Ladies and gentlemen, welcome to the PolyPeptide full year 2025 business update and results presentation conference call and live webcast. I am Moira, the conference call operator. I would like to remind you that all participants will be in listen only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions or comments in writing via the relevant field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Tim Brandl, Financial Planning and IR. Please go ahead, sir.
Thank you. Good morning, everyone, and welcome to our 2025 full year results presentation. I am being joined today by our CEO, Juan José Gonzalez, and our CFO, Marc Augustin, who will take you through the presentation and will be open to take questions at the end. Before we start, I would like to draw your attention to our usual disclaimer on page two. For the Q&A, please follow the instructions on page three. Anyone who wishes to ask a question can do so via telephone or in writing directly in the webcast. Moving on to the agenda, Juan José will start with a business update. Then Marc will guide you through the financial results before Juan José shares our guidance for the full year and the midterm outlook. With that, I'm pleased to hand over to our CEO, Juan José Gonzalez.
Thank you, Tim, and good morning, everyone. 2025 has been a year with a strong growth and a marked improvement in profitability. We achieve in 2025 a 16% revenue increase at constant exchange rate, mainly driven by metabolic therapeutics. In terms of EBITDA, we grew 84.4% from 7.5% EBITDA margin in 2024 to 12% EBITDA margin in 2025. Actually, in the second half of 2025, PolyPeptide already reached 19% in EBITDA margin. We also have improved our financing flexibility. Our strong operating cash flow, driven by increased profitability, better working capital, and further customer support in the form of prepayments, have significantly expanded our financing. We are also in advanced discussions to further expand our revolving credit facility.
Now, the combination of the better profitability, our ability to secure large customer support, and this expansion of our revolving credit facility gives us all the financial flexibility we need to continue our agenda towards our midterm guidance. Therefore, although we have the flexibility, we do not plan to pursue an equity raise. In terms of our capacity expansions, they are on track to deliver the respective contribution towards our midterm guidance. Our new large-scale capacity in Braine achieved optimal target utilization by the end of 2025. Actually, we optimized the output, and now the potential revenues from this new capacity have increased from EUR 100 million - EUR 125 million. Furthermore, our Malmö modular expansion is on track to start the ramp up in 2027.
The strong momentum in 2025 is reflected in our 2026 full year guidance, with accelerated growth and a further improvement in profitability. On the back of this momentum, we are confirming our 2028 midterm guide. Overall, we are very excited with the progress in 2025. Let's step back and talk about the market. In terms of the market, peptides is one of the most attractive markets for CDMOs. On the left-hand side, you have the global therapeutic peptide market potential. The growth from 2024 to 2031 is expected to be a CAGR of 15% and reach EUR 175 billion.
Metabolics will be the main driver of growth for this market, but the non-metabolic base that includes oncology, cardiovascular, rare diseases, will also more than double during this period. What is driving the growth on this market is a significant clinical development. On the right-hand side, what you have is the number of peptide drugs in clinical development by therapeutic area. As you can see, there are over 500 clinical development programs underway, and metabolic, oncology, and neurology account for half of the total clinical development activity. Now, when we look at the metabolic opportunity, which is the number one driver, there are three main things underway. Number one, the obesity comorbidities are significantly expanding the market.
The impact of peptide metabolics on weight loss is significant, but they also have major benefits across other comorbidities, whether it is sleep apnea or MASH or cardiovascular or oncology. The potential of metabolic peptides is much broader than initially thought. Now, we see also the ongoing success of a blockbuster drugs from Lilly and Novo Nordisk. We see also significant improvement in terms of the value proposition of metabolic peptides. We will see improvements in convenience, going from weekly to monthly. We will see oral peptides. We are seeing multiple agonists and combination therapies that will improve the side effect profile of metabolic peptides, whether it is GI, whether it is muscle mass. We continue to see the expanding range of indications.
This is very important because what we see is that the competitiveness of metabolic peptides over time will continue to increase and remain relevant vis-à-vis new modalities like small molecules. On top of that, you have a large number of new entrants which are advancing the next generation molecules. In terms of large pharma, Amgen, Roche, Pfizer, Boehringer, AstraZeneca, Merck, and the large number of biotech which are advancing these new metabolic projects, are going to ensure that metabolic peptides continue to scale up very rapidly and reach what will be a significant new market by 2031. Now, given the development in the market, let's talk about how PolyPeptide is positioned within this market. We believe that PolyPeptide is very well-positioned. The company have deep peptide expertise. We have over 70 years of experience.
