Dear ladies and gentlemen, welcome to the Merck Investor and Analyst Conference Call on fourth quarter and full year 2025. As a reminder, all participants will be in a listen-only mode. I'm now handing over to Florian Schroeder, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir.
Thank you very much, Sarah. A sincere welcome to everyone joining us for the Q4 and full year 25 earnings call. My name is Florian Schroeder, and I'm the Head of Investor Relations at Merck. I am delighted to be joined by Belén Garijo, Group CEO, Helene von Roeder, Group CFO, as well as Kai Beckmann, Deputy Chairman of the Executive Board. For the Q&A part of the call, we will be further joined by Jean-Charles Wirth, CEO of Life Science, and Danny Bar-Zohar, CEO of Healthcare. As you have surely noticed, we recently announced upcoming changes to the executive board. I am pleased to share that Benjamin Hein, appointed CEO of Electronics as of May first, will join us later today for a brief introduction. With that, I am pleased to hand over to Belén to kick us off.
Thank you, Florian, and good afternoon, everyone. A very warm welcome from my side as well, and thank you for joining us today. Please go to slide 5 of the presentation, where I will start. 2025 was overall characterized by a challenging macro and geopolitical environment, as you all know, and despite this, we delivered solid organic net sales and EBITDA pre growth. Our Life Science business has returned to organic growth, driven by the normalization of demand from our Process Solutions customers. Healthcare continued to show solid organic performance despite certain market pressures, and Electronics recovered in H2, thanks to continued AI-driven demand in Semiconductor Solutions. Above all, we have delivered on our latest guidance for both the group and our business sectors, as well as market expectations for the group.
With that, let's move to the highlights on the fourth quarter on slide number six. Group organic sales growth came in at a solid +2.6% in Q4. We delivered profitable growth supported by all three sectors with group EBITDA pre up +3.1% organically. Life Science continued to show good momentum with organic sales growth of 4%. I am particularly pleased with our Process Solutions business with sales up by close to 10% organically, despite the rising comparables. Order intake remains strong with a book to bill that is still comfortably above one. Healthcare posted +3% organic sales growth, with CM&E as the main driver on a franchise level. Our newly established rare disease business added a remarkable five percentage points of inorganic growth, which is ahead of the latest guide.
Electronics, on the other hand, declined -2% organically in Q4 as delivery systems and services reached its expected trough. Our Semiconductor Materials business, on the other hand, continued to perform strongly, supported by searching demand in AI and advanced nodes. Returning to the group level, given our strong cash generation, we have improved our leverage to 1.4x net debt to EBITDA pre, despite ongoing investment in both CapEx and M&A. As we have communicated earlier today, we will propose a stable dividend of EUR 2.20 per share to the annual general meeting on April 24th, which would mark the 15th consecutive year with an increasing or a stable dividend. Moving on to slide 7, let's take a closer look at 2025 through a more strategic lens. Our Life Science business has returned to growth, mainly driven by our Process Solutions.
Here we deliver around 10% organic growth in 2025 as the market normalized and moved beyond the de-stocking phase. This is, as you know, fully aligned with our mid-term guidance, and what we have communicated previously. Strategically, Life Science focuses on two key areas: customer centricity and innovation. To sharpen the focus on customers, strengthen execution, and improve capital efficiency, we have aligned our go-to-market model around customers' buying patterns. The new model was successfully implemented in January, customer feedback is very, very positive. When it comes to bolstering our innovation pipeline in Life Science, let me highlight the chromatography business of JSR Life Science and the HUB Organoids acquisitions. Both are great illustrations of how we are reinforcing our portfolio leadership strategy in Life Science.
Life science is well-positioned for continued growth with a stronger customer-facing model and an enhanced product portfolio supporting our mid-term growth ambitions. Turning to healthcare, 2025 was a defining year with the establishment of rare diseases as a new strategic pillar, supported by the acquisitions of SpringWorks and obtaining rights for the global commercialization of pimicotinib, which we recently launched in China. We have three growth engines with rare diseases, CMN, and fertility, while we will manage the life cycle challenges for key brands in NNI and oncology. Danny and his team also revealed plans to replenish the pipeline with an improved risk reward profile and backed by a combination of internal and external innovation. We stand firmly behind our commitment to maintain healthcare EBITDA pre north of 30% and R&D around 20% of sales.
We are focused on driving growth in line with our upgraded midterm ambition, with a scope for further acceleration in the longer term. In electronics, we have successfully completed the divestment of Surface Solutions and thus evolved into a focused pure-play electronic business. We have one of the most complete offerings in Semiconductor Solutions, which puts us right at the center of the rise in artificial intelligence. Materials demand continues to be strong, we have bottomed out in the SNS. As well, we continue to shape our portfolio in Optronics. Against this backdrop, we are bullish on the outlook for electronics and feel good about growth accelerating in the quarters ahead. Before handing over to Helene, let me briefly touch on a few highlights in terms of sustainability, I am now on slide number eight.
2025 is the second year we fully apply the European Sustainability Reporting Standards, and I am pleased to share that we have made excellent progress. Not only did we reach our 2025 targets, we have also already achieved some of our environmental ambitions for 2030. The most prominent example, we have surpassed our 50% reduction target, achieving a 60% reduction in Scope 1 and 2 greenhouse gas emissions versus our 2020 baseline. Despite increasing business volumes and portfolio shifts, we strive to maintain these low emission levels going forward. In terms of greener alternatives, we have significantly expanded our product portfolio already. In Life Science, we deliver an impressive 53 year-over-year increase in the number of greener products.
We now offer more than 5,000 such products with combined sales of over EUR 300 million, growing at a CAGR of about 30% since 2021. We aim for 10% greener alternatives in our Life Science product portfolio by 2030. These achievements underscore our commitment to sustainable growth and demonstrate that environmental responsibility and business performance go hand in hand. With that, let me pass on to Helene for a more detailed review of our financials.
