Political and regulatory risks and opportunities
As a global company, we face political and regulatory changes in a large number of countries and markets.
Risk of more restrictive regulatory requirements regarding drug pricing and reimbursement as well as pricing-related opportunities
Our business is affected by numerous regulations that are continuously changing – and could even become more stringent. In the field of healthcare, for example, the known trend toward increasingly restrictive requirements in terms of drug pricing, reimbursement and the expansion of rebate groups is continuing. With rising healthcare expenditures worldwide, both in absolute amounts and relative to GDP, healthcare budgets around the world face increasing pressure. These developments can negatively influence the profitability of our products, as can market referencing between countries and the success of market launches. Foreseeable effects are considered as far as possible in the Healthcare business sector’s plans. Close communication with health and regulatory authorities serves as a preventive measure to avert such risks. The remaining risks beyond the current plans resulting from restrictive regulatory requirements are improbable to likely with up to a significant impact. Additionally, an event with minor impact is more likely than not to occur. While we consider the possibility of price cuts in our forecasts, there is also an opportunity in the event that price pressure from healthcare systems worldwide is less pronounced than expected or materializes at a later point in time versus the base assumption. Additionally, as a global specialty innovator that pursues a focused leadership approach in attractive therapeutic areas, we are positioned to benefit from attractive pricing schemes for demonstrated major therapeutic improvements.
Risk of stricter regulations for the manufacturing, testing and marketing of products
We adhere to a multitude of regulatory requirements regarding the manufacturing, testing and marketing of our products. In the European Union specifically, we are subject to the EU chemicals regulation REACH. Other regulations are also emerging globally in relevant markets, especially in Asia. The use of chemicals, such as per- and polyfluorinated alkyl substances (PFAS), in production and final products could be restricted, which would negatively impact the ability to manufacture and market certain products. With the EU Chemicals Strategy for Sustainability, an initiative of the European Green Deal, we expect increasing demands such as the substitution of specific hazardous substances or comprehensive testing for chemicals. We are constantly pursuing research and development (R&D) in substance characterization and the possible substitution of substances of concern to mitigate this risk. Further regulatory requirements could potentially lead to additional efforts and/or costs. Nevertheless, risks of stricter regulations are classified as improbable to likely with minor to moderate impacts.
Risk of negative political and macroeconomic developments
Throughout 2025, we have operated in an environment shaped by increased geopolitical fragmentation, shifts in global power dynamics and evolving regulatory priorities across major economies such as the United States, the European Union, China, and a range of emerging markets including India, Brazil and the wider BRICS group. Each region is advancing its own industrial and economic policies, resulting in new patterns of trade, investment and regulatory oversight that directly affect our operations.
Military conflict and regional instability remain significant factors. The ongoing war between Russia and Ukraine continues to influence energy markets and supply chains in Europe. In the Middle East, persistent conflicts present ongoing risks for trade flows and operational stability. In Asia, heightened tensions in the Taiwan Strait and the South China Sea, combined with evolving U.S.-China relations, present further uncertainties for technology and manufacturing networks critical to our business.
At the same time, the regulatory environment is evolving. The expansion of U.S., EU and Chinese export controls, particularly on advanced semiconductors, biotechnology and dual-use goods, has introduced additional compliance complexity and procurement risks. New and overlapping data privacy laws – such as the EU AI Act, U.S. executive orders and China’s cross-border data requirements – require careful management of information and technology flows. Chemical regulation, including the EU’s PFAS (per- and polyfluoroalkyl substances) restriction initiative and diverse state-level regulations in the United States, has implications for product pipelines and supply continuity, especially in the healthcare and life science sectors.
Governments in core markets are reviewing their healthcare budgets, tax regimes and public procurement policies, which increases volatility in demand, pricing and margin expectations. Investment screening is becoming more stringent in the United States, the EU, China, and India, especially for biotech and advanced technology sectors, resulting in longer lead times and additional requirements for cross-border transactions.
Talent acquisition and mobility are also affected. Global shortages of scientific and technical talent, combined with tighter immigration regulations and changing workforce policies, continue to influence recruitment costs, project timelines and compliance exposure.
Economic nationalism and the drive for greater supply chain localization are reshaping procurement strategies across the industry. Domestic content mandates, industrial subsidies and the emphasis on regional production are contributing to higher input costs and greater planning complexity for our global operations. In addition, the risk landscape now includes hybrid threats, such as disinformation campaigns and cyber intrusions, which require ongoing monitoring and rapid response to maintain business continuity and stakeholder trust.
