Q2 2022 Catalent Inc Earnings Call

February 1, 2022

We refer you to slide three for more detail on forward looking statements. Slides four and five discuss Catalent's use of non-GAAP financial measures and our just issued earnings release provides reconciliations to the most directly comparable GAAP measures.

Please also refer to Catalent's Form 10-Q that was filed with the SEC today for additional information on the risks and uncertainties that may bear on our operating results performance and financial condition, including those related to the COVID-19 pandemic. Now I would like to turn the call over to John Chiminski, whose remarks will cover.

Slides six and seven of the presentation.

Thanks, Paul and welcome everyone to the call.

Catalent's strong start to fiscal 2022 continued in the second quarter.

Our financial results were driven by continuing strong growth in our biologics business with additional support from our other business segments. As we worked with our customers to deliver thousands of different products that help people live better healthier lives.

The recent addition to our offerings of consumer-preferred gummy dosage forms for nutritional supplements through the acquisition of [Bettera] added another growth engine on top of our robust organic performance.

Consumer preferred gummy dosage forms for nutritional supplements through the acquisition of <unk> added another growth engine on top of our robust organic performance.

The strong second quarter, along with continued momentum in the business has led us to again increase our fiscal 2022 guidance, which Tom will review later in the call.

Our net revenue for the second quarter was just over $1.2 billion, increasing 34% has reported or 35% in constant currency compared to the second quarter of fiscal 2021.

When excluding acquisitions and divestitures, organic growth was 32% measured in constant currency.

Our adjusted EBITDA of $310 million for the second quarter increased 39% both on an as reported and constant currency basis compared to the second quarter of fiscal 2021.

When excluding acquisitions and divestitures, organic growth was also 39% measured in constant currency.

Our adjusted net income for the second quarter was $163 million or 90 cents per diluted share up from 63 per diluted share in the corresponding prior-year period.

The biologics segment, driven by continued high utilization of our drug product assets was again, the top contributors to Catalent's financial performance.

This segment experienced organic net revenue growth of 59% driving an EBITDA increase of more than $60 million over the second quarter of last year.

Our legacy offerings in our Softgel and oral technologies segment continued to experience the recovery from pandemic related headwinds that we had anticipated and this segment results were further enhanced by the acquisition of [Bettera].

Organic growth was very strong as year over year demand for both prescription and consumer health products recovered nicely over the same period last fiscal year.

A quarter that included pandemic lockdowns.

Though net revenue is now higher than compared to the pre-pandemic second quarter of fiscal 2020, there are still a few headwinds and challenges driven by the ongoing pandemic with pockets of demand still not at historic levels.

However, we're pleased that our base business strong growth in product development and robust prescription drug pipeline are more than overcoming some of the headwinds that still exists.

In addition to our positive organic performance, we received a strong boost from the first quarterly contribution from [Bettera], which added more than 20 percentage points of net revenue growth to the segment.

The [Bettera] acquisition was an important factor and leading us to raise this segment's long term net revenue growth rate to 6% to 8% and improving its margin profile.

The acquisition is off to a better than expected start and we are seeing high interest in gummy formats from a consumer health customers.

Our oral and specialty delivery segment also saw continued organic net revenue growth after facing headwinds in fiscal 2021.

As with Softgel and oral technologies segment, there are improving market dynamics across our oral and specialty delivery segment.

These dynamics are most notable this quarter in our early phase development offerings and rising demand for orally delivered [Zydis] commercial products.

Finally, our clinical supply services segment posted high single-digit net revenue and EBITDA growth compared to the second quarter of fiscal 2021.

As highlighted last quarter, we opened new CSS facilities in San Diego, California, and she could Japan in the first half of this fiscal year and expect them to be long term growth drivers for the segment.

On our last several calls, I've detailed our capital expenditure projects across the company.

Most notably in support of our biotherapeutics in cell and gene therapy offerings.

I'm very proud of our team's ability to navigate the challenges presented by the pandemic, including those presented by the global increase in cases related to the omicron variant to keep these critical growth projects on track.

With no change to the timeline or scope of these projects. We thought it would be helpful to give you an update on the progress of our OneBio offering, which we first announced in June of 2019.

OneBio combines our drug substance and cell line development with our drug product and clinical supply services to help reduce development timelines risk and complexity for our customers to get their therapies to patients all uniquely with one CMO partner.

Since we introduced this initiative, we've signed more than 20 development programs, creating an additional theater channel for our commercial pipeline.

Since originally launching as an early stage offering specifically for preclinical through phase one programs. We've now expanded the offerings to support late-stage programs based on customers needs.

We now have several phase II and phase III programs in progress or signed.

We also recently completed the first OneBio customers cGMP batch using our new small scale filling line that we acquired in Bloomington in September 2020.

We continue to see interest from existing and potential customers, who are looking for a single proven partner to help them reduce development timeline risk and complexity and getting their therapies into the clinic and to patients faster.

And this is of course not limited to our biotherapeutics customers. We have a longstanding history of optimizing the successful development of small molecules as well and recently launched a new service in our oral and specialty delivery segment called Express pharmaceutics.

That is designed to accelerate the development of old drugs through phase one clinical trials.

Our team will integrate formulation development and provides on demand clinical manufacturing regulatory support and clinical testing guided by real-time clinical data to reduce the time potentially by half to complete first in human clinical trials.

I'd now like to make a few comments regarding our CEO transition plan announced last month.

Catalent is in a strong position given its growth history and trajectory, its increased profitability and its proven successful strategic execution, including the transformation of the company over the last few years as we've grown our biologics segment and further diversified our portfolio.

Catalent's offerings are not only balance they closely matched the industry's R&D pipeline.

After my 12 years at the helm, it makes sense to refresh Catalent's leadership, particularly when the board agrees that we have a top industry leader in Alessandro to advance Catalent seamlessly.

I'm very proud of and impressed with our board for overseeing such a thoughtful and thorough succession planning process.

Alessandro is uniquely positioned to lead the complex [CDMO Catalent].

You started off at the site level over a decade ago.

Worked his way up to larger sites, then ran multiple sites.

Rose up to become our senior VP of operations and eventually became an integral part of our leadership team and his role as our president and COO.

Over the last three years, Alessandro has been running Catalent to a significant degree.

Alessandro has been running catalyst to a significant degree.

Having ownership for all of our business units go to market strategies and technical operations.

He has worked hand in hand with me in developing and executing our strategy and has been pivotal in all our decisions regarding acquisitions and post-acquisition integrations.

With that said, I'd now like to turn the call over to Alessandro who will walk you through our recently announced long term financial targets.

Thank you, John and I'm glad you caught up to be given the opportunity to meet Catalent. You and I have worked closely together for a decade.

And side by side over the last three years.

I look forward to continuing to partner with us through the transition over the next several months and then again [inaudible] as executive chair when you will be delivering important value to the company in areas critical to our success.

