Bachem Holding AG (BANB) Earnings Call Transcript & Summary

Welcome, everyone. Welcome to Bachem's 2024 Capital Markets Day. I'm very happy to see a lot of faces, some familiar, some new here with us in Zurich. We have about 50 people on site registered. We have about 40 people joining us via Zoom today. And hope that everything works out on the technical side with this hybrid event. My name is Daniel Grotzky. I'm responsible for communications at Bachem. We have an exciting agenda today. I'll hand over in a moment to our Chairman, Kuno Sommer for a few introductory remarks, and then Thomas Maier will give us an update on how Bachem is progressing on its mission and our strategy. Torsten Wohr, our Chief Commercial Officer, will share his views on the market development and then Guenther Loidl, the CTO, will speak to capacity expansion and innovation and Alain Schaffter will then also a brief part regarding financing to share with you and Thomas will wrap it all up and then we should also have adequate time for Q&A. Time-wise, we estimate presentations to go between maybe 45 minutes to an hour, depending on how enthusiastic all the speakers are regarding peptides and oligonucleotides, we love them very dearly, so we can spend a lot of time speaking about them and then have about an hour of Q&A time wrapping it up around 4:00 CET, and then for those of you who are with us here in the room will also have a nice [indiscernible] following, so you can mingle with each other as well. Questions during Q&A can then also either through the Q&A function on the chat on the Zoom or here in the audience. Without any further ado, I am very happy to ask our Chairman Kuno Sommer, up to the stage for his introduction. Kuno, over to you.

Welcome, everybody. Thanks for taking the time. I'm only allowed to show you 1 slide. They don't give me more minutes, and I'm only allowed to some introductory remarks. I will do a bit more. When you look back in March, we told you this industry, the whole pharma industry is potentially facing some disruptive changes. GLP-1 diabetes weight loss, you know it all about. And I think we are in the middle of it. We're in the middle of it, you will hear more about today by Torsten, but the market dynamics are stronger every day, and that goes together obviously with capacity needs every day. Our strategy vision basically remains unchanged. And this also Thomas will elaborate on that. What is important, and you know that, that the capacities. I mean it's -- normally a pharma company will not talk about the building. But in our situation, it's a bit special, no. We know the big step is this famous K building. And today, we will do a deeper dive on that by Guenther Loidl, which we know is always risky if we do a deeper dive with you because he will then kind of make reports on it but we want to be totally transparent, and we want that you really understand what this means. At the same time, we will also talk about innovation, our true USP against competitors in the competitive environment. But there are competitors, there will be more competitors is innovation. And this is the edge we want to further build and we are working on. So there, we will give it deeper dive. Finance is a topic, but not a big 1 at the moment. We know how to finance. That's not the issue at the moment. So net-net, we are very privileged. I mean we have long-term commitments of strong customers. I mean, not many industries have that. So net-net, it's all about execution. And with this, I hand over to Thomas.

There we go. So let's talk about what Bachem is. And what is important to us and hopefully, that makes sense for your daily work and helps you to do a good job. Bachem is clearly a pharma service company. We are in the universe of pharma services. And within that universe, we are a contract development and manufacturing organization. That tells we produce products, active pharmaceutical ingredients for pharma companies. This all is based on our key knowledge and that's how to produce peptides and oligonucleotides and we want to do that with our customers for long-term relationship that means we carry the molecule with biotech from the early days until commercial products, or with the large pharma, while they are developing into really, really big products for a very, very long time. Those are products that they stay on the market, some of them even after becoming generic with the innovators. This all is based on chemical synthesis. We don't do any recombinant work. We don't do any expression. It is chemical synthesis. That's the core competence that's in the company. And with all that together, we manufactured revenues of EUR 577.3 million in 2023, and we had about 2,000 colleagues working for Bachem globally day over day. Now I mentioned we work in peptides and oligonucleotides. What are peptides, what are oligonucleotides. If you look at the biology, how they are built, the peptides are changed macro cycles of amino acids. They can go up to 100, the border between peptides and proteins is somewhat the gray zone. When I was in school, it was 50%, now we write 100, but it doesn't really matter. Those are similar molecules, and we can do them synthetically. That's where Bachem and other colleagues push the boundaries, how to do that, we can go up almost to 100. They are natural molecules, so they are in your body and they regulate many physiological processes. That means there's not a lot of side effects, small quantities are necessary to have a substantial impact. So they are good drugs, very good drugs. We also produce oligonucleotides, oligonucleotides are small fragments of DNA or RNA, and they are typically used for gene silencing. We use them as antisense oligonucleotides, that's what we synthesize or short interfering RNAs. Now why those 2 classes of molecules. And that's at the bottom of that slide. They are chemically modified typical peptides and for sure, the oligonucleotides. And that means there are important elements that are based on chemistry. And they're complex molecules. They are within the largest molecules that are manufactured synthetically. And we want to do a challenging task, important work. We want to have a high barrier of entry for competitors. That's why we are in that space. And they require specific knowledge and specific equipment. So not everybody can just walk in and say, "Hey, I'm going to be a peptide company or I'm going to be an oligonucleotide company." That's why we like this space. And I speak for everybody in the company and also the stakeholders. We are very fortunate and happy how we are positioned, and we want to stay there. That's where we are, and that's what we are. And now those are the numbers behind that. You see a healthy growth, the green line is the revenue. Really, really nice growth into 2020 and '21 years, not unlike many pharma services company. Those were also the Covid years. But we mainly see as a casual relationship that we had capacity we could grow in. We got the contracts, and we could relatively simply ramp up by day shift and use this capacity efficiently. In the last couple of years, capacity got a little bit more tight. We reacted, we put shift work in. We increased the utilization over to 7 days, but it was a little bit slower. And going forward, we hope that we can ramp up again with additional capacity coming on stream. The bars you see are the half years, and you see quite a big difference between the first half year and the second half year. We have, especially over the last 4 years, we have reoccurred this situation. There are many explanations about it. Looking forward, I hope we can level that out a little bit, and that will help us operationally and also for the financial results. Kuno mentioned it. We are fortunate. We have contracts. We are working in important indications and we took the liberty to list what we feel are game-changing innovations in the pharmaceutical market over the last couple of years. And clearly, the last one, you see that bottom right is those gut hormones or weight loss hormones that are used to lose weight, but have many positive effects on other organs too. And the economist had a cover running. The second economies cover in the last 2 years, they said, those are the everything drugs because they work on so many different organs and are so beneficial for all of us. So a very interesting space. And of course, if you're in there, you feel that you feel that push or pull from the customer and if you look at that slide, the horizontal, the middle slide, that should indicate that our short term and long term is of course dependent on the success of that class and takes this energy that's in the market and wants to formulate how we go forward. And if you look at the market dynamic at the top of that slide, of course, there is an urgent need for additional capacity. And we feel that we know that our building K needs to come on stream, customers and patients are waiting. We know we can sell more if we get it ready. We worked on that. And we also expect that more people are interested in that space. We want to prepare ourselves that good players are already here, but more will come. If you look at the long term, how we react to those challenges. We want to be the ones, who innovate how we produce those molecules. We don't think we are already a top performance of chemical synthesis for those tights molecule. We invest our own money in process R&D to improve how we manufacture those peptides. And we also feel that a lot of people want to nearshore, they want to have their molecules produced where they are producing, and we think we can profit from that process. The imperatives for that respect, in the short term, we execute quickly on those capacity expansion, and we need operational excellence. As I talked, we run more shifts. We need to go deeper, better understand how we can get our assets maximally used and reduce costs and quality-related costs. In the long term, we want to remain #1. And we want to push green chemistry, we want to push process R&D because we believe that's how you're going to win the future and how you're going to make this fee even better. To give all of that a little frame within the company, we came up 2 to 3 operating modes, and I start at the top second column, CMO that's just producing the same material maybe for a year on the same piece of equipment, and we are also accepting the CMO space that other people come to us and bring the recipe. A couple of years back, that was not our prime business model, but we see value in this kind of manufacturing, and we are educating ourselves and working together with customers to really put that into the Bachem mix. Then the middle pillar there, that's the CDMO business. That's where we develop processes, maybe together with the pharmaceutical companies, and we run them somewhere in a pilot scale infrastructure in campaigns a couple of months and then they go all out. And the bottom layer is the trailblazing CDMO. In a way, that's our process research angle. There, we want to improve. We want to learn. We put that in processes, either at small scale and then use that for future manufacturing something we are all excited about, and I think, it's an important value creation for the future. For this slide, you guys need to see me as the COO. Those are operational things we are tackling as we grow, as we go along. And very successfully, we implemented a network strategy. We kind of wanted to go away from the hub and spoke model with Bubendorf as the center of the universe and say, we're a network of different sites, who have different capacity utilization, different skill sets, but can ultimately transfer projects between the sites. And by doing that, we get more resilience that we can have capacity on stream when we need it. And we executed on that in the last 2 years, and it was very successful and also rewarding. The other thing I mentioned, we do CMO, it gets bigger, more peptide is needed. So we need to be more mindful about how can we scale. It's not just how can we make it happen? It's also, can we do it for a long term? Can we do it at a larger scale? Do we have the scalability in the chemical process, but also in the organization. And there is a lot of energy going into that, and we see that we make a lot of progress on those topics too. And we strengthened the management. That's clear. With the growth pace we have, we also need outside-in knowledge. We cannot just learn everything ourselves within the organization. And we have to put more effort on CapEx delivery for good reasons because we have big CapEx projects ongoing, and we see more of them coming in the future. So this is a core competence for us going ahead. That's our network. And you see that we grow into the CMO, large-scale capacity. And this network view is really for peptide manufacturing. So we see that CMOs currently getting developed and growing in Bubendorf, and importantly, then continuing in the Sisslerfeld expansion, the second column. We have CDMO capabilities all over the network, but we don't foresee that to happen in Sisslerfeld. And we want to do trailblazing globally, we have a strong focus in Bubendorf, where we have the highest density of peptide and RNA chemists in the world. And over the last year, we deliberately hired experienced hands and minds to help us with our operations with CapEx and with quality, because we see there is a huge demand and we wanted to bring in people with different backgrounds, who help us building on what we already have in the company. I start on the right side, Patrick Scheidegger, he's heading the quality assurance in Bubendorf and he just came through a successful Swissmetic inspection. Then we have Michael [indiscernible] who joined from many Swiss and international experience in CapEx delivery. He's working on building K and all the other CapEx initiatives we have. And we have Hans Van Hees, who comes after more than 20 years of pharma experience to Bachem. He joined on 1st of October, and I'm very happy that he's here. So you can talk with him and get a little bit of the experience he has. He will be a very valuable contribution to our company, help us with operational excellence and being even more successful going forward in delivering products customers, who are waiting and for patients who are waiting. And with that, I pass it on to Torsten, who will tell you more about the market.

