Earnings Call: Q4 2018

Mar 7, 2019

Dear ladies and gentlemen, welcome to the Merck Investor and Analyst Conference Call on fourth quarter and full year results 2018. As a reminder, all participants will be in a listen-only mode. May I now hand you over to Constantin Fest, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir. Many thanks, Julia, and a very warm welcome to our full year 2018 earnings conference call. My name is Constantin Fest, Head of IR at Merck, and today I am joined by Stefan Oschmann, our Group CEO, as well as Marcus Kuhnert, our Group CFO. During the next 30 minutes, we would like to run you through the key slides of this presentation, and right after that, take all of your questions. Please note that today's call, including the Q&A session, will focus on our Q4 and full year earnings reporting, and I would kindly ask you to be mindful of that. With this, I would like to directly hand over to Stefan. Thank you, Constantin, and a warm welcome to you, ladies and gentlemen, to our full year earnings call. 2018 was indeed a busy year for us. We saw a good operational development in our three businesses. We took the necessary investments to bring Merck back on a profitable growth trend from 2019 onwards. We reached our guidance and divested our consumer health business. Before we dig into the details of our full year 2018 results, let me provide some views on our proposal of last week to acquire Versum Materials for $48 per share in cash. It represents a superior offer to the previously announced merger between Versum and Entegris, and a significant premium to Versum's share price before our announcement. This proposal benefits both our shareholders and Versum shareholders. We believe that an acquisition of Versum would create a deep and complementary portfolio of electronic materials, equipment, and services for the semiconductor and display industry. It would expand our already strong footprint in the U.S. and add to the list of successful acquisitions we have made there, including Millipore in 2010 and Sigma-Aldrich in 2015. We believe that we are the best home for the Versum business, and we remain fully committed to the transaction. Unsurprisingly, we have been hearing from many Versum shareholders about our proposal. I wanted to take this opportunity to address some of the questions we have been repeatedly asked in these conversations. The first question is: now that Versum has rejected your proposal, what are you going to do? We think it is highly disappointing, both to us and to Versum shareholders, that the board was dismissive of our proposal without giving any reasons. Ours is a superior and compelling proposal. The market has said so, and we remain committed to the transaction and have every intention of coming to an agreement with Versum and completing the acquisition. Second question: will you raise your offer price for Versum? We believe our offer provides full and fair value for Versum, including a premium of 51.7% to the undisturbed trading price per Versum share on the trading day prior to the announcement of the Entegris transaction with Versum. It is clearly superior to Versum's acquisition by Entegris. Third: will you consider a tender offer if the Versum board refuses to engage with you? Our response is we have all options on the table for completing an acquisition of Versum, but it would be imprudent to speculate about them. We don't have any further update to our proposal for Versum at this time. Now, let's focus on our results. On slide seven, we summarized for you our 2018 promises, and for you to see that we delivered on each. I'm especially proud that we managed to limit the organic EBITDA pre decline versus the prior year to only -1.6%, despite the headwinds we faced during the year. Be it the ongoing decline of our liquid crystals business or high comparables from the prior year or the investment needs in our healthcare business. On slide eight, you see the regional breakdown of our sales with Asia Pacific and Europe accounting for approximately one-third each and North America for around 25%. Interesting maybe to note is the good growth in North America. The ongoing sales decline of Rebif was more than offset by the strength of our Life Science business, as well as good development of our fertility franchise and Bavencio. To the AGM on the 26th of April, we propose a dividend of EUR 1.25 per share. As you know, our payout aims policy to ensure a sustainable and resilient dividend, and is linked to EPS pre to ensure that our dividends develop in line with our sustainable earnings. Given that our EPS pre reflect the consumer health divestment. Our dividend proposal of EUR 1.25 for 2018 is stable compared to last year, but translates into an increased payout ratio slightly in excess of 24% of EPS pre. I'm on slide 11 now. Healthcare made significant progress in 2018 in three aspects. Firstly, the so-called core business performed very nicely, with about 3% organic growth driven by fertility and general medicine endocrinology. Secondly, our