Ypsomed Holding AG (YPSN) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and thank you for joining us for our full year results, '23/'24 earnings conference call. Joining me today are Simon Michel, CEO; and Samuel Kunzli, our new CFO. It's a very warm pleasure for me to welcome you. Our press release, report and presentation discussing our financial year 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. Ladies and gentlemen, good morning, good afternoon here to our earnings call, '23/'24. As you have read this morning, it is about transforming self-care. It's about transforming Ypsomed. Before I start, I would like to give the word to Samuel. He joined the team a month ago. Samuel, would you like to introduce yourself before we dig into the figures and the story?

Thank you very much, Simon, and warm welcome also from my side. Very few words about my background. I started my professional career at KPMG, learned more the basic financial skills. Then I worked a little bit more than 8 years for Stadler, that was quite expansion and growth story at that time. And the position I had before joining Ypsomed, was at Feintool. Some of you might know this company, it's a listed automotive supplier headquartered in Switzerland. And I'm now very excited to join Ypsomed and to join Simon and the team. So glad to be here. Thank you.

Thank you very much, Samuel. With that, let me start, and Samuel will then lead you through the figure section of today's presentation. We'll roughly spend half an hour together and then we'll have enough time for Q&A. Ypsomed, as you know, is all about making self-care simpler and easier. That's our mission. That's why we get up in the morning. And we have a lot of tailwind from global trends such as self-care, biologic, biosimilars and digitization. So global trends that gives us a strategic rationale that supports our business. And if you look at our potential, we have our growth drivers. As I just mentioned, that gives us tremendous -- they give us tremendous opportunities in both business areas, both in delivery systems and diabetes care. And this is why we are continuing to invest in CapEx, in capabilities, in innovation and employees. And this we'll lead you through in today's presentation. The most important announcement this morning is our Mercury program. We have decided to now move a step ahead. And this step ahead is making us a pure player as Ypsomed focusing on Delivery Systems, our device business, our injection business, our high-margin B2B business. And this transformational process is starting, not just today. We have started with it roughly 3 years ago. In 2022, we have decided to take the company apart in a sense of an organization. We have taken the matrix in 2 business areas, in 2 product areas. Some companies would call them divisions, they have given them a lot of capabilities, a lot of power, having speedboats here on the table in the 2 areas, both Diabetes Care and Delivery Systems. At the next step, we have divested DiaExpert, our mail-order business in Germany. Good business, lower margin, no fit, good divestment now with Mediq. Now this year, we have announced the divestment of our pen needle and BGM business. Low-margin business; in fact, negative over the past couple of years. We find a new home MTD, great company. They understand the pen needle business. This is a company that will in the future also sell our pen needles. Transition phase has started. Handover is taking place as we speak. We have also announced a couple of months ago that we are going to fade out our business with Sanofi, the contract manufacturing business, lower-margin business. For 12 years, we have manufactured over 1 billion devices for Sanofi. We're handing it back Fall '25, Spring '26. We have enough space then to move in vast volumes of all contractors for Novo. And now, ladies and gentlemen, it's time for the next step. We are now going to move into a fascinating and interesting next 1.5 years, which we will do in 2 phases by separating both companies, diabetes care and delivery systems, and then review strategic options for our Diabetes Care business. So why are we doing that? Because we believe that both areas, both businesses have unique elements, unique competencies and also unique offerings that must be described in a different way. What we want to achieve is 2 pure-play companies. Diabetes Care, for instance, is a very emotional business here on the top right. It's emotions. It's specific capabilities, it's marketing, it's sales, it's customer care, it's patients, it's people. It's a very -- very clear and focused B2C business, whereas on Delivery Systems side, it's all about capacity, lean manufacturing, volumes. It's about as few people as possible on the shop floor, it's cost of goods, it's B2B. It's very different cultures. And over the past year, we have seen that more and more, that both businesses can be better if they are in separate units. So this is why we are building a pure-play B2B company, Ypsomed, and a new pure-play B2C company, Diabetes Care. This is what we are up to. This is what we are going to do. And this we are going to do in 2 phases. So Mercury Phase 1 is starting today as we speak. Today, we are going to start this process where, in fact, we are going to establish a company. We call it Ypsomed Diabetes Care AG. It will be situated in Switzerland, in Solothurn. And this company is the home for all colleagues working today in the business area, Diabetes Care. At the same time, we bring all assets, so machines, IP, activated projects, we bring all assets into the new company as well as, of course, all subsidiaries. So our 18 sales subsidiaries [Technical Difficulty ] [ all over Asia ] and Europe, also in Canada, in Australia and the U.S. And those subsidiaries are moving over to Diabetes Care as well as our software center. At the same time, we start to market sounding to understand what the potential value of potential interest is for this business. In November, we will decide in the Board meeting to move ahead to either divest or spin. From a pure Ypsomed perspective, we want to maximize the asset. So we have an interest to sell the company. We're going to review those options in November, and then start the process together [ bank if cho ] [ Technical Difficulty ]. So I think the process is quite clear. With that, we are thrilled to finally go that first step. We all understand in the team that it's a huge chance for both business areas. And now we shall dig into the figures and then give you a bit more flavor for both Diabetes Care and Delivery Systems. Samuel, over to you.

