Merck 3Q Profit Down 75 Percent

The Darmstadt-based maker of cancer drug Erbitux earned 36.2 million euros ($51.6 million) in the July-September period, compared with 144.3 million euros a year earlier, which included a generics unit that was sold to Mylan Laboratories Inc. for $6.98 billion.

Despite the drop, the result was better than the 11 million euros ($15.68 million) that analysts polled by Dow Jones Newswires had predicted.

The company's operating profit rose nearly 56 percent to 291.5 million euros ($415.5 million) from 288 million euros a year earlier, lifted by demand for Erbitux and Rebif, the multiple sclerosis treatment it acquired in the Serono deal.

The company's sales rose 5 percent to 1.67 billion euros ($2.38 billion) from 1.08 billion euros last year. That fell short of analysts' forecasts of 1.73 billion euros ($2.47 billion). Its liquid crystals operation, which makes the crystals used in computer displays, saw sales rise 15 percent to 238 million euros ($339.25 million) but was hampered by the rising euro.

The return on sales of the highly profitable liquid crystals unit was 50.1 percent compared 50.3 percent last year. Merck said it was aiming for 52 percent by the end of this year.

The company's pharmaceuticals continued to show strong gains, with sales of multiple sclerosis treatment Rebif -- part of the drug development pipeline acquired in the Serono deal -- up 4.1 percent to 306 million euros ($436.17 million). Sales of Erbitux, which it licensed from ImClone Systems Inc., were up 36 percent to 118 million euros ($168.2 million) in the quarter.

"Merck's solid results so far this year confirm our strategy to focus on innovative pharmaceuticals and chemicals," Chief Executive Karl-Ludwig Kley said. "Even with the integration of Serono and the divestment of generics, our underlying business continues to grow."

Kley said the company expects operating profit to rise more than 20 percent in 2007, but conceded the strong euro and weak dollar could hurt sales. The company said it expects overall sales to rise between 4 percent and 5 percent through the end of the year. Not including exchange rate fluctuations, that increase is likely to be from 7 to 9 percent.

Kley also told reporters that the company aims to reach sales of 10 billion euros ($14.25 billion) by 2010, compared with the 6.26 billion euros it earned in 2006.

"We can only reach this goal through acquisitions," he said without elaborating on whether the company had targets in mind.

"Merck is in top-form," Kley said, adding that the company is well positioned to enter the fourth quarter and 2008.

Shares of Merck were down 1.5 percent to 87.70 euros ($125.01) in Frankfurt.

Merck of Germany is the oldest drug company in the world and has been separate from the U.S.-based Merck & Co. since the end of World War I.