We have a strong track record of over a thousand therapeutic peptides manufactured. Actually, if you look at all the peptide drugs approved by the FDA since 2021, 50% came through PolyPeptide. On top of that, we have a global multi-site development and manufacturing network providing customer proximity, flexibility, and speed to market. We believe that to be a significant competitive advantage given the current geopolitical environment and our ability to provide supply chain solutions across the U.S., Europe, and Asia is becoming more and more relevant. Today, PolyPeptide works with 14 of the top 20 large pharmaceutical players. As you can imagine, not all the top 20 are engaged in peptides. That basically means that PolyPeptide works with most of the large pharma companies engaged in the development and commercialization of peptides.
Now, let's talk about our innovation and how do we compete in the marketplace. We have a vision of being the most innovative peptide CDMO. The foundation around operational and quality excellence, industrial capabilities, and having the right talent, culture, and sustainability credentials are very important. On top of that, we work on three competitive advantages. We work on proprietary technologies, we work on development, and we work on modularity. Now, let me just give you a flavor on the progress on these three main competitive advantages. In terms of innovation, the company has a proprietary technology that is focused on three areas that we believe are very important to meet customer needs. Number one, around sustainable manufacturing that significantly reduce the cost, the CapEx required to be able to use some of these raw materials and to meet regulatory compliance.
We are talking about proprietary technology to reduce solvents. We are talking about green solvents to replace things like PFAS. We are now moving into a true solvent reprocessing within the sites that will significantly reduce the cost of solvents, which is an important part of our raw materials cost. We are also working on process speed and throughput. We are working on automation, and we have a proprietary technology, which is a high-capacity resin that increase the reactor throughput by 2-3 times. We are working on a better capacity expansion model, which is a flexible design for rapid deployment. This is what we call our modular technology. It basically allows to reduce the implementation risk while providing significant flexibility.
This agenda is supported by multiple patent families and scientific publications that ensure that we provide an offering to customers that cannot be matched in the marketplace. Now, this is in terms of innovation, and to support this innovation, we are also forming strategic relationships to strengthen our end-to-end offering. Basically, we are focusing on faster and efficient sourcing, reliable manufacturing, and accelerated development timelines. In terms of starting material, for example, we are deepening our relationship with Flamma and Lupin Manufacturing Solutions to secure significant raw material savings, improve our supply chain flexibility and resilience, and broadening our sourcing options. On the drug product side, we have a partnership with Lifecore Biomedical, which has expertise in formulation, fill and finish, and packaging. The idea is that in terms of development, we can provide a seamless transition between drug substance and drug product.
Now, this is in terms of innovation. Now, let's talk about development as a competitive advantage. Today, we have the richest pipeline in the market. In 2021, when the company went public, we had 247 projects, out of which commercial projects were 51. Four years later, in 2025, we have 264 projects, and our commercial projects have grown by over 30%. That basically shows that our ability to develop products and move them into commercialization is working. Not only that, PolyPeptide today is engaged in over one-third of all phase III peptide projects globally. Now, the reason why we have such a rich pipeline is because we have a proven track record of quality excellence, of our labor expertise and delivery performance.
We have advanced capabilities for complex peptides, and peptides are becoming more and more complex. Our ability to work with long, modified, and high-value molecules is basically resulting in, as we continue to advance our development pipeline. This is also driven by our proprietary technology, which is showing that to be able to produce industrial scale metabolics, you need a better development and manufacturing process. Our development infrastructure is also a key area of development, a key area of competitive advantage. We have development infrastructure in the U.S., in Europe, and now we are building development capabilities in our Indian facility. Now, this is in terms of development. Let's talk about modularity, and I will explain in a minute how this modular concept looks. In simple terms, traditional CDMO capacity expansion is not optimal.
The projects tend to be delayed, budgets tend to be overrun in terms of cost. If you look at the speed of the market development, you need a better and different way to build capacity. In the case of modularity, our modular technology ensures speed. We have an accelerated construction timeline, low execution risk. The existing manufacturing remains uninterrupted while we are expanding. Quality assurance, the standardized platform is supporting not only GMP, but also BLA requirements, which is important as peptide chains become longer and longer. It provides a fast scale-up, is a replicable setup to allow for short-term capacity addition and supply chain resilience. These flexible supply points across geographies with modules deployed in the U.S., Europe, and Asia, it provide a significant supply chain resilience. Now, these are the benefits in terms of modularity.
Let me show you how this modular technology looks. We have our modular expansion, which is on track to double the SPPS capacity, and we have a video to show you how does it look like. Let's play the video now. This video can give you a better feel in terms of how this modular technology looks like. Just to remind everyone, this is a metabolic program. It's an investment of EUR 100 million, which is largely funded by a large pharmaceutical player. This modular concept gives you a much faster speed to market. Basically, you can in three years move from design to construction to validation. Our experience with this modular expansion in Malmö is that it's going to be around a year and a half faster than our expansion in Braine.