Thank you, Simon. In the next few minutes, I'll give you a short overview about the financial results '23/'24. I do start with the [ top do men ]. We had a growth of roughly 10% so Ypsomed reached the sales level of roughly CHF 550 million. Please have in mind that in the previous years [ the previously ] compare year that is if CHF 10 million of sales is included. If you exclude those sales and you only add the sales from the continuous [Technical Difficulty] growth, which is [ CHF 100 million ] and if you adjust by the currency 26%. So you see huge top line growth. This resulted then also in higher utilization of our production facilities. So our [ gross ] margin grew by more than 600 basis points from 28% to 34.5%. We see the same in the EBIT, we reached a total EBIT of CHF 86.2 million. Also here, comparing with the roughly CHF 60 million from the previous period, you will need to have in mind that in the year before, there is a substantial one-off effect from DiaExpert. I will show you now a little more in detail how EBIT evolves. Starting point on the left side are those CHF 61 million in the 2023. There is 2 one-off effects, which we eliminate in this bridge. The CHF 21 million from DiaExpert, 17%, which is CHF 21 million [ is ] the proceeds we got. So basically profit [Technical Difficulty] and [ CHF 4 million ] is the EBIT from this business. And there was additional [Technical Difficulty]. And now we reached CHF 86 million, so we doubled that EBIT. So how did we come now to CHF 86 million. The biggest contribution came from the growth in the delivery system. So from the additional sales in pen auto-inject roughly CHF 40 million additional EBIT resulted. And also from the growth in income roughly CHF 20 million additional EBIT [ in ]. And because we have also the sales force and the distribution channels, we also had to invest heavily in the sales and distribution network. This resulted in higher SG&A for the Ypso [ com ] business, roughly CHF 14 million additional costs secured there. That's how those CHF 86 million then came. Now let's look at the cash flow. Simon mentioned at the beginning, we have a lot of tailwind. We have a lot of drivers and mega trends, which actually will lead to a huge top line growth. So we have to do a lot of growth CapEx. We realized the cash flow from operating activities of a little bit more than CHF 160 million, we spent roughly CHF 120 million for fixed assets. This is mainly investments into additional capacity for the UnoPen and also for the YpsoMate platforms and also, of course, related to the infrastructure. As well, we invested in the innovation in future platforms, all kinds of intangible investments for the platform study as well for the YpsoPump and the ecosystem for the apps and also the FDA filing, roughly CHF 80 million. This resulted then in a negative free cash flow of roughly CHF 30 million. But the investments, they will go ahead and let's now have a look a little bit more detail in the future investments into the fixed assets. As I mentioned, in the year '23, '24, we roughly invested CHF 120 million. Simon will later show in the details that we have to build up a capacity, a yearly capacity of roughly 100 billion devices. This is due to the success of our platforms, of our products and to those megatrends. And to reach that capacity level, we will invest in the next 5 years roughly CHF 1.5 billion. Have in mind, roughly 1/4 or 25% of it will be financed by contributions from our customers. But that means also that in the year [ '22 ] -- '24, we again will heavily invest. We will invest roughly CHF 250 million. But Ypsomed has the balance sheet to do that, our net debt::EBITDA level is roughly 1. So we can also do that additional -- we can also finance that additional investment. But it's one thing to have the capacity, the infrastructure, the machinery ready. You also need the people. Ypsomed already hired in the year '23, '24 over 300 people, more than half of it in Switzerland. And also for the year '24 '25 additional 400 jobs are created, 200 of them in Switzerland. And those people are, of course, crucial also to fulfill the growth mission. With that, I hand over to Simon for the deep dive into Diabetes Care.

