Good day and welcome to the Sartorius and Sartorius Stedim Biotech Conference Call on the Nine Months 2020 Results. Today's conference is being recorded. At this time, I would like to turn the conference over to Dr. Joachim Kreuzburg, CEO. Please go ahead, sir.
Thank you very much. Welcome and good day also from our side here to our conference call on the nine months results of Sartorius and Sartorius Stedim Biotech. As always, we first would like to walk you through the results for the Sartorius Group, and then thereafter through those for Sartorius Stedim Biotech. I would like to kick it off by talking briefly about the main highlights of our results for the first nine months. Sales revenues, order intake, and earnings all have been up with quite significant double-digit growth rates. Particularly, the BPS division continued to expand very dynamically with a very strong performance also in the recent three months. Strong underlying organic growth and then additional tailwinds from pandemic-related effects. The lab division, after challenging first six months of the year, has developed also very positively throughout the third quarter.
The acquisitions have contributed very nicely with a positive momentum to both divisions. We will also present then pretty much between the two presentations on the group and SSB on the acquisition of BIA Separations, which will become part of Sartorius Stedim Biotech after the closing, which we expect during Q4 of this year. Then we will also talk briefly about the outlook for 2020 full year, which we have specified and also slightly increased, even though for sure the remaining 10 weeks of the year will continue to include quite some uncertainties. With that, I would like to hand over to Rainer Lehmann, our CFO.
Yes. Thanks, Joachim. Hello, everybody, also from my side, and the heading on this next slide says it all: strong profitable growth for the first nine months. Sales revenues achieved EUR 1.68 billion. That's an increase in constant currencies of 25%. Six percentage points are attributed to the recent acquisitions we made, and six percentage points we attribute to the pandemic effect that Joachim was worth mentioning, that we have a little bit of tailwind. So overall, a very successful quarter. If we look back at H1, there we were showing a growth of 18%, so that means that a single quarter we grew basically by 40% quarter over quarter. So very, very happy to report these figures. If we look at the order intake, it grew over proportional by almost 38% to EUR 1.95 billion. Again, here, the order book was increased by EUR 276 million.
It's always a difference between order intake and sales revenue that we like to have an eye on. So that really means that we also have a lot in the pipeline to fuel further growth. Of course, these strong revenues translate also into a strong underlying EBITDA of EUR 489 million. It's an increase of 35% compared to previous periods and translates to a margin of 29.1% EBITDA, increase of two and a half percentage points, and I actually want to say a little bit here to the drivers. Of course, we had on the operation side economies of scale with this large revenue, but we also should bear in mind that we currently are seeing quite lower functional expenses.
And I would always call them like artificial economies of scale because they are not sustainable due to the fact that hiring is slower, that expenses are well below the average and what is needed in order to manage this growth sustainably. Acquisitions really had no major impact on the EBITDA margin, and actually FX was slightly dilutive in this regard. One remark also that I just omitted on the order intake. Also here, we have an estimated or we presume to be roughly 10 percentage points attributed to the pandemic tailwind. If you go on the next slide, we see here the regional view, as always. Across the board, double-digit growth, each region in the mid-20s. Let's start on the left-hand side with the Americas. Almost 29% growth to EUR 586 million. Really strong organic growth from the Bioprocess division.
That's going to be the underlying story throughout all of the different regions on the BPS side. And LPS, specifically in this region, of course, supported by the acquisition of Danaher, the Octet portfolio that is now on board, but also with a positive trend overall on the LPS side in Q3. EMEA, growth rate 23.6%, achieved revenues of EUR 672.6 million. Again, here, strong performance on the BPS side. And after the economic challenges that we saw in the first half, specifically in the first six months, a solid performance really of our LPS division in this region. In Asia Pacific, again, BPS, very solid growth as it did in all the other regions. Here, we can even say that the order intake was disproportionately high. The LPS demand improved significantly, specifically after the lockdown that hurt us at the beginning of the year.
On the right-hand side, the distribution of our revenue really didn't change much. There's no change due to the fact that everybody raised at the same level. So continue to have EMEA, strongest region was 40%, Americas was 35%, and Asia Pacific was 25%. When we now have a look at the Bioprocess portfolio, really high growth across all product segments and regions, as I just mentioned before. Order intake surged, we almost have to say, by 44.2% to EUR 1.54 billion. Here, we also see approximately 15 percentage points Corona-related. And I really want to point out that this figure is, of course, an estimate based on certain assumptions when we talk about these tailwind figures, but nevertheless, quite, quite substantial.
