PolyPeptide Aktie

Ladies and gentlemen, welcome to the PolyPeptide's Full Year 2025 Business Update and Results Presentation Conference Call and Live Webcast. I am Moira, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Tim Brandl, Financial Planning and IR. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to our 2025 full year results presentation. I am being joined today by our CEO, Juan Jose Gonzalez; and our CFO, Marc Augustin, who will take you through the presentation, and we'll be open to take questions at the end. Before we start, I would like to draw your attention to our usual disclaimer on Page 2. For the Q&A, please follow the instructions on Page 3.

Anyone who wishes to ask a question can do so via telephone or in writing in the webcast. Moving on to the agenda. Juan Gonzalez will start with a business update. Then Marc will guide you through the financial results before Juan Jose Gonzalez shares our guidance for the full year and the midterm outlook.

And with that, I'm pleased to hand over to our CEO, Juan Gonzalez.

Thank you, Tim, and good morning, everyone. 2025 has been a year with a strong growth and a marked improvement in profitability. We achieved in 2025, a 16% revenue increase at constant exchange rate, mainly driven by Metabolic Therapeutics. In terms of EBITDA, we grew 84.4% from 7.5% EBITDA margin in 2024 to 12% EBITDA margin in 2025. Actually, in the second half of 2025, PolyPeptide already reached 19% EBITDA margin.

We also have improved our financing flexibility. Our strong operating cash flow driven by increased profitability, better working capital and further customer support in the form of prepayments have significantly expanded our financing. We are also in advanced discussions to further expand our revolving credit facility. Now the combination of the better profitability, our ability to secure last customer support and this expansion of our revolving credit facility give us all the financing flexibility we need to continue our agenda towards our midterm guidance.

Therefore, although we have a flexibility, we do not plan to pursue an equity raise. In terms of our capacity expansions, they are on track to deliver the expected contribution towards our midterm guidance. Our new last decade capacity in Brain achieved optimal target utilization by the end of 2025. Actually, we optimized the output and now the potential revenues from this new capacity have increased from EUR 100 million to EUR 125 million.

Furthermore, our Malmo modular expansion is on track to start a ramp-up in 2027. The strong momentum in 2025 is reflected in our 2026 full year guidance with accelerated growth and a further improvement in profitability. On the back of this momentum, we are confirming our 2028 midterm guidance. So overall, we are very excited with the progress in 2025, but let's step back and talk about the market. In terms of the market, peptides is one of the most attractive markets for CDMOs.

On the left-hand side, you have the global therapeutic peptide market potential. The growth from 2024 to 2031 is expected to be a CAGR of 15% and reach EUR 175 billion. Metabolics will be the main driver of growth for this market, but the non-metabolic base that includes oncology, cardiovascular, rare diseases will also more than double during this period. What is driving the growth in this market is a significant clinical development.

On the right-hand side, what you have is the number of peptide drugs in clinical development by therapeutic area. And as you can see, there are over 500 clinical development programs underway and metabolic, oncology and neurology account for half of the total clinical development activity. Now when we look at the metabolic opportunity, which is the #1 driver, there are main things underway. Number one, the obesity comorbidities are significantly expanding the market. The impact of peptide metabolics on weight loss is significant, but they also have major benefits across other comorbidities, whether it is sleep apnea or MASH or cardiovascular or oncology, the potential of metabolic peptides is much broader than initially thought.

Now we see also the ongoing success of blockbuster drugs from Lilly and Novo Nordisk. And we see also a significant improvement in terms of the value proposition of metabolic peptides. We will see improvements in convenience going from weekly to monthly. We will see oral peptides. We are seeing multiple agonist and combination therapies that will improve the side effect profile of metabolic peptides, whether it is GI, whether it is mass mass. And we continue to see the expanding range of indications. And this is very important because what we see is that the competitiveness of metabolic peptides over time will continue to increase and remain relevant vis-a-vis new modalities like small molecules.

On top of that, you have a large number of new entrants, which are advancing the next-generation molecules. In terms of large pharma, Amgen, Roche, Pfizer, Boheim, AstraZeneca, Merck and the large number of biotechs, which are advancing these new metabolic projects are going to ensure that metabolic peptides continue to scale up very rapidly and reach what will be a significant new market by 2031.

Now given the development in the market, let's talk about how polypeptide is positioned within this market. And we believe that PolyPeptide is very well positioned. The company has deep peptide expertise. We have over 70 years of experience. We have a strong track record of over 1,000 therapeutic peptides manufactured. Actually, if you look at all the peptide drugs approved by the FDA since 2021, 50% came through peptide.

On top of that, we have a global multisite development and manufacturing network, providing customer proximity, flexibility and speed to market. We believe that to be a significant competitive advantage given the current geopolitical environment, our ability to provide supply chain solutions across the U.S., Europe and Asia is becoming more and more relevant.

Today, PolyPeptide work with 14 of the top 20 large pharmaceutical players. As you can imagine, not all the top 20 are engaged in peptides. That basically means that PolyPeptide works with most of the large pharma companies engaged in the development and commercialization of peptides.

Now let's talk about our innovation and how do we compete in the marketplace. And we have a vision of being the most innovative peptide CDMO The foundation around operational and quality excellence, industrial capabilities and having the right talent, culture and sustainability credentials are very important. On top of that, we work on 3 competitive advantages. We work on proprietary technologies, we work on development and we work on modularity.

Now let me just give you a flavor on the progress on these 3 main competitive advantages. In terms of innovation, the company has a proprietary technology that is focused on 3 areas that we believe are very important to meet customer needs. Number one, around sustainable manufacturing that significantly reduce the cost, the CapEx required to be able to use some of these raw materials. and to meet regulatory compliance. We are talking about proprietary technologies to reduce solvents. We are talking about green solvents to replace things like PFA. And we are now moving into a true solvent reprocessing within the sites that will significantly reduce the cost of solvents, which is an important part of our raw materials cost. We are also working on process speed and throughput. We're working on automation, and we have a proprietary technology, which is a high-capacity resin that increased the reactor throughput by 2 to 3x. And we are working on a better capacity expansion model, which is a flexible design for rapid deployment. And this is what we call our modular technology. It basically allows to reduce the implementation risk while providing significant flexibility. This agenda is supported by multiple patent families and scientific publications that ensure that we provide an offering to customers that cannot be matched in the marketplace.

Now this is in terms of innovation. And to support this innovation, we are also forming strategic relationships to strengthen our end-to-end offering. Basically, we're focusing on faster and efficient sourcing, reliable manufacturing and accelerated development pines. In terms of starting material, for example, we are deepening our relationship with [ Flama ] and lubing manufacturing solutions to secure significant raw material savings, improve our supply chain flexibility and resilience and broadening our sourcing options.

On the drug product side, we have a partnership with Lifecore Biomedical, which has expertise in formulation, fill and finish and packaging. And the idea is that in terms of development, we can provide a seamless transition between drug substance and drug product. Now this is in terms of innovation. Now let's talk about development as a competitive advantage. And today, we have the richest pipeline in the market. In 2021, when the company went public, we had 247 projects, out of which commercial projects were 51, 4 years later, 2025, we have 264 projects, and our commercial projects have grown by over 40%. That basically shows that our ability to develop products and move them into commercialization is working.

Not only that, PolyPeptide today is engaged in over 1/3 of all Phase III peptide projects globally. Now the reason why we have such a rich pipeline is because we have a proven track record of quality excellence, regulatory expertise and delivery performance. We have advanced capabilities for complex peptides and peptides are becoming more and more complex. Our ability to work with long, modified and high-value molecules is basically resulting on continue to advance our development pipeline. This is also driven by our proprietary technology, which is showing that to be able to produce industrial scale metabolics, you need a better development and manufacturing process.

Our development infrastructure is also a key area of development, a key area of competitive advantage. We have development infrastructure in the U.S., in Europe, and now we are building development capabilities in our Indian facility. Now this is in terms of development. Let's talk about modularity, and I will explain in a minute how do this modular concept looks. But in simple terms, traditional CDMO capacity expansion is not optimal. The projects tend to be delayed, budgets tend to be overrun in terms of cost. And if you look at the speed of the market development, you need a better and different way to build capacity. And in the case of modularity, our modular technology ensures speed. We have an accelerated construction time line, low execution risk. The existing manufacturing remains uninterrupted while we are expanding. Quality assurance, the standardized platform is supporting not only GMP, but also BLM requirements, which is important as peptide chains become longer and longer. It provides a fast scale up. It's a replicable setup to allow for short-term capacity addition and supply chain resilience.

This flexible supply runs across geographies with models deployed in the U.S., Europe and Asia, it provides a significant supply chain resilience. Now these are the benefits in terms of modularity. Let me show you how this modular technology looks. And we have our modular expansion, which is on track to double the SPPS capacity. And we have a video to show you how does it look like. So let's play a video now...

[Presentation]

[indiscernible] can give you a better feel in terms of how this mold technology looks like. And just to remind everyone, this is a metabolic program. It's an investment of EUR 100 million, which is largely funded by a large pharmaceutical player. And this molder concept gives you a much faster speed to market. Basically, you can in 3 years move from design to construction to validation.