What's going on in the market. I like starting my presentation on the market with this slide. Some of you may have seen it. It's an outline of peptide-based active pharmaceutical ingredients, starting from the '80s to present days. And Bachem being 50 years in the business with peptides, it also reflects Bachem's history. So on the far left, you see molecules how we started out relatively small molecules, 10 amino acid, 12 amino acid long sequences applied to treat diseases in like endocrine disorders. Typical examples would be octreotide, leuprolide, goserelin, and the remarkable thing about these peptides is they're still around. Even 30 years after introduction, they're still strong in the market. So it tells that peptide may have a long commercial tail. And they're part of our generics pipeline today. Then we will move a little bit on. We branched out. We improved our technologies. We introduced solid-phase peptide synthesis, making accessible larger peptides like glucagon very difficult molecule to produce 30-amino-acid-long. And that is a stepping stone then into what everybody is talking about today, the GLP-1 molecules here represented by liraglutide got introduced in the market in 2010 already. Not the first GLP-1 before there was a Byetta that was received approval in 2005. There are good tide, it's close to 40-amino-acid-long and it has this iconic fatty acid. It's a design feature that we now see in all other molecules that come along now. And what also means these molecules become more complex. I need better chemists to produce them. I need better processing technologies and in order to synthesize them, and I need innovation also to because the early molecules we started that batch size of 10 kilograms. Now we're moving into demands for hundreds of kilograms if not tonnes. So more complexity, more quantities are going higher and the patient population we're treating are getting larger and larger. So we're excited about the market, and let's dig into -- a little bit into more the details and explaining why we're excited about it. What you see here is the pipeline for peptides, the late-stage pipeline, Phase II, Phase III on commercial peptides and how it grows over the last 4 years. There is in 2024, when we made this analysis last summer, we counted about 1,100 peptide projects in the global pipeline, right? And about 1/3 is in the clinic. So that's a relatively high ratio. And when we look just look into this year, we had 3 approvals for peptides. And worth mentioning none in the obesity diabetes market. So stem cell mobilization, autoimmune disorders, but not obesity, not diabetes. If you would look into what's going on in Phase II and Phase III, there we see a lot of that indication being addressed. But overall, and this number may be wrong, we think the market is $1.8 billion. That was our assessment a couple of months ago. Probably today, we grew to further higher number. It's based on our assessment and excludes the captive market, anything that is produced in-house by pharmaceutical companies. So basically, our market accessible to companies like Bachem. So an important role are these GLP-1 molecules, right? And this is, I think, the other important message here is not just a vanity play, a cosmetic thing or just lifestyle drugs, there is clinical benefits that's worth talking about it. And the big pharma companies are investing a lot of money running big, big trials to show that it goes beyond just losing weight. Losing weight is just 1 thing, but there is indication that these GLP-1 molecules have other mechanisms and to really benefit with hypertension with diabetes, obviously, with cancer, with Alzheimer's, even Parkinson has been discussed and the more weight you lose more benefits you get, 5% weight loss gives you already better control on your blood pressure. If you go into 10%, 15% now you can talk about benefits in terms of sleep apnea or the prevention of diabetes or even the remission of diabetes. So and these data are now being collected. They are submitted to the authorities, and I'm pretty sure there will be indication extensions being granted, which basically increases the market for these peptides dramatically. And there's always a cost the debate on what is the cost of these molecules there. They're expensive to manufacture, right? Treatment at this point is relatively expensive, but I'm pretty sure, down the road, the cost will come down. And then on the other side, you get all these benefits, less surgery, less hip replacement, less knee replacement and less bariatric surgery so that will all help to really balance this out. So I think we will all see that there's a real benefit economic benefit also for these molecules down the road. So I used the term GLP-1 a lot. And clearly, most of these peptides, where it's liraglutide, semaglutide or tirzepatide are actually GLP-1 molecules, but the terms of GLP-1 is a little bit misused, scientifically, it's much broader, right? We have a gastric inhibitory peptides. We have glucagon, which is not an incretin and there is -- behind each of these natural products is a whole list of pharmaceutical derivatives that are being now developed for clinical -- in clinical research and for market. These are the single agonists. Then you all heard about the dual agonists. This is when pharmaceutic companies are combining 2 molecules into 1, like this GLP-1/GIP dual agonist, the most famous 1 here is tirzepatide, Mounjaro or Zepbound. Now commercialized by Eli Lilly. And there are other combinations as well. In combination with glucagon receptor agonists. And there is a very complicated biology behind it, that is complex, but it gives you all these kind of possibilities to feature the design of the molecules and to feature there the pharmaceutical effectiveness. In the pipeline in Phase III, we even have triple agonist and the other day even I saw a quadruple agonist. So the combination of this poly pharmaceutical design features is increasing. So this is what we know and what is now coming now is other molecules that have an effect on appetite, on satiety and gastric empting like amylin or peptide YY. And they are being combined now as well with the GLP-1s, the most interesting molecule here because we are all waiting for Phase III data now coming out very soon is Cagrisema, Novo Nordisk's response to tirzepatide. So it's complicated but for us, it means a bigger variation of research and peptides and peptides that primarily are -- require synthesis and chemical manufacturing. It's good news for Bachem. We believe a moment the obesity and diabetes area, I mean, there's a lot of dynamics as well in other areas. JNJ has came out 2 days ago with exciting news on their Phase II trials with this molecule JNJ-2113, which is -- has great efficacy to treat in the treatment of severe psoriasis interleukin-23 inhibitor, great effectiveness. We see a big momentum also in peptide drug conjugates. So this is -- you might have heard about antibody-drug conjugates just replace the antibody for a simpler peptide you might get similar effectiveness and targeting effects. So a big market here, keep an eye on that as well. And then another example would be the psck9 inhibitors that some of them are peptides now and one here -- a famous one is Merck's MK0616 that could go very big as well. So it's not only obesity and diabetes, it's other indications as well. Generally speaking, there's a lot of research going into peptides again, Pharmaceutical companies are building up there the peptide discovery capabilities, again, combine it with AI. And I'm pretty sure down the road, we will see more projects going into this global pipeline. At Bachem, we also have oligonucleotides. And here is a similar picture. So I'm counting about 700 projects right now in the preclinical and clinical pipeline. It's about 182 now in the clinic. And very exciting here is the hit rate, the approval rate for oligonucleotide seems to be very high. We just had this year, 4 approvals still small indications. Well, if we dig into the data for Phase II and Phase III projects, they will see the -- branching out into large scale or into large population indication as well. So there will be lipoprotein A. There is triglyceride reducers. These are all in Phase II, I'm very curious to see now in the next 2 or 3 years, whether they're going to receive approval. I came back from the European Tides conference last week, and there are some exciting trends as well. There's 2 topics that have been discussed primarily. It's as we go from the niche indication into larger indications, we need to scale the technology to be able to produce oligonucleotides in hundreds of kilograms as well. Current technology yes, can be scaled out, but it's not really elegant. So there is a big need for innovations, right? And this is something when we started investing in oligonucleotides, where we said, okay, we want to differentiate with new ideas to manufacture, oligonucleotides. And we have presented those ideas in the past as well. The other topic is oligonucleotides have been basically targeting the liver and any disease originating in the liver. They did this by conjugating this [indiscernible] to it. And delivery is sold out, so to say, right? So new organs new targets need to be addressed now. And they do it -- a big theme here is to conjugate an oligonucleotide to an antibody and use the antibody as a targeting unit and as a carrier molecule and let the oligo then do the effectiveness. So very 2 important trends, and we will keep an eye on them and try to leverage that also for our business. So our goal is the $1 billion company, and I think we have a pathway, clear pathway to it. We have a current -- strong current baseline. We reported EUR 577 million in sales last year. our portfolio is supposed to grow at least as fast as the market. So there is an organic growth here. But what really pushes or closes the gap to this $1 billion is our large contracts that we have been able to sign customers entrusting us with big projects, signing contracts with big commitments. And we have, in total, some of them we reported, some of them we haven't but in total, we're talking about minimum order values of $400 million. Not happening immediately. There will be a ramp-up phase. But once our building K is running, we have a path to this $1 billion. And then there is a future, right, what's coming after. And here, we also put some miles have a good story to tell. We already secured the Sisslerfeld, where we are having concrete plans to build a new manufacturing site, and there will be sustained growth. How we do this? Peter can tell you more about it.

