Merck has reported robust second-quarter results for 2024, surpassing market expectations with significant organic sales growth in its CM&E and oncology franchises within the Healthcare sector, and in its Electronics division.
Despite a decline in the Life Science sector, the company remains optimistic about a return to growth in the latter half of the year. Merck has also announced strategic portfolio changes, including the divestiture of Surface Solutions, and an increased focus on high-tech applications in electronics and life science technologies.
Key Takeaways
- Merck's Q2 2024 results exceeded expectations, with a 5% organic sales growth in the Healthcare sector and an 8% increase in Electronics.
- Life Science experienced a 4% decline in organic sales, but is expected to rebound in the second half of the year.
- Merck upgraded its full-year 2024 guidance, expecting net sales between €20.7 billion to €22.1 billion.
- The company announced the termination of the Xevinapant program but confirmed that it does not impact capital allocation priorities.
- Order intake and the book-to-bill ratio improved, indicating potential future revenue growth.
Company Outlook
- Full-year 2024 guidance raised, with expected organic sales growth between 2% and 5%, and EBITDA growth between 4% and 10%.
- Healthcare sector guidance increased, with organic sales growth projected between 6% and 9%, and EBITDA growth between 18% and 23%.
- Electronics sector guidance also raised, anticipating organic sales growth between 4% and 8%, and EBITDA growth of 5% to 11%.
- Life Science guidance confirmed, with organic sales growth expected between -2% and 2%, and EBITDA growth between -6% and 1%.
Bearish Highlights
- Life Science sector saw a 4% decline in organic sales in Q2, though recovery is anticipated in the second half of the year.
- The N&I franchise experienced a 7% drop in organic sales.
- EBITDA pre declined by 6.1% organically in Q2.
Bullish Highlights
- Strong organic sales growth in Healthcare, driven by CM&E and oncology franchises.
- Electronics division showed accelerated growth due to the Semiconductor Solutions business.
- Sales in Science & Lab Solutions and Life Science Services segments increased organically by 1% and 8%, respectively.
Misses
- Overall Q2 sales were down 12% organically, although this was an improvement from the 19% decline in Q1.
Q&A Highlights
- Executives discussed ending inventory destocking by year's end.
- Merck's confidence in the semiconductor solutions business was highlighted, especially in AI applications.
- The company emphasized the importance of external innovation in replenishing the pipeline.
- A positive net price impact is expected for the year in the Life Science segment.
Merck's second-quarter performance indicates a strong momentum in key sectors, which has prompted the company to raise its full-year guidance for 2024. The healthcare giant has also shown resilience in its strategy to balance investment in internal R&D with external innovation, ensuring a robust pipeline for future growth.
With strategic divestitures and acquisitions like Unity-SC, Merck is poised to enhance its technological capabilities, particularly in 3D metrology. The company's focus on high-quality assets and its capital allocation strategy underscore its commitment to maintaining long-term leadership in the life science and healthcare markets.
Full transcript - Merck (MRK) Q2 2024:
Constantin Fest: A very warm welcome from my side to this Merck Q2 2024 Results Call. My name is Constantin Fest, I'm Head of Investor Relations here at Merck. And I'm delighted to have today here with me Belen Garijo, the Group CEO; as well as Helene von Roeder, Group CFO. Also joining for the Q&A part of this call, we have Matthias Heinzel, CEO of Life Science as well as Peter Guenter, CEO of Healthcare; and Kai Beckmann, CEO of Electronics. In the first few minutes of this call, we would like to guide you through the key slides of this presentation. And after that, we'd be happy to take all of your questions. With this, we are ready to directly start and I'd like to now hand over to you, Belen, to kick us off. Over to you, Belen.
Belen Lopez: Thank you, Constantin, and welcome, everybody, to our Q2 earnings call. Please stay on Slide #5 of the presentation where we have the highlights of the quarter. First of all, we had a very strong second quarter. significantly beating expectations, as you saw in our ad hoc release from Friday of last week. Healthcare continues to show excellent performance across the portfolio at very attractive underlying margins. In electronics, the good news is the semi market for AI and advanced nodes has inflected driving sales and EBITDA pre of the business, while life science performed within expectations. And I am happy to say that Merck has already returned to organic and reported sales growth in Q2. The low light of the quarter was certainly the termination of our Xevinapant program. While you may have questions on it after the introduction, I want to say very clearly that our priority, it does not change our capital allocation priorities. Turning to our operating performance. The group sales increased by 2% organically and as a result of onetimers, primarily EBITDA pre went down by minus 1% organically. Life Science showed an organic sales decline of minus 4%, with the magnitude of the year-on-year decline being less pronounced than in Q1. Be reminded that while we no longer segregate the effect of COVID-related sales, it still represents a headwind for Life Science as a business as well as for the group in 2024 since we delivered EUR 250 million of COVID sales in 2023. Healthcare again contributed to the positive organic performance of the group with plus 5% organic sales growth, driven primarily by our CM&E and oncology franchises. Electronics, was the best performer this quarter with 8% organic sales growth driven by Semiconductor Solutions, which showed year-on-year growth for the second quarter in a row at an accelerated pace. Reported sales were EUR 5.352 billion, which is an increase of 1% as the currency was a 1 percentage point headwind. Reported EBITDA pre of EUR 1.509 billion was down by 3%, including a slightly dilutive effect from FX. On EPS pre, we are back at the level of Q2 2023 of EUR 2.20. Beyond our strong operational execution, you have also seen a number of portfolio announcements for Merck overall. First of all, the divestiture of Surface Solutions. And even though Surface Solutions only represents a little more than 10% of our sales in Electronics and around 2% of the group sales, the divestiture of Surface Solution is strategically relevant since it will help us further sharpen our focus on high-tech applications in electronics. It follows a suit of different activities, both in electronics and life science over the last few months, which expands our portfolio in the breakthrough technologies of the future. and as well supports our long-term growth journey. Mirus Bio complements our offering for the development and production of novel modalities such as cell and gene therapy. Unity-SC adds metrology and inspection tools that increase our relevance to customers for AI in semiconductors. Now turning to the guidance. We are upgrading our forecast and now anticipate net sales in a range of EUR 20.7 billion to EUR 22.1 billion. EBITDA pre of EUR 5.8 billion to EUR 6.4 billion, and EPS pre of EUR 8.20 to EUR 9.30, thereby slightly improving our guidance corridor for organic growth in sales and lifting our