UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2007

Commission file number 1-6571

SCHERING-PLOUGH CORPORATION

(Exact name of registrant as specified in its charter)

New Jersey	22-1918501
State or other jurisdiction of incorporation or organization	(I.R.S. Employer identification No.)
2000 Galloping Hill Road, Kenilworth, NJ (Address of principal executive offices)	07033 Zip Code

Registrant’s telephone number, including area code:

(908) 298-4000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  þ     Accelerated Filer  o     Non-accelerated Filer  o

Indicate whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o     No þ

Common Shares Outstanding as of June 30, 2007: 1,496,297,204

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 1A. Risk Factors
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits
EX-12: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EX-15: AWARENESS LETTER
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS

(Unaudited)
(Amounts in millions, except per share figures)

							Six Months
	Three Months Ended						Ended
	June 30,						June 30,
	2007			2006			2007			2006
Net sales	$	3,178		$	2,818		$	6,153		$	5,369
Cost of sales		977			1,004			1,913			1,897
Selling, general and administrative		1,358			1,224			2,572			2,310
Research and development		696			539			1,403			1,020
Other income, net		(16	)		(19	)		(62	)		(52	)
Special and acquisition related charges		11			80			12			80
Equity income from cholesterol joint venture		(490	)		(355	)		(978	)		(666	)
Income before income taxes		642			345			1,293			780
Income tax expense		103			86			190			172
Net income before cumulative effect of a change in accounting principle		539			259			1,103			608
Cumulative effect of a change in accounting principle, net of tax		—			—			—			22
Net income		539			259			1,103			630
Preferred stock dividends		22			22			43			43
Net income available to common shareholders	$	517		$	237		$	1,060		$	587
Diluted earnings per common share:
Earnings available to common shareholders before cumulative effect of a change in accounting principle	$	0.34		$	0.16		$	0.70		$	0.38
Cumulative effect of a change in accounting principle, net of tax		—			—			—			0.02
Diluted earnings per common share	$	0.34		$	0.16		$	0.70		$	0.40
Basic earnings per common share:
Earnings available to common shareholders before cumulative effect of a change in accounting principle	$	0.35		$	0.16		$	0.71		$	0.38
Cumulative effect of a change in accounting principle, net of tax		—			—			—			0.02
Basic earnings per common share	$	0.35		$	0.16		$	0.71		$	0.40
Dividends per common share	$	0.065		$	0.055		$	0.13		$	0.11

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

(Unaudited)
(Amounts in millions)

	Six Months Ended
	June 30,
	2007			2006
Operating Activities:
Net income	$	1,103		$	630
Cumulative effect of a change in accounting principle, net of tax		—			(22	)
Net income before cumulative effect of a change in accounting principle, net of tax		1,103			608
Adjustments to reconcile net income to net cash provided by operating activities:
Special and acquisition related charges and payments		(438	)		70
Depreciation and amortization		243			251
Accrued share-based compensation		88			79
Change in fair value of foreign currency option		31			—
Changes in assets and liabilities:
Accounts receivable		(293	)		(332	)
Inventories		(16	)		13
Prepaid expenses and other assets		(99	)		5
Accounts payable and other liabilities		139			116
Purchase of derivative instruments		(130	)		—
Net cash provided by operating activities		628			810
Investing Activities:
Capital expenditures		(275	)		(192	)
Dispositions of property and equipment		1			8
Purchases of short-term investments		(1,182	)		(3,795	)
Maturities of short-term investments		3,065			1,270
Other investments		(11	)		—
Net cash provided by (used for) investing activities		1,598			(2,709	)
Financing Activities:
Cash dividends paid to common shareholders		(179	)		(162	)
Cash dividends paid to preferred shareholders		(43	)		(43	)
Net change in short-term borrowings		(10	)		(849	)
Stock option exercises		177			32
Other		(2	)		—
Net cash used for financing activities		(57	)		(1,022	)
Effect of exchange rates on cash and cash equivalents		18			(4	)
Net increase/(decrease) in cash and cash equivalents		2,187			(2,925	)
Cash and cash equivalents, beginning of period		2,666			4,767
Cash and cash equivalents, end of period	$	4,853		$	1,842

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
(Amounts in millions, except per share figures)

	June 30,			December 31,
	2007			2006
ASSETS
Current Assets:
Cash and cash equivalents	$	4,853		$	2,666
Short-term investments		1,381			3,267
Accounts receivable, net		2,119			1,804
Inventories		1,723			1,676
Deferred income taxes		234			266
Prepaid expenses and other current assets		993			744
Total current assets		11,303			10,423
Property, plant and equipment		7,508			7,321
Less accumulated depreciation		3,113			2,956
Property, net		4,395			4,365
Goodwill		210			206
Other intangible assets, net		265			286
Other assets		888			791
Total assets	$	17,061		$	16,071
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	1,334		$	1,254
Short-term borrowings and current portion of long-term debt		246			242
U.S., foreign and state income tax		169			323
Accrued compensation		531			794
Other accrued liabilities		1,647			1,549
Total current liabilities		3,927			4,162
Long-term Liabilities:
Long-term debt		2,414			2,414
Deferred income tax		111			122
Other long-term liabilities		1,739			1,465
Total long-term liabilities		4,264			4,001
Commitments and contingent liabilities (Note 18)
Shareholders’ Equity:
Mandatory convertible preferred shares — $1 par value; issued: 29; $50 per share face value		1,438			1,438
Common shares — authorized shares: 2,400, $.50 par value; issued: 2,044 at June 30, 2007 and 2,034 at December 31, 2006		1,021			1,017
Paid-in capital		1,921			1,661
Retained earnings (The June 30, 2007 amount includes a reduction of $259 million for the cumulative effect of implementing FIN 48. See Note 6.)		10,723			10,119
Accumulated other comprehensive loss		(773	)		(872	)
Total		14,330			13,363
Less treasury shares: 2007,547; 2006, 547; at cost		5,460			5,455
Total shareholders’ equity		8,870			7,908
Total liabilities and shareholders’ equity	$	17,061		$	16,071

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.   BASIS OF PRESENTATION

These unaudited condensed consolidated financial statements of Schering-Plough Corporation and subsidiaries (Schering-Plough), included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for reporting on Form 10-Q. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles have been condensed or omitted pursuant to such SEC rules and regulations These statements should be read in conjunction with the accounting policies and notes to consolidated financial statements included in Schering-Plough’s 2006 Annual Report on Form 10-K.

In the opinion of Schering-Plough’s management, the financial statements reflect all adjustments necessary for a fair presentation of the statements of operations, cash flows and financial position for the interim periods presented.

Impact of Recently Issued Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 157, “Fair Value Measurements,” (SFAS 157) which is effective for calendar year companies on January 1, 2008. SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with Generally Accepted Accounting Principles, and expands disclosures about fair value measurements. SFAS 157 codifies the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Schering-Plough is currently assessing the potential impacts of implementing this standard.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” (SFAS 158) an amendment of FASB Statements No. 87, 88, 106, and 132R. Effective December 31, 2006, Schering-Plough accounted for its retirement and other post-retirement benefit plans in accordance with SFAS 158. SFAS 158 allows an extended adoption date for the requirement to have the company’s year-end date as the measurement date for all defined benefit pension and other postretirement plans. For the plans which had measurement dates other than year-end, Schering-Plough adopted the year-end measurement date effective with the 2007 plan year. The impact on the consolidated financial statements related to this measurement date change is not material.

In November 2006, the FASB issued Emerging Issues Task Force Issue (EITF) No. 06-10, “Accounting for Deferred Compensation and Postretirement Benefits Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements,” which is effective for calendar year companies on January 1, 2008. The Task Force concluded that an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement in accordance with either FASB Statement No. 106 or APB Opinion No. 12 based on the substantive agreement with the employee. The Task Force also concluded that an employer should recognize and measure an asset based on the nature and substance of the collateral assignment split-dollar life insurance arrangement. Schering-Plough is currently assessing the potential impacts of implementing this standard.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115” (SFAS 159), which permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 also includes an amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” which applies to all entities with available-for-sale and trading securities. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Schering-Plough is currently assessing the potential impacts of implementing this standard.

5

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

In June 2007, the FASB issued EITF Issue No. 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities,” which is effective for calendar year companies on January 1, 2008. The Task Force concluded that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities should be deferred and capitalized. Such amounts should be recognized as an expense as the related goods are delivered or the services are performed, or when the goods or services are no longer expected to be provided. Schering-Plough is currently assessing the potential impacts of implementing this standard.

2.   SPECIAL AND ACQUISITION RELATED CHARGES

During the three and six months ended June 30, 2007, Schering-Plough made cash payments of $56 million and $435 million, respectively, for the settlement of the Massachusetts Investigation. For the six months ended June 30, 2007, Schering-Plough made cash payments of $9 million related to the 2006 manufacturing streamlining. At June 30, 2007, there was no remaining liability related to the 2006 manufacturing streamlining.

During the three and six months ended June 30, 2007, Schering-Plough incurred $11 million and $12 million, respectively, of acquisition related charges (integration planning) for the planned Organon BioSciences N.V. (Organon BioSciences) acquisition.

Special charges for the three and six months ended June 30, 2006 totaled $80 million related to the changes in Schering-Plough’s manufacturing operations, consisting of $25 million of severance and $55 million of fixed asset impairments.

3.   EQUITY INCOME

In May 2000, Schering-Plough and Merck & Co., Inc. (Merck) entered into two separate sets of agreements to jointly develop and market certain products in the U.S. including (1) two cholesterol-lowering drugs and (2) an allergy/asthma drug. In December 2001, the cholesterol agreements were expanded to include all countries of the world except Japan. In general, the companies agreed that the collaborative activities under these agreements would operate in a virtual joint venture to the maximum degree possible by relying on the respective infrastructures of the two companies. These agreements generally provide for equal sharing of development costs and for co-promotion of approved products by each company.

The cholesterol agreements provide for Schering-Plough and Merck to jointly develop ezetimibe (marketed as ZETIA in the U.S. and Asia and EZETROL in Europe):

i. as a once-daily monotherapy;

ii. in co-administration with any statin drug; and

iii. as a once-daily fixed-combination tablet of ezetimibe and simvastatin (Zocor), Merck’s cholesterol-modifying medicine. This combination medication (ezetimibe/simvastatin) is marketed as VYTORIN in the U.S. and as INEGY in many international countries.

ZETIA/EZETROL (ezetimibe) and VYTORIN/INEGY (the combination of ezetimibe/simvastatin) are approved for use in the U.S. and have been launched in many international markets.

Schering-Plough utilizes the equity method of accounting in recording its share of activity from the Merck/Schering-Plough cholesterol joint venture. As such, Schering-Plough’s net sales do not include the sales of the joint venture. The cholesterol joint venture agreements provide for the sharing of operating income generated by the joint venture based upon percentages that vary by product, sales level and country. In the U.S. market, Schering-Plough receives a greater share of profits on the first $300 million of annual ZETIA sales. Above $300 million of annual ZETIA sales, Merck and Schering-Plough (the Partners) generally share profits equally. Schering-Plough’s allocation of the joint venture income is increased by milestones recognized. Further, either Partner’s share of the joint venture’s income from operations is subject to a reduction if the

6

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

Partner fails to perform a specified minimum number of physician details in a particular country. The Partners agree annually to the minimum number of physician details by country.

The Partners bear the costs of their own general sales forces and commercial overhead in marketing joint venture products around the world. In the U.S., Canada and Puerto Rico, the cholesterol agreements provide for a reimbursement to each Partner for physician details that are set on an annual basis, and in Italy, a contractual amount is included in the profit sharing calculation that is not reimbursed. In the U.S., Canada and Puerto Rico, this amount is equal to Partner’s physician details multiplied by a contractual fixed fee. Schering- Plough reports these amounts as part of equity income from the cholesterol joint venture. These amounts do not represent a reimbursement of specific, incremental and identifiable costs for Schering-Plough’s detailing of the cholesterol products in these markets. In addition, these amounts are not reflective of Schering-Plough’s sales effort related to the joint venture as Schering-Plough’s sales force and related costs associated with the joint venture are generally estimated to be higher.

Under certain other conditions, as specified in the joint venture agreements with Merck, Schering-Plough could earn additional milestones totaling $105 million.

Costs of the joint venture that the Partners contractually share are a portion of manufacturing costs, specifically identified promotion costs (including direct-to-consumer advertising and direct and identifiable out-of-pocket promotion) and other agreed upon costs for specific services such as market support, market research, market expansion, a specialty sales force and physician education programs.

Certain specified research and development expenses are generally shared equally by the Partners.

The unaudited financial information below presents summarized combined financial information for the Merck/Schering-Plough Cholesterol Partnership for the three and six months ended June 30, 2007 and 2006:

					Six Months
	Three Months Ended				Ended
	June 30,				June 30,
	2007		2006		2007		2006
	(Dollars in millions)
Net sales	$	1,264	$	973	$	2,432	$	1,767
Cost of sales		51		46		101		85
Income from operations		889		634		1,685		1,091

Amounts related to physician details, among other expenses, that are invoiced by Schering-Plough and Merck in the U.S., Canada and Puerto Rico are deducted from income from operations of the partnership.

Schering-Plough’s share of the joint venture’s income from operations for the three and six months ended June 30, 2007 was $436 million and $869 million, respectively, and $311 million and $577 million, respectively, for the three and six months ended June 30, 2006. In the U.S. market, Schering-Plough receives a greater share of income from operations on the first $300 million of annual ZETIA sales.

The following information provides a summary of the components of Schering-Plough’s equity income from the cholesterol joint venture for the three and six months ended June 30, 2007 and 2006:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2007			2006		2007			2006
	(Dollars in millions)
Schering-Plough’s share of income from operations	$	436		$	311	$	869		$	577
Contractual amounts for physician details		61			42		123			83
Elimination of intercompany profit and other, net		(7	)		2		(14	)		6
Total equity income from cholesterol joint venture	$	490		$	355	$	978		$	666

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SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

Equity income from the joint venture excludes any profit arising from transactions between Schering-Plough and the joint venture until such time as there is an underlying profit realized by the joint venture in a transaction with a party other than Schering-Plough or Merck.

Due to the virtual nature of the cholesterol joint venture, Schering-Plough incurs substantial costs, such as selling, general and administrative costs, that are not reflected in equity income and are borne by the overall cost structure of Schering-Plough. These costs are reported on their respective line items in the Statements of Condensed Consolidated Operations. The cholesterol agreements do not provide for any jointly owned facilities and, as such, products resulting from the joint venture are manufactured in facilities owned by either Schering-Plough or Merck.

The allergy/asthma agreements provide for the joint development and marketing by the Partners of a once-daily, fixed-combination tablet containing CLARITIN and Singulair. Singulair is Merck’s once-daily leukotriene receptor antagonist for the treatment of asthma and seasonal allergic rhinitis. In January 2002, the Merck/Schering-Plough respiratory joint venture reported on results of Phase III clinical trials of a fixed-combination tablet containing CLARITIN and Singulair. This Phase III study did not demonstrate sufficient added benefits in the treatment of seasonal allergic rhinitis. Although the CLARITIN and Singulair combination tablet does not have approval in any country, Phase III clinical development is ongoing.

During 2007, Schering-Plough announced that it had entered into a separate development agreement with Merck to commence development of an ezetimibe and atorvastatin combination product.