The most important thing is that once you build one module, the next module can be even faster as you don't go through the design process phase. Now, let's see how all these competitive advantages have resulted in terms of the performance of the company. On the left-hand side, you have the revenue by therapeutic area from 2021 to 2025. Basically, PolyPeptide's metabolic revenues have more than tripled since 2021. Today, it reach over half of the total revenues of the company. Now, just to give you a sense regarding the scale of our metabolic exposure, we have 47 programs. 37 are in development across 25 customers, of which seven are already in phase III. On top of that, we have 10 commercial projects.
PolyPeptide in metabolics is working on GLP-1s, orals, multiple agonists, and combination therapies. Our three major sites, Braine-l'Alleud, Malmö, and Torrance in the U.S., are actively engaged in the development and commercialization of this metabolics pipeline. That is the reason why we believe that our metabolic revenues will continue to grow at an accelerated pace. Now, let's look at our transformation towards commercial and large pharmaceuticals. On the left-hand side, you have our revenue by business area. In 2021, when the company IPO, our mix between development and commercial was around 50/50. By 2025, we have been able to grow our development revenues at a CAGR of 10%, but our commercial revenues grow even faster. We actually, over that period, have doubled our commercial revenues.
The benefits of having a larger percentage of commercial revenues is that it gives you more stability and predictability. This also reflects very well what I show in terms of our development pipeline and the increase of our commercial products. Now, if you look at our revenue by customer type, again, in 2021, we had large pharma, which means the top pharmaceutical players, accounting for EUR 119 million of the EUR 282 million. By 2025, large pharma have grown at a CAGR of nearly 20%, and today it accounts for around 60% of the total revenues. We believe that working with large pharma provides also some additional benefits in terms of sustainability, having long-term relations, and more stability.
Now, we have been able to grow our revenues in large pharma while also growing our revenues with innovative biotech companies, which we believe is very important as some of these biotech will end up being bought by large pharma and commercialized by them. Now, we talk about the evolution of our revenues. Let's see where we are with our capacity expansion. Our capacity expansion plans are on track and are expanding further in the U.S. and India. We basically talk about our expansion in Braine-l'Alleud that reached target utilization. We have been able to further optimize the output. In 2026, we will get the full year effect of this Braine-l'Alleud facility, this new Braine-l'Alleud capacity operating at target utilization. In the case of Strasbourg, we are starting the ramp-up in 2026.
That basically means that all the work in terms of engineering and validation is complete. In the case of Malmö, as we talked a few minutes ago, we are on track to start the ramp-up in 2027, and we are very excited given the size of this, new capacity and the proven benefits of this modular technology. On top of that, we also initiated a rapid expansion in India, which is going to come online in about three months. Finally, we are also embarking on a downstream expansion in Torrance that we should see scaling up in 2027. This capacity expansion put us in a position to exceed our 2028 midterm guidance.
We believe that we'll have all the capacity necessary to make sure that we meet the midterm guidance and ensure that we continue to grow in 2029. From now onwards, all new capacity will be focused on making sure that the company maintains its strong growth profile beyond 2028. Now, let's talk about how we are funding our capacity expansion projects. What you have here on the left-hand side is the capital expenditures, including the percentage of revenues. In 2023, we spent 17% of revenue. That increased to 26% in 2024, and 28% in 2025. Now, the financing of these CapEx is mainly driven by customer prepayments.
Over these three years, we received gross customer inflows of EUR 290 million, and we started to release payments for around EUR 90 million for a net inflow of EUR 156 million in terms of customer prepayments. The main areas of customer support is capacity reservation fees and raw material prepayments. This is very much in line with PolyPeptide's multi-year funding strategy for growth. We believe that our role in the development of these projects and the partnership that we have with customers to ensure that we can secure their support to invest capacity is an attractive model to grow the company over the next few years. Now, this is in terms of. Now, we talk a lot in terms of our competitive advantage. We talk about our revenue evolution.
We talk about this capacity expansion model with the customer funding. Let's talk about talent. In terms of talent, we continue on strengthening our organization and capabilities. Now, let me just start sharing that Marc Augustin, our CFO, is resigning for personal reasons, and Tim Brand is appointed as an interim CFO. Marc joined me about two years ago, and over the last two years, his impact on the company has been remarkable. The progress, not just in terms of our financial performance, supporting our operations and commercial contract agreements, the strengthening of the finance function. Marc has had a very positive impact in the company, and we wish him all the best in the future. Now, in addition to this announcement, we have a very active global agenda. We are strengthening our capabilities, especially in supply chain procurement, and finance.
We have been doing talent upgrades in Torrance across development, manufacturing, and engineering. We are basically getting ready to do a larger expansion in the U.S., and we are basically making sure the organization is ready for that. We are building a shared service center in India. You have here the picture of inauguration. We are basically leveraging the fact that we have infrastructure in India and moving some back-office functions there that is going to give us more flexibility as we grow our multi-site network. This is in terms of our talent. With that, I'll pass you to Marc, who's going to share the financial results.
