated with uncertain tax positions as a component of <i>Taxes on income </i>in the Consolidated Statement of Income. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Use of Estimates — </i>The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and, accordingly, include certain amounts that are based on management’s best estimates and judgments. Estimates are used when accounting for amounts recorded in connection with mergers and acquisitions, including fair value determinations of assets and liabilities. Additionally, estimates are used in determining such items as provisions for sales discounts and returns, depreciable and amortizable lives, recoverability of inventories, including those produced in preparation for product launches, amounts recorded for contingencies, environmental liabilities and other reserves, pension and other postretirement benefit plan assumptions, share-based compensation assumptions, restructuring costs, impairments of long-lived assets (including intangible assets and goodwill) and investments, and taxes on income. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Reclassifications — </i>Certain reclassifications have been made to prior year amounts to conform with the current year presentation. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Recently Adopted Accounting Standards — </i>During 2009, several new accounting standards issued by the FASB were adopted. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On January 1, 2009, new guidance on business combinations was adopted which changes the way in which the acquisition method is to be applied in a business combination. This guidance requires an acquirer to recognize the assets acquired and liabilities assumed at the acquisition date fair values with limited exceptions. Additionally, the guidance requires that contingent consideration be recorded at fair value on the acquisition date, that acquired in-process research and development be capitalized and recorded as intangible assets at the acquisition date, and also requires transaction costs and costs to restructure the acquired company be expensed. On April 1, 2009, additional guidance was issued further amending the accounting for contingencies in a business combination. MSD’s business combination transactions are now being accounted for under this new guidance. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On January 1, 2009, new guidance for the accounting, reporting and disclosure of noncontrolling interests was adopted which requires, among other things, that noncontrolling interests be recorded as equity in the consolidated financial statements. The adoption of this new guidance resulted in the reclassification of $2.4 billion of noncontrolling interests (formerly referred to as minority interests) to a separate component of equity on the Consolidated Balance Sheet (see Note 13). Additionally, net income attributable to noncontrolling interests is now shown separately from parent net income in the Consolidated Statement of Income. Prior periods have been restated to reflect the presentation and disclosure requirements of the new guidance. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On January 1, 2009, new guidance was adopted requiring enhanced disclosures about derivative instruments and hedging activities to allow for a better understanding of their effects on an entity’s financial position, financial performance, and cash flows. Among other things, the new guidance requires disclosure of the fair values of derivative instruments and associated gains and losses in a tabular format (see Note 7). Since the new guidance requires only additional disclosures about derivatives and hedging activities, the adoption did not affect MSD’s financial position or results of operations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On January 1, 2009, new guidance was adopted which defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. The effect of adoption was not material to MSD’s financial position or results of operations. See Note 6 for the associated disclosures of MSD’s collaborative arrangements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On January 1, 2009, new guidance was adopted which clarifies the accounting for certain transactions and impairment considerations involving equity method investments and is effective on a prospective basis. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On January 1, 2009, new guidance was adopted which clarifies that a defensive intangible asset (an intangible asset that the entity does not intend to actively use, but intends to hold to prevent others from obtaining access to the asset) should be accounted for as a separate unit of accounting and should be assigned a useful life that reflects the entity’s consumption of the expected benefits related to the asset. This guidance is effective on a prospective basis. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On April 1, 2009, new guidance was adopted which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This guidance was subsequently amended on February 24, 2010 to no longer require disclosure of the date through which an entity has evaluated subsequent events. The effect of adoption was not material. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On April 1, 2009, new guidance was adopted which provides additional guidelines for estimating fair value when there has been a significant decrease in the volume and level of activity for an asset or liability in relation to the normal market activity for the asset or liability (or similar assets or liabilities). In addition, the new guidance includes guidelines for identifying circumstances that indicate a transaction for the asset or liability is not orderly, in which case the entity shall place little, if any, weight on that transaction price as an indicator of fair value. The effect of adoption on MSD’s financial position and results of operations was not material. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On April 1, 2009, new guidance was adopted which amended the other-than-temporary recognition guidance for debt securities. The impairment model for equity securities was not affected. An impairment exists when the current fair value of an individual security is less than its amortized cost basis. Pursuant to this new guidance, an other-than-temporary impairment has occurred if MSD does not expect to recover the entire amortized cost basis of the debt security. If MSD does not intend to sell the impaired debt security, and it is not more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis, the amount of the other-than-temporary impairment recognized in earnings is limited to the portion attributed to credit loss. The remaining portion of the other-than-temporary impairment related to other factors is recognized in <i>Other comprehensive income (loss)</i>. In determining if credit losses have occurred, MSD evaluates whether expected cash flows to be received are sufficient to recover the amortized cost basis of the security. The new guidance did not have a material effect upon adoption or during the period from adoption through December 31, 2009. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As of December 31, 2009, MSD adopted new guidance amending existing authoritative literature which provides guidance on an employer’s disclosures about plan assets of defined pension or other postretirement benefit plans. The amended guidance requires disclosures about plan assets including how investment allocation decisions are made, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets, the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period, and significant concentrations of risk within plan assets. Since the amended guidance required only additional disclosures about MSD’s pension and other postretirement plan assets (see Note 15), the adoption did not affect MSD’s financial position or results of operations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Recently Issued Accounting Standards — </i>During 2009, the FASB issued several new accounting pronouncements, which are not yet effective for MSD. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for transfers of financial assets, which is effective January 1, 2010. The amendment eliminates the concept of a qualifying special-purpose entity, changes the requirements for derecognizing financial assets and requires enhanced disclosures to provide financial statement users with greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. The effect of adoption on MSD’s financial position and results of operations is not expected to be material. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Also in June 2009, the FASB amended the existing accounting and disclosure guidance for the consolidation of variable interest entities, which is effective January 1, 2010. The amended guidance requires enhanced disclosures intended to provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. The effect of adoption on MSD’s financial position and results of operations is not expected to be material. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In October 2009, the FASB issued new guidance for revenue recognition with multiple deliverables, which is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, although early adoption is permitted. This guidance eliminates the residual method under the current guidance and replaces it with the “relative selling price” method when allocating revenue in a multiple deliverable arrangement. The selling price for each deliverable shall be determined using vendor specific objective evidence of selling price, if it exists, otherwise third-party evidence of selling price shall be used. If neither exists for a deliverable, the vendor shall use its best estimate of the selling price for that deliverable. After adoption, this guidance will also require expanded qualitative and quantitative disclosures. MSD is currently assessing the impact of adoption on its financial position and results of operations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In January 2010, the FASB amended the existing disclosure guidance on fair value measurements, which is effective January 1, 2010, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which is effective January 1, 2011. Among other things, the updated guidance requires additional disclosure for the amounts of significant transfers in and out of Level 1 and Level 2 measurements and requires certain Level 3 disclosures on a gross basis. Additionally, the updates amend existing guidance to require a greater level of disaggregated information and more robust disclosures about valuation techniques and inputs to fair value measurements. Since the amended guidance requires only additional disclosures, the adoption will not impact MSD’s financial position or results of operations. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>3. Merger with Schering-Plough Corporation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On November 3, 2009, MSD and Schering-Plough completed the Merger. In the Merger, Schering-Plough acquired all of the shares of MSD, which became a wholly-owned subsidiary of Schering-Plough and was renamed Merck Sharp & Dohme Corp. Schering-Plough continued as the surviving public company and was renamed Merck & Co., Inc. MSD shareholders received one share of common stock of MSD’s Parent Company for each share of stock that they owned. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>4. Restructuring</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Merger Restructuring Program</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In February 2010, MSD’s Parent Company announced the first phase of a new global restructuring program (the “Merger Restructuring Program”) in conjunction with the integration of the legacy MSD and legacy Schering-Plough businesses. This Merger Restructuring Program is intended to optimize the cost structure of MSD’s Parent Company and its subsidiaries. As part of the first phase of the Merger Restructuring Program, by the end of 2012, MSD’s Parent Company expects to reduce its total workforce by approximately 15% across all areas of the company worldwide. These workforce reductions will primarily come from the elimination of duplicative positions in sales, administrative and headquarters organizations, as well as from the consolidation of certain manufacturing facilities and research and development operations. This first phase of the Merger Restructuring Program is expected to be completed by the end of 2012 with the total pretax costs, including the portion attributable to MSD, estimated to be $2.6 billion to $3.3 billion. In connection with the Merger Restructuring Program, separation costs under existing severance programs worldwide were recorded in the fourth quarter of 2009 to the extent such costs were probable and reasonably estimable. Costs under voluntary programs and enhancement programs will be recorded in 2010 as the relevant criteria are met. Approximately 85% of the cumulative pretax costs are estimated to be cash outlays, primarily related to employee separation expense. Approximately 15% of the cumulative pretax costs are non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD recorded pretax restructuring costs of $403.8 million in 2009 for its estimated portion of the Merger Restructuring Program costs, primarily representing employee separation costs. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>2008 Global Restructuring Program</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In October 2008, MSD announced a global restructuring program (the “2008 Restructuring Program”) to reduce its cost structure, increase efficiency, and enhance competitiveness. As part of the 2008 Restructuring Program, MSD expects to eliminate approximately 7,200 positions — 6,800 active employees and 400 vacancies — across all areas of MSD worldwide by the end of 2011. About 40% of these total reductions will occur in the United States. As part of the 2008 Restructuring Program, MSD is streamlining management layers by reducing its total number of senior and mid-level executives globally. As of December 31, 2009, approximately 4,910 positions have been eliminated in connection with 2008 Restructuring Program, comprised of employee separations and the elimination of contractors and vacant positions. During 2009, basic research facilities in Pomezia, Italy and Tsukuba, Japan were sold and the operations conducted at the basic research facility in Seattle were closed. MSD has also sold or closed certain other facilities and sold related assets in connection with the 2008 Restructuring Program. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In connection with the 2008 Restructuring Program, separation costs under existing severance programs worldwide were recorded in the third quarter of 2008 to the extent such costs were probable and estimable. MSD commenced accruing costs related to one-time termination benefits offered to employees under the 2008 Restructuring Program in the fourth quarter of 2008 as that is when the necessary criteria were met. Pretax restructuring costs of $474.7 million and $921.3 million, respectively, were recorded related to the 2008 Restructuring Program in 2009 and 2008. Since inception of the 2008 Restructuring Program through December 31, 2009, MSD has recorded total pretax accumulated costs of $1.4 billion. The 2008 Restructuring Program is expected to be completed by the end of 2011 with the total pretax costs estimated to be $1.6 billion to $2.0 billion. MSD estimates that two-thirds of the cumulative pretax costs relate to cash outlays, primarily from employee separation expense. Approximately one-third of the cumulative pretax costs are non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>2005 Global Restructuring Program</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In November 2005, MSD announced a global restructuring program (the “2005 Restructuring Program”) designed to reduce the cost structure, increase efficiency and enhance competitiveness which was substantially complete at the end of 2008. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The following table summarizes the MSD charges related to Merger Restructuring Program and 2008 and 2005 Restructuring Program activities by type of cost: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Separation</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Accelerated</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Year Ended December 31, 2009</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Costs</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Depreciation</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Other</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Total</td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b><i>Merger Restructuring Program</i></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Materials and production</b> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>36.4</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>36.4</b></td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Research and development</b> </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring costs</b> </div></td> <td> </td> <td> </td> <td align="right"><b>367.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>0.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>367.4</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right"><b>367.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>36.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>0.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>403.8</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b><i>2008 Restructuring Program</i></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Materials and production</b> </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>70.5</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(5.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>64.9</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Research and development</b> </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>227.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>3.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>231.6</b></td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring costs</b> </div></td> <td> </td> <td> </td> <td align="right"><b>13.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>164.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>178.2</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right"><b>13.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>298.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>162.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>474.7</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>380.7</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>334.7</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>163.1</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>878.5</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Year Ended December 31, 2008</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>2008 Restructuring Program</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Materials and production </div></td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">33.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">25.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">58.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Research and development </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">127.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">127.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Restructuring costs </div></td> <td> </td> <td> </td> <td align="right">684.9</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">50.6</td> <td> </td> <td> </td> <td> </td> <td align="right">735.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">684.9</td> <td> </td> <td> </td> <td> </td> <td align="right">160.8</td> <td> </td> <td> </td> <td> </td> <td align="right">75.6</td> <td> </td> <td> </td> <td> </td> <td align="right">921.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>2005 Restructuring Program</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Materials and production </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">55.0</td> <td> </td> <td> </td> <td> </td> <td align="right">9.5</td> <td> </td> <td> </td> <td> </td> <td align="right">64.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Research and development </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">0.9</td> <td> </td> <td> </td> <td> </td> <td align="right">0.4</td> <td> </td> <td> </td> <td> </td> <td align="right">1.3</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Restructuring costs </div></td> <td> </td> <td> </td> <td align="right">272.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">24.6</td> <td> </td> <td> </td> <td> </td> <td align="right">297.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">272.4</td> <td> </td> <td> </td> <td> </td> <td align="right">55.9</td> <td> </td> <td> </td> <td> </td> <td align="right">34.5</td> <td> </td> <td> </td> <td> </td> <td align="right">362.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right">$</td> <td align="right">957.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">216.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">110.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,284.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Year Ended December 31, 2007</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>2005 Restructuring Program</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Materials and production </div></td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">460.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">22.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">483.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Research and development </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.1</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.1</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Restructuring costs </div></td> <td> </td> <td> </td> <td align="right">251.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">75.7</td> <td> </td> <td> </td> <td> </td> <td align="right">327.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right">$</td> <td align="right">251.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">460.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">98.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">810.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Separation costs are associated with actual headcount reductions, as well as those headcount reductions which were probable and could be reasonably estimated. Approximately 3,185 positions were eliminated in 2009 of which approximately 3,160 related to the 2008 Restructuring Program and approximately 25 related to the Merger Restructuring Program. During 2009, certain employees anticipated to be separated as part of planned restructuring actions for the 2008 Restructuring Program were instead transferred to the buyer in conjunction with the sale of a facility. Accordingly, the accrual of separation costs associated with these employees was reversed resulting in a reduction to expenses. Approximately 5,800 positions were eliminated in 2008 of which approximately 1,750 related to the 2008 Restructuring Program and 4,050 related to the 2005 Restructuring Program. Approximately 2,400 positions were eliminated in 2007 in connection with the 2005 Restructuring Program. These position eliminations are comprised of actual headcount reductions, and the elimination of contractors and vacant positions. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Accelerated depreciation costs primarily relate to manufacturing and research facilities to be sold or closed as part of the programs. All of the sites have and will continue to operate up through the respective closure dates, and since future cash flows were sufficient to recover the respective book values, MSD was required to accelerate depreciation of the site assets rather than write them off immediately. The site assets include manufacturing and research facilities and equipment. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Other activity in 2009, 2008 and 2007 includes $14.9 million, $29.4 million and $39.4 million, respectively, of asset abandonment, shut-down and other related costs. Additionally, other activity includes $22.7 million, $68.4 million and $18.9 million in 2009, 2008 and 2007, respectively, related to curtailment, settlement and termination charges on pension and other postretirement benefit plans (see Note 15). Other activity also reflects pretax losses resulting from sales of facilities and related assets in 2009 of $57.9 million and pretax gains on such sales in 2008 of $61.5 million. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Adjustments to the recorded amounts were not material in any period. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The following table summarizes the MSD charges and spending relating to Merger Restructuring Program and 2008 and 2005 Restructuring Program activities: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Separation</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Accelerated</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Costs</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Depreciation</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Other</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Total</td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b><i>Merger Restructuring Program</i></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring reserves as of January 1, 2009</b> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Expense</b> </div></td> <td> </td> <td> </td> <td align="right"><b>367.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>36.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>0.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>403.8</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>(Payments) receipts, net</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(3.4</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(3.4</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Non-cash activity</b> </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(36.4</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(0.3</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(36.7</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring reserves as of December 31, 2009</b><sup style="font-size: 85%; vertical-align: text-top"> <b><i>(1)</i></b></sup> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>363.7</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>363.7</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b><i>2008 Restructuring Program</i></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Restructuring reserves as of January 1, 2008 </div></td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Expense </div></td> <td> </td> <td> </td> <td align="right">684.9</td> <td> </td> <td> </td> <td> </td> <td align="right">160.8</td> <td> </td> <td> </td> <td> </td> <td align="right">75.6</td> <td> </td> <td> </td> <td> </td> <td align="right">921.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">(Payments) receipts, net </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(77.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(37.3</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(114.5</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Non-cash activity </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(160.8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(38.3</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(199.1</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Restructuring reserves as of December 31, 2008 </div></td> <td> </td> <td align="right">$</td> <td align="right">607.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">607.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Expense</b> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>13.6</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>298.3</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>162.8</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>474.7</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>(Payments) receipts, net</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(372.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(154.5)</b></td> <td nowrap="nowrap"><sup style="font-size: 85%; vertical-align: text-top"><b><i>(2)</i></b></sup></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(526.5</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Non-cash activity</b> </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(298.3</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(8.3</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(306.6</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring reserves as of December 31, 2009</b><sup style="font-size: 85%; vertical-align: text-top"> <b><i>(1)</i></b></sup> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>249.3</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>249.3</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b><i>2005 Restructuring Program</i></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Restructuring reserves as of January 1, 2008 </div></td> <td> </td> <td align="right">$</td> <td align="right">231.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">231.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Expense </div></td> <td> </td> <td align="right">$</td> <td align="right">272.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">55.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">34.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">362.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">(Payments) receipts, net </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(389.1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(23.2</td> <td nowrap="nowrap">)<sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(412.3</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Non-cash activity </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(55.9</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(11.3</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(67.2</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Restructuring reserves as of December 31, 2008 </div></td> <td> </td> <td align="right">$</td> <td align="right">114.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">114.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>(Payments) receipts, net</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(77.2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(77.2</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring reserves as of December 31, 2009</b><sup style="font-size: 85%; vertical-align: text-top"><b><i>(1)</i></b></sup> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>37.6</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>37.6</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"> </td> <td width="1%"> </td> <td width="96"> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>The cash outlays associated with the first phase of the Merger Restructuring Program are expected to be substantially completed by the end of 2012. The cash outlays associated with the remaining restructuring reserve for the 2008 Restructuring Program are expected to be completed by the end of 2011. The cash outlays associated with the remaining restructuring reserve for the 2005 Restructuring Program are expected to be completed by the end of 2010.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> <td> </td> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup></td> <td> </td> <td><i>Includes proceeds from the sales of facilities in connection with restructuring actions.</i></td> </tr> </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. Acquisitions, Research Collaborations and License Agreements</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In December 2009, MSD and Avecia Investments Limited announced a definitive agreement under which MSD would acquire the biologics business of the Avecia group for a total purchase price of $180 million. Avecia Biologics is a contract manufacturing organization with specific expertise in microbial-derived biologics. Under the terms of the agreement, MSD would acquire Avecia Biologics Limited (“Avecia”) and all of its assets, including all Avecia’s process development and scale-up, manufacturing, quality and business support operations located in Billingham, United Kingdom. This transaction closed on February 1, 2010, and accordingly, the results of operations of the acquired business will be included in MSD’s results of operations after the acquisition date. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In September 2009, MSD announced that it had entered into an exclusive agreement with CSL Biotherapies (“CSL”), a subsidiary of CSL Limited, to market and distribute <i>Afluria</i>, CSL’s seasonal influenza (flu) vaccine, in the United States, for the 2010/2011-2015/2016 flu seasons. Under the terms of the agreement, MSD will assume responsibility for all aspects of commercialization of <i>Afluria </i>in the United States. CSL will supply <i>Afluria </i>to MSD and will retain responsibility for marketing the vaccine outside the United States. <i>Afluria </i>is indicated for the active immunization of persons ages 6 months and older against influenza disease caused by influenza virus subtypes A and type B present in the vaccine. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In July 2009, MSD and Portola Pharmaceuticals, Inc. (“Portola”) signed an exclusive global collaboration and license agreement for the development and commercialization of betrixaban (MK-4448), an investigational oral Factor Xa inhibitor anticoagulant currently in Phase II clinical development for the prevention of stroke in patients with atrial fibrillation. In return for an exclusive worldwide license to betrixaban, MSD paid Portola an initial fee of $50 million at closing, which was recorded in <i>Research and development </i>expense. Portola is eligible to receive additional cash payments totaling up to $420 million upon achievement of certain development, regulatory and commercialization milestones, as well as double-digit royalties on worldwide sales of betrixaban, if approved. MSD will assume all development and commercialization costs, including the costs of Phase III clinical trials. Portola retained an option (a) to co-fund Phase III clinical trials in return for additional royalties and (b) to co-promote betrixaban with MSD in the United States. The term of the agreement commenced in August 2009 and, unless terminated earlier, will continue until there are no remaining royalty payment obligations in a country, at which time the agreement will expire in its entirety in such country. The agreement may be terminated by either party in the event of a material uncured breach or bankruptcy of a party. The agreement may be terminated by MSD in the event that the parties or MSD decide to cease development of betrixaban for safety or efficacy. In addition, MSD may terminate the agreement at any time upon 180 days prior written notice. Portola may terminate the agreement in the event that MSD challenges any Portola patent covering betrixaban. Upon termination of the agreement, depending upon the circumstances, the parties have varying rights and obligations with respect to the continued development and commercialization of betrixaban and, in the case of termination for cause by MSD, certain royalty obligations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In April 2009, MSD, Medarex, Inc. (“Medarex”) and Massachusetts Biologic Laboratories (“MBL”) of the University of Massachusetts Medical School announced an exclusive worldwide license agreement for CDA-1 and CDB-1 (MK-3415A) (also known as MDX-066/MDX-1388 and MBL-CDA1/MBL-CDB1), an investigational fully human monoclonal antibody combination developed to target and neutralize <i>Clostridium difficile </i>toxins A and B, for the treatment of <i>C. difficile </i>infection. CDA-1 and CDB-1 were co-developed by Medarex and MBL. Under the terms of the agreement, MSD gained worldwide rights to develop and commercialize CDA-1 and CDB-1. Medarex and MBL received an aggregate upfront payment of $60 million upon closing, which was recorded in <i>Research and development </i>expense, and are potentially eligible to receive additional cash payments up to $165 million in the aggregate upon achievement of certain milestones associated with the development and approval of a drug candidate covered by this agreement. Upon commercialization, Medarex and MBL will also be eligible to receive double-digit royalties on product sales and milestones if certain sales targets are met. The term of the agreement commenced on the closing date and, unless terminated earlier, will continue until there are no remaining royalty payment obligations in a country, at which time the agreement will expire in its entirety in such country. Either party may terminate this agreement for uncured material breach by the other party, or bankruptcy or insolvency of the other party. MSD may terminate this agreement at any time upon providing 180 days prior written notice to Medarex and MBL. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Also, in April 2009, MSD and Santen Pharmaceutical Co., Ltd. (“Santen”) announced a worldwide licensing agreement for tafluprost (MK-2452), a prostaglandin analogue under investigation in the United States. Tafluprost, preserved and preservative-free formulations, has received marketing approval for the reduction of elevated intraocular pressure in open-angle glaucoma and ocular hypertension in several European and Nordic countries as well as Japan and has been filed for approval in additional European and Asia Pacific markets. Under the terms of the agreement, MSD paid a fee, which was capitalized and will be amortized to <i>Materials and production </i>costs over the life of the underlying patent, and will pay milestones and royalty payments based on future sales of tafluprost (both preserved and preservative-free formulations) in exchange for exclusive commercial rights to tafluprost in Western Europe (excluding Germany), North America, South America and Africa. Santen will retain commercial rights to tafluprost in most countries in Eastern Europe, Northern Europe and Asia Pacific, including Japan. MSD will provide promotion support to Santen in Germany and Poland. If tafluprost is approved in the United States, Santen has an option to co-promote it there. The agreement between MSD and Santen expires on a country-by-country basis on the last to occur of (a) the expiry of the last to expire valid patent claim; or (b) the expiration of the last to expire royalty. MSD may terminate the agreement at any time upon 90 days prior written notice and also at any time upon 60 days prior written notice if MSD determines that the product presents issues of safety or tolerability. In addition, MSD may terminate the agreement in the event that any of the enumerated agreements between Santen and the co-owner/licensor of certain intellectual property terminate or expire and this materially adversely affects MSD. If either MSD or Santen materially breaches the agreement and fails to cure after receiving notice, then the non-breaching party may terminate the agreement. The agreement provides for termination by the non-insolvent party due to bankruptcy by the other party. Finally, the agreement will terminate if, during the term, MSD develops or commercializes a competitive product (as that term is defined in the agreement). </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In addition, in April 2009, MSD and Cardiome Pharma Corp. (“Cardiome”) announced a collaboration and license agreement for the development and commercialization of vernakalant (MK-6621), an investigational candidate for the treatment of atrial fibrillation. The agreement provides MSD with exclusive global rights to the oral formulation of vernakalant (“vernakalant (oral)”) for the maintenance of normal heart rhythm in patients with atrial fibrillation, and provides an MSD affiliate, Merck Sharp & Dohme (Switzerland) GmbH, with exclusive rights outside of the United States, Canada and Mexico to the intravenous (“IV”) formulation of vernakalant (“vernakalant (IV)”) for rapid conversion of acute atrial fibrillation to normal heart rhythm. Under the terms of the agreement, MSD paid Cardiome an initial fee of $60 million upon closing, which was recorded in <i>Research and development </i>expense. In addition, Cardiome is eligible to receive up to $200 million in payments based on achievement of certain milestones associated with the development and approval of vernakalant products (including $15 million for submission for regulatory approval in Europe of vernakalant (IV), which MSD paid in 2009 as a result of that submission, and $20 million for initiation of a planned Phase III program for vernakalant (oral)) and up to $100 million for milestones associated with approvals in other subsequent indications of both the intravenous and oral formulations. Also, Cardiome will receive tiered royalty payments on sales of any approved products and has the potential to receive up to $340 million in milestone payments based on achievement of significant sales thresholds. Cardiome has retained an option to co-promote vernakalant (oral) with MSD through a hospital-based sales force in the United States. MSD will be responsible for all future costs associated with the development, manufacturing and commercialization of these candidates. MSD has granted Cardiome a secured, interest-bearing credit facility of up to $100 million that Cardiome may access in tranches over several years commencing in 2010. Cardiome’s co-development partner in North America, Astellas Pharma U.S., Inc., submitted an NDA with the FDA for Kynapid (vernakalant hydrochloride) Injection in December 2006 that included results from two pivotal Phase III clinical trials. In December 2007, the Cardiovascular and Renal Drugs Advisory Committee recommended that the FDA approve vernakalant (IV) for rapid conversion of atrial fibrillation. In August 2008, the FDA issued an Approvable action letter requesting additional information. A Phase IIb double-blind, placebo-controlled, randomized, dose-ranging clinical trial in patients at risk of recurrent atrial fibrillation showed that, at the 500 mg dose, vernakalant (oral) significantly reduced the rate of atrial fibrillation relapse as compared to placebo. This agreement continues in effect until the expiration of Cardiome’s co-promotion rights and all royalty and milestone payment obligations. This agreement may be terminated in the event of insolvency or a material uncured breach by either party. Additionally, the collaboration may be terminated by MSD in the event that MSD determines (in good faith) that it is not advisable to continue the development or commercialization of a vernakalant product as a result of a serious safety issue. In addition, MSD may terminate the agreement at any time upon 12 months prior written notice. Cardiome may terminate the agreement in the event that MSD challenges any Cardiome patent covering vernakalant. Upon termination of the agreement, depending upon the circumstances, the parties have varying rights and obligations with respect to the continued development and commercialization of vernakalant and in some cases continuing royalty obligations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In March 2009, MSD acquired Insmed Inc.’s (“Insmed”) portfolio of follow-on biologic therapeutic candidates and its commercial manufacturing facilities located in Boulder, Colorado. Under the terms of the agreement, MSD paid Insmed an aggregate of $130 million in cash to acquire all rights to the Boulder facilities and Insmed’s pipeline of follow-on biologic candidates. Insmed’s follow-on biologics portfolio includes two clinical candidates: MK-4214, an investigational recombinant granulocyte-colony stimulating factor (“G-CSF”) that will be evaluated for its ability to prevent infections in patients with cancer receiving chemotherapy, and MK-6302, a pegylated recombinant G-CSF designed to allow for less frequent dosing. The transaction was accounted for as a business combination; accordingly, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date. The determination of fair value requires management to make significant estimates and assumptions. In connection with the acquisition, substantially all of the purchase price was allocated to Insmed’s follow-on biologics portfolio (MK-4214 and MK-6302) and an indefinite-lived intangible asset was recorded. The fair value was determined based upon the present value of expected future cash flows of new product candidates resulting from Insmed’s follow-on biologics portfolio adjusted for the probability of their estimated technical and marketing success utilizing an income approach reflecting appropriate risk-adjusted discount rates. The ongoing activity related to MK-4214 and MK-6302 is not expected to be material to MSD’s research and development expense. The remaining net assets acquired were not material and there were no other milestone or royalty obligations associated with the acquisition. This transaction closed on March 31, 2009, and accordingly, the results of operations of the acquired business have been included in MSD’s results of operations beginning April 1, 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In September 2008, MSD and Japan Tobacco Inc. (“JT”) signed a worldwide licensing agreement to develop and commercialize JTT-305 (MK-5442), an investigational oral osteoanabolic (bone growth stimulating) agent for the treatment of osteoporosis, a disease which reduces bone density and strength and results in an increased risk of bone fractures. JTT-305 is an investigational oral calcium sensing receptor antagonist that is currently being evaluated by JT in Phase II clinical trials in Japan for its effect on increasing bone density and is in Phase I clinical trials outside of Japan. Under the terms of the agreement, MSD gained worldwide rights, except for Japan, to develop and commercialize JTT-305 and certain other related compounds. JT received an upfront payment of $85 million, which was recorded in <i>Research and development </i>expense, and is eligible to receive additional cash payments upon achievement of certain milestones associated with the development and approval of a drug candidate covered by this agreement. JT will also be eligible to receive royalties from sales of any drug candidates that receive marketing approval. The license agreement between MSD and JT will remain in effect until expiration of all royalty and milestone obligations, and may be terminated in the event of an uncured material breach by the other party. The agreement may also be terminated by MSD without cause before initial commercial sale of JTT-305 by giving six months prior notice to JT, and thereafter by giving one year prior notice thereof to JT. The license agreement may also be terminated immediately by MSD if MSD determines due to safety and/or efficacy concerns based on available scientific evidence to cease development of JTT-305 and/or to withdraw JTT-305 from the market on a permanent basis. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In September 2007, MSD completed the acquisition of NovaCardia, Inc. (“NovaCardia”), a privately held clinical-stage pharmaceutical company focused on cardiovascular disease. MSD acquired all of the outstanding equity of NovaCardia for a total purchase price of $366.4 million (including $16.4 million of cash and investments on hand at closing), which was paid through the issuance of 7.3 million shares of MSD common stock to the former NovaCardia shareholders based on MSD’s average closing stock price for the five days prior to closing of the acquisition. In connection with the acquisition, MSD recorded a charge of $325.1 million for in-process research and development associated with rolofylline (MK-7418), NovaCardia’s investigational Phase III compound for acute heart failure, as at the acquisition date, technological feasibility had not been established and no alternative future use existed. The charge, which is not deductible for tax purposes, was recorded in <i>Research and development </i>expense and was determined based upon the present value of expected future cash flows resulting from this technology adjusted for the estimated probability of its technical and marketing success at that time utilizing an income approach reflecting an appropriate risk-adjusted discount rate of 22.0%. The remaining purchase price was allocated to cash and investments of $16.4 million, a deferred tax asset relating to a net operating loss carryforward of $23.9 million and other net assets of $1.0 million. Because NovaCardia was a development stage company that had not commenced its planned principal operations, the transaction was accounted for as an acquisition of assets rather than as a business combination and, therefore, goodwill was not recorded. NovaCardia’s results of operations have been included in MSD’s consolidated financial results since the acquisition date. In June 2009, MSD announced that preliminary results for the pivotal Phase III study of rolofylline showed that rolofylline did not meet the primary or secondary efficacy endpoints. MSD terminated the clinical development program for rolofylline. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Also in 2007, MSD and GTx, Inc. (“GTx”) entered into an agreement providing for a research and development and global strategic collaboration for selective androgen receptor modulators (“SARMs”), a new investigational class of drugs with the potential to treat age-related muscle loss (sarcopenia) as well as other musculoskeletal conditions. MSD has discontinued internal development of MK-2866 (which is a SARM) under this agreement, and has subsequently terminated its agreement with GTx. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Also in 2007, MSD and ARIAD Pharmaceuticals, Inc. (“ARIAD”) entered into a global collaboration to jointly develop and commercialize ridaforolimus (MK-8669), ARIAD’s novel mTOR inhibitor, for use in cancer. This collaboration generally continues in effect until the expiration of all royalty and milestone payment obligations. This collaboration may generally be terminated in the event of insolvency or a material uncured breach by either party. The collaboration agreement between MSD and ARIAD may also be terminated by MSD upon the failure of MK-8669 to meet certain developmental and safety requirements or in the event MSD concludes it is not advisable to continue the development of MK-8669 for use in a cancer indication. In addition, MSD may terminate the ARIAD collaboration agreement on or after the third anniversary of the effective date by providing at least 12 months prior written notice. Upon termination of the ARIAD collaboration agreement, depending upon the circumstances, the parties have varying rights and obligations with respect to the continued development and commercialization of MK-8669 and continuing royalty obligations. