Q2/2009: Merck Revenues Remain Steady at € 1.9 Billion, Merck KgaA
Release Date: 2009-08-28
* Rebif sales up 21% to € 387 million; Erbitux sales rise 18% to € 171 million
* Liquid Crystals improves, revenues at € 189 million, ROS at 27.4%
* Operating result declines 42% to € 184 million
* Merck remains on track to meet Group guidance for 2009
Darmstadt, July 24, 2009 - Merck KGaA announced today that Group total revenues were steady in the second quarter and in the first half of 2009 at € 1,902 million and € 3,756 million, respectively. Royalty income was down 14% to € 75 million in the second quarter but up 7.0% to € 173 million in the first half. The gross margin declined by 2.1% to € 1,384 million in the second quarter and by 1.4% to € 2,781 million in the half year.
* EPS from continuing operations excluding amortization of intangible assets, exceptionals, integration costs and related tax effects.
“It is clear to see that the world remains in the midst of the economic crisis. Merck is also feeling its effects but to a lesser extent than many companies. In fact, we are able to continue investing in the development of innovative products that will secure our future,” said Dr. Karl-Ludwig Kley, Chairman of the Executive Board of Merck KGaA. “Despite the economic crisis, Merck expects to meet the Group guidance for 2009 that was announced earlier this year.”
Research and development costs jumped by 23% to € 341 million in the second quarter and by 16% to € 653 million in the first half of 2009. This was mainly attributable to the numerous late-stage clinical trials for new drug candidates and for expanding indications of medicines already on the market. Merck booked € –146 million in the second quarter for amortization of intangible assets from the 2007 acquisition of Serono, a 4.7% increase compared to the year-ago quarter. For the half year, this on-going cost amounted to € 294 million, a 4.8% increase.
For these reasons, plus higher marketing and selling expenses for launches of new pharmaceutical products and the decline in the Chemicals operating result, the Group operating result declined by 42% to € 184 million in the second quarter and by 44% to € 383 million in the first half of the year. The Group core operating result (excludes Serono-related amortization and integration costs) declined by 29% to € 330 million in the 2nd quarter and by 30% to € 673 million in the first half.
The Group return on sales (ROS: operating result/total revenues) declined to 9.7% in the second quarter of 2009 compared to 16.8% in the year-ago quarter. For the first half, Group ROS was 10.2% in 2009 compared to 18.1% in 2008. Group Core ROS (operating result excluding amortization of intangible assets and integration costs/total revenues) in the second quarter of 2009 was 17.4% compared to 24.4% in the year-ago quarter. For the half year, Core ROS was 18.0% in 2009 and 25.7% in 2008.
As with the operating result, earnings before interest and tax (EBIT) fell by 42% to € 184 million in the second quarter compared to € 321 million in the year-ago quarter. Half-year EBIT declined by 54% to € 314 million. Merck’s financial result remained at a relatively low level, rising by 2.5% to € –36 million from € –35 million in the second quarter and by 8.0% to € –71 million from € –66 million in the first half of the year.
Profit before tax fell 48% to € 148 million in the second quarter compared to € 285 million in the year-ago quarter. For the first half of the year, profit before tax declined 61% to € 243 million. Merck’s underlying tax rate was 25.9% for the second quarter compared to 26.5% in the year-ago quarter.
Merck’s second quarter profit after tax amounted to € 110 million compared to € 211 million in the year-ago quarter. First-half profit after tax was € 170 million compared to € 454 million for the first six months of 2008.
Merck had 32,857 employees worldwide on June 30, 2009, 57 more than at the end of 2008.
Merck Divisions
Merck Serono’s total revenues increased 6.0% to € 1,312 million in the second quarter of 2009 compared to € 1,237 million in the year-ago quarter. During the first half of the year, revenues rose 8.4% to € 2,622 million. Sales of Merck Serono’s top three products – the biologic therapies Rebif®, Erbitux® and Gonal-f® – accounted for half of the division’s total sales during the second quarter.
