On August 4, 2016 Merrimack Pharmaceuticals, Inc. (Nasdaq: MACK) reported its second quarter 2016 financial results (Press release, Merrimack, AUG 4, 2016, View Source [SID:1234514281]).

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Merrimack will host a live conference call and webcast today, Thursday, August 4 at 4:30 p.m., Eastern time, to provide an update on Merrimack’s progress as well as a summary of these results.

Investors and the general public are invited to listen to the call by dialing (877) 564-1301 (domestic) or (224) 357-2394 (international) five minutes prior to the start of the call and providing the passcode 38883620. A listen-only webcast of the call can be accessed in the Investors section of Merrimack’s website, investors.merrimack.com, and a replay of the call will be archived there for six weeks following the call.

ONIVYDE (irinotecan liposome injection) Update

ONIVYDE updates include:

Receipt of positive opinion from the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency for ONIVYDE in combination with fluorouracil (5-FU) and leucovorin for the treatment of patients with metastatic adenocarcinoma of the pancreas who have progressed following treatment with gemcitabine-based therapy. The CHMP’s positive opinion for ONIVYDE will now be reviewed by the European Commission for marketing authorization;
Presentation of new analyses of the Phase 3 NAPOLI-1 data showing patients treated with the ONIVYDE regimen maintained similar baseline quality of life at 12 weeks despite the addition of a second chemotherapeutic agent when compared to 5-FU and leucovorin alone at the European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) 18th World Congress on Gastrointestinal Cancer; and
Recognition of $14.8 million of gross product revenues and $12.9 million of net product revenues from U.S. commercial sales of ONIVYDE for the second quarter of 2016. This is compared to $10.0 million of net product revenues for the first quarter of 2016, which represents an increase of $2.9 million, or 29%, in net product revenues over the prior quarter.
Key Recent Events

Merrimack’s key recent events include:

Receipt of Fast Track designation from the U.S. Food and Drug Administration (FDA) for seribantumab (also known as MM-121) for development in patients with heregulin-positive, locally advanced or metastatic non-small cell lung cancer whose disease has progressed following immunotherapy;
Presentation of an expanded overall survival analysis from the seribantumab Phase 2 breast cancer study indicating that seribantumab decreased risk of death by more than 50% in HER2-negative, hormone receptor positive breast cancer patients at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Precision Medicine Series;
Initiation of a Phase 1 clinical study of MM-151 in combination with ONIVYDE plus 5-FU and leucovorin in patients with RAS wild-type metastatic colorectal cancer;
Initiation of a leading-edge biomarker-selected, multi-arm Phase 1 clinical study in metastatic colorectal, non-small cell lung, and head and neck cancers to evaluate the safety and tolerability of MM-151 in combination with seribantumab in patients with heregulin positive tumors, MM-151 in combination with MM-141 in patients with IGF-1-positive tumors, and MM-151 in combination with a MEK inhibitor (trametinib) in patients with KRAS/NRAS-mutant tumors;
Presentation of clinical data on multiple therapeutic candidates from Merrimack’s antibody engineering and antibody-directed nanotherapeutic (ADN) technology platforms at the 2016 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting, including the final analysis from the Phase 1 clinical study of MM-151 showing clinical activity in multiple solid tumor types, including colorectal cancer; and
Presentation of Merrimack’s research and development strategy at its 2016 Investor Day, including updates on ONIVYDE and MM-151 development, Merrimack’s ADN platform and Merrimack’s systems immuno-oncology program.
Upcoming Milestones

Merrimack anticipates the following upcoming clinical milestones:

Results in 2017 from the Phase 2 clinical study of ONIVYDE in previously untreated front-line metastatic pancreatic cancer;
Results in 2017 from HERMIONE, the Phase 2 clinical study of MM-302 in patients with HER2-positive metastatic breast cancer that is designed to support a potential Accelerated Approval application to the FDA;
Results in 2018 from the Phase 2 clinical study of MM-121 in patients with heregulin-positive, locally advanced or metastatic non-small cell lung cancer that is designed to support a potential Biologics License Application to the FDA; and
Results in 2018 from the Phase 2 clinical study of MM-141 in patients with front-line metastatic pancreatic cancer who have high serum levels of free IGF-1.
Second Quarter 2016 Financial Results

