Earnings call transcript: Merck’s Q4 2024 shows modest growth

Merck & Company Inc. (MRK) reported its financial results for the full year 2024, showing a slight increase in net sales and a notable improvement in operating cash flow. The company’s stock experienced a minor decline in premarket trading, reflecting cautious investor sentiment. Despite challenges in some sectors, Merck remains optimistic about its growth prospects for 2025.

Key Takeaways

• Merck’s net sales for 2024 reached €21.16 billion, a 0.8% increase year-over-year.
• Operating cash flow surged by 21.2% to €4.59 billion.
• The company reduced its net debt by over €300 million.
• The oncology portfolio continued its strong performance in the healthcare sector.
• Merck expects organic sales growth between 3-6% for 2025.

Company Performance

Merck demonstrated resilience in 2024, achieving modest sales growth and a significant boost in operating cash flow. Trading at a P/E ratio of 13.73 and offering a dividend yield of 3.48%, the company maintains strong fundamentals. InvestingPro analysis reveals that Merck has maintained dividend payments for 55 consecutive years, demonstrating exceptional financial stability. The company’s strategic focus on innovation, particularly in the life sciences and electronics sectors, has positioned it well against industry peers. The healthcare division, especially the oncology portfolio, remains a strong contributor to Merck’s revenue despite competitive pressures.

Financial Highlights

• Revenue: €21.16 billion, up 0.8% year-over-year
• EBITDA pre: €6.07 billion, up 3.3%
• EPS pre: €8.63, up 1.6%
• Operating cash flow: €4.59 billion, up 21.2%
• Net debt: Reduced by over €300 million to €7.16 billion

Outlook & Guidance

Merck has set its revenue guidance for 2025 between €21.5 billion and €22.9 billion, with expected organic sales growth of 3-6%. The company anticipates growth across its business sectors, with life sciences projected to achieve 2-7% organic sales growth, healthcare 1-5%, and electronics 2-6%. InvestingPro subscribers have access to over 10 additional exclusive insights about Merck’s financial health and growth prospects, along with a comprehensive Pro Research Report that provides deep-dive analysis of the company’s performance and outlook.

Executive Commentary

"We have delivered on our commitment in 2024, returning to profitable growth, and we stay very highly confident on accelerating our profitable growth in 2025," stated Belen Garicchio, Group CEO. Danny Vasohar, Incoming Healthcare CEO, emphasized the focus on achieving mid-single-digit growth for the healthcare sector, while Jean Charles Virts, Incoming Life Science CEO, highlighted the robust capabilities of the life sciences business.

Risks and Challenges

• Competitive pressures in the healthcare market could impact revenue growth.
• The semiconductor market’s slow recovery may affect the electronics segment.
• Potential impacts from NIH funding changes and tariff concerns.
• Supply chain resilience remains a priority amid ongoing global disruptions.

Merck’s strategic initiatives and financial performance in 2024 provide a solid foundation for future growth, with a strong focus on innovation and operational efficiency. InvestingPro data shows the company maintains a strong financial health score and operates with moderate debt levels, while its cash flows sufficiently cover interest payments. As the company navigates industry challenges, its diversified portfolio and strategic investments are expected to support continued progress in the coming year.

Full transcript - Merck (MRK) Q4 2024:

Conference Operator: I am now handing over to Florian Schroeder, 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 warm welcome to everyone joining us for this Q4 and full year twenty twenty four earnings call. My name is Florian Schrader. I’m Head of Investor Relations at Merck. I am delighted to be joined by Belen Garicchio, Group CEO as well as Helena van Goelhoer, Group CFO. For the Q and A part of the call, we will also have with us here in the room, Matthias Heinzfeld, CEO of Life Science Peter Guenter, CEO of Healthcare

Belen Garicchio, Group CEO, Merck: and Kai

Florian Schroeder, Head of Investor Relations, Merck: Beckmann, CEO of ElectronX. As you surely have noticed, we recently announced upcoming changes to the Executive Board. I’m pleased to share that both Jean Charles Dird, appointed CEO of Life Science as of June 1 as well as Danny Barthohar, appointed CEO, Healthcare as of June 1, will join us later today for a brief introduction. With this introduction, I believe we are ready to begin. Over to you, Belen, to kick us off.

Belen Garicchio, Group CEO, Merck: Thank you, Florian, and welcome, everybody, to our full year ’20 ’20 ’4 earnings call. I am starting on Slide number five of the presentation, and my main message on the slide is very clear. We delivered on our guidance and our ambition to return to profitable growth in 2024. Life Science returned to organic growth during 2024 with a continued sequential improvement on quarter in the second half of the year. Healthcare continued to show a strong organic performance and Electronics grew, thanks to AI driven demand in semiconductor solutions.

As we mentioned during our Q3 earnings call, we expected the group to trend in the lower half of the sales corridor and around the midpoint of the earnings corridors. And we have delivered on our expectations for net sales, EBITDA pre and EPS pre, both for the group and for the business sectors. Let’s move to the highlights for the Q4 twenty twenty four on Slide number six. We had a very solid organic a very solid Q4 with organic sales growth of plus 4% for the group. And we delivered strong profitable growth supported by all three sectors.

Health care was once again the best performer with 7% organic sales growth. Life science confirmed return to growth in Q4 with plus two organic sales growth. I am particularly pleased with a very strong order intake in Cluster Solutions, which registered low teens growth sequentially in Q4 and even higher growth year on year. Electronics showed organic sales growth of 2% in Q4, driven once again by semiconductor solutions as the semi market for AI and advanced nodes continues to perform very well. Back to the group.

While sales increased by 4% organically in Q4, EBITA3 achieved very strong growth of plus 20% organically in the fourth quarter. Given our strong cash generation, we have improved our net leverage despite having made significant investment in both CapEx and M and A during 2024. As communicated in our press release this morning, we will propose a stable dividend of $2.2 per share to the annual general meeting on April 25. As a reminder, for the dividend, we aim for a target corridor of 20% to 25% of EPS pre and the proposed dividend of $2.2 per share is marginally above that corridor. As you also see on the slide, we are moving for the first time from guiding on a qualitative basis towards quantitative guidance already with our full year results and expect sales in a range of EUR 21,500,000,000.0 to EUR 22,900,000,000.0 and EBITDA per year in a range of $6,100,000,000 to $6,500,000,000.

More details will follow on the guidance later on the presentation. Let me now provide a more detailed review of 2024, starting with Life Science on Slide eight. The positive news is that we saw growth inflecting in the second half of the year, both for Process Solutions and for Life Science as a whole, as we move past the period of customer destocking. In fact, growth in process solutions inflected already in Q3 and kept growing in Q4. Non repeat COVID-nineteen related sales fell to negligible levels.

