to the 44th JP Morgan Healthcare Conference. I'm Richard Vosser, European Pharma Analyst with JP Morgan. It's my great pleasure to host and introduce the CEO, Belén Garijo, from Merck KGaA, Darmstadt, Germany, and their presentation today at the conference. Just before I hand over to Belén, just a few housekeeping remarks. If you want to ask a question, put your hand up and we can take it in the room, or you can put your questions on the portal. Belén, welcome to the conference.
Thank you so much. Thank you very much. Good morning, everyone. It's great being here. So very welcome to the session of.
Welcome to the 44th JP Morgan Healthcare Conference. I'm Richard Vosser, European Pharma Analyst with JP Morgan. It's my great pleasure to host and introduce the CEO, Belén Garijo, from Merck KGaA, Darmstadt, Germany, and their presentation today at the conference. Just before I hand over to Belén, just a few housekeeping remarks. If you want to ask a question, put your hand up and we can take it in the room, or you can put your questions on the portal. Belén, welcome to the conference.
Thank you so much. Thank you very much. Good morning, everyone. It's great being here. So very welcome to the session of Merck KGaA, Darmstadt, Germany. And it's great to start the year, as usual, sharing our 2025 results and the journey, the growth journey ahead. So let me start by providing a helicopter view of our business, as well as reinforcing confidence in our ability to create significant shareholder value, with the next wave of growth becoming increasingly tangible. And why is that? First, because we are very well positioned in highly attractive, innovation-driven end markets and are addressing key secular trends with our so-called key growth pillars, namely Process Solutions, rare diseases, and Semiconductor Solutions. Second, while our investment focus is on these three growth pillars that I mentioned, our strong cash generation is broad-based and it serves as the backbone of, thank you, of active portfolio management.
Many of you know that we have a proud history of 358 years of existence and M&A is deeply embedded in our DNA. And we will continue to build on this strong track record of both acquisitions and divestments. Number three, our multi-industry business model and, importantly, our globally diversified footprint, which are clear strengths. And this pairs with the increasing regionalization in which we have been investing in recent years provides additional resilience to help us navigate more successfully in a highly changing geopolitical environment. So for those of you who may be less familiar with our company, let me highlight a few points. First of all, we operate in three leading businesses: Healthcare, Life Science, and Electronics. And we focus on innovation-driven businesses with the key growth pillars highlighted in the framed boxes on the slides. And those are great examples of what I mean by innovation-driven businesses.
In Process Solutions, we are at the forefront of bioprocessing, driving significant advancements in speed and quality across both traditional and novel modalities. Our current growth momentum is very strong. And the long-term fundamentals of this market, we have confirmed, are fully intact. Second, rare diseases is a new strategic pillar for us. And this is backed by the acquisition of SpringWorks that, you know, we announced last year in 2025. We aim at building a portfolio of innovative medicines which are addressing significant unmet medical needs. And we are making good progress. For example, pimicotinib has been approved in China right before Christmas. And a few hours ago, we received the news that the FDA has accepted our filing for the U.S. And you may have seen the announcement that we released a few minutes ago.
In Semiconductor Solutions, we are a critical enabler of artificial intelligence with one of the strongest and most innovative portfolios of materials and services for the manufacture of leading-edge chips. Last but not least, we are a truly global business with significant local presence, operating in over seven countries worldwide, and a balanced distribution of sales across key economic regions: U.S., North America, Europe, and APAC. Before turning to the future, let's take a quick look at what I call our strong track record. Over the past 15 years, we have delivered consistent sales growth with highly attractive margins. If we only look at even recent years, we have delivered revenue growth every single year, with the exception of 2023, when, of course, we were significantly hit by the COVID cliff after the pandemic.
That performance has been powered by a strategic foresight and a combination of organic growth boosted by M&A and a highly disciplined portfolio management. As you see on the slide and the bubbles illustrate, we are extremely focused and ruthlessly allocate resources where returns are the highest. Recent pivotal moves include the acquisition of SpringWorks, which I already mentioned, as well as the divestment of Surface Solutions. We have also further increased and strengthened our portfolio through a string of pearls approach, tapping into attractive technologies such as Mirus Bio, UnitySC, and the chromatography business that we acquired late last year from JSR, and the results speak for themselves. Attractive margins across cycles, sustained by a rigorous focus on profitable growth and capital discipline, so what is ahead of us? Before taking a closer look at the journey ahead, let me quickly turn to some important housekeeping items.