The following summarizes Merrimack’s financial results from the quarter ended June 30, 2016:

Product revenues from the commercial sale of ONIVYDE, net of discounts, allowances and reserves, were $12.9 million for the second quarter of 2016, compared to $10.0 million for the first quarter of 2016. This represents an increase of $2.9 million, or 29%, over the prior quarter;
License and collaboration revenues were $19.3 million for the second quarter of 2016, compared to $11.3 million for the first quarter of 2016. This represents an increase of $8.0 million from the prior quarter. This revenue includes $10.0 million related to a substantive milestone achieved during the second quarter of 2016 as well as revenue that was recognized under the proportional performance revenue recognition model;
Operating expenses were $61.7 million for the second quarter of 2016 and are made up of the following:
$41.0 million of research and development expenses, including a one-time $10.0 million milestone payment made to PharmaEngine, as compared to $32.9 million of research and development expenses incurred during the first quarter of 2016; and
$20.7 million of selling, general and administrative expenses as compared to $17.8 million of selling, general and administrative expenses incurred during the first quarter of 2016;
Interest expense was $21.1 million for the second quarter of 2016, compared to $8.6 million for the first quarter of 2016. This $12.5 million increase was primarily due to a $14.6 million one-time, non-cash loss related to the induced conversion of an aggregate principal amount of $64.2 million of Merrimack’s convertible notes in April 2016; and
Net loss attributable to Merrimack for the second quarter of 2016 was $50.8 million, or $0.40 per share, compared to a net loss attributable to Merrimack of $38.5 million, or $0.33 per share, for the first quarter of 2016.
Financial Outlook

In an effort to provide reconciliations to GAAP financial measures, Merrimack clarifies:

Previous guidance on the achievement of $46.5 million of net milestones in 2016 related to ONIVYDE is comprised of the anticipated achievement of $85.0 million of milestone obligations from Shire and $38.5 million of offsetting milestone obligations to PharmaEngine. Of the anticipated $85.0 million of milestone obligations from Shire, $75.0 million are expected to be classified as substantive milestones that would increase license and collaboration revenues and the remaining $10.0 million are expected to be classified as non-substantive milestones that would be recognized through Merrimack’s proportional performance revenue recognition model; and
Previous guidance for aggregate research and development and selling, general and administrative expenses for 2016, when calculated in accordance with GAAP, was in the range of $263.5 million to $283.5 million, which included the anticipated achievement of $38.5 million of milestone obligations to PharmaEngine. This corresponds to Merrimack’s previously disclosed guidance that aggregate research and development and selling, general and administrative expenses, excluding anticipated milestone obligations to PharmaEngine, a non-GAAP financial measure, would be in the range of $225.0 million to $245.0 million for 2016.
With respect to its fiscal 2016 guidance, Merrimack:

Lowers its previously provided expense guidance range by $20.0 million, such that Merrimack now anticipates aggregate research and development and selling, general and administrative expenses for 2016, when calculated in accordance with GAAP, to be in the range of $243.5 million to $263.5 million. Excluding anticipated milestone obligations to PharmaEngine of $38.5 million, this corresponds to a range of $205.0 million to $225.0 million for 2016, which is a non-GAAP financial measure.
A table reconciling guidance for aggregate research and development and selling, general and administrative expenses, excluding anticipated milestone obligations to PharmaEngine, a non-GAAP financial measure, to aggregate research and development and selling, general and administrative expenses calculated in accordance with GAAP is included at the end of this press release.

On August 4, 2016 Merck, a leading science and technology company, reported a significant increase in sales in the second quarter of 2016 in comparison with the year-earlier period (Press release, Merck KGaA, AUG 4, 2016, View Source [SID:1234514332]).

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EBITDA pre exceptionals also rose sharply. Owing to good business performance in the second quarter, Merck lifted its forecast for sales and EBITDA pre exceptionals.

“We again achieved everything we aimed for in the second quarter. That applies to both the Sigma-Aldrich integration and the development of new medicines,” said Stefan Oschmann, CEO and Chairman of the Executive Board of Merck. “Strong demand for our products and dynamic market developments gave our Healthcare and Life Science businesses additional tailwinds. Since particularly in Healthcare our performance in the second quarter was so good, we have decided to lift our forecast for the full year.”

