Catalent, Inc.

Hello and welcome to today's Catalan Incorporated Second Quarter Financial Year 2021 Earnings Call. My name is Bailey and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to Paul Serdes, Vice President of Investor Relations. Paul, please go ahead.

Good morning, everyone, and thank you for joining us today to review Catalan's second quarter fiscal 2022 financial results. Joining me on the call today are John Cheminski, Chair and Chief Executive Officer, Alessandro Maselli, President and Chief Operating Officer, and Tom Castellana, Senior Vice President and Chief Financial Officer. Please see our agenda for today's call on slide two of our supplemental presentation, which is available on our investor relations website at investor.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 on forward-looking statements. Slides 4 and 5 discuss Catalan's use of non-GAAP financial measures, and our just-issued earnings release provides reconciliation to the most directly comparable GAAP measures. Please also refer to Catalan's Form 10-Q that was filed with the SEC today for 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 Chmielewski whose remarks will cover slide six of seven of the presentation.

John Chmielewski Thanks, Paul, and welcome everyone to the call. Catalan's strong start to fiscal 2022 continued in the second quarter. Our financial results were driven by continuing strong growth in our biologics business with additional support from our other business segments as we work with our customers to deliver thousands of different products that help people live better, healthier lives. The recent addition to our offerings of consumer-preferred gummy dosage forms for nutritional supplements through the acquisition of Batera added another growth engine on top of our robust organic performance. The strong second quarter, along with continued momentum in the business, has led us to again increase our fiscal 2022 guidance which Tom will review later in the call. Our net revenue for the second quarter was just over $1.2 billion, increasing 34% as reported or 35% in constant currency compared to the second quarter of fiscal 2021. When excluding acquisitions and divesters, organic growth was 32% measured in constant currency. Our adjusted EBITDA of $310 million for the second quarter increased 39%, both on an as-reported and constant currency basis, compared to the second quarter of fiscal 2021. When excluding acquisitions into best years, organic growth was also 39% measured in constant currency. Our adjusted net income for the second quarter was $163 million, or 90 cents per diluted share, up from 63 cents per diluted share in the corresponding prior year period. The biologic segment, driven by continued high utilization of our drug product assets, was again the top contributor to Catalan's financial performance. The segment experienced organic net revenue growth of 59%, driving an EBITDA increase of more than $60 million over the second quarter of last year. Our legacy offerings in our soft-gel and oral technology segment continued to experience the recovery from pandemic-related headwinds that we had anticipated, and the segment results were further enhanced by the acquisition of Batera. Organic growth was very strong, as year-over-year demand for both prescription and consumer health products recovered nicely over the same period last fiscal year, a quarter that included pandemic lockdowns. Though net revenue is now higher than compared to the pre-pandemic second quarter of fiscal 2020, there are still a few headwinds and challenges driven by the ongoing pandemic with pockets of demand still not at historic levels. However, We're pleased that our base business, strong growth and product development, and robust prescription drug pipeline are more than overcoming some of the headwinds that still exist. In addition to our positive organic performance, we received a strong boost from the first quarterly contribution from Batera, which added more than 20 percentage points of net revenue growth to the segment. The Batera acquisition was an important factor in leading us to raise this segment's long-term net revenue growth rate to 6% to 8% and improving its margin profile. The acquisition is off to a better than expected start, and we're seeing high interest in gummy formats from our consumer health customers. Our oral and specialty delivery segment also saw continued organic net revenue growth after facing headwinds in fiscal 2021. As with soft-gel and oral technology segment, there are improving market dynamics across our oral and specialty delivery segment. These dynamics are most notable this quarter in our early phase development offerings and rising demand for orally delivered Zytus commercial products. Finally, our clinical supply services segment posted high single-digit net revenue and EBITDA growth compared to the second quarter of fiscal 2021. As highlighted last quarter, we opened new CSS facilities in San Diego, California and Shiga, Japan in the first half of this fiscal year and expect them to be long-term growth drivers for the segment. On our last several calls, I've detailed our capital expenditure projects across the company, most notably in support of our biotherapeutics and cell and gene therapy offerings. I'm very proud of our team's ability to navigate the challenges presented by the pandemic, including those presented by the global increase in cases related to the Omicron variant to keep these critical growth projects on track. With no change to the timeline or scope of these projects, we thought it would be helpful to give you an update on the progress of our OneBio service offering, which we first announced in June of 2019. OneBio combines our drug substance and cell line development with our drug product and clinical supply services to help reduce development timelines, risk, and complexity for our customers to get their therapies to patients, all uniquely with one CDMO partner. Since we introduced this initiative, we've signed more than 20 development programs, creating an additional feeder channel for our commercial pipeline. Since originally launching as an early stage offering specifically for preclinical for phase one programs, we've now expanded the offerings to support late stage programs based on customers' needs. We now have several phase two and phase three programs in progress or signed. We also recently completed the first one bio customer CGMP batch using our new small scale filling line that we acquired in Bloomington in September of 2020. We continue to see interest from existing and potential customers who are looking for a single proven partner to help them reduce development timelines, risk, and complexity in getting their therapies into the clinic and to patients faster. And this is, of course, not limited to our biotherapeutics customers. We have a longstanding history of optimizing the successful development of small molecules as well. and recently launched a new service in our oral and specialty delivery segment called Express Pharmaceutics that is designed to accelerate the development of oral drugs through Phase I clinical trials. Our team will integrate formulation development and provide on-demand clinical manufacturing, regulatory support, and clinical testing guided by real-time clinical data to reduce the time, potentially by half, to complete first-in-human clinical trials. I'd now like to make a few comments regarding our CEO transition plan announced last month. Catalan is in a strong position given its growth history and trajectory, its increased profitability, and its proven success with strategic execution, including the transformation of the company over the last few years as we've grown our biologic segment and further diversified our portfolio. Catalan's offerings are not only balanced, they closely match the industry's R&D pipeline. After my 12 years at the helm, it makes sense to refresh Catalan's leadership, particularly when the board agrees that we have a top industry leader in Alessandro to advance Catalan seamlessly. I'm very proud of and impressed with our board for overseeing such a thoughtful and thorough succession planning process. Alessandro is uniquely positioned to lead a complex CDMO like Catalan. He started off at the site level over a decade ago, worked his way up to larger sites, then ran multiple sites, rose up to become our Senior VP of Operations, and eventually became an integral part of our leadership team in his role as our President and COO. Over the last three years, Alessandro has been running Catalan to a significant degree, having ownership for all of our business units, go-to-market strategies, and technical operations. He has worked hand-in-hand with me on developing and executing our strategy and has been pivotal in all our decisions regarding acquisitions and post-acquisitions integrations. With that said, I'd now like to turn the call over to Alessandro, who will walk you through our recently announced long-term financial targets. Alessandro?