Our response to this risk landscape is rooted in regional diversification, supply chain resilience and proactive risk management. We are expanding our dual sourcing strategies, strengthening strategic inventories and maintaining close engagement with regulatory authorities and industry associations. Compliance processes are being automated and regularly reviewed, and scenario planning is used to anticipate and adapt to evolving developments across military, regulatory, economic, and reputational domains.
Extreme escalation scenarios are not part of current baseline planning. However, we continue to strengthen our resilience and compliance measures to mitigate potential disruptions and to adapt to the changing geopolitical and macroeconomic environment.
The net risks of negative geopolitical and macroeconomic developments are considered possible to likely and could have minor to significant effects. However, our assumptions on geopolitical developments exclude scenarios with severe escalation of tension. The materialization of such scenarios would jeopardize entire industries and the balance of political and economic structures, posing a substantial challenge for us, as for any other company.
Further details on the macroeconomic development can be found under Macroeconomic and Sector-Specific Environment.
Market risks and opportunities
Risks and opportunities in the life science industry
The Science & Lab Solutions business unit serves customers across the pharmaceutical and biotechnology industries, government agencies, scientific institutions, and other industries. We provide them with access to a broad portfolio that includes reagents, consumables, equipment, instruments, software, and services for research, production, and testing. Despite a complex macroeconomic environment and cautious spending among some customer segments, the business unit remains well-positioned to deliver long-term, profitable growth. We aim to provide customers with a streamlined, end-to-end experience and a comprehensive portfolio that supports their research and analytical workflows.
In 2025, we expanded our innovation capabilities and strategic partnerships to better serve evolving scientific needs. The acquisition of Hub Organoids Holding B.V., Netherlands (Hub Organoids), strengthens our position in next-generation biology by advancing access to organoid-based technologies for drug discovery and toxicology research. Our collaboration with Opentrons Labworks, Inc., USA, and the launch of the Advanced Automation Workstation (AAW) demonstrate our commitment to accessible laboratory automation and digitalized workflows. Additionally, our global distribution and collaboration agreement with Rapid Micro Biosystems, Inc., USA, expands our offering in rapid microbiological testing, enhancing quality assurance capabilities for pharmaceutical and biotech customers. For emerging biotechnology companies, the pace and scale of a sustained recovery in funding will influence R&D investment levels, presenting both opportunities for growth and risks related to market timing.
The Process Solutions business unit offers its comprehensive bioprocessing portfolio to biotechnology and pharmaceutical customers that develop and manufacture both traditional and novel therapies, including filtration devices, chromatography resins, single-use assemblies and systems, and excipients. Despite signs of market recovery, excess market capacities persist across the industry and could lead to increased competition with potential price impacts. Additionally, the trend toward multi-sourcing strategies among customers continues to shape the competitive landscape. To address and mitigate these impacts, we have strategically positioned ourselves to capture opportunities arising from the industry’s shift toward biologics and the growing demand for bioproduction capacity driven by an expanding pipeline of drug candidates and regulatory approvals. Our expected acquisition of the chromatography business of JSR Corporation, Japan (JSR), and the expansion of our new filtration manufacturing facility in Blarney, Ireland, strengthen our global network, enhance our supply resilience and expand our production capacity in crucial technologies. Through our multi-year regionalization and smart pricing strategies, we are balancing volume growth with margin protection while improving proximity to our customers. Together, these initiatives reinforce our ability to meet evolving market needs and sustainably support the future of biomanufacturing.
The growing use of biologics is creating a need for more efficient and higher-yield manufacturing processes. This represents an opportunity for us to enable continuous and intensified processing through ongoing innovation in single-use technologies and bioproduction. We also see continued growth potential in high-innovation areas, such as novel modalities, as well as emerging technologies that define the “facility of the future”. While the acceleration of pharmaceutical development could result in faster market expansion than expected, a slowdown in R&D activity may temper near-term market development. In 2025, research spending by pharma and biotech companies was lower than historical averages due to capital constraints and portfolio reprioritizations. Growth in demand is expected to normalize as funding levels stabilize, underpinned by a robust and diverse pipeline of therapies in development.
