Merck Kgaa · XETR:MRK
Merck Kgaa — Q1 2020 Earnings Presentation
40 slides from Merck Kgaa's earnings presentation, May 14, 2020
Slide 1: Good start to the year despite first COVID-19 impact
GOOD START TO THE YEAR DESPITE FIRST COVID-19 IMPACT Merck Q1 2020 results Stefan Oschmann, CEO Belén Garijo, CEO Healthcare Marcus Kuhnert, CFO May 14, 2020
Slide 2: 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 3: Agenda
Agenda Executive summary Financial overview Guidance Merck Q1 20 Results Presentation | May 14th, 2020 3
Slide 4: Executive summary
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Slide 5: Contributions to help face the global COVID-19 pandemic
Beyond focusing on the health & safety of our employees and on business continuity, we have contributed to help face global COVID-19 pandemic • Our Business: • Collaborations: • Research Grants: • Donations: • Supplying critical raw • Part of pharma and Life • 2019: €1 m Future • 290,000 units of ma
Slide 6: Highlights
Highlights Operations Financials Healthcare: double-digit growth fueled by Q1 organic sales growth of +7.6%; ® Mavenclad ramp-up and General Medicine Q1 organic EBITDA pre growth of +14.5% Life Science: Process Solutions with double Guidance: digit growth while Academia and Applied end Net sales: €1
Slide 7: Healthcare and Life Science fuel strong organic top- and bottom-line performance
Healthcare and Life Science fuel strong organic top- and bottom-line performance; significant portfolio effect from Versum Q1 YoY Net Sales Q1 YoY EBITDA pre Organic Currency Portfolio Total 10.7% 1,181 Healthcare 15.3% -0.4% 0.0% 14.9% 14.5% 2.0% 929 Life Science 5.6% 0.9% 0.0% 6.5% Performance Mat
Slide 8: Organic growth driven by North America, Europe and Latin America
Organic growth driven by North America, Europe and Latin America Regional breakdown of net sales [€ m] Regional organic development Europe +9.7% • About stable APAC due to double-digit org. growth of General Medicine, more than offsetting COVID-19 related flat Life 30% Science and decline in Display
Slide 9: Financial overview
FINANCIAL OVERVIEW
Slide 10: Q1 2020: Overview
Q1 2020: Overview Key figures Comments [€m] Q1 2019 Q1 2020 Δ • Net sales driven by organic growth of Net sales 3,746 4,370 16.7% Healthcare and Life Science, further fueled by portfolio effect from Versum EBITDA pre 929 1,181 27.2% Margin (in % of net sales) 24.8% 27.0% • EBITDA pre & margin increa
Slide 11: Reported figures
Reported figures Reported results Comments [€m] Q1 2019 Q1 2020 Δ • Higher EBIT driven by strong top line growth in Healthcare and Life Science EBIT 379 716 89.0% as well as consolidation of Versum and Financial result -113 -98 -12.5% divestment gain from Allergopharma* Profit before tax 266 617 131
Slide 12: Healthcare: Strong General Medicine and ongoing Mavenclad uptake
Healthcare: Strong General Medicine supported by COVID-19 pull-in effect ® and ongoing Mavenclad uptake; improved margins from top line leverage Healthcare P&L Net sales bridge 15.3% -0.4% 0.0% €1,701 m [€m] Q1 2019 Q1 2020 €1,481 m Net sales 1,481 1,701 Marketing and selling -550 -423 Q1 2019 Organ
Slide 13: Mavenclad - Global launch continues to make progress
Mavenclad® - Global launch continues to make progress, with Q1 showing initial impact of COVID; regaining of momentum expected in H2 2020 Global: First signs of COVID-19 related slow-down visible as of March, impacting Q1 2020 • Approved in 78 countries • Launches progressing well, with net sales, [
Slide 14: Mavenclad - Aiming to capitalize on waitlisted patient opportunity
Mavenclad® - Aiming to capitalize on “waitlisted” patient opportunity amid COVID-19 pandemic HE MS market: Mavenclad® : Significant opportunity for rebound in H2 Profile suited to evolved choice drivers • Diverse guidelines published – KOL debate ongoing • Lack of continuous immunosuppression3 • Inf
Slide 15: Bavencio - Enhancing its foundation in GU cancers
