SKAN Group AG (SKAN) Earnings Call Transcript & Summary

Ladies and gentleman, welcome to the SKAN Group Half Year 2024 Results Conference Call and Live Webcast. I am Maria, the chorus call operator. [Operator Instructions] At this time, it's my pleasure to hand over to Thomas Huber. Please go ahead, sir.

Thank you very much, Maria. I would like to welcome you to the presentation of the Half Year 1 figures of SKAN Group. My name is Thomas Huber. The agenda today will be that I will give you a quick overview in the beginning. Then our CFO, Burim Maraj, will guide you through the detailed figures. And number three, I will give you an outlook into the future, what we are expecting, and then we are happy to answer your questions. If we look at the highlights of the first half year, the order intake at CHF 177 million is stabilized on a good level. Net sales, CHF 163.7 million, we can show a growth of 17.2%, which is absolutely within our guidance. The EBITDA grew by 15.7% to CHF 21.5 million at a margin of 13.1%. Investments, we invested about CHF 22 million in our ongoing projects and the order backlog, CHF 328 million is still at a stable and healthy level. So the book-to-bill ratio is still at 1.1%, which gives us a good visibility for the rest of the year. As we are expecting still a significant order intake in the second half year, this visibility is also very good for the future. Solid order intake is slightly higher, right, than in the previous Half Year 1, it's very important to understand that the order intake was increasing significantly compared to the second half year of last year. If we look at the growth at a constant exchange rate, our growth would even exceed the guidance with 20.7%. Also, the EBITDA has increased significantly with a good EBITDA margin within the guidance. EBIT increased from CHF 12 million to CHF 15.2 million. And as I mentioned, investments are at CHF 22.2 million, mainly in our preapproved projects -- preapproved services project. If we look at the 2 reporting segments, we can report Equipment & Solution, our strategic initiatives are moving forward. We are making, let's say, little but continuous steps into equipment standardization. And once again, we spent about 8% of our sales into such initiatives as well as R&D. Both projects are developing according to plan. SKAN has set up a dedicated team for the standardization initiative, which is working with our partners to drive standardization process for which this is, on one hand, process on -- standardization on process side, but also on components side. If we look at services and consumables, this segment grows dynamically with increased margins, absolutely in line with the strategy our stake in Aseptic Technologies. You have read that earlier this year has now been -- has now reached 90%. This is what has been agreed with the Wallonie region who will remain the owner of the remaining 10% for the near future, at least currently, they are not interested to sell any more of their stake. We also made good progress with preapproved services, but I'll come back to that on a later slide. If we look at Aseptic Technologies, specifically, I think it's important to see that we are slowly, but definitely getting more track with commercial drugs in our vials. Currently, there are 7 drugs commercially available in Aseptic Technologies Closed Vial Technology. Important to see here is that also the jurisdictions that are getting approvals is increasing. So we have now 16 jurisdictions where these drugs are approved. As you understand, right, the FDA has to give an approval to sell a drug in North America, for example, or the EMEA in Europe, Swissmedic in Switzerland. So every country has their authority. And so to increase our market reach, it's important to see that number growing as well. Important here also as outlook for the future, we have about 450 active ingredients in clinical studies. Statistically, we know that a certain percentage of those drugs will turn into commercial drugs. Also here, we see that this is working as expected. If we look at the next slide, preapproved services, I would like to give you a little bit of an overview where we stand and what is expecting us here, right? We decided -- basically, we started with the concept beginning of '23, we started to build this preapproved services facility, in the meantime, all the major equipment has been delivered and is being installed. We will start a validation of the complete facility actually in these coming weeks. And this validation will probably -- we expect this will take about 12 months to complete. In the second half of 2025, we are -- we will approach Swissmedic and ask for a regulatory approval and expect to start commercial production in the beginning of 2026. As we stated during the IPO, the whole facility would have -- should have a volume to generate a rate about CHF 50 million in return on a -- with an EBITDA margin of up to 50%. Now it's important to understand that this CHF 50 million will not be generated on day 1 in 2026. So we expect this ramp-up to take a few years as well. Now I would like to hand over to Burim.

