Stevanato Group S.p.A. (STVN) September 2026 Conference Transcript

Okay, perfect. Welcome, everyone, to day two of Morgan Stanley's Global Healthcare Conference. I'm Callum Tishmarsh. I run the Life Sciences team here at MS. Really pleased today to be joined by the team from Stepanado. We have Marco Del Lago, CFO, and Lisa Miles, Chief Communications and Investor Relations Officer. Thank you both for being here.

Thanks for having us.

And just before we get started, for all disclosures relating to this discussion, please see morganstanley.com forward slash research disclosures so Marco and Lisa maybe just to set the stage can we talk about how 2026 has evolved versus your original expectations it feels like there's been quite a lot going on in the market throughout this year perhaps versus where we were this time last year so maybe just talk through that evolution for us 2026 is in line with our expectations We are growing quite significantly our BDS segment.

We are growing double-digit on the cost and currency rate, and so we plan to move to the end of the year with a double-digit growth on the cost and currency rate, 9% on a reported basis. On the engineering side, the same way we are in line with our expectations, the expectations are to decline our overall revenue with third parties in 2026, moving from $138 million to a range between $130 million to $140 million. You know, today, engineers are presenting approximately 11% to 12% of our revenue. we are doing improvements in operations and reducing the risk in that type of the business. The core business is strong. We have very good visibility. Again, we are growing double digit driven by demand, particularly in high-value products. We are growing significantly in high-value syringes. Max configuration with high mechanical resistance and very suitable for the self-administration devices. We are growing in easy-fill cartridges. We see a good traction also in easy-fill vials that are growing more significantly than anticipated. So all over all, the iValue solutions are gaining traction. We recently launched also the validation of our pen injector proprietary product, Alina. So it's a good omen also for the future to continue with this trajectory to further expand the value products. I didn't mention Alba, but it's very important because it's quite still not the most sold product, probably the best product we have in our portfolio, the most sophisticated one, and we can see very good growth also in Alba syringes.

Amazing.

Anything to add there, Lisa, on the first half?

We covered it all.

Covered a lot.

Amazing. So, yeah, BDS is where at least we get most of our investor inbound, so perhaps makes sense to start there. Performed well this year on track to deliver that low double-digit organic growth in the segment throughout 26. Could you maybe just unpack a little more of the drivers behind the strong performance here, and then would love to hear a little more on the demand trends you're seeing for syringes, cartridges, vials, et cetera?

Yes, as I was saying, the main driver of growth is in high-value products that are representing today between 46% and 47% in the first half of the year of our overall revenue, above 50% within the BDS segment. In the first half of the year, the main driver has been in syringes, in excess syringes. We see a very good demand also in the second part of the year. I mentioned before we can see an acceleration in easy-fill vias where today the market does low penetration in sterile configuration. It's below 5%, but we see very good demand in easy-fill cartridges. We are investing accordingly to expand our capacity. anchored to a big customer that is shifting some container from bulk to sterile cartridges, but we see many, many other customers approaching us for our easy-filled cartridges. We are full cover for 2027, and we are investing accordingly to expand our capacity. Beginning of 2027, we will be installing our ready RTU-400 machine for the sterilization of the cartridges. So it's an opportunity for us to further expand capacity in high-value products with much higher price per unit compared with the bulk configuration.

And those high-value solutions, I think 46%, 47% of the portfolio this year, revenue-wise at least, Where do you think that mix could ultimately go over the next few years, and which products do you think are likely to drive that next leg?

We expect to further increase the share of high-value products. In fact, if we look at the investment we have been doing after IPO, since IPO, we are investing predominantly in high-value products in Piombino, in Latina, and Fishers. We are installing a lot of capacity in pre-fill syringes, ALBA syringes, and now more and more in easy-fill cartridges to expand our capacity in high-value products that is matching exactly the customer's demand and where the market is going. We respect the growth in biologics. Our products are very, very suitable for the biologics needs where we can see more aggressive drugs and where the need of more sophisticated products is present.

And obviously that's an important part of the gross margin story as well, shifting over to those high-value solutions. Maybe just talk us through the premium on the margins that they have versus the lower portfolio.

