Merck Kgaa · XETR:MRK
Merck Kgaa — Merck KGaA, Darmstadt, Germany — Q2 2020 Earnings Presentation
47 slides from Merck Kgaa's earnings presentation, Aug 6, 2020
Slide 1: Q2 2020 results: Top line reflects COVID-19 impact, bottom line well managed
Top Line reflects COVID-19 impact, Bottom line well managed Merck KGaA, Darmstadt, Germany Q2 2020 results Stefan Oschmann, CEO Marcus Kuhnert, CFO August 6, 2020
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, Millipore Sigma, EMD Performance Materials). To reflect such fact and to avoid any mis
Slide 3: Disclaimer: Forward-Looking Statements
Disclaimer Cautionary Note Regarding Forward-Looking Statements and financial indicators 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 wor
Slide 4: Agenda
Agenda Executive summary Financial overview Guidance 4 Merck KGaA, Darmstadt, Germany Q2 20 Results Presentation | August 6th, 2020
Slide 5: Executive summary
Executive summary 01
Slide 6: Highlights
Highlights Operations Financials Healthcare: Oncology and General Medicine growing despite pandemic, Fertility demand lowered Q2 organic sales: decline of -2.5%; as anticipated, recovery of Mavenclad® ramp-up started in June, Bavencio® U.S. launch in UC 1L; Q2 organic EBITDA pre: decline of -11.5% M
Slide 7: Versum portfolio effect and Process Solutions drive sales growth despite COVID-19
Versum portfolio effect and Process Solutions drive sales growth despite COVID-19 related organic decline in Healthcare and Performance Materials Q2 YoY Net Sales Q2 YoY EBITDA pre Organic Currency Portfolio Total 1,139 8.8% 1,074 Healthcare -7.4% -2.3% -0.9% -10.6% -11.5% -3.1% Life Science 6.3% -0
Slide 8: All regions impacted by COVID-19; signs of recovery in APAC
All regions impacted by COVID-19; signs of recovery in APAC dragged down by Display Solutions & Fertility Regional breakdown of net sales [€m] Regional organic development Europe -4.2% ▪ Moderate decline in APAC as double- org. digit growth in Life Science and 27% Semiconductor Solutions offset a la
Slide 9: Financial overview
Financial overview 02
Slide 10: Q2 2020: Overview
Q2 2020: Overview Key figures Comments [€m] Q2 2019 Q2 2020 Δ ▪ Versum portfolio effect and strong growth Net sales 3,971 4,119 3.7% in Process Solutions drive sales above last year, despite materializing COVID-19 EBITDA pre 1,139 1,074 -5.7% impact across most business units Margin (in % of net sal
Slide 11: Reported figures
Reported figures Reported results Comments [€m] Q2 2019 Q2 2020 Δ ▪ EBIT decline driven by lower non- 618 491 -20.6% recurring income, higher depreciation EBIT & amortization from Versum PPA and Financial result -61 -102 67.4% impairments in Performance Materials Profit before tax 557 389 -30.2% ▪ F
Slide 12: Healthcare: Savings in M&S and R&D offset Fertility and Mavenclad impact
Healthcare: Savings in M&S and R&D offset impact from lowered Fertility demand and Mavenclad® drag amid COVID-19 Healthcare P&L Net sales bridge €1,677 m €1,499 m [€m] Q2 2019 Q2 2020 Net sales 1,677 1,499 -7.4% -2.3% -0.9% Marketing and selling -599 -409 +0.0%Q2 2020 Administration -84 -81 Q2 2019
Slide 13: Life Science: Strong resilience continues in Q2
Life Science: Strong resilience continues in Q2; Process growing 20%, Applied & Research impacted by COVID-19 but recovery visible in June Life Science P&L Net sales bridge €1,705 m 6.3% 0.0% €1,806 m [€m] Q2 2019 Q2 2020 -0.4% Net sales 1,705 1,806 Marketing and selling -490 -488 +0.0%Q2 2020 Admin
Slide 14: Performance Materials: Versum effect and Semi growth offset Display
