Good morning. Good afternoon. Welcome to all. Thank you for joining us today for Ypsomed half-year results 2026/2027. With me here today, our CEO, Simon Michel, and our CFO, Samuel Künzli. Simon will start and go over key achievements for the half year, for the last six months, followed by Samuel, who will go over our financial performance. After our prepared remarks, we will open the line for questions. At that time, please click on the Hand Raise icon and unmute your mic. Thank you very much for joining us, and without further ado, I'll hand over to Simon, please.
Thanks a lot, Sam, for introduction. Thanks, Samuel, for joining me here on stage. Let us start right away and move into the slide deck. We have prepared a small slide deck. I'm sure you have seen the news. We had a great first half year. Very pleased with the achievements of the team, and especially exciting, I think the first time in my 14 years as a CEO here at Ypsomed, we are raising the bar, we are raising the guidance for the full year. Ypsomed, we get up every morning because we make self-care simpler and easier. We help people with chronic conditions, and that's in the core of what we are doing. We benefit from those structural growth drivers. More care goes home because it makes sense. It's better for the quality of life, and it lowers healthcare costs.
We profit from this explosion of biologics, of large molecules. Only very few molecules can actually end up in a pill. Most of them end up in a device. That's where we play. Biosimilars, the golden age of biosimilars, that's where we play as well. We don't only work with originators, we work as well as with biosimilar companies all over the world. We are going to deepen that today. The incretins, the GLP-1s, we are now at close to 50 clients in that space, very broad, interesting new area where we can play an important role. We are through with our transformation. We are now a pure play self-injection specialist. That's in the core, in the heart, and now you see the pure Ypsomed as we stand and as we grow. We have divested everything which doesn't fit to us. Let us today deepen in four distinct areas.
I'm going to do with you the platforms, innovation, and operational excellence, some updates, and then Samuel will join me here back on stage and go with you through the financials before we open for Q&A. On the platforms, it's always very important to mention we have by far the broadest range of self-injection solutions. I think that's especially important to know that we are the only company to actually switch clients from autoinjectors to pens or from pen back to autoinjectors. We have this broad opportunity to offer everything our clients may need. We have three new products now, that's the YpsoDot, YpsoFlow, and YpsoLoop, so two pen devices and one new autoinjector. When we look at all revenue, then we are above 70% now coming out of autoinjectors and roughly a third in the space of pens. This may now change again.
We will see how it develops, but at the moment, our clearly strong growth driver is the autoinjectors. We have been super successful over the past six months. We have won 30 new deals, 30 new projects, and that is over two-thirds of what we have done in the past full year. It is remarkable that it is in a very broad spectrum. Only a very few of those actually come in the GLP-1 space. That is the blue bar. The majority comes out of a very broad range of autoimmune diseases that we support in the space of neuro drugs, et cetera. They come from both developed and emerging markets, and we have won 10 new customers, so we are now at 130 customers. We will deepen that in a minute.
Where we are particularly proud of is the fact that four out of five device launches over the past 12 months in developed markets come in an Ypsomed, and that shows the strength and the standing of our company. This is the leading company in the space, and we see it now more and more over the next months and years, what we launch, a very broad spectrum of devices. Also broad in the sense of therapeutic areas. With 130 clients, we are now active in close to 300 clinical and commercial programs. Autoimmune is the leading and fastest growing space, followed by incretins and diabetes, but we have more and more hormone therapies, rare disease stuff, et cetera. So very broad-based. Out of these 280, 90 roughly are actual launched products.
We have 90 in the market and 190 currently in development, and kind of every year, 50-ish adding to the project portfolio. This is a very broad scope. Again, you are aware of it for both pens and autoinjectors. Those deals, those products are very broad spread over 130 clients. The biggest 10 clients, they make roughly 50%. We do not have this topic anymore as we had it 15 years ago with one very strong client. Even Novo is very important, but is far away from 15%. Novo is an important client and will be an important client, but we are not dependent on the development of the company. Let me move into innovation. Innovation, I think it is important to mention that we are very active in the field. We lead the main conferences at CPHI, at the PDA in the U.S.
We are on the main speaker list. We are in very close contact with big pharma. We understand where they want to move tomorrow, and based on that, we also adapt our innovation and platform portfolio. One new element that struck over the past two years is time to market, time to clinic. That is where we can support our pharma partners. We have to shorten the time in phase II clinical studies. We support them doing studies at home, making it more comfortable for patients, and in the end, skipping the relevant bridging studies. That saves time when we are already in 2B, into three, and then into market in the same device. That is a game changer, and that is only possible because we collaborate very closely with the different glass manufacturers. Concretely, what does it mean? We are pre-verifying, pre-validating the combined product.