4.   SHARE-BASED COMPENSATION

Schering-Plough adopted SFAS No. 123 (Revised 2004), “Share-Based Payment” (SFAS 123R), effective January 1, 2006. SFAS 123R requires companies to recognize compensation expense in an amount equal to the fair value of all share-based payments granted to employees. Schering-Plough elected the modified prospective transition method and therefore adjustments to prior periods were not required as a result of adopting SFAS 123R. Under this method, the provisions of SFAS 123R apply to all awards granted after the date of adoption and to any unrecognized expense of awards unvested at the date of adoption based on the grant date fair value.

During the first six months of 2007, Schering-Plough issued performance-based deferred stock units under the 2006 Stock Incentive Plan, which provide certain senior managers the opportunity to earn shares of Schering-Plough common stock. These units will only be earned if specific pre-established levels of performance and service are achieved during a three year performance period (2007-2009). For certain of these units, fair value was estimated at the grant date using a lattice valuation model using expected volatility assumptions and other assumptions appropriate for determining fair value. Compensation expense for these units is based on the fair values of the awards and is recognized over the performance period.

8

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

During the second quarter of 2007 and 2006, Schering-Plough issued its annual share-based compensation grants, including stock options and deferred stock units. A summary of the options, deferred stock units and performance-based deferred stock units granted during the three and six months ended June 30, 2007 and 2006 is as follows:

	Three Months Ended June 30,								Six Months Ended June 30,
	2007				2006				2007				2006
			Weighted-				Weighted-				Weighted-				Weighted-
			Average				Average				Average				Average
	Underlying		Grant-Date		Underlying		Grant-Date		Underlying		Grant-Date		Underlying		Grant-Date
Number of Underlying Shares in Thousands	Shares		Fair Value		Shares		Fair Value		Shares		Fair Value		Shares		Fair Value
Stock options		9,792	$	8.11		9,466	$	5.22		9,974	$	8.07		9,586	$	5.22
Deferred stock units		5,358		31.43		6,452		19.23		5,483		31.26		6,507		19.23
Performance-based deferred stock units		22		38.77		—				1,397		23.47		—
Total Awards		15,172				15,918				16,854				16,093

Options become exercisable in equal annual installments over a three-year period. The deferred stock units generally vest at the end of a three year period from the date they were granted. The performance-based deferred stock units vest at the end of a three year performance period if specific pre-established levels of performance and service are met.

The weighted-average assumptions used in the Black-Scholes option pricing model for the three and six months ended June 30, 2007 and 2006, were as follows:

	Three Months						Six Months
	Ended						Ended
	June 30,						June 30,
	2007			2006			2007			2006
Dividend yield		1.1	%		1.1	%		1.1	%		1.1	%
Volatility		24.8	%		25.7	%		24.8	%		25.7	%
Risk-free interest rate		4.6	%		5.0	%		4.6	%		5.0	%
Expected term of options (in years)		4.5			4.5			4.5			4.5

Total compensation expense related to stock options, deferred stock units and performance-based deferred stock units for the three and six months ended June 30, 2007 was $46 million and $88 million, respectively. Total compensation expense related to stock options, deferred stock units and performance-based deferred stock units for the three and six months ended June 30, 2006 was $48 million and $83 million, respectively.

At June 30, 2007, the total remaining unrecognized compensation cost related to the performance-based deferred stock units amounted to $36 million, which will be amortized over the weighted-average remaining requisite service period of 2.6 years. The remaining unrecognized compensation cost for the performance-based deferred stock units may vary each reporting period based on changes in the expected achievement of performance measures.

Liability Plans

Schering-Plough has two compensation plans that are classified as liability plans under SFAS 123R. Schering-Plough recognized expense of $20 million and $27 million for these plans for the three and six months ended June 30, 2007, respectively. For the three and six months ended June 30, 2006, Schering-Plough recognized $3 million of expense and $4 million of income, respectively.

9

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

5.   OTHER INCOME, NET

The components of other income, net are as follows:

	Three Months						Six Months
	Ended						Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(Dollars in millions)
Interest cost incurred	$	44		$	48		$	86		$	98
Less: amount capitalized on construction		(5	)		(3	)		(10	)		(7	)
Interest expense		39			45			76			91
Interest income		(86	)		(69	)		(167	)		(137	)
Foreign exchange (gains)/losses		(3	)		5			(2	)		6
Mark-to-market loss on fair value of foreign currency option		35			—			31			—
Other, net		(1	)		—			—			(12	)
Total other income, net	$	(16	)	$	(19	)	$	(62	)	$	(52	)

In March 2007, as part of an overall risk management strategy and in consideration of various preliminary financing scenarios associated with the planned acquisition of Organon BioSciences, Schering-Plough purchased a Euro denominated currency option (derivative) for U.S. $130 million. This derivative did not qualify for hedge accounting in accordance with SFAS No. 133, “Derivative Instruments and Financial Hedging Activities,” as amended. The change in fair value of this derivative is recognized each period in the Statement of Condensed Consolidated Operations. For the three and six month periods ended June 30, 2007, Schering-Plough recognized losses of $35 million and $31 million, respectively, on the mark-to-market of this foreign currency option. The fair value of this currency option was $99 million at June 30, 2007. This derivative is short-term (trading) in nature and does not hedge a specific financing or investment transaction. Accordingly, the cash impacts of this derivative have been classified as operating cash flows in the Statement of Condensed Consolidated Cash Flows.

During 2006 and the first six months of 2007, Schering-Plough participated in healthcare refinancing programs adopted by local government fiscal authorities in a major European market. During the three and six months ended June 30, 2007, Schering-Plough transferred $12 million and $95 million of its trade accounts receivables owned by a foreign subsidiary to third-party financial institutions without recourse. There were no transfers of trade accounts receivable during the three and six months ended June 30, 2006. The transfer of trade accounts receivable qualified as sales of accounts receivable under SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” For the three and six months ended June 30, 2007, the transfer of these trade accounts receivable did not have a material impact on Schering-Plough’s Statement of Condensed Consolidated Operations. Cash flows from these transactions are included in the change in accounts receivable in operating activities.

6.   INCOME TAXES

Schering-Plough expects to report a U.S. Net Operating Loss (NOL) carryforward of approximately $1.54 billion on its 2006 tax return, which will be available to offset future U.S. taxable income through 2026. This U.S. NOL carryforward could be materially reduced after examination of Schering-Plough’s income tax returns by the Internal Revenue Service (IRS).

Schering-Plough implemented the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) as of January 1, 2007. As required by FIN 48, the cumulative effect of applying the provisions of the Interpretation have been reported as an adjustment to Schering-Plough’s retained earnings

10

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

balance as of January 1, 2007. Schering-Plough reduced its January 1, 2007 retained earnings by $259 million with a corresponding increase to the appropriate tax liability accounts as a result of the adoption of FIN 48.

Schering-Plough includes interest expense or income as well as potential penalties on unrecognized tax benefits as a component of income tax expense in the consolidated statement of operations. The total amount of accrued interest related to uncertain tax positions at January 1, 2007 was $193 million and is included in other accrued liabilities.

Schering-Plough’s unrecognized tax benefits result primarily from the varying application of statutes, regulations and interpretations and include exposures on intercompany terms of cross border arrangements and utilization of cash held by foreign subsidiaries (investment in U.S. property) as well as Schering-Plough’s tax matters litigation (see Note 18). At January 1, 2007, the total amount of unrecognized tax benefits was $924 million, which includes reductions to deferred tax assets carrying a full valuation allowance, potential refund claims and tax liabilities. Management believes it is reasonably possible that a significant portion of the total unrecognized tax benefits could decrease over the next twelve-month period. However, the timing of the ultimate resolution of Schering-Plough’s tax matters and the payment and receipt of related cash is dependent on a number of factors, many of which are outside Schering-Plough’s control. Approximately $644 million of total unrecognized tax benefits, if recognized, would affect the effective tax rate.

During the second quarter of 2007, the IRS completed its examination of Schering-Plough’s 1997-2002 federal income tax returns. Schering-Plough is seeking resolution of an issue raised during this examination through the IRS administrative appeals process. Schering-Plough remains open with the IRS for the 1997-2006 tax years. For most of its other significant tax jurisdictions (both U.S. state and foreign), Schering-Plough’s income tax returns are open for examination for the period 2000 through 2006.

7.   RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS

Schering-Plough has defined benefit pension plans covering eligible employees in the U.S. and certain foreign countries. In addition, Schering-Plough provides post-retirement medical and life insurance benefits primarily to its eligible U.S. retirees and their dependents through its post-retirement benefit plans.

The components of net pension expense were as follows:

	Three Months						Six Months
	Ended						Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(Dollars in millions)
Service cost	$	32		$	30		$	63		$	59
Interest cost		31			28			62			56
Expected return on plan assets		(31	)		(28	)		(62	)		(56	)
Amortization, net		9			10			20			21
Termination benefits		—			—			—			—
Settlement		—			2			2			2
Net pension expense	$	41		$	42		$	85		$	82

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

The components of other post-retirement benefits expense were as follows:

	Three Months						Six Months
	Ended						Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(Dollars in millions)
Service cost	$	5		$	4		$	10		$	9
Interest cost		7			6			14			13
Expected return on plan assets		(3	)		(3	)		(6	)		(7	)
Amortization, net		1			1			2			2
Net other post-retirement benefits expense	$	10		$	8		$	20		$	17

For the three and six months ended June 30, 2007, Schering-Plough contributed $22 million and $39 million, respectively, to its retirement plans. Schering-Plough expects to contribute approximately $140 million to its retirement plans during the remainder of 2007.

8.   EARNINGS PER COMMON SHARE

The following table reconciles the components of basic and diluted earnings per common share computations (EPS):

	Three Months				Six Months
	Ended				Ended
	June 30,				June 30,
	2007		2006		2007		2006
	(Dollars and shares in millions)
EPS Numerator:
Net income before cumulative effect of a change in accounting principle and preferred stock dividends	$	539	$	259	$	1,103	$	608
Add: Cumulative effect of a change in accounting principle, net of tax		—		—		—		22
Net income		539		259		1,103		630
Less: Preferred stock dividends		22		22		43		43
Net income available to common shareholders	$	517	$	237	$	1,060	$	587
EPS Denominator:
Weighted average shares outstanding for basic EPS		1,494		1,481		1,491		1,480
Dilutive effect of options and deferred stock units		28		8		23		7
Dilutive effect of preferred shares		65		—		65		—
Average shares outstanding for diluted EPS		1,587		1,489		1,579		1,487

Diluted earnings per common share for the three and six months ended June 30, 2007 is calculated based on net income of $539 million and $1.103 billion, respectively, and average diluted shares outstanding of 1.587 billion and 1.579 billion, respectively. Diluted earnings per common share for the three and six months ended June 30, 2006 is calculated based on net income available to common shareholders of $237 million and $587 million, respectively, and average diluted shares outstanding of 1.489 billion and 1.487 billion, respectively. The increase in average diluted shares outstanding for the three and six months ended June 30, 2007 as compared to 2006 is due primarily to the preferred shares being dilutive for the three and six month periods ended June 30, 2007. The preferred shares were not dilutive (antidilutive) for the three and six months ended June 30, 2006.

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SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

For the three months ended June 30, 2007 and 2006, 39 million and 55 million, respectively, of equivalent common shares issuable under Schering-Plough’s stock incentive plans were excluded from the computation of diluted EPS because their effect would have been antidilutive. For the six months ended June 30, 2007 and 2006, 34 million and 51 million, respectively, of equivalent common shares issuable under Schering-Plough’s stock incentive plans were excluded from the computation of diluted EPS because their effect would have been antidilutive.

For the three and six months ended June 30, 2007, approximately 65 million common shares obtainable upon conversion of Schering-Plough’s 6 percent mandatory convertible preferred shares were dilutive to earnings per share and were therefore included in the computation of diluted earnings per share. For the three and six months ended June 30, 2006, approximately 76 million common shares obtainable upon conversion of the preferred shares were excluded from the computation of diluted earnings per share because their effect would have been antidilutive.

9.   COMPREHENSIVE INCOME

Comprehensive income is comprised of the following:

	Three Months					Six Months
	Ended					Ended
	June 30,					June 30,
	2007		2006			2007		2006
	(Dollars in millions)
Net income	$	539	$	259		$	1,103	$	630
Foreign currency translation adjustment		39		34			58		48
Change in measurement date for pension and other post-retirement liabilities		—		—			3		—
Mark-to-market gain on derivative instrument		35		—			35		—
Unrealized gain (loss) on investments available for sale		4		(3	)		3		(3	)
Total comprehensive income	$	617	$	290		$	1,202	$	675

Comprehensive income for the three and six months ended June 30, 2007 includes a mark-to-market gain of $35 million on a series of three interest rate swaps. Schering-Plough executed the swaps in anticipation of financing the planned acquisition of Organon BioSciences. The interest rate swaps are for three, five and ten-year periods with Schering-Plough paying fixed rates and receiving floating rates based on individual notional amounts of 750 million Euro each, aggregating 2.25 billion Euro. The objective of the swaps is to hedge the interest rate payments to be made on future issuances of debt. As such, the swaps have been designated as cash flow hedges of future interest rate payments, and in accordance with SFAS 133, “Derivative Instruments and Financial Hedging Activities,” as amended, the effective portion of the gains and losses on the hedges are reported in other comprehensive income and any ineffective portion is reported in operations.

10.   INVENTORIES

Inventories consisted of the following:

	June 30,		December 31,
	2007		2006
	(Dollars in millions)
Finished products	$	794	$	728
Goods in process		730		771
Raw materials and supplies		300		248
Total inventories and inventory classified in other non-current assets	$	1,824	$	1,747

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

Included in non-current assets at June 30, 2007 and December 31, 2006 were $101 million and $71 million, respectively, of inventory not expected to be sold within one year.

11.   OTHER INTANGIBLE ASSETS

The components of other intangible assets, net are as follows:

	June 30, 2007						December 31, 2006
	Gross						Gross
	Carrying		Accumulated				Carrying		Accumulated
	Amount		Amortization		Net		Amount		Amortization		Net
	(Dollars in millions)
Patents and licenses	$	599	$	385	$	214	$	599	$	368	$	231
Trademarks and other		114		63		51		114		59		55
Total other intangible assets	$	713	$	448	$	265	$	713	$	427	$	286

These intangible assets are amortized on the straight-line method over their respective useful lives. The residual value of intangible assets is estimated to be zero. Amortization expense for the three months ended June 30, 2007 and 2006 was $11 million and $13 million, respectively, and $21 million and $24 million for the six months ended June 30, 2007 and 2006, respectively. Annual amortization expenses related to these intangible assets for the years 2007 to 2012 is expected to be approximately $40 million.

12.   ACQUISITION

On March 12, 2007, Schering-Plough announced that its Board of Directors approved the acquisition of Organon BioSciences for approximately 11.0 billion Euro in cash. The transaction is subject to certain closing conditions, including regulatory approvals, and is expected to close by the end of 2007. Schering-Plough has a committed bridge financing facility for the entire purchase price which it may draw upon for closing.

13.   PRODUCT LICENSES

During the three and six months ended June 30, 2007, Schering-Plough recognized upfront payments related to certain licensing transactions aggregating $60 million and $156 million, respectively. These payments have been expensed and reported in research and development expense for the three and six months ended June 30, 2007.

14.   SHORT-TERM BORROWINGS

Short-term borrowings consist primarily of bank loans and commercial paper. Short-term borrowings at June 30, 2007 and December 31, 2006 totaled $246 million and $242 million, respectively.

