ANNUAL REPORT 2014
`DELIVERING GROWTH
`
`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. To reflect such fact
`and to avoid any misconception of the reader of the publication certain logos, terms and business
`descriptions of the publication have been substituted or additional descriptions have been added.
`This version of the publication, therefore, slightly deviates from the otherwise identical version of
`the publication provided outside the United States and Canada.
`
`Page 2
`
`

`

`
`
`Page 3
`
`

`

`
`G R O U P →
`K E Y F I G U R E S
`
`€ million
`
`Total revenues
`Sales
`Operating result (EBIT)
` Margin (% of sales)
`EBITDA
` Margin (% of sales)
`EBITDA pre one-time items
` Margin (% of sales)
`Earnings per share (€)1
`Earnings per share pre one-time items (€)1
`Business free cash flow
`
`2014
`
`11,500.8
`11,291.5
`1,762.0
`15.6
`3,122.9
`27.7
`3,387.7
`30.0
`2.66
`4.60
`2,605.1
`
`2013
`
`11,095.1
`10,700.1
`1,610.8
`15.1
`3,069.2
`28.7
`3,253.3
`30.4
`2.77
`4.39
`2,960.0
`
`Change
`in %
`
`3.7
`5.5
`9.4
`
`1.7
`
`4.1
`
`–4.0
`4.8
`–12.0
`
`1 Taking into account the share split; previous year’s figures have been adjusted accordingly. See “Earnings per share” in the Notes to the Consolidated Financial Statements.
`
`G R O U P →
`S A L E S
`€ million
`
`G R O U P →
`E B I T D A P R E O N E -T I M E I T E M S
`€ million
`
`2014 →
`2013 →
`2012 →
`2011 →
`2010 →
`
`2014 →
`2013 →
`2012 →
`2011 →
`2010 →
`
`11,291.5
`10,700.1
`10,740.8
`9,905.9
`8,928.9
`
`3,387.7
`3,253.3
`2,964.9
`2,723.8
`2,545.0
`
`Page 4
`
`

`

`G R O U P →
`
`Company structure
`GROUP
`
`→
`
`Merck KGaA, Darmstadt, Germany, is a leading company for inno­
`vative and top­quality high­ tech products in healthcare, life science
`and performance materials. Around 39,000 employees work in
`66 countries to improve the quality of life for patients, to foster
`the success of customers and to help meet global challenges.
`
`G R O U P →
`B U S I N E S S S E C T O R S A N D B U S I N E S S E S
`as of January 1, 2015
`
`Merck KGaA, Darmstadt, Germany
`
`Group
`
`Healthcare
`
`Life Science
`
`Biopharmaceuticals
`
`Life Science
`
`Performance
`Materials
`
`Performance
`Materials
`
`Business sectors
`
`Businesses
`
`Consumer Health
`
`Allergopharma
`
`Biosimilars
`
`Effective January 1, 2015 the Group changed the structure of its financial reporting. As of the first quarter of 2015, the following three
`business sectors will be used for reporting purposes:
`→ Healthcare comprises the Biopharmaceuticals, Consumer Health, Allergopharma and Biosimilars businesses.
`→ Life Science refers to the business of the same name.
`→ Performance Materials corresponds to the business of the same name.
`
`Page 5
`
`

`

`” WE ARE ALL PURSUING ONE
`GOAL: DELIVERING GROWTH WITH
`OUR IDEAS AND COMMITMENT
`TO OUR DAILY WORK. TO BENEFIT
`OUR PATIENTS, OUR CUSTOMERS,
`OUR SHAREHOLDERS AND OUR
` SOCIETY.”
`
`
`K A R L- L U D W I G K L E Y, Chairman of the Executive Board of Merck KGaA, Darmstadt, Germany
`
`Page 6
`
`

