Okay, ladies and gentlemen, welcome to our media conference. I see many faces well known, being part in our journey since many years. I see new participants. Welcome to you all. Welcome also to the participants in our webcast. These participants have got a link where they can put on and then pose their questions, write it down, and it will arrive at my laptop here in the conference. In the Q&A session, I will then be your partner in posing this question to the new CEO, Wolfgang Wienand and Reto Suter. I already said it, our new CEO, Wolfgang Wienand, is the first time with us. Welcome also from my side.
Not the company.
Not with the company. There is, since 2010, already a member of our executive committee.
Right.
I hand over to him, many thanks.
Thank you, Peter. Where's my laser sword? There it is. Okay. Yeah. Welcome from my side to the 2019 analyst conference. My name is Wolfgang Wienand, since January 1st, I'm the CEO of the company. I'm actually happy today to present our company to you and our financial result, 2018, together with my dear colleague, Reto Suter, our CFO. With me standing here for the first time, please allow me a few introductory words. While being new to the role, I'm actually not new to Siegfried, quite the opposite. I'm with the company since 2010, started as Chief Scientific Officer, so I'm a chemist. By training, not only, but I'm a chemist. I took on the role of Chief Strategy Officer in a quite exciting time at Siegfried, have been responsible for the execution of our previous corporate strategy Transform.
Eventually, I was serving in both roles, Chief Scientific Officer and Chief Strategy Officer. Siegfried has undergone huge transformations, many changes in recent years. Let's remember, since 2012, we executed large strategic projects, acquired other companies, tripled revenues, number of employees, number of sites. With all these changes, one thing didn't change. There was, and still is, an outstanding entrepreneurial mindset within Siegfried that we have been able to preserve, actually probably is part of the corporate DNA throughout its history of 145 years. I felt it when I joined Siegfried nine years ago, I still feel it. It's my ambition and the ambition of the executive committee and the board as well to actually carry this spirit into the future and put it into action. Siegfried also is a great place to work.
For me, in our perspective, almost a unique platform when it comes to building an industry leader in the CDMO space. Considering the audience here, Siegfried is not only a great place to work, but it's also a promising place to invest in. I'm actually very excited to lead the company into the future. What we will be doing today, Reto and myself, is, of course, spending time on reporting the past. We will also share insights into our strategic thinking and share thoughts about the ambitions that we, as an executive committee, have when it comes to the future of Siegfried. I can't spare you this, safe harbor statement, please read it carefully and fast. I start off with the executive summary.
Looking at the figures that you received this morning, you can see that the annual result 2018 is a good one. Looking at the company's history, you will even see it's the best one, a record result in our history. We saw robust growth. Net sales up to almost CHF 800 million, a plus of 5.8%. What we also have been able to do again is to actually translate additional revenues into superior profitability, increase profitability over proportionally on any level when it comes to profits. EBITDA is up 14.5% to CHF 127.4 million, which is a plus of 120 basis points in terms of margin, now 16%. That's how it goes down through EBIT net profit. In the end, last but not least, also cash generation was strong. Operating cash flow for the first time beyond CHF 100 million.
Free cash flow with roughly CHF 45 million, up 42%. Strong financial performance, delivering on our promise to actually be able to profitably grow. I skip the first next bullet here and go to what we did in the past year when it comes to investing and preparing our company for future growth. We invested into a new logistics center in Zofingen, where our company's headquarter is, and also into 40 additional workplaces in R&D. Why is that so? Efficiency is a key competence for Siegfried, a key competence that you need in the CDMO business model and business processes. Logistic processes are part of our processes. Also part of our service offering to our customers is, of course, development. We feel increasing demand for development services, which is why we created room to grow in our R&D department in Zofingen.
We also decided to enter into another very attractive CDMO market segment, which is the segment of aseptic fill-finish services for biological drug substances. For example, monoclonal antibodies, proteins. They need special treatment, very sensitive molecules. You need special competencies, special analytical equipment, special machines to actually be able to handle that task. Hameln, after investments into a filling line, after investments into equipment and education of the people, is now capable of doing that. It's right now still a small business, single digit, but strongly growing. The market itself is very attractive as well. We see that as an important step for Siegfried. There are more investments, of course, ongoing, which are more adjacent in nature, so incremental to adding capacity to enable our network to absorb and accept more growth. Last item on this introductory slide is actually the outlook for 2019.
There we see at least mid-single digit sales growth with a further increase in EBITDA margin, constant currencies. If we even look beyond 2019, we strive for and are convinced that we will be able to actually achieve profitable growth in line with market. We have the clear ambition to outgrow the market, including selective and value accretive merger and acquisition. That's the point in time when Reto will take over and guide you through the figures.
