Earnings call transcript: Merck Q2 2025 results beat EPS forecast, stock dips

Merck & Company Inc. reported its second-quarter 2025 earnings with a notable beat on earnings per share (EPS), which came in at $2.13 compared to the forecasted $2.03, marking a 4.93% surprise. Despite this, the company’s stock saw a decline, with pre-market trading showing a 2.75% drop to $81.75 from $84.06. Revenue, however, fell short of expectations at $15.81 billion, slightly below the forecast of $15.87 billion.

Key Takeaways

• Merck’s EPS exceeded expectations by 4.93%, indicating strong profitability.
• Revenue slightly missed forecasts, coming in 0.38% below expectations.
• Stock reacted negatively despite EPS beat, dropping 2.75% in pre-market trading.
• The company narrowed its full-year organic sales growth guidance to 2-5%.
• Merck raised its EBITDA pre-organic growth guidance to 4-8%.

Company Performance

Merck demonstrated resilience in Q2 2025 with a solid EPS performance, although revenue fell short of projections. The company faced a challenging economic environment, with a 1.8% year-over-year decrease in net sales, primarily due to currency headwinds. Organic sales growth was positive at 2%, showcasing the underlying strength of its core operations.

Financial Highlights

• Revenue: $15.81 billion, slightly below the forecast and down year-over-year.
• EPS: $2.13, exceeding the forecast of $2.03.
• EBITDA pre: €1.462 billion, down 3.1% year-over-year.

Earnings vs. Forecast

Merck’s EPS of $2.13 surpassed the forecast of $2.03, resulting in a 4.93% surprise. This marks a positive deviation from expectations, reflecting effective cost management and operational efficiency. However, the revenue miss by 0.38% suggests challenges in achieving expected top-line growth.

Market Reaction

Despite the EPS beat, Merck’s stock fell by 2.75% in pre-market trading, likely influenced by the revenue miss and broader market volatility. The stock’s current price of $81.75 is within its 52-week range of $73.31 to $120.3, indicating room for recovery. InvestingPro data shows Merck has maintained dividend payments for 55 consecutive years, with a current yield of 3.83%. The stock’s beta of 0.39 suggests lower volatility compared to the broader market, making it potentially attractive for defensive investors.

Outlook & Guidance

Merck has adjusted its full-year organic sales growth guidance to 2-5% and raised its EBITDA pre-organic growth guidance to 4-8%. The company remains optimistic about its product pipeline, including the recent launch of OXIVIO and the upcoming introduction of Pimecotinib in 2026.

Executive Commentary

"We continued to sustain our organic sales growth momentum in this challenging environment," stated Belen Garicchio, Group CEO. She emphasized Merck’s strategic focus on enhancing its portfolio, stating, "We are actively working on and executing our portfolio composition to enhance Merck’s position."

Risks and Challenges

• Currency fluctuations pose a significant risk, impacting sales and EBITDA.
• The semiconductor market recovery remains uncertain, affecting electronics.
• Increased R&D spending could pressure margins in the short term.
• Competitive pressures in the bioprocessing market may intensify.
• Macro-economic volatility could impact customer spending, particularly in academia and government sectors.

Q&A

During the earnings call, analysts inquired about potential pre-ordering effects in Process Solutions, which Merck confirmed were absent. Concerns were also raised regarding project delays in the Electronics division, to which Merck acknowledged ongoing challenges but expressed confidence in overcoming these obstacles.

Full transcript - Merck (MRK) Q2 2025:

Heidi, Conference Operator: Dear ladies and gentlemen, welcome to the Merck Investor and Analyst Conference Call on Second Quarter twenty twenty five. I am now handing over to Florian Head of Investor Relations, who will lead you through this conference. Please go ahead, sir.

Florian Schroeder, Head of Investor Relations, Merck: Thank you very much, Heidi, and a heartfelt welcome to the Merck Q2 twenty twenty five results call. I’m Florian Schroeder, the Head of Investor Relations at Merck. It is my pleasure to be joined today by Belen Garicchio, our Group CEO and Helene von Rueder, our Group CFO. For the Q and A segment of this call, we will also have Jean Charles Wirth, CEO Life Science, Denis Barsohar, CEO Healthcare, and Kai Beckmann, CEO Electronics with us. In the initial minutes of this call, we will guide you through the key slides of the presentation.

Following that, we will be glad to address your questions. With that, I would like to hand it over to Melen to begin.

Belen Garicchio, Group CEO, Merck: Thank you, Florian. Welcome, everybody, to our Q2 earnings call. And before starting with the highlights of the quarter, I’m happy to remind everybody that we just announced the closing of the divestiture of Surface Solutions last week. The closure of this transaction will allow us to sharpen our focus on high-tech application within electronics, so that is an important milestone achieved recently. And this comes just one month after we closed the acquisition of SpringWorks in a record time, immediately accelerating the growth of healthcare and securing the sustainability of our healthcare pillar in the mid to long term.

So we are actively working on and executing our portfolio composition to enhance Merck’s position as a globally diversified science and technology company with attractive growth. Returning to the quarter, I’m now on Slide five of the presentation to go through the highlights. The global economic landscape continued to change very rapidly this quarter, generating some volatility across various business sectors and regions. We continued to sustain our organic sales growth momentum in this challenging environment, even though these economic conditions are also affecting, to a certain extent, some of our business sectors. Organically, our group sales increased by 2% and EBITDA pre went up by 5%.

We, therefore, continued to grow profitably on an organic basis. Healthcare and Life Science showed the strongest organic sales growth at 4% each, while electronic sales were down organically by minus 6%, driven mostly by the DS and S business. The highlight of the quarter was the acceleration of the organic sales growth momentum in Life Science. And this is driven by Process Solutions, which once again delivered 11% against rising comparables. The very strong order intake growth continued, and the book to bill ratio was again comfortably above one.