Thank you, Thomas. And also hello from -- sorry for this interruption. So thank you, Thomas. Also hello from my side, and welcome to this presentation of the half year figures 2024. I would like to give you some more color or insights in the financials of the first half year. So when we look at the next slide, on the left side, we have our -- in general, we have another successful half year, as already mentioned from Thomas. So we are pleased to report an order intake of CHF 177.2 million, which is a slight increase compared to previous half year of 1.1%. And when we look at -- or when we compare it with the second half year of 2023, which was a little bit a weaker year, so we were able to recover and increase the order intake of about 48% compared to the previous second half year of 2023. On the right side, regionally, we see clearly that Europe remains on a solid ground with a slight increase of 1% compared to the previous year. And also Americas is -- we were able to generate CHF 73.6 million, which looks like a slight decline, about 6.5%, but when we compare it with -- again, here with the second half year of 2023, we were able to strong -- we were able to catch up here and generate almost 5x more orders compared to the previous -- compared to the second half year of 2023. So the reason there is that we have the strong catch-up is that also last second half year or the last -- second half year of last year, we had also some cancelation there, but now the situation has recovered and the cautiousness of our customers is again getting back on track as they are buying again what they need. The Asian market is also here increasing. But there -- the portion of the total order intake is about 6.6%, and this fluctuates year-on-year, driven by some several larger individual orders. In summary, we can say here that the order situation has normalized at a stable level, but important is also that the order pipeline has continued to grow over the last 6 months, which gives us a very good -- or gives us very good visibility that the second half year, we are expecting a higher order intake, yes, for the second half year. Also, the book-to-bill ratio has increased to 1.1%, which gives us a good visibility for the development of the net sales. On the next slide, -- when we look at our net sales, we can report a solid growth to CHF 163.7 million, which is an increase of 17.2% and then we look at it at a constant exchange rate, so we were also able to exceed our guidance with 20.7%. So in this, the both segments, as we are reporting equipment and solutions, service and consumables, we are contributing to this growth as -- but the service and consumables is growing more dynamic and contributed a little bit more to this net sales growth. Here is also from a net sales point of view is important to understand that the nature of our project business, which is how do you say, which is -- which drives also the lumpiness of the net sales is also impacting the net sales. I will explain this effect in the next slide later on. But looking at the order backlog on the right side, we were able also here to increase it about 5.1% to CHF 328 million. And again, here, this order backlog with CHF 328 million gives us good visibility in the -- especially in the equipment and solutions business for more than one year. Now coming back to -- coming to the next slide, which is -- which I will explain the nature of our project business. So on the left side, the graph shows a typical value-creation structure of our project business during the different phases. We have this blue curve, which is representing the cumulative value creation over the different phases, then the green line is showing the cash in of the projects with down payments from our customers and the gray area in behind is showing the EBIT realization in the different phases. And as we can see clearly on the left side or at the beginning of a project in the Design and Engineering phase, we are only creating about 15 -- about 10% -- sorry, about 10% of value creation and also about 10% of the EBIT. From a cash-wise point of view, as we are working with down payments, we are generating a higher value, about 30% cash in. So that means that our projects are prefinanced. When we look in the middle phase, which is the value intensive or value creation intensive phase during our manufacturing and assembly phase. There, we will -- we have typically, the whole material, the whole components, the whole steer work, but also the majority of ours which are booked during these phases is driving the contribution, the majority of the contribution of the net sales generation, but also the EBIT generation. So about 75% of net sales and EBIT generation is done during this phase. And on the completion phase, you see again, it flattens down to about 15%. So when we -- when the projects are in the commissioning or completion phase we generate -- or the projects generate a lower level. This is because of our valuation method. We are using the cost-to-cost POC method, and this has big impact on our -- on the lumpiness of our project. This is -- always, it's depending in which phase the projects are. And currently, we have a lot of projects at the beginning phase, but also as we had last year, a strong year in the second half year, these projects were last year in value intensive phase. Now in the first half year, they are in the kind of completion phase with low contribution to the net sales, but in the second half year, all the projects that have started now will come in the value intensive phase. So we expect a stronger, stronger second half year driven by this effect of our project business. Then on the next slide, coming to the -- yes, the cost developed on the margin. When we look at the EBITDA, we were able to improve our EBITDA from CHF 18.6 million to CHF 21.5 million, which is a growth of 15.7 million (sic) [ 15.7% ] is representing an EBIT at the margin of 13.1% and is only 0.2% points lower than the margin of previous year. So the main factors when we look at the main elements or influencing factors of this is -- the primary fact is, as I explained before, the lumpiness of our project business or let's say, the phases of our project business. So in the first half year, we have -- or we had a lot of projects in the beginning phase and also a lot of projects in the completion phase, which were not generating or contributing to the stronger net sales and also stronger EBITDA. Yes, that's the main driver here, but also in the -- second effect is also here that last year, we had a