Strong bioprocess demand leaves room for Life Science upgrades but capacity limits upside With capacity expansion projects and process optimisation ongoing and competitor reports suggesting very strong demand, we expect Merck to report very strong Q2 results and see room for Life Science guidance to be raised. We increase our Life Science estimates by 1-2% to move slightly above management''s guidance for the division. Despite this, recent share price moves seem to imply more material upgrades than we believe are realistic given capacity constraints. Growing confidence COVID-19 tailwinds are more durable into 2022 Following a series of ''beat-and-raise'' Q2 prints from Life Science peers, near-term COVID-related tailwinds clearly continue to be strong. More importantly, we see evidence this demand will be more durable into 2022 than previously expected with longer-dated vaccine contracts, emerging variants and continued global vaccination roll-outs as drivers. We expect robust growth from non-COVID projects to mitigate the (increasingly unlikely) risk of COVID-demand plummeting. Recovering healthcare market dynamics reduce downside risk to Healthcare new launches Although competitor commentary suggests continued muted cancer diagnosis rates, company Q2 reports are thus far consistent with expected progress towards normalisation of healthcare systems as pandemic pressures ease. Importantly, a recovery in the MS switch market to close to 90% of pre-pandemic levels should support a return to QoQ growth for Mavenclad whilst Symphony Health sales data supports continued strong Bavencio uptake following approval in the 1Lm UC setting. Reiterate Neutral with TP of EUR168; capacity constraints limit Life Science upgrade cycle Merck''s shares have rallied c.28% since its upgraded FY21 outlook was quantified. Although at 21x 2022 PE Merck''s shares still trade at a 31% PE discount to Life Science peers, we view upside to growth prospects from the Life...