Merck KGaA Profit Hurt by Higher R&D Expenses: Street Wrap
(Bloomberg) -- While higher R&D expenses burden pharma results, analysts note costs fund promising pipeline.
- Shares fall 3% as of 9:31am CET, paring earlier decline of as much as 4.2%, biggest intra-day since June: Bloomberg data
- Trading volume 40% of 3-month daily avg
- NOTE: Merck KGaA Says Profit Won’t Grow Much on New Drug Efforts
CITI (Buy, PT EU116)
- Expect market to look through Ebitda guidance below expectations given driver is rising R&D to fund “an increasingly promising pipeline”, analysts Peter Verdult and Andrew Baum write in note
- Still offers a relatively attractive valuation, earnings momentum and scope for pipeline appreciation to further improve
- Expect interest in equity story to continue increasing, remains a preferred pharma play
CREDIT SUISSE (Outperform, PT EU125)
- 4Q figures are solid even as Performance Materials slightly disappointed, analysts including Rebekah Harper write
- In healthcare, phase 3 trials in the pipeline led to greater spending in 4Q, higher than expected R&D expenses
- In Performance Materials, co. lost some market share to other liquid crystals suppliers and Taiwan earthquake impacted demand from panel manufacturers; expect to impact 1Q 2017 demand
- Co. no longer provides timeline for atacicept; investors would react positively to termination/divestment of atacicept
GOLDMAN SACHS (Neutral, PT EU105)
- Investors will look for drivers for 2017 guidance, an update on the pipeline (expectations for cladribine filing), launch plans for cladribine and avelumab, and growth outlook for Life Sciences and Performance Materials
- 4Q EPS miss was largely driven by incremental D&A from the Sigma Aldrich acquisition
- Key risks include SIAL integration, further pressure on key franchises and LCD outlook
DZ BANK (Buy)
- Life Science had negative from delayed customer orders, strong R&D in 44Q burdens Pharma, analyst Peter Spengler writes in note
- Performance Materials growth suffers from recalibration of market shares
WARBURG (Buy, PT EU110)
- Reported positive set of figures; healthcare sales benefited from Rebif pre-buying in North America ahead of a price increase, analyst Ulrich Huwald writes in note
- Focus remains on pharmaceutical pipeline and mainly on oncology product Avelumab
- Wording in regard to Atacicept has turned more negative, but this is not decisive
LAMPE (Buy PT EU114)
- While outlook for flattish Ebitda may trigger discomfort, this is unfounded, analyst Volker Braun writes in note
- Ebitda will be affected by higher R&D costs and this is money well spent
- 2016 offers no major surprises and outlook is reassuring; co. continues to deliver on its promises
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
Tickers MRK GR (Merck KGaA)
People Andrew S Baum (Citigroup Global Markets Inc)
Peter Spengler (DZ Bank AG Deutsche Zentral-Genossenschaftsbank)
Peter Verdult (Citigroup Inc)
Rebekah Harper (Credit Suisse Holdings USA Inc)
Ulrich Huwald (Mm Warburg Investment Research)
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