significant expansion in employees. So we have hired 216 employees last year, which was a little bit higher as we planned. So we had a stronger growth in employees last year compared to what we have planned. And another 31 we hired or we added this year to be able to support also the future growth what we are planning. When we look at the ratio of the personnel cost -- yes, in relation to the net sales, there is a slight improvement to 50.5%, but also here, as the top line, as I mentioned, the top line, we are expecting a stronger generation in the second half at this ratio of 50.5% is improved compared to previous year, but it is still on a higher level and will be kind of on -- will be also improving with our expectation in the second half year. Then the material cost also the same effect is also here. The material costs fluctuate driven by the nature of our project business. Nevertheless, we were able to improve this, the ratio from 25.7% to 25%. And then the main driver is here, expansion that we did in Görlitz and in Stein with further in-sourcing of activities drives also here the improvement. The other operating costs also here, we have -- the operating expenses also here, we see a slight increasement from CHF 20.9 million to CHF 22.1 million and in relation to the net sales, there is an improvement of 15% to 13.5%. But here also, we are expecting as the growing top line in the second year that the factor or the ratio will improve. So we will have a higher cost leverage in the second half year also from the operating cost point of view. When we look at the segment details, the Equipment & Solutions segment reported an order intake of CHF 124 million for the first half year, which is representing a moderate decline of 2.6% compared to the previous year. This decline is primarily driven by the cautiousness that we have seen on our customers. But when we compare it again with the second half year of 2023, we were able to catch up of about 47% here, which is also indicating that the demand for our solution has stabilized on a healthy level. This increase in the second half year is also indicated by the general structure or the trend towards more injectable dosage forms. But also, we have seen the effects or events such as Novo Nordisk acquisition of Catalent, which is driving also here the pipeline for new orders. The net sales increased by 16.6% from CHF 103.1 million to CHF 120.1 million. The EBITDA of the first half year was CHF 8.9 million, corresponding to an EBITDA margin of 7.4%. The decrease of the margin compared to the previous year is again explained with periodicity or, let's say, the different phases of our projects, as I explained before, but here, we have -- another effect is also that due to the project mix that we have in the first year, so we have more large or high-speed lines, and this caused also that our production site in Görlitz had a lower workload, which impacts also the margin in Equipment & Solutions segment. Another effect is also here that we have invested in research and development, but also in our strategic initiatives, about 8% of our net sales, which is also higher about 1% point compared to the previous year. So last year, at the same time, the investments in R&D and strategic initiatives were at about 7% and currently at 8%. So this has also an impact. And we directly expense these investments to the P&L of this segment Equipment and Solutions. On the next slide, we have the Service and Consumables. Also here, we have an order intake growth to CHF 52.3 million, which is an increase of 11.1% compared to the previous year. The net sales also increased here more strongly compared to segment Equipment and Solutions to CHF 43.6 million and this stronger growth is also aligned with our strategy. And currently, it amounts at 27% of the total group level net sales. From an EBITDA perspective, it rose significantly from CHF 9.1 million to CHF 12.6 million, which is an increase of 39.1%. Also from an EBITDA point of view, we have been able to increase our margin by 4.2 percentage points to 28.9%. Here the main driver for this strong improvement is the product mix that we have in the first year. So the key contributors here were the life cycle support and the parts business, which is supported by our installed base, but our installed base worldwide and the second driver here also the higher sales of AT-Closed Vials and filling kits from our Belgian subsidiary Aseptic Technologies as we have heard at the beginning. So we have 7 products in our closed vials, which are consuming the -- we have consumed closed vials, but also other consumables of Aseptic Technologies. Another effect here is also that during the reporting period, we were able also to gain new customers using the closed vial technologies for -- not only for the cell and gene therapy, but also for other modalities, which also increased our net sales, but also our margin here. When we look at the cash situation, so we have here a decline from CHF 85.1 million to CHF 48.1 million, which is a decline of CHF 37.1 million. So the main driver here for this cash decline is the investments that we have done in our strategic initiatives in preapproved services, but also a further purchase of 5% in AT shares and now currently, we are at 90% as explained already from Thomas. Also from an operating cash flow point of view, we are on a, I would say, on a lower level. And the lower level is also a temporary effect that we have at the end of June. The main driver for this low operating cash flow is that the working progress has increased due to the timing effect of our project, but also the down payments or the timing of the order intake is impacting. So that means we have orders that we have received in May and June will be cash -- will have an impact on our cash situation in the second half of the year due to the long payment terms of our customers. When we look on the next slide, our balance sheet, so we have still a solid finance structure. We have a net cash position of CHF 41.8 million. And as explained before, the decrease in cash and cash equivalents is mainly driven the growth investments that we did during the first half year, but also the purchase of Aseptic Technologies shares and also the payout of the dividend impacting the whole cash situation. Nevertheless, also here, the equity, we are at a solid finance structure with the equity ratio of almost 51%, which gives us also the flexibility to finance also the future growth. So on the next -- then I would like to hand over to Thomas to give you outlook for 2024.

