Wacker Chemie AG (WCH) Earnings Call Transcript & Summary

Welcome, everybody, to the Wacker Chemie AG Virtual Capital Market Day on R&D and BioSolutions. Before we begin, please allow me to point you to safe harbor statement, which you'll find at the slide deck's beginning. You will also find a slido.com link there that enables you to ask questions during the Q&A session at the end of today's presentation. Today's presenters are Chris Hartel, our CEO; Tobias Ohler, our CFO; Susanne Leonhartsberger, President of BioSolutions; and Christoph Kowitz, Head of R&D. The presentation is available to download on our web page under the caption Investor Relations. Chris?

Thank you, Joerg. Ladies and gentlemen, welcome to the third edition of our Virtual Capital Market Day series. In June and December of last year, we first covered a strategy update and our main chemical segments. Today, we will speak about key growth progress beyond silicones and polymers. Our next edition in Q4 will cover ESG and polysilicon which are as essential, promising and exciting for our future. We expect to receive funds for our remaining stake in Siltronic later this year, latest in January 2022, depending on timing of all regulatory approvals. We will give you a fresh strategy update after that in Q1. We are entering a new phase and are currently formulating new group targets and ambitions. A small taste of which you will hear later in BioSolutions presentation with Susanne. And I can tell you, it will be really exciting stuff. Now let's have a look at where we stand today on Page 4. Over the last years, the 5 guiding targets on the left summarized our strategy, and we have delivered on all of them. Our businesses are well positioned. The business strategies are well defined, and we deliver strong results. For example, a key feature in our Chemicals business was pivoting towards higher shares of specialty products. And as you can see on the bar charts on the right, this strategy generates higher margins combined with lower capital intensity. We extended our leverage phase, and we invested significantly below depreciation on a group level. Investments in chemicals are and will continue to be above depreciation as we capture attractive growth opportunities. We do this by, a, growing our specialty business; and b, expanding our presence in the regions to better serve our customers. And this customer proximity is something which makes us, I believe, quite unique. and we will further continue this path. So capital allocation is my focus. You should expect us to direct funds in declining order to these users, growth, M&A, dividends and the reform of the pension system. We will detail our approach further as we proceed. So Wacker delivers on its targets and will continue to be a leading performer in specialty chemicals. We are now ready for the next step in our evolution as a company. I'm excited about our future. I'm dedicated and I'm convinced about our future. Next year, we will provide you with new group targets and our ambitions. So before we dive into the exciting world of R&D with Chris and BioSolutions with Susanne, let me close by saying that I really value the candid and open discussions with all of you in my first week as the CEO of this great company. Let me add that we really appreciate your involvement and your active coverage of Wacker. We can't promise to answer all your questions today. But you will understand that we try to balance transfer information and protect sensitive competitive interests. But today, we will continue to provide helpful insights into the exciting opportunities and our strategy for further growth in R&D and biotech. With this, let me hand over to Tobias, who will address current trading. Tobias?

Thank you, Chris. Welcome to everybody. As you saw from our recent ad hoc release, we have seen a very strong performance in our business, and we updated our guidance materially on June 16. Following the sustained positive performance of our businesses, we raised our full year guidance for sales and EBITDA. Let me now provide you a little bit of color on the second quarter. All segments developed better than we had expected in late April. Key drivers were the performance of our chemical businesses and polysilicon price increases. Specifically, we now see silicones with sales sequentially slightly up and our margins slightly up as well. Again, the key factor here was the continued success in specialty volumes. Polymers saw an unprecedented rise in raw materials. As a result, we deployed surcharges on all contracts in Q2 to dampen the effect of these cost increases. With strong demand from the construction industry continuing, we saw volume increases, especially in dispersible powders. As a result of pricing and volume, Q2 in polymers should come in with sales significantly up from Q1 and an EBITDA margin just double digit. Effects from a planned maintenance shutdown way on the end of Q2 and the start of Q3. BioSolutions continues to benefit from strong growth in biopharma. Raw material inflation in our chewing gum business and continued ramp and integration costs will hold back results similar to the first quarter. Q2 EBITDA will likely be a mid-single-digit million euros figure. Polysilicon benefited from strong demand from our semiconductor products and a very tight market in solar grade polysilicon, driven by polysilicon price increases, sales in Q2 are significantly up from Q1 and EBITDA is expected to triple from Q1. So much for today, we will discuss the quarter in more detail on August 5. And now let's proceed with the main event today and I hand over to Christoph.