Bavencio® - Enhancing its foundation in GU cancers with transformative OS data from JAVELIN Bladder 100 trial featured at ASCO 2020 plenary session • First immunotherapy to significantly prolong OS vs standard of care in 1L locally advanced or Urothelial metastatic urothelial carcinoma, and first to
Slide 16: Core business - Q1 growth rates reflect initial effects of COVID-19
Core business - Q1 growth rates reflect initial effects of COVID-19 and indicate future developments Q1 2020 net sales contribution1 & Expected Impact of COVID-19 org. growth (%) in Q1 2020 (FY 2019) • Q1 supported by COVID-19 related moderate stocking effects across the General globe, suggesting ph
Slide 17: Pipeline - 2020 developmental progress in Oncology, Immuno-Oncology and Neurology
Pipeline - 2020 characterized by developmental progress of innovative Oncology, Immuno-Oncology and Neurology assets Q1 2020 Q2 2020 H2 2020 ASCO 2020 Bavencio®: Late-breaking JAVELIN Bladder 100 data (1L urothelial carcinoma) presented at the Plenary Session on May 31 May 29 – Jun 2 Tepotinib: Prim
Slide 18: Life Science: Showing strong resilience
Life Science: Showing strong resilience, Process Solutions with double-digit growth, Research and Applied flat Life Science P&L Net sales bridge 5.6% 0.9% 0.0% €1,769 m [€m] Q1 2019 Q1 2020 €1,661 m Net sales 1,661 1,769 Marketing and selling -470 -498 Q1 2019 Organic Currency Portfolio Q1 2020 Admi
Slide 19: Performance Materials: Strong Semi offset by LC decline
Performance Materials: Strong Semi more than offset by LC’s accelerated underlying negative trajectory and declining Surface amid COVID-19 Performance Materials P&L Net sales bridge 52.1% €900 m [€m] Q1 2019 Q1 2020 €604 m -5.4% 2.4% Net sales 604 900 Marketing and selling -66 -136 Administration -2
Slide 20: Balance sheet
Balance sheet Assets [€ bn] Liabilities [€ bn] 43.8 44.7 44.7 43.8 Cash & cash equivalents 0.8 1.5 3.5 3.7 Receivables 3.3 3.4 Inventories 18.6 17.9 Net equity Intangible Assets 26.3 26.5 13.9 13.2 Financial debt 2.4 2.6 Payables/refund liabilities Property, plant 3.1 3.3 Provisions for employee ben
Slide 21: Cash flow statement
Cash flow statement Q1 2020 – cash flow statement Cash flow drivers [€m] Q1 2019 Q1 2020 Δ • Profit after tax driven by higher EBIT Profit after tax 190 458 268 and Allergopharma disposal* gain, neutralized in other operating activities D&A 474 431 -42 ® • D&A lower mainly from expired Rebif Changes
Slide 22: Guidance
GUIDANCE
Slide 23: Changed assumptions regarding the development of COVID-19
Our assumptions regarding the development of COVID-19 have changed significantly post pandemic classification by WHO and subsequent events Previous Assumptions (disclosed in March) Current assumptions (disclosed in May) • Impact mainly in China • Impact across all regions • Outbreak peaks in Q1 • Ca
Slide 24: COVID-19 Update: new assumptions on financial impact
Merck Group COVID-19 Update: new assumptions on financial impact of COVID-19 ▪ Mid single-digit percentage Sales impact Group ▪ Global impact across many businesses ▪ Strong Q2 impact, also from Q1 pull-in ▪ Lasting until at least Q3 ▪ Highest anticipated impact in absolute terms Healthcare ▪ Bigges
Slide 25: Key earnings drivers to remember for 2020
Merck Group Key earnings drivers to remember for 2020 EBITDA1-supporting factors EBITDA1-reducing factors • Increasing sales contribution from Mavenclad® and • No more support from Pfizer deferred income (€191 m Bavencio® in 2019) • Stringent M&S and R&D cost management in HC • Lower income from pip
Slide 26: Full-year 2020 guidance
Merck Group Full-year 2020 guidance Net sales: Slight to moderate organic sales growth, Versum growth contribution in the mid-single digits % FX between +1% to -2% YoY ~€16.8 – 17.8 bn EBITDA pre: Organically about stable, mid-single digit % growth from Versum FX headwinds of 0% to -3% YoY 1 ~€4,350
Slide 27: 2020 business sector guidance
