Merck Kgaa · XETR:MRK
Merck Kgaa — Q3 2011 Earnings Presentation
42 slides from Merck Kgaa's earnings presentation, Oct 26, 2011
Slide 1: Q3 2011 Earnings Release
Q3 2011 Earnings Release Karl-Ludwig Kley – CEO Stefan Oschmann – Head of Pharma Matthias Zachert – CFO October 26, 2011
Slide 2: Disclaimer
Disclaimer Remarks All comparative figures relate to the corresponding last year’s period. Important Information This presentation does not constitute an offer of securities for sale or a solicitation of an offer to purchase securities in the United States. The shares referred to herein have not bee
Slide 3: Agenda
Agenda A Executive Summary and Operational Developments – Karl-Ludwig Kley B Pharma – Stefan Oschmann C Financials – Matthias Zachert D Appendix 3
Slide 4: Key Messages
Merck Group Q3 2011 Key Messages Second layer of senior management put in place Change Management Overall global governance structure adjusted and respective divisional organizations put in place Solid organic growth driven by Merck Serono and Merck Millipore Performance Materials performanc
Slide 5: Leveraging our Global Presence
Merck Group Q3 2011 Leveraging our Global Presence Group sales by geographies Comments Japan, % of Group sales Europe: flat organic growth due to Australia/ New Europe tough economic environment and Zealand 40% governmental austerity measures 7% North America: organic sales growth of 13% in the
Slide 6: Pharmaceuticals Q3 2011
Merck Pharmaceuticals Q3 2011 Good performance in in all key Underlying Core OR* (€m) franchises and in Emerging Markets Rebif driven by U.S. price increases -6% Merck 358 338 Erbitux performance improves from Q2, Serono Japan weak but getting better Negative Fx, higher R&D costs, and start-
Slide 7: Chemicals Q3 2011
Merck Chemicals Q3 2011 Organic revenue of -1% reflects slowing OR (€m) demand for LC and sharp decline in Pigments 149 -24% Performance Performance of IPS and VA technologies 113 Materials remains strong Negative product mix, currency and lower utilization rates drive lower profitability Q3 2
Slide 8: Agenda
Agenda A Executive Summary and Operational Developments – Karl-Ludwig Kley B Pharma – Stefan Oschmann C Financials – Matthias Zachert D Appendix 8
Slide 9: Building Merck Serono: Change Process Gaining Momentum
Merck Serono Q3 2011 Building Merck Serono: Change Process Gaining Momentum Increasing commercial effectiveness Improving the pipeline Change Strengthening the R&D organization Agenda Optimizing cost structure Streamlining processes Division strengthened with highly experienced senior ma
Slide 10: Progress on Pipeline Pruning: Seven Pipeline Projects Discontinued
Merck Serono Q3 2011 Progress on Pipeline Pruning: Seven Pipeline Projects Discontinued Discontinuation of seven development programs in 2011: June: Cladribine tablets for use in Multiple Sclerosis (Phase III) July: Erbitux for use in metastatic triple-negative breast cancer (Phase II) Progres
Slide 11: Continued Actions to Strengthen and Defend Leadership Position in Multiple Sclerosis
Merck Serono Q3 2011 Continued Actions to Strengthen and Defend Leadership Position in Multiple Sclerosis Opportunities to capture incremental value from pipeline additions: Phase I PI-2301 from Peptimmune: second-generation peptide copolymer (Copaxone) ONO-4146 from Ono: Sphingosine-1-phospha
Slide 12: We Are Focusing on Markets Where We Have the Greatest Strengths and Opportunities