The sales revenue increased by 29%, roughly 4 percentage points related to the acquisitions, and 10 percentage points we attribute presumably to the Corona impact, positive impact in this regard, and of course, that strong revenue also contributes to a very strong underlying EBITDA amounting to EUR 410 million, with an increase of 41% to an EBITDA margin of 31.9%. Again, specifically also here in this division, let's keep in mind, yes, we're achieving economies of scale on the GP basis on the gross profit, but also the underlying, let's say, expenditure of expenses, specifically also a lot less travel, not as much aggressive hiring as would be needed to accompany the growth contributes here to, of course, the strong margin. Yeah, FX, I mentioned before, overall in the group, slightly dilutive, same here on the BPS side.
If you go look at the LPS, there we are happy to report really robust sales development, specifically in Q3. Order intake, nice recovery, specifically also fueled by the Bioanalytics portfolio after a first rough half year in 2020. Order intake rose by 18.1% in constant currencies to EUR 409.7 million. Revenue increased by 14.2%, of which 12 percentage points is attributed to acquisitions. And here, we have to say we still have a negative Corona impact of roughly three percentage points that is impacting our organic growth in this division. The underlying EBITDA margin is at 20%. Normally, of course, increased by 10% to EUR 78.2 million. But let's keep in mind here, actually, the dilutive FX effect was roughly half a percentage point. And also here, we had, of course, a little bit of percentage point of the FX.
If we look at some financial KPIs on the next slide, we want to point out one that sticks out is surely the extraordinary items increased. Basically, we're amounting here to EUR 30 million, mainly driven by the integration expenses of Danaher, but also by the acquisition that took place at the end of December of last year by Biological Industries, as well as we have, and this is very visible in all our appearances, of course, the rebranding within the group, which we show in this position. Financial results increased, of course, due to the increased financing needs, not only acquisitions, but the additional working capital that we're carrying on, so nothing to worry about, all in line, and underlying net profit we increased by 38% to EUR 211 million. Reported net profits, therefore, increased by 23% to EUR 149 million. Operating cash flow, EUR 380 million, increased year over year 50%.
Of course, driven by the strong earnings as well as by the increase of our factoring program that, compared to last year, we almost increased by EUR 100 million as an additional financing source. The investing cash flow here, negatively EUR 911 million. Please keep in mind that the Danaher acquisition is also shown in this line item. The CapEx ratio is at 8%, still lower than what we anticipated, but Joachim is going to talk about the guidance in a few minutes. Tax rate, as just mentioned here, for complete reasons, I already mentioned that actually during our H1 call. On the next slide, if we have a look at the equity ratio, one might think what happened here, 29.2% after last year's 38.1%.
Of course, nominally, this number increases by performing and increasing our earnings, but with the increase of the balance sheet sum, also specifically driven by a cash position that almost adds up to EUR 500 million as of September 30th and the additional working capital. Of course, the ratio of the equity to the increased balance sheet sum goes down. So from our point of view, nothing to worry about, but it's here at 29.2%. Net debt slowly decreasing compared to previous quarter, EUR 1.6 billion. And our leverage, so net debt divided by underlying EBITDA, as we anticipated to slowly decrease to 2.5, although we anticipated to increase, but Joachim is going to mention that as part of the guidance in a few minutes or pretty much now.
Yeah, thank you very much, Rainer. I now indeed will talk about our specified and slightly upgraded outlook for the full year 2020. Before I do so, I would remind everybody that even though there are only 10 weeks left to go, that given the, yeah, worsening pandemic situation, of course, imposes some additional uncertainties on such forecasts. So our guidance that we will share with you is based on the assumption that as during the last couple of months, logistic chains continue to be stable, customer labs, customer production lines remain in operation, and our own production lines, of course, also remain in operation. So starting with LPS first, we expect to achieve the upper end of our current sales revenue growth bandwidth of 10%-40% or even slightly above that number.
The same is for Bioprocess Solutions where we expect 26%-30%, again, upper end or slightly above now of that number, and that would add up to 26% or slightly above that number for the group, then obviously. Regarding the growth contribution by the recent acquisitions, that means that then 12 months for Biological Industries and the 8 months that we will have consolidated the life science businesses from Danaher will add up to 6.5% for the group, 4.5% for Bioprocess Solutions, pretty much unchanged, even though we believe that the contribution for LPS will be rather around one percentage point, maybe higher than the 12.5 percentage points that we were shooting for so far.
Talking about the underlying EBITDA margin, starting with LPS again, we now believe that we should come in 1 percentage point above the figure that we were guiding so far and expect 21% now, with the acquisitions being slightly accretive, as we said so far. The stronger than expected growth, particularly from the Danaher businesses here, also add nicely to our profitability. The BPS business, we expect now to finish the year at 32% EBITDA margin. We expect the effect from the acquisitions to be rather neutral on profitability. This partially has to do with the effect that Rainer was elaborating on already, so that the expansion of our overall organization is maybe, you could say, lagging a little bit behind the top-line growth. Nothing to really worry about here, clearly, but nevertheless, needs to be mentioned because it's a little bit temporary accretive effect on our profitability only.
