Operator: Dear ladies and gentlemen, welcome to the Merck Investor and Analyst Conference Call on Fourth Quarter 2021. As a reminder, all participants will be in a listen-only mode. May now hand you over to Mr. Constantin Fest, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir.

Constantin Fest: Thank you, John. Dear ladies and gentlemen, a very warm welcome from my side to this Q4 2021 earnings results call of Merck. My name is Constantin Fest, I’m Head of Investor Relations here at Merck. And I’m delighted to have here today with me, Belén Garijo, CEO of the Merck Group; as well as Marcus Kuhnert, CFO of the Merck Group. For the Q&A we will also be joined by Matthias Heinzel, CEO of Life Science; as well as Peter Guenter, CEO of Healthcare; and Kai Beckmann, CEO of Electronics.

We would like to first run you through the key slides of this presentation and then we'll be happy to take all of your questions during the Q&A. Having said this, I'd like to now hand over to Belén to kick off the presentation.

Belén Garijo: Thanks Constantin. And welcome everybody to our full-year earnings call. We have invited you to discuss our annual visuals today.

But given the incomprehensible violence happening right now, at the very heart of Europe, business events like this need to be put into perspective. The war in Ukraine is a painful cut to any regularity. And to me personally and to all of us at Merck, it is devastating to witness. It saddens me especially to see the heartbreaking images every day. What we know to be a truth in words that woman and children suffer disproportionately.

Hence to support humanitarian aid in Ukraine. Merck as a company will donate €2 million to the German Red Cross. €1 million of this amount will be contributed by the Merck family. In addition, we have setup a donation platform to enable everyone at Merck to contribute. The nation's made here will be met by the company.

As you know, we are dedicated to advancing human progress and the health and well-being of people will always be at the center of our actions. We live up to this responsibility by continuing to do everything in our power to ensure the supply of medicines and products to patients and customers, of course in full compliance with the existing sanctions. What makes me very proud is to seek our Merck colleagues across the company, particularly in countries bordering on Ukraine, such as Poland are volunteering to support anything, bearing to welcome Ukrainian refugees to their homes, organizing the transportation of care packages with food and hygiene products, and connecting on our intranet as well as locally to share information about ways to help underneath. And this is a very team that delivered our 2021 results and in face of other considerable challenges, such as COVID, they did a fantastic job. Now let's go to Slide Number 5 of the presentation for the highlights.

Overall, as you have seen in the press release already 2021 was an outstanding year for Merck operationally, strategically and financially. And thanks to the commitment and dedication of our more than 60,000 employees. We delivered strong operational performance in what continues to be a highly challenging environment. We made progress with our strategic agenda accelerated our science and technology leadership, through cutting edge innovation and launching major investments for profitable growth in the years ahead. We delivered very strong financial results.

Organically group sales increased by 14% and EBITDA pre rose 27% on an underlying basis, that is excluding the Biogen provision reversal in 2020. Operating cash flows showed by over 30% and we have strengthen our balance sheet further through rapid delivery chain. Close to 80% of our total sales growth was driven by the so called Big Three. And all three of our business sectors posted double-digit earnings growth with, which clearly speaks of the strength of our portfolio. Life Science was the star performer with very strong growth in the core business and a significant upside from our contribution in the response to COVID-19.

We increased capacities significantly in 2021, and further boosted our capabilities to expand in the attractive CDMO. space. In Healthcare, we continue to advance our pipeline and drove significant growth from the further ramp up of Mavenclad and Bavencio on top of a very highly resilient, established portfolio. In Electronics, we accelerated our growth trajectory by capitalizing on our strong position as a leading supplier in the semiconductor industry. As we look to 2022 and ahead to 2025.

We expect to achieve continued strong growth following rigorous execution of our strategic priorities. And as usual, at this time of the year, we are introducing qualitative guidance for 2022. This calls for strong organic growth of group sales and EBITDA pre-supported once again by all three business sectors. We are confident that 2022 will mark another successful year for Merck and we will provide more color later on in the Q&A. Let me now move into the next slide, Slide Number 6 to take a quick look at how we perform against our targets in 2021.

As you can see, we delivered on all of our headline promises. In fact, if you recall, we upgraded our guidance three times last year, mainly owing to the very dynamic environment generated by COVID in life science. On the Slide Number 7, you will find the sales breakdown and growth by region. Having generated almost 20 billion sales in 2021, we also generated double-digit growth in all major regions. A strong testament to the global relevance of our diversified portfolio.

Growth in Life Science was very strong and very similar across our three main regions. While in healthcare and electronics it was strong, but it's slightly skewed towards North America. Above all, it is important to note that our footprint remains nicely balanced with significant exposure to strategically important growth markets in Asia-Pacific at 76% of sales, followed by Europe at 29%, and North America at 27%. On the Slide Number 8, you have the dividend and as you have seen from our press release this morning, we have proposed a dividend of €1.85 per share. We will propose that to the AGM in April 22.

This is a 32% increase over 2020 and a payout ratio of €21.2 of EPS pre and fully consistent with our well known dividend policy aim at continuous dividend growth in line with our earnings developments. Let me now provide a more detailed view of 2021. Starting with Life Science in Slide Number 10. Once again Life Science had a fantastic year. Organically sales and EBITDA pre rose 21% and 38% respectively.

