Interim Report Q1 2008

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Interim Report

Q

1

___

2008

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3 Interim Management Report of the Merck Group as of March 31, 2008 3 At a glance | Highlights 4 Merck Group 7 Merck shares 8 Business sectors 9 Divisions 9 Merck Serono 11 Consumer Health Care 12 Liquid Crystals

13 Performance & Life Science Chemicals 14 Corporate and Other

14 Generics (Discontinued Operations) 15 Risk Report

15 Report on Expected Developments

16 Interim Consolidated Financial Statements as of March 31, 2008 24 Responsibility Statement

25 Executive Board | Supervisory Board | Capital structure 26 Financial calendar for 2008 | Publication contributors 27 Business sectors and divisions

Cover photo: Basic research for new active ingredients: In a research laboratory in Darmstadt, Germany, Verena Dresing cultivates protein crystals for 3D structural analysis of active ingredients and target proteins. A robot for high-throughput protein crystallization assists in identifying suit-able conditions.

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InterIm management report of the merck group as of march 31, 2008 at a glance | highlights

1

st

quarter 2008 at a glance

Highlights – 1

st

quarter 2008

Total revenues increased 8.3% to € 1.9 billion, 14% organic growth Operating result rose 49% to € 360 million

ROS 19.4% vs 14.0% in the year-ago quarter Erbitux® sales jumped 33% to € 145 million Rebif® sales rose 11% to € 313 million

Liquid Crystals revenues rose 13%, 25% organic growth, to € 234 million; ROS at 51.1% Merck remains on track to meet its guidance for 2008

2008 2007 Total revenues by quarter

€ million 2,000 1,500 1,000 500 Q1 Q2 Q3 Q4

Operating result by quarter

€ million 400 200 300 100 Q1 Q2 Q3 Q4

Key figures – 1st_{quarter 2008}

€ million Pharma– ceuticals Chemicals and OtherCorporate Total*

Total revenues 1,292.5 558.7 6.5 1,857.7

Gross margin 1,079.8 326.8 –0.1 1,406.5

Research and development –252.8 –34.8 0.0 –287.5

Operating result 202.4 173.0 –15.7 359.6

Exceptional items – – – –

Earnings before interest and tax (EBIT) 202.4 173.0 –15.7 359.6

EBIT before depreciation

and amortization 394.2 203.6 –15.0 582.8

Return on sales (ROS) 15.7 31.0 – 19.4

Free cash flow (FCF) 194.0 119.2 –100.7 212.5

Free cash flow adjusted for acquisitions

and disposals 194.0 126.2 –47.0 273.2

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Merck Group

The 1st_{quarter financial performance of the Merck Group presents a classic picture of}

“quality growth” with the gross margin growing faster than total revenues, the operating result increase exceeding that of the gross margin, and so on down the income statement. Likewise, the 1st_{quarter results are on track with the 2008 full-year guidance given in}

February and exceed market expectations – an excellent performance in turbulent times. The Merck Group’s total revenues in the 1st_{quarter rose 8.3% to € 1,858 million}

com-pared to € 1,715 million in the year-ago quarter. All four divisions contributed to the increase.

Again in this quarter, currency effects had a considerable negative impact on total rev-enues. Group total revenues grew organically by 14% but that percentage was reduced by 5.4% due to translation of local currencies into the strong euro. There were no significant acquisitions or divestments in the quarter.

Royalty income, mainly from Merck Serono, increased by 14% in the 1st_quarter

to € 74 million.

With revenues growing at a faster rate than the cost of sales, the gross margin rose 10% in the 1st_{quarter to € 1,406 million compared to € 1,279 million in the year-ago}

quarter.

Research and development costs rose as planned by 6.3% to € 288 million in the 1st_{quarter compared to € 270 million in the year-ago period. Merck booked € –141}

mil-lion for amortization of intangible assets, mainly stemming from the Serono acquisition that occurred in 2007. However, with an improved gross margin and operating expenses

1,292 70%

Total revenues by business sector* – Q1 € million 559 30% 202 54% 173 46%

Operating result by business sector* – Q1 € million

*without sector Corporate and Other Chemicals

Pharmaceuticals

Components of growth by division in the 1st_{quarter 2008 (continuing operations)}

Change in total revenues

compared to last year in % Merck Serono Health Care Liquid CrystalsConsumer

Performance & Life Science

Chemicals Merck Group

Organic growth 14.2 15.6 25.1 5.1 13.7

Currency effects –4.5 –5.0 –11.8 –4.5 –5.4

Acquisitions /

divestitures 0.0 –0.7 0.0 0.0 0.0

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InterIm management report of the merck group as of march 31, 2008 merck group

growing at a slower rate, the Group’s operating result jumped 49% to € 360 million from € 241 million in the year-ago quarter.