Thank you, Burim, for the details of the figures. I would like to give you an outlook for the rest of the year, what we are expecting to happen in the second half year of 2024. I think it's important to see that we are still in the middle of this trend of this century of biology, the trend towards large molecule injectables. Some of you might have seen those slides before, right. In 2005, just as an example, none of the top 10 drugs on the market were injectables. Today in 2023, 7 out of the top 10 and about 20 out of the top 100 are large molecule injectables. Large molecule injectables means these are sensitive drugs that cannot be terminally sterilized and need to be filled aseptically, in other words, require technology -- isolator technology. And SKAN being a leader on this market, obviously, we profit from that trend. So what we can summarize is that the demand momentum in our market is expected to continue at a very high level. Main drivers are, on one hand, the global biopharmaceutical market that is growing. On top of that, we have actually the reinforcing or the focusing on the injectable drugs, right? Still 3/4 of the new drugs being developed are injectable dosage forms. So this trend will continue in the coming years, or I'd say, at least the next 10 years, we will see more injectable drugs coming to the market than conventional drugs. The shift from traditional clean rooms into more advanced isolate technology is still happening. There are still old cleanroom facilities out there in the market. Today, I think at least we see hardly any cleanroom facility being upgraded. With a clean room, they are upgraded with isolators. Also a nice tailwind is the GLP-1 or obesity drug trend, which obviously requires more aseptic filling production globally, which obviously is good for us because this is raising the bar and basically raising the demand. As a consequence, we expect that our systems, services and consumables will be -- will continue to be in high demand, and we have a very well-filled order pipeline. That's not the order backlog. I think it's important to understand the order pipeline is basically the number or the value of the quotes we have out there in the market. We mentioned when we communicated the full year figures back in April that just by the fact that Catalent was acquired by Novo Nordisk, we saw an increase of about 30% of this order pipeline to about CHF 1.5 billion at the very moment. We expect those -- this demand to translate into order over the coming 12 months. Now it's important to see that purchase was only about 5 months ago. So this is going to turn into orders in the coming months and also next year. So all in all, we are very convinced that we can also confirm the 2024 guidance. So looking at the guidance, we expect Equipment & Solutions and Service & Consumables both to be in the mid-to-upper teens range on the sales growth side, midterm outlook will be also mid-to-upper teens. Here, typically, we get the question and when is this going to improve? I think the answer here is a significant change here will be the point when our preapproved services will start to kick in and will obviously have a positive impact on revenue and margin. And so we expect significant changes to happen after 2026. EBITDA margin between 13% and 15%. Also here, we are sure that we can keep this guidance for the rest of the year. Together always one step ahead, our mission statement. I think we are still one step ahead. Looking at our competition and our partners, I think we are defending our leading position very well. And we are happy to take your questions.