All three business units delivered record organic revenue growth with Process Solution being in the lead at an outstanding 71% followed by research solution at a very strong 15% and applied at a very good 9%. Also note that we posted double-digit growth across all regions on customer segments. Slightly more than half of the growth was attributable to our strong core business. Here we got a benefit from a recovery against soft comparables in H1 and more normal dynamics in H2 with very robust fundamentals across the board. On top of this, we continue to make critical contributions in the response to COVID-19 support in more than 80 vaccines projects.

Over 35 testing solutions are more than 50 treatments. Total COVID related sales in Life Science amounted to about €1.15 billion last year of which close to €1 billion came from Process Solution -- came from Process Solutions around €150 million from Research Solutions. Looking ahead, we expect continued strength in the core business which is our key value driver. And we also expect significant demand related to COVID, although likely fading and potentially increasingly volatile, as we will explain to you later. Turning to profitability, 2021 was exceptional.

The EBITDA pre margin in Life Science came in at a record 36.6% on sales, supported by a positive mix favorable pricing and a strong operating leverage. We have seen a slightly lower margins in eight to mainly due to investment basically accelerated recruitment of people that we need for the factory and the ramp-up of other strategic investments. Talking about strategic investment, our direction is clear, we aim to strengthen our core and expand in high growth segments. And we have made great strides again our strategy in 2021. First, we have maximized the output in bottleneck areas through productivity gains first, and adding significant new capacity in numbers and motion for single use and industry for filtration.

We have successfully launched our upgraded e-commerce platform and more than 20,000 new products across our portfolio. The highlights include important new features to our Bio4C platform and a high purity synthetic cholesterol for use in mRNA therapeutics. Also in Life Science, we increased R&D in the double-digit percentage range, and we will put even greater emphasis on innovation, digital and emerging markets mainly China going forward. We entered important strategic partnership, for example with BioNTech and we significantly accelerated our multi-modality CDMO strategy through organic and inorganic investments, including the acquisition of AmpTec and most recently Exelead. In summary 2021 was a great year for Life Science and we remain confident about the outlook.

The new organization of our Life Science sector that Matthias recently announced is aimed at enhancing our focus on capabilities in the service business while fully exploiting the synergies between Research Solution and Applied Solution at the customer level. And we are convinced that it will better serve that realization of our ambitious growth plan in the coming decade. Coming to Healthcare on Slide number 11, Healthcare had also a strong year overall, organically sales were up 9% and EBITDA pre increased 17%. Excluding the Biogen provision reversal in 2020, our established portfolio remained highly resilient, delivering organic sales growth of 3% despite VBP impact in China, on top of this sales from new launches in particular Mavenclad, Bavencio and tepotinib growth shoveling at more, adding more than 60% year-on-year. By franchise oncology increased almost 30% reflecting double-digit growth of Erbitux, supported by you may remember the temporary supply agreement with Eli Lilly and the strong up take of Bavencio in first line metastatic using urothelial cancer with sales more than doubling.

Our A&I franchise was up with the ongoing decline of Rebif more than offset by significant growth of Mavenclad which was up over 30% despite a very challenging high efficacy dynamic market environment. Another clear highlight of healthcare was the very robust performance of our Fertility franchise, which posted remarkable growth of more than 25% amid broad based recovery following the pandemic related deep in 2020. Our cardio metabolic and endocrinology franchise, CM&E was down slightly due to the temporary impacts on China VBP on Glucophage. In fact, Glucophage outside of China and the rest of the CM&E portfolio delivered very solid growth. In terms of profitability and excluding the Biogen provision reversal in 2020, the EBITDA pre margin in Healthcare increased to 30.4 on sales supported by revenue growth, milestone income from Bavencio and a very disciplined cost management.

Looking more strategically, our priorities have further evolved. And we are confident that our focused leadership approach is providing solid basis for longer-term growth. Our pipeline has significant potential, and we advanced it further in 2021. In total, as you can see on the slide, we have now 14 clinical development programs underway, including compounds with novel mechanism that could redefine the standard of care in major therapeutic areas. We completed the Phase 3 recruitment for our Blockbuster candidate, Evobrutinib in MS and we are on track with the development of Xevinapant, our latest state Blockbuster candidate in head and neck cancer.

We also remain committed to our other focus assets and we'll initiate Phase 2 for Enpatoran in SLE and CLE shortly. With regard to our recent launches, Mavenclad is holding or gaining market share in most markets, while we see a suppressed dynamic, high efficacy dynamic market in terms of volume. Bavencio is poised for continued strong growth from rising uptake in first line metastatic UC and the launch of Tepotinib in MET exon 14 will benefit from the recent approval in Europe. Our established portfolio continues to be providing a robust base and we have further strengthened our leading position in Fertility and return to growth in China in Q4. All in all, we feel good about our position in healthcare.

And we will remain very focused on the stringent execution of our study to deliver efficient growth. Let's move into electronics on Slide number 12 and here as well 2021 was a very strong year for electronics. Organic sales increased by 8% by strong 8% and EBITDA pre even faster at 10%. The key driver of growth was Semiconductor Solutions with revenues up 15% once again significantly ahead of our mid-year guidance. Double-digit growth in semi was supported by strong demand across key markets including China as well as new business wins in patterning, thin film and specialty gases.

