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Disclaimer Publication of
Merck KGaA, Darmstadt, Germany. In the United States and Canada the
subsidiaries of Merck KGaA, Darmstadt, Germany operate under the
umbrella brand EMD.

Table of contents

  • Page 1
    Disclaimer Publication of Merck KGaA, Darmstadt, Germany. In the United States and Canada the subsidiaries of Merck KGaA, Darmstadt, Germany operate under the umbrella brand EMD.

  • Page 2
    ANNUAL REPORT 2010

  • Page 3
    ... 12 executive board MAnAgeMenT reporT 2010 15 17 30 39 47 63 69 77 84 86 95 106 overall economic situation financial position and results of operations corporate responsibility Merck in the capital market Merck serono consumer health care Merck Millipore performance Materials corporate and other...

  • Page 4
    ... GlAnCe key figures for 2010 EUR million Pharmaceuticals Chemicals Corporate and Other Total Change in % Total revenues Gross margin Research and development Operating result Exceptional items Earnings before interest and tax (EBIT) EBIT before depreciation and amortization (EBITDA) Return on sales...

  • Page 5
    The pharmaceutical, chemical and life science businesses of Merck are organized into four divisions: Merck Serono, Consumer Health Care, Merck Millipore and Performance Materials. Merck employs more than 40,000 people and operates in 67 countries worldwide.

  • Page 6
    2 Merck Annual Report 2010 the key events oF 2010 On the whole, 2010 was an eventful and a very good business year for Merck. We pursued the Merck Way, which is based on the principles of "Sustain. Change. Grow." and were successful in doing so. oled technology proves fascinating - also to Angela...

  • Page 7
    ... chemicals business." Analysts also view the acquisition as a good strategic move. The confidence of the financial markets was reflected by the successful issue of a euro bond to finance the Millipore acquisition. The EUR 3.2 billion bond was the largest issue by a German company in Europe in 2010...

  • Page 8
    4 Merck Annual Report 2010 ABout merCk At Merck, the pharmaceutical, chemical and life science businesses are under one roof. We are convinced that in these sectors, the market will reward successful research and technological advances with attractive margins. We focus on specialty businesses. We ...

  • Page 9
    ... in the United Kingdom and Monot in France. At the same time, the acquisition of Amerpharm of the United Kingdom gave Merck a critical mass in the generic drugs business. The takeover of a large number of laboratory distribution businesses was rounded off with the purchase of VWR Scientific Products...

  • Page 10
    6 Merck Annual Report 2010 In order to secure the financing of these acquisitions, Merck went public in 1995. A 26% interest in Merck KGaA was sold to shareholders. The Merck family held the remaining 74% via the general partner E. Merck. Following a capital increase in 2007, the ownership ratio ...

  • Page 11
    Company Management Report Corporate governance Consolidated Financial Statements More information 7 merCk toDAy Merck is pursuing a business model aimed at creating value for shareholders and owners. Following the acquisition of Millipore, we have a portfolio with a balanced distribution of risk...

  • Page 12
    8 Merck Annual Report 2010 letter From kArl-luDwiG kley "We aspire to be a company where an enjoyment of work and innovative strength meet." Karl-Ludwig Kley

  • Page 13
    ... the Executive Board, taking over responsibility for the newly created Executive Board position for Human Resources on April 1. And on June 1, 2011, Matthias Zachert will succeed Michael Becker as Chief Financial Officer. With this new team, we are creating the perfect conditions to start a new...

  • Page 14
    10 Merck Annual Report 2010 to EUR 820 million, respectively. Core return on sales (ROS) was 22%. Yet we did not reach all our objectives. The Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) issued a final negative opinion regarding the marketing ...

  • Page 15
    Company Management Report Corporate governance Consolidated Financial Statements More information 11 fields, including innovative lighting materials based on LEDs and OLEDs, energy storage materials for the automotive sector, and products for the photovoltaics industry that will be used in the ...

  • Page 16
    ... and Acquisitions; Investor Relations; Purchasing Member of the Supervisory Board and Board of Partners of Merck from March 2004 to June 2006, Member of the Executive Board since joining Merck in September 2006 Responsibility for Group-wide functions: Information Services; Human Resources (global...

  • Page 17
    Company Management Report Corporate governance Consolidated Financial Statements More information 13 stefan oschmann Michael becker karl-ludwig kley

  • Page 18
    14 mAnAGement report oF the merCk Group 2010 15 17 30 39 47 63 69 77 84 86 95 106 Overall economic situation Financial position and results of operations Corporate responsibility Merck in the capital market Merck Serono Consumer Health Care Merck Millipore Performance Materials Corporate and Other ...

  • Page 19
    ... states totaled 2.8% in 2010. Gross domestic product (GDP) of the United States, the world's largest economy, grew by 2.7%, while gross national product (GDP) of the eurozone countries increased by 1.7%. Japan can look back at growth of 3.7%. On the positive side, the OECD noted that company profits...

  • Page 20
    ... data, consumer chemicals, which also include Merck products, account for 14% of European chemical sales. (The figures for 2010 will only be available after the publication of this report). Growth weakened toward year-end since economic incentives ended in some countries. Demand outside of Europe...

  • Page 21
    ... the acquisition of Serono of Switzerland within the Pharmaceuticals business sector in 2007, we also made a major acquisition in the Chemicals business sector by purchasing Millipore Corporation of the United States in 2010. This acquisition had a very strong impact on the 2010 financial statements...

  • Page 22
    ... expenses for marketing licenses and to a lesser extent production licenses. The components are as follows: royalty, license and commission income and expenses by division in 2010 EUR million Total Merck Serono Consumer Health Care Merck Performance Millipore Materials Corporate and Other Royalty...

  • Page 23
    ... spending by business sector EUR million 1,400 1,050 700 350 2006* * including Generics 2007 2008 2009 2010 Chemicals Pharmaceuticals Group operating result increases by 72% Amortization of intangible assets, which previously related mainly to the Serono purchase price allocation, now...

  • Page 24
    ... to close in 2011. Profit after tax up 70% sharp increase in profit after tax The financial result showed an expense balance of EUR 252 million compared to EUR 134 million in 2009. The marked increase was due mainly to interest expenses for the financing of the Millipore acquisition. Adjusted...

  • Page 25
    ... propose to the Annual Meeting on April 8, 2011 a raise in the dividend from EUR 1.00 to EUR 1.25 per share. good growth in the pharmaceuticals business sector The Pharmaceuticals business sector, comprising the two divisions Merck Serono and Consumer Health Care, increased total revenues by 7.1% to...

  • Page 26
    ... the financial statements for half a year. Organically, meaning adjusted for acquisition and currency effects, total revenues of the Chemicals business sector increased by 17%. chemicals | Total revenues by division EUR million / % of total revenues 1 Merck Millipore 2 Performance Materials 1,681...

  • Page 27
    ... Report Corporate governance Financial position and results of operations Consolidated Financial Statements More information 23 chemicals | operating result by division EUR million / % of operating result 1 Merck Millipore 2 Performance Materials 44 580 7% 93% 1 2 The Chemicals business...

