Ypsomed Holding AG (YPSN) Earnings Call Transcript & Summary

[Operator Instructions] This conversation will be recorded. Good day, ladies and gentlemen, and welcome to the Full Year 2020/'21 Results Conference Call of Ypsomed. [Operator Instructions] I would like to introduce your host for today's conference, Mr. Thomas Kutt, Head of Investor Relations. Sir, the floor is yours.

Thank you, Melanie. Good day, ladies and gentlemen, and thank you for joining us for our full year 2020/'21 results Earnings Conference Call. Joining me today are Simon Michel, CEO; and Niklaus Ramseier, CFO. Our press release, report and presentation discussing our financial year 2020/'21 performance are also available in the media and Investors section of our website. With that, I will turn the call to Simon. Simon, please?

Thank you, Thomas, and good morning, good afternoon, ladies and gentlemen, for this presentation of our full year 2020/'21 results. We will show you how robust our business model is. We are delivering products for chronically ill people independent from a pandemic, and this has shown in both our business areas that the demand is still here despite of the virus. So what we have done over the past 12 months is really executing on our YDS strategy while at the same time, keeping more patients on YpsoPump. Now the growth, obviously, on YpsoPump side has been below our expectations simply because we have not been able to meet doctors and clinics during the pandemic time. On injection systems, we have had a very strong H1 with a slightly weaker H2. But with GSK and AstraZeneca, for instance, and Astellas, several PTH launches with Fennec, AlbaChem, Mochida, ATP in Japan and Gedeon Richter, but also UnoPen, in Russia for Geropharm, just to name a few, we have been able to deliver on our pipeline, leveraging our platforms. With 17,500 patients on YpsoPump we are below our original expectations, obviously, wanted to reach 20,000. But nevertheless, we have used the time to progress on our technical advancements and on our YpsoPump model, which we are going to present to you later on. With an EBIT on the same level as the year before, we are on the way to our internal targets. Let me highlight a couple of elements on our strategy. And as you may have seen in the annual report, we are now no longer presenting YDC and YDS separately, but really reporting integrated on our 4 strategic initiatives, our 4 strategic pillars. And the first one, innovation and digital health was mainly focusing on the enhancement of YpsoPump system integrating Dexcom CGM centers and making progress on our AID program. At the same time, we have been able to close the deal with SCHOTT and Lonza for the industrialization of the YpsoDose large volume injector. On the global scale, talking about affordability and access and expansion, we have been able to sign in November. This very important deal for us with Eli Lilly. Eli Lilly is going to launch our pump in the U.S. market in 2022, and we're going to show you today in a bit more detail. We have also been able to derisk the pump business by settling with Insulet end of last year and by divesting the YpsoPod program, so being leaner and more focused for our core YpsoPump activities. In our third strategic initiative, the topic around responsibility and sustainability has been able to enhance massively on our path towards net carbon zero. We have been signing science based target initiatives, which gives us ambitious targets to take out carbon emission out of our products, our programs, our installations in order to eventually deliver carbon net 0 towards pharma clients. We are going to show you how we do that. And on the platform level and on the operational excellence level, we have expanded the capacity in Schwerin by implementing 2 new lines for autoinjector, but also implementing now the line for infusion set for the Orbit infusion set for YpsoPump. We are ready for the MDR change, as some of you may know, in Europe, today is quite an important day with MDR, the new medical device regulation, going into action. And Switzerland not being part of the European Union needed to actually move the product into the EU. We have done that on a legal perspective. We are ready. And we have no interruptions at all now with new regulation. COVID has been a special time for many of us. And COVID has, of course, an effect on most companies' strategies, on most companies the way they look at their business. When you look at Ypsomed and look at COVID, is actually enforced on our main growth drivers. Self-care, for instance, is a topic which is inherently clear, moving therapies from hospitals to home care. So self-care is getting more and more important. Digitization, doctors want to stay into contact with their patients. So more and more digitization is being accepted by patients. More and more pharma companies are seeking digital solutions to integrate their products with big data. Affordability, we have also seen that chronic diseases, although such as this virus are obviously global topics. Chronic diseases as well, cancer, asthma, migraine, diabetes, just to name a few. And these are chronic global issues. And we are able to deliver products not only to the first world, but also to emerging markets, China and Southeast Asia. Supply chain. We have been able to show that our supply chain is very robust from generating the supply from granulate for our plastic molding and educating our patients. We have not had any interruption in our supply chain during that crisis. And partnering. We have been able to sign a deal with Dexcom to sign deal with Lilly to sign several pharma deals without even seeing the people which gives me confidence that we are robust in also such a special time to deliver on our promise. Let me use the time with Slide 6 here to get a bit into more detail on how we see our strategy and what our growth drivers are and what our purpose is. And I would like to start with our 4-pillar technology platforms and operational excellence. Obviously, self-care and home care is a global need and the growth driver here is simply these chronic conditions in the aging population. So this market will stay, and this market will grow, and Ypsomed is delivering because we have these platforms in place. So we are extremely efficient to put new companies, new products, new indications online onto our products. And we continue to work on new management. We continue to work on taking costs out to stay productive and to be able to deliver such products to patients in need. And how we do that? We are doing that in a responsible manner, in a sustainable, responsible manner by also taking action on the climate challenge. Paris 2050 is a duty for all of us. And also Ypsomed will do his part. So our vision is clearly to be carbon net zero on Scope 3 by 2040 and Scope 1 and 2. And I'm going to explain you that by 2030, so 10 to 20 years before Paris is obliged to deliver. Access and expansion, our third pillar. It is very important that we are not only addressing new drugs, innovators, but also