Thank you, Tobias, and good morning, everybody. We just heard that actually, we are growing our specialties quite nicely over the last months, but also years. And I would like to take my slot today to tell you about how we use this specialty drive also to develop our technology position, how we are really coming to leading-edge technologies. And I'll start by giving a short innovation setup. You see the figures here in the middle, EUR 157 million we're spending on R&D per year. It's about 750 employees that are present in our organization that work on innovation, about 3.3% of our sales. You see the number 45 at the bottom right, it's 45 scientific collaborations. That's a number of institutions we are currently working with at this moment in a very deep way, and this really leads me over to one of the tenets of our R&D work, our innovation work. And this is to collaborate with other people. We are not alone in this world. We're in the network of academia, but also in a network of our customers throughout the regions globally. And this is the right side of this page, where you can see we are operating 23 technical centers and R&D centers globally to allow this type of collaboration and exchange with customers and also sometimes suppliers are a source of inspiration for us. You see also the topics that are high on our list when you look at those technical centers. For example, in Germany, at the consortium for electrochemical industry, we are focusing on our lithium ion battery work. In India, we focus very much on consumer care and textile applications from our silicones. And maybe one more word in Shanghai, we have our competence center for cement and concrete established a few years ago, and it really is the right place to be being the biggest construction market globally. Let me give you today a snapshot on our innovation work. And there's going to be 6 snapshots in fact, I'll cover new applications. On the left, you can see really 2 very critical market segments for us. Construction on the one hand, Construction Adhesives, be more specific and electronics, lower-left corner, really critical segments. In the middle, we talk about -- I'll talk about new products. One is the silicon anode in the lithium ion battery. And then also our ECO product line, I'll give some thoughts on our philosophy for those. And on new processes, I will shortly touch up on RHYME Bavaria, our flagship CO2 project as well as on our leading technology in the biosolutions division, ESETEC. Let me start with GENIOSIL in the construction adhesives area. And I'll start by telling you we launched about 10 years ago, GENIOSIL STP-E, you see the picture, the left upward picture in this little tableau of 4 pictures. And those GENIOSIL STP-E products, they gave superior adhesion sealants compared to silicone sealants. And they gave superior elastic adhesives versus polyurethanes. So at that time, when customers needed that outperformance and also today still, they go for the GENIOSIL type products. And on top of it, we have incredible sustainability credentials for these products. And it's all based on our proprietary alpha cyanate technology. It's heavy metal free. It's isocyanate-free and it's also solvent-free. Few years later around 2015, we launched 2 more product groups. It's called GENIOSIL XB and GENIOSIL XT, top right picture and top left picture. XB stands for extra bonding. The GENIOSIL XB lets you bond everything to everything. There is no epoxy with that type of property profile. And on top of it, if you want to, you can make this bond transparent. The XT -- the GENIOSIL XT stands for elastic high strength, extra strength. And that allows you to formulate protective floor coatings or also water barrier coatings that no other material can do. And on top of it, we continue to have the sustainability credentials that are known from the alpha silane technology. You still track possibly of all the different applications, but I have to come also now to the GENIOSIL XM launched just a couple of years ago, a few months ago, XM stands for low modules, high recovery bonding. And what we do is we take prefabricated concrete slabs, and we joined them, and there is always building movements, and you need a very long-lasting bond that is allowing to give a long-time stress but also has recovery when stress goes away and as well also has low modules, meaning low force. If it's not too strong, if it's too much force, then the elastic sealant would rip the concrete and you would have permanent damage. At the moment, we don't see any other material besides our GENIOSIL XM. Customers in all of these applications are willing to pay the premium on our product groups because they offer superior performance with the sustainability credentials. Why do I tell you this story? Well, on the one hand, we are really here in a very attractive construction markets. This is really these markets that we like that are growing. But on top of it, we are really shaping these markets with our products. Our customers, they create new building solutions using our materials. It doesn't come overnight. It does take time for the architects for the builders to understand and to learn about our products. That's when they can go by the way, to one of the Wacker centers that I just mentioned, the 22 centers globally, and they have to spec our products. So what we really do is we are building a technology franchise over time. And we will continue to develop this position. And really, this is based on butter proprietary chemistry. It's based on our application know-how. It's based on the close customer intimacy and joint development work, and it's based on the sustainability credentials. The same pattern, I will show you now on the next slide with LUMISIL. LUMISIL is our application for electronics. We started out in our center of electronics expertise in Korea, a few years back, tackling the optical clear resins market. You need a binder to bind the display with the cover glass. And we started out with our silicon solutions, tackling the thermally cross-linkable market. Our success wasn't so strong at first. But we got -- we gained useful insights. We then started to tackle the UV cross-linkable market segment. UV cross-linking customers like, it allows them to use thermally sensitive substrates. It's a potentially faster process, it saves some energy in the process and you can direct the UV light ray precisely. And so we worked on new products using our chemistry of silicon resins. And what we ended up was not only a UV cross-linkable product, but was a whole different format that we were able to develop jointly with our customers. Customers have unprecedented choice now with these types of LUMISIL UV products. They can choose the viscosity of the formulation. They can choose the mechanical properties of the final bond, and they can choose the cross-linking speed and also the time went to cross-link. Of course, they also get the silicon benefits of superior clarity of no yellowing and of excellent stability