Thus, the Group return on sales (ROS: operating result/total revenues) improved to 19.4% in the 1st_{quarter of 2008 compared to 14.0% in the year-ago quarter. Free cash}

flow (FCF) improved to € 211 million. Free cash flow before acquisitions and divestments was € 271 million in the 1st_{quarter of 2008 compared to € 313 million in the year-ago}

quarter.

Merck had no exceptional items during the 1st_{quarter of 2008 but posted exceptional}

items totaling € –196 million in the 1st_{quarter of last year. That sum mainly represented}

purchase price allocations related to Serono inventories that were completed in 2007. Therefore, earnings before interest and tax (EBIT) in the 1st_{quarter of 2008 amounted}

to € 360 million – the same as the operating profit – compared to just € 45 million in the year-ago quarter.

In spite of the € 10.3 billion purchase of Serono last year, Merck’s financial result is already back to a low level, just € –31 million in the 1st_{quarter of 2008 compared to}

€ –80 million in the year-ago quarter, which was burdened by interest payments on debt associated with the acquisition. Maintaining an investment-grade credit rating and a strong balance sheet are part of Merck’s financial strategy. In February, Moody’s Inves-tors Service, which gives Merck’s long-term debt rating at “Baa1”, raised its rating out-look for the company to positive from stable.

Profit before tax rose to € 329 million in the 1st_{quarter of this year compared}

to € –35 million in the year-ago quarter. Merck’s underlying tax rate was 26.4% for the quarter under review compared to 29.1% in the year-ago quarter.

Although Merck completed the sale of its Generics business to Mylan Inc. during the 4th_{quarter of last year for € 4.9 billion, the buyer still has an option to acquire some}

smaller operations that are a mixture of Generics and other Merck businesses. These are reported in the income statement as discontinued operations. Merck’s 1st_{quarter profit}

after tax from continuing operations was € 242 million compared to € –62 million in the year-ago period. First-quarter profit after tax from discontinued operations amounted to € 0.8 million. Profit after tax for the quarter was € 243 million compared to € –6 million in the year-ago quarter.

18,842 60% 4,229 13% 2,041 6% 6,569 21%

Number of employees as of March 31, 2008: 31,681 179 10% 239 13% 461 26% 905 51%

Merck Group | Sales by region – Q1 € million Asia, Africa, Australasia North America Latin America Europe

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The 1st quarter of 2008 was marked by major turbulence throughout the entire financial world due to the sub-prime mortgage crisis in the United States, which economists say may lead to a recession in the world’s largest economy. In addition, the European cur-rency has continued to gain strength against the U.S. dollar (reaching US $1.58 per € 1 on March 26) and oil prices are at record highs. While the currency exchange rate has had a significant impact on Merck’s revenues, and to a lesser extent, its operating results, as a producer of pharmaceuticals and specialty chemicals, the company is not highly dependent on petroleum-based raw materials.

Merck had 31,681 employees worldwide on March 31, 2008, compared to 30,968 at the end of 2007.

Effects of exceptional items (continuing operations)

€ million 1 st_quarter 2008 1 st_quarter 2007 Change in % Operating result 359.6 240.9 49.3 Exceptional items – –195.7 –

Profit before tax

before exceptional items 329.1 161.1 104.2

Income tax

before exceptional items –86.9 –46.8 85.6

Profit after tax before exceptional items 242.2 114.3 111.9

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InterIm management report of the merck group as of march 31, 2008 merck group | merck shares

www.investors.merck.de

Performance of Merck shares compared with the DAX® and the BEUPHRM Index

in %

April 2007 June Sept. Dec. March 2008 140

120

100

80

Merck shares

The Merck share price declined 12% during the 1st_{quarter from € 88.30 on December 28,}

2007, to € 78.07 on March 31, 2008, which was the low for the quarter. The high was € 93.79 on January 9. Germany’s DAX Index declined 19% during the 1st_{quarter and the}

Bloomberg Europe Pharmaceuticals Index fell 6.2%.

A survey of Merck shareholders conducted in February received responses repre-senting a total of 49.5 million shares or about 76% of the shares in free float. The results showed that North American-based investors dominated the share holding with 49% of the identified share capital, followed by British and German investors. By investment strategy, about two-fifths of the shareholders were focused on “Growth at reasonable price” (GARP), followed by “Growth” and “Value” oriented investments with about one-quarter each. Very few shares appeared to be held by hedge funds. However, 24% of the free-float shares could not be identified so that actual numbers could vary considerably.

