CTLT - Earnings call transcript Q4 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Catalent Fourth Quarter Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, there will be question-and-answer session and instructions will follow at that time.

[Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to turn the conference over to Tom Castellano, Vice President, Investor Relations and Treasurer. begin. may you Sir,

Thomas Castellano

Slide Good to and and review results. our agenda XXXX Shannon. which Company joining available is fiscal you us financial on on our see today Catalent's Relations Please of morning, you, our thank presentation website. everyone, Investor for year X Thank fourth quarter

are Catalent for and today John Chiminski Wetteny Joseph. Speaking myself,

you actual During to expectations. measures. It financial refer to our call non-GAAP more management's for today, X from management possible Slide will results that detail. make We differ refer forward-looking statements and could is

Slides just performance, that three, has Catalent's today with four bear may financial nearest reconciliations and and filed five, discuss operating later uncertainties condition. measures. the issued to additional on our non-GAAP information measures Form GAAP and provides be SEC our XX-K on to earnings results, the release the and the risks

I'd Chiminski. John over to turn Now the call to like

John Chiminski

into financial fourth Tom, position us everyone with Thanks, welcome and heading our year our earnings pleased results, which We're fiscal call. XXXX. quarter to well

As X% as Slide you increased $XXX X% constant-currency in fourth or million. X, for to the can our reported quarter revenue see on

The Delivery growth segments sourcing Softgel driven in recognition revenue was and our affected ASC within we change, activity and Clinical the offset XXX in partially by Technologies segment. our Oral Delivery, which revenue Specialty Drug comparator Services Biologics how was Drug by report Supply

contributing. segments X% and Organic was grew revenue Oral strong Drug change, and Delivery with XX% Excluding a within revenue compared during in recognition the also of Specialty would Softgel have recovery increased the prior-year. revenue Biologics and by Delivery this impact in constant-currency the Drug led to our constant-currency year-over-year quarter

of the constant-currency a was Our above fourth adjusted XX%. on a for $XXX XXXX the year quarter EBITDA Company fiscal of and basis by record million quarter

$XXX.X $X.XX figure the Our fiscal or adjusted diluted fourth the is which above from for million per same share, $X.XX quarter was prior income the net year.

technology segments, Oral by profitability reported but results above Softgel Delivery line all levels. were prior Drug the and profitability The led year segments at our strong

X% fiscal recording growth as year XX% for of while X% revenue of and growth in reported constant-currency. EBITDA reported Additionally, X% as and in XXXX, constant-currency we've recorded adjusted

As was recognition negatively ASC revenue revenue the XXX change. a year reminder, impacted fiscal XXXX by

revenue the the compared impact grew prior-year. X% change, to this of Excluding

time to Now announce we on XX site business our great on Bloomington our pleased it approval operational acquisition. moving to that I'm continues the product, at make the from to first, for strategy. the continue grow update; which the Biologics and was of recently up strides is XXst to commercial its received The producing

manage Bloomington late-stage will fiscal robust strong to of in year opportunities drive a continue clinical across funnel We that continue and 'XX. growth Madison to

drug and $XXX and Biologics customers. drug in add investment substance million both according manufacturing is capacity to among Madison and to meet This Bloomington fill-finish progressing Additionally, projected growth investment well more and the spanning will underway existing plan. product future

therapeutic Biologics our Paragon and and to portfolio, expertise adding one acquisition reinforcing position growth. growing us provides accelerated areas the of we partner leading May on us and manufacturing XXth, the for therapies. in long-term Biologics new in leadership vector development Bioservices, for Paragon healthcare, positioning Catalent's capabilities Further gene a fastest across viral completed of

industry gene adjacent tailwinds as vectors, enabling to cell therapies. commonly in Paragon's expertise categories of system in into offering development for most with gene deep Viral expertise expanded Vectors, a an used as gene therapy, the on positions substantial of delivery to Adeno-Associated us for of brings combined world-class capabilities development well entry Paragon other and and and manufacturing therapy. well capitalize the This technology support manufacturing facilities platform

growth of future our by our X% will positive X%. of commercial customer recently long-term and revenue our increase base, out X% performing the announced profile business. the revenue fit X% footprint its is to The and Paragon highly its an in from vector our expected value in it expected manufacturing, shareholders, for compelling ideal business position on Paragon's make chip expanding impact evidenced as gate well leading and outlook deliver EBITDA blue to to to strategic

capabilities and acquisition the assets facilities supplemented we and development We with business. capabilities gained immediate gene related therapy of us accelerate state-of-the-art Novovax. gives by two to the manufacturing to acquiring agreement and Paragon other equipment, and the manufacturing nearby our growth from The manufacturing access people, space

and fill-finish can services Bloomington in from analytical businesses provide a solutions and commercial forms, Catalent our finished supply clinical variety of including pre-existing integrated and cartridges a manufacturing and vials, dose Biologics reminder, As including drug Paragon, substance through Biologics and syringes.

of Biologics XXXX and today. XX% revenue we're fiscal and revenues in our organic Biologics to of comprised continue The value of customers our combination the represents consolidated Catalent's than Company's significant for investments in create and shareholders. year XX% the inorganic approximately more Company, making

treatments XXXX to transaction customers year our Delivery European potential comprehensive fiscal faster. the the acquisition to their continues first strategic site Drug as network according tracking our employees the in the to innovators, financial the unlock to and the of UK Pharmaceuticals be XXX Second, to our early of we of segment. Oral is development of contribute its and most molecules quarter Center pharmaceutical integration for expectations our goal helping Catalent Juniper of Excellence full Nottingham results a into advance to to strong and patients continues the The nearly provide partner part better the acquired

network in Europe, us sterile capacity solid and to June, packaging dose and in to site. and continue will and current oral along manufacturing Squibb purchase transaction portfolio Bristol-Myers in product biologics, BMS' our product we announced to manufacture solid, Anagni, provide finish our Italy. drug fill This agreement with an the Third, at oral facility product sterile manufacturing agreement enhance global

year. Anagni The and calendar biologics supply. the addition accelerate and to our of programs provides anticipate great transaction dose commercial European their the the development by the end with of completing customers oral improve capabilities We facility

we Solutions under gained that Ingredient Haverhill, Active facility. have with our we spray UK dry to spray an scale for Catalent commercial month Sanofi's customers which we services expanded global at agreement significantly capacity access have Sanofi last manufacturing through announced Fourth, drying

gives The state-of-the-art used and site an us dispersions also access are the experienced the overcome expertise spray at many frequently agreement only spray and which drying to and to challenges dry capabilities equipment, medicines. with new commercial skilled but team to not scale solubility with

