TOGETHER
WE LEAD

ACHIEVING
THINGS
TOGETHER

ACHIEVING
THINGS
TOGETHER

Setting the course together, pursuing the goal with passion and drive, creating unique outcomes, and establishing something pioneering, meaningful, and of lasting benefit from both a commercial and social perspective. For Bachem, “Together we lead” embodies this attitude and a determination to lead together, and to act successfully through shared commitment and with pooled resources while at the same time thinking and acting in a holistic and partnership-based way. Leading through passion.
Together We Lead

CREATING
NEW
THINGS
TOGETHER

CREATING
NEW
THINGS
TOGETHER

Generating enthusiasm for shared projects and tackling and mastering challenges as a team are key success factors. Accordingly, all areas and disciplines work toward shared targets and connect seamlessly in order to offer the customer bespoke solutions, products, and services. The final result of this approach is what showcases Bachem’s competitiveness and its uniqueness. Underpinning all this is the conviction that “the whole is greater than the sum of the parts.” Leading through teamwork.
Together We Lead

CREATING
PARTNERSHIP–
BASED
VALUES

CREATING
PARTNERSHIP–
BASED
VALUES

Seeing and presenting herself as a “Pioneering Partner” is both an ambition and an obligation for Bachem. This means dedicating ourselves to our customers with enthusiasm and total dedication day in, day out, actively seeking exchanges of views, listening, and being prepared to go the necessary extra mile to deliver the best possible solution. In addition, “quality matters” means acting both with and for the customer in a forward-looking, circumspect, reliable, and sustainable way. Leading through partnership.
Together We Lead

NET–
WORKED
PROGRESS

NET–
WORKED
PROGRESS

Those who want to be and remain the best – and those who want to lead the way – need to foster multiple joint undertakings, networks, and partnerships. Inspiring exchanges with researchers and in-depth dialog with industry experts are crucial if the latest trends are to be identified at an early stage and key developments anticipated. A strategically oriented, stable and secure network of suppliers and partners – thanks to which Bachem can guarantee the ultimate quality throughout the entire value creation process – is proving a solid basis for lasting success. Leading through networking.
Together We Lead

Letter to
shareholders


Dear Shareholders,

As the “Pioneering Partner for Peptides,” Bachem is the clear market leader in the field of peptides. Our aim is to hold and expand this position through top quality and innovation. In a constantly challenging market and competitive environment, Bachem again achieved its sales and profit growth targets in fiscal year 2019. We systematically invested in future growth and created new jobs at all of our locations worldwide.

Sales growth for the year as a whole was 11.0%. Sales of active pharmaceutical ingredients (APIs) continued to develop encouragingly. This product category consists of new chemical entities (NCEs) and generics and saw growth of roughly 10%. In 2019 Bachem again succeeded in significantly increasing operating profit, which gained 13.8% over the previous year. The EBIT margin reached 19.9%. Bolstered by the one-time effect of the Swiss tax reform, net profit rose by 16.1% despite negative currency effects.

As a worthwhile complement to the core peptides business, Bachem achieved initial success in the newly entered field of oligonucleotide APIs in 2019 – an area we first entered the year before. We are confident that in the coming years we will be able to build an oligonucleotide project portfolio on a par with the peptide pipeline, thus creating a second pillar for the Bachem Group in the medium term.

Based on the company’s strong market positioning and increasing demand, the Board of Directors and the Corporate Executive Committee are expecting Bachem to break through the 500 million CHF sales barrier over the next four to five years. Priority will continue to be given to profit growth over sales growth. We are striving to achieve a sustainable EBITDA margin of 30% by 2021. We intend to further improve earnings, not least thanks to efficiency enhancements through implementation of new digitalization and automation projects. In order to facilitate the targeted growth, we will be investing some 300 million CHF in our various locations over the next five years, of which more than half will be channeled into further capacity expansion, and will create additional jobs.

Based on the results we have achieved, our continuing good prospects and financial stability, the Board of Directors will propose at the Annual General Meeting that the dividend be raised from 2.75 CHF to 3.00 CHF per share.

