Merck Kgaa · XETR:MRK

Merck Kgaa — FY2014 Earnings Presentation

58 slides from Merck Kgaa's earnings presentation, Mar 3, 2015

  1. Slide 1: FY 2014 Results Conference Call

    FY 2014 Results Conference Call Strategic progress and delivery of results Karl-Ludwig Kley, CEO Marcus Kuhnert, CFO March 3, 2015

  2. Slide 2: Publication of Merck KGaA, Darmstadt, Germany (EMD notice)

    D | sc | a | mM er Publication of Merck KGaA, Darmstadt, Germany. In the United States and Canada the subsidiaries of Merck KGaA, Darmstadt, Germany operate under the umbrella brand EMD. To reflect such fact and to avoid any misconception of the reader of the publication certain logos, terms and bus

  3. Slide 3: Disclaimer

    Disclaimer Cautionary Note Regarding Forward-Looking Statements 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 words of similar meaning in

  4. Slide 4: Agenda

    Agenda Executive overview Strategy update Financial review Outlook and guidance

  5. Slide 5: 2014: A year of strategic progress

    2014: A year of strategic progress Closing and successful integration of AZ Electronic Materials Execution of “Fit for 2018” Announcement of Sigma-Aldrich acquisition growth strategy Signing of alliance with Pfizer to leverage iOnc pipeline Delivery on targets: Sales €11.3 bn, EBITDA pre €3.388 bn,

  6. Slide 6: FY 2014: We are on track to deliver results

    FY 2014: We are on track to deliver results Sales [€ m] EBITDA pre [€ m] EPS pre [€] +5.5% +4.1% +4.8% 4.0% organic 10,700 11,291 3,388 3,253 4.60 4.39 FY 2013 FY 2014 FY 2013 FY 2014 FY 2013 FY 2014 6

  7. Slide 7: Emerging Markets – Growth continues

    Emerging Markets – Growth continues Group FY 2014 sales by region Group: Emerging Markets sales development [€ bn] CAGR 11.6% North America Europe Organic: +1.7% Organic: +0.2% 4 4.000 19% 35% 3 3.000 2 2.000 38% 8% 1 1.000 Emerging Markets Organic: +9.1% Japan & others* Organic: +5.0% 0 2008 2009 2

  8. Slide 8: Divisional overview – Biopharmaceuticals and Consumer Health

    Divisional overview – Biopharmaceuticals and Consumer Health Sales [€ bn] Good performance of Erbitux and Fertility – +1.7% Rebif stable despite strong competition 5.7 5.8 Biopharma- Emerging Markets platform driving growth 3.6% ceuticals 32.6%* org. 31.7%* Pipeline advancing with continued focus on

  9. Slide 9: Divisional overview – Performance Materials and Life Science

    Divisional overview – Performance Materials and Life Science Sales [€ bn] High share in liquid crystals market +25.4% underlines innovation leadership 2.1 Performance Large premium TV demand fuels IPS & PS-VA growth; 1.6 4.1% successful launch of UB-FFS1 for small devices Materials 47.5% 2 org. 43.4

  10. Slide 10: Sustainable dividend development

    Sustainable dividend development Dividend1 development 2009-20142 2014 dividend and policy  Dividend of €1 per share proposed1 for 2014  Dividend increase in line with earnings 1.00 0.95 progression – 2014: +5.3% yoy 0.85  Last years’ dividend constitutes the 0.75 minimum level3 0.63 0.50  Aimin

  11. Slide 11: Agenda

    Agenda Executive overview Strategy update Financial review Outlook and guidance

  12. Slide 12: The Group going forward – three distinct business sectors

    The Group going forward – three distinct business sectors support profitable growth Healthcare* Life Science Performance Materials Strategic requirements Diversification Overlapping core competencies (customer intimacy, Attractive markets innovation, quality, life cycle management) High-margin b

  13. Slide 13: AZ – Complementing Performance Materials, expanding innovation leadership

    AZ – Complementing Performance Materials, expanding innovation leadership in niche markets Healthcare Life Science Performance Materials & Ongoing development in Liquid Crystals Research in advanced technologies R&D projects from AZ  Launch of new UB-FFS* mode - enhancing  Collaboration with EPSON

