Q4 and FY 2011 Earnings Release

Transcription

1 Q4 and FY 2011 Earnings Release Karl-Ludwig Kley CEO Matthias Zachert CFO March 6, 2012

2 Disclaimer Remarks All comparative figures relate to the corresponding last year s period. Important information This presentation does not constitute an offer of securities for sale or a solicitation of an offer to purchase securities in the United States. The shares referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act ), and may not be offered or sold in the United States absent registration under the Securities Act or an available exemption from such registration. Note regarding forward-looking statements The information in this document may contain forward-looking statements. Forward-looking statements may be identified by words such as expects, anticipates, intends, plans, believes, seeks, estimates, will or words of similar meaning and include, but are not limited to, statements about the expected future business of Merck KGaA resulting from the proposed transaction. These statements are based on the current expectations of management of Merck KGaA and E. Merck KG, and are inherently subject to uncertainties and changes in circumstances. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are factors relating to satisfaction of the conditions to the proposed transaction, and changes in global, political, economic, business, competitive, market and regulatory forces. Merck KGaA and E. Merck KG do not undertake any obligation to update the content of this presentation and forward-looking statements to reflect actual results, or any change in events, conditions, assumptions or other factors. 2

3 Agenda A Executive Summary and Operational Developments Karl-Ludwig Kley B Financials Matthias Zachert FY 2011 Review Q Review C Q&A 3

4 Merck Group FY 2011 Good Performance in a Year of Change 2011 Highlights We delivered on our guidance - Total Revenues reached bn - Solid organic top-line growth of 5% with all divisions contributing - Underlying Core OR grows 9% to 2.29 bn We generated good operational results in a challenging environment We implemented a stock-based incentive scheme We kicked off our transformation process 2011 Financials Total Revenues ( bn) % FY 2010 FY 2011 Underlying Core OR ( bn) % 2.29 FY 2010 FY

5 We Will Focus on Cost Efficiency Before Moving the Emphasis to Growth & Portfolio Transformation process Efficiency Growth Merck Group Portfolio Cultural change

6 Merck Group FY 2011 Strong Organic Sales Growth in Emerging Markets and the U.S. Offset Softness in Europe North America +7%* Europe ~0%* 40% 18% Asia / Africa / Australasia +9%* Latin America +9%* 30% 12% * Growth rates reflect organic sales growth 6

7 Merck Pharmaceuticals FY 2011 Divisional Overview Pharmaceuticals Merck Serono Growth across all businesses, strongest growth rates in Endocrinology and Fertility Defending Rebif franchise Erbitux growth rate slows due to softness in Japan, showing sequential improvement Emerging Markets continue strong growth First pipeline review accomplished Total Revenues ( bn) % 5.92 FY 2010 FY 2011 Total Revenues ( m) Consumer Health Solid revenue growth driven by Germany and France as well as some Emerging Markets Profitability recovery from a low base since 2010 was affected by one-time events % 496 FY 2010 FY

8 Merck Chemicals FY 2011 Divisional Overview Chemicals Performance Materials Growth of Liquid Crystals offsets decline of Pigments & Cosmetics business Healthy volumes and share gains of IPS and VA products balance market share losses for PS-VA products & price pressures Pigments & Cosmetics weakness due to softer economic conditions Total Revenues ( bn) % 1.47 FY 2010 FY 2011 Merck Millipore Increase of revenues reflects contribution of Millipore acquisition and organic growth Growth driven especially by biotech industry demand for Process Solutions products Weaker spending from academic & gov t customers led to lower Bioscience growth Investing in R&D and bolt-on acquisitions Total Revenues ( bn) +48% FY 2010 FY

9 Merck Serono Pipeline Focused Licensing Deals Strengthen Oncology and NDD Pipeline; Stimuvax Interim Analysis Licensing ONO 4641 (S1P) for MS - Licensing agreement signed with Ono Pharmaceuticals in Oct Phase II data (DreaMS) - Data analysis and interpretation is ongoing with partner - Planned disclosure of results at future neurology congress TH-302* - In-licensed from Threshold Pharmaceuticals in February International Phase III trial in soft tissue sarcoma - Positive Phase 2B results of TH-302 in pancreatic cancer Stimuvax Other pipeline updates Phase III in NSCLC (START) - Interim analysis confirms that trial is to continue to final analysis - Final result expected in 2013 Erbitux in NSCLC: list of questions and additional data requests received from EMA - Decision expected in H Cilengitide in GBM (Phase III): Final data expected in H * Subject to FTC clearance 9

