Merck Kgaa · XETR:MRK
Merck Kgaa — Q2 2019 Earnings Presentation
43 slides from Merck Kgaa's earnings presentation, Aug 8, 2019
Slide 1: A Quarter of Strong Performance
A QUARTER OF STRONG PERFORMANCE Merck Q2 2019 results Stefan Oschmann, CEO Marcus Kuhnert, CFO August 8, 2019
Slide 2: Disclaimer
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 3: Disclaimer
Disclaimer Additional Important Information and Where to Find It This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. This communication relates to a proposal which Merck Group has made for a business combination transaction with Versum Materials
Slide 4: Agenda
Agenda Executive summary Financial overview Guidance 4
Slide 5: Executive Summary
OO} executive summary RPAQGRTK
Slide 6: Highlights
Highlights Healthcare – Underlying profitability better than Q1 and further boosted by non- recurring business-related income Life Science – Sustained strong organic growth driven by all businesses with Process Operations Solutions as main contributor Performance Materials – Strong OLED growth more
Slide 7: Life Science and Healthcare drive organic growth supported by FX tailwinds
Life Science and Healthcare drive organic growth supported by FX tailwinds Q2 2019 YoY net sales • Solid growth in Healthcare reflects stable core business and increasing contributions from Organic Currency Portfolio Total Mavenclad® and Bavencio® Healthcare 5.2% 0.7% 0.0% 5.9% • Above-market organi
Slide 8: Organic growth driven by all regions
Organic growth driven by all regions Regional breakdown of net sales [€m] Regional organic development Europe +3.6% • Strong APAC due to double-digit growth of org. ® ® Glucophage , Erbitux and OLED; Life Science with ongoing strong demand 30% • Europe driven by strong demand in Life ® Science; stro
Slide 9: Financial Overview
FINANCIAL OVERVIEW
Slide 10: Q2 2019: Overview
Q2 2019: Overview Key figures Comments [€m] Q2 2018 Q2 2019 Δ • Net sales growth driven by 3,714 3,971 6.9% Life Science and Healthcare Net sales • EBITDA pre & margin reflect Peg-Pal (~€75 EBITDA pre 920 1,139 23.8% ® m) and Bavencio (~€35 m) milestones, Margin (in % of net sales) 24.8% 28.7% GSK d
Slide 11: Reported figures
Reported figures Reported results Comments [€m] Q2 2018 Q2 2019 Δ • Increased EBIT due to Peg-Pal and ® EBIT 392 618 57.6% Bavencio milestones, GSK deferred income as well as strong top-line Financial result -65 -61 -5.4% contribution from Life Science Profit before tax 328 557 70.0% • Effective tax
Slide 12: Healthcare: Underlying profitability increases vs. Q1
Healthcare: Underlying profitability increases vs. Q1 driven by organic performance and cost discipline, further boosted by non-recurring business-related income Healthcare P&L Comments ® [€m] Q2 20181 Q2 2019 • Solid growth in Healthcare driven by General Medicine, Mavenclad , ® ® ® Erbitux , Ferti
Slide 13: Life Science: Strong organic growth fueled by all businesses
Life Science: Strong organic growth fueled by all businesses Life Science P&L Comments [€m] Q2 20181 Q2 2019 • Process Solutions with continued strong demand: double-digit growth in all major business fields, especially single-use Net sales 1,543 1,705 -452 -490 • Advanced Analytical and Lab Water m
Slide 14: Performance Materials: Reduced China support for Liquid Crystals mitigated by OLED
Performance Materials: Reduced China support for Liquid Crystals mitigated by strong demand for OLED, amid market slowdown in Semiconductor and Surface Performance Materials P&L Comments [€m] Q2 20181 Q2 2019 • About stable Display Solutions sales driven by strong demand for OLED, Net sales 587 589
Slide 15: Balance sheet – Reflecting bond placements and IFRS 16 adoption
Balance sheet – Reflecting bond placements and IFRS 16 adoption Assets [€ bn] Liabilities [€ bn] 39.6 39.6 36.9 36.9 3,5 Cash & cash equivalents 2,2 3,5 3,2 Receivables 3,0 17,6 Net equity 2,8 17,2 Inventories Intangible assets 20,6 21,0 11,4 Financial debt 8,9 2,3 2,2 Payables Property, plant & equ
Slide 16: Cash flow statement