First of all, to confirm our 2025 guidance, as well as the early indication on 2026 in full consistency with the information that we provided during our Q3 call in November. Importantly, I think we reiterate our view of gradually improving end markets in both life science and electronics, and we are confident to be able to capitalize on these improving trends. We also remain confident in navigating life cycle challenges of some of our key brands in healthcare next year, in particular, Mavenclad, where we are building for accelerating growth over the midterm with rare diseases as the key contributor to growth in healthcare. I touched on the key growth drivers or the three key pillars earlier, so let me add a little bit more color into this. Across our three sectors, we operate in attractive industries, growing at least in the mid-single digits over the medium term.
Within these industries, we are tackling key secular trends: bioprocessing, orphan diseases, and the strong demand for fab materials. These are long-lasting trends. With that in mind, we are strongly positioned with our three growth drivers: Process Solutions, rare diseases, and semi, all of them with a clear competitive edge. What does this mean in terms of outlook? Well, we see a clear path. Next slide, I think. Yeah. We see a clear path to mid-single digit growth for the group, powered by our three main growth pillars. Together, we expect sales of the key growth drivers to go in the low double digits over the medium term, contributing to over 80% of our future growth. The remaining of our business, the so-called core business, will also grow, though at a slower pace.
In this part of the business, though, resilient cash generation is a very, very important feature so that we can continue to invest both organically and inorganically. Let's go deeper into our business sector, starting with Life Science. As we mentioned in our Capital Markets Day in October, we are introducing a new organizational design in Life Science. This is with the goal of becoming even more customer-centric. The organization is designed around the customer buying patterns and the way they use our products. Our new model is centered around three go-to-market approaches. First, Process Solutions, which is about tailored solutions embedded in customer processes, Advanced Solutions, a high-touch model for specialized products and services requiring technical sales and services, and Discovery Solutions, a high share of purchases going through our e-commerce platform.
The new go-to-market model has gone live January 1st and is giving the teams, the life science team, a simplified, more focused structure that accelerates execution and ultimately better serves our customers. Within the new organizational structure, Process Solution remains unchanged, serving mainly large biopharma companies, CDMOs, and biotech with end-to-end bioprocessing products. In this segment, we expect midterm market growth of 9%-10%, driven by strong demand for monoclonal antibodies and novel modalities like ADCs. Our Advanced Solutions portfolio includes regulated lab products and services such as CTO, contract testing, and CDMO, targeting pharma, biotech, industrial, and diagnostic clients. The market backdrop is favorable, with mid-single digit growth expected over the midterm. Discovery Solutions is operating in modestly growing markets, offering a broad catalog of chemical and biological reagents for research and analytical workflows, primarily sold, as I mentioned before, through our e-commerce platform.
Collectively, these three businesses form a balanced, high-quality portfolio positioned to win in highly regulated markets, which are faced with high switching barriers. Overall, we aim for mid to high single-digit organic growth in our life science business over the midterm. 2026, as mentioned in our early indication, will be more around mid-single digit as the markets continue to recover, mainly China, early-stage biotech funding, and the U.S. academic environment. In this context, Process Solutions will remain our main growth engine, with a growth of around 10%, which is consistent with the strong momentum that we have seen over the past couple of quarters. Growth continues to be very, very healthy in traditional modalities, while novel modalities are growing even faster, driven by rapid biotech advancements and more approvals.
Turning to Advanced Solutions, we expect mid- to high-single-digit growth as we build on our leading positions in key areas like lab water and biomonitoring. Last, Discovery Solutions is expected to grow in the low-single-digit range, supported by a strong e-commerce platform and an omnichannel presence. Moving into healthcare, our rare disease business is a new strategic pillar and has allowed us to raise our midterm growth projections for healthcare to low- to mid-single-digits recently. This franchise currently includes two commercial products from the SpringWorks acquisition, as well as pimicotinib, which I already mentioned at the beginning of the presentation, was recently approved in China, and which we expect to launch in the U.S. by the end of 2026. CM&E and Fertility will provide continued growth. It's a strong, very resilient business extending beyond the midterm.
We intend to continue modest and highly selective investments in this segment. And a great example of this approach is the expected launch of Pergoveris in the U.S. and other geographies to support the global potential. Switching to the longer term, we continue to strive for further growth acceleration with contribution from our pipeline as a key driver. We have a couple of promising assets in late-stage development, and we intend to continuously replenish our pipeline, managing the risk profile very rigorously, with about 50% of our new launches coming from external innovation. In rare diseases, we continue to be very open after the recent acquisition of SpringWorks to in-license or bolt-on M&A in all stages of development. And for non-rare diseases, we will focus on assets with a strong biological validation, either in licensing or co-development from discovery to phase II.