Sales in Healthcare grew organically by 4%, driven by double digit growth of Mavenclad, solid growth of 5% in our Centimeters and E portfolio, as well as double digit growth of Erbitux, respectively. Moving into electronics, we observed an organic decline of 6%, and this is primarily attributable to our DS and S, delivery systems and service business within semiconductor solutions, which experienced a decline in the low to mid double digits in relation to big project phasing. Semiconductor materials continued to grow this quarter, driven by our strength in artificial intelligence and advanced nodes. Turning to our guidance. We are now narrowing our organic sales growth range to plus 2% to plus 5%, staying within our previously communicated guidance communicated range.

Reported sales have been adjusted to mostly reflect the currency impact. We are also maintaining the midpoint of our absolute EBITDA pre guidance range despite increasing headwinds from FX and despite negative portfolio effects from the SpringWorks acquisition as well as the divestiture of Surface Solutions as we have lifted our organic growth guidance on EBITDA pre to plus four percent to plus 8%. Therefore, we now anticipate net sales in a range of EUR 20,500,000,000.0 to EUR 21,700,000,000.0 and EBITDA pre of EUR 5,900,000,000.0 to EUR 6,300,000,000.0. Hence, we are committed to growing even more profitably than we have forecasted previously. I will provide more details on our assumptions for the guidance at the end of this call.

So let’s now turn to Slide six for an overview of our performance by business sector. Organic sales growth in the second quarter was 2%, plus 2%. With organic sales growth of 3.7%, Life Science was the largest contributor this quarter, driven once again by the stellar performance of process solutions. Healthcare delivered 3.6% organically organic growth, with Mavenclad, our Centimeters and E portfolio, and Erbitux having been the key drivers. Electronics was down by minus 5.6% organically, as the growth of semi materials was not able to offset the decline in our DS and S business.

For the group, and as we predicted, FX now turned into a headwind of minus 4.2% in Q2 after having been a slight tailwind in Q1 twenty twenty five. FX was a mid single digit percentage headwind for all business sectors during the quarter. Together with a portfolio effect of plus 0.4% for the group in Q2, driven mainly by the acquisition of Unity SC, group sales reported group sales declined by minus 1.8% in Q2. It is important to note that we closed the SpringWorks acquisition on July 1. Hence, there is no SpringWorld revenues in Q2.

Regarding earnings, EBITDA pre amounted to EUR 1,462,000,000.000, growing organically more than twice as fast as sales and delivering plus 4.6% organic growth compared to the year earlier period. Currency also had a negative effect on EBITDA pre, which was more pronounced than on sales at minus 7.2%. The portfolio effect was slightly dilutive on EBITDA pre. And with this, let me hand it over to Helene for a more detailed review of the financials of Q2.

Helene von Rueder, Group CFO, Merck: Thank you very much, Belen, and a warm welcome from my side also. I’m now on slide eight for an overview of our key figures in the second quarter. Net sales decreased by 1.8% to EUR 5,255,000,000.000, as FX was a headwind of minus EUR $227,000,000. Portfolio effects were a slight tailwind in Q2 of plus EUR23 million. EBITDA pre was down by 3.1% to EUR1.462 billion, while EBITDA pre was up 8.8% year on year in healthcare, it was down by -1.3 percent in Life Science and 47.6% in Electronics.

The decline in EBITDA pre in Electronics was mainly due to two non recurring items we recognized in our second quarter results, as well as foreign exchange headwinds. I will provide more details later during the presentation. FX was a stronger headwind on EBITDA pre than on sales, while portfolio effects had a slightly dilutive impact on EBITDA pre. EPS pre declined by 8.2% to a €2.02 per share. The decline in EPS pre was higher than in EBITDA pre, which was primarily driven by a more negative financial result.

This in turn was mainly due to tax items in the financial results amid a lower interest income, in turn reflecting lower cash balances. Operating cash flow decreased to $567,000,000 The decline was mainly driven by higher tax and bonus payments. Net financial debt increased by EUR818 million compared with the December ’24 and reflecting the payment of our dividends. Let me also briefly comment on our reported results and with that I’m now on slide nine. EBIT was up by 12.4% year on year.

This was higher than the increase in EBITDA pre, due to mainly a decrease in D and A from a high level in Q2 twenty twenty four. Now as a reminder, we took the impairment on xivinapant in Q2 of last year. The financial result declined significantly by minus €55 from minus €7,000,000 to minus 62,000,000 due to primarily a more negative interest result. This reflects tax items as well as a reduction in interest income on a lower cash balance. The effective tax rate came in at 21%, which is actually at the lower end of our guidance range of 21% to 23%, and below the effective tax rate of 22.9% in the year earlier period.

The tax rate usually fluctuates over the quarter during the year. For the first six months of 2025, our effective tax rate stands at 21.9%, which is right in the middle of our tax rate guidance. As a reminder, please be aware that this year is a year of additional uncertainty with all of the debates around tax and tariffs. Reported EPS came in at 1.5 which is an increase of 7.1% year on year, which is below EBIT growth as it reflects a more negative financial result compared with the year earlier period. And with that, let’s move on to the review by business sector.

And I’m starting with Life Science on page 10. Life Science grew organically by plus 3.7 in Q2. This does represent a further acceleration compared with the previous quarter as Process Solutions kept its momentum and Science and Lab Solutions showed improving momentum. So turning to Process Solutions first, sales grew by 11.5% organically in the second quarter. Therefore, it maintained its growth momentum from the previous quarter, which is now compared against a growing base.

Customer destocking is finally now behind us. Order intake continued to show very strong growth and book to bill was at similar levels compared with the last two quarters, staying comfortably above one. We have not seen any significant preordering effects in Q2 twenty twenty five. Now let us take a closer look at Science and Lab Solutions. Sales were flat organically.