Bloomberg Europe Pharmaceuticals Index DAX ® Merck Share data1 1st _quarter 2008 2007Year

Earnings per share after tax and minority interest in €

from continuing operations 1.10 -0.50

Earnings per share after tax and minority interest in €

from continuing and discontinued operations 1.10 16.21

Dividend in € - 1.20

One-time bonus in € - 2.00

Share price high in € (Jan. 9) 93.79 (June 15) 106.55

Share price low in € (March 31) 78.07 (Jan. 2) 79.96

Closing share price in € (March 31) 78.07 (Dec. 28) 88.30

Actual number of shares in millions 64.6 64.6

Theoretical total number2_{of shares in millions} _217.4 _217.4

Adjusted weighted average number of theoretical shares

outstanding3_{(in millions)} _217.4 _215.9

Market capitalization4_{in € million} _16,971 _19,196

1_{Share-price relevant figures relate to the closing price in XETRA trading on the Frankfurt Stock Exchange.}

2_{The calculation of the theoretical number of shares is based on the fact that the general partner‘s equity capital is not represented by} shares. As the share capital of € 168.0 million was divided into 64.6 million shares, the corresponding calculation for the general partner’s capital of € 397.2 million resulted in 152.8 million theoretical shares on the balance sheet date March 31, 2008.

3_{For details, see Consolidated Financial Statements in the Annual Report for 2007, page 106.} 4_{Based on the theoretical number of shares.}

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Business sectors

Merck uses a business model that is designed to provide profitable growth and lower risks. The company achieves this balance with a two-pillar structure consisting of the major business sectors of Pharmaceuticals and Chemicals. And, within both the Phar-maceuticals and Chemicals sectors, Merck maintains a mixture of dynamic, higher-risk businesses and more stable businesses. Even within the four divisions, there is a balance between risks and opportunities.

The Pharmaceuticals business sector’s two divisions are Merck Serono (formerly

Ethi-cals and Serono) and Consumer Health Care. The Generics business was divested last year and is reported under discontinued operations. The Pharmaceuticals business sector gen-erated 70% of the company’s total revenues and 54% of the group operating result* dur-ing the quarter. The sector’s total revenues were € 1,292 million durdur-ing the 1st_{quarter, a}

9.7% increase over the year-ago quarter. In comparison, IMS Health, the world’s leading provider of market intelligence for the pharmaceutical and healthcare industries, is pre-dicting the global pharmaceutical market will grow by 5% to 6% this year.

The Pharmaceuticals business sector’s 1st_{quarter operating result more than doubled to}

€ 202 million from € 97 million in the year-ago quarter.

The Chemicals business sector also consists of two divisions – Liquid Crystals and

Performance & Life Science Chemicals. It generates about 30% of total revenues and 46% of the operating profit*, the latter percentage being much larger due to the very innova-tive and profitable Liquid Crystals division. The business sector’s 1st_{quarter total}

reve-nues rose 5.6% to € 559 million and the operating profit improved by 7.5% to € 173 mil-lion.

The European Chemical Industry Council (CEFIC) announced in March that European Union chemical sales, excluding pharmaceuticals, increased by 5.3% in 2007 but that business confidence in the industry is slipping.

Merck announced in March that in order to further improve delivery of innovative solutions to its customers, it is investing € 47 million in a new Chemicals research and development center at its headquarters in Darmstadt. The three-building complex will be used by both the Liquid Crystals and Performance & Life Science Chemicals divisions.

1,182 91% 111

9%

Pharmaceuticals | Total revenues by division – Q1 € million MERCK SERONO 1.182 CHC 111 234 42% 325 58%

Chemicals | Total revenues by division – Q1 € million

LC 234 42

PLS 325 58

Performance & Life Science Chemicals Liquid Crystals

*without segment Corporate and Other

Consumer Health Care Merck Serono

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InterIm management report of the merck group as of march 31, 2008 Business sectors | Divisions | Merck Serono

Asia, Africa, Australasia North America Latin America Europe 143 13% 133 12% 177 16% 662 59%

Merck Serono | Sales by region – Q1 € million

Europe 662 59%

North America 177 16% Latin America 133 12% Asia, Africa, Australia 143 13% Merck Serono | Key figures

€ million 1st quarter 2008 1 st_quarter 2007 Change in % Total revenues 1,181.7 1,077.6 9.7 Gross margin 1,005.7 893.8 12.5 R&D 249.2 232.3 7.3 Operating result 181.3 88.9 104.0 Exceptional items – –195.3 –

Free cash flow (FCF) 161.2 –6,895.4 – Free cash flow adjusted for

acquisitions and disposals 161.2 290.4 –44.5

ROS in % 15.3 8.2

Merck Serono

Merck’s largest division is Merck Serono, the new division for innovative small mole-cules and biopharmaceuticals. It was established early in 2007 following the acquisition of Serono and the integration of its business with the former Merck Ethicals division.

