Stevanato Group S.p.A. (STVN) Earnings Call Transcript & Summary

Okay. Perfect. Welcome, everyone, to Day 2 of Morgan Stanley's Global Healthcare Conference. I'm Kallum Titchmarsh. I run the life sciences team here at MS. Really pleased today to be joined by the team from Stevanato we have Marco Dal Lago, CFO; and Lisa Miles, Chief Communications and Investor Relations Officer. Thank you both for being here.

Thanks for having us. .

And just before we get started, for all disclosures relating to this discussion, please see www.morganstanley.com/researchdisclosures.

So Marco and Lisa, maybe just to set the stage, can we talk about how 2026 has evolved versus your original expectations. It feels like there's been quite a lot going on in the market throughout this year, perhaps versus where we were this time last year. So maybe just talk through that evolution for us.

2026 is in line with our expectations. We are growing quite significantly our BDS segment. We are growing double digit on a constant currency rate. And so we plan to move to the end of the year with double-digit growth on a constant currency rate, 9% on a reported basis. On the Engineering side, same way, we are in line with our expectation. The expectations are to decline our overall revenue with third parties in 2026, moving from EUR 138 million to a range between EUR 130 million to EUR 140 million. Today, Engineering representing approximately 11% to 12% of our revenue. We are doing improvements in operations and reducing the risk in that type of the business. The core business is strong. We have a very good visibility. Again, we are growing double digit driven by demand, particularly in high-value products. We are growing significantly in high-value syringes, Nexa configuration with, very suitable for the self-administration devices. We are growing in EZ-fill cartridges. We see a good traction also in easy field bios that are growing more significantly than anticipated. So all overall, the value solutions are gaining traction. We recently launched also, I mean, the validation of our pen injector proprietary product, Adena. So it's a good omen also for the future to continue with this trajectory to further expand the value products. I didn't mention Alba, but it's very important because despite still not the most sole product, probably the best product we have in our portfolio, the most sophisticated one. and we can see very good growth also in our basins.

Okay. Aman. Anything to add there, Lisa, on the first half.

Covered it all. Amazing.

So yes, BDS is where at least we get most of our investor imbalance perhaps makes sense to start there. performed well this year on track to deliver that low double-digit organic growth in the segment throughout 2016. Could you maybe just unpack a little more of the drivers behind the strong performance here -- and then would love to hear a little more on the demand trends you're seeing for syringes, cartridges, vials, et cetera.

Yes. As I was saying, the main driver of growth is in high value products. that are representing today between 46% and 47% in the first half of the year, our overall revenue, above 50% within the BDS segment. In the first half of the year, the main driver has been in syringes in Nexa synergies. We see a very good demand also in the second part of the year. I mentioned before, we can see an acceleration in EZ-fill vials, where today, the market, the low penetration in sterile configuration. It's below 5%, but we see very good demand in easy field cartridges. We are investing accordingly to expand our capacity anchored to a big customer that is shifting some container from bulk to strike cartridges, but we see many, many other customer approaching us for our cartridges we are full covered for 2027, and we are investing accordingly to expand our capacity. Beginning of 2027, we will be installing our ready LTU 400 machine for the stabilization of the cartridges it's an opportunity for us to further expand capacity in high value products with much higher price per unit compared with.

And those high-value solutions, I think 46%, 47% of the portfolio this year revenue-wise at least. Where do you think that mix could ultimately go over the next few years? And which products do you think are likely to drive that next leg?

We expect to further increase the share of high-value products. In fact, if we look at the investment we have been doing in the after IPO -- since IPO -- we are investing predominantly in high-value products in Piombino in and Fishers. We are installing a lot of capacity in syringes, Alba syringes and now more and more in EZ-fill,which is to expand our capacity in high value products that is matching exactly the customers' demand and where market is going with respect to the growth in biologics. Our products are very, very suitable for the biologics needs where we can see more aggressive drugs and where we -- the need of more sophisticated products is present.

And obviously, that's an important part of the gross margin story as well, shifting out to those high-value solutions. Maybe just talk us through the premium on the margins that they have versus the lower portfolio.

This is a very important point. So besides the higher price per unit is also -- high-value solutions are also more accretive compared with other containment and delivery solutions. We disclosed the range of gross profit margin for high-value products that is between 40% to 70%. 70% is for specific products. But all overall, is we're above 40%. On the other side, in other containment and delivery solutions, typical, the bulk the gross profit margin range is between 15% to 35%. So the mix shift is helping a lot to expand profitability. We are moving more and more the mix toward high-value products, and we are expanding the margin consistently. This year, the plan is to expand 170 basis point the adjusted EBITDA compared to 2025. 2025, we grew significantly compared to 2024. So we are keeping on expanding profitability. And in the coming years, we can leverage together with the increase of value product mix, also the fact that we are ramping up that today are dilutive in terms of gross profit margin because of the ramp-up and all the costs associated line validation with customers in the start-up of each line is obviously slower than when fully ramped up.

Yes, we've had quite a few questions on that BDS gross margin this year being impacted by that. that initial ramp-up phase. How should we think about BDS margins over the next year? Can investors expect to see more significant margin expansion in 2027 as you start lapping some of those comps?