`

`2
`
`3
`
`1
`
`F I T F O R
`2 0 1 8
`
`MAY 2 →
`ACQUISITION OF
`AZ ELECTRONIC
`MATERIALS
`
`Through the acquisition of AZ for around € 1.9 billion,
`the existing, highly profitable Liquid Crystals business
`is being expanded with high-tech electronic materials.
`AZ materials are widely used in integrated circuits,
`flat-panel displays and light-emitting diodes, making
`AZ an important partner to the leading global
`electronic manufacturers.
`
`G R O U P →
`H I G H L I G H T S
`of 2014
`
`Highlights 2014
`GROUP
`
`←
`
`MARCH 26 →
`SHARE SPLIT
`ANNOUNCED
`
`Subsequent to a doubling in the value of
`its shares since the beginning of 2011, the
`company announces a share split in a ratio
`of 1:2. The share split became effective on
`June 30.
`
`NOVEMBER 17 →
`STRATEGIC ALLIANCE
`WITH PFIZER IN
`IMMUNO-ONCOLOGY
`
`Merck KGaA, Darmstadt, Germany, and Pfizer will jointly
`develop and commercialize a highly promising anti-PD-L1
`antibody from its research pipeline. In value terms, the
`transaction is the largest so far in the biopharmaceutical
`industry for a single asset at this stage of development.
`Immuno-oncology is about mobilizing the body’s own
`immune system to fight tumor cells.
`
`9
`
`8
`
`SEPTEMBER 30 →
`“PROUD TO BE AN
`ORIGINAL” EMPLOYEE
`CAMPAIGN L AUNCHED
`
`Merck KGaA, Darmstadt, Germany, kicks off a global
`communications campaign called “Proud to be an
`Original”. The campaign offers its 39,000 employees
`worldwide the opportunity to express their pride in
`working for the company.
`
`Page 7
`
`

`

`AUGUST 1 →
`NEW CFO
`TAKES OFFICE
`
`Marcus Kuhnert joins the Group as Member of the
`Executive Board and Chief Financial Officer.
`
`4
`
`5
`
`6
`
`7
`
`AUGUST 27 →
`GROUNDBREAKING AT
`A NEW PHARMACEUTICALS
`MANUFACTURING SITE
`IN CHINA TAKES PL ACE
`
`The company holds the groundbreaking ceremony
`for its new pharmaceutical manufacturing site
`in Nantong, China, the new facility will be its second-
`largest worldwide. As of 2017, it will mainly focus
`on the bulk production and packaging of medicines
`referenced in China’s essential drug list.
`
`SEPTEMBER 1 →
`GROUNDBREAKING
`CEREMONY FOR
`NEW GLOBAL
`HEADQUARTERS
`
`The expansion of the company´s site in Darmstadt into
`a contemporary global headquarters is clearly taking
`shape. The symbolic groundbreaking officially marks the
`launch of the “ONE Global Headquarters” project.
`
`SEPTEMBER 22 →
`AGREEMENT TO
`ACQUIRE SIGMA-ALDRICH
`SIGNED
`
`SEPTEMBER 18 →
`PL AN TO STRENGTHEN
`THE EXECUTIVE BOARD
`ANNOUNCED
`
`The company announces an agreement to acquire Sigma-
`Aldrich for US$ 17.0 billion. The combination would establish
`one of the leading players in the US$ 130 billion global life
`science industry. On December 5, Sigma-Aldrich shareholders
`approve the merger with our company.
`
`Effective January 1, 2015, Stefan Oschmann becomes
`Vice Chairman of the Executive Board. On the same date,
`Belén Garijo becomes a Member of the Executive Board
`and assumes the leadership of the Healthcare business
`sector of Merck KGaA, Darmstadt, Germany.
`
`Page 8
`
`

`

`4
`
`M A G A Z I N E → Table of contents
`
`The world is changing at breathtaking speed. Megatrends, which characterize the deep- seated
` social and technological changes taking place around the globe, are one reason. In this
`Annual Report, we take a closer look at four global trends. Our magazine shows how we are
`meeting them, positioning ourselves optimally for the future and taking decisive steps
`to help shape tomorrow.
`
`TREND/1 →
`YOUNGER
`FOR LONGER
`6 – 11
`
`TREND/2 →
`MARKETS
`IN MOTION
`12 – 17
`
`While life expectancy is increasing, birth rates
`are declining, even in many dynamic emerging
`countries. We are the global leader in fertility
`treatment.
`
`The middle class is growing – worldwide. As incomes
`rise, so do consumption and health awareness.
`We see these new markets as future hubs, and are
`becoming even more international.
`
`TREND/3 →
`A CRYSTAL
`CLEAR FUTURE
`18 – 25
`
`TREND/4 →
`HEALTH FOR
`EVERYONE
`26 – 31
`
`The digital revolution is changing people’s lives
`around the globe. With our expertise in liquid
`crystals and insights into future trends, our
`company is technology leader and key driver
`of future developments.
`
`For many people around the world, access to
`innovative health solutions is more of a dream
`than a reality. In order to change this, we have
`committed ourselves to numerous projects, for
`instance in the fight against schistosomiasis.
`
`Page 9
`
`

