We care

Transcription

We care

Merz Group
We care for your tomorrow
Merz Pharma GmbH & Co. KGaA and Senator GmbH & Co. KGaA are brought together
Offering products of the highest quality and superior benefits,
Merz has been taking responsibility for people’s overall
health for 100 years. In order to do this, we act on the maxim
of fair and constructive partnership. The focus of our corporate action is the care of our patients.
under the umbrella of the Merz Group, based in Frankfurt am Main, Germany. Merz
Pharma includes the activities of its four subsidiaries, namely Merz Pharmaceuticals,
Merz Consumer Care, Merz Dental, and Merz Group Services.
– Merz Pharmaceuticals researches, develops, produces and distributes innovative
pharmaceutical products in the areas of neurology and psychiatry as well as in aesthetic
dermatology and metabolism. In the area of Alzheimers’s research, Merz Pharmaceuticals has achieved a leading position with the first active ingredient worldwide for
the treatment of moderate to severe Alzheimer’s dementia.
– Merz Consumer Care is a leading supplier of over-the-counter products in
wellness products such as its well-known brands tetesept ® and Merz Spezial ®.
– Merz Dental develops and markets synthetic teeth for dentists and dental technicians.
With artegral ® ImCrown, Merz Dental has developed the first pre-fabricated, fully
anatomical side and front teeth worldwide.
– Merz Group Services is the Group service provider for all operating units. The main
activities are in accounting, controlling, human resources, legal services, supply
chain management, the manufacture of medicinal drugs and consumer care products
as well as information technology.
Senator is one of the leading manufacturers of writing instruments in the field of pro-
Merz Annual Report 2006 / 07
German-speaking countries, including nutritional supplements, and beauty and
motional items worldwide and the number one manufacturer of ball-point pens in
Europe. Two thirds of all refillable ballpoint pens manufactured in Germany come from
Senator production lines.
Merz GmbH & Co. KGaA
Phone + 49 69 – 15 03 – 0
Corporate Communications
Fax
Eckenheimer Landstraße 100
[email protected]
d – 60318 Frankfurt am Main, Germany
www.merz.com
+ 49 69 – 15 03 – 200
Annual Report 2006 / 07
We care
for your tomorrow
Merz Group
Phone + 49 69 – 15 03 – 0
Fax
[email protected]
www.merz.com
+ 49 69 – 15 03 – 200
We care
for your tomorrow
7
Contents
Foreword
Key Figures of the Merz Group
2006 / 07
2005 / 06
Change in %
eur million
535.5
474.5
12.9
Pharmaceuticals
eur million
359.4
305.6
17.6
Consumer Products
eur million
110.9
103.6
7.0
eur million
65.2
65.3
– 0.2
Germany
eur million
184.4
171.7
7.4
Rest of Europe
eur million
163.0
143.0
14.0
America
eur million
177.8
148.5
19.7
Other regions
eur million
10.3
11.3
– 8.9
eur million
112.4
94.8
18.6
%
21.0
20.0
–
Pre-tax profit
eur million
115.4
97.8
18.0
Net profit
eur million
70.0
58.0
20.7
Operating cash flow
eur million
122.0
102.9
18.6
01
Sales
Highlights of the 2006 / 07 Financial Year
of which:
04
Merz Management Board
06
Writing Instruments
Our path
08
of which:
Employee report
Group Management Report
Merz-Group at a glance
36
38
Performance
ebit
Business performance
42
Financial position and net assets
54
Significant events and developments
occurring after the balance sheet date
56
Risk report
56
Outlook
59
ebit margin
Research and development
Research and development expenses
of which: Pharmaceuticals
Consolidated Financial Statements
Publisher
60.1
50.6
18.8
57.9
47.9
20.9
61
Financial position
Balance Sheet
62
Income Statement
63
Cash Flow Statement
64
Statement of Changes in Equity
65
Notes
66
Auditor’s Report
124
Investments
eur million
28.3
31.1
– 9.0
Depreciation and amortization
eur million
9.9
7.8
26.9
Equity
eur million
270.1
212.4
27.2
in % of balance sheet total
Balance sheet total
%
63.4
61.4
–
eur million
426.0
346.0
23.1
Design
Heisters & Partner, Büro für Kommunikationsdesign, Mainz
Photos
Uwe Aufderheide, Hamburg
Employees
Number of employees as of balance sheet date
2,052
1,915
7.0
Editor
Report of the Supervisory Board
126
Intellisource GmbH, Frankfurt am Main
Glossary
127
Reproduction
Druckerei und Verlag Klaus Koch GmbH, Wiesbaden
Printing
Universitätsdruckerei H. Schmidt GmbH & Co kg, Mainz
7
Contents
Foreword
2006 / 07
2005 / 06
Change in %
eur million
535.5
474.5
12.9
Pharmaceuticals
eur million
359.4
305.6
17.6
Consumer Products
eur million
110.9
103.6
7.0
eur million
65.2
65.3
– 0.2
Germany
eur million
184.4
171.7
7.4
Rest of Europe
eur million
163.0
143.0
14.0
America
eur million
177.8
148.5
19.7
Other regions
eur million
10.3
11.3
– 8.9
eur million
112.4
94.8
18.6
%
21.0
20.0
–
Pre-tax profit
eur million
115.4
97.8
18.0
Net profit
eur million
70.0
58.0
20.7
Operating cash flow
eur million
122.0
102.9
18.6
01
Sales
of which:
04
06
Writing Instruments
Our path
08
of which:
Employee report
36
38
Performance
ebit
42
54
56
Risk report
56
Outlook
59
ebit margin
Publisher
60.1
50.6
18.8
57.9
47.9
20.9
61
Financial position
Balance Sheet
62
Income Statement
63
Cash Flow Statement
64
65
Notes
66
Auditor’s Report
124
Investments
eur million
28.3
31.1
– 9.0
eur million
9.9
7.8
26.9
Equity
eur million
270.1
212.4
27.2
Balance sheet total
%
63.4
61.4
–
eur million
426.0
346.0
23.1
Design
Photos
Employees
2,052
1,915
7.0
Editor
126
Glossary
127
Reproduction
Printing
Dr. Jochen Hückmann, Chairman, Shareholders’ Council
Ladies and Gentlemen,
The 2006 / 07 financial year proved to be a successful one for the Merz Group in many
ways. We followed and we are continuing to follow our own motto with determination:
“Challenge for Excellence and Outperformance”. This has led to another year of very
good financial results, continued internationalization of our business, success in our
requests for market approval, positive study results and sizeable investments in research
and development. The basis for these results and the foundation of our motto is our
quest to be a leader in our respective markets, to be a reliable partner for our customers
and suppliers, and to be a company that offers a secure future for our employees.
One of the greatest successes in our research and business activities has been the longterm dynamic growth of our Alzheimer’s medication Memantine. This year Memantine,
which was developed by Merz, reached an important milestone by securing blockbuster status. Together with our license and distribution partners Forest Laboratories and
Lundbeck, we crossed the one-billion us-dollar sales mark for the first time, in March
of 2007.
The fact that Memantine has consistently been the 2nd-most often prescribed antidementive drug worldwide for several years is an impressive statement for Merz’ sustainable innovative power and our international reputation in the world’s most important
pharmaceutical markets. The open-ended approval for Axura ® and Ebixa ® by the European approval agency emea is a further affirmation of the beneficial tolerability and
efficacy profile that Memantine has for a wide range of patients.
2 Foreword
01
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126
Foreword
Highlights of Financial Year
Our path
Employee report
Another example of Merz’ innovative strength includes the successful European
drug approval for the botulinum neurotoxin Xeomin®, which was also developed in our
own research facilities. Further approvals were not only granted for Xeomin® in its
neurological indications, but the first approval for its use in aesthetic medicine was also
granted. This success is of even greater significance in light of recent political developments in health care and, consequentially, a more restrictive regulatory environment.
The solid earnings situation also benefits Merz in that it allows us to finance our
projects for growth and value-enhancement on our own. Our research and development
investments are targeted toward our core fields of competency; neurological and
psychiatric illness, in addition to aesthetic medicine. At the same time, we are continuing
to strengthen our products’ brand profiles and to investigate possible projects for
in-licensing and acquisitions in all of our businesses.
Activities conducted abroad, which now contribute to approximately 65 % of the
Group’s revenue, are another important element of Merz’ financial success. The strong
development of our own corporations abroad – we founded subsidiaries in France,
Spain, and Russia during the financial year – will enable us to provide an expansive base
for our international business. This will increase our revenues in the upcoming years,
and will enable us to fully utilize the potential of our products. Trustworthy cooperation
with our partners also plays a significant role in our international strategy for growth.
Despite the push in internationalization, the location in Germany continues to serve as
the strategic base of operations for Merz’ business. We have demonstrated this through
the creation of numerous new job positions, the expansion of our research activities
at the Frankfurter Innovationszentrum Biotechnologie (Frankfurt Biotechnology Innovation Center), as well as the investment of 17.7m euros in our production facilities in
Dessau during the 2006 / 07 financial year. In addition, we are extensively modernizing
our production plant in Reinheim, and have brought our processing capacity at Senator
up to the most modern of technological standards.
Merz’ international development as an innovative and high-performance company is a
pleasure that we share with our management, employees, and our shareholders. The
upcoming company anniversary during the current financial year is a special opportunity to recognize this success.
Foreword 3
Merz products have been based on innovative working principles, functionality, and
design for 100 years. Many of the products have developed into enduring brand names
that offer patients, customers, and cooperative partners high benefits and reliable
orientation. This has made Merz’ customer orientation a fundamental factor for our
success, which is deeply anchored in our company’s history.
I look forward to the continued formation of Merz’ future, and would like to extend my
heartfelt thanks to our customers, partners, employees, supervisory board members
and all shareholders for the trust you have placed in our company.
Sincerely,
Dr. Jochen Hückmann
4 Highlights of the 2006 / 07 Financial Year
01
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Foreword
Our path
Employee report
July 2006
August 2006
icad: new studies
The
Professor Mauricio
confirm the efficacy
www.alzheimerinfo.de
Montal is appointed
and tolerability
Internet portal is
Friedrich Merz Guest
of Memantine.
granted the 2006
Professorship.
September 2006
October 2006
November 2006
December 2006
“afgis” award.
Merz Pharma Italia
S.r.l. purchases
dermatological product line.
Introduction of
Introduction of the
Xeomin® in
fully anatomical
Mexico for use
synthetic crown, the
with neurological
artegral ® ImCrown,
indications.
in the usa.
Foundation of
Merz Pharma
France s.a.s.
Highlights of the 2006 / 07 Financial Year 5
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
Prof. Dr. Andreas
Groundbreaking
Merz founds sub-
First positive results
Fallgatter receives
takes place in
sidiary in Russia
of a phase-ii study
award for brain
Dessau for the
acting as its own
with Neramexane
research in geriatrics.
expansion
legal entity.
for the treatment of
of the production
Xeomin ® is granted
facilities there.
approval for use
tinnitus.
Senator installs silo
facility for a fully
Positive results of the
in Argentina in
Groundbreaking
automated injection
phase-iii study with
aesthetic and neurol-
takes place in
molding process.
nt 201 (Xeomin ®) for
Frankfurt for the
the treatment of arm
Memantine reaches
expansion of
spasticity in stroke
blockbuster status
research at fiz.
patients.
Foundation of
Prof. Agneta Nordberg
the Spanish sub-
receives Alois
The emea grants
sidiary Merz
Alzheimer Award.
open-ended approval
Pharma España s.l.
ogical indications.
with sales of over
1 billion us dollars.
of Axura ® and
Merz purchases
Ebixa ® for use in the
Merz informational
license from Prof.
European Union.
sites are awarded
Ehud Gazit (Tel Aviv
with the honCode
University) for new
seal.
medication tech-
Merz Spezial ® masks
move up to 2 nd
nologies for the treat-
place on the market
ment of Alzheimer’s.
for facial masks.
6 Merz Management Board
01
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Foreword
Our path
Employee report
Dr. Martin Zügel ceo Merz Pharmaceuticals
Hartmut Erlinghagen cao Merz Group
Merz Management Board 7
Armin von Buttlar cfo Merz Group
investing in the future
We have deliberately geared our company toward international competitiveness during the past years. Our principle,
“Challenge for Excellence and Outperformance”, is a symbol
of that. Merz shall continue to remain the leader in its
respective markets, provide benefits to its patients, be reliable
for its partners, and offer security for its employees.
8 Our
Merzpath
Pharmaceuticals
– Profitable, sustainable growth
merz group:
profitable, sustainable growth
The positive development that was experienced in the Merz Group’s
revenue and results during the past years continued throughout
the 2006 / 07 financial year. Despite difficult competitive conditions,
especially in the pharmaceuticals market, Group sales grew
12.8 percent from the previous year to reach 535.5m euros. At the
same time, there was a disproportionately high increase in the
results before taxes of 17.9 percent to reach a total of 115.4m euros.
Equipped with a patent
and a protected utility model,
pharmacist and chemist
Friedrich Merz established
his independence by founding the company Merz & Co.
1908
Despite resistance from
the German Emperor and the
Pope, Patentex ®, the first
local form of birth control and
Friedrich Merz’ personal
invention, became the main
source of revenues.
1910
Memantine, an anti-dementive drug developed by
Merz, exceeds the one-billion us dollar mark in
sales and achieves blockbuster status.
2007
A doubling of corporate
revenues by 2015 by
continuing to maintain a
rate-of-return well into
the two-figure range prior
to interest and taxes.
Coming years
Our path – Profitable, sustainable growth 9
10 Our path – Profitable, sustainable growth
our path
“It is our avowed goal that all areas of our business grow in a way
that will be profitable for many years to come. In 2015, we want
to more than double our revenue, and achieve a majority of those
sales with new products or in new markets.”
Armin von Buttlar, Chief Financial Officer, Merz Group
The high level of commitment of our employees, sales
concentration on core competencies
partners and license partners, the expansion and creation
Merz is an expert in the pharmaceuticals market in the
of our own country-based companies, as well as signifi-
areas of neurology, psychiatry, and dermatology. Our
cant investments in research and development are the basis
strategic focus is to ensure our top position in the anti-
for the continuation of our dynamic course of growth.
dementive market and to obtain more shares of the
market. In addition, Merz also strives to become a leading
Merz’ ambitious goal is to continue to maintain sustained,
expert in the area of non-operative aesthetic medicine.
profitable growth in all of its corporate areas, especially
Aesthetic medicine should develop into one of our impor-
within the pharmaceuticals segment. We intend to more
tant sources of revenue according to our mid-term
than double our Group-wide sales by 2015, and to achieve
planning.
a large portion of those sales with new products or in new
markets. Nevertheless, we strive to maintain return rates
Within the consumer products segment, the two
that are well into two figures prior to interest and taxes –
umbrella brands by Merz Consumer Care, tetesept ® and
despite considerable investments. In order to achieve
Merz Spezial ®, are distinguishing themselves as health
this planned growth, we have deliberately geared our busi-
care products, striving for significant sales growth through
ness toward international competitiveness and perform-
the internationalization of their corporate activities.
ance. Our principle “Challenge for Excellence and Outper-
Their development activities are concentrated on broad-
formance” is a symbol of that. The implementation of
ening the differentiation between their products, as
this motto is based upon:
well as expanding the uses for patented working princi-
12 Our path – Profitable, sustainable growth
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Foreword
Our path
Employee report
ples in order to position the health benefits of tetesept ®
®
population, having a natural and attractive appearance
and Merz Spezial in growing health care markets around
is becoming more and more important for the patient’s
the world.
general well-being in the area of aesthetic medicine.
Within the Writing Instruments segment, our Senator
synergic research and development
brand is consistently continuing its strategic growth on the
In order to produce innovations in the area of neurology /
basis of customer-specific solutions, shortened reaction
psychiatry and aesthetic dermatology, we have created
times, and tactical partnerships with internationally active
interdisciplinary innovation and project teams. These pro-
brand name manufacturers. This gives Senator a good
vide the optimal structure for carrying over the knowl-
position as one of the leading manufacturers of writing
edge won through fundamental research into new pharma-
instruments in the promotional materials market, as
ceutical products and clinical studies. Well-targeted
well as for winning further shares of the market, and for
cooperation with innovative partners and leaders in tech-
strengthening its presence on the consumer market.
nology serves as another crucial element of the expansion of Merz’ research network, allowing for innovations
innovation-based customer orientation
to be quickly converted into products that are suitable
Our market and innovative processes are clearly conducted
for the market.
to serve the needs of our patients and customers. Merz’
highest goal is to improve its patients’ and customers’ qual-
focused internationalization
ity-of-life in a very noticeable way, to prevent illness,
Merz continues to expand its own country-based organiza-
and to heal disease. New therapeutic approaches play an
tions in central pharmaceutical markets with determi-
important role: due to the increasing overall age of the
nation. In the 2006 / 07 financial year alone, we founded
Growth flagship: Memantine
(in millions of us dollars)
2006/07
114
2005/06
91
2004/05
76 154
2003/04
57 83
0
Axura
®
Growth motor: Foreign countries
(in millions of euros)
265
701
204
1,080
2006/07
840
2005/06
620
2004/05
243
2003/04
545
390
103
200
Ebixa
®
400
600
800
1,000
1,200
®
Namenda
our own subsidiaries in France, Spain, and Russia. The
construction of our own structures will strengthen our
internal revenues, and will enable us to better utilize the
full potential of our products.
strategic acquisitions
All Merz Group activities are geared toward the longterm stability and growth of our total corporate value. Yet
the implementation of goals for growth is not limited
to the development of our own products alone. It includes
targeted acquisitions with high dynamic potential, as
well as strategic cooperative agreements for licenses and
sales.
The high degree of earning power, reliable and successful partnerships with our license and sales partners
worldwide, and strategic course planning provide ideal
conditions for allowing the Merz Group to maintain its top
position in leading markets in the future.
351
184
300
249
192
0
International
100
200
Germany
535
475
175
418
169
377
185
300
400
500
600
14 Our path – Strengthening innovative power
strengthening innovative power
Merz is a company with its own fundamental research and development division. The expenditure for this department has been
continuously increased for years; in the 2006 / 07 financial year, it
grew by 18.9 percent for a total of 60.1m euros. High dynamics
in the area of innovations help to secure already-gained market
shares, and also help expand these due to growing worldwide
competition. In the future, Merz will continue to place its focus on
the core competencies of neurology and dermatology.
The Placentubex foaming
mask, a cosmetic sensation for
the modern woman who
just doesn’t have enough time,
goes on the market. The
product becomes a hit practically overnight.
1968
The European Commission
grants the first approval
to Memantine for the treatment of moderate to severe
Alzheimer’s dementia.
2002
Xeomin ® is approved for
use in Argentina for
both neurological and cosmetic indications.
2007
Merz Pharmaceuticals asserts
its outstanding market
position in the cns area and
positions itself as a leading
provider of aesthetic medicine.
Coming years
Our path – Strengthening innovative power 15
our path
“We do our work in order to improve patients’ quality-of-life.
That is why our goal will continue to be the development
of innovative medications and making new therapeutic methods
possible in the future.”
Salome Kutter, technical member of the Biotechnology / Merz Pharmaceuticals Analytics staff
product innovations with extensive
medical benefits
imately 4 to 8 % of the general population suffers chronically from it.
The ever-growing personal responsibility of the individual
patient, as well as a large variety of special therapeu-
Tinnitus manifests itself as an illness that can lead to
tic methods, will shape tomorrow’s health care market.
severe sleep impairment in addition to impairing the abil-
Pharmaceutical research at Merz is geared toward
ity to concentrate and to work.
the development of innovative preparations such as Axura ®
or Xeomin ® in the future, and the possibility of new
Merz Pharmaceuticals reached an important mile-
therapeutic methods. The goal: improving the quality-of-
stone within the phase-ii clinical development of the active
life and health of our patients and customers while
ingredient Neramexane for the treatment of tinnitus
providing outstanding benefits.
in 2006 / 07. The primary results of a placebo-controlled
feasibility and dosage study demonstrated the clinical
Successful study concerning the use of Neramexane
effectiveness and tolerability of Neramexane. This forms
for the treatment of tinnitus
an important foundation for the further development
At the time being, there are no pharmaceuticals for
of Neramexane. It became the first substance worldwide
the indication of tinnitus that have been approved by either
to reach phase-III study maturity for the treatment of
a European or American government. The so-called
tinnitus.
“ringing in the ears” is a widespread disease in industrial
nations. Patients suffering from tinnitus can detect
sounds that are not caused by any external source. Approx-
01
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Employee report
Indication expansion of nt 201 (Xeomin ®) for the
ies, is nevertheless stable without being cooled, and dem-
treatment of spasticity
onstrates a high degree of effectiveness and security.
A further successful study in the pharmaceuticals segment
®
After the introduction of Xeomin ® in Germany in 2005 for
was brought about by the substance nt 201 (Xeomin )
the indications cervical dystonia of a predominately
for the treatment of arm spasticity after a stroke. Spasticity
rotational form (wryneck) and blepharospasm (dystonia of
is a movement disturbance that is characterized by
the eyelid), Merz Pharmaceuticals reached yet another
non-voluntary muscle cramping and stiffness. It is often
milestone in 2006 / 07: the approval of Xeomin ® in Mexico
accompanied by muscle weakness and causes abnor-
in September of 2006 and approval in Argentina in
mal posture in the affected limbs. This leads to significant
January of 2007. Phase-iii clinical testing programs are
impairment to activities of normal daily life, such as
currently being conducted in the usa, and the results
walking, dressing, or personal hygiene. Those affected
look promising so far. Following the recommendation made
have a common tendency to pull away from their social
by the emea in July of 2007 to approve Xeomin ® for
surroundings. More than one in every three stroke patients
the requested indications worldwide, nothing can stand in
suffers from spasticity. Primary study results show that
its way.
the substance developed by Merz for the indication of arm
spasticity after a stroke is effective and well-tolerated.
aesthetics as the market of the future
Not only was tension in the affected muscles improved, but
The 21st century is characterized by health and wellness.
also the extensiveness of the disability was evaluated
The role of natural beauty and a healthy appearance
as significantly better. The success of the study is a signifi-
at every age is becoming increasingly important as time
cant step in issuing a request for approval for Xeomin ®
passes. There is a growing demand for “anti-aging”
for another important indication within the central nervous
medical procedures and cosmetic products in industrial
system.
nations and up-and-coming economies. There is a
great demand for effective therapy without surgical meas-
Further approval success for Xeomin
®
ures. Besides the cosmetic application areas that are
According to estimates by the Deutsche Dystoniegesell-
already of major importance, such as the face and the neck,
schaft (ddg), (German Dystonia Association), approximate-
overall appearance, including teeth, hair, décolleté, and
ly 160,000 people in Germany alone suffer from dystonia –
legs, is more often placed in the foreground. The interna-
movement disturbances originating neurologically in the
tional aesthetic market is therefore distinguished by
motor control center of the brain. Well above 300,000
appreciable growth rates.
are affected in the usa. For many patients, therapy with the
botulinum toxin represents the only effective treatment
Timeless beauty – then and always
possibility on the market.
