By Marleen Kaesebier
(Reuters) – Merck KGaA is seeing a faster-than-expected improvement in its semiconductor materials business and is aiming to accelerate its drug development pipeline, the German pharma and technology company said on Thursday.
It has seen an inflection point in the second quarter for advanced nodes and materials for AI applications, it said, having previously said it expected a recovery in the semiconductor market in the second half of the year.
Merck’s semiconductor solutions business, which makes up 69% of its electronics business, the smallest of its three divisions that accounts for about 18% of group sales, posted a 10.4% rise in second-quarter net sales, beating analysts’ expectations.
Raising its full year guidance of organic net sales growth on Thursday to 4% to 8% for electronics from 0 to 4% earlier, Merck said it expected “the remaining semiconductor materials market to gradually recover” in the second half of the year.
Merck had already raised group guidance last week when it pre-reported its earnings.
“It´s a light at the end of the tunnel” Bernstein analyst Florent Cespedes said of the sequential improvement in Process Solutions, part of the Life Sciences unit, where sales fell 12.3% from the previous year, compared to 20% in the first quarter.
For its Healthcare division Merck also raised its outlook to 6% to 9% sales growth from 4% to 7%, despite recent drug development setbacks.
Merck KGaA´s shares were up 1.3% at 1205 GMT rising as much as 2.1% after the results.
In June, the German diversified group said it stopped trials of the head and neck cancer drug xevinapant after it failed phase 3 trials, which followed earlier drug development setbacks, including the multiple sclerosis drug evobrutinib in December.
On Thursday, Merck said the cancer drug setback had a “mid double-digit million euro amount” negative impact on the group´s second quarter core profit, while reporting a 4.3% year-on-year net sales growth in its healthcare division.
“We don’t see an emergency or a crisis to act in healthcare and we will stick to our strategy to accelerate external innovation if the opportunity arises,” said CEO Belen Garijo in a call with journalists on Thursday.
Garijo also said that, unlike other pharma companies, Merck did not have a “patent cliff” and did not need to worry about the expiration of intellectual property rights for important drugs.
($1 = 0.9262 euros)
(Reporting by Marleen Kaesebier and Patricia Weiss; editing by Jason Neely, Christina Fincher and Tomasz Janowski)
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