organic growth guidance range for EBITDA pre. I will cover more details on our assumptions at the end of the presentation. And now on Page #6 for an overview of our performance by business sector. As announced last Friday in our ad hoc, our key growth engines in the quarter were Electronics and Healthcare, while Life Science performed within expectations. Life Science showed a decline of 4% organically, still against a somewhat strong base in 2023. While science and Lab Solutions and Life Science Services were up in the quarter, process Solutions was still down organically but also to a lesser extent than in Q1. Order intake in Process Solutions grew sequentially and year-on-year for the second quarter in a row. Book-to-bill stayed at around 1 as we have projected. And this is giving us confidence that Life Science will return to organic sales growth in the second half of this year. Healthcare delivered a robust organic sales performance in Q2 and raised revenues by 5%. This was mainly driven by the CM&E portfolio, as I mentioned before, which was up 14%, 1-4, and our oncology portfolio that grew 9% in the quarter with both Erbitux, up 8% organically and Bavencio with 6% organic sales growth having contributed. Mavenclad hit record sales ever in the quarter. However, you have seen that organic growth was muted because of a particularly strong Q2 2023 when we saw some channel dynamics that distorted that quarter in '23. At 8%, Electronics showed the strongest organic growth of all the three business sectors in Q2 as our semi business was up by 11%, driving the growth of the electronics sector. Display Solutions was slightly down organically year-on-year. And for the group, FX was a headwind on sales across the board with a minus 1% impact. Regarding earnings, now EBITDA pre came in at EUR 1.509 billion, only slightly down organically by minus 1% or minus EUR 12 million in absolute terms. This was due to Life Science, where organic EBITDA pre was down by 6% or minus EUR 44 million in quarter 2. For Healthcare, we were able to show an organic EBITDA pre growth of 5% in Q2, about in line with organic sales growth, even though we booked a termination provision of a mid-double-digit million euros amount on Xevinapant in Q2 this year. EBITDA pre in Electronics was down by 3% organically, and this is in relation to the onetime impact from the UDC patent agreement that you may remember we landed in the year earlier quarter, so in 2023. FX was a stronger headwind on EBITDA pre than on sales, mainly due to Healthcare and Life Science. I would also like to highlight that excluding the UDC patent agreement onetimer from Q2 last year and the termination provision of Xevinapant from Q2 this year, reported EBITDA pre for the group would have shown robust growth in the mid-single-digit percentages. With this, I'm going to hand it over to Helene for a more detailed review of our financials.
Helene von Roeder: Thank you very much, Belen, and a warm welcome also from my side. I am now on Slide 8 for an overview of our key figures in the first quarter. Let me emphasize we not only returned to organic sales growth in Q2, but we also made it back to reported sales growth. Taking into account currency headwinds of minus 0.7%, net sales did increase by 0.9% to EUR 5.352 billion. On the back of the Xevinapant termination provision, EBITDA pre was down by 2.9%, to EUR 1.509 billion, with a slightly higher FX headwind on EBITDA pre compared to sales. EPS pre was flat at EUR 2.20. Operating cash flow came in strong at EUR 861 million, which represents an increase of 38.4% over the year-earlier period. That was mainly due to lower bonus payments as well as LTIP. Net financial debt increased by EUR 450 million compared to the end of December '23, which is mainly due to the payment of our dividends, which took place in the second quarter. So let me also briefly comment on our reported results. And with that, I'm now on Slide 9. EBIT was down by 18.3% year-on-year. This was above the decline in EBITDA pre mainly as a result of the high level of D&A which was in turn due to the EUR 140 million impairment we are taking on Xevinapant as well as the operating performance on Life Science. The financial result was markedly up by EUR 69 million to just minus EUR 7 million in the quarter. This is mainly driven by tax items and lower provisions for our long-term incentive plan alongside higher interest income. The effective tax rate came in at 22.9% which is at the top end of our guidance range of 21% to 23% and reflects a slight shift in the overall tax rate for the full year due to the Xevinapant program termination and as well due to a slight increase in the expected Pillar 2 expenses. Reported EPS came in at EUR 1.40 which represents a decline of 13.6% year-on-year. Now with that, let's move on to the review by business sector, and I'm starting with Life Science on Slide 10. Overall, Life Science did deliver on our expectations in Q2. Sales were still down 3.7% organically year-on-year in the quarter. But remember, we only started to see the full effect of customer destocking and process solutions over the course of Q2 of last year. In Q1 '24, we still had an organic sales decline of 12.6%. So we saw a trend reversal and importantly, Life Science improved sequentially across the board. Supported by our broad and diversified position, we continue to expect a further recovery during 2024. Now 2 of the 3 businesses in Life Science also showed organic sales growth year-on-year in Q2. So with that, looking at Process Solutions first, the business, which faced a tougher comps in Q2, sales were down 12% organically, which represents an improvement versus the minus 19%, which we have seen in Q1. Sales showed a positive sequential trend and went up by 7% quarter-on-quarter. Order intake again went up sequentially as well as year-on-year. Book-to-bill remained at around 1. We continue to expect a sequential improvement in order intake throughout the year and that book-to-bill will remain at around 1 during 2024. Now we will take a closer look at Science & Lab Solutions. Sales were up 1% organically, the first positive organic sales development year-on-year since Q1 '23, and it was driven by demand from industrial and testing as well as diagnostics. Demand for pharma companies has remained soft, especially in North America, while academic research spending is experiencing more normalized growth now in 2024. Sequentially, sales in Science & Lab Solutions were up in Q2 and therefore grew for the third quarter in a row. Turning to Life Science Services, our third and smallest business within Life Science. Sales increased by 8% organically, driven by our clinical testing business, which went up in the mid-teens. Our CDMO activities also increased slightly. Looking to the coming quarters, I would like to mention that our CDMO business can be volatile on a quarterly basis as project phasing has a significant impact on the performance. When modeling Q3, it should also be remembered that we benefited from an end of a contract payment of a low to mid-double-digit euro million amount relating to COVID in Q3 of last year. EBITDA pre declined 6.1% organically in Q2, which was mainly due to lower volumes with idle costs from underutilization. Sequentially, however, EBITDA pre increased with the margin having moved up by 50 basis points as a result of stringent cost control as well as some operational leverage. I am now on Slide 11 for an overview of the performance of our Healthcare business sector. Healthcare