We would account this effect also to be a bit more tangible here, to be around 0.5-1 percentage point, probably. For the group, again, we also expect here then logically to come in one percentage point above our guidance so far. That means we expect now 29.5% EBITDA margin, and the acquisitions then would be also pretty much neutral in their effect on the profitability. CapEx, even though we stand at 8% after nine months, we do still expect around 10% for the full year. Even after the closing of the BIA Separations acquisition that we expect to take place before the end of the year, we still expect the net debt to underlying EBITDA ratio to stand slightly below 2.75 for the full year. I was talking about the statements given here in the second bullet point already before.
So with that, I would now like to move to talking about the results for Sartorius Stedim Biotech. But as announced at the beginning of our call, I first will talk about the acquisition of BIA Separations. We signed the agreement roughly three weeks ago and communicated that back then. But I would like to take the opportunity here to also share a little bit more information and also written information with you during this call. So the strategic rationale is a very clear one from our perspective. It's a technology that is really highly differentiating from the offerings of everybody else. It's a unique technology, and it's leading for purification applications, particularly in advanced therapy processes, particularly in gene therapy. It's also part of manufacturing processes for approved gene therapies already. It's highly complementary to our current purification offering, particularly in this field of advanced therapies.
As we announced, the transaction is structured in a quite specific way. There is a payment due upon completion of the transaction of EUR 360 million , of which two-thirds will be in cash and one-third, so EUR 120 million , will pay in shares of Sartorius Stedim Biotech. There will be then three performance-based earnout payments that will be due over the next five years. The last one will be due in Q1 2026. You will see that then in detail once the acquisition is completed, and we will have the first consolidation being done because you will see then all the respective items also in our respective reports. However, current performance of the company, it's expected to achieve sales revenues in 2020 of around EUR 25 million .
It's on a very strong double-digit growth rate path at the moment with very attractive and very substantial profit margins so that even in terms of our BPS business, this business, even at its limited size, should be margin accretive to our business right from the beginning. We expect closing, as I mentioned before, to take place within the remaining weeks of this year. And then, because of the limited time of becoming part of Sartorius Stedim Biotech and Sartorius, we don't expect any material impact on the P&L for this year. Some more information on BIA on the next slide. It's located in a quite small town in the western part of Slovenia. Currently employs 120 people, mostly people with an academic degree in bioengineering and the like.
The majority of the business actually is in the U.S., as you would imagine, with the strong focus on advanced therapies and the footprint in gene therapies. Given the very strong growth, the company had started already the execution of a substantial expansion of the production capacity. Actually, it's expected to become available within the course of next year, and it should be offering at least four times the capacity that it has today. The technology is called so-called prepacked monolithic columns, which are, and I repeat myself now, really optimized and particularly advantageous for purification purposes in advanced therapy processes, viruses, for example, plasmids, exosomes, etc., and the key advantages, basically, you could say that by using this technology for the purification process, you are much gentler to the respective molecules than any other purification technology.
I said already, well positioned in first commercialized gene therapies, strong presence in numerous molecules in development in both clinical as well as preclinical phases at the moment. I now would like to briefly talk about the numbers for Sartorius Stedim Biotech for the first nine months of this year. As always, pretty much, yeah, the same or almost the same like for our BPS division on the groups level. We have achieved EUR 1.38 billion of sales revenues, an increase of 29% compared to previous year in constant currencies. Order intake is up by almost 44 percentage points to EUR 1.64 billion. Underlying EBITDA has risen over proportionately by 39% and has reached a margin of 31.5%, as we have seen for the BPS division. This is an increase by 2.5 percentage points with all the mechanisms we explained before.
Earnings per share up also significantly over proportionately by around 40%. I think I should not go into detail on the pandemic effects or pandemic-driven effects because Rainer explained them before and would therefore like to talk about the geographical distribution of our growth. 30% is the increase that we achieved in the Americas and 26.5% in EMEA, and then pretty much the same ballpark figure, but a little bit the highest of all is Asia-Pacific with around 32%. All regions with very strong organic growth, Asia-Pacific with an eye on the order intake development with the highest momentum on that, and partially because of some projects we talked about that I think in our earlier calls this year already. Operating cash flow also on a very strong level, pretty much the same comments as have been given by Rainer before.
