Sartorius Stedim Biotech S.A. (DIM) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Welcome to the Sartorius and Sartorius Stedim Biotech Conference Call on the 9 Months 2022 Results. Today's conference is being recorded. It is my pleasure, and I would now like to turn the conference over to Dr. Joachim Kreuzburg, CEO. Please go ahead, sir.

Thank you very much, and hello and good day also from my side. Together with our CFO, Rainer Lehmann, I will now walk you through the results for the first 9 months of 2022 for both the Sartorius Group and Sartorius Stedim Biotech. As always, I will kick it off by talking a little bit about the highlights of our business development this year so far. Then also briefly, I'll remind everybody about the key features of the acquisition that we have been able to close by end of last month. And then I will hand over to Rainer on the numbers for the Sartorius Group. So I think, overall, we have seen a good third quarter, pretty much with the same set of numbers as we have seen for the first 2 quarters. Sales revenue very much on the same absolute level that leads to double-digit growth of sales revenues and earnings for both divisions. We also have seen a healthy profitability level based on the positive side, the scale effects that we have been able to generate. But of course, at the same time, and again, very much in line with what we have seen during the first half of the year, a certain dilution by the higher cost base as expected and planned for, mainly because of additional headcount, not so much because of inflation, and then also some FX-related headwinds, mainly through FX hedging instruments. I just said that inflation hasn't played a big role. I think we talked about that extensively after 6 months that we have been able to pass through pretty much the inflationary effect that we have seen on our cost side to our customers by increasing our price levels. We were talking about that a lot last time. I'm sure there will be a couple of questions around that later on as well. The situation is very much characterized by -- and again, we talked about that before -- by 2 trends that are at the moment offsetting each other a little bit depending on the perspective that you take. And on the one hand, we still see a very strong market, fundamentally strong market in the sense of healthy pipelines at our customers. A lot of innovation going on after a couple of decades, where everything in the biopharma sector was around monoclonal antibodies, we now see an increasing relevance of new modalities, cell therapies, gene therapies, mRNA-based products and therapies. But at the same time, we see a quite rapid normalization of demand, particularly on the bioprocessing side, not so much on the life science tools or lab product side. Again, I'm sure we will talk about that later on in a bit more detail, but it's important to us to really highlight that the current trend -- the expected current trend that we see on the order intake side for bioprocessing shouldn't be mixed up with the fundamentals of the market we are operating in. We specified our outlook for 2022 when we were heading into this year. We were applying a rather wide bandwidth for our sales revenue growth. We now narrowed that to the lower half of that bandwidth for bioprocessing and the upper end or the upper half of this bandwidth for the lab business. And given the relative size of these 2 businesses, that leads to the lower half of the bandwidth for the Sartorius Group. We are fully confirming the profitability target that we have set and communicated for this year. And I think it goes without saying at these times that the uncertainties remain to be high. We do have our -- all the supply chain challenges well under control. But I think there are some overarching geopolitical and economic aspects that still cause quite some uncertainty. So as I said before, I also wanted to repeat a couple of highlights about the acquisitions that we closed by September 30, which is the acquisition of Albumedix based in Nottingham, U.K., a business with a good 100 employees, sales revenue expected this year to be a bit above GBP 30 million, very healthy profitability. Therefore, also a price of a good GBP 400 million, representing, I would say, a multiple that you would expect for a business like this. We acquired 100% of this business, all in cash. And what is this business about? Albumedix is a leader in recombinant albumin, which is a critical component for a number of innovative biopharmaceuticals or what one calls today new modalities. As for example, cell therapies, also viral-based therapies, also a couple of vaccines. It strengthens our position further in this field of what we call critical raw materials for such modalities. And you have to see this in perspective with acquisitions like the one of CellGenix or Xell or Biological Industries before that. And yes, with that, I would like now to hand over to Rainer to walk you through the details of our 9 months results.