Company-founder Friedrich Merz had already thoroughly
investigated the effectiveness of nurturing, toning,
®
Xeomin is the next generation of the botulinum neuro-
and rejuvenating essences on the skin. Merz was able to
toxin. The innovative, complex-protein-free type A
present his beauty preparation Placentubex ® for the
botulinum neurotoxin is characterized at the pre-clinical
first time at the 1953 International Congress for Beauty
stage by its low potential for the formation of antibod-
Care in Paris. Skin tests proved its tightening and
rejuvenating effects. Placentubex ® was considered among
aesthetics during the reporting year. Its current product
professional circles to be a turning point in the cosmetic
portfolio for aesthetics consists of the two hyaluronic acid
industry.
preparations Belotero ® and Hyal-System®, a modern selection of fillers for the treatment of wrinkles. Merz’ goal
In 1964, beauty care “Beauty from within” followed. Merz
is to continue its pattern of growth and to establish itself
developed the Merz Spezial Dragees ® from eighteen
internationally. In pursuance of this goal, it achieved
different active ingredients and a special yeast extract. Four
important success with the approval of the first-ever com-
years later in 1968, Merz presented the next milestone
plex-protein-free, type A botulinium neurotoxin (Xeomin ®)
in cosmetics with the “foaming mask”. The foaming mask
in non-operative aesthetic medicine. Correspondingly,
no longer required a long resting period for it to take
Xeomin ® was approved for use in Argentina, one of the
effect, and it was not difficult to remove from the skin.
fastest growing aesthetic markets, for the treatment of
Instead, the foam and active ingredients were absorbed
glabellar frown lines in May of 2007.
and had disappeared within a few minutes. Film star
Maria Schell also appreciated the advantages of the prod-
innovators in exchange
uct, and went on to do advertisements for the innovative
The ability to create marketable products from good ideas
foaming masks.
is imperative for innovation-driven growth. Research
networks and the pooling of resources continue to gain in
In focus: aesthetics
importance. This is because new and creative solutions
Merz has defined aesthetics as one of its future fields of
can also be found in already-existing knowledge and tech-
expertise, and has systematically pursued its goal of
nologies that simply need to be combined differently
positioning itself as a complete provider of non-operative
or transferred to a new area. At Merz, our interdisciplinary
01
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cooperation involves dialogue about non subject-specific
research infrastructure and scientific intercommuni-
ideas. Clinical possibilities, knowledge of the market, and
cations. After areas completed during the first construc-
of the needs of the market can therefore be attuned to
tion phase were filled in the spring of 2006, Merz will
one another from the beginning of product development.
reinforce its pre-clinical research activities at fiz with its
presence in the second section of the building, which
Merz and Tel Aviv University cooperate
will be ready for occupancy in 2009. The Innovation Center
In June of 2006, Merz purchased a license for a new
has quickly become an important location for innova-
medication technology for the treatment of Alzheimer’s
tion, research, and entrepreneurial initiative. Merz profits
disease. The technology was developed by Prof. Ehud
from its location directly adjacent to the Riedberg cam-
Gazit and his team of researchers at the George S. Wise
pus of physical sciences at the Johann Wolfgang Goethe
Faculty of Life Science at the Tel Aviv University (tau)
University, as well as its close proximity to the Max-
in Israel. With the in-licensing of this new substance group,
Planck-Institute for Biophysics and the future Max-Planck-
Merz is one step closer to its goal of developing inno-
Institute for brain research.
vative medications in its competency field of the central
nervous system.
Promoting university research
Any endeavor toward the further research of Alzheimer’s
Merz at the Frankfurter Innovationszentrum
dementia and the development of new diagnosis and
Biotechnologie (fiz)
treatment possibilities must be pursued. In addition to
Merz upgraded its research activities at fiz, the Frankfurter
conducting its own research, Merz takes on this task
Innovationszentrum Biotechnologie (Frankfurt Biotech-
through its scientific dialogue and its support of scientific
nology Innovation Center), in order to further expand its
research activities in the areas of neurology and psychiatry.
The yearly appointment of a scientist to the Friedrich
Reinheim competence center passes
Merz Foundation Professorship at Frankfurt’s Johann Wolf-
through gmp upgrade
gang Goethe University and the annual donation of a
The plant in Reinheim is the competence center for the
prize for brain research, which is awarded by the Faculty
manufacturing and controlling of Merz products,
of Geriatrics at the Witten-Herdecke University, contrib-
which are currently being exported to more than one
ute to this.
hundred countries. The increasing degree of internationalization makes it necessary to ensure permanent
production facilities for the
highest quality
auditing capabilities over a long period of time. In
Partners and customers in over 100 export countries
(Good Manufacturing Practice) upgrade. The goal is
can rely on the fact that Merz Group production will satisfy
to become a Center of Excellence for the manufacturing,
their high demands for quality, delivery reliability, flexi-
testing, and quality assurance of Merz products with
bility, and efficiency. Merz therefore continually invests in
a focus on establishing itself as a provider of non-sterile
the most modern of production facilities.
solutions and semisolid preparations and the pack-
order to do this, Reinheim is currently conducting a gmp
aging of solid shapes in accordance with the highest of
Costly biotechnological process for the manufacturing
international standards.
of the active ingredient nt 101
In a complex biotechnological manufacturing process,
Fully automatic material supply through innovative
Merz produces its highly effective and pure active
silo facility at Senator
ingredient, the type A botulinum neurotoxin (nt 101) for
Aside from innovative product design and the assurance
®
the production of Xeomin at its facilities in Dessau.
of high product quality, the optimization of production
The active ingredient is isolated after fermentation through
processes is a focal point of the production activities in the
an extensive cleaning process to remove fermentation
Writing Instruments segment. For this purpose, Senator
residue and foreign and structural proteins. With the help
completed the last component of its material supply facil-
of this innovative process, the so-called complex proteins
ity for injection molding by installing a fully automated
are separated from the effective neurotoxin. In addition to
silo facility. This completes the extensive automation of
its already-existing, highly technologically advanced
the entire provision and transport process, from the
production facilities for the active ingredient nt 101, Merz
entrance of raw material granulates all the way to waste
is investing a two-figure amount (in millions of euros)
removal for the injection molding.
for the construction of its own manufacturing plant at the
same location for its finished product, Xeomin®. Ground-
Production know-how and experienced, highly qualified
breaking for the new facility took place in April of 2007.
employees are important elements that are needed in
The project includes the construction of a parenteral
order to ensure that products of the highest quality can
technical center for the cgmp-compliant production of ste-
be manufactured in a cost-effective manner. Merz has
rile preparations that can be used in clinical testing.
an open innovative process, where internal and external
scientists are networked with experts in the fields of
marketing, sales, and production.
22 Our path – Focused international expansion
focused international expansion
The sales and earning power of the Merz Group is based, aside
from customer orientation and product innovations, on the
progressive internationalization of its corporate activities in the
most significant sales markets. During the past four years
since 2002 / 03, the share of foreign revenues within the Pharmaceuticals segment rose continuously, from 44 % to 66 % to
approximately 350m euros in 2006 / 07.
Friedrich Merz takes his first
trip to America and
opens a branch of Merz & Co.
in Newark following
a long preparatory period.
1926
Merz taps the Russian market after opening a
representative office there.
2006
Merz Pharmaceuticals
establishes its own
subsidiaries in Spain and
France.
2007
Locations in important pharmaceuticals markets are
constructed and expanded.
Merz is one of the leaders
in the field in its competency
areas of cns and aesthetic
medicine.
Coming years
Our path – Focused international expansion 23
our path
“cns and aesthetic medicine are Merz’ core competencies. It is
my personal ambition to ensure that Merz Pharma uk also belongs
to the leading companies in these areas.”
Dr. Anzal Qurbain, Medical Director, Merz Pharma uk
Merz has experience abroad that reaches back into
formation of country-based locations
the 1920s. Company founder Friedrich Merz had already
closed the first license contract in the usa in 1926. In
Foundation of Merz subsidiaries in Spain and France
the early 1930s, Merz & Co. opened its first branch loca-
In April of 2007, Merz founded a Spanish subsidiary,
tion in Newark, close to New York. Today, Merz Phar-
Merz Pharma España s.l., with headquarters in Madrid.
maceuticals is present in over 70 countries worldwide with
Here, our partner Grünenthal has already been suc-
its cooperative sales agreements, license partners, and
cessfully distributing the Alzheimer’s medication Axura ®.
its own country-based locations. It now owns locations in
The task focus of the new subsidiary in Spain includes
the uk, France, Spain, Italy, Mexico, Austria, Switzer-
preparations for the introduction of the type A botulinum
land, Russia, and the usa.
neurotoxin (Xeomin ®) onto the market, as well as the
construction of a marketing and sales structure for prod-
Merz Consumer Care has established international brand
ucts within the area of aesthetic dermatology.
names for the Consumer Products segment, focusing
its organization on an increasingly international spectrum
In September of 2006, the French subsidiary Merz
of marketing and sales activities.
Pharma France s.a.s. was founded in Paris with the same
goals.
The subsidiary Senator of the Writing Instruments / Promotional Materials segment has its own subsidiaries in the
Russian representative office becomes independent
usa, Great Britain, France, the Netherlands, and Poland.
subsidiary
Above and beyond that, cooperative sales agreements
In addition to the representative office a separate legal
exist for all of the internationally relevant sales markets.
entity under the name of Merz Pharma llc, with headquar-
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ters in Moscow, was formed in May of 2007 for the further
Sales per region
development of business in Russia.
2.0 %
Merz Pharma uk expands aesthetic dermatology
In addition to the further development of their current business with neurological products, the London-based
33.2 %
subsidiary Merz Pharma uk Ltd. is focused on the expan-
34.4 %
sion of a second product field in aesthetic dermatology.
Business in the uk will assume an increasingly greater role
for overall business in Europe within the next several
years, due to the attractiveness of the profitability of the
English market, especially in the area of aesthetic der-
30.4 %
Germany
Rest of Europe
America
Other regions
matology. The introduction of the filler Belotero ® was one
of the central activities during the reporting year.
International teams for international markets
The Merz Group’s worldwide activities are reflected by
developments, and to further internationalize Merz
the internationality of its employees. At this time,
within the radpidly expanding areas of cns and aesthetic
more than 29 % of its employees work abroad. Featuring
dermatology. Furthermore, the dynamic growth of
a large number of newly created job positions, the
Memantine on the worldwide markets continued during
area of r&d was expanded for global development projects.
the reporting year as well. The medication, used to
treat Alzheimer’s dementia, earned revenues of over one
In order to press ahead with our planned growth world-
billion us dollars together with its license partners
wide, and in order to cater to the respective needs of
Forest Laboratories and Lundbeck, and is therefore consid-
the markets and the distinctive features of each specific
ered a blockbuster product. This secures Memantine’s
country, Merz Pharmaceuticals created teams of spe-
top position internationally as the 2 nd-most prescribed
cialists. They are comprised of employees from the area
anti-dementive.
of central strategic marketing, and employees from
country-specific teams. This exchange of information and
Above and beyond that, extensive activities set the course
experience and the incorporation of regional expertise
for the successful internationalization of Xeomin ® for
form Merz’ foundation for successful product development
the indication of cervical dystonia of a predominately rota-
and marketing in foreign countries.
tional form (wryneck) and blepharospasm (dystonia
of the eyelid). A process regulating mutual recognition of
product success abroad
approval (mr procedure) was started and successfully
The continued development of our own country-based
closed in July of 2007 with a recommendation for approval
organizations, which continued throughout the reporting
by the emea. Xeomin ® was also approved for use in
year, is the basis for our ability to react flexibly to global
Mexico and Argentina during the reporting year. Merz
Pharmaceuticals has, however, also tapped into growing
Its own subsidiary, Merz Pharmaceuticals usa, began
markets with its products in the area of aesthetic derma-
its activities in 1995 and achieved a market share of 54 %
tology: after the successful start of Belotero® in Germany,
of the us market for scar therapy during the reporting
Austria, Switzerland, and Italy one year prior, sales of
year with its skin product Mederma ® Skin Care for Scars™,
the hyaluronic acid preparation in 2006 / 07 grew by 40 %
a significant development since its introduction in
due to a high degree of market acceptance and due to
1997. Another top Merz product in the us is Naftin ®. Merz
its introduction onto the uk market. In Argentina, a rapidly
conducted the in-licensing of the antimycotic drug for
growing market for aesthetic products, Merz received
fungal infections in 1999, and was able to increase its sales
approval for Xeomin ® in treating glabellar frown lines.
results fivefold since the acquisition. Naftin ® was the
uncontested leader among brand name products for topical
In Italy, the subsidiary Merz Italia S.r.l. expanded their
antimycotics during the 2006 / 07 financial year.
aesthetic product portfolio by making additional strategic
purchases.
During the reporting year, Merz usa worked intensively
on preparations for the successful introduction of cur-
Determined market development in the usa
rent aesthetic products such as the hyaluronic acid filler
Together with its cooperative partner Forest Laboratories,
Belotero ®, and for the type A botulinum neurotoxin
Merz was able to achieve a market share of 33 % of
Xeomin ® for use in cosmetic indications.
new prescriptions with its anti-dementive Memantine
(Namenda ®) on the us market.
Merz products on the growing Russian market
Merz’ portfolio of products approved within the Russian
Federation took on leading positions in all of the respec-
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tive market segments. The market share of Memantine
®
regional markets, to reduce developmental risks, and to
(under the product name Akatinol ) amounts to a
pool resources for the quick introduction of a product.
68 % share of the Russian anti-dementive market. During
That is why international sales and research partners like
the 2006 / 07 financial year alone, sales of Memantine
Forest Laboratories, Lundbeck, and Asubio Pharma-
rose by 94 % in comparison to the previous year.
ceuticals play a decisive role in the international product
successes that Merz has achieved. In addition, Merz
Merz also achieved significant success in Russia within
continues to develop its own foreign locations as a further
the area of clinical dermatology. For instance, approxi-
foundation for growth and international expansion.
mately 500,000 units of its scar preparation Contractubex ®
were sold during the 2006 / 07 financial year. Around
With this high-performance structure, Merz is currently
650,000 units of Merz Spezial Dragees ® were sold within
developing not only international main markets such
the Consumer Products segment. As was confirmed
as the usa and Europe, but also emerging markets that
by the dynamic growth pattern and the positive economic
are experiencing new growth in Asia (Korea, Turkey,
environment, Merz prepared for new products to be
China, India), Latin America (Argentina, Brazil), and East-
introduced onto the aesthetic dermatology segment of the
ern Europe (Poland, Bulgaria, the Baltic States).
Russian market during the reporting year.
Efficiency through an integrated r&d network
worldwide research and sales network
For global development projects and research cooperation
For international competitiveness, it is even more
within the area of neurological and aesthetic indications,
important to be acquainted with the specific needs of
Merz established a worldwide, integrated r&d network.
While all international r&d functions are concentrated
at our headquarters in Frankfurt am Main, Merz also works
with specialists located in Riga for pre-clinical research.
Merz has a research facility in the us city of Greensboro
for clinical studies and questions regarding approval.
The Merz research and development network is a strategic,
worldwide foundation for efficiently testing new and
already existing substances for possible new indications
and expansions to the indications. This also means
that the cooperation between Merz and its us partner,
Forest Laboratories, not only includes a license partnership for the international marketing of Memantine, but
also for cooperative research. Merz and Forest Laboratories work together on clinical studies testing the substance Neramexane for its suitability with the indications of Alzheimer’s dementia and tinnitus.
The collaboration between interdisciplinary research and
international specialists allows Merz to use its developmental resources strategically and efficiently for new technologies, therapies, and active ingredients.
30 Our path – Patients and customers – always in mind
patients and customers – always in mind
Since the foundation of the company in 1908, Merz has put
patient and customer benefits at the center of all of its corporate
activities. The background for this is our personal aspiration
to strategically gear our work toward the needs of those people
who place their trust in Merz products: patients, doctors,
pharmacists, and all who cares about their health and appearance.
Fair and cooperative partnerships form the main maxim behind
all of our activities.
Friedrich Merz begins production of a patented
tube for creams and salves.
This hygienic presentation has remained the standard up to the present.
1908
The therapy treatment for
Parkinson’s Disease pkMerz ® leads to new success
in treatment by being the
first drug to use adamantyl
sulfate.
1970
Merz Consumer Care supports its commercial
partners in developing their
health competence with
the tetesept ® Health Center.
2007
The developmental activities
of the Merz Group are concentrated on innovations and
product differentiation for
outstanding patient and customer benefits.
Coming years
Our path – Patients and customers – always in mind 31
our path
“Our customers can trust, both now and in the future, that we
will fulfill our contracts quickly and reliably – anywhere
in the world. We’ve invested in the most modern production
technology in order to do that.”
Jost P. Welteroth, Vice President of Manufacturing, Senator GmbH & Co. KGaA
in 1911 for the first local form of birth control Patentex ®,
free enterprise for the service
of customers
which soon became the young company’s flagship product
“Measuring problems, knowing needs, and finding your
and a successful article for export.
own solution.” That was the aspiration of the company’s
founder, Friedrich Merz, when he began production of
fair and constructive partnership
a patented tube for creams and salves in Frankfurt am Main
The successful positioning of Merz products within inter-
in 1908. Creams and salves were still being taken from
national competition is a result of the ambition to
open flagons or clay bottles at that time – inevitably, impu-
always be “one idea better than the rest” – not only with
rities made their way onto the skin. The simple, yet
innovative products and services, but also in customer
groundbreaking solution was a much more hygienic admin-
and partner relations. That’s because long-term, fair, and
istration in the form of a tube, which has remained
constructive partnerships are formed where trust and
standard up to the present.
quality are made a connecting element. This fundamental
understanding has allowed Merz to establish a special
With his next steps – the individual labeling of the tubes
bond of trust over the past 100 years: with its patients, doc-
with company identification and the production of
tors, and pharmacists, with consumers, industrial clients,
creams and salves – Friedrich Merz based his entrepre-
and with partners in research and sales.
neurship on serving the customer and improving the
customer’s quality-of-life from the very beginning. Pharma-
Services for doctors and patients with integrated
ceutical developments quickly followed his cosmetics.
therapeutic solutions
Friedrich Merz manufactured pain relievers under the
The services provided by the foreign subsidiary Merz
name “merz”, and he was granted patent protection
Pharma uk for clinics, doctors, and patients in treatment
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with the neuroleptic Denzapine (active ingredient:
Senator supports internationally active suppliers of
Clozapine) serve as a current example of our construc-
consumer goods and brand name manufacturers in opti-
tive collaboration. The patient’s blood work must be
mally utilizing promotional products in their market-
closely monitored while taking Clozapine in order to detect
ing campaigns. The focus of this work is the brand name
a reduction of the granulocyte count and to adjust the
of the customer. Senator’s recipe for success lies in
treatment of the affected patient in due time. The legally
the individual assistance that it gives to its clients. This
required blood tests are conducted by Merz Pharma
includes customer-specific designs, decorative tech-
uk in their own laboratories and the blood work is rec-
niques such as 5-color, uv printing or laser engraving, and
orded in a databank that is accessible to all providers.
special functionalities for the writing instruments
Almost 8,000 patients were treated with this marketed
themselves. One of the most modern production facilities,
service by Merz Pharma uk in England, Scotland,
automated injection molding, the most modern of print-
and Ireland during the reporting year, which amounts to
ing machines, internal development, and tool construction
a market share of approximately 40 %.
provide for quick and reliable contract fulfillment worldwide.
Supporting trade partners
Scientific knowledge for more quality-of-life is the cornerstone of Merz Consumer Care in the Consumer Products
reliable information provides customer
orientation
segment. The product selection includes health and beauty
At a time when we are flooded by different types of
products as well as cold remedies, vitamins, and miner-
information, Merz offers trustworthy platforms for dialogue
als under the umbrella brands tetesept ® and Merz Spezial ®.
with its Zukunftsforum Demenz (Future Forum for
Both count as two of the most recognized brands on
Dementia) and its certified health care Internet sites.
the retail market.
Transparent and reliable health care information
In order to offer end consumers reliable orientation and
Through the numerous methods of information acquisi-
to support trade partners in the development of their
tion, patients become self-determined, critical, and
health competency, Merz Consumer Care developed the
informed customers all on their own. Around 40 % of all
tetesept ® Health Center. It is intended as a custom
Internet search queries in Germany pertain to the
store-within-a-store solution, which offers shelving space
topic of health. Considering the vast amount of informa-
for the entire health product portfolio including shower
tion available, it becomes increasingly difficult for
and bath additives. Stores featuring the tetesept ® Health
users to recognize reliable information when they see it.
Center were able to more than double their sales volume
Quality, transparency, and reliability – those are what
during the reporting year.
Merz Internet sites stand for, with scientifically verified
and helpful information about Alzheimer’s, depression,
Strengthening the customers’ brand name
dystonia, Parkinson’s, liver disease, and hair loss. Infor-
The promotional materials market is the most important
mational services provided by Merz on the Internet
mainstay for Senator, amounting to 85 % of its reve-
were certified with the internationally recognized honCode
nues. With its new sales concept, “Industry Consulting”,
Quality Seal during the reporting year. The Alzheimer’s
sites by Merz Pharmaceuticals, www.axura.de, specifi-
of civil legislative policy concerning health and care from
cally developed for professional circles, and the
the perspective of those affected and those who care
Internet site for family members and those affected at
for them. The goal of the Future Forum is to lighten the
www.alzheimerinfo.de – were given first and second
burden of living with Alzheimer’s dementia for both
place on a ranking of the best Alzheimer’s information
caregivers and patients, and to promote earlier diagnosis
portals by pharmaceutical companies. The informa-
and earlier treatment of the disease. Since those suf-
tion portal www.alzheimerinfo.de was also awarded with
fering from dementia are often unable to speak for them-
the prestigious afgis Quality Seal.
selves, they are given an important voice through the
Future Forum.
Zukunftsforum Demenz in societal dialogue
“For a tomorrow that’s worth living”: that’s the aspiration
The forum is a platform for dialogue. Doctors and experts
behind the Merz initiative, Zukunftsforum Demenz
in caregiving, representatives of health insurance and
(Future Forum for Dementia), which has been in existence
statutory health care, self-help groups, and political and
since 2001. The forum strives to remove the taboos
scientific experts meet there to share their experiences.
surrounding Alzheimer’s Disease, to accept the limitations
The Future Forum also provides valuable background infor-
of those suffering from it, and to increase provisions
mation for the family members of those suffering from
for the disease, which are plagued by numerous problems
dementia through its informational texts, documents, and
within intersecting areas of health care.
brochures.
