Merck KGaA · XETR:MRK
Merck KGaA — Merck KGaA, Darmstadt, Germany — FY2020 Earnings Presentation
62 slides from Merck KGaA's earnings presentation, Mar 4, 2021
Slide 1: Strong performance in a turbulent year
Strong performance in a turbulent year Merck KGaA, Darmstadt, Germany FY 2020 results Stefan Oschmann, CEO Marcus Kuhnert, CFO Kai Beckmann, CEO Electronics March 4, 2021
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 Strategic review Financial overview ESG update Outlook & Guidance 3 Merck KGaA, Darmstadt, Germany Q4 20 Results Presentation | March 4, 2021
Slide 5: Executive summary
Executive summary 01
Slide 6: Highlights 2020
Highlights 2020 Operations Financials Healthcare: Mavenclad® 71% org. growth; Bavencio® 57% FY organic sales: growth of +6.0% org. growth post Q3 U.S. launch in UC 1L; Fertility back to growth in Q4 post COVID-19 hit in Q2 FY organic EBITDA pre: growing +16.8% (+8.4% org. excluding release of Biogen
Slide 7: Guidance delivered
Guidance delivered 2020 Guidance 2020 Results Net Sales €17.1 – 17.5 bn €17.5 bn EBITDA pre €5.05 – 5.25 bn €5.20 bn EPS pre €6.50 – 6.80 €6.70 6 Merck KGaA, Darmstadt, Germany Q4 20 Results Presentation | March 4, 2021
Slide 8: All major regions growing amid persisting pandemic impacts
All major regions growing amid persisting pandemic impacts Regional breakdown of net sales [€m] Regional organic development Europe +6.8% ▪ APAC: Double-digit growth in Life org. Science and Semiconductor Solutions 29% overcompensates declines in Display Solutions, Fertility & Surface Solutions ▪ Eu
Slide 9: Sustainable dividend growth
Sustainable dividend growth Dividend1 development 2014 -2020 2020 dividend ▪ Dividend of €1.40 (+8% YoY) per share proposed1 for 2020 2 1.40 ▪ Payout ratio of 23.1% of EPS pre in 1.25 1.25 1.30 2020; aiming for 20-25% of EPS pre 1.20 3 1.05 ▪ Dividend yield of 1.0% 1.00 1Final decision is subject to
Slide 10: Strategic Review
Strategic Review 02
Slide 11: Healthcare: Delivering on both pipeline and base business commitments
Healthcare: Delivering on both pipeline and base business commitments Business performance Sector highlights ▪ Highly resilient base business ▪ Solid organic sales growth of 3.4% ▪ Fertility: Well-managed return to pre- despite significant COVID-19 impact on pandemic levels as of Q3 2020 Fertility a
Slide 12: Life Science: Leveraging strong position to support global efforts against COVID-19
Life Science: Leveraging strong position to support global efforts against COVID-19 on top of underlying growth Business performance Sector highlights ▪ Unprecedented level of growth driven by ▪ Successful increase in capacity utilization with global effort to battle COVID-19 pandemic flexible shift
Slide 13: Electronics: Enabling the future in a data-driven world
Electronics: Enabling the future in a data-driven world Business performance Sector highlights ▪ One of most relevant portfolios in industry ▪ Semiconductor Solutions now accounts for nearly 60% of sector net sales and continues ▪ Over 100 PORs1 won in Semi Materials in 2020 across all material cate
Slide 14: Financial overview
Financial overview 03
Slide 15: FY 2020: Overview
FY 2020: Overview Key figures (Excl. Biogen provision release) Comments [€m] FY 2019 FY 2020 Δ FY 2020 Δ ▪ Sales up 9%, driven by accelerating Net sales 16,152 17,534 8.6% double-digit growth in Life Science, Versum portfolio & Healthcare pipeline EBITDA pre 4,385 5,201 18.6% 4,836 10.3% 27.1% 29.7%
Slide 16: 6% organic growth in 2020 driven by Life Science, Healthcare recovery and Semi
6% organic growth in 2020 driven by unprecedented Life Science growth, swift recovery from COVID-19 in Healthcare and strong Semi performance FY YoY Net Sales FY YoY EBITDA pre Organic Currency Portfolio Total 16.8% 6.4% €5,201 m Healthcare 3.4% -3.6% -0.9% -1.1% €4,385 m -4.6% Life Science 11.8% -2
