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Merck KGaA Targets €4 Billion in New Product Sales

14.10.2016 -

Germany’s Merck KGaA is targeting sales of around €4 billion with new products by 2022, CEO Stefan Oschmann said at a Capital Markets Day presentation. The Darmstadt-based company expects new medicines from its pharmaceutical pipeline to contribute around €2 billion, with innovations in the Life Science and Performance Materials segments each adding around €1 billion in sales. The launch of a new liquid crystal technology is also planned.

Oschmann said Merck has focused its drugs pipeline on three therapeutic areas: immunology, immuno-oncology and oncology. Earlier this year it filed for regulatory approval of cladribine tablets for the treatment of multiple sclerosis and before the end of the year expects to have completed its regulatory submission of the immuno-oncological antibody avelumab in metastatic Merkel cell carcinoma. Since October 2015, some 20 drug projects have either advanced into the next phase of clinical development or are on the threshold.

Despite cyclical destocking at display industry customers, the Performance Materials segment (which includes liquid crystals), has demonstrated “sound earnings.” The company recently commissioned a €30 million OLED materials plant at Darmstadt and is building a new plant for liquid crystal window modules, with the new product hitting the market in 2018. Its new SA-VA liquid crystal technology will be aimed at large-area displays.

In the Life Science segment, Merck is “benefiting from strong demand and is growing faster than the market,” while the Sigma-Aldrich acquisition is “having a positive effect on profitability.” By the end of 2018, the company expects to have leveraged synergies worth €105 million.

Merck will rely on internal growth for the short term, the CEO suggested at the presentation. He ruled out major acquisitions worth more than €500 million if the debt level expressed as the ratio of net financial debt to EBITDA pre-exceptionals is greater than 2, unless divestments can be leveraged to finance them.

“As was the case following major acquisitions, subsequent to the Sigma-Aldrich purchase, we are working to swiftly deleverage and want to bring the ratio of our net debt to EBITDA pre-exceptionals down to less than 2 by 2018,” added CFO Marcus Kuhnert. “Then, major acquisitions will be on the agenda again,” he said.

Since 2002, Merck has made acquisitions and divestments with a volume of around €38 billion. All four were financially attractive and successfully integrated, Oschmann said. Sigma-Aldrich, acquired in late 2015, was its biggest deal, costing $17 billion. The company is now predicting that the integration will exceed synergy targets by €20 million. The additional top-line synergies will come from integrating the legacy’s company’s e-commerce platform.