We work with the glass and the rubber manufacturers, we take our device, and we make thousands of tests, and we deliver to our clients the finished documentation. By that, they can gain a lot of time. They can go much faster into the clinical trials and then eventually into the market. We are now way below six months. Our target is to go down to three months. My vision is to be off the shelf. You can really call us, and you get devices to go into a study because it's standard, it's prepared. There's a lot of work behind it, but it's extremely relevant. Because we are so well-networked in the whole industry, we have set up those offerings. Apart from those innovations in the space of products and services, we're investing a lot of money in AI.
AI is not only the actual brain power, the actual computational power, it's also data. We have spent a lot of time to aggregate data over the past months. We have now databases that support us being faster in manufacturing and being more precise in manufacturing. We have now less and less waste. We are raising the OEEs, so the productivity of our lines, and we are prolonging the maintenance windows. So we have less maintenance. We only take care of our lines once they have an issue. So we use the sensor data, and the brain understands it, sees patterns, and tells us when we have to do the maintenance. Our vision is to eventually get rid of in-process control because the process is so stable that we no longer need those analytical special tests, which take time and cost money.
Let me now move to the last topic here, the operational excellence. Operational excellence at Ypsomed is mainly broadening our footprint, getting the capacity ready that we see in the coming years. So we are now, when we look at the portfolio of sites, now really nicely spread. We have our Swiss and German sites for Europe and some of Eurasia. We have Changzhou for China, and we have our new site in Holly Springs. In Solothurn, now since we have no longer contract manufacturing here, we have enough space to upgrade it, and we are currently implementing state-of-the-art automation. We have those automated self-driving cars. They support us in logistics, make us much more efficient. We are building a new fully automated warehouse, which is required because of the massive volumes of autoinjector that we want to bring out here in Switzerland.
At the same time, in China, it just works. I mean, we don't even have this as a topic on board level. It just works. We have now space for one more line. We bought the land on the left, you see here on the picture, that we can grow if we decide to grow. But I'm very, very pleased with the work of the team here in China. We deliver both locally, but also into some neighboring markets, and this will also be the case in the future. Changzhou is on the same state-of-the-art level as our other sites. You see here the assembly lines that you know, nicely set up, highly automated as well. Let's move to Germany. That's a picture from last week. We are getting ready here to ramp up the manufacturing, which is next to the big cube, is almost ready.
We are at the moment bringing the first lines and the first 20 or 30 plastic molding machines in. The huge cube that you see has space for 25,000 pallets. It is made for over half a billion of autoinjectors and pens. This site that you see here has the capacity of roughly 250 million, so we have space to add one more unit in 2029, 2030. in the front here, you see the building that we require for office space, for projects, for customer meetings, et cetera. This will be ready roughly in June. We will open in summer officially. But the manufacturing is handed over as we speak. We have to ramp up because the original building to the right is full, and we need to ramp up the new clients. America now, we brought up the sign last week in Holly Springs. Very pleased.
The building is now being refurbished, respectively. We are now doing the work on the flooring and on the technical, and then we will be able to hand it over to manufacturing in September 2027. This is also when the first lines will get in. We see at the moment the realistic delivery of first products out of Holly Springs in Q1 2028. With that, ladies and gentlemen, I would like to hand over to Samuel. Samuel will deepen with you our figures. He will deepen with you our performance and explain in a bit more depth our outlook. Samuel, please.
Thank you, Simon, and welcome from my side. In the next 10 minutes, I will guide you now through the financial performance. Let's start with our top line. We achieved CHF 318 million of sales. You see here on the left side, the majority is coming from our main business, the delivery system business. It is the business with the own pens and autoinjectors. CHF 31 million is coming from other business areas. This is for now mainly the two contract manufacturing we still have going on. The one for the pens just ending those days, and the other, the contract manufacturing for diabetes care, so insulin pump consumables, that one is still going on until end of the decade. Let us now have a closer look at our main business. The delivery system business grew 17.5% in the first half year.
What you see here on the left side is that commercial sales, they grew very strong from roughly CHF 200 million to CHF 243 million, so more than 20% growth. That was driven mainly by our autoinjector platforms, by the high runners, the YpsoMate 1 mL, and also the 2.25 mL. The project revenue grew from CHF 43 million to CHF 44 million. Project revenue for us is the customization we do of our platforms for customers and the clinical samples we deliver for the clinical studies. Those of you who follow us longer, they know that the project revenue doesn't have the same dynamic as the commercial sales. The main reason there is also our customers, they use our platforms as platforms, so many of our new projects are repeating customers, so there we have less customization fees.
Also the clinical devices we deliver for clinical studies, by nature, that is a more volatile business. Let us look now at the profitability. We achieved CHF 102 million of EBIT. That is representing an EBIT margin of 35.7%. So similar like in the last business year, an EBIT margin close to 36%. In the others, we had a minor loss of CHF 3 million. That is mainly coming from the carve-out, the phase-out of the remaining of this contract manufacturing for the pen business, and is partially compensated by the profit we do with the contract manufacturing for the diabetes care business. So we reported around CHF 100 million of EBIT in the first half year. Let us now have a look at the cash flow. The operating cash flow was strong, close to CHF 120 million.