Key
Figures

  • > Table view
  • > Chart view
Sales
(IN MCHF)
EBIT
(IN MCHF)
Net Income
(IN MCHF)
2017
261.6
2018
282.5
2019
313.7
2017
2018
2019
2017
50.6
2018
54.8
2019
62.4
2017
2018
2019
2017
41.8
2018
46.6
2019
54.2
2017
2018
2019
Changes in %
 
2019
2018
CHF
LC
SALES (IN MCHF)
313.7
282.5
+11.0
+10.8
EBITDA (IN MCHF)
87.2
77.9
+12.0
+12.3
EBITDA IN % OF SALES
27.8
27.6
 
 
EBIT (IN MCHF)
62.4
54.8
+13.8
+14.3
EBIT IN % OF SALES
19.9
19.4
 
 
NET INCOME (IN MCHF)
54.2
46.6
+16.1
 
NET INCOME IN % OF SALES
17.3
16.5
 
 
EARNINGS PER SHARE (EPS – IN CHF)
3.91
3.43
+14.0
 
CASH FLOW FROM OPERATING ACTIVITIES (IN MCHF)
64.3
25.8
+149.3
 
RETURN ON EQUITY (IN %)
13.0
12.3
 
 
NUMBER OF EMPLOYEES (IN FULL-TIME EQUIVALENTS)
1 209
1 097
 
 
SALES PER EMPLOYEE 1 (IN CHF)
282 000
271 000
 
 
1  
Basis: average full-time equivalents excluding apprentices.

PROGRESS
REPORTS

US Flag

BROADENED PRODUCT PORTFOLIO

The product portfolio for both the Torrance and Vista sites in California has been broadened by effectively capturing new projects. With a clear focus on GMP compliance and utilization of Bachem’s robust Chemistry Manufacturing and Control (CMC) development approach, the sites have successfully delivered these new projects, fulfilling customer expectations in an increasingly demanding and dynamic US market for NCE products. Also to meet the growing expectations of both customers and regulatory authorities, 2019 saw the introduction of a harmonized industrial hygiene program at both manufacturing sites. With growth of the expanding NCE product portfolio, investments have been initiated in Torrance to increase capacity within the existing manufacturing footprint via automation for increased output and efficiency. Operational Excellence improvements and optimized production planning have provided streamlined processes, optimized utilization and lowered manufacturing costs.

Switzerland Flag

EXCELLENT CAPACITY UTILIZATION AND CAPACITY EXPANSION

The Swiss manufacturing sites in Bubendorf and Vionnaz enjoyed an excellent capacity utilization, especially in the second half of 2019. New Chemical Entities and Generic manufacturing was at a record level. To keep pace with demand, shift work schedules were extended at the Bachem Bubendorf and Vionnaz sites. It was very rewarding to see that both sites were substantially contributing to the excellent results. In Bubendorf, oligonucleotide manufacturing infrastructure was installed and the first oligonucleotides were successfully manufactured. Also, state-of-the-art Laboratory Information Management System (LIMS) was introduced, rollout of the LIMS to other manufacturing sites is in preparation. In November, the ground-breaking ceremony for the extension of the GMP manufacturing building to add state-of-the-art manufacturing space and equipment for operations took place in Bubendorf. And at the Bachem Vionnaz site, additional large scale equipment is added to make optimal use of the existing buildings and infrastructure.

UK Flag

CONTINUED FOCUS ON PEPTIDES FOR IN VITRO DIAGNOSTICS

Successful transition to the current version of ISO 13485 standard continues to benefit all customers, specifically those using Bachem peptides in their in vitro diagnostic kits. Further investment in state-of- the-art manufacturing technology increased capacity and reduced delivery times. The introduction of a new fully automated powder dispensing system enabled accurate and efficient aliquoting of finished products including peptide sets with short lead times and full compliance. Implementation of lean manufacturing principles across the site has resulted in significant efficiencies with benefits that will continue to be realized in future years. Together with previous expansion, the Bachem St. Helens Center of Excellence is ideally positioned to continue to fully support all customers in the research chemicals sector.