biosimilars. And this is sometimes in discussions, why are you already delivering products to innovation and also to biosimilars, but it is our global duty to deliver to all of them and to really be a packager of modern drugs for both companies in the western and in the emerging markets. So global access to therapy is a key purpose of Ypsomed, and we're going to deliver that also in the future. And then the fourth pillar, innovation and digital health. Obviously, the trend towards liquid drugs, and I've been talking to you about that before, is unstopped. More and more drugs are being delivered subcutaneously by injection. They can no longer be swallowed because the stomach could not allow to pass the molecule. So this trend is ongoing. And this trend, combined with digitization is an important growth driver for better therapy outcome. Together with digitization, we are able to take action on the behavior to actually work on the behavior of patients, I'm going to show you that, to enhance and to increase the therapy outcome. A key purpose for modern therapy and for modern medicine. And if you look into our annual report, we are now following these SDGs. As you may know, there are 17 Sustainable Development Goals of the UN, and Ypsomed is actively working on 13 of them. So we are looking into our 4 strategic areas of actions, and we are measuring in all details how we are doing. How we are enhancing the quality of life of people with chronic disease. At the moment, we are delivering products to 6.4 million people with the goal to deliver products to 10 million people by 2025. So a clear goal to enhance the quality of life. We are also looking at topics like gender equality, like taking care of our nature, and we are measuring that. We want to become better as a company as an organization. So because the profit of this recurring business because the growth trends of liquid drugs, the growth drivers of self-care and biosimilars are reality, we believe in our business model. And we've been using the past 12 months to improve our competitive position, especially in the area of the pump where we need to come up to Insulet, to Tandem and to Medtronic by making our products even higher automated. And we are going to unlock the market potential and increase shareholder value. And this is why we have not been restructuring. We have not cut jobs. We have not been too scarce on spending. We have really invested. We have invested CHF 143 million in R&D and capacity expansion. And we have employed 110 new people. So we believe in our strategy. We believe in our story. And that's why we are growing. We are growing and investing in growth. And this is what you see on Slide 9, here. We are investing not anymore so much in concrete and steel, but much more in software and IT. And I've been telling you that already last year, but we are increasing the speed of putting more people into our company that are launchable in the area of software, software architecture, cyber security and cloud business. So turning a company from a pure medical device manufacturer into a company that delivers successful medicine that delivers successful therapy, of course, requires new abilities. And this is what we have done over the past 12 months with an extreme speed, and we are going to continue that. So also next year, we are going to see a similar level of investments in the area of CHF 130 million, we are calculating, with a similar trend towards intangible assets where we invest continuously in software and IT. This graph is showing you that we have added 110 additional people with 106 of them in Switzerland. And then, of course, on the sales level, it is resilient. I mean 2.4% is not great. We have expected more. But obviously, we have not been able to put more patients on the product in Europe here. I mean, in Europe, most of the clinics have been closed. And to train people this was the same situation for our other colleagues in the market like Medtronic and Tandem have been a very similar situation. But it shows that the model is resilient and robust. I mean every patient on YpsoPump is still ordering infusion sets, and people on our pens and autoinjectors still require them. So we have not been declining, we've been stable. Delivery business now has clearly overtaken, YDC, by showing a 10% top line growth. And let me now deepen it a bit into delivery systems. We have shown a reliable performance on introduced products. Some of the new products that have just been launched, such as the asthma products, for instance, though, had a slightly weaker H2. So because of offices being closed in many clinics. Also, our pharma clients have not been able to really push those products out into the market. That's why we've seen a bit less sales in H2 versus H1. The performance though of projects or new projects has been over our expectations. We have delivered many, many products for clinics, and we have been especially able to acquire a record 36 new projects in delivery systems. This graph is showing you how we have been growing. So roughly 11% on injection systems, and 7% on contract manufacturing. So the roughly 100 million pens for -- pen components for Sanofi, roughly a growth of 7% despite of negative FX effect. So pretty well done here. What we see here is that the second half 2021, has been weaker. Has been slightly stronger than the year -- the half year a year before 2019, 2020. But obviously, not where we wanted it to be. What we see now already showing in the first month of the new business year is clearly accelerating. It's accelerating both on delivering of products into the market on commercial products, but also on projects itself. So we see this growth with H1 that is clearly stronger than H1 2021, and a much stronger H2 '21, '22 as we progress into the new business year. On diabetes care side, as I mentioned, YpsoPump shows a recurring business model. I mean infusion set has to be changed every couple of days. So this has been -- this is the reason also why actually the total of sets sold has been bigger than the year before, but we have been able to -- we have not been able to sell as many pumps. And it definitely needed to accelerate here also on a commercial level. So we have spent 7-digit amount of money in the announcement and the commercialization of our Loop Program here in Europe. So really pushing the message out that Ypsomed delivers not only a naked pump, a pure pump, but also a pump that talks to sensor, a pump that uses algorithms and that is bringing the closed-loop to patients that want to use that. As you may have seen, we have also made an organizational change. So I'm exchanging here the responsible person for diabetes care. Eberhard is going on early retirement by end of the year. And we're going to strengthen here the organization also from that perspective. mylife Loop program has been progressed. And obviously, we spend a lot of time with our friends from Indianapolis here is Eli Lilly to progress on the U.S. market entry 2022. Derisking infusion business was also a major topic on our