Chemicals | Merck Millipore

The Merck Millipore life science division comprises the activities of the former Millipore Corporation, acquired on July 14, 2010, and the majority of Merck’s former Performance & Life Science Chemicals division. With the third quarter, it is now possible to provide comparable year-ago figures.

The Merck Millipore division has three business units – Bioscience representing 18% of third-quarter total revenues; Lab Solutions representing 42%; and Process Solutions representing 40%.

The Merck Millipore division’s total revenues increased 5.2% to € 588 million in the third quarter of 2011 compared to € 559 million in the year-ago period. Changes in foreign exchange rates reduced revenue growth by 3.5% and acquisitions added 1.5% in growth, which led to a 7.3% increase in organic revenue growth in the third quarter. This strong organic growth benefited from a low base in the third quarter of 2010 due to a change in distribution vendors in Europe, which considerably slowed down sales in the year-ago period.

This good performance was driven by strong year-over-year increases in the Lab Solutions and Process Solutions business units. The Merck Millipore division began to see weakening demand from global industrial customers and academic and government-sponsored laboratories in the United States during the third quarter. However, these markets do not represent a material portion of the overall revenues of the division.

The division acquired the industrial microbiology business of Biotest AG, Dreieich, Germany, in August. The Biotest activities have been integrated into the Lab Solutions business unit and will expand the division’s portfolio of biomonitoring testing products. On August 30, Merck announced that it had agreed to acquire the Amnis Corporation of Seattle, which designs, manufactures and markets high-speed cell imaging instrumentation. It will become part of the division’s Bioscience business unit. The closing was on October 4.

From a business unit perspective, the Bioscience business unit’s third-quarter growth was driven by a good performance in North America, particularly for pharmaceutical customers. Sales in China and India showed double-digit growth. The business unit’s cell biology products, including flow cytometry, continue to be some of its fastest growing product lines.

Lab Solutions sales growth was powered by strong performances of its Lab Water and BioMonitoring products. BioMonitoring is benefiting from several important new product launches.

Third-quarter Process Solutions sales growth was driven by strong business in emerging markets, as well as a double-digit growth in sales to global biotech customers, who increased their production of biologic drugs and vaccines. The business unit’s growth is also benefiting from increased demand for single-use manufacturing products, which have grown to represent a material portion of its sales.

The division’s gross margin increased by 17% to € 340 million in the third quarter of 2011 primarily due to the effect of a € -43 million inventory step-up that was booked in the year-ago quarter as part of the purchase-price allocation for the Millipore Corporation. In addition, the division has increased operational spending to support future growth. This included investments in marketing and selling (+10%) and research and development (+12%).

This led to a third-quarter operating result of € 53 million compared to € 13 million in the year-ago quarter. The division’s third quarter EBIT margin was 9.0% compared to 2.4% in the year-ago quarter.

The third-quarter underlying core operating result, which is adjusted for one-time charges and amortization of purchased intangibles, was € 107 million, or 18.3% of total revenues, compared to € 125 million, or 22.4% of total revenues, in the third quarter of 2010. The year-over-year decrease was the result of changes in foreign currency exchanges rates, higher production costs, and higher levels of investment in the division’s R&D and sales organizations.