MKGAF - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen to the Merck Investor and Analyst Conference Call for the second quarter of 2022. [Operator Instructions] I will now hand the call over to Constantin Fest, Head of Investor Relations, who will lead you through the conference. Please go ahead, sir.

Constantin Fest

Dear ladies and gentlemen, a very warm welcome to the Merck Q2 2022 Results Call. My name is Constantin Fest, Head of Investor Relations at Merck. be Marcus Belen Kuhnert, to as Group pleased as well Group I’m joined Garijo, by CEO; Today, CFO.

place. slides happy Science; note, Heinzel, For this call, the this person. Kai we now are to you a couple that, ask of Beckmann, Matthias presentation. limit the Electronics. hour well in to guide more of off have we over With this maximum After hand reserved your to about Belen. CEO directly key Life CEO kick first to will to take This Over we next will also call, to CEO through Belen this, Healthcare; Q&A be of joined X for you as I’d you per you, would and part as presentation. questions Peter to of I questions. like questions to Guenter, to of minutes, this Please allow In of X like of of by ask kindly the the we’d

Belen Garijo

by while tough increased comparables. group EPS respectively, pre million the reported with and revenues of billion our to presentation EBITDA our X.X% you, and X.X% effect, very by significant second year-on-year. Life now earnings welcome, again up Paired the small X €X.XX and of with €X.X once the everybody, being QX amounted and rose Constantin, currency with highlights. the am main against and Organically, were had and sales we delivered to I driver. a Slide portfolio very call sunny pre pre XX% in a starting warm Thank and EBITDA Overall, by quarter day. on this billion, the €X.X tailwinds robust Science sector

challenging pressures the our has inflation really change environment challenging the and you The pandemic, supply the operations. ongoing of even operating more noticed, external the combined tensions, in geopolitical the past As couple become are months. have rising

However, continue show on great resilience, in we priorities. again QX, and execute vigorously strategic to we once our

a to heard, investment investment we single-use another membrane have to Cork €XXX million €XXX and recently in China As Wuxi our our you accelerate in announced capabilities. filtration capacity million and expand

solid to the and €XX at target in EPS level the our forecasting details QX absolute mainly strong billion assumptions billion, are €X.XX €X.XX currency pre pre our the we due EPS for guidance sales, confirm our group remainder year, a organic corridors results EBITDA and the and of incremental on Based fully for outlook for XXXX raised range more robust new our lateral and regard in We flow remain in a have and both With Verona QX in facility month Sheboygan, CDMO Russian new The China affected facility June. to limited me strong energy our of let in reiterate in that the the of ground results, on only we we our our the mitigation in Europe, broke since recovery have opened that is tailwinds. €X.XX group to give €XX.X We’ll and in pre also In to billion lockdowns on stop in seen of around case plans a moderately gas net U.S. place later. supplies. an supply energy EBITDA we sudden of intensity sales of now of to even €XX.XX. concerns to billion operational, you particular, a pre Wisconsin

QX. to business sector. see, turning you can as performance growth contributed in organic to our you business the X can by see solid sales X, And So Page all sectors

Please X%. by generated sales followed organic organically, performing QX. had Healthcare which million agreement Life a XXX% Solutions with quarter record Healthcare, QX that Science Lilly, sector, that means engines, Life onetime growth and Eli note of strongly benefit North drove of BIG with By and sales new XX% in €XX Solutions Science growth supply Services, as the the Process the year the Semiconductor main are by with around Healthcare up with temporary another known Our for about launches X Electronics got last and and in X% business America.

organic X% have effect, returned Also this sales pre. Excluding for sequential growth significant Group Mavenclad EBITDA XX% a sales the in provided been the Group and board, across in FX to would that adding note Healthcare digits. mid-single to almost growth QX. tailwind over to

in from to increase a Also in of Life offset that the acceleration that, by which our portfolio Life with new headwinds. the growth Science, first COVID note was to anticipated Science Within we for addition time. structure acquisition In Exelead. had positive small for XX%, the of an the stemming reporting line we the effect, driven business business core are

due decline was Services, was and manufacturing in had Followed in research is XX% to business former of Science the mode, now effect with in slight the while largest XX% more Solutions highlight that highest with organic was and recent to organic Solutions, by sales rate growth XX% of the to XX%, the the organically. the Science in organically still Healthcare X%. by from launches, Solutions, Lab solid remains growth growth up of Electronics, up. the down at Life Display business. digits, growth this was slightly established Erbitux. a and the So, over QX and increase the offsetting than is combined I Eli same mid-single Process in Semi portfolio the growth, while up which driven mainly scale-up earlier, At time, the Lilly applied non-COVID The in our In XX% mentioned clear Surface to contributor organic