Continued pricing pressure reflects market overcapacity, rising competition and evolving customer procurement practices. Inflation uncertainty and policy measures in key markets, including China and the United States, add to this environment. We are mitigating these effects through disciplined pricing strategies and ongoing cost reduction initiatives to sustain profitable growth.
Our Life Science Services business unit fully integrates testing services in addition to its services as a contract development and manufacturing organization to support customers across all stages of drug development, from preclinical to commercialization. We enable customers to advance complex therapies for patients worldwide both efficiently and reliably. While continued pressure on biotech funding presents near-term uncertainty, we mitigate this risk through a diversified client portfolio, operational excellence and ongoing investments in specialized capabilities and quality systems that strengthen our position in a dynamic and growing market. Opportunities also arise from our strong U.S. footprint, which enables pharmaceutical companies to access our domestic manufacturing and testing capacity quickly, without the need for lengthy new investments amid a shifting geopolitical landscape.
The market risks for the Life Science business sector are assessed as possible to likely with minor to moderate impact.
Further details on the industry, market developments and associated risks can be found under Risks Due to Increased Competition and Customer Technology Changes as well as Related Opportunities and Macroeconomic and Sector-Specific Environment.
Risks and opportunities in the semiconductor industry
Our Semiconductor Solutions business unit leverages a broad portfolio of differentiated, complementary technologies. This enables us to supply products for every key step in wafer processing, helping our customers to achieve their technology roadmaps. With the acquisition of Unity-SC SAS, France (Unity-SC), we are expanding our portfolio beyond front-end offerings and now also actively participate in high-end packaging.
The semiconductor industry remains cyclical and the positive recovery in 2025 has been uneven across individual segments. The growth experienced so far has been driven primarily by artificial intelligence (AI), data centers and high-bandwidth memory. At the same time, mature, replacement-led end markets such as PCs and smartphones, as well as demand outside AI in broader server and automotive applications, remained modest. The multilayered macroeconomic effects and lack of full transparency throughout the global supply chain cause a certain degree of uncertainty when estimating the future trajectory of the semiconductor industry. This uncertainty is reinforced by the current dynamic around the trade conflict between the United States and China, as well as tensions in the Taiwan Strait and potential price pressure from Chinese competitors. External and internal assumptions on the shape of the industry recovery and the future escalation of the trade conflict (e.g. further trade restrictions and tariffs) can deviate either positively or negatively. Such deviations present both an inherent opportunity and a risk to our base plan.
Irrespective of the current macroeconomic situation, the positive medium- and long-term growth prospects of our markets remain unchanged. Structural growth is supported by the increasing adoption of AI and the resulting demand for computing performance, which is driving higher materials intensity – particularly in advanced logic and memory devices.
We are also investing in our highly attractive growth markets and selectively expanding production capacities, thus strategically localizing our footprint to further boost customer proximity and strengthen supply resilience. Having the right capacity in the right locations enables us to deliver new products and required volumes efficiently, serving as a key competitive advantage.
The market risks for our Semiconductor Solutions business unit are assesed as possible to likely with up to significant impact.
Risks due to increased competition and customer technology changes as well as related opportunities
In the Healthcare business sector, both our biopharmaceutical products and classic pharmaceutical business are exposed to increased competition, especially in the form of biosimilars and generics but also in innovative R&D. We compete with other pharmaceutical companies in various therapeutic indications and rely on high-quality data to successfully market our products. For this reason, we closely observe our competitive landscape and make respective assumptions. Due to the uncertainty that is inherent to clinical trials, there is the possibility that competitor trials fail to meet primary endpoints in their studies or deliver inferior data to what we initially anticipated. If there are no new competing products or if our competitors deliver less promising data, this could represent opportunities for us in therapeutic areas in which we are active.
In the Life Science and Electronics business sectors, risks are posed not only by cyclical business fluctuations but also changes in the technologies used or customer sourcing strategies. As mitigating measures, we use close customer relationships and internal development capabilities as well as proximity to the market, including precise market analyses.
The risks due to increased competition and customer technology changes are assessed as being possible to more likely than not with up to a significant impact.
Further details on the industry and market development can be found under Macroeconomic and Sector-Specific Environment.
