Stevanato Group (NYSE:STVN) 2025 Conference November 19, 2025 06:00 AM ET Company ParticipantsFranco Stevanato - CEONone - Company RepresentativeConference Call ParticipantsDave Windley - Healthcare Equity Research AnalystDave WindleyHi, good morning, everyone. Thanks for joining us at Jefferies Healthcare Conference in London. I'm Dave Windley with Jefferies Healthcare Equity Research, excuse me, based in the States. I cover the CRO space, CRO and CDMO space, as well as the container suppliers, West and St ...

Summary of Conference Call Company and Industry - **Company**: Waters Corporation - **Industry**: Life Sciences and Analytical Instruments Key Points and Arguments Replacement Cycle and Growth Drivers - The replacement cycle for instruments, particularly LCMS, began about a year ago and is expected to continue for several more years, with current growth rates in the high single digits [2][4] - The growth drivers for LCMS include: 1. Instrument replacement cycle, which is still ongoing [2] 2. Idiosyncratic growth drivers such as GLP-1 testing, which has seen revenues double, and PFAS testing, which has 30% order growth [3] 3. Development of new products that meet significant unmet needs in the market [3] Performance in Different Segments - Chemistry segment grew by 13% in the third quarter, significantly above the pre-COVID run rate of 6%-7% [5] - The growth in chemistry is attributed to investments in bioseparations and innovations in product offerings, particularly for biologics [6][7] - The pharma segment experienced double-digit growth driven by the replacement cycle and idiosyncratic growth drivers, particularly in the U.S. and Europe [10][11] Regional Insights - In China, growth is driven by CDMOs supporting the local biotech industry, with a significant share of global in-licensing coming from China [11] - India is experiencing high teens growth driven by generics, while branded generics in China are still declining [11] Innovation and New Products - The CDMS opportunity is highlighted as a significant unmet need in the market, with potential to capture a large share of the $350 million annual sales currently dominated by existing techniques [16][17] - New product launches include the FACS DiVa S8 flow cytometer and the FXI incubator for microbiology, both expected to drive significant growth [22][23] Software and Commercial Model Changes - The Empower software business is a critical part of Waters' portfolio, with plans to transition to a subscription model to enhance revenue [30][31] - The Empower system is used for 80% of QAQC data submissions for drugs filed to regulatory bodies, indicating its importance in the industry [30] Market Dynamics and Future Outlook - The overall market setup is positive, with continued growth expected from the replacement cycle, new product introductions, and idiosyncratic growth drivers [38] - The company anticipates that the growth rate in chemistry will stabilize in the high single digits to low double digits over time [7] Additional Insights - The company is focusing on integration planning post-acquisition, with positive surprises in microbiology workflow improvements and potential market entry strategies [26] - The pricing strategy for large molecules is expected to be stickier and more significant compared to small molecules, enhancing revenue opportunities [9] Other Important Content - The company is actively working on enhancing its product offerings and market strategies to capture unmet needs and drive sustainable growth [17][38] - There is a focus on customer adoption and integration of new technologies, which is crucial for maintaining competitive advantage in the market [17][31]

Core Insights - The earnings season has concluded, highlighting the performance of drug development inputs and services stocks, particularly West Pharmaceutical Services [1] Industry Overview - Companies in drug development inputs and services are essential in the pharmaceutical and biotechnology value chain, providing support for drug discovery, preclinical testing, and manufacturing, leading to stable demand due to outsourcing by pharmaceutical companies [2] - The industry faces challenges such as high capital requirements, customer concentration, and sensitivity to changes in biopharma R&D budgets and regulatory frameworks [2] - Future growth is expected from increased investment in biologics, cell and gene therapies, and advancements in precision medicine, which will drive demand for sophisticated tools and services [2] - A trend towards outsourcing in drug development is noted for enhancing nimbleness and cost efficiency, benefiting the industry [2] - Potential challenges include pricing pressures from healthcare cost containment efforts and an evolving regulatory environment that could hinder innovation or client activity [2] Company Performance - The seven tracked drug development inputs and services stocks reported strong Q3 results, with revenues exceeding analysts' consensus estimates by 3.1% [3] - West Pharmaceutical Services reported revenues of $804.6 million for Q3, reflecting a year-on-year increase of 7.7% and surpassing analysts' expectations by 2.1% [5] - The company experienced broad-based strength across its Proprietary Products and Contract Manufacturing segments, with double-digit growth in its HVP Components business driven by GLP-1 products and an improving demand environment [6]

