MERCK KGAA, DARMSTADT, GERMANY-COMMERZBANK GERMAN INVESTMENT SEMINAR Marcus Kuhnert, CFO - EMD Group
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MERCK KGAA, DARMSTADT, GERMANY – COMMERZBANK GERMAN INVESTMENT SEMINAR Marcus Kuhnert, CFO New York – January 14, 2019
Disclaimer Publication of Merck KGaA, Darmstadt, Germany. In the United States and Canada the group of companies affiliated with Merck KGaA, Darmstadt, Germany operates under individual business names (EMD Serono, Millipore Sigma, EMD Performance Materials). To reflect such fact and to avoid any misconceptions of the reader of the publication certain logos, terms and business descriptions of the publication have been substituted or additional descriptions have been added. This version of the publication, therefore, slightly deviates from the otherwise identical version of the publication provided outside the United States and Canada. 2
Disclaimer Cautionary Note Regarding Forward-Looking Statements and financial indicators This communication may include “forward-looking statements.” Statements that include words such as “anticipate,” “expect,” “should,” “would,” “intend,” “plan,” “project,” “seek,” “believe,” “will,” and other words of similar meaning in connection with future events or future operating or financial performance are often used to identify forward-looking statements. All statements in this communication, other than those relating to historical information or current conditions, are forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond control of Merck KGaA, Darmstadt, Germany, which could cause actual results to differ materially from such statements. Risks and uncertainties include, but are not limited to: the risks of more restrictive regulatory requirements regarding drug pricing, reimbursement and approval; the risk of stricter regulations for the manufacture, testing and marketing of products; the risk of destabilization of political systems and the establishment of trade barriers; the risk of a changing marketing environment for multiple sclerosis products in the European Union; the risk of greater competitive pressure due to biosimilars; the risks of research and development; the risks of discontinuing development projects and regulatory approval of developed medicines; the risk of a temporary ban on products/production facilities or of non-registration of products due to non-compliance with quality standards; the risk of an import ban on products to the United States due to an FDA warning letter; the risks of dependency on suppliers; risks due to product-related crime and espionage; risks in relation to the use of financial instruments; liquidity risks; counterparty risks; market risks; risks of impairment on balance sheet items; risks from pension obligations; risks from product-related and patent law disputes; risks from antitrust law proceedings; risks from drug pricing by the divested Generics Group; risks in human resources; risks from e-crime and cyber attacks; risks due to failure of business-critical information technology applications or to failure of data center capacity; environmental and safety risks; unanticipated contract or regulatory issues; a potential downgrade in the rating of the indebtedness of Merck KGaA, Darmstadt, Germany; downward pressure on the common stock price of Merck KGaA, Darmstadt, Germany and its impact on goodwill impairment evaluations, as well as the impact of future regulatory or legislative actions. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere, including the Report on Risks and Opportunities Section of the most recent annual report and quarterly report of Merck KGaA, Darmstadt, Germany. Any forward-looking statements made in this communication are qualified in their entirety by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Except to the extent required by applicable law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. This presentation contains certain financial indicators such as EBITDA pre exceptionals, net financial debt and earnings per share pre exceptionals, which are not defined by International Financial Reporting Standards (IFRS). These financial indicators should not be taken into account in order to assess the performance of Merck KGaA, Darmstadt, Germany in isolation or used as an alternative to the financial indicators presented in the consolidated financial statements and determined in accordance with IFRS. The figures presented in this statement have been rounded. This may lead to individual values not adding up to the totals presented. 3
Agenda Business overview Transforming the company Healthcare – Funding for success Life Science – Focusing on profitable growth Performance Materials – Maintaining leadership and innovation Executive summary and guidance 4
Group A platform of three high-tech & science businesses to compete in attractive markets Healthcare Performance Life Science Materials Leading in specialty Leading life science Leading Company in pharma markets company high-tech solutions • Biologics and small molecules • Tools and services for biotech • High-tech solutions and materials • Research focus: Oncology, research & production for electronics Immunology & Immuno-Oncology • Tools and laboratory supply for the • Broad portfolio of decorative academic research and industrial and functional solutions testing 6
Group Strong businesses with attractive margins % of sales Margin1 % of EBITDA pre 46% 27.9% 41% FY 2017 FY 2017 Sales: EBITDA pre2: €15,327 m €4,414 m 30.4% 38% 38% 21% 16% 40.1% Healthcare Life Science Performance Materials 1EBITDA pre margin in % of net sales; 2Including Corporate/Others (-€301 m) 7
Group Strategic roadmap 2016-2022 2012-2015 2016-2018 2019-2022 Turnaround Fully leverage Efficiency First pipeline in Healthcare pipeline potential program launches Portfolio Above- 3 strong market growth optimization in LS and PM pillars Portfolio in Life Science Sigma management integration Leadership Digital in Performance business models Materials New applications beyond displays 9
Group We have added scale and strengthened the attractiveness of our portfolio 2007: ~€7 bn sales Transformation volume 2017: ~€15 bn sales Consumer Health1 merged + Healthcare 4 Ethicals Serono Generics - ~€10 bn 3 ~€30 bn + Life Science Millipore & 2 Life Science Solutions Sigma-Aldrich merged Laboratory Business Divestments Acquisitions Pigments merged + Performance Liquid Crystals - divested + acquired Materials AZ 1Closing of sale of Consumer Health at a cash purchase price of € 3.4 billion completed as of December 1 2018; 2Excluding “Crop Bioscience”, which was divested; 10 3 Profroma divestment volume includes cash proceeds for Consumer Health 4Excluding “Theramex”, which was divested;
Group Profitability improved fundamentally Acquisition of Sigma-Aldrich Acquisition of AZ 1 €m Electronic Materials Margins Acquisition of Millipore 15,024 15,327 14 000 35% 12,845 Acquisition of Serono 12 000 Divestment of Generics 11,363 10,756 10,735 9,922 30% 10 000 8,951 30% 30% 7,202 29% 8 000 7,402 28% 28% 28% 27% 28% 6,775 26% 25% 6 000 4 000 22% 20% 20% 2 000 0 15% 2 2 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net sales [€m] EBITDA pre margin [%] 1Included since 2 May 2014; 22007 and 2014 EBITDA pre margin adjusted for comparability 11