The way we see that, let's say, the medium-term scenario, we can leverage of further mix to our high-value product and the fact also leveraging the experience of but also Fishers, we keep on improving the financial performance of the 2 new plants. This is 1 of the main driver to explain the margin expansion in -- but if you think that in Fishers, we are still close to 0 gross profit margin compared with the target that is above 30% for those type of products and mix -- you can understand the room we have to further expand profitability with the operational performances that we will take full advantage when fully ramp up. for ramp-up is expected to be in 2028, but we can see steady improvement toward 2028.

Yes, that makes sense. And back in June, you launched the open -- maybe just talk us through the value proposition of that product. Talk a bit about the positioning as well relative to the current portfolio and like which customers you'd be targeting with that.

Okay, sure. As we have been working on the, which is the variable dose pen, it became clearly apparent to us that there was a vast market need for a fixed-dose pen injector. And so thus, we soft launched in June, our fixed-dose pen. Particularly as it relates to customers' needs, they're looking for a pen that requires strict adherence to a dosing regimen and thus the need for a fixed-dose pen such as Deora. And that's really kind of where we're going as we work in partnership with our customers through the cycle of what types of products they may need to really address some of the biggest challenges that they have. And Deora fits quite nicely into our proprietary product portfolio. So alongside our Deora fixed-dose pen, we have the Elena variable dose which we just received regulatory approval on in several European countries for liraglutide-based and we also have our Adeptus auto-injector. We anticipate regulatory approval for that either later this year or early next year. And lastly, we do have an on-body delivery system called Vertu.

Amazing. I think. I want to spend some time on the kind of fast growth markets, GLP-1s, occupying a lot of airtime to here. now about 22% to 23% of company revenue, how are you thinking about that market evolving over the medium term? And I guess talk to us about your competitive win rate within the GLP market as well.

Yes, we won a fair share of business in GLP-1s, leveraging our long-term relationship with the originators. We need to mention the fact that we started working more than 10 years ago for diabetes therapeutic needs and we keep on working on GLP-1. We -- one of the advantages that we have the capacity. We created the capacity linked to their need and also, we can offer flexibility in the type of format because we are in syringes. We are in cartridges. We can do dual chamber syringes and for the future, we have many opportunities also in drug-delivery systems for the biosimilars. So it's an important area for us. It's a phenomenal drug in our opinion that we represent a tailwind, a durable tailwind for Stevanato in the years to come. About the share of revenue, we are today basically where we plan to be. We expect similar share in the future on overall revenue. It means that we expect also other therapeutic areas will grow. Going back to GLP-1s, we are very positive because we expect market expansion driven by utilization in different therapeutic areas, not only in diabetes and in obesity. We can see new assets coming into the market. And in the coming years, also biosimilar will represent an important market to leverage. So overall, we see durable growth in different type of formats One of the questions we receive very often is about oral administration based on the conversations we have with our customers and also talking with peers market expert we still have the view of a 30% penetration of oral and 70% in injectables in the years to come, and we believe we are very well positioned to serve the market. I don't know.

I guess to complement what Marco said on GLP-1, we're really in the early innings here of GLP-1s. As Marco noted, there are many drug assets that are in the pipeline and set to come to market in the next 3 to 5 years. Biosimilars will also be game changer overall. So there's been so much focus on what's happening in the U.S. market and not a lot of focus with what's happening outside the U.S., which we think has certainly meaningful tailwinds to long-term growth, especially as we think about biosimilars in APAC. And we've already been successful in winning some of those biosimilar pieces of work for EZ-fill cartridges as well as for the Elena pen injector. So we're very excited about GLP-1s and the long-term prospects of it. When you peel back the revenue, and I think this is something we mentioned on the last earnings call, about 1% to 2% of that GLP-1 revenue is actually from outside the originators. So we are obviously working on new projects for those customers that are bringing additional assets or biosimilars to market as well. So I think that we've been very successful in winning our fair share in more. As Marco noted, we have a very long history in GLPs. Our first project dates back to 2010. And I think that we've really become a trusted partner for blockbuster type drugs. -- because we are a reliable supplier and have been for many years.

One of the things we've been talking with is it seems as though there's going to be an acceleration of growth for GLP-1s next year versus the levels this year, at least in terms of the patients that are being treated why wouldn't that equate to an acceleration for GLP-1 growth for the packaging providers? And I'm just trying to reconcile those 2 data points.

So there is early on. So what we did see essentially last year was inventory management, so really stocking up on their inventories as they're working through some of these products. And now we're moving into normalization, where we should see kind of those consistent products on a year in, year out with ongoing growth as they continue to grow globally.

That makes sense. And then outside of the oral debate, we've also had questions on multi-dose pens. You obviously have good visibility into that, just given how broad spread you are across the packaging types. So talk us through your assumptions there? And how do the economics change if a patient goes from single dose to multi-dose for Stevanato.

I think at the beginning, the market and administration was mainly in pen-injector single dose. We have couple of multiyear agreements in place. We have another multiyear agreement in place for. So we see the market growing significantly in different. So the future is -- we don't see a reduction in auto-injector in the syringes. On the other side, we see for the future expansion, depending also on the geographical area in different formats. But the good news for us is that we are a market leader in bulk cartridges, we are the first mover together with another player in sterile cartridges. So we are very well positioned to accommodate the different market needs.