end. I wanted to finish the Insulet topic. So get it done. So very happy here that we have been able to settle this Insulet, and resulting in a decent solution with USD 41.25 million. We have achieved a great amount that supports us on our cash position. It's less than we have explained to the market, 2 years before. But obviously, we have bet a bit high in order to settle on a high amount. So we are really content. And I think it's a good deal that we did here in the end with Insulet, and solving that problem. And we will keep that all behind us. At the same time, we have divested YpsoPod. YpsoPod program is sold to TecMed AG, it's a fully owned company by my father. It was a logical decision in order to take some financial burden off of Ypsomed. As you may know, YpsoPod program is a CHF 100 million investment. And I just wanted to focus our resources more on the short and near-term products and propositions and not in those long-term propositions. So we have sold for CHF 13 million. We have made CHF 5 million plus on our bottom line. We have a preemption right, so we are able to sell it. If you don't want to sell it, if you leave it up to somebody else, if TecMed decided to sell it to somebody else. We have a 20% earn-out here and pretty good situation for us. We are still developing it, but the financials come from TecMed AG. So 5.3% decline, top line. As you may see here, it's mainly because of less sold pumps, but also because we have sold less pen needles in the U.S. The Walmart relationship has been stopped. So we are seeking here new sources, new channels and working on that. We have also been reducing the shift from 7 to 5 days in order to take care of our gold mine here in the pen needle business. Let me now move over to the EBIT bridge, showing you -- explaining you how you can really compare core and core EBIT. As you may have read in the annual report, we had a small restatement, a positive restatement of CHF 400,000. The German tax authority has been paying us EUR 3.5 million for past tax money that we have paid too much. So the actual EBIT 2019, 2020 is CHF 9.7 million. Now we have to take nonrecurring elements, nonrecurring effects out, if you want to compare the last year with the year 2021. And these are 2 elements. Number one is the impairment on the FDA. The first try to bring YpsoPump to the FDA. So the CHF 3 million we have to take out. And also these onetime higher licensing fees that we were able to achieve. It was a onetime effect in the business year 2019-2020. So the real core EBIT, the chunk of space that we have to look at is roughly CHF 8 million. Now what has happened in the past year. We have grown on a bottom line perspective, with CHF 9 million on YDS. So we did a pretty good job here. We have sold CHF 1 million more -- CHF 1 million more EBIT on YpsoPump infusion sets, but lost CHF 3 million because we sold less pen needles and some less drips. We've done a bit better on Ypsotec, our metal business. And of course, now we have the full year engineering with our capacity expansion program, which leads to slightly higher amortization of CHF 3 million. So this is the actual core EBIT, how I see it and how we deliver in M&A. When I talk to my team and I compare 2019 to 2020, and then I compare CHF 8 million to the CHF 13 million. That's the operational delivery, what we did. Now we had those onetime effects with YpsoPump and Omnipod, which delivers us the real EBIT that we have been presenting to you, CHF 9.3 million. I hope this graph helps you to understand a bit how these results have been shaped. Outlook. Outlook for the financial year '21/'22. We are very positive on injection systems, and we foresee again the growth of 20%. That's actually the midterm growth path we see on a compound average. We see those 20% also over the next 3, 4 years, really enabling us to double the business again. So it came from CHF 100 million to CHF 200 million within 3 years. And now we're going to bring it from CHF 200 million to CHF 350-ish million, CHF 400 million in the next 3, 3.5 years. But it is really this progression we are making here in the injection systems business, so the own manufactured products. We are also going to catch up in pump. I'm pretty convinced that in late summer, September latest, we are going to be pretty much back to normal here in Europe. I mean it has a lot to do with vaccinations. We see those countries where vaccinations is advanced. We see a higher pick up again on new pumps. It's pretty much linked to that. We have other countries where vaccination is still much, much lower, like Germany, which is much behind, unfortunately. We see not yet the same uptake as we see in other countries. But during the year, we will definitely see here a certain pickup. So our guidance is on a top line level. It's a small double-digit growth. And on the bottom level, it's doubling to tripling of the operating results. So coming from CHF 9.3 million in the area of CHF 20 million to CHF 30 million. It's a bit a big range. We know, but we have this uncertainty here at YpsoPump. We have the uncertainty of potentially additional sales and project revenues on YDS. That's why we feel comfortable today to give you that range. Our midterm plan to reach CHF 100 million is the same as we have seen before. We need now 9 -- 6 to 9 more months, obviously, because of the corona and YpsoPump situation. But by '23, '24, we are going to reach the target. For our Annual General Meeting coming up on the 30th of June, we are going to propose to the shareholders that we are able to increase the share capital at any time for the next 2 years by issuing a maximum of CHF 1 million fully paid and registered shares. In order to give us freedom, freedom to act, freedom to accelerate on growth. We have a couple of pretty large deals in our pipeline on the device side, especially in UnoPen but also on YpsoMate. Which we just need to put us in a situation to be able to order additional manufacturing equipment and for that purpose, we need the flexibility. We also see a couple of opportunities out in a digital space. So we don't necessarily need to develop everything in-house. It's a couple of ideas here, but no concrete option at the moment to the couple of ideas on how we can accelerate in our digitization plans here, especially looking at Ypsomed delivery systems. I'm very happy and proud to be able to propose Ms. Betül Susamis Unaran as a new member of the Board of Directors to the Annual General Meeting. So as of July, Betül will join our Board. She brings a great background out of digitization. She is at the moment, leading the strategy and digital team in Zur Rose Group that one of the major pharmacy chains here in Europe. And with her background with Novartis and Ferring, she clearly understands the needs of big pharma biotech in the world of digitization. With that, ladies and gentlemen, I would like to just take a few more minutes to dive a bit deeper into innovation and digital health, respectively, into the 4 core pillars of our strategy, and starting with innovation and digital