Thank you very much, Belén, and welcome also from my side. I'm now on slide 10 and will start with an overview of our key figures for the group in Q4. Net sales declined by 3.1% to EUR 5.249 billion. Organic growth of EUR 139 million was more than offset by FX headwinds of EUR 318 million. These FX headwinds are related to the US dollar as well as various Asian currencies, including the Chinese renminbi, Korean won, Indian rupee, and the Japanese yen. EBITDA pre declined by 3.2% to EUR 1.443 billion with a stable margin of 27.5%, demonstrating strong operational discipline. EPS pre came in at EUR 1.88 per share.
Operating cash flow increased by 4.9% to EUR 1,000,000,291. Working capital year-on-year remained stable. Net debt was at EUR 8.6 billion as per December 31st. Let me also briefly comment on our result, reported results on slide 11. EBIT declined by EUR 341 million year-on-year, mainly driven by R&D-related impairments in Healthcare. The financial result of -EUR 82 million reflects the increased interest cost and reduced interest income following the SpringWorks acquisition. The effective tax rate came in at 19.1%. That is actually below our guidance corridor amid deferred tax effects. We expect this effect to normalize in 2060. Reported earnings per share came in at EUR 0.73. Let's turn to slide 12 for an overview of our performance by business sector.
Group organic sales growth in the third quarter was 2.6%. Life Science was the largest contributor, with organic sales growth of 3.9%, driven by the fourth consecutive quarter of around 10% organic growth for Process Solutions. Healthcare grew 3.3% organically, driven by strong growth in our CM&E franchise, alongside contributions from NNI and fertility. Electronics declined by 2% organically due to DS&S headwinds. The Semiconductor Materials business delivered stellar growth in the mid-teens range once again, gaining market share on the back of new customer qualifications. Regarding earnings, EBITDA pre amounted to EUR 1.443 billion, up 3.1% organically, driven by all three business sectors. The net portfolio effect was negligible in Q4, while currencies were a significant drag of about -6% on both group sales and EBITDA pre.
Life Science grew organically by 3.9% in Q4, driven by another strong performance of our Process Solutions business, which maintained its momentum while Science & Lab Solutions was around stable. Process Solutions delivered organic growth of 9.7%. Order intake remained strong in Q4 and the book-to-bill ratio stayed comfortably above one. Turning to Science & Lab Solutions, sales increased by 1.2% organically. This was slower compared with Q3. However, it was affected by the U.S. government shutdown, impacting academic and government lab spending, as well as a softer market in China. Life Science Services reported an organic sales decline of -8%, reflecting high comps and demand fluctuations at key customers. Our R&D ratio increased slightly, consistent with our ambition to be at roughly 5% of sales in the midterm. EBITDA pre increased by 2.5% organically.
This implies a 40 basis points lower margin year-on-year as operating leverage was more than offset by FX headwinds and start-up costs for site expansions. As we transition into Q1, our reporting structure will be updated to align with the new go-to-market strategy. As a reminder, Process Solutions will remain unchanged. Advanced Solutions will comprise our businesses in lab water, diagnostics-related materials, biomonitoring, contract testing, as well as development and manufacturing services. Our third franchise, Discovery Solutions, will combine our chemical and biology operations. As detailed at our last CMD, this new organizational setup will enhance our strategic focus on customers and operational efficiency. Turning to Healthcare on slide 14. Healthcare delivered a solid organic sales growth of 3.3% in Q4, that was mainly driven by our CM&E franchise, up 7% organically with strong performance across all therapeutic areas.
Fertility sales increased 3% organically, mainly driven by continued strong performance of Pergoveris, which was up by 22%. We recently secured approval for Pergoveris in China and continue working towards a launch in the U.S. in H2 '26. Sales in our NNI franchise grew by 3% organically. MAVENCLAD delivered another strong quarter and was up 16% organically, with only a small impact from the first generics launch in the U.S. in December. Oncology experienced a moderate organic sales decline as anticipated. A key driver in this context is the increased competition for ERBITUX in China from non-comparable biologics. On top of the solid organic performance, we saw a significant portfolio effect of 5 percentage points from the consolidation of SpringWorks. Our newly established rare disease franchise delivered 20% higher sales quarter over quarter.
This was partially helped by stocking effects, which basically explained their outperformance versus guidance, and as a result, we expect OGSIVEO sales modestly down quarter-over-quarter in Q1. In terms of pipeline, we were recently granted the first regulatory approval for pimicotinib in China, which came in well ahead of time. We expect minor sales contributions in the coming months and work towards NRDL inclusion as of 2027. For the U.S., we anticipate an FDA decision towards the end of the year. In addition, we are preparing to initiate two phase III studies this year. One, enpatoran in lupus rash, and PreCim TCT in third line colorectal cancer.
In terms of earnings, EBITDA pre amounted to EUR 683 million in Q4, with a margin of 31.2% as expected, reflecting normalized R&D now in line with our ambition of around 20% of sales. Looking ahead to Q1, please note that we anticipate an organic sales decline more around the lower end of our full-year guide, with all franchises expected down year-on-year on a mix of various factors, including tough comps and phasing. Danny will very happily provide more color if needed. Let's move to Electronics on slide 15. Organically, sales declined by 2% in Q4. Semi Materials delivered solid double-digit growth. Semiconductor Solutions declined by 4% organically, as the strength in Semi Materials could not entirely offset the anticipated decline in delivery systems and services.
Looking a bit deeper into Semiconductor Materials, demand for advanced nodes continues to drive growth for the 8th consecutive quarter, with low teens growth on average. For the year, Semiconductor Materials was up in the high single digits. This reflecting encouraging AI-driven 3D demand trends and strength in Asia around specialty and mature nodes. In DSMS, the quarter was in line with our expectations. As anticipated and highlighted by Kai during our Q3 call, we flagged approximately EUR 100 million downside in DSMS for Q4, which did materialize. Our view is that DSMS bottomed out in Q4 and will stabilize going forward. Our Optronics business achieved moderate organic growth of 5%, supported by a good quarter in our traditional applications.
