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Merck KGaA seeks 300 million euros in savings as profits fall

World News | May 15, 2012


Kevin Grogan

Merck KGaA seeks 300 million euros in savings as profits fall

Merck KGaA has unveiled details about its recently-begun restructuring plan and is targeting cost savings of 300 million euros at its drugs unit by 2014.

Chairman Karl-Ludwig Kley said the German group  faces "unprecedented market shifts and increasing competition in key product areas [and] we are fortunate that we can address these challenges from a position of relative strength". However, he added, "if we do not take urgent action, we will face the prospect of tackling these issues from a much weaker position".

Some 120 million euros of those savings will come from the closure of Merck Serono's R&D hub in Geneva, "reducing R&D infrastructure costs elsewhere and eliminating duplicate functions." The move to shutter Geneva, which will see 500 jobs go, has met with considerable resistance in Switzerland where strikes have been threatened.

Merck says that one-time costs related to the Merck Serono efficiency programme will amount to 600 million euros and improve the unit's profitability. Sales at the division should rise from 5,56 billion euros in 2011 to 5.70-5.90 billion in 2014. Earnings before interest, taxes, depreciation and amortisation should be in the region of 1.80-1.90 billion euros up from 1.57 billion euros last year.

Meantime, Merck has posted its first-quarter results which show that net profits fell 48.7% to 176.6 million euros. However the like, year-earlier period was inflated by a 157 million euro gain on the divestment of its crop bioscience business.

Revenues increased 3.2% to 2.65 billion euros and turnover at Merck Serono rose 5.4% to 1.42 billion euros. Growth was driven by the multiple sclerosis blockbuster Rebif (interferon beta-1a) which was up 2.7% to 429.8 million euros and the colorectal/head and neck cancer drug Erbitux (cetuximab), sales of which inched up 1.3% to 213.6 million euros.

The fertility drug Gonal-f (follitropin) increased 13% to 152 million euros, while the growth hormone treatment Saizen (somatropin) slipped 6.9% to 59 million euros.

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