COMUNICADO: Gerresheimer Extends Business Model and Increases Growth Forecast (1)

Publicado 11/07/2018 23:16:14CET

DÜSSELDORF, Germany, July 11, 2018 /PRNewswire/ --

- With the acquisition of Sensile Medical, Gerresheimer is extending its business model in the direction of an Original Equipment Manufacturer (OEM) for drug delivery platforms with digital and electronic capabilities for pharmaceutical and biopharmaceutical customers. The purchase price is a maximum of EUR 350m with an initial payment of EUR 175m. - Gerresheimer has secured two major orders for the manufacture of inhalers and prefillable syringes but lost a significantly smaller order for inhalers resulting in restructuring affecting the plant in Küssnacht, Switzerland. - This will require higher capital expenditure - without consideration of Sensile Medical - by a minimum of two and a maximum of four percentage points of revenues at constant exchange rates in the years 2019 and 2020. Among other things the higher expenditures will be used for capacity expansion at Horsovsky Tyn (Czech Republic), further investments in automation and a new plant in Eastern Europe. - For the financial years 2019 and 2020 - without consideration of Sensile Medical - the adjusted EBITDA margin will therefore be temporarily reduced by approximately one percentage point, compared with the financial year 2017. This is a consequence of proportionately higher revenues in the low margin engineering and tooling business for the new major orders as well as increased expenditures for relocation, employee training and production start-up/ramp-up. - In the years 2021 and 2022, revenues - without consideration of Sensile Medical - are expected to increase by two percentage points beyond the usual rate of growth, as is the adjusted EBITDA margin. Capital expenditure will then return to approximately 8%. - For the current year, Gerresheimer anticipates a strong second half without consideration of Sensile Medical and has narrowed its revenue forecast to the upper end of the guidance range.

Gerresheimer is acquiring Swiss technology company Sensile Medical AG and thus fundamentally extents its business model. The acquisition enables Gerresheimer to offer drug delivery platforms with digital and electronic capabilities for pharmaceutical and biopharmaceutical customers. "We are accelerating our growth and laying vital groundwork for the years ahead. For Gerresheimer, Sensile Medical is a perfect fit, as it develops innovative products and platforms for drug delivery, including digital connectivity. Sensile Medical is already working with customers on highly successful projects dealing with devices for diabetics and patients with heart complaints and therapy areas such as Parkinson's disease. Sensile Medical lays the foundation for a major extension of our business model in innovative application areas. We have also secured two major orders in our normal business, meaning that we can expect higher revenue growth and increased profitability in the medium term. The first half of the current financial year is going as expected, with earnings per share, in particular, performing well. We anticipate a strong second half year and have accordingly narrowed our revenue forecast to the upper end of the range," said Rainer Beaujean, Speaker of the Management Board and Chief Financial Officer. 

Acquisition of Sensile Medical 

By adhering to its four growth drivers-stronger growth with existing and new customers, ongoing product development and innovation, regional expansion, and additions to the service and value portfolio-Gerresheimer has now succeeded in taking a further major step forward: After the balance sheet date, the Company signed an agreement for the acquisition of Sensile Medical AG (Olten/Switzerland). The purchase price will be a maximum of EUR 350m depending on the attainment of contractually specific milestones. The initial payment is EUR 175m. By making this strategic acquisition, Gerresheimer gains a highly innovative technology, thus enhancing its capability and product portfolio. This is a building block in the Company's long-term development toward an original equipment manufacturer (OEM). Sensile Medical's leading position in micro pump technology combined with drug delivery devices featuring electronic and connected capabilities for medical applications progresses to market readiness in specific customer projects with pharma companies. By contrast to the contractual manufacturing model in the Gerresheimer Business Unit Medical Plastic Systems, Sensile Medical is involved at pharma producers in an earlier phase of drug and therapy development. In an already well-advanced collaboration, for example, pharma group Sanofi contributes its many years of experience with insulin and solutions for the treatment of diabetes. A further party to the same joint project is Verily, a company in the Alphabet group, with its expertise in integrating microtechnology and digital health technology. Sensile Medical holds a large number of patents and is remunerated by the pharma companies it partners with on attainment of specified milestones in the development phase and by way of royalties after product launch. It generates additional revenue from the sale of devices, where the products can be manufactured either by external producers or by Gerresheimer's Medical Plastic Systems Business Unit. As a result, the new division has little capital expenditure, a small asset base and low net working capital. An initial, preliminary purchase price allocation has shown that the transaction will result in virtually no goodwill and that the acquired technology will consequently result in amortization of fair value adjustments of approximately EUR 25m per year over the next 15 years. As has been the case with previous acquisitions, the amortization of fair value adjustments will be adjusted out in the determination of adjusted net income.

On the basis of the current contractually secured project pipeline, the initial, preliminary expectation for Sensile Medical's revenues and adjusted EBITA is presented in the table below.

FY FY FY FY in EUR m 2018 2020 2022 2027 Revenues ~ 15 ~ 100 ~ 200 ~ 400 thereof Development ~ 13 ~ 40 ~ 10 - Parts ~ 2 ~ 55 ~ 160 ~ 340 Royalties - ~ 5 ~ 30 ~ 60 Adjusted EBITA ~ -2 ~ 10 ~ 25 ~ 90

The Company naturally expects to obtain new customer projects in the future, which will further add to this pipeline. This may make it possible among other things to further raise development revenues, beyond 2020, although this is not yet secured by contracts. Sensile Medical is to become the Development Division covering the field of value added devices for the entire Gerresheimer Group.

New major orders and initial, preliminary guidance for the financial years 2019 to 2022 - without consideration of Sensile Medical 

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