Japan Flag

GAINING MORE GROUND IN ASIA

Our highly motivated team continued to serve the local Asian markets in 2019 at their second year into Japan. In April 2019, Bachem Japan K.K. moved from Shinagawa to new offices in the well known Nihonbashi area. Nihonbashi is a business district of Chuo, Tokyo, which grew up around the bridge of the same name. Nihonbashi is also the home of major pharmaceutical companies’ headquarters so Bachem is well positioned there in direct proximity to customers. Our team will continue to expand our business and keep an excellent network in the industry. For this reason, we also expanded our team in Tokyo by adding an additional Business Development Manager. We strive to keep our number one position in Japan and continue to strengthen our position for the rest of Asian countries such as South Korea, Taiwan, and China.

Milestones Review

RECORD YEAR POINTS TO INCREASING GROWTH DYNAMICS

SUCCESSFUL CAPITAL INCREASE

Bachem successfully carried out a capital increase during the first half of 2019, issuing 400 000 new shares at an issue price of 120.00 CHF each. The subscription ratio amounted to 34:1, i.e. 34 existing shares or subscription rights gave the holder the right to acquire one new share during the subscription period against payment of the subscription price. Although the issue price was higher than the stock market price when the capital increase was announced, the take-up ratio of existing shareholders nonetheless amounted to some 85%. Major shareholder Dr. h.c. Peter Grogg and Ingro Finanz AG also participated fully in the capital increase. Thanks to this issuance of new shares, Bachem Holding AG raised the gross sum of 48 million CHF, which was wholly channeled into financing the company’s growth strategy and further strengthening the balance sheet structure.

LIGHTNING START FOR OLIGONUCLEOTIDES

Based on promising market analyses and specific customer inquiries, Bachem started to position herself as a supplier for the development and production of oligonucleotides as drug substances. It quickly became apparent that both demand and interest for the new offering were even greater than originally anticipated. Bachem got off to what can only be described as a lightning start to its entry into this market segment. The new team of specialists had barely become operationally ready and the necessary certification had only just been obtained for the additionally required equipment when the first customer orders were ripe for execution. Assuming this momentum persists, management is expecting rapid expansion of its market share and an increasing sales contribution.

NORTH AMERICA EXHIBITS STRONG GROWTH

In North America, sales recorded growth of around 30% in 2019, following on from growth of almost 37% the previous year. This region increased sales by some 36 million CHF in 2019, achieving a new annual sales record of more than 155 million CHF. The main reason for these extremely pleasing sales figures was once again the very good development of key NCE and generics projects. Bachem was able to successfully support a number of different products simultaneously in their submission or approval. This was particularly true of generics, which were successfully brought to market with innovative new dosage forms. In a parallel development, Bachem also increased the sales of existing products.

FOUNDATIONS LAID FOR EXPANSION OF PRODUCTION CAPACITY

In November 2019, the traditional ground-breaking ceremony kicked off the next company expansion project at the Bubendorf site in Switzerland. The building of an extension adjoining the company’s largest existing production building will create additional space for capacity expansion. The transfer of production-related but not front-line manufacturing activities to the newbuild will free up additional space in the production building for the new manufacturing facilities needed for the company’s further growth. This will have the effect of optimally utilizing the existing infrastructure while at the same time supporting compliance with industrial hygiene regulations. This building project is the first step in the planned development of the site and the significant expansion of production capacity.

MILESTONES OUTLOOK

“TOGETHER WE LEAD” AS FOUNDATION FOR A SUCCESSFUL FUTURE

Given the excellent results and the promising market outlook, Bachem is currently in the midst of a dynamic growth phase. The company is creating new jobs and expanding the capacity on an ongoing basis so that it can seize these growth opportunities. The associated challenges require close coordination between all specialist areas and partnership-based collaboration with all stakeholder groups. The aim is to lead the company into a successful future together.

