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Japan's New Growth Strategy:MSD’s Contribution as a Global Company

Presentation at Pharma Delegates

Tony AlvarezRepresentative Director and President

MSD K.K.January 20, 2011

2 Tony Alvarez @ Pharma Delegates 012011

Forward-Looking StatementMerck & Co., Inc., Whitehouse Station, N.J., U.S.A.

This presentation contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding product development, product potential or financial performance. No forward-looking statement can be guaranteed and actual results may differ materially from those projected. Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this presentation should be evaluated together with the many uncertainties that affect Merck's business, particularly those mentioned in the risk factors and cautionary statements in Item 1A of Merck's Form 10-K for the year ended Dec. 31, 2009, and in any risk factors or cautionary statements contained in the Company's periodic reports on Form 10-Q or current reports on Form 8-K, which the Company incorporates by reference.


No Duty to Update

The information contained in the presentation set forth below was current as of December 29, 2010. While this presentation remains on the company’s website the company assumes no duty to update the information to reflect subsequent developments. Consequently, the company will not update the information contained in the presentation and investors should not rely upon the information as current oraccurate after December 29, 2010.


Agenda

New MSD

New MSD: A compelling combination1 Introduction of New MSD

2 Japan’s New Growth Strategy 2010

3 MSD’s Global Contributions toJapan’s Growth through Innovation


Agenda

New MSD



3MSD’s Global Contributions to Japan’s Growth through Innovation


► Approximately 93,000 employees around the world

► Operations in more than 140 nations

► Scientists committed to finding the best science globally, and accessing a great diversity of scientific thought

► 2010 Revenues (Jan.-Sep.) : $33.9 billion

► 2009 R&D Expense: $5.8 billion

Today’s MSD: Expanded Global Presence


7

A Diverse Portfolio and Global Presence1Q - 3Q 2010 Pharma & Vaccines Revenue¹1Q - 3Q2010 Total Revenue

Japan9%

Latin America7%

Canada4%

EasternEurope/Middle East Africa

4%

Other0%

Asia Pacific6%

Europe27%

United States42%

Animal Health6%

ConsumerHealth

3%

Other4%

Neuro & Ophth3%

InfectiousDisease

10%

Oncology5%

Women'sHealth

4%

Diabetes8%

Vaccines9%

DiversiliedBrands

11%

Bone, Resp,Immun & Derm

25%

Cardiovascular10%

¹ Excludes $38 million of other sales in 1Q 2010


Animal Health ConsumerHealth Care

Emerging Markets Vaccines

ComplementaryBusinesses

Focused Integrated Effort on Greatest

Growth Opportunities

Cardiovascular Diabetes/Obesity

Bone/ImmunologyRespiratory/Dermatology

Expanded and Strengthened

Franchises

Oncology Neurosciences/Ophthalmology

Women’s Health/

EndocrineMature Brands

Infectious Diseases

Biologics

Positioned to Capitalize on Growth Opportunities & Combined Strengths


9

CV andDiabetes

Infectious Diseases

Respiratory/ Bone/

Imm/Derm

Women’s Health

Neuro/Ophthalmology

Oncology

Vaccines

Mature Brands

Best Positioned to Offer Customers a Portfolio of Options in Key Therapeutic Areas


Financial strengthto invest in the best opportunities in healthcare

Merck* and Schering-Plough: A Compelling Combination

Strong & diverse portfoliowith leading brands in key businesses

Powerful late-stage pipelinewith more than 20 late-stage compounds in global

Expanded global focuswith a greater proportion of sales outside the U.S. and a dedicated strategy for emerging markets

*Merck & Co., Inc., Whitehouse Station, N.J., U.S.A.


MSD Started in Japan on October 1, 2010

Expanded product portfolio

Increased market presence

Diverse and robust pipeline

Banyu Pharmaceutical Co., Ltd.

x

Schering-Plough K.K.