`

`A N N U A L R E P O R T → Table of contents
`
`5
`
`TO OUR SHAREHOLDERS →
`32 – 41
`
`CORPORATE GOVERNANCE →
`142 –165
`
`Letter from Karl-Ludwig Kley
`034
`The Executive Board
`038
`040 Company Shares
`
`GROUP MANAGEMENT
`REPORT →
`42 –141
`
`044
`
` FUNDAMENTAL INFORMATION
`ABOUT THE GROUP
`The Group
`044
`050 Objectives and strategies of the Group
`Internal management system of the Group
`055
`059 Corporate Responsibility
`067 Research and Development at the Group
`077 Employees
`
`080 REPORT ON ECONOMIC POSITION
`080
` Macroeconomic and sector-specific environment
`082 Review of forecast against actual business developments
`084 Course of business and economic position
`084 Group
`097 Biopharmaceuticals
`104 Consumer Health
`109 Performance Materials
`115
`Life Science
`121 Corporate and Other
`
`122 REPORT ON RISK S AND OPPORTUNITIES
`
`134 REPORT ON EXPECTED DEVELOPMENTS
`
`140
`
` REPORT IN ACCORDANCE WITH SECTION 315 (4)
`OF THE GERMAN COMMERCIAL CODE (HGB)
`
`141 SUBSEQUENT EVENTS
`
`144
`
` Capital structure and corporate bodies of Merck KGaA,
`Darmstadt, Germany
`145 Statement on Corporate Governance
`162 Report of the Supervisory Board
`164
` Objectives of the Supervisory Board
`with respect to its composition
`
`CONSOLIDATED FINANCIAL
`STATEMENTS →
`166 – 259
`
`168 Consolidated Income Statement
`169 Consolidated Statement of Comprehensive Income
`170 Consolidated Balance Sheet
`171 Consolidated Cash Flow Statement
`172 Consolidated Statement of Changes in Net Equity
`174 Notes to the Group accounts
`
`
`260 RESPONSIBILIT Y STATEMENT
`
`261 AUDITOR’S REPORT
`
`262
`
`Information and Service
`
`→
`
`
`The full Consolidated Financial Statements can be found on
`our website at: ar2014.emdgroup.com
`
`Page 10
`
`

`

`TREND/1 →
`
`AGING POPULATIONS
`YOUNGER
`FOR LONGER
`
`“ What one has wished for in youth, in old age
`one has in abundance.” More and more
` people can relate to this quote from Johann
`Wolfgang von Goethe as life expectancies
`steadily increase worldwide. Birth rates,
`meanwhile, are sinking. These developments
`are reflected in our portfolio of products
`and services – including those that treat
` infertility and further cancer research.
`
`Page 11
`
`

