A winning team keeps up the good work

Merck’s figures were once again strong although they didn’t beat consensus by that much (sales: +0.3%; profitability: +0.4%). Our expectations had been a notch too high (sales -0.7%; profitability: -0.4%), which we do not see as meaningful as the miss at the profitability level mainly stemmed from too-high corporate costs. Investors seemed to have an issue with the new detailed guidance, which left little room for consensus revisions. The lowered guidance for Covid-19-related sales might be a

A good ending despite slightly troubled pharma

Merck reported a good set of figures, but profitability did not fully match our very optimistic expectations (sales: 0.9%; adjusted EBITDA: -4.1%). Likewise for consensus (sales: +1.3%; adjusted EBITDA: -1.3%). It looks as if pharma was troubled by something temporary but nothing structural. Nevertheless, the company fully delivered towards its guidance. The strong dividend proposal and the qualitative guidance make us quite optimistic for the current year.

Streamlined and focused

This looks to be the new motto of Merck’s refurbished R&D pipeline. The strong cut in clinical programmes (50% up to 11/11/2021) has been quietly done. This reminds us of 2014/15, when Merck did something similar. This time, the trigger might have been the understanding that a drug candidate could not be developed in all and every suitable indication. This should be positive for the R&D spend.

A shortage as a booster

We are not about to forget Process Solutions’ continued strong momentum, but Electronics has stepped quite impressively on the stage in recent quarters due to the roaring demand for chips from many industries. Healthcare was quite good, but suffered a bit from its Chinese business. The lifted guidance confirmed our strong view on Merck. The next potential catalyst might be the update on Merck Healthcare’s R&D pipeline on 22/11/2021.

Management’s strong confidence

Merck’s investors day was impressive. The company’s management was very positive about the group’s future performance as a whole and by the developments of each division. We had been very positive already in the past and there is no reason to change this. The different developments of the divisions is an advantage as we never believed in conglomerate discounts. However, besides all the enthusiasm, we remain cautious regarding Healthcare, where we need additional information to get a deeper und

No limit?

We are still puzzled about Merck’s high-flying performance. The name has – again – outpaced our strong view, beating us at the top line (+4.5%; consensus: +2.2%) and at the EBITDA pre level (+10.5%; consensus: +7.7%). All three (!) divisions reported stronger than expected figures, driving profitability exceptionally high from low comparables. Sales stood at the highest watermark ever and EBITDA pre was only higher in Q3 20 (including a provision revision). Nevertheless, these figures confirm

Too good to be true

We have no doubts that the Q1 figures show the reality, which is impressive in Life Science! After the release of the preliminary figures, the only questions left were about the pattern and the momentum. HealthCare’s growth was a bit less pronounced and that of Electronics was subdued due to the still ongoing decline in Liquid Crystals.

Strongly beating expectations

Merck’s preliminary figures came in a bit out of the blue, but street expectations were too moderate (adjusted EBITDA: -15%). We were more positive, but our miss was still expected to be -12%. However, this underpins our strong view.

As strong as expected...

... and with sound optimism into 2021. Merck’s Q4 figures fully confirmed our strong view on the share. All three divisions contributed to the development, according their respective strengths. Guidance and the higher dividend both support our thinking. Nevertheless, the pandemic will still have a negative impact here and there, if virus mutations invalidate the vaccination efforts. Consensus was met.

With Q3's strong momentum into Q4

Merck’s Q3 figures confirmed our strong view by beating our expectations (+11% on EBITDA pre line) as well as consensus (+6% on EBITDA pre line). Stripping out the one-off in Healthcare, the organic performance was still very strong at the group level, driven by Life Science which was stronger than expected. However, Performance Materials did better organically, supported by the semiconductor business. Consequently, management added c.€400-600m including the one-off to EBITDA pre guidance.

Ready for 2022?

Merck confirmed our positive view on the company. As expected, management confirmed the FY 2022 guidance and put some nice colour on 2021. The virtual Investors Day’s main topics gave helpful insights about the dynamics and drivers of the respective businesses. We see the company as well prepared and positioned.

Healthcare's weaker profitability

Merck’s top-line came in weaker than expected as Healthcare faced harsher business conditions. Not infected, but affected by fewer doctor visits. Profitability was in line and street expectations were met. Life Science continued to see strong demand in Process Solutions, and Performance Materials was clearly helped by the strong contribution from Versum at all levels. Management’s guidance update confirms our strong view on the company.

HealthCare's growth momentum

Merck reported a strong set of figures, which were slightly above our expectations and beat consensus by 4-5%. The strong performance was driven by HealthCare and Life Science as Performance Materials saw a stabilisation in its profitability. Management adjusted its COVID-19-related scenario and provided a quantitative FY guidance, where AlphaValue is at the lower end of the provided range and consensus at the midpoint.