Winchester, spray capacity clinical San early with Nottingham, we're sites scale of Diego, specialized the along programs instant-on development This and our and investment our making at stage that in the up facility from transfer California enables drying UK. Kentucky

several in program signed I'm also that potential first our into Haverhill discussions capacity new other pleased customers. with to already at we've the and report are

well market growing Catalent's the projects. have increasingly development positioned remain an than in strongest inception we more robust, attractive, active Finally, with X,XXX and since pipeline

Wetteny provide Chief for Financial year to fourth through take well our Joseph, quarter Now, fiscal I'll the turn as our Officer, and XXXX. fiscal year outlook you results call as our who'll XXXX over financial

Wetteny Joseph

John. Thanks,

briefly John X, new the modified ASC using earlier, retrospective As method. with revenue the mentioned XXX, as concerning of accounting adopted the July standards contracts XXXX, Company customers from

comparator the I the for the and XXX. June are while on ASC XXXX to results adoption standard reported of treatment the The basis the the the XX, and months year months guidance year especially new of gross three Supply changed standard, reported XX, results our activities, a results prepared compared XXXX important a now for the ended sourcing reported prior fiscal ended segment new discuss This as standard Clinical to related under basis our is year. which of in application reflect net Services were the three the the of were fiscal prior June

with our Now, please turn detailed Slide to segment business. performance, Softgel for a more X discussion beginning on

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

increasing strong prescription and North Softgel growth increased supply. America consumer revenue of during due Europe, ibuprofen the the XX% to due health stabilization X% volumes for $XXX.X with and segment partly million of to quarter EBITDA in

the in As of through months for production saw availability, we experienced fiscal the which experienced products offset as we partially we strong we first the ibuprofen levels anticipated, headwind the supply the fourth quarter nine a year. API given help recovery

network. product mix by across the utilization the performance Additionally, improved capacity the driven strong and was EBITDA favorable

It late growth fiscal ibuprofen fiscal and growth the with segment's have aligned the noting the would which X% shortage the for of after impact that for normalizing rate. XXXX the in historical revenue is been nearly is XXXX the completed divestitures also worth revenue segment Asia-Pacific

$XXX.X shows X that and in the versus with Slide of segment which during our million Biologics quarter, the is Delivery up XX% revenue EBITDA X% segments the Specialty year reported Drug period quarter. growing prior comparable

EBITDA points to to driven segment's However, the most the contributed XX percentage revenue inorganic and Paragon XX segment's and acquisition, percentage segment's by all growth growth the revenue and segment's growth was points growth. of which of EBITDA the the

across quarter in pre-existing facilities, our investment substance US, growth along one X% segment an into in the which impacted drug to the at XX%. growth maintenance volumes Europe the organic we but product the the Recent continued our drug of reported declines Paragon, the shutdown of revenue product negatively EBITDA recorded timing the as Biologics bottom to strong growth partially with of during mix, and fourth Excluding translate of due segment's unfavorable in line. business decline but quarter business annual experienced revenue in

capacity. completion US was platform Additionally, for of the build-out clinical services customer own our completed duration manufacturing as non-cell by its customer the line business the a substance impacted the limited drug contract in of

to over few our We customers increase new drug quarters expect and to utilization the on-board business we this to be our a as work headwind for substance next continuing levels.

line and we positioned these business were and to in fundamentals of period growth. well the platforms. drive the with fill ophthalmic our remain believe technology future is to However, prior attractive sterile the year respiratory for continue results key biologics that business The

Juniper the recorded up period million Oral the percentage XX% comparable growth year shows to EBITDA points X segment's partly revenue during EBITDA segment's which which Pharmaceuticals and the Drug our contributed the XX% versus $XXX.X increasing that segment the segment XX in quarter. to of growth during XX the quarter, attributable revenue quarter, prior with to Delivery the is acquisition, percentage Slide points

was delivery development and increased volume favorable related services EBITDA within organic growth higher revenue Europe. of across and demand the US business, well oral as X% our The analytical product mix growth as driven by of and to XX% and commercial

Drug insight continues development to of segment to number businesses, stage we growth or provide long-cycle see which In one Introductions our expect spray Technologies, well order programs of Softgel we long-cycle development have including Delivery, Oral as revenue Biologics product and additional includes to New are several NPIs. disclosing and Specialty accelerating and the the in dry our mid-term. development to Additionally, and NPIs our strongest as from late near Delivery into Drug revenue Product the lines,

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

development recorded more development large across we the XXXX, $XXX than million, above fiscal both XX% small of revenue the which and prior For in ended recorded is year fiscal June XXth, molecule year. the revenue

revenue, in SEC. on our which to today in calculated XXX disclosure with ASC development included accordance with is Additional be now our the filed Form is XX-K

In XX% addition, of is NPIs which the we introduced year, fiscal approximately the in contribution the $XXX XXX than contributed year. launched revenue revenue of products, million prior which new in fiscal nearly more

on activity. Clinical Now, as which XX% million, $XX.X by ASC our prior year, the XX, to Slide of is Services Supply quarter of treatment compared sourcing revenue XXX shown comparator of now the fourth segment driven posted

mix driven impact to of compared year, capacity comparative X% year quarter fourth segment across by to and manufacturing compared network. the favorable utilization period revenue prior declined increased services, but the XX% EBITDA the of the increased margins product XXX, and prior packaging improved Excluding segment to ASC the

segment the of EBITDA All was within CSS organic. growth recorded

segment's CSS As increase. the for The recorded XXXX, backlog was of June net decrease a prior new the wins X.X XXth, the times. during of sequential remained XX-month segment million, of X% $XX fourth in to at fourth quarter, $XXX is the million The new book-to-bill quarter a business segment compared ratio the trailing business which wins recorded of net X% our year.