The forum has provided important impulses for provision
research and is active within the further development
36 Employee report
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for their implementation. In order to support this process,
Merz further optimized their internal goal-setting practices. This allows corporate goals to be translated step-bystep into operative goals and measures, and for these
The dynamic growth experienced by the Merz Group
to be made transparent for the entire organization and its
is based on the qualifications and performance motivation
employees.
of our employees. By clearly gearing their involvement
toward the service of the patients and customers, basing
structured career management
their actions on the same, and by answering the chal-
In the context of the strong growth which took place in
lenges of the market with top performance, we can achieve
personnel, particularly in the area of research and
our ambitious corporate goals.
development, attractive professional perspectives are
essential in order to recruit talented scientists for
continuous growth
Merz and for them to form a bond with the company. The
Once again, Merz experienced strong growth during the
already existing developmental possibilities, which
past financial year. As of the balance sheet date of
had mainly focused on the successive expansion of a per-
June 30, 2007, the Merz Group employed 2,052 persons,
son’s respective number of accountable personnel,
representing an increase of 137 employees as com-
were therefore supplemented by a subject-specific career
pared to the previous year. The expansion of its employee
model for long-term further development of profes-
base was focused – as required by the strategic goals –
sional expertise. This new model is now the focus of
on the areas of research and development at its German
career development at Merz.
location and the continued expansion of its international presence, which emphasized the establishment and
employee survey
expansion of locations in Russia, Italy, France, and
The entire Merz Group is dedicated to continuous
Spain. The number of Merz employees currently working
improvement. The employee survey, which was conduct-
abroad grew to 596 (previous year: 560). In total, the
ed during the reporting year, delivered some valuable
number of employees within the Pharmaceuticals Segment
connecting factors for this improvement. Employees evalu-
rose from 988 to 1,052 during the 2006 / 07 financial year.
ated the conditions surrounding their own work and
their work with colleagues and superiors, and gave sugges-
orientation of the merz organization on
its strategic goals
tions pertaining to corporate strategy and possibilities
The past financial year was marked by the implemen-
a participation rate of over 80 % documented the
for improvement. Their feedback was decidedly positive:
tation of the Strategy 2015, “Challenge for Excellence and
employees’ interest in actively contributing to Merz’ fur-
Outperformance”. The goals formulated therein indicated
ther development. The survey showed that the large
the basis for Merz’ future success. The Merz organization’s
number of new employees and members of management
deliberate orientation toward these goals is significant
already felt strong personal ties to Merz. Positive
Employee report 37
evaluations of the cooperation between co-workers and
members of management, as well as a generally high
level of satisfaction, are indications of a good and productive working atmosphere.
vocational training
At Merz, we feel especially obligated to provide young
people with professional qualifications. At our locations in
Frankfurt and Reinheim, we cover a large spectrum of
commercial and industrial careers that require vocational
training. The number of apprenticeships within the
Merz Group increased during the 2006 / 07 financial year
by 15 % to reach 54.
38 Group Management Report
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of Merz GmbH & Co. KGaA
Group Management Report 39
Another year of growth
in 2006 / 07
cial year, which made the Merz Group’s business in foreign
markets especially profitable.
Demographic change prompts growth on the
pharmaceuticals market
Pharmaceutical sales rose by 7.0 % worldwide from
The Merz Group continued the positive dynamic growth of
2005 to 2006, for a total of 642.8 bn us dollars, doubling
the previous years during the 2006 / 07 financial year
in total since 1998.
by Merz, achieved revenues of over one billion us
Germany’s share of the world market decreased from
dollars. This blockbuster success further strengthened the
5.2 % in 1998 to approximately 3.1 %. Pharmaceutical
company’s earning power despite higher expenses in
sales in the us market grew more rapidly than those of
r&d, the foundation of additional foreign subsidiaries, and
other markets, with a 33 % increase from 2001 to 2004.
higher marketing and distribution expenses due to the
A steadily increasing momentum in comparison to
introduction of new products. The Group experienced an
Europe could also be observed in 2006. This resulted in an
increase in sales of 12.8 % to 535.5m euros (previous
increase in pharmaceutical sales of 8.0 % to a total of
year: 474.6m euros). The pre-tax earnings increases were
289.9 bn us dollars in 2006, whereas Europe experienced
proportionally high from 17.9 to 115.4m euros (previous
a gain of 5.0 % to reach a total of 182.5 bn us dollars.
year: 97.8m euros). Growth of sales and revenue exceeded
At the present time, the pharmaceuticals markets with the
all expectations.
fastest growth rates are Latin America and Asia.
Economic environment
(Total economy, industry economy)
Pharmaceuticals market: worldwide development
(in billions of us dollars)
World economy in upturn
The financial year coincided with a powerful upward eco642.8
2006
+ 7.0 %
nomic trend. In Germany, the gross domestic product
(gdp) grew 2.9 % in comparison to the previous year; it
2005
increased another 2.5 % in the first half of 2007. In
2004
2006, German economic growth was mostly propelled by
2003
export trade. However, in the first half of 2007 the
2002
domestic economy was also jump-started, which gave a
2001
+ 7.4 %
600.6
+ 12.3 %
559.1
+ 16.5 %
498.0
+ 9.6 %
427.6
390.2
boost to retail and consumer markets in particular. Not
only the German economy, but the entire world economy
experienced a positive upward trend during the finan-
0
150
300
450
600
750
Source: bpi Pharmadaten 2007
group management report
(June 30th). The active ingredient Memantine, developed
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By 2020, the prognosis is that revenue will double in the
Total expenditure within the statutory health insurance sys-
pharmaceuticals market worldwide. The main reasons
tem (shi) amounted to 147.6 bn euros in 2006. This
for this are increasing health costs resulting from a higher
equates to an increase of 2.8 % as opposed to the previous
life expectancy rate, particularly in industrial nations,
year. shi expenditure for pharmaceuticals rose margin-
and the increasing prosperity in emerging national econo-
ally in 2006 by 0.8 % to a total of 23.9 bn euros, represent-
mies. The overall aging of society has resulted in a sig-
ing a 17.5 % share of total overall shi expenditures.
nificant rise in the number of dementia-related illnesses.
The increase in shi costs can be partially attributed to the
rise in treatment costs for wide-spread chronic, somatic
Alzheimer’s dementia, with cognitive memory loss and a
illnesses, and neurological-psychiatric diseases.
heavy loss of normal, everyday abilities, is the most common type of age-related dementia according to epidemiol-
The momentum of growth in the German pharmaceuticals
ogical studies. Approximately 18 million people currently
market is still influenced by the Medicinal Drugs Econ-
suffer from Alzheimer’s dementia worldwide. Following the
omy Act (Arzneimittelversorgungs-Wirtschaftsgesetz) that
estimate of the World Health Organization (who), this
went into effect in May of 2006. Nevertheless, sales
number will double worldwide within the next 20 years. In
development has remained relatively stable despite this
this context, the need for more therapy in Merz’ strate-
reform law. The impact of a new reform law from March
gically important anti-dementive indication group can be
of 2007, designed to increase competition within the stat-
expected.
utory health insurance system, can first be expected at
the end of the current financial year. However, already in
In addition, Merz’ strengthened activity on the aesthetic
the first months since its enactment, a massive increase
medicine market has been aided by a beneficial envi-
in rebate contracts between manufacturers and health
ronment. The ever-increasing wish of many, especially
insurance funds has made itself apparent. The law includes
those living in countries experiencing economic emer-
special provisions for this purpose. At the current date,
gence, to delay the natural aging process increases the
these rebates are granted almost exclusively to manufac-
demand for products within aesthetic medicine.
turers of generic brands. Merz assumes that this law
will not have a strong negative impact on revenues for
Strained growth on German health market
Merz preparations, due to the data and patent protec-
With 25.8 bn euros, sales of German pharmaceutical
tion of its main source of income, Axura®, and due to the
manufacturers nearly stagnated during the reporting year.
fact that only a certain number of preparations in the
Sales in the German clinical market rose by 3 % from
generic branch will be affected.
July 2006 to June 2007 (previous year: 1.3 %) to a sales
volume of 3.4 bn euros (previous year: 3.3 bn euros).
Dental market re-emerges after crossing low point
In contrast, the German pharmacy market experienced a
Despite the negative effects of the new fixed subsidy sys-
decrease in revenue of 1.0 % to 22.3 bn euros, while
tem for dentures and the considerable decrease in
an increase of 6.0 % was recorded in the previous year.
revenue in 2005, the German dental market returned to
a positive trend in 2006. Technical dental laboratories,
foot care totals approximately 2.3 bn euros per year, of
one of Merz Dental’s major type of clients, have especially
which approximately 73 % of the revenue results from
profited.
mass market sales and 27 % from pharmacies. Products
for facial care represent the largest share of skin care
The sub-segment for synthetic dentures achieved sales
products with 41 %, followed by personal hygiene prod-
of 51m euros, amounting to growth of 11 % in comparison
ucts (23.9 %), shower care (19.5 %), bath additives
to the previous year. Despite a recession in 2005, the
(8.3 %), hand care (3.8 %), and foot care products (3.4 %).
German market demonstrated clearly improved demand.
These products allowed the mass market to achieve a
Manufacturers of technical and medicinal dental prod-
more positive sales volume on average than pharmacies.
ucts, such as Merz, are expanding their export business.
Strong brands with a high degree of customer recog-
The worldwide dental market is currently estimated at
nition, such as the tetesept ® and Merz Spezial ® brands by
approximately 15 bn euros, with yearly growth rates esti-
Merz Consumer Care, are important for business as
mated at five to six percent. North America is one of
image-bearers. This makes Merz one of the top three manu-
the strongest growth regions for German dental products.
facturers of over-the-counter products sold outside
A significant increase in life expectancy rates and in
of pharmacies, and the leading manufacturer of bath addi-
the standard of living in industrialized nations will continue
tives.
to fuel the need for health maintenance, including dentures, over the long-term, from which Merz can also profit.
Regarding the international market penetration of Merz
Consumer Care products, especially noteworthy is the
Growth of market for consumer products in Eastern
growing demand for self-medication products, personal
Europe and Russia
care products, and cosmetics in Eastern Europe and
In the area of non-prescription drugs (over-the-counter
Russia. In the area of self-medication, for example, the
market) in the German health care market, the reporting
Polish market rose by 5.5 % in 2006. In the Russian
year demonstrated sales of approximately 7.3 bn euros
cosmetic market, growth rates of 13 % and 12 % in the
by June 2007, amounting to an increase of + 0.1 % since
years 2005 and 2006, respectively, were reported for
the previous year. Pharmacies and the so-called mass
a total of approximately 7.0 bn and 7.9 bn us dollars per
market, with its grocery stores and drugstores, make up
year. Generally speaking, natural cosmetic products
the distribution channels of the over-the-counter mar-
and cosmetics with pharmaceutical ingredients are in
ket. Pharmacies represent the main share of the over-the-
high demand, especially in the area of skin care. Merz
counter-market with a volume share of approximately
Consumer Care products can especially profit from this
86 %, while the mass market provides the remaining 14 %.
development, as they are based on scientifically recognized, effective principles.
The total market volume for cosmetics and personal
hygiene in Germany amounts to 11.7 bn euros, whereas the
market volume for facial care, skin care, hand care, and
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Market for writing instruments profits from increasing
i. business performance
marketing expenditures
The robust growth of the world markets creates fertile
Structure of the Merz Group
ground for the marketing economy. Promotional expendi-
The operative businesses of Merz GmbH & Co. KGaA are
tures worldwide rose 5.8 % in 2006 to 391 bn us dol-
organized in three segments: Pharmaceuticals, Consumer
lars. As a result, the economic environment for promotional
Products, and Writing Instruments / Promotional Mate-
materials also improved. Sales of promotional materials
rials.
have remained constant since 2001 at approximately 3 bn
euros. For the first time in three years, promotional mate-
The Pharmaceuticals segment is Merz’ segment with
rials crossed the 3-billion-euro mark in 2006 with a sales
the highest sales. Merz’ largest subsidiary, Merz
volume of 3.1 bn euros. When comparing sales volume,
Pharmaceuticals GmbH, is responsible for the research,
that places promotional materials in 3rd place among the
development, and sale of pharmaceuticals. Their stra-
most important and most popular communicative tools.
tegic focus lies on neurological and psychiatric illnesses
Within the medium term, the promotional materials branch
and on clinical and aesthetic dermatology. The second
should achieve a sales volume of 5 bn euros.
subsidiary within the Pharmaceuticals segment is Merz
Dental GmbH, which develops and distributes medical
Approximately 50 marketing directors from Germany’s
and technical dental products such as dentures, prosthetic
largest consumer products manufacturers plan on increas-
materials, and articles for hygiene and disinfection.
ing expenditures for advertisement and sales promotions in 2008. In 2006 and 2007, only 35 and 29 marketing
In the Consumer Products segment, Merz Consumer Care
directors, respectively, had planned to increase their
GmbH develops and distributes health care products
marketing budgets.
for self-medication and personal hygiene, as well as nutritional supplements.
The worldwide promotional market for writing instruments
and drinkware has profited from the worldwide upturn
Senator GmbH & Co. KGaA produces and distributes
of the market. The consumer market and retail market are
plastic ballpoint pens, metal pens, markers, and printed
being positively influenced by the domestic increase in
coffee mugs for promotional purposes worldwide in
growth. Senator has reacted to this by constantly improving
the Writing Instruments / Promotional Materials segment.
its service quality and by contributing to the further expansion of its worldwide distribution network.
Merz Group Services GmbH is an internal service provider for all operative units. Its core competencies include
accounting, controlling, human resources, information
technology, supply chain management, and the manufacturing of medicinal drugs and consumer products.
Operative structure of the Merz Group
5
5
5
Pharmaceuticals Segment
Consumer Products Segment
Writing Instruments Segment
5
5
5
Merz Pharmaceuticals GmbH
Merz Consumer Care GmbH
Senator GmbH & Co. KGaA
Subsidiaries in:
Subsidiaries in:
Subsidiaries in:
Austria
Netherlands
Great Britain
France
Poland
Austria
France
Russia
Great Britain
Switzerland
Italy
usa
Spain
Mexico
usa
Merz Dental GmbH
Merz Group Services GmbH
Locations at home and abroad
ber 2006, and in April 2007 the Spanish subsidiary Merz
The Merz Group has its headquarters in Frankfurt am Main,
Pharma España s.l. was established with headquarters
Germany. Corporate and sales management, adminis-
located in Madrid. Just one month later, the represen-
tration, and significant areas of the Group’s research and
tative office in Russia was joined by an independent legal
development department are located here.
entity founded under the name of Merz Pharma lcc.,
with headquarters in Moscow.
Locations and distribution regions
Besides its headquarters in Germany, Merz Pharmaceuti-
In addition, Merz products maintain a presence in more
cals GmbH also operates its own subsidiaries in Great
than 70 countries around the world through coopera-
Britain, Italy, Mexico, Austria, Switzerland, and the usa.
tive and distributive partnerships. Central markets include
Within the framework of an internationalization strategy
Korea, Turkey, India, and China in Asia; Argentina and
and the creation of new subsidiaries, the French subsidi-
Brazil in Latin America; and Poland, Bulgaria, and the Bal-
ary Merz Pharma France s.a.s. was founded in Septem-
tic states in Eastern Europe.
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Locations at home and abroad
gb
rus
nl d pl
ch a
f
i
e
usa
mex
Merz Pharmaceuticals GmbH
Senator GmbH & Co. KGaA
Germany (d)
Russia (rus)
Germany (d)
France (f)
Switzerland (ch)
Great Britain (gb)
Great Britain (gb)
Spain (e)
France (f)
Italy (i)
usa
Poland (pl)
Mexico (mex)
Austria (a)
usa
Netherlands (nl)
In the Writing Instruments / Promotional Materials seg-
Value-oriented Group strategy
ment, Senator has subsidiaries in the usa, Great Britain,
The strategy of the Merz Group is geared toward a sustain-
France, the Netherlands, and Poland, and a joint ven-
able increase of its corporate value. Over the years,
ture with Modi in India. In addition, Senator has represen-
Merz has been able to secure a leading position in many
tatives in Russia and Scandinavia, and has distribution
markets with its products. This is the path that the cor-
partnerships in approximately 90 countries worldwide.
poration consistently follows – as approved in its “Strategy
2015” (Challenge for Excellence and Outperformance).
The Group made good progress in this area during the
Merz Consumer Care, with its well-known brands tetesept®
2006 / 07 financial year. This especially applies to the
and Merz Spezial ®, remains the leading provider within
Pharmaceuticals segment, as their top position on the anti-
German-speaking countries of products for self-medication
dementia drug market was further expanded.
and beauty in the Consumer Products segment. Its strategy for growth is based upon future-oriented further devel-
The strategy for growth in the core competence neurol-
opment and a strengthened profile of its brand names
ogy and psychiatry is based on innovation-driven customer
as health products, as well as strengthened international-
orientation. The goal is to develop innovative medications
ization by annexing new markets within Europe.
such as Axura® or Xeomin® in the future. New approaches
to therapy must be developed in order to noticeably
Within the Writing Instruments / Promotional Materials
improve the quality-of-life of patients, prevent illnesses,
segment, Merz’ Senator is one of the leading manufactur-
and to aid in the healing process. Year after year, Merz
ers of writing instruments in the promotional materials
invests a large portion of its income in the research and
market worldwide; its retractable ballpoint pen is number
development of new treatment principles for indications
one in sales in Europe. One of the most modern writing
that still have a high necessity for effective therapy.
instrument production plants, the highest of quality standards, sophisticated designs, and concepts that are tai-
Building upon its competence in clinical dermatology, Merz
lored to the customer are the pillars of long-term growth.
has determinedly developed into one of the experts in
Besides the production of writing instruments, the new
non-operative aesthetic medicine over the past years. It
facilities in Lemgo are also responsible for the finishing
strives for a leading position as a full-selection provider
of drinkware. The introduction of the new Senator brand
in Europe and in the usa with an attractive product port-
lego ® represented a new step in market leadership.
folio. The realization of this goal depends on the development of tailored products. Targeted acquisitions with
high potential in selected markets and with selected
products, new licenses for active ingredients, and collaborative research and distribution cooperation are also
important.
In order to further develop the growth of business abroad,
Merz is intensifying its internationalization process by
continuing to expand its organization in other countries.
Merz Pharma France s.a.s. was founded in September 2006 as a subsidiary in France, the Spanish subsidiary
Merz Pharma España s.l. was founded in April of 2006
with headquarters in Madrid. In May 2007, the Russian
location serving a representative purpose was supplemented by an independent legal entity founded under the
name of Merz Pharma lcc.
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Sales and contract development
Sales in Germany increased by 7 %, whereas sales in the
usa and the rest of Europe experienced a much steeper
Growth through internationalization and product
growth rate of 20 % and 14 %, respectively. Business in
innovation
the Baltic States (+ 57 %) and Russia (+ 38 %) demon-
The Merz Group was able to continue the dynamic growth
strated strong growth.
of the previous years during the 2006 / 07 financial year.
Group sales experienced a two-figure increase of 12.8 %
The increase in sales abroad can be largely attributed
to reach 535.5m euros (previous year: 474.6m euros).
to the Pharmaceuticals segment. Memantine’s sustained
This direction of growth can be attributed to the interna-
momentum served as a significant driver of that growth:
tional competitiveness of Merz products, successful new
both in internal sales, and through license partners Forest
introductions onto the market, and internationally effective
Laboratories and Lundbeck.
marketing and sales activity. The Pharmaceuticals segment contributed the largest proportion of Group sales rev-
Sales expanded by 7.0 % in the Consumer Products seg-
enue at 67.1 % (previous year: 64.4 %). The Consumer
ment for a total of 110.9m euros (previous year: 103.6m
Products segment achieved 20.7 % (previous year: 21.8 %)
euros).
sales revenue, while 12.2 % (previous year: 13.8 %)
was contributed by the Writing Instruments / Promotional
Senator achieved sales of 65.2m euros for the Writing
Materials segment.
Instruments / Promotional Materials segment (previous
year: 65.3m euros).
Sales revenues abroad increased to a total of 351.1m euros
(previous year: 302.8m euros). This amounts to 65.6 %
Core area of pharmaceuticals grows through
(previous year: 63.8 %) of the Group’s sales occurring in
blockbuster success and successful new product
foreign markets. 184.4m euros can be attributed to the
introductions
German market, representing 34.4 % of Group sales reve-
During the 2006 / 07 financial year, the Pharmaceuticals
nue.
segment increased their sales by 17.6 % (previous
year: 25.7 %) to a total of 359.4m euros (previous year:
305.6m euros). The main contributors to sales and
growth were products belonging to the strategic core
Development of sales
area of the central nervous system (cns).
Milestone successes with blockbuster status and
2006/07
535.5
open-ended approval
2005/06
474.6
Memantine’s momentum of growth remains undaunted.
The medication, developed for the treatment of Alzheimer’s dementia, reached a new high of more than 1 bn us
0
100
200
300
400
500
600
dollars worldwide in March of 2007, reaching block-
Sales per segment
Sales per region
2.0 %
12.2 %
20.7 %
33.2 %
34.4 %
67.1 %
30.4 %
Pharmaceuticals
Consumer Products
Germany
Rest of Europe
America
Other regions
Writing Instruments / Promotional Materials
buster status one year earlier than planned. This secures
Market introduction of the 2nd-generation neurotoxin
Memantine’s top position as the second-most prescribed
Xeomin ® remains on its successful course
anti-dementia drug worldwide. Merz distributes Meman-
The type A botulinum neurotoxin Xeomin ®, approved ini-
tine under the names Axura ® or Akatinol ®, as Namenda ®
tially for the German market in 2005 for the treatment
through licensee Forest Laboratories Inc., New York, and
of neurological movement disorders such as cervical dys-
as the brand name Ebixa® through licensee Lundbeck
tonia of a predominantly rotational form (wryneck) and
a / s, Copenhagen. License revenues during the 2006 / 07
blepharospasm (dystonia of the eyelid) achieved sales that
financial year increased by a total of 24.8 % compared
considerably exceeded the sales forecast.
to the previous year.
An important measure contributing to the two-figure
In the usa, Forest Laboratories reached a market share of
growth was the successful approval of Xeomin ® for the
33 % in the us anti-dementive market (according to
indication of dystonia in two more countries: Mexico
prescriptions). Despite difficult conditions in Germany due
in September of 2006 and Argentina in January of 2007.
to the developments in health care reform, the number
A process regulating mutual approval (mr procedure)
of prescriptions of Memantine increased. The market share
in this indication was initiated for 13 countries, and, follow-
of prescriptions remained unchanged at the high level
ing approval recommendation by the emea in July of
of over 42 %. The open-ended approval of Axura ® and
2007, was successfully closed. Based on a decision made
®
Ebixa in Europe by the emea (European Medicines
by the European Commission, the national approval
Agency) in March of 2007 served as another milestone for
boards will be contacted. This can be expected to happen
Merz, confirming Memantine’s low number of side-effects,
during the 2007 / 08 financial year. In Argentina, with
overall patient tolerance, and broad implication spectrum.
its rapidly growing market for aesthetic products,
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Xeomin® was further approved for the first time for cos-
The market share of the preparation Mederma® for the
metic indications; for the treatment of glabellar frown lines.
treatment of scars, which also leads the market in the
usa, amounts to 54 %. On the German market, the anti-
In the area of aesthetic medicine, Merz’ in-licensed hya-
hair loss products Pantovigar® and Pantostin® recorded
luronic acid filler Belotero® for the correction of wrinkles
considerable increases in the volume of sales of approxi-
and increased lip volume exhibited particularly strong
mately 20 % each following strengthened marketing
growth. Following successful launches in Germany, Austria,
and sales measures.
