IHS Global Insight Perspective | |
Significance | Merck Serono's first-quarter revenues grew 7% year-on-year to reach 1.4 billion euro, boosted by its two lead products Erbitux (interferon beta-1a) and Rebif (cetuximab), which respectively grew 19% and 17% over the period. |
Implications | While Rebif (interferon beta-1a) remained the company's best-selling product, Erbitux (cetuximab)—Merck Serono's fastest-growing compound—continued to penetrate the colorectal and head and neck cancer market, helped by a growing acceptance of personalised medicines. |
Outlook | In light of the positive performance achieved in the first quarter, Merck KGaA has upgraded its 2010 guidance, saying Merck Serono's revenues should increase between 2% and 5% in 2010. The pharmaceutical division however prepares to face significant challenges in the long-term in light of the recent setbacks that have affected its high-potential compounds, Erbitux, Cladribine and Stimuvax. |
German biopharmaceutical company Merck Serono has once again performed very well as it reported a 9.7% year-on-year (y/y) increase in net sales to 1.3 billion euro (US$1.71 billion) in the first quarter of 2010 while the whole pharmaceutical division grew 8.8% y/y in the reported currency to 1.4 billion euro. Spending on pharmaceutical research and development jumped 12% y/y to 309 million euro over the period while marketing and selling costs only increased by 2.1% to 379 million euro. Merck KGaA's pharmaceutical business realised 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 502.8 million euro, up 4.8% y/y.
Merck Pharmaceuticals: Q1 2010 Financial Results (mil. Euro) | ||
| Q1 2010 | % Change, Y/Y* |
Total Revenues | 2,098.9 | 12.9% |
Pharmaceutical Sales | 1,443.2 | 8.8% |
- Merck Serono | 1,336.3 | 9.7% |
- Consumer Healthcare | 107.6 | 0.0% |
Royalties | 71.2 | - 26% |
- Merck Serono | 70.5 | - 26.7% |
- Consumer Healthcare | 0.7 | - |
Costs of Sales | 255 | 14.6% |
Marketing & Selling | 379 | 2.1% |
- Merck Serono | 322.2 | 1.3% |
- Consumer Healthcare | 56.8 | 6.7% |
Administrative Expenses | 68.3 | -5.7% |
R&D Costs | 309.3 | 12.0% |
Operating Income** | 502.8 | 4.8% |
Operating Margin | 33.2% | 0.5 pp lower |
R&D as % of Sales | 21.4% | 0.6 pp higher |
Net income | 191.4 | 237.9% |
* in reported currency | ||
Merck Serono's good performance was mainly fuelled by sales of its two best-selling products: Rebif (interferon beta-1a) and Erbitux (cetuximab). MS treatment Rebif (interferon beta-1a) remained the company's best-selling product over the first quarter with sales up 17% y/y in the reported currency to 429 million euro. In second position comes Merck's cancer drug Erbitux, which scored the fastest-growing sales rate—19% y/y—to generate sales of 192 million euro. This very good performance was boosted by the growing acceptance of the drug in the first-line treatment of metastatic colorectal cancer for KRAS wild-type patients and of head and neck cancer patients. Meanwhile, sales of follicle-stimulating hormone Gonal-F grew by a fair 3.8% y/y to 139 million euro while first quarter sales of recombinant growth hormone Saizen (somatropin) achieved an impressive 18% y/y growth.
Merck Serono: Q1 2010 Sales of Leading Products (mil. euro) | ||
Brand | Q1 2010 | % Change, Y/Y |
Rebif | 429 | 17% |
Erbitux | 192 | 19% |
Gonal-F (follitropin alpha) | 139 | 3.8% |
Concor (bisoprolol fumarate) | 97 | - 2.1% |
Glucophage (metformin) | 81 | 9.7% |
Saizen | 54 | 18% |
Total Merck Serono Sales | 1,336.3 | 7% |
Source: Merck KGaA | ||
Outlook and Implications
Merck Serono's revenue is expected to grow between 2% and 5% in 2010 as its operating profit could jump 30% to 40% according to the company. Long-term expectations are however uncertain for the German company which has suffered several significant setbacks on the research and development front in the last few months. This began in November 2009 when Merck failed to obtain marketing approval for its drug Erbitux in advanced or metastatic non-small-cell lung cancer (NSCLC) in Europe (see Germany: 20 November 2009: Merck's Erbitux Receives CHMP Negative Opinion in Advanced NSCLC). The European Committee for Medicinal Products for Human Use (CHMP) negative opinion was shortly followed by an FDA negative feedback related to Merck's New Drug Application (NDA) for the oral formulation of its multiple sclerosis (MS) treatment Cladribine (see Germany: 1 December 2009: FDA Refuses Merck KGaA's NDA for MS Pill Cladribine). In parallel, Merck Serono had to suspend all clinical trials involving its therapeutic cancer vaccine Stimuvax (liposomal vaccine BLP25) after a patient participating in a Phase II trial developed encephalitis (see Germany: 23 March 2010: Merck Serono Announces Temporary Suspension of Stimuvax Clinical Programme). This came as a blow for Merck Serono which has successively seen three of its high-potential compounds fail to smoothly head for marketing approval. The challenge going forward for the group will be to successfully resubmit its NDA for Cladribine in the United States while effectively integrating the newly acquired U.S. biotech equipment supplier Millipore to diversify its source of revenue at a time when its main revenue contributor seems to face uncertainties on the R&D side (see Germany: 1 March 2010: Merck KGaA to Acquire Biotech Tool Maker Millipore in US$7.2-bil. Transaction).