Risks and opportunities of research and development
Innovation driven by R&D is a major element of the Group strategy – including fostering innovation at the intersection of our business sectors – and is particularly important in the Healthcare business sector. In regular portfolio management reviews, we continually evaluate and, if necessary, realign research areas and R&D pipeline projects to focus our investments in areas where patient needs are served best. Nevertheless, R&D projects can experience delays, expected budgets can be exceeded or targets can remain unmet. Sometimes, development projects are discontinued after high levels of investment at a late phase of clinical development. Decisions – such as those relating to the transition to the next clinical phase – are taken with a view to balancing risks and opportunities.
In addition to in-house R&D efforts, strategic alliances with external partners and the in- and out-licensing of programs also form part of the catalog of measures to develop innovative medicine and ensure the efficient allocation of resources. Strategic alliances with partners as well as in- and out-licensing transactions always follow a stringent selection process along clear strategic and financial decision criteria. In general, however, forecasting the exact number of transactions per year is challenging and, furthermore, we may not be able to identify a sufficient number of in-licensing assets on financially acceptable terms.
The aforementioned development opportunities are associated with different types of risks. There is the risk of regulatory authorities not granting approval, delaying approval or granting only restricted approval. The risk that undesirable side effects of a pharmaceutical product could remain undetected until after approval or registration could result in a restriction of approval or withdrawal from the market. Furthermore, we cannot guarantee that all the assets we are currently developing will achieve the desired commercial success. Failure to meet targets in this area could have significant effects due to lower net sales or the non-occurrence of milestone payments from collaboration agreements, for example.
In Electronics, we will continue to invest in R&D with a strong focus on leading-edge material solutions. The aim is to seize growth opportunities arising from the increasing global demand for innovative semiconductors. Promising opportunities for innovation are constantly emerging throughout our Semiconductor Solutions business unit, and we work closely with our customers to exploit these. Technology inflection points bring new opportunities to our material solutions and the chance to differentiate ourselves.
The pace of innovation in the semiconductor industry remains high, with system design, high-performance packaging and front-end chip manufacturing all increasing in importance. Demand for advancements in 3D advanced packaging, metrology and process control is accelerating. The acquisition of Unity-SC positions us to capture these innovation shifts and respond effectively to changing market needs.
Beyond semiconductor materials, we see opportunities in display devices, especially augmented reality applications, which require a broad set of new materials. The increasing convergence of optical and semiconductor technologies enables us to leverage existing competencies in these fields and benefit from growing demand.
The risks of research and development are evaluated with probabilities ranging from possible to more likely than not with a moderate to significant impact. More detailed descriptions on our R&D activities worldwide can be found under Research and Development in Fundamental Information about the Group.
Risks and opportunities related to the quality and availability of products
Opportunities arising from capacity expansion
We make targeted investments worldwide to expand our regional capacities and drive sustainable growth in all three of our business sectors.
In fiscal 2025, we strengthened our Life Science business through several strategic expansions and acquisitions that enhance our production capabilities, supply resilience and innovation potential – and we will continue to do so. These include the expected acquisition of the chromatography business of JSR, which will broaden our purification offering and strengthen our downstream processing portfolio, the expansion of our filtration manufacturing facility in Blarney, Ireland, which increases production capacity for critical bioprocessing products, and the acquisition of Hub Organoids, which advances our expertise in next-generation biology and organoid-based technologies. For our Electronics business sector, we also invested in the new precursor R&D site in Sheboygan, Wisconsin, USA, and new manufacturing capacities in Jade Park, Taiwan.
Having the right capacity in the right place secures a more reliable and effective supply chain and helps meet growing customer demand in key markets. These initiatives create opportunities to strengthen our competitive position, while also requiring careful management of utilization, integration and evolving market dynamics. We therefore review our expansion and investment plans regularly to ensure alignment with long-term growth objectives and industry needs.
Risks arising from project execution
In today’s dynamic business environment, we prioritize innovation and growth. Projects are essential for achieving our strategic objectives, including driving innovation, expansion and promoting sustainable development. To effectively support further business growth and enhance efficiency, we continuously invest in production facilities and equipment, IT systems, distribution centers, office buildings, and other projects. However, project execution involves significant capital expenditures, making effective project management critical to avoid delays and higher costs. Inadequate planning, execution errors and ineffective change management can lead to inefficiencies and disruptions, resulting in increased costs and lower sales.
