Merck Kgaa · XETR:MRK
Merck Kgaa — Merck KGaA, Darmstadt, Germany — FY2019 Earnings Presentation
53 slides from Merck Kgaa's earnings presentation, Mar 5, 2020
Slide 1: Back to Profitable Growth
BACK TO PROFITABLE GROWTH Merck KGaA, Darmstadt, Germany FY 2019 results Stefan Oschmann, CEO Marcus Kuhnert, CFO Kai Beckmann, CEO Performance Materials March 5, 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
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 Strategic review Financial overview Outlook and guidance 4
Slide 5: Executive Summary
EXECUTIVE SUMMARY
Slide 6: Highlights
Highlights Operations Financials ® Healthcare – Launches on track (Mavenclad ® Full-year organic sales growth of +5.3%; & Bavencio guidance delivered); core business1 2 full-year organic EBITDA pre growth of +11.3% remains stable; N&I back to growth since Q3 Life Science – Ongoing strong momentum ac
Slide 7: Guidance delivered
Guidance delivered 2019 Guidance 2019 Results Net Sales €15.7 – 16.3 bn €16.2 bn EBITDA pre €4,230 – 4,430 €4,385 m EPS pre €5.30 – 5.65 €5.56 7
Slide 8: All regions drive organic growth
All regions drive organic growth Regional breakdown of net sales [€ m] Regional organic development Europe +3.9% • Europe with solid growth driven by strong org. ® Life Science; Mavenclad ® ramp-up offsetting Rebif decline 29% • North America reflects strong Life Science; ® ® Mavenclad , Fertility a
Slide 9: Sustainable dividend growth
Sustainable dividend growth Dividend1 development 2011-2019 2019 dividend • Dividend of €1.30 (+4% YoY) per share proposed2 for 2019 1.30 1.25 1.25 • Payout ratio of 23.4% of EPS pre in 1.20 2019; we aim at 20–25% of EPS pre 1.05 3 1.00 • Dividend yield of 1.2% 0.95 0.85 0.75 1 1 1 2 2011 2012 2013
Slide 10: Strategic Review
STRATEGIC REVIEW
Slide 11: Healthcare: Mavenclad and core business fuel strong organic growth
® Healthcare: Mavenclad and core business fuel strong organic growth Business Performance Pipeline Strong organic sales growth of 6.2% Mavenclad®: now approved in 75 countries Bavencio®: Neurology & Immunology returns to growth EBITDA pre − Primary endpoint (OS) met in 1L urothelial over the
Slide 12: Life Science: Continued above-market performance
Life Science: Continued above-market performance Business Performance Innovation EBITDA pre Above-market growth in Life Science driven by 29.8% 31.0% Continued flow of new products in Process Margin all businesses and regions Solutions, supporting bioprocessing, single-use and FloDesign Sonics
Slide 13: Performance Materials: Acquisitions successfully closed
Performance Materials: Acquisitions successfully closed – delivering on Bright Future transformation Business Performance Transformation Acquisitions of Versum Materials and Semiconductor Solutions outperforming weaker EBITDA pre Intermolecular successfully closed market 32.7% 31.2% Margin − Ver
Slide 14: Financial Overview
FINANCIAL OVERVIEW
Slide 15: FY 2019 Financials: Overview
FY 2019 Financials: Overview Key figures Comments [€m] FY 2018 FY 2019 Δ • All business sectors drive net sales growth Net sales 14,836 16,152 8.9% • Increasing EBITDA pre & margin reflect strong top-line growth, milestone payments, EBITDA pre 3,800 4,385 15.4% deferred income and cost consciousness
Slide 16: Healthcare and Life Science fuel strong organic performance
Healthcare and Life Science fuel strong organic top- and bottom-line performance, supported by FX tailwinds and Portfolio FY 2019 YoY net sales Organic Currency Portfolio Total FY YoY EBITDA pre Healthcare 6.2% 1.3% 0.0% 7.5% 1 1.6% €4,385 m 11.3% 2.5% Life Science 9.0% 2.6% -0.6% 11.0% €3,800 m Per
Slide 17: Reported Figures
Reported Figures Reported results Comments [€m] FY 2018 FY 2019 Δ • Higher EBIT due to strong top-line contribution from LS and HC, cost EBIT 1,727 2,120 22.8% consciousness, milestone payments and Financial result -266 -385 44.6% GSK deferred income • Increase in financial result reflects higher Pr