The division accounts for 91% of total revenues within the Pharmaceuticals business sector and for 64% of Merck Group total revenues.

Merck Serono’s total revenues increased by 9.7% to € 1,182 million in the 1st_quarter

of 2008 compared to € 1,078 million in the year-ago quarter. Organic revenue growth of 14% was impacted by a negative 4.5% currency effect. Strong sales were due to robust growth across most major brands, including the biologic therapies Erbitux® and Rebif®, as well as small molecule drugs such as the Concor® and Glucophage® product families. Worldwide sales of Rebif®, for the treatment of relapsing forms of multiple sclerosis, rose 11% to € 313 million in the 1st_{quarter compared to the year-ago quarter. This was}

driven primarily by solid sales growth in Europe and a 26% organic sales growth rate in the United States. The new formulation of Rebif®, which has been shown to improve injection tolerability while providing an improved immunogenicity profile, has now been launched in the 27 countries of the European Union as well as in Canada.

Erbitux® maintained its strong sales growth trend, jumping 33% in the 1st_quarter

to € 145 million compared to the 1st_{quarter of 2007, with strong growth in France,}

Germany, Spain, Portugal, China and Brazil. It now has marketing authorization in 72 countries around the world as a treatment for colorectal cancer or squamous cell carcinoma of the head and neck. In the United Kingdom, NICE recommended reimbursement of costs for Erbitux® in the treatment of locally advanced head and neck cancer in patients whose Karnofsky performance-status score is 90% or greater (patient displays few symptoms or signs of disease) and for whom all forms of platinum-based chemo-radiotherapy are contraindicated.

During the 1st_{quarter, sales of Gonal-f®, a recombinant hormone used in the treatment}

of infertility, were € 114 million, up 1.3% compared to the year-ago quarter. The next generation of the Gonal-f® injection pen has now been rolled out in seven countries, including the United States and major markets in Europe.

Total sales of bisoprolol, including the branded Concor® products such as Lodoz® and Concor®COR, increased by 6.2% to € 100 million in the 1st_{quarter. Bisoprolol is Europe’s}

top-selling beta-blocker by sales value. Total sales of the Glucophage® (metformin) family of oral anti-diabetic products increased 10% to € 72 million. Sales of thyroid medicines such as Euthyrox® rose 4.6% to € 35 million in the 1st_quarter.

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Sales of Raptiva®, for the treatment of moderate-to-severe psoriasis, rose 23% during the 1st_{quarter to € 22 million. This growth is based on long-term efficacy data and}

mar-ket education initiatives.

Sales in the recombinant growth hormone family, including Saizen® and Serostim®, decreased 2.3% to € 52 million during the 1st_{quarter compared to the year-ago period.}

The division’s investment in research and development increased 7.3% to € 249 million in the 1st_{quarter. This is in line with Merck’s plan to spend about € 1 billion annually}

for the research and development of innovative specialist-focused drugs to help patients suffering from diseases with unmet needs.

Merck’s clinical development efforts will be showcased at the prestigious American Society of Clinical Oncology (ASCO) annual meeting being held May 30 – June 3 in Chicago. ASCO has announced that from nearly 5,000 abstracts accepted for the meeting, two related to Erbitux® have been selected for presentation at its main plenary session.

Merck Serono announced in February that it has decided, together with its partner Takeda Pharmaceutical Company Ltd, Osaka, Japan, to no longer jointly pursue develop-ment of the cancer treatdevelop-ment matuzumab any further after completion of ongoing stud-ies. The humanized monoclonal antibody has been investigated in Phase II clinical trials in indications such as metastatic colorectal cancer (mCRC), gastric cancer, and non-small cell lung cancer (NSCLC), where it has not met the predefined endpoints of activity.

In March, Merck Serono announced the availability of Cyanokit® (active ingredient: hydroxocobalamin) in Japan, through its local affiliate Merck Serono Co., Ltd. Cyanokit® has been approved by the Japanese Ministry of Health for the treatment of cyanide poi-soning caused by hydrocyanic acid and its derivatives in both adults and children.

Again in the 1st_{quarter, the division booked a charge of € –139 million for}

amortiza-tion of intangible assets in connecamortiza-tion with the Serono purchase price allocaamortiza-tion. The division’s gross margin rose 13% to more than € 1 billion. The 1st_{quarter operating result}

more than doubled to € 181 million from € 89 million in the year-ago quarter due to higher revenues and gross margin, as well as lower integration costs.

