March 8, 2018 / 9:39 AM / a year ago

Chinese competition and costs weigh on Merck KGaA outlook

FILE PHOTO: A cyclist drives past a logo of German drugs and chemicals group Merck KGaA in Darmstadt, Germany January 28, 2016. REUTERS/Ralph Orlowski/File Photo

DARMSTADT, Germany (Reuters) - Germany’s Merck KGaA (MRCG.DE) expects a fall in operating profit this year before a rise next, it said on Thursday, citing Chinese competition in liquid crystals used in flat screens and higher drug development expenses.

The chemicals and drugs maker said 2018 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) on a currency-adjusted basis would decline and expects foreign exchange rates to have a 4-6 percent negative impact.

Launch costs for multiple sclerosis pill Mavenclad and funds for research on cancer drug hopeful Bavencio are also being budgeted for, the company said.

Merck reported 1 billion euros ($1.24 billion) in fourth quarter adjusted EBITDA, down 6.5 percent and broadly in line with market expectations.

Its consumer health business with vitamin brands such as Neurobion and Femibion, which Merck is trying to sell, reported a 10 percent rise in currency-adjusted revenue to 225 million euros.

Merck said it was confident it would return to operating income growth in 2019 as liquid crystals and new drug sales rebound.

Merck, which is working with Pfizer to widen the use of immuno-oncology drug Bavencio, is reviving plans to bring an oral MS treatment Mavenclad to the U.S. market, despite regulatory concerns about side effects having frustrated its ambitions there almost seven years ago.

Reporting by Patricia Weiss; writing by Ludwig Burger; editing by Edward Taylor and Jason Neely

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