Croda International Plc (CRDA) Earnings Call Transcript & Summary

Welcome to the London Stock Exchange. We're just reflecting in the coffees that 10 years ago, if you came to Croda, it would be at Cowick Hall, and we'd probably pack you off with a packed lunch on the way home, and how the world's changed 10 years on. Today -- a lot of today is really part 2 of our investor seminar. Part 1 was all about Consumer Care, the deep dive that we did in March. And I think a lot of you -- a lot of familiar faces out there, a lot of you came there. Today is all about Health Care and all the growth potential that comes with that. So the team are very excited to share with you some of the growth potential, particularly in our -- the strategy and also our world-class platforms that we've got there as well. Just a reminder on the -- on our strategic priorities. I mean they remain unchanged. No u-turns from Croda today. They -- and they're consistent. And at its heart, it's all about the passion for our purpose, the Smart Science to Improve Lives, whether that's working with our partners to generate the next new medicines. However, in crop, it's supporting economical food production for the future, for the growing masses in the world. Or in Beauty Care, it's working with the big brands of the world to make us look good and feel good. We're improving people's lives, and we're saving people's lives. And there's nothing more powerful than Croda that drives us forward with that. Building on that foundation is 2 important philosophies. One is to deliver innovation leadership in any market that we operate in, and the other one is to deliver sustainability leadership in any market that we operate in. And those 2 together offer a huge amount of growth potential. Around the outside of the wheel, we've got the same 6 priorities that we've talked to you about before. So let me be brief. But it's also -- it's all about expanding Life Sciences and then strengthening Consumer Care. A lot of that is the deep passion we have for this big move into biologics, which Daniele and the team will talk to you about for Health Care today. But it's also about sustainable ingredients as well, this big drive for sustainable ingredients. And in Crop Care -- just taking the top right of the wheel, Crop Care, you see the big move into biopesticides now, and great opportunities for Croda, plus a big move into sustainable ingredients. So we'll talk to you more about that in probably investor seminar 3 early next year about the whole crop businesses. So lots of growth potential there. And in strengthening Consumer Care, we talked in March about the 4 businesses and the deep dive on those businesses. We feel the Consumer Care business is a much more resilient business than it was, and it's demonstrating that as we speak. Doing the basics brilliantly in Croda is our tagline for being more responsive to customers in every way that we can. As we get bigger in our organization, more knowledgeable in the group, we have to be more responsive. So how do we find mechanisms internally to do that? And proactive M&A, we've appointed 2 chief scouts, 1 for each of our businesses. Chief scouts is our football term for looking for the next-generation 15-year-old. So we're looking for Ronaldo at 15 rather than him at 36 or 37. But -- so we've appointed our best 2 business developers in the group. And we're developing lots of targets. Their priority is technology advancement for the group. It's building knowledge and capability for the group. And fast-growing China is something that I spend a lot of my time with. We're building knowledge there. That's what -- we're not building factories. We're building knowledge. That's people on the ground, sales, marketing, research, digital. And we see significant expansion potential over the next 5 and 10 years for ourselves and certainly for the industry as well. And Nick and Dave Shannon talked in Consumer Care about scaling biotechnology. We've done that very well, and we're on a journey there. We're not short of product launches and transformational product launches there. The big area there is operational scale up, something that we're doing. So we're working with a lot of partners there and also in-house capability to scale at it. So more on that as we go along. And then back to Health Care. Biologics is really exciting for us. You've heard me speak and Jez speak a lot about that. You've got a lot of CapEx in your model. Our job today is to develop the revenue model with you and really shine a light on the pipelines. So as I said, the team -- more on that in a few minutes. The portfolio is starting to take shape. It's a different business to 10 years ago. Croda is looking different. It feels different internally as well. We're moving to faster growth. And we've got multiple businesses in the company now. 10 years ago, if people were investing, when I became CEO, most of the discussions was about actives, how do you invest in the that part of Personal Care, Boots No7, Olay Regenerist, fascinating. You can still invest in that now. But you could invest in Croda because of our Beauty Care business because of the sustainable ingredients. You could invest because of the emerging market exposure in F&F that we've got. And also in crop, big emerging growth potential in the whole move to biologics there as well. And that's before we talk about Health Care today. So the breadth and depth of the opportunities in Croda is really great to see. And we expect all of these businesses to grow. And our mandate is along the bottom there. We expect to deliver 1.5x GDP growth in each of these businesses, greater than 20% return on sales and ROIC twice the cost of capital. And Jez and myself really sit above this, and we allocate capital resources in that way to help -- to encourage the businesses to grow as quickly as they can. And our job is to make sure we do that. So that's that. And also, I think we say it's more resilient as well now. We don't have an industrial portfolio that we had 6 months ago. And in Consumer Care, you can look at the F&F business that's now part of that in Home Care. Both of those have got a lot of growth in them. So the Consumer Care business alone is more resilient. And also in Life Sciences, the niches have just got big -- much bigger with this move to biologics and this move to sustainable ingredients in crop. So we're moving into faster growth in those markets because the market changes, too. So very pleased with that. I think the other thing we'd point out as well is they're all run by managing directors. So they all have innovation, responsibility, accountability, technology advancement, M&A. And their job really is to really search the world for next-generation capabilities for us as well. And then really, just on today before -- and meeting the team before we pass it over. It really is today -- it's not about Steve and Jez, Jez and Steve. Where is Jez, by the way? You see a lot of us. But it's really important that you see the team. There's a depth and breadth to the businesses and the product groups in Croda. There's a depth and breadth to the team in Croda as well. And we're very keen to show you that today. And I think throughout today, the real thing we're trying to bring to life is the Health Care strategy and then the component parts of that, these 3 technology growth platforms and how we're thinking about the innovation pipelines there. And I think the big message we want you to take away today is really get a message across about the size and shape of this innovation pipeline, this biopharma innovation pipeline that we call it. And the team will bring that to life. As for the agenda, pretty straightforward. It's strategy upfront from the team. And then the breakout groups will allow you to do a deep dive on each of these 3 platforms. And then back in here for a wrap-up with Q&A. And then, hopefully, we should be finished by 12:00. And then that should help us have a chat with you all, and we'll welcome you all for lunch. No packed lunches this time. So [ Greg ], if you can -- and the team are very happy to take further questions as well. So just before I pass over, meet the team then. A blend of youth and experience. And we invest a lot in innovation and sustainability, not so much in professional photography, so we apologize for that. But some pictures were a few years old there, including the Chief Exec. I think I was 25 when they took that picture. But -- so as Jez and myself, a very international team as well. A lot of new faces here. We've got from -- representation for Italians to Americans, Danish to Dutch, with a sprinkle of Yorkshire in there as well but only a sprinkle. So along the top, you've got Jez and myself, Daniele Piergentili. I think I pronounced that wrong. But Daniele came -- he's our winter signing from Inter Milan. He came last year from BASF. He spent 20 years in the industry, predominantly in pharmaceuticals. So Daniele is leading our drive into the pharmaceutical world, and you'll hear a lot more about him. Along the bottom, the 3 business, the workshop groups outside will be led by James, Peter and Steve Burgess. And they're all new to you. Steve and -- Peter and Steve came from the acquisitions of Biosector and Avanti. Peter's claim to fame -- by the way, Peter was a professional footballer many years ago. I know when he stands up, it's hard to believe. But he was at professional football. And he played in Anfield, Liverpool. Liverpool versus a team called OB in Denmark. He doesn't want me to tell you about that. But they got beat. And he was in central midfield, but he won't tell me what the score was. So can all the analysts out there try and get the score out of him? So it's 1983, was it, Peter? Something like that. But professional football, played against Alan Hansen, [ Matt Arenton ]. So anyway, that's his claim to fame. And then moving on, we've got Freek Snieders. And Freek -- probably those that attended the investor event in 2019 will know Freek, who led the Health Care session there, high-purity excipients. We've come a long way from there. But Freek will tell us a bit more about where we've come from to where we are now as well and where we're going. And then we've got to make up the senior team. We've got Laura, and we've got Ritesh. Laura heads up marketing across Life Sciences. Ritesh, finance from Life Sciences. So all happy -- all very much happy to take questions from you as well. So very new faces. It's a dynamic team with strong business opportunities. So without further ado, let me pass to Daniele to take it on from there. Thank you.

