A giant of the global pharmaceutical industry, Merck KGaA (not to be confused with the American Merck & Co) traces its roots back to the Holy Roman Empire in 1668. The group contributed significantly to forging Germany's reputation as the "pharmacy of Europe" in the 19th century. However, its modern industrial power was built on a more singular legacy: the commercialization of alkaloid products.
As early as the 1880s, the family-owned laboratory began producing cocaine. While production barely exceeded one kilogram in 1884, the discovery of the substance's anesthetic properties changed everything: volumes exploded over the following decades. Alongside this, Merck extracted codeine as early as 1827, a compound still in use today. The trade in these alkaloids filled the company's coffers until 1925, when the Geneva and Hague conventions imposed the first regulations on narcotics.
The group's contemporary history is marked by a shift towards therapeutic innovation: vaccines, antibiotics, vitamins and biotechnologies have replaced hard drugs. Today, Merck structures its activities around three major pillars: Life Science provides the tools and solutions necessary for scientists to produce biological therapies. Healthcare focuses on serious or chronic diseases, neurology, oncology (cancer), and fertility. More surprisingly, the Electronics segment supplies the semiconductor industry (photoresists, wafer cleaners), displays, and components for the automotive industry.
Revenue is largely derived from the Healthcare (41%) and Life Science (43%) segments, with the remainder attributable to Electronics (17%). Geographically, revenues are well-spread amongst the world's main regions, though the US and Europe maintain a slight dominance.
Healthcare slowed by competition
The Healthcare segment is now betting on the integration of SpringWorks Therapeutics, acquired in July 2025. This strategic move propels the company into the rare disease sector, with the global rollout of Ogsiveo and Ezmelky (oncology). While Europe and North America currently sustain activity, launches are expected in Japan and China to take over the momentum.
However, the group faces headwinds. Management expects that sales of Mavenclad (multiple sclerosis) will collapse in the US due to the arrival of generics. Conversely, the infertility treatment (Pergoveris) jumped by 20%, while cardiovascular and rare disease lines supported revenue. Despite these targeted successes, the segment declined by 3.4% in Q1, penalized by increasingly aggressive competition.
To turn the tide, management is relying on three pillars: successfully integrating SpringWorks, maximizing the profitability of legacy brands and balancing risks between internal R&D and acquisitions. The outlook for 2026 remains somber, however. Management anticipates negative organic growth, ranging between -6% and -3%.
Life Science: The growth engine
With an 8.4% increase in Q1, the Life Science segment has established itself as the group's locomotive. This success validates a massive investment strategy in new modalities, such as gene therapies, ADCs (antibody-drug conjugates), and laboratory automation. Since January 1, 2026, the business has operated under a more agile model, structured around three specialized units: Process Solutions (drug development), Advanced Solutions (custom products), and Discovery Solutions (research).
The Process Solutions unit saw significant growth in Q1, with a 16% increase in sales driven by strong demand from biotech and pharmaceutical manufacturers. The same trend was seen in Discovery Solutions (+1.6%), which benefited from improved academic budgets, and Advanced Solutions (+4%). The segment grew by 7.4% despite negative currency effects and US tariffs.
Regarding forecasts, they are positive this time, with the group anticipating between +4% and +7% organic sales growth.
Electronics: Not missing the AI train
Against all expectations, artificial intelligence has found a home at the heart of a 200-year-old healthcare company. Merck has seized the opportunity of the semiconductor boom to transform its Electronics segment into a true "pure-player" in the sector. Representing 17% of revenue in 2025, this division provides over 200 strategic products, from wafer cleaners to chemical gas delivery systems. A sign of this ambition: the group inaugurated a "megasite" in Taiwan this winter to meet global demand.
While the semiconductor business shows strong momentum (+7.5% in Q1), performance within the segment remains mixed: Metrology & Inspection posted a spectacular +50% jump, while Delivery Systems & Services fell by 10%, followed by Optoelectronics, which declined by 4.2%.
Although Merck is benefiting from the rise of AI-related infrastructure, the weakness of certain ancillary divisions limited the segment's overall growth to +4.2%. For the remainder of the fiscal year, the group remains optimistic and expects organic sales growth of between +3% and +7%.
A giant in transition: Between resilience and recovery
It's time for a reckoning for Merck KGaA. After the post-Covid euphoria, the German giant is struggling to regain sustained growth. For three years, revenue has stagnated and margins have slightly eroded. Yet, the company shows no signs of faltering and demonstrates steadfast solidity, even if it is not progressing.
In Q1, Merck nevertheless beat consensus expectations with organic revenue growth of 2.9%, with 5.3% o.g.for EBITDA. However, this operational performance was completely offset by highly unfavorable currency effects. As a result, in reported figures, revenue fell by -2.8% and EBITDA slipped -0.3%.
While the group's resilience is well-established, the challenge remains significant: to win back investors, Merck must transform this stability into clear and sustainable growth.
How to return to growth?
The challenge now lies in the company's ability to durably relaunch its growth. Q1 2026 offered an encouraging glimpse, although currency effects weighed on reported results. Positioned as a strategic partner to the semiconductor industry, Merck is benefiting from the rise of high-performance chips. These technologies require advanced materials that the German group is one of the few to master.
The acquisition of SpringWorks Therapeutics transforms Merck's profile in the rare disease field. If its global rollout succeeds, the Ogsiveo and Ezmelky products should become pillars of profitability. Benefiting from high margins and better protection from competition than older lines, these new treatments are intended to offset the natural erosion of legacy patents.
In the markets, Merck's valuation reflects cautious optimism: the stock is trading at 20.2x expected 2026 earnings, a multiple that should adjust to 17.5x in 2027. Above the sector average, this valuation is partly due to the company's technological profile. Investor confidence is gradually returning, with the consensus buyers of the stock, with a target price that is 16% above its current level.
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