`

`
`
`Page 12
`
`

`

`8
`
`M A G A Z I N E → Younger for Longer
`
`F E R T I L I T Y →
`B I R T H R AT E S A N D D I S T R I B U T I O N
`Worldwide by region
`
`Fertility rate
`
`7.0
`
`5.8
`
`4.6
`
`3.4
`
`2.2
`
`1.0
`
`Birth
`distribution
`worldwide
`2030
`
`Asia
`50.7 %
`
`Africa
`32.2 %
`
`Latin America
`and the Caribbean
`
`7.6 % Europe
`5.4 %
`
`Northern
`America
`3.6 %
`
`Oceania
`0.5 %
`
`1970
`
`→
`
`2030
`
`Source: United Nations, World Fertility Patterns 2013
`
`On average, women are bearing fewer and fewer children.
`In Asia, the fertility rate is likely to decline significantly.
`Yet according to a forecast of the global distribution of births in 2030,
`in absolute terms the majority of children will be born in Asia.
`
`“Catch me if you can!” yells Lovis as he
`races across the playground. Little Henri
`runs behind his older brother, shouting.
`The two boys keep their parents on their
`toes. But for Silke (41) and Jens (44),
`achieving this happy family was a long
`and difficult process. “At around the age
`of 30, I felt ready to start a family. At
`the time, Jens was still in awe of the
` responsibility of having a family, but I was
`able to convince him. Then, however,
`I couldn’t get pregnant,” Silke explains.
`There was a medical reason for this. When
`she was 17 Silke suffered from pelvic
` inflammatory disease, which blocked her
`fallopian tubes. “Although I had suspected
`this, it still came as a shock,” Silke recalls.
`After numerous discussions, the couple
` decided to try artificial insemination. One
`frequently used method is in vitro fertil­
`ization (IVF), a procedure in which the egg
`is fertilized outside the body. After ovula­
`tion is induced, the egg cells are removed
`through the vagina and placed in a test
`tube with the sperm and then transferred
`back afterwards. “The treatment took three
`years; it was not an easy time for us,” says
`Jens. Silke agrees, “I put myself under
` tremendous pressure and suffered from
`mood swings. And the negative test results
`made me very sad.” Not until the seventh
`attempt did they suddenly hear the words,
`
`“Congratulations, you’re pregnant!” The
`elation over the birth of Lovis in February
`2008 was followed by another shock. The
`baby had cerebral hemorrhaging. “After a
`difficult period, Lovis is a happy, normal
`boy today,” the parents report with relief.
`And he now has a younger brother to play
`with. Henri was born in summer 2011. This
`time, Silke became pregnant immediately
`after the first attempt. “Maybe it was
` because I was much more relaxed,” Silke
`says today. Silke and Jens experienced an
`“emotional rollercoaster” during
`their
` efforts to become parents. Artificial in­
`semination was ultimately successful,
`however – twice in fact. “We wanted these
`children so very much,” the couple says
`with conviction, gazing with pride at their
`sons.
`
`FULFILLING THE DESIRE FOR
`CHILDREN THROUGH FERTILIT Y
`TREATMENT
`What Silke and Jens went through is cer­
`tainly no isolated case.
`Roughly one in seven couples in Germany
`is unable to bear children due to fertility
`disorders. The yearning to have a baby of
`their own can quickly become a tale of
`woe. But many couples are able to fulfill
`their desire for a child through artificial
`insemination. The per­cycle success rate
`
`for in vitro fertilization is about 70 %.
` Hormone therapy is of decisive importance
`in treating infertility. As the world leader
`in the fertility drug industry, Merck KGaA,
`Darmstadt, Germany, supplies hormones
`for each phase of the reproductive cycle –
`from developing the egg cell to the early
`stage of pregnancy. The company has also
`developed a wealth of products in this
`area, including a computerized test that
`improves the prospects of a successful
`pregnancy by identifying viable embryos.
`As a result of the intensive research and
`development efforts, around two million
`children have now been born thanks to its
`products.
`“There are many causes of fertility disor­
`ders. Half of cases are due to women, the
`other half to men. However, in many cases
`advanced age is the reason,” says Professor
`Dr. Heribert Kentenich from the Fertility
`Center Berlin. Particularly in modern in­
`dustrial nations, career plans or individual
`fulfillment come first and many couples
`delay family planning – sometimes for
`too long. “By the age of 30, a woman’s
`probability of a successful pregnancy be­
`gins to decline, and at 40 the odds become
`very low,” Professor Kentenich explains.
` Despite this, the trend is clear: Fewer and
`fewer women are having their first child
`before the age of 30. Naturally, the topic of
`
`Page 13
`
`

`

`M A G A Z I N E → Younger for Longer
`
`9
`
`“ BY THE AGE OF 30, A WOMAN’S
`PROBABILITY OF A SUCCESSFUL
`PREGNANCY BEGINS TO DECLINE,
`AND AT 40 THE ODDS BECOME
`VERY LOW.”
`
`S I L K E A N D J E N S →
`A S S I S T E D R E P R O D U C T I V E T E C H N O L O G Y H E L P E D S I L K E A N D J E N S
`T O H A V E T H E I R C H I L D R E N L O V I S ( R I G H T ) A N D H E N R I .
`
`P R O F. D R . H E R I B E R T K E N T E N I C H →
`F E R T I L I T Y C E N T E R B E R L I N
`
`Page 14
`
`