Thanks, Joachim. And also welcome from my side to today's call. Let's start with the usual group overview. Sales revenues amounted for the first 9 months to EUR 3.1 billion. That's in constant currencies an increase of 16.6%. Just to put it into context -- and you will hear me doing this throughout the presentation -- it's important always to refer where we're coming from. Last year, at this time, we actually had an increase in revenues of 54%; the year prior to that, in 2020, of 25%. So the 17% are very healthy achievement on top of that substantial base that we have built over the last 2 years. Order intake also amounted to EUR 3.1 billion. As expected, it's a decrease in constant currencies of 9.5%. Also here, to put it into context, last year at this time, we actually were reporting 72% increase of order intake and prior year, in 2020, 37%. So really, I think it's very important that -- this is something that we also anticipated during our call. Book-to-bill ratio for the first 9 months is at 1 for the quarter, slightly below 0.9. And that is also that we pointed out at the half year call that we wouldn't be surprised if the book-to-bill ratio would go below 1. And this is not only what really happened and was expected. Underlying EBITDA is at EUR 1 billion. It's an increase of 21.5% almost. So despite higher costs. And there, again, we pointed out over the last calls that we were increasing our cost base, that last year's profitability was a little bit artificial because revenues increased over proportional to the functional cost development. And therefore, we see that now catching up. And the cost base has increased. In addition, we have still a few FX-related headwinds, but the margin pretty much on previous year level, slightly only 0.5 percentage points below. Also, just to complete the picture, the sales growth, actually 2 percentage points, we attribute to the acquisitions that we made this year. If we then look at the regional distribution of our revenues, we actually see that Americas is growing the fastest. No surprise as one of our key markets that we are focusing. Both divisions actually contributed strongly to this development. It's an increase of 22.5% to EUR 1.1 billion. In the EMEA, of course, here, we had higher comparables, really caused by the extraordinary boost through the pandemic. Nevertheless, an increase of 10.5% in constant currencies, also to a little bit over EUR 1.1 billion. In Asia Pacific, also a very nice growth track here of almost 19% to EUR 825 million. And we have to say that despite some partial lockdowns, which, at the end, really only had a minor impact on our growth in that region. You look on the right-hand side, sales by region, you actually see a little bit of movement also even compared to the 6 months figures. We see here 1 percentage point increase in the Americas as well as Asia Pacific. So that reflects, of course, the figures that I just presented. When we have a deeper look at the 2 divisions, and we start with the Bioprocess Solutions. And let's start in the middle with the sales revenue. Here, we have revenues of EUR 2.47 billion. It's an increase of almost 18% in constant currencies, 2 percentage points also are here attributed to the acquisitions that we made. That's basically -- and what is -- yes, and what we -- and one important point here is: of course, the sales that are attributed to the Coronavirus vaccine declined significantly as we expected. And as we also said at the half year time, that we expect only half the business compared to last year this year related to the Coronavirus vaccine. Again, here, this 18%, keep in mind on the previous year's rate in the last 9 months there in 2021, we actually saw a growth of 58%. So it's very important, I think, that we really see the 9 months '22 development in context of the last 2 years' development. On the order intake, on the left-hand side, you see the expected decrease really reflecting a normalizing demand. As we all know and we have pointed out several times, prior year figure was boosted by the pandemic. And in conjunction with this also, the really different behavior of the ordering patterns by some customers, which we, of course, now see also that our customers reduce some stock levels, and therefore, the order intake of EUR 2.45 billion really reflects that behavior. The underlying EBITDA margin for the Bioprocess Solutions divisions was 35.7%, slightly below the previous year. Nevertheless, an absolute increase of almost 22%. And despite, of course, the positive economies of scales that we're still achieving, we have a dilution because of this increase of the cost base, mainly attributed to headcount and also some FX-related headwinds. On the LPS side, we really see a fantastic development of the division, really the very dynamic growth fueled by the bioanalytics business. I start here again in the middle with the sales revenue. We see here an increase of 12.5% in constant currencies to EUR 642 million, and that on top of a very strong previous year. So we are really performing well, especially on the BioA side. M&A contributes actually only 1 percentage point here. On the order intake, we see an increase of 14.5% in constant currencies to almost EUR 670 million. Here, also the 2 regions that are really contributing is Americas as well as also Asia Pacific. EBITDA margin slightly up due to economies of scale and also a favorable product mix. BioA has a more attractive margin than our Lab Essential business. And we even could expand our margin by 2 percentage points despite some higher cost base, again, as planned, and also some -- despite some FX headwinds. If you look at some key performance indicators. We see here, again, the underlying EBITDA, I just mentioned before. I'm not going to say something about it, but it's a good billion. We have extraordinary items pretty much on previous year's level with EUR 26 million, really reflecting the corporate projects and expense related to M&A. Our financial results, pointing out, as always, is mainly driven here by the fluctuation of the earn-out liability in conjunction with the acquisition of BIA Separations. And underlying net profit, we see a healthy increase of 23% to EUR 501 million. And reported net profit, an over proportional increase to -- almost by 71% to EUR 526 million. Operating cash flow compared to previous year, a decline of almost 30%. This is really due to a change in our net working capital. That is mainly driven by the increase of inventories in order to really ensure that our supply chain is as secure as possible and buffers certain deficiencies in case they should happen. Investing cash flow has substantially increased to EUR 904 million. Of course, composition here is the 3 acquisitions, which pretty much add up to EUR 541 million. The biggest one, of course, that Joachim also just mentioned, that we closed at the end of September Albumedix. And then we also spent EUR 350 million on CapEx, mainly in order to really continue our production capacities expansions. And that translates to a CapEx ratio of 11.3%. We see on the next slide -- we then actually look at a very healthy and robust balance sheet. Equity ratio here increased 35%. Again, here, I mentioned that -- also at half year is the switch of the first earn-out that was paid out in conjunction with BIA Separations that increased basically equity side, but also, of course, the contribution of our net profitability. And the net debt increased to EUR 2.3 billion. Main driver here, clearly, the acquisition of Albumedix, which then translates into a net debt divided by underlying EBITDA, so dynamic indebtedness of 1.7%. So still even despite that substantial acquisition, a very healthy and robust financial situation for the overall group. And with that, I'm going to hand back to Joachim.

