On July 31, 2024 Merck, a leading science and technology company, reported organic sales growth in the second quarter of 2024 (Press release, Merck KGaA, JUL 31, 2024, View Source [SID1234645212]). EBITDA pre remained around stable organically compared with the year-earlier figure, which had been increased by one-time effects. Excluding these one-time effects in the year-earlier quarter, EBITDA pre would also have grown organically.
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
"We announced that we would gradually return to organic growth during the course of 2024. The second quarter shows our progress on this journey," said Belén Garijo, Chair of the Executive Board and CEO of Merck. "Our business dynamics as well as our assumptions point to growth also for the rest of the year. We are therefore raising our forecast for 2024 at Group level and for the Healthcare and Electronics business sectors."
Thanks to the good business performance of Healthcare and Electronics, Group sales in the second quarter of 2024 increased by 1.7% organically. Foreign exchange effects, especially from the U.S. dollar, had a negative impact of 0.7% on sales development. Overall, Group sales increased by 0.9% to € 5,352 million.
EBITDA pre decreased organically by only 0.8% and amounted to € 1,509 million despite the higher comparative base of the year-earlier quarter, which included one-time effects. Moreover, a provision of a mid double-digit million euro amount for the termination of the xevinapant program had a negative impact on EBITDA pre in the second quarter of 2024. In addition, negative foreign exchange effects of 2.1% were incurred. The total decrease compared with the year-earlier quarter was 2.9%. Without the one-time effect from a patent agreement in OLEDs with UDC (Universal Display Corporation) in the year-earlier quarter and the xevinapant termination provision, EBITDA pre would have grown in the mid-single digit percentage range in the second quarter of 2024. The Group EBITDA pre margin was 28.2% and earnings per share pre were stable compared with the year-earlier quarter at € 2.20.
On July 31, 2024, Merck completed the acquisition of Mirus Bio, which had been announced in May 2024. Mirus Bio is a U.S. life science company that specializes in transfection reagents for the manufacture of viral vectors. With this US$ 600 million acquisition, Merck is complementing its portfolio for the development and manufacture of novel modalities such as cell and gene therapies.
Life Science: Order intake in Process Solutions continues to recover; other business units deliver organic sales growth
In Life Science, sales declined organically by 3.7% and came in at € 2,258 million in the second quarter of 2024. The main reasons for this were the expected continued inventory destocking by customers of Process Solutions and the decrease in Covid-19-related demand. Sales of Process Solutions were down by 11.8% organically, evolving positively compared with the organic decrease of 19.0% in the first quarter of 2024. At the same time, order intake in this business unit improved both sequentially and in comparison with the second quarter of 2023. Merck expects sales of Process Solutions to recover gradually in the second half of 2024 as inventory destocking by customers comes to an end. The two other Life Science business units delivered organic sales growth in the second quarter of 2024: Science & Lab Solutions by 1.4% and Life Science Services by 8.2%.
EBITDA pre of Life Science decreased organically by 6.1% and amounted to € 655 million. This was mainly attributable to the decline in sales of Process Solutions and the lower share of sales from products with a higher contribution to earnings, partly offset by strict cost management. The EBITDA pre margin of the business sector reached 29.0%. Sequentially, i.e. compared with the first quarter of 2024, both EBITDA pre and the EBITDA pre margin of Life Science increased.
Healthcare: Solid organic growth driven by the Oncology and CM&E franchises
The Healthcare business sector delivered sales of € 2,137 million in the second quarter of 2024. Organically, sales grew by 5.3%. The Oncology franchise, with its cancer drugs Erbitux, Bavencio and Tepmetko, achieved organic sales growth. Sales of Mavenclad for the treatment of multiple sclerosis grew organically by 1.3% compared with the particularly high base of the year-earlier quarter. The organic sales growth of the Cardiovascular, Metabolism and Endocrinology (CM&E) franchise was attributable to various factors, including the market recovery in the area of diabetes in mainland China.
EBITDA pre of Healthcare was € 720 million, growing organically by 4.6% compared with a higher year-earlier base, which was supported by portfolio management. The provision for the termination of the xevinapant program had a negative impact on Healthcare earnings. The EBITDA pre margin of the business sector was 33.7% in the second quarter of 2024.
Electronics: Semiconductor Solutions growth based on market recovery in artificial intelligence and advanced nodes
In the second quarter of 2024, sales of the Electronics business sector grew organically by 7.6% and reached € 957 million. This growth was mainly driven by the Semiconductor Solutions business unit, which delivered organic sales growth of 11.4%. Alongside an increase in demand due to the market inflection for semiconductor materials for artificial intelligence applications and advanced nodes, the business with equipment for customer plants within the Delivery Systems & Services (DS&S) business unit also contributed to this. For the second half of 2024, Merck expects the remaining semiconductor materials market to gradually recover. However, the phasing of the DS&S project business will partly offset this effect.
EBITDA pre of Electronics declined organically by 3.1% against an increased comparative base and came in at € 255 million. The year-earlier quarter had recorded a one-time effect from a patent agreement in OLEDs with UDC. The increased sales in the Semiconductor Solutions unit had a positive effect on EBITDA pre. The EBITDA pre margin of Electronics reached 26.7%. Without the one-time effect, the EBITDA pre margin would have increased compared with the year-earlier quarter.