10 Merck Group FY 2011 Key Focus in 2012: The Transformation Continues Millipore Integration New Management Merck Millipore Bolt-on Acquisitions New Organizational Structures Implemented Merck Serono Licensing Deals Group-wide efficiency programs Merck Serono Pipeline Review Improved Incentive Scheme Capital Markets Day, May

11 Agenda A Executive Summary and Operational Developments Karl-Ludwig Kley B Financials Matthias Zachert FY 2011 Review Q Review C Q&A 11

12 Merck Group FY 2011 Transformation Process Impacts P&L m FY 2011 FY 2010 Δ Comments Total Revenues Net Sales Royalty Income Gross Profit as % of revenues 10,276 9, , ,291 8, , % 11% 2% 8% Good organic Revenue growth of 5% (7% acquisitions, -1% Fx) Gross Profit adversely affected by negative mix in PM, Fx and start-up costs for Vevey Marketing & Selling Royalty and Comm. Exp. Administration Other Expenses / Income R&D Amortization -2, ,517-1,005-2, , % 5% 6% 49% 9% 23% Other Expenses mainly up due to 165m impairment of LSB R&D increased due to safinamide charge, late-stage pharma portfolio and Millipore investments Operating Result lowered by 478m of one-time charges Operating Result 985 1,113-12% Underlying Core OR as % of revenues 2, , % 12

13 Merck Group FY 2011 despite This, Net Profit is at Previous Year s Level m FY 2011 FY 2010 Δ Comments Operating Result Exceptionals Financial Result Profit before Tax Income Tax Tax Rate (%) Net Profit (Underlying Core EPS ( )) , % n.m. 14% -1% 1% -2% 12% Exceptionals up due to capital gain on Crop BioScience Financial Result driven by Millipore financing Income Tax in line with guidance Net Profit lowered by one-time charges incurred during

14 Merck Group FY 2011 Solid Profitability in All Four Divisions Despite Challenging Markets Effective cost containment in G&A fully offsets higher R&D and austerity measures Merck Serono* 1,279 +4% 1,336 Performance Materials* 576-1% 572 Stable operational performance despite tougher market environment (Fx, customer destocking and mix change) Good operational performance vs. a low base FY 2010 FY 2011 Consumer Health* +229% 46 m FY 2010 FY 2011 Merck Millipore* +44% FY 2010 FY 2011 FY 2010 FY 2011 Overall positive development in context of more challenging market environment, integration work, and Fx * Underlying Core OR 14

15 Agenda A Executive Summary and Operational Developments Karl-Ludwig Kley B Financials Matthias Zachert FY 2011 Review Q Review C Q&A 15

16 Merck Group Q Quarterly Financial Performance Reflects Similar Trends Seen Throughout 2011 m Q Q Δ Comments Total Revenues Royalty Income Gross Profit as % of revenues 2, , , , % 13% 8% Top-line performance benefits from healthy emerging market growth - Organic revenue growth: 4% SG&A Royalty and Comm. Exp. R&D Amortization OR Underlying Core OR as % of revenues Net Profit (Underlying Core EPS ( )) -1, % 12% 10% -33% 126% 5% 192% -5% - Fx and acquisitions / divestitures have negligible effect Gross Profit improvement due in part to easy year-over-year comparison R&D increase reflects charge for discontinuing safinamide Amortization includes charge for safinamide in

17 Merck Serono Q Solid Improvement in Profitability, Momentum in Emerging Markets Continues m Q Q Δ Comments Total Revenues Net Sales Royalty Income Gross Profit as % of revenues SG&A Royalty and Comm. Exp. R&D Amortization 1,544 1, , ,503 1, , % 2% 12% 6% 5% 13% 12% -39% Revenues growth driven by Emerging Markets - Organic growth: 4% - Changes in Fx: 0% - Divestments: -1% Endocrinology and Fertility continue strong performance SG&A mainly driven by higher Rebif commission expenses OR Underlying Core OR as % of revenues n.m. 14% R&D includes 42m charge for safinamide in Q Amortization includes 134m charge for safinamide in Q

18 Consumer Health Q Good Operational Performance Vs. a Low Base m Q Q Δ Comments Total Revenues % Organic Revenue growth of 3% Gross Profit as % of revenues SG&A R&D Amortization OR Underlying Core OR as % of revenues % -3% -25% 5% n.m. n.m. Operating Result: - Improvement of overall cost structure including lower Marketing & Selling costs due to reprioritization of promotion spending - Fewer negative one-time events which lowered the Q comparable base 18