Switzerland, and Italy during the previous year, Belotero ®’s sales volume increased by 50 % during the current
Merz Pharmaceuticals was also able to increase sales
financial year. The main cause for this powerful growth
of the liver therapeutic medication Hepa-Merz ® within the
was the high market acceptance of the drug as well as the
area of metabolism disorders by close to 10 % by main-
introduction of Belotero ® in the uk. To complete the
taining strong business abroad, particularly in Russia and
aesthetic product portfolio in Italy, Merz Pharma Italia S.r.l.
Korea.
purchased the products Alfa Acid ®, Leniline ®, and
Lenoxiol® from the Sinclair corporation.
Merz Dental resumes growth pattern
Despite a difficult environment on the market and restric-
Dermatological products continued their growth as
tive prescription procedures in Germany, the Pharma-
well. Sales volume rose 10 % during the 2006 / 07 finan-
ceutical Segment-owned Merz Dental GmbH was able to
cial year. Naftin ®, a preparation sold in the usa for fun-
expand its business in dental technology and dental
gal infections, demonstrated a satisfactory increase in sales
medicine. The sales decline of 9 % during the previous
®
volume of 34 %. Since purchasing the Naftin license
year was stopped by product innovations and five prod-
in 1999, Merz has increased the sales volume of the prod-
uct introductions onto the market, which resulted in 2.7 %
uct in the usa fivefold and secured the market leader-
higher sales of 13.2m euros (previous year: 12.9m euros).
ship for drugs treating topical mycotic indications.
Merz was able to establish its position in the synthetic denture market as well. Sales abroad, which had already
improved in the previous year, continued to develop and
reported an increase of 10 % to reach a total sales volume of approximately 1.8m euros. The sales increase was
Development of Sales in the Pharmaceuticals Segment
due to the product area of dental technology with dentures, which encompasses partial and complete sets of dentures, and the newly introduced denture series artegral®.
2006/07
13.2
2005/06
12.9
346.2
359.4
305.6
292.7
In order to increase its independence from German health
care legislation, Merz Dental strengthened its internationalization measures. Target countries include the most
0
Dental
50
100
Pharmaceuticals
150
200
250
300
350
important European markets such as Austria, the Netherlands, Italy, and Spain, as well as the usa. Merz Dental
Development of Sales
in the Consumer Products Segment
Development of Sales
in the Writing Instruments / Promotional Materials Segment
2006/07
110.9
2006/07
65.2
2005/06
103.6
2005/06
65.3
0
20
40
60
80
100
120
0
10
20
30
40
50
60
70
closed a cooperative contract with Patterson Dental, the
tetesept’s position as the leading provider for medicinal
largest specialty provider of dental products in North Amer-
baths and bath additives on the mass market was suc-
ica, for the sales of the dental product artegral ® ImCrown
cessfully defended; market leadership for non-pharmacy
in the usa. Merz Dental will further expand its position as
cold remedies was expanded considerably. Newly intro-
a specialized provider of finishing systems for the inter-
duced innovations were the main pillar of growth for the
national technical dental industry.
area of cold remedies, such as Hals-activ throat spray
and Bronchial-activ sugar-free cough drops.
Consumer Products:
Growth despite intense competition
In contrast, sales in the area of shower products did not
The Consumer Products segment continued to remain
perform as expected. In total, the tetesept® brand was
under the influence of the intensely competitive market for
able to claim its excellent position as the 2 nd largest brand
non-pharmacy health care and personal hygiene prod-
on the self-medication market outside of the pharmacy.
ucts. Despite increased concentration within the trade, the
market introduction of new commercial brands, weather-
The Beauty Care area, with its traditional brand Merz
related losses for the bath additive segment, and intensi-
Spezial Dragees ®, demonstrated a trend reversal with con-
fied marketing activities on the part of the competition,
siderable sales volume growth after slightly receding
the sales volume increased by 7.0 % for a total of 110.9m
sales during the previous year. Due to successful brand
euros (previous year: 103.6m euros).
activation measures, accompanied by advertising measures, intensified pr, sales promotion activity, and the suc-
A major contributor to this volume was the newly formed
cessful launch of Merz Spezial single-portioned facial
cooperation for secondary distribution products. Within
masks, sales volume improved by 21 %. In particular, the
the generally stagnating German mass market, Merz Con-
new single-portion facial mask segment was very well
sumer Care was the only one among the top 3 providers
accepted by the consumer, and with a growth rate of 80 %,
of health care products that was able to grow.
it enabled Merz Spezial ® to move into second place in
the market for facial masks.
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Senator takes position on international promotional
materials market
Merz expanded Group research and development expend-
Senator recorded sales at a level similar to the previous
itures once again during the 2006 / 07 financial year,
year of 65.2m euros (previous year: 65.3m euros). A
increasing them by 18.9 % for a total of 60.1m euros (pre-
decrease in sales of 4 % had been recorded in the previous
vious year: 50.6m euros). The increase can be attributed
year. The largest proportion of revenue can be attrib-
to the added number of phase-iii and phase-iv projects and
uted to the promotional materials market. Senator contin-
the intensification of pre-clinical activities. Numerous
ued to strengthen its brand recognition in the market
employees were hired for this purpose.
with a sales and service network encompassing more than
90 countries, and with a yearly production of approxi-
Currently, various active ingredients for diverse indications
mately 300m writing instruments, Senator is the number
are going through phases of pharmacological and clini-
one manufacturer in the European market and occu-
cal testing. Metabotropic glutamate receptors are the focal
pies third place worldwide. With the help of the “Industry
point of this testing.
Consulting” sales project, initiated during the previous
year, Senator was able to significantly improve its sales
In the area of dermatology, the r&d focus was placed on
approach.
developing a complete product portfolio.
Senator was able to assert itself against growing interna-
Successful life cycle management for
tional competition and the increased sales of brand
Axura ® and Ebixa ®
imitators during the reporting year. The main factors con-
In March of 2007, five years after being granted central
tributing to this include Senator’s continuously inno-
approval for use in the European Union, Axura ® and
vative product and service concepts, major international
Ebixa® received open-ended (non-expiring) approval upon
prizes for its design, the highest of quality standards,
the recommendation of the European approval bureau
complete solutions for industrial clients, as well as cost
emea (European Medicines Agency).
reduction and modernization measures. To improve
efficiency within the production of synthetic components,
Merz has also issued a request to the emea for the expan-
a fully automated silo facility was installed at the Groß-
sion of the approval to include the once-daily dosage of
Bieberau location. The high quality standards and highly
Memantine.
modern production plants also reinforced license business during the reporting year, through which Senator
Study data shows that a standard dose of Memantine
became the licensed manufacturer for writing instruments
taken once daily is just as effective and as easily tolerated
®
under the lego brand name, among others.
as the currently approved dose. Taking their dosage
once a day makes therapy easier for patients. At present,
Memantine is only available in a standard dosage of
2 x 10 mg per day.
Product pipeline (selected products)
Indication
cns
Preclinical
Phase I
Phase II
Memantine
Phase III
Submitted
Approved
moderate to severe alzheimer‘s dementia
Botulinum
Neurotoxin Typ A
blepharospasm / torticollis spasmodicus
spasticity
Neramexane
tinnitus
alzheimer’s dementia
nystagmus
Product active ingredient pipeline (selected products)
Dermatology
Indication
Preclinical
Phase I
Botulinum
Neurotoxin Typ A
Phase II
Approved
aesthetic dermatology (eu)
mid-term wrinkle filling (usa)
mdf-100
long-term wrinkle filling
mill-100
local lipolysis
2
mom-100
onychomycosis
3
long-term filler
Submitted
aesthetic dermatology (usa)
Belotero
1
Phase III
2
local cellulite removal
3
1
fungus of the nail
Positive study results for Neramexane
Tinnitus, or ringing in the ears, is defined as sounds or
Within the clinical development process of Neramexane
noises perceived by the patient under the absence of
for the treatment of tinnitus, a phase-ii study was
an external source for the noise. Tinnitus is a wide-spread
concluded for therapeutic trials and dose definition. The
illness in industrial nations, which continues to increase
primary data provides evidence of clinical effective-
due to the aging world population and the increase in expo-
ness and tolerability, and is therefore the basis for the fur-
sure to noise. Approximately 4 to 8 % of the population
ther clinical development of the active ingredient.
suffers from chronic tinnitus; quality-of-life is severely
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inhibited for approximately 20 % of these patients. Cur-
involuntary muscle cramps and stiffness. It occurs fre-
rently, no medication has been approved by any European
quently in connection with muscle weakness, and is
or American agency for the treatment of this condition.
reported as present in up to 38 % of all stroke patients.
European approval and indication expansion
Belotero ® enters the market in other countries
for Xeomin
®
Besides European and American studies investigating
The approvals of the type A botulinum neurotoxin Xeomin ®
the use of Xeomin® in aesthetic dermatology, Merz is also
for the neurological indications cervical dystonia of a pre-
promoting the introduction of its hyaluronic acid filler
dominantly rotational form (wryneck) and blepharospasm
Belotero ® in other countries. The product, used to fill out
(dystonia of the eyelid) were expanded further during
wrinkles and increase lip volume, was introduced onto
the 2006 / 07 financial year with approvals in Mexico and
the market in Great Britain during the 2006 / 07 financial
Argentina. A process regulating mutual recognition of
year. In addition, clinical measures for its development
approval (mr procedure) for this indication was initiated
in the usa, which began in the past financial year, are
for 13 countries.
going well.
Merz took an important step by having Xeomin ® approved
Expansion of research and production infrastructure
for the first time for cosmetic indications: in Argentina,
Research and development teams were strengthened
®
Xeomin was approved for the treatment of glabellar frown
during the reporting year along with the modernization
lines in addition to its neurological indications in January
and expansion of the research infrastructure for more
of 2007.
efficient, goal-oriented, superior research. Job positions
for 70 highly qualified employees were created, espec-
The clinical testing phases carried out for Xeomin ® dur-
ially within the pre-clinical research area. The significant-
ing the reporting year showed promising results. Phase-iii
ly increased number of employees, as well as the fur-
studies for cervical dystonia of a predominantly rota-
ther expansion of research networks, has lead to an expan-
tional form and for blepharospasm were conducted in the
sion of the research activities at fiz – Frankfurter Inno-
usa. The phase-ii study for the aesthetic indication was
vationszentrum Biotechnologie (Frankfurt Biotechnology
concluded. Currently, a phase-iii test is being performed
Innovation Center).
in Europe for the aesthetic indication.
In order to develop greater capacity for the internal
Within the framework of intended indication expansion for
production of active ingredients, and to supply customers
Xeomin ®, a phase-iii clinical study for the treatment of
worldwide with Xeomin ®, Merz initiated their largest-
patients suffering from arm spasms following a stroke has
ever single investment of 17.7m euros at their production
been completed. Preliminary tests show that Xeomin ®
location in Dessau during the 2006 / 07 financial year.
is effective and well tolerated for this indication. Arm spasticity relates to a movement disorder characterized by
In addition to the already existing production facilities for
design, customer-tailored, individual service concepts, and
the type A botulinum neurotoxin active ingredient, a new
the intensification of process and production efficiencies.
building will be constructed for freeze-drying and bottling,
As the last component of the building of a material supply
along with laboratories and office space.
facility for injection molding, Senator installed a fully
automated silo facility. This completed the extensive auto-
For the Pharmaceuticals segment, Merz filed a total of 12
mation of the entire provision and transport process,
requests for approval internationally during the 2006 / 07
from the delivery of raw material granulate all the way to
financial year (previous year: 17); 14 new approvals were
waste removal for the injection molding. Within the
issued (previous year: 21). In addition, 49 requests for
Industry Consulting sales concept for brand name manu-
extensions to approval were filed and 43 extensions issued.
facturers and industrial clients, individual, customertailored solutions were developed that featured innovative
Developmental activities in the Consumer Products
design and functionality. The Akzento ballpoint pen was
segment
developed as a product innovation. For example the mod-
Developmental activities within the Consumer Products
ular construction of the clip enables a cost-effective and
segment focused on product upgrades to include pat-
quick realization of customer-specific custom clip forms
ented treatment principles as the most important basis for
during the injection molding phase allowing for the
sharpening the market profile. These products protect
imprint of a special advertising message.
the skin against the drying properties of water, transport
active ingredients to deeper layers of the skin, and
Employees
improve the overall structure of the skin over an extended
The Merz Group employed 2,052 people (previous year:
period of time. This is a general concept utilizing active
1,915) as of June 30, 2007. This figure is 7 % higher
ingredients that can be flexibly combined. The masks use
than for the same balance sheet date of the previous year.
a transfer system that has the ability to cut through the
The difference is mainly attributable to a marked expan-
energy barriers of the skin and to quickly deliver nutrients
sion in the number of employees in the research and devel-
to the deeper layers of the skin. The system products,
opment department, as well as sales activities abroad.
®
such as Merz Spezial Dragees , make use of the patent-
596 employees work outside Germany (previous year: 560).
pending Micro Targeting System, which optimizes the
This represents approximately 29 % of the total number
journey of active ingredients through the body to the tar-
of all employees.
get region, the skin, through improved capillary microcirculation.
The Pharmaceuticals segment counted 1,052 employees
as of the balance sheet date, a dramatic increase from
Developmental activities in the Writing Instruments /
the previous year’s 988. 70 new full-time positions result-
Promotional Materials segment
ing from the substantial expansion of the research and
Development activities for the Writing Instruments / Promo-
development department in Germany contributed to this
tional Materials segment focus on innovative product
increase, as well as the expansion of Merz’ presence on
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the international market, especially in Russia, Spain, Italy,
ii. financial position and net assets
and France. This was partially compensated by the reduction of 30 job positions in connection with the relocation of local pharmaceutical production from Austria to
Profit situation
Germany.
Group results exhibit further growth
In the Consumer Care segment, the number of employees
2006 / 07 was yet another year of growth in Merz company
remained constant at 101 year to year. Following restruc-
history. Once again, the Group was able to successfully
turing measures, the number of employees in the Writing
increase their overall results before taxes by a significant
Instruments segment decreased by 5 % to a total of
17.9 % to reach 115.4m euros (previous year: 97.8m
527 employees (previous year: 554) compared to the same
euros). The return on sales prior to taxes (earnings before
balance sheet date of the previous year. At Merz Group
income taxes in proportion to sales) climbed to 21.5 %
Services, the expansion of internal, on-site biotechnology
(previous year: 20.6 %). An after-tax net profit of 70.0m
production at the Dessau location lead to a total of ten
euros was achieved (previous year: 58.0m euros). The
newly created job positions. A further expansion of the
net return on sales (net profit for the year as a proportion
capacities has been planned. In addition, Merz increased
of sales) was 13.1 % (previous year: 12.2 %).
the number of trainees. Merz employed 54 trainees as of
the balance sheet date (previous year: 47) in administra-
As in the previous year, an increase in earnings was attain-
tive and operating positions.
ed despite a considerable rise in growth-related expenditures for research and development. In aggregate, the
Merz Group invested 60.1m euros during the financial
year (previous year: 50.6m euros) in research and development, so that the research and development sales ratio
(research and development costs as a proportion of sales)
was deliberately increased from 10.7 % to 11.2 %. For
the Pharmaceuticals area, this amounted to 16.1 % (previous year: 15.7 %).
The cost of sales was reduced from 26.9 % in the previous
year to 24.7 %, mainly due to the increase in license
income not being matched by a proportional rise in manufacturing costs. The selling costs / sales ratio (selling
and distribution expenses as a proportion of sales) was
also reduced slightly, in part due to strict cost manage-
ment in the area of advertising expenses. An 18.3m euro
increase in general administrative costs amounting to
The Merz Group was again able to improve its financial
51.6m euros is mainly related to personnel expenditures
position and net assets situation compared to the previous
by Merz KGaA and to the foundation of new subsidiaries.
year.
Other operating returns, which amounted to 8.4m euros
(previous year: 7.9m euros), were largely due to the market
This is particularly demonstrated by an increase in cash
valuation of option premiums as well as to returns on
flow from 102.9m euros to 122m euros.
securities owned by Merz KGaA. Other operating expenses
decreased to 5.4m euros (previous year: 8.3m euros).
Net cash from operating activities increased slightly by
This is attributable to the goodwill impairment for rou bill
2.9m euros from the previous year to a total of 81.5m
in the amount of 1.9m euros during the previous year.
euros. The increase was due to a considerable improvement in operating results, which were partly offset by
Capital investment
increased tax payments as well as higher inventories and
The intensification of worldwide activity, the strategic
receivables requirements.
expansion of research and development capacity, as well
as the modernization of production were among the top
Net cash from operating activities was partially used for
priorities of investment activities during the financial year
investment activities (26.6m euros) and financing activi-
now ended.
ties (19.8m euros). The increase in cash and cash equivalents in comparison to the previous year totaled 36.8m
One of the prime activities was the foundation of further
euros. The Merz Group is financed by its own operating
subsidiaries abroad, reinforcement of personnel in the
activities. As in the previous year, there is no financial
area of research and development, the further expansion
debt.
and modernization of the production locations Dessau
and Reinheim, the outsourcing of research activities to fiz
The balance sheet total increased to 426.0m euros (previ-
– Frankfurter Innovationszentrum Biotechnologie (Frank-
ous year: 346.0m euros). Long-term assets amounted to
furt Biotechnology Innovation Center), and the construction
108.2m euros as of the balance sheet date (previous year:
of a central archive in Groß-Bieberau.
90.7m euros). The increase was essentially caused by
investments made in the the production facilities at the
The reportable additions to non-current assets amounted to
Dessau and Reinheim locations, as well as credit granted
28.3m euros (previous year: 17.5m euros). Of this fig-
to a closely related company.
ure, 18.2m euros related to property, plant, and equipment,
and 10.1m euros to sundry intangible assets. Amortiza-
Short-term assets of the Group increased by 62.4m euros
tion and depreciation for these assets amounted to 9.9m
to a total of 317.8m euros (previous year: 255.4m euros).
euros (previous year: 7.9m euros).
Of this figure, 18.9m euros relate to receivables, particu-
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larly due to higher license receivables. The amount of
securities, cash, and cash equivalents grew from 107.9m
iii. significant events and developments
euros to 144.7m euros. This development is attributable to
In the opinion of management, no material macroeco-
the market expansion in business as well as to the high
nomic or business-related changes are discernible after the
operating cash flow, particularly in the Pharmaceuticals
balance sheet date of June 30, 2007 that could lead to
segment. Merz has further strengthened its sharehold-
a change in the assessment of the company. Neither have
ers’ equity base on the equity and liabilities side of the bal-
events of major significance for the company occurred
ance sheet. As in the previous year, shareholders’ equity
that could negatively influence the net assets, financial
increased to 270.1m euros (previous year: 212.4m euros),
position, or results of operations. In August of 2007,
due to large appropriations to Group-consolidated
the Group made use of its legal right to assess license lia-
reserves. As a result, the equity ratio is 63.4 % (previous
bilities retroactively from a Merz Group licensee, as
year: 61.4 %).
the licensee was not able to offer a similar product for inlicensing.
Long-term liabilities increased marginally to reach a total
of 22.2m euros (previous year: 21.8m euros).
iv. risk report
The economic situation of the Merz Group improved again
Risk management at Merz covers all significant opera-
in comparison to the previous year. Altogether, the Merz
tive and strategic risks, and records, monitors, and evalu-
Group is well situated to further implement its growth strat-
ates them in regard to their implications and probability
egy throughout the Group.
of occurrence for each specific segment. Included under
this heading are also limit systems and approval procedures that represent a safeguard for significant medium-tolong-term commitments.
Currency and interest rate risks resulting from Merz’
business operations chiefly arise from changes in exchange
rates or interest rates. In order to minimize these risks,
Merz utilizes primary and derivative financial instruments.
Merz carries out derivative transactions exclusively
with banks that have an excellent credit rating. Currency
risks are hedged at both the Group and individual company level. This is particularly the case for the hedging of
a major portion of the licensing income in us dollars
expected within the 2008 / 09 financial year, which is subject to currency fluctuations. These risks are recorded
and continuously monitored as part of the Group’s risk
management system.
Pharmaceuticals segment
Sales and market risks are comprised of risks associated
Risks affecting pharmaceutical research, production, and
with price, quantity, substitution, and poor debt. The sales
sales can arise from changes to the regulatory framework
achieved with the active ingredient Memantine make up
as well as to medical coverage conditions. In addition,
62 % (in the previous year: 60 %) of sales realized in this
economic and political risks must be taken into account.
segment. The growing success of Memantine on the
These risks can materialize due to changes in approval
international market generally increases the risk that new
procedures and also due to regulatory interventions on the
market participants – with analog preparations that have
health care market. An example within Germany is the
the same pharmacological and clinical effects as the already
benefit assessment of drug groups by the German Institute
existing pharmaceuticals, but without the indication-
for Quality and Efficiency in Health Care (Institut für
specific therapeutic advantages – could enter the market.
Qualität und Wirtschaftlichkeit im Gesundheitswesen,
Anti-dementives are equally susceptible to the devel-
iqwig) founded in 2004. The benefits of anti-dementives,
oping trend toward analog preparations in the highly com-
which are medicines for the therapy of Alzheimer’s
petitive pharmaceuticals market. In addition, an increase
dementia, are also being assessed by the Institute at the
in the number of prescriptions issued for anti-dementives
present time. A decision is expected within the first
will increase the competitive pressure by manufacturers
half of 2008. At this time, iqwig is only evaluating the
of generic brands. It can be predicted that manufacturers
therapeutic relevance of the medications’ treatment
of generic preparations in India, Europe, and the usa
principles. The assessment possibilities of the iqwig were
will issue their requests for approval in the usa at some
expanded to include cost-effectiveness following leg-
point during autumn of the current year. Considering the
islation to increase competition among statutory health
fact that Memantine’s patent protection will remain valid in
insurance providers. This is similar to other eu countries.
Europe for the next seven years, price, quantity, substi-
The anti-dementive Memantine, developed by Merz Phar-
tution, and supply problems due to demand are relatively
maceuticals, is endorsed by excellent documentation
manageable within the Pharmaceutical segment.
of its effectiveness and compatibility, by proven use for
patients and relatives, as well as by high cost-effective-
In the usa, where patent protection will expire in October
ness. Merz closely observes new developments and can
of 2008, Merz expects some legal disputes.
therefore react quickly to any changes.