I'm confident that we have everything we need to continue to win as we embark on these transition.

We continue to expand our global network.

Invest in growth driving capabilities.

Attracting new talent and accelerate our progress in operational excellence.

These would all be critical drivers of Catalent to deliver our long term targets.

As you know in January 2020, we provided investors for the first time with our fiscal '24 targets.

Our 2024 net revenue targets of four and a half a billion dollars represented more than a 50% increase from our LTM revenue at the time.

We have already achieved the business net revenue targets in the last 12 months and our fiscal '22 guidance is updated today is already $300 million higher at the midpoint now our prior 2020 for guidance.

In addition, back in 2020, we also projected our adjusted EBITDA margin to expand several hundred basis points to 28% in fiscal '24 driven by increased EBITDA margin in the faster growing to biologics offering.

We are right on track to meet that target, including an estimated 100 basis point increase in fiscal '22 over last year.

I wanted to sneak it changed significantly seemed to January 2020, when our biology segment accounted for just a quarter of our mass revenue.

Now it is already talked to 50%.

Already talked to 50%.

This transformation of our business in the last few years is a result of our strategic investments in assets supporting numerous therapeutic modalities in high demand.

Including vital vector, plasmid DNA, [ITSPs], other gene and cell therapy manufacturing technologies, messenger RNA, monoclonal antibodies and therapeutic proteins.

Given these products last month at the JPMorgan Healthcare conference, we announced we are moving up our fiscal '24 targets and we introduce instead the targets for fiscal '26, which are illustrated in slide eight.

As you can see each of our segments.

[inaudible] long term organic growth rate target, including our largest segment biologics, which has the fastest rate at the 10% to 15%.

Our second biggest segmented, Softgel and oral technologies is now up to 6% to 8% with improved margins following the acquisition of Bettera.

And our oral and specialty delivery and clinical supply services segment.

I would also [inaudible] to grow in the meat that to high single digits at attractive margin profiles.

Key drivers to our underlying growth across the company are.

First, the dynamic and growing expanded for R&D in both large and small molecules. And second, increased utilization of our premium assets manifesting approved products.

When we look at all the various segments of growth rate, we are very comfortable with our overall long term consolidated organic revenue growth of 8% to 10%.

Based on a combination of our long term organic growth rate and anticipated M&A activity, we are projecting more than seven five.

$5 billion in revenue in fiscal '26, or roughly a 20% CAGR from our fiscal '22 guidance updated today.

We believe margins will continue to improve over the next several years with an adjusted EBITDA margin of approximately 30% in fiscal '26.

It is important to note that that's our long term strategic plan does not assume that the pandemic related demand for vaccines will continue in the outer years.

In other words.

For these other years, our overall revenue is forecasted to continue to grow even as we expect that revenue from COVID-19 related programs to significantly decline both in terms of absolute dollar and as a percentage of overall revenue.

We believe our accelerated progress toward our former fiscal '24 targets, which was attended by our highly successful work on COVID-19 response product exemplifies our ability to deliver for all our stakeholders and we look forward to now really betting on that.

On our fiscal '26 targets.

Before turning the call over to Tom, I want to briefly address our [inaudible] facility and related debt for AG three letter from FDA.

We take all regulatory observations very seriously and works speedily to address all of them.

While some remediation efforts at relatively quick, others like in Brussels will take more time and resources.

We are a patient first company.

And we [inaudible] operations, while meeting the highest regulatory standards as soon as possible. So we assembled, we have assembled a team of internal and external experts.

To deliver on this expectation.

We are proud of our focus on operational excellence and quality.

And now that leads us to believe that more than 70 billion doses of [inaudible] for nearly 7,000 product on behalf of more than 1,000 clients across more than 50 facilities each year.

The broad divestiture a lot of product offering and resilience of our business is to create a key strategic advantage over our competitors.

Our business is to create a key strategic advantage over our competitors.

I would like to turn the call over to Tom who will review our financial results for the second quarter and our updated fiscal 2022 guidance.

Thanks, Alessandro.

I'll begin this morning with a discussion on segment performance, where commentary around segment growth will be in constant currency.

I will start on slide nine with the biologics segment.

I will highlight the company's transformation over the last few years, you will see that the company represented 52% of our net revenue in Q2 and fiscal year, 244% in Q2 of fiscal 2021, and 31% in Q2 of 2020.

Biologics net revenue in Q2 of $638 million increased 60% compared to the second quarter of 2021.

With cell therapy acquisitions adding one percentage point of growth.

This robust net revenue growth was driven organically by broad-based demand across the segment, most notably for COVID-19 related programs.

The segment EBITDA margin of 39% was up 60 basis points sequentially over the first quarter of this fiscal year, but was down year over year from the record level of 33.5% recorded in the second quarter of fiscal 2021, which is primarily attributable to mix.

Most notably, an increase in component sourcing as well as costs associated with our continued investment in cell therapy business.

As we discussed in the past, component sourcing is where we source materials components and other supply for our customers and it comes with two opposing dynamics increased revenue, but with margins well below the company average.

In Q2 of last year as we readied the additional capacity we were building we were not yet manufacturing at large scale and therefore had a much lower contribution from component sourcing versus today's levels.

Looking to the back half of the year as we discussed last quarter, we expect the biologics segment revenue growth rate to decelerate in the second half of fiscal 2022, as we begin to compare against the higher levels of COVID-19 related production that started back in in the back half of fiscal '21.

'twenty one.

Also in the back half of the year, we expect the EBITDA margin for biologic to be impacted by costs associated with corrective and preventative actions. We are taking in response to the regulatory observations out of a vessel site.

These remediation efforts will include a voluntary temporary shutdown as we replace equipment and we validate the facility had been factored into our updated fiscal 2022 guidance, which I'll review in a few moments.

Please turn to slide 10, which presents the results from our Softgel and oral technologies segment.

Softgel and oral technologies net revenue of $329 million increased 36% compared to the second quarter of fiscal 2021 with segment EBITDA, increasing 73% over the same period last fiscal year.

The October 1st acquisition of [Bettera] contributed 22 percentage points to net revenue growth from 30 percentage points to EBITDA growth in the segment during the quarter.

The organic net revenue increase was driven by growth in both prescription products and consumer health products, particularly in cough cold and over the counter pain relief products.

Segment EBITDA increased 570 basis points from the second quarter a year ago.

With organic volume growth and the addition of the margin accretive the terra business each contributing to the margin expansion.

Slide 11 shows the results of the oral and specialty delivery segment.

At the factoring out the net impact from divestiture of our blow fill seal business and the acquisition of a quarter spray drying assets organic net revenue grew 5% and segment EBITDA was up 24% over the second quarter of last year.

The topline growth was primarily driven by elevated demand for early phase development programs.

You may recall that a year ago, we called out lower demand for early phase development programs. As a result of pandemic related lockdowns. So this bounce back is another strong indicator of a return to pre-pandemic activity levels.

