Ypsomed Holding AG

SIX:YPSN

Q2-2026 Earnings Call

[Sam Ghezelbash, executive]

Good morning. Welcome, everyone, to Ypsomed Half Year Results 2025-2026 Earnings Conference call. Today, with CEO, Simon Michel; and CFO, Samuel Kunzli, we would like to go over our first half year results. We'll go over the key achievements and the financial drivers for this first half year. After a short presentation, we will open the floor to questions. Thank you for joining us again, and a warm welcome to all.

Without further ado, I'll pass on then to Simon. Please.

[Simon Michel, executive]

Thank you very much, Sam, for introduction. Good morning, everybody. Great to take the time for us here this morning. We have great results. You have seen it this morning. Let us deepen it. I will do a channel overview and then hand over to Samuel for the financials. And as you know me, I always start with our purpose. This is why we get up every morning. Ypsomed is making self-care simpler and easier. And those 4 are our structural growth drivers, therapy go home, drugs have to be injected, more and more biosimilars are available, and the large new class of GLP-1 incretins that is giving Ypsomed a strong push.

So we profit a lot. We have a lot of tailwind that supports Ypsomed in its growth. And we are really well set up. Ypsomed is a pure-play injection specialist. We are a leader in innovation. We have our operations under control, and we have very robust financials. I will deepen now with you the first 3 pillars, and then Samuel will go with you through the financials.

Let me start with the injection specialist focus. As you all know, we have done our homework. We have finished the transformation after 3 years, a very clear path, selling DiaExpert to Mediq in '23, selling Pen Needles to MTD in '24, selling Diabetes Care to TecMed this year, and selling Ypsotec last week to Callista. With that, Ypsomed is now really clear setup, really focused self-injection specialist, focusing on the high-profit, high-margin self-injection B2B business. So the new Ypsomed is a delivery systems only company. I will not further deepen the figures. I will leave that on to Samuel in a couple of minutes.

Innovation leadership. Ypsomed is strong with by far the broadest portfolio of devices, the auto-injectors to the left with the YpsoDose for larger volumes, the pens to the right and the digital assets. And as you may have read, we have received FDA approval as the first company at all with a digital device in America to support clinical studies, clinical trials with smart devices.

We're also very proud that we were able to launch and present 3 new platforms to the community in our industry, YpsoDot, YpsoFlow, and YpsoLoop. YpsoFlow is a FlexTouch-like device, it's a spring-driven disposable device for insulins for GLP-1s. YpsoDot is a GLP-1 optimized device, a click, very simple device. And YpsoLoop is the next-gen auto-injector. And what is in common for those 3 platforms is that they are all recyclable. They consist of 1 or maximum 2 different plastic parts. They used to have 7 different plastic types.

Now we are down to 2 different plastic types, and that makes them recyclable. And that's our new technological S-curve. And it gives us at least 4, not even 5 years of advantage towards competition. We are really, really much further now here in the new cycle. And big pharma biotech, they want to order devices that can eventually be recycled. So it's YpsoMate NetZero, YpsoMate Zero, the first version to reduce by 22% and YpsoLoop now is reducing 64%, remaining us at 85 grams of carbon equivalent. And this, of course, then in the end we can offset and will further work on in the recyclable scheme. So the main focus of Ypsomed on the innovation is sustainable devices for our pharma partners.

We have launched 12, 13 new products. We just mentioned 3 here. We are very proud to be the partner of Innovent with mazdutide. That's a GLP-1 incretin, the first of its kind in Mainland China. We had a very good start. We are producing both out of Switzerland and out of China now, and we will move, of course, the volumes there to deliver out of China 100%. We have a client for Alzheimer out of Japan, you may know, and we have a Japanese client here as well on a new innovative autoimmune therapy in the space of psoriasis. So very high-value drugs that we present here, especially in the 2.25 mL format.

I mean a very important topic probably is how we are set up. And you always hear Ypsomed's dependency on GLP-1s. We have indeed over 30 deals in the space of incretins and GLP-1s, absolutely. But they make only, at the moment, a small part, much less than 10%. Overall, we have not one client that is delivering more than 15% of revenue. And that's important. It will stay. Even in the foreseeable future, next 5 years, not one client will make more than 15%, and that's very important. So we don't have this clump risk, this risk of being too dependent on one client or one molecule, really broadly set up with 130 clients, 230 projects, 70 in the market, 160 in the pipeline. This is how Ypsomed is set up.

And this shows also -- this graph here how broad we are active. So we work in a large range of indications, in a large range of therapy areas, as you see here on this slide. Ypsomed is not a diabetes company. Ypsomed is not an obesity company. We are very broad. We are injection systems, injection therapy company. That's what we are doing for all kinds of therapies, and many more will follow in the coming years.