Performance Materials: Versum portfolio effect and accelerating Semi growth more than offset declining Display and Surface amid COVID-19 Performance Materials P&L Net sales bridge 50.1% €814 m [€m] Q2 2019 Q2 2020 €589 m 1.8% Net sales 589 814 -13.7% Marketing and selling -66 -134 +0.0%Q2 2020 Admin
Slide 15: Balance sheet
Balance sheet Assets [€bn] Liabilities [€bn] 43.8 43.8 43.8 43.8 Cash & cash equivalents 0.8 1.5 3.5 3.5 Receivables 3.3 3.5 Inventories 18.0 17.9 Net equity Intangible assets 26.3 25.8 14.1 13.2 Financial debt 2.6 Payables/refund liabilities 2.4 Property, plant 3.3 Provisions for employee benefits
Slide 16: Cash flow statement
Cash flow statement Q2 2020 – cash flow statement Cash flow drivers [€m] Q2 2019 Q2 2020 Δ ▪ Profit after tax driven by lower EBIT Profit after tax 471 289 -182 ▪ Higher depreciation & amortization from Versum PPA and impairments in D&A 453 559 106 Performance Materials Changes in provisions -47 -54
Slide 17: Guidance
Guidance 03
Slide 18: Assumptions on COVID-19 pandemic development remain largely the same
Our assumptions on the development of the COVID-19 pandemic have remained largely the same since May Previous assumptions Current assumptions (communicated in May) (communicated in August) Impact across all regions Impact across all regions Cases expected to peak in Q2 Situation eases in H2 Recovery
Slide 19: Active crisis management allowed quick 8-week recovery time
Active crisis management and resilient product portfolio allowed quick 8-week recovery time Organic sales growth - Group Increased visibility of COVID-19 impact +11% ▪ Strongest correlation with mandatory workplace closures +7% ▪ Fertility: closure of clinics ▪ N&I: closure of practices, limited vis
Slide 20: Life Science resilient and positioned for mid-term upside from COVID-19
Life Science highly resilient and well positioned to participate in potential mid-term upside from COVID-19 2020 heatmap of COVID-19 impact by customer segment H1 2020 monthly sales* by customer segment Pharma/ Industrial & Pharma / Biotech Industrial & Testing Academia Diagnostics Biotech Testing P
Slide 21: COVID-19 guidance overall accurate, slight upgrade warranted
COVID-19 guidance given in May overall accurate, improved visibility warrants slight upgrade Group: ▪ Up to mid single-digit percentage sales impact full year ▪ Countermeasures in place: confirm 50 to 60% of net sales impact to hit EBITDA pre ▪ Recovery visible in June, expected to continue in Q3 an
Slide 22: Key earnings drivers to remember for 2020
Group Key earnings drivers to remember for 2020 EBITDA pre - supporting factors EBITDA pre - reducing factors ▪ Increasing sales contribution from Mavenclad® and ▪ No more support from Pfizer deferred income (€191 m Bavencio® in 2019) ▪ Stringent M&S and R&D cost management in HC ▪ Lower income from
Slide 23: Group full-year 2020 guidance
Group Full-year 2020 guidance Net sales: Slight to moderate organic growth, Versum growth contribution in mid single-digit percentage range; FX between 0% to -2% YoY; ~€16.9 – 17.7 bn EBITDA pre: Slight to moderate organic growth, mid single-digit percentage range growth from Versum; FX headwinds of
Slide 24: 2020 business sector guidance
Group 1 2020 business sector guidance Net sales EBITDA pre Healthcare ▪ Slight organic growth ▪ Organically about stable ▪ COVID-19 significantly impacting ▪ Significant adverse FX impact Fertility performance ▪ Sustained performance of new products Net sales EBITDA pre Life Science ▪ Strong organic
Slide 25: Slide 25