Slide 17: FY 2020: Reported figures
FY 2020: Reported figures Reported results (Excl. Biogen provision release) Comments [€m] FY 2019 FY 2020 Δ FY 2020 Δ EBIT 2,120 2,985 40.8% 2,620 23.6% ▪ Top line-driven EBIT increase supported by Versum portfolio effect Financial result -385 -354 -7.9% ▪ Financial result mainly driven by Profit be
Slide 18: Q4 Healthcare: 4% organic growth driven by Mavenclad and Bavencio
Q4 Healthcare: 4% organic growth driven by Mavenclad® and Bavencio ® while base business about stable following Fertility recovery Healthcare P&L Net sales bridge [€m] IFRS Pre €1,800 m 4.1% €1,738 m Q4 2019 Q4 2020 Q4 2019 Q4 2020 -6.1% -1.5% Net sales 1,800 1,738 1,800 1,738 * M&S -595 -449 -595 -
Slide 19: Q4 Life Science: up 19% with unprecedented growth in Process Solutions
Q4 Life Science: up 19% with unprecedented growth in Process Solutions further boosted by acceleration in Research and Applied Life Science P&L Net sales bridge [€m] IFRS Pre 19.3% 0.0% €2,030 m €1,783 m Q4 2019 Q4 2020 Q4 2019 Q4 2020 -5.4% Net sales 1,783 2,030 1,783 2,030 M&S * -490 -531 -490 -52
Slide 20: Q4 Electronics: Organic growth in Semi overcompensates COVID-19 impact
Q4 Electronics: Organic growth in Semi overcompensates COVID-19 impact, underlying Display decline and FX headwinds Electronics P&L Net sales bridge [€m] IFRS Pre €798 m 8.0% 0.0% €831 m Q4 2019 Q4 2020 Q4 2019 Q4 2020 -3.9% Net sales 798 831 798 831 M&S * -136 -136 -136 -132 +0.0% Q4 2019 Organic C
Slide 21: Electronics: Successful transformation into a business supplying leading electronic players
Electronics: Successful transformation into a business supplying a broad base of leading electronic players Net Sales [ in €m ] Best-in-class portfolio of capabilities Net Sales share [ in % ] 3,380 Surface Solutions 11% ▪ Transformed from focused investments and Semiconductor Solutions acquisitions
Slide 22: Innovation in electronics industry is driven at the atomic level
Innovation in electronics industry is driven at the atomic level enabling smaller, faster & more energy efficient solutions Continued Proven, deep expertise warrants and growing strong outlook materials importance ▪ Technology trends merely reinforced by work- from-home & learn-from-home in electron
Slide 23: Electronics: Successful integration drives substantial synergy upgrade
Electronics Successful integration drives substantial synergy upgrade and acceleration EBITDA pre impact of synergy ramp-up [€ m] Sources of synergies ~50 ~83 ~95 10 Business • Transform country setup 8 10 Optimization • Streamline duplicate structures 35 30 75 • Optimize production and ~75 Procurem
Slide 24: Balance sheet
Balance sheet Assets [€bn] Liabilities [€bn] 43.8 43.8 0.8 41.8 41.8 Cash & cash equivalents 3.5 1.4 Receivables 3.3 3.2 Inventories 3.3 17.9 Net equity 17.0 Intangible assets 26.3 23.6 12.1 13.2 Financial debt 2.4 2.6 Payables/refund liabilities Property, plant 4.0 3.3 Provisions for employee benef
Slide 25: Q4 operating cash flow nearly doubling from a depressed Q4 2019 level
Q4 operating cash flow nearly doubling from a depressed Q4 2019 level Q4 2020 – cash flow statement Cash flow drivers [€m] Q4 2019 Q4 2020 Δ ▪ Lower D&A largely driven by reduced ® amortization of intangibles (Rebif ) Profit after tax 321 440 119 ▪ Changes in provisions reflect Healthcare D&A 552 49
Slide 26: Outlook & Guidance
Outlook & Guidance 04
Slide 27: Underlying COVID-19 assumptions for 2021 guidance
Underlying COVID-19 assumptions for 2021 guidance Group ▪ Increasing penetration of vaccination across large populations in all major regions as of summer ▪ Global gradual easing of lockdowns; virus mutations not to significantly invalidate vaccination efforts ▪ Overall improvement in the course of
