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Exhibit 99(a)
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REMARKS BY RAYMOND V. GILMARTIN
ANNUAL BUSINESS BRIEFING
WHITEHOUSE STATION, NJ
TUESDAY, DECEMBER 12, 2000
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OUR FOCUS ON GROWTH
Good morning everyone and welcome to Merck's Annual Business Briefing.
I recognize a lot of familiar faces in the room, and I look forward to an
informative day - both in the formal presentations and in our Q&A panel this
afternoon.
What you'll be hearing about from me this morning -- and later on from
Judy, Dick, Ed, David and Per -- is all about growth.
As a company, Merck is totally focused on growth. Over the last several
years we have exited or restructured all businesses that could impede our
growth. And we have made significant investments in those areas that can enable
us to achieve our goal to be a top-tier growth company over the long term:
cutting-edge science, strong and innovative new products, and Merck-Medco, the
nation's leading provider of pharmacy care.
Our strategy for growth and our focus in carrying it out have given us
a strong platform for continued growth. We are now seeing exceptional evidence
of our strength and our future potential:
- In six of the last seven quarters, revenue growth for our
pharmaceutical and vaccine businesses worldwide ranked either number
one or two within our industry. For the last three consecutive
quarters, Merck's revenue growth ranked number one in our industry --
17 percent, 18 percent and 18 percent again. And we have experienced
high-quality Earnings Per Share growth based on this strong top-line
growth.
- Our breakthrough-research strategy has produced 15 new products in the
last five years and we have more new chemical entities moving through
early development than ever before in our history.
- Five of our newer medicines have become our key drivers of growth
-- Vioxx, Zocor, Singulair, Fosamax, plus Cozaar and Hyzaar.
Together, they now account for nearly 60 percent of global
pharmaceutical sales, up from 45 percent a year ago.
- Merck-Medco -- with the addition of the UnitedHealthcare business
and the ProVantage acquisition -- now serves more than 65 million
people a year or
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roughly 1 in 4 Americans. It has grown to become the most successful
provider of pharmacy care in the United States.
As a result of its strategy and focus, Merck is delivering on its
goal of top-tier growth.
MEETING GLOBAL CHALLENGES
We have been able to deliver top-tier growth because we have
met and will continue to demonstrate our ability to manage three critical
challenges facing the Company - challenges that are in fact reshaping the face
of our entire industry.
Our first challenge has been to demonstrate the value of our
medicines in an environment where managed care organizations in the U.S. and
governments throughout the world are highly concerned about cost containment. We
have been able to meet this challenge because our breakthrough research strategy
has produced medicines with unique characteristics, and we continue to fund
research demonstrating the clinical value of our products - such as the VIGOR
study with Vioxx -- once they are marketed.
The relationships we have built with managed care organizations,
government regulators and other payers have helped ensure that our medicines are
included on managed care formularies in the U.S. - often in preferred positions
- and are reimbursed at prices that reflect their value in markets around the
world.
The added dimension of Merck-Medco gives Merck a unique
competitive advantage in a managed-care environment. Merck-Medco's efforts to
manage prescription drug spending through formulary and utilization management,
appropriate generic substitution, the Internet and mail-service pharmacy are
saving clients more than $1 billion a year and have led to a 96 percent client
retention rate. Dick Clark will have much more to say later today about
Merck-Medco as a key factor driving Merck's top-line growth.
Our second critical challenge: to create a strong platform for
growth. We have consistently said that our new medicines and our in-line
products, combined with the productivity of Merck research, would enable us not
only to offset our patent expirations but also to achieve top-tier growth over
the long term. Our results this year have provided compelling evidence of our
momentum in meeting this challenge. For the first nine months of 2000, earnings
per share have increased 20 percent over 1999, fueled by a 22 percent sales
increase. And as I stated earlier, our five key growth drivers for the third
quarter accounted for nearly 60 percent of our global pharmaceutical sales.
Ed Scolnick will discuss our research pipeline later today, but I
will say that this is the most productive time in the history of Merck research,
with eight programs in Phase IIb and beyond, important vaccines in clinical
trials and new mechanism treatments in early development. Additionally, we are
on the cutting edge of new fields
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like genomics and gene therapy that will enable us to take further advantage of
rapid advances in science.
The continuity of our pipeline will provide a sustainable
competitive advantage for Merck because we have excellent product candidates
both in early and late-stage development, with no anticipated gaps in product
flow.
Our third critical challenge: to maximize the commercial and
therapeutic value of our medicines in the face of intense global competition.
Once again, the bedrock is breakthrough research, which has produced our five
key growth drivers.
In order for these medicines to thrive in intensely competitive
therapeutic categories, we have had to enhance our marketing sophistication and
effectiveness, and provide the necessary resources to make sure our products
achieve and maintain strong leadership positions. And we have done exactly that.
Vioxx has achieved approximately 50 percent of the new
prescriptions in the COX-2 class in the U.S. Combined with its strong leadership
in Europe, Vioxx is firmly positioned for outstanding worldwide growth.
