Keeping up the Momentum

KEEPING UP
THE MOMENTUM

BACHEM CONSIDERS ENTREPRENEURIAL DYNAMISM AND FITNESS, ALONG WITH THE ABILITY AND COURAGE TO CONSTANTLY DEVELOP, TO BE ESSENTIAL PREREQUISITES FOR CONTINUING SUCCESS.

Bachem's strategy

BACHEM'S
STRATEGY

As the “Pioneering Partner for Peptides”, Bachem focuses unerringly on know-how and innovation, quality, close collaboration with customers and continuous employee training and development. Bachem’s stated goal is to be the partner of choice for successful implementation of peptide projects of whatever kind.

Bachem – Fit for the Markets

FIT FOR
THE MARKETS

By actively investing in our employees as well as buildings and facilities, Bachem is securing the foundation for a successful future. We are also increasingly investing in infrastructure to protect the environment and our employees in line with the latest regulations. Further key areas of research that will keep Bachem moving forward include digitalization, automation and improving process engineering, while strong project management provides the link between Bachem and the customer.

Bachem – The 360° Business Model

THE 360°
BUSINESS–MODEL

Bachem takes advantage of synergies between the Research Chemicals unit and the regulated business units in the diagnostic and clinical space. Researchers already know Bachem from their student days as a supplier of high-quality research chemicals. As a result, they readily turn to the company when they need high-quality peptides in a regulated environment. Among Bachem’s greatest strengths are a presence in the peptide sector from the beginning and the ability to meet the full spectrum of peptide research and development needs.

Bachem - Reliable Partner

Reliable
Partner

With a consistent focus on continual progress and improvement, we strive to excel in all business areas. Bachem is dedicated to offering its customers the best possible products and services in the industry. We earn trust through commitment and dedication to quality, ensuring an excellent performance for our customers. Our outstanding project management record with the world’s leading pharmaceutical and biotechnology companies shows that the best work with the best.

Bachem - Value-added Services

Value-added
Services

Bachem generates added value for clients through tailor-made services. Our know-how gets applied in the development of efficient manufacturing processes with an optimized cost structure while maintaining the highest quality standards. In the regulatory affairs arena, Bachem supports its customers’ projects in clinical phases up to successful marketing with experience in worldwide drug approval processes that is unique in the industry.

Sustainability as a Guiding Principle

Sustainability as
a Guiding Principle

Bachem follows sound economic and ecological principles and complies with relevant international regulations. We take our social responsibility seriously by putting a higher priority on secure jobs and apprenticeships than on maximizing profits. Bachem is fully committed to the voluntary Responsible Care Program of the chemical industry. Safe workplaces and a careful handling of resources, as well as the avoidance of environmental risks, are a precondition for the long-term commercial success of our company.

Ausbildung – Investitionen in die Zukunft

EMPLOYEES

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Julie Risse
Business Development Manager, Bubendorf CH

“At Bachem, we have the opportunity to work in a very dynamic, fast growing and high-performing company. In the Business Development team, we are the first contacts with our customers and we continually strive to deliver the best service by leveraging Bachem’s quality, pioneering spirit and experience to bring customers’ projects to the next level in collaboration with our expert colleagues.”

Brian Osterwalder
Technical Writer, Torrance USA

“Bachem is venturing out into new markets and constantly strives to provide the highest customer satisfaction in the industry. The technical writing group is moving forward with new additions to the team to meet the increased demand. Together we can move forward and exceed all expectations.”

Gavin Noble
Chemist R&D, St. Helens UK

“At Bachem to maintain our position as the leading provider of peptides, we constantly strive for improvement. To this end we investigate new technologies and methodologies, using our unrivalled knowhow and experience to further optimize our existing processes.”

Andrea Grieshaber
Assistant Corporate Executive Committee, Bubendorf CH

“Bachem offers its employees a highly inspiring and dynamic working environment. This supports me in my daily work and motivates me to actively shape the company’s development and to maintain the momentum we have seen in recent years.”

Tim Tran
CDirector Engineering, Vista USA

“Sometimes life offers you a seat on an amazing journey to far away places where few have ever experienced, do not waste time and doubt yourself by asking what seat! Just ‘Move-It’ and get on, seize this opportunity and take a part in the next exciting journey of your life! The best moment is now! Use your skills, resources and time in order to improve yourself and start ‘keeping up the momentum’!”

Thierry Rausis
Production Chemist, Vionnaz CH

“It’s our view of things that makes all the difference: is the glass half empty or half full? Our optimism enables us to tackle present and future challenges. And our strong team spirit will help us to meet tomorrow’s goals even more easily.”