Our experience with this model expansion in Malmo is that it is going to be around 1.5 years faster than our expansion in [indiscernible] The most important thing is that once you build one model, the next model can be even faster as you don't go through the design process phase. Now let's see how all these competitive advantages have resulted in terms of the performance of the company. And on the left-hand side, you have the revenue by therapeutic area from 2021 to 2025. And basically, PolyPeptide metabolic revenues have more than tripled since 2021. And today, it reached over half of the total revenues of the company.

Now just to give you a sense regarding the scale of our metabolic exposure, we have 47 programs, 37 are in development across 25 customers, of which 7 are already in Phase III. On top of that, we have 10 commercial projects. PolyPeptide in metabolics is working on GLP-1s, orals, multiple agonist and combination therapies. And our 3 major sites, BRI, Malmo and Torrance in the U.S. are actively engaged in the development and commercialization of this metabolic pipeline. That is the reason why we believe that our metabolic revenues will continue to grow at an accelerated pace.

Now let's look at our transformation towards commercial and large pharmaceuticals. On the left-hand side, you have our revenue by business area. And in 2021, when the company IPO-ed, our mix between development and commercial was around 50-50. By 2025, we have been able to grow our development revenues at a CAGR of 10%, but our commercial revenues grow even faster. We actually, over that period have doubled our commercial revenues. The benefits of having a larger percentage of commercial revenues is that it gives you more stability and predictability. And this also reflects very well what I show in terms of our development pipeline and the increase of our commercial projects.

Now if you look at our revenue by customer type, in 2021, we had large pharma, which means the top pharmaceutical players accounting for $119 million of the EUR 282 million. By 2025, large pharma has grown at a CAGR of nearly 20%. And today, it accounts for around 60% of the total revenues. We believe that working with large pharma provides also some additional benefits in terms of sustainability, having long-term relations and more stability. Now we have been able to grow our revenues in large pharma while also growing our revenues with innovative biotech companies, which we believe is very important as some of these biotech will end up being bought by large pharma and commercialized by them.

Now we talk about the evolution of our revenues. Let's see where we are with our capacity expansion. And our capacity expansion plans are on track and are expanding further in the U.S. and India. We basically talk about our expansion in brain that reached target utilization. We have been able to further optimize the output. And in 2026, we will get the full year effect of this brain facility, this new brain capacity operating at target utilization. In the case of Eras, we are starting the ramp-up in 2026. And that basically means that all the work in terms of engineering and validation is completed. In the case of Malmo, as we talked a few minutes ago, we are on track to start the ramp-up in 2027, and we are very excited given the size of this new capacity and the proven benefits of this modular technology.

On top of that, we also initiated a rapid expansion in India, which is going to become online in about 3 months. And finally, we are also embarking on a downstream expansion in province that we should see scaling up in 2027. This capacity expansion put us in a position to exceed our 2028 midterm guidance. We believe that we'll have all the capacity necessary to make sure that we meet the midterm guidance and ensure that we continue to grow in 2029. But from now onwards, all new capacity will be focused on making sure that the company maintains its strong growth profile beyond 2028.

Now let's talk about how we are funding our capacity expansion projects. And what you have here on the left-hand side is the capital expenditures, including the percentage of revenues. So in 2023, we spent 17% of revenue that increased to 26% in 2024 and 28% in 2025. Now the financing of this CapEx is mainly driven by customer prepayments. Over these 3 years, we received gross customer inflows of EUR 290 million, and we started to release payments for around EUR 90 million for a net inflow of EUR 156 million in terms of customer prepayments. The main areas of customer support is capacity reservation fees and raw material prepayments. So this is very much in line with PolyPeptide multiyear funding strategy for growth. We believe that our role in the development of these projects and the partnership that we have with customers to ensure that we can secure their support to invest capacity is an attractive model to grow the company over the next few years.

Now this is in terms of -- now we talk a lot in terms of our competitive advantage. We talk about our revenue evolution. We talk about this capacity expansion model with the customer funding. Let's talk about talent. And in terms of talent, we continue on strengthening our organization and capabilities. Now let me just start sharing that Marc, our CFO, is resigning for personal reasons and Tim Brandl is appointed as an interim CFO. Marc joined me about 2 years ago. And over the last 2 years, his impact on the company has been remarkable. The progress not just in terms of our financial performance, supporting our operations and commercial contract agreements, the strengthening of the finance function, Marc has had a very positive impact in the company, and we wish him all the best in the future.

Now in addition to this announcement, we have a very active global agenda. We are strengthening our capabilities, especially in supply chain, procurement and finance. We have been doing talent upgrades in Torrance across development, manufacturing and engineering. We are basically getting ready to do a larger expansion in the U.S., and we are basically making sure the organization is ready for that. And we are building a shared service center in India. And you have here a picture of integration. We are basically leveraging the fact that we have infrastructure in India and moving some back office functions there that is going to give us more flexibility as we grow our multisite network. So this is in terms of talent.

And with that, I'll pass it to Marc, who is going to share the financial results.

Thank you very much, Juan Jose. And this is my last call for PolyPeptide. I would like to take the opportunity to say thank you to the Board, to you, Juan Jose, the leadership team and the entire PolyPeptide organization for the last 2 years. A lot has been achieved during this period operationally, commercially and financially. And I believe the company has built a strong foundation for the next chapter of the growth journey.

But now let's move to the financials 2025. In 2025, we achieved sales of EUR 389.3 million, which represents around 16% growth at constant exchange rate. And I would say the underlying performance of the business was actually even stronger than the headline numbers suggest. So the real story is not only the level of growth, but also the quality behind.

Our development business grew by close to 30%, reaching EUR 153 million. That is an important signal for the future, because it reflects the strength of our pipeline and supports our confidence in future commercial momentum. And at the same time, we saw a solid growth of 7.9% in our commercial business, especially in Braine and Malmo, reaching EUR 236.0 million in total. The site and Braine delivered the strongest growth across the network in 2025. But also important is that a large commercial customer has now completely moved into our new commercial asset, freeing up capacity in the existing base. And that capacity was already backfilled with new late-stage development programs, which will transition into commercial phase in the near term.

So the key message for 2025 is not only the headline growth of 16% at constant exchange rate. More importantly, it shows that the PolyPeptide business model is becoming stronger, more balanced and more resilient and that we are putting the right building blocks in place to support future growth. And finally, as in previous years, FX only had a limited impact on sales due to our natural hedging approach.

Let's turn to the EBITDA development. Looking back 2 years when we started the profit improvement journey, operational performance was one of our key priorities. And today, we can see that the improvement initiatives, which we started across the network show tangible results and even more important that these are sustainable. We know that these activities take time to show the full results, but the impact we have achieved already over the last 2 years is very encouraging.

In 2025 alone, we improved EBITDA in the base business by more than EUR 40 million, and we are not done yet. There's more to come in the next years. Regarding the new asset in Braine, you may remember that in the first half, we were still making a small loss. However, by the end of the year, we have reached our target utilization as planned and finished the full year with a positive EBITDA of EUR 1.4 million. This is a great success for the site in BRI and also for the group. At the same time, we continue to invest in our people to support future development and to strengthen our capabilities. This led to a cost increase of EUR 16.4 million. That led to an EBITDA margin of 13.1% before exceptional costs.

As mentioned, we see further potential to improve profitability. And one of the key enablers to unlock that potential is our SAP project, which is designed to standardize and harmonize processes across the group. In 2025, we completed the prepare phase, resulting in project costs of EUR 4.1 million. Against this backdrop, EBITDA for 2025 came in at EUR 46.8 million, corresponding to a margin of 12% for the full year. And if we look specifically at the second half, the EBITDA margin reached 19%.

Let me recap on the next slide. We delivered a top line growth of 16% at constant exchange rate. We improved the EBITDA margin by 4.5 percentage points to 12% and EBITDA turned from negative EUR 7.4 million in 2024 to positive EUR 8.7 million in 2025. The improved operational performance was offset in the financial results by unrealized FX losses due to revaluation of intercompany loans, mainly in U.S. dollars, amounting to EUR 12.3 million, of which EUR 9.7 million has been already recognized in the first half of 2024.

Compared to 2024, the year-on-year change was minus EUR 18.5 million due to the fact that in 2024, the revaluation of the loans had positive impact of EUR 6.2 million. The second relevant item, which also is a noncash element relates to IFRS treatment of contract liabilities. For contract liabilities, the financing component has to be recognized in the financial results. This impacts for 2025 of EUR 6.9 million versus EUR 4.9 million in 2024. The interest expense was stable year-on-year of about EUR 8.5 million. This is leading to a net result of minus EUR 21.2 million for 2025.

Now let's turn to the cash flow bridge. And there, I would like to split the operational cash flow into 2 parts. The first part of EUR 38.6 million is mainly driven by the improved operational performance and the second part of EUR 38.9 million is a result of the progress we have made in the net working capital management and customer prepayments. A good way to look at the improvement we have achieved is to take net working capital, excluding contract liabilities in percent of sales. This KPI improved by more than 10 percent points from 46.1% in '24 to 35.1% in '21. That is a meaningful improvement and shows that we are capable to manage our net working capital alongside sales growth and profitability improvement. Investments account for EUR 111.7 million, mainly driven by growth projects. And finally, we end the year with a cash balance of EUR 74.6 million, essentially in line with 2024. EUR 51 million remained available under our RCF after drawing EUR 40 million during the year. So overall, we managed to improve operating cash and continue investing into the future.