And as a result, we saw a headwind in 2024 as sales declined by 3% organically. While sales in SLS, Science and Lab Solutions were flat organically in 2024, Process Solutions declined by minus 6% because of the soft H1 2024. As customer destocking in Life Science has gradually phased out, the EBITDA pre margin improved quarter on quarter throughout 2024, reaching 29.4% in Q4. Our focus in Life Science is clear. We aim to reaccelerate growth towards our mid term growth ambition in 2025.

And this is going to be driven by PS Process Solutions as we expect the recovery to continue in 2025. And we have strong confidence in our mid term growth ambition driven by our innovative portfolio across our businesses and across various growth drivers in the industry. Process Solutions continues to innovate monoclonal antibodies manufacturing with breakthrough products and technologies, especially in the areas of intensification, perfusion, digital solutions and novel modalities. We drive innovation through our own internal capabilities and at the same time, continue to look at external opportunities. The acquisition of Majors Bio is an excellent example in this context.

It is an important step for us towards completing our portfolio in process solutions for vector based cell and gene therapy applications, and it very well complements our existing commercialized portfolio. Turning to Healthcare on Slide nine. Organically, our sales were up 7%. Growth was driven by our oncology portfolio once again, with delivered organic growth of plus 13%, fueled by Erbitux and supported by Tecmeco. Bavencio also grew in 2024 despite growing competitive pressure.

Our CM and A portfolio delivered strong 8% organic growth, supported by contributions across all regions and all segments. Our NNI portfolio, urology and immunology, showed plus 2% organic growth with a strong performance of Mavenclad growing by 12% organically, being offset by the expected decline of rebid. Fertility sales increased 1% organically against very tough comps related to former competitor stockouts. We achieved a strong profitable growth in 2024. Our EBITDA margin our EBITDA pre margin increased by three eighty bps to 35.4%, mainly driven by revenue growth and temporarily lower R and D expenses coupled with a strict cost control.

From a strategic perspective, we have strong confidence in our ability to drive long term growth through internal and external innovation with around 50% of launches to be sourced for external innovation. And as you have seen, we have a very resilient base to build on with our very well established franchises expected to be the backbone of slight growth in the midterm. Moving on to Electronics on Slide 10. Organically, sales grew by 5% in 2024. This was mainly driven by semiconductor solutions, which was up 8% organically as semi materials saw low teens growth fueled once again by AI related demand.

We have grown faster than MSI yet again. MSI is less meaningful this year due to undershipping of oysters. Yet, our internal estimates show mid to high single digit growth in wafer starts, which we outperformed demonstrating the strength of our semiconductor materials portfolio. Displaced Solutions saw a sales decline of 3% organically as our growth areas in premium liquid crystals and OLED only partially offset the decline in general liquid crystals applications. The EBITA pre margin was 25.6%, which represents an increase of plus 60 basic points compared with last year.

This was mainly driven by revenue growth and supported by our 2024 efficiency program. Remember, EBITDA pre in 2023 was helped by a patent agreement with UDC. We continue to see excellent mid- to long term growth prospects of this business, having tech leadership in key high value materials. On the short term basis, while we continue to see growth in demand for semi materials needed for AI and advanced nodes, the broader market still has to rebound. And with that, let me hand it over to Helena for a more detailed review of our financials.

Helena van Goelhoer, Group CFO, Merck: Thank you very much, Helena, and welcome also from my side. I’m now on Slide 12 and will start with an overview of our performance by business sector in Q4. Organic sales growth in the fourth quarter was 3.8%. Our key growth engine was Healthcare, while Life Science and Electronics also contributed. Life Science delivered organic sales growth of 1.9%, which is largely driven by Crozer Solutions.

The 6.7% organic sales growth in Healthcare, it was the largest contributor and Oncology was the strongest franchise. Electronics grew 2.2% organically as our semi business was up five percent. For the group, FX represented a headwind of minus 0.5% on sales, which was mainly seen in Healthcare. Together with a portfolio effect of plus 0.4% for the group in Q4, which was driven by the acquisitions of Miras Bio and Unity SC, sales increased by 3.7% in the fourth quarter. Regarding earnings, EBITDA pre came in at EUR 1,491,000,000.000, driven by very strong organic growth of 19.7%, which is an increase of EUR 198,000,000 on an absolute basis.

Healthcare was a key contributor with an organic EBITDA pre increase of 34.2% or EUR 167,000,000 on an absolute basis with Life Science and Electronics also contributing. FX was a stronger headwind on EBITDA pre than on sales, mainly due to negative FX effects from hedging as well as operationally across various currencies, mainly in Healthcare. And with that, let’s move on to the review by business sector starting with Life Science on Page 13. Overall, Life Science confirmed its return to organic growth in Q4. Sales increased by 1.9% organically.

And Process Solutions was the main growth driver also showing a positive trajectory with sales up quarter on quarter. While Science and Life Solutions sales increased organically comparing with the low base in the year earlier period, Life Science Services was down organically, but yet against a higher base. So looking at Process Solutions first. Sales were up 4.1% organically. Order intake showed very strong year on year growth and increased by a low teens percentage rate quarter on quarter.

And book to bill is now above one. At 2.7, Science and Lab Solutions achieved organic sales growth in Q4. Excluding the SAP migration defect, which impacted the business by a low to mid double digit euro million amount in Q4 of last year, Science and Lab Solutions would have shown a flat performance organically. The overall spending environment remained soft. Regarding margins, EBITDA pre increased by 16% organically in Q4, well above organic sales growth.

The key driver here was an increase in the gross margins against a low base. And with that, I’m now moving on to Slide 14 for an overview of the performance of our Healthcare business sector. Healthcare showed strong organic sales growth and was up 6.7% in Q4. By franchise, there were two portfolios with the strongest growth again: Oncology with 14% organic growth and CM and E was an 8% organic growth. Our NNI franchise achieved organic growth of plus 3% and that was driven by a very strong Mavenclad performance of 18% organically reaching record sales in Q4.

Oncology is mainly driven by Erbitux, which showed a stellar performance of plus 22% again organically in Q4, driven by growth in all major regions. Bavencio was up slightly in Q4 with an organic performance of plus 1%. Similar to the previous quarters, we delivered double digit growth in all regions except North America, where competitive pressures led to an organic decline. Turning to our CM and E portfolio. This continues to show a strong performance with plus 8% organic growth in Q4, supported by all therapeutic areas.

Let’s look at the pipeline. In NNI, we now have all the data from the WILLOW study of Enpateron, both for CLE and SLE cohorts. Even though this SLE pipe did not meet the primary endpoint, the previous success of the CLE cohort and the performance of certain predefined populations in the SLE cohort make us optimistic about the potential for further development. Regarding openaclitus, which we have been informed by our partner about negative top line data from the ongoing Phase II trial, meaning we will not exercise The U. S.

