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Merck KGaA
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Dear, ladies and gentlemen, welcome to the Merck Investor and Analyst Conference Call on First Quarter 2020. [Operator Instructions] May I now hand you over to Constantin Fest, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir.
Thank you, Emma. A very warm welcome to this Merck Q1 2020 Results Call. My name is Constantin Fest, Head of Investor Relations here at Merck, and I'm delighted to have today here with me also Stefan Oschmann, our group CEO; as well as Belén Garijo, our CEO of Healthcare; and Marcus Kuhnert, our Group CFO. In the next few minutes, we'd like to walk you through the key slides of the presentation, which will then be followed by a Q&A, where we're happy to take all of your questions. Having said this, I'd like to now directly hand over to Stefan to kick off this presentation. Stefan?
Thank you, Constantin, and also a warm welcome to everyone from my side. I hope that you and your families are all safe and healthy. And before going into the details of the quarter, I would like to remind you of our top priorities during this time of global crisis and what we, at Merck, are doing to overcome it. So I'm now on Slide 5. Our #1 priority is and remains the health and safety of our employees. At the same time, we have a special responsibility to maintain business continuity for the many patients, scientists and customers that rely on us, be it in the context of delivering life-saving medicines, tools for the development of vaccines or materials enabling digitalization.Many of our employees are working under extraordinary circumstances, whether they are on-site, in a lab, a production facility or working from home. Thanks to their outstanding commitment and fantastic work, we are proud to be able to make important contributions to solving the challenges that lie in front of us all. In fact, our activities go far beyond our day-to-day business as summarized for you on this slide. Not only have we put in place dedicated teams in Life Science to leverage our products and know-how in the context of COVID-19 but we have also joined a global consortium of pharma and life science companies. Moreover, we provide research grants in the area of pandemic preparedness, and we take on responsibility for the communities in which we operate. In terms of financial performance, this crisis will not leave us unaffected. However, given our global presence, our diverse setup and the essential character of our businesses, we are poised to fare much better than many others. Above all, crisis not only present challenges but also offer opportunities and by acting wisely, calmly and sensibly, we are confident to emerge stronger at the end as demonstrated time and time again in our 352-year history as a company. With that, let's go to Slide #6 for the highlights of the quarter. Overall, we had a strong start to the year. Organic net sales growth was plus 7.6% in Q1, while EBITDA pre, increased 14.5% organically. Taking into account slight currency tailwinds and significant first time consolidation benefits from Versum, reported sales and EBITDA pre increased by a remarkable 16.7% and 27.2%, respectively. The impact from COVID-19 was relatively limited in Q1, with about minus 2% on sales and minus 3% on EBITDA pre. However, we expect additional drag in the coming quarters primarily in Q2. And yes, you will have noted already this morning, we have reflected this in our full year guidance, which calls for net sales in a range of EUR 16.8 billion to EUR 17.8 billion; EBITDA pre of EUR 4.35 billion to EUR 4.85 billion, and an EPS pre of EUR 5.50 to EUR 6.35. More details on our assumptions will come later. On to Slide 7 with an overview of the contribution to growth in Q1 by business sector. As you can see, Healthcare had an outstanding performance, contributing about 80% to organic sales growth in the quarter, while the moderate organic decline in Performance Materials was more than offset by solid organic growth in Life Science. FX was a slight tailwind overall and reported growth of the group was boosted by major portfolio effects in Performance Materials with Versum delivering over EUR 300 million sales in Q1. The latter is also consistent with strong uptake of our legacy semi business although soft market demand in Display and Surface Solutions resulted in a moderate organic decline for Performance Materials.Further to Healthcare, please note that double-digit organic growth was fueled by a very strong core business as well as sales from launch products, Mavenclad and Bavencio, which together almost tripled compared to Q1 last year. Belén will give you more details in a couple of minutes. In Life Science, we saw continued double-digit growth in Process Solutions overcompensating for COVID-19-related demand slowdown affecting research and applied in Asia.On earnings, the group EBITDA pre margin in Q1 expanded by 220 basis points to 27% due to strong top line growth paired with an ongoing focus on cost.From a business sector perspective, the margin uptake was primarily driven by Healthcare with slight expansion in Life Science and slight erosion in Performance Materials compared to the prior year period. On Slide 8, you will find the regional snapshot for the first quarter. Not surprisingly, we saw a significant slowdown of organic net sales growth in APAC compared to previous quarters. And this is primarily due to lockdown conditions and related effects on franchises such as Fertility or Surface Solutions and the Life Science portfolio. On the other hand, organic growth in Europe and North America picked up meaningfully, mainly driven by Healthcare and, to a lesser extent, Performance Materials. Overall, our regional footprint remains balanced, with APAC contributing 35% to group sales; Europe, 32% (sic) [ 30% ]; and North America, 26%. And with that, let me hand over to Marcus, who will provide you with additional color on the financial performance in Q1.
Thanks, Stefan, and a warm welcome also from my side. I am now on Slide 10 with an overview of our key figures for the first quarter of 2020. As mentioned by Stefan already, a very strong start to the year with a nicely leveraged P&L. Group net sales increased 16.7% to EUR 4.37 billion in the first quarter, translating an EBITDA pre growth of 27% and EPS pre growth of 32.7%. The financial and tax results did not contain any meaningful surprises and operating cash flow was solid.Net debt was slightly reduced compared to year-end 2019, and our net debt-to-EBITDA pre ratio sequentially improved from 2.8x to 2.6x. Onto Slide 11 with a few comments on our reported earnings figures. While EBITDA pre rose by around EUR 250 million, EBIT increased even stronger by close to EUR 340 million. The difference here is about equally driven by lower exceptionals, including a book gain on the disposal of Allergopharma and lower amortization of purchased intangibles with amounts related to Versum more than offset by ceased Rebif amortization.Consequently, reported EPS more than doubled to EUR 1.05 compared to EUR 0.43 in Q1 last year. That said, let's move on to review of our business sectors, starting with Healthcare, for which I'm pleased to hand over to Belén.