Net sales of the Merck Group rose in the second quarter of 2016 by 18.2% to € 3.8 billion (Q2 2015: € 3.2 billion). Organic sales growth, which was driven by Life Science and Healthcare, amounted to 5.1%. Acquisition-related sales growth of 19.2% reflects the Sigma-Aldrich transaction, which closed in November 2015. This was amid negative exchange rate effects of -6.1%, which were mainly due to Latin American currencies. In the second quarter, Merck grew organically in all reporting regions. As a result of the Sigma-Aldrich acquisition, North America’s share of Group sales increased significantly to 26% (Q2 2015: 20%). Europe and Asia-Pacific, which each accounted for a 31% share of Group sales, were the largest reporting regions.

EBITDA pre exceptionals, the key earnings indicator of the Group, climbed by 28.8% to € 1,158 million (Q2 2015: €  899 million) thanks to the good operating performance of Healthcare and Life Science as well as the Sigma-Aldrich acquisition. The EBITDA margin pre exceptionals roseto 30.4% (Q2 2015: 27.9%). Despite higher exceptionals in the course of the Sigma-Aldrich acquisition, Group EBIT grew by 9.8% to € 550 million (Q2 2015: € 501 million). In the second quarter, Merck’s net income of € 312 million was -9.1% lower than in the year-earlier period (Q2 2015: € 343 million). This reflected a sharp increase in the negative financial result stemming mainly from the long-term share-based variable compensation program, whose value increased due to the favorable development of the Merck share price in the second quarter of 2016. Earnings per share pre exceptionals rose in the second quarter of 2016 by 19.2% to € 1.55 (Q2 2015: € 1.30).

Net financial debt, which had increased sharply owing to the Sigma-Aldrich acquisition, decreased slightly to € 12.5 billion as of June 30, 2016 (December 31, 2015: € 12.7 billion) despite dividend payments. Merck had 50,456employees worldwide on June 30, 2016.

Organic growth in the first half
In the first half of 2016, net sales of the Merck Group increased by 19.3% to € 7.5 billion (January-June 2015: € 6.3 billion). This was due to both acquisition effects (+19.5%) and organic sales increases (+4.9%). Exchange rate movements lowered sales by -5.1% in the first half and were primarily attributable to Latin American currencies.

EBITDA pre exceptionals of the Merck Group amounted to € 2.2 billion in the first half of 2016 (January-June 2015: € 1.8 billion). This represented an increase of 27.9% over the first half of 2015. Earnings per share pre exceptionals climbed by 27.2% to € 3.09 in the first half of 2016 (January-June 2015: € 2.43).

Healthcare delivers organic growth in all regions
In the second quarter of 2016, sales by the Healthcare business sector showed strong organic growth of 7.3%, to which all regions contributed. This was canceled out by negative foreign exchange effects of -9.0%. In addition, the return of the rights to Kuvan to BioMarin Pharmaceutical lowered sales by -1.0%. Consequently, Healthcare net sales decreased by -2.7% in the second quarter of 2016 to
€ 1.8 billion (Q2 2015: € 1.8 billion).

Organically, sales of Rebif, which is used to treat relapsing forms of multiple sclerosis, were flat in the second quarter of 2016, despite competitive pressure from oral formulations. Including currency headwinds of -4.2%, Rebif sales amounted to € 441 million (Q2 2015: € 461 million). In the second quarter, Merck generated organic sales growth of 6.8% with the oncology drug Erbitux. Including negative foreign exchange effects of -7.2%, Erbitux sales were stable at € 232 million (Q2 2015: € 233 million). With the fertility treatment Gonal-f, Merck achieved very strong organic sales growth of 23.1%, which was primarily attributable to North America. In this region, Merck benefited from an advantageous competitive situation. Including negative exchange rate effects, sales grew by € 209 million (Q2 2015: € 177 million).

EBITDA pre exceptionals of the Healthcare business sector rose in the second quarter by 16.1% to € 557 million (Q2 2015: € 480 million). This was due not only to good organic performance, but also to a gain of around € 30 million on the sale of a minority interest held by the Merck Venture Fund. Against this background, the EBITDA margin pre exceptionals of Healthcare improved significantly in the second quarter to 31.8% (Q2 2015: 26.6%).

