Sartorius AG

Thank you very much and welcome everybody to our conference call today on the preliminary numbers for fiscal 2021 for both the Sartorius Group as well as for Sartorius Stedim Biotech. As always I will run this call together with our CFO, Rainer Lehmann, who will walk you through the details of our financial results in a minute.

Before that, I would like to start off by talking a little bit about maybe the highlights and the most important results of last year. I think it's fair to say that 2021 has been an outstanding year for both divisions, very strong growth rates that we have achieved in both divisions, both topline as well as bottom line.

We also were able to further strengthen the portfolio of both divisions through acquisitions, acquisitions that have been very large but very relevant and innovative for certain applications that our customers, that are also addressing new forms of therapies, new modalities for such therapeutical areas. We also made significant progress in regards to our number of capacity expansion initiatives across the world actually, also here is some more information later on.

We are giving a forecast for 2022 that is first of all, leading to a significant double-digit growth rate, of course, a lower growth rate than the one that we have achieved in 2021 for very obvious reasons. We are also guiding a profitability on the same high level that we have achieved for 2021, more details later.

We, as we talked about in the course of last year, we also looked into our guidance for the year 2025 and here we are confirming our revenue targets that we have substantially upgraded, just a year ago and we are now raising the profitability targets for both divisions and the Group. And we would also like to report on the ambitious targets that we have set for a continuous reduction of our CO2 emission intensity for the years to come through 2030 and we will have a chart that provides quite some details on that later in the presentation as well.

And with that, I would like to hand over to Rainer.

Thank you Joachim and also welcome everybody to today's call. So if we have to look at some key figures, overall, you can say very successful year.

Revenues rose by almost 50% to €3.45 billion. Actually only a small portion, roughly around five percentage points we attributed to mergers and acquisitions and the COVID related growth we amounts to roughly 16 percentage points.

So basically, leaving us with a very solid base growth for the overall group and we'll dig later into the different divisions as usual. Order intake rose by 52% to €4.27 billion, here actually COVID related increased around 13 percentage points for the order intake.

I would like to bring your attention, a little bit due to the volatile - also talk a little bit about the quarterly development on it because I think it's important not just to look at the year-end figure, which of course, as I always pointed out in the last calls, we still have a significant spread between order intake and sales revenue as of year-end cumulated around €800 million. But if you look at the quarterly development of that book-to-bill ratio, we clearly see that we had quite an increase of debt ratio is quite a strong, stronger order intake than revenue in the first three quarters and the fourth quarter, we dropped down to really normalized levels.

It's also important laid on to keep in mind when you are in talks about the guidance. So it's really a high volatility that we see by the behavior of our customers in and when they place orders.

Coming to the EBITDA, increase on 4.5 percentage points to 34.1% in absolute values, €1.17 billion, great result. What is the, the main drivers are here of course, economies of scale.

We mentioned that beforehand, once attributed to really a deferred cost development, especially in the first third quarters we are not increasing our cost base as we normally would have thought during a normal year. We see actually a pickup in Q4.

That's why you also see on a quarterly basis that our EBITDA margin did not continue to increase. In addition, we also want to point out that actually the acquisitions are also contributing a little bit in our accretive in 2021.

If we look at the regional split of the revenue and we have on the left hand side of the Americas here, very solid performance of our Bioprocess Solutions Division and LPS here was a dynamic growth as well. I have to say bioanalytics, of course here leading on the LPS side as well.

The growth, we're very happy with that segment and the growth rates and profitability, we will talk about later on when we look into the LPS. In EMEA, we see the growth rate of around 51% to €1.4 billion.

Here we have to say with the split BPS really with significant demand from the vaccine manufacturer. So, roughly half of the percentage points of the 50% are related really to the demand of vaccine manufacturers, but also on the LPS side considerable growth in that area.

In Asia Pacific we also grew over 50%, to be specific €52.3 to €897 million. In this case BPS solid performance as in the previous quarters and LPS, we also see a strong recovery compared to a soft prior-year.

Keep in mind that in 2020, this region was hit the hardest, driver affected by the shutdowns and we even had very low negative growth rates there. If you look on the right hand side to the donut chart, there is really no major movement in our retail distribution, EMEA still biggest regions with 41%, Americas 33% and Asia-Pacific was 26%.

For now looking on the BPS side, order intake fantastic development in constant currencies growth by 57.5% to €3.5 billion. Here, we have roughly seven percentage points included from M&A and 15 percentage points from Corona, at least are still with a very high base growth and here to be honest we also still have to factor in that there is this changed ordering pattern where we see customers placing orders for future periods, which is hard to grasp and attribute is it now related to the COVID figures are not so there for the base number, very strong, but we all know that the market growth rates are not as strong in that particular area.

Our sales revenues rose to €2.7 billion, almost 55%, COVID attributed here 20 percentage points, and the new acquisition, contributed around 5 percentage points. So very strong performance that also is then reflected in the substantial increase of our EBITDA margin from 32.3% to 36.2 percentage points, so an increase of 71% to almost a billion, to a €986 million.

Here driver, again as I mentioned on the group level economies of scale, but also keep in mind the deferred cost development that really only fully hit the P&L in the fourth quarter. Again here, the acquisitions that we did, for example, life, Danaher that we purchased 2020 as well as other acquisitions are accretive to the overall margin.

When we have a look at the LPS, also very successful year. Let's start on the left hand side with the order intake grew by 32.5% to €785 million and it's really nice performance by BioA portfolio which is very well performing in the Americas.

Sales revenue increased by 32% to €722 million, M&A playing here role of six percentage points and COVID also having in minor effect of six percentage points in this division. The jump in the profitability from 21% to now in 2021 to 26.1%.