Global sales of Rebif for the treatment of relapsing forms of multiple sclerosis continued to climb, increasing 21% to € 387 million in the second quarter and 19% to € 755 million in the half year.
Sales of the targeted cancer treatment Erbitux jumped by 18% in the second quarter to € 171 million and by 15% in the first half to € 332 million. Erbitux is now approved in 76 countries to treat colorectal cancer and in 71 countries to treat head and neck cancer.
Second-quarter sales of Gonal-f, a recombinant hormone used in the treatment of infertility, declined 6.6% to € 114 million while first-half sales were up 5.0% to € 247 million.
Merck Serono’s classic pharmaceuticals continue to be significant contributors to the division’s overall sales due to excellent life cycle management. Sales of bisoprolol, including the branded Concor® products such as Lodoz® and Concor®COR, decreased 3.1% to € 111 million in the second quarter and 1.8% to € 211 million for the half year. Sales of the Glucophage® (metformin) franchise of oral anti-diabetic products were stable at € 78 million in the second quarter and increased by 1.4% to € 152 million in the first half. Sales of thyroid medicines such as Euthyrox® rose by 0.7% to € 39 million in the second quarter and by 1.0% to € 75 million in the first half of 2009.
The division’s research and development costs jumped 26% to € 302 million in the second quarter and increased 18% to € 574 million in the first half of 2009 mainly due to the number of expensive late-stage clinical trials for Merck products being conducted at hundreds of medical centers around the world. Merck Serono currently is funding 10 Phase III international clinical trials, more than at any time in the company’s history.
During the second quarter:
* Kuvan®was launched in Europe for the treatment of hyperphenylalaninemia (HPA) in phenylketonuria (PKU) or BH4-deficient patients. PKU is a debilitating inherited condition that can cause serious brain damage in children and lasting impairments in adults if a strict diet is not observed throughout life.
* Glucophage powder was launched in Europe for the treatment of type 2 diabetes.
* RebiSmart™ was launched in the European Union and Canada for the self-administration of the company’s injectable MS treatment, Rebif.
Merck applied to the European Medicines Agency (EMEA) in July for marketing authorization of its new multiple sclerosis treatment Cladribine Tablets. Merck plans to submit a similar application to the U.S. Food and Drug Administration (FDA) in the third quarter. If approved, Cladribine Tablets could be the world’s first oral treatment for MS.
As in past quarters, the division booked a charge of € 143 million in the second quarter for amortization of intangible assets from the 2007 acquisition of Serono. This was a 4.0% increase compared to the year-ago quarter.
Due to the large increase in R&D expenses and higher marketing and selling costs, mainly due to increased commission payments and expenses for new product launches, the division’s operating result declined by 32% to € 125 million in the second quarter and by 17% to € 300 million in the first half of 2009. The division’s core operating result declined by 17% to € 270 million in the 2nd quarter and by 9.3% to € 591 million in the first half.
The Merck Serono ROS was 9.5% for the second quarter compared to 14.8% in the year-ago quarter. For the first half, ROS was 11.5% compared to 15.0% in the first half of 2008. Core ROS decreased to 20.7% in the second quarter of 2009 compared to 26.3% in the year-ago quarter. For the first half, Core ROS for the division was 22.6% compared to 26.9% in the first half of 2008. Free cash flow improved significantly to € 140 million in the second quarter of 2009 compared to € 86 million in the year-ago quarter. In the first half, free cash flow was € 368 million in 2009 and € 247 million in 2008.
Total revenues of the Consumer Health Care division in the second quarter of 2009 continued to be impacted by inventory destocking at the wholesale level in Mexico. In addition, negative currency effects reduced second-quarter revenues by 4.1%. Consequently, the division’s total revenues slipped by 2.7% to € 104 million in the second quarter and by 2.8% to € 212 million in the first half of the year.
