Merck KGaA expects MS pill to lift drugs margin
FRANKFURT (Reuters) - German pharmaceuticals and chemicals company Merck KGaA is banking on an experimental multiple sclerosis (MS) pill to lift operating margins at its embattled drugs unit, it said on Wednesday.
Earnings before interest, tax and special items at its Merck Serono prescription drugs unit could rise to 25 percent of sales in the long term, up from 22.4 percent in the first quarter, analysts at Exane BNP Paribas quoted the unit's head, Elmar Schnee, as saying in remarks confirmed by a Merck spokesman.
Merck resubmitted the U.S. application for its MS pill cladribine on June 8, trying to catch up with Novartis AG in the race to bring to market the first oral treatment against the debilitating disease.
If key pipeline drugs such as cladribine get rejected by regulators the margin could be 20 percent in the long term, Schnee said.
Merck's drug unit, which accounts for about three quarters of group sales, is in need of a morale booster after it failed last year to win regulatory approval for the use of its blockbuster-hopeful Erbitux against lung tumors, the most common form of cancer.
In addition, prospects remain uncertain for U.S. approval of its experimental multiple sclerosis pill cladribine and for its cancer vaccine Stimuvax.
Schnee also told the BNP analysts he expected the U.S. Food and Drug Administration (FDA) to formally accept its reworked request for regulatory approval of cladribine in early August.
The pill could still win U.S. priority review status, as long as Novartis' rival product Gilenia has not yet come to U.S. markets, he added.
Schnee also said he expected rival Gilenia to have only limited impact on demand for the current standard treatment of MS, so-called interferon beta injections, citing concern about Gilenia's side effects.
Interferon betas, which account for much of the $8.6 billion spent each year on MS treatments, include Merck's best-seller Rebif, Biogen Idec Inc's Avonex, Bayer AG's Betaferon and Novartis' Extavia.
Schnee's assessment contrasts with a ringing endorsement from U.S. experts for Gilenia this month, which cemented the pill's blockbuster potential and suggested consensus sales estimates need to rise.
Gilenia is likely to be approved to treat U.S. patients with relapsing multiple sclerosis (MS) as early as the third quarter.
Some investors had been skeptical about Gilenia due to its side effects, but feedback from a panel of experts advising the FDA was more positive than many had expected.
(Editing by David Holmes)
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