What happened? Merck KGaA yesterday hosted its annual CMD in Darmstadt providing a strategic update with commentary on mid-term targets, followed by breakout sessions with the management of each of the three divisions. BNPP Exane View: The event portrayed a confident picture of Merck''s future growth outlook and the ongoing recovery of its Life Science division, with revised mid-term targets putting it broadly on track with consensus expectations (see note here). Although a more challenging outlook in China moderates bull cases for Life Sciences and the likely pace of a recovery remains somewhat uncertain given muted early research spending and lack of explicit margin guidance, updated mid-term targets should significantly improve investor confidence. However, transformational MandA seems unlikely to materialise in the near-term and we continue to see challenges to Merck''s ability to invigorate its Healthcare business, with investors likely to continue to see this as very much a show me story given recent pipeline failures. Key takeaways: . Confident in growth outlook; transformational acquisitions seem less likely. Key points: (1) Merck''s three pillar growth strategy is here to stay, with management outlining its strong track record of delivering consistent 8%/12% sales/ EPS growth over the last 15 years; (2) FCF is expected to improve going forward as capex requirements normalise; (3) Life Science will remain the focus for capital allocation but transformational deals seem less likely given a broader focus on innovation across the Life Science portfolio; (4) management clearly recognise the need to accelerate business development in Healthcare, with bolt-on de-risked commercial/pre-commercial asset acquisitions clearly on the table; (5) margins are expected to improve based on operational leverage and efficiencies but explicit quantification remains limited. . Life Science recovery mode underway but pace of delivery and margin outlook still...