Merck KGaA

XETRA:MRK

Earnings Call Transcript 2018-Q4

[Operator]

Welcome to the Merck Investor and Analyst Conference Call on Fourth Quarter and Full Year Results 2018. [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.

[Constantin Fest, Head of Investor Relations]

Many thanks, Julia, and a very warm welcome to our full year 2018 earnings conference call. My name is Constantin Fest, Head of IR at Merck, and today, I'm joined by Stefan Oschmann, our group CEO; as well as Marcus Kuhnert, our group CFO. During the next 30 minutes, we'd like to run you through the key slides of this presentation and right after that, take all of your questions. Please note that today's call, including the Q&A session will focus on our Q4 and full year earnings reporting. I would kindly ask you to be mindful of that. With this, I'd like to directly hand over to Stefan.

[Stefan Oschmann, Chairman of Executive Board & CEO]

Thank you, Constantin, and warm welcome to you, ladies and gentlemen, to our full year earnings call. 2018 was a busy year for us. We saw good operational development in our 3 businesses. We took the necessary investments to bring us back on a profitable growth trend from 2019 onwards. We reached our guidance and divested our Consumer Health business. Before we dig into the details of our full year 2018 results, let me provide some views on our proposal of last week to acquire Versum Materials for $48 per share in cash. It represents a superior offer to the previously announced merger between Versum and Entegris and a significant premium to Versum's share price before our announcement. This proposal benefits both our shareholders and Versum's shareholders. We believe that an acquisition of Versum would create a deep and complementary portfolio of electronic materials, equipment and services for the semiconductor and display industry. It would expand our already strong footprint in the U.S., and add to the list of successful acquisitions we have made there, including Millipore in 2010 and Sigma-Aldrich in 2015. We believe that we are the best home for the Versum business, and we remain fully committed to the transaction. And not surprisingly, we've been hearing from many Versum shareholders about our proposal.I wanted to take this opportunity to address some of the questions we've been repeatedly asked in these conversations. The first question is, "Now that Versum has rejected your proposal, what are you going to do?" We think it is highly disappointing, both to us and to Versum shareholders that the board was dismissive of our proposal without giving any reasons. Ours is superior and compelling proposal, the market has said so and we remain committed to the transaction and have every intention of coming to an agreement with Versum and completing the acquisition. Second question, "Will you raise your offer price for Versum?" We believe our offer provides full and fair value for Versum, including a premium of 51.7% to the undisturbed trading price per Versum share on the trading day prior to the announcement of the Entegris transaction with Versum. It is clearly superior to Versum's acquisition by Entegris. Third, "Will you consider a tender offer if the Versum board refuses to engage with you?" Our response is, we have all options on the table for completing an acquisition of Versum, but it would be imprudent to speculate about that. We don't have any further update to our proposal for Versum at this time. Now let's focus on our results. On Slide 7, we summarize for you our 2018 promises and -- for you to see that we delivered on each. I'm especially proud that we managed to limit the organic EBITDA pre decline versus prior year to only minus 1.6% despite the headwinds we faced during the year. Be it the ongoing decline of our liquid crystals business or a high comparables from the prior year or the investment needs in our Healthcare business. On Slide 8, you see the regional breakdown of our sales with Asia Pacific and Europe accounting for approximately 1/3 each and North America for around 25%. Interesting maybe to note is the good growth in North America. The ongoing sales decline of Rebif was more than offset by the strength of our Life Science business as well as good development of our fertility franchise and Bavencio. To the AGM on the 26th of April, we propose a dividend of EUR 1.25 per share. As you know, our payout aims to a policy to ensure a sustainable and resilient dividend that is linked to EPS pre to ensure that our dividends develop in line with our sustainable earnings. Given that our EPS pre reflects the Consumer Health divestment, our dividend proposal of EUR 1.25 for 2018 is stable compared to last year, but translates into an increase payout ratio slightly in excess of 24% of EPS pre. I'm on Slide 11 now. Healthcare made significant progress in 2018 in 3 aspects. Firstly, the so-called core business performed very nicely with about 3% organic growth, driven by fertility and general medicine and endocrinology. Secondly, our pipeline products, Mavenclad and Bavencio, added another 2.2% to organic sales growth. So that Healthcare posted an impressive organic sales growth of 5.2% in 2018. And thirdly, we had very good news from our pipeline with Mavenclad accepted by the FDA for review, encouraging clinical data. For example, when you think of Evobrutinib or Avelumab in RCC first line, and just recently, the announcement of our strategic partnership with GSK re: the future development of M7824. Life Science on Page 12 had a very strong year. Organic growth was plus 8.8% and thus, well above the market average. Process Solutions account for almost 2/3 of the total organic growth in 2018. We completed the acquisition of Sigma-Aldrich and achieved a targeted EUR 280 million synergies. As you know, we do not take the strong demand from customers for granted but work hard to ensure that our offering is highly innovative and meeting latest customers' requirement in a rapidly growing and highly dynamic market. For Performance Materials, the year 2018 was dominated by the balancing of 2 fairly opposing trends. On the one hand, to ensure the momentum in Semiconductor Solutions and OLEDs is maintained and on the other hand, managing the ongoing decline in the liquid crystals business. The pick up you saw in Q3 and also, again, in Q4 in liquid crystals was a nice surprise, but we consider it a temporary effect due to the ramp up of new panel manufacturing capacity in China. We expect this to last into the first half of 2019 and have reflected this in our guidance accordingly. Performance Materials initiated its Bright Future transformation progress in summer 2018. Since then, it established a new R&D approach and defined clear portfolio roles for each business to steer future investments. And now, Marcus will guide you through the key financials.