The Merck Serono ROS was 15.3% in the 1st_{quarter compared to 8.2% in the year-ago}

quarter. Core ROS, which Merck defines as excluding Serono-related amortization and integration costs in both periods, improved to 27.5% in the 1st_{quarter from 22.2% in the}

year-ago quarter. Free cash flow adjusted for acquisitions and divestments was € 161 million.

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InterIm management report of the merck group as of march 31, 2008 Divisions | Merck Serono | Consumer Health Care

Consumer Health Care

Total revenues for the Consumer Health Care division rose 9.9% in the 1st_quarter

to € 111 million compared to the year-ago quarter, driven by an excellent performance in Europe and the division’s focus on strategic brands, an initiative that began early in 2007.

Sales of Bion®_{3 probiotic vitamins rose 38%, fueled by strong sales in France and}

Belgium. Sales of Femibion®, the vitamins and minerals supplement for pregnant and nursing women, increased 33% with the success in its main market of Germany as well as in Belgium and Poland. Sales of the Kytta® brand of plant-based treatments jumped 66%, boosted by a television advertising campaign in its core market of Germany.

Sales of Seven Seas products, Merck’s flagship OTC brand in the United Kingdom, rebounded in the 1st_{quarter, with sales up 15% in local currency. Sales drivers were the}

JointCare and probiotic multivitamin Multibionta® products.

The division sold its non-strategic brand in Spain, the dietary food supplements busi-ness biManán®, for €11 million during the 1st_{quarter. This was in line with the successful}

business model established last year of focusing on selected health themes and rebalanc-ing the brand portfolio, Proceeds from the sale will be reinvested in strategic brands dur-ing the course of the year to further strengthen the division’s overall portfolio.

Outlays for R&D and cost of sales increased during the quarter as part of the drive to expand and promote strategic brands. However, a higher gross margin and proceeds from the divestment of the Spanish business helped boost the division’s operating result to € 21 million compared to € 8.4 million in the year-ago quarter.

First-quarter ROS was 19.0% compared to 8.3% in the year-ago quarter. Free cash flow was € 33 million compared to € 11 million a year ago.

Asia, Africa, Australasia

Latin America Europe

Consumer Health Care | Key figures € million 1st quarter 2008 1 st_quarter 2007 Change in % Total revenues 110.8 100.8 9.9 Gross margin 74.1 68.3 8.5 R&D 3.6 2.7 32.7 Operating result 21.1 8.4 152.6 Exceptional items – – –

Free cash flow (FCF) 32.8 11.2 192.6 Free cash flow adjusted for

acquisitions and disposals 32.8 11.2 192.6

ROS in % 19.0 8.3 11 10% 15 14% ₈₃ 76%

Consumer Health Care | Sales by region – Q1 € million

Europe 83 76%

North America 0 0%

Latin America 15 14% Asia, Africa, Australia 11 10%

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Liquid Crystals

Total revenues for the Liquid Crystals division rose 13% to € 234 million in the 1st

quar-ter of 2008 compared to a relatively weak 1st_{quarter in 2007. An excellent 25% organic}

growth rate for total revenues was greatly impacted by a negative currency effect of 12%. All of Merck’s liquid crystals are manufactured at its headquarters in Darmstadt and are mixed to final customer specifications in Asia, where currencies generally are pegged to the weak U.S. dollar and Japanese yen.

The flat panel display industry is continuing its dynamic growth with the return of optimism following a moderate first half in 2007. This is evident in the announce-ments of significant investannounce-ments in additional liquid crystal display (LCD) manufacturing capacity.

Growth engines for the LCD industry will be the Asian markets and the continuing consumer demand for ever-larger television sets. DisplaySearch expects LCD televisions will account for half of all televisions sold beginning in 2008.

Merck continues to invest significantly in research and development in order to main-tain its leading position in display materials, spending € 21 million, or about 9% of its total revenues, on R&D during the 1st_{quarter. Merck also announced during the quarter}

that it plans to invest € 11 million in its Korean Application Technical Center that sup-ports the LCD industry.

With most revenues booked in U.S. dollars, Japanese yen and Korean won and a large share of expenses booked in euros, there is only a limited natural hedge for the division. Therefore, the currency effect impacts its profit line as well. The division’s operating result rose 5.6% to € 119 million in the 1st_{quarter. ROS maintained its high level,}

reach-ing 51.1% in the 1st_{quarter of 2008 compared to 54.8% in the same quarter of 2007.}

Free cash flow improved to € 119 million from € 89 million in the year-ago period.

