Perfect. Welcome, everyone, to day two of Morgan Stanley's Global Healthcare Conference. I am Kallum Titchmarsh. I run the life sciences team here at MS. Really pleased today to be joined by the team from Stevanato. We have Marco Dal Lago, CFO, and Lisa Miles, Chief Communications and Investor Relations Officer. Thank you both for being here.
Thanks for having us.
Just before we get started, for all disclosures relating to this discussion, please see morganstanley.com/researchdisclosures. Marco and Lisa, maybe just to set the stage, can we talk about how 2026 has evolved versus your original expectations? It feels like there has been quite a lot going on in the market throughout this year, perhaps versus where we were this time last year. Maybe just talk through that evolution for us.
2026 is in line with our expectations. We are growing quite significantly our BDS segment. We are growing double digit on a constant currency rate. We plan to move to the end of the year with a double-digit growth on a constant currency rate, 9% on a reported basis. On the engineering side, same way, we are in line with our expectation. The expectation are to decline our overall revenue with third parties in 2026, moving from EUR 138 million to a range between EUR 130 million- EUR 140 million. Today, engineering is representing approximately 11%-12% of our revenue. We are doing improvements in operations and reducing the risk in that type of the business. The core business is strong. We have very good visibility. Again, we are growing double digit, driven by demand, particularly in high-value products. We are growing significantly in high-value syringes.
Next, a configuration with high mechanical resistance are very suitable for the self-administration devices. We are growing in EZ-fill® cartridges. We see a good traction also in EZ-fill® vials that are growing more significantly than anticipated. Overall, the value solutions are gaining traction. We recently launched also the validation of our pen injector proprietary product, Alina®. It's a good omen also for the future to continue with this trajectory to further expand the value products. I didn't mention Alba®, but it's very important because despite is still not the most sold product, probably the best product we have in our portfolio, the most sophisticated one, and we can see very good growth also in Alba® syringes.
Okay, amazing. Anything to add there, Lisa, on the first half, or we covered it all?
Covered a lot.
Amazing. BDS is where at least we get most of our investor inbound, so it perhaps makes sense to start there. Performed well this year, on track to deliver that low double-digit organic growth in the segment throughout 2026. Could you maybe just unpack a little more the drivers behind the strong performance here? I would love to hear a little more on the demand trends you're seeing for syringes, cartridges, vials, et cetera.
Yes. As we were saying, the main driver of growth is in high-value products that are representing today between 46% and 47% in the first half of the year of our overall revenue, above 50% within the BDS segment. In the first half of the year, the main driver has been in syringes, in Nexa® syringes. We see very good demand also in the second part of the year. I mentioned before, we can see an acceleration in EZ-fill® vials, where today the market, there is low penetration in sterile configuration. It is below 5%, but we see very good demand in EZ-fill® cartridges. We are investing accordingly to expand our capacity. Anchored to a big customer that is shifting some container from bulk to sterile cartridges, but we see many other customer approaching us for our EZ-fill® cartridges.
We are full cover for 2027, and we are investing accordingly to expand our capacity. Beginning of 2027, we will be installing our RTU 400 machine for the sterilization of the cartridges. It is an opportunity for us to further expand capacity in high-value products with much higher price per unit compared with the bulk configuration.
Those high-value solutions, I think 46%, 47% of the portfolio, this year, revenue-wise at least. Where do you think that mix could ultimately go over the next few years, and which products do you think are likely to drive that next leg?
We expect to further increase the share of high-value products. In fact, if we look at the investment we have been doing since IPO, we are investing predominantly in high-value products in Piombino Dese, in Latina and Fishers. We are installing lot of capacity in prefilled syringes, Alba® syringes, and now more and more in EZ-fill® cartridges to expand our capacity in high-value products. That is matching exactly the customers demand and where market is going with respect of the growth in biologics. Our products are very, very suitable for the biologics needs, where we can see more aggressive drugs and where the need of more sophisticated products is present.
That is an important part of the gross margin story as well, shifting over to those high-value solutions. Maybe just talk us through the premium on the margins that they have versus the lower portfolio.
