Bachem Holding AG (BANB) Earnings Call Transcript & Summary

Welcome to the half year results call of Bachem. A few housekeeping rules before we kick it off. We will have time for questions at the end of the presentation. [Operator Instructions]. This call is being recorded and we want to put the playback on bachem.com as soon as possible following this call. With me today here in this call are Thomas Meier, the CEO of Bachem; and the CFO, Alain Schaffter. My name is Daniel Grotzky, and I will be moderating this session. Thomas will take us through the half year results of 2024, and then Alain will provide the financial review perspective then Thomas will take over again and speak to the future outlook, and then we will jump into Q&A. With that, I am very happy to hand over to Thomas Meier, CEO of Bachem.

Thank you, Daniel, and a very warm good afternoon to everyone here from Bubendorf. Thanks for joining. It must indeed be a very busy day for you. And I promise to be short. We at Bachem are focused on developing and manufacturing oligonucleotides and peptides, drug substances for pharma and biotechnology company. As such, we are on a long-term growth and innovation journey. Ultimately, as you know, we are always focused on the numbers set for the full year. And within this context, we could deliver solid results in the first half of 2024. It starts with the top line. Sales of CHF 240.3 million, pretty much flat and 1.3% in local currencies. An increase in EBITDA to CHF 55.5 million, a plus of 5.6% Swiss francs and 8.7% in local currencies. This brought us to an EBITDA margin of 23.1%. We invested in the first half year for expansion, the amount, CHF 143.9 million. That's a sign for the belief in our future, of Bachem of the company but also of our customers who helped us with the operating cash flow that came in at CHF 88.4 million. Today, over 2,000 colleagues work every day to make the best peptide and all the [ Oligonucleotide ] of this world. If we look at the product categories, we see that research and Specialties came in at CHF 22.8 million. CMC development came in at CHF [ 19.3 ] million and commercial API at 127.3%. Taking a closer look at those product categories. We see the commercial API sales were lower in the first half year of 2024 compared to the first half of last year. The main reason was lower demand for non-peptide, commercial oligonucleotides and small molecules. Peptides are a growing modality. The CMC product development product category includes projects in clinical phase and showed a very strong growth of over 18% in the first half of this year. The growth was mainly driven by late-stage assets. Research and specialties, which had a lower last year rebound, thanks to catalog sales particularly of starting materials. If you look -- within the context of long-term growth, you can see the dynamic we have each year of a strong second half year. From this perspective, the first half year is very much as expected for us and we are now focused on delivering for the second half of the year. And with that, I'll pass it over to Alain, who gives a deeper look into the financials.

Good afternoon also from my side. Let's have a look at the key figures on the next page for the first half of '24. Thomas already mentioned some of them I also like to highlight the net income where we also had an increase of 5% in Swiss francs compared to the first half of last year. Let's have a look at the EBITDA margin in the detail with the next page on the waterfall diagram. What were the main drivers? We start with the margin in the first half of '23, with 21.9 percentage. We have a positive impact from the overall COGS, which is an outcome of better cost awareness, but also a more favorable product mix in the first half of '24. Marketing and Sales, we kept stable the cost overall. We see a small impact, a positive impact on the margin in the first half. The R&D, we spent more money again this year or first half year. As we already communicated in the past, it's very important we invest there in technology. We invest in more efficient processes, automation and so on. And this is very, very important for the future of the company. The growth of the company, we also see in the G&A part, we invest also there. We have some new positions in the company, and this will also be aligned with the growth of the company also in the future, and we see dilution of the margin by 20 bps. All this together, we end up with a margin of 23.1 percentage in the first half of '24. Looking to the cash flow. The cash flow -- the operating cash flow ended up with CHF 88.4 million. What were the, drivers for this? Let me start with one bar that is not here, we spent about CHF 7 million more for income taxes. That has a result on the operating cash flow before the change in working capital, which was CHF 39.9 million. From there on, we reduced the account receivables by CHF 43.5 million in the first half of the year, but we also had a slight increase in other -- other receivables and also in other approvals. In the inventory, we have an increase of CHF 59.3 million, and this is very important for the future, you have the material on stock to deliver the quality and on time to our customers. On the change in payables and accruals, this is mainly driven by prepayments from customers, but also CHF 12 million is coming from a higher balance by the end of June for trade payables. All this ended up with CHF 88.4 million. This includes a net inflow of prepayments from customers of CHF 50.8 million in the first half year. And this, as Thomas also mentioned, very important, and it shows the commitment also from customers to support in our CapEx projects. We have spent this operating cash flow on one hand on the CapEx, which was CHF 154.9 million as a cash out and to cover this, we had also sold securities in the amount of CHF 29.2 million in the first half. The financing cash flow was driven by the dividend, which was paid out by -- in April '24, and related to the financial year '23. This all ended up with a negative cash flow of CHF 95 million for the first half. Looking at the balance sheet. We see here the reducing in working capital. We have cash and securities in the amount of CHF 173 million by the end of June. This is a reduction of CHF 125 million in the first half year, as shown in the cash flow slide before. On the net working capital, this is also a decrease by CHF 43 million, CHF 23 million -- sorry, CHF 23 million and this is mainly driven by the accounts receivable, as mentioned, but also offset, on the other hand, with a higher inventory balance at the end of June. At the end of June, we still don't have external loans in our books. So we are debt free, and we have an equity, which is around CHF 1.3 billion, and this is equal to a roughly 76% equity ratio. Talking about the investments where we have spent money on the next slide, we see the CapEx. We spent 100 -- we invested CHF 143.9 million in the first half. This is roughly 60% of our sales, and it shows that we invest globally at all sites, CHF 131 million of this CHF 144 million is invested in capacity, be it buildings or equipment. And with that picture on the future, I'd like to give back to Thomas, who goes to the outlook.