No, this is a very important point. So besides the higher price per unit, It's also, high-value solutions are also more accretive compared with other containment and delivery solutions. Close the range of gross profit margin for high-value products that is between 40 to 70 percent. 70 percent is for the some specific products, but all overall is well above 40 percent. On the other side, in other containment and delivery solutions, typical debunk configuration, the gross profit margin range is between 15% to 35%. So the mix shift is helping a lot to expand profitability. We are moving more and more the mix to a high-value product, and we are expanding the margin consistently. This year, the plan is to expand 170 basis points, the adjusted EBITDA, compared to 2025. 2025, we grew significantly compared to 2024. So we are keeping on expanding profitability. And in the coming years, we can leverage together with the increase of high-value product mix, also the fact that we are ramping up fissures in Latina that today are diluted in terms of gross profit margin because of the ramp up and all the costs associated to the ramp up installing line, validation with customer and the startup of each line is obviously slower than when fully ramp up.

We've had quite a few questions on that BDS gross margin this year being impacted by that initial ramp-up phase. How should we think about BDS margins over the next year? Can investors expect to see more significant margin expansion in 2027 as you start lapping some of those comps?

The way we see the medium-term scenario, we can leverage of further mix to our high-value products and the fact also leveraging the experience of Latina, but also fishers, we keep on improving the financial performances of the two new plants. This is one of the main drivers to explain the margin expansion in 26, but if you think that in a fisher we are still close to zero gross profit margin compared with the target that is above 30% for those type of products and mix, you can understand the room we have to further expand profitability with the operational performances that we will take full advantage when fully ramped up. About the full ramp-up is expected to be in 2028, but we can see steady improvement toward 2028.

That makes sense. Back in June, you launched the DROPEN. Maybe just talk us through the value proposition of that product. Talk a bit about the positioning as well relative to the current portfolio and which customers you'd be targeting with that.

Okay, sure. As we had been working on the Alina pen, which is the variable-dose pen, it became clearly apparent to us that there was a vast market need for a fixed-dose pen injector. And so thus we soft-launched in June our Diora fixed-dose pen. Particularly as it relates to customers' needs, they're looking for a pen that requires strict adherence to a dosing regimen and thus the need for a fixed-dose pen such as Diora. And that's really kind of where we're going as we work in partnership with our customers through the cycle of what types of products they may need to really address some of the biggest challenges that they have. And Diora fits quite nicely into our proprietary product portfolio. So alongside our Diora fixed-dose pen, we have the Alina variable dose, which we just received regulatory approval on in several European countries for a liraglutide-based biosimilar. And we also have our Adaptus auto-injector. We anticipate regulatory approval for that either later this year or early next year. And lastly, we do have an on-body delivery system called Verteef.

Amazing. I want to spend some time on the kind of fast growth markets, GLP-1s, occupying a lot of airtime too here. Now about 22% to 23% of company revenue. How are you thinking about that market evolving over the medium term? And I guess talk to us about your competitive win rate within the GLP market as well.

Yeah, we won a fair share of business in GLP-1s, leveraging our long-term relationship with the originators. We need to mention the fact that we started working in GLP-1s more than 10 years ago for diabetes therapeutic needs, and we keep on working on GLP-1. One of the advantages is that we have the capacity. we created the capacity linked to their needs and also we can offer flexibility in the type of format because we are in syringes, we are in cartridges we can do dual chamber syringes and for the future we have many opportunities also in drug delivery systems for the biosimilars so it's an important area for us is a phenomenal drug in our opinion that we represent a tailwind a durable tailwind for Stevanato in the years to come about the share of revenue we are today basically where we plan to be we expect similar share in the future on overall revenue it means that we expect also other therapeutic areas will grow So going back to GLP-1s, we are very positive because we expect market expansion driven by utilization in different therapeutic areas, not only in diabetes and in obesity. We can see new assets coming into the market. And in the coming years, also biosimilar will represent an important market to leverage. So all over all, we see durable growth in different type of formats. One of the questions we receive very often is about the truth of oral administration. Based on the conversations we have with our customers and also talking with peers, market experts, we still have the view of a 30% penetration of oral and 70% injectables in the years to come. And we believe we are very well positioned to serve the market. I don't know if you...