  • Page 28
    ...The Pharmaceuticals business sector accounts for around 70% and the Chemicals business sector for around 30% of sales in the United States. This ratio will continue to shift in favor of Chemicals owing to the acquisition of Millipore in mid-2010. In Latin America, Brazil is by far our largest market...

  • Page 29
    Company Management Report Corporate governance Financial position and results of operations Consolidated Financial Statements More information 25 were then consolidated in the financial statements of the Merck Group for the first time. The total volume of the transaction was EUR 5,137 million. ...

  • Page 30
    26 Merck Annual Report 2010 Underlying free cash flow doubles underlying free cash flow reflects good business performance The free cash flow of the Merck Group in 2010 was also strongly affected by the acquisition of Millipore. It amounted to EUR -3,522 million compared to EUR 812 million in ...

  • Page 31
    Company Management Report Corporate governance Financial position and results of operations Consolidated Financial Statements More information 27 Europe accounts for more than three-quarters of capital spending capital spending: decline after years of increases In 2010, Merck invested a total ...

  • Page 32
    ...Merck Annual Report 2010 Strong improvement in EBITDA key financial performance indicators of the Merck group Return on sales (ROS or the ratio of operating result to total revenues) and underlying free cash flow on revenues (FCR) are our two key financial performance indicators. The divisions use...

  • Page 33
    ... purchase price allocation. In the Pharmaceuticals business sector, the operating result was lowered by one-time expenses from declines in the value of intangible assets. The balance sheet ratios and the key financial indicators of Merck in 2010 were influenced mainly by the acquisition of Millipore...

  • Page 34
    ... sites located in 26 countries. The change in the number of employees was mainly a result of our acquisition of the life science company Millipore, which we completed in July 2010. The following countries saw significant increases in the workforce in connection with this acquisition: In the United...

  • Page 35
    ... opened a new research center there and also expanded its sales and marketing activities. A total of 512 young people were enrolled in vocational training programs in 19 different occupations at the Darmstadt site, the largest of the Merck Group. number of employees as of december 31, 2010 1 Europe...

  • Page 36
    32 Merck Annual Report 2010 Individual development plans have high priority performance management Performance management is of crucial importance for promoting entrepreneurial success and for identifying and developing employee potential. Key features of this process are clear objectives, ...

  • Page 37
    ...areas, functions and regions. In the Pharmaceuticals business sector, 47% of all employees are female, in Chemicals 33%, and in Group functions 21%. In North America, 47% of all employees are female, in Europe 46%, in Latin America 43%, and in Asia 33%. Women make up 55% of the workforce in research...

  • Page 38
    ... such as the cross-company mentoring program and creating opportunities to help employees reconcile the demands of career and family - we intend to develop further programs during 2011. We set ourselves a global objective of increasing the percentage of women in top management positions to 25% to 30...

  • Page 39
    ...a materiality analysis, we identified sustainability issues that are of importance to our Chemicals and Pharmaceuticals businesses. In both business sectors, responsibility for products is at the heart of our corporate responsibility. Group-wide topics include supply-chain sustainability and the use...

  • Page 40
    ...Annual Report 2010 "design for sustainability" The Merck Millipore division offers an example of sustainable product development with its "Design for Sustainability" principle. This starts with production and packaging, extends to helping customers to conserve resources in the daily use of products...

  • Page 41
    ... with the energy management standard EN 16001. Bari is the first pharmaceutical production site in Italy to have received this certification. utilizing solar energy Photovoltaic installations are used to generate energy at multiple locations throughout the Merck Group. The Merck Millipore division...

  • Page 42
    ...systems for medicines. In order to effectively identify counterfeits and quickly remove them from circulation, 394 compact mobile laboratories, or GPHF-Minilabs, were in use in more than 70 countries as of December 31, 2010. They make it possible to rapidly identify pharmaceutical active ingredients...

  • Page 43
    .... Merck DAX ® March June Sept. Dec. Bloomberg Europe Pharmaceuticals Index At year-end, the DAX ® was just below 7,000 points development of the key indices With the DAX ®, Germany's blue-chip index of the 30 largest German stock corporations by free float market capitalization and trading...

  • Page 44
    ... for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) surprised physicians and shareholders with its negative opinion regarding the marketing authorization application for cladribine tablets as a treatment for multiple sclerosis. As a consequence, Merck shares lost...

  • Page 45
    Company Management Report Corporate governance Merck in the capital market Consolidated Financial Statements More information 41 share data 1 2010 2009 Earnings per share after tax and non-controlling interest in EUR Dividend in EUR Share price high in EUR (Sept. 10, 2010/July 1, 2009) Share ...

  • Page 46
    ... 31, 2010, the following shareholders reported their holdings in Merck shares to the company in accordance with the German Securities Trading Act: 5% - 10% Barclays PLC, London (United Kingdom) 5% - 10% BlackRock Inc., New York (USA) 5% - 10% Capital Research and Management Company, Los Angeles (USA...

  • Page 47
    ... of 2010, the Executive Board and the Investor Relations team took part in 13 investor conferences in Frankfurt, London, Los Angeles, Munich, New York, Paris and San Francisco. In addition, company representatives visited investors at the key financial centers in the United States and Europe within...

  • Page 48
    44 Merck Annual Report 2010 capital and shares As of the balance sheet date, the company's subscribed capital is divided into 64,621,125 nopar value bearer shares plus one registered share. The holder of the registered share is E. Merck Beteiligungen KG. It is entitled and obliged to appoint one-...

  • Page 49
    ... of the acquisition financing was a bond issue amounting to EUR 3.2 billion. This was the largest euro-bond transaction by a German company in Europe in 2010. Merck benefited from attractive conditions as a result of the timing of the issue in March. In order to reach diverse investor groups and due...

  • Page 50
    46 rebismart ™, our electronic injection device for the self-administration of rebif ®, is easy and convenient to use.

  • Page 51
    Company Management Report Corporate governance Merck Serono Consolidated Financial Statements More information 47 merCk serono Merck Serono is the largest division of Merck. It markets innovative prescription drugs of chemical and biotechnological origin. The division offers its leading brands ...

  • Page 52
    ... the forecasted average for the pharmaceutical industry. Nearly two-thirds of this growth is attributable to the biopharmaceuticals Rebif ® and Erbitux ®. Five top-selling biopharmaceuticals account for 61% of sales In 2010, the Merck Serono division increased total revenues by 7.6% to EUR 5,754...

  • Page 53
    Company Management Report Corporate governance Merck Serono Consolidated Financial Statements More information 49 Merck serono | key figures EUR million 2010 2009 ∆ in % Total revenues Gross margin R&D Operating result Exceptional items Free cash flow Underlying free cash flow ROS in % 5,754...

  • Page 54
    50 Merck Annual Report 2010 our activities by therapeutic area Research Development Marketing Oncology Neurodegenerative Diseases Rheumatology Fertility Endocrinology CardioMetabolic Care and General Medicine onColoGy Our targeted oncology drug Erbitux ® (cetuximab) is approved in combination ...

  • Page 55
    Company Management Report Corporate governance Merck Serono Consolidated Financial Statements More information 51 mCRC. The share of patients in whom the test is performed in order to determine whether they can benefit from a personalized therapy, such as Erbitux ®, increased from 2.5% in 2008 ...

