Merck KGaA Profit Surges on Gain From Generics Sale

Merck KGaA Profit Surges on Gain From Generics Sale

Feb. 18 (Bloomberg) -- Merck KGaA, the German maker of the Erbitux cancer drug, said fourth-quarter profit surged on gains from the sale of its generics unit to Mylan Inc.

Net income climbed to 3.39 billion euros ($4.98 billion), or 15.58 euros a share, from 129.5 million euros, or 67 cents, the Darmstadt, Germany-based company said in a statement handed to reporters today. This fell short of the 3.6 billion-euro median estimate of seven analysts in a Bloomberg survey.

Family-controlled Merck sold the generic-drug unit for 4.9 billion euros to help pay for last year's acquisition of Serono SA for 16.6 billion Swiss francs ($15.2 billion). Serono added the Rebif multiple sclerosis treatment and reduced Merck's reliance on liquid crystals used to make flat-panel televisions. The drugs and chemicals maker had used its 70 percent share of the liquid crystals market to prop up earnings as it expanded uses of the Erbitux cancer drug.

``Merck is an emerging story, and they are trying to build a track record,'' Andrew Fellows, an analyst at Helvea in London said in an interview before the release.

The company expects ``another year of solid growth for Merck,'' Chief Executive Officer Karl-Ludwig Kley said in the statement.

Kley expects revenue to grow between five and nine percent in 2008. The liquid crystals unit will probably increase sales between five and ten percent, while operating profit as a percentage of sales will probably range from 47 and 52 percent for the unit, the company said.

Erbitux Rises

Of 31 analysts that cover Merck, 20 have a `buy' rating on the stock, 8 have `hold' recommendations, and 3 advise selling the stock.

Since buying Serono, Merck has focused its drug research on cancer, diseases of the nervous system, inflammatory illnesses and fertility. The company aims to market Erbitux, now used in head and neck as well as bowel cancers, to treat lung, breast and gastric tumors.

Sales of Erbitux rose 33 percent to 127 million euros, and the multiple sclerosis drug Rebif garnered 317 million euros in the fourth quarter.

BLOOMBERG