Group Clear set of priority goals to be realized by 2018 Performance Healthcare Life Science Materials ~41% ~38% ~21% EBITDA EBITDA EBITDA pre* pre* pre* Maximize growth of existing Focus on seamless integration Drive innovation and franchises and deliver cost synergies technology leadership across Deliver pipeline: Leverage strategic capabilities all businesses one product launch or for value creation Innovate in applications also indication p.a. from 2017 beyond displays MeRck KGaA, ▪ Deleverage to €500 m) until end of 2018 (unless financed by divestments) ▪ Dividend policy that ensures a sustainable and resilient development *based on FY 2017 reported EBITDA pre, excluding Corporate & Other 12
Group Regular portfolio review and optimization remains key Supporting mid-term strategy Acquisitions and divestments are and strengthening core business part of our history Growing in attractive markets Licensing transactions remain on Clear Proven track record: our agenda strong ability to win criteria All prior transactions earned their Compelling financials: required cost of capital IRR > WACC DNA and EPS pre accretive Regular portfolio review Maintain investment-grade and active capital allocation will continue track credit rating record Disciplined approach to portfolio management will persist 13
HEALTHCARE Funding for success
Healthcare Healthcare is set to deliver on promising pipeline candidates Potential pipeline > €2 bn Focus on sales the pipeline > €120 m1 Pipeline products 2018… …2022 Core business Deliver organic growth 2013 2022E 1 Guidance 2018 15
Healthcare Ambition to keep core business sales organically stable until 2022 Healthcare core business net sales until 2022 • Maintaining solid track record of Rebif® patient retention 5 years of organic Decline in line • Integration into joint franchise growth, w/o CH with interferon market strategy with Mavenclad® • Driving emerging markets growth Erbitux® • Mitigate price and competitive Low single-digit decline pressure in EU by clear Erbitux® franchise positioning Drug demand driven by emerging Fertility • markets growth and demographics Mid single-digit growth • Differentiation due to coverage of Base business the entire ART portfolio1 General medicine 2 Mid to high single-digit • Emerging markets growth growth • Repatriation measures 2013 2017 2022E 1 2 ART: Assisted Reproductive Technology; includes General Medicine, CardioMetabolic Care (CMC), Endocrinology & Allergopharma 16
Healthcare ® ® Mavenclad and Bavencio are growing well and support €2 bn pipeline target Recently launched products continue to … and support €2 bn pipeline sales gain market traction in 2018 ... ambition for 2022 90% 1 Bavencio: MCC 72% 3 > €2 bn 60% Bavencio: additional 30% indications 0% Bavencio RCC 1L FDA submission on track Jun Dec Feb Apr Nov Jan Oct Mar May Bavencio Competitor 1 Competitor 2 Mavenclad US 100% Submitted to FDA 2 Mavenclad: MS Mavenclad EU 4 > €120 m Bavencio approved indications (MCC, mUC) 0,1% 7,5% 10,4% 13,6% 15,3% 0% 2018 2022 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018* MAVENCLAD Orals (excluding MAVENCLAD) mAbs 1 2 US: naïve/1L Patient share of IO class in 2018 - Data source: IMS claims data; Germany: share of 3 HE dynamic patients (RMS only) - Data source: actual patients per IMS and shares estimated from IPSOS MS Monitor; Dynamic 4 markets per internal company estimates; Indication, risk adjusted; composition is an illustration and may change subject to data read-outs and registration outcomes; Guidance 2018 17
Recent & upcoming catalysts An eventful Q4 and a year of continued pipeline development ahead1 Oncology Q4 2018 H1 2019 Q3 2019 Immuno-Oncology Evobrutinib Evobrutinib Evobrutinib Neurology Ph IIb primary data presentation & Ph IIb 48 week data presentation & Ph II Rheumatoid Arthritis Immunology secondary endpoint read-out (MS) decision on PhIII (MS) trial design data read-out Completed Tepotinib Cladribine tablets Tepotinib Ph II data presentation Expected presentation of advanced Expected FDA decision (NSCLC 2L / HCC 1L/2L) interim results (NSCLC, MET Exon 14) Avelumab M7824 (TGF-ß trap) Ph III PFS IA data read-out Initiation of 2L BTC trial & (RCC 1L, FDA submission on track) decision on further NSCLC trial settings Avelumab Ph III data read-out & interim analysis (Ovarian 2L plat. res/ref & 1L resp.) 1Note: All timelines are event-driven and may be subject to change; Acronyms: NSCLC – Non small cell lung cancer | MS – Multiple Sclerosis | RCC – Renal Cell Carcinoma | HCC – Hepatocellular Carcinoma l plat. res/ref – platinum resistant/refractory | FDA – U.S. Food and Drug Administration | IA – Interim Analysis 18
LIFE SCIENCE Focus on profitable growth
Life Science Serving customers across the highly attractive life science industry RESEARCH PROCESS APPLIED ~€45-50 bn ~€50 bn ~€55 bn Low single-digit growth High single-digit growth Mid single-digit growth Academic and government institutions Pharmaceutical companies Diagnostic manufacturers Biopharma R&D Small biotech Clinical testing labs Industry R&D Contract manufacturing organizations Food & Beverage manufacturers ~€150 bn* market growing at ~4% CAGR Growth in volume of experiments Drug volume growth Volume growth from Mild growth in academic funding from biologics Population growth Investment in industry R&D from emerging modalities Rise in quality standards Continued shift to single-use Increased testing needs *Source: Merck KGaA, Darmstadt, Germany estimate 2018 20
Life Science Business is on track to deliver above-market organic growth Life Science Market 1 Long-term growth drivers 2 Research activity: >3,000 projects in research pipelines , rising Research Solutions number of experiments and newly emerging therapies/technologies 3 Low single digit growth backs healthy growth in biotech and CROs Public and private funding: availability, access and predictability Academia & Government drive demand from academia and emerging biotech customers Pharma & Biopharma Regulation: rising requirements foster long-term customer partnerships Emerging Biotech 35% Merck KGaA, 4 Darmstadt, Germany 5 Biologics: mAbs production growing by ~11-15% p.a. for 2018-2024 FY 2017 driven by new molecules and biosimilars 38% Process Solutions €5.9 bn High single digit growth Diversification: contribution by top 10 molecules will decline to 6 ~20% until 2024 from 60% today BioProcessing Noval modalities: innovation in complex-to-deliver therapies, 27% Pharma e.g. gene and cell therapy, will drive demand for single-use, Services end-to-end and new technology solutions 1 Market Regulation: testing volumes overall are rising globally rise in quality standards and increased demand for testing across customer segments Applied Solutions Population and economic growth: demand for access to more Mid single digit growth sophisticated products and services rises, e.g. in emerging markets Food&beverage Speed: need for fast testing results raises requirements for Applied Environmental Diagnostics customers, esp. in clinical testing and food & beverage testing 1 2 3 4 5 6 Source: Merck KGaA, Darmstadt, Germany Factbook; Source: PhRMA; CRO = Contract Research Organization; Indicative only; mAbs = monoclonal antibodies; Source: EvaluatePharma September 2018 21