Yes. Thank you, Torsten. Thank you to all of you for coming to Zurich for joining us online today. I think after Torsten's presentation, we appreciate that the markets that Bachem is acting in offers great potential, great opportunities, be it with tides -- be it with peptides or be it with oligonucleotides, what we call the tides family. I'm going to present to you our perspective on how we are going to meet the demands that we see in this exciting market regarding capacity and innovation. So it is quite obvious. The market is changing dramatically. We see a huge surge in demand in our products and services. And this means that also the way we make these products and services will have to change. The modalities that we are producing are moving out of the niche into large indications. We will scale up our manufacturing and we will enter a new era of peptide and oligonucleotide manufacturing. And to make this happen, this new era, we see formulated drivers. On the left-hand side, of course, we need to expand our capacity. This means we need to invest in new buildings, new equipment and we also need efficient and fast process development. And we need to scale the processes that we develop in R&D into operations, into production. Innovation has been mentioned frequently over the last minutes by Thomas and Torsten and innovation, we defined as a great idea, a new solution for an existing problem that clearly creates value for us, the customer and in the end for our patients. So when we talk about innovation, it's fancy ideas in many cases, but they all have to generate value. That's what we understand when we talk about innovation. And our innovation is targeted and quick and can be translated to large scale. Beyond that, we also see a strong focus in the market on sustainability. When we scale up our operations, we use much more materials, we build larger buildings, we bring in a lot of steel and concrete, and it becomes more and more important that we need our sustainability growth and also the growth of our customers. There's a strong pressure that we feel, but we are ready to meet these requirements and to take the responsibility we have in the market and also in the society. And on the right hand of the slide, you see the chemical complexity. This has also been mentioned before. We see that the molecules that are developed double antagonists, triple antagonists and so forth. These molecules are getting more and more complex. And we like this challenge. We are excited about these challenges, and we are dedicated to meet the requirements of our customers. The next-generation drugs are better. They are more efficient. They have less side effects, but some of them can be more complex and more difficult to produce with chemical synthesis. So in the next slide, I will give you a short deep dive into where we are with our building K. I have a perspective for the Sisslerfeld and I will also comment more on innovation and how we translate innovation to benefit for our customers and patients. So building K is a large manufacturing building that we are currently adding to our site in Bubendorf. This building will be a great step-up for Bachem. It will have the largest capacity in this building. And we have other focus areas, where we are also making great progress with this new facility. We have focused on automation. So we are using cutting-edge software and control systems to make sure that we are operating this facility efficiently and reliably to ensure highest quality of our products for the customers. Another key priority was to enhance our capabilities in closed handling, closed handling of solvents, closed handling of chemicals and also closed handling of products. Our products are pharmaceutical ingredients. They are active. The safety is also super important for us, and we have made this a priority in this project. Overall, it is clear that building cable be a huge step up for us. We have full focus on this project. We have full management attention. And we are dedicated to bring this capacity online safely as -- these are some real pictures from our -- you can see that we finished construction and we have finished the installation of the equipment and work with some utilities, some infrastructure -- required for the first manufacturing unit. This is a quite complex project. We have a footage of something like 15,000 square meters in this building, and we are building it out with high tech cutting-edge technology, a high degree of automation, as I mentioned. And there is 2 other complexity drivers that I would like to highlight briefly today. The first one you see here on this slide. This is an illustrative image. And what we want to say here is that on the left-hand side, you see a simple representation of what we planned to build originally. So some 4 years ago, we started this project. And at that time, this dramatic disruption in the market has not happened yet. So we were planning a building in the pre-GLP-1 era, so to say. We planned a building. That's what -- that should be able to deliver many different projects, as you can see here, small projects. And we also planned to build this capacity in a staggered approach over several years. And then the market changed dramatically and we had redesigned the layout and the scope of this building substantially. So on the right-hand side, now you see that we are building a large scale facility. It will be less products, fewer products -- but we are building all of this capacity simultaneously. So the key message is, we have changed the scope due to the new market demands, and we are building all of it at the same time. This clearly adds complexity for us. We had to go through a learning curve as an organization. But we have addressed this learning curve. We have brought in new talent, Torsten mentioned in his presentation. We have added skills. And now we make sure that we are ready to get this project over the finish line next year. This is another graph, where we would like to show the second complexity driver that we see in this project. Mentioned, we are building several manufacturing units. Here, we call them, you can see on the left-hand side of the slide. And we are now ramping up this manufacturing units in a staggered approach. The first unit, Unit A, there we have construction completed. As you have seen on these pictures, the building is ready, construction is finished. Infrastructure is available, [indiscernible] is built and the equipment is installed. Since Q3 last of this year, sorry, we are in commissioning and qualification of this Unit A. Commissioning and qualification means that we are now bringing all of that together, and we are bringing this capacity online. So we have a building, we have infrastructure, we have equipment. We have control units. We have software and all of these systems are now integrated and tested to make sure that this system operates and delivers as we expected to do. This commissioning and qualification is progressing now. And our goal is to have a transition into the next phase in the second quarter of next year. The next phase is manufacturing of technical batches and execute process validation. Safety is our key priority also in this project and especially in the current phase, where we are transitioning from where we are ramping up commissioning and qualification. This is the phase where we also bring insolvents into this building, where we bring in chemicals. And safety is our top priority, and this is also a clear expectation of our customers. So we are driving this project full speed forward. One unit after the other is constructed and commissioned and safety is our priority #1 in this project. This brings us to Sisslerfeld. Sisslerfeld will be the next large step-up, the large expansion of Bachem. As we have heard, we have acquired a greenfield in this Sisslerfeld of substantial size, 15 hectares or 37 acres. And we are on track to launch manufacturing in the Sisslerfeld at the end of this decade. Our goal is to build a 100% focused manufacturing site and the scale will be most likely larger than what we have -- what we are currently building in Building K. We have developed a site master plan, and we are working on a site development plan together with our -- the authorities and the communities. So we are preparing for filing first building applications. On the right-hand side, you can see that this site has a substantial potential for additional capacity. It is located in the Swiss life science cluster here in Northwestern Switzerland. It was a deliberate decision to buy this land here. We have excellent service partners. We have customers in the area, and we also have access to talent from different countries. So these were the main drivers why we -- that prompted us to stay in this Northwest Switzerland region. And another positive aspect is also that this land is in an existing area that is already used for chemical and pharmaceutical manufacturing. So we can realize synergies regarding infrastructure with our neighbors, and this will help us to reduce investment cost and to speed up the whole project. So when we think about how can we address these exciting demand that we expect in the market, where we are sure that this demand is already here and it will grow even more. How can we address it? Of course, 1 solution is build more larger reactors and add more people. But in our opinion, this is not the whole picture. We think that maximizing reactor yield is a key second aspect that we need to focus on. As we have heard and as we have seen, molecular complexity is changing, complexity is increasing. This is a key influence factor here. We also see that quality of starting materials is super important to manufacture these very long, very big molecules with the chemical synthesis and of course, the reactor volume. But then we also see equipment innovation is key in our opinion. We are dedicated to innovate, to bring in new chemistries, new technologies. And of course, once we have these systems available, we need to operate them, we need to have full focus on operational excellence and Hans Van Hees is a global expert in that area. Innovation at Bachem, as I said, means a great idea, a new solution to an existing question, and it has to generate value, we need to be able to translate these innovations into real value at large scale. We have built over the years a large pipeline of technology innovation projects. Currently, we are running more than 40 of these technology innovations. Approximately 1/3 of it, we ran in partnerships with customers or with academia or pharmaceutical companies. And the rest of it is driven by our own financial means, our own investments and our own resources. Over the last years, we have been able. We have several examples, where we translated these innovations into application in manufacturing. One of these examples is continuous chromatography. I have another slide to give you more detail on that, but I would like to emphasize that we are the first company globally to implement this technology. We are manufacturing large-scale peptides and oligonucleotides already with continuous chromatography and all chromatography systems in building K will be able to run continuous processes. So this is a clear example that came out of this pipeline, and there is many more of great potential. This is my last slide. And with that, I would like to highlight 2 examples of these technology innovations. On the left-hand side, you see an example from the upstream part of our processes. So here, we are synthesizing the peptides or the oligonucleotides. And we are using this attack assisted synthesis as a new way of doing that. Also here, we are the global leader. We are the first company to apply this technology on larger scale. And you can see here 2 examples, where we compare the traditional technology, SPPS in dark blue with the solid -- the solvent consumption of the new technology in light blue. And in both cases, we have been able to reduce the solvent consumption significantly by 60% or more than 70%. So I think this is a fantastic example. We are applying this at large scale and we have great solvent consumption reductions. And the example on the right-hand side, I mentioned already a couple of times. This is the continuous chromatography. This is a technology that we use in the downstream part of the process so the purification of the products. And here also some real data from a real use case, where we have reduced also solvent consumption from the batch mode to the MCS GP mode by approximately 70%. And we are committed to implementing these technologies. We are driving these technologies and Building K will house many of those, and it will be additional capacity, but also new cutting-edge technology with focus on automation and closed handling. So this is -- this concludes my presentation. And with that, I hand over to Alain to show how we are going to realize these investments.

