Strategy and Goals
Sartorius Stedim Biotech is a leading international supplier of products and technologies for the manu-facture of medications and vaccines on a biological basis, so-called biopharmaceuticals.
As part of our strategy as a total solutions provider, we offer the biopharmaceutical industry a product portfolio that covers virtually all steps of their production processes and increasingly their process development. These encompass cell culture media for seed fermentation and cultivation in various bioreactor sizes for cell propagation, as well as a range of technologies and equipment, such as filters and aseptic bags, for cell harvesting, purification and concentration, all the way to final filling.
Sartorius Stedim Biotech focuses in particular on single-use products, which represent around three quarters of its sales revenue. For our customers, single-use products are an innovative alternative to conventional reusable stainless steel systems: they provide considerable cost and time savings and reduce the risk of contamination. Sartorius Stedim Biotech has the most extensive portfolio of single-use technologies in the industry.
With its products, the company addresses an attractive market with an above-average growth rates. Its sales and distribution activities are carried out globally by its own field force. As our customers' manufacturing processes are validated by the respective authorities, product quality and assurance of supply are essential.
We see the leading market positions of Sartorius Stedim Biotech in process filtration, fluid management, fermentation and membrane chromatography as good stepping stones for sustained dynamic and profitable growth in the future. Besides realizing its organic growth potential, we also plans to continue expanding through complementary acquisitions and alliances.
Integrated Products and Services Along the Customer's Process Chain
Sartorius Stedim Biotech 2020 Strategy
In 2011, the Group developed its strategy and long-term targets for 2020 to achieve profitable growth. Assessment of Sartorius’ performance nearly at the midpoint of this trajectory is positive. The company updated its financial plan for the first time at the beginning of 2016, raising both its sales revenue and profitability forecast for 2020.
In view of sales revenue, Sartorius Stedim Biotech has slightly increased its target for 2020 from around €1.5 billion to €1.5 - €1.6 billion, based on current exchange rates. Regarding the company's continued strong organic growth and its relatively small acquisitions, the increase in sales contributed by organic growth is expected to be higher from today's stance than had been projected in 2011, and the share of revenue generated by acquisitions is anticipated to be slightly lower.
Sartorius Stedim Biotech has substantially increased its profitability since the implementation of its 2020 strategy, improving its underlying EBITDA margin to 26.2% in the reporting year. The reasons for this better-than-expected development were higher economies of scale and positive currency effects. The company's underlying EBITDA margin is now expected to reach about 29% to 30% in constant currencies in 2020 instead of about 28% formerly projected. This is assuming that the profitability of any future acquisitions would be at a level comparable to that of the existing business.
Sartorius Stedim Biotech's 2020 strategic plan is being implemented by various growth initiatives with the following areas of focus:
Regional Growth Initiatives
Regionally, North America and selected countries in Asia are at the focus of Sartorius' growth strategy.
North America is the world’s largest market for the manufacture of biopharmaceuticals. Because this market is home to the main competitors of the Group, we historically had lower market share in this region than in Europe and Asia. Accordingly, Sartorius Stedim Biotech is striving to gain market share, primarily by strengthening its sales and service capacities and reorganizing its sales and distribution processes.
Our second regional focus is on Asia, especially on China, South Korea and India. These markets have tremendous potential and, by international comparison, are growing at higher-than-average rates. To participate in this momentum in the best possible way, we invested substantially in its Asian sales infrastructure as well.
Expansion of Product Portfolio
Concerning the further development of our portfolio, the 2020 strategy also provides for making acquisitions besides conducting our own R&D activities and entering into alliances. Such acquisitions will be primarily focused on adding complementary technologies and products that make the company's portfolio even more attractive from a customer perspective. We have strengthened our portfolio by five small- and medium-sized acquisitions since 2011: Lonza, TAP Biosystems, AllPure Technologies, Cellca, BioOutsource.
Efficient business processes, a powerful IT infrastructure and sufficient production capacities are to constitute the backbone of our projected growth. Sartorius Stedim Biotech is increasingly using standardized business processes and is considerably extending its production capacities at various locations.
Sartorius Stedim Biotech serves customers mainly in the biopharmaceutical industry, which makes its business particularly sensitive to the development of this industry.