Life Science Market leading growth and profitability maintained during integration Consistent above-market growth Key industry player Superior profitability Organic sales growth vs market* [% YoY] Life Science net sales [€m] EBITDA pre margin [%] 29 2016 25 2016 6,3 . 5,658 22 30 2017 25 24 2017 5,3 . 5,882 30 H1 2018 25 23 H1 2018 . 8,3 3,030 Merck KGaA, Darmstadt, Germany LS Peer 1 Life Science organic growth Peer 2 Market growth* Ambition to grow above Secure leading market Maintaining industry- market through to 2022 position leading margin *Based on integrated life science peers’ performance, analyst reports and Laboratory Products Association report 22
Life Science Portfolio and focus are key drivers of above-market growth Life Science net sales organic CAGR 2015-2017* • Merck KGaA, Darmstdt, ~ 6% Germany grows within the Out- relevant market segments Performance • Broad range of differentiated + 50-100 bps products and services • E-commerce platform • Merck KGaA, Darmstadt, Portfolio Germany focuses on higher- + 50-100 bps growth segments of the market advantage • E.g. bioprocessing, lab water, diagnostics offerings • The life science industry grows Life science rapidly and develops ~ 4% market dynamically *Indication 23
Life Science Innovation underpins Life Science‘s position as growth engine for us Products launched after 2013 Categories of innovation Industry trends % of total net sales Sustain x2* 1 Increasing relevance Customer and competitiveness requirements, scientific standards and therapies are evolving continuously Incremental 2 Expanding high-value Merck’s KGaA, products offering Darmstadt, Germany strong and innovative portfolio ensures Breakthrough well-balanced 2013 2014 2015 2016 2017 2022E 3 Creating transfor- strategic growth mational solutions Innovation pipeline is key to differentiate in the market in order to sustain Life Science’s above-market growth trajectory *Indication 24
Life Science Integration of Sigma and synergy generation progressing well On track to deliver planned synergies of ~ €280 m until 2018 Cost synergies On track Topline synergies ✓ ✓ ~260 On track ✓ ~105 ~170 ✓~15 ~20 ~5 2015 2016 2017 2018 2015 2016 2017 2018 Net cost synergies Accelerated cost synergies Top-line synergies Network consolidation and operational Continued integration of sigmaaldrich.com transformation ongoing ~80% of relevant products in U.S. and EU are available online Consolidated 10 manufacturing and distribution sites >1/3 of Merck KGaA, Darmstadt, Germany eCommerce orders now contain products from both legacy companies Announced consolidation of 5 further sites Complete offering in Process Solutions Combination of customer service centers and offshoring of transactional tasks 25
PERFORMANCE MATERIALS Maintaining leadership and innovation
Performance Materials A leader in the electronic materials market 1 ~€1,250 bn ~€380 bn Electronic materials competitor landscape Electronics market Semiconductor market CAGR 18-25: ~4% CAGR 18-25: ~5% ~€38 bn Materials market C4 CAGR 18-25: ~3% C7 C10 C12 C14 C13 C6 C2 C1 C11 ~€125 bn Display market C8 C3 CAGR 18-25: ~-1% ~€48 bn C9 Materials market CAGR 18-25: ~-1% C5 1 Bubble size in competitive landscape illustrates share of semiconductor Illustration of the electronics market and thereof its selected sub markets and display material sales of indicated competitors (C1 – C14) 1Source: Linx 2018, Research & Markets 2017, Semi 2015, McClean/IC Insights 2018, IC insights, Gartner 2017, Prismark 2018, FujiChimera, IHS, Market size as of 2017 27
Performance Materials: New structure combines LC with OLED, serving same customer group Business allocation within Performance Materials % sales Products Dielectrics, colloidal silica, lithography materials, yield enhancers, edge-bead Integrated Circuit Semiconductor ~20-25% removers Materials Solutions Polyimide raw materials and printing materials Liquid crystals (LC) and photoresists for TVs, smartphones and tablet computers Display Display Materials Solutions ~50-55% Other display and non-display applications (e.g. LC Windows) Organic and inorganic light emitting diodes Advanced OLED Technologies Optoelectronics Effect pigments and functional materials for coatings, plastics, printing and cosmetics Pigments and Surface ~20-25% Functional materials for cosmetics & special Functional Materials Solutions applications Functional materials for electronics and energy solutions 28
“Bright Future” 5-year transformation program drives long-term performance 2018 2019 2020 2021 2022+ Back to organic Growth ▪ Refocus innovation and life cycle ▪ Exploit market growth of Semi & Surface management 2-3% CAGR ▪ Manage Liquid Crystal sales decline ▪ Explore growth in adjacent technologies Resource allocation & process excellence ▪ Centralized early research approach ~30% Margin ▪ Efficient reallocation/adjustment of resources ▪ Rigid R&D portfolio management Portfolio management ▪ Continuous review of entire portfolio ▪ Consider inorganic growth options ▪ Evaluation of partnering approaches ▪ Drive solution based business models ▪ Foster customer-centric mindset Cultural change ▪ Market-driven innovation ▪ Enhance a common Performance Materials spirit 29
Performance Materials Business portfolio management drives capital allocation and enables future value creation Profitability Invest for growth Invest for Strong and sustainable market growth Manage for growth Leading positions and attractive growth cash opportunities Semiconductor Display Solutions: LC Solutions Manage for cash Mature and lucrative market segments Surface Solutions Invest in extension, while managing for profit Build or Partner Build/Partner Divest Early industry cycles with strong potential e.g. Strictly prioritize and diversify risk Display Solutions: OLED, LC-Windows Divest Regular review for better strategic owner Growth potential 30
Performance Materials will return to sales growth after 2019 Performance Materials sales development, 2019-2022 sales growth trajectory in €m Semiconductor CAGR: Solutions Low single ~2-3% digit decline Mid- to high-single digit Trough growth year Surface Solutions Low-single digit growth Display Solutions 2019E Absolut org. decline of Absolute org. growth 2022E Low-single digit decline 2018E LC for displays of other businesses After 2019 sales growth of Semiconductor & Surface Solutions, OLED and Photoresists will overcompensate the decline of Liquid Crystals for displays 31
Margins of PM will remain around 30% in the long-run EBITDA pre margin indication by business Profitability indication Display Solutions • Display Solutions will adjust above Semiconductor Solutions towards PM average margin • Bottom-line management to support margin ~30% EBITDA pre margin • Strong FX exposure will cause fluctuations Surface below Solutions 32
EXECUTIVE SUMMARY AND GUIDANCE
