Bachem Holding AG (BANB) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to our Half Year 2026 Results Call. Joining with us on the call are our CEO, Anne-Kathrin Stoller; and our CFO, Alain Schaffter. My name is Barbora Blaha, responsible for Investor Relations, and I will walk you through the call. Before we begin, a brief housekeeping note. There will be enough time for questions after the presentation. [Operator Instructions] And as always, this call is being recorded, and a replay will be available on our web page. A few words on the agenda. Anne will start with an overview of our half year results 2026. Alain will then review the financial performance, and Anne will conclude the presentation with an update on market development and our business outlook. Following the presentation, we will be happy to take your questions. We expect today's call to last approximately 60 minutes. And with that, over to you, Anne.

Thank you very much, Barbora, and good morning to everyone also from me. It is my pleasure to talk about our half year results today. So let's look -- start with the -- a look at the team. So as Barbora mentioned today, Alain and I will be here on the call to guide through the results. And I'm very happy to draw your attention to our newest member of our executive team, Boris Corpataux. Boris is not new to Bachem. In fact, he's been with Bachem for more than 20 years, but we were very happy to appoint him to our new Chief Commercial Officer starting in this position on August 1. I've personally worked together with Boris for many years, and I'm extremely pleased that we found such a capable internal candidate for this position. So let's look at our half year results. We achieved CHF 326.4 million sales in the first half of the year, which is a growth of 4% compared to the first half of 2025. And in local currencies, it's actually a growth of 7.3%. We also achieved EBIT (sic) [ EBITDA ] of CHF 82.8 million, and we invested almost CHF 150 million in CapEx, and Alain will talk more about the EBITDA and the CapEx numbers in his part of the presentation. Let me put the first half year sales into perspective. So if we go to the next slide, we see the first half sales results of the previous years. And some of you may still remember that the first half of 2025 was an unusually high first half of the year. And we are very pleased that despite this fact that we are having a very, very strong reference first half year to compare to, we still achieved a growth of 4% even without contributions of Building K. So we are very happy with the sales of our first half year. And if we look where the sales are coming from, you see here that we had a very strong growth in CMC Development, where we achieved more than half of our first half year sales. Commercial API was a bit lower than the first half of 2025. And again, this is according to our expectations because the Building K sales, which we always said we would expect in the second half of the year, are contributing primarily in the Commercial API sales category. So with this, I think we are exactly where we expected to be with respect to our first half year sales and also with the contributions of these individual categories. We are very pleased with the growth that we have seen in the CMC Development based on the strong pipeline, and we expect Commercial APIs to be then much stronger in the second half of the year. Let's look a little bit into where we invested and where we continue to expand our capacity across our site network. So in Bubendorf, we talked a lot about it already. We are ramping up our Building K production. We could produce first commercial GMP material in the first half of this year, and we are very pleased with how the ramp-up is proceeding. Along the rest of the site in Bubendorf, we are working on several CapEx projects to reduce specific bottlenecks, and we are also continuing with our operational excellence initiatives to unlock further capacity. We were also extremely pleased to announce last week that we are now moving our Sisslerfeld project ahead and then we are really bringing it to life. We signed an agreement with a partner to supply large volumes of peptides as part of a strategic collaboration, and we will invest more than CHF 500 million, and we expect commercial production in 2030 out of our Sisslerfeld site. We are also continuing to invest in our U.S. sites, both in high-volume capacity that is primarily at our Vista site, and we are also modernizing and automating our small volume production at our Torrance site. So overall, we are very pleased with our progress, both in terms of sales as well as our site advancements. And I will then here hand over to Alain to talk a little bit more about the financial numbers.

