Sartorius AG

Ladies and gentlemen, welcome to the Sartorius and Sartorius Dedim Biotech conference call on the 9-month 2024 results. I am Sergin, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Joachim Kreutzburg. Please go ahead, sir.

Thank you very much. Welcome, everyone. Good day. And pleasure to walk you through our results for the first nine months of 2024. As always, we will do this together. That means it's myself and Florian Funk, CFO of the Sartorius Group, as well as René Faber, CEO of Sartorius Data and Biotech. And we will start with the results of Sartorius AG or the Sartorius Group. And then thereafter, we will walk you through the additional information on Sartorius Data and Biotech. So let me start with highlighting the key results of the first nine months of 2024. And I think the two main results points here are that the results are in line with our expectations, and secondly, that we confirm our guidance of full year 2024. The sales revenue for nine months are close to prior year level as expected, and we at the same time see a significant increase of our order intake. Clearly, the recurring business shows a positive trend, and this is very much in line with the continued depletion of stock levels by our customers. This, of course, particularly is impacting the bioprocess solutions division, where the nine-month revenues are very close to prior year level, and the positive trend in consumables is offsetting the continued soft equipment business. For the LPS division, where The instruments business and therefore the investment part of the business, so to say, is stronger. We still see a certain decline of our revenues, which is reflecting the reluctance of many customers globally to make investments and to decide upon investments. And that is particularly the case for China still. I think one can say that our profitability on a group level is on a very robust level. This is also very much positively influenced by the effects from our efficiency program, where we are still expecting increasing contribution during Q4. We also are reporting a significantly increase of our cash flow, which is reflecting both a reduction of our working capital as well as our capex management. And then once again, the guidance for 2024, we confirm in all metrics. Before I hand over to Florian, I would like to once again show a chart that we have used for a couple of quarters now, which is showing the very significant volatility over the last couple of years. and where we also see that the normalization hasn't been a, yeah, like ideally V-shape kind of normalization, but after the very sharp increase of order intake and the decoupling of order intake from sales revenue, we saw a more volatile development of the order intake and therefore also more a couple of Ws, if you wish, in regards to this normalization. But nevertheless, when you take a look on this chart, I think one can say that we see a gradually normalizing set of numbers here as well. So this is the bigger picture, and now we will focus on the most recent results. Florian.

