Catalent, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Catalan Inc. first quarter fiscal year 2021 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Paul Srdanc, Vice President, and Faster Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us today to review Catalan's first quarter 2021 financial results. Joining me on the call today are John Cheminski, Chair and Chief Executive Officer, and Whitney Joseph, Senior Vice President and Chief Financial Officer. We see our agenda for this call on slide two of the supplemental presentation, which is available on our investor relations website at www.catalan.com. During our call today, management will make forward-looking statements and refer to non-GAAP financial measures. It is possible that actual results could differ from management's expectations. We refer you to slide three for more detail. Slides four and five discuss the non-GAAP measures, and our just-issued earnings release provides reconciliations to the most directly comparable GAAP measures. Please also refer to Catalan's Form 10-Q regarding additional information on the risks and uncertainties that may bear on our operating results, performance, and financial condition, including those related to the COVID-19 pandemic. Now, I would like to turn the call over to John Cheminski, whose prepared remarks are covered on slides six and seven of the presentation. John?

Thanks, Paul, and welcome everyone to the call. Before diving into the first quarter results, I want to remind you that our top priority during the COVID-19 pandemic continues to be keeping our employees safe and maintaining business continuity. I'm proud of our teams who are literally working around the clock to deliver high quality products and services, including potential COVID-19 therapies and vaccines for our customers and their patients around the world. I'm pleased to report we had a very strong start to fiscal 2021, which, when combined with the higher levels of net demand we now expect for the back half of the year, led us to raise our fiscal 2021 revenue expectation by $130 to $180 million in our adjusted EBITDA expectation by $40 to $60 million. In the first quarter, our constant currency revenue growth was 26% year over year, of which 20% was organic. As a reminder, We also reported more than 20% organic year-over-year revenue growth last quarter. Adjusted EBITDA of $174 million represents constant currency growth of 35% over the first quarter of fiscal 2020, including organic growth of 23%. Our adjusted net income for the first quarter was $78 million, or 43 cents per diluted share. up from $0.26 per share in the first quarter of fiscal 2020. The biologic segment was by far the strongest contributor to our first quarter results as net revenue doubled over the first quarter of fiscal 2020, including 83% organic growth with market expansion of more than 900 basis points to 28.2%. While projects related to COVID-19 were a notable contributor to our biologic segment growth, similar to last quarter, underlying demand across the segment's offerings was very high, even when excluding these projects. Biologics continues to become a more meaningful contributor to our growth profile, with the segment contributing 44% of the company's revenue in the quarter compared to 28% in the first quarter of fiscal 20. Also adding to the quarter's performance was the clinical supply services segment, which showed revenue growth after a dip in the fourth quarter of fiscal 2020 when COVID-19 related clinical trial disruptions were most abundant. The top line growth in these two segments more than offset headwinds experienced in the soft gel and oral technologies and oral and specialty delivery segments. In soft gel and oral technologies, consumer health products had a slow start to the year, which we attribute in part to a decrease in occurrence of common flus and colds due to limited travel and social gatherings worldwide. Softgel and oral technologies also experienced a decrease in revenue for prescription products in North America. Looking ahead, we believe that some of the products we manufacture that were approved earlier this year experienced muted launches due to the COVID-19 pandemic. We expect these products and other planned launches will see increased demand and will contribute more in the second half of the fiscal year, leading soft gel and oral technologies to better performance than the first half. For oral and specialty delivery, we saw continued revenue growth and new product momentum in our Zytus platform, which was offset by a decrease in early phase development activity due to pandemic-related mitigation efforts, including lockdowns experienced worldwide. We continue to be very optimistic for long-term growth in the OSD segment given its 200-plus molecule pipeline, including the new novel Zytus Ultra technology, which will enable higher drug loading into each Zytus tablet. We believe that the Zytus Ultra platform after its commercial launch in the 2022 to 2023 timeframe will drive significant volume growth and can potentially lift the franchise to over 2 billion doses per year compared to the current annual run rate of approximately 1.4 billion. I'd now like to provide you with a brief update on our COVID-19 related programs. as Catalin continues to be a go-to company for potential COVID-19 therapies and vaccines. We've now been awarded work on more than 60 COVID-19-related compounds, including the three Operation Warp Speed vaccine programs we previously highlighted. We're actively working on projects across all four of our business segments, with some compounds involved in projects across multiple offerings. The strategic investments we've made in biologics capability and capacity over the last few years, including the $200 million capital additions to our U.S. drug product and drug substance capacity we began in January of 2019 and our acquisition of the NANI facility were well-timed to enable us to address the increased demand we are seeing from the combination of our ongoing business and our COVID-19 therapeutic and vaccine candidates. This incremental capacity in our multi-dose vial filling manufacturing capability has facilitated our ability to manufacture potentially billions of COVID-19 vaccine doses over time while continuing work on behalf of other customers. Our response to our customers' needs has not only raised our profile with both large