Yes. Happy to do so. So on the first, we see the usual table with the key figures. Anne already talked about the CHF 326.4 million that we have achieved on the sales top line in the first half of the year. The EBITDA margin of 25.4%. We go in a little bit deeper later. On the net income, we have stabilized this number. So we have a slight increase compared to the previous year. The cash flow from the operating activities resulted in CHF 104.7 million, and there were also more than 200 new colleagues joining Bachem in the first half of 2026. So when we go to the EBITDA margin and the drivers behind, we have overall a dilution of 370 bps compared to the previous year, as Anne mentioned, a very strong first half in 2025. So we did grow on the top line, but what we see is the dilution from the costs that are necessary to cover the future growth of the company. And that is mainly happening in the COGS area. So we have added new people to absorb all the future growth. We have added or invested in maintenance. We have invested also in smaller capacity increases, optimization of the overall organization. So we see this 2.1 percentage points that the COGS have an impact on the margin dilution in the first half. The marketing and sales numbers or cost expenses have been stable. So there is no impact from this side. On the G&A, other income, we also see a dilution of 0.6 percentage points, which is mainly driven by strengthening our global organizations. We added specific support functions to absorb the growth of the company. And also we had some shifts between different areas from a cost per se where we recognize the costs now. The R&D, we see also the dilution is 0.5 percentage points, but it's still in the bandwidth or the range we gave that we invest 1.2% -- 1.5% to 2% of our overall sales into R&D, which is a very important factor. We do our own innovations. We have a look on process optimization, and it's a very important factor to keep our leadership as an expert in the TIDES business. At the end, we still have the Swiss -- the strong Swiss franc, which also impacted on the currency side by 0.6 percentage points, which led us to the reported 25.4% EBITDA margin that we have achieved. In local currency, the margin was 25.9%. As we have now seen, the U.S. dollar and also the euro are getting stronger versus the Swiss franc. We expect the top line impact from the currency effect to be about CHF 20 million with 2/3 of that impacting the EBITDA. Let's have a look at the cash flow, starting from the EBITDA of CHF 82.8 million. We paid our taxes, CHF 9.3 million in the first half of '26. The change in receivables is not material. So this is also based on the slightly higher top line, no big impact. And then we see the inventory change, CHF 80.9 million impact on the cash flow. 1/3 of that number is related to raw materials, but also supplies, which is very important because we need that material to progress now also in Building K with the higher demand in production capacity. 2/3 is lying in the work in progress, semi-finished and finished goods. So this is all material products -- product -- products that will be supplied to our customers in the next few months. Also important, the part with the raw material is partially prefinanced by customers through their contribution as prepayments, which you see we have added another CHF 86.2 million from our customers in prepayments mentioned support to our working capital, but also our future CapEx initiatives that we will still have in the next few years. The change in payables is reflecting mainly 2 points. It's the growing company and on the second, also the higher activity on purchasing materials, but also other costs overall to support the company's growth. The operating cash flow ends up with CHF 104.7 million. What did we do with that money? We spent more than this CHF 166.2 million in capacity increase. CHF 90 million -- a big number of that is going into direct capacity, be it buildings, be it equipment. And this is where we also will spend in the future our main part of our cash. On the financing side, we paid out CHF 67.5 million as dividend from the last year '25 financial year, and we had drawdown loans from banks of CHF 150.7 million in the period. All of this leads us to a net increase of cash in CHF 20.6 million in the first 6 months of the year. Looking at some key numbers on the balance sheet. We just talked about the drawdown of the bank loan. So we had CHF 52 million cash and cash equivalents at the end of June, but we also had outstanding borrowings, loans from the banks and also the main shareholder of CHF 208 million, which leads us into CHF 157 million net debt, which is representing a leverage ratio of 0.8x, also reflecting and showing that Bachem still has a financial flexibility in that sense to grow the company. The prepayments, we added CHF 86 million. So the balance by the end of June was CHF 455 million from the customer side, CHF 142 million out of that is declared as a current position, which means this money will flow back to the customers in the next 12 months based on the supply of products. And the balance sheet and the equity ratio, so the equity summed up to CHF 1.5 billion by the end of June, which is representing an equity ratio of 62%. Now the last slide on the CapEx overview. We spent 45% of our overall sales into capacity. So we invested CHF 148 million in the first 6 months. And we will continue to invest there. It's a main factor for the -- to -- for the growth of the company, for the higher market demand. So we will invest in further capacity increases. 90% of this CHF 148 million was invested in capacity, as mentioned, building and equipment in the first 6 months. The outlook now, '26, we estimate a CapEx of CHF 350 million to CHF 400 million. It's a little bit a lower number than we anticipated a few months ago. And the main reason there is that the Sisslerfeld now, we started it, Anne mentioned, we announced it last week. But first, earlier this year, we thought that it's going to be a little bit earlier, and that's now why we spend a little bit less. Overall, on the midterm, the overall CapEx is not changing. And with that, looking forward, what's coming, the outlook back for Anne.