Option. Accordingly, we expect an around EUR 15,000,000, which is EUR 15,000,000 impairment in Q1 twenty twenty five. On EBITDA pre, we showed a very strong six forty basis points margin improvement in Q4. Now that was driven by on one hand by the decline in R and D expenses, both in absolute terms and as a percentage of sales and on the other hand by strong sales growth amid strict cost control. Overall, EBITDA pre amounted to SEK731 million in Q4 and that was up 34.2 organically.

And now on Slide 15 for Electronics. Sales increased organically by plus 2.3% in Q4. Semiconductor Solutions sales were up 5.3% organically, driven by low teens growth in Semiconductor Materials. We are seeing strong demand for differentiated materials driven by trends in AI and in Asia centric mature nodes, while the wider market has not yet recovered. The DS and S business declined year on year in the fourth quarter as anticipated as projects have been pushed at least to 25%.

Sales in Display Solutions decreased by 6% organically as the decline in Liquid Crystals was faster than contributions from growth areas. EBITDA pre amounted to EUR242 million, resulting in a margin of 24.8%, which represents an increase of 300 basis points compared with the year earlier period, which had the lowest EBITDA pre margin last year. This is mainly due to higher volumes driving the gross margin compared with the year earlier period. Therefore, EBITDA pre increased organically by 14.9%. And with that, let’s turn to a more detailed review of our group figures for the full year 2024, which you will find on Slide 16.

On a reported basis, group net sales increased by 0.8% to EUR 21,160,000,000.00. EBITDA pre was up 3.3% to EUR 6,070,000,000.00 and EPS pre increased by 1.6% to EUR 8.63 per share. The group EBITDA pre margin came in at 28.7%, which is an increase of 70 basis points versus last year’s EBITDA pre margin of 28%. EPS pre grew slower than EBITDA pre in 2024. That was mainly due to higher regular D and A and impairments not adjusted for mainly in Healthcare.

Operating cash flow increased meaningfully by 21.2% to EUR 4,590,000,000.00, up from EUR 3,780,000,000.00 of last year. Overall, we were able to further reduce our net debt by more than EUR 300,000,000 in 2024 to EUR 7,160,000,000.00 and that is despite the acquisitions of Miras Bio and Uniti SC, which we closed in 2024. So let me also briefly comment on our reported results. And with that, I’m now on Slide 17. EBIT was up 1% year on year.

That was below the increase in EBITDA pre mainly due to the high level of D and A, in turn mainly driven by the EUR140 million asset impairment we took on Xelena plant in Q2 this year. The financial report result improved by EUR 17,000,000 and that is mainly due to a better interest result in turn driven by lower interest expenses. The effective tax rate came in at 21.2% in the bottom half of our guidance range of 21% to 23%. Please be aware that there are potential changes to tax regulations being discussed on both sides of The Atlantic. The implications of these changes are not yet clear.

Turning to EPS, reported EPS came in at EUR 6.39 and EUR 6.23, which is in 2024, which is a decline of 1.5% year on year amid a higher tax rate compared to the full year of 2023. Now let’s quickly turn to our cash flow statement, which you find on Slide 18. Operating cash flow came in strong at EUR 4,586,000,000.000 and was up by EUR $8.00 2,000,000 compared with the full year of 2023, while profit after tax was down by EUR 48,000,000. The increase in operating cash flow was mainly driven by number one, compared to last year an improvement in other assets and liabilities, which is in turn mainly due to lower bonus payouts and taxes number two, higher D and A versus last year, which is mainly due to higher impairment in healthcare as well as higher regular D and A directly resulting from an elevated CapEx spend over the past couple of years. And number three, a favorable change in other operating assets and liability versus last year, a year which contained a number of non recurring items.

The investing cash flow increased to EUR 3,050,000,000.00, up from EUR 1,890,000,000.00 mainly due to higher cash outs for the announced acquisitions, while the financing cash flow improved in EUR 24 compared with last year. So before handing back to Belen, let me also briefly comment on our balance sheet, which is on Slide 19. Our balance sheet expanded by around EUR 3,100,000,000.0 compared with the December 2023. On the asset side, cash and cash equivalents increased to EUR 2,500,000,000.0 from EUR 2,000,000,000 at the December 2023. Inventories and receivables decreased by around EUR 100,000,000 each.

Property, plant and equipment increased driven by investments. Intangible assets increased due to FX and our acquisitions. And lastly, other assets increased mainly due to the reclassification of Surface Solutions, which is now classified as an asset held for sale. On the liability side, financial debt increased by around CHF 400,000,000 due to net new borrowings, namely the CHF 800,000,000 hybrid bond, which we issued in Q3 of twenty twenty four. Pension provisions were down due to interest rate changes and net equity increased, thanks to growth in profit after tax and currency translation differences.

As a result, our equity ratio strengthened further from 55% at the year end of 2023 to 58% at year end of 2024. And with that, let me hand back to Belen for the guidance.

Belen Garicchio, Group CEO, Merck: Thank you, Selene. I am before the guidance, I am on Slide number 21 to show our progress in sustainability for the year 2024. We are doing this for the first time fully applying the European Sustainability Reporting Standards. As you see on the slide, Merck is on a path to achieving its sustainability ambitions. The amount of people treated with our healthcare products continued to grow and we just recently announced the treatment of the first preschool eight trial with our new formulation, ARPRA SEQUINTEL against cystosomiasis, meaning that for the first time, medication is available for all ages.

In addition, we have made good progress in sustainable patents, supplier management and on a scope one and two emissions. Since 2020, we have been able to nearly half our emissions. And the key reason is the successful rollout of the NF3 abatement technology, which led to a significant reduction in process emissions. We therefore remain confident to achieve our 50% reduction target well ahead of 02/1930. Going on to the guidance on Slide number 23.

We feel very confident to provide quantitative targets for net sales and EBITA pre with our 2024 results today. As usual, we will provide quantitative targets on EPS III as part of our Q1 reporting in May. In that context, we forecast group revenues in a range of $21,500,000,000 to $22,900,000,000 and EBITDA pre in a range of $6,100,000,000 to $6,600,000,000 dollars This is based on organic sales growth between plus 3% to 6%. We aim to show profitable underlying growth and forecast the group EBITDA pre to grow in a range between 38% organically. While for sales, we expect an FX effect of between minus 1% and plus 2%, we anticipate a currency effect on EBITA pre between minus two and plus one.

