Q3 2020 Earnings Call

20 earnings call and webcast.

At this time, all participants' lines on a listen only mode. After the speakers presentation. There will be a question answer session and to ask a question. During the session you need to press star one on your telephone.

Please be advised that today's conference is being recorded in if we were already further assistance. Please press star Zero I'd now like turn the conference over to your Speaker today, Paul Surdez, Vice President of Investor Relations. Thank you and please go ahead Sir.

Good morning, everyone and thank you for joining us today to review Catalents third quarter fiscal year 2020, <unk> financial results.

Joining me on the call today, or John Chiminski Chair, and Chief Executive Officer, and what New Joseph Senior Vice President and Chief Financial Officer.

Please see our agenda for this call and fly to over a supplemental presentation, which is available on our Investor Relations website at Www Dot Catalent Dot com.

During our call today management will make forward looking statements and refer to non-GAAP financial measures. It is possible that actual results could differ from management's expectations.

We refer you to slide three for more detail slide three four and five discuss the non-GAAP measures that are just issued earnings release provides reconciliations to the nearest GAAP measures.

Add on form 10-Q to be filed with the FCC. Later today has additional information on the risks and uncertainties that may bear on our operating results performance and financial condition.

Moving those related to that Cobot 19, pandemic now I would like to turn the call over to John Chiminski.

Thanks, Paul and welcome everyone to the call.

I will start today's comments with an overview of our response to the covert 19 pandemic and how our early planning to implement responsive measures and quick reactions to emerging in unprecedented developments have enabled us to maintain business continuity.

I'm proud to report that the tireless efforts of employees across our company and our strong financial position have together permitted us to continue to meet our commitments to our internal and external stakeholders. Please refer to slide six and seven for our Kobin 19 discussion.

First and foremost our top priorities are ensuring that our employees have a safe and secure working environment. While at the same time, keeping our facilities open so that the vital medicines, we develop in produce are available for patients.

Kevin was proactive in February establishing a covert 19 response team and creating new processes to support our production workers.

So the big clean competently come to work.

We continue to follow in many cases, even exceed local steep and national guidelines.

Given our GMP culture, which is always included training for employees to stay home is sick and to promptly report illness, we had a strong foundation on which to expand our safety measures.

Some of the measures. We added include severely restricting visitor and non essential employee access to our sites.

Reorganizing, our workflows and adding shifts to maximize social distancing.

Effectively sourcing PE and requiring the use of masks.

Implementing virtual video inspections of our facilities for customers and regulators, eliminating almost all business travel.

Facilitating safer alternatives for travel to and from work.

And enhancing our infrastructure to comfortably handle the extra load for our employees that are able to work remotely.

Looking toward the future we have initiated a post luck Lockdown task force, which focuses on operating during the next phase of the coated 19 pandemic.

Roughly 75% of AR 13500 employees do not have roles that allow for them to work from home.

To recognize our site based production in support employees for their personal commitment reliability and resilience in keeping our sites running during its global emergency we're providing most of our site based employees with thank you bonuses totaling more than $5 million.

Kevin has more than enough cash to pay these bonuses itself, but as a sign of our managements sincere appreciation in our commitment to fiscal responsibility. These bonuses will be partially funded by contributions from the salaries of our executive and senior leadership teams.

I personally volunteered to have might pay reduced by 40% for the next three months to support this effort.

Our employees are extremely motivated and driven by our patient first culture as they know that their work improves the health and wellbeing of patients around the world.

And now in addition to the thousands of important products. We produce every year. We're all extremely proud to be working with our customers on multiple coded related vaccines treatments in diagnostics to detect present and address symptoms and effects of this disease and I will share more with you on these developments in.

Just a few moments.

I'm proud that Catalents committed employees have kept our facilities open and our quality intact.

However, the situation remains fluid and I want to be clear that we will not continue to keep a site or production line up and running if we think it isn't save for employees or will negatively impact quality.

Managing our supply chain is another critical component of maintaining business continuity.

We continue to stress test and serve a deep into our supply chain to mitigate risks.

To date, we've not identified any significant delayed that may have a substantial effect on the delivery of any product or clinical trial supplies or that may impact our development services.

We've adopted specific procedures to minimize management manage future disruption to our ongoing operations, including expanding our safety stock of raw materials, and securing personal protective equipment across our network as well as ongoing monitoring of our suppliers stock levels to mitigate impact on future delay.

Memories.

Note that our inventory levels will likely rise as a result of our proactive actions to secure a safety stock for longer than normal periods.

We have successfully navigated supply chain in other coated related complexities us bar and our proactive and continuing efforts position us for continued success.

However, the supply chain for our customers products is dynamic and fluid. So we will continue to focus on proactively identifying and resolving any global logistical challenge and there may be unforeseen challenges ahead.

When thinking about demand for our products and services. It should not surprise you given our business model that we see both potential challenges and potential opportunities as we respond to the coded 19 pandemic.

However, due to the diversity of the 7000 products in our portfolio with our top 20 products, representing just 20% of revenue and our single largest at 4%. We're not currently seeing a net shift in overall demand.

We have identified several coded related trends with respect to the demand business segments, and we would like to share with you. Some notable observations.

First.

So we produce we've seen so.

In customer forecasts and orders, which in both the third quarter and to date in this quarter had been largely offsetting.

Second.

Clinical supply services segment, we experienced strong year on year growth in the third quarter.

Contributing to this growth was a notable surge in storage and distribution services, but that has moderated in the fourth quarter to date.

We continue to monitor a variety of developing trends in this business, including to see whether widely predicted slowdown in clinical trials is actually occurring.

But we also note that CSS remains catalents smallest business segment. So these trends are likely to have only limited effect on catalents overall results.

Finally about 30% of our revenues are for our development services across multiple segments, representing a wide range of R&D solutions with most of the revenue tied to products that are in the later stages of development.

It's important to note that we work on more than 1000 development projects at any one time and it's one of the strengths of Catalent that are broad range of customers products and programs mean that no program is material to us.

We've not experienced a notable slowdown in demand for our development services, but we are actively monitoring the situation and continue to take the pulse of our customers.

In the event there is a short term decrease in demand for some early stage development services. It may be offset by an increase for cobot related services, depending on the size and duration of any potential market chips and the timing of coded related projects.

Due to our significant development experiencing capabilities across a broad range of advanced technologies. We are now helping our customers to develop manufacture and supply coded 19 vaccines and treatments across all four of our business segments, including projects for drug substance drug product.

Oral respiratory analytical chemistry and clinical supply services.