delivered a robust organic sales growth of 5.3% in Q2. By franchise, it was our CM&E portfolio, which was a star performer at plus 14% organically with strong growth supported by contributions across all segments and all regions. The growth has been amplified by a successful tender business and the prior year slowdown in the diabetes market in China. Oncology showed a strong performance in Q2 growing 9% organically. This was also driven by all brands. Erbitux was up 8%, supported by nearly all regions. And also Bavencio grew by 6%, in line with our expectations, with all regions up except North America, where competitive pressures led to a decline in the mid-teens. As a reminder, Bavencio sales in North America make up less than 30% of the global Bavencio sales. And furthermore, Tepmetko also contributed to the organic growth of the oncology franchise. Our N&I franchise was down 7% organically this quarter. Mavenclad grew only 1% organically versus a high basis last year. This is also the case for Rebif which declined by 18% organically this quarter. Looking at the H1 numbers, the N&I franchise has been stable. Regarding Mavenclad, we hit record sales this quarter. U.S. prescriptions continue to expand both in breadth and in depth. Concerning the pipeline. As announced in June, we decided to discontinue the Xevinapant Phase III program based on the insight into the data we gained from the interim analysis of the trialing study in Q2. In N&I, we initiated a new Phase III program to investigate cladribine in generalized myasthenia gravis. The recruitment to the study is now open. At ASCO, we have presented strong data for our ATR inhibitor, Tuvusertib and ADC M9140 and are now moving on to the execution of our DDR and ADC strategy. So with that coming to EBITDA pre, I am happy to say that even though we booked a mid-double-digit million euro termination provision on Xevinapant in Q2, our EBITDA pre margin declined only slightly from 34.3% to 33.7%. It was a strong sales growth, which supported the gross margin paired with lower underlying R&D and a positive effect of the Bavencio repatriation, which is now coming close to its first anniversary. For modeling, we expect underlying R&D to remain structurally lower also for the remainder of 2024. Please do have in mind that the provisions for both evoprutinib and Xevinapant have an impact on our absolute R&D costs in 2024. We also expect gross margin levels to normalize more in line with the last quarter's amid rebate dynamics. Overall, EBITDA pre amounted to EUR 720 million in Q2 and was up 4.6% organically, only slightly below the organic growth in sales. And with that, we will now move on to electronics on Slide 12. Electronics showed an acceleration of organic growth to 7.6% in Q2. The key driver was Semiconductor Solutions, which was up 11% organically. Our semiconductor materials businesses drove organic growth in the quarter driven by AI and advanced nodes, while our DS&S business was largely flat sequentially and year-on-year. As we mentioned in our last earnings call in May, we generated revenues until the completion of the large U.S. project in Q1, which did support our Q1 DS&S sales. However, contrary to our expectations, we did see an unanticipated increase in demand for delivery equipment during Q2, which compensated for the large project, we knew that was ending in Q1 in the U.S. Our semiconductor materials business continued to deliver sequential growth at a stronger pace. While a wider inflection of mainstream semiconductor end markets, particularly in the end of -- in the areas of 3D NAND and analog is not yet visible, the semi market for advanced nodes and II has inflected. We've seen an acceleration in demand for Thin-Film materials for advanced logic nodes in semiconductors, which is driving sales. Turning to Display Solutions. We saw a slight organic sales decline of minus 2%. Volume growth was again not able to offset continuous price pressure in liquid crystals. Belen has already spoken about the strategic rationale to sell surface solutions. So let me also say a few words about the financial implications. As the expected completion of the transaction is more than 12 months away, it will remain part of the reporting and group guidance. We will not define Surface Solutions as a discontinued business or asset held for sale as of now. Returning to our performance in the quarter. The EBITDA pre margin declined by minus 240 basis points year-on-year to 26.7%. But please do bear in mind that the EBITDA pre margin in Q2 of last year benefited from the patent agreement with UDC, which contributed around EUR 60 million to EBITDA pre back then. Sequentially, the EBITDA pre margin increased by 120 basis points. This was mainly driven by the sales increase in semiconductor materials and resulting leverage and positive mix effects within semiconductor materials from products associated with advanced nodes. For the further evolution of sales, please bear in mind that the dynamics in the semiconductor market have diverged from our previous expectations. While the semi market for advanced nodes and AI has inflected earlier, the broader semi market is developing at a more gradual pace. Regarding the further evolution of EBITDA pre-margins, I want to stress that we continue to be convinced of the long-term secular growth of semiconductors Therefore, we do sustain high level of R&D and are already bringing capacity expansions online. So before handing back to Belen, let me also briefly comment on our balance sheet and cash flow statement. As you can see on Slide 13, our balance sheet increased by EUR 1.4 billion compared with the end of December 2023. Now let's take a closer look at the asset side. Cash and cash equivalents increased to EUR 2.7 billion from EUR 2.0 billion at the end of December '23, driven by the strong operating cash flow. Inventories went up slightly as did receivables. Property, plant and equipment increased driven by our investments. And lastly, intangible assets increased slightly due to the FX effect on our goodwill. And the liability side, Financial debt increase, which was largely offset by a decline in other liabilities, in turn affected by the dividend payment in Q2. Pension provisions were down due to interest rate changes. Payables decreased from EUR 3.4 billion to EUR 3.0 billion due to in-license deals signed in the prior period, which resulted in payments this year. And net equity increased by EUR 1.8 billion, thanks to growth in profit after tax and higher gains recognized in equity driven mainly by FX. As a result, our equity ratio strengthened yet again from 55% at the end of December 2023 to 57% now. Now we will turn to cash flows, which are on Slide 14. Operating cash flow came in strong at EUR 861 million and was up by EUR 239 million compared with Q2 of last year despite a decline in profit after tax. This was mainly due to changes in other assets and liabilities, which were in turn driven by lower bonus payouts and taxes in the quarter amid a high level of D&A, including the one-off impairments in relation to health care R&D. Cash out for investing activities increased primarily due to higher investment of our excess liquidity and nonfinancial assets and slightly increased CapEx on property, plant and equipment as we continue to invest in capacity expansions in a responsible manner. Last but not least, the difference of financing cash flow can be explained mainly by proceeds from bank loans. And with that, let me hand back to Belen for the outlook.