Merck raises guidance for 2024
For fiscal 2024, Merck is raising its guidance for the Group and for the Healthcare and Electronics business sectors – for both sales and EBITDA pre in each case. This is based on the continued strong performance of Healthcare and by the earlier inflection of the AI and advanced nodes semiconductor materials market in Electronics. For Life Science, the company confirms its previous organic guidance. Merck now expects the following development on Group level:
Net sales: in a range of € 20.7 billion to € 22.1 billion with organic growth of +2% to +5% (previously: € 20.6 billion to € 22.1 billion; organic growth of +1% to +5%) and foreign exchange effects of -3% to 0%.
EBITDA pre: in a range of € 5.8 billion to € 6.4 billion with organic growth of +4% to +10% and negative foreign exchange effects (FX) of -5% to -1% (previously: € 5.7 billion to € 6.3 billion; organic growth of +1% to +7%, FX ‑4% to ‑1%).
EPS pre: € 8.20 to € 9.30 (previously: € 8.05 to € 9.10).
Overview of the key figures for Q2 2024
Merck Group
Key figures
€ million
Q2 2024
Q2 2023
Change
Jan.-June 2024
Jan.-June 2023
Change
Net sales
5,352
5,302
0.9%
10,472
10,595
-1.2%
Operating result (EBIT)1
792
969
-18.3%
1,724
2,004
-14.0%
Margin (% of net sales)1
14.8%
18.3%
16.5%
18.9%
EBITDA2
1,472
1,452
1.4%
2,857
2,942
-2.9%
Margin (% of net sales)1
27.5%
27.4%
27.3%
27.8%
EBITDA pre1
1,509
1,553
-2.9%
2,963
3,140
-5.7%
Margin (% of net sales)1
28.2%
29.3%
28.3%
29.6%
Profit after income tax
605
706
-14.3%
1,305
1,506
-13.3%
Earnings per share (€)
1.40
1.62
-13.6%
2.99
3.45
-13.3%
Earnings per share pre (€)1
2.20
2.20
0.0%
4.26
4.57
-6.8%
Operating cash flow
861
622
38.4%
1,896
1,475
28.6%
Net financial debt1, 3
7,950
7,500
6.0%
–
–
–
Number of employees4
62,176
63,701
-2.4%
–
–
–
1 Not defined by International Financial Reporting Standards (IFRS).
2 Not defined by International Financial Reporting Standards (IFRS); EBITDA corresponds to operating result (EBIT) adjusted by depreciation,
amortization, impairment losses, and reversals of impairment losses.
3 Figures for the reporting period ending on June 30, 2024, prior-year figures as of December 31, 2023.
4 Figures for the reporting period ending on June 30, 2024, prior-year figures as of June 30, 2023. This figure refers to all employees at sites of fully consolidated entities.
Life Science
Net sales by business unit
€ million
Q2 2024
Share
Organic growth1
Exchange rate effects
Acquisitions/ divestments
Total change
Q2 2023
Share
Science & Lab Solutions
1,192
53%
1.4%
-0.5%
–
0.9%
1,182
50%
Process Solutions
871
39%
-11.8%
-0.5%
–
-12.3%
994
42%
Life Science Services
194
9%
8.2%
1.0%
–
9.2%
178
8%
Life Science
2,258
100%
-3.7%
-0.4%
–
-4.1%
2,354
100%
1 Not defined by International Financial Reporting Standards (IFRS).
Healthcare
Net sales by major product lines/products
€ million
Q2 2024
Share
Organic
growth1
Exchange rate effects
Total change
Q2 2023
Share
Oncology
490
23%
9.2%
-2.1%
7.1%
458
22%
thereof: Erbitux
276
13%
8.2%
-2.1%
6.1%
260
13%
thereof: Bavencio
186
9%
6.4%
-1.9%
4.5%
178
9%
Neurology & Immunology
434
20%
-7.4%
0.2%
-7.2%
467
23%
thereof: Mavenclad
266
12%
1.3%
0.1%
1.4%
262
13%
thereof: Rebif
168
8%
-18.5%
0.3%
-18.2%
205
10%
Fertility
403
19%
-0.5%
-0.9%
-1.5%
409
20%
thereof: Gonal-f
227
11%
5.0%
-1.0%
4.0%
219
11%
Cardiovascular, Metabolism and Endocrinology
746
35%
13.7%
-1.6%
12.1%
665
32%
thereof: Glucophage
238
11%
23.5%
-2.6%
20.9%
197
10%
thereof: Concor
158
7%
13.2%
-1.8%
11.4%
142
7%
thereof: Euthyrox
155
7%
19.2%
-0.8%
18.4%
131
6%
thereof: Saizen
97
5%
23.0%
-0.6%
22.4%
79
4%
Other
64
3%
50
3%
Healthcare
2,137
100%
5.3%
-1.1%
4.3%
2,049
100%
1 Not defined by International Financial Reporting Standards (IFRS).
Electronics
Net sales by business unit
€ million
Q2 2024
Share
Organic growth1
Exchange rate effects
Acquisitions/ divestments
Total change
Q2 2023
Share
Semiconductor Solutions
665
69%
11.4%
-0.6%
-0.4%
10.4%
602
67%
Display Solutions
188
20%
-2.4%
-1.5%
–
-3.9%
196
22%
Surface Solutions
104
11%
4.1%
-1.3%
–
2.8%
101
11%
Electronics
957
100%
7.6%
-0.9%
-0.2%