Our Company’s Origin in Japan…

Established in 1891Founder: George Merck23 years oldat that time

1891 Founded Merck in New York

1915 First Merck Research Laboratory in Rahway, NJ- Sulfas- Antibiotics- Hormones, etc.

1930s Established framework for scientific research cooperation with universities

Merck & Co., Inc.,Whitehouse Station, N.J., U.S.A.

Established in 1915Founder: Toru Iwadare 26 years oldat that time

1915 Synthesizing and mass-producing SalvarsanFounded Banyu during post-graduate at University of Tokyo

1946 Developed penicillin (first in Japan)

Schering-Plough K.K.

1959 Established in Japan under the name of Essex Nippon(renamed to Schering-Plough K.K. in 1989)

1960 Nippon Organon K.K. was founded(was merged by S-P K.K. in 2008)

Banyu Pharmaceutical Co., Inc.


MSD: Increased Scale

Tokyo Head Office

Menuma Plant

Shiga PlantOsaka Office

• Approximately 4,400 employees

• Approximately 2,400 MRs

• 15 nationalities• Capital:Y26,349 million (As of October 1, 2010)


2009 FYRanking Company

2009 FYSalesBillion

Yen

2010 FYRanking Company

2010 FYSalesBillion

YenETHICAL TOTAL 8,852 ETHICAL TOTAL 8,874

1 TAKEDA YAKUHIN KOG 531 1 TAKEDA YAKUHIN KOG 5372 DAIICHI SANKYO 492 2 PFIZER 5203 PFIZER 472 3 DAIICHI SANKYO 4704 CHUGAI SEIYAKU 423 4 MITSUBISHI TANABE 3935 MITSUBISHI TANABE 401 5 CHUGAI SEIYAKU 3926 NOVARTIS PHARMA


Continuous Growth Through Delivering Innovative Medicines & Vaccines to Japan

0

50

100

150

200

250

300

350

400

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Banyu and Merck & Co., Inc., Whitehouse Station, N.J., U.S.A.Integration

Banyu & SPKKIntegration

Claritin®, Qvar®Claritin®, Qvar®

Rebetol®Rebetol®

PegIntron®Claritin® Reditab®

PegIntron®Claritin® Reditab®

Nulotan®Nulotan®

Preminent®Preminent®

Propecia®Propecia®

Eyevinal®Eyevinal®

Trusopt®Trusopt®

Singulair®, Fosamac®Singulair®, Fosamac®

PegIntron®, OthersPegIntron®, Others

Temodal®Temodal®Zetia®Zetia®

Claritin® DS, Nasonex®,Aroglycem® Follistim® Pen

Claritin® DS, Nasonex®,Aroglycem® Follistim® Pen Remeron®

Asmanex®Ganirest®

Remeron®Asmanex®Ganirest®

Isentress®Isentress®

Januvia®Januvia®

Sales in SPKK Sales in Banyu

(Bill

ion

yen,

NH

I Bas

is fr

om IM

S)


Cardio /Metabolic

Infectious Disease/ Vaccine

Respiratory

Therapeutic Area

MSD: Expanded Japan Product PortfolioLegacy Banyu Products

Dermatology

Bone

Neuro/Ophthalmology

Women’s Health

Oncology

Legacy SPKK Products

Anesthesiology


MSD’s pipeline has been expanding(As of December 27, 2010)