As of last week, we've been presented with approximately 100 opportunities for coated related programs involving roughly 90 molecules, which we estimate to comprise roughly 45% of all cobot 19 products and treatments currently under development.

Some of these projects have already been signed including the partnership we announced on April 29, with Johnson and Johnson for the establishment of new segregated manufacturing capacity and preparation for large scale commercial manufacturing in the United States for their lead vaccine candidate for coated 19.

On March Thirtyth, JNJ announced the expected timeline for its lead vaccine candidate, including the initiation of human clinical studies by September 2020, and its participation.

See use authorization in early 2021, a substantially accelerated timeframe compared to the typical vaccine development process.

Under our partnership with JJ, Catalent will accelerate availability of manufacturing capacity for Jay engage program and will prepare for large scale commercial manufacturing in our Bloomington, Indiana facility.

We also plan to higher approximately 300 additional employees beginning in July 2020 to deliver operational readiness and 24 by seven manufacturing schedules for our portion of the projected demand of multi dose units.

We also announced yesterday, our partnership with our tourists therapeutics to support the drug substance manufacture of its coded 19, MRM a based vaccine candidate in our Madison, Wisconsin facility.

The partnership will combine our tourists is vaccine technology with madison's scalable cgmp manufacturing capabilities to potentially commercialize commercially produced millions of doses. Starting later this year.

In noting these programs, we recognize that it's always difficult to predict future demand for on approved drugs and that historical statistics on the success of development programs suggest that many of the coated 19 related projects. Our customers have brought to us may never achieve commercialization, though we will do our part.

To maximize the odds that each and everyone is successful.

Before moving on to summarize our third quarter results I'd like to remind you that a key strength of Catalent is the wide diversity of our business products geographies and customers.

This has helped us whether storms in the past and we see no difference today when we consider what this situation means for the long term performance of the company.

While the crisis is still unfolding. We do now proceed is terrible pandemic, creating a fundamental change to our business.

Due to our comprehensive capabilities diverse revenue base, and well funded customers as well as the increasing need for complex solutions and our strengthened balance sheet Talon catalent is well positioned to whether this crisis.

While our industry will likely continue to experience change, we will quickly adapt and emerge as an even stronger company.

No I'm pleased to share with you a summary of our financial highlights from the third quarter, which are covered on slides eight and nine.

Our revenue for the third quarter increased 23% as reported were 25% in constant currency to $761 million with 7% of the constant currency growth being organic.

Our adjusted EBITDA of $185 million for the quarter was above the third quarter fiscal year 2019 on a constant currency basis by 22% with eight of the 22% being organic.

Our adjusted net income for the third quarter was $83 million or 50 cents per diluted share up from 49 cents per share Eni in the corresponding prior year period.

All four reporting segments reported year on year growth with the biologics soft gel and oral technologies and clinical supply services segments, continuing their solid organic growth and our oral and specialty delivery segment returning to organic growth.

We further strengthened our financial position before the recent market valid.

Chile.

Through a series of strategic transactions that funded important growth initiatives increased cash on our balance sheet.

Sheet lowered the overall interest rate on our debt and pushed out our nearest maturity dates.

As a result result of these transactions, which wed need will later detail combined with our cash generation in the four in the quarter, we funded our entry into self.

There are few through the acquisition of mass.

Let me 0.8 time from 4.2 times at December 31.

Our net leverage is currently at one of the lowest points.

They are 11 plus years and Catalent.

Further EBITDA growth means that we will continue to naturally delever.

Over the last 18 months since we have announced several substantial capital projects and across our business, including for our biologics in gene and cell given our strong cash position in long maturities, we can afford to and planned.

However, objects and we always have the ability of slower halt them if conditions warrant.

Though at the moment, we do not see a need to do so.

Enabling the growth of our World class Biologics business continues to be a key focus at catalent.

During the quarter, we completed two acquisitions that we expect will become future growth drivers will be.

With January Onest acquisition of the facility in the non easily expanded our European in capabilities in biologics drug product solid oral dose manufacturing and packaging packaging.

Given the current high demand for sterile filled finished product manufacturing capabilities for vaccines. The Nani facility has the capability talent and capacity to become a contributor in the global effort against totaled 19.

On February 10th we completed our acquisition of Master cell, which enabled catalent to broaden its biologic portfolio to includes cell therapy service offerings, including the development and manufacture of both autologous and allogeneic cell therapies as well as a variety of related analytical services.

When combined with the gene therapy capabilities, we acquired in 2019, we believe master cell establishes catalent as a leader in cell and gene therapy, creating deeper and broader relationships with customers and opening up cross selling opportunities across catalents other technology platforms as we've already seen through.

Our gene therapy acquisition.

Effectively integrating the premier assets, we have acquired and deploying capex to increase and enhance our biologics capacity and capability will underpin our ability to meet the needs of customers and their patients.

We expect strong revenue and adjusted EBIT growth from our biologics offerings overtime and continue to target the biologics segment to make up approximately 50% of our total revenues in fiscal 2024 versus approximately one third today and to be a primary driver of the margin expansion, we expect for our core.

Money over the same period.

To help guide this growth last week, we announced the next generation of leadership for our cell and gene therapy business with the appointment of Dr. manual borman as its president effective June Onest.

As announced earlier this year mining joined Catalent in December and has since led our European biologics business as well as our recently acquired cell therapy business.

Pete Fuzzy was led the cattle and gene therapy business since the company's acquisition of Paragon Bioservices in May 2019 will be retiring on June onest, but will remain with the company is chairman of the gene therapy in an advisory capacity.

For the next 12 months to support Banja as she transitions into our new role.

I would like to personally thank Pete under whose guidance our gene therapy business has seen significant growth and continuous investment to meet the strong associated viral vectors next generation vaccines and Antolin before turning today's presentation over to Whitney who will take you through our third quarter financial results in the deal.

Sales related to our updated financial guidance I'd like to point you to slide 10 to highlight our progress on corporate responsibility.

I'm proud to let you know that we recently published our first corporate responsibility report covering fiscal year 2019.

A copy of this report may be found on our website.

The report measures our progress across a range of important SG, environmental social and governance metrics using the standard.

Problem promulgated by the sustainability accounting standards for.

Standards board or SCS be where the biotechnology and pharmaceuticals industries.

Our report brings a new level of transparency concerning and highlights our ambitions towards our companywide quality safety environmental sustainability and diversity inclusion efforts all of which had become even more embedded in our culture over the last several years.

The guiding light of our corporate responsibility efforts is our mission to help people live better healthier lives.

As a global development and manufacturing partner for medicines clinical trial materials and health products the impact of our progress in all areas GE aerie areas on our company's ability to deliver on our mission has never been more important.