Thank you, Alain. I'm not going to tell you anything new when I state that the market for peptides and oligonucleotides is indeed very promising. From the bird's eye perspective, we have a drug modality that was niche, and that is increasingly becoming mainstream and coming into its own next to the small molecules on one side and the [ biologics ] on the other end of the spectrum. Currently, there are 88 approved medicines on the market and a very rich industry pipeline. And no doubt the GLP-1, [ GLP-GIP ] drugs used in very large indications like diabetes and obesity, have put peptides into the spotlight. And I'm convinced they're going to remain there. In addition, the increasing molecular complexity of those molecules is also leading to advantages for synthetic manufacturing over a [ combinant ] methods. In addition, oligonucleotides. Oligonucleotides are still at an earlier stage of their development. But the pipeline is equally exciting, and we see over the medium to long term the potential for larger volumes. If we look at the markets, we see those dynamics also driving the competitive environment. We estimate the market annual growth rate for peptides of above 10% per year. Of course, it's always difficult to assess market share since not all players are listed. We believe that Bachem still retains a leading position. While we see the competition is not sleeping, especially for large-scale manufacturing. Looking closer at the market dynamics on that slide. How do we see it? In short term, it's absolutely clear that the focus in the market is on capacity. This is something that we can also attract. This is something that can also attract new entrants. For Bachem, it means we absolutely must execute on the large-scale projects, we have and we focus on operational excellence that we have a higher efficiency in producing our molecules. But there is also a long-term perspective, and this is very important for Bachem. We believe that the need for more peptides and over time also for oligonucleotides will not be solved by just building new buildings and equipment alone. The industry needs process, innovation to increase yields, to use less solvents and ultimately, to comply with tougher regulation. We are working on it, and we need to make the chemistry greener and reduce all the materials that go into the synthesis and the purification. And also depending on the long-term trajectory of the geopolitics, there is a potential for near-shoring, shortening the supply chain is a term I hear very often. Customers are interested to keep supply chains close at home and to have short distance and easy communication. We believe that Bachem has great strength and we want to keep those. We are probably the first leading tight expert team. We have a very strong track record for innovation, process technology to improve overall manufacturing efficiency. And we want to remain a strong but well-selected pipeline going forward. Now on to the capacity expansion. This is key for the future for the next couple of years. We are investing across the global network at Bachem. The two projects are especially close to my heart and very essential for the company. One is our Building K facility in Bubendorf. On May 27, 2024, an exhaust pipe that was not yet in operation first on the construction site. Nobody got seriously injured and the damage to the building was localized. After the incident, access to the construction site was reallowed swiftly. Now we are in the commissioning phase for this building. The commissioning and qualification work has begun. We now expect that gradually, we will ramp up operations in the facility in the first half of 2025. Obviously, in such a complex project, not everything can be predicted exactly. The second expansion project is looking beyond Building K and it's [ duped ] by us by the name where it's located, that Sisslerfeld. It's a designated green field manufacturing site, about 30 minutes from Bubendorf. The interest in large-scale manufacturing in the market is very strong. And there is the potential to build the site or parts of it in the context of further strategic partnerships with customers. We now acquired the third piece of land to continue to envision a startup of that facility at the end of this decade. As mentioned before, we believe that capacity expansion by facility alone will not solve the industry's constraints. Innovation is needed in the long term, and Bachem is the leader on this frontier. Collaboration with start-ups and established players play a key role for our company. We are the first movers in large scale, continuous chromatography. And we see the advantages, the greener processes we can develop based on that technology. And this innovation can be used for peptides and oligonucleotides. And that's the kind of synergy we want to use in the future. And we see playing out not just in continuous chromatography but in other angles of the chemistry or technology that can be applied to peptides or oligonucleotides. We think that the innovation piece is currently not as much on the people's radar screen and this is certainly a place to watch. With that, we come to the full year guidance that is unchanged. We see sales mid- high single-digit growth in local currencies. and a stable EBITDA margin compared to prior year in local currencies. Our targets for 2026 remain unchanged yet ambitious. We want to achieve over CHF 1 billion revenue and a profitability above 30%. With that, we are in the question-and-answer session. And I'm looking to Daniel.