Let me close with our financing strategy. This financing strategy is built on 4 pillars. The first pillar is improving profitability. Over the last 2 years, we have improved profitability sustainably step by step. In 2025, we reached EBITDA margin of 12% despite the ramp-up in Braine and the ERP project costs. The second pillar is customer prepayment. Our recent expansions and the ones to come are supported by customer prepayments that helps to balance the cash flow and at the same time, mitigate our investment risk. The third pillar is our existing credit facility, which we increased in '25 by EUR 40 million. And currently, we are in advanced discussions with our banks to increase it further. The last pillar is equity instruments. Although we don't expect to use those instruments near term, they are part of our toolbox.

So overall, the message is we have a balanced and comprehensive financing strategy in place while at the same time, making tangible progress in strengthening and growing our business.

And with that, I'm at the end of my final slide and also my last presentation of PolyPeptide. I would like to sincerely thank the Board, Juan Jose, the EC and the colleagues across the company for the trust, the collaboration and support over the last 2 years. It has been an intense journey, but also a very rewarding one. I'm proud of what we have achieved together, and I'm confident that PolyPeptide is in a strong position today than it was 2 years ago.

Thank you very much. And with that, I hand it back to Juan Jose.

Thank you very much, Marc. So let's talk about how all this strong momentum in 2024 and 2025 translate in our guidance for 2026. And basically, in 2026, we should expect an accelerated growth and further profitability improvement.

Our priority for 2026 are the following: to meet increasing demand, especially in metabolics, execute capacity expansion in [indiscernible] and the ramp-up in [indiscernible] and India and advance negotiations for large commercial agreements to support growth beyond 2028. For 2026, our revenue growth at constant exchange rates is 20% to 25%.

Now just to give you a sense, just the full year benefit of the new capacity in Braine will take us to the upper end of this guidance, and it excludes any additional growth from the rest of our network. In terms of EBITDA margin, we are targeting mid- to high teens. And in terms of CapEx, we are targeting 15% to 20%, in line with our midterm guidance.

Now let me just show you why the EBITDA margin is within range. If you look at our performance in 2023, 2024 and 2025, our EBITDA margin in the second half of the year is very much in line with what will be the full year EBITDA margin of the following year. So in 2023, in the second half, we achieved an EBITDA margin of 7.1%. And in the full year 2024, the EBITDA margin was 7.5%. In 2024, in the second half, we achieved an EBITDA margin of 11.1%. And in 2025, we achieved an EBITDA margin of 12%. So if you look at having achieved an EBITDA margin of 19%, while we are confident on our ability to achieve a mid- to high teens EBITDA margin for 2026.

Now in terms of 2028, we are basically confirming our midterm outlook. Given the rapid growth and where we will be in 2026, the contract we have signed and the demand forecast, we are comfortable on our ability to hit our 2028 guidance. In terms of EBITDA margin, having achieved in the second half of 2025 [indiscernible] 19%, our target of approaching 25% is within reach. And in terms of capital expenditures, we are in line for 15% to 20% of revenues.

So this strategy to be the most innovative pet CDMO anchored on 3 competitive advantages: innovation, development and the potential of modularity is a strategy that we believe will create significant value for stakeholders.

And with that, let's move into the Q&A.

The first question comes from the line of Charles Weston from RBC Europe Ltd.

Could I have 3, please? The first of all, a question on the non-metabolic growth that you showed. Metabolic has obviously been very strong. Non-metabolic has only grown around 1% CAGR. Could you perhaps touch on the dynamics there and what may have held back that growth? Secondly, on your advanced discussion on contracting beyond 2028, could you tell us whether that's with a new commercial -- potential new commercial customer or an existing one? And would this be something that you announce when you sign a deal or just wait for the next update? And then just lastly, please, on the industry as a whole, clearly, the industry is expecting semaglutide generics to enter the market either later this year or 2027. Could you help us understand what the manufacturing network looks like globally to support the generic players? Are they investing in their own manufacturing? Are they going to be using third parties?

Thank you, Charles, for the question. First of all, in terms of non-metabolic growth from 2021 to 2025, we actually have also been going through a process of exiting some noncore businesses. We are reducing our presence in genetics. We are reducing our presence in cosmetics. We are reducing our presence in what we call noncore sectors and doubling down on branded pharmaceuticals.

So that's actually driving what you see in terms of the net growth in terms of non-metabolics. Now if you look at our non-metabolic pipeline, we have a pipeline as rich as what we have in metabolics in areas like oncology, cardiovascular, rare diseases. So we actually expect to accelerate our growth in the non-metabolic space.

Now I mean, when you have such a late-stage pipeline, that basically puts us in a very good position for new commercial agreements. And in this case, we have several commercial discussions, and it's a combination of Phase III moving into commercialization and existing and new customers. Now in terms of generics, I have to say I don't have a visibility in terms of what is the total global manufacturing infrastructure being built to serve generics. In our case, our strategy is very much focused on working with large pharma and biotech customers, bringing development pipeline into commercialization. And that's really what we are focusing on. Although we have the ability to serve generics, generics is not really a priority for us.

Actually, our Amman facility support genetics, but it is going through an expansion to serve branded pharmaceutical products.

The next question comes from the line of Laura Pfeifer from Octavian.

I think I have 2. Maybe the first one relates to your guidance for this year. I think, Juan Jose, you mentioned it yourself that somehow the guidance looks very much derisked. Just looking at the midpoint, it implies some EUR 85 million to EUR 90 million in additional growth. And I think looking at the statement that you have increased the output at Braine, you can fulfill that just by incremental contribution from BRI.

So my question is, why did you give that guidance? I mean -- and what is the potential upside given that we also have probably other capacities and projects ramping up? And then the second one relates to your margin target for '26. You say mid- to high teens range. Maybe you can just confirm that. This is about 15% to 19%. And then what are the key drivers and headwinds we should consider? And also, what accretion would you expect from the brain capacity?

Yes, Laura, thank you for the questions. And listen, I think we have been working already for 3 years, and you probably know by now that we are a very thoughtful and a very conservative company in terms of issuing guidance. And we always say that we want our performance to drive our valuation, not our guidance. So I think we are comfortable with this 20% to 25% range.

Of course, if everything goes well, we can go higher than that, but we plan to review our guidance at midyear. And then in terms of the margin target is mid- to high teens. So again, finalizing H2 at 19% is a good indicator in terms of the full year. Of course, the investment in ERP is going to increase, and that's a potential consideration. And of course, there is a lot of mix movements that we are scaling up multiple projects. But I think you have enough to be able to come up with an estimate.

Marc, I don't know if you have additional comments?

No, I think you mentioned the most important points. So one, the ERP system is gaining speed. As said, we have finalized the prepare phase in '25. And now in '26, we are going into the build phase. So that, of course, is adding to that. And we also mentioned the ramp-up we see across the network for future growth that is also hitting our profitability in '26.

Okay. But maybe just as a follow-up, can you maybe quantify the ERP investment? How much will it be in '26?

We assume that the cost will double compared to what we see in '25.

It's around 2 points of EBITDA margin. I think that could be a good assumption.

Okay. And then just maybe quickly a follow-up on the first question on the sales growth guidance. Can you just maybe give us at least an understanding what is kind of the base business growth you have baked into that guidance? And what is the contribution from Braine?

Yes. No, again, this guidance reflects the benefit of full year utilization of the brain expansion. After that, the growth in the base and growth from additional capacity expansion is not included in the guidance. But at this point, our recommendation is to take the guidance. Just know that we are in a comfortable position relative to the guidance, and we will review where we are at the end of the first half results.

Next question comes from the line of Estelle Betrisey from Berenberg.

Congratulations today also on the results. I wanted also to build on the previous question about the -- if you could maybe explain further the increased revenue potential from grain that you've explained. Like what brings you to expect this further revenue to be generated from that site? And yes, how confident you are to reach it? And also if we can expect further upside to come from the other sites as well that are currently being ramped up?

Yes. Thank you, Estella. I mean one of the things in terms of our focus on innovation is that we have proprietary technology to increase the yield output. So in very simple terms, this capacity expansion was initially designed to produce 100 kilo batches and we basically use some of our technology to increase the size of the batches to 125. That's why we say that revenue potential of this new capacity now has increased from 100 million to $125 million. And then, I mean, we have been doing expansions across the network.

So we talk about [ Strasport ] that will be ramping up. We talk about India that will also be ramping up. And of course, we have debottlenecking programs to expand our capacity in Torrance. So overall, I think our ability to maintain the rapid growth momentum and accelerate relative to 2025 is pretty much the...

The next question comes from the line of Daniel Jelovcan from ZKB.

So the first question is on the commercial revenue, which in the first half was plus 30%. And now you have -- yes, you have reclassified the segments. So my question is, it looks like in the second half, you had actually negative growth in the commercial revenue. And also a question related to that, you combined now in the contract manufacturing plus generics and cosmetics.