Thank you very much, Juan José. This is my last call for PolyPeptide. I would like to take the opportunity to say thank you to the board, to you, Juan José, the leadership team, and the entire PolyPeptide organization for the last two years. A lot has been achieved during this period, operationally, commercially and financially, and I believe the company has built a strong foundation for the next chapter of the growth journey. Now let's move to the financials of 2025. In 2025, we achieved sales of EUR 389.3 million, which represents around 16% growth at constant exchange rate. I would say the underlying performance of the business was actually even stronger than the headline numbers suggest. The real story is not only the level of growth, but also the quality behind.
Our development business grew by close to 30%, reaching EUR 153 million. That is an important signal for the future because it reflects the strength of our pipeline and supports our confidence in future commercial momentum. At the same time, we saw a solid growth of 7.9% in our commercial business, especially in Braine-l'Alleud and Malmö, reaching EUR 236.0 million in total. The site in Braine-l'Alleud delivered the strongest growth across the network in 2025. Also important is that a large commercial customer has now completely moved into our new commercial asset, freeing up capacity in the existing base. That capacity was already backfilled with new late-stage development programs, which will transition into commercial phase in the near term.
The key message for 2025 is not only the headline growth of 16% at constant exchange rate. More importantly, it shows that the Peptide business model is becoming stronger, more balanced and more resilient, and that we are putting the right building blocks in place to support future growth. Finally, as in previous years, FX only had a limited impact on sales due to our natural hedging approach. Let's turn to the EBITDA development. Looking back two years when we started the profit improvement journey, operational performance was one of our key priorities. Today we can see that the improvement initiatives which we started across the network show tangible results, and even more important, that these are sustainable.
We know that these activities take time to show the full result, but the impact we have achieved already over the last two years is very encouraging. In 2025 alone, we improved EBITDA in the base business by more than EUR 40 million, and we are not done yet. There's more to come in the next years. Regarding the new asset in Braine-l'Alleud, you may remember that in the first half we were still making a small loss. However, by the end of the year, we have reached our target utilization as planned and finished the full year with a positive EBITDA of EUR 1.4 million. This is a great success for the site in Braine-l'Alleud and also for the group. At the same time, we continue to invest in our people to support future development and to strengthen our capabilities.
This led to a cost increase of EUR 16.4 million. That led to an EBITDA margin of 13.1% before exceptional cost. As mentioned, we see further potential to improve profitability, and one of the key enablers to unlock that potential is our SAP project, which is designed to standardize and harmonize processes across the group. In 2025, we completed the prepare phase, resulting in project costs of EUR 4.1 million. Against this backdrop, EBITDA for 2025 came in at EUR 46.8 million, corresponding to a margin of 12% for the full year. If we look specifically at the second half, the EBITDA margin reached 19%. Let me recap on the next slide. We delivered a top-line growth of 16% at constant exchange rate.
We improved the EBITDA margin by 4.5 percentage points to 12%. EBITDA turned from negative EUR 7.4 million in 2024 to positive EUR 8.7 million in 2025. The improved operational performance was offset in the financial results by unrealized FX losses due to revaluation of intercompany loans, mainly in U.S. dollars, amounting to EUR 12.3 million, of which EUR 9.7 million had been already recognized in the first half of 2025. Compared to 2024, the year-on-year change was minus EUR 18.5 million due to the fact that in 2024, the revaluation of the loans had positive impact of EUR 6.2 million. The second relevant item, which also is a non-cash element, relates to IFRS treatment of contract liabilities.
For contract liabilities, a financing component has to be recognized in the financial results. This impacts for 2025 of EUR 6.9 million versus EUR 4.9 million in 2024. The interest expense was stable year-on-year of about EUR 8.5 million. This is leading to a net result of -EUR 21.2 million for 2025. Now, let's turn to the cash flow bridge. There I would like to split operational cash flow into two parts. The first part of EUR 38.6 million is mainly driven by the improved operational performance, and the second part of EUR 38.9 million is a result of the progress we have made in the net working capital management and customer prepayments.
A good way to look at the improvement we have achieved is to take the net working capital, excluding contract liabilities in percent of sales. This KPI improved by more than 10 percentage points from 46.1% in 2024 to 35.1% in 2025. That is a meaningful improvement and shows that we are capable to manage our net working capital alongside sales growth and profitability improvement. Investments account for EUR 111.7 million, mainly driven by growth projects. Finally, we end the year with a cash balance of EUR 74.6 million, essentially in line with 2024. EUR 51 million remained available under our RCF after drawing EUR 40 million during that year. Overall, we managed to improve operating cash and continued investing into the future. Let me close with our financing strategy.
