Aug 01, 2024 / 12:00PM GMT
Operator
Dear ladies and gentlemen, welcome to the Merck investor and analyst conference call on the second quarter 2024. (Operator Instructions)
I am now handing over to Constantin Fest, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir.
Constantin Fest - Merck KGaA - Head of Investor Relations
Thank you very much, Heidi, and a very warm welcome from my side to this Merck Q2 2024 results call. My name is Constantin Fest. I'm Head of Investor Relations here at Merck.
And I'm delighted to have today here with me Belén Garijo, the Group CEO; as well as Helene von Roeder, Group CFO. Also, joining for the Q&A part of this call, we have Matthias Heinzel, CEO of Life Science; as well as Peter Guenter, CEO of Healthcare; and Kai Beckmann, CEO of Electronics.
In the first few minutes of this call, we would like to guide you through the key slides of this presentation. After that, we'd be happy to take all of your questions.
With this, we are ready to directly start, and I'd like to now hand over to you, Belén, to kick us off. Over to you, Belén.
Belen Garijo - Merck KGaA - Chairman of the Executive Board, Chief Executive Officer
Thank you, Constantin. Welcome, everybody, to our Q2 earnings call. Please stay on slide number 5 of the presentation where we have the highlights of the quarter.
First of all, we had a very strong second quarter, significantly beating expectations, as you saw in our ad hoc release from Friday of last week. Healthcare continues to show excellent performance across the portfolio at very attractive underlying margins. In electronics, the good news is the semi market for AI and advanced nodes has inflected, driving sales and EBITDA pre of the business, while life science performed within expectations. And I am happy to say that Merck has already returned to organic and reported sales growth in Q2.
The low light of the quarter was certainly the termination of our Xevinapant program. While you may have questions on it after the introduction, I want to say very clearly that, a priori, it does not change our capital allocation priorities.
Turning to our operating performance, the group sales increased by 2% organically, and as a result of one-timers, primarily, EBITDA pre went down by minus 1% organically. Life science showed an organic sales decline of minus 4%, with the magnitude of the year-on-year decline being less pronounced than in Q1. Be reminded that while we no longer segregate the effect of COVID-related sales, it still represents a headwind for life science as a business, as well as for the group in 2024, since we delivered EUR250 million of COVID sales in 2023.
Healthcare, again, contributed to the positive organic performance of the group, with plus 5% organic sales growth, driven primarily by our CM&E and oncology franchises. Electronics was the best performer this quarter, with 8% organic sales growth, driven by semiconductor solutions, which showed year-on-year growth for the second quarter in a row at an accelerated pace.
Reported sales were EUR5.352 billion, which is an increase of 1%, as the currency was a 1-percentage-point headwind. Reported EBITDA pre of EUR1.509 billion was down by 3%, including a slightly dilutive effect on FX. On EPS pre, we are back at the level of Q2 2023 of EUR2.20.
Beyond our strong operational execution, you have also seen a number of portfolio announcements for Merck overall; first of all, the divestiture of surface solutions. Even though surface solutions only represents a little more than 10% of our sales in electronics and around 2% of the group sales, the divestiture of surface solutions is strategically relevant, since it will help us further sharpen our focus on high-tech applications in electronics. It follows a suite of different activities, both in electronics and life science, over the last few months, which expands our portfolio in the breakthrough technologies of the future and, as well, supports our long-term growth journey.
Mirus Bio complements our offering for the development and production of novel modalities, such as cell and gene therapy. Unity-SC adds metrology and inspection tools that increase our relevance to customers for AI in semiconductors.
Now, turning to the guidance, we are upgrading our forecast and now anticipate net sales in a range of EUR20.7 billion to EUR22.1 billion, EBITDA pre of EUR5.8 billion to EUR6.4 billion, and EPS pre of EUR8.20 to EUR9.30, thereby slightly improving our guidance corridor for organic growth in sales and lifting our organic growth guidance range for EBITDA pre. I will cover more details on our assumptions at the end of the presentation.
And now, on page number 6, for an overview of our performance by business sector, as announced last Friday in our ad hoc, our key growth engines in the quarter were electronics and healthcare, while life science performed within expectations. Life science showed a decline of 4% organically, still against a somewhat strong base in 2023.
While science and lab solutions and life science services were up in the quarter, process solution was still down organically, but also to a lesser extent than in Q1. Order intake in process solution grew sequentially and year on year for the second quarter in a row. Book-to-bill stayed at around 1, as we have projected, and this is giving us confidence that life science will return to organic sales growth in the second half of this year.
Healthcare delivered a robust organic sales performance in Q2 and raised revenues by 5%. This was mainly driven by the CM&E portfolio, as I mentioned before, which was up 14%, and our oncology portfolio that grew 9% in the quarter, with both Erbitux up 8% organically and Bavencio with 6% organic sales growth having contributed. Mavenclad hit record sales ever in the quarter. However, you have seen that organic growth was muted because of a particularly strong Q2 2023 when we saw some channel dynamics that distorted that quarter in '23.
At 8%, electronics showed the strongest organic growth of all the three business sectors in Q2, as our semi business was up by 11%, driving the growth of the electronics sector. Display solution was slightly down organically year on year, and for the group, FX was a headwind on sales across the board with a minus 1% impact.
Regarding earnings, now, EBITDA pre came in at EUR1.509 billion, only slightly down organically by minus 1% or minus EUR12 million in absolute terms. This was due to life science, where organic EBITDA pre was down by 6% or minus EUR44 million in quarter two. For healthcare, we were able to show an organic EBITDA pre growth of 5% in Q2, about in line with organic sales growth, even though we booked a termination provision of a mid-double-digit million euros amount on Xevinapant in Q2 this year.
EBITDA pre in electronics was down by 3% organically, and this is in relation to the one-time impact from the UDC patent agreement that you may remember we landed in the year earlier quarter, so in 2023. FX was a stronger headwind on EBITDA pre than on sales, mainly due to healthcare and life science. I would also like to highlight that excluding that UDC patent agreement one-timer from Q2 last year and the termination provision of Xevinapant from Q2 this year, reported EBITDA pre for the group would have shown robust growth in the mid-single-digit percentages.
With this, I'm going to hand it over to Helene for a more detailed review of our financials.
Helene von Roeder - Merck KGaA - Chief Financial Officer, Member of the Executive Board
Thank you very much, Belén, and a warm welcome also from my side. I am now on slide 8 for an overview of our key figures in the first quarter.
