Overview

PolyPeptide Half-year Report 2023

Transformational progress taking shape

Positioning for growth

The peptides market is accelerating, and we are focused on harnessing its potential. Our value proposition, based on our multi-site network, deep process development expertise and strong customer focus, positions us well to capture this growth. We are beginning to see concrete progress in the transformation of PolyPeptide into a large-scale global CDMO, as evidenced by a notable shift in the composition of our revenue by therapeutic area and customer type.

As at 30 June 2023, the metabolic therapeutic area accounted for 43% of revenue compared to 28% as at 30 June 2022. In parallel, large pharma customers represented 65% of our revenue, compared to 41% as at 30 June 2022. We expect these trends to continue as we advance our partnerships in the metabolic and rare disease markets with our large pharma customers. We view our active custom projects pipeline as industry-leading and are confident that it will allow us to drive further growth and long-term value creation.

Strong demand in peptides 

During 2023, PolyPeptide will phase out the bulk of the revenue associated with the coronavirus pandemic, while continuing to invest in growth. In the first half of 2023, reported revenue decreased slightly by 1.4% (2.9% growth at constant currency rates).

However, excluding revenue associated with the coronavirus pandemic, growth was 29.3%. This strong peptide-driven momentum highlights the potential of our partnerships and the significant advancements made within our active custom projects pipeline.

Lower profitability

Our rapid capacity expansion has come with operational challenges and weakened profitability. For H1 2023 we reported a net loss of EUR 34.3 million compared to a profit of EUR 10.2 million in H1 2022, whereby changes in cost absorption and a one-off inventory write-down accounted for more than half of the decline.

We have implemented a robust plan to tackle operational issues and are confident to make progress towards enhancing our effectiveness and efficiency. We have also launched measures to start restoring profitability, which is a key objective for the Group in H2 2023.

Upgrading our infrastructure and capabilities

We have been making significant investments in upgrading our infrastructure and capabilities since 2021. We have grown peptide capacity across our key manufacturing sites and added new development and production suites for oligonucleotides in Torrance, California. In parallel, we kept driving our green chemistry and digitalization agendas and to enhance our analytical capabilities.

We started 2023 with Jens Fricke as our new Global Director of Operations and Juan-José Gonzalez joined PolyPeptide as the new CEO in April. We are now pleased to announce the appointment of Marc Augustin as new CFO. His background in a high-growth CDMO environment with deep finance and operational experience will be valuable as we continue to scale up PolyPeptide.

Guidance for 2023

We have updated our guidance for 2023. Our overarching priority is to fulfill our customers’ demand and continue to grow, while implementing our operational and profitability improvement initiatives.

We now aim for mid to high single-digit percentage revenue growth versus 2022. At the lower end of that range, we expect EBITDA to be around break-even, excluding the EUR 9.5 million write-down of inventory in H1 2023. As previously announced, we will end 2023 with a net loss. Capital expenditures for 2023 are expected in the range of EUR 55 to EUR 65 million, subject to ongoing partnership discussions with customers.

At the beginning of July 2023, we secured a short-term credit facility from our main shareholder, Draupnir Holding B.V., in the amount of EUR 40 million, which together with our existing credit facilities will continue to support our growth ambitions. In the meantime, we continue our negotiations to implement a new long-term financing plan.

Thanks

We would like to express our gratitude to all employees of PolyPeptide for their passion and dedication in servicing our customers. We believe that our culture of customer proximity and collaboration sets us apart in the industry. We remain committed to enabling new healthcare treatments for the benefit of patients all around the world, while creating sustainable long-term value for all our stakeholders.

Sincerely,