Thank you, Marcus. Hello, everyone, and also a very warm welcome from my side. I go to Slide #12 to give you first an overall view of the Healthcare business sector in Q1. And as you heard from Marcus and Stefan before, we were off to a very strong start to the year with a significant organic sales growth of 15.3%, driven by all franchises with the exception of Fertility. We will speak about this later. And further significant uptake of our new launches, in particular, Mavenclad. The N&I franchise grew organically by over 20% in Q1. Now while I will comment on the individual franchises in more detail in a minute, let me state that the overall net impact from COVID-19 has been relatively limited in Q1 in the low double-digit million euros. With significant drags downsides in Fertility as we anticipated already when the crisis started in China, partially compensated by some pull in effects in General Medicine. However, we expect more pronounced drags from COVID-19 in the coming quarters and in particular, in Q2 and you will see this when Stefan shares our guidance and our assumptions later on in the presentation.The Healthcare EBITDA pre surged by almost 41% organically in Q1 and achieved EUR 472 million, including a marginal FX benefit.Next to the very strong top line development, this was also driven by our very significant cost discipline that is very visible in the P&L as well as about EUR 30 million deferred upfront recognition from GSK. On this point, I want to confirm our EUR 120 million to EUR 130 million guidance for the year, while we expect another EUR 30 million round about in Q2. Please note that the income from GSK, as you already may know, can vary depending on the cost evolution in the alliance and eventually the achievement of development milestones.As we are on the topic of nonrecurring income, other than the GSK contribution, we have no additional nonrecurring income in Q1, speaking of the strength of our underlying business and the huge impact of the top line development. However, we confirm our full year guidance for up to a mid-double-digit million amount from active portfolio management. And you know that we have been regularly doing that every year. And in Q2, we expect up to a low double-digit million contribution from these nonrecurrent income.Let me now move to Slide #13 to offer an update on Mavenclad. First of all, Mavenclad is now approved in 78 countries and continues to demonstrate its potential to be a very strong growth driver for Healthcare. We have already celebrated the 1 year into the U.S. launch and can look back at a very strong acceleration of the brand. Let me also highlight that the main launch fundamentals are progressing really well across all major markets, and this includes, as you know, both growth in breadth of the prescriber base, which is our foundation as well as an increasing willingness of these prescribers to use Mavenclad. In other words, also very good progress on depth.Despite this momentum, please keep in mind that the COVID-19 crisis caught Mavenclad in the middle of the launch phase and newly launched therapies require patients visit their clinician for either diagnosis and treatment initiation or for the treatment strategy to be sweet. Therefore, it's not surprising at all that the momentum has been disrupted by the COVID-19 pandemic. More specifically, not only the pandemic, but the lockdowns, the lockdowns in major markets, such as Spain, the U.K., Italy and the U.S.Let me offer a little bit more color on the quarter-on-quarter view. And I would like you to note that there is a small mid-single-digit provision that was reversed in Q4. And that, coupled with the COVID-19 impact as of March, gives you further context to be able to rightly read the Q1 versus Q4 sequential evolution. Let me stress that we see this COVID-19 effect on the Mavenclad launch as a temporary effect. It will -- according to all our assumptions and market insights that we have, it will closely correlate with the lockdowns and thus, it will extend into Q2, after which we anticipate a recovery. In this context, we have also adapted our plans to ensure that we can best serve the emerging needs of the community, of the MS community in this unprecedented context and also and most importantly, to deliver on an accelerated recovery of Mavenclad. This is bringing me to my next slide, Slide #14.And I just wanted to spend a few minutes taking you through what we have seen in the market. When you look at the market -- at the MS market in the context of COVID-19, this is clearly unprecedented. There have been guidelines and top leader opinions are published from the very beginning. And by the way, these guidelines and opinion have also been modified and tended to be revised based on emerging evidence as the pandemic has progressed.In the COVID-19 context, infection risk has become the #1 choice driver for treatment decisions. And this is why we believe Mavenclad is very well positioned as a high efficacy agent. As we look at the high efficacy dynamic market, with a focus on the U.S., as you see on the slide, what we see is that the total dynamic volume has decreased and that this has been primarily because of a lower number of high efficacy agent starts.75% of this missed high efficacy starts seem to have been delayed while some of those have been either breached or initiated on the platform agents. And this, we see as an opportunity for recovery. There are patients waiting to be treated with modifications agents and as you see, once again, on the slide, not everything that has been lost from high efficacy has been compensated by platform therapies, which brings us back to Mavenclad's profile and its potential to be a solution in the context of COVID. Given that it does not need patients to come into the hospital or clinic for half a day of infusions, thus avoiding the risk of exposing patients to potential centers of increased risk, that the efficacy is sustained beyond the recovery of the lymphocyte counts, that its preferential and transitory targeting of the T&B lymphocyte, it relatively spares the innate basic immune compartments, leading to an overall risk of infection that is similar to placebo, with the exception of herpes zoster as shown in the 10-year PREMIERE registry that was published last year in a very prestigious journal.In this context, we have actually seen, as I mentioned before, evolution of the guidance, evolution of the debate. And most recently, Dr. Giovannoni posted guidance for potential exit strategies for MS patients with high disease activity.Moving now into Bavencio, Slide #15. And as you very well know, we expect approval in first-line UC in the coming months, and we are studying Bavencio in first-line NSCLC in a Phase III trial, which has the potential to provide some differentiated data in certain patient subgroups of these very large indications. Please note that the Lung trial is now reading out in early 2020, and this is not because of a COVID effect, but it's rather reflecting an event-driven shift in time lines of about, did I say 2020 -- 2021 -- sorry, 2021. I meant 2021, reflecting an event-driven shift in time lines of about half a year compared to our previous expectations. We can discuss that during the question and answer. However, let me come back to the first-line bladder opportunity, which is extremely exciting as an opportunity for Bavencio's growth. As you know, following the planned interim analysis in January, Bavencio is the first immunotherapy that have demonstrated overall survival benefit in first-line locally advanced or metastatic UC. Therefore, based on the data that we have, we believe that it has the potential to be changing the practice of the current therapy in this very unmet -- high unmet medical need. This is underpinned by the fact that upon completion of the filing with the FDA about a month ago, we were granted BTD, breakthrough designation, as well as the review under the real-time oncology review pilot program.Also note that this data will be the first presentation at ASCO's high-profile plenary session on May 31, which actually speaks volumes. So everything is in place for a potential approval in first-line bladder in the coming weeks or months, which would likely also have a very positive spillover effect for our existing RCC renal cancer franchise through an enhanced brand value and most importantly, through a significant overlap of prescribers. On the Slide 16, I will provide some additional color on the strong performance of our core business in Q1 and the expectations for the remaining of the year in the context of COVID-19. I am now in Slide #16. And as I said before, the sales in our core business, that is everything with the exception of Mavenclad and Bavencio increased by almost 10% organically in Q1, including a small negative net impact from COVID-19. Fertility was down 3.5% organically as anticipated, mainly due to the lockdowns and the closure of the clinics in the regions that have been affected by the crisis. This is primarily Asia in the early time of the quarter and later in the quarter has been Europe. However, this downside has been partially compensated by positive development elsewhere within Fertility, in particular the U.S. Following the pattern of the lockdowns, we expect additional impact in Q2, but we assume the business will come back at a later point. And given our strong leadership in this field, we are expecting a progressive recovery towards Q3 and Q4. General Medicine & Endocrinology, on the other hand, posted very strong organic growth in excess of 20%, which was driven by a net positive effect from COVID-19 with some stocking in Europe and Lat Am, compensating the downside in China as well as good underlying performance and some minor phasing issues.The decline of Rebif has been rather modest. And this is for 2 reasons. One, there is a positive impact of COVID-19 as you have seen in my previous Mavenclad slides because patient initiations, some patient initiations have been moved to platform therapies. And we also have seen an impact of the tender phasing in Russia positively influencing our Q1 performance of Rebif as well, we have seen fewer discontinuations. And as I mentioned before, increased physician preference for these kind of therapies. Finally, Erbitux slowed a bit in comparison to the second half of last year in light of the situation in China, in particular. However, at 7% organic, underlying performance was actually very strong in Q1 while the COVID-related effects were basically worse. Fewer patients in Asia, offset by stocking and tendering in Europe. Looking ahead, we expect additional impacts from COVID-19 in the coming quarters, most importantly, in Q2 and the core business overall to decline moderately in 2020 as a whole versus our previous assumption of about stable performance this year.To finish on a more positive note, we clearly see signs of normalization in countries where economies are opening up. China is 1 of them. And in the absence of new waves of infection, we remain confident that we will deliver on our midterm ambition of keeping our core business stable, at least stable throughout 2022 compared with 2017 when we first issued the guidance.Let me complete Healthcare deep dive with the pipeline view. A clear highlight, as I mentioned before, will be the upcoming presentation of the full results for the Phase III bladder cancer study, which is going to be featured at ASCO, at virtual ASCO, in about 2 weeks from now. In this context, I would also like to highlight we have a significant presence at the congress this year. Next to the Bavencio UC data, we are going to give an update, more mature data from the VISION trial of Tepo and we will also present the 2 years plus follow-up on the bintrafusp non-small -- second line non-small cell lung cancer patients coming from previous studies. On the registrational front, as I mentioned before, we expect an FDA decision on first-line bladder for Bavencio and the subsequent launch in the coming months. As far as tepotinib is concerned, you know that we have received approval in Japan in advanced non-small cell lung cancer, especially MET exon 14 skipping alteration in March. And I am also very pleased to highlight that we just received reimbursement in Japan last night, which is going to allow us to move on with the launch.We also confirm our plans to file tepotinib in the U.S. in the first semester of this year. And as always, we will only communicate on this once the FDA accepts our filing.On the development front, we can further discuss this during the Q&A. I am happy to confirm that the recruitment for the major trials is on track. I want to make a special mention to the modified Phase III trial for evobrutinib in MS, which is going extremely well, and in which the first patient is to be dosed very soon. Finally, for Bintrafusp alfa, we plan to initiate additional studies beyond the recently posted studies in cervical and bladder and the plan is on track. With this, I would like to hand it back to Marcus.
