Q2 2006 Merck & Co., Inc. Earnings Conference Call - Part 2.

(From Fair Disclosure Wire)

Given the performance of the last six months, we are raising our guidance on equity income for affiliates by $100 million and it is now expected to be approximately 2.1 to $2.4 billion for 2006. Remember, this includes the result of the Merck Schering-Plough collaboration combined with the results of Merck's other joint venture relationships.

And finally, we are adjusting our consolidated 2006 tax rate. We now estimate the consolidated 2006 tax rate to be approximately 26 to 28%, including the net tax rate impact in the second quarter related primarily to the acquisition of GlycoFi. This guidance does not reflect the tax rate impact of restructuring costs. And keep in mind that the effective tax rate to be applied to the Company's restructuring costs, that is the tax benefit applicable to these costs, are at a higher level than the underlying effective tax rate guidance.

Given the uncertainty surrounding the timing of events in the lipid lowering market and the relative contribution of our products in this segment on our overall business performance, we're not in a position to provide third-quarter EPS guidance range. We consider that the loss of marketing exclusivity for Zocor a unique event in the pharmaceutical segment. Following the patent expiry, there remains uncertainty about the timing of several variables, including the uptake and share of generic Simvastatin relative to branded products, the specific period of generic exclusivity based on litigation that we're not part of, the extent of brand loyalty toward Zocor, the success of our authorized generic deal with Dr. Reddy, the level of branded Zocor inventory at both wholesalers and retail pharmacists and the potential for returns in accordance with the terms and conditions of our inventory management agreement. As stated a moment ago, the Company's full-year 2006 EPS guidance is now anticipated to be in the range of $2.40 to $2.48, excluding restructuring charges and reported 2006 EPS in the range of $2.10 to $2.24.

I would also like to highlight that for 2006, the Company remains on track to generate approximately $5 billion in free operating cash flow that is after capital expenditures but before dividends and share repurchases.

I also want to emphasize that we have the financial strength to support our dividend and we remain fully committed to maintaining it at the current level while at the same time continuing to fund our investment priorities. In addition, as Dick noted, our strategy is on track.

We remain committed to driving compound annual double-digit EPS growth, excluding restructuring costs, net tax charges any onetime gains associated with the AstraZeneca partnership and the establishment of any reserves for any potential liability related to the Vioxx litigation, over the three to five-year period, as well as adjusted compound annual revenue growth including 50% of joint venture revenues of 4 to 6% through 2010 over our 2005 base. With that, I will turn the call over to Graeme, who will introduce the question and answer portion in this call. GRAEME BELL: Thank you, Judy. We will now open the call and take your questions. We will take the questions in the order that they are received and try to get through as many as possible. At this point, I will turn it back to Michelle, who will communicate instructions on the Q&A format then introduce the first question. Michelle?

OPERATOR: (OPERATOR INSTRUCTIONS). Mario Corso, Summer Street Research. MARIO CORSO, ANALYST, SUMMER STREET RESEARCH: In terms of Gardasil, what can you say about VSC pricing or CDC negotiations at this point and what the timing may be there? And then secondarily, can you say at this point that there will not be an FDA advisory panel on JANUVIA or is that still uncertain at this point? Thank you. DICK CLARK: I would say on the advisory panel, it's still uncertain whether we will have one or not. And when it comes to pricing, that's information we won't disclose at this time. GRAEME BELL: Next question please. OPERATOR: Tim Anderson, Prudential Securities. TIM ANDERSON, ANALYST, PRUDENTIAL SECURITIES: Part of the Merck story has been one of cost controls yet in the last six or seven…