No, this is a very important point. So, beside the higher price per unit, high-value solutions are also more accretive compared with other containment and delivery solutions. We disclosed the range of gross profit margin for high-value products that is between 40%-70%. 70% is for some specific products, but all overall is well above 40%. On the other side, in other containment and delivery solution, typical the bulk configuration, the gross profit margin range is between 15%-35%. So, the mix shift is helping a lot to expand profitability. We are moving more and more of the mix to our high-value products, and we are expanding the margin consistently. This year, the plan is to expand 170 basis point adjusted EBITDA compared to 2025. 2025, we grew significantly compared to 2024. So, we are keeping on expanding profitability.
In the coming years, we can leverage together with the increase of high-value products mix, also the fact that we are ramping up Fishers and Latina that today are dilutive in term of gross profit margin because of the ramp-up and all the cost associated to the ramp-up. Installing line, validation with customer, and the startup of each line is obviously slower than when fully ramped up.
Yeah, we have had quite a few questions on that BDS gross margin this year being impacted by that initial ramp-up phase. How should we think about BDS margins over the next year? Can investors expect to see more significant margin expansion in 2027 as you start lapping some of those comps?
The way we see, let's say the medium-term scenario, we can leverage of further mix to our high-value product. The fact also leveraging the experience of Latina but also Fishers, we keep on improving the financial performances of the two new plants. This is one of the main driver to explain the margin expansion in 2026. If you think that in a Fishers, we are still close to zero gross profit margin compared with the target that is above 30% for those type of products mix, you can understand the room we have to further expand profitability with the operational performances that we will take full advantage when fully ramp up. About the full ramp up, is expected to be in 2028, but we can see steady improvement toward 2028.
Yeah, that makes sense. Back in June, you launched the Deora™ Pen. Maybe just talk us through the value proposition of that product. Talk a bit about the positioning as well relative to the current portfolio and which customers you'd be targeting with that.
Okay, sure. As we had been working on the Alina® Pen, which is the variable-dose pen, it became clearly apparent to us that there was a vast market need for a fixed-dose pen injector. Thus, we soft launched, in June, our Deora™ Fixed-Dose Pen. Particularly as it relates to customers' needs, they're looking for a pen that requires strict adherence to a dosing regimen, and thus the need for a fixed-dose pen such as Deora™. That's really kind of where we're going as we work in partnership with our customers, through the cycle of what types of products they may need to really address some of the biggest challenges that they have. Deora™ fits quite nicely into our proprietary product portfolio.
Alongside our Deora™ Fixed-Dose Pen, we have the Alina® variable-dose, which we just received regulatory approval on in several European countries for a liraglutide-based biosimilar. We also have our Aidaptus® Autoinjector. We anticipate regulatory approval for that either later this year or early next year. Lastly, we do have an on-body delivery system called Vertiva®.
Amazing. I want to spend some time on the fast growth markets, GLP-1s occupying a lot of airtime to here. Now about 22%-23% of company revenue. How are you thinking about that market evolving over the medium term? I guess talk to us about your competitive win rate within the GLP market as well.
Yeah, we won a fair share of business in GLP-1s, leveraging our long-term relationship with the originators. We need to mention the fact that we started working in GLP-1s more than 10 years ago for diabetes therapeutic needs. We keep on working on GLP-1. One of the advantages that we have the capacity, we created the capacity linked to their need. Also, we can offer flexibility in the type of format because we are in syringes, we are in cartridges, we can do dual-chamber syringes. For the future, we have many opportunities also in drug delivery systems for the biosimilars. So, it's an important area for us. It's a phenomenal drug in our opinion that we represent a durable tailwind for Stevanato in the years to come. About the share of revenue we are today, basically where we plan to be.
We expect similar share in the future on overall revenue. It means that we expect also other therapeutic areas will grow. Going back to GLP-1s, we are very positive because we expect market expansion driven by utilization in different therapeutic area, not only in diabetes and in obesity. We can see new assets coming into the market. In the coming years also biosimilar will represent an important market to leverage. So, all overall, we see durable growth in different type of formats. One of the question we receive very often is about the threat of oral administration. Based on the conversations we have with our customers and also talking with peers, market expert, we still have the view of a 30% penetration of oral and 70% in injectables in the years to come. We believe we are very well positioned to serve the market. I don't know if you?