What you see here that the cash flow from investing activities was still slightly bigger than the operating cash flow, so we ended up in a slightly negative free cash flow, but you see we are already close to being free cash flow positive. The cash flow from investing activities, we will now have a look at it, that was mainly growth investments and investments in innovation. We see that on this slide. We invested CHF 130 million in fixed assets. Simon showed you the buildings in Switzerland, in Germany, China, and U.S. You saw the plastic molding lines, you saw the intralogistic. That is where our fixed assets investments go to. The innovation investment, these are this investment in intangible assets. That is the next pen platform, so the platforms like YpsoFlow, and also the next autoinjector platforms, the YpsoLoop.
They are in those investments as well as the digital health investments. If we look at our CapEx investment cycle, we see that we are now in the business year 2026/2027 close to the peak. Like in the last business year, 2025/2026, we also expect this year fixed assets investments being close to CHF 300 million before we gradually go down with those fixed asset investments. You see, we expect already in the business year 2027/2028 to be on free cash flow level positive. What is also important to note, our investments, they are in the production manufacturing. These are all flexible and modular investments. We reach, although we are in this ramp-up and peak investment phase, we reached a very high capital efficiency. Also in this business year, in the first half year, we reached around 20% ROCE, so around 20% Return on Capital Employed.
Now, how do we finance those investments? You saw before the operating cash flow being already north of CHF 100 million. What you see here now is the EBITDA of the last 12 months was already north of CHF 300 million. Current debt level is on around CHF 300 million. That gives us a net debt to EBITDA ratio of around 1.0. This is a very solid balance sheet, and this balance sheet allows us to finance this growth CapEx cycle and also allows us to finance our growth strategy. Now, finally, looking forward, Simon mentioned it is a special day, so we raise our guidance. The initial outlook for this business year was a top-line growth of 12%-15% on sales, and now we raise that to 13%-16%. The same on the profitability level. We initially guided CHF 210 million-CHF 230 million.
Now we lift that to CHF 220 million-CHF 240 million. Before we come to the Q&A, I show you the midterm outlook. Also here, we confirm our midterm ambition, which is to reach on the top line CHF 0.9 billion-CHF 1.1 billion of sales, and to reach on EBIT level CHF 280 million-CHF 340 million until the business year 2029/2030. The capital efficiency should stay around this 20%. What is especially now favorable for us, we also see now coming closer to that end of the decade, we see that growth also after 2030 is persistent, and we see a sustained growth also in the years after. With that, I would hand over to Sam to lead us through the Q&A.
Thank you, Samuel. Thank you, Simon. A remarkable year indeed. Many firsts. We will now open the line for questions. Thank you. We see already a few of you have already clicked on the Hand Raise icon. We will go in order. We will start with you, Daniel from ZKB. Would you like to unmute your mic and ask your question, please?
Hello.
Just checking we would need.
Hello.
Perfect, we are hearing you. Thank you very much.
You see me?
We hear you, Daniel. Good afternoon.
That is great.
We see you. Good afternoon. How are you?
Good afternoon. Excellent. With these numbers, couldn't be better. Thank you very much for the good print today, for you, Simon Michel and Samuel Künzli, and also to the IR team, by the way, which did a great job over the last few months. My question is the first, in fact, the Solothurn phase-out with Sanofi, where you produced, I think, two months now in the second half, October, November, and then you have probably the transfer, the renovation, the maintenance. Is that probably baked into the full-year guidance, which is implying a bit slower? I mean, the second half growth still very good, of course, but is that-
We hear you well.
Okay, yeah, that was-
It's good.
Okay, now it's better. Sorry. You got the question. Maybe I just ask the first one out of the three.
Great. Why don't you want to start on Sanofi?
Absolutely. Thank you, Daniel, for the question. You're absolutely right. We said Sanofi, the contract manufacturing, will only have a minimum impact on second-year sales because we said October, November, it will stop. For you, fair to assume there is minor sales on that. We said also there will be a minor impact on the bottom line, but this is shown in the other segment, so not in the delivery system, and this is also not included in our guidance. The guidance is for our main business, the delivery systems. This other business, which had in the first half year now a slightly negative EBIT.
For you, it's fair to assume also in the second half year, yes, we will have a slight negative impact of this Sanofi phasing out, and this is partially compensated by the contract manufacturing profit we do with the diabetes care products. But think of it as a low single-digit negative impact we will see in others in the second half year. Feel free to add, Simon, if from your side.
No, I think we are very well on track. This is all foreseen. It will take us roughly half an year until we round the lines up. We are installing, as we speak, plastic molding for both Novo and many other clients. We have a multiple, we have a flexible system installed. It's a platform approach as well, so we can really proactively use then these volumes.
Yeah, thank you. Just maybe one more question, that's okay. I was really astonished by the high margin you can keep despite the ramp-ups in all the locations. I mean, how is that possible? I mean, I'm really astonished by that.
