Merck 2010 Annual Report Download - page 21

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The Group financial statements strongly reflect the acquisition of Millipore,
which is helping us to position Merck as a life science company.
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The financial and earnings position developed very positively in 2010. Following 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. The revenues and expenses of the Millipore companies have been included in the
income statement since July 2010. Moreover, the expenses from the purchase price allocation
as well as one-time transaction and integration costs have been taken into account.
Product sales of the Merck Group rose in 2010 by 21% to EUR 8,929 million. Declining by 2%,
royalty, license and commission income was slightly lower than in 2009. Total revenues, mean-
ing the sum of product sales as well as royalty, license and commission income, rose by 20%
to EUR 9,291 million. This sharp increase is related to the purchase of Millipore. However, our
business also grew satisfactorily on an organic basis, i.e. adjusted for acquisition and currency
effects, by 7.9%.
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EUR million
10,000
7,500
5,000
2,500
2006* 2007 2008 2009 2010
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Chemicals Pharmaceuticals
Cost of sales increased by 18%. In the course of the purchase price allocation, the inventories
from the Millipore acquisition were already recognized at fair values based on realizable sales
revenues, and thus stepped up by EUR 86 million. This amount was fully expensed in cost of
sales in the second half of 2010, and had a one-time negative impact on gross margin. Overall,
gross margin rose by 21%. Marketing and selling expenses increased relatively sharply by 20%
since the costs of the Millipore companies were included for six months compared to 2009.
Excluding the acquisition and currency effects, the increase amounted to 7.9%.
Owing to the increasing significance of royalty, license and commission expenses, we disclose
these separately below marketing and selling expenses. The 15% cost increase is sales-dependent
and relates to the positive development of our Merck Serono products Rebif ® and Erbitux ®.
Organic sales growth of 7.9%
for the Merck Group
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Overall economic situation
Financial position and results of operations