Merz Group

Eckenheimer Landstrasse 100
Frankfurt am Main, D-60318
Germany
Telephone: (+49 069) 15 03 0
Fax: (+49 069) 15 03 200
Web site: http://www.merz.de

Private Company
Incorporated: 1908
Employees: 1,748
Sales: EUR 417.19 million ($501 million) (2005)
NAIC: 325412 Pharmaceutical Preparation Manufacturing; 325620 Toilet Preparation Manufacturing

Merz Group is the holding company for Merz Pharma, a developer and producer of pharmaceuticals and beauty products, and Sentator, manufacturer of writing instruments. Pharmaceuticals represent Merz's largest operation, accounting for 54 percent of sales in 2005, which topped EUR 417 million ($501 million). The company's drug development specializes in so-called "ethical" drugs, with a particular focus on Alzheimer's disease. Merz's flagship molecule is Memantine, an active ingredient used to treat moderate-to-severe Alzheimer's dementia symptoms. Memantine is distributed under Merz's own brand name Azura, and licensed to Forest Laboratories and Lundbeck. Merz also produces drugs for the treatment of Parkinson's disease, depression, liver-related brain impairment, lipid metabolism disorders, cervical dystonia, blepharospasm, and others. Merz Pharma is also a leading producer of topical gels for dermatological treatments, including fungal diseases, hair loss, and wrinkles. The company's Mederma is also a leading treatment for scar prevention and reduction, sold both in prescription and over-the-counter (OTC) form.

Merz Pharma's Consumer Products Division adds another 28 percent to Merz Group's sales, and produces a line of beauty products under the Merz Spezial brand, as well OTC products under the tetesept brand. Included under the Consumer Products division is Merz Dental, which focuses on the dentist and dental professionals, and produces artificial teeth, partial dentures, and other prosthesis and casting materials. This division also produces a hyaluronic acid-based gum care treatment, as well as a range of disinfectant and sterilizing materials, and hand and skin care products for dental care professionals. The company's writing products division, conducted through subsidiary Merz & Krell, produces writing instruments under the Sentator and Roubill brands. This division added 16 percent to group sales in 2005; some 70 percent of Merz & Krell's revenues come through promotional and advertising sales. Germany remains Merz's largest market, at 40 percent of sales, while the rest of Europe contributes nearly 30 percent of sales. The North American market, backed by the strong reception of Memantine, is the company's fastest-growing market, and represented 27 percent of sales in 2005. Merz has kicked off an active international expansion effort in the mid-2000s. In 2005, for example, the company established a new subsidiary in Italy, then entered the United Kingdom in 2006 through the acquisition of Denfleet Pharma. Merz Group is a private company controlled by the founding Merz family.

TOPICAL BEGINNINGS IN 1908

Merz Group was founded by Friedrich Merz, born in 1884, who worked as a pharmacist in Frankfurt during the early years of the 20th century. Merz developed, and patented, a topical skin cream with a water-soluble base that permitted the cream's ingredients to be more readily absorbed by the skin. In order to produce the cream on a larger scale, Merz founded a new company in 1908 and set up a production line in a former cigarette factory on Frankfurt's Eckenheimer Landstrasse.

Merz continued to develop the company's line of topical creams and ointments, as well as other healthy and beauty products, including the company's own vitamin formulations. By the end of World War I, Merz himself had begun to explore other business interests. Indeed, Merz proved to be a prolific inventor with a variety of interests. During his lifetime, Merz received a number of patents, ranging from tire chains to a method for filling tubes, to a number of medicines and creams.

Merz's interests also turned to pens and other writing materials. In 1920, Merz joined with brother Georg and Justus Krell, a machine lathe operator, to found Merz & Krell. That company began producing penholders, celluloid-based fountain pens, and pencils, made from artificial horn. The company's writing products were originally produced under the Melbi brand name. Later, the company adopted the Senator brand name as well. Production at the company was shut down during World War II. Re-launched following the war, Merz & Krell grew into a major supplier of writing instruments to the European market. The company was especially strong in the market for promotional writing materials, and by the end of the century had grown into Europe's leading manufacturer of promotional pens and related items.