Yeah, I could start and feel free then to answer. I tried a little bit to highlight that. The product mix was really favorable for us. For you, it's fair to assume that the autoinjector business has a slightly higher margin than the pen business, and we tried to explain that the growth was driven by the autoinjector business, so by the one mL platform and the 2.25 mL platform, and that was really the main driver for this good margin where, yeah, which we could achieve in this first half year.
Then it's also the case that it doesn't necessarily mean that in biosimilar we can only charge lower prices. Obviously, there are clients where we have to go lower, but we have also clients in China that pay European-American prices. So we always try to understand our clients. We spend a lot of time in pricing. Pricing is an art, became an art. We have an excellent sales team. They understand the respective geographies, the respective clients. We do a lot of base work, and we try to optimize. Then, especially when you look into the 30 biggest pharma clients, for them, reliability, reliability. They pay the price.
We have done a review a couple of months ago, and we have asked all our clients, "How do you perceive us?" In fact, the majority perceive us as not the cheapest one, so we are actually perceived as the most expensive one in the industry. But 99%, I think it was one out of 85 clients said they are too expensive. The majority of clients say, "Yes, we pay a lot of money, but we know what we get." This is our promise, we have to deliver, and this has a value, and we try to optimize it for both sides.
Thank you very much.
Thank you, Daniel, also for your question. Now we will go to Sibylle from Vontobel. Would you like to unmute your mic and ask your question, please?
Thank you very much for taking me, and congratulations on the numbers. I also was pleased, as Daniel. The first question is about the other EBITs, so this CHF -3 million. Could you tell us how pump divestment, pump contract manufacturing, pen needles, and so on was helping this CHF -3 million? That is my first question.
I start with that one. Hello, Sibylle. We had two elements which had a slightly negative impact. That was, on the one side, the contract manufacturing of Sanofi, because, yes, volumes were already lower, so this phasing out that had a slightly negative impact, and also really the last pen needle transactions in there that was negative. A little bit helped was the contract manufacturing of the mylife Diabetes Care products, so the infusion sets and the reservoirs, but you saw it could not fully match, so we had still net around CHF -3 million EBIT. That is the story around this other result.
No other negative EBIT from the pen needles. This is done now?
Yes.
Good. The second question is about the midterm outlook, which you confirmed about sales CHF 0.9 billion-CHF 1.1 billion. Are you still sticking to the lower end of the outlook, or is this now open, so the whole range to be expected?
We haven't really discussed that one. We are definitely hitting this landing zone nicely, but let us get back on that one. We don't make a new statement on the midterm outlook, but when we see what we have delivered now and for the full year, and also 2027, 2028, which looks better than we have expected half a year ago, we are very confident that we are going to land in the landing zone that we provided to you.
Absolutely.
Okay.
For you, it's fair to assume, since we raised the guidance, that the situation at least did not get worse.
Sounds good. The last question is about capacity reservation in commercial. Could you help us with how much you could then book in the first half?
Yes. I start that. I maybe start with the overarching picture, right? We have a business model which is reliant also on co-financing. The rough indication we gave is of our CHF 1.3 billion CapEx plan, think of it as roughly 30% is co-financed by capacity reservation. What you see in our balance sheet on the liability side, Sibylle, is always what is still left in the balance sheet. That is slightly more than this CHF 200 million. But you need to have now in mind that part of it is always recycled. The math you can do there is you look what is recycled annually, that's around, yeah, CHF 20 million-CHF 30 million, which goes out. This is the short-term part. When the example, if overall it stayed constant for a year, 200, then it means roughly 20K in addition.
That gives you a rough idea how this works and also how you can read it. But happy also to deep dive if there is questions on that.
No, I'm fine. Thank you very much.
Thank you to you too, Sibylle. Now we'll go over to Tanya from UBS. Please feel free to unmute your mic and ask your question.
Hi, good morning, and thanks for taking my questions, and congrats as well on the great result. I have three questions, if I can. I'll go one by one. You upgraded your guidance this year, so how should we think about the cadence of growth going into the next years as the new contracts ramp? In terms of the midterm guidance, will it be even phasing or back-end loaded? That's the first question.
We try to be quite evenly phased. Of course, we cannot guarantee you a straight line. There might be some bumps, but no real bumps. I mean, we definitely don't see any more this kink, you know, this slowing down in 2027, 2028. We have a lot of new contracts that will deliver in 2027, 2028. The year looks already much better than we expected half a year ago. So we are really positive that we can provide to you the 15% CAGR. It will not be a straight line, but it will definitely be much smoother than we expected half a year ago.
Great. Thank you. That's very helpful. Second question on the EBIT margin. What level of margin pressure do you expect each year until 2029, 2030? Will it be a gradual fade down or some volatility as new capacities ramp up next year and weigh on the margins?