Good morning, everybody. Pronunciation was excellent, Steve. Daniele Piergentili. I joined Croda in 2021. My background is mainly in pharmaceuticals. I've been working in pharmaceutical for around 17 years and then moved to Personal Care, Home Care in the last 4 years. As I said, joined Croda in 2021. I'm responsible for the sector Life Sciences, which includes Crop Care. It includes Seed Enhancement and Health Care. But today, we will focus mainly on healthcare and the future of healthcare. But before we start on the future of healthcare, I would like to talk a little bit about where Croda is coming from in the Health Care journey. It's actually been in health care for over 20 years. And it started really with the strength of Croda, which is Personal Care, where all the dermatological applications were using some ingredients, which could also be used in dermatological application for Health Care. So they developed an initial platform, which was used in standard exhibits for Consumer Care. But then we have seen an acceleration of the value generation over time. From the consumer health, they moved into patient health. More complex molecule, more complex drugs needed specialty excipients. So they developed a first platform of specialty excipients for the pharmaceutical industry, accelerated further with the acquisition of, first, Biosector, the vaccine adjuvant business; a second platform for patient health; and then with the transformational acquisition, which came with Avanti. Avanti really gave us an entry point to new technologies, the technology of lipids for lipid nanoparticle and for the delivery of nucleic acid. They also strengthened and expanded our reach within the life cycle of a drug. So they have an exceptional entry point for research organization. So we started from a standard portfolio of excipients. And then we added 3 very specialty platform of ingredients for the patient health industry. And that creates a really, really good base for the strategy going forward, and we'll talk about this in the next few minutes. But it's not only about creating this great portfolio, which works into niches, really, the Croda way, but also having the best relationship with customers. And this is really important to the business model of Croda in general. You can see also in Consumer Care, this is how we handle customers. We talk with the R&D organization, of our customer. We have close relationship. We really integrate with the all life cycles of the development, and that makes us really successful in innovating, number one, and obviously have commercial relationship with our customers. So now we have over 5,000 customers within the whole life cycle of a drug from research to commercial manufacturing, and that is the second unique point of our fundamentals for Croda Health Care. So now I spoke a little bit about the past. And I would like to pass it on to Freek, who has been responsible over the last years about this business, to talk about what we have delivered in the last few years and what we plan for the next few years. Freek?

Yes. Thank you. Hello, everyone. My name is Freek Snieders, Senior Vice President for Croda's Health Care business, a role that I've held for the last 5 years. And some of us will have met 3 years ago, as said before, during a similar event here in London when we're talking to investors. And yes, I'm very pleased to talk about what's happened after that event and where we've gone to over the past years and really the transformation that we've seen in the business. So what we talked about in 2019 really was, first of all, specialty excipients, high-purity excipients being the stronghold of our business and how ever more demanding drug formulations needed a very stable formulation environment. And we're really focused on that area, and I'm very pleased to say that we have achieved a 20% compounded growth rate over the past 3 years. And that followed on from a 20% growth rate for a long time before that as well. So very strong performance in that area. We talked about leveraging the Croda selling network. We're represented across the globe with local people everywhere. And then an example of how effective we've been is that we've doubled the vaccine adjuvant sales that came with the Biosector acquisition that Peter was in charge of. We also talked about targeting adjacencies, yes, broadening that portfolio that we have for the health care industry. And as such, we're very pleased to acquire Avanti Polar Lipids back in 2020. Avanti Polar Lipids, headed up by Steve, a leading lipids producer, really operating at the smart premium end of the lipid industry. And it really was in collaboration with Avanti that we became a key part of the Pfizer COVID-19 vaccine and, in the process, really took the lipid nanoparticle delivery system to market in a big way, which has now been used by billions of patients around the world. So that really strengthened our presence in the biologics industry. And obviously, we targeted high growth rates during the period. And I think that's something that we've really achieved with revenue, top line growing, at the same time, expanding our margins. Just a minute to put Health Care in context of Croda Group sales. So on the left-hand side, you'll see the overall sales for Croda, GBP 1.9 billion. Consumer Care remains the largest division, followed by Life Sciences, around 30% of the total. However, profit from Life Sciences represent a bigger percentage than the 30%. And then you'll see the industrial businesses, of which GBP 360 million was divested to Cargill. So had Cargill bought the business at the start of the year, we wouldn't have seen that number there. So what remains is about GBP 200 million of industrial sales today. Then zooming in on Life Sciences. On the right-hand side, you'll see about 2/3 of the total is Health Care, with a big part of COVID-19 lipids. And about 1/3 is crop business, of which about again, 1/3 is the seed business that we have. Moving on is really to talk about the product mix and how it's evolved over the period. Yes, over the 5-year period. You see that back in 2017, the portfolio was dominated by APIs and standard excipients. Meanwhile, we have exited the large chunk of that API business for specific reasons. But as we move into 2019, you see that share of standard excipients and APIs reduced, and the proportion of specialty excipients, high-purity excipients and, of course, the adjuvants increased a lot over the period, yes. So then moving into 2021 last year, you see further expansion of the higher end of the portfolio. So we've seen that top line grow, as I said before, but also, the product mix improved a lot over the period. A little bit of talk about what has changed in terms of our footprint over the period as well. So in Croda, as you've heard before, it's all around innovation. This is where it starts. And very pleased to say that we've beefed up our innovation capacity really in Asia and Japan, in the U.K., in Denmark and then in North America and also in Brazil. These are the key geographies for our pharmaceutical business. North Asia, Western Europe, North America and also Brazil are key countries. Therefore, that's why we invest in these locations. But also, we invest in our manufacturing capacity. So Japan, we increased our high-purity excipients production capacity by about 50%. In Denmark, we doubled capacity for our adjuvants business. In the U.K. in Staffordshire, an existing Croda site was really converted to become a prime scale-up side for our lipids that we transferred over from Avanti. In Pennsylvania and North America, we doubled the capacity for our high-purity excipients business. It's a very important achievement there. And then last but not least, we doubled the GMP capacity at Avanti, so to make these premium lipids. And meanwhile, also we strengthened the sales and marketing teams to be able to take all these products to market. So very big changes in this respect as well on top of what I said before. A little bit on the acquired companies specifically. So Biosector, the acquisition we made in 2018, a leading independent producer of premium adjuvants, with a very strong pipeline in novel adjuvant technologies that we'll be talking about more today. Biosector also gave us access to a lot of the, if not all of the, vaccine producers around the world because this technology, they make -- these adjuvants are used throughout the world as the golden standard. When it comes to Avanti, on the right-hand side, really, as I said, operating in the premium end of the range, an R&D leader. And it's really been instrumental, as I said, in delivering that LNP technology to the world. So very proud to have Avanti as part of the Croda Group. Again, like with Biosector, the potential for further growth, the pipeline that they bring is really, really strong. And Steve will talk more about that. So the benefits to Croda, really, that expanded patient health portfolio. The breadth of our portfolio really increased. Bringing deep pharma knowledge, so really, the experts. And the expertise around GMP manufacturing that we've brought in with both companies. And the benefits to both companies -- the acquired companies is the benefit from the global selling network. As I said, for Biosector, we doubled the sales there. Collaboration on innovation between the 2 companies, between very, very strong -- but also with the rest of Croda. And of course, last but not least, access to capital. We really invested in those companies, as you've seen, significantly. Last slide really is to say and talk about how we are positioned for growth. We talked about the 5-year period, a very strong performance, expanding top line, expanding margins and, with that, profitability. We broadened the technology platforms significantly. We've seen the lipids and the adjuvants. But also we've continued to innovate organically as well, which James will talk about a bit more. Commercialized a novel technology, most notably the LNP technology, which has been groundbreaking. And then building the global footprint in operations but also in innovation, as I said. And all of that underpinned really by the Croda edge, as we call it. The proximity to customers is second to none in Croda. We love to work with customers, winning their hearts and minds with local people around the world. We don't like to use distributors where we can avoid it. We have a really broad portfolio today, but we really have ambitious targets to expand that continuously. We are seen as the industry leader here. So we are the go-to party for adjuvant systems. We are the go-to party for high-purity excipients, and we want to defend that position and strengthen it. Our products are highly differentiated. So it's really hard for customers to formulate out of our products, and inclusion rates tend to be really low. Our quality systems are really up there and all of this underpinned by a proven track record in 100 years in adjuvants -- sorry, in excipients, 80 years in adjuvants and 50 years in lipids. So we feel really strong position for future growth based on our strong track record. And with that, handing back to Daniele for market trends and strategy.