[Operator Instructions] The first question come from Odysseas Manesiotis, Berenberg.

Firstly, on the backlog. If my math is right, you need to deliver a bit less than 2/3 of your current backlog in H2 '24 to meet your full year targets, which you just reiterated. And I mean combining this with the comments there are normalizing order trends, but also your comments, Thomas, around the order pipeline being strong, would it be fair to expect full year '25 to be a lower growth year? Or do you feel that the order pipeline is strong enough to support another mid-to-high teens here? I mean I understand you can't talk a lot about '25, but you probably have some visibility towards that at this point.

Thank you, Odysseas, for this question. I mean your assumption would be right if we would not get any more orders as of today, right? But obviously, we're not expecting to get orders. We have still a very high activity on the market. So it's correct that about, let's say, 80% of our order backlog will turn into revenue this year, but we are continuously filling this order backlog with new projects. And looking at the pipeline, we are at the moment very optimistic that also 2024 -- second half of 2024 will become a stronger order intake year than last year was, right? You remember the half year 2 last year was actually quite weak. And on top of that, we had some significant cancelations from a major company involved in COVID after their share price went down, they canceled some major projects. So there, we expect that this is -- so at the moment, we have no signs that this should happen in half year, too. Looking at the order pipeline, I think it's fair to assume that the second half of this year, but definitely, the first half of next year will be a strong order intake year as well. Sometimes difficult to predict if a customer places an order this week or next week or this month or next months. Obviously, these are huge investment projects that also need to go through decision steps at our customer sites. But looking at the order pipeline, we are very positive that the backlog is still high at this time of the year currently. And we expect that we actually can fill up this backlog faster than we consume the backlog.

Understood. And a follow-up on your comment around the orders here. So in terms of the other funnel you're seeing for H2, I understand you're expecting an improvement from H2 last year, but would it be fair to also assume that we expect a material sequential improvement from H1 in your H2 order intake. I just want to get a sense of are you comfortable with where consensus stands for '25 on the mid-to-high teens?

Yes. Currently, there is no other signs that we cannot expect a stronger half to year. From an order intake point of view, as mentioned from Thomas, the pipeline is increasing and the dynamic or the momentum is there. So there is no other signs here.