On top of this, our DS&S business benefited from significant project contributions as our customers are executing a major investments in capacity expansion to address the well-known chip shortages on the future demand. The display was down 6% organically, fully aligned with our expectations as the ongoing decline of liquid crystals was mitigated by high growth in OLED materials. Surface increased 13% organically on the back of strong market recovery following as you recall pandemic related impacts in 2020. The EBITDA pre margin in electronics increased to a very solid 31.3% supported by the diversion synergies and despite rising input cost pressures in the second half of the year. The bigger picture we have successfully delivered on our bright future transformation ahead of time and launched our growth initiatives level up to drive growth in the years ahead.

Note the integration of Versum has been very smooth, and I'm very pleased to inform that we have already achieved our upgraded cost synergy target of €85 million for 2022 in the year 2021, so one year in advance. Looking at our end markets, we see vast growth potential and a substantial need not only for more materials and solutions, but also for cutting edge innovation to enable the next generation of kids. And we are highly confident that level up will help ensure that we address our customers ongoing capacity expansion as well as the innovation needs. Today we are focusing on additional scaling key semiconductor regions on supporting leading IT technology, a broad and relevant portfolio and importantly the right people and capabilities to cater to our customer needs. To sum up, once again 2021 was a good year, great year for electronics, I should say.

And we have everything in place to continue to execute on our accelerated growth ambitions. And with this, let me hand it over to Marcus for a more detailed review of our financials on Q4.

Marcus Kuhnert: Thanks, Belén. And welcome also from my side. I move on to Slide Number 14 for an overview of our key figures.

Overall, we are very pleased with our performance delivering very strong results in 2021. On a reported basis, group net sales increased 12.3% to €19.7 billion. EBITDA pre rose up 17.3% at €6.1 billion and EPS pre rose 30.1% to €8.72. Excluding the Biogen provision reversal in 2020, EBITDA pre and EPS pre increased even faster by 26.2% and 43.7% respectively. Portfolio effects were minimal and FX was a slight headwind for the full-year, but turn positive in H2.

Operating cash flow was very strong, up 32.7% at €4.6 billion given strong earnings growth paired with solid working capital management. As a result, we were able to deliver rich quickly lowering our net financial debt by round about €2 billion. Moving on to Slide 15 for a summary of performance by business sector. Group organic sales growth was very strong at 13.8%. This was fueled by all three business sectors with Life Science as the largest contributor followed by Healthcare and Electronics.

EBITDA, pre growth exceeded sales growth in all three business sectors, and corporate and other costs were down don't yet mainly due to an improved hedging result. As such, the group EBITDA pre margin came in at a remarkable 31%. Compared with 2020, this corresponds to an increase of 130 basis points and even as much as 340 basis points when excluding the Biogen provision reversal. Other non-recurring income items in healthcare did not make a big difference in the year-on-year comparison and were fully in line with our latest guidance. In other words, the strong underlying margin expansion is primarily a reflection of significant operating leverage in Life Science and discipline cost management across the entire company.

Before I move on to a review of our performance in Q4. Let's have a look at our reported earnings figures for 2021. As you can see on Slide 16, EBIT increased 40% year-on-year, or by close to €1.2 billion in absolute terms. Please note that this number would have been even €365 million higher without Biogen provision reversal in 2020. EBIT growth exceeded EBITDA pre growth by close to €300 million, mainly due to lower adjustments, fewer impairments and reduced amortization of purchased intangibles.

The financial result improved by close to €100 million on the back of ongoing swift deleveraging, hence significantly lower interest expenses. The effective tax rate was 21.9% in line with the lower end of our guidance range. And as a result, the reported net income totaled 54% to €3.1 billion and reported EPS came in at €7.03. That said, let's now take a closer look at Q4. Before ever I go into the details by business sector.

Let me briefly share some headline figures for the group, which you will find in the appendix to this deck. Organically group net sales increased 9.9% in Q4 and EBITDA pre rose by 11%. As such, momentum moderated further compared with previous quarters. However, this was fully in line with our expectations a mid tougher comparables and performance overall was still very strong led by Life Science and Electronics. Please also note that reported numbers were boosted by significant as X tailwinds in the fourth quarter, adding over 3% to group sales and close to 7% to EBITDA pre.

EPS pre increased sharply by 31%. And with that, let's now take a closer look to our three business sectors. Starting with Life Science on Slide Number 17. While growth moderated further due to rising comps. Life Science delivered yet another record quarter in terms of absolute sales and earnings.

Organically, sales increased 14.2% in Q4, still well above our mid-term guidance. The core business contributed almost two-thirds to this growth expanding at a very healthy pace of around about 10%. COVID related sales made up the rest growing significantly year-over-year, but declining slightly quarter-over-quarter, which supports our view that we have reached even past the peak by now. From a portfolio perspective, Process Solutions remains the key engine of growth with sales up 25.5% organically. About half of this was attributable to the core business with mid-teens growth reflecting robust end markets, especially in biopharma.

