Obligation Merck & Co 2.875% ( XS2011260705 ) en EUR

Merck & Co

91.836 % ▼

Allemagne

XS2011260705 ( en EUR )

2.875% par an ( paiement annuel )

24/06/2079

Prospectus brochure de l'obligation Merck & Co XS2011260705 en EUR 2.875%, échéance 24/06/2079

100 000 EUR

1 000 000 000 EUR

25/06/2024 ( Dans 38 jours )

L'Obligation émise par Merck & Co ( Allemagne ) , en EUR, avec le code ISIN XS2011260705, paye un coupon de 2.875% par an.
Le paiement des coupons est annuel et la maturité de l'Obligation est le 24/06/2079

June 21, 2019
Merck KGaA
(Darmstadt, Germany)
EUR 500,000,000 Subordinated Fixed to Reset Rate Notes due June 2079
with a First Call Date September 2024
and
EUR 1,000,000,000 Subordinated Fixed to Reset Rate Notes due June 2079
with a First Call Date March 2029
Merck KGaA, incorporated in the Federal Republic of Germany, (the "Issuer" and, together with its consolidated subsidiaries, the "Merck Group",
the "Group" or "Merck") will issue EUR 500,000,000 in aggregate principal amount of subordinated notes subject to interest rate reset at 5 year
intervals commencing on the first reset date on December 18, 2024 (the "NC5.5 Notes) and EUR 1,000,000,000 in aggregate principal amount of
subordinated notes subject to interest rate reset at 5 year intervals commencing on the first reset date on June 25, 2029 (the "NC10 Notes" and,
together with the NC5.5 Notes, the "Notes" and each a "Series"), each on June 25, 2019 (the "Issue Date") at an issue price of 99.355 % of their
principal amount in respect of the NC5.5 Notes (the "NC5.5 Issue Price") and 100.000 % of their principal amount in respect of the NC10 Notes
(the "NC10 Issue Price" and together, with the NC5.5 Issue Price, each an "Issue Price"). The Notes are issued in denominations of EUR 100,000
each (the "Specified Denomination").
The NC5.5 Notes shall bear interest on their principal amount (i) from and including the Issue Date to but excluding December 18, 2024 (the "NC5.5
First Reset Date") at a rate of 1.625 % per annum (the "NC5.5 Fixed Interest Rate"); (ii) from and including the NC5.5 First Reset Date to but
excluding December 18, 2029 at the relevant 5 year swap rate for the relevant reset period plus a margin of 194.8 basis points per annum (the "NC5.5
Initial Margin"); (iii) from and including December 18, 2029 to but excluding December 18, 2044 at the relevant 5 year swap rate for the relevant
reset period plus a first step-up margin (being equal to the NC5.5 Initial Margin plus 25 basis points per annum); and (iv) from and including
December 18, 2044 to but excluding June 25, 2079 (the "Maturity Date") at the relevant 5 year swap rate for the relevant reset period plus a second
step-up margin (being equal to the NC5.5 Initial Margin plus 100 basis points per annum).
The NC10 Notes shall bear interest on their principal amount (i) from and including the Issue Date to but excluding June 25, 2029 (the "NC10 First
Reset Date" and together with the NC5.5 First Reset Date, each a "First Reset Date") at a rate of 2.875% per annum (the "NC10 Fixed Interest
Rate"); (ii) from and including the NC10 First Reset Date to but excluding June 25, 2049 at the relevant 5 year swap rate for the relevant reset period
plus a first step-up margin (being equal to the NC10 initial margin of 268.8 basis points per annum (the "NC10 Initial Margin") plus 25 basis points
per annum); and (iv) from and including June 25, 2049 to but excluding June 25, 2079 (the "Maturity Date") at the relevant 5 year swap rate for the
relevant reset period plus a second step-up margin (being equal to the NC10 Initial Margin plus 100 basis points per annum).
During each interest period interest is scheduled to be paid annually in arrear, with respect to the NC5.5 Notes, on December 18 of each year, and,
with respect to the NC10 Notes, on June 25 of each year (each an "Interest Payment Date"), commencing, with respect to the NC5.5 Notes, on
December 18, 2019 (short first and short last coupon), and, with respect to the NC10 Notes, on June 25, 2020.
Upon the occurrence of a Change of Control Event (as defined in § 5(7)(c) of the terms and conditions of the NC5.5 Notes (the "NC5.5 Terms
and Conditions") and of the terms and conditions of the NC10 Notes (the "NC10 Terms and Conditions" and, together with the NC5.5 Terms
and Conditions, the "Terms and Conditions"), the interest rate payable on the Notes will be increased by an additional 500 basis points per annum
above the otherwise applicable rate, if the Issuer does not redeem the Notes in whole (as set out in § 4(4) of the Terms and Conditions).
The Issuer is entitled to defer payments of interest on any Interest Payment Date ("Deferred Interest Payments") and may pay such Deferred
Interest Payments voluntarily at any time, but only has to pay such Deferred Interest Payments under certain circumstances as set out in the relevant
Terms and Conditions.
Unless previously redeemed or purchased and cancelled, the Notes will be redeemed at par on the Maturity Date.
Each Series of Notes may be separately redeemed in whole but not in part at the option of the Issuer at an amount per Note equal to the Specified
Denomination plus (i) interest accrued on the Note to but excluding the date of redemption but yet unpaid and (ii) any outstanding Deferred Interest
Payments due and payable, (A) in case of the NC5.5 Notes, with effect (i) as of any date during the period from and including September 18, 2024
(the "NC5.5 First Call Date") to and including the NC5.5 First Reset Date and (ii) on any Interest Payment Date thereafter, and (B) in case of the
NC10 Notes, with effect (i) as of any date during the period from and including March 25, 2029 (the "NC10 First Call Date" and together with
the NC5.5 First Call Date, each a "First Call Date") to and including the NC10 First Reset Date and (ii) on any Interest Payment Date thereafter.

