Merck Kgaa · XETR:MRK
Merck Kgaa — Merck KGaA, Darmstadt, Germany — Q3 2015 Earnings Presentation
48 slides from Merck Kgaa's earnings presentation, Nov 12, 2015
Slide 1: Growth across all businesses & regions – Q3 2015 results
GROWTH ACROSS ALL BUSINESSES & REGIONS Q3 2015 results Marcus Kuhnert, Member of the Executive Board & CFO Bernd Reckmann, Member of the Executive Board & CEO Life Science and Performance Materials Rico Wiedenbruch, Head of Integrated Circuit Materials November 12, 2015
Slide 2: Disclaimer
Disclaimer Publication of Merck KGaA, Darmstadt, Germany. In the United States and Canada the group of companies affiliated with Merck KGaA, Darmstadt, Germany operates under individual business names (EMD Serono, EMD Millipore, EMD Performance Materials). To reflect such fact and to avoid any misco
Slide 3: Disclaimer – Cautionary Note Regarding Forward-Looking Statements
Disclaimer Cautionary Note Regarding Forward-Looking Statements This communication may include “forward-looking statements.” Statements that include words such as “anticipate,” “expect,” “should,” “would,” “intend,” “plan,” “project,” “seek,” “believe,” “will,” and other words of similar meaning in
Slide 4: Agenda
Agenda Executive summary Financial review Excursus: Integrated Circuit Materials Outlook and guidance 4
Slide 5: Executive Summary
©) EXECUTIVE SUMMARY Sa aan
Slide 6: Highlights
Highlights Organic growth in all businesses and regions Operations Sigma: EU approval of transaction granted – closing scheduled for Nov. 18, 2015 Avelumab: Phase III in 1st line NSCLC initiated; Orphan Drug and Fast Track designation for Merkel cell carcinoma Sales growth of 6.8% in Q3 2015 Financi
Slide 7: Sales and EBITDA pre growth driven by all businesses
Sales and EBITDA pre growth driven by all businesses Q3 2015 YoY net sales • Fertility and General Medicine Organic Currency Portfolio Total more than offsetting Rebif decline Healthcare 1.9% -0.5% 0.0% 1.4% • Life Science benefits from strong performance of Process Solutions Life Science 8.1% 6.8%
Slide 8: Asia-Pacific largest region – China with strong growth momentum
Asia-Pacific largest region – China with strong growth momentum Group Q3 2015 net sales by region [in %] 32% North America (NA) Europe (EU) 21% 9% Latin America (LatAm) 34% Asia-Pacific (APAC) 4% Middle East & Africa (MEA) 8
Slide 9: All regions contribute to organic growth
All regions contribute to organic growth Regional development of net sales Q3 2015 [€ m] Regional development +6.8% • Growth in EU and NA predominantly Organic sales driven by Life Science and Fertility 3,120 growth 2,921 • Organic growth in Asia-Pacific coming from China (esp. Fertility, GM) 996 +1
Slide 10: Financial Review
FINANCIAL REVIEW
Slide 11: Q3 2015 overview
Q3 2015 overview Q3 2015 – key figures Comments – Q3 2015 [€m] Q3 2014 Q3 2015 Δ • EBITDA pre increase driven by good Net sales 2,921 3,120 6.8% organic performance, release of R&D termination provision and FX EBITDA pre 857 944 10.2% Margin (in % of net sales) 29.3% 30.3% • EPS pre and operating ca
Slide 12: Q3 2015 – good quarter with strong earnings growth
Q3 2015 – good quarter with strong earnings growth Q3 2015 – reported results Comments – Q3 2015 [€m] Q3 2014 Q3 2015 Δ • Strong EBIT increase reflects EBITDA EBIT 429 564 31.4% pre progression; last year with higher D&A and exceptionals Financial result -57 -81 42.3% • Financial result includes hig
Slide 13: Healthcare: Slight sales growth driven by Fertility and General Medicine
Healthcare: Slight sales growth driven by Fertility and General Medicine Healthcare P&L Comments [€m] Q3 2014 Q3 2015 • Sales growth impacted by change of Venezuelan FX rate and softer Latin American currencies Net sales 1,684 1,708 Marketing and selling -625 -683 • Rebif organically lower as volume
