Business Review
In H1 2024, PolyPeptide generated EUR 135.0 million in revenue, representing a 2.4% increase versus H1 2023 or a 2.9% growth at constant currency rates. Commercial revenue1 increased by 8.6%, reflecting solid customer demand and favorable market trends across PolyPeptide’s broad portfolio. Development revenue1 declined by 5.1% versus H1 2023 reflecting project phasing and the continuing recovery within the biotech funding environment.
PolyPeptide’s development capabilities are reflected in its pipeline of custom projects, which it views as industry leading with broad diversification and strong exposure to GLP-1 receptor agonist drugs and oncology. At the end of H1 2024, the pipeline included 196 active projects, with 29 projects for phase III of clinical development (end of 2023: 204 and 29, respectively). In addition, PolyPeptide had 64 commercial projects ongoing (unchanged versus the end of 2023).
PolyPeptide made significant progress in restoring profitability. The gross profit in H1 2024 was EUR 10.5 million versus EUR -10.6 million in H1 2023 and EBITDA was EUR 2.9 million versus EUR -19.4 million.
The increase in EBITDA was driven by operational improvements leading to a higher utilization and a favorable product mix in the aggregated amount of EUR 18.5 million. Investments for accelerated growth led to higher personnel expenses, mostly from the increase in average full-time equivalents, of 8.1% compared to H1 2023. The higher personnel expenses combined with inflationary trends resulted in increased costs in H1 2024 of EUR 5.7 million versus H1 2023. Furthermore, EBITDA in H1 2023 included a one-off write-down of inventory of EUR -9.5 million.
The operating result (EBIT) in H1 2024 was EUR -12.6 million versus EUR -34.5 million in H1 2023. The financial result was EUR 0.3 million versus EUR -4.8 million, whereby higher interest expenses in H1 2024 related to the revolving credit facility (RCF) communicated in October 2023 were more than offset by the revaluation of an intra-Group receivable.
The result for the period and deferred tax income resulted in an income tax benefit of EUR 0.9 million in H1 2024 versus EUR 5.0 million in H1 2023, bringing the result for H1 2024 to EUR -11.4 million versus EUR -34.3 million.
The increased profitability contributed to an improved operating cash flow. Net cash flows from operating activities reached EUR 0.5 million in H1 2024 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.
Net cash flows from investing activities were EUR -32.2 million versus EUR -31.1 million in H1 2023, bringing the free cash flow to EUR -29.3 million. Cash and cash equivalents at the end of H1 2024 reached EUR 48.5 million versus EUR 9.0 million at the end of H1 2023 and EUR 95.7 million at the end of 2023. As at the end of H1 2024, EUR 40 million of the committed EUR 111 million was drawn from the RCF.
PolyPeptide continued its capacity expansion program during H1 2024 across its manufacturing network advancing projects in Belgium, Sweden, France and the United States of America. The commissioning of the large-scale solid-phase synthesis capacity in Belgium is on track with the production ramp-up to start during H2 2024. Capital expenditures reached EUR 20.5 million or 15.2% of revenue (14.7% in H1 2023).
Simultaneously, PolyPeptide progressed with its operational improvement agenda, focusing on optimizing production planning and execution, enhancing technical proficiency and best practice, implementing organizational changes and maintaining strict cost management and working capital discipline.
PolyPeptide drives operational excellence across its manufacturing network to achieve efficiency gains and increase capacity utilization. These are expected to mitigate the temporary margin dilutive impact from the ongoing capacity expansion program. With this balanced approach, PolyPeptide seeks to continuously recover profitability over coming periods.
During H1 2024, PolyPeptide undertook transformational steps to strengthen its organization with additional industrial-scale manufacturing and commercial capabilities. It appointed new directors for its manufacturing sites in the United States of America, France, and Sweden, complementing the appointment of a new director for the manufacturing site in Belgium in H2 2023.
It further strengthened its Group functions, including the restructuring of its quality organization, where a new director of quality assurance was appointed. In addition, PolyPeptide appointed new leaders in global development and program management as well as a dedicated manager to support its green chemistry efforts.
With its enhanced focus on commercial excellence, PolyPeptide appointed Stéphane Varray as Chief Commercial Officer and member of the PolyPeptide Management Committee, effective January 2025.
On the back of the solid operational progress made in H1 2024 and robust customer demand, PolyPeptide upgrades its guidance for the full year 2024. It now expects:
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Previous |
New |
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Revenue growth in % vs 2023 (at constant currency rates) |
Mid to high single-digit |
High single-digit |
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Profitability |
Positive EBITDA, operating at a net loss |
Positive mid single-digit EBITDA margin, operating at a net loss |
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Capital expenditures |
EUR 60 to 70 million |
EUR 60 to 70 million |
The upgraded guidance for 2024 implies that revenue in H2 2024 will exceed the strong revenue in H2 2023. PolyPeptide’s priorities for 2024 remain to meet the increasing customer demand, continue to strengthen operations and profitability, while further expanding capacity, particularly related to the GLP-1 opportunity.
PolyPeptide operates in an attractive growth market and believes 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. This will be complemented by the advancement of hundreds of pre-clinical and clinical development projects in other therapeutic areas.
Based on third-party market reports, PolyPeptide expects the peptide therapeutics market to grow with a compound annual growth rate of around 10% until 2033. It observes a continued trend toward synthetic peptides with complex molecular structures and expects a robust outsourcing trend, especially towards western-based CDMOs given customers’ geopolitical considerations.
While the increasing demand for manufactured volumes is expected to drive competition, PolyPeptide believes to be 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 communicated in December 2022 and March 2024.
PolyPeptide sharpened its growth strategy during H1 2024, taking into consideration the expected rapid market growth and PolyPeptide’s strong market position, as well as the large commercial agreements communicated in December 2022 and March 2024. Its goal is to be the most innovative peptides 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 its strategy, PolyPeptide advanced its capacity expansion roadmap. Focusing on the potential for modular solutions, it plans to add manufacturing capacity across the multi-site network. By design, it expects that modules can be placed in a faster and more flexible manner than pursuing large infrastructure projects. The approach will allow PolyPeptide to further strengthen customer proximity and provide customers with more flexible options to support their supply chain and growth strategies.
PolyPeptide targets 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 growth initiatives, improving profitability in the existing base business with higher asset utilization and efficiency as well as operating leverage (e.g. better absorption of global overhead and economies of scale).
Capital expenditures of 15% to 20% of revenue are required to ensure capacity also beyond 2028. PolyPeptide plans to expand manufacturing capacity in an efficient way capitalizing on its existing multi-site network and proprietary technology to maximize manufacturing throughput.
It plans to build additional capacity in phases in line with specific customer projects and their growth trajectory. The phasing of the capacity being made available is expected to result in an uneven year-on-year growth of revenue and operational expenses, impacting profitability for a given period.
By implementing its strategy, PolyPeptide expects an increasing share of revenue from commercial activities. I Furthermore, it refocused its half-year disclosure practice to better reflect the relevant drivers and trends. PolyPeptide’s guidance and mid-term outlook assumes, inter alia, no unexpected adverse events.