Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-77569 and 333-72546
Prospectus Supplement
(To Prospectus dated November 28, 2001)
(LOGO)
MERCK & CO., INC.
$500,000,000
4.375% Notes due 2013
Interest payable February 15 and August 15
ISSUE PRICE: 99.305%
The notes will mature on February 15, 2013. The notes are not redeemable prior
to their scheduled maturity. Interest will accrue from February 18, 2003.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes or determined that this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
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PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS THE COMPANY
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Per Note 99.305% 0.250% 99.055%
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Total $496,525,000 $1,250,000 $495,275,000
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The notes will not be listed on any securities exchange. Currently, there is no
public market for the notes.
We expect that delivery of the notes will be made to investors on or about
February 18, 2003.
JPMORGAN
SALOMON SMITH BARNEY
THE WILLIAMS CAPITAL GROUP, L.P.
February 10, 2003
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS, NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF MERCK & CO., INC. SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
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Recent Developments......................................... S-3
Ratios of Earnings to Fixed Charges......................... S-4
Description of the Notes.................................... S-4
Underwriting................................................ S-6
Validity of the Notes....................................... S-7
Experts..................................................... S-7
PROSPECTUS
PAGE
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About this Prospectus....................................... 2
Merck....................................................... 3
Ratios of Earnings to Fixed Charges......................... 3
Use of Proceeds............................................. 3
Description of Debt Securities We May Offer................. 13
Plan of Distribution........................................ 13
Validity of Debt Securities................................. 13
Experts..................................................... 13
Where You Can Find More Information......................... 14
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RECENT DEVELOPMENTS
On January 28, 2003, Merck & Co., Inc. announced its fourth quarter and
full year 2002 results. Merck's consolidated net income was $7,149.5 million in
2002, compared to $7,281.8 million in 2001. Consolidated sales grew 9% to $51.8
billion for the year, while Merck's human health sales in its core
pharmaceuticals business increased 1% for the year. Merck's consolidated net
income for the fourth quarter of 2002 was $1,889.8 million, compared to $1,860.9
million for the same period in 2001. Consolidated sales grew 11% in the fourth
quarter of 2002 to $13.9 billion, while Merck's human health sales in its core
pharmaceuticals business increased 8% for the fourth quarter, including a 1%
benefit from foreign exchange. Merck's five largest-selling products - ZOCOR,
FOSAMAX, COZAAR and HYZAAR*, SINGULAIR and VIOXX - collectively had increased
sales of 18% for the fourth quarter of 2002 as compared with the same period in
2001.
Merck's consolidated sales growth also reflected the impact of Medco Health
Solutions, Inc.'s sales, which increased 14% in 2002. On a stand-alone basis,
Medco Health's net revenues increased 13% to $33.0 billion in 2002, including
retail co-payments of approximately $6,456.8 million. Medco Health's net
revenues -- reported on a stand alone basis -- increased by 11% to $8.5 billion
in the fourth quarter of 2002, including retail co-payments of approximately
$1,652.4 million. Merck remains fully committed to the establishment of Medco
Health as a separate, publicly traded company and intends to complete the
separation in mid-2003, subject to market conditions.
As we reported on our Current Report on Form 8-K dated December 9, 2002,
Medco Health has agreed to settle a series of class-action lawsuits that
challenged Medco Health's position under the Employee Retirement Income Security
Act, or ERISA. Under ERISA, those with responsibility for overseeing certain
benefit plans -- such as retirement plans and health insurance plans -- are
known as "fiduciaries" and are obligated to ensure that decisions are made in
the best interest of the plans and plan members. Medco Health has contractual
and indirect relationships with many plan fiduciaries or plan sponsors. However,
Medco Health believes that it is not a fiduciary under ERISA as the plaintiffs
asserted, and this settlement does not change that position. Medco Health has
always maintained that the plaintiffs' claims were without merit. Under the
terms of the proposed settlement, which was agreed to by plaintiffs in five of
six initial lawsuits filed against Medco Health and requires the approval of the
U.S. District Court for the Southern District of New York, plaintiffs will
release various legal claims against Medco Health and Merck -- without any
admission of liability by either company -- in return for financial compensation
to eligible members of the settlement class. That class includes ERISA -- plans
for which Medco Health has administered a pharmacy benefit at any time since
December 17, 1994. The court will hold a hearing and consider objections to the
settlement. Final resolution of the legal matter is expected to take several
months.