pipeline products, Mavenclad and Bavencio, added another 2.2% to organic sales growth, so that Healthcare posted an impressive organic sales growth of 5.2% in 2018. Thirdly, we had very good news from our pipeline, with Mavenclad accepted by the FDA for review, encouraging clinical data. For example, when you think of evobrutinib or avelumab in RCC first line. Just recently, the announcement of our strategic partnership with GSK re the future development of M7824. Life Science on page 12 had a very strong year. Organic growth was +8.8%, and thus, well above the market average. Process Solutions account for almost two-thirds of the total organic growth in 2018. We completed the acquisition of Sigma-Aldrich and achieved the targeted EUR 280 million synergies. As you know, we do not take the strong demand from customers for granted, but work hard to ensure that our offering is highly innovative and meeting latest customers' requirement in a rapidly growing and highly dynamic market. For Performance Materials, the year 2018 was dominated by the balancing of two fairly opposing trends. On the one hand, to ensure the momentum in Semiconductor Solutions and OLED is maintained, and on the other hand, managing the ongoing decline of the liquid crystals business. The pickup we saw in Q3, and also again in Q4 in liquid crystals, was a nice surprise, but we consider it a temporary effect due to the ramp-up of new panel manufacturing capacity in China. We expect this to last into the first half of 2019 and have reflected this in our guidance accordingly. Performance Materials initiated its Bright Future transformation progress in summer 2018. Since then, it established a new R&D approach and defined clear portfolio roads for each business to steer future investments. Marcus will guide you through the key financials. Thank you, Stefan, and good afternoon from my side. You saw the detailed financials this morning, so I will be brief. You are meanwhile familiar with the FX burden, which lowered our net sales by as much as EUR 563 million and EBITDA pre by EUR 378 million compared to 2017. When you look at the organic development, however, the picture looks very good. Organic sales came in at 6.1% for the full year, slightly ahead of what we had expected still in November, and EBITDA pre declined organically by just 1.6%. With Q4, we delivered on our EBITDA pre-growth guidance, including the generation of income from the active development of our portfolio in healthcare. However, the significant outperformance of our share in Q4 led to additional costs for our businesses, especially for healthcare and Life Science. You know our LTIP program. If you adjust for this effect, the group EBITDA pre-margin would have been in line with the margin level you saw over the first nine months of 2018. I am on slide 16 now. Here you see the impressive organic sales growth in all our businesses for 2018 broken down to the business sectors and also highlighting the currency effects. Stefan has already highlighted the main drivers a minute ago. Maybe one additional word on the currencies. The adverse FX development throughout 2018 hit us in each of our businesses. Given our current hedges, we also incurred hedging losses, which are included in our corporate and other segment. As the euro-U.S. dollar rate has begun to turn to our favor in the last few months, our hedging losses have risen, which is not surprising. We will come to our guidance later in the presentation, but this is certainly a point for you to keep in mind for 2019. Slide 17, a quick word on the reported numbers. Our EBITDA pre-declined by roughly EUR 450 million for the reasons discussed before. EBIT, however, declined by almost EUR 700 million compared to last year. The difference between the two is last year's sale of our biosimilars activities to Fresenius, which led to a disposal gain of 319 million. Net income, as well as reported earnings per share, reflect the divestment of our consumer health business for EUR 3.4 billion to Procter & Gamble, which we completed on the 30th of November. We generated a disposal gain of 2.6 billion before tax and EUR 2.2 billion after tax. Now let us quickly look at the Q4 numbers for the three business sectors. Healthcare posted strong organic sales growth in the first quarter as a good development in all franchises could compensate the sales decline of Rebif and Abilif. Our newly launched products, Mavenclad and Bavencio, added to this. They accounted for almost 50% of healthcare's organic growth and combined reached EUR 54 million net sales in the first quarter. Marketing and selling costs increased, driven by the launch preparations for potential Mavenclad approval in the U.S. We hope to receive a decision in the second quarter. With regard to the long discussed and eagerly awaited one-time income, I can confirm that we generated approximately EUR 110 million from active portfolio management measures. In our annual report, you will find the full details. A number of the transactions we had on the radar screen during 