Chairman / CEO
Letter

Milestones
Review / Outlook

Key
Figures

The World
of Peptides

Letter to
shareholders

Dear Shareholders,

Bachem’s positioning as a Pioneering Partner for Peptides underscores our focus on the core peptides business with a commitment, based on unique expertise and a strong capacity for innovation, to being the best partner for successful execution of peptide projects of all kinds. Investments in additional modern production facilities at our US location in Vista, California, and in an automated high-bay warehouse at our headquarters in Switzerland will allow us to further expand our global leadership in the peptide market. With a planned local presence in Japan, the most important Asian market, we intend to take greater advantage of the dynamic growth in the Far East. In addition to organic growth, we will also review opportunities to further strengthen our position through selective alliances, acquisitions or portfolio expansions.

Even as the market and competitive environment remained challenging, Bachem hit sales and profit growth targets in fiscal year 2017 again. Dynamic growth continued in all markets, resulting in a 10.6% increase in sales. Sales of active pharmaceutical ingredients continued to develop favorably. The key business area of patented new chemical entities (NCEs), a key to future success, saw expansion in excess of 15%. As anticipated, Bachem also succeeded in significantly boosting operating profit in 2017. Profit from operations increased by 12.3% over the prior year while the EBIT margin reached 19.3%. Since operating potential is not yet fully exhausted at all levels, and especially at the Vista facility acquired in 2015, we expect further positive movement in revenues and profits in the coming years.

Our share price continued to rise in 2017. This is a strong incentive for us to continue delivering top performance with highly qualified and dedicated employees into the future. At the same time, we have no intention of losing our realistic perspective and will maintain strict cost discipline and carefully plan and execute necessary investments.

For the coming years, we are confident that sales in local currencies will continue to grow within the range of our long-term forecast of 6–10% per year. Profit growth takes precedence over sales growth. We remain strongly committed to expanding our leadership role in our core business of peptides and to being the pioneering partner for customers worldwide. In light of the results achieved, our continuing good prospects and financial stability, the Board of Directors will propose at the Annual General Meeting a dividend increase from 2.50 CHF to 2.75 CHF per share.

Key
Figures

  • > Table view
  • > Chart view
Sales
(IN MCHF)
EBIT
(IN MCHF)
Net Income
(IN MCHF)
2015
208.6
2016
236.5
2017
261.6
2015
2016
2017
2015
38.5
2016
45.1
2017
50.6
2015
2016
2017
2015
31.8
2016
41.2
2017
41.8
2015
2016
2017
Changes in %
 
2017
2016
CHF
LC
SALES (IN MCHF)
261.6
236.5
+10.6
+10.5
EBITDA (IN MCHF)
71.5
64.8
+10.4
+9.6
EBITDA IN % OF SALES
27.3
27.4
 
 
EBIT (IN MCHF)
50.6
45.1
+12.3
+11.1
EBIT IN % OF SALES
19.3
19.1
 
 
NET INCOME (IN MCHF)
41.8
41.2
+1.4
 
NET INCOME IN % OF SALES
16.0
17.4
 
 
EARNINGS PER SHARE (EPS – IN CHF)
3.08
3.04
+1.2
 
CASH FLOW FROM OPERATING ACTIVITIES (IN MCHF)
35.7
40.4
-11.5
 
RETURN ON EQUITY (IN %)
11.3
11.5
 
 
NUMBER OF EMPLOYEES (IN FULL-TIME EQUIVALENTS)
1 057
979
 
 
SALES PER EMPLOYEE 1 (IN CHF)
266 000
267 000
 
 
1  
Basis: average full-time equivalents excluding apprentices.

MILESTONES

Investments in the latest production technologies and process automation are key drivers of innovation in the peptide business. Again in 2017, Bachem has placed new equipment into service at all sites to expand the project portfolio. With continually improved production processes coupled with operational excellence, the company is cementing its market leadership.

PROGRESS REPORTS

LARGE VOLUME
PRODUCTION
IN CALIFORNIA

The high-volume active substance production facilities at the Vista, California (USA), location have been expanded and put into service. Concurrently, methods and chemical processes have been updated to meet Bachem’s highquality standards, and the workforce has been expanded and trained for operation in shifts. The complexity of the new facilities requires an especially high degree of specialization among the newly trained employees. New technology has been installed throughout the production chain to accommodate the industry’s largest freeze-dryer, not only enabling more cost-efficient and reliable large-scale production, but also providing customers with the benefits of enhanced flexibility and shorter delivery times. Further project-driven investments to optimize capacity utilization are already being planned.