Belen Lopez: Thank you, Helene. Let's take a closer look at our guidance on Slide #16. We are raising our full year 2024 guidance for the group on higher expectations for Healthcare and for the semi business within Electronics. And we now expect group net sales in a range of EUR 20.7 billion to EUR 22.1 billion, EBITDA pre in a range of EUR 5.8 billion to EUR 6.4 billion and EPS pre in a range of EUR 8.20 to EUR 9.30. With our first quantitative guidance in May, we confirm to you our goal to return to organic growth in 2024 and forecasted organic sales growth between plus 1% and plus 5%. We underline this goal with Q2 and are now lifting the lower end of the guidance range and therefore, expect an overall organic sales development between plus 2% and plus 5% for 2024. Regarding EBITDA pre, we are increasing the guidance range for organic growth to plus 4% to plus 10%, driven by the strong operational performance of both our Healthcare and our Electronics business sectors. We continue to expect FX to have an impact of minus 3% to 0% on sales, but we are expanding the guidance band for EBITDA to slightly higher minus 5 to minus 1 even though we now expect a slightly stronger headwind from FX on EBITDA pre, we are able to lease the guidance band for EBITDA pre and consequently also for EPS pre. For some additional color by business sectors, let's take a look at Slide 17. Our Q2 performance reinforces confidence in our 2024 return to growth trajectory. We have raised our expectations for Healthcare and Electronics while we fully confirm our guidance for Life Science. For Healthcare, our guidance now anticipates organic sales growth between plus 6% to plus 9%, above the quantitative guidance from May. And there are a number of drivers that continue to play in our favor. Our CM&E franchise continues to perform very well. Mavenclad keeps gaining market share in the U.S., and our oncology franchise is showing a strong growth. We are raising our guidance also for organic EBITDA growth even further to between plus 18% and 23%. And this is mainly driven by strongly leveraged growth paired with cost discipline and a lower R&D spend on an underlying basis already visible in Q2. Moving on to Electronics. We are increasing our guidance for the organic sales development to plus 4% to plus 8% driven by the performance of our Semiconductor Solutions business as we see the semi materials market for advanced nodes and AI inflecting already. The sales increase and positive mix effects from advanced semiconductor nodes are driving increased anticipated organic EBITDA pre growth of plus 5% to plus 11% and offset last year's UDC patent effect of around EUR 60 million. For Life Science, we are staying the course and confirm our guidance for an organic sales development between minus 2% to plus 2%. And for organic EBITDA pre, we also confirm our guidance for an organic year-on-year change between minus 6% to plus 1%. Staying on Life Science. Q2 has developed fully in line with our expectations, and we continue to expect a further gradual recovery during 2024 with organic sales growth now turning positive in the second half of the year. Overall, I'm very pleased to say that we have already returned to organic growth in Q2. In May, I mentioned to you that as a group, we also have the ambition to return to profitable organic growth in 2024, and we are now more confident that we will deliver on this ambition as our increased guidance already shows. And with this, we will be happy to now take your questions. Thank you.
Constantin Fest: Thank you very, Belen. Thank you very much, Helene. Heidi, if we could have the first question, please, that would be great. Thank you.
Operator: [Operator Instructions] Your first question comes from the line of [Harry Sifton] from UBS.
Unidentified Analyst: I have one on each of the divisions, please. So firstly, on the Healthcare division. With the recent late-stage failures, how are you thinking [indiscernible] the division? Are you considering selling either the late stage or early stage pipeline through deals? Or should we think of it as more of a stable cash generator in the midterm? And maybe along those lines, what could that potentially mean for the midterm R&D spend for the Healthcare division? In Life Sciences, what gives you confidence in the inventory destocking coming to an end in the second half of this year? And just to maybe expand on that point, why do you think there is so much volatility in different companies' expectations on the demand environment? Is it mix or are you seeing a shift in market share positions? And then finally, on Electronics. Could you give us an idea on what percentage of the current semiconductor solutions portfolio are from Thin-Film materials for AI applications. And if you could give us a sense of how fast this portion of the semis portfolio is growing relative to the rest that would be extremely helpful too.
Belen Lopez: Thank you very much, Harry. This is Belen. Let me take your -- the first part of the Healthcare question because, of course, the underlying question has a lot to do with our capital allocation strategy. So first of all, let me make a few points here. Number one, Healthcare has been operating on a very, very strong performance in recent years with strong and sustained sales growth, impressive market development, highly profitable business with limited CapEx needs. Healthcare continues to be a super relevant contributor to group top and bottom line as well as a very significant cash flow generator. Point number two, our Healthcare business, contrary to many other pharma players is not at risk of a patent cliff. And even in the face of the pipeline setbacks, we are expecting that health care continues to deliver a slight growth in the midterm. We have a partial loss of exclusivity for Mavenclad in late 2026. And for the rest of the world at the end of the decade. So that -- all that means that we have no urgency to act in health care, and we will stick to our strategy to accelerate the [indiscernible] innovation. And if those business development opportunities arise, we will, as we have always done, consider those. Definitely, our aim is to increase the optionality of the pharma pipeline with a clear focus to increase shots on goal at an accelerated speed in order to recover momentum as a global specialty innovator with licensing being our preferred way. So to summarize, our capital allocation strategy has not changed. Life Science remains a priority when it comes to M&A. We will continue our strategy to increase optionality in the pipeline via mostly licensing. If at all, M&A in health care will be limited to clear cut, low-risk deals that create value from very early on. So expect us to stay very, very disciplined on our financial criteria as we have always done. And to be crystal clear, let me conclude my statement before I hand over to Peter for the R&D spending, we will not compromise on the strategic agenda of Life Science, and we are planning that a substantial percentage of our M&A firepower to be allocated to Life Science as we have previously said. Peter, can you address the R&D spending and what it means for the midterm.
Peter Guenter: Yes. Sure, Belen, and thanks for the question, Harry. So a little bit more color perhaps from my side on R&D. Obviously, as already mentioned by Helene in her prepared remarks, we expect for half 2, a relatively low number of R&D spend in percentage to sales give and take around mid- to high teens and then a gradual recovery afterwards. Obviously, the pace of that recovery will depend on the success rate of our internal pipeline development as well, of course, as future pace of in-licensing. As we mentioned repeatedly in the past, we strive to have around about 50% of our portfolio coming from externally sourced innovation. And we will provide you indeed with more color on that during the Capital Markets Day. I can also say that we are very active in the search for external innovation, but at the same time, we want to retain discipline to in-license the right assets from a quality perspective and also on the right to win perspective. And we also want to build a pipeline with a balanced risk/reward profile. And also finally, obviously, we're not alone in the search of these assets. So very often, these are competitive processes. So overall, we continue to commit to innovation, which is essential for sustaining long-term growth. Finally, I would also draw your attention that we have a couple of capitalizing events. We have a readout coming up for Enpatoran in CLE first and then later this year or early next year the readout on SLE. We have the readout coming up in Q4 on Pimicotinib in TGCT. And as Helene has already mentioned, we have started a new Phase III program where we actually included the first patient the day before yesterday with cladribine in generalized myasthenia gravis. So I hope that gives you a little bit more color.