And Ypsomed is winning not only because of its unique platform portfolio, we are also winning because we do excellent service, because we pick up the phone after 3 times ringing, because we answer e-mails in 24 hours. It's the way we work with our clients, the way we listen, the ability to customize devices, but still have to manufacture on the same lines. So we have now a setup that really lets us to accelerate, really lets us to profit from what we have been installing over the past years.

Let me give you a couple of insights on the operations side. So what has happened? I mean the main topic, obviously, is our big plan to move to 1 billion device capacity to the end of this, beginning of next decade. 1 billion installed capacity. Today, we are at 350-ish million. So we'll almost triple the capacity in the coming 3 years. It doesn't mean that we will deliver 1 billion devices end of the decade, but we are ready to deliver, in a 5, 6, 7 days model, such volumes. And you see on this graph here where this is going to happen.

So Switzerland is remaining an important place. Switzerland here in Solothurn, we are moving old contract manufacturing out and we move new auto-injector YpsoMate in will still be a very important site with roughly 1/4 of the total volume. But the main site, obviously, is Schwerin with tripling our current installation, our so-called Schwerin 2 program. And then also China, Changzhou, which had an excellent start in the team there, and Holly Springs near Raleigh, which we are going to sign this week and then really start installing the factory.

So Ypsomed is becoming a much more global company. We have a footprint closer to our clients. This makes sense from a client perspective. It makes also sense from an ecological perspective. We have much less freight, much less cost on that end. So this is how Ypsomed is going to be positioned in the future, China for Mainland China, U.S. for North America, Switzerland and Germany for EU and rest of the world.

As I just mentioned, Solothurn remains a very important place. Diabetes Care business now moved out. So we have some office space left. We are going to fill that over the time. This is not the first priority. The main priority is manufacturing. We're installing a new high beam warehouse. We are installing a new tool shop, as you know, and we are installing tool lines for auto-injectors.

In China, we had opening in June, a great team, really ready, really proud. The team wants to succeed. They want to show us how it works. We want to learn from our friends in China. I have a very good feeling here that they will succeed.

In Germany, we had the topping-out ceremony with the Minister President Schwesig, a couple of weeks ago. You see here just a small glimpse on the new warehouse for 15,000 pallet places. This is now being built. It will be 40 meters high. It gives you an idea on how large this site will be, tripling basically in 2 phases, our current Schwerin 1 site, which is going to be full by end of '26.

And North America, in the research triangle, so we decided for North Carolina, a bit more south on the East Coast, a great area, fastest-growing state in America, Raleigh, third fastest-growing city in Northern America. Raleigh, the research triangle with most big pharma being very close to our site. Holly Springs, a small town. We are able to buy here, acquire a finished building, 15,000 square meters. It will take us now 18 months to install our equipment in to install first lines in and then to be live end of '27, deliver first devices '28 for our customers in America. It's very important that we have now this message out there since SHL also delivered the site in America. We are now also present, and that's important now that we are really close to our clients, and this is no longer an argument for our customers that we are not in America. So very proud we found that spot.

I was there last week. I have a very good impression. I met the Governor, I met many chancellors of universities. Also on the people side, with the community colleges, the apprenticeship programs they have, they acquire 150,000 people per year that move to North Carolina. So I believe we will have not an issue here finding good staff, well-educated people to ramp up our site in the course of '27.

My last slide before I hand over to Samuel, this gives you a glimpse on the people side. As you see here, we are still growing a bit in Switzerland, but the main growth is now happening, obviously, in our manufacturing sites in Germany and in China. And that will also be the case in the coming years. Switzerland will only grow slightly some specialty functions in R&D here and there, but the main growth of colleagues here is going to happen in Germany, China and then in 2 years in America. In Germany, we are going to move from 500 people to 1,000 people over the course of the next 3 years. So this is where the music is going to play. This is where we're going to manufacture, but we don't need more people in overhead, in admin, in R&D. So the main growth now is happening on variable side, on volumes, on factory side.

780 people, as you see here, moved out now last week. They are now part of the TecMed Group, roughly 250 in Switzerland and 500 in the countries. It's no longer part of the Ypsomed family, but many of them are nearby in Burgdorf.

So with that, I would like to hand over to Samuel, who will give you an insight on where we are on the financials and how we are set up financially. Samuel, please?

