Merck Kgaa · XETR:MRK
Merck Kgaa — Merck KGaA, Darmstadt, Germany — Q3 2020 Earnings Presentation
50 slides from Merck Kgaa's earnings presentation, Nov 12, 2020
Slide 1: A Strong Q3 driven by business recovery and COVID-19 upsides
A Strong Q3 driven by business recovery and COVID-19 upsides Merck KGaA, Darmstadt, Germany Q3 2020 results Marcus Kuhnert, CFO November 12, 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 Financial overview Guidance Sustainability 4 Merck KGaA, Darmstadt, Germany Q3 20 Results Presentation | Nov 12th, 2020
Slide 5: Executive summary
Executive summary 01
Slide 6: Highlights
Highlights Operations Financials Healthcare: Mavenclad® up 72% organically YoY after dip in Q3 organic sales: growth of +7.2% Q2, Oncology up 7% strongly supported by early U.S. Bavencio® 1L UC ramp-up; sequential recovery of Fertility Q3 organic EBITDA pre: growing +52.6% back to pre COVID-19 level
Slide 7: 7% organic sales growth driven by swift recovery from COVID-19
7% organic sales growth driven by swift recovery from COVID-19 in most businesses including “BIG 3” (HC pipeline, Process & Semi Solutions) Q3 YoY Net Sales Q3 YoY EBITDA pre Organic Currency Portfolio Total 52.6% 8.2% €1,701 m Healthcare 3.2% -5.1% -1.2% -3.1% €1,111 m -7.8% Life Science 15.6% -4.2
Slide 8: Nearly all regions resumed growth despite persisting pandemic impacts
Nearly all regions resumed growth despite persisting pandemic impacts Regional breakdown of net sales [€m] Regional organic development Europe +7.9% ▪ APAC: double-digit growth in Life org. Science and Semiconductor Solutions 28% overcompensates for declines in Display, Surface Solutions and Fertili
Slide 9: Financial overview
Financial overview 02
Slide 10: Q3 2020: Overview
Q3 2020: Overview Key figures (Excl. Biogen provision release) Comments [€m] Q3 2019 Q3 2020 Δ Q3 2020 Δ ▪ Double-digit growth in Life Science, Net sales 4,054 4,447 9.7% Versum portfolio effect and recovery in Healthcare drive sales growth of 10% EBITDA pre 1,111 1,701 53% 1,336 20% despite 4% FX d
Slide 11: Reported figures
Reported figures Reported results Comments [€m] Q3 2019 Q3 2020 Δ ▪ EBIT nearly doubling as strong 608 1,167 91.9% business performance is further EBIT elevated by Biogen provision release Financial result -135 -102 -24.6% ▪ Lower LTIP* provisions and reduced Profit before tax 473 1,065 125.1% inter
Slide 12: Healthcare: top line acceleration and stringent cost management
Healthcare: top line acceleration and stringent cost management drive underlying EBITDA pre expansion, further elevated by provision release Healthcare P&L Net sales bridge [€m] IFRS Pre €1,756 m 3.2% €1,702 m Q3 2019 Q3 2020 Q3 2019 Q3 2020 -5.1% -1.2% Net sales 1,756 1,702 1,756 1,702 * M&S -561 -
Slide 13: Life Science: Outstanding performance in Process Solutions
Life Science: Outstanding performance in Process Solutions and temporary post lockdown catch-up in Research Solutions drive 16% organic growth Life Science P&L Net sales bridge IFRS Pre 15.6% 0.0% €1,910 m [€m] €1,715 m Q3 2019 Q3 2020 Q3 2019 Q3 2020 -4.2% Net sales 1,715 1,910 1,715 1,910 M&S * -4
Slide 14: Life Science: Significant upside potential for Process Solutions
Life Science: Significant upside potential for Process Solutions; Research and Applied started recovering Organic growth versus LY by Quarter 27% ▪ Strong tailwinds in Process Solutions ▪ Order intake accelerating to >50% Process Solutions ▪ Sustainable increase in 20% underlying demand 16% 16% 16%
Slide 15: Performance Materials: Versum portfolio effect and Semiconductor growth