accounting and to net just revenue been ASC business disclosed XXX for figures in that It new is I now wins have basis. include note adjusted that comparator and backlog a net revenue on change the important the

information. slide contains reference The next

year. main already same reporting shown segment on performance on Slide the the the consistent We won't slide precisely both discussed format XXXX discussed statement have the throughout and as segment the drivers fiscal currency. detail as of consolidated XX we XX. results variance the Slide reported I income XX presentation since by in fiscal constant with our operating in in are what cover themes segments, the shows

related favorable EBITDA the shortage US product solids Drug due distribution our and capacity key the higher to and are during customer The impact Clinical Drug months segment licensing Paragon offerings, the utilization of storage nine Services, high growth drivers biologics Supply strong our Juniper duration the worldwide and mix within of growth within which on Oral the activities by first revenue products, are oral acquisition, fiscal and Softgel offset Delivery a certain and substance within drug drug decline our revenue improved Substance product limited partially margin contract impacted business. XXXX, end of ibuprofen that to and

reconciliation from out will months which is the to the EBITDA the provides This last detailed of a which our operations XX earnings assist XX the to GAAP loss. is on net tying Slide in adjusted most next of figures reported computation or proximate EBITDA, from bridge slide. measure,

basis, fourth most which currency fourth increased driven our Paragon acquisitions Softgel, XX, Moving On organic CSS within quarter segments. ODD, to adjusted EBITDA on EBITDA growth XX%, increased to XX% coupled by with million. the $XXX.X was constant adjusted inorganic and and quarter of EBITDA a adjusted our Juniper Slide

Note reconciliation to EBITDA. contains of net that adjusted a Slide revised of presentation XX the earnings

fiscal have of made of the adjusted see quarters We the revised can each in EBITDA the of adjustment our four fiscal XXXX of previously of an first LTM our that solely removal XXXX. million presentation for effect of the $XX.X quarter so on you

was fiscal The modified and the a principally ASC a determinable in in made that with reflected of first method, in related following and retrospective XXX due us July is XXXX, the that and adoption million. first the in fiscal customer adjusted payment $XXX.X the XXXX that GAAP was not adjustment of the opening to by fixed resulting of earnings quarter to Company's as a revenue recorded of termination to of contract Xst to part of year $XX.X as was that adjustment $XX.X of quarter full of retained by in for quarter transitional adjustment reduce instead Removal the million, EBITDA a EBITDA million quarter. of in XXXX adjusted

slide quarter share or in On was fourth share income income showing in year net adjusted Slide previous diluted the compared adjusted format million add XX, a million $X.XX you can net used the earnings the adjusted see or also to EBITDA reconciliation same non-GAAP same to or ago. diluted revised that the slide of per $XXX.X $XX backs. fourth This of net loss includes per the for essentially net $X.XX income adjusted quarter reconciliation

allocation our debt and shows Slide our ratios XX related capital priorities.

of more times, prior above fund incremental ratio, is increased debt turn of than where the Our June a added as acquisition. total stood X.X the the net at full as of leverage a XXth ratio ratio was which to Paragon end the result quarter. The

for our is was which improvement compared to the time turn net announced X.X of forma transaction. total Pro times leverage of the at X.X we ratio a ratio the Paragon acquisition, [Phonetic] an the

per between flow is generation the Company, it a Additionally, of given the cash X.XX EBITDA, of free turn naturally growing Company delevers the adjusted year. and X.X

M&A. Finally, by strategic organic unchanged on followed our first capital foremost, allocation priorities and and remain growth focus,

outlook billion financial $X.XX we revenue in fiscal to the slide $X.XX full-year expect range our XX, for on of to Turning billion. year XXXX

full $XXX of year adjusted million adjusted range million EBITDA $XXX We million the full-year net the income and $XXX of to expect to range $XXX million. in in

Paragon issued fully We counting share shares we shares in a weighted for with of common in average they shares, the accordance their fund expect the be XXth, were XXX the fiscal that terms. to to count million acquisition will June of if converted basis our million XXX in year preferred all the part diluted ended range on to May as

expect on be consolidated related our rate, XX% the also year. to our in to net we we XX% revenue, effective fiscal expectations adjusted and the tax the to guidance EBITDA which between and to wanted provided In adjusted addition we highlight income, just

be interest fiscal expense fund added Paragon also 'XX and a We debt between as of expect to in fiscal and during $XXX million the $XXX increase result the million to incremental year. the acquisition

expenditures year XX% to investments our gene XXXX including fiscal to of therapy capital net continued Lastly, in are increase expected to revenue. approximately XX% Biologics

some moving EBITDA full-year walks the adjusted determining when through guidance. pieces revenue we XX of our fiscal that and Slide XXXX considered

expect favorable X% the at is and changes constant-currency stronger growth revenue at between expected EBITDA XX% to an high-end see is EBITDA business. Organic but we at at the set in growth range. from which at with Organic perspective. revenue outlook result expected base the to X% be our business line, range, of low-end the mix across the the that much performance, the our range between first of a X% low-end long-term high-end and of of bars aligns to The brackets as the trend the are

the the second Paragon bars was acquisition for XXXX. full-year May of completed FY The 'XX impact of set adjusts that in

approximately in incremental of contribution that So adjustment. quarter included are XXXX X.X in there fiscal

The impact the makes Australia, products Softgel of customers, the highlights Blackmores. one third Braeside and sale to vitamin, set of of primarily in of bars which facility supplement mineral our our