I guess to complement what Marco said on GLP-1s, You know, we're really in the early innings here of GLP-1s. As Marco noted, there are, you know, many drug assets that are in the pipeline and set to come to market in the next three to five years. Biosimilars will also be a game-changer overall. So there's been so much focus on what's happening in the U.S. market and not a lot of focus with what's happening outside the U.S., which we think has certainly meaningful tailwinds to long-term growth, especially as we think about biosimilars in APAC. And we've already been successful in winning some of those biosimilar pieces of work for easy fill cartridges as well as for the Alina pen injector. So we're very excited about GLP-1s and the long-term prospects of it. But when you peel back the revenue, and I think this is something we mentioned on the last earnings call, about 1% to 2% of that GLP-1 revenue is actually from outside the originators. So we are obviously working on new projects for those customers that are bringing additional assets or biosimilars to market as well. So I think that we've been very successful in winning our fair share in more. As Marco noted, we have a very long history in GLPs. Our first project dates back to 2010, and I think that we've really become a trusted partner for blockbuster-type drugs because we are a reliable supplier and have been for many, many years.

One of the things we've been toying with is it seems as though there's going to be an acceleration of growth for GLP-1s next year versus the levels this year, at least in terms of the patients that are being treated. So why wouldn't that equate to an acceleration for GLP-1 growth for the packaging providers? And I'm just trying to reconcile those two data points.

So there is early on, you know, so what we did see essentially last year was inventory management, so really stocking up on their inventories as they're working through some of these products. And now we're moving into normalization where we should, you know, see kind of those consistent products on a, you know, year in, year out as they continue to grow globally.

That makes sense. And then outside of the oral debate, we've also had questions on multi-dose pens. You obviously have good visibility into that, just given how broad spread you are across the packaging type. So talk us through your assumptions there, and how do the economics change if a patient goes from single dose to multi-dose for Stevanado?

I think at the beginning, the market and administration was mainly in pen injectors. with syringes, single dose. We have a couple of multi-year agreement in place. We have another multi-year agreement in place for dry cartridges. So we see the market growing significantly in different formats. So the future is we don't see a reduction in auto-injector and in syringes. On the other side, we see for the future expansion, depending also on the geographical area, in different formats. But the good news for us is that we are market leader in bulk cartridges. We are the first mover together with another player in sterile cartridges. So we are very well positioned to accommodate the different market needs.

As we think about the guide in the back half of the year on the GLP-1 side, maybe just talk us through how much visibility you have on those orders and the typical length that customers would want to order out for. Just some context there would be really helpful.

The answer is that we have multi-year agreement in place that is, let's say, beneficial both for the pharma company and for us. On the pharma company side, obviously they want to secure their capacity. and let's say route to market in a component that is mission critical for them because obviously they need a good container to go to the market and at the same time they want to secure the capacity for the launch of the product and the following quarters and months. It's a mission critical component for them, relatively low cost compared to the overall cost of treatment and I don't want to appear arrogant but we are one of the best players to accommodate their needs in terms of capacity and also flexibility in moving to one format to the other if they have problem with formulation we can offer the dual chamber then they can switch to normal syringes or cartridges so we have many, many solutions to offer to these customers Today, we are working, as Lisa was saying, predominantly with the originators, but we see more and more drugs coming into the market, plus the biosimilars is something that we expect for the future. typically biosimilar are selecting the same containment solution than the originator to accelerate the go-to market. So this is the way we are covering the market for the future in order to take advantage of the different opportunities.

I was going to ask on that. I'm curious, Lisa, to your comments just on that new emerging GLP-1 demand pool you're seeing from biosimilars and generics. How big do you think that could be with time? Obviously not expecting numbers here, but just a rough direction of travel versus perhaps the more established drugs that are out there.

You know, I think as Marco rightfully put it, I think we view it as a sustainable, durable tailwind, certainly in the midterm years to come, but probably beyond there. There's really only a small percentage of the population that is currently, you know, taking a GLP-1 today. Also, as we think about the broader indications of where this is likely going to go, it really just points to the direction of really ongoing expansion in the next 5, 10, 12, 15 years.

