Grifols(GRFS) - 2022 Q2 - Quarterly Report

Introductory Remarks Strengthening Our Mission Grifols reinforces its mission to improve patient lives through sustainable innovation and organizational restructuring - Grifols employs 25,000 people and reinforces its mission through a sustainable approach centered on innovation and reorganization[15][16][17] Reinforcement of Plasma Supply Grifols significantly expanded its plasma network to over 400 centers and fractionation capacity to 22 million liters annually Plasma Network and Capacity Expansion (2020 vs. Today) | Metric | 2020 (before pandemic) | Today (June 30, 2022) | Progress in 2 years | | :--- | :--- | :--- | :--- | | Global Plasma Centers | 264 | 312 (Grifols) + 31 (Biotest) + 41 (SRAAS) = 400+ | +89 centers (Grifols + Biotest) | | Fractionation Capacity (ML/year) | 15 | 22 | +7 | Innovation and Organizational Structure Grifols strengthens its innovation ecosystem via Biotest acquisition and streamlines its organizational model into distinct Business Units for enhanced efficiency - The Biotest acquisition strengthens Grifols' innovation pipeline, focusing on 7 therapeutic areas with key projects like Fibrinogen, Trimodulin, and Cytotect® expected to drive revenue growth and margin expansion[22] - The new organizational structure creates distinct Business Units (Plasma Procurement, Biopharma, Diagnostic, Bio Supplies) to improve operational efficiency, governance, and speed to market[25] Sustainable Approach and ESG Grifols emphasizes a sustainable operating model with 30 goals for 2030, focusing on donors, patients, human rights, talent, and environmental responsibility - Grifols has established 30 sustainability goals for 2030, including achieving 50% women in Senior Management and donating 240 million international units of clotting factor medicines[27] - The company's operations created 141,500 jobs and had a €7,700 million economic impact, with 40-60% stemming from its plasma centers[29] - Grifols is committed to gender equality, with women comprising 60% of the workforce, 65% of promotions, and 41% of senior managers[30] - Key 2030 environmental goals include reducing GHG emissions per unit by 55% and sourcing 100% of electricity from renewable energies[31] Plasma Plasma Strategy and Global Footprint Grifols' plasma strategy focuses on expanding global collections, leveraging integration, and ensuring donor/employee experience, aiming for over 400 centers by year-end 2022 - The core plasma strategy focuses on expanding collections, leveraging technology and standardization for efficiency, and prioritizing donor/employee experience[38] - Grifols plans to expand its plasma center network to over 400 centers by the end of 2022, up from 264 in 2020, with significant growth in Europe (from 48 to 89 centers) and North America (from 264 to 343 centers)[40][42] Plasma Collection Trends and Market Position Plasma collections accelerated significantly in 2022, with Grifols maintaining a strong 28-30% market share despite headwinds Plasma Collection Growth in 2022 | Time Period Comparison | Growth Rate | | :--- | :--- | | Weeks 21-24 vs. Weeks 1-4 | +24% | | YTD (first 25 weeks) vs. PY | +20% | - Growth is driven by a favorable macro-economic context, new centers, and higher talent retention, while headwinds include B1/B2 visa restrictions and persistent inflationary pressures[45] - Grifols has consistently maintained a plasma volume market share of 28-30% from 2018 to 2021[48] Operational Efficiency and Technology Grifols drives operational efficiency through acquisition integration and new technology deployment, improving donations per employee hour and average yield - The company is standardizing operations and quality systems across all acquired plasma centers, including those from Biotest, GC, Kedrion, and Haema[50] - Digital transformation includes migrating to a new BECS for paperless records and rolling out new NexSys/Aurora Xi devices to improve donation yield and efficiency, with full implementation expected by year-end 2022[52][54] Key Efficiency Metrics (2022 vs. 2021) | Metric | Change | | :--- | :--- | | Donor Retention Rate | +11% | | Donations per Employee Hour | +4% | | Average