Singulair is the world's fastest growing asthma medicine. Fosamax is the leading
product worldwide for the treatment of postmenopausal osteoporosis. Zocor,
Cozaar and Hyzaar all continue to grow strongly.
Our performance gives us great confidence that we will continue to
meet the challenges facing Merck and the industry. And our strategy for growth -
expanding our lead in cutting-edge science, maximizing our five key growth
drivers, and building on the success of Merck-Medco -- will make us even
stronger in the future.
SETTING THE STANDARD FOR CUTTING-EDGE SCIENCE
Turning cutting-edge science into breakthrough research is
ultimately the way to drive sustainable growth in our industry, and Merck
research continues to set the standard for cutting-edge science. The latest
example came in October when the journal Science published results of our early
HIV vaccine research. While it is far too early to determine the ultimate
probability of success, this research gives us hope that a vaccine may one day
be able to help stem the tide of the HIV/AIDS epidemic.
Targeting and talent are the keys to this kind of cutting-edge
science. Breakthrough pharmaceutical research stems from recruiting and
nurturing the finest scientific talent -- and creating an environment where
that talent can strategically target the most promising research leads for
breakthrough medicines and vaccines.
The leadership team we have assembled under Ed Scolnick in the
Merck Research Laboratories speaks to Merck's ongoing ability to recruit the
finest scientific talent. Ben Shapiro and Roger Perlmutter joined Merck
following distinguished careers at the University of Washington. Doug Greene
came to us earlier this year with equally strong credentials from the University
of Michigan. And we were pleased to announce
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earlier this month that one of the truly outstanding scientific leaders of his
generation, Dr. Peter Kim, would be joining us as executive vice president,
research and development of the Merck Research Laboratories, following an
outstanding scientific career at MIT.
To create the best possible environment at Merck for breakthrough
research, we are organizing our laboratories into a federation of specialized
research sites, often located near leading academic research centers, to help
continue to recruit and collaborate with the best scientific talent in the
world. This structure will allow us to rapidly target and integrate the most
promising new science and new scientific techniques, including genomics and
bioinformatics.
Our laboratories in Montreal, which contributed so greatly to
Singulair and Vioxx, and our new laboratories in La Jolla, from the SIBIA
Neurosciences acquisition, are good examples of this structure. It is also the
model for the research center we are building in Boston.
To broaden our reach beyond our own laboratories we have developed
collaborations with more than 40 companies, institutes and universities
throughout the world. An intensive new focus on external collaborations is
giving us access to new product candidates and research technologies that will
significantly broaden our base for the future.
Research institutions - and companies - are willing to partner
with Merck because we have a long-standing track record of strategic alliances
that benefit both parties. The new partnerships we announced with
Schering-Plough in the U.S. build on that tradition, and give us the potential
for important new medicines in the cholesterol and respiratory disease areas.
Furthermore, these partnerships exemplify Merck's strategy of
seeking innovative collaborations to increase shareholder value. By investing in
our internal research program and complementing our pipeline through external
collaborations, we will continue at the forefront of the cutting-edge science
that is so essential to our future growth.
OUR FIVE KEY GROWTH DRIVERS
Merck research has given the Company five powerful medicines
around which we have built a series of strong competitive successes. Each of
these medicines has unique performance characteristics that are helping to
separate us from the competition. David Anstice and Per Wold-Olsen will go into
more detail on our key global franchises this afternoon, so I'll just mention a
few highlights.
Vioxx. Since its extraordinarily successful launch last year,
Vioxx, Merck's once-a-day medicine for osteoarthritis and acute pain, has
become the world's fastest growing prescription arthritis medicine, and it is
already our second largest selling medicine. Among its unique advantages,
Vioxx is the only COX-2 indicated in the U.S. both for
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osteoarthritis and acute pain, such as pain following knee or hip replacement
and dental surgery. As I said earlier, Vioxx has achieved approximately 50
percent of new prescriptions in the COX-2 class in the U.S. Combined with strong
performance in Europe, Vioxx is well positioned globally for long-term market
leadership.
In November, The New England Journal of Medicine published the
strong results of VIGOR, our gastrointestinal outcomes research study. We have
filed with the FDA for labeling changes based on the data from this 8,000
patient study. VIGOR is yet another example of the excellence of Merck research.
Zocor, Merck's cholesterol-modifying medicine, is showing
continued strong growth backed by excellent science showing that Zocor acts
favorably on all major lipid parameters -- including a much more favorable
impact on HDL (the good cholesterol) at higher doses than its major competitor.
As you will hear later in the day, we are poised for continued long-term growth
in the cholesterol market as a result of our partnership with Schering-Plough.
This continues to be a key therapeutic franchise for Merck, since more than
half of the people who should be taking cholesterol medicines are still
untreated.
