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Sartorius Stedim Biotech

Sector Environment

The Sartorius Stedim Biotech Group serves customers mainly in the biopharmaceutical industry. Thus, the development of this sector provides important impetus to the Group’s business performance.

Biopharma Market Grows Significantly

For the first-half of 2020, market data on the development of the biopharma industry is not yet available. The most recent sector data refer to the year 2019 and thus to the period that was not affected by the coronavirus pandemic.

In 2019, analyses of various market observers indicate that the global pharmaceutical market developed positively yet again, recording an increase of approximately 4% to 5%. Within this market, the segment for medications and vaccinations manufactured using biotech methods has grown faster than the rest of the pharmaceutical market for many years. In 2019, the biopharmaceutical market was estimated at a volume of €235 billion, an increase of approximately 8% to 9% over 2018. The steadily growing significance and acceptance of biologics is reflected in its increasing share of sales revenue in the global pharmaceutical market and the development activities of the pharmaceutical industry. For example, biopharmaceutical compounds account for more than 40% of the R&D pipeline.

Growth of the biopharma market fundamentally depends more on medium- to long-term trends than on short-term economic developments. In the process, significant impetus is provided by the world’s rising demand for medications and the approval and market launch of innovative biopharmaceuticals. The expanded range of indications for approved medications and their further market penetration also contribute to growth. For this reason, significant impacts of the coronavirus pandemic on first-half market growth are not to be expected. Yet market observers assume that in the current year, the pandemic will cause pharmaceutical companies to partially delay carrying out their clinical trials, which are prerequisite to new drug approvals. This could result in delayed market approvals for some medical drugs.

Sources: IQVIA Institute: Global Medicine Spending and Usage Trends. Outlook to 2024, March 2020; Evaluate Vantage 2020 Preview, December 2019; BioPlan: 17th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production, April 2020; Daedal Research: Global Biologics Market: Size, Trends & Forecasts, December 2019; BioPlan: Covid 19: Impact on Bioprocessing and Outsourcing, May 2020

Group Business Development

  • Significant double-digit growth in sales revenue, order intake and earnings
  • Strong demand across all geographies and product categories
  • Growth and earnings forecast for fiscal 2020 raised; high demand expected for technologies and products used for manufacturing vaccines and antiviral medications

Strong First Half of 2020 with Dynamic Growth in Sales Revenue and Order Intake

Sartorius Stedim Biotech grew significantly by double digits in the first half of 2020. Sales revenue rose sharply by 22.0% in constant currencies (reported: + 22.5%) to €869.1 million and were fueled by strong demand across all product categories. As expected, close to 3 percentage points of the growth were attributable to the most recent acquisitions, namely the selected life science businesses from Danaher, consolidated since May 2020, and the cell culture media specialist Biological Industries, consolidated since December 2019.

Sales Revenue and Order Intake
 6 months
€ in mn
6 months
€ in mn
in %Δ in %
Sales revenue869.1709.322.522.0
Order intake1,048.7778.134.834.1

1 cc= in constant currencies

First-half order intake in 2020 surged at an even stronger rate, by 34.1% in constant currencies (reported: + 34.8%) to €1,048.7 million. Growth was positively impacted by the coronavirus pandemic, which led to additional demand for products used for manufacturing both vaccines and antiviral medications. Strong project business, particularly in the Asia| Pacific region, also contributed to this increase.

Sartorius Stedim Biotech increased its sales revenue by double digits in all business regions. Sales in EMEA were up year over year by 18.3% in constant currencies to €340.3 million (reported: + 18.2%). This region accounted for the largest share of Group sales of about 39%. The Americas region saw significant sales growth of 21.9% in constant currencies (reported: + 24.1%) to €312.6 million against a strong prior-year base, and thus contributed about 36% to total Group sales. The Asia | Pacific region, which accounted for around 25% of total consolidated sales, showed the highest momentum with growth of 28.5% in constant currencies (reported: + 27.5%) to €216.2 million.

Profitability Further Enhanced

Sartorius Stedim Biotech uses earnings before interest, taxes, depreciation and amortization (EBITDA) as the key profitability measure. To provide a complete and transparent presentation of the Group’s profitability, SSB reports earnings adjusted for extraordinary items (underlying EBITDA).