Great achievement, of course here we also see not only the economies of scale and the partially deferred cost development is of course is applicable for both divisions, but also the development of the BioA product portfolio that contributed to this development. All right, I'll look at some of the financial key figures, the underlying EBITDA I just mentioned, its growth by 70% to €1.17 billion extraordinary items actually went down slightly mainly as always included or influence by a mergers and acquisitions and certain corporate projects that have one-time effect.

And I want to comment a little bit on the financial result because this one sticks out although below of our EBITDA as our key performance indicator and it's really comprised of evaluation in conjunction with the earn-out liability from the acquisition from BIA Separations. So that one amounted to €208 million, let's keep in mind though, this is a non-cash item and it's also not relevant for tax.

So this is really just evaluation entry that, of course as we have to earn out and we see that it's influenced not only by the increase in share price but also by good business performance from the BIA separation folks in 2021. Underlying net profit increased by almost 85% to €553 million and our reported net profit for the year increased by 52% to €319 million.

The strong EBITDA of course contribute also to strong operating cash flow, we're able to increase it by almost 70% to €866 million. The investing cash flow is not only comprised by CapEx, which is roughly around almost €400 million but of course also by the two acquisition CellGenix and Xell and the CapEx ratio, we basically got it there 12% came in at the end of the day at 11.8%.

If you look back, actually over the last three years, investments, you can almost say that we invested almost €1 billion over the last three years into the business and specifically there mainly into production capacities. In the next slide, we'll have a quick look at some balance sheet figures equity ratio, pretty much on last year's level.

All those strong profitability, of course in absolute values or equity increased by €360 million, but by the increase of our CapEx, as well as our working capital, mainly the inventory and the accounts receivable side and a little bit of the goodwill, we increased our balance sheet some by €1.2 billion. So therefore, the ratio pretty much stays the same, of course, it strengthens our financial position nevertheless, Net debt, we're able to decrease it by roughly $150 million to €1.7 billion and you see on the right hand side, the development of the indebtedness key figure net debt divided by underlying EBITDA where we see over the last quarters eight quarters, a nice, let's say, reduction of the key figure at year-end of 2021 amounted to €1.5 and we're very happy with that because it allows, of course give us enough firepower for future acquisitions that as, still part and are going to be part of the roadmap going forward.

And with that actually, I'm going to hand over back to Joachim.

Thank you very much Rainer. Before I talk about the CO2 target that are already announced that I would talk about, I would like to briefly refer to an acquisition that we have announced shortly before Christmas and closed beginning of January, we acquired automated lab solutions, a business that is located in Jena, in Germany.

It is adding to our bioanalytics portfolio in the LPS division. It's a rather small company still but fast growing and highly profitable, it has achieved a high single-digit a million euro revenue last year and significant double-digit EBITDA margin.

Employees are just around 30 people, who has, as I said some product development, as well as manufacturing capacities in the product is a very interesting one, differentiating one if for automated analysis selection isolation of cells, so addressing as I said earlier, innovative areas for our customers in the fields of cell therapies for example gene therapies and some others, it adds nicely and complementary to our existing portfolio in bioanalytics, helps our customers to accelerate their development processes, particularly. We acquired 62.5% of the company for €24 million.

The remaining shares we will acquire in four years from now in 2026. Now I would like to talk about our climate targets, we have defined therefore a performance indicator, which is the CO2 emission intensity.

CO2 here, of course stands for all greenhouse gas emissions. So we are talking about CO2 equivalent emissions and the emission intensity is the emission or the emissions in proportion in relation to sales.

For the reference year which is 2019 because for that year, we had all the necessary data available in the best manner, this number is 250 gram per euros. So 450,000 tons related to €1.8 billion of sales revenue.

We have set the target to reduce these emissions by 10% every year. This may not sound a lot, but it will lead to a reduction of our CO2 emission intensity by almost half to until the year 2025 and by almost 70% until the year 2030.

We have defined the intensity and not an absolute number here because of our very significant growth that we are intending to achieve also going forward, we have achieved more than 15% average growth rate for the last 10 years and our plans for the path forward. So therefore an absolute reduction would not be possible regarding the gross emissions and we are talking about gross emissions here by intention.

We are not excluding further measures in the future to also reduce the net reductions beyond what we are planning to achieve for the gross reductions, but as in any other area where it is about waste or any resource consumption, I think it's always important to first reduce and minimize the gross footprint before you think about compensation measures. Of course this, by the way I maybe should also say that this number compares to other such numbers in a way that it is more ambitious, it's more ambitious than the "Fit for 55" program by the EU.

It's more ambitious than the science based targets and also more ambitious than the number that we know from customers and suppliers. Of course, sometimes we are talking about absolute reduction targets that have been, defined and we have translated them into approximate intensity reduction target as you can see there on the right hand side.

So an ambitious target that of course can only be achieved at a certain cost. We are projecting those measures to cost around one percentage point of sales revenue going forward for the year 2025.

We rather anticipate 0.5 percentage point. We mentioned that on the two charts later in the presentation where we talk about our forecast for '22 and our ambition for 2025 again.

So first of all, 2022, we are shooting for 14% to 18% growth in sales revenue in constant currency. This should include one percentage points of non-organic growth related to the acquisitions that have been mentioned.

So the two that we have closed in 2021, CellGenix and Xell, as well as the one of ALS that has closed at the beginning of this year. Of course, it doesn't include any possible further acquisitions as always.

In such case we would update our guidance. For the BPS division, we are planning for 16% to 20% top line growth and for the lab division 6% to 10%, of course both growth numbers are well below the very high growth numbers that we have achieved for 2021 but they are based on the assumptions that we will not see any growth of the pandemic related business.