As facility you network. the XXXX sale of working move certain within other our been may have recall, we announced sites products in the to April non-Blackmores to and

and XXXX, revenue XXXX. and The net dollar expected US the translation euro impact within last bracket set bars the recent product is in of FX rate relation average October adjusted sterling. is was revenue The pound EURX.XX of that sterling well the remain highlighted the the strengthening GBPX.XX. anticipated transaction the to year-on-year, driven the pound of and of the and average close by transfers EBITDA In will EBITDA is the fiscal was euro principally impact underway Softgel portfolio. negative Catalent in transition to and The

in resulting In we conversion of light of exchange financial fiscal the in the guidance, headwind. rate sterling of rate assumed EURX.XX pound a a GBPX.XX euro modest and FX foreign recent activity markets, XXXX in our

expansion range. midpoint slide, our points, XXX anticipated adjusted see guidance drivers yield assuming basis of can of you approximately on margin the these EBITDA As the

business seasonality our highlight progression of me our quarterly in remind through year. the let everyone Lastly, expected and the

quarter our As EBITDA and of in far fourth fiscal be strongest, discussed fiscal to any year of fiscal where years in quarter is of case quarter approximately generally EBITDA will the of we adjusted by now, with XXXX for several continue of of being lightest second the any half first generally adjusted to in XX% fiscal year our expect the our XX% the our the first realize far. by This year. the half the year

questions. we the now open call would Operator, to like for

Operator

comes question [Operator from Instructions] with JPMorgan. Tycho Peterson first Our

is line Your open.

Tejas Savant

Good morning, here. taking for Tycho. Tejas Thanks on guys. the for question This is

like drove roughly a a contribution about mean half million Wetteny, So John the and since Paragon I closed. $XX quarter looks from about deal

Just on wanted here. take in sort anything have there. that response of terms And then you was customer to that or you ahead get color line any of your early in your surprised can share materially if of expectations

near-term, And then that, follow-up customers, of a obviously in pretty to sort there diversified the you've Paragon across quick of programs as XX is spoken here. about a a pipeline plus well having of customer concentration degree but

out, to mind there should of that in fiscal unique revenue or some as So 'XX of business is seasonality portion we anything point terms in keep from cadence we the in of the in these Wetteny, this customers contribution? the model

John Chiminski

Yes.

Tejas, a on. along with extremely where top necessary as growth and that to say, their in a a it that with customer had. dialog take bring into they needed point processes of on say been been be the would to, we the company, really growth strong response, team financial you Paragon the the to positive able say, the asked got part I've in well they will, I'd or early continue I that my met majority have first first of So as if you that I for with at in Paragon. has of would invest would all, to get we acquiring this regards before Catalent customers I'll question the

So Paragon by overall it's by as been customers received and well Catalent's our team. well very as the

fact, of of had, under of have I In we've all all retention XXX% and guess near them team agreements. retention the

a With XX the probably of that. the to, programs growing have I regards about on XX that's today say robustness with customers they happy almost basis. very early-stage would weekly business. we're to mean, and I So

the business knowledge also development another up phone being about XX picking XX XXX XXX about Paragon incredible capability. reputation, programs, are Paragon. referrals I through the say probably run that Paragon mostly have from we results XX an And to quite run their programs programs to -- would with I activities being XX has and and will, those, or from of from early-stage frankly, by if customers guess you And

again all site of do have of I funnel in individual we I'll regards customers in concerning, the that, bounds. would have that there, terms to some to to robustness regards Catalent, period. But turn with commentary customer the of several no across the We stub any performance I over mean they are may there, but large and with cause Wetteny by have growing leaps their say it we an And in with concentration. that

Wetteny Joseph

roughly Sure. was Paragon quarter. that right Tejas, in us. of of the I would say expectations the and the from a slightly out certainly with business very for roughly above -- in terms pleased our gates are you're contribution that the half of

business guidance, You our as assuming that portion quarters in the for bucket with Paragon the of can are X.X in course as falling other inorganic guidance base half year, contribution worth for that's from fiscal in the far us. see roughly the our we the

in be announced well the in programs customers programs the to, able as diversify quarter, the even have space Novovax, we would the add, addition two attract to of we capable us should the addition I thing number that lab long-term. further facilities one The have and having staff business in of bring which slate of manufacturing we a from future, both the in in that more we customers as the to

Tejas Savant

was opportunity? quick Sanofi unrelated spray commercial mean some on you think Manchester. investment drying I perspective and the I on million ago, signed your here, little can in just couple you a thoughts a here sort follow-ups also quick John, a share of Got obviously $XX there it. And agreement then while of the

of terms sort the then think excess up any the into Bristol is what here, being that And clients? the baked of your second where, road? there agreement So could guide shaping the site which of and you in exactly at for half, leverage other in how do is you down capacity

John Chiminski

Sure.

with Drug development has tremendous have, they that Oral drying, Nottingham would I out job also and regards being building there, majority, done say, available, I brought or Delivery would XX% Catalent that have through So Somerset to say, our early developed. molecules capabilities drying are development. the acquisition slate within and XX%, would say are strategy in a of majority spray they spray team of we them of site out that repositioned a of a large a It's Pharmatek, we molecules are the in a and that Catalent maybe I not has maybe early

we years. the our team strategy, of of -- needed was commercial take customers, couple because going that of to capability Winchester was need drying a terrific we really build out to spray build the knew which a out So and had in the

we of as drying we as matter the instant-on with comments capability, Haverhill. have So in the was prepared their suite the already already instant-on to spray spray and to our we to to of noted signed facilities first in be our partnership the in bringing, Company -- little that dried take doing large have a that activity the capability needed that we've for Sanofi which behind within strategy fact, capabilities a and molecules have able

and we techniques of bioavailability, is a great built drying and site, solubility and was products suite to Catalent capabilities Pharmatek that it another just we have and ability we take for development used area that commercial. Spray offerings. early built an were former the those capability full see what sure a now now within this Nottingham, one we with have through as to out of the under-developed make where in Juniper we several our So, we

again, we best always strategy. strong I've robust that ODD. within It about probably talked have pipeline follows a the fact So our

feel we terrific So that. about

don't from It's and doing It's really packaging the Anagni, Biologics to With give a close Oral to provide that acquisition, regards to capabilities capabilities strategic purchase with year, we regards we say be input their the product to within manufacturing just assumptions BMS. we I note financial also baked additional the site. of continuing within -- I'll the site providing that will, It's the with our XXXX have. from really at Delivery that if manufacturing into agreement within that what going All really we're to that have is us a of a and site Europe have also Drug we going we'll BMS you our this going of is now. that's clearly -- would we not to year fantastic are end us again have Anagni guidance. fiscal and

Tejas Savant

Got Thanks so much. it.

