Business Review and Results Presentation
Full Year 2007
Dr. Karl-Ludwig Kley (Chairman of the Executive Board), Dr. Michael Becker (CFO)
February 18th, 2008
Disclaimer
Remarks
All comparative figures relate to the corresponding last year’s period. From 2007 the Generics business is reported in
“discontinued operations”. According to IAS the comparable 2006 numbers are adjusted accordingly. If not otherwise
stated, 2006 figures are pro-forma, i.e. include the Serono business. The legal view (without Serono in 2006) is outlined in
the separate annual report. With the divestiture of Electronic Chemicals in Q2 2005 this division and the remaining toll
manufacturing business are allocated to Corporate & Other. If not otherwise stated all outlined numbers are referring to
FY 2007. Return on Sales (ROS) calculation is based on total revenues.
Important Information
This presentation does not constitute an offer of securities for sale or a solicitation of an offer to purchase securities in the
United States. The shares referred to herein have not been and will not be registered under the U.S. Securities Act of
1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration under the
Securities Act or an available exemption from such registration.
Note regarding forward-looking statements
The information in this document may contain “forward-looking statements.” Forward-looking statements may be identified
by words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “will” or words of similar
meaning and include, but are not limited to, statements about the expected future business of Merck KGaA resulting from
the proposed transaction. These statements are based on the current expectations of management of Merck KGaA and
E. Merck OHG, and are inherently subject to uncertainties and changes in circumstances. Among the factors that could
cause actual results to differ materially from those described in the forward-looking statements are factors relating to
satisfaction of the conditions to the proposed transaction, and changes in global, political, economic, business,
competitive, market and regulatory forces. Merck KGaA and E. Merck OHG do not undertake any obligation to update the
forward-looking statements to reflect actual results, or any change in events, conditions, assumptions or other factors.
2007 - Record Results in a Year of Change
Page 2
2007 – Record Results in a Year of Change
Dr. Karl-Ludwig Kley (Chairman of the Executive Board)
February 18th, 2008
2007 – An Outstanding Year
• Total revenues organically up 9.7% to €7.1bn
• Core operating result (OR) increased by 25% to €1.8bn
• Return on revenues (ROS) improved to 24.8%
• Profit after tax doubled to €3.5bn
• Dividend proposal 2007 per share:
€1.20 + €2.00 bonus
2007 - Record Results in a Year of Change
Page 4
Portfolio Management
Focused on Profitable Growth
9 Divisions in 2003
Laboratory Distribution
Analytics & Reagents
Pigments
Liquid Crystals
Pharma
Ethicals
Consumer Health Care
4 Divisions in 2007
Chemicals
Life Science Products
Performance & Life Science Chemicals
Pharma
Chemicals
Electronic Chemicals
Merck Serono
Liquid Crystals
Consumer Health Care
Generics
Sustain. Change. Grow.
2007 - Record Results in a Year of Change
Page 5
Pharmaceuticals
Portfolio Evolution Through Focus on Specialties
Merck Serono – Lifting Merck‘s Pharma Business into a New League
• Serono acquisition results in step-up of cash flow and profitability
• Total revenues grew organically by 11% to €4.5bn
• Core ROS jumped to 25.2%
• Growth drivers: Erbitux® (+41%) and Rebif® (+10%)
• Strengthened market position in US
• World-class biopharmaceutical know-how
• Definition of four therapeutic core areas
• Improved pipeline - attractive partnership agreements signed
• Integration used to improve processes
2007 - Record Results in a Year of Change
Page 6
Pharmaceuticals (2)
Portfolio Evolution Through Focus on Specialties
CHC – Focus on Strategic Brands Paying-Off
• Total revenues up organically by 6.8% to €420m
• Growing faster than OTC market
• ROS increased to 14.2%
Generics – Divested to Focus on Growth in Specialty Pharmaceuticals
• Transaction signed with Mylan Inc., US in May 2007
• Transaction completed and closed within only five months
• Net profit: €3.5bn
2007 - Record Results in a Year of Change
Page 7
Chemicals
Ongoing Growth and Healthy Returns
Liquid Crystals – Setting the Standards
• Organic total revenues grew 14.2% to €916m; ROS: 53.1%
• Leading in product quality and technology
• Continued focus on innovation to meet customer needs
• Ongoing capacity expansions to grow our customers
Performance and Life Science Chemicals – A Solid Business
• Total revenues at €1.2bn (+4.7% organically); ROS 11.7%
• Sales growth driven by continuous innovations in numerous niches
• Customer intimacy approach to deliver individual solutions
2007 - Record Results in a Year of Change
Page 8
Financial Strength
Despite €10bn Serono Investment
• Capital increase of €2.1bn
• Strong cash-flow generation
• Net proceeds from Generics disposal
• Special Dividend for 2007
• Financial discipline is Merck’s cornerstone for future growth
2007 - Record Results in a Year of Change
Page 9
Agenda 2008
Build the Businesses
• Growth driven by global strategy and
local entrepreneurship
• Deliver new pharmaceutical compounds based
on newly installed R&D processes
• Our best-of-both-worlds approach makes us
a preferred partner and the employer of choice
Sustain. Change. Grow.
2007 - Record Results in a Year of Change
Page 10
The Way Forward in 2008
• 2008 is the Erbitux® year
– New indications shall drive growth in the coming years
• Rebif® expected to grow continuously
• Ongoing volume growth for liquid crystal materials with
continuing high profitability levels
• Merck will deliver!