I guess to complement what Marco said on GLP-1s. We are really in the early innings here of GLP-1s. As Marco noted, there are many drug assets that are in the pipeline and set to come to market in the next three to five years. Biosimilars will also be game changer overall. There has been so much focus on what is happening in the U.S. market and not a lot of focus with what is happening outside the U.S., which we think has certainly meaningful tailwinds to long-term growth, especially as we think about biosimilars in APAC. We have already been successful in winning some of those biosimilar pieces of work for EZ-fill® cartridges, as well as for the Alina® Pen Injector. We are very excited about GLP-1s and the long-term prospects of it.
When you peel back the revenue, I think this is something we mentioned on the last earnings call, about 1%-2% of that GLP-1 revenue is actually from outside the originators. We are obviously working on new projects for those customers that are bringing additional assets or biosimilars to market as well. I think that we have been very successful in winning our fair share and more. As Marco noted, we have a very long history in GLP-1s. Our first project dates back to 2010. I think that we have really become a trusted partner for blockbuster-type drugs because we are a reliable supplier and have been for many, many years.
One of the things we have been toying with is it seems as though there is going to be an acceleration of growth for GLP-1s next year versus the levels this year, at least in terms of the patients that are being treated. Why wouldn't that equate to an acceleration for GLP-1 growth for the packaging providers? I am just trying to reconcile those two data points.
There is early on. What we did see essentially last year was inventory management. Really stocking up on their inventories as they are working through some of these products. Now we are moving into normalization where we should see kind of those consistent products on a year in, year out with ongoing growth as they continue to grow globally.
That makes sense. Outside of the oral debate, we have also had questions on multi-dose pens. You obviously have good visibility into that, just given how broad spread you are across the packaging types. Talk us through your assumptions there and how do the economics change if a patient goes from single dose to multi-dose for Stevanato?
I think at the beginning, the market and administration was mainly in pen injector with syringes, single dose. We have a couple of multi-year agreement in place. We have another multi-year agreement in place for sterile cartridges. We see the market growing significantly in different formats. The future is, we do not see a reduction in autoinjector, in syringes. On the other side, we see for the future expansion, depending also on the geographical area in different formats. The good news for us is that we are market leader in bulk cartridges. We are the first mover, together with another player in sterile cartridges. We are very well positioned to accommodate the different market needs.
As we think about the guide in the back half of the year on the GLP-1 side, maybe just talk us through how much visibility you have on those orders and the typical kind of length the customers would want to order out for. Just some context there would be really helpful.
The answer is that we have multi-year agreement in place that is, let's say, beneficial both for the pharma company and for us. On the pharma company side, obviously, they want to secure the capacity and the, let's say, route to market in a component that is mission-critical for them, because obviously they need a good container to go to the market. At the same time, they want to secure the capacity for the launch of the product in the following quarters and months. It is a mission-critical component for them, relatively low cost compared to the overall cost of treatment. I do not want to appear arrogant, but we are one of the best player to accommodate their needs in internal capacity and also flexibility in moving to one format to the other.
If they have problem with formulation, we can offer the dual chamber, then they can switch to normal syringes or cartridges. We have many solutions to offer to these customers. Today, we are working, as Lisa was saying, predominantly with the originators. But we see more and more drugs coming into the market, plus the biosimilars is something that we expect for the future. Typically, biosimilars are selecting the same containment solution than the originator to accelerate the go to market. This is the way we are covering the market for the future in order to take advantage of the different opportunities.
Yeah, I was going to ask on that. I am curious, Lisa, to your comments just on that new emerging GLP-1 demand pool you are seeing from biosimilars and generics. How big do you think that could be with time? Obviously, not expecting numbers here, but just a rough direction of travel versus perhaps the more established drugs that are out there.
I think as Marco rightfully put it, I think we view it as a sustainable, durable tailwind, certainly in the midterm years to come, but probably beyond there. There is really only a small percentage of the population that is currently taking a GLP-1 today. Also, as we think about the broader indications of where this is likely going to go, it really just points to the direction of really ongoing expansion in the next five, 10, 12, 15 years.