under harsh environmental conditions. And so now we are addressing market segment by market segment. We are in the thick of the optical touch displays in the automotive markets, top left picture, you can see that. We're tackling now the large format displays, top right picture, you can see. And then handheld mobile devices for tablet smartphones is a natural go-to-market for us also as a next step. Let me move on after these 2 market segments on our work for the lithium ion battery. And we've been working in this exciting market already for a number of years. We can confirm also today if you want to increase the capacity in the anode of lithium ion batteries, people will go to silicon. We can also confirm at the same time, we have not found the Holy Grail, also not other players to our knowledge. So we still have to work. But we are bullish on this opportunity. After all, we also have increased -- we have taken a 25% stake in the startup Nexeon in the U.K., which also focuses on this opportunity of silicon in the lithium ion battery. We are receiving encouraging feedback from OEMs from cell manufacturers. We are seeing higher energy densities than the status quo, and we can see how the cycle life is improving. So we are moving in the right direction. It's fair to say we expect the adoption of this type of technology to be maybe first in a type of niche applications like drones, take drones as an example where there's a premium for energy density. And that's also because, again, we have to work very closely with the cell manufacturers, and they have to change part of their processes based on our materials, and therefore, a smaller niche is a more likely avenue for introducing this type of new technology. I would like to move on to the second example of new products, our ECO product line. And I don't have to tell you, we are strong players in silicones, in vinyl acetate ethylene copolymers. So it's, I think, given that we are the first company to offer product groups in this area that are based on renewable raw materials. And there has been, of course, a technology edge to it. You have to qualify the raw materials. It's methanol in the case of the silicones based on natural raw materials. And it's acetic acid based on the processing of wood cellulose in the case of the vinyl acetate ethylene copolymers that we had to qualify. But besides the technical aspect, the more interesting topic is the regulatory and customer uptake. How do customers value these types of products using biodegradable raw materials, renewables, raw materials. And this is a work in progress customers keep changing their views and how they analyze our products and want to market the products from us into their final formulations. And so we are really gaining a lot of insight and continuously progress our work in this area. It's also a push pull topic for this type of product line. We are pushing this product line. We want this to be successful, and it is growing. That is good news. At the same time, we would wish for more pull from our customers. We have to add an adder on the cost side, and we see only that much interest, obviously, on the customer side to go along these product groups. But we are continuing to develop this product line. You see the elastase seal echo for the sealants in the silicones field, which is brand new. And this complements on the silicon side, for example, also our consumer care line, bell seal eco or also the paper coating and film coating eco line that we already offered. And same for the Polymers division within eco has been now established for some time and is gaining ground. A few words now on the RHYME Bavaria project. Just yesterday, we turned in our application at the European Union Innovation Fund for this flagship project of processing about 18,000 tons of carbon dioxide CO2 that we currently emit from our VAM plant at Burghausen and that we would like to avoid emitting by processing it with green hydrogen into eMethanol. If we are able to execute this project given sufficient public funding, we would have one of the largest water electrolysis units that are currently out there in the market, and we would definitely have the largest eMethanol plant available in the world as of today. Obviously, this is a flagship, we all recognize at Wacker that in 2015, we believe that our materials will either be made from CO2 or from biomass or from waste and RHYME Bavaria is a strong step in this direction of utilizing carbon dioxide for a product for methanol that we need for our silicones division. Let me end by giving you an idea on our core technology of BioSolutions, our ESETEC technology. As you can see on the top left picture, our first ESETEC strain. You can see at all-purpose leaky strain, we call it there, how these little bubbles outside the cell are being secreted. This is the recombinant protein produced in the cell and being secreted in these vessels. And there was, at that time, a revolution actually, quite a step that we offered to our customers to produce recombinant proteins and other products. Definitely, we still use this studies -- these types of strains today. It does mean metabolic stress to make the recombinant protein as well as to secrete it at the same time. And that's why we ended up with another generation of technology, lower left, where we focus on the cell stability. The cell gets more time to produce and correctly for the proteins, and that gives you very high active proteins when you use these types of strains, and we have very good results for difficult to fold proteins using this type of technology. On the lower right, you see another generation that we've developed. And there, we have a focus on secretion. You get higher yields that way, and we allow good folding truity and quality by including enzymes in the makeup of the strains that give you despite the fast processing good folded proteins. We use this technology, particularly for antibody fragments. On the top right, let me tell you, I would like to introduce to you our latest generation of ESETEC technology controlled release. Here, we give our customers choice as they have not before. They can choose how long to grow the cells. They can choose how much to produce the recombinant protein, and they can choose when to secrete the protein into the fermentation broth. The result is less cell lysis, meaning fewer dead cells that are hard to separate later on and a much lower amount of host cell proteins. At the end of the day, with this process, you land in a best-in-class yield. Again, why do I tell you all these different types of technologies how we've developed them over the years, it shows you we are building on our biochemistry strengths, proprietary know-how from Wacker together with our customers to develop this suite of ESETEC strains to give them the best choice for whatever product they want to produce at the best yield and best purity. With this, I would like to hand over to my colleague, our President of the BioSolutions division, Susanne Leonhartsberger.