Organic net revenue growth was driven by demand from early phase development programs and orally delivered situs commercial products.

EBITDA margin improvement was driven by organic net revenue growth as well as favorable comparison to our second quarter of fiscal 2021, when we booked charges related to our customer September 2020.

As voluntary recall of our respiratory products.

As shown on slide 12, our clinical supply services segment posted net revenue of $99 million.

Representing 7% growth over the second quarter of fiscal 2021 and segment EBITDA growth of 9% over the same period.

These increases were driven by growth in our manufacturing and packaging and storage and distribution offerings in North America.

As of December 31st, 2021 backlog for the segment was $529 million.

Compared to $550 million at the end of last quarter and up 18% from December 31 2020.

The segment recorded net new business wins of $114 million during the second quarter compared to $118 million in the second quarter of the prior year.

The segment's trailing 12-month book to Bill ratio is 1.2 times.

Moving to our consolidated adjusted EBITDA on Slide 13, our second quarter, adjusted EBITDA increased 39% to $310 million or 25.4% of net revenue.

They're up to 24.5% of net revenue in the second quarter of fiscal 2021.

On a constant currency basis, our second quarter adjusted EBITDA also increased 39% compared to the second quarter of fiscal 2021.

As shown on slide 14, first-quarter adjusted net income was $163 million or 90 cents per diluted share compared to adjusted net income of $114 million or 63 cents per diluted share in the second quarter a year ago.

Slide 15 shows our debt-related ratios and our capital allocation priorities.

Catalent's net leverage ratio as of December 31st, 2021 was 2.8 times below our long term target of 3.0 times.

This compares to a pro forma calculation of three one times at September 30th, which reflects both a material acquisition. We completed in October on October one and the debt we issued on September 29th in connection with the acquisition.

And the reported 2.6 times at December 31st, 2020.

From here, we will naturally delever absent any further M&A activity as our adjusted EBITDA continues to grow providing us with significant flexibility to continue to pursue organic and inorganic growth opportunities.

Our combined balance of cash cash equivalents and marketable securities as of December 31st was $960 million compared to approximately $1 billion also on a pro forma basis for the [Bettera] acquisition, we reported as of September 30th 2021.

Moving on to capital expenditures.

We continue to expect CAPEX to be approximately 15% to 16% of our fiscal 2022 net revenue expectations, driven primarily by growth investments biologic segment.

Now, let's turn to our financial outlook for fiscal '22 as outlined on slide 16.

Following a strong second quarter and solid outlook for the remainder of the fiscal year, we are raising both the low and high ends of our financial guidance ranges.

We're also tightening the range since they are just five months remaining in the fiscal year.

We now expect full fiscal year net revenue in the range of $4.74 to $4.86 billion, representing growth of 19% to 22%.

Versus our previous estimate $4.52 to $4.82 billion.

We project that net revenue growth from M&A will continue to be two to three percentage points, principally driven by the acquisition of Bettera.

We continue to project organic net revenue growth in each of our segments for the fiscal year to be within or above the long term growth range. We have previously disclosed for each segment.

For full-year adjusted EBITDA, we expect a range of 1.25 to $1.30 billion.

Representing growth of 23% to 27% over fiscal 2021.

Compared to our previous estimate of $1.225 to $1.295 billion.

Note that the continued strengthening of the US dollar against both the Euro and the British pound is expected to negatively impact our adjusted EBITDA by approximately $10 million in the second half of the fiscal year the effects of which has been absorbed into our new guidance.

We expect full year adjusted net income of $650 million to $700 million.

Representing growth of 18% to 28% over the last fiscal year compared to our previous estimate of $630 to $695 million.

We continue to expect our fully diluted share count on a weighted average basis for fiscal 2022 to be in the range of 181 to 183 million shares. This projection counts our formerly outstanding series a convertible preferred shares as if all were converted.

To common shares in accordance with their terms.

Finally, we also continue to expect our consolidated effective tax rate to be between 23 and 25% for fiscal 2022.

Operator. This concludes our prepared remarks, and we would now like to open the call for questions.

Thank you.

If you would like to ask a question, please press star followed by one on your telephone keypad.

If for any reason you would like to leave that question. Please press star followed by two. Again to ask a question that is star followed by one.

Okay. We have our first question. Our first question comes from David Windley from Jefferies. David, please go ahead.

Hi. Good morning. Thanks for taking my question. I wanted to.

I was hoping to ask two. My first one is around biologics revenue. Tom, you called out the COVID-19 programs were a big driver there.

In a conversation we had in December you talked about COVID. Management considers cobra to be in the base and then the base you expect to be able to grow.

10% to 15% over the long term.

Could you talk a little bit about, could you give us a little more color about how much COVID-19 contributed to the quarter or anything you can tell us there?

How much COVID-19 contributed to the quarter or anything you can tell us there and.

And how you believe that will kind of paced out over coming years that will allow you to continue to grow that segment, 10% to 15%.

Yeah. So David. We're going to fall short of giving any specificity further specificity around what the contribution was for COVID related revenue. I'll go back to comments, we made at the start of the fiscal year with not only just being part of our base, but work, but that it was a revenue contribution that was expected to be higher than the contribution that we saw in fiscal '21.

We're going to fall short of giving any specificity further specificity around what the contribution was for Covid related revenue I'll go back to comments, we made at the start of the fiscal year with not only just being part of our base, but work, but that it was a revenue contribution that was expected to be higher than the contribution that we saw in fiscal 'twenty one.

I'll remind everyone saw about $550 million on a net basis.

COVID related revenue in the prior year. I would say that in fiscal '22 we expect that revenue to be higher than those 11 than those levels. We have said that we do expect.

COVID revenue to continue to contribute to our fiscal '23 year.

In fact, we have public disclosures that have been made around relationships with several key customers that extend through fiscal '23 time frame. In terms of what the revenue profile COVID looks like after 2024, we haven't sorry. After 2023, we haven't talked about that specifically, but we did clarify on today's call.

Public disclosures that have been made around relationships with several key customers that extend through fiscal 'twenty three time frame in terms of what the revenue profile of <unk>. It looks like after 2024, we haven't sorry. After 2023, we haven't talked about that specifically, but we did clarify on today's call.

Dave that. It is expected to be a significantly lower contributor.

It is expected to be <unk>.

Significantly lower contributor.

In the outer years of our long term targets.

Especially with regards to fiscal '26.

I will say that the pipeline of drug product programs that we have built through the role that we claim and the pandemic is certainly giving us the confidence to continue to see this be part of the base.

Drug product programs that we have built through the role that we claim and the pandemic is certainly giving us the confidence to continue to see this be part of the base as.

As well as the additional capacity that we continue to invest in and bring online across several key facilities here within the network, primarily within Bloomington with RR Donnelley facilities in Europe.

Anything else to add?