19 Performance Materials Q Good Finish to the Year m Q Q Δ Comments Total Revenues Liquid Crystals Pigments & Cosmetics Gross Profit as % of revenues SG&A R&D Amortization OR Underlying Core OR as % of revenues % 11% -14% -1% -19% -7% -56% 8% 8% Revenue growth driven by LC and reactive mesogens - Organic growth: 3% - Changes in Fx: 1% - Divestments: -2% Liquid Crystals organic revenue growth of 10% driven by strong volume increase Pigments & Cosmetics report organic revenue decline of -15% due to weaker Mica & Xirallic sales Good cost management leads to lower SG&A Operating margin above 40%, in part helped by Fx tailwinds 19

20 Merck Millipore Q Division Delivers Good Profitability, While Continuing to Invest for Future Growth m Q Q Δ Comments Total Revenues Bioscience Lab Solutions Process Solutions Gross Profit as % of revenues SG&A R&D Amortization % 6% 7% 3% 21% -1% 16% 5% Revenue growth driven by acquisitions in Lab Solutions and new products in Bioscience - Organic revenue growth: 2% - Changes in Fx: 0% - Acquisitions: 3% Gross Profit increased affected by inventory step-up OR Underlying Core OR as % of revenues n.m. -8% Investments in R&D reflect both effects of acquisitions and opportunities for future growth 20

21 Merck Group Q Balance Sheet Further Deleveraging as Promised m Dec. 31, 2011 Dec. 31, 2010 Δ Comments Total Assets Equity Cash & Oth. Liqu. Funds Intangible Assets Financial Debt 22,120 10,493 2,055 11,764 5,539 22,388 10, ,484 5,484-1% 1% 106% -6% 1% Strong increase in Cash position fueled by operations and divestitures Pension Provisions: 520m in cash used to fund German pension scheme (CTA*) Pension Provisions thereof cov. by fin. assets 1, , % -100% Net Financial Debt 3,484 4,484-22% * Contractual Trust Arrangement 21

22 Merck Group FY 2011 Cash Flow Strong Operational Cash Flow m FY 2011 FY 2010 Δ Comments Profit After Tax Depreciation / Amort. Changes in WC Capital Expenditures Others Free Cash Flow 629 1, , , ,994-3, ,769 4,959 Profit After Tax at comparable level due to one-time costs D&A up due to impairment LSB, Merck Millipore depreciation and safinamide charge Changes in Working Capital - Inventories increased due to acquisitions and organic growth Others : 520m pension claims moved into CTA* - Input of acquisitions in 2010: Millipore; and 2011: Biotest and Amnis * Contractual Trust Arrangement 22

23 Merck Group FY 2011 Dividend Increase of 20% Proposed to Shareholders Dividend development +20% Proposed dividend of 1.50 Increase of 20% done despite substantial one-time charges reflects belief in sustainable strong cash flow To be confirmed at the Annual General Meeting

24 Merck Group New Disclosure Policy Additional Information Organic sales growth by geography for all four divisions Geographic breakdown of sales for Erbitux and Rebif Changes KPI change from Underlying CORE OR to EBTIDA pre one-time costs Margin analysis based on net sales (vs. revenues) Exceptionals Discontinued Businesses Margins disclosed for overall Performance Materials Division (no breakdown of Liquid Crystals margins) 24

25 Merck Group Qualitative Divisional Guidance for 2012 Merck Serono Consumer Health Performance Materials Merck Millipore Main therapeutic markets expected to grow Global market expected to grow mid single-digit Chemical industry expected to soften in H Solid demand for Life Science Tools products Industry Volume growth in Emerging Markets Potential further pressure from government austerity Asia and Latin America growing around 10% annually Continued pressure on LCD panel manufacturers Continued volume growth in biologicbased drugs Governmentsponsored R&D stable Stable revenues Rebif sales stable to slightly declining Erbitux, Fertility / Endo low singledigit growth Modest increase in profitability pre one-time costs Low single-digit revenue growth Strict cost control Slight improvement in EBITDA pre onetime costs Revenues growing slightly, soft start in Q1 and H Maintain market leadership in LC, increasing volumes partly offset by pricing Profitability at comparable level to 2011 Moderate revenue growth in line with market growth High comparable profit in Q Improvement in EBITDA pre onetime costs 25

26 FY 2011 APPENDIX

27 Merck Group Qualitative Merck Group Guidance for 2012 Revenues: Slightly increase EBITDA pre one-time costs: Slight increase R&D spend: Around 14% of total revenues Tax rate: Around 25% Free Cash Flow: High CAPEX: Increase to 360m-380m 27