The EBITDA pre-margin increased by 250 basis points year-over-year to 27.2%, mainly driven by the accretion from the divestment of Surface Solutions and ongoing cost dis-discipline within the business. The high twenties margin now reflects the pure-play electronics business clean of Surface Solutions. Let me also briefly comment on our balance sheet and cash flow statement. As you can see on slide 16, our balance sheet per year end of 2025 contracted by EUR 100 million year-over-year. Let's take a closer look on the asset side. Cash and cash equivalent increased by about EUR 200 million, mainly reflecting the net effects from the US dollar bond issuance in connection with the SpringWorks acquisition and the divestment of Surface Solutions. Receivables were stable, while inventories were up by about EUR 100 million.
Intangible assets increased by some EUR 100 million net, mainly due to the SpringWorks PPA. Property, plant, and equipment decreased by roughly EUR 100 million, mainly due to FX. Lastly, other assets were down by about EUR 500 million, mainly due to the divestment of Surface Solutions. Let's look at the liability side. Financial debt increased by EUR 1.7 billion, reflecting the funding of the SpringWorks deal. Pension provisions were down by EUR 400 million, mainly due to actuarial gains. Payables and other liabilities were roughly stable. Net equity decreased by EUR 1.3 billion, and that was mainly due to FX. As a result, in summary, our equity ratio declined from 58% to 56% as per the year end. Turning to cash flow on slide 17.
Operating cash flow increased to EUR 1.291 billion in Q4 2025, up from EUR 1.231 billion in Q4 of last year. Profit after tax declined due to impairments in Healthcare and other non-cash portfolio actions such as the divestment of CDMO activities in Martillac, France. D&A is significantly up, reflecting the non-cash nature of the impairment and portfolio actions. Changes in other balance sheet items were similar to the prior year period. With that, I am delighted to hand over to Kai, who will share with you our financial guidance for 2026.
Thank you, Helene. Before I talk about the guidance for 2026, I want to take a moment to thank Belén for her outstanding leadership. I also want to acknowledge the successful years we have experienced under her leadership. Belén, your support during the CEO transition has been invaluable, enabling a smooth and effective handover in a few weeks just from now. On behalf of the team and the executive board, thank you, Belén, for setting a strong foundation for our future. I look forward to building on the successes that we've achieved together. Let me now turn it to the outlook for 2026. As a brief reminder, similar to last year, we are sharing quantitative targets for net sales and EBITDA pre along with our full-year results.
In addition, for the first time, we are pleased to provide an outlook for EPS pre with our full-year guidance. Before we dive into the details, there are two key assumptions to consider. We assume no MAVENCLAD sales in the U.S. as of March 2026. Also not reflected in our guidance is the potential launch of Pegvuregis in the U.S. We forecast group net sales in the range of EUR 20 billion-EUR 21.1 billion. This reflects an organic sales development of -1% to +2%. On EBITDA pre, we forecast a range of EUR 5.5 billion-EUR 6 billion. This equals an organic growth in the range of -4% to +1%. With the evolution of currencies, please bear in mind that we expect for Q1 a disproportionate currency headwind relative to our full-year FX guidance.
You will note that the implied midpoint of our guidance clearly confirms our early indication of EBITDA pre margins of around 28% at the group level. Concluding the view on the group, this translates into an EPS pre range of EUR 7.10-EUR 8. For some additional color, let's take a look at slide 20. Starting with Life Science, we confirm mid-single digit organic sales growth. This is in line with Jean-Charles projections from our CMD last October. Our assumption reflects the continuous strong performance in our Process Solutions business and across Advanced and Discovery Solutions, we anticipate gradual improvement in biotech funding and academic research stabilization. Furthermore, we are facing an evolving market environment in China. Moving on to Healthcare. A challenging year is ahead of us amid life cycle challenges for key brands, in particular MAVENCLAD.
We expect growth in the remainder of the portfolio, including CM&E, fertility and above all, rare diseases, which will become organic in the second half. Danny and his team remain firmly committed to sustaining margins north of 30%, as reflected in the guidance. For Electronics, we anticipate continued strong growth in our Semiconductor Materials business while our DS&S business stabilizes going forward. The effect of one time as an electronics will contribute to mid-20% growth in EBITDA pre. On the one hand, the negative EUR 51 million from 2025, on the other hand, in 2026, the positive contribution from sales of OLED IP and compensation from our supplier that totals around EUR 60 million in 2026. Ignoring these one-timers, the underlying business shows nice operational leverage.
Before we go to Q&A, we are joined by Benjamin Hein, who will succeed me as CEO of Electronics. Ben and I have worked closely together for many years. He played a central role in shaping the Electronics strategy and in the transformation of performance materials into a focused semiconductor business. Ben is joining us today from Arizona, where he's visiting customers. Ben, great to have you with us for a brief introduction.
Thank you, Kai, and hello everyone from my side from sunny Arizona. Let me start by thanking the Merck family for the trust that they've placed in me and Kai for his leadership in building the Electronics business we have today. Over the past years, Kai led the transformation that has created a pure play business with an exceptionally strong base. For those of you who don't know me quite yet, I've been with Merck KGaA, Darmstadt, Germany for 13 years, with leadership roles across group strategy, Electronics and Life Science. A defining part of my experience has been leading the teams and executing with our customers in Taiwan and Southeast Asia for Electronics, and most recently in Boston, Massachusetts, for Life Science. That's how we help today. The future of AI will need better performance from the chip.
This means new materials and chemistries, new connectivity like silicon photonics and complex scaled architecture. The combination of materials, data and control will be more important than ever before. In this role, enhancing our strength and doubling down on execution is essential to me. I will build further on the strong foundation, accelerate hand in hand with our customers, and ensure operational precision and co-develop innovation at speed. I very much look forward to engaging with many of you in the very near future. With that, back to you, Florian.
Thank you so much, Ben, for your time today. We will now come to the Q&A part of our call to be followed by some special closing remarks from Belén. Sarah, I will now hand it over to you to kick us off for the Q&A session.
Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial star one one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you are using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. Our first question today is from Richard Vosser from J.P. Morgan. Please go ahead.
Hi. Thanks for taking my questions. Two, please. First one on electronics. Just looking at some of your customers, they're increasing CapEx again now, and you highlighted the bottoming of DS&S, but I was wondering if you could give us a bit more color on the picture for DS&S and the Semiconductor Materials business. You mentioned the stabilization of DS&S. Why should we not think about an improvement of that part of the business in 2026? On the materials business, just wondering about the sustainability of the strong double digit growth in advanced nodes and what's going on in terms of the catch up of some of the older nodes. Then the second question, just on Process Solutions.
you know, you talked about the strong order book. I was wondering just on the visibility you have into 26, given that strong order book, and whether we could maybe even anticipate stronger growth in 26 than the 10% you delivered in 2025. Thanks very much.