`

`1O
`10
`
`MAGAZINE —> YoungerforLonger
`M A G A Z I N E → Younger for Longer
`
`F I L L I N G O F R E A DY-T O - U S E S Y R I N G E S →
`U N D E R C L E A N R O O M C O N D I T I O N S AT A
`P H A R M A C E U T I C A L P R O D U C T I O N P L A N T
`I N D A R M S TA D T, G E R M A N Y.
`
`
`
`
`
`Page 15
`
`Page 15
`
`

`

`M A G A Z I N E → Younger for Longer
`
`11
`
`L U C I A N O R O S S E T T I →
`E X E C U T I V E V I C E P R E S I D E N T,
`G L O B A L H E A D O F R E S E A R C H &
`D E V E L O P M E N T AT T H E
`B I O P H A R M A C E U T I C A L S B U S I N E S S
`
`In the early 1960s, the worldwide fertility
`rate averaged 4.9 children per woman. In
`2012, the rate had fallen to 2.6 children over-
`all, and in industrialized countries to 1.6.
`Women in Germany currently give birth to an
`average of just 1.4 children. When the birth
`rate falls below the replacement-level fertili-
`ty rate of 2.1 children per woman, population
`numbers shrink. In a global comparison, the
`African continent has the highest fertility
`rate of 4.4 children per woman.
`
`→ Life expectancy and world population
`are rising
`Recent UN studies show that the world pop-
`ulation will grow from the current 7 billion
`to 11 billion people by the year 2100. Africa’s
`population will show a particularly dynamic
`development. It is likely to increase between
`now and then from 1 billion to 4 billion peo-
`ple. Increasing life expectancy is the main
`driver of population growth worldwide. In
`1900, life expectancy in Germany was ap-
`proximately 45 years; today a girl born in
`Germany can expect to live to the age of 83,
`and a boy to the age of 78. Researchers
` believe life expectancies around the world
`will continue to increase at varying rates,
`depending on the region.
`
`medicines much easier – from filtration,
`sample preparation and cell biology in­
`struments, products used in oncology and
`neurology, in molecular biology and stem
`cell research, or for infectious diseases and
`metabolic disorders.
`
`HIGH QUALIT Y OF LIFE IN OLD AGE
`Growing older does not necessarily mean
`becoming more ill. The vast majority of
`“new” senior citizens feel fitter for longer.
`They are active, like to travel and con­
`sume, and they take care of themselves.
`The company is responding to the increas­
`ingly health­conscious older population
`with over­the­counter products for the
`self­ treatment of minor complaints. In
`pharmacies around the globe, consumers
`can find products tailored to the varying
`requirements of older men and women –
`for example the Seven Seas Perfect7®
`range, a combination made from sources
`of natural fish oil rich in omega­3 fatty
`acids, with important vitamins and miner­
`als. Products like these are helping a grow­
`ing number of people enjoy a high quality
`of life in old age. In order to maintain their
`appearance, they can rely on cosmetic
` active ingredients, for example substances
`that offer protection from UV radiation,
`combat aging of the skin and regulate the
`skin’s moisture balance. If wrinkles persist,
`they can be covered with a skin­colored
` silicate powder.
`
`infertility is not confined to western in­
`dustrialized nations. However, in many
`countries it is a taboo topic. For this reason,
`in 2014 Merck KGaA, Darmstadt, Germany,
`launched a widespread educational cam­
`paign in India in order to overcome the
`culturally driven obstacle of silence.
`
`LONGER LIFE EXPECTANCY
`THANK S TO MEDIC AL ADVANCES
`Birth rates continue to decline worldwide,
`especially in highly developed societies
`and in the emerging markets of Asia and
`Latin America. At the same time, life
` expectancy is increasing (see text on right)
`with growing numbers of people who are
`getting older and older. This development
`is giving rise to new challenges. This
` relates not only to typical age­related dis­
`eases such as neurodegenerative disorders
`that the medical world is aiming to fight.
`Therapies to treat chronic diseases can also
`help younger patients to remain active
`members of the workforce and society for
`longer. One of the company's goals is to
`help people with neurodegenerative dis­
`orders such as multiple sclerosis by offer­
`ing therapies that substantially help to
`improve their quality of life. The same
` applies to cancer therapy. Thanks to highly
`specialized biopharmaceuticals, many tu­
`mors can now be cured through early
` detection and treatment. And the company
`continues to drive progress in cancer re­
`search with new approaches that focus pri­
`marily on harnessing the immune system
`to fight cancer. “In the field of immuno­
`oncology, we are testing treatment possi­
`bilities for our anti­PD­L1 antibody in sev­
`eral different pivotal clinical studies across
`multiple types of cancer, including non­
`small cell lung cancer and ovarian cancer,
`as well as Merkel cell carcinoma, a rare
`form of skin cancer,” said Luciano Rossetti,
`Head of Global Research and Development
`at the Group's Biopharmaceuticals busi­
`ness. The broad range of innovative mate­
`rials, reagents, test kits and equipment
`from the Life Science business of Merck
`KGaA, Darmstadt, Germany, also supports
`medical progress. Diverse products make
`the development and manufacture of new
`
`→ Declining birth rates
`
`Page 16
`
`