[Marcus Kuhnert, CFO & Member of Executive Board]

Thank you, Stefan, and good afternoon, from my side. You saw the detailed financials this morning, so I'll be brief. You're meanwhile familiar with the FX burden, which lowered our net sales by as much as EUR 563 million and EBITDA pre by EUR 378 million compared to 2017. When you look at the organic development, however, the picture looks very good. Organic sales came in at 6.1% for the full year, slightly ahead of what we had expected still in November and EBITDA pre declined organically by just 1.6%. With Q4, we delivered on our EBITDA pre growth guidance, including the generation of income from the active development of our portfolio in Healthcare. However, the significant outperformance of our share in Q4 led to additional costs for our businesses, especially for Healthcare and Life Science. You know our LTIP program. If you adjust for this effect, the group EBITDA pre margin would've been in line with a margin level you saw over the first 9 months of 2018. I'm on Slide 16 now. Here you see the impressive organic sales growth in all our businesses for 2018 broken down to the business sectors and also highlighting the currency effects. Stefan has already highlighted the main drivers a minute ago. Maybe one additional word on the currencies. The adverse FX development throughout 2018 hit us in each of our businesses and given our current hedges, we also incurred hedging losses, which are included in our corporate and other segment. As the euro/U.S. dollar rate has begun to turn to our favor in the last few months, our hedging losses have risen, which is not surprising. We will come to our guidance later in the presentation, but this is certainly a point for you to keep in mind for 2019. Slide 17. A quick word on the reported numbers. Our EBITDA pre declined by roughly EUR 450 million for the reasons discussed before. EBIT, however, declined by almost EUR 700 million compared to last year. The difference between the 2 is last year's sale of our biosimilars activities to Fresenius, which led to disposal gain of EUR 319 million. Net income as well as reported earnings per share reflect the divestment of our Consumer Health business for EUR 3.4 billion to Procter & Gamble, which we completed on the 30th of November. We generated a disposal gain of EUR 2.6 billion before tax and EUR 2.2 billion after tax. Now let's quickly look at the Q4 numbers for the 3 business sectors. Healthcare posted strong organic sales growth in the fourth quarter as good development in all franchises could compensate the sales declines of Rebif and Erbitux. Our newly launched products, Mavenclad and Bavencio, added to this. They accounted for almost 50% of Healthcare's organic growth and combined, reached EUR 54 million net sales in the first quarter. Marketing and selling costs increased driven by the launch preparations for potential Mavenclad approval in the U.S. We hope to receive the decision in the second quarter. With regard to the long discussed and eagerly awaited onetime income, I can confirm that we generated approximately EUR 110 million from active portfolio management measures. In our annual report, you will find the full details. A number of the transactions we had on the radar screen during 2018 actually materialized in the fourth quarter, mainly in relation to the out licensing of certain molecules, for example, the transaction with Vertex or the transfer of certain rights such as our announcement with Entegris. Switching to Slide #19. Life Sciences organic growth in the first quarter was quite impressive with 8.8% organically on top of an already strong prior year quarter. This growth was driven by all businesses and regions, yet again with Process Solutions in the mid-teens and Research Solutions and Applied Solutions growing in the solid mid-single-digit range. In line with a strong momentum, marketing and selling costs rose quite substantially compared to previous quarters but were stable in relation to net sales. The aforementioned effect of Merck's share price outperformance in Q4 had a visible effect on Life Sciences EBITDA pre. This is also the main reason why Life Science Q4 EBITDA pre was probably a bit below [ your ] expectation this morning. Without the LTIP effect, Life Science EBITDA pre margin would have been in line with the level achieved in the first 3 quarters of 2018 despite our continuous investments in e-commerce and building our strategic initiatives. On Slide 20, Performance Materials actually outperformed with organic sales growth of 7.8% in Q4 '18. Yet again, Semiconductor Solutions and OLEDs continued to grow very nicely, in line with the previous quarters. Our liquid crystals business continuously benefited from the ramp up of panel manufacturing capacity in China, which we see as temporary effect while Surface was somewhat softer in Q4 on the back of a slower automotive markets, especially in Asia, but also in Europe and North America. As a result of the higher sales level in Q4, EBITDA pre also came in stronger than expected. The margin development mainly reflects the business mix given the sales dynamics. Our balance sheet remains in solid shape and now reflects the sale of our Consumer Health business. Our equity ratio now stands at 47%, well above the September '18 numbers due to the CH book gain. Net financial debt decreased to EUR 6.7 billion by the end of December and our net debt-to-EBITDA pre ratio dropped below 2, now standing at 1.8, which was the target that we aimed to achieve by the end of 2018. On Slide #22, our operating cash flow in Q4 was solid with EUR 741 million and the divesting cash flow contains the EUR 3.4 billion gross cash proceeds for Consumer Health. And now, I hand back to Stefan for the guidance.