28 Merck Serono FY 2011 Sales Growth Brings Higher Underlying Core OR Despite Increased SG&A m FY 2011 FY 2010 Δ Total Revenues Net Sales Royalty income Gross Profit as % of revenues SG&A Royalty and Commission Expenses 5,920 5, , , ,754 5, , , R&D -1,225-1,167 5% Amortization % 3% 3% 3% 2% 9% 5% Comments Revenues growing 5% organically Gross margin slightly lower due to inventory adjustments and startup costs SG&A driven by higher Rebif commission expenses Amortization increased due to cladribine and Rebif OR % Underlying Core OR as % of revenues 1, , % 28

29 Merck Serono FY 2011 Key Products Defend Strong Market Positions Organic sales growth by key products ( m) Comments Successfully defending Rebif franchise Rebif Erbitux Gonal-f Concor* % % 374 4% % - Growth driven by US (mainly price) - European patient share stable, off-set by mandatory price cuts and austerity measures Erbitux sales growth driven by Emerging Markets - In Europe, volumes slightly increased, off-set by mandatory price cuts and austerity measures (i.e. Germany, Italy, Spain) Good growth of Gonal-f in Emerging Markets Glucophage* % Growth of Concor and Glucophage mainly due to Emerging Markets Saizen % FY 2011 FY 2010 * Sales of branded products only 29

30 Merck Serono Q Organic Sales Growth of Main Products Organic sales growth by key products ( m) Comments Rebif Erbitux Gonal-f Concor* Glucophage* % 0% 2% 6% % Rebif performance benefiting from US price increases, partly off-set by lower volumes - Continued volume growth in Europe, tender loss in Eastern Europe Erbitux grows due to volume growth and price increases in Latin America - Japan improves sequentially but still down y-o-y Strong volume increase of Gonal-f (mainly triggered by ongoing launches of Family of Pens) Saizen impacted by pricing pressures Saizen % Q Q * Sales of branded products only 30

31 Merck Serono FY2011 Rebif and Erbitux Sales by Geography Rebif sales by geography Erbitux sales by geography % of sales % of sales Total: 1.69 bn Total: 855 m * Asia, Africa, Australia / Oceania 31

32 Merck Serono Pipeline Portfolio Status Phase I Phase II Phase III in Registration ARX 424 Long-acting interferon Multiple sclerosis ATX-MS-1467 Immune tolerizing agent Multiple sclerosis ONO Oral S1P receptor modulator Multiple sclerosis Cilengitide Integrin inhibitor NSCLC Erbitux (cetuximab) Anti-EGFR mab (PETACC-8*) Adj colon cancer Erbitux (cetuximab) Anti-EGFR mab (EXPAND) Gastric cancer Erbitux (cetuximab), Anti-EGFR mab NSCLC (1st line therapy) EMA: Application submitted Extended-release formulation of interferon beta-1a Multiple sclerosis PI 2301 Second-generation peptide copolymer Multiple sclerosis Pimasertib (AS703026/MSC B) Solid tumors and hematological malignancies Novel combinations of pimasertib with one of two Sanofi PI3K inhibitors** Solid tumors MEK inhibitor (AS703988/MSC B) Solid tumors c-met kinase inhibitor (EMD ) Solid tumors NHS-IL12*** Cancer immunotherapy Solid tumors Fibroblast Growth Factor 18 Osteoarthritis Anti-integrin mab (DI17E6) Metastatic colorectal cancer (mcrc) Anti-integrin mab (DI17E6) Metastatic prostate cancer (mcrpc) Hypoxia-targeted drug (TH-302) Pancreatic cancer [Subject to clearance by the Federal Trade Commission] Fibroblast Growth Factor 18 Cartilage injury repair Atacicept anti-blys/anti-april fusion protein Systemic lupus erythematosus Cilengitide Integrin inhibitor (CENTRIC) Glioblastoma Stimuvax Cancer immunotherapy (START, INSPIRE) NSCLC Hypoxia-targeted drug (TH-302) Soft tissue sarcoma [Subject to clearance by the Federal Trade Commission] Kuvan Sapropterin dihydrochloride (SPARK****) PKU in pediatric patients < 4years Oncology Neurodegenerative Diseases Rheumatology Endocrinology mcrc: metastatic colorectal cancer mcrpc: metastatic castration-resistant prostate cancer MS: Multiple sclerosis NSCLC: non-small cell lung cancer *Sponsored and coordinated by the Fédération Francophone de Cancérologie Digestive (FFCD) ** Combined with PI3K/mTOR inhibitor (SAR245409), conducted under the responsibility of Merck, or combined with PI3K inhibitor (SAR245408), conducted under the responsibility of Sanofi *** Sponsored by the National Cancer Institute (NCI), USA **** Phase IIIb post-approval request by EMA As of March 6, 2012 Dropped from the pipeline since Q3 11: Atacicept in Lupus Nephiritis (phase I), Cilengitide in SCCHN (phase II) 32