COVID related sales and process solutions still contributed positively to the growth in the fourth quarter and came in at around €950 million for the full-year. slightly shy of our latest guidance due to supply challenges. All business lines grew double-digit with bioprocessing as the main driver and strong growth in services. We continue to make good progress as our capacity expansions. In turn, a key enable of yet another strong sequential sales increase.

Order intake growth was slightly positive against tough comps and the orderbook continued to increase quarter-over-quarter. Moving on to Research Solutions here. The sales were up 1.5% organically against tough comps. Growth was entirely driven by the core business with lab activity at or close to pre-pandemic levels. COVID related sales and research solutions were down year-on-year for the first time and continue to fade sequentially coming in at close to €200 million for the full-year and thus exceeding our latest guidance due to higher testing activity at year-end.

Last but not least Applied Solutions reported very robust growth of 6.9% organically with diagnostics as a key driver and negligible COVID related sales. Geographically, we saw double-digit growth in all major regions. And in terms of customer segments, pharma and biotech was the strongest followed by industrial and testing and diagnostics. All showing double-digit growth, while academia was slightly down against tough comparables. With regard to earnings, EBITDA pre searched 25.4% organically, implying a margin expansion of 300 basis points driven by positive mix, favorable pricing, and operating leverage.

Similar to Q3, we saw a further modest margin decline on a sequential basis as we are stepping up strategic investments. And as Belén mentioned, we make progress in hiring people which is essential to bring capacities up. And with that, let's move on to Healthcare on Slide Number 18. Healthcare delivered solid top-line growth in Q4 was set up 4.7% organically. The established portfolio was stable against tough comps and recently launched products showed strong growth with combined sales up more than 40%.

By franchise Oncology was up 21% entirely driven by continued strong uptake of Bavencio at a plus of 132%, in turn supported by the ongoing first line, Metastatic Urothelial cancer launch in Europe. was flat against tough comps related to the temporary supply agreement with Eli Lilly. As a reminder, this agreement generated initial sales of €32 million in Q4 2020 versus the final booking of €10 million in Q4 2021. Excluding this effect, performance of Erbitux was very strong with a double-digit growth. Our N&I franchise was down 5% organically, as the ongoing decline of Rebif, at a level of minus 12% may be partly offset by growth of Mavenclad at 5%.

On a positive note, we were able to keep market share stable from Mavenclad in the high efficacy dynamic market. However, this market was clearly impacted by the Omicron wave. Fertility performed strong again up 8% organically against slightly soft comps. With the fertility market back at pre pandemic levels, we do not foresee further ketchup effects, but solid growth on robust market fundamentals, including rising prevalence and awareness of infertility. And last but not least, our CM&E franchise returned to growth of 3% in the first quarter as a China VBP impact on Glucophage started to fade and the remainder of the portfolio continues to be in a good shape.

Other highlights include the recent approval of Tepmetko in Europe and the acquisition of Chord at the end of last year. With regard to earnings, EBITDA pre declined 12% organically with a margin down 360 basis points mainly due to tough comps in terms of non-recurring income in the last year and fluctuations in manufacturing yields. I should say temporary fluctuations in manufacturing yields. On non-recurring income, please note that Q4 2020 included around €30 million from GSK and a mid double-digit million euro amount from active portfolio management, while Q4 2021 did not contain any non-recurring income as guided. Looking into 2022, we expect income from active portfolio management in the low to mid double-digit million euros for the full-year, of which we expect a low double-digit million euro amount in the first quarter.

With that let's continue with Electronics on Slide Number 19. Electronics performed also very strongly in the first quarter, with sales growing at 10.4% organically. Semiconductor solutions was again the key driver and is firing on all cylinders with a record organic sales growth of 24%. This is significantly ahead of our mid-term guidance and should not be extrapolated. Our semi materials business accelerated further despite rising comps, delivering broad based performance across the portfolio and growth of over 20% in strong market.

On top of this, we continued to capitalize on important projects in our delivery systems and services business helping customers to realize their investments in new fab capacity. And we expect these project contributions to last throughout all of 2022. Sales in Display Solutions were down 10% organically with the usual pattern of a continued decline in liquid crystals partly offset by strong performance of OLED materials. Surface Solutions posted a slight growth of 1% against rising comp. EBITDA pre increased 12.1% organically translating into a very solid margin of 31.5%.

This corresponds to an increase of 160 basis points, with operating leverage, favorable use fluctuations and synergies more than offsetting rising input cost pressure. Turning to Slide 24, a few remarks on our balance sheet at year-end 2021. In summary, the €3.6 billion expansion over 2020 mainly reflects the strong business performance and FX. Cash and cash equivalents increased due to strong operating cash flow. Goodwill rose due to FX and net working capital increased less than sales.

Property, plant and equipment increased on the back of investments to support our growth ambitions and also again FX effects. Our financial debt was reduced by over €1 billion amid significant net repayments and as a result, our equity ratio strengthened from 41% to 47% while net debt to EBITDA pre improved from 2.1 to 1.4 times. Let me also briefly comment on cash flow performance in Q4. As you can see on Slide 21, operating cash flow was down €243 million year-over-year mainly due to tax prepayments and increased working capital support sales and supply security in Life Science and electronics. Cash out for investing activities was higher than last year.

