Merck KGaA Falls After ‘Uninspiring’ 2014 Profit Forecast

Merck KGaA fell the most in more than five weeks after the maker of the Erbitux cancer drug disappointed some investors with its 2014 profit forecast.

Earnings before interest, taxes, depreciation and amortization excluding one-time items will be at the same level as last year, when the company earned 3.25 billion euros ($4.5 billion), the Darmstadt, Germany-based company said today in a statement. Analysts predict 3.31 billion euros, the average of 16 estimates compiled by Bloomberg.

Currency swings are weighing on sales and profit growth at Merck, which also makes equipment for biotechnology labs and liquid crystals for flat-screen displays. The company expects to save an additional 60 million euros by 2017 from restructuring, bringing total savings to 325 million euros. It has closed several sites, including the Swiss headquarters of its Serono prescription-drug business, and replaced a third of its top managers.

The forecast for this year was “solid but uninspiring,” Alistair Campbell, an analyst at Berenberg Bank in London, wrote in a report to clients. “We note Merck typically guides cautiously at this stage.”

Merck fell 4.4 percent to 119.50 euros at the close of trading Frankfurt. The drop was the biggest since Jan. 27.

Ebitda climbed 0.7 percent in the fourth quarter to 795.2 million euros from 789.8 million euros a year earlier. Analysts had predicted 795.5 million euros, the average of eight estimates compiled by Bloomberg.

Euro’s Increase

Revenue for the quarter fell 3.3 percent to 2.74 billion euros, matching the average analyst estimate. Sales were hurt by the euro’s increase against the dollar, yen and Latin American currencies. Excluding currency swings, sales would have risen about 4 percent, the company said.

Merck took a 127-million-euro writedown related to a settlement with AbbVie Inc. in a patent dispute over the drug Humira. Merck will no longer receive royalties on Humira as of the second half of this year, which will mean a loss of 50 million euros this year and 50 million euros in 2015, according to Campbell.

Merck is scouting acquisitions as it looks to expand in the U.S., Japan and China. The company is particularly interested in cancer assets in the U.S. to rebuild its late-stage drug development pipeline. In the meantime it’s increasing investment in existing therapies such as cancer drug Erbitux and fertility products in emerging markets.

The company also is looking to buy brands to bolster its consumer health business in the categories of vitamins and supplements, cold and allergy, and pain relievers.

Merck has been expanding outside of drugs after acquiring biotechnology-equipment supplier Millipore in 2010 for about $6 billion. The company agreed to buy AZ Electronic Materials SA, a specialty chemicals supplier to the electronics industry, for 1.6 billion pounds. The offer has been extended until March 14 pending a regulatory review by Chinese authorities.

Before it's here, it's on the Bloomberg Terminal.