Merk Annual Report

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Jenna Christadore

Annual Report

Professor John Mecchia

DEAR SHAREHOLDERS:

More innovative. More customer-focused. Leaner and more agile. These are the defining characteristics of the new Merck we are continuing to build. This past year has underscored the importance of our ongoing work to emerge as a leader in the pharmaceutical industry of the future. It has also both tested — and proven — Merck's resilience. To achieve our mission of discovering and developing medicines and vaccines that improve the lives of people around the world, we are fundamentally changing this company.

We continue to transform every aspect of our business, guided by the strategy we first laid out in 2005. As we move ahead, we have the market insight and financial strength to drive our business growth by investing in strategic internal as well as external opportunities when they make sense for our shareholders.

TRANSFORMING RESEARCH AND DEVELOPMENT

Nowhere is Merck's transformation more critical than in our scientific research and development. New initiatives, such as our global operating strategy for basic research and our model for clinical development, will enable Merck to accelerate the discovery process, improve our research productivity and increase our probability of success. At the same time, we are seeking out collaborations that complement and extend our own world-class internal capabilities.

We are especially excited about the opportunity presented by Merck BioVentures, a new business we believe positions us to become a leading provider of high-quality, competitively priced, follow-on biologics. While chemistry has traditionally been at the root of most Merck drugs, biologics can expand Merck's portfolio by providing medicines derived from technologically engineered microorganisms. Merck BioVentures will use the proprietary glyco-engineering technology we brought into our labs with our 2006 acquisition of GlycoFi.

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