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	Chairman’s Message
		Dear Shareholders: Five key products driving growth: Our five key drivers of growth – Zocor, Vioxx, Cozaar/Hyzaar, Fosamax and Singulair – now represent more than two-thirds of our worldwide pharmaceutical sales. In addition, they have significant remaining growth potential based on key studies, and they compete in therapeutic areas where there are still large numbers of untreated patients. In last year’s annual report, I expressed confidence in Merck’s ability to offset our patent expirations while delivering competitive growth. The year began strongly: our five key growth drivers – Zocor, Vioxx, Cozaar/Hyzaar, Fosamax and Singulair – were performing well and represented nearly 60 percent of our worldwide human health sales. Just two years after its successful launch, Vioxx, Merck’s once-a-day medicine for osteoarthritis and acute pain, had become the world’s fastest-growing branded prescription arthritis medicine. Two new products, Cancidas (the first in a new class of drugs to treat deadly fungal infections) and Invanz (a once-daily injectable antibiotic), were about to be introduced. In addition, the productivity and potential of our early- and late-stage research had never been greater. As a result, we were well positioned to show growth rates that were competitive with other leading pharmaceutical companies. However, as the events of 2001 unfolded, Merck encountered unexpected challenges. While our five key growth drivers continued to perform well in the market, the COX-2 class (including Vioxx) experienced lower than expected penetration into the arthritis and analgesics market. This resulted in lower than expected growth for Vioxx, even while it claimed half of new prescriptions in its class. While we remain confident in the continuing worldwide growth potential of Vioxx (prescription trends for the COX-2 class have been recovering over the past several months), the product’s 2001 sales did not meet our expectations. This, in turn, led us to revise Merck’s earnings forecast for the year. An 8 percent increase in earnings per share over 2000, while perhaps respectable in the face of key patent expirations, was not at the level we would have liked to deliver and certainly was not what we had expected to deliver when the year began. Lower than expected sales of Vioxx, the decline in sales of the patent expiration products, and our firm commitment to continue making substantial investments – about $2.9 billion – in research and development will impact the Company’s performance in 2002. Consequently, this will be a transition year for Merck, in which we anticipate that earnings per share, as reported, will be at the same level as they were in 2001. We remain convinced that we have the right strategy in place to become a top-tier growth company. We will do this by focusing on our priorities of turning cutting-edge science into breakthrough medicines, supporting them through targeted and well-executed marketing, and improving our operational efficiency. In addition to investing to support our internal pipeline, our efforts also will include a continuing, intense focus on product licensing – from early- to late-stage opportunities – as well as targeted acquisitions. OUR STRATEGY FOR GROWTH • Discover important new medicines through breakthrough research • Demonstrate the value of our medicines to patients, payers and providers Our overriding financial goal • To be a top-tier growth company by performing over the long term in the top quartile of leading health care companies Cutting-edge science is our foundation Looking ahead, Merck anticipates filing or launching 11 new medicines and vaccines by 2006. These investigational medicines offer novel treatment approaches that address significant unmet needs, and thus have the potential to become important medical advances. These compounds include treatments for arthritis, cholesterol control, allergic rhinitis, chemotherapy-induced nausea, diabetes, respiratory disease, depression, anxiety, HIV/AIDS and a vaccine to combat an infection that can lead to the development of cervical cancer, as well as a vaccine against rotavirus, which causes severe diarrhea in infants. Two of these investigational medicines, Zetia, for cholesterol control (from our partnership with Schering-Plough), and Singulair for allergic rhinitis, have been submitted for approval by the U.S. Food and Drug Administration. We are also positioning the Company for long-term leadership in cutting-edge science. In 2001, we acquired Rosetta Inpharmatics, a leading informational genomics company based in Kirkland, Wash. Rosetta’s state-of-the-art tools and software will help Merck accelerate drug discovery by improving biological data analysis. We broke ground for a new basic research facility in the heart of Boston’s medical and scientific community. We enhanced our focus on the full spectrum of product licensing opportunities. And we continued to supplement our research team with outstanding new talent to build our expertise in neuroscience and other key areas of research. We will continue making the priority investments in research to deliver on the promise of cutting-edge science and our pipeline. Our 2002 research and development budget of about $2.9 billion represents a double-digit percentage increase over 2001 spending. Our focus is on breakthrough medicines and vaccines Merck excels at its core mission of discovering, developing and successfully bringing to market breakthrough drugs. Breakthrough for us is not a slogan. It’s a standard that defines what we work on in our research laboratories. Since 1995, we have introduced 17 new medicines and vaccines – more in that time frame than at any other period in our Company’s history. Successfully developing, producing and marketing these medicines is great testimony to our research and clinical development capability, our marketing skills and the effectiveness of our manufacturing organization. Our five key drivers of growth include several medicines launched during this period – Vioxx, Cozaar/Hyzaar, Fosamax, plus Singulair – along with our largest product, Zocor, whose growth was spurred by a landmark study completed in 1994. These five medicines now represent more than two-thirds of our worldwide pharmaceutical sales. In addition, they have significant remaining growth potential based on key studies, and they compete in therapeutic areas where there are still large numbers of untreated patients. Establishing Merck-Medco as a separate, publicly traded company To allow Merck to focus more fully on its priorities of turning cutting-edge science into breakthrough medicines, and supporting those medicines through targeted, well-executed marketing strategies, the Company in late January announced plans to establish Merck-Medco as a separate, publicly traded company. This is an exciting development for both Merck and Merck-Medco. The results of the 1993 acquisition of Merck-Medco have been highly successful. In less than 10 years, Merck-Medco’s revenues have grown from $2.2 billion to $26 billion, and the number of covered lives has nearly doubled to 65 million. Today it is clear that Merck-Medco is a much different company than it was nine years ago. Given the evolution of the distinct and highly competitive environments in which Merck and Merck-Medco compete, we believe the best way to enhance the success of both businesses is to enable each one to pursue its unique strategy. As a separate company, Merck-Medco will continue to provide high-quality service, as well as advanced technologies and clinical programs, to its customers. Expanding access to our medicines and vaccines We are confident that innovative medicines and vaccines will drive a new period of growth for our Company. At the same time, we recognize that access to these innovations is of mounting concern to patients, policy-makers and health care providers around the world. Our efforts to secure greater access to medicines continue across a number of fronts: from advocacy for comprehensive Medicare reform in the United States to the establishment of innovative public-private partnerships, such as the African Comprehensive HIV/AIDS Initiative now underway in Botswana. In March 2001, Merck announced that it would make its HIV/AIDS medicines available in the world’s poorest countries at prices from which we will not profit. We took this step to accelerate our response to the urgent humanitarian need in Africa and other regions of the developing world. At the same time, we continue to pursue our ultimate goal in fighting HIV/AIDS – the discovery of a safe and effective vaccine. Our model for shareholder value Merck’s growth goal remains unchanged – our long-term objective is to achieve earnings-per-share growth in the top quartile of leading health care companies. Despite the current challenges we face, I believe that there are many good reasons today to be optimistic about the Company’s future. This outlook is founded on the underlying strengths of Merck’s business: the continued growth of our five key franchises; the next wave of new products; the promise of Merck science, bolstered by our continued strong investment in research and development; and the ongoing implementation of initiatives to improve our operational efficiency. This strong foundation, coupled with the focus and commitment of the people of Merck, will allow Merck to capitalize on a new and greater set of opportunities and will drive shareholder value over the long term.
		Raymond V. Gilmartin Chairman, President and Chief Executive Officer March 15, 2002 Back to top

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