Richard, let me pick up the electronics question. On DS&S, with the planned ramp-up of CapEx of our customers, we will after the stabilization in 2026 see us moving towards the midterm guide in the future. This will take some time, and have in mind that we still compare with some ramp down of projects in the first half of last year. The comparisons we still have to overcome for that stabilization. Second, on the material side, our customers are engaged in debottlenecking their capacity for AI and advanced nodes, and this carries on as we speak.
This will give us the momentum that continues well into 2026 of growth, pretty good growth of the materials business for semi materials.
Hi, Richard. Jean-Charles speaking. Let me answer the second question related to Process Solutions. First of all, we don't disclose any information guidance by BU, but I would like to share with you some opinion. Number one, we continue to view the bioprocessing market as structurally attractive with a growth in the range of 9%-10% midterms. Talking about 2025, yes, we had a solid performance with an organic growth for the full year around 10%. We have a very clear view on our order book. Our order book looks solid. Maybe to answer one additional question, our book-to-bill ratio is still comfortably above 1. Based on that and on ongoing exchange interaction with our customer, we confirm our guidance for 2026 concerning Process Solutions, and your mission is to go around 10%.
I would like to highlight one point. When we say around 10%, you should assume that some quarters will go 8, some quarters will go 12. Overall, we are confident, very confident in Process Solutions to go around 10% for 2026.
Thank you very much.
Thank you. We'll now take our next question. This is from Peter Verdult from BNP Paribas. Please go ahead.
Yeah, thanks. Peter Verdult, BNP. Two quick ones for Kai and one for Danny. Kai, when do you plan to lay out your go-forward strategy for Merck? I know it's not gonna be a revolution, but just when should we expect to hear from you? Will it be the CMD in October, or could it be sometime sooner? Just staying on the current business Electronics, just smart glasses. Realize this is probably relatively immaterial right now. I'm assuming the business is less than $50 million, but clearly is gonna be a huge area of growth. Can you help us better understand Merck's, you know, competitive advantage here and the level of materiality for the current business, either on revenues or margins? Danny, on pipeline prioritization and replenishment, it's good to see the DVR portfolio efforts terminated.
Just wanted to better understand whether the phase III CEACAM5 is contingent on securing a partner or is Merck now willing to go solo? Could you just give us a little sort of temperature check on the M&A environment? I know, I know you're not gonna talk to specific assets, but you've clearly articulated, you know, a desire to accelerate the transformation towards rare. Would you characterize the environment to do that as good, bad or ugly currently? Thank you.
Thanks a lot, Peter, for the 2 questions. Maybe on the first one, let's have Belén and myself kind of conclude on the transformation and the transition first, and once then we are sitting together after May 1st, we will come back to all of you in sharing the plans going forward. Way too early to make any projections today. Second, on the ARVR, you're right that with the current quite low tech solution that we see in the market, our business is quite low on this one.
Assuming that we will see more implementation of higher-end glasses with higher field of view and kind of higher color intensity contrast, this is where the currently developed technologies will then have an opportunity. Depends, of course, on the roadmap of our customers, and it's again, way too early to speculate that. We, as we said during the CMD at the midterm guidance, none of that is included in our, in our midterm guidance. This is not yet as much visible as we would need it for including it into our, into our midterm guidance.
Thank you.
Yeah. Peter, thank you for the quick. Danny, sorry for my deep voice. Regarding the pipeline, as you remember, we have an ongoing phase III trial with cladribine tablets in generalized myasthenia gravis. You know, we are expecting it's recruiting very well. We are expecting it to read out around 2028. In addition to that, we are starting this year 2 studies, 2 phase III studies, twin studies with enpatoran
TLR7/8 in lupus rash. This is going to be enrolled in the next couple of months. If I'm not mistaken, they appear on ClinicalTrials.gov. You mentioned the CEACAM5 precemtabart tocentecan. Based on the, I would say, very encouraging results that we have from the phase I-B and the expansion cohorts. We are starting a trial in 3rd line colorectal in the next few months. These are the plans. The protocol has been aligned with all regulatory authorities.
When it comes to partnering of CEACAM5, yes, we said that if this program is going to be expanded further beyond third line colorectal cancer, we would really like to partner it, you know, to share the cost and the risk. The partnering discussions are currently ongoing with potential partners. We are also looking or waiting for additional combination data to come in earlier lines that will dictate the rest of the clinical development program. Now, as I said at the Capital Markets Day, and David alluded too, we are moving forward towards more homogeneous populations in terms of the, in terms of the biology. You will less likely going to see us going into neurodegeneration in the next couple of years or to very large population solid tumors.
Homogeneous populations can be epidemiologically rare diseases, which is a very big focus for us. Pimicotinib, GOMEKLI, OGSIVEO, and other smaller things in the pipeline right now from internal innovation perspective. Myasthenia gravis is a rare disease as itself, so we are already there. We will continue expanding on that. To your question around the fertile ground out there, we are very encouraged and we are very, very active in terms of looking for the next opportunities. We need to supplement the pipeline mainly around the peri-poc and executing on the phase III programs that are very exciting.
Thank you.
Thank you. We'll now take the next question. This is from Matthew Weston from UBS. Please go ahead.
Thank you very much. Just before I start, Belén, congratulations to the end of an era at Merck, and Kai, good luck in the new role. Belén, look forward to seeing you in your new role. To my question, I've got 2, both around guidance. I don't understand the caveats to the 2026 guidance. I don't think I've ever seen a generic erosion go to 0 in 6 months, and I don't think I've ever seen a company exclude a pipeline opportunity unless there's been an issue raised by a regulator. Can you explain the MAVENCLAD decision, and can you reassure us that all is well with Pergoveris at FDA? Then a specific question to Jean-Charles regarding Life Science guidance.
