Merck KGaA’s forecast for a tough 2023 is coming true, as the Darmstadt, Germany-based company’s contract manufacturing division took a major hit from production timing and COVID-related sales downturns.
The conglomerate's life science services business unit, which offers contract manufacturing and contract testing services, logged a “strong organic sales decline” in the second quarter, Merck reported Thursday. In total, the business pulled down €178 million ($194.6 million) for the three-month stretch, down from €262 million in the same period last year.
Merck KGaA’s process solutions arm struggled, too, with its sales slumping 12% to €994 million ($1.08 billion). That division produces supplies for pharmaceutical research labs and manufacturers.
The process solutions decline mainly came in the form of destocking and COVID-related sales declines, while life science services suffered a “sharp drop off in COVID-related sales to marginal levels as expected,” Merck KGaA CFO Helene Von Roeder said on a conference call.
Merck’s sales were salvaged, in part, by a strong performance in healthcare, where recent launches grew 29% organically. Merck’s established pharmaceuticals portfolio, meanwhile, brought home 8% sales growth.
That performance was good enough to “largely offset” declines in life sciences and electronics, Merck KGaA CEO Belén Garijo said.
Overall, Merck KGaA's pharma products achieved second-quarter revenues of €2.05 billion ($2.24 billion), growing about 5.3% from the same period last year. Oncology did much of the heavy lifting with 18% organic growth, driven by Bavencio and Erbitux. Multiple sclerosis drug Mavenclad, meanwhile, grew by 28%, helping to offset a 3% decline for older MS drug Rebif.
Merck KGaA hasn’t been shy about the turbulence it’s faced in recent years. Back in early March, the company warned of a “challenging year” ahead thanks to a lull in the semiconductor market, decreased demand for COVID-related services and “persistently high inflation.”
With those hurdles in mind, Merck KGaA at the time predicted “slight to solid” revenue growth for the year, while noting it expected profits to decline.
All told, Merck KGaA brought home second-quarter revenues of €5.3 billion, down 4% year-over-year. Those results were largely “in line” with analysts’ expectations, according to the team at ODDO BHF.
In light of 2023’s struggles, Merck KGaA is cutting its revenue guidance to a range of €20.5 billion to €21.9 billion, down from a prior range of €21.2 billion to €22.7 billion.