Thanks to our corporate responsibility team and several of our sales teams around the world. We have provided emergency relief grants to local charities in the communities, where we operate that are supporting coded 19 relief efforts.

In addition to corporate grants are contributions include two to one company match for employees charitable donations related to coated 19 pandemic relief efforts.

Our broad efforts to respond to the cobot 19 pandemic for employees are in Q communities, our customers and ultimately their patients underscore why I continue to look forward to additional progress in our corporate responsibility and sustainability as Catalent gross.

I would now like to turn the call over to Whitney.

Thanks, John.

I will begin this morning with a discussion on segment performance, where both the fiscal 2019 in fiscal 2023rd quarter results are presented on the basis of the reporting segments. We introduced earlier this fiscal year.

Please turn to slide 11, which presents our saw Jamal technology business.

As in past earnings calls my commentary around segment growth will be in constant currency.

Well, John all technologies revenue of $242.3 million decreased 3% over the third quarter 2019 with segment EBITDA increasing 9%.

After excluding the impact of the October 2019 divestiture of the segments Vms manufacturing site in Bayside, Australia segment revenue and EBITDA grew 4% and 13% respectively.

The growth primarily relates to increase demand in the prescription product business in North America, which is partially attributable to recently launched products.

In addition, the consumer health business had stronger demand in both Europe and North America.

The segment improvement in EBITDA was driven by favorable product mix across the network.

Slide 12 shows that our biologics segment recorded revenue of $250 million in the quarter, which is up 8% versus the comparable prior year period that segment EBITDA growing 46%.

Most of the revenue and all of the segment EBITDA growth with inorganic and driven by our gene and cell therapy acquisitions as well as by our acquisition of the Nanya facility, which recognizes a portion of its revenue and the biologics segment. This quarter with the remaining portion being included in our all in specialty delivery segment.

In total for the Biologics segment. These acquisitions contributed 77 percentage points to revenue and 51 percentage points through that as well.

EBITDA margin from acquisitions this quarter or below the segment average due to a significant increase in onboarding talent in the fast growing gene therapy business, mostly in the area of operations and quality.

The lower margin currently being generated in the cell therapy business, which is expected to continue the cost of continuing to build out is relatively new business over at least the next 18 months and the current other utilization of the a non facility, which will begin to change in our fiscal year 2021, as we already.

Have begun to see new customer activity outside of the BMS supply agreement.

Excluding acquisitions the segment recorded organic revenue growth of 11% in the third quarter, where the biggest driver of the revenue growth stemming from continued growing demand for the us drug product business. However, organic segment EBITDA declined, 5%, which was due to a number of factors, including unfavorable product mix.

Softness in the European drug product business increased head count and us drug product business to staff move production line, including the recent completion of the $14 million integrated complex packaging suites in Bloomington, and the previously discussed completion of a limited duration customer contract, which had a particularly high.

Hi drop through of EBITDA.

The end of this contract annualized in the third quarter. So we'll no longer I'll provide a comparison head point headwind of beginning in the fourth quarter.

Note that drug substance after excluding the completion of this non cell line clinical manufacturing contract grew both revenue and EBITDA year over year.

As a final note and biologics it is important consider the large amount of development work being done in this business following the gene and cell therapy acquisitions over the last year with approximately two thirds of their revenue being generated by development programs that were more likely be greater quarter to quarter fluctuations and financial performance. However, this increase in development revenues.

Primarily driven by mid to late stage projects and bodes well for the segments future organic growth as these programs move towards future commercialization.

Slide 13 shows our all in specialty delivery segment recorded revenue of $181.4 million in the quarter, which was up 19% versus the comparable prior year period that segment, EBITDA up 16% quarter over quarter.

Most of that will was driven by the acquisition of the 90 facility, which recognize more than half of its revenue in the oil at the segment this quarter.

In total Cninety facility contributed 13 percentage points to revenue and nine percentage points to EBITDA growth.

So Jeff discussed for the non U.S biologic component margins are expected to be low until new customers are brought into the facility overtime.

We experienced strong growth in all lead deliberate commercial products in both of us and in Europe, the segments respiratory and Ophthalmics specialty delivery platform significantly pick up from last quarter due to new product launches, including one that benefited our product what this vision component and a gentle increase in demand for respiratory products.

As a result of the covert 19 pandemic.

The segment continues to have a very strong development pipeline that is expected to drive future long term growth.

No that provides additional insight into our long cycle segments, which include such on all technologies, biologics and oil and specialty delivery each quarter, we disclosed our long cycle development revenue.

As a reminder, these metrics only directional indicators of our business since we do not controlled to sales and marketing of these products nor can we predict the ultimate commercial success of them.

As you can see from a slide presentation. Today. In addition to the schools in each of the long cycle segments development revenue in our 10-Q. We're also now presenting this information for you in the supplement we provide at the end of the earnings presentation slides.

For the first nine months of fiscal year 2020, we recorded development revenue across both small and large molecule of $666.2 million, which has more than 47% above the development revenue recorded in the same period of the fire fiscal year.

In addition to our quarterly disclosures of development revenue. We also provide the total number of new product introductions as well as expected revenue from these npis when the current year.

We introduced 120, new products in the first nine months of fiscal year, 2020, which are expected to contribute approximately $47 million or revenue in the fiscal year.

Now as shown on slide 14 arc levels by services segment posted revenue of $88.9 million was 16% growth over the third quarter over the prior year segment EBITDA of 24.6 million dollar.

Well, 24% growth.

The strong growth in both revenue and segment EBITDA was primarily driven by accelerated backlog burn for storage and distribution services as well as increased demand for our manufacturing packaging business.

As of March 30, Onest 2020.

Which is a decrease or 15.1% compared to the very high level of knitting business When's recorded and the third quarter of the car here.

But the strong food three prior quarter rolling off and the accelerated revenue and a third quarter of this year. It's segments trailing 12 Macbook to Bill is not 1.1 times compared to 1.2 times last quarter.

As I mentioned.

There are many cross currents in the C.S. business, we are beginning to see signs of a slow down of clinical trials, which will not be in Saudi offset by incremental demand you're asking for trials related to cope with 19 <unk>.

We believe there was a pool forward of clinical trial activity in March and C.S. as early queue for overall activity is lower than before they tend to.

Accordingly, we expect that works great Oh, the C.S.S. segmented significantly be celebrate into fourth quarter from the 16% growth in two or three.

<unk>, we expected them to normalize later in the calendar year. So we are not planning to significantly variabilize our costs to match the expected temporary slow down revenue.