Moving into Slide number 24 for some additional details on the sectors. We have, as you see, moved to a quantitative guidance for our three business sectors. For Life Science, we anticipate an organic sales growth between plus 2% and plus 7%. For organic EBITDA pre, we guide to a corridor between plus 2% to 9%, thereby expecting Life Science to return to a profitable growth path in 2025. We anticipate the growth of Life Science to be mostly driven by Process Solutions, where we have seen order intake and sales have been sequentially improved throughout 2024.

We also expect a more normal seasonal sales pattern for Life Science overall. Moving to Healthcare, we guide revenue growth between plus one and plus five. We forecast profitable organic growth and guide EBITA3 to grow organically between three percent and nine percent. For Electronics, we anticipate an organic sales development between plus 2% and plus 6% and an organic EBITDA pre development between 39%. We forecast the trend to AI and advanced nodes to continue to drive our growth in electronics, particularly in semiconductor materials, while the general market inflection is yet to come with the timing challenging to predict and this is reflected in our guidance.

Please note as well that our electronics electronics guidance still includes surface solutions. However, we are on track to close the transaction in the second half of this year. And with this, let me thank you for your attention. And Florian, over to you to lead us through the Q and A.

Florian Schroeder, Head of Investor Relations, Merck: Thank you, Belen. With that, we are now ready for the Q and A part of the call with Belen Garricio, Selene van Rutter, Matthias Heinzl, Peter Guenter and Kai Wegmann. We kindly ask all participants to limit her or himself to one or maximum two questions. Heidi, we are now ready to take the first question, please.

Conference Operator: Thank you. We will now begin our question and answer session. Your first question comes from the line of Matthew Weston from UBS. Please go ahead. Your line is open.

Matthew Weston, Analyst, UBS: Thank you very much and thanks for taking my questions. So the first is on, I guess, geopolitics, I suppose, in life science. Matthias, can you walk us through NIH funding exposure for the business and whether you expect that to be a pressure? And also given the focus from the Trump administration on tariffs, can you give us some help on, I guess, geographic location of the supply chain? How much of The U.

S. Do you supply from The U. S? And is there any way you can change that? And then the second question is for Peter on pharma.

We’ve seen the first true biosimilar Erbitux approved in China. Can you tell us how much Erbitux China is of total? And should we assume that Erbitux can’t grow in 2025?

Matthias Heinzfeld, CEO of Life Science, Merck: Yes. Hey, Matthew, it’s Matthias. Let me start with your first two questions. The first one around NH which obviously is a very important question these days. So just to size it right, so within SLS, that segment within Life Science, the segment which will be impacted by NIH is roughly five percent, five percent of total Life Science and roughly around 10% of total SLS, just to size it.

And obviously, we need to see now how that unfolds. Obviously, if there are potential cuts coming that could have an impact. If we look at the history, there was not always the strongest correlation. But apart from that, the question is always also what does it mean for potential buying behaviors of customers in that field by universities. So I think it’s a little bit too early to tell, but just to size it ballpark, it has an impact if it comes and how much it comes, but it’s around 5% of total life science.

Your second question on the tariffs. Look, if I look back the last three, four years, our strategy was clearly to go more to an in region, for region model, right, going away from big centers, supplying the whole world and we have done that obviously in parallel as the COVID situation developed. So we have a very strong footprint in The U. S. We have more than 20 plants.

We have a strong footprint in Europe. We have a high share of in region, full region, both in Process Solutions as well as in Life Science. It’s not 100%, it can’t be 100%, but we feel we are very well covered. We have some options to move obviously production around. Obviously, we have single use in The U.

S. If in Europe, it depends a bit also on the customer demand. But I think from a supply chain perspective, we have now much better global and regionally diversified footprint.

Peter Guenter, CEO of Healthcare, Merck: Yes, Matt sorry, Matthew, your question on Erbitux biosimilars China. So first of all, Erbitux, of course, yes, China is an important growth driver, but actually the brand is very dynamic across the world. Second, China is given a 25% of total Erbutux sales. And then what is important to mention is you mentioned biosimilars in China. That’s actually not totally accurate because the products that have come to the market actually, the first one in June and the second one recently now in January, are actually non comparable biologics.

So the Chinese regulatory authority did not classify them as biosimilar. And that has, of course, relatively important implications in terms of lack of substitution, NRDL listing, VBP, etcetera, etcetera. So we do continue to see growth for Erbitux overall on in 2025. We do not expect biosimilars before 2026. And I just remind you that you need four biosimilars to get into VBP, so we are pretty far away from that.

I hope this helps you.

Kai Beckmann, CEO of Electronics, Merck: Thank you.

Conference Operator: Thank you. We will take our next question. Your question comes from the line of Richard Vossa from JPMorgan. Please go ahead. Your line is open.

Speaker 8: Hi. Thanks for taking my questions. Two, please. One on business development. Obviously, given the context of the interest in swing disclosed interest in SpringWorks, could you remind us about how you’re thinking about allocating the $15,000,000,000 of firepower you have and what you’re looking for in healthcare to accelerate the growth of the business?

Second question, life sciences. Just thinking about the very good order number in the fourth quarter. And I was wondering if you could talk about your expectations on how the orders you think will develop for Process Solutions through the first half of twenty twenty five, through the whole of 2025, if you can, should we think about continued sequential improvement and book to bills above one? Thanks very much.

Belen Garicchio, Group CEO, Merck: Thank you, Richard. Let’s start with your first question. And to address the question to take a step back. First, as you know, we evaluate inorganic growth opportunities to ensure that they do align with the sector strategies, but most importantly with the group’s overall strategy. Let me make it very clear, our priority remains executing on life science M and A.

And accordingly, it should come as no surprise that our plan remains to allocate a substantial percentage of our capital and our M and A firepower, which is precisely your questions to the life science sector. In Healthcare, our inorganic growth strategy is focusing on accelerating external innovation, primarily through later stage in licensing. And that said, we have also mentioned the possibility of a smaller remaining health care limited and this is very important limited to clear cut low risk deals that create value from early on. Overall, I want to make this very, very clear for everybody and reassure all of you that we will remain extremely disciplined in executing our M and A agenda on the basis that I have described and as we have always done. For all the rest, let me take this opportunity to ask you to kindly focus on the ad hoc message that we launched a few weeks ago since we will not be able to provide any additional information on this topic during the call.

Matthias Heinzfeld, CEO of Life Science, Merck: Yes. Richard, it’s Matthias. Then on Life Science and then your order intake question. Indeed, we feel very good about our Q4 momentum, by the way, which we’ve been building over the prior quarters, right, but certainly to be continued in Q4 with very strong sequential order intake growth. The book to bill, which all of you ask quite often about, now solidly above one.

So we expect, if you will, this momentum, the order intake momentum to continue because that will drive our sales obviously. Now to your specific question, it’s a little bit harder to predict obviously every quarter, right? But let’s start with Q1 this year. Throughout the year, I would expect a sequential growth of order intake. Now how much every quarter to be seen, right?