€X.XX in in tough of XX%, to at strong some down EBITDA mainly year-on-year, earnings inflationary due Regarding leading margin slightly pre in and billion, Electronics. to came Healthcare now, comps a pressures

note up double €X growth for EBITDA However, with Europe, and a the in double-digit and Life which mark #X growing On volumes, to business and Display by that in timing a mid-single-digit East cracking our supported Asia although time. to the in Slide margin the due by on the Healthcare. region. inched fastest Middle in was this and was single North mix America tender in the by Overall, sales lockdowns organic in Pacific Science and growth pre a of performance Pacific and Asia quarter Also QX for the and performance Solutions Life billion mainly in pricing quarter to first remarks organic low Africa, latter regional region Healthcare. in demand growth or few a held decline also growth in or in back was developed region LatAm, was China, for soft Science with mixed

strong over Overall, shown June, as I driven let as markets. regional individual it Strength strength, me well before. again in globally hand additional external in business saw With Mavenclad our yet already ramp-up Marcus Europe was strong obstacles color factors a and recovery in the key has mentioned by and QX we mainly on diversified Bavencio. this, are our for as as trend of balanced growth of to a However, by Process results.

Marcus Kuhnert

of had net €X.XXX for billion €X.X Thank you, rose well XX.X% as tailwinds higher by excess acquisition €X.XXX currency inflationary key €X.XX. year-on-year, as with EBITDA EPS year. XX.X% now the the also primarily financial by December to for are I’m of double-digit the €XXX debt-to-EBITDA came growth sales pre was increased Accordingly, increased investment ratio increased at net Belen, XX.X% and overview to a of and pre last effect sales to Overall, end #X to end billion debt of Net significant account into X.Xx billion. the to acquisition and flow of the Operating quarter. also Taking Exelead, we small from with X% here welcome and second figures portfolio of from earnings. at up strong pre cash. an QX temporary a we million, driven side. on our from of capital my mainly in slightly X.Xx pressures. the cash down Exelead as due working mitigating compared Slide

Let on results. comment reported me also briefly our

a range. is impairment #X. Science less Science which booked review The guidance is our that, EPS €XX both added and lower reported why shall I D&A tax berzo are want is as not mainly more sector, rate All That Impairments amid pre. Net impairment €XX towards of the interest With or half over Healthcare, ago second against it mix impairments LTIP to adjusted. respective This threshold We affecting have rate. acknowledge write-offs. adjusted, and with we Financial meaningful up to in absolute we on So of due comment in income million. a business. XX%. Life time. discontinuation and this Life means EBITDA of EBIT years all tax shifting due €XX €XXX below delivered but assets that morning. included business in fluctuating impairment the the reduced impairment XX.X%, our is the QX in in strong lower adjust EPS a of make on growth received with the came with that in not EPS comparison connection short quarter on aspect provide sales first adjusted, in question of strongly in growth ahead included use the at in is of €XX anyhow deleveraging. when of expenses Slide and as included by we introduced have including and pre, XX. of pre, trial. by the than starting the EBIT million normalized XX.X% organically. increased to significantly foremost, Slide pre. pharma model million time, EPS moving than In are the the core thereby so not to treatment write-down to of million back, million EPS, EBITDA part The a in pre berzo the this move increased terms. slightly is berzosertib is quarter is mainly let’s another items weighing result ongoing effective the This improved on operating with over a comparability further provisions

was with impact of organically. perspective, significantly Solutions by portfolio with core prior From XX% the -X% to an COVID In similar in growth, absolute the business a fact, partly expected key Process the up the sales significantly accelerated remains year. XX%. organic of offset COVID QX with below of sales driver quarter, and increase growth to This

lower book demand strong in for impact our given positive up comps, organically, services. QX. book-to-bill and XX% growth growing X Again, Life mainly sales The with in of by organic continuously was and business, Order phasing business core order The robust again, the mainly XX% by even in to accelerated business capacities. the reflecting for and driven all reaching while regard Science territory. COVID organically points contract Solutions X% regions, increased and against ramp-up and driven supported by XX.X% Science highest rising output Lab demand We Pharma Geographically, operating COVID to and we and for a business double-digit for reflects product Research earnings, activity pricing, the had tough picked COVID delivered impact ongoing healthy. margin and the all Biomonitoring billion and the were double-digit while core flat productivity effects except remains at mainly growth of share lockdown year. XX% of we margin That the core up in pre strategic Water organically, Core From Services performance €X recorded was June. margin still in & of mix bottleneck COVID strong areas leverage -X%. sales by moderate now basis in other The a Lab the growth Science lines testing Bioprocessing pricing growth be up please EBITDA the sales note the time over Asia was in XX%. of Pacific, sales with plus customer Academia organic business China, up investments. organically significantly as impact had the to further the -XX%. while with pre a intake although X.X% said, partly that first turn, due quarter, by segments Applied by positive Biotech. business. was favorable declined record expect the in perspective, CDMO COVID a good business led Here, XX new -X%. as this COVID Life ratio lower a well former in to With and positive quarter, organically, increased ongoing combination all was saw supported with business across for by double-digit flat, the increase to and gains full offset a roughly EBITDA to