Merck Group 1 2020 business sector guidance Net sales EBITDA pre Healthcare ▪ Organically about stable ▪ Slight organic decline ▪ COVID-19 significantly impacting due to COVID-19 fertility performance ▪ Slight to moderate ▪ Sustained performance of new adverse FX impact products Net sales EBITDA pre
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Slide 29: Appendix
APPENDIX
Slide 30: Additional financial guidance 2020
Additional financial guidance 2020 Further financial details Corporate & Other EBITDA pre slightly higher than last year Interest result ~ -245 to -275 m Effective tax rate ~24 % to 26% Capex on PPE ~1.1 bn to 1.2 bn FY 2020 hedge ratio ~50% Hedging/USD assumption at EUR/USD ~1.18 2020 Ø EUR/USD ass
Slide 31: Maturity profile reflects Sigma-Aldrich and Versum financing transactions
Maturity profile reflects Sigma-Aldrich and Versum financing transactions Maturity profile as of March 31, 2020 Coupon 3.250% [€ m/US $] 0.125% 2.950% 1.375% 1.600 1.625% 2.625% 3.375% 2.875% 1.000 0.875% 0.500% 0.005% 500 0.375% 1.000 1000 750 750 800 550 600 500 600 2020 2021 2022 2023 2024 2025 2
Slide 32: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q1 2020 organic sales growth [%] by key franchise/products [€ m] Organic 295 -3% 299 234 +32% 180 211 +7% 199 167 -1% 168 150 +29% 117 123 +184% 43 114 +28% 91 33 +50% 22 Q1 2020 Q1 2019 Merck Q1 20 Results Presentation | May 14th, 2020 32
Slide 33: Neurology & Immunology: Paused Mavenclad ramp up
® Neurology & Immunology: Paused Mavenclad ramp up amid Covid-19 ® uncertainties offset by slower than anticipated organic Rebif decline ® ® Rebif sales of €295 m in Q1 ‘20 Sales development NDI, [€m] Rebif net sales, [€m] reflect lower organic decline of - 3.4%, further mitigated by FX 331 318 32
Slide 34: Oncology: High double-digit growth in Bavencio
Oncology: High double-digit growth in Bavencio®, while Erbitux is impacted by interruption of treatment protocols with infusions due to COVID-19 Sales development Oncology, [€m] Erbitux ® net sales, [€m] Absolute sales of €211 m reflect 6.1% growth in Q1 300 237 (org. 7.1%; FX -1.0%) org. org. org
Slide 35: Fertility: Strongest COVID-19 impact among all franchises
Fertility: As anticipated, strongest COVID-19 impact among all franchises particularly pronounced in China, Central and Western Europe ® Sales development Fertility, [€m] Gonal-f net sales, [€m] 250 206 191 200 168 178 167 org. org. org. org. org. 350 7.9% 3.5% 9.0% 3.3% -3.5% 150 Entire Fertility
Slide 36: General Medicine and Endocrinology: Strong growth
General Medicine and Endocrinology: Strong growth further accelerated by stocking effects more than offsetting negative COVID-19 impact in China Sales evolution Q1 2020 organic drivers [€m] Endocrinology Organic 150 91 +16.0% org. 100 83 90 99 95 • Endocrinology reflects strong demand for Saizen®
Slide 37: Merck Pipeline April 30, 2020
Merck Pipeline April 30, 2020 Phase I Phase II Phase III berzosertib (M6620) bintrafusp alfa peposertib (M3814) bintrafusp alfa avelumab ATR inhibitor TGFbeta trap/anti-PD-L1 DNA-PK inhibitor TGFbeta trap/anti-PD-L1 anti-PD-L1 mAb Solid tumors Solid tumors Rectal cancer Non-small cell lung cancer 1L
Slide 38: Adjustments in Q1 2020
Adjustments in Q1 2020 Adjustments in EBIT [€m] Q1 2019 Q1 2020 Adjustments thereof D&A Adjustments thereof D&A Healthcare 3 0 -27 2 Life Science 9 0 11 0 Performance Materials 35 0 35 0 Corporate & Other 28 0 17 0 Total 76 0 36 2 Merck Q1 20 Results Presentation | May 14th, 2020 Totals may not add
Slide 39: Financial calendar
Financial calendar Date Event May 14, 2020 Q1 2020 Earnings release May 28, 2020 Virtual Annual General Meeting August 6, 2020 Q2 2020 Earnings release November 12, 2020 Q3 2020 Earnings release Merck Q1 20 Results Presentation | May 14th, 2020 39
Slide 40: 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 constantin.fest@merckgroup.com svenja.bundschuh@merckgroup.com alessandra.heinz@merckgroup.com AMELIE SCHRADER EVA