There’s certainly some fluctuation, but the momentum should continue. Now Q4 to Q1, just to keep that all in mind, there’s also a bit of seasonality. I mean certain customers are placing orders to achieve their buying kind of volume. So Q4, Q1, I would look at it a little bit differently, but then certainly Q1 throughout the year, very good continued momentum. I feel very good about that.

And then the book to bill is a ratio out of that. It’s a bit harder to predict because obviously the stronger the sales, even if you have good order intake that way you can come down. But long story short, I think the takeaway for you and all the colleagues on the call, we feel very good about the order intake and the momentum.

Speaker 8: Splendid. Thank you.

Conference Operator: Thank you. We will take our next question. The question comes from the line of James Quigley from Goldman Sachs. Please go ahead. Your line is open.

Speaker 9: Great. Thanks for taking my questions. James Quigley from Goldman Sachs. I’ve got two, please. So one on Life Sciences guidance range.

So it’s reasonably wide as all the ranges are. But at the low end, what are you assuming here? As we think about the subdivisions, it seems like peers in bioprocessing landing around the 5% to 8% range there or thereabouts. Firstly, is this what you’re assuming? And the second and assuming that the LSS is in line with the midterm guidance, this is just that SLS will be negative at the bottom range.

So what are the scenarios for this potential decline in SLS and the bottom end of the range in Life Sciences? And second of all, on Life Science margins, could you give us an idea of the potential drag from the new investments and plants that are coming online? Were there any other impacts like this in the 2024 numbers to think about as we think about the growth year on year? I’m just trying to get a sense of what the clean underlying margin progression could be on a year on year basis within the Life Sciences division. Thank you.

Matthias Heinzfeld, CEO of Life Science, Merck: Hey, James, good to have you on the line. Sure, I’ll address your questions. On the first one, let me unpack it a little bit in terms of what are the key drivers. Some of them are known and of course there’s a few new ones. But hopefully, you all appreciate now that we’re already in this time of the year, give you absolute numbers and indeed initially the range is a little bit broader, but I think you can rest assure as we get more clarity, we will narrow the range, but I think so let me unpack it.

So number one, a key driver is obviously the speed of the recovery. As I said before, we are very confident about the recovery and the better it goes, obviously, the more we go to the upper end of that range. China is the second one. So obviously, we have a certain assumption for the midpoint. But since you’re asking towards the lower end, obviously, if this recovery takes longer, gets more hiccups that could certainly be a further headwind.

And China is to a large extent impacting SLS to a lesser extent, I would say also PS. The third one is R and D spending. We talked about that in prior quarters, left spending levels with pharma companies, again, impacting for the most part SLS. If that doesn’t pick up, right, or is prolonged a little bit more muted, that could have a drag and then moves more to the lower end. So those three, I think we’ve talked about before.

The new one is obviously what your colleague asked before the NIH funding. We need to see how that unfolds depending on that, of course, that could then also gravitate a little bit to the lower end. And then we also talked about the tariffs. I think these are the main drivers and obviously, we are taking actions to mitigate those, but if they are unfolding, they could really become a force towards below the midpoint. On the margin, look, on a high level, again, if you apply the midpoint of the ranges, we expect margin expansion, right.

Midpoint sales 4.5%, midpoint EBITDA 5.5%. So it provides a margin progression. That’s our goal, obviously, also for the following years. In 2025, we have two, if you will, elements to consider. One is, like you mentioned, the additional CapEx projects going live.

I’ll give you one example, actually here in Darmstadt will go live with our membrane line, right. It’s a size of investment, which is important, right, given what we talked before about geopolitics having a more regionally diversified supply chain, this is good strategically, but obviously as you start it up, you don’t fit it up right away with 100%. It has some startup costs, which we need to reflect in the margin. And the other one, and that’s again by design, it has been my big driver. We need to increase R and D spend gradually, right, year by year.

So again, consider that as an investment into the future, but that has short term also some year over year impact on the margin. But rest assured we by the way, the margin is clean, right? There’s no major, if you will, one time effect also on kind of making the margin opaque. The goal is to have margin accretion and navigate obviously all those drivers to

Helena van Goelhoer, Group CFO, Merck: get as

Matthias Heinzfeld, CEO of Life Science, Merck: high as possible.

Speaker 9: Great. Thank you very much and best of luck to both you and Peter in the next chapters. Thank you.

Matthias Heinzfeld, CEO of Life Science, Merck: James, appreciate it.

Conference Operator: Thank you. We will take our next question. And the question comes from the line of Sachin Jain from Bank of America. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck0: Hi there. Thanks for taking my questions. Two, please. So firstly, just back on M and A, Belen, if you could just remind us or Helena of your valuation criteria, so ROIC versus WACC in timelines and timelines for EPS accretion, the deal that you put an adult count on would have been diluted short term. So if you could just remind us of your timelines for EPS accretion given commentary of healthcare value from early on, I think, with your phraseology bill in.

And then secondly, related, Peter, we just remind us that your pharma R and D spend expectations, you’ve talked about 1H being lower than 2H and trending back to the 20s. If you did BD, If the deal you do in healthcare is more commercial versus pipeline, would R and D spend stay in the mid teens? And then I might just squeeze one in. Floren, you mentioned that new divisional CEOs were on the call. I just wondered if they had any introductory comments.

Thanks.

Belen Garicchio, Group CEO, Merck: Hi, Sachi and Luke. I already mentioned and comment extensively on the frame on the strategic frame guiding our inorganic decisions and what are the priorities. So nothing to add from my side. I think that on the financial guide rails that we have and that we have definitely kept impact over the years. I will ask Helena to provide further details on those.

Helena van Goelhoer, Group CFO, Merck: Yes. So Sachin, I think you know them by heart. But let’s go back into it. I mean, it’s like, yes, indeed, we look at accretion IRR above work. We look at financial stability in terms of our ratings.

We look at EPS accretion. And overall, of course, the most important one is like strategic sense. So I think that’s all to be said. Everything intact, everything the same. And I think with that, I would move over to Peter.

Peter Guenter, CEO of Healthcare, Merck: Yes, Sachin, thanks for your question on R and D phasing. So what you should expect is a progressive sequential increase, both in absolute and relative numbers during the year. Actually, this is driven by more activity, for example, in the ADC space, in the DER space, but also the full link coming up to speed of the Cloud MG trial. And this is actually a good sign of the progress that we are making in the pipeline. And of course, the anti SECON5 is very exciting in this respect.

Obviously, the pace of acceleration in especially in the second half of the year will be partly dependent on success of external BD and also to which extent this external BD is clinical development heavy or not.