Thank you very much, Rainer. I have the last slide now here for the Sartorius Group, which is about the guidance for 2022. As said before, we have specified now the expectation for sales revenue growth, whereas we left the profitability expectation unchanged. You can see in the table the change in bold letters in the middle of this table. So for the Sartorius Group, we are now expecting to reach the lower half of the range of 15% to 19%. And that is composed out of the expectation of, again, reaching the lower half of the range of 17% to 21% for Bioprocess Solutions and the upper half of the range for Lab Products & Services. The only other change here is the one in the -- on the bottom of this chart, the last bullet point on the underlying EBITDA -- net debt to underlying EBITDA ratio, which we now expect to come in at around 1.6% after the previous expectation of 1.1%, mainly driven by the Albumedix acquisition that we closed, as said before. And the main reason here is -- and you might remember that we reduced the expectation on the COVID business for the full year already after 6 months when we saw that our customers have reduced their projection for the full year substantially. And we said, "Well, we don't change the bandwidth that we have given at the beginning of the year," even though this is a substantial number because of -- but we said so and did so because of the strong order book. There is no change on that, of course. But now further in the year and closer to the end of the year, we now also know and see when our customers would prefer to get their deliveries, and that is the main reason why we now expect rather the lower half of the range for Bioprocess Solutions. And then the rest is just adding up the numbers. Whereas, for Lab Product & Services -- and I think a couple of analysts made these comments already today, "Maybe this looks a little bit conservative." but well, uncertainties remain high. And it, of course, depends really on, for example, whether we will see further lockdowns, et cetera, et cetera. And that is why we really prefer to basically confirm our guidance, but to narrow down the bandwidth a bit. And now I would like to move forward to SSB. And as always, walking you through the numbers rather quickly as most of the comments have been made before, particularly on Bioprocess Solutions business. Nevertheless, along the first chart, maybe one more word on order intake, though. You see the number of order intake, pretty much on the same -- I mean, identical level like sales revenue, representing a decrease of almost 9% in constant currencies versus the number the year before. Rainer was talking about book-to-bill ratio. And typically, you would say, "Well, order intake and the book-to-bill ratio reflects and represents an important information for the future business." And what is important for me to point out is that at the moment order intake is more reflecting the development of the business in the past than being a good proxy for the future business. And it's a matter of pure logic then after this very significant over amplification of demand because of longer lead times and the policies and initiatives by customers to increase their stock levels, and these 2 trends added to each other, that now when customers start to reduce their stock levels again and the lead times have normalized, you have 2 strong drivers in the reverse direction. It's clear that we see this trend. We always talked about that basically since 2 years ago. However, what we see here is a -- as you can read, a 20 -- sorry, 17% growth in constant currencies for sales revenue and a 12.8% decrease for order intake in constant currencies. Underlying EBITDA has been increasing by a good 19% margin, a little bit diluted, 0.5% approximately, because of the FX-related headwinds, and the other mostly because of the increase of headcount, as we talked about that before. We then have an earnings per share at EUR 6.58, an increase by, again, a good 19%. The regional picture, we talked about that for the group before, also for SSB. You see now Americas almost being on the same level as EMEA, pretty much in line with what we would have expected and always talked about. Nothing to add to what has been said before. And pretty much the same is also the case for the view on cash flow, where I would just repeat comments that have been made, and you can see them also on the right-hand side in these 3 bullet points regarding inventory buildup as well as devaluation on the earn-out liability. And then on the financial indicators, obviously, a very strong equity ratio for the SSB group. Then a reflection of the 2 acquisitions that we have made for SSB in the course of the year with a certain impact on net debt to underlying EBITDA on a very low level, though. And when we then take a look quickly on the last slide, again, the one on the guidance, the specified guidance, narrowed guidance for 2022. Again, we expect here now the lower half of the range that we have communicated since the beginning of the year. And we confirm the EBITDA margin target. And all the rest is also quite symmetrical what we have talked about before, including the now higher anticipated net debt to underlying EBITDA ratio for the end of the year, mostly following the Albumedix acquisition. And with that, I think we now have time for Q&A. Thank you for listening.