Yeah. Just outside of GLP-1s, biologics more broadly have been a really important growth driver. Q2 biologics growth accelerated to roughly 30%, I believe, now 42% of the total revenue base. Can you just talk about your biologic's exposure beyond GLP-1s, like which categories you are seeing the most momentum in?
Yes. Biologics is a very important element, obviously, of the growth story. While in the near term, the growth has really been centered around GLP-1s, which is part of the biologics bucket. One of the statistics that I find extremely interesting was in 2025, we had a 40% increase in new customer projects in biologics in just our prefillable syringes for Alba® and Nexa®. Those new projects, small but strategic, will serve as the seeds for future growth for us. That's how we kind of see it, right? Right now, we're seeing a big amount of growth coming from GLP-1s. The next leg of the stool we see from other future biologics coming to market.
In terms of what we're seeing, obviously, a lot of approvals for mAbs, monoclonal antibodies, where we have a great solution both in the Nexa® platform that we have, as well as for a higher-end platform such as Alba® for those very, I would say, modern formulations that are highly aggressive, and Alba® platform is quite ideal. As it relates to ADCs, as an example, we have a number of projects underway for specially coated vials, and we see that as an important growth driver in the future. Obviously, I would be remiss without mentioning mRNA applications as well.
Indeed. That's positive recent news we'll take.
Absolutely.
Shifting maybe on to the engineering segment for a bit. It's been still under pressure from softness in glass conversion and pharma visual inspection. Seems as though there's still that slower conversion of new orders there. Can you just elaborate on some of that softness you're seeing? Do you think that's temporary speed bumps or is there perhaps something more structural at play?
Yeah, in engineering, we did good progresses with respect of organization, industrial footprint. We are focusing now the Danish company to assembly and packaging line for devices predominantly. While in Italy, we are working in the important part that is the, let's say, the inter-segment glass forming and sterilization lines. The RTU lines for cartridge, for example, has been fully designed by our engineering department. We are also the center of excellence for the visual inspection machines in Italy. So, beside the strategic importance that we have for the glass technology to enhance the quality of our products while reducing cost and increasing flexibility.
We see very important also the assembly and packaging, where we have relevant synergies, for example, for the drug delivery system value proposition, and the same for visual inspection machines, where we can enter in intimacy with the operation of our customer in the pharma industry. How we see the market? We see the market, we see good demand both in assembly and packaging and visual inspection. In assembly and packaging, driven by self-administration predominantly, and the visual inspection driven by the fact that the inspection is becoming more and more important, obviously, to avoid contamination and detect the defect in time while avoiding false scrap and all that. So, we have much appreciated technology from our customers. We see the market growing the medium-term from mid-single digit to high single- digit, and we expect similar growth for our business. We are still doing progress in improving the financial performances.
Our first goal is to go back rapidly to our historical performances with 20%, 21% gross profit margin. We are still below that, but we are improving significantly compared to last year. We anticipate this year revenue range around EUR 135 million at the center point of our guidance. So below last year, but we expect higher profitability compared to last year.
Just in the backlog that you see today, do you think that could be indicative of perhaps some revenue growth for next year for the engineering segment, or is it too early to call?
It's a little bit early to give you numbers about 2027. It's a project business, so you need to build the backlog for the future quarters. With respect of that, we see some good signals in term of orders and negotiation in place and pipeline, but it's a little bit early to talk about 2027.
Then maybe we can just hit on some of the margin pressures that the engineering business has had from some of those lower legacy projects in Denmark.
Yeah.
Maybe just talk us through the potential ramp-up back there to the kind of low 20% that I think you've spoken to.
Yeah, you are right. One of the reason why we faced the problem last year and the year before is also driven by very complex projects we took in Denmark. We are now much more focused on our technology that is very good in assembly and packaging for drug delivery systems. The mix of backlog is improving significantly because we completed these very complex contracts. This now the time to restart growing and expand our profitability to get at least to our historical profitability. I think we reduce significantly the risk here in engineering, focusing on our core technology, fixing the operation, lowering the fixed cost and the break-even point. Also, today, engineering third parties is representing approximately 11%, 12% of the overall revenue, where the key focus is in the BDS segment and in expanding high-value solutions.
Yeah, maybe talk through the relationship between the engineering segment and BDS, because I think that is sometimes missed when we think about the strategic value of that engineering segment.
