Fundamental Information about the Group

Merck

We are a global science and technology company headquartered in Darmstadt, Germany. With a history of nearly 350 years, we are the oldest chemical and pharmaceutical company in the world. In line with our strategic direction, Merck comprises three business sectors: Healthcare, Life Science, and Performance Materials.

In Healthcare, we discover, develop and manufacture prescription medicines used to treat cancer, multiple sclerosis, and infertility. Our products help millions of people around the world.

In Life Science, we conduct research for researchers, providing scientists with laboratory materials, technologies and services. Our aim is to make research and biomanufacturing easier, faster and more successful.

Performance Materials develops specialty chemicals and materials for demanding applications – from liquid crystals and OLED materials for displays to effect pigments for coatings and cosmetics up to high-tech materials for the manufacture of integrated circuits.

We hold the global rights to the Merck name and brand. The only exceptions are Canada and the United States. In these countries, we operate as EMD Serono in the biopharmaceutical business, as ­MilliporeSigma in the life science business and as EMD Performance Materials in the high-tech materials business.

Apart from our three business sectors, our financial reporting presents the five regions Europe, North America, Asia-Pacific (APAC), Latin America as well as Middle East and Africa (MEA). As of December 31, 2017, we had 52,941 employees worldwide, which compares with 50,414 on December 31, 2016.1

1 Merck also has employees at sites which are not fully consolidated subsidiaries. These figures refer to all people directly employed by Merck and therefore may deviate from figures in the financial section of this report.

Healthcare

Our Healthcare business sector comprises the three businesses ­Biopharma, Consumer Health, and Allergopharma. Since 2015, Belén Garijo has been the CEO of the Healthcare business sector and ­member of the Executive Board. In 2017, Healthcare generated 46% of Group sales and 41% of EBITDA pre (excluding Corporate and Other), making it the largest of our three business sectors. The regions Europe and North America generated 57% of Healthcare’s net sales in 2017. In recent years, we have steadily expanded our presence in growth markets. In 2017, Asia Pacific and Latin America accounted for 36% of sales. Our divestment of the Biosimilars ­business to Fresenius closed on August 31.

Biopharma

Our Biopharma business discovers, develops, manufactures and ­markets innovative pharmaceutical and biological prescription drugs to treat cancer, multiple sclerosis (MS), infertility, growth disorders as well as certain cardiovascular and metabolic diseases. Biopharma is the largest of our Healthcare businesses. We operate in four franchises: Oncology, Neurology & Immunology, Fertility, and General Medicine & Endocrinology. Our streamlined R&D pipeline positions us with a clear focus on becoming a leading specialty innovator in oncology, immuno-oncology and immunology, including multiple sclerosis.

In 2017, we reinforced our commitment to growing our immunology pipeline to provide new options to better the lives of people with immunological diseases with the receipt of regulatory approvals for Mavenclad® in the 28 member states of the EU as well as Liechtenstein, Iceland and Norway; Canada and Australia. We reached important development milestones for atacicept and ­sprifermin, reporting our results at key medical meetings around the world.

In June, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) issued a ­positive opinion for approval of Mavenclad® (cladribine tablets). Data from clinical trials indicate that Mavenclad® can lead to high and sustained efficacy through selective modulation of B and T cells, resulting in lasting resolution of inflammation. We have robust data relating to the safety and tolerability profile and consider our unique oral shortcourse treatment to be an important therapeutic option for patients with relapsing multiple sclerosis (RMS) with high disease activity. We view Mavenclad® as a complementary new oral treatment option in our MS product portfolio. Our MS treatment Rebif® is and remains a well-established therapy.

In August, the European Commission (EC) granted ­marketing authorization for Mavenclad® in the treatment of highly active relapsing multiple sclerosis. In December, the Therapeutic Goods Administration (TGA) in Australia updated the registration including the indication, dosing and safety information of Mavenclad® for the treatment of relapsing-remitting (RRMS), and Health Canada approved ­Mavenclad® as monotherapy for the treatment of adult patients with RRMS. In January 2018, the Israeli Ministry of Health approved Mavenclad® for the treatment of adult patients with highly active relapsing MS as defined by clinical or imaging features.

We presented data on sprifermin, our investigational treatment for knee osteoarthritis, at the ACR/ARHP Annual Meeting held in November. The study of 549 patients met its primary endpoint, demonstrating statistically significant, dose-dependent increases in MRI total fe­morotibial joint cartilage thickness from baseline in the two sprifermin groups receiving the highest doses as compared with the placebo group after the two-year treatment period.