Belen Garicchio, Group CEO, Merck: Asin, it’s Belen again. On your third point, please allow us to close the Q and A before we have the intro comments from Yantel and Danny, who will join us later on.

Florian Schroeder, Head of Investor Relations, Merck0: Thank you.

Belen Garicchio, Group CEO, Merck: Thank you.

Conference Operator: Thank you. We will take our next question. And the question comes from the line of Emily Field from Barclays. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck1: Hi. Thank you. I’ll just ask two. The first one, you mentioned that platinum use is stabilizing in The U. S.

And bladder cancer. So I was just curious if you are also expecting stable sales for Bavencio in The U. S. In 2025 over 2024 or just how you’re expecting that to develop specifically in The U. S?

And then, I know obviously the NIH point has been discussed many times on the call, but you did mention that the academic markets were already soft in Q4. So I was just wondering if you could confirm within Life Sciences the share of academic and government and regardless of NIH cuts, how are you seeing those end markets for 2025 over 2024? Thank you.

Peter Guenter, CEO of Healthcare, Merck: Yes. So Emily, thanks for your question on Bavencio, Wes. But I also should give you a bit more color on Bavencio Global. So the first point is and that’s important that we see really the platinum use stabilizing in The U. S.

But of course, you know there is a certain inertia between what you see in internal sales and that leading indicator, which is platinum use, which is then followed by Varencio. But we would not see the stabilization of sales of Varencio, yes? And on the other parts of the world, we see that in those countries where you have early access in Europe, for example, where I’m thinking about Germany or France with an early access program. We see, of course, also the platinum share going down a little bit similar to what we have seen in The U. S.

And then progressively as ADTFS gets reimbursed in other European countries, we should expect the same trend in other European countries once reimbursement kicks in. So we’ve actually we’re quite in line with our modeling. And we have seen, of course, also that the EU, whereas it continued to grow in last year with a plus 8%, we have seen that growth slowing down recently. So from a 2025 outlook perspective, we should expect a more challenging Europe amid rising competition also in this region for GetRoots VACCE.

Matthias Heinzfeld, CEO of Life Science, Merck: Emanet, it’s Matthias. On your Life Science question, indeed, we have talked in the prior quarter about a temporary more muted market environment in the lab space in North America. We have factored or have factored that into our view for ’25 and the NIH cut, which has been discussed over the last few weeks, would be kind of a secondary or a second driver on top. Having said all that, our expectation is that SLS globally will grow. Obviously, we need to see then especially how the NIH funding will develop the cuts etcetera, but we have been expecting that the muted lab market development would ease out throughout 2025.

Belen Garicchio, Group CEO, Merck: Thank you.

Conference Operator: Thank you. We will take our next question. The next question comes from the line of Sian Hammer from Jefferies. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck2: Hi there. Just two please. So I know you said that sort of semiconductor market general market inflection is yet to come with timing difficult to predict. But can you just maybe give us some color on the indicators on the broader semi recovery in 2025? And albeit still quite far away, how are you thinking of 2026 given it’s likely a down year on the semi cycle?

And to what extent is there an offset from Display Solutions? Thank you.

Kai Beckmann, CEO of Electronics, Merck: Thank you, Ed. Kaj speaking, taking the electronics question. So how do we see 2025 developing? The strong momentum that we already saw in 2024 from PI advanced nodes will continue into 2025, specifically on the backdrop of our customers adding capacity, unlocking bottlenecks and advanced packaging and transitioning to more advanced nodes. We have heard the announcement of HINT2 or 18A from our customers that adds of capacity and technology opportunity of high value materials.

The wider market, automotive, industrial is still on a comparably low level in most countries. As well as I think the major market for semiconductor devices being in smartphones and in end user computing, they are still waiting for the replacement cycle from the COVID work from home, procurement boom that we had a few years ago. So another dimension for end user compute will be AI chips, so called Edge AI, that will help, of course, to have more penetration of high end chipsets in computers. So this will be starting more towards the second half of the year and well into 2026. So we the current view on 2026 is rather positive since that replacement cycle will definitely span across twenty twenty five second half, ’20 ’20 ’6 full year.

And the data center side of the business will not be much lower going forward since the projections of the new node introductions will go well into 2026 as well. We don’t guide, of course, on 2026. This is just a very qualitative outlook on what in 2026 could happen from an industry perspective.

Conference Operator: Thank you. We will take our next question. Your next question comes from the line of Florent Cespedes from Bernstein. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck: Good afternoon. Thank you very much for taking my questions. Two quick ones, please. First of all, on Tagopal, following the, let’s say, the announcement and the headline results you announced, could you share with us why you are confident to move forward with this product? And if you could give us a little bit more color on the different dimensions, that would be great.

That’s my first question. And second question on Fertility, as we start to see the competition coming back, some color on this environment would be great as well. Thank you very much.

Peter Guenter, CEO of Healthcare, Merck: Yes, Florent, thanks. So two questions for me, I guess. So first on Eantatoren. So what we have already disclosed, of course, is a POC and actually a pretty strong POC in CLE. On SLE, there is indeed a near miss on the primary endpoint, but we see like in many lupus trials, a high placebo response and high variability.

The good news is that we see clear responses in predefined subpopulation, so we can really say that the drug clearly hits the target. Couple of subpopulations, but this is by no means exhaustive. But for example, patients with skin manifestations within the lupus cluster, patients with a strong interferon gene signature or also patients with high storage use at baseline. Overall, we also have confirmation that the drug is extremely well tolerated. And if you take a step back and you go, for example, back to the Safnelo development, which is the AZ drug in lupus, they had actually a very similar situation in Phase II and made it in Phase III by the right adaptations and by smart development.

So yes, definitely, we have some work to do. We are confident that the data warrants further development of the drug. On fertility, so you just have to remember that in HALT one last year, we still had high growth rates because the competitor out of stock returned only gradually during this period. So consequently, now that the out of stock is resolved, we will be still looking at relatively high comps for H1 this year and come into the new steady state, if you will, as of Q3, where we are really confident to get back to mid single digit growth. Perhaps one more point.

If you look at GONALF only, you should look at the fertility cluster in total because we have a very dynamic and positive situation with pelgovirism.

Florian Schroeder, Head of Investor Relations, Merck: Thank you very much, Peter.

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

Florian Schroeder, Head of Investor Relations, Merck3: Thanks, Dylan. Hi, guys. Thanks for taking my question. So just firstly, I’m sorry, another tariff question. So just if we think about tariffs and kind of think about it as a shock and we know what sort of COVID did to the system and we know that stock levels are generally pretty low and there wasn’t a ton of order flushing in the fourth quarter either.

Could we see a dynamic of sort of restocking emerge? And maybe some historical context here is interesting. We know that the end market is not overly fond of big shocks to the system or also of potentially paying tariffs even though I know that in most CDMO contracts it’s reflected. But any thoughts here would be super helpful. And then I’ve got a follow-up.