health. And I show this graph again because it's still our plan, how we enhance our mylife YpsoPump proposition by going into Loop. So we launched now Assist function that is bringing the CGM signal onto the iPhones and onto the Android phones. After summer, early winter, we are going to launch the dose function in order to be able to bring the remote bolus to patients using YpsoPump. Now what is different to what we have told you in November is that we have decided to launch an interoperable Loop solution. As you may know, we still know we have signed the Dexcom deal not only to get the access to the SDK, softer development kits for the center data, but also to get access to the type-zero algorithm from Virginia. Now this type-zero algorithm is going into a clinical study at the Imperial College, it's called the BELIEF study in late fall '21. And this is taking its time, and then it's taken, of course, the whole registration here with MDR in Europe. So that's because we do not want to wait 2 years until patients on YpsoPump has access to a Loop solution. We have signed a deal with a company, which I would not like to name yet because of competition reasons. But a solution which is, at the moment, being integrated. A solution that has access to our pump that will steer our pump and deliver not only load and dispense functions but also enhanced hybrid closed-loop functions such as adapting the basal rate. And for patients in the end, it doesn't really matter whether the app is a mylife app, and mylife logo or not. it's a loop solution. So patients can profit from this small and lightweight, beautiful pump with a prefilled syringe, a very simple user interface. All those nice elements at YpsoPump is delivering plus the function to loop, and that's an interesting proposition. We are really motivated to launch here in Europe in summer '22. We are now also bringing on innovation side, this digitization into the world of YDS, with the clear vision of digital health, the clear vision to enhance the therapy outcomes of patients with chronic diseases. And that's showing this graph here 2 years ago already, it's the same situation. Non adherence is a huge challenge for global health care systems because the majority of patients with chronic diseases don't take care of themselves. And we have to motivate them to do better therapy. We have to change their behavior. And this cannot be done. If you don't see your doctor anymore. So digital solutions come into action. And it is very different on why adherence is not good. Some patients live in a different environment. Some people have issues with their disease. Some people are just people and they forget and we have to motivate them on doing a better therapy. So advancing SmartServices, what does it mean for Ypsomed? Of course, we are still delivering injection devices that's our core. In our heart. We are still a plastic molding company. We are molding 10 billion plastic parts per year. We are assembling them into devices with a high automation, large factories, on a high productivity level. That's the core, and that will be the same. That's our platform strategy. On top of that now, we are delivering smart devices, add-ons -- smart add-ons that will read out -- that are reading out the devices and send the data into the cloud through different means via mobile phone or directly to the cloud. Where the data has been aggregated, it's calculated and it's put up in a manner that our pharma clients can do something. But we want to go on further. We are actually to take action on the therapy itself by bringing solutions into the hands of patients that are enhancing their therapy on a day-to-day basis. So a solution that is supporting the way patients are doing their therapy. By monitoring the therapy, by asking about the pain levels, by asking about the movement issues they have in the case of rheumatoid arthritis, by gathering data through the mobile phone behavior, mobile phones measure a lot. By implementing digital companions, Digital Avatars that support the behavior and take influence on the behavior of patients to do a better therapy and to coach, of course, patients along their home care, with a clear goal to increase the quality of life and reducing risks for late complications not only in diabetes, I mean, if you do a good therapy in oncology, you may live longer. So it is a big motivation that you do it, and we want to support our patients here. By this, we avoid the burden of a -- further burden on the health care system. And this is probably the main reason why we -- why digital pays off for all of us. Pharma companies in the end are going to sell more drugs because patients will be longer on the therapy. So we see this as a service element. We're doing good by enhancing that the life of people's chronic disease. But at the same time, generating more revenues for our pharma clients. So there's a big win-win here that Ypsomed is playing, and we are the integrator. We are the company that has the data at hand. We are pushing them in the name of the patient, obviously, into the cloud and support the patient by helping them. This, ladies and gentlemen, this is Ypsomed digital transformation. Digital transformation is not the Webex, how we talk to each other. Digital transformation is the move from pure device delivery to delivery of successful therapy. And if we look in 5 years back, we will have seen progress on that path. Our second strategic pillar is access and expansion. Obviously, Lilly is the core that we have delivered last year. This relationship is important for us. It's important because it's supports us in our U.S. venture. And the relationship is crystal clear. Ypsomed is a marketing authorization holder with the FDA, obviously, in a close collaboration with Lilly Eli team. Lilly has a global access, a global right to promote the product in the U.S., exclusive. So Lilly is going to market the product. Lilly is going to train the patients. Lilly is going to be the first one to pick up the phone when a patient calls. But Ypsomed is always fair with the team on the ground to support on second level and the support on the supply as the product will launch. This is the same graph we have shown you on November 2020. It shows the first 2 product proposition with second half of '22 with first product with a remote bolus function and then mid-'23 -- mid-late '23, the AID-enabled solution. Our 2 teams in Switzerland and in the U.S. are working closely together to deliver this proposition into Lilly's portfolio of products in order to move therapy of diabetes forward in America. Now we see great opportunities in access and expansion also in delivery systems. And of course, the core of it is the platform element. The profit from the drivers and the fundamental drivers I've been explaining to you in the beginning. And this is why we have been able to close 36 additional projects. And if you look back last year, we have been at 30-ish, a year before at 25-ish. So we accelerate by putting new drugs onto our main platforms, existing platforms, and