Slide 14: Life Science: All businesses contribute to strong organic performance
Life Science: All businesses contribute to strong organic performance Life Science P&L Comments [€m] Q3 2014 Q3 2015 • Process Solutions remains main organic growth contributor driven 661 759 by strong performance in single-use & virus filtration Net sales Marketing and selling -209 -238 • Solid org
Slide 15: Performance Materials: All businesses yield profitable growth
Performance Materials: All businesses yield profitable growth Performance Materials P&L Comments [€m] Q3 2014 Q3 2015 • Strong increase in sales reflecting FX tailwinds Net sales 576 653 • Further shift towards innovative liquid crystal technologies Marketing and selling -45 -54 (esp. UB-FFS) suppor
Slide 16: Balance sheet reflects Sigma financing measures
Balance sheet reflects Sigma financing measures Assets [€ bn] Liabilities [€ bn] 32.3 32.3 26.0 11.6 26.0 14.0 Cash & marketable securities 5.1 Receivables 2.2 2.4 11.8 Net equity Inventories 1.7 1.8 Intangible assets 10.3 Financial debt 11.4 5.6 11.4 Property, plant & equipment 1.5 Payables 1.6 1.8
Slide 17: Strong operating cash flow reflecting cash generating nature of businesses
Strong operating cash flow reflecting cash generating nature of businesses Q3 2015 – cash flow statement Cash flow drivers [€m] Q3 2014 Q3 2015 Δ • Last year’s D&A included amortization Profit after tax 250 366 116 for discontinued R&D project D&A 353 337 -16 • In 2014 provision built-up for R&D ter
Slide 18: Excursus: Integrated Circuit Materials
EXCURSUS: INTEGRATED CIRCUIT MATERIALS
Slide 19: Integrated Circuit Materials – enabling solutions for the semiconductor market
Integrated Circuit Materials – enabling solutions for the semiconductor market and adjacent industries Dielectric Materials Lithography Materials Silica Materials IC Process Materials • Spin-on silicon-based • Diverse portfolio of bespoke • Colloidal silica used in • Removers, developers and materia
Slide 20: Strong position to benefit from technological advances and market trends
We have a strong position and will benefit further from complex technological advances and underlying market trends Feature sizes develop Market drivers and technological trends as predicted by Moore‘s law • Miniaturization: Devices are becoming smaller with better performance Feature size Need fo
Slide 21: Integrated Circuit Materials develops dedicated solutions for customer challenges
Integrated Circuit Materials develops dedicated solutions for customer challenges, enabling cutting edge innovation Challenge Solution PATTERN COLLAPSE FIRM® RINSE MATERIALS As lines get narrower and closer together in advanced chip generation, they tend to “stick” due to surface tension. LITHOGRAPH
Slide 22: Outlook and Guidance
OUTLOOK AND GUIDANCE
Slide 23: Broad and complementary product fit in attractive segments
& Broad and complementary product fit in attractive segments Strategic rationale Expanding global reach and scale Leveraging operational excellence to deliver superior value to customers New organizational structure designed (Applied, Research and Process Solutions) Integration Top 2 management leve
Slide 24: Sigma-Aldrich – timeline update
Sigma-Aldrich – timeline update U.S. and other 1 Antitrust Asset sale to Sigma shareholder antitrust approvals Antitrust approvals from approval from Honeywell; 2 approval (Dec. 5, 2014) (U.S. - Dec. 23, 2014) EU ,China, Japan and Israel South Korea EU to approve Anti-trust (June 15, 2015) and Brazi
Slide 25: Full-year 2015 guidance upgraded and updated for Sigma