15.   SHAREHOLDERS’ EQUITY

Effective July 10, 2007, the Board of Directors of Schering-Plough adopted an amended and restated certificate of incorporation to reflect the expiration of Schering-Plough’s existing shareholders’ rights plan.

16.   SEGMENT DATA

Schering-Plough has three reportable segments:  Prescription Pharmaceuticals, Consumer Health Care and Animal Health. The segment sales and profit data that follow are consistent with Schering-Plough’s current management reporting structure. The Prescription Pharmaceuticals segment discovers, develops, manufactures and markets human pharmaceutical products. The Consumer Health Care segment develops, manufactures and markets over-the-counter, foot care and sun care products, primarily in the U.S. The Animal Health segment discovers, develops, manufactures and markets animal health products.

14

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

Net sales by segment:

	Three Months				Six Months
	Ended				Ended
	June 30,				June 30,
	2007		2006		2007		2006
	(Dollars in millions)
Prescription Pharmaceuticals	$	2,520	$	2,230	$	4,918	$	4,263
Consumer Health Care		394		349		739		659
Animal Health		264		239		496		447
Consolidated net sales	$	3,178	$	2,818	$	6,153	$	5,369

Profit by segment:

	Three Months						Six Months
	Ended						Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(Dollars in millions)
Prescription Pharmaceuticals	$	588		$	371		$	1,139		$	720
Consumer Health Care		95			67			207			162
Animal Health		28			40			46			70
Corporate and other		(69	)		(133	)		(99	)		(172	)
Income before income taxes	$	642		$	345		$	1,293		$	780

Included in Animal Health’s 2007 profit by segment amounts are selling and promotional investments related to the New HomeAgain Proactive Pet Recovery Network, which was launched in 2007.

Schering-Plough’s net sales do not include sales of VYTORIN and ZETIA, which are marketed in the partnership with Merck, as Schering-Plough accounts for this joint venture under the equity method of accounting (see Note 3, “Equity Income from Cholesterol Joint Venture,” for additional information). Profit from the Prescription Pharmaceuticals segment includes equity income from cholesterol joint venture.

“Corporate and other” includes interest income and expense, foreign exchange gains and losses, headquarters expenses, special and acquisition related charges and other miscellaneous items. The accounting policies used for segment reporting are the same as those described in Note 1, “Summary of Significant Accounting Policies,” in Schering-Plough’s 2006 Form 10-K.

Sales of products comprising 10 percent or more of Schering-Plough’s U.S. or international sales for the three and six months ended June 30, 2007, were as follows:

	Three Months Ended June 30, 2007				Six Months Ended June 30, 2007
	Amount		Percentage		Amount		Percentage
	(Dollars in millions)		(%)		(Dollars in millions)		(%)
U.S.
NASONEX	$	175		15	$	352		15
OTC CLARITIN		131		11		253		11
International
REMICADE		394		20		767		20

Schering-Plough does not disaggregate assets on a segment basis for internal management reporting and, therefore, such information is not presented.

15

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

17.   CONSENT DECREE

In May 2002, Schering-Plough agreed with the FDA to the entry of a Consent Decree to resolve issues related to compliance with current Good Manufacturing Practices (cGMP) at certain of Schering-Plough’s facilities in New Jersey and Puerto Rico (the Consent Decree or the Decree). In summary, the Decree required Schering-Plough to make payments totaling $500 million in two equal installments of $250 million, which were paid in 2002 and 2003. In addition, the Decree required Schering-Plough to complete revalidation programs for manufacturing processes used to produce bulk active pharmaceutical ingredients and finished drug products at the covered facilities, as well as to implement a comprehensive cGMP Work Plan for each such facility. Schering-Plough completed all of the requirements in accordance with the schedules required by the Decree and obtained third-party certification of its completion of the Work Plan as required under the Decree.

Under the terms of the Decree, provided that the FDA has not notified Schering-Plough of a significant violation of FDA law, regulations, or the Decree in any five-year period since the Decree’s entry in May of 2002, Schering-Plough may petition the court to have the Decree dissolved and the FDA will not oppose Schering-Plough’s petition. There is no assurance about any particular date when the Consent Decree will be lifted.

18.   LEGAL, ENVIRONMENTAL AND REGULATORY MATTERS

Background

Schering-Plough is involved in various claims, investigations and legal proceedings.

Schering-Plough records a liability for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. Schering-Plough adjusts its liabilities for contingencies to reflect the current best estimate of probable loss or minimum liability, as the case may be. Where no best estimate is determinable, Schering-Plough records the minimum amount within the most probable range of its liability. Expected insurance recoveries have not been considered in determining the amounts of recorded liabilities for environmental related matters.

If Schering-Plough believes that a loss contingency is reasonably possible, rather than probable, or the amount of loss cannot be estimated, no liability is recorded. However, where a liability is reasonably possible, disclosure of the loss contingency is made.

Schering-Plough reviews the status of all claims, investigations and legal proceedings on an ongoing basis, including related insurance coverages. From time to time, Schering-Plough may settle or otherwise resolve these matters on terms and conditions management believes are in the best interests of Schering-Plough. Resolution of any or all claims, investigations and legal proceedings, individually or in the aggregate, could have a material adverse effect on Schering-Plough’s consolidated results of operations, cash flows or financial condition.

Except for the matters discussed in the remainder of this Note, the recorded liabilities for contingencies at June 30, 2007, and the related expenses incurred during the three and six months ended June 30, 2007, were not material. In the opinion of management, based on the advice of legal counsel, the ultimate outcome of these matters, except matters discussed in the remainder of this Note, will not have a material impact on Schering-Plough’s consolidated results of operations, cash flows or financial condition.

Patent Matters

As described in “Patents, Trademarks, and Other Intellectual Property Rights” in the Schering-Plough 2006 10-K, intellectual property protection is critical to Schering-Plough’s ability to successfully commercialize its product innovations. The potential for litigation regarding Schering-Plough’s intellectual property rights always exists and may be initiated by third parties attempting to abridge Schering-Plough’s rights, as well as

16

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

by Schering-Plough in protecting its rights. Patent matters described below have a potential material effect on Schering-Plough.

DR. SCHOLL’S FREEZE AWAY

On July 26, 2004, OraSure Technologies filed an action in the U.S. District Court for the Eastern District of Pennsylvania alleging patent infringement by Schering-Plough Healthcare Products by its sale of DR. SCHOLL’S FREEZE AWAY wart removal product. The complaint seeks a permanent injunction and unspecified damages, including treble damages.

Massachusetts Investigation

On August 29, 2006, Schering-Plough announced it had reached an agreement with the U.S. Attorney’s Office for the District of Massachusetts to settle an investigation involving Schering-Plough’s sales, marketing and clinical trial practices and programs along with those of Warrick Pharmaceuticals (Warrick), Schering-Plough’s generic subsidiary (the Massachusetts Investigation). The investigation was focused on the following alleged practices: providing remuneration to managed care organizations, physicians and others to induce the purchase of Schering-Plough pharmaceutical products; off-label marketing of drugs; and submitting false pharmaceutical pricing information to the government for purposes of calculating rebates required to be paid to the Medicaid program.

Pursuant to the agreement, Schering-Plough paid $435 million (a criminal fine of $180 million and $255 million to resolve civil aspects of the investigation).

AWP Litigation and Investigations

Schering-Plough continues to respond to existing and new litigation by certain states and private payors and investigations by the Department of Health and Human Services, the Department of Justice and several states into industry and Schering-Plough practices regarding average wholesale price (AWP). Schering-Plough is cooperating with these investigations.

These litigations and investigations relate to whether the AWP used by pharmaceutical companies for certain drugs improperly exceeds the average prices paid by providers and, as a consequence, results in unlawful inflation of certain reimbursements for drugs by state programs and private payors that are based on AWP. The complaints allege violations of federal and state law, including fraud, Medicaid fraud and consumer protection violations, among other claims. In the majority of cases, the plaintiffs are seeking class certifications. In some cases, classes have been certified. The outcome of these litigations and investigations could include substantial damages, the imposition of substantial fines, penalties and injunctive or administrative remedies.

Securities and Class Action Litigation

Federal Securities Litigation

Following Schering-Plough’s announcement that the FDA had been conducting inspections of Schering-Plough’s manufacturing facilities in New Jersey and Puerto Rico and had issued reports citing deficiencies concerning compliance with current Good Manufacturing Practices, several lawsuits were filed against Schering-Plough and certain named officers. These lawsuits allege that the defendants violated the federal securities law by allegedly failing to disclose material information and making material misstatements. Specifically, they allege that Schering-Plough failed to disclose an alleged serious risk that a new drug application for CLARINEX would be delayed as a result of these manufacturing issues, and they allege that Schering-Plough failed to disclose the alleged depth and severity of its manufacturing issues. These complaints were consolidated into one action in the U.S. District Court for the District of New Jersey, and a consolidated amended complaint was filed on October 11, 2001, purporting to represent a class of shareholders who

17

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

purchased shares of Schering-Plough stock from May 9, 2000 through February 15, 2001. The complaint seeks compensatory damages on behalf of the class. The Court certified the shareholder class on October 10, 2003. Notice of pendency of the class action was sent to members of that class in July 2007. Discovery is ongoing.

Shareholder Derivative Action

During the quarter, Schering-Plough and plaintiffs agreed to settle the derivative action pending in the U.S. District Court for the District of New Jersey against Schering-Plough, certain former officers, directors and former directors that alleged a failure to disclose material information and breach of fiduciary duty by the directors relating to the FDA inspections and investigations into Schering-Plough’s pricing practices and sales, marketing and clinical trials practices. The settlement, which must be approved by the Court, acknowledges that the pendency of the suit contributed to decisions by the Board and management to enhance compliance and governance processes and provides that Schering-Plough will pay the fees of the plaintiffs’ counsel.

ERISA Litigation

On March 31, 2003, Schering-Plough was served with a putative class action complaint filed in the U.S. District Court in New Jersey alleging that Schering-Plough, retired Chairman, CEO and President Richard Jay Kogan, Schering-Plough’s Employee Savings Plan (Plan) administrator, several current and former directors, and certain corporate officers (Messrs. LaRosa and Moore) breached their fiduciary obligations to certain participants in the Plan. The complaint seeks damages in the amount of losses allegedly suffered by the Plan. The complaint was dismissed on June 29, 2004. The plaintiffs appealed. On August 19, 2005 the U.S. Court of Appeals for the Third Circuit reversed the dismissal by the District Court and the matter has been remanded back to the District Court for further proceedings.

K-DUR Antitrust Litigation

Schering-Plough had settled patent litigation with Upsher-Smith, Inc. (Upsher-Smith) and ESI Lederle, Inc. (Lederle) relating to generic versions of K-DUR, Schering-Plough’s long-acting potassium chloride product supplement used by cardiac patients, for which Lederle and Upsher Smith had filed Abbreviated New Drug Applications. Following the commencement of an FTC administrative proceeding alleging anti-competitive effects from those settlements (which has been resolved in Schering-Plough’s favor), alleged class action suits were filed in federal and state courts on behalf of direct and indirect purchasers of K-DUR against Schering-Plough, Upsher-Smith and Lederle. These suits claim violations of federal and state antitrust laws, as well as other state statutory and common law causes of action. These suits seek unspecified damages. Discovery is ongoing.

Third-party Payor Actions

Several purported class action litigations have been filed following the announcement of the settlement of the Massachusetts Investigation. Plaintiffs in these actions seek damages on behalf of third-party payors resulting from the allegations of off-label promotion and improper payments to physicians that were at issue in the Massachusetts Investigation.

Tax Matters

In October 2001, IRS auditors asserted that two interest rate swaps that Schering-Plough entered into with an unrelated party should be recharacterized as loans from affiliated companies, resulting in additional tax liability for the 1991 and 1992 tax years. In September 2004, Schering-Plough made payments to the IRS in the amount of $194 million for income tax and $279 million for interest. Schering-Plough filed refund claims for the tax and interest with the IRS in December 2004. Following the IRS’s denial of Schering-Plough’s claims for a refund, Schering-Plough filed suit in May 2005 in the U.S. District Court for the District of New

18

SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

Jersey for refund of the full amount of the tax and interest as well as any additional interest accruing on the payments made by Schering-Plough. This refund litigation is currently in the discovery phase. Schering-Plough’s tax reserves were adequate to cover the above mentioned payments.

Pending Administrative Obligations

In connection with the settlement of an investigation with the U.S. Department of Justice and the U.S. Attorney’s Office for the Eastern District of Pennsylvania, Schering-Plough entered into a five-year corporate integrity agreement (CIA). The CIA was amended in August of 2006 in connection with the settlement of the Massachusetts Investigation, commencing a new five-year term. As disclosed in Note 17, “Consent Decree,” Schering-Plough is subject to obligations under a Consent Decree with the FDA. Failure to comply with the obligations under the CIA or the Consent Decree could result in financial penalties.

Other Matters

NITRO-DUR Investigation

In August 2003, Schering-Plough received a civil investigative subpoena issued by the Office of Inspector General of the U.S. Department of Health and Human Services, seeking documents concerning Schering-Plough’s classification of NITRO-DUR for Medicare rebate purposes, and Schering-Plough’s use of nominal pricing and bundling of product sales. Schering-Plough is cooperating with the investigation. It appears that the subpoena is one of a number addressed to pharmaceutical companies concerning an inquiry into issues relating to the payment of government rebates.

French Matter

Based on a complaint to the French competition authority from a competitor in France and pursuant to a court order, the French competition authority has obtained documents from a French subsidiary of Schering-Plough relating to one of the products that the subsidiary markets and sells. Any resolution of this matter adverse to the French subsidiary could result in the imposition of civil fines and injunctive or administrative remedies. On July 17, 2007, the Juge des Libertés et de la Détention ordered the annulment of the search and seizure on procedural grounds. On July 19, 2007, the French authority appealed the order to the French Supreme Court.

Environmental

Schering-Plough has responsibilities for environmental cleanup under various state, local and federal laws, including the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund. At several Superfund sites (or equivalent sites under state law), Schering-Plough is alleged to be a potentially responsible party (PRP). Schering-Plough believes that it is remote at this time that there is any material liability in relation to such sites. Schering-Plough estimates its obligations for cleanup costs for Superfund sites based on information obtained from the federal Environmental Protection Agency (EPA), an equivalent state agency and/or studies prepared by independent engineers, and on the probable costs to be paid by other PRPs. Schering-Plough records a liability for environmental assessments and/or cleanup when it is probable a loss has been incurred and the amount can be reasonably estimated.

19

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Schering-Plough Corporation:

We have reviewed the accompanying condensed consolidated balance sheet of Schering-Plough Corporation and subsidiaries (the “Company”) as of June 30, 2007, and the related condensed consolidated statements of operations for the three and six-month periods ended June 30, 2007 and 2006, and the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2007 and 2006. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2006, and the related statements of consolidated operations, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 27, 2007, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding the Company’s adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised 2004), “Share-Based Payment”, and SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2006 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

As discussed in Note 4 to the condensed consolidated financial statements, effective January 1, 2006, the Company adopted SFAS No. 123 (Revised 2004), “Share-Based Payment”, and as discussed in Note 1 to the condensed consolidated financial statements, effective December 31, 2006, the Company adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”. Also, as discussed in Note 6 to the condensed consolidated financial statements, effective January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”.