Sustain. Change. Grow.
2007 - Record Results in a Year of Change
Page 11
Results Presentation - Full Year 2007
Dr. Michael Becker (CFO)
February 18th, 2008
Merck Delivered
• Total revenues up 5.4%
• Operating result (OR), legal view: +22%
• Core OR up to €1.8bn (+25%)
• Core EPS +85% to €5.21
• Generics disposal generates €3.5bn net profit
• Underlying tax rate 28.2%
• Underlying free cash flow of €1.0bn
• Strong balance sheet with net financial debt of €355m
2007 - Record Results in a Year of Change
Page 13
Growth Held Back by Currency
Total Revenues by Quarter
€m
2006
2007
+9.3%
+0.1%
1.50 1.48
2006
2007
2008
+4.7%
+7.9%
1.40
1.37
1.30
1.26
1,806
1,795
1,741
1,713 1,715
1,643
USD/€ Rate (Annual Moving Average)
1,725
1,615
1.20
Q1
Q1
Q2
Q2
Q3
Q3
Q4
Q4
1.10
Jan
Aug Sep
Sep Oct Nov
Nov Dec
Dec
Jan Feb Mar
Mar Apr
Apr May Jun Jul Aug
2007 - Record Results in a Year of Change
Page 14
Operational Leverage Continues
Group Total Revenue and Core OR
€m
• Overall healthy P&L structure:
2006
2007
+5.4%
• Cost of sales –1.5%
7,057
6,695
• Total revenue +5.4%
+25%
Gross margin +8.0%
1,752
• Marketing & Selling +4.4%
1,406
• Administration –11.2%
Core OR +24.7%
PROFITABLE GROWTH!
Total Revenue
Core OR
2007 - Record Results in a Year of Change
Page 15
Core EPS
Reconciliation to Core Profit After Tax
€m
775.6
–319.3
1,124.5
153.6
556.7
65.9
–108.0
Net Income
reported
PAT
(continuing
Operations)
Amortization
Amort
IA
of
Intangible
Assets
Merck Serono
Impairments
Impairments
Restructuring
Restruc.
Costs
Exceptionals
Exceptionals
Tax Adjustments
Tax
Core Profit
Core
After PAT
Tax
2007 - Record Results in a Year of Change
Page 16
Strong Balance Sheet
Balance Sheet Structure 2006/2007
€m
Total
€14.9bn
Total
€14.9bn
• As per Dec. 31, 2007 Serono
added:
992
– Goodwill €1.3bn
3,702
– Other intangible assets €6.2bn
(€6.9bn as per Jan. 01, 2007)
3,490
1,347
Total
€8.1bn
Total
€8.1bn
• Net debt €355m
1,185
593
1,902
8,165
1,112
4,666
1,282
1,064
1,780
2006
8,688
Cash + Other
Financial Assets
Other Assets
3,807
2,275
Intangible Assets
2007
Property, Plant +
Equipment
2006
2007
Liabilities
Financial debt
Pension
Provisions
Equity
2007 - Record Results in a Year of Change
Page 17
Merck Serono
Key Figures
Total Revenues
€m
2006
2007
+7.4%
• Core OR up 48% to €1.1bn driven by:
– Cost of sales –5.6%
– Selling expenses +3.7%
– Administration expenses –17.5%
4,458
4,150
• Integration costs of €154m;
synergies in P&L €66m
Core Operating Result
€m
2006
2007
+48%
• R&D costs down to €879m following
portfolio review and synergies (€34m)
• Underlying free cash flow €774m
1,125
762
2007 - Record Results in a Year of Change
Page 18
Key Figures by Divisions
Merck Serono
€m
Sales
Royalty income
Total revenues
Cost of sales
in % of Sales
SGA
in % of Revenues
Thereof restructuring costs
Thereof Serono impairments
R&D
in % of Revenues
Amortization
of intangible assets
Core Operating result
before PPA and restructuring, etc.
Free cash flow
before acquisitions & disposals
Core ROS
(Return on total revenues)
Δ in % FY 2007
FY 2006
Δ in %
4,187.0
270.7
4,457.7
-693.1
3,893.7
256.0
4,149.7
-734.0
7.5
5.7
7.4
-5.6
16.6
18.9
30.4
-1,981.0
-1,734.8
14.2
45.9
0.0
0.0
…
44.4
-153.6
-65.9
41.8
0.0
0.0
…
…
-189.9
-238.7
-20.5
-878.6
-917.5
-4.2
16.6
22.4
19.7
22.1
-133.9
-6.5
...
-548.5
-25.6
…
275.5
133.8
105.9
1,124.8
762.4
47.5
73.4
221.3
-66.8
774.4
706.2
9.7
24.0%
12.6%
25.2%
18.4%
Q4 2007
Q4 2006
1.074.6
71.4
1,146.0
-170.2
997.1
68.7
1,065.8
-202.9
15.8
20.3
-638.8
-489.7
55.7
-75,0
-53.6
7.8
3.8
7.5
-16.1
2007 - Record Results in a Year of Change
Page 19
Merck Serono
Strong Growth in Defined Therapeutic Core Areas
FY2007 sales up 10% to €1,218m – Q4 up 11%
• Rebif New Formulation approved by EMEA in August, launched in
23 countries
• US sales up 18% FY2007, gaining market share;
9% price increase in November 2007
FY2007 sales up 41% to €470m – Q4 up 36%
• Erbitux is approved in 69 countries, for mCRC in 68 countries and for H&N in 61
countries
• Retrospective study data analysis indicates Erbitux has better efficacy in mCRC patients
with KRAS wild-type tumors
FY2007 sales up 38% to €76m – Q4 up 18%
• Continuing market penetration and education
All growth rates are organic growth rates.