Meanwhile, Merz had continued developing its health and beauty aids. The company began testing a new product, a specialty "dragee" (using the French term for a type of candy lozenge), designed as an ingestable skin, hair, and nail treatment. The vitamin formulation, developed by the then 80-year-old Merz himself, was launched under the Merz Spezial brand name in 1964. The company's claims for the dragee cure were boosted by a partnership with Dr. Ernst Dichter, a noted psychoanalyst who had been one of the founders of focus-group market research. Ernst, who employed Freudian theory as a marketing tool, had earlier been hired by Mattel Corporation to assist in the launch of the Barbie doll. With Dichter's assistance, Merz developed a highly successful sales pitch based on the tagline: "Can you eat beauty?"

The Merz Special dragee proved immensely popular with the German consumer market. By the end of the century, the brand had become one of the best known in the country, with a market recognition factor of some 87 percent. During the ensuing decades, Merz continued to conduct research on the formulation, and by the 1990s had succeeded not only in clinically proving the product's effectiveness, but also in identifying the active ingredients contributing to its effect. This led the company to be awarded a patent for the formula in 2004.

SHIFTING TO PHARMACEUTICALS DEVELOPMENT FOR THE NEW CENTURY

For the most part, Merz remained focused on the German market through the 20th century. Nonetheless, the company had achieved some degree of international growth. The Senator pen brand, in particular, became an international success and an important part of the company's expansion into the U.S. market. Merz's presence in the United States was extended to Connecticut when it bought E.E. Dickinson, a manufacturer of witch hazel-based products, in 1985. Into the 1990s, Merz established production facilities in North Carolina.

By then, Merz had already begun a transition into a noted international pharmaceuticals group. The company expanded into Austria in 1991, acquiring a business founded by Dr. Walter Kolassa in 1938 in Cologne, Germany, before transferring to Vienna in 1945. The addition of the Kolassa facilities enabled Merz to develop its in-house research and development operations. The company raised its international profile again in 1992, when it purchased the Swiss medical products distributor Adroka, founded in 1942.

COMPANY PERSPECTIVES

At Merz, our mission is to assume responsibility for people's health by producing top quality products that offer superior benefits. One of the key principles of our business activity is establishing a fair and constructive partnership with our customers—in particular patients, doctors and pharmacists—as well as with cooperating companies.

During the 1990s, Merz focused on a number of promising areas, notably the treatment of Alzheimer's disease and other neurological conditions, including Parkinson's disease. Merz also continued to develop its expertise in dermatological treatments. Other areas of interest for the company included depression, hair loss, liver disease, as well as the treatment of scars, and the development of cold remedies and vitamin and mineral preparations.

The company achieved European success with the launch of an anti-scar gel, Contratubex in the late 1980s. In 1997, Merz launched that gel in the United States under the Mederma brand name. Mederma quickly became one of the most prescribed scar treatment compounds. By the end of the decade, Merz had also released Mederma in OTC packaging as well.

Into the early 2000s, however, Merz made a new step in its shift toward the pharmaceuticals market with the launch of a new drug, called Memantine, which received approval as a treatment for Alzheimer's disease in Europe in 2002. That drug, based on Akatinol, had been available in Germany for some decades, yet Merz's discovery of its effectiveness on Alzheimer's symptoms came only during the 1990s.

Merz quickly signed up licensees to produce and distribute the drug, including Forest Labs in the United States, and Lundbeck in the Scandinavian region, Grunenthal elsewhere in Europe, and Daiichi Asubio in Japan. The global success of Memantine encouraged Merz to begin planning its own international growth. The company expanded into new markets, including Uruguay, Mexico, India, Russia, Poland, and Italy. In 2006, the company entered the United Kingdom, acquiring that country's Denfleet Pharma. At the same time, Merz targeted further expansion into such markets as Hungary and Turkey.

