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General principles

At our company, we believe in the opportunities of science, the transformational power of technology and the endless possibilities to change the lives of patients, researchers and customers. Our purpose is ‟We are curious minds dedicated to human progress”. Science is at the heart of everything we do. It drives the discoveries we make and the technologies we create, it inspires our ideas and drives our entrepreneurial spirit.

We believe that scientific exploration and responsible entrepreneurship are key to technological advances that benefit us all. Our everyday decisions are guided by our company values. We want to live courage, achievement, responsibility, respect, integrity and transparency in every step we take, in every decision we make.

Together, we have defined the road ahead until 2022. This strategy is based on our Group Foundation, external trends that will impact our industry and a concrete map on how to reach our future ambition.

Group Strategy

The transformational journey since 2007

Throughout the past years, our company has grown significantly through a series of strategic moves that have enabled us to develop into the vibrant science and technology company we are today. We have systematically and continuously strengthened and focused our portfolio of innovative science and technology throughout our business sectors. In Healthcare we divested our Generics business (2007) to focus on highly specialized products and acquired Serono (2007) to expand our pipeline and strengthen our business. This focused approach has continued until today with the divestments of the Biosimilars business (2017) and Consumer Health business (2018), so that we can increase our efforts on our Oncology, Immuno-oncology and Immunology franchises. Within Life Science, we have significantly transformed to become a diversified industry leader through the acquisition of Millipore (2010) and Sigma-Aldrich (2015). We continue to leverage the Sigma-Aldrich e-commerce platform to expand our reach and leadership in the industry as well as investing in strategic initiatives such as Gene Editing & Novel Modalities and End-to-End Bioprocessing. During this time, Performance Materials has continued to deliver profitable growth and a significant cash contribution, and we evolved this business further into attractive science and technology areas such as semiconductor materials through the acquisition of AZ Electronic Materials (2014), which also helped us further diversify our product portfolio that was strongly driven by liquid crystals.

Strategically, what we have achieved is the transformation of a classic chemicals and pharmaceuticals supplier into the vibrant science and technology company with leading positions in Healthcare, Life Science and Performance Materials. To further achieve our strategic goals from 2011 – 2017, we completed a transformation and growth program known as ‟Fit for 2018”, primarily targeting organizational effectiveness and process optimization, and in the later years new initiatives such as the commencement of our Innovation Center in Darmstadt, new product innovations and our new brand.

the Roadmap

Our Group Strategy considers certain foundational elements such as, first and foremost, a risk diversification strategy that ensures that we are not over-exposed to any single customer, industry or region. We want to be a forward-thinking company generating long- term sustainable value. We focus our efforts and activities on innovative areas to add maximum value to the future of science and technology. We continue to operate under our current ownership structure with the Merck family, as a majority owner, and external shareholders. We aim to maintain an attractive financial profile. M&A (mergers & acquisitions) is an important part of our long-term value creation strategy with a focus on innovation-driven technology. In 2018, we further prioritized our activities in line with our strategic ambition to become the vibrant science and technology company. This includes the initiation of a new strategic approach in Performance Materials focused on the expanding electronics market, optimizing R&D through the efficient reallocation and adjustment of resources, and increasing our customer focus. In Healthcare, in addition to the aforementioned divestment of Consumer Health, we have continued our strategy of becoming a Global Specialty Innovator through continued development and externalization of selected pipeline projects. This way, we aim to ensure that promising products can be brought to the market quickly for the benefit of patients everywhere. Life Science is on track with the integration of Sigma-Aldrich and has continued along the path of science and technology leadership through its sustained investment and focus on its strategic initiatives of Gene Editing & Novel Modalities, which includes gene editing tools, viral and gene therapies, cellular therapies and RNA therapies, End-to-End Solutions for Bioprocessing and Connected Labs.

From now until 2022, we categorize our strategy as a period of growth and expansion, with all business sectors contributing to our growth ambition. In order to achieve our strategic ambition by 2022, we want to work on ensuring strong and innovative, specialty-focused pillars with strong positions in our priority growth areas, such as Oncology, Immuno-oncology and Immunology, Bioprocessing, and Semiconductor Solutions.