2007 - Record Results in a Year of Change
Page 20
Merck Serono
Robust Development of Established Brands
FY2007 sales up 6% to €434m – Q4 increase by 11%
• Global leading fertility treatment – approved in more than 100 countries
• New generation pen started to launch in Q4
• Regaining market share in the US
• Introduction supports Saizen growth hormone brand differentiation. Approved in
25 countries (including US since 11/07). Saizen® sales up 2% to €163m
• Classical product portfolio amounts to €1,640m (+9% FY) – Q4 up 10%
Broad growth driven by
Family (+11%)
(+13%)
Family (+9%)
All growth rates are organic growth rates.
2007 - Record Results in a Year of Change
Page 21
Merck Serono
Recent Pipeline Changes since Q3 Reporting
Trial initiations
• Phase II/III for atacicept in lupus nephritis
• Phase III MOTION study (Safinamide+dopamine agonist in patients with early
stage Parkinson’s disease)
Collaborations
• Licensing and collaboration agreement with Idera for TLR9 agonists
• Merck Serono and Takeda decided to no longer jointly pursue development of
matuzumab
Terminations
• Glenmark/DPPIV
2007 - Record Results in a Year of Change
Page 22
Merck Serono
Pipeline Catalysts 2008
Labels/new indications and new markets
• CHMP opinion expected for amended Erbitux® label for mCRC
• EMEA Erbitux® filing – 1st line NSCLC and 1st line SCCHN
• Japanese regulatory decision – Erbitux® for mCRC
• Erbitux® 1st line NSCLC (FLEX) data presentation at a medical conference
• CHMP opinion expected for sapropterin for HPA/PKU, filed with EMEA in
Q4 2007
Trial initiations
• Erbitux® Phase III trial in gastric cancer (EXPAND)
• Phase III trial with cilengitide in glioblastoma
• Atacicept Phase II/III study for SLE
2007 - Record Results in a Year of Change
Page 23
Consumer Health Care
Key Figures
Total Revenues
€m
2006
2007
+5.0%
• Merck’s OTC business is among fastest
growing leading OTC companies (#4)
• 16% increase in R&D
• ROS FY 14.2%, Q4: 15.9%
420
400
• Underlying free cash flow €47m
Operating Result
€m
2006
2007
+9.4%
55
60
2007 - Record Results in a Year of Change
Page 24
Key Figures by Divisions
Consumer Health Care
Q4 2007
Q4 2006
108.5
0.4
108.9
-35.4
102.5
0.4
102.8
-36.3
32.7
35.4
-51.7
-54.4
47.5
52.9
-3.9
-2.7
3.5
2.6
Operating result
17.3
8.9
Free cash flow
18.5
17.6
15.9%
8.6%
€m
Sales
Royalty income
Total revenues
Cost of sales
in % of Sales
SGA
in % of Revenues
R&D
in % of Revenues
before acquisitions & disposals
ROS
(Return on total revenues)
Δ in % FY 2007
FY 2006
Δ in %
418.2
1.5
419.7
-136.0
398.3
1.5
399.7
-135.8
5.0
3.4
5.0
0.1
32.5
34.1
-210.0
-197.2
50.0
49.3
-12.0
-10.4
2.9
2.6
95.0
59.6
54.5
9.4
5.1
46.9
58.7
-20.1
14.2%
13.6%
5.9
-1.8
5.9
-2.3
-4.9
43.2
6.5
15.6
2007 - Record Results in a Year of Change
Page 25
Liquid Crystals
Key Figures
Total Revenues
€m
2006
2007
+2.3%
895
• Currency effect –8.7%
• Acquisition effect –3.2%
• Ongoing capex investments to support our
business (€49m in 2007)
916
• 53.1% ROS for FY and 53.0% in Q4 2007
• Underlying free cash flow €425m
Operating Result
€m
2006
2007
+0.1%
486
487
2007 - Record Results in a Year of Change
Page 26
Key Figures by Divisions
Liquid Crystals
Q4 2007
Q4 2006
246.9
1.5
248.4
-89.8
253.4
0.6
253.9
-75.2
36.4
29.7
-8.0
-6.8
3.2
2.7
-18.0
-16.6
7.3
6.5
Operating result
131.7
154.6
Free cash flow
138.8
148.7
53.0%
60.9%
€m
Sales
Royalty income
Total revenues
Cost of sales
in % of Sales
SGA
in % of Revenues
R&D
in % of Revenues
before acquisitions & disposals
ROS
(Return on total revenues)
Δ in % FY 2007
FY 2006
Δ in %
909.4
6.3
915.7
-304.4
892.4
2.7
895.0
-303.0
1.9
136.4
2.3
0.4
33.5
34.0
-42.5
-35.8
4.6
4.0
-78.7
-66.7
8.6
7.5
-14.8
486.6