/s/  Deloitte & Touche LLP

Parsippany, New Jersey

July 26, 2007

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

EXECUTIVE OVERVIEW

Overview of Schering-Plough

Schering-Plough is a global science-based company that discovers, develops and manufactures pharmaceuticals for three customer markets - human prescription, consumer and animal health. While most of the research and development activity is directed toward prescription products, there are important applications of this central research and development platform into the consumer healthcare and animal health products. Schering-Plough also accesses external innovation via partnering, in-licensing and acquisition for all three customer markets.

Strategy — Focused on Science

Earlier this decade, Schering-Plough experienced a number of business, regulatory, and legal challenges. In April 2003, the Board of Directors named Fred Hassan as the new Chairman of the Board and Chief Executive Officer of Schering-Plough Corporation. With support from the Board, he recruited a new senior executive team and initiated a strategic plan, with the goal of stabilizing, repairing and turning around Schering-Plough in order to build long-term shareholder value. That strategic plan, the Action Agenda, is a six- to eight-year, five-phase plan. In October 2006, Schering-Plough announced that it entered the fourth phase of the Action Agenda — Build the Base. During the Build the Base phase, Schering-Plough continues to focus on its strategy of value creation across a broad front, including:

•  growing the business;

•  penetrating new markets;

•  expanding the product portfolio for Schering-Plough’s three customer markets — human pharmaceutical, consumer healthcare and animal health; and

•  discovering and developing or acquiring new products.

As part of the Build the Base phase, in March 2007 Schering-Plough announced its planned acquisition of Organon BioSciences N.V. (Organon BioSciences) for approximately 11.0 billion Euro in cash. This planned acquisition further supports Schering-Plough’s value creation strategy.

A key component of the Action Agenda is applying science to meet unmet medical needs. Research and development activities focus on mechanisms to treat serious diseases. As a result, a core strategy of Schering-Plough is to invest substantial funds in scientific research with the goal of creating therapies and treatments that address important unmet medical needs and also have commercial value. Consistent with this core strategy, Schering-Plough has been increasing its investment in research and development. Schering-Plough’s progressing pipeline includes drug candidates across a wide range of therapeutic areas with more than 20 compounds now approaching or in Phase I development. As Schering-Plough continues to develop the later phase growth-drivers of the pipeline (e.g., thrombin receptor antagonist, golimumab, vicriviroc and HCV protease inhibitor), it anticipates higher spending on clinical trial activities.

As part of the Action Agenda, Schering-Plough is enhancing infrastructure, upgrading processes and systems and strengthening talent — both the recruitment of talented individuals and the development of key employees. While these efforts are being implemented on a companywide basis, Schering-Plough is focusing especially on research and development to support Schering-Plough’s science-based business.

Results and Highlights for the three and six months ended June 30, 2007:

•  Schering-Plough’s net sales for the three months ended June 30, 2007 were $3.2 billion, an increase of $360 million, or 13 percent, as compared to the three months ended June 30, 2006. Net income available to common shareholders for the three months ended June 30, 2007 was $517 million, as compared to $237 million in the three months ended June 30, 2006.

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•  Schering-Plough’s net sales for the six months ended June 30, 2007 were $6.2 billion, an increase of $784 million, or 15 percent, as compared to the six months ended June 30, 2006. Net income available to common shareholders for the six months ended June 30, 2007 was $1.1 billion, as compared to $587 million in the six months ended June 30, 2006.

•  Global sales of Schering-Plough’s cholesterol franchise products, VYTORIN and ZETIA, made by the cholesterol joint venture with Merck & Company, Inc. (Merck) continued to grow in 2007. Increased sales of pharmaceutical products such as REMICADE, NASONEX, TEMODAR, CLARINEX, AVELOX and ASMANEX also contributed favorably to Schering-Plough’s overall operating results and cash flow.

•  Schering-Plough realized approximately $30 million and $60 million of savings during the three and six months ended June 30, 2007 related to the manufacturing streamlining that took place in 2006.

•  During the three and six months ended June 30, 2007, Schering-Plough recognized upfront payments related to certain licensing transactions aggregating $60 million and $156 million, respectively. These payments have been expensed and reported in research and development.

Strategic Alliances

As is typical in the pharmaceutical industry, Schering-Plough licenses manufacturing, marketing and/or distribution rights to certain products to others, and also manufactures, markets and/or distributes products owned by others pursuant to licensing and joint venture arrangements. Any time that third parties are involved, there are additional factors relating to the third party and outside the control of Schering-Plough that may create positive or negative impacts on Schering-Plough. VYTORIN, ZETIA and REMICADE are subject to such arrangements and are key to Schering-Plough’s current business and financial performance.

In addition, any potential strategic alternatives may be impacted by the change of control provisions in those arrangements, which could result in VYTORIN and ZETIA being acquired by Merck or REMICADE reverting back to Centocor. The change in control provision relating to VYTORIN and ZETIA is included in the contract with Merck, filed as Exhibit 10(r) to Schering-Plough’s 2006 10-K, and the change of control provision relating to REMICADE is contained in the contract with Centocor, filed as Exhibit 10(v) to Schering-Plough’s 2006 10-K.

Cholesterol Franchise

Schering-Plough’s cholesterol franchise products, VYTORIN and ZETIA, are managed through a joint venture between Schering-Plough and Merck for the treatment of elevated cholesterol levels in all markets outside of Japan. ZETIA is Schering-Plough’s novel cholesterol absorption inhibitor. VYTORIN is the combination of ZETIA and Zocor, Merck’s statin medication. The financial commitment to compete in the cholesterol reduction market is shared with Merck, and profits from the sales of VYTORIN and ZETIA are also shared with Merck. The operating results of the joint venture with Merck are recorded using the equity method of accounting.

The cholesterol-reduction market is the single largest pharmaceutical category in the world. VYTORIN and ZETIA are competing in this market, and on a combined basis, these products continued to grow in terms of sales and market share during the second quarter and first six months of 2007. A material change in the sales or market share of Schering-Plough’s cholesterol franchise would have a significant impact on Schering-Plough’s consolidated results of operations and cash flows. In order to maintain and enhance its infrastructure and business, Schering-Plough must continue to increase profits. This increased profitability is largely dependent upon the performance of Schering-Plough’s cholesterol franchise.

Japan is not included in the joint venture with Merck. In the Japanese market, Bayer Healthcare is co-marketing Schering-Plough’s cholesterol-absorption inhibitor, ZETIA, which was approved in Japan in April 2007 as a monotherapy and co- administered with a statin for use in patients with hypercholesterolemia, familial hypercholesterolemia or homozygous sitosterolemia. ZETIA was launched in Japan during June 2007. Schering-Plough’s sales of ZETIA in Japan under the co-marketing agreement with Bayer Healthcare are recognized in net sales.

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License Arrangements with Centocor

REMICADE is prescribed for the treatment of immune-mediated inflammatory disorders such as rheumatoid arthritis, early rheumatoid arthritis, psoriatic arthritis, Crohn’s disease, ankylosing spondylitis, plaque psoriasis and ulcerative colitis. REMICADE is Schering-Plough’s second largest marketed pharmaceutical product line (after the cholesterol franchise). REMICADE is licensed from and manufactured by Centocor, Inc., a Johnson & Johnson company. Schering-Plough has the exclusive marketing rights to this product outside of the U.S., Japan and certain Asian markets. During 2005, Schering-Plough exercised an option under its contract with Centocor for license rights to develop and commercialize golimumab, a new TNF-alpha monoclonal antibody, in the same territories as REMICADE. Golimumab is currently in Phase III trials. Schering-Plough and Centocor have been collaborating in resolving the difference in the parties’ opinions as to the expiration date of Schering-Plough’s rights to golimumab. In August 2006, Schering-Plough received a determination through arbitration that its rights to market golimumab will extend to 15 years after the first commercial sales in its territories, but Centocor has appealed the ruling.

Manufacturing, Sales and Marketing

Schering-Plough supports commercialized products with manufacturing, sales and marketing efforts. Schering-Plough is also moving forward with additional investments to enhance its infrastructure and business, including capital expenditures for the drug development process (where products are moved from the drug discovery pipeline to markets), information technology systems, and post-marketing studies and monitoring.

Schering-Plough continually reviews the business, including manufacturing operations, to identify actions that will enhance long-term competitiveness. However, Schering-Plough’s manufacturing cost base is relatively fixed, and actions to significantly reduce Schering-Plough’s manufacturing infrastructure involve complex issues. As a result, shifting products between manufacturing plants can take many years due to construction and regulatory requirements, including revalidation and registration requirements. From time to time, actions are taken to enhance Schering-Plough’s overall manufacturing efficiency. For example, during 2006, Schering-Plough closed a manufacturing plant in Puerto Rico and in 2007 began the process of closing a small manufacturing facility in the Asia Pacific region. Schering-Plough continues to review the carrying value of manufacturing assets for indications of impairment. Future events and decisions may lead to additional asset impairments or related costs.

Regulatory and Competitive Environment

Schering-Plough is subject to the jurisdiction of various national, state and local regulatory agencies. Regulatory compliance is complex and costly, impacting the timing needed to bring new drugs to market and to market drugs for new indications.

Since 2002, Schering-Plough has been working under a U.S. FDA Consent Decree to resolve issues involving Schering-Plough’s compliance with current Good Manufacturing Practices at certain of its manufacturing sites in New Jersey and Puerto Rico. Under the terms of the Decree, provided that the FDA has not notified Schering-Plough of a significant violation of FDA law, regulations, or the Decree in any five-year period since the Decree’s entry in May 2002, Schering-Plough may petition the court to have the Decree dissolved and FDA will not oppose Schering-Plough’s petition. There is no assurance about any particular date when the Consent Decree will be lifted.

Schering-Plough engages in clinical trial research in many countries around the world. Research activities must comply with stringent regulatory standards and are subject to inspection by U.S., the EU, and local country regulatory authorities. Schering-Plough is subject to pharmacovigilance reporting requirements in many countries and other jurisdictions, including the U.S., the EU, and the EU member states. Clinical trials and post-marketing surveillance of certain marketed drugs of competitors within the industry have raised safety concerns that have led to recalls, withdrawals or adverse labeling of marketed products.

In the U.S., many of Schering-Plough’s pharmaceutical products are subject to increasingly competitive pricing as managed care groups, institutions, government agencies and other groups seek price discounts. In most international markets, Schering-Plough operates in an environment of government mandated cost-containment programs. Further, the pricing, sales and marketing programs and arrangements, and related

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business practices of Schering-Plough and other participants in the health care industry are under increasing scrutiny from federal and state regulatory, investigative, prosecutorial and administrative entities.

The market for pharmaceutical products is competitive. Schering-Plough’s operations may be affected by technological advances of competitors, industry consolidation, patents granted to competitors, loss of patent protection due to challenges by competitors, competitive combination products, new products of competitors, new information from clinical trials of marketed products or post-marketing surveillance and generic competition as Schering-Plough’s products mature.

DISCUSSION OF OPERATING RESULTS

Net Sales

A significant portion of net sales is made to major pharmaceutical and health care product distributors and major retail chains in the U.S. Consequently, net sales and quarterly growth comparisons may be affected by fluctuations in the buying patterns of major distributors, retail chains and other trade buyers. These fluctuations may result from seasonality, pricing, wholesaler buying decisions or other factors. In addition to these fluctuations, sales of many pharmaceutical products in the U.S. are subject to increased pricing pressure from managed care groups, institutions, government agencies, and other groups seeking discounts. Schering-Plough and other pharmaceutical manufacturers in the U.S. market are also required to provide statutorily defined rebates to various government agencies in order to participate in the Medicaid program, the veterans health care program, and other government-funded programs. The Medicare Prescription Drug Improvement and Modernization Act of 2003 contains a prescription drug benefit for individuals who are eligible for Medicare. This prescription drug benefit became effective on January 1, 2006 and is resulting in increased use of generics and increased purchasing power of those negotiating on behalf of Medicare recipients. In most international markets, Schering-Plough operates in an environment where governments may and have mandated cost-containment programs, placed restrictions on physician prescription levels and patient reimbursements, emphasized greater use of generic drugs and enacted across-the-board price cuts as methods to control costs.

Consolidated net sales for the three months ended June 30, 2007 totaled $3.2 billion, an increase of $360 million or 13 percent compared with the same period in 2006, including a 3 percent favorable impact from foreign exchange. For the six months ended June 30, 2007, consolidated net sales totaled $6.2 billion, an increase of $784 million or 15 percent as compared to the same period in 2006, including a 4 percent favorable impact from foreign exchange. The impact of currency is more pronounced on products and businesses that are concentrated in Europe.

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Net sales for the three and six months ended June 30, 2007 and 2006 were as follows:

	Three Months Ended June 30,							Six Months Ended June 30,
					Increase							Increase
	2007		2006		(Decrease)			2007		2006		(Decrease)
	(Dollars in millions)				(%)			(Dollars in millions)				(%)
PRESCRIPTION PHARMACEUTICALS	$	2,520	$	2,230		13		$	4,918	$	4,263		15
REMICADE		394		307		28			767		585		31
NASONEX		295		242		22			579		471		23
CLARINEX/AERIUS		250		226		11			455		386		18
PEGINTRON		234		226		3			451		423		7
TEMODAR		216		171		26			412		334		23
CLARITIN Rx		102		104		(1	)		214		205		5
INTEGRILIN		78		82		(5	)		163		162		—
AVELOX		75		58		30			191		138		38
REBETOL		74		86		(14	)		146		164		(11	)
CAELYX		65		53		23			127		104		22
ASMANEX		42		20		108			85		40		112
Other Pharmaceutical		695		655		6			1,328		1,251		6
CONSUMER HEALTH CARE		394		349		13			739		659		12
OTC		182		149		22			359		302		19
Sun Care		110		104		6			200		178		12
Foot Care		102		96		7			180		179		1
ANIMAL HEALTH		264		239		10			496		447		11
CONSOLIDATED NET SALES	$	3,178	$	2,818		13		$	6,153	$	5,369		15

International net sales of REMICADE, for the treatment of immune-mediated inflammatory disorders such as rheumatoid arthritis, early rheumatoid arthritis, ankylosing spondylitis, psoriatic arthritis, plaque psoriasis, Crohn’s disease, pediatric Crohn’s disease and ulcerative colitis, were up $87 million or 28 percent to $394 million in the second quarter of 2007 and $182 million or 31 percent to $767 million for the first six months of 2007, driven by continued market growth and expanded use across indications. During 2006, competitive products for some of the indications referred to above were introduced, and additional competitive products have been introduced in 2007.

Global net sales of NASONEX Nasal Spray, an inhaled nasal corticoster for allergies, rose $53 million or 22 percent to $295 million in the second quarter of 2007 and $108 million or 23 percent to $579 million for the first six months of 2007. Second quarter U.S. sales climbed 22 percent to $175 million and international sales climbed 22 percent to $120 million, as the product captured greater market share in the core countries in which Schering-Plough competes.

Global net sales of CLARINEX (marketed as AERIUS in many countries outside the U.S.), a non sedating antihistamine for the treatment of seasonal outdoor allergies and year-round indoor allergies, increased 11 percent to $250 million in the second quarter of 2007 and $69 million or 18 percent to $455 million for the first six months of 2007. Sales outside the U.S. rose 12 percent to $144 million in the second quarter due to increased demand.