The effects of the German Medicines Supply Act
The shortage of or the increase in price of materials
(Arzneimittelversorgungs-Wirtschaftlichkeitsgesetz, avwg),
needed for production figure largely in purchasing risks.
which took effect in May of 2006, the Statutory Health
However, as many production steps have been out-
Insurance Competition Strengthening Act (gkv-wsg) that
sourced to reliable suppliers this danger is comparatively
was passed in March of 2007, and the long-term effects
negligible at Merz. Merz monitors its pool of suppliers
of the November 2003 Statutory Health Insurance Modern-
so that dependence on one single outsourcing partner is
ization Act put a strain on the German pharmaceuticals
prevented. The process and production risks are corre-
market.
spondingly low.
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Changes to pharmaceutical legislation generally affect the
General market risks include the considerable market
process of price determination and the prescription proc-
concentration of pharmaceutical manufacturers in Ger-
ess within the framework of the German health care reform.
many, where researching manufacturers with operating
With the gkv-wsg, statutory health insurance providers
sites in Germany have forfeited their top position compared
will not only increase the number of rebate contracts closed
to other European locations. Merz counters this risk by
with manufacturers of generic medications, but also with
maintaining an integrated, top-notch, worldwide research
some original manufacturers. This particularly applies to
network with partners such as Forest Laboratories Inc.,
preparations reaching the expiration of their patent
New York, and Lundbeck a / s, Copenhagen.
protection, or those preparations that are threatened by
re-imports. Yet determining the price for patent-pro-
Consumer Products segment
tected medications could be affected more extensively if
In the Consumer Products area, economic risks and the risk
this practice is expanded or continued.
of keener price competition among the market players
exist. In addition, climate-related risks such as unusually
Research and development risks are the absence of a pre-
mild winters, negatively affect the income generated by
viously presumed therapeutic effect or safety in clinical
bath additives, in particular bath additives for self-medica-
studies and delays in pre-clinical or clinical development.
tion of the common cold.
Further risks for research and development include the
current trend toward shorter product cycles and planning
Aside from risks related to sales, risks also exist concern-
uncertainty following changes to health care legisla-
ing pressure on companies to reduce profitability margins
tion. Merz counters these risks through focused, efficient
due to the intensified entrance of generic brands onto
research within an integrated, worldwide research net-
the market, aggressive predatory competition among man-
work and through the intense observation of the regulatory
ufacturers of name brands, and growing marketing
environment.
costs. Merz limits the consequences of these risks by using
scientifically proven treatment methods in its product
Legal risks relate to possible patent or competition disputes
designs and through intensified communication of the high
or infringements upon licensing or cooperation agree-
consumer benefits of its premium products, innovative
ments. The patent and competition-related law dispute with
marketing concepts, and strong internationalization. A fur-
the company Allergan concerning the products Xeomin ®
ther and significant factor in risk limitation is the contin-
®
und Botox has not posed any negative consequences for
ued brand positioning of the two leading umbrella brands
the reporting year. A mutual agreement was reached in
tetesept ® and Merz Spezial ®.
August.
Writing Instruments / Promotional Materials segment
Patent risks could occur when manufacturers of generic
In the Writing Instruments segment, the danger of the
brands (imitation products) force their way into the market
imitation of quality goods by imported cut-price articles
before the expiration of patent protection. Due to the
from the Far East remains undiminished. Purchase risk
sales volume of Memantine, Merz is expecting legal cases
as a result of increased prices for raw materials and pri-
and intense legal disputes.
mary products exists due to the robust world economy.
The new distribution concepts initiated by Senator, with
v. outlook
specialized and innovative solutions for major customers,
For the 2007 / 08 financial year and for the year thereafter,
and a high-quality expansion of the selection are pro-
Merz expects its growth trend to continue. Measures
ducing results. Moreover, production capacity has been
are being taken in all business areas and in all subsidiaries
further modernized in order to remain efficient and to
to increase sales and operating results, with the largest
meet the needs of wholesale customers on short notice
sales and earnings growth expected for the Pharmaceuti-
without sacrificing the highest of quality standards. A
cals segment. Merz is expecting a small increase in
new organizational concept must be implemented at the
sales returns before taxes for the next two financial years.
subsidiary in the usa.
Through the development of a competitive position on the
In summary, management is not aware of any significant
aesthetic market, the continuous modernization and
risks that could endanger the continuance of the company
expansion of production capacity, expansion of country
at present.
organizations, and a well-calibrated process of product
development, marketing, and sales, the products of the
entire Merz Group should be able to achieve success
in the relevant markets worldwide even more rapidly. The
Merz Group continues to deliberately pursue its goal of
being present in the fastest growing international markets
in all of its segments. This requires the strategic acquisition of products and product palettes, active ingredient
licensing, and research and distribution cooperative
agreements that promise momentum.
Merz intends to continue to increase the amount spent
on research and development during the current and
upcoming financial years. Expenditures on advertising,
marketing, and distribution will also rise, caused by the
market launch of new products and marketing measures
worldwide. In addition, the internal risk management
system will be expanded in order to continually monitor
the specific risks existing for each and every segment.
Pharmaceuticals segment
Memantine will continue its positive development throughout the current financial year with accelerated activities
in life cycle management and with new dosage forms.
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Due to the massive investments for the market introduction
®
Writing Instruments / Promotional Materials segment
of Xeomin a successful market entry for the neurologi-
Senator will continue the positive sales and profitability
cal indication is expected in Europe. Furthermore, an intro-
trend of the current reporting year in the next financial
duction onto the us market is currently in preparation.
year. Restructuring for process optimizations will be completed by the end of the current financial year. In order
Merz will also expand the resources for pharmaceutical
to stabilize the growth initiated in the current year, Senator
research significantly in the coming financial year. Core
will continue to expand its product selection with more
aspects of this research include: the clinical development
innovative designs. Additionally, customer assistance for
of several indications for Xeomin®, the clinical development
industrial clients will be intensified in order to gain a
of Neramexane, and the creation of an innovative pipe-
greater international market share by offering customer-
line for the areas of neurology and aesthetic medicine.
tailored solutions and shortened reaction times. Internationalization of the production base will continue, and
In view of the rather modest developments in the German
acquisition projects are currently being sought in order
market, Merz Dental will concentrate on expanding its
to expand the product base. The development of strategic
international business through the promotion of innovative
partnerships with other brand name manufacturers will
products. Correspondingly, expenditures on research
strengthen Senator’s presence in the consumer market as
and development will be further increased during the cur-
well.
rent and new financial years.
Consumer Products segment
In the Consumer Products segment, Merz is planning
increases in sales through a stronger brand profile, and
through more forceful internationalization of the two
umbrella brands tetesept® and Merz Spezial®. Furthermore,
plans have been made to expand its position as the
market leader in the bath market, and to strengthen its
number one position for cold remedies over the longterm. In addition, developmental activities will focus on
further product differentiation and on the further application of patented treatment principles in order to better
emphasize the health benefits and premium quality of
tetesept ® and Merz Spezial ®.
Consolidated Financial Statements 61
Notes to the Consolidated Financial Statements
of Merz GmbH & Co. KGaA
62 Consolidated Financial Statements
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Consolidated balance sheet of Merz GmbH & Co. KGaA, Frankfurt am Main, as of June 30, 2007
Note
June 30, 2007
June 30, 2006
47,377
in thousands of euros
Assets
Non-current assets
Property, plant and equipment
(3), (6)
56,789
(3), (4), (7)
1,427
1,427
Other intangible assets
(3), (7)
24,884
23,738
Other financial assets
Goodwill
(3), (8)
1,110
843
Advance payments on property, plant and equipment and on other
intangible assets
(3), (9)
11,537
5,327
Other non-current assets
(3), (9)
5,200
3,672
(3), (35)
7,210
8,275
108,157
90,659
Deferred tax assets
Total
Current assets
Inventories
(3), (10)
47,066
42,348
(3), (11), (36)
124,212
98,624
(3), (6), (12)
0
2,620
Income tax receivables
(3), (13)
1,875
3,902
Cash and cash equivalents
(3), (14)
144,667
107,894
Total
317,820
255,388
Balance sheet total
425,977
346,047
Trade receivables and other receivables
Property, plant and equipment held for sale
Shareholders’ equity and liabilities
Shareholders’ equity
Share capital
(15)
30,000
30,000
Reserves and retained earnings
(15)
240,149
181,979
Minority interest
(15)
Total
0
459
270,149
212,438
6,985
Non-current liabilities
Deferred tax liabilities
(3), (35)
7,284
Pension provisions
(3), (16)
8,205
7,715
Other non-current provisions
(3), (17)
6,553
6,905
Other non-current liabilities
(3), (18)
Total
122
146
22,164
21,751
26,494
Current liabilities
Trade payables
(3)
36,478
Amounts owed to affiliates
(3), (36)
172
340
Income tax payables
(3), (19)
48,983
41,926
Other current liabilities
(3), (20)
6,728
9,416
Other current provisions
(3), (21)
41,303
33,682
Total
133,664
111,858
Balance sheet total
425,977
346,047
Consolidated income statement
of Merz GmbH & Co. KGaA, Frankfurt am Main, for the period from July 1, 2006 to June 30, 2007
Note
July 1, 2006 – June 30, 2007
July 1, 2005 – June 30, 2006
%
%
Sales
Cost of sales
(3), (24)
535,535
100.0
474,554
100.0
(25)
– 132,322
– 24.7
– 127,515
– 26.9
403,213
75.3
347,039
73.1
Gross profit
Selling and distribution expenses
(3), (26)
– 181,997
– 34.0
– 168,010
– 35.4
(3), (27)
– 60,137
– 11.2
– 50,594
– 10.7
General administrative expenses
(28)
– 51,628
– 9.6
– 33,300
– 7.0
Other operating income
(29)
8,426
1.5
7,943
1.7
Other operating expenses
(30)
– 5,444
– 1.0
– 8,251
– 1.7
Results from operating activities
(31)
112,433
21.0
94,827
20.0
Results of associates
(32)
13
0.0
15
0.0
ebit
(34)
112,446
21.0
94,842
20.0
Finance results
(3), (33)
Profit before income tax
Income taxes
(3), (35)
Net profit for the year
2,912
0.5
2,985
0.6
115,358
21.5
97,827
20.6
– 45,350
– 8.4
– 39,792
– 8.4
70,008
13.1
58,035
12.2
Attributable to:
Minority interest
0
0.0
35
0.0
Equity holders of the parent company
70,008
13.1
58,000
12.2
70,008
13.1
58,035
12.2
Earnings per share in eur
(3)
23.34
19.33
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Consolidated statement of cash flow
of Merz GmbH & Co. KGaA, Frankfurt am Main, for the period from July 1, 2006 to June 30, 2007
2006 / 07
2005 / 06
115,358
97,827
Profit before income tax
Amortization and depreciation on assets
Financial results
Results from the disposal of property, plant and equipment and intangible assets
Changes in other non-current provisions
Other non-cash transactions
Change in inventories
Change in receivables and other non-current and current assets
9,919
7,836
– 2,912
– 2,985
-470
– 120
138
458
0
– 133
122,033
102,883
– 4,661
5,005
– 18,204
– 12,499
Change in deferred tax receivables
1,065
847
Change in other current provisions
7,293
3,444
Change in other current liabilities
Income taxes paid
Income tax refunds received
Interest received
Interest paid
Net cash from operating activities
Acquisition of property, plant and equipment and intangible assets
Acquisition of consolidated companies
Cash acquired on the first-time consolidation of companies
7,494
5,718
– 36,657
– 30,860
233
1,094
3,019
3,358
– 107
– 373
81,508
78,617
– 28,291
– 17,509
0
– 14,918
0
512
Cash used for the disposal of companies
– 197
0
Proceeds from disposals of property, plant and equipment and intangible assets
2,130
821
Acquisition of financial assets
– 267
0
Net cash used in investing activities
– 26,625
– 31,094
Distribution to shareholders
– 13,000
– 10,000
Cash used for lending to non-consolidated companies
– 6,818
0
Cash used for securities-lending transactions
0
– 42,743
Proceeds from securities-lending transactions
0
42,743
Change in other non-current financial liabilities
0
– 1,612
– 19,818
– 11,612
35,065
35,911
Net cash used in financing activities
Cash component movement in cash and cash equivalents 1)
Change in short-term investments from measurement at fair value
2,532
50
Effect of exchange rate fluctuations on cash held
– 824
– 316
36,773
35,645
Change in cash and cash equivalents 1)
Cash and cash equivalents 1) at beginning of financial year
107,894
72,249
Cash and cash equivalents 1) at end of financial year
144,667
107,894
1)
Cash and cash equivalents contain cash held as well as freely disposable short-term investments.
Consolidated statement of changes in equity
of Merz GmbH & Co. KGaA, Frankfurt am Main
Issued
share
capital
Capital
reserves
Retained
earnings
and
consol.
financial
statement
Foreign
currency
translation
reserve
Fair value
of
financial
instruments
Shareholders'
equity
Minority
interest
Total
115,484
Balance at June 30, 2004
30,000
15,478
70,042
– 1,650
966
114,836
648
0
0
52,200
0
0
52,200
42
52,242
0
0
– 5,000
0
0
– 5,000
0
– 5,000
Currency translation differences
0
0
0
591
0
591
0
591
Withdrawal from “Hedging reserve”
0
0
0
0
– 23
– 23
0
– 23
Allocation to “Hedging reserve”
0
0
0
0
397
397
0
397
Purchase of own shares
0
0
0
0
0
0
– 690
– 690
30,000
15,478
117,242
–1,059
1,340
163,001
0
163,001
0
0
58,000
0
0
58,000
35
58,035
0
0
– 10,000
0
0
– 10,000
0
– 10,000
0
0
0
– 1,636
0
– 1,636
– 50
– 1,686
0
0
0
0
2,614
2,614
0
2,614
First-time consolidation
0
0
0
0
0
0
474
474
30,000
15,478
165,242
– 2,695
3,954
211,979
459
212,438
0
0
70,008
0
0
70,008
0
70,008
0
0
– 13,000
0
0
– 13,000
0
– 13,000
0
0
0
– 917
0
– 917
0
– 917
0
0
0
0
2,079
2,079
0
2,079
First-time consolidation
0
0
0
0
0
0
– 459
– 459
30,000
15,478
222,250
– 3,612
6,033
270,149
0
270,149
The distribution to shareholders is equivalent to a distribution per share in the amount of eur 4.34.
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Notes to the Consolidated Financial
Statements (ifrs) as of June 30, 2007
1. general
The present ifrs consolidated financial statements, including the Group Management
Report, have been prepared in accordance with Section 315a hgb (German Commercial Code). The legal requirements of Sections 290 ff hgb are thus fulfilled by the
preparation and publication of the audited ifrs consolidated financial statements issued
with an auditors’ report.
The Merz Group operates in the areas of pharmaceuticals, consumer products, and
writing instruments. The parent company is Merz GmbH & Co. KGaA (“Merz KGaA”),
with its headquarters in Frankfurt am Main, Eckenheimer Landstraße 100, Germany,
which carries out a holding function for all commercial companies of the Merz Group.
The Merz Group maintains production sites in Germany, France, England, the usa, and
Poland. Intersegment transfer prices are based on comparable market prices.
Merz Pharmaceuticals GmbH and Merz Dental GmbH are responsible for activities within
the Pharmaceuticals segment, with activities in the Consumer Products segment being
managed by Merz Consumer Care GmbH. These companies, as is the case with Merz
Group Services GmbH, are 100 % subsidiaries of Merz Pharma GmbH & Co. KGaA.
Merz Group Services GmbH renders services for consolidated companies in the Group
within the fields of manufacturing, distribution, and administration, and also grants
contracts for the outsourcing of manufacturing labor to third parties.
Research and the distribution of products in Germany are carried out by Merz
Pharmaceuticals GmbH, Merz Consumer Care GmbH, and Merz Dental GmbH. Distribution outside of Germany occurs mainly via Merz Pharmaceuticals GmbH and its
foreign subsidiaries.
Pharmaceutical activities relate to products and indications in connection with the
central nervous system, metabolism, and dermatology. Research and development and
the marketing and distribution of mainly prescription drugs is carried out by Merz
Pharmaceuticals GmbH. The most important preparations are Axura ® (active ingredient:
Memantine) for the treatment of patients with Alzheimer’s disease; pk-Merz ® for
Parkinson’s disease therapy; Xeomin ® for two types of dystonia; Hepa-Merz ® for liver
therapy; Contractubex ® for the treatment of hypertrophic scars and movementinhibiting keloids; and Belotero ® (dermatological preparation for injection under wrinkles, under license). License revenue is generated with the cooperation of our partners, Forest Laboratories Inc., New York (“Forest”) and H. Lundbeck a / s, Copenhagen,
Denmark (“Lundbeck”) from the marketing of Namenda ® and Ebixa ® (active ingredient: Memantine). In connection with the marketing of Memantine, Merz is obligated
to pay certain licensing fees to the licensors, Neurobiological Technologies Inc.,
Richmond, usa (“nti”) and the Children’s Medical Center Corporation, Boston, usa
(“cmcc”).
Consumer Products includes the business units of Health Care and Beauty Care, as well
as the distribution of contracts for Merz Consumer Care GmbH.
In the Health Care business unit, health and relaxation baths, as well as many products
for the treatment of colds and rheumatic illnesses, are marketed together with vitamin
preparations under the tetesept ® brand. Included among the preparations of the Beauty
Care business unit are, in particular, Merz Spezial Dragees ® and various cosmetic
products. These products are distributed via two channels: pharmacies (including wholesale pharmacies) and drugstores (drugstores and consumer markets).
Group company Senator GmbH & Co. KGaA (“Senator KGaA”) encompasses, together
with its foreign subsidiaries, the Writing Instruments business unit. In addition to its
own writing instruments sold under the brands Senator and rou bill on the market for
promotional articles and specialty retail (> 300 million items per year), Senator also
carries merchandise to complement its product range.
Unless otherwise indicated, all amounts are stated in thousands of euros [€(000)].
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2. application of international
financial reporting standards (ifrs)
The consolidated 2006 / 07 financial statements of the Merz Group have been prepared
by Merz KGaA under uniform accounting and valuation (measurement) policies. This
means that all International Financial Reporting Standards (ifrs) of the International
Accounting Standards Board (iasb) and interpretations of the International Financial
Reporting Interpretations Committee (ifric) that were active and mandatory as of the
balance sheet date of June 30, 2007 and were accepted by the European Union have
been applied.
During the 2006 / 07 financial year, the following new standards, amendments to standards, and interpretations were applied for the first time:
– iftic 4 (Determining whether or not an arrangement contains a lease): The standard is
to be applied, for the first time, to the financial year beginning on or after January 1,
2006. This first application had no effect on the consolidated statements of the Merz
Group.
– ias 1 / ias 19 (Payments to employees): The standard is to be applied, for the first
time, to the financial year beginning on or after January 1, 2006. Thereafter, there is an
option to shift from the recognition of actuarial gains and losses under the corridor
approach to include these within shareholders’ equity without affecting profit or loss.
The Merz Group has not utilized this option and will continue to use the corridor
method without change.
The iasb has issued the following standards, interpretations and amendments to
existing standards, whereby application is not yet mandatory and the items have not yet
been applied by the Merz Group:
– ias 1 (Amendment to ias 1: Presentation of Financial Statements – details on capital):
The standard is to be applied, for the first time, to financial years beginning on or
after January 1, 2007. Initial application of this standard will lead to further details in
the statements.
– ifrs 7 (Financial Instruments: Details): The standard is to be applied, for the first
time, to financial years beginning on or after January 1, 2007. Initial application of this
standard will lead to further details in the statements.
– ifric 10 (Interim Reporting and Devaluation): The standard is to be applied, for the
first time, to financial years beginning on or after November 1, 2006. This first
application will most likely have no effect on the consolidated statements of the Merz
Group.
3. significant accounting and valuation policies
General
The basis for the measurement of assets and liabilities is historical purchasing costs or
production cost – with the exception of derivative and financial instruments that are
available-for-sale.
Non-current assets that are up for sale are measured by taking the lower amount of their
carrying / manufacturing costs and their realizable value, less selling costs.
The preparation of consolidated financial statements in accordance with ifrs calls for
estimates and assumptions to be made by management. These affect the value of
assets, liabilities, and contingent liabilities, as well as income and expenditures. Estimates and associated assumptions are based on previous experience and a multitude
of sundry factors which management assumes are appropriate in estimating the value
of assets and liabilities. Actual future values may vary from these estimates.
The estimates and the assumptions on which they are based are subject to continuous
review. When changes to estimates only affect past accounting periods, these are recognized in the most recently completed period. On the other hand, if the change also
affects the future, the resulting effect on profits is recognized both in the current and
in the subsequent periods.
The estimates utilized by management in applying ifrs, and which might have a significant effect on future periods, are dealt with in the notes to the individual balance
sheet items.
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Companies included in the consolidation
The consolidated financial statements include Merz KGaA, as well as six German
(previous year: six) and eighteen (previous year: eighteen) foreign subsidiaries in which
Merz KGaA directly or indirectly holds the majority of voting rights.
The following companies are included for the first time in the consolidated financial
statements: Merz Pharma France s.a.s., Maisons Laffitte and Merz Pharma España s.l.,
Madrid, which were founded during the reporting year. The company Merz Pharma
llc in Russia, also newly established at the end of the financial year, has yet to post any
notable business activity and is thus not yet included among the consolidated
companies.
No longer included among the consolidated companies is Laboratorios Merz Darier,
s.a. de c.v., Mexico City, which is presently in liquidation after ceasing business operations. The Transpharma Handels ag, Zug, Switzerland, was dissolved after its assets
and liabilities were transferred to Merz Austria GmbH, Vienna (formerly Merz Beteiligungs GmbH).
Eight (previous year: seven) companies without business activities of their own are not
included in the consolidation.
In note 39, the major shareholdings of the Merz Group are provided. The full list of
shareholdings is filed and available electronically in the Federal Commercial Register
(hrb 325).
By being included in the consolidated financial statements of Merz GmbH & Co. KGaA,
Senator GmbH & Co. KGaA, Groß Bieberau, Merz Consumer Care GmbH, Frankfurt
am Main, Merz Pharmaceuticals GmbH, Frankfurt am Main, Merz Group Services GmbH,
Frankfurt am Main, Merz Pharma GmbH & Co. KGaA, Frankfurt am Main, as well as
Merz Dental GmbH, Lütjenburg, fulfill the requirements of Section 264 paragraph 3 hgb
and utilize the right to exemption.
Consolidation methods
The consolidated financial statements are based on the individual annual and interim
financial statements of the companies consolidated, prepared as of June 30, 2007,
using uniform accounting policies in accordance with ifrs, which – with the exception
of the financial statements of Senator Benelux b.v. (formerly rou bill benelux b.v.),
Merz Pharma Italia S.r.l. (formerly Merz Italia S.r.l.), Merz Pharma France s.a.s. and
Merz Pharma Espana, s.l., which are not subject to mandatory audit – have been
audited and verified.