So therefore, I guess I will not walk through all of them. We see the same type of influences on the extraordinaries. Investing cash flow, of course, influenced by the acquisition that we closed so far this year. And the tax rate also here is a bit affected by some influences, as mentioned before. Financial indicators remain on a very solid level, even though we have an expanded balance sheet after the acquisition and the substantial increase of our cash position still in, yeah, almost extremely low net debt to underlying EBITDA number. So therefore, yeah, a lot of room to maneuver going forward here. And then finally, also the outlook for SSB here. Again, we now project the top line to come in at a growth rate at the upper end or slightly above the 26%-30% that we were expecting so far.
effect of the acquisitions pretty much unchanged in comparison to what we have expected so far, so around 5 percentage points of non-organic growth for this year. Underlying EBITDA, we expect to be 1 percentage point higher for the full year for all the reasons that we were talking about before, and we expect 32% now for SSB approximately for the full year as well. CapEx guidance unchanged, 8%. Same as for the net debt to underlying EBITDA, even after the expected closing of the BIA acquisition, which again should not have any material effect on the numbers that we show here, and then finally, also for Sartorius Stedim Biotech, we want to underline that this guidance, of course, is based on the assumption that things remain being stable and intact on all ends.
So, and with that, I think I finish our presentation here, and we open the line for Q&A.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Patrick Wood from Bank of America. Please go ahead.
Perfect. Thank you very much, and good afternoon, everyone. I'll keep it to two so everyone gets a chance to ask some questions. But I guess the first one would be, could you help us understand, because the order book growth is extraordinary, A, how confident you feel you guys have the capacity to actually fulfill these orders over the next, whatever, three, six, 12 months? So how much capacity do you have to deliver on those? And then B, I'm just curious, understand, and thank you for the estimates on how much is pandemic-driven and how much is stocking, etc. But I'm just curious, maybe for a little bit more color about why you think now, this quarter, you've got such a sharp and aggressive acceleration in, I guess, primarily BPS, but of course, LPS as well.
Just maybe a little bit of color about what you're hearing from your customers and why that's happening now, and maybe the durability of that over the next couple of quarters. Thanks.
Yeah, thank you very much. So capacities, I mean, you're addressing, of course, a key topic we were talking about that I think in our earlier calls this year already that we had expanded our capacities mainly by expanded shifts and additional shifts in manufacturing. We still have some room to move there, but we also have pulled forward some of the capacity expansions now, and we will start to execute on those within the next couple of months. So we believe that we are well positioned to execute on this high level of order intake that we have seen. As you can, I think, derive from our guidance for this year, the strong order intake to some extent already relates to 2021. So some of those orders are not to be executed on this year.
But yeah, but clearly, capacity expansion is on our agenda going forward, but again, well positioned to deliver on that. On the second question, well, the concentration of this acceleration in Q3 is, I think one can quite well explain, as mostly in such cases in hindsight. Now, how we see it is, after having Q1 being quite impacted by the pandemic in China, where we have seen that in our LPS numbers in particular, not so much or only towards the end of Q1 in the other geographies, Q2 has really been impacted in many geographies, particularly the U.S. then also. China not yet really recovering, so still some impact on LPS here. In Q2, we already saw some orders, both stocking, less so on preparation for the manufacturing of vaccines and COVID therapeutics, but still, we saw that already.
But then, of course, with some acceleration in Q3, as those vaccine projects and also other projects on developing therapeutics moved into advanced clinical phases, that then companies started to, and clearly differently from, let's say, normal course of business, they already started to produce such products, to have them in stock, even accepting the risk that all this might have to be thrown away in case that no market approval would be achieved. But that's the situation at the moment. A number of companies have started to produce vaccines without having the market approval and are still ordering also to further ramp up the manufacturing of the product. Others are just preparing for building up capacities for that. But all this we have already seen to quite some extent in Q3.
For LPS to move back to that division, Q3 was really then the quarter where customer labs, both in biotech or biopharma as well as in academia, had opened again, particularly in North America. That was a topic, but also in some other countries. China increasingly back on track. Plus then, of course, as you can see from our quantification of the non-organic effect here, then Q3 was the first quarter with a full impact for the ForteBio acquisition in LPS. So all those factors came together and have led to this extraordinary high, particularly order intake number. Yeah, and we definitely would not advise to extrapolate the Q3 order intake number going forward, yeah, because some of these effects, as I said, were really not one-off effects in that sense, but regarding the order of magnitude one-off.
That maybe answers already your question for the durability of these effects. We believe that we should see a, yeah, obviously very decent fourth quarter. You can read that from our guidance. I mean, it's too early to talk about 2021, but we don't see any reason to expect a, whatever, a downturn or anything like that. It's definitely too early to talk about the different elements for growth and our path forward in 2021 because there are definitely a couple of moving parts that are difficult to quantify at the moment. Again, number of vaccines that we're manufacturing already have started, don't have market approval. Not all probably will get it. Very difficult to estimate all those effects. Then, of course, the second wave that we are in now in the pandemic, also hard to estimate what that exactly means.
So I hope that halfway answers your question.
It does. Thank you for the detailed answers. Thanks, guys.
Next question comes from the line of Richard Vosser from JP Morgan. Please go ahead.
