Show all results

Healthcare

9.75 KBEXCEL
Healthcare
Key figures        
      Change
€ million 2019 2018 € million %
Net sales 6,714 6,246 468 7.5%
Operating result (EBIT)1 1,149 731 418 57.2%
Margin (% of net sales)1 17.1% 11.7%    
EBITDA1 1,896 1,492 404 27.1%
Margin (% of net sales)1 28.2% 23.9%    
EBITDA pre1 1,922 1,556 366 23.5%
Margin (% of net sales)1 28.6% 24.9%    
Business free cash flow1 1,252 1,025 227 22.1%
1 Not defined by International Financial Reporting Standards (IFRSs).

Development of sales and results of operations

In fiscal 2019, the Healthcare business sector recorded net sales of € 6,714 million (2018: € 6,246 million). Total growth of € 468 million or 7.5% was generated compared to the 2018 reporting period, consisting of organic growth amounting to 6.2% and positive exchange rate effects of 1.3%. The positive exchange rate effects resulted, in particular, from the trends of the U.S. dollar, the Chinese renminbi, and the Japanese yen.

The net sales in the individual quarters as well as the respective organic growth rates in 2019 are presented in the following graph:

  

Net sales and organic growth1 by quarter2

€ million/organic growth in %
Not defined by International Financial Reporting Standards (IFRSs).
2 Quarterly breakdown unaudited.

Net sales of the key product lines and products developed as follows in 2019:

6.25 KBEXCEL
Healthcare
Net sales by major product lines/products
€ million 2019 Share Organic ­
growth1
Exchange ­
rate ­
effects
Total change 2018 Share
Oncology 1,030 15% 8.9% 0.2% 9.1% 944 15%
thereof: Erbitux® 871 13% 6.7% -0.1% 6.6% 816 13%
thereof: Bavencio® 103 2% 44.1% 3.9% 48.0% 69 1%
Neurology & Immunology 1,594 24% 1.8% 2.5% 4.2% 1,529 24%
thereof: Rebif® 1,273 19% -13.9% 2.4% -11.5% 1,438 23%
thereof: Mavenclad® 321 5% >100.0% 3.7% >100.0% 90 1%
Fertility 1,247 19% 5.9% 1.4% 7.3% 1,162 19%
thereof: Gonal-f® 743 11% 3.3% 1.6% 4.9% 708 11%
General Medicine & Endocrinology 2,557 38% 8.3% 0.9% 9.2% 2,341 38%
thereof: Glucophage® 877 13% 18.5% 1.1% 19.6% 733 12%
thereof: Concor® 530 8% 10.4% 1.2% 11.6% 475 8%
thereof: Euthyrox® 402 6% 10.4% 0.2% 10.6% 363 6%
thereof: Saizen® 238 4% 3.3% -1.6% 1.7% 234 4%
Other 287 4%       270 4%
Healthcare 6,714 100% 6.2% 1.3% 7.5% 6,246 100%
1 Not defined by International Financial Reporting Standards (IFRSs).

Oncology drug Erbitux® (cetuximab) showed a positive organic sales trend of 6.7%, with the addition of Erbitux® to the National Reimbursement Drug List (NRDL) in China being a major contributing factor. In addition, in September 2019, the National Medical Products Administration (NMPA) of China approved Erbitux® for the first-line treatment for patients with RAS wild-type metastatic colorectal cancer (mCRC) in combination with FOLFOX or FOLFIRI, or in combination with irinotecan in patients who are refractory to irinotecan-containing chemotherapy. As a result, the Asia-Pacific region generated organic sales growth of 31.1%. By contrast, the situation in Europe remained marked by a difficult competitive environment, which led to an organic sales decline of -6.8%. Global net sales of Erbitux® in fiscal 2019, taking into account slightly negative exchange rate effects, increased by 6.6% to € 871 million (2018: € 816 million).

In the field of immuno-oncology, sales of oncology drug Bavencio® (avelumab) rose organically by 44.1% and reached € 103 million (2018: € 69 million), supported by a positive exchange rate trend of 3.9%. The extension of approval in various regions contributed to this growth. In May 2019, for example, the United States Food and Drug Administration (FDA) issued approval for the combination of Bavencio® (avelumab) plus axitinib for patients with advanced renal cell carcinoma. The European Commission followed suit in October with the approval of Bavencio® (avelumab) in combination with axitinib as a first-line treatment in patients with advanced renal cell carcinoma. In Japan, too, approval was granted in December 2019.

A material contribution to the pleasing organic growth of the Healthcare business sector amounting to 6.2% came from Mavenclad®, a medicine for the oral short-course treatment of highly active relapsing multiple sclerosis. Mavenclad® generated net sales of € 321 million in fiscal 2019 (2018: € 90 million), a three and a half times increase on the prior-year figure. The sharp rise in sales of Mavenclad® was also thanks to the FDA approval in the United States in March 2019, where Mavenclad® was approved as the first and only oral short-course treatment of highly active relapsing and active secondary progredient multiple sclerosis. This means that the therapy is now available in more than 70 countries, including the countries of the European Union, Australia, Canada, and the United States.