If you're highly confident in the growth in bioprocess that you laid out in answer to Richard's question, how do we get to the 3% organic life science growth number at the bottom end of the 26 growth range?
Thank you for your congratulations, Matthew. I'm going to invite Kai to speak about the 2026 guidance together with Danny on your first question.
Matthew, thanks for your good wishes and let me address your question on the guidance. I will start and Danny will give you some additional insights on to products you mentioned. Let me start a bit with the rationale that we have used and which I believe is quite straightforward. Regarding MAVENCLAD, we will not speculate on the timing of potential entries of generics nor their market behavior. Frankly, we believe there's very little to gain from the speculation. Hence we have opted for a more conservative approach concerning this item by clearly outlining our assumptions. We will, of course, keep you updated as the year progresses.
Rest assured that we will manage the decline very carefully and always focusing on maximizing the returns for shareholders and prioritizing patient needs. Similar for Pergoveris, we are advancing the filing under the CNPV as quickly and diligently as possible. As Helena already mentioned, we are preparing for a launch in the second half of the year. However, the ultimate decision regarding the Pergoveris approval is beyond our control, and thus we have chosen to exclude potential sales from our guidance. Danny, maybe you wanna add a bit more color to that.
Fully agree with your points. Matthew, briefly on MAVENCLAD, some additional color. We filed, as you may remember, the petition for the CAFC for a panel rehearing at the very end of November last year. This petition was denied at the end of January. In light of this decision, we expect generic companies to request the district court to lift their 30-month stays where applicable. As of today, there is 1 generic version of MAVENCLAD that received final FDA approval. They received it at the end of November and has entered the U.S. market. What I can tell you is that already for December, we see an impact on volume with that 1 generic. Another generic has received tentative FDA approval early December.
Three additional companies, to the best of our knowledge, are working on developing MAVENCLAD generics as well. So you're right. There are erosion curves for generics. However, the unknown entry date of the second generic and how others that we know are trying to get in make it very difficult for us to predict sales. On top of that, you should also add the unknowns of how these erosion curves will behave in terms of year one and year two because of the very special dosing regimen for MAVENCLAD. That said, yes, one can take that as conservative and we guide without the sales of MAVENCLAD in the U.S. as of March. To the question regarding Pergoveris in the U.S.
Following the Commissioner's National Priority Voucher procedure, we submitted part 1 of the filing for Pergoveris at the end of November. We are currently in a rolling submission mode and preparing part 2. The clock starts ticking as of part 2 is submitted. Now, as we've said, the Pergoveris submission is based, and I said that, on a lot of legacy data. A lot of legacy data. We have extensive data. While this is, you know, not our first submission to the regulator, the procedure when it comes to the CNPV is quite new. I want to ensure that the FDA has everything that is needed for an approval. We have this 1 shot, and we wanna get it right.
Now, we are diligently working through adaptations from data collected primarily to satisfy ex-U.S. authorities to the FDA, and we're doing that in close collaboration with the FDA. This means that there is some uncertainty about the exact timeline for the submission of the second part. Of course, we will keep you updated. As Kai and Helena mentioned, we're still aiming for a potential launch in the second half of this year. Then regarding the opportunities magnitude, you know, how much to forecast, you know, as I previously indicated, this depends heavily, first and foremost on the timing, then on the label, so it is premature to provide more details. Additionally, you must also be mindful of channel and access negotiations with payers.
Many unknowns here, and the largest of them is actually the timing and knowing that the submission has not been finalized yet. Rest assured we aim to bring the product to patients as soon as possible. As we said, second half 2026.
Richard, Jean-Charles speaking. To answer your question on Life Science guidance, let me start by the fact that we confirm what we initially share during the Capital Market Day, where we mentioned mid-single-digit organic growth for Life Science. When you peel the onion, this is split by the three business units. Let me give you some hint. From Process Solutions, we confirm that we are marching towards an organic growth around 10%. As I said earlier today in the call, we have a very clear view on our order book. Our book-to-bill ratio is comfortably above one, and we continue to have ongoing clear discussion communication we are with our key customers. On Process Solutions, we are very confident.
From the assumption point of view in Advanced Solutions, we anticipate organic growth this year towards the lower end of our midterm guidance, and we currently assume that the QC testing business, namely bio monitoring, will be a key driver of the growth. Concerning Discovery Solutions segments, we anticipate performance to be flattish as headwinds persists, such as academia and biotech funding, China and the macroeconomic factor, including tariff. It's one part of the answer. To be clear on your question about the 3% organic growth, which will be in the low end of our guidance. If we find ourself at the lower end of our guidance, it will be influenced by the non-Process Solutions businesses, namely Advanced Solutions and Discovery Solutions. The key headwinds could be China, NIH funding, biotech funding and call it broader macroeconomic factors.
Thank you all. Very clear.
Thank you. We'll now take the next question. This is from Sachin Jain from Bank of America. Please go ahead.
Hi there. Thanks for taking my questions. Two I guess for Dan, if I may. Just to follow on to prior question on Pergoveris, just to get a better understanding then from your perspective, when would you feel comfortable enough to include and guide? Is that when part two's been submitted, or would you need to see full approval? Acknowledging you sort of wanna see the label, but perhaps you could just remind us for our benefit as to where you're seeing differentiation of this product in the ex-US markets, share to uptake, so we can begin to think about how to better model the US. The second one on the 2 SpringWorks assets.
Why don't you just give us your latest updates on the two launches, how we should think about progress over the course this year. Anything to note on geographic split of launch. Then now that you've seen the Immunome data, any change in your perspective on that as a potential competitor as we think about into 2027? Thank you so much, Sachin, for your questions. When it comes to Pergoveris, again, as I said, the entire procedure of the CNPV is new to us as much as it's new to the FDA. We need to be aware of that and I guess that many other companies that receive these vouchers are also taking some caution.
We have one shot here. When will it come? As we said, our assumption and our aim and our goal together with the FDA is to have it the second half of this year. Rolling submission, part one was submitted in November. We are submitting smaller parts actually as we go. We are on a continuous dialogue. There is this challenge, I would say, when it comes to adapting quite old legacy data from Europe to what the FDA needs. This might take time. Initially, we thought that we will complete that in March. What I expect is that it will be delayed beyond March in order to get it done right.