In more detail, it is our goal to continue to accelerate organic growth, expand our market footprint and sustain our leadership positions within our science and technology specialty areas. We have clearly defined goals, such as generating annual sales of at least € 2 billion by 2022 with products from our Healthcare R&D pipeline – products that we launched recently or expect to bring to market soon. In addition, we aim to double our Group sales in China. Healthcare shall contribute significantly to our growth ambition with the main drivers being new product launches and stable base business delivery. We expect Life Science to continuously target above-market growth with Process Solutions contributing significantly to this.

We expect the Performance Materials business sector to generate an EBITDA pre margin of around 30% after 2019. The business sector initiated the ‟Bright Future” transformation program. Besides the ambition to get back to organic top-line growth, the program focuses on resource allocation, process excellence and active portfolio management.

We aim to keep an attractive financial profile, regain our financial flexibility through stringent deleveraging and sustain our strong investment-grade rating. It is of utmost importance to us that we meet our obligations at all times through our diversified and profitable businesses as the basis for sustained cash flow generation. We are aiming to achieve sustained organic profitable growth, while targeted acquisition remains a growth option. We pursue a sustainable dividend policy. Provided that the economic environment develops in a stable manner, the current dividend represents the minimum level for future dividend proposals. In addition, our Group Strategy is always aimed at delivering our ambition of becoming the vibrant science and technology company, and be an innovation leader within our fields of activity. We will therefore strive to achieve our strategy by continuing to focus on our three core priorities: ‟Performance”, ‟People” and ‟Technology”.


Our priority area ‟Performance” includes all activities that create sustainable, profitable growth. We have defined a strategic roadmap until 2022 to meet our ambition. Our primary aim is to deliver accelerated profitable growth through sustained core business delivery and selective portfolio strengthening.

In Healthcare, a successful 2018 included our innovative product launches of Bavencio® and Mavenclad®, which together reached around € 160 million in sales in 2018. Our Healthcare core business has grown consistently for many quarters and we continue to diligently develop and manage our pipeline of innovative medicines. The 2018 news flow clearly shows that our pipeline contains highly attractive and innovative assets in key indications, in various stages of the clinical development process.

Going forward, in Healthcare, we will drive our positioning as a global specialty innovator by fully leveraging our pipeline potential. Here we aim to focus and prioritize development of key pipeline projects, deliver multiple study readouts in major tumor types and ensure a regular inflow of promising early-stage projects to ensure the long-term pipeline potential. We expect that our pipeline will continue to progress quickly. It therefore requires regular prioritization and de-risking decisions, with strategic partnerships and external financing being key. At the same time, it is our goal to continue to profitably deliver on our core business while further expanding our global reach.

In Life Science, we have achieved our € 280-million synergies target for 2018 and a net sales organic CAGR of around 6% since 2015, which is around 200 basis points (bps) above the market average – despite the integration of Sigma-Aldrich. Furthermore, we started various innovation projects to support our industry-leading growth and profitability in the future.

We are a highly differentiated leader, positioned for sustained and profitable growth, in Life Science. Working towards 2022, our strategy is to sustain above-market growth in our core businesses , with a focus on our leadership in Bioprocessing and delivering on our strategic initiatives such as End-to-End Bioprocessing and Gene Editing & Novel Modalities. The business sector will concentrate on advancing the already favorable portfolio mix with exposure to growth market segments, full operating leverage driving margin progression, ensuring that our strategic initiatives enable sustained above-market growth and making capacity investments that support industry growth dynamics.

Despite a decline in sales and profits at Performance Materials in 2018, we remain a market leader in this sector. In parallel we embarked on a transformation program to deliver on our strategy of becoming a leading electronics solutions provider and established a new R&D framework.

The focus of Performance Materials is on bringing the business back to a 2 - 3% organic sales growth trajectory from 2020 onwards, implementing our 5-year ‟Bright Future” transformation program and ensuring efficient resource allocation to foster the EBITDA pre margin of around 30%. We aim to further strengthen Performance Material’s position as a leading electronics solutions provider, ensure a stronger focus on existing end market needs and implement a rigorous innovation and project prioritization process.