Thank you very much, Wolfgang. Welcome and hello from my side as well. Very happy to take you through the 2018 numbers of the Siegfried Group. We recorded a very robust growth in sales of 5.8% to a number of CHF 794 million. You see how the individual business lines grew. We recorded a sale of 17.1% in the drug product field, whereas growth in the drug substances part amounted to 2.5% for the year. The picture between drug substances and drug products is very similar to last year. Three-quarters of our business is in drug products, so production of the API. Whereas a quarter of our revenues comes from the drug product space. Please allow me at this point two comments which go beyond the content of this slide. One obviously is on sales growth in the second half of 2018. This obviously is lagging expectations.
In hindsight, it's very fair to say that we have been too optimistic mid-2018. Where does it come from? Siegfried is in a transition. We come from a world where we have been optimizing individual sites. We have optimized the business of an individual site, but we strive to go to a situation where we optimize a network. This is obviously enhancing our capabilities and our capacities by quite a bit. That's the way to go. However, in order to do that, we need to introduce a few measures in order to be able to do that. These measures, they include transferring production orders from one site to another. For example, transferring processes out of the high value add, but expensive sites in Zofingen to cheaper sites, to Saint-
Strong financial performance, delivering on our promise to actually be able to profitably grow. I skip the first next bullet here and go to what we did in the past year when it comes to investing and preparing our company for future growth. We invested into a new logistics center in Zofingen, where our company's headquarter is, and also into 40 additional workplaces in R&D. Why is that so? Efficiency is a key competence for Siegfried, a key competence that you need in the CDMO business model and business processes. Logistic processes are part of our processes. Also part of our service offering to our customers is, of course, development. We feel increasing demand for development services, which is why we created room to grow in our R&D department in Zofingen.
We also decided to enter into another very attractive CDMO market segment, which is the segment of aseptic fill-finish services for biological drug substances. For example, monoclonal antibodies, proteins. They need special treatment, very sensitive molecules. You need special competencies, special analytical equipment, special machines to actually be able to handle that task. Hameln, after investments into a filling line, after investments into equipment and education of the people, is now capable of doing that. It's right now still a small business, single-digit, but strongly growing. The market itself is very attractive as well. We see that as an important step for Siegfried. There are more investments, of course, ongoing, which are more adjacent in nature, so incremental to adding capacity to enable our network to absorb and accept more growth. Last item on this introductory slide is actually the outlook for 2019.
There we see at least mid-single-digit sales growth with a further increase in EBITDA margin, constant currencies. If we even look beyond 2019, we strive for and are convinced that we will be able to actually achieve profitable growth in line with market. We have the clear ambition to outgrow the market, including selective and value accretive merger and acquisition. That's the point in time when Reto will take over and guide you through the figures.
Thank you very much, Wolfgang. Welcome and hello from my side as well. Very happy to take you through the 2018 numbers of the Siegfried Group. We recorded a very robust growth in sales of 5.8% to a number of CHF 794 million. You see how the individual business lines grew. We recorded a sale of 17.1% in the drug product field, whereas growth in the drug substances part amounted to 2.5% for the year. The picture between drug substances and drug products is very similar to last year. Three-quarters of our business is in drug products, so production of the API. Whereas a quarter of our revenues comes from the drug product space. Please allow me at this point two comments which go beyond the content of this slide. One obviously is on sales growth in the second half of 2018. This obviously is lagging expectations.
In hindsight, it's very fair to say that we have been too optimistic mid-2018. Where does it come from? Siegfried is in a transition. We come from a world where we have been optimizing individual sites. We have optimized the business of an individual site, but we strive to go to a situation where we optimize a network. This is obviously enhancing our capabilities and our capacities by quite a bit. That's the way to go. However, in order to do that, we need to introduce a few measures in order to be able to do that. These measures, they include transferring production orders from one site to another.
For example, transferring processes out of the high value add, but expensive sites in Zofingen to cheaper sites, to Saint-Vulbas the amount of low double-digit CHF million, some of which we will see again in 2019, but unfortunately some of which is lost. The second comment is on the currency situation. You see from the numbers that we had a little bit of tailwind from the currencies, 1.4%, what's the currency situation's been for Siegfried in the 2018 year. Actually, as in the past, we are long the U.S. dollar, which had not a great impact as the U.S. dollar year-on-year was almost flat to the Swiss, and we have been slightly short to euro. We have had more cost in euro than the revenues in the euro.