[Operator Instructions] The first question is from Patrick Wood from Bank of America.

Perfect. I'll keep it to 2 because I'm sure there's a lot of questions around, and hopefully, they're pretty straightforward. Firstly, apologies if I missed it. Do you have a sense for the -- let's say, the Q3 orders within BPS, but excluding the COVID vaccine side, just so we can have a sense of ex vaccines, how that looks? And then the second one. Joachim, you kind of gave a sense -- you gave a hint about looking forward and not really -- the order books being a backward-looking sort of thought process. Should we interpret that -- and I appreciate you probably don't want to guide on '23 at this stage. But should we interpret that as some kind of confidence that we should see some reasonably decent growth on the revenue line in '23? Is that a fair assumption given what you've seen of the orders that you still have in the backlog?

I'll try to answer the second question first. So honestly, still a little bit too early to talk about 2023, indeed. What we can say is that we don't see any change to our underlying view on the business. And I think we talked about that after 6 months as well, we, of course, will also talk about our midterm guidance, which is for 2025 when we publish our preliminary figures end of January. And I would say we don't have any different view from a, let's say, volume side. Volume side no movement in a physical sense than in a monetary sense. So we will take a look on how to translate that into the changed environment regarding currencies and also inflation. So that is something that I can say that we don't have any different view on that. For 2023, to be honest, the variable here is, again, not so much the underlying market. The variable here is the inventory level of our customers. And I think we always have talked about that. That's a bit difficult, and it's always quite incomplete the picture that we have. But just to give you a sense. A couple of customers of ours and in the industry have usually stock levels around 6 months of their annual demand, so half of annual demand. And they were rather aiming for and quite some of them were able to execute on that to increase that to 12 months. So that gives you a sense for how much reduction of stock levels we partially see. Of course, not everybody is doing that to the same extent because not everybody was able to build that up or wanted to build it up. And that is the variable, and that is really why we are hesitating to give any more precise guidance for 2023. But we look on that. We -- at some point, the right perspective will probably be to look on the years 2020 through to 2023 in total. And these are 4 years. We are aware of that. But this is probably the right perspective to take later on. But again, give us another 3 months before we talk about 2023 a little bit more precisely. And then the first question on COVID -- or Q3 order intake ex-COVID. We, for sure, would have seen a much more positive picture. And now it depends on COVID. What do you mean -- how do we define COVID. We always have used a narrow definition here. So rather -- really, in Bioprocess orders related mainly to vaccine manufacturing. That already would have made a significant difference and probably has a flat -- for Q3, stand-alone to a book-to-bill ratio around 1. If we would exclude now the -- this additional effect that we are talking about, stock level, lead time driven, et cetera, et cetera, then for sure we would have seen it above 1.

The next question comes from Paul R. Knight from Key.

Could you talk to what you think the underlying market growth is in your view, mid-teens, above 20%? Can you talk about what you think the market pace is without COVID?