Yeah, thank you, Jochen. And welcome, everybody, and also good afternoon from my side. Let's have a look at our financial key figures. Overall, our performance in Q3 was what I would call solid and in line with our expectation. Sales for the nine months are still slightly negative versus prior year with minus 2.8% reported, respectively 2.0% FX adjusted. But we are looking quite confidently into the rest of the year. And confidence is fueled by looking at the activity level that we see with our customers, which is driven, as also Joachim stated, by mainly our consumables and recurring business, also as expected. Recurring sales are constantly improving over the course of the year, and maybe to remind you, we started from a negative high single-digit decline in Q1, now to a positive high single-digit growth in Q3, with a nine-month performance being um positively low single digit over the course of the first three quarters and this is as we always said any performance in 24 will be driven by the recurring business by the consumables business q3 numbers are fully in line with our expectations and what we communicated also during our H1 call. Just as a recap, we told you in the H1 call that Q3 will show the lowest sales in absolute terms of all quarters in 24, and that the sales performance versus prior year will be close to the H1 performance. So H1 was minus 2.2% in constant currencies, and now Q3 was minus 1.7% in constant currencies, so very much in line with that. And regarding the underlying EBTA margin, nine-month figures show a solid 27.7%. We communicated in the H1 call that mainly because of our internal inventory reduction program and the seasonally low sales volume in Q3, margin will be lowest in Q3. Our underlying EBTA margin in Q3 standalone was 27.1%. which indeed was lower than the H1 margin of 28.1, but it was already above the prior year Q3 margin of 26.7%, which shows that positive effects from our efficiency program are kicking in, and despite the negative effects from inventory reduction. With the efficiency program, we are targeting more than 100 million euro in 2024 and are well underway. And this program will have its biggest impact in Q4-24. To give you a little bit more feeling for the sequence of the numbers, we will see roughly 60% of the impact of the program in H2. And of that H2 impact, 60% once again then in Q4. Order intake was up in the nine months by 6.6% in constant currencies to 2.326 billion euro. And in order intake, we also saw a good performance in consumables and a rather soft order intake on equipment. And well, as a consequence, on the back of the lower EBDA in million euro and the higher interest expenses after the PolyPlus acquisition, underlying net profits and EPS are below prior year. Coming then to the regional performance. In both divisions, we see EMEA being the strongest performing region with an overall growth of approximately 5 percent. EPS being a little bit higher than this 5 percent, LPS is slightly up against prior year. With regards to Asia, the lower performance is very much due to the China effect, where markets, as you know, have heavily corrected in H123, and since several quarters seems to have found the bottom. Excluding China, the Asia sales performance would have been positive in mid-single digits, roundabout. To remind you, China currently accounts for approximately 8% of the group sales, 6% BPS, and 13% LPS. Looking at the Americas, the performance has to be seen in connection with the fact that during the pandemic, the U.S. business overproportionately benefited from our ability to deliver at these times and had, therefore, the biggest exposure to stocking at our customers. and in turn also now has the biggest exposure to destocking effects. Reni will comment a little bit later on BPS, but let me start with some broader comments. Order intake in BPS is up approximately 8% to 1.836 billion in constant currency. Please note that the recurring order intake is over all three-quarters and 24 up double digits. Overall, sales growth was flattish at minus 0.8% and constant currencies to 1.962 billion euro, while PolyPlus acquisition is contributing approximately 2.5% to this number. The current sales are up after nine months by low single digit, with improving performance over the quarters from quite negative territory to a high positive single digit growth in Q3. Underlying EBITDA and corresponding margin is slightly down, but margin was 28.9% still on a very robust level. A slight margin decline is driven by mixed effects, but especially the lower production volumes alongside with our internal inventory reduction program are due to that. We are working against these effects with the already mentioned efficiency program, which will also, of course, in DPS show the strongest contribution in Q4. Please also note that on the back of this efficiency program, Q3 in BPS is the first quarter where the underlying EBITDA in terms of margin and million euro is above the prior year number. So if you look at margin, for example, it is in Q3 28.4% versus 27.4% in the prior year. And also Q4, you'll see margin above prior year. Then coming to LPS. where the market environment stays challenging, having to digest the much weaker China market and seeing across the board customer reluctance to invest in instruments. In this environment, I think we can be very satisfied with an auto intake that came in slightly above prior year in constant currencies. Saves are down by 6.5 percent in constant currencies in nine months against quite high comps, especially from China at the beginning of the year. Especially equipment business with bioanalytic instruments is still weak. The broader lab essential business is currently doing better. And as you know, lab essential business is coming with lower margins than the BioA instruments, so there's a negative mixed effect. Also, the overall volume effect versus prior year and the output reduction were weighing on the LPS margin. As you can see here, underlying EBTA is down to 118.5 with a margin of 23.2. If we go to the next slide, as usual, we have added one page in the deck with some additional financial data that some of you use for your modeling and deeper understanding. Let me do some short comments. Extraordinaries are slightly below prior year, mainly because in 24 we had less M&As. integration costs. The main buckets in the Extraordinaries in 23 and 24 are restructuring costs and here predominantly severance costs to be recorded in 24. This number also contains to some extent corporate projects like our currently running S4 HANA transition project. The financial result in prior year was heavily influenced by a positive non-cash or not valuation effect adjusted For these non-cash one-offs, the financial result is down only due to the increase in average net debt versus prior year. Cash flow, and Joachim mentioned that, is showing the results of our working capital and capex management and is up from 91 million in prior year to this year, 280 million. And also Q3 has been a strong free cash flow contributor with around 180 million in that quarter. Looking at CapEx, the prior year number in investment is, of course, impacted by the Pulley Plus acquisition. Adjusted for that, the nine-month CapEx in million euro is well below the nine-month figure for the prior year. CapEx as a percentage of sales is down to 12.9% after three quarters, and this is already quite close to our full year 24 financial guidance of around 12%. This brings me to the next chart and some balance sheet-related figures. Non-current assets are slightly up to $7.825 billion, mainly because of our CapEx program and the included growth project adding to the property plant and equipment position. Equity ratio stands at healthy 38.6%. where the increase is driven, of course, by the capital increase that we did in Q1 24. And capital increase is also the reason for the reduced net debt of 3.946 billion. And this quarter is the first quarter in this year where this number is below 4 billion. This brings me to net debt to EBTA ratio, which stands at 4.4 times after nine months. And as you know, we are working on further reducing these numbers to around four times. And I see us well underway here. And with that, I would like to conclude for that moment and hand over back to Joachim.

Yeah, thanks, Florian. So then the last slide here for the groups part of our today's presentation is the guidance. We confirm that guidance, and just therefore as a reminder, we are shooting for a flat sales revenue development for the group and both divisions, and an ABTA margin of 27 to 29 percent for the group, and then 28 to 30, and 22 to 24, respectively, for the two divisions. and I think I don't need to root out all the other items here. I'm sure we will have some discussion and questions around this, so maybe with that we can move forward directly to the SSV part, and I hand over to René.