In addition to cash compensation of $42.5 million, under the proposed
settlement Medco Health has voluntarily agreed to modify or continue certain
business processes that are designed to ensure clients have an even greater
understanding of, and realize maximum value for, their investment in pharmacy
healthcare services. The practices include, among other items, keeping clients
regularly updated on changes to standard formularies and providing notice when
generic equivalents to branded pharmaceuticals become available on the market.
They also include affirmatively notifying clients of new proposed therapeutic
interchanges when they involve an interchange of a lower-cost drug to a
higher-cost drug on an average wholesale price, or AWP, basis. In these
situations, Medco Health will provide clients with information on the AWP of
each drug and the cost of each drug after ingredient cost discounts and
formulary rebates. Clients will have the opportunity to decline participation in
that particular interchange.
Upon final approval, the settlement would resolve nearly all pending and
potential litigation by plans against Medco Health and Merck based on ERISA and
similar claims, for events occurring up to the date of the settlement. Only
those claims by plans that affirmatively opt out of the settlement would
survive.
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* COZAAR and HYZAAR are registered trademarks of E.I. DuPont de Nemours &
Company, Wilmington, DE, USA.
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RATIOS OF EARNINGS TO FIXED CHARGES
Our consolidated ratios of earnings to fixed charges for the nine months
ended September 30, 2002 and for the fiscal years ended December 31, 1997
through 2001 are as follows:
YEARS ENDED DECEMBER 31,
NINE MONTHS ENDED --------------------------------------------------------------------------------------------
SEPTEMBER 30, 2002 2001 2000 1999 1998 1997
------------------ ---------------- ---------------- ---------------- ---------------- ----------------
15 13 12 16 24 28
For purposes of computing these ratios, "earnings" consist of income before
taxes, one-third of rents (deemed by the Company to be representative of the
interest factor inherent in rents), interest expense, net of amounts
capitalized, equity income (loss) from affiliates, net of distributions, and
dividends on preferred stock of subsidiary companies. "Fixed charges" consist of
one-third of rents, interest expense as reported in Merck's consolidated
financial statements and dividends on preferred stock of subsidiary companies.
We have corrected these ratios from those previously reported to reflect
primarily (i) certain deductions from earnings from affiliates and (ii) the
implied tax effect on preferred stock dividends paid by Merck.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the 4.375% Notes due
2013 offered hereby supplements the general description of debt securities set
forth in the prospectus.
GENERAL
The notes will initially be limited to $500,000,000 aggregate principal
amount and will mature on February 15, 2013. The notes are not redeemable prior
to their scheduled maturity. The notes will bear interest from February 18, 2003
at the rate per annum shown on the cover page of this Prospectus Supplement.
Interest will be payable on February 15 and August l5 of each year, commencing
August 15, 2003, to the person in whose name the notes were registered at the
close of business on the preceding February 1 or August 1, as the case may be.
Interest on the notes will be computed on the basis of a 360-day year composed
of twelve 30-day months. If any payment date for the notes is not a business
day, we will make the payment on the next business day, but we will not be
liable for any additional interest as a result of the delay in payment. By
business day, we mean any Monday, Tuesday, Wednesday, Thursday or Friday which
is not a day when banking institutions in the place of payment are authorized or
obligated to be closed. The notes are unsecured and will rank equally with all
our other unsecured and unsubordinated indebtedness.
The full defeasance and covenant defeasance provisions of the indenture
described under "Description of Debt Securities We May Offer -- Defeasance" in
the Prospectus will apply to the notes.
FURTHER ISSUES
We may, without the consent of holders of the notes, issue additional notes
having the same ranking and the same interest rate, maturity and other terms as
the notes. Any additional notes, together with the notes covered in this
prospectus supplement, will constitute a single series of notes under the
indenture. No additional notes may be issued if an event of default has occurred
with respect to the notes.