486.1
0.1
-6.7
424.8
371.9
14.2
53.1%
54.3%
-2.5
164.5
-2.2
19.4
17.9
8.7
18.9
18.0
2007 - Record Results in a Year of Change
Page 27
Performance & Life Science
Key Figures
Total Revenues
€m
2006
2007
+1.5%
• One-time restructuring costs of €20m
weighed on ROS (11.7%)
• R&D expenses down (–13%) due to
advancing projects to product launches
1,217
1,235
• Underlying free cash flow €132m
Operating Result
€m
2006
2007
–7.0%
155
144
2007 - Record Results in a Year of Change
Page 28
Key Figures by Divisions
Performance & Life Science
Q4 2007
Q4 2006
294.6
0.6
295.2
-155.0
293.0
0.6
293.6
-144.4
52.6
49.3
-100.9
-95.5
34.2
32.5
-15.2
-18.1
5.1
6.2
Operating result
23.3
34.9
Free cash flow
42.6
49.3
7.9%
11.9%
€m
Sales
Royalty income
Total revenues
Cost of sales
in % of Sales
SGA
in % of Revenues
R&D
in % of Revenues
before acquisitions & disposals
ROS
(Return on total revenues)
Δ in % FY 2007
FY 2006
Δ in %
1,231.3
3.5
1,234.8
-619.7
1,213.3
3.4
1,216.7
-603.9
1.5
3.1
1.5
2.6
50.2
49.8
-409.9
-388.9
33.2
32.0
-58.3
-66.7
4.7
5.5
-33.3
144.4
155.4
-7.0
-13.6
131.8
154.4
-14.6
11.7%
12.8%
0.5
5.0
0.5
7.4
5.6
-16.4
5.4
-12.6
2007 - Record Results in a Year of Change
Page 29
Business Outlook 2008
Division
Total revenues
Core ROS
in %
in %
Merck Serono
+ 7 – 11
23 – 27
Liquid Crystals
+ 5 – 10
47 – 52
Merck Group
+5–9
23 – 27
2007 - Record Results in a Year of Change
Page 30
Investor Relations Events
Mar 28, 2008
Annual General Meeting
Jahrhunderthalle Frankfurt
April 23, 2008 Publication of business results for Q1 2008
Conference Call
July 23, 2008
Publication of business results for Q2 2008
Conference Call
Oct 27, 2008
Publication of business results for Q3 2008
Conference Call
2007 - Record Results in a Year of Change
Page 31
FY 2007 Analyst Meeting
Questions
&
Answers
The Details
2007 - Record Results in a Year of Change
Page 32
FY 2007 Analyst Meeting
Back-Up
2007 - Record Results in a Year of Change
Page 33
Key Figures
Continuing Operations Pro-forma
€m
Q4 2006 Δ in %
Q4 2007
FY 2007
FY 2006 Δ in %
Total revenues
1,805.7
1,724.6
4.7
7,057.1
6,694.9
5.4
Gross Margin
1,349.0
1,258.2
7.2
5,277.3
4,887.4
8.0
430.9
314.7
36.9
1,752.2
1,405.6
24.7
-105.9
211.4
…
-87.8
1,391.8
…
-0.53
0.30
…
-0.50
4.06
…
1.21
0.70
72.9
5.21
2.82
84.8
248.5
423.3
-41.3
977.7
1,171.1
-16.5
53.2
-0.6
28.2
15.3
Operating result
(before PPA, Serono restr. Costs, etc.)
Profit after Tax
EPS (reported in €)
Core EPS (in €)
Free Cash Flow
(before acquisitions and disposals)
Underlying Tax rate (in %)
Total Revenues
€m
1,806
1,795
2006
2007
Q3
Q4
2006
2007
25.2
23.9
22.9
Q2
(Core ROS) in %
27.3
1,741
1,715
Q1
Return on Sales (before PPA, etc.)
Q1
Q2
Q3
Q4
2007 - Record Results in a Year of Change
Page 34
Income Statement
Pro-forma
€m
Sales
Q4 2006 Δ in %
FY 2007
FY 2006 Δ in %
1,731.9
1,654.3
4.7
6,775.1
6,431.3
5.3
73.8
70.2
5.1
282.0
263.5
7.0
1,805.7
1,724.6
4.7
7,057.1
6,694.9
5.4
-136.2
-8.5
…
-556.7
-33.1
…
166,1
306.2
-45.8
976.0
1,372.5
-28.9
-213.6
-111.0
92.4
-775.6
232.6
…
EBIT
-47.5
195.1
…
200.4
1,605.1
-87.5
Financial result
-57.6
-22.0
161.9
-311.3
-24.7
…
Profit before tax
-105.1
173.1
…
-110.9
1,580.4
…
-0.8
38.3
…
23.1
-188.6
…
-105.9
211.4
…
-87.8
1,391.8
…
3,501.0
70.2
…
3,608.0
194.9
…
-8.4
-1.1
…
-20.2
-18.4
9.7
3,386.7
280.5
…
3,500.1
1,568.3
123.2
15.58
0.67
…
16.21
5.07
…
Royalty income
Total revenues
Amortization of intangibles
Operating result
Exceptionals
Income tax
Profit after tax continuing
operations
Profit after tax discontinued
operations
Minorities
Net Profit
Earnings per share (€)1 reported
1
Q4 2007
According to IAS 33 EPS is calculated on the average weighted number of shares (Q4: 217.4m; FY 2007: 215.9m).