Wetteny Joseph

We will, stated we transaction, close will we as But we that not the at once guidance, once we point. earlier, reflect -- Anagni. does the them reflect contributions from

Tejas Savant

Got it. Thanks so much guys.

Operator

Thank you.

Our next question Morgan comes from with Stanley. Ricky Goldwasser

open. is line Your

Ricky Goldwasser

of kind I bigger the agreement more question. like a Bristol-Myer morning. on picture and have Good question hi. Yes, a

capacity some the consider pharma more to existing is think going opportunity you large outsourcing? the overall see we're and you capacity this do of to beginning pharma of an kind when of do a So players, trend in with out just like the that taking

Wetteny Joseph

Yes.

I bringing end us Wetteny with capabilities this beginning described that and through time to our to earlier, pharma. context here. that oral a this this in is we CDMO customer allows take with executed up to utilization able a such would close combination facility. fulsome trend Europe, which carefully this opposed John bit to as one. solid launch of We be pipeline pipelines in ability continuing and a to a of the at is, at is had you we starting Ricky, one evaluated be on to existing large Juniper in acquisition transactions gap our the in that of not have presence the this out footprint have as relationships that look development expect So, European capacity put terms Historically, coming of over capacity that when we

addition the In where performing work which contract would them we have is for with BMS, mentioned, be facility. John the what at we to

in the continue biologics capability focused capacity the here as fast for to state-of-the-art from intend segment, our well to saw grow we the the at market the given our addition, a on Biologics growth we to which perspective. facility and able strong be leverage growing very In filling end this and of in continuing opportunity vial utilize to on

it combination out closing things the on taking a this be large the would led in been that describe at and execute has a to But this of those So I selling pharma, terms will the transaction continuation of year. a those. us underutilized we of is that as trend calendar in end just what overall capacity of space

Ricky Goldwasser

Okay. question just organic growth guidance. And above follow-up XXXX just EBITDA your one on long-term being

very early just But obviously we you updated on and is think do that kind see more. this that could guidance. of long-term you something So, provided

Sounds the trends, year? kind into guide of an long-term or it opportunity an year-over-year like like next raise is time to given that just over opportunity or easing comparisons

John Chiminski

quarters growth we we've guidance after And from Paragon Ricky, here, just fiscal took business, line very pleased would to growth expectations our EBITDA announced sitting them the from Paragon. be an our inorganic the acquisition, at our sight X% 'XX, can in of base we're Paragon, see above of those growing excludes in largely issued as with we that's long-term So, that -- to as organic which for X.X we X%, ranges year. X% to perspective Paragon X% and

you that are put recently business out today. do our we the time we ability year-by-year But end able guidance the the therapy, which increasingly and in we within unless supply Paragon we our our enter long-range basis, cycle would long visibility, and And guidance. are past, guidance tied strategic as the well our agreements done on faster So which to change acquisition. a give visibility portion that so long-term with businesses, growing the announced look into we the of will as only the guidance markets exposed in that given us long-term the gene as in see afford the customers our did a of shorter frankly, the biologics parts a quite to at on plans commercial be will put at year, as provide to basis, continue we've we to we our cycle we year-by-year to

Operator

Thank you.

comes Our William question with Kreger John next from Blair.

line Your is open.

John Kreger

capacity are have in-house the one near-term you. John, in much. bringing capability Catalent talk to Biologics deciding a strategically that you for you I about you remarks talk for relying and customer just creating broadly; very Thanks for prepared that? think Can house do headwind seeing in versus customers as about trend? Biologics a upon others seeing to or are that you Where some

Wetteny Joseph

Yes.

first if see then John add and So anything here. go love to I'll

of was we drug was Substance the customer generally Just that the our the we itself. cell do relationship lines of our us of or We with the into use first out lines technology. a this the starting their of core from business, in develop substance is those in Drug capacity. beginning own our This that business building GPEx manufacturing from -- in what differentiate all, cell proprietary then the biologic

it a with So start cell line.

is this specific This not the not was core a the lipid fact, capacity our substance approximately in XX% manufacture this so a duration a the contract, customer it's In in out that their fully in building we realm -- that do own RNA a for we what knowing line. regard. This messenger of business XX% the in we our again, this our product. is patient fixed expected customer is of start of be is nanoparticles, substance and -- line cell to production of loaded the drug operations non-cell with drug

see So, the of robustly. when a the continue I look is at business, growing that market base we to

we train, third of manufacturing see the to end fiscal our at continue year. up last We a launched of ramp which

with dynamics to would instance indication is particular to that not see And trend I this growth in of capabilities business our market a so the see expect we we this long-term in combination in an business. and continue quality, say and the

John Chiminski

just say, small for drug that way in-house just said I'd question, and no trend Wetteny business a very the medicine, Yes, determinants substance the the for this mid-sized large was one to that we building is that unique would situation again, do capability, are was certainly in to the we're beginning, of doing that what not this build part that your and customers as And they exit answer there were predetermine at capacity already, manufacturing contract. main a of there. the

John Kreger

revenue should Any of quick segments, And growth. these for I X% follow-up, you organic thanks. X% year your any the guidance could think or extra helpful, to then to Very assumes be a X% well X% the below where coming four across above range. comments that add