I think it's important to understand, like the mechanics behind the orders, right? Normally, if you are a big pharma company and you want to invest into new production capacity, you obviously need more than just a fitting machine. You need probably a new building. You need -- it's a heavy investment for you. And so typically, it takes you about 1 year to get approval for that investment within the big pharma companies. So to be able to even apply for a budget, right, they need to get quotes. And this is this order pipeline that we're looking at. And by experience, we know that order pipeline turns into order early as 6 months, but typically between around 12 months after we send out the first quote. So from that point of view, seeing the order pipeline with this, let's say, explosion driven by the Catalent, by selling Catalent to Novo in -- which was back in March, right? March or April. So this will turn into orders earliest in the second half year of this year, but most likely, the big wave would only come in the first half of next year. So all in all, for us, our order backlog is an important buffer to make sure that the workload in the sites and the fabrication sites is less lumpy than actually the order intake.

That's very helpful. And just to confirm one of your previous comments there. Did you say you have an around CHF 1.5 billion of quotes, not backlog that you would expect at least part of it to turn into orders in the coming 12 months? Did I get that right?

Yes, it's around CHF 1.5 billion of order pipeline. Now you have to know that never 100% of this would turn into orders. So from this CHF 1.5 billion over the next 12 to 18 months, we can expect maybe 30%, maybe 25% or maybe 30% to turn into orders. Obviously, a big portion of it will not be approved and will simply disappear again. And obviously, we will also lose a certain part to our competition. So it's not that we are the only ones quoting on those jobs. So but in the end, the CHF 1.2 billion that it was in the beginning of the year was at the lower end, the CHF 1.5 billion again now is at the higher end. So from that, we feel comfortable for the future.

Very clear. And may I ask one last follow-up on the Service & Consumables side of the business. So you have previously flagged some expected strength in the life cycle support and spare parts for your existing installed base, given a big portion of your isolators will be reaching that 10-year mark soon. And you also said that was strong this half. So could you give us a feeling of what portion of your installed base will be getting in that 10-year mark in the coming 2, 3 years? And how this compares to history?

When you look at the growth curve of SKAN, the real hockey stick, if I may call it like that, only kicked in about 5 years ago. So the big number of our isolators are kind of still new and are not yet 10 years old. So it's probably about 25 -- 20% of our installed base that are probably older than 10 years. Since we have been growing exponentially in the past, let's say, this number, yes, is also growing exponentially, but 10 years back, it's not yet in the raising part of the curve. But yes, it's increasing, but it's not yet -- the big momentum is not yet there. So this is still to go. On the other hand, maybe to be clear, we are also -- when we talk about retrofit, it's not only that we are retrofitting old machines because they're old. There is also a trend that we are currently retrofitting equipment from an ESG perspective. For example, we sell catalytic converters to our equipment to make sure that the equipment can be -- that the air can be reused, the exhauster can be reused, and we have a smaller consumption of energy during decontamination and production phases. So from that point of view, we are also upgrading our machines to be more ESG-compliant. So that's not yet a big portion, but this is also a growing portion that is not limited to old machines. That's -- Obviously, the latest machine would have that typically as a standard. But 5 years back, people were not yet as sensitive to ESG as they are today.

[Operator Instructions] The next question comes from Daniel Jelovcan, ZKB.

Just one question left for me. I mean, other, let's say, life science tool companies not related to your business, they -- a lot of them have warned that in the biopharma segment there were orders delayed or canceled because of budget constraints. And I'm not talking about early-stage drugs where the problems we all know with the difficult situation, but also, let's say, some site restructuring of companies they closed or that's why they don't need as much equipment and so on. So I guess when you're commenting in depth about your order backlog, you weren't affected, but maybe you were affected, but it was overcompensated by other business. If you can elaborate about that would be nice.

