Merck : Q1 24 Quarterly statement

Quarterly Statement

1st Quarter

2024

Publication of Merck KGaA, Darmstadt, Germany

In the United States and Canada the subsidiaries of Merck KGaA, Darmstadt, Germany, operate as MilliporeSigma in life science, EMD Serono in healthcare and EMD Electronics in the electronics business. To reflect such fact and to avoid any confusion, certain logos, terms and business description of the publication have been substituted or additional descriptions have been added.

This version of the publication, therefore, slightly deviates from the otherwise identical versions provided outside the United States and Canada.

Group

Key figures

€ million	Q1 2024	Q1 2023	Change
Net sales	5,120	5,293	-3.3%
Operating result (EBIT)1	931	1,035	-10.0%
Margin (% of net sales)1	18.2%	19.6%
EBITDA2	1,385	1,491	-7.1%
Margin (% of net sales)1	27.0%	28.2%
EBITDA pre1	1,454	1,587	-8.4%
Margin (% of net sales)1	28.4%	30.0%
Profit after income tax	699	800	-12.5%
Earnings per share (€)	1.60	1.83	-12.6%
Earnings per share pre (€)1	2.06	2.36	-12.7%
Operating cash flow	1,035	853	21.4%
Net financial debt1, 3	7,498	7,500	-
Number of employees4	62,345	64,011	-2.6%

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 March 31, 2024, prior-year figures as of December 31, 2023.
4. Figures for the reporting period ending on March 31, 2024, prior-year figures as of March 31, 2023. This figure refers to all employees at sites of fully consolidated entities.

Group

Net sales by quarter

Group

EBITDA pre by quarter

• This document is a quarterly statement pursuant to section 53 of the Exchange Rules for the Frankfurt Stock Exchange. This quarterly statement contains certain financial indicators such as operating result (EBIT), EBITDA, EBITDA pre, net financial debt and earnings per share pre, which are not defined by International Financial Reporting Standards (IFRS). These financial indicators should not be taken into account in order to assess the performance of the Group in isolation or used as an alternative to the financial indicators presented in the consolidated financial statements and determined in accordance with IFRS.
  The figures presented in this quarterly statement have been rounded. This may lead to individual values not adding up to the totals presented.
  It is our aim to ensure that our communication is inclusive and so we strive to use language that is both non-discriminatory and easy to read. This report attempts to use gender-neutral language, which may not yet be consistent in all instances. Even if masculine forms are used, all genders are explicitly meant. The Annual Report for 2023 has been optimized for mobile devices and is available at https://www.emdgroup.com/en/annualreport/2023/.

Quarterly Statement as of March 31, 2024 __ Course of Business and Economic Position __ Group

4

Group

Development of net sales

The development of Group net sales across the individual business sectors in the first quarter of 2024 was as follows:

Group

Net sales by business sector

						Organic		Exchange	Acquisitions/
€ million		Q1 2024	Share		growth1		rate effects	divestments	Total change		Q1 2023		Share
Life Science		2,144		42%		-12.6%		-1.2%		-		-13.8%		2,487		47%
Healthcare	2,048		40%	10.1%	-2.6%		-	7.5%	1,905	36%
Electronics	928		18%	6.3%	-3.2%		-0.1%		3.1%	901	17%
Group	5,120		100%	-1.2%	-2.0%		-	-3.3%	5,293	100%

1 Not defined by International Financial Reporting Standards (IFRS).

In the first quarter of 2024, the regional breakdown of Group net sales was as follows:

Group

Net sales by region

						Organic		Exchange		Acquisitions /
€ million		Q1 2024	Share		growth1		rate effects		divestments	Total change		Q1 2023		Share
Europe		1,515		30%		-3.6%		-0.5%		-		-4.1%		1,580		30%
North America	1,379		27%	-7.4%	-1.1%		-	-8.5%	1,507	28%
Asia-Pacific (APAC)	1,701		33%	3.9%	-5.4%		-	-1.5%	1,728	33%
Latin America	346		7%	3.4%	3.6%		-	7.1%	323	6%
Middle East and Africa	178		3%	16.8%	-1.8%		-	15.1%	155	3%
(MEA)
Group	5,120		100%	-1.2%	-2.0%		-	-3.3%	5,293	100%

1 Not defined by International Financial Reporting Standards (IFRS).

Quarterly Statement as of March 31, 2024 __ Course of Business and Economic Position __ Group

5

Results of operations

The following table presents the composition of EBITDA pre for the first quarter of 2024 in comparison with the year-earlier quarter. The IFRS figures have been modified to reflect the elimination of adjustments included in the respective functional costs.