Liquid Crystals | Key figures € million 1st quarter 2008 1 st_quarter 2007 Change in % Total revenues 233.9 206.5 13.3 Gross margin 154.5 148.8 3.8 R&D 20.9 21.4 –2.1 Operating result 119.5 113.2 5.6 Exceptional items – – –

Free cash flow (FCF) 119.3 88.7 34.5 Free cash flow adjusted for

acquisitions and disposals 119.3 88.7 34.5

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InterIm management report of the merck group as of march 31, 2008 Divisions | Liquid Crystals | Performance & Life Science Chemicals

Performance & Life Science Chemicals

Total revenues for the Performance & Life Science Chemicals division rose slightly in the 1st_{quarter to € 325 million compared to € 323 million in the year-ago quarter.}

A 5.1% organic growth rate for total revenues was reduced by a 4.5% negative currency effect due to the division’s sizable operations in the United States and Asia.

The division achieved double-digit growth rates in major markets such as India, Japan and China, with a stable business development in Europe and Latin America.

The product groups solvents and microbiology showed the best sales performances. In addition, the Xirallic® effect pigments continued their very successful growth trend.

The crop bioscience business is now off to a good start in the United States market, producing a solid double-digit sales growth.

During the 1st_{quarter, the Performance & Life Science Chemicals division acquired}

another start-up business following its strategy of adding businesses or technologies that enhance existing product or technology portfolios and customer bases. SeQuant AB in Sweden will expand the technology range in the division’s already successful chromatog-raphy business.

Significant progress was made in integrating Solvent Innovation GmbH of Cologne, Germany. This company was acquired in December 2007 to expand Merck’s opportunities for offering industry-tailored solutions in the new technology field of ionic liquids.

With reduced expenses and an improved gross margin, the division’s operating result increased 12% to € 53 million in the 1st_{quarter compared to the year-ago quarter. ROS}

in the 1st_{quarter rose to 16.5% from 14.8%. Free cash flow was € –0.1 million due to the}

SeQuant acquisition compared to € –6.6 million in the year-ago period.

Performance & Life Science Chemicals | Key figures € million 1st quarter 2008 1 st_quarter 2007 Change in % Total revenues 324.9 322.8 0.6 Gross margin 172.3 167.4 2.9 R&D 13.9 14.1 –1.6 Operating result 53.5 47.7 12.0 Exceptional items – – –

Free cash flow (FCF) –0.1 –6.6 – Free cash flow adjusted for

acquisitions and disposals 6.8 –6.6 –

ROS in % 16.5 14.8 Asia, Africa, Australasia North America Latin America Europe 79 25% 30 9% 62 19% 152 47%

Performance & Life Science Chemicals

Sales by region – Q1 _{€ million}

Europe

152

47%

Latin America

30

9%

North America

62

19%

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Corporate and Other

The segment Corporate and Other includes corporate overhead costs incurred by Group holding companies, financial result, taxes and other items that are not allocated to specific divisions.

Generics (Discontinued Operations)

Merck completed the sale of its Generics business to Mylan Inc. of Canonsburg, Pennsylvania, for € 4.9 billion on October 2, 2007. Mylan still has an option to acquire some smaller operations that are a mixture of Generics and other Merck businesses. These remain on Merck’s income statement as Discontinued Operations. In addition, the 2007 revenues and profits from the entire Generics business, as well as the gain of the sale, are reported under Discontinued Operations.

Corporate and Other | Key figures € million 1st quarter 2008 1 st_quarter 2007 Change in % Total revenues 6.5 7.6 –14.3 Gross margin –0.1 0.6 – R&D 0.0 0.0 – Operating result –15.7 –17.2 –8.8 Exceptional items – –0.4 –

Free cash flow (FCF) –100.7 –104.4 –3.5 Free cash flow adjusted for

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InterIm management report of the merck group as of march 31, 2008

corporate and other | generics (Discontinued operations) | risk report | report on expected developments

Risk Report

All issues concerning business-related risks, financial risks, legal risks, information technology risks and environmental and safety risks – as previously stated in the 2007 Annual Report – remain completely valid in the current reporting period.

Therefore, no issues have been identified that pose a risk to the continued existence of the Merck Group.

Report on Expected Developments

Merck continues to expect total revenues to increase in a range between 5% and 9%. The operating margin (operating result/total revenues), excluding amortization and Merck Serono integration costs, is expected to be 23% to 27%. Revenue growth in the Liquid Crystals division should be between 5% and 10% and the operating margin between 47% and 52%. For the Merck Serono division, revenue growth should be in the range of 7% to 11% and the operating margin, excluding amortization and integration costs, is expected to be between 23% and 27%.