Let me emphasize, we not only returned to organic sales growth in Q2, but we also made it back to reported sales growth. Taking into account currency headwinds of minus 0.7%, net sales did increase by 0.9% to EUR5.352 billion. On the back of the Xevinapant termination provision, EBITDA pre was down by 2.9% to EUR1.509 billion, with a slightly higher FX headwind on EBITDA pre compared to sales. EPS pre was flat at EUR2.20.
Operating cash flow came in strong at EUR861 million, which represents an increase of 38.4% over the year-earlier period that was mainly due to lower bonus payments, as well as LTIP.
Net financial debt increased by EUR450 million compared to the end of December '23, which is mainly due to the payment of our dividends which took place in the second quarter.
So let me also briefly comment on our reported results, and with that, I am now on slide 9. EBIT was down by 18.3% year on year. This was above the decline in EBITDA pre, mainly as a result of the high level of DNA, which was in turn due to the EUR140 million impairment we are taking on Xevinapant, as well as the operating performance on life science.
The financial result was markedly up by EUR69 million to just minus EUR7 million in the quarter. This was mainly driven by tax items and lower provisions for a long-term incentive plan alongside higher interest income. The effective tax rate came in at 22.9%, which is at the top end of our guidance range of 21% to 23% and reflects a slight shift in the overall tax rate for the full year due to the Xevinapant program termination and as well due to a slight increase in the expected pillar 2 expenses.
Reported EPS came in at EUR1.40, which represents a decline of 13.6% year on year.
Now with that, let's move on to the review by business sector, and I'm starting with life science on slide 10. Overall, life science did deliver on our expectations in Q2. Sales were still down 3.7% organically year on year in the quarter. But remember, we only started to see the full effect of customer destocking in process solutions over the course of Q2 of last year.
In Q1 '24, we still had an organic sales decline of 12.6%, so we saw a trend reversal, and importantly, life science improved sequentially across the board. Supported by a broad and diversified position, we continue to expect a further recovery during 2024. Now, two of the three businesses in life science also showed organic sales growth year on year in Q2.
So with that, looking at process solutions first, the business which faced the toughest comps in Q2, sales were down 12% organically, which represents an improvement versus the minus 19% which we have seen in Q1. Sales showed a positive sequential trend and went up by 7% quarter on quarter. Order intake, again, went up sequentially as well as year on year. Book-to-bill remained at around 1. We continue to expect a sequential improvement in order intake throughout the year and that book-to-bill will remain at around 1 during 2024.
Now, we will take a closer look at science and lab solutions. Sales were up 1% organically, the first positive organic sales development year on year since Q1 '23, and it was driven by demand from industrial and testing, as well as diagnostics. Demand from pharma companies has remained soft, especially in North America, while academic research spending is experiencing more normalized growth now in 2024. Sequentially, sales in science and lab solutions were up in Q2 and, therefore, grew for the third quarter in a row.
Turning to life science services, our third and smallest business within life science, sales increased by 8% organically, driven by our clinical testing business, which went up in the mid-teens. Our CDMO activities also increased slightly. Looking to the coming quarters, I would like to mention that our CDMO business can be volatile on a quarterly basis, as project phasing has a significant impact on the performance. When modeling Q3, it should also be remembered that we benefited from an end of a contract payment of a low to mid-double-digit euro million amount relating to COVID in Q3 of last year.
EBITDA pre declined 6.1% organically in Q2, which was mainly due to lower volumes with idle costs from underutilization. Sequentially, however, EBITDA pre increased, with the margin having moved up by 50 basis points as a result of stringent cost control, as well as some operational leverage.
I am now on slide 11 for an overview of the performance of our healthcare business sector. Healthcare delivered a robust organic sales growth of 5.3% in Q2. By franchise, it was our CM&E portfolio which was a star performer at plus 14% organically, with strong growth supported by contributions across all segments and all regions. The growth has been amplified by successful tender business and the prior year's slowdown in the diabetes market in China.
Oncology showed a strong performance in Q2, growing 9% organically. This was also driven by all brands. Erbitux was up 8%, supported by nearly all regions. And also, Bavencio grew by 6%, in line with our expectations. With all regions up, except North America, our competitive pressures led to a decline in the mid-teens. As a reminder, Bavencio sales in North America make up less than 30% of the global Bavencio sales. And furthermore, Tepmetko also contributed to the organic growth of the oncology franchise.
Our NNI franchise was down 7% organically this quarter. Mavenclad grew only 1% organically versus a high basis last year. This is also the case for Rebif, which declined by 18% organically this quarter. Looking at the H1 numbers, the NNI franchise has been stable. Regarding Mavenclad, we hit record sales this quarter. US prescriptions continue to expand, both in breadth and in depth.
Concerning the pipeline, as announced in June, we decided to discontinue the Xevinapant Phase 3 program based on the insight into the data we gained from the interim analysis of the TrilynX study in Q2. In NNI, we initiated a new Phase 3 program to investigate cladribine in generalized myasthenia gravis. The recruitment to the study is now open. At ASCO, we have presented strong data for our ATR inhibitor tuvusertib and ADC M9140 and are now moving on to the execution of our DDR and ADC strategy.
So with that, coming to EBITDA pre, I am happy to say that even though we booked a mid-double-digit million euro termination provision on Xevinapant in Q2, our EBITDA pre margin declined only slightly from 34.3% to 33.7%. It was a strong sales growth, which supported the gross margin, paired with lower underlying R&D and a positive effect of the Bavencio repatriation, which is now coming close to its first anniversary.
For modeling, we expect underlying R&D to remain structurally lower also for the remainder of 2024. Please do have in mind that the provisions for both [ibuprofenib] and Xevinapant have an impact on our absolute R&D costs in 2024. We also expect gross margin levels to normalize more in line with the last quarters amid rebate dynamics. Overall, EBITDA pre amounted to EUR720 million in Q2 and was up 4.6% organically, only slightly below the organic growth in sales.
And with that, we will now move on to electronics on slide 12. Electronics showed an acceleration of organic growth to 7.6% in Q2. The key driver was semiconductor solutions, which was up 11% organically. All semiconductor materials businesses drove organic growth in the quarter, driven by AI and advanced nodes, while our DS&S business was largely flat sequentially and year on year.
As we mentioned in our last earnings call in May, we generated revenues until the conclusion of the large US project in Q1, which did support our Q1 DS%S sales. However, contrary to our expectations, we did see an unanticipated increase in demand for delivery equipment during Q2, which compensated for the large project we knew that was ending in Q1 in the US.
Our semiconductor materials business continued to deliver sequential growth at a stronger pace. While a wider inflection of mainstream semiconductor end markets, particularly in the areas of 3D NAND and analog, is not yet visible, the semi-market for advanced nodes and AI has inflected. We've seen an acceleration in demand for thin-film materials for advanced logic nodes and semiconductors, which is driving sales.