Thanks, Belén. I'm now on Slide 18 with the value of Life Science. Overall, Life Science had a solid quarter, showing resilience in a challenging environment, thanks to its diversified portfolio of products. Q1 sales increased 5.6% organically driven by double-digit growth in process solutions and a flat development, both research and applied, in turn, mainly due to COVID-19 related effects on demand which were in the low to mid double-digit million euros. From a regional perspective, in line with the phasing of lockdowns around the globe, the growth in Asia has slowed down significantly to flat versus low- to mid-teens growth in the previous quarters, while Europe saw an initial impact with growth in the mid-single digits compared to mid to high single digits before. North America still remains on its high single-digit growth trajectory in Q1, and other regions were also largely unaffected. Not a big surprise, in terms of customer segments, we saw a shift away from academia towards pharma and biotech as well as diagnostics and testing. In fact, demand from companies involved in COVID testing vaccines and therapies surged meaningfully, and we are currently in the process of assessing how we can best meet this surging demand, especially in areas where capacity is unlimited. Further to the business units, sales in Process Solutions were up 13.2% organically, mainly driven by downstream and single-use with growth across all regions and basically no visible effects from COVID-19. Sales in Research Solutions were organically flat as growth in lab and specialty chemicals was just offset by declines in other areas.Applied Solutions also showed flat organic growth on a combination of tough comps as well as COVID-19-related declines in lab water with basically very reduced accessibility to lab, which were compensated by growth in the rest of the portfolio. What is reassuring is that following a substantial slowdown of the business in China in the first half of the first quarter, we saw a meaningful recovery in the second half.Finally, on earnings, EBITDA pre came in at a pleasing EUR 553 million, reflecting organic growth of 8.2% and thus, a leveraged P&L and an increase in margin to 31.2%. Moving on to a review of Performance Materials on Slide #19. PM took a strong leap forward with sales up 49% on a reported basis to EUR 900 million. Organically, however, sales declined by 5.4%, but this was more than offset by a small positive currency effect and a major boost from portfolio effects primarily reflecting the acquisition of Versum. In terms of business units, we are very pleased with the sound performance in Semiconductor Solutions which posted strong organic sales growth of 8.7% amid clear signs of underlying market recovery as anticipated and a slight pull in effect from COVID-19. Underlying performance of the legacy Versum business was even better. And I'm also delighted to report to you that the integration is well on track with initial synergies materializing as planned and the combined organization fully established slightly ahead of plan.Let me just also remind you briefly that the entire effect of Versum also the inherent growth of that business is for the first 9 months reported in the portfolio effect, and it is not contributing to the group organic or the PM organic growth rate as it is an M&A-related effect.Moving over to Display Solutions. Here, sales were down 10.5% organically against still tough comps. While the decline was less pronounced compared to the second half of last year, COVID-19 marginally accelerated the underlying negative trajectory in liquid crystals and also had a negative impact on OLED.Similarly, the 9.1% organic sales decline in Surface Solutions is mainly attributable to COVID-19-related effects on the automotive and cosmetics industries as expected.So overall, the strong performance of semis couldn't fully make up for the declines in display and surface on an organic basis, while portfolio effects boosted reported sales, as explained before.On earnings, EBITDA pre came in at EUR 286 million, up 48.3% on a reported basis mainly due to first-time consolidation benefits from Versum, while the organic decline could be limited to minus 9% on diligent underlying cost management in the context of our bright future program.Further to the portfolio effect of round about EUR 100 million on EBITDA pre and a corresponding margin of 32% on acquired sales. Please note that this comes in spite of modest dilution from intermolecular and confirms our comments about robust underlying performance of Versum expected for 2020 on our last earnings call.On to Slide #20 with some short remarks on our balance sheet. As you can see, only little change compared to year-end 2019. One thing of note is that cash and cash equivalents are up EUR 750 million, reflecting a conscious decision to secure liquidity in light of the current crisis. In fact, taking into account the EUR 2 billion syndicated bank loan, we currently have a comfortable liquidity buffer in excess of EUR 3 billion.Earlier, you heard me saying earlier that our net financial debt was slightly reduced implying a net debt-to-EBITDA pre ratio of 2.6x for end of the first quarter.Let's now take a closer look at the cash flow statement in the first quarter. As you can see on Slide #21, operating cash flow slightly improved year-over-year to EUR 516 million, as higher earnings were largely eaten up by working capital outflows. The main driver behind this is a relatively higher buildup of receivables, mainly driven by Life Science and higher inventory levels partially impacted by COVID-19.Still, when looking at the balance sheet, the overall net working capital increase is still significantly below the increase of net sales.CapEx was up as planned, and the higher financing cash flow reflects the measures to secure liquidity, as mentioned before.And with that, let me hand back to Stefan for the outlook.