Although CapEx on PP&E was lower. Keep in mind that investing cash flow in the first quarter of last year was positively impacted by the reversal of temporary investment of excess cash. At the same time, CapEx was elevated than last year by the opportunistic purchase of buildings at our Burlington and Tempe sites. By contrast, cash out for CapEx in Q4 2021 was slowed due to phasing of payments. In fact, gross additions to PP&E on the balance sheet were broadly in line with our latest CapEx guidance of around €1.4 billion in 2021.

Also note that for 2022, we are guiding to CapEx in the range between €1.6 billion and €1.7 billion fully in line with our goal to increase CapEx to around a level of €2 billion by 2023 to support our accelerated organic growth ambitions. Last but not least, significant decline and cash out for financing activities can be explained by significant net debt repayments here especially of bank liabilities and commercial papers in the prior-year period. And with that, let me hand back to Belén for an update on ESG and for guidance.

Belén Garijo: Thank you, Marcus. So briefly on ESG.

I'm pleased to report that we have accomplished all goals that we set ourselves in 2021. The Merck ESG database is in place and we have implemented and tested the Sustainable Business Value methodology in several pilots. We have developed a set of KPIs that we are introducing to you today. The 14 metrics and corresponding targets, as far as they have been disclosed today can be found in the appendix of this deck. For the majority of the KPIs, we will report numbers as of 2021.

While the remainder will follow next year, we have incorporated ESG frameworks in major processes across important functions including R&D, procurements, controlling and M&A and we have already defined a list of priority projects and approved the corresponding budgets to fund those. One of the projects relates to our group wide supply chain with the objective of increasing the percentage of relevant suppliers that are covered by a valid sustainability assessments. Other projects to mention some growing the share of greener products in Life Science, as well as establishing a sustainability scorecard for healthcare, R&D and portfolio assessment in electronics. In Healthcare, we are also for example building programs for access to medicine in low and middle income. Moving onto 24th, our initiatives are coupled with increased transparency on ESG and starting with the fiscal year 2021, we integrated the non-financial statements into the annual report.

We also added reporting on EU taxonomy in line with the recent regulations and these shows that our share in taxonomy eligible net sales, CapEx and OpEx in connection with the environmental objectives or climate change mitigation is low. However, this is due to limited conformity of the Merck's business activities as defined in the regulation so far, and will evolve will change with an extra steps of the EU taxonomy reporting. As discussed, we are introducing a set of 14 sustainability metrics including those which are relevant for the compensation of the executive board. Looking ahead, we are planning to publish our comprehensive sustainability report in April as usual, and these will contain the tax force on climate related financial disclosure, reporting for the first time and in addition, we will extend it to our Sustainability Accounting Standards Board reporting from the pharma and biotech to the medical supply and the semiconductor industry standards to reflect all three business sectors. The analysis of VAT requirements will be ongoing as the stakeholders expect -- will be dynamic as the stakeholder expectations and regulations continue to evolve.

And we will adjust our plans as necessary and continue to be very focused on execution. To submit that, significant progress in 2021 convinced that this will help us to further accelerate the contributions that we make to solving more of the greatest sustainability facing the world resulting in mutual benefits for society, for the environment, and importantly for our competitive advantage and business performance. Let me conclude with the guidance for 2022. As you can see, on this Slide 26, we are providing qualitative targets as usual at this time of the year, and these will be followed by more detailed targets as part of our Q1 report in May. For group net sales, we are guiding to strong organic growth and currency tailwinds in a range of 1% to 4%.

For Group EBITDA pre, we are also guiding to strong organic growth and even slightly higher FX tailwinds in a range of 2% to 5% and this is mainly linked to the USD and the Chinese Renminbi. With regard to the situation in Russia and Ukraine, please note that our business exposure is limited and our forecast currently doesn't assume a meaningful impact. However, we are of course, carefully monitoring the situation and will provide you with further updates as the year progresses and we'll have more transparency on the evolution of the world. Moving into the next one, some color by business sector and there. As you can see, we expect sales and earnings growth to be supported by all three business sectors as it was the case in 2021.

Life Science will continue to be the fastest growing sector followed by electronics and healthcare. Please note that you should think about qualitative guidance in ranges. These ranges could be overlapping and the sector guidance are to support the group guidance and do not have to add up. For Life Science, we expect growth to be driven by continued strength in the core business and Process Solutions as the key driver of growth. COVID related sales will be slightly diluted to growth.

In particular, we now expect COVID related sales in Process Solutions of up to €900 million, which is slightly more cautious compared with our previous guidance of around €900 million. For research, we continue to expect COVID related sales below €100 million and negligible contributions in applied. In terms of the margin, our qualitative guidance may suggest an stable margin in Life Science, we continue to believe that slight margin erosion is the most likely scenario consistent with the trend in recent quarters and reflecting increasing strategic investments. Let me also give a sense on Phasing. In the past couple of weeks, we have observed increased volatility around COVID related demand in Process Solutions due to Omicron.