XX. Slide on Healthcare to on Moving

in by by growth with our more Oncology partly led Bavencio XX% by sales QX organically. growth -X% XX% franchise, X% organic in sales recent launches. to decline ramp-up established the was strong over decline X.X% offset Here, ongoing organically X% was By of as offset This - driven a than of up portfolio growing of a was Erbitux. growth

that million €XX said, last QX year Eli benefited agreement supply the related temporary contribution a However, to as please note already roughly from Lilly. with

above have Excluding XX% again. this effect, would grown Erbitux

Our higher sales decline. with -X.X% XX% -XX% related a organic not Improving from X driven -X% year in pressure down to modest lockdowns organically due China. franchise was year N&I to interferon comps on impact of franchise was the of turn fully segment. by down mainly consistent up decline slightly X The a Rebif in Mavenclad, in and tough the Fertility uptake offset the momentum year-on-year and patients,

in and X% CM&E by expect phasing organically encouraged Middle down tender Concor by a strong growth effect and Pergoveris. was HX are in in increased strong Africa. the supported the performance, we while Sales in Glucophage of recovery in However, Euthyrox China East&

Regarding our me let focus on first. Evobrutinib pipeline,

by Following recruitment has war affected the of countries. Ukraine, we Start-up our inside begun. course, track the the patients our the QX continue to of add the well work patients by conflict extra are recently of We country. and of had on also outside and in decided in-house towards the activities outbreak outside aim and support data having to XXXX, affected we of

receive in most entering cisplatin. study, are conjugate the drug who of our for high-risk I. in with second are reloading early-stage For to promising picture, not broader newest our xXray are we the out addition Phase Xevinapant, eligible progressing Phase we Zooming assets our pipeline patients with anti-CEACAMX postoperative launching vision antibody III MXXXX, recent

Regarding amounted to margin pre earnings, XX.X%. organically down of million, a EBITDA €XXX -X.X% with

related year’s note that last earnings with to earnings absence almost the of Lilly supply organic was entirely agreement mentioned please earlier. effect Eli the However, the decline from

year QX management, recorded the recorded Euro in year-ago are fully €XX million with million about terms With we low we portfolio in million In line million €X of income active momentum income in has double-digit which million seen guidance with softer already full than about any and range active our QX. from the low guidance Euro context not HX a note comparables. you compared full year unchanged implies the Therefore, our portfolio HX, of expect of period. in management better much our mid-double-digit amount. contribution meaningful within in guidance should in €XX earnings in about from higher Also be to of HX, that to

Eli HX Lilly Just and Bavencio the which think milestones of year. agreement last boosted

categories, increased strong in performance high by acceleration all remarkable across a films, organically. This sales growth to Electronics Turning remained was engine growth X/X which XX% spec material supported semi growth, by by fueled X.X% to in materials the growth on sector Electronics sales strong delivered of gases. Semiconductor contributes sales and QX. Slide Solutions, meanwhile, key with especially to and organic pricing patterning thin up the XX.

& costs at down Surface growing growth amount basis EBITDA sales some -X% pressures The margin coatings amidst soft offset to our year-on-year given lower up to to Euro almost was a of in double-digit down Sales we from Solutions in decline more with and capacity. terms slightly addition, pre XX due mainly million, of by continued which this was cost saw utilization crystals strongly. of comp -XX% currency year than inflationary XX% a earnings points however, HX, X% XX.X%. organically, amplified guidance project liquid by for tailwinds, reported rather Solutions cosmetics. full strong strong low declining for €XXX trends growth ramp-up Systems million Chinese measures mitigating ongoing organic our amounted in a in more by momentum pricing related to Display in effect, were in organically Delivery Services. implies customers. both than inflation, contributions kicking in Healthcare, to and is in were as business In was better a Similarly

to on our also Sheet outlook, Before statement. for back and Belen let the me Cash I comment hand Flow Balance

expanded billion can this and with our growth FX As €X.X rising actuarial XX, interest drivers business The end Slide rates. the Sheet development of compared December. behind see amid are Balance by main you gains on