We presented a total of 11 abstracts at ACR/ARHP, highlighting the momentum of our various clinical programs in immunology. We presented other data of note on a Phase II post-hoc study analysis of atacicept for SLE patients with high disease activity. In the ­analysis of ADDRESS II, a 24-week, randomized, placebo-controlled Phase IIb study of 306 people, those who had high disease activity at baseline had three to five times the odds of attaining low disease activity at 24 weeks when treated with atacicept 150 mg dose (n=51) as compared to those treated with placebo (n=52).

Erbitux® (cetuximab) remains the second best-selling drug in the portfolio of our Biopharma business and is our flagship product in oncology. The product is a standard of care for patients with ­epidermal growth factor receptor (EGFR)-expressing, RAS wild-type metastatic colorectal cancer (mCRC) therapy, as well as both recurrent/metastatic and locally advanced squamous cell carcinoma of the head and neck (SCCHN). We continue to invest in Erbitux® and are committed to making it available to those patients whom it will ­benefit most.

Together with Pfizer Inc., USA, we are developing much-needed new ­treatment options for patients with hard-to-treat cancers. In 2017, we made key progress in this area. We have obtained a total of six regulatory approvals for our anti-PD-L1 antibody avelumab under the brand name Bavencio®. The U.S. Food and Drug Administration (FDA) granted two accelerated approvals for Bavencio® for the treatment of adults and pediatric patients 12 years and older with ­metastatic Merkel cell carcinoma (MCC) and previously treated patients with locally advanced or metastatic urothelial carcinoma (UC). These indications were approved under accelerated approval based on tumor response rate and duration of response. Continued approval for these indications may be contingent upon verification and description of clinical benefit in confirmatory trials. The ­prognosis for both patient groups is very poor, so for patients around the world this may represent a welcome new treatment option. Furthermore, approvals were granted for Merkel cell carcinoma in Switzerland, Japan, Canada and in the 28 member states of the European Union, as well as Iceland, Liechtenstein and Norway. Approvals followed in Australia and Israel in early 2018. In addition, ­Bavencio® was approved for the treatment of patients with urothelial carcinoma in Israel in late January 2018.

The Bavencio® approvals were based on data from our comprehensive clinical development program, JAVELIN, which currently ­comprises at least 30 clinical programs, including various Phase III trials, and over 7,000 patients evaluated across more than 15 different tumor types. In addition to MCC and urothelial carcinoma, these cancers include breast, gastric/gastro-esophageal junction, head and neck, Hodgkin’s lymphoma, melanoma, mesothelioma, non-small cell lung, ovarian, and renal cell carcinoma. Key data from the ­JAVELIN program were presented at major medical congresses in 2017 to help advance understanding of the field of immuno-­oncology, and this will continue in 2018.

In November, we announced that our Phase III JAVELIN Gastric 300 study did not meet its pre-specified primary endpoint of superior overall survival. The study set a high bar for success and although the primary endpoint was not met, we believe that the data will provide valuable insights. We will therefore further examine the data in an effort to better understand the results and intend to ­present the results at an upcoming medical congress.

In addition, as part of our commitment to developing new treatment options for patients with hard-to-treat cancers who would ­otherwise have a low chance of survival, we are exploring all ­potential options and have entered into four new strategic collaborations to evaluate avelumab in combination with a range of complementary oncology medicines (further details can be found under ‟Research & Development”).

An important growth driver for our Biopharma business is our portfolio of fertility products that help couples conceive a child, ­ranging from drugs to technologies. Infertility has become a key topic globally due to the trend towards delaying childbirth. We see ­steadily increasing demand in growth markets fueling sales. In addition, we are facing a rapidly changing environment in the fertility market, changes in competitive environment trending towards increased price pressure in the drugs business, more educated patients and an increasing importance of technologies in Fertility. The innovative strategic objective of our Fertility business is to develop from the world market leader in fertility drugs into an integrated fertility treatment partner. We are therefore focusing on turning these trends into opportunities for Merck to achieve further growth. The first step to achieve this goal was to complement our existing drug portfolio with a continuously expanding innovative technologies offering.