The Issuer may also redeem each Series of Notes separately in whole but not in part at any time following a Rating Agency Event, a Tax Event, or
an Acquisition Event (each as defined in the relevant Terms and Conditions), in each case, at an amount per Note (i) equal to 101% of the Specified
Denomination if the redemption occurs prior to the relevant First Call Date or (ii) equal to the Specified Denomination if the redemption occurs
on or after the relevant First Call Date, plus, in each case, (i) interest accrued on the Note to but excluding the date of redemption but yet unpaid
and (ii) any outstanding Deferred Interest Payments due and payable on the Note. Additionally, the Issuer may redeem the Notes in whole but not
in part at any time following a Gross-up Event and a Change of Control Event (each as defined in the Terms and Conditions) or if the Issuer has
redeemed or repurchased and cancelled at least 80% of the originally issued aggregate principal amount of the relevant Series, in each case, at an
amount per Note equal to the Specified Denomination plus (i) interest accrued to but excluding the date of redemption but yet unpaid and (ii) any
outstanding Deferred Interest Payments.
Each Series of Notes will initially be represented by a temporary global note in bearer form (a "Temporary Global Note"). Interests in a Temporary
Global Note will be exchangeable, in whole or in part, for interest in a permanent global note in bearer form (a "Permanent Global Note" and
together with the Temporary Global Notes, the "Global Notes") not earlier than 40 days after the Issue Date (the "Exchange Date"), upon
certification as to non-U.S. beneficial ownership. The Global Notes will be deposited with a common depositary for Clearstream Banking S.A and
Euroclear Bank SA/NV (together, the "Clearing System").
This prospectus (the "Prospectus") constitutes a prospectus within the meaning of Article 5.3 of Directive 2003/71/EC of the European Parliament
and of the Council of November 4, 2003 (as amended or superseded, the "Prospectus Directive"). This Prospectus will be published in electronic
form together with all documents incorporated by reference on the website of the Luxembourg Stock Exchange (www.bourse.lu).
This Prospectus has been approved by the Commission de Surveillance du Secteur Financier, Luxembourg ("CSSF") in its capacity as competent
authority under the Luxembourg Act dated 10 July 2005 relating to prospectuses for securities (Loi du 10 juillet 2005 relative aux prospectus pour
valeurs mobilières, the "Luxembourg Prospectus Law"). By approving this Prospectus, the CSSF gives no undertaking as to the economic and
financial opportuneness of the transaction and the quality or solvency of the Issuer in line with the provisions of Article 7 (7) of the Luxembourg
Prospectus Law.
This Prospectus will be published in electronic form together with any supplement thereto and all documents incorporated by reference on the
website of the Luxembourg Stock Exchange (www.bourse.lu).
Application has been made to the Luxembourg Stock Exchange for the Notes to be listed on the official list of the Luxembourg Stock Exchange
(the "Official List") and to be admitted to trading on the Luxembourg Stock Exchange's regulated market "Bourse de Luxembourg", appearing on
the list of regulated markets issued by the European Commission. The Luxembourg Stock Exchange's regulated market is a regulated market for
the purposes of Directive 2014/65/EU (as amended, "MiFID II").
The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any
retail investor in the European Economic Area ("EEA"). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail
client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the
"Insurance Distribution Directive"), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of
MiFID II. Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the "PRIIPs Regulation") for
offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling
the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
Following the respective First Reset Date, amounts payable under the Notes are calculated by reference to the annual swap rate for swap transactions
denominated in Euro with a term of 5 years, which appears on the Reuters Screen Page ICESWAP2 and which is provided by ICE Benchmark
Administration Limited ("IBA"). As at the date of this Prospectus, IBA appears on the register of administrators and benchmarks established and
maintained by the European Securities and Markets Authority ("ESMA") pursuant to article 36 of the Benchmark Regulation (Regulation (EU)
2016/1011) (the "Benchmark Regulation").
Prospective purchasers of the Notes should ensure that they understand the nature of the Notes and the extent of their exposure to risks and that
they consider the suitability of the Notes as an investment in light of their own circumstances and financial condition. Investing in the Notes
involves certain risks. Please review the section entitled "Risk Factors" beginning on page 8 of this Prospectus.
Joint Bookrunners
Banco Bilbao Vizcaya
Argentaria, S.A.
Bank of China
Barclays
BayernLB
BNP PARIBAS
BofA Merrill Lynch
Commerzbank
Deutsche Bank
DZ BANK
Goldman Sachs International
Helaba
J.P. Morgan
Landesbank Baden-
Württemberg
Mizuho Securities
NatWest Markets
SEB
Société Générale Corporate &
Investment Banking
Standard Chartered Bank
UniCredit Bank