Thanks, Marcus. And I'm now on Slide 23. So in summary, we had a strong start to the year. The net impacts from COVID-19 in Q1 were limited and largely consistent with the assumptions laid out to you in March. However, the world has changed a lot since then. In fact, the outbreak of COVID-19 has developed into a global pandemic with unprecedented consequences for the global economy amid enforced lockdowns.Accordingly, we have updated our assumptions regarding the development of COVID-19 and are sharing them with you today. In particular, we now assume an impact across all regions, cases to peak in Q2 and the situation to ease only in the second half.Furthermore, we assume the pandemic crisis will last for the rest of the year and possibly beyond, suggesting health care systems will remain under stress.We also assume that some countries will have a less effective response than others, but -- and this is important, we do not assume a resurgence of a global outbreak. This is a scenario -- we have to select some scenario to base our planning on. We are not claiming that we have ultimate wisdom in this context, but we wanted to make transparent that this is our planning base. Reality could be better, reality could be worse. The improved scenario would depend largely on the efforts of our industry or industries in accelerating the development of treatment. It could -- if there's a scenario in which antivirals and other compounds would provide significant progress and lower disease burden down to a level maybe that influenza would normally have, that would clearly be an upside. We believe that the vaccine work is super important, and our company is participating through life science in quite a few projects, but we do not assume that there will be availability of a vaccine for mass application in the near term. I'm going to Slide 24. And in terms of the financial impact on our business, you will find the corresponding overview here. At group level, we now anticipate COVID-19 to have a mid-single-digit effect on full year sales with a drop-through of about 50% to 60% on EBITDA pre.In terms of quarterly phasing, we expect a material impact in Q2 and visible drags at least until Q3.Regarding our 3 business sectors, we believe Healthcare will see the highest absolute impact and Life Science the lowest, while Performance Materials will likely sit in between.Further to Healthcare, we expect our Fertility franchise to be impacted considerably and pull in effect seen in Q1, for example, in GM&E to weigh on our Q2 performance.Similarly impacts on the U.S. launch of Mavenclad will be mainly felt in Q2, but we assume further significant uptake beyond.In Life Science, process solutions should remain largely unaffected, whereas research and applied are set to get a bit worse before getting better, i.e. we assume at least a partial recovery in the second half.Last but not least, in Performance Materials, our current expectations is that semiconductor solutions will see strong growth despite certain drags from COVID-19 in the coming quarters, while the anticipated decline in display will probably be somewhat accelerated, and the impact on surface will be significant.That said, on to a brief reminder of the key earnings drivers for 2020 on Slide 25. You're familiar with this from our March call, so I will limit my comments to important changes.On the EBITDA reducing factors, nothing new except for the updated effects from COVID-19 as outlined before. On the EBITDA supporting factors, we are implementing countermeasures across the board and have tightened up our cost management efforts, especially in Healthcare, now pointing to not only a relative, but also an absolute year-over-year decrease in marketing and selling as well as R&D cost.With that, let's move on to Slide 26 for the group guidance. We expect group net sales in 2020 in a range of EUR 16.8 billion to EUR 17.8 billion, EBITDA pre in a range of EUR 4.35 billion to EUR 4.85 billion and EPS pre in a range of EUR 5.50 to EUR 6.35.Compared to the outlook provided in March, we have reduced our organic growth assumptions for net sales and EBITDA pre in line with the greater impact from COVID-19 as detailed earlier i.e. we now expect slight to moderate organic net sales growth and EBITDA pre to remain organically about stable.The anticipated portfolio effects from Versum are confirmed at a mid- single-digit percentage tailwind for both net sales and EBITDA pre.The anticipated FX effects on EBITDA pre are unchanged at 0% to minus 3%, while the range for net sales has moved into our favor by 1 percentage point and now calls for plus 1% to minus 2%.Finally, a brief comment on our business sector guidance on Slide 27, you have noted that we are not providing specific ranges in terms of net sales and EBITDA pre as you used to from us at this point of the year. However, this has to be seen in the context of the special situation we're in.With that, now on to your questions.
Emma, first question, please?
[Operator Instructions] We'll now take our first question from Matt Weston of Credit Suisse.
If I could ask 1 clarification and then 2 questions, please. Marcus, just to put it all in 1 place. Can you just give us the divisional impact of COVID at the sales and the EBITDA level for Q1? I know you've given us a number of clues throughout the text, but just putting it all in 1 place would be extremely helpful.And then 2 questions. Belén, thank you for all the information on MS market dynamics. The one thing that I'm just mindful of is that for cladribine, every patient is new-to-brand because it's such a short course with no repeat prescriptions. So does that mean that we would expect you to see a full impact of that high efficacy slowdown impacting the total franchise? Or you think that, that more modest slowdown you set out for the market in general is more reasonable for clad and what have you seen in April?And then the second question, you mentioned all the activity in the Life Science industry around COVID vaccines and therapeutics. Can you just help us understand how much spare capacity you have in different areas of Process Solutions? It sounds like it's something that you may struggle to capitalize on, but maybe I'm over-interpreting your comments.
Okay. Thank you for your questions, Matthew. I'll start with the first one. Divisional impact on COVID-19 -- from COVID-19 on Q1. As we have said earlier in the presentation, the impact was very moderate in the first quarter. To be a little bit more precise on this, so you can think about the overall impact in the mid, let's say, upper mid double-digit million euro amount on sales. The biggest absolute amount actually was in Life Science. And here, predominantly Asia Pacific and SBU-wise, Applied solutions and Research Solutions affected. That is the reason why both of these SBUs have been only flat in the quarterly comparison versus prior year. The effects on Healthcare and on Performance Materials consequently have been very small. So both in the sales-wise in the low double-digit million euro and very low double-digit million euro amount. In Performance Materials, we had a slight positive, as we already mentioned, in semiconductor solutions, which was then overall compensated by a slight negative in display, predominantly OLED and a more -- a little bit more pronounced negative in Surface Solutions. On Healthcare, we also had overall net-net, a slight negative effect in the low double-digit million euros. And that was overlaid or that was actually composed of 2 bigger single effects, but with different signs, so to say.So we have another, let's say, low double-digit million plus from the mentioned inventory stocking or pull in effect that we have seen. And that was compensated by a low to mid double digit -- negative low to mid double-digit million euro amount negative on Fertility what we have also mentioned already during the presentation. So this is, by and large, the overview on the COVID-19 effects in Q1 on net sales.
So Matthew, let me give you a bit more context on Mavenclad because the U.S. situation and the ex-U.S. situation is slightly different. So first of all, in Europe, we are well advanced and only a percentage, a smaller percentage of the business is coming from new patients and the majority of the business, of the source of business is coming from switches. When we look at the U.S., actually, the high efficacy switch share of Mavenclad is growing at a faster rate than the 1 of S1P. When you look at the IMS' projected national claims weekly data up to almost early April, you see that we have achieved already a high efficacy switch share of 10% and an oral sweet share of 18%. This is -- this together with the evolution of the SRF, which is a leading indicator that we measure internally. So it's basically the number of weekly prescriptions that we get the view that we have on SRF is actually very, very positive before the COVID-19 crisis hit in the U.S. So those 2 views are actually indicating in our view that while we will be hit because of the lockdowns in many markets, and we already saw that started in March in Germany and in the U.S. and actually later on in the U.K., we see our main impact restricted to Q2. And as I mentioned, we see this as a temporary effect.
Matthew, on to your Life Science related question. Yes, Merck Life Science is a key player in this. We support the diagnostics industry, both for PCR and serological diagnostics. Again, we cannot name specific customers, but our customers include 8 of the top 10 IVD market leaders. Merck Life Science is also supplying reagents and other essential raw products for vaccine development. You've read about our collaboration with The Jenner Institute, and that has laid the foundation for large-scale production of its COVID-19 vaccine candidate and has reduced process development to 2 months from a previous span of 6 months to a year. So we made a lot of progress on this and beyond our partnership with The Jenner Institute, again, we cannot name specifics, but we are supporting customers on more than 45 different vaccine programs across all vaccine platforms. And yes, we are experts in monoclonal antibody manufacturing with mature templates and the most comprehensive portfolio of high-quality products, services and testing for the biopharmaceutical manufacturing. Again, I cannot name specifics, but we are supporting more than 20 COVID-related therapeutics using monoclonal antibody plasma products and antivirals.It is very difficult to make any precise forecast when it comes to capacity. And I guess you've read Udit's interview, yes, it requires a heroic effort on the part of our people. And just like anybody -- any other company that is -- that keeps on manufacturing, we see at times some sort of disruptions if cases emerge. We've acted very, very swiftly to this. It does require a very strict reprioritization. We're reprioritizing to support COVID-19, specifically. It is difficult to give any forecast or any guarantees, but everybody can be sure that we do everything that is humanly possible in this context.
Maybe 1 short additional note from my side. So having given you the sales impact, I think it is a reasonable assumption to take the 50% to 60% flow through that we have given for the full year guidance also as an indication on the EBITDA, the respective EBITDA effect in Q1.