We are the only company to offer recombinant versions of the three natural hormones needed to treat infertility as well as a ­complete and clinically tested portfolio for every stage of the reproductive cycle. We are continuously supporting patients on their IVF journey. In November, the FDA approved a new version of the Gonal-f® (follitropin alfa injection) prefilled pen that is easy-to-learn and easy-to-use (please refer to the R&D section for details). Earlier in the year we received regulatory approval for the new Pergoveris® pen in Europe (please refer to the R&D section for details).

Our Fertility Technologies business continues to broaden its footprint. In December, we announced U.S. FDA 510(K) clearance of the benchtop embryo incubator Geri™1. This innovative technology, designed to improve processes in fertility laboratories, will be ­commercially available to IVF clinics in the United States as of the first half of 2018. In early 2017, we announced the release of two advanced ­Fertility Technologies products for improved efficiency in the assisted reproductive treatment (ART) lab, Eeva® Test 3.0 and Geri™ humidified incubation products.

In January, we opened our first Center of Excellence (CoE) for fertility, an international state-of-the-art facility for high-quality training of healthcare professionals, such as physicians and embryologists, to improve clinical practices, protocols and clinical ­outcomes.

Every day, more than 60 million patients around the world use our trusted general medicine and endocrinology (GM&E) medicines. Today, Concor®, Euthyrox®, Glucophage® and Saizen® are high-value brands and market leaders in many key markets around the world. As a result, in terms of sales GM&E is the largest business franchise of the Healthcare business sector, with strong double-digit growth in all major therapeutic areas in 2017, contributing significantly to the overall profitability of Biopharma and Merck. Although no longer patent-protected, the brand equity built over decades makes our flagship products cornerstones for the treatment of chronic cardiovascular, metabolic and endocrine diseases.

Concor®, containing bisoprolol, is the leading beta-blocker for chronic cardiovascular diseases such as hypertension, coronary artery disease and chronic heart failure. With a market share above 40% and double-digit sales growth, Euthyrox® (active ingredient levothyroxine) is the worldwide market leader for treating hypothyroidism, a disease with high prevalence but low diagnosis in most emerging markets. Glucophage®, containing the active ingredient metformin, is the drug of choice for first-line treatment of type 2 diabetes. In May, the Medicines and Healthcare products ­Regulatory Agency (MHRA) in the United Kingdom authorized ­Glucophage® SR (sustained release formulation; metformin) for the reduction in the risk or delay of the onset of type 2 diabetes in adult, overweight patients with impaired glucose tolerance (IGT) and/or impaired fasting glucose (IFG), and/or increased glycated ­hemoglobin (HbA1c), when intensive lifestyle changes for three to six months have failed. In addition to the United Kingdom, we have approvals in the indication of prediabetes in 16 markets and see great potential due to an increasing prevalence of diabetes.

We also help to raise awareness and education in the areas we operate in, such as thyroid diseases and diabetes. For example, we took part in International Thyroid Awareness Week and announced a partnership with the International Diabetes Federation (IDF), which will serve as a basis for joint education and communication activities to raise awareness of the importance of type 2 diabetes prevention.

Saizen® (somatropin) is our main endocrinology product and is indicated for the treatment of growth hormone deficiency (GHD) in children and adults. Saizen® is delivered with the easypod™ electromechanical injection device, the only growth hormone injection device of its kind. easypod™ is able to wirelessly transfer data such as injection times, dates and doses to the web-based software ­system easypod™ connect, making it easier for healthcare ­practitioners and patients to ensure adherence and reach their ­treatment goals.

At the 2017 Pharmaceutical Market Excellence Awards, Merck won in the category ‟Excellence in Innovation”. We were awarded for our eHealth ecosystem designed to improve treatment outcomes by working with patients, carers and healthcare professionals.

Consumer Health

Our Consumer Health business focuses on consumer-centric innovation under the umbrellas of several strategic brands such as ­Neurobion®, Bion3®, Seven Seas®, Nasivin®, ­Femibion® and Dolo-­Neurobion®, as well as Vivera®/­Floratil®, ­Sangobion®, ­Vigantoletten®, Apaisyl®, and Kytta®. The aim is to emotionalize these over-the-counter and food supplement brands so that they become irresistible love brands in the eyes of our consumers and customers alike. Most of these brands are fully aligned with the newly established purpose of the Consumer Health business: ‟We exist to prepare society for a new era of humans living 100 healthy years.”