And just outside of GLP-1s, biologics more broadly have been a really important growth Q2 biologics growth accelerated to roughly 30%, I believe, now 42% of the total revenue Can you just talk about your biologics exposure beyond GLP-1s, like which categories you're seeing the most momentum in?

Yes. So biologics is a very important element, obviously, of the growth story. And while in the near term, the growth has really been centered around GLP-1s, which is part of the biologics bucket, one of the statistics that I find extremely interesting was in 2025, we had a 40% increase in new customer projects in biologics in just our pre-fillable syringes for ALBA and NEXA. Those new projects, small but strategic, will serve as the seeds for future growth for us. And so that's how we kind of see it, right? So right now we're seeing a big amount of growth coming from GLPs. The next leg of the stool we see from, you know, other future biologics coming to market. In terms of, you know, what we're seeing, obviously a lot of approvals for MADS, monoclonal antibodies, where we have, you know, a great solution both in the Nexa platform that we have as well as for a higher-end platform such as Alba for those very, I would say, modern formulations that are highly aggressive and ABBA platform is quite ideal. As it relates to ADCs, as an example, we have a number of projects underway for specially coded vials, and we see that as an important growth driver in the future. And obviously I would be remiss without mentioning mRNA applications as well.

That's positive recent news, we'll take. Shifting maybe on to the engineering segment for a bit, It's been still under pressure from softness in in-glass conversion and pharma visual inspection. It seems as though there's still that slower conversion of new orders there. Can you just elaborate on some of that softness you're seeing, and do you think that's temporary speed bumps, or is there perhaps something more structural at play?

Yeah, in engineering we did good progresses with respect of organization, industrial footprint. We are focusing now the Danish company to assembly and packaging line for devices predominantly. While in Italy, we are working in the important part that is, let's say, the intersegment glass forming and sterilization lines. The RTU lines for cartridges, for example, has been fully designed by our engineering department. And we are also at the center of excellence for the visual inspection machines in Italy. So, besides the strategic importance that we have for the glass technology to enhance the quality of our product while reducing cost and increasing flexibility, we see very important also the assembly and packaging where we have relevant synergies, for example, for the drug delivery system value proposition, and the same for visual inspection machines where we can enter in intimacy with the operation of our customers in the pharma industry. How we see the market? We see the market, we see good demand, both in assembly and packaging in visual inspection, The assembly and package is driven by self-administration, predominantly. And the visual inspection is driven by the fact that the inspection is becoming more and more important, obviously, to avoid contamination and detect the defect in time while avoiding false crap and all that. So we have a much appreciated technology from our customers. We see the market growing in the medium term from mid-single digit to high-single digit. and we expect similar growth for our business. We are still doing progress in improving the financial performances. Our first goal is to go back rapidly to our historical performances with 20-21% gross profit margin. We are still below that, but we are improving significantly compared to last year. So we anticipate this year revenue range around $135 million at the center point of our guidance, so below last year, but we expect higher profitability compared to last year.

And just in the backlog that you see today, do you think that could be indicative of perhaps some revenue growth for next year for the engineering segment, or is it too early to call?

It's a little bit early to give you numbers about 2027, it's a project business so you need to build the backlog for the future quarters with respect of that we see some good signals in terms of orders and negotiation in place and pipeline but it's a little bit early to talk about 2027.

And then maybe we can just hit on some of the margin pressures that that engineering business has had from some of those lower legacy projects in Denmark. Maybe just talk us through the potential ramp-up back there to the kind of low 20s that I think you've spoken to.

Yeah, you are right. One of the reasons why we faced the problem last year and the year before is also driven by very complex projects we took in Denmark. We are now much more focused on our technology that is very good in assembly and packaging for drug delivery systems. The mix of backlog is improving significantly because we completed these very complex contracts. And it is now the time to restart growing and expand our profitability to get at least to our historical profit. I think we reduce significantly the risk here in engineering focusing on our core technology, fixing the operation, lowering the fixed cost and the break-even point. And also, you know, today, engineering third parties is representing approximately 11-12% of the overall revenue, where the key focus is in the BDS segment and in expanding high-value solutions.

