27 Apr 2009
April 27 (Bloomberg) -- Merck KGaA said first-quarter profit plunged 76 percent as the global recession damped demand for liquid crystals used in flat-panel televisions and monitors.Net income fell to 56.7 million euros ($74.7 million) from 239.1 million euros a year earlier, Darmstadt, Germany-based Merck said in an e-mailed statement today. Core earnings were 1.14 cents a share, missing the median estimate of 1.15 euros of five analysts in a Bloomberg survey. Sales came in at 1.85 billion euros compared with 1.86 billion euros.
Operating profit from liquid crystals, a market Merck KGaA dominates with a share of about 70 percent, plummeted 89 percent to 13 million euros, prompting the company to predict a margin decline to as low as 20 percent from the unit this year. The drug and chemical maker, which isn't affiliated with Merck & Co. of the U.S., is relying on the Erbitux cancer drug and the Rebif multiple sclerosis treatment to bolster earnings as the return on the TV chemicals slides.
"The weakness affecting liquid crystals is likely to continue," DZ Bank AG analysts Elmar Kraus and Thomas Maul wrote in a note to clients before the results. "Merck should benefit from growing demand for precisely targeted cancer drugs" and from the experimental cladribine pill for the treatment of multiple sclerosis, Maul and Kraus wrote.
The German company will present late-stage clinical trial results on April 29 for cladribine. Merck KGaA is racing Switzerland's Novartis AG to introduce the first oral drug for the debilitating neurological disease. Each company is set to publish results at the Seattle meeting of the American Academy of Neurology.
Side-Effects
Analysts and investors are most interested in the potential side-effects of the drugs, the DZ Bank analysts said. Preliminary results already showed that the medicines limit flare-ups for patients with so-called "relapsing-remitting" multiple sclerosis.
"The major message in our study is that if I have multiple sclerosis, I can take as few as eight pills a year and have my risk of relapse halved," Bruno Musch, the company's head of global clinical development for neurodegenerative diseases, said in a telephone interview.
Merck plans to ask European and U.S. regulators to approve cladribine in June or July, Musch said.
"After Merck was so bullish about it, I don't think they would lean so far out the window if the data wasn't good," said Markus Mayer, an analyst for UniCredit Research.
If studies show cladribine is safe for patients, Mayer estimated sales could reach 800 million euros a year by 2014.