In the first half of 2020, Sartorius Stedim Biotech strongly increased its earnings. Underlying EBITDA grew by 27.8% to €262.3 million. The corresponding margin rose from 28.9% to 30.2% year over year due to economies of scale and despite slightly dilutive effects of the most recent acquisitions and currency headwinds of close to 0.5 percentage points.

Reconciliation between EBIT and underlying EBITDA
 6 months
€ in mn
6 months
€ in mn
EBIT (operating result)206.5167.2
Extraordinary items11.76.0
Depreciation & amortization44.232.1
Underlying EBITDA262.3205.3

Consolidated EBIT, including extraordinary items of -€11.7 million (H1 2019: -€6.0 million), depreciation and amortization, amounted to €206.5 million compared with €167.2 million in the previous year. Extraordinary items were primarily related to the integration of the company`s most recent acquisitions, as well as to expenses incurred for various corporate projects and the rebranding. The consolidated EBIT margin rose from 23.6% a year ago to 23.8% in the reporting period.

The financial result was -€10.5 million in the first half of 2020, relative to -€2.8 million for the prior-year period. This change is essentially attributable to the financing of the most recent acquisitions.

In the period under review, the net profit attributable to shareholders of Sartorius Stedim Biotech S.A. rose by 17.5% from €120.9 million to €142.1 million. The expected tax rate of the Group for fiscal 2020 will be around 27.5% (previous year: 26%). This increase by around 1.5 percentage points is essentially due to the accounting treatment of tax risks. The higher tax rate was already applied to first-half accounting.

Strong Increase in Underlying Net Profit

The underlying net profit after non-controlling interest increased significantly by 27.7% from €131.1 million to €167.4 million. This profit figure is calculated by adjusting for extraordinary items, eliminating non-cash amortization and valuation adjustments from hedging instruments, and is based on the normalized financial result, as well as the corresponding tax effects for each of these items. Underlying earnings per share rose accordingly from €1.42 to €1.82.

 6 months
€ in mn
6 months
€ in mn
EBIT (operating result)206.5167.2
Extraordinary effects11.76.0
Amortization | IFRS 310.66.9
Normalized financial result1–2.5–2.1
Normalized income tax (2020: 26%, 2019: 26%2–58.8–46.3
Underlying net result167.4131.8
Non-controlling interest0.0–0.7
Underlying net result after non-controlling interest167.4131.1
Underlying earnings per share in €1.821.42

1 Financial result excluding fair value adjustments of hedging instruments and currency effects related to financing activities

2 Underlying income tax, based on the underlying profit before taxes and non-cash amortization

Operating Cash Flow Rises Significantly

In the first six months of the current fiscal year, Sartorius Stedim Biotech increased its cash flow from operating activities: this figure stood at €195.3 million relative to €140.0 million a year ago, which equates to growth of 39.5%. This development is essentially attributable to the increase in earnings and, among other things, to the sale of trade receivables in the amount of €83.2 million within the scope of a factoring program.

Cash flow from investing activities decreased in the reporting period by 23.0% to -€78.5 million. The capex ratio in the first half of 2020 decreased to 5.8% compared with 9.0% in the previous year.

Financial Position Remains Strong

The balance sheet total for the Sartorius Stedim Biotech Group rose to €2,224.1 million as of the period ended June 30, 2020, from €1,845.4 million as of December 31, 2019. This rise was primarily due to the acquisition of selected life science businesses from Danaher, which have been consolidated since May 2020.

Equity increased from €1,188.9 million to €1,287.9 million between December 31, 2019, and the reporting date. At 57.9%, the equity ratio remained at a comfortable level, despite the closing of the recent acquisitions (64.4% as of December 31, 2019).

As a result of the acquisitions, gross debt increased from €138.6 million as of December 31, 2019, to €332.6 million as of June 30, 2020; net debt also edged up from €110.4 million as of December 31, 2019, to €243.2 million at the end of the reporting period. Therefore, the ratio of net debt to underlying EBITDA was 0.5 compared with 0.3 at year-end 2019.