2018 actually materialized in the fourth quarter, mainly in relation to the out-licensing of certain molecules, for example, the transaction with Vertex or the transfer of certain rights, such as our announcement with Intrexon. Switching to slide number 19, Life Sciences organic growth in the first quarter was quite impressive, with 8.8% organically on top of an already strong prior year quarter. This growth was driven by all businesses and regions, yet again with Process Solutions in the mid-teens and Research Solutions and Applied Solutions growing in the solid mid-single digit range. In line with this strong momentum, marketing and selling costs rose quite substantially compared to the previous quarters but were stable in relation to net sales. The aforementioned effect of Merck share price outperformance in Q4 had a visible effect on Life Sciences EBITDA pre. This is also the main reason why Life Science Q4 EBITDA pre was probably a bit below your expectations this morning. Without the LTIP effect, Life Science EBITDA pre-margin would have been in line with the level achieved in the first three quarters of 2018, despite our continuous investments in e-commerce and building our strategic initiatives. On slide 20, Performance Materials actually outperformed with organic sales growth of 7.8% in Q4 2018. Yet again, Semiconductor Solutions and OLED continue to grow very nicely, in line with the previous quarters. Our liquid crystals business continuously benefited from the ramp-up of panel manufacturing capacity in China, which we see as a temporary effect, while Surface Solutions was somewhat softer in Q4 on the back of a slower automotive market, especially in Asia, but also in Europe and North America. As a result of the higher sales level in Q4, EBITDA pre also came in stronger than expected. The margin development mainly reflects the business mix given the sales dynamics. Our balance sheet remains in solid shape and now reflects the sale of our Consumer Health business. Our equity ratio now stands at 47%, well above the September 2018 numbers due to the CH book gain. Net financial debt decreased to EUR 6.7 billion by the end of December, and our net debt to EBITDA pre-ratio dropped below two, now standing at 1.8, which was a target that we aim to achieve by the end of 2018. On slide number 22, our operating cash flow in Q4 was solid with EUR 741 million and the divesting cash flow contains the EUR 3.4 billion gross cash proceeds for Consumer Health. I now hand back to Stefan for the guidance. Thank you, Marcus. We promised you already one year ago that 2019 would be a year of profitable growth. We deliver on this promise and expect moderate organic net sales growth for 2019, mitigated by a slightly negative currency effect to the tune of -1% to -2%. For EBITDA pre, we expect strong organic growth in the low teens. The impacts from the adoption of the new standards on lease accounting, IFRS 16, are included in this guidance and lift EBITDA pre by roughly EUR 130 million. The FX headwinds for EBITDA pre are forecast to be in the range of -3% to -4%. Let me give you a couple of additional details. Firstly, we see the average euro-U.S. dollar rate for 2019 at 115 to 120. The FX headwinds will be mainly attributable to the unfavorable development of several emerging market currencies, particularly in LATAM, albeit this burden will most likely ease in the second half of 2019. Thirdly, Marcus indicated already we expect FX hedging losses in 2019. Corporate and other costs should therefore remain in the EUR 360 million to EUR 400 million range. Fourthly, our guidance is based on a constant portfolio assumption. Slide 25 will give you an overview of the key drivers and underlying assumptions for 2019. With the exception of our recently announced collaboration with GlaxoSmithKline regarding the development of M7824. As well as the forementioned IFRS 16 effect, it should contain little surprises for you. Healthcare should see strong sales contribution from Bavencio, and particularly from Mavenclad. Note that we have included first sales from a potential approval of Mavenclad in the U.S., which we expect for Q2 2019. As a result, Mavenclad is expected to reach up to mid-triple digit sales in 2019. Important to note further, that we consider milestones and income from the management of our pipeline as part of healthcare's operating business. Life Science remains on its solid path, driven by good organic sales growth and margin progression. For Performance Materials, we expect a moderate organic sales decline and an organic decline in EBITDA pre in the high single digits to low teens. With that, now to your questions. Allow me to make the friendly reminder, please let us focus on our results, not the Versum proposal. Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial star and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial the hash key to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. Speakers, are you ready for the first question? Yes, please. The first question does come from the line of Matthew Weston from Credit Suisse. Your line is open. Please go ahead. Thank you for taking my questions. Two, please. The first on, excuse me, Mavenclad U.S. I presume you are probably now in labeling discussions with FDA. So could you give us an update as to whether the profile that you are hoping for is in line with those discussions? Can you also confirm that there will be no advisory committee for Mavenclad in the U.S.? Also, Marcus, I think at a recent broker conference, you said early Q2 as the target PDUFA date. Can you reconfirm that or give us some color within that Q2 timeframe? Secondly, I am sorry, this one is going to have lots of numbers in it, but it is about healthcare guidance. It is to do with the gap between 4% or whatever, mid-single digit organic sales growth, and then the mid-20% EBITDA growth. If I work that through, it implies essentially an incremental uplift in EBITDA of about EUR 350 million. You already booked just over EUR 100 million of portfolio management, as you call it, in 2018. That essentially means EUR 450 million that we need to find. You have told us EUR 100 million from GSK. You have told us Erbitux royalties ex Japan go away. We estimate that is EUR 50 million. I do not know whether you can comment. You have told us EUR 40 million from IFRS 16. That essentially implies EUR 200 million-plus of further portfolio management. Can you outline, are those numbers remotely accurate? What we should assume in terms of Bavencio milestones on the Inlyta approval, and what other areas of portfolio management could generate more than EUR 100 million of income? Thanks for your question, Matthew. Markus here. I will start with the last one. I think your calculation is by and large, correct. The EUR 100 million GSK deferred income is confirmed. That is what we said during the call. The amount that you mentioned for the Lilly topic is also ballpark-wise, by and large, okay. EUR 40 million IFRS is also correct. Do not forget that we would see a significant ramp up, especially on Mavenclad. Stefan has said, I think that we have included Mavenclad sales and the assumption of an approval, in the second quarter in our guidance. There you should expect, let us say, an effect. However, I must say the effect will be mostly visible in sales. The bottom line effect will be at least in 2019, very much limited. For completeness reasons, I want to mention it here as well. Nevertheless, we would also have some progress on organic sales. On the other topics, on the portfolio management topic. What I can tell you is that we are factored in a milestone payment for the approval of renal cell cancer for Bavencio, which we expect to happen in June. This is included. Also, when you check the latest news on BioMarin, we are most likely also eligible to a milestone payment in that respect. As you know, we are working always on a couple of measures, and the one or other might come through in 2019, as it was the case in 2018. By purpose, we do not want to disclose certain things we are still working on, but you can assume that we have a basket of initiatives and the one or other will get through, and I hope that you might have gained a little bit more confidence with the successful delivery of the EUR 110 million in 2018, where we also said it is not just a partnering topic, we are working on other things as well. Finally, the things were materializing and were helping us to achieve the guidance in full respect that we gave to you. Marcus, can I just interject there before answering the Mavenclad U.S.A. question. On Bavencio, previous milestones, as I recall, have been somewhere around EUR 50 million or thereabout. Is that reasonable for the Inlyta assumption? And then your BioMarin, your last milestone that you received, I think, was EUR 60 million. Is that again, a reasonable assumption for what could be due on those two topics? The first one is by and large, reasonable. It's a little bit lower than EUR 50 million in euro terms. The BioMarin topic, I think, out of my mind, is a little bit higher than what you said. Many thanks indeed. Matthew, let me answer your Mavenclad U.S. regulatory question. I am absolutely certain you will appreciate my laser precision of my response. Mavenclad U.S. is on track. We perceive positive vibes. We have no indication of the need for an advisory committee so far, and we are on track for a Q2 feedback. Many thanks indeed. Thank you. The next question comes from the line of Richard Foster from JP Morgan. Your line is open. Please go ahead. Hi. Thanks for taking my question. Two questions, please. Firstly, just on Mavenclad and Bavencio sales in 2019. I think you have provided 2018 guidance on the size or the growth of those. Obviously, we have long-term guidance, but perhaps you might be thinking about filling in some midterm guidance for 2019 for both those products. How big do you think they can get in 2019? The second question, the Life Science guidance for growth is slightly above market and market being around 4%. Clearly there was very strong