`

`
`
`Page 17
`
`

`

`TREND/2 →
`GROWING
`MIDDLE CLASS
`MARKETS IN
`MOTION
`
`The world is converging – with amazing
`dynamism. Economic boundaries are
`blurring, and global competition is heat-
`ing up at an accelerating rate. We are
`strengthening our presence in emerging
`markets and preparing ourselves for a
`successful future.
`
`Page 18
`
`

`

`14
`
`M A G A Z I N E → Markets in motion
`
`M E E TA G U LYA N I →
`E X E C U T I V E V I C E P R E S I D E N T, H E A D O F S T R AT E G Y & G L O B A L F R A N C H I S E S
`AT T H E B I O P H A R M A C E U T I C A L S B U S I N E S S
`
`“ WE ARE UNIQUELY POSITIONED TO FURTHER OUR GREAT POTENTIAL
`IN EMERGING MARKETS BY DRIVING GROWTH OF OUR SPECIALTY
`CARE PORTFOLIO.”
`
`Page 19
`
`

`

`M A G A Z I N E → Markets in motion
`
`15
`
`D A N I E L S TA M M →
`H E A D O F G L O B A L P H A R M A P R O C E S S I N G
`AT T H E L I F E S C I E N C E B U S I N E S S
`
`“ ON THE TECHNOLOGY
`FRONT, WE ARE SEEING
`INCREASING VOLUMES
`OF BIOLOGIC DRUG PRO-
`DUCTION.”
`
`expand our strong position in Healthcare,
`Life Sciences and Performance Materials,”
`says Karl­Ludwig Kley, Chairman of the
`Executive Board.
`
`HEALTH AS A KEY FACTOR
`Growth is being driven by the need for
`effective medicines, which is predicted to
`rise further. With the increase in prosperity,
`the birth rate is dropping, families are
`being started later in life, and average life
`expectancy is on the rise (see page 11). The
`prevalence of diseases of civilization such
`as diabetes and cardiovascular disorders
`is predicted to increase even further. And
`Merck KGaA, Darmstadt, Germany, offers
`health solutions to address these issues.
`“Emerging markets have accounted for al­
`most two­thirds of the Group's Biopharma­
`ceuticals business’ organic growth over the
`last several years,” says Meeta Gulyani,
`Executive Vice President, Head of Strategy
`& Global Franchises at the Biopharma­
`ceuticals business. “We are uniquely po­
`sitioned to further our great potential in
`emerging markets by driving growth of our
`specialty care portfolio,” she explains.
`
`Not long ago, there was still a clear world
`order, one that was founded above all
`on differences – political, ideological and
` economic. Yet since the fall of the Iron
`Curtain, these differences have been in­
`creasingly disappearing, eliminated by the
`march of globalization. New free trade
`agreements have resulted in enormous
`economic areas – the markets are in motion.
`The once profound differences between
`developing, emerging and industrialized
`countries are crumbling, primarily due to a
`growing level of prosperity. According to
`estimates, the middle class will represent
`around 60 % of the world’s population by
`the year 2030, with the Asia­Pacific region
`accounting for two­thirds of that figure.
`This “emerging middle class” is still a long
`way off from attaining the income level of
`central Europe. Yet in the past several
` decades, many millions of people have
` risen out of poverty in emerging markets
`such as China, India and Brazil. Urbani­
`zation is the key to this economic growth.
`People from rural areas are finding jobs
`in the megacities, where they are earning
` rising incomes and spending heavily on
`everything from their first flat­screen TV
`to their first car. Multinational corporate
`groups, which are increasingly building
`production facilities in Asia, are driving
`this dynamic development. More and more,
`the expanding middle class is leading to a
`profound sociocultural transformation, in­
`cluding a higher level of education, greater
`political interest and growing health aware­
`ness. Optimists view this transformation as
`a long­term upward spiral of prosperity.
`
`A WELL-HONED STRATEGY
`The new world economic order is signifi­
`cantly impacting the strategic direction
`of global players such as Merck KGaA,
` Darmstadt, Germany. It is giving rise not
`only to incredible opportunities, but to
`risks as well. After all, the competition is
`not slumbering; in many sectors, new com­
`petitors are springing up everywhere. Now
`more than ever, it is therefore necessary for
`companies to be in the right place at the
`right time, with the right products. And
`to equip themselves for the future. Success
` tomorrow will only come to those who
` invest in innovative technologies today,
`make meaningful acquisitions, forge stra­
`tegic alliances and expand local capacities;
`to those who optimize their processes as
`well as attract and retain a qualified work­
`force. Merck KGaA, Darmstadt, Germany,
`recognized the signs of the times early on
`and is acting accordingly. The company
`does not view emerging markets merely
`as sales markets with enormous potential,
`but also as key technology and production
`hubs. This is why the presence in these
`markets, has been significantly expanded,
`whether that means OTC products for con­
`sumer health, liquid crystals for consumer
`electronics, laboratory products for the life
`science sector, or medical care. In addition
`to this, the company is creating more effi­
`cient structures and processes through its
`“Fit for 2018” transformation and growth
`program. “We have significantly increased
`our efficiency in the last few years and will
`continue on this successful course. We are
`already well­positioned in global growth
`markets. We are making targeted invest­
`ments in our businesses in order to further
`
`Page 20
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`