Slide 18: Healthcare: Mavenclad and Bavencio deliver guidance
® ® Healthcare: Mavenclad and Bavencio deliver guidance; moderate growth of core business Healthcare P&L Net sales bridge 8.4% 2.0% 0.0% €1,800 m [€m] Q4 20181 Q4 2019 €1,630 m Net sales 1,630 1,800 Marketing and selling -634 -595 Q4 2018 Organic Currency Portfolio +0.0% Q4 2019 Administration -89 -
Slide 19: Life Science with strong operating leverage
Life Science with strong operating leverage Life Science P&L Net sales bridge 7.8% 2.3% -0.6% €1,783 m [€m] Q4 20181 Q4 2019 €1,628 m Net sales 1,628 1,783 Marketing and selling -473 -490 Q4 2018 Organic Currency Portfolio Q4 2019 Administration -106 -102 EBITDA pre bridge Research and development -
Slide 20: Performance Materials: Expected LC decline has materialized
Performance Materials: Expected LC decline has materialized amid continued market slowdown in Semiconductor and Surface Performance Materials P&L Net sales bridge €798 m 39.7% €629 m -15.2% [€m] Q4 20181 Q4 2019 2.3% +5.2% Net sales 629 798 +0.7% Marketing and selling -72 -136 Q4 2018 Organic Curren
Slide 21: Performance Materials: Mid term outlook
Performance Materials: Attractive underlying market trends and business conditions to deliver the turnaround in 2020 Mid term outlook Continued market growth due to technological advances (Artificial intelligence, 5G, Big Data and cloud, Internet of Things) serving customers in Logic, Memory, Pack
Slide 22: Versum integration and synergy realization
Performance Materials: Versum integration and synergy realization in focus Cost synergies on Source of Synergies EBITDA pre ~€75m Business • Transform country setup Optimization • Streamline duplicate structures ~€40m ~€20m • Optimize production and Procurement supply chain network and Supply Chain
Slide 23: Balance sheet – Reflecting Versum acquisition
Balance sheet – Reflecting Versum acquisition Assets [€ bn] Liabilities [€ bn] 43.8 43.8 0.8 3.5 36.9 3.3 36.9 Cash & cash equivalents 2.2 17.9 3.2 Receivables 2.8 Inventories 17.2 Net equity 26.3 Intangible assets 13.2 21.0 8.9 Financial debt 2.6 Payables/Refund liabilities 2.2 Property, plant & eq
Slide 24: Versum balance sheet effects
Versum balance sheet effects [€ bn] 6 ~5.4 5 ~0.04 4 ~0.7 ~3.1 3 ~2.3 ~0.5 ~0.1 ~0.06 2 1 0 Excess purchase Trademarks Customer Technology, R&D, PPE Inventories Deferred tax Goodwill price relationships Licenses liabilities Amortization of intangible assets from Versum PPA*: ~€230 – 250 m p.a. Total
Slide 25: Cash Flow Statement
Cash Flow Statement Q4 2019 – cash flow statement Cash flow drivers [€m] Q4 2018 Q4 2019 Δ • Last year’s profit after tax driven by Consumer Health disposal, neutralized in Profit after tax 2,458 321 -2,137 other operating activities D&A 508 552 45 • D&A increase mainly due to IFRS 16 reclassificati
Slide 26: Outlook and Guidance
OUTLOOK AND GUIDANCE
Slide 27: COVID-19 Update
Group Assumptions as of mid February COVID-19 Update If COVID-19 outbreak peaks in Q1, eases in Q2 and the situation is back to normal in H2, the impact on Merck KGaA, Darmstadt, Germany and its sectors is estimated to be the following: ▪ Around -1% on full year net sales mainly Group from China ▪ I
Slide 28: Full-year 2020 guidance
Group Full-year 2020 guidance Net sales: Solid organic sales growth, Versum growth contribution in the mid-single digits and slight FX headwinds of 0% to -3% YoY EBITDA pre: Strong organic growth, mid-single digit growth from Versum Slight FX headwinds of 0% to -3% YoY 28
Slide 29: Key earnings drivers to remember for 2020
Group Key earnings drivers to remember for 2020 EBITDA1-supporting factors EBITDA1-reducing factors • Increasing sales contribution from Mavenclad® and Bavencio® • No more support from Pfizer deferred income (€191 m in 2019) • Stringent M&S and R&D cost management (decrease YoY as % of • Lower incom
Slide 30: 2020 business sector guidance