We will now take our next question from Simon Baker from Redburn.
2 questions. Firstly, on Healthcare for Belén. I wonder if you could just give us an update on any changed time lines start times for any key clinical trials as a result of COVID-19. Is this expected to have any meaningful delay on your previously stated plans? And then secondly, moving over to Performance Materials. You did talk about some positive benefits there. One of the things we've been hearing is there's unsurprisingly been a significant uptick in demand for storage and particularly cloud storage. I was wondering if you could give us any flavor of how much that's been impacting you so far and the expectations you have for the coming quarters?
Thank you, Simon. So first of all, I mentioned this during the presentation, we have not seen any impact on any of our critical programs. Of course, we have seen some site activation delays in some of the smaller trials or we have decided because of the situation of a particular country to slow down trials with lower strategic importance. So the answer to your question is we don't have, at this time, major concerns with any of the critical programs, be evobrutinib, as I mentioned, bintrafusp, any of the bintrafusp. And even the 1 that I mentioned for Bavencio, the non-small cell lung cancer first-line trial, which is going to be reading a little bit later than expected is not COVID-related, but it's actually event-driven. So no major delays.
Simon, on to your semicon-related questions. Semicon business. Let me start with maybe a couple of negatives. Also semicon business is affected by the crisis. And we've seen that many of our customers were affected by lockdowns, supply chain issues like, also logistics issues like so many other industries. But we have observed that the materials demand was very healthy in Q1, and we expect it to be very solid going into Q2 and furthermore. And longer term, we believe that we kind of see a global experiment in working from home right now, and that has pushed the world's level of digitalization to a completely unprecedented degree. And it changes people's ways to work and consume, and we think this is not just a temporary effect. These containment measures have led to a significant increase of working from home, online shopping, online gaming, streaming, data traffic all with the corresponding need for more faster and more reliable data processing, storage and bandwidth.We have seen also in Q1, a strong demand for PCs, tablets, et cetera, as well as a rising investment in service and data centers, and we believe this will have a long-lasting effect on consumers and enterprises. And we think that this will benefit the demand for semiconductor products and hence, our wafer processing materials. We don't see such positive effects in the other business units in PM.
We will now take our next question from Richard Vosser from JPMorgan.
Could we go back to Mavenclad and just -- I wondered if you could give us the split of the sales between North America and ex-North America. And just if you could think about the net price development in North America, just how that has developed? Thanks for telling us about the small rebate reversal or whatever. But if you could give us some color there, that would be great. And second question, just on the Chinese implementation of 4+7 that I believe has been pushed back. How should we think about that coming through now for Concor and whether you're aware of any other new waves from the Chinese being implemented maybe earlier than expected?And then final question, just on Rebif, if you could just give us -- you gave us some ideas about how that's benefiting. But do you continue to see that being more robust? And how should we think about Rebif in the context of COVID-19?
Yes. So hello, Richard. Let me start with Mavenclad. On -- if your question on price relates to Q1, we have no price impact. It's -- all the business that you have seen is actually volume-driven, and there is no price effect. You know that we don't disclose sales by country. So I believe, in previous conversations, Marcus indicated that the U.S. became around 35-more-or-less percent of our global sales. This has continued to develop and the U.S. became our single biggest contributor to the global Mavenclad sales at this time. So that's for Mavenclad.Then on VBP, look, we have limited visibility on the way this is going to unfold given the situation in China. So we are expecting no changes versus our initial assumptions. As you know, Concor was in round 2. Now we have a price agreed and implementation is on track.On Rebif, you have already seen that in Q1, I explained the drivers of the Rebif in Q1. So there is a slight preference by the physicians to -- whenever the patient needs therapy, to start with a platform therapy, but we are expecting this also to be a temporary effect. And we are expecting, as I mentioned before, that the high efficacy market will recover both on those patients who will require more effective therapies. And our guidance on Rebif for the year is not changing at all.
Maybe 1 short comment from my side to add to what Belén said. We do not -- we have not factored into our guidance any VBP effects beyond the currently Concor included in wave 2. So nothing on top of that is included in the current guidance.
Maybe I can add a couple of words as we have -- as we keep receiving media inquiries about the role of interferon beta in some of the global trials that are ongoing to test products like Rebif for antiviral activity or in addition to maybe the enhancement of the activity of other antivirals that you have -- you may have seen the so-called Hong Kong trial lately that was conducted with interferon beta-1b. Experts assume that interferon beta-1a might have, if it exists, a higher antiviral activity. Some of you that have been around as long as I have, may remember that Rebif was initially -- or interferon beta was initially developed as an antiviral agent. There are 2 major trials ongoing. There might be more. There's the French INSERM trial. We've heard some sort of anecdotal rumors about issues in recruitment but we can't be sure about that. And there's the big multi-center WHO SOLIDARITY trial. We have not put in any sort of upside for this into our numbers. That would be absolutely premature, but Belén's organization is working very hard that, if needed, that we have sufficient capacity.
We will now take our next question from K.C. Arikatla from Goldman Sachs.
This is K.C. Arikatla from Goldman Sachs. I had 2 questions, both on Mavenclad, please. One, given that vaccinations are usually not recommended during treatment with immunosuppression agents, how are doctors thinking about prescribing Mavenclad given its implications for the adaptive immune system? And isn't a pickup in demand for Mavenclad more a function of finding a vaccine for COVID rather than lockdown measures easing?And the second one, if I just do a rough math on U.S. and ex-U.S. split, it looks like ex-U.S. has declined dramatically. Is that because you're now entering more than 2 years since launch in countries like Germany, and you're finding it difficult to get new launches?
Thank you for your question. On your first question related to Bavencio for vaccines, we believe Mavenclad is optimally positioned because of the selective immune reconstitution associated to Mavenclad. Because, as I mentioned before, there is a lack of continuous immunosuppression, transient preferential targeting of B&T lymphocyte and specifically, moderate T-cell reduction and minimal impact on the innate immunity, which are 2 factors specifically very important for viral defense. So we are very positive in this respect. And I invite you to see some of the guidance that has been published most recently by some experts in MS including preparation for vaccination. Then on the ex-U.S. market, yes, we have seen some impact related to the lockdowns, right? So we see positive development of Mavenclad. We have seen positive development of Mavenclad, high efficacy market share in the EU4, in Canada. Also in the U.S., despite the hit that the whole market has taken, we have been able to keep our market share in the U.S. in the -- both in the oral and in the high efficacy dynamic segment stable. So we haven't lost market share at all. And this is very encouraging. The drop-offs that we have seen in Germany are very, very, very low. Germany and the U.K., we are in the range of 5% drop off [ spend ]. And even when we are developing additional data from the U.S., we are now estimating that the drop offs from Mavenclad will not rise from that level. Is that answering your question? And was there any other element there?
That answers. Thank you. All good.
We will now take our next question from Luisa Hector from Berenberg.
It's Luisa Hector at Berenberg. I wondered, Belén, whether you could comment using evobrutinib as an example, and Phase III, you said you're starting to move forward as planned. Clearly, oral is helpful here in the current environment. But have you had to adapt the trial design for the ongoing social distancing measures in terms of patient recruitment, baseline scans, et cetera?And on Versum, you seem confident you can integrate as planned. Can you confirm that there have been no delays through the social distancing and that you're on track for your synergy targets? And perhaps this situation allows you to identify some new savings. Just wondered about that.And a final quick one. Just on the receivables, you flagged the increase in working capital, particularly in Life Science. Just wanted to check that you are confident in payments.
