VOICE: Ladies
and gentlemen, thank you for attending the Merck Annual Meeting of
Shareholders. At this time, we ask that all shareholders join us in
the auditorium where the meeting will begin shortly. A few important
announcements, as you take your seats, please note, food and drink are not
permitted in the auditorium. Also, kindly turn off any cell phones,
pagers, or BlackBerry's for the duration of the meeting. Thank
you.
VOICE: Welcome
to the theatre at Raritan Valley Community College. For your safety,
please take a moment to locate the exit nearest your seat. In the
unlikely event of an emergency, please proceed in an orderly fashion to the
nearest exit. Raritan Valley Community College is completely smoke
free. Thank you.
DICK
CLARK: Good afternoon ladies and gentlemen, and welcome to the 2009
Annual Meeting of the Stockholders of Merck and Company. It is now
2:00 o’clock, the official time to start our meeting. I’m Dick Clark,
Chairman, President and Chief Executive Officer, and I will now call this
meeting to order.
On the
stage with me is the Company’s Senior Vice President, Secretary and Assistant
General Counsel, Celia Colbert, who will serve as Secretary of today’s
meeting.
Ms.
Colbert has informed me that we have a quorum.
I direct
your attention to today’s agenda which we plan to follow as closely as
possible. Before we begin, I want to thank Dr. Casey Crabill,
President of Raritan Valley Community College for allowing us to use your
facilities. You’ve been a great neighbor to Merck, and we appreciate
our long association with the college.
The Audit
Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP, as
an independent registered public accounting firm for Merck for 2009 subject to
stockholders ratification at this meeting.
Here
representing PricewaterhouseCoopers, are Gerry Flynn, Denis Naughter, and Graham
Poles.
Welcome,
and thank you for joining us.
Now I’ll
introduce Merck’s Board of Directors. I ask Board Members to rise and
remain standing as I read your names.
May I ask
stockholders to hold your applause until all are introduced:
Leslie A.
Brun, Chairman and Chief Executive Officer, SARR Group, LLC;
Thomas H.
Glocer, Chief Executive Officer, Thomson Reuters Corporation;
Steven F.
Goldstone, retired Chairman and Chief Executive Officer of RJR Nabisco; William
B. Harrison, Jr., retired Chairman of the Board of J.P. Morgan Chase &
Company;
Dr.
William N. Kelly, Professor of Medicine, Biochemistry, and Biophysics, at the
University of Pennsylvania School of Medicine;
Rochelle
B. Lazarus, Chairman, Ogilvy & Matter, Worldwide;
Carlos E.
Represas, Chairman of Nestle Group, Mexico;
Dr. Thomas
E. Shenk, Elkins Professor of the Department of Molecular Biology at Princeton
University;
Anne M.
Tatlock, Retired Chairman and Chief Executive Officer of Fidelity Trust Company,
International;
Dr.
Samuel O. Thier, Lead Director of the Board and Professor of Medicine and Health
Care Policy Emeritus, at Harvard Medical School.
Wendell
P. Weeks, Chairman and Chief Executive Officer of Corning Incorporated; and
Peter C. Wendell, Managing Director of Sierra Ventures.
Dr. Harry
R. Jacobson, Vice Chancellor, Health Affairs, at Vanderbilt University could not
be with us today.
Les Brun
and Carlos Represas, new candidates for election by stockholders at this Annual
Meeting, joined the Merck board in July 2008 and February 2009
respectively.
Dr.
Thomas R. Cech, President of the Howard Hughes Medical Institute is also a new
candidate for election by stockholders today.
We look
forward to welcoming Tom to the Merck meeting in May when his election becomes
effective.
The
superb Board of Directors represents a depth of experience in business, science
and medicine and a broad range of perspectives.
Our
Company is fortunate to be served by people of such extraordinary passion and
commitment.
Thank you
very much ladies and gentlemen.
(Applause)
Now I’d
like to introduce the members of our Senior Leadership team. Please
stand as I call your names. Again, I ask that you please hold your
applause until all the members have been introduced.
Willie A.
Deese, Executive Vice President and President Merck Manufacturing
Division;
Kenneth
C. Frazier, Executive Vice President and President of Global Human Health;
Mirian M. Graddick-Weir, Executive Vice President, Human Resources;
Peter N.
Kellogg, Executive Vice President and Chief Financial Officer;
Peter S.
Kim, Executive Vice President, and President of Merck Research
Laboratories,
Bruce N.
Kuhlik, Executive Vice President and General Counsel;
Margaret
G. McGlynn, President, Merck Vaccines and Infectious Diseases;
Chris
Scalet, Executive Vice President, Global Services and Chief Information Officer;
and
Adam H.
Schechter, President, Global Pharmaceuticals.
Please
join me in recognizing the efforts of our excellent management
team.
(Applause).
It's good
to see all of you here today. It's especially good to see so many
Merck retirees and have the opportunity to talk with you about some of the
exciting things on our horizon. This certainly has been an eventful
year, for this country, for the healthcare industry and for
Merck. Major shifts in the economic and political landscape have
coincided with significant changes in our industry. At the same time,
we continue to dramatically transform this Company to build a new Merck for a
new era. This process has not been without its
challenges. We’ve had to make some tough decisions along the
way. Our experience in 2008 both tested and proved Merck’s
resilience. We have some terrific opportunities as well. One of the
most exciting is the opportunity to combine with our long-term partner,
Schering-Plough. We will come back to the proposed merger in a few
moments, but first, I want to take a moment to look back on the progress
we’ve made since our last meeting. Our strategic actions over the
past four years have been focused on positioning Merck for long-term
success. My goal and the goal of this leadership team is to ensure
that Merck emerges as a leader in the healthcare industry of the
future. This year, we have continued to make progress towards
fundamentally changing this Company. We have made good strides to
re-engineering our business model. We continue to change the way we
approach research and development. New initiatives are enabling us to
accelerate the discovery process and improve our research productivity and
increase our probability of success. At the same time, we continue to
seek out external collaborations that complement and extend our own world-class
internal capabilities. In fact, we are now operating in our new
commercial sales model in the United States and other markets around the world.
At the same time, we continue to drive improvements and efficiencies and
effectiveness. We’re especially excited about the opportunity
presented by Merck BioVentures. Using a proprietary technology, we
brought into our labs with our 2006 acquisition of GlycoFi. We believe this new
business has the potential to position Merck to become a leading provider of
high quality, competitively priced, follow-on biologics. In addition,
we are working actively to expand our presence in emerging markets such as
China, India, Korea, Russia, Turkey, Poland and Brazil. We are on
track to achieve our goal of $2 billion in sales from emerging markets by
2010.
We have
made great strides in positioning Merck for success, but there’s no question
that these are challenging times. Let’s look back briefly at our 2008
results. For year 2008, earnings per share were $3.42 excluding
certain items. Reported EPS, was $3.64. While we are
pleased with the performance of many of our new products, strong revenue growth
internationally was offset last year by continued challenges and demand for
SINGULAIR and GARDASIL in the United States.