Global net sales of PEGINTRON for treating hepatitis C, increased 3 percent to $234 million in the second quarter of 2007 and 7 percent to $451 million for the first six months of 2007 reflecting growth in Latin America and Europe tempered by lower sales in the U.S. and Japan. PEGINTRON sales in Japan will continue to reflect a reduction in the available patient pool as well as the introduction of competitive combination therapy.

Global net sales of TEMODAR Capsules, a treatment for certain types of brain tumors, increased $45 million or 26 percent to $216 million in the second quarter of 2007 and $78 million or 23 percent to $412 million for the first six months of 2007. The growth was due primarily to increased sales in international

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markets. The growth rate for TEMODAR is expected to moderate, as significant penetration in U.S. and E.U. markets has already been achieved for this product.

International net sales of prescription CLARITIN decreased 1 percent to $102 million in the second quarter of 2007 and increased 5 percent to $214 million for the first six months of 2007, reflecting growth in Latin America and Asia Pacific and declines in Europe.

Net sales of AVELOX, a fluoroquinolone antibiotic for the treatment of certain respiratory and skin infections, sold primarily in the U.S. by Schering-Plough as a result of its license agreement with Bayer, increased $17 million or 30 percent to $75 million in the second quarter of 2007 and $53 million or 38 percent to $191 million for the first six months of 2007 primarily as a result of increased market share.

International net sales of CAELYX, for the treatment of ovarian cancer, metastatic breast cancer and Kaposi’s sarcoma, increased 23 percent to $65 million in the second quarter of 2007 and 22 percent to $127 million for the first six months of 2007, as a result of increased use in treating ovarian and breast cancer.

Global net sales of ASMANEX, an orally inhaled steroid for asthma, increased $22 million or 108 percent to $42 million for the second quarter of 2007 and $45 million or 112 percent to $85 million for the first six months of 2007 primarily due to market share growth in the U.S.

Other pharmaceutical net sales include a large number of lower sales volume prescription pharmaceutical products. Several of these products are sold in limited markets outside the U.S., and many are multiple source products no longer protected by patents. These products include treatments for respiratory, cardiovascular, dermatological, infectious, oncological and other diseases. Included in other pharmaceutical sales is sales of Schering-Plough’s albuterol products. In 2005, the FDA issued a Final Rule that requires all CFC albuterol products, including Schering-Plough’s PROVENTIL CFC, be removed from the market no later than December 31, 2008. Schering-Plough’s transition to albuterol HFA (PROVENTIL HFA) is well advanced. Schering-Plough no longer manufactures the CFC product and Schering-Plough anticipates that any remaining CFC inventories will be sold during 2007. Schering-Plough is uncertain as to the ultimate impact on Schering-Plough’s overall future sales of PROVENTIL products, due to the complexities and multiple external factors influencing this transition, including competing albuterol HFA products.

Global net sales of Consumer Health Care products, which include OTC, foot care and sun care products, increased $45 million or 13 percent to $394 million in the second quarter of 2007 and $80 million or 12 percent to $739 million for the first six months of 2007. The growth was primarily due to higher sales of OTC CLARITIN and MIRALAX, which was launched in February 2007 as the first Rx-to-OTC switch in the laxative category in more than 30 years. Sales of OTC CLARITIN increased $26 million to $137 million in the second quarter of 2007 and increased $42 million to $264 million for the first six months of 2006. The OTC CLARITIN increase was driven by stronger category performance and new chewable products. OTC CLARITIN continues to face competition from private labels and branded loratadine, and a competing prescription antihistamine is expected to be launched for OTC sale in late 2007. Future sales are difficult to predict because the consumer healthcare market is highly competitive, with heavy advertising to consumers and frequent competitive product introductions.

Global net sales of Animal Health products increased $25 million or 10 percent in the second quarter of 2007 to $264 million and $49 million or 11 percent to $496 million for the first six months of 2007. The increased sales reflected solid growth internationally, led by the poultry, companion animal, aquaculture and swine product lines coupled with a positive impact of foreign currency exchange rates. Schering-Plough expects this growth rate to moderate due to increased competition, including the introduction of generic products.

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Costs, Expenses and Equity Income

A summary of costs, expenses and equity income for the three and six months ended June 30, 2007 and 2006 is as follows:

	Three Months Ended June 30,									Six Months Ended June 30,
							Increase									Increase
	2007			2006			(Decrease)			2007			2006			(Decrease)
	(Dollars in millions)						%			(Dollars in millions)						%
Gross margin		69.3	%		64.4	%		4.9	%		68.9	%		64.7	%		4.2	%
Selling, general and administrative (SG&A)	$	1,358		$	1,224			11.0	%	$	2,572		$	2,310			11.4	%
Research and development (R&D)		696			539			29.0	%		1,403			1,020			37.5	%
Other income, net		(16	)		(19	)		(15.8	)%		(62	)		(52	)		19.2	%
Special and acquisition related charges		11			80			N/M			12			80			N/M
Equity income from cholesterol joint venture		(490	)		(355	)		38.3	%		(978	)		(666	)		46.8	%

N/M — Not a meaningful percentage.

Substantially all the sales of cholesterol products are not included in Schering-Plough’s net sales. The results of these sales are reflected in equity income from cholesterol joint venture. In addition, due to the virtual nature of the joint venture, Schering-Plough incurs substantial selling, general and administrative expenses that are not captured in equity income but are included in Schering-Plough’s Statements of Consolidated Operations. As a result, Schering-Plough’s gross margin, and ratios of SG&A expenses and R&D expenses as a percentage of net sales do not reflect the benefit of the impact of the joint venture’s operating results.

Gross margin

Gross margin increased to 69.3 percent in the second quarter of 2007 and 68.9 percent for the first six months of 2007 as compared to 64.4 percent and 64.7 percent for the second quarter and first six months of 2006, respectively. Gross margin in the second quarter and first six months of 2006 reflected the negative impact of $58 million of costs associated with the 2006 manufacturing streamlining activities included in cost of sales. The increase in gross margin during 2007 was due primarily to improved product mix and cost savings from the 2006 manufacturing streamlining activities. Additionally, Schering-Plough is achieving greater production efficiencies and process improvements through its “Right First Time” initiative.

Selling, general and administrative

Selling, general and administrative expenses (SG&A) were $1.4 billion in the second quarter of 2007 and $2.6 billion in the first six months of 2007, up 11 percent versus the prior year periods. The increase in SG&A in the second quarter and first six months of 2007 primarily reflects higher promotional spending and investments in emerging markets.

Research and development

Research and development (R&D) spending increased 29 percent to $696 million in the second quarter of 2007 and 38 percent to $1.4 billion in the first six months of 2007. R&D spending in the second quarter and first six months of 2007 included $60 million and $156 million, respectively, related to upfront payments made for certain licensing transactions. The increase in R&D spending versus 2006 also reflects higher spending associated with clinical trials and related activities and building greater breadth and capacity to support Schering-Plough’s progressing pipeline. Generally, changes in R&D spending reflect the timing of Schering-Plough’s funding of both internal research efforts and research collaborations with various partners to discover and develop a steady flow of innovative products.

To maximize Schering-Plough’s chances for the successful development of new products, Schering-Plough began a Development Excellence initiative in 2005 to build talent and critical mass, create a uniform level of

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excellence and deliver on high-priority programs within R&D. In 2006, Schering-Plough began a Global Clinical Harmonization Program to maximize and globalize the quality of clinical trial execution, pharmacovigilance and regulatory processes.

Other income, net

Schering-Plough had $16 million and $62 million of other income, net, in the second quarter and first six months of 2007, respectively, as compared to $19 million and $52 million of other income, net, in the second quarter and first six months of 2006, respectively. Other income for the second quarter and first six months of 2007 reflected higher interest income due to higher interest rates on cash equivalents and short-term investments and lower interest expense due to lower short-term borrowing levels partially offset by losses of $35 million and $31 million, respectively, on the mark-to-market of a foreign currency option.

Special and acquisition related charges

During the three and six months ended June 30, 2007, Schering-Plough incurred $11 million and $12 million of acquisition related charges (integration planning) for the planned Organon BioSciences acquisition.

Special charges for the three and six months ended June 30, 2006 totaled $80 million related to the changes in Schering-Plough’s manufacturing operations consisting of $25 million of severance and $55 million of fixed asset impairments.

Equity income from cholesterol joint venture

Sales of the Merck/Schering-Plough Cholesterol Partnership for the three and six months ended June 30, 2007 totaled $1.3 billion and $2.4 billion, respectively, as compared to $973 million and $1.8 billion for the three and six months ended June 30, 2006. The sales growth in 2007 was due to an increase in market share.

The Partners bear the costs of their own general sales forces and commercial overhead in marketing joint venture products around the world. In the U.S., Canada and Puerto Rico, the cholesterol agreements provide for a reimbursement to each Partner for physician details that are set on an annual basis, and in Italy, a contractual amount is included in the profit sharing calculation that is not reimbursed. In the U.S., Canada and Puerto Rico, this amount is equal to Partner’s physician details multiplied by a contractual fixed fee. Schering-Plough reports these amounts as part of equity income from the cholesterol joint venture. These amounts do not represent a reimbursement of specific, incremental and identifiable costs for Schering-Plough’s detailing of the cholesterol products in these markets. In addition, these amounts are not reflective of Schering-Plough’s sales effort related to the joint venture as Schering-Plough’s sales force and related costs associated with the joint venture are generally estimated to be higher.

Costs of the joint venture that the Partners contractually share are a portion of manufacturing costs, specifically identified promotion costs (including direct-to-consumer advertising and direct and identifiable out-of-pocket promotion) and other agreed upon costs for specific services such as market support, market research, market expansion, a specialty sales force and physician education programs.

Certain specified research and development expenses are generally shared equally by the Partners.

Equity income from cholesterol joint venture totaled $490 million and $978 million for the three and six months ended June 30, 2007, respectively, as compared to $355 million and $666 million for the three and six months ended June 30, 2006, respectively. The increase in 2007 equity income as compared to 2006 reflects continued strong sales of VYTORIN and ZETIA. Schering-Plough’s equity income in the first six months of the year is favorably impacted by the proportionally greater share of income allocated from the joint venture on the first $300 million of annual ZETIA sales.

It should be noted that Schering-Plough incurs substantial selling, general and administrative and other costs, which are not reflected in equity income from the cholesterol joint venture and instead are included in the overall cost structure of Schering-Plough.

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Provision for income taxes

Tax expense was $103 million and $190 million for the three and six months ended June 30, 2007, respectively. Tax expense was $86 million and $172 million for the three and six months ended June 30, 2006, respectively. The income tax expense primarily relates to foreign taxes and does not include any benefit related to U.S. operating losses. Schering-Plough continues to maintain a valuation allowance against its U.S. deferred tax assets, as management cannot conclude that it is more likely than not the benefit of the U.S. net deferred tax assets can be realized.

Schering-Plough expects to report a U.S. Net Operating Loss (NOL) carryforward of approximately $1.54 billion on its 2006 tax return, which will be available to offset future U.S. taxable income through 2026. This U.S. NOL carryforward could be materially reduced after examination of Schering-Plough’s income tax returns by the Internal Revenue Service (IRS). Schering-Plough expects to generate additional U.S. operating losses and NOLs in 2007. Differences between U.S. operating losses and NOLs are due to differences between financial and tax reporting.

LIQUIDITY AND FINANCIAL RESOURCES

Discussion of Cash Flow

	Six Months Ended
	June 30,
	2007			2006
	(Dollars in millions)
Cash flow provided by operating activities	$	628		$	810
Cash flow provided by/ (used for) investing activities		1,598			(2,709	)
Cash flow used for financing activities		(57	)		(1,022	)

Operating Activities

In the first six months of 2007, operating activities provided $628 million of cash, compared with net cash provided by operations of $810 million in the first six months of 2006. The decrease was primarily due to payments of $435 million for the settlement of the Massachusetts Investigation, and the purchase of a foreign currency option for $130 million partially offset by higher net income.

During March 2007, Schering-Plough purchased a foreign currency option for $130 million as part of an overall risk management strategy and in consideration of various preliminary financing scenarios associated with the planned acquisition of Organon BioSciences. See “Foreign Currency Exchange Risk” included in Item 3. “Quantitative and Qualitative Disclosures about Market Risk,” for additional information about this foreign currency option. This derivative is short-term (trading) in nature and does not hedge a specific financing or investment transaction. Accordingly, the cash impacts of this derivative have been classified as operating cash flows in the Statement of Condensed Consolidated Cash Flows.

Investing Activities

Net cash provided by investing activities during the first six months of 2007 was $1.6 billion and included a net reduction of short-term investments of $1.9 billion partially offset by $275 million of capital expenditures. Net cash used for investing activities for the first six months of 2006 was $2.7 billion due primarily to net investment purchases of $2.5 billion.

Financing Activities

Net cash used for financing activities was $57 million for the first six months of 2007, compared to $1.0 billion for the same period in 2006. Uses of cash for financing activities for the six months ended June 30, 2007 included the payment of dividends on common and preferred shares of $222 million partially offset by $177 million of proceeds from stock option exercises. Net cash used for financing activities for the six months ended June 30, 2006 included dividends on common and preferred shares of $205 million and the repayment of short-term borrowings of $849 million.

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Other Discussion of Cash Flows

Total cash, cash equivalents and short-term investments less total debt was approximately $3.6 billion at June 30, 2007. Cash generated from operations and available cash and short-term investments are expected to provide Schering-Plough with the ability to fund cash needs for the intermediate term, not including the impact of the planned Organon BioSciences acquisition expected to be closed later in 2007. See “Borrowings and Credit Facilities” below for information on the potential impact of the Organon BioSciences transaction on Schering-Plough’s liquidity.

In July 2007, Schering-Plough made a cash payment of $98 million for tax and interest due in connection with an examination by the IRS of Schering-Plough’s 1997-2002 federal income tax returns.

Borrowings and Credit Facilities

Schering-Plough has outstanding $1.25 billion aggregate principal amount of 5.3 percent senior unsecured notes due 2013 and $1.15 billion aggregate principal amount of 6.5 percent senior unsecured notes due 2033. As previously disclosed, the interest rates payable on the notes are subject to adjustment and have been adjusted as discussed below.

On July 14, 2004, Moody’s lowered its rating on the notes to Baa1. Accordingly, the interest payable on each note increased 25 basis points effective December 1, 2004. Therefore, on December 1, 2004, the interest rate payable on the notes due 2013 increased from 5.3 percent to 5.55 percent, and the interest rate payable on the notes due 2033 increased from 6.5 percent to 6.75 percent. This adjustment to the interest rate payable on the notes increased Schering-Plough’s interest expense by approximately $6 million annually. The interest rate payable on a particular series of notes will return to 5.3 percent and 6.5 percent, respectively, and the rate adjustment provisions will permanently cease to apply if, following a downgrade by either Moody’s or S&P below A3 or A-, respectively, the notes are subsequently rated above Baa1 by Moody’s and BBB+ by S&P.

Schering-Plough has a $1.5 billion credit facility with a syndicate of banks. This facility matures in May 2009 and requires Schering-Plough to maintain a total debt to total capital ratio of no more than 60 percent. This credit line is available for general corporate purposes and is considered as support to Schering-Plough’s commercial paper borrowings. Borrowings under this credit facility may be drawn by the U.S. parent company or by its wholly-owned international subsidiaries when accompanied by a parent guarantee. This facility does not require compensating balances, however, a nominal commitment fee is paid. As of June 30, 2007, no borrowings were outstanding under this facility.