Matthias Heinzel: Yes. Hello, it's Matthias. You had raised two questions on Life Sciences. Let me start with the first one where you asked about our confidence on the status of destocking. So two aspects on that. Number one, obviously, our order intake trend, which has been building momentum. We shared the numbers, right? We had a sequential increase quarter-on-quarter Q1, now in Q2, year-over-year, a nice increase. So obviously, these are real orders from customers, which now need to support their business, and we have confidence based on that ordering trend and the quality of the orders that for those, mostly the destocking is over. And then obviously, the other aspect is for the more larger customers. We have a very detailed model. Obviously, we look at -- first of all, we talk with them, right, with S&OP meetings. We have our own model. And based on that, we also have a clear view of who basically is kind of in a more normalized phase already. And there's still a few which will come post Q2. But the vast majority to our understanding to all our, if you will, analysis, have the destocking behind them. Then the second question, it's a bit of a broad question, right? I can't talk too much about the others, but let me try and make an attempt to put a bit more color. I think looking at the product portfolio, probably the instrument was materials. I would look at probably in a differentiated way. I think the materials having the destocking now behind provides a bit more stable perspective instrument, it looks like, has a bit of a higher volatility for different reasons. We have a rather low share of instruments, large-scale instruments, the vast majority of our business is certainly in materials with a nice recurring, if you will, revenue stream. Regional mix may play a role. I mean China is still also quite volatile driver. In our case, China plays less than 10%. So yes, it has an impact but to a lower degree. So yes, we are navigating, I think, all of us through a very volatile environment. I think what we've demonstrated to you over the last quarter is to provide you a guidance. And we have, again, today confirmed that guidance and navigating through that volatility. And yes, we'll do so over the next couple of quarters.
Kai Beckmann: Kai -- let me -- for the electronics question, reiterate and reconfirm a model that we have shared earlier. So the 10% of the semiconductor market is today related to AI technologies. However, only 0.1% of the produced devices. Our semi solutions business is much closer to the top end of that range correlated and specifically means the Thin-Films business that you mentioned, this is the highest share of the contribution to that growth and contributing to AI. For this part of the business where we create with every technology node transition of our customers more value for our customers per wafer, we are in our growth rates, considerably higher than our midterm guidance for semiconductor solutions. And with that, we are more correlated to the growth rates of the respective industry in that segment.
Operator: Your next question comes from the line of Richard Vosser from JPMorgan (NYSE:JPM).
Richard Vosser: Two, please. Firstly, on Process Solutions, another question there, please. Just the book-to-bill is hovering around one. Can I ask whether it's sequentially improved in the quarter? And whether you could give us a little bit more color in terms of the consumables or as I think you called it materials reordering across different customer groups? And then second question, just on Healthcare. There was some tendering or stocking that was called out. Could I ask about that impact, particularly, I suppose, in China and particularly for the CM&E business. How do you see the outlook in China for those businesses? Are we seeing demand come back after anticorruption measures? How sustainable is that demand? How should we think about it?
Matthias Heinzel: Richard, look, on purpose, right, we're using the term around 1. I think it's almost immaterial, whether it's 0.1 -- 0.001 higher or lower the prior quarter, I think it's very important. We are in a steady course. What we communicated before, we're happy about the trend line with the order intake in absolute numbers, right? The quarter-over-quarter increase, the strong year-over-year increase -- and like we have said in prior calls, in line with our expectation, having it around 1, yes, with maybe a little bit of a small fluctuation quarter-over-quarter, we feel very comfortable. Then you asked about the customer segments. Obviously, we look at different customer groups. Quite often, we get the question, hey, CDMOs with the rest of the customer groups like pharma companies and maybe give you a hint there. Indeed the CDMOs show a bit of a stronger growth momentum coming out of this destocking versus the rest of the group. It's not major, but that gives a bit of a hint. But by and large, like I said before, the vast majority of the broad customers whether it's regionally or by segment and the destocking behind them based on our information.
Peter Guenter: Richard, for your question on CM&E China Glucophage. So first of all, let me reiterate that we're quite happy with the performance, obviously. And as you can see from the deck, it's pretty across the board of all subsegments or sub products, if you will, of the CM&E business and in all the regions. So obviously, as already mentioned before, we had indeed the low comps in China versus last year with Glucophage. That was still COVID-related. So there was stocking at patient level and then destocking. Actually, your question on the anti-bribery anticorruption movement. I was in China 2 weeks ago, obviously looked at all this, and we don't really see a significant impact from that. If anything, I think that international manufacturers who, of course, respond to the highest compliance standards may have had actually an advantage compared to the local manufacturers. So I'm not worried at all on that point on the contrary. Your question on tenders, obviously, the large majority of our CM&E business is indeed in developing markets, and there are quite a couple of countries or subregions if you will, where tenders play an important role in that business, and we had indeed some positive tender realizations in the second quarter in some of those markets or subregions. Perhaps another point, you shouldn't forget, which we also flagged in the past is, of course, that we have very good continued growth in the endocrinology business, so our growth hormone, Saizen, and that was actually amplified on the one hand by the rollout of new connected devices as well as a prolonged competitor stock-outs which drove us to leveraging geographical opportunities whilst we are manufacturing at capacity. Perhaps the last point is that we have consistently guided for a mid-single-digit growth on this business segment on the long term, and that's what we continue to do.
Operator: Your next question comes from the line of Sachin Jain from Bank of America (NYSE:BAC).
Sachin Jain: So firstly, on process. Just trying to get more color on the growth of Process Solutions in the back end of the year. So you're pointing very vocally to high single-digit sequential growth in 2Q. Is that a good proxy for the continued sequential growth to be seen in third quarter and fourth quarter. I'm just wondering if you could update on how you think about exit growth rate for '24 as you sit now? And then secondly, either Peter or Belen, just on the midterm health care outlook, which I think you suggested was low single-digit growth. Consensus is basically flat at EUR 8.5 billion out to '29, '30. Just a really simple big picture question, what do you think we're mismodeling the most versus your low single-digit growth expectations? And then just one clarification on your R&D spend, if I could, Peter, you said gradual recovery from the high teens. Is that gradual recovery beyond '25 or to be seen in '25? I know there's a bunch of variables, but perhaps some color would be helpful.
