Merck sees profit jump in Q2

Mer­ck, a sci­ence and tech­nol­o­gy com­pa­ny, gen­er­at­ed strong net sales growth in the sec­ond quar­ter of 2019, pri­mar­i­ly on an organ­ic basis. EBITDA pre grew very strong­ly and was also dri­ven by organ­ic per­for­mance. The firm con­firmed its full-year fore­cast for 2019.

“We achieved sales growth in all busi­ness sec­tors and regions. The jump in earn­ings was due to the very good busi­ness per­for­mance of Life Sci­ence as well as the mile­stone pay­ments in Health­care. These pay­ments are evi­dence of our suc­cess­es in devel­op­ing inno­v­a­tive med­i­cines,” said Ste­fan Oschmann, Chair­man of the Exec­u­tive Board and CEO of Mer­ck. “For the full year 2019, we con­tin­ue to assume growth for the Group key fig­ures, name­ly sales, EBITDA pre and EPS pre.”
In the sec­ond quar­ter, Mer­ck gen­er­at­ed net sales growth of 6.9% to € 4.0 bil­lion (Q2 2018: € 3.7 bil­lion). Organ­ic sales growth amount­ed to 5.6%. Mer­ck grew organ­i­cal­ly in all regions, with espe­cial­ly strong growth in Asia-Pacif­ic, its largest report­ing region. Sales also increased due to slight­ly pos­i­tive exchange rate effects of 1.5%, which were pri­mar­i­ly due to the U.S. dol­lar and the Japan­ese yen, as well as a slight­ly neg­a­tive port­fo­lio effect of ‑0.2%.

EBITDA pre, the Group’s most impor­tant earn­ings indi­ca­tor, rose sharply by 23.8% to € 1.1 bil­lion in the sec­ond quar­ter (Q2 2018: € 920 mil­lion). The increase pri­mar­i­ly stemmed from organ­ic growth of 20.3% and was dri­ven by the mile­stone pay­ments in Health­care and the very good per­for­mance in Life Sci­ence. It was sup­port­ed by pos­i­tive exchange rate effects of 3.3% and slight port­fo­lio effects of 0.3%. Accord­ing­ly, Group EBIT also grew very strong­ly, increas­ing by 57.6% to € 618 mil­lion (Q2 2018: € 392 million).

Net income of Mer­ck thus soared in the sec­ond quar­ter by 90.8% to € 471 mil­lion (Q2 2018: € 247 mil­lion). Earn­ings per share increased to € 1.08 (Q2 2018: € 0.57). Earn­ings per share pre climbed by 25.2% to € 1.54 (Q2 2018: € 1.23).
Net finan­cial debt of Mer­ck as of June 30 increased by € 1.1 bil­lion over Decem­ber 31, 2018 to € 7.8 bil­lion (Dec. 31, 2018: € 6.7 bil­lion). The main rea­sons for this includ­ed the first-time appli­ca­tion of the new account­ing stan­dard IFRS 16 as well as div­i­dend pay­ments. Mer­ck had 53,051 employ­ees world­wide on June 30, 2019, com­pared with 54,009 on June 30, 2018. The decrease is pri­mar­i­ly attrib­ut­able to the divest­ment of the Con­sumer Health busi­ness, which closed in Decem­ber 2018.

All business sectors contribute to sales growth in the first half

In the first six months of 2019, net sales of the Mer­ck Group rose by 7.2% to € 7.7 bil­lion (Jan­u­ary-June 2018: € 7.2 bil­lion). This pos­i­tive sales devel­op­ment was main­ly due to the organ­ic sales increase of 5.7%, to which all three busi­ness sec­tors con­tributed. EBITDA pre rose by 9.6% to € 2.1 bil­lion in the first six months of 2019 (Jan­u­ary-June 2018: € 1.9 bil­lion). At 8.9%, organ­ic per­for­mance was also a main dri­ver of the increase. The EBITDA pre mar­gin increased slight­ly to 26.8% (Jan­u­ary-June 2018: 26.2%). Earn­ings per share pre for the first half rose by 4.3% to € 2.67 (Jan­u­ary-June 2018: € 2.56).