By 2006, Merz's pharmaceuticals division represented more than half of the company's total sales, which topped EUR 417 million in 2005. The company had also successfully expanded beyond Germany, which by then accounted for just 40 percent of the group's sales. At the same time, Merz's active research and development effort continued to produce strong results in an increasing array of areas. After nearly a century, Merz remained an important contributor to the world pharmaceuticals market.

PRINCIPAL SUBSIDIARIES

Dr. Kolassa + Merz Beteiligungs-GmbH (Austria); Dr. Kolassa + Merz GmbH (Austria); Dr. Kolassa + Merz med.wiss. Informations-GmbH (Austria); Laboratorios Merz Darier S.A. de C.V. (Mexico); M Pharma de Mexico Servicios S.A. de C.V.; Medra Handelsgesell-schaft mbH (Austria); Merz & Krell GmbH & Co. KGaA; Merz Beteiligungs GmbH (Austria); Merz Consumer Care GmbH; Merz Dental GmbH; Merz GmbH & Co. KGaA; Merz Incorporated (U.S.A.); Merz Pharma (Schweiz) AG (Switzerland); Merz Pharma GmbH & Co. KGaA; Merz Pharmaceuticals GmbH; Merz Pharmaceuticals LLC (U.S.A.); Modi-Senator (India) Private Limited; MZ Pharma de Mexico S.A. de C.V.; rou bill benelux B.V. (Netherlands); Senator France, S.A.R.L.; Senator Pen LLC (U.S.A.); Senator Pens Limited (U.K.); Senator Polska, S.p.z.o.o., (Poland); Transpharma Handels AG, Zug (Switzerland).

PRINCIPAL COMPETITORS

Pfizer Inc.; Merck & Co., Inc.; Johnson and Johnson; GlaxoSmithKline; Bayer AG; Novartis Inc.; Roche Holding AG; Celesio AG; AstraZeneca PLC; Eli Lilly and Co.

KEY DATES

1908:

Friedrich Merz invents a water-soluble cream and founds a factory in Frankfurt.

1920:

Merz, together with brother Georg Merz and Justus Krell, founds Merz & Krell, which specializes in the production of writing instruments.

1964:

Merz launches Merz Spezial Dragees, a vitamin and mineral supplement.

1991:

Merz acquires Dr. Kolassa in Austria.

1992:

Company acquires medical products distributor Adroka in Switzerland.

1997:

Mederma, a scar tissue gel, is approved for sale in the United States.

2003:

Akatinol Memantine is approved as a treatment for Alzheimer's disease in the United States and Europe.

2005:

Merz launches subsidiary as part of international expansion.

2006:

Merz acquires Denfleet Pharma in England.

FURTHER READING

"Chains Give Mederma Sales a Boost," Chain Drug Review, February 18, 2002, p. 54.

"Merz Enhances Its Position in Dermatology," Chain Drug Review, November 8, 1999, p. 9.

"Merz Eradicates Gaps in the Memory," Chemical Business NewsBase-Chemische Rundschau, May 20, 2003.

"Merz Pharmaceuticals LLC," MMR, October 17, 2005, p. 59.

"Merz Pharmaceuticals, of Frankfurt, Germany, Began a Cooperation with NascaCell IP GmbH, of Munich, Germany, to Use NascaCell's Aptamers to Improve Validation of Different Targets for Products in Merz's Pipeline," BioWorld International, September 1, 2004, p. 5.

Seidlitz, Frank, "Merz to Increase Focus on Pharmaceuticals," Die Welt, December 27, 2003.

Subramanian, Nithya, "Merz Pharma to Launch Drug for Alzheimer's Dementia," Business Line, December 16, 2004.