This has obviously helped us on the top line, contributed about CHF 10 million in additional sales, tailwind on the top line. However, as we have been short to euro, it also introduced a heavier cost. In total, we had a negative adverse impact of CHF 2 million onto the bottom line. That's transaction effect of currencies. What's the earnings quality? How does the risk that we have in our revenues look like? You see here concentration measures, both in terms of customers as well as products. You see the top 10 customers and the top 10 products, and it tells you that we have a highly diversified business portfolio in both areas. The top 10 customers account for 38% of revenue, with the largest accounting for 6% of revenue. No huge concentration from a customer perspective.
Whereas from a product perspective, a similar picture is imminent, 35% concentration from the top 10 products. In addition, the top 10 products are quite equally weighted between the 2 product types that we have. Exclusive products that we do for just one single customer, and four products come from the multi-client business, which is the off-patent, the generic business where we sell to many clients. Diversified and also valid in terms of products. Let's move down the P&L. This is the profit metrics, the profit aggregates that we show for the year 2018. The numbers that we show from EBIT downwards are before the restructuring cost, maybe another CHF 1.5 million, to be fair. Here we have the clear confirmation that we have again been able to transfer, to Transform a robust growth into an even better growth in the profit aggregates.
I was happy to see that we have been able to grow net profit to CHF 57.5 million this year. It's again a record number for Siegfried, which is a plus of 40.9%. I think that's very good. A technical statement. You will have seen that we had restated the 2017 numbers. It's a technical restatement concerning our European pension fund obligations, we need to calculate interest for that obligation, technical interest, non-cash. In the past, we had recorded these interest payments as a part of the financial result, as IFRS does it usually. However, we have come to the conclusion and have also been made aware of that Swiss GAAP FER requires the inclusion of these interest payments, these interest charges to personal expenses. We had to move them from below EBIT to top of EBITDA, part of SG&A now.
The magnitude of this change for the 2017 numbers was CHF 2.7 million adverse, we have reduced EBITDA by exactly these CHF 2.7 million. The relative picture obviously looks the same as the absolute picture, again, we have been able to increase the EBITDA margin to 16.0%, a plus of 120 basis points on that restated level. However, EBITDA margin could have been better. Also, two isolated incidents that I have to tell you about in the last semester of 2018. One was that we have built more provisions towards the end of the year. Obviously, this leads to a much more stable financial results going forward. However, we had to accept that charge to the admin cost in 2018. Amount is about up to close to CHF 3 million. The second event was an isolated series of events, one of which I can tell you about.
We had a much weaker than expected yield on recycling of palladium catalysts, which had a significant effect, provided that palladium prices have skyrocketed towards the end of the year and still continue to do so. The effects of all these operational slippages account to CHF 3 million, which have been charged to COGS, to the cost of goods sold, have decreased the gross profit margin and obviously down all the rest. The impact easily calculated on the level of EBITDA, it's 80 basis points for the year. This is a summary of what I have already told you. Maybe to, again, mention SG&A, what's happening below gross profit before, then operating profit.
These numbers that are shown here, let's concentrate for a second on admin and general overhead, the CHF -43.35, they include the restructuring cost of the CHF 1.5 for the restructuring that we did earlier in the year in Evionnaz. They also include the increase of the provision positions that I just mentioned. If you correct for that, actually, SG&A as a total aggregate has come down, which again, is a fantastic confirmation of the scaling up of margins and profit aggregates. Even though we have recorded only a robust sales growth this year. The financial result, the CHF -6 million, includes the translation difference for Forex in the amount of CHF 2.5 million. The pure financial expenses have remained stable compared to last year. Cash flow statement.
This is maybe the financial statements that I, Wolfgang, the rest of the management team studies the closest when analyzing the performance of the business. Ultimately, we require a strong cash generation in order to be able to fund our future plans, to implement our strategy. That's important, and I'm proud that this year, for the first time in Siegfried's history, we have been able to record a triple-digit million operating cash flow. That's fantastic news. Obviously, also, free cash flow has increased strongly, +42% to CHF 46 million, despite a little bit more heavy CapEx program this year, which, for the record, was not only maintenance CapEx, but also expansionary CapEx. Wolfgang has and will still be alluding to that point later on. How do we spend that cash? What's our set of priorities for the use of our funds that we generate?