Performance Materials: Versum portfolio effect and Semiconductor growth more than offset decline in Display and Surface Solutions Performance Materials P&L Net sales bridge [€m] IFRS Pre 51.6% €836 m €583 m Q3 2019 Q3 2020 Q3 2019 Q3 2020 -5.4% -2.8% Net sales 583 836 583 836 M&S * -61 -133 -62 -132
Slide 16: Balance sheet
Balance sheet Assets [€bn] Liabilities [€bn] 43.8 43.8 43.2 43.2 0.8 Cash & cash equivalents 1.5 3.5 3.5 Receivables 3.3 3.4 Inventories 18.0 17.9 Net equity Intangible assets 26.3 24.7 13.7 13.2 Financial debt 2.6 Payables/refund liabilities 2.4 Property, plant 3.3 Provisions for employee benefits
Slide 17: Cash flow statement: strong increase in operating cash flow
Cash flow statement: strong increase in operating cash flow Q3 2020 – cash flow statement Cash flow drivers [€m] Q3 2019 Q3 2020 Δ ▪ Profit after tax elevated by €365 m release of Biogen provision Profit after tax 342 806 465 ▪ Lower D&A largely driven by reduced ® D&A 464 451 -13 amortization of in
Slide 18: Guidance
Guidance 03
Slide 19: Successful crisis management increasingly mitigates pandemic impact
Successful crisis management increasingly mitigates pandemic impact Quarterly Net Sales in €m* Underlying developments ▪ Life Science well positioned for new COVID-19 driven demand trends COVID-19 Impact ▪ Process business rapidly addressing new market needs, fueling net upside ▪ Research and Applie
Slide 20: Key earnings drivers to remember for 2020
Group Key earnings drivers to remember for 2020 EBITDA pre - supporting factors EBITDA pre - reducing factors ▪ €365 m Biogen litigation provision release ▪ No more benefit from Pfizer deferred income (€191 m in 2019) ▪ Increasing sales contribution from Mavenclad® and Bavencio® ▪ Lower income from
Slide 21: Full-year 2020 guidance
Group Full-year 2020 guidance Net sales: Organic: +4% to +5% YoY Versum growth contribution in the mid-single digits % FX: -2% to -3% YoY ~€17.1 – 17.5 bn EBITDA pre: Organic: +14% to +16% YoY (ex Biogen1: +6% to +8%) Mid-single digit % growth from Versum FX: -3% to -5% YoY ~€5.05 – 5.25 bn (thereof
Slide 22: 2020 business sector guidance
Group 1 2020 business sector guidance Net sales EBITDA pre Healthcare ▪ Organic: +2% to +3% ▪ Organic:+25% to +27% YoY ▪ COVID-19 impacting fertility (ex Biogen2: +6% to +8%) performance ▪ FX: -7% to -9% YoY ® ▪ Continued Mavenclad recovery after ▪ ~€2,220 – 2,290 m ® June and solid uptake of Bavenc
Slide 23: Sustainability
Sustainability 04
Slide 24: Enhanced sustainability strategy leverages our strengths
Enhanced sustainability strategy leverages our strengths and manifests the company’s commitment Who we are Targets Integration Innovation Power Target #1: Dedicated to human progress Linked ▪ Merck KGaA, Darmstadt, Germany is a leading science and technology In 2030, we will advance human progress f
Slide 25: Potential to increase sustainable value for business and society
Potential to increase sustainable value for business and society High Impact SDGs High-Impact Where we can contribute and benefit Target Business opportunities Good Health ➢ We are able to contribute with dedicated 1 and products, know-how, partnerships and ▪ Develop a new range of sustainable produ
Slide 26: Next steps towards the ESG targets
Next steps towards the ESG targets 0 ➢ Analysis of requirements: Strategy, business, regulation, stakeholders (done and institutionalized) 1 Target 1 Dedicated ➢ Build an effective data platform for internal steering to human 2 progress Target ➢ Develop ESG-KPIs for reporting and integrate in compen
Slide 27: Slide 27
Slide 28: Appendix
Appendix
Slide 29: Additional financial guidance 2020
Additional financial guidance 2020 Further financial details Corporate & Other EBITDA pre ~ -440 to -460 m Interest result ~ -280 to -310 m Effective tax rate ~24% to 26% Capex on PPE ~1.2 bn to 1.3 bn FY 2020 hedge ratio ~70% Hedging/USD assumption at EUR/USD ~1.16 2020 Ø EUR/USD assumption ~1.13 t