Thank you very much, Samuel, excellent. So let's turn the page and start with Diabetes Care today. I mean if you look at top line, we have a slight reduction, obviously, due to the sale of DiaExpert. So more important is probably Page 23, where we see the actual growth from continuing business which is 30%. So we achieved a 69% growth on the YpsoPump system. That's the key figure. We've been a bit less -- a bit below our expectations since we had some issues on one of the infusion set manufacturing lines in Schwerin. Overall, we could have done 3,500 patients per month, we were at 2,000, 2,500 patients per month, and I will show you the figures in a minute. Leaving that, we should have a look at the breakdown in YDC business, which is now, of course, changing a lot. So the light grade 57 is leading us, DiaExpert, the pen needle, the CHF 52 million, now CHF 39 million. is leaving us. So we are ending up with the 97 in the future and 15 for project work. So we still have some project services in Diabetes Care. That's, for instance, for the PatchPump program for Tekmed, which is an external program that we are developing with in-house resources. When we look at the pen needle business, we have announced a couple of weeks ago that we are divesting it. So we have found a new home. The company is called Medical Technology and Device in Italy, a great company. They understand pen needle business, they understand [ own lancet ] business, they have own manufacturing. So we're going to move, one after the other, our pen needle lines from Solothurn to Poland, the new home. For that purpose, we are going to ramp up, do a lot of manufacturing in contract manufacturing. So we manufacture more devices, more pen needles for MTD in order to ensure a smooth transition. I believe that we will stop producing pen needles for MTD in [ mid-25 ]. But you see when you look at the figures, I mean, minus CHF 12 million, it was really time for Ypsomed to sell it. It was no longer our focus. It was clearly time to move on and focus on our pump business. And we look at our pump business, most of you in the call, you know our system. We have a system that is one of its kind. We are the only system that is available for all ages. We have newborns on the pump system. We have newborns on the loop. We have a pump that is available for women in pregnancy. We're the only system which is available both for Libre 3 and Dexcom G6. We're working on G7, obviously, to also be compatible on that end. So very happy with the quality of the system. It's looking great, and we are investing more and more here and, of course, also extending the access. When we talk about the access, obviously it's all about growth. We have reached 50,000 patients. And now with the 50,000 patients, we have the basis to write the Black Zero. We will write the Black Zero in Q4 '24 to '25, which is very important, start earning money. That's, of course, a key element: when we want to place this business into new hands, a new shareholder structure, we want to be able to sell a profitable business. At the same time, we have -- we are in Canada under review. Canada is a great market and high reimbursements. We see here starting of the business towards the end of the year. We have opened France, Norway, Spain, Italy, as you know. Now America, it's clear that we are still in process. [ A KMA process effix ] app is under review. We see a, find here a release from the authority in the coming months. YpsoPump is also fully on track. We have received a question, we've received 27 questions, nothing really worrying. We are now answering them within the 180 days. Then we should get the first approval in Q1 '25. Then we will file again a special (510)K in order to reach the 4 years. We are now on 2 years. We go to 4 years. We will add Libre 3 -- FreeStyle Libre 3. So we have both options also for people in America with the potential launch here in Q4 '25. Important for you on the call that Ypsomed is investing still in this preparation work, obviously in the program, in the whole approval process. We're going to hire a small team, going to hire a local GM. But the main decision for launch will then be taken obviously under the new structure on the new ownership. So pretty much on track here, a bit delay on infusion sets, huge demands. I'm pretty positive that we can reach the 2,000, 2,500 patients per month. So with 25,000 patients, we should reach 75,000 patients by end of the year. So slow, steady, clear growth with a great system here in Europe. With that, let me turn to Delivery Systems. Obviously, as Samuel introduced, enormous growth. We are one of the fastest-growing med tech companies in Europe. We have 38.9% more sales in own devices, mainly on the old injectors. And UnoPen, I'm going to show you a couple of graphs which are quite interesting in a minute, that show the differences of the 2 platforms. Project revenue is stable at roughly CHF 60 million, contract manufacturing slightly above and another 33 new deals as the year before. When we look at the breakdown, the first time in history we are actually achieving more sales, more revenue, from the old [ injector ] platform, so our YpsoMate for the single dose, fixed dose applications. So they really take over on the pen side, it's -- if you also look at the deals that we won, out of the 33 new deals, almost 3/4 of them are actually old injector deals. And interestingly also from where they come: about 2/3 come from existing clients. We are now working with all 30 big pharma companies, and of course, many, many smaller pharma biotech companies. We are able to serve them. We are able to support them. And as you know, our space is pretty limited. It's basically SHL left and Ypsomed. When we go into the more detail and look at the indications, I know some people call me and tell me you know, Sam, I'm afraid, you've now got all those big obesity deals? And is it dangerous? You have this -- you have this dependency again as you had with Sanofi 15 years ago. I say yes, of course, there's a certain element to it. But if you look at the figures, and this is here looking 5 years into the future, both diabetes and all obesity deals we got, and we work with almost everybody out there, and we will not be above 50%. And obviously, from a profit perspective, it's even lower because those large volume deals pay a bit lower than the smaller volume deals. So it will be important, it will be huge, but it will not be a core risk to our company. Interestingly also is the split between originators and biosimilars, with [ 230 not ] originator, which is, of course, very multi-rating, as they pay better, and also actually -- and this is probably the more important question, if you move from us to the next slide. And if you really look at the new drugs that we introduced, many new applications, new drugs out there, [ Minacour and rafan faring ] in the space of fertility, for instance. Interesting new drug supporting, making the life easier from people with chronical disease, [ crank ] disease. This is giving you a selection of UnoPens. I think we launched 9. If you go to the next page, YpsoMates, we launched also about 9 YpsoMates over the past 12 months, a couple of ideas here, maybe on the left -- on the right top, Medac, methotrexate, great drug. An old drug, basically, in OBD [ off a device ] until last fall. We are now taking over