We are planning for the same level of such business at around €500 million in total. So in other words, we are talking about a portion of our business that we expect to not grow that means that the, let's call it the base business, we expect to grow a bit higher than the number that you can see here, and we also believe that the ordering pattern of our customers that has also influenced the development of our base business to some extent will normalize one way or the other, I'm saying one way or the other, which means we don't believe that this necessarily will be a very straight line.

But it's really difficult if not impossible to make any meaningful projection, how this exactly will look like quarter by quarter or so, but we believe that this will rather be the case in the full year's perspective. As said, the margin that we are projecting here includes 0.5 percentage point of additional cost, 0.5 percentage point of sales as additional costs and we are planning to achieve 34% for the group, 36% for BPS and 26% for LPS.

So in other words, the same significantly higher level for both divisions and the Group higher level in comparison to what we are starting off into back to into 2021. The reason here is that we are not planning for a further increase of margins is besides the additional spending for CO2 emission intensity reduction measures that we have added significant personnel we always were talking about that during last year that significant hirings in non-manufacturing functions like sales and marketing, product development and some others largely only started after the last phase of lockdowns and there is very much in the second half of the year even accelerated in Q4 in comparison to Q3.

Therefore, we will see the full year's effect of such cost development only in 2022. So how we would look on that is that we see a continues effectiveness of our business model and it's economies of scale and the deviation from that is that there is an additional profitability kicker in 2021 because of this deferred cost development.

So I wouldn't consider 2022 to somehow represent a dip. The opposite is that we saw an additional peak in 2021.

CapEx, we are planning to be 14%, which should translate into a number somewhere around €550 million, maybe slightly above. So another year of very significant investments into additional manufacturing capacities across the globe in also different product segments.

As you can imagine, given the strong growth, we had to pull forward, a number of capacity expansions we largely expand existing facilities, be it in Yauco, North America, be it in Germany at diverse locations, or be it in France or also in China for example, in Korea, we are planning to start as a significant investment as well as we see the market and also our market position there evolving very, very positively. Now I would like to shift the perspective towards the year 2025.

I said at the beginning, that we are not changing our topline guidance here. We keep that at €5 billion, quite some of you have asked for our perspective on that in the course of last year and we said, well, yes, we believe that we have to have an eye on the profitability target, but we believe that for 2025 it's not meaningful at this point in time to plan for any pandemic related business and we stick to this perspective.

This is an assumption, not necessarily a prediction but we simply believe it's too early to make any quantitative prediction regarding Corona related, pandemic related business in the year 2025. I think as of now, maybe, I one would say, well, yes, more likely than not there will be a smaller number of Corona vaccine doses being produced and applied in the year 2025 plus there will be maybe to some extent vaccines available for both the ordinary flu and Corona so that the net effect of such business will be even lower.

So, but because of the difficulty or the possibility to quantify that at this point we are basing our 2025 projection on the assumption that there will be no such business. So, and that means the best comparison to this goal for 2025 is the year 2019, the last year, before the pandemic and as you can see from this chart that means that we are actually planning for a combined annual growth rate from '19 to '25 of 18% on average so and very obviously our growth excluding corona therefore has been 27% for the two years on average for the two years from '19 to '21.

And this in our view is above the fundamental market growth partially driven by effects that we have mentioned today but also mentioned throughout last year already that we see kind of like second level of second round effects from the different ordering behavior of customers that we don't think should be the basis of future projections. So, and what we therefore are planning for is a compound annual growth rate from '21 to '25 of 14% which is pretty much the number that we have been growing at for the last, as I said before, 10 years, probably so that is the logic of our top line target setting for 2025 and on the last chart for our presentation on the Sartorius Group, you therefore can see that we stick to the target of €3.8 billion for sales of the BPS division €1.2 billion for LPS in total, the €5 billion I was talking about, but for the margin we are now projecting 36% for BPS and 28% for LPS.

That's an increase by 2% or respectively three percentage points. And for the group, or 34% which is a shift by 2 percentage points upwards.

As mentioned before, for the year 2025, we are expecting the additional expenses for reduction measures regarding greenhouse gas emissions, to be around 1% of sales. This is included here and we still expect as before some dilution rather to play a role from further acquisitions going forward.

Of course, that can be different as it has been for most of the more recent acquisitions like the businesses that we have acquired from Danaher and others that we have mentioned here today already, but our assumption for our 2025 profitability target is that there will be rather a dilution for maybe two years or something after acquisition until those businesses perform on the same level as the group does today or the respective division does today, and that's how we are setting up this project. So, I would now like to leave our presentation on the Sartorius Group and briefly talk about Sartorius Stedim Biotech.

I would like to do this as usually in quite a lean way because most of the numbers are very close to those that Rainer was talking about for the BPS division and even some financial key figures are very similar except for a few that I will talk about in the second. So sales revenue growth 15 2.5% for SSB order intake growth even three percentage points higher, 70% increase of our EBITDA which has reached 35.8% and came in at a bit more than €1 billion, underlying earnings per share up to €7.46, it's an increase by 79%, the pandemic related effect you see in the two bullet points below for, sales revenue 18%, and 4 for M&A, for order intake 13 and respectively 7 percentage points, we indeed have seen for this business very much the effect that Rainer was elaborating on that the orders were particularly high around the mid of the year, we have seen this increase kicking in towards the end of the year and acceleratingly kicking in towards the end of the year of 2020, peaking around mid of 2021, normalizing towards the end of 2021, and that leads us to confirming what we were talking about for many quarters now, when we were very much elaborating on an always insisting on the different ordering pattern of our customers that this has played a role and that as to be expected that there will be a phase of normalizing or one could say a time of a phase out of this behavior.