growth this year towards the higher single digit range, 8%-9%. Maybe you could talk about the burdening factors that you are seeing that could lead to a slowdown in terms of the growth in Life Science. It seems like one of the big growth drivers around bioprocess is probably still in the double-digit range of growth and remaining strong. Perhaps you could give us some comfort or some color there. Thank you very much. Okay. I would start with your first question, Richard. On Mavenclad, as we said, we affected in the guidance an approval in the U.S. in the second quarter of 2019. If this is going to happen, we are basically ready to immediately enter into the market, and thus we believe that the sales contribution from Mavenclad in 2019 will be in the mid-triple digit million euros from Mavenclad. For Bavencio, we think that we will end the year 2019 a little bit higher than 2018, namely in the high double digit million euros. This is our guidance for 2019 for the two products. Yeah, touching on Life Science growth, as you can imagine, to predict market growth in the different Life Science business is a rather complex thing, and we've been okay with, if you look at our track record at predicting this. We have the Research Solutions, Applied Solutions. Growth is a more steady factor. It depends on all sorts of government actions, so we must always use a certain degree of prudence there. When it comes to Process Solutions, this is obviously very much dependent on biopharma, biotech pipelines, and on volumes, but we feel okay-ish with regard to predicting this. Our forecast is relative to market growth. We then obviously need to translate that into numbers, but we would adjust if market growth develops differently. Let me just reiterate, we said for Life Science, organic growth slightly above 4% per annum, the annual medium term market growth and all businesses contribute. We see no weakness. Could I just follow up on the MAVEN study? That's a total U.S.-Europe number. Yes Marcus? Yeah. Thank you very much. Yeah, worldwide. Sorry, Richard, it's worldwide. It's not only U.S., Europe, because we have meanwhile approvals also in other countries outside of Europe, so it's a worldwide number. Thank you. The next question comes from the line of Wimal Kapadia from Bernstein. Your line is open. Please go ahead. Great. Thank you very much for taking my questions. Wimal Kapadia from Bernstein. Just first on Bavencio in renal cell carcinoma. Now that we've seen all the data from yourselves and the KEYTRUDA study, how competitive do you see your profile? It seems as though KEYTRUDA has a slight edge with respect to efficacy, and given that the product is widely used in other indications and the fact that Opdivo-Yervoy combination has already taken about 30% of the first-line share in renal, how do you think Bavencio will shape up in the indication? Then just on Performance Materials, given the benefit that you've seen this year in liquid crystals from China, how confident is management that 2019 is actually going to be the trough year? If we look at wafer shipment forecast, there seem to be, in terms of growth rate, a deceleration in growth between 2019 and 2020. Whilst OLED continues to expand quite nicely, I suspect it's still quite low margin, and Surface Solutions is still quite a slow growth business. I guess I'm just trying to understand how management are thinking about the decline in LC in 2020, and will that offset the growth elsewhere in the portfolio from a top line and margin perspective? Thank you. Thanks, Wimal. I will take your second question first for the PM one. Honestly, at the moment, we have no reason to deviate from the midterm trend that we have outlined in our communication in July 2018, which says that 2019 will be the trough year. We have seen an unexpectedly good H2 2018 that will also most probably reach into 2019 in, let's say, at least most probably during the first three to six months. The second half in 2019, according to our current assumptions, will be much weaker. That means we would have a strong half year in 2018 and a strong first half year in 2019, but all in all, we believe 2019 will be slightly below 2018. 2020 then shall show moderate growth on the top line and a margin stabilization of around 30%, which inevitably means also a slight increase in EBITDA pre. This is our current belief. We do not yet know exactly when this expected swing back will hit us. We currently believe might be around mid of this year, and we also do not yet know exactly how strong it will be. For the time being, our latest best assumption is to confirm the story that we have given to you in July, and that is basically incorporated in the guidance that you have in front of you. That's great. Could I just follow up very briefly in terms of OLED margins. In the past, very recently, you said in terms of OLED being now breakeven, where are we today and how should we expect that to ramp over the next 12 to 18 months? For OLED, it is right. The very strong and favorable sales development has brought