Full-year 2015 guidance upgraded and updated for Sigma Guidance for 2015, including Sigma-Aldrich for 43 days Net sales: ~ €12.6 – 12.8 bn thereof Sigma: ~ €300 m EBITDA pre: ~ €3,580 – 3,650 m thereof Sigma: ~ €80 - 95 m EPS pre: ~ €4.80 – 4.95 thereof Sigma: ~ €0.10 – 0.15 25
Slide 26: 2015 business sector guidance without Sigma-Aldrich
2015 business sector guidance without Sigma-Aldrich Healthcare Performance Life Science* Materials Net sales Net sales Net sales Organically stable Solid organic growth Slight organic growth EBITDA pre EBITDA pre EBITDA pre ~ €1.93 – 2.0 bn ~ €0.76 – 0.78 bn ~ €1.1 – 1.14 bn 26 *Without Sigma-Aldric
Slide 27: Slide 27
Slide 28: Appendix
APPENDIX
Slide 29: Additional financial guidance 2015
Additional financial guidance 2015 Further financial details Group royalty, license and ~€300 m commission income in 2015 Corporate & Other EBITDA pre ~ -€340 – -360 m Underlying tax ratio ~23% to 25% Capex on PPE ~€550 m 2015 & 2016 hedge rate ~25-30% Hedging/USD assumption at EUR/USD ~1.19 to 1.24
Slide 30: Solid structure to finance Sigma-Aldrich transaction
Solid structure to finance Sigma-Aldrich transaction Financing structure as of September 30, 2015 Update on funding structure • Acquisition 100% cash & debt financed Total: US$17.4 bn • The bridge has almost completely been replaced through various Cash capital markets transactions ~US$2.4 bn • Acco
Slide 31: Well-balanced maturity profile reflects Sigma-Aldrich related capital markets transactions
Well-balanced maturity profile reflects Sigma-Aldrich related capital markets transactions Maturity profile as of Sept. 30, 2015 [in €m] 2.4% 4.5% Coupon 668 2.95% 1.375% 3.25% L+35bps 4.25% 2.625% E+23bps 0.75% 891 223 70 1,350 3.375% 1,426 5.875% 4.0% 1.7% 1,000 700 800 3.615% 250 550 500 356 100
Slide 32: Growth driven by FX, AZ and organic performance of all segments
Growth driven by FX, AZ and organic performance of all segments 9M 2015 YoY net sales • Rebif and Erbitux declines more than Organic Currency Portfolio Total offset by other franchises driving organic growth of Healthcare Healthcare 1.2% 4.7% 0.0% 6.0% • Life Science benefits from positive Life Scie
Slide 33: 9M 2015: Overview
9M 2015: Overview 9M 2015 – key figures 9M 2015 [€m] 9M 2014 9M 2015 Δ • Sales increase mainly driven by FX, Net sales 8,364 9,381 12.2% AZ and organic performance 2,509 2,696 7.5% • EBITDA pre increases, while margin EBITDA pre Margin (in % of net sales) 30.0% 28.7% softens due to royalty loss and
Slide 34: 9M 2015 – solid reported figures
9M 2015 – solid reported figures 9M 2015 YoY – reported results Reported results [€m] 9M 2014 9M 2015 Δ • EBIT reflects increased EBITDA pre EBIT 1,338 1,545 15.5% and higher exceptionals last year Financial result -142 -223 56.7% • Financial result impacted by higher interest expenses for Sigma fin
Slide 35: Healthcare: Stability in base business and investments in future growth
Healthcare: Stability in base business and investments in future growth 9M 2015 YoY net sales Comments [€m] 9M 2014 9M 2015 • Rebif decline due to competition partially mitigated by U.S. pricing Net sales 4,904 5,197 • Erbitux soft, as mandatory price cuts in Europe & lower private -1,894 -2,073 sec
Slide 36: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q3 2015 organic sales growth [%] 9M 2015 organic sales growth [%] by key products [€ m] by key products [€ m] 468 1,358 -7% -12% 466 1,389 223 661 -2% -3% 232 670 Consumer 200 +6% Consumer 644 +11% Health 204 Health 569 167 +9% 508 +4% 147 461 106 -1% 3
Slide 37: Rebif: Defending the franchise
Rebif: Defending the franchise – competitive pressure in the U.S. and Europe Rebif sales evolution Reported results North America Q3 drivers • Rebif sales of €468 m in Q3 2015 [€ m] Price benefit from FX tailwinds (USD) -2.8% org. increase 300 Price Price • Organic decline of -7.0% due to lower incr