Moving to a definitely a good on slide 15 third quarter, adjusted EBITDA increased 20% to $185 million, what 24.4% of revenue compared to 25 per cent of revenue reporting the third quarter of the part here.

<unk> basis, or third quarter, just increased 22%, including 8% organic <unk>.

Complexity thing you can see that third quarter or just the net income was $82.9 million for 50 cents per did little to cheer compared to adjust the net income of $71.2 million or 49 cents per share and third quarter a year ago.

Like 17 shows are that related ratios and our capital allocation priorities.

That's what I mentioned earlier, it's all last call yeah, situated several important financial transactions ahead of the recent market volatility Smith, and our balance sheet do start leverage and weighted average interest rate.

First remains approximately $500 million equity offering which was used to finance the mass herself cell therapy acquisition I pay down into a period revolver bothering with the remainder up net cash be going to the balance sheet.

Next we pay down over $750 million of your nominated lawns and notes.

24, and replace them with roughly $900 million <unk> nominated notes, you're 2028 at a much lower rate of two and three 8% with a difference in cash after expenses going till the balance sheet.

I said these moves are near term senior debt maturity <unk> and 2026, roughly six years out and all of our senior knows remain covenant light and all of our senior that has been placed at very attractive interest rates.

You know an abundance of caution, we put $200 million and all balance sheet to a bar in under our 550 million dollar revolving facility towards the end of the quarter all that cash remained on our balance sheet at the end of the quarter and we still have.

$350 million <unk> capacity under the revolver, let the aggregate value of our standing letters of credit the details of rich or set forth in the form 10 Q. We are finally this morning.

In another moved to strengthen our balance sheet and minimize the impact of any future volatility in market interest rates. We completed an interest rate swaps agreement. After these kind of the quarter for approximately half of our fan and yes dollar denominated term lawns stopping some of our lives or base variable rates for fixed rates, making over 70% of our debt fixed rate.

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As an adult adult of the structure transactions, we executed in the third quarter as well as the cash regenerated in the quarter, our cash and cash equivalence balance at March 31st well $608 million compared to $189 million December 31st.

And the end of April cash and catch equivalents, where roughly the same as at the end up to three.

Oh aggregate <unk> leverage ratio as of March 31st 2020 was 3.8 times, which were significantly reduced from the 4.2 times ratio at the end of the park order and an improvement over proximately two thirds of utterance compared to the ratio at the time, we announced the cards on a transaction approximately one year ago.

Historically, given a free cash will generation of the company and it's growing just even though the coping naturally the leverage between one happened three quarters of return per year.

Her given our elevated cap explains over the next 24 months the reduction of leverage is expected to occur at a lower pace for that period.

We expect our fiscal 2020 capital expenditures to remain at approximately 13 to 14 per cent of net revenue.

I bet is expected to continue to be at elevated levers levels for the next two to three years.

I'd like to make some general comments regarding the composition of our topics, which generally falls into three parts.

First roughly 3% to 4% of revenue spent every year to maintain our facilities and to me the rigorous regulatory requirements for G.M.P. manufacturing.

<unk> based on our insights regarding our basket of development projects careful consideration of long term expected demand, we build capacity with high confidence that a substantial portion of the new capacity will be engaged to meet expected customer demands.

This is a natural attrition inherently pharmaceutical developing programs, but it's difficult for counseling to protect our interest and not invest capital speculative somebody.

Potential product launches, so generally do not deployed capital to meet the anticipated and have a single product.

When we do we require a mix of customer funded cap x. or take what pair instruments offset the risks associated with any single products.

Nope that our growth cap x. is overwhelmingly discretionary and if there is an unforeseen issue related to the pandemics that should impact or cash position will be able to act swiftly to control the deployment of punk committed Catholics as well as a portion of other discretionary operating expenses.

Now, we turn into a financial outlook for fiscal year 2020 has outlined some slight 18.

John noted in his opening comments that we have updated all financial guidance and stuff Central Park to take into account the anticipated near term impact of took over at 19 pandemic.

We can choose to excite full year revenue in the image of $2.87 billion to $2.95 billion.

I'm expected lost revenue should be upset by new demand, including demand related to cope with nine so.

Well full full year adjusted EBITDA, we now expected range of 700 $725 million compared to previous expectations of seven or 810 11 to 730 $500.

Changes as a result of lower productivity and increase that costs related to the pandemic.

Tivity impact includes a modest increase in absenteeism, and adding additional shift to accommodate social distant so.

Elevated costs related to incremental P.P. expense incremental overtime enhanced by tea and the thank you bonuses that John described there there.

Reflect the change in adjusted EBITDA, We're all set up dating off while you're just sitting in income guidance to a range of 295 200 $320 million compared to the previous guidance of $307 million to $331 million.

As a result of the 500 million dollar equity raise on February 4th we now expect that are fully little bit share account under weighted average basis.

I've been June 30th will be in the range of 165 to 166 million shares compared to the previous range of 160 to 161 million shares. This projection continues to count the preferred shares we issued in May of 2019 to find part of the gene therapy acquisition as if all were converted the common shares in accordance.

With their terms.

Continue to expect all consolidated effective tax rates would be between 24% and 26% for the fiscal year.

Our guidance wrenches assume that there is no major social change to the current situation.

Oh major personnel issue and that our supply chain will remain intact. So that production may continue.

Operator, we now we don't show up in the fall of questions.

Thank you.

Ladies and gentlemen, if you have a question that these tiny please <unk> starred in the one on your touch tone telephone to enjoy your question. Please press the pound key.

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No first question comes from a line of Tyco Peterson with J.P. Morgan you're launching open.

Hey, Thanks, Johnson grappling announcing the docking deals just curious if you could help US you know, let's take a little bit more about the potential talent here for J. and J.H. a million doses 60 cents per dose kind of a right match or maybe 130 850 million per year and because this is production was at risk can you maybe just talk about component of the deal.

They'll be you know a manufacturing address for emergency use initially before h. one in September.

Yeah. So first of all I'd, just like to see that Catalan has you know given our capabilities.

Within the industry, we've really become a go to company for coded related vaccines and therapies soon I I'm mentioning my prepared comments and we've had nearly 100 touch points with about 19 molecules of which we are really secure somewhere around us 30 sighing.

So I'm just incredibly proud that catalents been able to be I would say front and center partnering with our pharmaceutical and biotech customers to be able to you know to really participate in being part of the solution with regards to Jane Jane or any other customers that we.

That we have we generally don't outline any specific terms with regards to those two those deals I would just seen that in constructing these deals we make sure that we understand the fact that there's some of these are many of these.