So if we exclude COVID as well as, again, the normalization now, if this is the question, then we believe the underlying trend in the market is around the 10% mark.

Like 10% from like a 2019 basis?

Right. So that is -- that would be a perspective market. So we usually over the last whatever decade or so have beaten the market. But you were asking for market. So market we would say around the 10%.

Right. Plus share gain, et cetera.

Right. Exactly.

The next question comes from Sezgi Oezener from HSBC.

I have 2, please. First of all, is lower -- are lower COVID orders the main change? Or do you also see some impact from your customers from the inflation control act, which is expected to have an impact on drug prices? Is that cutting the appetite a little bit? And my second question relates to bioanalytics. Given the quite striking growth in bioanalytics, especially in America --but I believe that's regionally diverse -- do you see a higher ratio of recurring revenues going forward within your LPS segment? And does that change the longer run outlook?

Yes. So on the first question, yes, I can confirm that, that the drivers that we were referring to here are really the main drivers, and there are no other relevant drivers at a comparable level. So we are really talking about these drivers like COVID business in direct sense, in this narrow sense as just defined before. And then the second round drivers we were talking about since -- basically since the second half of 2020, longer lead times have led to earlier orders plus the desire to increase stock levels was a second booster to that. And now we see the reverse. So that's really what we are talking about. And then on BioA, absolutely correct. We believe that this business is growing on a very significant double-digit level. It's growing at nice profitabilities. It's growing in all regions with quite some pronunciation of the Americas. That is pretty much also reflecting the relevance and strength of the U.S. when it comes to new drug developments where these tools are playing a particular role. But again, we are growing in all regions. And yes -- I mean, this is absolutely our strategy to make this a key pillar of the further development of our LPS division. And as you have seen also over the last couple of years, that is why we were making a couple of acquisitions in this field, and we believe there is maybe some more room for adding innovative and complementary businesses to it.

So if I may follow up on the first question. You're not seeing any negative or positive impact from the inflation control act affecting clients' appetite to invest?

No. So far, we don't see anything.

The next question comes from Zain Ebrahim from JPMorgan.

Zain Ebrahim, JPMorgan. Just 2 questions for me, please. My first question would be on your '22 BPS guidance. So if I take the low end of the guidance, that implies about mid-teens EPS growth in Q4. There seems to be an acceleration in growth that you believe in Q3. So can you talk through what's driving that acceleration in Q4? And maybe beyond the inventory levels in 2023 that you've already commented on, what are the factors should we think about in '23 as we think about potential for growth there, will be my first question. Second question would be on the book-to-bill ratio. So I know you've alluded to book-to-bill being below 1 for a couple of quarters or maybe a few. I mean, we saw it now in Q3 and it seems like the order book is normalizing maybe even quicker than people expected. So how should we think about the normalization left in terms of how many more quarters you expect the book-to-bill to be below 1? And how should we think about Q4 relative to Q3 in terms of -- Q4 last year, it already started to normalize. Can we start to think about [indiscernible]? Those are my 2 questions.

Okay. So on the first -- on your first question, that's right. But please keep in mind the strength of the fourth quarter last year. So therefore -- and I think Rainer alluded to that during his part of the presentation. So we are expecting, I would say, a strong fourth quarter when you take the -- like this total perspective, what we always would recommend to take. And book-to-bill, let me answer like this. We have seen 4, 5 quarters from the later part of 2020 well into 2021, including the third quarter, where book-to-bill ratios have been very significantly higher than usual. We had in our bioprocessing business typically -- or you can also take the group's numbers -- but particularly in bioprocessing for the years before --always when you take the annual level, because quarters can always fluctuate a little bit, we had book-to-bill ratio of 1.08. And we were talking about orders -- quarters where we partially had book-to-bill ratios around 1.5 and a few quarters of that. And it's -- and we have to just understand that this cannot be -- that this doesn't work. Purely, mathematically, physically, it doesn't work. It has to go down again. We were talking about that, and we always said don't extrapolate that since the second half of 2020. And therefore, I think it's well possible, as we said also after 6 months, that we will see a book-to-bill ratio below 1 again next quarter, for instance. So that's absolutely well possible. And what you also have to keep in mind here, because I'm sure you are all comparing our numbers with the numbers of the competition. And of course, we also take a close look on those numbers. And when you do that, then you will see that particularly when you take out COVID, where sometimes the effects have been a little bit different in the different fiscal years, for instance, particular -- and even more so in the different quarters for sure. But then you see that we have seen a significantly stronger growth than our competition particularly when it came to order intake because our delivery performance was significantly better than the one of quite a number of our competition. So that means this effect has been a bit overpronounced on our side, and that means that the reverse effect will be also a little bit stronger. And again, we tried to be very transparent on that very much ahead of time. And now we see that as expected. And our recommendation really would be to take this total perspective rather from the big -- let's say, starting from mid of 2020 or take the full year of 2020, whatever your preference would be so that you understand the full and see the full dynamics and get a picture -- a true picture on the total performance and the true performance. And then I think you can see, and hopefully, understand why we are talking about a very healthy performance of ourselves.