  • Page 56
    ... the Business Unit Fertility increased by 6.6% to EUR 657 million. We generated nearly half of our sales in Europe, which remains our largest market. In 2010, sales in Europe were slightly higher than in 2009. We recorded double-digit growth in the regions Asia, Africa, Australasia and Latin America...

  • Page 57
    Company Management Report Corporate governance Merck Serono Consolidated Financial Statements More information 53 Our recombinant combination treatment Pergoverisâ„¢ is used to stimulate follicular development in infertile women with severe follicle-stimulating hormone and luteinizing hormone ...

  • Page 58
    ... CardioMetabolic Care products have made us one of the fastest growing pharmaceutical companies in Latin America and Asia. In Latin America we rank among the top 15 pharmaceutical companies. However, price reductions in Europe and generic competition in France, our largest market in terms of sales...

  • Page 59
    Company Management Report Corporate governance Merck Serono Consolidated Financial Statements More information 55 concor ®: strong performance in growth markets, fierce competition in europe Sales of branded Concor ® products containing the active ingredient bisoprolol amounted to EUR 373 ...

  • Page 60
    ... the field of fertility. As of December 31, 2010, the division had around 3,000 employees working in research and development. Our most important research centers are Darmstadt, Geneva and Boston. Additionally, we are expanding the Beijing site in order to cover Asia, to facilitate regional clinical...

  • Page 61
    Company Management Report Corporate governance Merck Serono Consolidated Financial Statements More information 57 status of our innovative compounds Therapeutic area Oncology Compound Erbitux ® (cetuximab, monoclonal antiEGFR antibody) 1 Indication Adjuvant colorectal cancer 2 Glioblastoma...

  • Page 62
    ... projects in the field of neurodegenerative diseases using new models and technologies. Merck Serono Ventures is the name of our corporate venture capital fund. In 2010, the fund invested in two highly innovative biotech companies. One of the companies is f-Star from Vienna, Austria, which is...

  • Page 63
    ... projects Merck Serono remains committed to its discovery and development work in the therapeutic area of oncology. Our aim is to offer patients with high unmet medical needs additional therapeutic options in various indications. An important step toward this aim is the worldwide research and...

  • Page 64
    60 Merck Annual Report 2010 Rebif ® significantly delayed conversion to clinically definite MS in patients with CIS efficacy of rebif ® demonstrated in clinically isolated syndrome Within our Neurodegenerative Diseases therapeutic area, we are conducting research to discover new therapeutic ...

  • Page 65
    Company Management Report Corporate governance Merck Serono Consolidated Financial Statements More information 61 Study 016. The data from Study 018 also confirm the safety profile of safinamide. With SETTLE, a further Phase III clinical trial is underway in this indication. In the MOTION study,...

  • Page 66
    62 sales of the well-established nasivin ® range grew by 23% to eur 52 million in 2010.

  • Page 67
    ...: strong increases in France, Belgium and Chile - Nasivin ®: strong sales growth in Poland, Russia, South Africa and India - Research and development further expanded - Higher expenses due to restructuring measures in China, impairment losses in Mexico, and a warehouse fire in the United Kingdom...

  • Page 68
    ... course, growing in line with western Europe, its main market. The global sales of our strategic brands performed well, posting double-digit growth. Focus on four health themes consumers trust Merck Consumer Health Care specializes in over-the-counter products and focuses on four health themes...

  • Page 69
    ...breakdown as follows: 71% in Europe, 17% in Latin America and 12% in Asia, Africa, Australasia. Europe thus remains our largest market with sales of EUR 331 million, an increase of 3.8% over 2009. france: our largest market France remains our top-selling country, posting sales of EUR 101 million, or...

  • Page 70
    ... % of total divisional sales 1 Europe 2 North America 3 Latin America 4 Asia, Africa, Australasia 331 1 81 57 71% 0% 17% 12% 3 2 4 1 femibion ®: the clear market leader in germany Germany has replaced the United Kingdom as our second most important market. In 2010, our German subsidiary Merck...

  • Page 71
    Company Management Report Corporate governance Consumer Health Care Consolidated Financial Statements More information 67 currency effects in latin America In Latin America, total sales decreased by 9.6% to EUR 81 million. This was attributable to exchange rate losses in Venezuela, one of our ...

  • Page 72
    68 Milli-Q ® and elix ® laboratory water purification system: ultrapure water for research laboratories around the world

  • Page 73
    ... supplies general lab products and equipment for applications in both life science and industrial markets; and Process Solutions markets products used in the production of chemical and biopharmaceutical drugs. All three business units increased their total revenues in 2010. key proDuCt Groups...

  • Page 74
    ..., meaning excluding acquisitions and currency effects, amounted to 5.6%. Merck Millipore | sales by region EUR million / % of divisional sales 1 Europe 2 North America 3 Latin America 4 Asia, Africa, Australasia 657 394 157 465 39% 24% 9% 28% 3 4 1 2 The realignment of the Chemicals business...

  • Page 75
    Company Management Report Corporate governance Merck Millipore Consolidated Financial Statements More information 71 Merck Millipore | key figures EUR million 2010 2009 ∆ in % Total revenues Gross margin R&D Operating result Exceptional items Free cash flow Underlying free cash flow ROS in %...

  • Page 76
    ... Merck Annual Report 2010 Tools and services from our Bioscience Business Unit help researchers meet increasing demands as pharmaceutical researchers come under increasing competitive pressure to screen and identify new drugs with more speed and accuracy. Therefore, our goal is to create products...

  • Page 77
    ... Solutions Business Unit supplies products for research, analytical and clinical laboratories in a wide variety of industries. Accounting for about 40% of the division's total revenues, it is one of the leading suppliers of laboratory chemicals, lab water equipment and consumables. Merck Millipore...

  • Page 78
    ... analysis targeting customers in the pharmaceutical, biopharmaceutical and food industries. The business unit also sells membranes, antibodies, and other diagnostic reagents to diagnostic and medical device manufacturers. Beverage companies also benefit from the use of BioMonitoring products to...

  • Page 79
    Company Management Report Corporate governance Merck Millipore Consolidated Financial Statements More information 75 proCess solutions consolidating resources The Process Solutions Business Unit supplies products used to manufacture biopharmaceutical drugs. It accounts for about 40% of the ...

  • Page 80
    76 ultrathin televisions: better image quality, greater contrast and less power consumption thanks to ps-vA technology

  • Page 81
    ...as innovative effect pigments for the plastics, printing and coatings industries. Our pigments are also used, for example, in skin care and color cosmetics. In view of climate change and high energy prices, we are also active in growth markets in the field of renewable energy sources. We are working...

  • Page 82
    ... Annual Report 2010 strenGth BoosteD Merck has combined its materials businesses and activities in the new Performance Materials division, which was created after completing the acquisition of the U.S. life science company Millipore on July 14. The division consists of the Liquid Crystals, Pigments...

  • Page 83
    Company Management Report Corporate governance Performance Materials Consolidated Financial Statements More information 79 liquiD CrystAls upturn sustained As a result of the growing demand for high-tech liquid crystals from Merck, total revenues increased in 2010 to EUR 1,013 million, which is ...