us, in the meantime, in positive territory. You can imagine that we do not disclose exact margin levels, but we have successfully passed the breakeven point meanwhile. More OLED sales, basically, when this growth momentum continues, would also mean further margin progression because here we clearly have a situation where the volume growth significantly outpaces the price declines that we also see in the OLED sector. As long as we see those very nice top-line momentum, we will see further margin progression in OLED. However, to be very clear, we are far away from the levels that we still enjoy in liquid crystals. Vimal, I am coming to your question on Bavencio. First of all, let me state that we have a lot of confidence when it comes to our data. The data shown at ASCO GU has reinforced the consistency of the PFS and the ORR results, and that across all patient subgroups. That means including patients with favorable, intermediate, and poor prognosis, as well as those with PD-L1 positive or negative tumors. Very important factor. Response rates were almost doubled. That was 51% for Bavencio plus Inlyta versus 26% for SUTENT, and median PFS extended by 5.4 months. So 13.8 months for Bavencio plus Inlyta versus 8.4 months for SUTENT and compared with the current standard of care. We also think that an important takeaway is that an IO plus TKI regimen will become a new standard of care in first-line renal cell cancer. Also, please note that more mature data with a longer follow-up for Bavencio and Inlyta will be communicated after the upcoming interim analysis this year. Market success is going to depend on the quality of the data, and it is going to depend on the quality of commercial execution. We think that especially the Pfizer sales force is a power to reckon with in renal cancer, and they have extensive experience through Inlyta. Great. Thank you very much. Thank you. The next question comes from the line of Sachin Jain from Bank of America. Your line is open. Please go ahead. Hi. Sachin Jain from Bank of America. Two topics please. Firstly, on Mavenclad. Based on your 2019 guidance of mid-triple digits, you are getting towards the bottom, I guess, of your prior peak sales guidance of EUR 500 million to EUR 700 million, which is obviously just ex-U.S. So one could assume that once you have the U.S. approval officially, you would look to update that peak sales. The U.S. market is obviously a lot bigger than Europe, so should we be fair to think about when you do update that peak sales, it reflects the existing U.S. European market split, or do you assume a lower share in the U.S.? So a broad question on Mavenclad. And the second question is on BTK, just around some comments you made on the wire, Stefan, regarding looking for partners in MS. I just wonder if you could just clarify whatever was said to media in terms of prior expectations of looking for a financing deal versus a strategic partner and looking at all indications versus just MS, and if we should be thinking about a deal, the timing versus the RA and SLE data, which is towards the end of this year. Thank you. Sachin, so on Mavenclad peak sales, you remember we said EUR 500 million to EUR 700 million peak sales EU. U.S. peak sales will depend entirely on the exact label structure. We will update once we have the label. On BTK partnering, we have had, what can I say? We have been more general with regard to our partnering assumptions prior to the announcement of the GSK deal on TGF-beta trap. The successful signing of the GSK deal gives us more flexibility. I said this morning that when we were talking about partnerships in general, that we sometimes we need a partner not only for financial risk reasons, that we also need a partner to add capabilities in clinical and regulatory in development. And what I was trying to say is that in the field of MS, that is something we do not really need. We are really very capable of managing that indication. There are other indications such as RA or so where we would have no commercial presence. This is a rather complex field, and basically what I was trying to say this morning was, we may, we may not. We don't say that we don't partner, and we don't say that we will partner. What is very important in this whole thing is that any potential partnering discussions must not compromise our phase III study initiation. We're fully behind that, and we're driving this at full speed. Can I just come back on Mavenclad? I understand peak sales, you want to wait for the label, but obviously you've assumed some form of label for the 2019 launch. So within label expectations, where is that mid-triple digit number? Is there upside, should the label be better? Or is there risk, should the label be worse? Just to get a bit of flavor around that. Thank you. It's a bit early, Sachin. Fair enough. Thank you. Also, I didn't answer the question when it comes to the publication of the BTK readout. The MS, the 48-week data are confirmed for AAN in May 2019, and we will, after the publication of the 48-week data, we