Yield | +2% | - Average liters per center showed strong momentum in Q2 2022, increasing by 26% compared to Q2 2021[62] Donor and Employee Experience Grifols prioritizes superior employee and donor experience through technology, data, and targeted recruitment campaigns to ensure reliable plasma collections - The company's strategy is to improve employee engagement through better tools and training, which in turn enhances the donor experience at every touchpoint[65][66] - A customer data platform is used to collect and analyze data from every touchpoint, creating a 360-degree view of the donor to inform and elevate their experience[68] - The 2022 U.S. recruitment campaign successfully raised awareness and recruited new donors, achieving 259 million impressions and 2.6 million website visits[73] - In Europe, national recruitment campaigns in 2021 and 2022 have led to a significant increase in new donors, with monthly new donors in Germany in early 2022 surpassing 2021 levels[74][78][80] Canada and Egypt Global Self-Sufficiency Model Grifols partners with countries to build sustainable plasma self-sufficiency models, expanding global fractionation capacity to 26 million liters by 2026 - Grifols is implementing a Self-Sufficiency Program to help countries establish sustainable plasma-collection models, addressing the growing global demand for plasma-derived therapies[86] - The company is expanding its global fractionation capacity from 22 million liters in 2022 to 26 million liters in 2026, with new plants in Canada and Egypt contributing to this growth[89] Canada Operations and Expansion Grifols expands its Montreal facility in phases to enhance Canada's plasma self-sufficiency, adding albumin purification, fractionation, and Gamunex production - Canada is the world's second-largest consumer of IgG per inhabitant, and the government is seeking to increase its self-sufficiency in plasma-derived therapies[91] - Grifols is expanding its Montreal facility in three phases: Phase I (Albumin Purification, Aug '22), Phase II (Fractionation Expansion, Sep '23), and Phase III (Warehouse & Gamunex Expansion, Nov '24)[102] Egypt Project and Milestones Grifols established a pioneering public-private joint venture in Egypt to build Africa's first integrated plasma supply platform, achieving key milestones including plasma collection - Grifols is addressing Egypt's need for plasma-derived medicines through a joint venture to establish a self-sufficient plasma infrastructure, including donor centers and manufacturing facilities[107] - Key milestones achieved include the signature of the Master Joint Venture Agreement (2020), start of plasma collection (2021), and inauguration of the first plasma center (2022)[108] - The project includes the construction of 20 donor centers across Cairo and the Canal Zone, with the first 10 in Wave 1, and a new manufacturing site in Egypt's New Administrative Capital[112][114] Biopharma Market Overview and Performance The global plasma-derived proteins market is attractive and growing, with Grifols' Bioscience revenues showing strong Q1 2022 recovery driven by core products and key geographies - The global plasma-derived proteins market reached €25 billion in FY20, with a CAGR of 7.2% from 2017-2020[122] Bioscience Revenue Growth (at constant currency) | Year | Growth Rate | | :--- | :--- | | 2017 | +7.6% | | 2018 | +8.9% | | 2019 | +8.0% | | 2020 | +7.9% | | 2021 | -5.9% | - In Q1 2022, core products showed positive trends: IgG returned to growth, Albumin saw strong sales in China and the U.S., and Alpha-1 sustained growth[124] Product Portfolio Highlights Grifols maintains a strong position across therapeutic areas with leading products like Gamunex®-C, Xembify®, Prolastin®, and HyperRAB®, alongside recent successful launches - Gamunex®-C maintained its position as the 1 prescribed IG for CIDP in the U.S., with a 31-34% market share in 2021-Q1 2022[131] - Xembify® sales volume grew +141% YoY (LTM March '22) in the U.S. and is projected to account for 10-15% of global IG sales by 2025 It is being launched in Europe in 2022-2023[133][135] - Prolastin® holds a dominant market share of over 70% in the global Alpha-1 