May not actually be commercialize so we need to make sure that we get a return for.

Our investments in the J. and J. deal. There there was just singing in in funding of the of the the cat backs and we have I would just say put in place terms said and ensure that you know <unk>, we'll get a return from this investment it's kind of interesting in the J. and j. deal because of.

<unk> the proactive nature of our business, we were putting online some additional capacity in Bloomington as you well no. We had you know somewhere around a 110 million dollar investment going in there and we're actually going to be re purpose, saying, Oh wine and dedicating it for a foreign chain j. in.

This particular situation I'll ask if a white me once to any additional commentary with regards to the financials.

Yeah, I think tyco developing a couple of things I would add is given that even with the accelerated development path that j. and j's on we we likely won't see any any significant provide successful bombings here until well into the back half of our our fiscal 21. So that's the first thing I was too and in terms of.

Volumes, we won't won't give any precision other than to say you know this is structured so that we would provide a substantial portion of a j. and j's U.S. targets in terms of.

And volume and the last point I'll make Tyco is is you know Catalan that is highly diversified company, what 7000 products across the world delivering for 80 countries and that level of diversification no means that the f. 20 products on the account for 20% of our revenues and I think even in with the the work with doing.

Virginia, others, you don't see that changing substantially in terms of little over there just efficient in there were several parties huh.

Oh really define how we perform well.

Thanks, and then one follow up you know, we're seeing a number the drug companies scale up monoclonal anybody you know production as well as a way to bridge the gap until that she's come on the market, obviously, they're they're pretty good shape. So just curious I mean lilies going to start dancing first patients next month can you talk to that opportunity for for you as well.

I would just say tyco that we're seeing opportunities across every technology and capability that we have within the company again will not oh pine, specifically with regards to one customer, but I would just say, there's almost not a single business unit and technology that we have that is.

Being asked to to to participate in in some way everything from again, you know antibodies C.M.R. in a a dental virus vaccines are analytical capability or clinical supply services, even our soft show an oral technologies in are always.

<unk>. There's a segment every single business segment is somehow being drawn into a potential vaccine and potential a potential therapy and I I would just say again with catalents proactive nature of making sure. We are building out Pasadena highest growth area.

The fact that we had acquired the you're naive B.M.S. facility has proven to be you know really <unk>. It has so critical capacity than I think is is very much wanted and needed in this <unk> crisis, you know the build up said we've done in Madison.

The expansion that we did and are doing in in our Bloomington facility is almost as if Catalent is you know again, the right company at the right time with the right capabilities and the right capacity. So again, we're just you know we're just you know humbled and thrilled that then we can be participate.

In such a substantial way in the coveted vaccines and therapies.

Okay. Thank you.

Thank you.

There next question comes from a lot of John Krieger with wouldn't blame God is now.

Thanks, very much [noise].

John If if you I know a one program is probably not going to be material, but have you had a opportunity to if you aggregated does thirty's sign programs that you mentioned for covert 19 give us a rough sense about what does that would mean that said, let's say a percent of revenue and in 2020.

Well so first of all I think we've been very clear here that you know we we have you know headwinds inhale wins that are largely offsetting I think we made that very clear in the.

You know in to prepare comments.

And and certainly we're not looking forward to fiscal year 21, but I would tell you that you know as we looked to our performance and the third quarter and and have them divisibility with with you know continuing uncertainties in this fluid environment to the fourth quarter, we've taken that all into account in our in our revised guy.

Vincent obviously, we've given ourself, a little bit wider birth for potentially some of those unknowns than we normally would've you know we got a a kind of a wider range than we normally have sitting here in the fourth quarter, but again I would say that you know certainly we've got some some strong tailwinds that will you know.

Modestly be upset by you know potential declines in C.S.S. and in other actions that we're taking that will you know kind of increased costs and reduce productivity. So again, we feel confident in the the revised guidance in the range that we've we've given and then obviously, we'll we'll have above you.

Move towards to school, you're 21 with a significant number of projects. We have when we provide that guidance. So late in August.

Great. Thanks, and then a follow up I think you've got five different facilities and your biologics business now can you just run through.

The the current utilization rates and if and to the degree that you've got capacity to to unload some of these newer programs.

Yeah, I mean <unk> the way I would go through this and again, we're working very closely with our customers you know starting with our biologics facility I would just see we're in biologic struck substance facility in Madison I would say that we are in good shape.

I you know, we haven't yet secure to commercial customer yet in that facility. So that leaves us with some spare capacity plus new capacity just going to be coming on line with a fourth and fifth train set puts us I would seem very good position from Oh overall drug substance.

And drug product you know we this is a facility that that quite frankly, we already feast with very heavy demand and in fact, you know the new demand was going to be coming on dumped healing in line with when we were going the operating at a capacity level that was I would say uncomfortable <unk>.

In the current situation I would just see that we have creatively in aggressively.

Repositioned some of that cat bucks to put in.

Including looking at additional <unk> <unk> <unk> for for more capacity given the significant significant demand that we have in in in a drug product, but I again feel that were in good position to take I'm not only Jane J.

But other significant customers from a drug products standpoint.

The real another jewel here is is a nominee.

Oh and now I mean, we brought on board in fundamentally right now.

We have just B.M.S. as the customer there with the plan over the next two years to build up that book a business with Catalan are there other customers for cattle and beyond B.M.S.N. It turns out that the capabilities that they had from a drug products standpoint again can be.

You know aimed towards in positions for <unk> drug products in were already in conversations with multiple customers day or so then again you know catalent, it's becoming a go to <unk>, where we happen to have you know the right keep a building capacity at the right at the right time and then.

And then certainly if there's anything that ends up going into a prefilled syringe format. We have <unk>, we have capability and capacity you know Brussels facility, but you know if you know John most of the this stuff being given it's highly accelerated state when will likely be and Multidose files and.

Polluting, the J. and J., the J. and J. product that will be you know <unk>, probably have somewhere between three and five dose who's not yet determine so again I would just see that cattle. One is in a very strong position to to a a dress a lot of our.

Are <unk> customers, but you know things or you know I. The capacity I had last Friday is you know changed on Monday, just be starting you know the conversations and things going on with customers. So it's it's an exciting time and again I'm I'm, just humbled and thankful their cattle and it's going be able to play a substantial role.

And being part of solution for <unk> Coven 19.

Sounds good thank you.

Thank you.

No next question comes from the line of day, when Lee with Jeffries. Your line is now.

Hi, Good morning, Thanks for taking my questions John wanted to make sure I come away with a right to understanding on a couple things the in the biologics segment.