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Interim Consolidated Financial

Statements as of March 31, 2008

Income Statement

¤ million 1 st_quarter 2008 1 st_quarter 2007 Change in % sales 1,783.7 1,650.5 8.1 Royalty income 74.0 64.9 14.1 Total revenues 1,857.7 1,715.4 8.3 Cost of sales –451.2 –436.4 3.4 Gross margin 1,406.5 1,279.0 10.0

Marketing and selling expenses –477.8 –448.7 6.5

Administration expenses –107.9 –110.3 –2.2

Other operating income and expenses –33.0 –68.6 –51.9

Research and development –287.5 –270.5 6.3

Amortization of intangible assets –140.6 –140.2 0.3

Investment result 0.0 0.1 –

Operating result 359.6 240.9 49.3

Exceptional items – –195.7 –

Earnings before interest and tax (EBIT) 359.6 45.2 –

Financial result –30.6 –79.8 –61.7

Profit before tax 329.1 –34.6 –

Income tax –86.9 –27.6 215.2

Profit after tax from continuing operations 242.2 –62.2 –

Profit after tax from discontinued operations 0.8 56.2 –98.5

Profit after tax 243.0 –6.0 –

Minority interest –3.9 –2.3 69.8

Net profit after minority interest 239.1 –8.3 – Earnings per share

from continuing operations (in €)

basic 1.10 –0.31 –

diluted 1.10 –0.31 –

Earnings per share from continuing and discontinued operations (in €)

basic 1.10 –0.04 –

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1st_{quarter 2008}

Interim consolidated financial statements as of march 31, 2008

Balance Sheet

¤ million March 31, 2008 December 31, 2007 Change in %

current assets

Cash and cash equivalents 799.7 426.6 87.5

Marketable securities and financial assets 122.8 565.3 –78.3

Trade accounts receivable 1,520.4 1,378.3 10.3

Inventories 1,157.7 1,158.5 –0.1

Other current assets 270.9 226.4 19.6

Tax receivables 57.2 43.5 31.3

Assets held for sale 26.6 26.9 –1.0

3,955.2 3,825.5 3.4

non-current assets

Intangible assets 8,368.2 8,164.6 2.5

Property, plant and equipment 2,273.6 2,274.5 0.0

Investments at equity 1.4 1.4 4.8

Non-current financial assets 129.4 130.3 –0.6

Other non-current assets 57.7 61.8 –6.7

Deferred tax assets 481.3 464.2 3.7

11,311.7 11,096.8 1.9

Total assets 15,266.9 14,922.3 2.3

current liabilities

Current financial liabilities 725.5 300.4 141.5

Trade accounts payable 725.4 646.9 12.1

Other current liabilities 511.9 981.2 –47.8

Tax liabilities 387.9 337.1 15.1

Current provisions 275.7 297.0 –7.2

Liabilities held for sale 5.7 8.0 –29.5

2,632.0 2,570.7 2.4

non-current liabilities

Non-current financial liabilities 1,041.8 1,046.6 –0.5

Other non-current liabilities 17.0 39.5 –56.9

Non-current provisions 548.0 570.0 –3.9

Provisions for pensions and other post-employment benefits 1,190.2 1,185.5 0.4

Deferred tax liabilities 861.7 822.4 4.8

3,658.7 3,664.0 –0.1 net equity Equity capital 565.2 565.2 0.0 Reserves 8,349.9 8,060.5 3.6 Minority interest 61.0 61.9 –1.4 8,976.2 8,687.6 3.3 Total liabilities and stockholders’ equity 15,266.9 14,922.3 2.3

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Segment Reporting

Merck Serono Consumer Health Care Pharmaceuticals Liquid Crystals Performance & Life Science Chemicals Chemicals Corporate and Other

¤ million 1st quarter2008 1 st _quarter 2007 Change in % 1 st _quarter 2008 1 st _quarter 2007 Change in % 1 st _quarter 2008 1 st _quarter 2007 Change in % 1 st _quarter 2008 1 st _quarter 2007 Change in % 1 st _quarter 2008 1 st _quarter 2007 Change in % 1 st _quarter 2008 1 st _quarter 2007 Change in % 1 st _quarter 2008 1 st _quarter 2007 Change in % Sales 1,114.2 1,015.7 9.7 110.3 100.4 9.8 1,224.5 1,116.1 9.7 229.1 204.8 11.9 323.6 322.0 0.5 552.7 526.8 4.9 6.5 7.6 –14.5 Royalty income 67.5 61.9 8.9 0.5 0.4 27.6 68.0 62.3 9.0 4.8 1.7 176.3 1.3 0.8 50.8 6.0 2.6 135.2 0.0 0.0 – Total revenues 1,181.7 1,077.6 9.7 110.8 100.8 9.9 1,292.5 1,178.5 9.7 233.9 206.5 13.3 324.9 322.8 0.6 558.7 529.3 5.6 6.5 7.6 –14.3 Gross margin 1,005.7 893.8 12.5 74.1 68.3 8.5 1,079.8 962.1 12.2 154.5 148.8 3.8 172.3 167.4 2.9 326.8 316.3 3.3 –0.1 0.6 –

