Merck Kgaa · XETR:MRK
Merck Kgaa — Merck KGaA, Darmstadt, Germany — Q3 2019 Earnings Presentation
46 slides from Merck Kgaa's earnings presentation, Nov 14, 2019
Slide 1: Life Science and Healthcare Driving Profitable Growth
LIFE SCIENCE AND HEALTHCARE DRIVING PROFITABLE GROWTH Merck KGaA, Darmstadt, Germany Q3 2019 results Marcus Kuhnert, CFO Udit Batra, CEO Life Science November 14, 2019
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: Forward-Looking Statements
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 4
Slide 5: Executive Summary
EXECUTIVE SUPAMARY Ol
Slide 6: Highlights
Highlights Operations Financials ® Healthcare – Mavenclad ramp-up and Q3 2019 organic sales growth of +5.7%; core business drive strong organic growth Q3 2019 organic EBITDA pre growth of +9.8% Life Science – All businesses and regions fuel 1 Versum acquisition successfully closed – double-digit gro
Slide 7: Life Science and Healthcare drive organic growth of top- and bottom-line
Life Science and Healthcare drive organic growth of top- and bottom-line, supported by FX tailwinds Q3 2019 YoY net sales Organic Currency Portfolio Total Q3 YoY EBITDA pre 1 5.8% -0.1% €1,111 m 9.8% Healthcare 8.0% 2.0% 0.0% 10.0% €963 m Life Science 10.0% 3.0% -0.7% 12.3% Performance Materials -10
Slide 8: Solid organic growth driven by all regions
Solid organic growth driven by all regions Regional breakdown of net sales [€m] Regional organic development +4.0% Europe org. • Solid APAC due to double-digit growth of Life ® ® Science, Glucophage and Erbitux offset by decline in PM amid strong OLED 29% • Europe solid growth reflects strong demand
Slide 9: Financial Overview
FINANCIAL OVERVIEW
Slide 10: Q3 2019: Overview
Q3 2019: Overview Key figures Comments [€m] Q3 2018 Q3 2019 Δ • Net sales growth driven by Healthcare and 3,749 4,054 8.1% Life Science, offsetting Performance Materials Net sales decline EBITDA pre 963 1,111 15.4% • EBITDA pre & margin reflect GSK deferred Margin (in % of net sales) 25.7% 27.4% inc
Slide 11: Reported figures
Reported figures Reported results Comments [€m] Q3 2018 Q3 2019 Δ • Higher EBIT due to strong top-line EBIT 491 608 23.8% contribution from LS and HC, cost consciousness, and GSK deferred income Financial result -56 -135 141.1% • Increase in financial result reflects higher 2 Profit before tax 435 4
Slide 12: Healthcare: Prominent contribution from Mavenclad and Bavencio; solid core business
® ® Healthcare: Prominent contribution from Mavenclad and Bavencio ; solid core business Healthcare P&L Net sales bridge 8.0% 2.0% 0.0% €1,756 m [€m] Q3 20181 Q3 2019 €1,596 m Net Sales 1,596 1,756 Marketing and selling -573 -561 Q3 2018 Organic Currency Portfolio +0.0% Q3 2019 Administration -81 -8
Slide 13: Life Science: All major businesses and regions fuel double-digit growth
Life Science: All major businesses and regions fuel double-digit growth Life Science P&L Net sales bridge 10.0% 3.0% -0.7% €1,715 m [€m] Q3 20181 Q3 2019 €1,527 m Net Sales 1,527 1,715 Marketing and selling -443 -474 Q3 2018 Organic Currency Portfolio Q3 2019 Administration -85 -83 EBITDA pre bridge
Slide 14: The Life Science tools market is attractive and dynamic
The Life Science tools market is attractive and dynamic Attractive market… …with robust trends Research • Increase in NIH Funding and Pharma R&D1,2 €170 Bn • Increase in novel technologies3 ~€45-50 bn • Increase in research outsourcing4 ~2-3% CAGR9 4-6% 10 CAGR Process • Increase in biologics pipeli
Slide 15: We continue to set the benchmark for industry performance
We continue to set the benchmark for industry performance 2 31,1 30,4 29,8 EBITDA pre 29,2 margin, % of sales 25,1 (actual) 25.5 24,9 25,1 25,3 24,2 24,1 24,2 23,1 24,6 22.2 9,4 Organic sales 8,8 growth, 8,0 YoY % 6.51 6,3 6,4 6,0 5,3 5,5 5,2 4,8 4,2 3,0 3,0 3,3 2015 2016 2017 2019 2018 2015 2016 20
Slide 16: Life Science: Ongoing strong demand driving Q3 performance
Life Science: Ongoing strong demand driving Q3 performance of Process, Applied and Research Solutions Net sales by BU, Research +5.2 % v in % Solutions org. Lab Separation and Workflow Tools driving growth, +15.6 % v Process org. especially with filtration based products in protein Solutions resea
Slide 17: Acting to capitalize on three life science trends
Acting to capitalize on three life science trends 1 COMPLEX BIOLOGICS 2 DIGITAL UNIVERSE 3 ASIA Single Use / End to End #1 eCommerce Manufacturing/Distribution Opened Wuxi site in 2018, Nantong, Wuxi Single use site in Life and expanded Danvers facility Science1 90% Commercial expansion Viral Vector
Slide 18: Performance Materials: Expected LC decline starts to materialize