Slide 30: Balanced maturity profile: lower refinancing risks & higher flexibility
Financial Update Balanced maturity profile: lower refinancing risks & higher flexibility Maturity profile as of September 30, 2020 Coupon 3.250% [€ m/US $] 0.125% 2.950% 1.375% 1,600 1.625% 3.375% 1.625% 2.875% 1,000 0.875% 0.500% 0.005% 500 0.375% 2.625% 1 000 1,000 750 750 800 550 600 500 600 317
Slide 31: Very strong performance in Life Science and quick Q3 recovery in Healthcare
Very strong performance in Life Science and quick Q3 recovery in Healthcare drive 4% organic growth in the first 9 months of 2020 9M YoY Net Sales 9M YoY EBITDA pre Organic Currency Portfolio Total 18.5% 9.2% €3,956 m Healthcare 3.2% -2.7% -0.7% -0.2% €3,179 m -3.3% Life Science 9.2% -1.3% 0.0% 7.9%
Slide 32: 9M 2020: Overview
9M 2020: Overview Key figures (Excl. Biogen provision release) Comments [€m] 9M 2019 9M 2020 Δ Q3 2020 Δ ▪ A strong Q1, Versum portfolio effect and Net sales 11,771 12,936 9.9% accelerating growth in Process and Semiconductor Solutions drive sales EBITDA pre 3,179 3,956 24.4% 3,591 13.0% above last
Slide 33: Reported figures
Reported figures Reported results Comments [€m] 9M 2019 9M 2020 Δ ▪ EBIT increase driven by Versum 1,605 2,374 47.9% portfolio effect and Life Science EBIT growth, partially offset by lower non- Financial result -309 -302 -2.0% recurring income, higher depreciation & amortization from Versum PPA and
Slide 34: Healthcare: Organic growth based on a strong Q1 and swift recovery in Q3
Healthcare: Organic growth based on a strong Q1 and a swift recovery in Q3 while EBITDA pre further elevated by €365 m Biogen provision release Healthcare P&L Net sales bridge [€m] IFRS Pre €4,913 m 3.2% €4,901 m 9M 2019 9M 2020 9M 2019 9M 2020 -2.7% -0.7% Net sales 4,913 4,901 4,913 4,901 M&S * -1,
Slide 35: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q3 2020 organic sales growth [%] 9M 2020 organic sales growth [%] by key product [€m] by key product [€m] 279 864 -9% -8% 318 947 226 686 +3% +10% 235 653 217 +2% 636 +3% 222 633 192 -2% 471 -15% 206 565 127 -5% 407 +10% 143 384 115 +14% 344 +21% 108 29
Slide 36: Neurology & Immunology: back to 9% organic growth in Q3
® Neurology & Immunology: back to 9% organic growth in Q3 as Mavenclad ramp-up clearly recovers starting June ▪ Highest quarterly sales since launch Sales development NDI, [€m] Mavenclad® TRx1, [IQVIA, NPA, Weekly View] ▪ US: continued market share gains in both dynamic high org. org. org. org. org.
Slide 37: Oncology: Bavencio showing strong YoY and sequential growth
Oncology: Bavencio® showing strong YoY and sequential growth; Erbitux® also resilient, growing vs. Q2 and YoY during COVID-19 pandemic ® Sales development Oncology, [€m] Erbitux net sales, [€m] ▪ Absolute sales of €217 m reflect resilient growth of 2% 250 222 237 in Q3 org. org. org. org. org. 211 2
Slide 38: Launch Update: Mavenclad recovering; Bavencio 1L UC USA launch
Launch Update: Mavenclad® recovering and gaining share; Bavencio 1L UC USA launch driving strong inflection Mavenclad® Bavencio® UC 1L Regaining momentum globally 3 months into launch, a clear inflection ▪ New data at 2020 ACTRIMS-ECTRIMS highlight rapid onset of ▪ Strong early launch performance, a
Slide 39: Fertility: visible recovery to pre COVID-19 levels
Fertility: visible recovery to pre COVID-19 levels across Fertility portfolio, however still differentiated picture across geographies during pandemic ® Sales development Fertility, [€m] Gonal-f net sales, [€m] 250 org. org. org. org. org. 206 [€m] 9.0% 3.3% -3.5% -38.9% -1.3% 200 192 178 167 400 15
