Transcript HJB 2010 - Siegfried

Siegfried – Results H1 2011
Media/Analyst Conference
August 25, 2011
Siegfried Group
Important Notice
Half-year report
August 25, 2011
Folie 2
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Semi-annual report
August 31, 2010
Folie 3
1.
2.
3.
Strategy
Highlights 1st half year
2011
Facts and figures
Pharma CMO market expected to grow
at CAGR of 7%
Half-year report
August 25, 2011
Folie 4
Above average growth expectations due to increased outsourcing in Pharma industry
Global market revenue
in US$ bn
1200
6%
Sub-segment
indication
1051
On-patent
Gx
Biopharma
1000
800
750
5%
92
6%
121
61
7%
87
40
62
0
Pharm
a
Fine
chemicals
Pharma
fine
chemicals
(captive
and
merchant)
Note: 2014 estimates extrapolated to 2015 at 2009–14 CAGR
Source: Siegfried strategy materials "Quo vadis";Jan Ramakers Report 2010; Visiongain report 2010; BCG analysis
Pharma
CMO
(merchant)
2009
2015 exp.
x% CAGR 2009–15
There are two attractive entry points for CMOs
Gx grows at 2x pharma rate (but
will disappear after 2014)
FDA approvals
# FDA NME approvals
YoY Growth rate in %
60
20
20
Gx
Total pharma
50
15
15
40
12
30
10
7
20
7
6
6
6
5
10
0
0
1990
2000
Pipeline prospects
are improving
Source: FDA
2010
2007 2008 2009 2010
Increasing
importance of Gx
Half-year report
August 25, 2011
Folie 5
Asian low-cost CMOs aggressively promote
their cost advantage along the entire value
chain
Half-year report
August 25, 2011
Folie 6
Price pressure—
low-cost key
Sales
Generics
Quick, flexible
ramp-up required
Originators
~ 9 years
Preclinical
Clinical
phase 1–3
5–15 years
On-patent
>> 10 years
Off-patent
API
Advanced
intermediates
Standard
intermediates
European producers
→ Stronger competence
→ Regulatory track record
Asian producers
→ Low cost
Asian producers
→ Low cost
Source: Siegfried strategy materials "Quo vadis"; BCG analysis
Customer demands: CMO customers look for
competence and cost focus—but also value
stability and flexibility
Half-year report
August 25, 2011
Folie 7
Most relevant CMO characteristics
from PharmaCo perspective
Product experience
63
Cost
Product experience and cost
competitiveness most relevant criteria
52
Technological equipment
investments
30
Technological capabilities essential
Financial stability
20
Scheduling flexibility
20
Geographic location
9
Size
8
0
20
Financial stability and scheduling
flexibility also significant criteria—
effectively translating into critical size
requirement from CMO perspective
40
60
80
% of responses1
1. Which of the following CMO characteristics do you feel are the two most relevant?
Source: Pharmaceutical processing; BCG analysis
Customer demands: To ensure flexibility
and stability CMOs need critical size
Key aspects of CMO cost economics
Size matters for 'stability'/'scheduling
flexibility'
• New client offers require certain idle capacity
for quick-ramp-up—barely affordable for small
CMOs
• Losing single product endangers 'financial
stability' of small CMOs
Source: BCG analysis
Reactor capacity
in m3
Illustrative
250
250
Stylized capacity
Profitability driven by …
• Geographic location driving factor cost
• Efficiency of asset base
• Capacity utilization
Flexibility requires critical size
Stylized P&L
Limited scale economics
• Individual customer business limits classical
economies of scale in production
• Scale effects mainly achievable in support
functions (analytics, process development,
G&A)
Half-year report
August 25, 2011
Folie 8
100
200
Used
50
50
Idle
Smal
l
CMO
Larg
e
CMO
50
New client
order:
50
100T API 
50m3 idle
capacity
0
Sales
50
x4
200
Fixed cost of idle
capacity (CHF)
10
=
10
Cost of idle
capacity
(in % of sales)
20%
5%
Summary: CMO market analysis yields
key success factors
Half-year report
August 25, 2011
Folie 9
Key success factors define ambition level
I
Defend and expand differentiated offering
• Organization: customer relationship, service orientation, flexibility
• Technology: broad toolbox, process development skills, rapid changeovers,
integration of primary and secondary manufacturing
• Regulatory: cGMP track record, management of FDA audits
II
Achieve competitive cost position
• Factor cost: operational cost efficiency, lean manufacturing, footprint in
LCCs (especially for non-regulated and early cGMP steps)
• Asset base: appropriate standard and scale, footprint in LCCs
• Utilization: optimization per site but also across entire network
III
Establish critical size
• Flexibility: ability to afford required idle capacity for large projects
• Financial stability: to ensure relevance for large Pharma
• Risk reduction: for investors and customers due to less dependency on
single projects/products
Source: Siegfried strategy materials; Industry reports; Expert interviews; BCG analysis
In 2009/10 Siegfried cleared ground for next
strategic steps
Short-term financial position improved
• Significant improvement of operating cash flow
• Cash injection through convertible bond issue
• Reduction of operational costs
• Acquisition of large new project
Strategy as CMO service provider clarified
• Eliminated potential conflict of interest
between innovator IP needs and Gxproduction
• Protection of core partnerships with innovators
• Confirmed USP over Asian competitors
Organization aligned
• Sale of unrelated business unit (PulmoJet)
• Set up of new functional organization
EBITDA
adj.
Half-year report
August 25, 2011
Folie 10
H1 2009
H1 2011
CHF m
CHF m
Change
11.2
26.3
+235%
NWC
177.5
103.3
-42%
Cash
-75.3
55.2 +130.5 m
Strategy
Status
 Negotiations with two Asian parties on-going
 Investments in technology portfolio in Zofingen on-going for drug
products manufacturing of high potent APIs
 Open eyes on opportunities re critical size
Half-year report
August 25, 2011
Folie 11
Strategy
Summary
 Siegfried is a leading player in the Custom Manufacturing
Organisation Market
 Focus on core business and development of clear USP:
One Stop Shop for Primary and Secondary Manufacturing
 Alignment of Business and asset strategy
 Solid cash flows in all businesses; improved working capital performance
and expense control
 Sound financing structure with positive net cash position
 Experienced and partially new Board of Directors and Management Team
 New functional organization with aligned incentives for Management
and Board through Equity Ownership Plan (EOP) in place
 Segments obsolete after new organizational structure among USP
Half-year report
August 25, 2011
Folie 12
Semi-annual report
August 31, 2010
Folie 13
1.
2.
3.
Strategy
Highlights 1st half year
2011
Facts and figures
Siegfried Group
Highlights H1 2011




