Expenses Audited

Group marketing and selling expenses increased moderately by 1.1% to € 2,411 million (2011: € 2,386 million) but at a significantly lower growth rate than sales, reflecting the first results of the ongoing restructuring initiatives and indicating more focused discretionary spending. Through this, the ratio of marketing and selling expenses to total sales declined from 24.1% to 22.4%.

Royalty, license and commission expenses increased by 15.8% to € 580 million (2011: € 500 million), reflecting the strong performance of Rebif® as well as changes in foreign exchange rates, most notably the U.S. dollar.

Administration expenses rose by 3.1% to € 552 million (2011: € 536 million). This increase was primarily due to the fact that Merck Millipore is headquartered in the United States and the related translation effect stemming from the U.S. dollar. In addition, administration expenses in Corporate and Other increased due to higher bonus accruals.

Other operating income and expenses amounted to € –1,127 million (2011: € –417 million). Of this amount, € –664 million was classified as one-time items. Within the scope of its “Fit for 2018” efficiency program, the Group incurred € 504 million in restructuring costs (excluding impairments), incurred mainly in the Merck Serono division. In relation to in prior years discontinued businesses, reported under Corporate and Other, follow-up expenses of € 60 million were booked in 2012, in contrast to the previous year, when Merck reported a gain of € 152 which included the proceeds from the sale of the CropBioscience business. During 2012, impairments of € 59 million were classified as one-time items, with the majority related to site closures as a consequence of the restructuring. In 2011, asset impairments of € 332 million were recognized, including € 165 million for the LSB manufacturing site in Vevey.

At € 1,511 million, R&D spending remained roughly at last year’s level (2011: € 1,514 million). At 14.1%, the ratio of R&D expenses to total sales fell around one percentage point compared to 2011. Lower R&D expenses in the Merck Serono and Consumer Health divisions more than offset higher investments by Merck Millipore and Performance Materials.

Merck Group | R&D by division – 2012

Amortization of intangible assets, mainly including amortization of intangible assets in connection with the purchase price allocations of the Serono and Millipore acquisitions, declined by 13.3% to € 872 million (2011: € 1,005 million). In 2011, in addition to amortization, impairments related to three Merck Serono development products were recorded, amounting to € 149 million. The current amount more typically reflects normal levels.