  • Page 84
    ... supplies innovative liquid crystal mixtures needed for devices such as 3D televisions and touch screens used in tablet PCs, which are becoming more and more popular. The liquid crystal mixtures used for special 3D glasses for watching 3D television contributed to the positive business performance...

  • Page 85
    Company Management Report Corporate governance Performance Materials Consolidated Financial Statements More information 81 to produce unique, large-area, homogeneous lighting surfaces with a total layer thickness of just a few millimeters. Compared to the vacuum evaporation process used today, ...

  • Page 86
    82 Merck Annual Report 2010 The concept labs are located at hot-spots of academic research around the world and focus internationally on strategic growth areas within the chemical industry. The systematic use of in-house expertise and the core competencies of Merck create the preconditions for ...

  • Page 87
    ... Report Corporate governance Performance Materials Consolidated Financial Statements More information 83 Additionally, in October we laid the cornerstone for the construction of a new plant to produce Meoxalâ„¢ at the Onahama site in Japan. Commercial production of Meoxalâ„¢, an effect pigment...

  • Page 88
    ... the Millipore acquisition Group administrative costs relate primarily to Merck KGaA and consist of typical holding company functions. These include, for example, the corporate finance and accounting, tax, procurement, communications and human resources departments to the extent that their services...

  • Page 89
    Company Management Report Corporate governance Corporate and Other Consolidated Financial Statements More information 85 Free cash flow was EUR -736 million in 2010, compared to EUR -511 million in 2009. In 2010, payments totalling EUR 241 million (2009: EUR 16 million) were made in connection ...

  • Page 90
    ...comparable manner. Opportunity management in the Merck Group is conducted in the operating units on the basis of the corporate strategy. In this connection, we refer to the Report on Expected Developments starting on page 95. Within the context of the Group-wide risk management process, the division...

  • Page 91
    ... system backups are performed in order to prevent a potential loss of data. The local management of the individual companies is responsible for implementation. The effectiveness of Merck's internal control system with regard to accounting and the compliance of financial reporting is confirmed by...

  • Page 92
    ... in sales in certain countries and regions. Diversification in terms of products, industries and regions serves to mitigate potential negative effects. research and development risks For Merck, innovation is a major element of the strategies of its Pharmaceuticals and Chemicals business sectors...

  • Page 93
    ... means of quality controls along the entire value chain. This starts with the qualification of our suppliers. Comprehensive quality requirements for raw materials, purchased semifinished products and plants must be mentioned, as well as long-term strategic alliances in the case of supply- and price...

  • Page 94
    ... of Serono in 2007 and Millipore in 2010. Further details can be found in Note (23) to the Consolidated Financial Statements. risks in connection with pension obligations Merck has commitments in connection with pension obligations. The present value of these obligations can be influenced by changes...

  • Page 95
    ... exclusive distribution agreement with the laboratory wholesale distributor VWR International. Owing to a decision by the German Federal Antitrust Office, Merck is obliged to supply a number of products from its Laboratory business to other laboratory wholesale distributors in Germany. The company...

  • Page 96
    ... of employees for new business challenges and their motivation to solve these challenges for the benefit of the company. The Rewards Policy system complements this process by ensuring that performance-related payment components are handled consistently throughout the Group. The Merck Long-Term...

  • Page 97
    ... risk scenarios for Merck include the failure of the central ERP (Enterprise Resource Planning) systems, the publication of classified confidential research and business development data, the manipulation of IT systems in chemical process control, as well as the revocation of drug registrations due...

  • Page 98
    ... low. environmentAl AnD sAFety risks Merck is a company with global production operations and is exposed to risks of possible damage to people, goods and its image. We minimize the risks to people and the environment by means of auditing, advising and training in matters of environmental protection...

  • Page 99
    ... and for the Group as a whole: Deviations Forecast 2010 adjusted actual values 2010 * Total revenues growth* Merck Group Merck Serono Consumer Health Care Liquid Crystals * Performance & Life Science Chemicals * operating result growth * Merck Group Merck Serono Consumer Health Care Liquid Crystals...

  • Page 100
    ... it increased by 59%, rising to EUR 565 million. Better business developments as well as more favorable exchange rate developments contributed to this growth. On the cost side, we took steps to manage our marketing and selling as well as our research and development expenses more efficiently. Sales...

  • Page 101
    ... calls for governments to immediately concern themselves with consolidating state finances in order to achieve more stability in the financial markets. Moreover, it is essential to end the different economic stimulus programs at the right time. The OECD expects that interest rates will not return to...

  • Page 102
    ... is presented in the following table: overall overview 2010 - 2011 adjusted actual values 2010 * Total revenues Forecast 2011 EUR million Merck Serono Consumer Health Care Merck Millipore* Performance Materials* Merck Group * The Chemicals divisions have been restated on a comparable basis. 5,754...

  • Page 103
    Company Management Report Corporate governance Report on expected developments Consolidated Financial Statements More information 99 Our debt has increased as a result of the Millipore acquisition. Merck had an equity ratio of 46.3% and net debt of EUR 4,484 million in 2010, and we expect the ...

  • Page 104
    ... drugs already account for 50% of our pharmaceuticals sold. We see important opportunities and risks for the Merck Serono division closely linked to the successful launch of new products: Consequently, the special focus of Merck Serono will be on the market launch of cladribine tablets. Cladribine...

  • Page 105
    ...'s sales did not meet our expectations for 2010. Besides these two effects, the operating result was also impacted by a warehouse fire in the United Kingdom as well as impairment losses. For 2011, market researchers from the company Nicholas Hall are predicting key markets for OTC medicines to...

  • Page 106
    ...2007, which was the best-performing year for the German chemical industry to date. forecast for the Merck Millipore division With the acquisition of Millipore, we have created a successful business model for the life science industry, in which we will occupy a strong market position in the future as...

  • Page 107
    ... The Lab Solutions Business Unit supplies a broad portfolio of innovative, reliable high-quality products for general laboratory applications in a wide variety of industries. Growth is achieved by offering excellent products and direct sales. In addition, opportunities are arising in China, India as...

  • Page 108
    ... company for the cosmetics industry, predicts growth of 5.2% to USD 369 billion for the personal care and cosmetics sector in 2011 and further growth of 3.7% in 2012 relative to 2011. Performance Materials is also active in this market. Additional opportunities for the Liquid Crystals Business Unit...

  • Page 109
    ... and operating result of the Merck Group. The higher financial liabilities of the Merck Group, which resulted from the Millipore acquisition, will steadily decrease over the next several years, also as a result of our high free cash flow. This will continue to lead to solid balance sheet ratios. The...

  • Page 110
    ... for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) confirmed its previous position and adopted a final negative opinion regarding our marketing authorization application for cladribine tablets in Europe. On February 7, 2011, all the conditions for the closing of...

  • Page 111
    107 CorporAte GovernAnCe 108 Statement on corporate governance 128 Report of the Supervisory Board 131 Objectives of the Supervisory Board with respect to its composition

  • Page 112
    ... auf Aktien (KGaA) company form followed by the specific situation at Merck with additional references to the General Meeting and shareholder rights. corporation with general partners (kommanditgesellschaft auf Aktien) "The corporation with general partners is a company which constitutes...