While US policy changes continue to affect academic and government lab spending, we did see some green shoots with our pharma and larger biotech customers. We increasingly feel comfortable to move towards our mid term growth aspiration of a low single digit to mid single digit organic growth in Science and Lab Solutions by Q4 of this year. In Life Science Services, sales were down 8.2% organically, which was primarily due to an approximately low teens percentage decline in our contract testing services business due to demand fluctuations from key customers. Additionally, Q2 twenty twenty five faced the highest comparison base from 2024. Our CDMO business was organically up in the quarter, excluding a sales effect in connection with the disposal of the Martijac site, which was closed on August 1.

EBITDA pre increased by 3.7% organically in Q2, in line with organic sales growth. The positive operating performance and mix effects were offset by production cost phasing. While our EBITDA pre margin was flat year on year on an organic basis, both FX and portfolio effects were dilutive. And with that, I’m now on slide 11 for an overview of the performance of the Healthcare business sector. Healthcare again delivered solid organic sales growth of 3.6% in Q2, which is very similar to what we actually saw in Q1.

By franchise, our CMNE portfolio was the largest contributor to growth in healthcare. It was up 4.7% organically and in line with our medium term growth ambition of a mid single digit CAGR. We saw organic growth across all therapeutic areas. Oncology was up 3.9% organically in Q2, 10.9% organic growth of Erbitux and 41.4% growth in TEPMETCO more than compensated for the anticipated decline of Bavencio, which was down -12.1 percent in Q2 in a competitive environment. Almost all regions contributed to the growth of ABETOX, although we saw China slowing.

TEPmedco mainly benefited from very strong demand in North America and APAC, including benefits from a recently signed distribution agreement. Our NNI franchise grew by 2.6% organically in Q2. Declines of Rebif in line with the interferon market were more than offset by Mavenclad, which delivered a stellar growth of 20.7% organically. This was mainly driven by North America and supported by positive channel mix. Fertility sales were down by minus 3.4% in Q2 against the still elevated comps reflecting prior year competitor stock outs and amid a slightly softening market.

Regarding our pipeline, detailed results from part one of the phase three MANUVAR study were presented at the ASCO Annual Meeting, showing pimecotinib significantly improved objective response rate versus placebo at the primary endpoint and all key secondary endpoints. Merck holds the rights to commercialize pimecotinib worldwide, and we intend to launch in 2026. Also at ASCO, we presented Phase Ib data for M9140 with its efficacy and safety encouraging further development of this anti CCAM5 ADC. The robust organic sales growth in Q2, in combination with temporarily lower R and D spending and a favorable mix, helped us to achieve an EBITDA pre margin of 37.2% in the quarter. Compared with the year earlier quarter, our EBITDA pre margin improved by three fifty basis points, implying organic growth of plus 20, in part also due to a soft comp, including a mid double digit million euro R and D impairment last year.

Overall, EBITDA pre amounted to $783,000,000 in Q2. On the further evolution of our R and D spending, let me remind you that we expect underlying R and D costs to increase gradually over the coming quarters, both in absolute terms and as a percentage of sales. Adding SpringWorks on top, we expect the R and D ratio in H2 to be around 20% of sales. So let us move to electronics on slide 12. Organically, sales went down by minus 5.6% in Q2, as semiconductor solutions declined by 5.6% organically.

The key reason is the performance of our DS and S business within Semiconductor Solutions, which declined by more than 30% organically in Q2. Semiconductor materials continued to grow in the quarter at a low single digit rate against stronger comps. Following the divestiture of Surface Solutions, this business now accounts for around two thirds of our electronic sales. Despite this, it was not able to offset the significant decline of our DSNAS business in Q2, where customers have informed us that projects have been pushed out even further. AI and advanced nodes continue to drive the growth of semiconductor materials.

However, a near term recovery of the wider market, especially in NAND and memory, is still not in sight. Our Optronics business was down 5.3% organically in Q2, but showed slight growth of plus 0.3% on a reported basis, including the consolidation benefit of Unity SC. Surface solution was down minus 6.4% organically, which was mainly due to weaker cosmetics demand. I’m sure you have seen our announcement of the divestment of Surface Solutions closed on July 31. Hence, Q2 was the last quarter in which we fully consolidate Surface Solutions.

The EBITDA pre margin decline of -41.3 percent organically in Q2 was impacted by two special one time effects. First, we recognize the one time non cash adjustment of a PPA entry related to manufacturing know how from the 2014 acquisition of AZ Electronic Materials, which amounts to a low double digit million euro amount. This entry properly reflects the expired useful life of the know how associated with the original PPA entry and does not reflect our ongoing operating performance. Furthermore, a provision in the mid double digit million euros was recorded for customer compensation related to a historical supplier mislabeling that caused a pricing issue. There were no quality concerns and the customer relationship remains strong with ongoing orders.

We are seeking appropriate remedies. Both items had a combined negative effect on our EBITDA pre margin in Electronics around minus seven percentage points. Additionally, other elements, mainly the significant decline in our DS and S business and FX, further reduced the margin by around 4.5 percentage points. Overall, the EBITDA pre margin was 15.1% in the quarter and that equates to an EBITDA pre of EUR134 million. For the further margin evolution during the remainder of 2025, please do note that we sold surface solutions, which had a margin dilutive effect of electronics.

I also want to stress that the two previously described special effects recorded in our Q2 results were limited to Q2 and will not recur. Before handing back to Berlin, let me also briefly comment on our balance sheet and cash flow statement. As you can see on Slide 13, our balance sheet decreased by EUR4.2 billion compared with the December 2024. Let’s take a closer look on the asset side. Cash and cash equivalent went down to EUR1.2 billion from EUR2.5 billion at the December ’24, due to the repayment of a U.

Dollar bond, which took place in March. Inventories were stable, while receivables went up by $300,000,000 following a quarter of strong cash collection at the end of last year. Property, plant and equipment decreased by €300,000,000 due to mainly FX translation differences. Intangible assets decreased by €2,600,000,000 due to FX effects and DNA. And lastly, other assets were down by EUR300 million due mainly to divestments and revaluation effects.