APPROVALS

Following a number of successful approvals in the reporting period and given the broad project portfolio, the company is anticipating being able to provide successful support to the customers over the next few years too in their submission and market launch of new NCEs and generics. Further approvals could be issued as soon as next year.

OLIGONUCLEOTIDES

The momentum accompanying the company’s entry into the oligonucleotide market is promising. The demand for producers of drug substances is much greater than the existing supply. Bachem is anticipating growing interest in oligonucleotide-based drugs and an increasing number of the corresponding development projects. The Group will continue to work on the build-up of its project portfolio, with further investment in the corresponding facilities. Bachem will be offering capacity for the production of commercial drug substance quantities from 2021 onward. In the medium term, the company is seeking to achieve a market position in the “Top 3” of oligonucleotide CDMOs. This new product category is to be expanded to become a parallel mainstay of our business alongside peptides.

CAPACITY EXPANSION

The company is expecting sales in excess of 500 million CHF in four to five years’ time. To facilitate this growth, Bachem will be investing around 300 million CHF over the next five years. More than half of this sum will be channeled into capacity expansion.

INTERVIEW
DR. GÜNTHER LOIDL

Dr. Günther Loidl, CTO

Innovative strength has been a cornerstone of Bachem’s business success since the founding nearly 50 years ago. A new innovation management system will further heighten the importance of innovation in the future.

What does «innovation management» mean to you?

Dr. Günther Loidl: Bachem Innovation Management is part of a comprehensive approach spanning every business unit. In accordance with the corporate strategy, we are generating the necessary space and implementing lean structures and processes to improve the flow of new ideas within the organization. The most important basis for innovation is a corporate culture which is positive and open to change.

How is Bachem strengthening its innovation culture? What elements need to be in place?

GL: Each and every Bachem employee is allowed and encouraged to be innovative. We want to get our employees excited about innovation and raise awareness of the importance of innovation for our future success. We will open up the space where ideas can be generated and provide the necessary resources to support their implementation. We recognize the best suggestions, implement improvements, and celebrate important advances together. We clearly communicate our goals and empower our employees through coaching and mentoring along with focused education and training.

Do you innovate strategically, following a roadmap? How does that work?

GL: Our innovation management system is built on three pillars. A strategic team continually collects ideas for improvements in our production technology. The key areas here are chemical knowhow, automation of our production processes, and developing and improving machinery and equipment. At the same time, we continually analyze our business processes and implement digital solutions in a focused way along the entire value chain. The third element consists of a broad initiative to promote continual improvements in all business units and across all hierarchy levels.

Where do you find innovation triggers? Do you work on an interdisciplinary basis?

GL: A number of very valuable improvements in recent years have been based on ideas from our employees. Our technology scouting program also conducts strategic searches outside the organization. We often get key ideas from our customers. The legal and regulatory environment is also an important driver. And finally, we collaborate with academic groups on breakthrough solutions such as using artificial intelligence to identify optimization potential in production processes.

Can you give us some examples of recent strategically important Bachem innovations?

GL: Since many of our active ingredients are highly biologically active, developing sealed trays for product containment during freeze-drying was a very important win for protecting our employees’ health. We are currently developing a fully automated peptide synthesis system in-house. This will enable us to expand production capacity while also cutting costs. We protect intellectual property such as production processes with a strong and properly focused patent portfolio.

How do you see things developing around the world as a whole? Who will be tomorrow’s innovation leaders?

GL: The successful businesses in the future will be those that spot global trends early and develop effective and efficient solutions across disciplines. Digitalization and artificial intelligence are opening up new opportunities in data collection and analysis, which will facilitate better decision-making and enhance entrepreneurial agility. At the same time, the human factor is becoming an evermore important focus of our thinking and interaction with our customers and partners. In our industry in particular, the goal of all innovation is to better serve the customer.

The World
of Peptides

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 -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.