Thank you, Freek. Thank you very much. So we talked a little bit about the past. So the history of Croda in health care, very successful over 20 years. Then Freek has talked a little bit about what we have done in the last 2 or 3 years. And it's important to remember we did exactly what we said we were going to do, and we delivered on that. And now why we have a great excitement about the future is because we see a great opportunity in front of us. The pharmaceutical market is a large market. Everybody knows that. We're over $1.2 trillion. It's a very, very resilient market, which is almost recession-proof, if you want. I've been working in this industry for over 20 years. And honestly, I've seen it growing every year very steadily, yes, over 6% year-on-year CAGR. But this doesn't mean that it stayed the same over the last hundreds of years. There has been a major shift over the last 50, 60 years about the makeup of this industry. Originally, all the drugs that we were taking were small molecule drugs. In the last 30, 40 years, there has been the growth of what we call biologics, which now grow really disproportionately in the market, over 10%, 30%, 20% faster than the small molecules. These drugs are different from the small molecules. If you -- I want to give you an example. Everybody is taking ibuprofen, a small molecule. How much does it cost? Probably less than $1 per treatment. And it's used for one indication: pain relief. A large molecule, a biologic, can cost up to $2 million. The latest drug in gene therapy, ZOLGENSMA, which is a blockbuster, 1 treatment is $1.8 million, yes. But every health care insurance is actually paying for this. Why? Because it's unique, and it actually does cure a disease. So there is a quite dramatic shift and a quite dramatic revolution that is happening in the market today, and this is a great opportunity. To go a little bit more in detail about this journey, as I said, we started a first-generation type of drugs, which was small molecules. These were drugs relatively easy to make and, today, relatively cheap to buy depending, obviously, on the drug, 1 indication usually or 2 indication per drug. Then we developed over the last 40, 50 years into the proteins, a second-generation type of drugs. These drugs are actually much closer to what we have in our body. They're complex molecules, and they're much better at doing the job of treating the disease. In this case, the cost of a drug can be thousands of dollars per treatment, yes. But these drugs also, since they are much well received from the body, they can have a lot more indication. So KEYTRUDA, the #1 drug in the world today, 14.7 billion in 1 year, has over 40 indication in the pipeline. So you go from 1 indication to over 40 indication from a relatively cheap drug from -- to a more expensive drug. And then in the last 10 years, something incredible happened with the genome revolution. Now we are no longer giving a medicine to the body, but we are telling the body to create their own medicine. So with the nucleic acid, we now have a way to teach the body how to create their own medicine. And this is opening an incredible number of opportunities and possibilities. This is going to change the way the pharma is going to look in the next 10, 20, 30 years. The analysts think that over 30% of all the new drugs in 10 years' time will be in nucleic acid, DNA-, mRNA-based. So this is a really change in the complexity, a big change in the increase of value for the patient that has been happening over the last 40 years. How does that translate into a market opportunity for Croda? So bear with me to try and explain this graph. On the X axis, we've got the development need, so how much does a technology still need development, innovation, how mature it is. On the epsilon axis, we have got the growth potential of that technology in the market. So if we start left to right, we see that the small molecule market, as you remember, still very big, over $900 billion market, still growing middle single digit, but it doesn't need a lot of development. It's relatively mature. The technologies have been developed over the last 200 years. So it's there to stay. It's big, and it's very steadily growing. Next, we have the protein market, which includes monoclonal antibodies. And this protein market is relatively large already, $300 billion plus, and is still growing double digit. It has been developed over the last 20, 30 years. And today, the majority of the blockbusters in the top 10 are actually monoclonal antibodies. So this is a market which is more mature but still growing very nicely. And last but not least, there is the nucleic acid market, currently a much smaller market but growing extremely fast as a result of the genome revolution that I talked about before. So these really made us clearly understand that the focus for the future needs to be for us to empower biologic delivery. And in biologics, we include proteins and nucleic acid. So in the past -- so as a result of this, we really wanted to develop a new vision and a new strategy for pharma, which is a development of the existing strategy. Today, we are recognized as the Health Care of -- part of Croda. In the future, we will want to be recognized as Croda Pharma. In the past, we have been recognized as an excellent producer and provider of high-quality ingredients for the pharmaceutical industry. In the future, we still want to be recognized as that, but we want to add -- we want to be recognized as a solution provider and a system provider. So not just the individual ingredients but a combination of the ingredient and providing a solution to our customers. And this vision was really necessary for us to also change a little bit our positioning in the market. And for this, we have created a new brand, which is going to be exemplified in the video coming up. [Presentation]

So great. I hope you enjoyed the video. It's the new brand of Croda Pharma. And what is important for us is to obviously create an image for Croda Pharma and raise that image in the market but also to create an umbrella under which Avanti Polar Lipids, Biosector and Croda is and those verticals, those strategic platforms that cover the old business. We talked about the market opportunity, right? But we want to go a little bit more in details as to what we want to do in each and every area. The small molecules is still a big market, I said. It's still an interesting market for us. We do have a very good portfolio to handle this market. So we will continue to maintain and sustain this market opportunity. For the protein delivery -- for the protein market, the monoclonal antibody, we have developed a very, very good specialty excipients market. We will broaden this portfolio of specialty excipients for proteins. And we want to lead. We have the opportunity, in this case, to lead because we start from a very, very strong position. The nucleic acid market, which is the fastest-growing, is the fastest-growing for the all markets. So everybody is developing in this market. But we want to develop very aggressively and really take full advantage of the growth of the market and go even faster of the general growth of the market. And you notice that there is some bubbles within the protein and in the nucleic acid, which are blue. And they are different color because within this market, there is the submarket of vaccine. And given our position already in vaccine adjuvants, we want to -- we will be able to lead in this market. And this really is translating one to one in the strategic platform that we have created, and we're going to develop and accelerate in the future. As I said, small molecule delivery, we'll maintain it. It's a good market for us. We really have here already very good solutions. In the area of protein delivery and adjuvant system, we want to lead because we start already from a very, very strong position and unique position that will be more explained by James and Peter. And here, we can really lead. In nucleic acid delivery, this is a very fast-developing market, yes. And here, we want to develop aggressively our capabilities. When I talk about a strategic platform, I want to maybe spend a couple of minutes to also explain how we look at it. So within a platform, we don't only have in the biologics opportunity to participate to the drug delivery part of it. A biologic is such a complex molecule that even the processing of a biologic present great opportunities for us to provide solutions. So ingredients and systems, which are using in processing. So for us, a platform is not only the part of drug delivery but also the part of bioprocessing. And in each platform, what we are aiming to achieve is to create not just ingredients but systems, which are a combination of these ingredients, which provide a unique solution. And why we like unique solution because they are very sticky. And the way we want to utilize this model, it's not just price per kilo but really value per outcome. And with -- in this new platform is super important because if you remember what I said before is these platforms require a lot of development. So our partners actually do need those solutions and do come to us to create those solutions for them. So that is a little bit about the platforms. And now I'll pass it on to obviously the gentleman who make this platform alive. And what we're going to talk about in the breakout is really, what is the unique value proposition of this platform? What is the market opportunity for each platform? And what is the execution plan that we have for each platform? And so with that, I thank you. And I think now we're going to have the breakout/daybreak. [Presentation]

