Merck KGaA bucks up on Rebif sales, emerging markets growth


Merck KGaA has long struggled to ramp up its sagging drug portfolio, sinking funds into M&A and diversifying away from pharma as it faces big-name competition. Now, the German drugmaker is enjoying a change in the wind, announcing third-quarter earnings buoyed by sales of its multiple sclerosis med Rebif and progress in emerging markets.

Merck KGaA's MS powerhouse Rebif brought in €466 million for the quarter, a 1.3% increase year over year, despite formidable competition from Biogen Idec's ($BIIB) bestselling Tecfidera, Novartis' ($NVS) Gilenya and Sanofi's ($SNY) Aubagio. Rebif, an injectable treatment, faces defectors as patients prefer easier-to-take pills.

The Darmstadt-based company's colorectal cancer drug Erbitux and its infertility treatment Gonal-f also charted positive numbers, raking in €232 million and €147 million, respectively. Merck KGaA points to growth in emerging markets as a driving factor behind sales, as both products posted their biggest increases abroad.

The Q3 success in emerging markets falls in line with the company's plans to carve a bigger international niche. In September, Merck KGaA broke ground on a new, €80 million ($102 million) plant in Nantong, China, to produce meds on China's Essential Drug List and build a manufacturing stronghold in the country.

But the drugmaker isn't stopping there: In September, Merck KGaA snatched up St. Louis-based Sigma Aldrich ($SIAL) for $17 billion to get its hands on the company's chemicals and laboratory equipment. The deal further diversifies Merck KGaA away from its drug pipeline and beefs up its presence in the lab equipment space. The company expects the deal to expand its reach in North America and Asia, and to realize €260 million ($340 million) in cost savings per year within three years of the deal closing.

Merck KGaA CEO Karl-Ludwig Kley

Still, CEO Karl-Ludwig Kley said on Thursday that the company would steer clear of larger takeovers for the time being, focusing instead on reducing its debt after the Sigma-Aldrich deal, Reuters reports.

"We are well-positioned in the life science business, as both sales and earnings growth show, with stable margins," Kley said in the company's Q3 earnings statement. "With the planned acquisition of Sigma-Aldrich, we will create a leading player in the global life science market."

The company's overall sales jumped 9.3% in Q3 to €2.9 billion, up from €2.7 billion in 2013--an increase the company partly attributes to its June acquisition of AZ Electronic Materials. Earnings before interest, taxes, depreciation and amortization (EBITDA), excluding one-time items, rang in at €857 million, a 3.1% hop from Q3 2013, the drugmaker said in a statement.

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