Switching to the liability side. Financial debt decreased by €900,000,000 reflecting the repayment of the U. S. Dollar bond in March. This was partially offset by a decline in other liabilities, in turn affected by the dividend payments in Q2.

Pension provisions were down, which was driven by actuarial gains. Payables decreased from $3,100,000,000 to $2,900,000,000 as we saw declines in current payables across our three business sectors. And, net equity decreased by 1,700,000,000.0 as the increase in retained earnings was more than offset by FX differences, mainly resulting from the weakening of the U. S. Dollar.

In summary, our equity ratio strengthened further from 58% at the December 2024 to 60% at the end of Q2. It did decline slightly from 61% at the end of Q1 this year, following the payment of their annual dividend. Turning to cash flow on slide 14. Operating cash flow went down from EUR861 million in Q2 of last year to EUR567 million on Q2 twenty twenty five. This was mainly due to changes in other assets and liabilities, driven in turn by higher bonus payouts and tax cash outs in the quarter.

The increase in tax cash outs mainly reflects the phasing of a tax payment in Switzerland, which occurred in Q2 of this year, as opposed to Q3 of last year. D and A experienced a notable year on year decline this quarter, primarily attributed to the absence of last year’s 140,000,000 impairment associated with Sevinapan and a decrease in the amortization of acquired intangibles. This reduction is not entirely reflected in the increase in profit after tax, due largely to a year on year decline in financial results and significant currency headwinds that impacted our sales and in return profits. Cash out for investing activities increased by €113,000,000 which mainly reflected the payment to Abisko for the global commercialization rights of pimecotinib. Last but not least, the difference in financing cash flows driven by proceeds from short term investments in the quarter.

And with that, let me

Belen Garicchio, Group CEO, Merck: hand back to Belen for the outlook. All right. Thanks, Helene. And let’s now turn our attention to our updated guidance on Slide number 16. Reflecting on my earlier comments regarding currency impacts, we have now included a stronger currency headwind, which comes as no surprise.

On group net sales, we now factor in unexpected FX headwind of minus 5% to minus two Consequently, we are revising our 2025 report corridor for group net sales to a range of €20,500,000,000 to €21,700,000,000 Our organic net sales growth guidance is set at plus 2% to plus 5%, staying, as I said before, within the previously communicated range. Turning to our EBITDA pre and despite the increasing FX headwinds, as well as the estimated negative portfolio effects of minus 120,000,000 to minus $80,000,000 resulting from the acquisition of SpringWorks as well as the divestment of Surface Solutions, we are maintaining the midpoint of our absolute EBITDA pre guidance and narrowing the range to EUR 5,900,000,000.0 to EUR $6,300,000,000 We have also raised our organic growth corridor for EBITDA pre to plus four to plus eight, up from plus two to plus seven. Furthermore, despite the inclusion of SpringWorks, we are guiding for an EPS pre range of between 8 and €8.7, slightly reducing the midpoint only by €00 point Our guidance accounts for the full impact of tariffs based on our current knowledge. Please go to Slide number 17 for additional color by business sector. Starting with Life Science, we are upgrading our organic sales growth guidance, now projecting a range of plus three to plus six for 2025, leaning towards the upper half of the previous corridor.

We anticipate that process solutions will come in line with the midterm target of a CAGR of around 10% growth already in 2025. We expect EBITDA pre to demonstrate organic growth between plus 3% and plus 7%, thereby adjusting and elevating the lower half of our guidance range. This upgrade aligns with our narrowed top line guidance, and we are confident in delivering an improvement in organic EBITDA pre margins in 2025, as indicated by the midpoints of our guidance ranges. Moving on to Healthcare, we are narrowing our guidance for organic sales growth to a range of plus three to plus five, maintaining the midpoint. Key contributors to this organic sales performance remain our Centimeters and E portfolio, Mavenclad and Erbitux.

We also expect a contribution to net sales from portfolio effects in the amount of $170,000,000 coming from the acquisition of SpringWorks. We are pleased with the Q2 performance of SpringWorks. ObsEveo had USD 67,000,000 sales in the quarter, which is up 52% quarter on quarter and the strongest quarter since launch, while GOMEKLY generated US15 million dollars sales in the quarter. Our guidance for EBITDA preorganic growth is being raised to plus 9% to plus 13%, driven by robust leverage growth, coupled with disciplined cost management and the divestment of an FDA priority review voucher, which we agreed at the July, and which impacts the earnings of the healthcare business sector in a mid double digit million euro amount in the second half of the year. For electronics, we are revising our forecast down for organic sales growth to a range of minus five to minus one, and this primarily reflects further delays in customer projects now moving beyond 2025, which impact our DS and S business.

While we expect semi materials to deliver continuous growth in 2025, this growth will not compensate the anticipated decline in our DS and S business. DS and S phasing, along with the nonrecurring one timers from Q2, has led to reduced expectations in our organic growth guidance for EBITDA pre, now expected to be in a range of minus 15% to minus 7%. While not included in the guidance update I just presented, I would also like to highlight that we have adjusted down corporate and other EBITDA pre guidance from $500,000,000 to $550,000,000 to $350,000,000 to 400,000,000 This adjustment is mainly driven by hedging gains and also due to a mid double digit euro million onetime impact, driven by changes in local regulations in Latin America. Overall, Q2 has been a robust quarter in which we once again delivered profitable organic growth despite the continuously challenging macroeconomic environment. On top, we executed two major strategic milestones, the closing of SpringWorks and Surface Solutions, and we stay highly confident to deliver an even stronger profitable organic growth in 2025 than expected before.