Belen Garicchio, Group CEO, Merck: Dylan, let me take this question because I understand is this for the group? I guess this is going to be this is a group wide question or are you more specifically targeting life science?

Florian Schroeder, Head of Investor Relations, Merck3: More life sciences, bioprocessing, but I guess broader thoughts would be very welcome as well.

Belen Garicchio, Group CEO, Merck: Okay. So let me comment for the group very briefly and then I will hand it over to Matthias. First of all, look, it’s not that we have incurred on this before, right? And this has been President of The U. S.

Has been quite vocal during the electoral campaign that this could be one of the options. For us, The U. S. Is not only a key market, but it’s our largest business hub globally. We have our biggest percentage of our workforce is in The U.

S. We have 72 sites in more than 20 states. And I see a significant investment, both in R and D and manufacturing in The U. S. So to say that we are a local company in The U.

S, And as Matthias mentioned before, we have localized over the years our supply chain in anticipation of potential trade barriers and potential tariffs. In relation to this, the initial wave of tariffs that are already in place, so Mexico, Canada and China are not impacting us. And obviously, as we better understand the potential scenarios, we are putting in place mitigation plans across the group to cover supply in The U. S. And to stay to meet customer and patient demand in The U.

S. That’s basically our position today. And with this, we believe that it is still premature to speculate what type of types can come to other regions. We are virtually waiting. I can tell you.

I’m preparing.

Matthias Heinzfeld, CEO of Life Science, Merck: Just one addition, Belen and Bill, just on your question. Yes, look, we are well positioned from a network standpoint. I think we’ve talked about that multiple times. The other point is obviously staying close to customers trying to understand if they are considering movement. But maybe just one recent example, we had one small example actually and obviously it’s public right in India where there were tariffs applied not in PS, but in SLS on a specific portfolio, it was last year.

And like you said, that created a little disruption then people including us try to reshuffle their supply chains and then a few weeks better, it was kind of removed the tariff. So the point is, I think we need to also make sure that we’re not overreacting, right, because that could create a lot of disruption. And then to your final point, I think, look, we are ready, right? We are ready to take also additional upside, right, should it come because we talked about before, right, if the trajectory of PS is even stronger, of course, we need to be ready to supply. So we’re ready, we’re engaging with customers.

So far, we have not seen a major kind of reshuffling. But like you said, I mean, I think many customers are running now scenarios and we’re staying close dialogue with them, but we are certainly prepared.

Florian Schroeder, Head of Investor Relations, Merck3: Awesome. Thank you for that answer. That was super comprehensive. And then just one for Kai. So just you spend a ton of time in life science and pharma, but I know that in the second half, there was at least some recomping on projects activity last year, which was a little bit less favorable.

And we’ve seen a lot of projects getting announced. Could you maybe just give us an idea of what the project business is going to look like for next year? And I know there’s typically high visibility there, but just any color there would be super useful.

Matthias Heinzfeld, CEO of Life Science, Merck: Yes. Thank you. As you remember, from 2023,

Kai Beckmann, CEO of Electronics, Merck: we came for a real record year with multiple parallel projects that were very strong. That kind of gave us then, of course, a tougher start in 2024, which again was the second highest year on project and equipment for our company and just moderately below 2023. So that was the timing, the phasing in the different quarters that has maybe given a picture of more variability. The second half was lower than the first half as it comes to projects. And in addition, we have learned from some of our customers that they have phased out on or phased some of their CapEx projects into 2025 and even some of them into 2026.

So this impacts us in the current year. See some variability over the year. We see some delays on projects. But all in all, still 2025 will be on a high level in terms of projects and equipment, similar to 2024 and 2023, maybe slightly below 2024, if we would take that more precisely. So that phasing, of course, is not fully in our hands.

Nothing we can influence. We just depend on the customer project timing.

Florian Schroeder, Head of Investor Relations, Merck3: Awesome. Thank you.

Belen Garicchio, Group CEO, Merck: Thank you.

Conference Operator: We will take our next question. 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, Merck4: Yes. Good afternoon. Thanks a lot for taking my questions. Two on Life Science, please. The first one on order intake.

So can you first describe the dynamics between consumables and equipment? And in this context, also how long does it take to convert these orders into revenues? Second question is at LSS. So the testing business seems to be pretty intact, but it appears to me that over last quarters, the volatility at the CDMO business was more skewed towards the negative side. So can you comment about any forms of meaningful customer losses during this time?

Or would you describe it still as a normal volatility given the scale of the business? Thank you.

Matthias Heinzfeld, CEO of Life Science, Merck: Oliver, thank you. Good questions. On the first one, again, just to frame it, we are 90% consumable business, less than 5% or so is equipment, right, from a pure sales perspective. But on order intake, indeed, we have seen a strong order intake overall, but that applies to both obviously, consumer and equipment. Having said that, equipment has sometimes a little bit more volatility because you have certain larger purchases.

It’s less, if you will, diversified, But the key message is momentum has been building on those consumer equipment over the last quarters. On LFS, you’re right, we have two parts of the business. The testing business, very strong overall throughout last year, call it like a mid single digit, a little bit above that kind of trend line. It fluctuates also a little bit, yes, some exposure to biotech funding or if certain customers have a really a blockbuster running extremely well. So there’s also a little bit of fluctuation, but overall, we feel good about the trend.

CDMO, indeed that business given its focus on the more novel modalities, right, whereby definition you work with a fewer number of customers, where you work with early stage customers, we are depending more on their success. There has not been a significant customer loss, right. Some customers may have some cash limitations, right, then they streamline their programs. We see the impact. The one thing I would like to mention, although I didn’t want to talk too much about COVID anymore, if you look at that business versus Q4 twenty twenty three, that still had quite some COVID revenue because we had some last time by if you will in Q4 twenty twenty three that is if you were distorting a little bit the year over year comparison and makes it even a little more negative.

But in a nutshell, CTS on a good growth trend, very stable, CDMO long term perspective, yes, absolutely clear value proposition, but short term still a bit more volatility depending on customers’ own program progression through the pipeline.

Florian Schroeder, Head of Investor Relations, Merck4: Okay, great. Thank you and all the best for your future.

Matthias Heinzfeld, CEO of Life Science, Merck: Thank you.

Conference Operator: Thank you. We will take our next question. The next question comes from the line of Rajesh Kumar from HSBC. Please go ahead. Your line is open.

Rajesh Kumar, your line is open. Please ask your question.

Florian Schroeder, Head of Investor Relations, Merck5: Hi, sorry. This is Sohra Doprakarakis from HSBC on behalf of Rajesh Kumar. So I’ve got a question on your capital allocation priority. Is your capital allocation priority still more skewed to Life Sciences or is it gradually moving more towards final? Thank you.