RESPONSIBILITY STATEMENT
Merck KGaA is solely responsible for the information given in this Prospectus. The Issuer hereby
declares that, having taken all reasonable care to ensure that such is the case, the information contained
in this Prospectus for which it is responsible, is, to the best of its knowledge, in accordance with the
facts and contains no omission likely to affect its import.
NOTICES
This Prospectus should be read and construed with any supplement thereto and with any other
documents incorporated by reference.
The Issuer has confirmed to Banco Bilbao Vizcaya Argentaria, S.A., Bank of China Limited, London
Branch, Barclays Bank PLC, Bayerische Landesbank, BNP Paribas, Commerzbank Aktiengesellschaft,
Deutsche Bank Aktiengesellschaft, DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt
am Main, Goldman Sachs International, Landesbank Hessen-Thüringen Girozentrale, J.P. Morgan
Securities plc, Landesbank Baden-Württemberg, Merrill Lynch International, Mizuho Securities Europe
GmbH, NatWest Markets Plc., Skandinaviska Enskilda Banken AB (publ), Société Générale, Standard
Chartered Bank and UniCredit Bank AG (the "Joint Bookrunners") that this Prospectus is true and
accurate in all material respects and is not misleading; that any opinions and intentions expressed herein
are honestly held and based on reasonable assumptions; that there are no other facts with respect to the
Issuer, the omission of which would make this Prospectus as a whole or any statement herein or opinions
or intentions expressed herein misleading in any material respect; and that all reasonable enquiries have
been made to verify the foregoing.
The Issuer has undertaken with the Joint Bookrunners to prepare a supplement to this Prospectus or a
new prospectus in the event that any significant new factor, material mistake or inaccuracy relating to
the information included in this Prospectus, which is capable of affecting the assessment of the Notes,
arises or is noted after the date of this Prospectus.
No person has been authorized by the Issuer to give any information or to make any representation not
contained in or not consistent with this Prospectus or any other document entered into in relation to the
Notes or any information supplied by any Issuer or such other information as is in the public domain
and, if given or made, such information or representation should not be relied upon as having been
authorized by the Issuer, the Joint Bookrunners or any individual Joint Bookrunner.
No representation or warranty is made or implied by the Joint Bookrunners or any of their respective
affiliates, and neither the Joint Bookrunners nor any of their respective affiliates make any
representation or warranty or accept any responsibility, as to the accuracy or completeness of the
information contained in this Prospectus.
Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall, in any
circumstances, create any implication that the information contained in this Prospectus is true
subsequent to the date upon which this Prospectus has been published or most recently supplemented
or that there has been no adverse change in the financial position of the Issuer since the date hereof or,
as the case may be, the date upon which this Prospectus has been most recently supplemented or the
balance sheet date of the most recent financial statements which are deemed to be incorporated into this
Prospectus by reference is correct at any time subsequent to the date on which it is supplied or, if
different, the date indicated in the document containing the same.
3