Yes, so we heard a lot about the exciting market on the demand side. We heard a lot about that we need the capacity to meet that demand. And that's why my colleagues from the [indiscernible] knocking on my door, " Hey, we need money." And where do we get that money is right now, we see the big project is building K in Bubendorf, we talked a lot about now. We also have Vista in the San Diego area in the U.S. where we're also increasing capacity right now for the future. And then we also have Sisslerfeld and you see there is an overlapping time in the next few years, where we need money that we can build capacity to meet the market demand. How do we get that money? It's -- of course, first is operational cash flow. That's also -- it's important that we have a good margin that we have an operational cash flow to support that growth. But we all know it's not sufficient when we look at our plans for the future CapEx capacity increase. Then we have customer financial contribution. You've seen that last year, you will also see this year, now we have that contribution. It's significantly amounts, where customers give us money to increase and have a better pace on the capacity we do. It's their financial support. It will also be a huge part for Sisslerfeld. So we said if we want to go to Sisslerfeld , we need a customer, who financially contributes to that CapEx, but we also want their already commitments for future supply agreement. That's an important factor for there. And then there is another option right now. It's a debt bond instrument, which is under review. We have many discussions now internally, but also with banks or other third parties that we can get that money. So Kuno mentioned that the early stage finance is not the problem. I would say, yes, I have not sleepless nights for financing. I have more sleepless nights which options do we take? What's the perfect match right now, what do we need and what's a good fit for the company at the moment. And then we always have, of course, smaller project maintenance, which is just the ongoing business, replacement and compliance stuff that is ongoing. Those are the major projects. Just to give you an over -- don't try to match numbers behind these arrows with time lines and amounts, please. It's just illustrative, but that you have an overview on where the exciting ride goes to. Summary, Thomas, back to you. Thank you.

All right. There's the strategy slide again. I think everybody has seen, we have measures in place for the short term. We know what we are doing. We are very focused, and we have good plans what's ahead of us. We are optimistic and at the same time, realistic that we need focus and focus also means that you have to say no to many things every day and just keep going to make happen, what's possible for the company, for our customers and for the patients. And that is what we presented in August for the half year, and it is the same slide. We don't give a new update. We see mid- to high single-digit growth in 2024 and a stable EBITDA margin, and our big goal is to make this billion in 2026. And with that, I guess, we conclude the presentation. And I want to say thank you to everybody, who was involved in getting this to happen. It's a lot of work, and it was relatively smooth and seamless. So thank you all who worked on it. Thanks for the speakers and of course, for you, for your attention and that you came here to Zurich in this [indiscernible] nice for me, it was a great time, and I'm looking forward to questions and answers. Daniel, do you want to say something? I hear other. I wonder that they clap now actually.