The overriding principle here in allocating capital is that we would like to maintain a strong balance sheet in order to safeguard and preserve our financial flexibility to be prepared to fund our future business, which includes M&A. We have debated within management team with the board the set of priorities, here it is. Priority number 1 is reinvesting into the current business in order to support organic growth, which is maintenance capital, maintenance CapEx, but which is also organic growth initiatives, investments into organic growth initiatives. Priority number 2, just for sanitary reasons, we want to pay out a dividend. Keeps us honest. Our dividend payout ratio is modest. If you see what we propose to the AGM in a month from now, it accounts for about 20% of net profit or a little more than 10% of operating cash flow. I would consider that modest.
This will continue to be modest. However, we will step by step increase the absolute number. Third, deleveraging. Obviously, we are highly cash generative this time. I will use the cash that we don't use for organic growth or the dividend. I will use it to deleverage, which then in the future, again, provides much, much, much more flexibility to me. Only to be prepared for the fourth priority, which is then M&A in line with the strategy Evolve that we currently are about to implement. I'm asked a lot around funding capacity. What could you, just short-term now, without any dilution of the equity holders, the shareholders, what would you be able to pay? This is that funding capacity, I'm happy to confirm that we do have dry powder to fund our strategic journey ahead. Yes, indeed. These are the numbers for 2017 and 2018.
What you see is obviously the net debt, which is just the debt position minus cash. I deduct the treasury shares that we have, and you see we have increased that position opportunistically during the downturn in Q4, which is then my real debt capacity in terms of ratios, net debt to EBITDA 0.38 at the end of 2017, which through cash generation and increase of EBITDA has come down to 0.18. For the avoidance of doubt, these numbers obviously are calculated counting the hybrid bonds as an equity position. That's the way how banks currently look at it, how the accountants look at it. I'm aware that financial analysts not necessarily look at it that way. If I take the 0.18 as a basis and just scale it up to an acceptable net debt to EBITDA ratio of three. That math is easy.
It's CHF 350 million additional debt on top of what I currently have, which is also supported by debt capacity calculations using free cash flow projections into the future. That figure is well-based. Out of the 350, I can quickly mobilize 200 because it's under existing financing contracts. That's the situation around dry powder at Siegfried at this point in time, and obviously, this number is increasing quarter by quarter, by quarter, by quarter, as it should be. Payout proposal. What will the board of directors propose to the shareholders at the AGM in April? In Zofingen, again, a slight increase in absolute terms, an increase of CHF 0.20 to CHF 2.60 per share. It's not a dividend from a structural point of view.
It's a return or a distribution out of capital contribution reserves, which is favorable for some receivers of the dividend, mainly Swiss natural persons. Even after this payout, which is CHF 10.8 million, even after that, we will have a total capital contribution reserve left of in excess of CHF 100 million, which in our view, at least, represents value available to the shareholders. We will try to preserve it as much and as best as we can. This has been the retrospective part. I hand back to my colleague, Wolfgang, for the strategic part.
Thank you very much. I actually want to spend the time on talking about four things. First, a little bit reflecting on who we are as a company, what we are doing, why we exist at all, and the market environment we are playing in. Second, briefly reflect on strategic imperatives analysis, which we see in the market. Third, compare what we are today against these strategic imperatives, fourth, talk about the things that we believe we need to do going forward to actually build out our leading position in the CDMO space. I want to start with that mission statement, which I think is very useful internally, externally as well, because it kind of is the North Star. If you're really busy in your daily life, kind of reminds me and all of us what we are actually good for as a company.
We spent the time as an executive committee to come up with that mission statement. With Mastery of Science and Technology, we take the precious innovations of our pharmaceutical customers to industrial scale and manufacture safe drugs for patients worldwide. 4 elements being provided in this mission statement. First, Mastery of Science and Technology. In the end, we are a technology-providing company. We need excellent scientists and the ability to actually transform this science into industrial processes, which is why we invest in our people. Then there's the part of precious innovations. Customers come to us and hand over their innovations to us, trusting that we are capable of making it industrial process, a commercially viable process, and manufacture product at large scale so that they can actually use it for the treatment of their patients. There's one short story.
I was using this mission statement, of course, also internally for town hall meetings. If you're not, there was a point in time when actually the head of production stood up and said, "Wolfgang, exactly. We have a customer, a small one, with only one product, a startup. Life or death for the company is that one product." This product is so important for the company that actually they have people on our site continuously watching what we are doing and literally sleeping besides the reactor. They trust us. Trust is an important part of our business model. If you would ask me, what is it in the end, what needs to be and was the success of Siegfried in the past and needs to be part of our success in the future?