Look, covering the second part of your question a little bit more in detail.

The quality and give the second part of your question a little bit more in detail.

Across all the offerings in biologics, we still have a number of assets, which have not used before [quality stones], which are in NAND will continue to be expanded in capacity over the next three years.

Tvs.

On drug substance in gene therapy cell therapy center saw that specifically with regard to [inaudible]. So we feel comfortable that we have enough assets, which will come online that we've done.

Very good the demand profiles, which will continue to help growing the business at projected fleets.

<unk> projected fleets.

Thank you. My follow up question, maybe you could segue Alessandro you touched on the 43.

I guess kind of two aspects of this question as well.

Two times two aspects of this question as well one beam.

One being the timeframe that you expect this facility to be impacted as you remediate the issues.

I believe from other context were to believe that maybe that's a six or seven months timeframe, if you could confirm that and then more broadly and this facility is one that has had 480 threes at every FDA inspections since 2013.

Six or seven months timeframe, if you could confirm that and then more broadly and this facility is one that has had 480 threes at every FDA inspections since 2013.

This particular 43 highlights some issues that appeared to be kind of neglected for several years. If you could add some context to the investments in quality and the priorities around quality.

In this facility. I'd appreciate it, thank you.

Yeah, sure. So look, we are not providing here any specific update about the timeline.

To these. I can only share that we have deployed.

A significant amount of resources that on an external expert said in my comments to these.

I can confirm that we only going to restart that facility.

Where we have satisfied the meetings with the highest standards of.

quality and compliance.

That investment is ongoing. It did require some engineering changes to the.

[inaudible], which is ongoing but they will fall short from providing the specifics about this one.

With regards of your second question around 40 degrees in this specific facility.

We take all these observations very, very seriously. Some of them.

Are more related to the procedure. Some practices that can be corrected

With the ongoing production. Some others like in this case right appalling to wherever you need to stop

Production some others like in this case right appalling to wherever you need to.

Production for a period of assignments implement some changes, especially when it comes to.

facilities that would be running for a while.

I believe that the response of the company has always been a very very thorough.

The sponsor of the company has always been a very very thorough.

In collaboration with all the regulating agencies. For each of those we've been in contact. We have responded and but we have a growth that those observations to.

We believe the regulating agency for each of those we've been in contact we have responded and but we have a growth that those observations to.

Conclusion that [inaudible] of regulators.

Excellent. Thank you. I appreciate the answers.

Thank you.

Our next question comes from Tejas Savant from Morgan Stanley. Please go ahead.

Hey, guys. Good morning, just just to follow up on David's line of questioning that Tom.

It sounds like the financial impact from the shutdown is clearly fairly manageable, but have you seen any issues in terms of your ability to participate in new RFPS or your win rates? And then.

Can you just walk us through your ability to absorb the impact by moving customer projects to elsewhere in the network from Brussels?

So with this first part of the of the question look.

We, of course, plan worked very very hard in stride.

Not whether these situations.

And we expect [inaudible] surely.

The highest level of excellence.

However, we all need to appreciate that [inaudible] specific idea, but won't disappoint the just 1, 43 [inaudible]

experienced an observer.

The performance of Catalent and add values first and for most the patient first inaction everyday.

Without [inaudible] so I believe that our customers have a way more.

Information and data volume to make a bid evaluation and as such we have not experienced that.

Any slowdown in our commercial activity on that, any like data and in fact, I can confirm that the demand.

And the request for Catalent services is as high as it's ever been.

<unk>.

And in terms of your question related to the financial impact. This goes back to the one of the core strengths of the company, which is the diversification of the portfolio. We operate over 50 sites across the globe manufacturing over 7000 products across a thousand different customers. So.

The size of Catalent's battleship if you will gives us the ability to absorb these types of normal course challenges that come up from time to time and we operate in a highly regulated space. So to answer your question we have.

Been able to absorb this. We said from the start that this was not a material financial or contributor or impact for the company.

<unk> or impact for the company.

And I think that's seen by the robust guidance, we put forth here for the remainder of the fiscal year.

<unk> seen by the by the robust guidance, we put forth here for the remainder of the fiscal year.

Got it. And then one quick follow up there, Tom you mentioned remediation costs in your prepared remarks.

Would you be able to sort of quantify that for us in terms of what the EBITDA impact look like in terms of the revised fiscal '22 guidance?

Yes, that's a level of granularity that we don't disclose. We don't talk about the contribution from individual plants across the network. We did want to just highlight the fact that we will see some additional costs as a result.

Of the remediation efforts that will have an adverse impact.

In the margin profile of the business in the second half of the year, primarily in the third quarter. However, as I said, that's already contemplated in the robust guidance that we've put forth.

Got it. I appreciate the color, thanks, guys.

Thank you.

Our next question comes from Jacob Johnson from Stephens. Please go ahead.

Hey, good morning.

Maybe a question on the drug product side, obviously, there has been a good amount of benefit from COVID there. I think as Tom mentioned, you have contracts that run into next calendar year, but if and when those dedicated lines free up potentially for other customers or are you already in discussions with.

Let's call them non COVID-19 customers about that capacity.

Yes, sure absolutely. Look, I wouldn't call them

[inaudible] customers that will call them non-COVID product that they might be with the theme of COVID-19 customers than any factor.

I do believe that's the most likely scenario, where those partnerships, which again as said in a way that.

Create partnership and collaboration across the spectrum will pipelines and not necessarily on these specific products.

I believe that we're going to continue with these customers.

Priority to drive these lines. I'm going to continue to underline and underscore that these type of assets are specific and if you didn't finish line [inaudible] demand, there is not enough capacity in the awarded to support the current volumes in the future pipeline.

More importantly, [ianudible]. So there is demand, but he has a line of customers wanting to access and I do believe we will continue to be the priority you can swap out of an asset, which we have developed such a strategic relationship or through the COVID pandemic responses.

<unk> so.

<unk> demand, but he has a line of customers wanting to access and I do believe we will continue to be the priority you can swap out of an asset, which which we have developed such a strategic relationship or through the quality of the pandemic responses. So.

I hope this addresses your question.

That's super helpful. Thanks for that and maybe just one follow up.

In your updated investor presentation, you had this slide on where the Biopharma industry could go.

In the next five years. I think you highlighted some things like gene editing oncologic viruses Red blood cell therapeutics. Are those capabilities you can serve today or those areas that maybe we should consider for inorganic growth at Catalent?

It's both.

We have already as I shared a few weeks ago.

Maybe these went a little bit under the radar, but we have secured a number of facilities that from [inaudible] of our clients that in the [inaudible] facility, which would not necessarily be using before that current platforms. And we have dedicated these facilities to the gain on the development of some of the platforms that you're already heading to name.

[inaudible] which again is one of the therapeutic modalities for some significant patient populations, which you will see that it affected in the future.

Our move. The other one that we are really working hard on these the plasmid DNA, we continue to see.