Key EBITDA pre* drivers EBITDA-supporting factors EBITDA-reducing factors • Organic net sales growth by Healthcare and Life Science • Underlying R&D costs in Healthcare are budgeted above 2017, but actual development will be subject to clinical data outcome of priority • Sigma-Aldrich incremental cost and revenue synergies projects and prioritization decisions ~+€95 m YoY • Healthcare margins negatively impacted by product mix • Biosimilars divestment frees up R&D budget (2017: mid to high double-digit million R&D costs) • 2017 special gains of ~€200 m will not recur • First full-year sales contribution from newly launched pipeline • Performance Materials sales and earnings continuously affected by products Mavenclad® and Bavencio® decline in Liquid Crystals • BioMarin milestone payment of €50 m • First launch preparations for Mavenclad® U.S., driving M&S costs • FX remains a strong headwind, esp. in H1 2018, and is slightly stronger than anticipated so far; expected EUR/USD 1.19-1.22 for FY 2018 *Constant portfolio 34
Group Full-year 2018 guidance* Net sales: Organic +4% to +6% YoY FX ~ -3% to -5% YoY ~ € 14.4 – 14.8 bn EBITDA pre: Organic -1% to -3% YoY FX -8 to -10% YoY ~ € 3,700 – 3,900 m EPS pre: ~ € 5.00 – 5.30 *Excluding Consumer Health 35
Group on a growing and profitable trajectory 2019 Group EBITDA pre increase confirmed 2019 2018 Sales > Sales EBITDA pre > EBITDA pre Margin > Margin Healthcare and Life Science will compensate for Performance Materials’ trough year 36
Group 2018 business sector guidance* Healthcare Performance Life Science Materials Net sales Net sales Net sales ▪ Sound organic growth of +4% to ▪ Organic growth ~+7% to 8%: slightly ▪ About stable with -1% to +1% YoY ® +5%: ongoing organic Rebif above market; all businesses ▪ Volume increases in major businesses decline offset by growth in other contributing; main driver Process ▪ Liquid Crystals temporarily benefiting franchises Solutions from China capacity ramp-up ▪ Full-year contributions from 2017 ▪ Full realization of expected topline launches synergies EBITDA pre EBITDA pre EBITDA pre ▪ Organic -1% to -2% YoY ▪ Organic ~+8% YoY ▪ Organic -14% to -16% YoY ▪ FX -9% to -11% YoY ▪ FX -3% to -5% YoY ▪ FX -6% to -8% YoY ▪ ~ €1,540 – 1,600 m (excl. CH) ▪ ~ €1,830 - 1,880 m ▪ ~ €745 – 785 m *Excluding Consumer Health 38
Additional financial guidance 2018 Further financial details Corporate & Other EBITDA pre ~ -€360 – -400 m Interest result ~ -€230 – -250 m Effective tax rate ~ 24% to 26% Capex on PPE ~ €900 – 950 m Q4/2018 – FY 2019 hedge ratio ~60% Hedging/USD assumption at EUR/USD ~1.20 2018 Ø EUR/USD assumption ~ 1.18 – 1.21 39
Group Merck KGaA, Darmstadt, Germany has clear financial priorities Strong cash flow will be used to drive down gearing to €500 m) ruled out for 2018 Focus on cash flow (or financed by divestments) and deleveraging Dividend policy that ensures a sustainable and resilient development Synergy generation is utmost priority Ongoing cost discipline Cost discipline continues in all business sectors Further efficiency gains from ongoing improvement and harmonization of processes and systems All our businesses have growth potential Efficient capital allocation Decisions on growth investments are based on sound business cases and robust clinical data Near-term financial priorities will secure Merck KGaA, Darmstadt, Germany‘s profitable growth path 40
Group Strong focus on cash generation to ensure swift deleveraging 1 Net financial debt and leverage development Focus on deleveraging [Net financial debt/ EBITDA pre] • Commitment to swift deleveraging to ensure a strong investment grade credit rating and financial flexibility 4x • Cash flow will be used to drive down 3.5x leverage to expected 3x 3.5x €500 m) 2.5x * remain ruled out 2018 2.6x 2.5x 2x 2.3x
Group Dividend growth sustained Dividend1 development 2011-2017 2017 dividend • Dividend of €1.25 (+4% YoY) per share approved for 2017 1.25 • 20.3% of EPS pre 1.20 1.05 • Sustainable dividend growth 1.00 0.95 2 • Dividend yield of 1.4% 0.85 0.75 1 1 1 2011 2012 2013 2014 2015 2016 2017 1 2 Adjusted for share split, which has been effective since June 30, 2014; Calculated with 2017 year-end share price of 89.75€ per share 42
Healthcare Strategy The Healthcare Pipeline continues to deliver November 20, 2018 Phase I Phase II Phase III M2698 avelumab tepotinib sprifermin avelumab - anti-PD-L1 mAb p70S6K & Akt inhibitor anti-PD-L1 mAb MET kinase inhibitor fibroblast growth factor 18 Non-small cell lung cancer 1L1 Solid tumors Solid tumors Non-small cell lung cancer Osteoarthritis avelumab - anti-PD-L1 mAb M3814 avelumab tepotinib atacicept Gastric cancer 1L-M1M DNA-PK inhibitor anti-PD-L1 mAb MET kinase inhibitor anti-BlyS/APRIL fusion protein avelumab - anti-PD-L1 mAb Solid tumors Hematological malignancies Hepatocellular cancer Systemic lupus erythematosus Ovarian cancer 1L1 and 1L-M1M M6620 (VX-970) M9241 (NHS-IL12) atacicept avelumab - anti-PD-L1 mAb ATR inhibitor Cancer immunotherapy avelumab anti-BlyS/APRIL fusion protein Ovarian cancer 1L1,5 Solid tumors Solid tumors anti-PD-L1 mAb IgA nephropathy avelumab - anti-PD-L1 mAb M4344 (VX-803) M7824 Merkel cell cancer 1L1 evobrutinib Urothelial cancer 1L-M1M ATR inhibitor anti-PD-L1/TGFbeta trap avelumab BTK inhibitor avelumab - anti-PD-L1 mAb Solid tumors Solid tumors anti-PD-L1 mAb Rheumatoid arthritis Renal cell cancer 1L1 M3541 Solid tumors2 evobrutinib avelumab - anti-PD-L1 mAb ATM inhibitor M6495 avelumab BTK inhibitor Locally advanced head and neck cancer Solid tumors anti-ADAMTS-5 nanobody anti-PD-L1 mAb Systemic lupus erythematosus M8891 Osteoarthritis Non-small cell lung cancer2 M1095 (ALX-0761)4 MetAP2 inhibitor M5049 avelumab anti-IL-17 A/F nanobody Registration Solid tumors Immune receptor inhibitor anti-PD-L1 mAb Psoriasis M7583 Immunology Urothelial cancer2 cladribine tablets BTK inhibitor abituzumab3 evobrutinib lymphocyte-targeting agent Hematological malignancies M5717 pan-αν integrin inhibiting mAb BTK inhibitor Relapsing multiple sclerosis6 PeEF2 inhibitor Colorectal cancer 1L1 Multiple sclerosis Oncology Malaria M7824 anti-PD-L1/TGFbeta trap Immuno-Oncology Non-small cell lung cancer 1L1 Immunology Neurology Global Health 1 First-line treatment; 1M First-line maintenancetreatment.2 Avelumab combination studies with talazoparib, axitinib, ALK inhibitors, chemotherapy, or novel immunotherapies. 3 As announced on May 2 2018, in an agreement with SFJ Pharmaceuticals Group, abituzumab will be developed by SFJ for colorectal cancer through Phase II/III clinical trials. 4 As announced on March 30 2017, in an agreement with Avillion, anti-IL-17 A/F nanobody will be developed by Avillion for plaque psoriasis and commercialized by Merck KGaA, Darmstadt, Germany. 5 Avelumab in combination with talazoparib. 6 As announced on July 30 2018, the US Food and Drug Administration (FDA) has accepted the resubmission of the New Drug Application (NDA) for cladribine tablets. 43 Pipeline products are under clinical investigation and have not been proven to be safe and effective. There is no guarantee any product will be approved in the sought-after indication.
