Forecast for the pharmaceutical sector in general
The market research institute IMS Health expects global sales of pharmaceuticals to increase in 2010 by 4% to 6% to between US$ 820 billion and US$ 830 billion.
The U.S. market is expected to grow by the same rate in 2010 to a volume ranging between US$ 310 billion and US$ 320 billion. According to IMS Health, the five largest markets of Europe will grow in the range of 1% to 3% in 2010 and will achieve sales of between US$ 145 billion and US$ 155 billion. Market researchers expect developments in Japan to range from stagnation to a 2% decline, meaning that this market is likely to then have a volume of between US$ 86 billion and US$ 90 billion in 2010.
According to the forecasts, up to 2013, the global pharmaceutical market will grow at an annual average rate of between 4% and 7% to a volume of up to US$ 1,005 billion. Up to 2013, the U.S. market alone is expected to expand by an average of 2% to 5% per year, while the five largest markets of Europe and Japan are expected to grow by between 1% and 4% annually. IMS Health sees the highest growth rates in emerging countries, which are expected to show average market growth of 13% to 16% per year to between US$ 160 billion and US$ 190 billion. These include the four BRIC countries (Brazil, Russia, India and China) as well as Turkey, South Korea and Mexico. These seven countries will account for a 12% to14% share of the global pharmaceutical market in 2010. China’s pharmaceutical market is expected to grow more than 20% annually, accounting for a 21% share of global market volume by 2013. IMS Health expects China to supersede Germany as the world’s third-largest pharmaceutical market in 2011. In 2013, the United States will rank first, followed by Japan, China, Germany and France.
Forecast for the Merck Serono division
For the Merck Serono division, we expect an increase in total revenues in a range of between 2% and 5% in 2010, based on € 5,345 million in 2009. Regarding the operating result, following the low level of € 355 million in 2009, we want to achieve an increase ranging between 30% and 40%. Likewise, we expect both total revenues and the operating result to increase in 2011.
The multiple sclerosis and cancer therapy markets are very important to Merck. IMS Health expects the global market for oncology medicines to grow by 13% in 2010 and by 10% in 2011. The importance of the markets of Europe and Japan will rise as the dominance of the U.S. market declines. Evaluate Pharma, another market research institute, expects that the market for oncology medicines will grow by an annual average rate of 6% to a volume of US$ 70 billion by 2014. Consequently, oncology is and will remain the largest prescription drug market. Evaluate Pharma estimates that the multiple sclerosis therapy market will increase by 5% annually up to 2014.
With respect to research and development, as in 2009, for the Merck Serono division we will post a research ratio exceeding the target of 20%. This is attributable to the high number of clinical trials in Phase III, the final, most expensive stage of clinical testing prior to the submission of a marketing authorization application. Merck Serono currently has 23 projects in its development portfolio covering the therapeutic areas of Oncology, Neurodegenerative Diseases, Autoimmune and Inflammatory Diseases, and certain areas of Endocrinology.
We see important opportunities and risks for the Merck Serono division closely linked to the successful launch of new products. The focus in 2010 and 2011 will be on the market launch of cladribine. As an oral therapy for the treatment of relapsing-remitting multiple sclerosis, cladribine tablets have high market potential and therefore represent significant opportunities for the division and for Merck as a whole. Yet cladribine is exposed to risks that are not to be underestimated up until its successful launch in individual markets. This generally applies also to all other compounds in this very advanced stage of pharmaceutical development. However, at this point in time, a conclusive statement may not yet be derived from the refuse to file letter issued by the U.S. Food and Drug Administration (FDA) for cladribine in the fourth quarter. Importantly, the refuse to file cannot be equated with a final rejection of marketing approval since we are closely coordinating with the FDA on a successful resubmission of the application. Aside from commercializing products we have developed in-house, opportunities and risks also exist with respect to product rights that are in- and out-licensed, as is customary in the pharmaceutical industry.
Moreover, the existing business offers growth opportunities, particularly in markets such as Asia – especially China – Russia and Latin America, as well as in the further development of existing products (life cycle management), for example with new dosage forms.
Forecast for the Consumer Health Care division
For the Consumer Health Care division, we assume that total revenues will increase by between 5% and 10% in 2010. Our expectations for the division thus clearly exceed standard estimates by external market researchers. They expect that consumer purchasing restraint will continue in 2010 since consumers first start to cut voluntary spending and do not save on purchases of prescription medicines. Nicholas Hall, a market researcher specializing in the over the counter (OTC) drug market, assumes that global sales of OTC medicines will increase by 3.2% in 2010, while sales in Europe is expected grow by 1.9%. At 6.1%, Asia is expected to show comparatively strong growth, followed by Latin America at 4.2%. According to these forecasts, the Japanese OTC market is stagnating.
Merck assumes that the operating result of the Consumer Health Care division will either remain unchanged or will decline by up to 10% in 2010. We are planning, in particular, to increase spending on research and marketing activities. Merck is optimistic that the division will increase total revenues and the operating result in 2011.
Besides the development outlined, opportunities will arise for the division if economic recovery proceeds more quickly and consumer purchasing restraint recedes. Opportunities will also offer themselves if the division succeeds in accelerating the market launch of new products or in penetrating new regional markets. Risks for the business relate to the fact that against the backdrop of the ongoing economic crisis, consumers will continue to save on OTC products. Moreover, a changed health care policy framework could have a negative impact on the business.
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