The other one that we are really working hard on these the plasmid DNA, we continue to see.

Huge interest and demand from customers. The reality that this is at the moment a capacity-constrained environment and the new without getting into the new platforms that have been validated through the pandemic.

Primarily messenger RNA [inaudible] large use of those products.

<unk>. Product so.

Product so.

Some of that we do have the infrastructure, we [are not material], will disclose it at this point in time in the role

Mass of the company, but I do believe that will become at some point in [inaudible] and I expect that in the years to come, we're going to talk more about that the contribution of plasmid DNA and some obese platform you're referring to.

Super helpful. Thanks for taking the questions, Alessandro and congrats on the new role.

Thank you.

Thank you. Our next question comes from Luke [inaudible] from Barclays. Please go ahead.

Question comes from Nick <unk> from Barclays. Please go ahead.

Thanks for the question. I just kind of want to dig into the margin for '22. You guys have a ton of moving parts here to get to that 100 basis points expansion, that's including Tara. You have FX headwind, you have the mixed dynamics. Can you just kind of walk us through what those puts and takes are and bucket those out?

Yes, so first I would say the FX headwinds are not having an impact on the margin profile of the business and what we're seeing.

The strengthening dollar impact both the top and the bottom line at similar levels here. So no impact related to that.

We are assuming as you mentioned.

Over 100 basis points of margin expansion at the midpoint of the range.

We're certainly seeing the Bettera contribution helped.

<unk> contribution help Paul.

The margin profile within the [inaudible] business, we mentioned that the business that has EBITDA margins that are operating closer to that of biologics.

Than that of the S&P business, where it is today.

But also the recovery efforts that we're seeing in terms of moving.

Closer to pre pandemic levels within [SOP] and OSD.

And OSB.

And the corresponding increase in utilization levels we're seeing in those facilities as a result of those volume upticks are contributing to the.

Margin expansion profile that we're seeing in that business. Biologics is the only segment, where we saw some margin pressure. And that's really primarily attributable to the mix issue and the component sourcing dynamic, which I talked about in detail through my prepared remarks, and I would expect.

But the margin profile of biologics continues to be a modest drag for us in the second half of the year, especially now with the inclusion of the remediation related costs associated with the 43 out of the Brussels facility. In the CSS business, I would say the margin.

A modest drag for us in the second half of the year, especially now with the inclusion of the remediation related costs associated with the 43 out of the Brussels facility in the PSS business I would say the margin.

Accretive business, we continue to see EBITDA levels that are growing faster than the top line in that business and I would expect that dynamic to contribute in the second half of the fiscal year as well so.

It really comes down to the inclusion of the tariffs and the recovery within S&P and OSD that are going to help drive the margin profile.

<unk>.

Higher year for us and offset some of the headwinds we're seeing within biologics.

Great. Thanks.

And then secondly, as you talk to, you talked about some pockets of demand being less than historic levels. Can you talk about where particularly you're seeing those and then just the overall order book is as you guys see it stacking up?

And how that's really kind of meeting or exceeding your expectations.

Look, Alessandro here, so I mean, some of the areas that would be would be obvious to you.

All the areas of a biomarker velocity and get clearly easing high demand. Just let me remind you that in that area we serve both commercial products, but also the R&D pipeline.

In all the new modalities of the pipeline, not only increasing as we show in our presentation but is also a maturity meaning that we need to get more and more assets are moving to the latest stage. And when it comes to see the monotherapy specifically that is more of a opportunity for us to generate revenues in the latest stage of the pipeline as opposed to the early stage of the pipeline.

So that's for sure is creating some interesting dynamics.

I would tell you the clinical service business has been an interesting one because they get.

There were a couple of dynamics ability to recruit patients and patients go into clinics.

Although the other end [inaudible].

[inaudible] The fact that now this is a little bit going backward.

The fact that now this is a little bit going backward.

The study starts being up in the game and so we are seeing very good commercial leads in that area, which are a good proxy for the future revenues.

Good commercial leads in that area, which are a good proxy for for the future revenues.

To invest in their businesses.

There it is still a little bit of lingering effect I would say of the pandemic it onto the consumer business.

Lingering effect I would say of the pandemic it onto the consumer <unk>.

I mean, this is primarily with the Q2 commentary, although I have to tell you.

That in the last few weeks, we've seen some good movement, there will be some historical products, large products and brands that we serve and consume it out which are.

Going back to historical demand. And in fact, in some cases.

Regaining a little bit of stock will create a temporary effect of increasing demand.

So in regards to our pharmaceutical therapies.

It's in feeding more of the small molecule, look, we are very very mindful and protocols really is having this more molecules.

Not making the volume play, but the technology play moving out there those.

diseases and unmet needs are which has still been targeted by small molecules.

And that.

And that is an area that the mortality today is giving [inaudible] especially for our early stage assets that good demand, but we see that trend continuing into the next few years.

Shawn. Please go ahead.

Yes, thanks, good morning.

Oh man. That was an area you all. Previously talked about as being a likely kantar.

That was an area you all.

Previously talked about as being a likely kantar.

Continued investment focus in terms of adding new capacity at some point John mentioned that the strong client interest in gummies kind of right out of the chute here.

Any updated thoughts you can share around when you might begin investing expanding.

But there is that correct.

Yes. Thanks for the question first of all we couldnt be more excited about our acquisition of the Tera its really come out of the gate incredibly strong as you know we have relationships with or all the words.

Consumer health companies.

Honestly I would tell you the phone is a little bit bringing off the hook.

They have really some.

<unk>.

Great technology, great taste profile great.

Overall.

Suite of products that they're developing that overall effort specifically on the capacity expansion piece I will tell you that we came out of the gate with our business plan on the tariff already planning to spend significant capex there.

They are to expand capacity.

The current.

Demand supply imbalance says for us to quickly expand capacity literally if we could double our footprint right now with regards to our manufacturing capacity, we could sell at all so we have some very aggressive plans in terms of capex expansions.

With our new <unk> team, we're hiring a significant amount of individuals', we're taking the catlin playbook of operations and processes already expanding.

Where we can from an operational standpoint in terms of increasing 24 by seven operations, where we can in certain facilities.

We have capex.

Expansion is already deployed and I can share with you at our board meeting that we had just last week, we had a specific section around material and how we are going to significantly multiply the EBITDA of that business over the next few years. So we're very excited about about the space to the strong interest and demand and really how Cadillac can turbocharge the.

Given our strong position in franchises that we have in the consumer health area.

Great. Thanks, and then on <unk>.

Maybe on capacity utilization more broadly you had said before there are a number of facilities that were operating 24 hours a day seven days a week to meet commitments is this still the case and is that happening across a lot of your footprint is more prevalent in any one particular segment and then in those situations how does that affect margins.

Fixed cost deleveraging, but I would imagine you have to do things like other ship premiums.

