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We remain firmly positioned to return to growth in 2024 and generate long-term, sustainable value for our owners, shareholders, customers, patients, employees, and society.

Belén Garijo Chair of the Executive Board and CEO

Letter from
Belén Garijo

In Handwriting: Dear shareholders, dear friends, (Handwriting)

We have successfully navigated through many challenging times in our 355-year history. The year 2023 provided yet another opportunity to demonstrate our resilience to the world. Despite a difficult global macroeconomic environment and the geopolitical situation, our Group performed robustly.

Once again, we demonstrated the competitive strengths of our people, the diversification of our business sectors, and our global footprint. In our Life Science business, demand declined as expected in 2023 due to the end of the Covid-19 pandemic. Pronounced destocking by customers within Process Solutions has also been longer in duration than expected. In parallel, our Electronics business faced a prolonged downcycle in Semiconductor Solutions and the Display Solutions unit was affected by low customer demand.

The strong performance of our Healthcare business sector mainly offset these temporary, industry-wide challenges. In particular, our new products experienced robust growth. Full-year net sales of our multiple sclerosis medicine Mavenclad® exceeded US$ 1 billion for the first time, joining our cancer medicine Erbitux®, which maintained its blockbuster status for the second year in a row. Our immuno-oncology drug Bavencio®, to which we regained sole ownership rights on June 30, 2023, generated organic net sales growth of 23.4%. This was complemented by the solid performance of both our Fertility and our Cardiovascular, Metabolism, and Endocrinology franchises.

The competitive strength of our global business footprint was demonstrated by moderate Group exposure to localized economic trends in 2023. Our business operations in Asia-Pacific, North America and Europe as well as other geographic regions made important financial contributions.

Overall, Group net sales of € 21.0 billion were about at the mid-point of the absolute guidance range. Due to the aforementioned factors as well as negative foreign exchange effects and inflationary pressures, EBITDA pre in 2023 was also within our guidance range at € 5.9 billion, albeit at the lower end of the corridor.

We are grateful to our approximately 63,000 employees around the world for their exceptional dedication and resilience and would like to thank our many partners and suppliers for their important contributions to this performance. Furthermore, in recognition of the contribution of shareholders, we will propose to the Annual General Meeting a dividend of € 2.20 per share for 2023.

Looking forward, we expect that global economic and geopolitical challenges will continue to adversely affect our activities through 2024. However, based on current forecasts, we anticipate a gradual return to organic sales growth during the year.

We expect our Life Science business sector to recover in the course of the year with the expected end of the destocking phase within Process Solutions on the one hand and improving conditions in Science & Lab Solutions on the other hand. Within our Healthcare business sector, growth rates should begin to normalize and more closely align with our mid-term targets. And within our Electronics business sector, we expect to benefit from an upswing in customer demand for Semiconductor Solutions as the market gradually recovers.

Looking beyond 2024, our Group remains firmly positioned for long-term growth and impact as a leading science and technology company with a clear purpose to advance human progress. In addition to favorable macrotrends such as the digital transformation of markets by generative AI and machine learning technologies, many other forces are expected to drive growth across each of our three sectors. They include novel drug modalities in Life Science, growing patient needs for cancer, neurological and immunological treatments in Healthcare, and AI-enabling chips and high-performance computing demanding more and novel materials in Electronics. Our teams are closely monitoring these and other trends to help us anticipate potential scenarios and adapt with speed and agility to protect or expand our competitive positions.

We continue to make strategic investments, enter collaborations, and adapt our businesses in order to constantly improve our competitive position and anticipate emerging market needs even more proactively. In Germany, the United States, Switzerland, China, the United Kingdom, Korea, and other countries across our global network, we invested significantly in new and upgraded sites and capabilities. With these and other significant capital expenditure projects, we are striving to move even closer and become more responsive to customers and patients worldwide. We assume that this overall momentum in operational expenditure will continue through 2025 and beyond. However, we reserve the flexibility to respond to further market changes.

Despite the disappointing news in December 2023 that the Phase III clinical trials of evobrutinib did not meet their primary endpoints, we remain confident in the position of our Healthcare business sector as a global specialty innovator. In addition to the continued resilience of our established product portfolio, we look forward to the progress of many investigational therapies within our Healthcare pipeline, such as xevinapant in oncology and enpatoran to treat autoimmune diseases such as systemic and cutaneous lupus erythematosus. Boosted by various in-licensing of external innovation, including those announced in 2023, such as with Hengrui and Abbisko, we aim to introduce one new product or major indication every 1.5 years on average.

Finally, I am pleased by the significant strides being made to achieve our three core sustainability targets. By 2030, we aim to have fully integrated sustainability into our value chains and contributed to human progress for more than one billion people through sustainable science and technology. And by 2040, we expect to achieve climate-neutrality and significantly reduce our resource consumption. After entering into virtual power purchase agreements in 2023, renewable energy is expected to cover 100% of our current electricity purchases in Europe, more than 90% in North America, and 70% worldwide from 2025.

As you continue to read this Annual Report, you will see that we remain firmly positioned to both return to growth in 2024 and generate long-term, sustainable value for our owners, shareholders, customers, patients, employees, and society.

On behalf of the Executive Board, I thank you and all our other shareholders for your ongoing trust and support.


Signature Belén Garijo (Signature)

Belén Garijo

Chair of the Executive Board and CEO

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