Organic growth at Merck’s process solutions business hovered around 15% in the year preceding the pandemic. Demand for products used in the production of COVID-19 vaccines and therapies began to accelerate growth last year, but “pinch points” in the supply chain constrained the unit.
Merck has invested €380m ($461m) in the past 12 months to ramp up capacity and meet demand, helping organic growth to rise from 27% over the second half of 2020 to 38% in the first quarter of the new year. Facilities focused on single-use assemblies and filtration have benefited from the investment.
With order intake at the process solutions division rising more than 60%, Merck is increasingly bullish about its prospects, as deputy CEO, Belén Garijo, explained on a quarterly results conference call with investors on May 12.
“We now expect our life science COVID-related sales to more than double in 2021 compared with 2020, and our process solution COVID-related sales to increase by a factor of at least 2.5 times.”
The forecast growth in life science sales underpins Merck’s improved outlook. The company now expects its sales to grow organically by 10% to 12% this year, having previously forecast a “strong” increase. It is forecasting 16% to 20% growth in the operational profitability measure EBITDA pre, up from the high single-digit to low teens percentage range it previously set out.
What happens beyond 2021 is less clear, though. Developers of COVID-19 vaccines such as Moderna and the providers of products that enable their production including Merck are all benefiting from the need for countries to vaccinate entire populations as quickly as possible.
Vaccine manufacturers are talking up the prospect of demand for their products continuing into 2022 and 2023. Garijo said it “is difficult to speculate on the magnitude and sustainability of COVID-related demand in the medium term,” but expects the pandemic to continue contributing to sales into 2022.
“We foresee a potential need for vaccine and therapy approaches well beyond the current year. And therefore, we expect at least €500m of COVID-related sales in process solution by 2022,” he remarked.
The €500m forecast represents a sharp deceleration from the current level of COVID-19 business. First quarter process solutions sales were €1.1bn. Garijo said half of growth at the unit relates to COVID-19.