The work is done -- so if I can have the speakers up, please. All those speakers up, please, and I was going to say the work isn't done yet. So let's -- the fun part. So Joshua, maybe do you have the mic. Okay, so we have Joshua here in the room with the microphones. So if you have questions, please do raise your hand, raise it visibly. There are some highlights here that they don't blind me, but they make it a little bit more challenging. And that's another 1 over there. And also, if you are online joining us by Zoom, I already have 7 questions, there's a Q&A function, write your question into that Q&A function, and we'll try to weave in questions from the virtual audience -- is that the right word, I'm not sure. The online aspirants as we go along. First question.

Daniel Jelovcan. I mean, in the past, you talked about Phase [Technical Difficulty] is that the Phase I or the whole building, just to be clear?

Yes. So we have realized that this naming of Phase I, Phase II, Phase III and other phases. This was confusing to some people within Bachem also to some people without Bachem. So we have now changed and re or updated this convention this naming convention -- slide is that the first manufacturing line Unit A, is in commissioning [Technical Difficulty] from commissioning to a technical batches and process validation in the second quarter with the first slide and the other lines will follow.

Building then it's complete.

Yes. So, I would like to ask you not to read too much details into this illustrative picture. What we really wanted to say is there's different line -- that will come online in a short period of -- month.

Last question. Don't you think -- I mean when I read this slide, the $1 billion target -- when it only starts maybe late '25 commercial that is a bit a very big hockey stick in '26 because it looks like '25 is a bit -- for '25...

Mentioned, it's our target to reach the $1 billion in 2026. It's correct that a lot of things need to fall into place, but we have plans and try to execute according to those plans.

It's Fynn Scherzler from Deutsche Bank. Again, back to the Slide 23. You said we should not read too much into that, but it's, of course, a bit tough for us. So I'm interested in the timing that you put on the Unit A. So you said you began in 3Q, you expect to move into the next phase into 2Q. So these little blocks that you put -- is this always sort of the same length that we should expect for each individual step. So ask the other way around, if we sort of try to extrapolate that into 2025, it's like it's already said, so unit A essentially only begins probably in early -- sorry, in late '25. And then connected to that, the 3 lines that you spoke about, are they all roughly the same size -- but should we think about it as sort of 1/3 of the building K being done then.

Yes. Good question. I think this is important to have more granularity on these topics because I'm sure it's of interest for many people. So I think the first question was, are the blocks representing equivalent time lines. And the clear on -- it is important to -- I would like to ask you to read this as processes...

Can we just make sure that the mics are on also that people in the online audience can hear what's been said.

So our intention is to show that this is processes for each of these steps in the project. So it is not such simple that we say, okay, on March 31. This period ends and on April 1, this starts, but it's a continue. It's a process. It is a highly complex building, as I tried to show you also in these pictures with a footage of 15,000 square meters. And we are driving the build-out of these units forward in parallel. And some units are more advanced than others. So these blocks of construction, CNQ, technical batches and process validation, they do not take the same amount of time. And with the second question, please, can you help me again? What was this?

Whether unit A, B and C are all roughly the same size?

Yes. Thank you. Now also here, we have really an illustrative concept in this picture. The units may be different in size, in output. And we have the largest capacity in this building plan for peptides, but we also see some oligonucleotide capacity in this building. So lines are different. Scale is different and also the technology that we install is not exactly the same for the different lines.

Okay. That's very helpful. But I understand that you say the different blocks along this chain are not necessarily the same length. But between commissioning and technical batches indicative, which one would you say takes longer or takes less time? How should we think about it.

Yes. So I think you can see in the time lines that we've given that this commissioning and qualification is quite a substantial effort. As I tried to explain before, this comprises many various activities -- so it's virtually thousands of tasks that have to be completed to bring this capacity online in a safe manner. So we are introducing our solvents. We are introducing chemical reagents -- this is potentially hazardous, and we have hundreds of people working in this building. So 1 key focus area is to have safe operations, clear processes, clear responsibilities, roles and responsibilities and to make sure that all systems in this building, infrastructure, so vacuum, heating, cooling, water, energy supply, gases, liquids, and so on, all of this has to be fit and we have to demonstrate that it is safe and can be scaled up and safe -- and operated in a safe manner. And all of this has to be integrated with the control systems that we have in this building. So it's a quite complex exercise we are going through. And it's not so that it starts on 1 day and ends on the other day, it's a process, it's thousands of activities and the time lines that we have given on this slide really -- we really meant to give you an idea of the scale and of the dimension we are talking about in this building.

Okay. That's very helpful. If I can maybe squeeze in 1 last one. So I was about to ask, whether if you are successful with the first line that we can sort of take away from that, that probably line B and see the commissioning and the technical batches would likely be the same. But there are certain differences or asked the other way around, is it the most difficult to get the first line to work kind of and then maybe the other 2 are a bit quicker?

Yes. I think that's a fair assumption, and Guenther, showed his passion and our passion for this building. And as we mentioned, we're going to go into the first unit, while we still have construction work. So we need to bring all systems up to speed and also all safety measures. So there's a big chunk of work going in for the first one, and hopefully, the second one is a bit easier. People tell me with kids, it's similar, but I don't know. Maybe a short addition, if I may, it is truly fair to say that Unit A also includes construction of the building and construction of most of the infrastructure. So we have 1 ventilation system. We have 1 heating, 1 electricity play in this whole building. So Unit A is the biggest chunk. It takes the longest time and the largest part of the investment. And Unit B and C and other units will benefit from what is included in building, in infrastructure, in systems, in Unit A. So also here, the time lines or the size of the box is not representative. In reality, unit -- following units will be easier and hopefully, faster to install and bring online.

So I see questions here in the room, I'd like to take 1 or 2 from the online audience for a moment. Charles Pitman from Barclays ask whether we have any guidance. This 1 goes to Guenther, I think, it's technical one. Can you provide guidance on your current yields across small and large-scale manufacturing, how has this evolved over time? And whether or new technologies and processes as you mentioned, hiving MCSGP can be retrofitted to older sites. So 2 points anything we can say about yields across small and large scale manufacturing, the differences dynamics? And then can you apply these technologies to older site equipment on older sites?

Okay. Also excellent questions. Yes, the yields are, of course, more important with increasing scale. When we manufacture at smaller scale, let's say, hundreds of grams or a couple of kilograms, the yield is typically not so much of an issue because most of the costs are accumulated with personal time, not so much capacity utilization and starting materials. This situation changes when we scale up and when we manufacture in hundreds of kilograms or even tonne scale, then small improvements in yield can have a substantial impact on lead times, environmental impact and also the cost structure. So -- and also with repetitive manufacturing, when we gain more and more better experience with a specific product, this helps us to improve the process and also to drive the yield upwards. So in general, yields, we do everything we can to have higher yields at larger scale, whereas at smaller scale, it's not so much a focus. And regarding the question, how can we implement these technologies in different sites? Yes. We have developed a clear network strategy, also with input from Hans Van Hees. And we have clear site missions and we also have a clear plan how to transfer processes and products between different sites. And to enable this process and product transfer, we need to make sure that we have similar or comparable technologies and equipment at different sites. So driving these technology innovations forward happens at a global scale at all the sites.