[Samuel Kunzli, executive]

Thank you, Simon, and a warm welcome also from my side. I will give you the highlights of the semiannual result in the next 10 to 15 minutes. Let's start with the top line. We reported sales of CHF 363 million in the first half year. On the left side, you see the breakdown. I do start with the green part, the Diabetes Care business. CHF 75 million of sales the infusion pump business realized in the months April to July. You remember, end of July, we had the closing of that business. Then CHF 21 million, that is in the red part, this is all discontinued operations, and this includes Ypsotec. You heard, we sold that business end of October. So in the first 6 months, that was fully included. This includes also still the phaseout of the Pen Needle and BGM business. And this includes now also what we started for Diabetes Care, the contract manufacturing for infusion sets and reservoirs.

Now let's focus on the core business, the remaining business, the delivery system business. Here, we had sales of CHF 267 million in the first half year. Let's deepen that. You see we grew from CHF 220 million last year to CHF 267 million, so a 21% top line growth in the core business. So we are on track with what we guided. You remember, we said we will grow in the core business around 20% in the business year '25-'26. What is especially a good sign and what I want to highlight is how the project revenues developed. We grew from CHF 43 million to CHF 52 million, so around 20% growth in the project business, pen and auto-injectors together. And that is a very strong signal that we have a good pipeline, because those project sales, so the clinical devices we sell, the customizing we do for our customers, they translate into midterm commercial sales, and this is the future then for the commercial sales.

Now the commercial sales, there we also had a very strong development. The main growth drivers were the auto-injectors. They grew by 46%. Now what did we earn? What did -- how does the profitability look? We reported EBIT in the first half year of CHF 152 million. And that EBIT is high. It needs some explanation because we had certain one-off effects. And I want to highlight that. Let's also have a look on the left side of this graph. The Diabetes Care business in those 4 months in which it was consolidated in our P&L made a loss of CHF 5 million. So that business was not yet breakeven.

Now in other, we report a profit on EBIT line of CHF 70 million. The main driver was the book profit we realized from selling the Diabetes Care business. This profit was CHF 75 million. Some of you expected a higher profit from this sale. We were reading numbers in your reports from CHF 90 million to CHF 100 million. Therefore, I want to explain why we have now the CHF 75 million profit.

One important factor, and we mentioned that when we sold the Diabetes Care business is the earn-out components. So the earnout depends on the sales of the business we sold for the next 3 years. When you value earn-outs in the balance sheet, you always have to assume an uncertainty, because the competition in that business, Insulet, Tandem, they are not sleeping. So from this total possible earn-out of CHF 90 million, you see that in our books, we took CHF 45 million in our books. The second point I want to mention why this profit is maybe not so high as some of you expected, have in mind, we sold a business which still was also at the closing not breakeven. So we had still minus CHF 5 million negative EBIT. And this, of course, does also not help for this book profit.

Now let's focus on the core business. In Delivery Systems, we earned CHF 87 million. This is an EBIT margin of 32.4%. Let's have a look now at how we make sure that we also grow and that we are profitable in the future. For that, we did the investments, and these are mainly growth CapEx. You remember, we have our growth plan to reach this 1 billion device capacity by the beginning of the next decade. For this, we want to invest around CHF 1.5 billion until end of the decade. This program, we started already last business year. Partially, this is financed also by customers. Have that in mind.

What you see here very well, we are on track with those investments, with the fixed assets. Simon showed you the investments we did in Schwerin. So from this CHF 126 million, the biggest part, roughly CHF 120 million went to the core business, to the Delivery System business. And yes, Schwerin is a very important side now we invest. We invest in Solothurn, but we invest also in China, in Changzhou. That were the main drivers on the fixed asset side.

The intangibles as well, we develop the future platforms, the pen, auto-injector platform, Simon showed you the YpsoLoop, the YpsoDot, and the YpsoFlow. And we have invested around CHF 20 million overall, roughly half of it is for the Delivery System business. When you compare that number with the previous year for the intangibles, you see that in the previous year, we capitalized CHF 39 million of intangible assets. And the main driver was that the Diabetes Care business in the previous year was 6 months included and was heavily investing at that time. So it's not that we invested less in R&D in the core business.

Now could we finance the growth CapEx with the operating cash flow? For this, we look now at the cash flow statement. Let's start with the operating cash flow. Again, have in mind, this is the operating cash flow for all the businesses, including the Diabetes Care and the discontinued operations. The CHF 130 million is for everything. If we just look at the core business, that number is even slightly higher. We would be above CHF 140 million cash flow we generate from the operations, and that is a very strong number.

Then the cash flow from investment activity needs an explanation, because you just saw we roughly invested CHF 150 million. So why net, we are here positive? The reason is we sold the Diabetes Care business and received a little bit more than CHF 300 million already now in cash. So that makes this cash flow from investment activity positive, roughly CHF 160 million. So the free cash flow, around CHF 290 million. So even if you take that extraordinary cash we got from TecMed for the sale of the Diabetes Care out, you see we are only slightly negative. So we nearly managed to finance with the operating cash flow, our growth CapEx. So having in mind that the operating cash flow from the core business is even a little bit higher. So we would nearly finance that with the operating cash flow.