Group 1 2020 business sector guidance Net sales EBITDA pre Healthcare ▪ Solid organic growth ▪ Solid organic growth ▪ Driven by Mavenclad and Bavencio ▪ Base business organically stable contribution and continued cost ▪ New products with strong contribution discipline ▪ Moderate adverse FX impact Ne
Slide 31: Slide 31
Slide 32: Appendix
APPENDIX
Slide 33: Additional financial guidance 2020
Additional financial guidance 2020 Further financial details * Corporate & Other EBITDA pre ~ - €400 – -€440 m Interest result ~ - 235 – -260 m Effective tax rate ~24 % – 26% Capex on PPE ~1.1 bn – 1.2 bn FY 2020 hedge ratio ~ 50% Hedging/USD assumption at EUR/USD ~1.18 2020 Ø EUR/USD assumption ~ 1
Slide 34: Maturity profile reflects Sigma-Aldrich and Versum financing transactions
Maturity profile reflects Sigma-Aldrich and Versum financing transactions Maturity profile as of Mar. 5, 2020 Coupon [€ m/US $] 3.250% 0.125% 2.400% 4.500% 2.950% 1.375% 750 1 600 1.625% 2.625% 3.375% 2.875% 1 000 0.500% 0.875% 0.005% 500 0.375% 1 350 1 000 1000 750 750 800 550 600 500 600 2 2 2020
Slide 35: Life Science and Healthcare fuel organic growth, supported by Versum
Life Science and Healthcare fuel organic growth of top- and bottom-line, supported by Versum Portfolio and FX tailwinds Q4 2019 YoY net sales Organic Currency Portfolio Total Q4 YoY EBITDA pre Healthcare 8.4% 2.0% 0.0% 10.4% 1 2.6% 6.7% €1,206 m 17.7% €950 m Life Science 7.8% 2.3% -0.6% 9.5% Perform
Slide 36: Q4 2019: Overview
Q4 2019: Overview Key figures Comments [€m] Q4 2018 Q4 2019 Δ • All business sectors drive net sales growth Net sales 3,888 4,381 12.7% • EBITDA pre & margin reflect strong top-line growth, GSK deferred income, milestone EBITDA pre 950 1,206 27.0% payments, cost consciousness, strong Margin (in % of
Slide 37: Reported Figures
Reported Figures Reported results Comments [€m] Q4 2018 Q4 2019 Δ • Higher EBIT due to strong top-line contribution from Life Science and EBIT 341 515 51.0% Healthcare as well as cost consciousness Financial result -84 -76 -9.7% • Last years net income and EPS reflect Consumer Health disposal Profit
Slide 38: Healthcare: Significant contribution from Mavenclad and Bavencio
® ® Healthcare: Significant contribution from Mavenclad and Bavencio ; solid core business Net sales bridge Healthcare P&L 1.3% 0.0% €6,714 m 6.2% €6,246 m [€m] FY 20181 FY 2019 Net sales 6,246 6,714 Marketing and selling -2,349 -2,305 FY 2018 Organic Currency Portfolio +0.0% FY 2019 Administration
Slide 39: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q4 2019 organic sales growth [%] FY 2019 organic sales growth [%] by key product [€m] by key product [€m] 326 -8% 1 273 -14% 344 1 438 237 +15% 877 +19% 202 733 224 +3% 871 +7% 216 816 178 0% 743 +3% 175 708 146 +3% 530 +10% 140 475 127 402 >100% +10% 3
Slide 40: Neurology & Immunology: Strong ramp up of Mavenclad
® Neurology & ®Immunology: Strong ramp up of Mavenclad more than offsets Rebif decline ® ® Rebif sales of €326 m in Q4 Rebif net sales, [€m] 2019 reflect organic decline of Sales development NDI, [€m] 400 344 -7.6%, mitigated by FX effect 331 318 326 350 299 of +2.2% 300 org. org. org. org. org. 5
Slide 41: Neurology & Immunology: Mavenclad Launch Update
® Neurology & Immunology: Mavenclad Launch Update Triple digit YoY growth (+€230 m, x3.5 vs FY 2018) USA: Continued growth within Ex-USA: Strong launch High Efficacy and Oral market1 progress globally • Approved in 75 countries2 • Leading clinical perception among oral class in key markets (Germany,
Slide 42: Oncology: Double-digit growth reflects strong Erbitux demand in China
® Oncology: Double-digit growth reflects strong demand for Erbitux in China ® Absolute sales of €237 m reflect Erbitux net sales, [€m] double-digit growth in Q4 Sales development Oncology, [€m] 300 (org. 14.5%; FX 3.1%) 237 250 202 199 212 222 Strong APAC fueled by China org. org. org. org. org.