So Luisa, thank you for your questions. I'll start with the Versum question. So actually, the closing was, as you will remember, in October 2019. And similar to what we have done with Sigma-Aldrich a couple of years ago, we started relatively early even before closing with significant pace with the integration planning. The tangible consequence out of that was that immediately after closing, we were already able to start with full steam going into the integration. What does it mean? That means that we were able to have very, very important integration meeting scheduled with the entire team of Versum and legacy Merck semiconductors. Several of these important team meetings late 2019 and early 2020, so that a very important foundation relevant for the ongoing integration now was laid at a point in time before the corona crisis hit us and before all the strict lockdown measures came into place.So that means, actually, that we are fully on track regarding the realization of synergies, on the 1 hand, and also regarding the integration of Versum. The next important milestone, for example, will be by the end of this month. That we are communicating now the entire new organization, so down to the very granular levels of our organization. We have further detailed and outlined synergy plans, and we are fully on track. I think Stefan wants to take the...
Maybe into the cash collection.
Yes, okay. Cash collection. Yes. So this is actually, Luisa, nothing which keeps us up at night at the moment. As you know that Stefan and myself that we have a very close eye on working capital development overall. However, I must say, in the current crisis, it turns also out to be beneficial every 1 or other time or area when we have a little bit higher inventories in order to continue to be able to deliver to our customers and also to keep service levels on a high level. A slight increase in accounts receivable, I think, is also quite normal in those critical times, especially with smaller customers and especially in regions and countries which are facing relatively strict lockdown measures. I can tell you, on the other hand, that this is very, very roughly and diligently monitored. And there's currently nothing what we would see that goes completely in the wrong direction. With that, over to Stefan.
Yes, Luisa, you asked a question about new savings, if I understood that correctly. We have in our current forecast, we have built in savings that we have modeled based on the lock down scenarios, based on the fact that currently, there is -- very simple, there is no travel, there are no events and many other things. And our sales force in all of the businesses are mostly reaching out to their customers through digital means. We have modeled that. We will be watching the months as they come in. If we see further savings potential, we would obviously use that to protect the bottom line.
So Luisa, on your evobrutinib trial, first of all, remember that evobrutinib is not an immunosuppressant, it's considered an immunomodulator based on its putative mechanism of action. Based on the safety data that we have today with RMS patients exposed for over 2 years and more than 1,200 patients overall, evo has not been associated with lymphopenia or T-cell depletion or an increase of either bacterial or viral infection. Obviously, in the current context of the pandemic, we are developing guidance to decide regarding surveillance for COVID-specific sign and symptoms, but the trial is actually performing to expectations. And I would say, in this context, meet your expectations. First of all, because a significant number of sites in terms of site activation were moved from the previous design directly to the new study with a very fast track ethical committee approval. So the site activation has been very, very good. We haven't faced any delays, and we will continue to work very closely with the sites to ensure the safety of the patients, and we will, of course, be vigilant on any potential guidelines that may be released by the regulatory agencies regarding the conduct of clinical trials in the context of this pandemic. But so far, so good.
We will now take our next question from Michael Leuchten from UBS.
Two questions, please. One about your guidance at the upper end of the range there, there is a margin increase implied in that guidance, if I do my numbers right. So I was wondering if you could talk about that. Is that cost efficiencies that despite the disruption this year allows you to you include that in your range of outcomes? Or is it mix effect? Your thoughts would be appreciated. And I'm sorry, going back to Mavenclad, if I think about the timing of the lockdowns in Europe in the quarter, the impact of Mavenclad seems to have happened quite briskly, quite quickly, certainly compared to other high efficacy agents out there. So just interested in your thoughts, why it hit that quickly. And then I guess on the other side, do you also expect it to reverse quicker than the impact might have been on competitive products as we come out the other side?
So let me start by Mavenclad. Yes. I mean, we -- I have shown you the way the market in the U.S. has evolved. And I can tell you the U.S. really -- has been really impacted since very early on the pandemia. I think the majority, the biggest impact we have seen in the U.K. where we have a very strong position and a very high market share in the high efficacy dynamics and followed by some impact in Germany but contrary to the U.S., in which telemedicine from neurologists has not been so widely accepted, the teams in Europe have been permanently in contact through digital means with the customers, and we are confident on a firm recovery of the brand.
Can I say 1 word about the lockdown impact, and that is something that is also being discussed in the overall context of managing the pandemic and quite a few conspiracy theorists have reported that, actually, the lockdown had no effect because infections went down already prior to the lockdown. Quite a few companies, including ours and many other institutions went into a home office situation significantly before lockdowns were declared. The same happened on the side of clinics and of physician practices and many people stayed at home. So if you model the impact of that, you should take into account that there was a high degree effectively of a lockdown before lockdown was declared in many countries.
Yes. And to your question, Michael. So let's say, if -- and I understand you have taken the very other points of our guidance. I mean if this very much best, best, best case scenario would occur, we are almost, I would say, almost in a pre-COVID crisis scenario. And then I've just made the math quickly, 27.2% EBITDA margin is indeed something which we would expect to achieve in such kind of a scenario. Yes. This is basically on the level of the first quarter and also on the level of year-end 2019, and that is definitely then if we would be able to reach EUR 17.8 billion in sales, we should cross the 27% EBITDA margin. That's for sure.
We will now take our next question from Florent Cespedes from Societe Generale.
Two quick ones for Belén. First, on Fertility, how do you see the magnitude of the decline in Q2 for this business? And how do you see the, let's say, the shape of the recovery? Or in other words, do you believe that you should be back to the pre-COVID-19 crisis towards the end of the year or maybe more in 2021? And my second question is on avelumab, the trial which is delayed to 2021. You said during your presentation that you would give us a little bit more color on that during Q&A. So I'm asking the question. Could you give us please a little bit more color on that?
Thank you, Florent. So we -- I mean, the Fertility franchise is starting to see a nice recovery in China. We need not to forget that China is the major driver, but Fertility is also solid in Europe and in the U.S. So as we see recovery in China, we are also expecting an accelerated recovery in Europe, mainly in the private segment. Remember, the patients are waiting and the private clinics are, of course, eager to resume the business. So we are expecting to see an impact in Q2. We have a great position versus the competition and the phasing of the business is going to be, China will help Q2, Europe and the U.S. will help Q3 and Q4, together with a stronger China. So we are confident on what we have communicated in terms of guidance for the rest of the year. And we are really confident on our capabilities versus the key competitions, our ability to connect to digital channels, which we have already developed before the crisis. And my bet is that we are going to recover strongly from this crisis in Fertility. Now on the non-small cell lung cancer trial, if you got what I said is that we have a light delay, which is not related to COVID-19, but it's actually is event-driven. So there is little we can do, but rather complete the trial once we hit the number of events that are required to deliver on this study. And we will update this in the clinical trials that come very, very soon. It's going to be early 2021 surely, because during the presentation, I said early 2020 and perhaps I confused some people.
Okay. So, Belén, which means that the slight delay, which should be a trial readout for early 2021?
It's a delay of more or less 4 to 6 months.
We will now take our next question from Falko Friedrichs from Deutsche Bank.
I would have 2.5 questions actually. So firstly, could you share some more color on the speed of recovery you currently see in China? And how fast the demand is recovering across your 3 segments? And then secondly, now that we have seen initial data from a competing BTK inhibitor in MS, and your competitor has been very vocal on the benefits of a brain penetrating drug in MS, can you talk to your view on the importance of brain penetration? And is there evidence to suggest evobrutinib can penetrate the brain? And then following on to that, how do you view evobrutinib's competitive positioning in light of Sanofi's data?