He talked to eat the acquisition certainly made a bigger contribution than we expected that seems encouraging.

Splitting those you talk about <unk> down 5% year over year I suspect the the the non core products coming out of Madison was part of that where there were there under factors that influence that you're over your ears at dawn comparison or was that one thing.

Really the the issue.

Well look I I think Dave I'll I'll always to briefly in turn it over to web me, but I think you can see from our prepared remarks that there were there were multiple reasons with regards to biologics a even a being down first of all we're onboarding a significant amount of talent.

Both within our Bloomington, as well as our our Baltimore gene therapy business, and then also our cell therapy business, which when we did the acquisition. We told you that we wouldn't have meaningful meaningful contributions.

From from their business, including a 90 those both had impacts both with regards to the your the the even a margin and then <unk> specifically with regards to the easy to I would say again it was the softness of the European drug product. When we mean by that is fundamentally the flew demand that'd.

He had there again increased headcount and then there was also this one limited duration nine so wine Ah Ah Ah Ah.

Comparable that we have in in again I'll turn it over to what needs to be wants to get into any more precise details there.

Thank John they just just to remind or I mean, as we said in the progress <unk>, we're very pleased with.

The strengthening of our financial position that we did ahead of the market volatility and frankly, you know from what we've got right now and a year to date base, having delivered company wide eight per cent organic growth your to date and again. This is <unk> based businesses, excluding gene therapy from an organic perspective eight per cent. They certainly are.

Opposition to deliver a salad.

The impact of the endemic as we've already described factored into what we can see is that puts and takes and says with a man for the remainder of the year now through to answer your question more directly in terms of adequate John <unk> said, Oh Biologics segment as we've said no reminds you has a number of development stage poor man's while we're very.

Pleased with the commercial calls that we've seen the also relatively young and that they're continuing to quilt. So we call computing to add capacity in terms of people to access existing installed capacity and then adding new capacity as well. So we expect a more I would say variation from quarter to quarter into business.

But when you will get the performance of biological into your to date basis.

Again on a organic standpoint.

Acquisitions, you'll see that the business, including Q3, 13% top line grill.

Excluding the one time the customer that we've talked about this we just coming in extreme contract, we exclude that 13% top like 11% ended up will across the the on an <unk>, including Q3. So I think looking at the performance only single quarter, given what I've already said, we believe it.

The right way to look at the business you like took it over a period of time, where pertaining to that capacity, which will have impacts on on the give it a performance. In addition to what you already highlighted.

Thank you if if I could just put it to a different topic on on soft shell you call out strengths and prescription in North America.

Prescription, obviously I'm driving positive mix I would think could you talk about the Evan flow that <unk> you know sometimes the call out is is more consumer oriented sometimes it's your versus North America do you think kind of north American prescription can be a persistent driver positive driver and call out for a few given.

You're talking about new product launches being a contributor there. Thank you.

Yeah, so they we've.

We try to highlight no two quarters exactly like.

<unk> I think that that's something that's.

This is a well recognized as a quarter to quarter. So when you look at a full year you've seen the performance of course, a number of years so to to look at prescription for example on a quarter to quarter basis, depending on what happened here in the current near the timing of went product launches happen.

In some of the more mature aquatic start to naturally declines that's going to have an impact on which part of the business is actually driving that will now when you look at the actual T. segment of what what is delivered so far in a year to day basis in the in the third quarter, it's organic looking at business or 4%. We said this is.

That should deliver between three and 5% after adding.

I used to it.

2% to 4%. So this is right in the middle down in the first half a year was well above what we expected business to blow in the long term so.

Quarter to quarter, if we've lost a recent products on a purchase prescription in which we saw that.

Fiscal year and as me into this one that's going to have several quarters of well tell when as close products continue to grow.

And and and of course consumer will have a similar type facets as as there are you launches or different factors in terms of the demand for those particular products. So I think I think you know please certainly that mix is favorable when when prescription drug or are behind that will or supporting that growth I should say.

Which we're seeing right now, but that that really quite frankly, the gun in a fourth quarter of last year, we've seen that can senior too.

Recorder.

Thank you.

Banking.

The next question comes from the line object Johnson, what Stephen July News now.

Hey, Thanks vaccine margins broadly how do margin on vaccine work near with.

Yeah.

So I would say it on your product in general.

I have margins that are sort of above our company average I'm not going to go into specific you know margin levels for vaccines that Pops up segment of a certain product type in in the business, but all I would say is we would expect a marches that that or.

A slightly above a company average in in these endeavors.

Yeah I leave it there thanks.

<unk>.

Thank you and I'm next question comes from a line of Dan <unk> with U.B.S., you're not as an open.

Great. Thank you. Thanks for taking the question and congratulate recorder I I I told me to take a big picture view. If you don't mind just on covert 19, I know you spend some time already discussing some of the segments and the impact that's far but could you just kind of given vantage point as we think about your fourth quarter and then I know you're not going to discuss 21 right now.

But if you think about possibly you know as as we go through you know like we are difficult quarter now, but then come out of it could you characterize.

<unk> 19 on your different segments, so kind of how much how much is there a drag kind of being incorporated anything kind of you know what could be the possibility kind of coming out of it and then kind of related to that because the 47% organic guidance for the full year.

It's still intact, what about change thank you very much.

Sure. So Dan I'll, just for <unk> speaking a high level. So first of all Catalan was extremely per active in our posted response really.

Having our teams up and running full starting in February and so I would see the companies already been operating over the net <unk> over the last two and a half to three months in I would see this new way with about 25% of our employees working from home and about 75% of our.

Please going in all of our sights or operational you know our number one priority is keeping our employees safe and that's why we've been able to have the competence in the resilience far employees to be able to come in to work in continued to do the important work for for cattle and I would see that.

You know in are prepared remarks, we we discussed the fact that you know if we look at some of the headwinds that we we face is really around the area of of you know slightly decreased productivity.

Productivity that that comes from modestly higher absent kids in levels someone increased cost that were and incurring due to <unk>, including many things that we're doing from a company benefits standpoint to help out our employees in this into some precedent in time.

We're also as I mentioned in my remarks will be seen.

Likely seeing higher inventory levels since we'd go out and increase our our overall safety stocks with regards to you know just talking about the overall business segments. Certainly we discussed the fact that you know C.S.S.C.C.S.S. business had a very strong Q3, we we.

I expect that not to be repeating queue for and and actually that's where we would expect to see some so overall headwins until we get some clarity around when there will be a snap back if you will on clinical clinical trials again, a modest you know we've already have that taken into.