Slide 28: Qualitative full-year 2021 guidance
Group Qualitative full-year 2021 guidance Net sales: Strong organic growth Adverse FX of -2% to -5% YoY EBITDA pre: Organic: high single-digit to low teens growth (excl. Biogen1) Adverse FX of -2% to -5% YoY 1 Q3 20 Reversal of the provisions for the patent dispute proceedings for Rebif in the amoun
Slide 29: Key earnings drivers to remember for 2021
Group Key earnings drivers to remember for 2021 EBITDA pre - supporting factors EBITDA pre - reducing factors ▪ Increasing Mavenclad® & Bavencio® contribution • Glucophage® impacted by VBP in China ▪ Ongoing strength in Life Science with robust base • Continued decline of liquid crystals and Rebif®
Slide 30: 2021 business sector guidance
Group 2021 business sector guidance1 Net sales EBITDA pre Healthcare ▪ Strong organic growth ▪ Strong organic growth (excl. Biogen2) ▪ Mainly driven by ▪ Mainly driven by Mavenclad and Bavencio ® Mavenclad and Bavencio® sales and continued cost discipline ▪ Base business organically around stable ▪
Slide 31: ESG update
ESG update 05
Slide 32: Sustainability strategy enhanced with clear commitment to new targets
Sustainability strategy enhanced, leveraging strengths with clear commitment to new targets Who we are Targets Integration Innovation Power Goal #1: Dedicated to human progress Integrated ▪ We are a leading science and In 2030, we will advance human progress for more than ▪ Part of the overall strat
Slide 33: Reduce our environmental footprint: targets achieved, new targets set
Reduce our environmental footprint: Environmental targets 2020 have been achieved, new targets set Achievements 2020 New targets from 2021 ▪ Aiming for climate neutrality Reduce scope 1+2 emissions Emissions target 2020 achieved! (scope 1 to 3 emissions) by 2040 ✓ 25% overall reduction for ▪ Lower s
Slide 34: Next steps towards achieving ESG targets
Next steps towards achieving ESG targets AGENDA 2020-2022 2030 Analysis of requirements: Strategy, business, regulation, stakeholders targets 01 Goal Develop SBV tool2 to measure product sustainability value Dedicated to human Link ESG1 to progress board compensation 02 Goal Build effective data pla
Slide 35: Appendix
Appendix
Slide 36: Additional financial guidance 2021
Additional financial guidance 2021 Further financial details Corporate & Other EBITDA pre ~ -400 to -470 €m Interest result ~ -220 to -245 €m Effective tax rate ~24% to 26% Capex on PPE ~1.4 to 1.5 €bn FY 2021 hedge ratio ~70% Hedging/USD assumption at EUR/USD ~1.17 2021 Ø EUR/USD assumption ~1.17 t
Slide 37: Balanced maturity profile: Lower refinancing risks & higher flexibility
Financial Update Balanced maturity profile: Lower refinancing risks & higher flexibility Maturity profile as of December 31, 2020 Coupon 3.250% [€ m/US $] 0.125% 2.950% 1.375% 1,600 1.625% 3.375% 1.625% 2.875% 1,000 0.500% 0.875% 0.005% 500 0.375% 2.625% 1 000 1,000 750 750 800 550 600 500 600 317 2
Slide 38: Q4: 11% organic sales growth driven by BIG 3
Q4: 11% organic sales growth driven by “BIG 3” (HC pipeline, Process & Semi Solutions) including strong turnaround in Electronics Q4 YoY Net Sales Q4 YoY EBITDA pre Organic Currency Portfolio Total 12.1% Healthcare 4.1% -6.1% -1.5% -3.5% €1,206 m €1,245 m -8.0% -0.9% Life Science 19.3% -5.4% 0.0% 13
Slide 39: Q4 2020: Overview
Q4 2020: Overview Key figures Comments [€m] Q4 2019 Q4 2020 Δ ▪ 11% organic sales growth driven by all Net sales 4,381 4,599 5.0% three sectors muted by -5% FX headwinds EBITDA pre 1,206 1,245 3.3% ▪ EBITDA pre growing 3% despite significant Margin (in % of net sales) 27.5% 27.1% -0.4pp FX burden of
Slide 40: Q4 2020: Reported figures