What did we do now with this money? We paid back our short-term financial liabilities. So we deleveraged, and I'll come to that. So the net cash amount on our bank accounts end of September was roughly the same as it was end of March. Now since we are in a capital-intensive industry, we have to look also at our balance sheet. And for us, not only EBIT margin counts, for us counts the capital efficiency. And we measure that with the return on capital employed. And for us, a very important number is this ROCE in the core business. So we realized, again, the created value. We realized a ROCE of around 21% in the core business, and that shows that we create value for our shareholders.

Then the second point I want to mention, our balance sheet is very solid. We have an equity ratio of around 67% and the ratio, net debt-to-EBITDA from the last 12 months is 0.3x. So the last 12 months EBITDA was CHF 245 million, and that is a very high and important number. The last 12 months EBITDA, CHF 245 million. So as you see, we are well set. We are on track to finance that organic growth, growing up to 1 billion device capacity, investing in total this CHF 1.5 billion with some co-investment from customers, with our own cash flow and our own resources.

Now let's finally look forward. We confirm our guidance for this business year. I mentioned already the top line. We expect to grow around 20% with the sales with the Delivery System business. And the EBIT, remember, in the first half year, we had now CHF 87 million. So mathematically, we are not on half, but you need to have in mind that for us, typically, the second half year is stronger than the first half year. So we are also comfortable to reach that EBIT range between CHF 190 million and CHF 210 million.

In the last slide, I want to even look further in the future our midterm ambition. Many of you followed our Capital Market Day, and you saw our midterm announcement. We want to grow with our sales between CHF 900 million and CHF 1.2 billion. So that is basically when you look at the Delivery System sales of '24-'25, which was around CHF 500 million, that is basically doubling the top line. We want to reach between CHF 280 million and CHF 340 million of EBIT. We also want to clarify, so this time we wrote it also that the EBIT margin stays above the 30%. I last time only mentioned it in the oral way. So we want to really clarify this. This is our ambition. And the capital efficiency should stay on the level we have now, around 20% ROCE.

With that, I want to finish the presentation, and we want to open the floor for questions, and I give back to Sam.

[Sam Ghezelbash, executive]

Thank you, Samuel. Indeed, strong financials, great performance for the first half year. Simon as well, thank you for going over our key achievements.

[Sam Ghezelbash, executive]

We will now open the floor for questions. [Operator Instructions] So now we have on the screen, number one, Sandra, I believe that will be you. Please feel free to unmute and ask your questions.

[Sandra Dietschy, analyst]

I have 2 on the gross margin and one on the pen segment. I think maybe we go one by one. So first on the pen segment. Can you comment on the current growth rate of your pen business? You mentioned that commercial sales of the auto-injectors grew 46%. So the overall segment grew 21%. So that implies that commercial sales from the pens might have declined. Does that interpretation make sense?

And then what do you expect from this segment going forward, especially with the new platforms such as the YpsoFlow and YpsoDot that should support the pens midterm outlook? So that would be my first question on the pen segment.

[Simon Michel, executive]

So indeed, we have been flat on the pens. Maybe Samuel you can explain why this has happened, and then I can give a couple of comments on the new platforms.

[Samuel Kunzli, executive]

So it's the right observation, yes. So the pens were more or less flat. And have in mind with pens, there is quite a wide portfolio. So the pen sales are heavily driven by product and customer mix. But your observation is right. For now, it was flat. And the second part, when we look forward, yes, we assume a growth rate for the pens as well. But for you, it's fair to assume that the growth rate for the auto-injectors, also when you look midterm, will be higher than what we expect from the pens, but we expect also the pens to grow, especially having also our new platforms in mind. And Simon, please add from your side.

[Simon Michel, executive]

Sure. I mean the main growth on UnoPen is still happening, on the disposal pens is still happening on UnoPen. So we have new clients in China, and we have new clients in the Western world on GLP-1s. But those GLP-1s will only launch in '28, '29, '30. So these 3 years in between now, we are basically bridging with Chinese volumes. So this is going to start as of now-ish. Therefore, we are going to fill the capacity and then swap steadily with higher-margin Western products. That's for UnoPen. So this platform is still very much alive. YpsoDot and YpsoFlow are new platforms. We have presented them now at PDA and CPHI the first time. We are now discussing and starting the dialogue. So this is something we will see the first revenues in 3 to 4 years from now. It's a new platform.

[Sandra Dietschy, analyst]

Okay. Very helpful. Just to clarify, so the commercial sales were flat. You're not talking units, but rather sales?