Merck Serono Q3 2011 – 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 therapeutic areas Fertility Oncology ‘TA’ with high Mul
Slide 13: Today's R&D Organization Highly Complex
Merck Serono Q3 2011 Today’s R&D Organization Highly Complex Key direct reports R&D Key subreports Medical Global Oncology Global Non-clinical Global Clinical Chief Medical Operational Science & Regulatory Research Technologies Development Ops Officer Excellence Innovation Affairs Clinical Quality O
Slide 14: Increasing Output with a New Global Discovery and Early Development Organization
Merck Serono Q3 2011 Increasing Output with a New Global Discovery and Early Development Organization Global Discovery & Early Development Admin Strategy HR Realization and Operations Finance Chemistry Non-Clinical Early Clinical External Manufacturing Development Development Innovation & Controls O
Slide 15: Increasing Commercial Success with a New Global Drug Development & Medical Organization
Merck Serono Q3 2011 Increasing Commercial Success with a New Global Drug Development & Medical Organization Global Drug Development & Medical Admin Strategy Realization and HR Operations Finance Head Global Chief Global Health Global Global External R&D Clinical Medical CMO Services Bio- Clinical R
Slide 16: Redefining the R&D Organization
Merck Serono Q3 2011 Redefining the R&D Organization Benefits: Simplification of committee structure comprising both functions will ensure seamless transition Stronger focus on external research will help to fill pipeline more quickly New R&D Organization Rationale: Build excellent development
Slide 17: Agenda
Agenda A Executive Summary and Operational Developments – Karl-Ludwig Kley B Pharma – Stefan Oschmann C Financials – Matthias Zachert D Appendix 17
Slide 18: Healthy Organic Revenue Growth, Bottom Line Impacted by Higher Expenses and Fx Headwinds
Merck Group Q3 2011 Healthy Organic Revenue Growth, Bottom Line Impacted by Higher Expenses and Fx Headwinds €m Q3 2011 Q3 2010 Δ Organic revenue growth 7% (Fx impact -2%; acquisitions Total revenues 2,531.6 2,437.8 4% -1%) Royalty income 97.3 90.8 7% Gross margin negatively Gross margin 1,851.8
Slide 19: Solid Top-line Growth, Fx Headwinds and Higher R&D Softening Bottom-Line
Merck Serono Q3 2011 Solid Top-line Growth, Fx Headwinds and Higher R&D Softening Bottom-Line Underlying Organic revenue growth of 9% €m Q3 2011 Q3 2010 Δ (Fx -2%, acquisition -2%) Total revenues 1,468.8 1,393.5 5% Organic growth inflated due to Royalty income 93.9 87.6 7% distribution model cha
Slide 20: Healthy Organic Revenue Growth in All Brands and Therapeutic Areas
Merck Serono Q3 2011 Healthy Organic Revenue Growth in All Brands and Therapeutic Areas Organic Sales Growth by Comments Key Products (€m) 426 Rebif performance benefiting from Rebif 407 8% U.S. price increases Erbitux 218 5% Volume growth in Europe 207 Erbitux sales growth driven by Emergin
Slide 21: Good Top-Line Growth in a Seasonally Strong Quarter
Consumer Health Care Q3 2011 Good Top-Line Growth in a Seasonally Strong Quarter €m Q3 2011 Q3 2010 Δ Organic revenue growth 7% (Fx -1%) Total revenues 132.8 125.0 6% Organic growth driven by: Good BION®3 sales in France due to promotional activities Gross Margin 90.7 86.3 5% Nasivin generat
Slide 22: Good Organic Revenue Growth in a Tough Market Environment