Is our ability not only to be great scientists, great technologists, having a great network acquire. It is in the end, the trust that our customers have into our capabilities. The product that we are manufacturing and selling, you can't just buy on the next corner. Very important. Precious innovation. Industrial scale. I talked about that. That's what we do. We don't invent new therapies. That's our customer's business. Our innovation takes place when it comes to creating the most efficient industrial commercial process so that the therapies become affordable and we come up with prices which are okay for the healthcare systems. Last but not least, looking beyond our customers, B2B, to the patients which are treated with our products. It is our obligation to actually manufacture safe drugs. It's important and part of our business.
I also created 3 more data points when it comes to who we are and what we do and why do we matter. The first one is quite a surprising one, at least it was for me at the time. If you look at the number of Active Pharmaceutical Ingredients approved by the FDA, it's not such a huge number. It's roughly 1,500. Out of these 1,500 Active Pharmaceutical Ingredients, we at Siegfried are capable of manufacturing approximately 200 out of them. Just almost 15%. Significant. We are a significant source of pharmaceutical products. Another perspective that you can take is the number of patients approximately treated by our customers using products manufactured by Siegfried. There you can easily say it's probably around 40 million, quite a number.
It's five times Switzerland or five times Nantong, the city where we actually, the friends from the Chinese actually manufacture also APIs, 2 hours away from Shanghai. It's quite a significant number, and that even dramatically increases if you look at a specific product that we are manufacturing in our Minden site in Northern Germany, caffeine. You can easily say probably up to 1 billion people get in contact with a Siegfried product every year by consuming caffeinated beverages. We matter, and it matters what we do and how we do it. What is the environment we are acting in? There I got lot of good news on that slide. The healthcare market, it's a strongly growing market. It's not very cyclical.
Health is the last item where people would stop spending. That's a good start. We see the growth of our pharmaceutical customers of roughly 4.5% year-on-year, so healthy growth. That's our target industry, so we can expect our industry, the CDMO business model, to grow at 4.5% as well. On top of that, there's a growth increment coming from a strategic shift in our customer's industry, which is that large corporations, many of them with a chemical conglomerate background, used to manufacture their products themselves. Investors more and more expect pharmaceutical companies to spend their funds on their key value drivers, which is not manufacturing. It is innovation, it's marketing, it's distribution.
Pharmaceutical customers either don't invest in our manufacturing capacities anymore or actually take capacity out of operation, take it off their balance sheet, and actually hand over manufacturing to companies like us. Based on this, what we call outsourcing trend, we see a growth increment in our market on top of the underlying of roughly 1.7%, so let's say 6%. That's good news. There are not so many industries which are not cyclical but still growing year-on-year in the range of five, six, 7%. Just to give you some figures, won't go through this slide bullet by bullet. In 2017, our target market accounted for roughly $800 billion US. It's projected to grow at a CAGR of 4.5% to slightly above 1 billion in 2022.
As said before, that translates into a much smaller market, of course, CHF 70 billion in 2017, but in a slightly stronger growing market, the CDMO market, our market, with a growth rate of 6.2%. That's who we are and where we are playing. When you define a strategy as a company, you're well advised, obviously, to look at fundamental trends which are taking place in your target industry, the pharmaceutical space. That's what we did as well. We came up with five fundamental observations which we used to actually build our strategy. First one is focus of our pharmaceutical customers on innovation marketing. I explained that. Strong incentive for them to outsource, not invest funds into brick and mortar, but rather innovation, distribution, marketing. Very good. Increased cost awareness.
That's an interesting one. I remember a situation one and a half years ago when a COO of a large, big pharma customer actually visited Siegfried, us being a strategic supplier. He said, "Look, I'm responsible for product supply at my company, from all the acquisitions that our company did," so his company, "my supplier base grew beyond 500. That's a zoo. I can't handle it, Wolfgang.
I want to get it down to 150 or less, that means that strategic supplier like yourself need to be capable of doing more." What he also said is, "We are kind of transforming from a very much transactional supplier-customer relationship, in many cases based on price, to more strategic customer relationship, because in the end, the amount of internal resources that I have to keep ready to control this zoo of suppliers is adding so much complexity and costs that the overall picture is not healthy anymore." The more a supplier can take out complexity of the supply chain of a pharmaceutical customer, the more attractive he is for the customer. Third point is that breakthrough innovation, if you look at the pharmaceutical pipelines, of course, companies like Pfizer, Novartis, Roche, are strong innovators.