Thank you very much, Alain. So let's start with the outlook by looking a little bit into the market. We are still in a phase of strong growth, both as a company, but also the market. And a lot of that growth is still driven by what is very often nowadays called diabesity. So type 2 diabetes and obesity. And if you look primarily at the U.S., you still see that there is still a very large growth expected in number of patients and also not all patients currently are having access to medications. So with this growth, both in the U.S. as well as in the Rest of the World, we still see an unprecedented demand for peptides, and that means as a CDMO and CMO, we are still having the responsibility to look into large-scale capacity expansions, but also into advanced manufacturing technology to unlock further capacity. And a lot of this growth is actually also then spilling over into other areas outside of diabetes and obesity. And if we look at the next slide, we see an overview of the peptide pipeline. And a lot of that pipeline, especially the late phase pipeline, the Phase III is actually driven by metabolic diseases. You can see here, 37% is in metabolic areas, meaning it has overtaken the historically strong oncology area. But we see also still growth in other areas. And you can see here also the peptide pipeline per se is still growing overall. And we see with recent approvals that also other indications and other disease areas are being treated by peptides and the interest in peptides as a modality goes far beyond metabolic diseases. The same is true for oligonucleotides. So looking at the oligonucleotide pipeline, you can see here, it's a less mature pipeline. It's a less mature modality, but we see a really strong growth in Phase I and Phase II projects. And over the next few years, we expect this then also to reflect in Phase III and approved products. The distribution between different disease areas is much more diverse for oligos. But also here, you can see that metabolic and cardiovascular indications are on the rise. And with that, we expect that also some larger indications and respectively, some larger volumes will drive the oligonucleotide market in the next couple of years. So what does it mean for us as a CMO and CDMO for the priorities of the remaining year of 2026? We are in a very strong position with respect to orders. We have all orders for the remaining year of 2026 in our books. So the main priority and the main focus is actually on the seamless and high-quality execution of the existing orders of the existing contracts to make sure that our customers are in a position to ensure their safety, their patient supply. We talked about the successful ramp-up of Building K. So we expect this to continue in the second half of the year. And we are also continuing to work on the construction of the second phase while we continue production of the first phase, and we expect then to see a strong contribution from Building K for the second half of the year. With the announcement of last week, we now also expect to really advance the Sisslerfeld project to accelerate it and to really bring it to life from a also construction point of view. And in parallel to all these activities, we are working on our strategy update, which will then be the ground for Bachem's next chapter, and we are looking forward to presenting that at the Capital Markets Day in November. With that, we are already at the outlook for the year, the full year 2026. We expect our sales to grow 35% to 40% in local currencies. This is a refined guidance from the guidance of 35% to 45%, which we gave earlier this year. And this new guidance is now actually reflecting that we have much better visibility on our production plan for the rest of the year, and we are very confident that we are achieving this still very, very strong growth of 35% to 40%. For the profitability, we are still expecting our EBITDA margin to be in low 30s in local currency, so unchanged to what we communicated earlier this year. And with this, I think I hand it back to Barbora to start our Q&A session.

Thank you, Anne, and thank you, Alain. Let's move directly to the Q&A. [Operator Instructions] And let's start with the first question with Daniel Jelovcan.

You hear me?

Yes.

Yes.

Yes.

Very good. So, three questions, when I may. The first one, I was a bit puzzled in your main segments with the development. Of course, I understand the dynamics in Building K ramp-up, but the Commercial API down close to 20%. Why was that? I mean, is the base business not growing? This one is typically growing somewhere mid-single digits. So that's why it was quite below my estimates, to be honest. Maybe I ask one by one.