The very significant increase of the EBITDA margin is obvious and has been seen, has to do with economies of scale and deferred cost development as talked about. The geographical pattern of our growth is quite similar to what Rainer has presented for the group.

So I don't think that I should again talk about that very lengthy, the strong operating cash flow has led to also a strong result regarding our indebtedness ratio etcetera, which I will show in a second. You can see here, the underlying EBITDA, the not very higher extraordinary items financial result Rainer made a comment on therefore strong operating cash flow, investing cash flow includes the two divisions that have been mentioned and the significant investments and the CapEx ratio came in at where we basically projected it to come in.

Financial indicators remain on a very solid level. These numbers of course look a little bit different than for the group, particularly the net debt to underlying EBITDA ratio is in a very low level at 0.4 as projected.

Guidance for 2022 is 14% to 18% for Sartorius Stedim Biotech. This number should include one percentage point of growth by the acquisitions of CellGenix and Xell and the underlying EBITDA margin we project, I mean, above 35%.

So also here all the comments that I've made before are relevant both regarding CO2 emission intensity reduction measures, and there is related costs, as well as the aspect of the deferred cost development and also I would like to highlight that the around €500 million of Corona related business, we expect to remain on that level. So therefore as rather a even though it sounds strange maybe or counterintuitive, but this we expect to dilute growth in the year 2022.

CapEx ratio expectation 14.5% and the further reduction of our indebtedness ratio. For 2025 I don't want to show with the same chart again.

Regarding the mechanics that we don't anticipate as of today, any Corona related business to play a role in 2025. But of course the conclusion is the same that we don't change the sales revenue target for SSB, I will leave it at €4 billion and we are also projecting therefore very much in sync with what we have talked about before and an EBITDA margin of above 35% which is an increase in comparison to the previous guidance by two percentage points.

And again, I would like to remind you of the second bullet point here. This includes already one percentage of additional expenses related to the reduction of our CO2 emission intensity in the year 2025.

And with that, I would like to finish our presentation and we are looking forward to your questions. Thanks for listening.

Hello, this is Petrina Carcota from UBS. Two questions from my side, please.

So first one, if we strip out COVID from 2021 and 2022, the underlying growth in the guidance is around the 16% to 21%, and if we strip it out from 2021 in the CAGR 2025 is 14%, so where is that sales coming from between the growth near-term versus the long-term? And my second one at the order intake.

So as you said, the steeper step down in Q4 and you mentioned, this is due to normalizing order patterns. Could you provide additional color regarding what you see for the next quarters?

Do you expect customers to place orders to par list out and is there a risk of inventory work-down? Thank you so much.

Yes. Thank you very much for these two questions, I guess they are quite related to each other, because they are addressing the same topic, which is what like to describe a bit labelled by different ordering pattern that we have seen in partly already in 2020 and quite to some extent in the year 2021, and that both leads to these different growth expectations or a growth expectation that is lower than the most recent growth.

And then of course the more near term question is the one that you have then phrased by saying, okay, how could that look like by quarter. So, as said before means we started to talk about that in the course of 2020 that we said when we define our Corona related business, then we really said okay what part of our business is with the developers and manufacturers of Corona vaccines or therapeutics or tests and test kits, so that is how we have defined that, that is what our numbers tell you.

But then there are effects that are related very much to the longer lead times that we have seen in the market. We actually believe we have performed quite well.

We have got very positive feedback by customers that we were rather doing very well in the competitive landscape regarding keeping our lead times half ways under control, by when I say half way under control, that means they are still and have been throughout the last couple of months longer than they usually are and such a situation of course triggers, then a different ordering patterns and even emphasizes and amplifies a certain risk averse behavior of customers who said well let's rather make sure that we have higher stock levels probably than we had before and that may even mean across the different levels on their stock. So even finished goods maybe or a goods that they purchase from us, be it be fullest, be it backs and whatsoever.

So therefore, we believe that the growth rate that we have shown to you also have the growth rate 27% on average from 2019 to 2021 doesn't represent the fundamental underlying market growth. Now, how much of this temporary effect which is basically a pull forward effect did we see?

That is quite frankly, hard to say. Maybe five percentage points, something like that, which would total to something like 10% of business in total, because 5% per year roughly sums up to something like 10% in total.

So, but those 10% roughly have to be somehow like transpire out at some point along the basically the time for a longer time horizon, and that is what we are anticipating. But it's really difficult to say to what extent that will play a role within the next quarters.

This has to do also with the overall supply chain situation even outside maybe our sector, because I mean you can see this all over the place that people are behaving a bit more cautiously even though maybe the stress isn't so, you know, like narrow but they see difficult and strained supply chains in other sectors. So, and that is what we see, we simply would say 27% is not the underlying market growth, and that's why we believe it wouldn't be the right yardstick for any assumption going forward, but rather the opposite, one would have to deduct a certain number that has to be somehow got out of the system, most likely at some point in time.

So, that's all. But having said that, what is really important to me, in our sector, my observation, at least we luckily have predominantly long term oriented investors and whenever you are long term oriented, I can only advise you not to put too much emphasis on such a short-term - relatively short-term effect.

We have seen that for completely different reasons before. I mean now it sounds like an old anecdote, about 15 years ago, we have seen after a phase of high investments into capacities for monoclonal antibody manufacturing and then there was a very, very poor year in between because everybody realized that there was too much manufacturing capacity, but in the long run this didn't play any role at all.

So what we try to do here is quite frankly manage short-term expectation a little bit on the best level that we can, but we cannot give, nobody can, give you more color regarding the different quarters, even though our customers can't give this to us. So therefore we can't share anything with you, beyond this.