Back in
January, we said that the first quarter 2009 would be the most challenging
quarter of this year. Our first quarter results in earnings per share
were 74 cents excluding certain items, and our reported EPS was 67
cents. Looking ahead, we continue to believe our performance in the
second half of the year will be stronger relative to the first quarter because
of the normal seasonality of vaccines and SINGULAIR, improvements in supply for
the ZOSTAVAX shingles vaccine and continued growth in our newest
products. Let me take a moment to address how the difficult global
economy is affecting Merck’s business. Many of our customers are
expecting the effects of the harsh economic environment. Patients,
providers and payers around the world are facing difficult choices about
spending on healthcare, including medicines and vaccines. This is
evident based on the decrease in physician visits and the lower treatment
initiatives and compliance rates for patients with chronic diseases such as
diabetes. In the United States, wholesalers too appear to be
responding to the uncertain economy by reducing their inventory levels for some
of our most widely used products. All of this puts additional
pressure on us to continue providing significant value and innovation to all of
our customers. In addition to external economic factors, our
performance in the first quarter also was hurt by the 2008 loss of marketing
exclusivity by FOSAMAX, the soft performance of SINGULAIR and GARDASIL and
manufacturing constraints in our vaccine supply. We achieved
continued strong growth around the world from our newest
medicines: JANUVIA, JANUMET, and ISENTRESS and sales volume increased
by 6 percent outside the United States. However, this growth was more
than offset by the unfavorable effects of foreign exchange. During
the first quarter, we also announced four significant agreements with new
partners including Biotech and pharmaceutical companies that will bolster our
late stage therapeutic pipeline and drive near and long-term
growth. Looking ahead, we believe our performance in the second half
of the year will be stronger and we remain on track to meet our full year
earnings guidance. Of course, our major news last quarter was our
announcement that we planned to merge with our long-term partner
Schering-Plough. We believe this transaction makes outstanding
strategic sense, and will create meaningful value for our
shareholders. Under the terms of the deal, each Merck share will
automatically become a share of the combined company. Upon the
closing of this transaction, Merck shareholders are expected to own
approximately 68 percent of the combined company, and Schering-Plough
shareholders approximately 32 percent. We are on track to complete
the merger in the fourth quarter of 2009 subject to regulatory and shareholder
approval.
The
combination of these companies makes for a unique suitable match. It
brings together two strong science-based organizations with complementary
products and customer focused selling models to create a global healthcare
leader that can deliver consistent, sustainable growth and meaningful value to
shareholders. Peter Kim will talk more in a few minutes about
the benefit of the proposed merger under R&D capabilities.
For now,
let me just say that this transaction will significantly expand not only the
number but also the diversity of potential medicines and vaccines in our
pipeline. The combination also will significantly expand our global
reach while providing substantial synergies and opportunities for efficiencies
above and beyond the cost programs already underway at both
companies.
The new
Merck will have a much more diverse product portfolio as you can see on this
slide. Merck and Schering-Plough have targeted many of the same
therapeutic areas so we expect to benefit from our combined companies and
expertise in these areas by increasing the new company’s ability to help
physicians and healthcare systems improve patient outcomes. This
transaction also gives us a broader set of products with significant market
exclusivity contributing to our goal of maintaining stable, consistent top-line
growth. The new Merck also will benefit from the industry leading
team of marketing and sales professionals throughout the world. Merck
has been working to build our presence outside the United States. The
combination of Merck and Schering-Plough will dramatically accelerate these
efforts. We believe this merger makes sound strategic sense and will
drive compelling financial benefit for shareholders. One of our goals
going into this was to maintain Merck’s strong financial profile. We
believe we have done that. In addition to significant cost savings
opportunities, this transaction gives us the enhanced financial flexibility to
invest in promising drug candidates as well as external
R&D. Moreover, we believe that Merck/Schering-Plough combination
will generate $15 billion in free cash flow in 2013. The transaction
with Schering-Plough was structured to maintain our current credit
ratings. We are pleased to confirm that the rating agencies have
maintained Merck’s current strong ratings following the merger
announcement. Let me also say that we are committed to maintaining
our current annual dividend of $1.52 per share for shareholders of the combined
company. Merck and Schering-Plough are making good progress towards
completing the merger on schedule. We have taken a number of key
steps since our March 9th
announcement. The syndication of financing has been
completed. We have made the appropriate filings with regard to the
Hart-Scott-Rodino Antitrust Improvements Act.
And we
expect to file our preliminary S-4 proxy filing toward the end of next month so
that both companies' shareholders can vote on the transaction. This
pending merger is a remarkable moment for this Company. Merck hasn’t
entered into a merger of this magnitude since we combined with Sharp & Dohme
more than 50 years ago.
The
integration of Merck and Schering-Plough will be a significant
undertaking. Our integration team is focused on bringing our two
companies together as quickly as we can once the transaction closes, and doing
so in a thoughtful, deliberate and collaborative manner. As I said
before, our key priority is keeping the best talent from both
companies. The new Merck will be a much larger organization and we
expect that the substantial majority of Schering-Plough employees will remain
with the combined company.
The past
few years have been a time of transformation for Merck and the coming months
will bring even more change, but even as we work to align and integrate these
two great companies, we know there are some things that will not
change. First and foremost, we remain true to our core principle of
putting patients first. We continue to seek out new innovative ways
to meet patients' needs, while also maintaining our long standing commitment to
help people around the world get the medicines and vaccines they
need. Scientific excellence has always been and remains the
cornerstone of Merck. We believe the merger with Schering-Plough will
help take our scientific passion and drive it to the next level.
At the
same time, our commitment to operating openly, honestly and ethically remains as
strong as ever. Last October, Merck began reporting grants of over
$500 to U.S. organizations in support of independent accredited educational
programs for healthcare professionals. In 2009, Merck will begin to
voluntarily disclose payments to U.S. based medical and scientific experts who
speak on behalf of our Company regarding our products or other healthcare topics
we identify.
We also
remain committed to supporting the communities in which we
live. Everyday, Merck employees are giving back to their communities
through our recently enhanced MerckVolunteers program which grants employees up
to twenty hours of time annually during regular work hours to volunteer at
approved non-profit organizations.
In tough
economic times, we know it is more important than ever to help people get the
medicines they need; so we’ve recently increased the income parameters at the
Merck Patient Assistance Program to provide greater access to our 50 year-old
program. We also have rolled up our sleeves to work with the Obama
Administration and Congress to support the enactment of common sense plans to
expand healthcare coverage and improve quality and ensure that we all get good
value for our healthcare dollars. As a global company, we know that
our impact on the communities in which we live and work goes beyond
healthcare. Two weeks ago, Governor Jon Corzine and other officials
joined us to visit our headquarters nearby in Whitehouse Station, to dedicate a
new solar energy system. This new system covers 7 ½ acres and will
provide about 2.5 million kilowatt hours of energy per year. We rely
on the integrity, skills, and diversity of our employees to achieve our business
goals. We value the many contributions of our current and former
employees and are committed to keeping you informed about the
Company. We’ve launched a new retiree website, MerckConnections.com
to help us do this. I hope you had a chance to preview this site
before the meeting. If not, please pick up a special notepad about
the retiree website in the lobby as you leave today’s meeting. I
believe the values on which this Company was built will serve us in good stead
as we continue to transform ourselves for this new era. As I said
last year, our goal is to deliver results and honor the values that reflect
Merck’s ongoing commitment to patients and to our stockholders. I
hope that you leave this meeting confident that the decisions we are making will
help to ensure the best possible future for Merck. Now I’d like to
introduce Dr. Peter Kim, President of Merck Research Laboratories, who will tell
you about the innovative work our scientists are doing to help build a new
Merck. Peter.
PETER: Thank
you, Dick. Once again, it’s good to be with you this
afternoon. We meet at an exciting time for Merck Research
Laboratories.