antitrypsin market[138] - HyperRAB® has over 80% market share in the U.S. Rabies IG market and has treated over 1 million patients since launch[144] - Vistaseal® fibrin sealant showed double-digit growth worldwide in FY21 and is undergoing global expansion into new markets through 2023[151] Growth Drivers and Market Expansion Biopharma growth is driven by addressing underdiagnosed conditions, expanding indications for Xembify®, and increasing Albumin use in critical care, adding significant market potential - Grifols is using AI and partnerships to reduce the average 12.4-year diagnosis time for Primary Immunodeficiency (PI), a largely undiagnosed condition[155][158] - The company is developing Xembify® for Secondary Immunodeficiencies (SID) in oncological patients, a market with a 7.2% CAGR[161] - Grifols' worldwide AATD testing program has performed over 950,000 tests since 2006, diagnosing over 16,000 severe patients[163] - There is a potential global market growth of over €400 million for Albumin stemming from its regular use as a disease-modifying treatment in hepatology and critical care[168] Diagnostic Business Strategy and Performance The Diagnostic division focuses on strengthening its current business, supporting Biopharma, and driving innovation, achieving €734 million in 2021 revenues with sustained growth - The Diagnostic division's strategy is based on consolidating the current business, supporting Biopharma, and regulatory innovation & digital transformation[175] Diagnostic Revenue by Segment (2021, EUR millions) | Segment | Revenue (approx. EUR millions) | | :--- | :--- | | NAT Donor Screening | ~350 | | NAT COVID-19 | ~50 | | Blood Typing Solutions | ~200 | | Recombinant Proteins | ~50 | | Clinical Diagnostic & Others | ~84 | | Total | 734 | - A strategic alliance with SRAAS in China is set to consolidate current business and drive growth through new assay development for global expansion[181] - The Blood Typing Solutions business shows constant growth, driven by the DG Gel® System, achieving sales of 50 million gel cards in 2021[184][185] Support for Biopharma and Innovation The Diagnostic division supports Biopharma through high-ROI testing programs like Alpha-1, with 'AlphaID™ at Home' submitted for FDA clearance, and plans to expand this model - The Alpha-1 testing program has performed over 950,000 tests, diagnosed over 205,000 deficient patients, and identified over 16,000 severe patients since 2006[187] - In May 2022, Grifols submitted a 510(k) filing to the FDA for 'AlphaID™ at Home,' an Over-The-Counter (OTC) screening test for Alpha-1 deficiency[190] - The successful testing model for Alpha-1 will be expanded to support Biopharma growth in other areas, including Primary Immunodeficiency (PI), Secondary Immunodeficiency (SID), and future Biotest projects[192] Regulatory Compliance and Digital Transformation Grifols is ahead of schedule in complying with new European IVDR and is undergoing digital transformation with new software solutions to streamline customer operations - Grifols is on track with the new European IVDR, receiving its first certifications in December 2021, ensuring on-time delivery for all relevant products without needing the additional transition period[193][194] - Digital transformation initiatives include new software like Bloodstream for NAT testing labs and Blood Typing Manager middleware to connect laboratory networks, improving efficiency and minimizing risks[197] Innovation Innovation Strategy and Ecosystem Grifols accelerates innovation by evolving its structure, rationalizing its R&D portfolio, and building a 360-degree ecosystem through internal research and strategic alliances - The innovation strategy involves evolving the organization, gaining focus and speed in the pipeline, and building new innovation models[203] - Grifols is rationalizing its R&D portfolio by discontinuing non-strategic projects and divesting assets like VCN, while launching key new projects[206] - The company is developing a broad innovation ecosystem through strategic alliances, including an R&D collaboration with Shanghai RAAS and a precision medicine partnership with Endpoint Health for ATIII in sepsis[208] Key