Slide 26: Appendix
Appendix
Slide 27: Additional financial guidance 2020
Additional financial guidance 2020 Further financial details Corporate & Other EBITDA pre slightly lower than last year Interest result ~ -280 to -310 m Effective tax rate ~24% to 26% Capex on PPE ~1.1 bn to 1.2 bn FY 2020 hedge ratio ~65% Hedging/USD assumption at EUR/USD ~1.16 2020 Ø EUR/USD assum
Slide 28: Maturity profile reflects Sigma-Aldrich and Versum financing
Maturity profile reflects Sigma-Aldrich and Versum financing transactions Maturity profile as of June 30, 2020 Coupon 3.250% [€ m/US $] 0.125% 2.950% 1.375% 1,600 1.625% 2.625% 3.375% 2.875% 1,000 0.875% 0.500% 0.005% 500 0.375% 1,000 1,000 750 750 800 550 600 500 600 2020 2021 2022 2023 2024 2025 2
Slide 29: H1 growth driven by Process Solutions and Semiconductor Solutions
A strong Q1 and double-digit Q2 growth in Process Solutions and Semiconductor Solutions allow for overall organic growth in H1 H1 YoY Net Sales H1 YoY EBITDA pre Organic Currency Portfolio Total 9.7% 2,256 Healthcare 3.2% -1.4% -0.5% 1.3% 2,068 0.2% -0.8% Life Science 5.9% 0.2% 0.0% 6.2% Performance
Slide 30: H1 2020: Overview
H1 2020: Overview Key figures Comments [€m] H1 2019 H1 2020 Δ ▪ A strong Q1, Versum portfolio effect and Net sales 7,717 8,489 10.0% accelerating growth in Process and Semiconductor Solutions drive sales EBITDA pre 2,068 2,256 9.1% above last year, despite materializing Margin (in % of net sales) 26
Slide 31: Reported figures
Reported figures Reported results Comments [€m] H1 2019 H1 2020 Δ ▪ EBIT increase driven by Versum 997 1,207 21.0% portfolio effect and Life Science EBIT growth, partially offset by lower non- Financial result -174 -201 15.6% recurring income, higher depreciation & amortization from Versum PPA and P
Slide 32: Healthcare: Organic growth in H1 based on strong Q1
Healthcare: Organic Growth in H1 based on a strong Q1 and a portfolio that showed resilience in the COVID-19 pandemic Healthcare P&L Net sales bridge €3,158 m 3.2% €3,200 m [€m] H1 2019 H1 2020 -1.4% -0.5% Net sales 3,158 3,200 Marketing and selling -1,150 -832 +0.0%H1 2020 Administration -172 -160
Slide 33: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q2 2020 organic sales growth [%] H1 2020 organic sales growth [%] by key product [€m] by key product [€m] 290 584 -13% -8% 331 630 226 460 -1% 13% 237 418 207 1% 419 4% 212 411 112 -41% 279 -22% 191 359 130 9% 281 19% 124 241 114 22% 228 25% 97 189 82 3
Slide 34: Neurology & Immunology: 7% organic growth in H1
® Neurology & Immunology: 7% organic growth in H1; paused Mavenclad ramp-up showing signs of recovery in June ▪ Mavenclad® recovery of ramp-up from peak COVID Sales development NDI, [€m] Mavenclad® TRx, [IQVIA, NPA, Weekly View] impact visible starting in June ▪ Rx volumes improving org. org. org. o
Slide 35: Oncology: Bavencio and Erbitux remain resilient
Oncology: both Bavencio® and Erbitux® remain resilient despite impact from the COVID-19 pandemic ® Sales development Oncology, [€m] Erbitux net sales, [€m] ▪ Absolute sales of €207 m reflect a resilient growth of 1.1% in Q2 250 237 org. org. org. org. org. 212 222 211 207 [€m] 2.7% 6.8% 8.8% 14.3% 6
Slide 36: Fertility: Strongest COVID-19 impact
Fertility: Strongest COVID-19 impact particularly in Europe and the U.S. given short treatment duration and temporary clinic shutdowns ® Sales development Fertility, [€m] Gonal-f net sales, [€m] 250 ▪ Entire Fertility portfolio shows org. org. org. org. org. 206 [€m] 3.5% 9.0% 3.3% -3.5% -38.9% 200