ISO CERTIFICATION
AS MILESTONE
IN ENGLAND

Bachem’s Center of Excellence in production of Research Chemicals in St. Helens, UK, has benefited from the worldwide growth in demand for complex peptides for new applications in pre-clinical research. The investment in the latest production technology using automated synthesis equipment has enabled us to further increase productivity at the site. Thanks to systematic implementation of comprehensive quality systems, Bachem UK has obtained ISO certification. This milestone in the quest for top quality will facilitate our advance into the rapidly growing market for high-grade diagnostic and cosmetic peptides and further strengthen Bachem’s market position. To enhance performance for the future, additional production and analytical labs have been built and equipped with state-of-the-art instruments.

OPERATIONAL
EXCELLENCE
AND INNOVATION

Bachem’s commitment to always providing customers with the best solution requires continuous improvement in all aspects of the value chain. The Green Chemistry Award bestowed on Bachem by the US Environmental Protection Agency (EPA) for a jointly developed project underscores our dedication to also improving environmental aspects of production processes, ensuring that Bachem products are sustainable. Business processes have been harmonized to take advantage of synergies between the various sites and further increase flexibility for the rapid execution of customer projects. The research and development building at the company’s headquarters in Bubendorf, placed in service in 2016, has been continually upgraded to meet market needs.

Milestones Review

AN INTENSIVE AND SUCCESSFUL BUSINESS YEAR

PARTNER OF CHOICE

Bachem performed well amid persisting market challenges. As market leader with more than 45 years of experience in peptide synthesis and a steadfast focus on quality, Bachem serves its customers as a reliable and trusted partner.

HIGH DEMAND

Demand for peptide-based compounds continued to grow during the year under review, pushing both sales and the order backlog to record highs. In response, Bachem created new jobs and invested in additional production capacity.

QUALITY MATTERS

Bachem made specific investments in compliance and replacements to ensure unfailing compliance with the company’s high standards. Bachem’s commitment to quality and reliability in all dealings with customers is a key factor for its success.

EXECUTIVE BOARD ENLARGED

Dr. Alex Fässler was appointed as an additional member of the Executive Board effective April 1, 2017. As Chief Operations Officer (COO) he is responsible for the Group’s production sites worldwide.

OPERATIONAL EXCELLENCE

Bachem again achieved further efficiency improvements and cost savings during the past year. Efforts focused on integration and harmonization of internal processes, reducing complexity, process automation and consistent application of best practices. The groupwide rollout of a new enterprise resource planning (ERP) system was a further driver in the company’s successful advance.

GREEN CHEMISTRY AWARD

Together with a customer, Bachem accepted the Greener Reaction Conditions Award at a National Academy of Sciences ceremony in Washington, D.C. The award was given to recognize the development of a robust, costefficient and environmentally friendly manufacturing process for a peptide compound with regulatory approval.

These accomplishments are a striking testimony to the possibilities of combining green chemistry, efficiency enhancement and cost optimization.

CAPACITY EXPANSION IN THE UNITED STATES

Through focused investments in production capacity and by strengthening the organization, Bachem was able to optimize utilization of its available potential in the United States. Despite the negative impact of delays and expansion work, Bachem more than doubled the sales contribution of its Vista, California plant, over the previous year.

ASIA AS GROWTH MARKET

Following a strong 2016 with gains of around 69%, business in Asia grew more than 41% in 2017 – well above the average figure again. Asia continues to offer great growth potential for the long term.

MILESTONES OUTLOOK

KEEPING UP THE MOMENTUM

INTO THE FUTURE WITH ELAN

Bachem focuses on quality, innovation and partnership and invests continually in the future. Standing still and resting on our laurels is never an option. With a commitment to getting even better, the company cultivates a forward-looking culture of performance designed for sustainability. From a position of strength, Bachem continuously reviews expansion opportunities in new markets and technologies and in carefully chosen strategic alliances.

QUALITY, INNOVATION AND PARTNERSHIP

Beyond high demand and a strong order book, Bachem anticipates trends and market demands as sources of future growth in its strategy and planning. As market leader, Bachem aspires to set new industrywide standards for quality, innovation and partnership.

PRESENCE IN ASIA

As a key pillar of Bachem’s growth strategy, Asia is a uniquely dynamic region, already accounting for 14% of the Group’s total sales in 2017. In response, Bachem plans to establish a subsidiary in Japan. Preparations are already nearly complete. The move strengthens Bachem’s presence and activities in a region with clearly exceptional growth potential.