Life Science doubles EBITDA pre exceptionals
The Life Science business sector generated a strong organic sales increase of 8.1% in the second quarter of 2016. Life Science thus achieved the highest organic growth rate of all the Merck business sectors, benefiting from sustained demand for Merck products from the biopharmaceutical industry. In addition to organic growth, the acquisition of Sigma-Aldrich lifted sales by 79.7%. However, exchange rate effects lowered sales by -2.8%. In the second quarter of 2016, sales by the Life Science business sector thus rose overall by 85.0% to € 1.4 billion (Q2 2015: € 773 million).

The Process Solutions business area, which markets products for the entire pharmaceutical production value chain, delivered strong organic sales growth of 13.5%. The Research Solutions business area, which focuses on academia and pharmaceutical research institutions, reported organic sales growth of 3.2%. Applied Solutions, which serves clinical and diagnostic testing laboratories as well as the food and environmental industries, achieved an organic sales increase of 3.9%.

EBITDA pre exceptionals of the Life Science business sector soared by 108.6% to € 417 million in the second quarter (Q2 2015: € 200 million). The EBITDA margin pre exceptionals of Life Science improved to 29.1% (Q2 2015: 25.9 %).

“The doubling of Life Science’s EBITDA pre exceptionals reflects not only our strong organic growth, but also the Sigma-Aldrich acquisition synergies, which we are leveraging with focus and resolve,” said Stefan Oschmann. “And we will not let up before we fully realize our synergy objectives for 2018.”

Performance Materials maintains profitability in a difficult market environment
In the second quarter, net sales of the Performance Materials business sector declined organically by -4.7%, mainly owing to destocking by display industry customers. In addition, negative exchange rate effects of -2.0% were incurred. The SAFC Hitech business of Sigma-Aldrich, which has been integrated into the Performance Materials business sector, made a positive impact with a 3.1% contribution to sales. Sales by Performance Materials thus declined by -3.5% to € 621 million (Q2 2015: € 643 million).

The Display Materials business unit saw an organic decrease in sales owing to the continued volume declines of mature liquid crystal technologies as well as destocking by customers, a development that will extend into the second half of the year. By contrast, the innovative liquid crystal technology UB-FFS grew further. The Integrated Circuit Materials business unit, which includes the business with materials used to manufacture integrated circuits and the SAFC Hitech business of Sigma-Aldrich, generated solid organic sales growth. The Pigments & Functional Materials business unit delivered very strong organic growth in comparison with a weak year-earlier quarter. Within the Performance Materials business sector, the highest growth rates were achieved by the Advanced Technologies business unit. This was primarily due to the expanding business with OLED materials. A new OLED materials production unit in Darmstadt involving an investment of around € 30 million is to be commissioned in September 2016 to manufacture materials for ultra-modern displays and lighting. Moreover, Merck is planning to construct a new production facility for liquid crystal window modules for around € 15 million; manufacturing is scheduled to begin in 2017. Merck’s objective is to expand its market and technology leadership in liquid crystals beyond applications in displays.

In the second quarter, EBITDA pre exceptionals of Performance Materials amounted to € 273 million (Q2 2015: € 295 million). With an EBITDA margin pre exceptionals of 44.1%, the profitability of Performance Materials was the highest among all the business sectors.

Merck lifts forecast
Owing to the good business performance in the second quarter, Merck is lifting its forecast and now expects Group net sales to increase to between € 14.9 billion and € 15.1 billion in 2016 (previous forecast: € 14.8 billion to € 15.0 billion). Organically, Merck predicts net sales to increase moderately in 2016 (previous forecast: slightly). In addition, owing to the acquisition of Sigma-Aldrich, the company continues to expect a portfolio-related net sales increase in the low double-digit percentage range. This will still be countered by negative foreign exchange effects that are forecast to range between –3% and –5% and are mainly due to the currency devaluations in Latin America. Owing to the good business performance, especially in the Healthcare business sector, Merck is also raising its forecast for EBITDA pre exceptionals, which is now expected to range between € 4,250 million and € 4,400 million for 2016 (previous forecast: € 4,100 million to € 4,300 million). Business free cash flow of the Merck Group is expected to be between € 3,140 million and € 3,250 million in 2016.