Yeah look it's.

It's a little bit.

Valuable crops.

Cross across the bank, what I can tell you shouldn't you can affect our tax products.

But that.

Primarily vial to run at very high capacity utilization rates should be at 24 seven rates.

I believe that the movie button, because I think we shared that we have the debt capacity will continue to come online in the capacity utilization of the one that you calculate.

Some real deep, but when this capacity comes online.

So I would tell you that in fact substance.

But we have fairly high utilization, but there is still a BTB put out there to continue to sell more than we had the very recent peak coming online two additional training in our Madison facility again, we are doubling down in our volume and velocity.

Healthily led to continue to serve but by amount of us sitting in the space.

Good evening did have some early moves that we do routinely in some areas, which we see attractive in the mid to long term like cell therapy like <unk> like <unk>.

You know that the other ibs simulation, where we decide that because it makes sense to.

<unk> entered into the space and these platforms organically as opposed to PMI premium on acquisition and those scan, Florida, Peter but think you'd be a little bit dilutive, but once we are okay with that because you can get a little scheme of things to the capital deployment do you see the way more efficient than just.

They don't acquisition multiples so.

Tony.

Is the best way I can describe the across the board.

<unk> got obviously the division die they impact the margin.

Alright Thats helpful. Thanks again.

Thank you Sean.

The next question comes from John Kreger, William Dere, John Please go ahead.

Great. Thanks, very much I had a couple of questions about the longer term growth goals that you guys.

Research again in the in the presentation.

Tom maybe for you what are the planned capex spending levels that we should assume kind of correspond to the to the longer term revenue growth goals that you guys have provided.

Yes. Good question, John So we've talked about an elevated level of Capex, obviously in fiscal 'twenty, two we'll be spending about 15% to 16% of sales as we mentioned in the prepared remarks.

Closely aligned to what we spent in the prior year as well.

To remind folks that obviously the more normal levels of capital spend for us is somewhere in the 8% to 10% of sales.

Sure.

Basis annually.

Don't know that we get back to that level.

In fiscal 'twenty, three year, but I would expect us to start to.

Gravitate more more more closely to that.

So I think we remain elevated above the eight to 10 levels within the next one to two years, but probably not quite at the 15% to 16.

<unk> percent level, so we're not assuming in our in our plan that 15% 16% of sales John is the new normal level of Capex spend.

That we will.

Spending annually, however, it will likely stay above 10% for the next for the next several years, yes, John Let me just add a little bit of color here first of all I would say that cattle has done an excellent job staying ahead of surpassing that's needed in the industry. So we've been very astute understanding.

We can get a really quick and excellent payback on capacity investments and certainly what we've been doing in biologics, which is of course.

<unk> biotherapeutics, which is a drug product drug substance, but also our gene and cell therapy business again, we see.

Terrific ability to be number one in those spaces, specifically for cell and gene therapy from a <unk> standpoint, as well as to have the capacity that are there.

That our customers need which by the way is what kind of.

Really made us that go to player. If you will during during Covid with regards to vaccines and therapies, because we have much coveted capacity that our customers wanted it needed specifically the <unk>.

Hi technology of under Isolator and drug product.

Filling assets that catalog was putting in line and was able to secure even through the pandemic. The next thing that I'll tell you is that although as Tom says, we would expect to be 10% more normal run rate for the business. The cycle of the business as follows we'd find a great adjacency from an inorganic standpoint or an area.

Where maybe geographically we wanted to improve our position and then when we buy that asset get our hands on that asset. We then deploy significant.

Capex or against it to drive it organically as I was just mentioning that we'll be doing with the tariff so.

Assuming that.

We don't have any significant M&A I would expect us to do.

Get to that 8% to 10% and continuing to drive significant organic growth through our capex platform that I would say, which is the businesses that we've acquired or or put in place, but if we do continue to get into some other adjacencies or.

New assets, let's say in Europe , specifically for drug product and drug substance.

You would expect US to then quickly follow on with some additional capex. So it really depends on the M&A profile.

The assets that we get that will determine how quickly we can get to that I would say normal spend level of 8% to 10%, but hopefully that provides a little bit of a color and John having followed us for a long time and you probably see that debt.

That play out in the financials.

Yes, Thanks, John that's helpful and maybe just one last thing to clarify along the same lines I think in the past you've told US you weren't really interested in investing in la.

Large capacity.

<unk> drug substance production is that still your thinking.

Look we've always stated that our strategy is really in that sub 5000 leader.

Category for drug substance.

70% of the molecules that are in the pipeline. If they go commercial are going to require 5000 liters or less of drug substance.

<unk>. So we really feel that we've carved out a really nice area here and we will continue to invest in the sub 5000 single use I will tell you that we'd like to have more assets in Europe for drug substance drug product, we announced that we're going to be doing $100 million expansion in drugs.

Since in our <unk> facility.

In Italy. So we will continue to go after that but we really feel that.

Our place in the drug substance area is really in that sub 5000 liter theres a tremendous amount of biotechs in the small and medium size that are going after.

Indications that have smaller populations and then we combine that with that one bio offering that I talked about in our prepared comments and now we can take them basically from our cell line expression technology drug substance all the way through drug product and clinical supply. So I think we've really carved out a great area here.

We're kettle and is building a terrific brand reputation.

Yes, the only thing that was out there.

Look.

Our job is to try to get out not only where there is demand by where over time there could be.

Trying to balance the supply versus demand is going to and we do believe that.

The sub 5000 leaders.

More opportunity that the supply versus demand profile.

A healthy for longer time or foresee the mills.

Sounds good thanks branch.

Thanks, Jeff.

Thanks, John .

The next question comes from Derik de Bruin from Bank of America.

Please go ahead.

Hi, good morning.

Hey.

Hey, so a couple of questions. So first of all just to close the loop on the 43 is that did you is the is the plant shutdown and Theres still lines operating.

If you get a sense of the impact.

So.

The intervention that these are mostly requiring both in production and as we said is the oil and gas these patient sistema.

That that that does require a very comprehensive approach around the cylinder operation of the site. The cleaning of seismic that wanted that many added up Dvds when it comes to commercial operations and another legacy CVD and unseated activities until this deal.

Quite up quite an intense level of activities.

Including the integration activities as though it's not like.

Completely boat just add to that.

Tampa litigation and to the extent, we're doing that that requires the feeding operation to be both the Philadelphia did decline.

Thank you.

Can you talk a little bit about your LNG therapy.

Expansion in that market.

I mean, it's.

Here is where is the industry and capacity today number of projects, we can get a lot of questions from investors.

Trying to dig into this a little bit more and its not there it doesn't seem to be there and I think any sort of bite general comments on profitability versus some of the other biologics I continue to serve.

Talk a little bit broader about.

Where you are in that market, where you are in the expansion where the overall market is.