Slide 38: Erbitux: A challenging market environment
Erbitux: A challenging market environment Erbitux sales by region Erbitux performance -2.0% Q3 YoY • Sales decrease to €223m due to [€ m] organic growth negative pricing and FX 250 • Europe impacted by mandatory -9.8% price cuts in various countries and 200 increasing competition -1.1% • Latin Ameri
Slide 39: Strong growth in Fertility, General Medicine and Endocrinology
Strong growth in Fertility, General Medicine and Endocrinology Sales evolution Q3 drivers Fertility [€ m] Organic growth of Fertility driven by 260 all major regions, especially China Organic 220 Endocrinology with strong growth 180 across all regions and products; Q3 2014 Q4 2014 Q1 2015 Q2 201
Slide 40: Clinical pipeline
Clinical pipeline Phase I Phase II Phase III In registration Tepotinib – c-Met kinase inhibitor M2736 (ATX-MS-1467) – Evofosfamide (TH-302) – Cladribine Tablets5 – Solid tumors Immune tolerizing agent Hypoxia-activated prodrug Lymphocyte targeting agent Evofosfamide (TH–302) – Multiple sclerosis Sof
Slide 41: Next catalysts for focus projects
Next catalysts for focus projects Initiate up to 6 registrational trials End 2015 Avelumab Data readout Phase II mMCC H1 2016 Evofosfamide Pancreatic Cancer Phase III results End 2015 Soft Tissue Sarcoma Phase III results End 2015 Atacicept Data readout Phase II H1 2016 41
Slide 42: Life Science: Good organic performance fueled by Process Solutions
Life Science: Good organic performance fueled by ongoing demand for Process Solutions products 9M 2015 YoY net sales Comments 9M 2014 9M 2015 • Process Solutions drives divisional growth mainly due to strong 1,976 2,270 demand from biopharma for single-use and purification products Net sales Marketi
Slide 43: Performance Materials: Healthy trends & strong FX tailwinds drive growth
Performance Materials: Healthy trends & strong FX tailwinds drive growth 9M 2015 YoY net sales Comments 9M 2014 9M 2015 • Strong sales mainly reflect portfolio effect and FX tailwinds Net sales 1,484 1,914 • Liquid crystals volume trend remains largest contributor to growth Marketing and selling -13
Slide 44: Operating cash flow burdened by tax payment for Pfizer upfront
Operating cash flow burdened by tax payment for Pfizer upfront 9M 2015 – cash flow statement Cash flow drivers [€m] 9M 2014 9M 2015 Δ • D&A increase due to AZ Profit after tax 883 997 114 • Changes in provisions reflect higher D&A 980 1,006 26 pension & litigation provisions • Higher tax and interes
Slide 45: Exceptionals in Q3 2015
Exceptionals in Q3 2015 Exceptionals in EBIT [€m] Q3 2014 Q3 2015 Exceptionals thereof D&A Exceptionals thereof D&A Healthcare 17 0 -1 0 Life Science 11 0 21 0 Performance Materials 25 0 5 0 Corporate & Other 26 4 18 0 Total 79 4 44 0 45 Totals may not add up due to rounding
Slide 46: Exceptionals in 9M 2015
Exceptionals in 9M 2015 Exceptionals in EBIT [€m] 9M 2014 9M 2015 Exceptionals thereof D&A Exceptionals thereof D&A Healthcare 43 4 32 2 Life Science 32 0 71 0 Performance Materials 81 0 6 0 Corporate & Other 42 4 39 0 Total 198 8 148 2 46 Totals may not add up due to rounding
Slide 47: Financial calendar
Financial calendar Date Event December 10, 2015 M³ - Meet Management March 8, 2016 Q4 2015 Earnings release April 29, 2016 Annual General Meeting May 19, 2016 Q1 2016 Earnings release 47
Slide 48: Investor Relations contacts
CONSTANTIN FEST SVENJA BUNDSCHUH ALESSANDRA HEINZ Head of Investor Relations Assistant Investor Relations Assistant Investor Relations +49 6151 72-5271 +49 6151 72-3744 +49 6151 72-3321 [email protected] [email protected] [email protected] ANNETT WEBER JULIA SCHWIE
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