Forecast for FY 2016

€ million
Net sales
EBITDA pre exceptionals
Earnings per share pre exceptionals

Merck Group
14,900 –15,100
~4,250 –4,400
€ 5.85 – € 6.10

Healthcare
Solid organic growth,
slightly negative portfolioeffect due to the
divestment of Kuvan
~ 1,950 – 2,050

Life Science
Organic growth in the mid to high
single-digit percentage range, portfolio effect in the high double-digit percentage range due to the acquisition of Sigma-Aldrich
~ 1,620 – 1,670

Performance Materials
Moderate decline
~ 1,100 – 1,150

Corporate and Other
–
~-370 – -400

Merck Group – Key figures

€ million
Q2 2016
Q2 2015
Change
in %
Jan.- June 2016
Jan.- June 2015
Change
in %

Net sales
3,805
3,219
18.2
7,470
6,261
19.3

Operating result (EBIT)
550
501
9.8
1,399
981
42.6

Margin (% of net sales)
14.5
15.6
18.7
15.7

EBITDA
1,069
845
26.6
2,351
1,650
42.5

Margin (% of net sales)
28.1
26.2
31.5
26.4

EBITDA pre exceptionals
1,158
899
28.8
2,242
1,752
27.9

Margin (% of net sales)
30.4
27.9
30.0
28.0

Profit after tax
314
346
-9.1
907
631
43.8

Earnings per share (€)
0.72
0.79
-8.9
2.08
1.44
44.4

Earnings per share pre exceptionals (€)
1.55
1.30
19.2
3.09
2.43
27.2

Net income
312
343
-9.1
903
625
44.4
June 30, 2016
Dec. 31, 2015

Net financial debt
12,510
12,654
-1.1

On August 4, 2016 Merck, a leading science and technology company, reported a significant increase in sales in the second quarter of 2016 in comparison with the year-earlier period (Press release, Merck KGaA, AUG 4, 2016, View Source [SID:1234514332]).

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EBITDA pre exceptionals also rose sharply. Owing to good business performance in the second quarter, Merck lifted its forecast for sales and EBITDA pre exceptionals.

"We again achieved everything we aimed for in the second quarter. That applies to both the Sigma-Aldrich integration and the development of new medicines," said Stefan Oschmann, CEO and Chairman of the Executive Board of Merck. "Strong demand for our products and dynamic market developments gave our Healthcare and Life Science businesses additional tailwinds. Since particularly in Healthcare our performance in the second quarter was so good, we have decided to lift our forecast for the full year."

Net sales of the Merck Group rose in the second quarter of 2016 by 18.2% to € 3.8 billion (Q2 2015: € 3.2 billion). Organic sales growth, which was driven by Life Science and Healthcare, amounted to 5.1%. Acquisition-related sales growth of 19.2% reflects the Sigma-Aldrich transaction, which closed in November 2015. This was amid negative exchange rate effects of -6.1%, which were mainly due to Latin American currencies. In the second quarter, Merck grew organically in all reporting regions. As a result of the Sigma-Aldrich acquisition, North America’s share of Group sales increased significantly to 26% (Q2 2015: 20%). Europe and Asia-Pacific, which each accounted for a 31% share of Group sales, were the largest reporting regions.

EBITDA pre exceptionals, the key earnings indicator of the Group, climbed by 28.8% to € 1,158 million (Q2 2015: €  899 million) thanks to the good operating performance of Healthcare and Life Science as well as the Sigma-Aldrich acquisition. The EBITDA margin pre exceptionals roseto 30.4% (Q2 2015: 27.9%). Despite higher exceptionals in the course of the Sigma-Aldrich acquisition, Group EBIT grew by 9.8% to € 550 million (Q2 2015: € 501 million). In the second quarter, Merck’s net income of € 312 million was -9.1% lower than in the year-earlier period (Q2 2015: € 343 million). This reflected a sharp increase in the negative financial result stemming mainly from the long-term share-based variable compensation program, whose value increased due to the favorable development of the Merck share price in the second quarter of 2016. Earnings per share pre exceptionals rose in the second quarter of 2016 by 19.2% to € 1.55 (Q2 2015: € 1.30).

