Report on Economic Position
Macroeconomic and sector-specific environment
The year 2014 was characterized by the repercussions of the financial crisis and uncertainties regarding future economic and political developments. According to the most recent report published by the International Monetary Fund (IMF), global gross domestic product (GDP) grew by 3.3 % in 2014, which was 0.4 percentage points more than in 2013. While the industrialized countries generated an increase of 1.8 %, emerging markets continued to make the largest contribution to global growth, with GDP in emerging economies rising by 4.4 %.
The GDP of the United States, the world’s largest economy, grew by 2.2 % in 2014, which was 0.4 percentage points slower than the 2013 forecast. Growth in the United States was stalled by a decline in exports and a harsh winter. For the eurozone, the IMF noted an increase of 0.8% in GDP. While particularly the countries of southern Europe continued to struggle with the consequences of the sovereign debt crisis, some nations, for example Germany, showed signs of recovery.
Merck’s performance was influenced by general global trends as well as the continued growing importance of emerging markets. In 2014, the Emerging Markets region accounted for around 80 % of Merck’s organic sales growth. While Merck Millipore generated around 50 % of its sales growth in the Emerging Markets region, the sales growth of both Performance Materials (approx. 80 %) and Consumer Health (approx. 70 %) was particularly strong in this region. Merck Serono generated its sales growth nearly entirely in the Emerging Markets region, thus compensating for a slight sales decline in Europe.
IMS Health, a market research firm specialized in the health sector, reported 8.1 % growth for the pharmaceutical market in 2014. This sales increase approximately corresponded to the 2013 forecast. The increase was primarily attributable to emerging markets. For instance, the pharmaceutical market of China posted growth of 11.6 % and in Latin America, the pharmaceutical market grew by as much as 15.1 %. However, after having seen slightly declining growth rates in 2013, the United States and Europe also reported growth of 11.7 % and 2.5 % respectively. According to the market research institute Evaluate Pharma, particularly the markets for multiple sclerosis therapies and type 2 diabetes treatments delivered above-average growth rates of 13 % and 14 % respectively. Whereas the market for oncology therapies to treat colorectal cancer saw a 2 % decline in sales, sales of Erbitux®, one of Merck Serono’s top-selling products, increased organically by around 6 % in this indication.
Nicholas Hall, a market research firm for the pharmaceutical industry, reported a 4.0 % increase for the global over-the-counter drug market in 2014, which fell 1 percentage point short of the forecast made in 2013. Latin America and Asia were growth drivers here, while Europe posted growth of 2.4 %.
Market for high-tech materials
With its liquid crystals business, Merck is the leading producer of liquid crystal mixtures for the display industry. According to market researchers from Display Search, the display industry registered a sharper sales increase of 10 % in 2014 following slightly lower sales growth of 5 % in 2013, based on the surface areas of liquid crystal displays sold. Liquid crystals remain the leading display technology, with growth primarily coming from the increasing size of television screens.
The markets for automotive coatings and cosmetics are crucial to Merck’s Pigments business. As reported by the German Automobile Industry Association (VDA), global automobile sales increased by 2 % in 2014. Declines in other markets were offset by growth in China (+10 %), as well as the United States and western Europe (+4 % each). Nevertheless, global automobile sales growth in 2014 fell by 3 percentage points compared with 2013 (+ 5 %). According to Euromonitor International, global consumption of materials used to produce cosmetics grew by 1.9 %, with Asia reporting the highest growth rate of 4.9 %.
The semiconductor industry is one of the main sales markets for AZ Electronic Materials, another key business for the Performance Materials division. According to Gartner, a market research institute specializing in technology and electronics markets, the semiconductor industry grew by 7.2 % in 2014 compared with 5.0 % in 2013.
Life science market
Merck Millipore is a leading supplier of products and services for general laboratory applications, as well as for the research, development and production of drug therapies of biological and chemical origin.
For the global laboratory product market relevant to the Lab Solutions business, the market research firm Frost & Sullivan calculated slight growth of 2.6 % for 2014. Growth was thus 0.8 percentage points higher than the original forecast for the year 2014 (+ 1.8 %). In terms of growth, the individual regions varied considerably. In comparison with 2013, the market situation in Europe (+ 1.6%) and the United States (+ 2.5 %) improved, especially due to positive market developments in Germany, the United Kingdom and Spain, as well as an initial slight improvement in the U.S. academic and government sectors. Emerging economies grew much more strongly than industrialized countries; however their 11.9 % share of the global market volume remains relatively low. The main drivers of growth in emerging economies were India (+ 8.7 %) and China (+ 8.5 %).
The demand for Process Solutions products depends heavily on the sales as well as research & development activities of pharmaceutical companies. Both primary influencing factors had a positive impact on the Process Solutions market, leading to noticeable growth. Global pharmaceutical sales increased by 8.1 % according to IMS Health. Moreover, research & development spending increased by 3.2 % compared with the previous year, according to the market research firm Evaluate Pharma, and the number of Phase I to III clinical trials continues to increase, leading to higher demand for Process Solutions products. This is mostly being driven by greater demand for monoclonal antibodies as well as increased biosimilars development and biological manufacturing, particularly in emerging markets.