Corporate

The Merz Pharma Group successful after realignment

Frankfurt am Main,November 11, 2013

Growth continues / Group revenue increases by 7.4 % to EUR 980.2 million / vigorous growth in foreign operations and the aesthetics business / portfolio broadened by successful acquisitions / positive trends validate corporate strategy.

The Merz Pharma Group increased its revenue by 7.4 % in fiscal 2012/13 to EUR 980.2 million. Earnings before taxes rose to EUR 332.5 million. This number surpasses the high figure posted last year by EUR 70.1 million.

In its international business, Merz Pharma generated revenue of EUR 837.4 million, representing 85.4 % of total revenue. The remaining 14.6 % of total revenue, or EUR 142.8 million, was generated on the German market. While revenue in Germany decreased during the year, business in North America and the Emerging Markets developed particularly well.

The success of foreign operations and Aesthetics validates the corporate strategy

“The fact that the US and the Emerging Markets developed so well, two markets of great significance to us, and that Aesthetics signaled strong growth, underscores that we are on the right track with our business strategy. In the reporting year, a clear focus was placed on elaborating this strategy and putting it into practice, which has resulted in a long-term realignment of our company,” says Philip Burchard, CEO of Merz since July 2012. Two key fields of competence will characterize Merz in future: skin, with its two units, Aesthetics and Medicinal Dermatology, and neurologically induced movement disorders. In addition, the company is systematically strengthening its position in the Emerging Markets.

Expansion of the portfolio through acquisitions in the field of aesthetics

Bocouture®/Xeomin®, Radiesse®, Belotero® and Glytone® – Merz Pharma has made great strides with its harmonized portfolio of products for aesthetics. It has launched its Glytone® filler on the markets in France, Spain, and the Benelux countries. Currently, Merz is concentrating on efficient lifecycle management and strategic acquisitions to expand its portfolio of aesthetics and dermatology products for the long term with the aim of becoming one of the leading providers in the fields of aesthetics and medicinal dermatology. It realized an important addition to its product portfolio in the US with the acquisition of the cosmeceutical specialist, Neocutis at the beginning of the fiscal year. Precisely one week ago, Merz concluded another significant acquisition by taking over Anteis, its distribution partner for Belotero®. This constitutes another significant step in the development of its portfolio of fillers and reinforces the company’s global reach.

In addition to such acquisitions, Merz Pharma also focuses on new product developments. For this reason, it has strengthened its research and development efforts in Aesthetics by bundling the development of its hyaluronic acid filler with all other laboratory functions at its research center in Frankfurt. In the fall of 2013, Merz obtained CE certification for its internally developed MHA100 hyaluronic acid filler. At the same time, the company initiated its life cycle management program for its Bocouture®/Xeomin®, Radiesse®, Belotero® and Glytone® products.

North America and the Emerging Markets: the markets of the future

In the coming years, Merz expects to see a huge shift in sales as North America and the Emerging Markets advance to become the regions with the greatest sales potential. The company is working intensively on reinforcing its position on the local markets in these regions. This has involved, for example, combining the organizations in the US and Canada into one operating unit. It has also strengthened its market position by taking over companies and products that match its portfolio: Neocutis for aesthetics, the drug Cuvposa® for the treatment of chronic severe drooling, and Onmel®, an innovative oral antimycotic as a supplement to the extremely successful topical antimycotic, Naftin®.

Merz Pharma is also investing heavily in the Emerging Markets. In Russia, Brazil, Mexico and its Asian locations, the company wants to achieve a leading position on the market with both its OTC/OTX products and its products for aesthetics. In the previous fiscal year it already recorded the highest growth rates in these regions. Business developments in Russia have been particularly outstanding.

In China, Merz is preparing to set up its own organization and has founded its own branch there recently.

New competitors in Western Europe

Merz is facing different challenges in the established markets of Europe. Data exclusivity had hardly expired for the anti-dementia treatment, Memantine, when, as expected, the first generics appeared on the market and led to a substantial decrease in sales in Germany. Overall, Merz Pharma recorded negative growth of 7.9 % in Germany.

Xeomin®, which is used to treat neurologically induced movement disorders, has developed extremely well. In the therapeutic market, business grew above the trend line in all the major markets of Europe. In the market serving German clinics and pharmacies Merz also recorded double-digit growth.

High royalties

Royalties for Memantine rose by more than 8 % on the prior year thanks to the marketing successes of Merz’s partners, Forest Laboratories in the US and Daiichi Sankyo in Japan. With support from Merz, Forest Laboratories launched a once-daily dosage of the medication for dementia on the market in June 2013, a major step forward in treating dementia patients in the US.

Merz Consumer Care on course for success

Merz Consumer Care and Merz Dental both reported pleasing figures. With its brands tetesept® and Merz Spezial® Merz Consumer Care closed the fiscal year as the strongest growing company in the German mass market for healthcare. Thanks to its superior product concepts and a strategy based on continuously launching new products over the long-term, Merz Consumer Care has greatly improved its results. Merz Consumer Care contributed EUR 63.6 million (up 7.1 %) to the Group’s total revenue and now accounts for approximately 7 % of the total.

Slight rise in headcount

At the end of the reporting period on June 30, 2013, the Merz Pharma Group had a total of 2,443 employees (prior year: 2,389), slightly up on the prior year. In Pharmaceuticals, the headcount rose to 1,776 on account of the strategic realignment (prior year: 1,751). A total of 1,259 employees are working outside Germany (prior year: 1,229). This represents 52 % of the total workforce.

Well equipped for the coming changes

How well equipped is Merz Pharma for the future? In response to the expiry of the patent for Memantine, it has set a new course by realigning itself and investing in its international business and in aesthetic medicine.

With its competence in the fields of dermatology and neurologically induced movement disorders and the potential of its products on the Emerging Markets, Merz is convinced that it can grow sustainably and for the long-term even if the overall economic environment continues to pose major challenges. “We will generally be able to compensate any fall in sales and earnings related to Memantine by successfully implementing our strategy in the current year,” explains Burchard. “We can already see this now at the end of the first quarter, as our figures are in line with our budget forecasts.”

About the Merz Pharma Group

Merz is a privately held pharmaceutical company based in Frankfurt, Germany. The company is active in research, development and distribution of innovative products in the areas of aesthetic medicine and dermatology as well as in the field of neurologically induced movement disorders.

For the treatment of neurologically induced movement disorders, Merz developed Xeomin®, the first botulinum toxin that is free of complex proteins. Another core competency of Merz lies in medical and aesthetic dermatology. Merz Aesthetics offers a tailored and harmonized portfolio of products for minimally invasive treatments. With the fillers Radiesse®, Belotero®, Glytone® and the neurotoxin Bocouture®/Xeomin®, the company is an important player in the aesthetics market.

In the consumer products segment, Merz Consumer Care is the leading provider of OTC medication, dietary supplements and skincare products in the German-speaking countries with its well-known tetesept® and Merz Spezial® brands.

The Merz Pharma Group employs 2,443 people worldwide (prior year: 2,396). The Company generated revenue of EUR 980.2 million in fiscal year 2012/13 (prior year: EUR 913.1 million).