Does it mean you have less growth in generics and cosmetics. I'm not sure if I understood it correctly. I mean, do you kind of exit that segment? Or yes, that's the first question. Then I follow with the second one.

Yes. Thank you, Daniel. And maybe just to clarify. So basically, we report development and commercial and within commercial, you have branded pharmaceutical, you have generics and then you have others. Now there is a lot of volatility between half year. That's why we always recommend for people to look at full year because our performance really depends not on what are we manufacturing, but what are we invoicing at a particular time. And you can see that sometimes development seems to accelerate rapidly, sometimes commercial but you should look basically at the full year growth for development and commercial revenue. I mean our strategy is very clear. We are a pure peptide player, and we are focused predominantly in branded pharmaceuticals. That basically means that we are deprioritizing the business and making sure that we are using our capacity to bring Phase II and Phase III projects into commercialization.

Marc, anything else to comment?

Yes. Maybe one further point to add to that, Daniel, is if you compare percentages between the half years, please consider also that the revenue is different between the half years. So as Juan Jose said, you should really look at the full year split, especially when we're talking about commercial and development.

Second question, your customer prepayments were down to, as you showed on the slide to EUR 27 million, so down from the previous years, which is probably normal in view of the big customers' contracts. But how is that going to look in the future? Is that increasing again because you probably have another big customer, which is doing some prepayments? That's the second question. And then I follow up with the third.

Yes. I mean in terms of customer prepayments, I will say it's better to do -- to look at it over a longer period of time. So if we look at the last 3 years, we said that we had a gross inflow of customer prepayments of EUR 290 million and that we released about EUR 90 million and a net inflow of about EUR 150 million. There will always be a lot of volatility year-over-year in terms of the size of the customer prepayments. What is important is that going forward, we expect customer prepayments to continue to be a material source of funding to expand our capacity.

Okay. And the last question -- and before that last question, maybe a personal remark, thank you very much, Marc. It was always a pleasure to work with you, and you are always quite -- I mean, you were always very helpful and spot on. Thank you so much for this first. And the last question, do you expect to pay taxes this year with the better profitability or you still can use some tax loss carryforwards?

Thank you, Daniel, and thanks for your nice words. Always a pleasure to work with you as well. So yes, the current profit situation, I think we are still using the loss carryforward so that we are not in a cash paying situation.

I think we have EUR 1.4 billion of tax carry losses to use. So I think taxes is not really something that we should be concerned for the next few years.

Let's go to the next one.

The next question comes from the line of Chris Richardson from Jefferies.

Just a couple, if possible. Can you please clarify the potential downside or drags on the sales growth given your comments that Braine should take you to sort of the midpoint of that guidance? Is there any complication with the backfilling of the capacity mentioned? Or is it something else? And then just regarding capacity optimizations, is this something we can expect to see in other expansions? Or is it Braine specific? And then just on Braine and those increased peak revenues, given it's only a single customer, in that expansion. Does this match -- does this increase in potential revenues match the demand from said customer? Or is there a risk this front-end loads the revenues from that site and any potential minimum contract order over its term life?

Yes. Thank you very much, Chris. And listen, in terms of downside, one of the reasons why there are barriers to entry into this market is because the development and manufacturing process is very complex. So at any moment, you could always find yourself finding some issues. And we are also in a very uncertain geopolitical environment. So I think it's very important for us to be prudent. But we don't see any new specific downside than just a normal complexities of running a better CDMO and a more volatile market environment.

Now in terms of the improvement in the yield in Bin, this is actually something that we do across our -- all of our commercial programs. It's just that now we have more potent technology to be able to be more effective driving yields. So in the case of Malmo, at this point, assume that this is a $100 million revenue expansion. But of course, we plan to apply our technology and see improvements in yield at some point. Now your last question regarding the expansion in brain and where this could be front-loaded. This actually reflects the rising demand of customer projects. And actually, we just renew and extend this last contract. And based on the forecast, we expect the demand to continue at a very high level for the next few years.

The next question comes from the line of Tanya Anzalik from UBS.

We'll proceed with the next question, which comes from the line of Charles Weston from RBC.

Echoing Daniel's words, Marc, thank you very much for your help over the last couple of years. Two follow-ups, if I can, please. First of all, can you remind us what the level of maintenance CapEx we should be thinking about in this business as a percentage of sales? And secondly, can I just follow up on an answer you just provided? I think I heard that you have renewed and expanded the contract with the large customer in Braine. Is that -- did I hear that right?

Yes, that's correct. And in terms of maintenance CapEx, it's around 4%. You can use 4%, 5% of revenues.

Okay. If I could just follow up on that customer renewal. I think the contract was out to 2029 or 2030, if I can remember. And I think it was roughly EUR 500 million over that time period. Are you able to share how much it's been expanded or how long it's been expanded?

Yes. No, thank you for the question, [indiscernible] We cannot really comment, but we have expanded the capacity and the customer is taking the full capacity. So you can just assume that we have a longer duration than what it was previously and that they are taking everything we can produce.

That was the last question from the phone at the moment.

Thank you very much. And Tanya, you can follow up with us so we can answer your questions. But listen, thank you very much to everyone. And we are very excited in terms of the evolution of PolyPeptide. The acceleration in terms of I'm sorry, I hear there is a question coming.

Yes.

A question via the chat. 2 questions, actually. The first one is regarding the financing or in relation to the financing and the development from the metabolics. So mega pharma customer funding is, of course, possible. They have a strong balance sheet. What about the next wave of GLP-1s with smaller companies and generics entering. They're not going to be able to finance and Bachem is issuing equity periodically. The question is, is that not something that PolyPeptide also needs to go beyond 2028?

All right. Thank you.

Yes. I mean, listen, if you look, first of all, at the next wave of metabolic launches, they are actually going to be executed by large pharmaceutical players. So Roche, [indiscernible] Pfizer, I mean, they are the ones that are really going to be driving these launches. So in terms of ability to secure customer support, we are confident mainly because we are the ones advancing these programs into -- from Phase I, Phase II, Phase III and then into commercialization.

I mean with the momentum that we have, we believe that as we move towards our 2028 target, we should see a significant improvement in our valuation. And that's why equity at this point is not really a preferred financing option. We are really focusing on improving our profitability, again, customer funding and expanding our debt, and that is going to be our model. Anything else for you to add, Marc?

No, I think it was a good summary and also the financing strategy.

And then there was a second question around the unrealized currency loss, the FX loss that we were showing on one of the finance slides related to the intercompany loan. The question is why is this currency risk not being hedged?

So it's a risk we had on the balance sheet for a short-term intercompany loan. So we fixed that risk now as through an equity comparable instrument between the companies. So there is no further risk going on.

And this is all noncash. So it's not really -- it's more of an accounting thing.

All right. Any more questions?

I think Tanya just sent a message with her question. Question is, what should we expect for 2026 for the profitability contribution related to Brain? And can you talk about the revolving credit facility, advanced negotiations and how much additional financing you need for the midterm targets?

Yes. So maybe let me just take the last one. You should see an announcement...

Relatively soon regarding the RCF expansion. So you can -- you will be able to get the details there. But I think with that, we don't need any more financing to hit our 2028 target because most of the capacity is pretty much underway.

Daniel, do you want to comment on the first question?

Profitability contribution from Braine in '26?

As you can imagine, Tanya, the contribution of new assets coming online is quite significant, especially if you compare '25 to '26 as we are working in a very much fixed cost base situation. The majority of the incremental revenue will come with a quite high EBITDA portion in it. But we don't go into details of profitability of a specific asset, I'm sorry.

Yes. But as you can imagine, in 2025, the contribution of the new capacity was breakeven basically. And now in 2026, you have that new capacity operating at optimal target. So that's going to be the #1 driver of improvement in profitability for the group. Any additional questions? No?

All right. So now we can do that closure.

Excuse me, this is the operator. We have a question from the phone from Charles Weston from RBC.

One more question. Charles...

Sorry, more questions and I've interrupted your closing, sorry, again. Could you give us a sense of what the revenue contribution from Braine was in 2025, please? It was kind of a follow-up from the last question, really asking it in a slightly different way.

Sure, Charles. So the contribution of Braine for '21 is EUR 35 million.

Before I start talking any more questions on the phone online? No?

All right. Okay. Listen, thank you very much for joining us this morning. And listen, we are very excited with the progress of PolyPeptide. We finished the year with a strong momentum. As you can see, with all the new capacity coming online, we will accelerate in 2026. We are moving to a much higher levels of profitability. We are very confident in terms of hitting our 2028 midterm guidance. And I have to say that the efforts around our innovation, our development pipeline, our capacity expansion, I think the company has a bright future.

So thank you very much, and enjoy the rest of the day.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the PolyPeptide's Half-Year 2025 Results Presentation and Business Update Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. 

[Operator Instructions] 

The conference is being recorded. 

[Operator Instructions]

The conference must not be recorded for publication or broadcast. 

At this time, it's my pleasure to hand over to Tim Brandl, Director, FP&A and Investor Relations. Please go ahead, sir.