Yes. Thank you very much, Thomas. So I am having a look. We have a couple of people who have raised their hand here. I'm trying to see where they are -- why can I -- I see a number of raised hands, but where are they? Otherwise, we quickly check the Q&A, if there's something there that we can start off with. So let's take a question from the Q&A. We have one from Vineet from Citi. Question is, can you update us in terms of the revenue potential of Building K given -- and then I guess the second question sounds like a second question, given the biosecure backdrop, are you seeing any change in customer behavior as [ WuXi ] holds about 20% of the market share?

Just that I got it right. The first question was whether?

Revenue potential of Building K.

I think we stated that several times, we see the same potential for Building K as we currently have around sales last year. But of course, that depends on the specific projects we have in there at the time. And the second one was the Biosecurity Act in the U.S. As I mentioned, shorting the supply chain is something people talk about it very frequently, and we certainly see a potential there that we would like to add to harness in some ways.

Now I see I got the raised hands here. I was too far down in my list. There are so many participants. We have over -- almost 90 people here. So let's take the first question from Barbora Blaha from UBS, if we can unmute Barbora you'll also have to make sure that you are unmuted yourself on your own device, see if this works.

I have more questions about the opening of the Building K. Can you be a bit more specific how long it takes from the qualification and commissioning to really start producing the test batches that can be sold? And where you stand now there in this process of qualification? And then how many lines do you -- are you building there? And how many lines will be ready by the end of this year, actually? This is my first question on Building K. And then some questions on small molecules business. Could you please quantify this business? Is this more like CHF 70 million or less or more? And is the biggest part of this [ proposal? ]

Thank you, Barbora. That's quite a bit to unpack here. Let's start with Building K and I'd like to start this on a little bit of a high level. I think it's important to realize that expansion projects and new construction of production capacity for oligonucleotides and peptides is by no means a trivial matter. Projects of this kind require a high knowledge in different disciplines and are complex. For example, you need a technical knowledge, you need the regulatory knowledge and you need to fulfill highest compliance for safety and quality. And putting all this together, not everything can be predicted exactly. But one thing is clear, we are working very deliberate to get this building started up as quickly as ever possible. We are now in the commissioning phase and we will gradually ramp it up in the first half of 2025. And I think that's where we stand, and we're going to work that this is really what's happening going forward. Then there was a follow-on question on the small molecules. We have never broke that out. That's -- and we want to keep it that way. It's included in our forecast for -- that we give to the market. And we foresee to give a first indication earliest in the full year 2024 call that's in February 2025, we can give you most likely an outlook for 2025.

All right. I'm seeing hand raised by Charles Pitman King. We can have [ your], Charles.

So maybe just for the first one, I was wondering if you could give us a bit more detail on the kind of expected volatility of kind of commercial API recorded sales over the years -- to what degree is there any seasonal effect between H1 '24 given the expected guidance hasn't changed for this year? And to what degree is the -- a lower commercial [ EBITDA ] mix reflected in your current FY '24 margin? And then just a second question on CapEx. I was wondering if you could just reconfirm you're expecting FY '23 CapEx to come in roughly 15% higher than FY '23? And to what expect you believe customer prepayments are going to be needed to continue to fund this expansion?

Well, thank you, Charles. I'll take the first part of the question. And now we just lost me.

With respect to volatility of commercial...