will communicate the study design for phase III. Your next question comes from the line of Michael Leuchten from UBS. Your line is open. Please go ahead. Thank you for taking my questions. Two questions please. One on Life Science and one briefly going back to Mavenclad, I'm afraid. On Life Science, obviously continues to perform very strongly. I was just wondering if you could talk about price components in the top line as the industry continues to perform strongly. Are we seeing price creeping into the mix as a negative as the industry is starting to compete for market share? Any color would be very appreciated. Then on Mavenclad, given your pay-for-performance contracts in Europe, how is that factored into your expectations for 2019 and how will you book those patients who have been treated don't meet the criteria of treatment success and you then having to reimburse the paying parties for those patients? Thank you. Michael, I will take your questions on Life Science. At the moment, we are clearly in a growth market, driven by a very robust demand for monoclonal antibodies. We are benefiting from the breadth of our portfolio, from our e-commerce platform, and from the relatively low share in the entire value generation in the supply chain of our customers. So low share of the price of our products, which gives us a certain pricing power. That being said, we see positive pricing effects in our portfolio across all of our businesses. I cannot or will not disclose the price volume split obviously, because we are not talking about that. But for us, it's similar to the healthy conditions that we currently see in the market. There's no reason to doubt that this is going to change in the foreseeable future. When it comes to the somewhat innovative Mavenclad pricing outcomes based arrangements that we have in Europe, we think this is clearly a way forward. We are not the only company who has such deals with European payers. I think it is really a very adequate measure to ensure that the right patients receive the right treatment, and such value-based schemes could also help to efficiently use scarce healthcare resources. Our industry is advocating such measures in other geographies too. We do not comment as a matter of principle on details behind these schemes, but you can rest assured that they have been factored into our guidance. There is a positive aspect of this whole thing because they come very close to registers, and they are actually helping patients to achieve higher degrees of adherence to medication through reminder systems, for instance. Thank you. Thank you. The next question comes from the line of Gunnar Romer from Deutsche Bank. Your line is now open. Please go ahead, sir. Gunnar Romer, Deutsche Bank. Thanks for taking my questions. The first one would be again on Mavenclad. I am not sure whether I missed it, but can you comment on the U.S. contribution in the mid-triple digit number that you expect for the current year? Would that be already a triple digit number or would that be more likely a double digit number? Any comment on that would be very helpful. Second question would be on the 2019 guidance, in particular, your EUR-USD assumption which seems quite conservative compared to current spots. I was wondering whether you can provide us with an indication of the effects on sales and EBITDA based on current spot because I would assume that is less than the 1%-2% and 3%-4% respectively. Last but not least on Life Science, specifically the competitive environment here. Clearly, we've heard of the recent acquisition of GE's biopharma business by Danaher. I was wondering whether you can comment on the potential implications, if any, to your business as well as the potential response, including the need, desire, and ability to strengthen the franchise organically or through acquisitions. Any comment around would be very helpful. Thank you. Maybe I start on Mavenclad U.S. It would be really nice if I could comment on this right now because that would mean that we've had approval already. You have to bear with us until we have approval and then we will update the information that we provide to you. On the Life Science competitive environment, what can I say? It's obviously a significant event. No doubt that this is going to be a formidable competitor. However, it's not really appropriate to comment on the strategy of our Life Science business with regard to that at this stage. We shall see how the antitrust authorities are going to react. This is a deal, obviously, we're following that very closely. What it shows is that we actually took the right decisions to get so deeply into this space. This deal shows the attractiveness of the bioprocessing space where we are a globally recognized solution provider and our offering is very broad across modalities from monoclonal antibodies to novel therapies, from reagents to manufacturing to testing. This is a hot industry and we are very happy to be in it. Gunnar, I take the question on the currencies. We also see that the currency guidance