Recession hits Merck KGaA profits
pharmafile | April 29, 2009 | News story | Sales and Marketing | Merck Serono
Merck KGaA saw its profits fell through the floor for the first quarter this year due to a combination of strong results the previous year, poor performance in its chemical business and stiff charges.
Profit after tax was down a massive 75% year on year to 60.2 million euros, having reached 243 million euros in the first quarter of 2008.
In mitigation the company said this year's first quarter was compared to "a very strong first quarter in 2008", and added: "All in all, the Merck Group performed solidly during the first quarter of 2009."
Then in a nod to the global economic situation it said: "However, Merck is not an island. The recession is affecting the company's results, mainly in the Chemicals business sector."
Chemicals revenues fell 22% to 436m euros in Q1 and, along with increased expenses, this meant a 79% drop in operating result to 37m euros.
"This year will be a challenge for Merck but I am happy to say that our Pharmaceuticals business remains strong," said Merck chairman Karl-Ludwig Kley.
Pharmaceuticals revenues were up 9.7% to 1.4 billion euros in Q1 but higher expenses meant that the division's operating result still fell 9.3% to 184m euros.
Merck Serono's turnover increased 11% to 1.3bn, left by double-digit performance by some of its top drugs.
Sales of multiple sclerosis drug Rebif were up 18% to 368m euros, while cancer treatment Erbitux rose 11% to 162m euros and sales of Gonal-f fertility products increased 17% to 134m euros.
But sales of Raptiva, the psoriasis drug whose marketing authorization has been suspended by the European Commission, dropped 36% to 14m euros.
The move followed confirmed cases of progressive multifocal leukoencephalopathy in patients.
As well as a 70m euros bill to cover costs from this suspension, Merck also had 69m euros of exceptional items in Q1.
The group's poor overall result was down to a number of other factors, among them a 9.1% rise in research and development costs to 272m euros.
Overall revenue for the quarter was down slightly to 1.8bn euros, but there was some good news. Royalty income, in the main from Merck Serono, was up 31% to 97m euros.
Looking ahead to the full year, Kley said the group expected revenues to increase up to 5% on last year and that return on sales (ROS) will be between 15% and 20%.
It will have some way to go to meet this. This year's first quarter figures show ROS down to 10.7%, compared to 19.4% a year ago.
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