  14. Slide 14: Sigma-Aldrich – Next step to enhance Life Science

    Sigma-Aldrich – Next step to enhance Life Science business sector Healthcare Life Science Performance Materials & Broad and complementary Leveraging operational excellence product fit in attractive segments Expanding global reach and scale to deliver superior value to customers Sigma shareholder app

  15. Slide 15: Pfizer collaboration – Acceleration and broadening of immuno-oncology pipeline

    Pfizer collaboration – Acceleration and broadening of immuno-oncology pipeline Healthcare Life Science Performance Materials & Leverage anti-PD-L1 asset Tackle combination therapies Build commercialization strength +  Avelumab* with over 700 patients  Enlarge pool of potential combinations  Co-co

  16. Slide 16: Strategic agenda 2018 – milestones achieved

    Strategic agenda 2018 – milestones achieved ~2012 - 2013 > 2014 Restructuring Growth initiatives Organic Portfolio/Alliances Innovation  Potential pharma Early pipeline Repatriation projects AZ Electronic Materials launches ramp-up Leverage regional New advanced Sigma-Aldrich OLED platforms materia

  17. Slide 17: Strategic agenda 2018 – milestones achieved

    Strategic agenda 2018 – milestones achieved  Repatriation projects:  Glucophage and Euthyrox from Takeda in Russia  Co-promotion agreement with BMS1 for Glucophage in China  Transfer of full promotional responsibilities for Erbitux in Japan  Leverage regional platforms:  Transfer of Neurobion

  18. Slide 18: 2014 – a solid foundation for future growth

    2014 – a solid foundation for future growth Key steps in portfolio transformation taken  Continued implementation of “Fit for 2018” strategy  Solid financials – delivered on guidance  Operational discipline kept at high level  Poised for future growth  18

  19. Slide 19: Agenda

    Agenda Executive overview Strategy update Financial review Outlook and guidance

  20. Slide 20: FY 2014: Another year of sound delivery

    FY 2014: Another year of sound delivery [€ m] FY 2013 FY 2014 Δ FY 2014 Sales 10,700 11,291 5.5%  Sales, EBITDA pre and EPS pre increase on organic growth and AZ EBITDA pre 3,253 3,388 4.1%  Operating cash flow benefits from Margin (% of sales) 30.4% 30.0% Pfizer upfront payment  Only slight incr

  21. Slide 21: All businesses drive organic growth

    All businesses drive organic growth FY 2014 YoY sales Organic Currency Portfolio Total  All Biopharmaceuticals franchises Biopharmaceuticals 3.6% -1.9% 0.0% 1.7% deliver organic growth; Rebif stable  Volume growth in Liquid Crystals Consumer Health 5.4% -2.2% 0.0% 3.2% drives Performance Materials

  22. Slide 22: Reported EPS burdened by normalization of tax rate

    Reported EPS burdened by normalization of tax rate [€ m] FY 2013 FY 2014 Δ Reported results EBIT 1,611 1,762 9.4%  EBIT increases due to operational performance and lower impairments Financial result -222 -205 -7.7%  Financial result improved mainly from decreasing interest expenses after bond rep

  23. Slide 23: Q4 - Biopharmaceuticals: Emerging Markets drive organic growth

    Q4 - Biopharmaceuticals: Emerging Markets drive organic growth [€ m] Q4 20131 Q4 2014 Comments Sales 1,419 1,497  Rebif organically lower as European and U.S. volume losses to  XXX competition from oral therapies outweigh U.S. pricing initiatives Marketing and selling -449 -459  Erbitux with good

  24. Slide 24: Q4 - Consumer Health: Strong volumes amid investments

    Q4 - Consumer Health: Strong volumes amid investments in marketing and selling [€ m] Q4 2013* Q4 2014 Comments Sales 180 197  Sound organic sales growth supported by currency tailwinds  XXX Marketing and selling -72 -86  Investments in global marketing initiatives drive growth in Emerging Markets