Thank you very much, Chris. Hello, everybody listening. My name is Susanne. I'm responsible for Wacker BioSolutions. I'm very happy to be here today and give you some insights in this exciting business division. We recently adjusted our organizational setup in BioSolutions. Now we are looking at 3 business units. Two of them, you see on the left side, biopharma and bioingredients. Here, our strategy is really accelerated growth in our biopharma business unit, we run a GMP contract manufacturing or CDMO business for biologics, vaccines, live microbials and since very short time also mRNA and plasma DNA. In bioingredients, we have product platforms around nutraceuticals, cysteine and cyclodextrins. We built here on our fermentation technologies and aim at markets that are driven by megatrends. In our business unit, life science chemicals, we focus on efficiency and cash products here as polyvinyl acetate for the chewing gum industry and advanced chemical intermediates. Our Golden BioSolutions is to capitalize on market trends and our owned technologies and strengths to realize accelerated growth mainly in biopharma and bioingredients. With these preconditions, we feel we are well positioned. We aim at EUR 1 billion sales in the year 2030 and at an EBITDA margin of 25% or above. Our strategy and key strategy elements for this is to expand the biopharma activities and capacities to support the strong growth. Also to establish Wacker as a leading mRNA and plasma DNA CDMO in emerging and very attractive field in the area of advanced medicines. Also grow the bioingredients product portfolio. And for this, we built very strongly on internal innovation, but also looking externally and also evaluating M&A for accelerated growth. This is also based on generating cash strategy in life science chemicals. Let us first have a look at bioingredients. With our product portfolio currently, we address trends like healthy living in many different aspects. And also, for sure, we are looking at sustainability and providing very good solutions here. From a product perspective, we offer antioxidants and anti-inflammatory products, for instance, and solutions for many different applications. And if you look at the processes, we build on renewable raw materials and sustainable fermentation technologies. The product platform around the amino acid system is used in a broad range of applications in food, pharma and personal care applications. Wacker was the first company to develop a fermentative process, and by this vegetarian product, we use raw materials like sugar to produce the amino acid sustain and derivatives here. The traditional process still uses human or even human or animal hair as a raw material and a chemical process, which uses a vast amount of hydrochloric acid. So our process definitely is a very sustainable process, and we run production in our plant in Lyon that is really world scale. Our product is of highest purity and fulfills all the food safety standards and of course, it's nonanimal, nonhuman. Our cyclodextrin production process, again, is really excelling in sustainability. Here we start with plant-based starch. Our world-scale production facility in edible uses the plant and the starch that has grown around the plant basically. So also short ways here and by a very sustainable bioprocess, we produce cyclodextrins and derivatives thereof, which go in a variety of applications. As a manufacturer, we definitely can say we have a very strong position here with this world-scale production facility, we produce all 3 types of cyclodextrins. Cyclodextrins are a very exciting class of products. It's a performance chemical basically that can be used in a variety of applications bringing in solutions for all kinds of, yes, challenges that our customers have. Two prominent examples. It increases the bioavailability of the natural component to a human by a factor of 40, and it also enables the solubility of the drug Remdesivir. As a summary, I'd like to say that in bioingredients, we are active in end markets that show high growth rates and for instance, also have not been affected in times of the pandemic. They are used and backed by sustainable megatrends like aging population, healthy living and through clean label. Also, of course, the trend to being nonanimal. We are already active in these areas, as I have shown you with our current portfolio, but these areas and trends are also very attractive and the focus for our future activities of the strategy of portfolio expansion. We are set up to do so and add additions to our product portfolio with internal innovation but also looking outside. In our biopharma unit, we position ourselves as a leading CDMO, especially in the microbial field where we have a lot of expertise. The market shows highly attractive characteristics, and we established a very sound track record here. Based on the high quality we offer, our customer intimacy and our proprietary technologies that have already been introduced by Chris before that are of high value for our customers. Here, you see some market characteristics. The business of CDMO, the business model is really benefiting and being driven by a great and sustainable drain to outsourcing from big pharma and biotech likewise. We see also a strong pipeline in the biopharma because more and more drugs in development really belong to this class. So there's really a higher growth rate as in pharma in general. So we'll definitely look in the CDMO market at growth potential of around 10%. We, as Wacker, we see ourselves currently as #5 in this market we are active in. And with a CAGR of 23% in the last years, we are definitely outperforming this market, and that is our goal to continue that also in the future. So what are we really offering here specifically? And what is our differentiating factors here? As a CDMO, we are not active in the drug discovery, drug development itself and also not in distribution, but we focus our business on the development of processes, the supply for clinical trials and, of course, also then manufacturing for commercial supply. This is all under the highest pharma GMP standards and backed by high -- really