Merck KGaA said its doors are open for more M&A, particularly for its manufacturing business, as the company tempers sales expectations for its life science arm due to a muted market in China.
While the German drugmaker will show “no prioritization” when it comes to the size of the deals across its business, “larger future transactions” will be focused on boosting its manufacturing arm, it said during its Capital Markets Day on Thursday.
The company will use cash to fund these deals before turning to loans, one of the presentations states. As of June 2024, the company had €2.7 billion ($2.9 billion) in cash and cash equivalents. Merck KGaA has made a string of various acquisitions, recently buying Mirus Bio for $600 million to boost its viral vector manufacturing.
“M&A remains a key priority for Merck. And we remain disciplined and patient in our approach in order to maximize the strategic impact of any acquisitions,” CEO Belén Garijo said in a statement.
Merck KGaA has downscaled its sales guidance for its manufacturing business to 7-9% compared to the previous guidance of 7-10%. This is due to slower business in China, where there is more cautious spending and rationalization of biopharma drug development pipelines, said Matthias Heinzel, CEO of Merck KGaA’s life science business. Also, price competition from manufacturers in China is fierce, he added in his presentation.
Asia makes up Merck KGaA’s largest customer base for manufacturing, contributing 33% of total sales for the first half of this year, followed by Europe at 29% and then North America at 27%.
The company is “fine tuning” its strategy in China by developing a more localized manufacturing footprint in the region to cater to local customers, Heinzel said. In recent months, it has announced moves indicating an increased presence in Asia, such as a €300 million ($328 million) new biologics facility in South Korea.
As for its healthcare business, Merck KGaA acknowledged it had some drug development “pipeline setbacks.” For instance, earlier this year, the company discontinued work on a head and neck cancer asset after it failed a Phase 3 study.
Nonetheless, Merck KGaA reiterated its overall 2024 sales guidance, anticipating growth between 2% and 5%, reaching €20.7 billion ($22.4 billion) to €22.1 billion ($24 billion), which is mainly due to its electronic business.