And with this, thank you so much for your attention, and we will be happy to start taking your questions. Florian, over to you. Thank you, Belen and Helene,

Florian Schroeder, Head of Investor Relations, Merck: for guiding us through the slides. I will now pass it over to Heidi, who will facilitate the Q and A segment of the call.

Heidi, Conference Operator: Thank you. We will now begin our question and answer session. Please dial 11 on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you are using speaker equipment today, please lift the handset before making your selection.

One moment, please, for the first question. And your first question comes from the line of Sachin Jain from Bank of America. Please go ahead. Your line is open.

Sachin Jain, Analyst, Bank of America: Hi there. Thanks for taking my questions. I’ll just have one on each division, please, if I may. So first, on Electronics, any color on how long the projects are delayed within DSF? So how long should we think about that impact?

And if you could just give a bit more color on the broader macro outlook where you’ve commented recovery not in sight. Just trying to get a sense of what your forward visibility is and therefore any thoughts into 2026? On Healthcare, just thoughts on the Maverick Lab IPR outcome and how that may impact guide for 2025? And then thirdly, on process, just any commentary on how growth rates exit in 2Q and July trends? There’s been some industry commentary of more recent softness.

Doesn’t feel like you’re seeing that, but just wanted to confirm. Thank you.

Belen Garicchio, Group CEO, Merck: You’re welcome. Thank you, Sachin. We’ll start, Kai, with electronics. Yes.

Kai Beckmann, CEO Electronics, Merck: Sachin, this is Kai speaking. Thanks for the electronics questions. On DS and S, we will update once we get more clarity on when the project restart again, they resume implementation currently for the second half. We only took what we already have really fixed and confirmed after the conversations of the past quarter in a very conservative way to not overestimate what’s happening in 2025. So let’s look into what then may happen in 2026.

On the broader picture, Sarjen, So by the end of the year, electronics will be shaped with a shaped portfolio focused on electronics businesses only. Surface is out, Unity is then fully in from November onwards. We will be a sector exclusively focused on the electronics industry. The materials side you will see growing at high single digit rate. This is what you can see in our guidance, what we expect and that is then two thirds of our portfolio.

So 80% of electronics is semi and 80% of semi is materials, so two thirds being materials growing at this rate and the market projections do not show any indication that deviate from our early expectations. On the materials side, well intact going into 2026.

Dani, Healthcare Executive, Merck: Sachin, hi, it’s Dani. Regarding the IPR, so first and foremost, we remain very confident about the LOE base case that we communicated for Mavenclad, which is October 2026. And indeed on July 11, it was, there was a Court of Appeals for the Federal Circuit hearing and hearing what happened there, just hearing the discussion, I would say, keeps our confidence in the October 2026 rather high. And you spoke about 2025 forecast, so you saw the stellar growth for Mavenclad in the second quarter. And for the full year, we expect similar to what we saw last year, which is double digit, low to mid teens.

And even if in the highly unlikely scenario in our case that we are hit by generics, the impact would be, I would say, super limited and well within our guidance.

Jean Charles Wirth, CEO Life Science, Merck: Sachin, Georgasal speaking. We are not disclosing any performance of Process Solutions in July. That said, what I can tell you is that we are looking for solid, solid performance in 2025 for Process Solutions. And we are now feeling very confident to reach our midterm organic growth aspiration of a CAGR which is around 10% for this year.

Sachin Jain, Analyst, Bank of America: Thank you.

Heidi, Conference Operator: Thank you. We will take our next question. And your next question comes from the line of Sophia Gracebull Nearsen from JPMorgan. Please go ahead. Your line is open.

Sophia Gracebull Nearsen, Analyst, JPMorgan: Good afternoon. Thanks for taking my questions. A couple on life science. So just firstly on FLS, how has The US Academic And Government performed in Q2 relative to your initial expectations? And how do you expect this segment to perform for the rest of the year and into 2026?

And then just one on process Solutions. So what has driven the very strong order intake useful this quarter? Have you seen this pick up sequentially? And are you expecting book to bill to remain above one for the rest of the year?

Jean Charles Wirth, CEO Life Science, Merck: Thank you, Sofia. So Jean Charles speaking. I will start by answering the question on SLS, and afterwards I will shift to PS. So let me start to mention that our current lab market conditions are certainly challenging, And I would like to give you some example. You mentioned US.

Yes, our academic customer remain cautious due to the high level of uncertainty linked to The US policy changes. That said, I also want you and participant to keep in mind that we have limited exposure to NIH, roughly 10% of our portfolio. Nevertheless, it’s true that Q2 was impacted in U. S. Top, when I say changing market condition, I would like also to highlight China.

China remains muted. And I would like also to mention the behavior of some pharma customer, which continue to closely monitor their expense, especially concerning early research activities. That said, we expect to see a gradual recovery in Pharma discovery in the near future. I also want to repeat what Helene said. We are seeing green shoots in some customer in 2025 in Q2, and we are also seeing some positive development in Pharma Quality Control.

So this is the situation we are dealing with. But under this condition, we have continued to execute on our strategy. And I would like to provide you two concrete examples. The first one is on innovation. Earlier this year, we announced the acquisition of Hub Organoids.

And right now, we are bundling Hub Organoids with our MilliCell DCI, which is a cutting edge tool for rapid and objective cell culture measurements. And I will say the first sentiment from our customer is extremely positive. Another example on our execution on our strategy is around our multi omnichannel. We are selling through our direct sales force, our dealers and our e commerce. And yes, we are making good strides.

So when you combine the current market condition plus our very clear strategy and execution, we are performing quite well, I will say, in the market. We have been flat in Q2. And I would like to mention that I see the SLS business as a very resilient business. So looking forward, we expect to show an organic growth towards our mid top guidance in SLS of low single to mid single digits by year end. I shift to Process Solutions.