On of up cash. cash cash partially higher are of asset sales, inflationary driven temporary inventories Receivables the side, Exelead. and on stocks intangibles by down investment and equivalents on and higher safety and are excess FX, effects, acquisition are up and the FX

new that and in tax, to and issuance growth debt down provisions side, rising due liability actuarial mainly are effects. FX of higher positive rates interest financial Pension On due so after given equity the actuarial the is to profit gains, is bonds. gains the up

the end end XX% at improved further result, of ratio June. the December of the a equity at from As XX% to

Turning cash cash down working in mainly mentioned to earnings, inflationary at for Last that, as significantly, the higher to hand QX me an out flow €XX temporary million investments influenced were safety the driven by repayments reasons. excess business saw sales increase million, China capital year. for be €XXX but of versus And inventories came year-on-year. activities investing explained least, higher from cash. with to this in year financial due outlook. financing phasing of the while cash with can by in increased back was higher growth, in difference effects Operating Cash #XX. net as debt flow on flows in Belen stocks we let Apart net Despite transit. Slide and lockdowns, last not already issuance for connection receivables to by in well this due the primarily goods

Belen Garijo

Thank you, Marcus.

solid. very have QX #XX. on Slide very, Now In our summary, results been

a external resilience and sectors, our complex across highly operating in strength environment. shown have We business X

growth are XXXX "XX ease and Nevertheless, that midterm billion, don’t to committed expect to we is our ambitions organic remain confirming by XX" we our you anytime for headwinds know, XXXX. firmly soon. fully in as €XX ahead, Looking these ambition

to for pre year. our to of a Given range pre and We EPS pre in X% of due EBITDA of X%- X%- billion, a in the and of now organic aligned to €X.XX of based provide we with additional Also for note U.S. that strengthening in guided to expect expected X% our tailwinds major a group XX% for a risk XXXX €XX.XX. €XX we before, of of range fully million of sales outlook organic mainly now shortages X%-X% we to X% pre, corridors growth dollar. to is on increased for see in to in XXXX €X.XX X%- growth sales billion Europe. further is don’t target May. billion current ahead the potential EBITDA additional provided currency EBITDA our €XX.X the tailwinds, and outlook Currency absolute sales X%- and range X% gas This X% €X.XX from that net

where we and reasonable scenario million further low For incremental XX% electricity, would example, cost on price in increases. assumptions need to we with for gas range reduce be replace Euro this the to would consumption with faced in a in mid-double-digit based by XX/XX Europe and our oil

Of gas indirect course, we effects are could those truly to are us also potential dependent assess. on Europe. challenged by But suppliers difficult be in shortages on who

parallel with are indirect minimize qualifying our However, are effects. suppliers close suppliers in in alternative to potential we contact and

Moving take slide, to a the the next at sector look to guidance.

three the XXXX earnings expect to sales all by in be to business supported and organic continue sectors. growth We

Electronics be growth. Healthcare. to driver and Life confirm of sector sales and business the Science of growth followed sales, continue as We in fastest-growing see our core the guidance Life expect for organic by main Science the We to terms

assumptions Our unchanged. COVID remain

the we up growth suggesting in roughly business EBITDA more of €XXX Life breakdown We slightly €XXX in new COVID reflecting in Solutions, Solutions, Science up million Process and Science, sales means making Earnings-wise, Services around in organic million numbers, is This to million optimistic a to to to expect we pre million Lab Life margin the €XXX the as unit a €XXX structure. on in become total QX. development. flat organic sales and guided the Science up of are just of reflecting we COVID have

and we we main as growth of the Healthcare, fully about cautious growth guidance confirm become sales established more In is remain Semiconductor top this to with be EBITDA due and slightly our are very your launches on pressures pre, and to staying margins, strong have but we to organic line questions. going by very portfolio confident inflationary growth, recent for our happy Electronics, Solutions. with on For the we both driven drivers mainly take the And stable. this,

Constantin Fest

have the could first if Jack, please. question, we

Operator

Vosser, And Instructions] hear Richard we’ll from [Operator first JPMorgan.

Richard Vosser

please. Two,

Firstly, just Process on Solutions.

