Pharmaceutical Companies:

Espicom
Market Briefing  March 2003

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Following a record year in 2001, Merck believes it put up a solid performance in 2002, despite the weak economy, disadvantageous currency exchange rates and an overall weak chemical industry. At €7,473 million, sales were maintained at almost the same level as 2001, however, the company's operating result on a comparable basis declined by almost 30%.

Two divisions, namely Liquid Crystals and Generics were particularly successful, growing by 47% and 36%, respectively. Liquid Crystals benefited from Merck's enhanced patented liquid crystals, which enabled customers to build bigger and better LCDs for TFT displays in computer monitors, together with increased sales of display glass. In Generics, growth was led by the launch of several new products, most notably, omeprazole. Merck's strategy of quickly establishing a presence in important new markets paid dividends in countries such as Portugal. The acquisition of Mohan in March 2002 is also bolstering this segment.

Merck's sales in Pharmaceuticals were adversely affected by the expiration of patent protection for its most important drug, Glucophage. Merck was able to limit the effects of this through launches of newer, improved products and formulations such as Glucovance, Glucophage XR and Metaglip. Despite this, the business with Bristol-Myers Squibb almost came to a complete standstill due to overstocking by US wholesalers. As a result, Pharmaceuticals recorded a drop in sales of almost 3% to €3,226 million.

Despite the decline in Glucophage sales, Merck was able to maintain a high level of investment in research, allowing the continued progress of pipeline projects. During 2003, Merck aims to submit the documentation for marketing authorisation for Erbitux, with first launches planned on the European market in 2004. In addition, new trials for EMD 72000, Merck's fully humanised anticancer antibody, are planned for 2003, and a Phase III trial for Theratope will conclude in mid-2003. Merck also believes there are opportunities for growth in existing markets and with existing products. Bisoprolol-containing products such as Lodoz and ConcorCOR are still increasingly attractive for the medical community. They are experiencing excellent growth and remain patent-protected. The US subsidiary, Dey, has achieved solid growth with the epinephrine autoinjector Epipen and has effectively established DuoNeb, a product for the treatment of chronic obstructive pulmonary disease. Merck believes that with four compounds in Phase III clinical trials and 14 in Phase II, it has good prospects for future products.

For 2003, Merck expects to maintain its performance in 2002, unless the euro significantly appreciates further. It anticipates that the Generics division will at least maintain the record sales level it established in 2002, while Consumer Health Care should increase its sales in 2003. In Ethicals, Merck expects a bottoming out followed by a slight sales increase.

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