Frankly speaking, you know, all we have guided is above 30%. It doesn't mean we need to reach 30%. It may also mean we are way above 30%. So, at the moment, we see a couple of larger deals where we get less per device that will actually start ordering in 2028, 2029, that will have a more effect. I would say in the coming 18 months, 24 months even, we will see some decline. That's mainly due to some biosimilar markets in China mainly. But then the larger volume deals, they kick in rather at the end of the decade. I don't believe we will actually hit the 30%, but it will not be as even also that it will not be straight. We should probably try to deepen that a bit more for the full year. Do you have anything to add here, Samuel?
Well summarized. I just also want to remind you, and those of you who follow us close know that we have a volume-based pricing. So, although we have this ramp-up, more capacity being online utilized, we give that economies of scale also to our customers. That's why it's fair to assume that EBIT margin slightly goes down. We had a very good EBIT margin now, but as Simon said, we are comfortable to stay above the 30%. So that's my five cent on that one.
Great. That's very clear. The last question, if you could provide an update on, you know, what part of your pipeline is GLP, and where do you see, you know, GLP sales in percentage going towards by the end of the decade?
We have given you an indication one year ago that was roughly in the space of 10%, where GLP-1 is at the moment. We also have told you that we may reach one-third by end of the decade. You can assume that we are somewhere on that way, on the way from 10%- 30%. We have at the moment close to 50, 5-0, GLP-1 deals, incretins, both in autoinjector and some in pens. We have relationships such as Innovent with mazdutide that explode, that just order, that actually move this therapy away from clinics into beauty salons. So a new business model in China, B2C, out of pocket. It's pretty difficult for us to judge, but I would say we are now above 10%, but way, way below a third.
Thank you.
And maybe, if I may.
Please.
Have a closer look at our auto-immune pipeline. We are very broadly set up, and these companies pay really good money for our devices because they have so expensive molecules, they want to get the best. Also, not just the 1 mL, we move more and more into larger volume devices. We move into 2.5 mL, move into 5.5 mL, and this is expensive stuff. So this actually increases our margin, and when you look into the space and also the graphs where we have shown you that only a small portion of new deals is incretins, you can assume that you're actually increasing the interesting deals outside of incretins as we speak.
Thank you, Simon, for providing the additional color. I hope that was helpful, Tanya. Now we'll move to John. John from Barclays, please unmute your mic and ask your question.
Hi. Good afternoon. Thank you for taking my questions. John Unwin here from Barclays. I actually also have three. The first one is just to follow up on the FY 2028 margin. It seems like the margin this year is going to be better than you'd expected, closer to 36% in the first half, and the gap between 36% and 30% is quite big. So I wonder if you could help us think about where in that gap you might finish for FY 2028 on the margin. Is 33% the right number? 31? Just some context to help us try and frame the model for next year, please.
So for the current business year or for the next business year?
For FY 2028, please.
Yeah. We come with the official guidance in May 2027. I tried to give a little bit color on that. Of course, we are now ramping up, so that is for sure giving somehow us a headwind. On the other side, yes, we have economies of scale, which we realize, but we share them with the volume-based pricing. We have bigger contracts ramping up, but it is not that you should think of a huge fall of the margin, but we said we somehow gradually come a little bit down with the margin. But a precise number, a precise guidance, we come up in May 2027, or the 2027, 2028.
Fair enough. I had to try. My second question is on the YpsoFit program and the potential benefits you could see from improving the utilization and also some of the procurement programs that you have spoken about, like dual sourcing of plastic. When could we see some benefit to the EBIT line from these programs, and could you help us to think about the magnitude that these programs could bring on EBIT?
The program has actually gotten much bigger than we originally expected. We are kind of turning every stone in the space of dual sourcing and new plastic suppliers. We also move for many clients from medical grade to food grade, which is a much cheaper sourcing because you have less paperwork and customers are very happy. We will see the first effect in 2028. You have to assume that these are product changes together with the clients, and the clients have to reapply in some countries because of the new material. Most clients will be part of it. We are obviously sharing the cost reduction with our clients in order to motivate them, but you will not see benefits in 2027. It will soften the EBIT effect in 2028, 2029.
Okay. Just to confirm on that point, in the midterm EBIT guidance, are you assuming a significant benefit from utilization procurement improvements in that reconfirmed guidance, or could it present upside to FY 2030 EBIT?
So-
Guidance
Yes. That's the reason is, we will not see the 30. We'll be clearly above 30%. We cannot guide at the moment, and YpsoFit will definitely have an impact on that. Definitely have an impact. We have to move all clients by 2029 to the new material. That's the order I have given inside. It's very clear task we have. We have to move, we have to simplify, we have to have dual sourcing, and we also motivate our clients to do so. Yes, we will see an effect in the outlook.
Okay. My third question is on M&A. You've spoken about potential for M&A and firepower for M&A. I just wondered if you'd give us some idea of what kind of things you would be looking at, adjacencies or market expansion, and potentially any timelines you had in mind.