high grade of quality control, quality assurance and also regulatory services that we offer as well. In the development of processes, we are very strong. We have cutting-edge patented technologies. One was already introduced, and I will give you a flavor of some more here. We have also a very educated team of experts and state-of-the-art equipment here. In manufacturing, our clients value our flexibility and scale that we can offer at our 4 production sites. We supply a small biotech as well as big pharma with their different needs. And our processes of a high yield and low cost of goods. I think our track record speaks for itself. We really look back to a long history of successes and batches and projects accomplished, and we have a global customer base. We can disclose only some of them, but we have a broad, broad basis here. This slide here really summarizes our most important technologies that we built on in the biopharma business. The first one was ESETEC and it's still a very, very important one for us. As Chris already explained, in this technology, we are able to produce the protein of interest by secreting it into the supernatant which really offers great advantages in production and purification, thus increasing the yields and lowering cost of goods. We are constantly working on this technology platform, creating new versions and improvements and launched this year, the latest of our improvement that is really superior because it offers this controlled release and by this, also again, can increase the production yield, for instance, of difficult to produce protein by a factor of 8. FOLDTEC is another of our technologies that aims at the production of proteins. Here, we aim to produce proteins that are not so soluble, but are prone to aggregation. But also here, we have a good solution. We have antibiotic and Phase 3 production platform scalable processes that yields protein of interest and very high yields and thus also offer a very favorable cost of goods. If you look at the right side, those are more recently developed and acquired technologies, LIBATEC is our technology platform to produce live microorganisms. That's really a new class of drugs that can use as therapeutics or also for preventative effects. Here at our Amsterdam site especially developed a scalable and fully closed mono-septic production processes. This is really a specific challenge because you cannot work sterile because the end product is also a microorganism but you have to ensure it's mono-septic and free of any other microorganisms in the end. mRNA and plasma DNA. Those are our recent additions and really an exciting new area that we are entering here. In mRNA, we finished brand new production lines at our Amsterdam site. We established a process. We are ready to produce for pure COVID vaccine, and we are also ready to meet growing demand and also beyond COVID vaccine. For plasma DNA, we also at the beginning of this year, did an acquisition genesis in the U.S. And by this also acquired the access to a platform technology that aims at producing plasma DNA in the GMP quality in large scale. Our steps to enter plasma DNA, mRNA production was a strategic move. We are convinced that advanced medicine area is a rapidly growing field to offer new solutions to prevent and treat diseases and heal patients. Also with this step, we are building on our own expertise and track record in the established field of CDMO and our microbial platforms. The mRNA CDMO market is a very new one, but it saw incredible growth driven also by COVID vaccines. The approval of mRNA-based vaccines mark a breakthrough for this whole class of drugs, but mRNA definitely goes beyond vaccines. The technology, in fact, is maybe even better suited to treat cancer and other diseases, and you see a split of indications that are in development here. And there is a huge pipeline of more than 150 vaccines and also therapeutics in development. Also, the pDNA market is growing very fast. Plasma DNA can be a therapeutic itself, but it's also used as a raw material for mRNA production and also as a raw material for vial vector production. And viral vector also is a very -- as a group with very high growth rates also boosted by the trend to advanced medicines. With our recent acquisition of Genopis. We got immediately access to a large-scale GMP plasma DNA manufacturing facility and the know-how and technology for manufacturing. In addition to that, we also have now a footprint of manufacturing of biologics in the U.S. Summing up our biopharma activities. We continue to build a leading player in the CDMO arena with 4 acquisitions that we did over the last 15 years. The latest one being the addition of the San Diego site in the U.S. And every time we follow up with investments at all sites. We have attractive and flexible setup in terms of scale at all 4 sites. So we are very flexible to meet our customer needs. We have expertise in our technologies at all 4 sites and also all the regulatory approvals needed here. As a summary, our strategy in BioSolutions has really accelerated growth mainly in biopharma and bioingredients, and we are really excited about the opportunities we have here. We build very strongly on our technology platform. So we are really science-driven here, have cutting-edge technologies that we always develop further. We are building on our strengths with microbial technologies and also develop technologies and processes that are very favorable to our customers. We have a strong global track record here. In biopharma, for sure, but also in our other areas, we are really strong in customer intimacy, and we look at the trends in the markets and adjust our portfolio and applications towards them to leverage these opportunities. We are committed to growth EUR 1 billion of sales in BioSolutions is the goal and an EBITDA margin of 25% or more in 2030. This will be backed by continuous investments in our capacities but also in innovation and growth opportunities and also we look outside for M&A opportunities that can complement this strategy. With this, I'm at the end of my part. Thank you very much for listening. Looking forward to your questions.

