Merck Starts a Challenging 2015 with a Solid First Quarter

Integration of AZ Electronic Materials, favorable currency environment
and organic business drive overall net sales growth of 15.7%
• Organic sales growth of 1.3%
• EBITDA pre exceptionals up 5.7%
• Debt from AZ acquisition largely eliminated
• Merck specifies forecast for 2015
Darmstadt, Germany, May 19, 2015 – Merck, a leading company for innovative, topquality
high-tech products in healthcare, life science and performance materials,
announced today that it generated strong sales growth in the first quarter of 2015.
EBITDA pre exceptionals also rose in the year-on-year comparison.
"We are pleased that all three business sectors grew despite a challenging
environment," said Karl-Ludwig Kley, CEO of Merck. "We continue to expect slight
organic sales growth for the full year as well."
Group net sales rose by 15.7% to € 3.0 billion in the first quarter of 2015 (Q1 2014:
€ 2.6 billion). Organically, sales grew by 1.3%. Reported sales also reflect not only
noticeably positive currency effects of 8.9%, but also portfolio effects due to the
integration of AZ Electronic Materials (AZ) amounting to 5.5%. All three business
sectors of the Merck Group posted sales increases. From a geographic perspective,
organic sales growth was mainly driven by the Asia-Pacific and Latin America regions.
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Merck KGaA
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News Release
EBITDA pre exceptionals, the key earnings indicator of the Group, rose by 5.7% to
€ 853 million thanks to good operational performance and a favorable currency
environment (Q1 2014: € 807 million). Higher research and development spending,
mainly relating to the intensification of immuno-oncology research, dampened EBITDA
pre exceptionals. Higher marketing and selling expenses as well as the absence of
royalty and license income that had already expired in the second quarter of 2014, also
had a negative impact on EBITDA pre exceptionals. Group EBIT rose by 2.5% to
€ 480 million. Net income declined in the first quarter of 2015 by -13.4% to € 282
million (Q1 2014: € 325 million). This figure was lowered by the financing costs incurred
in advance of the planned acquisition of Sigma-Aldrich.
Taking into account the share split in 2014, earnings per share pre exceptionals
amounted to € 1.12 in the first quarter of 2015 (Q1 2014: € 1.15).
Net financial debt declined to € 78 million as of March 31, 2015; in mid-2014, it had
temporarily risen to € 2.2 billion owing to the acquisition of AZ. The rapid and
substantial reduction of debt is evidence of Merck's strong internal financing capacity in
the run-up to the planned acquisition of Sigma-Aldrich. Merck had 39,842 employees
worldwide on March 31, 2015.
Healthcare starts a year of investments
The Healthcare business sector generated organic sales growth of 0.3% in the first
quarter of 2015. Including positive foreign exchange effects of 7.1%, net sales rose
overall by 7.4% to € 1.7 billion (Q1 2014: € 1.6 billion). In the first quarter of 2015,
organic growth was driven in particular by products to treat diabetes (Glucophage),
cardiovascular diseases (Concor) and infertility, as well as by the brand Neurobion,
which is marketed by the Consumer Health business. These increases more than
offset the decline in sales of Rebif, the top-selling product. From a geographic
perspective, organic growth was mainly driven by the Latin America and Asia-Pacific
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News Release
Rebif, which is used to treat relapsing forms of multiple sclerosis, saw a sharp -15.9%
decrease in organic sales in the first quarter of 2015 owing to strong competition from
oral formulations. Amid currency tailwinds of 9.5%, Rebif sales amounted to € 430
million. Sales of the cancer drug Erbitux declined organically by -5.9% to € 205 million.
Following a very strong year-earlier quarter, Merck achieved slight organic sales
growth of 1.7% with the fertility drug Gonal-f. Including positive foreign exchange
effects, sales rose to € 164 million.
Higher spending on research and development, particularly to finance immunooncology
projects, as well as the absence of royalty and license income and the sales
declines with respect to Rebif outweighed the positive currency effects. Consequently,
EBITDA pre exceptionals of the Healthcare business sector decreased by -3.8% to
€ 461 million in the first quarter of 2015.
"In 2015, we plan to invest heavily in immuno-oncology and together with Pfizer we
want to build a strong position in this emerging research area. A Phase III clinical trial
of avelumab in non-small-cell lung cancer was recently initiated. Up to five further trials
that could be pivotal for product registrations are to start this year, also in gastric and
bladder cancer," said Kley.
Life Science starts with a solid first quarter
In the first quarter of 2015, the Life Science business sector posted moderate organic
sales growth of 3.4%, which was primarily driven by the good business development of
Process Solutions. Sales developed particularly well in North America. Including
pronounced positive currency effects of 9.8% and the sale of the Discovery and
Development Solutions business field, Life Science net sales rose by a total of 12.4%
to € 738 million (Q1 2014: € 657 million).
The Process Solutions business area, which markets products and services for the
pharmaceutical production value chain, generated organic sales growth of 5.4%. This
was mainly driven by increasing demand from the biotech sector for single-use and
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News Release
purification solutions. With its broad range of products for researchers and scientific
laboratories, the Lab Solutions business area recorded organic sales growth of 2.2%.
The Bioscience business area, which primarily markets products and services for
pharmaceutical and academic research laboratories, recorded organic sales growth of
Performance Materials benefits from a new liquid crystal generation and AZ
Net sales of the Performance Materials business sector, which comprises Merck's
specialty chemicals business, soared by 53.4% to € 617 million in the first quarter of
2015 (Q1 2014: € 402 million). This was mainly attributable to the additional
contribution to sales by the AZ acquisition (37.0%) as well as significant foreign
exchange effects (14.8%). Sales also saw organic growth of 1.6%, to which all
business units contributed.
The newly formed Display Materials business unit, consisting of Merck's successful
liquid crystals business and the complementary AZ display materials business,
benefited from energy-saving UB-FFS technology used in the liquid crystal displays of
the latest mobile device generation. Yet the established liquid crystal technologies were
also robust, benefiting from the demand for high-end televisions, for example ultra-HD
sets with ever larger display diagonals. The renamed business unit Pigments &
Functional Materials (formerly Pigments & Cosmetics) generated slight organic sales
growth in the first quarter of 2015. Growth drivers were pigments for coating
applications, mainly the Xirallic pigments, which are primarily used in automotive
coatings. The Integrated Circuit (IC) Materials business unit includes the AZ business
with materials used to manufacture integrated circuits. Compared with the year-earlier
figures, IC materials posted a moderate organic increase in sales. Thanks to higher
demand for OLED displays and LED phosphors, the Advanced Technologies
business unit also generated organic growth.
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News Release
Merck confirms guidance for 2015
For 2015, Merck continues to expect slight organic sales growth and a slight portfolio
effect due to the inclusion of AZ for a full fiscal year. This development will be
supported by strong, positive foreign exchange effects. Overall, Merck assumes an
increase in net sales to between € 12.3 billion and € 12.5 billion in 2015. As of the first
quarter of 2015, Merck is disclosing commission income as part of net sales in order to
better steer its business sectors. Yet this has no effect on the forecasts made. Merck
anticipates EBITDA pre exceptionals of between € 3.45 billion and € 3.55 billion in
2015 despite higher R&D spending in the Healthcare business sector, the downturn in
the development of Rebif in the United States and Europe, as well as the absence of
royalty and license income. Business free cash flow of the Merck Group is expected
to lie between € 2.4 billion and € 2.5 billion in 2015.
Forecast for FY 2015 (without taking the planned Sigma-Aldrich acquisition
into account)
€ million
Net sales EBITDA pre exceptionals Business free cash
Merck Group ~ 12,300 – 12,500 ~3,450 – 3,550 ~2,400 – 2,500
Healthcare Organic at the previous
year's level
~1,900 – 2,000 ~ 1,500 – 1,550
Life Science Moderate organic growth ~730 – 760 ~ 450 – 480
Performance Materials Slight organic increase,
strong portfolio effect
~1,050 – 1,100 ~ 850 – 900
Corporate and Other - ~-330 – -280 ~ -420 – -390
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News Release
Merck Group – Key figures
€ million