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>6. Collaborative Arrangements</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD continues its strategy of establishing external alliances to complement its substantial internal research capabilities, including research collaborations, licensing preclinical and clinical compounds and technology platforms to drive both near- and long-term growth. MSD supplements its internal research with an aggressive licensing and external alliance strategy focused on the entire spectrum of collaborations from early research to late-stage compounds, as well as new technologies across a broad range of therapeutic areas. These arrangements often include upfront payments and royalty or profit share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development, as well as expense reimbursements or payments to the third party. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As discussed in Note 2, on January 1, 2009, new guidance issued by the FASB was adopted which defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. MSD reviewed its third party arrangements to determine if any arrangement is within the scope of this new guidance. Each arrangement is unique in nature and MSD’s most significant arrangement is discussed below. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Cozaar/Hyzaar</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In 1989, MSD and E.I. duPont de Nemours and Company (“DuPont”) agreed to form a long-term research and marketing collaboration to develop a class of therapeutic agents for high blood pressure and heart disease, discovered by DuPont, called angiotensin II receptor antagonists, which include <i>Cozaar </i>and <i>Hyzaar</i>. In return, MSD provided DuPont marketing rights in the United States and Canada to its prescription medicines, <i>Sinemet </i>and <i>Sinemet CR</i>. Pursuant to a 1994 agreement with DuPont, MSD has an exclusive licensing agreement to market <i>Cozaar </i>and <i>Hyzaar</i>, which are both registered trademarks of DuPont, in return for royalties and profit share payments to DuPont. The patents that provide U.S. marketing exclusivity for <i>Cozaar </i>and <i>Hyzaar </i>expire in April 2010. In addition, the patent for <i>Cozaar </i>expired in a number of major European markets in March 2010. <i>Hyzaar </i>lost patent protection in a number of major European markets in February 2010. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>7. Financial Instruments</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Derivative Instruments and Hedging Activities</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD manages the impact of foreign exchange rate movements and interest rate movements on its earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A significant portion of MSD’s revenues and earnings in foreign affiliates is exposed to changes in foreign exchange rates. The objectives and accounting related to MSD’s foreign currency risk management program, as well as its interest rate risk management activities are discussed below. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Foreign Currency Risk Management</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A significant portion of MSD’s revenues are denominated in foreign currencies. MSD relies on sustained cash flows generated from foreign sources to support its long-term commitment to U.S. dollar-based research and development. To the extent the dollar value of cash flows is diminished as a result of a strengthening dollar, MSD’s ability to fund research and other dollar-based strategic initiatives at a consistent level may be impaired. MSD has established revenue hedging and balance sheet risk management programs to protect against volatility of future foreign currency cash flows and changes in fair value caused by volatility in foreign exchange rates at its U.S. functional currency entities. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The objective of the revenue hedging program is to reduce the potential for longer-term unfavorable changes in foreign exchange to decrease the U.S. dollar value of future cash flows derived from foreign currency denominated sales, primarily the euro and Japanese yen. To achieve this objective, MSD will partially hedge forecasted foreign currency denominated third party and intercompany distributor entity sales that are expected to occur over its planning cycle, typically no more than three years into the future. MSD will layer in hedges over time, increasing the portion of third party and intercompany distributor entity sales hedged as it gets closer to the expected date of the forecasted foreign currency denominated sales, such that it is probable the hedged transaction will occur. The portion of sales hedged is based on assessments of cost-benefit profiles that consider natural offsetting exposures, revenue and exchange rate volatilities and correlations, and the cost of hedging instruments. The hedged anticipated sales are a specified component of a portfolio of similarly denominated foreign currency-based sales transactions, each of which responds to the hedged risk in the same manner. MSD manages its anticipated transaction exposure principally with purchased local currency put options, which provide MSD with a right, but not an obligation, to sell foreign currencies in the future at a predetermined price. If the U.S. dollar strengthens relative to the currency of the hedged anticipated sales, total changes in the options’ cash flows offset the decline in the expected future U.S. dollar cash flows of the hedged foreign currency sales. Conversely, if the U.S. dollar weakens, the options’ value reduces to zero, but MSD benefits from the increase in the value of the anticipated foreign currency cash flows. MSD also utilizes forward contracts in its revenue hedging program. If the U.S. dollar strengthens relative to the currency of the hedged anticipated sales, the increase in the fair value of the forward contracts offsets the decrease in the expected future U.S. dollar cash flows of the hedged foreign currency sales. Conversely, if the U.S. dollar weakens, the decrease in the fair value of the forward contracts offsets the increase in the value of the anticipated foreign currency cash flows. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     These derivative instruments are designated as cash flow hedges and the fair value of these contracts are recorded as either assets (gain positions) or liabilities (loss positions) in the Consolidated Balance Sheet. Accordingly, the effective portion of the unrealized gains or losses on these contracts is recorded in <i>AOCI </i>and reclassified into <i>Sales </i>when the hedged anticipated revenue is recognized. The hedge relationship is highly effective and hedge ineffectiveness has been <i>de minimis</i>. The cash flows from these contracts are reported as operating activities in the Consolidated Statement of Cash Flows. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The primary objective of the balance sheet risk management program is to protect the U.S. dollar value of foreign currency denominated net monetary assets from the effects of volatility in foreign exchange that might occur prior to their conversion to U.S. dollars. In these instances, MSD principally utilizes forward exchange contracts, which enable MSD to buy and sell foreign currencies in the future at fixed exchange rates and economically offset the consequences of changes in foreign exchange on the amount of U.S. dollar cash flows derived from the net assets. MSD routinely enters into contracts to offset the effects of exchange on exposures denominated in developed country currencies, primarily the euro and Japanese yen. For exposures in developing country currencies, MSD will enter into forward contracts to partially offset the effects of exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the exchange rate and the cost of the hedging instrument. MSD will also minimize the effect of exchange on monetary assets and liabilities by managing operating activities and net asset positions at the local level. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Foreign currency denominated monetary assets and liabilities are remeasured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in <i>Other (income) expense, net</i>. The forward contracts are not designated as hedges and are marked to market through <i>Other (income) expense, net</i>. Accordingly, fair value changes in the forward contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency exchange rates, except to the extent of the spot-forward differences. These differences are not significant due to the short-term nature of the contracts, which typically have average maturities at inception of less than one year. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     When applicable, MSD uses forward contracts to hedge the changes in fair value of certain foreign currency denominated available-for-sale securities attributable to fluctuations in foreign currency exchange rates. These derivative contracts are designated and qualify as fair value hedges. Accordingly, changes in the fair value of the hedged securities due to fluctuations in spot rates are recorded in <i>Other (income) expense, net</i>, and offset by the fair value changes in the forward contracts attributable to spot rate fluctuations. Changes in the contracts’ fair value due to spot-forward differences are excluded from the designated hedge relationship and recognized in <i>Other (income) expense, net</i>. These amounts, as well as hedge ineffectiveness, were not significant for the years ended December 31, 2009, 2008 or 2007. The cash flows from these contracts are reported as operating activities in the Consolidated Statement of Cash Flows. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Interest Rate Risk Management</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     At December 31, 2009, MSD was a party to seven pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of fixed-rate notes in which the notional amounts match the amount of the hedged fixed-rate notes. There are two swaps maturing in 2011 with notional amounts of $125 million each that effectively convert MSD’s $250 million, 5.125% fixed-rate notes due 2011 to floating rate instruments and five swaps maturing in 2015 with notional amounts of $150 million each that effectively convert $750 million of MSD’s $1.0 billion, 4.0% fixed-rate notes due 2015 to floating rate instruments. The interest rate swap contracts are designated hedges of the fair value changes in the notes attributable to changes in the benchmark London Interbank Offered Rate (“LIBOR”) swap rate. The fair value changes in the notes attributable to changes in the benchmark interest rate are recorded in interest expense and offset by the fair value changes in the swap contracts. During 2008, MSD terminated four interest rate swap contracts with notional amounts of $250 million each, and terminated one interest rate swap contract with a notional amount of $500 million. These swaps had effectively converted its $1.0 billion, 4.75% fixed-rate notes due 2015 and its $500 million, 4.375% fixed-rate notes due 2013 to variable rate debt. As a result of the swap terminations, MSD received $128.3 million in cash, excluding accrued interest which was not material. The corresponding gains related to the basis adjustment of the debt associated with the terminated swap contracts were deferred and are being amortized as a reduction of interest expense over the remaining term of the notes. The cash flows from these contracts are reported as operating activities in the Consolidated Statement of Cash Flows. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Presented in the table below is the fair value of derivatives segregated between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments as of December 31, 2009. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="54%"> </td> <td width="3%"> </td> <td width="29%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Fair Value of Derivative</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">U.S. Dollar</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center">Balance Sheet Caption</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Asset</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Liability</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Notional</td> </tr>   <tr style="font-size: 1px"> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td nowrap="nowrap"> <div style="margin-left:15px; text-indent:-15px"><i>Derivatives Designated as Hedging Instruments</i> </div></td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign Exchange Contracts (current) </div></td> <td> </td> <td align="left" valign="top" nowrap="nowrap">Deferred income taxes and other current assets</td> <td> </td> <td align="right">$</td> <td align="right">139.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,050.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign Exchange Contracts (non-current) </div></td> <td> </td> <td align="left" valign="top">Other assets</td> <td> </td> <td> </td> <td align="right">152.6</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2,118.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign Exchange Contracts (current) </div></td> <td> </td> <td align="left" valign="top">Accrued and other current liabilities</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">34.0</td> <td> </td> <td> </td> <td> </td> <td align="right">658.6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps (non-current) </div></td> <td> </td> <td align="left" valign="top">Other assets</td> <td> </td> <td> </td> <td align="right">26.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,000.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td align="right">$</td> <td align="right">318.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">34.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">6,827.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="15" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td nowrap="nowrap"> <div style="margin-left:15px; text-indent:-15px"><i>Derivatives Not Designated as Hedging Instruments</i> </div></td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign Exchange Contracts (current) </div></td> <td> </td> <td align="left" valign="top">Deferred income taxes and other current assets</td> <td> </td> <td align="right">$</td> <td align="right">60.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,841.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign Exchange Contracts (current) </div></td> <td> </td> <td align="left" valign="top">Accrued and other current liabilities</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">38.6</td> <td> </td> <td> </td> <td> </td> <td align="right">2,104.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td align="right">$</td> <td align="right">60.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">38.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4,946.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td align="right">$</td> <td align="right">378.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">72.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">11,773.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="15" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">          The table below provides information on the location and pretax (gain) or loss amounts for derivatives that are: (i) designated in a fair value hedging relationship, (ii) designated in a cash flow hedging relationship, and (iii) not designated in a hedging relationship for the year ended December 31, 2009. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Amount of</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Amount of</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Amount of</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Amount of</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Pretax</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Pretax</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Gain (Loss)</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Gain (Loss)</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">(Gain) Loss</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">(Gain) Loss</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Recognized in</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Recognized in</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Reclassified</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Recognized</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Earnings on</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Earnings on</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">from AOCI</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">in OCI on</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Derivatives<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Hedged Item<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">into Earnings<sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Derivatives</td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Derivatives designated in fair value hedging relationships:</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Interest rate swap contracts </div></td> <td> </td> <td align="right">$</td> <td align="right">2.8</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(2.8</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts </div></td> <td> </td> <td> </td> <td align="right">5.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(9.1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right">$</td> <td align="right">8.0</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(11.9</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Derivatives designated in cash flow hedging relationships:</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts </div></td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">60.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">310.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Derivatives not designated in a hedging relationship:</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts<sup style="font-size: 85%; vertical-align: text-top"><i>(3)</i></sup> </div></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(40.8</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Recognized in Other (income) expense, net.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup></td> <td> </td> <td><i>Recognized in Sales.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(3)</i></sup></td> <td> </td> <td><i>These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates.</i></td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">          At December 31, 2009, MSD estimates $65.6 million of pretax net unrealized loss on derivatives maturing within the next 12 months that hedge foreign currency denominated sales over that same period will be reclassified from <i>AOCI </i>to <i>Sales</i>. The amount ultimately reclassified to <i>Sales </i>may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Fair Value Measurements</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">          Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value: </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">     <i>Level 1 </i>— Quoted prices in active markets for identical assets or liabilities. MSD’s Level 1 assets include equity securities that are traded in an active exchange market. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">     <i>Level 2 </i>— Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. MSD’s Level 2 assets and liabilities primarily include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, corporate notes and bonds, U.S. and foreign government and agency securities, certain mortgage-backed and asset-backed securities, municipal securities, commercial paper and derivative contracts whose values are determined using pricing models with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">     <i>Level 3 </i>— Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. MSD’s Level 3 assets mainly include certain mortgage-backed and asset-backed securities, as well as certain corporate notes and bonds with limited market activity. At December 31, 2009, $71.5 million, or approximately 8.4%, of MSD’s investment securities were categorized as Level 3 assets (all of which were pledged under certain collateral arrangements (see Note 17)). All of the assets classified as Level 3 at December 31, 2009 were acquired when MSD elected to be redeemed-in-kind from a short-term fixed income fund that restricted cash redemptions as described below. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">          If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Financial assets and liabilities measured at fair value on a recurring basis are summarized below: </div> <div align="center"> <table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="20%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000"><b>Fair Value Measurements Using</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Fair Value Measurements Using</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Quoted</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Prices</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Quoted Prices</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>In Active</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Significant</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">In Active</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Significant </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Markets for</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Significant</b> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Markets for</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Other </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Significant </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Identical</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Observable</b> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Unobservable</b> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Identical</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Observable </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Unobservable</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Inputs</b> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Inputs</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Assets</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Inputs </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Inputs</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>(Level 1)</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>(Level 2)</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>(Level 3)</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Total</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">(Level 1)</td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">(Level 2)</td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">(Level 3)</td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="15"><b>December 31, 2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="15">December 31, 2008</td> </tr>   <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Investments</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">U.S. government and agency securities </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>215.6</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>215.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,885.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,885.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Corporate notes and bonds </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>205.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>205.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">3,093.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">3,093.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Municipal securities </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>186.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>186.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Mortgage-backed securities<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">723.9</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">723.9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Commercial paper </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">133.0</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">133.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Asset-backed securities <sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>36.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>36.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">306.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">306.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign government bonds </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">319.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">319.4</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Equity securities </div></td> <td> </td> <td> </td> <td align="right"><b>37.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>39.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>76.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">71.1</td> <td> </td> <td> </td> <td> </td> <td align="right">73.6</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">144.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other debt securities </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>3.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>3.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2.8</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right"><b>37.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>686.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>723.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right">71.1</td> <td> </td> <td> </td> <td> </td> <td align="right">7,538.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">7,609.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other assets <sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>55.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>71.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>126.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2,877.9</td> <td> </td> <td> </td> <td> </td> <td align="right">96.6</td> <td> </td> <td> </td> <td> </td> <td align="right">2,974.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Derivative assets<sup style="font-size: 85%; vertical-align: text-top"> (3)</sup></i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Purchased currency options </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>291.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>291.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">451.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">451.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Forward exchange contracts </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>60.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>60.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">73.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">73.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Interest rate swaps </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>26.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>26.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">23.9</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">23.9</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>378.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>378.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">548.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">548.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total assets </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>37.4</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,120.0</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>71.5</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,228.9</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">71.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">10,964.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">96.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">11,132.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Liabilities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Derivative liabilities<sup style="font-size: 85%; vertical-align: text-top"> (3)</sup></i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Written currency options </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>0.3</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>0.3</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1.9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Forward exchange contracts </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>72.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>72.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">273.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">273.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total liabilities </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>72.6</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>72.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">275.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">275.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Substantially all of the asset-backed securities are highly-rated (Standard & Poor’s rating of AAA and Moody’s Investors Service rating of Aaa), secured primarily by credit card, auto loan, and home equity receivables, with weighted-average lives of primarily 5 years or less. Mortgage-backed securities represent AAA-rated securities issued or unconditionally guaranteed as to payment of principal and interest by U.S. government agencies.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup></td> <td> </td> <td><i>Other assets represent a portion of the pledged collateral discussed below and in Note 17. At December 31, 2009, Level 2 other assets are comprised of $39.5 million of asset-backed securities, $11.6 million of mortgage backed securities and $4.0 million of corporate notes and bonds. At December 31, 2008, Level 2 other assets are comprised of $987.4 million of corporate notes and bonds, $792.5 million of municipal securities, $357.3 million of commercial paper, $276.0 million of mortgage-backed securities, $240.1 million of U.S. government and agency securities and $224.6 million of asset-backed securities.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(3)</i></sup></td> <td> </td> <td><i>The fair value determination of derivatives includes an assessment of the credit risk of counterparties to the derivatives and MSD’s own credit risk, the effects of which were not significant.</i></td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As of December 31, 2009, MSD had approximately $5.6 billion of cash equivalents. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Level 3 Valuation Techniques</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial assets also include certain investment securities for which there is limited market activity such that the determination of fair value requires significant judgment or estimation. MSD’s Level 3 investment securities at December 31, 2009, primarily include certain mortgage-backed and asset-backed securities, as well as certain corporate notes and bonds for which there was a decrease in the observability of market pricing for these investments. These securities were valued primarily using pricing models for which management understands the methodologies. These models incorporate transaction details such as contractual terms, maturity, timing and amount of future cash inflows, as well as assumptions about liquidity and credit valuation adjustments of marketplace participants at December 31, 2009. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="28%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">2008</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Available-</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Other</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>for-Sale</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Debt</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Other</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Investments</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Securities</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Assets</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Total</td> </tr>   <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Beginning balance January 1 </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>96.6</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>96.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">314.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">958.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,273.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net transfers in to (out of) Level 3<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>26.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>14.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>41.2</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(314.5</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(684.5</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(999.0</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Purchases, sales, settlements, net </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(26.9</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(48.8</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(75.7</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(132.8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(132.8</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total realized and unrealized gains (losses) </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Included in: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Earnings<sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>0.5</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(4.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(4.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(43.6</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(43.6</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Comprehensive income </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(0.3</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>13.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>13.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1.1</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1.1</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Ending balance at December 31 </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>71.5</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>71.5</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">96.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">96.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td nowrap="nowrap"> <div style="margin-left:15px; text-indent:-15px">Losses recorded in earnings for Level 3 <br /> assets still held at December 31 </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3.3</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3.3</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(44.3</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(44.3</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"> </td> <td width="1%"> </td> <td width="96"> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Transfers in and out of Level 3 are deemed to occur at the beginning of the quarter in which the transaction takes place.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> <td> </td> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup></td> <td> </td> <td><i>Amounts are recorded in Other (income) expense, net.</i></td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On January 1, 2008, MSD had $1,273.1 million invested in a short-term fixed income fund (the “Fund”). Due to market liquidity conditions, cash redemptions from the Fund were restricted. As a result of this restriction on cash redemptions, MSD did not consider the Fund to be traded in an active market with observable pricing on January 1, 2008 and these amounts were categorized as Level 3. On January 7, 2008, MSD elected to be redeemed-in-kind from the Fund and received its share of the underlying securities of the Fund. As a result, the majority of the underlying securities were transferred out of Level 3 as it was determined that these securities had observable markets. On December 31, 2009, $71.5 million of the investment securities associated with the redemption-in-kind were classified in Level 3 as the securities contained at least one significant input which was unobservable. These securities account for the entire balance of MSD’s Level 3 assets at December 31, 2009. During 2009, Level 3 investments in the aggregate amount of $26.7 million, which were no longer pledged as collateral, were reclassified from <i>Other assets </i>to available-for-sale investments. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Financial Instruments not Measured at Fair Value</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Some of MSD’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature, such as cash and cash equivalents, receivables and payables. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The estimated fair value of loans payable and long-term debt (including current portion) at December 31, 2009 was $8.8 billion compared with a carrying value of $8.5 billion and at December 31, 2008 was $6.3 billion compared with a carrying value of $6.2 billion. Fair value was estimated using quoted dealer prices. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A summary of the December 31 gross unrealized gains and losses on available-for-sale investments, including those pledged as collateral<i>, </i>recorded in AOCI is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="20%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000"><b>December 31, 2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">December 31, 2008</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Fair</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Amortized</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Gross Unrealized</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Fair</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Amortized</td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Gross Unrealized</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Value</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Cost</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Gains</b><sup style="font-size: 85%; vertical-align: text-top"><b><i>(1)</i></b></sup></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Losses</b><sup style="font-size: 85%; vertical-align: text-top"><b><i>(1)</i></b></sup></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Value</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Cost</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Gains<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Losses<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> </tr>   <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">U.S. government and agency securities </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>215.6</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>215.7</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1.1</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(1.2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td align="right">$</td> <td align="right">3,125.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,061.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">67.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(3.2</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Corporate notes and bonds </div></td> <td> </td> <td> </td> <td align="right"><b>209.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>207.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>3.3</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(1.2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">4,124.7</td> <td> </td> <td> </td> <td> </td> <td align="right">4,158.4</td> <td> </td> <td> </td> <td> </td> <td align="right">31.6</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(65.3</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Municipal securities </div></td> <td> </td> <td> </td> <td align="right"><b>186.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>184.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>2.9</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(1.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">792.5</td> <td> </td> <td> </td> <td> </td> <td align="right">764.4</td> <td> </td> <td> </td> <td> </td> <td align="right">28.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.3</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Mortgage-backed securities </div></td> <td> </td> <td> </td> <td align="right"><b>79.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>65.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>13.8</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(0.3</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">1,031.9</td> <td> </td> <td> </td> <td> </td> <td align="right">1,024.4</td> <td> </td> <td> </td> <td> </td> <td align="right">12.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(5.0</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Asset-backed securities </div></td> <td> </td> <td> </td> <td align="right"><b>79.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>69.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>10.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">551.7</td> <td> </td> <td> </td> <td> </td> <td align="right">571.8</td> <td> </td> <td> </td> <td> </td> <td align="right">0.6</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(20.7</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign government bonds </div></td> <td> </td> <td> </td> <td align="right"><b>0.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>0.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">319.4</td> <td> </td> <td> </td> <td> </td> <td align="right">305.9</td> <td> </td> <td> </td> <td> </td> <td align="right">13.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Commercial paper </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">490.3</td> <td> </td> <td> </td> <td> </td> <td align="right">490.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other debt securities </div></td> <td> </td> <td> </td> <td align="right"><b>21.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>19.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>9.4</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(7.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">46.7</td> <td> </td> <td> </td> <td> </td> <td align="right">48.6</td> <td> </td> <td> </td> <td> </td> <td align="right">1.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3.4</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Equity securities </div></td> <td> </td> <td> </td> <td align="right"><b>57.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>39.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>26.0</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(8.2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">100.9</td> <td> </td> <td> </td> <td> </td> <td align="right">86.3</td> <td> </td> <td> </td> <td> </td> <td align="right">17.7</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3.1</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>850.0</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>802.3</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>66.6</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(18.9</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td align="right">$</td> <td align="right">10,583.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">10,511.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">173.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(101.0</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="33" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"> </td> <td width="1%"> </td> <td width="96"> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>At December 31, 2009, gross unrealized gains and gross unrealized losses related to amounts pledged as collateral (see below and Note 17) were $25.6 million and $(0.3) million, respectively. At December 31, 2008, gross unrealized gains and gross unrealized losses related to amounts pledged as collateral were $36.1 million and $(30.3) million, respectively.</i></td> </tr> </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Available-for-sale debt securities included in <i>Short-term investments </i>totaled $293.1 million at December 31, 2009. Of the remaining debt securities, $141.9 million mature within five years. There were no debt securities pledged as collateral included in current assets at December 31, 2009. Debt securities pledged as collateral maturing within five years totaled $37.1 million. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Letter of Credit</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In August 2008, MSD executed a $4.1 billion letter of credit agreement with a financial institution, which satisfied certain conditions set forth in the U.S. <i>Vioxx </i>Settlement Agreement (see Note 12). MSD pledged collateral to the financial institution of approximately $5.1 billion pursuant to the terms of the letter of credit agreement. Although the amount of assets pledged as collateral was set by the letter of credit agreement and such assets were held in custody by a third party, the assets were managed by MSD. MSD considered the assets pledged under the letter of credit agreement to be restricted. The letter of credit amount and required collateral balances declined as payments (after the first $750 million) under the Settlement Agreement were made. As of December 31, 2008, $3.8 billion was recorded within <i>Deferred income taxes and other current assets</i> and $1.3 billion was classified as <i>Other assets</i>. During 2009, MSD made all remaining payments into the <i>Vioxx </i>settlement funds pursuant to the U.S. <i>Vioxx </i>Settlement Agreement. Accordingly, the letter of credit agreement was terminated and the collateral was released. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Concentrations of Credit Risk</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On an ongoing basis, MSD monitors concentrations of credit risk associated with corporate issuers of securities and financial institutions with which it conducts business. Credit exposure limits are established to limit a concentration with any single issuer or institution. Cash and investments are placed in instruments that meet high credit quality standards, as specified in MSD’s investment policy guidelines. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Derivative financial instruments are executed under International Swaps and Derivatives Association master agreements. The master agreements with several of MSD’s financial institution counterparties also include credit support annexes. These annexes contain provisions that require collateral to be exchanged depending on the value of the derivative assets and liabilities, MSD’s credit rating, and the credit rating of the counterparty. As of December 31, 2009, <i>Cash and cash equivalents </i>includes cash collateral of $69.2 million received from various counterparties with a corresponding offset included in <i>Accrued and other current liabilities</i>. MSD had not advanced any cash collateral to counterparties as of December 31, 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD’s four largest U.S. customers, McKesson Corporation, Cardinal Health, Inc., AmerisourceBergen Corporation and Medco Health Solutions, Inc., represented, in aggregate, approximately one-fourth of accounts receivable at December 31, 2009. MSD monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business. Bad debts have been minimal. MSD does not normally require collateral or other security to support credit sales. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>8. Inventories</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Inventories at December 31 consisted of: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Finished goods </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>523.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">432.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Raw materials and work in process </div></td> <td> </td> <td> </td> <td align="right"><b>2,404.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2,147.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Supplies </div></td> <td> </td> <td> </td> <td align="right"><b>98.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">98.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total (approximates current cost) </div></td> <td> </td> <td> </td> <td align="right"><b>3,027.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2,678.3</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Reduction to LIFO costs </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(169.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,857.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,678.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Recognized as: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Inventories </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,147.7</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,091.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other assets </div></td> <td> </td> <td> </td> <td align="right"><b>709.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">587.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Inventories valued under the LIFO method comprised approximately 53% and 56% of inventories at December 31, 2009 and 2008, respectively. Amounts recognized as <i>Other assets </i>are comprised almost entirely of raw materials and work in process inventories, the majority of which are noncurrent vaccine inventories. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>9. Goodwill and Other Intangibles</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The following table summarizes goodwill activity: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr>   <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill balance as of January 1, 2008 </div></td> <td> </td> <td align="right">$</td> <td align="right">1,454.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(16.1</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill balance as of December 31, 2008 </div></td> <td> </td> <td> </td> <td align="right">1,438.