Merck Kgaa · XETR:MRK
Merck Kgaa — Cheuvreux German Corporate Conference 2012
29 slides from Merck Kgaa's conference presentation, Jan 17, 2012
Slide 1: Cheuvreux German Corporate Conference 2012
Cheuvreux German Corporate Conference 2012 Matthias Zachert – Chief Financial Officer Frankfurt, January 17, 2012
Slide 2: Agenda
Agenda 1 The Merck Group 2 Key strengths 3 Unlocking value 4 Financials 5 Summary 2
Slide 3: Four attractive businesses with leading positions
Merck Group Four attractive businesses with leading positions Merck Group Consumer Performance Merck Serono Merck Millipore Health Care Materials Total revenues1) Total revenues1) Total revenues1) Total revenues1) € 5.8bn € 0.5bn € 2.5bn € 1.4bn Operating margin2) Operating margin2) Operatin
Slide 4: Leveraging our global presence
Merck Group Leveraging our global presence Group sales by geographies Organic growth rates by (9M 2011) geographies (9M 2011) Australia/ % of Group sales New Zealand Europe 10% 10% 7% 40% 9% 5% Asia*, ROW 23% 1% North Latin America Europe North Latin Asia*, Japan, America 18% America America ROW Aus
Slide 5: Agenda
Agenda 1 The Merck Group 2 Key strengths 3 Unlocking value 4 Financials 5 Summary 5
Slide 6: Merck Serono
Merck Serono Specialty pharma Business Multiple Sclerosis, Oncology and Fertility characteristics Less risk from “patent cliff” Extensive network and ability Clear to develop and scale biologics competencies Life cycle management Biomarkers Leading in key therapeutic areas Market Lea
Slide 7: Market leading franchises with growth contributors
Merck Serono Market leading franchises with growth contributors Historic growth rates and future growth Sales by therapeutic area (9M 2011) trends CAGR Future growth Cardiometabolic (2006-2010) trend Neurodegenerative Care/Others Diseases 36% Neurodegenerative 31% 7.9% Diseases Oncology 24.2% Oncolo
Slide 8: Key franchises well protected: no “patent cliff”
Merck Serono Key franchises well protected: no “patent cliff” Revenues lost to patent expiries Key products protected for next three as a % of 2010 group revenue years - patent expiries: • Rebif • first formulation: EU 2015, US 2022 25% • HSA-free* formulation: patent application pending; tentativ
Slide 9: We are focusing on markets where we have the greatest strengths and opportunities
Merck Serono – Strengthening the Franchise We are focusing on markets where we have the greatest strengths and opportunities Assessment of Therapeutic Areas Comments Strengths & Externalize Capabilities Investing Focus on Under Review Fertility therapeutic areas Oncology ‘TA’ with high Multiple un
Slide 10: Multiple Sclerosis: defending the Rebif franchise
Merck Serono Multiple Sclerosis: defending the Rebif franchise Rebif Injectable biological drug against relapsing forms of Multiple Sclerosis Overview (MS) Well established risk/benefit profile Blockbuster with € 1.7bn sales in 2010 Leading market positions Business development: Organic gr
Slide 11: Oncology: strong player in market with high unmet medical needs
Merck Serono Oncology: strong player in market with high unmet medical needs Erbitux Biological drug against metastatic colorectal cancer and head & neck cancer Overview € 820m sales in 2010 Pipeline projects Stimuvax: therapeutic vaccine against lung cancer Cilengitide: innovative compound
Slide 12: Fertility & Endocrinology: strong brand and execution
Merck Serono Fertility & Endocrinology: strong brand and execution € 973m sales in 2010 (nearly all biologics) Broad range of fertility treatments to improve take-home baby rate Overview Endocrinology: therapies for patients with metabolic disorders and growth deficiencies Excellent track re
Slide 13: High percentage of revenues derived from Emerging Markets benefits growth profile
Merck Serono High percentage of revenues derived from Emerging Markets benefits growth profile Short-term growth 2009 vs. 2010 in % 18 16 Merck Serono 14 12 10 8 6 4 2 0 0 2 3 5 6 8 9 11 12 14 15 17 18 20 Source: IMS MIDAS, May 2011, constant USD Long-term growth CAGR Note: Size of bubble = Sales (M
Slide 14: Consumer Health Care
Consumer Health Care Strong positions in selected geographies Business Stable niche business with limited risk characteristics Strength of Merck brand High quality Women’s / children’s health Clear Cough / cold competencies Vitamins / supplements Mobility Leading brands Market A
Slide 15: Process of improving margins has begun