Good morning, everybody, and welcome to this session on protein and small molecule delivery. My name is James Lawrence, and I am the Global Business Director for Small Molecule and Protein Delivery. By way of introduction, I've been at Croda for 15 years and have over 25 years' experience of working in the specialty chemical industry, having been based in Europe and in Asia. Firstly, a few definitions to help explain what we mean by protein delivery. Drug products contain active pharmaceutical ingredients, or APIs, which have an effect on the human body. In first-generation drug products, such as paracetamol, ibuprofen or aspirin, the APIs with small molecules produced by traditional chemical synthesis. Second-generation drugs contain more effective protein APIs produced by biologic means by cells, bacteria or yeast. They are large sensitive molecules typically injected into the body to protect their complex 3D structures from being broken down by digestion, if they were taken orally. Examples here would include hormones, enzymes or antibodies. A monoclonal antibody, or MAB, is a specific type of protein. They are manufactured using DNA technology in a bioreactor using bacteria or mammalian cells and binds specifically to target sites to stimulate the patient's immune system. They are the current flagship of the pharmaceutical industry, highly specific in targeting particular antigens but well tolerated by the body, so with minimal side effects. And they are being used to treat all manner of different diseases. In addition to the active ingredient, drug products are made up of a number of inactive ingredients called excipients that are safe to the human body and protect the API, ensuring it stays in the right form to give the desired medicinal effect. Different excipients make the API soluble, keep it stable, aid absorption and stop molecules from aggregating together. Discovering an API that has a positive therapeutic effect is one thing. But to have a successful drug product, you need to be able to stabilize this API in an easy-to-use formulation and deliver it in the right form to where it needs to go. As we move from simple small molecule APIs to large molecule biologic APIs, such as proteins and monoclonal antibodies, it becomes more of a challenge to keep the drug product stable and deliver it to the right place in the patient where it can then perform its action. Excipients perform an ever more crucial role in this stabilization and delivery and become ever more critical to the success of the drug product. The protein delivery platform is a logical progression in the journey of Croda Pharma, from our Consumer Health business, originally spinning out of Personal Care, through our offering of standard excipients for small molecule APIs, to specifically designed specialty excipients for injectable drugs and now forwards into delivery systems and solutions for large-molecule protein drug formulations. The opportunities on the left-hand side of the screen remain incredibly exciting for Croda. And only just recently, we've secured a multimillion dollar deal for one of our high-purity excipients with a major Chinese pharmaceutical company for use in their osteoporosis drug. The demand will really start to take off in Q4 this year and is forecast to grow strongly through next year. Similarly, in India, we have numerous examples of generics companies utilizing our high-purity excipients for their versions of blockbuster drugs, which are about to come off patent. Next year, you should see 2 major projects commercialize: 1 for diabetes and 1 for hypertension. And our sales into this generics market continue to grow at a high rate. At the same time, our focus is increasingly on the next generation of large molecule pharmaceuticals seen here on the right-hand side. And in general, we would say that as the value of the active increases, so the amount of complexity increases and, therefore, the value that the excipient brings. As you know, this business is based on high-purity excipients. And primarily, these are used in parenteral formulations, so injections. APIs given by injection are usually highly sensitive as otherwise, they would be formulated into a tablet and taken orally. In general, the parenteral excipient market is estimated to be growing at 7% per annum, with the biologics market growing at a higher rate, and I'll come back to this shortly. The small molecule market is growing at a slightly lower rate, but remains very significant. Croda's standard excipients will continue to grow with this market and our specialty excipients will continue to grow faster than this market. Here at Croda, we particularly focus on the high-growth and high-value niches, where our high-performance products really make a difference and where lowering risk is hugely valuable to the pharmaceutical company. When you have a potential multibillion-dollar blockbuster drug on your hands, why would you take any risk? You would naturally use the highest-performing excipients available, giving your drug product the highest chance of success and the quickest route to regulatory approval. Now let's look more in detail at the burgeoning biologics market. Overall, the market for proteins and mAbs is worth $300 billion and growing fast with a CAGR of 10% forecast through to 2030. This is a huge market, and we are a linchpin within it. The actual excipient market, so Croda's addressable market is estimated to be worth around 1% to 2% of this total value. As the complexity of the protein increases, the value of the excipient grows. The charts on the screen here show how the biologics proportion of the overall pharmaceutical market continues to increase. You can see here just how many biologic products are in development relative to small molecules as well as the total number of monoclonal antibody and protein drugs in various stages of development around the world. Thousands of products in research, in preclinical trials and in Phase I, Phase II and Phase III trials. But remember, small molecules remain of importance to us as well, particularly as a lot of these products in development are complex and sensitive, can't be put into a tablet or oral form and have to be delivered by injection. Again, this is an area where Croda's high-performance excipients can make a crucial difference to the success of the overall drug product. We focus on value at Croda and increasingly are selling smaller quantities of specific products designed to meet niche requirements unlike many of our competitors who focus more on volume. You can see on this chart from Kline that Croda is listed as the largest supplier of parenteral excipients by value, but not even in the top 10 by volume. Our positioning is unique. No competitor has a comparable portfolio of high purity excipients to Croda. Our excipients are of the highest purity. We have market-leading, batch-to-batch consistency. We work closely with customers large and small all around the world, utilizing our specialist R&D teams and local commercial teams to develop solutions for their issues. And we have absolutely the broadest range of high purity excipients available, a much wider portfolio than anyone else in the market. Working with Croda using our high purity excipients gives the greatest chance of success for a customer's pharmaceutical formulation. Really, when your potential drug product is this valuable, why would you use anything else? Looking at our customers for this platform. We have over 1,400 direct customers around the world, including all of the top 20 big pharma companies. But we're not dependent on these companies as we have a balanced portfolio of customers spread across big pharma and biopharma, generics and biosimilars, contract manufacturing organizations and contract research organizations, innovating with them to solve their delivery challenges. We also supply a huge number of research institutions through our specialist distribution partner, [ Avantor ]. The diversity of this customer base is a huge strength for Croda. It means our high-performance excipients are in the drug formulation right through from the discovery phase to commercial manufacture. In addition to our customer collaborations, we have a number of innovation projects with our own R&D partners, such as universities, academic institutions and SMEs to further fuel our R&D pipeline. And at the moment, we have 24 such projects running. Our biopharma pipeline of customer projects is really exciting. We are partnering with both major pharma brands and small startup companies to provide specialty excipients for monoclonal antibodies and protein APIs. Highlighted here are just 3 examples of the many, many projects that Croda are involved in. The example on the left is for a blockbuster monoclonal antibody-based drug used in oncology. It's the biggest selling cancer drug in the world, used in the treatment of 40 different indications and still being developed further with multiple clinical trials ongoing looking at additional cancer indications. Macular degeneration is a condition that radically affects people's vision and is estimated to affect more than 200 million people globally. We're working with a biopharma company and their contract manufacturer on their monoclonal antibody-based drug to treat this condition, using our high-purity excipients to create a successful and stable formulation. The third example uses one of our specialist high-purity excipients, which is being developed for APIs that require superior solubility performance. This will help enable diabetics to take insulin orally rather than by injection, which is a huge potential market worldwide. An estimated 9% of the adult population suffer from the disease. This project is currently in Phase III clinical trials in the U.S. and is progressing in China at the same time. As we look to the future, the opportunity is there. We are involved in over 2,000 customer projects around the world, helping find solutions for their particular challenges. And we're now increasingly focusing on 2 separate areas: delivery of the mAb or protein to the human patient and the bioprocessing stages to manufacture the mAb or protein in the first place. So we will continue to broaden our range of specialty excipients designed to help protect and deliver advanced biologics. And as such, we'll transition from an ingredient supplier to a solutions provider. As one example, a global biopharma company was experiencing a repeated quality issue with their mAb formulation, which is a blockbuster drug. What was the result of this quality issue? Batches of very expensive drug product had to be disposed of and potentially the drug could not be administered to patients at the point of need. They thought this was due to variability with their excipient and so came to Croda to see if we could help. Working collaboratively, we developed a custom specialty excipient grade for them with a much tighter specification, allowing for predictable supply and guaranteed quality. The result? Well, the problem was solved. No further quality issues with the drug product was seen, and the customer is now buying this custom excipient globally. For bioprocessing, we mean the biological process of creating the desired protein or mAb. As you will recall, this is carried out in a bioreactor using DNA technology with either bacteria or mammalian cells. These cells need to be carefully looked after, fed with the right nutrients and protected so that they multiply and produce the specific protein that is required. Small differences in the materials used can lead to huge yield losses or, in some cases, cell death, where a whole batch will fail. And as you can imagine, this is very expensive. We plan to build a specific range of reagents and process aids for use in bioprocessing, which will address the challenges faced by the market today. These challenges vary depending on the material involved with typically over 70 different ingredients going into the cell culture process. Croda's innovation is guided by our customers, creating solutions for the products that cause the most problems. What customers are looking for is a process that gives a high and predictable yield of the desired API, batch after batch after. And to achieve this, what they require are raw materials that are high purity, high-performance and hugely consistent from batch to batch. We've developed one such product using new purification technology where Croda will be giving a guarantee of performance for every single batch we supply. So the customer will see higher yields, have a more consistent process and will no longer need to carry out very expensive and time-consuming testing of each batch of raw material. Purity and batch-to-batch consistency remain the key quality attributes that customers are looking for and that Croda can provide like no other supplier. As you've already heard from Steve and Daniele, in order to take advantage of these market opportunities and deliver on our growth, we're investing in the business, in innovation, in knowledge and in capacity. Innovation teams are being created or expanded to build our expertise, deliver the new product pipeline and solve individual customer challenges. Our drug formulation team will demonstrate the performance of our high-purity excipients and the value they can bring to a customer's drug product. The biotech processing team will look at the protein manufacturing process itself and demonstrate the benefits brought by using Croda's specifically designed process aids and reagents. Our protein delivery commercial teams are being expanded across all of our target markets in the U.S., Europe and Asia, with increased local technical expertise being put in place, helping us to work closely with our customers wherever they may be. Additional capacity is planned for all of our specialty excipient sites in the U.S., in the U.K. and in Japan. In addition, we're bringing in new purification technologies to provide the highest-performing products available. In line with our strategy, we have a strong and valuable innovation pipeline with a number of new product launches scheduled for the coming years. These products will both add to our range of specialty excipients and build our range of specialty reagents for use in bioprocessing. The chart here shows a snapshot of this innovation pipeline for protein delivery. The vertical axis highlights the relative probability of success of a given innovation project. This probability of success is influenced by technical, regulatory and commercial success factors. Across our platforms, you will see a different probability of success, which results in a balanced portfolio for Croda Pharma. The horizontal axis shows the year of introduction to market and availability of first material. Note, this is not the year at which peak revenue is achieved. The size of the bubble reflects the non-risk-adjusted annual peak sales value. And please note that different projects will reach peak sales at differing years. I'm not going to go into each project individually, but this chart indicates the spread that we have. And overall, the total weighted annual sales value of this innovation pipeline is worth GBP 150 million by 2030. To summarize, Croda has a market-leading position. We have a 20-year track record in supplying excipients into the pharma industry. Our specialty excipients business has delivered high double-digit growth over recent years, meeting the needs of the growing biologics drug delivery market. The growth opportunity is significant. The mAb protein market is worth $300 billion today and is growing at 10%. The increase in complexity of these APIs means that there is more value-add for high-performing specialty excipients. We anticipate exciting future growth, double-digit growth over the next 3 years from existing customer projects, leveraging our recent capacity expansion, then further growth from 2026 onwards based on our innovation pipeline for both protein delivery and for bioprocessing. Thank you.