You question, to? do biosimilars? then do And We’ve some see do on is you’ve of Process underlying of the injuries the strong do very any that? step-up not now particular for - obesity enzymes modalities? XX% competitors their I been diabetes, feel Is for liver in Phase being book sustainable product there see I order that And seen liver programs. And the growth normalized second in think whole growth. III. Solutions? your referenced related how you monitoring just peptides, you drug-induced What Evobrutinib, know some the you have

trials So your date you wondering, the profile product. affecting how you’ve see ultimate seen and the of in just that to

Matthias Heinzel

the main Richard, was it’s core is XX%, across Solutions modalities. Process and across it’s drivers. And that board, Matthias. across two regions, Indeed, business

of COVID, and secondly, a and really capacity demand, demand beyond underlying strong around ex kind expansion our First strong and of capacity COVID all, relief. efforts continued

the book business respect growth feel decline. confident continued the continues we order as With COVID remains to kind about healthy. core the to order of So book,

the down with in intake that the heard order to think do remarks that I it has And you times. slightly. also comes lead

bit of over to patterns as from customers. quarters, down, recall, long we are lead the had through and times really a a the last very around we order the work normalization coming times capacity may see lead expansions you As

very a bit in intake, of book strong. that, but remains a order the with order decline little So again,

Peter Guenter

call. have or Evobrutinib, on misperceptions to that clarify during it’s I last created important Sanofi’s perceptions maybe earnings may Richard, Yes, some think even been week

perhaps you points, three if me. So allow

reversible, II observed well-conducted any placebo-controlled met elevations all these I them with Phase Hy’s you were with the of within trial. that liver decompensation all, first neither know, nor enzyme been three associated elevations remind the two treatment of initiation. let’s data was about II Phase facts: enzyme regarding June source talk clarified. Phase the are XXXX. the liver trials to that in types are trial in Number of only elevation that as the published and New And two, to you RMS our since occurred evobrutinib running, several England after III reporting as events and of of months liver. our law data is in also be patterns First needs There have typically

the Each is lab the liver by of reports the regulators are elevations, upper the X meaningful. upper ALT, First of of Grade enzymes. and as between normal. report most are and limit limits contains enzyme, overall particularly considered non-clinically considered Xx which Xx sensitive

you by of the to more will drug. the elevation. at then are a limit Xx see think importance, supplementary is agree look grades have on see elevation to This not hepatotoxic dimethyl in be such the be to signal there regulators are I i.e., When even past publication, with the many the years. known of definitely X, considered patients been reporting As transparently in we X fumarate, which or there we clinical able and which appendix upper higher, a all we mid-single-digit is we

an worthy event. of adverse investigator is The considers what reporting second reporting as layer as the

XX-milligram dose, you equivalent BID the in in as Phase reporting is III publication, Phase the of adverse which for clear Here know. the also ALT rate elevations events rate you at our dose, of see a X% one a II

liver due are for that, self-limited mention general, clinical a of viral usually liver that to hold life-threatening in as Tolebrutinib. infection, drug-induced to imposed of The were on important many These, particularly a are elevations care. to elevations, reasons, partial mostly and problem we higher occur mild, injury, is true common. what which These clinical following very to even is: requires the can Now example. convert these how have grades elevations that led of trials enzyme the supportive in a variety hospitalization understand, cases

on. just points serious that compare data commented between I So, we really not feel to it’s that

enzymes important BTKi and Evobrutinib these rates amongst best-in-disease Evobrutinib inhibitors, managed BTKi today like data most evo we the is you MS were guess to important Just supporting to frequent progression reporting the In rules. lesions, when and looking else least, versus that this SX discontinuations. will relapses, which that patient comment identical and that of anti-CDXX double-digit show is and remember, fever. only you as Number this elevations, rates reality, don’t the you, to the If discontinuation to there to at one of discontinuation Table other X.XX, has stricter monitoring different to a overlap the remind not of just central expanding elevations. claim, efficacy I not really elevations where NFLs have ones potential penetrants comprehensive patients. an real protocols but stopping a also not of believe made also compound package enzyme rates for of there wrap that three, find I what’s is Protocol effect. were and publication. between is to last like something remember different words, LFT between was up, vary, neurodegeneration because due the is inhibitors. and tole Or was well who to evo the rules, by X.X%. mention liver X in of I X.XX stopping the on enzyme There due system slowly its the in liver is an then plan Biomarkers monitoring obviously, plan more to according temperature, with. begin rates into of don’t and other as the take demonstrate, only the a rates nervous you has the reported discontinuations

allows as levels neuro-degeneration. and the regimen dosing and mentioned, this, and efficacy believe, I dose strong through progression well-thought on both just Our highest trough peak occupancy on attributes and we the have enables BTKI

have I representatives continue manner. of to own to done this like it like may company a present our explain is will that we share end, data and data to assets, to the our other the moving interpretation so to in We would responsibility we while at So forward. date, and do transparent ultimately state believe to related our pipeline

Operator

which our to with question, Weston come move now from will We’ll Matthew Suisse. next Credit

Matthew Weston

If please. can two take I questions,

a you’re growth. customers. we really And expect that what I’m on it’s still is that from €XXX first COVID. The comes with having about conversations going your million Process follow-up should XXXX Solutions for detailed sure into