Yes. So the base business is still growing, but we will see the base business growing primarily in the second half of the year. So we had a very strong growth in our development area in our pipeline, which we're very happy about. But the contribution for the Commercial APIs will be primarily in the second half of the year, and we expected it that way. But we also expect that for the full year, the distribution between Commercial API and CMC Development will be not fundamentally different compared to what we have seen last year. So a much stronger contribution to our Commercial API business in the second half of the year.

Okay. Fair enough. And also related to commercial, when you talked on Slide 18, the 94 approved peptides, do you disclose in how many you're involved? I mean, probably similar to your market share or maybe I'm on the wrong side.

No, we are not disclosing that information. So the 94 is peptides that are approved worldwide. Some of them are chemically manufactured. Some of them are made recombinantly, but we don't disclose which ones and how many of those we are making.

Okay. But on a follow-up on the 94, probably there is -- there are not so many fermented, right? It's probably most are chemical synthesis. Is that the correct assumption?

To be honest, I couldn't answer that question for sure. I'm sure we can look into that with the marketing department, but I cannot, from the top of my head, tell you what is the number of chemically synthesized versus recombinantly manufactured products.

All right. Okay. Yes. And the last one on inflation, raw mats and so on. How is that developing now and going forward? Maybe a question to Alain.

Yes. It's a good question, but we don't see a big impact from there. So the inflation and the costs on raw material, of course, it's fluctuating. It's sometimes higher, sometimes lower, but we don't see a big impact from that side, also not the salary point at the moment from inflation in Switzerland. It's not something material for the company. Also going forward, maybe more the price pressure on top line than the costs on the COGS side.

Yes. Okay. And supply chain-wise, Strait of Hormuz or so coming from China, is that not an issue?

We didn't see a huge impact for us because we were already having other ways around the Strait of Hormuz. So we did not have issues on getting the material that we have asked for to secure production.

And the next question comes from Zain Ebrahim.

Zain Ebrahim, JPMorgan. Two from me, please. My first question is just on the full year guidance and just to understand the reason for the revision more on the sales guidance from 35% to 45% to 35% to 40%. Is that reflecting maybe lower contribution from Building K? And why is that given that you mentioned the first half has developed in line with your expectations? So that's the first question. And then the second question would just be to understand how -- when you mentioned the Building K ramp-up in the second half contribution to the guide, is that mainly from the first manufacturing lines? Or do the second phase contribute partially to the end of this year as well?

Maybe I'll start with the second question. So yes, the contribution from Building K comes from the first phase, from the first line. We are still finalizing construction for the second phase, and that will then start to contribute next year. And to the first question, yes, the first half went very well, and we also have very strong expectations for the second half of the year. The challenge that you have every year at the beginning of the year is that you need to make a rather accurate prediction on the full year sales. And at that time, you have a good idea on what are the products, what is the product mix, what runs on which manufacturing line. But we are now in a much better position to know exactly what the production schedule for the second half will look like. So we know the products, what lines they're running and what are the number of changeovers. And based on this much better visibility on our production schedule, on the detailed production schedule, we are now in a much better position to say exactly which of the products that we manufacture this year will actually go out and will be delivered and sold this year and which maybe will then be delivered and sold in the beginning of 2027. So it's really no material change. It's just a much better visibility on the detailed production schedule.

And the next question comes from Tanya Hansalik.

Can you...

Tanya? Okay, we can hear you.

Yes. Okay. Great. Yes, I have maybe 2 or 3. Then the first question is, I don't know if you can answer it, on the Building K on the first part, can you confirm if you've been able to book revenues for these customers already? That would be the first question. And then the second question is, you left the EBITDA guidance unchanged. So I'd like to know what are the important factors to consider here? And how confident are you in the Building K output and yields? And then the third question was on the pricing discount letter sent by a big GLP player to suppliers. Interesting to understand for the large-scale contracts, are the price and minimum commitments for these 5-year agreements, are these binding? Or are these based on moving forecasts adjusted based on demand?

So maybe I'll start with the first question on Building K. So I think we said earlier this year, and we can confirm this now that the sales out of Building K will contribute only in the second half of the year. So yes, production was already happening in the first half, but there was no sales contribution out of Building K in the first half. That will be then only in the second half. And maybe I also take the third question and then let Alain comment more on the EBITDA question. So we don't disclose any details on our contracts with respect to what prices are fixed or not fixed. You can generally take into account that prices are usually a question of volume, so very much volume-linked. But other than that, I cannot confirm or comment on any pricing mechanisms on individual contracts.

