Plans for Future Growth

Mer­ck, a sci­ence and tech­nol­o­gy com­pa­ny, held its 24th Annu­al Gen­er­al Meet­ing today at the Jahrhun­derthalle in Frank­furt am Main. After Ste­fan Oschmann, Chair­man of the Exec­u­tive Board and CEO of Mer­ck KGaA, briefly reca­pit­u­lat­ed the anniver­sary year 2018, he pre­sent­ed the company’s plans for future growth to Mer­ck shareholders.

“Sci­ence and tech­nol­o­gy are trans­form­ing our world at light­ning speed and we at Mer­ck are help­ing to shape this trans­for­ma­tion. Sci­ence is at the heart of every­thing we do,” said Oschmann. “We per­formed well in 2018, which was a chal­leng­ing year. In 2019, we want to resume growth for all key fig­ures: sales, EBITDA pre and EPS pre. Our objec­tives are ambi­tious yet fea­si­ble since we’ve cre­at­ed a sol­id foundation.”

As already report­ed in ear­ly March, Mer­ck gen­er­at­ed net sales in 2018 of € 14.8 bil­lion, an increase of 2.2%. EBITDA pre, the company’s most impor­tant earn­ings indi­ca­tor, declined by ‑10.5% to € 3.8 bil­lion. This was large­ly due to neg­a­tive exchange rate effects. Earn­ings per share pre (EPS pre), which is deci­sive for the Mer­ck div­i­dend, decreased in 2018 by ‑13.9% to € 5.10. Nev­er­the­less, in the inter­ests of div­i­dend con­ti­nu­ity, Mer­ck is propos­ing to the Annu­al Gen­er­al Meet­ing a div­i­dend of € 1.25 per share as in the pre­vi­ous year. As pre­vi­ous­ly announced, Mer­ck expects mod­er­ate organ­ic growth of Group sales in 2019. For EBITDA pre, the com­pa­ny fore­casts a pro­nounced organ­ic per­cent­age increase in the low teens range in 2019.

The com­pa­ny has also clear­ly for­mu­lat­ed its long-term objec­tives and is res­olute­ly focus­ing on them. In the Health­care busi­ness sec­tor, as of 2022 Mer­ck aims to achieve around € 2 bil­lion in sales annu­al­ly with new­ly launched med­i­cines or com­pounds still in its Bio­phar­ma pipeline at the present time. In 2018, Mer­ck gen­er­at­ed sales of € 160 mil­lion with its two new med­i­cines, the immuno-oncol­o­gy drug Baven­cio and Maven­clad for the treat­ment of mul­ti­ple scle­ro­sis. At the end of March 2019, Maven­clad was approved by the U.S. Food and Drug Admin­is­tra­tion (FDA) and thus in the largest sin­gle region­al mar­ket for this medicine.

The firm has also filed for fur­ther approvals of Baven­cio. The reg­u­la­to­ry author­i­ties in the Unit­ed States, Europe and Japan are review­ing Baven­cio in com­bi­na­tion with Inly­ta from Pfiz­er in the treat­ment of patients with advanced renal cell car­ci­no­ma. In addi­tion, an impor­tant ele­ment of Merck’s strat­e­gy in the Health­care sec­tor is the alliance entered into in Feb­ru­ary with Glax­o­SmithK­line to co-devel­op and co-com­mer­cial­ize bin­tra­fusp alfa (M7824), an immunother­a­py from Mer­ck cur­rent­ly in clin­i­cal tri­als. The agree­ment has a poten­tial over­all val­ue of up to € 3.7 bil­lion. Over­all, eight clin­i­cal pro­grams for this nov­el immunother­a­py will be in progress or ini­ti­at­ed this year.

In its Life Sci­ence busi­ness sec­tor, Mer­ck intends to con­tin­ue to achieve above-mar­ket growth. Mer­ck sees great poten­tial par­tic­u­lar­ly for the busi­ness with phar­ma­ceu­ti­cal com­pa­nies, which is the main focus of the Process Solu­tions busi­ness unit. E‑commerce is also play­ing an impor­tant role and already accounts for a large por­tion of Life Sci­ence sales. In addi­tion, Mer­ck is invest­ing in growth fields such as bio­pro­cess­ing tech­nol­o­gy for drug man­u­fac­tur­ing. The com­pa­ny is forg­ing ahead with promis­ing new tech­nolo­gies, for exam­ple the Bio­Con­tin­u­um plat­form. With Bio­Con­tin­u­um, Mer­ck wants to sig­nif­i­cant­ly sim­pli­fy and accel­er­ate the com­plex man­u­fac­tur­ing process for biotech med­i­cines by meld­ing for­mer­ly sep­a­rate steps into one con­tin­u­ous process for its cus­tomers in the com­ing years.

In Per­for­mance Mate­ri­als, Mer­ck intends to expand its posi­tion as a lead­ing provider of solu­tions for the elec­tron­ics indus­try. After 2019, the com­pa­ny is aim­ing to increase sales in this busi­ness sec­tor by an aver­age of 2% to 3% annu­al­ly. On
April 12, Mer­ck signed a defin­i­tive agree­ment to acquire Ver­sum Mate­ri­als for US$ 53 per share. The busi­ness com­bi­na­tion is expect­ed to sig­nif­i­cant­ly strength­en the Per­for­mance Mate­ri­als busi­ness sec­tor. The U.S. com­pa­ny Ver­sum is one of the world’s lead­ing sup­pli­ers of inno­va­tion-dri­ven, high-puri­ty process chem­i­cals, gas­es and equip­ment for semi­con­duc­tor man­u­fac­tur­ing. The trans­ac­tion is expect­ed to close in the sec­ond half of 2019, sub­ject to the approval of Ver­sum stock­hold­ers at a Ver­sum spe­cial meet­ing, reg­u­la­to­ry clear­ances and the sat­is­fac­tion of oth­er cus­tom­ary clos­ing con­di­tions. “Ver­sum will broad­en our port­fo­lio. Our com­pe­ten­cies are high­ly com­ple­men­tary. Togeth­er, we can offer our cus­tomers more. This is very impor­tant because the dig­i­tal rev­o­lu­tion has only just begun and we want to con­sid­er­ably advance it fur­ther,” Oschmann said to shareholders.

Fur­ther­more, Mer­ck is also work­ing to build new dig­i­tal busi­ness­es beyond its three busi­ness sec­tors. The joint ven­ture Syn­tropy, which Mer­ck plans to estab­lish with Palan­tir Tech­nolo­gies, wants to help sci­en­tists use sci­en­tif­ic data bet­ter and secure­ly. By enabling researchers to struc­ture data from var­i­ous sources and to ana­lyze it via pat­tern recog­ni­tion, Syn­tropy ini­tial­ly aims to con­sid­er­ably accel­er­ate can­cer research. Addi­tion­al­ly, Syn­tropy will enable researchers to exchange and trace data reli­ably, with users always retain­ing full con­trol of their data.