China is a major innovation hotspot and one of our strategically most important growth markets. Cornerstones of our strategy are further localization via our Healthcare and Life Science production sites in Nantong and the OLED application center in Shanghai, the engagement of key stakeholders in the local environment and tapping into the Chinese innovation ecosystem via our future innovation hubs in Shanghai and Guangzhou. The establishment of both these hubs is already well underway, with scheduled openings in the second half of 2019. Together they will create a strong platform for us and our partners to drive innovation, while also significantly contributing to the range of our activities and general footprint in China.


Our People Strategy aims at building the capability of the organization to shape the future and to address how we as a science and technology company can create a working environment that meets our employees’ individual needs and allows curiosity to unfold. Our growth strategy calls for people with diverse experience and backgrounds who work together on the basis of shared values to create innovation and respond flexibly to changing demands.

Moreover, it is crucial to be perceived as an attractive employer in the market in order to continue to capture the interest of potential employees. The fact that we rank among the world’s best employers was also confirmed by the distinction as ‟Global Top Employer 2018” by the Dutch Top Employers Institute. In addition, we were ranked fifth among employers worldwide in the field of biotechnology and pharmaceutics by Science magazine, a leading peer-reviewed international scientific publication.

Our leaders play a decisive role in our new ‟People Strategy”. We aim to place next to our employees leaders who will develop them for future requirements, not just current needs, and foster the diversity and unique strengths within the organization. At the same time, we want the leadership style of our managers to enable strategic innovation. On top of this, we promote curious talents who can solve complex problems and are passionate about the work they do. We will also strengthen results-driven teams and networks by valuing team collaboration and providing flexible frames for teams and individuals to drive.

In this process, it is our goal to take data-driven decisions, both when hiring new members of staff and in the personnel development of employees (people analytics). Another element of this strategy is the promotion of diversity, with a special focus on women and talent in Asia, and the use of the unique strengths and understanding of key customers and markets that these employees bring. We have to value different perspectives and encourage constructive conflicts.

We place great importance on the continuous advanced training and further development of our managers. This is essential for them to address the diverse needs of their team members and the changing requirements of the businesses and of digitalization. Our leaders are responsible for pushing our strategy ahead by building up the right competences, thereby fostering innovation. As part of this, they take calculated risks, set clear and inspiring direction to their employees and provide the requisite structures and resources.

In the context of the ‟People Strategy” we also want to look at new forms of cooperation and experiment with methods that result in better decision-making. For example, pilot initiatives focus on expanding our ‟Science Network” further. Through this project we are promoting the establishment of a science community within the company to accelerate the exchange of innovative ideas and improve the collaboration between all employees in the Research and Development sector. In the Healthcare sector, we have begun to deepen the awareness of unbiased decision-making. We want to support leaders to help them reflect on their decision-making processes and take unbiased decisions.


Our priority area ‟Technology” is twofold. It is inherent in our business sectors through our innovations, product pipelines and digitalization strategies. In addition, the ways in which we address cross-sector innovations is reflected in our approach to potentially disruptive technologies. It covers the closely interlinked areas of innovation and digitalization. Developing and marketing innovative products and services are at the forefront of our Group strategy and all the business strategies. Our objective is to foster innovations both within the businesses and between them as well as beyond existing businesses into areas in which we are not yet active. In particular, we want to capture the opportunities that digitalization offers in order to create value for patients, customers and business associates. To us, digitalization means the digital integration of our entire value chain, the digitalization of our products, services and communication interfaces to customers as well as the development of new digital business models. This is supported by state-of the-art methods to collect and analyze vast amounts of data. Another example is Syntropy, our intended joint venture with Palantir Technologies to advance cancer research. Syntropy is expected to empower scientists and research centers with a collaborative technology platform to advance cancer research, help drive scientific discovery and improve human lives. Research institutions around the world are generating a rapidly growing amount of biomedical data, but much of it is trapped in silos within and between institutions. Today, this critical data is often inaccessible to the scientists and clinicians who need it to advance their work. Syntropy aims to unlock the value of this untapped data, enabling the world’s leading experts to collaborate in the fight against cancer and many other diseases.

