Resilient US Rebif, Gonal-f Q2 Sales Allow German Merck To Up Forecast
Executive Summary
Solid US demand for Gonal-f fertility and Rebif MS drugs in the second quarter – along with commissions from its Xalkori co-promotion partnership there with Pfizer – let Merck KGaA upgrade its guidance for the full year.
Germany's Merck KGAA – which is trying to transform itself into a top oncology and immuno-oncology innovator – lifted its full-year earnings forecast Aug 4 in part on the back of stable US sales for its Gonal-f fertility treatment after the recall of a rival product there, and for demand for its Rebif (interferon beta-1a) treatment for relapsing forms of multiple sclerosis, which faces competition from oral treatments.
The company said its priorities going forward are now boosting its pharma pipeline, further integration of chemicals and biologicals maker Sigma-Aldrich, which it acquired recently for $17bn, and reducing its new financial debt which stood at €12.5bn at the end of June and only slightly lower than the €12.7bn recorded at the end of 2015.
"Since particularly in healthcare our performance in the second quarter was so good, we have decided to lift our forecast for the full year" – Merck KGaA CEO Stefan Oschmann
"We again achieved everything we aimed for in the second quarter. That applies to both the Sigma-Aldrich integration and the development of new medicines," said Stefan Oschmann, chief executive of the family-controlled conglomerate which is also the largest maker of high-tech chemicals for display screens. "Strong demand for our products and dynamic market developments gave our healthcare and life science businesses additional tailwinds. Since particularly in healthcare our performance in the second quarter was so good, we have decided to lift our forecast for the full year," he told an analysts call.
Merck therefore now expects group net sales to rise this year to between €14.9bn and €15.1bn from the previously forecast €14.8bn to €15.0bn, and raised its outlook for 2016 EBITDA before special items to between €4.25bn and €4.4bn, up from a previous target range of €4.1bn and €4.3bn. Full-year EPS range is now €5.85 to €6.10 compared with €5.65- €6.00 previously. Around half of the guidance upgrade is due to the strong second-quarter with the remainder resulting from the sale of a minority interest held by the group's venture fund that generated €30m, and on R&D. (Also see "German Merck To Double Fund Size And Broaden Corporate VC Focus" - Scrip, 8 Jun, 2016.)
Merck, based in Darmstadt, Germany, has around 50,000 employees in around 70 countries. Over the past five years it has been rebuilding its pharma R&D organization and realigning its healthcare businesses to focus on neurology, oncology, immuno-oncology and immunology, while expanding its footprint in emerging markets. (Also see "German Merck Identifies Pipeline Stars, Plots Course Through A Dynamic Cancer Space" - Scrip, 29 Jun, 2016.) It also plans to bolster its biopharma R&D activities in Britain – despite Brexit – on grounds the UK is too key and dynamic a player in the life sciences sphere for it not to.
The company continues to reap benefits in the US for its infertility therapy Gonal-f (follitropin injection) for follicle stimulation after the loss of a competitor, Ferring Pharmaceuticals Inc. , in the recombinant follicle-stimulating hormone (rFSH) market. Analysts think this benefit will flow into the second half of the year. But Gonal-f is seeing significant competition in certain EU markets from Teva Pharmaceutical Industries Ltd.'s rival Ovaleap (follitropin alfa, r-hFSH) recombinant human follicle-stimulating hormone.
One of the big future hopes for Merck involves its multi-billion dollar collaboration with Pfizer Inc. on the development of immuno-oncology products, including the clinical-stage PD-L1 inhibitor avelumab. Through it, Pfizer will have access to Merck's Phase II PD-L1 inhibitor, but in return Merck has gained wider access to the US oncology market – and commissions – through a co-promotion deal for Pfizer's lung cancer drug Xalkori (crizotinib).
The FDA has given avelumab breakthrough designation, so the group plans to complete the drug's US filing submission in the early part of the second half of 2016.
Merck – which hasn't launched a new drug in a decade – is also banking on is cladribine tablets, the oral multiple sclerosis medicine it suspended in late-stage trials five years ago but then resuscitated last September after having evaluated new data and done additional analyses of the product's benefit-risk profile. The company at the end of June submitted an application for marketing approval with the European Medicines Agency for cladribine and hopes to get EU approval by the middle of 2017.