Research and development Audited

Research and development spending increased by 10% to € 1,184 million in 2009. This is equivalent to 22% of the total revenues of the Merck Serono division. Our research and development activities have three main areas of focus: Oncology, where we are seeking new therapeutic options for tumors such as colorectal cancer, lung cancer, head and neck cancer, breast cancer and gastric cancer; Neurodegenerative Diseases, where we are working on new therapies for multiple sclerosis and Parkinson’s disease; Autoimmune and Inflammatory Diseases, where we are focusing on rheumatological indications. We also continue to conduct research and development work in the field of Fertility. As of December 31, 2009, the division had around 2,800 employees working in research and development.

Our research pipeline comprises ten projects in Phase III, eight in Phase II and five in Phase I. The large share of projects in the later and more costly stages of clinical development is the reason for the marked increase in our R&D spending.

We continue to position ourselves as a company with research and development expertise relevant to both small molecules as well as biopharmaceuticals. This strategy gives us the flexibility to select the most suitable approach for each medically relevant molecular target. Since our pipeline includes many promising candidates, we will continue to prioritize our projects in order to maximize opportunities and to manage risks. We also assign priority to partnerships with other companies. Our key hubs are our three R&D centers in Darmstadt, Geneva as well as Boston. In addition, we plan to establish an R&D center in Beijing in order to better address the Asian region and to facilitate local clinical trials. From 2010 to 2013, we will invest € 150 million and create 200 highly qualified positions there. The expansion work is proceeding as scheduled at our site in Boston, where we are investing a total of US$ 65 million. The new research center is expected to be completed by the end of 2010 and will accommodate around 200 scientists.