Healthcare Strategy Continuous newsflow of data throughout 2018 triggered next phases for our key assets ASCO GI ASCO WCLC ECTRIMS ESMO (18-20 Jan) (1-5 June) (23-26 Sep) (10-12 Oct) (19-23 Oct) ] TGF-ß trap/ Tepotinib NSCLC/ Anti-PD-L1 (ph Ib) TGF-ß trap/ Anti-PD-L1 (ph Ib) MET-Exon 14 (ph II) ▪ Billiary tract: ORR 20% (indep.) Initiation of 2L Potentially ▪ Gastric: ORR 22.6% (invest.), 16.1% BTC trial & ▪ Gastric (ORR 16 %) ▪ ORR 57.5% (invest.) fileable (indep.)3 decision on ▪ ORR 35.0% (indep.) ▪ NSCLC 2L: ORR 37.0%, mPFS 9.5 months2 further NSCLC ▪ ESCC: ORR 20.0% (all-comers) trial settings in H1 2019 ▪ EAC: ORR 13.3% (all-comers) ▪ SCCHN (Oral presentation): clinical Avelumab MCC (launched) Various ph II Evobrutinib MS (ph II) response rate of 54.5% in HPV+ tumors combination ▪ 2 years safety/efficacy ▪ Positive read-out in MS trials started ▪ Significant T1 Gd+ lesions Decision on Ph III design (MS) reduction versus placebo to follow in Q2 2019 TGF-ß trap/ ▪ Clinically relevant decrease Anti-PD-L1 (ph Ib) in ARR Ph II head-to- Avelumab RCC 1L (ph III) ▪ NSCLC 2L: ORR 71.4% head vs SoC 1 (mPFS / mOS not reached) ▪ Primary endpoint met (PFS) in (NSCLC 1L) planned interim analysis FDA filing on track ▪ HPV-associated cancers: ORR 41.7% (HPV+) ▪ mPFS: 13.8 months (indep.)2 ▪ ORR: 55% (indep.)2 1 2 3 PD-L1 high; PD-L1 ≥ 1%; Update from ASCO GI; Abbreviations: 2L = second line therapy; PR = partial response; ORR = objective response rate; NSCLC = Non- small-cell lung carcinoma; (m)PFS = (median) progression-free survival; (m)OS = (median) Overall survival; HPV = human papillomavirus; SoC = standard of care; MCC = Merkel cell carcinoma; RCC = Renal cell carcinoma; RR = lesion rate ratio; ARR = annualised relapse rate; SCCHN = squamous cell carcinoma of the head and neck; ESCC = Esophageal squamous cell carcinoma; EAC = Esophageal adenocarcinoma; CRC = Colorectal Cancer 44
Oncology Strategy Strategy anchored on five foundational pillars 1 1. Numerous Erbitux ISTs Targeted 1. Erbitux: continued leadership in CRC and SCCHN llllllll incl. combination with Avelumab Oncology 2. Tepotinib: c-met driven cancers 2. Tepotinib in NSCLC, HCC 1. Monotherapy as a basis for combinations 1. NSCLC 1L (high intensity) 2 2. Establish immunogenic priming in combination or sequence with CT/RT1 2. Maintenance in UC 1L, gastric 1L Avelumab 3. Avelumab + Inlyta (RCC 1L) 3. Novel combinations 4. Establish value of unique molecular characteristics (ADCC) 4. Unique combinations leveraging ADCC 3 • TGF-beta trap/anti-PD-L1 IO bi- Engineer or access platforms where biology is best addressed llllllll • Anti-LAG-3/anti-PD-L1 functionals by a bi-functional approach • NHS-IL 12 DNA Damage • DNA-PK-i 4 Establish leadership in DDR and leverage synergies across portfolio Response (immuno-oncology plus emerging platforms) • ATR-i inhibitors • ATM-i 5 Emerging • Antibody-Drug-Conjugates (ADC, Invest in complementary technologies within focus discovery areas Platforms e.g. partnership with Mersana/Sutro) Acronyms: CT: Chemotherapy | RT: Radiotherapy | ATM: ataxia-telangiectasia mutated |ATR: ataxia telangiectasia and Rad3 | DNA-PK: DNA-dependent protein kinase | 45 RCC: Renal Cell Carcinoma | MCC: Merkel Cell Carcinoma | NSCLC: non-small cell lung cancer | DLBCL: Diffuse Large B-cell Lymphoma | UC: Urothelial Cancer
1 2 3 4 Targeted IO bi- Avelumab functionals DDR Oncology Tepotinib: Highly selective c-met inhibitor Currently no approved therapy targeting METex14 and/or c-met amplification Oncogenic drivers in lung adenocarcinoma1 Selectivity Profile2 • MET-mutations are clinically unique molecular subtypes of • ATP competitive, reversible small molecule c-Met NSCLC inhibitor3 • MET exon 14 alteration confer oncogene addiction in ~3-4 % • Highly selective according to preclinical benchmarking2 of NSCLC In panel of >240 kinases, only c-Met inhibited at 1 µM • No approved therapy specifically targeting METex14 and/or >90% inhibition of phospho-c-Met levels (tumor biopsy) c-Met amplification 1 Cancer Genome Atlas Nature 2014;511:543-50; 2 Merck KGaA, Darmstadt, Germany data on file; 3 Bladt et al, 2013 46
1 2 3 4 Targeted IO bi- Avelumab functionals DDR Oncology Tepotinib: Program overview Development focus on biomarker enriched patient populations 2017 2018 2019 2020 Est. primary completion1 • Clinical activity demonstrated (interim) NSCLC MET Exon 14 Skipping Alterations June + follow-up2 • Planned enrollment: 120 (est.) – liquid and N tissue S LBx MET Amp. • Pr. endpoint: Confirmed ORR (Independent) C • Enrollment: 70 (act.) L NSCLC 2L EGFRm Dec 2017 (results • Comparator: Pemetrexed + Cisplatin/ C (with Gefitinib) presented at ESMO 2018) Carboplatin • Pr. endpoint: PFS (Investigator) … … • Primary endpoint met HCC 1L Oct • Enrollment: 90 (act.) H • Pr. endpoint: TTP (Independent) C • Primary endpoint met C • Enrollment: 49 (act.; failed sorafenib) HCC 2L Feb • Pr. endpoint: PFS status 12 weeks (Investigator) 1Timelines are event-driven and may be sbject to change; 2 Confirmed ORR expected approx. in June 2019, subsequent durability of response/follow-up period pending 47 outcome of discussions with health authorities
1 2 3 4 Targeted IO bi- Avelumab functionals DDR Oncology Tepotinib: Interim Phase II results Encouraging signs of activity in patients with advanced NSCLC harboring METexon14-skipping mutations VISION Interim results presented at the Study Design1 World Conference on Lung Cancer (WCLC) 20181,2 • Encouraging signs of activity • Patient population: • ORR to date based on independent review (35.0%) and investigator Patients with advanced/metastatic NSCLC assessment (57.5% incl. two CR) (all histologies) that are METexon 14- skipping mutation-positive • Median duration of response based on investigator assessment is 14.3 months (95% CI: 3.7, nd) 46 patients treated • Safety: well tolerated, most common side effects were peripheral edema and Based in EU, US and Japan diarrhea 1L, 2L and 3L treatment Tepotinib 500 mg2 Investigator Independent • Treatment: Tepotinib 500mg QD Complete response 2 (5.0) 0 (0) • Primary endpoint: ORR (IRC) Partial response 21 (52.5) 14 (35.0) • Secondary endpoints: ORR (investigator Stable disease 6 (15.0) 11 (27.5) assessed), safety, duration of response, Progressive disease 5 (12.5) 8 (20.0) progression-free survival and overall survival Non-evaluable 6 (15.0) 7 (17.5) ORR n (%) 23 (57.5) 14 (35.0) DCR: n (%) 29 (72.5) 25 (62.5) 1Felip E et al., ”Phase II Data for the MET Inhibitor Tepotinib in Patients with Advanced NSCLC and METexon14-Skipping Mutations”, presented at WCLC 2018; 2 Combined analysis (n=40); efficacy analysis includes patients having at least 2 post-baseline assessments or who discontinued treatment for any reason (n=40) 48