When you look at potential inorganic growth at Ypsomed, we differentiate between horizontal and vertical. Horizontal means we are trying to add new platforms that we have not in our own innovation pipeline. At the moment, we look at two options. We have two potential addings that would fit nicely into our family. We are analyzing them, we are talking to them, we are not negotiating yet, but we are in the phase of deciding which of the two will have a first priority, number one. Number two is the vertical. We try to understand much better the roles of the different players in the vertical, not just the device, but also the glass, the fill finish, and of course, the assembly and packaging. In the vertical, our vision is clear. As an industry, we must simplify the supply chain towards pharma.
There are not so many targets out there, frankly speaking. In each of those spaces, you have one to three companies. We talk to them. We have intense discussion, but we have not negotiations yet. We are trying to give you more flavor on it and also on the prioritization at the dedicated Market Day in 2027, where we want to explain you the benefits of moving into such a space, because you have been asking now a couple of questions on our bottom line. Obviously, we don't want to jeopardize our group bottom line too much with those new elements in our family. So we want to give you much more flavor in summer-ish on that topic, but I can tell you, we have a good team, a great team. We have support of consultants in the two areas, vertical and horizontal.
Great. Thank you very much.
Thank you also, John, for your questions and interest. We will now go to Sandra from Octavian. Please unmute your mic and feel free to ask your question.
Yes. Can you hear me? Good afternoon also from my side. I have first a little bit a more strategic question on China, where you are ramping up the capacity, and you have said China should become a meaningful part of your production footprint over time. How do you see the competitive environment in China? Is it particularly on pricing, also competition from potentially local device manufacturer? Do you think you can, with your existing platform, compete in the broader Chinese market, or would you also consider a dedicated low-cost offering just for this market? If so, is that a topic for M&A, or would that rather be developed in-house?
Great questions. First of all, when we look at the manufacturing capacity we are going to have in China by end of the decade, out of the 1 billion capacity by 2031-ish, 2030, 2031-ish, we will have roughly 150 million, 120, 150 million in China. Yes, it is important, but I would say Germany makes 50%, will be much more important, number one. Number two, we have to differentiate in the segmentation of the clients, five segments. We look at premium plus, that is mainly global big pharma. Then we look at hybrid, that is this GLP-1 incretin space, and then we have value plus and value. Value plus is local companies in emerging markets that attempt to sell outside of the domestic market, i.e., a Chinese company tries to sell glargine in the U.S., right? Then you have the value market, which is the actual domestic local market.
Where we want to champion and where we are currently championing is in every segment above value. Value plus, we are the one that is selected. Every Chinese company who wants to sell outside of mainland China is selecting Ypsomed. That is given, and that we can do with our current portfolio. Where we have to look at, and that is why we have a close look at China, mainland China, is the value segments. What we will not do, we will not take our existing UnoPen and existing Ypsomed and cut the price by half just to get some domestic volume. We will not do that, for sure not. We have three passes at the moment. One is our new NeoPen low-cost platform, which is under development. One is a program with a Chinese contract manufacturer, and then thirdly, we are actually also looking at acquiring a local Chinese manufacturer.
We have done the analysis. We have looked at a very broad space of Chinese pen manufacturers, roughly 30. Out of them, four or five really do a good job domestically, still small volume, but they can deliver quality. We are definitely not looking at companies with backyard shop level style. So we look at serious med tech companies, and we have a clear understanding who is there, but we have not started, as I mentioned just a minute ago, we have not started yet any negotiations. We are in the learning phase, the education phase, but those three options are actually relevant for us to win in the value segment. All other segments, our portfolio, we are well set up.
Thank you very much. Appreciated for all these details. Thank you. If I may, a second one. Sorry, I know we already talked a lot about the margin, but I have to follow up here again, only for the second half. So the guidance implies that second half margin will be kind of lower than the strong margin in the first half. For this year, is the main driver for that already greater ramp-up costs, or is it mix? You mentioned the biosimilar launches, or what is it? Just for the next six months, what is driving, or is it just a cautious guidance? What is driving down the margin otherwise?
I start, and then feel free to add. Yes, it is on the one side for sure ramp-up, which is going on, so that costs we have. Product mix to a certain extent as well. You can somehow read that, yes, autoinjectors now became very good, but on the other side, yes, the pen business is also running well. So you see the product mix plays a role in that as well, and that, t hat together gives you that, when you just look half year by half year, this slightly lower profitability in the second half year.
Okay. Thank you.
Thank you too, Sandra, for the great question and interest. We will now move to Anna. Please, Anna from KeyBanc, feel free to unmute your mic and ask your question.
Hi. Good morning. Thanks for taking my questions. Maybe first to start on your long-term guidance to 2030. I think when you first gave that guidance, you assumed flat project growth. But I think in this half year, you saw another record project orders. Is there any area of upside in the guide around the project side? Does the record number of orders suggest you are gaining share here? Then I have another follow-up.
Anna, we have defined our landing field, our landing zone quite broad, CHF 0.9 billion-CHF 1.1 billion. This obviously includes the potential of stronger growth. We can just reconfirm that we are comfortably landing, going to land in that zone, but we are not adjusting our guidance as we speak for midterm. We will definitely have a close look at it for May. At the moment, we are highly confident to reach it. Of course, the new projects, because your question is really relevant. When we sign a deal today, it takes 2-5 years until the product launches. Obviously, some of those new deals are going to launch in that time, so it has an effect on the actual landing.