That's the nature of, I would say a little bit the uncertainty regarding the approval timelines. Only once the second part is submitted, the clock starts ticking the 60 days that the FDA gives. When it comes to the label, I don't wanna comment too much on label because we are currently under review with the FDA, and this is not something we usually do. It depends on the eligible patient population and how you define the need for the therapy, whether it's based on hormone levels or clinical judgment, and I will leave it like that. This is another unknown. We are progressing very well, but we will keep it like that.
Regarding SpringWorks, generally speaking, I remain very confident in the potential of both products, yeah. When OGSIVEO positioned, we positioned it as around blockbuster potential and GOMEKLI as near blockbuster potential. For GOMEKLI, we are encouraged with the uptake, with sales increasing by 35% quarter-over-quarter in Q4. We see positive uptake across both pediatric and adult populations, which is super important for us. We see 90% penetration in centers of excellence while successfully tapping also into non-centers of excellence. Just to remind you, we are in the same class with a rather well-established KOSELUGO.
Additionally, early signs from the launch in Europe for GOMEKLI are promising, having launched in Germany and Austria in Q4 with further country-by-country launches planned across Europe in the months and the quarters ahead. When it comes to OGSIVEO, I am equally pleased with OGSIVEO's uptake, first of all, in Europe, because I mentioned Europe before. The drug was launched in Germany in the middle of Q4 and also in Austria, and there is very strong launch as it looks right now, very similar to GOMEKLI. In the United States, as we've said in the last couple of times that we spoke, we are currently in the second phase of OGSIVEO's launch.
We're transitioning from the quote-unquote warehoused patients to identifying those who are under active surveillance who should be given systemic treatment. The patient pool is significant. There are over 20,000 diagnosed patients in the U.S. alone, of which you could say 20%-30% are under this active surveillance. We are using a lot of tools including AI in order to identify these patients, particularly at the community level. They are no longer always floating in the center of excellence. We are becoming also more targeted in terms of our messaging towards patients and healthcare professionals. We are focused on maximizing patient retention by leveraging the quite substantial amount of long-term data that we have at hand, providing education on adverse event management through dose modifications.
We have an advantage with our formulation, the dose and the dose strength when it comes to the ability to dose modify. It's very important. Also enhancing compliance and persistence. The disease itself, desmoid tumors, is chronic, and the patient and the physician, and maybe to some extent the drug need to be managed or to dance together with the drug on the long term. This is not just related to managing adverse events. They behave differently from malignant tumors. I don't want to disclose exactly how what we know about patient dynamics because we will have competition in the class, but I suspect that these dynamics will be applicable for the competition as well.
Yes, we are currently going through a period of lower growth when it comes to OGSIVEO. I also expect OGSIVEO sales in the first quarter of 2026 to be down versus Q4. However, this is mainly due to seasonality. We observed some stocking in Q4 ahead of the anticipated WAC increase, which is normal. In fact, we have minimized that stocking, as we told you, and it's much less pronounced as compared to what you saw with SpringWorks exactly a year ago, the transition between Q4 2024 and Q1 2025. Importantly, the underlying demand continues to increase. We saw Q4 versus Q3 and we expect new patient starts to be higher in Q1 versus Q4. We remain confident with that.
When it comes to Immunome data, I said that also the CMD for each one of the rare tumors we have or either or will have strong in-class competition. We are aware of that, AL102 has been taken into account very seriously from the get-go. With all of the beautiful attempts to get into indirect comparisons, this is the same class. The numerical differences in response rates, of course, are there, but the question is what they mean for a patient. As I said before, the patient needs to feel comfortable with a drug on the long term. It's a nasty disease, but it's not a malignant disease. The treatment should be long-term, as I said, and need to.
We need really to see the data on things that matter to the patients as well. Pain, quality of life, onset of effect. We haven't seen that data. When it comes to toxicity, this was also mentioned every once in a while, each drug needs to manage the patients on the tolerability side. The most bugging tolerability issue is the GI effect. On this side, as expected, both drugs have quite, I would say, identical rates. Here comes how these patients are handled, kept, dose-adjusted. As I said before, the BID dosing that we have and the different dose strengths of OGSIVEO that we have are actually a potential advantage here, and we know that. We know that because I am personally talking with a lot of prescribers.
We have touched more than 1,300 prescribers have already prescribed OGSIVEO. This is what they are telling us. This flexibility is important. On ovarian toxicity, you know, it's on target. We knew that. It's also important to see how they reported their numbers in terms of apples to apples. OGSIVEO will have been in the market for almost 3 years when AL102 is launched. That's quite a long time for same line, same class competition. We have the broadest and the longest long-term data. This data suggests increasing efficacy, effects on quality of life, very robust ones with no new safety signals. AL102 is a credible competitor. We believe in the strength of OGSIVEO and its potential.
Thank you.
Thank you. We'll now take our next question. This is from Theodora Rowe Beadl from Goldman Sachs. Please go ahead.
Hi. Thanks for taking my questions. Firstly, it looks like the DDR portfolio is no longer part of your pipeline chart. What were the reasons to discontinue the program, and how do you plan to reinvest the R&D expenses that are unlocked here? Secondly, what are your expectations for the pimicotinib launch, both globally and also in the US, assuming approval? Thank you.
Thank you. Kai, I'll take the questions. First one on the DDR. Rightfully said, the key assets in the DDR portfolio were tuvusertib, the ATR inhibitor and the PARP1-selective compound that we in-licensed from Hengrui. Both of them were taken, each one of them data-driven, taken out of the pipeline, data-driven. We ran combination studies, particularly with other DDRs in selected populations with chemotherapy, trying to address all of these questions. I must say that we answered these questions relatively fast and relatively cheap. If you could look at other companies that have been doing DDR in this space, I'm really proud of the R&D organization that managed to answer all of these questions very fast and very clearly.