Daniel, thank you very much for your question. And yes, you're right, we were by this -- we had a significant cancellation, although it was already end of last year. So it was actually in half year 2 last year. But that was a significant cancellation from one of the COVID vaccine manufacturers that simply didn't need the demand. The demand wasn't there anymore, so they canceled several lines that they have ordered. And so that's why our order intake last year was behind target. And that's why, let's say, our order backlog today is not as full as it has been 2 years ago. So the book-to-bill ratio of 1.1 currently is obviously lower than it was 1 or 2 years ago when we were in the middle of the COVID hype and everybody was placing orders just for the sake of getting into the queue to make sure they get some -- they get filling machine equipment -- to get in line to get this. So what we see is that actually a lot of, let's say -- or effects that we have seen is that companies that sell consumables during COVID, customers were filling up their warehouses and those companies who were able to increase production quickly profited during that phase, but are now facing the issues that the warehouse is still full, and those customers are not continuing to buy at those high levels. Now we are not affected by this because we are on the investment good side, mainly, right, and the investments itself take years to happen. And so from that point of view, we're maybe not as quickly affected as others. We also have to see that when we talk about life science, we don't necessarily talk about fill finish in the aseptic environment. So we are really in a niche in this niche that we call the biology or century of biology or, let's say, you can also call the niche in the niche is even cell and gene. It's a very small niche. In that niche, we are well positioned and we are -- we have been less affected than maybe other companies have in the past few months. But we also have a good order backlog that allows us to compensate some, let's say, fluctuations in order intake. Hope that answers your question.

That's great. I was also talking about the equipment, but I guess you are not affected at all by some site closes or whatever from big pharma.

Currently, I mean, as I mentioned, we were affected end of last year. In the first half year of this year, we have not been affected yet or at least those customers who have closed their sites have not yet placed orders. We are affected on the site, but that's not really a negative impact that we see more and more customers closing a site, but shifting the equipment to another site. So for us, that means they are concentrating their fill finish at a few sites. For us, that means actually extra business because we typically have to modify those machines to fit into other buildings, but it's not really a cancellation. I think currently, there is a lack of aseptic filling capacity globally when you look at GLP-1 and so on. So I think that's the reason why nobody thinks there will be overcapacity soon. So that's why I feel Finnish is still surviving.

Okay. And then maybe a follow-up. Aren't you affected at all by the Chinese situation? I mean China, when you talk to life science companies, I mean, everybody is escaping from China, at least the Western companies and all these companies in the Western world who did business with the Wuxi AppTec, Wuxi Biologics or whoever, they stopped dramatically because of the U.S. Biosecure Act, which is far away, but still, of course, it triggers the Western companies to reshuffle their supply chains. Aren't you affected at all by that?

No. We are not affected by that. I think we are lucky to be in a position where we have not really serious activities in China. We sell one or two projects to China every year, mainly to Western joint ventures in China. WuXi is a customer of ours. They ordered a few lines, a few years back, and they are now running those lines because we are not selling them any consumables. We are not involved in any -- let's say, the business for us has been completed there. But yes, I think I'm happy that we did not invest in a Chinese facility 20 years ago, like many of our competitors did. So currently, we profit from the fact that we are only serving the Western World, if I may call it like that.

Very good. And my last question. When you mentioned in the Service & Consumables segment, you also now have some customers outside cell and gene. Just to understand in what areas is that exactly?

I mean that's -- we have some confidentiality there with our customers, so we are not allowed to talk about that. But what I can say is that it's not only those drugs that have to be frozen to minus 150 or 180 degrees, we are now seeing more and more customers that also go into this close vial technology with drugs that don't have to be frozen that deep. I mean, they still have to be frozen, but not that deep. And that opens the field away from cell and gene more into big molecule, large molecule biotech, which is obviously nice to see. But again, that's clinical stage, right, those drugs are not commercial yet.

The next question comes from Rupen Boyadjian, Finanz und Wirtschaft.

It's also about the aseptic filling. You said 7 medicaments are now filled on -- with your technology and that there is a pipeline. Can you give us some more details about if the statistics work out that you mentioned as well? How many medicaments we can expect to come online per year? And how could that affect also the use of those consumables? You mentioned that the sale of those vials was also a driver for your revenue.