Matthias Heinzel: Yes, let me take the first one on -- we're talking about PS and your question about how the rest of the year is shaping up. Indeed, we will -- or we are expecting a continuous positive momentum in PS, right? We talked already about the order intake increase and the sales trending also along with that. I'll expect a sequential growth in the PS business both for order intake and for sales over the next couple of quarters. Now the magnitude of the incremental growth quarter-over-quarter may vary, right? So it's not a steady line. But there should be an incremental growth quarter-over-quarter. And that, like you asked, will give us a nice exit growth rate end of the year towards our mid-term guidance. Now then your question is, okay, what's exactly the exit rate? Look, we still have 5 months to go, right? And we already talked about some of the influence factors. So I think it's too premature to give you the exact rate, but I can certainly say with all what we see and what we expect that it will guide us and bring us towards overturn guidance.
Belen Lopez: Sachin, it's Belen, very briefly. When we say low single-digit growth, we are speaking about the CAGR view. So this obviously may have some fluctuations in the early years versus the later years. But anyway, we will offer much more perspective in the Capital Markets Day.
Peter Guenter: Yes. Sachin, you also asked a question on R&D. Look, it really depends on -- obviously, it's highly correlated with our execution on deal making and the progress of the internal pipeline. So depending on this, you see -- you could start to see the recovery already in 2025. I think it's a little bit too early. And let's wait until the Capital Markets Day to give you a little bit more color. What I can confirm to you indeed is that we are confident in the slight growth that we announced to you. And I think it's also fair to say this is a real tribute to the resilience of our portfolio and the strength of our teams.
Operator: Your next question comes from the line of Peter Verdult from Citi.
Peter Verdult: Pete Verdult, Citi. Two questions, one strategy, one bottom up. Matthias, just in the past management has sort of hinted to where numbers are going to land in terms of top or bottom half of the guidance range. I realize it's a little bit tedious, but in terms of confidence building as we enter the final 1/3 of the year and based on the trends you're seeing, what's your best guess for Life Sciences? Is it -- is it on track to be at the upper or lower end of the current revenue guidance range. And then secondly, Belen and/or Peter, you won't thank me for saying this, but candidly, I've yet to speak to an investor that wants to invest in Merck due to health care or because of what you're doing in ADCs and DNA damage repair. So just in light of these failures, can I ask as the family or as a team, have you discussed or raised the need for any potential changes to health care R&D strategy going forward? Or is the message today very much that nothing is going to change.
Matthias Heinzel: Peter, look, I think we got 5 months to go, so there's still a bit of work ahead of us. And on purpose, we kept the guidance, which we have outlined before it's really too early to give an indication, right? We talked about all the dynamics, order intake. We feel really good about PS. We feel good about the development in FLS. At the same time, we talked about before about the volatility and also probably some of the wider ranges, some of the others provided. At this point, we are fully confirming the guidance, Peter. And as the year unfolds, probably towards the CMD, we can narrow it down. But for now, we stick to the guidance.
Belen Lopez: Peter, so I will start with your second question, which is a very good question. And you know us very well, you have been following us for years. And you know that we have delivered very well on the first wave one launches. Have we discussed at the Board level, very deeply. Have we audited to the bone, our R&D engine yes. R&D has gone through many different phases of transformation, the most recent transformation under the leadership of our Keranibarsohar has been bringing R&D to the next level in terms of development capabilities, expertise, therapeutic area expertise, regulatory network with main agencies, et cetera, et cetera, et cetera. So we are confident in our R&D engine. What do we believe we need to have? And I mentioned that in the first part of the presentation, if you assume that we have been relying for different reasons on our internal R&D engine the number of shots on goal that we have in late phase is limited, and it was limited before. So what we are trying to do is to really ramp up in an accelerated way our external innovation agenda. And let me be very clear. We are not going to also compromise on the quality of the assets. We go after lower risk, high-quality assets that can be in license and can be increasing the optionality that we have in R&D. Then by doing so, we will progressively replenish the pipeline in order to continuously improve the productivity. As for me Peter, anything else to say?
Peter Guenter: I think you said it all Belen, nothing to add.
Operator: Your next question comes from the line of Thibault Boutherin from Morgan Stanley (NYSE:MS).
Thibault Boutherin: My first question on the Healthcare growth in 2024. If you could help us understand what are the things that need to go right in order for Merck to reach the high end of the Healthcare growth guidance, which implies an acceleration in H2 versus H1. Is it continued strong performance of the cardiovascular metabolism and endocrinology business. Is it maybe a bit better performance from Mavenclad because you mentioned you had some positive tenders in Q2. You mentioned the end of the fertility competition stock out. I just need to understand what should happen to reach the high end in [indiscernible] acceleration? And just second question, on electronics. So you have a strong demand for AI-related materials, momentum is really not clear. When we think about the growth beyond '24, is that momentum in AI enough to continue to carry the growth? Or do you need to see a recovery in the broader market in order to have more momentum in this business? And what are your current assumptions on the timing of the broader market recovery?
Peter Guenter: Yes, Thibault, let me take the first question on health care. Look, we're confident, obviously, in the guidance that we gave you. You may see some swing factors between half 1 and half 2. Obviously, when you have easy comps, for example, for the CM&E you don't expect the Glucophage to continue in Q3 and Q4, as we have done in Q2, for example. But on the other hand, I can tell you that we have very difficult comps, for example, for Mavenclad in Q2 last year, and that's why the current growth of Mavenclad is a little bit muted in this quarter. Overall, I can tell you that we continue to make a lot of good progress with Mavenclad, we have guided you previously to a high single-digit growth for the year. I can at least confirm that, if not better, to a low-teens growth that's also in the possibilities. On Bavencio, we're very happy with the performance. You have seen constant growth in half 1 and we see that continuing moving forward in half 2 with a continued growth ex U.S. and a good defense, I would say, in the U.S. and North America. Fertility is a little bit of a year of gradual normalization of competitor stock out. So that's why we do not expect a mid-single-digit growth for fertility rather low single-digit growth of fertility this year. But then we are absolutely confident that we can go back to that mid-single-digit growth once the, let's say, the dust has settled on the competitor stockouts. Last but not least, you will also see that we are continuously extremely disciplined on costs and that we are very focused on profitable growth, and we will continue to do so, obviously, in the half -- in the second half.