We’ve
established a strategy of science-based diversification to manage the risks
inherent in drug discovery research. We’re enthusiastic about our
planned merger with Schering-Plough, and we’re anticipating the added value to
our research strategy and to our pipeline that this merger will
produce. We are advancing the most promising candidates in our
pipeline so that we can continue to bring the market the drugs and vaccines the
patients want and need. As Dick said, we are building the new
Merck. Merck’s success is and always has been directly linked to the
success of our research efforts – research that leads the development of
therapeutic treatments that address the unmet medical needs of the patients we
serve is fundamental to Merck. Yet, the very nature of drug discovery
and development involves risk.
Not every
promising compound develops into a new drug.
Not every
brilliant theory results in a practical application.
Not every
research investment yields a profitable product.
Scientific
research always involves risk but that risk can be managed. At MRL,
we have been managing the inherent risk of science-based research and
development by diversifying our portfolio. This science based
diversification means that we are balancing the various levels of risk involved
with the various avenues of research. We are diversifying the patient
populations for whom we seek to develop new medicines. We’re working
to produce medicines that will serve the needs of patients in primary care,
specialty care, and in hospital settings. We are diversifying our
approaches to the drug development process. We are balancing our
investments across diverse approaches that carry different probabilities of
success.
First, we
continue to invest in novel, targets and innovative technologies that could lead
to future breakthroughs, and while these novel approaches may have a low
probability of success, we think it is critical to pursue them because they have
the potential for maximum impact on human health as we know from
experience. Next, we are also pursuing best-in-class products that
improve upon treatments that have already shown clinical proof of
concept. Our goal with this approach is to reduce the undesirable
side effects or make it easier to take or administer an existing
drug. This approach has a higher probability of
success. And third, by successfully managing the entire life cycle of
our existing drugs, we are pursuing avenues that both deliver maximum value to
patients and carry the highest probability of success. By developing
new formulations and indications, we are working to meet the needs of even more
patients. Utilizing all three of these approaches, our researchers
have continued to bring forward innovative products to meet patient
needs.
Most
recently, our approach to discovery of novel and best-in-class medicines has led
to JANUVIA, GARDASIL and ISENTRESS.
In
addition, by using our diversified approach to development, we’ve advanced
several promising product candidates into late stage clinical
testing. These include potential new treatments for heart failure,
atherosclerosis, migraine, cancer, diabetes and osteoporosis.
I should
also mention that we are diversifying our portfolio of modalities for developing
new products. We are pursuing promising avenues of research in small
molecules, vaccines, biologics, peptides and RNAi. The promise of
RNAi technology for example, is not yet proven. But it has the
potential to completely change the landscape for the development of new
medicines. We are committed to exploring innovative and promising
technologies such as RNAi because while there is risk involved, the potential
rewards make it a risk worth taking. This commitment to science based
diversification allows MRL to manage the inherent risk to scientific research
while still allowing us to invest in innovative science that could advance
patient care that makes it possible for us to continue the research that has
long made Merck a global leader in the discovery and development of new drug
therapies and vaccines, and it makes it possible for us to achieve both
incremental advances and great leaps forward in patient treatment and
care.
Merck’s
commitment to discovering/developing important therapies for patients is at the
heart of our Company.
It’s a
commitment that Schering-Plough shares. This shared commitment,
coupled with the numerous other complementary aspects of our two organizations
will make our combined research and development capacity even greater than that
of each of our organizations alone.
Merck and
Schering-Plough’s R&D organizations share a common culture of scientific
excellence. Their pipeline, like ours, is strong and
innovative. Their scientists are working in mechanisms not tested
before, and they are breaking new ground in a variety of therapeutic
areas.
Schering-Plough,
like Merck, has a diversified research portfolio. Their researchers
are pursuing novel medicines. They are developing best in class
products and they are working successfully to extend the indications of their
existing drugs and to bring to market new formulations that make it easier for
patients to take their medicines. Once the transaction between Merck
and Schering-Plough is complete, we will have a significantly more diverse
R&D portfolio. This diversity, however, will be in many of the
same therapeutic areas where we have already been focusing including
cardiovascular, metabolic, respiratory, and infectious diseases as well as in
immunology. In those areas where our capacity is still maturing, such
as oncology and neuroscience, Schering-Plough already has an established
presence so in both oncology and neuroscience, this transaction will accelerate
our progress far faster than we could have achieved on our own. This
transaction will also substantially increase Merck’s position in
biologics. Schering-Plough has considerable experience in biologics
discovery, development, and manufacturing and an attractive early-stage
biologics pipeline.
Adding
Schering-Plough’s unique biologic capabilities will extend our reach and our
capabilities. They will complement Merck’s novel, proprietary
biologics platform and will advance our commitment to become an industry leader
in this rapidly advancing field. And while each of them is pursuing
new therapies, in many of the same therapeutic areas, there will actually be
very little overlap within each area. That’s because the compounds in
which we have been working do not have the same targets or mechanisms of
action.
Our two
pipelines truly do dovetail. With just two exceptions, there is no
overlap in the approaches that we are taking in our late stage
pipelines. Given the size of each pipeline, it is remarkable that
there are only two examples of compounds with the same mechanism of
action. When we look at the late-stage compounds we each have in
development, we see just how well our pipelines are aligned. The area
of cardiovascular disease illustrates this clearly. At Merck, we have
been making major investments in compounds to treat atherosclerosis and heart
failure. We currently have three compounds in Phase III, and two in
Phase II of development for the treatment of atherosclerosis. At
Schering-Plough, their R&D focus in the cardiovascular field has been on
atherothrombosis. Their Phase III compound, a thrombin receptor
antagonist, or TRA, is designed to prevent and treat atherothorombotic events in
patients with acute coronary syndrome. I consider TRA to be the
most exciting compound in Schering-Plough’s pipeline. Being able to
offer treatment for both atherosclerosis and atherothrombosis would make Merck a
clear leader in the prevention and treatment of cardiovascular disease, and this
is just one of the therapeutic areas where this will be true. By
rigorously prioritizing our portfolios and by using outside experts to help us
in that effort, we will make the best use of our combined R&D expertise and
experience to ensure that we deliver innovative medicines to address unmet
medical needs. The complementary nature of the work we each have been
pursing is such that the combination of our two research organizations will
produce an acceleration of the strategic directions that we have already
established.
So rather
than trying to bring together two research organizations that largely duplicate
each other, our combined capacity will instead deepen and broaden our ability to
advance our research into the therapeutic areas in which we are
concentrating. Our Phase III pipeline, for example, will double to 18
candidates. I’m confident that we will achieve leadership across the
therapeutic areas in which we have concentrated our focus sooner than we would
have otherwise been able to. Indeed, I believe that our combined
pipeline will be without question the best in the industry.