`

`16
`
`M A G A Z I N E → Markets in motion
`
`Among other areas, the company is invest­
`ing in biosimilars, which are subsequent
`versions of innovator biopharmaceuticals
`made by a different company following
`patent expiration of the innovative prod­
`uct. Another important step is the strategic
`alliance with Pfizer, which was announced
`in November 2014 and will allow the
`two companies to jointly strengthen and
` accelerate the development of immuno­
`oncology assets.
`The consumer health care market is also
`experiencing extremely dynamic growth
`in emerging markets such as China, India,
`Russia, and Latin America, along with
`markets in the Middle East and Africa.
`This growth is being driven by increasing
`health awareness among the emerging
`middle class, as well as the desire to feel
`young and healthy until as late an age as
`possible. Market research on the expand­
`ing middle class segment in Africa shows
`that health has become synonymous with
`prosperity. “Health is the key to realizing
`a higher standard of living. Good health
` enables better performance, success and
`recognition in one’s professional as well as
`private life,” says Erich Nobis, Vice Presi­
`dent, Intercontinental at Consumer Health,
`particularly with a view to emerging mar­
`kets. This business encompasses products
`tailored to the markets and target groups,
`such as food supplements for preventive
`health care, along with informational
` material for consumers and training for
`personnel. “In order to accomplish this,
`we have to be close to consumers, which
`means we have to build and expand our
`organizations in the core markets. Here,
`qualified employees with a cultural back­
`ground in the respective market are espe­
`cially important,” notes Nobis.
`
`LEVERAGING GLOBAL
`OPPORTUNITIES
`The Life Science business is also on a growth
`course and is leveraging the opportunities
`offered by both mature and emerging mar­
`kets. Every year, the company develops
`new reliable products for the life science
`industry, “Scientists are everywhere and
`science happens across the globe. Tradi­
`
`M I D D L E C L A S S →
`G L O B A L D I S T R I B U T I O N
`in 2030
`
`Sub-Saharan Africa
`2.2
`North Africa & Middle East
`4.8
`
`Asia-Pacific
`66.1
`
`Central and South America
`6.4
`
`North America
`6.6
`
`Europe
`13.9
`
` %
`
`Source: United Nations Human Development Report 2013
`
`tional sources of scientific funding in
`North America and Europe are still lead­
`ing, but stagnating as government funding
`is constrained and pharmaceutical research
`is consolidating,” says Daniel Stamm, Head
`of Global Pharma Processing at the Life
`Science business. Many emerging markets
`are investing heavily to develop biosimilar
`production capabilities. Backed by favor­
`able demographics as well as improving
`education standards, Africa and the Middle
`East have the potential to foster a new
`generation of scientists. “On the technology
`front, we are seeing increasing volumes of
`biologic drug production, of both currently
`off­patent drugs as well as a burgeoning
`pipeline of new biological entities. Cellular
`analysis is becoming more relevant, as is
`the purity of lab water and chemicals,”
`says Stamm.
`
`The middle class is growing worldwide,
`and this growth is especially strong in Asia.
`In 2030, well over two-thirds of the
`middle class will reside in Asian countries.
`
`For the Performance Materials business, the
`key goal is to underpin its global leadership
`position in liquid crystals and functional
`pigments, as well as to expand this position
`through investments in new technologies.
`Effect pigments make coatings, plastics,
`print products, and cosmetics shine. In its
`business with effect pigments, which are
`used in automotive coatings, the company
`is thus also benefiting from the boom the
`automotive industry is experiencing in
`emerging markets. “Today it is more im­
`portant than ever before to think outside
`the box, and to meld the familiar with the
`unfamiliar in order to develop truly inno­
`vative content, products and applications,”
`summarizes Walter Galinat, who heads the
`Performance Materials business sector of
`Merck KGaA, Darmstadt, Germany. With
`this philosophy, the company is laying the
`ideal foundation for success in dynamic
`markets.
`
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`