Thank you, Sandra, for the introduction. Good morning, everyone, and welcome to our H1 2025 results presentation. I'm being joined today by our CEO, Juan Jose Gonzalez; and our CFO, Marc Augustin, who will take you through the presentation, and we'll be open to take your questions at the end. 

Before we start, I would like to draw your attention to our usual disclaimer on Page 2. For the Q&A, please follow the instructions on Page 3. Anyone who wishes to ask a question can do so via telephone or in writing in the webcast. 

Moving on to the agenda. Juan Jose will start with a business update. Then Marc will guide you through our financial results before Juan Jose shares our guidance for the full year and midterm outlook. 

Now without further ado, I'm pleased to hand over to our CEO, Juan Jose Gonzalez. Juan Jose?

Thank you, Tim, and good morning, everyone. Thank you for joining us today. There are 4 key messages for today's session. Number one, we posted a strong growth in revenue and cash flow. We grew 24% versus the first half of 2024, mainly driven by our commercial revenue in therapeutic -- in metabolics. We also posted a strong operating cash flow on the back of more disciplined working capital management and further customer prepayments. 

Now we not only are improving our operating performance, we are not only securing customer prepayments, but we are also improving our financial flexibility. And this is on the back of expanding our revolving credit facility, which we announced in May 2024. The combination of these levers will allow us to continue to pursue capacity expansion and fulfill growth opportunities. 

Number three, in terms of capacity expansion across our global manufacturing network, they are all on track. Specifically, our new SPPS glass capacity in Brain is progressing according to plan, and we are in line to achieve target utilization rate by the end of 2025. And it is on the back of this momentum that we have in the first half of '25 that we are revising our 2025 full-year guidance towards the upper range, and we are confirming our 2028 midterm outlook. 

Now all of this was achieved in the context of a market growing rapidly. And peptides is one of the most attractive markets for CDMOs. If you look at the global peptide therapeutics market, is forecasted to grow between 2024 to 2030 at a compound annual growth rate above 15%, and this is largely driven by metabolics. There is a very rich and diversified pipeline of peptide drugs in clinical development today. There are nearly 500 between Phase I to Phase III, with metabolic and oncology accounting for over 40% of all the clinical development activity. 

Now, if you look at metabolics, the market continues to evolve rapidly. There is a strong focus on differentiation, particularly in terms of indication expansion, enhanced efficacy, alternative delivery routes, and extended dosing intervals. The positive thing is that as customers are looking for differentiation in terms of metabolics, the peptide molecular structure is becoming more and more complex, which basically make them focus on synthetic solutions. And together with all the geopolitical concerns regarding China, this is favoring outsourcing Western-based CDMOs. And just to give you a sense of how engaged is PolyPeptide in all these clinical development programs, if you take all the Phase III peptide drugs in clinical development globally, PolyPeptide is working in over 1/3 of all of them. That makes us a company with the richest pipeline in the market. 

Now, this is in terms of how this market is growing rapidly. Let's see how well we are positioned in this market. Basically, we believe that on the back of our multisite network with development and commercial infrastructure across the U.S., Europe, and Asia, we are very well positioned. PolyPeptide has 70 years of experience. We have deep peptide expertise with over 1,000 therapeutic peptides manufactured, and our multisite network give us the customer proximity to ensure that we are able to participate actively in all this development. 

I mean just to give you a sense, from 2021 to today, if you look at all the peptide drugs that secure approval by the FDA, PolyPeptide were engaged in over half of them. Now with this multisite network, we have a very clear strategy in terms of how we want to compete in this market. And basically, we have a vision of being the most innovative peptide CDMO. We have a foundation around operational and quality excellence, industrial scale capabilities, talent culture, and sustainability. And then we are working on 3 competitive advantages. First of all, in terms of innovation. And in our previous call, we talked about our proprietary percolation technology. Today, we have rolled out across all of our large SPPS assets, which allow us to reduce solvent consumption by 40%. And in parallel, we are advancing the development of proprietary ultra-high capacity SPPS resin, which will boost reactor productivity by a factor of 2 to 3. So a very transformational innovation. 

Now in terms of development, we already have the richest pipeline, and we are very much focused on making sure that we continue to work with all key metabolic players, not just with our commercial offering, but also with our pipeline, and also that we work across all other therapeutic areas. And the idea is we take our proprietary technology from innovation, and we create value propositions which are differentiated to customers. And then finally, we are working on a competitive advantage around capacity expansion through modularity. And basically, if you look at what some of our companies are doing, they are building very large vessels, which are very complex, we will say, are more rigid and more difficult to operate. 

And because we have more advanced innovation, we actually can build mid-sized manufacturing lines. We're building a model, so we build them externally. And when they are ready, we place them across our manufacturing sites. And today, we are already in the process of deploying our first model, and everything indicates that this is going to be between 12 to 18 months faster than a traditional capacity expansion. So basically, the combination of these competitive advantages is going to help us to fulfill our vision of competing as the most innovative peptide CDMO. 

Now, let's see how, on the back of this strategy, we are transforming our portfolio. And basically, our business mix is shifting rapidly towards metabolic and commercial revenue. On the left-hand side, you have our revenue by therapeutic area. In the first half of 2021, right when the company IPO, Metabolics accounted for 27% of our revenues. Four years later, those revenues have tripled. Our metabolic business is growing at a compound annual growth rate of 27% and already accounts for more than half of our global revenues. This is very important that we have this rapid growth in Metabolics because Metabolics will be the #1 growth engine of the peptide market. 

On the right-hand side, you have our revenue by business area. And again, when we IPOed in the first half of 2021, our commercial business accounted for 44% of our revenues. 4 years later, it has grown to be 65% of our revenues. Now commercial revenues have some advantages of our development. They are on the back of long-term contracts. They are recurring revenues. You can deploy automation and operational efficiency, and just give more stability to the company. So this is in terms of how our product portfolio is shifting. 

Now we are also doing very important investments in terms of capacity expansion. So let's see where we are. And basically, what we have here is our old capacity expansion plan. And in addition to our maintenance and debottlenecking programs, there are 3 key projects undergoing. The first one is our large-scale SPPS production in Braine in Belgium. And basically, we are in line to hit our target utilization by the end of 2025.

In the first half of this year, this new capacity already started to contribute in revenues, and we have been able to break even. And then in the second half of the year, what we will see is that this capacity is going to have a positive impact in both revenues and profitability. 

In terms of Strasbourg, we are also on track, and this capacity is targeted to become online at the end of 2025, and we expect that in 2026, it will follow a very similar dynamic to what we are having with our new capacity in Braine. And then finally, we are also working to double our SPPS capacity in Malmö. And this is our modular capacity expansion and is on track to become online at the end of 2027. These 3 capacity expansions are very important because it is on the back of that that we will be able to meet our 2028 guidance. And by the time we finish 2025 and start 2026, we have already have completed 2 of the 3. 

Now, as we improve our performance, as we execute our capacity expansion plan, we are also strengthening our talent and capabilities. We have new groups in terms of procurement and engineering, and operational excellence. And we also have brought a very strong senior talent. I mean, Marc with me today, he came from Lonza, where he led a rapid expansion of biologics. We also announced previously the appointment of Stéphane Varray as our Chief Commercial Officer. He used to be the peptide platform leader at Corden. 

And today, we are announcing some important changes in terms of operations. And basically, with the increasing importance of our multisite capacity expansion, Jens Fricke, who today is our Head of Global Operations, is going to move to be 100% focused on the execution of these CapEx programs. And therefore, we are appointing a new Chief Manufacturing and Supply Chain Officer, who is going to be Raoul Bernhardt. Raoul has over 30 years of healthcare operations experience, including over a decade working at Catalent, where he was the Vice President of Pharma Pro Delivery division, which was a global network of sites across the U.S., Europe, and Asia. We are very excited with Raoul joining us, and we are looking forward to working with him. 

Now we are not only making changes at the senior level. We also have new leaders joining at our manufacturing sites in the U.S. For example, we have new colleagues coming into manufacturing and process development from other CDMO peptide players. And that is going to ensure that we have the right level of capabilities and experience as we continue to expand our U.S. operations. 

Now with that, let me pass it to Marc, who is going to talk about our H1 financial results.

Thank you, Juan Jose, and a warm welcome from my side as well. Before we go into the details of our financial performance, I'd like to highlight 3 key takeaways. First, the continued expansion of our commercial metabolic business is the major driver of our sales growth. Second, profitability on the back of the base business, while the new asset in grain is already operating around breakeven. Third, our strong cash flow and improved financing situation, combined with rising profitability, place us in a solid position to capture future growth opportunities. And with that, let's start with sales. 

In H1 2025, we achieved sales of EUR 167.1 million, representing a growth of more than 23% compared to last year. This remarkable increase was primarily driven by nearly EUR 30 million in our commercial business. As Juan Jose mentioned, we saw a successful start of the large-scale asset in Braine, which accounted for about 50% of the growth. Additionally, we continue to see robust growth in our existing base business while further optimizing our program portfolio to enable further efficiency gains. 

On the development side, we saw sustained demand in the market across different therapeutic areas, generating a solid revenue increase of 4.1% versus the first half of 2024. While the development business tends to be more volatile due to program life cycle fluctuations, we are pleased with the consistent overall demand and growth. Currency exchange rate changes had a minor net positive impact. Within the group, positive and negative effects were largely balanced out. 

