overview july 2009. copyright merck kgaa 2 contents the company 1 pharmaceuticals 2 3 chemicals 4...

Overview

July 2009

July 2009 Copyright Merck KGaA 2

Contents

The company1

Pharmaceuticals2

3 Chemicals

4 Corporate Responsibility

5 History


Merck at a glance

• Merck conducts its operations in two major business sectors – Pharmaceuticals and Chemicals

– Pharmaceuticals: Prescription drugs and consumer health care products

– Chemicals: Specialty products for the electronics, coatings, cosmetics, pharmaceutical and biotech industries

• Approximately 33,000 employees in 59 countries

• Merck manages its operating activities under theumbrella of Merck KGaA, which was listed on theFrankfurt Stock Exchange in 1995 and admittedto the DAX® in June 2007.

• Around 30% of the total capital is publicly traded, while the Merck family, as general partner, indirectlyholds around 70%.

Pützer Tower and Pyramidat Darmstadt headquarters

www.merck.de


• Merck KGaA and the U.S. pharmaceutical company Merck & Co. have been two independent companies since 1917.

• Common historical roots:

• 1891 Merck & Co. founded in New York by Georg Merck, a member of the Merck family

• As a consequence of World War I, Merck & Co. was expropriated and became an independent company.

• Today, Merck & Co. holds the rights to the name within North America. Merck operates there as EMD and holds the rights to the name Merck in the rest of the world.

Merck is not the same as Merck


Corporate structure

Pharmaceuticals

Merck Serono

Chemicals

Consumer Health Care

Liquid Crystals

Central functions

Merck Group

D i

v i s

i o

n s

Business sectors

Performance & Life Science Chemicals


Key figures for 2008

€ million 2008 2007Change in

%

Total revenues 7,558 7,057 7.1

Gross margin 5,652 5,277 7.1

Research & Development 1,234 1,028 20

Operating result 1,131 976 16

Free cash flow before acquisitions and divestments

601 978 -38

Return on sales (ROS) in % 15.0 13.8


Business sectors* 2008

Total revenues: € 7,558 million

€ million

Operating result: € 1,113 million

€ million

655; 54%

558; 46%

Pharmaceuticals

Chemicals

5,428; 72%

2,123; 28%

*excluding Corporate and Other


Key figures January-June 2009

in € mJan.-June

2009Jan.-June

2008Change

in %

Total revenues 3,756 3,761 -0.1

Gross margin 2,781 2,821 -1.4

R&D 653 564 16

Operating result 383 680 -44

Free cash flowbefore acquisitions anddivestments

243 350 -31

ROS in % 10.2 18.1


Merck Serono

ConsumerHealth Care

Liquid Crystals

Performance& Life ScienceChemicals

Merck – Business Strategies

• Focus on specialist and innovative drugs in prescription markets • Grow three core therapeutic areas backed by strong established fields• Improve R&D efficiency and leverage biopharmaceutical expertise

• Focus on over-the-counter pharma products in four health themes• Grow key brands through regional expansion• Strengthen business in established markets

• Focus on specialty chemicals solutions • Leverage strong expertise in regulated markets with high entry barriers• Strengthen position in growth focus regions: India and China

• Focus on innovation in display technologies to sustain market leadership• Capitalize on excellent reputation in quality and reliability • Broaden application basis long-term with penetration into new markets


Merck Group sites


Contents

The company1

Pharmaceuticals2

3 Chemicals


5 History


Pharmaceuticals: Key figures2008

€ million 2008 2007Change

in %

Total revenues 5,428 4,877 11

Gross margin 4,485 4,048 11

Research & Development 1,091 891 23

Operating result 655 417 57


592 821 -28



Pharmaceuticals: Total revenues and operating result 2008

Total revenues: 5,428 million €

€ million

Operating result: 655 million €

€ million

594; 91%

61; 9%

Merck Serono

ConsumerHealth Care


Pharmaceuticals: Sales 2008

€ million

Sales: € 5,089 million

664; 13%

788; 15%

678; 13%

2,959; 59%

Europe

Latin America

North America

Asia, Africa, Australasia


Merck Serono – Product portfolio

• Oncology: – Targeted cancer therapy: Erbitux®

(metastatic colorectal cancer, head and neck cancer)

– Chemotherapy: UFT® (colorectal cancer)

• Neurodegenerative Disorders:– Rebif® (multiple sclerosis)

• Fertility:– Products to help infertile couples at every stage of the reproductive cycle:

Gonal-f®, Ovitrelle®, Luveris®, Cetrotide®, Crinone®, Pergoveris™

www.merckserono.com


Merck Serono – Product portfolio

• Endocrinology:– Growth hormone disorders (Saizen®)

– HIV-associated wasting (Serostim®)

– Hyperphenylalaninemia (Kuvan®)

• CardioMetabolic Care: Integrated therapies for– Type 2 diabetes (Glucophage® family)

– Cardiovascular diseases (beta-blockers of the Concor® family)

– Thyroid disorders (Euthyrox®)

• Other therapeutic areas:– Treatment of acute cyanide poisoning (Cyanokit®)

– Maintenance of abstinence in alcohol dependency (Campral®)


Merck Serono: Sales 2008

Sales by therapeutic area Sales by product

Approx. 60%of sales generated by innovative biotech products


Merck Serono: Highlights of 2008/2009

• Total revenues amounted to € 4,987 million (2008)

• Sales of Erbitux® in 2008: € 565 million (+20%)

• Erbitux®:– NICE1: positive recommendation for 1st line use in mCRC

patients with KRAS wild-type tumors and liver limited disease

– Merck Serono has requested re-examination of the negative CHMP2 opinion on Erbitux in Non Small-Cell Lung Cancer (NSCLC)

• Sales of Rebif® in 2008: € 1331 million (+9.3%)

• RebiSmart™-1st electronic injection device in MS launched from June 2009

• Cladribine tablets - potentially the first oral treatment for MS

– Marketing Authorization Application to the EMEA submitted in July 2009; submission in preparation in other countries including the US

• Kuvan® approved in the EU; market launch in 2009 in France, Germany, Spain, UK, Greece, The Netherlands and Austria; ongoing in other countries

1 National Institute for Health and Clinical Excellence (Great Britain)2 Committee for Medicinal Products for Human Use


Erbitux®: Success in Oncology

• Merck‘s first cancer drug: one of the most successful oncology product launches in Europe

• Erbitux® – a monoclonal antibody for targeted treatment of tumors

– Specifically blocks the epidermal growth factor (EGFR)

• Approved in 76 countries* all over the worldfor treating patients:

– In various indications in metastatic colorectalcancer and in locally advanced or recurrentand/or metastatic squamous cell carcinoma of the head and neck

*not all indications are approved in all countries


Sales development of Erbitux®

€ million

Sales by Merck

110 116 118 127145 145 134 141

162 171

0

25

50

75

100

125

150

175

Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09

* The slowdown in sales growth in Q3 vs. Q2 2008 reflects the introduction of a biomarker test (KRAS test)

*


Rebif®: A leading MS therapy

• Drug (interferon 1-beta) to treat relapsing forms of multiple sclerosis (MS)

• Rebif® was first launched by Serono in Europe in 1998 and in the U.S. in 2002

– Available in more than 80 countries worldwide

– Market leader outside the U.S., continued stronggrowth in the U.S.

• A blockbuster: global sales in 2008 totaled € 1.3 billion(+9.3% over 2007)

• A new formulation has meanwhile been introduced in all countries of the European Union as well as in Canada; the new formulation was recently approved in a number of countries including Australia and Switzerland as well as in several Latin American and Asian countries


Sales development of Rebif®

581723

875

1,3311,2181,018

1,157

0

400

800

1200

1600

2002 2003 2004 2005 2006 2007 2008

€ million

Sales

Source: Company data


Pharmaceutical R&D

• In 2008, R&D spending by Merck Serono totaled € 1,074 million – equivalent to around 22% of the division’s total revenues

• A well-stocked development pipeline: currently around 30 projects in clinical development

• Focus on unmet medical needs

– Oncology: Targeted cancer therapies

– Neurodegenerative Diseases: Multiple sclerosis and Parkinson‘s disease

– Autoimmune and Inflammatory Diseases: osteoarthritis, rheumatoid arthritis, systemiclupus erythematosus (SLE)

– Fertility

– Endocrinology


Oncology research

• “Combination is key”: Development of new therapies that act on three areas:

– The tumor cell

– The tumor environment

– The immune system

• Targeted approaches to extend survival time of cancer patients and to improve their quality of life


Research into Neurodegenerative Diseases

• Discovery and development of innovative therapies to treat Neurodegenerative Diseases (multiple sclerosis, Parkinson’s disease)

• Cladribine - potentially the first oral therapy for the treatment of multiple sclerosis