Performance Materials: Expected LC decline starts to materialize amid continued market slowdown in Semiconductor and Surface Performance Materials P&L Net sales bridge €626 m -10.6% €583 m [€m] Q3 20181 Q3 2019 3.7% 0.0% +5.2% Net Sales 626 583 +0.7% Marketing and selling -62 -61 Q3 2018 Organic Cur
Slide 19: Balance sheet – Reflecting bond placements and IFRS 16 adoption
Balance sheet – Reflecting bond placements and IFRS 16 adoption Assets [€ bn] Liabilities [€ bn] 42.1 42.1 36.9 36.9 5,1 Cash & cash equivalents 2,2 3,5 18,2 Receivables 3,2 3,1 Net equity 2,8 17,2 Inventories Intangible assets 21,0 21,0 12,5 Financial debt 8,9 2,3 2,2 Payables/Refund Liabilities Pr
Slide 20: Cash flow statement
Cash flow statement Q3 2019 – cash flow statement Cash flow drivers [€m] Q3 2018 Q3 2019 Δ • D&A increase mainly due to IFRS 16 reclassification Profit after tax 345 342 -3 • Changes in other assets/liabilities driven ® D&A 428 464 37 by Bavencio milestone payment; last years’ low base due to neutra
Slide 21: Guidance
GUIDANCE
Slide 22: Key earnings drivers to remember for 2019
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® • Healthcare underlying margins negatively impacted by product mix • Ongoing strength in Life Science with 8% to 9% organic above-
Slide 23: Group Full-year 2019 guidance
Group Full-year 2019 guidance Group guidance for 2019, including Versum for 86 days Net sales: Organic +3% to +5% YoY FX +1% to +2% YoY ~ €15.7 – 16.3 bn thereof Versum: ~ €270 m EBITDA pre: 1 Organic +10% to +13% YoY FX 0% to +2% YoY ~ €4,230 – 4,430 m thereof Versum: ~ €80 – 90 m EPS pre: ~ €5.30-
Slide 24: 2019 business sector guidance without Versum
Group 1 2019 business sector guidance without Versum 2 Net Sales EBITDA pre Healthcare ▪ Solid organic growth +4% to +6% ▪ Organic +19% to +23% YoY ▪ Base business at least stable ▪ FX 0% to +2% YoY organically ▪ ~ €1,830 – 1,940 m ▪ Strong contributions from launches including Mavenclad 2 Net Sales
Slide 25: Slide 25
Slide 26: Appendix
APPENDIX
Slide 27: Additional financial guidance 2019
Additional financial guidance 2019 Further financial details Corporate & Other EBITDA pre* ~ -€460 – -490 m Interest result ~ -€260 – -280 m Effective tax rate ~ 24% to 26% Capex on PPE ~ €1.0 bn – 1.1 bn FY 2019 hedge ratio ~60% Hedging/USD assumption at EUR/USD ~1.20 2019 Ø EUR/USD assumption ~ 1.
Slide 28: Maturity profile reflects Sigma-Aldrich and Versum financing transactions
Maturity profile reflects Sigma-Aldrich and Versum financing transactions Maturity profile as of Sept. 30, 2019 Coupon 2.400% 4.500% [€ m/US $] 2.950% 3.250% 750 1.375% 1.625% 2.625% 3.375% 2.875% 1 000 0.875% 0.005% 1 600 0.375% 1 350 500 1 000 1000 800 4.250% 550 600 500 600 70 2019 2020 2021 2022
Slide 29: Healthcare and Life Science more than offset decline of Performance Materials
Healthcare and Life Science more than offset decline of Performance Materials supported by FX tailwinds 9M 2019 YoY net sales Organic Currency Portfolio Total 9M YoY EBITDA pre Healthcare 5.4% 1.0% 0.0% 6.5% 1 9.2% 2.4% -0.1% € 3,179 m Life Science 9.4% 2.6% -0.6% 11.5% €2,850 m Performance Material
Slide 30: 9M 2019: Overview
9M 2019: Overview Key figures Comments [€m] 9M 2018 9M 2019 Δ • Net sales reflect sales growth of Healthcare 10,949 11,771 7.5% and Life Science supported by FX tailwinds Net sales • EBITDA pre & margin increase due to EBITDA pre 2,850 3,179 11.5% operational leverage in LS, milestone Margin (in % o
Slide 31: Reported figures
Reported figures Reported results Comments [€m] 9M 2018 9M 2019 Δ • Higher EBIT reflects strong topline EBIT 1,386 1,605 15.9% contribution from Life Science and non-recurring income in Healthcare Financial result -182 -309 69.8% • Increased financial result driven by Profit before tax 1,204 1,297 7
Slide 32: Healthcare: Solid growth of core business and increasing contribution of launches
Healthcare: Solid growth of core business and increasing contribution of launches Healthcare P&L Net sales bridge 5.4% 1.0% 0.0% €4,913 m [€m] 9M 20181 9M 2019 €4,615 m Net Sales 4,615 4,913 Marketing and selling -1,715 -1,710 Administration -241 -254 9M 2018 Organic Currency Portfolio 9M 2019 Resea
Slide 33: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q3 2019 organic sales growth [%] 9M 2019 organic sales growth [%] by key product [€m] by key product [€m] 318 -15% 947 -16% 363 1 094 235 +22% 653 +25% 188 517 222 +5% 633 +4% 212 615 206 +10% 565 +5% 182 532 143 +20% 384 +14% 116 335 108 297 +17% +12%
Slide 34: Neurodegenerative Diseases: Strong growth of Mavenclad starts to offset Rebif decline
Neurodegenerative Diseases: Strong growth of Mavenclad® starts to offset Rebif® decline ® Rebif net sales, [€m] ® Rebif sales of €318 m in Q3 Sales development NDI, [€m] 400 363 344 331 2019 reflects organic decline of 350 299 318 300 -15.1% mitigated by org. org. org. org. org. 450 0.4% -1.9% -7.