  • Page 113
    Company Management Report Corporate Governance Consolidated Financial Statements More information 109 Statement on corporate governance Merck kgaA The general partner E. Merck KG holds around 70% of the total capital of Merck KGaA (equity interest); the shareholders hold the remainder, which is...

  • Page 114
    ... represented, shareholder participation at the meeting was stable. At 59% in 2009, the rate was only marginally higher. In accordance with Article 21 para 3 of the company's Articles of Association, the annual financial statements, the management report, the report of the Supervisory Board, and...

  • Page 115
    ... 5.4.6 of the German Corporate Governance Code) The compensation report is part of the audited Notes to the Consolidated Financial Statements. compensation of members of the executive board of Merck kgaA Contrary to members of the Board of Management of German stock corporations, the members of the...

  • Page 116
    ...Merck Annual Report 2010 board members of comparable companies. The Personnel Committee regularly commissions an independent compensation consultant to review the appropriateness of compensation. features of the compensation system The compensation paid to the Executive Board members of Merck KGaA...

  • Page 117
    Company Management Report Corporate Governance Consolidated Financial Statements More information 113 Statement on corporate governance The following table provides an overview of the amount of the variable compensation paid in 2009 and 2010: Variable compensation EUR thousand 2010 * 2009 ** ...

  • Page 118
    114 Merck Annual Report 2010 The individual values are presented in the following table: Pensionable compensation in EUR thousand Percentage entitlement Dr. Karl-Ludwig Kley Dr. Michael Becker Dr. Bernd Reckmann Elmar Schnee 790 560 470 570 70 75 54 46 The percentage entitlement increases up ...

  • Page 119
    Company Management Report Corporate Governance Consolidated Financial Statements More information 115 Statement on corporate governance Miscellaneous The members of the Executive Board additionally receive certain benefits, mainly contributions to insurance policies as well as a company car, ...

  • Page 120
    116 Merck Annual Report 2010 The individual values are presented in the following table: compensation of supervisory board members of Merck kgaA Fixed compensation EUR Variable compensation 2010 2009 Total compensation 2010 2009 2010 2009 Prof. Dr. Dr. h.c. Rolf Krebs (Chairman since July 1, 2009...

  • Page 121
    ... of the issued shares of Merck KGaA. In fiscal 2010, Merck KGaA reported the following transactions in accordance with section 15a of the German Securities Trading Act (WpHG): Date of the transaction Name, Function Type and place Financial instrument and ISIN Number Price in EUR Total volume in EUR...

  • Page 122
    118 Merck Annual Report 2010 inFormAtion on CorporAte GovernAnCe prACtiCes reporting It is Merck KGaA's objective to provide the latest information to all shareholders, media, financial analysts and interested members of the public, while creating the greatest possible transparency. For this ...

  • Page 123
    ... are instructed on the subject of insider trading. Accounting and audits of financial statements Merck KGaA prepares its consolidated financial statements and Group management report in accordance with International Financial Reporting Standards (IFRS), as applicable in the EU, as well as the...

  • Page 124
    ... the business process to implement the values when dealing with one another on a daily basis. Merck has created the Code of Conduct as a set of rules and regulations intended to help Merck employees to act responsibly and to make the right decisions in their daily work. The Code of Conduct explains...

  • Page 125
    ...members and Supervisory Board members Merck KGaA are exclusively committed to the interests of the company and pursue neither personal interests nor grant unjustified advantages to third parties. Before an Executive Board member takes on honorary offices, board positions or other sideline activities...

  • Page 126
    ... overall responsibility for products, supply chains and the community. Merck signed this expanded version of Responsible Care ® for the entire Group in February 2007. Many guidelines specify how the sites and employees of the Merck Group are to observe the principles in their daily work. The Group...

  • Page 127
    ... financial statements of Merck KGaA, the quarterly and half-year financial statements, as well as the annual financial statements of the Merck Group. In addition, the Executive Board ensures that all provisions of law, official regulations and the company's internal policies are abided by, and works...

  • Page 128
    ... Switzerland, Educator no board positions frieder kaufmann no board positions Rossdorf, Full-time member of the Works Council of the Darmstadt site of Merck KGaA dr. hans-Jürgen leuchs Cobham, United Kingdom Retired graduate chemist (a) - Zeton B.V., Enschede, The Netherlands - Zeton International...

  • Page 129
    ... the German Stock Corporation Act (AktG). The Supervisory Board deals with the quarterly and half-year consolidated financial statements and examines the annual financial statements of the Merck Group as well as the annual financial statements of Merck KGaA, taking into account the auditor's reports...

  • Page 130
    ... (until May 12, 2010) - E.ON AG, Düsseldorf - Henkel AG & Co KGaA, Düsseldorf (b) - Board of Directors DKSH Holding Ltd., Zurich (a) - Fortas AG, Rösrath (Chairman) (b) - Travel Asset Group Ltd., Feltham, United Kingdom (Chairman) prof. dr. Theo siegert Düsseldorf, Managing Partner of de Haen...

  • Page 131
    Company Management Report Corporate governance Consolidated Financial Statements More information 127 Statement on corporate governance The Board of Partners supervises the Executive Board in its management of the company. It informs itself about the business matters of Merck KGaA, and may ...

  • Page 132
    ...detail and discussed company developments and strategic issues together with the Executive Board. In the meeting held on February 18, 2010, the Supervisory Board dealt mainly with the annual financial statements and consolidated financial statements for 2009. The Executive Board reported on business...

  • Page 133
    ... changes to the German Corporate Governance Code and discussed the objectives with regard to its composition. Annual financial statements The annual financial statements of Merck KGaA, the consolidated financial statements of the Merck Group, and the management reports for Merck KGaA and the Merck...

  • Page 134
    ... given in the Statement of Compliance on pages 108 et seq of the Annual Report. committees The Supervisory Board of Merck KGaA currently has no committees on account of the special features that apply to the Supervisory Board of a corporation with general partners (KGaA) under German company law and...

  • Page 135
    ...5.4.1 (2) and (3) of the German Corporate Governance Code, the Supervisory Board shall specify concrete objectives regarding its composition which, while considering the specifics of the enterprise, take into account the international activities of the enterprise, potential conflicts of interest, an...

  • Page 136
    ... in managing medium- or large-sized family-owned companies. internationality The Supervisory Board shall have at least three members with business experience in the main sales markets of Merck KGaA. Currently, the main sales markets of Merck KGaA are Europe, North and Latin America and Asia...

  • Page 137
    ...the Merck group statement of changes in net equity including non-controlling interest of the Merck group notes Scope of consolidation Accounting policies Notes to the income statement Notes to the balance sheet Notes to the segment reporting Notes to the cash flow statement Other disclosures List of...

  • Page 138
    134 Merck Annual Report 2010 inCome stAtement oF the merCk Group Notes to the Income Statement: see page 156 EUR million sales Note [1] [2] 8,928.9 2010 7,377.7 2009 Royalty, license and commission income Total revenues Cost of sales 9,290.6 361.7 7,747.0 369.3 Gross margin Marketing ...