Hi. Thanks for taking my question. Two, please. Just on the order book, in terms of the timing of the flow through of that and the composition of the order book. Now, I think on the previous quarter, we were somewhere away from the 75%-25% of normality. Where are we now in terms of equipment and consumables? And how should we think about the flow through? Is it more? You alluded to some in 2021, but are we thinking mainly that it'll be delivered within six months or some beyond that? Second question, just on, you touched in the previous answer on the ramp of the vaccines in some customers. Just as much as you can in terms of, how far are we through the ramp-up? You talk about some of the manufacturers being at risk.
Some are behind as well in terms of still in early stage of development, but I presume they're not doing billions of doses at this point. So it'd be useful if you give us some idea of where we are in that ramp-up? Thanks very much.
Yeah, I'll do my best. Thank you for the question. So on order book timing, I mean, exactly as you say, there is not this one number that one can work with because it's always there is also variation and the bandwidth on it. But I would say the majority of the orders that we have received so far will be due within the first half of 2021. Of course, some still in 2020, but what we have seen in Q3, when we talk about now the strong order intake, is not too much influenced by larger systems or so, exactly as you said. So and then all our consumables, etc., are typically then for delivery within the next couple of months.
But here in this case, there is quite some portion of orders in where customers don't expect a very soon delivery even, but typically, as I said, let's say within the first half of 2021. You were asking for the composition, 75%-25%, I would say still the right yardstick. Nevertheless, indeed, Q3, as I already said, was a bit more heavy on the consumable side when it comes to the order intake in particular. So where are we in regards to the ramp-up of vaccine manufacturing? We do have only limited insight, of course, as you can imagine, but we would definitely agree that we are not talking about billions of doses at this point. But it's also very different for the different type of vaccines, as I think you are also aware of.
But we definitely think that for those vaccines that then hopefully receive market approval, we are rather in the early phase of manufacturing the volumes that are needed, but really difficult to give a very good and precise quantification for that.
Thank you very much. Very helpful. Thanks.
Next question comes from the line of Michael Leuchten from UBS. Please go ahead.
Thanks very much. Three questions, please. One, just the commentary around the inventory build in your presentation, also in your Q3 release. Just the spirit of that commentary, is that you flagging that you think inventory will normalize and hence create a headwind for 2021, or should we expect a higher level of inventory in your customer base going forward, given the uncertainty? The second question is just you alluded to the operating expenses that you're currently saving and not sustainable. So going into 2021, and I appreciate you don't give guidance at this point in time, but in terms of the magnitude of operating expenses coming back versus potentially gross margin effect from the consumable pull-through that you just talked about, how should we think about those two variables playing each other off? Is it a net positive? Is it a net neutral, at least in broad terms?
Then the third question. Again, I understand you're saying there's a lack of visibility going into 2021, but as you look at your business outlook, what's your base case as you try to manage the demand going into the next year and after? Do you assume a vaccine makes it to market, but you go to a technology where you wouldn't benefit as much relative to others? Is your base case no approval, and then you build from there? So I understand it's uncertain, but where do you go to as you think about your planning in terms of capacity over the next two years? What's your starting point? Thank you.
Yeah, thank you for these three questions. So on inventory, we at least think currently that it is possible that within the, yeah, now, let's say, coming months, whatever that exactly might mean, but maybe in the course of 2021, we will see a certain normalization of inventory level. That's exactly why we mentioned that, to give that visibility of what we are talking about here in terms of revenue figure. But again, of course, it's really difficult to say because it depends on a number of factors. But we would say it's definitely possible that customers go back to normalized inventory levels. To the second question on how we think that normalizing operating expenses on the one hand and economies of scale, how they will play out in 2021, current thinking is that maybe it should rather be a neutral effect overall.
But please don't take this as a guidance for 2021 at that point, but we would imagine that maybe this is the best way how to think about it at this point in time. And then base case for demand, I would like to add one aspect to this to at least when I answer this question, and that is that we are not only talking about vaccines here. I mean, the majority of our business still is with, yeah, mainly monoclonal antibodies for other indications, cancer for sure being a large one, but also others. And therefore, when we think about a base case for future demand, then there are a number of factors that we take into account.
We would expect, given our also for the past, whatever, 10, 20 years, very strong positioning at the vaccine manufacturers, that we should be a very relevant supplier for those who get market approval. It should not depend too much on which one exactly gets market approval. It will make for sure a certain difference, but it's not the most relevant variable. On the other hand, and I think we talked about that also three months ago, we do see that clinical trials for many other drugs under development are rather postponed. Even though we would expect some continuous, let's say, tailwind from additional demand coming from vaccine manufacturing, that we see maybe some dilution of that from postponed market approvals and therefore postponed ramp-up of manufacturing of such drugs.