Healthcare milestone payments reflect R&D achievements

Sales by the Health­care busi­ness sec­tor grew organ­i­cal­ly in the sec­ond quar­ter by 5.2%. Includ­ing slight­ly pos­i­tive for­eign exchange effects of 0.7%, net sales of Health­care amount­ed to € 1.7 bil­lion (Q2 2018: € 1.6 bil­lion). Organ­ic growth was pri­mar­i­ly dri­ven by the Gen­er­al Med­i­cine & Endocrinol­o­gy fran­chise, Erbitux as well as the two new med­i­cines Maven­clad and Baven­cio; fur­ther­more by the Fer­til­i­ty franchise.

Sales of Maven­clad, an oral med­i­cine for the treat­ment of mul­ti­ple scle­ro­sis, tripled to € 61 mil­lion (Q2 2018: € 20 mil­lion), sup­port­ed by reg­u­la­to­ry approval in the Unit­ed States at the end of March. The good per­for­mance of Maven­clad part­ly off­set the declines in sales of Rebif. In the sec­ond quar­ter, sales of Rebif, which is used to treat relaps­ing forms of mul­ti­ple scle­ro­sis, declined organ­i­cal­ly by ‑16.1%, par­tic­u­lar­ly as a result of the per­sis­tent­ly chal­leng­ing com­pet­i­tive envi­ron­ment in North Amer­i­ca. Includ­ing cur­ren­cy tail­winds of 2.5%, Rebif sales amount­ed to € 331 mil­lion (Q2 2018: € 383 mil­lion). Sales of the immuno-oncol­o­gy drug Baven­cio totaled € 23 mil­lion (Q2 2018: € 17 mil­lion). Sales of the oncol­o­gy drug Erbitux grew organ­i­cal­ly by 5.7%; the addi­tion of Erbitux to the Nation­al Reim­burse­ment Drug List in Chi­na was a major dri­ver of the good devel­op­ment of Erbitux sales in Asia. Includ­ing neg­a­tive for­eign exchange effects, sales amount­ed to € 212 mil­lion (Q2 2018: € 203 mil­lion). Gonal‑f, the lead­ing recom­bi­nant hor­mone for the treat­ment of infer­til­i­ty, saw organ­ic growth of 2.8%, gen­er­at­ing sales of € 191 mil­lion (Q2 2018: € 184 mil­lion). The Gen­er­al Med­i­cine & Endocrinol­o­gy fran­chise, which com­mer­cial­izes med­i­cines to treat car­dio­vas­cu­lar dis­eases, thy­roid dis­or­ders, dia­betes and growth dis­or­ders, among oth­er things, gen­er­at­ed very strong organ­ic growth of 10.1%, yield­ing net sales of € 640 mil­lion (Q2 2018: € 580 mil­lion). Deliv­er­ing organ­ic sales growth of 31.9% pri­mar­i­ly thanks to demand in Chi­na, the dia­betes med­i­cine Glu­cophage was the main dri­ver of this development.

EBITDA pre of Health­care rose organ­i­cal­ly in the sec­ond quar­ter by 37.3%. Includ­ing a slight­ly pos­i­tive exchange rate effect of 2.2%, it amount­ed to € 528 mil­lion (Q2 2018: € 379 mil­lion). It includ­ed mul­ti­ple mile­stone pay­ments. This demon­strates the achieve­ments of Mer­ck in the dis­cov­ery and devel­op­ment of inno­v­a­tive med­i­cines. On May 15, the U.S. Food and Drug Admin­is­tra­tion (FDA) grant­ed reg­u­la­to­ry approval of Baven­cio in com­bi­na­tion with axi­tinib as a first-line ther­a­py in patients with advanced renal cell car­ci­no­ma (RCC). For this, Mer­ck received a mile­stone pay­ment of around € 35 mil­lion from its alliance part­ner Pfiz­er. The upfront pay­ment amount­ing to € 300 mil­lion from the alliance with Glax­o­SmithK­line to co-devel­op and com­mer­cial­ize the immunother­a­py bin­tra­fusp alfa also had a pos­i­tive effect of € 31 mil­lion in the sec­ond quar­ter. Mer­ck also received a mile­stone pay­ment of € 75 mil­lion from Bio­Marin Phar­ma­ceu­ti­cal in con­nec­tion with the sale of the rights to Palynz­iq (Peg-Pal) in 2016.