1 2 3 4 Targeted IO bi- Avelumab functionals DDR Oncology Avelumab: Program overview Ongoing studies – Six Phase III trials, more than 15 tumor types 2018 2019 2020 2021 2022 Est. primary completion1 Leverage potential of unique 1 NSCLC 1L (mono/high-intensity) Oct molecular characteristics (ADCC) Gastric 1L (SW-MN) Nov Establish potential of 2 Urothelial 1L (SW-MN)2 immunogenic priming (incl. combination and sequencing with CT/CRT) Locally Advanced Head & Neck Cancer (CRT) Apr Renal Cell Cancer 1L (+Inlyta/TKi) Q1 Proprietary 3 combinations Ovarian Cancer 1L (+PARP/Talazoparib) Q1 1Estimated primary completion date according to Clinicaltrials.gov as of October 26, 2018; timelines are event-driven and may be subject to change; 2 Estimated primary 49 completion date being reprojected; Acronyms: NSCLC: Non Small Cell Lung Cancer, CT: Chemotherapy, CRT: Chemoradiotherapy, MN: Maintenance; SW: Switch
1 2 3 4 Targeted IO bi- Avelumab functionals DDR Oncology Avelumab: NSCLC 1L Assessing potential efficacy upside in mono-therapy1 NSCLC 2L+: exposure NSCLC 1L: testing hypothesis of higher efficacy/intensity response correlation • Hypothesis: higher drug intensity may result in greater efficacy (potentially driven by ADCC) • Potential association between higher ORR and higher avelumab exposure • ORR highest in patients with both higher avelumab exposure and tumors with higher levels of PD-L1 expression PD-L1+ • NSCLC 1L phase III trial amended to leverage high-intensity hypothesis (est. primary completion Jul 2019) 1Abstract No. 9086. Presented at the 53rd ASCO Annual Meeting; June 2-6, 2017; Chicago, IL, USA: Exposure–response and PD-L1 expression analysis of second-line 50 avelumab in patients with advanced NSCLC: data from the JAVELIN Solid Tumor trial | Acronyms: ORR: Overall Response Rate
1 2 3 4 Targeted IO bi- Avelumab functionals DDR Oncology Avelumab: Renal Cell Carcinoma 1L Alliance will pursue US regulatory submission following positive Interim Analysis (PFS) Interim Analysis1 results Study Design1 presented at ESMO 2018 • Study: PhIII JAVELIN Renal 101 Primary endpoints (PFS and OS in patients with PD-L1+ tumors): • mPFS Avelumab + Axitinib: 13.8 months • Patient population: 886 patients with • mPFS Sunitinib: 7.2 months advanced RCC across all risk groups, 63% PD-L1+ Key secondary endpoints (PFS and OS in overall population): • Comparator: BAVENCIO (avelumab) + • mPFS Avelumab + Axitinib: 13.8 months INLYTA (axitinib) vs SUTENT (sunitinib) as • mPFS Sunitinib: 8.4 months 1L therapy Confirmed Objective Response Rate: • Breakthrough Therapy Designation • ORR Avelumab + Axitinib: 55.2% granted by the FDA in December 2017 • ORR Sunitinib: 25.5% Safety profile: favourable safety profile • Alliance plans to pursue a regulatory submission in the US Next steps and discussions with other health authorities • Renal 101 will continue as planned to the final analysis (OS) 1Motzer et al., „JAVELIN Renal 101: Randomized Phase 3 Trial of Avelumab + Axitinib vs Sunitinib as First-Line Treatment of Advanced Renal Cell Carcinoma“, presented 51 at ESMO 2018; Avelumab plus axitinib significantly improve progression-free survival in untreated renal cell carcinoma [ESMO 2018 Press Release], published on 21 October 2018 at https://www.esmo.org/Press-Office/Press-Releases/Javelin101-renal-cancer-immunotherapy-Motzer
1 2 3 4 Targeted IO bi- Avelumab functionals DDR Oncology Anti-PD-L1/TGF-ß trap (M7824) The first Phase II trial, evaluating M7824 monotherapy vs. pembrolizumab, was started in October 2018 Mode of Action Study Results & Next Steps • Manageable safety profile1 • Saturated peripheral PD-L1 and sequestered all released plasma TGF-β1, -β2, and -β31 • Great potential when combined with Standard of Care, immunotherapy and internal pipeline drug candidates • Status Quo & Next Steps: Dose level finding of Phase I completed Tested in 14 Phase Ib expansion cohorts across >700 patients PhII study M7824 monotherapy versus pembrolizumab 1L, advanced NSCLC high PD-L1-tumor expressers started in October 2018 Additional studies to be started in the course of 2019 • Innovative first-in-class bifunctional fusion protein designed to simultaneously target • Criteria allowing timely decisions: two immune suppressive pathways (blocking 1. Expand cohort and/or explore single-arm path-to-registration PD-L1 and reducing TGF-β signaling) 2. Expand cohorts to confirm signal and/or follow with randomized • Bifunctional mode should result in broader comparative trial application vs. respective mono-functional 3. Explore biomarker driven pan-tumor opportunities agents 4. De-prioritize cohort 1 As presented by J. L. Gulley at ASCO Annual Meeting 2017, June 5, 2017. 52
1 2 3 4 Targeted IO bi- Avelumab functionals DDR Oncology Anti-PD-L1/TGF-ß trap (M7824): Focus areas NSCLC & BTC Updated data presented at ESMO 2018 defined next steps NSCLC 2L Biliary Tract Cancer (BTC) • Need: NSCLC accounts for 80-85% of all cases of lung cancer1 • Need: Few available treatment options (no 2L standard of care)4 • Results: Encouraging efficacy comparing favorably to • Results: Encouraging activity5 in 30 Asian patients with established PDx-inhibitor monotherapy (IRC)2,3: pretreated biliary tract cancer ORR (all-comers): 27.0% • ORR5: 20% (IRC assessment). Median DoR was NR (range, 8.3– 13.9 months) with confirmed responses ongoing in all patients ORR (PD-L1-positive): 37.0% • Overall Survival by IRC: ORR (PD-L1-high): 85.7% mOS: 12.7 months (6.7 – NR), comparing favorably with • Progression free survival by IRC (PD-L1 ≥ 1%): historical data in pretreated patients receiving second- or later line treatment (