The consolidation was carried out in accordance with ifrs 3 Business Combinations,
using the purchase method of accounting, by offsetting the carrying value of the investments against the portion of newly measured equity of the respective subsidiaries
on the respective dates of acquisition. Using this method, the remaining positive differences are capitalized as goodwill after reclassification of hidden reserves and hidden
deficits.
By applying ifrs 3, normal straight-line amortization of goodwill was stopped as of
July 1, 2004. From this date forward, goodwill is regularly tested once a year for impairment – and, should contrary indications exist, during the course of the year as well –
and inspected for depreciation (Impairment Test) and, if necessary, recorded at its recoverable amount. Furthermore, in accordance with ifrs 3, hidden reserves and hidden
deficits attributable to minority holdings arising from acquisitions of companies are also
to be identified and depicted as minority interest. Any remaining positive difference
shall be stated as goodwill under non-current assets. A remaining negative difference
shall be recognized in the income statement at the time of the first consolidation.
Calculations of receivables and liabilities between the companies consolidated are offset
against each other. Interim and intra-Group profits and losses, as well as intra-Group
sales, expenses, and income are eliminated. Deferred taxes are calculated for consolidation measures affecting income in cases where the tax deferral is expected to balance out within the coming financial years.
Currency translation
The Consolidated Financial Statements are drafted in euros; the amounts listed are
rounded to the nearest thousand euros.
Foreign currency transactions are translated at rates applicable at the time of the transaction. Monetary assets and liabilities in foreign currency are translated into euros at
the balance sheet date, at the rate which applies on that date, regardless of whether or
not this rate has been secured. Gains and losses resulting from these rate translations
are, in principle, posted in the income statement.
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Translation of financial statements in foreign currency
All assets and liabilities of Group companies in foreign currency are translated into euros
at the rate which applied as of the balance sheet date. Income and expenditures are
translated at average exchange rates. Exchange differences resulting from translation
are recognized in equity without effecting profit or loss.
As of June 30, 2007, cumulative translation differences in equity amounted to
– 3,612 thousand euros (previous year – 2,745 thousand euros).
The carrying values of the investments included in the consolidation and the equity of
the subsidiaries are accounted for at historical rates.
The exchange rates of major currencies dealt with in the consolidated financial statements are as follows:
Mean rate at the balance sheet date
Average annual rate
June 30, 2007
June 30, 2006
July 1, 2006 –
June 30, 2007
British pound
0.67
0.69
0.68
0.68
Swiss franc
1.66
1.57
1.61
1.56
us dollar
1.35
1.27
1.31
1.22
Polish zloty
3.77
4.06
3.88
3.94
14.58
14.37
14.28
13.15
Exchange rate for eur 1
Mexican pesos
July 1, 2005 –
June 30, 2006
Intangible assets
Goodwill
All business combinations are accounted for using the purchase method. Goodwill arises
from the acquisition of subsidiaries, associated companies, and joint ventures. Goodwill represents the difference between the cost of the acquisition and the fair value of
the assets and liabilities of the company acquired.
Up to June 30, 2004, goodwill arising after 1995 was routinely written off during its time
of applicability. Under ifrs 3 in conjunction with ias 36, goodwill has no longer been
subject to routine amortization since July 1, 2004. Cumulative amortization was offset
against cost on this date.
Goodwill arising before 1995 was not amortized, but offset against distributable reserves.
Negative differences on consolidation were immediately accounted for in the income
statement.
Research and development costs
Research expenses are the costs of independent and systematic research incurred with
the aim of acquiring new scientific or technical knowledge. They are fully treated as
expenditures.
Development costs are defined as expenditure that serves to technically and commercially implement theoretical findings. Development costs within the Pharmaceuticals
division are not activated, as the higher risks occurring before pharmaceutical products
can be launched onto the market do not satisfy the conditions of ias 38.
Other intangible assets acquired by the Group are shown at their cost less cumulative
amortization and other impairments. The period of amortization is calculated according
to the expected time of use.
Expenditure on internally generated goodwill and on brand names is directly handled
as such.
Subsequent costs of acquisition
Subsequent costs of acquisition are capitalized if these enhance the future earning
prospects of the asset to which they relate. All other expenditure is treated as expense
directly upon acquisition.
Amortization
Intangible assets are amortized on a straight-line basis over their expected time of use.
Goodwill is tested annually and systematically for impairment. Other intangible assets
are amortized beginning with the date on which they are available for use.
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The following amortization periods were applied:
Years
Patents, licenses and similar rights
10 – 12
8
Amortization on intangible assets is shown in the respective functional areas (cost of
sales, distribution expenses, research and development expenses and general administrative expenses).
Property, plant, and equipment
Property, plant, and equipment in the legal ownership of the company
Property, plant, and equipment are stated at cost less normal and special depreciation.
The cost of self-constructed property, plant, and equipment items includes the cost
of materials, directly attributable labor costs, costs of environmental restoration (where
applicable), as well as an appropriate portion of overhead.
Where items of property, plant, and equipment have differing expected times of use,
depreciation has been charged over the useful life applicable to each individual
component.
Costs related to financing have not been capitalized. In the case of acquisitions denominated in foreign currencies, later changes to the exchange rate have not had an effect
on the balance sheet approach to the original costs of acquisition or manufacturing.
Gains or losses from a disposal of assets are included in other operating income or other
operating expenses.
Leased assets
If assets are rented or leased, and if economic ownership is in the hands of the Group
company concerned (finance leasing), they are capitalized at the present value of the
lease payments, or at fair value if lower, and depreciated in line with their useful lives.
The corresponding payment obligations from future lease installments are included
under liabilities.
Subsequent costs of acquisition
Investments to replace and enhance assets are capitalized as subsequent costs of acquisition, if it is expected that these will result in future benefit and the costs can be
reliably determined. Sundry maintenance and repair work is treated as an expense.
Depreciation
Property, plant, and equipment – with the exception of land – are depreciated over their
estimated useful life by the straight-line method as shown below:
Years
Buildings
10 – 50
Plant and machinery
15 – 25
Capitalized finance leases
4 – 25
Other facilities, operating and office equipment
4 – 25
Depreciation of property, plant, and equipment is shown in its respective functional area
(cost of sales, selling and distribution expenses, research and development expenses
and general administrative expenses).
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Financial instruments
Original financial instruments
Original financial instruments include interest-bearing securities, receivables from deliveries and services, as well as other assets, cash and cash equivalents, loans, payables
from deliveries and services, as well as other payables.
Original financial instruments are stated at fair value, with the addition of directly allocable transaction costs, at the time of acquisition. Subsequent valuation is carried out on
the basis of the principles stated below.
A financial instrument is valued when the company gains ownership of a liability or a
right to this financial instrument. The financial instrument will then be regarded as
“disposed of” when no further cash flow for the company results from it, or when the
asset has been sold.
Financial instruments are recognized (or, in the case of disposals, no longer recognized)
from the date on which the company either purchased or sold the instruments. For purchase of securities on the open market, this is the date of transaction. Financial obligations will be disposed of when obligations no longer exist.
Cash and cash equivalents consist of cash-on-hand, sight deposits, and short-term fixed
deposits.
Financial instruments treated as “held-to-final-maturity”
In so far as the company has the intention and the ability to hold debt securities until
maturity, these will be treated accordingly and balanced by taking the continued
purchasing expense, taking account of the effective interest rate method, and less any
required depreciation for impairment.
Financial instruments treated as “available-for-sale”
Other financial instruments are classified as available-for-sale and are stated at fair value
after purchase. With the exception of losses deemed to be permanent on the grounds of
impairment or changes in foreign exchange, resulting gains and losses are recognized
directly in equity.
When such assets are sold, the cumulative gains and losses which have been held in
equity hitherto are released to the income statement.
The fair value of financial instruments that are classified as available-for-sale or heldfor-sale is their market price or bank quotation.
Other
Other original financial instruments are valued at the continuous purchasing expense
using the effective interest rate method. Depreciation due to impairment has been taken
into account as affecting profits.
Derivative financial instruments
Derivative financial instruments are used exclusively to hedge currency positions, with
the goal of minimizing currency risks caused by exchange rate fluctuation. The instruments used are marketable forward-exchange and options contracts. The use of such
derivatives is governed by internal regulations. Derivative financial instruments are
subject to continuous risk control, and are only entered into with banks of the highest
standing. They are confined to the hedging of operational business and to associated
financing transactions.
Derivative financial instruments are measured at historical cost. Subsequent measurement of derivatives is at market value. Gains or losses on valuation at market are
directly accounted for in the income statement. If the derivatives are used for hedging
purposes, however, and the criteria for hedge accounting are fulfilled, the effects on
the consolidated financial statements depend on the nature of the underlying transaction
(see the following section on hedge accounting).
Hedge accounting
Cash flow Hedges
When derivative financial instruments are employed in order to secure future cash flows
relating to a recognized asset, liability or expected future transactions, the effective
portion of the gain or loss from the derivatives is directly accounted for in equity. The
ineffective portion of the gain or loss is recognized immediately in the income statement as profit or loss.
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In case the expected transactions result in the recognition of a non-financial asset or
non-financial liability, the cumulative gain or loss is calculated under equity, acquisition expenditure, or the fair value of the non-financial asset or liability. If, on the other
hand, the forecast transaction results in the recognition of a financial asset or a financial liability, the cumulative gains and losses recognized directly in equity are reclassified into profit or loss in the periods in which the asset or liability affects the income
statement.
For cash flow hedges not covered by either of the above treatments, cumulative gains
and losses are recognized in profit or loss in the periods in which the forecast transactions affect the income statement.
If a hedging instrument matures, is sold or exercised, or the company abandons the
hedging arrangement, yet it is nevertheless expected that the forecast transaction will
occur, the cumulative gain or loss shown under equity is kept there for the time being,
and, in accordance with the above-mentioned procedures, is recognized on the income
statement when the transaction takes place.
If the hedged transaction is no longer expected to occur, the cumulative unrealized gains
and losses recognized in equity up to that point are immediately accounted for under
income.
Hedging of monetary assets and liabilities
If derivative financial instruments are used in order to limit the effects of currency risks
relating to assets and liabilities already recognized, hedge accounting is not applied.
Instead, gains and losses on the hedging instrument are charged directly to the income
statement.
Inventory
Inventories are calculated as the purchase or manufacturing cost, or as net realizable
value as of the balance sheet date. The net realizable value is equal to the estimated
selling price which may be obtained in the ordinary course of business, less expected
costs for completion and disposal. Acquisition and manufacturing costs are based on
weighted average costs. Manufacturing costs include the cost of materials and personnel expense, as well as various forms of overhead including depreciation.
Third-party financing costs are not included in acquisition or manufacturing costs.
Trade accounts receivable and other assets
Receivables and other assets are stated at their nominal amount. Perceived interest risks
and risks of default are covered by appropriate allowances.
Securities
Securities mainly consist of investment shares, they are classified as available-for-sale,
and they are valued accordingly.
Cash and cash equivalents consist of cash-on-hand, sight deposits and fixed deposits
with terms of up to three months.
Impairment
In respect to all assets with the exception of inventories and deferred tax, an assessment is made at each balance sheet date as to whether there are signs of impairment.
In case of an impairment, the recoverable amount has been estimated.
For goodwill, the recoverable amount is determined for each balance sheet date.
An impairment loss is passed through the income statement when the recoverable
amount determined for an asset or a cash-generating unit is lower than the carrying
amount.
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A unit generating cash or cash equivalents is the smallest group of assets that can
create cash flow essentially on its own, independent of other assets and / or groups of
assets.
If an impairment loss is sustained by cash-generating units, any available goodwill is
decreased first, with the remaining assets being proportionally written down afterward.
A financial asset is depreciated when there are objective indications that one or more
events will have a negative impact on estimated future cash flow for this asset.
Specific essential financial assets are tested individually for depreciation. Remaining
financial assets are bundled in groups with similar risks and are estimated on this basis.
All impairments are recognized in the income statement.
When an impairment of the value of financial instruments, which are classified as available-for-sale, has been directly recognized in equity, and there are objective indications that the asset is permanently impaired, the impairment expense hitherto recognized directly in equity is charged to income, even if the financial instrument is still
being held. The effect on expense is made up of the amount of the difference between
initial cost and fair value at the time the valuation is carried out, less the write-downs
already charged to income in prior periods.
Measuring recoverable amount
The recoverable amount of investments classified as held-to-maturity, and accordingly
recognized under amortized cost, is calculated as the present value of the estimated
future cash flow. Provided current receivables are not involved, cash flow is discounted
at the effective interest rate applicable at the time the asset was acquired.
For financial assets classified as available-for-sale, the fair value of the asset is considered as its recoverable amount.
The recoverable amount of other assets is calculated by taking the greater of either realizable value or the value of the item to the company. Establishing the value of an asset
involves balancing forecast cash flows against present value. The discount rate chosen
for this shall be a pretax rate that reflects the market conditions prevailing at the relevant balance sheet date and the risks specific to the asset. If the individual asset does not
generate cash flows that are largely independent of other assets, the estimated amount
is calculated for the cash-generating unit to which the asset belongs.
Reversing an impairment loss
Reversals are carried out in respect to financial instruments designated as held-to-maturity and / or available-for-sale if the reason for the reversal is objectively based on an
event that has occurred after the date of impairment.
Impairment reversals with respect to goodwill are not carried out on any occasion.
Reversals with respect to other non-financial assets are carried out if the assumptions
have changed on which the determination of the recoverable amount was based.
Reversals may only be carried out up to the level which would have resulted from normal
amortization.
Loans and other non-current liabilities
Loans and other non-current liabilities are stated at acquisition cost, less transaction
expenses. Any difference to the amount repayable is recorded over the credit term, affecting income, by applying the effective interest method.
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Long-term employee benefits
Defined contribution pension plans
Obligations in connection with defined contribution pension plans are recorded when
incurred.
Defined benefit pension plans
For Group obligations resulting from pension plans, it is necessary to separately calculate what portion of future benefits employees have earned from their service to
the Group in the reporting period as well as in prior periods for each individual plan.
The resultant amount is discounted to present value. Discounting is based on interest rates that first-class debtors (aaa rating) would be required to pay for loans with
an equivalent redemption period. Measurement is carried out by an actuary.
When benefits to employees are increased, the portion of the increase applicable to prior
periods is charged to the income statement on a straight-line basis over the average
period, until the benefits become vested. In the case that benefits are already vested, the
corresponding portion is charged immediately to income in the applicable amount.
Actuarial gains and losses that exceed a 10 % corridor of the actual present value of
the pension obligation are amortized over the average remaining service periods of
the employees concerned. Actuarial gains and losses under 10 % are not recognized.
Other long-term benefits to employees
The obligations of the Group in connection with other long-term employee benefits
are recognized at the amount, based on future benefits, that relates to service by the
employee during the reporting period and during prior periods.
The obligation is calculated using the projected unit credit method and is discounted to
the balance sheet date. Discounting shall be based on interest rates that first-class
debtors (aaa rating) would be required to pay for loans with a corresponding redemption period.
Other provisions
A provision is shown in the balance sheet when the company has a legal or constructive
obligation as a result of a past event, and where future settlement is probable and the
amount can be reliably estimated.
The amounts recognized represent the best estimate of the expenditure required to
settle the present obligation at the balance sheet date.
Warranty provisions
Warranty provisions are recognized when the underlying products are sold. The measurement of the provision is based not only on actual warranty expenditures that
occurred in the past, but also on the evaluated overall risk concerning the product.
Provisions for impending losses
Provisions for impending losses under a contract are established when the benefits
which the company may expect to receive are less than the value of the related costs it
will incur in the future.
Trade accounts payable and other liabilities
Trade accounts payable and other liabilities are stated at initial cost.
Sales
Revenue from the sale of products, goods and services is realized when the significant
risks and rewards have been transferred from the vendor to the buyer. In addition, it
must be possible to reliably measure personal costs to the company and the consideration expected in return. Discounts and rebates granted to customers and returns of
goods are recorded in the same period as the related sales.
Non-repayable and unconditional one-time payments under licensing agreements are
immediately recorded under income. If the payment is made in regard to a service to
be rendered by the Merz Group, revenue is apportioned over the period during which
the service is provided.
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Selling and distribution expenses, advertising expenses
Advertising expenses, included under selling and distribution expenses, are recorded
as incurred.
Financial results
Financial results include interest expenses from loans and interest-bearing liabilities,
accounted for in the correct period through utilization of the effective interest method.
It also includes interest income from investments, dividend income, and gains and
losses from hedging instruments, which are recognized immediately under income.
Interest income is allocated to the correct accounting period in the income statement
using the effective interest method. Dividends are not credited to income until the company becomes entitled to receive them.
Interest expenses in connection with finance leasing are accounted for as finance
expenses using the effective interest method.
Income tax expenses
Taxes on income are comprised of current and deferred tax and are fundamentally recognized in the income statement. Where taxes have been levied in connection with items
that are directly recognized in equity without affecting profit or loss, the related tax is
dealt with in the same way.
Current tax includes the amount computed using tax rates applicable as of the balance
sheet date applied to current taxable income, as well as adjustments to tax payments
for earlier years.
Deferred tax is a result of applying the balance sheet liability method, i.e. it arises from
temporary differences between the values of individual assets and liabilities used for
tax purposes and those shown in the consolidated balance sheet. The sole exceptions
to the recognition of deferred tax are instances of goodwill that are not liable to taxation, and the initial recognition of assets and liabilities that have no effect on commercial or fiscal net profit. The computation of the amount of deferred tax is based on
current and future tax rates.
Deferred tax assets are only recognized when it is likely that they can be utilized in
the future. Deferred tax assets are subject to write-downs when it is no longer likely
that they can be utilized in the future.
Taxes on income incurred on the distribution of dividends are accounted for in the same
period in which the liability is recognized.
Deferred income taxes also arise from consolidation adjustments. Deferred tax on
goodwill resulting from the consolidation of investments in subsidiaries is, in accordance with ias 12, not calculated.
Deferred tax assets and liabilities are offset, in case they are handled by a single tax
authority.
Earnings per share
Earnings per share (basic earnings per share) are calculated by dividing the consolidated
net profit by the weighted average number of shares in circulation.
Earnings per share
2006 / 07
2005 / 06
Net profit attributable to the shareholders of
the parent company in eur
70,008,000
58,000,000
Weighted average number of shares issued
3,000,000
3,000,000
23.34
19.33
Earnings per share in eur
Concentration of risk
A significant part of Merz’ sales is achieved with Memantine, a therapeutic drug for the
treatment of moderate to severe Alzheimer’s dementia, and with licensing revenue
from the cooperative partners Forest and Lundbeck for the marketing of this active ingredient. In the 2006 / 07 financial year, Merz achieved sales revenue with this active
ingredient (including license revenue) of eur 224.0 million (previous year: eur 182.7
million) or 62 % (previous year: 60 %) of pharmaceutical sales (eur 359.4 million,
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previous year: eur 305.6 million). Sales revenue from this active agent in the 2006 / 07
financial year represented 42 % (previous year: 38 %) of Group sales (eur 535.5 million, previous year: eur 474.6 million). Merz expects this active ingredient to maintain
its importance for the business as a whole during the next few years.
Previous year’s figures
For the purpose of improved comparability, the previous year’s figures have been adjusted in some cases to the reporting year’s presentation methodology.
Non-current assets held for sale
Where assets that had previously been classified as non-current are now being held for
sale, they are re-measured and stated under current assets at the lower of fair value or
carrying value.
4. impairment goodwill
Determination of the value of goodwill was carried out applying ias 36 on the basis of
cash-generating units. For this purpose, the Group was subdivided into the units
Pharmaceuticals, Consumer Products, and Writing Instruments and was subjected to
an impairment test. The cash-generating units and their respective goodwill figures
as of the balance sheet date are as follows:
Cash generating unit
Goodwill
Pharmaceuticals 1)
Consumer Products
Writing Instruments 2)
777
0
650
1) Goodwill
2)
from first-time consolidation of Merz Pharma (Switzerland) ag;
Remaining goodwill from first consolidation of rou bill GmbH & Co. kg
To carry out the valuation tests, the future cash flows of the cash-generating units are
calculated on the basis of the planning for the next three financial years. The planning
is based on past empirical values as well as on the best-possible estimates of management concerning future development.
In addition, the weighted average growth rates used for planning meet the expectations
in corresponding growth forecasts. To assess the value, management estimated cash
inflow beyond the planning period by extrapolating a constant growth rate for the subsequent years. The growth rates used are based on the specific business and range
from 0 % to 10 %. Using a discounted cash flow procedure, the fair value, less the costs
of disposal, was calculated in the reporting year for every cash-generating unit.
The discount rate that was used amounted to 7 % to 10 % and was based on the wacc
("weighted average cost of capital"). The parameters used for this purpose were determined assessing the risk situation specific to the company. The recoverable amount thus
determined was then compared to the carrying value of the cash-generating units and
the value assessed.
5. risks of default
The Merz Group is exposed to risks of default if contracting parties do not meet their
obligations. To avoid such risks, contracts are concluded solely with contracting parties
that have first-class credit ratings. There were no material risks of default as of the
balance sheet dates June 30, 2007 und June 30, 2006, so that in the opinion of management the risk of non-payment by the contracting parties is minimal, although not to
be completely ruled out.
Risks of default in the Merz Group mainly relate to trade receivables. Where concrete
risks of default are recognizable in the case of individual trade receivables, these
risks are recognized by the creation of allowances. The allowances stated in the financial
year amount to eur 1,622 thousand (previous year: eur 1,460 thousand).
Thus, the reported amounts of financial assets, notwithstanding existing collateral security, take into consideration the maximum risk of default in the event that the contracting parties do not meet their financial obligations. A concentration of risks of default
arising from business relations with individual debtors or debtor groups has to be
taken into account with respect to the license payments of Forest and Lundbeck.
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6. property, plant, and equipment
Land, property,
rights and
buildings,
including
buildings on
third-party land
Plant and
machinery
Other facilities,
operating
and office
equipment
Construction
in progress
Total
133,160
Acquisition costs
Opening balance July 1, 2005
42,828
51,460
37,675
1,197
Effect of exchange rate fluctuation
– 121
– 154
– 171
0
– 446
Additions
1,462
2,475
7,004
645
11,586
– 3,960
Disposals
Transfers from construction in progress
Transfers from advance payments
Additions from initial consolidation
0
– 1,751
– 2,209
0
449
553
100
– 1,102
0
82
101
114
0
297
152
0
646
0
798
Transfers to non-current assets
held for sale
– 6,819
– 127
– 542
0
– 7,488
Closing balance June 30, 2006
38,033
52,557
42,617
740
133,947
38,033
52,557
42,617
740
133,947
64
– 108
– 132
0
– 176
Additions
1,241
1,740
7,418
6,866
17,265
Disposals
– 2,016
– 2,724
– 2,791
0
– 7,531
93
16
13
– 122
0
0
356
502
0
858
37,415
51,837
47,627
7,484
144,363
90,777
Transfers from construction in progress
Depreciation
20,121
42,350
28,306
0
– 25
– 133
– 87
0
– 245
Additions
911
949
2,597
0
4,457
Disposals
Reversals of past depreciation
0
– 1,642
– 1,929
0
– 3,571
– 133
0
0
0
–133
12
0
140
0
152
Transfers to non-current assets
held for sale
– 4,242
– 112
– 513
0
– 4,867
16,644
41,412
28,514
0
86,570
16,644
41,412
28,514
0
86,570
–3
– 89
– 86
0
– 178
1,217
1,905
3,370
0
6,492
Additions
Impairment
39
72
192
0
303
– 583
– 2,635
– 2,395
0
– 5,613
17,314
40,665
29,595
0
87,574
Net carrying value June 30, 2007
20,101
11,172
18,032
7,484
56,789
21,389
11,145
14,103
740
47,377
Disposals
The items of property, plant, and equipment shown under “Construction in progress“
refer to production facilities in Dessau and Reinheim.
