Merz Continues Its Growth in Aesthetics and Neurotoxins

FRANKFURT, Germany–(BUSINESS WIRE)–In the fiscal year 2015/16, Merz Pharma has strengthened its
strategic positioning as a leading global provider in the fields of
Aesthetics and Neurotoxins. This core business has grown by 8.9% from
EUR 809.8 million to EUR 881.9 million. The company’s total revenue of
EUR 1,092.9 million has declined by 5.5% compared to previous year
(EUR 1,157.0 million) as a result of lower royalties for the Alzheimer’s
disease drug Memantine due to expiration of patent protection.

“Our two core business areas Aesthetics and Neurotoxins now generate
63.7% of our product sales – seven percentage points more than last
year,” said CEO Philip Burchard. “We will continue to focus on these
segments and expect to see continued growth here.”

Significant milestones

“In the previous fiscal year, we have made significant progress in
implementing our corporate strategy,” Burchard added. As an example, he
mentioned the medical device Ultherapy, an ultrasound system for
non-invasive skin lifting. During the two years since the 2014
acquisition of the US medical device company Ulthera, Ultherapy has
become the product with the highest revenue in the Merz Aesthetics
portfolio.

In addition, Merz has received a number of approvals for additional
therapeutic and aesthetic indications. In December 2015, the botulinum
neurotoxin Xeomin was approved by the FDA for treatment of adult upper
limb spasticity. In March 2016, Bocouture became the first and only
neurotoxin to be approved in the European Union for the treatment of
upper facial lines. And the dermal filler Radiesse with the integrated
local anesthetic Lidocaine was approved by European regulatory
authorities in June 2016.

Merz has also strengthened its focus on innovation with its Venture
Capital Initiative launched in late 2015, which aims to identify and
foster innovative early-stage development projects from start-ups and
universities. As part of this offering, Merz also takes a partnership
approach to clinical development and market launch.

In April 2016, Merz announced its investment in the US company Cytrellis
Biosystems. This start-up is developing a new, minimally invasive
technology designed to remove excess facial skin, eliminate wrinkles and
reverse age-related sagging of the skin. In August, Merz completed its
acquisition of the US medical device company ON Light Sciences. This
company manufactures a special patch allowing for more efficient and
less painful laser based tattoo removal procedures.

Overall, Merz has invested 7.7% more in research and development in the
fiscal year 2015/16 (EUR 160.2 million) compared to 2014/15
(EUR 148.8 million).

International growth

Merz’s operating revenue has grown in all regions. Again, international
business was the main driver of growth. In the Asia Pacific region,
revenue increased by 31% from EUR 61.9 million to EUR 81.0 million. In
North America, currently the region with the highest revenue, sales rose
by 15.9% to EUR 377.0 million (previous year: EUR 325.3 million). In
Latin America, revenue increased by 13.8% to EUR 55.1 million (previous
year: EUR 48.4 million). The EMEA region (Europe, Middle East, Africa)
generated revenue of EUR 352.4 million with a 2.1% increase (previous
year: EUR 345.2 million).

Merz Consumer Care also continued its growth in the past fiscal year.
This business generated EUR 74.4 million, a 6.4% increase compared to
the previous year (EUR 69.9 million), primarily due to the positive
development of its tetesept brand.

As a result of falling royalty income for the Alzheimer’s disease drug
Memantine, total EBIT declined by 48.4% to EUR 131.8 million (previous
year: EUR 255.6 million). “Due to the expiry of Memantine’s patent
protection, this diminishing income from our license partner business
was expected,” said Burchard.

As of the June 30, 2016 reporting date, Merz had a total workforce of
3,005 employees (previous year: 2,754). 1,972 employees are located
outside of Germany (previous year: 1,750), representing approximately
two-thirds of the company’s overall headcount.

Reorganization of R&D and Administration

Philip Burchard announced that Merz will support its strategy by
creating a more flexible organization. “We will modify our internal
structures to become more powerful, agile, and effective,” he said. “In
this process, we will realign R&D as well as certain administrative
departments. Unfortunately, this will also lead to a workforce
reduction.”

In Germany, less than 100 positions will be affected, mainly in the
headquarters in Frankfurt. Globally, the staff reduction will impact
between 250 and 300 jobs, the majority of which were already realized in
North America in July 2016. “In Germany, we have begun negotiations with
the Works Council for an interest reconciliation agreement and a social
compensation plan. Our objective is to approach any workforce reduction
in the most socially responsible way,” said Hans-Jörg Bergler, Global
Head of HR.

About Merz Pharma Group

With approximately 3,000 employees and 34 subsidiaries, Merz is a
leading global provider in the fields of Aesthetics and Neurotoxins.
Privately held for more than 100 years, the company is distinguished by
its in-house research and development, solid financial strength and
continuous growth. Complementing its unique portfolio of products for
minimally invasive and non-invasive skin rejuvenation and tightening,
Merz also develops neurotoxin therapy to treat neurologically induced
movement disorders. OTC medicines, dietary supplements and skincare
products round off the offerings from the company, which is
headquartered in Frankfurt, Germany. In fiscal year 2015/16, the Merz
Pharma Group generated revenue of EUR 1,092.9 million. More information
is available at www.merz.com.

Contacts

Merz Pharma GmbH & Co. KGaA
Gerhard Lerch
Corporate
Communications
+49 69 1503-411
gerhard.lerch@merz.de