Kai Beckmann: Thibault, on the Electronics question. So the recovery, let me peel that onion a bit outside and we see already as we discussed, the AI growth pretty significantly. Inline with that, we see advanced node recovery in logic, in memory, in line with AI growing as well as well as mature foundry being very strong already throughout the first half of this year. Other technologies such as analog, specifically analog in industrial and in automotive applications. We are just on the bottom of the current cycle. They will only come back in the coming quarters or probably even only in the first half of 2025. And the mature memory technologies here specifically V-NAND, that we see somewhere in between those lines. So we see a set of different time lines of recovery, which is a difference to the past 2 cycles when recovery happened almost in a pretty sharp V shape. Now we see more of a set of stairs rather than a gradual recovery over time. The market is a bit more complex this time however, dominated by the positive signals, very positive signals of AI-related growth, and that will be driven by no transitions of our customers now on into 2025.
Operator: Your next question comes from the line of Falko Friedrichs from Deutsche Bank (ETR:DBKGn).
Falko Friedrichs: My first question is on Process Solutions. And to what extent are you confident that we will leave this destocking behind by the end of this year? Is there still a little bit of a risk that it might last into 2025? My second question is on Science & Lab Solutions. Could you provide a little bit more color on the different trends you're seeing here? You seem to be doing a little bit better than your peers. So I'm curious to hear sort of which parts are doing better than others? And then my third question, can you add a little bit more flavor about Mavenclad and how we should think about growth here over the next few quarters and next year? And when should we start to see this plateau?
Matthias Heinzel: Yes, Falko, let me start off you with your first question on destocking, and I think we touched a bit on it before. Look, as we speak, about 2/3 of our customers, right? The one we track very, very closely kind of have the destocking behind them. So the vast majority, and we expect the rest to follow. Will there be a few rare occasions for which destocking is still a topic beyond end of December, maybe. But I tell you, I hope, maybe with the next call, we have the word destocking behind us for this industry, at least for us. I mean that's my clear expectation. So the point is destocking should be coming to an end, if you will, as a main negative driver headwind for our industry that would be really my -- the expectation. Again, not to say individual customers may still have a topic. On Lab Solution indeed, I'm positive about the trend, right? We have shown now in Q2 a positive growth. I expect also here, if you will, the H2, H1 dynamic, which we have outlined before to really fully unfold. You asked about the subsegments. We are seeing a good performance in our lab water business. We have a leading position there that performs very nicely. Our biomonitoring business performs nicely, which goes into pharma biotech but also into some industrial segments. So these are just two examples. China is obviously the topic. We have a very good presence with our SLS business in China. It's still muted. But also here, we see a gradual improvement, again, on a more muted basis, but gradually also improving. So I think we are on a good trend also in SLS to really see that unfolding, as we said before, with an H2 versus H1 dynamic.
Peter Guenter: Yes, Falko, on Mavenclad. Obviously, we are really gaining market shares. We have now become in the high-efficacy oral dynamic segment, the leading product -- and I think that physicians and patients alike appreciate more and more the benefits and the easiness of use of Mavenclad. So we're confident on the growth rates for this year. It's a little bit early to give you an outlook for next year, obviously. It is definitely a very competitive market, as you know. So more to follow.
Operator: Your next question comes from the line of Oliver Metzger from Oddo BHF.
Oliver Metzger: Do you hear me now.
Operator: Yes, we can hear you.
Oliver Metzger: First question for you, Matthias. Can you comment on the order intake. So it's my understanding, it was said also in the past that order sizes have come down and the frequency of orders has come up. So if you comment that order intake is sequentially up quarter-on-quarter, is it fair that with respect to order size and frequency has started to stabilize from now while on a year-on-year comparison, you still see the difference between the different ordering patterns? That's number one. Number two on semiconductors. Sort of positive development. You mentioned considerable growth in the cutting edge applications, which come obviously at a higher price point. Also, you made some comments about the normal semiconductor market. Can you give us a hint whether you saw already some recovery generally in volume terms? Or are the actual volumes basically purely driven by the better price/mix due to this higher value solutions. And the last one is on Healthcare. So from the outside, we could get the impression that you're very excellent in the commercialization of drugs and also some legacy drugs you squeeze out fantastically. So now we saw the second consecutive failure also was some in-licensing drugs. So you can be active at the different layers for the early drug discovery there's the highest risk, for in-licensing there's still some risk as we saw right now? Or if you acquire already approved drugs for which you can execute your commercial firepower. In the past, you mentioned that you are not a big fan of M&A in health care of already proved drugs and because you mentioned the competition of big pharma. So can you share with us how recent developments might have changed your stance on M&A in health care in general.
Matthias Heinzel: Oliver, it's Matthias. On your first question, indeed, we look at, obviously, the order intake in terms of nominal values and how that trends and the second aspect is then what we call the quality of the order intake and that has many, many facets, including those what you mentioned. And the short answer is yes. We see a trend towards normalization, right, smaller order sizes, small in terms of compared to the big order sizes during COVID with a lot of lead times in advance. We see that also here on a trend towards normalization. That's indeed correct.
Kai Beckmann: Oliver on electronics. So we see both pricing or mix, I would put in one bucket mix driven by higher value products. but we see as well volume growth to bigger effect is on mix and price.
Belen Lopez: And as a final question, it also touches on our capital allocation. I will touch on that at the end. But let me clarify this, you are good at commercialization that you have stated, discovery is risky. Since 2018, when we started to launch new products to market, some of them partners, some of them on our own, the majority of the growth of health care, the very strong growth of health care came from innovation from those three launches that we basically activated in 2017. Since then, Healthcare has been on a growth path that has been highly profitable. And as I mentioned before, continues to contribute quite a lot to the top, the bottom line and the cash generation of the group. In Discovery (NASDAQ:WBD), we have really transformed and revamped the capabilities that we have in order to focus on what we understand and what we know how to do on specific platforms. As I mentioned before, the ideal mix to foster R&D productivity comes from investing in R&D internally but also onboarding external innovation. And you can assume that 50% of the options that you generate in late phase comes from external innovation. From that perspective, we -- our goal is to stay very attractive to biotech and other pharma companies in order to be able to effectively compete for assets. How do we also compete for assets is by focusing on midsized sales assets, which may not be what bigger pharma is looking at. And there, we have been very successful. You have seen that in late 2023, we already licensed three assets and have put options for even more assets. Now just to be very clear on capital allocation, our capital allocation strategy has not changed. We will continue to get the majority of our M&A capital to promote and support the long-term leadership of a life science business. In full complementarity with this, we will invest on in-licensing assets in order to increase the optionality of our pipeline. But our capital allocation strategy, allow me to repeat, stays untouched.