deviates a bit from the current spot rate, especially when it comes to EUR-U.S. dollar. Allow me one comment in advance before we enter too much into FX discussions at this early point in time in the year. It was exactly the purpose to avoid these kinds of discussions or the deep dive into these topics when we decided last year to introduce an organic guidance because we do not have a crystal ball. Of course, the assumptions that we have given in our March guidance now look conservative given the spot rates, but we have seen a lot of developments where currencies can significantly go down the drain suddenly. Think about geopolitical risks. Think about the looming risk on trade wars between U.S. and China, et cetera. For the time being, we stick to the assumption of 115 to 120 when it comes to EUR-USD relationship. In case this change, we will give you an updated number in May and subsequently in August and November. I can assure you that we would be much more, how shall I say, much more resilient before we will alter our organic guidance because this is what matters and this is really what we are committed to. Allow me one more comment. Please do not focus too much on the EUR-U.S. dollar guidance. Also, as you know, we have a wide basket of currencies and do not forget of the emerging market currencies, which have shown really a very, I would say, painful development over the last couple of months. Your final question, current spot effect. If we would make the calculation on our numbers with the current spot rates, I confirm we have an upside in sales and in EBITDA. Thank you very much for your comments. Just a quick follow-up on Mavenclad. Obviously, I appreciate that the approval is outstanding. I was just curious whether you can comment on the contribution that you have factored into your guidance because you said that the three triple digit number would include a contribution from the U.S., just on your assumption, whether you can provide any additional color here. I mean, these assumptions are made based on different scenarios of label structures with different probability adjustment. Either I take you in deep detail through this or I say nothing. I prefer the second option. All right. Thank you. Thank you. The next question comes from the line of Joe Lockey from Morgan Stanley. Your line is open. Please go ahead. Thank you very much. Joe Lockey, Morgan Stanley. A couple on pharma, please. First, forgive me if I have missed it, but I think the EUR 2 billion target for combined Bavencio and Mavenclad sales in 2022 is missing from your slides today. Do you still have that ambition? If so, can you disclose roughly how much you think is going to come from Bavencio? Second on evobrutinib, I think you told us roughly a month ago that the phase II-B data readout in RA was expected in Q3 this year. I think the trial is due to finish in June. It seems to be missing from your catalyst calendar in the slides today. Has there been anything changed in that trial to cause the delay? Thank you. When it comes to the EUR 2 billion target, your assumption is correct that this is maintained. We do not comment on specific contribution of Bavencio in this context. Thank you. On evobrutinib in RA? Yes. On the RA data, the top-line results are expected in late 2019. Sorry about that. Okay. Thank you. Thank you. Your last question comes from the line of David Evans from Kepler Cheuvreux. Your line's open. Please go ahead. Thanks for taking my question. Sorry, it's another one on Mavenclad. I was just wondering if you could give us a sense of how the phasing of launches in different countries in Europe is coming along. I understand that currently, really most of the sales seem to be coming from Germany and U.K. I'm just wondering when different regions, different countries really might start to kick in and drive those European sales upwards. Thanks. Yeah. Mavenclad, maybe I can cover the whole world. The product is approved in 49 countries, i.e., in the E.U., in Australia, Argentina, Canada, Israel, the U.A.E. The product is reimbursed in 25 markets with payer negotiations on track in key markets. Germany market share in Q3 was about 15%. Seventy percent is from switching, i.e., from GILENYA or other high efficacy drugs, versus 30% naive patients. We're following a very typical European launch rollout with standard timetables, that Germany, U.K., sometimes the Scandinavians, Netherlands and so on, are early. Italy comes later, Spain, and then often France is the last market to enter, and we see exactly the same pattern. We also have recently received an approval in Taiwan. I think this is new news. Okay. Thank you. Thank you. I would now like to hand the conference back to Mr. Fest for closing remarks. Well, thank you very much to all of you for joining this call. I appreciate and thank you for all your questions. We look now very much forward to meeting many of you in person during the upcoming full year road shows. Thank you and goodbye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may now disconnect.