step-by-step. So we were able to convince MEDAC to change from BD to Ypsomed for this device, roughly 25 million, 30 million units per year, quite an interesting deal and a drug that supports people with chronic conditions and early-stage cancer treatment. So really, really important steps towards patient health. Also Xolair, an important drug now just received U.S. approval. It's for us [ fine of space ] a first line, both applications 1 and 2.25, an important drug that really makes life easier for people with asthma. And you see now, we are offering solutions for more and more disease areas. On the pen side, for instance, it's a variable dose device for ATTR. It's a [ self so orphan ] drug for people with a terrible disease that dissolves your organs. We can stop with the support of our device that disease. Or on the autoinjector side, new products in the space of high cholesterol to support that. And of course, the disease that is going along with obesity and diabetes, you often in multi-morbid situations, we see those many indications also served now in autoinjectors. And you will see more and more disease areas coming. And as Samuel said before, I think that is one of the key points. That is also one of the reasons why we are separating. Ypsomed needs to build factories. You need to build capacity, we're going to spend CHF 1.5 billion over the next 4 to 5 years, around 1 billion devices will be our capacity by the end of the decade. We invest the money in Solothurn, that's our core site in Switzerland. We are expanding our current hall. I'll show you a couple of pictures in a minute. We are opening our plant in China in fall. We are planning now [ Schwerin 2 ] the doubling -- the tripling of the volume in Germany, and we are planning our site in North America. As Samuel said, part of it is contributed by our pharma partners. We need the money in order to be efficient and quick, and we also believe it makes sense that they contribute here. So this gives you an idea of where those factories are. But I suggest we just move to the next Page 39. We give a couple of ideas what is actually happening in Solothurn, for instance. So Solothurn, we move in a third line of Unopen, another CHF 20 million. We have now roughly CHF 60 million UnoPens in Switzerland and roughly CHF 60 million in Germany, and we are getting another line in Germany and the first line in China for local Chinese volume. As I mentioned, we move out Sanofi business. We get in the autoinjectors for Novo and Solothurn in 2 steps, '25 -- '26. Then we install a new tool shop. That was 1 important reason also why we divested the pen needle business. We need the space. We're topping the capacity on our molds from 40 molds per year to roughly 80 molds per year. We want to lower our dependency from external tool manufacturers. This is what we do by installing a second shop. Then we do a large photovoltaic system [ actually ] on every roof now. By now, we have solar, and we are building a new conference center to host conferences and press releases. In Germany, that's a nice picture here on a sunny day up in the north in Schwerin, roughly 1.5 hours east of Hamburg. As you remember, we have been able to acquire 20 hectares of land, 200,000 square meters. We are going now to buy another 100,000, another 10 hectares in the coming months so we have enough space to grow. And this is going to open here this whole [ D ] extension 4,000 square meters of space for UnoPens mainly in fall. But the next big step is this very impressive graph here that we are kicking off now in Schwerin. It's basically tripling in the north here, you see the existing site, that's 200 meters time 58, 50, 60 meters. We're building now a new site which is 300 times 200 meters, it's huge. You see a large white block there on the north. That's our fully automated warehouse with 10 truck positions to get the product out of the factory. This factory here will host over 250 plastic molding machines, 100 spring machines, 6 to 8 large volume lines for devices, mainly autoinjectors, but they have a certain flexibility here. 50,000 square meter for roughly 0.5 billion devices. And this project is starting now. We see it on the next graph, we have kicked it off. We have been able to find a great partner here that is able to build factory turnkey because this site has to be up and running in mid-'26. So you have roughly 2 years to go, then we hand it over to operations to fill it step by step with the lines you see here also on the left side, this [ high nill ] windmill, it's a 200-meter high windmill. Together with the solar power, we will have all over the roof will roughly generate 70 5 of the energy required at this site, also a very important sign towards our clients, towards our employees that we care for nature, that we are important in that important duty to lower the carbon emission. China is also a great story. I was impressed how fast we had a topping up ceremony a couple of weeks ago in Changzhou, a city that didn't exist 15 years ago. Now we have 12,000 companies there, high-tech. We built here on a LEED gold standard, the highest building level, really sustainable as well, all solar, of course, they work in 3 shifts. They hand us over the factory in October. We will move in with the first lines in November, December and January. We have basically 4 holes. We have filled them already. We should have built larger. We have to extend in China in about 2 years from now. So great journey here, a great team. I'm very pleased with the progress and look forward that we can manufacture devices in China for China. Remember, this is a business in China for local demand. We have to be local, geopolitics demand it, but also speed, time, carbon emissions, all makes sense that you are local and no longer all central out of Switzerland. And then the next big and exciting step for us is North America finally we make the step, we get even closer to our large customers. We haven't decided yet whether it's Queretaro in Mexico, or North Carolina. The decision will be taken in the next few weeks. We have a road trip and going to look at all the sites. So I'm pretty, pretty positive about -- I'm pretty positive about the decision that we build up the site in North America, we have to be closer to our clients overseas. And with that, ladies and gentlemen, I would already like to come to the outlook and then open for questions. Thomas will lead us through the Q&A. As you have read this morning, most likely, we guide again sales growth from continuing operations. So it's basically everything except the needle business of around 25% and on EBIT level, an EBIT operating result of around CHF 140 million, also again excluding one-off effects. We have described in the annual report in financial sections that we will have a CHF 10 million goodwill effect, which is has nothing to do maybe, so we can extend a bit here on the pen needle as we have to as we sell it. With that, I would hand over to Thomas, and then you may deepen those topics when the questions come up. We are excited about our future. We are excited to start a Mercury program. We had the chance yesterday, this morning to talk to our employees. People understand it, it makes sense. It makes a lot of sense that we do it both separately, very focused and we look forward to that journey. So with that, Thomas, I hand over to the floor.