So 2 questions, maybe here from [indiscernible]...

No, no, it's okay. okay. All right. My questions are also around capacity and utilization. So excluding Building K what is the capacity utilization across all of the sites now? Or to put another way, how much growth is available from the existing network, excluding Building K?

Excellent question, of course, and a very important 1 also going forward into 2025. We have additional units coming online in building G. And we were also qualifying 1 of those units this year in the first half. We are ramping up shift work as we speak. And we are driving towards a better utilization in 24/7 operations in Bubendorf, but also in our American sites. I would refrain from giving you exact numbers, but we are certainly in the high teens, when it comes to capacity utilization right now, and it's a question of fit to the facility 2 of the projects that we are handling really fit into the existing print.

So you're in the high...

Close to 100%, I want to delay. I'm sorry, not below 20, thank you for clarification.

And therefore, when it comes to 2026 and Building k is obviously critical for that, does it require to hit your $1 billion, does it require 100% or full utilization of building K?

We're approaching this question from every angle, I guess. It requires a substantial part of building K being operative in 2026. So I would put it away.

And would you frame that as sort of full sort of 24/7 maximum utilization there? And here, I'm also thinking about 2027 or 2028, before Sisslerfeld comes on, where else could you get your growth from?

All right. I would repeat that we are taking Unit A or this A piece into operations in the near future and then we have additional expansion steps in the Building K going forward. So in 2026, it's about the first unit.

Okay. If I can just do 1 more before I hop back in the queue. Or in terms of the columns, the illustrative columns that I'd like to analyze more the 3.5 blue bars, you still got 2 blue ones and then a shaded one. If you remember that on your slides, do they represent different customers? Or are they kind of some of them the same customer, but just coming online at different times.

So this is the slide where I talked about innovations in the upstream and in the downstream technology development, right? Is this what you're referring to... Sorry. The original design of building K and the current design. Okay, I got it. Yes. So the original design was a more fragmented approach. At that time, we were still operating in a business that was dominated by a larger number of small and medium scale projects. And the design of this -- the original design of our building K was to fit these processes into this building and into this equipment. And then we saw this dramatic surge in demand in the market. And we redesigned the building. So we adjusted floors and ceilings. We adjusted roles to make sure that the equipment that we need for the new market requirements fits in this building. And we also adjusted infrastructure -- so we -- what we built now is very much different from our original plan. And on the one hand, this gave us the fact that we had the building, the shell and the floors already constructed, gave us a head start. So we could immediately react to the new demand in the market. But on the other hand, it added a substantial complexity because we had to redesign even reconstruct parts of this building to fit the new equipment in.

And towards the question, how many customers, I think you should imagine that there are less customers in building k than what we have in building G right now. But you should not read too much into this graph we had there. It's not 3.5 or something.

[indiscernible]. I think, it's fair to assume that from what you've said until now, commercial production will start only towards the end of next year. And so if there's not some sort of rather unusual upfront payment or intermediate payment, there will be no cash flow next year from the new capacity, right?

Actually it's fantastic question, I think we presented the information we have at hand right now, and I would keep it where it is.

And you said in '26, there will be Unit A going online like the first unit. So the other ones will come online only after '26.

Again, I would not add any more color to it. We will inform as soon as we know more.

The first line will be '25, just to -- thank you. Yes. First line is '25. Other lines will follow partly after...

And I think for unit. It referenced in the context as 2026. The question was the growth to 2026 and that $1 billion, we need Unit A online for that. That was, I think, that was the point that was made earlier. Let me take -- sorry, okay. Good. Let's take another 1 from the online audience. Moving to chemical synthesis, we spoke about chemical synthesis. I think this 1 goes maybe to -- let me read it first we'll see who it goes to. How does Bachem's chemical synthesis compare to competitors and the in-house chemical synthesis of the GLP-1 players, could growing chemical synthesis demand means a substantially larger opportunity for Bachem? So I think the question is, are there differences in the approach to chemical synthesis between Bachem and other companies who also do it? It sounds like a question for you, Thomas.

I think what is important to us is that we understand all different trades of chemical synthesis. We play on all those different or should I call it technologies. I would say you have the liquid phase, you have the solid phase, you have the hybrid approach. You have the hiving approach. And we really work on all of them and we push all of them into a better future. And I wanted to give this example for illustration. I remember anecdotally that we got request 1 for Liraglutide or a similar molecule and all our chemists put their hands over the hand and said, "This is too complex. We can't do it." And that changed over the 38 something years that I'm working in the field, chemical synthesis is now capable of doing that. And that's the good work of all the R&D folks in Bachem, mainly, but also in the academia and worldwide. We really push this field of chemical synthesis ahead. And as we see, it's important because you can make better molecules using chemistry than just recombinant manufacturing. And that was the question whether we are -- additional business in peptides is, of course, good news for Bachem. I mean I think that was also in there.

Question in the online audience here. All right, lot of hands.

Laura Pfeifer from Octavian. I think it was on Slide 19 that you mentioned a minimum of this $450 million annual sales at peak that is contracted. And I assume this includes customer A, B, I think, the Lilly oligo project and then, I guess, a couple of other nondisclosed projects. So can you maybe indicate how much capacity you have still available in Building K that is still open to be filled. And also related to that, how much flexibility do you have in upsizing your existing contracts, if needed?

So I guess there's 2 parts, maybe the commercial -- if there's anything to add around the contracted volumes? And then how much capacity is still not contracted. The second question.

When we decided to build building K, one of the biggest worry to me is on the commercial side was to fill the capacity, right, find customers for this big, big project. And the original plan was always to move slowly into it, build the first 2 here, then go next project comes in. And what really happened is we were rushing into this building, simply because the market demanded it, right? So we've been able to sign a couple of contracts. I would like to remind some of you then we're talking about this GLP-1 area that this is a relatively new area. Many of these projects are still in clinical research, advanced Phase III, but still, there's a reminder, remaining risk, right? That they may not come through all the way. Even though I think we are very bullish about it and people are losing weight. We see these additional benefits. So it's a fairly safe bet. So when we're talking about capacity, we try to lock in a customer in the sense that he gives us the commitment so that we can plan and make these investments. But usually, you operate with minimum order quantities or order values, and those are below the maximum capacity, right? So it's not -- you're not getting a contract for full capacity. So there is always a little bit of flexibility.

Is there another question no or okay. All right. Then over here.

Charlie Southern from Devon Capital. I can't marry Slide 19 to Slide 23. I think it follows on from the last question. you've got long-term contracts at around $400 million taking you -- I think, if I read Slide 19 correctly to your 2 or just over your $1 billion guidance in '26 and then you've got Slide 23, and you said in the past that I think Building K has revenue potential equivalent to about the 2023 revenue basis, which we're going to take is about CHF 550. So putting those all together, I guess, it would imply quite a high utilization of building K by the end of 2026, which would presumably mean that at least units 1 and 2 would have to be substantially utilized. I just can't square all these -- I can't square the circle. So maybe you could just try and help us, to be a bit more specific about how '19 and '23 fit together and how it relates to how you've spoken about building K's revenue potential in the past, perhaps that number has changed?

Maybe to toss me because I think there might be a misunderstanding with the $450 million being all between now and '26. You said something around.

No, I think there's a ramp-up phase, right? There are several contracts and they come staggered. And yet, as Guenther said, a big chunk of the investment is in this first Phase A, right? Where quite a bit of that capacity will come online, and that will help push us and close that gap. I also would like to remind you, Bubendorf is not the only site within our network. We have sites in California that we are also investing that we're also building up our shift systems, and they will contribute too -- and then there's also the base business that we said that at least should grow with the market. And of course, my ambition for my team is always that we beat the market, right? The market grows 10%. My expectation is Bachem grows faster than 10%. So our existing business or outside of these big opportunity is supposed to contribute there as well. So throughout the entire network, I'm expecting come '26, good utilization, high utilization. And a lot of things need to come together, not to close this gap, but there is a pathway.