This financing strategy is built on four pillars. The first pillar is improving profitability. Over the last two years, we have improved profitability sustainably step by step. In 2025, we reached a EBITDA margin of 12% despite the ramp-up in Braine-l'Alleud and the ERP project costs. The second pillar is customer prepayment. Our recent expansions and the ones to come are supported by customer prepayment. That helps to balance the cash flow and at the same time mitigate our investment risk. The third pillar is our existing credit facility, which we increased in 2025 by EUR 40 million, and currently we are in advanced discussions with our banks to increase it further. The last pillar is equity instruments. Although we don't expect to use those instruments near term, they are part of our toolbox.
Overall, the message is we have a balanced and comprehensive financing strategy in place, while at the same time making tangible progress in strengthening and growing our business. With that, I'm at the end of my final slide, and I'm also my last presentation with PolyPeptide. I would like to sincerely thank the board, Juan José, the EC, and the colleagues across the company for the trust, the collaboration, and support over the last two years. It has been an intense journey, but also a very rewarding one. I'm proud what we have achieved together, and I'm confident that PolyPeptide is in a strong position today than it was two years ago. Thank you very much, and with that, I hand it back to Juan José.
Thank you very much, Marc. Let's talk about how all this strong momentum in 2024 and 2025 translate in our guidance for 2026. Basically, in 2026, we should expect an accelerated growth and further profitability improvement. Our priorities for 2026 are the following. To meet increasing demand, especially in metabolics, execute capacity expansion in Malmö and Torrance, and the ramp-up in Strasbourg and India, and advance negotiations for large commercial agreements to support growth beyond 2028. For 2026, our revenue growth at constant exchange rates is 20%-25%.
Now, just to give you a sense, just the full year benefit of the new capacity in Braine-l'Alleud will take us to the upper end of this, of this guidance, and it excludes any additional growth from the rest of our network. In terms of EBITDA margin, we are targeting mid to high teens. In terms of CapEx, we are targeting 15%-20% in line with our midterm guidance. Now, let me just show you why the EBITDA margin is within reach. If you look at our performance in 2023, 2024, and 2025, our EBITDA margin in the second half of the year is very much in line with what will be the full year EBITDA margin of the following year.
In 2023, in the second half, we achieved an EBITDA margin of 7.1%. In the full year of 2024, the EBITDA margin was 7.5%. In 2024, in the second half, we achieved an EBITDA margin of 11.1%. In 2025, we achieved an EBITDA margin of 12%. If you look at having achieved an EBITDA margin of 19%, why we are confident on our ability to achieve and meet to high teens EBITDA margin for 2026. Now, in terms of 2028, we are basically confirming our midterm outlook.
Given the rapid growth and where we'll be in 2026, the contract we have signed and the demand forecast, we are comfortable on our ability to hit our 2028 guidance. In terms of EBITDA margin, having achieved in the second half of 2025 already 19%, our target of approaching 25% is within reach. In terms of capital expenditures, we are in line for a 16%-20% of revenues. This is strategy to be the most innovative peptide CDMO, anchored on three competitive advantages, innovation, development, and the potential of modularity is a strategy that we believe we will create significant value for the stakeholders. With that, let's move into the Q&A.
We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on their touch tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Webcast viewers may submit their questions or comments in writing via the relevant field. Anyone who has a question or a comment may press star and one at this time. The first question comes from the line of Charles Weston from RBC Europe Ltd. Please go ahead.
Good morning, and thank you for taking the questions, 'cause I have three, please. First of all, a question on the non-metabolics growth that you showed. Metabolics obviously been very strong. Non-metabolics has only grown around 1% CAGR. Could you perhaps touch on the dynamics there and what may have held back that growth? Secondly, on your advance discussion on contracting beyond 2028, could you tell us whether that's with a potential new commercial customer or an existing one? And would this be something that you announce when you sign a deal, or just wait for the next update?
On the industry as a whole, clearly the industry is expecting some obesity generics to enter the market, either later this year or 2027. Could you help us understand what the manufacturing network perhaps looks like globally to support these generic players? You know, are they investing in their own manufacturing? Are they gonna be using third parties? Thank you.
Thank you. Thank you, Charles, for the question. First of all, in terms of the non-metabolic growth from 2021 to 2025, we actually have also been going through a process of exiting some non-core businesses. We are reducing our presence in generics, we are reducing our presence in cosmetics, we are reducing our presence in what we call non-core sectors and doubling down on branded pharmaceuticals. That's actually driving, you know, what you see in terms of the net growth in terms of non-metabolics. Now, if you look at our non-metabolic pipeline, we have a pipeline as rich as what we have in metabolics in areas like oncology, cardiovascular, rare diseases. We actually expect to accelerate our growth in the non-metabolic space.
