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26 | Merck Annual Report 2008
Merck shares
Pessimism takes hold in the capital markets
Sentiment in the international capital markets worsened considerably in the course
of 2008. Uncertainties regarding potential defaults on sub-prime mortgages, which
had begun in 2007 and increased in the course of the year, led to the collapse of
some banks in 2008. These banks were either sold or went bankrupt, which triggered
a chain reaction in the stock markets, resulting in recessionary trends in different
economies. The development of Merck shares was also characterized by this general
turmoil in the capital market.
Merck shares finished 27% lower than in 2007. In terms of our share price perfor-
mance, we ranked sixth among the DAX® 30 companies. The DAX® index suffered
a 40% drop in value in 2008. Merck shares developed virtually consistent with
the broad index of European pharmaceutical companies included in the Bloomberg
Europe Pharmaceuticals Index (BEUPHRM). This pharmaceutical index recorded a
decline of 22% in 2008 compared to 2007.
The relative stability of Merck shares in these turbulent times can be attributed, among
other things, to the Merck Group’s business model. The Pharmaceuticals and Chemicals
business sectors enable us to balance risk, putting Merck on a solid foundation.
Share price supported by good Erbitux® study results
As a result of the strong euro and high oil prices at the beginning of the year, Merck
shares suffered with the entire DAX® from fears of only moderate economic growth in
Germany. This was followed by a period of uncertainty in which Merck shares remained
unchanged in line with the stock markets. At the end of April, the Merck share price
recovered and approached its annual high of € 93.79 recorded on January 9, 2008.
The capital market’s expectations regarding the approval of the oncology drug Erbitux®
for early treatment of metastatic colorectal cancer supported the share price develop-
ment in the second quarter. A committee of the European Medicines Agency issued a
positive opinion on May 30. In addition, Merck shares benefited in the second quarter
from expectations of positive study results for Erbitux® in the treatment of lung
cancer. Merck presented the data at the beginning of June 2008 in Chicago at ASCO,
the world’s most important oncology congress. We received marketing approval for
the early use of Erbitux® in colorectal cancer patients on July 23. This included the
potential for broad combination with existing chemotherapies; however, it limits the
use of the drug to a certain patient group (see page 34 for details).
In a market environment of continued insecurity, profit-taking in July 2008 exerted
downward pressure on Merck shares. In September, the financial crisis reached another
peak with the collapse of Lehman Brothers and sent the entire stock market into a tail-
spin. Despite our comparatively crisis-resistant business model, the Merck share price
declined and reached its annual low of € 57.67 on November 21 but recovered slightly
toward year-end.
Merck shares outperform the
DAX® in 2008.
Despite turbulence, our
share price recovered slightly
at year-end.