This document may only be communicated or caused to be communicated in circumstances in which
section 21(1) of the Financial Services and Markets Act 2000 ("FSMA") does not apply.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as
amended (the "Securities Act"), and will include Notes in bearer form that are subject to U.S. tax law
requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the
United States or to U.S. persons, see "Subscription and Sale -- Selling Restrictions".
The distribution of this Prospectus as well as the offering, sale, and delivery of the Notes in certain
jurisdictions may be restricted by law.
Persons into whose possession this Prospectus comes are required by the Issuer and the Joint
Bookrunners to inform themselves about and to observe any such restrictions. For a description of
certain restrictions on offers, sales and deliveries of Notes and on the distribution of this Prospectus and
other offering material relating to the Notes, see "Subscription and Sale -- Selling Restrictions".
This Prospectus may not be used for the purpose of an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is
unlawful to make such an offer or solicitation.
This Prospectus does not constitute an offer or an invitation to subscribe for or purchase Notes and
should not be considered as a recommendation by the Issuer or any Joint Bookrunners that any recipient
of this Prospectus should subscribe for or purchase Notes. Each recipient of this Prospectus shall be
taken to have made its own investigation and appraisal of the condition (financial or otherwise) of the
Issuer.
This Prospectus contains assessments of market data and information derived therefrom which could
not be obtained from any independent sources. Such information is based on the Issuer's own internal
assessments and may therefore deviate from the assessments of competitors of Merck or future statistics
by independent sources. As regards the market positions of Merck, Merck's own estimations are mainly
based on company data which either is derived from information by competitors or from data provided
by independent research companies.
For the avoidance of doubt the content of any website referred to in the Prospectus does not form part
of this Prospectus.
The language of this Prospectus is English. Any part of this Prospectus in the German language
constitutes a translation except for the Terms and Conditions where the English part constitutes a
translation. The German text of the Terms and Conditions is controlling and binding. In respect of the
documents incorporated by reference, the German language version is controlling and binding in
relation to the documents listed in the table of documents incorporated by reference in the section
"Documents Incorporated by Reference".
MIFID II PRODUCT GOVERNANCE / PROFESSIONAL INVESTORS AND ECPS ARE
THE ONLY TARGET MARKET
Solely for the purposes of each manufacturer's product approval process, the target market assessment
in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible
counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for
distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person
subsequently offering, selling or recommending the Notes (a "distributor") should take into
4

consideration the manufacturers' target market assessment; however, a distributor subject to MiFID II
is responsible for undertaking its own target market assessment in respect of the Notes (by either
adopting or refining the manufacturers' target market assessment) and determining appropriate
distribution channels.
PRIIPS REGULATION / PROHIBITION OF SALES TO EEA RETAIL INVESTORS
The Notes are not intended to be offered, sold or otherwise made available to and should not be offered,
sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail investor
means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of
MiFID II; or (ii) a customer within the meaning of the Insurance Distribution Directive, where that
customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.
Consequently, no key information document required by the PRIIPs Regulation for offering or selling
the Notes or otherwise making them available to retail investors in the EEA has been prepared and
therefore offering or selling the Notes or otherwise making them available to any retail investor in the
EEA may be unlawful under the PRIIPs Regulation.
Where acting as agent on behalf of a disclosed or undisclosed client when purchasing, or making or
accepting an offer to purchase, any Notes (or any beneficial interests therein) from the Issuer and/or the
Joint Bookrunners the foregoing representations, warranties, agreements and undertakings will be given
by and be binding upon both the agent and its underlying client.
BENCHMARK REGULATION: STATEMENT ON REGISTRATION OF BENCHMARK
ADMINISTRATOR
Following the respective First Reset Date, interest amounts payable under the Notes are to be calculated
by reference to the annual swap rate for swap transactions denominated in Euro with a term of 5 years,
which appears on the Reuters Screen Page ICESWAP2 and which is provided by IBA. As at the date of
this Prospectus, IBA appears on the register of administrators and benchmarks established and
maintained by ESMA pursuant to article 36 of the Benchmark Regulation.
STABILIZATION
IN CONNECTION WITH THE ISSUE OF THE NOTES, MERRILL LYNCH INTERNATIONAL
(THE "STABILISING MANAGER") (OR ANY PERSON ACTING ON BEHALF OF THE
STABILISING MANAGER) MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH
A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN
THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, STABILISATION MAY NOT
NECESSARILY OCCUR. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE
DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF
THE NOTES IS MADE AND, IF BEGUN, MAY CEASE AT ANY TIME, BUT IT MUST END NO
LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE NOTES AND 60
DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. ANY STABILISATION
ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE STABILISING MANAGER
(OR ANY PERSON ACTING ON BEHALF OF THE STABILISING MANAGER) IN
ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.
5