1 2 3 4 Targeted IO bi- Avelumab functionals DDR Oncology Anti-PD-L1/TGF-ß trap (M7824): Phase Ib results (HPV cohort at NCI) HPV-assoc. cancers as potential pan-tumor therapy – prospective study ongoing at NCI Patients with HPV-assoc. cancers BOR as confirmed by independent radiologist1 • Analyses of HPV+ cervical/SCCHN tumor samples from TCGA/Oncomine show frequent dysregulation of TGF-βR1 signaling – suggesting this pathway plays a role in HPV-mediated carcinogenesis • HPV associated with almost all anal and cervical cancer, and some SCCHN2-4 • Retrospective subgroup analysis incl. 17 patients with HPV-associated cancers1: Activity in all three tumor types N=17 N-12 BOR, n (%) (all HPV associated tumors) (all HPV-positive) Confirmed ORR = 41.7% (HPV+)1 ORR 6 (35.3)10 5 (41.7)10 Clinical activity of anti-PD-1 monotherapies in CR 2 (11.8)9 1 (8.3) range of 17–26%5-8 PR 4 (23.5)10 4 (33.3)10 SD 4 (23.5) 1 (8.3) • Phase II study by NCI specifically accruing PD 7 (41.2) 6 (50.0) patients with HPV-associated malignancies DCR 10 (58.8)10 7 (50.0)10 1J.L. Gulley et al, ASCO, Jun 2018 (presentation); 2 De Vuyst et al. Int J Cancer. 2009;124:1626–36; 3 Ihloff et al. Oral Oncol. 2010;46:705–11; 4 Mehanna et al. Head Neck. 2013;35:747–55; 5 Bauml et al. J Clin Oncol. 2015;33 (suppl; abstr TPS3094); 6 Ferris et al. N Engl J Med. 2016;375(19):1856; 7 Frenel et al. J Clin Oncol. 2017;35(36):4035; 8 Ott et al. Ann Oncol. 2017;28(5):1036; 9 1 patient had a confirmed BOR or PR and an unconfirmed BOR of CR; 10 1 PR did not meet the RECIST criteria 54
1 2 3 4 Targeted IO bi- Avelumab functionals DDR Oncology DNA damage response (DDR) Complete portfolio supporting leadership in a potentially disruptive class Genomic instability: a hallmark of late stage cancers1 • DNA damage response (DDR) keeps genetic information intact • In many cancers DDR pathways are defected, leading to greater dependency on remaining functional DDR pathways • Preferentially inhibiting remaining DDR pathways can result in cancer cell death (“synthetic lethality”) Amplifying cytotoxic effects of conventional and novel cancer treatments potentially bears combination potential cancer treatments potentially bears combination potential 1. Inhibitor portfolio targets all three leading pathways of double stranded breaks – enabling unique synergies 2. ASCO 2017: leading DNA-PK-I (M3814) found safe and tolerable in a phase I study, with limited single-agent activity (20% of patients with stable disease for at least 18 weeks)2 1 Sources: O’Connor, Molecular Cell, 2015 | Benjamin et al., Current Drug Targets, 2010, 11, 1336-1340; 2 “A multicenter phase I trial of the DNA-dependent protein kinase (DNA-PK) inhibitor M3814 in patients with solid tumors”, Mark van Bussel, ASCO 2017; Acronyms: ATM: ataxia-telangiectasia mutated |ATR: ataxia telangiectasia and Rad3 | DNA-PK: DNA-dependent protein kinase | 55
56 1 Targeted 2 3 IO bi- 4 Avelumab functionals DDR Oncology DNA damage response (DDR) 4 Broad combination potential across multiple mechanisms At least 50% of all cancer patients receive some type of RADIATION therapy (NCI 2016) Combination with CT At least 70% of all cancer patients receive some Combination Combination type of CHEMOTHERAPY (NCI 2016) with RT with ADC DNA- PK ATM ATR Significant share of patients to be treated with CHECKPOINT INHIBITORS Monotherapy Combination with DDR Combination with IO 56
57 1 Targeted 2 3 IO bi- 4 Avelumab functionals DDR Oncology DNA damage response (DDR) Clinical program targets three major DDR pathways, in mono- and combination (incl. Avelumab) Estimated primary completion1 2017 2018 2020 2017 2018 2019 2020 Sep Phase I expansion cohorts ongoing in M6620 combination with CT (TNBC, NSCLC, SCLC) Sep Phase I dose escalation ongoing for mono- ATR-i M4344 and combination therapy (with CT) Phase II study initiated (+Avelumab + M6620 + Avelumab Nov Carboplatin), PARPi-resistant ovarian cancer Phase I dose escalation completed in Q4 17 M9831 Oct in combination with CT, MTD not reached DNA- One study completed (mono), one study PK-i M3814 Jul ongoing (Phase I, combination with RT/ CRT) Phase I dose escalation initiated (+Avelumab M3814 + Avelumab Oct with/without palliative RT), advanced solid tumors ATM-i Phase I dose escalation ongoing in ATM-i M3541 Jul combination with RT 1 Estimated primary completion date acccording to Clinicaltrials.gov as of October 26, 2018; Acronyms: ATM: ataxia-telangiectasia mutated | ATR: ataxia telangiectasia and 57 Rad3 | DNA-PK: DNA-dependent protein kinase | CT: Chemotherapy | RT: Radiotherapy | CRT: chemoradiotherapy | NSCLC: non-small cell lung cancer | SCLC: small cell lung cancer | TNBC: triple negative breast cancer | MTD: Maximum Tolerated Dose; Note: timelines are event-driven and may change
Immunology Immunology Strategy is anchored on leadership in selected disease areas Sustain Build additional New frontiers leadership AI pillars Lupus • OA disease modification MS Leadership AI Indications • SSc-ILD Fibrosis Core Focus Indications Rebif: A pioneer Marketed / Filed assets Mavenclad: A new treatment paradigm Atacicept Sprifermin Clinical BTK-i Abituzumab pipeline IL-17 Pre-clinical Strong Discovery Engine pipeline 58