Development Projects Grifols highlighted notable progress in four core R&D projects AMBAR-Next (Alzheimer's Disease) AMBAR-Next is a confirmatory Phase 3 trial for mild-to-moderate Alzheimer's Disease using plasma exchange with albumin replacement, enrolling ~600 subjects globally - The AMBAR-Next Phase 3 trial is a confirmatory study for mild-to-moderate Alzheimer's, building on the two-pronged strategy of plasma exchange and albumin replacement to remove toxic moieties and restore albumin's properties[214][215] Xembify® in CLL Grifols is developing Xembify® to prevent infections in CLL patients with hypogammaglobulinemia, planning a Phase 3 trial targeting the fastest-growing IG therapy segment - The market potential for IG in Secondary Immunodeficiencies (SID), including CLL, is projected to grow from ~€260 million in 2021 to over €1 billion by 2031[218] ATIII in Sepsis Grifols, with Endpoint Health, is developing ATIII for severe sepsis using a precision medicine approach, identifying a specific patient sub-population via a rapid IVD test - The collaboration with Endpoint Health aims to develop and commercialize ATIII for severe sepsis by using a rapid, 90-minute IVD test to identify a targeted patient population of ~139,000 cases per year in the U.S[222][224] GigaGen and HBV Therapy GigaGen is developing a recombinant polyclonal antibody therapy for Hepatitis B (HBV) with over 1,000x greater potency than plasma-derived therapy in pre-clinical models - GigaGen's platform captures and recreates complex antibody repertoires to develop recombinant polyclonal and exceptional monoclonal antibodies[228] - The lead candidate, a recombinant polyclonal antibody for HBV (rHBIG), has demonstrated a neutralizing potency over 1,000x that of plasma-derived therapy in pre-clinical models[231] Grifols and Biotest Transaction Rationale The Biotest acquisition is a transformational transaction maximizing opportunities through strong geographic fit, enhanced commercial reach, increased scalability, and accelerated pipeline - The Biotest acquisition is a transformational deal that offers a strong geographic fit, broader commercial reach, increased scalability, and an accelerated innovation pipeline[237] Key Pipeline Assets from Biotest Biotest acquisition brings high-potential late-stage assets like Fibrinogen, Trimodulin, and Cytotect® for CMV in pregnancy, expected to boost revenue per liter and expand margins Fibrinogen Biotest's Fibrinogen concentrate is being developed for congenital and acquired fibrinogen deficiency, with an ongoing Phase III study for acquired deficiency showing promising interim results - Fibrinogen concentrate is being developed for congenital and acquired deficiencies, with a completed Phase I/III trial for congenital use and an ongoing Phase III trial (ADFIRST) for acquired use[248] - The market for fibrinogen is expected to grow significantly, driven by improved point-of-care diagnostics and increased awareness Obtaining an acquired deficiency indication could multiply consumption, as seen in markets like Canada[251][254] Trimodulin Trimodulin, a unique polyvalent immunoglobulin, targets severe community-acquired pneumonia and COVID-19, with two Phase III trials initiated and blockbuster potential - Trimodulin is a unique immunoglobulin containing ~23% IgM and ~21% IgA, targeting severe community-acquired pneumonia (sCAP) and severe COVID-19[257] - Following positive Phase II studies that showed a 50-70% relative reduction in mortality in the target population, two Phase III trials are starting in 2022[263] - The initial target market is over 80,000 sCAP patients per year, with no direct competitors for an IgM-enriched immunoglobulin on the market[265][267] Cytotect® for CMV in Pregnancy Cytotect® is being developed to prevent maternal-fetal CMV transmission, with a pivotal Phase III trial underway, showing potential to significantly reduce transmission rates - Cytotect® is being developed to prevent maternal-fetal transmission of CMV, the most common congenital infection, which affects 0.5-1.0% of all newborns[270][280] - A Phase III trial (PreCyssion) is underway with 80 subjects Previous observational studies showed a reduction