[Simon Michel, executive]

There's a mix. We have also a couple of older products in pen, as you know, which declined a bit, but in total volumes on UnoPen, we had a slight increase. In Swiss francs, we were flat.

[Sandra Dietschy, analyst]

Okay. Super. And then my second question is on the gross margin. So the H1 gross margin has still been diluted by noncore segments, the 41%, I think it was. What would be a reasonable assumption for the gross margin of the core YDS stand-alone business? And how should we expect that to evolve given the factors such as price pressure and lower ASP from high-volume contracts, but then also potential efficiency improvement and positive mix effect from higher auto-injector shares. That would be very helpful to have some guidance there.

[Simon Michel, executive]

Gladly. I want to give you, let's say, calculating backwards view on how you can imagine that gross margin developing midterm. If we say midterm, the EBIT margin is still above the 30%. So then it's for you fair to assume that a little bit more than 10% will be needed for SG&A and R&D. So what you need to realize still is a gross margin of at least 45% that you still end up above the 30% EBIT margin, just ballpark numbers. And again, I tried to speak for a mix, auto-injectors, pens, project business, as you know, many factors influence that, but just to give you a rough idea on how we think of that number.

[Samuel Kunzli, executive]

Maybe a comment to the profitability since Sandra is asking on that. Yesterday, we have launched YpsoFit. It's a fitness program that we have rolled out over the whole company. We believe it's the right moment, not that we really are under pressure, but it's the right moment since Diabetes Care is leaving us now. So we see some potential for stranded cost improvements that we take out elements. We have 4 programs in the space of organization, space of procurement, IT data and systems. So this is a program that we rolled out in order to really also work on the cost, on the bottom line to achieve those margins.

[Sam Ghezelbash, executive]

Thank you, Sandra, for your questions as well. Now we'll move to the second person, Odysseas.

[Odysseas Manesiotis, analyst]

So my first question is on the Solothurn plant organization. Could you give us a feeling on the full year '26, '27 impact on the Delivery System sales growth and EBIT? I mean, is high single-digit growth for Delivery Systems likely in that year? Or am I being too conservative here?

[Simon Michel, executive]

I mean, I'm not sure just like the question, I got right. So for '25, '26, the Delivery Systems segment and which growth rate you were speaking?

[Odysseas Manesiotis, analyst]

'26, '27.

[Simon Michel, executive]

So '26, '27, we don't really guide there, but it will be a bit below. In the end of the day, we have those waves. We have also months sometimes. We cannot really predict. It depends a lot on a couple of large launches. We will talk more about it in May. But yes, in the end of the day, you have to see this 1 billion that we look at end of the decade. This is where we are heading to. And so it might be a bit -- a smaller one since we have now had a bit of stronger one on the 20% area. Overall, we will be in this 13% to 17% growth, right? And so it can be a bit softer one. We have certain indications, but for us, the important element is the 2028, '29 time frame where we are heading to.

[Samuel Kunzli, executive]

And if I may add to that one, Simon correctly said, look, we have this 1 billion you see midterm, which is the midpoint of that guidance, which implies this 15% CAGR year-on-year top line. And when we look now at next year, of course, the launches, the individual contracts, but one important factor you need to have in mind, we have also the phaseout of the contract manufacturing, which is going to end next business year. So just roughly from that, not having this contract manufacturing business within the Delivery Systems. So if you just have CHF 20 million, CHF 30 million of sales less from that, this automatically gives you a lower top line growth rate. But as Simon said, we will do the guidance for '26, '27 when we present the annual results in May '26.

[Odysseas Manesiotis, analyst]

Understood. Very clear. And my second question, have there been any changes to your Novo agreement announced in September '23 in light of the CagriSema readout in Q4 and given some pipeline reorganization with the company?

[Simon Michel, executive]

No. Zero change. We are fully on track installing the capacity here in Switzerland and in Germany, everything is on track.

[Sam Ghezelbash, executive]

And now we'll move to Daniel Jelovcan.

[Daniel Jelovcan, analyst]

Hello, do you hear me?

[Simon Michel, executive]

Yes.

[Daniel Jelovcan, analyst]

Excellent. So 3 questions, if I may. And I just ask one by the other. So the first one is, would you be willing to share the dilution to the still very good 32.4% EBIT margin for YDS. I mean, how big was the dilution of the ramp-up with Novo and Innovent? Because I have no idea, is it 100 bps, 200 bps, 300 bps or more?

[Simon Michel, executive]

I think it's a good one. Let's talk a bit about the comparison, 35%, 36% to 33% now. That was 2%, 3% points in EBIT. Maybe you want to start with it, Samuel?