Account for our fourth quarter, and we'll have a much stronger view that again as we go in fiscal year 21 in in set our guidance there I would expect our our our biologics shouldn't in drug product.

To be you know in balance you will with a you know whatever potential headwinds that we may have for earlier clinical development offset by a lot of the the <unk> related work that we that we have and then with regards for soft showing.

You know I would say Oh, it's the business segments again, you know this is where in soft shall we have our largest number of commercialized products. So we just tends to continue to roll and obviously seeing you know increase to me and I would see from our consumer health products in that business segment and then you know it's steep we're we're we have a little bit of.

Watch out is just on the earlier development projects, but I think that'll be offset by other opportunities in that in that business segments. So again, I think you know cattlemen's highly diversified nature across products in geography is in product type really positions, it's extremely well.

In this in this current crisis and again I'm I'm unhappy that were also in a position to be able to you know potentially be a a significant contributor on a lot of the vaccines and therapies and then I'll I'll ask what if he wants to again at a higher level any additional details to what I provided.

Yeah. So part of your question was related to our guidance and and what what organic will be for the year.

With the slowest situation related to God endemic we've decided to do some things with the Guy one.

Maintain a a fairly wide range.

One quarter remaining who would typically up narrow at our range with only one quarter, we've decided to keep it the same so that's one thing on the other thing. We did was we didn't split organic versus you know ganic here.

With with again, the last quarter, but I would remind you.

With the Paragon gene therapy acquisition.

An anniversary, we only have really one myself.

You know ganic in that so you know ganti becomes.

So the first saw three quarters of the year, you know getting becomes a smaller element again in relative terms, we still have a B.M.S. acquisition into master So acquisition, obviously, but those to a smaller they're paragon. So so the contributions from you know ganic in the first three quarters would be far greater than contribution and glass in the fourth quarter. So that's one remind her second one I would give you as we've delivered eight.

Per cent organic little so far for the first three quarters, as I mentioned, which positions as well to deliver on the year again with the backdrop of everything with a scribe.

Kobe 19, so having a little bitty per cent here today, and we get guidance of four to seven for the year clearly world position, even though we're not splitting that when you with this remaining guidance.

What final point I would I would make is really without giving specifics on sickened by segment I would give who directional indicators are we going to discuss what's going on in C.S.S., but as we look at 11, the rest of this year and the Guy and we've just provide it I would expect to have biologics and I were boy.

Segments to sort of in relative terms be leading the way here for a quarter with.

T behind that and then last D.C.S.S. with some some headwins we already described there.

Deliver the guidance Wendy's all factored in terms of what we've what we provided already.

Great. Thank you.

Thank you.

In our next question comes from the line of Ricky Goldwasser with Morgan Stanley. Your line is now.

[noise] <unk> I'm, so clearly you Sean mean, when it too.

Deeper into supply concrete to provide any time to prepare to remark because he can get us some color on where you might see <unk>. Some options A.P.I. pricing time and change when you talked about kind of like.

Inventory.

Maybe you can get some more color on how much inventory or how many a month inventory did you have 13 any that enough to manage.

<unk> scenario.

Finally, <unk> and if we think longer time beyond the current epidemic games as being you know some.

Not only do we can see.

<unk> <unk> <unk> in T.D. links to any thought to to have one on potential kind of like structural changes.

Softy environment.

Thank you.

Yeah, I'll actually answer the first Ricky Oh I answer to the the last question first and just see that I do think that there will be some longer term structural ships, they're going to happen I think that everybody's re thinking what it means to be a sovereign nation and have you know have the ability.

To have a safe and secure supply chain. So I think that there will be some long longer term structural.

Changes, but again those are going to take time I do think that on a go forward basis, there's certainly going to be a preference for domestic.

Assets and when I say domestic I mean, you s. in western Western European. So this is certainly not something that's going to be a switch that's gonna be flipped with regards to changing the structure, but I do think that the preference towards domestic assets in a consideration of what is high risk supply.

Chain is going to.

Change over time now backing up with regards to Carolina I think with regards to specific pressure first of all we've we've noted that 80% I would say that 80% of of what Catalan.

Sources directly is non China and on India.

And that if we are to see yeah, you know any potential disruptions you know those would probably be the first couple of of couple of places and for us that that is in the area of some consumer you know health products. If you will that's where a lot of those.

If you guys are are are source from but again, we have a very strong bead in in signals on that and our proactively going out to a increase increase our overall safety stocks a lot of also a lot of the.

You know I would see the the T.I.'s that are getting source from those areas the world or for generic switched had some very small portion of the overall Catalan business in about 7%. So again I think we're just kind of wealth positioned overall from from that from that standpoint.

Point on that being said you know, we're we're trying to be incredibly proactive across the board.

You know we are increasing our safety stocks you know normally you know we're running a motive somewhere between three and six months and we are expanding those across our our top products.

And that's also why I'd mentioned that you know you will likely see a a rise in our overall inventory levels, which we believe is the right tradeoff right now to make sure that we continue to have the overall continuity of supply so.

You know there may be some additional bumps in the road, but you know what we what we've experienced so far and what we have current visibility to believe we believe that you know any impacts will be modest in in likely offset by.

A lot of the increasing demand that we're seeing from a lot of these coded related.

Projects and and hopefully that answered most of your questions. Ricky if it didn't rewind and let me know what else you'd like me to answer.

Oh, that's good thinking.

Thank you.

And our next question comes from the Lawn Oh, one I've been done with Bank of America. Your line is now.

Right trying to given the margin Buddha impact of a recent acquisitions would be investments are required to ramp up yourself do therapy business.

You still think but you can achieve your fiscal year or 40, 44 target over just ready with them, arguing over 48% plus were just mowing fights about three 400 basis points of margin expensive from fiscal year 2020.

The one who's Whitney here clearly is we.

Deliberate last year, roughly 140 basis points of margin expansion last year again, largely driven by our shift towards more biologics. We continue to see line of sight to continue to expand all margins, particularly gene therapy and biologics businesses.

I mentioned is prepared commentary, we knew what you've made those acquisition, namely in on your masters. So that they would be a margin deluded initially is absolutely right.

That's what Catalan.

Nibbling on additional capabilities, but he's also assets that have either [laughter] of 90 that is very well suited particularly in in the N.B. a reaction or.

Asking the current pandemic.

<unk> solutions for that endemic though this is a great asset for that that would.

Accelerate the.

<unk> facility, which would have significant impact on on margin there and then with after so we continue to.

Investing that business as me prepared to open up a and I've already seen activity customer activity, you know or Houston.