  25. Slide 25: Q4 - Performance Materials: A strong quarter

    Q4 - Performance Materials: A strong quarter [€ m] Q4 2013 Q4 2014 Comments Sales 383 576  Sales jump on portfolio effect, strong organic growth & FX tailwinds  XXX Marketing and selling -36 -50  Volume growth in Liquid Crystals remains largest contributor to organic performance Admin -6 -15  St

  26. Slide 26: Q4 – Life Science: Process Solutions drives growth

    Q4 – Life Science: Process Solutions drives growth [€ m] Q4 2013 Q4 2014 Comments Sales 654 706  Good organic growth and FX, slightly offset by portfolio changes  XXX Marketing and selling -206 -231  Strong demand from biopharma industry for single-use equipment and purification consumables drive

  27. Slide 27: Swift deleveraging following AZ acquisition

    Swift deleveraging following AZ acquisition Net debt [€ m] and net debt/EBITDA pre* development 2014 [€ bn] 3 0.8 0,8 0.7x 0.5x 0,6 2 2,220 0,4 1,521 1 0.2x 0.1x 0,2 0x 559 307 -7 0 0 0 Dec. 2013 Mar. 2014 June 2014 Sep 14 Dec. 2014 Net debt Net debt/EBITDA pre *Last twelve months 27

  28. Slide 28: Balance sheet: Reflecting strategic M&A moves

    Balance sheet: Reflecting strategic M&A moves Assets [€ bn] Liabilities [€ bn] 26.0 26.0 5,1 20.8 20.8 2.2 11.8 Cash & marketable securities 3,4 1.7 Receivables 2.0 11.1 Net equity Inventories 1.5 11.4 5.6 Intangible assets 9.9 1.5 3.7 Financial debt Property, plant & equipment 1.8 Payables 1.4 3.0

  29. Slide 29: Operating cash flow increase driven by Pfizer

    Operating cash flow increase driven by Pfizer [€ m] FY 2013 FY 2014 Δ Cash flow drivers Profit after tax 1,209 1,165 -44  Decrease in D&A YoY due to 2013 impairments D&A 1,458 1,361 -97  Changes in provisions reflect release from litigation settlement Changes in provisions -203 -342 -139  Changes

  30. Slide 30: Agenda

    Agenda Executive overview Strategy update Financial review Outlook and guidance

  31. Slide 31: Food for thought on royalty, license and commission income

    Food for thought on royalty, license and commission income Royalty, license and commission income bridge 2013 - 2015 Details and future changes  Pfizer deal contains release of upfront and Xalkori accruals  New reporting starting 2015: €395 m  Net Sales will include commission and profit share in

  32. Slide 32: Industry outlook 2015

    Industry outlook 2015 Continuous market growth in emerging markets Healthcare Mature markets driven by launches of innovative products Consumer market is expected to grow mid-single digit Biotech IPO’s drive R&D investments Life Science Molecules in pharma-pipelines support Process Solutions Academi

  33. Slide 33: Indicative 2015 guidance

    Indicative 2015 guidance Group guidance for 2015 Slight organic sales growth EBITDA pre* slightly higher, at least stable 2015 key influencing factors - R&D costs from PD-L1 & TH302 buy-up  4 months AZ contribution - 6 months loss of Humira royalties  Currency tailwinds - Strong competitive pressu

  34. Slide 34: Business sector guidance

    Business sector guidance Healthcare Life Science Performance Materials  Organically stable top line  Moderate organic sales growth  Slight organic growth  Rebif decline  Process solutions key growth  Strong AZ portfolio effect contributor leads to low double-digit  Growth in other franchises

  35. Slide 35: Merck KGaA Darmstadt - Germany

    Merck KGaA Darmstadt - Germany

  36. Slide 36: Appendix

    Merck KGaA

  37. Slide 37: Additional financial guidance

    Additional financial guidance Further financial details Group royalty, license and commission income in 2015 ~€300 m Corporate & Other EBITDA pre at least -€220 m Underlying tax rate ~23% to 25% Capex on PPE and software ~€600 m 37