new platforms. And if you look into the first month already of this new business here, the momentum is still here. So we are growing, and we don't see the end. More and more molecules are moving into devices. If you just look at oncology, there are over 1,000 PD, PDX clinical studies ongoing here on this banner. That is crazy. And all of them want to go home care. So we need to prepare ourselves for more and more deals to bring liquid drugs into the hands of patients at home. And this is why we are also working on the portfolio of our devices. This graph shows you nicely how we evolved from the 1 milliliter to 2.25 ml, higher volume autoinjector. We are working on the higher viscosity autoinjector with a stronger and stronger spring system. We have very high viscous drugs that are like oil or honey. We need to have a strong support here to bring the drug into your body. We even think about larger volumes and we connect the device. And the latest evolution is the sustainability by delivering products without any carbon footprint, CO2-neutral devices into the hands of our pharma clients, into the hands of our patients. And I can tell you, this is a real competitive advantage we have out in the market. The third strategic pillar, platforms and operational excellence. Obviously, in the core in the heart of it is our platform and device strategy. It is what we've been working on for the past 10 years, and it proves it works. We have been able to deliver on the promise to be fast and it's much, much smaller risks. If a customer starts with us, at the first red square here, they have the option to choose from a variety of products that are tested that are IT-safe and that are industrialized. And we only go into customization programs and the time from the start -- the timing of the contract into the clinic is no longer 4, 5 years. It's having it to 1 year. Then we go into clinic. Then after clinic we go into the registration. Ypsomed is supporting its clients on this path towards market until commercial launch happens. So we have been able to reduce the time lines massively from the old time. This is the Ypsomed platform strategy, and this is the reason for Ypsomed YDS success. We have changed the rule of the game, and no longer selling projects, but by selling products. And this is why we are growing on our platforms. We are investing in our platforms in autoinjectors, in disposable devices now into electronics and smart devices and the latest adding the YpsoDose. So the large volume injectors, we are working on at the moment, with 2 large clients, adding 2 more up in this year, bringing larger volumes of drugs up to 10 ml into the body of ELP, especially in the space of oncology, where they do therapy only once per month or every other week. Then, of course, YpsoPump. YpsoPump is a platform itself. And the U.S. version will be slightly different, but the core is identical. It's the same drive, with the same electronics. It's just some software changes. It's a platform as well. So we leverage on it also in the case of Lilly. When you look at operations, we have used this year not only to enhance on the capacity expansion in Schwerin. We have also used the year to make some changes in how we look at lean management and how we look at lean transformation. With the change in the management and production, we have now a new responsibility here that takes a much, much closer look into the way we look at overall equipment effectiveness. So we are measuring everything we are doing, and we have clear ambitious targets to get rid of the waste, get rid of the scrap to be more effective and more productive here, not only from a cost perspective, but -- of course, because of a cost perspective, but also because of a sustainability perspective to actually be more effective and more resourceful. And then what we have delivered over the past 12 months, doubling the capacity for autoinjectors, we're going to double again over the next 3 years. By delivering more capacity here in the Switzerland, but also in Schwerin filling this large buildings, we see a clear plan towards '24, '25, to really fill is these very large infrastructure and a clear way forward with planned capacities for projects in our pipeline. With that, and then coming to the last topic, the last pillar, responsibility and engagement. We have done our homework here and been analyzing carbon footprint on the Ypsomed group level for 2019. It is very important, very interesting for us to see where this emission comes from. Interestingly, only 3% of the carbon emission comes from Scope 1 and 2. So electricity, heating, transport, traveling. And not because of COVID, it's really a smaller part of the real carbon footprint. I mean we have been changing a lot of the heating away from fossil fuels into reusing of the heat that we generate in the factories. We have done a lot of the homework. So the large chunk of the carbon footprint that we are delivering that we are anything, comes from granulate, comes from new machinery, new buildings. So this is where we have to work on. We have to reduce or exchange or substitute material here in the future. It's very important now that we have a clear view on what we are doing. And 2019 has been over 110,000 tonnes of CO2. So we have to take our share here and also be responsible. That's why we have been able to sign the SBTi, the science-based carbon initiative, a very a strong and swift set of rules on how you progress that you're really going to look at the challenge from a scientific perspective that you first use, substitute, substitute, substitute that you think in a circle. A manner that we take material back that you work with recycled material in packaging, et cetera, et cetera. We are clear now. We have signed that towards that initiative that by 2030 will be carbon net zero in Scope 1 and 2. By 2040, also in Scope 3. On the way, obviously, we are delivering products with a smaller footprint, such as the YpsoMate Zero. We're also going to launch that UnoPen Zero at the later stage. It's clear that we have to take carbon emissions out of the product. So 10 to 20 years ahead of Paris 2050 Goals that is our belief that our promise towards our clients. And the Ypsomed Zero, I'm very much convinced that this is going to change our industry. We are also going to announce in the near future, a partnership with companies along the whole value chain from glass manufacturers, from plant manufacturers from sellers to deliver as an industry towards big pharma biotech carbon net zero products into the hands of patients. And we're doing that by substituting and by offsetting. If you want to know more about our management and sustainability, read our annual report. We are communicating as of today in an integrated manner along those 4 strategic areas of actions, and no longer clearly distinct between YDS and YDC. Obviously, those are still our 2 segments how we report financially. With that, ladies and gentlemen, I would like to hand back to Thomas. He sits opposite of me here in Burgdorf. Thomas, please?