CAPTIVE BUSINESS

As market leader, Bachem combines quality, reliability and expertise. As an exchange-listed corporation, Bachem offers the necessary size and transparency, offering pharmaceutical companies a viable alternative to in-house production of active pharmaceutical ingredients.

INTERVIEW
DR. JOSÉ DE CHASTONAY
DR. ANNE-KATHRIN STOLLER

Dr. José de Chastonay, CMO (June 2012–31.12.2017)
Dr. Anne-Kathrin Stoller, CMO (as of 1.1.2018)

How does Bachem keep its edge as market leader?

José de Chastonay: Bachem continues to uphold its trailblazer status through ongoing development of peptide chemistry and advances in automation for maximum efficiency. This keeps us competitive and enables us to meet our customers’ expectations of top quality.

Getting down to brass tacks, what makes Bachem so unique?

JC: Customers value our quality and our commitment to partnership. Bachem stands out from the competition through expertise in chemistry and dependability in project execution. Our slogan, “Pioneering Partner for Peptides”, communicates these strengths.
Anne-Kathrin Stoller: Especially in project execution, Bachem has expanded its capabilities in recent years and developed considerably as a company. This is something our customers value greatly and is part of how we’re making sure we can live up to our slogan.

What makes Bachem the “partner of choice”?

JC: It’s about much more than the product itself. We don’t just sell peptides, we support our customers in a close partnership from product development to approval. We’re not just dealing with chemical and analytical issues but also validation of computer systems, industrial hygiene and regulatory requirements. Customers value our strong expertise, our long experience, and our absolute reliability.
AS: Along with our unique know-how when it comes to innovative and efficient manufacturing of peptides, Bachem also offers a lot more. Bachem is a knowledgeable advisor for customers in all phases of drug development. We are there for our customers, providing support and contributing our experience for each of over 150 NCE development projects, from the pre-clinical stage to market approval.

What opportunities and challenges do you see for Bachem in entering new markets?

JC: The peptide market remains very dynamic. There are still a lot of peptide projects in progress. Bachem is providing the efficient infrastructure to complete them. This takes long-term planning and the will and capability to invest.
AS: Entering new geographic markets is both an opportunity and a challenge. Bachem is a company which operates worldwide. We sell our products and services in very many countries around the world. That means knowing and respecting the unique aspects of new geographical markets. We have to weigh potential against expense and be able to identify the right moment.

Bachem pursues a systematic quality strategy. Does that still win points in global competition?

JC: Absolutely, especially in the pharmaceutical industry, where regulatory requirements play a very important role.
AS: A company like Bachem can only be successful in the long term with a systematic quality strategy. It’s about much more than the quality of the actual products themselves. The quality has to be right in every area, such as project execution and communication with our customers. Systematically bringing our quality commitment to life gives us a decisive competitive advantage.

The world
of Peptides

COSMETICS

Peptide-based agents are used in top-end personal care products, for example as ingredients in antiaging products that promise to reduce wrinkles.

NUTRITION PRODUCTS

The artificial sweetener aspartame is a dipeptide that is 200 times sweeter than table sugar. It is an important agent in diabetology.

CANCER THERAPIES

Peptides are useful in oncology both in diagnostic imaging procedures and for treatment purposes.

What are Peptides?

Peptides are chains of 2 to about 100 amino acids. Longer chains are called proteins. Peptides are organic compounds made up of natural amino acids in living organisms. Originally isolated from biological sources, they are synthesized chemically today. The biological properties of peptides depend on the number of amino acids involved and their position in the chain. The 20 natural α–amino acids are sufficient to form the basis for an unimaginably large number of peptides, each with their own distinctive physical, chemical and biological properties.

WHAT ARE PEPTIDES USED FOR?

Peptides are mainly used as highly active and highly specific drug substances. In keeping with the diversity of their biological functions, they are used in an extensive range of therapeutic areas. Oncology, diabetes and obesity are three prominent examples of therapeutic areas in which peptides generate billions of dollars in revenues. Peptides are much in demand in the treatment of cardiovascular and neurodegenerative diseases, renal failure, as antibiotics, in vaccines and in drugs for rare diseases (orphan drugs).

AVAILABLE DOSAGE FORMS

Peptides taken orally would undergo rapid breakdown in the digestive system and would therefore be unlikely to reach their target organs. Peptide-based drugs are usually administered by the parenteral route for that reason. In addition to conventional injections, implants with durations of action ranging from a matter of days to months and nasally delivered drugs are increasingly becoming available. Research and development activities are ongoing on sublingual and transdermal dosage forms and drug delivery using nanoparticles for transport.