`

`M A G A Z I N E → Markets in motion
`
`17
`
`E R I C H N O B I S →
`V I C E P R E S I D E N T, I N T E R C O N T I N E N TA L
`C O N S U M E R H E A L T H
`
`“ HEALTH IS THE KEY
`TO REALIZING A HIGHER
`STANDARD OF LIVING.”
`
`Asia-Pacific
`
`2009
`
`2020
`
`2030
`
`3,228 million
`
`1,740 million
`
`525 million
`
`Page 22
`
`

`

`TREND/3 →
`DIGITIZATION
`A CRYSTAL CLEAR
`FUTURE
`
`The digital revolution is impacting our lives in
`a variety of ways – especially as users of
`communication media. Whether for smart-
`phones, laptops or flat-screen televisions,
`we as global liquid crystals market and tech-
`nology leader are driving the development
`of cutting-edge displays.
`
`Page 23
`
`

`

`
`
`Page 24
`
`

`

`20
`
`M A G A Z I N E → A crystal clear future
`
`P R O D U C T I O N O F L I Q U I D C R Y S TA L S →
`I N AT S U G I , J A PA N
`
`Technology is not merely moving forward
`– it is making quantum leaps. In the age
`of digitization, our world is undergoing a
`breathtaking transformation. The global
`volume of electronic data is doubling every
`two years, and computing power is con­
`tinuously reaching new heights, breaking
`one record after another. Cloud comput­
`ing, big data and the Internet of Things
`are the buzzwords of the digital debates.
`As a global communication and informa­
`tion medium, the Internet is profoundly
`changing people’s day­to­day lives – from
`consumer behavior and the exchange of
`ideas and experiences, to the transmission
`of knowledge.
`
`The information explosion unleashed by
`the Web is viewed by social scientists as
`the basis of a modern understanding of
` democracy, and by economists as a growth
`driver. Online marketing along with the
` real­time analysis of relevant customer and
`market data using digital technologies have
`become key competitive factors for com­
`panies. Smartphones and tablet computers
`have long been making the Internet mobile.
`This represents a rapid shift; mobile phones
`were once only affordable to wealthy cus­
`tomers, who could also use the devices to
`tone their muscles. In today’s world, it
`would be a real challenge for the average
`user to get through a single day without
`a smartphone. These networked fonts of
` information have gone mainstream and,
`in the digital age, are now the constant
`companion of people everywhere.
`
`INTUITIVE DISPL AY CONTROL
`The situation is no different for Mark Verrall.
`He demonstratively swipes his index finger
`over his display, smiles and says, “We have
`already accomplished a great deal and will
`go on to accomplish much more.” Verrall,
`who holds a PhD in Chemistry, was recent­
`ly appointed Head of Display Materials
`R&D. He has been working for the com­
`pany for 25 years and has contributed to
`the unique success story of liquid crystal
`displays (LCDs) – a tale in which the “swipe”
`represents a particularly exciting chapter.
`“Intuitive touchscreen control is what
`turned smartphones and tablet computers
`into a mass phenomenon,” says Verrall.
`
`