Simon, thank you very much for this very interesting explanations and a lot of information. I'm sure we have now a couple of questions. Anyway. So therefore, I kindly ask the operator to start the Q&A. Melanie?

[Operator Instructions] So we have the first question from Chris Gretler.

I have actually 3 questions. Maybe start first on the pipeline in injection business. Actually, the 36. Could you put that into a context of the total number of projects you have? And maybe also give an indication how many of these 36 of the total are actually kind of look in the different phases of commercialization either generics or kind of Phase III or so? To get a bit of a sense now where kind of the potential is in this development project pipeline? That's the first one.

Sure. Thank you, Chris. Good question. So in total, we have, at the moment, roughly 100 projects in the company, so it's 36 new ones. If you look at those 36. It's a split of roughly 50-50 between new drugs and biosimilars with more new drugs in the autoinjectors and a bit more biosimilars in the space of UnoPen or disposable pens. I think what is interesting to look at, if you look at those new deals, that we have an increased level of large deals. So if you look back, we had an average of 1 to 2 deals, which are going to deliver CHF 10-plus million peak sales. Out of the 2021, 36 projects that we have acquired, we have 7 that are delivering CHF 10-plus million per year revenue. So the increase of size of deals has been interesting to look. If we talk about timing, obviously, it's for all of the projects pretty similar. They all move into customization program, then into clinic and then into registration phase, and this is a 4-5 year path. So those 36 ones are now moving into that funnel. They are all going to customization. Some of them have longer, some of them have shorter clinical trials, but they are all going to the funnels. So the project -- effectively the product that we're going to see launching in '21 and '22 are projects that we have acquired 4 to 5 years ago. So this is how I would like to bring it into perspective. Does this help?

