CDMO Experiences Downturn at Merck KGaA as COVID-Related Sales Plunge, Says CFO

COVID-19 Hits Merck KGaA’s CDMO Hard, CFO Shares Insights

Merck KGaA is facing the challenges it anticipated for 2023, with its contract manufacturing division and process solutions arm experiencing significant setbacks due to production timing issues and COVID-related sales declines. The conglomerate’s life science services business unit, which provides contract manufacturing and testing services, reported a substantial organic sales decline in the second quarter, earning €178 million ($194.6 million), compared to €262 million in the same period last year.

Similarly, the process solutions arm’s sales slumped by 12% to €994 million ($1.08 billion). This decline was primarily due to destocking and COVID-related sales downturns. Merck KGaA’s CFO, Helene Von Roeder, stated that the life science services division faced a sharp drop-off in COVID-related sales, as anticipated, leading to marginal levels of revenue.

However, Merck KGaA found some solace in its healthcare sector, where recent product launches saw a 29% organic growth. The established pharmaceuticals portfolio also contributed to the company’s sales growth, achieving an 8% increase. Despite the challenges faced by the life sciences and electronics divisions, CEO Belén Garijo mentioned that the strong performance in healthcare managed to largely offset these declines.

Merck KGaA’s pharma products, as a whole, achieved second-quarter revenues of €2.05 billion ($2.24 billion), showing a growth of approximately 5.3% compared to the same period last year. Notably, the oncology segment played a significant role in driving this growth, with 18% organic growth driven by products such as Bavencio and Erbitux. Additionally, the multiple sclerosis drug Mavenclad grew by 28%, which helped offset a 3% decline for the older MS drug, Rebif.

The company had already anticipated a challenging year due to various factors, including a slowdown in the semiconductor market, reduced demand for COVID-related services, and persistent high inflation. As a result, Merck KGaA previously predicted “slight to solid” revenue growth for the year while expecting a decline in profits.

For the second quarter, Merck KGaA’s total revenues amounted to €5.3 billion, a decrease of 4% compared to the previous year. This performance was largely in line with analysts’ expectations, according to ODDO BHF.

Given the struggles faced in 2023, Merck KGaA has revised its revenue guidance to a range of €20.5 billion to €21.9 billion, down from the previous range of €21.2 billion to €22.7 billion.

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