Just based on numbers, most of the phase I, phase II projects are not coming from big pharma. They are coming from mid-size, small, startup pharmaceutical companies. These companies, by definition, don't have internal manufacturing resources. They simply spend their money, the limited funds they have, on the key value drivers, which is innovation. They even don't have the option to manufacture internally. They need to come to companies like us. Another good trend for companies like Siegfried. There are two more. Increasing complexity of the molecule itself. I won't go too much into detail here, but technically, you can create a commercial upside if you are a company who's able to support the customer in both areas, in drug substances development, so the API itself, and also in the formulation. By combining the development cycle, you actually save time of the customer.
Time in that phase for a customer is everything. Time to market. If you lose one year, you don't lose tail-end sales, you lose peak sales, customer perspective. Us being able to offer that integrated services is attractive to customers. Last point is proactive life cycle management. 10 years ago, I remember that most originators actually gave up on their drugs as soon as they lost exclusivity. Just let it go. Didn't take care anymore, didn't spend marketing, just gone. That's not the case anymore. Some of them trying to exploit it to the degree possible, which makes them enter also a cost game, including cost of goods sold. The product that we manufacture and their price point becomes even more important to the customer. If you are a company to support that requirement, then you can make good business.
These are the challenges, the fundamental trends that we face as a company, as an industry. How do we compare against these trends? That's a landscape. That's what Siegfried is today. After strategy Transform, many acquisitions, spending half a billion Swiss francs and so on. We are now present in any relevant region of the world. Of course, heavily in Europe with the corporate headquarters in Zofingen, another big site in Evionnaz, Saint-Vulbas, close to Lyon, then the northern German operations in Minden and Hameln. Then we have Hal Far, a drug product facility, Nantong, our GMP API facility in Asia, and a presence in California, Irvine for drug products, Jyväskylä, Finnish, and East Coast, Pennsville. It's a pretty good setup already.
Pretty good in the sense of us now being able, at least partially, in one important field of our activity, which is drug substances, so the API. Us being able to actually operate our sites as a true network, which we believe will create a strong competitive advantage to Siegfried. It's a pretty complex task. Reto kind of alluded to that when discussing the slippage in 2018. It's worthwhile. If you're able to operate your site as a true network, you can generate competitive advantages. I will explain you how. It is a pretty busy slide. I will make it as short as possible. On the left-hand side, you see new business coming into the company, phase II, phase III, so development projects or sometimes even commercial products.
If the process is pretty mature, it can go directly to a large-scale manufacturing plant. It's not so often the case. In most cases, we need to spend development. Does it make sense to have a development department on each site? No, it does not. We have three development hubs, the one in Zofingen, another one in Evionnaz, and in Nantong, each one of them between 25 and 50 people. They, in the past, have only been responsible for their own sites. Zofingen for Zofingen, Evionnaz for Evionnaz, Nantong for Nantong. Already last year, and for sure going forward, they are responsible to actually feed the whole network. First synergy. Let's look at the network as well. We do have Zofingen, Evionnaz, great sites, very flexible, great people. High cost.
We have sites in Minden, surprisingly competitive when it comes to cost. Great people as well. Saint-Vulbas, surprisingly competitive when it comes to cost. Pennsville and Nantong, obviously in the role of low-cost manufacturer. Our vision on this network of sites is not every site needs to be technically able to do everything. The whole network needs to be able to do everything. That leads to a specific view on how do we spend CapEx and where do we spend CapEx. It also leads to a specific view how to actually work on our portfolio. Three things are now possible if you are capable of running sites as a true network. Dual sources for security of supply. I'm referencing the same CEO that I was talking about earlier. For a large product of this company, Siegfried supplies 100% of the API.
Usually, that doesn't happen because there's so much value at risk on the pharmaceutical company level. They never give the whole supply into one hand. Usually, they have either internal capacity plus an external supplier or two, or two external suppliers. Why did it work out in our case? Because we have been able to actually offer two sites. There's security of supply. On top of that we could add a second lower cost site to our Swiss site, which helped to defend margins. Because the customer can now decide where to allocate which volume, and in doing so, defining, deciding upon the mixed price that he pays. Also commercially very viable. Second part, horizontal integration of value chain. Chemistry is a thing which can take time, right? Sometimes your manufacturing is just two or three steps, then you're fine.
Sometimes it's 15 steps, can take one year or longer because it's a sequence. You do the first step, second step, third step. The requirements, also from a cost perspective on the individual steps are different, right? We are now able to actually insource intermediates, high-value intermediates, which we before had to purchase from external suppliers, which meant giving up on margin. We do have cases where we manufacture an early stage in Nantong, a middle stage in Saint-Vulbas, and the final stage in Northern Germany. That you can do if you're capable of running your sites as a true network. We consistently also look at high-value intermediates that we are still purchasing for insourcing in Nantong, which adds value to our portfolio. Third part is lifecycle management, and again, alluding to what Reto said before, product transfers.