Yes. No, very much. So essentially kind, I guess, there were also a few dropouts. But kind of if I look at kind of relative to the total pipeline, it's basically pretty much a third that is new. And so basically, kind of it provides certain evidence to your growth projections. I guess no one can conclude here. And which actually gets...

Yes. Yes. Sorry to interrupt. I mean it's very important to amend. This gives us also this clear visibility, and this is why we are convinced to double again in the next 2, 3 years. Because we understand our pipeline. And I mean, you are absolutely right. I mean there are -- obviously, there are drop-outs, but this is in the area of 10-ish -- 10%, 12%. So out of 100, 10 to 15 will not make it. But I mean, in this magnitude, it's pretty good to calculate both.

Okay. And then basically, if I just look at your '22 -- fiscal '22 guidance, basically, you were saying that kind of the injection -- your own kind of injection business should grow 20% or so. Let's say, kind of something like CHF 35 million, CHF 40 million incremental sales. So taking a 35%, 40% margin on it. So it will be like CHF 15 million, CHF 20 million in incremental operating profit, which is kind of pretty much the low end of your guidance range that you provided. So does the guidance essentially not include any improvement on the pump side? Is this kind of the right way to think of it? Or...

So it pretty much goes into this direction. I mean you see an improvement on the pump side. I mean, obviously, by adding now more patients again, will definitely be reduced from 40-ish to 30-ish negative, but we still see a negative -- strong negative effect in this new year. If you look at the guidance, we guide 20% growth in injection systems. So the contract business, yes to actually take out. If you look at the CHF 211 million that we delivered, we have to take CHF 40 million -- CHF 40-ish million out of contract business, this is roughly staying flat, right? So we are at CHF 170 million. If you grow with 20%, this is what you have to take into calculation. So -- but I mean making your assumptions with CHF 15 million additional bottom line is pretty good. I mean this is basically how growth comes from. And as you know, I mean, we are delivering in a way -- yes, if it's met bottom line over the coming 3 years mainly out of delivery systems. Then our goal is to reach the CHF 100 million with YDS easily and just making YDC profitable by '23, '24. That's our job. And then we reach to CHF 100 million that we are projecting.