Manage those short-term expectations but I strongly would emphasize at the same time, we have fully intact very positive fundamentals in this market for many reasons.

Thanks very much for taking my questions. So first question is on acquisition intensity.

So just thinking about relatively limited acquisitions as you stated in '22 and probably - sorry, '21 and '20. So how should we think about that for '22 and the next few years?

Are you still anticipating M&A generating about 20% of the growth on your mid-terms? And second question, just on the COVID revenues, so beyond '22.

I know you've said nothing in the guidance for '25, but should we anticipate '23 being a phase towards nothing in '25 or a steep drop down in '23. Any color, any thoughts you can give at the moment would be useful.

And then if I could as well just back on the order book normalization. So, should we anticipate, I think you said the order book is at a more normal level for Q4.

So is that the sort of order book level we should think for the rest of - for the quarter is going through '22 and then just on the timing of delivery of the order book, is it still, you talked about longer lead times. But we still are facing sort of the majority, sort of three quarters being consumable and being delivered in say the first half of the year in terms of the order book at the end of the year of '21, first half of '22 being delivered or should we think about it being delivered a bit longer than that?

So thanks very much.

Yes, quite a number of questions. So on the acquisition intensity as you call that, well, I would say, we did quite a number of acquisitions, but I would agree those that we have closed in choose that we have agreed upon in 2020 and '21.

There have been rather small ones as the closing of the acquisition of the businesses from Danaher has also been taking place in 2020 and hasn't been that small, so it's a little bit on the perspective, but it's correct that we are also planning for further acquisitions. We think that maybe the proportional relevance of acquisitions could be a little bit larger in LPS than in BPS and I think you can read that also from the numbers that this is the current projection, but of course with M&A, it's always difficult to make such projections.

This could then also be a little bit different and then may lead to of course maybe some updates regarding the outlook on the top line, but that is the basis of how we are setting up this projection, but definitely we believe to continue making acquisitions going forward. Yes, COVID-related business in 2023, honestly, too early to make any quantitative comment.

It's not very likely that there is a sharp cliff like business as we project today in 2022 and then no business in 2023. So I would rather expect that to be a more transient, a transient effect and trend.

But bear with us, give us a little bit - a few more quarters until we can talk about that in a more educated manner. On your question regarding order book, maybe just for - to making sure that we are talking about the same numbers.

Rainer and I were talking about the order intake. And then you, of course, can also translate that into a book-to-bill ratio, if you will.

And the order intake was normalizing very much in - and particularly Q4 has shown that. And by the way, not - that wasn't a surprise.

Yes, maybe that would be anyhow one headline for what we are talking about here. No surprise.

Even - I mean, maybe that sounds a little bit odd in the face of so many volatilities here, but we were talking about that throughout last year. That we said we do see this a different ordering pattern, and this will change again.

That we have seen, so no surprise at all. So - but of course, we still have an accumulated order book that is higher than it has been before.

So if you look on the book-to-bill ratio, not on a quarterly basis but on an annual basis, then our book-to-bill ratio is significantly higher for 2021 than it has been for the years before the pandemic. So therefore, we are starting with quite a healthy order book into the year 2022.

But again, now it depends on how this exactly will materialize, what we are expecting to happen at some point. And that is, again, that customers will normalize also their stock level management, for instance.

And then we might see even quarters with what could be perceived by some people as relatively soft order intake. But that is incorporated in our projection to some extent.

So that is what is important for me to say here. We are expecting this normalization and that includes that in comparison to this very high order intake that we have seen in some quarters last year, in particular, as we talked about, that order intake might be below that level.

But that would still support the guidance that we are sharing here with you for the year 2022 lead times. Yes, lead times, of course, are a function of the book-to-bill ratio, you could say, when - and vice versa, book-to-bill ratio partially is a function of the lead time.

So - and that is what I meant before, there is this self-amplifying effect to some extent. And they are still, for sure, higher, longer than they have been before the pandemic.

They are partially influenced also by constraints within the supply chains. We believe that we will see such constraints for most of 2022.

But we also would anticipate, nevertheless, that by the end of the year 2022, lead times are closer to normality again. Because of what we are anticipating regarding order intake, because of the significant expansions of manufacturing capacities and because of, hopefully, also the lifting of some of the constraints in the supply chain.

And regarding mix, I can confirm what you said that we still are seeing very much a mix of two-thirds of consumables and other recurring business; 25% of nonrecurring business, which is largely instrument and equipment for bioprocessing. When we talk about the Bioprocess division, when we talk about the Lab division, the ratio is a little bit different, but also more than 50% is recurring turnover by now.

Perfect. Thank you very much.

I'll keep it to two, please. Not to return to the same point that I guess you guys have been talking about before about the sort of higher-than-normal growth rates recently.

But it seems like it's been kind of two years or now, and I get that it's not sustainable, totally understand that. But I'm just trying to understand, do you really think inventory rates that customers have gone up that high?

I mean, double ordering for kind of 48 months seems like quite a long time. I mean maybe do you have any sort of KPIs around a number of new customers?

Or are you having conversations with some larger customers where they're accelerating their shift, say, in fermentation to single use. So I'm trying to understand what are the moving parts other than just say inventory build might be able to account for it?

Would you really think it is just all sort of built up within the channel? So that's the first question.

And then second one is a little shorter. Maybe just any comment on pricing.

If you guys have managed to push, given capacity constraint, any price increases through to the customers and how those have been received? Thanks.

Yes. Thanks, Patrick.

Indeed, two relevant points. The first point maybe helps to indeed put a little bit more on a spotlight on the growth of the non-corona-related business.