Yes, absolutely. I mean, our strategy, we are trying to enforce, let's say, the Service & Consumables part to also get further away from the project lumpiness also to generate more stable numbers. We are currently not yet disclosing any detailed numbers about Aseptic Technologies. But what I can say is, yes, the statistics so far work out. I mean if you look back during the IPO, we had 1 or 2 drugs approved. Now it is 7 and knowing that the clinical phases typically lasts up to 10 years, we are absolutely in line with our expectations there. Also looking at the number of trucks in the vials, which for me is much, let's say, more the more important indicator with 450 drugs, knowing that about 10% statistically can reach clinical phases. We have actually 45 more to come, which would be significant if we trust pure statistics.

And on the commercial side, there will be 1, 2 or 3 per year that we can expect?

I mean there -- what we also said there, the drug approval in the first country is one thing and then the rollout to other countries is the other thing, right? For the company launching these drugs to the market, rollout in every country is a huge administrative effort. They maybe have to prove stability. They have to show maybe some even different data to different authorities. So that's a process as well. But important if the drug is approved in the U.S., for example, then the U.S. market can consume it. If it's not approved in Europe, then the Europe market is simply not existing for that drug. So it's important that we do not only count the drugs, we also count the countries and kind of look at both those figures. But you're correct, we expect a handful of drugs every year to be added to the list.

Okay. And maybe also about the stability testing facility that is going online in '26, you mentioned volume of CHF 50 million that will be scheduled over several years. Will that be a linear uptake? Or can we expect a fast uptake in the beginning and then a slow expansion or the other way around?

We discussed that lately. If we would be -- if we would have been ready in March this year, we probably would have filled the facility to full capacity with Novo Nordisk from day 1, right? So it really depends on the market situation. Now we are not calculating with this best case situation. We are assuming that this is a slow ramp-up, taking maybe 3 years. but it really depends on the situation. Currently, the demand for aseptic filling capacity is very high. And so currently, we are very optimistic that maybe we can do that in 2, 3 years, but that really depends on how the situation looks like end of '25 once we have the Swissmedic approval because this kind of -- this stamp is kind of -- if we don't have this stamp, it's hard to even talk to customers or no -- not talking to customers, but to get any commitments from customers is impossible without this step. So from that point of view, it could be faster, but we don't expect it to be faster in our business projections.

We have a follow-up question from Odysseas Manesiotis.

I just had a quick one on the Aseptic Technologies point you made about how many processes might come online or on commercial phasing per year and how we should think about it. Did you say that a reasonable assumption would be assuming sort of 2 to 3 drugs that you're involved in coming commercial? I mean I'm just thinking is it a bit of a small number compared to the 450 active ingredients you have on the pipeline?

Yes. Now imagine the 450 is the pipeline that we currently have. 90% of those drugs would fail, by statistics, 10% will survive. And since we know that this these clinical phases last from 5 to 10 years in length, it's realistic to assume that every year, it will -- the list will be added by a handful of drugs. It's somewhere between 0 and 5. But I mean, also here, it really depends on how the progress is going on at our customer site, which is kind of out of our control. If their molecule fails in Phase III, then the product is typically dead. So for us, it's important to have a big pipeline to see that statistically, we will see some drugs winning race reaching a commercial stage and just from the past, when you follow, let's say, our explanation since the IPO statistics worked out well.

Just also to add here, the 450 active ingredients that we have in our pipeline, these are in different phases. So that means clinical Phase I, II and III. So it's not the to that all of these 450 is in the clinical Phase III that are expecting to get commercial and 90% is how to say, yes, doesn't make it, so it's divided until -- between the whole phases -- clinical phases there.

Gentlemen, there are no more questions from the phone at this time. Mr. Huber, back to you for the conclusions. Thank you.

Thank you very much for your questions. I hope we could clarify all the open points and we're looking forward to see you guys again in 6 months' time or in April '25. Thank you very much for your attendance, and goodbye.

Thank you.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.