Merck: 2008 Operating Result Rises 16% to € 1,131 Million
Despite a rapidly deteriorating economic situation, total revenues of the Merck Group rose 7.1% to a record € 7,558 million in 2008 due to increased sales of Pharmaceuticals and a 26% increase in royalty income to € 356 million. On a currency-adjusted basis, annual revenues rose 11%. For the fourth quarter, Group revenues were up 5.4% to € 1,904 million. Merck made no major acquisitions or divestments during 2008.
Research and development costs rose 20% during 2008 to € 1,234 million, with the lion's share spent by the research-driven Merck Serono division. However, other operating expenses and income declined to € -170 million in 2008 from € -340 million in 2007, which included high one-time integration and restructuring expenses due to the Serono acquisition. Amortization of intangible assets such as technologies and licenses, mainly stemming from the Serono acquisition in 2007, totaled € -573 million in 2008 compared to € -557 million in the previous year. Thus, Merck's full-year operating result rose 16% to € 1,131 million. The fourth-quarter operating result fell by 15% to € 142 million, mainly due to a sharp decline in the Liquid Crystals division.
The Group's 2008 core operating result, which excludes amortization of intangible assets and integration costs for Merck Serono from the operating result, was € 1,735 million, a decrease of 1.0% from 2007.
The Group's return on sales (ROS) in 2008 improved to 15.0% compared to 13.8% in 2007 mainly due to a 7.1% increase in the gross margin. ROS for the fourth quarter of 2008 was 7.5% compared to 9.2% in the year ago quarter due to Liquid Crystals.
Pharmaceuticals total revenues rose 11% in 2008 to € 5,428 million. The majority of this increase is due to higher sales of the drugs Rebif® and Erbitux®. Royalty income grew by 25% to € 339 million. Fourth-quarter revenues increased 15% to € 1,439 million. During 2008, the Pharmaceuticals business sector generated about 72% of the Merck Group’s revenues and 54% of the Group's operating result, excluding the segment Corporate and Other.
Full-year revenues for the Merck Serono division rose 12% to € 4,987 million compared to € 4,458 million the year before due improved sales of all its major products, especially Rebif and Erbitux. Fourth-quarter revenues for the division were up 16% to € 1,327 million, which included € 36 million from the remaining Generics business. The 66% increase in the full-year operating result to € 594 million was due to the good development of business and to the absence of high, one-time restructuring and integration expenses for Serono in 2007. For the fourth quarter, the operating result rose to € 60 million in 2008 from € 13 million in the year-ago quarter due to increased sales and royalties.
For more details on the Merck Serono portfolio and pipeline, please see the FY-2008 presentation at: http://www.merck.de/financial_results