Personnel Further Increased

As of June 30, 2020, the Sartorius Stedim Biotech Group employed a total of 6,690 people worldwide. Compared with December 31, 2019, headcount thus rose by 467 or around 7.5%. The number of employees in EMEA was up by around 6.5% to 4,679 in the reporting period. Sartorius Stedim Biotech employed 1,048 people in the Americas region as of the end of the reporting period, an increase of 8.3%. From a geographical perspective, personnel increased at the highest rate in Asia | Pacific, by 11.8% to 963.

Opportunity and Risk Report

The opportunities and risk situation of the Sartorius Stedim Biotech Group has not materially changed since the publication of its 2019 Annual Report. For this reason, please refer to a detailed description of the opportunities and risks as well as the risk management system for the Sartorius Stedim Biotech Group on pp. 37 et seq. of the Annual Report called Universal Registration Document 2019.

Forecast Report

Resilient Growth of the Biopharmaceutical Market Expected

The trends affecting the development of the Sartorius Group that are described in its 2019 Annual Report on pages 49 to 51 remain in place, although the coronavirus pandemic and its economic effects have led to increased uncertainty in forecasting.

Most recent estimates project that the global pharmaceutical market will expand at a compound annual growth rate of between 3% and 6% during the period up to 2024. Market analysts predict that the biopharma segment of the pharmaceutical market, against the backdrop of growing demand worldwide, will continue to outperform the market, with a compound annual growth rate between approximately 8% and 9% on average. Also fueling this growth are the higher market penetration of already approved biopharmaceuticals, the expansion of their areas of indication, and strong research and development pipelines. The global biopharmaceutical market as a whole is largely independent of fluctuations in the economy, and this is also likely to apply to the effects of the coronavirus pandemic. Nevertheless, experts anticipate that given the pandemic, market approval of some medical drugs could be delayed by a few quarters because clinical trials series had to be postponed during the peak phase. By contrast, the areas of COVID-19 vaccines and therapeutics could create positive momentum..

Sources: IQVIA Institute: Global Medicine Spending and Usage Trends. Outlook to 2024, March 2020; Evaluate Vantage 2020 Preview, December 2019; BioPlan: 17th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production, April 2020; Daedal Research: Global Biologics Market: Size, Trends & Forecasts, December 2019; BioPlan: Covid 19: Impact on Bioprocessing and Outsourcing, May 2020

Full-Year 2020 Guidance Raised

Based on strong business performance in the first half of 2020 as well as on high demand also expected to continue for the rest of the current fiscal year, Sartorius Stedim Biotech raised its full-year growth and earnings guidance. Upward revision of the forecast is partly related to the current COVID-19 pandemic as Sartorius Stedim Biotech products are used for manufacturing both vaccines and antiviral medications.

Management now anticipates sales growth of 26% to 30% (previously 17% to 21%). As projected so far, Biological Industries is expected to contribute 2 percentage points and the Danaher portfolio about 3 percentage points to sales revenue growth. The underlying EBITDA margin is projected at approximately 31% (previously around 30%), which includes slightly dilutive effects from the inclusion of the acquisitions. As previously forecasted, the ratio of capital expenditures (CAPEX) to sales revenue is expected to be around 8% (previous year: 9.4%). Net debt to underlying EBITDA is now expected to be slightly below 0.5 by year-end 2020 (previously approximately 0.5; previous year: 0.3).

Due to the ongoing pandemic, this guidance is subject to greater uncertainty than usual. In particular, these updated projections are based on the assumptions that logistics chains will continue to be stable and production lines remain in operation. As in the previous years, all forecast figures are given on the basis of constant currency rates.

Mid-Term Guidance Unchanged
Despite the currently increased demand, Sartorius Stedim Biotech does not see any need at the moment to adjust its medium-term forecast up to 2025. The company continues to expect to achieve sales revenue of around €2.8 billion at an underlying EBITDA margin of about 30% in 2025. This is based on the fact that the medium-term fundamentals of the biopharmaceutical industry have remained unchanged. Therefore, it is currently not foreseeable whether the current additional demand for vaccines and antiviral drugs will lead to a sustained increase in demand in these areas. In addition, signs are becoming apparent that the market approval of some biopharmaceuticals could be delayed due to postponed clinical trials as a result of the pandemic. It is currently not possible to quantify the impact of these various effects concerning monetary amounts or timing.

Report on Subsequent Events

No material events occurred after the end of the first half of 2020.