Good. So let me start by the recovery in China. Look, this is slightly determined by franchise. So oncology is recovering slightly, fertility is ramping up and general medicine is solid. So we are anticipating a catch-up that obviously will be much faster than in the European territories, for example. Yes, on your BTK question, Falko, Sanofi has indeed been very vocal, but we haven't seen any data to more deposition in that they are making of their own BTK. Keep in mind that our evobrutinib has been the first BTK to show proof of confidence in RMS and we are really characterizing the efficacy of this compound as a MAP, monoclonal antibody like clinical efficacy over 2 years with a very rapid onset of action. And today is the only BTK inhibitor in MS with this kind of data and characterized with more than 1,200 patients for the safety profile.In terms of the penetration of the BBB, as we mentioned before, we believe both assets, evobrutinib and Sanofi's BTK are capable of closing BBB and demonstrated CNS penetration. As you can imagine, we have also done our own experiment because this is very easy to actually synthesize in the lab. So the BTK occupancy by evobrutinib has been observed in the brain of both healthy animals and in animal models. And yes, there are variabilities in the preclinical experiments that have been conducted today. And hence, since we don't have head-to-head data, I want to stay prudent. But definitely, our molecule process BBB and we have animal data to support that. However, the clinical relevance of pain -- of brain penetration has yet to be proven for BTKi in MS. And we remain very confident in our demonstrated clinical efficacy based on a large placebo control trial, which now has offered 2 years of follow-up.
We will now take our next question from Emily Field from Barclays.
Just on Mavenclad very quickly. Could you quantify exactly what the amount was of the fourth quarter provision? And then just after backing that out, how U.S. growth was trending in January and February before the impact of coronavirus? And then also, again, kind of on the U.S. business within Healthcare, have you factored into your guidance any mix shift in terms of payer coverage? And if you could perhaps just discuss any exposure you may have to any growth in Medicaid as we're entering into this period of very high unemployment? And then just -- I know this was asked earlier, but just for Fertility specifically, is that more exposed to -- if there could be a protracted macroeconomic downturn and just if you have any examples on perhaps if that business fared any differently than the rest of your business in 2008, 2009.
Yes. That is Emily, right?
Yes.
Hi, Emily. So the provision in Q4 is around EUR 5 million. Then on the Fertility, yes, of course, we have factored -- we have taken into consideration the current environment, how much is the impact of the economic recession on our Fertility business, it is still to be seen. We believe that those patients -- I mean, we have always seen that this market is not such a price-sensitive market. And eventually, in some countries, we have seen low prices, low prices -- low price clinics emerging. And actually, we haven't seen this business making a big difference. Our exposure to Medicaid is basically negligible in the U.S. and in the rest of Europe, we are counting that it will have some impact, not a major impact.
And Emily, since I'm probably the longest-serving person at Merck around the table. I was not here in 2008, but I have actually looked into the Fertility numbers in 2008. The 2 driving forces behind the impact right now is, on the 1 hand, the lockdown, i.e., the closure of fertility clinics, that's a mechanical question. Belén was explaining that. And the second one, the second item would be consumer sentiment. In 2008, we saw a steep decline in the Fertility business. We saw a V-shaped recovery. As to whether this is fully applicable to this crisis, difficult to tell, but it's possible.
So let me also -- I think, Emily, you have a question on the Mavenclad U.S. ramp up. Not only you are referring to the IMS, NPA, TRx data, and I think you have to be cautious on interpreting this data because remember that Mavenclad has a unique pathology. So what we have asked IMS to do is to give us a custom view, which is trending extremely nicely for the prescriptions, and that is normalizing to the dosing schedule of Mavenclad. Just to explain you a bit better, when you go for -- imagine an SP1, you will get a prescription every month, right? For Mavenclad, you will get 2 prescriptions or 1 prescription per patient for the whole year. So you have to -- because this is the dosing schedule, right, of Mavenclad. So you have to adjust for that, and this is why it's only the custom view that will give you that reality and the comparable reality versus other agents. Do you -- is that clear?
Yes, that's very helpful.
Yes. And the IR team can give you the data off-line if you want to see those -- if you don't have those easily accessible.
We will now take our next question from Daniel Wendorff from Commerzbank.
Three, if I may. And the first 1 is on your Research Solutions and Applied Solutions performance during the COVID crisis. Maybe you can talk a bit more about the positive effects you saw or you still see from the crisis on some of your businesses? You mentioned efforts during your presentation to meet the demand there for certain products. Maybe you can talk a bit more about that and how we should see this effect in Q2 and Q3?And my second question would be on the performance of China in Life Science in Q1. Can you remind us again how that was? And maybe if you're already able to tell us a few words on how this improved in April? And my last question would be on your -- a follow-up question on your guidance. You talked now a bit about what needs to happen to reach the high end of your adjusted EBITDA guidance. Maybe you can talk a bit more about the scenario underlying the low end of your adjusted EBITDA guidance here for 2020?
Marcus will address the guidance-related question. On the Life Science business, let me try to combine this. So what is it that we -- what we're doing in this COVID-19 crisis? So we're providing research tools and reagents, for instance, for RNA purification, RT PCR, RTQ PCR, immunoassay and supporting reagents that are suitable for SARS-CoV-2. We do -- we work on products and reagents for diagnostics, the 2 main diagnostics platforms like PCR and -- serology and PCR, guanidin, oligo primers, probes, we do high flow membrane speeds, antibodies for serology tests. On therapy manufacturing products, cell culture and media clarification, DNA digestion, tangential flow filtration, chromatography, steroid filtration, fermentation, bioreactors and final fill. And on vaccine development, its discovery and development with benzonatate, proteases, peptides, peptide libraries, antibodies, amicons, milliplex assays, ELISAs. And in manufacturing, it's very similar to the therapy manufacturing product.So the upsides and downsides. In process, process is obviously less affected due to the long-term supply of bioprocessing. A good portion of the bioprocessing portfolio is sustained by the ongoing treatment of chronic diseases, and there's increased demand in areas of COVID-19 therapy and vaccine development. In research, we supply products for testing like buffers, enzymes, reagents. However, academia is 1 of the largest customer segments. And as a result, this portfolio is impacted by the demand reduction as lab work in many universities that are not COVID-related has come to a halt. Applied is mostly in the diagnostics space, we see continued demand for RNA extraction kits and lab water system, installs, repairs. However, industrial testing is also down, and this reduces demand for many of the products supplied by this portfolio. We have seen in China, let's say, in approximately 6 to 8 weeks, we began to see order returns to levels that we were -- that we used to, that is an important factor for us to model the future, and that results in us assuming that applied and research will be doing much better in the second half.
The guidance question?