Wetteny Joseph

segment without say, So segment just you in the would as I by know on go what at looking business. giving full the guidance, basis, a segment just trend

year; of the X% with we're that business -- this grows exiting We've transitory fiscal again business which business to stands. Softgel very a historically said issues, X% Our in organically. pleased where [Phonetic], the number we're had 'XX

be having will We exit well issue supply we that addition recent we business mitigated which the the the as Australian we the of trends seeing on in a some business. bode segment and As will side the the in facility approvals with the year. respect for like prescription the the reminder, divestiture we're ibuprofen to in having to largely believe the product

some So some that business in to again, we expect of long-term, be rate. X% I'm to you -- Long of just the giving trends. term, the X% recent the growth

substance Biologics substance and just double-digit in at few the to market we Again, favoring core a business. top etc. to we quarter's quality the growth you capabilities one the to continue contract. the underlying Specialty, the discuss to see product drug and our this and look drug sit with where and when respect business, rate and our But in business dynamics the favorable line drug from Looking continue Biologics our low supply terms demand next of imbalance point element impact the in at in are we

the continue drug product impact excluding and the extent on this tailwind. from particularly well we that, lesser on to substance, part near-term business contract, see to drug So a again, of

the at what I the of is grow think expect of part to business we part our specialty not the Biologics core this segment. of levels

said range seen done partly in we business business, to our 'XX did would the that therefore stated as as a to as of that nature we've segment that variability variability the the that's due the low-single business year some in fill previously, well. in the business part level site in we the the would grow shutdowns things of -- as we've and we've and some we've digit expect in As timing of when that that ebbed fiscal reflect our capacity and in seal comparables blow flow and year in last well the part work of of

see the to 'XX. we Drug, in Oral Moving you business momentum exit fiscal as really

Winchester here the pipeline said, business moves that late-stage have. the with to spray we've as the with pleased we've We're of of making strategic dispersion pipeline our that programs capitalize we we organic including US. the As in is dry very term the the agreement development We that look we're strongest well in both have. facility the in number as made long Haverhill this investments

And a us quarter. so, services, again, which our in the in quarter to fourth in [Phonetic] development other addition had for strong

business we in So expect a would continue expectations a rate in have. to that's business momentum again is the long the we term, growth this mid-single-digit and that

And a revenue lastly, to our in burn longer time bit Clinical business we've business. a of seen this

recognition seen an what overall and in numbers perspective perspective, fastest but a versus from don't shown we've XXX that a we basis, change because that is that the revenue XXX to in start you that the comparator. backlog a see uptick the done net basis, actually As to net and did, on it's piece ASC burn is reminder, has from a to our

the we still we from side, see in wins the from business that And saw are new the as the to uptick in perspective sit the in we've of terms EBITDA the here fiscal business year an in year. not XXXX the in fiscal net we early and throughout seen that contribution fourth momentum revenue starting on quarter

and trends now. to seeing business again, the we're in term digit is business right a So growth the I've this that long we'd expect mid-to-high-single be just relayed

John Kreger

thank you. Very helpful,

Operator

Thank you.

question with next Jefferies. from David Windley comes Our

Your line is open.

David Windley

taking questions. little my in wanted drill to for bit. on a thanks Hi, I Paragon

those had think I'm be get opened over opening it half, the suites to of opening contributing you're in are just sites. Is BWI the -- of the say, you XXXX? half capacity, two capacity first at kind are wanting are in how then now are a second to fiscal course I now? to suites year. the we're four terms sense I guess two opened and There the cadence that new should revenue and the many suites of in and opening six of the next that opening suites, two of described more in for another expecting to possible like timing when I

John Chiminski

Yes.

which facility the initial and what on and bracket expect the integration expectations. with is focus to of to there. executed to late continues two from that and completed here work we in said I from suites in expansion would be So, Paragon we guidance out a continue we are running and clearly line calendar look, broke business continue execute on proceed we say of in reflected business, year the a up will the terms gave, that which separate the the will what be next, and our into It have we we in in

David Windley

that -- in you from from guidance in at low-XXs level math the that contribution of EBITDA at mid-XXs out. better discussed think XX something midpoint certainly the Paragon my like I time great, than expand terms -- that math Is Okay. Wetteny, looks what acquisition. is was implies is margin the the it a of to And can the right? something isn't broke in fourth think calculated that my quarter in the is the which but I I've One margin, continue then the toward? and

that back things, on I also business happen? guess digging that what I'm you doesn't where that business I'm is that happens a the or causes you fees that this such hit things that step margins reservation that a utilization said margin think capacity, and what supporting little when as bit core I is to those new like in are -- bring performing can but for, that the is interested toward expand Biologics today.

Wetteny Joseph

that expect short So of relatively and batches. in terms well look, early of is is roughly what pleased capacity long are we've time in business right as I Look, and clearly -- business mid-XXs a year into have EBITDA we to be would can that integration the we days anticipating very math still the in frame see execution say, them as given in the the the said we contribution elements in first business, term, continue you on the an the margins. to with where the quarter your the is and as reservations we contract of foremost, we're are where

As years we accordingly, provide there. get guidance continue we'll into cap it to but we'll

David Windley

time commented a Okay. on related then Paragon quarters couple in question. to Sticking BSDD, has that. a there you little rate And row, soft the excluding you been I when for shutdowns, in a think last growth have of

You a appears and to may the respiratory business there. be confusing but drag that be I ophthalmic ODD, know, with

But of down low you earlier kind double-digit an the there to what core mid-teens. in Biologics business from grower, response historically a called question, you've also, is which called

can And the Thanks. do Biologics still BSDD, so, excluding long why? -- Paragon, term mid-teens we have still to or in is core want it business understand do core I and moderated that that

John Chiminski

see a This the So low our a drug at growth to is drug business our see and biologics on some third substance, you fourth not What is and business quarter But and the small molecule. look biologics if delivering we product look that at quarter, product, from continue top teens to double-digit drug so all both growth. the product indicated consistent. look, the drug drug line products, substance we our continue remains is the if drug long-term you in into I would view perspective.

well a to as we prior below respect timing into substance That's between and with year. quarter a compare of that, to drug mix growing the third being in bit the drug products we combination teens and with it said the -- some a

that of for Bloomington remind manufacturing XXst operations. announced that fair a amount of now example. I commercial today have of a we have you by business, recently clinical drug still thing We this would one approval we in Now is, way

that and for that batches the of milestone majority the can the and actually and tell so when time. in working in Madison continue next And versus a Bloomington run programs, commercial for which with larger with get would the XXX business is important clinical you then, of [Phonetic] it or on clinic. we're have substance both scale. evolution working Until still drug substance to you upwards drug programs flow are of drug phase we to the ebb our a product other later programs, see is them terms programs in

that you something level of is the rates at of a you perspective, it may quarter-to-quarter long-term from variability but CAGR we half to business, see programs from would we these or if think year, So business across some the to a continue given half expect, albeit we this feature growth look be what that expect are, largely year particularly long-term a are I the clinical-stage in have.