[Stefan Oschmann, Chairman of Executive Board & CEO]

Thank you, Marcus. We promised you already 1 year ago that 2019 would be a year of profitable growth and we deliver on this promise and expect moderate organic net sales growth for 2019 mitigated by a slightly negative currency effect to the tune of minus 1% to minus 2%. For EBITDA pre, we expect strong organic growth in the low teens. The impact from the adoption of the new standards on lease accounting, IFRS 16, are included in this guidance and lift EBITDA pre by roughly EUR 130 million. The FX headwinds for EBITDA pre are forecast to be in a range of minus 3% to minus 4%. And let me give you a couple of additional details. Firstly, we see the average euro/U.S. dollar rate for 2019 at 1.15 to 1.20. With the FX headwinds, we will be mainly -- the FX headwinds will be mainly attributable to the unfavorable development of several emerging market currencies, particularly in LatAm although this burden will most likely ease in the second half of 2019. Thirdly, Marcus indicated already we expect FX hedging losses in 2019. Corporate and other costs should, therefore, remain in the EUR 360 million to EUR 400 million range. And fourthly, our guidance is based on a constant portfolio assumption. Slide 25. We give you an overview of the key drivers and underlying assumptions for 2019. With the exception of our recently announced collaboration with GlaxoSmithKline regarding the development of M7824 as well as the aforementioned IFRS 16 effect, it should contain little surprises for you. Healthcare should see strong sales contribution from Bavencio and particularly from Mavenclad. Note that we have included first sales from a potential approval of Mavenclad in the U.S., which we expect for Q2 2019. As a result, Mavenclad is expected to reach up to mid-triple-digit sales in 2019. Important to note further that we consider milestones [ and ] income from the management of our pipeline as part of Healthcare's operating business. Life Science remains on its solid path, driven by good organic sales growth and margin progression. And for Performance Materials, we expect a moderate organic sales decline and an organic decline in EBITDA pre in the high single digits to low teens. And with that, now to your questions, and allow me to make the friendly reminder, please let us focus on our results, not the Versum proposal.

[Operator]

[Operator Instructions] Speakers, are you ready for the first question?

[Constantin Fest, Head of Investor Relations]

Yes, please.

[Operator]

The first question does come from the line of Matthew Weston from Crédit Suisse.