The division’s second quarter operating result declined by 32% to € 10 million as marketing and selling costs as well as R&D expenses continued to increase due to the focus on developing strategic brands. In addition, the division received a € 4 million payment in the second quarter of 2008 for reimbursement of contaminated raw materials. The first-half operating result was 50% lower because of the additional gain from the divestment of the Spanish business biManán® for € 11 million in the first quarter of 2008. The division’s second-quarter ROS was 10.0% compared to 14.3% in the year-ago quarter. For the first half, ROS was 8.6% in 2009 and 16.7% in 2008.
Total revenues for the Liquid Crystals division have climbed steadily since the beginning of the year, confirming that the bottom of the slowdown definitely was reached in December 2008. For the second quarter of 2009, the division’s revenues were € 189 million, a 21% decline compared to a very strong year-ago quarter. However, this was a marked improvement from the first quarter, when revenues were € 131 million. Thus, in the first half of 2009, the division’s revenues were down 32% to € 320 million.
The improvement in second quarter revenues compared to the first quarter was partially due to a general uptick in the global liquid crystal panels business as noted by the market research organization DisplaySearch, which in June raised its full-year estimate for the global LCD television market, citing demand from China.
The division’s improved revenue picture is also the result of Merck’s new enhanced Polymer Stabilized Vertical Alignment (PS-VA) technology for LCDs. The technical advantages of PS-VA are improved moving picture quality, faster switching times, higher contrast and brightness, and lower energy consumption. Although mass production of PS-VA materials for televisions began less than a year ago, demand from manufacturers of high-quality flat-panel televisions already had a positive impact on the division’s second-quarter revenues and operating result.
Due to price pressures and increased costs compared to the year-ago quarter, the division’s second-quarter operating result dropped 52% to € 52 million. During the first half, the operating result declined 72% to € 64 million. Second-quarter ROS fell to 27.4% compared to 45.0% in the year-ago quarter. This is a considerable improvement over the first quarter ROS of 9.7%, which resulted in a first-half ROS of 20.1%.
In the second quarter, the Performance & Life Science Chemicals division generated total revenues of € 297 million, a 7.5% decline compared to the year-ago quarter, mainly due to reduced sales of effect pigments. During the first half of 2009, revenues fell 6.9% to € 602 million. The Pigments business remains under pressure due to the weakness in the global automotive industry. Sales of effect pigments to the cosmetics industry also were down in the quarter. Merck reduced working hours in May for 300 employees at its site in Gernsheim, Germany, where pigments are produced. Other pigment production sites in Savannah, Georgia, USA, Onahama, Japan, and Songjiang, China, also are affected. Sales in the Life Science Solutions and Laboratory businesses remained steady.
The division’s operating result fell by 55% to € 18 million in the second quarter and also by 55% to € 42 million in the first half of the year. Second-quarter ROS fell to 6.0% from 12.4% in the year-ago quarter while first-half ROS was at 7.0% compared to 14.4% in the first half of 2008.
Outlook
Merck’s 2009 guidance for the divisions is now as follows:
Total revenues: Merck Serono +6% to 9%, Consumer Health Care +3% to 6% (from +5% to 9% in April), Liquid Crystals –20% to –25% (from –20% to –30% in April), and Performance & Life Science Chemicals unchanged compared to 2008.
Core ROS: (Operating result excluding amortization of intangible assets and integration costs/total revenues) Merck Serono 20% to 25%, Consumer Health Care 5% to 10%, Liquid Crystals 20% to 30% and Performance & Life Science Chemicals 5% to 10%.
The operating result for the segment Corporate and Other should be similar to 2008.
The guidance Merck gave in April for the Group remains unchanged. The company expects the Group’s total revenues for 2009 will have a growth rate in the range of 0% to 5%. The Group’s Core ROS is expected to be between 15% and 20%.
| Type: | NORMAL |
| Company: | Merck KgaA |
| Country: | 德国 |
| Url: | http://www.merck.de/en/media/extNewsDetail.html?newsId=9C9A0904615A9F68C12575FC0045CFC3 |