BOOK-ENTRY SYSTEM
Upon issuance, the notes will be represented by one or more global notes.
Each global note will be deposited with, or on behalf of, The Depository Trust
Company, as depository, and registered in the name of a nominee of the
depository.
Ownership of beneficial interests in a global note will be limited to
institutions that have accounts with the depository or its nominee or persons
that may hold interests through participants. We have been advised by the
depository that upon receipt of any payment of principal of, or interest on, a
global note, the depository will credit, on its book-entry registration and
transfer system, accounts of participants with payments in amounts proportionate
to their respective beneficial interests in the principal amount of the global
notes as shown on the records of the depository. Ownership of beneficial
interests by participants in the global note will be evidenced
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only by, and the transfer of that ownership interest will be effected only
through, records maintained by the depository or its nominee. Ownership of
beneficial interests in the global note by persons that hold through
participants will be evidenced only by, and the transfer of that ownership
interest within such participant will be effected only through, records
maintained by participants. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in definitive
form. These laws may impair the ability to transfer beneficial interests in the
global note.
Payment of principal of, and interest on, any global note registered in the
name of or held by the depository or its nominee will be made to the depository
or its nominee, as the case may be, as the registered owner of the global note.
Payments by participants to owners of beneficial interests in a global note held
through the participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
registered in "street name", and will be the sole responsibility of the
participants. None of us, the trustee, the underwriters, nor any agent of ours
or the trustee will have any responsibility or liability for any aspects of the
depository's records or any participant's records relating to or payments made
on account of beneficial ownership interests in a global note or for
maintaining, supervising or reviewing any of the depository's records or any
participant's records relating to the beneficial ownership interests.
No global note may be transferred except as a whole by the depository to a
nominee of the depository or by a nominee of the depository to the depository or
another nominee of the depository.
No global note may be exchanged in whole or in part for notes registered,
and no transfer of a global note in whole or in part may be registered, in the
name of any person other than the depository or any nominee of the depository
unless (i) the depository has notified Merck that it is unwilling or unable to
continue a depository for such global note or has ceased to be qualified to act
as such as required by the indenture, (ii) there has occurred and is continuing
an event of default with respect to the notes or (iii) we determine in our sole
discretion at any time that the global note shall be so exchangeable.
Any global note that is exchangeable pursuant to the preceding sentence
shall be exchangeable in whole for separate notes in registered form of any
authorized denomination and of like tenor and aggregate principal amount. These
notes shall be registered in the name or names of such person or persons as the
depository instructs the trustee. We expect that these instructions would be
based upon directions received by the depository from its participants with
respect to ownership of beneficial interests in such global note.
As long as the depository, or its nominee, is the registered holder of a
global note, the depository or such nominee, as the case may be, will be
considered the sole owner and holder of such global note for all purposes under
the notes and the indenture. Except in the limited circumstances referred to
above, owners of beneficial interests in a global note will not be entitled to
have such global note registered in their names, will not receive or be entitled
to receive physical delivery of notes in exchange therefor and will not be
considered to be the owners or holders of such global note for any purpose under
the notes or the indenture. Accordingly, each person owning a beneficial
interest in the global note must rely on the procedures of the participant
through which such person owns its interest, to exercise any rights of a holder
under the indenture.
The Indenture provides that the depository, as a holder, may appoint agents
and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver, or other action which a
holder is entitled to give or take under the indenture.
The depository has advised us as follows: the depository is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. The depository was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions, such as transfers and pledges, among its participants in these
securities through electronic computerized book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The depository's participants include securities brokers and
dealers, banks, trust companies, clearing corporations,
S-5
and other organizations, some of whom (and/or their representatives) own the
depository. Access to depository's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the notes will be made in immediately available funds. So
long as the notes are represented by one or more global notes, we will make all
payments of principal and interest in immediately available funds.