Yeah, Jochen, thank you very much. Hello, everyone. Thank you also from my side for joining us today to discuss the Satura Steady Biotech's third quarter results for 2024. I'm pleased to share our performance and outlook with you now. So over the past month, we have observed a continued stabilizing business environment. Q3 has developed as expected, showed typical seasonality with weaker summer months and stronger September. Most of our customers are nearing the completion of their destocking, which has led to an increase in order intake, particularly for consumables. We are encouraged by the above average performance of our advanced therapies portfolio and are also well progressing with the integration activities in that area. We see increasing activity levels at customers. However, many customers remained cautious about investing, impacting our equipment business. Looking at our performance, nine months, we closed the first nine months of 24 with sales revenue of 2.029 million euros, reflecting a slight decline of 1.3%. in constant currencies. Order intake grew strongly 8.5% in constant currencies with strong recurring business, as I mentioned, more than compensating for the muted investments in equipment. Despite the low volume, our EBITDA remains robust at 565 million, which is a margin of 27.8%. We expect increasingly positive effects from efficiency program in Q4, as Florian described that. Looking at regions quickly, we see different dynamics. While in America, sales revenue declined by almost 10% against the strong prior year comparables, And due to the soft equipment business in that region, sales revenues in EMEA grew almost 6% and also picked up in Asia Pacific by 1.3%, despite a still weak China market. Net operating cash flow, as Florian described, increased significantly. to 530 million euros compared to 410 million euros in the prior year period, particularly due to reduction of working capital. Investments in our R&D and global production infrastructure amounted to 260 million euros, which is a capex ratio going down from 17.9% last year to 12.8% for the SSB group. Key indicators, financial indicators remain at high robust level. De-leveraging progress is as expected. The net debt decreased to 2.349 million euros, and the net debt to underlying EBITDA ratio decreased to 3.14 SSB group as planned. That brings me to our guidance. We confirm the guidance for the full year 2024 and expect sales revenue to be at the priority level with a bandwidth of low single-digit negative to low single-digit positive development in sales revenue. Acquisition should contribute around 2% to sales revenue in terms of profitability. Underlying EBITDA margin is expected to reach the 27% to 29% range with slightly positive effect as mentioned from above average profitability of a Polyplus business. The ongoing efficiency program will contribute more than 85 million euros for the SSB group, while volume effects and our own inventory reduction will have a temporarily dilutive effect. We forecast capex ratio to be around 12% for the full year. while the ratio of net depth underlying EBITDA should be approximately between 2.5 and 3 for the end of this year. With that, thank you, and now we are happy to take your questions.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone for telephone. You will hear a tone to confirm that you have entered the queue. In the interest of all participants who are in the queue, we kindly ask everyone to limit themselves to two questions per person. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only handsets and turn off the volume of the webcast. Anyone who has a question may press star and one at this time. The first question comes from the line of Zain Ibrahim from JP Morgan. Please go ahead.

My question, this is Zain Ibrahim from JP Morgan. So my first question is just on mix, and I think you touched on it. But how did the mix and BTS orders develop in Q3 between consumables and equipment? I think you said the recurring order intake overall for the next nine months was up double digit, but any sort of further pilot you're able to provide on the differences between consumers and equipment and the growth year on year in Q3 would be, I think would be helpful for people. And then my second question is on the 24 guidance. So you've maintained a relatively wide range with a few months left till the end of the year, and you now have the order intake for the first nine months in the books, as well as your order book entering this year, which was relatively high. So why have you maintained that range? Is there still some volatility that you're that you're seeing or expecting, and how should we think about the implied exit rate for Q4 bridging to 25? Thank you.

Okay. So, yeah, thank you very much for the questions. So, maybe I start with the second one on financial guidance. So, as we said, we confirm Our guidance, we are quite confident about Q4 and optimistic that we will also, therefore, land within our guidance regarding oil metrics. And we would say that the ambition level maybe is a little bit higher for LPS than for BPS, but we decided to not narrow down any of the bandwidth to reflect the general global volatilities. There is not much more behind that, so that we didn't want to change this again at this point. And then regarding the mix, as we already said, we see a healthy recovery of demand for consumables, which reflects the reduction and the progress that our customers made in the reduction of their stock levels, because this is a topic that by nature and definition only relates to consumables, whereas we see an ongoing reluctance of many customers to decide upon investments. I think we shared that with you already last time that our sales team is quite busy in regards to discussions with customers about their projects. So we see a healthy pipeline, but yet customers are quite reluctant to decide upon that. And therefore, we have a mix towards consumables, a certain mixed trend towards consumables in the order intake, I would say.