Excellent. Our presentation ends here today. We will now begin with the Q&A session. Please lock into Slido. The tool allows you to post questions. We will then collect your questions to avoid redundancies and read out the questions aloud. Please note, that in today's event, we want to focus on our core topics, R&D and BioSolutions. Regarding other parts of our interesting businesses or our performance, please address the IR department directly after today's call.

Okay. Great. So now we'll go ahead, and we'll start with the Q&A session. The first question is for Susanne. Susanne, any near-term targets for the EUR 1 billion ambition in 2030?

Well, that's not something that we would share. And also that's something that we're still working on our near-term targets. But definitely, it's a double-digit growth in the next years. And of course, the EUR 1 billion is set.

So now the next question we have is for Christoph. This is about -- Christoph, how fast could you switch your powder and sealants production to be fully renewable if there was enough market demand?

I love that question. We would love to give all of our powder and sealant products with the renewable raw materials. It's possible, definitely. What really is the limit is that our customers have to adopt these types of products to figure out how to market them. This is really this work in progress. Think of construction, green construction is a buzzword and what exactly it will mean is not so clear nowadays. And therefore, we have to figure out together with our customers. So it's not technical. It's all market-driven.

Susanne, we have another question here from Markus Mayer and Oliver Schwarz from Warburg Bank. Is Wacker Chemie entitled to a compensation payment from CureVac, should CureVac decide to move COVID to mass production? Can those capacities be filled with other products or rather short notice if need be?

Okay. First of all, I think you understand that we cannot disclose any contractual details with our customers. But while currently, we are moving full steam ahead and also CureVac is. So we have an existing contract with CureVac and they have existing contracts with the U and so on. So currently, there is no change should there be changes, we have to look at it specifically how they are and then -- but definitely, what I can say, it will not be a substantial financial impact on Wacker. So -- and of course, also very important, I hope I made that clear, we are not just producing -- setting up this mRNA production to produce this specific vaccine for CureVac. We really see that as a product platform or a drug platform. So we could also produce other vaccine candidates for CureVac or other customers or definitely also other mRNA candidates for other applications beyond vaccines.

So now here we have another question here for Markus Mayer from Baader Bank. Are the renewable silicon, sealant, polymers sold with a premium prices to nonrenewables, and if so, by how much?

Well, we do sell at a premium. It is more costly to use renewable on trials today. And our customers are willing to pay this, but definitely also, as I mentioned, in this push for topic, it puts a damper on the demand in some portion.

We have a question from John Francois, [ NMD ]. Susanne, could you please comment on your capacity versus Alderon? Can you -- can we think you have 25% of their capacity?

Well, as far as I know, Alderon is also expanding currently. So I don't know for sure how big their capacity is at the moment. What I know is that the size of their fermenters are in the same size as the one in San Diego, but they have much more. So what we have in San Diego is a 500-liter fermenter and a smaller one as a single-use fermenter. So we have also flexibility of size here, but we definitely are smaller than Alderon.

So we have sort of a follow-up question here or it touches on the same topic. I think I got rid of it. I apologize that. Jaideep was looking for information on Alderon, which you just mentioned. And I'm sorry, let me go to the next question here from Martin Jungfleisch. Sorry. So now here once again, I apologize. We have another question here from Markus Mayer from Baader Bank. How difficult is it to manufacture I guess you mean mRNA or pDNA, how big is the market in terms of volumes and value and what is the growth profile?

How difficult is it to manufacture a plasma DNA? Well, it also builds on microbial fermentation where we already are very strong at. And then you have to purify the plasma DNA that's produced in the bacterial cell. So you have to disrupt the cell and then purify the plasma DNA without compromising it and to a very high purity. So there is especially one step in it because the slices of the cell without disrupting or compromising the plasma DNA that is really the most sophisticated step, and that's also where our technology in San Diego is around. So there are a couple of companies out there that can do that, especially in the large scale, not so many compared to in small scale. So I think the market volume, I showed also on the slide. So currently, the CDMO market, we calculate it's in the area of $100 million. And there are definitely growth rates beyond the 10% here.