Cash flow statement Q2 2019 – cash flow statement Cash flow drivers [€m] Q2 2018 Q2 2019 Δ • Profit after tax in line with higher EBIT Profit after tax 251 471 220 • Changes in provisions driven by LTIP* adjustment D&A 448 453 5 • Changes in other assets/liabilities reflects GSK upfront and Peg-Pal
Slide 17: Guidance
GUIDANCE
Slide 18: Key earnings drivers to remember for 2019
Merck Group Key earnings drivers to remember for 2019 1 1 EBITDA -supporting factors EBITDA -reducing factors • Strong sales contribution from Mavenclad® ramp-up and Bavencio® • About stable R&D costs budgeted for Healthcare and decrease as % of sales (actual development will be subject to clinical
Slide 19: Full-year 2019 guidance
Merck Group Full-year 2019 guidance1 Net sales: Organic +3% to +5% YoY FX ~ 0% to +2% YoY ~ € 15.3 – 15.9 bn EBITDA pre: 2 Organic +10% to +13% YoY FX 0% to +2% YoY 3 ~ € 4,150 – 4,350 m EPS pre: ~ € 5.30 – 5.65 1 2 Merck stand-alone, i.e. without acquisition of Versum Materials and Intermolecular I
Slide 20: 2019 business sector guidance
Merck Group 2019 business sector guidance1 Healthcare Performance Life Science Materials Net sales Net sales Net sales ▪ Solid organic growth +4% to +6% ▪ Organic growth +7% to +8%, above ▪ Organic decline -4% to -7% ▪ Base business at least stable organically expected market growth ▪ LC resuming de
Slide 21: Slide 21
Slide 22: Appendix
APPENDIX
Slide 23: Additional financial guidance 2019
Additional financial guidance 2019 Further financial details Corporate & Other EBITDA pre* ~ -€420 – -480 m Interest result ~ -€260 – -280 m Effective tax rate ~ 24% to 26% Capex on PPE ~ €1.1 bn – 1.2 bn FY 2019 hedge ratio ~60% Hedging/USD assumption at EUR/USD ~1.20 2019 Ø EUR/USD assumption ~ 1.
Slide 24: Maturity profile reflects Sigma-Aldrich and Versum financing transactions
Maturity profile reflects Sigma-Aldrich and Versum financing transactions Maturity profile as of June 30, 2019 Coupon 2.400% 4.500% [€ m/US $] 2.950% 3.250% 750 1.375% 1.625% 4.250% 2.625% 3.375% 2.875% 0.750% 1.000 0.875% 70 0.005% 1.600 0.375% 1.350 500 1.000 1000 800 800 550 600 500 600 2 2 2 201
Slide 25: All businesses drive organic growth supported by FX tailwinds
All businesses drive organic growth supported by FX tailwinds H1 2019 YoY net sales • Healthcare with solid growth driven by General ® Medicine, Mavenclad®, Fertility, Erbitux and Organic Currency Portfolio Total Bavencio®, offsetting strong Rebif® decline Healthcare 4.1% 0.5% 0.0% 4.6% • Above-mark
Slide 26: H1 2019: Overview
H1 2019: Overview Key figures Comments [€m] H1 2018 H1 2019 Δ • Net sales reflect sales growth across all 7,199 7,717 7.2% businesses supported by FX tailwinds Net sales • EBITDA pre & margin increase due to EBITDA pre* 1,887 2,068 9.6% milestone payments and deferred income in Margin (in % of net s
Slide 27: Reported figures
Reported figures Reported results Comments [€m] H1 2018 H1 2019 Δ • Higher EBIT reflects strong topline EBIT 895 997 11.5% contribution from Life Science and non-recurring income in Healthcare Financial result -126 -174 38.1% • Lower financial result driven by Profit before tax 769 824 7.1% revaluat
Slide 28: Healthcare: Profitability driven by topline growth and milestone payments
Healthcare: Profitability driven by topline growth and milestone payments Healthcare P&L Comments ® • Solid growth in Healthcare driven by General Medicine, Mavenclad , [€m] H1 20181 H1 2019 ® ® ® Erbitux , Fertility and Bavencio , more than offset strong Rebif decline Net sales 3,019 3,158 ® • Mave
Slide 29: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q2 2019 organic sales growth [%] H1 2019 organic sales growth [%] by key product [€m] by key product [€m] 331 -16% 630 -16% 383 732 237 +32% 418 +27% 180 329 212 +6% 411 +4% 203 403 191 +3% 359 +2% 184 350 124 +3% 241 +10% 120 219 97 189 +5% +9% 93 174
Slide 30: Neurodegenerative Diseases: Mavenclad growth overcompensated by Rebif decline
® Neurodegenerative Diseases: Strong growth of Mavenclad still ® overcompensated by Rebif decline ® Rebif net sales, [€m] ® Rebif sales of €331 m in Q2 Sales development NDI, [€m] 450 383 363 2019 reflects organic decline of 400 344 331 -16.1% mitigated by 350 299 300 450 org. org. org. org. org.