Great. Thank you. That is very helpful. Then another topic, maybe just the larger volume biologics. I think you mentioned that that was a growth driver. Is this mainly in the funnel today, or are you seeing these in commercial? Just trying to get a sense of where we are in this industry shift. I think you also mentioned these are some of your highest margin products. Is there any way you could quantify maybe margins of your high-volume autoinjector versus some of your lower volume autoinjectors?
That is really picking up, but I am not aware of the Are we allowed to say names? Can we give names here?
Just broadly, I think the space, I think it is quite interesting. Maybe we can give you a bit of color. Yes, autoimmune therapies that already launched are growing, and we are benefiting from this. Also, we are winning a lot of new clinical projects.
But do we have products in the market that we can name? Can we give examples?
We have a partnership with medac that we also already disclosed. We also have some exciting products in the market, for example, for Alzheimer's disease, that also is well-known on the market.
In the 2.25 mL, interesting in the 5.5 mL?
Yes, those would be launching soon.
Okay. I think we will have in Q1 2027, we will have the first launch in 5.5 mL. To answer your question, we are just in the mode of going commercial on the volumes, but we see a very strong inflow. When we are at the conferences, there is enormous interest. Pharma companies realize that their molecules, they have a much higher viscosity, and they are actually requiring larger volume, so we see a strong rise. This will have a positive impact in the midterm on our bottom line.
If I may add to that one, what we mentioned now already, that the 2.25 mL platform, that that was one of the main growth drivers. So for you, it is fair to assume if we say they grow faster, that this growth is already above the 17.5%, which is the average growth. So that gives you an idea about that large volume segment and the growth dynamics there.
Great. Thank you. Maybe just my last one is, overall on autoinjectors, can you quantify what that grew in the half year?
Yeah. We understand the question, but we do not declare a pure autoinjector growth rate. But what you can derive from us saying 1 mL and 2.25 mL is growing faster, that autoinjector growth was more than the 17.5%, and pens, therefore, was less. So you see, there is a different dynamic, but I also want to highlight, we feel in pens, and I mentioned it before a little bit when we talked about product mix, we feel also traction in our pen business, especially now also in the GLP-1 and incretin space.
We have dedicated solution in the space of GLP-1 with the YpsoDot and YpsoFlow. I think these are great devices that are actually built for GLP-1s, where we can achieve interesting margins because it's unique features that we don't see in the autoinjector. At the moment, as I mentioned, we are above 70% now on autoinjectors. It may increase a bit, but we also see somehow in this area until the end of the decade, because there will be a revival of pens to a certain extent.
Thank you, and congrats on the results.
Thank you.
Thank you too, Anna.
Thank you.
We'll now move to Urs from Research Partners. Please feel free to unmute your mic and ask your question, Urs.
Yes. Hello, Simon Michel, Samuel, and Sam. Congrats on the great achievements in delivery systems. Maybe first, just a thing to clarify in delivery systems. You said you saw growth also in the pen business in first half 2026/2027.
We said pens grew less than the overall growth. So that's for you to assume pens grew less than the 17.5% and auto-injectors grew more. We don't declare here the specific growth rate of those areas.
Yeah, that's fair. Then my other questions are around the others. Maybe first to the contract manufacturing to mylife Group that was CHF 20.7 million in the first half of this year. I remember numbers like CHF 50 million a year, so why is that low? Or is it now lower than the close to CHF 50 million? Then you said on that thing that you will do that till the end of the decade, so a little bit longer than you assumed before. Is that correct?
I'm taking the second one. Maybe you can take the first one.
Yes. It's right that we said roughly CHF 50 million per year, but you read correctly from the numbers. If only CHF 31 million was from others and there was still the contract manufacturing from the pen in it, you can assume that, yes, it was only a little more than CHF 20 million. For you, yes, the top line, we don't expect from this contract manufacturing for mylife, we don't expect now fully CHF 50 million this year, so rather think of it something between CHF 40 million and CHF 50 million. About the duration, I hand over to you, Simon, yeah?
I think this volume also shows that we, together with mylife Diabetes Care, we support also their transition. They have also selected the contract manufacturer outside of Ypsomed that is going to ramp up in 2027/2028, the first line. For us, it's important that we have a smooth transition. We don't want to stop immediately. So we may see the peak of CHF 50 million in the end of 2027/2028. We may not, but then it will definitely go down. Our interest is that we have a smooth decline then over the course of two to three years until latest 2030, because we need the room, we need the space for YpsoDose and other products. I mean, this is nicely managed.
We have a good relationship with the team over there, and we just try to reduce in order to keep the people, to use them for our to retrain them on our autoinjector lines in Schwerin II.