Singulair. Our once-a-day pill for asthma control has by far
outdistanced earlier competition in the leukotriene-antagonist category of
asthma controllers. It is now approaching market leadership in the U.S. and is
one of the top-selling asthma controllers worldwide. Singulair is oral, once a
day, it is not a steroid, and it has a chewable formulation that can be used in
children as young as two. These advantages give Singulair the potential to
become the leading medicine for asthma control.
Fosamax. Our leading product worldwide for the treatment of
postmenopausal osteoporosis has outperformed its recent competition because of
its established leadership as the only non-hormonal medicine proven to reduce
the incidence of hip fractures. Two recent developments will further strengthen
our competitive edge. In the U.S., we have FDA approval to extend the benefits
of Fosamax to men with the bone-thinning disease. Also, we have just launched in
the U.S. -- and we have received E.U. approval in our first European market,
the U.K. -- for a novel once-a-week dosage, making Fosamax more convenient
for many women, and extending its patent life in that formulation to 2018.
Cozaar and Hyzaar. These were the first of a new class of
well-tolerated high blood pressure medicines called A-II antagonists, and their
success shows our ability to launch products in competitive markets with great
success. Cozaar and Hyzaar remain the world's most widely prescribed drugs in
their class, maintaining market leadership despite new entrants in the AIIA
category. Strong growth continues because of the excellent tolerability and
efficacy of these medicines.
Throughout the day, we will review in more detail the continued
potential of our five key growth drivers, including ongoing research to expand
the market for these medicines and provide for our future growth.
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MERCK-MEDCO, THE MOST SUCCESSFUL PROVIDER OF PHARMACY CARE
The final element driving Merck's growth is Merck-Medco, the
nation's most successful provider of pharmacy care. Side by side with our
cutting-edge research, our marketing and sales capabilities and our five major
products, Merck-Medco is an essential component of our growth strategy.
Merck-Medco is experiencing superb growth this year. For the first
three quarters, Merck-Medco's sales of non-Merck products increased by 26
percent. Lives under management, bolstered by the installation of 10 million
lives from UnitedHealthcare and the acquisition of ProVantage, now total more
than 65 million people. Through innovative programs like Generics First --
Merck-Medco's generic sampling initiative -- and YOURxPLAN --
Merck-Medco's program for the unfunded consumer market -- Merck-Medco is
helping to appropriately manage drug costs, thereby creating the necessary
headroom for the broader use of innovative products in the U.S. And because
Merck's product line is comprised of highly innovative, once-daily oral
medicines for chronic use, Merck has been able to compete successfully for
preferred position on Merck-Medco's independently managed formularies. The
combination of the strength of Merck's product line and Medco's unique
capabilities has made this aspect of our strategy a clear success -- as both
Merck and Medco have grown faster together than either could have as separate
companies.
Merck is also helping Medco grow through continuous investment in
leading-edge pharmacy and Internet technology. These investments have created
the world's most advanced pharmacy in Las Vegas, which dispenses more than 18
million prescriptions a year. They have created the industry's most effective
programs for controlling the growth of prescription drug spending. They have
created the powerful growth platform of merckmedco.com, the world's leading
Internet pharmacy, which now fills more than 100,000 prescriptions per week via
the Internet. With merckmedco.com, we proved we could compete with the dot.coms
and win.
Merck-Medco will build on its strength in the PBM arena with the
opening next year of a new automated pharmacy in New Jersey, by using new
technology to connect patients, payers and providers, and by creating even more
personalized platforms for pharmacy care via the Internet. The seamless
transition of leadership from Per Lofberg to Dick Clark gives Merck-Medco the
management strength and experience to enhance its position as the nation's
leading provider of coordinated pharmaceutical care. And while Per has turned
the reins over to Dick's able hands, he will continue to play a key leadership
role at our newest subsidiary, Merck Capital Ventures, which will allow us to
participate in emerging Internet and web-based technologies which can enhance
Merck and Merck-Medco's business capabilities.
LOOKING TO THE FUTURE
Looking to the future, we are extending our lead in cutting-edge
science and we have important new products moving through later stages of
development. In
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addition, our new medicines continue to grow in the marketplace. Merck-Medco is
outdistancing its competition. As a result of our success in each of these
areas, we are poised to take the Company to a new level of performance,
delivering on our goal of top-tier growth over the long term.
Our ongoing investments in research, our five key growth drivers
and Merck-Medco have created an exceptionally strong foundation on which we will
continue to build.
I began this morning by saying you would hear a lot about growth
today. Dick Clark will describe the outstanding performance of Merck-Medco. Ed
Scolnick will highlight our cutting-edge science and our external
collaborations. David Anstice and Per Wold-Olsen will review our global
marketing strategy and the success of our five key medicines.
But first Judy Lewent will talk to you about several key elements
of our strategy -- including Merck Capital Ventures, our plans to invest in
new product launches and how we will maximize support for our five key growth
drivers. She will also discuss Merck's research budget for 2001 and our earnings
guidance for next year.
With that, I am happy to introduce Judy Lewent, who will speak
about Merck's financial model.
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