===
PolyPeptide Group / Key word(s): Annual Results
PolyPeptide with record revenue growth of 43% in H2 2023 versus H1 2023; operational improvements yielding increased
profitability and cash flow
12-March-2024 / 06:45 CET/CEST
Release of an ad hoc announcement pursuant to Art. 53 LR
The issuer is solely responsible for the content of this announcement.
Media release - ad hoc announcement pursuant to Art. 53 LR

PolyPeptide with record revenue growth of 43% in H2 2023 versus H1 2023; operational improvements yielding increased
profitability and cash flow
Baar, 12 March 2024 - PolyPeptide Group AG (SIX: PPGN), a focused global CDMO for peptide- and oligonucleotide-based
active pharmaceutical ingredients, today announced its results for 2023 and guidance for 2024:
. Revenue of EUR 320.4 million; growth of 14.0% compared to 2022 (18.2% at constant currency rates) on the
back of strong customer demand and peptide-driven momentum
. Operational progress in H2 2023 with revenue of EUR 188.5 million (+43.0% versus H1 2023); EBITDA
improved to EUR 13.4 million (H1 2023: EUR -19.4 million) and net cash flows from operating activities increased to
EUR 84.8 million (H1 2023: EUR -48.3 million)
. 2023 EBITDA of EUR -6.0 million (2022: EUR 38.7 million) with decline driven by the phase-out of the
coronavirus-related business, the ongoing ramp-up of capacity, as well as the operational challenges
. Result for the year of EUR -51.4 million (2022:EUR 7.8 million), driven by foreign currency exchange
losses of EUR 14.5 million (2022: EUR 1.6 million), most of which was offset in other comprehensive income
. 2023 capital expenditures of EUR 54.9 million (2022: EUR 83.0 million), or 17.1% of revenue (2022:
29.5%), bringing the cumulative capital deployment for the three-year period between January 2021 and December 2023
to EUR 214.5 million
. Three large commercial agreements concluded during 2023, complementing the one announced in December
2022, providing the potential to double PolyPeptide's revenue; evolution of commercial model evidenced by increase
of customer prepayments; increase of contract liabilities by EUR 38.6 million in 2023
. Audio webcast and conference call will take place today at 10:30 am CET (details see page 5)
Juan José González, CEO of PolyPeptide, commented: "In H2 2023 we delivered record revenue growth, improved
profitability and cash flow. The priority for 2024 is to meet the increasing customer demand, continue to strengthen
our operations and profitability, while further expanding our capacity. Our recently concluded commercial agreements
combined with our rich pipeline of over 250 peptides, of which 55 are for phase III of clinical development, position
PolyPeptide for an exciting journey of growth."

Key figures^1

kEUR                                             2023    2022     Change 
Revenue                                       320,372 280,978      14.0% 
Custom Projects                          154,453 140,044      10.3% 
Contract Manufacturing                   135,385 110,753      22.2% 
Generics & Cosmetics                      30,534  30,181       1.2% 
EBITDA                                         -5,999  38,670    -115.5% 
EBITDA in % of revenue                      -1.9%   13.8% -15.6 ppts 
Operating result (EBIT)                       -36,468  12,607    -389.3% 
Operating results (EBIT) in % of revenue   -11.4%    4.5% -15.9 ppts 
Result for the year                           -51,440   7,767    -762.4% 
Result for the period in % of revenue      -16.1%    2.8% -18.8 ppts 
Earnings per share (EUR), basic                 -1.56    0.24    -763.3% 
Return on net operating assets (RONOA)          -8.5%    3.2% -11.7 ppts 
Cash and cash equivalents (end of period)      95,706  37,528     155.0% 
Net cash flow from operating activities        36,485   5,460     568.4% 
Capital expenditures                           54,890  82,985     -33.9% 
Capital expenditures in % of revenue        17.1%   29.5% -12.4 ppts 
Total assets (end of period)                  689,088 575,782      19.7% 
Equity ratio (end of period)                    55.3%   73.2% -17.9 ppts 
Employees (# of FTEs, average)                  1,202   1,139       5.5% 

===
Revenue

In 2023, PolyPeptide generated EUR 320.4 million in revenue, representing a 14.0% increase versus 2022 and 18.2% growth at constant currency rates. Excluding the contribution of revenue associated with the coronavirus pandemic, which amounted to EUR 5.8 million in 2023 versus EUR 50.7 million in 2022, revenue grew by 36.6%.

In H2 2023, revenue growth accelerated versus H1 2023 on the back of strong customer demand and operational progress to EUR 188.5 million, representing a substantial increase of 43.0% versus H1 2023 and 28.0% versus H2 2022.

