(Bloomberg) -- Merck KGaA said its semiconductor business has reached a turning point amid the artificial intelligence surge, one of the reasons for the German company’s improved earnings forecast.
“The progress of adoption of artificial intelligence is going to drive growth of this business,” Chief Executive Officer Belen Garijo said in an interview on Bloomberg TV. “The participation of artificial intelligence in our current material business is still very low.”
As demand has ebbed for supplies for tests, therapies and vaccines since the pandemic, Merck’s life-sciences unit has struggled to regain its footing. The increased need for its semiconductor materials along with higher sales of multiple sclerosis drug Mavenclad and cancer drug Bavencio is helping buoy performance.
The shares rose as much as 2% in Frankfurt. They gained 15% this year through Wednesday’s close.
In a bid to strengthen its ability to supply the AI boom, Merck announced in July that it plans to buy semiconductor instrumentation provider Unity-SC. Merck will pay €155 million ($168 million) upfront, with further payments for reaching business goals.
Merck also sees progress in its life-sciences division that makes components for medical supplies. The company expects customers to stop destocking its products in the current quarter, Garijo said.
“We have already seen some major customers normalizing their stock levels and we are expecting this to continue,” she said in the interview.
After recent setbacks in developing some drugs, Merck is looking to expand its pipeline through licensing deals and potential smaller acquisitions, Garijo said in a call with journalists. The group is exploring multiple licensing options and will “communicate when we reach agreements in coming months,” she said.
Merck said late Friday that 2024 adjusted profit will be €8.20 ($8.91) to €9.30 per share, up from a previous range of €8.05 to €9.10. It also released its second-quarter results.
The Darmstadt, Germany-based company is unrelated to US-based Merck & Co.
--With assistance from Anna Edwards.
(Updates with CEO comments in eighth paragraph.)
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