So like always, short and sharp. So we started with a short delay, but I think we catched up a lot. Maybe given all this information and different developments we have now discussed, the last 30 minutes to wrap it up. What are the 3 main points, looking back the last 12 months, for you that are important and also considering for the future for Ypsomed?

So I think, first of all, it's definitely achieving the operational tasks. On the volumes, we have been able to deliver at all times in the space of all the injectors and devices. That's our duty. That's our promise. This is why customers pay the price. This is -- has been achieved well. So very pleased with the operations, number one. Number two, we have reached 50,000 patients. On the pump, we are a bit delayed here, but we have achieved the 50,000 now in May. That's the basis for the Black Zero, so pleased with that. And then I believe it's really a decision. I mean we have 6 intensive months behind us to come to that final decision of really separating the units. There's a lot of work behind. We are very convinced that it's the right -- we have selected the bank. We are starting the process next week. So I believe we have a good year, a company here also with a great culture, a low fluctuation rate and good spirit.

Excellent. Thanks, Simon. With this, I would like to open the lines for our Q&A, and I would like to start with Curtis. Curtis, we are very happy. Curtis initiated Ypsomed a couple of weeks ago. So we look forward to your questions.

I just wanted to start off maybe on your outlook for the 25% sales growth of continuing operations. Can you maybe just give us a little bit of color about what you expect for -- in the Delivery Systems versus the Diabetes Care segment for the year?

And on top line, on top line too. So we don't...

Yes. Top line.

I mean just roughly, both areas will grow in that area. We don't guide yet those individual businesses, but both will have a growth in a double-digit area, but it's, it's not yet guided on the business area level.

Okay. That's helpful. And then maybe just to also come back down to that chart that you showed, that was interesting about the midterm sales assumption split between diabetes and obesity. And then others. I was just curious, is it safe to assume that diabetes and obesity is mostly GLP-1? Or would you expect a large portion of kind of insulin pens to be in there here as well?

So good question. So if you look at those disease areas, we have roughly 1/3 that will actually remain on insulin. We -- remember, we still have all the Chinese insulin manufacturers. We have the 2 candidates that are launching in the U.S. with the [ glarchins ]. We have Mexico, Turkey and Brazil. We have Russia. So a couple of biosimilar markets, obviously, on the insulin. Now this is 5 years looking ahead. If you look at 2030, 2032, I would say 80% is obesity. So obviously the relationship will really go into GLP-1.

Okay. Got it. That's very helpful. And then maybe if I could just squeeze in 1 last question here regarding the facilities that you mentioned, the new ones. That was the second one in Schwerin and then also the new site in North America. You said they would be gradually ramped up in the second half of 2026 and then mid-2027, respectively. Can you give any kind of color on when you would expect them to be fully commercial? Or is that too hard to tell?

So I mean, this is always a bit frustrating if you stand into these huge holes and they are not operating yet. But obviously, it's a step-wise thing. We will build in 2 phases in Schwerin as well. We will build in 1 phase in North America. But then you can say we are roughly adding -- I mean that's a rule of thumb -- we are roughly adding CHF 100 million capacity per year roughly, per year. So if you think 2030, we're now '24, we add CHF 700 additional million. We are now at 300-ish capacity. We have reached the CHF 1 billion that we described. So roughly CHF 100 million additional, so we don't really have to care about the building. We amortize that over 40 years, so it doesn't really matter. It's a bit tough if you look at those big empty holes, but it gives you peace of mind. You can just move in with lines. And obviously, those all are not warm yet. So roughly CHF 100 additional million. At an average price of 120-ish, 130-ish obviously be lower and other drugs are a bit higher, that gives you bit a rule of thumb.