4.83 KBEXCEL   
Healthcare
Sales and organic growth1 of Rebif® and Erbitux® by region– 2019
Total Europe North America Asia-Pacific (APAC) Latin America Middle East and Africa (MEA)
Rebif® € million 1,273 340 809 12 43 70
Organic growth1 in % -13.9% -13.7% -16.5% -5.9% 0.1% 9.9%
% of sales 100% 27% 64% 1% 3% 5%
Erbitux® € million 871 405 344 72 50
Organic growth1 in % 6.7% -6.8% 31.1% 16.5% -11.1%
% of sales 100% 47% 39% 8% 6%
1 Not defined by International Financial Reporting Standards (IFRSs).

Sales of the drug Rebif®, which is used to treat relapsing forms of multiple sclerosis, saw an organic decline in net sales of -13.9% in 2019. Including positive exchange rate effects, net sales of € 1,273 million were recorded in 2019 (2018: € 1,438 million). This trend resulted from an organic decline on the main sales market, North America, amounting to -16.5%, followed by Europe with -13.7%. The drop in sales was attributable to the persistently difficult competitive situation on the interferon market and the competition from alternative therapies, including oral dosage forms. Since October 2019, Rebif® has been approved as well in the European Union for use during pregnancy and breast-feeding if clinically needed. The use of Rebif® while breast-feeding is an important option because many patients experience a relapse in the first three months after birth.

Gonal-f®, the leading recombinant hormone used in the treatment of infertility, generated organic growth of 3.3%. Including positive exchange rate effects, global sales increased by 4.9% to € 743 million (2018: € 708 million). North America and China, in particular, contributed to the organic growth.

The General Medicine & Endocrinology franchise (including CardioMetabolic Care) generated organic growth of 8.3% in comparison with the prior-year period. The franchise includes medicines to treat cardiovascular diseases, thyroid disorders, diabetes, and growth disorders. In all, the franchise generated net sales of € 2,557 million in fiscal 2019 (2018: € 2,341 million), equivalent to growth of 9.2%, of which 8.3% was organic and 0.9% currency-related.

The diabetes drug Glucophage®, the best-selling product in this area, recorded organic growth of 18.5%. The main driver was the positive development in China. Taking into account positive exchange rate effects, global Glucophage® sales increased to € 877 million (2018: € 733 million).

Double-digit sales growth (10.4%) was also achieved with beta-blocker Concor®. Additional positive exchange rate effects prompted an increase in sales of 11.6% to € 530 million. Net sales in the previous year were € 475 million.

A positive performance was also recorded by Euthyrox®, a medicine to treat thyroid disorders, with organic sales growth of 10.4%. Net sales thus increased to € 402 million (2018: € 363 million), with exchange rate effects playing only a minor role.

The organic sales growth of 3.3% reported by growth hormone Saizen® was reduced to 1.7% due to a negative exchange rate effect; as a result, sales overall rose to € 238 million (2018: € 234 million).

Net sales of the Healthcare business sector by region in 2019 developed as follows:

10.2 KBEXCEL
Healthcare
Net sales by region
€ million 2019 Share Organic growth1 Exchange rate ­
effects
Acquisitions/­
divestments
Total change 2018 Share
Europe 2,241 33% 2.1% -0.4% 1.7% 2,203 35%
North America 1,474 22% -2.0% 4.9% 2.9% 1,432 23%
Asia-Pacific (APAC) 1,816 27% 19.0% 2.0% 21.0% 1,501 24%
Latin America 702 11% 9.8% -3.6% 6.2% 661 11%
Middle East and Africa (MEA) 482 7% 4.4% 3.0% 7.4% 448 7%
Healthcare 6,714 100% 6.2% 1.3% 7.5% 6,246 100%
1 Not defined by International Financial Reporting Standards (IFRSs).

The following table presents the composition of EBITDA pre in fiscal 2019 in comparison with 2018. The IFRS figures have been modified to reflect the elimination of adjustments included in the functional costs.