Turning to display solutions, we saw a slight organic sales decline of minus 2%. Volume growth was again not able to offset continuous price pressure in liquid crystals.
Belén has already spoken about the strategic rationale to sell surface solutions, so let me also say a few words about the financial implications. As the expected completion of the transaction is more than 12 months away, it will remain part of the reporting and group guidance. We will not define surface solutions as a discontinued business or as it held for sale as of now.
Returning to our performance in the quarter, the EBITDA pre margin declined by minus 240 basis points year on year to 26.7%. But please do bear in mind that the EBITDA pre margin in Q2 of last year benefited from the patent agreement with UDC, which contributed around EUR60 million to EBITDA pre back then. Sequentially, the EBITDA pre margin increased by 120 basis points. This was mainly driven by the sales increase in semiconductor materials and resulting leverage and positive mix effects within semiconductor materials from products associated with advanced nodes.
For the further evolution of sales, please bear in mind that the dynamics in the semiconductor market have diverged from our previous expectations. While the semi markets for advanced nodes and AI has inflected earlier, the broader semi market is developing at a more gradual pace.
Regarding the further evolution of EBITDA pre margins, I want to stress that we continue to be convinced of the long-term secular growth of semiconductors. Therefore, we do sustain high level of R&D and are already bringing capacity expansions online.
So before handing back to Belén, let me also briefly comment on our balance sheet and cash flow statement. As you can see on slide 13, our balance sheet increased by EUR1.4 billion compared with the end of December 2023.
Now, let's take a closer look at the assets side. Cash and cash equivalents increased to EUR2.7 billion from EUR2.0 billion at the end of December '23, driven by the strong operating cash flow. Inventories went up slightly, as did receivables. Property, plant, and equipment increased, driven by our investments. And lastly, intangible assets increased slightly due to the FX effect on our goodwill.
And the liabilities side, financial debt increased, which was largely offset by a decline in other liabilities, in turn affected by the dividend payment in Q2. Pension provisions were down due to interest rate changes. Payables decreased from EUR3.4 billion to EUR3.0 billion due to in-license deals signed in the prior period, which resulted in payments this year. And net equity increased by EUR1.8 billion, thanks to growth in profit after tax and higher gains recognized in equity, driven mainly by FX. As a result, our equity ratio strengthened yet again from 55% at the end of December 2023 to 57% now.
Now, we will turn to cash flows, which are on slide 14. Operating cash flow came in strong at EUR861 million and was up by EUR239 million compared with Q2 of last year, despite the decline in profit after tax. This was mainly due to changes in other assets and liabilities, which were in turn driven by lower bonus payouts and taxes in the quarter amid a high level of D&A, including the one-off impairments in relation to healthcare R&D. Cash out for investing activities increased, primarily due to higher investment of our excess liquidity in non-financial assets and slightly increased CapEx on property, plant and equipment, as we continue to invest in capacity expansions in a responsible manner. Last, but not least, the difference in financing cash flow can be explained mainly by proceeds from bank loans.
And with that, let me hand back to Belén for the outlook.
Belen Garijo - Merck KGaA - Chairman of the Executive Board, Chief Executive Officer
Thank you, Helene. Let's take a closer look at our guidance on slide number 16.
We are raising our full-year 2024 guidance for the group on higher expectations for healthcare and for the semi business within electronics. And we now expect group net sales in a range of EUR20.7 billion to EUR22.1 billion, EBITDA pre in a range of EUR5.8 billion to EUR6.4 billion, and EPS pre in a range of EUR8.20 to EUR9.30.
With our first quantitative guidance in May, we confirmed to you our goal to return to organic growth in 2024 and forecasted organic sales growth between plus 1% and plus 5%. We underline this goal with Q2 and are now lifting the lower end of the guidance range and, therefore, expect an overall organic sales development between plus 2% and plus 5% for 2024.
Regarding EBITDA pre, we are increasing the guidance range for organic growth to plus 4% to plus 10%, driven by the strong operational performance of both our healthcare and our electronics business sectors. We continue to expect FX to have an impact of minus 3% to 0% on sales, but we are expanding the guidance bands for EBITDA to a slightly higher minus 5% to minus 1%. Even though we now expect a slightly stronger headwind from FX on EBITDA pre, we are able to lift the guidance bands for EBITDA pre and consequently also for EPS pre.
For some additional color by business sectors, let's take a look at slide number 17. Our Q2 performance reinforces confidence in our 2024 return to growth trajectory. We have raised our expectations for healthcare and electronics while we fully confirm our guidance for life science. For healthcare, our guidance now anticipates organic sales growth between plus 6% to plus 9%, above the quantitative guidance from May.
And there are a number of drivers that continue to play in our favor. Our CM&E franchise continues to perform very well. Mavenclad keeps gaining market share in the US, and our oncology franchise is showing a strong growth. We are raising our guidance also for organic EBITDA growth and even further to between plus 18% and 23%. And this is mainly driven by a strongly leveraged growth paired with cost discipline and a lower R&D spend on an underlying basis already visible in Q2.
Moving on to electronics, we are increasing our guidance for the organic sales development to plus 4% to plus 8%, driven by the performance of our semiconductor solutions business as we see the semi materials market for advanced nodes and AI inflecting already. A sales increase and positive mixed effects from advanced semiconductor nodes are driving increased anticipated organic EBITDA pre growth of plus 5% to plus 11% and offset last year's UDC patent effect of around EUR60 million.
For life science, we are staying the course and confirm our guidance for an organic sales development between minus 2% to plus 2%. And for organic EBITDA pre, we also confirm our guidance for an organic year-on-year change between minus 6% to plus 1%. Staying on life science, Q2 has developed fully in line with our expectations, and we continue to expect a further gradual recovery during 2024, with organic sales growth now turning positive in the second half of the year.
Overall, I'm very pleased to say that we have already returned to organic growth in Q2. In May, I mentioned to you that as a group, we also have the ambition to return to profitable organic growth in 2024. And we are now more confident that we will deliver on this ambition as our increased guidance already shows.
And with this, we will be happy to now take your questions. Thank you.
Constantin Fest - Merck KGaA - Head of Investor Relations
Thank you very much, Belén. Thank you very much, Helene. Heidi, if we could have the first question, please, that would be great. Thank you.
Questions and Answers:
Operator(Operator Instructions) Harry Sephton, UBS.
