Deal for Millipore starting to pay off for Merck KGaA

February 23, 2011 by Dave Price

German chemical and drug company Merck KGaA forecasts profit growth of up to 45 percent in 2011 as its post-merger Merck Millipore unit forecasts revenue growth of up to 56 percent.


Recently acquired Millipore pumped nearly $900 million in additional revenues into Merck Group KGaA (XETRA:MRK) during the second half of 2010, including a $465 million, fourth-quarter contribution.

The German chemical and pharmaceutical manufacturer completed its $7.1 billion (€5.1 billion) merger with Millipore July 14, 2010, forming Merck Millipore with remnants of its former Performance & Life Sciences unit. The new division immediately established itself as a growth nexus within the combined companies, now accounting for roughly one-quarter of all revenues at Merck and about one-fifth of its sequential growth in Q4 over the prior quarter.

Merck executives late Monday forecast a rise in revenues of 13 percent to 18 percent company-wide during 2011, suggesting a jump as big as $2.3 billion to $17.4 billion from the $12.7 billion in overall revenues reported by Merck last year. They also said Merck Millipore should post revenue growth of between 51 percent and 56 percent, which — should that guidance pan out — would produce as much as $3.6 billion in sales.

"The guidance looks pretty punchy," Jack Scannell, a London-based analyst for Sanford C. Berstein Ltd., told Bloomberg News. "This is a good set of numbers."

Merck executives also raised their 2011 profit guidance, forecasting 35 percent to 45 percent growth in operating profits company-wide this year. Analysts surveyed by Thomson Reuters had been expecting Merck to predict a 20 percent increase in 2011 profits, to $1.9 billion (€1.4 billion), seeing only modest growth from best-selling drugs Rebif and Erbitux.

The initial sales mix within Merck Millipore still mostly reflects what would be expected from a combination of the two former businesses, with the bioprocess and bioscience units coming from Millipore and accounting for about 40 percent and 20 percent, respectively, of sales. The lab solutions unit contributes the remaining 40 percent of sales.