Core Insights - The article discusses the Q3 earnings results of Repligen and its peers, highlighting the overall performance of the drug development inputs and services sector [1] Industry Overview - Companies in drug development inputs and services are essential in the pharmaceutical and biotechnology value chain, providing support for drug discovery, preclinical testing, and manufacturing [2] - The industry benefits from stable demand due to pharmaceutical companies outsourcing non-core functions, often through medium to long-term contracts [2] - Future growth is expected from increasing investments in biologics, cell and gene therapies, and advancements in precision medicine, which will drive demand for sophisticated tools and services [2] - Outsourcing trends in drug development are growing for cost efficiency and agility, benefiting the industry [2] - Potential challenges include pricing pressures from healthcare cost containment efforts and an evolving regulatory environment that could impact innovation and client activity [2] Company Performance - The seven drug development inputs and services stocks tracked reported strong Q3 results, with revenues exceeding analysts' consensus estimates by 3.1% [3] - Repligen reported revenues of $188.8 million for Q3, representing a year-on-year increase of 21.9%, surpassing analysts' expectations by 3.8% [5] - Despite strong earnings, Repligen's stock has decreased by 10.1% since the earnings report, currently trading at $144.50 [6]

Financial Data and Key Metrics Changes - In Q3 2025, the company reported total revenue of $160 million, representing a 15% increase compared to Q3 2024 and an 18% increase for the first nine months of 2025 over the same period in 2024 [14][15] - The net loss for the quarter was $180 million, equating to $1.81 per share [15] - Cash, cash equivalents, and securities as of September 30, 2025, totaled $447 million, bolstered by a recent $400 million financing [16] Business Line Data and Key Metrics Changes - Crysvita generated $112 million in Q3 2025, with revenue contributions of $57 million from North America, $47 million from Latin America and Turkey, and $8 million from Europe [15] - DOJOLVI contributed $24 million, maintaining steady growth, while EVKEEZA and MEPSEVII contributed $17 million and $7 million, respectively [15] - The company expects total revenue for 2025 to be between $640 million and $670 million, indicating a growth of 14%-20% over 2024 [16] Market Data and Key Metrics Changes - In Latin America, approximately 875 patients are now on Crysvita therapy, with 50 new start forms generated in Q3 2025 [8] - In the EMEA region, around 310 patients are receiving EVKEEZA across 17 countries, with 120 new patients added since the beginning of the year [10] Company Strategy and Development Direction - The company is focused on maximizing opportunities from its four commercial products and has two BLA submissions in progress for ultra-rare diseases [4] - A recent $400 million financing through the sale of Crysvita royalties is aimed at strengthening the balance sheet and supporting upcoming pivotal data readouts [4][13] - The company plans to maintain financial discipline while preparing for the launch of new products and managing cash burn [5][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the upcoming pivotal data readouts for osteogenesis imperfecta and Angelman syndrome, with expectations for significant commercial opportunities [5][23] - The company reaffirmed its path to profitability by 2027, supported by continued double-digit growth from existing products and potential new launches [16][48] Other Important Information - The company is preparing for the rolling BLA submission for DTX401, expected to be completed next month, and anticipates a BLA resubmission for UX111 in early 2026 [18][21] - Management highlighted the importance of patient support programs in influencing treatment decisions among caregivers and patients [62] Q&A Session Summary Question: Data update on Orbit and Cosmic studies - Management confirmed that data from both studies will be reported together, expected in December or January, with variability in timing due to data cleaning processes [26][27] Question: Open label extension from phase II for OI - Management stated that while no new quantitative data is available, they are confident in the phase II results and expect a fracture reduction of 40%-70% in phase III [30][32] Question: Clarification on UX111 and DTX401 submissions - Management explained that the timing of submissions was adjusted due to the need for additional reports, with DTX401 expected to be filed first [35][36] Question: Impact of OMERS transaction on financing needs - Management indicated that the $400 million raised will help address investor concerns regarding financing needs in 2026, particularly related to priority vouchers [42][48] Question: Commercial opportunity for Setrusumab in OI - Management believes the OI population is larger than XLH and expects similar pricing, indicating a significant commercial opportunity [58] Question: Loss of exclusivity for Setrusumab - Management highlighted orphan designation as a protective factor against loss of exclusivity, with additional patents in place to extend protection [90]

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Industry Trends & Investment - A new $3 billion drug manufacturing plant is opening in North Carolina, potentially at an opportune time for US manufacturing [1][2] - North Carolina was ranked as the top state for business, indicating a favorable environment for manufacturing investments [2] - The new Fujifilm Biotechnologies factory will be one of the largest biologics manufacturing facilities in the US, featuring bioreactors capable of holding 20,000 liters each [2][3] - Historically, the US has lagged behind Europe in biologics production, with only 17% of branded injectable drugs originating in the US compared to almost half in Europe [3] - Pharmaceuticals from the EU will face a 15% tariff, which is lower than previously anticipated, benefiting the industry [4] Impact of Tax Policy - Lower corporate tax rate of 21% is encouraging more US manufacturing investments [5] - The US biopharmaceutical manufacturing landscape has expanded from approximately 1,000 facilities to 1,600 since the 2017 tax act passage [6] Company Specifics - Johnson & Johnson is among the first companies to utilize the new facility, signaling further investments across the country [5] - It takes significant time to realize the benefits of investments, with the new plant taking five years from conception to near-completion [6]