Merck Millipore Q3 2011 Good Organic Revenue Growth in a Tough Market Environment underlying Organic revenue growth 7% €m Q3 2010 Q3 2011 Δ (Fx -4%, acquisition effect of 2%) Total revenues 588.3 559.0 5% Good demand from Biopharma Bioscience 102.9 n.a. n.a. customers and Lab Solutions more Lab
Slide 23: Soft Quarter as Expected, Impacts from Product Mix, Divestments and Fx Headwinds
Performance Materials Q3 2011 Soft Quarter as Expected, Impacts from Product Mix, Divestments and Fx Headwinds Affecting Margin underlying Organic revenue growth -1% €m Q3 2011 Q3 2010 Δ Fx impact -2% Acquisition impact -2% from Total revenues 341.7 360.4 -5% divestment of Crop BioScience Liqu
Slide 24: Deleveraging Continues
Merck Group Q3 2011- Balance Sheet Deleveraging Continues Sep. Dec. Total assets stable versus last 30, 31, year and increase from June €m 2011 2010 Δ due to currency changes Total assets 22,394 22,388 +/- € 466m of net cash generated from two divestments in Q1 Equity 10,437 10,372 1% 2011 Cash
Slide 25: Business Generates Strong Operational Cash Flow
Merck Group 9M 2011- Cash Flow Business Generates Strong Operational Cash Flow 9M 9M Profit after tax negatively €m 2011 2010 Δ in €m impacted by one-time costs mainly taken in Q2, which are Profit after tax 490.0 596.0 -106.0 primarily being reversed under depreciation/amortization Depreciation/a
Slide 26: Guidance Update FY 2011
Merck Group Q3 2011 Guidance Update FY 2011 Merck Divisions Reported revenue growth Merck Serono ~1-2% Consumer Health Care ~5-6% Performance Materials* ~3-4% Merck Millipore ~47% Merck Group Merck Group Total Revenues ~ € 10.0 bn - € 10.2 bn Merck Group Operating Result ~ € 1bn Merck Group Underlyi
Slide 27: Future Changes to Disclosure & Guidance
Merck Group Q3 2011 Future Changes to Disclosure & Guidance 2012 Key Performance Indicator: EBITDA pre one-time charges - replaces Core Operating Result as key metric for profitability Qualitative guidance for 2012 on Feb. 29th earnings releases First quantitative guidance on Q1 earnings relea
Slide 28: Agenda
Agenda A Executive Summary and Operational Developments – Karl-Ludwig Kley B Pharma – Stefan Oschmann C Financials – Matthias Zachert D Appendix 28
Slide 29: Detailed Reconciliation of Non-Cash Balance Sheet Adjustments on 9M 2011 P&L
Merck Group Q3 2011 Detailed Reconciliation of “Non-Cash” Balance Sheet Adjustments on 9M 2011 P&L Impact on Qu. €m Division P&L Line Reason OR Core OR 1) Impairments -352 a) Cladribine Q1 -50 MS Amortization no FDA/EMA approvals yes no a) New biotech plant Vevey Q2 -161 MS Other expenses oversized
Slide 30: Changes in Foreign Exchange Rates Had a Considerable Impact on Q3 2011 Performance
Merck Group Q3 2011 Changes in Foreign Exchange Rates Had a Considerable Impact on Q3 2011 Performance Risk Exposure Impact One US$ cent (vs. €): Revenues decrease/increase by Currency ~€ 15m* per year, OR decreases/increases by ~€ 7m* per year Sensitivities One CHF centime (vs. €): OR increases
Slide 31: Financial Snapshot of Four Divisions
Merck Group Q3 2011- Divisions Q3 Financial Snapshot of Four Divisions €m Q3 Merck Consumer Merck Perform. Corporate Total Serono Health Millipore Materials and Other Care abs. % abs. % abs. % abs. % abs. % abs. % Total Revenues 1,469 100% 133 100% 588 100% 342 100% 0 … 2,532 100% Gross margin 1,225
Slide 32: 2011 YTD Performance Is Solid
Merck Group Q3 2011- Divisions 9M 2011 YTD Performance Is Solid €m YTD Merck Consumer Merck Perform. Corporate Total Serono Health Millipore Materials and Other Care abs. % abs. % abs. % abs. % abs. % abs. % Total Revenues 4,376 100% 368 100% 1,783 100% 1,124 100% 0 … 7,651 100% Gross margin 3,634 8