Slide 37: General Medicine & Endocrinology: Growing organically overall
General Medicine & Endocrinology: Growing organically overall despite COVID-19 impact in Q2 and a negative effect from Q1 pull-in Sales evolution Q2 2020 organic drivers [€m] Endocrinology Organic 99 95 100 90 91 83 -5.4% org. 80 ▪ Endocrinology was impacted in the U.S. 60 and to a minor extent in E
Slide 38: China's VBP: Round 3 includes metformin
China‘s VBP: Recently announced round 3 includes metformin, as anticipated, with implementation expected to follow in Q4 2020 Round 1 Round 2 Round 3 2019 2020 2021 March: 4+7 pilot initiated in December: Official 4 municipalities1 and 7 key announcement of Round 2 July: Official announcement of cit
Slide 39: Healthcare Pipeline
Healthcare Pipeline July 31, 2020 Phase I Phase II Phase III berzosertib (M6620) bintrafusp alfa peposertib (M3814) avelumab avelumab ATR inhibitor TGFbeta trap/anti-PD-L1 DNA-PK inhibitor anti-PD-L1 mAb anti-PD-L1 mAb Solid tumors Solid tumors Rectal cancer Solid tumors2 Non-small cell lung cancer
Slide 40: Healthcare catalysts - significant developmental progress
Healthcare catalysts - significant developmental progress across all therapeutic areas H2 2020 Q2 2020 H1 2021 (R&D Update Call: September 25) Tepotinib (c-Met–inhibitor) METex14: U.S. filing on track under RTOR (BTD granted in 2019) Bavencio® (Avelumab/Anti-PD-L1) 1L UC: U.S. FDA approval on June 3
Slide 41: Life Science: Strong resilience throughout H1
Life Science: Strong resilience throughout H1; Process growing double-digit, Applied & Research impacted by COVID-19 but recovery visible in June Life Science P&L Net sales bridge €3,366 m 5.9% 0.2% 0.0% €3,575 m [€m] H1 2019 H1 2020 Net sales 3,366 3,575 Marketing and selling -959 -986 +0.0%H1 2020
Slide 42: Performance Materials: Versum effect and Semi growth compensate Display
Performance Materials: Versum portfolio effect and accelerating organic Semi growth compensate declining Display and Surface amid COVID-19 Performance Materials P&L Net sales bridge 51.1% €1,714 m [€m] H1 2019 H1 2020 €1,193 m 2.1% Net sales 1,193 1,714 -9.5% Marketing and selling -132 -270 +0.0%H1
Slide 43: Cash flow statement
Cash flow statement H1 2020 – cash flow statement Cash flow drivers [€m] H1 2019 H1 2020 Δ ▪ Profit after tax driven by higher EBIT Profit after tax 660 747 87 ▪ Higher Depreciation & Amortization from D&A 927 991 64 Versum PPA and impairments in PM Changes in provisions 54 -38 -92 ▪ Changes in prov
Slide 44: Adjustments in Q2 2020
Adjustments in Q2 2020 Adjustments in EBIT [€m] Q2 2019 Q2 2020 Adjustments thereof D&A Adjustments thereof D&A Healthcare 5 0 15 0 Life Science 15 0 -15 0 Performance Materials 29 0 131 112 Corporate & Other 16 0 8 0 Total 65 0 138 112 44 Merck KGaA, Darmstadt, Germany Q2 20 Results Presentation |
Slide 45: Adjustments in H1 2020
Adjustments in H1 2020 Adjustments in EBIT [€m] H1 2019 H1 2020 Adjustments thereof D&A Adjustments thereof D&A Healthcare 8 0 -12 2 Life Science 24 0 -4 0 Performance Materials 65 0 165 112 Corporate & Other 44 0 25 0 Total 141 0 174 114 45 Merck KGaA, Darmstadt, Germany Q2 20 Results Presentation
Slide 46: Financial calendar
Financial calendar Date Event August 6, 2020 Q2 2020 Earnings release September 16, 2020 Virtual Capital Markets Day November 12, 2020 Q3 2020 Earnings release 46 Merck KGaA, Darmstadt, Germany Q2 20 Results Presentation | August 6th, 2020
Slide 47: 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] AMELIE SCHRADER EVA STERZ
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