Merck KGaA expects 2023 profit to slip as COVID demand wanes

9:51 am Thursday, March 02nd, 2023

By Ludwig Burger

FRANKFURT (Reuters) – Germany’s Merck KGaA on Thursday predicted 2023 earnings would slip due to a decline at its electronic chemicals unit and a drop in COVID-related demand for its lab supplies from drug and vaccine makers.

For 2023 earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for one-offs, the company “assumes a moderate decline to an about stable development”, before any currency swings, it said in a statement.

Negative foreign exchange effects would likely be an additional drag of between 1% and 4%, according to the maker of pharmaceuticals, lab equipment and specialty chemicals.

“Overall, Merck assumes that 2023 will be a challenging year. The slowing semiconductor market, decreasing Covid-19-related demand and persistently high inflation will contribute to this,” the family-controlled group said in a statement.

Revenues from COVID-19 related lab supplies would likely drop to 250 million euros from 800 million last year, it added.

Pharmaceutical companies such as Pfizer, Moderna, Gilead and Roche have this year warned of a plunge in pandemic-related product sales after making billions from them over the past two years.

Still, Merck Chief Executive Belen Garijo upheld the German group’s goal of 25 billion euros ($26.6 billion) in sales by 2025, up from 22.2 billion last year, citing new product development and a diversified business.

Analysts have said that two important trial results, expected at the end of the year, could boost longer-term earnings prospects at Merck’s drug business.

One is on a next-generation multiple sclerosis drug candidate, where Merck is ahead in a development race with Novartis, Sanofi and Roche, and the other on an experimental head and neck cancer drug known as xevinapant.

Merck also reported fourth-quarter adjusted EBITDA rose 11% to 1.63 billion euros, slightly short of the average estimate of 1.69 billion euros in an analyst poll on the company’s website.

($1 = 0.9401 euros)

(Reporting by Ludwig Burger, Editing by Friederike Heine and Kim Coghill)