Now, I mean, when you have such a late-stage pipeline, that basically put us in a very good position for new commercial agreements. In this case, we have several commercial discussions, and it's a combination of phase III moving into commercialization, and existing and new customers. Now, in terms of generics, I have to say I don't have a visibility in terms of what is a total global manufacturing infrastructure being built to serve generics. In our case, our strategy is very much focused on working with large pharma and biotech customers, bringing development pipeline into commercialization. That's really what we are focusing on. Although we have the ability to serve generics is not really a priority for us. Actually, our Ambernath facility support generics, but it is going through an expansion to serve branded pharmaceutical products.
Thank you very much.
Thank you, Charles.
The next question comes from the line of Laura Pfeiffer from Octavian. Please go ahead.
Yes, hello. Good morning. Thanks for taking my questions. I think I have two. Maybe the first one relates to your guidance for this year. I think, Juan José, you mentioned it yourself that somehow the guidance looks very much de-risked. You know, just looking at the midpoint, it implies some EUR 85 million-EUR 90 million in additional growth. I think, looking at the statement that you have increased the output at Braine-l'Alleud, you can fulfill that, you know, just by incremental contribution from Braine-l'Alleud. My question is, why did you give that guidance? I mean, what is the potential upside given that we also have probably other capacities and projects ramping up? Then the second one relates to your margin target for 2026. You say mid- to high-teens range.
Maybe you can just confirm that, this is about 15%-19%. Then what are the key drivers and headwinds we should consider? Also, what accretion would you expect from the Braine-l'Alleud capacity? Thank you.
Yes, Laura. Thank you for the questions. Listen, I think we have been working already for three years. You probably know by now that we are a very thoughtful and a bit conservative company in terms of issuing guidance. We always say that we want our performance to drive our valuation, not our guidance. I think we are comfortable with this 20%-25% range. Of course, if everything goes well, we can go higher than that, but we plan to review our guidance at mid-year. Then in terms of the margin target, it's mid- to high-teens . Again, finalizing H2 at 19% is a good indicator in terms of a full year. Of course, the investment in ERP, it's going to increase and that's a potential consideration.
Of course, there is a lot of mixed movements, so we are scaling up multiple projects. I think you have enough to be able to come up with an estimate. Marc, I don't know if you have additional comments.
No, I think you mentioned the most important points. One, the ERP system is gaining speed. As said, we have finalized the prepare phase in 2025, and now in 2026 we're going into the build phase. That of course is adding to that. You also mentioned the ramp-ups we see across the network for future growth. That is also hitting our profitability in 2026.
Okay. Maybe just as a follow-up, can you maybe quantify the ERP investment? How much will it be in 2026?
We assume that the cost will double compared to what we see in 2025.
That's around two points of EBITDA margin. I think that could be a good assumption.
Just maybe quickly follow up on the first question on the sales growth guidance. Can you just maybe give us at least an understanding what is kind of the base business growth you have baked into that guidance, and what is the contribution from Braine-l'Alleud?
Yeah. No, again, listen, this guidance reflects the benefit of a full year utilization of the Braine-l'Alleud expansion. After that, growth in the base and growth from additional capacity expansion is not included in the guidance. At this point, our recommendation is to take the guidance, just know that we are in a comfortable position relative to the guidance, and we will review where we are at the end of the first half results.
Okay, thank you.
Next question comes from the line of Estelle Bétrisey from Berenberg. Please go ahead.
Yes, good morning. Thank you for taking my question and congratulations today also on the results. I wanted also to build on the previous question. If you could maybe explain further the increased revenue potential from Braine-l'Alleud that you've explained. Like what brings you to expect this further revenue to be generated from that side? Yeah, how confident you are to reach it and also if we can expect further upside to come from the other sides as well that are currently being ramped up.
Yes, thank you, Estelle. I mean, one of the things in terms of our focus on innovation is that we have proprietary technology to increase the yield output. In very simple terms, this capacity expansion was initially designed to produce 100 kilo batches. We basically use some of our technology to increase the size of the batches to 125. That's why we say the revenue potential of this new capacity now have increased from EUR 100 million- EUR 125 million. I mean, we have been doing expansions across the network. We talk about the Strasbourg that will be ramping up. We talk about India, that will also be ramping up.
Of course, we have people making programs to expand our capacity in Torrance. Overall, I think our ability to maintain the rapid growth momentum and accelerate relative to 2025 is pretty much there.
Okay. Thank you.
Thank you.
For any further questions, please press star and one. The next question comes from the line of Daniel Jelovcan from ZKB. Please go ahead.
Yeah, good morning. So the first question is on the commercial revenue, which in the first half was +30%, and now you have reclassified the segments. So my question is, it looks like in the second half you had actually negative growth in the commercial revenue. And also question related to that, you combine now in the contract manufacturing plus generics and cosmetics. Does it mean you have less growth in generics and cosmetics? I'm not sure if I understood it correctly. I mean, do you kind of exit that segment? Yeah, that's the first question then I follow with the second one.