[Matthew Weston, Managing Director and Co]

Two, please. The first on Mavenclad U.S. I presume you're probably now in labeling discussions with FDA. So could you give us an update as to whether the profile that you are hoping for is in line with those discussions? And can you also confirm that there will be no advisory committee for Mavenclad in the U.S.? And also Marcus, I think at a recent broker conference, you said early Q2 as the target PDUFA date. Can you reconfirm that or give us some color within that Q2 timeframe? And then secondly, I'm sorry, this one is going to have lots of numbers in that, but it's about Healthcare guidance. And it is to do with the gap between 4% or whatever, mid single-digit organic sales growth and then the 20% -- mid 20% EBITDA growth. If I work that through, it implies essentially an incremental uplift in EBITDA of about EUR 350 million, but you already booked just over EUR 100 million of portfolio management, as you call it in 2018. So that essentially means EUR 450 million that we need to find. Now you told us EUR 100 million from GSK. You told us Erbitux royalties ex Japan go away. We estimate that's [about ] EUR 50 million, I don't know whether you can comment and you told us EUR 40 million from IFRS 16. That essentially implies EUR 200 million-plus of further portfolio management. So can you outline, are those numbers remotely accurate? And what we should assume in terms of Bavencio milestones on the INLYTA approval? And what other areas of portfolio management could generate more than EUR 100 million of income?

[Marcus Kuhnert, CFO & Member of Executive Board]

Thanks for your question, Matthew. Marcus here. I will start with the last one. So I think your calculation is, by and large, correct. So the EUR 100 million GSK deferred income is confirmed. That is what we said during the call. The amount that you mentioned for the lead topic is also, ballpark-wise, by and large, okay. EUR 40 million IFRS is also correct. Don't forget that we will see a significant ramp up, especially on Mavenclad, yes? Stefan has said I think that we have included Mavenclad sales and the assumption of an approval in the second quarter in our guidance. So there, you should expect, let's say, an effect. However, I must say the effect will be mostly visible in sales. The bottom line effect will be, at least in 2019, very much limited, but for completeness reasons, I want to mention it here as well. Nevertheless, we would also have some progress on organic sales, yes? And on the other topic on the portfolio management topic. So what I can tell you is that we have factored in a milestone payment for the approval of renal cell cancer for Bavencio, which we expect actually in June -- to happen in June. This is included. Also when you check the latest news on BioMarin, we are most likely also eligible to a milestone payment in that respect. And as you know, we are working always on a couple of measures and the one other might come through in 2019 as it was the case in 2018. By purpose, we do not want to disclose certain things we are still working on, but you can assume that we have a basket of initiatives and one or the other will get through, and I hope that you might have gained a little bit more confidence with the successful delivery of the EUR 110 million in 2018, where we also said it is not just a partnering [ topic ] . We're working on other things as well. And finally, the things were materializing and were helping us to achieve the guidance in full respect that we gave to you.

[Matthew Weston, Managing Director and Co]

Marcus, can I just interject there before answering the Mavenclad U.S.A. question? On Bavencio previous milestones, as I recall, have been somewhere around EUR 50 million or thereabouts. Is that reasonable for the INLYTA assumption? And then your BioMarin, your last milestone that you received, I think was EUR 60 million. Is that, again, a reasonable assumption for what could be due on those 2 topics?

[Marcus Kuhnert, CFO & Member of Executive Board]

The first one is, by and large, reasonable. It's a little bit lower than EUR 50 million in euro terms. And the Biomarin topic, I think, in my mind, it's a little bit higher than what you said.

[Stefan Oschmann, Chairman of Executive Board & CEO]

So Matthew, let me answer your Mavenclad U.S. regulatory question. I am absolutely certain you will -- appreciate my later, my latest response. Mavenclad U.S. is on track. We see positive vibes. We have no indication of the need for an advisory committee so far and we're on track for Q2 feedback.

[Operator]

The next question comes from the line of Richard Vosser from JPMorgan.

[Richard Vosser, Senior Analyst]

Two questions, please. Firstly, just on Mavenclad and Bavencio sales in 2019. I think you have provided '18 guidance on the size or the growth of those and obviously, we have long term guidance. But perhaps you might be thinking about filling in some midterm guidance for '19 for both those products, how big do you think they can get in '19? And then the second question. The Life Science guidance for growth is slightly above market and market being around 4%. I think, clearly, there was very strong growth this year towards the higher single digit range 8% to 9%. So just maybe you could talk about the burdening factors that you're seeing that could lead to a slowdown in terms of the growth in Life Science? It seems like one of the big growth drivers around bioprocess is probably still in the double-digit range of growth and remaining strong. So perhaps, you could give us some comfort or some color there.

