For the first quarter 2024, MilliporeSigma, the life sciences division of Merck KGaA, reported €2.1 billion ($2.3 billion) in sales for its, a decrease of 13.8% year-on-year.
While the firm said the results are “in line with expectation of a softer first half of the year,” Matthias Heinzel, CEO of the unit, said that he looks at the “Life Science Services (LSS) business, especially the contract development manufacturing organization (CDMO) portion [as] much more volatile.”
He said that compared to other businesses, the CDMO space has “a much smaller set of customers.” Heinzel described how the company is focusing more on “the customers in novel modalities, which are by nature in the early phases.” This means the financial rewards come “as they go through their development phases and that [is] what’s driving a lot of the volatility.”
He reinforced that the decline in sales is not because the firm has “lost customers” but explained how the nature of the CDMO sector means if the company “get a batch in” then “it could go up a quarter” but equally, if in “the next quarter the batch is kind of delayed […] it could go down.”
The firm said it is still expecting the business to become more stable and grow by the midterm but added “that’s kind of the dynamics of that business.”
The unit also suffered from continued destocking by Process Solutions customers, with the sales of the business unit declining by 20%. MilliporeSigma is not alone with this, and various vendors have felt the economic impact of destocking. The destocking dynamic has been described as playing a part in a “swift normalization of demand” post-COVID and some of the big players have seen quarterly sales drop 15-20% year-on-year.
However, things are looking up, the company said in a statement. “As a positive signal, order income in Process Solutions increased sequentially as well as year-on-year. The company expects customers to reach their target inventory levels by the end of the second quarter of 2024.
“However, due to the manufacturing and delivery times for products ordered by customers, this will significantly increase sales only in the second half of the year. In addition to inventory destocking, the phase-out of Covid-19-related demand was also a headwind for the business development of Life Science in the first quarter of 2024.”
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