33 Merck Serono Pipeline Timelines Project Indication Trial Datapoint Timeline Oncology Erbitux Gastric cancer EXPAND PIII final H Erbitux Adjuvant colon cancer PETACC-8 PIII final Q Stimuvax NSCLC START PIII final 2013 Cilgengitide Glioblastoma CENTRIC PIII final H NDD ONO 4641 MS DreaMS PII full data H Rheumatology Atacicept SLE APRIL PII final H

34 Consumer Health FY 2011 Top Brands Growing and Spending Disciplined m FY 2011 FY 2010 Δ Brand Growth* Total Revenues % Gross Profit % SG&A % R&D % BION 3 +17% Nasivin +6%** Femibion +5% Seven Seas*** -1% Amortization % Cebion +4% Underlying Core OR as % of revenues % Kytta*** +18% * Growth rate reflect organic sales growth ** Nasivin on comparable basis *** Mobility ex-germany represented by Flexagil and by Seven Seas in UK 34

35 Performance Materials FY 2011 Highly Profitable, Growing on the Back of LC and New Technologies m FY 2011 FY 2010 Δ Total Revenues 1,467 1,452 1% Gross Profit % SG&A % R&D % Amortization % OR % Underlying Core OR as % of revenues % Comments Revenues growing 4% organically - Strong growth of LC Gross Profit affected by lower utilization rates, higher production costs and Fx SG&A lower than last year - Savings in administration costs Continued investment in R&D Underlying Core OR stable 35

36 Merck Millipore FY 2011 Growth Through Innovation and Acquisitions in a Competitive Market m FY 2011 FY 2010 Δ Total Revenues 2,393 1,613 48% Gross Profit 1, % SG&A % R&D % Amortization % OR % Underlying Core OR as % of revenues % Comments Revenues growing 4% organically - Launch of new products Gross Profit affected by inventory step-up SG&A increased from new product launches, investment in sales force and effects from 3 bolt-on transactions Continued investment in R&D Operating margin (underlying core) stable 36

37 Reconciliation 2011 Merck Group and Divisions Merck Group MS CH MM PM CO Operating Result Amortization of intangible assets Impairments of intangible assets Amortization inventory step-up 2 2 Transaction / special integration costs Impairments of tangible assets* Inventory adjustments Project termination costs** Total one-time costs Total costs 1,310 1, Underlying Core OR 2,294 1, * Vevey, Switzerland biotech facility ** cladribine, safinamide 37

38 Reconciliation of Reported to Underlying Core Operating Results Merck Group FY 2011 Results m Operating Result Amortization of intangible assets Merck Serono Amortization of intangible assets Merck Millipore Amortization inventory step-up Millipore / Hycon Heipha 2 86 Transaction / special integration costs Millipore Other impairments of intangible assets 9 Impairments of tangible assets (biotech facility Vevey) 165 Inventory adjustments 52 Project termination costs* 55 Total charges 1, Underlying Core Operating result (Underlying Core OR) 2,294 2,096 as % of revenues 22.3% 22.6% * cladribine, safinamide 38

39 Reconciliation of Reported to Underlying Core Operating Results Merck Group Quarterly Results m Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Operating Result Amortization of intangible assets Merck Serono Amortization of intangible assets Merck Millipore Amortization inventory step-up* Transaction / special integration costs Millipore Other impairments of intangible assets 9 Impairments of tangible assets** Inventory adjustments 52 Project termination costs*** Total charges Underlying Core Operating result as % of revenues 20.6% 22.7% 25.6% 21.1% 24.6% 21.4% 21.8% 21.5% * Millipore / Hycon Heipha ** Vevey, Switzerland biotech facility *** cladribine, safinamide 39

40 Merck Group Q4/FY 2011 Reconciliation to Profit Before Tax (pre one-time costs) m Q4 2011* FY 2011* EBITDA 641 2,736 Integration and restructuring M&A costs 0 0 Other important one-offs Gains / losses from discont. businesses EBITDA (pre one-time items) 682 2,729 Depreciation and amortization Financial result Profit before tax (pre one-time items) 493 2,009 * Reconciliation breakdown by division can be found in the Financial Statements. 40

41 Investor Relations Your Contacts Joshua Young Head of Investor Relations Eva Schaefer-Jansen Dr. Thomas Kornek Claudia Nickolaus Eva Sterzel Alessandra Heinz Assistant Investor Relations Silke Meyer Assistant Investor Relations