Merck: COVID-related work helped German firm grow revs in Q1

COVID-19 will continue to drive growth according to Merck KGaA, which says demand from vaccine makers helped its life science business revenue grow 20.4% to € 2.1 billion in Q1.

The German drug and processing tech firm unveiled its results for the first quarter this week, explaining that group sales increased 6% to € 4.6 billion ($5.6 billion) “mainly thanks to the high organic growth of the Life Science business.”

Merck’s process solutions business – the part of the life sciences business that provides manufacturing services and sells production technologies – saw revenue increase 38% in the quarter.

Image: iStock/Stadtratte

The firm said, “This increase was mainly driven by continued high demand as well as the additional business related to the pandemic relief effort.”

Similarly, revenue generated Merck’s research solutions unit increase 24% thanks again to “additional, pandemic-related demand.”

In its earning statement Merck said, “For the Life Science business sector, Merck continues to expect significantly positive contributions owing to the Covid-19 pandemic, particularly in the Process Solutions business unit.”

It also predicted that, “The increasing availability of Covid-19 vaccines and the associated immunization of the population is likely to contribute to a further stabilization of the societal and economic situation.”

CFO Marcus Kuhnert reiterated this during Merck’s Q1 call, telling analysts 12% of the Life Science unit’s organic sales growth of 27% came from COVID-related business.

Forecast

Merck revised its forecast, predicting organic growth of 10% to 12% and net sales of €18.5 billion to €19.5 billion.

And demand from COVID-related projects is likely to continue to be a major driver according to CEO Belén Garijo.

“We now expect our life science COVID related sales to more than double in 2021 compared with 2020 and our process solution COVID related sales to increase by a factor of at least 2.5 times.

“Overall the situation as you know remains very dynamic and is difficult to speculate on the magnitude and sustainability of COVID related demand in the medium term, but happy to answer questions later. However, we foresee a potential need for vaccine and therapy approaches will begin the current year.”

Garijo added that “We expect at least €500 million of COVID related sales in process solution by 2022.”

Investment

Merck has already invested to support current COVID-19 related work and future needs according to Andrew Bulpin, head of life science process solutions.

He told analysts Merck has invested €380 million in recent months to support its core business and the needs of COVID-19.

“So for example €140 million investments in Darmstadt for new membrane plant. €100 million in Carlsbad for viral vector. We’ve got 60 million in Madison for high potent API’s and for ADCs and then 21 million in Danvers for single use, 19 million in Jaffrey for filtration, 18 million in Buchs, supporting our reference materials, and then the 25 million investment for single-use in Molsheim.”