Furthermore, we opened our Innovation Center in Darmstadt as a Group-wide infrastructural commitment to our science- and technology-driven growth. The Innovation Center aims to develop entirely new businesses beyond the current spectrum as well as bring together people, scientific expertise, technologies and skills from different areas under one roof. Our cross- and beyond-sector innovation offers incremental and disruptive ideas and aims to keep us ahead of the game. We are focusing on our activities within three core innovation fields of interest: Liquid Biopsy, Clean Meat and Biosensing and Interfaces. With liquid biopsies, a variety of diseases can be diagnosed through the detection of biomarkers in body fluids. This could be a key technology for early disease detection and for expanding the delivery of precision medicine to more patients. The innovation field Clean Meat comprises technological innovations to meet the world’s growing demand for protein- and nutrient-dense foods made by ethical, eco-friendly methods. The innovation field of Biosensing and Interfaces focuses on the integration of electronics with the human body to create a digital human/biological interface. This could enable faster and more accurate (remote) health monitoring and treatment.

Additionally we focus on disruptive innovation beyond our currently established business sectors. To achieve innovation success, we transform ideas into businesses through different pathways. They include M Ventures, our strategic corporate venture capital fund, with a total volume of € 300 million. M Ventures invests in promising start-ups and businesses within our core business areas and in innovations outside these areas by providing financial and/or strategic value. Furthermore, our Digital Office works to generate new digital business opportunities within our areas of expertise. It also supports the existing businesses in selecting digital projects where maximum value for our company can be generated. The Innovation Ecosystem is responsible for scouting, ideating and delivering new internal projects across and beyond our current scope.

The transformation of our company towards a science and technology company is evident at our Darmstadt site, which we are growing into a center of excellence for science and technology. Our largest site in the world already stands for excellent research and development as well as production that creates value. Darmstadt is the only site at which all three of our business sectors have a presence. In addition to being global Group headquarters, Darmstadt is home to our Executive Board and Group functions. At our new Innovation Center in Darmstadt, internal and external experts collaborate on identifying trends of significance to our business and markets as well as generating technology-driven growth going forward. All in all, this site offers a very good foundation for implementing our Group strategy successfully.

Business strategies


Our Healthcare business sector comprises the Biopharma and Allergopharma businesses. Our businesses specialize in key franchises and specific diseases. Global megatrends such as a growing world population and an increase in average life expectancy continue to drive the demand for our healthcare products. To meet these demands and respond appropriately to the dynamics of our healthcare markets, we have significantly transformed our Healthcare business sector in recent years.

Following on from the successes over the past two years, we continue to drive pipeline projects with the aim of bringing groundbreaking medicines to patients, maximizing our existing portfolio and continuing our expansion in growth markets. The ambition of the Healthcare business sector is to become a global specialty innovator, operating in franchises with significant unmet medical need and bringing high value to patients and consumers. Therefore, we continue to invest in research and development to discover new treatment options and improve existing ones. Together with our stakeholders and partners, we want to ensure that people can access the medicines they need to stay healthy and live longer.

The first pillar of our strategy is to reinforce our global footprint, e.g. bringing the innovation of our pipeline to patients and grow our presence in the United States and in China. The emerging markets and China are expected to be the largest growth driver for our established products in the future. Managing the balance between delivery of innovative medicines while expanding reach and ensuring profitable growth of the existing business will be one of the strategic challenges.

The second pillar of our strategy is the focus on specialty medicine franchises. Here, we expect oncology, immuno-oncology and immunology markets to remain highly attractive in terms of size, growth prospects, and profitability. Within each specialty franchise, our approach is to develop deep internal expertise and insight from internal research to commercialization, augmented by external talent sourcing, strategic partnering and asset acquisitions. Fertility and Endocrinology offer significant opportunities to bring value to patients, with high profitability and growth potential; maximizing the commercial potential of these areas will remain important.

