* Merck Group Sales Increase 7% to EUR 1.9 Billion
* Pharmaceutical Sales Rise 9%; Generics Sales Jump 22%
Merck Group reported sales increased 7% in the first quarter to
EUR 1,900 million, aided by strong sales from Generics. The operating result
fell 15% to EUR 182 million and profit after tax declined 19% to
EUR 76 million as U.S. generic competition for Glucophage eroded sales and
earnings.
DARMSTADT, Germany, April 24 /PRNewswire/ -- The Merck Group recorded a
satisfying first quarter with results in line with expectations. Sales rose 7%
to EUR 1,900 million from EUR 1,778 million in the year-ago quarter. All
business sectors reported sales increases. After 27 consecutive quarters of
double-digit sales growth for Merck's top-selling product, the oral
anti-diabetic Glucophage, U.S. generic competition began in late January and
caused the drug's quarterly sales to drop 61% to EUR 253 million from
EUR 653 million in the previous year's first quarter.
As a result, the operating result fell 15% to EUR 182 million from
EUR 215 million. Profit after tax was down 19% to EUR 76 million from
EUR 94 million. Net profit after minorities fell 18% to EUR 73 million, or
EUR 0.42 per share, from EUR 90 million, or EUR 0.52 per share.
"Considering the difficult circumstances - both for Merck and the economy
in general -- we are satisfied with the results of the first quarter," Merck
CEO Bernhard Scheuble said. "The results are in line with the guidance we
gave in February -- single-digit sales growth and a decline in profit compared
to last year." Merck booked an exceptional gain of EUR 50 million from the
wind down of its U.K. holding company. It had first-quarter exceptional
charges of EUR 35 million in connection with class-action and individual legal
claims for alleged Vitamin C price fixing and EUR 15 million for exceptional
costs at Electronic Chemicals in Singapore. The net effect is zero
exceptional items.
First-quarter earnings before interest and tax (EBIT) fell 15% to
EUR 182 million and profit before tax fell 16% to EUR 140 million. Merck's
tax rate of 46% resulted in taxes paid of EUR 64 million. For the first
quarter of 2001, the company had a tax rate of 44% and paid EUR 73 million in
taxes.
Merck achieved an ROS (return on sales) of 9.6% in the first quarter
compared to 12.1% the year before, while ROCE (return on capital employed) was
11.0% compared to 13.0% last year.
Geographically, first-quarter sales in North America rose 6% to
EUR 744 million or 39% of total sales. European sales also rose 6% to
EUR 730 million or 38% of the total. Sales in Latin America declined 5% to
EUR 103 million, in large measure because of the situation in Argentina, and
sales in Asia, Africa and Australia increased 14% to EUR 323 million.
Business sectors
Pharmaceuticals first-quarter sales rose 9% to EUR 826 million while the
operating result fell 9% to EUR 105 million due to the decline in sales and
profit from the diabetes treatment Glucophage, which now faces generic
competition in the U.S. The return on sales (ROS) for the first quarter
declined to 12.7% from 15.2%. Pharmaceuticals contributed 44% to first-quarter
sales and 58% to the operating result of the Merck Group. Sales of Ethicals
rose 5% to EUR 501 million for the quarter. After 27 consecutive quarters of
double-digit sales growth through the end of 2001, Merck's best-selling
product, the oral anti-diabetic Glucophage faced generic competition in the
U.S. on January 28, 2002. This caused a drop in sales for the Glucophage
franchise of 61% to EUR 253 million compared to EUR 653 million in the
year-ago quarter.
Sales of the Concor family of beta-blocker products rose 12% to
EUR 65 million. The U.S. subsidiary Dey Inc. saw sales rise 38% to
EUR 22 million for its EpiPen, a life-saving epinephrine auto-injector for the
treatment of anaphylaxis. Dey's DuoNeb unit-dose inhaler for the treatment of
chronic obstructive pulmonary disease posted sales of EUR 12 million after
having been launched in the third quarter of 2001.
Merck Generics drug sales jumped 22% to EUR 249 million despite the
deconsolidation of Pharmaceutical Resources Inc. in the U.S. during the third
quarter of last year. This sales increase was led by successful product
launches through Generics U.K. and strong sales growth at Alphapharm in
Australia and Genpharm in Canada.
Consumer Health Care sales fell 3% to EUR 76 million in the first quarter,
mainly due to the negative sales development in Latin America.
Sales in the Chemicals business sector rose 3% to EUR 439 million in the
first quarter compared to a strong first quarter in 2001. This slight
increase also reflects the continued slump in the high-technology industry.
While sales rose, the operating result fell 33% to EUR 55 million for various
reasons including a decrease in licensing revenue in the Liquid Crystals
division. The return on sales (ROS) dropped to 12.5% from a very strong
19.1% the year before.
Liquid Crystal sales improved 11% to EUR 74 million mainly due to consumer
demand for the popular new flat LCD monitors. Sales in the Pigments division
were slightly ahead of last year at EUR 83 million as demand for Pigments for
Coatings offset a drop in demand for Optical Materials. Electronic Chemicals
sales were down 10% to EUR 49 million compared to the year-ago quarter but up
4% compared to the fourth quarter of last year, indicating a recovery in the
semiconductor industry may be underway.