Let's briefly zoom into our current rare disease business. Ogsiveo, developed by SpringWorks, is still the only approved systemic treatment for desmoid tumors, and has been in the market for more than two years. It has seen a strong uptake and is now entering the next phase of launch in the U.S. In Europe, we are very strongly encouraged by the positive signs from recent launches in Germany, and we will roll out further across Europe in the coming quarters. We, despite competition, remain confident in the blockbuster potential of this drug in the future. Gomekli, also from SpringWorks, is indicated for the treatment of neurofibromatosis. Following approvals from the FDA and the EMEA last year, this product is off to a strong start with adoption both in pediatrics and adult markets, supported by a highly differentiated value proposition.
Last but not least, pimicotinib has a best-in-class potential in TGCT and will be launched in China and later in the U.S., and we aim to leverage the synergies that exist between PIMI and the two commercial drugs of SpringWorks. Taking these three products together, we see combined peak sales potential in the range of EUR 2.5 billion. Let me now move briefly into electronics to conclude. We are at the center of the most important innovation in computing power for years, which is artificial intelligence. You all know that, and we mainly benefit through our Semiconductor Solution, which is now representing 80% of our electronic sales. A few points to highlight: the size of chips keeps shrinking, and hence the biggest growth is advanced nodes with new materials. Over 50% of our semi portfolio is here versus 33% of that of the market.
AI is driving an infrastructure boom, and as this expands, we expect significantly more volume. Advanced packaging in this context is the next frontier. And basically, we have gone from no sales three years ago to now expecting well over EUR 100 million. We are also excited about Optronics, the smaller part of electronics. And in short, electronics is a great value compounder, and Semiconductor Solution is one of the fastest growth pockets of the group. To bring this session to a close, let me wrap up with our midterm guidance and key priorities. So we have a clear and credible path to accelerating growth and driving margin expansion over the medium term. The structural growth drivers across our sectors are intact, and we are focused on the right trends with our key growth pillars, which I already mentioned. From these growth pillars, we expect to deliver low double-digit growth combined.
This momentum comes on top of a resilient core business, which we expect to continue to grow slightly. When you put it together, the group is committed to deliver mid-single digit organic sales growth over the midterm. When we look at the margins, we are targeting an increase of about 100 basis points over the level implied by our 2025 guide. As you saw earlier in the presentation, underlying margin expansion will be masked by life cycle challenges of some of our key brands in healthcare, as we mentioned already in 2026. However, looking through this, we will see margin expansion supported by positive mix from the key growth drivers, coupled with core discipline in the core, improving capacity utilization and efficiency gains. All in all, we are firmly committed to profitable growth over the midterm and looking further ahead.
Our ambition is to accelerate even more as we approach 2030 and beyond. In summary, we have a clear set of priorities. Next slide, please. First, concentrating resources behind our growth pillars. Second, driving margin expansion and cash generation, which is going to be helped by an improving mix, ongoing cost discipline, which characterizes our company, and higher capacity utilization, tighter working capital, and reduced CapEx intensity that we have already announced after big investment in supply chain resilience. Third, our investment opportunity is rich, and we retain a disciplined, opportunity-driven M&A appetite, and significant headroom, and last but not least, customer centricity and innovation are the flywheel, and with this, we are ready for the next wave of growth grounded in execution today and positioned to win in the markets that matter the most.
With this, thank you very much for your attention, and I will hand it back to Richard to start the Q&A.
Thanks, Belén. So, as I said, if there are any questions in the room, please put your hand up. Maybe I'll start. So maybe a question just on healthcare to start with. Belén, you alluded to some of the near-term challenges around, and I think that's with relation to Mavenclad and the LOEs. Maybe you could just talk about the balance of that and how we should think about Mavenclad and then the underlying growth of the business as well.
Okay, so Danny, can you?
Thank you so much for the question. I think that this is a super valid one. When it comes to Mavenclad, we have the loss of exclusivity, I would say, earlier than we expected, started late last year.
And as we say, we expect the impact of it in the U.S. this year, and we will be able to quantify it better when we guide in March. Of note, in Europe, just to remind that in Q3 2025, the growth in Europe was along the lines of 19%, and we expect it to continue growing in Europe. The loss of regulatory data protection in Europe, we are talking about August 2027. So the trajectory outside of the U.S. stays the same. Now, when it comes to the bigger picture, the growth will be mainly driven by double-digit growth, as Belén alluded to, when it comes to the rare tumor business. Ogsiveo, Gomekli, we are very encouraged with what we see in terms of the launches of the drug. With Ogsiveo, we are the second phase of the launch in the U.S. and doing very well in Europe.