[Marcus Kuhnert, CFO & Member of Executive Board]

Okay. I will start with your first question, Richard. On Mavenclad, as we said, so we have factored in the guidance and approval in the U.S. in the second quarter of 2019. So if this is going to happen, we are basically ready to immediately enter into the market and thus, we believe that sales contribution for Mavenclad in 2019 will be in the mid triple digit million euros for Mavenclad. For Bavencio, we think that we will have -- that we will end the year 2019 a little bit higher than '18, namely in the high double-digit million euros. So this is our guidance for '19 for the 2 products.

[Stefan Oschmann, Chairman of Executive Board & CEO]

Yes, on Life Science growth, as you can imagine, these are -- we take market growth in the different Life Science business is a rather complex thing and we've been okay. If you look at our track record at predicting this, we have the Research Solutions, the Applied Solutions growth is more steady factor. It depends on all sorts of government actions. So we must always use a certain degree of prudence there. When it comes to Process Solutions, this is, obviously, very, very much dependent on biopharma, biotech pipelines and on volumes, but we feel okay with regards to predicting this. Our forecast is relative to market growth. We then obviously, need to translate that -- we need to translate that into numbers, but we would adjust if market growth develops differently. And let me just reiterate. We said for Life Science, organic growth slightly above 4% per annum, per annum medium term market growth and all businesses contribute. And we see no weakness.

[Richard Vosser, Senior Analyst]

Could I just follow-up on the Mavenclad, that's a total U.S./Europe number?

[Marcus Kuhnert, CFO & Member of Executive Board]

Yes, yes. Yes, sorry, Richard, it's worldwide. It's not only U.S., Europe because we have meanwhile approvals also in other countries outside of Europe. So it's a worldwide number.

[Operator]

The next question comes from the line of Wimal Kapadia from Bernstein.

[Wimal Kapadia, Research Analyst]

Wimal Kapadia from Bernstein. So just first on Bavencio in renal cell carcinoma. Now that we've seen all the data from yourselves and the KEYTRUDA study, how competitive do you see your profile? It seems as though KEYTRUDA has a slight edge with respect to efficacy and given the product is widely used in other indications and the fact that OPDIVO + YERVOY combination has already taken about 30% of the first line share in renal, how do you think Bavencio will shape up in the indication? And then just on Performance Materials. Given the benefit that you've seen this year in liquid crystals in China, how confident is management that 2019 is actually going to be the trough year? So if we look at the wafer shipment forecast, there seems to be -- in terms of growth rate, a deceleration in growth between '19 and '20, whilst OLEDs continues to expand quite nicely, I suspect there's still quite low margin, low margin and Surface Solutions is still quite a slow growth business. So I guess, just trying to think -- understand how management are thinking about the decline in the LC in 2020 and will that be more -- will that offset the growth elsewhere in the portfolio from a top line and margin perspective?

[Marcus Kuhnert, CFO & Member of Executive Board]

Thanks, Wimal, and I will take your second question first so the PM one. Honestly, at the moment, we have no reason to deviate from the midterm trend that we have outlined in our communication in July 2018, which says that 2019 will be the trough year. We have seen an unexpectedly good H2 2018 that will also most probably reach into 2019. And let's say at least, most probably during the first 3 to 6 months. The second half of 2019, according to our current assumptions, will be much weaker. So that means we would have a strong year -- half year in 2018 and the strong half year -- first half year in 2019, but all in all, we believe '19 will be slightly below '18. 2020 then shall show moderate growth in the top line and that margin stabilization of around 30%, which inevitably means also slight increase in EBITDA pre. This is our current belief. We do not yet know exactly when this expected swing back will hit us. We currently believe it might be around middle of this year and we also do not yet know exactly how strong it will be. So for the time being, our latest best assumption is to confirm the story that we have given to you in July and that is basically incorporated in the guidance that you have in front of you.

[Wimal Kapadia, Research Analyst]

That's great. Could I just follow-up very briefly in terms of OLEDs margins? In the past, very recently, you said in terms of OLED being now breakeven, where are we today? And how should we expect that to ramp over the next 12 to 18 months?