And with that, let's move to the EBITDA bridge. 

Based on the strong growth in our commercial business, as outlined before, we observed a EUR 14.5 million EBITDA increase. We are showing that in the first column of the bridge. As mentioned before, the sales growth is almost evenly split between our new large-scale asset in Braine and our base business across the network. On the EBITDA side, the base business is contributing nearly all of the EBITDA improvement, enabled by operational improvement as well as portfolio optimization, which are driving utilization and efficiency. 

We are particularly pleased that the Braine asset already in H1 '25 reached breakeven on EBITDA level, only a few months after its start-up, demonstrating both flawless execution of the efficiency and the efficiency of the facility. As communicated earlier, we expected the asset to reach its target utilization by the end of the second half, which will further drive both sales and profitability in H2 compared to H1 2025. In other words, most of the profitability improvement of EUR 14.5 million in H1 2025 stems from our base business, while the growth business is successfully ramping up. This also illustrates the accretive impact of our commercial metabolic business, even though raw material costs increased by EUR 5.2 million compared to H1 2024. 

Let's pause here for a second. The commercial business is and will stay the main driver of our sales growth, and at the same time, improve continuously the underlying profitability. We also continue to invest during the transition and growth in our most valuable asset, [ our people ]. Over the past months, we've expanded our organizational capabilities across key functions by adding nearly 90 FTEs, positioning us well for the growth ahead. This led to an EBITDA of EUR 7.6 million or 4.6% of sales before exceptional items. As anticipated in all larger projects, we faced non-operational costs also for the new asset in Braine, leading to an impact of EUR 2 million compared to H1 2024. I want to emphasize that these costs are entirely expected during the ramp-up phase of a new asset. We are very pleased with the current performance level of the asset and confident that the asset will continue to perform as well as evidenced in H1, and since it's already operating around breakeven. 

Additionally, we have shared at our full-year '24 earnings call, we have embarked on a strategic investment in a new ERP system, which is a key enabler of our AI and digitalization road map. As this is a cloud-based solution, implementation costs are expensed, which impacted our EBITDA in H1 by EUR 1 million. Overall, our EBITDA margin continued to improve compared to the previous period, even after considering exceptional costs associated with the program and the asset ramp-up. 

Turning from the EBITDA to the cash flow. This is certainly one of the base highlights. We achieved a substantial improvement in operating cash flow. Our disciplined approach in managing net working capital has clearly paid off. As a result, we delivered positive free cash flow of EUR 0.5 million and ended the first half with a solid cash position of EUR 76.7 million. This strong performance was driven not only by new customer prepayments of EUR 27.7 million, but also by the proactive inventory management ahead of the anticipated growth in the second half and stringent receivable collection. 

As communicated earlier this year, we expanded our revolving credit facility to EUR 151 million, while also extending its maturity to 2028. At the end of H1, EUR 60 million was drawn under this facility, leaving substantial headroom for future investments and providing for operational flexibility.

Finally, I would like to briefly revisit our 4-pillar financing strategy, first introduced during our full-year '24 earnings call. First, we remain laser-focused on profitability and improving operating cash flow, as shown in H1 2025. Second, we continue to ensure that large investments are closely aligned with customer support, offsetting our capital expenditure cash outflow. Third, we have strengthened our financial flexibility through the expanded revolving credit facility and the long-term support from our anchor shareholders. Lastly, at our Annual General Meeting, the shareholders approved the use of equity to provide additional flexibility under the right conditions. We see this as a tactical tool that complements our 3 primary financing pillars, strengthening our balance sheet and enabling us to size growth opportunistically at the right point of time. 

Before concluding, let's briefly recap. First, strong first-half growth driven by the successful ramp-up of the Belgium facility and sustained performance from our base business. Sustainable EBITDA improvements in our base business, driven by the transition to more commercial business. Free cash flow achieved breakeven, validating our disciplined net working capital management. And last, strengthened financial position with a well-equipped toolbox and significant cash reserves, positioning us well for executing on our midterm targets. With these results, we look forward to an exciting second half of the year. 

Thank you. And now back to Juan Jose and our '25 guidance.

Thank you very much, Marc. So before we talk about our guidance, let me just spend a moment talking about our approach to guidance. And we basically are very thoughtful in terms of how we want to guide the market. We have multiple projects moving across clinical phases. We have ramp-ups. We see all these capacity expansion projects. And basically, our approach to guidance is at the beginning of the year, we issued a relatively broad guidance. Then on the back of our first half results, we refined that guidance, and then we share with you our full year results at the end of the year. And basically, what we want is our performance to drive our valuation and not our guidance. 

So with that in terms of context, let me talk about how we are revising our guidance for 2025. And basically, if we go through our revenue, EBITDA margin, and CapEx. In terms of revenues, at the beginning of the year, we basically indicated that we were planning to grow between 10% to 20%. We have had a strong first half of the year with a 24% growth. So we are revising that range towards the upper end. So now it's going to be between 13% to 20%. And on the back of the strong momentum we have in the first half of the year, we are very confident in terms of that range. 

In the case of the EBITDA margin, we at the beginning of the year, target that we will increase our profitability versus 2024. Now we are indicating that it's going to be from high single digits to low double digits. And in the case of CapEx, we were targeting 20% of revenues. That was about $75 million. Now we are revising that target to $100 million, and this is just reflecting the customer demand for accelerated CapEx. 

Now the priorities to be able to meet this revised guidance remains unchanged to what was the beginning of the year. We are very much focused on our operational and quality excellence programs. We are focusing on reaching our target utilization rate of the new SPPS asset in Belgium by the end of the year, and we want to continue to advance the capacity expansion programs in Malmö and Strasbourg, which will position us very well for the following years. 

And then finally, we are working on a second wave of metabolic contracts, and we are already having some commercial discussion, which we will announce as we finalize them. So that's in terms of our 2025 revised guidance. 

Now let's talk about our 2028 midterm guidance. And basically, a year ago, we put a target around doubling our 2023 revenues by 2028. We said that by then, we will have an EBITDA margin approaching 25%. And that during that period, our capital expenditure will be between 15% to 20%. So 1 year has passed since we issued that guidance, and we are reconfirming our ability to meet these targets. We believe that the momentum that we have, the progress in terms of our shift to metabolics and commercial, our capacity expansion, our stronger capabilities that we should be able to hit this guidance, and we are going to do it by every year moving towards this target. This is not something that we will achieve at the end of this period. 

Now, this strategy around being the most innovative peptide CDMO, we believe is going to create a significant value for stakeholders by 2028. A company of that size with that level of profitability, with a rich pipeline, will be valued several times higher than where we are today. And that's why we are aggressively focused on execution. Our strategy doesn't involve to go into new markets beyond peptides or doing transformational transactions. We are very much focused on being a pure peptide player and executing against this midterm guidance. 

And with that, let me pass you to Sandra for the Q&A.

[Operator Instructions] Our first question comes from Charles Weston from RBC Europe.

Two, if I can kick off with, please. First of all, on the negative mix. Can I just confirm that negative mix related to the product manufacturing location, i.e., from manufacturing in Spain rather than from the increase in metabolic versus other products? And secondly, can you give us some color on the utilization of the site in Braine? What's the average utilization or perhaps the end of H1 utilization? And if you assume that you will reach peak utilization at the end of the second half, what does that mean for the average utilization in the second half?

Thank you, Charles. And Marc is going to comment on the negative mix. But let me just say, overall, our metabolic contracts, our commercial business are actually margin accretive in terms of the company. It's just that because of the nature of these contracts, the mix is different than what we have on the development side. But Marc can comment.

Yes. Charles, thank you very much for the question. Please let me make one step back to answer your question. We are in a transition and growth phase, which is driving our profitability in different ways and which are partly linked. So let me first start with the growth. We see strong growth driven by commercial metabolic business in our base business and in our new assets. Especially in the base assets, this growth is driving the underlying profitability, as Juan Jose mentioned, and we have shown in the H1 bridge. 

Around half of the growth is coming from base, but nearly the full profit increase is driven by the base business and the metabolic growth there. We introduced our profitability guidance of approaching 25% in 2028. And we said this transition towards metabolic commercial business will take some time to shift the portfolio. And we now start to see exactly the success of this transition in the base business. The shift to commercial business, especially metabolic, also means that we are seeing a higher share of raw material costs compared to the past, which was more driven by development and small volume production. This is shown in the second pillar of the EBITDA bridge and call mix. 

Looking at the Braine assets, we are very pleased with the progress running short after the start, around a breakeven EBITDA level, which we see very positive and not only for the financial attractiveness of the growing metabolic business, but also showcasing the efficiency of the new asset. We expect in H2 the asset to contribute positively to the group profitability. But not -- so in the second half, the growth will be shown not only in the new asset in Braine, but also in the base business, as we have seen in the past '24 and '23, where the profitability and the sales grew stronger in the second half compared to the first half.