The next question comes from James Quigley from Morgan Stanley.

I've got 3, if that's okay. So you mentioned that you may have a book-to-bill ratio below 1 in the next quarter as well. But sort of how long -- or what's your best sense or best guess of how long this sort of disruption could last or the normalization could last for? You mentioned some customers are going to 12 months versus 6 months inventory levels. But how are customers sort of balancing inventory levels versus other uncertainties that are out there in terms of geopolitical risks or anything that might affect deliveries in the future? And then one last point on order book and deliveries. You saw a similar sort of situation in 2017 and 2018. How does the current situation compare to that? Then when I look at orders versus sales over the past sort of 8 quarters, if you do an offset of about 2 quarters, there's around EUR 200 million to EUR 300 million of excess orders. So orders being EUR 300 million higher than sales. How should we think about realization of these revenues? Have there been any cancellations at all? Or should we expect those to flow through in Q4 or next year? And then finally, on the LPS business, Bioanalytics -- so last quarter, you mentioned it was slightly above 30% of the LPS business and is growing at around 30%. Is that still the same? You mentioned sort of very healthy double-digit growth. So is bioanalytics still in the same region? And then for the remainder of the LPS business, the non-bioanalytics part, can you give us a sense of what the exposure is to the economic downturn, particularly in areas such as food and beverage, chemicals, autos, et cetera?

Yes. So I only can repeat my answer regarding book-to-bill ratio. It's well possible that we will see another quarter or so with book-to-bill ratio below 1. I would rather like to try being more specific when it comes to an outlook on order intake developments again end of January next year. But on a higher level, what I think is we will see differently from this year, where, as I said before, sales revenue has been the same for 3 quarters now and also the fourth will look not that much differently from that. That maybe next year we will see a little bit more a different development in the -- during the course of the year, and that may particularly be the case for order intake. So we would expect that order intake will gradually improve in the course of the year. But to translate that into at least somehow a guidance for book-to-bill ratios quarter-on-quarter, it's a bit too early. And please bear with us. We will try to give more transparency when we get a little bit closer to that. I think then you were asking for order cancellations. That is not really a very significant topic. It's rather -- and I think we addressed that earlier in our call. It's rather that we are in close alignment with our customers when it comes to the delivery times. And I mean, we have long-standing relationships to our customers. And therefore, within a certain frame, we are adopting also to their preferences here. So we see some pushouts of deliveries and have seen that before into 2023, but cancellation don't really plays so much of a role. To your 2 questions on LPS. First one, we would confirm the very healthy growth rate. And we also confirm that BioA is, therefore, of course, increasing the share within the business. It's now a bit above the 30%, now continuously growing. So yes, confirmation on that. And then I think the last question was about the exposure of our non-BioA business in LPS to macroeconomic trends. And you mentioned the food and beverage industry, the chemical industry, et cetera. It's right, a portion of our non-BioA products are sold into such sectors. And it's clear that there is also some level of macroeconomic exposure and cyclicity. We don't expect much -- or too much effect here. But of course, this depends a bit on whether we really see a longer and very deep recession affecting such markets. So I would say it's some exposure, but I would consider that to be rather a limited exposure to recession -- to a potential recession.

The next question is from Odysseas Manesiotis from Berenberg.