Harry Sephton - UBS - Analyst
Thank you very much for taking my questions. I have one on each of the divisions, please. So firstly, on the healthcare division, with the recent late-stage failures, how are you thinking of the division? Are you considering filling either the late-stage or early-stage pipeline through deals, or should we think of it as more of a stable cash generator in the midterm? And maybe along those lines, what could that potentially mean for the midterm R&D spend for the healthcare division?
In life sciences, what gives you confidence in the inventory destocking coming to an end in the second half of this year? And just to maybe expand on that point, why do you think there is so much volatility in different companies' expectations on the demand environment? Is it mixed, or are you seeing a shift in market share positions?
And then finally, on electronics, could you give us an idea on what percentage of the current semiconductor solutions portfolio are from thin-film materials for AI applications? And if you could give us a sense of how fast this portion of the semi's portfolio is growing relative to the rest, that would be extremely helpful too. Thank you.
Belen Garijo - Merck KGaA - Chairman of the Executive Board, Chief Executive Officer
Thank you very much, Harry. This is Belén. Let me take the first part of the healthcare question because, of course, the underlying question has a lot to do with our capital allocation strategy. So first of all, let me make a few points here.
Number one, healthcare has been operating on a very, very strong performance in recent years -- a strong and sustained sales growth impressive market development, highly profitable business with limited CapEx needs. Healthcare continues to be a super relevant contributor to group top and bottom line, as well as a very significant cash flow generator.
Point number two, our healthcare business, contrary to many other pharma players, is not at risk of a patent cliff. And even in the face of the pipeline setbacks, we are expecting that healthcare continues to deliver a slight growth in the midterm. We have a partial loss of exclusivity for Mavenclad in late 2026 for the rest of the world at the end of the decade.
So all that means that we have no urgency to act in healthcare, and we will stick to our strategy to accelerate external innovation. And if those business development opportunities arise, we will, as we have always done, consider those. Definitely, our aim is to increase the optionality of the pharma pipeline with a clear focus to increase shots on goal at an accelerated speed in order to recover momentum as a global specialty innovator with licensing being our preferred way.
So to summarize, our capital allocation strategy has not changed. Life science remains a priority when it comes to M&A. We will continue our strategy to increase optionality in the pipeline via mostly licensing. If at all, M&A in healthcare will be limited to clear-cut, low-risk deals that create value from very early on. So expect us to stay very, very disciplined on our financial criteria, as we have always done.
And to be crystal clear, let me conclude my statement before I hand over to Peter for the R&D spending, we will not compromise on the strategic agenda of life science. And we are planning that a substantial percentage of our M&A firepower will be allocated to life science as we have previously said.
Peter, can you address the R&D spending and what it means for the midterm?
Peter Guenter - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Healthcare
Yeah. Sure, Belén, and thanks for the question, Harry. So a little bit more color perhaps from my side on R&D. Obviously, as already mentioned by Helene in her prepared remarks, we expect for half two a relatively low number of R&D spend in percentage to sales, give and take, around mid to high teens and then a gradual recovery afterwards. Obviously, the pace of that recovery will depend on the success rate of our internal pipeline development, as well of course as future pace of in-licensing.
As we mentioned repeatedly in the past, we strive to have around about 50% of our portfolio coming from externally sourced innovation. And we will provide you indeed with more color on that during the Capital Markets Day.
I can also say that we are very active in the search for external innovation, but at the same time, we want to remain disciplined to in-license the right assets from a quality perspective and also on the right-to-win perspective. And we also want to build a pipeline with a balanced risk-reward profile. And also, finally, obviously, we're not alone in the search of these assets. So very often, these are competitive processes. So overall, we continue to commit to innovation, which is essential for sustaining long-term growth.
Finally, I would also draw your attention that we have a couple of catalyzing events. We have a readout coming up for Enpatoran in CLE first, and then, later this year or early next year, the readout on SLE. We have the readout coming up in Q4 on pimicotinib in TGCT. And as Helene has already mentioned, we have started a new Phase 3 program, where we actually included the first patient the day before yesterday with cladribine in generalized myasthenia gravis. So I hope that gives you a little bit more color.
Matthias Heinzel - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Life Science
Hello. It's Matthias. You had raised two questions on life sciences. Let me start with the first one, where you asked about our confidence on the status of destocking. So two aspects on that. Number one, obviously, our order intake trend, which has been building momentum, we shared the numbers.
We had a sequential increase quarter on quarter in Q1. Now in Q2, year over year, a nice increase. So obviously, these are real orders from customers which now need to support their business. And we have confidence based on that ordering trend and the quality of the orders that, for those, mostly the destocking is over.
And then, obviously, the other aspect is for the more larger customers, we have a very detailed model. Obviously, we look at -- first of all, we talk with them with SNMP meetings. We have our own model. And based on that, we also have a clear view of who basically is kind of in a more normalized phase already, and there's still a few which will come post Q2. But the vast majority, to our understanding, to all our, if you will, analysis, have this destocking behind them.
Then the second question, it's a bit of a broad question. I can't talk too much about the others, but let me try and make an attempt to put a bit more color. I think looking at the product portfolio, probably the instrument was materials. I would look at it probably in a differentiated way. I think the materials, having the destocking now behind, provides a bit more stable perspective.
Instruments, it looks like, has a bit of a higher volatility for different reasons. We have a rather low share of instruments, large-scale instruments. The vast majority of our business is certainly in materials with a nice recurring, if you will, revenue stream.
Regional mix may play a role. I mean, China is still also quite volatile driver. In our case, China plays less than 10%. So yes, it has an impact, but to a lower degree. So yeah, we are navigating, I think all of us, through a very volatile environment. I think what we've demonstrated to you over the last quarter should provide you a guidance. And we have, again today, confirmed that guidance and navigating through that volatility. And yeah, we'll do so over the next couple of quarters.
Kai Beckmann - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Electronics
Harry, let me, for the electronics question, reiterate and reconfirm a model that we have shared earlier. So that 10% of the semiconductor market is today related to AI technologies, however, only 0.1% of the produced devices. Our semi solutions business is much closer to the top end of that range, correlated, and that specifically means the thin films business that you mentioned. This is the highest share of the contribution to that growth and contribution to AI.
For this part of the business, where we create with every technology, no transition of our customers, more value for our customers per wafer, we are, in our growth rates, considerably higher than our midterm guidance for semiconductor solutions. And with that, we are more correlated to the growth rates of the respective industry in that segment.
Harry Sephton - UBS - Analyst
That's super helpful. Thank you.
Operator
Richard Vosser, JPMorgan.
