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Merck KGaA (MKGAF) Q3 Earnings Decline Y/Y, Revenues Flat

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Merck KGaA MKGAF reported third-quarter 2017 earnings of $1.77 per American Depositary Share, 6.4% lower than the year-ago figure of $1.90.

Net sales in the reported quarter came in at $4.35 billion (€3.7 billion), up a mere 0.1%. Organic sales growth of 4.2% was driven by the Healthcare and Life Science segment. However, unfavorable foreign exchange impacted sales by 3.7% while portfolio changes had a slight negative impact.

Shares of the company have performed almost in line with industry so far this year. The company rose 1.6% while the industry increased 1.3% in the same period.


Segment Sales in Detail

The company reports results under three segments – Healthcare, Life Science and Performance Materials.

The Healthcare division recorded sales of €1.7 billion, up 1.2% year over year due to a negative impact of 3.4% of foreign exchange rate and a negative 1.2% impact of portfolio changes. However, organically, sales at the segment were up 5.8%.

As part of the strategy to focus on the discovery and development of innovative pharmaceuticals, the company divested its Biosimilars business to Fresenius. The company is also looking to divest its Consumer Health business, which has registered 11% higher sales compared with the year-ago period.

Erbitux’s sales were down 5.5% from the year-ago period to €207 million due to increased competition and negative currency movement. Rebif sales came in at €389 million, down 10.8% due to organic decline of 6.9% and negative currency impact of 4.1%. Gonal-f sales were down 7.1% to €169 million due to continued competitive pressure in North America and Europe and unfavorable currency impact.

Sales at the Life Science segment amounted to €1.4 billion, up 1.3% primarily due to growth in all business segments, partially offset by an unfavorable foreign exchange effect of 3.9%. Moreover, it witnessed a positive portfolio effect of 0.4%. On an organic basis too, the segment witnessed sales growth (up 4.8%). Both Process Solutions and Applied Solutions business recorded organic sales growth of 5.2%. The Research Solutions business registered organic growth of 4%.

Performance Materials sales were down 5.3% to €611 million. However, organically, the segment witnessed a 1.5% decline in sales.

Other Update

In August, the company received approval for Mavenclad in Europe for the treatment of relapsing multiple sclerosis (“MS”). Meanwhile, NICE recommended approval of Erbitux for squamous cell carcinoma of the head and neck. This was followed by a recommendation for the approval of Mavenclad in the United Kingdom for MS in November.

Merck KGaA is evaluating lead immuno-oncology candidate, avelumab, in a number of phase III studies for several cancer indications under its partnership with Pfizer Inc. PFE. In September 2017, the candidate received approval for the treatment of metastatic Merkel cell carcinoma (mMCC) in Europe and Japan under the tradename of Bavencio. In the first half of 2017, Bavencio received approval for mMCC and advanced bladder cancer in the United States.

However, Bristol-Myers Squibb Company’s BMY Opdivo and Roche Holding AG’s RHHBY Tecentriq are available in the market for the treatment of bladder cancer.

Outlook Maintained

Merck KGaA has maintained its guidance for 2017. The company expects net sales toward the lower end of the range of €15.3-€15.7 billion due to appreciation of euro against the dollar.

Merck KGaA Price, Consensus and EPS Surprise

Merck KGaA Price, Consensus and EPS Surprise | Merck KGaA Quote

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