[Marcus Kuhnert, CFO & Member of Executive Board]

So for OLEDs, it's right, so the very strong and favorable sales development has brought us mid -- in the meantime, in positive territory. You can imagine that we do not disclose exact margin levels, but we have successfully passed the breakeven point meanwhile. And more OLEDs sales basically, when this growth momentum continues, would also mean further margin progression because here, we clearly have the situation where the volume growth significantly outpaces the price declines that you also see in the OLED sector. So as long as we see those very nice top line momentum we will see further margin progression in OLEDs. However, to be very clear, we are far away from the levels that we still enjoy in liquid crystals.

[Stefan Oschmann, Chairman of Executive Board & CEO]

Wimal, I'm coming to your question on Bavencio. First of all, let me state that we have a lot of confidence when it comes to our data. The data shown at ASCO GU has reinforced the consistency of the PFS and our results and that is across all patient subgroups. And that means including patients with favorable, intermediate and poor prognosis, as well as those with PD-L1 positive or negative tumors. Very important factors. Response rates were almost doubled. That was 51% for Bavencio plus INLYTA versus 26% for SUTENT and median PFS extended by 5.4 months. So 13.8 months for Bavencio plus INLYTA versus 8.4 months for SUTENT and compared with this current standard of care. And if we also think that an important take away is that a IO plus PKI regimen will become a new standard of care in first line renal cell cancer. And also please note that more mature data, with a longer follow-up for Bavencio and INLYTA will be communicated after the upcoming interim analysis this year. Market success depends on the quality -- it's going to depend on the quality of the data. It's going to depend on the quality of commercial execution. We think that especially the Pfizer sales force is a power to reckon with in renal cancer and they have extensive experience through INLYTA.

[Operator]

The next question comes from the line of Sachin Jain from Bank of America.

[Sachin Jain, Managing Director]

Sachin Jain from Bank of America. Two topics, please. Firstly on Mavenclad. Based on your '19 guidance in mid triple digits. You're getting towards the bottom, I guess, of your prior peak sales guidance of EUR 500 million to EUR 700 million which, obviously, just ex U.S. So one can assume that once you have the U.S. approval officially, you would look to update that peak sales. The U.S. market is, obviously, a lot bigger than Europe. So should we be fair to think about when you do update our peak sales, it reflects the existing U.S./European market split or do you assume a lower share in the U.S.? So a broad question on Mavenclad. And the second question is on BTK, just around some comments you made on the wires, Stefan, regarding looking for partners in MS. I was wondering if you could just clarify whatever was said to media in terms of prior expectations of looking for financing deal versus strategic partner. And looking at all indications versus just MS and if we should be thinking about the deal, the timing versus the RA and SLE data, which is towards end of this year?

[Stefan Oschmann, Chairman of Executive Board & CEO]

Sachin, so in Mavenclad, peak sales, you remember, we said EUR 500 million to EUR 700 million peak sales EU. U.S. peak sales will depend entirely on the exact label structure. We will update once we have the label. On BTK -- or BTK partnering, we have had -- what can I say, we have been more general with regard to our partnering assumptions prior to the announcement of the GSK deal on TGF-beta trap. The successful signing of the GSK deal gives us more, more flexibility. I said this morning that when we were talking about partnerships in general that we sometimes we need a partner not only for financial risk reasons. That we also need partner to add capabilities in clinical and regulatory, in development, and what I was trying to say is that in the field of MS, that is something we don't really need. We are really very, very capable of managing that indication. There are other indications such as RA also, where we would have no commercial presence. This is a rather complex field. And basically, what I was trying to say this morning was we may, we may not. So we don't say that we don't partner and we don't say that we will partner. What is very important in this whole thing is that any potential partnering discussions must not compromise our Phase III study initiation. So we're fully behind that and we're driving this at full speed.

[Sachin Jain, Managing Director]

Can I just come back on Mavenclad? I understand peak sales, you want to wait for the label, but obviously, you've assumed some form of label for the '19 launch. So within label expectations, where is that mid triple digit number? Is there upside should the label be better? Or is there a risk should the label be worse. Just to get a bit of flavor around that?

[Stefan Oschmann, Chairman of Executive Board & CEO]

It's a bit early, Sachin. Also I didn't answer the question when it comes to the publication of the BTK, the readout, the 48-week data are confirmed for AAN in May 2019 and we will, after the publication, of the 48-week data, we will communicate the study design for Phase III.