However, I mean, we are in a business that is very much driven by long-term trends. Therefore, if we I mean, I know it sounds a bit strange now, but if we ignore 2020 and 2021, how it might look like, and look on this in a little bit longer terms, then what we believe is that all the fundamental growth drivers in our business are pretty much intact. I think we talked about that in a little bit more length when we published our six-month results. We do not see any of the drivers as there are demographic drivers, technological drivers, etc., geographical drivers being fundamentally changed at this point.
And therefore, when we talk about our base case for demand planning and capacity planning, we would say what we experience at the moment is that because of this sharp additional and very focused demand at the moment, that there is a certain need of pulling forward certain capacity expansions, as I said already before, but it's probably not so much of a difference when we think about it in, let's say, five years' time horizons. So that is how we look on it at this point in time. But again, of course, with all those disclaimers that we are just in the middle of a very specific situation.
Thank you.
Next question is from the line of Markus Gola from MainFirst, please go ahead.
Great. Thank you and good afternoon. So my first question is on the potential of the Alzheimer's therapy. So if a drug is approved, it is estimated that you need some roughly 30-40 metric tons of drug substance for this therapy, which obviously means stainless steel manufacturing. However, I guess that this process would also require a significant amount of single-use consumables too. And therefore, I would be interested in your view how substantial this opportunity could become for the single-use manufacturers like Sartorius. And then my second question is a bit of a follow-up on a capacity situation. I know you have materially increased your infrastructure in recent years. However, how confident are you that this infrastructure would be enough to handle this level of demand if it really is rather structural than temporary?
Or asked differently, do you still believe it will most likely be CapEx-like expansions which you pull forward, or should we also expect more meaningful projects here given the accelerated growth? Thank you.
Yeah. So on the first one, so you're right that when really huge volumes of active drug substance are produced or need to be approved, then this typically becomes a case for stainless steel technology on the upstream side of the processes. So when we talk about the bioreactors, etc., for instance, for the downstream, you basically cannot avoid, to phrase it that way, the utilization of single-use technology. So without referring to any specific drug here, we definitely can say that in case of such, yeah, of market approvals in areas of such relevance like Alzheimer's and also others, there is a significant opportunity also for additional single-use sales, for sure. There is no drug out there where you don't need a significant portion of single-use technologies, be it filtration, there for sure, but very often also in the domain of fluid management and others.
On the infrastructure, very good point indeed. Maybe to be quite a bit specific, I think, because we talked about that also quite in detail during the last years, particularly the expansion in Yauco for our main facility for the U.S., we really have built an infrastructure where we then can add additional cleanroom capacities into without any major investment into the infrastructure. That is clearly one, yeah, piece of our capacity expansion now that we will play on also during next year. We also have created capacities there, so infrastructure to add further membrane casting lines into. Also, that is one piece that we will do next year. We will pull forward also capacity expansions in membrane casting lines in Germany. Here, we also will have to add some infrastructure, though.
We would have done that probably a year later or so, but now we will kick that off earlier. Now your question is in the end, okay, how does that translate into numbers? And here, I mean, we had this peak in CapEx in 2017 and 2018, and then the numbers were going down. We are expecting this 10% now for this year, further down. And now for 2021, it is a bit too early to say, but instead of a further decrease, which normally would have happened because of this pull-forward effect, we might see a certain increase again, but not so much because there is a massive infrastructure project, but more because of the number of, yeah, let's say, smaller additions to our capacity within that infrastructure within a certain period. Please take that as an indication.
We for sure will be, as always, very transparent and detailed in that regard once we will give the guidance for the full year, which will be in, whatever, 13-14 weeks or so from now. Yeah. But that is, I think, how we should look on it. Not so much that the investment items have changed, but how they are where we put them on the timeline, that will change a little bit.
Great. Thank you for this detailed answer.
Next question is from the line of Scott Bardo from Berenberg. Please go ahead.
Yeah. Thanks very much for taking my questions. So first question, please, just relates to the BIA Separations acquisition. And at first glance, it appears quite an expensive acquisition for a relatively small revenue, but I appreciate this is rapidly growing and of strategic importance. So the question is, the quadrupling of capacity by the end of 2021, are you trying to signal that the revenues for this business indeed could be some 100 million EUR or so on a 12-18-month time horizon? And just on the capital structure of funding, why is it that the deal is being funded with SSB shares rather than debt? It was a relatively unlevered balance sheet for SSB or the treasury shares for the parents. Just wonder if you could comment on that.
Second question, please, just relates to, are you in any way benefiting from the recent acceleration in influenza vaccinations that are going across the globe? Has that in any way benefited your business? And last question, please. I think that there are several players in the Bioprocess industry already poking some comments into 2021, suggesting that this could indeed be a disproportionate year for growth. I guess you've had a very strong order book so far coming into 2021 that you've outlined a few moving parts. Would you share some of the commentary from other players that 2021 is also gearing up to be a disproportionate growth for the industry? Thanks.