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Additions</b> </div></td> <td> </td> <td> </td> <td align="right"><b>0.3</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Goodwill balance as of December 31, 2009</b> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,439.0</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Other intangibles at December 31 consisted of: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="28%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">2008</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Gross</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Gross</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Carrying</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accumulated</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Carrying</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Accumulated</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Amount</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Amortization</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Net</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Amount</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Amortization</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Net</td> </tr>   <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Products and product rights </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,627.0</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,531.2</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>95.8</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,629.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,501.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">127.9</td> <td> </td> </tr> <tr valign="bottom"> <td nowrap="nowrap"> <div style="margin-left:15px; text-indent:-15px">In-process research and development<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>130.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>130.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Tradenames </div></td> <td> </td> <td> </td> <td align="right"><b>65.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>41.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>24.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">64.0</td> <td> </td> <td> </td> <td> </td> <td align="right">37.5</td> <td> </td> <td> </td> <td> </td> <td align="right">26.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right"><b>743.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>470.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>272.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right">742.5</td> <td> </td> <td> </td> <td> </td> <td align="right">371.5</td> <td> </td> <td> </td> <td> </td> <td align="right">371.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total identifiable intangible assets </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,566.1</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,042.9</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>523.2</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,435.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,910.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">525.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Amounts capitalized as in-process research and development are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, MSD will make a separate determination as to the useful life of the assets and begin amortization.</i></td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Aggregate amortization expense was $134.0 million in 2009, $186.1 million in 2008 and $235.8 million in 2007. The estimated aggregate amortization expense for each of the next five years is as follows: 2010, $130.8 million; 2011, $103.0 million; 2012, $84.0 million; 2013, $63.6 million; 2014, $4.0 million. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>10. Joint Ventures and Other Equity Method Affiliates</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Equity income from affiliates reflects the performance of MSD’s joint ventures and other equity method affiliates and was comprised of the following: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Merck/Schering-Plough </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,463.5</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,536.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,830.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">AstraZeneca LP </div></td> <td> </td> <td> </td> <td align="right"><b>674.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">598.4</td> <td> </td> <td> </td> <td> </td> <td align="right">820.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>365.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">425.9</td> <td> </td> <td> </td> <td> </td> <td align="right">325.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,503.0</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,560.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,976.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Primarily reflects results from Merial Limited until disposition on September 17, 2009, Sanofi Pasteur MSD and Johnson & Johnson°Merck Consumer Pharmaceuticals Company.</i></td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Merck/Schering-Plough Partnership</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In 2000, MSD and Schering-Plough (collectively the “Partners”) entered into an agreement to create an equally-owned partnership to develop and market in the United States new prescription medicines for cholesterol management. This agreement generally provides for equal sharing of development costs and for co-promotion of approved products by each company. In 2001, the cholesterol-management partnership was expanded to include all the countries of the world, excluding Japan. In 2002, ezetimibe, the first in a new class of cholesterol-lowering agents, was launched in the United States as <i>Zetia </i>(marketed as <i>Ezetrol </i>outside the United States). In 2004, a combination product containing the active ingredients of both <i>Zetia </i>and <i>Zocor</i>, was approved in the United States as <i>Vytorin </i>(marketed as <i>Inegy </i>outside of the United States). </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The cholesterol agreements provide for the sharing of operating income generated by the Merck/Schering-Plough partnership (the “MSP Partnership”) based upon percentages that vary by product, sales level and country. In the U.S. market, the Partners shared profits on <i>Zetia </i>and <i>Vytorin </i>sales equally, with the exception of the first $300 million of annual <i>Zetia </i>sales on which Schering-Plough receives a greater share of profits. Operating income included expenses that the Partners contractually agreed to share, such as a portion of manufacturing costs, specifically identified promotion costs (including direct-to-consumer advertising and direct and identifiable out-of-pocket promotion) and other agreed upon costs for specific services such as on-going clinical research, market support, market research, market expansion, as well as a specialty sales force and physician education programs. Expenses incurred in support of the MSP Partnership but not shared between the Partners, such as marketing and administrative expenses (including certain sales force costs), as well as certain manufacturing costs, are not included in <i>Equity income from affiliates</i>. However, these costs are reflected in the overall results of each company. Certain research and development expenses were generally shared equally by the Partners, after adjusting for earned milestones. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     See Note 12 for information with respect to litigation involving the MSP Partnership and the Partners related to the sale and promotion of <i>Zetia </i>and <i>Vytorin</i>. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Summarized financial information for the MSP Partnership is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Sales </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>4,128.1</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4,561.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,186.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Vytorin </div></td> <td> </td> <td> </td> <td align="right"><b>2,060.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2,360.0</td> <td> </td> <td> </td> <td> </td> <td align="right">2,779.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Zetia </div></td> <td> </td> <td> </td> <td align="right"><b>2,068.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2,201.1</td> <td> </td> <td> </td> <td> </td> <td align="right">2,407.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Materials and production costs </div></td> <td> </td> <td> </td> <td align="right"><b>173.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right">176.3</td> <td> </td> <td> </td> <td> </td> <td align="right">216.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other expense, net </div></td> <td> </td> <td> </td> <td align="right"><b>1,000.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,230.1</td> <td> </td> <td> </td> <td> </td> <td align="right">1,307.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Income before taxes </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,954.4</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,154.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,663.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">MSD’s share of income before taxes<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,476.0</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,489.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,832.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total assets <sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>506.0</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">608.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total liabilities<sup style="font-size: 85%; vertical-align: text-top"> <i>(2)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>432.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right">488.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"> </td> <td width="1%"> </td> <td width="96"> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>MSD’s share of the MSP Partnership’s income before taxes differs from the equity income recognized from the MSP Partnership primarily due to the timing of recognition of certain transactions between MSD and the MSP Partnership during the periods presented, including milestone payments.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> <td> </td> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup></td> <td> </td> <td><i>Amounts are comprised almost entirely of current balances.</i></td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>AstraZeneca LP</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In 1982, MSD entered into an agreement with Astra AB (“Astra”) to develop and market Astra’s products under a royalty-bearing license. In 1993, MSD’s total sales of Astra products reached a level that triggered the first step in the establishment of a joint venture business carried on by Astra Merck Inc. (“AMI”), in which MSD and Astra each owned a 50% share. This joint venture, formed in 1994, developed and marketed most of Astra’s new prescription medicines in the United States including <i>Prilosec, </i>the first of a class of medications known as proton pump inhibitors, which slows the production of acid from the cells of the stomach lining. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In 1998, MSD and Astra completed the restructuring of the ownership and operations of the joint venture whereby MSD acquired Astra’s interest in AMI, renamed KBI Inc. (“KBI”), and contributed KBI’s operating assets to a new U.S. limited partnership, Astra Pharmaceuticals L.P. (the “Partnership”), in exchange for a 1% limited partner interest. Astra contributed the net assets of its wholly owned subsidiary, Astra USA, Inc., to the Partnership in exchange for a 99% general partner interest. The Partnership, renamed AstraZeneca LP (“AZLP”) upon Astra’s 1999 merger with Zeneca Group Plc (the “AstraZeneca merger”), became the exclusive distributor of the products for which KBI retained rights. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     While maintaining a 1% limited partner interest in AZLP, MSD has consent and protective rights intended to preserve its business and economic interests, including restrictions on the power of the general partner to make certain distributions or dispositions. Furthermore, in limited events of default, additional rights will be granted to MSD, including powers to direct the actions of, or remove and replace, the Partnership’s chief executive officer and chief financial officer. MSD earns ongoing revenue based on sales of current and future KBI products and such revenue was $1.4 billion, $1.6 billion and $1.7 billion in 2009, 2008 and 2007, respectively, primarily relating to sales of <i>Nexium, </i>as well as <i>Prilosec</i>. In addition, MSD earns certain Partnership returns which are recorded in <i>Equity income from affiliates </i>as reflected in the table above. Such returns include a priority return provided for in the Partnership Agreement, variable returns based, in part, upon sales of certain former Astra USA, Inc. products, and a preferential return representing MSD’s share of undistributed AZLP GAAP earnings. The AstraZeneca merger triggered a partial redemption in March 2008 of MSD’s interest in certain AZLP product rights. Upon this redemption, MSD received $4.3 billion from AZLP. This amount was based primarily on a multiple of MSD’s average annual variable returns derived from sales of the former Astra USA, Inc. products for the three years prior to the redemption (the “Limited Partner Share of Agreed Value”). MSD recorded a $1.5 billion pretax gain on the partial redemption in 2008. The partial redemption of MSD’s interest in the product rights did not result in a change in MSD’s 1% limited partnership interest. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In conjunction with the 1998 restructuring, Astra purchased an option (the “Asset Option”) for a payment of $443.0 million, which was recorded as deferred income, to buy MSD’s interest in the KBI products, excluding the gastrointestinal medicines <i>Nexium </i>and <i>Prilosec </i>(the “Non-PPI Products”). AstraZeneca can exercise the Asset Option in the first half of 2010 at an exercise price of $647 million which represents the net present value as of March 31, 2008 of projected future pretax revenue to be received by MSD from the Non-PPI Products (the “Appraised Value”). On February 26, 2010, AstraZeneca notified MSD that it was exercising the Asset Option. MSD also had the right to require Astra to purchase such interest in 2008 at the Appraised Value. In February 2008, MSD advised AstraZeneca that it would not exercise the Asset Option, thus the $443.0 million remains deferred but will be recognized when the Asset Option is consummated. In addition, in 1998 MSD granted Astra an option (the “Shares Option”) to buy MSD’s common stock interest in KBI, and, therefore, MSD’s interest in <i>Nexium </i>and <i>Prilosec</i>, exercisable two years after Astra’s exercise of the Asset Option. Astra can also exercise the Shares Option in 2017 or if combined annual sales of the two products fall below a minimum amount provided, in each case, only so long as AstraZeneca’s Asset Option has been exercised in 2010. The exercise price for the Shares Option is based on the net present value of estimated future net sales of <i>Nexium </i>and <i>Prilosec </i>as determined at the time of exercise, subject to certain true-up mechanisms. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The AstraZeneca merger constituted a Trigger Event under the KBI restructuring agreements. As a result of the merger, in exchange for MSD’s relinquishment of rights to future Astra products with no existing or pending U.S. patents at the time of the merger, Astra paid $967.4 million (the “Advance Payment”). The Advance Payment was deferred as it remained subject to a true-up calculation (the “True-Up Amount”) that was directly dependent on the fair market value in March 2008 of the Astra product rights retained by MSD. The calculated True-Up Amount of $243.7 million was returned to AZLP in March 2008 and MSD recognized a pretax gain of $723.7 million related to the residual Advance Payment balance. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Under the provisions of the KBI restructuring agreements, because a Trigger Event has occurred, the sum of the Limited Partner Share of Agreed Value, the Appraised Value and the True-Up Amount was guaranteed to be a minimum of $4.7 billion. Distribution of the Limited Partner Share of Agreed Value less payment of the True-Up Amount resulted in cash receipts to MSD of $4.0 billion and an aggregate pretax gain of $2.2 billion which is included in <i>Other (income) expense, net </i>in 2008. AstraZeneca’s purchase of MSD’s interest in the Non-PPI Products is contingent upon the exercise of the Asset Option by AstraZeneca in 2010 and, therefore, payment of the Appraised Value may or may not occur. Also, in March 2008, the $1.38 billion outstanding loan from Astra plus interest through the redemption date was settled. As a result of these transactions, MSD received net proceeds from AZLP of $2.6 billion. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Summarized financial information for AZLP is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="60%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="7%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="7%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Sales </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>5,743.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,450.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">6,345.4</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Materials and production costs </div></td> <td> </td> <td> </td> <td align="right"><b>3,136.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2,682.4</td> <td> </td> <td> </td> <td> </td> <td align="right">3,364.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other expense, net </div></td> <td> </td> <td> </td> <td align="right"><b>1,194.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,408.1</td> <td> </td> <td> </td> <td> </td> <td align="right">1,090.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Income before taxes </div></td> <td> </td> <td> </td> <td align="right"><b>1,412.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,359.9</td> <td> </td> <td> </td> <td> </td> <td align="right">1,891.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr style="font-size: 10pt"> <td colspan="13"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Current assets </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,956.2</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,023.9</td> <td> </td> <td> </td> <td align="right"> </td> <td align="right"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Noncurrent assets </div></td> <td> </td> <td> </td> <td align="right"><b>294.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">359.0</td> <td> </td> <td> </td> <td> </td> <td align="right"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total liabilities (all current) </div></td> <td> </td> <td> </td> <td align="right"><b>3,489.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">3,054.4</td> <td> </td> <td> </td> <td> </td> <td align="right"> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Merial Limited</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In 1997, MSD and Rhône-Poulenc S.A. (now sanofi-aventis) combined their animal health businesses to form Merial Limited (“Merial”), a fully integrated animal health company, which was a stand-alone joint venture, 50% owned by each party. Merial provides a comprehensive range of pharmaceuticals and vaccines to enhance the health, well-being and performance of a wide range of animal species. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On September 17, 2009, MSD sold its 50% interest in Merial to sanofi-aventis for $4 billion in cash. The sale resulted in the recognition of a $3.2 billion gain in 2009 reflected in <i>Other income (expense), net</i>. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Also, in connection with the sale of Merial, MSD, sanofi-aventis and Schering-Plough signed a call option agreement. Under the terms of the call option agreement, following the closing of the Merger, sanofi-aventis had an option to require MSD’s Parent Company to combine its Intervet/Schering-Plough Animal Health business with Merial to form an animal health joint venture that would be owned equally by MSD’s Parent Company and sanofi-aventis. On March 9, 2010, MSD’s Parent Company and sanofi-aventis announced that sanofi-aventis had exercised the option. As part of the call option agreement, the value of Merial has been fixed at $8 billion. The minimum total value received by MSD’s Parent Company for contributing Intervet/Schering-Plough to the combined entity would be $9.25 billion (subject to customary transaction adjustments), consisting of a floor valuation of Intervet/Schering-Plough which is fixed at a minimum of $8.5 billion (subject to potential upward revision based on a valuation exercise by the two parties) and an additional payment by sanofi-aventis of $750 million. Based on the valuation exercise of Intervet/Schering-Plough and the customary transaction adjustments, if Merial and Intervet/Schering-Plough are combined, a payment may be required to be paid by either party to make the joint venture equally owned by MSD’s Parent Company and sanofi-aventis. This payment would true-up the value of the contributions so that they are equal. Any formation of a new animal health joint venture with sanofi-aventis is subject to customary closing conditions including antitrust review in the United States and Europe. Prior to the closing of the Merger, the agreements provided MSD with certain rights to terminate the call option for a fee of $400 million. The recognition of the termination fee was deferred until the fourth quarter of 2009 when the conditions that could have triggered its payment lapsed. The amount is reflected in <i>Other (income) expense, net.</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Merial sales were $1.8 billion for the period from January 1, 2009 until the September 17, 2009 divestiture date, $2.6 billion for 2008 and $2.4 billion for 2007. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Sanofi Pasteur MSD</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In 1994, MSD and Pasteur Mérieux Connaught (now Sanofi Pasteur S.A.) established an equally-owned joint venture to market vaccines in Europe and to collaborate in the development of combination vaccines for distribution in Europe. Joint venture vaccine sales were $1.6 billion for 2009, $1.9 billion for 2008 and $1.4 billion for 2007. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Johnson & Johnson°Merck Consumer Pharmaceuticals Company</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In 1989, MSD formed a joint venture with Johnson & Johnson to develop and market a broad range of nonprescription medicines for U.S. consumers. This 50% owned venture was subsequently expanded into Canada. Significant joint venture products are <i>Pepcid AC</i>, an over-the-counter form of the ulcer medication <i>Pepcid</i>, as well as <i>Pepcid Complete</i>, an over-the-counter product which combines the ulcer medication with antacids. Sales of products marketed by the joint venture were $203.2 million for 2009, $212.1 million for 2008 and $219.7 million for 2007. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Investments in affiliates accounted for using the equity method, including the above joint ventures, totaled $1.1 billion at December 31, 2009 and $1.4 billion at December 31, 2008. These amounts are reported in <i>Other assets</i>. Amounts due from the above joint ventures included in <i>Deferred income taxes and other current assets </i>were $552.4 million at December 31, 2009 and $623.4 million at December 31, 2008. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Summarized information for those affiliates (excluding the MSP Partnership and AZLP disclosed separately above) is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="60%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="7%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="7%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b><sup style="font-size: 85%; vertical-align: text-top"><b><i>(1)</i></b></sup></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Sales </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3,767.0</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4,860.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4,218.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Materials and production costs </div></td> <td> </td> <td> </td> <td align="right"><b>1,225.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,553.6</td> <td> </td> <td> </td> <td> </td> <td align="right">1,346.9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other expense, net </div></td> <td> </td> <td> </td> <td align="right"><b>1,564.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2,297.9</td> <td> </td> <td> </td> <td> </td> <td align="right">1,995.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Income before taxes </div></td> <td> </td> <td> </td> <td align="right"><b>977.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,008.9</td> <td> </td> <td> </td> <td> </td> <td align="right">876.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr style="font-size: 10pt"> <td colspan="13"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Current assets </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>757.2</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,935.8</td> <td> </td> <td> </td> <td align="right"> </td> <td align="right"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Noncurrent assets </div></td> <td> </td> <td> </td> <td align="right"><b>270.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,174.4</td> <td> </td> <td> </td> <td> </td> <td align="right"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Current liabilities </div></td> <td> </td> <td> </td> <td align="right"><b>601.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,152.6</td> <td> </td> <td> </td> <td> </td> <td align="right"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Noncurrent liabilities </div></td> <td> </td> <td> </td> <td align="right"><b>84.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">266.5</td> <td> </td> <td> </td> <td> </td> <td align="right"> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Includes information for Merial until divestiture on September 17, 2009.</i></td> </tr> </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>11. Loans Payable, Long-Term Debt and Other Commitments</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Loans payable at December 31, 2009 included $298.2 million of long-dated notes that are subject to repayment at the option of the holders on an annual basis, $106.0 million of long-dated notes that are subject to repayment at the option of the holders beginning in 2010 that were reclassified from long-term debt during 2009, and short-term foreign borrowing of $46.3 million. Loans payable at December 31, 2008 included $1.9 billion of commercial paper borrowings, $322.2 million of long-dated notes that are subject to repayment at the option of the holders on an annual basis and $68 million of short-term foreign borrowings. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Long-term debt at December 31 consisted of: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">1.875% notes due 2011 </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,249.8</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">5.00% notes due 2019 </div></td> <td> </td> <td> </td> <td align="right"><b>1,242.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">4.75% notes due 2015 </div></td> <td> </td> <td> </td> <td align="right"><b>1,065.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,078.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">4.00% notes due 2015 </div></td> <td> </td> <td> </td> <td align="right"><b>1,004.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">5.85% notes due 2039 </div></td> <td> </td> <td> </td> <td align="right"><b>748.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">4.375% notes due 2013 </div></td> <td> </td> <td> </td> <td align="right"><b>522.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right">530.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">6.4% debentures due 2028 </div></td> <td> </td> <td> </td> <td align="right"><b>499.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right">499.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">5.75% notes due 2036 </div></td> <td> </td> <td> </td> <td align="right"><b>497.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">497.8</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">5.95% debentures due 2028 </div></td> <td> </td> <td> </td> <td align="right"><b>497.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right">497.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">5.125% notes due 2011 </div></td> <td> </td> <td> </td> <td align="right"><b>268.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">273.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">6.3% debentures due 2026 </div></td> <td> </td> <td> </td> <td align="right"><b>248.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">248.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right"><b>223.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">319.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>8,067.8</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,943.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD was a party to interest rate swap contracts which effectively convert the 5.125% fixed-rate notes and $750 million of the 4.00% fixed-rate notes to floating-rate instruments (see Note 7). </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Other (as presented in the table above) at December 31, 2009 and 2008 consisted primarily of $186.7 million and $292.7 million of borrowings at variable rates averaging 0.0% and 1.1%, respectively. Of these borrowings, $158.7 million is subject to repayment at the option of the holders beginning in 2011. In both years, Other also included foreign borrowings at varying rates up to 8.5%. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On June 25, 2009, MSD closed an underwritten public offering of $4.25 billion senior unsecured notes consisting of $1.25 billion aggregate principal amount of 1.875% notes due 2011, $1.0 billion aggregate principal amount of 4.00% notes due 2015, $1.25 billion aggregate principal amount of 5.00% notes due 2019 and $750 million aggregate principal amount of 5.85% notes due 2039. Interest on the notes is payable semi-annually. The notes of each series are redeemable in whole or in part at any time, at MSD’s option at the redemption prices specified in each notes associated prospectus. Proceeds from the notes were used to fund a portion of the cash consideration of the Merger. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Also, in connection with the Merger, effective as of November 3, 2009, MSD’s Parent Company executed a full and unconditional guarantee of the existing debt of MSD and MSD executed a full and unconditional guarantee of the existing debt of MSD’s Parent Company (excluding commercial paper), including for payments of principal and interest. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The aggregate maturities of long-term debt for each of the next five years are as follows: 2010, $6.3 million; 2011, $1.5 billion; 2012, $4.2 million; 2013, $529.9 million; 2014, $15.8 million. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Also, in connection with the Merger, on March 8, 2009, MSD entered into a financing commitment letter with JPMorgan Chase Bank, N.A. and J.P. Morgan Securities Inc. (collectively “JPMorgan”), under which JPMorgan committed to provide $7 billion of financing. On May 6, 2009, MSD entered into a $3 billion 364-day senior unsecured interim term loan facility (the “bridge loan facility”); a $3 billion 364-day asset sale revolving credit facility (the “asset sale facility”); and a $1 billion 364-day corporate revolving credit facility (the “incremental facility”). In connection with the above $4.25 billion offering, the bridge loan facility was terminated and the commitment of the lenders under the 364-day asset sale facility was reduced. Upon completion of the sale of Merial to sanofi-aventis (see Note 10), the asset sale facility was terminated. The incremental facility is available to backstop commercial paper and for general corporate purposes. This facility has not been drawn on and will expire in November 2010. MSD has incurred commitment fees of approximately $150 million associated with these facilities which are being amortized over the commitment period. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In April 2009, MSD amended its $1.5 billion, 5-year revolving credit facility maturing in April 2013 to allow the facility to remain in place after the Merger. The facility provides backup liquidity for MSD’s commercial paper borrowing facility and is to be used for general corporate purposes. MSD has not drawn funding from the facility. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Rental expense under operating leases, net of sublease income, was $193.3 million in 2009, $222.4 million in 2008 and $197.5 million in 2007. The minimum aggregate rental commitments under noncancellable leases are as follows: 2010, $99.2 million; 2011, $92.5 million; 2012, $70.9 million; 2013, $47.9 million and thereafter, $68.6 million. MSD has no significant capital leases. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>12. Contingencies and Environmental Liabilities</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property and commercial litigation, as well as additional matters such as antitrust actions. MSD records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. For product liability claims, a portion of the overall accrual is actuarially determined and considers such factors as past experience, number of claims reported and estimates of claims incurred but not yet reported. Individually significant contingent losses are accrued when probable and reasonably estimable. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD’s decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such decisions are made. As a result of a number of factors, product liability insurance has become less available while the cost has increased significantly. MSD has evaluated its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and as such, has no insurance for certain product liabilities effective August 1, 2004, including liability for MSD products first sold after that date. MSD will continue to evaluate its insurance needs and the costs, availability and benefits of product liability insurance in the future. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Vioxx </i></b><b>Litigation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Product Liability Lawsuits</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, individual and putative class actions have been filed against MSD in state and federal courts alleging personal injury and/or economic loss with respect to the purchase or use of <i>Vioxx</i>. All such actions filed in federal court are coordinated in a multidistrict litigation in the U.S. District Court for the Eastern District of Louisiana (the “MDL”) before District Judge Eldon E. Fallon. A number of such actions filed in state court are coordinated in separate coordinated proceedings in state courts in New Jersey, California and Texas, and the counties of Philadelphia, Pennsylvania and Washoe and Clark Counties, Nevada. As of December 31, 2009, MSD had been served or was aware that it had been named as a defendant in approximately 9,100 pending lawsuits, which include approximately 19,400 plaintiff groups, alleging personal injuries resulting from the use of <i>Vioxx</i>, and in approximately 44 putative class actions alleging personal injuries and/or economic loss. (All of the actions discussed in this paragraph and in “Other Lawsuits” below are collectively referred to as the “<i>Vioxx </i>Product Liability Lawsuits.”) Of these lawsuits, approximately 7,350 lawsuits representing approximately 15,525 plaintiff groups are or are slated to be in the federal MDL and approximately 10 lawsuits representing approximately 10 plaintiff groups are included in a coordinated proceeding in New Jersey Superior Court before Judge Carol E. Higbee. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Of the plaintiff groups described above, most are currently in the <i>Vioxx </i>Settlement Program, described below. As of December 31, 2009, 80 plaintiff groups who were otherwise eligible for the Settlement Program have not participated and their claims remain pending against MSD. In addition, the claims of approximately 275 plaintiff groups who are not eligible for the Settlement Program remain pending against MSD. A number of these 275 plaintiff groups are subject to various motions to dismiss for failure to comply with court-ordered deadlines. Since December 31, 2009, certain of these plaintiff groups have since been dismissed. In addition, the claims of over 35,600 plaintiffs had been dismissed as of December 31, 2009, the vast majority of which were dismissed as a result of the settlement process discussed below. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On November 9, 2007, MSD announced that it had entered into an agreement (the “Settlement Agreement”) with the law firms that comprise the executive committee of the Plaintiffs’ Steering Committee (“PSC”) of the federal <i>Vioxx </i>MDL, as well as representatives of plaintiffs’ counsel in the Texas, New Jersey and California state coordinated proceedings, to resolve state and federal myocardial infarction (“MI”) and ischemic stroke (“IS”) claims filed as of that date in the United States. The Settlement Agreement applies only to U.S. legal residents and those who allege that their MI or IS occurred in the United States. The Settlement Agreement provided for MSD to pay a fixed aggregate amount of $4.85 billion into two funds ($4.0 billion for MI claims and $850 million for IS claims). </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Interim and final payments have been made to certain qualifying claimants. It is expected that the remainder of the full $4.85 billion will be distributed in the first half of 2010. MSD has completed making payments into the settlement funds. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     There are two U.S. <i>Vioxx </i>Product Liability Lawsuits currently scheduled for trial in 2010. MSD has previously disclosed the outcomes of several <i>Vioxx </i>Product Liability Lawsuits that were tried prior to 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Of the cases that went to trial, the <i>McDarby </i>matter was resolved in the fourth quarter of 2009, leaving only two unresolved post-trial appeals: <i>Ernst v. Merck </i>and <i>Garza v. Merck</i>. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously reported, in September 2006, MSD filed a notice of appeal of the August 2005 jury verdict in favor of the plaintiff in the Texas state court case, <i>Ernst v. Merck</i>. On May 29, 2008, the Texas Court of Appeals reversed the trial court’s judgment and issued a judgment in favor of MSD. The Court of Appeals found the evidence to be legally insufficient on the issue of causation. Plaintiff filed a motion for rehearing <i>en banc </i>in the Court of Appeals. On June 4, 2009, in response to plaintiff’s motion for rehearing, the Court of Appeals issued a new opinion reversing the jury’s verdict and rendered judgment for MSD. On September 8, 2009, plaintiff filed a second motion for rehearing <i>en banc, </i>which the Court of Appeals denied on November 19, 2009. On December 7, 2009, plaintiff filed another motion for rehearing, which the Court of Appeals again denied. Plaintiff filed a petition for review with the Supreme Court of Texas on February 3, 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously reported, in April 2006, in <i>Garza v. Merck</i>, a jury in state court in Rio Grande City, Texas returned a verdict in favor of the family of decedent Leonel Garza. The jury awarded a total of $7 million in compensatory damages to Mr. Garza’s widow and three sons. The jury also purported to award $25 million in punitive damages even though under Texas law, in this case, potential punitive damages were capped at $750,000. In May 2008, the San Antonio Court of Appeals reversed the judgment and rendered a judgment in favor of MSD. In December 2008, the Court of Appeals, on rehearing, vacated its prior ruling and issued a replacement. In the new ruling, the court ordered a take-nothing judgment for MSD on the design defect claim, but reversed and remanded for a new trial as to the strict liability claim because of juror misconduct. In January 2009, MSD filed a petition for review with the Texas Supreme Court. The Texas Supreme Court granted MSD’s petition for review and oral argument was held on January 20, 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Other Lawsuits</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Approximately 190 claims by individual private third-party payors were filed in the New Jersey court and in federal court in the MDL. On September 15, 2009, MSD announced it had finalized a settlement agreement, which it had previously disclosed, to resolve all pending lawsuits in which U.S.-based private third-party payors (“TPPs”) sought reimbursement for covering <i>Vioxx </i>purchased by their plan members. Certain other claimants participated in the resolution as well. The agreement provided that MSD did not admit wrongdoing or fault. Under the settlement agreement, MSD paid a fixed total of $80 million. This amount includes a settlement fund that will be divided among the TPPs (insurers, employee benefit plans and union welfare funds) participating in the resolution in accordance with a formula that is based on product volume and a provision for potential payment of attorneys’ fees. In return, the settling TPPs will dismiss their lawsuits and release their claims against MSD. Stipulated dismissals of the settled TTP actions were filed in New Jersey and the MDL in December 2009. MSD recorded a charge of $80 million in the second quarter of 2009 related to the settlement and paid the $80 million in the fourth quarter of 2009. Since the settlement, one additional TPP case has been filed which is pending in the MDL proceeding. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Separately, there are also still pending in various U.S. courts putative class actions purportedly brought on behalf of individual purchasers or users of <i>Vioxx </i>and seeking reimbursement of alleged economic loss. In the MDL proceeding, 33 such class actions remain. In 2005, MSD moved to dismiss a master complaint that includes these cases, but the MDL court has not yet ruled on that motion. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On March 17, 2009, the New Jersey Superior Court denied plaintiffs’ motion for class certification in <i>Martin-Kleinman v. Merck</i>, a putative consumer class action. Plaintiffs moved for leave to appeal the decision to the New Jersey Supreme Court on November 6, 2009. On January 12, 2010, the New Jersey Supreme Court denied plaintiff’s request for appellate review of the denial of class certification. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On June 12, 2008, a Missouri state court certified a class of Missouri plaintiffs seeking reimbursement for out-of-pocket costs relating to <i>Vioxx. </i>The plaintiffs do not allege any personal injuries from taking <i>Vioxx. </i>The Missouri Court of Appeals affirmed the trial court’s certification of a class on May 12, 2009, and the Missouri Supreme Court denied MSD’s application for review of that decision on September 1, 2009. Trial has been set for April 11, 2011. In addition, in Indiana, plaintiffs have filed a motion to certify a class of Indiana <i>Vioxx </i>purchasers in a case pending before the Circuit Court of Marion County, Indiana; discovery in that case is ongoing. Briefing is complete on plaintiffs’ motion to certify a class of Kentucky <i>Vioxx </i>purchasers before the Circuit Court of Pike County, Kentucky. A hearing on this matter was held on February 26, 2010. A judge in Cook County, Illinois has consolidated three putative class actions brought by <i>Vioxx </i>purchasers. The plaintiffs in those actions recently voluntarily dismissed their lawsuits. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Plaintiffs also filed a class action in California state court seeking certification of a class of California third-party payors and end-users. The trial court denied the motion for class certification on April 30, 2009, and the Court of Appeal affirmed that ruling on December 15, 2009. On January 25, 2010, plaintiffs filed a petition for review with the California Supreme Court. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD has also been named as a defendant in twenty-one separate lawsuits brought by government entities, including the Attorneys General of thirteen states, five counties, the City of New York, and private citizens (who have brought <i>qui tam </i>and taxpayer derivative suits). These actions allege that MSD misrepresented the safety of <i>Vioxx </i>and seek: (i) recovery of the cost of <i>Vioxx </i>purchased or reimbursed by the government entity and its agencies; (ii) reimbursement of all sums paid by the government entity and its agencies for medical services for the treatment of persons injured by <i>Vioxx</i>; (iii) damages under various common law theories; and/or (iv) remedies under various state statutory theories, including state consumer fraud and/or fair business practices or Medicaid fraud statutes, including civil penalties. Nine of the thirteen cases are pending in the MDL proceeding, two are subject to conditional orders transferring them to the MDL proceeding, and two were remanded to state court. One of the lawsuits brought by the counties is a class action filed by Santa Clara County, California on behalf of all similarly situated California counties. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD’s motion for summary judgment was granted in November 2009 in a case brought by the Attorney General of Texas that was scheduled to go to trial in early 2010. The Texas Attorney General did not appeal. In the Michigan Attorney General case, MSD is currently seeking appellate review of the trial court’s order denying MSD’s motion to dismiss. The trial court has entered a stay of proceedings (including discovery) pending the result of that appeal. Finally, the Attorney General actions in the MDL described in the previous paragraph are in the discovery phase. The Louisiana Attorney General case is currently scheduled for trial in the MDL court on April 12, 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Shareholder Lawsuits</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, in addition to the <i>Vioxx </i>Product Liability Lawsuits, MSD and various current and former officers and directors are defendants in various putative class actions and individual lawsuits under the federal securities laws and state securities laws (the “<i>Vioxx</i> Securities Lawsuits”). All of the <i>Vioxx </i>Securities Lawsuits pending in federal court have been transferred by the Judicial Panel on Multidistrict Litigation (the “JPML”) to the U.S. District Court for the District of New Jersey before District Judge Stanley R. Chesler for inclusion in a nationwide MDL (the “Shareholder MDL”). Judge Chesler has consolidated the <i>Vioxx </i>Securities Lawsuits for all purposes. The putative class action, which requested damages on behalf of purchasers of MSD stock between May 21, 1999 and October 29, 2004, alleged that the defendants made false and misleading statements regarding <i>Vioxx </i>in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and sought unspecified compensatory damages and the costs of suit, including attorneys’ fees. The complaint also asserted claims under Section 20A of the Securities and Exchange Act against certain defendants relating to their sales of MSD stock and under Sections 11, 12 and 15 of the Securities Act of 1933 against certain defendants based on statements in a registration statement and certain prospectuses filed in connection with the MSD Stock Investment Plan, a dividend reinvestment plan. On April 12, 2007, Judge Chesler granted defendants’ motion to dismiss the complaint with prejudice. Plaintiffs appealed Judge Chesler’s decision to the U.S. Court of Appeals for the Third Circuit. On September 9, 2008, the Third Circuit issued an opinion reversing Judge Chesler’s order and remanding the case to the District Court. MSD filed a petition for a writ of certiorari with the United States Supreme Court on January 15, 2009, which the Supreme Court granted on May 26, 2009. Oral argument was held on November 30, 2009 and a decision is expected in the first half of 2010. While the petition for certiorari was pending, plaintiffs filed their Consolidated and Fifth Amended Class Action Complaint in the District Court. MSD filed a motion to dismiss that complaint on May 1, 2009, following which the District Court proceedings were stayed pending the outcome of the Supreme Court appeal. The motion to dismiss in the District Court has been withdrawn without prejudice to MSD’s right to re-file such a motion pending the outcome of the Supreme Court appeal. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In October 2005, a Dutch pension fund filed a complaint in the District of New Jersey alleging violations of federal securities laws as well as violations of state law against MSD and certain officers. Pursuant to the Case Management Order governing the Shareholder MDL, the case, which is based on the same allegations as the <i>Vioxx </i>Securities Lawsuits, was consolidated with the <i>Vioxx</i> Securities Lawsuits. Defendants’ motion to dismiss the pension fund’s complaint was filed on August 3, 2007. In September 2007, the Dutch pension fund filed an amended complaint rather than responding to defendants’ motion to dismiss. In addition, in 2007, six new complaints were filed in the District of New Jersey on behalf of various foreign institutional investors also alleging violations of federal securities laws as well as violations of state law against MSD and certain officers. By stipulation, defendants are not required to respond to these complaints until the resolution of any motion to dismiss in the consolidated securities action. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In addition, as previously disclosed, various putative class actions filed in federal court under the Employee Retirement Income Security Act (“ERISA”) against MSD and certain current and former officers and directors (the “<i>Vioxx </i>ERISA Lawsuits” and, together with the <i>Vioxx </i>Securities Lawsuits and the <i>Vioxx </i>Derivative Lawsuits described below, the “<i>Vioxx </i>Shareholder Lawsuits”) have been transferred to the Shareholder MDL and consolidated for all purposes. The consolidated complaint asserts claims for breach of fiduciary duty on behalf of certain of MSD’s current and former employees who are participants in certain of MSD’s retirement plans. The complaint makes similar allegations with respect to <i>Vioxx </i>to the allegations contained in the <i>Vioxx </i>Securities Lawsuits. On July 11, 2006, Judge Chesler granted in part and denied in part defendants’ motion to dismiss the ERISA complaint. On October 19, 2007, plaintiffs moved for certification of a class of individuals who were participants in and beneficiaries of MSD’s retirement savings plans at any time between October 1, 1998 and September 30, 2004 and whose plan accounts included investments in the MSD Common Stock Fund and/or MSD common stock. On February 9, 2009, the court denied the motion for certification of a class as to one count and granted the motion as to the remaining counts. The court also excluded from the class definition those individuals who (i) were not injured in connection with their investments in MSD stock and (ii) executed post-separation settlement agreements that released their claims under ERISA. On March 23, 2009, Judge Chesler denied defendants’ motion for judgment on the pleadings. On May 11, 2009, Judge Chesler entered an order denying plaintiffs’ motion for partial summary judgment against certain individual defendants, which had been filed on December 24, 2008. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, on October 29, 2004, two individual shareholders made a demand on MSD’s Board to take legal action against Mr. Raymond Gilmartin, former Chairman, President and Chief Executive Officer, and other individuals for allegedly causing damage to MSD with respect to the allegedly improper marketing of <i>Vioxx</i>. In December 2004, the Special Committee of the Board of Directors retained the Honorable John S. Martin, Jr. of Debevoise & Plimpton LLP to conduct an independent investigation of, among other things, the allegations set forth in the demand. Judge Martin’s report was made public in September 2006. Based on the Special Committee’s recommendation made after careful consideration of the Martin report and the impact that derivative litigation would have on MSD, the Board rejected the demand. On October 11, 2007, two shareholders filed a shareholder derivative lawsuit purportedly on MSD’s behalf in state court in Atlantic County, New Jersey against current and former officers and directors of MSD. Plaintiffs alleged that the Board’s rejection of their demand was unreasonable and improper, and that the defendants breached various duties to MSD in allowing <i>Vioxx </i>to be marketed. The parties reached a proposed settlement and, on February 8, 2010, the court issued an order preliminarily approving the settlement and requiring that notice of the proposed settlement be made to MSD’s Parent Company’s shareholders. On February 9, 2010, MSD’s Parent Company notified shareholders of the proposed settlement and its terms. On March 22, 2010, the court approved the settlement. Under the settlement, certain corporate governance changes will be made and policies and procedures previously established will be supplemented. In addition, MSD will pay an award of fees and expenses to plaintiffs’ attorneys in an amount to be determined by the court, not to exceed $12.15 million. In addition, MSD, the plaintiffs and the individual defendants will exchange full, mutual releases of all claims that were, or could have been, asserted in the derivative actions. The settlement does not constitute an admission of liability or wrongful conduct by MSD or by any of the defendants named in the actions. This settlement also resolves the federal consolidated shareholder derivative action described below. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, various shareholder derivative actions filed in federal court were transferred to the Shareholder MDL and consolidated for all purposes by Judge Chesler (the “<i>Vioxx</i> Derivative Lawsuits”). On May 5, 2006, Judge Chesler granted defendants’ motion to dismiss on the grounds that plaintiffs had failed to demonstrate that demand should be excused and denied plaintiffs’ request for leave to amend their complaint. Plaintiffs appealed, arguing that Judge Chesler erred in denying plaintiffs’ leave to amend their complaint with documents acquired by stipulation of the parties. On July 18, 2007, the United States Court of Appeals for the Third Circuit reversed the District Court’s decision on the grounds that Judge Chesler should have allowed plaintiffs to seek leave to amend their complaint using the documents acquired by stipulation, and remanded the case for the District Court’s consideration of whether, even with the additional materials, plaintiffs’ proposed amendment would be futile. Plaintiffs filed their brief in support of their request for leave to amend their complaint, along with their proposed amended complaint, on November 9, 2007. The Court denied the motion on June 17, 2008, and again dismissed the case. One of the plaintiffs appealed Judge Chesler’s decision to the United States Court of Appeals for the Third Circuit. Oral argument on the appeal was held on July 15, 2009. On November 10, 2009, before any decision was issued, the appeal was stayed pending approval of the settlement reached in the derivative action pending in the New Jersey Superior Court discussed above. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>International Lawsuits</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, in addition to the lawsuits discussed above, MSD has been named as a defendant in litigation relating to <i>Vioxx </i>in various countries (collectively, the “<i>Vioxx </i>Foreign Lawsuits”) in Europe, as well as Canada, Brazil, Argentina, Australia, Turkey, Israel, The Philippines and Singapore. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In November 2006, the Superior Court in Quebec authorized the institution of a class action on behalf of all individuals who, in Quebec, consumed <i>Vioxx </i>and suffered damages arising out of its ingestion. On May 7, 2009, the plaintiffs served an introductory motion for a class action based upon that authorization, and the case remains in preliminary stages of litigation. On May 30, 2008, the provincial court of Queen’s Bench in Saskatchewan, Canada entered an order certifying a class of <i>Vioxx </i>users in Canada, except those in Quebec. MSD appealed the certification order and, on March 30, 2009, the Court of Appeal granted MSD’s appeal and quashed the certification order. On October 22, 2009, the Supreme Court of Canada dismissed plaintiffs’ appeal application and decided not to review the judgment of the Saskatchewan Court of Appeal. On July 28, 2008, the Superior Court in Ontario denied MSD’s motion to stay class proceedings in Ontario and decided to certify an overlapping class of <i>Vioxx </i>users in Canada, except those in Quebec and Saskatchewan, who allege negligence and an entitlement to elect to waive the tort. On February 13, 2009, the Ontario Divisional Court dismissed the appeal from the order denying the stay and, on May 15, 2009, the Ontario Court of Appeal denied leave to appeal. On October 22, 2009, the Supreme Court of Canada dismissed MSD’s application and decided not to review the judgment of the Ontario Court of Appeal. After the Court of Appeal for Saskatchewan quashed the multi-jurisdictional certification order entered in that province, MSD applied to the Ontario Court of Appeal for leave to appeal from the Ontario certification order. Leave to appeal was granted, the appeal was filed on May 20, 2009 and, in accordance with the court’s decision, MSD sought leave to appeal to the Divisional Court, which was denied on December 7, 2009. These procedural decisions in the Canadian litigation do not address the merits of the plaintiffs’ claims and litigation in Canada remains in an early stage. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A trial in a representative action in Australia concluded on June 25, 2009, in the Federal Court of Australia. The named plaintiff, who alleged he suffered an MI, seeks to represent others in Australia who ingested <i>Vioxx </i>and suffered an MI, thrombotic stroke, unstable angina, transient ischemic attack or peripheral vascular disease. On March 30, 2009, the trial judge entered an order directing that, in advance of all other issues in the proceeding, the issues to be determined during the trial are those issues of fact and law in the named plaintiff’s individual case, and those issues of fact and law that the trial judge finds, after hearing the evidence, are common to the claims of the group members that the named plaintiff has alleged that he represents. On March 5, 2010, the trial judge delivered his judgment. The Court decided to dismiss all claims against MSD, specifically finding that MSD had done everything that might reasonably be expected of it in the discharge of its duty of care. With regard to MSD’s Australian subsidiary, Merck Sharp & Dohme (Australia) Pty. Ltd., the Court decided to dismiss certain claims but to award the named plaintiff, who the Court found suffered an MI after ingesting <i>Vioxx </i>for approximately 33 months, compensation based on statutory claims that <i>Vioxx </i>was not fit for purpose or of merchantable quality, even though the Court rejected the applicant’s claim that MSD knew or ought to have known prior to the voluntary withdrawal of <i>Vioxx </i>in September 2004 that <i>Vioxx </i>materially increased the risk of MI. On May 7, 2010, the Court will conduct a hearing to determine the orders to be entered giving effect to the judgment, in which the court will determine which of its findings of fact and law are common to the claims of other group members and will consider any other motions that might be brought. MSD’s subsidiary intends to appeal the adverse findings after the orders have been entered. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Insurance</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, MSD has Directors and Officers insurance coverage applicable to the <i>Vioxx </i>Securities Lawsuits and <i>Vioxx </i>Derivative Lawsuits with stated upper limits of approximately $190 million. MSD has Fiduciary and other insurance for the <i>Vioxx </i>ERISA Lawsuits with stated upper limits of approximately $275 million. As a result of the previously disclosed arbitration, additional insurance coverage for these claims should also be available, if needed, under upper-level excess policies that provide coverage for a variety of risks. There are disputes with the insurers about the availability of some or all of MSD’s insurance coverage for these claims and there are likely to be additional disputes. The amounts actually recovered under the policies discussed in this paragraph may be less than the stated upper limits. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Investigations</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, MSD has received subpoenas from the DOJ requesting information related to MSD’s research, marketing and selling activities with respect to <i>Vioxx </i>in a federal health care investigation under criminal statutes. This investigation includes subpoenas for witnesses to appear before a grand jury. As previously disclosed, in March 2009, MSD received a letter from the U.S. Attorney’s Office for the District of Massachusetts identifying it as a target of the grand jury investigation regarding <i>Vioxx</i>. Further, as previously disclosed, investigations are being conducted by local authorities in certain cities in Europe in order to determine whether any criminal charges should be brought concerning <i>Vioxx</i>. MSD is cooperating with these governmental entities in their respective investigations (the “<i>Vioxx </i>Investigations”). MSD cannot predict the outcome of these inquiries; however, they could result in potential civil and/or criminal remedies. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In addition, MSD received a subpoena in September 2006 from the State of California Attorney General seeking documents and information related to the placement of <i>Vioxx </i>on California’s Medi-Cal formulary. MSD is cooperating with the Attorney General in responding to the subpoena. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Reserves</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As discussed above, on November 9, 2007, MSD entered into the Settlement Agreement with the law firms that comprise the executive committee of the PSC of the federal <i>Vioxx </i>MDL as well as representatives of plaintiffs’ counsel in the Texas, New Jersey and California state coordinated proceedings to resolve state and federal MI and IS claims filed as of that date in the United States. In 2007, as a result of entering into the Settlement Agreement, MSD recorded a pretax charge of $4.85 billion which represents the fixed aggregate amount to be paid to plaintiffs qualifying for payment under the Settlement Program. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     There are two U.S. <i>Vioxx </i>Product Liability Lawsuit trials scheduled for trial in 2010. MSD cannot predict the timing of any other trials related to the <i>Vioxx </i>Litigation. MSD believes that it has meritorious defenses to the <i>Vioxx </i>Product Liability Lawsuits, <i>Vioxx </i>Shareholder Lawsuits and <i>Vioxx </i>Foreign Lawsuits (collectively the “<i>Vioxx </i>Lawsuits”) and will vigorously defend against them. In view of the inherent difficulty of predicting the outcome of litigation, particularly where there are many claimants and the claimants seek indeterminate damages, MSD is unable to predict the outcome of these matters, and at this time cannot reasonably estimate the possible loss or range of loss with respect to the <i>Vioxx </i>Lawsuits not included in the Settlement Program. MSD has not established any reserves for any potential liability relating to the <i>Vioxx </i>Lawsuits not included in the Settlement Program, other than a reserve established in connection with the resolution of the shareholder derivative lawsuits discussed above, or the <i>Vioxx </i>Investigations. Unfavorable outcomes in the <i>Vioxx </i>Litigation could have a material adverse effect on MSD’s financial position, liquidity and results of operations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. As of December 31, 2008, MSD had an aggregate reserve of approximately $4.379 billion (the “<i>Vioxx </i>Reserve”) for the Settlement Program and future legal defense costs related to the <i>Vioxx </i>Litigation. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     During 2009, MSD spent approximately $244 million in the aggregate in legal defense costs worldwide, including approximately $54 million in the fourth quarter of 2009, related to (i) the <i>Vioxx </i>Product Liability Lawsuits, (ii) the <i>Vioxx </i>Shareholder Lawsuits, (iii) the <i>Vioxx </i>Foreign Lawsuits, and (iv) the <i>Vioxx </i>Investigations (collectively, the “<i>Vioxx </i>Litigation”). In addition, during 2009, MSD paid an additional $4.1 billion into the settlement funds in connection with the Settlement Program. Also, during 2009, $75 million of charges were recorded, including $35 million in the fourth quarter, solely for future legal defense costs for the <i>Vioxx </i>Litigation. Consequently, as of December 31, 2009, the aggregate amount of the <i>Vioxx </i>Reserve was approximately $110 million, which is solely for future legal defense costs for the <i>Vioxx </i>Litigation. Some of the significant factors considered in the review of the <i>Vioxx </i>Reserve were as follows: the actual costs incurred by MSD; the development of MSD’s legal defense strategy and structure in light of the scope of the <i>Vioxx </i>Litigation, including the Settlement Agreement and the expectation that certain lawsuits will continue to be pending; the number of cases being brought against MSD; the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the <i>Vioxx </i>Litigation. The amount of the <i>Vioxx </i>Reserve as of December 31, 2009 represents MSD’s best estimate of the minimum amount of defense costs to be incurred in connection with the remaining aspects of the <i>Vioxx</i> Litigation; however, events such as additional trials in the <i>Vioxx </i>Litigation and other events that could arise in the course of the <i>Vioxx </i>Litigation could affect the ultimate amount of defense costs to be incurred by MSD. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD will continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the <i>Vioxx </i>Reserve at any time in the future if, based upon the factors set forth, it believes it would be appropriate to do so. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Other Product Liability Litigation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Fosamax</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, MSD is a defendant in product liability lawsuits in the United States involving <i>Fosamax </i>(the “<i>Fosamax </i>Litigation”). As of December 31, 2009, approximately 978 cases, which include approximately 1,356 plaintiff groups, had been filed and were pending against MSD in either federal or state court, including one case which seeks class action certification, as well as damages and/or medical monitoring. In these actions, plaintiffs allege, among other things, that they have suffered osteonecrosis of the jaw, generally subsequent to invasive dental procedures, such as tooth extraction or dental implants and/or delayed healing, in association with the use of <i>Fosamax</i>. In addition, plaintiffs in approximately five percent of these actions allege that they sustained stress and/or low energy femoral fractures in association with the use of <i>Fosamax</i>. On August 16, 2006, the JPML ordered that the <i>Fosamax </i>product liability cases pending in federal courts nationwide should be transferred and consolidated into one multidistrict litigation (the “<i>Fosamax </i>MDL”) for coordinated pre-trial proceedings. The <i>Fosamax </i>MDL has been transferred to Judge John Keenan in the U.S. District Court for the Southern District of New York. As a result of the JPML order, approximately 771 of the cases are before Judge Keenan. Judge Keenan issued a Case Management Order (and various amendments thereto) setting forth a schedule governing the proceedings which focused primarily upon resolving the class action certification motions in 2007 and completing fact discovery in an initial group of 25 cases by October 1, 2008. Briefing and argument on plaintiffs’ motions for certification of medical monitoring classes were completed in 2007 and Judge Keenan issued an order denying the motions on January 3, 2008. On January 28, 2008, Judge Keenan issued a further order dismissing with prejudice all class claims asserted in the first four class action lawsuits filed against MSD that sought personal injury damages and/or medical monitoring relief on a class wide basis. <i>Daubert </i>motions were filed in May 2009 and Judge Keenan conducted a <i>Daubert </i>hearing in July 2009. On July 27, 2009, Judge Keenan issued his ruling on the parties’ respective <i>Daubert </i>motions. The ruling denied the Plaintiff Steering Committee’s motion and granted in part and denied in part MSD’s motion. The first MDL trial — <i>Boles v. Merck </i>— began on August 11, 2009, and ended on September 2, 2009. On September 11, 2009, the MDL court declared a mistrial in <i>Boles </i>because the eight person jury could not reach a unanimous verdict and, consequently, the <i>Boles </i>case is set to be retried on June 2, 2010. The second MDL case set for trial — <i>Flemings v. Merck </i>— was scheduled to start on January 12, 2010, but Judge Keenan granted MSD’s motion for summary judgment and dismissed the case on November 23, 2009. The next MDL case set for trial — <i>Maley v. Merck </i>— is currently scheduled to start on April 19, 2010. MSD filed a motion for summary judgment in <i>Maley</i>, which the MDL court granted in part and denied in part on January 27, 2010 and, as a result, MSD expects that the trial will commence as currently scheduled on April 19. On February 1, 2010, Judge Keenan selected a new bellwether case — <i>Judith Graves v. Merck </i>— to replace the <i>Flemings </i>bellwether case, which the MDL court dismissed when it granted summary judgment in favor of MSD. The MDL court has set the <i>Graves </i>trial to begin on September 13, 2010. A trial in Alabama is currently scheduled to begin on May 3, 2010 and a trial in Florida is currently scheduled to begin on June 21, 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In addition, in July 2008, an application was made by the Atlantic County Superior Court of New Jersey requesting that all of the <i>Fosamax </i>cases pending in New Jersey be considered for mass tort designation and centralized management before one judge in New Jersey. On October 6, 2008, the New Jersey Supreme Court ordered that all pending and future actions filed in New Jersey arising out of the use of <i>Fosamax </i>and seeking damages for existing dental and jaw-related injuries, including osteonecrosis of the jaw, but not solely seeking medical monitoring, be designated as a mass tort for centralized management purposes before Judge Higbee in Atlantic County Superior Court. As of December 31, 2009, approximately 189 cases were pending against MSD in the New Jersey coordinated proceeding. On July 20, 2009, Judge Higbee entered a Case Management Order (and various amendments thereto) setting forth a schedule that contemplates completing fact discovery in an initial group of 10 cases by February 28, 2010, followed by expert discovery in five of those cases, and a projected trial date of July 12, 2010 for the first case to be tried in the New Jersey coordinated proceeding. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Discovery is ongoing in the <i>Fosamax </i>MDL litigation, the New Jersey coordinated proceeding, and the remaining jurisdictions where <i>Fosamax </i>cases are pending. MSD intends to defend against these lawsuits. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As of December 31, 2008, MSD had a remaining reserve of approximately $33 million solely for its future legal defense costs for the <i>Fosamax </i>Litigation. During 2009, MSD spent approximately $35 million and $40 million was added to the reserve. Consequently, as of December 31, 2009, MSD had a reserve of approximately $38 million solely for its future legal defense costs for the <i>Fosamax </i>Litigation. Some of the significant factors considered in the establishment of the reserve for the <i>Fosamax </i>Litigation legal defense costs were as follows: the actual defense costs incurred thus far; the development of MSD’s legal defense strategy and structure in light of the creation of the <i>Fosamax </i>MDL; the number of cases being brought against MSD; and the anticipated timing, progression, and related costs of pre-trial activities in the <i>Fosamax </i>Litigation. MSD will continue to monitor its legal defense costs and review the adequacy of the associated reserves. Due to the uncertain nature of litigation, MSD is unable to reasonably estimate its costs beyond the third quarter of 2010. MSD has not established any reserves for any potential liability relating to the <i>Fosamax </i>Litigation. Unfavorable outcomes in the <i>Fosamax </i>Litigation could have a material adverse effect on MSD’s financial position, liquidity and results of operations. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Commercial Litigation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>AWP Litigation and Investigations</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, MSD was joined in ongoing litigation alleging manipulation by pharmaceutical manufacturers of Average Wholesale Prices (“AWP”), which are sometimes used in calculations that determine public and private sector reimbursement levels. The complaints allege violations of federal and state law, including fraud, Medicaid fraud and consumer protection violations, among other claims. The outcome of these litigations and investigations could include substantial damages, the imposition of substantial fines, penalties and injunctive or administrative remedies. In 2002, the JPML ordered the transfer and consolidation of all pending federal AWP cases to federal court in Boston, Massachusetts. Plaintiffs filed one consolidated class action complaint, which aggregated the claims previously filed in various federal district court actions and also expanded the number of manufacturers to include some which, like MSD, had not been defendants in any prior pending case. In May 2003, the court granted MSD’s motion to dismiss the consolidated class action and dismissed MSD from the class action case. MSD and many other pharmaceutical manufacturers are defendants in similar complaints pending in federal and state court including cases brought individually by a number of counties in the State of New York. Fifty of the county cases have been consolidated in New York state court. MSD was dismissed from the Suffolk County case, which was the first of the New York county cases to be filed. In addition to the New York county cases, as of December 31, 2009, MSD was a defendant in state cases brought by the Attorneys General of eleven states, all of which are being defended. In February 2009, the Kansas Attorney General filed suit against MSD and several other manufacturers. AWP claims brought by the Attorney General of Arizona against MSD were dropped in 2009. The court in the AWP cases pending in Hawaii listed MSD and others to be set for trial in August 2010. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD continues to respond to litigation brought by certain states and private payors and to investigations initiated by the Department of Health and Human Services, the Department of Justice and several states regarding AWP. MSD is cooperating with these investigations. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Governmental Proceedings</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, in February 2008, MSD entered into a Corporate Integrity Agreement (“CIA”) with the U.S. Department of Health and Human Services Office of Inspector General (“HHS-OIG”) for a five-year term. The CIA requires, among other things, that MSD maintain its ethics training program and policies and procedures governing promotional practices and Medicaid price reporting. Further, as required by the CIA, MSD has retained an Independent Review Organization to conduct a systems review of its promotional policies and procedures and to conduct, on a sample basis, transactional reviews of MSD’s promotional programs and certain Medicaid pricing calculations. MSD is also required to provide regular reports and certifications to the HHS-OIG regarding its compliance with the CIA. MSD believes that its promotional practices and Medicaid price reports meet the requirements of the CIA. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Vytorin/Zetia </i></b><b>Litigation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, MSD (as well as MSD’s Parent Company) has received several letters from the House Committee on Energy and Commerce, its Subcommittee on Oversight and Investigations (“O&I”), and the Ranking Minority Member of the Senate Finance Committee, collectively seeking a combination of witness interviews, documents and information on a variety of issues related to the ENHANCE clinical trial, the sale and promotion of <i>Vytorin</i>, as well as sales of stock by corporate officers. In addition, as previously disclosed, since August 2008, MSD (as well as MSD’s Parent Company) has received three additional letters each from O&I, including identical letters dated February 19, 2009, seeking certain information and documents related to the SEAS clinical trial. As previously disclosed, MSD received subpoenas from the New York State Attorney General’s Office and a letter from the Connecticut Attorney General seeking similar information and documents, and on July 15, 2009, MSD and Schering-Plough announced that they reached a civil settlement with the Attorneys General representing 35 states and the District of Columbia to resolve a previously disclosed investigation by that group into whether the companies violated state consumer protection laws when marketing <i>Vytorin </i>and <i>Zetia</i>. As part of the settlement, the companies agreed to reimburse the investigative costs of the 35 states and the District of Columbia, which totaled $5.4 million, and to make voluntary assurances of compliance related to the promotion of <i>Vytorin</i> and <i>Zetia</i>, including agreeing to continue to comply with the Food, Drug and Cosmetic Act, the U.S. Food and Drug Administration Amendments Act, and other laws requiring the truthful and non-misleading marketing of pharmaceutical products. The settlement did not include any admission of misconduct or liability by the companies. Furthermore, as previously disclosed, in September 2008, the companies received letters from the Civil Division of the DOJ informing them that the DOJ is investigating whether their conduct relating to the promotion of <i>Vytorin</i> caused false claims to be submitted to federal health care programs. MSD is cooperating with these investigations and responding to the inquiries. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, MSD had become aware of or been served with approximately 145 civil class action lawsuits alleging common law and state consumer fraud claims in connection with the MSP Partnership’s sale and promotion of <i>Vytorin </i>and <i>Zetia</i>. Certain of those lawsuits alleged personal injuries and/or sought medical monitoring. The lawsuits against MSD and Schering-Plough were consolidated in a single multi-district litigation docket before Judge Cavanaugh of the District of New Jersey, <i>In re Vytorin/Zetia Marketing Sales Practices and Products Liability Litigation</i>. On August 5, 2009, MSD and Schering-Plough jointly announced that their cholesterol joint venture entered into agreements to resolve, for a total fixed amount of $41.5 million, these civil class action lawsuits. The MSP Partnership recorded these charges in the second quarter of 2009. On February 9, 2010, Judge Cavanaugh granted final approval of the settlements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Also, as previously disclosed, on April 3, 2008, an MSD shareholder filed a putative class action lawsuit in federal court in the Eastern District of Pennsylvania alleging that MSD and its Chairman, President and Chief Executive Officer, Richard T. Clark, violated the federal securities laws. This suit has since been withdrawn and re-filed in the District of New Jersey and has been consolidated with another federal securities lawsuit under the caption <i>In re Merck & Co., Inc. Vytorin Securities Litigation</i>. An amended consolidated complaint was filed on October 6, 2008, and names as defendants MSD; Merck/Schering-Plough Pharmaceuticals, LLC; and certain of MSD’s current and former officers and directors. Specifically, the complaint alleges that MSD delayed releasing unfavorable results of the ENHANCE clinical trial regarding the efficacy of <i>Vytorin </i>and that MSD made false and misleading statements about expected earnings, knowing that once the results of the <i>Vytorin </i>study were released, sales of <i>Vytorin </i>would decline and MSD’s earnings would suffer. On December 12, 2008, MSD and the other defendants moved to dismiss this lawsuit on the grounds that the plaintiffs failed to state a claim for which relief can be granted. On September 2, 2009, the court issued an opinion and order denying the defendants’ motion to dismiss this lawsuit, and on October 19, 2009, MSD and the other defendants filed an answer to the amended consolidated complaint. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, on April 22, 2008, a member of an MSD ERISA plan filed a putative class action lawsuit against MSD and certain of MSD’s current and former officers and directors alleging they breached their fiduciary duties under ERISA. Since that time, there have been other similar ERISA lawsuits filed against MSD in the District of New Jersey, and all of those lawsuits have been consolidated under the caption <i>In re Merck & Co., Inc. Vytorin ERISA Litigation</i>. A consolidated amended complaint was filed on February 5, 2009, and names as defendants MSD and various current and former members of MSD’s Board of Directors. The plaintiffs allege that the ERISA plans’ investment in MSD stock was imprudent because MSD’s earnings are dependent on the commercial success of its cholesterol drug <i>Vytorin </i>and that defendants knew or should have known that the results of a scientific study would cause the medical community to turn to less expensive drugs for cholesterol management. On April 23, 2009, MSD and the other defendants moved to dismiss this lawsuit on the grounds that the plaintiffs failed to state a claim for which relief can be granted. On September 1, 2009, the court issued an opinion and order denying the defendants’ motion to dismiss this lawsuit. On November 9, 2009, the plaintiffs moved to strike certain of the defendants’ affirmative defenses. That motion was fully briefed on December 4, 2009 and is pending before the court. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD intends to defend the lawsuits referred to in this section. Unfavorable outcomes resulting from the government investigations or the civil litigations could have a material adverse effect on MSD’s financial position, liquidity and results of operations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In November 2008, the individual shareholder who had previously delivered a letter to MSD’s Board of Directors demanding that the Board take legal action against the responsible individuals to recover the amounts paid by MSD in 2007 to resolve certain governmental investigations delivered another letter to the Board demanding that the Board or a subcommittee thereof commence an investigation into the matters raised by various civil suits and governmental investigations relating to <i>Vytorin</i>. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Vaccine Litigation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, MSD is a party to individual and class action product liability lawsuits and claims in the United States involving pediatric vaccines (e.g., hepatitis B vaccine) that contained thimerosal, a preservative used in vaccines. As of March 2010, there were approximately 200 thimerosal related lawsuits pending in which MSD is a defendant, although the vast majority of those lawsuits are not currently active. Other defendants include other vaccine manufacturers who produced pediatric vaccines containing thimerosal as well as manufacturers of thimerosal. In these actions, the plaintiffs allege, among other things, that they have suffered neurological injuries as a result of exposure to thimerosal from pediatric vaccines. There are no cases currently scheduled for trial. MSD will defend against these lawsuits; however, it is possible that unfavorable outcomes could have a material adverse effect on MSD’s financial position, liquidity and results of operations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD has been successful in having cases of this type either dismissed or stayed on the ground that the action is prohibited under the National Childhood Vaccine Injury Act (the “Vaccine Act”). The Vaccine Act prohibits any person from filing or maintaining a civil action (in state or federal court) seeking damages against a vaccine manufacturer for vaccine-related injuries unless a petition is first filed in the United States Court of Federal Claims (hereinafter the “Vaccine Court”). Under the Vaccine Act, before filing a civil action against a vaccine manufacturer, the petitioner must either (a) pursue his or her petition to conclusion in Vaccine Court and then timely file an election to proceed with a civil action in lieu of accepting the Vaccine Court’s adjudication of the petition or (b) timely exercise a right to withdraw the petition prior to Vaccine Court adjudication in accordance with certain statutorily prescribed time periods. MSD is not a party to Vaccine Court proceedings because the petitions are brought against the United States Department of Health and Human Services. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD is aware that there are approximately 5,000 cases pending in the Vaccine Court involving allegations that thimerosal-containing vaccines and/or the <i>M-M-R </i>II vaccine cause autism spectrum disorders. Not all of the thimerosal-containing vaccines involved in the Vaccine Court proceeding are MSD vaccines. MSD is the sole source of the <i>M-M-R </i>II vaccine domestically. The Special Masters presiding over the Vaccine Court proceedings held hearings in three test cases involving the theory that the combination of <i>M-M-R </i>II vaccine and thimerosal in vaccines causes autism spectrum disorders. On February 12, 2009, the Special Masters issued decisions in each of those cases, finding that the theory was unsupported by valid scientific evidence and that the petitioners in the three cases were therefore not entitled to compensation. Two of those three cases are currently on appeal. The Special Masters held similar hearings in three different test cases involving the theory that thimerosal in vaccines alone causes autism spectrum disorders. On March 12, 2010, the Special Masters issued decisions in this second set of test cases, finding that the theory was also unsupported by valid scientific evidence and that the petitions in these three cases were also not entitled to compensation. The Special Masters had previously indicated that they would hold similar hearings involving the theory that <i>M-M-R </i>II alone causes autism spectrum disorders, but they have stated that they no longer intend to do so. The Vaccine Court has indicated that it intends to use the evidence presented at these test case hearings to guide the adjudication of the remaining autism spectrum disorder cases. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Patent Litigation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     From time to time, generic manufacturers of pharmaceutical products file ANDA’s with the FDA seeking to market generic forms of MSD’s products prior to the expiration of relevant patents owned by MSD. Generic pharmaceutical manufacturers have submitted ANDA’s to the FDA seeking to market in the United States generic forms of <i>Fosamax, Nexium, Singulair</i>, <i>Emend </i>and <i>Cancidas </i>prior to the expiration of MSD’s (and AstraZeneca’s in the case of <i>Nexium</i>) patents concerning these products. In addition, an ANDA has been submitted to the FDA seeking to market in the United States a generic form of <i>Zetia </i>and an ANDA has been submitted to the FDA seeking to market in the United States a generic form of <i>Vytorin</i>, both prior to the expiration of Schering-Plough’s patent concerning each product. The generic companies’ ANDA’s generally include allegations of non-infringement, invalidity and unenforceability of the patents. MSD has filed patent infringement suits in federal court against companies filing ANDA’s for generic alendronate (<i>Fosamax</i>) and montelukast (<i>Singulair</i>) and AstraZeneca and MSD have filed patent infringement suits in federal court against companies filing ANDA’s for generic esomeprazole (<i>Nexium</i>). Also, MSD and Schering-Plough have filed patent infringement suits in federal court against companies filing ANDA’s for generic versions of ezetimibe (<i>Zetia</i>) and ezetimibe/simvastatin (<i>Vytorin</i>). Similar patent challenges exist in certain foreign jurisdictions. MSD intends to vigorously defend its patents, which it believes are valid, against infringement by generic companies attempting to market products prior to the expiration dates of such patents. As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In February 2007, Schering-Plough received a notice from a generic company indicating that it had filed an ANDA for <i>Zetia </i>and that it is challenging the U.S. patents that are listed for <i>Zetia</i>. Prior to the Merger, MSD marketed <i>Zetia </i>through a joint venture, MSP Singapore Company LLC. On March 22, 2007, Schering-Plough and MSP Singapore Company LLC filed a patent infringement suit against Glenmark Pharmaceuticals Inc., USA and its parent corporation (“Glenmark”). The lawsuit automatically stays FDA approval of Glenmark’s ANDA until October 2010 or until an adverse court decision, if any, whichever may occur earlier. The trial in this matter is scheduled to commence on May 3, 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In November 2009, MSD’s Parent Company received notice from Mylan that it filed an ANDA for ezetimibe/simvastatin and that it was challenging two patents listed in the FDA Orange Book for <i>Vytorin</i>. On December 16, 2009, MSD’s Parent Company filed a patent infringement suit against Mylan. The lawsuit automatically stays FDA approval of Mylan’s ANDA until May 2012 or until an adverse court decision, if any, whichever may occur earlier. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, in February 2007, MSD received a notice from Teva Pharmaceuticals, Inc. (“Teva”), a generic company, indicating that it had filed an ANDA for montelukast and that it is challenging the U.S. patent that is listed for <i>Singulair</i>. On April 2, 2007, MSD filed a patent infringement action against Teva. A trial in this matter was held in February 2009. On August 19, 2009, the court issued a decision upholding the validity of MSD’s <i>Singulair </i>patent and ordered that Teva’s ANDA could not be approved prior to expiry of MSD’s exclusivity rights in August 2012. Teva had appealed the decision, however, in January 2010, Teva withdrew its appeal of the trial court’s decision upholding the validity of MSD’s <i>Singulair </i>patent. In addition, in May 2009, the United States Patent and Trademark Office granted a petition by Article One Partners LLC to reexamine MSD’s <i>Singulair </i>patent. On December 15, 2009, the United States Patent and Trademark Office issued a notice indicating that it will allow the claims of MSD’s <i>Singulair </i>patent. Product exclusivity is accordingly expected to be maintained until August 2012. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In May 2005, the Federal Court of Canada Trial Division issued a decision refusing to bar the approval of generic alendronate on the grounds that MSD’s patent for weekly alendronate was likely invalid. This decision cannot be appealed and generic alendronate was launched in Canada in June 2005. In July 2005, MSD was sued in the Federal Court of Canada by Apotex Corp. (“Apotex”) seeking damages for lost sales of generic weekly alendronate due to the patent proceeding. In October 2008, the Federal Court of Canada issued a decision awarding Apotex its lost profits for its generic alendronate product for the period of time that it was held off the market due to MSD’s lawsuit. In June 2009, the trial court decision was upheld in part and both companies sought leave to appeal to the Supreme Court of Canada. In January 2010, the Supreme Court of Canada declined to hear the appeal, leaving intact the decision that Apotex is entitled to damages for the discrete period of time that its market entry was postponed due to the litigation launched by MSD. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, in September 2004, MSD appealed a decision of the Opposition Division of the European Patent Office (“EPO”) that revoked MSD’s patent in Europe that covers the once-weekly administration of alendronate. On March 14, 2006, the Board of Appeal of the EPO upheld the decision of the Opposition Division revoking the patent. On March 28, 2007, the EPO issued another patent in Europe to MSD that covers the once-weekly administration of alendronate. Under its terms, this new patent is effective until July 2018. MSD has sued multiple parties in European countries asserting its European patent covering once-weekly dosing of <i>Fosamax</i>. Decisions have been rendered in the Netherlands and Belgium invalidating the patent in those countries. MSD has appealed these decisions. Oppositions have been filed in the EPO against this patent. In a hearing held March 17-19, 2009, the Opposition Division of the EPO issued an appealable decision revoking this patent. MSD has appealed the decision. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In addition, as previously disclosed, in Japan after a proceeding was filed challenging the validity of MSD’s Japanese patent for the once-weekly administration of alendronate, the patent office invalidated the patent. The decision is under appeal. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In October 2008, the U.S. patent for dorzolamide, covering both <i>Trusopt </i>and <i>Cosopt</i>, expired, after which MSD experienced a significant decline in U.S. sales of these products. MSD is involved in litigation proceedings of the corresponding patents in Canada and Great Britain and Germany. In November 2009, the trial court in Great Britain issued a decision finding MSD’s <i>Cosopt </i>patent invalid. In Canada a trial was held in December 2009 regarding MSD’s Canadian <i>Trusopt </i>and <i>Cosopt</i> patents. MSD is awaiting a decision. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD and AstraZeneca received notice in October 2005 that Ranbaxy had filed an ANDA for esomeprazole magnesium. The ANDA contains Paragraph IV challenges to patents on <i>Nexium</i>. In November 2005, MSD and AstraZeneca sued Ranbaxy in the U.S. District Court in New Jersey. As previously disclosed, AstraZeneca, MSD and Ranbaxy have entered into a settlement agreement which provides that Ranbaxy will not bring its generic esomeprazole product to market in the United States until May 27, 2014. MSD and AstraZeneca each received a Civil Investigative Demand (“CID”) from the U.S. Federal Trade Commission (“FTC”) in July 2008 regarding the settlement agreement with Ranbaxy. MSD is cooperating with the FTC in responding to this CID. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD and AstraZeneca received notice in January 2006 that IVAX Pharmaceuticals, Inc. (“IVAX”), subsequently acquired by Teva, had filed an ANDA for esomeprazole magnesium. The ANDA contains Paragraph IV challenges to patents on <i>Nexium</i>. In March 2006, MSD and AstraZeneca sued Teva in the U.S. District Court in New Jersey. On January 7, 2010, AstraZeneca, MSD and Teva/IVAX entered into a settlement agreement which provides that Teva/IVAX will not bring its generic esomeprazole product to market in the United States until May 27, 2014. In addition, in January 2008, MSD and AstraZeneca sued Dr. Reddy’s Laboratories (“Dr. Reddy’s”) in the District Court in New Jersey based on Dr. Reddy’s filing of an ANDA for esomeprazole magnesium. The trial, which had been scheduled for January 2010 with respect to both IVAX’s and Dr. Reddy’s ANDAs, has been postponed and no new trial date has been set. Also, MSD and AstraZeneca received notice in December 2008 that Sandoz Inc. (“Sandoz”) had filed an ANDA for esomeprazole magnesium. The ANDA contains Paragraph IV challenges to patents on <i>Nexium</i>. In January 2009, MSD and AstraZeneca sued Sandoz in the District Court in New Jersey based on Sandoz’s filing of an ANDA for esomeprazole magnesium. In addition, MSD and AstraZeneca received notice in September 2009 that Lupin Ltd. (“Lupin”) had filed an ANDA for esomeprazole magnesium. The ANDA contains Paragraph IV challenges to patents on <i>Nexium</i>. In October 2009, MSD and AstraZeneca sued Lupin in the District Court in New Jersey based on Lupin’s filing of an ANDA for esomeprazole magnesium. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In January 2009, MSD received notice from Sandoz that it had filed an ANDA and that it was challenging five MSD patents listed in the FDA Orange Book for <i>Emend</i>. In February 2009, MSD filed a patent infringement suit against Sandoz. The lawsuit automatically stays FDA approval of Sandoz’s ANDA until July 2011 or until an adverse court decision, if any, whichever may occur earlier. The case is scheduled to go to trial in December 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In Europe, MSD is aware of various companies seeking registration for generic losartan (the active ingredient for <i>Cozaar </i>and <i>Hyzaar</i>). MSD has patent rights to losartan via license from E.I. du Pont de Nemours and Company (“du Pont”). MSD and du Pont have filed patent infringement proceedings against various companies in Portugal, Spain, Norway, Finland, Belgium, the Netherlands and Austria. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In October 2009, MSD received notice from Teva Parenteral Medicines (“TPM”) that it filed an ANDA for caspofungin acetate and that it was challenging five patents listed in the FDA Orange Book for <i>Cancidas</i>. On November 25, 2009, MSD filed a patent infringement suit against TPM. The lawsuit automatically stays FDA approval of TPM’s ANDA until April 2012 or until an adverse court decision, if any, whichever may occur earlier. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Legal Proceedings Related to the Merger</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In connection with the Merger, a class action lawsuit was brought against MSD challenging the Merger and seeking other forms of relief. As previously disclosed, the lawsuit has been settled pending court approval. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The settlement, if approved by the court, will resolve and release all claims that were or could have been brought by any shareholder of MSD challenging any aspect of the proposed merger, including any merger disclosure claims. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Other Litigation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     There are various other legal proceedings, principally product liability and intellectual property suits involving MSD, that are pending. While it is not feasible to predict the outcome of such proceedings or the proceedings discussed in this note, in the opinion of MSD, all such proceedings are either adequately covered by insurance or, if not so covered, should not ultimately result in any liability that would have a material adverse effect on the financial position, liquidity or results of operations of MSD, other than proceedings for which a separate assessment is provided in this note. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Environmental Matters</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD and its subsidiaries are parties to a number of proceedings brought under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, and other federal and state equivalents. 