BACHEM SPRING SYMPOSIUM 2017

The seventh Bachem Spring Symposium was held in Basel in 2017. This year’s event was the continuation of an impressive success story, highlighting the importance of the symposium for the exchange of scientific ideas on innovative chemical methods and application of Bachem products and bringing together the right people from the industry and research sectors.

The Symposium’s remarkable agenda once again underscored Bachem’s pioneering role in peptide and amino acid chemistry. This year’s program addressed the latest peptide analysis technologies and featured scientists and business leaders as speakers.

As in previous years, the day began with a tour of Bachem’s state-of-the-art production facilities and analytical laboratories at the Bubendorf plant. This was followed by the scientific portion of the symposium in Basel with over 30 guests from the worlds of business and science.

Dr. José de Chastonay and the moderator, Prof. Helma Wennemers, opened the proceedings. The audience heard presentations by Prof. Wolfgang Lindner (Lindner Consulting GmbH) on stereoselective separation methods for amino acids and small peptides and from Dr. Dan Bach Kristensen (Symphogen) on using mass spectroscopy for peptide quantification and pharmaceutical development.

Dr. Wendy Winchester (Takeda) spoke on the significance of biological test procedures in drug development, and Dr. Astrid Pappenberger (Roche) gave a presentation on challenges in formulating therapeutic peptides. According to Dr. Pappenberger, close teamwork, a reliable production process and robust analytical methods are the keys to successful drug formulation, bolstering her arguments with six very different case studies.

Dr. Tobias Hauck, Head of Quality Control at Bachem Bubendorf, gave the final presentation on Bachem’s quality strategy for pharmaceutically active peptide substances. Bachem has implemented a “holistic” quality strategy for pharmaceutically active peptide substances to meet ever-stricter targets in the context of an ever-growing number of projects. The entire spectrum of in-house analytics is gathered under the Quality Control umbrella (Figure 1). In addition, the latest analytical methods are used in each application case, as Dr. Hauck illustrated using various examples. With some 30 post-doctoral scientists and a laboratory staff of over 90 in Bubendorf alone, Quality Control is one of the absolute key units at Bachem, guaranteeing the exceptional quality of the company’s products every day.

A shared dinner at the close of the Symposium gave this eclectic group of experts from a wide range of disciplines, who would rarely get the chance to meet in the course of their everyday work, an opportunity to exchange ideas.

We owe a debt of thanks to the organizers, moderators, and all who participated for making this valuable symposium possible.

The world
of Peptides

SPRING SYMPOSIUM TOPICS THROUGH THE YEARS

ANALYTICAL
DEVELOP-
MENT/VALIDATION

RELEASE
TESTING
RAW- AND
STARTING-
MATERIALS

IPC &
TROUBLE
SHOOTING

RELEASE
TESTING GMP
MATERIALS

STABILITY

QC CONCEPTS, INTERNAL GUIDELINES AND PROCEDURES, TECHNICAL REPORTS, PROJECT MANAGEMENT

QC STAFF, ANALYTICAL TECHNOLOGIES, IT SYSTEMS

BACHEM’S
360° BUSINESS MODEL

RESEARCH

Bachem offers the world’s largest collection of amino acid derivatives which are used by customers interested in manufacturing peptides. Also solid phase supports for peptide synthesis are available. Other essential product lines are bioactive peptides, enzyme substrates and inhibitors as well as some organic molecules. New products are added to maintain an innovative touch. Strong emphasis is placed on quality.

PRECLINICAL DEVELOPMENT

During preclinical development, lead finding and lead optimization require large panels of peptides. These are generated as custom synthesized molecules for customers around the world. Frequent consultation with Bachem experts allows further refining of target compounds. As such, a clear partnering aspect is required to come up with pioneering concepts and molecules to bring into clinical development.

CLINICAL DEVELOPMENT

When clients have selected their lead compound, they commence clinical trials. It is a decade-long process to approval of the drug. During this time, there is a close collaboration to learn more about the product. Each production step is scrutinized and manufacturing reproducibility strived for. Scale-up and full control of the process is targeted. Validation and control of the process is the end result of an intense partnership.

PEPTIDE DRUGS

The responsibility to manufacture sufficient drug substance rests on the shoulders of the Contract Manufacturing Organization. This can only be done by being extremely reliable and also by coordinating activities closely with our partners. Forecasting the quantity needed is extremely difficult, especially for new drugs where the commercial success has not been proven. Hence, responsiveness to customer needs becomes paramount.