Merck KGaA Sees Profit Rising This Year on AZ Electronic Buy

May 15, 2014 11:41 am ET

(Updates with closing shares in fifth paragraph.)

May 15 (Bloomberg) -- Merck KGaA, the maker of the Erbitux cancer drug, forecast a “moderate increase” in sales and profit in 2014 because of the acquisition of AZ Electronic Materials SA, a chemicals supplier to the electronics industry.

Earnings before interest, taxes, depreciation and amortization excluding one-time items will be 3.3 billion euros ($4.5 billion) to 3.4 billion euros, the Darmstadt, Germany- based company said today in a statement. Merck previously forecast that profit would be at the same level as last year, when the company earned 3.25 billion euros.

Merck has sought growth outside its pharmaceutical unit amid research setbacks and competition for its older drugs. The company completed the 1.6 billion-pound ($2.7 billion) acquisition of AZ this month. The deal’s contribution to this year’s profit forecast is a positive sign, said Peter Spengler, an analyst for DZ Bank AG in Frankfurt.

“The results were good,” Spengler said in a telephone interview. He rates Merck’s shares buy. “All segments of the business contributed positively.”

The shares fell 0.2 percent to close at 123.25 euros in Frankfurt. Merck returned a loss of 3.7 percent this year before today, compared with a 12 percent gain from the Bloomberg Europe Pharmaceuticals Index.

Ebitda excluding one-time items rose 0.7 percent to 807.1 million euros in the first quarter, Merck said today. That beat the 793.5 million-euro average estimate of eight analysts surveyed by Bloomberg.

Rebif’s Price

Total revenue fell 3.5 percent to 2.66 billion euros, hurt by the euro’s increase against the dollar, yen and Latin American currencies. Excluding currency swings, revenue would have risen 1.8 percent, the company said. Merck forecast 2014 sales of about 10.9 billion euros to 11.1 billion euros.

Pharmaceutical sales fell 1 percent to 1.38 billion euros, hurt by the euro’s strength. Excluding currencies, sales increased 4.2 percent, helped by a 5.3 percent increase for the Rebif multiple sclerosis drug.

Rebif’s price has risen amid competition from newer medicines, according to an analysis conducted for Bloomberg News by DRX, a Los Angeles-based provider of comparison software for health plans. The wholesale price has soared 154 percent since 2007, the analysis showed, to $967.28 for 1 milliliter of the drug in March.

“The price increases could more than compensate for the decline in volumes,” Chief Executive Officer Karl-Ludwig Kley said on a call with journalists today. The volume drop has slowed, he said. He declined to say how long Merck plans to keep raising prices.

--With assistance from Robert Langreth in New York and Makiko Kitamura in London.