Consumer Health Care Process of improving margins has begun Consumer Health Care Gross margin between 2005 EBIT margins 2005 - 9M 2011 and 2010 was approximately 65–68% of revenues 20,0% Higher investments into R&D and SG&A in 2009 and 2010 15,0% Generally healthy business Leading strategic
Slide 16: A powerful portfolio to improve our customers’ efficiency in R&D and production
Merck Millipore A powerful portfolio to improve our customers’ efficiency in R&D and production Bioscience Lab Solutions Process Solutions ~ € 0.3bn sales 9M ~ € 0.7bn sales 9M ~ € 0.7bn sales 9M 2011 2011 2011 Products and services Lab products Products used in Overview for life science
Slide 17: Well positioned to take advantage of growth in biotech market
Merck Millipore Well positioned to take advantage of growth in biotech market Total pharmaceutical market, US$bn Growth drivers Innovative biologics: need for effective drugs in areas of high unmet medical needs CAGR 7%* Biotech 192 Biosimilars: need for cost management of healthcare Biotech 130
Slide 18: Performance Materials
Performance Materials Highly consolidated market Business Solid value chain position in high-tech materials characteristics Pioneer and technology leader in Liquid Crystals (LC) Customer intimacy and product customization Clear Translate chemistry into electro/optical performance competenc
Slide 19: Significant industry investment in LCD ensures continued demand for Liquid Crystals
Performance Materials Significant industry investment in LCD ensures continued demand for Liquid Crystals Industry investment LCD production, Industry investment of more cumulative, US$bn than US$ 100bn over last 10 years in LCD production 160 Limited opportunity for 140 disruptive technology ch
Slide 20: Agenda
Agenda 1 The Merck Group 2 Key strengths 3 Unlocking value 4 Financials 5 Summary 20
Slide 21: We will tackle our major challenges
Merck Group – Unlocking value We will tackle our major challenges Change management Foster awareness for need of cultural change Improve profitability Optimize cost structure Streamline internal processes Strengthen R&D function Reduce cycle times Improve efficiency of R&D processes Focus
Slide 22: Building Merck Serono: Change Process Gaining Momentum
Merck Serono Building Merck Serono: Change Process Gaining Momentum Increasing commercial effectiveness Improving the pipeline to enhance early stage projects Change Strengthening the R&D organization and shift focus from late stage Agenda to early stage Increase focus on licensing in across
Slide 23: Redefining the R&D organization
Merck Serono Redefining the R&D organization One executive heading the combined R&D office Heavily matrixed organization with up to 12 layers Past R&D High span of control at L1 and L2, very low span of control at lower Organization levels of the organization No clear responsibility for stra
Slide 24: Agenda
Agenda 1 The Merck Group 2 Key strengths 3 Unlocking value 4 Financials 5 Summary 24
Slide 25: Our strong growth rates reflect the attractiveness of our assets
Merck Group Our strong growth rates reflect the attractiveness of our assets Revenues €m 12,000 8% te (2006-2010): ~ wt h ra age organic gro 10,000 aver 9,291 7,651 7,558 7,747 8,000 7,057 (5.2%*) 6,259 6,000 4,000 2,000 0 2006 2007 2008 2009 2010 9M 2011 Merck portfolio has attractive assets and br
Slide 26: We have strong underlying free cash flow which can be used to create value
Merck Group We have strong underlying free cash flow which can be used to create value Underlying Free Cash Flow 2000 in €m 1670 1500 978 960 1000 852 601 83% 68% 57% 58% 73% 500 0 2007 2008 2009 2010 9M 2011 Sufficient cash flow to strengthen balance sheet and create value 26
Slide 27: Acquisitions and strong growth drive higher profitability
Merck Group Acquisitions and strong growth drive higher profitability Total revenues and operating profit margin 2000-2010 Acquisition of Millipore €m Acquisition of Serono, 10,000 divestment of Generics 9,291 Operating profit margin 30% 8,000 7,528 7,558 7,747 7,473 7,202 7,057 6,740 23.1% 22.6% 6,
Slide 28: Agenda
Agenda 1 The Merck Group 2 Key strengths 3 Unlocking value 4 Financials 5 Summary 28
Slide 29: Summary: Why invest in Merck
Summary: Why invest in Merck Balanced portfolio with businesses in leading market positions ! Strong financial base and solid cash-flow generation ! Willingness to change and address industry challenges ! Ideally positioned to exploit future growth opportunities ! 29
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