Net financial debt, which had increased sharply owing to the Sigma-Aldrich acquisition, decreased slightly to € 12.5 billion as of June 30, 2016 (December 31, 2015: € 12.7 billion) despite dividend payments. Merck had 50,456employees worldwide on June 30, 2016.

Organic growth in the first half
In the first half of 2016, net sales of the Merck Group increased by 19.3% to € 7.5 billion (January-June 2015: € 6.3 billion). This was due to both acquisition effects (+19.5%) and organic sales increases (+4.9%). Exchange rate movements lowered sales by -5.1% in the first half and were primarily attributable to Latin American currencies.

EBITDA pre exceptionals of the Merck Group amounted to € 2.2 billion in the first half of 2016 (January-June 2015: € 1.8 billion). This represented an increase of 27.9% over the first half of 2015. Earnings per share pre exceptionals climbed by 27.2% to € 3.09 in the first half of 2016 (January-June 2015: € 2.43).

Healthcare delivers organic growth in all regions
In the second quarter of 2016, sales by the Healthcare business sector showed strong organic growth of 7.3%, to which all regions contributed. This was canceled out by negative foreign exchange effects of -9.0%. In addition, the return of the rights to Kuvan to BioMarin Pharmaceutical lowered sales by -1.0%. Consequently, Healthcare net sales decreased by -2.7% in the second quarter of 2016 to
€ 1.8 billion (Q2 2015: € 1.8 billion).

Organically, sales of Rebif, which is used to treat relapsing forms of multiple sclerosis, were flat in the second quarter of 2016, despite competitive pressure from oral formulations. Including currency headwinds of -4.2%, Rebif sales amounted to € 441 million (Q2 2015: € 461 million). In the second quarter, Merck generated organic sales growth of 6.8% with the oncology drug Erbitux. Including negative foreign exchange effects of -7.2%, Erbitux sales were stable at € 232 million (Q2 2015: € 233 million). With the fertility treatment Gonal-f, Merck achieved very strong organic sales growth of 23.1%, which was primarily attributable to North America. In this region, Merck benefited from an advantageous competitive situation. Including negative exchange rate effects, sales grew by € 209 million (Q2 2015: € 177 million).

EBITDA pre exceptionals of the Healthcare business sector rose in the second quarter by 16.1% to € 557 million (Q2 2015: € 480 million). This was due not only to good organic performance, but also to a gain of around € 30 million on the sale of a minority interest held by the Merck Venture Fund. Against this background, the EBITDA margin pre exceptionals of Healthcare improved significantly in the second quarter to 31.8% (Q2 2015: 26.6%).

Life Science doubles EBITDA pre exceptionals
The Life Science business sector generated a strong organic sales increase of 8.1% in the second quarter of 2016. Life Science thus achieved the highest organic growth rate of all the Merck business sectors, benefiting from sustained demand for Merck products from the biopharmaceutical industry. In addition to organic growth, the acquisition of Sigma-Aldrich lifted sales by 79.7%. However, exchange rate effects lowered sales by -2.8%. In the second quarter of 2016, sales by the Life Science business sector thus rose overall by 85.0% to € 1.4 billion (Q2 2015: € 773 million).

The Process Solutions business area, which markets products for the entire pharmaceutical production value chain, delivered strong organic sales growth of 13.5%. The Research Solutions business area, which focuses on academia and pharmaceutical research institutions, reported organic sales growth of 3.2%. Applied Solutions, which serves clinical and diagnostic testing laboratories as well as the food and environmental industries, achieved an organic sales increase of 3.9%.

EBITDA pre exceptionals of the Life Science business sector soared by 108.6% to € 417 million in the second quarter (Q2 2015: € 200 million). The EBITDA margin pre exceptionals of Life Science improved to 29.1% (Q2 2015: 25.9 %).

"The doubling of Life Science’s EBITDA pre exceptionals reflects not only our strong organic growth, but also the Sigma-Aldrich acquisition synergies, which we are leveraging with focus and resolve," said Stefan Oschmann. "And we will not let up before we fully realize our synergy objectives for 2018."