What we are currently doing is taking out mature products from our high-value capacities in Switzerland and kind of providing them a second life in terms of margin. By taking them out, bringing them, for example, to Saint-Vulbas, Hameln, or Nantong, improving margin, and at the same time freeing up high-value capacity in Évionnaz and Zofingen. That's a third play that you can actually have if you're capable of running your site as a network. Another thing is possible, which is very important, very useful for us, and I would think also from a financial perspective, very attractive, because assuming that you have the right setup of sites, you are capable of not only making use of one market entry point, but two. Here you see the life cycle of a pharmaceutical product.
Pre-clinical phase I to III, clinical phase, then there's a commercial on-patent, time period, then there's your off-patent time period, right? That's the sales, the revenue curve of a pharmaceutical customer. That's a typical entry point. Customers come to us with phase II-A, II-B, maybe phase III projects for the development of industrial processes, later, commercial supply. Great entry point. I mean, of course, you need to offer attractive prices, price sensitivity is relatively low. Willingness to pay if you can deliver great services is high. That's what happening in Zofingen, Évionnaz, our European sites. There's a second market entry point here. When the drug product gets off patent, there are new players entering the stage, looking for supply, generic companies. There you can also make great business, assuming that you have the right setup in terms of cost structure.
That's where the Nantong site, but also other sites, Saint-Vulbas, Minden, come into play. Why did I say probably also attractive if you look at our business through financial eyes? It's about volatility or standard deviation as a measure of volatility. Let's have a look at the approval rates per year of approvals per year by the FDA for new drugs. Time horizon 2007 to 2017, 25, 35, up to 55, next year down to 30, up again to 55. That's what I would call volatility, right? In the end, that's our pipeline. That's where the next projects are coming from. If you just depend on that, you, in theory, of course, often and so on, you don't win every project here, but that's the volatility we have to deal with.
If you include the second entry point here, generics, it's a higher number because there are different dosage forms and so on. There's also volatility, of course. But if you are able to serve both, that's your curve. Just adding it up. The standard deviation from 30% goes down to 18. That's useful. That gives stability to your portfolio when it comes to generating new business. That's where we are today in terms of competitive landscape. Just straightforward, not arguing a lot, taking revenues as a measure of scale, size. That's the year 2017 here in $ million. These are the companies just taking their revenues. You see many things on this slide, one being Siegfried is in the leading pack. It's number 6. It's US dollar 2017 figure. What you also see is less than 20% market share for the top 10 player.
That tells us two things. First of all, the business model is pretty young. It has been invented just in the '90s by Lonza and also Siegfried, a few others. It's only 30 years old. In such a young industry, you see fragmentation because consolidation didn't take place yet. Didn't have time to take place. First. Second rationale here is that the investment hurdle, I mean, the ticket to play, not to play here, but to play here. All the rest, small scale, a few products, a few projects only, is relatively low, CHF 20 million, CHF 30 million in China. You can start to do something. I mean, the most attractive projects won't go to these vendors, of course. But that's the entry ticket. The outcome of that is depicted here. In mature industries, you see it the other way around, right?
Top five, six players covering 80% of the market. We believe at a certain point in time, far future, the CDMO market will have consolidated to that point as well. Far future. What is clear to us is consolidation has taken place. We'll give you some insights why there is also a strong strategic rationale for consolidation. That's what we call the CDMO pyramid, right? That's a fragmented market, I would say. Right? Here again, you see the leaders, the top four, Patheon, Lonza, Fareva, Catalent, breakaway group, above CHF 1 billion. CHF 500 million to CHF 1 billion, there at Siegfried. Number 6, some others. Getting more, getting more, and even more down here. I said there is a strong strategic rationale for scale. You can actually approach that hypothesis from many different perspectives.
I thought that I can make it short with this audience here by just providing some analytics here. You see on the Y-axis, EBITDA margin as a proxy for profitability. Right? EBITDA margin in %. You see on the X-axis, revenues of the company. We took the leading competitors, including ourselves, and asked ourselves, what happened with these leading players? If you look at EBITDA and revenues in 2012, and look at it again in 2017. You see this picture for Siegfried. CHF 48 million in 2012. We did our strategy, came up in 2017, with CHF 113 million EBITDA and margin increase. Of other players, this one here is Patheon, did their strategy ending up here. Other players. There is a clear corridor, which at least correlates scale with profitability. One might argue that a correlation is not causality, but it is causality in this case.