Global megatrends favor the future growth of our Consumer Health business. People are becoming more health-conscious and looking after their own physical well-being. Preventive healthcare and minimally invasive treatment are growing in importance in both established and developing markets, the latter characterized by a growing middle class with specific needs. As people and societies are growing older than ever before, Consumer Health has established a movement around its new purpose of actively driving change in the societies it operates in, all under the independent label and motto ‟WE100®.”

Consumer Health currently ranks among the top 15 players in the global OTC market and already generates more than 50% of its annual sales in developing growth markets. In particular, markets such as Mexico, Brazil, Poland, Greece, South Africa, India, ­Indonesia, Thailand, and Malaysia are delivering significant growth rates. To further align the regional strategies with the strategic brand strategies and to even better focus on efficient region-brand combinations, the business has reorganized its brand structure into a brand-­franchise model leveraging its full expertise and capabilities across functions.

On September 5, we announced that we are preparing strategic options for our Consumer Health business, including a potential full or partial sale of the business as well as strategic partnerships. This is consistent with our focus on our innovation-driven Biopharma pipeline.

Allergopharma

Our allergy business Allergopharma is one of the leading companies in the field of allergy immunotherapy (AIT). The Allergopharma portfolio includes a diverse spectrum of approved allergen products that meet high quality standards. AIT (hypo-sensitization, ­desensitization, specific immunotherapy) is the only causal therapy for treating ­allergies to unavoidable allergens.

We manufacture products to diagnose and treat type 1 allergies such as hay fever or allergic asthma. Our allergy business offers high-­dose, hypoallergenic, standardized products for allergen immuno­therapy of pollen and mite allergies. These allergoids have a special focus in Allergopharma’s product portfolio and constitute a cornerstone in its integrated health approach for patients suffering from these conditions. For effective treatment, reliable diagnosis is key. Allergopharma offers a broad range of diagnostics in the field of allergies with more than 100 single allergens, providing physicians with the specific tools needed to identify the substances causing an allergy. In addition, Allergopharma provides individual allergen extracts on a named patient basis, which are needed to treat less frequent allergies. Personalized medicine has been a reality for ­Allergopharma for many years now. Products of Allergopharma are available in 18 countries worldwide.

Life Science

In the Life Science business sector, our purpose is to solve the ­toughest problems in life science by collaborating with the global scientific community – and through that, we aim to accelerate access to health for people everywhere. Udit Batra has been the CEO of our Life Science business sector since 2014 and a member of the Merck Executive Board since 2016. In 2017, Life Science generated 38% of Group sales as well as 38% of EBITDA pre (excluding Corporate and Other).

We serve customers in academia, biotech and pharma – helping them to deliver the promise of their work better, faster and safer. As a leading player in the life science industry, we offer innovative solutions for scientists and engineers at every stage.

Our 300,000 products range from lab water systems to genome-­editing tools, antibodies and cell lines, as well as end-to-end bioprocessing systems to support the manufacturing needs of both emerging biotech and large pharma companies. For example, the Life Science business sector created the first-ever commercially available cell line platform for faster, simpler selection and scale-up of high-­producing clones for making recombinant protein drugs. Used to produce biopharmaceuticals, the CHOZN® cell line has been proven to shorten bioproduction times in early development, enabling ­customers to enhance their speed to market and decrease costs.

Another example is the Life Science business sector’s Mobius® single-­use bioreactors, which help customers move closer to fully disposable manufacturing. Single-use technology is becoming increasingly popular in the industry. With single-use disposable equipment, customers get improved batch turnaround times, reduced risk of product cross-contamination, decreased capital costs and have less equipment to clean.

After successfully orchestrating the largest integration in the history of Merck, the Life Science business sector redesigned its organizational structure in the second quarter of 2017 to capture growth opportunities even more nimbly and to align the entire organization to optimally contribute to, and capitalize on the strength of the Merck Group. Strategic Marketing & Innovation units and commercial teams have been streamlined into three distinct business units – Research Solutions, Process Solutions and Applied Solutions – with each designed to increase agility and drive sustained entrepreneurship to better serve our customers.

The Life Science business sector generates recurring sales and stable, attractive cash flows in an industry characterized by stringent regulatory requirements. A highly diversified and loyal customer base additionally ensures a low-risk profile. We benefit from a broad and relevant portfolio, a highly efficient supply chain that includes an e-commerce platform and global reach.