Schering-Plough has an 11.0 billion Euro committed bridge financing facility to fund the planned acquisition of Organon BioSciences. Long term, Schering-Plough intends to utilize a mix of cash, debt of varying maturities and issuances of equity to fund the transaction.

At June 30, 2007 and December 31, 2006, short-term borrowings totaled $246 million and $242 million, respectively, including outstanding commercial paper of $154 million at June 30, 2007 and $149 million at December 31, 2006. The short-term credit ratings discussed below have not significantly affected Schering-Plough’s ability to issue or rollover its outstanding commercial paper borrowings at this time. However, Schering-Plough believes the ability of commercial paper issuers, such as Schering-Plough, with one or more short-term credit ratings of P-2 from Moody’s, A-2 from S&P and/or F2 from Fitch to issue or rollover outstanding commercial paper can, at times, be less than that of companies with higher short-term credit ratings. In addition, the total amount of commercial paper capacity available to these issuers is typically less than that of higher-rated companies. Schering-Plough’s sizable lines of credit with commercial banks as well as cash and short-term investments held by U.S. and international subsidiaries serve as alternative sources of liquidity and to support its commercial paper program.

Schering-Plough’s current unsecured senior credit ratings and ratings review status are as follows:

Senior Unsecured Credit Ratings	Long-Term		Short-Term		Long-Term Ratings Review Status
Moody’s Investors Service		Baa1		P-2	Under review for possible downgrade
Standard and Poor’s		A-		A-2	Credit Watch with negative implications
Fitch Ratings		BBB+		F-2	Rating Watch for possible downgrade

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Schering-Plough’s credit ratings are currently under review due to the financing associated with the planned Organon BioSciences acquisition and could decline below their current levels. The impact of such decline could reduce the availability of commercial paper borrowing and would increase the interest rate on Schering-Plough’s short and long-term debt. As discussed above, Schering-Plough believes that existing cash, short-term investments and cash generated from operations will allow Schering-Plough to fund its cash needs for the intermediate term, not including the impact of the planned Organon BioSciences acquisition.

6 Percent Mandatory Convertible Preferred Stock

In August 2004, Schering-Plough issued 28,750,000 shares of 6 percent mandatory convertible preferred stock with a face value of $1.44 billion. The preferred stock will automatically convert into between 2.2451 and 2.7840 common shares of Schering-Plough depending on the average closing price of Schering-Plough’s common shares over a period immediately preceding the mandatory conversion date of September 14, 2007, as defined in the prospectus. This preferred stock is described in more detail in Note 15, “Shareholders’ Equity” under Item 8, “Financial Statements and Supplementary Data,” in the 2006 10-K.

REGULATORY AND COMPETITIVE ENVIRONMENT IN WHICH SCHERING-PLOUGH OPERATES

Schering-Plough is subject to the jurisdiction of various national, state and local regulatory agencies. These regulations are described in more detail in Part I, Item I, Business, in Schering-Plough’s 2006 10-K. Regulatory compliance is complex, as regulatory standards (including Good Clinical Practices, Good Laboratory Practices and Good Manufacturing Practices) vary by jurisdiction and are constantly evolving. Regulatory compliance is also costly. Regulatory compliance impacts the timing needed to bring new drugs to market and to market drugs for new indications. Further, failure to comply with regulations can result in delays in the approval of drugs, seizure or recall of drugs, suspension or revocation of the authority necessary for the production and sale of drugs, fines and other civil or criminal sanctions.

Regulatory compliance, and the cost of compliance failures, can have a material impact on Schering-Plough’s results of operations, its cash flows or financial condition.

Much is still unknown about the science of human health and with every drug there are benefits and risks that must be balanced. Societal and government pressures are constantly shifting between the demand for innovation to meet urgent unmet medical needs and adversity to risk. These pressures impact the regulatory environment and the market for Schering-Plough’s products.

Regulatory Compliance and Pharmacovigilance

Consent Decree

Since 2002, Schering-Plough has been working under a U.S. FDA Consent Decree to resolve issues involving Schering-Plough’s compliance with current Good Manufacturing Practices (cGMP) at certain of its manufacturing sites in New Jersey and Puerto Rico. See details in Note 17, “Consent Decree” under Item 1, “Financial Statements.”

Regulatory Inspections

Schering-Plough is subject to pharmacovigilance reporting requirements in many countries and other jurisdictions, including the U.S., the EU, and the EU member states. The requirements differ from jurisdiction to jurisdiction, but all include requirements for reporting adverse events that occur while a patient is using a particular drug, in order to alert the drug’s manufacturer and the governmental agency to potential problems.

During 2003, pharmacovigilance inspections by officials of the British and French medicines agencies conducted at the request of the European Medicines Agency (EMEA) cited serious deficiencies in reporting processes. Schering-Plough has continued to work on its long-term action plan to rectify the deficiencies and has provided regular updates to the EMEA.

During the fourth quarter 2005, local UK and EMEA regulatory authorities conducted a follow up inspection to assess Schering-Plough’s implementation of its action plan. In the first quarter of 2006, these authorities also inspected the U.S.-based components of Schering-Plough’s pharmacovigilance system. The

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inspectors acknowledged that progress had been made since 2003, but also continued to note significant concerns with the quality systems supporting Schering-Plough’s pharmacovigilance processes. Similarly, in a follow up inspection of Schering-Plough’s clinical trial practices in the UK, inspectors identified issues with respect to Schering-Plough’s management of clinical trials and related pharmacovigilance practices.

Schering-Plough intends to continue upgrading skills, processes and systems in clinical practices and pharmacovigilance. Schering-Plough remains committed to accomplish this work and to invest significant resources in this area. Further, in February 2006, Schering-Plough began the Global Clinical Harmonization Program for building clinical excellence (in trial design, execution and tracking), which will strengthen Schering-Plough’s scientific and compliance rigor on a global basis.

Schering-Plough does not know what action, if any, the EMEA or national authorities will take in response to the inspections. Possible actions include further inspections, demands for improvements in reporting systems, criminal sanctions against Schering-Plough and/or responsible individuals and changes in the conditions of marketing authorizations for Schering-Plough’s products.

Regulatory Compliance and Post-Marketing Surveillance

Schering-Plough engages in clinical trial research in many countries around the world. These clinical trial research activities must comply with stringent regulatory standards and are subject to inspection by U.S., EU and local country regulatory authorities. Failure to comply with current Good Clinical Practices or other applicable laws or regulations can result in delays in approval of clinical trials, suspension of ongoing clinical trials, delays in approval of marketing authorizations, criminal sanctions against Schering-Plough and/or responsible individuals, and changes in the conditions of marketing authorizations for Schering-Plough’s products.

Clinical trials and post-marketing surveillance of certain marketed drugs of competitors within the industry have raised safety concerns that have led to recalls, withdrawals or adverse labeling of marketed products. In addition, these situations have raised concerns among some prescribers and patients relating to the safety and efficacy of pharmaceutical products in general. Schering-Plough’s personnel have regular, open dialogue with the FDA and other regulators and review product labels and other materials on a regular basis and as new information becomes known.

Following this wave of recent product withdrawals by other companies and other significant safety issues, health authorities such as the FDA, the EMEA and the PMDA have continued to increase their focus on safety when assessing the benefit/risk balance of drugs. Some health authorities appear to have become more cautious when making decisions about approvability of new products or indications and are re-reviewing select products which are already marketed, adding further to the uncertainties in the regulatory processes. There is also greater regulatory scrutiny, especially in the U.S., on advertising and promotion and in particular direct-to-consumer advertising.

Similarly, major health authorities, including the FDA, EMEA and PMDA, have also increased collaboration amongst themselves, especially with regard to the evaluation of safety and benefit/risk information. Media attention has also increased. In the current environment, a health authority regulatory action in one market, such as a safety labeling change, may have regulatory, prescribing and marketing implications in other markets to an extent not previously seen.

Some health authorities, such as the PMDA in Japan, have publicly acknowledged a significant backlog in workload due to resource constraints within their agency. This backlog has caused long regulatory review times for new indications and products and has added to the uncertainty in predicting approval timelines in these markets. While the PMDA has committed to correcting the backlog and has made some progress over the last year, it is expected to continue for the foreseeable future.

These and other uncertainties inherent in government regulatory approval processes, including, among other things, delays in approval of new products, formulations or indications, may also affect Schering-Plough’s operations. The effect of regulatory approval processes on operations cannot be predicted.

Schering-Plough has nevertheless achieved a significant number of important regulatory approvals since 2004, including approvals for VYTORIN, CLARINEX D-24, CLARINEX REDITABS, CLARINEX D-12 and

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new indications for TEMODAR and NASONEX. Other significant approvals since 2004 include ASMANEX DPI (Dry Powder for Inhalation) in the U.S.; NOXAFIL in the U.S., the EU and Australia; PEGINTRON and ZETIA in Japan, and new indications for REMICADE. Schering-Plough also has a number of significant regulatory submissions filed in major markets awaiting approval.

Pricing Pressures

As described more specifically in Note 18, “Legal, Environmental and Regulatory Matters,” under Item 1, “Financial Statements,” the pricing, sales and marketing programs and arrangements, and related business practices of Schering-Plough and other participants in the health care industry are under increasing scrutiny from federal and state regulatory, investigative, prosecutorial and administrative entities. These entities include the Department of Justice and its U.S. Attorney’s Offices, the Office of Inspector General of the Department of Health and Human Services, the FDA, the Federal Trade Commission (FTC) and various state Attorneys General offices. Many of the health care laws under which certain of these governmental entities operate, including the federal and state anti-kickback statutes and statutory and common law false claims laws, have been construed broadly by the courts and permit the government entities to exercise significant discretion. In the event that any of those governmental entities believes that wrongdoing has occurred, one or more of them could institute civil or criminal proceedings, which, if instituted and resolved unfavorably, could subject Schering-Plough to substantial fines, penalties and injunctive or administrative remedies, including exclusion from government reimbursement programs. Schering-Plough also cannot predict whether any investigations will affect its marketing practices or sales. Any such result could have a material adverse impact on Schering-Plough’s results of operations, cash flows, financial condition, or its business.

In the U.S., many of Schering-Plough’s pharmaceutical products are subject to increasingly competitive pricing as managed care groups, institutions, government agencies and other groups seek price discounts. In the U.S. market, Schering-Plough and other pharmaceutical manufacturers are required to provide statutorily defined rebates to various government agencies in order to participate in Medicaid, the veterans health care program and other government-funded programs. The Medicare Prescription Drug Improvement and Modernization Act of 2003 contains a prescription drug benefit for individuals who are eligible for Medicare. This prescription drug benefit became effective on January 1, 2006 and is resulting in increased use of generics and increased purchasing power of those negotiating on behalf of Medicare recipients.

In most international markets, Schering-Plough operates in an environment of government mandated cost-containment programs. Several governments have placed restrictions on physician prescription levels and patient reimbursements; emphasized greater use of generic drugs; and enacted across-the-board price cuts as methods to control costs.

Since Schering-Plough is unable to predict the final form and timing of any future domestic or international governmental or other health care initiatives, including the passage of laws permitting the importation of pharmaceuticals into the U.S., their effect on operations and cash flows cannot be reasonably estimated. Similarly, the effect on operations and cash flows of decisions of government entities, managed care groups and other groups concerning formularies and pharmaceutical reimbursement policies cannot be reasonably estimated.

Competition

The market for pharmaceutical products is competitive. Schering-Plough’s operations may be affected by technological advances of competitors, industry consolidation, patents granted to competitors, competitive combination products, new products of competitors, new information from clinical trials of marketed products or post-marketing surveillance and generic competition as Schering-Plough’s products mature. In addition, patent positions are increasingly being challenged by competitors, and the outcome can be highly uncertain. An adverse result in a patent dispute can preclude commercialization of products or negatively affect sales of existing products. The effect on operations of competitive factors and patent disputes cannot be predicted.

OUTLOOK

Schering-Plough continues to anticipate that sales from VYTORIN and ZETIA will grow in 2007. However, there is growing competition for Schering-Plough’s key brands.

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Schering-Plough expects its gross margin for the full year of 2007 to improve versus 2006, primarily as a result of annual cost savings of approximately $100 million expected from its manufacturing streamlining actions in 2006 and improved product mix. However, gross margin in the second half of 2007 is expected to be slightly lower than the first half due to the seasonality of some respiratory products.

As Schering-Plough’s pipeline continues to progress, it expects that the number of patients in Schering-Plough’s clinical trials will continue to increase in the remainder of 2007. As a result, Schering-Plough expects research and development expenses, excluding any upfront payments, to continue to grow faster than adjusted net sales in 2007. Adjusted net sales is defined as net sales plus an assumed 50 percent of global cholesterol joint venture net sales.

Schering-Plough expects its full year 2007 tax rate to be in the mid-teens on a GAAP basis, but vary between quarters depending on the product and country mix of earnings.

In advance of the planned acquisition of Organon BioSciences, Schering-Plough will incur integration planning related costs and potential foreign currency related activity associated with the purchase. The transaction is anticipated to be accretive to Schering-Plough’s earnings per share in the first full year, excluding purchase-accounting adjustments and acquisition-related costs. Schering-Plough expects to achieve annual synergies of $500 million, however it is expected that it will take three years from the closing to reach this level of synergies.

The risks set forth in Part II, Item 1A, “Risk Factors,” in this 10-Q could cause actual results to differ from the expectation provided in this section.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Refer to “Management’s Discussion and Analysis of Operations and Financial Condition” in Schering-Plough’s 2006 10-K for disclosures regarding Schering-Plough’s critical accounting policies and estimates.

Rebates, Discounts and Returns

Schering-Plough’s rebate accruals for Federal and State governmental programs at June 30, 2007 and 2006 were $122 million and $299 million, respectively. Commercial discounts, returns and other rebate accruals at June 30, 2007 and 2006 were $377 million and $304 million, respectively. These and other rebate accruals are established in the period the related revenue was recognized resulting in a reduction to sales and the establishment of liabilities, which are included in total current liabilities.

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The following summarizes the activity in the accounts related to accrued rebates, sales returns and discounts for the six months ended June 30, 2007 and 2006:

	For the
	Six Months Ended
	June 30
	2007			2006
	(Dollars in millions)
Accrued Rebates/Returns/Discounts, Beginning of Period	$	486		$	522
Provision for Rebates		298			260
Adjustment to prior-year estimates		(17	)		—
Payments		(257	)		(213	)
		24			47
Provision for Returns		94			99
Adjustment to prior-year estimates		(23	)		—
Returns		(57	)		(61	)
		14			38
Provision for Discounts		349			265
Adjustment to prior-year estimates		—			—
Discounts granted		(374	)		(269	)
		(25	)		(4	)
Accrued Rebates/Returns/Discounts, End of Period	$	499		$	603

In formulating and recording the above accruals, management utilizes assumptions and estimates that include historical experience, wholesaler data, the projection of market conditions, the estimated lag time between sale and payment of a rebate, utilization estimates, and forecasted product demand amounts.

As part of its review of these accruals, management performs a sensitivity analysis that considers differing assumptions, which are most subject to judgment in its rebate accrual calculation. Adjustments to prior year estimates for rebate accruals are expected to be $20 million to $30 million in 2007.