  • Page 139
    Company Management Report Corporate governance Consolidated Financial Statements Income Statement Balance Sheet More information 135 BAl AnCe shee t oF the merCk Group Notes to the Balance Sheet: see page 163 EUR million current assets Note Dec. 31, 2010 Dec. 31, 2009 Cash and cash ...

  • Page 140
    ... reportinG oF the merCk Group part of the notes, for details see page 183 information by business sector and division EUR million Merck Serono 2010 2009 Consumer Health Care 2010 2009 Pharmaceuticals Sales Royalty, license and commission income Total revenues Gross margin Marketing and selling...

  • Page 141
    Company Management Report Corporate governance Consolidated Financial Statements Segment Reporting More information 137 Merck Millipore * 2010 2009 Performance Materials * 2010 2009 Chemicals Corporate and Other 2009 2010 2009 Group 1,673.5 7.2 1,680.7 -427.7 -9.9 -76.4 -140.0 -78.0 44.0 - ...

  • Page 142
    ... Merck Annual Report 2010 CAsh Flow stAtement oF the merCk Group Notes to the Cash Flow Statement: see page 185 EUR million profit after tax Depreciation/amortization/impairment losses/write-ups Changes in inventories Changes in trade accounts receivable Changes in trade accounts payable Changes...

  • Page 143
    Company Management Report Corporate governance Consolidated Financial Statements More information Cash Flow Statement Free Cash Flow Statement of Comprehensive Income 139 Free CAsh Flow oF the merCk Group part of the notes, for details see page 185 EUR million Note 2010 2009 net cash flows from ...

  • Page 144
    140 Merck Annual Report 2010 stAtement oF ChAnGes in ne t equit y inCluDinG non-ControllinG interest oF the merCk Group for details see note [34] Equity capital General partner's equity Merck KGaA Subscribed capital Merck KGaA Capital reserves (share premium) Merck KGaA Reserves Retained earnings/...

  • Page 145
    ... manages the operations of the Merck Group, as parent company. In accordance with the provisions of the German financial reporting disclosure law (Publizitätsgesetz), consolidated financial statements are also prepared for E. Merck KG, the ultimate parent company and general partner of Merck KGaA...

  • Page 146
    ...Including the parent company Merck KGaA, Darmstadt, 236 (2009: 176) German and foreign companies are fully consolidated in the annual financial statements of the Merck Group. Of these companies, 214 (2009: 154) are located abroad. Due to the first-time consolidation of Millipore, the number of fully...

  • Page 147
    ... under non-current financial assets. A list of all the Merck Group's shareholdings can be found in Note [54]. Acquisition of millipore On July 14, 2010, Merck successfully completed the acquisition of 100% of the shares in Millipore Corporation, a leading life science company based in Billerica...

  • Page 148
    ... impact of the purchase price allocation on the balance sheet and the income statement results from the fair value adjustment of intangible assets and inventories. The adjustments to intangible assets relate mainly to the measurement of the existing customer relationships, technologies, trademarks...

  • Page 149
    ... cost of sales due to the step-up of the acquired inventories to fair values. Additionally, restructuring expenses and integration costs of EUR 87.3 million were incurred in 2010. Had Millipore been included in the consolidated financial statements of the Merck Group as of January 1, 2010, for the...

  • Page 150
    ... in the balance sheet as of December 31, 2010. The sale includes the marketing rights to Théramex products in a number of countries, including Spain and Brazil. Merck Serono will continue to market Théramex products in certain other countries. Apart from the payment of the purchase price, Merck is...

  • Page 151
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 147 ACCountinG poliCies With the exception of the presentation changes described below, the accounting policies have remained unchanged in comparison with 2009. In 2010, Merck started to ...

  • Page 152
    ..., Switzerland, was changed from Swiss francs to euros. This move reflects the fact that the transactions of this subsidiary are now primarily conducted in the new reporting currency. Currency translation is based on the following key exchange rates: Average annual rate 1 EUR = 2010 2009 Closing rate...

  • Page 153
    ..., the risks involved until products are marketed means that development expenses in the Chemicals business sector cannot be capitalized. In addition to our own research and development, Merck is also a partner in collaborations aimed at developing marketable products. These collaborations typically...

  • Page 154
    ...active market are available, they are used to measure the financial instrument. In other cases, generally accepted financial techniques using observable prices on the market or third-party valuations are used. Financial assets are derecognized in part or in full if the contractual rights to the cash...

  • Page 155
    ... assets in this category are subsequently measured at fair value. Changes in fair value are recognized immediately in equity and are only transferred to the income statement when the financial asset is derecognized. If there is objective evidence that such an asset is impaired, an impairment...

  • Page 156
    ... Merck Annual Report 2010 Changes in the fair value or cash flows of the hedged item and the hedging instrument must be effective at all times. In both cash flow and fair value hedges, the ineffective portion of the gain or loss on a hedging instrument is recognized in profit or loss. Merck uses...

  • Page 157
    ... are included using a long-term growth rate of 1.0% that is applied uniformly to all cash-generating units, with the exception of Merck Millipore. Business plans assuming growth rates of 3.8% were used to measure the goodwill of the Merck Millipore division in order to take the specific business and...

  • Page 158
    ... Plant and machinery Other facilities Operating and office equipment maximum of 33 years maximum of 40 years 6 to 20 years 3 to 10 years 3 to 10 years The useful lives are reviewed regularly and adjusted if necessary. If indications of a decline in value exist, an impairment test is performed...

  • Page 159
    ...of service and salary of the employees. Pension obligations of the Merck Group include both defined benefit and defined contribution plans and comprise both obligations from current pensions and accrued benefits for pensions payable in the future. In the Merck Group, defined benefit plans are funded...

  • Page 160
    ... the Millipore acquisition, organic growth amounted to 8.5%. Sales are presented by business sector, division and region in the Segment Reporting. In 2010, royalty and license income totaled EUR 339.4 million (2009: EUR 344.9 million) and mainly included royalty and license income from the products...

  • Page 161
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 157 [7] other operating expenses and income Other operating expenses and income comprise the following: EUR million 2010 2009 Litigation Project costs Impairment losses Restructuring and ...

  • Page 162
    158 Merck Annual Report 2010 [8] research and development Research and development costs rose in 2010 by 3.9% to EUR 1,397.1 million. The increase relates entirely to the Chemicals divisions, including Merck Millipore. Reimbursements for R & D amounting to EUR 21.9 million (2009: EUR 13.3 million...

  • Page 163
    ... items by business sector and division is presented in the Segment Reporting. [12] Financial result The change in the financial result is mainly attributable to the interest expenses arising in connection with the financing of the Millipore acquisition. EUR million 2010 2009 Interest income and...

  • Page 164
    ... Merck Annual Report 2010 The reconciliation between deferred tax assets and liabilities shown in the balance sheet and deferred taxes in the income statement is presented below: EUR million 2010 2009 Change in deferred tax assets (balance sheet) Change in deferred tax liabilities (balance sheet...

  • Page 165
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 161 Deferred tax assets and liabilities correspond to the following balance sheet items: Dec. 31, 2010 EUR million Assets Liabilities Dec. 31, 2009 Assets Liabilities Intangible assets ...