Yes. So first of all we remain extremely enthusiastic about the cell and gene therapy space not just from an overall enthusiastic about its ability to literally sold diseases or cure cancers, but the fact that there is significant demand out there and when you take a look at <unk>.

<unk> therapy and pipeline expansion you can see that it's going to grow about three and a half times over the next five years going from about 850 programs to about 2900 from our data and then if you take a look at cell therapy, which is again is an area that we've gotten into much earlier than we normally do I would say.

In an innovation technology investment cycle that is growing it has more assets today at about 500 pipeline programs. We see that growing also at about three times to 4700 Boe.

Both of these areas.

<unk> itself extremely well to <unk>, if you take a look at gene therapy.

A lot of the assets are coming from small and mid sized companies that.

I really do not have the firepower to deploy 150 $200 million or even more.

Putting in place the manufacturing assets necessary for the gene therapy that assumes that their asset is successful and if their asset is successful they will care patients and then have much lower demand and ultimately idling those assets. So from a gene therapy standpoint, right now our estimate is about 70% of that whole category.

<unk> is outsourced and we only see that increasing over time.

Investments into this area when we have.

Two commercial manufacturing suites.

Yes.

Basically categories.

As we invested to take that up to 10 suites and since then we now have 10 suites up and running.

We announced another five suites and have now I'll turn it on to them.

An additional three for a total of 18 suites that will have from a commercial manufacturer once theyre, all up and running again very robust pipeline, there and its cell therapy standpoint.

As enthusiastic if not even more.

Does he have seen without the cell therapy space I think over the next 10 years. This can move from.

<unk> for a second line of treatment to a first line of treatment, especially if we have some.

Put together quite.

A significant campus in gasoline <unk>, Belgium, we initially started off with the master cell acquisition that had assets in gas had the naphtha and gasoline and also in our Houston and in the gasoline area. We've made multiple.

Acquisitions, or whether they'd be business or asset related plus significant capex, that's going to be putting in place a facility that will be able to be used for both autologous and allogeneic. So I would say we remain very bullish both on the gene and cell therapy area I will proper that catalog.

It will be the number one CMO by far if they're not already from Asia.

The gene and cell therapy standpoint, and we're going to continue to invest in that area.

And behind that the profile of customers right. So of wireless in the early stage of services that we provide but we tend to have in the needs much more biased.

Perhaps demand, so which isn't shown clarified that there haven't been a capacity and rely on <unk> to progress.

Assets through the clinic soon.

But unfortunately provided that goes well beyond that.

That will be done at <unk> and <unk>.

Everything that is required by the CMT, but when it comes to do more late stage assets.

We have a very good mix also over large clients, which are interested enough capacity.

Which are less depending the sort to speak of external funding.

Because they have a very good about the overall dynamics, but we also feel good about the mix of the customers that we serve.

Our next question comes from.

John <unk> from UBS.

Please go ahead.

Thanks for taking my question I guess I just have a question here on the guidance given the strong top line performance in the quarter.

So vaccines in anything.

The highlight there outside of that.

In the second half.

No I would just say we were very prescriptive in our prepared remarks, John related to <unk>.

More normalized growth rate.

Expected for our biologics business in the second half of the year as we think about the timing over the last.

Six quarters or so just in terms of when Covid.

Close to peak.

Volumes. It was it was in the second half of our fiscal 'twenty one third.

Third quarter was when we brought online.

Line.

One of the dedicated bile lines.

In the prior year. So the fact that we saw very high levels of Covid related contributions in Q3 and Q4 fiscal 'twenty one.

Okay.

We're now expecting to see more normalized growth within the violence in biologics segment in Q3, and Q4 and fiscal 'twenty, two income and impact given.

And on the margin than it is.

And I think thats.

Pretty much.

Sure.

For the year.

As we think about it.

We did also note comparator.

<unk> second quarter of this year when compared to prior years.

And.

Given we had very high levels of Covid volumes in the second half of last year.

The comparator sourcing shouldnt.

The a material contributor to the top line from a growth standpoint in Q3 and Q4, given again that that was already.

I think part of the story in the second half of the prior year. So that's really what I can provide here in terms of the dynamics youre seeing within biologics as we enter the second half of the fiscal year and seeing growth return to that more normalized level that we would expect.

Thanks.

Maybe to follow up on the question on the Sone gene therapy, I think you've recently provided some color that I was wondering one these are growing around 25% year over year.

Directional guidance or color you can give us on how these looks for 2022.

And groceries.

Yes, so I don't know that we talked about the growth rate of that business in particular, maybe talking about the overall market dynamics being very robust their from a cell and gene therapy perspective on the heels of John's comments here, but John .

Provide.

Right specificity bounds.

The individual.

Sub segment mines, like cell and gene therapy or drug substance drug product.

I will say this is a business that has been good.

Growing nicely, we will continue to grow but we certainly not disclose anything in terms of what that growth rate looks like on a on a percentage or absolute dollar basis.

Thanks for taking the questions.

Right.

Thank you John .

The next question comes from Evan Stover from that.

Evan Please go ahead.

Thank you a couple of quick ones from me on the tear.

It looks like the implied EBITDA margin there was about 25% in the quarter.

Is that a fair near to intermediate term.

And a approximation for that business I know.

You had discussed biologics like EBITDA margins, which I think of as being 30% plus so I'm just wondering if some of the investments.

Maybe maybe shape that margin curve, a little bit out into the future on that business.

Yes, so I'm still having a good good question.

Your back of the envelope math is correct I will say.

Longer term, we view of the margins of this business as being closer to biologic as I mentioned this was the first quarter in which we operated the assets that youll close for us on October one.

There were several I would say integration related costs that we needed to deploy into the business. This is a business that was non operated.

Levels of a public company.

A lot of back office related.

I'd say.

Investments, we needed to make here to align it to catalyst.

As we sit here and think about the business and the potential that we see here are not only do we see very robust levels of growth in the 20 plus percent range.

There is improvement that we can make given our expertise in terms of running manufacturing facilities to these assets that will help drive further margin expansion down the road here. So I would say that the mid 20 range that we saw here.

Or take a couple hundred basis points in either direction is probably the near term view there.

There, but like we said we do have line of sight to this business contributing EBITDA margins.

Very close to that of the Biologics segment look I would just say, what Tom said that around but the opportunity from an operational excellence standpoint that basically is running at 94, seven which we are very rapidly implementing that even at the high demand very high demand that we're experiencing and the other way.

To respond to short term increase in utilization rates of the asset that is one element that leads to buck the biggest yield so incredible opportunities from an operational excellence standpoint.

Blind competent playbook to these assets is so multi.

More to come on these on the surplus.

Thanks. Thank you that's great color on free cash flow always dangerous to look at a quarter or even a half of the year, but you were negative for the first half of the year.

Is there any change to your guidance or just broadly speaking some positive free cash flow in fiscal 'twenty. Two has that changed at all with the Brussels and maybe some other items that you'd like to address.