[Operator]

Your next question comes from the line of Michael Leuchten from UBS.

[Michael Leuchten, Co]

Two questions, please. One on Life Sciences and one briefly going back to Mavenclad I'm afraid, On Life Science, obviously, continues to perform very strongly. I'm just wondering if you could talk about price components and the top line as the industry continues to perform strongly. Are we seeing price creeping into the mix as a negative as the industry has started to compete for market share? Any color would be very appreciated. And then on Mavenclad. Given your pay-for-performance contract in Europe, how is that factored into your expectations for 2019? And how will you book those patients who have been treated don't meet the criteria of treatment success and you then having to reimburse the paying parties for those patients?

[Marcus Kuhnert, CFO & Member of Executive Board]

Michael, I will take your questions on Life Science. So at the moment, we are clearly in the growth market, driven by very robust demand for monoclonal antibodies. We are benefiting from the breadth of our portfolio, from our e-commerce platform and from the relatively low share in the entire value generation or in the supply chain of our customers. The low share of the price of our products, which gives us a certain pricing power. That being said, we see positive pricing effects in our portfolio across all of our businesses. I cannot or will not disclose price volume split, obviously, because we're not talking about that. But for us, it's similar to the healthy conditions that we currently see in the market. There's no reason to doubt that this is going to change in the foreseeable future.

[Stefan Oschmann, Chairman of Executive Board & CEO]

So when it comes to the somewhat innovative Mavenclad pricing outcomes-based arrangements that we have in Europe, we think this is clearly way forward. We're not the only company who has such deals with European payers. I think it's really a very, very adequate measure to ensure that the right patients receive the right treatment and such value based schemes could also help to efficiently use scarce Healthcare resources and our industry is advocating such measures in other geographies. We don't comment as a matter of principle, on details behind the -- these schemes, but you can rest assured that they've been factored into our guidance. And there's a positive aspect of this whole thing because they come very close to registers and they are actually helping patients to achieve higher degrees of adherence to medication through reminder systems, for instance.

[Operator]

And the next question comes from the line of Gunnar Romer from Deutsche Bank.

[Gunnar Romer, Research Analyst]

Gunnar Romer, Deutsche Bank. The first one would be, again, on Mavenclad. I'm not sure whether I missed it, but can you comment on the U.S. contribution in the mid triple digit number that you expect for the current year? Would that be already a triple-digit number or would that be more likely a double-digit number? Any comment on that would be very helpful. Second question would be on the 2019 guidance and in particular, your euro/U.S. dollar assumption, which seems quite conservative compared to current spots. So I was wondering whether you can provide us with an indication of the effects of on sales and EBITDA based on current spots because I would assume that's less than the 1% to 2% and 3% to 4%, respectively. And then last but not least, on Life Science, specifically the competitive environment here. Clearly, we've heard of the recent acquisition of GE's biopharma business by Danaher. So I was wondering whether you can comment on the potential implications, if any, to your business as well as the potential response including the need, desire or an ability to strengthen the franchise organically or through acquisitions. Any comment around would be very helpful.

[Stefan Oschmann, Chairman of Executive Board & CEO]

Thank you, Gunnar. Maybe I start on Mavenclad U.S. It would be really nice if I could comment on this right now because that would mean that we've had approval already. So you have to bear with us until we have approval and then we will update the information that we provide to you. On the Life Science, the competitive environment, what can I say? It's, obviously, a significant -- it's a significant event. No doubt that it is going to be a formidable competitor. It's, however -- it's not really appropriate to comment on the strategy of our Life Science business with regard to that. At this stage, we shall see how the antitrust authorities are going to react. What sort of -- so this is a deal -- we are, obviously, we're following that very, very closely. What it shows is that we actually took the right decisions to get so deeply into the space. This deal shows the attractiveness of the bioprocessing space, where we are a globally-recognized solution provider and we -- our offering is very broad, across the modalities from monoclonal antibodies to novel therapies, from reagents to manufacturing, to testing. This is a hot industry and we are very happy to be in it.