So first of all, maybe to rephrase the question James asked a bit. I mean, just to get a better sense of where we are in the order behavior normalization progress. So on the orders you received in Q3, what would be the average lead time for these orders to be delivered? And how does this compare to the first half of the year? I know it's not easy to get this data, but if you have it, it would be very helpful. And a quick second one. Could you also please quantify the FX headwind on the EBITDA margin for Q3 and the 9 months? And how should we think about FX and margin movements going forward given the fluctuations?

I'll take the first one, and then Rainer will talk about FX headwinds. So lead time, of course, is always quite a bandwidth because of the different nature of the products that we have. And nevertheless, I'll try to answer your question, but please give me a bit background so that the -- my answer can be put also in perspective. So we do have some standard products, for example, in the filtration arena, where we are talking about just a few weeks of delivery time between -- we receive the order and then we deliver a standard sterilization filter, for instance, and such. Even here, lead times have been going up a bit last year. Sometimes instead of, say, 3, 4 weeks, we have seen 8, 10 weeks in some areas. And then we also have customized products like customized bags. I'm still talking about single-use products here, where, typically, customers are used to 8, 10 weeks maybe. And we have seen in some parts lead times that were going up to half a year and partially even a little bit longer. Again, all lead times still have been relatively low in comparison to some others that we have seen in the market. And now we are pretty much back to normal in the sector. A different situation -- or not situation, a different standard also is in the area of systems. So as soon as we are talking about a bit more complex customized systems like, for example, bioreactor systems, then lead times can be because of the design phase involved, et cetera, anyway, a couple of months. Here, we haven't seen so much of a change during the pandemic. And therefore, I would maybe take that out of the equation. But just to be -- to give you a complete picture. So that's rather what we are talking about. So we have seen an extension of lead times by a factor of 2, 3, sometimes even more in some areas, and we are now much closer back to normal, are clearly in -- and again, pretty much across the board. On FX, Rainer?

Yes. So let me answer that from a group perspective. And when you come from last year's EBITDA margin to today's, of course, initially, just by the conversion of our P&L by a strong dollar, we initially have a positive effect by doing that. But they are really offset and counteracted by our hedging instruments that we are realizing. And of course, we hedged -- if you look at the FX levels, 12 months prior they're significantly higher than what we are right now, where we are mainly driven by the U.S. dollar below parity. So all in all -- and then when you consider what the swing is really compared to previous year into what is this year, you almost talk -- it's a little bit below, let's say, 0.5 percentage point that is included just due to the FX comparison if you do the walk from last year margins to this year's margin for the first 9 months.

The next question comes from Oliver Reinberg from Kepler.

And I also wanted to come back on the order dynamics. In the past, I think you talked about the large part of the normalization is expected to end by this year. So can you just talk about is there a risk for further sequential decline from these levels? And can you also specify what amount of COVID-related business was still part of the 9 months order book? That will be the first question. And the second one. I think mid-November, President Biden announced kind of U.S. biopharma initiatives, talking about a significant ramp-up of capacities and investments. Can you just talk about what is the potential from this initiatives for your operations?

Yes. So I think we pretty much can confirm what we have said earlier this year, exactly as you said, that we think that we will see this for sure until the end of the year. And as we said earlier this year, we may have seen most of this normalization by end of the year. But as I tried to say before, it's too early to really confirm that. So I don't think that there is a big difference in what we are saying here. I think I would repeat now a lot of what I have said. We see quite a significant normalization. You can read that from the number. I think we also are using the respective comments here in saying it's a swift normalization. It really has gained momentum in the course of this year as customers now see normalized lead times. So it now really has quite some momentum. Customers are clearly talking about their desire now also to get their inventory levels now down. And therefore, we think that we will see -- we will have seen a good portion of that probably by end of the year. But whether it will be definitely the last quarter then by end of the year that has been impacted by that, that would be too early to say. COVID order book. We don't see that much COVID -- directly COVID-related business. So in this more narrow definition in our order book, we would think quite a very low 3-digit million euro number. And then biopharma initiative in the U.S. Of course, we are looking into that. It will be interesting to see how this will be operationalized. I think it should offer opportunities for ourselves. When -- there will be additional efforts being taken in the U.S. to make the country more independent from any non-U.S.-based manufacturing steps, because we are partially talking also about intermediates, et cetera, that are being produced elsewhere. But again, operationalization not yet clear, and therefore, also not possible for us today to quantify that. But I guess, going forward, we will see -- or get a little bit more clarity about that and then we can talk about that.