That is certain type of vaccines and treatments are working better than others and there are signs for a potentially accelerated transition into the endemic phase. In addition, we are facing increased supply chains related to Omicron including staffing and raw materials, which are temporarily weighing on output in key manufacturing sites. So bear this in mind when you build your models for Q1. For healthcare, we expect growth to be mainly driven by the launches mainly Mavenclad and Bavencio and in electronics, semiconductors will stay the key growth engine with OLED materials to continue with a strong performance. Last but not the least, we believe that we are very well positioned to manage profitability amid rising input costs, although the situation has become slightly more challenging in the past couple of months and we can further discuss all these topics during the question-and-answer session.

This is concluding my presentation. And over to you, Constantin.

Constantin Fest: Thank you very much, Belén for this presentation, Belén and Marcus. Now, John, if we could start the Q&A please, I would like to remind everybody to kindly limit yourselves to a maximum of two question, two questions. This will allow more of you to ask questions.

With this, John please let's kick-off the Q&A.

Operator: Thank you. We will now begin our question-and-answer session. We'll take our first question from Matt Weston. Please go ahead.

Matthew Weston: Thank you very much. It's Matt Weston from Credit Suisse. Two questions if I can, firstly is on Mavenclad. And obviously, you had a challenging performance during the Omicron wave in 4Q. But it's also clear that it's a very major driver of your healthcare growth guidance in 2022.

So we're already into March, I would be very interested in understanding the trends that you are seeing in Mavenclad recovery in the dynamic MS market as the Omicron wave wanes in major markets around the world. And then the second question is on Life Science. There was a lot of discussion during 2021, about whether customers were overstocking than non-COVID orders, because they were just concerned about constraints on supply chain. And during those discussions, Merck always expressed confidence that this wasn't the case with your products. And you are managing customers very carefully, because of the limited inventory you have.

There are clearly concerns that some of your peers that we may see a significant unwind of customer base stocking in 2022. Can you reiterate your confidence that you think you don't have customers with a lot of stock in the channel?

Belén Garijo: Matthias do you want to start with that?

Matthias Heinzel: Yes. Hey, Matt. It's Matthias here. If I may I start with your second question.

And indeed, I confirm what we talked about in the past, right. We stay very close to our customers. And we do not see by and large, especially in the high demand products a major overstocking right in here. Talk especially about the single use products, which are really made to order right. So specific needs of customers, and as well as the filtration products.

So yes, by and large, we still see a very, very high demand. And we do not see a major overstocking.

Belén Garijo: Peter?

Peter Guenter: Yes, so Matt, thanks for the question. This is Peter. So you remember that in Q3, I hinted to further volatility in Q4, which is related in E2D impact on the high efficacy market due to Omicron.

And as you know, I'm not the only one in the high efficacy sector having mentioned those issues. I think my colleagues or portion of artist hinted towards the same continued depression of the high efficacy market. I would say, though, that the impact of Omicron is definitely bigger in the U.S. than it is in Europe. And I think that if you would take all these things into account, you also remember that we had a one-off in Q3 that actually Q4 would have been in line with Q3 sales normalized for this one-off of Q3.

The other point I think it's important to mention is that our market share remains stable in the U.S. continues to grow in some of the key European markets. So basically, I'm confident that if we can consolidate that market share position and the high efficacy markets indeed recovers once we go out of Omicron that you should see a recovery of the growth of Mavenclad. I would say though, that in the first month of this year, we are still not out of the Omicron wave. As you know, especially in the U.S., so I would expect some more volatility in Q1, and then a more clear trajectory moving forward.

: Many thanks indeed. I'll jump back in the queue.

Operator: . Will now take our next question from Gary Steventon. Please go ahead, your line is open.

Gary Steventon: Thank you first for taking the question. So I guess just going to your CDMO and CTO offerings. Have been getting a bit more airtime in recent quarters and are going to be split out with Life Science going forward. Could you just talk a bit here to your aspirations for this business, as well as kind of the current profile in terms of growth and margin contribution within Life Science and Process Solutions? And then just on the slide, you note that you intend to scale up to become a leading CDMO. So I'm just wondering kind of what this means in terms of size and over what time period? And then just a follow-up question on Mavenclad, please.

So you gave us an update in terms of the patent term extensions for the Capital Markets Day? I think you mentioned you were appealing a decision in the U.S., and then the extensions are already been granted in France, Italy, and Spain, I think in Europe taking you through to 2013. But other decisions were pending. So it just an update here on any progress would also be helpful? Thank you.

Peter Guenter: Yes, Gary, let me start by the Mavenclad question. There is no update since our last communication on that.

So our appeal is pending in the U.S. and the SBC situations in U.S. are in -- are identical actually to the update that we gave you. Indeed, we have some key European countries where we have an SPS obtain and SPC obtain, sorry. And we are continuing to try to get those SPCs in those European countries.

What we haven't got it yet.

Belén Garijo: Matthias?

Matthias Heinzel: Yes, hey, Gary, it's Matthias. So to your question around CDMO and CTO. Currently, it's about 15% of our process are used in this business. And our strategy is clearly as we've outlined at the CMD, to build a multi-modality CDMO business.

