Solid sales development Audited

The Consumer Health Care Division stabilized its growth course, growing in line with western Europe, its main market. The global sales of our strategic brands performed well, posting double-digit growth.

Consumers trust Merck

Consumer Health Care specializes in over-the-counter products and focuses on four health themes: Cough and Cold, Mobility, Everyday Health Protection, and Women’s and Children’s Health. The main distribution channels for our products are pharmacies, as well as retail chains, drug stores and mail order in some countries and certain markets. We are building on the strength of our well-known brands and the long-standing trust consumers place in them with respect to their quality and efficacy.

Consumer Health Care | Key figures

XLS

 

 

 

 

EUR million

2010

2009

Δ in %

Total revenues

472

467

1.1

Gross margin

317

319

–0.8

R&D

25

19

28

Operating result

14

48

–71

Exceptional items

Free cash flow

45

49

–7

Underlying free cash flow

45

49

–7

ROS in %

2.9

10.3

 

Business in focus countries develops well

In 2010, total revenues of the Consumer Health Care division rose by 1.1% to EUR 472 million. We thus achieved stable growth and grew in line with the market in western Europe, our main market. We recorded organic growth of 2.6% worldwide and exceeded average market growth in many countries. The cornerstones of our strategy are strong brands and regional expansion. With a few exceptions, our focus countries performed well. In one important market, Venezuela, negative currency effects impacted business. In China, we undertook extensive restructuring in the third and fourth quarters. We had expanded outside the four major cities of Beijing, Shanghai, Guangzhou and Shenzen too quickly. As a consequence, we ended up with considerable stocks that were not being pulled through to consumers. Having concluded an exclusive agreement with the Chinese Medical Doctors Association to offer Diabion in major hospitals, we did not receive the necessary government permission to allow doctors to prescribe the product. Adjusted for the effects in China, the division posted organic growth of 5.2%.

Research and development expanded

The operating result of the Consumer Health Care division declined by 71% to EUR 14 million. ROS was 2.9% compared with 10.3% in 2009. Underlying free cash flow was EUR 45 million, which was 7% lower than in 2009. In addition, higher impairment losses in Mexico lowered the operating result. We also incurred losses due to a fire in a warehouse in the United Kingdom. At EUR 25 million, research and development spending in the Consumer Health Care division was 28% higher than in 2009.

Research and development

In 2010, we completed the realignment of our research and development organization, which we had started in 2009. As part of our evidence-based approach to OTC products, we stepped up our investment in clinical studies for additional indications (as in the case of Kytta®). This will enable us to meet increased regulatory requirements and further substantiate our health claims based on the study results. The regulatory requirements at the EU level are increasing for dietary and nutritional supplements as well. We are meeting these requirements through far-reaching trials, such as those for Bion®, Flexagil® and Femibion®.