Merck AG Says Smaller Cos Have Good Prospects

Merck AG, the Swiss-based holding company incorporating the foreign businesses of Merck of Germany, has said it is convinced that medium-sized drug companies have good prospects in a rapidly changing international drug market and that the mergers trend among the majors can create considerable problems for these large groups. Merck AG president Hans Joachim Langmann said he is optimistic over 1994 prospects as a whole but notes that the strong Swiss franc is not an advantage.

Professor Langmann argues that many of the acquisitions undertaken by larger groups do not necessarily reflect an active forward strategy but rather serve to secure a company's independence. Similarly, companies with major best-selling drugs face the problem at patent expiry of not being able to offset the loss of these sales. Merck has improved its range of drugs on offer through the acquisition of the generics company Amerpharm, the specialist laboratory Kebo Labo and Squibb Diagnostics - through Bracco of Italy. These three companies will be consolidated in 1995 and will increase sales by some 400 million Swiss francs ($309.36 million).

Consolidated sales of Merck AG rose 3% in the first half of 1994 to 1.3 billion francs ($1.0 billion). The increase in local currency terms was 12% and better reflects the progress achieved. Net profits rose 19% to 101 million francs but improved 30% in local currency terms. Professor Langmann expects this trend to be repeated in the current second half, and attributes growth to organizational streamlining, concentration on strategic areas and rationalization of sites, together with notable improvements in efficiency.