Merck KGaA’s MKGAF net income during the second quarter of 2015 increased to €343.4 million, up 13.2% from the year-ago period.
The company reported second-quarter 2015 earnings of €0.79 (approximately 87 cents), up 12.9% year over year.
Net sales were €3.2 billion, up 14.3% from the year-ago quarter.
All growth rates mentioned below are on a year-over-year and local currency basis.
Segment Sales in Detail
The company reports its results in three business sectors – Healthcare, Life Science and Performance Materials.
Sales at the Healthcare division sales grew 9.2% primarily supported by strong performances at the diabetes (Glucophage), thyroid disorders (Euthyrox), cardiovascular diseases (Concor) and Neurobion. Organically, sales at this segment inched up 1.5% driven mainly by the Latin American and Asia-Pacific markets. Rebif sales decreased 12% organically due to strong competition from oral formulations. Oncology drug, Erbitux’s sales also suffered a slight organic decline. On the other hand, Gonal-f sales witnessed organic growth of 1.6%.
The Life Science division’s sales increased 17.3%. Sales at this segment grew 6.2% organically primarily due to strong performance in North America. Sales at the Process Solutions business generated organic growth of 11% driven by higher demand from the biotech sector for viral clearance products and purification solutions. Lab Solutions segment sales grew 4.1% organically. However, Bioscience segment sales decreased 2.2% organically.
The Performance Materials division’s sales shot up 27.2%, driven by currency fluctuations (16.8%) and contribution to sales by the acquisition of AZ Electronic Materials (10.7%). Organically, this segment declined 0.4%.
Meanwhile, Merck KGaA is investing heavily in research and development purposes. Under its partnership with Pfizer Inc. PFE, Merck KGaA is conducting a phase III study on avelumab for non-small cell lung cancer. The candidate is being evaluated in several other early-stage studies for different types of cancers as well.
2015 Sales View Retained
Merck KGaA expects sales to grow slightly on an organic basis in 2015. Net sales are still expected in the range of €12.3 billion – €12.5 billion. The May 2014 acquisition of AZ Electronic Materials is expected to boost sales. Additionally, the company expects to benefit substantially from currency fluctuation (5%–7%). Organic growth at the Healthcare business is expected to remain at 2014 level, while the Life Science segment is expected to see moderate organic growth. The Performance Materials business is expected to undergo a slight organic increase due to strong portfolio effect.
Our Take
Performance at all three sectors of Merck KGaA in the second quarter of 2015 was impressive. The Life Science division showed the highest organic sales growth. We remain optimistic about the contribution of AZ Electronic Materials to the top line. Meanwhile, we believe that the Sigma-Aldrich acquisition (expected to close in the third quarter of 2015) will create further growth opportunities for the Life Science business.
Investors interested in well-ranked stocks in the health care sector may consider Valeant Pharmaceuticals International, Inc. VRX and Corcept Therapeutics Inc. CORT. Both carry a Zack Rank #1 (Strong Buy).
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