ALTERNATIVE PERFORMANCE MEASURES
Certain terms used in this Prospectus and financial measures presented in the documents incorporated
by reference are not recognized financial measures under International Financial Reporting Standards
(IFRS) ("Alternative Performance Measures") and may therefore not be considered as an alternative
to the financial measures defined in the accounting standards in accordance with generally accepted
accounting principles. The Issuer has provided these Alternative Performance Measures because it
believes they provide investors with additional information to assess the economic situation of the
Issuer's business activities. The definition of the Alternative Performance Measures may vary from the
definition of identically named alternative performance measures used by other companies. The
Alternative Performance Measures used by the Issuer should not be considered as an alternative to
measures derived in accordance with IFRS as measures of operating performance. These Alternative
Performance Measures have limitations as analytical tools and should not be considered in isolation or
as substitutes for analysis of results as reported under IFRS.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements. A forward-looking statement is a
statement that does not relate to historical facts and events. They are based on analyses or forecasts of
future results and estimates of amounts not yet determinable or foreseeable. These forward-looking
statements are identified by the use of terms and phrases such as "anticipate", "believe", "could",
"estimate", "expect", "intend", "may", "plan", "predict", "project", "will" and similar terms and phrases,
including references and assumptions. This applies, in particular, to statements in this Prospectus
containing information on future earning capacity, plans and expectations regarding Merck Group's
business and management, its growth and profitability, and general economic and regulatory conditions
and other factors that affect it.
Forward-looking statements in this Prospectus are based on current estimates and assumptions that the
Issuer makes to the best of its present knowledge. These forward-looking statements are subject to risks,
uncertainties and other factors which could cause actual results, including Merck Group's financial
condition and results of operations, to differ materially from and be worse than results that have
expressly or implicitly been assumed or described in these forward-looking statements. Merck Group's
business is also subject to a number of risks and uncertainties that could cause a forward-looking
statement, estimate or prediction in this Prospectus to become inaccurate. Accordingly, investors are
strongly advised to read the section "Description of Merck and the Merck Group" of this Prospectus.
This section includes more detailed descriptions of factors that might have an impact on Merck Group's
business and the markets in which it operates.
In light of these risks, uncertainties and assumptions, future events described in this Prospectus may not
occur. In addition, neither the Issuer nor the Joint Bookrunners assume any obligation, except as
required by law, to update any forward-looking statement or to conform these forward-looking
statements to actual events or developments.
6

TABLE OF CONTENTS
RESPONSIBILITY STATEMENT ................................................................................................... 3
NOTICES ......................................................................................................................................... 3
RISK FACTORS............................................................................................................................... 8
TERMS AND CONDITIONS OF THE NC5.5 NOTES................................................................... 38
TERMS AND CONDITIONS OF THE NC10 NOTES.................................................................... 91
DESCRIPTION OF MERCK AND THE MERCK GROUP .......................................................... 144
TAXATION.................................................................................................................................. 176
SUBSCRIPTION AND SALE....................................................................................................... 184
GENERAL INFORMATION........................................................................................................ 187
DOCUMENTS INCORPORATED BY REFERENCE .................................................................. 190
NAMES AND ADDRESSES ........................................................................................................ 193
7