Yeah. Thank you, Daniel. Maybe just to clarify. Basically we report development and commercial, and within commercial you have branded pharmaceutical, you have generics, and then you have others. Now there is a lot of volatility between half year. That's why we always recommend for people to look at full year, because our performance really depends not on what are we manufacturing, but what are we invoicing at a particular time. You can see that sometimes development seems to accelerate rapidly, sometimes commercial. But you should look basically at the full year growth of development and commercial revenue. I mean our strategy is very clear. We are a pure peptide player and we are focused predominantly in branded pharmaceutical.
Basically means that we are deprioritizing the other business and making sure that we are using our capacity to bring phase II and phase III projects into commercialization. Marc, anything else to comment?
Yeah, maybe one further point to add to that, Daniel, is if you compare percentages between the half years, please consider also that the revenue is different between the half years. As Juan José said, you should really look at the full year split, especially when we're talking about commercial and development.
Okay.
Thank you.
Second question. Your customer prepayments were down to EUR 27 million, as you showed on the slide. Down from the previous years, which is probably normal in view of the big customers' contracts. How is that going to look in the future? Is that increasing again because you probably have another big customer which is doing some prepayments? That's the second question, then I follow up with the third.
Yeah. I mean, in terms of customer prepayment, I will say it's better to look at it over a longer period of time. If we look at the last three years, we said that we had a gross inflow of customer prepayments of EUR 290 million, and that we released about EUR 90 million and a net inflow of about EUR 150 million. There will always be a lot of volatility year-over-year in terms of the size of the customer prepayment. What is important is that going forward, we expect customer prepayment to continue to be a material source of funding to expand our capacity.
Okay. Thank you. The last question, and before that last question, maybe a personal remark. Thank you very much, Marc. It was always a pleasure to work with you, and you were always quite. I mean, you were always very helpful and spot on. Thank you so much for this first. The last question now, do you expect to pay taxes this year with the better profitability, or you still can use some tax loss carry forwards? Thanks.
Thank you, Daniel. Thanks for your nice words. Always a pleasure to work with you as well. The current profit situation, I think we're still using the loss carry forward, so that we're not in a cash paying situation.
Yeah. I think we have EUR 1.4 billion of tax carry losses to use. I think taxes is not really something that we should be concerned for the next few years. Let's go to the next one.
Thanks.
Thank you.
The next question comes from the line of Chris Richardson from Jefferies. Please go ahead.
Hi. Thanks for questions. Just a couple if possible. Can you please clarify the potential downside or drags on the sales growth, given your comments that Braine-l'Alleud should take you to sort of the midpoint of that guidance? Is there any complication with the backfilling of the capacity mentioned or is it something else? Just regarding capacity optimizations, is this something we can expect to see in other expansions or is it Braine-l'Alleud specific? Just on Braine-l'Alleud and those increased peak revenues, given it's only a single customer in that expansion, does this increase in potential revenues match the demand from said customer? Or is there a risk this front end loads the revenues from that site and any potential minimum contract order over its term life? Thank you very much.
Yeah. Thank you very much, Chris. Listen, in terms of downside, one of the reasons why there are barriers to enter into this market is because the development and manufacturing process is very complex. At any moment, you could always find yourself finding some issues and we are also in a very uncertain geopolitical environment. I think it's very important for us to be prudent. We don't see any new specific downside than just a normal complexities of running a peptide CDMO and a more volatile market environment. Now in terms of the improvement in the yield in Braine-l'Alleud, this is actually something that we do across all of our commercial programs.
It's just that now we have more potent technology to be able to be more effective driving yields. In the case of Malmö, at this point, assume that this is EUR 100 million revenue expansion. But of course, we plan to apply our technology and see improvements in yield at some point. Now your last question regarding the expansion in Braine-l'Alleud and where this could be front-loaded, this actually reflects the rising demand of the customer project. Actually we just renew and extend this last contract. Based on the forecast, we expect the demand to continue at a very high levels for the next few years. Thank you. Let's move to the next one.
Super. Thanks very much.
Thank you, Chris.
The next question comes from the line of Tanya Hansalik from UBS. Please go ahead. Miss Hansalik, your line is open. You can proceed with your question. We cannot hear you. Maybe your line is on mute. We'll proceed with the next question, which comes from the line of Charles Weston from RBC. Please go ahead.
Hello. Thanks for the follow-up. Echoing Daniel's words, Marc, thank you very much for all your help over the last couple of years. Two follow-ups, if I can, please. First of all, can you remind us what the level of maintenance CapEx we should be thinking about in this business as a percentage of sales? Secondly, can I just follow up on an answer you just provided? I think I heard that you have renewed and expanded the contract with the large customer in Braine-l'Alleud. Is that? Did I hear that right?
