) reported 2013 earnings per American Depository Receipt (ADR) of
$11.70, up 19.2% year over year but below the Zacks Consensus
Estimate of $11.99.
Revenues in 2013 were $14.7 billion, up 2.6% year over year
and short of the Zacks Consensus Estimate of $15 billion.
In 2013, sales (total revenues less royalty, license and
commission income) grew 4.2% organically due to strong
performance in the emerging markets. Emerging markets grew
organically by 9.3%, mainly driven by Merck Serono's
biopharmaceutical division. In 2013, the emerging markets region
contributed 36% to group sales.
Fourth quarter 2013 earnings per ADR were $2.90, up 7.4% year
over year and ahead of the Zacks Consensus Estimate of $2.35.
Revenues for the reported quarter were $3.7 billion, up 1.5% year
Segment Sales in Detail
The company operates under four divisions: Merck Serono,
Consumer Health Care, Merck Millipore and Performance
Merck Serono's revenues decreased 0.7% in 2013 due to currency
headwinds of 4.6%. Rebif sales grew organically by 1.4% in 2013.
Oncology drug Erbitux' sales grew organically by 5.9% in 2013 due
to its approval in the head and neck cancer indication in Japan
as well as good demand in the emerging markets. Gonal-f sales
fell organically by 0.7% in 2013 due to adverse foreign exchange
impact of 3.5%.
The Consumer Health Care division's revenues decreased 0.9% in
2013 due to a negative foreign exchange impact of 4.7%. Sales
from this segment grew organically by 5.6% primarily driven by
Europe and emerging markets.
The Merck Millipore division's revenues edged up 1.1% in 2013.
Segment sales grew 5.5% organically, which was offset by a
negative currency headwind of 4.8%. Growth was driven by Lab
Solutions and Process Solutions through price increases and
higher sales volumes.
The Performance Materials division's revenues declined 1.9% in
2013 due to currency headwinds of 4.9%.
In 2013, research and development (R&D) expenses were €1.5
billion, down 0.5%. In 2013, administration expenses were €562.4
million, up 1.8% and selling and marketing expenses were €2.3
billion, down 3.5%.
For 2014, Merck KGaA expects sales to grow slightly on an
organic basis. The growth will however be impacted by negative
foreign exchange effects. Thus, Merck KGaA expects steady sales
in 2014. The company lacks pipeline launches in 2014. Merck KGaA
expects high earnings in 2014.
Weak cough and cold season in continental Europe was seen in
the fourth quarter. But the emerging markets performance was
strong. The year 2013 was pretty difficult due to stagnation in
television shipments and negative currency impact. The company
has decided to move into biosimilars market and it will focus on
autoimmune diseases and oncology. This move will prove beneficial
in the long run as biosimilars market will become an interesting
market by 2020.
Merck KGaA carries a Zacks Rank #4 (Sell). Investors looking
for better-ranked stocks in the pharma sector may consider
Forest Laboratories Inc.
Lannett Co., Inc.
). Actavis and Forest Labs carry a Zacks Rank #2 (Buy) while
Lannett has a Zacks Rank #1 (Strong Buy).
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