2010 Phase Ⅱ

Infectious Dis., V710

Cancer, MK-8669

Insomnia, MK-6096

Cancer, MK-0683NHL

2010 Phase III

Moved forward in 2010

Osteoporosis, MK-0822

Infectious Dis., MK-0991

Insomnia, MK-4305

HPV Vaccine, V-503

Cardiovascular, SCH-530348

Schizophrenia, SCH-900274

Atherosclerosis, MK-0859

Infectious Dis., MK-7009

Cancer, MK-0683Mesothelioma


Positioned for Growth: Successful Integration

Focus on Customer- Maximize product value

Deliver on Pipeline- Keep programs on time

Upgrade Capability- Develop and retain talents

Build Long-term Strategy- Set course for growth in

Research and Commercialization

Accelerate BreakthroughLaunch


Delivering on Our Pipeline:All Planned NDAs Achieved during Integration

*Add-on indication or new formulation

NDAs submitted in 2010

*Follistim®900IU

NDAs Under ReviewNDAs Under Review

Cervical cancer Vaccine

Rotavirus vaccine

*Januvia®AGI

*Follistim®900IU

Vorinostat

*Nasonex®unscented

Daptomycin

*Januvia®Insulin

2010Planned NDAs

2010Planned NDAs

Rotavirus vaccine

Daptomycin

*Januvia®AGI

Vorinostat

*Januvia®Insulin

All submissions completed

Product Approvals 2010

Product Approvals 2010

Bridion® (Jan)

*Temodal® (Jan)

Cosopt® (Apr)


Build Long-term Strategy:MSD’s R&D Strategy is Basis for Growth

► Focus on priority disease areas to meet unmet medical needs and maximize opportunities

– Bone, Respiratory, Immunology and Endocrine, Cardiovascular, Diabetes & Obesity, Infectious Diseases, Neuroscience, Women Health, Oncology, Vaccines

► Redefining R&D success by looking to customers and scientific leaders early and often in product lifecycle

► Leveraging technologies to facilitate drug discovery & development

► Ensure a more sustainable pipeline by translating basic research productivity into late-stage clinical success

► Focus on cycle time reductions

► Supplementing internal R&D capability withexternal collaborations

CycleTimeCycleTime

Probabilityof SuccessProbabilityof Success

ProductivityProductivity

CollaborationCollaboration


Agenda



3MSD’ Global Contributions to Japan’s Growth through Innovation


Japan’s Future in Innovation:The Cabinet’s New Growth Strategy (2010-20)► 4 growth areas and

3 infrastructure areas by 2020► In the 4 areas, 5 million new

employments and 123 trillion yen in demand will be created.

Science and Technology includes:1. Construct globally competitive

science-tech innovation systems2. Construct national strategy to

promote science-tech innovation3. Strengthen basic research and

accelerate innovation 4. Academia, government, and

industry collaboration is key

4 Growth Areas

Green Innovation

［Environment/E

nergy]

Life Innovation

［Health care/Nursing]

Asian Economy

Sightseeing/Region

3 Infrastructure AreasScience/

Technology/Telecommunication

Employment/Talent

Finance

1 2 3 4

5 6 7


Is the Growth Strategy Feasible?

► Aging Society Challenge ► Economic Stagnation

#27(2010)

#1(1990)

3) IMD* global competitiveness

8.9%(2008)

14.3%(1990)

2) Global share of GDP

#23(2008)

#3(2000)

1) GDP per one person

* International Institute for Management Development

Note: 1) , 2) IMF World Economic Outlook Database3) World Competitiveness YearbookSource: National Institute of Population and Social Security

Research


Does Economic Growth Strategy support Bio-Pharmaceutical Industries Comprehensively?

Increase Government investments & provide tax incentivesFoster science careers, attract global talent, align science education &

industry needsCross-Ministerial decision -making on budgets & strategies

Basic Research

A pre-requisite for reform: Improve clinical testing environment►Industry-Academia-Government partnerships crucial to success

Clinical Trials

A pre-requisite to reform: Drug approval decisions must be expeditedPMDA operational funds increased in 2010 Supplemental Budget

Regulatory Reviews

►Unapproved Drugs & Indications the primary issue►New Product Premium remains only a trial & not mentioned in Strategy►Pricing rules inconsistently incentivize innovative research

Pricing

Focus of Economic Growth StrategyOur Issues:

► Worldwide, the Bio-Pharmaceutical Industries thrive in a policy environment that comprehensively supports innovation.► Our Issues: Pricing to support innovation, globally-integrated

regulatory review processes, strong clinical trials environment,government support for basic research