Belen Garicchio, Group CEO, Merck: Thank you for your question. I will raise what I said before. Our M and A strategy and capital allocation has not changed. And accordingly, I want to emphasize that our plan remains to allocate a substantial percentage of our capital and our M and A firepower to Life Science as we have people times mentioned. Healthcare, inorganically, we are focusing on accelerating a stem and innovation, primarily through later stage in licensing.

And this is obviously aiming to increase the optionality of our pipeline. We have mentioned the possibility of a smaller inorganic moves in healthcare, though this is going to be absolutely limited to clear cut low risk deals that will create value for from very early on. So rest assured that we will fully comply with this and stay extremely disciplined when executing our M and A agenda.

Florian Schroeder, Head of Investor Relations, Merck: Hi, Di, this is Florian. We would have time for one more question, please.

Conference Operator: Thank you. We will take our final question. And your final question comes from the line of Simon Baker from Redburn Atlantic. Please go ahead. Your line is open.

Florian Schroeder, Head of Investor Relations, Merck6: Thank you for squeezing me in. What I just wanted to really come back to something that’s been discussed before, but ask in a slightly different way. We talked about the evolution of orders in Life Science. I just wonder if you could just give us some idea of how that is going to translate into revenue growth throughout the year. Should we given the performance in Q4, are we expecting to see much back end weighting to 2025?

Any color you can give on the evolution by quarter would be handy. And also the same question for electronics. How should we given where we are in the cycle think about the second half, first half waiting of growth within electronics? Thanks so much.

Matthias Heinzfeld, CEO of Life Science, Merck: Hey, great. Simon, very good. Thank you. Because I think I missed one part of Oliver’s questions I can cover it here. It was about how the orders translate into revenue.

So ballpark, you can think about that the bulk of the orders will turn into revenue within six months. That’s a key metrics we’re looking at. I call it quality of order intake, meaning which portion turns into revenue in three months, three to six months and so on. But this trend is also going in the right direction. It’s a very important metrics and kind of ballpark that the majority will turn into revenue within six months, which is a good trend.

Kai Beckmann, CEO of Electronics, Merck: Simon, let me take the electronics question. So coming from last year, where we had paid quite a very nice picture of quarter on quarter growth where we in the beginning of the year said second half clearly is stronger than the first half. But we don’t underestimate, we had a quarter on quarter growth trajectory over all four quarters last year. And this momentum, specifically in the materials sector, specifically in the area of materials for advanced nodes, that momentum will continue as we now start into node transitions using gate all around technology, using molybdenum as new material, using more sustainable photoresist materials. So that will be kind of a continuous development apart from major inflection points in the wider markets, such as what I explained earlier on end user compute and mobile phone replacements.

So that is independent of that. This is why we believe there’s a gradual development for materials step by step quarter on quarter underneath plus of course the market inflection point that are more skewed towards the second half of twenty twenty five will give us additional support for growth in the second half.

Florian Schroeder, Head of Investor Relations, Merck6: Okay. Thank you.

Belen Garicchio, Group CEO, Merck: Okay. So thanks, Florian, and thanks, everyone, for your continued interest in Merck. We are getting to the end of the call. And therefore, I would like to just leave a key take home message with all of you before I introduce our newly appointed members of the Executive Board. And that message is very clear.

We have delivered on our commitment in 2024, returning to profitable growth, and we stay very highly confident on accelerating our profitable growth in 2025. And now, of course, as we continue to execute on our strategy and for sustainable value maximization. And now before closing the call, it’s my great pleasure to welcome two of our three newly appointed members of our Executive Board, Gintels Berth, who will serve as CEO of Life Sciences starting in June and Dani Vasohar, who will take on the role of CEO of Healthcare as of June as well. So I will now hand it over to both of them for a few introductory remarks, and I would like to ask Gintels to begin. Jean Charles?

Florian Schroeder, Head of Investor Relations, Merck7: Yes. Thank you, Belen, and hello to everyone on today’s call. First, I want to express my sincere gratitude for the warm and supportive messages I received over the last few days. It truly means a lot to me. And a thank you to Mathias for his partnership over the last four years and commitment to ensure a smooth transition.

So let me introduce myself. I am Georges Charles Virts and I have been in the company nearly twenty years. Throughout my career, I led various finance and business leadership roles, mainly in Life Science. Tim Eyestone includes serving as the LASTSEN sector CFO integrating SIM Aldrich and leading the Applied Solutions business unit from 2017 to 2021 and most recently, I led the Science and Lab Solution business unit. With these backgrounds, I’m excited to step into the role of Lab Science CEO.

Lab Science is a remarkable business with outstanding capabilities and extended portfolio, a vast global footprint and amazing professionals. So I move into this responsibility to lead LASANCE with both optimism and excitement. Matthias and I continue to meet regularly and have begun engaging with my new executive colleagues on critical priorities. I am incredibly excited to collaborate with our team across businesses and functions. And let me close by saying that I look forward to meeting and interacting with many, many of you in the near future.

With that, I would like to hand over to Danny. Over to you, Danny.

Kai Beckmann, CEO of Electronics, Merck: Thank you.

Florian Schroeder, Head of Investor Relations, Merck8: Thank you so much, JC. And hello, everyone, from my side. Let me just start by expressing also quite a lot of gratitude to the Merck family for the trust that they place in me. To Peter for his leadership and vision that have strengthened our healthcare business for sure and to our teams around the globe for the huge impact that we have on so many patients. Some of you know me from past interactions, I’m sure, but for those who don’t, I joined Merck Healthcare at the end of twenty twenty as Global Head of Development and have served as Global Head of R and D and CMO since 2022.

Transposition by education and bring two decades of leadership experience in pharma, having worked previously at Novartis, at Teva and also venture capital firm, Cincona. I’m truly excited to take on this new role and would like to share three important messages with you today. First, having closely worked with Peter together, you can expect nothing short of, I would say, a small transition and very reasonable degree of continuity. Second, putting healthcare on what I would define as a solid track to mid single digit growth is a top of mind for me. And for this, we will need to replenish the pipeline, both advancing it internally and from external sources, as we say.

Third, our established franchises will continue providing a resilient backbone. And overall, we’ll remain very disciplined on cost to allow more high quality shots on goal for the pipeline for the growth. So I very much look forward to our future touch points. And with that,

Kai Beckmann, CEO of Electronics, Merck: I’ll hand it back to Melanie.

Belen Garicchio, Group CEO, Merck: Okay. Thank you, Yantel. Thank you, Danny. And with this, I want to once again thank everybody for their participation and look forward to our coming interactions during the roadshows. Goodbye.

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