MKGAF Merck KGAA (PK)

Merck KGaA (MKGAF) recently announced a definitive agreement to acquire Berlin, Germany-based Biochrom AG. Biochrom AG, which specializes in the production and marketing of cell culture media and buffer solutions, posted sales of approximately €13 million in 2011. The company also reported a total workforce of approximately 60 in 2011.

The financial terms of the deal were not disclosed. Subject to the necessary regulatory approvals, the transaction is expected to close in the fourth quarter of 2012.

The acquisition should support Merck Millipore’s Process Solutions business unit, which concentrates on simplifying the complexities faced by pharmaceutical and biopharmaceutical manufacturers.

The innovative cell-culture media products at Biochrom AG complements Merck Millipore’s Process Solutions business unit by adding liquid cell-culture media and buffers.  These include disposable packaging solutions and serum-free products.

Merck Millipore, a division of Merck KGaA, consists of three units - Bioscience, Lab Solutions and Process Solutions. This division was formed following the acquisition of Millipore Corp. in July 2010.

We note that Merck KGaA was in the news recently due to a collaboration agreement signed between Dr. Reddy’s Laboratories Ltd. (RDY) and Merck Serono, a division of Merck KGaA, for the co-development and commercialization of a portfolio of biosimilar compounds in oncology, primarily focused on monoclonal antibodies (MAbs).

As per the deal, Dr. Reddy’s will be responsible for early product development and will complete phase I studies. Depending on the success of the phase I program, Merck Serono will take over manufacturing of the compounds and initiate phase III development. Research and development costs (R&D) will be shared by the partners.

Merck Serono will commercialize compounds developed under the agreement globally, outside the US and a few areas which are co-exclusive or where Dr. Reddy’s enjoys exclusive rights. In the US, both companies will co-commercialize products on a profit-sharing basis.

Our Recommendation

Merck KGaA currently retains a Zacks #4 Rank (short-term Sell rating).

 
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