Yes. So I'll take the guidance question. So as Stefan outlined in the presentation, we are obviously preparing several scenarios in order basically to shed a little bit light on a potential, how shall I say, bandwidth of outcomes that COVID-19 could add to what this could mean to our business going forward. And as Stefan said, so the guidance is actually based on a kind of base case scenario, which we also, at the same time, consider to be somewhat from today's perspective and realistic outlook what we currently see for 2020. Of course, I mean, the lower end of the guidance would cover more the worst-case scenario. And while I cannot share detailed, very detailed assumptions with you, I would just want to give you a heads up on certain things that would have to happen in order to bring us really to the lower -- very lower end of our current guidance corridor.So first of all, as also Belén outlined, we believe that the second quarter will get quite a hit from the COVID-19 crisis. So this will be a rather weaker quarter to say it very clearly. And then from Q2, actually Q3 and Q4 onwards, we actually project some recovery into our numbers that lead us to the current guidance. Of course, and you have seen this in our set of assumptions, if we would enter into a big global second wave of infections and another set of very strict lockdown measures across the three, for us, very, very important and big regions, Europe, U.S. and Asia Pacific, we would be actually south of the base case scenario because then it is likely that we would not see any recovery or no meaningful recovery in Fertility and also no improved dynamics in Mavenclad in the second half of the year. We would not see a recovery of applied Solutions and Research Solutions, which are affected in Q1 and Q2. But most likely, not so much anymore even shows some catch-up effects in Q3 and Q4. And that would also endanger the current assumption of an ongoing, very robust business in Process Solutions and in Semiconductor Solutions, which are both meant actually in the current base case scenario to support us and to compensate some of the shortfalls that we were experiencing in the more affected areas of our business. I hope, Daniel, this helps?
Absolutely, yes. Thank you.
We will now take our next question from Wimal Kapadia from Bernstein.
Wimal Kapadia from Bernstein. In fact, if I could just push a little bit more on Mavenclad. Can I just ask how much of your current revenue is seen as, or I'm thinking here, April, May, is actually coming from new Mavenclad patients or versus returning customers for year 2 of the drug? Just curious given your previous comments on low monitoring burden, easy administration, et cetera.And then tied to this, I know it's very difficult, given the uncertainties, but you've done it in the past. Any comments on expectations for Mavenclad? Even a range for 2020, I think would be quite helpful.My second question is just on Surface Solutions. I appreciate things have changed since the global financial crisis, but when I look back at how pigments performed back then, we saw a couple of years of low double-digit declines and then a very nice rebound thereafter. So could you provide any color on how you think about the outlook now versus that period, given we already saw a 9% decline in 1Q? Should we expect a larger and more sustained under performance? Any comments will be great.And then Belén, since you're on the call, I just want to get your thoughts on the changing lung landscape. Clearly, there's a lot of activity in first line non-small cell lung cancer. So I'm just curious to hear your thoughts on how this changing landscape will be factored into the beta trial programs moving forward.
Let me start, Wimal -- let me start with your question on Surface Solutions. It wasn't entirely clear, you asked a question about Surface Solutions not about Semicon solutions. Is that correct?
Surface solution. That's right.
Thank you, Wimal. So yes, the 2008 crisis is comparable in a certain way. On the other hand, it's not. In 2008, we saw exactly what you described. But then this was followed by a strong stimulus package specifically geared towards the automotive industry in quite a few major countries. So the recovery was pretty fast. Secondly, the other big industry that we rely on is the cosmetics industry and the cosmetics industry is very much affected by lockdown, by people wearing masks, et cetera. And that also -- that didn't happen in 2008. What we should note is that, if I remember the numbers correctly, Marcus, correct me if I say something wrong, Surface Solutions is roughly 14% of Performance Materials revenues and Performance Materials is roughly 20% of Merck's revenues. So we're talking about an impact on 3% of Merck's revenues, and it's obviously, a somewhat lower-margin business compared to the others. So I don't think we should focus so much on this.
So let me go back to your Mavenclad question, Wimal. And just to clarify, so you are talking about new starts versus continuation, right?
That's right, yes.
So where COVID-19 has hit us has been on the [indiscernible] side, right? As much as the market because we haven't lost any market share in the high efficacy dynamic market or in the oral high efficacy market in the U.S., which is a very good sign, right? Obviously, the new starts are -- so the higher the reliance on the new starts, the higher has been the impact. On the continuation, we continue to see a very good trajectory. And as I mentioned before, based on the data that we got from Germany and the U.K., even a bit less than 5% of the patients have actually discontinued, which is actually very encouraging for the recovery. So we are confident that after a bad Q2, we are going to recover ground and continue the accelerated growth that we have seen in previous quarters. That's for Mavenclad. Then -- and that covers the expectations for 2020. I'm not going to give you any specific numbers, as you know. But definitely, we don't see any major influence of the COVID crisis at this time on the guidance we have given on big sales, right?On the non-small cell lung cancer landscape, yes, obviously, we are very closely following everything that is happening there. Is this changing the perspective for bintrafusp? No, this is our main focus. We are right now on progressing with our trials, both in first line, in combination with chemotherapy, and then we are also -- we have also gone to covering unresectable stage 3 non-small-cell lung cancer versus durva. So we have a very extensive program. And you will see more data on the whole thing and the way we see the competitive environment evolving in the R&D update call. So if the trials deliver actually, the evolution of the non-small cell lung cancer market will be an opportunity for us in terms of combination and an increasing number of patients being treated with new classes.
Emma, I think we have time for 1 more additional question, please.
We will now take our final question from David Evans from Kepler Cheuvreux.
Yes. It's David Evans from Kepler Cheuvreux. So just on your 15% Healthcare sales growth in Q1, so the net impact of COVID is quite small. So I was just wondering, could you -- is there any way you can quantify the other phasing tender benefits that you got in Q1 within Healthcare? I'm trying to get to underlying Healthcare sales, which still look very strong. And so, if so, within General Medicine, are there any brands that you would pick out as seeing really genuinely underlying acceleration in demand? And then second -- sorry, maybe just 1 final question on Fertility. You talked about catch-up effects as lockdowns -- so specifically, that means a genuine pickup in sales in 2021, not just later in 2020?
So let me repeat what I said at the beginning. Our growth is very solid, and all the franchises with the exception of Fertility are growing. In the N&I franchise, the main growth driver has been Mavenclad. Of course, the tender phasing for Rebif has helped Rebif decline being less pronounced than in previous quarter. But all in all, our business has been extremely solid, and this has been, as I mentioned before, driven by strong N&I, strong Oncology and strong General Medicine that grew by almost 10%.On Fertility, some predict the acceleration goal to 2021, perhaps. We don't see that happening. It's difficult to predict, but we see already, this is too early to say, but based on what we see in China, right, we are expecting to see clinics reopening already during Q2. And this happened already for China in Q1. 90% of the Chinese centers reopened already, at reduced capacity, not only in China but also in other APAC clinics. And in Europe, the clinics are reopening once and following the guidance and the recommendations of the European society for human reproductive procedures. So as we see that, I think that the majority of the ground we'll recover in 2020. Did I answer your question?
Yes, perfect. Thanks.
Happy to hand over to Stefan then for closing this call.
Thank you. Thank you very much, Constantin. So just thank you for discussing with us these challenging times. I would like to -- let's say, thank our people for their outstanding commitment and their fantastic work, and we have to solve many challenges that lie in front of us. You've seen what our priorities are. Our priorities are to protect the safety and health of our employees and their family. I think we've done a fairly decent job on this. Out of roughly 60,000 employees, we've had very few cases, which results in very few disruptions in our manufacturing activities.Our second priority business continuity and early business recovery. I hope we gave you a good overview of what we're doing in that respect. And our third priority is to be a very, very positive force in managing this crisis. We also had quite some discussion about this. We're getting a lot of recognition. We're seeing that the image of the pharmaceutical and biotech and other industries has improved largely despite some announcements from yesterday. But we feel that society recognizes that companies like ours are assets that are extremely important for the safety and health of society worldwide. And we feel an even stronger sense of purpose than ever before. Thank you very much.
Bye-bye.
Ladies and gentlemen, that will conclude today's conference, and you may now all disconnect.