Yes, this is a very important point. I can make many examples. If we have the ability today to be the number two in syringes with Nexa® and Alba®, it is also due to the ability of our engineering department to basically design and do the process. We have the technology within the engineering division. It is very important, the learning loop we have between the two divisions, with the two teams working together to improve the products, enhance the quality, launch on the market new products. Another example is Alba®. Another example can be the EZ-fill® vials in the configuration. I mentioned before the RTU cartridges that we manage the process in [uncertain] .
The growth of high-value products is also driven by our ability to manage the technology and keep on improving the quality of our products. This is the core, the key competitive advantage that is giving engineering to Stevanato Group.
Just to complement what Marco said, I just want to underline the fact the importance of owning and controlling the manufacturing technology that is powering the product set within the BDS segment, so our vials, cartridges, and syringes. A proof point would be we have a very high amount of demand for cartridges through to today, and we are fully booked through 2027 on cartridge capacity. However, we were able to, based on our internal expertise, take a ready-to-use vial that had been essentially sitting somewhat idle and transformed that into a ready-to-use cartridge line in the period of roughly 12 months.
Adding additional cartridge capability and capacity at a time where it is very meaningful for us and our customers, I think it really speaks to the ability and the flexibility, agility that we have by owning and controlling that technology through engineering, that is really helping to drive some of that growth within the BDS segment.
An important topic, and I would say theme more broadly, is reshoring across the space. Across those two businesses, maybe just talk through how you would expect reshoring to perhaps benefit both, if that is your assumption, because I think the question we have had is, are you getting incremental volumes if you are just replacing production from one region to another? I am curious whether you guys have a view on that.
Well, with respect of the core business in BDS, we decided to invest in U.S. in 2021. During the IPO process, we decided to further expand our capacity in 2022, almost doubling the size of the originally planned size of Fishers. It is something that is going to the direction more of the customer proximity and the importance of U.S. market for us in terms of biologics, sophisticated containers, and so on. There is more strategic approach on the decision to invest in the U.S. Nevertheless, it is becoming even more important due to what you said, the tariffs, the reshoring, this type of trend that we can see, and we can take advantage of.
Yeah.
The main driver for us has been the proximity to the U.S. market. On the engineering side, we still have not seen a big acceleration in the investment for machines. It is probably related to the time schedule of the investment. They start from buildings, infrastructure. We are reinforcing our presence in the U.S. also from the engineering point of view, especially in the commercial department, but also in the after-sales presence. We have not experienced yet a strong acceleration in U.S. But it is something we are monitoring, and we believe it is coming in the coming years.
Very clear. I want to quickly just hit on the Fishers investments and Latina as well. Can you just update us on some of the manufacturing lines you've added, and then any data on utilization relative to the longer-term goals that you have?
Okay. I start with Latina, that is less complex. We are talking about a brownfield smaller than Fishers, and where, in the first step, we installed basically all Nexa® syringes lines. We have completed the installations, and we have almost completed the ramp-up. We are very happy about the speed of ramp-up in Latina. The profitability keeps on improving every quarter, and we are extremely happy about the success of the initiative. Fishers is more [uncertain]. The next step will be the installation of the cartridges, ready-to-fill lines, where we have a long-term contract with an important customer. We are installing the first line beginning of 2027, and more lines in the coming years so that it satisfy the customer's demand. About Fishers, it's a bigger plant. We started from greenfield.
It's a 600,000 sq ft building, where we have installed already capacity for ready-to-fill syringes, similarly to Latina. We are currently starting the production for our CMO in drug delivery system. We took a CMO contract with an important customer in U.S. to leverage the integration with the syringes, but also to accelerate the learning curve in the device business. We are installing Alba® technology in Fishers, and we have a ready-to-be-tested line for EZ-fill® vials. We are investing predominantly in high-value products, where Fishers is planned to be the hub for North America, where we will have many different type of products, not only Nexa® syringes, but also Alba®, also vials, and also drug delivery system. It's a more complex project. We anticipate the full ramp-up of the plan by 2028, toward the second half of 2028. The first year fully ramped up will be 2029.
Amazing. Marco, Lisa, thank you so much.
Thanks for having us.
Thank you.