Merck KGaA-Lupin Ink Deal, Focus on Emerging Markets - Analyst Blog

Merck KGaA 's ( MKGAF ) biopharmaceutical division, Merck Serono, has entered into a long-term strategic partnership with Lupin Ltd. This deal is aimed at expanding Merck KGaA's General Medicine & Endocrinology franchise in emerging markets.

According to IMS Health, Lupin is the fifth largest and one of the top five fastest growing generic pharmaceutical companies in the U.S. (5.3% market share by prescriptions). It is also one of the top ten fastest growing generic companies in Japan and South Africa.

Terms of the Deal

Under the agreement, Lupin will manufacture products, provide product dossiers and supply finished products to Merck KGaA, while the latter will hold the marketing authorization for these products. Financial terms of the deal were not disclosed.

With the necessary support from Lupin, Merck KGaA expects to strengthen its distribution network across Latin America, Asia, Central Eastern Europe and Africa. Merck KGaA stated that its general medicines portfolio will be enriched with the addition of up to 20 new products following this deal. Both companies will focus on the markets for cardiovascular diseases and diabetes.

Additionally, in Africa, Merck KGaA and Lupin will supply drugs for other therapeutic conditions depending on local healthcare needs.

Merck KGaA expects to launch the first product under this collaboration in 2016.

The company said that revenues generated in emerging markets are one of the key growth drivers for its biopharmaceutical division. In 2013, Merck Serono divisional sales from emerging markets amounted to approximately €1.8 billion, accounting for nearly 30.3% of the total revenues generated by this division.

We are positive on Merck KGaA's agreement with Lupin. Given Lupin's position in the market for a wide range of branded and generic formulations as well as active pharmaceutical ingredients and its fast paced growth rate in emerging markets, we believe Merck KGaA has gained a strong partner in the form of Lupin.

Merck KGaA carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector are Lannett Company, Inc. ( LCI ), Anacor Pharmaceuticals, Inc. ( ANAC ) and Avanir Pharmaceuticals, Inc. ( AVNR ). While Lannett carries a Zacks Rank #1 (Strong Buy), Anacor and Avanir hold a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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