Since we
met a year ago, Merck’s own pipeline, of course, has continued to
advance. As of Feb. 15th, 18
compounds have entered Phase I, 11 have advanced into Phase II of development,
and 3 have advanced into Phase III. We have achieved important
progress across the entire spectrum of our therapeutic areas. As we
approach the expected conclusion of the merger between Merck and Schering-Plough
there is, of course, some concern about just how successfully we will be able to
combine our two research organizations. That concern is
understandable given the experience that others in the industry have endured
following large mergers. What makes this transaction different and
what will enable us to avoid the difficulties others have faced, is that our two
research organizations are truly complementary. First, we work hard
to manage the inherent risk of pharmaceutical research and
development. By adding Schering-Plough’s pipeline to Merck’s, we are
enhancing and accelerating our commitment to science-based
diversification. Second, our scientists share a commitment to
excellence and the vision of leveraging the best science to meet major unmet
medical needs. And third, the compounds in our combined pipeline will
broaden and strengthen our pipeline with almost no duplication. We
believe the combined pipeline will be the best in the industry. In
short, we are bringing together two research organizations that already have a
lot in common. Those common elements will provide us with greater
opportunities to advance science and innovation in the cause of relieving human
suffering and promoting human health. They will help ensure that
Merck research continues to do what it has always done best, discover and
continuously develop the drugs and vaccines that patients want and
need. Thank you very much.
DICK
CLARK: Continuing now with the meeting, I note for the record that
Bruce Kuhlik, Celia Colbert, and I are members of the Proxy Committee, and
now I ask Ms. Colbert as Secretary to report on our quorum and other
matters.
CELIA
COLBERT: Proxies have been received totaling 1,740,877,000 votes or
82.59 percent of the total votes entitled to be cast. This
substantially exceeds the majority required for a quorum. This
meeting is held pursuant to the notice of Annual Meeting that we began mailing
on March 13, 2009 to all stockholders of record on February 27th,
2009.
DICK
CLARK: In accordance with the resolution of the Board, dated February
24, 2009, Michael J. Barbera, and Henry C. Warnke, of IVS Associates, Inc., are
appointed as Inspectors for this meeting and have executed an oath of office to
conduct the voting and canvas and receive the ballots. In the
interest of time, we will dispense with reading the minutes of our previous
meeting, but the minutes are available to anyone who wishes to see
them. The proposals will be presented in the order set forth in the
Proxy Statement. There will be an opportunity for questions on each
proposal. In order to give everyone a chance to participate, we ask
that each proponent’s statement be no longer than 3 minutes, and any questions
pertaining to the statement be no longer than 3 minutes. At this
time, please limit your questions to the proposal on the floor. There
will be ample time for general questions later in the
meeting. If you have a question, please raise your hand and
wait to be recognized. When it is your turn, the microphone in front
of you will be "on" and ready for use. Please speak into the
microphone and identify yourself before asking your question. If you
have already mailed in your proxy or voted by telephone or the Internet, you do
not need to vote in person unless you wish to change your vote. Will
stockholders who wish to vote in person, please raise your hand so that ballots
may be distributed to you. If your shares are held in street names,
and you have a legal proxy from your broker to vote your shares, you will need
to take a ballot. We ask you to mark the appropriate part of your
ballot after each item is presented. The Inspectors will collect the ballots and
legal proxies when the voting is completed. I declare the polls
officially open.
The first
item of business is election of directors. The Board nominees are
Leslie A. Brun, Thomas R. Cech, Richard T. Clark, Thomas H. Glocer, Steven F.
Goldstone, William B. Harrison, Jr., Harry R. Jacobson, William N. Kelley,
Rochelle B. Lazarus, Carlos E. Represas, Thomas E. Shenk, Anne M. Tatlock,
Samuel O. Thier, Wendell P. Weeks, and Peter C. Wendell for terms expiring in
2010. Dr. Cech is a first time candidate for election to the Merck
Board. Mr. Brun, who joined the Board in July 2008, and Mr. Represas,
who joined the Board in February 2009, had not previously been elected by
Stockholders of the Company. I note for the record that no nomination
for Director has been properly made in advance of this meeting by any
stockholder of the Company. Are there any questions? Those
stockholders voting in person should now mark their ballots for
Directors. Another item of business is a proposal to ratify the
appointment of PricewaterhouseCoopers, LLP, as the independent, registered
public accounting firm for 2009 as set forth in the Proxy
Statement. The Board of Directors recommends a vote for this
proposal. Are there any questions on this proposal? If
you’re voting in person, please mark your ballots with respect to this
proposal. The next item of business is a proposal to amend the
Restated Certificate 0f Incorporation to limit the size of the Board to no more
than 18 Directors as described in the Proxy Statement. The Board of
Directors recommends a vote for this proposal. Are there any
questions on this proposal? If you’re voting in person, please mark
your ballots with respect to this proposal. We now come to the
stockholder proposals. The first stockholder proposal is from
Mr. William Steiner and concerns Special Shareholder
Meetings. Is Mr. Steiner or an authorized representative here to
introduce this proposal?
MALE
VOICE: Mr. Clark, (unintelligible) [44:27] I so do as Vice President
of United Steel Workers, I’m prepared to (unintelligible) to get for
Steiner.
The
proposal before the stockholders to approve is concerning special shareholder
meetings. Over here (Unintelligible) [44:33] Steiner, Piermont, New
York. Shareowners ask our board to take the steps necessary to amend
our bylaws and any appropriate governing document to give owners of 10 percent
of our outstanding common stock (or the lowest percentage allowed by law above
10 percent) the power to call special shareholder meetings. Special
meetings allow shareowners to vote on important matters, such as electing new
directors, that can arise between annual meetings. If shareholders
cannot call special meetings, management may become insulated and investor
returns may suffer. Shareholders should have the ability to call a
special meeting when a matter that is sufficiently important to merit prompt
consideration. Shareholders’ input on the timing of shareholder
meetings is especially important during major restructuring when events unfold
quickly and an issue may become moot by the next annual meeting. Last
year, at our 2008 annual meeting, this proposal won 57% of shareholder votes,
however, our company adopted the (Unintelligible) [45:31] for 25 percent of
shareholders to call a special meeting. Due to our first ownership a
25 percent threshold may be unattainable under the
circumstances. Please acknowledge on our Board respond positively to
the proposal to enable 10 percent of shareholders to call special shareholder
meetings.
DICK
CLARK: In February, the Board of Directors adopted an amendment to
the Company’s By-Laws to require the Board to call a special stockholders
meeting at the request of holders of 25 percent or more of the Company’s
stock. Prior to this amendment, a request of holders of a majority of
the shares entitled to vote was necessary to require the calling of the special
stockholders meeting. In addition, under New Jersey law, the holders
of 10 percent or more of the Company’s stock have the right to call a special
shareholders meeting upon the showing of "good cause" in New Jersey Superior
Court. The Board believes that By-Law amendment that lowered the
threshold for calling a special meeting from majority approval to support from
25 percent of stockholders, affords meaningful opportunities for stockholders to
call special meetings without establishing a good cause or obtaining a court
order. The Board believes that the Company’s approach coupled with
the protection under New Jersey law, appropriately balances the interests of the
company and its stockholders. The Board of Directors recommends a
vote against this proposal. Are there any other questions on this
proposal? If you’re voting in person, please mark your ballots with
respect to this stockholder proposal.
Then next
item is a stockholder proposal from Mr. Kenneth Steiner concerning an
Independent Lead Director. Is the proponent or an authorized
representative here to introduce the proposal?
MALE
VOICE: Here Mr. Clark, I (Unintelligible) [47:24] Mr.