Richard Vosser - J.P. Morgan Securities plc - Analyst
Hi. Thanks for taking my questions. Two, please. Firstly, on process solutions, another question there, please. The book-to-bill is hovering around 1. Can I ask whether it's sequentially improved in the quarter and whether you could give us a little bit more color in terms of the consumables or, as I think you called it, materials reordering across different customer groups?
And then second question, just on healthcare, there was some tendering or stocking that was called out. Could I ask about that impact, particularly, I suppose, in China and particularly for the CME business? How do you see the outlook in China for those businesses? Are we seeing demand come back after anti-corruption measures? How sustainable is that demand? How should we think about it? Thanks very much.
Matthias Heinzel - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Life Science
Hey, Richard, on purpose, we're using the term around 1. I think it's almost immaterial whether it's 0.001 higher or lower than the prior quote. I think it's very important we are on a steady course. What we communicated before, we're happy about the trend line with the order intake in absolute numbers -- the quarter-over-quarter increase, the strong year-over-year increase. And like we said in prior calls, in line with our expectation, having it around 1, yes, with maybe a little bit of a small fluctuation quarter over quarter, we feel very comfortable.
Then you asked about the customer segments. Obviously, we look at different customer groups. Quite often, we get the question, hey, CDMOs versus the rest of the customer groups, like pharma companies. And maybe to give you a hint there, indeed, the CDMOs show a bit of a stronger growth momentum coming out of this destocking versus the rest of the group. It's not major, but that gives a bit of a hint. But by and large, like I said before, the vast majority of the broad customers, whether it's regionally or by segment, have the destocking behind them based on our information.
Peter Guenter - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Healthcare
Hi, Richard. For your question on CM&E China, Glucophage, so first of all, let me reiterate that we're quite happy with the performance, obviously. And as you can see from the deck, it's pretty across the board of all sub-segments or sub-products, if you will, of the CM&E business and in all the regions. So obviously, as already mentioned before, we had indeed a low comps in China versus last year with Glucophage. That was still COVID-related, so there was stocking at patient level and destocking.
Actually, your question on the anti-bribery, anti-corruption movement, I was in China two weeks ago, obviously looked at all this, and we don't really see a significant impact from that. If anything, I think that international manufacturers, who of course respond to the highest compliance standards, may have actually an advantage compared to the local manufacturers. So I'm not worried at all on that point, on the contrary.
Your question on tenders, obviously, the large majority of our CM&E business is indeed in developing markets, and there are quite a couple of countries or sub-regions, if you will, where tenders play an important role in that business. And we had indeed some positive tender realizations in the second quarter in some of those markets or sub-regions.
Perhaps another point you shouldn't forget, which we also flagged in the past, is of course that we have very good continued growth in the endocrinology business, so our growth hormone sizing. And that was actually amplified on the one hand by the rollout of new connected devices, as well as a prolonged competitor stock-out, which drove us to leveraging geographical opportunities whilst we are manufacturing at capacity.
Perhaps the last point is that we have consistently guided for a mid-single-digit growth on this business segment on the long term, and that's what we continue to do.
Richard Vosser - J.P. Morgan Securities plc - Analyst
Perfect. Thank you very much.
Operator
Sachin Jain, Bank of America.
Sachin Jain - BofA Global Research(UK)-Analyst
Hi there. Thanks for taking my questions. One for Matthias, one for Peter. So firstly, on process, just trying to get more color on the growth for the back end of the year. So you're pointing very overtly to high single-digit sequential growth in 2Q. Is that a good proxy for the continued sequential growth to be seen in third quarter and fourth quarter? I'm just wondering if you could update on how you think about exit growth rates for '24 as you sit now.
And then secondly, either Peter or Belén, just on the midterm healthcare outlook, which I think you suggested was low single-digit growth. Consensus is basically flat at EUR8.5 billion after '29, '30. Just a really simple big picture question, what do you think we're mismodeling the most versus your low single-digit growth expectations?
And then just one clarification on your R&D spend, if I could, Peter. You said gradual recovery from the high teens. Is that gradual recovery beyond '25 or to be seen in '25? I know there's a bunch of variables, but perhaps some color would be helpful. Thank you.
Matthias Heinzel - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Life Science
Yeah. Hey, Sachin. Let me take the first one. We're talking about PS and your question about how the rest of the year is shaping up. Indeed, we will or we are expecting a continuous positive momentum in PS. We talked already about the order intake increase and the sales trending also along with that.
I'll expect a sequential growth in the PS business, both for order intake and for sales, over the next couple of quarters. Now, the magnitude of the incremental growth quarter over quarter may vary. So it's not a steady line, but there should be an incremental growth quarter over quarter. And that, like you asked, will give us a nice exit growth rate end of the year towards our midterm guidance.
Now then, your question is, okay, what's exactly the exit rate? Look, we still have five months to go, and we already talked about some of the influence factors. So I think it's too premature to give you the exact rate, but I can certainly say with all what we see and what we expect that it will guide us and bring us towards early term guidance.
Belen Garijo - Merck KGaA - Chairman of the Executive Board, Chief Executive Officer
Hi, Sachin. It's Belén. Very briefly, when we say low single-digit growth, we are speaking about the CAGR view, so this obviously may have some fluctuations in the early years versus the later years. But anyway, we will offer much more perspective in the Capital Markets Day.
Peter Guenter - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Healthcare
Yeah. Sachin, you also asked the question on R&D. It really depends on -- obviously, it's highly correlated with our execution on deal making and the progress of the internal pipeline. So depending on this, you could start to see the recovery already in 2025. I think it's a little bit too early, and let's wait until the Capital Markets Day to give you a little bit more color. What I can confirm to you indeed is that we are confident in the slight growth that we announced to you, and I think it's also fair to say this is a real tribute to the resilience of our portfolio and the strength of our teams.
Sachin Jain - BofA Global Research(UK)-Analyst
Very good. Thank you.
Operator
Peter Verdult, Citi.
Peter Verdult - Citi - Analyst
Thank you. Pete Verdult, Citi. Two questions, one strategy, one bottom-up. Matthias, just in the past, management has sort of hinted to where numbers are going to land in terms of top or bottom half of the guidance range. I realize it's a little bit tedious, but in terms of confidence building, as we enter the final third of the year and based on the trends you're seeing, what's your best guess for life sciences? Is it on track to be at the upper or lower end of the current revenue guidance range?
And then secondly, Belén and/or Peter, you won't thank me for saying this, but candidly, I've yet to speak to an investor that wants to invest in Merck due to healthcare or because of what you're doing in ADCs and DNA damage repair. So just in light of these failures, can I ask, as a family or as a team, have you discussed or raised the need for any potential changes to healthcare R&D strategy going forward? Or is the message today very much that nothing is going to change? Thank you.