Revenue in 2023 was underpinned by peptide-driven momentum emerging from PolyPeptide's active custom projects pipeline. Several of the phase II and phase III projects for drugs related to metabolic, rare diseases and oncology progressed in their clinical development, with some reaching commercial stage. The number of commercial projects supported during 2023, including those in Generics & Cosmetics, increased to 64, up from 60 in 2022.

Revenue in Custom Projects increased by 10.3% in 2023 versus 2022, and by 22.2% in Contract Manufacturing. Excluding revenue associated with the coronavirus pandemic, revenue showed significant increases of 33.6% and 53.1% respectively. Revenue in Generics & Cosmetics, where no impact from the coronavirus pandemic was recorded, increased by 1.2% compared to the strong prior year.

===

kEUR                                                    2023    2022 Change 
Revenue not associated with the coronavirus pandemic 314,548 230,268  36.6% 
Custom Projects                                 152,786 114,387  33.6% 
Contract Manufacturing                          131,228  85,700  53.1% 
Generics & Cosmetics                             30,534  30,181   1.2% 

===
Within the strong revenue growth in 2023, the revenue shares related to metabolic diseases and large pharma customers increased to 39% and 58% respectively (up from 27% and 42% respectively in 2022), evidencing the ongoing transformation of the Group into a large-scale global CDMO.

Profitability

The gross profit in 2023 was EUR 9.1 million (versus EUR 54.5 million in 2022) and EBITDA was EUR -6.0 million (EUR 38.7 million).

The significant drop in profitability was mainly attributable to the phase-out of the high margin coronavirus-related business, the ongoing ramp-up of additional capacity, as well as the operational challenges that had become apparent towards the end of 2022, and which continued into 2023. Throughout the year, the Group implemented targeted measures for operational improvement, achieving increased profitability and cash flows in H2 2023. These measures included process optimizations related to production planning and execution, efforts to instill technical proficiency and best practice, as well as organizational changes. The Group also tightened its cost management and working capital discipline.

During 2023, the adverse impact on EBITDA from changes in the product mix was EUR 5.0 million, with the phase-out of the coronavirus-related business largely offset by benefits from the peptide-driven momentum. Operational costs increased by EUR 18.3 million, mainly reflecting the ongoing ramp-up for future growth combined with a temporarily lower utilization of assets, including the increase of average FTEs by 5.5%. Inventory write-downs were EUR 19.3 million higher, including a significant EUR 12.5 million write-down of obsolete inventory.

With the Group's measures for operational improvement beginning to bear fruit, profitability in H2 2023 increased to a gross profit of EUR 19.8 million (versus EUR -10.6 million in H1 2023 and EUR 16.6 million in H2 2022) and EBITDA of EUR 13.4 million (EUR -19.4 million in H1 2023 and EUR 12.0 million in H2 2022).

The financial result for 2023 was EUR -21.8 million (versus EUR -5.0 million in 2022), driven by foreign currency exchange losses of EUR 14.5 million (EUR 1.6 million). The majority of these losses relate to the currency translation of an intra-Group receivable with an offsetting effect in other comprehensive income, resulting in a net impact on total equity of zero. Interest expenses amounted to EUR 5.6 million (EUR 2.1 million).

The 2023 result and deferred tax income resulted in an income tax benefit of EUR 6.8 million (EUR 0.2 million), bringing the result for the year to EUR -51.4 million (EUR 7.8 million).

Cash flow and cash position

During H2 2023, the Group significantly improved its cash position, benefiting from successful financing activities, working capital improvement initiatives and customer prepayments. The net cash flow from operating activities in H2 2023 totaled EUR 84.8 million versus EUR -48.3 million in H1 2023, with free cash flow in H2 2023 of EUR 59.4 million (H1 2023: EUR -79.7 million).

In 2023, net cash flows from operating activities reached EUR 36.5 million (2022: EUR 5.5 million). Within that amount, the net cash flow from changes in net working capital was EUR 46.2 million, including a EUR 38.8 million increase in contract liabilities and a EUR 15.5 million decrease in inventories.

This was partly offset by the EUR 29.9 million increase in trade receivables, reflecting the high share of revenue recognized towards the end of the reporting period, while trade payables increased by EUR 17.4 million.

With cash flows from acquisitions of property, plant and equipment as well as intangible assets of EUR -56.7 million (EUR -78.8 million), free cash flow totaled EUR -20.2 million (EUR -73.3 million).

MORE TO FOLLOW) Dow Jones Newswires

March 12, 2024 01:46 ET (05:46 GMT)