  • Page 166
    ... income statement Tax ratio according to income statement -219.6 -109.7 25.5% 22.6% [14] non-controlling interest Non-controlling interest in net profit is primarily composed of the minority interests in the listed companies Merck Ltd., India, and PT Merck Tbk., Indonesia, as well as in Merck...

  • Page 167
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 163 notes to the BAlAnCe sheet [16] Cash and cash equivalents This item comprises: EUR million Dec. 31, 2010 Dec. 31, 2009 Cheques, cash and bank balances Short-term cash investments 233.6 ...

  • Page 168
    ... materials and production supplies Work in progress, finished goods and goods purchased for resale Advance payments 189.7 1,483.8 1,673.5 - 174.1 1,193.8 1,367.9 - Write-downs of inventories amounted to EUR 138.7 million in 2010 (2009: EUR 141.7 million). As of balance sheet date, the fair value...

  • Page 169
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 165 [20] other assets Other receivables and other assets include an amount of EUR 269.3 million from the sale of Théramex (see "Scope of consolidation - Divestment of Théramex") and mainly ...

  • Page 170
    ... to assets held for sale current assets Cash and cash equivalents Inventories Receivables Other current assets non-current assets Intangible assets Property, plant and equipment Other non-current assets Assets held for sale current liabilities Trade accounts payable Other current liabilities Non...

  • Page 171
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 167 [23] intangible assets Patents, licenses and similar rights, brands, trademarks and other EUR million Finite useful life Indefinite useful life Advance payments Goodwill Software Total...

  • Page 172
    ... reporting currency of the Merck Group. The net carrying amount of "Patents, licenses and similar rights, brands, trademarks and other" with finite useful lives amounting to EUR 7,567.4 million mainly include the recognized assets from the Millipore purchase price allocation in 2010 and the Serono...

  • Page 173
    ...The book values of "Patents, licenses and similar rights, brands, trademarks and other" as well as goodwill can be attributed to the divisions as follows: EUR million Remaining useful life in years Merck Serono Consumer Health Care Merck Millipore Performance Materials Total Dec. 31, 2010 Total Dec...

  • Page 174
    170 Merck Annual Report 2010 [24] property, plant and equipment Land, landrights and buildings, including buildings on third-party land Other facilities, operating and office equipment Construction in progress and advance payments to vendors and contractors EUR million Acquisition cost January ...

  • Page 175
    ... losses on production units in the Merck Millipore, Consumer Health Care and Merck Serono divisions and are recorded under "Other operating expenses". Property, plant and equipment amounting to EUR 8.1 million served as collateral (2009: EUR 8.1 million). Total government grants and subsidies...

  • Page 176
    172 Merck Annual Report 2010 [26] non-current financial assets Investments in EUR million available-for-sale affiliates available-for-sale companies available-for-sale financial investments Securities financial investments held to maturity Loans and other non-current financial assets Book value ...

  • Page 177
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 173 The following amounts arising from non-current financial assets classified as available-for-sale were recognized in equity as of the balance sheet date: EUR million Availablefor-sale ...

  • Page 178
    ... in the balance sheet. The following amounts arising from financial assets covering pension obligations classified as available-for-sale were recognized in equity as of the balance sheet date: EUR million Dec. 31, 2010 Dec. 31, 2009 Fair values/Book values Amortized acquisition cost Unrealized...

  • Page 179
    ... into shares no longer exists. The bonds issued by Merck Financial Services GmbH in 2010 serve to finance the acquisition of Millipore Corporation, USA, and are admitted to trading on the regulated market of the Luxembourg Stock Exchange. In the fourth quarter of 2010, a bond issued by Merck KGaA...

  • Page 180
    ... Liabilities from profit distributions Other financial liabilities to third parties sundry other financial liabilities Accruals for personnel expenses Deferred income Advance payments received from customers Liabilities from derivatives (operational) Liabilities from non-income related taxes 260...

  • Page 181
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 177 Liabilities to related parties exist vis-Ã -vis the general partner E. Merck KG and result from profit entitlements as of the balance sheet date. Other financial liabilities due to third ...

  • Page 182
    ... employees of the Merck Group a long-term, profit-related compensation component. The program was resolved upon in 2008. The Executive Board is excluded. The amount paid depends on the achievement of the two financial performance indicators "Underlying Free Cash Flow on Revenues (FCR)" and "Return...

  • Page 183
    ... pension plans of the Group parent company Merck KGaA account for the bulk of the present value of pension obligations funded by provisions. The present value of commitments for future health care expenses of retirees in the United States is based on an expected future increase in health care costs...

  • Page 184
    ... in the financial result, the relevant expense of defined benefit and defined contribution plans is distributed across the individual functional areas. During the reporting period the present value of the benefit obligations changed as follows: benefit obligations funded by provisions funded benefit...

  • Page 185
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 181 The fair value of the plan assets can be allocated to the individual asset categories as follows. Weighted average values are used here. in % Dec. 31, 2010 Dec. 31, 2009 Debt instruments ...

  • Page 186
    ...on our financial strategy, the Executive Board regularly reviews various key figures that reflect the capitalization of the company. Gearing (ratio of net debt and pension provisions to net equity) and the equity ratio are important indicators here. As of the balance sheet date, the number of shares...

  • Page 187
    ... and reporting structure of the Merck Group. Within the Merck Serono division, we focus on specialist therapeutic areas and market innovative prescription drugs of chemical and biotechnological origin. The Consumer Health Care division comprises Merck's business with high-quality over-the-counter...

  • Page 188
    ... innovative technologies. Accordingly, the Merck Millipore and Performance Materials segments are reported within the Chemicals business sector in the Segment Reporting as of December 31, 2010. The previous year's figures have been adjusted. The segment Corporate and Other mainly includes the income...

  • Page 189
    ... from changes in other financial assets amounting to EUR 1,431.3 million were mainly the result of the sale of short-term securities and financial assets and were used to finance the acquisition of Millipore. [37] net cash flows from financing activities Disclosed dividend payments and transfers of...

  • Page 190
    ... are indicators that we use internally to measure the contribution of our divisions to liquidity. Free cash flow includes all net cash flows from operating activities as well as investing activities performed in connection with operating business. We do not include in free cash flow pure financial...

  • Page 191
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 187 other DisClosures [40] Derivative financial instruments Merck uses derivative financial instruments exclusively to hedge currency and interest rate positions, and thereby reduce currency ...

  • Page 192
    ... million). This amount was recognized in equity at 100% effectiveness. [41] management of financial risks Fluctuations in the price of currencies and interest rates can result in significant profit and cash flow risks for Merck. Therefore, Merck centralizes these risks as far as possible and steers...

  • Page 193
    ... in 2011 in the key currencies: EUR million as of Dec. 31, 2010 CHF GBP JPY TWD USD Foreign exchange risk from balance sheet items Foreign exchange risk from contingent business and anticipated transactions in 2011 Transaction-related foreign exchange position Position hedged by derivates Open-end...

  • Page 194
    ... value risk. A 10% change in the value of the stock market would impact equity by EUR 6.0 million. These changes in value are recognized in income at the time of disposal. The liquidity risk, meaning the risk that Merck cannot meet its financial obligations, is limited by effective cash management...

