Business development in 2012 Audited

In 2012, Merck delivered a strong business performance while significantly transforming the company. Total revenues of the Merck Group rose 8.7% to € 11,173 million (2011: € 10,276 million). This increase reflects 4.8% organic growth, a 3.6% benefit from changes in foreign exchange rates, and a 0.3% effect from acquisitions. At € 432 million (2011: € 370 million), royalty, license and commission income, which is disclosed as part of total revenues, was € 62 million higher than in 2011. This was primarily due to higher royalty income related to Humira® and the stronger U.S. dollar.

Sales grew by 8.4% to € 10,741 million (2011: € 9,906 million) reflecting a 4.5% organic increase, 3.6% growth based on changes in foreign exchange rates and 0.3% growth due to acquisitions. On an absolute basis, Merck Serono was the strongest contributor to organic sales growth followed by Merck Millipore and Performance Materials.

Merck Group | Sales by region – 2012

From a regional perspective, North America generated low double-digit organic sales growth, expanding its contribution to 20% of Group sales (2011: 18%). This resulted from strong organic sales growth of the Merck Serono prescription medicines portfolio, particularly the MS treatment Rebif® and to a smaller extent recovering sales of Pigments & Cosmetics products in the Performance Materials division. The Emerging Markets region, consisting of Latin America and Asia (excluding Japan), also slightly increased its share of sales to 35% (2011: 33%). The region grew organically by a high single-digit rate to which all four divisions contributed. Europe reported a 1.6% decline in organic sales triggered by flat to declining organic sales in all divisions except for Merck Millipore. Accordingly, Europe’s contribution to Group sales decreased to 37% in 2012, representing a continuous decline from 46% three years ago. This development is primarily due to the Millipore acquisition which included a strong U.S. franchise, a revised U.S. marketing and pricing strategy of Merck Serono as well as softening economic conditions and pricing pressures in the eurozone. Sales in the Rest of World region, which comprises Japan, Africa, and Australia/Oceania, increased by 9.6%, generating an unchanged 9% of Group sales.

Gross profit increased by 7.0% to € 8,015 million (2011: € 7,491 million), or 74.6% as a percentage of sales (2011: 75.6%). Higher start-up costs for Merck Serono’s Large-Scale-Biotech (LSB) manufacturing site in Vevey (Switzerland) as well as idle costs in production and selected factory shut-downs as a result of initiatives to lower inventories in the Performance Materials and Merck Millipore divisions lowered the gross margin compared to 2011.