German Merck profit soars on Serono deal
( AP ) - Merck KGaA, the German drug and chemical company whose products include the multiple sclerosis drug Rebif and cancer treatment Erbitux, said Monday that its fourth-quarter profit soared to nearly $5 billion as it reaped the benefits of its acquisition of Serono and the divestiture of its generic drug unit.
The Darmstadt-based company earned 3.39 billion euros ($4.9 billion) in the final three months of 2007 compared with 129.5 million euros a year earlier. Sales more than doubled to 1.8 billion euros ($2.6 billion) in the fourth quarter compared with nearly 1.2 billion euros a year earlier, lifted in part by its purchase of Serono SA.
For 2007, the company's net profit rose to 3.5 billion euros ($5.1 billion) from 1 billion euros in 2006, while sales surged 58 percent higher to 7 billion euros ($10.3 billion). The figures were boosted by Merck's decision to sell its generics unit to Mylan Inc. for 4.9 billion euros in the fourth quarter.
That move, the company said, meant "Merck was able to repay essentially all the debt resulting from the purchase of Serono after less than one year."
Merck Chief Executive Karl-Ludwig Kley said the results - both quarterly and yearly - were clear evidence that its acquisition of Swiss biotech firm Serono was the right decision.
"For Merck, 2007 was a year of major accomplishments - the successful integration of Serono, the sale of generics and a capital increase, resulting in a very low net debt at year end," he said. "We produced the strongest financial results in Merck's long history, allowing us to recommend an increased regular dividend of 1.20 euros ($1.76) and a one-time bonus dividend of 2 euros ($2.93)."
Kley said that given its performance so far and its outlook for 2008 even "in these uncertain economic times, we expect 2008 will be another year of solid growth for Merck." The company said it expects revenue to grow between 5 percent and 9 percent by the end of the year.
The company's pharmaceutical business saw its revenue more than double in 2007 to 4.8 billion euros ($7 billion) from 2.3 billion in 2006, which did not include results from Serono. In the fourth-quarter, sales more than doubled to nearly 1.3 billion euros ($1.9 billion) from a year earlier.
The Merck Serono division, part of the pharmaceutical business, saw its sales more than double to 4.4 billion euros ($6.5 billion) from 1.9 billion in 2006, lifted by the Serono deal. In the fourth quarter, sales were up to 1.1 billion euros ($1.6 billion) compared with 493 million euros a year earlier. The increase was credited to stronger sales of Rebif and Erbitux.
Globally, sales of Rebif - part of the drug development pipeline acquired in the Serono deal - rose 10 percent in 2007 and 11 percent in the last three months of the year. With currency effects added in, sales rose 5.3 percent to 1.2 billion euros ($1.7 billion) for the year and up 5.1 percent to 317 million euros ($465.2 million) in the fourth quarter.
Sales of Erbitux, which it licensed from ImClone Systems Inc., leaped 40 percent in 2007 to 470 million euros ($689.7 million) and were up 33 percent to 127 million euros ($186.4 million) in the quarter.
Its liquid crystals operation, which makes the crystals used in computer displays, saw sales slip 2.2 percent in the fourth quarter to 248 million euros ($363.92 million) but Merck said that revenue from that unit would likely increase 5 percent to 10 percent. For the year, sales rose 2.3 percent to 916 million ($1.3 billion).
Merck said it plans to invest 11 million euros ($16.14 million) in South Korea to set up an advanced technology center aimed at enhancing its liquid crystals research and development efforts and manufacturing in that market.
Shares of Merck fell 2.3 percent to 82.57 euros ($121.05) in Frankfurt trading.
Merck of Germany is the oldest drug company in the world and has been separate from the U.S.-based Merck & Co. since the end of World War I.