Sigma in a the Merck? So forward. be U.S. question adds should you is is Merck’s number It’s that France know also interesting is Belen. are I’d Swiss, the German. critical what underlying next not the of exposure about cadence as hub rely gas I being of the is that there in misinterpretation can expectations issue what going your Germany. that would it reason certainly of on, ask be a U.S. I further for of Serono great. following any year capacity trends second moving and very terms on And coming the And think up on along and of be And the think it Millipore Darmstadt are Versum, a how Germany, we percentage year that into businesses given a to was Is interested. oil this in the always then commentary in geography? give us But the for would Any

Matthias Heinzel

Yes.

on, of do next year decline with start line but COVID of low Science a our discussion kind for both we’re now Process with see Services Let assumption a midterm our to combined continued with decline. to up for despite them, actually and this of remaining see LSS to in years. and for Process we’re core midterm Life for had exactly And Solutions the from we that’s we just and for are the the question. about like the of we our that together, a course, seeing the the strong growth. over we’re guidance. is reminder, years, are guidance obviously, we our PS And kind as we’ll time, so which expecting what and confident said But And mid-teens with customers, report of million impact €XXX Solutions me separately. we continue PS same At and COVID decline, the in

Belen Garijo

question your before some get so can that give the different you context me let to Matthew, dimension this. of So go you really I

not all, a energy-intensive So we of very are first company.

million. last cost the hedges million expect were in this and and environment current costs energy year, This total around further energy increases is example, that have on pricing we year next year, based we place. for Our and €XXX €XXX the

place as also including Italy event the has and introduction, in this of gas sourcing, site we highest mentioned Switzerland particular. to have solid energy oil have switch at and European production our exposure plans the Russia, alternative contingency Europe France, Darmstadt challenges permanently at Darmstadt from And is sites the Now The we Germany, other Russian in have in demand covered sites, in indeed by the in supply can during secured oil Spain, built I Russia decline relatively stop. should or gas reserves in low our we gas. sources, to already and electricity, the in

So let cost to you something the do want Marcus, on ask say me side?

Marcus Kuhnert

Yes.

to course, of say, and In energy can would So replace lead we This first by sources. again, equal XXXX. to parts, euro and electricity, in let’s reduce Europe, so estimate consumption natural to further where faced in a also all, say, price double-digit gas we of to low let’s in alternative XXXX XX%, cost. this important stress euro increases millions million the would, double-digit assumptions to need high with in switch our at the scenario to be cost mid- in XX-XX reasonable higher oil assumed and, permanently we with incremental would for we mid that

pre, company, the size to guidance. the that potential the of this our alter size have EBITDA the you or alter the fundamentally nothing is that fundamentally given of notice will So will

and shortages Europe. effects we gas course, said, already turn who in those challenged potential But on as be by dependent indirect to are in could Belen suppliers gas difficult also Of on depend are assess. extremely

Belen Garijo

I on we continue to point think to would of reduce course, renewable our fuels. dependency the continuously that like only to invest in aim energy add and I is fossil

seen announcement this. have recent may You point our of a as proof

that site Sheboygan in Wisconsin enough the us of installed at power new have XXX We give X,XXX homes. energy our panels solar equivalent to

to the that side. and around in the we So have natural to gas we the operational facilities capacity opportunity manufacturing are converting we are alternatives our obviously anytime implementing expansions

Operator

question move Gary now Steventon, Paribas. BNP We’ll a from to

Gary Steventon

market wondering is kind historically then by conversion growth recurring and the And driven driven over now. you the and growth performance demand for at the strong semis it sense if was exposure more of just you’re coming bit being and on secondly, by a capacity semis with industrial, diverging down consumer, looking you here. order talk and underlying I Could seen that of and incremental some also light book, which the terms of helpful what’s end better your from true growth of business. we’ve semi autos, versus profile strong just get relative a cetera. of base, the in then being could to edge And just of your the names also I business the exposed would et exposure to memory the how really bioprocessing. the just leading level of chips. on QX customer core in about seen non-COVID in of here trailing just seeing then your guess just that the Firstly, that is the exposure of current shed higher business, be kind much logic we’ve

Matthias Heinzel

most your about slight question it’s your Yes. BioP, related We a to To the around intake Thanks in both. to actually, mean, that combination order talked of decrease the question. COVID. part was I for

the of combination for both. combination products. continued been It’s a business, both. core actually, to customers a not the of of need a the only strong. effect. core of priority customers where of need who to support bit there’s serve in Our while, also was a time it’s given long were probably to slightly catch-up say the a those effect inflow remains order intake bit see should now have of COVID We customers, business, now And strong But high there’s of catch-up we book their with in order the actually course, past, get also strong down. a I orders a that, a kind list for do waiting

Kai Beckmann

take I Speaking, the will Kai Gary, semi question.