  • Page 195
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 191 The following tables present the contractually set payments such as repayments and interest on financial liabilities and derivative financial instruments with a negative market value: Cash...

  • Page 196
    192 Merck Annual Report 2010 [42] other disclosures on financial instruments The following table presents the reconciliation of the balance sheet items to the classes of financial instruments in accordance with IFRS 7: Book value Dec. 31, 2010 Amortized cost Subsequent measurement according to IAS...

  • Page 197
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 193 Subsequent measurement according to IAS 39 Fair value Dec. 31, 2010 Book value Dec. 31, 2009 Amortized cost At cost Fair value Carrying value according to IAS 17 Non-financial items ...

  • Page 198
    194 Merck Annual Report 2010 The net result of financial instruments comprises the impact of financial instruments on income. This includes mainly measurement results from currency translation, the adjustment to fair value, write-downs and write-ups as well as the recognition of premiums and ...

  • Page 199
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 195 The fair value of stocks and bonds used to cover pension obligations and to manage liquidity are mainly based on the official market prices and market values quoted on the balance sheet ...

  • Page 200
    ... issued exist in connection with our pharmaceutical business in Italy, where pursuant to tax legislation, guarantees must be given for reimbursements of tax receivables from the Italian fiscal authorities as well as to secure the supply of products to public hospitals. As of December 31, 2010, these...

  • Page 201
    ... relate mainly to market-typical leasing arrangements to lease operating and office equipment. [45] personnel expenses/ headcount Personnel expenses comprise the following: EUR million 2010 2009 Wages and salaries Compulsory social security contributions and special financial assistance Pension...

  • Page 202
    198 Merck Annual Report 2010 The breakdown of personnel by function is as follows: Average number of employees 2010 2009 Production Logistics Marketing and sales Administration Research & Development Infrastructure and Other Total 8,327 1,927 11,541 4,378 4,116 36,347 6,058 6,956 1,773 10,582 ...

  • Page 203
    ... by E. Merck KG to Merck Financial Services GmbH. These financial payables of EUR 190.3 million (2009: EUR 118.8 million) are subject to standard market interest rates. From January to December 2010, Merck KGaA and Merck Shared Services Europe GmbH performed services for E. Merck KG with a value of...

  • Page 204
    ... for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) confirmed its previous position and adopted a final negative opinion regarding our marketing authorization application for cladribine tablets in Europe. On February 7, 2011, all the conditions for the closing of...

  • Page 205
    ... Report Corporate governance Consolidated Financial Statements Notes More information 201 [54] list of shareholdings The following table presents the list of shareholdings of the Merck Group as of December 31, 2010. Equity interest (%) thereof Merck KGaA (%) Country Company Registered office...

  • Page 206
    ... Report 2010 Country Company Registered office Equity interest (%) thereof Merck KGaA (%) Switzerland Switzerland Switzerland France France France France France France France France France United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom...

  • Page 207
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 203 Country Company Registered office Equity interest (%) thereof Merck KGaA (%) United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom ...

  • Page 208
    ... north America United States United States United States United States United States United States Merck Capital Asset Management Ltd. Merck Capital Holding Ltd. Merck Capital Ltd. Merck B.V. Millipore B.V. Millipore International Holding Company B.V. Millipore Ireland B.V. Serono Tri Holdings...

  • Page 209
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 205 Country Company Registered office Equity interest (%) thereof Merck KGaA (%) United States United States United States United States United States United States United States United ...

  • Page 210
    ...) Ltd. Merck Serono (Beijing) Pharmaceutical R&D Co., Ltd. Merck Serono Co., Ltd. Merck Song-Jiang Ltd. Millipore (Shanghai) Trading Co., Ltd. Millipore China Ltd. Shanghai Yayang International Co., Ltd. Merck Ltd. Merck Specialities Pvt. Ltd. Millipore India Pvt. Ltd. P.T. Merck Tbk. Inter-Lab Ltd...

  • Page 211
    Company Management Report Corporate governance Consolidated Financial Statements Notes More information 207 Country Company Registered office Equity interest (%) thereof Merck KGaA (%) Tunisia Tunisia Australia Australia Australia Australia New Zealand Merck Promotion SARL Merck SARL ...

  • Page 212
    208 Merck Annual Report 2010 Country Company Registered office Equity interest (%) thereof Merck KGaA (%) latin America British Virgin Islands Dominican Republic Curacao Curacao Axebury Ltd. Merck Dominicana S.A. Applied Research Systems ARS Holding N.V. CMIP (Curacao) B.V. Tortola Santo ...

  • Page 213
    ..., the consolidated financial statements of the Merck Group give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group management report includes a fair review of the development and performance of the business and the position of the...

  • Page 214
    210 Merck Annual Report 2010 AuDitor's report "We have audited the consolidated financial statements prepared by Merck Kommanditgesellschaft auf Aktien, Darmstadt, comprising the balance sheet, income statement, the statement of comprehensive income, the cash flow statement, statement of changes ...

  • Page 215
    .... The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development." Frankfurt/Main, February 9, 2011 KPMG AG Wirtschaftsprüfungsgesellschaft...

  • Page 216
    212 Merck Annual Report 2010 GlossAry A Affiliate Associate b Beta-blockers A collective term for similarly acting drugs that act as inverse agonists on the body's beta receptors and thus inhibit the effect of stress hormones (notably, norepinephrine and epinephrine). They lower the heart rate and...

  • Page 217
    ... of total revenues. This is a key performance indicator for steering the business. Food and Drug Administration: U.S. government agency responsible for protecting and advancing public health, especially as concerns food and drugs. Financial figures stipulated in loan contracts to which the company...

  • Page 218
    ... of Chemical Associations. International Financial Reporting Standards (until 2001 known as International Financial Accounting Standards, IAS) are the standards that publicly traded companies must apply if their headquarters are domiciled in the European Union. The International Monetary Fund, with...

  • Page 219
    ... the part of a company's growth that is not derived from acquisitions or currency effects. Over-the-counter drugs is the term used for drugs that are available at stores and pharmacies without a prescription. purchase price allocation r randomized study In medical research, randomization refers to...

  • Page 220
    ... removal of the tumor. Research spending as a proportion of the total revenues of the company or division. Return on sales: Ratio of operating result to total revenues. This is a key performance indicator for steering the business. Schistosomiasis, also known as bilharziosis, is a parasitic...

  • Page 221
    ... 2004 Total revenues by division Pharmaceuticals Merck Serono Generics 2 Consumer Health Care Chemicals Merck Millipore Performance Materials Liquid Crystals Performance & Life Science Chemicals Electronic Chemicals 2 Laboratory Distribution Corporate and Other Operating result by business sector...

  • Page 222
    2004 2005 2006 2007 2008 2009 2010 Change vs. 2009 in % 6,017 3,601 1,619 1,625 357 1,696 - - 589 1,107 - 582 -62 200 776 391 420 21 -56 1,044 1,419 961 672 1,889 234 ...

  • Page 223
    ...may read or order (in German and English) at www.publications.merck.de: Responsibility: Corporate Responsibility Report 2009 Merck - Facts & Figures (also available in French and Spanish) You can order these publications from Corporate Communications, Merck KGaA, 64271 Darmstadt, Germany, or via the...