Steiner. Proposal number 5, stockholder proposal concerning an
Independent Lead Director. On behalf of Mr. Steiner of Great
Neck, New York, shareholders ask our Board to take the steps necessary to adopt
a by-law to require that our company have an Independent Lead Directors when
ever possible with clearly delineated duties. This Lead Director
would be elected by and from the independent Board members and would be expected
to serve for more than one continuous year unless our company at the time has an
independent Board Chairman. The standard of independence would be the
standard established by the Council of Institutional Investors, which is simply
an Independent Director is a person whose directorship constitutes his or her
only connection to the corporation. These clearly delineated duties
of the independent lead director is that shareholder’s interest are providing
independent oversight and management including our CEO. An Independent Lead
Director will clearly relate an interview [Inaudible] and promote greater
management accountability to shareholders and lead to a more objective and
[Inaudible] evaluation of our CEO. Please carefully pull this one possibly from
the [Inaudible] ...
DICK
CLARK: Thank you Mr. Hughes. Adoption of this proposal is unnecessary
as the Policies of the Board already require a Lead Director of the Board. The
Policies were updated in 2008 to more clearly delineate the responsibilities of
the Lead Director. Those Lead Director responsibilities set forth in the
Policies of the Board include all of the duties delineated in this proposal. The
Board of Directors believes that the interests of the Stockholders are well
served by a board that can adapt its structure to the needs of the Company and
the capabilities of its directors. The proposal, if adopted, would deprive the
Board of this flexibility, given the Board’s demonstrated leadership in changing
itself to meet evolving needs. In 2005 the Board determined that its governance
approach would be best served by not appointing a Chairman of the Board. Instead
from May 2005 to April 2007 the Board’s Executive Committee comprised of
independent directors collectively performed the functions typically discharged
by the Chairman of the Board. In December 2006, the Board again changed its
structure by appointing the Company’s chief executive officer as Chairman of the
Board and Dr. Samuel Thier as the Lead Director, effective April 24,
2007.
The
proposal, if adopted, would eliminate the Board’s ability to organize its
functions and execute its duties related to providing independent leadership to
the Board in the manner best suited to meet the Company’s changing needs and
capabilities.
The Board
of Directors recommends a vote AGAINST this proposal. Are there any
questions on this proposal?
If you
are voting in person, please mark your ballots with respect to this stockholder
proposal.
The last
item is a stockholder proposal from The Firefighters’ Pension System of the City
of Kansas City, Missouri, Trust, concerning an Advisory Vote on Executive
Compensation.
Is a
proponent or an authorized representative here to introduce this
proposal?
GLEN
JOHNSON: Good afternoon, Chairman, Members of the Board and fellow
Shareholders. My name is Glen Johnson and I’m here to present the Shareholder
proposal filed by The Firefighters Pension System of Kansas City Missouri,
Trust. Their proposal can be found on page 72 of your Proxy Statement. This
proposal requests the Board adopt a policy that gives shareholders the
opportunity to ratify the compensation of the named Executive Officers as
disclosed in the Company’s Proxy Statement. The Shareholder vote would be
advisory, non binding and would not affect any compensation paid or awarded to
any named Executive Officer. This type of proposal is commonly referred to as
Say on Pay. Investors are increasingly concerned about the connection between
the compensation of the top officers of a company and the creation of
shareholder value. According to the corporate governance practices in this
country, shareholders can express displeasure with executive pay by voting
against an equity based incentive plan when it is presented at an annual meeting
of shareholders or withhold their vote from an incompetent nominee to the Board
who is a member of the compensation committee. These two methods do not provide
a means of giving the compensation committee shareholder input on how to better
tie performance goals with award values and the use of shareholder money to pay
for other forms of compensation such as severance pay, retirement plans or
perks. There is growing support for shareholders say on pay proposals. Eleven
such proposals received majority support in 2008 and 6 companies - Aflac, Risk
Metrics, Little Field, H&R Block, Jackson Hewitt, and Zale, voluntarily
submitted their executive compensation practices to shareholders and received
approval votes ranging from 63% to 99%. In addition a bill requiring an advisory
vote passed the U.S. House of Representatives and both Presidential candidates
endorsed it. Also starting this year companies receiving TARP funds must submit
their compensation practices to an advisory shareholder vote. In conclusion,
adaption of this proposal would provide shareholders with a mechanism to give
the Board feedback on the company’s compensation practices that could be a
helpful tool to them when shaping executive pay packages. If you agree with
this, please support our proposal. Thank you.
DICK
CLARK: Thank you Mr. Johnson. The proponent recommends that
shareholders be asked to ratify compensation paid to the Company’s Named
Executive Officers and that shareholders be provided narrative disclosure of
material factors necessary to have an understanding of the Summary Compensation
Table, but not the Compensation Discussion and Analysis.
The
Compensation and Benefits Committee of the Board, which is comprised entirely of
independent Directors, is responsible for establishing and maintaining a
competitive, fair and equitable compensation policy that attracts, motivates,
and retains the talented employees necessary to execute the Company’s strategies
and achieve its goals.
The
Committee considers both public and confidential information about the Company’s
strategies and performance when assessing executive performance and setting
compensation.
Some of
this information could not be made available to stockholders without also
providing proprietary competitive data to the Company’s
competitors.
As
proposed, shareholders would therefore be asked to endorse or reject
compensation decisions without complete information.
... or
alternatively to have the Company disclose competitive information in a public
document.
The
results of a requested advisory vote cannot be expected to provide the Company
with meaningful results.
If
shareholders do not ratify compensation decisions, the Company will understand
that shareholders are dissatisfied...
but the
source of shareholder dissatisfaction will not necessarily be clear, much less
the actions that should be taken to address concerns.
We note
that while the United Kingdom has adopted a say on pay requirement, we have not
found an evidence of increased investor satisfaction with UK pay
practices.
The Board
appreciates that shareholders are a crucial stakeholder whose views must be
heard and valued.
Shareholders
who wish to express their opinion on the Company’s executive compensation
strategy, or any other matter of interest to the Company, are encouraged to do
so by writing to a member of the Board at the Company’s address.
The Board
believes that this approach facilitates a sharing of shareholder views and is
ultimately more meaningful and useful to the Board than a non-binding advisory
vote that is based on incomplete information.
The Board
of Directors recommends a vote AGAINST this proposal.
Are there
are any questions on this proposal?
MALE
VOICE: is this on? First of all I think there’s no doubt it’s going
to be voted down. It’s going to be voted down for two reasons, whatever the
Board of Directors usually recommends most stockholders will go along with it.
Secondly, most people don’t realize or don’t believe that the fact of the matter
as Warren Buffet said, when you buy into a company you are a partner. And as a
partner, I think you are entitled to have only the information which is going on
in regard to what they are doing, what their plans are, and what we are paying
the people that we have hired to run our company. The fact that you’re saying
you will have incomplete information is a cop-out. The fact you’re saying
there’s no proof that in the United Kingdom it has proved good, does not take
into consideration it has not proven that it is bad. I realize it is not going
to be carried, but I hope next time we will have a greater number of people
supporting the idea that we as the owners of the Company will be able to express
our opinion to the people we hired including our Chairman, Mr. Clark. Thank
you sir. (applause).
DICK
CLARK: Thank you for your comments. I appreciate it. If you’re voting
in person, please mark your ballots with respect to this stockholder’s
proposal.
Since
this completes the voting, the Inspectors may now collect the ballots and legal
proxies and tabulate the votes.
I declare
the polls officially closed.
Now I’ll
be happy to answer any questions you may have. Please raise your hands and wait
to be recognized. I will try to answer as many of your questions as
possible.
In order
to do so, I must remind you that we will limit each question to a maximum of 3
minutes.