Our exposure on logic and memory is approximately half-half.

where are balanced the a asking markets, and as by more deepest Leading more kind behavior, of think see shift growth this industrial of pretty course, different use well pretty we markets. that most all markets side. the of to impact the end technologies. kind semiconductors the cost it So of our impacted away pattern good of the coverage material edge in we you edge gradually two than end from in areas. logic, a I trailing And the end overall because consumption of more we benefit, industry, leading-edge between and in broad more and And portfolio current is these no with while driving were and on the driver is portfolio complexity towards has exposure consumer of And materials we growth material on there, about consumer broadest currently there have is chips.

and So business. that’s the for pattern semi large, the by

Operator

will we from Citi. Verdult next, And hear Peter with

Peter Verdult

mirror? reference business to sort what and squeeze Science. of questions, shares comments you latest Two if about just And for at if Europe I are firstly and significant players. mean the of don’t dynamics your you Matthias CDXX in the market in quarters, business a quantify of could look China with quantify well business to is just if just know supply the supply perhaps the quickly, but then back talking fast-growing I what us your it those you they had the in, light a from in is. strong I bottlenecks Peter, just sense, pretty I left Can U.S. but Life they mentioned you performances I underlying clarify Could resolve? what ADC that would MAVENCLAD mean, Or provide in high API. now and size just some that not like XX% And to three could us the been market you go you’ve lastly, were? that least as been organic of temporary lockdowns from place. one into two, growth. ballpark individual impact does lines, about potency the to for there bottlenecks give rear-view current any the last then

Peter Guenter

the take question I’ll MAVENCLAD first. Peter,

point, mentioned in especially in that Belen of Peter And the had already the to your mentioned as the sequential speech, growth in competitive a in and U.S. trends the XX% U.S. that and is with see past her divergent versus QX market, satisfied we with I quarter. for MAVENCLAD we performance the already the previous quite quite antiCDXXs Europe. in So is with are of and strong it

first-line first-line in more U.S. in fact in to to is the constraints the you, the Europe and in high line. as more treatments up oral Europe, gain in is label. in that compete we testimony team the rather the have a see high-efficacy have U.S., mentioned fact U.S., dynamic think stable. label remind market. than in to a high-efficacy in efficacy the important high that share the label despite and course, the treatment, despite sense that consequence, efficacy a of the market, So, I can’t it’s mention market order And actually gain restricted whereas label as leadership our do we overall dynamic quite moving U.S. in more first-line a we in to emerging And our are we think, in to the the don’t in now In drug efficacy MAVENCLAD continue with high the one the setting. leading is high-efficacy really I we we do in first in we a the the the where countries Europe But that Europe share the fact

you a that of and So between what’s more little happening color gives Europe. bit U.S.

Matthias Heinzel

All right. Yes.

Let three me Life address Science. on questions your

there June, the and a indeed and quarter, especially did lockdown we Indeed, the for The April China. China slight in customers. But we already could first our slight dip in to to May and QX, one a was full uptick we dip. saw again months the was then see the around from as ship QX lifted, of

say major yes, I would If a I the mean, I key say, for I are they through look XX% to In category kind every in not were terms the that, products, product our XX%. at major of improvements. we of improvement. times major, least by cut at bottlenecks, would there’s but lead

further Around us. just challenges a we the behind XX%, left about then our business, for give the then part, reported about split line, together, biggest numbers, are So on the ADC, XX% the have into But Services high business. on is call would a CDMO our by the you All details to of and are testing have around going LSS high-growth most not level path. then business LSS we XX%, our obviously which but product we I in mRNA. what business, we say they

Operator

Kapadia Wimal from question a to with on moving Bernstein. Now

Wimal Kapadia

moved into I Can that about the little I. I Phase saw anti-CEACAMX. bit ask you’ve a just more

of your One competitors year. in is advanced next Phase quite data with III

So question on behind. given like you’re if appreciate just And strong that can that start target, be any seem to Electronics particularly is I’d then my competition, provide margin, against seems CEACAMX gives to And second in you versus color similar you target quite that you more EBITDA also what a on confidence curious trial just with TROPX population. which please.

you’ve got ramp-up, you et cetera, So supporting and as you in XQ, drags, capacity materials, energy, dropped XX% margin below semi. but EBITDA raw then flag pricing

semi how pricing expect much there just actually moving to is outlook how you about accelerate? capacity the inflationary And impacts. I’m forward? think So curious these Should we to pressures for increase