Our e-commerce platform, www.sigmaaldrich.com, allows ­customers in nearly every country to easily find the exact products needed to advance their research. Currently, more than 80% of legacy Merck Millipore products are available on the platform. In 2016, we implemented a centralized initiative to manage all ­customer acquisition channels and scaled search advertising to include more than two million active keywords to drive increased web traffic to the content customers are seeking. In 2017, we continued to optimize our web channel and streamline the customer experience, resulting in increased user sessions and revenue.

We continued our journey to spark curiosity in the next generation of scientists with a year-long Curiosity Cube™ tour across the United States. The tour was built on the business sector’s successful Curiosity Labs™ program, where employee volunteers brought leading-­edge science, technology and experiments to tens of ­thousands of students around the globe – aiming to inspire a future career in Science, Technology, Engineering and Math (STEM). Through 2017, the Curiosity Cube™ – a retrofitted shipping container transformed into a mobile science lab – visited 79 schools, held 54 public events and reached 38,040 students.

The Life Science Research Solutions business unit serves customers focused on identifying and developing new medicines. We offer a broad and relevant portfolio of solutions that enables scientific discovery through collaborative partnerships across the customer journey. This includes more than 200,000 products and services, including molecular platforms, protein and pathway technologies, biochemicals, materials science and cell culture workflow tools.

In May, we acquired Grzybowski Scientific Inventions (GSI) to complement our industry-leading e-commerce platform and ­chemistry portfolio of more than 400,000 building blocks, catalysts and ­reagents for chemical synthesis. GSI developed a revolutionary ­computer-aided retro-synthesis tool, used to advance reaction rules and proprietary algorithms to identify synthesis pathways that meet user-defined constraints. Virtual synthesis significantly reduces the time between chemical target conception and route evaluation by using a lab’s preferences to filter millions of data points.

The Process Solutions business unit delivers end-to-end products and expertise to customers who take what is developed in labs and manufacture it. We offer a diverse range of products to pharmaceutical and biotechnology companies that enables customers to develop large- and small-molecule drugs safely, effectively and cost-­efficiently. The 15,000-plus products and services in this business unit include single-use manufacturing, filtration, chromatography and purification, virus reduction, pharma and biopharma raw materials, drug delivery compounds and engineering and validation ­services.

As a leader in single-use technology, we launched an industry-­first program that allows more flexibility, better supply predictability and shorter lead times for safer and more efficient drug ­manufacture through the Mobius® MyWAY portfolio. This is critical to customers ranging from contract manufacturing organizations to large pharma companies, whose biggest challenge is getting custom assembly with fast, reliable lead times for quicker turnarounds and more rapid biomanufacturing.

Our single-use chromatography portfolio was boosted in August with an agreement to acquire Natrix Separations, a provider of hydrogel membrane products based in Ontario, Canada. Natrix is known for its unique technology platform, which delivers high ­productivity and impurity removal in a single-use format. The ­acquisition complements our efforts to drive next-generation bio­processing, ultimately enabling faster and more efficient technology for customers.

In September, China’s first BioReliance® End-to-End ­Biodevelopment Center was opened in Shanghai. The center provides a full range of process development capabilities and services, including cell line development, upstream and downstream process ­development and non-GMP clinical production. The center is designed to meet the specific needs of customers in the APAC region.

The Applied Solutions business unit supports customers in their efforts to ensure that drugs, food and beverages are safe for ­consumption. We provide trusted products and comprehensive workflow solutions that streamline processes, lower costs and deliver consistent, reliable results. Our 62,000-plus products and services include analytical separation systems, reference materials, lab water instruments with consumables and services, and microbiology and bio-monitoring testing materials.

The Life Science business sector reinforced its commitment to food safety with the acquisition of BioControl Systems Inc., offering customers a complete workflow solution for food pathogen testing. BioControl’s established rapid-detection technology and third-­party-validated testing platforms complement our current portfolio of instruments and consumables. The acquisition strengthens our ­ability to help customers protect the global food supply by providing an extensive portfolio of state-of-the-art testing technology.

Following the acquisition, we opened our first customer food-safety studio, located in Bellevue, Washington, USA, for manufacturers of all types of food. The new center gives customers access to a ­complete food-safety workflow, from raw materials testing to ­finished-product safety testing, to help find, correct and prevent hazards within the food supply chain. The investment brings teams together in a workspace designed to foster open innovation and collaboration aimed at our becoming the leader in food-safety testing.