  38. Slide 38: Underlying tax rate remains unchanged

    Underlying tax rate remains unchanged Tax rate development 2009-2014 Tax rate rationale  Underlying tax rate of 23 - 25% due to beneficial tax rulings in 40% Previous range ~25 - 26% Current underlying several countries range ~23 - 25%  2012 and 2013 contained one-time 30% effects and exceptional

  39. Slide 39: Growing Emerging Markets share

    Growing Emerging Markets share Group Q4 2014 sales by region [in %] 19% 34% Europe North America 8% Japan & others* Emerging Markets 39% *Australia/Oceania, Africa 39

  40. Slide 40: Emerging Markets main contributor to growth

    Emerging Markets main contributor to growth Regional development of sales [€ m] Regional details  Reported sales growth includes AZ Organic contribution esp. EM, NA and Japan +12.9% sales  Chinese market remains driver in growth 2,976 Emerging Markets especially for branded generics and fertility

  41. Slide 41: All divisions post organic growth, currency headwinds soften

    All divisions post organic growth, currency headwinds soften Q4 YoY sales Organic Currency Portfolio Total  Portfolio reflects the acquisition of Biopharmaceuticals 2.8% 2.7% 0.0% 5.5% AZ Electronic Materials  Currency tailwinds mainly Consumer Health 6.5% 2.7% 0.0% 9.2% driven by EUR/USD developm

  42. Slide 42: Q4 2014: Strong year-end performance

    Q4 2014: Strong year-end performance [€ m] Q4 2013 Q4 2014 Δ Q4 2014 Sales 2,636 2,976 12.9%  Organic growth, portfolio effects as well as currency tailwinds drive sales EBITDA pre 795 878 10.5%  EBITDA pre and EPS pre improve on Margin (% of sales) 30.2% 29.5% solid organic performance and AZ des

  43. Slide 43: Reported EPS impacted acquisition hedging effects

    Reported EPS impacted acquisition hedging effects [€ m] Q4 2013 Q4 2014 Δ Reported results  EBIT up due to lower one-time costs EBIT 264 424 60.4% and organic growth  Last years’ tax rate impacted by one- Financial result -63 -63 -0.4% time change in applicable tax rates  Net income and EPS almos

  44. Slide 44: Biopharmaceuticals: Solid performance supported by all franchises

    Biopharmaceuticals: Solid performance supported by all franchises amid royalty income reduction [€ m] FY 2013 * FY 2014 Comments Sales 5,688 5,783  Organic growth partially offset by adverse currency effects  XXX Marketing and selling -1,814 -1,780  Rebif organically stable, as U.S. pricing and Q

  45. Slide 45: Biopharmaceuticals organic growth by product

    Biopharmaceuticals organic growth by product Q4 2014 organic sales growth [%] by key product [€ m] FY 2014 organic sales growth [%] by key product [€ m]  XXX  XXX 450 -5% 1.840 0% 452 1.865 234 +5% 904 +6% 223 882 167 +10% 628 +9% 148 586 102 -5% 428 +8% 105 401 102 +10% 378 -1% 91 394 62 +2% 237

  46. Slide 46: Rebif – defending the franchise

    Rebif – defending the franchise; competitive pressure in the U.S. and Europe Rebif performance - Regional sales evolution [€ m]  Rebif sales of €450 m in Q4  Organic decline of -4.7% is driven by Trend North America Q4 drivers lower volumes mitigated by pricing +2.1% org.  Competition from orals

  47. Slide 47: Erbitux – Emerging Markets strength

    Erbitux – Emerging Markets strength Erbitux sales by region Erbitux performance  Sales increase to €234 m as volume +5.3% Q4 YoY [€ m] gains outweigh negative price effects organic growth 250  Europe with slight organic growth mainly driven by reimbursement 200 approval in Turkey  Strong growth i