And maybe to add to that, you were asking specifically about BPS. I was talking about group numbers when I said regarding the consumables we are seeing over the course of the three quarters, double-digit growth versus prior year. This is, of course, also true looking at BPS or SSB.

Thank you. That's helpful.

The next question comes from the line of Oliver Reinberg from Kepler Chevreux. Please go ahead.

Thanks very much for taking my questions. The first one would be on market share. I guess one, we had the discussion in the past that you expect two-thirds of the share gains from the early part of the pandemic to move back. Can you just provide an update? Is this process has been completed or to what extent this provided a drag so far this year and whether this can spill over next year? And also on market share, I think Merck talked at their Cap-Market today about the kind of trend towards more dual and multiple sourcing as a new trend. Can you just share what you see in this regard and how this is impacting your different product lines? And secondly, just in China, also a follow-up probably from Merck, who talked about that they see post-pandemic more local competition. I think in the early discussion, you said when there was not enough supply, there was a switch towards local supplier. which then however reversed. So can you just provide an update? Do you see still any kind of competition from local suppliers? Thank you.

Yeah, thank you very much. I take the questions. So first on the market share, you're right. We've been looking at that like taking or benefiting from our ability to supply during the pandemic brought us to a stronger growth, taking market shares. We knew that some of that, and our expectation is that we'll go back to the previous suppliers, and this is what we are seeing. We would not say it's completely over, as also the destocking is still progressing, but I think we can confirm that this split, one-third stay with us is what we will see. On the dual sourcing, yes, we also see at some customers the activities to find and implement second source for certain products. I would say as of today it's a rather punctual picture we see. Some customers are doing that and are progressing. As you can imagine, this all is always linked to quite an effort and time and spend and money to do this. So yes, it's happening, but we are far away from a broader scale of such dual sourcing. as of today. And to your third question on China, yes, during the pandemic, local suppliers gained importance and market shares. And as of today, I would say looking at this year, I would see the situation stabilized. The local suppliers continue to supply mostly the local customers, but we don't see any further shifts in market shares as of now.

Okay, thank you. Can I just follow up? Can you just put any kind of number to what extent the reversal of market shares is impacting business and whether we're going to see it next year? And the dual sourcing, is that also impacting validated processes or rather new ones? Thank you.

We are not giving any concrete market share information.

The next question comes from the line of Charles Bittman King. Please go ahead.

Hi, thank you very much for taking my questions. Two from me. The first one just on the equipment business. You mentioned the hesitant farmer spending today. I mean, when do you expect this hesitancy to resolve? How are your conversations really progressing on that? Are things getting better when you mention these projects? And to what degree do you see this as an impact from overcapacity from COVID orders and versus kind of investment uncertainty around the US election or progression of rate declines? And then just the second question is on China, China related to its stimulus programs. You highlighted that this has been distributed to provinces. When do you start to expect this to impact companies and then drive potential orders to bring China back off the trough levels that you mentioned on the call there?

Thank you very much. I think it's not easy to give any very precise predictions now on when this will be back to normal. We would expect a gradual recovery also in that regard going forward. You mentioned stimulus programs both in the U.S. and in China, and obviously a lot of our customers are looking into that. But as these stimulus programs partially also have an element of, let's say, making it more difficult for certain companies from certain countries to make business, for example, in the U.S., there are also some counter-effects. So until that will be sorted, it may take a little while. We don't see the election play a role, but sure, interest rates do. And the post-COVID effect, of course, is one reason why there is overcapacity at this point. So we would expect this recovery going forward. And as I said already, we do see encouraging discussions with customers pretty much globally. We see this in the U.S., we see this in Europe, and we also see Chinese customers looking into the opportunities that the local stimulus program provides to them. But again, we wouldn't see ourselves in a position to label this now on the timeline.

So just one very quick follow-up. Can you just clarify what you mean by the stimulus partially preferring to keep out certain countries or prefer domestic suppliers? Do you see that as a potential headwind to market shares in China?

No. First of all, I think in the U.S. we see that some Chinese players are reducing their activities in the U.S. because they have to. And that I mean by some counter effects before maybe there will be a plain positive effect from stimulus programs. Let's see whether that is something that we will see in China as well, but I would nevertheless again and again say these are relatively short-term effects only and will not change anyhow the underlying mechanics of our market. Perfect. Thank you very much.

The next question comes from the line of Charles Weston from RBC Capital Markets. Please go ahead.

Hello. Thanks for taking my questions. The first is related to that equipment spend again. Can you give us a sense of whether that's a similar outlook being, you know, tough by all types of customer whether that's academic cdmo or pharma companies and my second question on a different topic in light of joachim's announcement regarding not standing for ceo again what is the time frame that the board is working towards to announce a new ceo yeah um

So, looking at the equipment spend, there is, you know, a quite muted environment that we see very much across the board. So, I would not directly strip out any customer group that would react in a very special way here. And on the CEO timeline?