That makes us very, very optimistic. Pimicotinib, recently approved in China, we are going to bring it to patients after we get the price in China and in the U.S., hopefully at the end of this year upon FDA approval. Now, another element to the growth potential of healthcare is in the fertility business, particularly when it comes to Pergoveris. Pergoveris is the fixed dose combination of FSH and LH, and it has been growing. The five-year CAGR has been 20% outside of the U.S., Japan, and China. When it comes to China, we submitted Pergoveris in China last year, and we expect an approval within the next couple of months. So this should give us a boost, and we are optimistic about that. When it comes to Japan, we agreed with the Japanese authorities on a very lean development plan.
It will not impact 2026, yeah, but it will bring, hopefully, Pergoveris to Japan in 2028, 2029. The biggest ticket item is the United States. As we communicated at the end of last year, we received a Commissioner National Priority Review voucher to review Pergoveris fast. Pergoveris is not new to the FDA. We had a lot of back and forth in recent years on how to bring that. And this priority review voucher gives us a very nice opportunity to bring it fast. And I would call it right now as a non-negligible opportunity for us. It will depend on how the label looks like. We started the submission in January, and if everything goes right, as we assume that it will go, it's going to be launched early second half of this year, somewhere around the summer. So we are very optimistic with that as well.
I would say the pushes mainly coming from Bavencio continued erosion during the Bavencio and Keytruda competition. A lot of competition for Erbitux in China with an incomparable biologics. And of course, as we said at the beginning, Mavenclad, so I hope that it gives you the picture.
Thanks, Danny. Maybe one other question on healthcare. Just, Belén, you mentioned sort of the competition and not being afraid of the competition in terms of Ogsiveo. We've seen the Immunome data, which was slightly higher response rate, so maybe just you could put into context how you see that competition.
I will invite Danny to speak, but of course, we are not fearful about competition. It's not a matter of being fearful. It's a matter of being prepared, and this is what matters the most, and Danny will share a bit more detail on how are we preparing for that.
Yes.
I'm taking one step backwards, and I'm referring us back also to what I said at the Capital Markets Day. It was one of my first sentences. I think that one of the learnings that we had when it comes to previous launches and performance is that we need to have a much more sober look at the competition, yes. And this is exactly what we did when we due diligenced the SpringWorks assets. And we took into account the [Nirogacestat], same mechanism of action. It had back then data from a handful of patients. And our assumption was, is that, and I said that many times, is that it will be a drug and a serious competitor.
Now, exactly how we're going to compete with them, it will be a little bit, and what is the strategy in terms of data generation and messaging, it will be a little bit complex to say it right now. But we looked at their data. Now, you mentioned higher response rates and so on and so forth. So the drug clearly works because it belongs to the data of gamma secretase inhibitors. What we know from Ogsiveo, Ogsiveo is in the market for more than two years. We have four years' data of increasing ORRs, of decreasing adverse events, of more than in the real world of more than 90% refilling by prescribers and by physicians and by patients. So we feel very confident in the profile in the real world. Now, few percentages up or down, I wouldn't, it's not my personal opinion.
I actually, last week, I spent a lot of time here in Stanford and UCSF with key opinion leaders. There is no slam dunk. It is, I would say, a conglomerate of efficacy, safety, tolerability, convenience for the patients, the high touch for the patients. Though we need to see the data, we haven't seen the data on the time to response. We haven't seen the data on what matters to the patients most in these non-lethal tumors, which is pain and quality of life. We haven't seen the data on Grade 3 and Grade 4 adverse events, so of course, the drug works, but I believe that Ogsiveo will continue delivering on that promise, and there are, to remind you, more than 20,000 patients only in the U.S. that can use this treatment, so I'm very optimistic with the potential of Ogsiveo, with taking into account super seriously the competition.
Excellent. Maybe we could pivot to Life Science. We've seen a good recovery in the Process Solutions business in 2025. What's the thoughts on the continuation of that and how your customer base are in terms of their inventory levels, etc.?
Yeah, thanks, Richard. So, as you said, during the course of 2025, we saw our Process Solutions performing quite well. So we disclosed a solid performance Q1, Q2, Q3, more to come in Q4. What I would like to highlight is we learned from COVID time, meaning that today we have implemented very, very robust tools, systems, processes to track our Process Solutions performance, to monitor our customer behavior.