When you
are recognized, please speak into the microphone and identify yourself before
asking your questions. In the middle here. Stand up sir.
Q: My
name is Joseph Faschooli, I’m a 14 year employee at Rahway, Merck. I ask you
sir, if you have a moral obligation to 120 employees that are going to lose
their jobs unlike our neighbor GM who has not, we’re not going out of business,
but you’re going to replace them with a management company. I ask you if you
have a moral obligation to a community that we have established a - excuse me, a
certain level of living standard, do you have a moral obligation to those
employees? Thank you.
DICK
CLARK: Yeah, thank you for the question. (applause).
Certainly
I appreciate the issues that you’re talking about Rahway and the fact that the
company has made a decision to outsource some of the jobs that are not core to
our business and what it means to the community or to the employees, and I think
we’ve always tried to do it with respect for the employees and the fact through
enhanced compensation or through the ability to have education programs or the
ability to bid on other jobs both at West Point and Elkton, as they come up, in
order to stagger that, hopefully it minimizes the number of concerns that you
have from an employee or a family standpoint and I certainly understand your
position.
There’s a
question over at this side. Yes. There’s a hand up. Right
there. Please stand up sir.
Q: Yes.
My name is John Smurla. I have a question. Is Merck involved in this swine flu
thing anyway at all?
DICK
CLARK: You have a good question. Thank you. Certainly one of the
vaccines that we produce is called PNEUMOVAX 23 and one of the secondary
infections that you have with the swine flu is pneumonia and so we are currently
in discussion with the CDC and other regulatory agencies throughout the world to
discuss our ability to give the PNEUMOVAX 23 vaccines to obviously the United
States and other countries who may need it if they determine that a pneumonia
shot is appropriate for the swine flu reaches that we face, so it’s early yet,
but you know as a company we plan to participate as much as we can to help solve
the issue if we can. Right here in - stand up sir - or right here then. Yes. Yes
ma’am.
Q: Thank
you. This is probably for Dr. Kim but I have two questions. One is what’s
happening with GARDASIL, it started like gang busters and I want to know its
strength and future right now and the other recalling conversation last year
with Dr. Kim, they were talking about the possibility of a Parkinson’s
medication, some research and some clinical trials and I would be interested in
knowing what has transpired since last year. Thank you.
DICK
CLARK: Thank you for that question. Why don’t we start with Mr.
Frazier who can help us with the answer on GARDASIL and then we’ll turn to Dr.
Kim.
Mr.
FRAZIER: Good afternoon. We have tremendous expectations for GARDASIL, it did
start very quickly, in most markets, we have been very successful, particularly
with teenage girls age 13 to 18, as we sit here today, we have had some issues
frankly with women 19 to 26 years of age, we continue to believe that the
vaccine has tremendous value and we have a number of programs working with those
women’s physicians, largely gynecologists, as well as with those consumers
themselves to actually help generate greater demand so we continue to believe in
the vaccine, we believe it has tremendous value to the patients as well as to
public health.
DICK
CLARK: Dr. Kim?
Dr.
KIM: Parkinson’s
disease... Parkinson’s...
DICK
CLARK: Microphone!
Dr.
KIM: Microphone. Okay, thank you. Thank you, with regard to
Parkinson’s disease, we continue to study Parkinson’s disease, several different
mechanisms. I should also add that our Schering-Plough counterparts are also
studying Parkinson’s disease and again in a similar manner to what I described
for the late stage pipeline even though we’re both interested in Parkinson’s
disease we’re actually studying it with different mechanisms, so once again I
think this is an example of where our two research efforts will be complementary
and will be able to bring them together towards addressing this devastating
disease. Thank you.
DICK
CLARK: There’s a question right behind you on this side.
Q: Good
morning, my name is Dr. Morrell, I’m a physician. My question has to do with the
nomination of the board of directors. In general we see that there are only one
person nominated for each one of these positions and therefore other people
would be quite hesitant to even put their nomination up for grabs because it
would very likely be filed and then never heard of again. It seems that the
nominations are always people that the other board members know and therefore we
never get to see if there’s any rebuttals or any kind of dialogue going on
between real, valid candidates. In a real democracy, people get up and make a
debate as we’ve seen with Obama and we’ve seen with the other candidates. This
is a normal protocol. However, what we have here is we have the Harvard and Yale
syndrome, very good on multiple choice exams and networking one another. But the
likelihood of someone else getting in a position to show eloquence, to show
knowledge, to show depth of things, yes, these should be medical people, the
majority of the board. But unfortunately no one with any real qualifications
wants to put their name in abeyance, because they see that the likelihood of
them actually being a candidate is basically nil, so the question is when are we
going to see people who are not nominated by the board, who really have a
candidacy and two or three people can be up there debating for why they are the
most viable candidate (applause).
DICK
CLARK: Also we believe we have a good process in place and obviously
I think the credentials of our board are very outstanding. We do use outside
sources to determine board members and vet it very completely. If there are
individuals who are interested in being on our board, we actually have a process
that allows you to write to us and to be able to do that and so that’s another
alternative. Phil?
Phil:
....
DICK
CLARK: Wait a minute for a microphone. You may not need one
but....
Phil: Mr.
Clark, some of the banks that are being used to fund our merger between Merck
and Schering-Plough received TARP money, that TARP money was taxpayer money that
is now going to fund a merger which will result in the loss of taxpayer jobs. As
a company who professes, we claim to be ethical and above that, where do you
feel, what position would you take in that, don’t you think that’s kind of a
conflict of interest.
DICK
CLARK: Certainly I don’t because the amount of financing and the
banks involved and the limited amount of funding is an issue I can’t comment, I
don’t know the exact details, but what we said about the merger is that a
substantial majority of Schering-Plough employees will remain with the company
and that out of the 100,000+ individuals it’s not only positions in the United
States but it’s positions around the world that we will take a look at. I think
the other comment I’ll make is even though we’ve lost positions in the United
States, this is a separate company. We’ve also at the same time closed
facilities in Japan, in Italy and other parts of the world, so it’s just not
U.S. focused. Thank you. Yes. The lady right here.
Q: My
name is Francine Eckelman and I have a question. I believe I heard a report not
too long ago that Merck intends to enter the generic market or marketplace. Is
that true and if so, would you please explain to us as shareholders what plans
they contemplate?
DICK
CLARK: Yes, we do not plan to enter into the generic business. If you
remember several decades ago we were actually in the generic business at West
Point and we haven't been in it since. What you may have heard is we’ve started
a new company called Merck BioVentures, and with Merck BioVentures, with the
type of technology that we’ve been able to acquire through a company called
GlycoFi, we absolutely have technology and capability that allows us to
[Inaudible] follow on biologics, bio similar or bio betters, but that business
around biologics is still based on innovation, and in fact that innovation is
going to allow us to put novel mechanisms hopefully in the lab and then for
patients worldwide. But the generic business, as we know it today, whether
[Inaudible] or a patent and companies are making that generic product or ZOCOR
when it went off patent and companies are making that generic, that is not a
business that we’re interested in. Yes sir?
Q: My
name is Anthony Acatada, and the question I have is regarding the merger with
Schering. According to the announcement that stockholders of Schering-Plough
will receive .57 shares of Merck stock and $10.50 in cash for each share of
stock the question is why the cash payout in lieu of additional
shares?