And we were indeed talking about the effect that comes from this different ordering pattern by customers, but that shouldn't mean at all that this is the only growth driver. So we clearly are talking about a very healthy market for many reasons.

And basically, all the fundamental drivers that we usually are talking about a lot and have talked about a lot and predominantly before the corona situation are fully intact and are more relevant and stronger than maybe five years ago. So therefore, what we have seen during the last two years is indeed a very healthy fundamental market situation.

And on top of that, we got the pandemic with these two effects, the very direct effect, additional demand, and then this like second-round effect triggered by lead time lead time - longer lead times and so on. I don't want to get into that again.

So - and the fundamental drivers that have played a role are substantial investments into additional capacities needed for new drugs. We, on average, have seen throughout the last five years, a nice and relatively high number of new drug approvals, higher than in the five years.

Before we are seeing expansions of production volumes in established drugs, by and large. We have seen very successful launches of biosimilars.

Hand-in-hand with most of those effects, we have seen a substantial expansion, let's say, of the geographical footprint of the biopharmaceutical industry, i.e., much more manufacturing capacity is now also in Asia, in particular, and respective investments and respective, of course, also recurring business. That is particularly the case for China and also South Korea.

Then we see, maybe to elaborate a little bit more on these newly approved drugs. We see, of course, a very a promising pipeline of new drugs where partially also clinical material is produced in increasing volume.

Some drugs have made it to the market already in the area of cell and gene therapy. So all those fundamentals are fully intact, very strong and has, of course, led to quite a strong underlying market growth.

Maybe as a reminder, the fundamental market growth that we always have said that should be the underlying growth of our end market. We said - and that is what all the most recent pre-pandemic projections have said, should be in the very high single-digit range, maybe max 10%.

So let's say, for the simplicity, 10%. Now we have achieved 27%.

So and even if you exclude M&A, it's a significantly higher number. So we believe that the underlying growth over the last two years has been significantly stronger than it has been before.

So we have seen really very strong development of the base business. And on top of that, as we said, don't want to repeat myself here, this additional effect that should have led to some buffer within the entire system, be it stock levels of products from us and competition, be it pulled forward capacity expansions, be it maybe also a higher stock level in finished goods and so on and so forth.

Very difficult to quantify, but that is how we would read those numbers. On price, as a result of the stressed supply chains, we do see some price increases.

Of course, we do see it for logistic services, but we also see it for some of the products, materials and components that we are purchasing. And we are - have started to pass those price increases forward to customers.

That hasn't played much of a role in the recent one or two years, but it should play a role somewhere maybe around or close to the 5% mark in the year 2022.

Hi, Joachim. The emergence of cell therapy and mRNA, does that benefit your business more than monoclonal antibodies?

What's your outlook for that market? And then lastly, does this broaden your acquisition opportunity as those categories of new therapies emerge?

Thank you.

So maybe on the last question first, yes, there are now additional, yes, technological segments, certain types of innovation that are of interest for us. And that - and from that perspective, it has broadened also the playing field, the number of opportunities for acquisitions.

That's definitely the case. Does it - or is it more interesting than monoclonal antibodies in regards to the consumption of product from us when it comes to the manufacturing of mRNA or cell therapies?

That's a little bit more difficult to answer because now unfortunately one has to say, oh, now, it really depends. Yes, because the processes can look very different.

For mRNA, the process is very, very different. We have a significant footprint in the respective manufacturing.

Hard to do a one-to-one comparison. I would say the business opportunity there is maybe, by and large, the same for cell therapies, it could be even larger going forward.

But that again depends very much on how those production processes look like the variety of production processes can be very different, will be or diverse and will be very diverse going forward. So therefore, hard to answer.

But what one can say is we do have relevant partially essential technologies for all those modalities. And I guess that will remain being a very dynamic and promising area for us.

Yes, congratulations for these outstanding results this year and, of course, last year. Two questions, if I may.

What strike me over the result is definitely the amazing performance you've been seeing in APAC in the Asian region. So I was wondering, can you be more precise in giving us the reason for that?

Is it due to new clients? Is it due to new drug?

I know you've been talking a bit about China expansion. Is it just an increase in terms of market share?

So can you let us know a bit more about what's going on in Asia and how we should look at Asia by '25? Second question, deal with the CapEx.

Joachim, I don't know if you do remember, but last year, you were also targeting 14% revenue as a CapEx for the year. It comes to be lower.

So what makes you confident today to achieve again 40% of revenue in CapEx. Are we getting into a new cycle of expansion?

Can you let us know your thoughts on that? Thank you.

Yes. Thank you for these two questions.

Maybe on the second one first. You're absolutely right.

We started off into the year with a CapEx guidance of 14% and then we lowered it to 12%, and that is also where we came in. But the 14% related to the initial top line growth guidance, which has been at the beginning of the year 2021, 19% to 25%.

And therefore, basically, what we've finished off the year with has been pretty much exactly the euro number that we were started off into the year as well. So therefore, it has really has to do with the top line reference number, so to say.

And we could execute on all the initiatives pretty much to the extent that we planned for. So really no impact through the pandemic also.

On all sites, we were able to pretty much execute those projects. And for 2022, we would expect the same, right.

As I said before, we even see higher CapEx probably in 2022. And the reason is really that we are continuing to execute on our capacity expansion program at an accelerated speed.

We had to pull forward capacity expansions, particularly when it comes to filter manufacturing and back manufacturing, but also in the instruments and systems space, really across the board. Because our growth - we didn't talk about that much, we didn't mention that.

But what is really a nice feature is all of our business segments, all of our product segments are growing very, very nicely. So we don't have any - there is no clustering of demand.