Yes. And Charles, maybe if I can just help you in terms of the capacity utilization for the new capacity in Braine. Maybe just a couple of things. One is the manufacturing of any new asset started slowly. And then as you are getting more and more confident, then you increase your capacity utilization. And then there is a difference between what you are manufacturing versus what you are invoicing because there is a time from when you finish manufacturing to when you go through all the quality process and then are able to ship to customers. Our objective is to make sure that by the end of 2025, we are at target utilization, and then you will see the full benefit in 2026. And if you remember, this capacity is supporting a $100 million contract.

The next question comes from Laura Pfeifer from Octavian.

I have 2 questions, please. Maybe on the sales guidance for this 13% to 20% growth, I think this is still quite a broad range for outcomes, potential outcomes in the second half, ranging from, I don't know, mid-single-digit growth to the high teens. So can you please give us an idea how much growth you expect from your base business? And also how much of commercial revenue you expect to be contributed by Braine? I think this would be just helpful to get a better feeling why the range is still so broad. And then related to that, is there an upside potential? So could you also do even better, given that you already grew at 24% in the first half? 

And then secondly, on the margin target for this year, you have now provided a range. Do I interpret it correctly that it might read as 8% to 12% when you say single digit -- high single digit to low teens? And also here, what are the drivers and the headwinds we should consider? And specifically, maybe you could comment here on what profitability level do you see as feasible for the Braine. I think you mentioned it's now at breakeven. It will contribute, but will it already be accretive? Or will it still be dilutive to margins in H2?

Thank you, Laura. And let me just start with the revenue range. And of course, we grew 24% in the first half of the year. So we are very pleased with the momentum of the company. Now we have multiple programs. This is a new asset that we are ramping up. There is volatility. And at the end is not just how much you can manufacture, but then how much you can invoice in the second half of the year. So although we are confident in terms of our growth rate, we do see a range of outcomes. Now, whatever we end up growing in the second half of the year, what you can get from our performance in the first half is that we are moving through accelerated growth phase in 2025, '26, '27, and '28. 

In terms of our EBITDA, I mean, you are right that that will be like 8% to 12%. That will be a good conclusion in terms of what will be the EBITDA margin. And again, we have different clinical programs, moving in between phases, ramp-ups, and depending on what is the level of revenues that we achieve, that will give you a different level of EBITDA margin. But again, if you look at our 2028 guidance, a lot of our improvement in profitability comes from our leverage, our ability to grow, and making sure that that flows into our bottom line. And we expect to see that dynamic in the second half, which is similar to what we saw in 2023 and 2024, where a lot of our profitability is concentrated in the second half of the year. So I don't think this is going to be dissimilar. 

And Marc, I don't know if you want to comment in terms of whether our Braine facility will be -- the brand new capacity will be margin accretive [indiscernible]?

No, happy to do so. So as we saw in the first half, Braine is contributing nicely to the growth we have seen in the first half. And Juan Jose mentioned already, we expect further growth in the second half compared to the first half in the base business, as well as in the growth business in Braine. So having said that, of course, this new asset in Braine will improve over time, and the sales contribution will grow in the second half. And with the growing sales contribution, you can also assume that the asset, which is currently running around breakeven on an EBITDA level, will contribute positively to the overall profit of the group.

The next question comes from Charles Pittman King from Barclays.

A quick clarification for my 2 questions. Can I just push again a little bit on the last question that you see Braine as dilutive to group margins for 2H? It sounds like it's on track to become accretive next year, exit rate, but just for 2H, does it remain dilutive? But my 2 questions, just firstly, on the metabolic space, I'm just interested to know how -- to get some insight from you on how your conversations have evolved over the past 6 months. Have you seen any kind of indication -- change of indicated demand from your customers? I mean you mentioned that you had this accelerated CapEx requirement as you raised your FY '25 outlook. Is that indicative of higher demand? 

And then just secondly, on China, I think you mentioned earlier that you see increasing of in-licensing of China assets as a positive tailwind for rising focus of Western CDMO use. I'm just wondering if you can give us a little bit more insight into that perspective.

Yes, Charles, and thank you for the question. So let me talk about metabolics and what we have seen in the last 6 months, then about Western CDMOs and China, and how that is playing out. And then Marc can talk about whether this new capacity will be margin dilutive or not in the second half of this year. So first of all, in terms of metabolics, I mean, this market is, again, growing very rapidly, and it's a very dynamic environment, and we believe that those trends are favoring Western CDMOs. So if you look at some of the announcements, you see either the leading players or new companies getting ready to enter into the market, focusing on acquiring assets and differentiating their portfolio. And the way they try to differentiate their portfolio move them from recombinant solutions towards more and more synthetic solutions. And of course, that's very good for us. 

The imbalance between supply and demand still continues, which basically means that the overriding focus, either for existing players or players that want to get into the market, is to secure capacity. And you can see that when you look at our customer prepayments, where you have customers willing to fund the expansion to be able to secure capacity. So I think all of these things are there, and we believe it is positive in our case. If you look at our metabolic performance, we basically grew 98% this year versus last year. And we have such an exposure in terms of working with all the key metabolic players and such an expertise in terms of metabolic clinical development that we are very well positioned there. 

Now I would say the concerns regarding China, of course, started with the Biosecurity Act, and then with all the tariff and geopolitical tensions, is making our customers actually try to work more with Western-based CDMOs. So in the case of development, we are seeing projects moving, I would say, more rapidly towards SaaS. In the case of commercial contracts, of course, it takes time to move those. But I will say we are basically seeing an environment where Chinese CDMOs are focusing on supporting the Chinese market, where Western CDMOs are focusing on U.S. and European players. 

Now Marc, do you want to comment on the margin dilution?

Yes, sure. So as I mentioned, the new asset is around breakeven in H1. And with the increasing sales performance in the second half, we expect that the asset is adding absolute EBITDA to the group. But of course, if you look at -- from a margin perspective, that is, of course, not that strong. It needs to build up during the time of what we said, we expect a high utilization towards the end of the year. So from that perspective, you're right.

Yes. So I think it's going to be margin accretive in 2026.

The next question comes from Konstantin Wiechert from Baader Helvea.

Juan Jose, maybe we can start with a question on the Indian side again. I would appreciate if you could give us an update on the talks that you had with customers to transition certain products to that site. If possible, could you give us maybe a rough ballpark number how much sales you expect to switch in '26 and whether you expect any one-off costs related to that? That would probably be my first question, and then I'll put the next one after that.

Yes. Thank you, Konstantin. And listen, first of all, customers are more focused on securing supply, both in the U.S. and Europe. And you can see that the majority of our CapEx investment is against those geographies. Now in the case of India, we do have this manufacturing site. We are doing some tactical investments to be able to increase capacity. And basically, what we are doing is we are reallocating some key projects to India to free up capacity so they can better support, especially metabolic projects. And that's basically how we are managing it. But our India facility is relatively small. So this is not really that material for the performance of the company.

That will happen mostly in the next year or already this year. I mean, we see growth of about EUR 12 million or so in the generics and cosmetics business. Is that something where that move or that growth has been driven also by growth in the Indian side? Or is that not related to that?

I mean it's not related to that. We have different generic programs in different sites. Yes. But in terms of the optimization of the portfolio, this is something which is important because we are specializing the sites depending on some key therapeutic areas and capabilities. So we are shifting our product portfolio, and that process takes time. It's something that we started last year, and we're doing it this year, and it will continue next year. But it will position us very well to make sure that we can better support customers.

And then maybe on the -- just to ask a bit differently again on the mix effect. How much was that really driven by the growth in the labs or the transition to the large-scale production? And how much of that was driven by this growth or growing share in the generics and cosmetics business? Was that having a negative impact as well?

So the mix effect is coming mainly out of the commercial -- growing commercial business where we have a different cost structure compared to a development business or small-scale production. It is not specifically coming out of the generic business.

And with this like, let's say, contribution margins of 30% that you've shown now in the first half year, is that something that you are happy with? Where should this go over the next 2 years? What is probably holding you back in the first half to probably go more towards the range of, I would assume, 45% to 55%.

Yes. So as mentioned earlier, so we expect the margin to improve towards the second half of the year, as we have seen in the prior years and also supported now through the ramp-up of the new asset in Braine. Over the longer time horizon, we said that we are approaching the EBITDA margin of 25% by '28. And we are for that on a good track and feel very confident to achieve that.

Yes, sorry, I keep the last question, and then I go back in the line. Just Yes, I mean most have already asked anyways, right? Have you still produced like when you switch to your main or your metabolic customer, potentially metabolic customer to the large-scale asset in the first half, have you still produced volumes for that customer or for that product on the equipment that you have so far produced capacity on just to get a better understanding of the growth in the base business.

So talking about customer, we have multiple programs with customers. So we do not have customers in just one program. So we work on several programs for the customers. That's point one. The second point regarding the transition from the product we have produced in the existing asset, we transferred that into the new asset. And I think that's one of the part I mentioned earlier regarding the portfolio mix and which also takes time. So the capacity is backfilled with new programs, which are also going through a ramp-up period, qualification, and so on and so forth, which is impacting also the profitability. And that's what we said when we meant that it takes time until '28 to reach the 25%. 

So portfolio mix in the base asset is something which is taking time. It's not just switching a customer from an asset A to an asset B. The asset A needs to be backfilled. And when we look at the improvement of the growth business, you see just a net improvement, not necessarily the underlying mix change.