• Safinamide - new prospects in the treatment of Parkinson’s disease


Consumer Health Care

• Mobility: Products to improve mobilitye.g. Flexagil®, Seven Seas®, Seven Seas® JointCare, Kytta®

• Everyday health protection: Vitamins and minerals,e.g. Bion®3, Multibionta®, Cebion®, Diabion®,

• Women’s and children’s health:e.g. Femibion®, Kidabion® (Haliborange®)

• Cough and cold:e.g. Nasivin®, Sedalmerck®

www.merck.de/consumerhealthcare

Products for self-medication


Consumer Health Care Sales 2008

€ million

Sales: € 440 million*

306; 70%

78; 18%

51; 12%

Europe

Latin America


*including € 5 million achieved in North America


Consumer Health CareHighlights 2008/2009

• Total revenues in 2008: € 442 million

• Sales growth considerably exceeds thatof the global consumer health care market

• Strategic brands further strengthened

• Focus on health themes with high consumer benefit

• Acquisition of the Belgian company Bio-Fyt expands product portfolio in Mobility, Women’s Health and Everyday Health Protection

• Successful expansion in the growth markets of eastern Europe, Asia and Latin America

Foto


Contents

The company1

Pharmaceuticals2

3 Chemicals


5 History


Chemicals: Key figures 2008

€ million 2008 2007Change

in %

Total revenues 2,123 2,150 -1.3

Gross margin 1,169 1,226 -4.6

Research & Development 143 137 4.4

Operating result 558 631 -12


477 557 -14



Chemicals: Total revenues and operating result 2008

Total revenues: € 2,123 million € million

Operating result: € 558 million € million

167; 30%

391; 70%

Liquid Crystals

Performance &Life ScienceChemicals

877; 41%

1,246; 59%


Chemicals: Sales 2008

€ million

Sales: € 2,106 million

559; 27%

142; 7%

227; 11%

1,178; 55%

Europe

Latin America

North America



Liquid Crystals

• Merck is the world‘s leading supplier of liquid crystals for liquid crystal displays (LCDs) in

– Flat screen televisions

– Notebooks and PC monitors

– Mobile telephones as well as numerous consumer electronic devices and navigation systems

• Research and distribution of liquid crystalsbegan more than 100 years ago

• We also offer organic light-emitting materials for OLEDs or new light sources

www.merck-chemicals.com/lcd-emerging-technologies


Liquid Crystals: Highlights 2008/2009

• Market and technology leadership successful maintained

• Total revenues amounted to € 877 million in 2008

• Return on sales: 44.6%

• Innovative Merck materials have supported the breakthrough of PS-VA technology (better contrasts, faster switching times, greater energy efficiency)

• Presentation of the first LCD television with 200/240 hertz technology (higher definition of fast-moving pictures, for example sports programs) – contains liquid crystals from Merck

• Superb position to maintain market leadership going forward


Laboratory Business

• Analytical Reagents

– High-purity acids, salts and alkalis

– Organic chemicals for production

– Columns, thin-film plates and solvents for

analytical chromatography (Chromolith® range)

• Mobile systems for food and environmental analysis

• Rapid tests for hygiene control and dry media cultures for

microbiological tests

• Rapid tests and other products for protein and drug

research


www.merck4pharma.com


Life Science Solutions • Products and services for the entire drug

development and manufacturing process chain– Chemical synthesis and biotech processes, analyses,

isolation and purification of chemical and biotech substances

– Pharmaceutical formulation development

• Cosmetic active ingredients

– for sun protection products (Eusolex®)– for skin care products (RonaCare®)


www.merck-chemicals.com/cosmetic-ingredients



Pigments

• Effect pigments for industrial applications (e.g. Iriodin®, Colorstream®, Xirallic®, Miraval®, Pyrisma®)

Areas of application:

– Automotive and industrial coatings

– Printing inks

– Plastics

• Effect pigments for the cosmetics industry(e.g. Ronastar®, Xirona®, Timiron®)

www.merck-chemicals.com/pigments


Performance & Life Science Chemicals: Highlights 2008/2009

• Total revenues amounted to € 1,246 million in 2008

• Return on sales: 13.4%

• Leader in its core European markets

• Strong growth in Asia and Latin America

• Sustained growth of rapid microbiological tests for detecting harmful and pathogenic microorganisms

• Expansion of the chromatography product portfolio by acquiring the Swedish firm SeQuant

• Portfolio of the Emprove® premium brand expanded (pharmaceutical raw materials)


