Raymond V. Gilmartin Chairman, President and Chief Executive Officer Merck & Co., Inc.

It’s a pleasure to speak with you today about our company’s accomplishments in 1999: solid growth in sales, income, and earnings, and continued advances and expansion in Merck research and production and at Merck-Medco Managed Care. We’re proud of our success last year and over the long term, and we are confident that our growth will continue in 2000 and in the future. Merck in 1999             Our strategy to achieve this growth is based on our proven excellence in discovering and developing safe and effective medicines and vaccines – fifteen since 1995 alone – and on marketing them ethically throughout the world. Last year’s extraordinarily successful launch of VIOXX – the only medicine in the coxib class powerful enough to be indicated both for osteoarthritis and acute pain – is an ideal example. The medicine is taken just once daily, is highly effective, and in clinical studies, patients taking VIOXX developed far fewer serious gastrointestinal side effects than those taking standard non-steroidal anti-inflammatory drugs.

            We’re also conducting studies to evaluate VIOXX for rheumatoid arthritis, for the prevention and treatment of Alzheimer’s disease, and for colon polyps, an indicator for colon cancer, which kills 48,000 Americans every year – more than any other cancer except lung cancer.

            Complementing the success of our research in developing this medicine are our excellent marketing and manufacturing capabilities. We started shipping VIOXX just four days after FDA approval – and we have launched it in 54 countries around the world. In the U.K, Sweden, Germany, Spain, Denmark, Switzerland – and numerous other countries – VIOXX is off to a tremendous start. The medicine has been achieving market leadership in its class in most European nations just months after introduction. Here in the U.S., VIOXX is up to a 48 percent share in its class, on a new prescription basis. And VIOXX is the fastest growing prescription arthritis medicine in the U.S.

            While we’re very proud of our achievements with our newest medicine, our company’s success is driven by a wide array of products and services. VIOXX, ZOCOR, FOSAMAX, COZAAR and HYZAAR, and SINGULAIR represent fifty percent of our pharmaceutical sales, and – along with our research pipeline – will prove powerful drivers of future growth.

            Worldwide, sales growth for ZOCOR increased 14 percent last year. It remained the world’s largest-selling medicine in its class, with its proven ability to lower LDL, or "bad" cholesterol, and triglycerides, and to increase HDL, or "good" cholesterol, in patients with high LDL. We are pursuing important new data for ZOCOR among diabetics, women, and the elderly.

            FOSAMAX continues to be the most widely prescribed medicine in the world for the treatment of postmenopausal osteoporosis. In the U.S. alone, more than 30 million people have or are at risk for osteoporosis – yet the majority of them remain untreated. We are increasing awareness of this disease to reach the tremendous number of patients who can benefit from treatment. We have filed with the FDA and with regulatory agencies in Europe and worldwide for a convenient once-weekly formulation for FOSAMAX. We’ve already received approval in Mexico for this new formulation.

            Last year, we received approval for FOSAMAX for the treatment of osteoporosis caused by the use of certain steroids in both men and women. Finally, we have just submitted data to the FDA in support of an application for a new indication for male osteoporosis. It may surprise you that one in five people with osteoporosis is male.

            Let me turn now to COZAAR and HYZAAR for high blood pressure. They are the world’s most widely prescribed drugs in their class, and among Merck’s fastest-growing products, with global sales increasing 31 percent last year. A number of trials are now underway to evaluate the effectiveness of these medicines in improving survival and reducing disability associated with hypertension, diabetic kidney disease, and recent heart attacks.

            SINGULAIR had the most successful launch of any asthma medicine in history and remains the world's fastest growing asthma medication. It is registered in 76 countries. Last month, the FDA approved a pediatric formulation of SINGULAIR for children as young as two. This cherry-flavored, chewable tablet is the first new asthma therapy in more than 15 years indicated for children this young. To expand our patient base for SINGULAIR even further, we are studying its effectiveness for allergy-induced asthma and allergic rhinitis, or hay fever.

            Among the other medicines supporting our company’s growth are MAXALT for migraines, PROPECIA for male pattern hair loss, AGGRASTAT for unstable angina, and COSOPT and TRUSOPT for glaucoma.

            As one of the few U.S. companies that develop and market vaccines, we are proud of our work in this area. Today, we market vaccines for chickenpox; for hepatitis A and B; for Haemophilus influenzae type b, a cause of invasive bacterial infections including meningitis; for pneumococcal disease, which causes more deaths than any other vaccine-preventable bacterial disease; and a combination vaccine for measles, mumps, and rubella. Incidence of these three diseases has declined by more than 99 percent in the U.S. since the vaccine's registration nearly 30 years ago. We also continue our pioneering vaccine research, which includes work on vaccines for HIV; for human papillomavirus, which causes cervical cancer; and for rotavirus, the most common cause of severe diarrhea in children.