Good morning. I'm Peter Tygesen. I'm the Managing Director for Vaccine Adjuvant Systems at Croda. I'm an organic chemist by training, and I spent the last 30 years in the pharmaceutical industry in various areas. I joined Croda when it acquired Biosector 3.5 years ago. Let me just start by explaining what a vaccine adjuvant is and the role it plays in a vaccine dose. To work, a vaccine needs to deliver the right amount of antigen in the right confirmation to the right subset of cells for a sufficient amount of time. That creates the immune response, which would either prevent or treat a disease. We distinguish in general between 2 types of vaccines. The more traditional prophylactic vaccines, which is administered to a person in order to prevent disease, like influenza or COVID-19, and the more innovative therapeutic vaccines, which is administered to patients that have the disease and which are intended to stimulate the immune system to fight the disease. The latter could be cancer or viral infections, like HIV. In order to be efficacious, the vaccine dose will often need the right [ co-stimuli ] delivered precisely in for a sufficient amount of time. This is exactly the role of the vaccine adjuvant system. And many vaccines will not work as intended without a well-designed vaccine adjuvant system. The vaccine adjuvant system, therefore, acts as a delivery system as well as an immune modulator. Challenges in vaccine development are complex, and it's important to bear in mind that there is no one size fits all when it comes to vaccine adjuvant systems. Croda is the only company capable of combining a unique technology platform with deep expertise in vaccine adjuvants to create the solutions required for both existing and future vaccines to be efficacious and safe. The vaccine adjuvant business in Croda Denmark was established in 1939. In 1990, the company moved to its current location, where it has gradually been expanded. In 2018, Biosector was acquired by Croda and was Croda's first move into the human vaccine space. The subsequent acquisition of Avanti Polar Lipids really accelerated our position in the vaccines adjuvant space giving us all the necessary building blocks to develop the innovative vaccine adjuvant systems, which create those solutions that the vaccine R&D community require. Given that Croda has only really been operating in this space of human vaccines for the last 3.5 years, the strong progress that we've made to build this business segment in such a small -- a short time is really impressive. The global market for vaccine was growing pre-COVID, but we've seen significant acceleration in growth over the last 2 years. Looking at the vaccine market today, the main hop for breakthrough innovation is in Europe and North America, which is why these regions represent roughly 75% by value. The top 4 companies being GSK, Pfizer, MSD and Sanofi, are the companies bringing key -- are the key companies bringing breakthrough innovation to the market. But breakthrough discovery, however, is to a large extent being driven by academia, startups and biotech, which then subsequently feed the major pharma companies. By volume, the largest manufacturer of vaccines is Serum Institute of India, which reflects the fact that the volume-based vaccine manufacturing is centered around Asia, with India being the largest and most developed country for vaccine manufacturing followed by China. China, however, is investing heavily in a fast pace in the industry and is developing. The main growth driver in the traditional prophylactic vaccine adjuvant segment is the WHO Immunization Agenda 2030, the increased government preparedness program and the general increase in vaccine awareness in the public following COVID-19. In 2019, the WHO launched its Immunization Agenda 2030. This aimed to treat or eradicate a number of vaccine preventable diseases. As an example, between 2010 and 2018, an estimated 23 million deaths were prevented by the vaccination of measles. The agenda has set out to defeat a number of diseases globally, which still cause concern, such as diarrhea, typhoid, [ pneumococcal ] infections, meningitis and other serious infectious diseases, and is, therefore, a significant growth driver. Through our commitment to use Smart Science to Improve Lives, Croda is committed to support the agenda by being part of more than 10 clinical Phase III programs by 2024. We Are currently well ahead of our commitment. We are part of 15 different vaccine developments in different stages of development. And more importantly, we are also part of 5 marketed vaccines in different indications. Generally, Croda is uniquely positioned to serve the needs of both the innovative and the volume-based prophylactic vaccine business due to our unique footprint. We are focusing our R&D efforts in Europe and the U.S., building an R&D Center of Excellence in Denmark and integrating the efforts between Avanti Polar Lipids and Croda Denmark, whilst our local reach in different parts of the world allows us to cater for the volume-based business. The main growth driver in breakthrough innovation is the move into therapeutic vaccines, which typically are significantly higher value than their traditional prophylactic counterparts. The use of vaccinology as a therapeutic intervention is evolving. PROVENGE against prostate cancer was the first therapeutic vaccine approved by the FDA in 2010. Therapeutic vaccines are intended to stimulate the patient's own immune system to fight the disease. They will, therefore, often be more efficacious and give less side effects than other interventions like for instance, chemotherapy. Therapeutic vaccines are highly innovative and require us to take the vaccine innovation to the next level. Therapeutic vaccines will, in the future, help treat some of the most prevalent diseases on the planet, including cancer, complex diseases, like malaria, and neurological disorders. This development is therefore one of the biggest leaps in the pharma industry for many years and a significant growth driver for the next decade. Not surprisingly, the share of therapeutic vaccine R&D programs is steadily growing. Even though the attrition rates of these programs are high with only maybe 10% making it through clinical Phase II, we still expect to see a significant high number of therapeutic vaccines within oncology in other areas reaching the market in the next 5 to 10 years. Looking ahead, we expect both the heritage aluminum-based adjuvant business to grow and for breakthrough innovation in vaccinology to create significant growth in the mid- to longer term. Growth in the vaccine adjuvant space in the near to midterm will predominantly come from the heritage aluminum-based business, which we expect to grow between 5% to 8%. We will also achieve some growth from the adjuvant systems in the near to midterm because we will increase our presence in vaccine R&D programs with our R&D adjuvant systems thereby expecting double-digit growth overall in the period. Growth in the breakthrough innovation adjuvant systems, however, will not really materialize before the end of the 2020s and the beginning of the 2030s. This is simply due to the long lead times in vaccine development. Bear in mind that we're in the progress of launching our adjuvant systems into the R&D community in vaccines right now. We have some of our systems in a number of clinical programs, but before any of those get commercial and significant growth materializes, we need to see them clear different clinical stages and other development activities. But once these vaccines go commercial, growth for our vaccine adjuvant systems will also accelerate significantly. So why will Croda win? I guess the simple answer is that we have a leading position in the market and a unique value proposition within vaccine adjuvant systems. Croda has the most extensive portfolio of adjuvants and components of anyone in the business. And besides that, we are market leaders in the aluminum-based adjuvants business. We're the only manufacturing plant globally, which is able to manufacture adjuvants aseptically. Our unique blend of products and adjuvant components, such as saponins, liposomes, lipids and excipients, with both formulation immunology expertise in our vaccine adjuvant R&D is not matched by anyone else in the business and enables us to take the vaccine adjuvant innovation to the next level. Last but not least, by developing the innovative solutions, we gain a strong IP position and the ability to use licensing as a business model for our patented technologies, which is actually a new way for Croda to generate revenue from our new product development. Our customers are generally faced with 3 main challenges in their development efforts. First of all, they need to work with complex pathogens, which change over time and thereby create a moving target, this could be malaria. Secondly, there is a search for new and noninvasive routes of administration, such as intradermal or intranasal delivery. And finally, and maybe the biggest challenge of them all, namely the development of the therapeutic vaccines. As stated previously, we have products and expertise to be the partner in creating solutions for all these 3 challenges. The major pharma companies and leading regional companies are our biggest customer base. They're bringing new products to the market and are therefore more than 50% of our customer base. However, the majority of breakthrough discovery happens in the academic, start-up and biotech environments, and it all starts in the discovery phase. And we are, therefore, very active in supporting early discovery with scientific interaction and sampling. In 2022, we have sent out more than 200 samples to more than 60 different R&D groups so far. And we're also very visible in engaging with the R&D community in scientific meetings and conferences. A couple of examples of customers we work with are set out in the bottom right of this slide. We have been a supplier for Janssen vaccines for a long time, and they approached us some years ago in order to become the supplier of vaccine adjuvant for their HIV-1 program, currently in clinical Phase III. Working with a disease that suppresses the immune system, the fact that Croda could manufacture our adjuvant aseptically was really critical to this partner. The other example is Evaxion, a Danish-based biotech company, who are engaged in using an AI-supported technology platform to develop a personalized cancer treatment, which could be a breakthrough treatment for cancer. They are using one of Croda's vaccine adjuvant systems in this work. They're currently in clinical Phase II with their lead program, and we are supporting this with our vaccine adjuvant system. Consequently, Croda is active in all different customer segments to support projects ranging from early discovery to late-stage development through to commercial projects. The heritage business in Croda vaccine adjuvants is primarily the aluminum-based adjuvants, where we hold a leading position, having more than 100 commercial customers globally. Our customer base here is ranging from major pharma to leading regional players. Aluminum-based adjuvants are still considered to be the golden standard in vaccines, and they are applicable in 30% to 35% of all human vaccines. The adjuvant systems are basically divided into 2 segments. The current marketed adjuvant systems like Matrix-M from Novavax or AS01 from GSK, are typically owned by the pharma company and not available for licensing. There is, therefore, a demand in the market for workarounds and other solutions with these type of systems. Again, we have all the necessary building blocks and expertise to develop and market work around adjuvant systems. But the future of vaccinology also require us to take adjuvant systems to the next level and develop innovative systems, possessing completely new mode of actions. It's within our key focus to develop these innovative adjuvant systems that will enable the next generation of vaccines to be efficacious and safe. Finally, vaccine adjuvants are critical for the development of the new and noninvasive administration routes such as intranasal or intradermal delivery. We're in a number of those projects with different companies to develop these different delivery systems for the future. Our investment activity is focused around 3 main areas, all of which support our future growth. We are first and foremost investing in innovation to realize the potential of the pipeline and drive future value. We're also investing in R&D capabilities to fuel our innovation in both EU and the U.S. to develop the novel adjuvant systems, which create solutions for future vaccines. Adjuvant systems are a combination of different components, like lipid-based adjuvants with, for example, saponins. This require investments in multipurpose facilities and engineering expertise. We're therefore investing in knowledge, bringing more people with the right skills and expertise to help us expand. And we're, at the same time, upgrading our infrastructure to support our growth, both in terms of capacity and manufacturing technologies. The vaccine adjuvant building we plan to build at Avanti will enable us to manufacture the lipid-based adjuvants that we need, and the multipurpose facility we will build in Denmark will enable us to assemble those future vaccine adjuvant systems in order for us to support the vaccine R&D community. Croda has several adjuvant systems in our pipeline, which we are working hard with partners to mature and commercialize. Our current adjuvant systems are in several clinical programs in different indications ranging from more traditional targets, for instance, hepatitis B, pneumococcal infections, to more innovative targets like, for instance, HIV-1, chlamydia or cancer. The value of the pipeline will increase over time both due to the progression of the development of the vaccine projects using our vaccine adjuvant systems already and because we will introduce other vaccine adjuvant systems in the future, which are not on this slide. Based on our current picture, we value our current pipeline to be around GBP 80 million in 2030. The growth will accelerate significantly from 2030 to 2035 as vaccines are launched in the market. A number of the vaccine projects, which are currently in preclinical and clinical development will reach the market by the early 2030s, and that's the main reason for the increased growth in the first half of the 2030s. Let me just conclude with a few key takeaways. Vaccinology is the fastest-growing therapeutic intervention in the pharma industry today. This was the case pre-COVID, and it has been significantly accelerated by the pandemic. Croda is uniquely positioned in the field of vaccine adjuvant systems with high ambitions to fuel our innovation further because we have a head start with all the key building blocks to be successful as well as a well-established expertise within the vaccine adjuvant market today. And finally, we are investing in infrastructure, people and technology platforms to fuel our innovation capabilities and become that key go-to partner for the vaccine R&D community and pharma companies. Thank you.