These are taken out of the pipeline. Yes, on paper, there are, you know, freed up, “ R&D resources,” but these are quite nicely used in terms of ramping up the phase III programs. Tadruventin myasthenia gravis, pritelivit, the CEACAM5 in colorectal cancer, two studies with enpatoran, phase III studies. We are, I would say our hands are full and, of course, we are keeping our R&D spend around 20% and we'll move forward like that. Yeah. When it comes to pimicotinib launch. As Belén mentioned, the drug was approved first in China, well ahead of time, and we are very happy about that. It's going to be introduced into the private market in, I would say, several weeks from now.
We are very excited about the potential of this drug in China. We are currently in discussions, an NRDL discussion in order to get the price in China, but this will kick in only in 2027. We submitted to the FDA. The file has been accepted, which means that the clock has started ticking, which means we have a PDUFA date, an action date around November this year.
Stay tuned to that. We also submitted in Europe. Overall, we said that the potential of pimicotinib in TGCT will be around near half blockbuster, I would say.
Thank you. We'll now move to our next question. This is from Oliver Metzger from Oddo BHF. Please go ahead.
Good afternoon. Thanks for taking my questions. The first one is on the Electronics guidance. Organic growth of 3%-7% is targeted for 2026. Just want to understand the dynamics stronger. You have, on the one hand, the Semiconductor Materials, which are doing very well. You said above 10% or even Q4 is 15%. DS&S should stabilize, let's say, in H1 and also on lower comps turn positive in H2. Optronics limiting a digit range does not look ambitious. If I look in particular to the lower end, it looks like that there consists of a lot of safety caution, but even at the high end, it looks like that you, let's say, factor in more uncertainties. A comment on that would be great. Second question, very quick on Process Solutions.
You made only a quick comment on equipment demand. Could you share with us how you see demand for equipment evolving and when do we expect a normalization of that? Thank you.
Oliver, let me take the Electronics question first. If you take the fact that we got 66% of our business in Semiconductor Materials, then roughly 15 in DS&S and about the rest of 20% in Optronics. As we said, Optronics about stable, DS&S about stable, and the materials business at high single-digit. That gives you the midpoint of our guidance. What kind of offers us the kind of the lower end of the guidance is the current constraints are driven by the high memory prices limiting consumer behavior on consumer electronics.
This is the optionality that drives us towards the lower end of the guidance and the efforts of our customers for debottlenecking advanced node capacity and AI-related capacity that kind of would give us the opportunity towards the higher end of the guidance. This gives the frame of the guidance, and that should do the math as per our CMD and Q3 communication last year.
Hi, Oliver. Jean-Charles speaking. Related to the question around Process Solutions equipment, keep in mind that more than 90% of our portfolio is consumables related, and as such, we have very limited visibility and exposure on equipment.
Thank you.
Thank you. We'll now take our next question. This is from Charles Pitman King from Barclays. Please go ahead.
Hi, guys. 2 questions for Jean-Charles from me, please. Firstly, just on life science. I know that we've kind of, we've been cautioning about potential downside drivers, but just wondering a little bit more about the upside drive potential. I mean, given M&A picked up in 2H 2025 and we saw a record year of China in licensing, I'm just wondering how your RFP discussions are starting to evolve. Are you seeing any potential uptick in interest for advanced therapy development, acknowledging the NIH funding and macro issue, as you've mentioned? Just how are you thinking about the potential for U.S. onshoring, given recent U.S. peers have been pointing to a kind of 2027-2028 timeframe, just in terms of your midterm outlook? Just a second point.
Following your strategic review of the Life Science business that gave us these new divisions, I'm just wondering if there's any follow-up or further thoughts on the potential future of your CDMO offering within that. Thank you.
Thank you. Thank you for the question. Let me start with the second one on CDMO. Let's step back a bit for 2025. We mentioned that the LSS business declined in 2025, and it was mainly driven by customer phasing and also let's say lower funding in biotech, which impacts many our CDMO business. Looking to the CDMO business, you're right. We mentioned during the capital market day that we are navigating the complexity of the CDMO markets with a strategic approach for us focusing our customer needs and customer expectation. I also mentioned that we are currently reviewing our CDMO business to ensure that these businesses align with our mission and with our current portfolio.
To do this, we have established a very robust decision-making framework, in order to assess the market, assess our operational excellence, assess a financial ambition and implication.
This framework ensures our strategic initiatives to remain close to our commitments being a customer-centric organization. At this point, we are making progress. Paolo Carli, the Head of Advanced Solutions, is working on this assessment and be sure and reassure that when we'll be ready, we'll come back with further information on our CDMO business. On the uptick and onshoring, as I said earlier to the question, most of our Process Solutions portfolio is consumable-related. On short term, on 2026, 2027, we don't see massive upside linked to the onshoring in U.S. as an example. We may see maybe some upside in 2027, 2028, but onshoring for 2026, we don't see any upside. Again, it's linked to our portfolio, which many relates to consumables.
Just to follow up, in terms of your RFP discussions, for kind of advanced therapies, are any changes just following the recent uptick in M&A or in licensing? Has there been any change in your conversation?
No change for the time being.
Thank you very much.
Thank you.
Thank you. We will now take our next question. This is from Falko Friedrichs from Deutsche Bank. Please go ahead.
Thank you. Two questions, please. Firstly, can you elaborate on the reasons why Q1 is expected to be at the low end of full year guidance? Do you expect to see a pickup in Q2, or is the year expected to be rather back-end loaded in terms of growth and margins? Secondly, how much do you expect MAVENCLAD to grow outside of the US in 2026? Thank you.
Falco, the main point on the low end of the guidance for the thing is, as Danny just elaborated, the fact that like especially in the healthcare area, we expect lower sales for the Q1. I think he made all of the points around that. The other thing which you also need to take in mind is like if you look at FX has basically the biggest delta in Q1 25-26 because we saw the biggest market moves in FX in that quarter. I think those were the two reasons that you should be looking at. I pass on to Danny.
Yeah.
For MAVENCLAD.
Thanks. Thanks, Helene. As you said, we do expect the Q1 sales in healthcare to decline, I would say, towards the lower end of our full year guidance, the -7% to -4%, with actually all franchises down year-over-year due to different various reasons including phasing and also tough comps. Let's try to pick one by one. Starting with CM&E. The full year, we expect to be in line with our midterm guidance of mid-single digit organic growth. We expect Q1 to be moderately down around low to mid-single digit decline. The main reason for this is a very tough comp. I don't know if you remember last year, Q1 2025 was 11% growth.