DICK
CLARK: Well, certainly when you look at the total investment from an
equity standpoint and what’s the best financing for the company, you have to
look at both from a cash standpoint and a shareholder standpoint, a share
standpoint and in looking at that, we thought it was appropriate to have that
split between cash and shareholder. For the long term value for our shareholders
we think that’s the best solution. Other questions? Yes. The lady with her hand
up.
Q: I’m
Jennette Brown, a retired research chemist, I want to know a question. We have a
program called Project Seed which is for economically disadvantaged high school
students. The Merck Foundation funds this program but does not allow individuals
who want to contribute to this program to match the funds. A former Merck Vice
President was not even allowed to match his contribution to Project Seed. I
would like you, and probably the only person who could do it to change that.
This is Health and Human Services, this is children who cannot afford to become
scientists, who do become scientists because the American Chemical Society pays
them, and it’s a separate organization, other than American Chemical Society
membership. So I’m asking you that question. Also, the Leukemia and Lymphoma
Society last year you said that they would do the Light the Night in New Jersey,
it happened only in Pennsylvania and you said in person that you would do it in
New Jersey and here I am again. I’m ready to get volunteers to come, and I’ll
come to any of the sites to get the volunteers to work, to do the Light the
Night program.
DICK
CLARK: Thank you for your question. (applause). Could you send the
information on Project Seed so I - you know send to my office, I’ll be glad to
take a look at that for you. Yes, there’s a person right here, which
are...
Q: Good
morning, my name is George Barisow, I’m an employee down at West Point. You said
you rolled up your sleeves with the present administration on national health
care and Merck’s involvement in that, could you give us a little bit more detail
and the dynamic that’s taken place for the future?
DICK
CLARK: Yes, that’s a good question. Certainly on health care reform,
certainly over the past few years, and as Chairman of the Pharmaceutical
Association which I was last year, I think Merck played a major role in really
trying to come up with alternatives and solutions that would allow us to meet
the President’s objectives, so there’s a lot of common objectives around how do
we take care of the uninsured. In a company like ours, there shouldn’t be 40
million plus citizens that are uninsured and don’t have health care coverage of
any kind, and so what we’ve been doing is presenting alternatives to President
Obama’s administration and how is the best way to do that. And how can we have
an impact on the ability to make sure that that happens this time around, and so
to the Administration’s credit, there [Inaudible] for those that come with
objectives that are trying to meet their goals that you have a seat at the table
and I think we’re able to do that and so I’m cautiously optimistic that was in a
short period of time at the end of this year or next year perhaps that we’ll
have major health care reform in the United States. (applause). Yes,
sir.
Q: Hello,
my name is Robert Pataki, I’m a 12 year employee at the Rahway site. As
previously mentioned I’d like to bring up the 120 jobs that may be eliminated by
the company. One of our company’s greatest CEO’s , John Jay Huran, was a leader
in affirmative action and had a vision that regardless of race, creed, or sexual
orientation that person, he or she could advance as far as their abilities would
take them. How does a company forget that vision and can build and move that
will affect those jobs that are most are held by minorities and women at that
plant.
DICK
CLARK: Thank you for the question. Obviously a major part of what we
think Merck is about is diversity. And the rights for minorities and women to be
able to work at Merck. We anticipate with the Rahway situation that you raised
that the exercise the seniority rights by the affected employees during the
layoff and bumping process, if it takes place, should result in more females and
minorities being retained. And so we will certainly monitor that. There’s a
question in the back there. I’m sorry, I can’t see you, please stand up. Yes.
We’ll get you a microphone.
Q: My
name is Mary Fedor, oh I’m sorry, my name is Mary Fedorco, but I compliment you
on your field of solar panels, I was very interested, I’m a resident of
Hunterdon County and every single tidbit that came out in the mail went to my
grandson who is studying, who is now completing his masters in alternative
energy so he was very pleased to get that information that Merck planted a field
of solar panels. But I do have a question. Have there been any studies on
whether GARDASIL is indeed effective in preventing cancer in our little girls or
is that premature, has it not been enough time to do that kind of study? Or has
there been any proof that it might even be harmful to these little girls? Thank
you.
DICK
CLARK: Yeah, thank you for your comment on our solar project at
Whitehouse Station. It’s remarkable. I made this statement at 7 1/2
acres of solar panels and until you see what 7 1/2 acres of solar panels look
like, it’s just an incredible site, and so we are very proud of what our company
is trying to do to be environmentally responsible throughout the world and this
is just one of the next steps to be able to accomplish that and I’ll have Dr.
Peter Kim answer your GARDASIL question.
Dr.
Peter: Thank you for the question on GARDASIL. Indeed, our clinical studies have
shown very convincingly that GARDASIL does prevent cervical cancer, prevents
cervical cancer caused by two of the major sub types of human papillomavirus and
so the results are very clear and unequivocal that this vaccine has an
outstanding efficacy in preventing both the pre-cancerous lesions as well as
cervical cancer itself. With regard to potential harmful effects, what I can
tell you is that in our clinical studies we’ve looked very carefully at the
adverse events both in the vaccinated group as well as the placebo group and
there are no significant differences in the adverse event group [inaudible] it’s
a generally safe and well tolerated vaccine. I have been told that it hurts when
you get the injection but other than that, it’s generally safe and well
tolerated. We have obviously continued to monitor the adverse experience with
this vaccine that we get from the field. So thank you for the
question.
DICK
CLARK: Thank you Peter. Other questions. Yes.
Q: I have
just a comment, not a question, my name is Madeline Edsold, I’m a ten year
retiree this month. And at last year’s meeting I asked a question about perhaps
getting us retirees access to some of the internet that Merck has and was I
happy when I went into the little feeder and saw Merck connections, the website
just for retirees, I had a little taste of it back there and I can’t wait to get
home. So thank you very much for keeping us in the loop and I know things are
tough in this world, it just took my daughter eight months to find another job,
and it’s so happy, I’m so happy to be kept in the loop here, it’s very important
to us and thank you Merck. One of the best decisions I ever made back in 1957
was to apply at Rahway. Thank God for Mrs. Giles’ typing pool. Thank you.
(applause).
DICK
CLARK: Well thank you for your comments and please for all retirees,
once you see the site, please give us feedback on how we can continue to improve
it as well. That was feedback that we received last year. Yes. The man in the
white shirt.
Q: My
name is Bill Craddle. I’m a former Merck employee and a shareholder today. Last
year was the first time I attended an annual meeting as a former employee and
the question of VYTORIN came up and it just sat with me all year because the
response pretty much was that the company stood behind VYTORIN, it was a very
good drug and at the same time the company was pulling the ads from television,
the stock was in the 40’s, it’s now in the 20’s, I just wanted to know the
status of VYTORIN. Thank you.
DICK
CLARK: Well certainly we believe VYTORIN is a very important part of
the providers and a physician’s ability to reduce LDL and in fact when you look
at VYTORIN compared to Lipitor or generic simvastatin or Crestor for reducing
LDL in head to head studies, VYTORIN was obviously the best and it is a very
important, it’s a very safe product and we continue to support it, and the RX’s,
the subscriptions for VYTORIN have stabilized this year, because they were going
down last year, now they are stabilized and hopefully they will return to even
better improvement as we move forward. Good question. Any other questions on
this side? Yes sir.
Q: Thank
you. I’d like to make two comments first of all. I am encouraged that Merck is
looking for ways to increase its presence in an ever-changing market. Secondly,
I think we’re all aware that we have a close relationship with Schering-Plough
in various other things. Having said that, my next question or my question is
simply this, given those things, what was the idea of going into a merger with
Schering-Plough rather with a bio-pharmaceutical company? I’m sure you must have
some good reasons. We’d like to hear them.
