In the past 60 years, innovative medicines and vaccines have helped dramatically improve public health and the economic well-being of societies and individuals in many countries.

As a result of such biomedical advances and increasing economic prosperity, diseases that were prevalent 100 years ago, such as smallpox and polio, have all but disappeared. The global burden of illness looks very different today, and the World Health Organization projects that it will be different again in 20 years.

Merck is committed to addressing medical needs through scientific excellence: Research and Development expenses were $11.0 billion in 2010, $5.8 billion in 2009 and $4.8 billion in 2008. The talent of our scientists, combined with the dramatic scientific and technological advances of the past decade, has led to an exciting period of Merck research as we seek new and more effective ways to treat diseases.

Merck's research philosophy is based on satisfying unmet medical needs globally. In assessing our research priorities, we also explore the scientific and commercial feasibility of conducting research with the potential to develop a product that is useful, considering available knowledge, theories, technologies and skills. Our research and development is focused on the following six disease areas, called franchise areas:

• Cardiovascular Disease
• Diabetes and Endocrinology (including Women's Health)
• Neuroscience and Ophthalmology
• Oncology
• Infectious Diseases
• Respiratory and Immunology

We pursue therapies in a variety of modalities, from small molecule and vaccines to biologics (peptides, small proteins, antibodies) and RNAi. The Merck BioVenture division is focused on delivering high-quality follow-on biologics products to enhance access to patients worldwide.

Merck Research Laboratories (MRL) commits resources to products that have the potential to have a major impact on human health, to develop novel and best-in-class approaches and to deliver the most value to our customers.

Medicines discovered and developed by Merck scientists save and improve countless lives around the globe. Thanks to the people behind the life-enhancing discoveries of MRL, we are among the world's most innovative institutions in the medical sciences for producing first-in-class medicines.

Our products and research priorities are aligned with the current and projected global burden of disease as defined by the World Health Organization (WHO), as well as with the emerging need for new treatments for increasingly treatment-resistant diseases such as HIV.

Merck is committed to research in specific therapeutic areas and clinical development in support of new products. We maintain several long-term exploratory and fundamental research programs in biology and chemistry, as well as research programs directed toward product development. Learn more.

With increasingly complex challenges in bringing important new drugs to our patients and simultaneously controlling the rising costs of innovation, Merck is leveraging a combination of new clinical and quantitative tools to rapidly differentiate between drugs that will meet the needs of the patient and those that will not.

Critical to these efforts is a focus on translational medicine, which incorporates the ability to develop biomarkers–those characteristics that can be objectively measured and evaluated as an indicator or marker–of normal biologic processes, disease or responses to drugs. Biomarkers provide critical information along the drug discovery and development pathway. The intent is to apply these research platforms very early in the clinical development of novel mechanisms (Phase 1 if possible), to gain some preliminary evidence of potential benefit before substantial exposure to patients.

Adding to the insight provided by these clinical studies, Merck is also using novel quantitative approaches so we can leverage our learning from our nonclinical trials, incorporate the information from our clinical trials, and develop models based on published literature. By integrating our broad knowledge, we can develop mathematical models that allow us to explore possible scenarios. Instead of running a single clinical trial, we first simulate the trials thousands of times and explore the impact of different factors influencing disease, the patient population, and efficacy and safety response.

With this integrated approach we can optimize the next phase of clinical trials and, importantly, support early decision making. By eliminating likely failures sooner and focusing on those mechanisms that appear more promising, we believe we will bring innovative products to patients faster. Throughout these processes, a rigorous focus on scientific excellence and safety is maintained

Merck's R&D model is designed to increase productivity and improve the probability of success by prioritizing MRL's resources. We also believe that drug development is not an effort that can successfully be driven by an individual or just one company. Most cases of true innovation come from robust and honest collaboration among individuals with diverse backgrounds and capabilities joined together by the idea of changing the course of human health.

As part of our R&D strategy, therefore, we continue to pursue appropriate external licensing and partnering opportunities. MRL recognizes advancements in scientific knowledge external to Merck, and we establish significant external alliances to accelerate drug discovery and development, improve R&D productivity, and successfully commercialize novel therapeutics and vaccines.

Pipeline

Merck's research pipeline¹ continues to grow as we accelerate our discovery efforts. The company currently has a number of candidates under regulatory review in the United States and internationally. An update on Research and Development can be found in the company's Form 10-K Report.

"With more than 20 products in late-stage development and an investment of more than $8 billion in overall research and development, we are poised to help patients and address major global health issues, including diabetes, cardiovascular and respiratory diseases and chronic hepatitis C."

Dick Clark
Chairman of the Board
March 2011

Governance of Our Research Agenda

The Research Leadership Team, headed by the Executive Vice President and President, Merck Research Laboratories (MRL), develops the divisional strategy, allocates resources and manages the portfolio of MRL products. The Research Leadership Team is made up of the heads of eight functional areas within MRL. Each area provides expert, efficient support of our drug candidates—ushering them from drug discovery through product life-cycle management.

Code of Conduct

All Merck employees must abide by our Code of Conduct, which also applies to the way we work with external researchers, doctors and academics. More.

Research Misconduct

In accordance with MRL policy, Merck does not tolerate fraud or misconduct in our research activities–whether by an employee or an external business partner. More.

MRL Compliance

To help ensure compliance, Merck has clearly articulated policies in place to provide guidance to employees on ethical and lawful conduct. More.

Product Safety

Safety is our highest priority. We rigorously study our products and work with regulators and healthcare professionals over many years to characterize the safety profiles of these products. More.

Pediatric Formulations and Indications

We are including pediatric clinical trials in the company's new drug and vaccine development strategies worldwide in response to unmet clinical needs, where they are relevant. More.

"I believe there is before us a wider field of the unknown than all that is behind us. Based on knowledge already developed, there are many ideas to be discovered. The still-greater progress to come will depend on fine intellects, inspiration and the efforts of both those who teach and those who benefit from such teaching. It also will depend upon the business and industrial world and upon teamwork on all fronts with, above all, a genuine and active interest in the welfare of humanity."

George Merck
Founder, Merck

¹Candidates shown in Phase III include specific products. Candidates shown in Phase II include the most advanced compound with a specific mechanism in a given therapeutic area. Phase 1 candidates are not shown. This chart reflects the Company's current research pipeline as of February 16, 2011. This chart has been excerpted from the Company's annual report on Form 10-K year ending on December 31, 2010 and should be viewed along with disclosures in that filing.