So on Process Solutions, you asked about our order intake. First of all, I want to take the opportunity to mention that over the last months, we have, let’s say, improved our quality of reporting related to order intake. I mean, in terms of tracking processes, we are at the stage now where we could find any type of information related to our order intake and we can slice and dice information by customer, region, portfolio, etcetera. So we are quite confident with the quality of our data. To answer your question, we don’t see any pull of order in Q2.

We are also confirming and we are believing that the customer destocking is now behind us. And to your last question concerning book to bill ratio, we feel comfortable to have a book to bill ratio above one. It has been the case in Q4 twenty twenty four. It has been the case in Q1 twenty twenty five. It’s still the case in Q2 twenty twenty five.

So overall, for Process Solutions, as I just said earlier, we are now comfortable and we feel confident to reach our midterm guidance for the full year around 10%.

Heidi, Conference Operator: Thank you. We will take our next question. Your next question comes from the line of Matthew Weston from UBS. Please go ahead. Your line is open.

Matthew Weston, Analyst, UBS: Thank you. If I can just follow on from the last question on bioprocess demands. I think you answered it, Jean Charles, but just to be double clear, with the new visibility that you have looking into your customers, are you confident that they are not accelerating manufacturing ahead of U. S. Tariffs?

So we’re basically seeing a pull forward that will then we’ll see that next year as a slowdown, but that this is really sustainable growth and would you actually have that visibility? And then the second one, I don’t know whether it’s a question for Dani or Helena, irrespective of the debate on timing from Sachin’s question, we will soon see Mavenclad U. S. Patent expiry. I think most of us would assume that a $45,000 small molecule is extremely profitable, but I’m aware you also have a neurology sales force attached to that.

So can you help us understand the relative profitability of Mavenclad in The U. S. Versus your normal healthcare margins so that we can plan for the midterm and the gradual loss of Mavenclad in the model? Thank you.

Jean Charles Wirth, CEO Life Science, Merck: Hey, Matthew. Jean Charles speaking. So to keep it short, we are confident in the quality of our order intake. And just to give you some flavor, in Q2, I said that we didn’t see any pull forward at global level. We have such detailed level of information that early April, we saw some in China, but the value was negligible at global level.

So overall, the key message is yes, we feel confident.

Dani, Healthcare Executive, Merck: Matthew, it’s Dani. Hi. Regarding the question on Mavenclad. So again, as I said before, the base case for us is October 2026 as the loss of exclusivity in The US and a staggered one between the 2027 and 2030 in Europe based on SPCs in different countries. So this is not going to be an abrupt decline globally.

This is one thing. The decline when it comes will be profitable. We will manage it. Just to remind you, we are building sales forces also in The US and outside of The US for SpringWorks and this will be managed properly.

Heidi, Conference Operator: Thank you.

Jean Charles Wirth, CEO Life Science, Merck: Thank you.

Heidi, Conference Operator: We will take our next question. Your next question comes from the line of Feko Friedrich from Deutsche Bank. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck0: Thank you very much. Good afternoon. My first question is also on Process Solutions. Could you give us a little bit more flavor on the orders and sales developments for consumables versus equipment, what you’ve seen here in the recent quarter? Then secondly, in your group guidance, was there any change in the tariff assumptions that are embedded versus the initial guidance with Q1?

And then thirdly, a quick one for Kai. Can you provide a bit more color on what exactly this labeling issue was that happened? Thank you.

Belen Garicchio, Group CEO, Merck: So let me start with the group guidance to confirm that anything that we have in our hands today is included in our guidance, that there are no significant changes versus what we communicated in Q1.

Jean Charles Wirth, CEO Life Science, Merck: Jean Charles speaking related to the first question of Falco. Very high level, if you look at our portfolio today, roughly 90%, nine-zero, 90% of our portfolio in Process Solutions is consumable driven.

Kai Beckmann, CEO Electronics, Merck: Yes, Fako, on the electronics question. So there were wrong labeled products by a supplier that have led to an overcharging of our customer over the past fifteen years, which we then have compensated for. Now we are seeking remedies at supplier for the damage.

Florian Schroeder, Head of Investor Relations, Merck0: Okay, thank you. If I can very briefly follow-up to the Process Solutions question. Could you add more flavor on what you saw in the 10% that is the equipment portion in terms of demand and orders?

Jean Charles Wirth, CEO Life Science, Merck: I mean, what what I it’s it’s a limited file. It’s really a limited number. As I said earlier, the large large part of our portfolio is linked consumables today.

Dani, Healthcare Executive, Merck: Understood. Thank you. Thank you.

Belen Garicchio, Group CEO, Merck: Thank

Heidi, Conference Operator: you. We will take our next question. And the next question comes from the line of Charles Pittman King from Barclays. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck1: Hi, guys. Thanks very much for taking my question. Charles Whitman King from Barclays. Just one quick one to start off with, just your corporate and other EBITDA pre guidance. I was just wondering if you could give us a bit more detail on what those local regulation changes are if you can provide any more quantification to that mid double digit impact.

Then just secondly on OXIVIO outlook. So within the desmoid tumor space, was wondering if you could talk a bit about your expectations for potential competition given competitors such as AL102 which is so far illustrated apparently superior Phase II data and is set to report Phase III and 2H25. Just wondering how you’re thinking about OXIVO’s likely treatment position should outperform its data? Thank you very much.

Helene von Rueder, Group CFO, Merck: Hey, how are you? So on the regulation, what I can say is like it is in Latin America, there has been a change in law and it actually has impacted all of our sector, which is why you’re seeing this impact in the corporate line.

Dani, Healthcare Executive, Merck: Hi, this is Dani. Thank you for the question on OXIVIO. And first and foremost, we are very excited, as Belen said at the beginning about the relatively fast completion closing of the deal on July 1, and you saw the numbers for the second quarter, which are super strong. Now, we see a very high demand and continuous demand for the drug, which make us very, very encouraged by the performance, particularly in The US. This is where the drug is currently launched.

