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12:00 AM
 | 
Mar 08, 2010
 |  BioCentury  |  Strategy

Merck's Chemical Test

Merck KGaA has put its own spin on the trend among mid-size European companies to choose between their prescription drugs and chemical businesses. Last week the company confirmed its commitment to a dual business strategy by unveiling plans to buy U.S. laboratory and biotech supply company Millipore Corp. for $7.2 billion.

By enhancing its performance chemicals business, Merck hopes to catalyze growth. Last month, the pharma said it expects overall group growth this year of 3-7%. Revenues from Merck Serono S.A., which account for 70% of the company's drugs business, are predicted to grow only 2-5% in 2010.

In contrast, its consumer healthcare products are forecast to grow 5-10%, liquid crystal display (LCD) chemicals revenues are expected to advance by a similar amount, and performance and life science chemicals sales were guided to increase 3-8%.

More importantly, the operating margins on Merck's chemical operations are superior to those of the pharma business. So the company is moving even further into the chemicals space.

Other European mid-caps that once ran chemicals and pharmaceuticals businesses, such as Akzo Nobel N.V., Solvay S.A. and UCB Group, have opted to focus on one business and divest the other.

UCB started the trend in 2004 when it sold off its chemicals business and acquired Celltech Group plc, at the time Europe's largest entrepreneurial biotech company. In 2006, UCB added Schwarz Pharma AG (see BioCentury, Oct. 2, 2006).

In 2007,...

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