Okay. So the high utilization that Thomas mentioned earlier, there's still scope for I guess, low single or double-digit growth on an organic basis regardless of building K?

Yes. Maybe I was not precise enough. I was talking about the existing capacity we are trying to utilize more fully in the Americas and also in Switzerland, being at Vienna, Bubendorf. And there's always uncertainty in the business. It's a little less lately for peptide manufacturers, but -- we will see what happens over the coming years.

For the questions here. I see 1 from Charles. I'll take 1 from the audience while we bring the mic over. This 1 comes to -- this was a financial question. And it, I guess, comes to Alain. This is from Paul Knight. We understand from other companies in the industry that $1 of CapEx can generate $1 to $1.7 in revenue? Is that possible in your view? So the CapEx translating into it.

So when we plan an investment, we also go for the 1 to 1. When we do the business case, that should also be in our case. The $1.7 you said, I think that's high. I would say we should get at least CHF 1 per 1 CapEx but it also depends on what you produce there, if it's small, large, to large scale, but that's for sure, a good rule that we apply.

A couple more questions. Just on the external environment. You mentioned nearshoring being 1 of the drivers within the industry. Are you seeing that sort of specifically through contract discussions catalyzed potentially by biosecure or in general?

Yes. Is all of this really complicated to see but it's causation and that's correlation. So sometimes you kind of wonder, but we certainly have seen a request for proposal for topics or areas, where we have not seen a request over the last 10, 15 years. And I would have thought that, that has something to do with the Biosecurity Act. And then it's not necessarily all in large-scale manufacturing, but also in the earlier stage.

And the second question on external. And in terms of potential tariffs from the U.S. Has the Board had any discussion in terms of how it might impact your business or how you could mitigate this?

Of course. I mean it's something that's out there. And it's still -- it's probably still close to the election [ Board of Director ] we had, but it's a serious uncertainty for our business, and we will look into it, and we try to mitigate as good as ever possible. But if you know what happens, then please let me know. I'm just working on scenarios.

Okay. And then 1 last question on financing, please. In terms of the Board has been conservative, should we say, in the use of debts before? What -- is there some sort of maximum level of gearing that the Board would be happy with?

You can ask the board. Where I would feel comfortable still is at 2.5x leverage. And when I do my calculation, this should not be a problem.

We'll stick with 1 or 2 questions from the online audience for Alain. I'll take 2 more. I think your first was -- just on this one, when might we hear more about the ongoing review of using debt or bond instruments. So anything you can say to that? And the other question is around how do you think regarding implied margin accretion of building, I guess, building K versus older, less automated facilities. So on the debt/bond, as soon as we know more as soon as we have secured contracts, we will let you know, of course. But as we said, financing itself is not a problem from our side. It's more the how and what is the best fit for the company.

And on the margin, we see now -- we suffered a little bit. It's the growth has a certain impact bottom line. We have to hire people. But in the future, when building K is running, we see clearly the increase also from operational excellence from the automation that has been mentioned a few times today, we see that the margin should go more than just the floor of 30, we announced for '26.

Daniel Jelovcan here. Any questions from this slide? No. Okay.

Okay. Two questions towards the end of the decade. So oral peptides, the consensus in the industry is roughly 25% to 30% of the market volume in tonnes will be oral and the rest injectable. Oral for you would be, of course, very interested because you need more drug substance. So that's the first question. What is your view is that a realistic quarter or third? And the second question towards the end of the decade, you haven't talked about small molecules at all. And we believe that it will be 40% of oral PEP. 40% of all oral GLP-1s will be small molecules and 60% or roughly 50-50 oral peptides. Is that something you can agree on? I'm sure you have done some thoughts on that.

I think this 1 goes to task from regarding the market, small molecules, maybe you have a -- you have an [indiscernible] maybe Torsten then give some thoughts and Thomas can add.

Have a debate. Okay.

Maybe we can have a debate.

Maybe we'll start with oral peptides and small molecules. Yes, small molecules are in development. There's -- I'm aware of at least 2 in Phase III. And developed by big pharmaceutical companies. They say in the public domain, that 1 will not substitute the other. So they see a future for all the modalities, right? The peptides have the big advantage there, they're right to natural products. right? So we all have these hormones that are pharmaceutically enhanced, right? Small molecule is a small molecule, and it's a one-trick wonder. The ones I know address the GLP-1 receptor, but the beauty of these peptides, dual, triple, quadruple agonist is you can address multiple sectors at the same time. So basically fine-tuning the pharmaceutical properties I see there an advantage. But clearly, there are markets where you don't want to have a minus 20 or 5-degree cold chain as small molecules might be easier. And also, once we are thinking really long term, OTC products, I guess they would be orally delivered and not injected. So yes, we keep an eye on it, but we can focus pretty much on what we are supposed to do well, and this is the chemical synthesis of peptides.

So that was the tough question. The easy 1 is oral peptides. And Torsten, you had a nice slide there with the pcsk9 and the EL-23 antagonists, and those are both orals. So it's -- to me, it's quite fascinating to see how companies like Protagonist Therapeutics bring oral peptides successfully to the market. If we look and they use specialized amino acids. And I think there was also talk that the they use this AI-induced design, and that seems to pay off. They published -- they have an investor call today on IL 17 antagonist. They have first results there, should also be an oral. So tremendous potential for peptides to replace infusions or injectables, I think this is this is fascinating and helps patients to take their drugs more convenient. So I hope this is going to come to fruition and gets approval and turn the good market uptick.

I think just 1 remark to oral peptides too. Yes, you can design peptides in a way that they're more bio -- by availability goes up, right? But the development of injectables is not at the end, right? Companies are looking into sustained release formulations in the monthly injections that's going on. When you looked at the slide, I pointed out 3 approvals in peptides this year alone. And one is a small company called Ascendis. They are developing degradable hydrogels that pack the peptide into a -- into and so that it can act longer, survive longer. And these are the technologies, I think the big pharma companies with all the big products, having a very close eye on it. And again, it's not the end of the peptide injectable technology.

You're right, Torsten. That's a very exciting message also we have to position. We see a lot of people getting interested in the space. And I think it's not a surprise if there are such successful products out there. It opens up fantasy and ideas in many boardrooms or scientific labs.

[indiscernible] Asset Management. I have a question related to innovation and also GLP-1s. So maybe on the large scale, do you think you have room for innovation in the upstream process compared to competitors? Or is this not possible because it's a strict process that you have to adhere to?

I think -- we definitely have room for innovation and for further improvements in the future. So this example that I've shown this tag assisted synthesis, this is a new approach. It has been developed over the last years. And now it has reached maturity so that we can apply it also on a larger scale. And another example that I can give you is that even details like the solid support for solid-phase synthesis can make a huge difference. So those of you who are interested in the chemistry and technical details when we manufacture our peptides, we frequently use a solid support where we build the peptide step-wise. And at the end, we cleave it from the solid support. And this solid support is a polymeric solid support and making this solid support is not easy. And on the other hand, it has a high criticality for the outcome of the synthesis. So if you have a good support, you will get a good result. If you have a poor support, the outcome that can be very different. So we have decided to in-source this manufacturing of the solid support. This is also 1 of the innovation projects that I've mentioned, 1 of these more than 40 and we have learned over the last years how to make this resins. We know how to do it. And we are in the process of scaling up this manufacturer of solid support in our [ Vienna ] site, and we will implement these resins for large-scale products in the near future. This is another example, and there's many more in that pipeline.

