Sustainable and profitable growth

We focus on innovative and top-quality high-tech products in the business sectors Healthcare, Life Science and Performance Materials . The company’s goal is sustainable and profitable growth. We intend to achieve this by growing primarily organically and by further developing its competencies, but also by making targeted acquisitions that complement and expand existing strengths in meaningful ways. Building on leading branded products in all four businesses we aim to generate income that is largely independent of the prevailing economic cycles. Moreover, the aim is to further expand the strong market position in emerging markets in the medium to long term. In 2014, the Emerging Markets region contributed 38% to Group sales.

Our biopharmaceutical business aims to become a preferred global biopharmaceutical partner, providing innovative specialty medicines, leading brands, and high-value solutions. Global megatrends such as world population growth and a general increase in life expectancy are bolstering the demand for our products. The aim is to grow at least in line with the global pharmaceutical market.

Innovative drugs are the key to competing in mature markets, which remain the largest and most profitable markets for our products. In addition, we will use customized products and dosage forms to systematically capture the growth potential of emerging markets in order to further expand our leading position in key cardiometabolic diseases mainly based on our General Medicine products such as Glucophage®, Concor® and Euthyrox®.

The business continues to focus on the therapeutic areas of Oncology, Multiple Sclerosis, Fertility and General Medicine.

In Oncology, we launched the Erbitux® Reloaded program, the strategic focus of which is on building on the existing business to expand market share and to ensure market leadership in first-line therapy of metastatic colorectal cancer in patients with KRAS wild-type tumors. Based on the results of the FIRE 3 study as well as further retrospective analyses of pivotal trials, we are emphasizing the importance of offering patients complete testing for RAS status in order to ensure optimum treatment.
 
In Multiple Sclerosis, the vision is to remain a leader by providing innovative solutions that include drugs, devices and services to help people living with multiple sclerosis. We plan to fully exploit the potential of Rebif®, its top-selling product, in an increasingly competitive multiple sclerosis market and to position it as the best interferon-based therapeutic option for patients who suffer from the relapsing form of the disease. 

We intend to further expand our market leadership in Fertility especially by leveraging the comprehensive portfolio of products and life cycle management activities, and by capturing growth opportunities in emerging markets. 

In General Medicine, we will focus on further boosting its efforts in emerging markets and enhancing the life cycle management of its products. In addition, we intend to continue to strengthen our current portfolio through suitable partnerships.

China and Brazil are key growth markets for the business. We want to step up our activities in these countries by 2018. At the same time, we intend to further expand its activities in North America. The business is therefore examining potential business models such as alliances, acquisitions of start-ups as well as the launch of new products.

In 2012 and 2013, the Consumer Health business undertook steps to strategically realign the internal organization while sharpening its focus on core brands and particularly attractive key markets. 

As of 2014, Consumer Health intends to push ahead with its growth agenda, particularly in emerging markets of Latin America and Southeast Asia. To this end, the business is pursuing a clear strategy: The aim is for Consumer Health to achieve a market share of at least 3% by 2021 in each of the business' top 20 markets (including France, Mexico, Brazil, Germany and the United Kingdom), with at least three brands in leading positions. 

An important milestone within the framework of this strategy will be the transfer of the Neurobion® and Floratil® brands from the biopharmaceutical business to the Consumer Health business in 2014. Neurobion® is a leading global brand in the vitamin B segment and Floratil® is a leading brand in the probiotic antidiarrheal segment in Brazil. Their transfer to Consumer Health will allow a stronger focus on consumer needs. 

As a consequence, the emerging markets exposure of Consumer Health will increase from 28% in 2013 to 51% in 2014, and Consumer Health will also increase its market share in key markets such as Brazil, Mexico, India and Indonesia.
The demand for high-tech products in general and for innovative display solutions in particular has seen high global growth in recent years. Nor is this trend expected to weaken in the coming years. Instead, we assume that there will be increasing demand for these types of consumer goods from a growing middle class in emerging markets. Therefore, Performance Materials will defend its position as the market and technology leader for liquid crystals and further expand it as far as possible.

Since the typical life cycle of liquid crystal mixtures is less than three years, innovation will remain the key success factor. The liquid crystals pipeline is well-stocked with new technologies such as self-aligned vertical alignment (SA-VA), advanced fringe field switching (FFS) as well as projects beyond displays. 

The Performance Materials business wants to further position itself in the OLED market and play a leading role in this market segment in the medium to long term. Lower production costs for OLED displays are a precondition for this. External partnerships will also be used in the future to ensure the required exchange of technology and expertise.

In addition, the acquisition of AZ Electronic Materials and the resulting combination of two research and development teams will lead to further innovative solutions for customers in the electronics industry.

Within its Pigments & Cosmetics business unit, the Performance Materials will continue to focus on customers as well as the effect pigments business and selected technology segments in the functional materials business.
In order to continue to outperform its peers, the life science tools business is pursuing various strategic approaches. It will maximize the potential of the combined portfolio, drive market share growth in North America, Asia and Latin America, and increase sales generated by new products. 

The profitability is to improve by globalizing the entire portfolio and reducing organizational complexity. It will secure operational excellence by implementing systems such as Enterprise Resource Planning (ERP), delivering the highest standard of customer service, and cultivating talent in the organization. These measures are to be fully implemented by 2017.

For reasons of sustainability, our company generally follows a conservative financial policy. Apart from a solid balance sheet with transparent and healthy structures, this policy is reflected by the selection of financing sources, liquidity management, key financial indicators, dividend policy, and risk management.

Our company generates high business free cash flow and its return on capital employed is consistently improving. In the context of the Group-wide efficiency program currently underway, cash is being reserved with high priority to fund restructuring measures across all divisions and regions. Around € 800 million of one-time costs related to restructuring are planned to be incurred from 2012 to 2015.

Moreover, cash is to be used for selective acquisitions in order to provide for future growth.

Lastly, we use our cash for dividend payments to its shareholders. The current dividend constitutes the minimum level, assuming a stable economic environment. While Merck KGaA, Darmstadt, Germany, aims to continuously develop dividends in line with business performance and earnings progression, dividend growth can deviate, e.g. in times of restructuring or because of significant global economic developments. Merck KGaA, Darmstadt, Germany, also aims at a target corridor of 20-25% of EPS pre.
 
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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.
 
 
  
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