[Samuel Kunzli, executive]

Good question, yes. So it's right, in the first half year '24, '25, the EBIT margin in the core business was rather around 36% on EBIT margin level. So yes, now we report the 32.4%. And I want to highlight a few points. First, have in mind, we sold a business area, the Diabetes Care business. And of course, we used certain functions for both areas. So it's normal to have a certain dyssynergy, a certain stranded costs Simon mentioned, that has for us a high focus. We have an internal cost optimization program, the YpsoFit going on. So we want to really be on top of that.

Then, yes, we talked about the pen business. So I mentioned product, customer mix. So that, for sure, does also not then help to keep that level. And your assumption is right. Yes, we have new contracts ramping up, Innovent and also Novo. So that, of course, is also a factor to be considered when you want to explain why, in the core business, the EBIT margin goes down from 36% to around 33%. But I also want to highlight what we announced in May this year when we did the full year guidance, if you take the midpoint from this full year guidance, you are on 33% EBIT margin.

So we expected that already. We at that time already guided it in that way for the first half year, because for those who observe us closely, they know that in the first half year, we rather have a little bit less sales, and that means in the first half year, the EBIT margin is rather a little bit lower, because the distribution of the indirect cost is a little bit worse. So I hope that explains those main deviations.

Simon, feel free to add from your side.

[Simon Michel, executive]

I think it's also good to assume that in general, now speaking, that when you install new capacity, you will always have some cost until it's full. You can also assume that Solothurn is now really optimized. It's full. So you don't have cost lying around. It's really used, fixed costs are all covered. The same for Schwerin 1. It's almost full. It's really used. But now we put Changzhou online, and this is now just one part, maybe 1/3 a bit more is now running, and we have space left that is generating cost. And we will now put in -- end of '26, you will see something like 3 months of Schwerin 2 going live. It's huge. So we will have 1 or 2 lines in when we start in '27 step by step. So we will have a bit cost there, fixed cost there that need to be covered. And then the same thing will happen 1 year later in the U.S.

So that's why it's probably right to assume that this idle capacity costs us something like 2% constantly, and therefore, you will not see a 36% EBIT anymore. So that's why we actually guide in this direction above 30%. Samuel just made the mathematics on it, but that's a very good question. And we take a very close look at that, but we have to do big steps, and we cannot do whole, whole, whole. You have to build a building and then you install. So it's a very important topic where we put a lot of attention on.

[Daniel Jelovcan, analyst]

Yes. That's very clear. And yes, the dyssynergy point is actually a good point as well. That's at least -- yes, that's good that you highlighted. The second question is, I mean, the 20% growth in project revenues. I mean, at the CMD, you said it will rather be stable or decline a bit. And of course, I'm happy to see 20%, because it's very good for the future. But why is there such a big deviation basically?

[Samuel Kunzli, executive]

I'll start, and feel free to add then, Simon. So the project business by nature has a higher volatility, because that is the business. What we invoice there is we do customizing for our customers of those devices, and we sell clinical devices. And by nature, you have there -- if a clinical trial starts, you might have a higher delivery of clinical devices, you might reach certain milestones. So by nature, you have more volatility.

I mentioned we are also positively -- let's say, we are pleased that we have that 20% growth. But I stay with the opinion what we said at the Capital Market Day. It's not something we can just assume to grow in parallel with the commercial sales. We have new platforms coming in, adding to the project business, but we have also platforms which are getting more mature. So the main statement stays, it stays more or less stable and only grows a little.

Simon, feel free to add from your side.

[Daniel Jelovcan, analyst]

That's great. And the last question, I mean, the Alzheimer's -- do you hear me?

[Simon Michel, executive]

Sure.

[Daniel Jelovcan, analyst]

The Alzheimer's device caught my attention, of course, a hot topic. But Alzheimer's probably isn't that important for you because the volumes are probably not that big. I mean, this one device now, is that in a commercial drug for Alzheimer's? And if so, how often do you need the auto-injector for Alzheimer's? I have no clue. Is it also weekly like obesity or -- yes, thanks.

[Simon Michel, executive]

So it's LEQEMBI drug, Eisai and Biogen, and it has launched in the U.S., but I'm not sure about if it's once weekly or -- I think it's once weekly. But it's just starting now. So it's slow. But we are launching it now. We are delivering now. We are just delivering.

[Daniel Jelovcan, analyst]

But we don't talk about huge volumes.

[Samuel Kunzli, executive]

Yes, it's a maintenance therapy. I think probably if we look at their communication, it's probably best to see how they see the future of this particular therapy.