2006 EPS does not include Serono.
2007 - Record Results in a Year of Change
Page 35
Revenue Analysis
Continuing Operations FY2007
Total Revenues Growth Analysis in %
Acq./Divest
Organic
Currency
Total Revenues by Division in %
7.4
7.2
5.0
5.4
6.8
10.7
10.3
7.2
1.8
– 0.1
9.7
-0.5
10.3
8.7
-3.0
Pharma
– 0.1
-3.1
Merck Serono
-1.2
1.8
14.2
-5.6
-3.8
Merck Group
8.7
-1.2
Pharma
CHC
2.3
-0.1
-3.0
-1.8
Chemicals
1.5
4.7
+0.2
-3.2
-3.3
-5.6
-8.7
Chemicals
Liquid Crystals
PLS
2007 - Record Results in a Year of Change
Page 36
Core EPS Calculation
Continuing Operations
€m
Q1 2007
Q2 2007 Q3 2007
Q4 2007
FY 2007
Profit after tax (cont. operations after minorities)
-64.5
42.9
27.9
-114.4
-108.0
+ Amortization of intangible assets(IA)1
140.2
0.0
140.6
0.0
139.8
12.2
136.2
53.6
12.1
34.3
32.2
75.1
195.7
183.0
183.3
213.7
556.7
65.9
153.6
775.6
-35.9
-106.8
-76.4
-100.1
-319.3
247.4
294.1
319.0
264.0
1.17
1.35
1.47
1.21
1,124.5
5.21
+ Impairment of Serono assets - following Purchase Price Allocation
+ Restructuring/integration costs Serono
+ Exceptionals
./. Tax adjustment from amortization of IA, restructuring costs and
exceptionals
Core profit after tax
Core EPS2 (in €)
Core EPS3
€
1.35
1.17
1.01
1.47
0.95
1.21
1.05
Q2
1) Primarily from Serono acquisition.
2) According to IAS 33 EPS is calculated on the average weighted
number of shares (Q1: 211.4; Q2: 217.4; Q3: 217.4; Q4:
217.4m; FY 215.9m).
3) 2006 numbers show historical EPS for underlying business,
which means excluding Exceptionals and including Generics.
0.84
Q1
2006
2007
Q3
Q4
2007 - Record Results in a Year of Change
Page 37
Exceptionals
€m
Q1 2007
Q2 2007
Q3 2007
Q4 2007
FY 2007
-183.5
-183.5
-183.5
-183.5
-734.0
-11.8
0.1
0.2
-
-11.5
-0.4
0.4
0.0
-
0.0
Environmental expenses
-
-
-
-38.5
-38.5
Restructuring
-
-
-
2.0
2.0
Reversal EC Provision
-
-
-
6.4
6.4
-195.7
-183.0
-183.3
-213.6
-775.6
Amortization inventories Serono
(PPA)
Sale of Genmab shares
Generics transaction cost
Total
2007 - Record Results in a Year of Change
Page 38
Financial Result
Q4 2007
Q4 2006
Δ in %
FY 2007
FY 2006
Δ in %
-57.6
-22.0
161.9
-311.3
-24.7
…
Interest result
-51.5
11.7
…
-262.8
42.0
…
Interest on pens. provisions
-16.0
-14.1
13.9
-59.5
-55.1
8.0
Currency gains/losses
8.7
-5.2
…
8.5
-8.9
…
Other income from fin. Inv.
1.2
0.0
…
2.5
11.6
-78.4
-0.0
-14.4
…
0.0
-14.3
…
€m
Financial result
Measurement of
interest swaps
2007 - Record Results in a Year of Change
Page 39
Income Tax
Continuing Operations
Q4 2007
Q4 2006
Δ in %
FY 2007
-0.8
38.3
…
23.1
-188.6
…
Income taxes - actual period
-40.9
-58.8
-30.5
-235.5
-284.7
-17.3
Income taxes - previous
periods
-36.5
11.8
…
-29.9
14.9
…
Deferred taxes
19.6
48.7
-59.6
78.1
63.5
23.1
Income tax - exceptional items
-0.1
12.4
…
-0.1
-8.5
-99.2
Deferred taxes – exceptional
items
57.0
24.3
135.1
210.3
26.2
…
€m
Income tax
FY 2006 Δ in %
2007 - Record Results in a Year of Change
Page 40
Adjustments for Exceptionals
Continuing Operations
€m
Q4 2007 Q4 2006
Δ in % FY 2007
Profit before tax
-105.1
173.1
…
Exceptionals
-213.6
-111.0
92.4
Profit before tax before exceptionals
108.5
284.2
-61.8
Income tax before exceptionals
-57.8
1.6
…
Profit after tax before exceptionals
50.7
285.8
-82.2
Tax rate before exceptionals (%)
53.2
-0.6
FY 2006
Δ in %
-110.9 1,580.4
…
-775.6
232.6
…
664.8 1,347.8
-50.7
-187.2
-206.4
-9.3
477.6 1,141.4
-58.2
28.2
15.3
2007 - Record Results in a Year of Change
Page 41
Balance Sheet
€m
12/31/2007 09/30/2007
12/31/2007
09/30/2007
14,922
16,541
100
100
3,826
992
11,097
1,792
2,275
5,339
576
11,202
1,754
2,233
26
7
74
12
15
32
3
68
11
13
Equity and liabilities
14,922
16,541
100
100
Current liabilities
2,571
300
3,664
1,047
1,185
2,857
670
7,968
5,313
1,240
17
2
25
7
8
17
4
48
32
7
8,688
5,715
58
35
355
5,407
Assets
Current assets
thereof: Cash & Cash equi./Fin. Investments
Non-current assets
thereof: Goodwill
Property, plant and equipment
thereof: Financial liabilities
Non-Current liabilities
thereof: Financial liabilities
Pension and other post-emp. Benef.