Group

Reconciliation EBITDA pre1

				Q1 2024						Q1 2023				Change
				Elimination of						Elimination of
€ million		IFRS		adjustments		Pre1		IFRS		adjustments		Pre1		Pre1
Net sales	5,120		-	5,120	5,293		-	5,293	-3.3%
Cost of sales	-2,111	4	-2,107	-1,973	3	-1,970	6.9%
Gross profit	3,009	4	3,013	3,320	3	3,323	-9.3%
Marketing and selling
expenses	-1,087	9	-1,078	-1,109	-1	-1,110	-2.9%
Administration expenses	-332	43	-289	-358	72	-286	0.9%
Research and development
costs	-581	5	-575	-597	-8	-605	-5.0%
Impairment losses and
reversals of impairment losses
on financial assets (net)	1		-	1	-2		-	-2	>100.0%
Other operating income and
expenses	-79	8	-71	-219	41	-178	-59.9%
Operating result (EBIT)1		931						1,035
Margin (in % of net sales)1		18.2%						19.6%
Depreciation/amortization/
impairment losses/reversals
of impairment losses	454		-	453	456	-10	446	1.6%
EBITDA2		1,385						1,491
Margin (in % of net sales)1		27.0%						28.2%
Restructuring expenses	45	-45		-	44	-44		-
Integration expenses/
IT expenses	17	-17		-	23	-23		-
Gains (-)/losses (+) on the
divestment of businesses	-5	5		-		-		-		-
Acquisition-related
adjustments	3	-3		-	9	-9		-
Other adjustments	9	-9		-	19	-19		-
EBITDA pre1		1,454		-		1,454		1,587		-		1,587		-8.4%
Margin (in % of net sales)1		28.4%						30.0%
thereof: organic growth1														-5.2%
thereof: exchange rate
effects												-3.2%
thereof: acquisitions/
divestments													-

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.

• In the first quarter of 2024, the operating result (EBIT) decreased in comparison with the year-earlier quarter. This was primarily due to the decline in gross profit and was partly offset by the reduction in operating expenses. Consequently, the EBIT margin decreased by around one percentage point from 19.6% in the year-earlier period to 18.2%.
• EBITDA pre, the key financial indicator used to steer operating business, was lower in the first quarter of 2024 than in the year-earlier period. This resulted mainly from an organic earnings decline as well as negative foreign exchange effects. The Group EBITDA pre margin also decreased and amounted to 28.4% in the first quarter of 2024 (Q1 2023: 30.0%).
• Earnings per share pre (earnings per share after net of tax effect of adjustments and amortization of purchased intangible assets presented in the foregoing table) declined in the first quarter of 2024 to € 2.06 (Q1 2023: € 2.36).

Quarterly Statement as of March 31, 2024 __ Course of Business and Economic Position __ Group

6

The following table presents the reconciliation of EBITDA pre of all operating businesses to the profit after tax of the Group:

Group

Reconciliation Profit after income tax

€ million		Q1 2024		Q1 2023
EBITDA pre of the operating businesses1	1,556	1,728

Corporate and Other

EBITDA pre of the Group1

-102

1,454

-141

1,587

Depreciation/amortization/impairment losses/reversals of impairment losses	-454	-456
Adjustments1		-69		-96
Operating result (EBIT)1	931	1,035

Financial result

Profit before income tax

Income tax

Profit after income tax

Earnings per share (€)

-32

899

-200

699

1.60

-23

1,012

-213

800

1.83

1 Not defined by International Financial Reporting Standards (IFRS).

Financial position

The composition and development of net financial debt were as follows:

Group

Net financial debt1

						Change
€ million		March 31, 2024		Dec. 31, 2023	€ million	in %
Bonds	7,839	7,802		37			0.5%
Bank loans	298	283		15			5.3%
Liabilities to related parties	1,168	1,196		-27			-2.3%
Loans from third parties and other financial liabilities	81	68		13			19.3%
Liabilities from derivatives (financial transactions)	41	77		-35			-46.1%
Lease liabilities	525	515		10			1.9%
Financial debt	9,953	9,941		12			0.1%
less:
Cash and cash equivalents	2,220	1,982		238			12.0%
Current financial assets2		236		459		-223			-48.7%
Net financial debt1	7,498	7,500		-2			-

1. Not defined by International Financial Reporting Standards (IFRS).
2. Excluding current derivatives (operational) and contingent considerations, which are recognized in the context of business combinations according to IFRS 3.