pharma and biotech customers, it has also resulted in an acceleration of our strategic capacity expansion plans, which will help to support the achievement of our long-term growth targets. To better enable us to serve all of our customers during this period of accelerated demand, we recently made two additional drug product investments in Bloomington, Indiana. The first is the addition of a $50 million high-speed biofilling line that will supplement our current capacity. Given our experience in facility and capacity expansions, we expect to accelerate this project from a typical 18-month timeframe to approximately 10 months in total. We expect to bring this new high-speed biofilling line into our operations in the fourth quarter of fiscal 2021 to support the growing pipeline of commercial launches at the site. The second drug product investment is the acquisition of a 23,000 square foot manufacturing facility three miles away from our Bloomington campus, where we will create a North American center of excellence for early phase clinical biologics formulation development and drug product fill finish services. This $14 million investment which includes the acquisition, build-out, and qualification of the facility, is expected to begin supporting customer programs starting in January. The facility will enhance our one-bio drug development offering as it includes a new flexible filling line ideal for enabling rapid changeover for greater efficiency in the manufacture of clinical batches. We also recently announced the expansion of our gene therapy campus near the BWI airport to support our growing customer pipeline and increased market demand for gene therapy products, which includes an overall investment of approximately $130 million to add five additional phase three and commercial scale manufacturing suites, as well as cold storage warehousing in the first half of calendar 2022. When this project is completed, the BWI campus will house a total of 15 gene therapy manufacturing suites, each designed to accommodate multiple bioreactors for commercial supply. As we highlighted last quarter, the first facility on the campus was recently approved by the FDA for commercial manufacturing, and we expect to have all 10 cGMP suites qualified and operational in the next few months. Five of these suites are already qualified and operational, including one suite where we accelerated startup during Q1 in order to provide drug substance manufacturing to AstraZeneca for the University of Oxford's adenovirus vector-based COVID-19 vaccine candidate. We are also expanding our footprint in cell therapy, where we opened our U.S. clinical facility in Houston earlier this year, and we continue to build out our commercial scale production and fill finish facility in Gosselies, Belgium, which is scheduled to open in late fall 2021. In addition, last week we signed an agreement with Bone Therapeutics to acquire its subsidiary with a 41,000 square foot purpose-built CGXP facility and manufacturing assets which are located next to our facility in Gosselins. Additionally, Catalin will manufacture clinical material for bone therapeutics, allogeneic osteoblastic cell therapy products. When the transaction closes, which we expect to occur this month, the additional manufacturing capacity and technical expertise from this facility and its employees will immediately expand our clinical and commercial capacity for current late-stage customers, as well as create a bigger center of cell therapy excellence for Catalan in Europe. In addition to capital investments and the addition of new facilities to our global Catalan network, we continue our innovation and partnership efforts across the company. The first example is also in our cell therapy offering, where we announced an agreement with Brainstorm Cell Therapeutics to manufacture its autologous cell therapy being investigated for the treatment of ALS, also known as Lou Gehrig's disease. Under the agreement, the new facility in Houston will undertake the transfer of the manufacturing process to provide future CGMP clinical supply for this treatment with the potential to extend the partnership to include commercial supply should the treatment be approved. We're proud to support Brainstorm in its pursuit of a solution for this critical unmet patient need. Another example is our recent partnership with Exalexis. where our Redwood Biosciences subsidiary will develop multiple antibody drug conjugates, or ADCs, for Exalexis using our proprietary Smart Tag technology over a three-year period. Under the partnership, Exalexis will provide R&D funding targeting various oncology indications, and Catalin will be eligible for development and commercial milestones and royalties on net sales of any product commercialized as part of the collaboration. The Smart Tag platform has recently demonstrated promising results in the clinic, highlighting the potential to create ADCs with significantly expanded therapeutic indices for cancer patients. Innovation at Catalan also continues to make further advancements to our soft-gel technologies, where we recently launched Opti-Gel DR, a technology for the formulation and manufacture of delayed enteric release soft gels. This new technology eliminates the coating step and solves the processing and performance challenges associated with conventionally coated delayed release soft gels and has the potential to encapsulate a wide range of ingredients. This latest evolution allows our customers to design more efficient products and bring superior pharmaceuticals and nutraceuticals to patients. Our site in St. Petersburg, Florida, is the first to offer this new technology with the capability being expanded to our other soft gel manufacturing facilities in Brazil, Canada, Germany, Italy, and Japan in the future. And finally, I'm proud to highlight that in September, Catalan was added to the S&P 500 index. I believe this designation is an affirmation of the substantial progress we've made in executing our growth strategy since our IPO in 2014. Of course, this progress would not be possible without the passion and dedication of our more than 14,000 employees whose commitment to our mission to help people live better, healthier lives has never been more critical or valued. I'd now like to turn the call over to Wetney, who will review our financial results for the quarter and our enhanced fiscal 2021 guidance.