Maybe, if I listened correctly, you also asked, can we always implement that immediately? And that's not the case. You need to be patient. We are all excited about what we are doing in our labs, and we would like to target on everything. But typically, we kind of get accustomed to what we have, and then we bring it in for the new processes.

So an add-on here. So is it possible that you have a product you're producing? And then at some point, you bring this innovation into this product production? Or is it only when you get a new project that you can implement it.

If you want to introduce it in something that's already approved by the regulatory bodies, you have to go the regulatory pathway, and then that's possible. But those QIA colleagues are typically in high demand and not always available.

I'll bring over the mic to Laura Pfeifer back there. While, we do that, 1 question from the online audience. We spoke about Amylin. So we start this 1 off with Torsten than anyone chime in who wants to. Can you talk through your capabilities and history with respect to Amylin production given this area is typically more complex the GLP-1 manufacturing and whether this is an area you are involved in anything we can say about producing Amylin.

Yes. These are complicated molecules as well, right? They're not new. I mean Guenther, and I and Thomas, we have -- we know these for 20, 30 years. These are natural products they have been studied a long time. What is being discovered now is their use in weight loss. There are similar -- we have similar chemical complexity, require chemical synthetic methods to get to it. They have the Amylin is the most of the I've seen there are a little bit cyclic, right? Very small cycles with the long chain on it. 30, 40 amino acids. So something that requires quite a bit of know-how and I'm glad we have 2,000 employees that really focus on tides chemistry and tides manufacturing. I think this is 1 of the advantages we have. It's not just that we are waiting for a customer to transfer a process to us. We have customers that come with a sequence and the EMEA as complicated or difficult as it may be. We have the manpower and the brains in our group to develop this process is steady at the end of the day are scalable and also cost effective.

So just on the Sisslerfeld expansion a little bit longer term. So how comfortable do you feel planning now for this next step of large-scale expansion and how much visibility do you currently have already that you will be able to contract this quite significant capacity in the future. So do you already have kind of initial feedback or interest from the industry -- and then maybe related to that, I think it was Guenther, who mentioned that you might even put a larger reactors or capacities into that building. So a little bit more details would be interesting to know also in context of the whole industry-wide capacity build-out, that big pharma and also your peers have announced.

Thank you, Laura. For us, it's paramount that we have somebody involved deeply in the Sisslerfeld project to really kick it off. That is where we stand today. And we are reasonably optimistic that this could happen. And as soon as something materializes, we would let you know. And the second question, larger reactors.

Should I talk to that. Just the reactors. So I think what we are aware of is that the search in demand is not at the end yet. We expect that the demand is continuing to grow over the next years until the end of the decade and beyond. And we are aware that we need to meet this demand and to produce these products economically viable sustainable, safe with highest quality. And we are preparing for this step-up. We are preparing for this challenge for this opportunity. And it's not only the reactor size or the reactor volume that really determines the output. It's also the integration of such equipment into a facility automation, control units, operational excellence. All of this has to come together to create 1 system that is highly efficient, can generate high output on a daily basis day after day after day. So the reactor volume is not really the only determinant. There's many factors that are influencing the outcome of such a facility. And we are preparing from all perspectives to build such a facility as soon as we have the partners that we need for such a strategic project.

I'll take 1 question here from the online audience. This 1 goes to Torsten regarding the demand side. Can you talk through contract momentum in Q3 2024 and year-to-date compared to last year, particularly for peptide projects. So how is the contract momentum. Discussions with customers, contract.

Yes. I mean this goes maybe ties into this question of Sisslerfeld . So the -- the time is now to kick off a project like Sisslerfeld . So there is the opportunity in the market that the market is growing. There is still customers are searching for capacity. And so you may assume that we had this idea of kicking off discussions with our big customers about Sisslerfeld . So this is happening. And I think this is where contracts as soon as we have them, we will report on them. That's where I would see a next series of contracts that are in the size that we would disclose them. Then there are other contracts. We talk to our customers on a daily base. My team is under the FTEs basically on daily contact with customers and we take also small projects. Not all the sizes in our net sites in our network are talking about multi-ton quantities of peptides. We are smaller sites. We even have sites that do non-GMP work. And my goal is always to utilize entire capacity, the entire range of capabilities we have. And then of course, includes oligo as well.

Any further questions. Yes, there we go.

Tanya Hansalik from UBS. Can you talk a bit more about the oligonucleotide pipeline, the Lilly contract is a big contributor to the $450 million. I think you said $100 million potential before. So these are in early phase right now. So can you give an indication of how this is progressing since you made that announcement?

I'm quite happy how our portfolio of oligo projects evolves and grows. So we see multiple technologies in there. The contract you mentioned here is at the heart of that is a process technology that we helped to bring to GMP level, right? And in return, we get the certain commitments from the customers. I don't think we have revealed any details in the past. But yes, we are in this ramp-up phase, where we use this technology to manufacture oligonucleotides for Elly Lilly.

Follow-up question? Okay. Any other question here from the audience. Otherwise, I'll take 1 regarding Sisslerfeld, but going beyond that maybe a little bit. And I think I'll throw it to Thomas and Alain. Demand seems high and visibility is also strong. Why not accelerate the Sisslerfeld project time line. And then also given financing CapEx as an ongoing consideration, would management consider temporarily maintaining or cutting the dividend.

I was thinking about the first piece. If there's an impression that we slow it down, that would be mistaken or bad communication. We go appropriately quick, and we certainly are excited and diversified.

Dividend. I mean, the dividend is at the end, it's a decision of the shareholders, and that's where we are. And so it's -- we propose something and the AGM is this is deciding, if there is a dividend.

Any other questions from the audience here? I'm just browsing through the perfect back here and just checking through the online. If there's anything we might not have already covered by an audience question.

Something we haven't touched on is the opportunity in generics with a couple of imminent off-patent GLP-1s, but also just longer term one some of the really big existing ones off-patent. How do you see generics contributing to your sort of mid- to- longer-term within the mix?

I think we alluded to the fact that peptide stay in the market for a very long time. So some of the innovation products are now generics, and we are very happy with that offering. Right now, however, innovative products are probably a bit more front and center in our planning and thinking.

Okay. There's no more question here, I'm going to take 1 more here from online, which goes to, as we haven't spoken about it necessarily in detail. Can you discuss the manufacturing process with respect to Bachem's contribution to produce dual and triple agonists and whether Bachem is only contracted for 1 of component of peptides, either for dual chamber devices or co-formulations. We'll probably -- we're not talking about the individual customers, but maybe general.

What we know about what we can do synthetically dual and triple agonist.

Yes, that's right. The chemical capabilities that we have, the technology, the know-how that we have enables us to produce even the most complex molecules that customers are able to design or decide to move into the clinics. So these molecules comprise, let's say, 20, 30, 40, even up to 50 amino acids. These are the projects we are working on. And so far, we have been able to meet the demands of our customers, and we have been able to produce these compounds with chemical synthesis. I hope this answers the question.

I think it's. I'm happy, but out there. Okay. All right. Any last question here in the audience, just checking out -- all right. All right. In that case, thank you very much for your questions. Thank you for the engaged conversation. We have a [indiscernible], which hopefully will be arriving soon. Please stick around if you're here with us in Zurich, yes, it's snowing outside, so maybe a glass of wine to warm yourself up before you go out into the cold is a nice idea. And just to wrap it up here. We'll be showing our full year results on February 27. So also a little bit earlier than we used to be early March, now it's end of February. The other dates here as well for you. And if you have any follow-up questions, please reach out to us. And also don't sue us, here's the standard disclaimer. Thank you very much for coming, and thank you to all the speakers. Have a nice day.