Significant Growth in Singapore for Pharmaceutical Industries : Japan’s Competitors in Basic Research

► Importing global brains– Top global scientists / Novel prize level (more than 2,000)– ¼ of population come from other countries

► Major company’s core facilities newly built– Roche: Translational Research Center (2010)– Abbott: R&D Center (2010)– MSD: Translational Research Laboratory (2009)– Takeda: Clinical Research Center (2008)– Medtronic: Global Business Center and manufacturing site for

Pacemaker (2010)– Fujitsu: Healthcare Center (2010)– Waseda Univ.: Bio-Science Research Center (2009)

► Expected GDP growth in 2010: 13~15%– Pharma. Industry becomes a core to contribute its growth.


Japan’s Current trends:Impact to Pharma Industries - Challenges

►Increasing pressure on drug pricing and reimbursement

►Patent expiries and growing generic threats have increased

►Diversification of customer needs►Possibility of insurance system crisis►Persistence of slow-growth economy


Japan’s Current trends:Impact to Pharma Industries - Opportunities

►Aging population with growing healthcare needs►Rising incidence of chronic disease►High unmet medical needs, e.g. Alzheimer’s,

Oncology, etc.

►Increasing importance of preventive care- Increasing importance of promoting health of the working population

►Advancing science and technology enabling new drug discovery


Agenda

New MSD

New MSD: A compelling combination1 Introduction of the New MSD

2 Japan New Growth Strategy 2010

MSD’s Global Contributions toJapan’s Growth through Innovation3


29

Merck*/ Schering-Plough Integration:Commitment to Discovery and Development for Patients

►Schering-Plough and Merck R&D organizations share a common culture of scientific excellence

►Schering-Plough has an established presence in oncology and neuroscience, two areas Merck is building

►Schering-Plough’s expertise in novel biologics complements Merck’s BioVentures technology

►Schering-Plough’s therapeutic areas of focus complement those of Merck– Mechanistic diversity adds strength to our joint

pipeline

*Merck & Co., Inc., Whitehouse Station, N.J., U.S.A.


► Launching new commercial models around the world –including the U.S., EU, Japan and Canada – with common tenets:

– Focus on customer value and trust – Portfolio approach– Solutions to improve health outcomes– Multi-channel approaches and new technologies– Efficient management of resources through common

infrastructures, systems and processes

► Flexible models created by local market leaders who determine execution and channel selection based on local market dynamics and customer input

New, Differentiated Commercial Modelsto Grow Our Business


Investing in Future Growth► Merck BioVentures

► Regional Business Development

► Franchise Strategy

► Emerging Markets– Brazil, China, India,

Korea, Turkey, Russia and Poland

► Japan: Key Growth Market

Invest in Future Growth

Become Lean & Flexible


32

Best Positioned R&D Pipeline

File 20111Filed 2009 File 20101 File 20121

• AIT Grass3 (US)

• BRIDION® (US)

• Ezetimibe + Atorvastatin

• SAFLUTAN® (US)

• Sitagliptin + Pioglitazone

• Telcagepant

• Vorapaxar

• BRINAVESS (EU)

• DULERA2

• NOMAC/E2 (EU)

• SYCREST (EU)

• Boceprevir

• JANUMET® XR (US)

• NOMAC/E2 (US)

• Ridaforolimus

• Sitagliptin + Simvastatin

• Acadesine

• AIT Ragweed (US)

• ELONVA (US)

• MK-0524A (US)

• MK-0524B

• MK-4305

• Odanacatib

• V503

1Anticipated filing date2Trade name DULERA is under regulatory review in the US3Anticipated filing 2010/2011


33

Today’s MSD R&D Strategy:Continued Investment in Innovation

Extract greatest pipeline value fromInnovative internal and external R&D

►Ensure a strong internal research capability►Leverage the capability through collaborations►Openly collaborate with the best partners►Continually evaluate potential transactions

– From platform technologies to late-stage product opportunities

– In a coordinated approach across the company►Celebrate the global and distributed nature of innovation!