And maybe before taking the second question, add to this third question, if there's a difference if you have minimum order quantities or the minimum order values and both contracts are valued. So even if the price changes, it's just the quantity differs and not the value of the minimum order in that sense. And on the EBITDA margin, we gave a certain range, which is low 30s, 30% to 35% -- 33% maybe. And if we achieve the top line now this huge growth of around 60% in the second half, the economy of scale, the operational excellence and also keeping the marketing sales, the G&A, the overhead cost stable. As long as we achieve and we are confident, as Anne mentioned, this top line growth, the EBITDA margin will follow there. We still have ramp-up costs for the next phase of the building. So we are hiring more and more people also now for the second phase. So this will be a constant hiring process and always having some growth costs in our P&L in there. But we are confident to achieve this profitability guidance that we gave you.

And let's take the next question from Fynn Scherzler.

Fynn Scherzler from Deutsche Bank. I have 2 on Sisslerfeld. So essentially, can you tell us anything else on the contract that you won that was not already in the press release? So whether it's a new product, an existing product, a new customer, whether it's multiple products. So any additional color here would be helpful or maybe you could comment on the CapEx phasing of the project. And then related to that, on Sisslerfeld, my understanding is that the land that you have there is quite large. So my question is, are you essentially happy for now with the large contract that you won? Or should we expect that you are looking for additional contracts in similar magnitude in the near term?

Yes. So we are very happy with the contract that we recently signed with this partner. However, this does not mean that this is the last contract that we expect to see for Sisslerfeld. We are still in discussions with a number of other potential partners. But I think this is a very, very meaningful first step in Sisslerfeld. As you mentioned, we -- the land that we acquired is very large. So there is much more space for future additions and future buildings, but we are very happy with this very first step that we do in Sisslerfeld. And unfortunately, there's not more that we can disclose on either the partner, the product or other contractual terms as we agreed to keep those confidential with this partner.

And maybe I can answer the question of the phasing of the CapEx. So we are now ramping up. We're also hiring many people for Sisslerfeld as we have signed this contract and the team will grow there. Those are in-house hours that are capitalized. So we see now start of those CapEx and I would say, distribute then within the '27 to 2030, equally the CapEx, maybe a little bit lower at the end. But in the 3 years between, I think it's an equal portion of the CapEx there.

And let's take the next question Sibylle Bischofberger.

So I have also a question about Sisslerfeld. I remember a couple of years ago, you expected to invest CHF 1.2 billion, partly financed by customers, partly financed by you. Is this still the plan? Or did you change the strategy and now you start investing step by step depending on the contract? So you start now with the CHF 500 million. If there are new customer contracts signed, then you will increase the size? And then I have another question, so maybe one by one.

Yes. So the overall investment in the Sisslerfeld site, once it's fully built out, and we are talking a very long time frame here, will probably be way more than CHF 1.2 billion. But this first step, the CHF 500 million really allows us a significant growth and even has room within this building for additional partners. And ultimately, of course, we always said we grow in line in lockstep with the market. If then this first building indicates that it's not large enough, then of course, we will add further buildings. But again, we will do that together with partners in making sure that we have volume commitments for those buildings. But there's a lot more space for a lot more buildings in Sisslerfeld, but I think it's important that we make this first step happening. And we are very excited that we now can do that.

And then about CapEx in the first half of 2026, how much was it Sisslerfeld and how much was it at Building K? Could you say something about that?

Sisslerfeld was mid-single digit. It was not that much.

And the most part is Building K.

The bigger part -- the biggest part is Building K. So I think it was about 70% was spent in Bubendorf, which is not only Building K. We have also, as Anne mentioned, debottlenecking and other projects on the comp books, but about 70% of that investment have been done in Bubendorf, and then the main part is Building K. And Sisslerfeld, it was not that much. It was the energy tunnel because we said we just go ahead with a bigger CapEx investments until we have signed the contract and a partner supports there also financially and for the future production.