[Sam Ghezelbash, executive]

Now we'll turn to Pallav from Barclays. So Pallav, if you hear us, you have to click on the mic. Unfortunately, Pallav, we cannot hear you. So that's okay. We'll move to Sibylle and come back to you in a moment.

[Sibylle Bischofberger Frick, analyst]

Good morning, everybody. Does it work now?

[Simon Michel, executive]

Yes.

[Sibylle Bischofberger Frick, analyst]

So I was quite happy with your development in YDS. But in there, you have also the contract manufacturing for the French customer. Is it still correct that this part of the business is not growing and you will end production in November '26? Or has anything changed because they ask you to produce longer for you? And what does it mean afterwards, then you will have a couple of months no production there because you have to move the production facilities out and the next in. So will this mean that end 2026, '27, you will have less sales due to that?

[Simon Michel, executive]

Thank you very much, Sibylle. So as Samuel said before, and then I'll let you answer the question on the amount. So yes, absolutely. So that's what we said before. That will have a slight impact on the growth rate for '26, '27. We will have roughly actually almost half a year less. And then we do it in 2 phases. The first line, SoloStar, we took out already. So there is no manufacturing at all anymore. We manufactured last SoloStar in the summer. So we are now installing the first auto-injector line.

And then the same exercise will start half a year later in spring when we move out -- or summer-ish, we move out to [indiscernible] and then we install that one. So we have, twice in a row, something like 4 to 6 months no manufacturing on one floor. So therefore, you, of course, will see -- then in the same time, we are ramping up. I mean, for the auto-injectors, we don't manufacture from day 1, 5 shifts, 7 days. So you also ramp up. So that will have an impact on the auto-injector growth rate '26, '27. But maybe you can add some -- give some more flavor on the contract business.

[Samuel Kunzli, executive]

Yes. Gladly. I can give you, Sibylle, a little bit more that you understand the numbers. So in the first half year now, this business made a little bit more than CHF 20 million of sales, so in line with what we saw in the previous years. In the previous years, it was roughly CHF 40 million for the full year. So now we have a half year around CHF 20 million. For the second half year, it's for you now fair to assume that it goes slightly down, but not yet significantly. So we still might see around CHF 15 million of sales in the second half year now of this business year.

And your assumption is right, in November '26, it's going to stop. That means we have in the next business year, still a little bit more than 6 months. So if you take the October and November as well, so you might have 8 months. So you might still end up also again having around CHF 15 million of sales of this not continued contract manufacturing business. And I think, Simon, you explained very well what the challenge is. And, of course, that is a reason why we have next business year a challenge with the top line growth.

[Sibylle Bischofberger Frick, analyst]

And then the second question is about the broadening of your portfolio. You mentioned it in Schwerin with the Capital Market Day. Any news there on possible acquisition targets or in what direction you could go?

[Simon Michel, executive]

So we are really doing our analysis. We have a lot of launches, a lot of dinners, and we continue to understand our space better. We are in such an excellent position. We have such a great opportunity ahead of us in our core business. And this is our main focus. We are focusing on delivering the capacity, on delivering the device to our clients. And at the same time, we do our homework. We listen, we talk a lot. We also look at the market specifically with some consultants. They help us to understand better margin profiles, et cetera, but we are not there yet to explain you our next steps.

[Sam Ghezelbash, executive]

Thank you, Sibylle, for your questions. Perhaps we'll have another trial. Pallav, if you can maybe try again to unmute or type in your question into the chat and I can read it for you.

[Pallav Mittal, analyst]

Good morning. Can you hear me now?

[Sam Ghezelbash, executive]

Perfect. Yes.

[Pallav Mittal, analyst]

Sorry about that initially. So 3 questions. I'll take it one by one. Firstly, on your 20% revenue growth for the full year, given the second half is traditionally stronger versus the first half, are you being conservative here? Because your H1 growth is already touching 21%. Or are there some moving parts which I'm missing?

[Samuel Kunzli, executive]

I start, and Simon, feel free to add. Yes, the 20 year around -- sorry, the 20% growth for the full year is our guidance. When you now look at the second half year, which we now basically compete or compare against for what is ahead of us, you need to keep in mind that we had, in the last business year, a very good second half year. You remember, we had even some pharma customers anticipating tariffs. So we even had very strong deliveries in February and March. So for you, it's fair to assume that it will be challenging to also overtake this already strong second half year, which we showed last year, by 20% or more percent. It's fair to assume that this will be more difficult to reach. And that, of course, you can make then the conclusion also for the full year. I think that is important here to notice and gives you a little bit of flavor.

Feel free to add if.

Feel free to add if...

[Simon Michel, executive]

No, sure. I mean we compare half year with half year, so fully on track.