In March, we marked the 50th anniversary of our first lab water system launch and introduced worldwide the Milli-Q® IQ 7000, the seventh-generation Milli-Q® water purification innovation. There have been tremendous advancements in the lab, and today’s scientists continue to seek ways to improve reproducibility and reliability of data. The new lab water system addresses these pain points. Milli-Q® water has become synonymous with ultrapure lab water and is the most cited brand in peer-reviewed publications.

Performance Materials

Our specialty chemicals business is combined in our ­Performance Materials business sector. The portfolio includes high-tech chemicals for applications in fields such as consumer elec­tronics, lighting, coatings, printing technology, paints, plastics, and ­cosmetics. Performance Materials comprises four business units: Display ­Materials, Integrated Circuit Materials, Pigments & Functional Materials, and Advanced Technologies. In September 2017, Kai ­Beckmann, a member of the Executive Board of Merck since April 2011, ­succeeded Walter Galinat as CEO Performance Materials. In 2017, the Performance Materials business sector’s share of Group sales amounted to 16% and its share of EBITDA pre (excluding Corporate and Other) was 21%. The EBITDA pre margin amounted to 40.1% of sales.

Global demand for innovative display solutions has continued to grow in recent years. The demand for high-quality consumer electronics, such as high-resolution televisions and smartphones, will rise further in the coming years. This will be accompanied by the building of new capacities and growth in volume demand, driven primarily by large-screen televisions. In Display Materials, our ­largest business unit, we observed a normalization of our market shares in the liquid crystals sector in 2017. We want to stabilize this situation by further strengthening our position as market and technology leader. Key to this are new, sophisticated liquid crystal technologies, such as SA-VA (self-aligned vertical alignment) and UB-Plus (ultra brightness). Both new technologies are being intensively tested by customers – initial quantities to manufacture the corresponding ­display panels have already been sold. The innovative, energy-­saving ­liquid crystal technology UB-FFS (ultra-brightness fringe-field switching) for small and medium-sized displays recorded double-digit growth compared with 2016. In addition, we further enhanced our ability to support customers in solving process technology issues. In 2017, we made further progress in developing new applications for liquid crystals. For example, we opened the first production facility for switchable liquid crystal window modules in Veldhoven, the Netherlands. This is an important milestone for capturing a new market segment for liquid crystals. Frost & Sullivan recognized our liquid crystal window technology with the Technology Innovation Award 2017. We also made good progress in applying liquid crystal technologies to smart antennas and automotive headlight systems, where we expect to generate initial sales in 2018.

In 2017, our annual ‟Displaying Futures” symposium, which took place in Tokyo, focused on the topic of Digital Transformations. We host this symposium in order to stimulate an interdisciplinary dialogue on the development and potential of technologies and their future impact on society. Experts in robotics, artificial intelligence (AI) and design participated, elucidating digital transformation from the various perspectives. Back in 2016, we launched the Displaying Futures Award to promote young entrepreneurs and researchers. The aim of this year’s call for proposals was to identify flexible applications in the field of hybrid electronics. The prize, worth US$ 50,000, was awarded to three teams from Canada and the United Kingdom.

Integrated Circuit Materials is our second-largest business unit and supplies products to manufacture integrated circuits and micro­electronic systems, for antireflection coatings, and for the mini­aturization of transistor structures. Deposition materials and ­conductive pastes for semiconductor packaging round off the portfolio. As an important partner to leading global electronics manufacturers, the business unit achieved very strong organic sales growth and gained relevant ­market shares in an overall positively developing semiconductor market. Particularly strong growth was generated by materials for dielectric insulating layers and metal layers deposited from the gas phase used for advanced processors and latest-generation storage chips. At industry events such as the international trade show for semiconductor technology Semicon Korea, SPIE Photonics West in San Francisco, California, USA, and Semicon Taiwan, we presented our portfolio expanded by the acquisitions of SAFC Hitech and Ormet Circuits. At the International Conference on Atomic Layer Deposition (ALD) in Denver, Colorado, USA, we presented our latest advances in coating technology. In order to support our business expansion in Asia, we opened a new research and application center at our site in Kaohsiung, Taiwan. The center houses two laboratories developing applications for coating materials and semiconductor packaging in order to provide future-oriented support to our customers.