Q4 2020: Reported figures Reported results Comments [€m] Q4 2019 Q4 2020 Δ ▪ Strong performance across all sectors EBIT 515 611 18.7% particularly in Life Science drive Financial result -76 -52 -31.6% 18.7% EBIT growth Profit before tax 439 559 27.5% ▪ Reduced interest expense drives improved financ
Slide 41: FY Healthcare: Organic growth based on strong Q1 and swift recovery
FY Healthcare: Organic growth based on a strong Q1 and a swift recovery post Q2 dip; EBITDA pre further elevated by €365 m provision release Healthcare P&L Net sales bridge [€m] IFRS Pre €6,714 m 3.4% €6,639 m FY 2019 FY 2020 FY 2019 FY 2020 -3.6% -0.9% Net sales 6,714 6,639 6,714 6,639 M&S * -2,305
Slide 42: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q4 2020 organic sales growth [%] FY 2020 organic sales growth [%] by key product [reported €m] by key product [reported €m] 268 1.131 -12% -9% 326 1.273 218 903 +4% +8% 224 877 255 +13% 891 +6% 237 871 158 -6% 630 -13% 178 743 121 -10% 529 +4% 146 530 1
Slide 43: Neurology & Immunology: Organic sales growth of 4.5% in Q4
Neurology & Immunology: Organic sales growth of 4.5% in Q4 as Mavenclad® recovery continues ▪ Highest quarterly sales Mavenclad® TRx1, since launch Sales development NDI, [€m] [IQVIA, NPA, Weekly View] ▪ Rx data continues to trend positively with org. org. org. org. org. [€m] 17.2% 20.3% -5.1% 8.9%
Slide 44: Mavenclad launch update: renewed global share momentum
Mavenclad® launch update: Showing renewed global share momentum, in a dynamic market that remains suppressed ▪ Real world data presented at 2020 ACTRIMS-ECTRIMS reaffirmed confidence in safety profile, Increasing confidence in demonstrating that Mavenclad patients with COVID-19 are not at an increas
Slide 45: Oncology: Bavencio showing strong YoY and sequential growth
Oncology: Bavencio® showing strong YoY and sequential growth post U.S. launch in UC 1L; EU and JP approvals expected to accelerate growth further ® Sales development Oncology, [€m] Erbitux net sales, [€m] ▪ 13% growth in Q4, supported by temporary 300 supply agreement with Eli org. org. org. org. or
Slide 46: Xevinapant: Potential to become standard of care in core area
Xevinapant Potential to become standard of care in core area for Group Chart originally presented in 2020 R&D update call; selected, non-exhaustive examples Worldwide Selected DDR assets M9831 xevinapant in-licensing External (incl. M6620/Berzosertib) (formerly Xevinapant VX984)3 builds on leadershi
Slide 47: Xevinapant: Blockbuster potential & meaningful clinical benefit
Xevinapant Blockbuster potential & meaningful clinical benefit in curative setting Mode of Action1 Phase 2 Clinical Study Results2 ▪ Improvement in OS statistically significant and clinically meaningful: HR 0.49 (0.26–0.92); p=0.0261 ▪ mOS not yet reached in xevinapant arm; 5-year extended OS follow
Slide 48: Xevinapant in-licensing with total deal-volume of up to ~€900 m
Xevinapant In-licensing with a total deal-volume of up to ~ €900 m and industry-typical sales royalties Payment type Amount (in €) Accounting treatment2 Upfront payment ~ €190 m Largest part to be capitalized as an intangible asset Approval To be paid and capitalized as an intangible asset upon appr
Slide 49: Bavencio UC 1L launch update
Bavencio® UC 1L launch update: Continued inflection in the U.S, recent EU and Japan approvals expected to further accelerate growth ▪ Strong US launch performance: Increasing breadth: Number of accounts ordering Bavencio®1 ‒ Increasing breadth & depth of accounts/ prescriber base ‒ Leading share of
Slide 50: Bavencio: Holistic UC 1L treatment sustaining disease control
Bavencio®: Holistic UC 1L treatment sustaining disease control; maintenance following induction chemo achieving transformative OS benefit Durable responses to standard of care (1L chemotherapy) are rare with most patients experiencing progression within 9 months of treatment1 Carboplatin or Complete