The next question comes from Tanya Hansalik from UBS.

I have 2 questions. Another one on the Braine reactor. When you say you reach a target utilization rate by end 2025 and accretive in '26, what does that mean in terms of timelines to reaching target EBITDA profitability in 2026? Or is this also takes a few years to get there?

So from a profitability perspective for the new asset, we expect that to reach at '26 as we are reaching the target utilization rate towards the end of this year. So '26, we should see the first year of target utilization rate.

Yes. And I mean, again, our profitability target is to be approaching 25% by 2028. And if you look at in 2023, I think it was negative 2%. And last year, it was plus 7.5%. Now you will see us that we will continue to improve on our EBITDA margin, and we are going to move again, every year, towards that target.

And then second question, maybe I missed this, but on your guidance for sales growth for the full year, this implies a slowdown in the second half. I see there's a stronger base from last year, but I would have still expected a continued acceleration. Or maybe you can give some more color on this.

Yes. I mean, I think similar to the question of Laura, we are very thoughtful in terms of how we issue guidance and how we refine guidance. And these are new assets. We have all these programs moving across clinical phases, and there is also a lot of external volatility. Let's just say that we had a very strong first half of the year, and we expect to continue to have our growth momentum. So I would say let's just wait to see at the end of the year where -- what we finish relative to this guidance.

The next question comes from Daniel Buchta from ZKB.

Just not much left, but just elaborating a bit on Slide 9. I mean, metabolic close to EUR 100 million sales now. How concentrated is that? I guess, it is quite concentrated -- or are there also a lot of Phase III drugs in that, I mean, which also has a certain volume? That's the first question.

Thank you, Daniel. And actually, one of our strategies in metabolics is to make sure that we have exposure to the market, but to avoid a significant level of concentration. And that's why we say that we work across all key metabolic players. in commercial and in development. And if you look at our over 30 projects in Phase III, there is a good number of them that are actually in metabolics. So we have tripled our revenues in the last 4 years. And again, we expect all this to continue to be the #1 growth engine for the company.

And the last question is maybe more big picture, but one key concern from investors about pharma stocks and the big CDMOs is clearly MFN, and nobody knows about the impact. And of course, you will say, well, we have the contract, we ship our API to wherever warehouse and the customer picks it up. But if pharma will have a big hit from MFN, and I know that, that will take quite a time. But if that happens, there will be the day when there must be a compromise also on the price. I think you see my question. That would be interesting.

Yes. Daniel, thank you for the question. I think it's very relevant. I mean, relative to other CDMOs, peptide CDMOs are more insulated to pricing pressure because we represent a very small percentage of the COGS. So we are less than 4% of the COGS, less than 2% of the final price. So really, in our commercial discussions -- and by the way, this is across branded pharmaceutical and generics. This is more about supply rather than pricing. If they are not able to secure peptide supply or the peptide CDMO is not able to ramp up their capacity to meet their demand, then what they will lose in terms of value is significantly higher than whatever they will get in terms of the cost savings. And that basically makes for a healthier relationship. 

Now I think it's true that over time, if there is a major correction of pricing in the U.S., that might result on pricing pressure. And that's why it's so important that you remain relevant with them. And you remain relevant by doing 2 things. One is making sure that you work on their commercial projects and on their pipeline. And this is something that we are very focused on, but we are always working on the next generation of products, where there will be less pricing pressure than on the existing commercial programs. 

And the second thing is that you have an innovation that allows you to compete effectively also in terms of throughput and pricing. So for example, the technology I shared when I was talking about innovation, if you have technology that is able to increase the output of our vessels 2 to 3x, of course, that will make you much more competitive than a CDMO that doesn't have that level of technology. But let's see, I think there is a lot of volatility and a lot of discussions. And right now, our -- again, our #1 focus is to make sure that we execute against this strategy that we advance in terms of our financial performance towards this midterm guidance and that we are very well positioned for any future scenario.

[Operator Instructions] We have a follow-up question from Charles Weston from RBC Europe.

[Technical Difficulty] accelerated delivery of products for a tariff possible utilization you're seeing in your assets anyway? Secondly, you said that Strasbourg's capacity [Technical Difficulty]? And the same question for Malmö. And then lastly, a bigger picture question as well on generic GLPs, you'll start to see that next year. How do you envision that impacting the API [Technical Difficulty]?

Sorry to interrupt you, but there is a problem with your sound system. We actually maybe got 20% of what you said. Do you mind repeating your question?

Excuse me, this is the Operator. Mr. Weston, we are not receiving any audio from your end. We need to switch to the next question.

Charles, if you would like -- why don't you just send it over text and then we can -- we go to the next question and then we'll be able to answer it.

The next question comes from Charles Pittman King from Barclays.

A couple of more follow-up questions from me. Just thinking about on the financial side of things. Just thinking about this ERP cost headwind that you kind of highlighted as exceptional in 1H '25. Just wondering if you can provide a little bit more insight into what kind of headwinds these costs are going to remain just going over the next few years as you continue to invest? And then just secondly, on FX, you kind of highlighted in your financial results that there was a large impact related to FX. However, the net impact on your sales is less than 1%. So just trying to kind of square the circle around how we should think about FX headwinds going forward as well.

Yes. And listen, before Marc addresses both questions, let me just say, I mean, the ERP program is an important investment for the company. not just because of how it is going to help us to standardize and strengthen our core processes, but also because it's going to enable our artificial intelligence agenda. And there are major areas of improvement where you can leverage AI where it is in terms of your forecasting, manufacturing planning, in terms of better development expertise. So this is a key area of investment for the company, and I think it's going to have a very, very good return for us. 

Now, Marc, do you want to talk about that?

The financial side of the ERP project. No, definitely. Charles, thanks for your question. So compared to the past where we would have been able to capitalize the ERP implementation costs, we are embarking towards a cloud solution for the ERP system. That means that you cannot capitalize these costs. So what we see, and that's the reason why we classify them as exceptional costs. In addition to running the current ERP system, we are driving the implementation of the new system, where we have additional costs in the preparation and also setting up the team for the project, which was hitting us in the first half with around EUR 1 million. So regarding the further activities, the more activities you have in these projects, of course, the higher the costs increase, and we expect the peak of the impact in the '26 time frame. 

Then regarding your question on the FX. So yes, we have a 2-sided picture of the FX. On the revenue side, we are following a natural hedge approach and which worked pretty well for us in the first half. As I mentioned earlier, we have some gains and some losses, but they are netting each other more or less off. On the balance sheet side, we have intercompany loans and receivables, which cause unrealized exit gains and losses, and we were impacted this year by these unrealized revaluation impact from intercompany positions.

Gentlemen, so far, there are no further questions. Back over to you for the written questions from the webcast.

Thanks a lot. This is Tim again. I'll read out the questions. So the first question is, was there an attempt by our customers to pull forward deliveries into H1, given potential tariffs?

Thank you. And I mean, the answer is no. And actually, even if they want it, we are basically producing and shipping as much as we can. I mean the whole point of tariff, and this is very important because a lot depends on how customers are optimizing taxes and what is the supply chain strategy. But we actually haven't had one question regarding tariffs. All the discussions with customers are again around are we able to produce? Are we able to scale up in line with what they need? And this is really the focus of our discussions.

Next question is around our capacity in Strasbourg and Malmö, and how much that represents as part of the total capacity, given that we're talking about doubling in Strasbourg and Malmö.

Sure. Yes. And I guess that was a question from Charles that we -- all right. I mean, I think we haven't commented how much was -- what was the financial impact of the capacity expansion in Strasbourg. But of course, Strasbourg is a smaller site. So you can imagine that smaller relative to what we are doing in Belgium and Sweden. I think in the case of Sweden, we basically said that it was supporting around EUR 100 million in terms of contracts. So very much of a similar size to what we are doing in Belgium. And as you can see, between the growth on TAS plus the new capacity in Belgium and Strasbourg, and Malmo, we have what we need to be able to hit our midterm guidance. We do not -- we do not need to sign new commercial contracts to be able to hit our 2028 target. Next question?

I think that's the last one then on the impact of genericization of Wegovy in 2026 on the peptide API industry as a whole.

Yes. I mean we don't -- first of all, if we take Novo Nordisk, Novo Nordisk's initial launch in metabolics was using recombinant technology, and the next generation of products also use synthetic peptides. So actually, for us as a Western-based CDMO, Novo Nordisk represent more attractive opportunity going forward because, again, they are moving from in-house manufacturing to a combination of in-house and outsourcing. 

Now in terms of the impact of Wegovy on generics, of course, the generic market is going to grow, but you have over 100 metabolic projects in clinical development. And you will continue to see this wave of launches and this balance between branded and generic. So we don't think it's going to be dissimilar to what we saw in any other healthcare market. As long as there is a very active innovation, you're going to have a very robust and attractive branded pharmaceutical segment. Next question. 

All right. I think that was the last question. Thank you again for joining us today. At the end of the first half of the year, we are pleased with our progress. We are in a position to revise our guidance towards the upper range. And more importantly, we are in a position to confirm that we are in the right track to hit our 2020 targets. But thank you very much, and enjoy the rest of the week.

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