Merck KGaA foresees post-pandemic localization of biologics supply chains
Global competition for scarce, in-demand materials has exposed downsides of global supply chains throughout the pandemic, from early competition for personal protective equipment and diagnostic reagents through to the current rows over cross-border trade in COVID-19 vaccines. The experience could shape the attitudes of governments to trade and the need for local infrastructure.
“I have, almost on a daily basis, heads of government, people from the EU commission, from various countries on the phone who tell us that one of the lessons out of this pandemic is that our healthcare systems must become more resilient and that they.. want to build up a vaccine and biologics infrastructure locally in various countries,” Oschmann said during a fourth quarter results conference call on March 4.
Building resilience into supply chains
Discussions about the need for more resilient supply chains typically focus on the risks of relying on countries in Asia, notably China, for key materials. However, the actions of Western governments have also caused people to reevaluate how comfortable they are relying on third countries for vital products.
Notably, Oschmann said Merck’s customers want it to make single-use reactors in Europe because of the wartime legislation that empowers the US president to dictate how American factories are used.
“We have very concrete plans and are talking to a specific government in this context,” said the CEO.
Oschmann, who sees the move toward local supply chains as a positive midterm factor for the Darmstadt, Germany headquartered Merck, made the comments in conjunction with the release of fourth quarter results shaped by the crisis.
Sales at Merck’s life science unit grew 19% on an organic basis in the fourth quarter. More than half of the growth came from COVID-19-related businesses, such as the process solutions products that Merck provides to manufacturers of coronavirus therapies and vaccines.
Merck expects the elevated demand to continue into 2021, leading it to predict orders for process solutions products will power the life sciences division to organic growth in the low teens this year. The situation beyond 2021 is less clear but Merck thinks it is plausible that demand for its products will remain elevated over the longer term.
“There is a high likelihood for this virus to become endemic,” Oschmann said. With low-vaccination rates in parts of the world providing opportunities for the virus to mutate, Oschmann foresees an ongoing need for COVID-19 vaccines.