Provision for Income Taxes

Schering-Plough implemented the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) as of January 1, 2007. As required by FIN 48, the cumulative effect of applying the provisions of the Interpretation have been reported as an adjustment to Schering-Plough’s retained earnings balance as of January 1, 2007. Schering-Plough reduced its January 1, 2007 retained earnings by $259 million with a corresponding increase to the appropriate tax liability accounts as a result of the adoption of FIN 48.

Schering-Plough includes interest expense or income as well as potential penalties on unrecognized tax benefits as a component of income tax expense in the consolidated statement of operations. The total amount of accrued interest related to uncertain tax positions at January 1, 2007 was $193 million and is included in other accrued liabilities.

Schering-Plough’s unrecognized tax benefits result primarily from the varying application of statutes, regulations and interpretations and include exposures on intercompany terms of cross border arrangements and utilization of cash held by foreign subsidiaries (investment in U.S. property) as well as Schering-Plough’s tax matters litigation (see Note 18). At January 1, 2007, the total amount of unrecognized tax benefits was $924 million which includes reductions to deferred tax assets carrying a full valuation allowance, potential refund claims and tax liabilities. Management believes it is reasonably possible that a significant portion of the total unrecognized tax benefits could decrease over the next twelve-month period. However, the timing of the ultimate resolution of Schering-Plough’s tax matters and the payment and receipt of related cash is dependent on a number of factors, many of which are outside Schering-Plough’s control. Approximately $644 million of total unrecognized tax benefits, if recognized, would affect the effective tax rate.

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During the second quarter of 2007, the IRS completed its examination of Schering-Plough’s 1997-2002 federal income tax returns. Schering-Plough is seeking resolution of an issue raised during this examination through the IRS administrative appeals process. Schering-Plough remains open with the IRS for the 1997-2006 tax years. For most of its other significant tax jurisdictions (both U.S. state and foreign), Schering-Plough’s income tax returns are open for examination for the period 2000 through 2006.

DISCLOSURE NOTICE

Cautionary Statements Under the Private Securities Litigation Reform Act of 1995

Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this report and other written reports and oral statements made from time to time by Schering-Plough may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and are based on current expectations or forecasts of future events. You can identify these forward-looking statements by their use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “project,” “intend,” “plan,” “potential,” “will,” and other similar words and terms. In particular, forward-looking statements include statements relating to future actions, ability to access the capital markets, prospective products or product approvals, timing and conditions of regulatory approvals, patent and other intellectual property protection, future performance or results of current and anticipated products, sales efforts, research and development programs and anticipated spending, estimates of rebates, discounts and returns, expenses and programs to reduce expenses, the outcome of contingencies such as litigation and investigations, growth strategy, expected synergies and financial results.

Any or all forward-looking statements here or in other publications may turn out to be wrong. There are no guarantees about Schering-Plough’s financial and operational performance or the performance of Schering-Plough’s stock. Schering-Plough does not assume the obligation to update any forward-looking statement. Many factors could cause actual results to differ from Schering-Plough’s forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. Although it is not possible to predict or identify all such factors, Schering-Plough refers you to Part II, Item 1A, “Risk Factors,” in this 10-Q for identification of important factors with respect to risks and uncertainties.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

Schering-Plough is exposed to market risk primarily from changes in foreign currency exchange rates and, to a lesser extent, from interest rates and equity prices. The impact of currency is more pronounced on products and businesses that are concentrated in Europe.

Foreign Currency Exchange Risk

In March 2007, as part of an overall risk management strategy and in consideration of various preliminary financing scenarios associated with the planned acquisition of Organon BioSciences, Schering-Plough entered into a foreign currency option contract to mitigate its exposure in the event there was a significant strengthening in the Euro as compared to the U.S. Dollar. At June 30, 2007 Schering-Plough had an option to purchase 7.7 billion Euro at $1.38 per Euro expiring on December 31, 2007. At June 30, 2007 a 5 percent decrease in value of the U.S. dollar as compared to the Euro would have resulted in an unrealized gain of approximately $312 million and a five percent strengthening of the U.S. dollar as compared to the Euro would have resulted in an unrealized loss of approximately $85 million.

Interest Rate Risk

In consideration of Schering-Plough’s plans to finance the planned acquisition of Organon BioSciences, Schering-Plough executed three separate interest rate swaps. The interest rate swaps are for three, five and ten-year periods with Schering-Plough paying fixed rates and receiving floating rates based on individual notional amounts of 750 million Euro each, aggregating 2.25 billion Euro. The objective of the swaps is to hedge the interest rate payments to be made on future issuances of debt. As such, the swaps have been designated as cash flow hedges of future interest payments, and in accordance with SFAS 133, “Derivative Instruments and Financial Hedging Activities,” as amended, the effective portion of the gains or losses on the hedges are reported in other comprehensive income and any ineffective portion is reported in operations. At June 30,

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2007 a 25 basis point increase in interest rates would have resulted in an unrealized gain to other comprehensive income of approximately $36 million and a 25 basis point decrease in interest rates would have resulted in an unrealized loss of approximately $37 million to other comprehensive income.

Refer to “Management’s Discussion and Analysis” in Schering-Plough’s 2006 10-K for further discussion of market risks.

Item 4.   Controls and Procedures

Management, including the chief executive officer and the chief financial officer, has evaluated Schering-Plough’s disclosure controls and procedures as of the end of the quarterly period covered by this 10-Q and has concluded that Schering-Plough’s disclosure controls and procedures are effective. They also concluded that there were no changes in Schering-Plough’s internal control over financial reporting that occurred during Schering-Plough’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, Schering-Plough’s internal control over financial reporting.

As part of the changing business environment in which Schering-Plough operates, Schering-Plough is replacing and upgrading a number of information systems. This process will be ongoing for several years. In connection with these changes, as part of Schering-Plough’s management of both internal control over financial reporting and disclosure controls and procedures, management has concluded that the new systems are at least as effective with respect to those controls as the prior systems. An example of a change in information systems that occurred during the first six months of 2007 is the replacement of Schering-Plough’s system for consolidation and reporting.

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

Material pending legal proceedings involving Schering-Plough are described in Item 3, “Legal Proceedings,” of the 2006 10-K. The following discussion is limited to material developments to previously reported proceedings, which Schering-Plough, or any of its subsidiaries, became a party during the quarter ended June 30, 2007, or subsequent thereto, but before the filing of this report. There were no new legal proceedings. This section should be read in conjunction with Part I, Item 3, “Legal Proceedings” in the 2006 10-K.

During the quarter, Schering-Plough and plaintiffs agreed to settle the derivative action pending in the U.S. District Court for the District of New Jersey against Schering-Plough, certain former officers, directors and former directors that alleged a failure to disclose material information and breach of fiduciary duty by the directors relating to the FDA inspections and investigations into Schering-Plough’s pricing practices and sales, marketing and clinical trials practices. The settlement, which must be approved by the Court, acknowledges that the pendency of the suit contributed to decisions by the Board and Management to enhance compliance and governance processes and provides that Schering-Plough will pay the fees of the plaintiffs’ counsel.

Patent Challenges under the Hatch-Waxman Act

While Schering-Plough does not currently believe that any pending Paragraph IV certification proceeding under the Hatch-Waxman Act is material, because there is frequently media and investor interest in such proceedings, Schering-Plough is listing the pending proceedings each quarter. Currently, the following are pending:

•  On July 20, 2007, Schering-Plough and its licensor, Cancer Research Technologies, Limited, brought a patent infringement action against companies seeking approval of a generic version of certain strengths of Temodar capsules;

•  in March 2007, Schering-Plough and an entity jointly owned with Merck filed a patent infringement action against companies seeking approval of a generic version of ZETIA; and

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•  in September 2006, Schering-Plough filed patent infringement actions against companies seeking approval of generic versions of Clarinex Tablets, Clarinex Reditabs and Clarinex D12.

Item 1A.   Risk Factors

Schering-Plough’s future operating results and cash flows may differ materially from the results described in this 10-Q due to risks and uncertainties related to Schering-Plough’s business, including those discussed below. In addition, these factors represent risks and uncertainties that could cause actual results to differ materially from those implied by forward-looking statements contained in this report.

Key Schering-Plough products generate a significant amount of Schering-Plough’s profits and cash flows, and any events that adversely affect the market for its leading products could have a material and negative impact on results of operations and cash flows.

Schering-Plough’s ability to generate profits and operating cash flow is largely dependent upon the continued profitability of Schering-Plough’s cholesterol franchise, consisting of VYTORIN and ZETIA. In addition, other key products such as REMICADE, NASONEX, PEGINTRON, TEMODAR, CLARINEX, and AVELOX account for a material portion of revenues. As a result of Schering-Plough’s dependence on key products, any events that adversely affect the markets for these products could have a significant impact on results of operations. These events include loss of patent protection, increased costs associated with manufacturing, OTC availability of Schering-Plough’s product or a competitive product, the discovery of previously unknown side effects, increased competition from the introduction of new, more effective treatments and discontinuation or removal from the market of the product for any reason.

For example, the profitability of Schering-Plough’s cholesterol franchise may be adversely affected by the introduction of multiple generic forms in December 2006 of two competing cholesterol products that lost patent protection earlier in 2006.

There is a high risk that funds invested in research will not generate financial returns because the development of novel drugs requires significant expenditures with a low probability of success.

There is a high rate of failure inherent in the research to develop new drugs to treat diseases. As a result, there is a high risk that funds invested in research programs will not generate financial returns. This risk profile is compounded by the fact that this research has a long investment cycle. To bring a pharmaceutical compound from the discovery phase to market may take a decade or more and failure can occur at any point in the process, including later in the process after significant funds have been invested.

Schering-Plough’s success is dependent on the development and marketing of new products, and uncertainties in the regulatory and approval process may result in the failure of products to reach the market.

Products that appear promising in development may fail to reach market for numerous reasons, including the following:

•  findings of ineffectiveness, superior safety or efficacy of competing products, or harmful side effects in clinical or pre-clinical testing;

•  failure to receive the necessary regulatory approvals, including delays in the approval of new products and new indications;

•  lack of economic feasibility due to manufacturing costs or other factors; and

•  preclusion from commercialization by the proprietary rights of others.

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Intellectual property protection for innovation is an important contributor to Schering-Plough’s profitability. Generic forms of Schering-Plough’s products may be introduced to the market as a result of the expiration of patents covering Schering-Plough’s products, a successful challenge to Schering-Plough’s patents, or the at-risk launch of a generic version of a Schering-Plough product, which may have a material and negative effect on results of operations.

Intellectual property protection is critical to Schering-Plough’s ability to successfully commercialize its products. Upon the expiration or the successful challenge of Schering-Plough’s patents covering a product, competitors may introduce lower-priced generic versions of that product, which may include Schering-Plough’s well-established products. In recent years, some generic manufacturers have launched generic versions of products before the ultimate resolution of patent litigation (commonly known as “at-risk” product launches). Such generic competition could result in the loss of a significant portion of sales or downward pressures on the prices at which Schering-Plough offers formerly patented products, particularly in the U.S. Patents and patent applications relating to Schering-Plough’s significant products are of material importance to Schering-Plough.

Additionally, certain foreign governments have indicated that compulsory licenses to patents may be granted in the case of national emergencies, which could diminish or eliminate sales and profits from those regions and negatively affect Schering-Plough’s results of operations. Further, recent court decisions relating to other companies’ patents in the U.S., as well as the discussion of regulatory initiatives may result in further erosion of intellectual property protection.

Patent disputes can be costly to prosecute and defend and adverse judgments could result in damage awards, increased royalties and other similar payments and decreased sales.

Patent positions can be highly uncertain and patent disputes in the pharmaceutical industry are not unusual. An adverse result in a patent dispute involving Schering-Plough’s patents, or the patents of its collaborators, may lead to a loss of market exclusivity and render such patents invalid. An adverse result in a patent dispute involving patents held by a third party may preclude the commercialization of Schering-Plough’s products, force Schering-Plough to obtain licenses in order to continue manufacturing or marketing the affected products, which licenses may not be available on commercially reasonable terms, negatively affect sales of existing products or result in injunctive relief and payment of financial remedies.

The potential for litigation regarding Schering-Plough’s intellectual property rights always exists and may be initiated by third parties attempting to abridge Schering-Plough’s rights, as well as by Schering-Plough in protecting its rights. A generic manufacturer may file an Abbreviated New Drug Application seeking approval after the expiration of the applicable data exclusivity and alleging that one or more of the patents listed in the innovator’s New Drug Application are invalid or not infringed. This allegation is commonly known as a Paragraph IV certification. The innovator then has the ability to file suit against the generic manufacturer to enforce its patents. In recent years, generic manufacturers have used Paragraph IV certifications extensively to challenge patents on a wide array of innovative pharmaceuticals, and it is anticipated that this trend will continue. Even if Schering-Plough is ultimately successful in a particular dispute, Schering-Plough may incur substantial costs in defending its patents and other intellectual property rights. See “Patent Challenges Under the Hatch-Waxman Act” in Part II, Item 1, “Legal Proceedings” in this 10-Q, for a list of current Paragraph IV certifications for Schering-Plough products.

Multi-jurisdictional regulations, including those establishing Schering-Plough’s ability to price products, may negatively affect Schering-Plough’s sales and profit margins.

Schering-Plough faces increased pricing pressure globally from managed care organizations, institutions and government agencies and programs that could negatively affect Schering-Plough’s sales and profit margins. For example, in the U.S., the Medicare Prescription Drug Improvement and Modernization Act of 2003 contains a prescription drug benefit for individuals who are eligible for Medicare. The prescription drug benefit became effective on January 1, 2006 and is resulting in increased use of generics and increased purchasing power of those negotiating on behalf of Medicare recipients.

In addition to legislation concerning price controls, other trends that could affect Schering-Plough’s business include legislative or regulatory action relating to pharmaceutical pricing and reimbursement, health

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care reform initiatives and drug importation legislation, involuntary approval of medicines for OTC use, consolidation among customers and trends toward managed care and health care costs containment. Increasingly, market approval or reimbursement of products may be impacted by health technology assessments, which seek to condition approval or reimbursement on an assessment of the impact of health technologies on the healthcare system.

In the U.S., as a result of the government’s efforts to reduce Medicaid expenses, managed care organizations continue to grow in influence, and Schering-Plough faces increased pricing pressure as managed care organizations continue to seek price discounts with respect to Schering-Plough’s products.

In other countries, many governmental agencies strictly control, directly or indirectly, the prices at which pharmaceutical products are sold. In these markets, cost control methods including restrictions on physician prescription levels and patient reimbursements; emphasis on greater use of generic drugs; and across-the-board price cuts may decrease revenues internationally.

Government investigations against Schering-Plough, could lead to the commencement of civil and/or criminal proceedings involving the imposition of substantial fines, penalties and injunctive or administrative remedies, including exclusion from government reimbursement programs, which could give rise to other investigations or litigation by government entities or private parties.

Schering-Plough cannot predict whether future or pending investigations to which it may become subject, would lead to a judgment or settlement involving a significant monetary award or restrictions on its operations.