Immunology Immunology Mavenclad could change the MS treatment paradigm …followed by Selective reconstitution Unique immune posology: reconstitution max. 20 days therapy of oral (SIRT)1 Selective reduction treatment3 in B & T lymphocytes… 100 Proportion of Patients Qualifying Relapse Free (%)2 80 4 years 77.8 75.6 60 disease Low control with 40 monitoring treatment over requirements4 20 2 years2 n=98 n=98 0 CLARITY CLARITY EXT Cladribine Tablets Cladribine Tablets 3.5mg/kg | Years 1 & 2 3.5mg/kg | Years 1 & 2 Placebo | Years 3 & 4 1Giovannoni G. Neurotherapeutics 2017; Nov 22 [Epub ahead of print] | Wiendl H et al. Neurology 2017;89:1098‒100 | Weindl H. Nat Rev Neurol 2017; Sept 8 [Epub ahead of print] 2Giovannoni G et al. N Engl J Med 2010;362:416–26 | Giovannoni G et al. Mult Scler Aug 1 [Epub ahead of print] 3 Maximum of 20 days of oral dosing over 2 years with no further treatment required in the next 2 years. For important safety information, refer to the abbreviated Prescribing Information | Oral, weight-based dosing. For an average patient weighing 67 kg. Recommended treatment over 2 years. One treatment course per year, followed by observation for another 2 years. Each treatment course consists of two treatment weeks, one at the beginning of the first month and one at the beginning of the second month of the respective year | MAVENCLAD ® EU SmPC, September 2017 | Giovannoni G et al. N Engl J Med 2010;362:416–26 4 MAVENCLAD® EU SmPC September 2017 | Screening must be performed prior to initiation of therapy in Year 1 and Year 2. Vaccination of antibody-negative patients is recommended prior to initiation of Cladribine Tablets. AE, adverse event; HBV, hepatitis B virus; HCV, hepatitis C virus; MRI, magnetic resonance imaging; NEDA, no evidence of disease activity; TB, tuberculosis 59
Immunology Immunology 1 Mavenclad®ꞌs attractive label in Europe supports integrated franchise strategy Mavenclad® label covers 2 Our overall NDD franchise 60-70% of patients with RRMS Integrated franchise 1 will cover a broad within the MS patient population strategy MS patient pool in Europe 3 4 MS patient population RRMS patients, EU-5 Disease Disease activity Mavenclad® label activity • At patient level: Rebif ® and Mavenclad® are high high highly complementary • At physician level: High overlap • Franchise infrastructure investment benefits both low low brands Therapy Therapy Initiation Escalation Reserve Initiation Escalation Reserve Prioritized for Prioritized for Not covered by label Mavenclad® Rebif® 1 2 Mavenclad® label covers: RRMS+rSPMS+rPPMS; Abbreviations: RRMS = relapsing-remitting multiple sclerosis, MS = multiple sclerosis, rSPMS = replapsing secondary 3 4 progressive MS, rPPMS = relapsing primary progressive multiple sclerosis; Source: Merck KGaA, Darmstadt, Germany; Source: Merck KGaA, Darmstadt, Germany, Ipsos; As of September 2018, Mavenclad was reimbursed in 22 countries globally 60
Immunology Evobrutinib Highly selective BTK-i to be explored as chronic therapy Safety: Promising kinase selectivity Efficacy: Oral, highly efficacious in minimizing off-target effects1 pre-clinical models1 • Evobrutinib (irreversible antagonist) inhibiting signal transduction until protein is naturally degraded (no B-cell depletion) • Occupancy/efficacy correlation: average BTK occupancy of >80% correlated with near complete inhibition of disease activity1 • Clinical benefit of addressing B cell biology • Greater selectivity vs. in-class competitors in kinase demonstrated by anti-CD20 Illustrative screen (>270 kinases) targeting agents • Besides BTK, two more kinases inhibited (vs. 25 off- • Insights from phase IIa target kinases by others) trial (RA) leveraged in broad clinical development • Kinase selectivity may result in lower AE rate vs. program (three phase IIb existing treatments trials in MS, SLE, and RA) 1 “Pharmacodynamic Modelling of BTK Occupancy versus Efficacy in RA and SLE Models Using the Novel Specific BTK Inhibitor M2951” Abstract #4342; EULAR 2016 61
Immunology Evobrutinib First BTKi demonstrating clinical proof-of-concept in relapsing multiple sclerosis (RMS)1 Study Outcome presented at ECTRIMS 2018: Study Design Significant reduction of T1 Gd+ lesions vs placebo • Design: Randomized, double-blind, Primary endpoint (T1 Gd+ lesions, wks 12-24, endpoint met): placebo-controlled study in patients with • T1 Gd+ lesion rate ratio vs placebo: RMS Evobrutinib 25 mg QD: 1.45 Evobrutinib 75 mg QD: 0.30 • Patient population: 267 patients Evobrutinib 75 mg BID: 0.44 • 5 arms: placebo vs. 3 drugs-arms (low, mid, high dose2) incl. open-label reference Key secondary endpoint (ARR, wk 24, clinically relevant decrease): arm (dimethyl fumarate, 240 mg BID) • Annualized Relapse Rate (ARR): Placebo: 0.37 • Gadolinium enhancing T1 (T1 Gd+) lesions Dimethyl fumarate: 0.203 measured at weeks 12, 16, 20 and 24 in Evobrutinib 25 mg QD: 0.57 comparison to patients receiving placebo Evobrutinib 75mg QD: 0.13 Evobrutinib 75mg BID: 0.08 Safety: • Well tolerated, no treatment associated infections, infestations or 48 wks data, informing lymphopenia observed Next Ph III trial design, to be • Elevated ALT, AST and lipase levels steps presented at an upcoming observed were reversible and medical congress in 2019 patients were asymptomatic 1Motalban et al., “Primary Analysis of a Randomised, Placebo-Controlled, Phase II Study of the Bruton’s Tyrosine Kinase Inhibitor Evobrutinib (M2951) in Patients 62 2 with Relapsing Multiple Sclerosis”, presented at ECTRIMS 2018; evobrutinib 25 mg QD, 75mg QD and 75mg BID; 3 One patient considered an outlier, when accounted for the performance of dimethyl fumarate was in line with previous studies
Immunology Evobrutinib Comprehensive development plan across immune-mediated diseases Comprehensive phase I/IIa Robust phase II program to Est. primary safety data-set enable differentiated phase III completion • Randomized, double-blind, placebo-controlled study in patients with RMS 48 wks data RMS • 267 patients presentation and Safety decision on PhIII SLE (Ib) • 5 arms study: placebo vs. 3 drugs-arms (low, • 24 patients mid, high dose) incl. active control trial design • Double-blind, Randomized, Placebo- (Dimethyl fumarate) expected in controlled Study Q2 2019 • Randomized, double-blind, placebo-controlled dose-ranging study in subjects with SLE SLE • 451 patients SLE Q4 2019 • 4 arms study: placebo vs. 3 drugs-arms (low, Signal Finding mid, high dose) RA (IIa) • 65 patients • Randomized, double-blind, placebo- controlled trial in subjects with RA on • Randomized, double-blind, placebo-controlled stable Methotrexate therapy RA dose-ranging study in subjects with RA • 360 patients Q2 20191 • 4 arms study: placebo vs. 3 drugs-arms (low, mid, high dose) 1Data presentation not expected until Q3 2019. 63 All timelines are event-driven and may be subject to change.
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