Selling, general and administration –436.5 –434.5 0.5 –49.0 –56.8 –13.7 –485.5 –491.3 –1.2 –13.1 –13.5 –2.3 –104.5 –105.1 –0.6 –117.6 –118.5 –0.8 –15.6 –17.8 –12.1

Research and development –249.2 –232.3 7.3 –3.6 –2.7 32.7 –252.8 –235.0 7.6 –20.9 –21.4 –2.1 –13.9 –14.1 –1.6 –34.8 –35.5 –1.9 0.0 0.0 –

Operating result 181.3 88.9 104.0 21.1 8.4 152.6 202.4 97.2 108.2 119.5 113.2 5.6 53.5 47.7 12.0 173.0 160.9 7.5 –15.7 –17.2 –8.8

Exceptional items – –195.3 – – – – – –195.3 – – – – – – – – – – – –0.4 –

Earnings before interest and tax (EBIT) 181.3 –106.5 – 21.1 8.4 152.6 202.4 –98.1 – 119.5 113.2 5.6 53.5 47.7 12.0 173.0 160.9 7.5 –15.7 –17.6 –10.9

Net operating assets 10,214.5 10,826.9 –5.7 271.2 272.9 –0.6 10,485.7 11,099.8 –5.5 907.2 911.3 –0.5 1,081.8 1,095.0 –1.2 1,989.0 2,006.2 –0.9 18.4 64.7 –71.5

Capital spending on property,

plant and equipment 30.3 24.1 25.8 1.5 0.8 80.3 31.8 24.9 27.7 8.9 11.6 –23.1 12.9 10.2 25.7 21.8 21.8 –0.2 0.1 0.6 –84.7

Net cash flows from operating activities 224.9 196.3 14.5 24.9 12.1 105.9 249.8 208.4 19.9 128.6 100.8 27.6 20.2 5.9 242.1 148.8 106.7 39.5 –88.4 –103.8 –14.8

Net cash flows from investing activities –63.6 –7,091.7 –99.1 7.8 –0.9 – –55.8 –7,092.6 –99.2 –9.3 –12.1 –23.1 –20.3 –12.5 62.1 –29.6 –24.6 20.3 485.0 463.1 4.7

Free cash flow 161.2 –6,895.4 – 32.8 11.2 192.6 194.0 –6,884.3 – 119.3 88.7 34.5 –0.1 –6.6 –98.9 119.2 82.1 45.2 –100.7 –104.4 –3.5

Discontinued Operations

(Generics) Reversal Discontinued Operations (Generics) Group /Continuing Operations

¤ million 1st quarter2008 1 st _quarter 2007 Change in % 1 st _quarter 2008 1 st _quarter 2007 Change in % 1 st _quarter 2008 1 st _quarter 2007 Change in % Sales 9.6 452.6 –97.9 –9.6 –452.6 –97.9 1,783.7 1,650.5 8.1 Royalty income 0.0 0.2 0.0 0.0 –0.2 0.0 74.0 64.9 14.1 Total revenues 9.6 452.8 –97.9 –9.6 –452.8 –97.9 1,857.7 1,715.4 8.3 Gross margin 3.7 227.4 –98.4 –3.7 –227.4 –98.4 1,406.5 1,279.0 10.0

Selling, general and administration –2.4 –119.0 –98.0 2.4 119.0 –98.0 –618.7 –627.6 –1.4

Research and development –0.3 –25.9 –98.9 0.3 25.9 –98.9 –287.5 –270.5 6.3

Operating result 0.8 80.4 –99.0 –0.8 –80.4 –99.0 359.6 240.9 49.3

Exceptional items – – – – – – – –195.7 –

Earnings before interest and tax (EBIT) 0.8 80.4 –99.0 –0.8 –80.4 –99.0 359.6 45.2 –

Net operating assets 21.7 1,069.0 –98.0 –21.7 –1,069.0 –98.0 12,493.1 13,170.7 –5.1

plant and equipment 0.1 4.2 –97.4 –0.1 –4.2 –97.4 53.7 47.4 13.3

Net cash flows from operating activities –1.6 40.7 – 1.6 –40.7 – 310.2 211.3 46.8

Net cash flows from investing activities –0.1 –6.7 –98.5 0.1 6.7 –98.5 399.7 –6,654.1 –

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19

1st quarter 2008

Merck Serono Consumer Health Care Pharmaceuticals Liquid Crystals Performance & Life Science Chemicals Chemicals Corporate and Other