RISK FACTORS
Below is a description of risk factors that are material for the assessment of the market risk associated
with the Notes and risk factors that may affect the Issuer's ability to fulfil its obligations under the Notes.
Any of these risks could have a material adverse effect on the financial condition and results of
operations of Merck. The market price of the Notes could decline due to any of these risks, and investors
could lose all or part of their investments.
Potential investors should carefully consider these risk factors outlined below in addition to all other
information in this Prospectus and consult with their own professional advisors should they deem it
necessary before deciding upon the purchase of the Notes. In addition, investors should bear in mind
that several of the described risks can occur simultaneously and thus have, possibly together with other
circumstances, a stronger impact. The order in which the risks are described neither indicates the
probability of their occurrence nor the gravity or significance of the individual risks nor the scope of
their financial consequences. Additional risks of which the Issuer are not presently aware could also
affect the business operations of Merck and have a material adverse effect on Merck's business activities
and financial condition and results of operations.
Words and terms that are defined in the Terms and Conditions of the Notes below or elsewhere in this
Prospectus have the same meaning in this section "Risk Factors".
Potential investors should, among other things, consider the following:
Risk factors relating to the Issuer and the Group
The Group's ability to market pharmaceutical products is subject to strict regulations by government
authorities.
The development, manufacture, marketing, import and advertising of drugs are subject to extensive and
restricting government regulations. In almost all jurisdictions in which the Group operates, the market
launch of new drugs or new dosages of drugs requires regulatory approval. The development and
approval processes are very cost-intensive and time-consuming. Moreover, the result of the process
cannot always be predicted because it depends on the outcome of scientific studies on the one hand and
possible statutory and regulatory measures on the other. In such cases, the Group weights the additional
costs against the expected benefits to decide whether it is commercially reasonable to further invest in
the development of such drugs. Moreover, it can sometimes take several years to determine whether a
drug is approvable. In addition, the required regulatory approvals for drugs may be delayed or denied
or drugs may not be approved for all indications for which marketing authorization applications were
submitted.
If the Group is not successful in obtaining regulatory approval or positive reimbursement decisions for
the marketing of new drugs or existing drugs for new indications in time or at all, or if the Group were
to encounter other regulatory hurdles, this could have a material adverse effect on the Group's business,
financial condition, results of operations and prospects.
Even after approval, drugs are still the subject of regulatory or legal action if new facts concerning their
safety and efficacy come to light. For example, subsequent to the EMA's recommendation to suspend
the marketing authorization for the psoriasis treatment Raptiva® (efalizumab) in the European Union
(EU), Biopharma deliberately withdrew this product from all markets in and outside of Europe in 2009.
The decision to suspend and withdraw the marketing authorizations was made because of safety
concerns, including the occurrence of virologically confirmed cases of progressive multifocal
8

leukoencephalopathy (PML) in patients. In addition, there is a risk that claims may be brought against
the Group in connection with any suspension of marketing authorizations.
Regulatory measures can also relate to statutory requirements for product labelling. Changes in product
labelling could influence decisions of doctors on whether or not to prescribe the relevant products.
Moreover, regulatory action can have a considerable impact on the marketing of drugs by the Group or
even force the Group to withdraw products from the market.
The move of the EMA from the United Kingdom to The Netherlands as consequence of Brexit could
have a negative impact on the registration process in the EU in particular driven by time delays.
Any of the factors mentioned above could have a negative impact on the Group's business, financial
condition, results of operations and prospects.
Due to the uncertainties associated with the process of developing new drugs, the Group may be
unable to successfully develop new drugs and other pharmaceutical products and launch them in a
timely manner.
The Group's success in the pharmaceutical industry in part relies on launching newly developed drugs
in a timely manner. Whether a drug can be introduced to the market cannot be predicted in advance.
Drugs that were considered very promising in Phase I studies may prove to be unsuitable for regulatory
approval in Phase II and Phase III clinical trials. This might also be the case for drugs which are already
approved in other indications but cannot meet primary endpoints in subsequent studies targeting
different indications and patient populations. For example, in December 2018, Merck and Pfizer Inc.
announced that that data from a planned interim analysis of the Phase III JAVELIN Ovarian 100 study
of avelumab did not support the study's initial hypothesis, and therefore the alliance made the decision
to terminate the trial in alignment with the independent Data Monitoring Committee.
Reasons for negative trial outcomes may include ineffectiveness in certain indications, previously
unknown side effects appearing in later phases, risk-benefit analyses that can produce a negative result,
or changes in the competitive environment that can make continuing development commercially
impractical.
Due to the uncertainties associated with the process of developing new drugs, no assurance can be given
that the Group will be able to successfully develop and launch new drugs and other pharmaceutical
products in a timely manner. The aforementioned factors also influence the development and approval
process of new indications for drugs that have already been approved, the approval of drugs or drug
delivery devices that have been approved in certain geographies in additional geographies that require
regional-specific registration studies.
Should the Group be unable to successfully develop new drugs and other pharmaceutical products or to
launch them in a timely manner this could have a negative impact on the Group's business, financial
condition, results of operations and prospects.
If the Group would be unable to arrange and maintain alliances and other cooperation agreements
with third parties, this could impair the Group's financial capabilities and ability to develop new
drugs and other pharmaceutical products.
In the pharmaceutical sector, the Group is increasingly making use of opportunities for partnerships
with 3rd parties, particularly by entering into cooperation agreements with other pharmaceutical and
biotech companies. As a result, the Group depends on its partners to, among other things, fulfil their
9

