Merck KGaA’s CDMO business hit with sales decline in 2024 amid manufacturing investment
Science and technology company Merck KGaA announced that it returned to profitable growth in 2024, thanks in part to a rebound in its life science business during the second half of the year. However, Merck KGaA’s contract development and manufacturing (CDMO) business struggled last year.
In 2024, sales of its life science services’ CDMO business unit declined to €722 million, compared to €792 million in 2023, an organic sales decline of 9.4% which Merck KGaA said was mainly driven by a customer adjusting its supply chain.
“Sales from our CDMO activities declined organically due to the loss of pandemic-related sales that still positively affected the previous year,” according to Merck KGaA’s 2024 annual report, which said the decrease was mainly attributable to Europe and North America.
Despite the challenges, Merck KGaA CEO Belén Garijo in a statement said the company has taken the opportunity to strengthen its supply chains and invest in Asia, Europe, and the U.S., while adding that it is well-positioned to benefit from “global macro trends such as complex biologics and novel modalities.”
Last year, Merck KGaA closed its transaction to buy life science company Mirus Bio for approximately $600 million. The acquisition was a move towards offering “solutions for every step of viral vector manufacturing” and supporting customers in advancing cell and gene therapies from preclinical through commercial production.
In 2024, MilliporeSigma, operating as the U.S. and Canada life science business of Merck KGaA, announced a $76 million expansion at its Bioconjugation Center of Excellence in St. Louis, Missouri. The investment, which tripled its manufacturing capacity, was intended to meet increased global demand for antibody-drug conjugates (ADCs).
Last year, Merck KGaA launched the “first scalable single-use mixer specifically designed for manufacturing ADCs.” The Mobius ADC reactor enables biopharma companies to produce therapies faster and more safely by offering accelerated turnaround times and fewer cross contamination risks, according to the company.
Merck KGaA in 2024 also signed a potential $1.4 billion deal with Caris Life Sciences to accelerate the development of ADCs for cancer treatment. Under the agreement, Merck KGaA obtained an exclusive global license to develop, manufacture and commercialize ADC therapeutics for targets identified through the collaboration.
Trump tariffs, NIH funding cuts
On Tuesday, President Donald Trump’s 25% tariffs on imports from Canada and Mexico took effect, with the 10% tariff on Chinese imports now doubled to 20%. Trump said Thursday that he has postponed the 25% tariff on most goods from Mexico for a month after a conversation with that country’s president. During Thursday’s earnings call with analysts, Garijo was asked about the potential impact of the Trump administration’s tariffs on Merck KGaA overall.
Trump’s tariffs on Canada, China, and Mexico are “not impacting” the company, according to Garijo, who noted that the U.S. is the company’s largest business globally with the “biggest percentage” of its workforce in the country working at 72 sites in more than 20 states.
“It’s a significant investment, both in R&D and manufacturing, in the U.S.,” she said. “We have localized over the years our supply chain in anticipation of potential trade barriers and potential tariffs.”
At the same time, Garijo said as the company better understands how the tariffs are imposed in other regions of the world, Merck KGaA is putting in place mitigation plans across the company “to cover supply in the U.S. and to meet customer and patient demand.”
Merck KGaA CEO of Life Science Matthias Heinzel was also asked about the potential impact of Trump’s tariffs as well as funding cuts and freezes to the National Institutes of Health (NIH).
Regarding tariffs, Heinzel said Merck KGaA’s strategy over the past three or four years has been to adopt a “within region/for region” model. He noted that the company has a “very strong footprint in the U.S.” with more than 20 plants that provide flexibility.
“We feel we’re well covered. We have some options to move production around,” according to Heinzel. “We have single use [infrastructure] in the U.S. and Europe. It depends a bit also on the customer demand, but I think from a supply chain perspective we have now a much better global and regionally diversified footprint.”
Heinzel said the company’s science and lab solutions (SLS) exposure to potential NIH cuts by the Trump administration represents approximately 5% of its total life science business and about 10% overall for the SLS segment.
“We need to see now how that unfolds. Obviously, if there are potential cuts coming, that could have an impact,” he told analysts.