The items of property, plant, and equipment shown under “Transfers to non-current
assets held for sale” refer to a Senator GmbH & Co. KGaA property containing a factory
and administrative building as well as other property, plant, and equipment in Bad Salzuflen. These assets were transferred to the purchaser on July 1, 2006.
The depreciation taken in the reporting year due to impairment is shown in income
statements in the following functional divisions:
2006 / 07
Cost of services rendered
Distribution costs
83
50
General administrative costs
170
Impairment
303
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7. goodwill, other intangible assets
Goodwill
Other
intangible assets
Total goodwill
and other
intangible assets
13,475
54,093
67,568
– 55
– 400
– 455
Additions
0
1,406
1,406
Disposals
0
– 169
– 169
Acquisition costs
0
75
75
0
14,909
14,909
13,420
69,914
83,334
13,420
69,914
83,334
– 57
– 55
– 112
0
3,381
3,381
Disposals
0
– 57
– 57
0
577
577
13,363
73,760
87,123
10,120
44,303
54,423
– 55
– 302
– 357
1,928
0
1,928
Additions
0
1,451
1,451
Disposals
0
– 157
– 157
Additions
Amortization and impairment losses
Impairment
0
881
881
11,993
46,176
58,169
11,993
46,176
58,169
– 57
– 379
– 436
Additions
0
3,124
3,124
Disposals
0
– 45
– 45
11,936
48,876
60,812
1,427
24,884
26,311
1,427
23,738
25,165
Goodwill contains an amount of eur 650 thousand following the acquisition of rou bill
GmbH & Co. kg (segment Writing Instruments); unchanged from the previous year.
Goodwill in the amount of eur 777 thousand also existed for the Pharmaceuticals business unit (Switzerland).
The amount of goodwill will be covered by projected profit expectations within the business unit.
Since business assets do not depreciate according to a schedule, an annual valuation
test is conducted. No extraordinary depreciation has resulted from this test in the
financial year.
Sustained negative economic conditions in the markets in which the Merz companies
operate could impact the estimates of future cash flows that were used for the measurement of goodwill.
Other intangible assets held mainly include rights to medicinal drugs, distribution and
marketing rights, as well as it software that had been acquired.
Material items consist of the marketing rights held by Merz Pharma uk Limited for
Denzapine ® as well as distribution licenses for burgit, an Austrian brand name for foot
care, distribution licenses for dermatological products residing with Merz Pharma
Italia S.r.l., and the hyaluronic acid filler. The carrying value for Denzapine ® on June
30, 2007 was eur 13,026 thousand and the expected remaining useful life is 9 years.
The carrying value for burgit on June 30, 2007 amounted to eur 1,487 thousand and
the expected remaining useful life is 9 years. For distribution licenses in Italy, the
carrying value on June 30, 2007 was recorded at eur 1,511 thousand, and for the hyaluronic acid filler a carrying value of eur 800 thousand was recorded.
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The depreciation taken in the reporting year due to impairment is shown in income
statements in the following functional divisions:
2006 / 07
Cost of services rendered
Distribution costs
80
2,697
166
General administrative costs
181
Depreciation over the year
3,124
8. investments in associates other financial assets
Investments
in associates
Investments
in affiliates
Other
investments
at cost
Security
assets
Other financial
investments
493
249
69
602
920
–5
0
0
0
0
Additions
0
0
0
2
2
Disposals
0
0
0
–2
–2
Transfers
– 488
– 25
317
0
292
0
224
386
602
1,212
0
224
386
602
1,212
0
–9
0
0
–9
Additions
0
331
0
19
350
Disposals
0
– 72
0
–2
– 74
Transfers
0
0
0
0
0
0
474
386
619
1,479
0
43
2
7
52
0
0
0
0
0
Additions
0
0
0
0
0
Disposals
0
0
0
0
0
Transfers
0
0
317
0
317
0
43
319
7
369
0
43
319
7
369
0
0
0
0
0
Additions
0
0
0
0
0
Disposals
0
0
0
0
0
0
43
319
7
369
0
431
67
612
1,110
0
181
67
595
843
Acquisition costs
Write-downs
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Within investments in affiliates that were accounted for as of June 30, 2007, eight
(previous year: seven) of the companies tabulated were of immaterial economic significance.
Additions include the shares in the newly established company Merz Pharma llc in
Russia. This company did not yet post any material business activity in the financial year
and has thus not yet been included in the consolidation group.
9. advance payments on property, plant, and equipment, and on
other intangible assets as well as other long-term intangible
assets
June 30, 2007
June 30, 2006
10,412
4,271
Advance payments on other intangible assets
Advance payments on property, plant,
and equipment
1,125
1,056
Advance payments
11,537
5,327
Reinsurance assets
1,865
1,476
797
937
Receivables from sales-dependent
license payments
Long-term portion of option premiums
and currency-forward transactions
2,086
914
Loan to Modi-Senator
258
345
Other
194
0
5,200
3,672
16,737
8,999
Other non-current assets
Advance payments
and other non-current assets
The increase in advance payments on other intangible assets includes additions of eur
6,719 thousand, primarily referring to a licensing contract with Anteis sa, Switzerland
and the purchase of a license for new medication technology for treating Alzheimer's
disease, as well as disposals from transfers to other intangible assets amounting to
eur 578 thousand.
The increase in advance payments for property, plant, and equipment includes additions of eur 927 thousand as well as disposals from transfers to property, plant, and
equipment of eur 858 thousand.
10. inventory
June 30, 2007
June 30, 2006
13,423
12,676
Raw materials and operating supplies
Work in progress
Finished products and merchandise
7,603
6,654
26,030
23,008
Advance payments
Inventory
10
10
47,066
42,348
The lower realizable net selling price was applied to inventories with a carrying value
eur 6,884 thousand (previous year: eur 12,277 thousand).
Allowances exist in the amount of eur 3,794 thousand (previous year: eur 7,852 thousand).
11. trade receivables and other receivables
June 30, 2007
June 30, 2006
105,495
86,549
6,842
1,224
Trade receivables
Receivables from related parties
Receivables from companies with whom
an equity investment relationship exists
Market values of forward exchange transactions
252
193
3,670
3,637
Short-term portion of option premiums
1,523
44
Other current assets
6,430
6,977
124,212
98,624
Trade receivables and other receivables
The market values from forward exchange transactions show a positive balance in the
reporting year, as they had in the previous year as well.
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Trade receivables are comprised of the following items:
June 30, 2007
June 30, 2006
Trade receivables, gross
107,117
88,009
Less allowances for bad debts
– 1,622
– 1,460
105,495
86,549
Trade receivables, net
The increase in trade receivables is attributable to a higher figure for receivables from
licensing fees.
The increase in receivables from related parties is primarily attributable to loans from
Merz Pharmaceuticals llc, Greensboro to Merz Immobilien GmbH & Co. kg.
Other current assets are made up as follows:
June 30, 2007
June 30, 2006
Receivables from fiscal authorities
(excepting income tax receivables)
3,011
2,461
Prepaid and deferred expenses
1,715
2,481
Various
1,704
2,035
Other current assets
6,430
6,977
12. property, plant, and equipment held for sale
The property, plant, and equipment held for sale relates to Senator GmbH & Co. KGaA
land containing a factory and an administrative building as well as other plant and
equipment in Bad Salzuflen, which was transferred to the purchaser on July 1, 2006.
13. income tax receivables
The income tax receivables result from advance tax payments as well as from refund
claims for previous years.
14. cash and cash equivalents
June 30, 2007
June 30, 2006
Freely disposable investments
90,576
25,364
Cash
54,091
82,530
144,667
107,894
The freely disposable investments classified as “available for sale” at Merz KGaA
amounted to eur 79,657 thousand as of June 30, 2007. They were comprised of various
conventional, traded funds as well as corporate shares and stock certificates. Furthermore, Merz Pharmaceuticals llc has highly liquid security investments amounting to
eur 10,919 thousand. The investments are measured at market value.
Cash consists of cash on hand and balances with banks.
The major part of cash refers to balances with banks.
15. shareholders’ equity (including minority interest)
The development of shareholders’ equity is shown in the schedule “Consolidated statement of changes in equity”.
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Shareholders’ equity is comprised of the following categories:
June 30, 2007
June 30, 2006
Issued share capital of Merz KGaA
30,000
30,000
Share premium of Merz KGaA
15,478
15,478
Retained earnings reserve of Merz KGaA
Consolidated unappropriated earnings
Fair value reserve financial instruments
Foreign currency translation reserve
Minority interest in shareholders’ equity
Shareholder equity
60
60
222,190
165,182
6,033
3,954
– 3,612
– 2,695
270,149
211,979
0
459
270,149
212,438
The issued share capital of Merz KGaA is composed of 3 million no-par registered shares
and is held by Merz Holding GmbH & Co. kg (“Merz Holding kg”), Frankfurt am
Main, as the sole limited partner (shareholder). The share capital is unchanged as of
June 30, 2007 and fully deposited. At the annual general meeting of Merz KGaA,
the Supervisory Board will propose that the unappropriated accumulated earnings of
eur 147,834,000 as shown in the financial statements prepared according to German
commercial law, be carried forward. The share premium of Merz KGaA arises principally from contributions-in-kind by Merz Holding kg.
The general partner, Friedrich Merz GmbH, Frankfurt am Main, is neither obligated nor
entitled to make a contribution of capital.
The consolidated unappropriated earnings contain equity components from the application of ifrs regulations and from changes in consolidation adjustments affecting
profit or loss and changes in the scope of companies consolidated. In addition, allocations to, or transfers from, the consolidated earnings for the year are shown under
this heading.
In accordance with ias 39, Financial Instruments: Recognition and Measurement, gains
and losses from changes in the fair value of available-for-sale investments are allocated, not affecting profit or loss, to a separate component of equity (fair value reserve
financial instruments), unless the time of disposal of the investment is foreseeable; in
that case, the changes in fair value are accounted for in the income statement. Changes
in the value of derivative financial instruments that are used to hedge against future
cash flows are also included in the item “fair value reserve financial instruments” if the
criteria of hedge accounting in accordance with ias 39 are met. The amounts allocated
to the item “fair value reserve financial instruments” are shown after deducting the related deferred taxes. In the reporting year, deferred taxes arising from the fair value
measurement of financial instruments and recorded in shareholder equity, not affecting
income, amounted to eur 0.1 million (previous year: eur 1.4 million).
The minority interest shown under shareholders’ equity refers to the 49 % third-party
holding in Laboratorios Merz Darier s.a. de c.v. The closure of the company was
decided upon in August of 2006, to take effect as of July 1, 2006. The company has since
ceased operations and its equity has been distributed to the shareholders. The legal
framework still in existence pending the legal completion of the liquidation is not included in the consolidation group.
The equity ratio is calculated as follows:
June 30, 2007
June 30, 2006
270,149
211,979
Issued share capital and consolidated reserves
Minority interest in shareholders’ equity
Balance sheet total
Equity ratio
0
459
270,149
212,438
425,977
346,047
63.4 %
61.4 %
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The following table shows the development of changes in shareholder equity not affecting profit and loss from the fair valuation of financial instruments:
Short-term
financial investments
in the “available
for sale” category
Derivative
financial instruments
Total
35
3,919
3,954
As of July 1, 2006
Shareholder equity
2,534
2,332
4,866
– 35
– 2,670
– 2,705
Deferred taxes on shareholder equity
– 773
691
– 82
As of June 30, 2007
1,761
4,272
6,033
Disposals taken from shareholder equity
16. pension provisions
Pension commitments, which are primarily of a domestic nature, exist for a small number of senior managers.
Individual, contractual pension commitments were granted that will result in the payment
of retirement benefits, disability benefits, or surviving dependants’ pensions.
Employees who have received individual, contractual pension commitments within the
context of a deferred compensation scheme will receive future benefits in the form
of retirement pensions, early-retirement pensions, sums payable at death or disability
benefits.
In addition, benefit entitlements exist, which stem from company agreements for a
one-time retirement payment upon reaching a qualifying age or upon death.
Furthermore, lump-sum capital agreements exist for senior managers. As a consequence, these persons will be due lump-sum capital payments upon reaching age 65 or
as a result of earlier disability or death. The benefits allocated, however, are limited
to the amount that would be covered by the reinsurance policy, which was signed by the
employee together with the capital agreement. The present value of pension plan rein-
surance assets amounts to eur 1.865 thousand (previous year: eur 1,476 thousand) and
is included under other non-current assets.
Retirement liabilities for pensioners relate to lifelong regular pension obligations that are
rendered in monthly installments.
The pension provisions were calculated in accordance with ias 19 (revised in 2000)
“Employee Benefits”. They were measured using the projected unit credit method,
under which future increases in pension benefits are calculated based on salary and
pension progression.
The calculations, supported by actuarial reports, are based on a discount rate of 5.25 %
(previous year: 4.7 %), future salary growth of 2.5 % (previous year: 2.5 %), future
pension increases of 2.0 % (previous year: 2.0 %), a fluctuation rate of 5.0 % (previous
year: 5.0 %) as well as the 2005 life expectancy tables prepared by Dr. Klaus Heubeck.
Actuarial reports are prepared annually for this purpose.
Pension provisions developed as follows during the reporting year:
2006 / 07
2005 / 06
2004 / 05
2003 / 04
2002 / 03
Balance July 1
7,715
7,151
6,878
6,544
6,278
Service expense
357
546
182
194
168
Interest expense
367
308
370
361
355
Actuarial gains / losses
– 41
60
26
14
– 22
Transfer / reversals
0
– 204
0
0
0
Pension payments
– 193
– 146
– 305
– 235
– 235
Balance June 30
8,205
7,715
7,151
6,878
6,544
Measurement of pension provisions and calculation of pension costs are conducted using
the 10 % corridor rule. Actuarial gains or losses are not recognized as long as they
do not exceed 10 % of the present value of the defined benefit obligation. Actuarial gains
and losses outside the 10 % corridor are spread over the expected remaining periods
of service of the participating employees.
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Because of unrecognized actuarial losses, pension provisions accounted for in the
balance sheet are lower than the present value of the defined benefit obligation.
Financing situation
June 30, 2007
June 30, 2006
June 30, 2005
June 30, 2004
June 30, 2003
Present value of the
defined benefit obligation
Actuarial losses not recognized
Defined benefit obligation disclosed
in balance sheet
8,108
7,980
8,449
7,419
6,952
97
– 265
– 1,298
– 541
– 408
8,205
7,715
7,151
6,878
6,544
Expenses, including interest charges, for retirement benefits attributable to individual
functions are recognized in the income statement and are accounted for under selling
and distribution expenses, general and administrative expenses, and research and development expenses. The expenses relate to pension entitlements earned in the financial year in the amount of eur 316 thousand (previous year: eur 606 thousand) and the
compounding of interest on pension entitlements earned in previous years of eur 367
thousand (previous year: eur 308 thousand).
In addition, the American subsidiaries feature “defined contribution plans”, in which
the company makes staggered supplementary contributions in proportion to the contributions made by the participating employee. These amounted to eur 465 thousand
(previous year: eur 345 thousand).
The expenses recorded in the reporting year for employer’s contributions to the statutory pension fund were eur 6,371 thousand (previous year: eur 6,160 thousand).
Companies located in Germany and Austria are required to make contributions to the
statutory pension funds in the respective country.
17. other non-current provisions
Balance
July 1, 2006
Usage
Reversals
Interest
compounded
Additions
Balance
June 30, 2007
Pre-retirement plan
4,755
– 1,079
– 218
Long-term service awards
1,777
– 165
– 12
166
391
4,015
94
119
373
– 49
1,813
0
18
28
0
370
0
0
0
355
6,905
355
– 1,293
– 230
278
893
6,553
Severance pay 1)
Other
Other non-current provisions
1)
Compensation claims to which employees are entitled upon termination of their employment relationship
In accordance with ias 37 Provisions, Contingent Liabilities and Contingent Assets,
other provisions take all identifiable legal or constructive obligations into account at their
probable settlement values.
Other non-current provisions include provisions with an anticipated remaining term
of more than one year. Disclosure is at present value. Actuarial reports form the basis of
calculation for the provisions.
The calculation of provisions for commitments under pre-retirement plans for older
employees was conducted in the same way as in the previous year, applying a discount
rate of 3.5 %. Calculation of the provision for long-term service awards was based on
a discount rate of 5.25 % (previous year: 4.7 %).
In the income statement, expense and income from the compounding of interest and the
change in interest rates were allocated to the individual functional areas.
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18. other non-current liabilities
Other non-current liabilities contain those of Merz Pharma uk Limited and Elstree
Pathology Services Limited.
19. income tax payables
This item is made up of actual income taxes in the amount of the expected payments for
current and earlier periods. The increase compared with the previous year stems from
the improvement in earnings.
20. other current liabilities
June 30, 2007
June 30, 2006
Short-term bank loans
Other payables
(of which taxes, excluding income taxes)
2
4
6,726
9,412
(2,783)
(3,763)
(of which relating to social security)
(906)
(653)
Other current liabilities
6,728
9,416
21. other current provisions
Balance
July 1, 2006
Effect of
exchange rate
fluctuation
Usage
Reversed
Additions
Balance
June 30, 2007
Current taxes (other)
22
0
–4
0
0
18
Special payments
6,980
– 30
– 6,868
0
10,411
10,493
Vacation pay
3,172
–8
– 2,939
0
2,957
3,182
Commissions, bonuses
1,671
– 20
– 1,393
– 208
1,847
1,897
Pre-retirement plan
998
0
– 294
– 10
150
844
Severance pay
519
0
– 160
0
24
383
Long-term service awards
126
0
– 36
– 26
60
124
Other personnel provisions
1,957
–5
– 1,673
– 129
692
842
15,423
– 63
– 13,363
– 373
16,141
17,765
Outstanding supplier invoices
8,179
– 153
– 6,042
– 750
9,878
11,112
Promotional grants
2,646
0
– 1,539
– 314
2,393
3,186
Warranties
1,138
0
– 1,009
–2
1,179
1,306
Miscellaneous other provisions
6,274
– 112
– 5,236
– 132
7,122
7,916
Other provisions
18,237
– 265
– 13,826
– 1,198
20,572
23,520
Other current provisions
33,682
– 328
– 27,193
– 1,571
36,713
41,303
Personnel and social area
The remaining term is estimated at up to one year.
Provisions for outstanding supplier invoices refer to supplies received and services
already rendered for which an invoice has not yet been received.
Provisions for promotional grants were established in respect to contractual agreements
in which the company takes part in promotional customer sales activities.
Provisions were made for warranties for expected repurchase obligations on various
products, and for outstanding credit notes that relate to deliveries before the balance
sheet date.
Other provisions provide for risks from further uncertain liabilities. They also contain
costs in respect to legal expenses and court fees.
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22. financial instruments
Management of use and risk with financial instruments
Currency and interest rate risks are hedged, as soon as they are discernable, by financial instruments. Currency risks in the Merz Group primarily exist from us dollardenominated licensing payments in accordance with the cooperation and licensing
agreement with Forest Laboratories Ireland Ltd.
The following derivative financial positions were held as of the balance sheet date:
Nominal amounts
June 30, 2007
June 30, 2006
Fair values
June 30, 2007
June 30, 2006
in millions of euros
Option contracts
Forward exchange contracts
141.5
117.2
2.8
1.0
70.1
136.2
4.3
4.5
211.6
253.4
7.1
5.5
The nominal amount is the aggregate of all purchasing and selling amounts relating to
derivatives contracts. The fair values result from the measurement of open positions
at market prices, ignoring any opposite movements in the value of the underlying (host)
transactions. They correspond to the income or expenses which would result if the
derivatives contracts were terminated as of the balance sheet date. The fair values are
calculated on the basis of information provided by the respective banks and to a
small extent on the basis of own calculations. The derivative financial instruments are
reported at fair values in the balance sheet under other receivables or other liabilities,
depending on the instance.
The forward exchange contracts consist entirely of us dollars (of which those having a
term for more than one year amount to eur 11.9 million). The forward exchange contracts hedge expected quarterly payments of license income in us dollars for payment
dates between November 2007 und August 2008. Additionally, us dollar options were
concluded in this connection. Of these, options with a nominal value of eur 81.5 million
fall due within one year.
The remaining terms of the hedging transactions (nominal amounts) as of the balance
sheet date are as follows:
Remaining
term
up to 1 year
Remaining
term
beyond 1 year
Total
June 30, 2007
Remaining
term
up to 1 year
Remaining
term
beyond 1 year
Option contracts
81.5
60.0
141.5
51.9
65.3
117.2
Forward exchange contracts
58.2
11.9
70.1
70.9
65.3
136.2
139.7
71.9
211.6
122.8
130.6
253.4
Total
June 30, 2006
in millions of euros
The hedging of planned transactions relates to transactions up to, and including,
February 13, 2009.
Fair value of financial instruments
As in the previous year, the fair value of non-derivative financial instruments that are not
classified as “available for sale” largely corresponds to the carrying values. The financial instruments in their entirety are not subject to any significant interest-based cash
flow risk.
23. other financial obligations
Rental and leasing agreements
Merz rents or leases office space and vehicles. Based on the content of the agreements,
these are, almost without exception, operating leases. The rental and leasing contracts
expire at varying dates up to and including 2016.
Merz rents offices for the sales and administrative functions in Frankfurt, warehouse
space in Frankfurt-Höchst and Frankfurt-Fechenheim, as well as premises for parts of
the research function in the Frankfurter Innovationszentrum Biotechnologie (fiz)
[Frankfurt Biotechnology Innovation Center]. Furthermore, nearly all company vehicles
are leased. The leasing agreements have a term of between 24 and 48 months and
are regularly extended for a further 24 months.
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Rental and leasing obligations
Future obligations from rental and leasing contracts (operating leases) to June 30, 2007
are depicted as follows:
June 30, 2007
June 30, 2006
20,294
19,284
Rental and leasing obligations, of which:
(are due in the following year)
(are due in 2 to 5 years)
(are due in more than 5 years)
7,148
6,224
10,867
10,627
2,279
2,433
The rental commitments contain obligations to Merz + Co. Immobilien GmbH & Co. kg
in the amount of eur 1,524 thousand (previous year: eur 1,524 thousand).