With this, I would like to ask Peter.

I just had two things. One is when looking at the growth opportunities in auto-injector, obviously, there's a lot of focus on GLP-1, but your balance you're still expecting extremely high development in the other parts of the auto-injector. And I was wondering if you could give any kind of understanding or focus on some of the key projects that you see coming, or the disease therapies which you think could drive that on that list? Or whether there's other things that we should think about in terms of the growth of autoinjector? And I have another question after that, please.

So we talk about sales growth, not the innovation R&D.

Yes, sales growth. Sales growth, yes.

So it's really a broad scheme of applications coming. We still have 7 or 8 [ of the linmarks ] coming. We have Enbrels coming. There is a new drugs in the space of polyarthritis. So it's quite broad. I mean the first auto injectors for obesity, we are going to launch only in mid-'26. As you know, [ kakrizema ] is still under review. So development review. We expect the first delivery to start building up the volumes for market launch mid-'26. So the volumes that we see today, '25, '26 is, is known obesity business, obviously. So we are still in a quite broad here. Does this help?

Yes, it does. Yes. I would assume, as you say, the next 18 months, 2 years will mostly be made up of other products. But that's why I was trying to understand and obviously [ then ]...

As [ Medac ] is obviously important. But if you look at my current capacity, the current installed capacity of our 2 small lines in Switzerland, 2 plus [ so it's added ] 4 small lines in Switzerland, 1 in [ al el ] and 2 [ per fan el ] with a total of roughly 50 million units. They are fully load at full capacity limit they run. And then we have 2 lines, 25 million each, another 50 million up and running fully to the limit running in Schwerin. Now we're getting the new 50 -- 60 million unit lines. We are now at CHF 100 million, and then MEDAC's roughly 1/3 of it or maybe a quarter at the moment. So it's quite broad. We have the [ Taber ] product, we have migraine, asthma products. We have the Cosentyx product for Novartis, so it's really broad for psoriasis, for instance.

Okay. And then you mentioned on obesity, you work with all the players. And obviously, we know about one that's pretty significant. But if you give a sense on how you're positioned in the product development pipeline of the obesity market, which is going to be substantially an auto-injector. Can you give some sort of sense as to how broad you are in that market, the extent to which there might be some constraints because of your strong relationship with your Danish partner, just to help understand the opportunity that's developing around that, please?

Absolutely. So first of all, you are, of course, right, that basically autoinjector is the product at the go at the moment. But many of the new drugs in obesity will become liquid stable and not only liquid stable, they will become stable in the sense that they can take more than 1 shot out of a container. So actually, there will be a revival of pens. If you look at trusepatide, for instance, also [ Asentyk ] is actually also available in the FlexTouch pen from Novo or in the kwikpen from Lilly. So there is also a space for a pens. Now as you know, Lilly has both pens and autoinjector in-house, whereas Novo only has pens in-house. That's why Novo needed to reach out to Ypsomed and SHL. SHL now delivering for Ozempic, Ypsomed going to deliver for [ kakrizema ]. There are a couple of other companies out there, a German large company, a Swiss large company that will go into the obesity space. There are 3 Chinese and we basically are in relationship with all of those 5 companies. Now with Lilly, we don't have a contractual relationship yet. We've tried, there's definitely space for us in certain areas. You could also think about durable device solution, et cetera, et cetera. But there are [ no ] discussions ongoing. At the end of the day, we have a lot of work at the moment. If we can work with Lilly, we will love to work with Lilly. At the moment, we focus on our Novo program, obviously, and the future projects, obviously, will come 2028. 2029 and 2030 only.

Okay. And if I could just ask a favor, the line was rather poor when you were going through the schedule for diabetes and the disposal process or partnering process of diabetes. Could you just repeat exactly what stage you're looking to be at in November, please?

Oh, in the process. Yes, of course

Yes.

I'm happy to give a bit more flavor and describe what we are up to do now. So our Diabetes Care business will reach a positive quarter in '24, '25, and that's important to reach that. Over the coming 9 months until end of March '25, we are going to clean up, and we're going to put all assets and all employees and all elements which are diabetes care, including the subsidiaries including the manufacturing for pump, including the software center in Barcelona, we are moving all those elements into a new Ypsomed Diabetes Care AG. This company is still fully owned by the holding, which is at the stock market as a sister to the Ypsomed AG as we have it today. In November, after a market sounding, understanding the interest and the value, potential options for potential buyers, we're going to decide whether we want to start the process or not. But we are most likely going to start the process. So in November, we start the process, formal process, most likely it's going to be a sales project together with the bank, that will then hopefully end in spring-ish we say signing. Does that help?