Research & Development

• New components and mixtures for liquid crystal displays, in particular for large-format, flat-screen televisions and computer monitors using new technologies

• Organic light-emitting materials for OLEDs (organic light-emitting diodes)

• Reagents and products for instrumental analysis, chromatography, microbiology, food and environmental analysis

• Products and services for the entire process chainfrom research to market launch

• High-quality pigments with extraordinary color andluster effects, as well as functional pigments, e.g. for brand protection

Chemical research for sophisticated applications in research, industry and everday life


Contents

The company1

Pharmaceuticals2

3 Chemicals


5 History


Corporate Responsibility

We strive to achieve positive recognition for our company in all communities in which we operate worldwide. Merck gives top priority to its responsibility for health and safety and protecting the environment.

Responsibility with respect to:

– Environment

– Community

– Employees

– Products

www.responsibility.merck.de


From our Mission Statement

We, the management and employees, are striving for entrepreneurial success. Entrepreneurial success starts with people.

Our goal is to operate a worldwide business that produces meaningful benefits for consumers, our market partners and our community.


Our values

Integrity

Respect

Courage

Achievement

Responsibility

Transparency

Integrität

Respekt

Transparenz

Mut

Leistung

Verantwortung


Our values

• Courage opens the door to the future.

• Achievement makes our entrepreneurial success possible.

• Responsibility determines our entrpreneurial actions.

• Respect is the foundation of any partnership.

• Integrity ensures our credibility.

• Transparency makes mutual trust possible.


Employees

Entrepreneurial success starts with people

• We believe that talent is an important precondition, and lifelong learning a never-ending responsibility. But only the entrepreneurial thinking of our employees will make the decisive difference.

• Our corporate culture creates trust and makes innovation possible.

• Teams are an essential element of successful cooperation among our workforce of approximately 33,000.


Promoting and supporting staff

• High level of investment in advanced training

• Above-average social benefits

• Helping employees to reconcile the demands of having both a career and a family

• Employee profit-sharing

• International management development programs

• Merck Innovation Award

• Merck Award Plan for Inventions

• Employee suggestion scheme


Commitment to fighting schistosomiasis,a tropical disease

• Merck-WHO partnership agreement to fight schistosomiasis together

• Merck provides free of charge 200 million tablets of Cesol® 600(active ingredient: praziquantel) to fight schistosomiasis(total value: around USD 80 million)

• Altogether, this will permit the treatment of 27 million African school children

The worm disease schistosomiasis is one of the biggest health risks to African children after malaria. Merck has committed itself to taking on responsibility:


Social responsibilityFighting counterfeit drugs

• Merck remains the exclusive supporter of the Global Pharma Health Fund (GPHF) in the fight again counterfeit drugs in developing countries.

• The mobile compact laboratory GPHF-Minilab®

makes it possible to test drugs rapidly

• Currently, 300 of these laboratory units arein use in 70 countries

According to WHO, up to 10% of the drugs offered worldwide are either counterfeit or of deficient quality. This primarily affects people in developing countries.


Social responsibilityCultural promotion

• A very diverse concert repertoire

• Regular concert tours to many countries of Europe, Asia and Latin America

• The ensemble comprises up to 70 musicians

• “Musical Autumn”: Internationally renownedorchestras, ensembles and soloists complement the concerts of the Merck Philharmonic Orchestra at this highly acclaimed, cross-regional musical festival held every two years in Darmstadt

The Merck Philharmonic Orchestra is the company’s musical ambassador:


Contents

The company1

Pharmaceuticals2

3 Chemicals


5 History


Milestones in our history

1668Friedrich Jacob Merck (1621-1678) buys the Angel Pharmacy (Engel-Apotheke)

1827Heinrich Emanuel Merck (1794-1855) starts production on an industrial scale

Merck is the oldest pharmaceutical and chemical company in the world


Internationalization

Factory in the late 19th century

• Expansion of the product range: high-quality basic substances with “guaranteed purity” and, since 1904, finished pharmaceutical products as well

• Based on international success, subsidiaries were established in

- London (1883)

- New York (1887)

- Moscow (1899)


Merck is not the same as Merck

• World War I led to expropriation of property and Merck & Co. – founded by a grandson of Heinrich Emanuel Merck – thus became an independent American company

• Today, Merck & Co. holds the rights to the name in North America, wherewe operate as EMD; we hold the rightsto the name Merck in the rest of the world

A research lab in the 1950s

overview july 2009. copyright merck kgaa 2 contents the company 1 pharmaceuticals 2 3 chemicals 4...

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