Yeah. Thank you for these questions. So we do believe that given the strong profitability, the BIA acquisition, even though it's not that big, as you rightly pointed out, is not a particularly expansive acquisition. To your specific number regarding the growth, whether it will achieve EUR 200 million within 12 or 18 months, that is unfortunately not the case, but still, the statement is definitely valid that it's not a particularly expansive acquisition. We do expect indeed that these additional capacities will be needed within the next few years. So when I say no, not within the next 12, 18 months, then I say that would be too aggressive assumption, but we definitely believe in very substantial further growth.
We decided to use shares as a portion of our payment here to the sellers because we wanted to limit the leverage of our balance sheet on the group's level. You're right on the SSB level, that wouldn't be relevant at all, but still, I mean, even though we think that 2.75 is not very high, but nevertheless, we wanted to limit that, and at the same time, as we always have said, that we think that the opportunity to use SSB shares that we have the approval by our shareholder meetings for both entities, Sartorius AG and SSB, is one that we consider to be very valuable and that we will make use of that at some point in time, and we think that this is a reasonable opportunity to do so.
The decision to take SSB shares for us was quite a logical one because this is a business that becomes part of SSB. We consider, without saying that this needs to be or is carved in stone, but we think that the use of the Sartorius AG treasury shares, if we use them, we might rather use them for an acquisition for our lab division. But again, not because it needs to be the case like that, but maybe that would be our current thinking, how we would use them rather. Influenza vaccines, yeah. Let's see whether the total production volume really will exceed those of previous years, then we might benefit from that a bit. I don't see much change yet, but it might be indeed the case if really the number of vaccinated people overall in the season will be higher than before.
So far, I would say it's a certain timing effect, but nevertheless, it hasn't been really relevant, even though we definitely are a relevant supplier to those processes. But within the overall set of numbers and the total picture on our end, this hasn't been a too relevant effect, and again, for 2021, we would not like to give any specific guidance at this point in time. What I tried to bring across a minute ago already was that we do not see that one should expect a downturn or anything like that for 2021, but we believe that, as we always have done that in the past, it makes a lot of sense to wait until one has the final results for the fiscal year, in this case, 2020, and then a solid base to relate the guidance on.
Particularly, we believe this is the case in a phase like the one we are in at the moment.
Very good answers. Thank you. Maybe just a quick follow-up for Rainer. I think you highlighted at the last update that you were recalculating your ongoing effective tax rate, and maybe that was subject to an increased forecast. Have you made any assumptions or conclusions now?
Basically, the forecast is going to be the rate that we mentioned is going to be running at 30% for year-end 2020, and for 2021, we'll still elaborate if it's needed to adjust it, and we'll do that once we publish our guidance for 2021 at the beginning of next year, then.
Thank you.
As a reminder, if you'd like to ask a question, please press star followed by one on your touch-tone telephone. The next question comes from the line of Daniel Wendorff from Commerzbank. Please go ahead.
Yeah. Good afternoon, and thanks for taking my questions. Two if I may. Can you potentially quantify the pandemic-driven effects on your order book, particularly in Q3? I appreciate that you've given us for the first month, but I would have assumed that that's something in there also for the first half. So any more color you could provide here, in particular on Q3, would be helpful. And maybe in that regard also, how important to the order intake growth were really development projects for Corona treatments and not necessarily vaccines, but really treatment projects? And then I have a question on the organic growth in the laboratory division. Maybe you can talk a bit about the dynamics that you saw in Q3 with regards to the different industries.
I would assume that Bioanalytics demand was really strong, but maybe you can give us a few more comments on how the other different industry groups ordered, basically, in Q3 in LPS. Thank you very much.
Yeah. Thank you for these questions. So on the first one, we believe that the effect from the or the sum of these two effects that we would relate to the pandemic should have been around 30 percentage points of our order intake growth in Q3. So single quarter was up in Bioprocess. I'm talking about Bioprocess at the moment. So in Bioprocess, Q3 single quarter was up by roughly 67%, and a bit more than 30%, maybe close to half of that, we think should be linked to these pandemic effects. Difficult to really make an allocation of what was related to vaccines, therapeutics, and maybe still some inventory buildup. And honestly, COVID therapeutics also then, as a further drill down, hard to say. As an indication, I would say probably the smaller part of these effects. Yeah. The smaller part. But please bear with us.
Hard to give a quantification for that. In the lab business, so what we call applied research business, so the business that is not going into life science research, and maybe let's stay with life science research for a moment, or by the way, our bioanalytical business pretty much goes completely into life science research, and it's the most important product segment in life science research. But that is how we look on it. So it's not exactly the same when we segment our markets and segment our products. So having said that, life science research has developed nicely with bioanalytical business being the strongest driver. And applied research for the full year is now pretty much not for the full year, for the first nine months, is pretty much flat, with Q3 being positive around 4%.