Slide 35: Mavenclad dosing regimen and revenue recognition
Neurodegenerative Diseases: Mavenclad® dosing regimen and revenue recognition Year 1 Year 2 Year 3 Year 4 Maximum of 20 days of oral treatment spread over 2 years (# of tablets weight-based) Treatment Week 1: max. 10 tablets Week 1: max. 10 tablets No treatment Week 2-4: no treatment Week 2-4: no tr
Slide 36: Oncology: Solid organic growth reflects strong demand for 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 €222 m reflect Erbitux net sales, [€m] solid growth (org. 5.1%; FX 0.0%) Sales development Oncology, [€m] 250 212 202 199 212 222 Strong APAC mainly driven by China 200 reimburse
Slide 37: Fertility: Strong organic growth driven by ongoing demand for Gonal-f
Fertility: Strong organic growth driven by ongoing demand for Gonal-f in the U.S. and China ® Gonal-f net sales, [€m] Sales development Fertility, [€m] 250 206 182 191 200 175 168 org. org. org. org. org. 350 17.9% 10.7% 7.9% 3.5% 9.0% 150 100 300 Fertility posts strong organic 50 growth driven by
Slide 38: China, Europe and LATAM fuel double-digit growth of General Medicine
China, Europe and LATAM fuel double-digit growth of General Medicine Sales evolution Q3 2019 organic drivers Endocrinology [€m] Organic 150 • Endocrinology with solid organic growth +4.2% org. 100 87 96 83 90 91 driven by all major regions, especially LATAM 50 0 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 20
Slide 39: Clinical Pipeline
Clinical Pipeline November 8, 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 M3541
Slide 40: Life Science: All businesses across all regions drive ongoing strong performance
Life Science: All businesses across all regions drive ongoing strong top and bottom line performance Life Science P&L Net sales bridge 9.4% 2.6% -0.6% €5,082 m [€m] 9M 20181 9M 2019 €4,557 m Net Sales 4,557 5,082 Marketing and selling -1,304 -1,434 9M 2018 Organic Currency Portfolio 9M 2019 Administ
Slide 41: 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 [€m] 9M 20181 9M 2019 €1,776 m -3.4% 3.3% 0.0% €1,776 m Net Sales 1,776 1,776 Marketing and selling -183 -193 Administration -72 -78 9M 2018 Organic
Slide 42: Cash flow statement
Cash flow statement 9M 2019 – cash flow statement Cash flow drivers [€m] 9M 2018 9M 2019 Δ • Profit after tax reflects higher EBIT Profit after tax 938 1,002 64 • D&A increase mainly due to IFRS 16 reclassification D&A 1,304 1,391 87 • Changes in other assets/liabilities reflects GSK upfront, Peg-Pa
Slide 43: Adjustments in Q3 2019
Adjustments in Q3 2019 Adjustments in EBIT [€m] Q3 2018 Q3 2019 Adjustments thereof D&A Adjustments thereof D&A Healthcare 9 0 -3 0 Life Science 16 5 20 0 Performance Materials 1 0 16 8 Corporate & Other 23 0 13 0 Total 49 5 47 8 Totals may not add up due to rounding 43
Slide 44: Adjustments in 9M 2019
Adjustments in 9M 2019 Adjustments in EBIT [€m] 9M 2018 9M 2019 Adjustments thereof D&A Adjustments thereof D&A Healthcare 52 0 5 0 Life Science 54 21 44 0 Performance Materials 10 1 81 8 Corporate & Other 73 0 58 0 Total 189 22 188 8 Totals may not add up due to rounding 44
Slide 45: Financial calendar
Financial calendar Date Event March 5, 2020 FY 2019 Earnings release April 24, 2020 Annual General Meeting May 14, 2020 Q1 2020 Earnings release August 6, 2020 Q2 2020 Earnings release 45
Slide 46: 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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