The pricing, sales and marketing programs and arrangements, and related business practices of Schering-Plough and other participants in the health care industry are under increasing scrutiny from federal and state regulatory, investigative, prosecutorial and administrative entities. These entities include the Department of Justice and its U.S. Attorney’s Offices, the Office of Inspector General of the Department of Health and Human Services, the FDA, the Federal Trade Commission and various state Attorneys General offices. Many of the health care laws under which certain of these governmental entities operate, including the federal and state anti-kickback statutes and statutory and common law false claims laws, have been construed broadly by the courts and permit the government entities to exercise significant discretion. In the event that any of those governmental entities believes that wrongdoing has occurred, one or more of them could institute civil or criminal proceedings which, if resolved unfavorably, could subject Schering-Plough to substantial fines, penalties and injunctive or administrative remedies, including exclusion from government reimbursement programs. In addition, an adverse outcome to a government investigation could prompt other government entities to commence investigations of Schering-Plough or cause those entities or private parties to bring civil claims against it. Schering-Plough also cannot predict whether any investigations will affect its marketing practices or sales. Any such result could have a material adverse impact on Schering-Plough’s results of operations, cash flows, financial condition, or its business.

Regardless of the merits or outcomes of any investigations, government investigations are costly, divert management’s attention from Schering-Plough’s business and may result in substantial damage to Schering-Plough’s reputation.

There are other legal matters in which adverse outcomes could negatively affect Schering-Plough’s business.

Unfavorable outcomes in other pending litigation matters, or in future litigation, including litigation concerning product pricing, securities law violations, product liability claims, ERISA matters, patent and intellectual property disputes, and antitrust matters could preclude the commercialization of products, negatively affect the profitability of existing products and could subject Schering-Plough to substantial fines, penalties and injunctive or administrative remedies, including exclusion from government reimbursement programs. Any such result could materially and adversely affect Schering-Plough’s results of operations, cash flows, financial condition, or its business.

Please refer to “Legal Proceedings” in Item 3 in Schering-Plough’s 2006 10-K and Part II, Item 1 in this 10-Q for descriptions of significant pending litigation.

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Schering-Plough is subject to governmental regulations, and the failure to comply with, as well as the costs of compliance of, these regulations may adversely affect Schering-Plough’s financial position and results of operations.

Schering-Plough’s manufacturing facilities and clinical/research practices must meet stringent regulatory standards and are subject to regular inspections. The cost of regulatory compliance, including that associated with compliance failures, can materially affect Schering-Plough’s financial position, cash flows and results of operations. Failure to comply with regulations, which include pharmacovigilance reporting requirements and standards relating to clinical, laboratory and manufacturing practices, can result in delays in the approval of drugs, seizure or recalls of drugs, suspension or revocation of the authority necessary for the production and sale of drugs, fines and other civil or criminal sanctions.

For example, in May 2002, Schering-Plough agreed with the FDA to the entry of a Consent Decree to resolve issues related to compliance with current Good Manufacturing Practices at certain of Schering-Plough’s facilities in New Jersey and Puerto Rico. The Consent Decree work placed significant additional controls on production and release of products from these sites, which increased costs and slowed production and led to a reduction in the number of products produced at the sites. Further, Schering-Plough’s research and development operations were negatively impacted by the Consent Decree because these operations share common facilities with the manufacturing operations.

Schering-Plough also is subject to other regulations, including environmental, health and safety, and labor regulations.

Developments following regulatory approval may decrease demand for Schering-Plough’s products.

Even after a product reaches market, certain developments following regulatory approval, including results in post-marketing Phase IV trials, may decrease demand for Schering-Plough’s products, including the following:

•  the re-review of products that are already marketed;

•  new scientific information and evolution of scientific theories;

•  the recall or loss of marketing approval of products that are already marketed;

•  uncertainties concerning safety labeling changes; and

•  greater scrutiny in advertising and promotion.

In the past several years, clinical trials and post-marketing surveillance of certain marketed drugs of competitors within the industry have raised safety concerns that have led to recalls, withdrawals or adverse labeling of marketed products. These situations also have raised concerns among some prescribers and patients relating to the safety and efficacy of pharmaceutical products in general, which have negatively affected the sales of such products.

In addition, following the wake of recent product withdrawals of other companies and other significant safety issues, health authorities such as the FDA, the European Medicines Agency and the Pharmaceuticals and Medicines Device Agency have increased their focus on safety when assessing the benefit/risk balance of drugs. Some health authorities appear to have become more cautious when making decisions about approvability of new products or indications and are re-reviewing select products that are already marketed, adding further to the uncertainties in the regulatory processes. There is also greater regulatory scrutiny, especially in the U.S., on advertising and promotion and in particular, direct-to-consumer advertising.

If previously unknown side effects are discovered or if there is an increase in the prevalence of negative publicity regarding known side effects of any of Schering-Plough’s products, it could significantly reduce demand for the product or may require Schering-Plough to remove the product from the market. Further, in the current environment in which all pharmaceutical companies operate, Schering-Plough is at risk for product liability claims for its products.

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New products and technological advances developed by Schering-Plough’s competitors may negatively affect sales.

Schering-Plough operates in a highly competitive industry. Schering-Plough competes with a large number of multinational pharmaceutical companies, biotechnology companies and generic pharmaceutical companies. Many of Schering-Plough’s competitors have been conducting research and development in areas served both by Schering-Plough’s current products and by those products Schering-Plough is in the process of developing. Competitive developments that may impact Schering-Plough include technological advances by, patents granted to, and new products developed by competitors or new and existing generic, prescription and/or OTC products that compete with products of Schering-Plough or the Merck/Schering-Plough Cholesterol Partnership. In addition, it is possible that doctors, patients and providers may favor those products offered by competitors due to safety, efficacy, pricing or reimbursement characteristics, and as a result Schering-Plough will be unable to maintain its sales for such products.

Competition from third parties may make it difficult for Schering-Plough to acquire or license new products or product candidates (regardless of stage of development) or to enter into such transactions on terms that permit Schering-Plough to generate a positive financial impact.

Schering-Plough depends on acquisition and in-licensing arrangements as a source for new products. Opportunities for obtaining or licensing new products are limited, however, and securing rights to them typically requires substantial amounts of funding or substantial resource commitments. Schering-Plough competes for these opportunities against many other companies and third parties that have greater financial resources and greater ability to make other resource commitments. Schering-Plough may not be able to acquire or license new products, which could adversely impact Schering-Plough and its prospects. Schering-Plough may also have difficulty acquiring or licensing new products on acceptable terms. To secure rights to new products, Schering-Plough may have to make substantial financial or other resource commitments that could limit its ability to produce a positive financial impact from such transactions.

Schering-Plough relies on third-party relationships for its key products, and the conduct and changing circumstances of such third parties may adversely impact the business.

Schering-Plough has several relationships with third parties on which Schering-Plough depends for many of its key products. Very often these third parties compete with Schering-Plough or have interests that are not aligned with the interests of Schering-Plough. Notwithstanding any contracts Schering-Plough has with these third parties, Schering-Plough may not be able to control or influence the conduct of these parties, or the circumstances that affect them, either of which could adversely impact Schering-Plough.

Schering-Plough’s global operations expose Schering-Plough to additional risks, and any adverse event could have a material negative impact on results of operations.

Schering-Plough operates in more than 120 countries, and the majority of Schering-Plough’s profit and cash flow is generated from international operations. Acquisitions, such as the recently announced purchase of Organon BioSciences, would further expand the size, scale and scope of its global operations. Risks, inherent in conducting a global business include:

•  changes in medical reimbursement policies and programs and pricing restrictions in key markets;

•  multiple regulatory requirements that could restrict Schering-Plough’s ability to manufacture and sell its products in key markets;

•  trade protection measures and import or export licensing requirements;

•  diminished protection of intellectual property in some countries; and

•  possible nationalization and expropriation.

In addition, there may be changes to Schering-Plough’s business and political position if there is instability, disruption or destruction in a significant geographic region, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest; and natural or man-made disasters, including famine, flood, fire, earthquake, storm or disease.

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Schering-Plough is exposed to market risk from fluctuations in currency exchange rates and interest rates.

Schering-Plough operates in multiple jurisdictions and as such, virtually all sales are denominated in currencies of the local jurisdiction. Additionally, Schering-Plough has entered and will enter into acquisition, licensing, borrowings or other financial transactions that may give rise to currency and interest rate exposure. Since Schering-Plough cannot, with certainty, foresee and mitigate against such adverse fluctuations, fluctuations in currency exchange rates and interest rates could negatively affect Schering-Plough’s results of operations and/or cash flows.

In order to mitigate against the adverse impact of these market fluctuations, Schering-Plough will from time to time enter into hedging agreements. Schering-Plough has entered into a foreign currency option to partially mitigate the currency exchange rate risk on the Euro purchase price of the Organon BioSciences acquisition. In addition, Schering-Plough has entered into a series of interest rate swaps to partially mitigate interest rate risk associated with financing the purchase of Organon BioSciences. While hedging agreements, such as currency options and interest rate swaps, limit some of the exposure to exchange rate and interest rate fluctuations, such attempts to mitigate these risks are costly and not always successful.

Insurance coverage for product liability may be limited, cost prohibitive or unavailable.

Schering-Plough maintains insurance coverage with such deductibles and self-insurance to reflect market conditions (including cost and availability) existing at the time it is written, and the relationship of insurance coverage to self-insurance varies accordingly. For certain products, third-party insurance may be cost prohibitive, available on limited terms or unavailable.

Schering-Plough is subject to evolving and complex tax laws, which may result in additional liabilities that may affect results of operations.

Schering-Plough is subject to evolving and complex tax laws in its jurisdictions. Significant judgment is required for determining Schering-Plough’s tax liabilities, and Schering-Plough’s tax returns are periodically examined by various tax authorities. Schering-Plough’s 1997-2006 tax returns remain open for examination by the IRS. Schering-Plough may be challenged by the IRS and other tax authorities on positions it has taken in its income tax returns. Although Schering-Plough believes that its accrual for tax contingencies is adequate for all open years, based on past experience, interpretations of tax law, and judgments about potential actions by tax authorities, due to the complexity of tax contingencies, the ultimate resolution of any tax matters may result in payments greater or less than amounts accrued.

In addition, Schering-Plough may be impacted by changes in tax laws including tax rate changes, changes to the laws related to the remittance of foreign earnings, new tax laws and revised tax law interpretations in domestic and foreign jurisdictions.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

This table provides information with respect to purchases by Schering-Plough of its common shares during the second quarter of 2007.

						Total Number of		Maximum Number
						Shares Purchased as		of Shares That May
				Average		Part of Publicly		Yet be Purchased
	Total Number of			Price Paid		Announced Plans or		Under the Plans or
Period	Shares Purchased			per Share		Programs		Programs
April 1, 2007 through April 30, 2007		60,924(1	)	$	28.66		N/A		N/A
May 1, 2007 through May 31, 2007		55,521(1	)	$	32.43		N/A		N/A
June 1, 2007 through June 30, 2007		16,119(1	)	$	31.03		N/A		N/A
Total April 1, 2007 through June 30, 2007		132,564(1	)	$	30.53		N/A		N/A

(1) All of the shares included in the table above were repurchased pursuant to Schering-Plough’s stock incentive program and represent shares delivered to Schering-Plough by option holders for payment of the exercise price and tax withholding obligations in connection with stock options and stock awards.

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Item 4.   Submission of Matters to a Vote of Security Holders

The annual meeting of shareholders was held on May 18, 2007 and shareholders voted on the following matters with the results indicated:

(1) Election of Directors:  Thirteen nominees for*( director were elected for a one-year term by a vote of shares as follows: Hans W. Becherer received 1,219,203,973 votes for his election (90.78% of shares voted) and 123,884,350 votes were withheld (9.22% of shares voted); Thomas J. Colligan received 1,269,098,484 votes for his election (94.49% of shares voted) and 73,989,839 votes were withheld (5.51% of shares voted); Fred Hassan received 1,263,077,296 votes for his election (94.04% of shares voted) and 80,011,027 votes were withheld (5.96% of shares voted); C. Robert Kidder received 1,268,458,498 votes for his election (94.44% of shares voted) and 74,629,825 votes were withheld (5.56% of shares voted); Philip Leder, M.D. received 1,263,089,288 votes for his election (94.04% of shares voted) and 79,999,035 votes were withheld (5.96% of shares voted); Eugene R. McGrath received 1,268,522,318 votes for his election (94.45% of shares voted) and 74,566,005 votes were withheld (5.55% of shares voted); Carl E. Mundy received 1,260,447,608 votes for his election (93.85% of shares voted) and 82,640,715 votes were withheld (6.15% of shares voted); Antonio M. Perez received 1,329,595,713 votes for his election (99.00% of shares voted) and 13,492,610 votes were withheld (1.00% of shares voted); Patricia F. Russo received 1,260,174,538 votes for his election (93.83% of shares voted) and 82,913,785 votes were withheld (6.17% of shares voted); Jack L. Stahl received 1,329,560,727 votes for his election (98.99% of shares voted) and 13,527,596 votes were withheld (1.01% of shares voted); Kathryn C. Turner received 1,265,355,957 votes for his election (94.21% of shares voted) and 77,732,366 votes were withheld (5.79% of shares voted); Robert F.W. van Oordt received 1,259,061,794 votes for his election (93.74% of shares voted) and 84,026,529 votes were withheld (6.26% of shares voted); and Arthur F. Weinbach received 1,268,219,933 votes for his election (94.43% of shares voted) and 74,868,390 votes were withheld (5.57% of shares voted).

(2) Ratification of Auditors:  The designation by the Audit Committee of Deloitte & Touche LLP to audit the books and accounts of the Company for the year ending December 31, 2007 was ratified with a vote of 1,322,966,475 shares for*, 10,969,266 shares against and 9,152,582 abstentions.

(3) Reduction of Supermajority Vote Requirements:  The amendments to the governing instruments to reduce shareholder supermajority vote requirements to a majority vote was approved with a vote of 1,322,101,786 shares for* (88.78% of outstanding shares), 10,788,350 shares against and 10,198,187 abstentions.

(4) Election of Directors by a Majority Vote:  The amendment to the Certificate of Incorporation to elect Directors by a majority vote rather than a plurality vote was not approved with a vote of 946,099,114 shares for* (63.53% of outstanding shares), 386,601,719 shares against and 10,387,490 abstentions.

(5) Shareholder Proposal:  A shareholder proposal relating to equity grants was not approved with a vote of 346,977,095 shares for, 824,169,740 shares against, 13,851,387 abstentions and 158,090,101 broker non-votes.

Item 6.   Exhibits

Exhibit
Number			Description	Location
	3	(a)	Amended and Restated Certificate of Incorporation	Incorporated by reference to Exhibit 3.1 to Schering-Plough’s 8-K filed July 11, 2007
	3	(b)	Amended and Restated By-Laws	Incorporated by reference to Exhibit 3.2 to Schering-Plough’s 8-K filed June 28, 2007.
	12		Computation of Ratio of Earnings to Fixed Charges	Attached
	15		Awareness letter	Attached

(     * Includes 158,090,101 broker non-votes

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Exhibit
Number			Description	Location
	31	.1	Sarbanes-Oxley Act of 2002, Section 302 Certification for Chairman of the Board and Chief Executive Officer.	Attached
	31	.2	Sarbanes-Oxley Act of 2002, Section 302 Certification for Executive Vice President and Chief Financial Officer.	Attached
	32	.1	Sarbanes-Oxley Act of 2002, Section 906 Certification for Chairman of the Board and Chief Executive Officer.	Attached
	32	.2	Sarbanes-Oxley Act of 2002, Section 906 Certification for Executive Vice President and Chief Financial Officer.	Attached

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SCHERING-PLOUGH CORPORATION
(Registrant)

By  /s/  Steven H. Koehler

Steven H. Koehler

Vice President and Controller

(Duly Authorized Officer

and Chief Accounting Officer)

Date: July 26, 2007

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