Peter Guenter

Wimal. Yes,

question anti-CEACAMX. take first I’ll on the the So

So three Number this antigen me. new designed allow with CEACAMX antibody points, against specifically one, the target high a affinity specificity. you very is if and

So first that’s the point.

look antibody that us a the is actually we use are is The other resistant warhead a will to tumor which as ones payload. second inhibitor you type when tubulin point, actually select are topoisomerase anti-CEACAMX that used of conjugate to mentioned. the we the there most And toxin, that the that for are that in I to drug importantly, lead tumors the

technology. be payload do high third to the try ADC. we with course, the And where in then is to stability the what basically, has we potency, first this new linker of can tumors new circulation one itself, market explore indeed which is, So with good

our call, it about hear the much excited very with in call in and can update anti-CEACAMX that will to in R&D but you November. order and very our update you tell we’re the confident will more So not here, R&D I I thunder of steal stop

Kai Beckmann

Wimal, on the situation. Electronics margin

on bit a more to I think give flavor different you factors. very this just one. are There

to definitely a kind impact. kind think be the that investments mentioned Then Display of a Marcus have China. we impact. the capacity, on X on on in things, leads mix we a specifically the inflation That are more kind of the the different in there projects on already driven a investments executing as engineering margin investment side future effect built temporary of at will a we team growth. side by I have you in effect that we mix have the experienced the customers transitory impact. based utilization areas. people AD headwind our And that of the lower sales highlighted, then And with That is

good On with kind solutions the found semi our side, we customers to manage impact. of the

that. crystal that impact exposure liquid there pressure. the short-term impact definitely to over only of On and limited where inflationary is manage the kind course, don’t see direction, of kind I knows crystals elements side, reduces time long-term side, area since impact very that space however, which price two more liquid to By on a the one of an is especially Display And primarily. large, is, have It’s the one of diminishing. a

Constantin Fest

have one for Jake, more question, please. we time last

Operator

come question Jain And with last America. will that from Sachin Bank of

Sachin Jain

picture big two Just questions.

Firstly, target in fallen, for sheet guess, some areas, valuations balance M&A, your Life of on so with Belen, I target biotech having strengthening. Sciences,

on larger to flex this to beginning M&A, the you’re out of which if end wondering you rolled Just year. your perspectives

second in confidence, thoughts follow of guess, sort trending then midterm I clearly guide. growth Matthias, XX% some prior, your Process any above big from the And on it’s given there? question, picture Just

update if wondering enough which was midterm to process, September. guide CMD low think to in I have of you Just confidence mid-teens

Belen Garijo

Sachin M&A. on

a solid organic very have outlook. We

are in So we really hurry. not a

However, permanently on focus now and BIGX, with acceleration our for are opportunities we screening BIGX. scanning of a our

entering those opportunities to close bit come our a are not we identifying definitely evaluating bolder that are a may way. in We and bigger which in phase

Capital bolt-ons provide things. be during on to a we more on bigger So and the obviously, continue, transparency focus M&A open But able BIGX will to Day. Markets bit

Matthias Heinzel

including the that was low mid-teens this to the of is Solutions mid-teens of very low of included we to our and obviously new guidance, from that that interest. a the really to provide Process that much at guidance. time Services. midterm committed years And CMD, guidance say and which split Solutions into structure. are Process guidance Life of obviously we also new growth But obviously to why that’s COVID. in around planning but should mode, confident are in and say, we’ll and which hit split transition I of guidance right lot I specific reporting then we’re And at And for business, core Yes, PS then we the business, of And would kind reasons, for LSS to I also provided, the understand kind And the because we indeed PS which COVID transition decline Science have in kind strength obviously, in that’s core what growth more midterm the we down, for and But we business are commitment the clear the guidance is confidence comes important. as showing. on and total really we’re for PS. more for

Constantin Fest

your remarks any closing Belen, from side?

Belen Garijo

audience Very quickly attend. calls our because are I probably other know that have there to

We delivered we showed very strength. quarter. robust So second a

significant resilience to on progress challenging and environment. very strength agenda. operating make showed we, in same business And at continue time, Our strategic the our a

at committed ambition. look you October our headquarters person we at the the growth X our upcoming many at in Markets in We meeting confirmed really importantly, here have We most forward targets for to to organic and firmly our and growth in the of remain Day midterm Darmstadt. meetings Capital year,

So great see in summer the fall. thanks a again. and you Have

Operator

has gentlemen, for call attendance. thank concluded. you your and This Ladies

disconnect. may You now

Merck KGaA (MKGAF) 8 Aug 222022 Q2 Earnings call transcript