Volatility, yes. Thank you, Daniel. I think as I mentioned in the presentation, we have seen the first half of 2024, pretty much in line with our expectation, and we have seen over the last couple of years that the second half was stronger. And in that respect, the volatility was pretty much in what we have seen in the past or have expected. So no surprises there. While the business will be growing, we will see, but I think then we have a stronger base business and volatility between the half years might change slightly, but we will see. And the second part was on CapEx, and I'll pass that on to Alain.

Thank you, Thomas. So on the CapEx, we said roughly 15% more than in the '23 numbers. I would now maybe go more to 20%. We see that we sometimes have to go faster, and it all depends also when invoices come in. So I would now roughly be more around 20% compared to the '23 numbers. than with the lower end of '15? And the second one, I wasn't sure was about the prepayment of the customers.

Yes.

Yes, but exactly what, Charles? Can you please repeat the third question you had on the prepayments?

Sorry, my question was just more around kind of to what extent can you guide us that you are expecting to continue to rely on customer prepayments to fund your asset expansion?

So you will also see in the second half, most likely prepayments from customers. So we still have contracts there where we should receive prepayments -- and we are also, of course, negotiating in every potential contract, potential customer prepayments. It's still available on the market. It's negotiations and -- but we are confident that we can get also financial participation from our customers in the future.

All right. Then I see Laura Pfeifer has both raised her hand and written to us in the chat. So maybe let's take Laura on the phone, and then we can also reiterate anything that might be in the Q&A.

So the first one is actually, I think rather kind of a clarification on the question, I think, asked by Barbora on the gradual ramp-up of the facility that you plan for H1 '25. So is it fair to assume that you only will start producing production in '25? Or does it mean you will just ramp it up then to a more significant degree? And in other words, maybe I also want to understand when we can expect the first revenues from Building K to be booked. And then the second question is on the pipeline. Maybe you could comment a little bit how the pipeline evolved in -- during H1. I think the last time in March, you mentioned 14 projects in Phase III. So how is that progressing? And also should we expect a new contract announcement?

Thank you, Laura. Good questions. The first one, again, on Building K and maybe I'll try again. So there is a high complexity in this project, and it's really hard to predict everything exactly. But we are working there to get it commissioned and we will start producing with chemistry as quickly as I were possible. And -- we will have that ramped up in the second half -- in the first half -- sorry, in the first half of 2025. And I think that's what I can say. And then there was a question on -- on the pipeline, I remember the pipeline, we give you the data on the pipeline always in the call for the full year, if I'm not mistaken. And right now, I don't have an accurate count on the pipeline. And I missed one in between.

There was a question when we could expect first revenues from Building K.

Yes, revenues. So as I mentioned, we will give you a forecast for 2025 on revenue most likely in the full year call in February, and we reiterated that we stand to our guidance for 2024.

And I think there was one more question around, is there a new contract announcement coming?

Yes. We are, of course, talking to many customers at all times, and we cannot comment and quite frankly, don't want to -- while negotiations are ongoing.

So next question is, I'll take from Sibel [indiscernible], has her hand raised.

I have also a question about CapEx. It seems that in the second half, you will have much higher CapEx to be invested. Is the reason the timing of the billing? And second question about the CapEx. I mean your cash position is shrinking. And how are you going to finance that in the second half and especially more in 2025? And does it also mean that we have to increase now depreciation from semester to semester? This is my first question. And the second question would be about oligos. So the trend is still negative with low demand. Could you give us any color about the trends you're going to expect in the second half and then also in next year, please?

So I can start with the CapEx. Thank you for the question, [indiscernible]. Yes, there is -- when you calculate there is a higher CapEx in the second half, that's partial also, as I mentioned, with the invoice some companies invoiced by the end of the year. And we sometimes have different plans. During the year, there are different CapEx committees during the year, and then it can happen that we decide maybe differently than what we have decided in March. So that's a moving target, if you want to say so. And then how do we finance that? Yes, you're right. It's -- the free cash flow is in the negative and it will stay in the negative. We have our own operating cash that we earn by our business model. We get as a second source, we try to if the prepayments from our customers could be CapEx investments, but also contribution to the working capital as a prepayment. And then the third option would be external financing like a bank loan or a bond or whatever is possible on the market that are the options in that order, we try to get the money that we need for our CapEx programs in the future. And then maybe Thomas back.

Yes, I'll take the oligos. Thank you, Seb. I like to talk about the oligos. I think the oligo space is a great space, and maybe there's so much limelight on the peptides that we sometimes forget that there is a very nice dynamic in there. We reported lower commercial sales, that's correct. That's -- and that's kind of like one program. We see good development in the development space, especially for siRNA and antisense oligonucleotides, we still believe in a very bright future going forward.