So we really see that all of our product are - and product segments are relevant and attractive to customers. And that means that we really had to pull forward such expansion plans.

Maybe one last word. What also plays a role is here that we have started to invest significantly into own capacities for cell culture media, which really plays a role here as well.

So - and then on APAC, maybe to put some color to it. We see an effect from the pandemic demand of around 18 percentage points for APAC approx as well.

So that hasn't been particularly high. That means that the underlying growth indeed has been very strong in APAC.

And what we see here is substantial investments by customers, as you said, in China. But also in Korea, a lot into additional capacities and also quite a significant utilization of these capacities.

China, of course, is very consequently executing on their agenda to become increasingly independent from imports of medicines That is part of their agenda. They have their China for China agenda, but they also have a particular or a specific agenda for the health care sector and the biopharma sector in particular.

And Korea, what plays hero role, of course, is that Korea has become the hub or one of the most important hubs, to say the least, for contract manufacturing. Samsung Biologics has to be named here the first, but also some others like Celtron, for example.

And yes, and we see substantial growth of the business that we have in those markets with such customers.

Good afternoon and also congratulations on the numbers and indeed, the new emissions initiative. On single use, I had a question.

Can you give us a little bit more color on some of - if we could speak to last year's numbers, of the split in your bioprocessing sales between single-use and stainless steel. Just a rough guide on that would be helpful.

And also, perhaps, if you could give us some color on where you see your market share is relative to your wider market share in single use?

Yes. So we - our recurring revenue is a good 75% of our total revenue in the bioprocessing domain.

And most of that are consumables. So roughly 75% of our BPS sales are consumables.

In the Lab domain, this is around 40% and that means for the Sartorius Group in total, this number is just a little bit below 70%. So roughly two-thirds of our sales revenue of the group are single-use products.

And this number is not changing very much year-on-year. That has to do with the fact that we still see and we expect that also going forward for the next couple of years, still a lot of investments into additional and new manufacturing capacities in particular, partially also into new laboratories.

And then you always see these investments into systems and instruments are like front running and the utilization and consumption of consumables only kicking in then later. And therefore, there's - yes, and therefore, there is no big shift.

Maybe one word, I'm sure you are aware of that. Besides the fact that we, of course, are working quite intensively on numerous ends to make the - let's say, to limit and potentially reduce our, what I would call, plastic footprint, for example, when it comes to the packaging, but also there are some opportunities maybe regarding the design of the product.

And then in the long run, but really only the long run, hopefully, also a substitution of oil-based plastics by other plastic raw materials. But besides that, what is really important is to highlight that the overall ecological footprint in most applications is smaller for single-use products than for stainless steel.

And not only because stainless steel is also a product that requires substantial consumption of diverse material and energy, et cetera, but particularly, the cleaning and sterilization of such system after each run leads to a very substantial emissions, related emissions, particularly energy. But also a high level of water consumption, which we believe will become an increasing focus of environmental concern going forward.

So I really would like to make the point that the plastic that we are using and particularly the use of our plastic product shouldn't be mixed up with maybe some other plastics where one could say, well, one should maybe reduce that consumption going forward. Our market share varies both for instruments as well as plastic waste or single-use products, depending on the area where we are or the type of product we are talking about.

I think maybe it's fair to say that for most product segments, our market share is somewhere in the 20%, 30%, sometimes up to 40% range. So that's basically the range where we typically have our market share.

But I wouldn't say that there is the one number for single-use and the one number for multiuse that makes a lot of sense to use here. Does that help you?

You know, it does. Thank you very much.

That's good.

Thanks for taking my questions. On the COVID guide for 2022, which has been left unchanged at about €500 million, since you first laid out that guidance in the 3Q call, we have had the lowering age of eligibility, boosters, increased purchase agreements and so on and so forth.

So what's the main driver for leaving this guidance unchanged at this stage? And have you started to see within your COVID sales a mix, shift of the mix towards more consumables?

That would be my first question. And then a quick follow-up on given that you've pulled forward several capacity expansion projects already, what should we assume as a CapEx to sales ratio from 2023 onwards?

Thank you.

Yes. Thank you.

Thank you for those questions. Yes, you're right.

We were touching upon our view regarding corona-related business, particularly vaccine manufacturing already three months ago. And elaborating on our view that 2022 may look quite similar to 2021 overall.

The reason why we didn't change that is because or what we have seen and heard from our customers and also regarding the orders that they have received from governments and whether there are changes leads us to the perspective that this is still the best and most realistic expectation. The dominant manufacturer of vaccines in 2021 in the Western world has been Pfizer BionTech.

The guidance that they have given, for example, at the JPMorgan conference not very long ago basically also confirms this view. They are planning very much with the same level of manufacturing at the same level of sales revenue.

The only thing that might have changed is at what point in time they think they will shift towards the next generation in the sense of whatever adaptation to the Omicron variant. Probably the same for Moderna.

We wouldn't anticipate as of now that the other vaccines that come on the market now should change this picture very much. We also would not anticipate that once maybe this Omicron wave is over, that then the demand for vaccination completely implodes.

Because that would mean even that maybe there's less business than, particularly by the way, maybe for the manufacturers as such than for us than projected so far. So long story short, we still believe that this is the most meaningful assumption for several reasons to the best of our knowledge today.

The mix didn't change so much because also throughout 2021, of course, at the beginning of 2021, we have seen predominantly systems being ordered by those manufacturers. But other than in in other cases where you really see sometimes a gap between 12 and 24 months between ordering and equipment and starting manufacturing, this went hand in hand.

They got the equipment and basically qualified and validated it, went into manufacturing. So we had substantial sales of consumables already back in 2021.

