Merck KGaA: PharmaVitae Profile 2005

CHAPTER 1 EXECUTIVE SUMMARY 4
Key findings 4
Strategic outlook 5
Current positioning: competitive outlook 2004 6
Datamonitor’s strategic recommendations 7
Key issues facing Merck KGaA: 2005–10 8
CHAPTER 2 GLOBAL COMPANY STRATEGY 17
Introduction to Merck KGaA 18
Assessment of strategic position 18
Strengths 18
Weaknesses 20
Opportunities 21
Threats 22
Datamonitor’s strategic recommendations 22
Therapeutic foci 23
Evolution of R&D focus 26
Growth strategy assessment 29
Organic growth 29
Partnerships/licensing 30
Mergers and acquisitions 31
CHAPTER 3 GLOBAL PORTFOLIO AND PIPELINE ANALYSIS 33
Evolution of therapy area focus, 2004-10 34
Key growth drivers and resistors of future performance, 2005–10 38
Generics business 39
Marketed specialty generics 41
R&D compounds 45
Generics division sales forecasts and forecast revenue growth 45
Diabetes & endocrinology franchise 46
Marketed products 46
R&D compounds 53
Diabetes & endocrinology portfolio sales forecasts and forecast revenue growth 54
Cardiovascular franchise 56
Marketed products 56
R&D compounds 62
Cardiovascular portfolio sales forecasts and forecast revenue growth 66
Oncology franchise 67
Marketed products 67
R&D compounds 76
Oncology portfolio sales forecasts and forecast revenue growth 80
Other products 81
R&D compounds 87
Other products sales forecasts and forecast revenue growth 91
CHAPTER 4 US STRATEGY, PORTFOLIO AND PIPELINE 92
US Company Strategy 93
Merck KGaA’s geographic focus 93
Introduction to Merck KGaA’s presence in the US 95
US marketing strategy 96
US product sourcing strategy 97
US Portfolio and pipeline analysis 98
US evolution of therapy area focus, 2004-10 98
US business development by therapy area 100
US sales forecasts and revenue growth of major product 102
Generics business US sales forecasts and forecast revenue growth 102
Diabetes & endocrinology portfolio US sales forecasts and forecast revenue growth 103
Other portfolio US sales forecasts and forecast revenue growth 104
CHAPTER 5 CORPORATE DEVELOPMENT 106
Financial position, 2003–04 108
Revenue growth 108
Historical assessment of Merck KGaA’s profitability, 2000–04 110
Cost structure 112
2004 operating cost ratio benchmarking 113
Business model clustering according to 2004 cost ratios 113
Liquidity, 2000–04 115
2004 growth and investment momentum 118
CHAPTER 6 APPENDIX : SUPPORTING DATA 120
Financial data 120
Exchange rates 120
Methodology for therapy area forecasting 121

LIST OF TABLES
Table 1: Breakdown of Merck KGaA’s ethical revenues by therapy area, 2004–10 35
Table 2: Merck KGaA’s generics portfolio 40
Table 3: Forecast sales for Merck KGaA’s generics division, 2005–10 46
Table 4: Merck KGaA’s marketed diabetes & endocrinology portfolio 47
Table 5: Merck KGaA’s current diabetes & endocrinology clinical R&D pipeline, 2005 53
Table 6: Forecast sales for Merck KGaA’s diabetes & endocrinology portfolio, 2005–10 54
Table 7: Merck KGaA’s marketed cardiovascular portfolio 56
Table 8: Merck KGaA’s current cardiovascular clinical R&D pipeline, 2005 62
Table 9: Clinical trial summary for Advicor 64
Table 10: Forecast sales for Merck KGaA’s cardiovascular portfolio, 2005–10 66
Table 11: Merck KGaA’s marketed oncology portfolio 67
Table 12: Clinical trial summary for Erbitux 69
Table 13: Merck KGaA’s current oncology clinical R&D pipeline, 2005 76
Table 14: Forecast sales for Merck KGaA’s oncology portfolio, 2005–10 80
Table 15: Merck KGaA’s other marketed products 82
Table 16: Merck KGaA’s other clinical R&D pipeline 88
Table 17: Forecast sales of Merck KGaA’s other products portfolio, 2005–10 91
Table 18: Merck KGaA’s regional sales, 2004 93
Table 19: Merck KGaA’s regional ethical sales, 2004 95
Table 20: Breakdown of Merck KGaA’s US ethical sales by therapy area, 2004–10 98
Table 21: Forecast US sales for Merck KGaA’s generics business, 2005–10 102
Table 22: Forecast US sales for Merck KGaA’s diabetes & endocrinology portfolio, 2005–10 103
Table 23: Forecast US sales for Merck KGaA’s other portfolio, 2005–10 104
Table 24: Merck KGaA’s revenues by division, 2002–03 108
Table 25: Merck KGaA’s costs assessment, 2003-04 112
Table 26: Exchange rates*, 2004 120

LIST OF FIGURES
Figure 1: Assessment of Merck KGaA’s strategic position, 2005 5
Figure 2: Competitive positioning of Merck KGaA within the pharmaceutical market, 2004 6
Figure 3: Forecast sales for Merck KGaA’s major therapy areas, 2005–10 8
Figure 4: Evolution of maturity of Merck KGaA’s therapeutic portfolio, 2004-10 9
Figure 5: Merck KGaA’s licensing dependence by therapy area, 2004-10 10
Figure 6: Development of Merck KGaA’s therapeutic strategy, 2004-10 25
Figure 7: Merck KGaA’s business development by therapy area 26
Figure 8: Merck KGaA’s R&D dependence by therapy area, 2004–10 28
Figure 9: Merck KGaA’s breakdown of corporate deals against the industry trend between January 2004 and May 2005 30
Figure 10: Merck KGaA’s breakdown of ethical revenues, 2004-10 37
Figure 11: Merck KGaA’s growth drivers and resistors, 2005–10 38
Figure 12: Breakdown of Merck KGaA’s sales by region, 2002–03 94
Figure 13: Merck KGaA’s breakdown of US ethical sales, 2004-10 100
Figure 14: Development of Merck KGaA’s US therapeutic focus, 2004–10 101
Figure 15: Merck KGaA’s profitability stream, 2000–2004 110
Figure 16: R&D and S,G&A spend and COGS as a proportion of sales, 2004 114
Figure 17: Merck KGaA’s liquid assets versus total liabilities,2000–04 116
Figure 18: Benchmarking of financial strength, 2004 118