  48. Slide 48: Strong growth in Fertility and General Medicine

    Strong growth in Fertility and General Medicine Sales evolution Q4 drivers Fertility Q4 drivers  Gonal-f sales increase to €167 m [€ m] with 10.0% organic growth mainly 240 driven by U.S. demand and pricing 210 Organic  Solid volumes in Europe support solid 180 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2

  49. Slide 49: Clinical pipeline

    Clinical pipeline Phase I Phase II Phase III In registration 1  Pimasertib – MEK inhibitor  ATX-MS-1467 – Immune tolerizing agent  Evofosfamide (TH-302) –  Kuvan® 3 Solid tumors Multiple sclerosis Hypoxia-activated prodrug (Sapropterin dihydrochloride)  Tepotinib (MSC 2156119J) – Soft tissue sa

  50. Slide 50: Consumer Health: Focus on strategic brands in Emerging Markets

    Consumer Health: Focus on strategic brands in Emerging Markets drives organic performance [€ m] FY 2013 * FY 2014 Comments Sales 742 766  Increase in sales as good organic growth driven by Emerging  XXX Markets and Europe is partially offset by FX headwinds Marketing and selling -287 -303  New st

  51. Slide 51: Performance Materials: Growth fueled by display industry trends

    Performance Materials: Growth fueled by display industry trends [€ m] FY 2013 FY 2014 Comments Sales 1,642 2,060  Sales increase as good organic growth and portfolio effects from  XXX AZ are slightly offset by negative FX effects Marketing and selling -152 -178  Liquid Crystals flagship technolog

  52. Slide 52: Life Science: Growth in Process Solutions

    Life Science: Growth in Process Solutions [€ m] FY 2013 FY 2014 Comments Sales 2,628 2,682  Sales increase as organic growth overcompensate FX headwinds  XXX and portfolio effects* Marketing and selling -835 -844  Process Solutions growth driven by biopharma demand for Admin -99 -110 filtration a

  53. Slide 53: Underlying cash flow strength

    Underlying cash flow strength [€ m] Q4 2013 Q4 2014 Δ Cash flow drivers Profit after tax 281 282 1  Higher impairments last year lead to lower D&A in 2014 D&A 462 380 -81  Changes in provisions mainly impacted Changes in provisions -238 -342 -104 by release for litigation settlement  Increase in

  54. Slide 54: One-time items in Q4 2014

    One-time items in Q4 2014 One-time items in EBIT [€ m] Q4 2013 Q4 2014 One-time items thereof D&A One-time items thereof D&A Biopharmaceuticals 164 144 15 1 Consumer Health 1 0 1 0 Performance Materials 7 -4 10 0 Life Science 40 17 28 0 Corporate & Other 14 0 23 1 Total 226 157 76 2 Totals may not a

  55. Slide 55: One-time items in FY 2014

    One-time items in FY 2014 One-time items in EBIT [€ m] FY 2013 FY 2014 One-time items thereof D&A One-time items thereof D&A Biopharmaceuticals 258 189 50 5 Consumer Health 1 0 9 0 Performance Materials 10 -4 91 0 Life Science 70 17 60 0 Corporate & Other 47 0 65 5 Total 387 203 275 10 Totals may no

  56. Slide 56: New allocation of royalty, license and commission income and expenses

    New allocation of royalty, license and commission income and expenses 2014 P&L structure New 2015 P&L structure Sales Net sales Royalty, license and commission income Royalty, license and commission income Commission income Commission income Royalty & license income Royalty & license income Revenues

  57. Slide 57: Financial calendar

    Financial calendar Date Event April 17, 2015 Annual General Meeting 2015 May 19, 2015 Q1 2015 Earnings release August 06, 2015 Q2 2015 Earnings release November 12, 2015 Q3 2015 Earnings release March 08, 2016 Q4 2015 Earnings release 57

  58. Slide 58: Investor Relations contact details

    Investor Relations contact details Constantin Fest Head of Investor Relations +49 6151 72-5271 constantin.fest@emdgroup.com Alessandra Heinz Annett Weber Assistant Investor Relations Institutional Investors / Analysts +49 6151 72-3321 +49 6151 72-63723 annett.weber@emdgroup.com alessandra.heinz@emdg

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