Mm-hmm. If I may add, I didn't want to give the impression that we now prolonged that. I wanted to say it was rather by end of the decade that will be phased out.
No, we have clearly an interest to move it out. It is important now. It's an important job we need to do. At the moment, they are almost our biggest client, we shouldn't forget. Obviously not from a bottom line perspective, but we want to do it professionally and as smooth as possible.
Yeah, thanks. On the EBIT, this CHF -2.55 million, you said we have to expect about the same minus in the second half. In this first half of the CHF -2.5 million, was there any impact from the needles business regarding this earn-out of CHF 2 million that you still have in your balance sheet? Is that still there, or did some charge come from that side?
I take that one. The earn-out is still on our balance sheet, so there was no, let's say, charge from that side. It was really just the remaining transactions from the pen needle business, which had a slightly negative impact still in the first half year. But the 2 million earn-out is still on our balance sheet.
As you said, in the second half, we have to take about the same amount of loss in this other segment on EBIT level?
That's fair to assume. I said a low single-digit million amount, so if you think about the range of the first half year, you're not completely wrong.
Then maybe again regarding to this earn-out from the needles business, that's in long-term non-current receivables booked. But I thought that should be paid in 2027, so why is it in long term?
Yeah, it's a good question. No, typically you have then a little bit time after the, let's say, this business year ends to first announce the numbers, whatever is relevant for that earn-out. Let's assume it's something like sales, and then you have a time to check that. You really when you have to pay it, you see now from the calculation that this still takes a little bit more time until we really receive the cash. But for you important, the cash would then come in the next business year, 2027/2028. The fact that it is still on our balance sheet tells you that, yes, we expect that earn-out to come.
Sorry, I believe we are at time, but we'll give you perhaps, Ed, another few minutes to ask your question. Ed, would you like to unmute your mic and ask a question?
Perfect. Can you hear me?
Yes, loud and clear, Ed. Please.
Great.
Very clear. Thank you very much. My first question would just be on today's guidance and maybe looking at next year. The midpoint implies roughly CHF 80 million of incremental delivery systems revenue, it was around CHF 100 million last year. I was just curious, maybe appreciate high level, and it's still early days, how we should expect that incremental revenue for next year. My second question would just be on lifecycle management, and again, qualitatively here, could you provide a flavor of some customers that either bringing new molecules or new markers to the market versus maybe existing IV formulations? I mean, is this a niche, or is there actually something that's quite a meaningful part of your business?
Then finally, just how you guys expect the cost of medical-grade plastics to evolve over time, but I assume resin costs have been impacted this year. Just to refresh our memories on how that is potentially passed through to customers. Thanks.
Should I start?
I start, with the first one, and then I hand over. You're right. If you take the midpoint of our annual guidance, you end up with incremental roughly CHF 80 million more. Yes, in the business year before, it was roughly CHF 100 million. Now, going forward, think of it when Simon Michel mentioned that we are more or less linear growing, you have that CAGR of 15% in mind. That tells you that the incremental revenue the next year will be slightly higher, because you start from a higher basis when you grow with that rate. That's the way of thinking of this incremental revenue growth.
On the lifecycle and the molecule side, I am personally aware of five cases out of the 30 where we have a move from IV to subQ. I am not sure what we can explain more. Can we give you some more flavor on the therapeutic areas or-
Existing and new therapeutic areas, I think that is fair to assume. Yes. I think you mentioned a few, neurology, very exciting, autoimmune disease. We see also some in oncology and infectious disease. I think those are very exciting new therapy areas and existing therapy areas where we keep winning new clinical projects.
Out of the 30 projects that we won, roughly 50% are new, I think a bit slightly more, about 50%, 16, 17 projects are new molecules, and in two new therapeutic areas in the space of neurology, for instance. It is basically broadening. The IV to subQ is one trend, but obviously, many formulation teams are trying to go directly into subQ nowadays. The third question on your medical grade, on the medical grade and food grade or even industrial grade level as we see it. I mentioned before, it is a program that runs all in all roughly three years. First of all, we have to test the respective plastics if they deliver the same results in our plastic molding tools, number 1. Number 2, we have to negotiate with the respective sources to get their dual source situation.
We have to test again, verify again, and then we have to convince, and we do it in parallel, our clients to actually move. I would say, my wish is to go end of decade, as I mentioned, 2029-ish, 100% of our clients, but there might be some stubborn ones, which we do not want because the effort, for instance, in a situation where we have a drug or a device which comes end of life cycle, it does not really make sense to push them for the last three, four years. Generally, we try to move them all, and this will give us a couple of EBIT percentage points that we are going to share, 3%, 4% that we are going to share with our clients.
These EBIT percentages will then counteract or counterwork with the potential lower pricing towards the end of the decade in order to land at the clearly above 30% EBIT margin level. Not sure if this helps.
That is very clear. Thanks very much, guys.
Great. Thank you, Ed. Thank you very much, everyone, for your interest and your continued trust in Ypsomed. With that, we will close the call. Thank you.
Thank you.