Slide 33: New Definition of Underlying Core Operating Result
Merck Group Q3 2011 New Definition of Underlying Core Operating Result EBIT + Impairments e. g. assets, patents e. g. amortization of inventory step-up, + M&A charges advisory costs + Restructuring costs from acquired and existing businesses + Integration/IT related restructuring from acquired and e
Slide 34: Merck Serono Portfolio
Merck Serono Merck Serono Portfolio Phase I Phase II Phase III in Registration ARX 424 ONO - 4641 Erbitux® (cetuximab) Rebif ® HSA-free formulation Long-acting interferon Oral S1P receptor modulator Anti-EGFR mAb (PETACC-8*) (interferon beta-1a) in CIS Multiple sclerosis Multiple sclerosis Adj colon
Slide 35: Progress on Pipeline Pruning in 2011: Seven Development Programs Discontinued
Merck Serono Q3 2011 Progress on Pipeline Pruning in 2011: Seven Development Programs Discontinued June: Cladribine tablets for use in Multiple Sclerosis (Phase III) Neuro- October: degenerative Safinamide for treatment of Parkinson indications (Phase III) Diseases HAS-free Formulation of Re
Slide 36: Merck Group 9M 2011
Merck Group 9M 2011 €m 9M 2011 9M 2010 Δ Total revenues 7,650,7 6,744.7 13% Royalty income 269.3 272.1 -1% Gross margin 5,570.9 5,121.2 9% SG&A -2,979.7 -2,620.0 -14% Royalty expenses -363.7 -355.3 2% R&D -1,119.6 -1,034.6 8% Amortization -780.1 -484.7 61% OR 693.4 984.4 -30% Underlying Core OR** 1,
Slide 37: Merck Serono 9M 2011
Merck Serono 9M 2011 €m 9M 2011 9M 2010 Δ Total revenues 4,375.9 4,250.7 3% Royalty income 260.6 259.5 … Gross Margin 3,633.7 3,605.1 1% SG&A -1,927.9 -1,744.8 11% Royalty expenses -347.4 -340.4 2% R&D -904.0 -880.2 3% Amortization -625,6 -429.0 46% OR 176.1 551.1 -68% Underlying Core OR* 995.2 980.
Slide 38: Consumer Health Care 9M 2011
Consumer Health Care 9M 2011 €m 9M 2011 9M 2010 Δ Total revenues 367.7 346.4 6% Gross Margin 252.4 237.5 6% SG&A -199.1 -205.8 -3% R&D -16.5 -16.4 1% Amortization -3.1 -3.1 -1% Underlying Core OR* 33.7 12.3 175% in % of revenues 9.2 3.5 * Underlying Core OR is defined on slide 33. 38
Slide 39: Merck Millipore 9M 2011
Merck Millipore 9M 2011 €m 9M 2011 9M 2010 Δ Total revenues 1,783.2 1,033.0 73% Bioscience 310.5 n.a. n.a. Lab Solutions 735.5 n.a. n.a. Process Solutions 737.3 n.a. n.a. Gross Margin 1,026.3 545.1 88% SG&A -616.7 -407.3 51% R&D -98.2 -43.3 127% Amortization -140.8 -48.3 192% OR 171.4 47.0 265% Unde
Slide 40: Performance Materials 9M 2011
Performance Materials 9M 2011 €m 9M 2011 9M 2010 Δ Total revenues 1,123.8 1,114.5 1% Liquid Crystals 832.1 778.0 7% Pigments & Others 291.7 336.5 -13% Gross Margin 658.5 733.5 -10% SG&A -161.1 -186.9 -14% R&D -100.9 -94.7 7% Amortization -10.6 -4.2 150% Underlying Core OR* 433.3 447.6 -3% in % of re
Slide 41: Upcoming Events
Investor Relations Upcoming Events Date Event Wednesday, February 29, 2012 2011 Financial Results Friday, April 20, 2012 Annual General Meeting Tuesday, May 15, 2012 Quarterly Financial Report Q1 Wednesday, August 15, 2012 Half-Year Financial Report Q2 Thursday, November 15, 2012 Quarterly Financial
Slide 42: Your Contacts
Investor Relations Your Contacts Joshua Young Merck KGaA Head of Investor Relations +49 6151 72-3706 Investor Relations Frankfurter Str. 250 Dr. Thomas Kornek 64293 Darmstadt +49 6151 72-7434 Germany Claudia Nickolaus +49 6151 72-2584 Fax: +49 6151 72-913321 Eva Sterzel +49 6151 72-5355 investor.rel