David Windley

Appreciate thank it. you. Great,

Operator

Thank you.

UBS. Brennan next comes with Dan from question Our

is line Your open.

Dan Brennan

Great, versus what, thanks. you Dave me in grew wouldn't Biologics hate if to quarter Specialty mind, so the itself, just I the to Delivery? question back -- the asked, go but let quarter just in

Wetteny Joseph

the low Biologics of business, of is. you portion you at core can look the if a roughly so business the the into just what rest it's said We've double-digit back growth,

Dan Brennan

Okay. Paragon. to back then, And

'XX. said at customers think you at were, the I time said fiscal XX fully 'XX the and I time So the for think of you you deal, and I the of fiscal think booked you had deal

question is, comments mentioned the from earlier of it feedback you remarks, the prepared if but on us Paragon the I forgot give know, earlier updated guess sense I some customers. So in I you John, just -- a from

Dave, Is to activity beyond you and customer of of already kind that? back there But the capacity do much you've you above a -- to of earlier new how with do we to business think question think provide get kind extent what win I an could there to potentially and kind guided. were on about how capacity, Paragon

John Chiminski

Yes so, gene again extremely comment the first the of for Paragon at make is that all, to market I work robust. have therapy just

build-outs. and basis. programs the running And we then winning new and have and new phase build-out they're gaining we contemplated regular suites So year currently and calendar other our and talked through customers on of two a up have about, this rest we've as

those said, our improve but more the our things plans into guidance. I as out fully say the faster expectations, have for getting current fully I that all is models that current have are would within Certainly time, contemplated build And capacity that baked could with we capacity is we numbers our meeting over something guidance. that into our

Dan Brennan

free of impact in for, I -- you XX% to and need for 'XX what's sustainable you and little beyond you're to guided could you. cash Okay. flow I sense is CapEx 'XX. the we beyond? ongoing free that I when level related just XX% guide of ratio some ratio an about but then And fiscal to free about do to like give and not CapEx know cash? needs can for flow, a of cash Thank fiscal you us going kind think implied to How talk capital believe CapEx on -- for the bit conversion CapEx the think investment 'XX. Maybe

Wetteny Joseph

previously a Yes, sure. so is announced we which we [Indecipherable] that of product and in expect to on. substance in This investments We our of drug our XX% Paragon, XX% did net sort combination in as say combination revenue others business, of we US CapEx. that mentioned of organic drug in biologics terms booked and across commercial as the in with well capacity

across over ones. said expect two-year as we increase more So, revenue years see the programs these we of significant next have CapEx roughly through percentage a get couple as of to we that these

year. X% with exited as to CapEx which as roughly we the we started already year we see fiscal And in exited XXXX this

Biologics net and a and cash the from to we given market position our conversion quality businesses. on from looking conversion and expect capitalize to operations flow income perspective, a but between So of really gene in free therapy, just flow cash uptick those CapEx free I've tailwinds, the XX% are strong described perspective, capability a both we in our across adjusted given XX%

Dan Brennan

Great, thank you.

Operator

you. Thank

KeyBanc. question Hooker next comes from Donald with Our

Your line open. is

Donald Hooker

Great.

that? Just especially your therapy 'XX. all in around some visibility be when of guidance for curious gene setting guidance. and has changed there you with acquisitions, of fiscal Can these How you're volatility area your the for that the of maybe Wetteny qualitatively, maybe visibility your terms qualify might kind to

John Chiminski

supply cycle to customers the our guide and commercial for if continue influence where So that long visibility across products to for our very are year. the we have business, look strong businesses you

We are development increasing revenue an amount contribution of across the seeing from services business.

But growing of that the the are and therapy Biologics those coming markets fastest, the space. from ends are being the increases gene

us year we above the internally as we to we figures certainly of to a gives externally you that in guide we certain tend where level are terms So enter of those. and driving confidence that guide

midpoint So, years, from in on have fast I'll certainly the side just the have development ends confidence remains as we the growing businesses coming the loan market. previous of through and we our reiterate, of guidance visibility the across with our cycle growth consistent

Donald Hooker

And you were to gone elaborate like surprised expectations. sounded your maybe internal Okay. it than related Juniper expected guess has versus you what you positively that, better you from on Can there? I think

John Chiminski

markets that and strong above performing, made since our been throughout we I the remained has that of product the slightly expectations in for has perform supply CRINONE with program. various first Juniper say, services would the as fiscal respect the we to, as described we our quarter in well acquisition the we've the as development year for development that both so certainly customers previously

through solids I we a well upcoming the Anagni important pleased it's contribution of with molecules far and the oral the network, performance. very we're of business feeding our facility feed look element of rest of the and business the so as in combination them the capture closing rest network. to more as into its with of the the very so of as And And strategic our think

Operator

Thank you.

with of question Our Avendano Bank next comes America. from Juan

mute is check Juan, your Please open. line Your Your line open. is button.