If you go back to the strategic analysis that I presented to you, many of the things you can track back to scale. Technology breadth that you are able to finance. Flexibility and capacity to provide security of supply. A network to play the game that I just explained to you. These are all things related to funds available. Funds available relates to size. There's a strong imperative for growth because growth translates into superior margins. We have proven it. Others have proven it. What are we going to do about this insight that size matters? That is summarized on this slide, which are the key areas of activity for our current corporate strategy Evolve. It actually starts with organic investments, because first and foremost, we have a strong organic case to support.
We will invest and are investing already now and last year into additional technologies which matter in our space. Won't bother you with details here. One word is micronization. Being able to process particles and produce the right particle size, which is important for bioavailability in the final drug product. It's about highly potent APIs, more complex molecular structures coming to market with more potency, which require special precautions in the manufacture of these APIs. We are capable of doing it already today at the so-called Class 3 level, which is a certain level of exposure, but not yet in the Class 4 exposure level, which we believe is an interesting segment as well. Organic investments into technology. I alluded to what we are doing in Hameln.
Investing into capabilities, analytical equipment, filling line, to actually be able to serve the market of biological drug substances fill finish. Not manufacturing the drug substance itself, but being able to do the aseptic fill finishing services to produce the drug product. That's something where we are investing and where we right now are building the business. Both organic acquisition in drug product and acquisition in drug substances. I mean, the network that I've presented to you previously with the sites, six sites, R&D, them working together, horizontal integration, and so on. That we can't play in the drug product field because we are too small. We have one site for oral dosage form manufacture in Malta, which is a great site, happy with it, but it's one site. What worked with the one customer giving us 100% of his volumes will never happen in Malta.
Too risky, not possible. There we need scale, which is why we say we need to acquire. We need to acquire sites and capacity, and that's a clear field of activity of our strategy Evolve. Acquisition in drug substances. Strong network already. It's fine for organic growth. We see additional opportunities, especially in the U.S., it would be great to have more capacity in the drug substances space as well, because proximity to customers matters, especially in the times of Trump. Doing acquisition there, value accretive, selective, not taking whatever is available, that would be attractive as well. To give you a notion how we look at that. BASF transaction three years ago, four years ago, was great for Siegfried. If such an asset would become available again, we would do it, of course, be it in the U.S. or Europe. Doesn't matter.
That's our flexibility here. There is one more item, which we phrase that way, and I think it's important to phrase it that way. Depending on opportunity, we would also be ready to acquire a biological drug substances CDMO asset. Why is that so? The drug product part, we are currently investing in organically. In Hameln and already did investments in Evionnaz. There we can grow. Capabilities there, organic case. We believe that the integrated offering that we are making also in the small molecule space will also work in the biologic space. The question is, how do we enter such an activity? Do you build it on your own greenfield, which is too late. We need to acquire. The issue is looking at number of targets available and if available, valuations.
It's not a good time because we believe that the price is being paid right now, last two years, are not sustainable, at least not sustainable according to the metrics that we apply. We are ambitious people. Depending on opportunity. How does that translate into our outlook that I would like to discuss with you here? We see Siegfried today, roughly CHF 800 million revenues. I've explained to you our robust organic growth case, the base case, so to say. If we look at the timeline of, let's say, 10 years, 2018 or 2019 to 2028, it is our ambition to organically grow with the market and with the additional ambition to actually outgrow the market as being one of the market leaders.
On the way, we want to continue and will continue to expand our profitability, our EBITDA margin, eventually up to the target of 20% EBITDA. We will continue to do selective investments in technologies, as just described, as part of the Evolve strategy. We will continue to work on leveraging the upsides, the competitive advantages of our network, a deeper integration of our network. We will continue to do add-on investments in capacity within that network according to demand. Building on that, we strive for accelerated growth through M&A. Value accretive acquisitions in our core areas. That's the drug substance part, for example, drug products, our solid dosage form, and acquisitive entry to new areas within our business model. We won't leave our business model. We are pure play CDMO. That's what we will be. No change.
The biologic space is an adjacent area where the CDMO business model works well, and depending on opportunity, we would be ready to acquire. Our target state that we are striving for, so say the Siegfried vision, is given here. Be a global leader in the CDMO space. Be the trusted partner, strategic partner of the pharmaceutical industry. Having the strongest team, mastery of science and technology. Running the most competitive network, discussed that. Have critical size in all segments and main geographies, so drug product, North America. In the end, are capable of mastering all relevant chemical, biological, and pharmaceutical technologies. That's what we wanted to present to you.