Capital Structure, Investments, and Financing Activities

(37) Financial debt/capital management

The composition of financial debt as well as a reconciliation to net financial debt are presented in the following table:

The hybrid bonds issued by Merck KGaA, Darmstadt, Germany, are bonds for which the leading rating agencies have given equity credit treatment to half of the issuances, thus making the issuances more favorable to the Group’s credit rating than traditional bond issues. The bonds are recognized in full as financial liabilities in the balance sheet. Although the Group intends to repay them at the earliest possible date, these bonds are principally reported as non-current financial debt for accounting purposes.

In connection with the acquisition of SpringWorks Therapeutics, Inc., United States, the Group issued a U.S. dollar bond with a volume of US$ 4,000 million in August 2025. A total of four fixed-interest-bearing tranches were placed.

An early partial repayment of the hybrid bond issued in fiscal 2020 with a nominal volume of € 571 million took place in November 2025, as did a new issue of a hybrid bond with a nominal volume of € 850 million that will mature in November 2055.

The early repayment of the hybrid bond issued in fiscal 2014 with a nominal volume of € 500 million and the hybrid bond issued in fiscal 2019 with a nominal volume of € 500 million took place in December 2024.

The financial debt was not secured by liens or similar forms of collateral. The loan agreements do not contain any financial covenants. The average borrowing cost on December 31, 2025, was 3.1% (December 31, 2024: 2.2%).

Liabilities to related parties primarily consist of liabilities to E. Merck Beteiligungen KG, Darmstadt, Germany, a related party of E. Merck KG, Darmstadt, Germany, and E. Merck KG, Darmstadt, Germany. In fiscal 2025, the Group took on non-current financial liabilities to related parties in the amount of € 780 million, which are offset against existing financial liabilities as non-cash financial liabilities.

Information on liabilities to related parties can be found in Note (45) Related party disclosures.

Capital management

The objective of capital management is to ensure the necessary financial flexibility in order to maintain long-term business operations and realize strategic options. Maintaining a stable investment-grade credit rating, ensuring liquidity, limiting financial risks, and optimizing the cost of capital are the objectives of our financial policy and set important framework conditions for capital management. In this context, net financial debt as well as gearing, calculated as the ratio of EBITDA pre to net financial debt, are important capital management indicators in the Group.

Traditionally, the capital market represents a major source of financing for the Group, for instance, via bond issues. As of December 31, 2025, there were liabilities with a nominal volume of € 3.15 billion from the debt issuance program under which all of the euro-denominated bonds were issued (December 31, 2024: € 3.9 billion). In addition, the Group had access to a commercial paper program to meet short-term capital requirements with a volume of € 2.5 billion (December 31, 2024: € 2.5 billion), none of which was utilized as of December 31, 2025, or as of the reporting date of the previous year.

Loan agreements represent a further significant source of financing for the Group. On the balance sheet date, the financing commitments from banks with respect to the Group were as follows:

There were no indications that the availability of extended credit lines was restricted.