As an example, once a quarter now, we do a kind of mini survey with our top 20, top 30, what we call global strategic accounts to have a feeling of what they perceive within the market and how they want to manage their own business, including our inventory. So we said that for Process Solutions, we are marching towards an organic growth midterm around 10%. And today, I would like to confirm that this is what we are aiming at in the near future.
Excellent. And there's been outside of Process Solutions some pressure on the other parts of the business, funding requirements in the U.S., funding in R&D, etc. I mean, there's been even the courts have got involved. So what's the latest picture there for Discovery Solutions?
Yeah, I mean, so overall, I would like to highlight the fact that when you look at our Life Science markets, mid- to long-term, our fundamentals remained very strong. The mega trends are confirmed, i.e., aging population, access to health, robust drug pipeline, especially in biologics. So we feel good on the mid-term guidance. On short-term, I believe we'd like to echo what you said. We are facing some headwinds. I would like to highlight three. China remains muted, which has an impact on our Discovery and Advanced Solutions business unit. Biotech funding are still a question mark. We believe we reached the bottom, but we don't see yet a recovery.
And the third element I would like to highlight is the academic market, especially in the U.S., where most of our customers, I will say, are extremely cautious from a behavior point of view because of the unknown. So I would say on short term, we are quite positive on Process Solution markets. We are more cautious on the lab business.
Excellent. And Belén, you highlighted the new business structure for the life science business. What does that bring? Any tangible elements that's brought to business performance of being more customer-centric?
Yeah, I can take it. So first of all, we announced the new organizational design in October. We went live in January 1st. You should assume that the decision to adjust our go-to-market model was mainly driven by our customer. From last year, actually, we started to pressure test our current model here at JPM a year ago.
From January to March, we spent a lot of time with customers, and the feedback was always the same. We need to simplify the way we interact with them. And today, the feedback is extremely positive. I would like to give you some concrete examples. Number one is with what we call our global strategic accounts, which are extremely important for Process Solutions business. In the past, our global strategic account in Process Solutions, we are only selling the portfolio of Process Solutions. We gave the guidance, and we trained the organization not only to sell the Process Solutions portfolio, but to expand to Advanced Solutions and to Discovery Solutions. The feedback is absolutely outstanding. Our customers are extremely positive about the way that now they have only one interaction, one face, and they can interact on a day-to-day basis with this person.
Same is true for our e-commerce platform. In our key strategy, we said that we have three pillars: portfolio leadership, customer centricity, and operational excellence. Under operational excellence, we want to improve our service level. And there is one metric that we are measuring under e-commerce called ETS, estimated time to ship. And I would say over the last few weeks and months, we have been on a good streak. And guess what? The feedback from our customers is extremely positive as well. So overall, I feel good with the model, and it's about execution. So quite positive.
I think Jean-Charles Wirth has been a bit modest on defining the way this new design is securing customer intimacy and much higher accountability in front of the customers, a simplification that was absolutely key in the life science business post-COVID.
Definitely, we are confident that the value that the customers are drawing from this organization will ultimately reflect on health performance.
Belén, in your slides, you highlighted many business development opportunities and M&A that have transformed Merck over the last 20 years. Where are we in terms of thinking about the use of M&A now? As SpringWorks is transforming healthcare, where do you go next?
Look, I mean, first of all, let me emphasize that we have been already extremely active in M&A in recent years. For us, M&A is not only acquisitions, but it's also focusing on the right businesses that are going and disposing or putting our businesses in the hands of other companies through divestments. This is equally important.
What is very clear is that in the current environment, and also when we look at our portfolio, we don't feel the need of looking for scale. But you have heard me many times saying that what we need is in Life Science, for example, which is our top priority, a very solid innovation model which is going to contribute to accelerating growth of the future. In Healthcare, clearly, we have been very short of external innovation. And therefore, we haven't invested enough in recent years in external innovation. And if you compare any company of our size, a mid-cap pharma company, between 50%-70% of the new launches will come from external innovation. So the focus on external innovation is driving our strategy for Healthcare. And definitely, in Electronics, we are very well positioned, as I mentioned.
But we are also interested in tapping into this advanced packaging, as we have done with UnitySC, which we consider to be a very promising opportunity for the future. So in reality, sitting on a solid organic performance, we will continue with the activities that we have initiated and actually look for the way we do it, right time, right target, right price. And it's likely that looking at these innovation-driven businesses, we stay on a string of pearls approach.
Makes perfect sense. I think we've run out of time. Thank you very much, Belén. Thank you very much for coming.
Thank you.
Thank you.