Welcome to our session on nucleic acid delivery. It's a pleasure to be with you today to introduce this exciting technology and Croda's role in empowering biologics delivery. I'm Dr. Stephen Burgess, Managing Director of the Nucleic Acid Delivery platform. I've been a part of Avanti for 43 years, and my background is in chemistry, biochemistry and biophysics, with an emphasis on lipid synthesis, lipid biophysical properties and lipid membrane dynamics. Nucleic acids are the building blocks of our genetic code and essential for all forms of life. They're present in 2 major forms, DNA and RNA, and their primary role is to store and process genetic information. Nucleic acid-based therapeutics require sophisticated technologies to overcome inherent challenges, such as stability and delivery. Most of what we will be discussing today will center around lipid nanoparticle delivery, or LNPs, which is a nonviral delivery system utilizing multiple synthetic or semisynthetic lipids. Croda's entry into the nucleic acid delivery space began over 50 years ago with the founding of Avanti Polar Lipids. Avanti was originally founded to provide high-purity lipid reagents for biomedical research and worked exclusively in this space until 1985 when Burroughs Wellcome requested material suitable for a drug product they were developing. Avanti worked together with Burroughs Wellcome to initiate GMP manufacturing and successfully supplied the API material for the commercial launch of Exosurf in [ 1990 ]. Avanti continued to build relationships with the pharmaceutical industry in various drug delivery applications. And over the next 30 years, Avanti provided clinical grade material to support clinical trials in the developing field of gene therapy. The relationships cultivated with researchers in academic and pharma physicians over these 30 years gave Acuitas Therapeutics and their partners confidence that Avanti could successfully supply the ALC compounds for clinical development. Over the next 3 years, Avanti supplied Acuitas partners with clinical-grade material for multiple programs. When the COVID-19 pandemic began, BioNTech and Pfizer reached out to Avanti for supply of these materials to develop a vaccine. Through collaboration and acquisition by Croda Pharma, we were collectively able to supply the materials needed for clinical trials and launch of COMIRNATY. That's a very simple statement for what was a monumental task. Avanti and Croda working together scaled a clinical process to commercial scale and provided the delivery vehicle for the COVID vaccine, and we did it in 8 months during a global pandemic with lockdowns and travel restrictions. This was truly historic. Following the acquisition of Avanti, Croda immediately invested in the site to expand production capacity to support the vaccine as well as provide capacity to support new pipeline projects for future nucleic acid-based products. In addition, becoming part of the Croda Pharma family gave us immediate access to new markets and commercial capacity, removing a limitation and constraint on commercial development. With these investments, Croda Pharma is now in a strong position to innovate and supply the rapidly expanding field of nucleic acid delivery. The success of the COVID-19 mRNA vaccines demonstrated the viability of nucleic acid delivery as a therapeutic option. If we look at nucleic acid-based therapies that are currently in the development pipeline, we see there are over 2,500 projects in early development through Phase I trials. This represents a significant investment in this area and a confidence in the technology. Nucleic acid delivery is expected to have an annual growth rate north of 20% from now to 2030, with much of that being driven by mRNA and cell and gene therapy. I think everyone is familiar with mRNA and its use in vaccines. Cell and gene therapy is a broad area that encompasses several therapeutic applications. Cell therapy uses an unmodified cell to treat a patient. A good example of this is a blood transfusion. Gene therapy, on the other hand, focuses on the modification of genetic material in cells to produce a therapeutic effect. A recognizable application of this technology is CAR T cell therapy, which is a cell-based gene therapy. An emerging area of gene therapy that is a particular interest to Croda is gene editing. With gene editing, it is possible to modify a person's genetic material, possibly permanently, to correct the genetic disorder. This is an exciting area of medicine with great potential to improve patient lives both in quality of life and life span. If we look at the strategically relevant markets for Croda's nucleic acid delivery platform, 2 areas that we see having potential are the mRNA-based products, including vaccines and therapeutics and the gene editing space. These are just part of the broader market of cell and gene therapy that offer numerous opportunities for Croda to expand and address the growing needs. As the mRNA COVID vaccine pulls back to a baseline volume, the success of the vaccine is driving new vaccine development for other infectious diseases, like influenza, as well as therapeutic vaccines and therapeutics. This market will be a bit erratic with some fluctuations due to the number of products in development and timing of approvals, but should show overall growth after the COVID decline. With a projected market value in the $25 billion to $30 billion range, the niche lipid market is estimated to be around $1.5 billion, perhaps a bit higher. With respect to gene editing, the market anticipates a bit more aggressive growth with a growth rate greater than 20% and hitting $36 billion by 2030. Obviously, there is more risk in this area as we are only now entering clinical trials with this technology. But the reward could be bigger than projected, given the volume of lipid materials needed is 100 to 1,000 times that needed for vaccines. Again, the niche lipid market is estimated to be around $1.5 billion, perhaps a bit higher. To capitalize on these market potentials, Croda offers its clients full support along the development path from discovery to commercial supply. We do this through the strong relationships and trust built over many decades with the Avanti brand. It starts with having the leading lipid technology experts in synthesis and formulation and approaching the discovery process in a collaborative nature, then having the expertise to transfer those learnings to our GMP manufacturing environment to support clinical development, something we have been doing successfully for over 30 years. And finally, having the commercial production capability within Croda assets to support launch and commercial supply. While we are focusing much of the attention today on lipids used in the cell and gene therapy market, we are also working diligently to provide solutions and additional products to address the needs of bioprocessing and manufacturing. For example, polymer lipid hybrid systems as transfection agents. When we look at the competitive landscape for these markets, there is one primary competitor in the core lipid space, [indiscernible], and 3 primary competitors in the nucleic acid delivery space, [ Evonik ], Merck and [ Corden ]. No competitor has a more diverse portfolio of lipid products or pipeline opportunities in this area than Croda. Based on historical feedback from our research and pharma clients, Croda Avanti has the highest quality standards, both in product and customer service, which generates strong brand loyalty. We offer expert technical collaboration on product design, as well as formulation expertise in lipid-based delivery. And no one has the unique products we can offer for developing next-generation materials for this space. Now with the combined strengths of Avanti and Croda, we can support discovery through commercial launch and supply. These are the attributes that consistently set us apart from the competition and bring partners back for their new projects. This is demonstrated by the key relationships we have built through our strong presence in pharma research. As you can see here, 50% of the total research sales from the Avanti R&D business is in the pharma biotech space. We are equally strong in the academic space, the source of ideas and innovation as well as the training ground for researchers moving into pharma biotech. We developed the trust and loyalty with researchers during the academic years of their career, and they carry that brand loyalty with them when they transition to a pharma biotech career. Two examples of key partners that have developed through our collaborative nature of building relationships, our Acuitas Therapeutics and BioNTech. Acuitas came to us 6 years ago when they were ready to transition their products to clinical development because many of their scientists including the founder and members of the management team have been using Avanti products throughout their scientific career. We work with their licensing partner to successfully transfer a bench scale process to GMP manufacturing for clinical trials. Our relationship with Acuitas remains strong and continues to grow as we now supply additional compounds from Acuitas to a broad range of licensing partners. The relationship with Acuitas ultimately led to becoming a key supplier to BioNTech, which has evolved to include a collaboration to develop advanced materials for next-generation products to improve vaccine delivery and tolerability. As we look to the future and the growth opportunities in the vaccine and gene therapy space, there is a great deal of work that is already in progress. Based on a report published in 2021 that pulled 31 companies working on mRNA vaccines, there were 180 total projects in various stages of development across the companies reported at that time. This number has increased dramatically in the past year, as have the number of companies working in this area. But just looking at these 31 companies, Croda is working with at least 1/3 of the companies and contributing to at least half of the projects in their pipeline. I'm not going to go through all of these case studies for vaccines but I would like to highlight prophylactic vaccines, where we could see the broadest impact for the near term. In addition to the COVID-19 vaccines in development, these vaccines offer the greatest opportunity to improve health care for a broad range of infectious diseases. We have the opportunity with this technology to develop a universal flu vaccine that is more effective than the current annual flu vaccine as well as develop combinations within a single vaccine to address multiple infectious diseases. For example, a single vaccine to address flu, RSV and COVID-19. An area within gene therapy that I am particularly excited about is gene editing. With gene editing, we are not just treating the symptoms of a genetic disease. We are altering the genetic flow to potentially eliminate the disease permanently, a one-and-done treatment. This could have a profound impact on patient lives with respect to both quality of life and life span. One example of this is genetically induced high cholesterol, leading to accelerated heart disease and early death. This condition affects 31 million people worldwide. Verve Therapeutics recently dosed the world's first patient with a gene-editing medicine to correct the problem. In preclinical studies, a single dose to turn off the problematic gene resulted in a 60% reduction in LDL cholesterol that persisted for 20 months at last reporting of results. The gene editing was quite specific with no off-target editing and 3,000 related targets. We are very excited that our lipids were used in this groundbreaking study in clinical trial. If all goes well with the clinical development, we could see this therapy launched and saving lives as soon as 2027. We now have a short video from Andrew Bellinger, Chief Scientific and Medical Officer for Verve Therapeutics. [Presentation]