Obligations to purchase property, plant, and equipment
The amount for contractually agreed obligations to purchase property, plant, and equipment amounted to eur 1,150 thousand on June 30, 2007.
Rental and leasing expenses
The leasing expense for the financial year totaled eur 3,260 thousand (previous year:
eur 2,670 thousand).
The rental expense for the financial year totaled eur 5,615 thousand (previous year:
eur 4,893 thousand).
24. sales
Sales are shown as follows:
2006 / 07
2005 / 06
Revenue from supplied goods
385,242
357,074
Revenue from licenses
157,479
126,184
Revenue from services
5,267
3,560
547,988
486,818
Rebates, discounts etc.
– 12,453
– 12,264
Sales
535,535
474,554
Gross revenues
The following table provides a summary of sales by segment:
Pharmaceuticals
Consumer
Products
2006 / 07
359,443
2005 / 06
305,613
Segments
Writing
Instruments
Sales
110,917
65,175
535,535
103,625
65,316
474,554
Sales
The following table provides a summary of sales by region:
Germany
Rest of
Europe
2006 / 07
184,449
2005 / 06
171,748
Regions
America
Other
regions
Sales
163,055
177,768
10,263
535,535
142,975
148,496
11,335
474,554
Sales
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25. cost of sales
2006 / 07
2005 / 06
Cost of materials
92,338
87,634
Cost of production
39,984
39,881
132,322
127,515
Cost of sales
The cost of sales includes the manufacturing cost of products sold and the purchase cost
of merchandise sold. It consists of directly attributable costs, such as the cost of materials, personnel costs, and energy costs, as well as indirect overhead including depreciation of production facilities.
The cost of sales contains expenses from the previous year that occurred due to restructuring measures at Senator GmbH & Co. KGaA amounting to eur 1,058 thousand.
26. selling and distributation expenses
In addition to marketing and sales department costs and costs of the field sales force,
distribution expenses include advertising, logistics, and commission expenses.
27. research and development expenses
Research costs are recorded exclusively as expenses. Development costs are also
recorded as expenses, as risks existing up to the time of the market launch prevent the
requirements for a capitalization as intangible assets from being fully met.
28. general administrative expenses
Personnel costs and general expenses of management and of administrative functions
are disclosed under this heading.
The administration expenses contain expenditures in the previous year on restructuring
measures at Senator GmbH & Co. KGaA amounting to eur 1,190 thousand.
29. other operating income
2006 / 07
2005 / 06
1,803
3,157
Income from the reversal of provisions
Foreign currency gains
739
919
Income from disposal of assets
628
229
Supplier cash discounts and bonuses
533
541
Increase in reinsurance assets
415
575
Miscellaneous other operating income
4,308
2,522
Other operating income
8,426
7,943
2006 / 07
2005 / 06
30. other operating expenses
Foreign currency losses
1,331
961
Disposals and write-downs of option premiums
610
1,638
Bad debts allowances effected within the year
352
852
Other taxes
143
701
0
1,928
Amortization of goodwill
Miscellaneous other operating expenses
3,008
2,171
Other operating expenses
5,444
8,251
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31. amortization and depreciation, personnel expenditure
2006 / 07
2005 / 06
9,616
5,908
Amortization and depreciation
Normal amortization and depreciation
on intangible assets and property,
plant and equipment
Special write-downs
(impairment losses)
Goodwill
303
0
0
1,928
9,919
7,836
Personnel expenses
Wages and salaries
Social security contributions and benefits
(of which state pension contributions)
Company pensions expenses
108,196
92,561
17,075
18,823
(6,371)
(6,160)
2,124
1,978
127,395
113,362
32. results of associates,
results of equity-accounted investments
As in the previous year, these results are entirely attributable to results from profit
distribution agreements with non-consolidated affiliated companies.
33. finance results
2006 / 07
2005 / 06
Income from other investments and loans
included under financial assets
Other interest received and similar income
24
20
2,995
3,339
Interest paid and similar expenses
– 107
– 374
Finance results
2,912
2,985
Last year’s financial result includes dividend income from a securities lending transaction amounting to eur 2,743 thousand. It is offset by expenses of the same amount
relating to this transaction, which are tabulated in the balance.
34. ebitda
ebitda was calculated on the basis of ebit as follows:
2006 / 07
2005 / 06
112,446
94,842
ebit
Amortization and depreciation
ebitda
9,919
7,836
122,365
102,678
2006 / 07
2005 / 06
44,169
37,727
3,175
1,489
– 1,087
429
35. income taxes
Income tax expense is broken down as follows:
Current income taxes
Deferred income taxes
Movements on temporary differences
Movements on tax loss carry-forwards
Changes in tax rates
Income tax expenses
– 907
147
45,350
39,792
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Deferred tax assets
Deferred tax assets are structured as follows:
June 30, 2007
June 30, 2006
2,635
4,055
Differences between carrying values
in tax and ifrs balance sheets
Consolidation adjustments
807
1,539
Tax losses carried forward
3,768
2,681
Deferred tax assets
7,210
8,275
Deferred tax items are calculated according to the liability method pursuant to ias 12,
Income Taxes. Accordingly, they arise when temporary differences occur between balance sheet carrying values used for tax purposes and those contained in ifrs financial
statements through usable tax loss carry-forwards and through consolidation adjustments. The change in deferred taxes caused by tax losses carried forward is caused by
negative annual results of foreign subsidiaries.
Deferred tax liabilities are calculated based on the temporary differences arising between
balance sheet carrying values used for tax purposes and those contained in ifrs
financial statements of the companies consolidated, and on consolidation adjustments.
Balance
July 1, 2006
Usage
Reversals
Additions
Balance
June 30, 2007
6,985
491
0
790
7,284
The addition in the reporting year arose mainly due to assets, as well as from the market
evaluation of derivative financial instruments.
Deferred tax assets and liabilities are attributable to the following balance sheet items:
June 30, 2007
Assets
Liabilities
June 30, 2006
Assets
Liabilities
Intangible assets
416
791
347
957
– 123
3,600
– 123
3,227
Inventory
193
97
263
125
Trade receivables
152
351
153
413
Derivative financial instruments
and market movement of securities
0
2,968
0
2,582
Pension provisions
0
– 599
398
– 384
Other provisions
2,011
76
2,990
65
Accumulated losses carried forward
3,768
0
2,681
0
Deferred tax on consolidation
adjustments
Deferred tax assets / liabilities
793
0
1,539
0
7,210
7,284
8,275
6,985
Deferred
tax assets
Deferred
tax liabilities
9,122
3,959
– 475
1,590
– 70
1,406
Deferred taxes have developed as follows:
Balance July 1, 2005
Movement
Affecting expenses
Taken directly into account in
shareholders’ equity (reducing)
Translation difference (reducing equity)
– 302
30
Balance June 30, 2006
8,275
6,985
Balance July 1, 2005
8,275
6,985
– 558
624
Movement
Affecting expenses
Taken directly into account in
shareholders’ equity (reducing)
0
66
Transfers
– 361
– 361
Translation differences
– 146
– 30
7,210
7,284
Balance June 30, 2006
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Tax expenses resulting from applying the expected tax rate of 39.1 % deviate as follows
from expenses based on the effective tax rate:
2006 / 07
2005 / 06
115,358
97,827
Earnings before income taxes
Anticipated tax expense (Corporation and
trade tax expense of the parent company 39.1 %,
previous year 39.4 %)
45,105
38,544
Tax effect of fiscally non-allowable income
and expenses
– 94
– 227
Tax effect of revaluations of deferred taxes
due to changes in tax rates
– 907
147
736
– 926
323
2,244
Out-of-period taxes
Consolidation adjustments not affecting tax
Differences in the tax rates of foreign companies
– 149
20
336
– 10
45,350
39,792
Other
Income tax expenses
The calculation of the tax rate of 39.1 % is based on a corporate tax rate of 25 %,
a German solidarity surcharge of 5.5 %, and the trade tax rate of Frankfurt am Main,
the city in which principal Group companies are registered.
Deferred tax liabilities on the fair value measurement of derivative financial instruments
in the amount of eur 2,648 thousand are added directly to shareholders’ equity (previous year: eur 2,582 thousand).
When revaluing deferred taxes, the tax rate used for calculating deferred taxes in the
reporting year is based on the tax rates to be implemented with the German corporate
tax reform.
36. related parties
Related parties, as defined by ias 24 Related Party Disclosures, are considered to be
Merz Holding kg as a limited partner of Merz KGaA, the companies forming the
non-commercial area (Merz + Co. Immobilien GmbH & Co. Verwaltungsgesellschaft,
formerly Merz + Co. Immobilien GmbH & Co. Verwaltungsgesellschaft I, and Merz +
Co. Immobilien GmbH & Co. Verwaltungsgesellschaft II, which later merged), Merz-Hof,
Merz Investment Co., usa) and Ms. Dorothee Baatz und Dr. Jochen Hückmann.
Ms. Baatz and Dr. Hückmann hold shares in Merz Holding kg, which in turn holds
100 % of the shares in Merz GmbH & Co. KGaA. Both are managing directors of
Friedrich Merz GmbH, the general partner entrusted with the sole power of representation that left Merz Holding kg as their general partner effective as of November
23, 2006. Merz GmbH became the new general partner company. Apart from the regular remuneration for their management mandate, no business transacted between
them and the Company in the reporting year.
A management agreement exists between Friedrich Merz GmbH, Merz GmbH & Co.
KGaA, Merz Pharma GmbH & Co. KGaA, and Senator GmbH & Co. KGaA. As part of
this contract, Friedrich Merz GmbH renders managerial services for the other parties
within the contract in its capacity as general partner. These managerial services are
carried out by the managing directors and consultants appointed by Friedrich Merz
GmbH. In addition, Friedrich Merz GmbH receives annual compensation for the
assumption of liability in the amount of eur 25 thousand from each company for which
it acts as general partner. Billing and charges are based on standard market prices.
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Subsidiaries, associates, and joint ventures are also considered to be related parties.
Balances with related parties are recorded under loans from affiliates. Balances and
trans-actions with non-consolidated related parties are disclosed below:
June 30, 2007
June 30, 2006
Amounts owed by related companies
Merz Immobilien GmbH & Co. kg
Verwaltungsgesellschaft 1)
6,818
0
22
139
Merz Holding kg
0
1,083
Other
2
2
6,842
1,224
0
168
0
168
Merz Investment Co.
Amounts owed to related companies
Friedrich Merz GmbH
1)
Loan from Merz Pharmaceuticals llc, usa
Transactions with related parties (enterprises and persons) during the 2006 / 07
financial year were as follows:
2006 / 07
2005 / 06
Familiengesellschaft Merz-Verwaltung
43
22
Verwaltungsgesellschaft
12
11
Merz Investment Co.
10
2
Other income
Other
1
2
66
37
90
0
0
7
1,349
1,242
Interest income
Interest expense
Rental expense
Merz Investment Co.
288
282
1,637
1,524
75
75
98
274
General partner reimbursement
Friedrich Merz GmbH
Management remuneration and consultancy costs
Friedrich Merz GmbH
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37. information on the board of management
and the supervisory board
General partner Friedrich Merz GmbH, Frankfurt am Main, is responsible for the management of Merz GmbH & Co. KGaA.
The management of this company consists of the following persons:
Prof. Dr. Bernhard Scheuble, Bensheim (from March 11 to April 30, 2007)
Armin von Buttlar, Bonn (since March 11, 2007)
Hartmut Erlinghagen, Schmitten (since March 11, 2007)
Dr. Martin Zügel, Frankfurt am Main (since March 11, 2007)
Ms. Dorothee Baatz (until March 11, 2007)
Dr. Jochen Hückmann (until March 11, 2007)
Merz Group management is provided by the Merz Management Board (mmb) and consists of the following persons:
Armin von Buttlar
Hartmut Erlinghagen
Dr. Martin Zügel
Dr. Jochen Hückmann (Chairman) (until September 30, 2006)
Prof. Dr. Bernhard Scheuble (Chairman)
(October 1, 2006 to April 30, 2007)
Total remuneration of the members of the Board of Management for the financial year
now ended amounted to eur 2,040 thousand (previous year: eur 3,356 thousand).
Pension obligations for the group of persons listed above amounted, as of June 30,
2007, to eur 3,089 thousand (previous year: 3,032).
The members of the Supervisory Board of Merz GmbH & Co. KGaA are:
Edward R. Roberts (Chairman), Rödermark,
Prof. Dr. Dr. h.c. Rolf Krebs, Mainz,
Michael Freiherr von Truchseß (Deputy Chairman), Frankfurt am Main,
Prof. Dr. Harald Wiedmann, Berlin
Member emoluments of the Supervisory Board amounted to eur 169 thousand (previous
year: eur 48 thousand) during the reporting year.
A Shareholders’ Council was installed at Merz GmbH & Co. KGaA during the 2006 / 07
financial year that represents the interests of the shareholders as they pertain to the
management of the operative companies in the Group. The Shareholder’s council advises
the general partner in managing the business. Decisions of particular significance
require the express consent of the Shareholders’ Council. The Shareholders’ Council is
comprised of four members, two of whom are named by the general partner and two
of whom are members of the company’s Supervisory Board. Under Chairman Dr. Jochen
Hückmann, the following persons belong to the Shareholders’ Council: Edward R.
Roberts (Deputy Chairman), Ms. Dorothee Baatz, and Michael Freiherr von Truchseß. In
so far as members of the Shareholders’ Council are also members of the Supervisory
Board, the reimbursement received for their work for the Supervisory Board is set off
against their reimbursement for their work on the Shareholders’ Council.
38. legal disputes
Within the scope of normal business, Merz is occasionally involved in legal disputes or
can be threatened with lawsuits. Management routinely analyzes the merits of these
cases and takes all possibilities into account to avoid or to obtain insurance coverage for
possible claims and, when necessary, establishes provisions. It is not anticipated that
such cases will have a material impact on the net assets, financial position, or on the
results of operations.
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39. consolidated companies
Interest held
in %
German companies
Merz GmbH & Co. KGaA, Frankfurt / Main
Merz Pharma GmbH & Co. KGaA, Frankfurt / Main
–
100
Merz Pharmaceuticals GmbH, Frankfurt / Main
– 1)
Merz Consumer Care GmbH, Frankfurt / Main
– 1)
Merz Group Services GmbH, Frankfurt / Main
– 1)
Merz Dental GmbH, Lütjenburg
– 1)
Senator GmbH & Co. KGaA, Groß Bieberau
100
Foreign companies
Merz Incorporated, Greensboro, usa
– 1)
Merz Pharmaceuticals llc, Greensboro, usa
– 1)
Senator Pen llc, Greensboro, usa
– 1)
Merz Pharma de México Servicios s.a. de c.v., Mexico City, Mexico
– 1), 2)
M Pharma de México Servicios s.a. de c.v., Mexico City, Mexico
– 1), 2)
Merz Austria GmbH (previously Merz Beteiligungs GmbH), Vienna, Austria
– 1)
Merz Consumer Care Austria GmbH (previously Medra
Handelsgesellschaft mbH), Vienna, Austria
– 1)
Merz Pharma Austria GmbH (previously Dr. Kolassa + Merz GmbH),
Vienna, Austria
– 1), 3)
Merz Pharma (Schweiz) ag, Allschwil-Basel, Switzerland
– 1)
Merz Pharma uk Limited (previously Denfleet Pharma Limited),
London, uk
– 1)
Elstree Pathology Services Limited, London, uk
– 1)
Senator Pens Limited, Harlow, uk
– 1)
Merz Pharma France s.a.s., Maisons Laffitte, France
– 1), 4)
Senator France s.a.r.l., Cestas, France
– 1)
Merz Pharma Italia S.r.l. (previously Merz Italia S.r.l.), Milan, Italy
– 1)
Merz Pharma España, s.l., Madrid, Spain
– 1), 4)
Senator Benelux b.v. (previously rou bill Benelux b.v.), Borne, Netherlands
– 1)
Senator Polska S.p.z.o.o., Zielona Gora, Poland
– 1)
1)
Indirect 100 %; 2) Financial year is the calendar year; attested interim balance as of June 30, 2007 forms basis for
inclusion; 3) Renamed as of July 3, 2007; 4) Newly founded in 2006 / 07 financial year
40. events following to the balance sheet date
No events have occurred since the end of the 2006 / 07 financial year which have a
material significance for the results of operations, net assets, and / or the financial position of the Group.
Dated September 28, 2007, Frankfurt am Main
Friedrich Merz GmbH
Armin von Buttlar
Hartmut Erlinghagen
Dr. Martin Zügel
124 Auditor's Report
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Auditor’s Report
We have audited the consolidated financial statements prepared by the Merz GmbH &
Co. KGaA, Frankfurt am Main, which were comprised of the balance sheet, the income
statement, the statement of changes in equity, the cash flow statement and the notes to
the consolidated financial statements, together with the Group Management Report,
for the business year from July 1, 2006 to June 30, 2007. The preparation of the consolidated financial statements and the Group Management Report in accordance with
ifrs, as adopted by the eu, and the additional requirements of German commercial law
pursuant to § 315a Abs. 1 hgb are the responsibility of the parent company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the Group Management Report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with
§ 317 hgb [Handelsgesetzbuch “German Commercial Code”] and German generally
accepted standards for the audit of financial statements promulgated by the Institut der
Wirtschaftsprüfer (idw). These standards require that we plan and perform the audit
such that misstatements materially affecting the presentation of the net assets, financial
position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the Group Management
Report are detected with reasonable assurance. Knowledge of the business activities
and of the economic and legal environment of the Group and expectations as to possible
misstatements are taken into account in the determination of audit procedures. The
effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the Group Management
Report are examined primarily on a test basis within the framework of the audit. The
audit includes assessing the annual financial statements of those entities included in
consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements
and Group Management Report. We believe that our audit provides a reasonable basis
for our opinion.
Auditor's Report 125
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements comply with ifrs, as adopted by the eu, the additional requirements of German
commercial law pursuant to § 315a Abs. 1 hgb, and give a true and fair overview of
the net assets, financial position and results of operations of the Group in accordance
with these requirements. The Group Management Report is consistent with the consolidated financial statements, provides a suitable overview of the Group’s position as a
whole, and suitably presents the opportunities and risks of future development.
Dated September 28, 2007
Frankfurt am Main
kpmg Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft (Firm of Auditors)
Jenal
Peters
Auditor
Auditor
126 Report of the Supervisory Board
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Ladies and Gentlemen,
The Supervisory Board of the Merz Group has carefully and regularly monitored the
work of the Management Board during the financial year now ended and continually
advised them on their work. In the process, we were directly involved in all decisions
of essential importance for the company. The Supervisory Board held three meetings in
the course of the financial year.
Outside of Supervisory Board meetings, the Chairman of the Supervisory Board was
also informed about current developments in the business situation and about significant business transactions.
The Supervisory Board would like to thank the Management Board, all staff members,
and employee representatives for the work they have done. They have again contributed
to a successful financial year at the Merz Group.
Frankfurt, October 2007
Edward R. Roberts, Chairman
Glossary 127
Glossary
cns
Abbreviation for the central nervous system.
dermatics
Ingredients applied to the skin and are mainly used to treat
skin diseases.
antagonist
In pharmacology, a substance that inhibits the effect of
dystonia
a neurotransmitter or hormone, for example, without
A group of movement disorders whose neurological origin
causing an effect itself.
lies in the brain structures involved with the control of
movement.
anti-dementiva drugs
Drugs that delay the advancement of dementia. They help
emea
to improve the memory, well-being and power of con-
European Medicines Agency. European medicinal drug
centration and preserve the patients’ independence and
agency based in London.
quality-of-life.
fda
blepharospasm
Food and Drug Administration. us government agency
Motion dysfunction (dystonia) of the eyelid. A twitching
responsible for the approval of pharmaceutical products.
of the eyelid occurring in one or both eyes when the eyelid
muscles repeatedly and rhythmically contract.
glutamate
In the human body: a neurotransmitter in the central
botulinum toxin
nervous system.
Neurotoxin inhibiting the propagation of nerve impulses
to the muscle. Small doses injected into specific muscles
hyaluronic acid
will immobilize those muscles, while other functions of
Endogenous substance which contributes to the tautness
the nerves (such as the ability to feel) remain unaffected.
of the skin. With advancing age, the concentration of
Botulinum toxin is used to treat movement disorders,
hyaluronic acid decreases and the skin loses its elasticity.
muscular tensions, or spastic muscular diseases, among
others.
iqwig
Institut für Qualität und Wirtschaftlichkeit im Gesund-
cervical dystonia of a predominantly
rotational form
Movement disorder that causes an abnormal posture of the
head and neck.
heitswesen [Transl.: Institute for Quality and Efficiency in
the Health Care]
128 Glossary
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neurotoxin
Poisonous substance that specifically affects nerve cells
or nerve tissue.
neurotransmitter
Biochemical substances that relay information from one
nerve cell to another.
nmda receptor antagonist
Drug for the treatment of Alzheimer’s dementia. It hinders
the damaging effects of glutamate on the nerve cells.
otc
Market in “over-the-counter” products; this refers to medication and other medical products and health articles
which the customer can buy without a doctor’s prescription, mainly in pharmacies.
rejuvenative dermatology
Rejuvenation = regeneration / smoothing of the skin.
self-medication
Treatment of diseases or symptoms without prior consultation of a doctor.
tertiary prevention
Measures that serve to prevent the progress or the onset
of complications of an already manifested illness.
7
Contents
Foreword
2006 / 07
2005 / 06
Change in %
eur million
535.5
474.5
12.9
Pharmaceuticals
eur million
359.4
305.6
17.6
Consumer Products
eur million
110.9
103.6
7.0
eur million
65.2
65.3
– 0.2
Germany
eur million
184.4
171.7
7.4
Rest of Europe
eur million
163.0
143.0
14.0
America
eur million
177.8
148.5
19.7
Other regions
eur million
10.3
11.3
– 8.9
eur million
112.4
94.8
18.6
%
21.0
20.0
–
Pre-tax profit
eur million
115.4
97.8
18.0
Net profit
eur million
70.0
58.0
20.7
Operating cash flow
eur million
122.0
102.9
18.6
01
Sales
of which:
04
06
Writing Instruments
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08
of which:
Employee report
36
38
Performance
ebit
42
54
56
Risk report
56
Outlook
59
ebit margin
Publisher
60.1
50.6
18.8
57.9
47.9
20.9
61
Financial position
Balance Sheet
62
Income Statement
63
Cash Flow Statement
64
65
Notes
66
Auditor’s Report
124
Investments
eur million
28.3
31.1
– 9.0
eur million
9.9
7.8
26.9
Equity
eur million
270.1
212.4
27.2
Balance sheet total
%
63.4
61.4
–
eur million
426.0
346.0
23.1
Design
Photos
Employees
2,052
1,915
7.0
Editor
126
Glossary
127
Reproduction
Printing
Merz Group
Phone + 49 69 – 15 03 – 0
Fax
[email protected]
www.merz.com
+ 49 69 – 15 03 – 200
We care
for your tomorrow

We care

Transcription

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