On the CEO timeline, I think it was the purpose of the quite early announcement to give the supervisory board additional time for organizing and conducting the search. I would expect that, therefore, within the next couple of months, we will probably see a conclusion here and a decision. And then, of course, it will depend on when the person will be available, whether that person will be available immediately or whether it will take a couple of months until this is the case. But my contract will run for another 13 months. So we are very well, I think, set to have a hand over very, very smoothly before this long stop date, so to say. So I think we are on a very, very good track here.

Great. Thanks very much.

The next question comes from the line of Charlie Haywood from Bank of America. Please go ahead.

Charlie Howard, Bank for America. Thank you for taking my questions. I've got one clarification and then one question, please. So the clarification is from your prepared remarks. I think you said bioprocessed third quarter recurring order intake was up double digits year on year, but I wanted to clarify that. And then could you give any comment on how that's changed sequentially? And then I guess sort of a looser one, how sustainable do you see that consumables growth? Do you think we've seen a big acceleration this quarter that might not be sustained over the next few quarters? And then the second question is obviously lack of visibility has been a big trend for you, but sounds like it's starting to improve. So what's the trends driving that improved visibility and how do you see those developing into 25? And when do you think we could get to a time that visibility returns to pre-COVID levels? Thank you.

Yeah, maybe I start with your order intake question where we're saying that recurring order intake in the DPS division is up double digits over all the three quarters of 24 versus prior year. And this implies also a double-digit growth sequentially in Q3 over Q2.

And a comment on the visibility. What we see, and it continues over the course of the first nine months, is that customers are moving to ordering patterns according to the current lead times. So less visibility in that sense for longer standing orders and we believe that that trend will stay here and it will be the normal moving forward from now on.

Thanks.

The next question comes from the line of Oliver Metzger from Odoo BHF. Please go ahead.

Yeah, good afternoon. Thanks for taking my questions. The first one is, in the past you mentioned a couple of times order intake is not the right indicator due to the changing ordering pattern. So if you look on a year-to-year comparison, do you see already a stabilization of the ordering pattern of customers so that looking on orders becomes now more a better indicator for future again. Second question, I know it's a very detailed question, but we are looking for any signs of hope. So can you give us some comments around the phasing of order intake among the third quarter? Thank you.

Let me take the question on the order intake as an indicator. If you remember back in the capital markets day, we were talking about order intake and sales being out of sync, and we still think that order intake is not the best indicator to really assess the activity that we see in the market. This is still true, although we are seeing normalizing activity trends in the order patterns, meaning that we are seeing the orders becoming smaller and getting more frequent, more short term. But there is still also certain orders that we transform into sales that are not what I would call fresh orders. but come from our very healthy order books that we took out of the end of pandemic. So the trend moves into the right direction, but we are not back at normal by now.

The next question comes from the line of Dylan Van Haften from Stiefel. Please go ahead.

Hi, guys. Thanks for taking my questions. So just one question on reminding us on the comps for 4Q and 1Q. So I remember there's a lot of equipment in there, and could you just tell us, you know, if there's anything you want to point our attention to in the fourth quarter and the first quarter? Because I think I remember there was a big equipment up in the fourth quarter that then came down in the first quarter. Now, my second question would be just on biotech recovery kinetics. So funding has come through in the first quarter. It's been quite volatile. It's come down again, and now it's up again. Should we be thinking that biotech is not so small, doesn't really move the needle, or is there going to be sort of a kind of bumpy recovery in biotech as well, and that's going to be kind of detached from the product from the recovery? Thank you.

So we needed some time to make sure that we got both questions right because the line was not too good. So first question, so indeed we had not a big equipment order within our order intake end of last year, but rather a higher level of equipment orders. So that was the case. Let's see how this will be towards the end of the year. But as said before, we so far don't see a strong recovery of orders in that regard. We are rather a little bit more cautious here. And then on biotech funding, it's not that relevant for BPS. It plays a certain role, of course, as long as it is influencing the clinical trials, and therefore also the need for manufacturing of clinical test material by CDMOs, for example. And then it plays some role for the lab division, of course. We don't see, as we said before, much recovery here. But, of course, as soon as there is a more robust level of funding again, then we will also see a higher level of investments by customers into, for example, by analytical instruments, et cetera, and that would be beneficial for LPS. But so far, I would say we see a gradual improvement here only, and therefore a limited impact.

Excellent. Thank you.

The next question comes from the line of Falco Friedrichs from Deutsche Bank. Please go ahead.