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. MSD 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. MSD’s potential liability varies greatly from site to site. For some sites the potential liability is <i>de minimis </i>and for others the final costs of cleanup have not yet been determined. While it is not feasible to predict the outcome of many of these proceedings brought by federal or state agencies or private litigants, in the opinion of MSD, 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 MSD. MSD has taken an active role in identifying and providing for these costs and such amounts do not include any reduction for anticipated recoveries of cleanup costs from former site owners or operators or other recalcitrant potentially responsible parties. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, approximately 2,200 plaintiffs have filed an amended complaint against MSD and 12 other defendants in U.S. District Court, Eastern District of California asserting claims under the Clean Water Act, the Resource Conservation and Recovery Act, as well as negligence and nuisance. The suit seeks damages for personal injury, diminution of property value, medical monitoring and other alleged real and personal property damage associated with groundwater and soil contamination found at the site of a former MSD subsidiary in Merced, California. MSD intends to defend itself against these claims. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In management’s opinion, the liabilities for all environmental matters that are probable and reasonably estimable have been accrued and totaled $72.7 million and $89.5 million at December 31, 2009 and 2008, respectively. These liabilities are undiscounted, do not consider potential recoveries from other parties and will be paid out over the periods of remediation for the applicable sites, which are expected to occur primarily over the next 15 years. Although it is not possible to predict with certainty the outcome of these matters, or the ultimate costs of remediation, management does not believe that any reasonably possible expenditures that may be incurred in excess of the liabilities accrued should exceed $70.0 million in the aggregate. Management also does not believe that these expenditures should result in a material adverse effect on MSD’s financial position, results of operations, liquidity or capital resources for any year. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>13. Equity</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Capital Stock and Investment in MSD’s Parent Company</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A summary of common stock and treasury stock transactions (shares in millions) is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="28%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2007</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Treasury</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Stock /</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Investment</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>in MSD’s</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Common</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Parent</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Common</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Treasury</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Common</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Treasury</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Stock</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Company</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Stock</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Stock</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Stock</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Stock</td> </tr>   <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance as of January 1 </div></td> <td> </td> <td> </td> <td align="right"><b>2,983.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>875.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2,983.5</td> <td> </td> <td> </td> <td> </td> <td align="right">811.0</td> <td> </td> <td> </td> <td> </td> <td align="right">2,976.2</td> <td> </td> <td> </td> <td> </td> <td align="right">808.4</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Schering-Plough Merger </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(2,499.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Issuances of shares in connection with the acquisition of NovaCardia, Inc. </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">7.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other issuances <sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(1.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(4.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(23.9</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Purchases of treasury stock </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">69.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">26.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cancellations of treasury stock <sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(484.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(484.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance as of December 31 <sup style="font-size: 85%; vertical-align: text-top"><i>(3)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>390.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2,983.5</td> <td> </td> <td> </td> <td> </td> <td align="right">875.8</td> <td> </td> <td> </td> <td> </td> <td align="right">2,983.5</td> <td> </td> <td> </td> <td> </td> <td align="right">811.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Issuances primarily reflect activity under share-based compensation plans prior to the Merger.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup></td> <td> </td> <td><i>Pursuant to the Merger agreement, certain treasury shares were cancelled.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(3)</i></sup></td> <td> </td> <td><i>At December 31, 2009, there are 100 shares of common stock outstanding.</i></td> </tr> </table> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Noncontrolling Interests</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In connection with the 1998 restructuring of AMI, MSD assumed a $2.4 billion par value preferred stock obligation with a dividend rate of 5% per annum, which is carried by KBI and included in <i>Noncontrolling interests</i>. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>14. Share-Based Compensation Plans</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD’s Parent Company has share-based compensation plans under which employees, non-employee directors and employees of certain of MSD’s equity method investees may be granted options to purchase shares of MSD’s Parent Company common stock at the fair market value at the time of grant. In addition to stock options, MSD’s Parent Company grants performance share units (“PSUs”) and restricted stock units (“RSUs”) to certain management level employees. These plans were approved by the MSD’s Parent Company’s shareholders. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As a result of the Merger on November 3, 2009, MSD became a wholly-owned subsidiary of the MSD’s Parent Company. In conjunction with the Merger, outstanding MSD share-based compensation awards became identical awards of MSD’s Parent Company. For periods prior to the Merger, MSD recorded the expense in accordance with applicable share-based compensation accounting guidance. For periods subsequent to the Merger, an allocation of the expense for employees of MSD and its subsidiaries has been recorded using a consistent method with MSD’s Parent Company. Management believes this allocation method is reasonable. The tables below reflect acvitity for these awards for MSD employees for the pre and post-Merger periods through December 31, 2009. At December 31, 2009, 105.5 million shares collectively were authorized for future grants under the MSD’s Parent Company’s share-based compensation plans. Prior to the Merger, employee share-based compensation awards were settled primarily with treasury shares. Subsequent to the Merger, these awards are being settled with newly issued MSD’s Parent Company shares. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Employee stock options are granted to purchase shares of MSD’s Parent Company common stock at the fair market value at the time of grant. These awards generally vest one-third each year over a three-year period, with a contractual term of 10 years. RSUs are stock awards that are granted to employees and entitle the holder to shares of common stock as the awards vest, as well as non-forfeitable dividend equivalents. The fair value of the stock option and RSU awards is determined and fixed on the grant date based on the MSD’s Parent Company’s stock price. PSUs are stock awards where the ultimate number of shares issued will be contingent on the MSD’s Parent Company’s performance against a pre-set objective or set of objectives. The fair value of each PSU is determined on the date of grant based on the MSD’s Parent Company’s stock price. Over the PSU performance period, the number of shares of stock that are expected to be issued will be adjusted based on the probability of achievement of a performance target and final compensation expense will be recognized based on the ultimate number of shares issued. RSU and PSU distributions will be in shares of MSD’s Parent Company stock after the end of the vesting or performance period, generally three years, subject to the terms applicable to such awards. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Total pretax share-based compensation cost recorded in 2009, 2008 and 2007 was $376.0 million, $348.0 million and $330.2 million, respectively, with related income tax benefits of $119.5 million, $107.5 million and $104.1 million, respectively. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Black-Scholes option pricing model is used to determine the fair value of option grants. In applying this model, both historical data and current market data are used to estimate the fair value of options. The Black-Scholes model requires several assumptions including expected dividend yield, risk-free interest rate, volatility, and term of the options. The expected dividend yield is based on historical patterns of dividend payments. The risk-free rate is based on the rate at grant date of zero-coupon U.S. Treasury Notes with a term equal to the expected term of the option. Expected volatility is estimated using a blend of historical and implied volatility. The historical component is based on historical monthly price changes. The implied volatility is obtained from market data on the MSD’s Parent Company’s traded options. The expected life represents the expected amount of time that options granted are expected to be outstanding, based on historical and forecasted exercise behavior. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The weighted average fair value of options granted to MSD employees in 2009, 2008 and 2007 was $4.02, $9.80 and $9.51 per option, respectively, and were determined using the following assumptions: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Expected dividend yield </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>6.3</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">3.5</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">3.4</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Risk-free interest rate </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>2.2</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">2.7</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">4.4</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Expected volatility </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>33.8</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">31.0</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">24.6</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Expected life (years) </div></td> <td> </td> <td> </td> <td align="right"><b>6.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">6.1</td> <td> </td> <td> </td> <td> </td> <td align="right">5.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Summarized information relative to stock option plan activity for MSD employees (options in thousands) is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Weighted</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Weighted</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Average</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Average</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Remaining</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Aggregate</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Number</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Exercise</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Contractual</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Intrinsic</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>of Options</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Price</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Term</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Value</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance as of January 1, 2009 </div></td> <td> </td> <td> </td> <td align="right">247,651.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">51.50</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Granted</b> </div></td> <td> </td> <td> </td> <td align="right"><b>34,279.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>24.31</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Exercised</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(1,483.2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>26.84</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Forfeited</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(25,926.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>68.30</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Outstanding as of December 31, 2009</b> </div></td> <td> </td> <td> </td> <td align="right"><b>254,521.3</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>46.27</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>5.22</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>560.3</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Exercisable as of December 31, 2009</b> </div></td> <td> </td> <td> </td> <td align="right"><b>187,195.0</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>50.60</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>4.05</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>139.0</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Additional information pertaining to stock option plans for MSD employees is provided in the table below: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total intrinsic value of stock options exercised </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>10.1</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">40.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">301.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Fair value of stock options vested </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>282.8</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">259.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">251.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash received from the exercise of stock options </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>39.8</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">102.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">898.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A summary of nonvested RSU and PSU activity for MSD employees (shares in thousands) is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>RSUs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>PSUs</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Weighted</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Weighted</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Average</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Average</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Number</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Grant Date</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Number</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Grant Date</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>of Shares</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Fair Value</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>of Shares</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Fair Value</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Nonvested as of January 1, 2009 </div></td> <td> </td> <td> </td> <td align="right">6,292.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">39.41</td> <td> </td> <td> </td> <td> </td> <td align="right">1,621.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">41.86</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Granted</b> </div></td> <td> </td> <td> </td> <td align="right">2,818.5</td> <td> </td> <td> </td> <td> </td> <td align="right">26.78</td> <td> </td> <td> </td> <td> </td> <td align="right">726.4</td> <td> </td> <td> </td> <td> </td> <td align="right">24.20</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Vested</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,487.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">35.15</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(341.4</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">35.14</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Forfeited</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(169.6</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">37.95</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(158.9</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">35.72</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Nonvested at December 31, 2009</b> </div></td> <td> </td> <td> </td> <td align="right">7,453.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">35.52</td> <td> </td> <td> </td> <td> </td> <td align="right">1,847.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">36.69</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     At December 31, 2009, there was $340.4 million of total pretax unrecognized compensation expense related to nonvested stock options, RSU and PSU awards for MSD employees which will be recognized over a weighted average period of 1.5 years. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>15. Pension and Other Postretirement Benefit Plans</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. Pension benefits in the United States are based on a formula that considers final average pay and years of credited service. In addition, MSD provides medical, dental and life insurance benefits, principally to its eligible U.S. retirees and similar benefits to their dependents, through its other postretirement benefit plans. MSD uses December 31 as the year-end measurement date for all of its pension plans and other postretirement benefit plans. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The net cost for pension and other postretirement benefit plans consisted of the following components: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="28%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11"><b>Other Postretirement</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>Pension Benefits</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>Benefits</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Service cost </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>358.1</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">344.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">377.2</td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>71.1</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">73.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">90.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest cost </div></td> <td> </td> <td> </td> <td align="right"><b>405.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right">414.2</td> <td> </td> <td> </td> <td> </td> <td align="right">379.9</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>102.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">113.8</td> <td> </td> <td> </td> <td> </td> <td align="right">107.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Expected return on plan assets </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(614.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(559.4</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(491.4</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(96.7</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(129.0</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(130.5</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net amortization </div></td> <td> </td> <td> </td> <td align="right"><b>122.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">70.4</td> <td> </td> <td> </td> <td> </td> <td align="right">149.4</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>18.9</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(22.6</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(16.8</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Termination benefits </div></td> <td> </td> <td> </td> <td align="right"><b>30.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">62.3</td> <td> </td> <td> </td> <td> </td> <td align="right">25.6</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>8.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">11.2</td> <td> </td> <td> </td> <td> </td> <td align="right">7.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Curtailments </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(6.2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">5.7</td> <td> </td> <td> </td> <td> </td> <td align="right">1.1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(9.9</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(15.9</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(16.8</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Settlements </div></td> <td> </td> <td> </td> <td align="right"><b>2.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">8.6</td> <td> </td> <td> </td> <td> </td> <td align="right">5.4</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net pension and other postretirement cost </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>298.4</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">345.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">447.2</td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>94.5</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">30.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">42.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Net pension and other postretirement benefit cost totaled $392.9 million in 2009, $376.6 million in 2008 and $489.3 million in 2007. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The net pension cost attributable to U.S. plans included in the above table was $205.1 million in 2009, $226.4 million in 2008 and $302.2 million in 2007. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In connection with restructuring actions (see Note 4), termination charges were recorded in 2009, 2008 and 2007 on pension and other postretirement benefit plans related to expanded eligibility for certain employees exiting MSD. Also, in connection with these restructuring activities, net curtailment gains were recorded in 2009 and curtailment losses were recorded in 2008 and 2007 on pension plans and net curtailment gains were recorded in 2009, 2008 and 2007 on other postretirement benefit plans. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In addition, settlement losses were recorded in 2009, 2008 and 2007 on certain domestic and international pension plans. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Summarized information about the changes in plan assets and benefit obligation, the funded status and the amounts recorded at December 31, 2009 and 2008 is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Pension Benefits</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Other Postretirement Benefits</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Fair value of plan assets at January 1 </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>5,887.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">7,385.4</td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,088.4</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,577.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Actual return on plan assets </div></td> <td> </td> <td> </td> <td align="right"><b>1,352.1</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,959.4</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right"><b>303.9</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(512.0</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">MSD contributions </div></td> <td> </td> <td> </td> <td align="right"><b>496.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,190.8</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>91.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">99.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Effects of exchange rate changes </div></td> <td> </td> <td> </td> <td align="right"><b>105.6</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(90.3</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Benefits paid </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(470.8</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(643.2</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(72.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(76.7</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right"><b>21.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">4.3</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Fair value of plan assets at December 31 </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>7,392.1</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,887.6</td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,410.9</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,088.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Benefit obligation at January 1 </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>7,140.1</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">7,049.4</td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,747.3</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,936.8</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Service cost </div></td> <td> </td> <td> </td> <td align="right"><b>358.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">344.1</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>71.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">73.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest cost </div></td> <td> </td> <td> </td> <td align="right"><b>405.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right">414.2</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>102.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">113.8</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Actuarial losses (gains) </div></td> <td> </td> <td> </td> <td align="right"><b>602.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">325.8</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>148.2</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(129.8</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Benefits paid </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(470.8</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(643.2</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(72.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(76.7</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Effects of exchange rate changes </div></td> <td> </td> <td> </td> <td align="right"><b>133.5</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(158.0</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right"><b>5.4</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(6.6</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Plan amendments </div></td> <td> </td> <td> </td> <td align="right"><b>1.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(180.6</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Curtailments </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(32.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(249.6</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right"><b>12.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">6.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Termination benefits </div></td> <td> </td> <td> </td> <td align="right"><b>30.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">62.3</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>8.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">11.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right"><b>9.0</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(4.9</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Benefit obligation at December 31 </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>8,177.2</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">7,140.1</td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,023.4</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,747.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Funded status at December 31 </div></td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(785.1</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(1,252.5</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(612.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(658.9</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Recognized as: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other assets </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>394.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">142.4</td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>220.1</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">147.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Accrued and other current liabilities </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(117.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(46.8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(8.3</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3.4</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Deferred income taxes and noncurrent liabilities </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(1,062.7</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,348.1</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(824.3</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(803.2</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The fair value of U.S. pension plan assets included in the preceding table was $4.6 billion in 2009 and $3.5 billion in 2008. The pension projected benefit obligation of U.S. plans included in this table was $5.2 billion in 2009 and $4.6 billion in 2008. Approximately 36% of MSD’s pension projected benefit obligation relates to international defined benefit plans, of which each individual plan is not significant relative to the total benefit obligation. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     At December 31, 2009 and 2008, the accumulated benefit obligation was $6.3 billion and $5.7 billion, respectively, for all pension plans. At December 31, 2009 and 2008, the accumulated benefit obligation for U.S. pension plans was $4.0 billion and $3.4 billion, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     For pension plans with benefit obligations in excess of plan assets at December 31, 2009 and 2008, the fair value of plan assets was $1.5 billion and $4.8 billion, respectively, and the benefit obligation was $2.7 billion and $6.2 billion, respectively. For those plans with accumulated benefit obligations in excess of plan assets at December 31, 2009 and 2008, the fair value of plan assets was $483.1 million and $414.5 million, respectively, and the accumulated benefit obligation was $1.1 billion and $880.0 million, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As discussed in Note 2, as of December 31, 2009, MSD adopted new authoritative guidance issued by the FASB which revised the disclosure requirements for plan assets of defined pension and other postretirement plans. This amended guidance requires disclosure of how investment allocation decisions are made, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets, the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period, and significant concentrations of risk within plan assets. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value: </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">     <i>Level 1 </i>— Quoted prices in active markets for identical assets or liabilities. The plans’ Level 1 assets primarily include registered investment companies (mutual funds) and equity securities. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">     <i>Level 2 </i>— Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The plans’ Level 2 assets primarily include investments in common/collective trusts and certain fixed income investments such as government and agency securities and corporate obligations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">     <i>Level 3 </i>— Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. The plans’ Level 3 assets primarily include investments in insurance contracts which are valued using methodologies that management understands. The plans’ Level 3 investments in insurance contracts are generally valued using a crediting rate that approximates market returns and invest in underlying securities whose market values are unobservable and determined using pricing models, discounted cash flow methodologies, or similar techniques. At December 31, 2009, $262.0 million, or approximately 3.4%, of the pension investments were categorized as Level 3 assets. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     If the inputs used to measure the financial assets fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The fair values of pension plan assets at December 31, 2009 by asset category are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000"><b>Fair Value Measurements Using</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Quoted Prices</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Significant</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>In Active</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Significant</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Markets for</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Observable</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Unobservable</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Identical Assets</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Inputs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Inputs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>(Level 1)</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>(Level 2)</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>(Level 3)</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Cash and cash equivalents</b> </div></td> <td> </td> <td align="right">$</td> <td align="right">80.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">141.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">221.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Securities lending collaterial in short-term investments</b> </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">280.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">280.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Equity securities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">U.S. large cap </div></td> <td> </td> <td> </td> <td align="right">196.8</td> <td> </td> <td> </td> <td> </td> <td align="right">1,419.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,616.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">U.S. small/mid cap </div></td> <td> </td> <td> </td> <td align="right">545.2</td> <td> </td> <td> </td> <td> </td> <td align="right">637.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,182.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Non-U.S. developed markets </div></td> <td> </td> <td> </td> <td align="right">982.1</td> <td> </td> <td> </td> <td> </td> <td align="right">693.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,675.4</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Emerging markets </div></td> <td> </td> <td> </td> <td align="right">54.7</td> <td> </td> <td> </td> <td> </td> <td align="right">404.8</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">459.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Fixed income securities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Government and agency obligations </div></td> <td> </td> <td> </td> <td align="right">60.8</td> <td> </td> <td> </td> <td> </td> <td align="right">1,124.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,184.9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Corporate obligations </div></td> <td> </td> <td> </td> <td align="right">71.2</td> <td> </td> <td> </td> <td> </td> <td align="right">497.6</td> <td> </td> <td> </td> <td> </td> <td align="right">0.1</td> <td> </td> <td> </td> <td> </td> <td align="right">568.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Mortgage and asset backed securities </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">133.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">133.4</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other fixed income obligations </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">12.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">12.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Other types of investments</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Insurance contracts </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">67.7</td> <td> </td> <td> </td> <td> </td> <td align="right">214.3</td> <td> </td> <td> </td> <td> </td> <td align="right">282.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2.0</td> <td> </td> <td> </td> <td> </td> <td align="right">47.6</td> <td> </td> <td> </td> <td> </td> <td align="right">49.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right">$</td> <td align="right">1,991.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,414.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">262.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">7,667.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Liabilities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Liability for the return of collateral for securities loaned </div></td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">280.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">280.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets measured at fair value using significant unobservable inputs (Level 3) during 2009 for pension plan assets: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="40%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Actual Return on Plan Assets</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Relating to</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Beginning</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Assets Still</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Ending</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Balance at</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Held at</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Relating to</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Purchases,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Balance at</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>January 1,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>December 31,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Assets Sold</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Sales,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>December 31,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>During 2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Settlements, Net</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="21" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Insurance Contracts </div></td> <td> </td> <td align="right">$</td> <td align="right">182.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">15.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">16.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">214.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">52.7</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(4.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.3</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">47.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="21" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="right">$</td> <td align="right">234.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">10.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">16.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">262.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="21" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The fair values of other postretirement benefit plan assets at December 31, 2009 by asset category are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000"><b>Fair Value Measurements Using</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Quoted Prices</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Significant</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>In Active</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Significant</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Markets for</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Observable</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Unobservable</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Identical Assets</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Inputs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Inputs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>(Level 1)</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>(Level 2)</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>(Level 3)</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Cash and cash equivalents</b> </div></td> <td> </td> <td align="right">$</td> <td align="right">1.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">38.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">39.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Securites lending collateral in short-term investments</b> </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">65.0</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">65.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Equity securities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">U.S. large cap </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">424.9</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">424.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">U.S. small/mid cap </div></td> <td> </td> <td> </td> <td align="right">70.7</td> <td> </td> <td> </td> <td> </td> <td align="right">270.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">341.4</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Non-U.S. developed markets </div></td> <td> </td> <td> </td> <td align="right">176.7</td> <td> </td> <td> </td> <td> </td> <td align="right">83.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">260.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Emerging markets </div></td> <td> </td> <td> </td> <td align="right">31.2</td> <td> </td> <td> </td> <td> </td> <td align="right">75.8</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">107.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Fixed income securities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Corporate obligations </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">137.0</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">137.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Government and agency obligations </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">65.9</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">65.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Mortgage and asset backed securities </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">26.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">26.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other fixed income obligations </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">6.0</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">6.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total investments </div></td> <td> </td> <td align="right">$</td> <td align="right">280.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,193.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,473.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Liabilities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Liability for the return of collateral for securities loaned </div></td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">65.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">65.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Total pension and other postretirement benefit plan assets excluded from the fair value hierarchy include short-term payables and receivables related to the purchase and sale of investments, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD has established investment guidelines for its U.S. pension and other postretirement plans to create an asset allocation that is expected to deliver a rate of return sufficient to meet the long-term obligation of each plan, given acceptable level of risk. The target investment portfolio of U.S. pension and other postretirement benefit plans is allocated 45% to 60% in U.S. equities, 20% to 30% in international equities, 15% to 25% in fixed-income investments, and up to 8% in cash and other investments. The portfolio’s equity weighting is consistent with the long-term nature of the plans’ benefit obligations. The expected annual standard deviation of returns of the target portfolio, which approximates 13%, reflects both the equity allocation and the diversification benefits among the asset classes in which the portfolio invests. For non-U.S. pension plans, the targeted investment portfolio varies based on the duration of pension liabilities and local government rules and regulations. Although a significant percentage of plan assets are invested in U.S. equities, concentration risk is mitigated through the use of strategies that are diversified within management guidelines. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Contributions to the pension plans and other postretirement benefit plans during 2010 are expected to be approximately $270 million and $50 million, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Expected benefit payments are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Pension</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Postretirement</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Benefits</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Benefits</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2010 </div></td> <td> </td> <td align="right">$</td> <td align="right">359.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">90.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2011 </div></td> <td> </td> <td> </td> <td align="right">360.9</td> <td> </td> <td> </td> <td> </td> <td align="right">97.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2012 </div></td> <td> </td> <td> </td> <td align="right">388.8</td> <td> </td> <td> </td> <td> </td> <td align="right">102.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2013 </div></td> <td> </td> <td> </td> <td align="right">411.1</td> <td> </td> <td> </td> <td> </td> <td align="right">109.3</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2014 </div></td> <td> </td> <td> </td> <td align="right">428.7</td> <td> </td> <td> </td> <td> </td> <td align="right">115.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2015 — 2019 </div></td> <td> </td> <td align="right">$</td> <td align="right">2,833.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">690.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Net loss amounts reflect experience differentials primarily relating to differences between expected and actual returns on plan assets as well as the effects of changes in actuarial assumptions. Net loss amounts in excess of certain thresholds are amortized into net pension and other postretirement benefit cost over the average remaining service life of employees. The following amounts were reflected as components of <i>Other comprehensive income</i>: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="28%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11">Other Postretirement</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Pension Plans</td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Benefit Plans</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net gain (loss) arising during the period </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>158.0</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(2,586.0</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">269.1</td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>58.4</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(509.3</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(16.5</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Prior service (cost) credit arising during the period </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(0.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">10.6</td> <td> </td> <td> </td> <td> </td> <td align="right">21.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(23.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">157.7</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(21.2</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>157.5</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(2,575.4</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">290.5</td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>34.9</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(351.6</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(37.7</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net loss amortization included in benefit cost </div></td> <td> </td> <td> </td> <td align="right"><b>127.5</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">50.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">139.3</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>67.7</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">26.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">26.6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Prior service cost (credit) amortization included in benefit cost </div></td> <td> </td> <td> </td> <td align="right"><b>8.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right">7.6</td> <td> </td> <td> </td> <td> </td> <td align="right">12.1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(48.8</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(48.7</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(43.4</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>136.2</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">58.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">151.4</td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>18.9</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(22.6</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(16.8</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The estimated net loss and prior service cost (credit) amounts that will be amortized from AOCI into net pension and postretirement benefit cost during 2010 are $171.3 million and $8.7 million, respectively, for pension plans and are $56.9 million and $(47.2) million, respectively, for other postretirement benefit plans. