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Why we're cautious about 2015: Germany's Merck

Tough competition for its biggest drug and a rise in research and development costs have pushed Merck KGaA to adopt a cautious outlook for 2015, the German pharmaceutical group's CFO told CNBC Tuesday.

Earlier in the day, Merck said underlying core earnings would stagnate or grow only slightly this year as it earmarks money for the developing a new immunotherapy against cancer and amid strong competition for its multiple sclerosis drug Rebif.

"We are a little bit cautious because we are facing some adverse impacts in 2015, which are first and foremost strong competitive pressure against our biggest product – Rebif," Merck CFO Marcus Kuhnert told CNBC.

"Second, we will miss six months of license income in 2015, which is burdening our profit and loss. Also we have a strategic alliance with Pfizer, with whom we are leveraging our oncology pipeline and here we will be facing a ramp-up in R&D (research and development) costs and this will also burden our P&L," he added.

The Merck KGaA logo sits outside the company's headquarters in Darmstadt, Germany.
Hannelore Foester | Bloomberg | Getty Images
The Merck KGaA logo sits outside the company's headquarters in Darmstadt, Germany.

Rebif, Merck's best-selling pharmaceutical, saw sales slip 5 percent in the last three months of 2014, adjusted for currency swings - a smaller decline than expected. The company on Tuesday predicted further declines this year.

Merck shares dipped 0.4 percent in early Frankfurt trade.

Merck's established injectable MS drug Rebif is under threat from new oral treatments against the debilitating disease, such as Novartis's Gilenya, Sanofi's Aubagio and Biogen Idec's Tecfidera.

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But overall fourth-quarter earnings before interest, taxes, depreciation, amortisation (EBITDA) and one-offs rose 10.5 percent to 878 million euros ($983 million), the maker of drugs, high-tech chemicals and lab supplies said.

The result was lifted by strong demand for liquid crystals used in the screens of ultra-high-definition TVs and mobile devices, and beat the 870 million euros expected on average by analysts polled by Reuters.

After years of setbacks in drug development, Merck scored a rare success in November when it won Pfizer as development partner for an experimental cancer immunotherapy, part of a class of drugs known as anti-PD-L1.

The family-controlled German group in September agreed to acquire Sigma-Aldrich Corp for $17 billion in cash, the biggest takeover in the German group's history, and plans to wrap up the deal in mid-2015.

Kuhnert told CNBC that after the acquisition of Sigma, Merck was unlikely to plan any further major acquisitions over the next two to three years.

"With the acquisition of Sigma and debt, the priority in the next 2-3 years will be paying down of debt so big acquisitions will not be on the agenda," he said.

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