Half-year report
August 25, 2011
Folie 14
Sales growth H1 2011 28.3% in CHF (42.4% in LC)
Adjusted EBITDA improved 37.0%
Only limited FX-exposure on operating result due to good natural hedge position
Return to profitability
 Cash flow from operating activities increased by 58.4%
 Increase of cash position to CHF 55 million
 Capex CHF 6.5 million
 Final conversion of CHF 80 million mandatory convertible notes completed (May

2011)
Existing credit facility replaced by new CHF 150 million credit line (strategic and
operational)
Solid financial basis for strategy implementation
Siegfried Group
Highlights H1 2011
Half-year report
August 25, 2011
Folie 15
 New Chairman and three new Board members started end of May 2011
 Strategy assessment of new Board of Directors completed by end of June;
strategy confirmed
 Reorganization from divisional to functional structure fully implemented.
 Former reportable Segments Drug Substances and Drug Products obsolete
 Outsourcing in Zofingen with second partner EBM has become effective Jan 1, 2011
 Additional cash inflow of CHF 11.5 million due to assets taken over by EBM
 Planned operational savings secured
Adaptation of organization further progressed to support strategy “Transform”
Semi-annual report
August 31, 2010
Folie 16
1.
2.
3.
Strategy
Highlights 1st half year
2011
Facts and figures
Business Development H1 2011
Net Sales
Half-year report
August 25, 2011
Folie 17
H1 2011
CHF m
H1 2010
CHF m
Change %
CHF (LC)
Net sales Group
173.8
135.4
+28.3 (+42.4)
Net sales Drug Substances
146.6
103.9
+41.1 (+57.5)
Net sales Drug Products
27.2
31.5
-14.0 (-7.4)
Business Development H1 2011
Net sales
Half-year report
August 25, 2011
Folie 18
 Exclusive Synthesis, which accounts for approximately 60% of sales, grew more than
50%
 Controlled substances (approximately 20% of sales) also show positive development,
especially in Europe
 Finished dosage forms remain under pressure. Co-development strategy brings first
success, first launches expected by the end of 2011.
Business Development H1 2011
Gross profit - operating result – net income
Half-year report
August 25, 2011
Folie 19
H1 2011
CHF m
H1 2010
CHF m
Change %
CHF
Gross profit
30.5
26.3
+16.3
EBITDA
18.9
17.2
+10.2
EBIT
4.3
1.9
+126.6
Net income/(loss)
2.4
-2.3
n/a
Business Development H1 2011
One-time effects H1 2010/2011 - EBITDA
37%
CHF million
26,3
2,2
7,1
1,8
3,2
19,2
17,2
Half-year report
August 25, 2011
Folie 20
0,8
0,4
EBITDA Inventory Exchange
H1 2010
effect rate effect
reported (40% of
2 Mio)
0,8
EOP
H1 2010
18,9
1,6
Adjusted EBITDA Adjusted Negative Exchange
EBITDA increase EBITDA inventory rate effect
H1 2010
H1 2011
effect
(40% of
CHF 5.5
Mio)
EOP
H1 2011
Strategy
1,4
EBM
EBITDA
outsourcing H1 2011
reported
Business Development H1 2011
Consolidated Income Statement
Half-year report
August 25, 2011
Folie 21
Business Development H1 2011
Cash Flow
Half-year report
August 25, 2011
Folie 22
CHF million
3,8
11,7
5,9
1,5
4,1
4,4
55,2
22,0
41,2
Cash Jan 1,
2011
Operating Legal cases
CF (w/o
legal cases)
Disposal
PP&E
Capex /
Own
Coupon / Financial
other inv. shares, net stamp duty expenses
activities
MCN
incl. FX
Cash June 30,
2011
Business Development H1 2011
Capex H1 2011
Half-year report
August 25, 2011
Folie 23
Capital expenditure
H1 2011
CHF Mio.
H1 2010
CHF Mio.
Capex Fixed/Intangible Assets
6.5
5.0
Outlook
 For the whole year 2011 Siegfried expects significant sales growth in local


currencies.
The EBITDA-margin should be similar to the first half of the year.
The Company expects a net profit for the whole year.
 Further steps in the realization of the strategy are expected.
Half-year report
August 25, 2011
Folie 24
Semi-annual report
August 31, 2010
Folie 25
Thank you for your attention