Merck KGaA (MRK), the German maker of the cancer drug Erbitux, reported third-quarter profit that exceeded analyst estimates and increased the full-year sales forecast on higher demand for its medicines.
Earnings before interest, taxes, depreciation and amortization excluding one-time items climbed 16 percent to 754.2 million euros ($960.8 million) from 652.5 million euros a year earlier, the Darmstadt-based company said today in a statement. Analysts had predicted 739.9 million euros, the average of estimates compiled by Bloomberg.
Merck, which isn’t related to U.S. drugmaker Merck & Co., is eliminating jobs, closing facilities and reviewing its pipeline amid setbacks for some key medicines and declining sales of Erbitux. The company has a target to save 300 million euros by 2014 as it expands outside Europe, particularly in the U.S., Japan and China.
“Even in these tough economic times and while in the midst of our own business transformation, Merck is performing well operationally,” Chief Executive Officer Karl-Ludwig Kley said in a statement.
Ebitda excluding one-time items this year will be 2.9 billion euros to 2.95 billion euros, compared with an Aug. 14 forecast of 2.85 billion euros to 2.95 billion euros. The company now expects sales of about 10.9 billion euros to 11 billion euros, compared with 10.7 billion euros previously.
Merck rose 1.3 percent to close at 99.30 euros at 5:30 p.m. in Frankfurt, valuing the company at 21.6 billion euros.
Net income fell 17 percent to 185.5 million euros, hurt by 98 million euros in one-time costs, mostly related to the company’s restructuring.
Total revenue for the quarter rose 12 percent to 2.84 billion euros, beating the 2.71 billion-euro average estimate of 13 analysts surveyed by Bloomberg. Core earnings, which exclude costs such as writedowns and merger expenses, totaled 1.98 euros a share, beating the 1.91-euro average estimate.
Revenue at Merck Serono, which represents 56 percent of total sales, rose 10 percent to 1.62 billion euros. Sales of multiple sclerosis therapy Rebif advanced 10 percent, excluding effects such as currency shifts, to 499 million euros. Revenue from Erbitux was little changed at 224 million euros.
Consumer health sales declined 7.7 percent to 122 million euros because of lower demand in Europe, the division’s biggest market. The company is reorganizing the unit and may close some sites, according to the statement.
Sales at the Merck Millipore equipment, ingredient and services division increased 9.5 percent to 643 million euros.
The performance-materials unit, the world’s biggest maker of liquid crystals for flat-screen televisions and electronics, reported a sales increase of 31 percent to 446 million euros, benefiting from the stronger U.S. dollar.
The strong performance in liquid crystals is “unlikely to be sustainable in the future” with the company expecting a slowdown in the fourth quarter, Martin Voegtli, an analyst at Kepler Capital Markets, said in a note to investors today. The increase in Rebif sales was a “positive surprise” because of U.S. price increases and a stronger U.S. dollar while Erbitux sales were a disappointment, he said.
“While we expect a positive market reaction to share price, structural issues remain and will weigh on the performance going forward,” he said.
Merck is closing the Geneva headquarters of its Merck Serono drug unit and transferring 750 employees elsewhere after halting work on its cladribine treatment and struggling with regulatory and clinical-trial obstacles to broadening approved uses for Erbitux. The company will also eliminate 1,100 positions in Germany by the end of 2015.
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