Slide 40: General Medicine growing organically, Endocrinology up vs. Q2 2020
General Medicine growing organically, Endocrinology up vs. Q2 2020 and flat vs. Q3 2019 Sales evolution Q3 2020 organic drivers [€m] Endocrinology Organic 99 95 100 91 83 87 -0.2% org. 80 ▪ Endocrinology impacted in the U.S. 60 and to minor extent in Europe amid 40 20 COVID-19 pandemic; stable to 0
Slide 41: Clinical pipeline
Clinical pipeline October 31, 2020 Phase I Phase II Phase III berzosertib (M6620) bintrafusp alfa peposertib (M3814) avelumab avelumab ATR inhibitor TGFbeta trap/anti- DNA-PK inhibitor anti-PD-L1 mAb anti-PD-L1 mAb Solid tumors1 PD-L1 Rectal cancer Solid tumors6 Non-small cell lung cancer 1L peposer
Slide 42: INTR@PID LUNG 037: Phase III passed futility at interim analysis
INTR@PID LUNG 0371: Having passed futility during a planned interim analysis, the Phase III study continues and will read out on clinically relevant endpoints PFS/OS Interim • The IDMC reviewed preliminary safety and efficacy data from both treatment arms; data remains blinded to GSK and Merck Analy
Slide 43: Healthcare catalysts expected in 2021
Healthcare catalysts – Significant developmental progress across Oncology and Immuno-Oncology portfolio expected in 2021 Oncology Immuno-Oncology Immunology Q1 2021 Q2 2021 H2 2021 Tepotinib (c-Met–inhibitor) METex14: Expected FDA approval Bavencio® (Avelumab/Anti-PD-L1) 1L UC: Expected approval by
Slide 44: Life Science: Strong YTD performance with Process Solutions double-digit growth
Life Science: Strong YTD performance with Process Solutions double-digit growth; Research & Applied recovering from COVID-19 impacts Life Science P&L Net sales bridge [€m] IFRS Pre adjustments €5,082 m 9.2% 0.0% €5,485 m 9M 2019 9M 2020 9M 2019 9M 2020 -1.3% Net sales 5,082 5,485 5,082 5,485 M&S * -
Slide 45: Performance Materials: Versum portfolio effect and Semiconductor growth
Performance Materials: Versum portfolio effect and continued organic Semiconductor growth far outweigh declining Display and Surface Performance Materials P&L Net sales bridge [€m] IFRS Pre adjustments 51.3% €2,550 m 9M 2019 9M 2020 9M 2019 9M 2020 €1,776 m 0.5% Net sales 1,776 2,550 1,776 2,550 -8.
Slide 46: Cash flow statement
Cash flow statement 9M 2020 – cash flow statement Cash flow drivers [€m] 9M 2019 9M 2020 Δ ▪ Higher EBIT Profit after tax 1,002 1,553 551 ▪ Higher depreciation & amortization from Versum PPA and impairments in PM D&A 1,391 1,442 51 ▪ Changes in provisions reflect reduced Changes in provisions 134 -2
Slide 47: Adjustments in Q3 2020
Adjustments in Q3 2020 Adjustments in EBIT [€m] Q3 2019 Q3 2020 Adjustments thereof D&A Adjustments thereof D&A Healthcare -3 0 4 0 Life Science 20 0 18 0 Performance Materials 16 8 28 1 Corporate & Other 13 0 31 0 Total 47 8 82 1 47 Merck KGaA, Darmstadt, Germany Q3 20 Results Presentation | Nov 12
Slide 48: Adjustments in 9M 2020
Adjustments in 9M 2020 Adjustments in EBIT [€m] 9M 2019 9M 2020 Adjustments thereof D&A Adjustments thereof D&A Healthcare 5 0 -8 2 Life Science 44 0 15 0 Performance Materials 81 8 194 112 Corporate & Other 58 0 56 0 Total 188 8 256 114 48 Merck KGaA, Darmstadt, Germany Q3 20 Results Presentation |
Slide 49: Financial calendar
Financial calendar Date Event March 4, 2021 FY 2020 Earnings release April 23, 2021 Annual General Meeting May 12, 2021 Q1 2021 Earnings release August 5, 2021 Q2 2021 Earnings release November 11, 2021 Q3 2021 Earnings release 49 Merck KGaA, Darmstadt, Germany Q3 20 Results Presentation | Nov 12th,
Slide 50: Investor Relations contacts
CONSTANTIN FEST SVENJA BUNDSCHUH SARA HOFMANN 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] ILJA DOERING GUNNAR ROMER AMELIE
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