Significant Growth in the Pharmaceutical Markets
The most important growth drivers in the global pharmaceutical industry remained unchanged during the reporting year: the world’s steadily growing population, demographic change, improved access to health care in emerging markets in particular, and the availability of new medications. These positive factors were countered by austerity measures in healthcare systems and the expiration of patents.
According to the market research institute IMS Health, growth in the global pharmaceuticals market in 2015 was, at 6%, slightly above the long-term average of 5.4% (2009- 14). As in previous years, the strongest growth dynamic was evident in the regions of Asia and Latin America, where conditions were favorable owing to the expansion of state-funded healthcare provision and higher out-of-the pocket spending. In the USA, the world’s largest pharmaceutical market, growth normalized in comparison with the extraordinarily strong dynamic of the previous year, which was driven by a large number of new product approvals.
Above-Average Growth in the Biotechnology Market
The market for pharmaceuticals manufactured using biotech methods has grown overproportionately within the world’s pharmaceutical market for many years now, and enjoyed particularly dynamic development during the reporting year. This is primarily attributable to the launch of many new biopharmaceutical drugs as well as additional market penetration of existing medicines, in part through expanded indications. For instance, the high R&D productivity of the biotechnology sector led to almost twice as many new approvals in the USA in 2014 as in previous years. Overall, the proportion of sales revenue on the world’s pharmaceutical market accounted for by medications manufactured using biotech methods grew from around 20% in 2012 to approximately 24% during the reporting year.
Biosimilars, which are biological copycat medications, played a minor role in the growth of the biotechnology market in 2015. Compared with the markets for biosimilars in Europe and Asia, the important U.S. market is still underdeveloped. However, here the industry recorded significant progress during the reporting year: five biosimilars have meanwhile been submitted to the U.S. health authority FDA for approval, and the first market authorization was granted on the basis of an abbreviated approval procedure.
Trend Towards Single-Use Systems in Biopharmaceutical Production Continues
Biotech production methods are much more complex and cost-intensive than traditional methods. Consequently, manufacturers and suppliers are continuously looking to develop more efficient production technologies. Single-use products play a decisive role in this effort, because they require significantly less capital expenditure, reduce costs for cleaning and validation, and minimize downtime. They also offer greater flexibility and help accelerate time to market. Thanks in particular to their cost-efficiency, single-use technologies have already become well established in a large number of process steps of the manufacture of medicines.
Continued Soft Demand in the Public Research Sector
Some of the demand for our laboratory products comes from public-sector research. According to the market observers Frost & Sullivan, public-sector spending during the reporting year lay only slightly above last year’s levels, thus corresponding to the moderate growth of the world’s economy overall.
The primary means by which companies in the biotechnology market differentiate themselves from competitors are innovative prowess and the quality and performance of their products. The biotechnology sector is constantly discovering new areas of application and expects suppliers to be equally fast-moving and creative in developing new equipment for the manufacture of biotech products. New suppliers, in particular, seek to exploit the opportunities inherent in this environment to gain a foothold in the market with carefully targeted niche products. The more established suppliers, meanwhile, are expanding their product range continuously.
We generate round 90% of our sales revenue from validated processes in which replacing products during the production cycle is very expensive, so we receive a high proportion of follow-up and repeat business. The particular strength of Sartorius Stedim Biotech lies in its integrated process solutions: from the investigation and development of substances in the lab to the production of the end product, we offer the broadest range in the industry. Our strategic focus on single-use products gives us another edge over the competition. Sartorius Stedim Biotech occupies a strong position in the market worldwide in the fields of bioprocess filtration, fermentation, fluid management and membrane chromatography.
Most of our competitors are multinationals based in the USA. Merck | Millipore, Danaher | Pall and General Electric Healthcare are among our main rivals in the process area; Thermo Fisher and Merck | Millipore are key players in the laboratory field. We also face competition from smaller companies, such as Applikon in individual segments.
Sources: IMS: IMS Health Market Prognosis, May 2015; Evaluate Pharma: World Preview 2015, Outlook to 2020, June 2015; Frost & Sullivan: 2015 Annual Report: Forecast and Analysis of the Global Market for Laboratory Products, November 2015; www.fda.gov; Citi Research: Biosimilars Real, Dangerous, Coming Soon, February 2015; Bernstein: Biosimilars Who is doing what?, November 2015.