Slide 51: Fertility: Return to organic growth post Q2 dip
Fertility: Return to organic growth post Q2 dip, while picture across geographies remains mixed ® Sales development Fertility, [€m] Gonal-f net sales, [€m] 192 org. org. org. org. org. 200 178 167 ▪ Fertility portfolio growing [€m] 158 3.3% -3.5% -38.9% -1.3% 0.8% 150 again organically vs. strong 40
Slide 52: General Medicine growing despite VBP impact in China
General Medicine growing despite VBP impact in China; Endocrinology impacted by COVID-19 particularly in U.S. Sales evolution Q4 2020 organic drivers [€m] Endocrinology ▪ COVID-19 impact in U.S. continues due Organic to decline in HIV patient visits and 99 95 100 83 87 84 -8.1% treatment initiations
Slide 53: Healthcare Pipeline
Healthcare Pipeline December 31, 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 tumors1 Solid tumors Rectal cancer Biliary tract cancer
Slide 54: Bintrafusp alfa INTR@PID Program: Upcoming Readouts
Bintrafusp alfa INTR@PID Program: Upcoming Readouts Registrational potential 2021 2022 2023 2024 BTC 047 - 2L Mono/CT Ph II Q1 combo Monotherapy BTC 055 - 1L Ph II/III Q4 CT combo (Gemcitabine Plus Cisplatin) Lung 024 - 1L Ph I/II CT/CRT Q1 combo CT combo Lung 005 – Stage* III Ph II cCRT + IO combo
Slide 55: Healthcare catalysts 2021
Healthcare catalysts – Significant developmental progress across Oncology and Immuno-Oncology portfolio expected in 2021 Oncology Immuno-Oncology Immunology Q1 Q2 Q3 Q4 Tepotinib (c-Met–inhibitor) METex14: FDA approval Bavencio® (Avelumab/Anti-PD-L1) 1L UC: Approved by EMA and Japanese MHLW Berzoser
Slide 56: FY Life Science: 12% increase driven by Process Solutions
FY Life Science: 12% increase mainly driven by 22% growth in Process Solutions as strong underlying growth is boosted by COVID-19 demand Life Science P&L Net sales bridge [€m] IFRS Pre adjustments €6,864 m 11.8% 0.0% €7,515 m FY 2019 FY 2020 FY 2019 FY 2020 -2.3% Net sales 6,864 7,515 6,864 7,515 M&
Slide 57: FY Electronics: Versum portfolio effect and Semiconductor growth
FY Electronics: Versum portfolio effect in Q1-Q3 and continuous organic Semiconductor growth far outweigh declining Display and Surface Electronics P&L Net sales bridge [€m] IFRS Pre adjustments 35.4% €3,380 m €2,574 m FY 2019 FY 2020 FY 2019 FY 2020 -3.2% -0.9% Net sales 2,574 3,380 2,574 3,380 M&S
Slide 58: FY 2020: Cash flow statement
FY 2020: Cash flow statement FY 2020 – cash flow statement Cash flow drivers [€m] FY 2019 FY 2020 Δ ▪ Higher profit after tax driven by strong Profit after tax 1.324 1.994 670 operational performance particularly in Life Science D&A 1.944 1.938 -6 ▪ Stable D&A as higher depreciation Changes in provi
Slide 59: Adjustments in Q4 2020
Adjustments in Q4 2020 EBIT Adjustments [€m] Q4 2019 Q4 2020 Adjustments thereof D&A Adjustments thereof D&A Healthcare 21 1 93 0 Life Science 15 0 6 3 Electronics 93 -1 29 11 Corporate & Other 10 0 23 0 Total 139 1 151 14 58 Merck KGaA, Darmstadt, Germany Q4 20 Results Presentation | March 4, 2021
Slide 60: Adjustments in FY 2020
Adjustments in FY 2020 Adjustments in EBIT [€m] FY 2019 FY 2020 Adjustments thereof D&A Adjustments thereof D&A Healthcare 26 1 85 2 Life Science 59 0 21 3 Electronics 174 7 223 123 Corporate & Other 68 0 79 0 Total 328 9 407 128 59 Merck KGaA, Darmstadt, Germany Q4 20 Results Presentation | March 4
Slide 61: 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 60 Merck KGaA, Darmstadt, Germany Q4 20 Results Presentation | March 4,
Slide 62: 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 constantin.fest@emdgroup.com svenja.bundschuh@emdgroup.com sara.hofmann@emdgroup.com ILJA DOERING GUNNAR ROMER AMELIE
Merck KGaA, Darmstadt, Germany — FY2020 Earnings Presentation on 6ix