Yes. Because as November 2024, you start the process, you'll have the company organized by spring of '25, is that right? Have I got the years right?

Yes. Yes. I mean this is, of course, a bit overlapping. I mean in the end of the day, we want to have a clear structure so the transition phase will be lean we want to describe the asset, I want to show a positive quarter. I think these elements are all important for me.

Okay. Thanks, please. We had -- we provided a lot of information, a lot of news today, saying there is a couple to digest. We are here very happy to answer your questions, to take your questions. Please raise your hand. You know this function. Maybe in the meantime, we got [ long ] question in the chat and I'm very happy to take this one because it's one of the special topics for Simon. It's discussing the tax rate going forward.

[ now assuming Swiss new and ] OCD low. No, obviously, I mean, I'm -- so I'm now, as you know, a member of the Swiss Parliament. So we will most likely going to adapt here in Switzerland, again, as the good school boy here and that we will implement OEC below -- OECD by first of January 2025, which means that as of 2025 onwards, every company in Switzerland that has a revenue of EUR 750 million or higher is going to be taxed up to 15% minimum tax. Ypsomed at the moment, if you look at our tax today, it's very low, it's 4%, but it's mainly due to special effects. If you look at the Swiss tax situation, we are now at 12-ish percent. 12.5-ish-percent. That's a bit what we pay today in Switzerland. So we would be taxed up. If I look at our midterm plan, if you look at our guidance, obviously, we will not reach EUR 750 million yet in the coming business year. We will be somewhere in the range of CHF 650 million, CHF 670-ish million when we calculate the 25% growth on top of the existing business, minus obviously, the needle effect. Now that being said, we could theoretically be taxed with 15% as of '26, but because we divest Diabetes Care with CHF 200 million, we will get another 1 year relief until we would enjoy the higher tax as of '27. Obviously, 15% is a good level. I was involved in that process in the state of Solothurn. And I can really stand behind the 15%. I think it's a fair level. It's a very attractive level. If you look at Germany, where we tax at 30%. We are obviously bringing the tax into Switzerland, as you know, I mean, all those sites in Germany, in the U.S., in China, they have 1 client. And this client is the house, the home in Switzerland. And this client pays not highest prices. So we actually tax in the sites in America, in Germany, in China, only roughly 7%, 8% profit and the rest profit we bring home and they tax at the lower percent. So I think it's quite a good transfer price system here in place, quite stable and robust. So we shouldn't care too much about the tax topic, but thanks for the question, indeed, [ since it is ] an important topic that we watch.

Thanks, Simon. This was a very interesting discussion and conversation. Curtis, please.

You had discussed on the EBIT expectation for 2024 or 2025, there could be a potential one-off for the pen needle business. I don't know, do you have any kind of idea what that might look like or when that might come for the time being?

Yes, [ so if ], I may answer. As Simon mentioned, we have disclosed this also. So at the moment, we do actually the closing for the pen needle business. We will have to recycle a goodwill, and it is roughly CHF 10 million. As you know, we do [ as Swiss get fair ]. So our goodwill is offset in the equity. So at the moment we divest this business, we have to recycle it through the P&L transaction, which is not cash relevant, but this one-off will come. And also for the rest of the pen needle business, there will be still some sales level, not the level you saw now in the year '23-'24, which was still CHF 39 million, so it will be lower level, whatever something between CHF 20 million and CHF 30 million and also the loss from this pen and needle business is much smaller than it was what we showed here is minus CHF 12 million. It will be, if at all, a single digit million ] amount negative. So that's those 1 of them not included in this CHF 90 million EBIT guidance -- sorry CHF 140 million.

Okay. Got it. Got it. And then just last one. You're talking about this big CapEx investment plan through 2030. I just wanted to double check 2 questions here. Number one, can you discuss maybe the phasing? Is it going to be kind of slow but steady through each year, or are some years going to be higher investment than others? And then secondly, is there a split that you can share between fixed assets and intangible assets?

Yes. So let's say, on the fixed assets, so the CHF 1.5 million, Curtis, is a fixed asset alone. We have shown on the CapEx sheet that we have spent roughly CHF 70 million, CHF 69 million, CHF 70 million on R&D for intangible assets. And we see this investment in R&D in the magnitude of CHF 60 million also in the future. Now with about a split of 50-50 between diabetes care and delivery systems. So we move onwards, obviously, the percentage of R&D will be at roughly 5% of the top line figure. So we really go from a double-digit R&D budget into a single-digit R&D budget. So to your first question on the CapEx for investments, it's roughly CHF 250 million to CHF 300 million CapEx for infrastructure building lines, manufacturing capacity per year. Sometimes difficult when we pay out because sometimes we only pay the [ five ] we try to move, of course, we want to -- we are asking our line manufacturers to play the bank so we don't have to spend the money too early, but you can have a rule of thumb. It's roughly CHF 0.25 billion per year.