Juan Avendano

segment, an that you. this from little flattish, I mid-to-high-single-digits. Supply the impact in In is negative, question fiscal long-term thank Services of the is ASC a of Clinical negative organic excluding question My even believe that that maybe growth first believe a I Hi, you the the earlier the year growth XXX, 'XX, adoption for bit decline. organic said was response to probably also rate segment on

a of growth? the give more wondering this reaccelerate how on to I organic segment backlog CSS, slowing little mid-to-high in your expect of into conversion And long-term in guidance what's you us the was if and baked you dynamics color growth so bit just single-digit could given

John Chiminski

Yes.

this business, certainly the slower the at backlog Juan, to -- healthy a So, we've Clinical burn business. in looking we've the built backlog seen

the comparator contract I executed is business, customers As we earliest be the the mentioned to piece work earlier, the revenue. when our with

net comparator effectively we but And on shifted about would seen timing past a on would earlier because of shown It's years, have so in a couple have uptick gross quarters. a been basis, by it's that that basis. now

which it's the we're comparative while we been which that so, line. our double-digit throughout EBITDA in slower, business the And pleased the just year, as utilize the EBITDA making the capacity it's and benefit seeing well. at uptick not as It's with, we top of just growth enjoy growth a we're muted growth in bit very -- the

starting we the 'XX, why, backlog. So see as that and see of the to that burn are early starting to we understand liked while burn of sit see FY have in the start we part are we here would earlier we to

and growth dynamics with with with to help well customers we be positioned And footprint trials very their clinical long long-term. again pleased be our the we and have expectations business able continue of to global clinical term, the manage terms so trials, the we global and our continue have to in a be position to to

Juan Avendano

Okay.

into between was Paragon. Specialty this and believe a before Drug XX-XX BSDD before split Going Biologics the segment, the was Delivery I split,

with Biologics between give 'XX, revenue update part poorly Specialty in how did Delivery Specialty can now and on of in year an breakdown the you BSDD? fiscal us Given inclusion the Drug Paragon, and

John Chiminski

for from a $XX Paragon. roughly contribution you million 'XX estimate about revenue So, fiscal can Juan, look,

in the look I just 'XX put what that's with don't from definition, the So right you you as assumptions fiscal Paragon can back respect is, front you as as going Paragon if for will, Biologics to into core to math. you, to as that can our not that I but that see 'XX number contribution what well our and me contribution, have materially of perspective the you I at the is do you the of number total would into quote segment, shift guidance think

Juan Avendano

adjusted medium like, EBITDA of EBITDA of on Okay. three the next years, the basis to lastly, number long-term years lines expansion to expansion expect adjusted four margin to X you've or a outlook years. XXX over margin last on of the we of And over given points two couple the three something us

next over all margin with Paragon and a years? investments taking adjusted on few long-term are expansion EBITDA now the would Given give that to guidance the place, medium us you

Wetteny Joseph

would a in the between assume basis in we an our expect point comments, basis said our point we're over long-term, So guidance. previously it's for the incremental of two if XXX prepared next inclusive seeing margin fiscal said as XXX expansion basis we 'XX we guide and we margin linear three XXX of seeing FY have we've point 'XX, in expectations. expansion not to terms uptick of midpoint about to Mid 'XX. said which be deliver to continue we've Clearly nice as years, we're you to to what those

Operator

Thank you.

Baird. Robert comes Stover Our question with from next Evan W

open. is line Your

Evan Stover

to that me question business. wondering get plus that XXX% really given the pro down path XX% add growth got at period the stub is to guidance idea, rates the revenue is going of is in rates I Paragon If bridge of forma previously recent 'XX, to that on basis quarter fiscal to a to and glide 'XX do you. of about fiscal of next this that the tell us the million $XXX and for if implication in the 'XX. look $XXX a Paragon from then of down Paragon I'm thank thrust you've Yeah, look looks we market my can and year kind year, I just at in better think fourth million you or kind kind what growth growth like rate

Wetteny Joseph

your perspective Paragon that about from rough would is math Look, a say right. first I

we what in -- revenue. were do the $XXX said that's to ramping to calendar revenue of year calendar expecting million 'XX business roughly in 'XX. half is Here's we've previously, said and Clearly, the business of expected we that 'XX calendar million of back did the $XXX year we

quote forma what perspective, in bucket but total business. would and of your roughly continue pro right, the growth in of put clearly the in contribution I single this inorganic we of that for growth a the we've in again is. portion to is I from confirming have is don't to this exact the rate figure you hyper that year And that rough math terms out what see

Evan Stover

question of drag Braeside Final a Okay. stands last from the the contrast, this round one actually to me, were think smaller in little slight Pac a bit a divestiture, an year it's I of did that you to I see benefit. divestitures EBITDA Asia EBITDA

some you kind if wondering I'm from divestitures Softgel? an upside a divestiture give of potential the maybe last last, of, Braeside with at or for conservative the the is there So can round estimate idea does me that differ of

Wetteny Joseph

Yeah.

we've operation, a bracket, a said take impact. that you this roughly actually look million a So about with as $X as is of at $XX and EBITDA out we margin it's if EBITDA million bit bigger little only accretive but of revenue

a number. about it's So XX%

So points it that be in we XXX year. the of margin part expansion the basis accretive and see EBITDA will

versus totality in So to the but the transfer in I to we to compared which elsewhere work diligently facility would substantially other, one. this network, smaller were the on products say the continue

flat relatively think impacting, million, which I EBITDA is modest The EBITDA. on accretive. a slightly negative EBITDA roughly $X margin is and to other This roughly ones, were again,

Evan Stover

much. very you thank right, All

Operator

questions this for back Chiminski time, call to Thank John you. over closing to no at like turn showing I'm And further currently remarks. the I'd

John Chiminski

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

we're delivering committed our overall focused our results on year organic are 'XX financial to fiscal with business. First, drive consistent across to continuing growth guidance and

of our strong May Bloomington world-class demonstrated EBITDA further being to CapEx sites from capability grow offerings. the our continue determined to deployed we're Biologics our to forward and look $XXX and business acquisition in Second, capacity and and Biologics margin build million growth continue and revenue our to as Paragon by our Madison of high

return. investments. family believe is Catalent team on enhances expansion to successful will of XXX margin Paragon we towards adjusted next and years. transaction and for a recent efficient key management into continued EBITDA the as the basis Third, the offerings, the of business over swiftly focus firmly growth business our priority the points to capitalize XXX Fourth, points long-term lead further Biologics to look shareholder three expanding our the area inorganic we a integration of accelerates the basis increased as We top drive is our

not the focus of Last and we are commitment do. We scientific least, we every a putting our but operations, constant run Thank all support regulatory you. to and first remain business at certainly with project in the quality a deep heart how excellence expertise patient and priority. customer and

Operator

everyone you today's and conference. and have a wonderful joining this Ladies for gentlemen, concludes Thank day.

Catalent (CTLT) 27 Aug 192019 Q4 Earnings call transcript