The new Analytics and Reagents division posted a 2% drop in sales to EUR
124 million as lagging sales in Europe offset growth in North America. The
new Life Science Products division had an 11% rise in sales to EUR 110 million
on strong demand from key pharmaceutical customers.
The Laboratory Distribution business sector, VWR International Inc.,
reported first quarter sales growth of 7% to EUR 697 million. The operating
result rose 25% to EUR 22 million from EUR 18 million the year before. Again,
the operating result showed a steady rise over the comparable prior period.
Outlook
Generic competition for Glucophage has already had an impact on sales and
profit but Merck will not be able to gauge the full impact until the end of
the second quarter. At this time, the company reiterates the guidance it gave
in February -- for the full year, Merck expects single-digit sales growth and
an operating result below that of last year. The Pharmaceutical business
sector will remain the major source of revenue for the Merck Group. The
Glucophage franchise will continue to provide revenue and sales are growing
steadily for Ethicals products such as the EpiPen and the Concor family of
heart drugs.
The good sales growth of the Merck Generics division is expected to
continue this year despite the disposal of the stake in Pharmaceutical
Resources Inc. As promised, the disposal will not prevent Merck's generics
from reaching the lucrative U.S. market. Earlier this month, PRI licensed a
further 11 Merck Generics products, including the low-cost version of
Schering-Plough's non-sedating Claritin(R) (loratadine). Also in April,
Merck's Generics U.K. began selling the off-patent version of AstraZeneca's
Losec(R) (omeprazole) ulcer medicine.
For Chemicals, the environment remains difficult and the anticipated
upswing remains to be seen with the exception of Liquid Crystals.
Notes to Editors:
Merck will hold a conference call in English for financial analysts and
journalists today at 4:30 p.m. Frankfurt time. To access the conference call,
please dial:
+44 (0) 20 8781 0598 or
+44 (0) 20 8240 8248
and use the passwords: "Merck - Christian Raabe."
An Instant Replay will be available for two working days after the
conference call by dialing +44 (0) 20 8288 4459, Access Code 615 682
The complete quarterly report in English and German, along with the
financial charts, are available on the company website: http://www.merck.de
Stock Symbols:
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With more than 34,000 employees in 55 countries, the Merck Group generated
sales of EUR 7.5 billion in 2001. Founded in 1668 in Darmstadt, Germany, the
company aims to be a world leader in its core businesses of pharmaceuticals
and chemicals. The Merck Group strongly believes the key to its long-term
business success is innovative products created by entrepreneurial and
talented employees. Merck groups its operating activities under Merck KGaA,
in which the Merck family holds 74% and the remaining 26% is publicly traded.
The former U.S. subsidiary, Merck & Co., has been a completely independent
company since 1917.
Business Development Figures: Q1/2002 vs Q1/2001
Merck Group (EUR million) Q1/2002 Q1/2001 (+/-%)
Sales 1,899.9 1,778.3 6.8
Research & Development -148.0 -141.6 4.5
Patent and license revenues 24.3 45.0 -46.0
Operating result 181.9 214.5 -15.2
Exceptional items -- -- --
EBIT 181.9 214.5 -15.2
Financial result -41.5 -47.2 -12.0
Profit before tax 140.3 167.4 -16.1
Income tax -64.0 -73.1 -12.4
Profit after tax 76.3 94.3 -19.0
Minority interest -3.2 -4.7 -30.5
Net profit after minority interest 73.1 89.6 -18.4
Earnings per share (EUR) 0.42 0.52 --
Free Cash-Flow 27.1 64.7 --
Investments (property, plant, equipment) 90.9 121.5 --
Employees 34,611 34,003 1.8
Sales by businesses (EUR million) Q1/2002 Q1/2001 (+/-%)
Pharmaceuticals 826.4 759.4 8.8
- Ethicals 501.4 477.3 5.0
- Generics 248.9 203.9 22.1
- Consumer Healthcare 76.1 78.2 -2.6
Chemicals 439.1 427.9 2.6
- Liquid Crystals 73.5 66.3 11.0
- Pigments 82.7 81.7 1.2
- Electronic Chemicals 48.5 54.0 -10.1
- Analytics and Reagents 124.1 126.5 -1.8
- Life Science Products 110.0 98.8 11.4
- New Business Chemicals 0.2 0.7 -66.9
Laboratory Distribution 697.0 652.2 6.9
- VWR (Europe) 210.7 214.6 -1.8
- VWR (North America) 486.3 437.6 11.1
Interdivisional sales -62.6 -61.3 2.1
Sales by Regions (EUR million) Sales
Q1/2002 (+/-%) Share(%)
Europe 729.6 6.2 38
North America 744.3 6.4 40
Latin America 103.2 -4.6 5
Asia/Australia/Africa 322.9 13.9 17
SOURCE The Merck Group
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CONTACT:
Phyllis Carter of Merck, +49-61-51-72-7144
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