in transmission from 35.2% (no intervention) to 6.5% with CMVIG treatment[276][279] Financials Financial Performance Review Grifols' 2021 performance was impacted by COVID-19, resulting in €4,933 million revenues and 19.5% reported EBITDA margin, with an underlying margin of 27.3% excluding one-offs 2021 Key Financials (EUR in millions) | Metric | H1'21 | H2'21 | 2021 Total | | :--- | :--- | :--- | :--- | | Revenue | 2,537 | 2,397 | 4,933 | | Gross Margin (%) | 43.9% | 35.4% | 39.8% | | EBITDA Adjusted | 637 | 377 | 1,014 | | EBITDA Adjusted (%) | 25.1% | 15.8% | 20.6% | | Group Profit | 267 | (78) | 189 | - The Bioscience division was constrained by plasma supply in 2021, while Diagnostic, Bio Supplies, and Hospital divisions grew[294][295] - COVID-19 had an estimated €420 million volume-related negative impact on 2021 EBITDA, comprising €150 million from donor compensation, €183 million from cost under-absorption, and €106 million from lower sales volume[297] Strategic Investments and Biotest Acquisition Grifols invested over €1 billion in capacity and plasma network, notably acquiring Biotest for €1.5 billion, adding European plasma centers and a strong late-stage pipeline - Grifols invested over €900 million in CAPEX from 2019-2021 to expand industrial capacity, including new fractionation and purification plants[300] - The acquisition of Biotest closed on April 25, 2022, with an investment of €1.5 billion, giving Grifols 96% of voting rights[303] Biotest Financial KPIs (EUR in millions) | Year | Revenues | Adjusted EBITDA | Adjusted EBITDA Margin (%) | | :--- | :--- | :--- | :--- | | 2017 | 378 | 75 | 19.8% | | 2018 | 400 | 92 | 23.0% | | 2019 | 419 | 100 | 23.9% | | 2020 | 484 | 108 | 22.3% | | 2021 | 516 | 101 | 19.5% | Financial Outlook and Deleveraging Strategy Grifols expects H1 2022 revenue growth of c. +5% and 20-22% EBITDA margin, committed to deleveraging through cost savings, divestments, dividend suspension, and lower CAPEX Outlook H1 2022 (Growth vs. PY) | Metric | Growth Rate | | :--- | :--- | | Revenues (Reported) | c. +5% | | Revenues (at cc) | c. +11% | | Biopharma (Reported) | c. +9% | | EBITDA Margin | 20-22% | - Performance in 2022 is expected to be driven by accelerating plasma collections, price increases, and robust underlying demand, with a gradual sequential expansion in margins[309] - The deleveraging plan includes a €100 million structural cost savings program, divestment of non-core assets (e.g., VCN, Hospital Software BU), suspension of cash dividends, and reduced CAPEX[311] Macro-economic Context Grifols is prepared for the macro-economic environment, with low exposure to interest rate hikes, a tailwind from EUR/USD exchange rate, and minimal impact from the Ukraine-Russia conflict - The company has low exposure to interest rate hikes, as c. 65% of its debt is at a fixed rate[312][314] - The EUR/USD exchange rate is a tailwind in 2022, and sales from Ukraine/Russia represent less than 0.3% of the total[312] Final Remarks Delivering on Commitments Grifols delivered on commitments by strengthening its core business, accelerating innovation, and streamlining its organization, achieving significant savings and positioning for growth - Grifols has re-prioritized its R&D portfolio, discontinuing some projects to achieve €30 million in savings, while accelerating priority projects like Xembify in CLL and ATIII in Sepsis[321] Market Potential of Key Pipeline Assets | Project | Company | Market Potential | | :--- | :--- | :--- | | Xembify® in SID (CLL) | Grifols | ~USD 1Bn | | ATIII in Sepsis | Grifols | ~USD 1Bn | | AMBAR-Next | Grifols | USD 1Bn+ | | GigaGen Platform | Grifols | USD 1Bn+ | | Fibrinogen® | Biotest | USD 400-800M | | Trimodulin | Biotest | USD 1Bn+ | | CMV IG Hyper | Biotest | USD 200-300M | - The company is optimizing its business through divestments (Hemostasis, VCN, Blood Bags, Hospital Software BU) and a cost optimization plan to achieve over €100 million in annualized savings[330] - The new organizational structure splits the former Bioscience Division into Biopharma and Plasma Procurement, creating full-fledged, value-driven business units for enhanced effectiveness and accountability[332]