No I would say we were expecting to be.

Most of these levels through the first half of the year I mean, we see.

The step up in our EBITDA contributions in the back half.

Do expect if you look at us historically seeing the bulk of our free cash flow generation.

From our third and fourth fiscal quarter I will say, maybe we were perhaps a little bit behind here.

Mainly related to inventory as we look at working capital inventory.

An area that we have.

I would say intentionally have used.

To make sure we hedge against some of the supply chain related challenges that we see.

Across the industry I would have hoped that we would have started to see some of those challenges.

Alleviate here.

In the second quarter, we haven't we've been able to be a little bit.

More cautious around inventory, but we haven't made the improvement that we expect to see.

In the us.

In the fiscal year, yet I will say as we enter the back half of the year. This is going to be something we continue to look at year I will.

Not expect inventory to be continue to be something that that increase the trough, which is going to come down to how quickly can we can we get through some of the inventory we have and have the comfort that we could run at lower levels of safety stock around some of our key materials. So that's really the dynamic of the free cash flow and then as you look at this.

I will say, we can continue to drive the business with what we believe will be a positive free cash flow year, which will be.

A nice improvement from what we saw in fiscal 'twenty, one, but we're not out of the woods just yet around these inventory related challenges and it continues to be a little bit of a free cash flow headwinds, but I wouldn't expect any material change as a result of the Brussels remediation for 83 to have a meaningful impact on free cash flow.

Thanks, Tom that's it for me.

Thank you Evan.

The next question comes from Jack Meehan from Nephron Research Jack. Please go ahead.

Yes.

Thank you and good morning.

A few questions back on Covid.

Can you talk about the diversity of your sales now between the vaccines and therapeutics.

We've seen some prioritization of that some vaccines over others, but just curious to hear what proportion of your COVID-19 sales.

Now coming from your largest customer.

So look.

I believe that if we got to make sure that we factor into the picture of the vaccine to the global demand and not only the Western Award.

Some of your comments around preferred vaccina shouldn't be applicable to the mid West award of the Liza field.

Can you give a number of countries, which are probably be relying more on the less obvious vaccine and even the ability to supply enough quantity. So I would tell you we haven't seen.

Significant softening of demand across the board on any of the legacy that we serve.

With regards of therapeutics.

We have a number of them.

We continue to serve them.

And but those are the ones that are more.

Depending on the <unk> interest and that different mutations we will continue to be updated as the banks go by.

We do expect that on deferred I think is strong, but they will continue to be ongoing demand to try to protect the.

<unk> population, which we just don't get vaccinated.

Great and.

One more on the vaccine side I think earlier this year you called out 2 billion doses kind of as a target for 2022 can you talk about what trends youre seeing in terms of dose per mile has that started to come down at all.

Yeah, no look he's going to come down that he brought up about it.

<unk> therefore, the vaccine.

Im going more towards <unk>.

And again I need to caveat my response with the Western World Dominion.

The counties, which have them hired vaccination rates exceeding the dynamics should be now different settings for administration of vaccine.

We are already doing in several projects to either go to the low rig counts, but vial a full sell through <unk>, which will be by definition.

Singled those presentations.

The mall is doing.

That exiting that direction.

You want to add one quick point of clarification here, Jack and you probably noticed but.

2022 dose number that we talked about at Jpmorgan in the calendar year 2022.

And it really was not met for modeling purposes here. It was to speak to the role of the Catlin has played and continues to play.

And the pandemic, but again not for financial modeling purposes.

Some data that's coming in I think maybe last comment we've made just before it's important to note that Cadillac is that peanut and dose level were paid on a fill whether it's pre filled syringe, whether its a vial, whether it's 14 doses five doses provide overpaid for that vial. So in some sense when you move.

Down too.

Fewer doses per vial.

The economic for us to be flat to improving depending on where it's going so is it just something that we're continuing to mentioned.

Operator, I think we have our last question coming up.

Thank you our last question comes from Paul Knight from Keybanc pull please go ahead.

Thank you very much and congrats on all the questions.

<unk>.

I know the fill and finish as linear more significant businesses can you talk.

Where you feel you are in that position in the market today was it growing faster than other parts of the biologics business.

I would just tell you that drug product.

<unk> is an extremely high demand.

Across across the board certainly the.

The pandemic and the use of those assets for vaccines has has really increased their utilization in a significant way I think catalog was really.

Very forward thinking when we put in place our investment plans for a four foot product assets and then.

Even during the pandemic, we were able to get our hands on and secure some additional drug product.

Overall assets the pipeline outside of vaccines remains very robust again for drug product and youre going to see a lot more demand specifically in the pre filled syringe area, especially with some high profile of blockbuster drugs, they're going into these pre filled syringe format. So it's.

It's a really.

An area that has seen robust growth I think catlin has positioned ourselves very well our early acquisition of.

Cook pharma costs and follow on investments that we've made there has been absolutely fantastic, making it one of the most strategic North American assets for for the Covid vaccine solution, but also for future drug product.

Billing and then also our acquiring the asset from BMS, Vietnam facility, which we're continuing on with follow on investments there is significant so.

I would see catalyst continuing to make both.

Organic investments from a capex standpoint, as well as identify additional inorganic assets that we can that we can use to serve this very very robust pipeline.

Okay. Thank you.

Thank you Paul.

I would now like to turn the call back at this juncture minsky for closing remarks.

Thanks, operator, and thanks, everyone for your questions and for taking the time to join our call I'd like to close by highlighting a few key points.

Directory of catalyst is strong as shown by our ability to confidently provide robust projected growth targets for fiscal 2026, we're able to do this because of the strategy. We have in place the skilled team of dedicated employees to execute the strategy and the patient first culture that is foundational to our long term success.

We're also encouraged by the many drivers of growth for the CMO industry, allowing <unk> to expand into new therapeutic areas and modalities and to enable new opportunities for partnership.

Our response to the pandemic has revealed the importance of a culture that is purpose built to tackle heart problems and we will continue to be flexible in how we meet the needs of our customers.

<unk> is well positioned to work on and find solutions to the largest most complex challenges in the industry as illustrated by our ability to quickly stand up production efforts to produce billions of COVID-19 vaccine doses.

We're extremely proud of our focus on operational excellence and quality and how that has led us to deliver more than 70 billion doses of medicines for more than 7000 products for nearly 1000 clients each year.

The broad diversity of our products and resilience of our businesses have allowed catlin to endure widespread issues like the pandemic and challenge is more specific to our industry.

Catalyst has consistently found ways to improve its performance and thrive in a variety of conditions.

We have the right people leadership processes technologies and capacity to help our customers and we're proud to see how our work helps improve the lives of millions of patients around the world.

Thank you.

Yeah.

That concludes the Catlin incorporated second quarter fiscal year 2021 earnings conference call. Thank you for your participation you may now disconnect your lines.

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