Editorial

Peter Wilden, Chair of the Board of Directors, and Juan José González, Chief Executive Officer

Solid progress in H1 2024 – Upgrade of 2024 full-year guidance – Mid-term target to double 2023 revenue by 2028

H1 performance highlights

In the first half of 2024, we achieved solid progress in recovering our financial performance while advancing our capacity expansion program:

EBITDA was EUR 2.9 million versus EUR -19.4 million in H1 2023. Our agenda of operational improvement yielded higher asset utilization and a favorable product mix.
Net cash flows from operating activities were EUR 0.5 million versus EUR -48.3 million in H1 2023. The disciplined working capital management offset the buildup of inventory to support the planned growth in H2 2024.
Capital expenditures reached EUR 20.5 million, or 15.2% of revenue, for projects in Belgium, Sweden, France and the United States. Our large-scale solid-phase synthesis capacity in Belgium is on track with the production ramp-up to start during H2 2024.

Strengthening our organization

To achieve our ambitions, we continued during H1 2024 to drive improvements and to strengthen our organization with additional industrial-scale manufacturing and commercial capabilities.
We restructured the quality organization and appointed new site directors, a new director of quality assurance, new leaders in global development and program management, as well as a dedicated manager to support our green chemistry efforts.
In addition, we are pleased to announce the appointment of Stéphane Varray as Chief Commercial Officer of PolyPeptide, effective January 2025. Stéphane has deep commercial and peptide experience with a successful track record working at Corden Pharma and Lonza.

Updated guidance for full-year 2024

On the back of the solid progress made in H1 2024 and robust customer demand, we upgrade our guidance for the full year 2024. We now expect high single-digit revenue growth versus 2023 at constant currency rates with a positive mid single-digit EBITDA margin, still operating at a net loss.

Our priorities thereby remain unchanged: We focus on meeting the increasing demand of our customers. We continue to strengthen operations and profitability, while we further expand capacity, particularly related to the GLP-1 opportunity.

Operating in an attractive market

Based on third-party market reports, we expect the peptide therapeutics market to grow with a compound annual growth rate of around 10% until 2033, turning it in our view into one of the most attractive markets. We believe that GLP-1 receptor agonist drugs for the treatment of diabetes, obesity and other comorbidities will be the main market growth driver over the next decade, complemented by the advancement of hundreds of pre-clinical and clinical development projects in other therapeutic areas. We also observe a continued trend toward synthetic peptides with complex molecular structures and expect a robust outsourcing trend, especially toward western-based CDMOs given customers’ geopolitical considerations.

While the increasing demand for manufactured volumes is expected to drive competition, we are convinced that PolyPeptide is well positioned to successfully compete with its strong track record of over 1,000 distinct therapeutic peptides manufactured, customer proximity driven by multi-site network and a culture of agility and responsiveness. These strengths are reflected in PolyPeptide’s rich pipeline of custom and commercial projects with large exposure to the GLP-1 opportunity and the large commercial agreements that we communicated in December 2022 and March 2024.

Sharpened growth strategy

We sharpened our growth strategy during H1 2024, taking into consideration the expected rapid market growth and PolyPeptide’s strong market position. Our goal is to be the most innovative peptide CDMO, strengthening competitive advantages in 1) superior pipeline development capabilities, 2) innovation focused on green chemistry and industrial manufacturing and 3) capacity expansion leveraging the potential for modularity.

As part of our strategy, we advanced our capacity expansion roadmap. Focusing on the potential for modular solutions, we plan to add manufacturing capacity across our multi-site network. By design, we expect that modules can be placed in a faster and more flexible manner than pursuing large infrastructure projects. Our approach will allow us to further strengthen customer proximity and provide customers with more flexible options to support their supply chain and growth strategies.

We believe the execution of this strategy will enable PolyPeptide to offer a distinctive value proposition and to further differentiate the Group from competition. More importantly, we believe that we can shape the future of peptide manufacturing through effective and sustainable ways of working and leveraging new technologies. We believe that such transformational changes are needed to meet the sharp increase in customer demand, and PolyPeptide is committed to embracing this challenge.

Mid-term outlook

Our target is to double revenue reported for 2023 by 2028. Revenue growth projections are supported by commitments and supply forecasts of existing customers.

Profitability is expected to approach an EBITDA margin of 25% by 2028, driven by our growth initiatives, improving profitability in the existing base business with higher asset utilization and efficiency as well as operating leverage.

Capital expenditures of 15% to 20% of revenue are required to ensure capacity also beyond 2028. We plan to expand manufacturing capacity in an efficient way, capitalizing on our existing multi-site network and proprietary technology to maximize manufacturing throughput. Our plan is to build additional capacity in phases in line with specific customer projects and their growth trajectory.

Well positioned to make a difference

At PolyPeptide, we are excited about the journey ahead of us, ultimately for the benefit of millions of patients around the world. To prepare for growth, we grew our organization during H1 2024 by adding around 70 positions. We would like to thank our now close to 1,300 colleagues as they strive for excellence while embracing our transformation journey.

On behalf of the Board of Directors and Executive Committee, we would also like to thank our customers and shareholders for their continuous support, confidence and trust.

Baar, 13 August 2024

Sincerely,

Peter Wilden

Chair of the Board of Directors

Juan José González

Chief Executive Officer