So I'm very happy. It's a very lively discussion. I think this is one of the most successful earnings calls we ever had in our history so far. And I'm very happy that Peter also has a question. Peter, please go ahead.

Yes. Just two things. One on injection and the other one, diabetes. On the injection system, when looking at the R&D part of it, I mean, when you were elaborating on who you're working with also in obesity, I was wondering whether you also have follow-on projects with Novo, whether it be single chamber to support [ kagrisema ] long term or other of the range of different products that they are also considering moving through R&D?

And obviously, now we are very close to Novo. So is SHL, obviously, but on the single syringe solution, we are pretty close. Obviously, it makes sense that [ karisema ] stays in the same device from a patient perspective now in the [ guerezhimer ] syringe in the future, maybe in a [ BD shocked ] or again, [ guerezhimer ] syringe for us. You're right. I mean Novo is working on the liquid stable formulation of [ karizema ]. And we are very much involved in those follow-up programs. There are a couple of other indications or specific versions that are coming. But I cannot give you more details. I mean you would like to, need to ask Novo. I think it's a very strong partnership. Obviously, we understand that this business is so big and important to know what -- that they are also looking at that options. What we have publicly announced is that also contract manufacturers are going to manufacture our YpsoMate that only roughly 50% of the overall demand of the Ypsomed [ or the jeks ] will actually be manufactured by Ypsomed itself. The other 50% will be manufactured by contract manufacturers [ who ] will give us more license for those -- that's a clear agreement, but we are in a strong partnership here.

Okay. And then the other question I had was on the diabetes care. If you look at the infusion set challenge, whether that is sorted out now, whether your ability to use contract manufacturing has come on at this stage, whether that's later on, just to be able to understand how you free -- it frees you up and the extent to which you could then do more, for example, in France?

Yes. Now, of course, it's very important and we have prepared [ comatek ] in Denmark already 2 years ago as a backup. We have our volumes in Queretaro with Molex, our contract manufacturing partner. It's basically our Orbit infusion set manufactured. Manually, we have roughly 250 people there in clean rooms assembling our infusion sets. And then that thins our line, our manufacturing line in cleanroom 1 in Shwerin, which is only delivering roughly 3 million to 4 million units per year instead of 6 to 8, and this made us a lot of trouble in the past 6 months. Now the second CHF 4 million in Mexico will be up and running in September, October. Together with the better results in Shwerin, we should be okay after summer again. But we really had to -- so it was kind of frustrating, we had to stop putting patients on the pump for the past 3, 4 months, roughly. So that's why we didn't reach the 50,000 in March already. Now we are almost [ through ]. We have A team now on the line. This line, you're a bit in a difficult situation. This line was ordered from a contract manufacturer that was shut down. We had the new team on the line, and it was delivered not finalized yet. So this is where we are. I mean I think we have to back up, a bit bad luck, everything came together. The demand was above our expectation. I think that's also important to mention. If you look at the demand you could probably install 3 to 4,000 patients per month. We now have to still restrict a bit until we have the volumes again, but we look now positive into the future with our proposition.

So excellent. More questions. So this is really a very exciting and thrilling earnings call. We have Felix.

My question will be more on the balance sheet and how do you intend to finance this CapEx of CHF 1.5 billion. And to what extent do you need external financing? And how far would you go in net debt to EBITDA levels? Europe around 1x now. Would you go further beyond that?

Yes, as you mentioned, at the moment, this net debt::EBITDA is around 1x. And have in mind in that 5 years. We also will generate a lot of operating cash flow, basically also over this 5 years will be much more than CHF 1 billion also we will generate. But in those next few years, we will have a need for finance, but our balance sheet is solid enough that we can still take that on our balance sheet, those additional debt. And with not even increasing our net debt::EBITDA level significantly. It might go up to a level of 2x net debt::EBITDA, but we are in a solid position to finance that. Simon, you add.

No, absolutely, I think, I mean those negative free cash flows don't really worry us, as Samuel mentioned, we are at a very healthy balance sheet. And we are -- have a clear understanding in the Board and the team that we are not going to do any capital increase or dilution. We are really working with our current model and maybe try to optimize a bit with local currencies for China and China. But over that, we have a clear way forward. And then as Samuel said, I mean the cash will pay back. And eventually, diabetes care will actually support on that process as well.

With this, we reached local time. If there is -- if there are no further questions, I would close this call. Thank you for your interest and your trust. And if you have any further questions, please feel free to reach out. We are happy to support you. So thanks a lot. Have a nice day. See you. Bye.