So there is no shift that is of any material relevance for the overall business, how we anticipate it to be in 2022. And then you were asking for the trend in CapEx.

Well, I would not like to give a number here. As you know, there would be anyway a missing piece, and that's the top line guidance for the year 2023.

So therefore, to say anything for 2023 now is difficult. What we would expect is that we should see more normal levels of CapEx ratio towards the end of this midterm cycle that we are talking about, so the one until 2025.

And we typically say that there is like a hard core of our CapEx that is related to capitalized R&D and maintenance CapEx. And this should add up to something like a good 3%.

And so then there's a remaining like average level of CapEx related to capacity expansion, which should be then maybe somewhere around the 5 percentage points or so. So the sum then should be somewhere in the upper single digit range.

But that's even not a calculation there. That is to try to give you a little bit of feeling for the composition and how I would think about that.

But for 2023, I think the number will look a little bit different.

Thanks for taking my questions. Just to follow-up from Paul's question on the cell and gene therapy opportunity.

You seem to be getting a stronghold of this market, particularly following your acquisitions over the past couple of years. I know it's a hard question to answer, but do you have a rough estimate at this point in time of what share of this pipeline you're currently exposed to?

I think hearing that the summer is like fermentation in from auto group that you currently have more than a 60% share. And a short follow-up on that, a customer of yours recently mentioned that the RCA, the cell and gene therapy part of their business, grew higher than initially expected.

Is that an impact you've been seeing on your side as well? Thank you.

Yes, we would share that view that the evolution of this segment has accelerated and it looks very promising and maybe even more promising than a few years ago. Pipelines have been filled, so - and that is one element of what we were talking about a little bit earlier today when we said that the market fundamentals all look very positive, look positively and promising.

And that, for sure, holds true particularly for the cell and gene therapy segment. A little bit more tricky is maybe the first part of your question.

When you said, okay, how well basically in this very market segment in comparison to other market segments. And the reason why I find that a bit tricky to answer is because it's still a very young market.

And that means not only that there is a lot of growth to be expected, but there is also a lot of innovation to be expected. And a lot of innovation, not only regarding new therapies based on the technology, but also innovation regarding the technologies that are used to manufacture such therapeutics.

We believe we indeed have invested into very relevant technologies that are needed across different cell and gene therapies. And that's really a reason why we think that to be in the space of cell culture media and essential performance relevant ingredients of cell culture media is a very important and also robust space to be.

But for sure, I would find it too early to make any assessment to say - and our position in this market is whatever stronger or whatsoever than in the more mature market segment of monoclonal antibodies. But I don't want to show negative here.

I just want to say it's a bit too early. We consider ourselves to be well positioned.

But for sure, more innovation to come, more activities to be taken by us and that might also include further acquisitions.

Understood. That's very clear.

And another small follow-up. So on your historical COVID vaccine contribution estimates for - on the BPS business, I'm thinking how is it for you to exactly know your customers are using your equipment for?

Basically, if you had to add a margin of error to your 20% coronavirus vaccine-related benefit in 2021 for the division, what would that be?

So you are asking for how precisely we know the numbers regarding what for our products are used when it comes to vaccine manufacturing? Or was it --

Yes, exactly.

Yes, for vaccine manufacturing, the visibility is, I would say, good. But I wouldn't say it's like a scientifically precise number, let's put it that way.

Because if you sell a product to BioNTech, that's simple. When you sell a product to Pfizer, it's not that simple.

When you sell a product to Lonza or other contract manufacturers, then it's even more complicated. And of course, our customers partially give us quite precise guidance.

And that has been particularly the case, of course, when everybody was working hard on ramping up vaccine manufacturing capacities as quick as possible. And therefore, it's a good visibility.

But I wouldn't say that this €500 million is, as I said, a scientifically precise number. And that is even more the case as soon as we are talking about that, but smaller portion that is related to, for example, test kits or therapeutics, et cetera.

So good visibility, but not 100%, okay?

Thanks for the quick follow-up. Based on the midpoint of your 2022 guidance and removing COVID from that, that would imply your 2022-2025 sales CAGR of about 12.5%.

If we remove M&A, which historically has been 2 to 3 percentage points, that lowers that CAGR to around high single digits or let's call that 10%, which you mentioned earlier was the market growth. What would prevent you from gaining market shares from 2023 to 2025?

Is there only an impact from destocking here that you're forecasting into your long-term guidance? Just want to understand that what seems to be somewhat cautious expectations.

Exactly, Hugo. That is in there.

Because in our 2021 base number or in the '22, difficult to say. But in the '21 base number that I would prefer to use here because it's an actual number, as I said, there is this €500 million, our corona-related business.

And that's what we talked about a bit at the beginning of our call here today, this number that represents maybe a stocking effect, et cetera, et cetera. So and that exactly - then, of course, is partially reflected in this 10% that you were calculating here.

I would suggest, and I'm sure we will talk about that in the next quarters and the next really very good reference point, I guess, we will have in 12 months from now because then we will really see how 2022 will have worked out. It will be interesting in regards to how the phase out, hopefully, it will be a phase out in the sense of that all those lockdowns and all this stuff will be behind us by then, but how this will have played out.

I have to admit, it's my first pandemic. Hopefully, also my last.

But we will really have to see and learn from that. One thing you can be sure, we will be very transparent in sharing our views and the different bits and pieces of how things interact here and how we base our perspective going forward on it.

Okay. Having said that, I would like to thank everybody for your interest in Sartorius and Sartorius Stedim Biotech.

Great talking to you. Thank you for your questions.

We hope that we have been able to answer them and looking forward to our next call in three months from now on the Q1 numbers. All the best.