The impact on material supply from gene-editing applications could be substantial. Compared to vaccines, the amount of nucleic acid material required per dose is 100x to 1,000x more. The ratio of lipid to nucleic acid remains constant. So gene editing will require 100x to 1,000x more lipid than mRNA vaccines or roughly 2 metric tons of lipid per 1 million patients treated with a gene-editing medicine. This is based on today's dosing levels. Just looking at 3 of the top genetic diseases, thalassemia, sickle cell and heart disease, this accounts for 700 million patients worldwide or 1,400 metric tons of lipid. If gene-editing companies are successful, we're going to need a bigger boat. To address the future needs for nucleic acid delivery, Croda will continue to invest in innovation, knowledge and capacity. We will invest in innovation through extensions to the product pipeline from internal R&D and licensing, including new products to improve lipid nanoparticle delivery systems and new transfection agents for cell and gene therapy. We will invest in people to enhance our capabilities across the organization to support our ambitious strategy, including expanding our reach in the Asia market. And finally, in addition to the GBP 50 million already invested in the Avanti site to expand GMP manufacturing and quality control, Croda will be expanding manufacturing capability for R&D to support innovation, discovery and new pipeline opportunities for clinical development. At the U.K. scale-up site, Croda will be investing in further capacity supported by a co-investment from the U.K. government and a new multiproduct scale up site located in the U.S. will be established to support commercial production. This investment will be supported by co-investment from the U.S. government. This graphic represents a snapshot of our innovation pipeline for nucleic acid delivery. It highlights the relative probability of success of a given innovation project versus the year of introduction to market and availability of first material. This is not the year at which peak revenue is achieved. The probability of success is influenced by technical, regulatory and commercial success factors. Across our platforms, you will see a different probability of success, which results in a balanced portfolio for Croda Pharma. The size of the bubble reflects the non-risk-adjusted annual peak sales value. Note different projects will reach peak sales at different years. As an example, in the nucleic acid delivery pipeline, you can see we have an LNP project worth greater than GBP 20 million being made available to customers in 2023. The project is then in early-stage development and peak sales will only occur following regulatory approval and successful commercialization of the customer product. For the products you see here, the total estimated risk-adjusted revenue in 2030 is expected to be approximately GBP 150 million. To sum up today's presentation, our strong position in pharma biotech research leads to development opportunities with supply for commercial launch. The business opportunity is significant. The COVID-19 mRNA vaccines demonstrated the viability of nucleic acid delivery as a therapeutic modality, providing new treatment options to address disease with greater effectiveness and gene editing, while new and still unproven may have substantial requirements for material supply, far surpassing that of the mRNA vaccines. And finally, the future is exciting. Demand will stabilize in the near term with new projects offering significant commercial opportunities in the years to come. Thank you. [Break]

So welcome back, everybody. I hope you enjoyed the session with Steve, Peter and James. The purpose of those sessions obviously was to give you a much better idea in detail for each platform what is the unique value proposition, what is the market opportunity, what is the execution plan. But even more was to give you an idea of the people we're going to deliver that execution plan. That is important for us and I hope we could share that with you. Now what I'm going to try and do in the final session is to try and summarize it all, yes. So let's start with why we are so excited with these 3 platforms. On protein delivery, James has shared with you, we have this fantastic portfolio of specialty excipients, which we're going to further improve and develop in the coming years. But we have a unique position because there is limited competition for the specialty excipients for delivery of proteins and the market is growing double digit. So we like that very much. Peter has been talking about vaccine adjuvant and has been talking about the fact that we also see ourselves with the broadest portfolio of component of vaccine adjuvants but also the ability of putting those vaccine adjuvants together for powering the therapeutic vaccines which are coming up in the market. So this is also a unique value proposition and is working in a market which is growing over double digits. Finally, Steve has talked about the nucleic acid delivery platform. This is the fastest-growing market in the pharmaceutical industry today. And we are excited about the market growth, but we are also excited by the fact that we have a very good fundamental in the knowledge that Avanti brought in the company and also the fact that we are developing that knowledge further and growing as fast. In 10 years' time, 30% of all the pharmaceuticals that are going to be developed and brought into market will be nucleic acid delivery. This is a unique opportunity. And then we've talked about execution. It's good to have a strategy, but it's very, very important to have a clear execution plan. So what I'm going to talk about in the coming slides is the summary of what are we going to do in innovation, how we are going to increase our knowledge when we need to increase it and then how we are expanding our capacity and what are we doing for inorganic growth. Let's start with innovation. Smart Science to Improve Lives. Well, in this case, we improve lives and we save lives, and we are very proud of that. This is our purpose and the way that our business model works is that we create value to the customer via innovation. If you remember the graph that I showed in the previous section was about development need. We like very much this area of business because there is a need of high development need. And so we will do innovation in these areas. And we will create new ingredients, which come from sustainable sources and have a unique quality and then we will create from these ingredient systems, which will be unique for the customers and will allow us not just to sell the products and our services at a price per kilo but it's a value per outcome. Steve, Peter and James have gone one by one through their pipeline. And I go back to how this graph works. So you got on the x-axis, the time of launch and epsilon axis, the relative probability of success. What we have done, we have been very careful in understanding what is the risk associated with the clinical trials, the risk associated with the regulatory journey of the drug and the technical risk of development and we have weighted that risk into our pipeline. So this is what you see there. And what is pointed about this pipeline is that it's not dependent on one platform or the other platform, it's pretty much spread across the 3 platforms. And it's not dependent on one product or the other product. As you can see, there is multiple opportunity within each platform. And there is different kind of projects, smaller projects, more incremental projects and more structural projects. It's very important in pharma and in the supply of pharma to have a balanced pipeline. Together with investment in the pipeline, it's super important for us also to invest in people and knowledge. Obviously, we have a great fundamental in the knowledge we got from Avanti, from Biosector, from Croda, and we've taken all the knowledge within the strategic platform. But we are adding on to that because these are developing technologies and we need to be at the forefront of these technologies. So we will be adding people where needed in R&D, in operation, in new business development and we will structure these people and businesses under the umbrella of the 3 strategic platforms. And Freek has been talking about the investment in the last couple of years. We said we were going to do something. We have delivered those investments and those investments have fueled our growth. We are doing the same for the next couple of years. And we have clear investment ideas for a new scale-up brand for -- in the United States. Here, we are actually collaborating with the United States government that is co-investing with us in this multiproduct plant. The same in the U.K., where we are expanding our capacity together with the United Kingdom government. And on top of that, we are investing in our capacity and capabilities in R&D globally. And last but not least, we have Chief Scout as Steve called them, who are going out there in order to make deals potentially where we see the need to increase our technology platform. In some cases, we will partner with companies. In some cases, we will license technology from a university or a company and in some cases, where we see an opportunity, we will obviously also have an acquisition or inorganic growth. But a good strategy and a good plan and good people is not enough. These all will bring us a sustainable value creation for the coming years. So in the near term, if we go platform by platform from the left to the right, let's start with small molecules and proteins. We believe in '21, '25, we will grow high single digits in this platform. And this platform obviously is a blend of the small molecules part, which is growing middle single digit and the large molecule protein, which is growing double digit. Next, the vaccine adjuvant. Here, we believe we're going to be able to grow double digit. And this growth will actually accelerate as soon as the vaccine adjuvant system will come into play. And last but not least, the nucleic acid delivery platform is also going to grow double digit. This is the fastest-growing market. And net of COVID, we see that as a solid double-digit growth. So this is the near-term future, a very clear continuation of the growth that Freek has shown you for the last few years. But this growth will then be accelerated, thanks to the innovation pipeline we have put together and we've shown you. So from '25 onwards, that growth will strongly accelerate and will be based, as you can see on the graph on the right, on a combination of innovation from the 3 platforms. So it's a balanced growth. So we do have really very, very strong building blocks to achieve our ambition. We start with a very good business in 2021, where we have delivered what we said we will deliver. We believe that in the next 5 years, we will continue to deliver at the same rate of high single-digit growth and then accelerate with a pipeline of around GBP 380 million, that growth between 25% and 30%. And then with some acquisition, we will reach our ambition to become a GBP 1 billion business for Croda by 2030. So a couple of takeaways from the session today. We build on a strong delivery from the past. We have built a really, really strong portfolio, and we've been very successful with the buy-and-build expansion strategy. This will continue to work well for us. We have seen a significant growth opportunity, and that's why we developed this new strategy of empowering biologics delivery, a strategy which is based on 3 strategic platforms and a clear execution plan. The result of the strategy and the clear execution plan is that we're going to have a double-digit growth, customer-driven and then later on in the decade, an even faster growth driven by our innovation. And with that, I really want to thank you for your attention. And I think now we've got a little bit of time for questions.

Well, thanks, Daniele, and thanks to the team for some great presentations there. I'm going to -- before we start the questions, I'm going to invite the team, all the presenters up to the stage because in the normal way in Q&A, I like to answer most of the questions. So we'll let them get settled first, and you can start thinking about the questions that you want. Charlie?