            Merck medicines are improving the lives of patients worldwide – and they’re achieving success in markets in the U.S. and abroad. Another important factor contributing to Merck’s ongoing success is Merck-Medco Managed Care, the nation’s leading provider of prescription drug care. Merck-Medco manages pharmaceutical benefits and care for 52 million people, and over the next year will add ten million more patients covered by the United Healthcare Group, for a total of nearly one in four Americans.

            Merck-Medco helps patients receive the best care while both patients and payers receive the best value. For example, our automated mail service pharmacy in Las Vegas is the most technologically advanced pharmacy in the world, using robotics and other state-of-the-art tools to increase safety and efficiency. While a large retail drug store generally dispenses about 500 prescriptions a day, that one pharmacy in Las Vegas dispenses 5,000 prescriptions per hour, or up to 18 million prescriptions a year.

            Merckmedco.com* is the world’s largest Internet pharmacy, dispensing more than a quarter of a million online prescriptions per month. Last year, we entered into an agreement with CVS, the nation’s number one drugstore chain, to further enhance services at our website. As a result, Merck-Medco customers will soon be able to conveniently order over-the-counter and general health items online. [ * Ed. note: This site is only available to US residents.]

            Merck-Medco’s "Partners for Healthy Aging" program is helping to ensure prescription drug safety for seniors, many of whom take multiple medications and run a greater risk of medical complications from dangerous drug interactions or inappropriate dosages. Studies have shown that this program is effective in advancing safer prescribing. Additionally, our health management programs improve ongoing care for patients with chronic conditions such as asthma, depression, and gastrointestinal disease.

            Merck’s overall success worldwide has generated consistent positive results over the past five years. We showed solid double-digit growth once again in 1999. Sales rose 22 percent to $32.7 billion. Net income was up 12 percent to $5.9 billion. Earnings per share increased 14 percent, to $2.45.

            We’re very pleased that the first quarter of 2000 continues this positive trend, as we reported yesterday. Worldwide sales were $8.9 billion, up 17 percent over first quarter 1999. Our five key products, VIOXX, ZOCOR, FOSAMAX, COZAAR/HYZAAR, and SINGULAIR, led growth and accounted for fifty percent of human health sales. Net income increased 15 percent to $1.5 billion. And earnings per share were up 17 percent, to 63 cents. Clearly, our strategy and the investments we have made in both R&D and in marketing are continuing to pay off.

            At Merck, our long-term goal is to be a top-tier growth company. And given our progress on all these fronts, we remain confident in our ability to deliver earnings growth rates competitive with the other leading health care companies through the year 2002, notwithstanding the expiration of several patents during this period.

Merck’s future

            Today, Merck competes in 20 therapeutic categories, up from 11 in 1992 – and we expect to continue to expand, thanks to our commitment to and success in research. Last year we invested $2.1 billion in research and development; this year, we expect to increase that by 15 percent to $2.4 billion.

            Our investments are paying off with a research pipeline that holds great promise. We’re in Phase IIb clinical trials with two substance P antagonists, one for depression and anxiety and one for chemotherapy-induced vomiting and nausea. We’re in Phase III with the first in a new class of antifungal medicines that promises to be a real breakthrough for patients, and with our new once-daily injectable antibiotic. Our second Cox-2 inhibitor – the most selective one known in clinical development – is also in Phase III trials for osteoarthritis, rheumatoid arthritis, and pain. As I mentioned, we also have a number of vaccines in early trials. Dr. Ed Scolnick, head of Merck Research Laboratories, will share with you further details of our pipeline.

            Our approach to research is deliberately designed to capitalize on rapid advances in science not only inside Merck, but also externally – by aggressively investigating and acquiring promising compounds, useful technologies, and new ideas for drug development. A number of such collaborations are reflected in our pipeline.

            At Merck – in addition to discovering medicines in-house – we have been very successful at bringing in compounds at an early stage, then designing and developing them into highly potent, highly selective, and well-tolerated medicines that are easy and convenient to use, and then bringing them to the global market. FOSAMAX and COZAAR/HYZAAR are good examples of our distinction in this area.

            Last year, we signed a licensing agreement with Kyorin Pharmaceutical Co., Ltd. to develop and market a novel compound for the treatment of diabetes. We also acquired SIBIA Neurosciences in La Jolla, California, an important addition to our existing central nervous system research sites in the U.K. and Canada. Our new facility also gives us a presence in an area with world-class research institutions and investigators – as will a new biomedical research center we’re building in Boston, another center of advanced science and medical research.