COSMETICS

Peptide-based agents are used in top-end personal care products, for example as ingredients in anti-aging 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

BACHEM SPRING SYMPOSIUM 2019

Bachem’s traditional Spring Symposium under the headline “Antimicrobial Peptides: Resistance is Futile” took place in the Hotel Victoria in Basel on April 4, 2019. With the annual Spring Symposium Bachem continues a long tradition of bringing together international scientists and to contribute to the development of peptide based active ingredients.

Dr. Anne-Kathrin Stoller, Chief Marketing Officer at Bachem, welcomed numerous international guests from the industrial as well as from the academic sector and gave the introductory speech. Prof. Dr. Helma Wennemers (ETH Zurich, Switzerland) moderated the event.

Resistances of bacterial strains against classical antibiotics are a growing threat to public health. Scientists all over the world are doing research to overcome this threat. One approach is the use of antimicrobial peptides (AMP). The lectures gave an insight to current research with AMPs, examples for such in development and clinical or preclinical phases and the challenges in GMP manufacture.

One of the challenges with AMPs is that their antimicrobial activity frequently comes along with hemolytic activity. Prof. Dr. Kai Hilpert (St. George’s University in London, United Kingdom) is progressing his work by building up peptide screening libraries to find compounds with the first activity but lacking the latter one. He showed that AMPs have modes of action which are different from those of classical antibiotics.

With the lead compound Aspidasept®, Prof. Dr. Klaus Brandenburg (Forschungszentrum Borstel, Germany) described an approach to overcome sepsis as complication after treatment with antibiotics. The release of bacterial toxins after treatment with antibiotics leads to the release of cytokines in the immune cascade, which again lead to sepsis. The target of Aspidasept® is not killing of bacteria, but the neutralization of the inflammation-inducing bacterial toxins.

In his very enthusiastic talk about their unique mode of action compound OMN6, Dr. Niv Bachnoff (Omnix Medical Ltd., Israel) presented promising results about antimicrobial activity against the multidrug resistant Acinetobacter baumanii without cytotxic, hemolytic or other adverse effects.

Dr. Daniel Knappe (EnBiotix GmbH, Germany) presented linear peptide antibiotics (LPA) as novel highly potent and save therapeutics with a unique intracellular mode of action. They can freely enter bacteria, bind to ribosomes within the cells and inhibit protein translation. Protein synthesis, crucial for the cell, is inhibited.

Dr. Daniel Obrecht (Polyphor AG, Switzerland) described the mechanism of outer membrane protein targeting antibiotics with Murepavadin as the first member of this class. This compound is in late stage development for the treatment of Pseudomonas aeruginosa infections. It is pathogen specific and has a low resistance potential.

It was interesting to see the manufacturing challenges for Murepavadin, described by Dr. Stefan Eissler (Bachem AG, Switzerland), and the way Bachem successfully developed a scalable, safe and commercially viable GMP manufacturing process. Bachem has been able to prove its expertise and the “Pioneering Partner” approach in this project.

The lively questions and answers after each talk have been continued during the aperitif and dinner, which had been offered in Hotel Victoria’s top floor dining room with a great view over Basel.

BACHEM’S
360° BUSINESS MODEL

PEPTIDE DRUGS

Assuring commercial supply
Managing logistics
Adhering to regulations
Meeting customer expectations

BIOTECH COMPANIES
PHARMACEUTICAL COMPANIES

RESEARCH

Over 5 500 products
Made in-house
Available from stock
Ordered through webshop

UNIVERSITIES
RESEARCH CENTERS
INDUSTRY

CLINICAL DEVELOPMENT

Optimization of processes and analytics
Development of formulations
Scale-up, validation and fill finish
Project management through partnership

BIOTECH COMPANIES
PHARMACEUTICAL COMPANIES

PRECLINICAL DEVELOPMENT

Custom synthesis services
Assistance in drug discovery
Characterization of by-products
Conducting stability studies

BIOTECH COMPANIES
PHARMACEUTICAL COMPANIES

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.