Despite a rocky start to the year for Merck KGaA’s contract development and manufacturing group, the German company is finding some reason to be optimistic about its recent performance.
Last week, Merck KGaA reported what it deemed a “very strong” second quarter, growing sales 2% to reach 5.4 billion euros ($5.8 billion). As has been the case for the past few earnings periods, Merck KGaA credited its overall growth to the steady performance of both its healthcare and electronics arms.
Notably, Merck KGaA’s third major unit—life science—has been working to dig out of a trough. During the second quarter, the unit's sales slid 3.7% to 2.3 billion euros ($2.5 billion).
Merck KGaA cited “continued inventory destocking” by process solutions customers and a drop in demand for COVID-19-related services as the reasons for the life science downturn.
Merck KGaA's process solutions unit helps customers "develop, manufacture, purify, formulate and assure the quality of their" medicines, according to the company's website.
At this division specifically, sales decreased by 11.8% versus last year's second quarter. Still, Merck KGaA heralded the outcome as a win when compared with an organic sales decline of 19% in 2024’s first quarter.
Proclaiming Merck KGaA’s second quarter as “positive,” analysts at ODDO BHF wrote in a note that they “like the sequential growth in process solutions, which indicates a turnaround could come soon.”
After delivering steady growth for more than half a decade, Merck KGaA ran into turbulence last year when its total 2023 sales slid 6% to 21 billion euros. A downturn in life science, which saw sales plunge 11%, was largely to blame, the company said at the time.
Merck KGaA is just one of many companies with contract manufacturing businesses that have struggled to match the sales highs achieved by CDMOs during the COVID-19 pandemic.
Elsewhere, Merck KGaA’s healthcare arm generated 2.1 billion euros ($2.3 billion) in 2024's second quarter, thanks in large part to the performance of drugs like cancer med Erbitux and oral multiple sclerosis treatment Mavenclad.
In light of Merck KGaA’s ongoing life science recovery, the company has raised its guidance. For all of 2024, Merck KGaA now expects to generate net sales between 20.7 billion euros and 22.1 billion euros, up from a previous range of 20.6 billion euros to 22.1 billion euros.