Matthias Heinzel - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Life Science
Hey, Peter. I think we've got five months to go, so there's still a bit of work ahead of us. And on purpose, we kept the guidance, which we have outlined before. It's really too early to give an indication. While we talked about all the dynamics, order intake, we feel really good about PS. We feel good about the development in SLS. At the same time, we talked before about the volatility and/or probably some of the wider ranges some of the others provided.
At this point, we are fully confirming the guidance, Peter. And as the year unfolds, probably towards the CMD, we can narrow it down. But for now, we stick to the guidance.
Peter Verdult - Citi - Analyst
Thank you.
Belen Garijo - Merck KGaA - Chairman of the Executive Board, Chief Executive Officer
Hi, Peter. So I will start with your second question, which is a very good question. You know us very well. You have been following us for years. And you know that we have delivered very well on the first wave one launches. Have we discussed at the Board level? Very deeply. Have we audited to the bone our R&D engine? Yes.
R&D has gone through many different phases of transformation. The most recent transformation under the leadership of our Head of R&D, Danny Bar-Zohar, has been bringing R&D to the next level in terms of development capabilities, expertise, therapeutic area expertise, regulatory network with main agencies, et cetera, et cetera, et cetera. So we are confident in our R&D engine.
What do we believe we need to have? And I mentioned that in the first part of the presentation. If you assume that we have been relying for different reasons on our internal R&D engine, the number of shots on goal that we have in late phase is limited, and it was limited before. So what we are trying to do is to really ramp up in an accelerated way our external innovation agent -- our external innovation agenda.
And let me be very clear, we are not going to also compromise on the quality of the assets. We go after lower-risk, high-quality assets that can be in-licensed and can be increasing the optionality that we have in R&D. Then, by doing so, we will progressively replenish the pipeline in order to continuously improve the productivity.
That's for me. Peter, anything else to say?
Peter Guenter - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Healthcare
I think you said it all, Belén. Nothing to add.
Peter Verdult - Citi - Analyst
Thank you.
Operator
Thibault Boutherin, Morgan Stanley.
Thibault Boutherin - Morgan Stanley & Co. International Plc - Analyst
Yes, thank you. My first question on the healthcare growth in 2024, if you could help us understand what are the things that need to go right in order for Merck to reach the high end of the healthcare growth guidance, which implies an acceleration in H2 versus H1. Is it continuous strong performance of the cardiology, metabolism, and endocrinology business? Is it maybe a bit better performance from Mavenclad, because you mentioned you had some positive standards in Q2. You mentioned the end of the [subsequent] competition stock-out. So just need to understand what should happen to reach the high-end and sell acceleration.
And just a second question on electronics. So you have a strong demand for AI-related materials. Momentum in memory is not clear. When we think about the growth beyond 2024, is that momentum in AI enough to continue to carry the growth, or do you need to see a recovery in the broader market in order to have more momentum in your business? And what are your current assumptions on the timing of the broader market recovery? Thank you.
Peter Guenter - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Healthcare
Thibault, let me take the first question on healthcare. We're confident, obviously, in the guidance that we gave you. You may see some swing factors between half one and half two. Obviously, when you have easy comps, for example, for the CM&E, you don't expect the Glucophage to continue in Q3 and Q4 as we have done in Q2, for example.
But on the other hand, I can tell you that we had very difficult comps, for example, for Mavenclad in Q2 last year, and that's why the current growth of Mavenclad is a little bit muted in this quarter. Overall, I can tell you that we continue to make a lot of good progress with Mavenclad. We have guided you previously to a high single-digit growth for the year. I can at least confirm that, if not better, to a low teens growth that's also in the possibilities.
On Bavencio, we're very happy with the performance. You have seen constant growth in half one, and we see that continuing moving forward in half two, with the continued growth of ex-US and a good defense, I would say, in the US and North America. Fertility is a little bit of a year of gradual normalization of competitor stock-outs so that's why We do not expect a mid-single-digit growth for fertility, rather a low single-digit growth for fertility this year, but then we are absolutely confident that we can go back to that mid-single-digit growth once the dust has settled on the competitor stock-outs.
Last, but not least, you will also see that we are continuously extremely disciplined on costs and that we are very focused on profitable growth. And we will continue to do so, obviously, in the second half.
Kai Beckmann - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Electronics
I have to go on the electronics question. So the recovery, let me peel that onion a bit outside NBC. Already, as you discussed, the AI grows pretty significantly. In line with that, we see advanced node recovery in logic, in memory, in line with AI growing as well, as well as mature foundry being very strong already throughout the first half of this year.
Other technologies such as analog, specifically analog, in industrial and in automotive applications, they are just on the bottom of the current cycle. They will only come back in the coming quarters, or probably even only in the first half of 2025. And the mature memory technologies, here specifically V-NAND, that we see somewhere in between those lines.
So we see a set of different timelines of recovery, which is a difference to the past two cycles when recovery happened almost in a pretty sharp V shape. Now, we see more of a set of stairs rather than a gradual recovery over time. The market is a bit more complex this time, however, dominated by the positive signals -- very positive signals of AI-related growth, and that will be driven by no transitions of our customers from now on into 2025.
Thibault Boutherin - Morgan Stanley & Co. International Plc - Analyst
Thank you.
Operator
Falko Friedrichs, Deutsche Bank.
Falko Friedrichs - Deutsche Bank AG(Investment Banking)-Analyst
Thank you. Good afternoon. My first question is on process solution. To what extent are you confident that we will leave this destocking behind by the end of this year? Or is there still a little bit of a risk that it might last until 2025?
My second question is on science and lab solution. Could you provide a little bit more color on the different trends you're seeing here? You seem to be doing a little bit better than your peers, so I'm curious to hear sort of which parts are doing better than others.
And then my third question, can you add a little bit more flavor about Mavenclad and how we should think about growth here over the next few quarters and next year? And when should we start to see this plateau? Thank you.
Matthias Heinzel - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Life Science
Hello, Falko. Let me start, obviously, with your first question on destocking, and I think we touched a bit on it before. As we speak, end of Q2, about two-thirds of our customers, the one we track very closely, kind of have the destocking behind them. So with the vast majority, and we expect the rest to follow, will there be a few rare occasions for which destocking is still a topic beyond end of December? Maybe, but I tell you, I hope maybe with the next call, we have the word destocking behind us for this industry, at least for us. I mean, that's my clear expectation. So the point is destocking should be coming to an end, if you will, as a main negative driver headwind for our industry. That would be really my expectation. Again, not to say individual customers may still have a topic.
