Merck Serono's Revenues Rise 5.7% During Q3 on Good Performance of Lead Products

German biopharmaceutical company Merck Serono has reported a 5.7% year-on-year (y/y) increase in net sales to 1.3 billion euro (US$1.81 billion) in the third quarter (Q3) of 2010 while sales of Merck KGaA's consumer health business grew 1.5% y/y to reach 124.7 million euro. Overall, the whole pharmaceutical business of Merck KGaA grew 5.3% y/y in the reported currency to 1.5 billion euro over the period. On the expense side, expenditure on pharmaceutical research and development decreased 4.6% compared with the same period last year to account for 279.6 million euro while marketing and selling costs increased by 9.7% to 345.6 million euro. Merck KGaA's pharmaceutical business achieved an operating income—calculated by IHS Global Insight as sales minus cost of sales, R&D, and Selling, General and Administrative (SG&A) costs—of 538.4 million euro, up 16.3% y/y during the third quarter of 2010.

Merck Serono's two best-selling products, Rebif (interferon beta-1a) and Erbitux (cetuximab), continued to achieve strong growth over the third quarter. On top position, MS treatment Rebif (interferon beta-1a) brought in sales of 407 million euro, up 6.8% y/y in the reported currency. Merck's cancer drug Erbitux follows with a sales growth of 17% y/y, the fastest among Merck's portfolio, and revenues of 207 million euro. Meanwhile, sales of follicle-stimulating hormone Gonal-F grew by a stable 3.9% y/y to 115 million euro while first-quarter sales of recombinant growth hormone Saizen (somatropin) achieved an impressive 17% y/y growth, striking the fifth position in Merck's portfolio.

Outlook and Implications

Merck Serono has revised its forecast and is now expected to grow 7.2% in 2010, from a previous estimate of 7.5%. Merck KGaA however raised its profit guidance for its pharmaceutical unit on lower-than-anticipated research and development costs, which decreased 4.6% y/y over the third quarter. Merck now expects the Merck Serono core operating result to rise by 26%, up from a previous forecast of 12%.

Merck Serono suffered a series of significant setbacks on the regulatory front during the third quarter as the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) rebuffed its drug Movectro (cladribine) tablets as a treatment for relapsing-remitting multiple sclerosis (MS; see Germany: 27 September 2010: CHMP Issues Negative Opinion for Merck KGaA's MS Pill). In the United States, the approval of Novartis' (Switzerland) drug Gilenya/Gilenia (fingolimod) has ruined its chances to benefit from a first-mover advantage in this huge market where the U.S. FDA refused to grant approval to the drug in December last year (see Switzerland: 22 September 2010: Novartis Wins Final FDA Nod for Oral MS Drug and Germany: 1 December 2009: FDA Refuses Merck KGaA's NDA for MS Pill Cladribine). On the positive side, the third quarter was marked by the first ever approval of an MS pill with the Russian nod for the marketing of Movectro in Russia (see Russia: 12 July 2010: Merck KGaA's MS Pill Cladribine Approved in Russia). This first approval represented a significant milestone as Merck Serono managed to gain the regulatory green light several months ahead of its rival Novartis (Switzerland, see Russia: 10 September 2010: Novartis's Oral MS Drug Approved in Russia).

A high single-digit growth in sales is expected for the next two years at Merck's pharma unit as sales are likely to rise by double digits in emerging regions. The transfer of part of Merck’s operations to Dubai underlines its ambition to capture the most of this growth potential with a special focus put on Russia, the Middle East and Africa. Meanwhile, inflammatory diseases and oncology will remain keys to Merck Serono's growth in the near future. The expansion of its collaboration with Belgian firm Ablynx is the latest sign of Merck's objective to further develop and strengthen its inflammatory pipeline (see Germany: 12 October 2010: Merck Serono Partners with Ablynx in Second Nanobody Agreement, Moves African, Russian Operations to U.A.E.).