[Marcus Kuhnert, CFO & Member of Executive Board]

So Gunnar, I take the question on the currencies. We also see that the currency guidance deviates a bit from the current spot rate, especially when it comes to euro/U.S. dollar. Allow me one comment in advance before we enter too much into FX discussions at this early point in time in the year. It was exactly the purpose to avoid these kinds of discussions or deep dives into these topics when we decided last year to introduce an organic guidance. Because we do not have a crystal ball and of course, I mean, the assumptions that we have given in our March guidance now look conservative given the spot rates, but we have seen a lot of developments where currencies can significantly go down the drain suddenly. I mean, think about geopolitical risks, think about the looming risk of trade wars between U.S. and China, et cetera, et cetera. So for the time being, we stick to the assumption of EUR 1.15 to EUR 1.20 when it comes to euro/dollar relationship. In case this change, we will give you an updated number in May and subsequently, in August and November. And I can assure you that we would be much, much more -- how shall I say? Much, much more resilient before we will alter our organic guidance because this is what matters and this is really what we are committed to. Allow me one more comment. Please do not focus too much on the euro/U.S. dollar guidance. Also as you know, we have a wide basket of currencies and do not forget also the emerging market currencies, which have shown really a very, I would say, painful development over the last couple of months. Your final question, current spot effect. So if we would make the calculation on our numbers with the current spot rates, I confirm we have an upside in sales and in EBITDA.

[Gunnar Romer, Research Analyst]

Quick follow-up on Mavenclad. Obviously, I appreciate that the approval is outstanding and I was just curious, whether you can comment on the contribution that you have factored into your guidance because you said that the 3 triple digit number would include a contribution from the U.S. Just on your assumption whether you can provide any additional color here?

[Stefan Oschmann, Chairman of Executive Board & CEO]

I mean, these assumptions are made based on different scenarios of label structures with different probability adjustment. Either I take you in deep detail through this or I say nothing. I prefer the second option.

[Operator]

And the next question comes from the line of Joe Lockey from Morgan Stanley.

[Joseph W Lockey, Equity Analyst]

Joe Lockey from Morgan Stanley. A couple on Pharma, please. First, forgive me if I missed it, but I think the EUR 2 billion target for combined Bavencio and Mavenclad sales in '22 is missing from your slides today. Do you still have that ambition. If so, can you disclose roughly how much you think is going to come from Bavencio? And then second, on the evobrutinib. So I think you told us roughly a month ago that the Phase IIb data readout in RA was expected in Q3 this year. I think the trial finished -- is due to finish in June. It seems to be missing from your pamphlets accompanying your slides today. Is there anything changed in that trial to cause a delay?

[Stefan Oschmann, Chairman of Executive Board & CEO]

When it comes to the EUR 2 billion target, your assumption is correct that this is maintained. We don't comment on specific contribution of Bavencio in this context.

[Joseph W Lockey, Equity Analyst]

And on evobrutinib on RA?

[Stefan Oschmann, Chairman of Executive Board & CEO]

Yes. So the -- on the RA data, the top line results are expected in 2020 -- sorry, sorry, in late 2019. Sorry, about that.

[Operator]

And your last question comes from the line of David Evans from Kepler Cheuvreux.

[David Paul Evans, Senior Equity Research Analyst]

Sorry, it's another one on Mavenclad, but I was just wondering if you could give us a sense of how the phasing of launches in different countries in Europe is coming along? I understand that currently, really most of the sales seem to be coming from Germany and U.K. Just wondering when different regions, different countries really might start to kick in and drive those European sales upwards?

[Stefan Oschmann, Chairman of Executive Board & CEO]

Yes. So Mavenclad, maybe I can cover the whole world. The product is approved in 49 countries, i.e. in the EU, Australia, Argentina, Canada, Israel, the U.A.E. The product is reimbursed in 25 markets with payer negotiations on track in key markets. Germany market share in Q3 was about 15%, 17% is from switching, i.e. from Gilenya, other high efficacy drugs versus 30% naïve patients. I mean, we are following a very typical European launch rollout with standard timetable. As You know, Germany, U.K., sometimes the Scandinavians, Netherlands and so on are early. And then Italy comes later, Spain, then often France is the last market to enter and receive exactly the same patent. We also have recently received an approval in Taiwan. I think this is new news.

[Operator]

I would now like to hand the conference back to Mr. Fest for closing remarks.

[Constantin Fest, Head of Investor Relations]

Well, thank you very much to all of you for joining this call. We appreciate it. Thank you for all your questions. We look now very much forward to meeting many of you in person during the upcoming full year roadshows. Thank you, and goodbye.

[Operator]

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