On the lab solution, indeed, I'm positive about the trend. We have shown now in Q2 a positive growth. I expect also here, if you will, the H2, H1 dynamic, which we have outlined before, to really fully unfold.
You asked about the sub-segments. We are seeing a good performance in our lab water business. We have a leading position there that performs very nicely. Our biomonitoring business performs nicely, which goes into pharma biotech, but also into some industrial segments. So these are just two examples.
China is obviously a topic. We have a very good presence with our SLS business in China. It's still muted. But also here, we see a gradual improvement, again, on a more muted basis, but gradually also improving. So I think we are on a good trend also in SLS to really see that unfolding, as we said before, with an H2 versus H1 dynamic.
Peter Guenter - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Healthcare
Yeah. Falko, on Mavenclad, obviously, we are really gaining market shares. We have now become, in the high-efficacy oral dynamic segment, the leading product. And I think that physicians and patients alike appreciate more and more the benefits and the easiness of use of Mavenclad. So we're confident on the growth rates for this year. It is a little bit early to give you an outlook for next year. Obviously, it is definitely a very competitive market, as you know, so more to follow.
Falko Friedrichs - Deutsche Bank AG(Investment Banking)-Analyst
Thank you.
Operator
Oliver Metzger, ODDO BHF.
Oliver Metzger - ODDO BHF - Analyst
Good afternoon from my side. First question for you, Matthias, can you comment on the order intake? So it's my understanding, and it was said also in the past, that order sizes have come down and the frequency of orders has come up. So if you comment that order intake is sequentially up, quarter on quarter, is it fair that the respective order size and frequency has started to stabilize from now, while on a year-on-year comparison, you still see the difference between the different ordering patterns? That's number one.
Number two, on semiconductors, for the positive development, you mentioned considerable growth in the cutting-edge applications, which come obviously at a higher price point. Also, you made some comments about the normal semiconductor market. Can you give us a hint whether you saw already some recovery generally in volume terms? Or are the actual volumes basically purely driven by the better price mix due to these higher-value solutions?
And the last one is on healthcare. So from the outside, we could get the impression that you're very excellent in the commercialization of drugs and also some legacy drugs you squeeze out fantastically. So now, we saw the second consecutive failure also was some in-licensing drugs. So you can be active at the different layers.
For the early drug discovery, there's a higher risk. For the in-licensing, there's still some risk, as we saw right now. Or if you acquire already approved drugs for which you can execute your commercial firepower. In the past, you mentioned that you are not a big fan in healthcare of already approved drugs because you mentioned the competition of big pharma. So can you share with us how recent developments might have changed your stance on M&A in healthcare in general? Thank you.
Matthias Heinzel - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Life Science
Yeah. Hi, Oliver. It's Matthias. On your first question, indeed, we look at, obviously, the order intake in terms of nominal values and how that trends. And the second aspect is then what we call the quality of the order intake, and that has many, many facets, including those what you mentioned.
And the short answer is yes, we see a trend towards normalization -- smaller order sizes, smaller in terms of compared to the big order sizes you encode with a lot of lead times in advance. We see that also here on a trend towards normalization. That's indeed correct.
Kai Beckmann - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Electronics
Oliver, on electronics, so we see both pricing or mix. I would put in one bucket mix, driven by higher value products. But we see, as well, volume grows too. Bigger effect is on mix and price.
Belen Garijo - Merck KGaA - Chairman of the Executive Board, Chief Executive Officer
And with your final question, since it also touches on our capital allocation, I will touch on that at the end. But let me clarify this, you are good at commercialization, that you state that discovery is risky.
Since 2018, when we started to launch new products to market, some of them partners, some of them on our own, the majority of the growth of healthcare, the very strong growth of healthcare came from innovation, from those three launches that we basically activated in 2017. Since then, healthcare has been on a growth path that has been highly profitable, and as I mentioned before, continues to contribute quite a lot to the top, the bottom line, and the cash generation of the group.
In discovery, we have really transformed and revamped the capabilities that we have in order to focus on what we understand and what we know how to do on specific platforms. As I mentioned before, the ideal mix to foster R&D productivity comes from investing in R&D internally, but also onboarding external innovation. And you can assume that 50% of the options that you generate in late phase comes from external innovation.
From that perspective, our goal is to stay very attractive to biotech and other pharma companies in order to be able to effectively compete for assets. How do we also compete for assets is by focusing on mid-size sales assets, which may not be what bigger pharma is looking at. And there, we have been very successful. You have seen that in late 2023, we already in-licensed three assets and have put options for even more assets.
Now, just to be very clear on capital allocation, our capital allocation strategy has not changed. We will continue to get the majority of our M&A capital to promote and support the long-term leadership of our life science business. In full complementarity with this, we will invest on in-licensing assets in order to increase the optionality of our pipeline. But our capital allocation strategy, allow me to repeat, stays untouched.
Oliver Metzger - ODDO BHF - Analyst
Okay. Thank you.
Operator
Gary Steventon, BNP Paribas Exane.
Gary Steventon - Exane BNP Paribas(UK)-Analyst
Hi. Thanks for taking the questions. One on life science and one on healthcare/capital allocation, please. So firstly, just on life science and on pricing, one of your peers talked to being back in an environment where they can take low single-digit price increases near term, but they did mention beginning to see pressure build. So how are you thinking about your ability to take price across process solutions, but also the wider life science business from here? And are you seeing anything in the market that might indicate that price is becoming a more significant factor for your customers?
And then on healthcare licensing and the topic of M&A, perhaps some thoughts just on how you're thinking about your ambitions when it comes to investing in and adding US-based infrastructure and increasing your US presence, given that that would now be an incremental cost to any licensing deal following the --
Matthias Heinzel - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Life Science
Hello. It's Matthias. So thanks for your question. On pricing, we're still doing pretty well on pricing. We see a good positive price impact this year. Obviously, it came down from the more inflationary trends we have seen over the last couple of years.
And just to recap, pre-COVID, we saw usually a net price of 1% to 2% across life science. That went up to about 2.5% of that number in the high inflation years. We are on the trend down towards a monetarization. But I clearly expect for total life science, Merck life science, to show year over year a net positive price impact. Of course, that varies a little bit by segment, but overall, we should be able to see that price impact.
Because at the end of the day, if you look at the value we create, customers look at the quality of the product, resilience in this day and age, we look at the global landscape, having the ability to provide a resilient supply chain plays a key role, innovation, and we feel we're very well positioned. So from that angle, of course, price is always part of the equation. But I don't think that will, if you will, dominate a customer's decision making because all those other factors have a huge impact, at the end of the day, on the output of their own production, and the value we create is very substantial.