The Pigments & Functional Materials business unit develops and markets a comprehensive product portfolio of decorative effect pigments and functional materials. Our effect pigments are primarily used in automotive and industrial coatings, plastics, printing applications, cosmetics and some foods, in order to give products a unique luster. Functional materials include laser marking, conductive ­additives, applications for counterfeit protection as well as high-­quality cosmetic active ingredients, for example for use in skin care, as well as sun protection and insect repellants. In 2017, we introduced Xirallic® NXT Cougar Red as a new product for coating applications. It belongs to the improved product generation of the well-known high-tech effect pigments and stands out due to an attractive bluish red and very intense glitter. We developed a special clear coat for new effect dimensions in automotive coatings in cooperation with Daimler, the coatings specialist PPG Industries and the Fraunhofer Institute for Manufacturing Engineering and Automation. This new development, which was presented at Sucar, the international ­conference on automotive body finishing in Cannes, France, can significantly intensify the effect on existing OEM base coats, making it possible to create completely new color tones. For its innovative 3D effect printing technology, Merck entered into a strategic partnership with Schmid Rhyner of Switzerland. The aim is to further develop this innovative printing process with effect pigments for various surfaces and markets. We added Tivida® FL 3000 to our portfolio of fluorosurfactants. Its competitive differentiation is based on its favorable ecotoxicological profile, and even in very low concentrations it significantly improves the flow and wetting behavior of coating systems.

At the Laser World of Photonics 2017 exhibition, we presented a new pigment for laser marking in a new application field. Iriotec® 8826 is particularly suitable for dark and high-contrast marking of colored polymers and for the first time enables the laser marking of films. Besides materials for technical applications, we are working on innovative materials for cosmetics. In 2017, two new raw materials complemented our portfolio: RonaCare® Pristine Bright liquid, a liquid variant of an active ingredient that makes the skin appear naturally lighter, and an alcohol-free variant of the anti-aging active ingredient RonaCare® CP5.

In 2017, we opened a new application laboratory in Shanghai, China. It is the first application laboratory for pigments and functional materials in China, through which we offer our customers comprehensive tailored services for our products and at the same time work with them to develop new products. China is one of the fastest-growing markets for our pigments and cosmetics businesses. With the new application laboratory, we are continuing our 20-year commitment in this business in China and Southeast Asia, and are underscoring our leading position in pigments and functional ­materials.

At the International Symposium on Automotive Lighting (ISAL) in Darmstadt, we presented our functional pigments for lighting applications. With these pigments from the Iriotec® 8000 series, circuit layouts can be integrated into injection-molded components or powder-coated components in laser direct structuring processes. Laser structuring of the components offers tremendous design ­freedom, especially since these pigments also enable light-colored design in addition to dark modules.

In 2017, the Advanced Technologies business unit invested further, particularly in future-oriented research and development in Performance Materials. A very good example of this are our materials for organic light-emitting diodes (OLEDs). The OLED materials business is one of our fastest-growing businesses. We worked intensively to improve materials for televisions, for instance. Brighter displays and a larger color spectrum were two areas of focus. At our debut at the International Motor Show (IAA) in Frankfurt, Germany, we exhibited rear lights with OLED materials, for instance. As OLEDs are extremely thin and lightweight, the parts require only little space. This allows rear lights in new forms, giving vehicle designers even greater possibilities in the future. OLED materials also permit free-form displays in vehicle interiors, which expands the design possibilities even further. The technology permits particularly vivid contrasts, brilliant colors, sharp images, and pleasant readability. We are continuing to drive OLED technology forward. The capacities at the application laboratory in Korea were doubled in 2017. High-quality phosphors are used for the backlighting of liquid crystal displays. We launched our new full-spectrum phosphors for application in violet chip-based LEDs. They are very luminous and achieve a high color rendering index and a spectrum that comes very close to natural sunlight. Apart from the use of OLED materials in displays, we are continuing to target the lighting market.

In the field of organic photovoltaics, more and more pilot projects demonstrate the manifold applications of the technology in architecture. In initial construction projects in Europe and Brazil, printed solar foils turn glass façades and canopies into active power generators. In 2017, we received the Innovation Award Architecture + Building at the BAU 2017 for our organic photovoltaic modules developed in cooperation with Belectric OPV.

Strategic realignment

In 2018, we want to focus even more strongly on the needs of our customers and markets. Therefore, in December 2017, we announced that we will combine our expertise in three newly created business units aligned with our target markets: Display Solutions, Semiconductor Solutions and Surface Solutions. <