11.21 KBEXCEL
Healthcare
Reconciliation EBITDA pre1
  2019 20182 Change
€ million IFRSs Elimination of ­
adjustments
Pre1 IFRSs Elimination of ­
adjustments
Pre1 Pre1
Net sales 6,714 6,714 6,246 6,246 7.5%
Cost of sales -1,605 -1,605 -1,425 7 -1,419 13.1%
Gross profit 5,109 5,109 4,820 7 4,827 5.8%
Marketing and selling expenses -2,305 3 -2,303 -2,349 10 -2,339 -1.5%
Administration expenses -344 15 -329 -329 28 -301 9.2%
Research and development costs -1,666 2 -1,663 -1,687 1 -1,686 -1.4%
Impairment losses and reversals of impairment losses on financial assets (net) -1 -1 -3 -3 -61.7%
Other operating income and expenses 357 6 363 279 29 308 17.8%
Operating result (EBIT)1 1,149     731      
Depreciation/amortization/impairment losses/reversals of impairment losses 747 -1 746 761 -11 749 -0.5%
EBITDA1 1,896     1,492      
Restructuring expenses 17 -17 12 -12  
Integration expenses/IT expenses 13 -13 18 -18  
Gains (-)/losses (+) on the divestment of businesses -5 5 26 -26  
Acquisition-related adjustments  
Other adjustments 8 -8  
EBITDA pre1 1,922 1,922 1,556 1,556 23.5%
thereof: organic growth1             19.5%
thereof: exchange rate effects             4.1%
thereof: acquisitions/divestments            
1 Not defined by International Financial Reporting Standard (IFRSs).
2 Previous year’s figures have been adjusted, see Note (45) “Effects from new accounting standards and other presentation changes” in the Notes to the Consolidated Financial Statements.

Gross profit of the Healthcare business sector after adjustments amounted to € 5,109 million and was 5.8% above the prior-year period (2018: € 4,827 million). The increase is essentially attributable to the strong organic development of net sales. The resulting gross margin declined slightly compared to the prior year, to 76.1% (2018: 77.2%). The 13.1% rise in the cost of sales also includes higher license expenses for Mavenclad®, which developed in line with the higher sales volume.

Marketing and selling expenses after adjustments amounted to € 2,303 million (2018: € 2,339 million) and showed a slight decline (-1.5%). At € 1,663 million (2018: € 1,686 million), research and development costs also remained at a comparable level to the prior year (-1.4%). This reflects continued investments in the development pipeline. The income balance of other op­er­at­ing expenses and income rose by 17.8% to € 357 million after adjustments (2018: € 308 million). Various lump sums recognized in fiscal 2019 made a material contribution to this increase. In connection with the sale of Palynziq™ rights to BioMarin Pharma­ceutical Inc., United States, in 2016, a milestone payment of € 75 million was recognized in 2019 (2018: € 50 million). Following the extension of approval of Bavencio® for the treatment of advanced renal cell carcinoma in combination with axitinib in the United States, the EU, and Japan, milestone payments of € 90 million were generated from the partnership with Pfizer.

The upfront cash payment of € 300 million from the alliance with GlaxoSmithKline plc., United Kingdom, for the joint development and marketing of bintrafusp alfa is recognized in the income statement in accordance with the fulfillment of contractually promised goods and services, and had a positive effect of € 92 million in fiscal 2019. The increase in income was also accompanied by higher expenses. Among other things, an impairment loss was recognized in 2019 in connection with an intangible asset from the collaboration with F-star Delta Ltd. in the field of immuno-oncology (see Note (6) “Collaborations” in the Notes to the Consolidated Financial Statements).

EBITDA pre recorded a highly gratifying development in 2019, rising by 23.5% to € 1,922 million (2018: € 1,556 million). Organic earnings growth was 19.5%; this figure includes the positive effects from the application of IFRS 16 “Leases” amounting to € 52 million. Overall, the EBITDA pre margin also showed growth of more than 3 percentage points to 28.6% (2018: 24.9%).

The development of EBITDA pre in the individual quarters in comparison with 2018 is presented in the following overview:

Healthcare 

EBITDA pre1 and change by quarter2

 € million/change in %
1Not defined by International Financial Reporting Standards (IFRSs).
2Quarterly breakdown unaudited.

Development of business free cash flow

In 2019, the business free cash flow amounted to € 1,252 million (2018: € 1,025 million) and thus grew by 22.1%. This de­vel­op­ment was primarily attributable to the higher EBITDA pre, which more than offset the inventory build-up and increase in re­ceiv­ables.

9.99 KBEXCEL
Healthcare
Business free cash flow1
      Change
€ million 2019 2018 € million %
EBITDA pre1 1,922 1,556 366 23.5%
Investments in property, plant and equipment, software as well as advance payments for intangible assets -427 -395 -32 8.1%
Changes in inventories -94 -55 -38 69.3%
Changes in trade accounts receivable as well as receivables from royalties and licenses -100 -81 -19 23.6%
Lease payments2 -50      
Business free cash flow1 1,252 1,025 227 22.1%
1 Not defined by International Financial Reporting Standards (IFRSs).
2 Excluding payments for low-value leases and interest components included in lease payments.

The development of business free cash flow items in the individual quarters in comparison with 2018 is presented in the following overview:

Healthcare 

Business free cash flow1 and change by quarter2

€ million/change in %
1Not defined by International Financial Reporting Standards (IFRSs).
2Quarterly breakdown unaudited.