Yes. Okay. And then just one question. I noticed in the accounts kind of the capitalized R&D stayed high. And I also noticed that there was this patent investment. Could you maybe kind of indicate for what that was? And then there was another investment, I took my attention and noticed secure investment. What was your assessment there and kind of why was it so small, relatively speaking. It sounds like it's pretty interesting technology. So I was just wondering what was the thought process behind that?

Yes. I can start with the first question of the 100 -- I mean CHF 140 million obviously is more than we have guided a year ago. We have hoped to be in the range of CHF 100 million, CHF 120 million. But I mean this patent opportunity is in the space of pumps, and I cannot go deeper. It's basically paves the way in certain critical areas of infusion business to be safe, especially in America. And it was a very important crucial investment for us to be safe and to have freedom to operate in many new areas of infusion business. So this is number one. I mean -- and if you talk about CapEx, CHF 140 million is obviously at the high end. And we still see CHF 130-ish million for the current business year, mainly focusing more and more on to software development. Now secure, I mean we know the team for 12 years. and we never really believed in them until they have changed the product. I mean, they have changed from their own product into the product they've acquired from J&J, and they need to need to divest their assets. This secure patch is really a game changer for type 2 patients, really much believe in the product. And from an Insulet perspective, it's a financial investments. Obviously the private investment in them. So all in all, we are a bit higher than what we show in the books here on Ypsomed's balance sheet. We believe in the story. And I just think it's interesting also for Ypsomed to follow such a venture. It shows what is possible in America, how to access the market. And by being a shareholder, also small shareholders, it puts a topic on the agenda of the Board. Just to look at the company, how they are doing what they are doing. I'm very convinced that secure will do very good with their very special new proposition in between a pen and a pump. So it's really a 1.5 pen or a 0.75 pump. It's a really interesting proposition that the world of diabetes has been waiting for.

There are actually no more requests to speak. [Operator Instructions] Yes, Daniel Jelovcan, you can speak.

Just one follow-up, quickly. On the new projects you mentioned in injection systems, 36 or maybe also in the next 1, 2, 3 years where do you see the most dynamic environment? I mean I guess it's oncology. And I guess the 7 you mentioned before on Chris' questions with CHF 10 million-plus potential per year. I guess that many of them are actually in oncology, is that the right way of looking at it?

When you look at the disease areas, actually, it's rheumatoid arthritis and psoriasis. And many of those autoimmune diseases that come first. We see a magnitude of new products that make life easier for people with those of immune disease and oncology is actually the second wave. So first oncology launch -- our first launch, we see not before '24, '25. So yes, you're right. In these 36, there are a couple of oncology indications involved, but we see indications all over the space. I mean in diabetes in growth, obviously, new growth hormones coming quicker, more long-term growth hormones. But then especially in the area of autoimmune disease. So it's thinly spread. It's spread about on a wide range. But the first wave now is actually array of autoimmune diseases. And then second wave is oncology. I mean obviously, Daniel, obviously, many oncology drugs are today available in IV solution in the hospital and this trend towards home care and self-care is really accelerating that. And we are in discussions with all of the oncology players in the world that are working on reformulating the drug. So that it can be put into a large volume injector YpsoDose or into an autoinjector in Ypsomed. So it's a global trend that we're seeing. And we are in all those discussions and negotiations or have -- especially also now closed deals that we have been reporting.

There are no more questions. I hand over to Thomas.

Okay. So thank you. Thank you, Melanie. Thanks. Ladies and gentlemen, for your interest in Ypsomed. I think it's -- it was an interesting year, 2020/'21. Everybody has faced challenges. And it was a challenging situation. Of course, we are confident so far, and we are content with our results. Of course, we are affected, we have been affected, each segment differently. But at all -- but most important, we look forward. We have our strategy, our business model has been proven. It is a privilege to supply people with chronic conditions. It's a recurring business. And therefore, we are really -- we uphold our midterm targets. And thanks for your interest. And if you have any further questions, please feel free to contact me anytime. So thanks a lot. Stay healthy. Have a nice day. Operator, you may close all lines.

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