Thank you for taking my questions. Firstly, thank you for providing us with the ballpark growth indications for the consumables or recurring order intake in Q3. Could you potentially round out the picture and also give us at least a ballpark indication for the level of declines in the equipment orders in the third quarter, whether that was still in the double digits or maybe just in the single digits in the third quarter. And then my second question is on pricing in the quarter specifically. And I'm curious whether you potentially cut your prices a bit more aggressively in order to get this increase in order intake again, or whether you remained rather disciplined on the pricing side. Thank you.

Let me, speaking, I take the pricing question. No, we are not doing that. I think we are well on track with the pricing progress for this year. And no, we are not buying revenues by decreasing pricing.

Falco, on your question on auto intake in non-recurring, you said it's soft and the softness translates into a double-digit Q3 decline.

Thank you. And how did that develop sequentially on the equipment side? Could you also give us a flavor there?

This is not an information that we are giving.

Okay. Thank you.

Thank you.

The next question comes from the line of James Wayne Tempest from Jefferies International Limited. Please go ahead.

Hi, thanks for taking my questions. Just the first one, apologies if I missed it, but in terms of the quarter, can you give us a sense in terms of what September looked like compared to July and August and any flavor between equipment and consumables that would be helpful? And then my second question is actually just around sort of M&A and leverage. I mean, you're targeting obviously, you know, four times, you know, by the end of the year. So just kind of curious, you know, how realistic is you can continue to acquire growth over the midterm with the leverage at that level and how we should think about that? And then related to M&A, I guess your guidance is 2% for BPS, but I noticed PolyPlus was 2.5% at nine months. So is this the kind of level we should be anticipating or is there an expected slowdown in PolyPlus at the end of the year or phasing considerations to get it to 2%? Thank you.

So on the first question, the answer is no. On the second question is that we are confident to reduce the... the leverage so that in the midterm, and that is what you were asking for, we will be an active player again. And the third question of the two that you asked, the answer is that this is simply because of math as the consolidation took place at the beginning of Q3.

The next question comes from the line of Tom DeBursy from Nipron Research. Please go ahead.

Yes, hello. Thanks for taking my question. Just wanted to maybe just start on single-use products and also advanced therapy demand and whether you're seeing, particularly within consumables, faster growth in particularly single-use products, and then also whether you're seeing continued growth, added beds, therapy, cell G therapy type of products?

So, yes, on single-use products, of course, part of our recurring revenues portfolio, we see if you mean products like bags, assemblies, It's a bit faster, the recovery, compared to the other parts of the portfolio. So, yes, and advanced therapies, what we see is a certain impact of the funding, lower funding on broader, smaller customers, early-stage projects, but quite a good progress, late-stage projects with... these drugs approaching phase three or approvals or getting extensions of approved drugs in the market.

Got it. And then just one other follow-up question is just on the efficiency program, just wanted to clarify, I think you mentioned 60%, you know, of the kind of 100 million that you expected for 2024 in the second half. Just for 2024, can you say how much kind of savings you expect to realize for 2024, specifically?

Dr. Thomas Rousseau Yeah, the number of well above 100 million is the number for 2024, and I was just talking about the sequencing over the quarters as the effects are increasing from quarter to quarter, with the 60 percent in H2 and within that 60 percent in Q4. Got it. Okay. Thank you very much.

The next question comes from the line of from HSBC.

Please go ahead.

Mr. , your line is now open. You may go ahead with your question. The next question comes from the line of Paul Knight from KeyBank Capital Markets. Please go ahead.

Joachim, did you see the strength in traditional monoclonals, or are you seeing some of the approvals we're seeing in antibody drug conjugates, phylogene therapy? Are those two categories showing greater growth in the monoclonal market right now?

Yeah, so monoclonal antibodies are, as you know, a well-established, mature modality. ADCs is a kind of a subclass of that, and we see strong growth and also strong pipelines within that category of monoclonal antibodies. And, yeah, help me with the second part of your question, please.

Are you, what's the growth, what level of growth you're seeing within the cell and gene therapy portion of the marketplace?

Oh, yeah. Oh, yeah. Okay. Yes, cell and gene is, yeah, other than MAPS, immature new modalities. We see, however, a significant portion of the pipelines overall coming from that type of cell and gene therapy modalities. We see roughly one-third is within that category. So early pipelines is a stronger growth. We've been saying that, you know, what we can expect is due to the fact that there is yet a small number of approved tracks, there will be higher ups and downs within that modality segment. But overall, I think that we will see an above-average growth with these new modalities.

And then lastly would be the 8% to 12% growth. I think you had cited a prior call. What's your thought there? Do you think the long-term normalized industry growth rate is in that range of 8% to 12%? Thank you.