Belen Garijo - Merck KGaA - Chairman of the Executive Board, Chief Executive Officer
Gary, I assume you have already heard me say, answering part of this capital allocation question to previous participants, so I will actually focus on the US because you are spot on. Definitely, our ambition is to increase the exposure to the US market. This is obviously a market that is highly driven by innovation, and as we progress our in-licensing activities, definitely, the US is in focus.
I mentioned already that increasing optionality at an accelerated speed is key at this time to recover our momentum as a global specialty innovator, and licensing is the preferred way. But, if at all, M&A in healthcare will be limited to clear-cut, lower-risk deals that create value from very early on, and there, the geographical priority is US.
Gary Steventon - Exane BNP Paribas(UK)-Analyst
Clear. Thank you.
Operator
Florent Cespedes, Bernstein.
Florent Cespedes - Bernstein - Analyst
Good afternoon. Thank you very much for taking my questions. Two quick ones on pharma, please. First, on Bavencio in the US, how do you see the trend of this product going forward? Is the Q2 performance a good proxy for the rest of the year and next year? That's the first question.
Second question, on the oncology pipeline, as you have quite attractive assets in early phase, IECs and DNA repair, would you consider to put more resources behind these products to increase the R&D budget in order to accelerate their development following the Xevinapant setback? That's my second question. Thank you.
Peter Guenter - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Healthcare
Thanks a lot, Florent, for your question. So first on Bavencio, obviously, the slight erosion that we see in North America is really in line with what we expected. We really feel we hold our ground, and our team is very much engaged in sharing our strong data with the community. Again, it shows resilience and it shows the capability of the team in a very competitive situation. And I also want to remind you that the US share is less than 30%, as mentioned, I think, by Helene in her prepared remarks.
Now, to give you a super reliable forecast for the next quarters and the next years is obviously a little bit more difficult. So I would reserve my answer until we have a little bit more maturity in analyzing the market and to see exactly what happens in academic centers, in non-academic centers, patient segmentation. So there's a lot at stake and of course also data generation.
Your second question on the pipeline, of course, we agree with you that we have a very attractive earlier stage oncology pipeline. I think we showcased this very nicely at ASCO with some very exciting assets. At the same time, as I mentioned already before, we want to also strike the right balance between risk and rewards in the pipeline. So I think it's first better to derisk a certain number of assets before going all in in perhaps several indications in parallel. So that's the way we want to progress here.
Constantin Fest - Merck KGaA - Head of Investor Relations
Heidi, I think we have time for -- thank you. Heidi, I think we have time for one more last question, please, then we need to close. Thank you.
Operator
Simon Baker, Redburn Atlantic.
Simon Baker - Redburn Atlantic - Analyst
Thank you for squeezing me in. Two, if I may, please. Firstly, on costs, you've obviously called out the impact of Xevinapant on other operating expense and R&D, but it also looks, aside from that, like marketing and selling expenses were higher. I just wonder if there are any additional factors to call out with respect to that.
And then a question on semiconductors. Kai, I wonder if you could give us thoughts on the opportunity for Merck in the hybrid bonding setting, where it is today, where Merck is positioned, and where it could be in the future.
And I know when you announced the Unity acquisition, hybrid bonding was mentioned, but specific to Unity, could you give us an idea of exactly what Unity's USP is and who its competitors are? Because talking to my semis colleagues, a lot of the equipment manufacturers include metrology solutions. So I just wondered, against whom is Unity competing? Is it against other metrology equipment providers, or is it against providers of broader semiconductor equipment? Thanks so much.
Peter Guenter - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Healthcare
The question was around healthcare? Okay. So if you look at the marketing and sales, actually, it's in line with our sales growth. So the ratio as a percentage of sales remains stable.
And of course, you have to take into account that we have increased somewhat our Bavencio efforts since the stopping of the alliance with Pfizer where, yes, we took a lot of synergies, but of course, we also wanted to maximize the chances of success to drive the top line. So I would even say that without that, your marketing and sales costs would be actually slower than your sales.
Kai Beckmann - Merck KGaA - Member of the Executive Board, Chief Executive Officer - Electronics
Thanks for the question on hybrid integration and the area of metrology. So we announced the intent to acquire Unity-SC because there is a new area building up, which is kind of the 3D metrology field versus the traditional optical inspection happening in two dimensions. And with the heterogeneous integration demanding for more vertical integration structure, 3D metrology becomes very important.
And this serves us on the cross-section of helping our customers to build these complex systems, as well as developing materials in line with those specific needs. And for that, the capabilities of Unity-SC will help us to develop additional opportunities on the material side.
For Unity, the advantage is with our capabilities in in optoelectronics and all the optics space that we have from our display business, they can accelerate development of new technologies on their side. So it has advantages for both sides. And we are pretty excited about the opportunity to help not only in the front and wafer processing, but as well in even more developing and faster growing area of the heterogeneous integration.
Simon Baker - Redburn Atlantic - Analyst
Thanks so much.
Constantin Fest - Merck KGaA - Head of Investor Relations
I think this is all the time we had. Thank you so much for joining this call. With this, we close the Merck Q2 2024 results call, and we look forward to meeting many of you in our upcoming roadshows.
Thank you, and goodbye.
Operator
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.
Call participants:
Corporate ParticipantsConstantin Fest, Merck KGaA - Head of Investor Relations
Belen Garijo, Merck KGaA - Chairman of the Executive Board, Chief Executive Officer
Helene von Roeder, Merck KGaA - Chief Financial Officer, Member of the Executive Board
Peter Guenter, Merck KGaA - Member of the Executive Board, Chief Executive Officer - Healthcare
Matthias Heinzel, Merck KGaA - Member of the Executive Board, Chief Executive Officer - Life Science
Kai Beckmann, Merck KGaA - Member of the Executive Board, Chief Executive Officer - Electronics
Conference Call Participants
Harry Sephton, UBS - Analyst
Richard Vosser, J.P. Morgan Securities plc - Analyst
Sachin Jain, BofA Global Research (UK) - Analyst
Peter Verdult, Citi - Analyst
Thibault Boutherin, Morgan Stanley & Co. International Plc - Analyst
Falko Friedrichs, Deutsche Bank AG (Investment Banking) - Analyst
Oliver Metzger, ODDO BHF - Analyst
Gary Steventon, Exane BNP Paribas (UK) - Analyst
Florent Cespedes, Bernstein - Analyst
Simon Baker, Redburn Atlantic - Analyst
Refinitiv StreetEvents Transcript
Q2 2024 Merck KGaA Earnings Call
Aug 01, 2024 / 12:00PM GMT