Charlie Webb from Morgan Stanley. Maybe first, just around clearly an extremely exciting opportunity you kind of find ahead of yourselves. It's going to attract a lot of attention from competition, other people wanting to also participate in this market opportunity. So how do you see yourselves position versus that competition? How do you plan to stay ahead? How differentiated will these solutions be to continue to allow such an attractive rate of return and such an attractive growth opportunity for yourselves?

Okay. Great. I think we'll let Daniele, over to you?

Yes, sure. That's a great question. We believe in leading -- first of all, with having the best innovation out there. You've seen how much time we have spent trying to grow the innovation pipeline. This is how you win in health care. And actually, it's the same model that Croda is using in Personal Care for many years successfully. We'll continue to do that. We do also believe that for each platform, we have not 2 years, 3 years had the start versus our competition. But in some cases, like for lipids, we have a 40-year head start versus competition. It's not easy to really close the gap for competition. The other point, which I want to make very clear is that Croda's ways of business model is we focus on niches and those niches we want to lead into. So we don't go into the large commodity markets. We really look into the specific niches and where we can win by technology.

And maybe just a second one around M&A. You obviously a small item in the bridge. Obviously, this is an area you've had some success with M&A in terms of building out the platforms you have today. What do you see out there that's compelling? Are there other platforms that you're not in that you would like to be in? Or is it more about kind of adding to what you have to kind of adding to the same technologies you have today?

Well, let me kick off and I'll pass to Daniele. Yes, I mean, as you can see from that bridge at the end, a lot of that, you can draw the conclusion that it's organic growth in the main that's going to get us there, which is great. In the GBP 160 million capital investment that's out there with you in your numbers is, is really to get us match fit for 2025 for that inflection to make sure that we can deliver that growth. We don't expect another ramp to deliver that growth in terms of capital investment. Of course, we will spend a little bit more beyond '25, but the major spend is before that to get us to that inflection, so we can cater for that growth going forward. So I think that's a big point. And in Croda [indiscernible], myself will always say the organic growth is much more lucrative for Croda than the inorganic growth. So this is a model that's not reliant on big M&A. Having said that, looking to -- if the opportunities arise, we're obviously very keen to deploy capital into this space because, as you can see, we're not short of opportunities. And if we consolidate around, the 3 platforms will be the priority. But we would also look at a fourth platform as well if we felt that was appropriate as well to offer more synergistic benefits to some of the other platforms. So a good example is -- we've acquired Avanti. Avanti is great in some terrific synergies between Peter's business and Steve's business. So we're developing synergies along the way as we build our capabilities. So these chief scouts, they have a technology list, which is probably the most important intellectual property we've got. They know what we're looking for and we map that to potential target customers that we're interested in. So interesting times, as I say. And we normally do our best business through or after a recession. I've been in Croda for 30 years now -- 32 years, and I've seen 5 recessions and each time we've grabbed opportunities because we've got a very -- and we have a very strong balance sheet as well now. So -- but I think take our message, organic growth first, quite a lot in the story for organic, opportunistic and targeted inorganic opportunities and we will deploy the balance sheet in this space if we can.

Thanks for the breakout sessions. They were very interesting. And in both the nucleic acid and also in the small molecule sessions, I noticed that a large chunk of the innovation partners are listed as distributors which seems like a bit of a step out from the normal Croda business model. If you could just talk to us about that?

Daniele, do you want to kick off and then I'll pass it back?

So actually, there is still an enormous amount of direct business and the relationship with the customers, and as you've seen, over 5,000 customers, which go through the life cycle. In some cases, we do have some distributors that we use as the multipliers where they can also put together our products with other offerings and then create a better solution maybe for the customer. But I wouldn't say this is a departure from our model. Our model is actually learning very closely from direct relationships with the customers in order to get the best innovation and really get that innovation through the commercial phase.

David?

It's a question from the [indiscernible]...

I didn't know why you were going there? Ask him one on football.

On behalf of [ Camilla Ayling ] who said, are you not tempted to be more cautious on CapEx spend given the macro environment?

Yes, I mean, it's a good question. I mean, I think a lot of companies are, but I think the biggest -- for a growth company like Croda, I mean, you can see the opportunities ahead of us. I think the biggest challenge for us is to be bold enough to continue that investment through the 5 recessions I've lived through if there's a regret of growth companies, I think it's that they haven't continued to invest through that period because when that period is never longer -- as long as you think. And also when we come out, we need to be strong when we come out. We can't afford to miss the '25 and beyond pipeline. So the GBP 150 million spend, which is, let's be honest, is the only additional spend that we're making on top of our normal routine capital to deliver extra GBP 380 million of revenue. I think when we look at it, it's a no-brainer for Croda that we would do that, why wouldn't you do that? And we got government support to do that. So I think for a lot of companies, I think that's right, but a lot of companies are probably pushing capital out, but you won't see Croda doing that.

Charles Bentley, Jefferies. So if I look at the innovation pipelines in both lipids and excipients and something that's been talked about is bioprocessing reagents. Can you just talk a little bit about that? Because I think it sounds like that is essentially a new leg. It's like slightly different to the kind of core business. How that's come about, whether it's like a shared chemical base or something like that and just kind of the fundamentals around it would be very helpful?

We'll start with James because in your session. So do you want to respond to that?

Yes. So the first thing to say is it's a very attractive market for us. So it's growing very fast, and there are issues with the current products available on the market today. There's a similarity between the chemistry of those products and the chemistry of some of the products we offer. And then by applying the Croda expertise, purification, approach to providing solutions to customers, we believe it's a very close adjacency that we can move into. And then once we're in for that, then we can move on to the next thing and so on. But it's very attractive and it's, I would say, very adjacent.

Yes. Maybe I add one point. Just to give you an example of why is this so important? So bioprocessing into nucleic acid, for instance, it can be extremely complex. Cell therapy, you take the blood from the human body, you actually take the cells from that blood and then you change their DNA and then you inject them back into the patient. So this process is actually very, very unstable. This creates a great opportunity because there is no good solutions to that process. And so that's why we are excited also in nucleic acid delivery to look at bioprocessing needs because they are as complex as the challenges we see in the drug delivery. So it's a really very attractive market for us with similar technology, similar challenges in drug delivery, where we have good solutions.

Okay. Matthew at the back?

Maybe I'll direct to you, Steve, given your tenure as part of Avanti. The revenue from the Pfizer COVID vaccine will obviously drop away at some degree. Do you see a longer-lasting benefit from that product in terms of the Croda brand, the franchise driving more customer engagement than you've seen before have improved your ability to supply such a complex product in big, reliable quantities? Is there a longer-lasting halo that can be extracted from the vaccine?

Yes, absolutely. We don't have just one customer. We've got quite a few people spread across a number of applications not just in the vaccines, but in the gene editing, which are utilizing, there are some partners that are utilizing the same products that are in the COVID vaccine. And then there are next-generation products that are in the development pipeline that we've already moved into GMP manufacturing and the clinical development. So there's -- so we are taking advantage of the fact that we're a recognized leader in this field and supplied the COVID vaccine.

I think just an additional anecdote for you. I was in Avanti just about 2 weeks ago, and talking to the marketing team. We look at peer review articles from academia with Avanti in and every month now, we're picking up about 300 peer reviewed monthly. On Avanti being quoted in with polar lipids in research work. And there's nothing better for the growth here as a leading indicator of future indications. So there's a lot being written about Avanti, much more than there has been in the past.

And a second question, if I can, around profitability. We're using a lot of words like specialty, purity, which all sounds like it bodes very well for incremental margins. I don't know if it's for you, Steve or Jez, but I haven't seen a comment today around profitability or midterm margin targets. How do we think about how that trends as we get towards the GBP 1 billion revenue number?

Margins are always a finance director in Croda.

Yes. So the -- so I guess the peak health care margins were really probably high 30s and that was seen in the first half of 2021, and that was the combination of producing the requirements for the COVID vaccines in actually quite a manual way before we put in the sort of automation and the capital and so and that came on stream in the second half year. So I guess that's the peak of where we've been. Margins in the pharma space are now around the mid-30s. And we expect that to sort of stay broadly there given the investment that we're making here over the next couple of years. And then we would expect with the innovation profitability to start to see those margins coming up through the second half of the decade, again, back to sort of levels and where we were at the beginning of '21. Of course, you combine that for the life science reporting, which is the level at which we report with Crop Care. Crop Care tends to run a few percentage points below pharma in terms of profitability, but still very profitable. So overall, at the moment, I'd say Life Sciences were in the low 30s. And we'd expect, with that innovation, to see the margin move certainly up to the mid-30s at the reported level for Life Science, if that makes sense, Matthew.

Sebastian?

I have 2, please. The first is on the slide. So I appreciate this is a little product specific, but stock prices of Biologics produces worldwide rallied when Biogen unveiled its Alzheimer's results for Phase III about 2 weeks ago. Are the slides that you're showing net of that data for Phase III? Or do they not included, i.e., could that be a material tailwind beyond what is shown in the slides, in particular, for the biologics, the peptides? And my second question relates to your presentation, James. It was very interesting to see the market share in parenterals, the injectables. I didn't see the names of any CDMOs there, but companies like Lonza and Catalent have increasingly been marketing themselves as one-stop shops. Are they your buddies or your rivals in this market? Are your customers or potential competitors are looking at the excipients market and seeing the source of value?

I'll let James do question 2, and I'll let Daniele in with question 1.