Merck 2014 Annual Report Download - page 106

101GROUP MANAGEMENT REPORT → REPORT ON ECONOMIC POSITION → Biopharmaceuticals
The results of operations developed as follows:
BIOPHARMACEUTICALS →
RESULTS OF OPERATIONS
2014 20131 Change
€ million in % € million in % € million in %
Sales 5,783.3 100.0 5,688.4 100.0 94.9 1.7
Royalty, license and commission income 191.7 3.3 372.0 6.5 –180.3 – 48.5
Total revenues 5,975.0 103.3 6,060.4 106.5 – 85.4 – 1.4
Cost of sales2–1,119.7 –19.4 –1,024.4 –18.0 – 95.3 9.3
(of which: amortization of intangible assets) 2 (–) (–) (–) (–)
Gross profit24,855.3 84.0 5,036.0 88.5 – 180.7 – 3.6
Marketing and selling expenses2–1,780.2 – 30.8 –1,813.6 – 31.9 33.4 –1.8
(of which: amortization of intangible assets) 2 (– 552.8) (– 596.7) (43.9) (– 7.4)
Royalty, license and commission expenses – 518.3 – 9.0 – 547.3 – 9.6 29.0 – 5.3
Administration expenses – 219.7 – 3.8 – 202.5 – 3.6 –17.2 8.5
Research and development costs2–1,343.7 – 23.2 –1,178.1 – 20.7 –165.6 14.1
(of which: amortization of intangible assets) 2 (– 1.0) (–) (– 1.0) (–)
Other operating expenses and income – 36.9 – 0.6 – 501.4 – 8.8 464.5 – 92.7
Operating result (EBIT) 956.5 16.5 793.1 13.9 163.4 20.6
Depreciation / Amortization / Reversals of impairments 829.5 14.3 993.5 17.5 –164.0 –16.5
(of which: one-time items) (4.7) (189.1) (– 184.4) (– 97.5)
EBITDA 1,786.0 30.9 1,786.6 31.4 – 0.6 –
Restructuring costs 42.5 62.3 – 19.8 – 31.8
Integration costs / IT costs 2.4 6.2 – 3.8 – 61.5
Gains / losses on the divestment of businesses – – – –
Acquisition-related one-time items – – – –
Other one-time items – – – –
EBITDA pre one-time items 1,830.9 31.7 1,855.1 32.6 – 24.2 – 1.3
1 Previous year’s figures have been adjusted, see “The Group" in the Group management report.
2 The disclosure of amortization of intangible assets (excluding software) has been changed. See “Accounting and measurement principles“ in the Notes to the Group accounts.
Royalty, license and commission income, which is reported under
total revenues along with sales, dropped substantially in 2014
by – 48.5 % to €192 million (2013: €372 million). This was due
primarily to lower royalty and license income from Humira®,
Avonex® and Enbrel®. Among other things, the agreement reached
with Bristol- Myers Squibb in 2013 on the co-promotion of
Glucophage® in China had a slightly positive effect on commis-
sion income in comparison with the previous year.
Taking into account the development of sales and total reve-
nues as well as cost of sales, the gross profit of the Biopharma-
ceuticals division fell by €–181 million to €4,855 million, leading
to a gross margin of 84.0 % (2013: 88.5 %). This decrease was pri-
marily due to lower royalty, license and commission income, but
also to stronger sales growth in regions with lower margins as
well as isolated production and supply bottlenecks.
The division’s research spending ratio increased to 23.2 %
(2013: 20.7 %). In 2014, an assessment of the R&D pipeline took
place, leading to a prioritization of research activities and the
discontinuation of multiple research projects. Provisions, which
increased research and development costs in 2014, were set up for
future expenses of the discontinued projects. In addition, invest-
ments in the Biosimilars pipeline led to higher research and devel-
opment costs.