DICK
CLARK: Yeah, good question. Certainly, the most important reasons for
the merger of Schering-Plough and Merck. First of all you have two very
important and strong companies that are really focused on science and science
[Inaudible] excellence. To me the important part of pharmaceutical companies and
your question about two companies coming together, they really need to be
scientifically focused and have scientific excellence and so when we did our due
diligence, when Dr. Kim reviewed their pipeline and how they did their science
it was remarkable to see how the science excellence fits together. To me that’s
the most important aspect of bringing two companies together, that there really
is a culture of science capability, so that was number one. Number two, as you
saw from some of the slides that I presented and perhaps Peter presented, there
is complementary products and complementary compounds in the pipeline in each
therapeutic area. So it was a perfect match of bringing products together and
many of the therapeutic areas that were both in and the good news is that there
was not much of an overlap in mechanisms of action in there, so there wasn’t a
lot of duplications. I think the third reason was that when you look at it in a
global basis in order to succeed in today’s pharmaceutical environment on a
global basis you have to be able to have a global footprint and from the
Schering-Plough revenue standpoint about 70% of their business is outside of the
United States and about 30% is inside the United States so there’s greater
diversity, from a footprint standpoint when you look at it on a global basis.
And finally from my standpoint as CEO when you look at the culture aspirations
of those companies they’re remarkably the same, so when you think about
integrity and ethics and scientific excellence and customer focus, as a part of
the culture of both companies it’s remarkably the same, and culture goes a long
way to making sure companies really can merge together and I was very pleased
with that. Obviously the financials had to work for long term shareholder value
which they did, but these other comments that I made were just as important as
that one, and so when we compare that to other companies include biotech there
was no match for the Schering-Plough Merck merger. In the back, there’s a
question. And this will be the final question.
Q: My
name is [inaudible]. I’d like to know if you do any work on HDL.
DICK
CLARK: Peter?
PETER:
Yes, thank you for that question. We are indeed working on mechanisms to
increase HDL. HDL is the good cholesterol as opposed to LDL which is the bad
cholesterol. Statins and VYTORIN and ZETIA lower LDL cholesterol, the bad
cholesterol, we’re also looking at mechanisms to raise good cholesterol or HDL
indeed.
DICK
CLARK: There was a person in the back that stood up as I was ... so
let’s use you as a final question there, since you already stood
up.
Q:
Hello.
DICK
CLARK: Yes.
Q: My
name is John Boquino, I’m a retiree of Merck. You know when you look at the
tremendous growth in the senior citizen community around the world, you would
think there’s enormous potential for a product like the shingles vaccine.
However when I’ve tried to ask a number of physicians about getting it, they’re
not only not informed about the product, but they can’t seem to get it. What’s
wrong with the shingles vaccine?
DICK
CLARK: That’s an excellent question and something that we’re focusing
a great deal of our attention on, but there are manufacturing constraints with
making the ZOSTAVAX vaccine, that we’re overcoming and so hopefully within a
very short period of time the back orders and the out of stock that you see in
ZOSTAVAX in the United States will disappear. And the final question, the man
standing right here.
Q: My
name is Joel Flamholtz, a Merck retiree. Dr. Kim mentioned managing of the
inherent risk of science based diversification, and several years ago as I
recall, there was an emphasis put on failing early in clinical trials, it seems
to me that the opposite has occurred. In the recent past, we’ve experienced
failures due to regulatory and marketing problems and what was euphemistically
referred to as manufacturing constraints in vaccine supply. Besides VIOXX and
VYTORIN, which were end line products which developed problems – ARCOXIA was
rejected by the FDA, CORDAPTIVE required more data, over the counter MEVACOR
failed several times, PARGLUVA was rejected by the FDA, the HIV vaccine was
withdrawn, GABOXADOL for insomnia was withdrawn, the obesity drug was withdrawn,
hepatitis B vaccine was put on hold, migraine drug recently delayed, HPV
vaccine for older women delayed for more data, and in manufacturing we’ve
experienced contamination in HIV, and problems in the manufacture of ZOSTAVAX.
It seems to me that we haven’t reached our stated goals and I want to know why
we should believe that we’re going to make progress in the future. Thank
you.
DICK
CLARK: Well from the sound of those two questions, that you’re
asking, two separate questions, the first question is around the manufacturing
capacity constraints that we talked about with vaccines. And certainly we had
very dedicated employees at West Point who are helping us work through there
from the processing standpoint as well as the capacity issues to be able to
overcome some of those capacity issues and I have a great deal of confidence in
the West Point organization and to be able to solve those issues for our
vaccines and we’ll be able to come on that in a very short period of time this
year and next year, so that’s one issue. The other issue that you raised on the
issues that we’re having with late stage pipeline, unfortunately is a state of
the union is what we have is an industry right now and when you think of how
tough innovation, how tough it is to create and discover new products and to be
able to take it through the system it becomes more challenging each and every
year, and so from an innovation standpoint what’s important is that we use new
technology, we use new capabilities to be able to overcome that, but there is no
doubt throughout the industry, including Merck, that it’s very difficult not
from an innovation standpoint, with the risk benefits that we face, so we
appreciate your question and we hope that as Peter showed you our pipeline,
particularly our early stage pipeline and how it’s been expanding and how that
relates to what Schering-Plough is doing that we have the capabilities, we move
forward to be successful, because as you know it is all about the pipeline, so
thank you. If there are no further questions, we will proceed with the rest of
the meeting and I’ll certainly be available after the meeting if anybody has
questions you want to ask of me. The final report of the Inspectors of Elections
will not be available today. We do however have a preliminary report which I now
ask Ms. Colbert to present.
Ms.
COLBERT: The Inspectors of Election have presented their preliminary report.
They have determined that each of the 15 directors nominated by the board has
been elected by a majority of the votes cast, and the Audit Committee’s request
for ratification of PriceWaterhouseCoopers LLP as the independent registered
public accounting firm has been approved. The proposal to amend the Restated
Certificate of Incorporation to limit the size of the Board to no more than 18
directors has been approved. It received an affirmative vote of 98.7% of the
total votes cast. A majority of the votes cast was required for this proposal to
be approved. A majority of shares present in person or represented by proxy and
entitled to vote is required for approval of each of the stockholder proposals.
The Inspectors have determined that the stockholder proposal concerning Special
Shareholder Meetings has received an affirmative vote of 49.7% of the total
votes cast. The stockholder proposal concerning an Independent Lead Director has
received an affirmative vote of 14.6% of the total votes cast and the
stockholder proposal concerning an Advisory Vote on Executive Compensation has
received an affirmative vote of 46.1% of the total votes cast. Final results
will be available Friday on the Company’s toll free telephone number
1-800-225-5675 and also on the Company’s website www.merck.com under
Investor Relations, along with an archived webcast of this meeting.
DICK
CLARK: The business of the meeting has now been completed. On behalf
of the Board and our management team, I thank you for your attendance here today
and for the interest you have shown in the affairs of our Company. When you
leave the Theatre, buses will be outside waiting to take you to your cars. The
final matter before you is to conclude the meeting. All those in favor, say
aye.
PEOPLE: Aye.
DICK
CLARK: Those against? (applause). I declare this meeting is
concluded. Thank you very much. (applause).