All right. Let's now hear from Charles Weston from RBC.

Just wanted to clarify something, again, please, Thomas. You said ramp-up Building K during H1. And then I think you said actually ramped up during H1. So should we expect a fairly full capacity utilization as early as H2 2025, well, certainly into 2026? And then also on Building 5 -- sorry, Building K, if it seems that perhaps things have been pushed a little bit to the right in terms of the timing due to the complexity of that program. But presumably, the moment you open it for commercial production, we start getting all the costs expense rather than capitalized. So should we be thinking about nudging our EBITDA margins down for next year? And then perhaps leaving them for 2026 when you hit that full utilization just because of the timing of the revenues and the costs? I have a couple more, but I'll leave it there for the moment.

All right. Thank you, Charles. One more time on Building K and thank you for asking. I wanted to say that we have a gradual ramp-up in 2025. And I mentioned that earlier in calls that we will have manufacturing work ongoing in some parts of the building where we still are in construction commissioning phases in other parts of the building. And that's how it is. And for the EBITDA, I feel Alain he's more competent.

Yes. On the capitalized expenses, you're right, of course, there is as soon as this building is up and running there are freed up some people in our organization. But we have Sisslerfeld, these people will then work on other projects and will not just stay on our P&L and have nothing to do. I'm not worried about that. And I just realized that [ Sibel ] had another question, depreciation, it's somehow similar to that. And I didn't answer it. Yes, we have higher depreciation this year or end of last year, we started to move in the Building U, which is the office buildings, that has an impact and the real impact from higher depreciation in the Building K will only happen as soon as this building goes online and start to produce then also the depreciation will start. But yes, of course, in the future, it will be higher depreciation, but also higher sales at the same time.

Could I squeeze in one more, please, just as a higher-level question, please. People have talked about oral GLP development programs, but these might require several 100x the amount of peptide per dose. Could you perhaps discuss whether that's an approximately right multiple? And also what you might be able to do from an innovation perspective to be able to make such a large amount in an efficient way?

You, Charles. I think you're correct. Those are the numbers for the formulation. I have been looking into, typically, people tell me below percentage of bioavailability. I said that we continue to innovate how peptides are manufactured. But yes, ultimately, you probably need to get 100% -- 100x cheaper and that's a real challenge. So far, for Rybelsus, this is recombinantly manufactured. That's what I can say.

But I see [indiscernible] has her hand raised, and I also see Daniel Jelovcan. We left good amount of time. So maybe let's take Daniel Jelovcan for next round of questions, and then we'll see if anyone else still has any, Daniel Jelovcan.

The first question would be in your CMC development business, and you talked about primarily late-stage projects, which were a key driver. Do you talk about peptides mainly or also [ oligonucleotides ]? That's the first question. I have another one later.

Yes. In the first half year of 2025, we are mainly excited about peptide projects. But yes.

For 2024.

Thank you.

You're ahead of the curve.

I don't think that's possible.

Okay. And then the second question is actually, I mean the guidance '24, which is not new, but it implies at least 10% or even 15% sales growth in the second half. And -- so that means sequentially, at least CHF 100 million more. And it also means a significant amount more than in the second half '23. And I remember in the second half '23, you said you are already running at a very, very high capacity. So I kind of struggle a bit how that's possible technically because of the Building K is not yet up and running.

Thank you, Daniel. I mentioned a few bits and pieces why we believe this is possible. One is operational excellence. It's longer working hours, and we also took some additional capacity into play in 2020. I need to get the numbers right, 3, I would say. That is now fully running and on stream. Okay. Okay.

Maybe I can add here, we also increased the stock that we have the material to sell in the second half. That also helps it's not the capacity needed there. It's already on stock. We just have to sell it. But you're right. It doesn't come for free. It's hard work that everybody could see those over 2,000 associates that are working for Bachem.

We are all very grateful for them. So I see some raised hands, I guess, a reraised hands Charles Weston and [indiscernible] and Barbora Blaha. So maybe let's go to Charles Weston for another round of questions.

Just on the inventories, which you just touched on actually a couple of times. Would that be a combination of inventories of sort of finished goods waiting to be sold, but also in anticipation of the additional work that you need to do in the second half and, I guess, first half next year with Building K? And was that also the reason for some of the step-up in prepayments to pay for those higher raw materials?