And now we have a question from Andreas Heine from Stifel, Markus Mayer from Baader and Sam Perry from Credit Suisse. It's a similar question. How much of your EUR 1 billion sales target should come from M&A? In biopharma, you said market is growing by 10% per year in bioingredients at 6% to 8% per year. Your 2030 target implies 15% CAGR. What gives you confidence that you can continue at the upper end of the market long term?

Well, it's a really good question, but I don't have to answer exactly how much will come from M&A because our approach to M&A really is that we look for opportunities where we really see a good fit. So we don't have an exact target in terms of value here, but we are definitely paying a lot of attention when we select targets on really a good fit in terms of technology, but also culture and other factors. And we have been quite successful with that already in the past in the biopharma arena, and we definitely we'll do that in the future. So we will, yes, invest a lot of effort and time to find really good targets here. Biopharma, I said, well, the microbial area is growing above the 10%. We are definitely committed to grow with higher growth proceeds like that. And here, of course, we need also to grow our capacity. But most importantly, also, it's our technologies to really stay ahead and -- of competition with our cutting-edge technologies and offer also the best services to our customers. And on the other hand, the areas that we just recently entered in advanced medicines, they are growing with much higher growth rates. So pDNA and mRNA, we're expecting higher growth rates than for the established business of CDMO.

We have another question from Andreas Heine from Stifel. What would be the capital resources needed to get to the BioSolutions targets?

Well, that's not something that we are prepared to share today and also depends a little bit on how big the M&A opportunities and the demand for capital investments in our existing facilities are. But we definitely look at, yes, double-digit investments per year here, definitely.

So we have a question from Jan -- Jaideep from On Field and Markus Mayer from Baader Bank. I think we talked about the manufacturing and technology capacity of Alderon, but do you have any business from Helixmith? And how does the acquisition change the pDNA market? How big is the pDNA business for you?

We do have business from Helixmith. So that's also something that we published around our acquisition. So they are basically the former owners. So they had this facility for like captive fuels, you can say. And since the acquisition, we're turning that really in a clear CDMO business and Helixmith is our customer. I'm not sure if Alderon -- the acquisition will change the pDNA market. My expectation is that Danaher will just continue the business and, of course, also provide more maybe investments means here, but that remains to be seen. And currently, the plasma DNA business is very, very small. We're just building it up basically and turning the site from a captive use site to our CDMO business.

So I'll stay with Jaideep. What is the main driver of improvement in profitability towards the greater than 25% EBITDA margin from current level?

Well, it's basically a change in the portfolio shifts. We are aiming at really a high profitability activities, giving emphasis to the biopharma field, where these kinds of merchants are pretty standard, I would say, but also in the bioingredients field definitely going into areas that are attractive also from a margin perspective.

Sebastian Bray from Berenberg Bank would like to know who are the biggest bacterial CDMO players? Who does Wacker actually compete with in the nutricells and the CDMO space?

Well, in the microbial field, I think I had a slide on this. So there are really 4 major players that we see ahead of us. One is Lonza for sure. Lonza also is pretty big in mammalian production where we are not active in. So we specifically made the decision to stay in the microbial field where we can offer our technologies and have really an advantage here. Also Boehringer is active here, Fujifilm and AGC, Asahi Glass Corporation from Japan. In the nutraceutical area, yes, you have to look at food companies like also, for instance, DSM and others, that's more specific to the different products here.

Oliver Schwarz from Warburg would like to know, can you please provide expected organic growth rates for bioingredients, life science chemicals and biopharma?

That's not something that we can disclose here, and we don't go beyond the level of business division in our reporting, but you can feel from the markets that we're active there what's our growth rate that one can expect.

Rikin Patel from Exane, would like to know 2030 targets? What can we expect the segment mix to look like in terms of biopharma versus bioingredients versus lifestyle and chemicals on a sales and EBITDA basis?

What I can tell you is that's very clear that biopharma and bioingredients will be the majority of it.

We have a question from Jaideep from On Field. How will your technology platform in eco live help on the pDNA side?

That's actually very good and exciting question. We are working on with our colleagues in R&D already. Yes, that remains to be seen. We are working on it. And definitely, our microbial expertise is also something that we expect to help in the pDNA production.

We have a question from Oliver Schwarz from Warburg Bank. Regarding your patent portfolio in biopharma, when will key patents expire? Can your processes be easily copied once the technology is no longer protected by patents?

As you have heard, we are constantly improving our technologies and that also ties into a patent. So we are constantly also updating our patent portfolio here. It's not very easy to copy, not by the patents, but also not by the know-how that we have.

Rikin Patel from Exane would like to know other CDMO players spend much more or much significantly percent of sales on R&D versus the current ratio in Wacker's BioSolutions business. Should we expect this spend to ramp up materially next year and beyond?

Yes. Like I said, we are definitely counting on our R&D and also improving our efforts here, and we are definitely looking on increasing spending.