Equity
Net financial debt
% of total
% of total
2007 - Record Results in a Year of Change
Page 42
Serono Acquisition
Final Purchase Price Allocation
Reported
31.12. 2007
€m
Acquisition costs Serono shares
10,271
Equity adjusted
-2,415
Amortization
FY 2007
Difference for allocation
7,856
Goodwill
1,339
Other intangible assets
6,819
-531
Tangible assets
112
-11
Step-up inventories
734
-734
-1,053
257
Deferred tax
Liabilities/provisions
-95
2007 - Record Results in a Year of Change
Page 43
Free Cash Flow
€m
Q4 2007
Q4 2006
FY 2007
FY 2006
Profit after tax
3,395.1
281.6
3,520.2
1,586.7
Depreciation
75.6
109.9
287.5
355.1
Amortization
194.9
22.1
636.1
48.5
35.3
-15.4
-191.9
-251.9
-106.8
-124.9
-282.8
-375.7
Other
1,483.2
-979.4
-5,442.3
-1,841.6
Free cash flow
5,077.3
-706.1
-1,473.1
-478.9
-
1,120.3
7,279.6
1,575.4
-4,828.8
-
9.1
-4,828.8
-
74.6
248.5
423.3
977.7
1,171.1
Working capital
Capital expenditure
Serono
Generics disposal
Other acquisitions/divestitures
FCF before acquisitions & divestitures
2007 - Record Results in a Year of Change
Page 44
Merck Serono
Key Pharma Products
Indication Area
Product
Q4 2007
€ million
Δ in %
Organic
Growth
Δ in %
FY 2007
€ million
Δ in %
Organic
Growth
Δ in %
Neurodegenerative
Diseases
Rebif ®
316.7
5
11
1.128
5
10
Oncology
Erbitux®
126.6
33
36
470.2
40
41
Fertility
Gonal-f®
109.0
7
11
434.2
2
6
Autoimmune &
Inflammatory
Raptiva®
19.3
17
18
76.3
37
38
87.6
2
5
379.0
9
11
67.4
14
19
265.9
7
9
34.2
3
4
135.7
8
9
Neurobion Products
33.9
8
15
150.2
7
12
Saizen®
42.3
0
5
163.1
-2
2
Concor®
Bisoprolal Products
CardioMetabolic
Care
Glucophage®
Metformin Products
Euthyrox®
Thyroid Products
Neurobion®
Others
2007 - Record Results in a Year of Change
Page 45
Merck Serono Portfolio
18 February 2008
Phase I
Phase II
Phase III
Adecatumumab (MT201)
EpCAM-expressing tumors
Atacicept
Multiple Sclerosis
Rebif New Formulation in CIS
(REFLEX)
Aurora Kinase Inhibitor
AS703569
Solid tumors and hematological
malignancies
Erbitux® (cetuximab)
Breast cancer
Oral cladribine tablets
Relapsing forms of MS
Matuzumab (EMD 72000)
EGFR-expressing tumors: NSCLC
Safinamide
Early stage Parkinson’s
Atacicept
Hematological malignancies
Matuzumab (EMD 72000)
EGFR-expressing tumors:
gastric cancer
Safinamide
Mid-to-late stage Parkinson’s
NHS-IL2-LT
Solid tumors
DI17E6
Solid tumors
Eg 5 inhibitor
Solid tumors and hematological
malignancies
IMO 2055
Solid Tumors
MEK Inhibitor
Solid tumors
Survivac Cancer Vaccine
Survivin-expressing tumors:
Solid tumors
Anti-CD 3 (NI-0401)
Crohn's disease / Renal
transplantation
Fibroblast Growth Factor 18
Osteoarthritis
ARX 201
Growth hormone deficiencies
FC EPO
Anemia associated with chronic
renal failure
Tucotuzumab celmoleukin
(EMD 273066/huKS-IL2), EpCAMexpressing tumors: ovarian cancer
Erbitux® (cetuximab)
(Adj Colon Cancer)
Erbitux® (cetuximab)
(SCCHN)
Tucotuzumab celmoleukin
(EMD 273066/huKS-IL2),
EpCAM-expressing tumors:
Small cell lung cancer (SCLC)
Erbitux® (cetuximab)
(NSCLC)
EMD 273063 (hu14.18-IL2),
immunocytokine
GD2-expressing tumors: melanoma
Cilengitide
Glioblastoma
EMD 273063 (hu14.18-IL2),
immunocytokine GD2-expressing
tumors: Pediatric neuroblastoma
IMO2055
Renal Cell Carcinoma (RCC)
Atacicept
Rheumatoid Arthritis
Anastrozole
OI and improvement of follicular
development
Hyperglycosylated FSH
Infertility (OI / ART)
EMD 387008
Type 2 Diabetes
Submitted
Rebif New Formulation
Relapsing forms of MS
EMEA: approved
FDA: Submission filed
Erbitux® (cetuximab)
Colorectal cancer (CRC),
1st line therapy
EMEA: Submission filed
Sapropterin
Mild-to-Moderate Phenylketonuria
(PKU)
EMEA: Submission filed
Erbitux® (cetuximab)
(Gastric Cancer)
Stimuvax®
MUC1-expressing tumors (NSCLC)
Atacicept
SLE
Recombinant Growth Hormone
HARS
Under discussion with FDA
„ Neurodegenerative Diseases
„ Oncology
„ Autoimmune & Inflammatory
Diseases
„ Fertility
„ Endocrinology
„ CM Care & local products
2007 - Record Results in a Year of Change
46
Principal Portfolio Changes
Since October 2007
3 Projects Stopped
Status changes
Osteopontin
Stopped in Phase I
MEK Inhibitor
Phase I trial initiated
AS602868 (IKK 2 inhibitor)
Stopped in Phase I
Sapropterin
Mild-to-Moderate
Phenylketonuria (PKU)
Submitted to EMEA
DPPIV-Inhibitor
Type 2 Diabetes
Rights returned to Glenmark
Pharmaceuticals S.A.