Performance Materials maintains profitability in a difficult market environment
In the second quarter, net sales of the Performance Materials business sector declined organically by -4.7%, mainly owing to destocking by display industry customers. In addition, negative exchange rate effects of -2.0% were incurred. The SAFC Hitech business of Sigma-Aldrich, which has been integrated into the Performance Materials business sector, made a positive impact with a 3.1% contribution to sales. Sales by Performance Materials thus declined by -3.5% to € 621 million (Q2 2015: € 643 million).

The Display Materials business unit saw an organic decrease in sales owing to the continued volume declines of mature liquid crystal technologies as well as destocking by customers, a development that will extend into the second half of the year. By contrast, the innovative liquid crystal technology UB-FFS grew further. The Integrated Circuit Materials business unit, which includes the business with materials used to manufacture integrated circuits and the SAFC Hitech business of Sigma-Aldrich, generated solid organic sales growth. The Pigments & Functional Materials business unit delivered very strong organic growth in comparison with a weak year-earlier quarter. Within the Performance Materials business sector, the highest growth rates were achieved by the Advanced Technologies business unit. This was primarily due to the expanding business with OLED materials. A new OLED materials production unit in Darmstadt involving an investment of around € 30 million is to be commissioned in September 2016 to manufacture materials for ultra-modern displays and lighting. Moreover, Merck is planning to construct a new production facility for liquid crystal window modules for around € 15 million; manufacturing is scheduled to begin in 2017. Merck’s objective is to expand its market and technology leadership in liquid crystals beyond applications in displays.

In the second quarter, EBITDA pre exceptionals of Performance Materials amounted to € 273 million (Q2 2015: € 295 million). With an EBITDA margin pre exceptionals of 44.1%, the profitability of Performance Materials was the highest among all the business sectors.

Merck lifts forecast
Owing to the good business performance in the second quarter, Merck is lifting its forecast and now expects Group net sales to increase to between € 14.9 billion and € 15.1 billion in 2016 (previous forecast: € 14.8 billion to € 15.0 billion). Organically, Merck predicts net sales to increase moderately in 2016 (previous forecast: slightly). In addition, owing to the acquisition of Sigma-Aldrich, the company continues to expect a portfolio-related net sales increase in the low double-digit percentage range. This will still be countered by negative foreign exchange effects that are forecast to range between –3% and –5% and are mainly due to the currency devaluations in Latin America. Owing to the good business performance, especially in the Healthcare business sector, Merck is also raising its forecast for EBITDA pre exceptionals, which is now expected to range between € 4,250 million and € 4,400 million for 2016 (previous forecast: € 4,100 million to € 4,300 million). Business free cash flow of the Merck Group is expected to be between € 3,140 million and € 3,250 million in 2016.

Forecast for FY 2016

€ million
Net sales
EBITDA pre exceptionals
Earnings per share pre exceptionals


Merck Group
14,900 –15,100
~4,250 –4,400
€ 5.85 – € 6.10


Healthcare
Solid organic growth,
slightly negative portfolioeffect due to the
divestment of Kuvan
~ 1,950 – 2,050


Life Science
Organic growth in the mid to high
single-digit percentage range, portfolio effect in the high double-digit percentage range due to the acquisition of Sigma-Aldrich
~ 1,620 – 1,670


Performance Materials
Moderate decline
~ 1,100 – 1,150


Corporate and Other
–
~-370 – -400

Merck Group – Key figures

€ million
Q2 2016
Q2 2015
Change
in %
Jan.- June 2016
Jan.- June 2015
Change
in %


Net sales
3,805
3,219
18.2
7,470
6,261
19.3


Operating result (EBIT)
550
501
9.8
1,399
981
42.6


Margin (% of net sales)
14.5
15.6
18.7
15.7


EBITDA
1,069
845
26.6
2,351
1,650
42.5


Margin (% of net sales)
28.1
26.2
31.5
26.4


EBITDA pre exceptionals
1,158
899
28.8
2,242
1,752
27.9


Margin (% of net sales)
30.4
27.9
30.0
28.0


Profit after tax
314
346
-9.1
907
631
43.8


Earnings per share (€)
0.72
0.79
-8.9
2.08
1.44
44.4


Earnings per share pre exceptionals (€)
1.55
1.30
19.2
3.09
2.43
27.2


Net income
312
343
-9.1
903
625
44.4
June 30, 2016
Dec. 31, 2015


Net financial debt
12,510
12,654
-1.1