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD reassesses its benefit plan assumptions on a regular basis. For both the pension and other postretirement benefit plans, the discount rate is evaluated on measurement dates and modified to reflect the prevailing market note of a portfolio of high-quality fixed-income debt instruments that would provide the future cash flows needed to pay the benefits included in the benefit obligation as they come due. The weighted average assumptions used in determining pension plan and U.S. pension and other postretirement benefit plan information are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="28%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11">U.S. Pension and Other</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11">Postretirement</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Pension Plans</td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Benefit Plans</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Net cost</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Discount rate</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>5.75</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">5.90</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">5.35</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>6.20</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">6.50</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">6.00</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Expected rate of return on plan assets </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>7.65</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">7.65</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">7.65</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>8.75</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">8.75</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">8.75</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Salary growth rate </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>4.25</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">4.30</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">4.20</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>4.50</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">4.50</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">4.50</td> <td nowrap="nowrap">%</td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Benefit obligation</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Discount rate </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>5.50</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">5.75</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">5.90</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>5.90</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">6.20</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">6.50</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Salary growth rate </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>4.25</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">4.25</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">4.30</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>4.50</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">4.50</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">4.50</td> <td nowrap="nowrap">%</td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The expected rate of return for both the pension and other postretirement benefit plans represents the average rate of return to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid and is determined on a country basis. In developing the expected rate of return within each country, long-term historical returns data is considered as well as actual returns on the plan assets and other capital markets experience. Using this reference information, the long-term return expectations for each asset category and a weighted average expected return for each country’s target portfolio is developed, according to the allocation among those investment categories. The expected portfolio performance reflects the contribution of active management as appropriate. For 2010, MSD’s expected rate of return of 8.75% will remain unchanged from 2009 for its U.S. pension and other postretirement benefit plans. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The health care cost trend rate assumptions for other postretirement benefit plans are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Health care cost trend rate assumed for next year </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>8.6</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">9.0</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Rate to which the cost trend rate is assumed to decline </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>5.0</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">5.0</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Year that the trend rate reaches the ultimate trend rate </div></td> <td> </td> <td> </td> <td align="right"><b>2018</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2016</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A one percentage point change in the health care cost trend rate would have had the following effects: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>One Percentage</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Point</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Increase</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Decrease</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Effect on total service and interest cost components </div></td> <td> </td> <td align="right">$</td> <td align="right">31.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(24.7</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Effect on benefit obligation </div></td> <td> </td> <td align="right">$</td> <td align="right">292.7</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(239.2</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD also maintains defined contribution savings plans in the United States. MSD matches a percentage of each employee’s contributions consistent with the provisions of the plan for which the employee is eligible. Total employer contributions to these plans in 2009, 2008, and 2007 were $98.2 million, $104.0 million, and $110.0 million, respectively. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>16. Other (Income) Expense, Net</b> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Interest income<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(357.1</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(631.4</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(741.1</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest expense<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>429.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right">251.3</td> <td> </td> <td> </td> <td> </td> <td align="right">384.3</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Exchange (gains) losses </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(10.2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">147.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(54.3</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other, net </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(3,338.1</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2,085.4</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">335.9</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(3,275.8</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(2,318.1</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(75.2</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Interest income in 2009 includes interest income from affiliates of $148.7 million and Interest expense in 2009 includes interest expense from affiliates of $28.3 million.</i></td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The decline in interest income in 2009 as compared with 2008 is primarily the result of lower interest rates and a change in the investment portfolio mix toward cash and shorter-dated securities in anticipation of the Merger. The increase in interest expense in 2009 is largely due to $174 million of commitment fees and incremental interest expense related to the financing of the Merger. Included in other, net in 2009 was a $3.2 billion gain on the sale of MSD’s interest in Merial (see Note 10), $231 million of investment portfolio recognized net gains, and an $80 million charge related to the settlement of the <i>Vioxx </i>third-party payor litigation in the United States. Included in other, net in 2008 was an aggregate gain on distribution from AZLP of $2.2 billion (see Note 10), a gain of $249 million related to the sale of the remaining worldwide rights to <i>Aggrastat</i>, a $300 million expense for a contribution to the Merck Company Foundation, $117 million of investment portfolio recognized net losses and a $58 million charge related to the resolution of an investigation into whether MSD violated state consumer protection laws with respect to the sales and marketing of <i>Vioxx</i>. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The fluctuation in exchange losses (gains) in 2008 from 2007 is primarily due to the higher cost of foreign currency contracts due to lower U.S. interest rates and unfavorable impacts of period-to-period changes in foreign currency exchange rates on net long or net short foreign currency positions, considering both net monetary assets and related foreign currency contracts. The change in other, net for 2008 primarily reflects an aggregate gain in 2008 from AZLP of $2.2 billion, the impact of a $671 million charge in 2007 related to the resolution of certain civil governmental investigations, and a 2008 gain of $249 million related to the sale of the remaining worldwide rights to <i>Aggrastat</i>, partially offset by a $300 million expense for a contribution to the Merck Company Foundation, higher investment portfolio recognized net losses of $153 million and a $58 million charge related to the resolution of an investigation into whether MSD violated consumer protection laws with respect to the sales and marketing of <i>Vioxx</i>. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Interest paid was $276.9 million in 2009, $247.0 million in 2008 and $406.4 million in 2007, respectively, which excludes commitment fees. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>17. Taxes on Income</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Effective with the closing of the Merger, MSD’s Parent Company will begin to file taxes on a consolidated basis with MSD for U.S. federal and certain state tax purposes. The income tax provision and payable balances have been computed on a separate company basis for the purpose of these financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A reconciliation between the effective tax rate and the U.S. statutory rate is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="28%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2007</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Tax</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Tax</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Tax</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Amount</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Rate</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000">Amount</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Rate</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000">Amount</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Rate</td> </tr>   <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">U.S. statutory rate applied to income before taxes </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3,787.9</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>35.0</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td align="right">$</td> <td align="right">3,476.1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">35.0</td> <td nowrap="nowrap">%</td> <td> </td> <td align="right">$</td> <td align="right">1,222.3</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">35.0</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Differential arising from: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign earnings </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(1,082.3</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(10.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,269.9</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(12.9</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,196.0</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(34.3</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">State tax settlements </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(108.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(1.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(191.6</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2.0</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign tax credit utilization </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(192.0</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2.0</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">State taxes </div></td> <td> </td> <td> </td> <td align="right"><b>202.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">310.9</td> <td> </td> <td> </td> <td> </td> <td align="right">3.2</td> <td> </td> <td> </td> <td> </td> <td align="right">11.6</td> <td> </td> <td> </td> <td> </td> <td align="right">0.3</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Restructuring </div></td> <td> </td> <td> </td> <td align="right"><b>114.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">114.7</td> <td> </td> <td> </td> <td> </td> <td align="right">1.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Gain on equity investments </div></td> <td> </td> <td> </td> <td align="right"><b>95.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>0.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">29.0</td> <td> </td> <td> </td> <td> </td> <td align="right">0.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">In-process research and development </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">113.8</td> <td> </td> <td> </td> <td> </td> <td align="right">3.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Other <sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(262.3</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(2.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(277.8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2.7</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(56.4</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1.6</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,747.5</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>25.4</b></td> <td nowrap="nowrap"><b>%</b></td> <td> </td> <td align="right">$</td> <td align="right">1,999.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">20.1</td> <td nowrap="nowrap">%</td> <td> </td> <td align="right">$</td> <td align="right">95.3</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">2.7</td> <td nowrap="nowrap">%</td> </tr> <tr style="font-size: 1px"> <td colspan="25" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Other includes the tax effect of contingency reserves, research credits, export incentives and miscellaneous items.</i></td> </tr> </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The 2007 tax rate reconciliation percentage of (34.3)% for foreign earnings reflects the change in mix of foreign and domestic earnings primarily resulting from the $4.85 billion U.S. <i>Vioxx </i>Settlement Agreement charge. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Income (loss) before taxes consisted of: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Domestic </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>6,681.8</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,210.1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(2,525.8</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign </div></td> <td> </td> <td> </td> <td align="right"><b>4,140.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">4,721.6</td> <td> </td> <td> </td> <td> </td> <td align="right">6,017.9</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>10,822.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">9,931.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,492.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Taxes on income consisted of: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Current provision</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Federal </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>174.9</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,053.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">988.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign </div></td> <td> </td> <td> </td> <td align="right"><b>394.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">292.4</td> <td> </td> <td> </td> <td> </td> <td align="right">687.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">State </div></td> <td> </td> <td> </td> <td align="right"><b>9.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">123.3</td> <td> </td> <td> </td> <td> </td> <td align="right">202.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right"><b>579.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,469.3</td> <td> </td> <td> </td> <td> </td> <td align="right">1,877.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Deferred provision</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Federal </div></td> <td> </td> <td> </td> <td align="right"><b>2,057.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">419.0</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,671.5</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(83.7</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">55.8</td> <td> </td> <td> </td> <td> </td> <td align="right">157.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">State </div></td> <td> </td> <td> </td> <td align="right"><b>195.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">55.3</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(267.7</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right"><b>2,168.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">530.1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,782.0</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,747.5</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,999.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">95.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Deferred income taxes at December 31 consisted of: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2008</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Liabilities</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Assets</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Liabilities</td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other intangibles </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>18.8</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>73.4</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">124.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Inventory related </div></td> <td> </td> <td> </td> <td align="right"><b>235.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">248.6</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accelerated depreciation </div></td> <td> </td> <td> </td> <td align="right"><b>35.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1,057.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,045.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Unremitted foreign earnings </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>42.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">16.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Equity investments </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>178.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">75.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Pensions and other postretirement benefits </div></td> <td> </td> <td> </td> <td align="right"><b>566.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>101.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right">796.5</td> <td> </td> <td> </td> <td> </td> <td align="right">129.9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Compensation related </div></td> <td> </td> <td> </td> <td align="right"><b>411.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">347.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Vioxx </i>Litigation reserve </div></td> <td> </td> <td> </td> <td align="right"><b>42.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,755.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Unrecognized tax benefits </div></td> <td> </td> <td> </td> <td align="right"><b>740.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">984.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net operating losses and other tax credit carryforwards </div></td> <td> </td> <td> </td> <td align="right"><b>233.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">224.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right"><b>1,081.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>53.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,012.9</td> <td> </td> <td> </td> <td> </td> <td align="right">95.9</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Subtotal </div></td> <td> </td> <td> </td> <td align="right"><b>3,365.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1,507.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">5,369.4</td> <td> </td> <td> </td> <td> </td> <td align="right">1,487.6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Valuation allowance </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(141.9</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(94.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total deferred taxes </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3,223.1</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,507.2</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,275.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,487.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net deferred income taxes </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,715.9</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,787.6</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Recognized as: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Deferred income taxes and other current assets </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>786.1</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,436.9</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Other assets </div></td> <td> </td> <td> </td> <td align="right"><b>1,243.2</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">1,666.7</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Income taxes payable </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>7.3</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Deferred income taxes and noncurrent liabilities </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>306.1</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">312.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD has net operating loss (“NOL”) carryforwards in several foreign jurisdictions. The valuation allowance in 2009 and 2008 primarily relates to various foreign entity NOL carryforwards resulting primarily from losses generated by restructuring actions. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Income taxes paid in 2009, 2008 and 2007 were $820.5 million, $1.8 billion and $3.5 billion, respectively. Stock option exercises reduced income taxes paid by $138.4 million in 2007. Stock option exercises did not have a significant impact on taxes paid in 2009 or 2008. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On January 1, 2007, new authoritative guidance issued by the FASB for the accounting and reporting of uncertain tax positions was adopted. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance as of January 1 </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3,665.0</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,689.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,008.4</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Additions related to current year positions </div></td> <td> </td> <td> </td> <td align="right"><b>310.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right">269.4</td> <td> </td> <td> </td> <td> </td> <td align="right">284.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Additions related to prior year positions </div></td> <td> </td> <td> </td> <td align="right"><b>48.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">64.2</td> <td> </td> <td> </td> <td> </td> <td align="right">187.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Reductions for tax positions of prior years </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(547.4</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(310.5</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(87.0</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Settlements<sup style="font-size: 85%; vertical-align: text-top"> <i>(1)</i></sup> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(321.8</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(38.8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,703.5</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Lapse of statute of limitations </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(2.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(8.8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.7</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance as of December 31 </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3,152.1</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,665.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,689.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Reflects the settlement with the Internal Revenue Service in 2007 discussed below</i>.</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     If MSD were to recognize the unrecognized tax benefits of $3.2 billion at December 31, 2009, the income tax provision would reflect a favorable net impact of $2.6 billion. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The amount of unrecognized tax benefits will change in the next 12 months due primarily to the anticipated closure of various tax examinations. MSD estimates that the change could result in a reduction in unrecognized tax benefits of approximately $240 million. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Interest and penalties associated with uncertain tax positions amounted to a (benefit) expense of $(184) million in 2009, $101 million in 2008 and $270 million in 2007. Liabilities for accrued interest and penalties were $1.1 billion and $1.7 billion as of December 31, 2009 and 2008, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, the Internal Revenue Service (“IRS”) has completed its examination of MSD’s tax returns for the years 1993 to 2001. As a result of the examination, MSD made an aggregate payment of $2.79 billion in February 2007. This payment was offset by (i) a tax refund of $165 million received in 2007 for amounts previously paid for these matters and (ii) a federal tax benefit of approximately $360 million related to interest included in the payment, resulting in a net cash cost to MSD of approximately $2.3 billion in 2007. The impact for years subsequent to 2001 for items reviewed as part of the examination was included in the payment although those years remain open in all other respects. The closing of the IRS examination did not have a material impact on MSD’s results of operations in 2007 as these amounts had been previously accrued for. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD reported the results of the IRS adjustments for the years 1993 through 2001 to various state tax authorities. This resulted in additional tax, as well as interest and penalty payments of $20 million and $9 million, respectively, in 2008 and $57 million and $67 million, respectively, in 2007, and an equivalent reduction in the balances of unrecognized tax benefits, accrued interest and penalties. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, in October 2006, the Canada Revenue Agency (“CRA”) issued MSD a notice of reassessment containing adjustments related to certain intercompany pricing matters. In February 2009, MSD and the CRA negotiated a settlement agreement in regard to these matters. In accordance with the settlement, MSD paid an additional tax of approximately $300 million (U.S. dollars) and interest of approximately $360 million (U.S. dollars) with no additional amounts or penalties due on this assessment. The settlement was accounted for in the first quarter of 2009. MSD had previously established reserves for these matters. A significant portion of the taxes paid is expected to be creditable for U.S. tax purposes. The resolution of these matters did not have a material effect on MSD’s financial position or liquidity, other than with respect to the associated collateral as discussed below. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In addition, in July 2007 and November 2008, the CRA proposed additional adjustments for 1999 and 2000, respectively, relating to other intercompany pricing matters. The adjustments would increase Canadian tax due by approximately $312 million (U.S. dollars) plus $314 million (U.S. dollars) of interest through December 31, 2009. It is possible that the CRA will propose similar adjustments for later years. MSD disagrees with the positions taken by the CRA and believes they are without merit. MSD intends to contest the assessments through the CRA appeals process and the courts if necessary. Management believes that resolution of these matters will not have a material effect on MSD’s financial position or liquidity. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In connection with the appeals process for the matters discussed above, during 2007, MSD pledged collateral to two financial institutions, one of which provided a guarantee to the CRA and the other to the Quebec Ministry of Revenue representing a portion of the tax and interest assessed. As a result of the settlement noted above, guarantees required to appeal the disputes were reduced or eliminated and approximately $960 million of associated collateral was released. Certain of the cash and investments continue to be collateralized for guarantees required to appeal other Canadian tax disputes. The collateral is included in <i>Deferred income taxes and other current assets </i>and <i>Other assets </i>in the Consolidated Balance Sheet and totaled approximately $290 million and $1.2 billion at December 31, 2009 and 2008, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The IRS is examining MSD’s 2002 to 2005 federal income tax returns. In addition, various state and foreign tax examinations are in progress. For most of its other significant tax jurisdictions (both U.S. state and foreign), MSD’s income tax returns are open for examination for the period 1999 through 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     At December 31, 2009, foreign earnings of $25.7 billion have been retained indefinitely by subsidiary companies for reinvestment, therefore no provision has been made for income taxes that would be payable upon the distribution of such earnings. In addition, MSD has subsidiaries operating in Puerto Rico and Singapore under tax incentive grants that begin to expire in 2013. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     At December 31, 2009, <i>Income tax payable </i>includes amounts due to MSD’s Parent Company. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>18. Comprehensive Income</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The components of <i>Other comprehensive income (loss) </i>are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><b><i>Year Ended December 31, 2009</i></b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Pretax</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Tax</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>After Tax</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Net unrealized loss on derivatives</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(316.1</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>125.0</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(191.1</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Net loss realization</b> </div></td> <td> </td> <td> </td> <td align="right"><b>60.5</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(23.9</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>36.6</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Derivatives</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(255.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>101.1</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(154.5</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Net unrealized gain on investments</b> </div></td> <td> </td> <td> </td> <td align="right"><b>205.9</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(31.2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>174.7</b></td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Net gain realization</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(230.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>23.6</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(206.9</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Investments</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(24.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(7.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(32.2</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Benefit plan net (loss) gain and prior service cost (credit), net of amortization</b> </div></td> <td> </td> <td> </td> <td align="right"><b>347.5</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(149.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>198.0</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Cumulative translation adjustment </b><sup style="font-size: 85%; vertical-align: text-top"><b><i>(1)</i></b></sup> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(23.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(23.0</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>44.3</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(56.0</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(11.7</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Year Ended December 31, 2008</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net unrealized gain on derivatives </div></td> <td> </td> <td align="right">$</td> <td align="right">291.0</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(116.0</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">175.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net gain realization </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(38.8</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">15.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(23.4</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Derivatives </div></td> <td> </td> <td> </td> <td align="right">252.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(100.6</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">151.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net unrealized loss on investments </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(212.9</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">79.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(133.7</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net loss realization </div></td> <td> </td> <td> </td> <td align="right">116.9</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(63.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">53.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Investments </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(96.0</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">15.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(80.5</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Benefit plan net (loss) gain and prior service cost (credit), net of amortization </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2,891.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">1,129.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,761.7</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cumulative translation adjustment <sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(37.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(37.2</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(2,772.2</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">1,044.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(1,727.8</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Year Ended December 31, 2007</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net unrealized loss on derivatives </div></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(50.5</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">20.7</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(29.8</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net loss realization </div></td> <td> </td> <td> </td> <td align="right">43.0</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(17.6</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">25.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Derivatives </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(7.5</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">3.1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(4.4</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net unrealized gain on investments </div></td> <td> </td> <td> </td> <td align="right">106.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(24.5</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">81.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net gain realization </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(36.1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">12.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(23.7</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Investments </div></td> <td> </td> <td> </td> <td align="right">70.1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(12.1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">58.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Benefit plan net gain (loss) and prior service cost (credit), net of amortization </div></td> <td> </td> <td> </td> <td align="right">387.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(147.1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">240.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cumulative translation adjustment<sup style="font-size: 85%; vertical-align: text-top"> <i>(1)</i></sup> </div></td> <td> </td> <td> </td> <td align="right">34.4</td> <td> </td> <td> </td> <td> </td> <td align="right">9.9</td> <td> </td> <td> </td> <td> </td> <td align="right">44.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right">$</td> <td align="right">484.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(146.2</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">338.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Represents cumulative translation adjustments related to equity investees.</i></td> </tr> </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The components of <i>Accumulated other comprehensive loss </i>are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net unrealized (loss) gain on derivatives </div></td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(42.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td align="right">$</td> <td align="right">111.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net unrealized gain on investments </div></td> <td> </td> <td> </td> <td align="right"><b>30.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">63.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Pension plan net loss </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(2,278.8</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2,440.7</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other postretirement benefit plan net loss </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(521.4</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(596.5</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Pension plan prior service cost </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(20.7</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(26.4</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other postretirement benefit plan prior service cost </div></td> <td> </td> <td> </td> <td align="right"><b>264.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">309.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cumulative translation adjustment </div></td> <td> </td> <td> </td> <td align="right"><b>2.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right">25.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(2,565.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(2,553.9</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>19. Related Party Transactions</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As of December 31, 2009, current <i>Receivables from affiliates</i> were $1.0 billion, primarily reflecting a loan receivable from another subsidiary of MSD’s Parent Company of $722 million that is due in October 2010, as well as interest receivables on both the current and non-current <i>Receivables from affiliates. </i> Non-current <i>Receivables from affiliates</i> were $7.1 billion and primarily represented loans receivable from other subsidiaries of MSD’s Parent Company with due dates greater than one year. <i>Receivables from MSD’s Parent Company</i> were $8.8 billion and are reflected as a reduction of shareholder’s equity. <i>Receivables from affiliates and MSD’s Parent Company</i> are largely attributable to the Merger. <i>Payables to affiliates, </i> arising primarily from a cash pooling arrangement between MSD and MSD’s Parent Company, were $859.5 million as of December 31, 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Subsequent to the Merger, share-based compensation of approximately $84.0 million was incurred by MSD’s Parent Company on behalf of MSD and allocated to MSD. MSD’s Parent Company did not incur any other significant expenses on behalf of MSD. Also subsequent to the Merger, salaries and benefits for executive officers of MSD’s Parent Company of approximately $5 million were incurred at MSD and appropriately allocated to MSD’s Parent Company. MSD and MSD’s Parent Company share certain employees, systems and facilities and MSD provides certain services to MSD’s Parent Company. MSD incurs the majority of these expenses and allocations are made between MSD’s Parent Company and MSD for certain of these expenses, which in the opinion of management are reasonable allocations. Certain expenses benefit both MSD and MSD’s Parent Company and for those expenses, no allocation of expense has been made to MSD’s Parent Company. For the two month period subsequent to the Merger, these costs are not material to MSD or to MSD’s Parent Company. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>20. Segment Reporting</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     MSD’s Parent Company operations are principally managed on a products basis and are comprised of one reportable segment, which is the Pharmaceutical segment. The Pharmaceutical segment includes human health pharmaceutical and vaccine products marketed either directly or through joint ventures. Human health pharmaceutical products consist of therapeutic and preventive agents, sold by prescription, for the treatment of human disorders. These human health pharmaceutical products are sold primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. These human health vaccines are sold primarily to physicians, wholesalers, physician distributors and government entities. A large component of pediatric and adolescent vaccines is sold to the U.S. Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the U.S. government. Segment composition reflects certain managerial changes that have been implemented. Segment disclosures for prior periods have been recast on a comparable basis with 2009. MSD’s Parent Company also has an all other category which includes other non-reportable segments, including animal health and consumer health care, as well as revenue from MSD’s relationship with AZLP. The accounting policies for the segments described above are the same as those described in Note 2. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Revenues and profits for MSD’s operations within MSD’s Parent Company segments are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Pharmaceutical</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>All</b><br /> <b>Other</b><sup style="font-size: 85%; vertical-align: text-top"><b><i>(1)</i></b></sup></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b><i>Year Ended December 31, 2009</i></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Segment revenues</b> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>22,192.4</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,470.6</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>23,663.0</b></td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Segment profits</b> </div></td> <td> </td> <td> </td> <td align="right"><b>14,594.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1,616.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>16,210.6</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Included in segment profits:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px"><b>Equity income from affiliates</b> </div></td> <td> </td> <td> </td> <td align="right"><b>1,579.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>751.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>2,331.5</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px"><b>Depreciation and amortization</b> </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(92.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(92.6</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Year Ended December 31, 2008</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Segment revenues </div></td> <td> </td> <td align="right">$</td> <td align="right">22,081.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,694.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">23,775.4</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Segment profits </div></td> <td> </td> <td> </td> <td align="right">14,110.3</td> <td> </td> <td> </td> <td> </td> <td align="right">1,691.0</td> <td> </td> <td> </td> <td> </td> <td align="right">15,801.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Included in segment profits: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Equity income from affiliates </div></td> <td> </td> <td> </td> <td align="right">1,655.8</td> <td> </td> <td> </td> <td> </td> <td align="right">668.4</td> <td> </td> <td> </td> <td> </td> <td align="right">2,324.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Depreciation and amortization </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(101.4</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(101.4</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Year Ended December 31, 2007</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Segment revenues </div></td> <td> </td> <td align="right">$</td> <td align="right">22,282.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,848.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">24,130.9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Segment profits </div></td> <td> </td> <td> </td> <td align="right">14,558.7</td> <td> </td> <td> </td> <td> </td> <td align="right">2,027.6</td> <td> </td> <td> </td> <td> </td> <td align="right">16,586.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Included in segment profits: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Equity income from affiliates </div></td> <td> </td> <td> </td> <td align="right">1,895.9</td> <td> </td> <td> </td> <td> </td> <td align="right">820.0</td> <td> </td> <td> </td> <td> </td> <td align="right">2,715.9</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Depreciation and amortization </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(137.1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(137.1</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>All other for MSD primarily includes revenue and equity income from MSD’s relationship with AZLP and equity income from Merial until its disposition on September 17, 2009.</i></td> </tr> </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Segment profits are comprised of segment revenues less certain elements of materials and production costs and operating expenses, including components of equity income (loss) from affiliates and depreciation and amortization expenses. For internal management reporting presented to the chief operating decision maker, production costs are not allocated, other than standard costs, research and development expenses and general and administrative expenses, as well as the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A reconciliation of total segment revenues to consolidated <i>Sales </i>is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Segment revenues </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>23,663.0</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">23,775.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">24,130.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(19.8</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right">74.9</td> <td> </td> <td> </td> <td> </td> <td align="right">66.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>23,643.2</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">23,850.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">24,197.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Sales of MSD’s products were as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Bone, Respiratory, Immunology and Dermatology</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Singulair </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>4,659.7</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4,336.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4,266.3</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Fosamax </div></td> <td> </td> <td> </td> <td align="right"><b>1,099.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,552.7</td> <td> </td> <td> </td> <td> </td> <td align="right">3,049.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Propecia </div></td> <td> </td> <td> </td> <td align="right"><b>440.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right">429.1</td> <td> </td> <td> </td> <td> </td> <td align="right">405.4</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Arcoxia </div></td> <td> </td> <td> </td> <td align="right"><b>357.