Operator: Your next question comes from the line of Gary Steventon from BNP Paribas (OTC:BNPQY) Exane.
Gary Steventon: One on Life Science and one on Healthcare/capital allocation, please. So firstly, just on life science and on pricing. One of your peers talked to being back in an environment where they can take low- single digit price increases near term but they did mention beginning to see pressure build. So how are you thinking about your ability to take price across Process Solutions, but also the wider Life Science business from here? And are you seeing anything in the market that might indicate that price is becoming a more significant factor for your customers? And then on health care, licensing and the topic of M&A. Perhaps some thoughts just on how you're thinking about your ambitions when it comes to investing in and adding U.S.-based infrastructure and increasing your U.S. presence given that, that would now be an incremental cost to any in-licensing deal following [indiscernible]
Matthias Heinzel: It's Matthias. So thanks for your question. Look, on pricing, we're still doing pretty well on pricing. We see a good positive pricing impact this year. Obviously, it came down from the more inflationary trends we have seen over the last couple of years. And just to recap pre-COVID, we saw usually a net price of 1% to 2% across life science that went up to about 2.5% of that number in the high inflation years. We are a trend down towards a normalization. But I clearly expect for total Life Science, Merck Life Science to show a year-over-year a net positive price impact. Of course, that varies a little bit by segment. But overall, we should be able to see that price impact. Because at the end of the day, if you look at the value we create, right, customers look at the quality of the product, resilience in this day and age, right, where we look at the global landscape having the ability to provide a resilient supply chain plays a key role, innovation, and we feel we are very well positioned. So from that angle, of course, price is always part of the equation, but I don't think that will, if you will, dominate customers' decision-making because all those other factors have a huge impact at the end of the day on the output of their own production and the value we create is very substantial.
Belen Lopez: Gary, I assume you have already heard me answering part of this capital allocation question to previous participants. So I will actually focus on the U.S. because you are spot on. Definitely, our ambition is to increase the exposure to the U.S. market. This is obviously a market that is highly driven by innovation. And as we progress our in-licensing activities, definitely, the U.S. is in focus. I mentioned already that increasing optionality at an accelerated speed is key at this time to recover our momentum as a global specialty innovator and licensing is the preferred way, but if at all, M&A in health care will be limited to clear cut lower risk deals that create value from very early on. And there, the geographical priority is yes.
Operator: Your next question comes from the line of Florent Cespedes from Bernstein.
Florent Cespedes: Two quick ones on Pharma, please. First, on Bavencio in the U.S. How do you see the trend of this product going forward? Is the Q2 performance a good proxy for the rest of the year and next year? That's the first question. Second question on the oncology pipeline, as you have quite attractive assets in early phase on ICs and DNA repair. Would you consider to put more resources behind these products to -- and increase the R&D budget in order to accelerate their development for the xevinapant setback? That's my second question.
Peter Guenter: Yes. Thanks, Florent, for your question. So first on Bavencio, obviously, the slight erosion that we see in North America is really in line with what we expected. We really feel we hold our ground and our team is very much engaged in sharing our strong data with the community. Again, it shows the resilience, it shows the capability of the team in a very competitive situation. And I also want to remind you that the U.S. share is less than 30%, as mentioned, I think, by Helene in her prepared remarks. Now to give you a super reliable forecast for the next quarters and the next years is obviously a little bit more difficult. So I would reserve my answer until we have a little bit more maturity in analyzing the market and to see exactly what happens in academic centers, in nonacademic centers, patient segmentation. So there's a lot at stake and of course, also data generation. Your second question on the pipeline. Of course, we agree with you that we have a very attractive earlier-stage oncology pipeline. I think we showcased this very nicely at ASCO with some very exciting assets. At the same time, as I mentioned already before, we want to also strike the right balance between risk and reward in the pipeline. So I think it's first better to derisk a certain number of assets before going all in, in perhaps several indications in parallel. So that's the way we want to progress here.
Operator: Your final question comes from the line of Simon Baker from Redburn Atlantic.
Simon Baker: Two, if I may, please. Firstly, on costs. You've constantly called out the impact of Xevinapant on other operating expense and R&D. But it also looks aside from that, like marketing and selling expenses were higher. I just wonder if there are any additional factors to call out with respect to that? And then a question on semiconductors. Kai, I wonder if you could give us thoughts on the opportunity for Merck in the hybrid bonding setting. Where it is today, where Merck is positioned and where it could be in the future? And I know when you announced the Unity (NYSE:U) acquisition, hybrid bonding was mentioned. But specific to Unity, could you give us an idea of exactly what Unity's U.S. peers and who its competitors are? Because talking to my semis colleagues, a lot of the equipment manufacturers include metrology solutions. So I just wondered against whom is Unity competing? Is it against other metrology equipment providers or is it against providers of broader semiconductor equipment.
Peter Guenter: The question was around Healthcare. Okay. So if you look at the marketing and sales, actually, it's in line with our sales growth. So the ratio as a percentage of sales remains stable. And of course, you have to take into account that we have increased somewhat our Bavencio efforts since the stopping of the alliance with Pfizer (NYSE:PFE) where, yes, we took a lot of synergies. But of course, we also wanted to maximize the chances of success to drive the top line. So I would even say that without that, your marketing and sales costs would be actually slower than your sales.
Kai Beckmann: Thanks for the question on hybrid integration and the area of metrology. So we announced the intent to acquire Unity-SC because there is a new area building up, which is kind of the 3D metrology field versus the traditional optical inspection happening in 2 dimensions and with the gene integration demanding for more vertical integration structure, 3D metrology becomes very important. And this serves us on the cross section of helping our customers to build these complex systems as well as developing materials in line with those specific needs. And for that, the capabilities of Unity-SC will help us develop additional opportunities on the material side. For Unity the advantage is with our capabilities in Optoelectronics and all the optics space that we have from our display business, they can accelerate development of new technologies on their side. So it has advantages for both sides, and we are pretty excited about the opportunity to help not only in the front-end wafer processing, but as well in the even more developing and faster-growing area of the heterogeneous integration.
Constantin Fest: I think this is all the time we had. Thank you so much for joining this call. With this, we close the Merck Q2 2024 results call, and we look forward to meeting many of you in our upcoming roadshows. Thank you, and goodbye.
Operator: Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.
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