Published - May 11th, 2023 @ 12:03 PM (CET)
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Merck KGaA, a prominent German pharmaceutical and chemicals company, has warned about its adjusted operating earnings for the year. Despite witnessing an upswing in drug prescriptions, the company anticipates a potential decline of up to 10% in adjusted operating profits due to a challenging outlook for its specialty chemicals business. This article delves into Merck's latest financial update, highlighting key figures and insights from the company's recent statements.

Earnings Projection:

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Merck KGaA projects its 2023 earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted for one-offs, to range between 6.1 billion euros ($6.71 billion) and 6.7 billion euros. This projection represents a decrease from the previous year's figure of 6.8 billion euros. Initially, the company forecasted a moderate decline with a stable development before factoring in currency fluctuations.

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Specialty Chemicals Business:

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Merck anticipates a challenging period for its specialty chemicals business. The recovery in demand for its semiconductor materials is expected to occur in the second half of 2023. However, the recovery is projected to commence at a later point and from a lower base than previously assumed. These circumstances contribute to the overall decline in the company's adjusted operating earnings.

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Q1 Performance:

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In the first quarter of the year, Merck KGaA experienced a 2.6% decline in adjusted EBITDA, reaching 1.6 billion euros. This figure slightly surpassed the average estimated 1.54 billion euros, as reported in an analyst poll on the company's website. Despite this decline, the company highlighted notable achievements in its drug portfolio.

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Positive Drug Sales Growth:

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Merck emphasized the positive performance of its cancer immunotherapy drug, Bavencio, which exhibited a currency-adjusted sales growth of 30.6%. The multiple sclerosis drug, Mavenclad, also demonstrated a sales growth of 23%. These encouraging figures reflect the effectiveness and growing demand for these innovative pharmaceutical products.

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Belen Garijo, CEO of Merck KGaA, acknowledged that higher prescriptions of the company's new drugs are tempering the overall decline in 2023. Despite the challenges faced by the specialty chemicals business, the company's focus on pharmaceuticals and its expanding drug portfolio presents an optimistic outlook for the future. Garijo describes this year as a "transition year," emphasizing the resilience of Merck's diversified, multi-industry portfolio.

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Merck KGaA's financial update reveals the company's cautious outlook due to its specialty chemicals business challenges. While the adjusted operating earnings are expected to decline by up to 10% this year, the positive growth in drug prescriptions provides some offset. The performance of the cancer immunotherapy drug Bavencio and the multiple sclerosis drug Mavenclad further underscores the strength of Merck's pharmaceutical segment. As Merck navigates through this transition year, its diversified portfolio positions the company well for future growth and resilience in the pharmaceutical industry.

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