Yeah, that's correct. In terms of like the maintenance CapEx, it's around 4%. You can use 4% or 5% of revenues.
Okay. Thank you. If I can just follow up on that customer renewal. I think the contract was out to 2029 or 2030, if I can remember, and I think it was roughly EUR 100 million over that time period. Are you able to share how much it's been expanded or how long it's been expanded?
Yeah. No, thank you for the question, Charles. We cannot really comment, but we have expanded the capacity, and the customer is taking the full capacity. You can just assume that we have a longer duration than what it was previously and that they are taking everything we can produce.
Okay. Thank you very much.
Thank you.
That was the last question from the phone at the moment.
Right. Thank you very much. Tanya, you can follow up with us, so we can answer your questions. Listen, thank you very much to everyone. We are very excited in terms of the evolution of PolyPeptide, the acceleration in terms of-
There's no question.
Oh, I'm sorry. I hear there is a question coming. Yeah.
A question via the chat. Two questions, actually. The first one is regarding the financing or in relation to the financing and the development from the metabolics. Mega pharma customer funding is of course possible. They have strong balance sheet. What about the next wave of GLP-1s with smaller companies and generics entering? They're not going to be able to finance, and Bachem is issuing equity periodically. The question is that not something that PolyPeptide also needs to go beyond 2028?
All right. Thank you. Yeah. I mean, listen, if you look first of all at the next wave of metabolic launches, they are actually going to be executed by large pharmaceutical players. Roche, Boehringer, Pfizer, I mean, they are the ones that are really going to be driving these launches. In terms of ability to secure customer support, we are confident mainly because we are the ones advancing these programs from phase I, phase II, phase III, and then into commercialization. I mean, with the momentum that we have, we believe that as we move towards our 2028 target, we should see a significant improvement in our valuation. That's why equity at this point is not really a preferred financing option.
We are really focusing on improving our profitability, again, customer funding and expanding our data, and that is going to be our model. Anything else for you to add, Marc?
No, I think it was a good summary and also of the financing strategy. Thank you.
There was a second question around the unrealized currency loss, the FX loss that we were showing on one of the finance slides related to the intercompany loan. The question is, why is this currency risk not being hedged?
It's a risk we had on the balance sheet for short-term intercompany loan. We fixed that risk now through an equity comparable instrument between the companies, so there is no further risk going onward.
This is all non-cash, so it's not really. It's more of an accounting thing. All right, any more questions?
I think Tanya just sent a message with her question. Question is, what should we expect for 2026 for the profitability contribution related to Braine-l'Alleud? Can you talk about the revolving credit facility, advanced negotiations, and how much additional financing you need for the midterm targets?
Maybe let me just take the last one. You should see an announcement relatively soon regarding the RCF expansion, so you will be able to get the details there. I think with that, we don't need any more financing to hit our 2028 target because most of the capacity is pretty much underway. Now, do you wanna comment on her first question?
Profitability contribution from Braine-l'Alleud in 2026.
As you can imagine, Tanya, the contribution of our new assets coming online is quite significant, especially if you compare 2025 to 2026 as we are working in a very much fixed cost-based situation. The majority of the incremental revenue will come with a quite high EBITDA portion in it. We don't go into details of profitability of a specific asset. I'm sorry.
Yeah. As you can imagine, in 2025, the contribution of the new capacity was break-even, basically. Now in 2026, you have that new capacity operating at optimal target. That's going to be the number one driver of improvement in profitability for the group. Any additional questions? No. All right. Now we can do the closure.
Excuse me.
Thank you very much.
Thank you very much.
Yeah.
Excuse me. This is the operator. We have a question from the phone from Charles Weston from RBC.
One more question, Charles.
Let's go.
Sorry. More questions, and I've interrupted your closing, sorry, again. Could you-
No problem.
Could you give us a sense of what the revenue contribution from Braine-l'Alleud was in 2025, please? It was kind of a follow-up from the last question, really asking it in a slightly different way.
It's sure, Charles. The contribution of Braine-l'Alleud for 2025 is EUR 35 million.
Perfect. Thank you.
Thank you, Charles.
All right. Before I start taking any more questions on the phone, online. No? All right. Okay. Listen, thank you very much for joining us this morning. Listen, we are very excited with the progress of PolyPeptide. We finished a year with a strong momentum. As you can see, with all the new capacity coming online, we will accelerate in 2026. We are moving to a much higher levels of profitability. We are very confident in terms of hitting our 2028 midterm guidance. I have to say that the efforts around our innovation, our development pipeline, our modular capacity expansion, I think the company has a bright future. Thank you very much, and enjoy the rest of the day.
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