And regarding competition and a little bit to guide you the challenges and the market. You mentioned AL-one hundred two, and we did factor it in, of course, since the very early days of our due diligence, and the commentaries that we heard are mainly coming from its Phase two data in, I would say, much limited number of patients. Now, one thing with all of these things said, one thing that I believe is important for me personally to leave you with that is that we are taking AL-one hundred two super seriously. Why? Because it is the same mechanism of action of OXIVIO and hence we expect it to work.

And I also want to separate between what all of us know about the compound and also how serious we are already taking it in terms of the education of our field teams, scenario building, market shaping and on top of that, how we modelled it into our assumptions. Now, obviously, we cannot provide you with the numbers that we plugged into our assumptions, but you should remember, is also the prevalent population, talking about those 30,000 patients in The US roughly, with huge potential to address those who are currently limboing between wait and see and yes or no surgery. So there is a huge potential there. And now the model that we based our valuation and the direction that we have given once we close the deal, or once we announce the deal for peak sales of around $1,000,000,000 includes both the competition very seriously, as well as, I would say, a much more conservative patient pool than the 30,000. Now, when we go to ObsEvio, hazard ratio of 0.21 on PFS with median not reached and a two years landmark of 76% progression free, we believe that this is a very high bar as itself.

We and AL-one hundred two, can AL-one hundred two be 72% or 80%? Yes, of course, but this is the same class. Second one is toxicity. We also got the, I would say, thoughts or the commentary around the potential for less ovarian toxicity with Oxevio. Obviously, we take that super seriously, because these patients need to stay on drug.

It’s a chronic treatment. It’s not a malignant tumor. And what I can tell you today from real world rates of discontinuation for any reason on OXIVIO, this rate is quite low and resembles very much what we saw in the DEFIRE trial, where patients more and more learn to manage their adverse events with label approved dose adjustment, etc. And when it comes to specifically to ovarian toxicity, the vast majority of these cases are reversible either on drug or off drug, so patients know how to manage it. So we are not taking it lightly.

It’s the same mechanism of action. It will work. We have a first mover advantage. As I said, there is a strong adoption that continues across all sites of care. We’re very pleased that the total number of OXIVIO prescribers continues to grow month over month and we have a strong base of physicians who have, I would say, very positive experience with Oxevio since its approval late twenty twenty three.

And just to give you a little bit of flavor, in the first half, Centers of Excellence account for approximately one third of the ordering accounts and about two thirds of the total volume, and we are expanding. If you understand these numbers, you can if you hear these numbers, you can understand that we are much beyond already in terms of the centers. So very excited about this and looking forward to share more of the Capital Markets Day on that.

Jean Charles Wirth, CEO Life Science, Merck: Thank you so much.

Heidi, Conference Operator: Thank you. We will take our next question. Your next question comes from the line of Shayam Khotaria from Goldman Sachs. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck2: Hi there. Thank you for taking my question. Two from me, please. First one on Electronics. So just a bit of color on the margin going forward.

So the midpoint of your guide for full year 2025 implies around 23%. So it implies an acceleration in the second half to around 26% mark. What’s driving this? Is it just the removal of the lower margin surface business? Or is there something else underlying that you’re anticipating?

And then how should we think about a normalized margin going forwards for Electronics excluding surface? Will it be the exit margin around 26%? Or could we expect this to increase going forward towards the high 20s and low 30s once you’re past the negative impacts of DS and S? So that’s the first question. Second question is on SpringWorks.

So on the top line, based on your guidance portfolio effect for Healthcare, you’ve guided to around $170,000,000 for second half twenty twenty five. But looking at Exvio and Gomekli sales for first half twenty twenty five, you’ve got around $80 odd million. So that implies pretty flat sequential growth on a quarter by quarter basis and they’re two relatively new launch assets. So again, could you confirm why this is the case, especially if you’re mentioning that ObsEvio is growing pretty well and if there’s any volatility that we should be aware of? Thank you very much.

Kai Beckmann, CEO Electronics, Merck: Yes, starting with the margin question, Electronics. Where do we start from? In Q2, we got a 7% impact of the one timers. We got a 1% impact of currency. And then a quite significant mix impact that explains the bridge to the previous year, a mix impact from BSNS because of the known reasons.

So a lot of that goes away in the second half and brings us then closer towards the high 20s range again. This is the way forward. There will be a dilution of ramp up cost effect that we still have in our books and there will be of course a positive contribution of our very strong symptoms business with a positive mix impact helping to bridge from where we are today to drive by volume growth and acceleration of leverage and with that a better margin profile towards the end of the year. So that’s the expectation for the second half.

Dani, Healthcare Executive, Merck: Hi, it’s Daniel. Regarding SpringWorks, so as I’ve said before, we are super pleased with how the launches of OXIVIO and GOMEKLY. GOMEKLY’s first days are moving forward. Yeah, for both products, there is a very strong demand. The 170 that you mentioned for the second half includes both products.

So it’s not just one of them. So it’s a combination of both. And, you know, we have it under our belt for, you know, for two months now. We are very encouraged with what we see. I think that what we are committed with the 170 is very consistent with the month over month growth, as we mentioned before.

And if there are additional updates for that, and we are working on that, we’ll give them in the Capital Markets Day. Okay. Thank you.

Heidi, Conference Operator: Thank you. We will take our next question. And the question comes from the line of Oliver Metzger from ODDO BHF. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck3: Yeah. Good afternoon. Thanks a lot for taking my questions. The first two ones are on process solution, and the first one is a follow-up on Falco’s question. Yes.

Even we know that equipment makes up 10% only of process solutions. But can you give us an indication how the demand of equipment has worked? Is there already some normalization seen? Then also on process solutions, can you talk about the demand across the different modalities? And the last one is on electronics.

