In 2007, Merck completed the largest acquisition and the largest divestment in its history.

The financial position and results of operations of Merck again developed satisfactorily in fiscal 2007 – strongly influenced by the purchase of the Swiss biopharmaceutical company Serono S.A. and the sale of the Generics division. These two transactions represent the largest acquisition and the largest divestment in Merck’s history. Both events had a lasting effect on the balance sheet, the income statement and cash flow. The closing of the Serono acquisition took place on January 5, 2007. Thereafter, the company was merged with the former Ethicals division of Merck to form the new Merck Serono division and is reported for the full year in the consolidated financial statements of Merck. On October 2, 2007, Merck completed the sale of the Generics division to Mylan Inc. of the United States. The Generics division is therefore included for the first nine months in the consolidated financial statements of Merck. However, in accordance with International Financial Reporting Standards (IFRS), it is reported as a discontinued operation. In the income statement, revenues and expenses do not include the Generics business. The gain on the disposal (€3,471 million) and the earnings contribution made by Generics up until its disposal are reported in total on a separate line below the profit from continuing operations. The previous year’s presentation has been adjusted accordingly. Those parts of the business not yet sold – for which Mylan has a purchase option – are presented as assets and liabilities held for sale in the balance sheet as of December 31, 2007.

In contrast to the financial statements for 2006, we now present royalty income as a component of total revenues and inventory write-downs as a component of cost of sales. In addition, the amortization of intangible assets is reported on a separate line above the operating result. As of 2007, we no longer allocate the financial result to the operating divisions, but disclose it in the segment Corporate and Other instead. This also impacts the free cash flow of the operating divisions. The previous year’s figures are presented on a comparable basis. For more information on the reasons and the effects, please refer to the section entitled “Changes in the reporting structure” in the Consolidated Financial Statements.