Yeah, I think the range is broad enough to say most likely as market growth. Okay, thank you.

The next question comes from the line of Lilouet from Bernstein. Please go ahead.

Hello, hi. Good afternoon, Delphine. Lilouet speaking. Different question on my side. I was willing to get your view, René, on the BPS performance into the North America business. And how should we think about the mixed evolution in between the consumable in between 3Q last year and 3Q now? Second question relates to how that could compare And if we have a stronger erosion in the U.S. linked to the equipment, how should that compare to European performance? The question is that we have a sharp decline of 50 million euro, and so I was wondering quarter over quarter and year over year, right, in between Q3 last year and now, and so I was wondering how this is linked to the equipment performance versus, let's say, a normalized scenario. And I will go for my second question after that. Yeah.

Well, thanks for the question. So on North America consumables, we are very happy and seeing quite a recovery and progressive improvement in order intakes, strong development in that region. Two parts of what Florian said before. that North America was a rather region where we experienced stronger COVID effect and now recover as well on its way. On equipment, it's a bit opposite. It's a weaker region, at least this year. And yeah, we'll need to see how that develops, but nothing I would where I would say it's a market share topic. It's overall weakness of the North American market coming back to the investment willingness of customers.

All right. And so the second question would deal with the particularity when you look at the order in tech, what is the proportion of the really new contract you're signing either with new customer or regarding new drugs?

I mean, we are not reporting on such numbers, but there is a healthy portion, of course, of new business in our intake.

And do you see the massive flow that inflows the competition, and mostly in the U.S. is seeing currently, at least since September?

kind of inflows are you talking about?

About the new ordering and the new customer coming up with new projects and signing.

In that sense, September was not very different to the other months. Thank you.

Next question comes from the line of Ridley. Please go ahead.

Hi, thank you. Yes. Firstly, very quick clarification question. Can you give us, in the first nine months, what proportion of your BPS revenue came from equipment? If you can give us that breakdown, I think it'd be very helpful. And secondly, on pricing, you obviously had very strong pricing during the pandemic. From your comments already, which have been helpful, you have still got some pricing. If you could give us a little clarity around that, that would also be helpful. Thank you.

So equipment, it's in the rates of 80-20, so 20% ish. And pricing, you know, pricing in our business industry is looking at what our customers are doing. First of all, quality, assurance of supply, innovation play the most important role. I think And this is how we are looking at that. And we've seen our ability and ability of the peers to pass the cost, increase inflationary cost to the customers. It works. And again, it's very much about delivering high quality, innovative products. And that's why we were not really concerned about any price pricing shifts. What we see and will see and expect is that moving forward, we are rather getting back to pre-pandemic price increase levels, low single digit. I think that's fair to expect to what we will see then as well.

That's great. That's very helpful. Thanks. And if I could just squeeze a follow-up in. You mentioned Polyplus earlier. really differentiated technology there and obviously a very high share in that particular space. I don't know if you can comment at all to the extent to which you've been able to leverage Polypus thus far to win additional business?

Yeah, so absolutely. Polyplus is to be seen as highly differentiated and with a strong market position. We've built a portfolio where PolyPlus fits into a set of other critical materials and reagents with very strong cross-selling synergies. You know, you can say per modality at least three of such reagents within our ATS portfolio are relevant and can be used. And by that, of course, we start to see a in nice wins and cross-selling wins at customers where Polyplus is a strong position and we're starting out placing other reagents from that portfolio. So, yes. Great. Thank you.

The next question comes from the line of Oliver Borough from Goldman Sachs. Please go ahead.

Hello. Thank you for taking my questions. It's Oliver Borough from Goldman Sachs on for James Quigley. So the first question is just on excess orders in the order book. So if we take your annual order book number and adjust for orders in and sales out, it implies your total order book at the end of the third quarter was around 1.4 billion. That's around 1.9 quarters of orders. Normalized levels looks like 1.4 times quarters. So it implies around 400 million excess orders in the order book that have to come through before book to bill returns to above one. Is that 400 million excess orders in the order book in the right ballpark? And has anything changed so that on a normalized basis you just carry more orders in the order book going forward? And then I can ask my second question after.

So You know, we are not specifically reporting about order book, order book composition. We're just trying to give you a feeling about, you know, are we back in a normal state where, you know, the business is predominantly done by fresh young orders or if there's still certain amounts of orders coming from earlier times. And in that perspective, I try to give the kind of sense here in this call that we have seen the order book coming down to certain extent, but it's that the order book is still um not on a pre-pandemic comparable level so we will still see certain parts of the business also going forward coming from the order book that's very helpful um thank you very much and then the second question is just on the guidance so

In the first nine months, you delivered a 2% sales decline at constant currency. So to be flat for the year, for the midpoint of the guidance, it requires an acceleration in the fourth quarter. And it looks like the comps aren't exactly easy. So what are the drivers that can get you to the midpoint of the guidance? And can that all be driven by just consumables? Or do you need a pickup in equipment as well?