The third pillar of our aspiration is innovation: to develop high-quality, first-to-market and best-in-class therapies, and to build a portfolio in each of our franchises. We have streamlined our pipeline and expanded our innovation capabilities with strong investigational drug candidates. In order to maximize the output of our R&D investments and increase our chances of success in discovering and developing new therapies, we focus our expertise on specific franchises and are exploiting synergies in disease mechanisms and biological pathways. We are investing in digital technologies as well as personalized and translational medicine in order to drive continued pipeline success.

In this context, strategic collaborations are an integral part of delivering on our commitment to transforming the lives of patients living with serious unmet medical needs. We recognize the value of collaboration in the research and development of breakthrough therapies, as well as in strengthening our current portfolio. Here, we focus on balancing the right blend of internal capabilities and external partnerships, building strong collaborations with other leaders in the industry.

On December 1, 2018, we announced the completion of the sale of our Consumer Health business to Procter & Gamble. The divestment of Consumer Health was aligned with our strategy of focusing on our pipeline of innovative medicines.

Life Science

Since closing the acquisition of Sigma-Aldrich, in November 2015, Life Science’s organic sales growth has exceeded that of the industry and has remained the highest among integrated peers.

The Life Science business sector is executing an ambitious strategy to capture near-term opportunities and to invest for future growth. Our integration is on track, and we have consistently outperformed the market during the largest integration in our history and that of the industry.

Our aspiration remains to reinforce our leadership position as a tools and equipment supplier that is solving the toughest problems in life science. This has allowed us to achieve quality growth with a well-leveraged balance sheet.

To sustain our leadership for the future, Life Science has established a strategy based on three key pillars:

  1. Ensure operational excellence by focusing on creating value, building a strong organization and implementing consistent processes
  2. Strengthen the core organization by rejuvenating chemistry and reagents, expanding our leadership in bioprocessing, continuing to access new growth areas and strengthening our e-commerce platform to maintain our leadership position
  3. Establish new growth pillars through our four strategic initiatives: Gene Editing & Novel Modalities, BioReliance® End-to-End Solutions, BioContinuum® Platform and BrightLab™.

We began the year 2018 with a recently signed commercial supply agreement to manufacture viral vectors for bluebird bio, Inc., of Cambridge (Massachusetts, United States), a clinical-stage company that develops potentially transformative gene and cell therapies for severe genetic diseases and T-cell-based immunotherapies for cancer. As part of the multi-year agreement, we will manufacture lentiviral vectors for bluebird bio’s drug products developed to treat a variety of rare genetic diseases.

Throughout 2018, we streamlined our business through integrating strategic initiatives, such as single-use technologies for Bioprocessing, into the base business. We expanded our foundational intellectual property for our CRISPR technology with patents in key markets in Asia Pacific, the Middle East and Europe. We also expanded our business sector through the opening of new facilities throughout Asia and South America.

Looking ahead, we expect our strategy to continue to deliver net sales growth ahead of the market and maintain our market leading EBITDA pre margin. Our priorities for 2019 are to continue to support new growth pillars with our Gene Editing & Novel Modalities offerings, as well as differentiated gene editing tools, drug safety systems and models, and clinical viral manufacturing. In addition, we will further develop our BioReliance® End-to-End Solutions, a service offering for process development and manufacturing for emerging biotechs as well as our BioContinuum™ Platform, to address intensified bioprocessing and continuous manufacturing. We will also focus on expanding the use of BrightLab™, our digital ecosystem for complete lab management.

Performance Materials

Performance Materials targets attractive end markets that are driven by megatrends: digitalization, urbanization, mobility and affluency will drive advanced electronic systems with semiconductors at their heart. As a result, electronics demand is expected to grow for the foreseeable future. Roughly 80% of our sales are currently linked to the electronics market, which of course includes our Semiconductor Solutions and Display Solutions business units, but also parts of Surface Solutions.