Quarterly Statement as of March 31, 2024 __ Course of Business and Economic Position __ Group

7

As one of the three key performance indicators alongside net sales and EBITDA pre, operating cash flow developed as follows:

Group

Operating cash flow

€ million		Q1 2024		Q1 2023		Change
EBITDA pre1		1,454		1,587		-8.4%
Adjustments1		-69		-96		-28.4%
Financial result2		-32		-23		42.1%
Income tax2		-200		-213		-6.1%
Changes in working capital1		-177		-224		-20.8%
thereof: changes in inventories3		-41		-323		-87.3%
thereof: changes in trade accounts receivable3		-64		-116		-45.0%
thereof: changes in trade accounts payable/refund liabilities3		-72		215		>100.0%
Changes in provisions3		40		-8		>100.0%
Changes in other assets and liabilities3		33		-187		>100.0%
Neutralization of gains/losses on disposals of fixed assets and other disposals 3		-8		-		>100.0%
Other non-cash income and expenses3		-5	17	>100.0%
Operating cash flow	1,035	853	21.4%

1 Not defined by International Financial Reporting Standards (IFRS). 2 In accordance with the Consolidated Income Statement.

3 In accordance with the Consolidated Cash Flow Statement.

Quarterly Statement as of March 31, 2024 __ Course of Business and Economic Position __ Life Science

8

Life Science

Development of net sales and results of operations

In the first quarter of 2024, the net sales of the Life Science business sector developed as follows:

Life Science

Net sales by business unit

						Organic		Exchange		Acquisitions/
€ million		Q1 2024	Share		growth1		rate effects		divestments	Total change		Q1 2023		Share
Science & Lab Solutions		1,169		55%		-6.9%		-1.5%		-		-8.4%		1,276		51%
Process Solutions	817		38%	-19.0%	-1.1%		-	-20.0%	1,022	41%
Life Science Services	157		7%	-16.6%		-		-	-16.7%	188	8%
Life Science	2,144		100%	-12.6%	-1.2%		-	-13.8%	2,487	100%

1 Not defined by International Financial Reporting Standards (IFRS).

• The Science & Lab Solutions business unit, which provides products and services to support life science research for pharmaceutical, biotechnology, academic research laboratories and researchers as well as scientific and industrial laboratories, saw an organic decline amid a decreasing demand from pharma companies mainly in North America and China, an overall decreasing demand in China due to the current economic environment, as well as further decreasing pandemic related demand. In general, the performance in the first quarter of 2023 was still driven by higher Covid-19-related sales and a more beneficial economic environment. Therefore, the year-on-year comparison is impacted by a base effect. Including an unfavorable foreign exchange effect of -1.5%, the decline in sales was mainly driven by Asia- Pacific (APAC), followed by North America and Europe.
• The Process Solutions business unit, which markets products and services for the entire pharmaceutical production value chain, saw an organic decrease in sales caused by the continued decline in pandemic- related sales as well as the effects of destocking by key customers. Including an unfavorable foreign exchange effect of -1.1%, net sales decreased across all core regions (North America, Europe, Asia-Pacific (APAC)).
• The Life Science Services business unit, which offers fully integrated Contract Development and Manufacturing Organization (CDMO) and Contract Testing services, recorded an organic sales decline. This was driven by the streamlining of the supply chain of one of our CDMO customers and an organic sales decline in our CDMO activities mainly due to project phasing. Geographically, the decline in sales was mainly attributable to North America and Europe, while Asia-Pacific (APAC) contributed favorably.

Quarterly Statement as of March 31, 2024 __ Course of Business and Economic Position __ Life Science

9

The following table presents the composition of EBITDA pre for the first quarter of 2024 in comparison with the year-earlier quarter. The IFRS figures have been modified to reflect the elimination of adjustments included in the respective functional costs.

Life Science

Reconciliation EBITDA pre1

		Q1 2024				Q1 2023			Change
		Elimination of				Elimination of
€ million	IFRS	adjustments	Pre1		IFRS	adjustments	Pre1		Pre1

Net sales

Cost of sales

Gross profit

Marketing and selling expenses

Administration expenses

Research and development costs

Impairment losses and reversals of impairment losses on financial assets (net)

Other operating income and expenses

Operating result (EBIT)1

Margin (in % of net sales)1

Depreciation/amortization/ impairment losses/reversals of impairment losses

2,144		-	2,144	2,487		-	2,487	-13.8%
-988	1	-987	-999		-	-999	-1.2%
1,156	1	1,157	1,488		-	1,488	-22.2%
-551	5	-545	-568	-1	-569	-4.1%
-112	17	-95	-105	11	-94	0.9%
-95	1	-95	-104		-	-104	-8.6%
-1		-	-1	-1		-	-1
											>100.0%
-20	3	-17	-38	6	-31	-45.2%
377					672		-
17.6%					27.0%		-
207		-	207	212		-	212	-2.0%

EBITDA2		585						884
Margin (in % of net sales)1		27.3%						35.5%
Restructuring expenses	18	-18		-	-		-		-
Integration expenses/	7	-7		-	11	-11		-
IT expenses
Gains (-)/losses (+) on the		-		-		-	-		-		-
divestment of businesses
Acquisition-related	1	-1		-	5	-5		-
adjustments
Other adjustments		-		-		-	-		-		-
EBITDA pre1		611		-		611	901		-	901	-32.1%
Margin (in % of net sales)1		28.5%						36.2%
thereof: organic growth1														-30.3%
thereof: exchange rate													-1.8%
effects

thereof: acquisitions/	-
divestments

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.