Based on our existing presence, which is mainly around maps, high potency API's, viral vectors, and obviously mRNA. We were recently also added significantly with an acquisition of Exelead. So our goal is clearly to really further accelerate the business, investing into R&D, we're investing into capacity to really build that up. And probably you're seeing that we also announced in the organization, effective April 1. And to really support that growth and really accelerated, we are creating a lifetime services unit.

So basically, we are splitting out all the service related businesses, namely CDMO and CTO, and then post Q2, we will actually report that business, the new Life Science services business. So you will also get greater transparency on that business going forward.

Gary Steventon: Okay, thank you.

Operator: We will now take our next question from James Quigley. Please go ahead.

Your line is open.

James Quigley: Thank you for taking my question. So I have two. First one is on Bavencio. It's now been on the market for quite a while.

So where is the average daytime landing during the maintenance setting? And can you give us a bit more details on the new combination trials with novel therapies, I think due to starting in the second quarter. So in these trials we will eventually still be used as a maintenance or we should put it up in the treatment setting as part of those -- as far as those combinations? And secondly, on Russia and Ukraine. You mentioned that your business exposure is quite low from a clinical trials perspective has been some reports that there have been a number of clinical trials that are currently ongoing and enrolling in Russia and Ukraine. I think I noticed that one of your or both of the beaten up trials have some reasonable exposure in Ukraine. So have you done an analysis of what that could mean in terms of timing of readouts or, or how that could impact any of your trials particularly tepotinib trial? Thank you.

Belén Garijo: So, Peter comment on this, but of course, we have deeply analyzed the multiple dimensions of the implication of the situation in the regions. We have had round 13, we have conducted around 13 clinical studies in Russia and Ukraine. And I think the team has done a marvelous job to anticipate the dynamics of the trial in preparation for what was to come. So it's too early to say at this time, but definitely the team is very well prepared to protect the safety of their patients to secure the continuity of the follow-up to the extent that we can control that. And we will keep you informed on the future developments.

Peter, I think you don't want add to anything.

Peter Guenter: I think Belén you captured it perfectly. I think we did everything we could what has within our power to try to mitigate the impact? For example, we increased of course the investigational product stock in the countries and the sites. We were looking into moving into local labs instead of central labs for the biology's, et cetera, et cetera. So that's as you know, it's a very dynamic situation, I would say.

And we have to navigate it as things unfold. On Bavencio we continue to make progress, both sides of the Atlantic and you can see that also in the sales. I think your question was around the percentage of maintenance therapy now in the U.S. So, we are making progress continuously. We are now at 75% of patients given indeed chemo or platinum-based treatment, if they are platinum eligible.

And we started at 50% at the launch off of NCOs, who are really we are able to change your treatment paradigm there. And then I would say that in the use of first line maintenance therapy with Bavencio, we are at 50% at the end of last year. So, also making continuous progress. The share of countries like Japan and some key currencies in Europe should not be underestimated in total Bavencio sales. So, we have very good performance with Bavencio in Japan, in countries like France, like Germany, and we are still I would say in the probably final stages of getting reimbursement for Bavencio in countries like Italy and Spain for example.

So, I think we can be relatively optimistic to see that growth continue. Last piece of news is that the extension of the JAVELIN Bladder trial in metastatic UC, we have now over 30 months of follow-up and actually we have seen that the survival benefit further increased now to 8.8 months where it was 7.1 months in the pivotal data. So, we remain very, very optimistic and very bullish on Bavencio. On the clinical trials, the so called Medley trial, I can tell you that these trials are actually focused on reinforcing the position in the maintenance segments. So, we are not moving up in to for example, the adjuvant setting and I think we have talked more about this in detail in the R&D update call.

Thank you.

Operator: We will now take our next question from Falko Friedrichs. Please go ahead, your line is open.

Falko Friedrichs: Thank you. And I also have two questions please.

Firstly, what are your latest thoughts on M&A? And are you open to make a bigger step this year or is that rather unlikely? Then secondly on your electronics business, my question is how much longer can this higher demand due to the semiconductor shortage last and do you expect this to normalize again at some point this year or do you rather think and you can benefit from it throughout the entire year? Thank you.

Belén Garijo: So let us start with the semiconductors question, Kai.

Kai Beckmann: Yes, Falko, this is Kai speaking. Thanks for your question. Asking about the long, additional demand.

Our customers are investing like never before, so there is a strong expectation in the industry that demand is not just short term, it's a mid to long-term demand and the investments point clearly in this direction, this doesn't come from only one source, it comes from very different sources of developments and kinds of areas that digitize and require more chips and more sophisticated chips going forward. And the current data clearly supports mid-term guidance that we have given last year to Capital Market Day and we see a similar development confirming this year's close trajectory MSI close is projected at mid to high single-digit for 2022 confirming our mid-term assumptions.

Belén Garijo: Falko on the M&A front. Not too many things new to report, I think we have been very disciplined in executing on our strategy. As I mentioned before, we have recently closed Exelead which is very centric, to further developing our mRNA offering as a CDMO in our Life Science sector, we will continue to move on primarily on bolt-on acquisitions this year, which is exactly your questions, although of course, we are not excluding or close to looking at more transformative options as of 2023 as our cash position continues to significantly improve.

Falko Friedrichs: Okay, thank you.

