Merck KGaA announced that Group total revenues rose 2.1% in 2009 - meeting the guidance given earlier in the year. Total revenues for the Group reached € 7,747 million as the 6.5% increase in revenues from the Pharmaceuticals business sector more than offset the 9.0% decline in revenues from the Chemicals business sector. During the fourth quarter, Merck recorded a 5.9% increase in total revenues to € 2,029 million. Merck had no major acquisitions or divestments during 2009.
Royalty and commission income declined 4.8% to € 369 million. In 2009, commission income was reclassified from marketing and selling costs to total revenues (€ 24 million in 2009, € 32 million in 2008), since these now represent regular business revenues for Merck. The previous year's figures and key indicators have been adjusted accordingly.
For the Group, cost of sales grew faster than sales due to underutilization of capacities, mainly in the Chemicals business sector. Therefore, the Group gross margin increased only slightly to € 5,718 million, 0.6% more than in 2008.
Research and development costs rose 8.9% to € 1,345 million in 2009, mainly due to the Merck Serono division because, for the first time in its history, Merck is conducting trials on 10 projects in the final phase of clinical development prior to potential market launch. Other operating expenses and income, which amounted to € -170 million in 2008, rose to € -373 million in 2009. This was mainly due to additions to provisions for litigation, mostly relating to the Merck Serono division. Merck also booked € –68 million for currency risks in Venezuela.
Amortization of intangible assets, which for the most part included ongoing amortization from the Serono purchase price allocation, increased by 15% to € 658 million. Included within this amount were write-downs on the value of license rights for the products Enbrel® (Amgen) and Puregon® (Merck & Co.) due to reduced estimates of the future amount of their royalty income.
Therefore, Merck generated an operating result for 2009 of € 649 million, corresponding to a decline of 43%. For the fourth quarter, the operating result declined 69% to € 44 million compared to € 142 million in the year-ago quarter. The Group's fullyear core operating result (operating result excluding amortization of intangible assets and integration costs from Serono) fell 25% to € 1,296 million. Fourth-quarter core operating result was € 258 million, down 16% from € 306 million in the year-ago quarter.
The Group return on sales (ROS: operating result/total revenues) declined to 8.4% in 2009 compared to 14.9% in 2008. The fourth-quarter ROS was 2.2% in 2009 and 7.4% in 2008. Group core ROS (operating result excluding amortization of intangible assets and integration costs from Serono/total revenues) for 2009 was 16.7% compared to 23.0% in 2008. For the fourth quarter, core ROS was 12.7% in 2009 and 16.3% in 2008.
In 2009, Merck recorded exceptional items totaling € -28 million. These include costs of € 40 million for the market withdrawal of the psoriasis drug Raptiva®. In addition, Merck realized income of € 11 million from the divestment of the business with natural substances in Brazil (Performance & Life Science Chemicals division). Merck's financial result improved in 2009 by € 22 million or 14% year-on-year to € -134 million. The tax rate adjusted for exceptional items declined to 21.6%, compared to 25.8% in 2008.
Full-year earnings before interest and tax (EBIT) fell by 15% to € 621 million, a much lower rate of decline than for the operating result as exceptional items were significantly lower in 2009 than in 2008. Profit before tax fell to € 486 million in 2009 from € 575 million the year before. Profit after tax was € 377 million, nearly at the previous year's level of € 379 million.
The 2009 Annual Report, available in an interactive online format, can be found at: http://www.merck.de/annualreport2009 This site allows quick access to the annual report with better navigation, downloading of financial tables as Excel spreadsheets, intelligent searches and much more.
About Merck KGaAMerck is a global pharmaceutical and chemical company with total revenues of € 7.7 billion in 2009, a history that began in 1668, and a future shaped by approximately 33,000 employees in 61 countries. Its success is characterized by innovations from entrepreneurial employees. Merck's operating activities come under the umbrella of Merck KGaA, in which the Merck family holds an approximately 70% interest and free shareholders own the remaining approximately 30%. In 1917 the U.S. subsidiary Merck & Co. was expropriated and has been an independent company ever since.