Merck KGaA gets Q2 sales bump from competitors' manufacturing slips

Sometimes companies see their earnings hurt by manufacturing problems. But one company’s pain can be another’s gain. Take Germany’s Merck KGaA, which today reported big second-quarter growth in sales of its Gonal-f fertility drug after shortages developed for competitors' products.

Overall, the drugmaker reported organic net sales growth in Q2 of 18.2% to €3.8 billion, driven by its Life Science and Healthcare division, which saw revenue growth of 7.3% when foreign exchange issues were factored out. The quarter and first half were also helped by sales from the $17 billion acquisition of life sciences lab a product supplier Sigma-Aldrich.

But there were those currency issues which shaved 9% off results and meant that Merck KGaA’s Healthcare net sales decreased by -2.7% in Q2 to € 1.8 billion. Still, the execs at the German company felt good enough about results to raise the forecast for net sales to between €14.9 billion and €15.1 billion from a previous forecast of between €14.8 billion to €15.0 billion.

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In its healthcare operations, the drugmaker reported organic growth of 6.8% for cancer drug Erbitux which were otherwise flat based on currency adjustments. But Gonal-f was the break-out for the quarter, up 23.1% to €209 million, from €177 million in Q2. Most of that growth came in the U.S., where it “ benefited from an advantageous competitive situation," according to Merck's earnings release. 

That situation was due to product issues by two competitors. Ferring Pharmaceutical in September 2015 recalled 42 lots, more than 32,300 vials, of its fertility drug Bravelle because of potency concerns. Then in May, the other Merck ($MRK), known as MSD outside the U.S., reported a supply interruption for its ovulation-stimulating hormone Follistim. It said at the time that it expected the supply issue to be resolved this summer.

But those supply interruptions left Merck KGaA in a good position. At the time, Dr. Eric Levens, a physician partner at Shady Grove Fertility in the Washington, DC, area, said “The Follistim recall creates more of a shortage and leaves you with one option.”  

Merck KGaA is certainly not the first company to benefit from a competitor's manufacturing problems. Jordan-based Hickma in 2013 reorted its operating profits increased more than 110% when a shortage of the antibiotic doxycycline developed because of plant problems by some other manufacturers. That left Hickma as the main supplier to the U.S. for a drug that was used to treat conditions such as malaria, sexually transmitted diseases and Lyme disease.

- here’s Merck KGaA’s earnings release

Related Articles: 
Merck runs into manufacturing glitch for ovulation drug 
Hikma hits the jackpot with doxycycline shortage

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