So on DS and S, you you talked in the past about different cycles, like infrastructure first, then equipping the fabs. Now it looks like a complete stop of customer orders, which reminds us technically to the situation during the financial crisis. So while visibility for these orders is still very limited, but can you describe how the recovery might look like? Does it start first with infrastructure again? Or is the infrastructure still in place and the current stuff is related more towards equipment?

And also in this context, how must the macro conditions be or what needs to be fulfilled before we see a turn to a better? That’s me. Thank you.

Jean Charles Wirth, CEO Life Science, Merck: Hey, Oliver, Jean Charles speaking. Let me try to answer to the first two questions. So on process, the first one was about our equipment. As I said, roughly 90% of our portfolio is consumable related. So we don’t have a lot of information to share on equipment.

On your second question on the demand, we are marching towards more of the traditional modalities than the novel modality. So you should assume that traditional is closer to our core business.

Kai Beckmann, CEO Electronics, Merck: So on the DS and S question, although I’d just be reminded on three elements of DS and S. We got the services business, which is stable to growing. We got the equipment business, which is kind of a normal sales of new equipment used for new materials, specifically here I want to remind you on the molybdenum precursor which requires a very specific delivery technology. That’s a very important part. And then on top we have turnkey as well as equipment business linked to large projects and some individual large projects.

And we had in the past years an unusual amount of large project business that has peaked that business quite significantly, which is now kind of going back to normal levels. And here we had kind of a very short notice period on the significant delays of these projects and this is what has caused difference in our expectation that you can see. But the underlying business, very important to remember, strategically important, high-tech and as well on a long term growing business.

Florian Schroeder, Head of Investor Relations, Merck3: Okay, that’s helpful. Thank you very much.

Heidi, Conference Operator: Thank you. We will take our next question. The next question comes from the line of Simon Baker from Rothschild and Co Redburn. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck: Hi, this is Dean speaking on behalf of Simon Baker. I have two questions if I may. First question is on the science and lab solution. Is The US NIH impact more modest than expected or is it still too early to see the full effect? And the second question is on the one off items.

It looks like the EBITDA pre miss was entirely down to the one offs in electronics. Can you quantify a little more than in the press release, please? Thank you.

Jean Charles Wirth, CEO Life Science, Merck: Jean Charles speaking. Let me try to answer to the first question on SLS. So we have very modest exposure to NIH funding. Again, if I link it to the previous question on process solution hardware versus equipment or equipment versus consumable, I should say, you should assume that we have the same speed in the lab business. So as such, we have limited exposure or modest exposure to NIH in US.

Helene von Rueder, Group CFO, Merck: Hi. So maybe let’s just zoom out for a moment and take the big picture, because I know this is a messy quarter and quite hard to model. But if you look at it, it’s like we had two negative items this quarter, which came from electronics. One was low double digit, one was mid double digit, and in some it’s mid double digit. One of them we explained, it is basically a reserve we had to take for customer claims, but of course we will turn around and ask our supplier to compensate us for the damages.

What you need to know, of course, if you look at the accounting, the reserve for the customer claims need to be booked immediately, but the remediation from a supplier can only be booked virtually actually if the cash is in the bank. So that’s the first one you need to look at. And let me tell you, it is really truly non recurring items, basically dating back more than ten years ago. Second, you then have the upside, the positive. One is, if you look at the full year, the disposal of the PRV voucher, which also is a double digit positive on the EBITDA side, And you have this item we talked about, the corporate side in Latin America.

Both of them will come now in the third quarter. And on top of that, you have the negative again from FX. If you sum all of these up, you get to the situation where it’s plusminus zero. Sorry, speaking German. So that means if you then look at our EBITDA upgrade, you can see actually the strength of our business and what we have actually done here, because we additionally are compensating for the downside that SpringWorks will bring into Q3 and Q4.

So I hope that gives you some color of how we are looking at the situation and help you sort through a little bit through the mess that we are seeing in Q2.

Florian Schroeder, Head of Investor Relations, Merck: That’s great. Thank you.

Heidi, Conference Operator: Thank you. We will take our next question. The question comes from the line of Dylan Van Haeften from Stifel. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck4: Guys, good afternoon. So just two for me. The first one is on the recent sort of BARDA cancellations and mRNA funding. I know you guys have a presence in the LNP side. I was just wondering, are you aware of any impacts or any downstream impacts here?

And then my second question is just on SLS. We’ve talked a lot about academia, NIH, all this stuff, but you guys call it that generally SLS geographically is flat. And I was wondering, if what we’re seeing is just more of a broad based R and D hesitancy rather than anything policy related at this point, I think Jean Charles, you called out that you expect to kind of end up mid single digit at the end of the year. I was wondering if you could give any color on if we’re maybe reading a little bit too much into policy at this point.

Jean Charles Wirth, CEO Life Science, Merck: So on mRNA, so Jean Charles speaking again, and thanks, Dylan, for the question. On the first one on mRNA funding, as of now, we don’t see major, major impact, a little bit in the labs and services. Concerning the second question on SLS, you are right. We our sales are well spread across different geographies. Call it Americas, one third EMEA, one third Asia, one third.

And as of now, we, as I said, we expect to land the year positively. What I mean is we look we expect to show an organic growth towards our midterm guidance between low single digit to mid single digits at the 2025. So overall, we are quite positive. And again, we need to keep in mind that H2 has a lower base.

Florian Schroeder, Head of Investor Relations, Merck: Looking at the time, I believe we have reached the end of our Q and A session for today. Highly appreciating all of the questions you raised. Now I would like to pass it on over to Belen for some closing remarks.

Belen Garicchio, Group CEO, Merck: Well, only to thank everybody for your participation in our Q2 call. Summarize, we continued on our profitable organic growth path, in this challenging environment that we all know, and we expect to grow, even more pro profitably than expected, in q one, towards the, you know, during the year 2025. So we really look forward to meeting, many of you at the upcoming road shows and and conferences, And I just want to close to wishing you all a good summer.

Heidi, Conference Operator: Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.

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