Yes. I mentioned some support for net working capital is where we receive as prepayments from customers, and that is exactly Dubai sometimes expensive raw materials to produce now or in the future. That's where -- it's a lot of money we received there. And you see a little bit of difference between the current and the noncurrent prepayments we have in our balance sheet. There, you see how the future, especially raw material and will come in. But yes, you're right, that's a part of the inventory. On the other hand, it's what I'm also every month looking at this, even maybe sales are not that high maybe as expected. But for me, it's important that we see that manufacturing is up and running. So it's on stock manufacturing goes on, the utilization is high, and that's the important thing, as I said, and we have to sell it. We have to send it to the customer, and that's the other part of the inventory.

Okay. So do we expect that number to fall by the end of the year or sort of will remain steady as it is?

I assume that it will still increase for supporting then the '25 numbers.

So let's go to [indiscernible], raised her hand again.

I have only two small questions for Alain. The first is on tax 2024, you have still a very low tax. Can I expect 10% to 12% also in full year? And the second question about financials is the financial results you had a special effect here in the first half. Can I expect the same effect in the full year? Or does it mean the special effects are now over, and we can -- or how much can we expect for the full year in general?

So on the tax, I would say still the 12% to 13%. It also depends in which region we make our profit. because we have totally different tax rates in the U.S. and in Switzerland. I will be more like, say, 12% right now until there is a minimum tax rate in the future. On the financial it's two things. So one was the U.S. dollar. The exchange rate is the Swiss franc, where -- which was very low by the end of the year, we had there the impact because we have to translate this in Swiss francs. That was the positive impact now when the dollar went back to 89% compared to Swiss franc. That was a positive one if the FX stays where it is the currency that was a 1.5 year impact. Yes, that's true. On the other hand, we still have our securities, which is a part share. So part is funds. And of course, it's -- the we realized some gains, but we also have some book losses, and this can go in both directional until the end of the year. So I cannot tell you, especially not on those two things where they will go by the end of the year, what those are the main drivers behind this impact on the financial results.

All right. So for second question from Barbora Blaha. let's hear from Barbora.

I have two additional questions. One is on the costs. So you said that you expect disproportionate investment into R&D going forward. And this was now already nearly 3% of revenues, up from 2% last year. It is the new base? And then a second question, Cordon Pharma and clearly, are both increasing capacities here in Central Europe, you will also need to hire additional people. And do you expect it will be more challenging to get talent in the future?

Should I take the HR first? okay. Thank you, Barbora. Yes, we were right. And I can report that we are very fortunate with the people we have in our team. We have a world-class team, and I see a strong interest in working with Bachem. So hiring for us in the past couple of months was really successful in terms of quality and also quantity. We could quickly higher and we could make some really nice additions to our team. Going forward, it's kind of hard to predict. We do whatever we can to also help the ecosystem. We have apprenticeships that are going. I think it's around 50 to 60 people here in Bachem education, and we collaborate with universities and [indiscernible] in Switzerland and also globally and in the U.S. So we want to make sure that we get the talent, and we believe we have something to offer at Bachem that is attractive now and in the future. And a question about -- I felt that was for Alain.

Yes. So the R&D, you're right, it's about 2.9% right now coming from, I think, 1% a few years ago. And we said this is very important. So I guess we will not stop any projects in innovation, which makes sense for us just because maybe of 5, 10, 50 basis points. But we are somewhere at a cap right now. So I would say the 3% should be somewhere where we can be in the future, but it will not go year-by-year in a percentage of sales, like it was in the past. We committed to invest there. It's important to invest there. But yes, I think it's now somewhere on the ceiling now.

So one last hand raised, Daniel Jelovcan for a second run of questions.

Just one last, the prepayments of CHF 50 million. I mean that's about 20% of sales. And of course, that's for the future. But still, if I would speculate, I guess that mainly goes to the big [ GLP1 ] customers? Or is that the total raw assessment, Alain?

Yes, what can I say to that. We do comment -- we don't give any details to -- from which customer and for which projects we receive those prepayments, I think we don't change that, that communication in this sense.

Okay. Thank you very much. I don't see any of our hands raised or questions in the Q&A. I know that there have been a lot of companies reporting results today. So probably all major questions have been asked if there are any further things, please do shoot us an e-mail. And let us know if we miss something that you still have an open question on. And with that, I am sharing the formal disclaimer and also thanking everyone for joining us today on this call and your interest in Bachem. Thank you, Alain and Thomas and the team working in the background, so I hear you all then [indiscernible] at our Capital Markets Day on November 21.

Bye-bye. Thank you.

Thank you very much, bye.