Recombinant Growth
Hormone
HARS
Clinical program under review
Discussions ongoing with FDA
Added
IMO-2055 (Idera deal)
Renal Cell Carcinoma
Phase II
IMO-2055 (Idera deal)
Solid Tumors
Phase I
Status changes
„ Neurodegenerative Diseases
„ Oncology
„ Autoimmune & Inflammatory
Diseases
„ Fertility
„ Endocrinology
„ CM Care & local products
2007 - Record Results in a Year of Change
47
Full Portfolio
Clinical Programs
18 February 2008
24
1
20
6
Compound Breakdown*
40%
60%
16
12
Small
Molecules
Biologics
8
8
1
4
9
1
1
2
4
1
0
Oncology
Neurodegenerative
Diseases
2
Autoimmune and
Inflammatory
Fertility
1
1
1
1
1
Endocrinology
CM Care & Local
Products
„ Phase I „ Phase II „ Phase III „ Submission
* Based on individual compounds in development from Phase I; not based on development programs.
Source: Company information
2007 - Record Results in a Year of Change
48
R&D Pipeline
Oncology
Substance
Current Status1
Indication
Colorectal cancer (CRC)
Erbitux (cetuximab),
EGFR-specific monoclonal antibody2
Stimuvax (BLP25 liposome vaccine),
liposomal cancer vaccine4
Matuzumab (EMD 72000), humanized
EGFR-specific monoclonal antibody5
Cilengitide (EMD 121974),
integrin inhibitor, anti-angiogenic
1
2
3
4
5
6
Squamous cell carcinoma of the head and neck
(SCCHN)
Phase III
1st line therapy filed
with EMEA
Phase III
Adj Colon Cancer3
Phase III
recurrent/ metastatic
1st line therapy
Non-small cell lung cancer (NSCLC)
Phase III
Gastric Cancer
Phase III in planning
Breast cancer
Phase II
MUC1-expressing tumors: NSCLC
Phase III
EGFR-expressing tumors: NSCLC
Phase II
EGFR-expressing tumors: gastric cancer
Phase II
Glioblastoma6
Phase II completed /
Phase III in planning
Clinical status (for the most advanced indication).
Collaboration between Merck KGaA, Darmstadt, Germany, and ImClone Systems Incorporated of New York. Merck KGaA licensed the right to
market Erbitux outside the U.S. and Canada from ImClone Systems Incorporated in 1998. In Japan, ImClone Systems Incorporated, BristolMyers Squibb Company and Merck jointly develop and, upon approval, commercialize Erbitux.
Clinical trials under responsibility of FFCD.
Exclusive worldwide licensing rights acquired from Oncothyreon Inc., Bellevue, Washington, USA.
Collaboration between Merck KGaA, Darmstadt, Germany, and Takeda Pharmaceutical Company Ltd.
Further indications in development by the US National Cancer Institute (NCI).
Adj: adjuvant
CRC: colorectal cancer
EGFR: epidermal growth factor receptor
MUC: mucinous glycoprotein that is abnormally expressed in various cancers
NSCLC: non-small cell lung cancer
SCCHN: Squamous cell carcinoma of the head and neck
2007 - Record Results in a Year of Change
49
R&D Pipeline
Oncology cont‘d
Substance
Indication
Current Status1
Tucotuzumab celmoleukin
(EMD 273066/huKS-IL2),
immunocytokine
EpCAM-expressing tumors: ovarian cancer
Phase II
EpCAM-expressing tumors:
Small cell lung cancer (SCLC)
Phase II
GD2-expressing tumors: melanoma
Phase II2
GD2-expressing tumors:
Pediatric neuroblastoma
Phase II2
Renal cancer
Phase II
Solid tumors
Phase I
EpCAM-expressing tumors
Phase I
Solid tumors and hematological malignancies
Phase I
Hematological malignancies
Phase I
Solid tumors
Phase I
EMD 273063 (hu14.18-IL2),
immunocytokine
IMO-2055
DNA based TLR9 agonist3
Adecatumumab (MT201),
anti-EpCAM monoclonal antibody4
AS703569 (R763),
Aurora kinase inhibitor5
Atacicept, decoy receptor for B-cell
growth factors BlyS and APRIL6
NHS-IL2-LT (EMD 521873),
immunocytokine
(targeting DNA of necrotic cells)
1
2
3
4
5
6
Clinical status (for the most advanced indication).