Slide 43: Fertility: Organic growth driven by other Fertility products
Fertility: Organic growth driven by other Fertility products ® Gonal-f net sales, [€m] Sales development Fertility, [€m] 250 206 191 200 175 168 178 org. org. org. org. org. 350 10.% 7.9% 3.5% 9.0% 3.3% 150 Fertility posts moderate organic growth driven by Europe and 100 300 North America 50 ® 250
Slide 44: Ongoing strong demand for Euthyrox drives General Medicine growth
® Ongoing strong demand for Euthyrox drives General Medicine growth Sales evolution Q4 2019 organic drivers Endocrinology [€m] Organic 150 • Endocrinology reflects strong demand in +0.1% org. 100 96 83 90 91 99 South Korea, offsetting weaker North America and Europe 50 0 Q4 2018 Q1 2019 Q2 2019 Q3
Slide 45: Clinical pipeline
Clinical pipeline December 31, 2019 Phase I Phase II Phase III M3258 avelumab tepotinib avelumab avelumab LMP7 inhibitor anti-PD-L1 mAb MET kinase inhibitor anti-PD-L1 mAb anti-PD-L1 mAb Multiple myeloma Solid tumors Non-small cell lung cancer Merkel cell cancer 1L Non-small cell lung cancer 1L pepo
Slide 46: Pipeline: Upcoming Healthcare catalysts
Pipeline: Upcoming Healthcare catalysts mark progress across all therapeutic areas Q4 2019 H1 2020 H2 2020 Bavencio® (Avelumab/Anti-PD-L1) Bavencio® (Avelumab/Anti-PD-L1) Expected EMA feedback Expected in-house availability of (advanced Renal Cell Carcinoma) Phase III data (NSCLC 1L) Expected PMDA f
Slide 47: Life Science: All businesses across all regions drive performance
Life Science: All businesses across all regions drive ongoing strong top- and bottom-line performance Life Science P&L Net sales bridge 9.0% 2.6% -0.6% €6,864 m [€m] FY 20181 FY 2019 €6,185 m Net sales 6,185 6,864 Marketing and selling -1,777 -1,924 FY 2018 Organic Currency Portfolio FY 2019 Adminis
Slide 48: Performance Materials: LC back to negative underlying trajectory
Performance Materials: LC back to negative underlying trajectory amid softness in Semiconductor and Surface Performance Materials P&L Net sales bridge 10.4% €2,574 m [€m] FY 20181 FY 2019 €2,406 m -6.5% 3.1% Net sales 2,406 2,574 Marketing and selling -255 -329 FY 2018 Organic Currency Portfolio FY
Slide 49: Cash Flow Statement
Cash Flow Statement FY 2019 – cash flow statement Cash flow drivers [€m] FY 2018 FY 2019 Δ • Last year’s profit after tax driven by Consumer Health disposal, which was Profit after tax 3,396 1,324 -2,072 neutralized in other operating activities D&A 1,812 1,944 132 • D&A increase mainly due to IFRS
Slide 50: Adjustments in Q4 2019
Adjustments in Q4 2019 Adjustments in EBIT [€m] Q4 2018 Q4 2019 Adjustments thereof D&A Adjustments thereof D&A Healthcare 23 11 21 1 Life Science 54 2 15 0 Performance Materials 28 20 93 -1 Corporate & Other 34 0 10 0 Total 138 33 139 1 Totals may not add up due to rounding 50
Slide 51: Adjustments in FY 2019
Adjustments in FY 2019 Adjustments in EBIT [€m] FY 2018 FY 2019 Adjustments thereof D&A Adjustments thereof D&A Healthcare 75 11 26 1 Life Science 108 23 59 0 Performance Materials 37 21 174 7 Corporate & Other 107 0 68 0 Total 327 55 328 9 Totals may not add up due to rounding 51
Slide 52: Financial calendar
Financial calendar Date Event April 24, 2020 Annual General Meeting May 14, 2020 Q1 2020 Earnings release August 6, 2020 Q2 2020 Earnings release November 12, 2020 Q3 2020 Earnings release 52
Slide 53: 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 PATRICK B
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