Q1 2015 Q1 2014

Change (in %)
Net sales 3,041.2 2,628.2 15.7
Operating result (EBIT) 480.0 468.3 2.5
Margin (% of sales) 15.8 17.8
EBITDA 805.4 770.2 4.6
Margin (% of sales) 26.5 29.3
EBITDA pre exceptionals 853.0 807.1 5.7
Margin (% of sales) 28.0 30.7
Earnings per share (€) 0.65 0.75 -13.3
Earnings per share pre excpetionals (€) 1.12 1.15 -2.6
Business free cash flow 360.5 684.1 -47.3
Net income 281.7 325.2 -13.4
€ million March 31, 2015 Dec. 31, 2014
Net financial debt 78 559 -86.0
Notes for editors:
• The conference call for media representatives will also be webcast live as of
9:30 a.m. (CET) (in English and German)
• The corresponding charts as well as further information for the press including
a digital press kit with more information can be found here
• The financial report on the first quarter can be found here
• Merck on Facebook, Twitter, LinkedIn
• Merck photos and video footage can be found here
• Merck stock symbols
Reuters: MRCG, Bloomberg: MRK GY, Dow Jones: MRK.DE
Frankfurt Stock Exchange: ISIN: DE 000 659 9905 – WKN: 659 990
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Merck is a leading company for innovative and top-quality high-tech products in healthcare, life science
and performance materials. The company has six businesses – Merck Serono, Consumer Health,
Allergopharma, Biosimilars, Merck Millipore and Performance Materials – and generated sales of € 11.3
billion in 2014. Around 39,000 Merck employees work in 66 countries to improve the quality of life for
patients, to foster the success of customers and to help meet global challenges. Merck is the world's oldest
pharmaceutical and chemical company – since 1668, the company has stood for innovation, business
success and responsible entrepreneurship. Holding an approximately 70% interest, the founding family
remains the majority owner of the company to this day. Merck, Darmstadt, Germany holds the global rights
to the Merck name and brand. The only exceptions are Canada and the United States, where the company
operates as EMD Serono, EMD Millipore and EMD Performance Materials.