Slide 31: Multiple Sclerosis: Mavenclad launch continues to make progress
Multiple Sclerosis: Mavenclad® launch continues to make progress with sales +41% Q2 vs Q1 2019 Improved clinical perception Global Launch Update versus leading HE oral (Germany)4 • Approval in 61 countries with reimbursement in ~50% to Deviation vs leading HE Oral Q4 2017 Q2 2019 date, consistent wi
Slide 32: Mavenclad gaining momentum in first 13 weeks of launch in the USA
Multiple Sclerosis: Mavenclad® gaining momentum in the first 13 weeks of launch in the USA Payer & Physician Source of Feedback Prescription5 • Positive, early payer acceptance: 100% = total USA population 60M lives1 with preferred access ~170M lives with Injectables no NDC block2 Orals 25% • Strong
Slide 33: Oncology: Solid organic growth from Erbitux in China and Bavencio ramp up
® Oncology: Solid organic growth reflects strong demand for Erbitux in China ® and Bavencio ramp up ® Absolute sales of €212 m reflect Erbitux net sales, [€m] solid growth (org. 5.7%; FX -1.5%) Sales development Oncology, [€m] 250 203 212 202 199 212 Decline in Europe reflects ongoing 200 compet
Slide 34: Fertility: Moderate organic growth driven by Gonal-f in the U.S.
Fertility: Moderate organic growth driven by ongoing demand for Gonal-f in the U.S. ® Gonal-f net sales, [€m] Sales development Fertility, [€m] 250 184 182 191 200 175 168 350 org. org. org. org. org. 150 8.0% 17.9% 10.7% 7.9% 3.5% 100 300 Fertility franchise posts moderate 50 organic growth drive
Slide 35: Double digit organic growth of General Medicine fueled by China and LATAM
Double digit organic growth of General Medicine fueled by China and LATAM Sales evolution Q2 2019 organic drivers Endocrinology [€m] Organic 150 • Endocrinology declines organically due to 96 -3.4% org. 100 93 87 83 90 lower demand and higher sales deductions in the U.S. mitigated by 50 higher deman
Slide 36: Merck pipeline
Merck pipeline August 5, 2019 Phase I Phase II Phase III M2698 avelumab tepotinib bintrafusp alfa avelumab - anti-PD-L1 mAb p70S6K & Akt inhibitor anti-PD-L1 mAb MET kinase inhibitor TGFbeta trap/anti-PD-L1 Non-small cell lung cancer 1L Solid tumors Solid tumors Non-small cell lung cancer Non-small
Slide 37: Life Science: Strong organic growth across all regions
Life Science: Strong organic growth fueled by all businesses across all regions Life Science P&L Comments [€m] H1 20181 H1 2019 • Process Solutions with double-digit growth due to ongoing strong demand in all businesses and all major regions Net sales 3,030 3,366 -861 -959 • Solid growth of Applied
Slide 38: Performance Materials: Strong OLED demand amid Semiconductor and Surface slowdown
Performance Materials: Ongoing strong demand for OLED and support from LC capacity ramp-up, amid market slowdown in Semiconductor and Surface Solutions Performance Materials P&L Comments [€m] H1 20181 H1 2019 • Performance Materials about stable reflecting strong demand for OLED, Net sales 1,151 1,1
Slide 39: Cash flow statement
Cash flow statement H1 2019 – cash flow statement Cash flow drivers [€m] H1 2018 H1 2019 Δ • Profit after tax in line with higher EBIT Profit after tax 593 660 68 • D&A increase mainly due to IFRS 16 reclassification D&A 876 927 51 • Changes in other assets/liabilities reflects GSK upfront and Peg-P
Slide 40: Adjustments in Q2 2019
Adjustments in Q2 2019 Adjustments in EBIT [€m] Q2 2018 Q2 2019 Adjustments thereof D&A Adjustments thereof D&A Healthcare 40 0 5 0 Life Science 26 16 15 0 Performance Materials 5 1 29 0 Corporate & Other 26 0 16 0 Total 97 17 65 0 Totals may not add up due to rounding 40
Slide 41: Adjustments in H1 2019
Adjustments in H1 2019 Adjustments in EBIT [€m] H1 2018 H1 2019 Adjustments thereof D&A Adjustments thereof D&A Healthcare 43 0 8 0 Life Science 39 16 24 0 Performance Materials 9 1 65 0 Corporate & Other 50 0 44 0 Total 140 17 141 0 Totals may not add up due to rounding 41
Slide 42: Financial calendar
Financial calendar Date Event November 14, 2019 Q3 2019 Earnings release March 5, 2020 FY 2019 Earnings release April 24, 2020 Annual General Meeting May 14, 2020 Q1 2020 Earnings release 42
Slide 43: 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 PAT