Yeah, maybe talk through the relationship between the engineering segment and BDS, because I think that's sometimes missed when we think about the strategic value of that engineering segment.

Yes, this is a very important point. I can make many examples. If we have the ability today to be the number two in syringes with NEXA and ALBA, it's also due to the ability of our engineering department to basically design and do the process, we have the technology within the engineering division. And it's very important, the learning loop we have between the two divisions with the two teams working together to improve the product, enhance the quality, launch on the market new products. Another example is ALBA. Another example can be the easy fill vias in the AERA configuration. I mentioned before the RTU cartridges that we manage the process entirely. So the growth of value products is also driven by our ability to manage the technology and keep on improving the quality of our products. So this is the core, the key competitive advantage that is giving engineering to Usternato Group.

And just to complement what Marco said, I just want to underline the fact the importance of owning and controlling the manufacturing technology that's powering the product set within the BDS segment, so our vials, cartridges, and syringes. A proof point would be we have a very high amount of demand for cartridges today, and we're fully booked through 2027 on cartridge capacity. However, we were able to, based on our internal expertise, take a ready-to-use vial line that had been essentially sitting somewhat idle and transform that into a ready-to-use cartridge line in the period of roughly 12 months. So adding additional cartridge capability and capacity at a time where it's very meaningful for us and our customers, I think it really speaks to the ability and the flexibility and agility that we have by owning and controlling that technology through engineering that is really helping to drive some of that growth within the BDS segment.

And an important topic, and I'd say theme more broadly, is reshoring across the space. Across those two businesses, maybe just talk through how you would expect reshoring to perhaps benefit both, if that is your assumption. Because I think the question we've had is, are you getting incremental volumes if you're just replacing production from one region to another? And I'm curious whether you guys have a view on that.

Well, with respect of the core business in BDS, we decided to invest in U.S. in 2021. So, during the IPO process, we decided to further expand our capacity in 2022, almost doubling the size of the originally planned size of fishers. So, it's something that is going to the direction more of the customer proximity and the importance of U.S. market for us in terms of biologic, sophisticated containers, and so on. So there's more a strategic approach on the decision to invest in the U.S. Nevertheless, it's become even more important due to what you said, the tariffs, the reshoring, this type of trend that we can see and we can take advantage of. But the main driver for us has been the proximity to the U.S. market. On the engineering side, we still haven't seen a big acceleration in the management for machines. It's probably related to the time schedule of the investment. You know, they start from buildings. We are reinforcing our presence from the engineering point of view, especially in the commercial department, but also in the after-sales presence. we haven't experienced yet a strong acceleration in the U.S. But it's something we are monitoring and we believe is coming in the coming years.

Very clear. I want to quickly just hit on the Fisher's investments in Latina as well. Can you just update us on some of the manufacturing lines you've added and then any data on utilization relative to the longer-term goals that you have?

Okay. I start with Latina, that is less complex. We are talking about a brownfield smaller than Fishers, and where in the first step we installed basically all nexus syringes lines. We have completed the installations, and we have almost completed the ramp-up. We are very happy about the speed of ramp-up in Latina. The profitability is keeping on improving every quarter, and we are extremely happy about the success of the initiative. Fishers is more, sorry, the next step will be the installation of the cartridges ready-to-fill lines where we have a long-term contract with an important customer. So we are installing the first line beginning of 27 and more lines in the coming years to satisfy the customers' demand. About Fisher, it's a bigger plant. We started from Greenfield. It's a 600,000 square feet building where we have installed already capacity for ready-to-fill syringes, similarly to Latina. We are currently starting the production for our CMO in drug delivery system. We took a CMO contract with an important customer in the U.S. to leverage the integration with the syringes, but also to accelerate the learning curve in the device business. We are installing Alba technology in Fishers, and we have a ready-to-be-tested line for easy-fill vials. So we are investing predominantly in high-value products, where Fishers is planned to be the hub for North America, where we will have many different types of products, not only Nexus syringes, but also Alba, also vials, and also... It's a more complex project. We anticipate the full ramp-up of the plan by 2028, toward the second half of 2028. So the first year fully ramp-up will be 2029.

Amazing. Marco, Lisa, thank you so much.

Thanks for having us. Thank you.