Merck KGaA says lab supplies business can grow by up to 10% per year

By Ludwig Burger

FRANKFURT (Reuters) - Germany's Merck KGaA on Thursday issued a more ambitious medium-term growth forecast for its Life Science unit, as manufacturers of COVID-19 vaccines and treatments snap up its materials and gear.

Life Science division revenues are now expected to grow 7% to 10% per year until 2025, excluding the effect of currencies and acquisitions, significantly above market growth and higher than a previous goal of 6% to 9%, the diversified company said.

Pandemic-related demand would subside until 2025 but underlying demand for lab supplies would continue to be driven by the development of new biotech drugs and by China's ambitions to nurture an innovative pharmaceutical industry.

"Life Science will sharpen its focus on the Asia-Pacific region, especially China, as well as on innovations and digital solutions in all businesses," the company said in a statement on its capital markets day on Thursday.

The shares were up 2.4% at 0730 GMT, outperforming a 0.6% decline in the STOXX Europe 600 Health Care index.

Demand from the biotech industry has also fuelled the rise of Franco-German lab gear and supplies maker Sartorius, competing with Merck in complex equipment, to soon join Germany's blue-chip index DAX.

Family-controlled Merck said it expects group sales to grow organically by more than 6% per year on average through 2025, driven by demand for the Life Science unit's bioprocessing products, new pharmaceuticals and semiconductor chemicals.

That would lift 2025 group sales to about 25 billion euros ($30 billion), up from 17.5 billion in 2020.

Having reduced its debt from the 5.8 billion euro takeover of electronics materials maker Versum in 2019, Merck will now boost investments in plants and equipment and research and development through 2025 by more than half compared with the previous five years.

It will also have close to 10 billion euros to spend on acquisitions from the end of next year, though smaller and medium-sized deals are more likely.

The Life Science unit, mostly made up of businesses formerly known as Millipore and Sigma Aldrich, has surpassed the pharmaceuticals unit as Merck's main earnings driver, now accounting for about 45% of adjusted group earnings.

($1 = 0.8457 euros)

(Reporting by Ludwig Burger, editing by Thomas Escritt and Elaine Hardcastle)