We have a question from Sebastian Bray from Berenberg Bank. How much fermentation capacity would be needed for EUR 1 billion in sales? Could you give any examples of the type of products that microbes produce, antibody fragments specific drugs?

Well, there is definitely not an answer to the first question because it clearly depends on what are you producing that is really defining the capacity you need. In CDMO, what we are producing are, yes. Some of our clients' products are antibody fragments, others are enzyme-specific drugs, modulating immune responses, drugs that we can disclose, for instance is asparaginase. It's a commercial product that acts against leukemia in children. It's from the company, medac in Hamburg. Another one is our Reteplase. It's also an approved product from a U.S. company that acts for cardiac failure. And there are many more that I cannot disclose because we have confidentiality with our clients here.

Chris, Sam Perry from Credit Suisse has a question on the silane-modified polymers. You stated this is a 12% growth market at roughly $2.8 billion. What do you believe is the rough market share or what is our rough market share? Are you the technology leader in this field?

We think we are definitely the technology leader in this field. There's no question around it because we have analyzed this opportunity and felt that this is a great fit to our capabilities. And as you might know, we are investing in this field also CapEx besides the technology pieces that we are doing with our people in the labs and with our customers. And I think our market share is clearly -- we are a very good #2 and really we're gaining ground year-over-year.

We have another question from Jaideep from On Field. This is for Susanne. What are the trends on sustainability in the cysteine market? Are you gaining market share versus Chinese players who have less sustainable processes?

Well, trends are really to sustainability. That's definitely something that we can say. But having said that, there is also some competition in sustainably processes. So we are not really the only one that's a clear trend. Another trend is what we are working on is also to provide a fully natural cysteine for the flavor industry. So we are definitely going in that direction.

Chris, Chetan Udeshi from JPMorgan has a question as well for Dr. Ohler. Did I hear you correctly that Wacker as a whole, M&A is a higher priority over dividend in terms of capital allocation? Is large M&A on the agenda? Is M&A also possible outside of BioSolutions?

Well, Chetan, I can give you an answer, good question. Of course, what has meant is, for us, the future of the company is really in the focus. And for the future of the company, we need growth, we need profitable growth. And from that respect, organic growth and M&A options are really the focus. And dividends, we have a clear policy in place. So I think that's the way you have to -- you have to understand this. But you just skip the questions. What was the other one? The other one was -- is large M&A possible? I would say, I mean, outside of BioSolutions. Well, outside of BioSolutions, yes, that's what we always said in the past. This could be opportunities in the space of silicones to add best specialties, which we don't have in the portfolio today. So that could be an opportunity or it could be an opportunity, as we also said, on a regional footprint where we are not as strong today as in other areas. And on M&A, in general, regarding the size, I think it all depends on is it a good fit to our business of what we have today, are there synergies with our businesses and our customers what we have today. And of course, if it's a good deal. So we are not running after something which is not a good deal for us.

We have a question from Sebastian Satz from Barclays. What is missing for silicon anodes breakthrough, where are you versus the competition?

This is definitely a marathon, the topic of putting silicon into the anode of the lithium ion batteries. And we are happy that we are exposed to several technology paths. So this gives us comfort that we think that we will be participating in this market once the breakthrough comes. Is it going to be a breakthrough like a big explosion? Probably not. It's probably -- what we see as improvements year-by-year in the energy density as well as in the cycle times. And that's why we're saying it goes -- moves in the right direction. What we're also seeing is technology trends, what are the more likely technologies that will be successful to get silicon into the variant -- into the anode. And in this case, where are we versus competition, I think that there is a convergence of technologies where also we are present and where others are also present. And our feeling is from the conversations we have and what we see is that this is a very close field.

I think this is a good question for Tobias and for Chris. We're talking about M&A preference and biopharma, bioingredients, multiples that we'd be willing to pay transaction multiple suggests the CDMO space can command very prohibitive valuations? What other BioSolutions areas would you consider doing M&A?

Yes. Again, I mean, what I just said before, I think a good M&A target for us is a combination of whether it fits technology-wise, whether it fits customer-wise and product offering wise, on the one hand and the other thing is if it's a good deal for us, and that obviously depends on the margins you can get with that business. So I think there is no clear, simple, easy answer to that question. We look at all these targets very diligently, and we decide on what's the best fit for us, and then we try to proceed with that. Sorry. And to add, I mean, there's no intrinsic preference for biopharma or bioingredients. As we said, and as Susanne also pointed out, it needs to fit. And if it's a good fit for us at a good price, then we go forward.

Okay. Thank you. This concludes our Q&A session today. If you feel that your question has not been answered, then please address the IR department today. Thank you all for joining us today and for your interest in Wacker Chemie. We're looking forward to further discussions with you over the next weeks. See you on August 5 for our Q2 results.