Operator: We will now take our next question from Daniel Wendorff. Please go ahead, your line is open.

Daniel Wendorff: And thanks for taking my questions and good afternoon also from my side, two, if I may. The first one on Semiconductor Solutions is amazed, so according to my understanding the Ukraine supplies 70% of the world's Neon gas, which is an important step for semiconductor manufacturing.

So how much of a risk is the war here really for recovery of this market and maybe for your guidance, any more color you can provide here would be much appreciated. And my second question would be on Life Science, and then particular on Applied and Research Solutions. So how should we think about each businesses going into 2022 according to my understanding, the business environment, spending environment from Life Science research institutions looks actually quite healthy. Yes, any more color you can provide here? I would appreciate it. Thank you.

Kai Beckmann: Yes, Daniel this is Kai speaking. So Merck has no supplies from Russia or Ukraine as direct supply, currently some contact with all suppliers whether any indirect effects that could harm us, but we do not expect anything which is significant on our side because your data is correct. And we need to check with our customers whether they have other sources than Merck that would impact their factory output. This is largely unknown at this point in time and we checked going forward.

Matthias Heinzel: Yes, hello Daniel, it's Matthias here.

So to address your question about Research and Applied, first of all as we look at '21, we're coming from very strong growth rates for research with 50% Applied with 9% that partially due to also the softer comps against '20. And now as we move into '22, I think we are on the path towards our mid-term guidance which we provided, which was for research in the low single digit and in Applied in the mid-single-digit. Again, I would keep in mind that especially with research, as you're rightly pointing out, the spending levels are increasing. The labs are getting more occupied, but given the extremely strong comp versus '21, I think the view around what we provide for the mid-term guidance gives you a good indication.

Daniel Wendorff: Thank you.

Maybe a follow-up on Research Solutions, is that excluding the COVID sales you mentioned or should we think about this also taking into account and COVID sales?

Matthias Heinzel: Yes, this includes COVID sales, right, I mean we indicated already before that we expect. So first of all in 2001, we had COVID close to €200 million for research, and we are indicating that it will be below €100 million. The question will be how much below €100 million, so keep that in mind when I provided the low single digit.

Daniel Wendorff: Okay, thank you.

Constantin Fest: I think we have time for one more question please.

Operator: We will take our final question from Michael Leuchten. Please go ahead, your line is open.

Michael Leuchten: Thank you very much. It's Michael Leuchten from UBS. Just one quick question going back to the order book and maybe related to the slight wording change on COVID contribution.

Just wondering why yes soften that wording and what you're seeing in the order intake and Process Solutions. And then a quick follow-up on Evobrutinib, looking at the number of sites that are located in Russia and Ukraine for EVOLUTION RMS 1 and RMS 2 at about 15%, it's a meaningful enough number, given those trials have fully recruited, if you cannot follow-up with those patients as planned, what happens then, I know that is censored from the study? And you have to run with the patients that you've got? Would you be able to re-recruit more patients elsewhere, should that be needed? Thank you.

Matthias Heinzel: Yes, Michael, hello it's Matthias. Let me address your first two question indeed, we made a careful voting change. And based on our view of the market, our very close discussions with our customers, we believe that that the 900 we put out for Process Solutions is still possible.

But at this point in time, we will see that rather at the upper end of the range. And that is of course, based on a view on the different COVID drivers, we look at target vaccination rates, especially the boosters. And also, as we see now Omicron still being highly contagious, but with milder symptoms. The question is, what's the booster adoption rate going forward? So at the end of the day, it's still very volatile. But we believe the indication we provide to you is very important.

And yes, we believe it's more in the upper end of the range. To your question on order book or usually we talk here about order intake. So first of all, we see the order intake the growth rates coming down over the quarters, the growth is still higher than prior year for Q4. But it's certainly coming down significantly, like you've seen also from other market players. Nevertheless, the book-to-bill ratio is still above one, meaning our order intake is still above the sales we have.

And then tying that answer to my first point, what we see indeed in the order intake is that the COVID share significantly coming down. On the other hand, the base business order intake share is significantly increasing. But again given the order intake for COVID coming down that's yet another evidence for our more cautionary statement on the 900 for this year.

Marcus Kuhnert: Yes, Michael on the Eevobrutinib as Belén had mentioned before, it's really moving target, we are looking at different scenarios. We are in I would say daily contact with our CRO to have the bills on what's happening and in function, they're off, we have to look at different alternatives if necessary.

I remind you, of course, that countries like Russia and Ukraine are traditionally countries where there's a lot of clinical trials ongoing by the whole pharmaceutical markets. So it's not like you're in a specific position here. But if there's more news, of course, we love that.

Constantin Fest: Thank you very much for all your questions. With this, I'd like to hand over to Belén for some closing remarks.

Belén Garijo : Very briefly because we are running out of time. Thank you, Constantin and thank you for your continued interest in our company, 2021 was clearly a record year in terms of growth and margin expansions. And as we have discussed today, we have a very solid position to deliver another successful year in 2022. We look forward to meeting many of you at the upcoming Roadshows and Conferences and obviously we will be updating you whenever it's necessary as the year progresses. Thanks again and have a good evening.

Operator: Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may now disconnect.