Facility for that business. So these I would say according to plan and as we act capacity, we will see that has an AD in slow it watching rates in parts of the business and as we as we get significantly high on the on the utilization in that capacity, you'll see more interested or.

Yell about what we see it as the the long term well.

Absolutely.

<unk> with our expectations to get to be.

<unk>.

[noise] Frankie.

Thank you.

And then next question comes from the line of George who would do it your bank. Your line is now.

Yeah come morning, guys and thanks for taking the questions Oh Watson covered I guess Whitney I don't know if you would be willing to providing more commentary on kind of what you've seen quarter to date as it relates to the T.S. a segment perfectly in supplies.

I wanted to make sure interested something correctly is that if we see a slowdown in drug r. and D. spending does it only hit C.S.S. or does it also hit the drug substance part of the biologics business as well and given the out performance biologics in the quarter. I guess can you talk about the performance of like the drug products stuff or the the non orange, you really need something stuff versus.

What we're seeing kind of quarter today.

Sure so with respect to our.

That we're we're really worked please.

Oil company on a year.

Having delivered what 8% organic growth.

Seven per cent in the third quarter, including C.S.S., she's been a big part of that and we saw substantial book and I'll see if it's business and cute three part of that was we believe.

Essentially burning backlog faster in a third quarter in advance of potential disruption in a in the the to deliberate parts to to clink. So we saw a higher stores and did not know distribution activities.

In that segment, we we've seen good packaging I would say activity in the business too. We can we continue to see that I didn't do for let's say good packaging activity, but there's still that we're saying is it into distribution side again, having seen that accelerating Q3. So.

Hopefully that gives you to call it looking for with respect to C.S.S., but but in terms of our new business wins, Oh, we see those continue at a relatively healthy speech, even as we as we are at this point in the quarter, which.

Well in terms of what we're seeing what we're hearing from customers as well in terms of a temporary slow down in certain activities that would then pick up at a later date and and one thing I would I would add is with respect to talk clinical trials run unless the trial is completely outfit cancelled if it takes longer it actually.

Results in more revenue for us because we would end up storing those materials for longer periods of time, those little biologics that require cold temperature et cetera would be oh nicely additive to what would expect on an individual a program that that we are working with a customer on so long term.

Slowing a clinical trial, but still running it tends to result in more revenue for us for that program.

And it's only if it again, probably the cancelled that that would be an issue. The second part of your question.

Who on D. spend a slow down and what that was a imply that mentioned on the basis, we've seen biologics business.

Really delivering 13% top line <unk> that's across.

All bent programs as well as a those but a commercial keep in mind two thirds of the business are in development, but most of those gain in mid to late faces you've seen Oh, two aquatic business over the last couple of years going from an acquisition of Bloomington that was doing 12, a commercial programs.

Mouse sitting I believe 22, and so that that I would say is an indicator of the let's see maturity of this.

Where we have they face programs, which we believe even in cases, where they made you slow down and spending mid to late fees programs that show significant promised would continue to be funded and continued to drive Ah revenue for us in our business and potential official commercial launches as well. So we think that if there is a slowdown that may impact.

<unk> early phase preclinical to phase one types programs are we still have significant portion of our programs that are more mid to late fees versus early phase across the continent.

I mean to to bode well for us from from as well.

<unk>.

Okay. That's helpful. Thank you.

Thank you.

And our last question comes from the line haven't stove William W. Bear Dylan is open.

Hey, I've got just one so we can get off a call here on J. and J. you already addressed that you've structured the deal for a return on investment even if this vaccines not approved but can you just talk to the level of potential drag in the second half of calendar 20 as you've ramp.

I'm just wondering if the tremendous national urgency here and things like you know the recently announced operation Warp speed.

There may be going to change how this project would roll through your P.N.L. versus a a normal you know vaccine pill finish.

Yeah, So what I would say having is first of all so we are highly diversified right with 7000 products.

Plus the number of developing programs as I just described that or you know mid late fees program to continue to drive volume of course about businesses.

So so I want to just you know put that out there first in terms of any single program that really.

Moving to a needle plus overall and we factored into.

Oh guidance that you've just given call and will continue to factor into guidance on next fiscal year, when we get to the to that point Oh, we can check to the balance of this fiscal year. This really is not very much that's gonna be impacted by these programs you can with the accelerated development as we sent me we anticipate adding.

Again headcount starting in July which is effectively after our fiscal year.

Between now and through that time will be working with.

Change and others around <unk> activities and other things that will that will also drive Ah revenue into our facilities, if we put our scientists and others to work.

While he professionals to work to help to help develop the program to the point that it would potentially be commercially lobster. So between between that time I would say generally speaking of this is not specific to this one program generally speaking, we all working with customers on development programs up to including batches that are useful.

The court trials.

Transfers, if it's something that's been developed elsewhere that all drive rather than me for businesses, so even with those investments without giving specificity.

With the investments and headcount who would we would have some upsetting revenues to go along with those and as I said, we don't expect any or any significant impact on a balanced with this year and to the extent, we expect anything we factored that already or not okay.

Alright.

Thank you very much.

Thank you.

This does include today's question and answer session I wouldn't knowledge to turn the cold back to John Chiminski for clothes more much.

Thanks, operator, and thinks everyone for your questions for taking the time to join or call. It might to close by reminding you of a few important points.

First keys strings of Catalan that is even more evident today is the wide diversity of our business across products geography and customers.

Do do our comprehensive capabilities diverse revenue base, well funded customers the increasing need for complex solutions in our strengthen balance sheet channel. One is that only very well positioned to whether this crisis, but also play an important role in the development of treatments and vaccines that will allow us to win the battle against coded 19.

Yeah.

Second.

We're committed to the delivering results consistent with our updated <unk> financial guidance for this here and we're focused on continuing to drive organic revenue and either grows across all of our segments over the long term.

It's a top priority to grow our road class biologics business and effectively integrate the premier assets, we've acquired and deploy <unk> further build our our capacity and capability to help improve the lives of patients and meet our customers demand, we expect strong revenue and adjusted either grow from or biologics offerings overtime.

In target the biologic segment to make up approximately 50 per cent of our total revenues in fiscal 2024 versus approximately one third today.

Finally operations quality and regulatory excellence are at the heart of how we run our business and remain a constant focus in priority our employees commitment to these areas have enabled us to keep sites open in production running even during the worst pandemic of our lifetimes, we support every customer project with deep scientific expertise.

In a commitment to putting the patient first in all we do.

Thank you.

[laughter].

Ladies and gentlemen is concludes today's conference call. Thank you for participating you might now disconnect.

[music] mm.