The expected strong set of figures

Merck’s Q4 results were marginally above our high expectations, but they beat consensus by 2-4% depending on the level. At the divisional level, the reported pattern fits as well. Management shared its view on the development of the virus outbreak and its expected implications on the detailed, but figure-less, FY guidance, which was much appreciated.

Healthcare's strong pick-up

Merck’s profitability was materially driven by Healthcare, which generated strong organic growth and the profitability line was additionally helped by some relief from costs. Life Science continued to perform very well. Performance Materials suffered from the decline in Liquid Crystals, as expected, which were not offset by a stronger OLED business and Semiconductor remained subdued. Reported figures were above our expectations and beat the street’s as well.

Cenkos: Healthcare Sector - Ward Round

Weekly round-up of AIM-listed healthcare news. Venture Life Group, GENinCode, Kromek, Alliance Pharma, Polarean Imaging, Benchmark Holdings, Ondine Biomedical, Verici Dx, Faron Pharmaceuticals, Avacta Group, Abingdon Health, Open Orphan, Belluscura, Hutchmed (China), Oxford Biodynamics

LIBERUM: Futura Medical* - Strategy on track, FM71 data in Sept

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SHORE CAPITAL - Warpaint London+ (W7L) - House Stock at 113p

Record H1 as distribution widens and offer resonates

Trading continues to track ahead of expectations, which have been upgraded twice so far YTD. There is clear evidence the growth strategy is bearing fruit. Distribution gains are increasing brand reach both in the UK and overseas. This appears to be an ideal time for its on-trend value-for-money proposition to gain traction, potentially with counter-cyclical characteristics as consumers start trading down. After the recent pull-back, valuation is undemanding for a 3-yr EPS CAGR of 13% with risk p

Cenkos: OptiBiotix Health Plc -- Final results

OptiBiotix has reported final results for the year to December 2021, with revenues growing 45% to £2.2m and the EBITDA loss increasing to £1.0m, reflecting the increased investment in the business. Post-period end, OptiBiotix has continued to return value to shareholders through the successful spin-out and listing of its ProBiotix Health division. Future growth of the company is supported by commercial agreements with large partners and a substantial pipeline of opportunities through its 2nd gen

Morning Note – 30 June 2022

Next Gen XPLOR and D2C

Belluscura has announced the launch of the next generation X-PLOR portable oxygen concentrator and expanded distribution through a D2C offering and partnership distribution plan for smaller DMEs.

Hybridan Small Cap Feast 30/06/2022

Dish of the day Joiners: Visum Technologies has joined the AQSE Growth Market. The Company's business is to own and operate an "on-ride" video and photographic camera system that it sells and/or licenses to customers (being theme parks, ride manufacturers, souvenir imaging providers, and other leisure operators). Leavers: No Leavers Today. What’s cooking in the IPO kitchen? Immediate acquisitions (IME.L) is to re-join AIM via a Reverse Takeover of Fiinu Holdings Limited. Once complete the Compan

SHORE CAPITAL - Oxford BioDynamics+ (OBD) - House Stock at 16p

Hybridan Small Cap Feast 20/06/2022

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CMA conclusion; small bolt-on; and in line trading

An update from CVS this morning covering conclusion of the CMA process, a further acquisition and update on trading. The CMA investigation into the acquisition of Quality Pet Care (QPC) is now complete, thereby bringing to an end a 9 month process. As part of the undertaking, CVS yesterday completed the sale of QPC for cash proceeds of c.£9m, implying a c.£12m impairment. Whilst the CMA episode has clearly been a setback, it does not seem to have fundamentally impaired ongoing M&A ambitions give

Positive AGM statement

The strong momentum from Q4-21 has continued into H1-22, with revenues expected to be up by more than 22% YoY. The outlook remains positive supported by strong industry demand and market share gains in the UK, where the group’s sustainability and affordability credentials are increasingly resonating. Whilst some macro pressures remain, these look to be manageable. We therefore make no change to our forecasts at this stage, but are highly encouraged by current trends and remain optimistic for the

LIBERUM: SourceBio International* - Scaling growth and trading well

Continued growth and margin improvement prompt further upgrades

A positive AGM update confirms strong revenue growth has continued YTD and further margin improvement means management again expect EBITDA to be materially ahead of expectations. The business model is now settled, with additional distributors appointed in the US which should help drive further penetration into the Primary Care market there. China revenues were strong and with no sign yet of any slowdown, despite being cognisant of renewed lockdowns there. Gross margins have remained robust on po