Financial Data and Key Metrics Changes - In 2025, revenue increased by 8% to $280 million, driven by a 10% growth in the BDS segment, offsetting a 2% decline in the Engineering segment [19][20] - Adjusted EBITDA increased to $65.1 million, resulting in a 240 basis point improvement in the adjusted EBITDA margin to 23.2% for 2025 [21][22] - Net profit totaled $29.7 million with diluted earnings per share of $0.11, while adjusted net profit was $31.3 million with adjusted diluted EPS also at $0.11 [21][22] Business Line Data and Key Metrics Changes - Revenue from the BDS segment grew 10% to $243.5 million, with high value solutions accounting for 42% of total revenue, driven by strong demand for high value syringes [22][23] - High value solutions revenue grew 13% to $116.8 million, while revenue from other containment and delivery solutions increased 6% to $126.7 million [20][23] - The Engineering segment saw a 2% revenue decline to $36.5 million, with gross profit margin declining to 6.6% due to a higher mix of revenue from legacy projects [23][24] Market Data and Key Metrics Changes - Biologics represented 39% of BDS revenue in 2025, up from 25% in the same periods of fiscal 2024 and 2023 [15] - The company is experiencing stabilization in vial demand as destocking effects continue to ease, with a projected mid- to high single digit growth in vials for 2025 [40][41] Company Strategy and Development Direction - The company is focused on executing its multiyear investment optimization plans, enhancing its commercial strategy, and positioning itself to capitalize on long-term growth opportunities in high value solutions [29][30] - The strategic focus includes expanding capacity for high value syringes and ready-to-use cartridges, with ongoing capital investments to meet rising market demand [15][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full year guidance, citing sustained momentum driven by healthy market demand and strategic investments [29][30] - The company anticipates continued strong demand due to favorable trends such as the increase in self-administration of medicine and the rise in biologics [12][30] Other Important Information - The company announced a $200 million financing to support expansion in syringe production and capacity for ready-to-use cartridges [25][50] - The updated guidance for 2025 includes revenue expectations in the range of $1.16 billion to $1.19 billion, with adjusted EBITDA between $288 million and $301.8 million [26][28] Q&A Session Summary Question: Engineering segment delays and customer decision-making - Management clarified that delays in new orders are related to customer decision-making on CapEx and are not indicative of lost negotiations [33][36] Question: Vial demand and growth expectations - Management confirmed a 3% increase in vial demand compared to the same period last year, reiterating confidence in mid- to high single digit growth for vials in 2025 [40][41] Question: Impact of tariffs on guidance - Management indicated that they have been able to offset tariff impacts through customer conversations and leveraging their global footprint [48][49] Question: Capacity expansion in Fisher's and Latina - Management confirmed that Latina is currently profitable, while Fisher's is not yet profitable but showing improvement [73][74] Question: Future growth in the Engineering segment - Management expressed confidence in returning to profitability levels seen in 2022 and 2023, with expectations for margin recovery [78][79] Question: Pricing pressure in the biopharma industry - Management noted that securing supply chains is a priority for clients, and there is less pricing pressure for high-value products [118][119]

Financial Performance - Revenue grew by 8% year-over-year in Q2 2025, driven by a 10% increase in the BDS (Biopharmaceutical and Diagnostic Solutions) segment, offsetting a 2% decline in the Engineering segment[12, 30] - High-Value Solutions (HVS) accounted for 42% of total revenue in Q2 2025[12] and increased 13% year-over-year to €116.8 million[30] - Gross profit margin increased by 210 bps to 28.1%[31] - Adjusted EBITDA increased to €65.1 million, with an adjusted EBITDA margin increase of 240 bps to 23.2%[31] - Net profit was €29.7 million, or €0.11 of diluted EPS[31] Segment Performance - BDS segment revenue increased by 10% to €244 million, with a gross profit margin increase of 350 bps to 31.2%[33, 34, 35] - Engineering segment revenue decreased by 2% to €36.5 million, with a gross profit margin decrease to 6.6%[36, 37] Capacity Expansion and Investments - Capital expenditure (CAPEX) in Q2 2025 was €69.1 million[40] - Net cash generated from operations in Q2 2025 was €44.9 million[40] - Free cash flow in Q2 2025 was negative €13.0 million[40] - The company announced financing agreements totaling €200 million to support capacity expansion in Latina and Fishers facilities[40] Outlook - The company maintains its FY 2025 revenue guidance of €1.160 billion - €1.190 billion, representing a year-over-year growth of 5% to 8%[42] - The company expects HVS to account for 40% to 42% of revenue in FY 2025[42] - Adjusted diluted EPS is projected to be €0.50 - €0.54 for FY 2025[42] - Adjusted EBITDA is projected to be €288.5 million - €301.8 million for FY 2025[42]

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