In a rapidly evolving market, delaying or deferring investments poses a risk of missing out on market opportunities and development. To mitigate this risk, we actively monitor industry trends, conduct market research and maintain a flexible project portfolio. By aligning our investment decisions with market dynamics, we aim to capture opportunities and minimize the risk of being left behind. This is particularly important in economic sectors such as the semiconductor industry, where market cycles present substantial risks. Overall, the risks are possible to likely and could have a moderate impact.
To proactively address project execution risks, we apply well-established project planning, effective oversight and internal control practices, while collaborating closely with stakeholders and conducting regular project reviews through teams and steering committees. This approach enables us to detect risks early on and implement corrective actions or discontinue projects that are unlikely to succeed. Through comprehensive planning, accurate cost estimations and re-evaluations, we monitor costs and ensure efficient resource allocation. Effective project governance and prioritization further contribute to desired project outcomes.
Risk of a temporary ban on products, production facilities or of non-registration of products due to non-compliance with quality standards
We are required to comply with the highest standards of quality in the manufacturing of pharmaceutical products (Good Manufacturing Practice or official pharmacopoeia). In this regard, we are subject to the supervision of the regulatory authorities. Conditions imposed by national regulatory authorities could result in a temporary ban on products or production facilities and potentially affect new registrations with the respective authority. We make the utmost effort to ensure compliance with regulations by regularly performing our own internal audits and carrying out external inspections. Due to these quality assurance processes, the occurrence of a risk with a moderate impact is highly improbable to possible.
Risks of production availability
Further risks include operational failures due to fire or force majeure, for example natural disasters such as floods, droughts or earthquakes, which could lead to a substantial interruption or restriction of business activities. As far as possible and economically viable, the Group limits its damage risks with insurance coverage, the nature and extent of which is constantly adapted to current requirements. Likewise, we are exposed to risks of production outages and the related supply bottlenecks that can be triggered by technical problems in production facilities with very high-capacity utilization. Furthermore, there are risks of supply bottlenecks due to a lack or loss of capacity. We work toward the continual mitigation of such risks by making regular investments, setting up alternative sourcing options and maintaining sufficient inventory levels.
The occurrence of these risks with up to significant impact is considered improbable to likely, while a highly improbable individual extreme event could have up to a critical negative effect and a more likely than not event could have a moderate impact.
Supply chain integrity
In 2025, we successfully navigated a complex landscape of challenges, including ongoing geopolitical tensions, supply chain disruptions due to natural disasters, and evolving regulatory environments. Our commitment to building resilient supply chains has been pivotal in ensuring uninterrupted service across all business sectors.
In Life Science, our supply resilience activities have enabled us to monitor several potential impact events closely, ensuring that we remain responsive to challenges rooted in geopolitical factors and regulatory changes. Our proactive engagement with suppliers has been crucial in maintaining service continuity and adapting to evolving circumstances.
In the Healthcare business sector, we effectively managed the supply of our medicines, ensuring that patients have access to essential therapies. Through proactive measures such as diversifying sourcing options and maintaining close relationships with suppliers, we fortified our supply reliability.
In Electronics, we avoided major disruptions due to our strong supplier relationships and ongoing efforts to enhance resilience. Our focus on diversifying sourcing and strengthening partnerships has positioned us to navigate these challenges effectively.
We acknowledge that certain vulnerabilities persist and are therefore committed to investing in our supply chain resilience across all business sectors. Overall, the improbable to likely risks could have a minor to significant impact.
Risks due to product-related crime
As a leading global science and technology company and manufacturer of innovative products, we face various security and crime-related risks due to the complexities of international trade and global supply chains. Our products are vulnerable to counterfeiting, theft, illegal diversion, and misuse. If unaddressed, these risks could lead to financial loss, reputational damage and business disruption and could even compromise patient safety. To mitigate these threats, we have implemented technical, operational and procedural measures to protect our product integrity and supply chains while ensuring that emerging threats are managed effectively.
Overall, the threat resulting from product-related crime is likely with a moderate impact.
Risks from the use of social media
We and our employees are active on numerous social media platforms. The consistent and legally compliant use of such platforms and their content is important for increasing awareness of our brand, among other things. We take all necessary precautions and have implemented processes to ensure awareness of the proper handling of social media as well as actively managing and controlling our publications and communication.
Nevertheless, reputational risks could result from public dialogues on social media, for example. On the qualitative rating scale, we thus rate this possible risk with up to critical impact.