            Furthermore, in addition to our internal work with genomics, biotechnology, and other leading-edge science, we have a number of collaborative agreements in place with specialized high-tech companies. One is with Elan Corporation on nanotechnology, which transforms poorly water-soluble compounds into nanometer-sized particles, allowing them to be developed into medicines that are convenient for people to take. We are continuing a collaboration with Vical, to help develop vaccines using the latest genetic technology, and with Aurora Biosciences on genomics technology, high-throughput screening, and other cutting-edge tools.

            Today, researchers are identifying genes and the proteins they express, providing important new knowledge that will help revolutionize the future of medicine. The next task – also a massive undertaking – is to determine the role of these proteins in causing disease, and their potential as targets for pharmaceutical intervention. Merck excels in these areas. And our tremendous strength in capitalizing on such discoveries to develop safe and effective medicines will continue to make Merck successful. Simply said, we produce results: good medicines, which in turn lead to good health.

            And we believe that the best way to continue to create value for our shareholders – and the best medicines for patients – is to continue to invest in internal growth and the kind of collaborations I’ve described.

            With regard to technological advances, our company is also capitalizing on many of the benefits associated with the Internet: from streamlining business processes and improving productivity – to expanding our marketing reach – to providing reliable health information to consumers. As I mentioned, Merckmedco.com is the world’s largest Internet pharmacy, and the site provides personalized services and information online to help improve the quality, convenience, and affordability of prescription drug care. Merck’s Vaccinesbynet.com offers doctors the convenience of ordering vaccines and getting relevant medical information online – the nation’s first such site. One of the Internet’s overall advantages is increasing the speed of communication and access to information. In such an atmosphere, Merck thrives: because of the proven benefits and safety of our medicines and the reliability of our medical information.

            While Merck is committed to discovering and developing the best medicines and providing the best pharmaceutical care, we also believe in helping to bring our achievements to patients throughout the world – through donations, improvements in patient care, advocacy, and other efforts.

            Just last month, we announced a $100 million donation of our hepatitis B vaccine to the world’s poorest children, in conjunction with the Global Alliance for Vaccines and Immunization. Our Mectizan donation program – now in its second decade – each year treats about 25 million people who have or are at risk for river blindness, a devastating disease in many of the world’s poorest nations. We have also established and continue to support programs to improve patient care for those with HIV/AIDS in countries such as Thailand, Brazil, South Africa, Senegal, and Romania.

            Here at home, we help make our medicines available to the nation’s neediest through special patient programs. And for senior citizens, we have been actively supporting the addition of an outpatient prescription drug benefit to a modernized and strengthened Medicare program. In contrast to the era in which Medicare was created, medications are now available to treat and prevent heart disease, osteoporosis, glaucoma, and many other chronic and debilitating conditions that affect seniors. Like private sector employees and members of Congress, seniors with Medicare should be able to choose among private-sector health plans that include coverage of medicines that can increase the quality and length of life. Recognizing that such change may take time, in the interim we support federal legislation that would provide all seniors with access to affordable pharmaceutical coverage. We are encouraged that Congress is moving forward constructively on this issue.

            And just last week, Merck-Medco introduced a new service, the Your_x Plan, a pharmacy savings program intended for individuals and families without prescription drug insurance or with inadequate coverage. With discounts on virtually all prescription drugs plus additional cash-back savings on many major medicines, Your_x Plan allows people of all ages to save money on their drug bills right away. Our partner in this venture is Reader’s Digest, which brings strong expertise in health publishing and marketing to this initiative.

            For the public at large, Merck publishes the best-selling Merck Manual of Medical Information–Home Edition on a not-for-profit basis, to provide high quality, unbiased health information. We’ve just made the entire manual available online at Merckhomeedition.com. It’s searchable and free of charge.

            In the pharmaceutical industry, the only sustainable advantage a company can have is the ability to innovate – to discover and develop medicines that save or improve people’s lives. At Merck, we’re proud that we can do just that – and that we can progress as fast as the times. Indeed, that’s the nature of our business: even if our patents didn’t expire, science would advance to make yesterday’s breakthrough treatments obsolete. So we are very familiar with taking advantage of the best of new science – of collaborating with others when their technologies prove useful to us – of bringing out the best in our 62,000 employees – of developing innovative new medicines and bringing them to physicians, patients, and families around the world.

            That’s why Merck will continue to grow and to deliver value to our shareholders in the years to come. Now, Dr. Edward Scolnick, president of Merck Research Laboratories, will share with you the exciting developments in Merck research.

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This document contains forward-looking statements. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. We undertake 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 document should be evaluated together with the many uncertainties that affect our businesses, particularly those mentioned in the cautionary statements in Part 1 of our 1999 Form 10-K and in our periodic reports on Form 10-Q and Form 8-K (if any) which we incorporate by reference.