• Adjusted gross profit for the Life Science business sector was lower in the first quarter of 2024 compared to the year-earlier period. This was mainly attributable to the sales decline due to the effects of destocking by key customers in Process Solutions as well as plant fix costs amid the continued decrease in pandemic related sales. At 54.0%, the adjusted gross margin was below the year-earlier period (Q1 2023: 59.8%).
• The reduction in gross profit was partially compensated by lower operational expenses. In the first quarter of 2024, the decrease in marketing and selling expenses was mainly driven by cost programs and efficiencies and lower logistics costs, while the decrease in research and development costs was largely driven by project phasing. Administration expenses remained organically largely stable in comparison with the year-earlier quarter. The net position of other operating income and expenses decreased due to an one-time disposal of an asset and cost savings.
• EBITDA pre saw an organic decline of -30.3%, resulting in an EBITDA pre margin of 28.5% in the first quarter of 2024 (Q1 2023: 36.2%).

Quarterly Statement as of March 31, 2024 __ Course of Business and Economic Position __ Healthcare

10

Healthcare

Development of net sales and results of operations

Sales of the key product lines and products developed in the first quarter of 2024 as follows:

Healthcare

Net sales by major product lines/products

						Organic		Exchange
€ million		Q1 2024	Share		growth1		rate effects		Total change		Q1 2023		Share
Oncology		500	24%	19.3%	-3.8%	15.5%	433	23%
thereof: Erbitux®		287		14%		19.3%		-4.3%		15.0%		250		13%
thereof: Bavencio®		186		9%		14.2%		-2.8%		11.4%	167	9%
Neurology & Immunology	419	20%	8.8%	-1.5%	7.3%	390	20%
thereof: Mavenclad®		261		13%		12.2%		-2.0%		10.2%		237		12%
thereof: Rebif®		158		8%		3.7%		-0.9%		2.8%	154	8%
Fertility	383	19%	7.7%	-3.3%	4.4%	366	19%
thereof: Gonal-f®		204		10%		6.8%		-3.5%		3.3%		197		10%
Cardiovascular, Metabolism and	689	34%	4.2%	-2.4%	1.7%	677	36%
Endocrinology
thereof: Glucophage®		221		11%		5.1%		-3.7%		1.4%		218		11%
thereof: Concor®		140		7%		1.6%		-3.6%		-1.9%		142		7%
thereof: Euthyrox®		139		7%		8.9%		-1.7%		7.2%		130		7%
thereof: Saizen®		89		4%		17.0%		-0.2%		16.7%	76	4%
Other	57	3%							38	2%
Healthcare	2,048		100%	10.1%	-2.6%	7.5%	1,905	100%

1 Not defined by International Financial Reporting Standards (IFRS).

• In the first quarter of 2024, the oncology drug Erbitux® (cetuximab) recorded strong organic sales growth in the high-teens percentage range to which every region contributed. The Asia-Pacific region (APAC), in particular China, exhibited strong organic growth as a result of lower pandemic-related sales in the year- earlier quarter.
• In Immuno-Oncology, sales of the oncology medicine Bavencio® (avelumab) grew organically in the mid- teens percentage range in the first quarter of 2024 with nearly all regions contributing. Europe and Asia- Pacific in particular generated favorable growth with organic increases in the double-digit percentage range. This development was mainly driven by further market share growth in first-line maintenance treatment for patients with locally advanced or metastatic urothelial carcinoma.
• Mavenclad®, for the oral short-course treatment of highly active relapsing multiple sclerosis (MS), delivered favorable organic sales growth in the first quarter of 2024. In particular, increased demand in North America contributed to this positive sales performance while all other regions also saw organic increases.
• The drug Rebif®, which is used to treat relapsing forms of multiple sclerosis, generated moderate organic sales growth in the reporting period, which was mainly attributable to positive effects from changes in inventories in North America. Irrespective of the moderate sales growth in the first quarter of 2024, the dynamics in the interferon market such as the persistently difficult competitive situation as well as competition from oral dosage forms and high-efficacy MS therapies remained unchanged. Consequently, sales of Rebif® are expected to decline in the further course of the year.
• In the first quarter of 2024, the Fertility franchise generated strong organic sales growth mainly driven by China as a result of lower pandemic related sales in the year-earlier quarter. Gonal-f®, the leading recombinant hormone for the treatment of infertility, delivered strong organic growth, which was driven by increased demand as well as continued stock-outs of a competing product. Overall, the remaining product portfolio of the Fertility franchise also saw organic sales increases, thus contributing to the strong growth.