The remaining 20% of our sales relate to the automotive and cosmetics market served by Surface Solutions. We expect demand in these segments to likewise benefit from global trends such as increasing affluency in developing countries.

Within the electronics market, we are active in the field of semiconductor and display solutions, targeting a material market of about € 85 billion. We are already one of the largest players in this field, while operating in selected and highly attractive market segments. In coming years, we expect that the market for liquid crystal materials for TVs – still our largest business and one of the most attractive – will continue to decline. For us, after 2019, this development is expected to be more than offset by growth in OLED materials and photoresists as well as in semiconductor materials and our solutions for surfaces. As a result, we want to achieve an attractive average sales growth of 2 - 3% after 2019 and to generate EBITDA pre margins of around 30%, substantially above the specialty chemicals industry average.

We have a solid foundation: a strong global customer network, a proven track record of delivering high-tech solutions, an efficient production infrastructure and the highest quality standards throughout the industry. Our innovative solutions allow us to establish intimate and long-term customer relationships, and understand the changing requirements of end customers in markets as diverse as consumer electronics, automotive and cosmetics.

The market segments we operate in represent a well-balanced mix of new and fast-growing areas (such as deposition materials in Semiconductor Solutions or OLED materials in Display Solutions), but also more mature segments where we have established ourselves as the clear market leader (liquid crystals for Display Solutions, for example, or pearlescent pigments used for coatings).

Our priorities are:

  • Focus on the attractive electronics market to achieve long-term organic growth perspective of 2 – 3% per year (CAGR)
  • Allocate our resources more efficiently to maintain an above-industry EBITDA pre margin of around 30%
  • Actively manage our portfolio and expand our partnership network
  • Foster our customer-centric orientation with an integrated R&D approach to better serve market and customer needs

Strategic finance and dividend policy

We are pursuing a conservative financial policy characterized by the following aspects:

Financial flexibility and a conservative funding strategy

We ensure that we can fulfill our obligations at all times. In this context, we pursue a conservative, proactive financing strategy in which we deploy a variety of financial instruments. We have diversified and profitable business activities as the basis for our strong and sustainable cash flow generation capacity. In addition, we have several sources of financing, including a € 2 billion syndicated loan facility that was renewed in 2018 and is in place until 2023 to cover any unexpected cash needs. The facility is a pure back-up credit facility and has not been drawn on so far. In addition, we have a commercial paper program with a volume of € 2 billion at our disposal. Within the scope of this program, we can issue short-term commercial paper with a maturity of up to one year. Furthermore, in 2018 we used bilateral bank loan agreements with first-class banks in order to optimize the funding structure and cost.

The bond market additionally represents a key source of financing. The most recent bond issues took place in 2014 and 2015 in connection with the acquisition of Sigma-Aldrich. They have terms that run to 2025, with the first redemption options for hybrid bonds in 2021 and 2024. The use of various instruments provides a broad financing basis and addresses different investor groups.

Maintaining sustainable and reliable business relations with a core group of banks

We mainly work with a well-diversified, financially stable and reliable group of banks. Due to our long-term-oriented business approach, bank relationships typically last for many years and are characterized by professionalism and trust. The banking group consists of banks with strong capabilities and expertise in various products and geographic regions. We regard these banks as strategic partners. Accordingly, we involve them in important financing transactions.

Strong investment-grade rating

The rating of our creditworthiness by external rating agencies is an important indicator of the company’s financial stability. A strong investment-grade rating is an important cornerstone of our financial policy, as it safeguards access to capital markets at attractive financial conditions. Our company currently has a Baa1 rating from Moody’s, an A rating from Standard & Poor’s (S&P), and an A– rating from Scope, each with a stable outlook.

Dividend policy

We are pursuing a sustainable dividend policy. Provided that the economic environment develops in a stable manner, the current dividend represents the minimum level for future dividend proposals.

The dividend policy is oriented towards the business development and earnings increase of the coming years. However, dividend growth could deviate, for example, within the scope of restructuring or in the event of significant global economic developments. We aim for a target corridor of 20% to 25% of earnings per share pre.