German pharmaceutical company Merck KGaA reported a fall in second-quarter profit of 4.5% owing to acquisition-related expenses, lower royalty, licence and commission income and a strong euro.
Net profit was €303m compared with €316m in the same period in 2013. Income from royalties, licences and commissions fell by 30.4% to €441m, mainly owing to a decline in the company's Merck Serono business.
Sales increased by 1.9% to €2.8bn in the second quarter (Q2 2013: €2.7bn).
Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 2.3% to €845.7m from €826.4m.
'We had a solid second quarter,' said Karl-Ludwig Kley, Chairman of the Executive Board of Merck. 'This was primarily due to our healthy operating business. Especially in Emerging Markets, all our divisions performed well. Merck's stronger focus on this attractive region is visibly paying off.'
Dynamic business in Emerging Markets contributed to the organic sales growth, the company said. Strong growth of 11.1% was mainly driven by the Merck Serono and Merck Millipore divisions, which helped sales in these regions rise by 8.5% to €1.0bn (Q2 2013: €967m).
In the second quarter, Merck Serono delivered organic sales growth of 3%. Owing to negative exchange rate effects amounting to -4.4%, the division's sales declined slightly by 1.4% to €1.4bn (Q2 2013: €1.5bn). Merck Serono's organic sales in Emerging Markets grew by 16.7%.
We had a solid second quarter. Especially in Emerging Markets, all our divisions performed well
Multiple sclerosis drug Rebif posted an organic sales decline of -2.8% in Q2 owing to 'the increasingly difficult competitive situation' in North America and Europe, the company said. Including negative exchange rate effects of -4.2%, Rebif sales fell by 7% to €464m (Q2 2013: €499m).
Sales of the oncology drug Erbitux showed strong organic growth of 11.3% in Q2. Including a foreign exchange impact of -4.9%, sales increased 6.5% to €229m (Q2: 2013: €215m). The portfolio for the treatment of thyroid disorders, as well as Gonal-f, the recombinant hormone used in the treatment of infertility, 'performed particularly well in the second quarter of 2014', the company said.
'At Merck Serono, we want to further expand our business with existing medicines this year. To this end, we are focusing on Emerging Markets. The past quarters have already confirmed the success of this approach,' said Kley.
The Consumer Health division, which manufactures and markets over-the-counter pharmaceuticals, generated strong organic sales growth of 8.5%, which was the highest percentage increase of all four divisions. Including adverse exchange rate effects of -5.2%, sales increased by 3.3% to €185m (Q2 2013: €179m). Organic sales growth was mainly driven by the brands Neurobion, Floratil and Femibion, as well as by local brands in Germany. As in the first quarter of 2014, weaker demand for Bion and Nasivin was compensated for by strong sales of the vitamin supplement Femibion and local brands in Germany and France. EBITDA rose by 16.7% to €41m in this division.
'The realignment of Consumer Health is reflected by the increase in profitability,' said Kley. 'Focusing on strategic brands and key markets has put us on the right path, which we will continue resolutely to pursue.'
At Merck Serono, we want to further expand our business with existing medicines this year. To this end, we are focusing on Emerging Markets
The Merck Millipore bioscience business area, which primarily markets products and services for pharmaceutical and academic research laboratories, recorded a moderate organic sales increase of 2%. Across-the-board healthcare spending cuts in the US continued to soften demand. However, this was compensated for by higher demand from diagnostic laboratories for cell analysis products, the company said. In the second quarter, EBITDA at Merck Millipore climbed 6.3% to €166m.
'For Merck Millipore, 2014 will be a year of growth initiatives. Here we will be leveraging our market share gains in North America, further growth in Asia and Latin America, and using new products to generate additional sales,' said Kley.
In the first six months of 2014, Group sales increased by 0.1% to €5.4bn (January–June 2013: €5.4bn). Regionally, sales showed the strongest organic growth in the Emerging Markets and Rest of World regions, with growth of 8.4% and 4%, respectively. Europe generated slight organic growth of 1.1%, whereas sales in North America slipped organically by -0.5%.
EBITDA was €1.65bn (January–June 2013: €1.63bn). This represented a slight increase over the half-year result reported in 2013.