Clinical trials being conducted by US NCI, Children‘s Oncology Group, and University of Wisconsin.
Inlicensed from Idera Pharmaceuticals Inc.
Collaboration between Ares Trading SA and Micromet AG.
Collaboration between Ares Trading SA and Rigel Pharmaceuticals Inc.
Collaboration between Ares Trading SA and ZymoGenetics Inc.
BLyS/APRIL: members of the TNF family
EPCAM: epithelial cell adhesion molecule
GD2: cancer associated ganglioside
SCLC: small cell lung cancer
2007 - Record Results in a Year of Change
50
R&D Pipeline
Oncology cont‘d
Substance
Indication
Current Status1
DI17E6 (EMD 525797)
integrin inhibitor, anti-angiogenic
Solid tumors
Phase I
Solid tumors and hematological malignancies
Phase I
Solid tumors
Phase I
Solid tumors
Phase I initiated
Eg 5 inhibitor (EMD 534085)
mitotic kinesin inhibitor
Survivac (EMD 640744)
cancer vaccine
MEK inhibitor (AS703026)2
1
2
Clinical status (for the most advanced indication).
All rights acquired from Santhera Pharmaceuticals (Switzerland) AG.
2007 - Record Results in a Year of Change
51
R&D Pipeline
Neurodegenerative Diseases
Substance
Indication
Current Status1
Rebif New Formulation
(interferon beta-1a)
Relapsing forms of MS
EU approval (Aug 07) /
Filed with FDA (US)
Rebif New Formulation in CIS
(REFLEX)
Clinical Isolated Syndrome
Phase III
Relapsing forms of MS (CLARITY)
Phase III
Add-on to interferon in MS patients with
active disease (ONWARD)
Phase II
Add-on to dopamine agonist in early stage
Parkinson’s
Phase III
Adjunct treatment to Levodopa in mid-to
late-stage Parkinson’s
Phase III
Multiple Sclerosis
Phase II
Oral cladribine tablets
Safinamide2
Atacicept3
1
2
3
Clinical status (for the most advanced indication).
Collaboration between Merck Serono and Newron Pharmaceuticals S.p.A.
Collaboration between Merck Serono and ZymoGenetics Inc.
2007 - Record Results in a Year of Change
52
R&D Pipeline
Autoimmune & Inflammatory Diseases
Indication
Current Status1
Rheumatoid Arthritis
Phase II
SLE*
Phase II / III
Anti-CD 3 monoclonal antibody
(NI-0401)3
Crohn's disease /
Renal transplantation
Phase I
Fibroblast Growth Factor 184
Osteoarthritis
Phase I
Substance
Atacicept for B-cell growth factors
BlyS and APRIL2
1
Clinical status (for the most advanced indication).
Collaboration between Merck Serono and ZymoGenetics Inc.
Collaboration between Merck Serono and NovImmune SA.
4 Candidate in-licensed from ZymoGenetics Inc.
* Merck Serono and ZymoGenetics received FDA Special Protocol Assessment for Atacicept pivotal study in SLE.
2
3
2007 - Record Results in a Year of Change
53
R&D Pipeline
Fertility
1
2
Substance
Indication
Current Status1
Anastrozole2
Ovulation induction and improvement of
follicular development
Phase II
Hyperglycosylated FSH
Infertility (OI / ART)
Phase II
Clinical status (for the most advanced indication).
Collaboration between Merck Serono and AstraZeneca UK Limited.
2007 - Record Results in a Year of Change
54
R&D Pipeline
Endocrinology
1
2
3
Substance
Indication
Current Status1
Sapropterin2
Mild-to-Moderate Phenylketonuria (PKU)
Filed with EMEA
Recombinant human growth
hormone
HIV-associated adipose redistribution
syndrome (HARS)
Phase III/Under
discussions with FDA
Long-acting growth hormone
(ARX 201)3
Growth hormone deficiencies
Phase I / II
Clinical status (for the most advanced indication).
Collaboration between Merck Serono and Biomarin Pharmaceuticals, Inc.
Collaboration between Merck Serono and Ambrx, Inc.
2007 - Record Results in a Year of Change
55
R&D Pipeline
Others (including Diabetes)
1
Substance
Indication
Current Status1
FC EPO
Aneamia associated with chronic renal
failure
Phase I
EMD 387008
Type 2 Diabetes
Phase II
Clinical status (for the most advanced indication).
2007 - Record Results in a Year of Change
56
Your Contact
Sascha Becker
Head of Investor Relations
℡ +49 6151 72-3706
Robert Bennett
℡ +1 781 681 2552 (N. America)
℡ +49 6151 72-5355
Dr. Monika Buttkereit
℡ +49 6151 72-2584
Dr. Thomas Kornek
℡ +49 6151 72-7434
Merck KGaA
Investor Relations
Frankfurter Str. 250
64271 Darmstadt
Germany
Fax: +49 6151 72-913321
investor.relations@merck.de
www.investors.merck.de
Ina Pfeiffer
Assistant Investor Relations
℡ +49 6151 72-3744
2007 - Record Results in a Year of Change
Page 57