34

Collaboration Creates Value

MSD

• Novel technology application

• Clinical Development

• Commercialization expertise

• Subject Matterexpertise

Partners

• Discovery• Innovation• Formulation• Subject Matter

expertise

Combining our StrengthsSharing our Successes

34


35

• MSD publishes our Areas ofInterest twice each year.

• For each therapeutic area, welist the Mechanism of Actionsthat we are interested in andthose that we are not.

• Late-stage clinical compounds(phase 2b or beyond) are ofinterest in any therapeutic area.

• Visit us at:www.merck.com/licensingto learn more!

We have defined our Areas of Interest

35

Merck & Co., Inc.,Whitehouse Station, N.J., U.S.A.


Build Long-term Strategy:Partnerships as the Foundation

Basic Basic Research Research

Drug Drug Discovery Discovery

Drug Drug Development Development

Clinical Clinical TrialTrial ApprovalApproval

Pharmaceutical IndustryPharmaceutical Industry

VC/BiotechVC/Biotech

AcademiaAcademiaAcademiaAcademia

Source: Alzheimer’s & Dementia, 2008 (modified)

AcademiaAcademia

• Academia, Pharma and Biotech more closely collaborate, expanding Academia’s role• Academia will be more involved in drug development stage (e.g. development and understanding of appropriate animal models…)


Academia: Powerhouse of Innovation

► Novel drug target for unmet medical needs► New methodologies for target validation in human biological function► Elucidate pathogenetical and pathophysiological mechanism of

intractable diseases► Innovative technology platform for drug development► Biomarkers for disease and pharmacology

Breakthrough knowledgeNew concepts of diseaseEpoch-making technology

PowerhousePowerhouseofof

InnovationInnovation

What pharmaceutical industries need from academia


Collaborative and Innovative R&D Partnering with Academia IncreasesTraditional Approach► Narrow alliance on specific

technology/knowledge► Restricted contracts► Separate labs► Limited information exchange

Collaborative Approach► Broad alliance on certain disease area

or research field► Comprehensive contracts► Fusion labs/frequently visit each other► Share all information

► Harvard Medical School – Merck & Co., Inc., Whitehouse Station, N.J., U.S.A., 2007

– A broader R&D alliance to conduct research into oncology and central nervous system disorder

► Columbia University - AstraZeneca, 2008– A broader pact to develop new drugs for diabetes and obesity, and to pursue

basic research for neurology

► Universities in UK – Shionogi, 2009– International academia-industry collaboration initiatives with the United

Kingdom to research and develop new seeds for innovative medicine

Collaborative Approach


We have a long history of successful collaborations with Japanese partners

Kyorin: NOROXIN®First quinolone antibiotic

Yamanouchi: PEPCID®H2 antagonist for ulcers

Kitasato Institute: ivermectinAntiparasitic for animals/humans

Osaka University/Biken: VARIVAX® /ZOSTAVAX®Varicella virus vaccines

Japan Tobacco: JTT-305Osteoporosis

Santen: SAFLUTAN®Prostaglandin analogue for Glaucoma


Seeking Potential Partners in Japan During 2010- Much More Coming in 2011

MSD Satellite Luncheon Seminar at Bio International 2010 in Chicago

“New MSD Worldwide Licensing Strategy”- How to Work Together with Asia Pacific Partners -

MSD Technology Days and Partnering Meetings at Bio-Expo Japan 2010 in Tokyo

Wants and Needs of MSD in Basic Research and Platform Technology - A Showcase for Partnerships in Biomarkers, Drug Delivery-Formulation and Data Management-Mining Technologies

Luncheon Seminar and Partnering Meetings at Bio Japan 2010 in Yokohama


Toward the Best Healthcare Company in Japan

Meet unmet medical needs

Deliver high customer value

Achieve long-term growth

Most trusted partner in science and innovation


Thank you !

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