On top of that, we may see some shifts from Q1 to Q2 of this year due to some geopolitical situations, as you are aware of in the Middle East. When it comes to fertility, with fertility, we expect low single digits organic growth for the full year, again, excluding the potential Pergoveris in the U.S. That's below the mid-single digits that we expect midterm, mainly due to the remaining near-term headwinds for GONAL‑f in the U.S. These are in general, these consist of a significant price cut for GONAL‑f in Q2 last year, which is going to be annualized only this year, fully annualized this year. You'll see an effect in Q1.
We have a lower inventory valuation for GONAL‑f in light of the direct to patient model that was agreed with the White House. We will have the initial impact of the MFN. When it comes to oncology, and NNI, we expect both franchises to decline, I would say significantly in 2026 due to the life cycle challenges for the key brands. Based on our guidance, which assumes no MAVENCLAD sales in the U.S. as of March, the decline in NNI should be, I would say, substantially more pronounced than in oncology. For Q1, however, the decline could be, I would say, more similar, likely around higher, slightly higher than 10% in both franchises. That said, I you know, this relates a lot to what I said at the Capital Markets Day.
What you can expect from us is the highest degree of clarity and transparency about what's coming. We maintain our full enthusiasm with the growth of OGSIVEO, GOMEKLI, pimi, Pergoveris, and of course, the CM&E. To your question around MAVENCLAD potential outside of the U.S., you saw the double-digit growth in 2025, both in Q4 and in the full year. This is the most prescribed oral high efficacy drug. We expect continued very solid growth outside of the U.S., maybe not double-digit, as you said, but very solid growth with a very good potential there. Thank you, Danny.
Okay, thank you.
We've got one last question.
Thank you.
Thank you, Sarah. We have time for one last question, please.
Thank you. The last question today is from Simon Baker from Rothschild & Co. Please go ahead.
Thank you for squeezing me in. I'll be brief. Firstly, just returning to Sachin's question on Pergoveris. Danny, I appreciate you don't wanna get embroiled in potential labels in the US. Could you highlight the key differences in the European marketing authorizations for Pergoveris and GONAL‑f, and how has that manifested itself in European territories in terms of share? Going back to Charles' question on life sciences and CDMOs. Jean-Charles, my reading of your description of this strategic decision-making framework was that the outcomes were we keep it, we dispose of it. Are there outcomes where you would increase your exposure to the CDMO space if that were deemed consistent with your broader strategic ambitions? Thanks so much.
Let me start with the CDMO question. We keep it or we dispose it or we increase the investment. As of now, I can't say. I can't give much more information. We are assessing all the options, so stay tuned, more to come. I would say, I will stop there for the time being.
Simon, regarding Pergoveris. I hope that I got your question right. I'm not sure. You asked about differences in the label between GONAL‑f and Pergoveris in Europe.
Yeah. I was really in terms of the, yeah, the characteristics. What are the points you would emphasize as the key differentiators between the two products?
Okay. The two products are, you know, GONAL‑f is the only recombinant FSH that is in the market. Pergoveris is a fixed-dose combination of recombinant FSH and LH. As such, it is much more suitable for the treatment of IVF treatments in advanced maternal age, where they lack also the LH. Because what you usually do, you start with the FSH, and when there is a need, you top up with additional injections with the LH component. This is a fixed-dose combination, and it allows much better addressing this patient population with great results.
As I said, the drug, I'm talking about Pergoveris, has been growing in the last 5 years at a CAGR of 20% in Europe, Asia Pacific, for example, Middle East, Latin America. The potential is very high, and we believe that the potential will be high also in China when it gets in and potentially in the U.S. in the second half.
Great. Thanks so much.
Thank you. I will now hand over to Belén for closing remarks. Thank you.
Thank you, Sarah. As you know, today is my last quarterly call and yearly call. Because of this, I just wanted to be a bit longer on my closing remarks. You know, as previously said, I really look forward to meeting many of you in my new mandate. Today, you know, looking back at my time at Merck, first of all, I have to say I have immensely enjoyed working for Merck. When I joined in 2011, the company had just begun an unprecedented period of transformation. Alongside with major acquisitions like MilliporeSigma Aldrich, Versum. I took on the task of transforming our healthcare business for a new era of patient care.
In 2017, we launched BAVENCIO, MAVENCLAD, and TEPMETKO, three products that brought healthcare back to growth. We expanded beyond our European roots to build a truly global presence across growth markets, particularly China, where we built a business from scratch that became an above EUR 1 billion in sales and meaningfully strengthened our position in healthcare. That decade shaped the globally diversified company I stepped into as CEO in 2021. Over the last 5 years, my ambition was to make Merck not only bigger but also better. Since 2020, we increased sales by 20%. We grew earnings even faster and reduced our net debt by 20%, all with only modest increases in headcount and assets.
We achieved during one of the most volatile periods in modern history: the pandemic, the war in Europe, and rising geopolitical tension. Each and every challenge has tested us, and each and every challenge made us stronger. Alongside with our strong financial performance, we grew selectively through high-quality M&As, such as Mirus Bio, UnitySC, and SpringWorks. This string of pearls approach sharpen our focus on key growth fields, like bioprocessing, semiconductors, and rare diseases. We also streamlined the portfolio through divestments, including Consumer Health, Biosimilars, Surface Solutions. In parallel, we strengthened our resilience very early, particularly in Life Science and Electronics, by investing several billion EUR across our global footprint under our region for regional strategy.
I believe Merck is exceptionally well-positioned for the next chapter, ready to lead in the breakthrough markets that will define the next decade, from novel modalities to the materials powering chips for AI. Today, preparations to hand over the reins of leadership to Kai Beckmann are very advanced, as he mentioned already. I know that Kai and the team have everything they need to keep reaching higher. I want to use this opportunity to say a heartfelt thank to our teams around the world and to our investors and to all the analysts covering us. Thank you for your trust, and I hope to see many of you in my new mandate, my new job. Thank you so much, and goodbye.
Thank you. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.