Merck KGaA Raises Forecast as Quarterly Profit Tops Estimate

  • 2015 sales, profit forecast boosted after including Sigma
  • Sales of top-selling Rebif almost unchanged in third quarter

Merck KGaA, Germany’s second-largest publicly traded pharmaceutical company, posted third-quarter profit that beat analysts’ estimates and raised its forecast for the year following the $17 billion acquisition of specialty chemical firm Sigma-Aldrich Corp.

A measure of earnings excluding some costs and one-time items rose 10 percent to 944 million euros ($1.02 billion), the Darmstadt, Germany-based company said in a statement Thursday. That’s higher than the 919 million-euro average of nine estimates compiled by Bloomberg. The shares rose to the highest in more than three months.

Chief Executive Officer Karl-Ludwig Kley is betting on Sigma-Aldrich to reduce Merck’s dependence on its pharmaceuticals unit after more than 10 years of failing to develop a new drug. The German conglomerate, which also makes products ranging from liquid crystals for screens to specialty chemicals and drugs to treat multiple sclerosis, last month named deputy CEO Stefan Oschmann to succeed Kley in April.

“China especially is growing strongly and is delivering a substantial contribution to growth” for the health-care unit, Kley told reporters on a call. The health-care unit makes up 55 percent of the group’s sales.

Currency Boost

Merck’s sales rose 6.8 percent to 3.12 billion euros during the quarter. That compared with the average analysts’ estimate for 3.17 billion euros. The company got a boost in the quarter from a weaker euro as it translates overseas sales into its home currency.

Shares of Merck, a family controlled company founded in 1668, rose 2.8 percent to 93.48 euros at 12:15 p.m. in Frankfurt trading, after earlier climbing to its highest since Aug. 7. The stock has gained 16 percent this year, compared with an 11 percent increase in Germany’s benchmark DAX Index.

Full-year sales, including the Sigma-Aldrich operations, will range from 12.6 billion euros to 12.8 billion euros, the company said on Thursday. It had previously forecast as much as 12.5 billion euros, without including Sigma. It also projected earnings before interest, taxes, depreciation and amortization, excluding one-time items, of 3.58 billion euros to 3.65 billion euros, up from the earlier forecast of as much as 3.55 billion euros.

Biggest Acquisition

Revenue for the life sciences division climbed 15 percent to 759 million euros, bolstered by the weaker euro. Merck will on Nov. 18 complete the acquisition of St. Louis, Missouri-based Sigma-Aldrich, its biggest deal to date. The purchase will allow the German company to expand production of laboratory chemicals and pharmaceutical manufacturing to bolster its life science unit. Sigma-Aldrich earlier this month reported a 2 percent increase in third-quarter sales to $703 million.

Revenue from the pharmaceutical unit remained almost unchanged in the third quarter from a year earlier at 1.7 billion euros.

Sales of Merck’s top-selling multiple sclerosis drug Rebif rose 0.4 percent to 468 million euros, beating the average analyst estimate of 453.8 million euros. Cancer drug Erbitux declined 4 percent to 223 million euros, missing estimates of 241 million euros. Fertility treatment Gonal-f rose 14 percent to 167 million euros, while heart drug Concor fell 9.4 percent to 106 million euros.

The German company in 2014 acquired AZ Electronic Materials SA, a chemical supplier to the electronics industry, to bolster its performance materials division. Sales at that unit, which makes liquid crystals used to make screens as well as specialty chemicals, rose 13 percent to 653 million euros last quarter.

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