So long as the notes are represented by one or more global notes registered
in the name of the depository or its nominee and its procedures so permit, the
notes will trade in the depository's Same-Day Funds Settlement System, and
secondary market trading activity in the notes will therefore be required by the
depository to settle in immediately available funds.
THE PAYING AGENT AND SECURITY REGISTRAR
U.S. Bank Trust National Association is the paying agent and security
registrar with respect to the notes.
UNDERWRITING
The underwriters for this offering named below have entered into a pricing
agreement and an underwriting agreement with respect to the notes. Subject to
certain conditions in the Underwriting Agreement, each underwriter named below
has severally agreed to purchase the principal amount of the notes indicated in
the following table:
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
------------ ----------------
J.P. Morgan Securities Inc............................... $375,000,000
Salomon Smith Barney Inc................................. 100,000,000
The Williams Capital Group, L.P.......................... 25,000,000
------------
Total.......................................... $500,000,000
============
Under the terms and conditions of the underwriting agreement, the
underwriters are obligated to take and pay for all the notes if any are taken.
The notes are a new issue of securities with no established trading market
and will not be listed on any national securities exchange. The underwriters
have advised us that they intend to make a market for the notes, but they have
no obligation to do so and may discontinue market making at any time without
providing any notice. No assurance can be given as to the liquidity of any
trading market for the notes.
The underwriters initially propose to offer the notes directly to the
public at the offering price described on the cover page. After the initial
offering of the notes, the underwriters may from time to time vary the offering
price and other selling terms.
We have also agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments which the underwriters may be required to make in
respect of any such liabilities.
In connection with the offering of the notes, the underwriters may engage
in transactions that stabilize, maintain or otherwise affect the price of the
notes. Specifically, the underwriters may overallot in connection with the
offering of the notes, creating a short position. In addition, the underwriters
may bid for, and purchase, notes in the open market to cover short positions or
to stabilize the price of the notes. Any of these activities may stabilize or
maintain the market price of the notes above independent market levels. The
underwriters are not required to engage in any of these activities, and may end
any of them at any time.
S-6
Our estimated expenses associated with this offering are approximately
$225,000. The underwriters have agreed to reimburse us for $140,000 of these
expenses.
In the ordinary course of their respective business, the underwriters and
their affiliates have engaged, and may in the future engage, in commercial
banking and/or investment banking transactions with us and our affiliates.
William B. Harrison, the Chairman and Chief Executive Officer of J. P. Morgan
Chase & Co., of which J. P. Morgan Securities Inc. is a subsidiary, is also a
member of our Board of Directors.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for the underwriters by
Sullivan & Cromwell LLP, New York, New York. Sullivan & Cromwell LLP has from
time to time provided legal services to us. Sullivan & Cromwell LLP also
performed services for us in connection with the offering of the notes described
in this prospectus supplement.
EXPERTS
The financial statements incorporated in the accompanying prospectus by
reference to our annual report on Form 10-K for the year ended December 31, 2001
were so incorporated in reliance on a report of Arthur Andersen LLP, independent
accountants, given on the authority of that firm as experts in auditing and
accounting. That report was issued on March 21, 2002 and has not been reissued
by Arthur Andersen since that date.
Arthur Andersen was convicted on June 15, 2002 of federal obstruction of
justice in connection with its actions regarding Enron Corp. and ceased to
practice before the Securities and Exchange Commission as of August 31, 2002.
Arthur Andersen consented to the incorporation by reference of its audit report
relating to our annual consolidated financial statements into the registration
statement of which the prospectus forms a part. Arthur Andersen also satisfied
the Commission's requirements to certify to us that the audit was subject to its
quality control system to provide reasonable assurance that the engagement was
conducted in compliance with professional standards, and that there was
appropriate continuity of its personnel working on the audit, availability of
national office consultation, and availability of personnel at its foreign
affiliates to conduct the relevant portions of the audit. Nevertheless, as a
result of the events arising out of Arthur Andersen's conviction you may have no
effective remedy against it in connection with a material misstatement or
omission in the financial statements it audited. Moreover, the events arising
out of Arthur Andersen's conviction may adversely affect the ability of Arthur
Andersen to satisfy any successful claim.
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