Overview

Progress not without challenges

In the first half of 2022, we experienced the combined impact of an increased cost base ahead of planned growth and a more demanding operating environment. Revenue for the period was down by 1.1% to EUR 133.7 million. With the cumulative effect of several factors, including inflationary pressure, the drop in profitability versus the strong previous-year period was larger-than-expected. Adjusted EBITDA declined by 38.2% to EUR 26.7 million.

On the positive side, we continued to see encouraging progress in our active custom projects pipeline and consistently executed on our late-stage phase III pipeline. For the second half of 2022, we expect revenue growth and a partial margin recovery, to be driven by our peptides business. We are continuously strengthening processes within Operations and Quality to address the increased complexities that come with growth, and in response to inflationary trends, we are making our “cost plus” pricing approach more flexible going forward.

Growing volume expectations

At the end of June, our active custom projects pipeline included 218 projects, with around half in two fast growing therapeutical areas: metabolic disorders, including diabetes and obesity, and oncology.

Given the expected dynamics emerging from the pipeline, we are preparing for a significant growth of manufacturing volumes that is projected to outpace our anticipated revenue growth. During the reporting period we continued to expand our infrastructure with capital expenditures of EUR 37.9 million or 28.4% of revenue.

As a CDMO for peptides and oligonucleotides, we are proud to be a reliable partner for our customers mainly in pharma and biotech. We manufacture based on their requirements, whereby the phasing of volumes can vary. The build-up of commercial launch quantities or even the timing of more sizable batches can have an impact on reported results in the short-term.

Confidentiality is a key element of the commercial relationships in our industry. We are mindful that since the IPO in April 2021, we were not always able to answer questions from analysts and investors on specific customer projects with the amount of desired detail. While the contractual obligations prevail, we have decided to provide more insight into the mix of our business.

Updated financial aspirations

In 2021, around EUR 63 million of revenue was associated with the pandemic, followed by around EUR 33 million in the first half of 2022, broadly stable versus the first half of 2021. Consistent with the market update provided on 12 July, we reached an agreement to shift a portion of the business associated with the pandemic on order for the second half of 2022 into 2023. As a result, PolyPeptide now expects revenue growth for 2022 of between 8% to 10%, which implies healthy growth from the peptides business. The adjusted EBITDA margin is now expected at between 22% and 25%, given continued inflationary pressure.

We recognize that the nature of the pandemic is changing, that the macroeconomic environment has become more demanding and that geopolitical developments are unpredictable. However, we have confidence in the structural growth opportunities in our market and more specifically in the potential of our pipeline of customer projects. For the mid-term, PolyPeptide expects to grow its business with a revenue CAGR in the low-teens with varying growth rates year-by-year and a continued progression of the adjusted EBITDA margin towards 30%.

An ambitious rest of the year

We would like to thank our customers for their scientific and commercial efforts in creating relief for millions of patients across the world and significant opportunities for PolyPeptide. Delivering on our aspirations in the second half of 2022 requires strong execution. With our integrated strategy we continue to expand our capacities, while maintaining the focus on customers and green innovative manufacturing technologies.

Over 100 colleagues joined PolyPeptide in the first half of the year. We should not miss the opportunity to welcome them and to also thank every single employee on behalf of the Board of Directors and the Executive Committee for their contribution in making PolyPeptide a trusted long-term partner. Their continued commitment is at the heart of our ability to deliver on our rich agenda and to turn plans into success.

Sincerely,