Yeah, we do indeed expect that the majority of that, particularly in BPS, should come from consumables for sure. We are also expecting a healthy year ending in LPS, and that is more on the equipment side or instrument side there. But from a roof perspective, as BPS is the larger part, it will be mostly consumables indeed. Brilliant. Thank you very much.

The next question comes from the line of Harry Sefton from UBS. Please go ahead.

Brilliant. Thank you very much for taking my questions. So I just want to go back to the weakness in China. And is this being driven in any part by the fact multinationals are scaling back more in China? And therefore, does that give you an opportunity if they're going to reallocate some of that capacity And are there any geographies particularly that you are seeing some of that capacity being reallocated to if it is? Then my second question would just be on the lack of investment from customers in both equipment and LPS. How can you be confident that this isn't more share loss for yourselves? And are there any lead indicators that you are tracking that give you confidence of when you might start to see an improvement in these businesses? Thank you.

Yeah, sure. So, the first question refers to an aspect, I think, that we were discussing quite a bit last time, and we have been discussing that also a lot with investors during the last couple of months, and that is indeed that we would consider the lower expectation that everyone, I think, has regarding the Chinese market is not a net loss to the global market, but indeed a shift. I think it's a little bit too early how this exactly will be distributed globally. I guess it's not far-fetched to assume that all other geographies will benefit in a way because there are a lot of efforts in the U.S. and in Europe, for example, also to ensure that going forward there is a higher portion of local manufacturing in that region, local manufacturing of drugs. But, of course, we also think that other Asian countries might benefit from that. India, in principle, has a healthy infrastructure for sure, also North Korea, not South Korea, of course. And we also see that the Japanese market has recovered also quite a bit over the last couple of years and is maybe not too bad positioned for that. So I don't think that there will be the one net beneficiary, but again, most importantly, there won't be a net loss of what's not happening in China going forward. And then on the second one, of course, we are tracking that. We are always tracking our win rate of projects that we are working on. And that is a very good early indicator. We are tracking in how many projects we are involved. And then, again, also the win rate, absolutely no indication that we are losing share here. And then, of course, we are also observing then the numbers that those of our competitors are reporting that are listed. And also here, I think we can clearly say absolutely no indication that we would lose shares maybe rather the opposite. When you compare our top-line development over the last five years, and I would recommend five years because then you can ignore for the peaks of volatility during the high times of the pandemic, then you clearly see that we are performing better than the average of the market for top-line and even more so for profitability. That's helpful.

Thank you.

The next question comes from the line of Naresh Chauhan from Intron Health.

Please go ahead. Thank you for taking my question. Just firstly on yields, please. So we've done quite a lot of work on the impact of high yields. And it would seem that your customers are increasingly getting more mammalian products out of the same number of batch runs. And Rosh recently verified this in a presentation. So the question is, how do you see the impact of higher mammalian yields on trend consumable growth? And should we be expecting trend growth to be a few percentage points lower as a result of higher yields? And the second question is on equipment sales as you look forward, given that we're kind of well into... Q4 and the lead times on equipment are relatively long. We should have some sense as to how equipment sales should be progressing into 25. And should we expect a recovery in 25? What are you seeing as you look forward kind of six to nine months, maybe 12 months for equipment sales, please? Thank you.

Thank you for the question. So let me take first yield. Yes, absolutely. You're right. Customers are, as always, have been working on improving efficiencies of their processes and us working on helping them doing that. And I think this is nothing new, not a new trend, a continuous trend. improvements we have seen in the industry. We are looking at the impact on our business. The better you support customers, the better chance you have to win new businesses. With increased yield practically means you can do more with less. In low volumes, you can produce more of the biological product. That also means that some of the stainless steel volumes can be shifted back or shifted to lower volumes in use. So overall, we see that trend not new and positive, actually, for what we are doing. And so long midterm is a positive impact we expect on your question on consumables. Equipment, again, it's weak now, stabilized over the last quarters, and yet we need to see how that will develop going forward. Yeah, too early to say how 2025 will look for equipment.

Thank you very much. Then I think we have come to the end of the conference call, obviously. I would like to thank everyone for your interest in Sartorius and the question and the discussion. I hope you understand that we have to limit the number of questions a little bit to stay within the time that we have reserved for this. Thanks again. Talk to you again when we publish our numbers for 2024. All the best. Take care. Bye-bye.

Thank you.

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