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">377.3</td> <td> </td> <td> </td> <td> </td> <td align="right">329.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Cardiovascular</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Vytorin<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>82.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">84.2</td> <td> </td> <td> </td> <td> </td> <td align="right">84.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Zetia<sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>5.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">6.4</td> <td> </td> <td> </td> <td> </td> <td align="right">6.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Diabetes and Obesity</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Januvia </div></td> <td> </td> <td> </td> <td align="right"><b>1,922.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,397.1</td> <td> </td> <td> </td> <td> </td> <td align="right">667.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Janumet </div></td> <td> </td> <td> </td> <td align="right"><b>658.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right">351.1</td> <td> </td> <td> </td> <td> </td> <td align="right">86.4</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Infectious Disease</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Isentress </div></td> <td> </td> <td> </td> <td align="right"><b>751.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">361.1</td> <td> </td> <td> </td> <td> </td> <td align="right">41.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Primaxin </div></td> <td> </td> <td> </td> <td align="right"><b>688.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">760.4</td> <td> </td> <td> </td> <td> </td> <td align="right">763.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Cancidas </div></td> <td> </td> <td> </td> <td align="right"><b>616.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right">596.4</td> <td> </td> <td> </td> <td> </td> <td align="right">536.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Invanz </div></td> <td> </td> <td> </td> <td align="right"><b>292.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">265.0</td> <td> </td> <td> </td> <td> </td> <td align="right">190.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Crixivan/Stocrin </div></td> <td> </td> <td> </td> <td align="right"><b>206.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">275.1</td> <td> </td> <td> </td> <td> </td> <td align="right">310.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Mature Brands</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Cozaar/Hyzaar </div></td> <td> </td> <td> </td> <td align="right"><b>3,560.7</b></td> <td> </td> <td> </td> <td> </td> <td align="right">3,557.7</td> <td> </td> <td> </td> <td> </td> <td align="right">3,350.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Zocor </div></td> <td> </td> <td> </td> <td align="right"><b>558.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right">660.1</td> <td> </td> <td> </td> <td> </td> <td align="right">876.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Vasotec/Vaseretic </div></td> <td> </td> <td> </td> <td align="right"><b>310.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">356.7</td> <td> </td> <td> </td> <td> </td> <td align="right">494.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Proscar </div></td> <td> </td> <td> </td> <td align="right"><b>290.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">323.5</td> <td> </td> <td> </td> <td> </td> <td align="right">411.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Neurosciences and Ophthalmology</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Maxalt </div></td> <td> </td> <td> </td> <td align="right"><b>574.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">529.2</td> <td> </td> <td> </td> <td> </td> <td align="right">467.3</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Cosopt/Trusopt </div></td> <td> </td> <td> </td> <td align="right"><b>503.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">781.2</td> <td> </td> <td> </td> <td> </td> <td align="right">786.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Oncology</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Emend </div></td> <td> </td> <td> </td> <td align="right"><b>313.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">259.7</td> <td> </td> <td> </td> <td> </td> <td align="right">201.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Vaccines</i><sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">ProQuad/M-M-R II/Varivax </div></td> <td> </td> <td> </td> <td align="right"><b>1,368.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,268.5</td> <td> </td> <td> </td> <td> </td> <td align="right">1,347.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Gardasil </div></td> <td> </td> <td> </td> <td align="right"><b>1,118.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,402.8</td> <td> </td> <td> </td> <td> </td> <td align="right">1,480.6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">RotaTeq </div></td> <td> </td> <td> </td> <td align="right"><b>521.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">664.5</td> <td> </td> <td> </td> <td> </td> <td align="right">524.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Pneumovax </div></td> <td> </td> <td> </td> <td align="right"><b>345.6</b></td> <td> </td> <td> </td> <td> </td> <td align="right">249.3</td> <td> </td> <td> </td> <td> </td> <td align="right">233.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Zostavax </div></td> <td> </td> <td> </td> <td align="right"><b>277.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right">312.4</td> <td> </td> <td> </td> <td> </td> <td align="right">236.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other pharmaceutical<sup style="font-size: 85%; vertical-align: text-top"><i>(3)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>667.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">922.9</td> <td> </td> <td> </td> <td> </td> <td align="right">1,136.6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other <sup style="font-size: 85%; vertical-align: text-top"><i>(4)</i></sup> </div></td> <td> </td> <td> </td> <td align="right"><b>1,450.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,769.0</td> <td> </td> <td> </td> <td> </td> <td align="right">1,914.9</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>23,643.2</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">23,850.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">24,197.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 3pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup></td> <td> </td> <td><i>Sales of </i>Zetia <i>and </i>Vytorin <i>reflect MSD’s sales of these products in Latin America which was not part of the MSP Partnership.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(2)</i></sup></td> <td> </td> <td><i>These amounts do not reflect sales of vaccines sold in most major European markets through MSD’s joint venture, Sanofi Pasteur MSD, the results of which are reflected in </i>Equity income from affiliates. <i>These amounts do, however, reflect supply sales to Sanofi Pasteur MSD.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(3)</i></sup></td> <td> </td> <td><i>Other pharmaceutical primarily includes sales of other human pharmaceutical products, including products within the franchises not listed separately.</i></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(4)</i></sup></td> <td> </td> <td><i>Reflects revenue from MSD’s relationship with AZLP primarily relating to sales of </i>Nexium, <i>as well as </i>Prilosec. <i>Revenue from AZLP was $1.4 billion, $1.6 billion and $1.7 billion in 2009, 2008 and 2007, respectively.</i></td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Consolidated revenues by geographic area where derived are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">United States </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>13,151.1</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">13,370.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">14,690.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Europe, Middle East and Africa </div></td> <td> </td> <td> </td> <td align="right"><b>5,534.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">5,773.8</td> <td> </td> <td> </td> <td> </td> <td align="right">5,159.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Japan </div></td> <td> </td> <td> </td> <td align="right"><b>2,215.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,823.5</td> <td> </td> <td> </td> <td> </td> <td align="right">1,533.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right"><b>2,742.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2,882.5</td> <td> </td> <td> </td> <td> </td> <td align="right">2,814.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>23,643.2</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">23,850.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">24,197.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A reconciliation of total segment profits to consolidated <i>Income before taxes </i>is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>Years Ended December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Segment profits </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>16,210.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">15,801.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">16,586.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other profits </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(174.2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(92.3</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(56.2</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Adjustments </div></td> <td> </td> <td> </td> <td align="right"><b>372.0</b></td> <td> </td> <td> </td> <td> </td> <td align="right">424.7</td> <td> </td> <td> </td> <td> </td> <td align="right">367.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Unallocated: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Interest income </div></td> <td> </td> <td> </td> <td align="right"><b>357.1</b></td> <td> </td> <td> </td> <td> </td> <td align="right">631.4</td> <td> </td> <td> </td> <td> </td> <td align="right">741.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Interest expense </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(429.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(251.3</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(384.3</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Equity income from affiliates </div></td> <td> </td> <td> </td> <td align="right"><b>171.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">236.5</td> <td> </td> <td> </td> <td> </td> <td align="right">260.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Depreciation and amortization </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(1,569.6</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,529.8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,851.0</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Research and development </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(5,139.2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(4,805.3</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(4,882.8</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Gain on Merial divestiture </div></td> <td> </td> <td> </td> <td align="right"><b>3,162.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Gain on distribution from AstraZeneca LP </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">2,222.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">U.S. <i>Vioxx </i>Settlement Agreement charge </div></td> <td> </td> <td> </td> <td align="right"><b>—</b></td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(4,850.0</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other expenses, net </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"><b>(2,138.5</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2,706.2</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2,439.3</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>10,822.6</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">9,931.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,492.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Other profits are primarily comprised of miscellaneous corporate profits as well as operating profits related to divested products or businesses and other supply sales. Adjustments represent the elimination of the effect of double counting certain items of income and expense. Equity income from affiliates includes taxes paid at the joint venture level and a portion of equity income that is not reported in segment profits. Other expenses, net, include expenses from corporate and manufacturing cost centers and other miscellaneous income (expense), net. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Property, plant and equipment, net by geographic area where located is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>December 31</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2008</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">2007</td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">United States </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>9,021.3</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">9,023.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">9,249.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Europe, Middle East and Africa </div></td> <td> </td> <td> </td> <td align="right"><b>1,595.8</b></td> <td> </td> <td> </td> <td> </td> <td align="right">1,649.0</td> <td> </td> <td> </td> <td> </td> <td align="right">1,625.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Japan </div></td> <td> </td> <td> </td> <td align="right"><b>183.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right">362.0</td> <td> </td> <td> </td> <td> </td> <td align="right">459.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right"><b>852.5</b></td> <td> </td> <td> </td> <td> </td> <td align="right">965.4</td> <td> </td> <td> </td> <td> </td> <td align="right">1,012.9</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>11,652.8</b></td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">11,999.6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">12,346.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Assets are not disaggregated on a products and services basis for internal management reporting and, therefore, such information is not presented. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 12pt; display: none">Schering-Plough Cholesterol Partnership Combined Financial Statements </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <b>2. Financial Statement Schedules</b> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="1%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>Merck/Schering-Plough Cholesterol Partnership Combined Financial Statements</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Merck/Schering-Plough Cholesterol Partnership<br /> Combined Statement of Net Sales and Contractual Expenses</b><br /> Year Ended December 31, 2009<br /> ($ in millions, unaudited) </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net sales </div></td> <td> </td> <td align="left">$</td> <td align="right">4,128</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cost of sales </div></td> <td> </td> <td> </td> <td align="right">173</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Selling, general and administrative </div></td> <td> </td> <td> </td> <td align="right">798</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Research and development </div></td> <td> </td> <td> </td> <td align="right">203</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">1,174</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Income from operations </div></td> <td> </td> <td align="left">$</td> <td align="right">2,954</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>The accompanying notes are an integral part of this combined financial statement.</i> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Merck/Schering-Plough Cholesterol Partnership<br /> Combined Balance Sheet</b><br /> December 31, 2009<br /> ($ in millions, unaudited) </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents </div></td> <td> </td> <td align="left">$</td> <td align="right">11</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accounts receivable, net </div></td> <td> </td> <td> </td> <td align="right">337</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Receivable from MSD, net </div></td> <td> </td> <td> </td> <td align="right">64</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Inventories </div></td> <td> </td> <td> </td> <td align="right">84</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Prepaid expenses and other assets </div></td> <td> </td> <td> </td> <td align="right">10</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total assets </div></td> <td> </td> <td align="left">$</td> <td align="right">506</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Liabilities and Partners’ Capital</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Rebates payable </div></td> <td> </td> <td align="left">$</td> <td align="right">259</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Payable to New Merck, net </div></td> <td> </td> <td> </td> <td align="right">119</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accrued expenses and other liabilities </div></td> <td> </td> <td> </td> <td align="right">54</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Total liabilities </div></td> <td> </td> <td> </td> <td align="right">432</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Commitments and contingent liabilities (notes 3 and 5) </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Partners’ capital </div></td> <td> </td> <td> </td> <td align="right">74</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total liabilities and Partners’ capital </div></td> <td> </td> <td align="left">$</td> <td align="right">506</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>The accompanying notes are an integral part of this combined financial statement.</i> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Merck/Schering-Plough Cholesterol Partnership<br /> Combined Statement of Cash Flows</b><br /> Year Ended December 31, 2009<br /> ($ in millions, unaudited) </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Operating Activities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Income from operations </div></td> <td> </td> <td align="left">$</td> <td align="right">2,954</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Adjustments to reconcile income from operations to net cash provided by operating activities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Accounts receivable, net </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(26</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Inventories </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(5</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Prepaid expenses and other assets </div></td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Rebates payable </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(4</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Payable to Partners, net </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(126</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Accrued expenses and other liabilities </div></td> <td> </td> <td> </td> <td align="right">10</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Non-cash charges </div></td> <td> </td> <td> </td> <td align="right">51</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:30px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Net cash provided by operating activities </div></td> <td> </td> <td> </td> <td align="right">2,858</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:30px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Financing Activities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Contributions from Partners </div></td> <td> </td> <td> </td> <td align="right">438</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Distributions to Partners </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(3,489</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:30px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Net cash used for financing activities </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(3,051</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:30px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net decrease in cash and cash equivalents </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(193</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of period </div></td> <td> </td> <td> </td> <td align="right">204</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:30px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of period </div></td> <td> </td> <td align="left">$</td> <td align="right">11</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:30px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>The accompanying notes are an integral part of this combined financial statement.</i> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Merck/Schering-Plough Cholesterol Partnership<br /> Combined Statement of Partners’ Capital (Deficit)</b><br /> ($ in millions) </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>New Merck</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>MSD</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance, January 1, 2009 </div></td> <td> </td> <td align="right">$</td> <td align="right">9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">111</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">120</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Contributions from Partners (unaudited) </div></td> <td> </td> <td> </td> <td align="right">158</td> <td> </td> <td> </td> <td> </td> <td align="right">280</td> <td> </td> <td> </td> <td> </td> <td align="right">438</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Income from operations (unaudited) </div></td> <td> </td> <td> </td> <td align="right">1,478</td> <td> </td> <td> </td> <td> </td> <td align="right">1,476</td> <td> </td> <td> </td> <td> </td> <td align="right">2,954</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Distributions to Partners (unaudited) </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,693</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,745</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3,438</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance, December 31, 2009 (unaudited) </div></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(48</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">122</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">74</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>The accompanying notes are an integral part of this combined financial statement.</i> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Merck/Schering-Plough Cholesterol Partnership<br /> Notes to Combined Financial Statements</b><br /> (unaudited) </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>1. Description of Business and Basis of Presentation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Overview</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On November 3, 2009, Merck & Co., Inc. (“MSD”) and Schering-Plough Corporation (“Schering-Plough”) completed their <font style="white-space: nowrap">previously-announced</font> merger (the “Merger”). In the Merger, Schering-Plough acquired all of the shares of MSD, which became a wholly-owned subsidiary of Schering-Plough and was renamed Merck Sharp & Dohme Corp. Schering-Plough continued as the surviving public company and was renamed Merck & Co., Inc. (“New Merck”). </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Upon consummation of the Merger, New Merck obtained a controlling interest in the Merck/Schering-Plough Cholesterol Partnership (the “Partnership”) and it is now owned 100% by New Merck. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Description of Business</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In May 2000, MSD and Schering-Plough (collectively the “Partners”) entered into agreements (the “Agreements”) to jointly develop and market in the United States, Schering-Plough’s then investigational cholesterol absorption inhibitor (“CAI”) ezetimibe (marketed today in the United States as ZETIA and as EZETROL in most other countries) (the “Cholesterol Collaboration”) and a fixed-combination tablet containing the active ingredients montelukast sodium and loratadine (the “Respiratory Collaboration”). New Merck sells montelukast sodium, a leukotriene receptor antagonist, as SINGULAIR and loratadine, an antihistamine, as CLARITIN, both of which are indicated for the relief of symptoms of allergic rhinitis. The Respiratory Collaboration was terminated in 2008 in accordance with the applicable agreements, following the receipt of a not-approvable letter from the U.S. Food and Drug Administration (“FDA”) for the fixed-combination tablet. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Cholesterol Collaboration is formally referred to as the Merck/Schering-Plough Cholesterol Partnership. In December 2001, the Cholesterol Collaboration Agreements were expanded to include all countries of the world, except Japan. The Cholesterol Collaboration Agreements provide for ezetimibe to be developed and marketed in the following forms: </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Ezetimibe, a once daily CAI, non-statin cholesterol reducing medicine used alone or co-administered with any statin drug, and</td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Ezetimibe and simvastatin (MSD’s existing ZOCOR statin cholesterol modifying medicine) combined into one tablet (marketed today in the United States as VYTORIN and as INEGY in most other countries).</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     VYTORIN and ZETIA were approved by the FDA in July 2004 and October 2002, respectively. Together, these products, whether marketed as VYTORIN, ZETIA or under other trademarks locally, are referred to as the “Cholesterol Products.” </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Under the Cholesterol Collaboration Agreements, New Merck established jointly-owned, limited purpose legal entities based in Canada and the United States through which to carry out the contractual activities of the Partnership in these countries. An additional jointly-owned, limited purpose legal entity based in Singapore was established to own the rights to the intellectual property and to fund and oversee research and development and manufacturing activities of the Cholesterol Collaboration. In all other markets except Latin America, subsidiaries of New Merck perform marketing activities for the Cholesterol Products under contract with the Partnership. These legal entity and subsidiary operations are collectively referred to as the “Combined Companies.” In Latin America, the Partnership sells directly to New Merck’s Latin American subsidiaries. Consequently, selling, promotion and distribution activities for the Cholesterol Products within Latin America are not included in the results of the Combined Companies. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership is substantially reliant on the infrastructures of the Partners. There are a limited number of employees of the legal entities of the Partnership and most activities are performed by employees of the Partners under service agreements with the Partnership. Profits, which are shared by the Partners under differing arrangements in countries around the world, are generally defined as net sales minus (1) agreed upon manufacturing costs and expenses incurred by the Partners and invoiced to the Partnership, (2) direct promotion expenses incurred by the Partners and invoiced to the Partnership, (3) expenses for a limited specialty sales force in the United States incurred by the Partners and invoiced to the Partnership, and certain amounts for sales force physician detailing of the Cholesterol Products in the United States, Puerto Rico, Canada and Italy, (4) administration expenses based on a percentage of Cholesterol Product net sales, which are invoiced by one of the Partners, and (5) other costs and expenses incurred by the Partners that were not contemplated when the Cholesterol Collaboration Agreements were entered into but that were subsequently agreed to by both Partners. Agreed upon research and development expenses incurred by the Partners and invoiced to the Partnership are shared equally by the Partners. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership’s future results of operations, financial position, and cash flows may differ materially from the historical results presented herein because of the risks and uncertainties related to the Partnership’s business. The Partnership’s future operating results and cash flows are dependent on the Cholesterol Products. Any events that adversely affect the market for those products could have a significant impact on the Partnership’s results of operations and cash flows. These events could include loss of patent protection, increased costs associated with manufacturing, increased competition from the introduction of new, more effective treatments, exclusion from government reimbursement programs, discontinuation or removal from the market of a product for safety or other reason, and the results of future clinical or outcomes studies (Note 5). </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Basis of Presentation</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The accompanying combined balance sheet and combined statements of net sales and contractual expenses, cash flows and partners’ capital (deficit) include the Cholesterol and Respiratory Collaboration activities of the Combined Companies. The Respiratory Collaboration activities primarily pertained to clinical development work and pre-launch marketing activities. Spending on respiratory-related activities ceased in 2008 following termination of the collaboration. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Net sales include the net sales of the Cholesterol Products sold by the Combined Companies. Expenses include amounts that the Partners have contractually agreed to directly invoice to the Partnership, or are shared through the contractual profit sharing arrangements between the Partners, as described above. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The accompanying combined financial statements were prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission and reflect the activities of the Partnership based on the contractual agreements between the Partners. Such combined financial statements include only the expenses agreed by the Partners to be shared or included in the calculation of profits under the contractual agreements of the Partnership, and are not intended to be a complete presentation of all of the costs and expenses that would be incurred by a stand-alone pharmaceutical company for the discovery, development, manufacture, distribution and marketing of pharmaceutical products. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The amounts presented in these combined financial statements exclude all purchase accounting impacts resulting from the Merger. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Under the Cholesterol Collaboration Agreements, certain activities are charged to the Partnership by the Partners based on contractually agreed upon allocations of Partner incurred expenses as described below. In the opinion of management, any allocations of expenses described below are made on a basis that reasonably reflects the actual level of support provided. All other expenses are expenses of the Partners and are reflected in their separate consolidated financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As described above, the profit sharing arrangements under the Cholesterol Collaboration Agreements provide that only certain Partner-incurred costs and expenses be invoiced to the Partnership by the Partners and therefore become part of the profit sharing calculation. The following paragraphs list the typical categories of costs and expenses that are generally incurred in the discovery, development, manufacture, distribution and marketing of the Cholesterol Products and provide a description of how such costs and expenses are treated in the accompanying combined statement of net sales and contractual expenses, and in determining profits under the contractual agreements. </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Manufacturing costs and expenses — All contractually agreed upon manufacturing plant costs and expenses incurred by the Partners related to the manufacture of the Cholesterol Products are included as Cost of sales in the accompanying combined statement of net sales and contractual expenses, including direct production costs, certain production variances, expenses for plant services and administration, warehousing, distribution, materials management, technical services, quality control, and asset utilization. All other manufacturing costs and expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are not invoiced to the Partnership and, therefore, are excluded from the accompanying combined financial statements. These costs and expenses include, but are not limited to, yield gains and losses in excess of jointly agreed upon yield rates and excess/idle capacity of manufacturing plant assets.</td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Direct promotion expenses — Direct promotion represents direct and identifiable out-of-pocket expenses incurred by the Partners on behalf of the Partnership including, but not limited to, contractually agreed upon expenses related to market research, detailing aids, agency fees, direct-to-consumer advertising, meetings and symposia, trade programs, launch meetings, special sales force incentive programs and product samples. All such contractually agreed upon expenses are included in Selling, general and administrative in the accompanying combined statement of net sales and contractual expenses. All other promotion expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are excluded from the accompanying combined financial statements.</td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Selling expenses — In the United States, Canada, Puerto Rico and other markets outside the United States (primarily Italy), the general sales forces of the Partners provide a majority of the physician detail activity at an agreed upon cost which is included in Selling, general and administrative in the accompanying combined statement of net sales and contractual expenses. In addition, the agreed upon costs of a limited specialty sales force for the United States market that calls on opinion leaders in the field of cholesterol medicine are also included in Selling, general and administrative. All other selling expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are excluded from the accompanying combined financial statements. These expenses include the total costs of the general sales forces of the Partners detailing the Cholesterol Products in most countries other than the United States, Canada, Puerto Rico and Italy.</td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Administrative expenses — Administrative support is primarily provided by one of the Partners. The contractually agreed upon expenses for support are determined based on a percentage of the net sales of the Cholesterol Products. Such amounts are included in Selling, general and administrative in the accompanying combined statement of net sales and contractual expenses. Selected contractually agreed upon direct costs of employees of the Partners for support services and out-of-pocket expenses incurred by the Partners on behalf of the Partnership are also included in Selling, general and administrative. All other expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are excluded from the accompanying combined financial statements. These expenses include, but are not limited to, certain U.S. managed care services, Partners’ subsidiary management in most international markets, and other indirect expenses such as corporate overhead and interest.</td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Research and development (“R&D”) expenses — R&D activities are performed by the Partners and agreed upon costs and expenses are invoiced to the Partnership. These agreed upon expenses generally represent an allocation of each Partner’s estimate of full time equivalents devoted to pre-clinical and post-marketing clinical development and regulatory activities and include grants and other third-party expenses. These contractually agreed upon allocated costs are included in Research and development in the accompanying combined statement of net sales and contractual expenses. All other R&D costs that are incurred by the Partners but not jointly agreed upon, are excluded from the accompanying combined financial statements.</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>2. Summary of Significant Accounting Policies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Principles of Combination</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The accompanying combined balance sheet and combined statement of net sales and contractual expenses, cash flows and partners’ capital (deficit) include the Cholesterol and Respiratory Collaboration activities of the Combined Companies. Interpartnership balances and profits are eliminated. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Use of Estimates</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The combined financial statements are prepared based on contractual agreements between the Partners, as described above, and include certain amounts that are based on management’s best estimates and judgments. Estimates are used in determining such items as provisions for sales discounts and returns and government and managed care rebates. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Foreign Currency Translation</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The net assets of the Partnership’s foreign operations are translated into U.S. dollars at current exchange rates. The U.S. dollar effects arising from translating the net assets of these operations are included in Partners’ capital, and are not significant. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Cash and Cash Equivalents</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Cash and cash equivalents primarily consist of highly liquid money market instruments with original maturities of less than three months. In 2009, the Partnership changed certain cash management practices, increasing the amount of cash distributed to the Partners. The Partnership’s cash, which is primarily invested in highly liquid money market instruments, is used to fund trade obligations coming due in the month and for distributions to the Partners. Interest income earned on cash and cash equivalents is reported as a reduction to Selling, general and administrative in the accompanying combined statement of net sales and contractual expenses and amounted to $1 million in 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Inventories</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Substantially all inventories are valued at the lower of first in, first out cost or market. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Intangible Assets</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Intangible assets consist of licenses, trademarks and trade names owned by the Partnership. These intangible assets were recorded at the Partners’ historical cost at the date of contribution, at a nominal value. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Revenue Recognition, Rebates, Returns and Allowances</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Revenues from sales of Cholesterol Products are recognized when title and risk of loss pass to the customer. Recognition of revenue also requires reasonable assurance of collection of sales proceeds and completion of all performance obligations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Net sales of VYTORIN/INEGY and ZETIA/EZETROL for the year ended December 31, 2009 are: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>$ in millions</i></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Vytorin/Inegy </div></td> <td> </td> <td align="left">$</td> <td align="right">2,060</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Zetia/Ezetrol </div></td> <td> </td> <td> </td> <td align="right">2,068</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="left">$</td> <td align="right">4,128</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In the United States, sales discounts are issued to customers as direct discounts at the point-of-sale or indirectly through an intermediary wholesale purchaser, known as chargebacks, or indirectly in the form of rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Sales are recorded net of provisions for sales discounts and returns for which reliable estimates can be made at the time of sale. Reserves for chargebacks, discounts and returns and allowances are reflected as a direct reduction to accounts receivable and amounted to $44 million at December 31, 2009. Accruals for rebates are reflected as Rebates payable, shown separately in the combined balance sheet. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Income Taxes</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Generally, taxable income or losses of the Partnership are allocated to the Partners and included in each Partner’s income tax return. In some states and other jurisdictions, the Partnership is subject to an income tax, which is included in the combined financial statements and shared between the Partners. Except for these income taxes, which are not significant to the combined financial statements, no provision has been made for federal, foreign or state income taxes. At December 31, 2009, the Partnership had $52 million of deferred tax assets comprised solely of net operating loss carryforwards (“NOLs”) generated by a branch of a legal entity of the Partnership. These NOLs expire between 2010 and 2016, and carry a full valuation allowance. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Concentrations of Credit Risk & Segment Information</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership’s concentrations of credit risk consist primarily of accounts receivable. The Partnership does not normally require collateral or other security to support credit sales. Bad debts for the year ended December 31, 2009 have been minimal. At December 31, 2009, three customers each represented 28%, 16% and 10% of Accounts receivable, net. The same three customers each accounted for more than 10% of Net sales in 2009 as shown in the table below. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3">Percent of</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">Net Sales</td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">McKesson Drug Company </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">23</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cardinal Health, Inc. </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">20</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Amerisourcebergen Corp. </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">16</td> <td nowrap="nowrap">%</td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership derived approximately 61% of its combined Net sales from the United States in 2009. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>3. Inventories</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Inventories at December 31, 2009 consisted of: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>$ in millions</i></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Finished goods </div></td> <td> </td> <td align="left">$</td> <td align="right">32</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Raw materials and work in process </div></td> <td> </td> <td> </td> <td align="right">52</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="left">$</td> <td align="right">84</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership has entered into long-term agreements with the Partners for the supply of active pharmaceutical ingredients (“API”) and for the formulation and packaging of the Cholesterol Products at an agreed upon cost. In connection with these supply agreements, the Partnership has entered into capacity agreements under which the Partnership has committed to take a specified annual minimum supply of API and formulated tablets or pay a penalty. These capacity agreements are in effect for a period of seven years following the first full calendar year of commercial sales of API to the Partnership and formulation on behalf of the Partnership by one of the Partners and expire in 2009 for API and 2011 for formulation. The Partnership had no payment obligation under the capacity agreements at December 31, 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>4. Related Party Transactions</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership receives substantially all of its goods and services, including pharmaceutical product, manufacturing services, sales force services, administrative services and R&D services, from the Partners. The Partnership had a net receivable from MSD for these services of $64 million at December 31, 2009. The Partnership had a net payable to New Merck for these services of $119 million at December 31, 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Selling, general and administrative expense includes contractually defined costs for physician detailing provided by New Merck and MSD of $122 million and $122 million each, in 2009, net of an underperformance penalty incurred by MSD of $38 million. These expenses are not necessarily reflective of the actual cost of the Partners’ sales efforts in the countries in which the amounts are contractually defined. Included in these amounts are $51 million in 2009 relating to contractually defined costs of physician detailing in Italy. These amounts were not invoiced or paid by the Partnership to the Partners, but are a component of the profit sharing calculation. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Cost of sales and selling, general and administrative expense also include contractually defined costs for distribution and administrative services provided by the Partners of $37 million in 2009. These amounts are not necessarily reflective of the actual costs for such distribution and administrative services. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership also sells Cholesterol Products directly to the Partners, principally to the Partners’ affiliates in Latin America. In Latin America, the Partners purchase Cholesterol Products from the Partnership and sell directly to third parties. Sales to the Partners are included in Net sales at their invoiced price in the accompanying combined statement of net sales and contractual expenses and totaled $85 million in 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. Legal and Other Matters</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership may become party to claims and legal proceedings of a nature considered normal to its business, including product liability and intellectual property. The Partnership records a liability in connection with such matters when it is probable a liability has been incurred and an amount can be reasonably estimated. Legal costs associated with litigation and investigation activities are expensed as incurred. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership maintains insurance coverage with deductibles and self-insurance as management believes is cost beneficial. The Partnership self-insures all of its risk as it relates to product liability and accrues an estimate of product liability claims incurred but not reported. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In February 2007, Schering-Plough received a notice from Glenmark Pharmaceuticals Inc. USA (“Glenmark”), a generic pharmaceutical company, indicating that it had filed an Abbreviated New Drug Application (“ANDA”) for a generic form of ZETIA and that it is challenging the U.S. patents that are listed for ZETIA. In March 2007, Schering-Plough and the Partnership filed a patent infringement suit against Glenmark and its parent company. The lawsuit automatically stays FDA approval of Glenmark’s ANDA until the earlier of October 2010 or an adverse court decision, if any. The trial in this matter is scheduled to commence on May 3, 2010. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     New Merck and the Partnership intend to vigorously defend its patents, which they believe are valid, against infringement by generic companies attempting to market products prior to the expiration dates of such patents. As with any litigation, there can be no assurances of the outcomes which, if adverse, could result in significantly shortened periods of exclusivity. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In November 2009, New Merck received notice from Mylan that it filed an ANDA for ezetimibe/simvastatin and that it was challenging two patents listed in the FDA Orange Book for VYTORIN. On December 16, 2009, New Merck filed a patent infringement suit against Mylan. The lawsuit automatically stays FDA approval of Mylan’s ANDA until May 2012 or until an adverse court decision, if any, whichever may occur earlier. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, in January 2008, the Partners announced the results of the Effect of Combination Ezetimibe and High-Dose Simvastatin vs. Simvastatin Alone on the Atherosclerotic Process in Patients with Heterozygous Familial Hypercholesterolemia (“ENHANCE”) clinical trial, an imaging trial in 720 patients with heterozygous familial hypercholesterolemia, a rare genetic condition that causes very high levels of LDL “bad” cholesterol and greatly increases the risk for premature coronary artery disease. As previously reported, despite the fact that ezetimibe/simvastatin 10/80 mg (VYTORIN) significantly lowered LDL “bad” cholesterol more than simvastatin 80 mg alone, there was no significant difference between treatment with ezetimibe/simvastatin and simvastatin alone on the pre-specified primary endpoint, a change in the thickness of carotid artery walls over two years as measured by ultrasound. The Improved Reduction in High-Risk Subjects Presenting with Acute Coronary Syndrome (“IMPROVE-IT”) trial is underway and is designed to provide cardiovascular outcomes data for ezetimibe/simvastatin in patients with acute coronary syndrome. No incremental benefit of ezetimibe/simvastatin on cardiovascular morbidity and mortality over and above that demonstrated for simvastatin has been established. In January 2009, the FDA announced that it had completed its review of the final clinical study report of ENHANCE. The FDA stated that the results from ENHANCE did not change its position that an elevated LDL cholesterol is a risk factor for cardiovascular disease and that lowering LDL cholesterol reduces the risk for cardiovascular disease. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On July 21, 2008, efficacy and safety results from the Simvastatin and Ezetimibe in Aortic Stenosis (“SEAS”) study were announced. SEAS was designed to evaluate whether intensive lipid lowering with VYTORIN 10/40 mg would reduce the need for aortic valve replacement and the risk of cardiovascular morbidity and mortality versus placebo in patients with asymptomatic mild to moderate aortic stenosis who had no indication for statin therapy. VYTORIN failed to meet its primary end point for the reduction of major cardiovascular events. In the study, patients in the group who took VYTORIN 10/40 mg had a higher incidence of cancer than the group who took placebo. There was also a nonsignificant increase in deaths from cancer in patients in the group who took VYTORIN versus those who took placebo. Cancer and cancer deaths were distributed across all major organ systems. The Partners and the Partnership believe the cancer finding in SEAS is likely to be an anomaly that, taken in light of all the available data, does not support an association with VYTORIN. In August 2008, the FDA announced that it was investigating the results from the SEAS trial. In December 2009, the FDA announced that it had completed its review of the data from the SEAS trial as well as a review of interim data from the Study of Heart and Renal Protection (“SHARP”) and IMPROVE-IT trials. Based on currently available information, the FDA indicated it believed it is unlikely that VYTORIN or ZETIA increase the risk of cancer-related death. The SHARP trial is expected to be completed in 2010. The IMPROVE-IT trial is scheduled for completion in 2013. In the IMPROVE-IT trial, recently approximately 50% of the endpoints were accrued and a blinded interim efficacy analysis was conducted by the Data Safety Monitoring Board (“DSMB”) for the trial. After performing the analysis the DSMB approved continuing the study. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partners are committed to working with regulatory agencies to further evaluate the available data and interpretations of those data; however, the Partners do not believe that changes in the clinical use of VYTORIN are warranted. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, since December 2007, MSD and New Merck have received several letters addressed to both companies from the House Committee on Energy and Commerce, its Subcommittee on Oversight and Investigations (“O&I”), and the Ranking Minority Member of the Senate Finance Committee, collectively seeking a combination of witness interviews, documents and information on a variety of issues related to the ENHANCE clinical trial, the sale and promotion of VYTORIN, as well as sales of stock by corporate officers. In addition, as previously disclosed, since August 2008, the Partners have received three additional letters from O&I, including one dated February 19, 2009, seeking certain information and documents related to the SEAS clinical trial. Also, as previously disclosed, the Partners and the Partnership have received subpoenas from the New York State Attorney General’s Office and a letter from the Connecticut Attorney General seeking similar information and documents, and on July 15, 2009, the Partners and the Partnership announced that they reached a civil settlement with the Attorneys General representing 35 states and the District of Columbia to resolve a previously disclosed investigation by that group into whether the Partners and the Partnership violated state consumer protection laws when marketing <i>Vytorin </i>and <i>Zetia</i>. As part of the settlement, the Partners and the Partnership agreed to reimburse the investigative costs of the 35 states and the District of Columbia which totaled $5.4 million, and to make voluntary assurances of compliance related to the promotion of <i>Vytorin</i> and <i>Zetia</i>, including agreeing to continue to comply with the Food, Drug and Cosmetic Act, the U.S. Food and Drug Administration Amendments Act, and other laws requiring the truthful and non-misleading marketing of pharmaceutical products. The settlement did not include any admission of misconduct or liability by the Partners and the Partnership. Furthermore, as previously disclosed, in September 2008, the Partners and the Partnership received letters from the Civil Division of the DOJ informing them that the DOJ is investigating whether their conduct relating to the promotion of <i>Vytorin </i>caused false claims to be submitted to federal health care programs. The Partners and the Partnership are cooperating with these investigations and responding to the inquiries. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, the Partners and the Partnership have become aware of or been served with approximately 145 civil class action lawsuits alleging common law and state consumer fraud claims in connection with the Partnership’s sale and promotion of VYTORIN and ZETIA. Certain of those lawsuits allege personal injuries and/or seek medical monitoring. The lawsuits against the Partners were consolidated in a single multi-district litigation docket before Judge Cavanaugh of the District of New Jersey, <i>In re Vytorin/Zetia Marketing Sales Practices and Products Liability Litigation</i>. On August 5, 2009, the Partners jointly announced that their cholesterol joint venture, entered into agreements to resolve, for a total fixed amount of $41.5 million, these civil class action lawsuits. The Partnership recorded these charges in the second quarter of 2009. On February 9, 2010, Judge Cavanaugh granted final approval of the settlements. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Merck/Schering-Plough Cholesterol Partnership<br /> Combined Statements of Net Sales and Contractual Expenses</b><br /> <i>Years Ended December 31,<br /> ($ in millions)</i> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2007</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net sales </div></td> <td> </td> <td align="right">$</td> <td align="right">4,561</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,186</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cost of sales </div></td> <td> </td> <td> </td> <td align="right">176</td> <td> </td> <td> </td> <td> </td> <td align="right">216</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Selling, general and administrative </div></td> <td> </td> <td> </td> <td align="right">1,062</td> <td> </td> <td> </td> <td> </td> <td align="right">1,151</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Research and development </div></td> <td> </td> <td> </td> <td align="right">168</td> <td> </td> <td> </td> <td> </td> <td align="right">156</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">1,406</td> <td> </td> <td> </td> <td> </td> <td align="right">1,523</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Income from operations </div></td> <td> </td> <td align="right">$</td> <td align="right">3,155</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,663</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Merck/Schering-Plough Cholesterol Partnership<br /> Combined Balance Sheet</b><br /> <i>December 31,<br /> ($ in millions)</i> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2008</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents </div></td> <td> </td> <td align="right">$</td> <td align="right">204</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accounts receivable, net </div></td> <td> </td> <td> </td> <td align="right">311</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Inventories </div></td> <td> </td> <td> </td> <td align="right">79</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Prepaid expenses and other assets </div></td> <td> </td> <td> </td> <td align="right">14</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Total assets </div></td> <td> </td> <td align="right">$</td> <td align="right">608</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Liabilities and Partners’ Capital</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Rebates payable </div></td> <td> </td> <td align="right">$</td> <td align="right">263</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Payable to Merck, net </div></td> <td> </td> <td> </td> <td align="right">81</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Payable to Schering-Plough, net </div></td> <td> </td> <td> </td> <td align="right">100</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accrued expenses and other liabilities </div></td> <td> </td> <td> </td> <td align="right">44</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Total liabilities </div></td> <td> </td> <td> </td> <td align="right">488</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Commitments and contingent liabilities (notes 3 and 5) </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Partners’ capital </div></td> <td> </td> <td> </td> <td align="right">120</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total liabilities and Partners’ capital </div></td> <td> </td> <td align="right">$</td> <td align="right">608</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="center" style="font-size: 10pt; margin-top: 18pt"><i>The accompanying notes are an integral part of these combined financial statements.</i> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Merck/Schering-Plough Cholesterol Partnership<br /> Combined Statements of Cash Flows</b><br /> <i>Years Ended December 31,<br /> ($ in millions)</i> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2007</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Operating Activities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Income from operations </div></td> <td> </td> <td align="right">$</td> <td align="right">3,155</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,663</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Adjustments to reconcile income from operations to net cash provided by operating activities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Accounts receivable, net </div></td> <td> </td> <td> </td> <td align="right">91</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(109</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Inventories </div></td> <td> </td> <td> </td> <td align="right">26</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(18</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Prepaid expenses and other assets </div></td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Rebates payable </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(114</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">106</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Payable to Merck and Schering-Plough, net </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(53</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Accrued expenses and other liabilities </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">38</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Non-cash charges </div></td> <td> </td> <td> </td> <td align="right">68</td> <td> </td> <td> </td> <td> </td> <td align="right">60</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Net cash provided by operating activities </div></td> <td> </td> <td> </td> <td align="right">3,174</td> <td> </td> <td> </td> <td> </td> <td align="right">3,739</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Financing Activities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Contributions from Partners </div></td> <td> </td> <td> </td> <td align="right">407</td> <td> </td> <td> </td> <td> </td> <td align="right">722</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Distributions to Partners </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3,868</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(4,006</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Net cash used for financing activities </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3,461</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3,284</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net increase/(decrease) in cash and cash equivalents </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(287</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">455</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of period </div></td> <td> </td> <td> </td> <td align="right">491</td> <td> </td> <td> </td> <td> </td> <td align="right">36</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of period </div></td> <td> </td> <td align="right">$</td> <td align="right">204</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">491</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="center" style="font-size: 10pt; margin-top: 18pt"><i>The accompanying notes are an integral part of these combined financial statements.</i> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Merck/Schering-Plough Cholesterol Partnership<br /> Combined Statements of Partners’ Capital (Deficit)</b><br /> <i>($ in millions)</i> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Schering-</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Plough</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Merck</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance, January 1, 2007 </div></td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(83</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(81</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Contributions from Partners </div></td> <td> </td> <td> </td> <td align="right">276</td> <td> </td> <td> </td> <td> </td> <td align="right">506</td> <td> </td> <td> </td> <td> </td> <td align="right">782</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Income from operations </div></td> <td> </td> <td> </td> <td align="right">1,831</td> <td> </td> <td> </td> <td> </td> <td align="right">1,832</td> <td> </td> <td> </td> <td> </td> <td align="right">3,663</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Distributions to Partners </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,944</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2,062</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(4,006</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance, December 31, 2007 </div></td> <td> </td> <td> </td> <td align="right">165</td> <td> </td> <td> </td> <td> </td> <td align="right">193</td> <td> </td> <td> </td> <td> </td> <td align="right">358</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Contributions from Partners </div></td> <td> </td> <td> </td> <td align="right">143</td> <td> </td> <td> </td> <td> </td> <td align="right">264</td> <td> </td> <td> </td> <td> </td> <td align="right">407</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Income from operations </div></td> <td> </td> <td> </td> <td align="right">1,665</td> <td> </td> <td> </td> <td> </td> <td align="right">1,490</td> <td> </td> <td> </td> <td> </td> <td align="right">3,155</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Distributions to Partners </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,964</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1,836</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3,800</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance, December 31, 2008 </div></td> <td> </td> <td align="right">$</td> <td align="right">9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">111</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">120</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="center" style="font-size: 10pt; margin-top: 18pt"><i>The accompanying notes are an integral part of these combined financial statements.</i> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Merck/Schering-Plough Cholesterol Partnership<br /> Notes to Combined Financial Statements</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>1. Description of Business and Basis of Presentation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Description of Business</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In May 2000, Merck & Co., Inc. (“Merck”) and Schering-Plough Corporation (“Schering-Plough”) (collectively the “Partners”) entered into agreements (the “Agreements”) to jointly develop and market in the United States, Schering-Plough’s then investigational cholesterol absorption inhibitor (“CAI”) ezetimibe (marketed today in the United States as ZETIA and as EZETROL in most other countries) (the “Cholesterol Collaboration”) and a fixed-combination tablet containing the active ingredients montelukast sodium and loratadine (the “Respiratory Collaboration”). Montelukast sodium, a leukotriene receptor antagonist, is sold by Merck as SINGULAIR and loratadine, an antihistamine, is sold by Schering-Plough as CLARITIN, both of which are indicated for the relief of symptoms of allergic rhinitis. The Respiratory Collaboration was terminated in 2008 in accordance with the applicable agreements, following the receipt of a not-approvable letter from the U.S. Food and Drug Administration (“FDA”) for the fixed-combination tablet. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Cholesterol Collaboration is formally referred to as the Merck/Schering-Plough Cholesterol Partnership (the “Partnership”). In December 2001, the Cholesterol Collaboration Agreements were expanded to include all countries of the world, except Japan. The Cholesterol Collaboration Agreements provide for ezetimibe to be developed and marketed in the following forms: </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Ezetimibe, a once daily CAI, non-statin cholesterol reducing medicine used alone or co-administered with any statin drug, and</td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Ezetimibe and simvastatin (Merck’s existing ZOCOR statin cholesterol modifying medicine) combined into one tablet (marketed today in the United States as VYTORIN and as INEGY in most other countries).</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     VYTORIN and ZETIA were approved by the FDA in July 2004 and October 2002, respectively. Together, these products, whether marketed as VYTORIN, ZETIA or under other trademarks locally, are referred to as the “Cholesterol Products.” </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Under the Cholesterol Collaboration Agreements, the Partners established jointly-owned, limited purpose legal entities based in Canada and the United States through which to carry out the contractual activities of the Partnership in these countries. An additional jointly-owned, limited purpose legal entity based in Singapore was established to own the rights to the intellectual property and to fund and oversee research and development and manufacturing activities of the Cholesterol Collaboration. In all other markets except Latin America, subsidiaries of Merck or Schering-Plough perform marketing activities for the Cholesterol Products under contract with the Partnership. These legal entity and subsidiary operations are collectively referred to as the “Combined Companies.” In Latin America, the Partnership sells directly to Schering-Plough and Merck’s Latin American subsidiaries and Schering-Plough and Merck compete against one another in the cholesterol market. Consequently, selling, promotion and distribution activities for the Cholesterol Products within Latin America are not included in the Combined Companies. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership is substantially reliant on the infrastructures of Merck and Schering-Plough. There are a limited number of employees of the legal entities of the Partnership and most activities are performed by employees of either Merck or Schering-Plough under service agreements with the Partnership. Profits, which are shared by the Partners under differing arrangements in countries around the world, are generally defined as net sales minus (1) agreed upon manufacturing costs and expenses incurred by the Partners and invoiced to the Partnership, (2) direct promotion expenses incurred by the Partners and invoiced to the Partnership, (3) expenses for a limited specialty sales force in the United States incurred by the Partners and invoiced to the Partnership, and certain amounts for sales force physician detailing of the Cholesterol Products in the United States, Puerto Rico, Canada and Italy, (4) administration expenses based on a percentage of Cholesterol Product net sales, which are invoiced by one of the Partners, and (5) other costs and expenses incurred by the Partners that were not contemplated when the Cholesterol Collaboration Agreements were entered into but that were subsequently agreed to by both Partners. Agreed upon research and development expenses incurred by the Partners and invoiced to the Partnership are shared equally by the Partners, after adjusting for special allocations in the nature of milestones due to one of the Partners. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership’s future results of operations, financial position, and cash flows may differ materially from the historical results presented herein because of the risks and uncertainties related to the Partnership’s business. The Partnership’s future operating results and cash flows are dependent on the Cholesterol Products. Any events that adversely affect the market for those products could have a significant impact on the Partnership’s results of operations and cash flows. These events could include loss of patent protection, increased costs associated with manufacturing, increased competition from the introduction of new, more effective treatments, exclusion from government reimbursement programs, discontinuation or removal from the market of a product for safety or other reason, and the results of future clinical or outcomes studies (Note 5). </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Basis of Presentation</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The accompanying combined balance sheet and combined statements of net sales and contractual expenses, cash flows and partners’ capital (deficit) include the Cholesterol and Respiratory Collaboration activities of the Combined Companies. The Respiratory Collaboration activities primarily pertained to clinical development work and pre-launch marketing activities. Spending on respiratory-related activities ceased in 2008 following termination of the collaboration, and is not material to the income from operations in any of the years presented. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Net sales include the net sales of the Cholesterol Products sold by the Combined Companies. Expenses include amounts that Merck and Schering-Plough have contractually agreed to directly invoice to the Partnership, or are shared through the contractual profit sharing arrangements between the Partners, as described above. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The accompanying combined financial statements were prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission and reflect the activities of the Partnership based on the contractual agreements between the Partners. Such combined financial statements include only the expenses agreed by the Partners to be shared or included in the calculation of profits under the contractual agreements of the Partnership, and are not intended to be a complete presentation of all of the costs and expenses that would be incurred by a stand-alone pharmaceutical company for the discovery, development, manufacture, distribution and marketing of pharmaceutical products. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Under the Cholesterol Collaboration Agreements, certain activities are charged to the Partnership by the Partners based on contractually agreed upon allocations of Partner-incurred expenses as described below. In the opinion of management, any allocations of expenses described below are made on a basis that reasonably reflects the actual level of support provided. All other expenses are expenses of the Partners and are reflected in their separate consolidated financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As described above, the profit sharing arrangements under the Cholesterol Collaboration Agreements provide that only certain Partner-incurred costs and expenses be invoiced to the Partnership by the Partners and therefore become part of the profit sharing calculation. The following paragraphs list the typical categories of costs and expenses that are generally incurred in the discovery, development, manufacture, distribution and marketing of the Cholesterol Products and provide a description of how such costs and expenses are treated in the accompanying combined statements of net sales and contractual expenses, and in determining profits under the contractual agreements. </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Manufacturing costs and expenses — All contractually agreed upon manufacturing plant costs and expenses incurred by the Partners related to the manufacture of the Cholesterol Products are included as Cost of sales in the accompanying combined statements of net sales and contractual expenses, including direct production costs, certain production variances, expenses for plant services and administration, warehousing, distribution, materials management, technical services, quality control, and asset utilization. All other manufacturing costs and expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are not invoiced to the Partnership and, therefore, are excluded from the accompanying combined financial statements. These costs and expenses include, but are not limited to, yield gains and losses in excess of jointly agreed upon yield rates and excess/idle capacity of manufacturing plant assets.</td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Direct promotion expenses — Direct promotion represents direct and identifiable out-of-pocket expenses incurred by the Partners on behalf of the Partnership including, but not limited to, contractually agreed upon expenses related to market research, detailing aids, agency fees, direct-to-consumer advertising, meetings and symposia, trade programs, launch meetings, special sales force incentive programs and product samples. All such contractually agreed upon expenses are included in Selling, general and administrative in the accompanying combined statements of net sales and contractual expenses. All other promotion expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are excluded from the accompanying combined financial statements.</td> </tr> </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Selling expenses — In the United States, Canada, Puerto Rico and other markets outside the United States (primarily Italy), the general sales forces of the Partners provide a majority of the physician detail activity at an agreed upon cost which is included in Selling, general and administrative in the accompanying combined statements of net sales and contractual expenses. In addition, the agreed upon costs of a limited specialty sales force for the United States market that calls on opinion leaders in the field of cholesterol medicine are also included in Selling, general and administrative. All other selling expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are excluded from the accompanying combined financial statements. These expenses include the total costs of the general sales forces of the Partners detailing the Cholesterol Products in most countries other than the United States, Canada, Puerto Rico and Italy.</td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Administrative expenses — Administrative support is primarily provided by one of the Partners. The contractually agreed upon expenses for support are determined based on a percentage of the net sales of the Cholesterol Products. Such amounts are included in Selling, general and administrative in the accompanying combined statements of net sales and contractual expenses. Selected contractually agreed upon direct costs of employees of the Partners for support services and out-of-pocket expenses incurred by the Partners on behalf of the Partnership are also included in Selling, general and administrative. All other expenses incurred by the Partners not agreed to be included in the determination of profits under the contractual agreements are excluded from the accompanying combined financial statements. These expenses include, but are not limited to, certain U.S. managed care services, Partners’ subsidiary management in most international markets, and other indirect expenses such as corporate overhead and interest.</td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Research and development (“R&D”) expenses — R&D activities are performed by the Partners and agreed upon costs and expenses are invoiced to the Partnership. These agreed upon expenses generally represent an allocation of each Partner’s estimate of full time equivalents devoted to pre-clinical and post-marketing clinical development and regulatory activities and include grants and other third-party expenses. These contractually agreed upon allocated costs are included in Research and development in the accompanying combined statements of net sales and contractual expenses. All other R&D costs that are incurred by the Partners but not jointly agreed upon, are excluded from the accompanying combined financial statements.</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>2. Summary of Significant Accounting Policies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Principles of Combination</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The accompanying combined balance sheet and combined statements of net sales and contractual expenses, cash flows and partners’ capital (deficit) include the Cholesterol and Respiratory Collaboration activities of the Combined Companies. Interpartnership balances and profits are eliminated. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Use of Estimates</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The combined financial statements are prepared based on contractual agreements between the Partners, as described above, and include certain amounts that are based on management’s best estimates and judgments. Estimates are used in determining such items as provisions for sales discounts and returns and government and managed care rebates. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Foreign Currency Translation</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The net assets of the Partnership’s foreign operations are translated into U.S. dollars at current exchange rates. The U.S. dollar effects arising from translating the net assets of these operations are included in Partners’ capital, and are not significant. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Cash and Cash Equivalents</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Cash and cash equivalents primarily consist of highly liquid money market instruments with original maturities of less than three months. In 2007, the Partnership changed certain cash management practices, increasing the amount of cash held by the Partnership. The Partnership’s cash, which is primarily invested in highly liquid money market instruments, is used to fund trade obligations coming due in the month and for distributions to the Partners. Interest income earned on cash and cash equivalents is reported as a reduction to Selling, general and administrative in the accompanying combined statements of net sales and contractual expenses and amounted to $10 million and $8 million in 2008 and 2007, respectively. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Inventories</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Substantially all inventories are valued at the lower of first in, first out cost or market. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Intangible Assets</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Intangible assets consist of licenses, trademarks and trade names owned by the Partnership. These intangible assets were recorded at the Partners’ historical cost at the date of contribution, at a nominal value. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Revenue Recognition, Rebates, Returns and Allowances</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Revenues from sales of Cholesterol Products are recognized when title and risk of loss pass to the customer. Recognition of revenue also requires reasonable assurance of collection of sales proceeds and completion of all performance obligations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Net sales of VYTORIN/INEGY and ZETIA/EZETROL for the years ended December 31 are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><b>$ in millions</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2007</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Vytorin/Inegy </div></td> <td> </td> <td align="right">$</td> <td align="right">2,360</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,779</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Zetia/Ezetrol </div></td> <td> </td> <td> </td> <td align="right">2,201</td> <td> </td> <td> </td> <td> </td> <td align="right">2,407</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="right">$</td> <td align="right">4,561</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,186</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In the United States, sales discounts are issued to customers as direct discounts at the point-of-sale or indirectly through an intermediary wholesale purchaser, known as chargebacks, or indirectly in the form of rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Sales are recorded net of provisions for sales discounts and returns for which reliable estimates can be made at the time of sale. Reserves for chargebacks, discounts and returns and allowances are reflected as a direct reduction to accounts receivable and amounted to $34 million at December 31, 2008. Accruals for rebates are reflected as Rebates payable, shown separately in the combined balance sheet. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Income Taxes</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Generally, taxable income or losses of the Partnership are allocated to the Partners and included in each Partner’s income tax return. In some states and other jurisdictions, the Partnership is subject to an income tax, which is included in the combined financial statements and shared between the Partners. Except for these income taxes, which are not significant to the combined financial statements, no provision has been made for federal, foreign or state income taxes. At December 31, 2008, the Partnership had $49 million of deferred tax assets comprised solely of net operating loss carryforwards (“NOLs”) generated by a branch of a legal entity of the Partnership. These NOLs expire between 2009 and 2015, and carry a full valuation allowance. In January 2007, the Partnership adopted Financial Accounting Standards Board Interpretation No. 48, <i>Accounting for Uncertainty in Income Taxes </i>(FIN 48)<i>. </i>Adoption of FIN 48 had no impact on the Partnership’s financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Concentrations of Credit Risk & Segment Information</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership’s concentrations of credit risk consist primarily of accounts receivable. The Partnership does not normally require collateral or other security to support credit sales. Bad debts for the years ended December 31, 2008 and 2007 have been minimal. At December 31, 2008, three customers each represented 25%, 19% and 17% of Accounts receivable, net. The same three customers each accounted for more than 10% of Net sales as shown in the table below. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Percent of Net Sales</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2007</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">McKesson Drug Company </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">24</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">28</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cardinal Health, Inc. </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">21</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">26</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Amerisourcebergen Corp. </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">16</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">17</td> <td nowrap="nowrap">%</td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership derived approximately 65% and 75% of its combined Net sales from the United States in 2008 and 2007, respectively. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Termination of the Respiratory Collaboration</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Respiratory Collaboration was terminated in 2008 in accordance with the applicable agreements, following the receipt of a not-approvable letter from the FDA for the proposed montelukast/loratadine combination tablet. As a result of termination, Schering-Plough received $105 million in incremental allocations of Partnership profits in 2008. Except for the allocation of certain profits, termination had no other impact on the Cholesterol Collaboration. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>3. Inventories</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Inventories at December 31 consisted of: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><b>$ in millions</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2008</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Finished goods </div></td> <td> </td> <td align="right">$</td> <td align="right">31</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Raw materials and work in process </div></td> <td> </td> <td> </td> <td align="right">48</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="right">$</td> <td align="right">79</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership has entered into long-term agreements with the Partners for the supply of active pharmaceutical ingredients (API) and for the formulation and packaging of the Cholesterol Products at an agreed upon cost. In connection with these supply agreements, the Partnership has entered into capacity agreements under which the Partnership has committed to take a specified annual minimum supply of API and formulated tablets or pay a penalty. These capacity agreements are in effect for a period of seven years following the first full year of production by one of the Partners and expire beginning in 2009. The Partnership had no payment obligation under the capacity agreements at December 31, 2008. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>4. Related Party Transactions</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership receives substantially all of its goods and services, including pharmaceutical product, manufacturing services, sales force services, administrative services and R&D services, from its Partners. The Partnership had a net payable to Merck and Schering-Plough for these services of $81 million and $100 million, respectively, at December 31, 2008. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Selling, general and administrative expense includes contractually defined costs for physician detailing provided by Schering-Plough and Merck of $223 million and $201 million, respectively, in 2008 and $242 million and $197 million, respectively, in 2007. These expenses are not necessarily reflective of the actual cost of the Partners’ sales efforts in the countries in which the amounts are contractually defined. Included in these amounts are $68 million and $60 million in 2008 and 2007, respectively, relating to contractually defined costs of physician detailing in Italy. These amounts were not invoiced or paid by the Partnership to the Partners, but are a component of the profit sharing calculation. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Cost of sales and selling, general and administrative expense also include contractually defined costs for distribution and administrative services provided by Merck and Schering-Plough of $39 million and $34 million in 2008 and 2007, respectively. These amounts are not necessarily reflective of the actual costs for such distribution and administrative services. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership also sells Cholesterol Products directly to the Partners, principally to Merck and Schering-Plough affiliates in Latin America. In Latin America, where the Partners compete with one another in the cholesterol market, Merck and Schering-Plough purchase Cholesterol Products from the Partnership and sell directly to third parties. Sales to the Partners are included in Net sales at their invoiced price in the accompanying combined statements of net sales and contractual expenses and totaled $74 million and $82 million in 2008 and 2007, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. Legal and Other Matters</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership may become party to claims and legal proceedings of a nature considered normal to its business, including product liability and intellectual property. The Partnership records a liability in connection with such matters when it is probable a liability has been incurred and an amount can be reasonably estimated. Legal costs associated with litigation and investigation activities are expensed as incurred. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partnership maintains insurance coverage with deductibles and self-insurance as management believes is cost beneficial. The Partnership self-insures all of its risk as it relates to product liability and accrues an estimate of product liability claims incurred but not reported. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In February 2007, Schering-Plough received a notice from Glenmark Pharmaceuticals Inc. USA (“Glenmark”), a generic pharmaceutical company, indicating that it had filed an Abbreviated New Drug Application (“ANDA”) for a generic form of ZETIA and that it is challenging the U.S. patents that are listed for ZETIA. In March 2007, Schering-Plough and the Partnership filed a patent infringement suit against Glenmark and its parent company. The lawsuit automatically stays FDA approval of Glenmark’s ANDA until the earlier of October 2010 or an adverse court decision, if any. Schering-Plough and the Partnership intend to vigorously defend its patents, which they believe are valid, against infringement by generic companies attempting to market products prior to the expiration dates of such patents. As with any litigation, there can be no assurances of the outcomes which, if adverse, could result in significantly shortened periods of exclusivity. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In January 2008, the Partners announced the results of the Effect of Combination Ezetimibe and High-Dose Simvastatin vs. Simvastatin Alone on the Atherosclerotic Process in Patients with Heterozygous Familial Hypercholesterolemia (“ENHANCE”) clinical trial, an imaging trial in 720 patients with heterozygous familial hypercholesterolemia, a rare genetic condition that causes very high levels of LDL “bad” cholesterol and greatly increases the risk for premature coronary artery disease. Despite the fact that ezetimibe/simvastatin 10/80 mg (VYTORIN) significantly lowered LDL “bad” cholesterol more than simvastatin 80 mg alone, there was no significant difference between treatment with ezetimibe/simvastatin and simvastatin alone on the pre-specified primary endpoint, a change in the thickness of carotid artery walls over two years as measured by ultrasound. There also were no significant differences between treatment with ezetimibe/simvastatin and simvastatin on the four pre-specified key secondary endpoints: percent of patients manifesting regression in the average carotid artery intima-media thickness (“CA IMT”); proportion of patients developing new carotid artery plaques >1.3 mm; changes in the average maximum CA IMT; and changes in the average CA IMT plus in the average common femoral artery IMT. In ENHANCE, when compared to simvastatin alone, ezetimibe/simvastatin significantly lowered LDL “bad” cholesterol, as well as triglycerides and C-reactive protein (“CRP”). Ezetimibe/simvastatin is not indicated for the reduction of CRP. In the ENHANCE study, the overall safety profile of ezetimibe/simvastatin was generally consistent with the product label. The ENHANCE study was not designed nor powered to evaluate cardiovascular clinical events. The Improved Reduction in High-Risk Subjects Presenting with Acute Coronary Syndrome (“IMPROVE-IT”) trial is underway and is designed to provide cardiovascular outcomes data for ezetimibe/simvastatin in patients with acute coronary syndrome. No incremental benefit of ezetimibe/simvastatin on cardiovascular morbidity and mortality over and above that demonstrated for simvastatin has been established. In March 2008, the results of ENHANCE were reported at the annual Scientific Session of the American College of Cardiology. In January 2009, the FDA announced that it had completed its review of the final clinical study report of ENHANCE. The FDA stated that the results from ENHANCE did not change its position that an elevated LDL cholesterol is a risk factor for cardiovascular disease and that lowering LDL cholesterol reduces the risk for cardiovascular disease. The FDA also stated that, based on current available data, patients should not stop taking VYTORIN or other cholesterol lowering medications and should talk to their doctor if they have any questions about VYTORIN, ZETIA, or the ENHANCE trial. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On July 21, 2008, efficacy and safety results from the Simvastatin and Ezetimibe in Aortic Stenosis (“SEAS”) study were announced. SEAS was designed to evaluate whether intensive lipid lowering with VYTORIN 10/40 mg would reduce the need for aortic valve replacement and the risk of cardiovascular morbidity and mortality versus placebo in patients with asymptomatic mild to moderate aortic stenosis who had no indication for statin therapy. VYTORIN failed to meet its primary end point for the reduction of major cardiovascular events. There also was no significant difference in the key secondary end point of aortic valve events; however, there was a reduction in the group of patients taking VYTORIN compared to placebo in the key secondary end point of ischemic cardiovascular events. VYTORIN is not indicated for the treatment of aortic stenosis. No incremental benefit of VYTORIN on cardiovascular morbidity and mortality over and above that demonstrated for simvastatin has been established. In the study, patients in the group who took VYTORIN 10/40 mg had a higher incidence of cancer than the group who took placebo. There was also a nonsignificant increase in deaths from cancer in patients in the group who took VYTORIN versus those who took placebo. Cancer and cancer deaths were distributed across all major organ systems. The Partners and the Partnership believe the cancer finding in SEAS is likely to be an anomaly that, taken in light of all the available data, does not support an association with VYTORIN. In August 2008, the FDA announced that it was investigating the results from the SEAS trial. In this announcement, the FDA also cited interim data from two large ongoing cardiovascular trials of VYTORIN — the Study of Heart and Renal Protection (“SHARP”) and the IMPROVE-IT clinical trials — in which there was no increased risk of cancer with the combination of simvastatin plus ezetimibe. The SHARP trial is expected to be completed in 2010. The IMPROVE-IT trial is scheduled for completion around 2012. The FDA determined that, as of that time, these findings in the SEAS trial plus the interim data from ongoing trials should not prompt patients to stop taking VYTORIN or any other cholesterol lowering drug. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Partners and the Partnership are committed to working with regulatory agencies to further evaluate the available data and interpretations of those data, and do not believe that changes in the clinical use of VYTORIN are warranted. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As previously disclosed, since December 2007, Merck and Schering-Plough have received several letters addressed to both companies from the House Committee on Energy and Commerce, its Subcommittee on Oversight and Investigations (“O&I”), and the Ranking Minority Member of the Senate Finance Committee, collectively seeking a combination of witness interviews, documents and information on a variety of issues related to the ENHANCE clinical trial, the sale and promotion of VYTORIN, as well as sales of stock by corporate officers of Merck and Schering-Plough. In addition, since August 2008, the Partners have received three additional letters from O&I, including one dated February 19, 2009, seeking certain information and documents related to the SEAS clinical trial. Also, as previously disclosed, the Partners and the Partnership have received subpoenas from the New York and New Jersey State Attorneys General Offices and a letter from the Connecticut Attorney General seeking similar information and documents. In addition, the Partners and the Partnership have received five Civil Investigative Demands (“CIDs”) from a multistate group of 35 State Attorneys General who are jointly investigating whether violations of state consumer protection laws occurred when marketing VYTORIN. Finally, in September 2008, Merck and Schering-Plough received a letter from the Civil Division of the U.S. Department of Justice (“DOJ”) informing them that the DOJ is investigating whether the companies’ conduct relating to the promotion of VYTORIN caused false claims to be submitted to federal health care programs. The Partners and the Partnership are cooperating with these investigations and responding to the inquiries. In addition, the Partners and the Partnership have become aware of or been served with approximately 145 civil class action lawsuits alleging common law and state consumer fraud claims in connection with the Partnership’s sale and promotion of VYTORIN and ZETIA. Certain of those lawsuits allege personal injuries and/or seek medical monitoring. These actions, which have been filed in or transferred to federal court, are coordinated in a multidistrict litigation in the U.S. District Court for the District Court of New Jersey before District Judge Dennis M. Cavanaugh. The parties are presently engaged in motions practice and briefing. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     While it is not feasible to predict the outcome of the investigations or lawsuits arising from the ENHANCE and SEAS clinical trials, unfavorable outcomes could have a significant adverse effect on the Partnership’s financial position, results of operations and cash flows. </div> </div> false --12-31 FY 2009 2009-12-31 10-K 0000064978 100 Yes Non-accelerated Filer 58949000000 Merck Sharp & Dohme Corp. No Yes 9174100000 5477300000 0 8809700000 8348900000 8683200000 7766600000 7382400000 -3162500000 3492100000 9931700000 10822600000 451100000 -1710900000 -3981600000 -1401100000 -1629700000 5474300000 0 19080200000 13103700000 13002900000 120800000 121800000 120000000 4000000000 10132700000 11967300000 3070800000 -8809700000 -8809700000 49493800000 43759400000 -2788100000 20705600000 13918600000 12820600000

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