Merck (MRK) investor relations material

Strategic priorities, capital allocation, and portfolio management

• Focus on growth, innovation, and sustainable value creation, with disciplined portfolio management and capital allocation to areas with highest returns.

• Active portfolio management includes recent acquisitions (SpringWorks Therapeutics, JSR's chromatography business) and divestments (Surface Solutions), prioritizing investments in attractive markets and divesting non-core assets.

• Over 80% of business operates in attractive markets with strong competitive positions; ongoing disciplined review ensures adaptability and resource optimization.

• M&A remains a priority, especially in Life Science, with strict financial criteria and significant firepower for both bolt-on and transformative deals.

• Capital allocation and portfolio optimization are guided by systematic, data-driven prioritization, considering interdependencies, risk-adjusted returns, and a holistic approach to resource allocation.

Business sector strategies and growth drivers

• Life Science introduces a new customer-centric structure with three business units: Process Solutions (bioprocessing), Discovery Solutions (digital catalog), and Advanced Solutions (specialized services), driving scalable growth and innovation.

• Process Solutions is the main growth engine, targeting around 10% CAGR mid-term, supported by resilient manufacturing and regionalization.

• Healthcare pivots to rare diseases as a new strategic pillar, supported by SpringWorks acquisition and launches of Ogsiveo, Gomekli, and Pimicotinib, aiming for upgraded mid-term growth.

• Oncology and Neurology & Immunology are managed for cash and sustainability, with pipeline replenishment and risk diversification.

• Electronics focuses on Semiconductor Solutions (80% of the segment), leveraging AI and advanced computing trends, with mid- to high-single-digit organic sales growth ambition.

Financial guidance and outlook

• Group targets mid-single-digit organic growth over the midterm, with key growth drivers (process solutions, rare diseases, semiconductor solutions) expected to deliver low double-digit growth combined.

• Margin improvement of about 100 basis points over the midterm, driven by higher capacity utilization, efficiency gains, and ramp-up in rare diseases, partially offset by lifecycle challenges in healthcare.

• On track to meet 2025 guidance with organic sales growth of 2-5% and EBITDA pre margin around 29%; positive early indication for 2026 with stable margins.

• Free cash flow to strengthen as operating cash flow improves and CAPEX-to-sales ratio gradually reduces after a period of overinvestment.

• 2026 guidance: Life Science and Electronics to improve, Healthcare to moderate temporarily; SpringWorks will be margin dilutive in 2026 but EPS pre-accretive in 2027.