FRANKFURT - German drugs-to-chemical hybrid Merck KGaA has mulled acquisitions in both the pharmaceutical and chemical industries and has sufficient funds for big targets, its chief executive told a German newspaper.

In principle, I can very well imagine acquisitions in both areas -- in the pharma and chemical sectors, Karl-Ludwig Kley was quoted by Sueddeutsche Zeitung in an excerpt of an article ahead of its publication on Monday.

Kley said that the company had enough funds to finance small as well as big acquisitions, but did not specify.

But it also needs to fit, he said.

The head of Merck's pharmaceuticals unit, Elmar Schnee, had told Reuters in September the company aims to boost its drugs pipeline by acquiring rights to drug candidates or buying smaller research-based companies, with such projects accounting for 30 percent of total expenses for research and development.

He then said that the company does not need another Serono, referring to the 2007 takeover of Swiss biotech company Serono for 10.3 billion euros ($14.74 billion).

Regarding Merck's cancer drug Erbitux -- which was rejected for use to fight lung cancer by an influential European expert panel on drug approvals in November -- Kley said: The fact that our drug Erbitux was not approved for the indication of lung cancer has surprised us. We are still convinced of the drug's effectiveness.

Erbitux, seen by Merck as a potential blockbuster with more than 1 billion euros in peak annual sales even without lung cancer revenue, is already approved for use in cancer of the bowel and of the head and neck.

Merck is also the world's largest maker of liquid crystals (LC) for flat-panel displays and expects a full-year EBIT margin at its LC unit of 30 percent, far below margins of about 50 percent seen in 2008.

Operating margins that are constantly above 50 percent are not possible ... I rule out that we return to those regions, Kley said, but he added he was convinced that the margin would rise again next year from the current 30 percent. ($1=.6986 Euro) (Reporting by Christoph Steitz, editing by Maureen Bavdek)