It has been negative for the first half of the year, and now it's flat again because of the recovery in Q3, or partial recovery. You can imagine a very strong driver in life science research. Here, of course, the engine is really our BioA business, where all the non-organic contribution goes into from the ForteBio acquisition, but also our existing BioA business is growing very nicely.
Very good. Thank you very much.
You're welcome.
Next question is from the line of Delphine Le Louët from Société Générale. Please go ahead.
Thank you very much, and congratulations for the result. Just to follow up on everything which has been said, I don't know if you do remember, but at the beginning of the year in Q1, we spent a lot of time talking about the switch from research to manufacturing, saying that there were really a stop at the pharma industry on the research project. Can we get a flavor now that we are almost done with the year, how this has evolved over the year, and how you see the future in terms of a contract and manufacturing on this part of the business research for the pharma? Second question, can we deal with the capacity production?
Because it sounds to me you're a bit shy, and you're in a very strong position having we do understand visibility and less visibility on some of the volume that has to be made, either on the vaccine or therapeutic side of the pandemic. But there is the rest of the business, of course, and here you have a strong visibility on that. So does that mean, and compared to what you say regarding the CapEx evolution, does that mean that we're going to enter a cycle of stronger acquisition, and you're going to leverage the acquisition, and one of them would be BIA? I mean, we talk about the quadrupling volume capacity there, but is there any spare capacity that you can even use or increase over there? Can you be more precise on that?
You're talking about China being back on track. Volumes in China are not yet recovered completely compared to what you said two years ago. So what restrains you today from being more aggressive on the manufacturing side? Thank you.
Yeah. Thank you very much. I think you are asking for a tour de force for all of our businesses, and that's fair enough. So maybe on the first point, as far as we see, there's quite still a number of clinical trials that are paused. So you asked for the visibility, I would say it's still limited, and it's difficult, therefore, to really attach new timelines to those projects. And that is part of why we say, well, as new molecules become getting market approval, always has been a key growth driver in the industry. This is a variable that is difficult to quantify for 2021. Again, this doesn't mean that the midterm perspectives have changed, yeah, because in the midterm perspective, that should be pretty much leveled out again. But for 2021, we consider that being a little bit difficult.
But definitely, there will be delays regarding projects in the non-Corona COVID space being transferred into manufacturing after approval. If I got it right, the question regarding manufacturing capacity is in how far we would try to leverage or use capacities that came or became part of the group or will become part of the Group through acquisitions. That is not very much the case. You can say, in the case of BIA Separations, for example, that is a very specific manufacturing process for that product, and there are no plans at the moment to either use their capacities for the manufacturing of other products of the Sartorius Group, nor the other way around that we intend to produce the BIA Separations product anywhere else than in their site. That might be the case at a later stage of the integration process, but for sure not near term.
When we talk about capacity expansion, then we really mean investments into machinery. Again, not so much the infrastructure because that we have expanded very much in the last couple of years, but into machinery or maybe cleanrooms and machinery and such to produce additional bags, filters, etc. China, that's a very good point because we believe, and you're right, during the last couple of years, we always have talked, of course, a lot more about China than we talk about that at the moment because at the moment, everything is so much dominated by this focus on vaccines and other effects from the pandemic. We definitely didn't stop, even not pause very much, apart from the few months at the beginning of this year regarding our execution on our China roadmap. And that includes the further expansion of our manufacturing capacities over there.
That includes the further expansion of our overall organizational footprint there regarding also sales teams, service activities. We plan one further investment in customer interaction centers. So for the site acceptance test of our customers, we arrange capacities there and so on and so forth. Going forward, we believe China will definitely become a major and at some point in time, probably the major market in the pharmaceutical industry. Also, the current trade wars that we see in other industrial segments may spill over at some point in time, and that will rather lead to the need for further acceleration on the execution of such roadmaps.
But maybe as a quick recap, when we started to execute on our roadmap to build up manufacturing capacity, for example, for bags and single-use bioreactors in China, we have done that not because there was any pressure at that time from customers or whatever political institutions or so, but just because we wanted to prepare ourselves and to build this up. So we think we are well prepared there, but definitely, it's a key part of our roadmap at the moment. And you're right, maybe not so much in focus in public communication at the moment, but nevertheless under full execution. So yeah, maybe that would be the answers to your question as I got them. I hope that was halfway as helpful.
Definitely. Thank you very much.
There are no further questions at this time, and I would like to hand back to Dr. Joachim Kreuzburg for any closing comments. Please go ahead.
Yeah. Thank you very much. I think we had a broad discussion about several topics, so no additional comments from my side apart from that, I want to thank you all for your interest in Sartorius and Sartorius Stedim Biotech. Stay safe, stay healthy. Looking forward to our next discussion, most likely, end of January next year. All the best. Bye-bye.
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