contractual obligations, fulfil their delivery and quality obligations and maintain the underlying patents.
However, the Group's contractual partners may be unable to do so or terminate partnerships owing to
limited financial resources or other reasons.
The Group could also be unable to enter into the required cooperation agreements at suitable terms and
conditions, or at all, in the future. Against the backdrop of further consolidation in the biotech industry,
it could become more difficult for the Group to find suitable partners for cooperation agreements in this
field. In addition, there is a strong competition among pharmaceutical and biotech companies for the
acquisition of licenses for technologies and active ingredients developed by third parties.
A deviation from the strategic targets of the Group defined in this area could have a negative impact on
the Group's business, financial condition, results of operations and prospects.
The Healthcare Business Sector is affected by rising pressure on healthcare costs worldwide.
The Healthcare Business Sector is strongly influenced by the structure of the public healthcare systems
in the relevant countries and the resulting market structures. In particular, regulations that vary by
country apply to the selection, price and dispensing of physician-prescribed drugs and to the
reimbursement or payment of the cost of such drugs by the relevant health insurance funds, country-
specific social security institutions and public health services. Market structures are also shaped by the
relevant national regulations on drug pricing and market access. These market structures can force the
Group to lower its prices for drugs or change sourcing strategies to market them efficiently.
Furthermore, in some markets, major customers of pharmaceutical products (government agencies,
health insurance companies or certain healthcare providers) have such market power that they can exert
substantial price pressure on pharmaceutical producers such as the Group. In many countries, healthcare
regulations and regulatory mechanisms are subject to frequent changes, often at short notice.
In some cases, new regulations can substantially change the marketing conditions for drugs. For
example, in the United States, policies are frequently proposed that could adversely impact the pricing
or utilization of the Group's biopharmaceutical products provided to patients in government-
administered healthcare programs. Accordingly, investments made in reliance on an existing market
structure could prove to be not cost effective or worthless and existing market positions could be at risk.
In general, any measure aimed at decreasing the costs of drug provision applicable to pharmaceutical
manufacturers in the countries in which the Group operates may reduce its sales and profitability. In
addition, in Europe certain countries serve as reference points for the determination of prices in other
countries, and increasingly also in other regions such as Latin America, the Middle East and Asia.
Any regulatory developments in these countries that adversely affect the market structure, or the price
of the Group's products could have a negative impact on the Group's business, financial condition,
results of operations and prospects.
The increasingly stringent regulatory environment for the specialty chemical industry could have a
negative effect on the Group's production costs and the product portfolio in its Life Science and
Performance Materials Business Sectors.
In its chemicals business, the Group must adhere to a multitude of regulatory specifications regarding
the manufacture, testing and marketing of many of its products. More stringent regulations worldwide
can have a negative impact on the Group's production costs and product portfolio. Specifically, in the
European Union, the Group is subject to the European Regulation (EC) No. 1907/2006 on the
Registration, Evaluation, Authorization and Restriction of Chemicals ("REACH"), which is designed
10