[Pallav Mittal, analyst]

Sure. Second question. So there's a lot of discussion around GLP-1s now over the last few months. And now the expectation is that pricing is going to be lower. So how are you thinking about the impact of that on your volumes? And also, how are you seeing the risk of oral GLP-1s in your medium-term ambitions that you laid out at the CMD?

[Simon Michel, executive]

So I mean, we are just a device deliver. We deliver devices according to contracts, and those contracts are set in stone. They are rock solid for the next 5 to 10 years. So there is no impact on Ypsomed side. We just deliver the devices. We have 47 contracts in GLP-1. We closed all the large deals out there. We cannot give you the names, but we are well set up. Now this is not a topic at all. We have no risk with Novo or any other company. We are just delivering our volumes and we will profit from GLP-1.

As I said very clearly, we will not do more than 15% with any client in the future. So we have a clear broad spectrum. Out of our 130 clients, we have roughly 30 in the space of GLP-1. Mainly China will be interesting, actually more interesting in the next 2 years than Western world.

Orals for us, it can -- orals will play a role, of course. But as I said again, we deliver such a small volume of the overall GLP-1 opportunity out there. If you look at what Lilly is manufacturing themselves with their 5 or 6 contract manufacturers, and when you see what Novo is doing as SHL next to us, we are just all growing. And of course, oral will play a role, but oral will play a role eventually together with the injection. For some patients at the BMI of 30, 35, they will take a shot, one pill therapy. There are new formats coming. And then we wait for the new molecules coming, the new molecules that are less problematic on the muscle. So we have so much things going on. So for us, this is not a risk at all. It's a huge opportunity for Ypsomed, and we will profit from GLP-1, and we are not dependent on Novo. So...

[Pallav Mittal, analyst]

Sure. And lastly, just to fact check, any impact from FX in the numbers in the first half, if you could quantify? And what should we expect for the full year?

[Simon Michel, executive]

FX, yes.

[Samuel Kunzli, executive]

Yes. I gladly take that, Pallav. So really we have -- the huge majority of our contracts are in Swiss francs. So the currency we are reporting and the currency in which our stock is listed. So we do really have very minor FX impacts on the top line and also on profitability. So for modeling, you can really ignore that effect, and we'll also stay for the second half year that way.

[Sam Ghezelbash, executive]

We'll now move to Peter.

[Unknown Analyst]

Okay. Can you hear me fine?

[Sam Ghezelbash, executive]

Yes.

[Unknown Analyst]

Okay. Great. A couple of questions, please. The first topic is just on some of the ramp-up of facilities. And as you've highlighted, you closed the first part of the contract manufacturing over the summer. You take 6 months or so to put back new machines in. Does that mean, say, around Easter time, you'll start to ramp up again on the first phase of the Solothurn part?

[Simon Michel, executive]

Yes, absolutely.

[Unknown Analyst]

Okay. So you'll start to ramp up from around Easter. Okay, good. And you're meeting the rest of the sales out of inventory, I presume?

[Simon Michel, executive]

And from existing clients. So we have obviously also installed capacity in Schwerin. You talk about auto-injector now, right?

[Unknown Analyst]

Yes.

[Simon Michel, executive]

Yes. Of course, we have installed capacity in Schwerin. As you know, we are a platform company. Also, Novo is on a platform, so they run on the same line. So we are quite flexible here to deliver volumes for the ramp-up phase. Especially, now we have this machine learning phase where all those final assembly lines have to be installed. And therefore, we can deliver these also from different lines.

[Unknown Analyst]

So the first part of Solothurn will start to ramp up and the beginning of Schwerin 2. You said a couple of lines will be starting in H2. So they will also start to ramp up in the fiscal first half -- from early fiscal first half, yes?

[Simon Michel, executive]

So exactly in '26, in the first half, one large line will ramp up a bit before Easter here in Solothurn. And the second line will only ramp up in the beginning of '27, because we finish to [indiscernible] until October, November on the second floor, and then we need again those 4 months of redoing, putting paint on the wall and put 40 plastic molding machines in and the big micron line and then it will take another 4 months. So we will start in March-ish. Maybe we'll see 1 month more from ramping up '27 for the second line, a large line here in Solothurn. Is that answering your question?

[Unknown Analyst]

Yes, it is. And then the other part was just on the U.S. facility since you're able to buy a completed building and you can start putting machines in. Can you give a sense as to when the first sales you would expect would come out of that as you start to pick that in phases?

[Simon Michel, executive]

Peter, this is really brownfield. I've been there last week. It's a building, but it's just a shell. There is soil on the ground. We are actually now deciding -- I mean, we are ramping it up now. We are probably -- I think we are signing today the contractor. We have to do the flooring in. We have to do the engineering in, the cooling, the pressure. We will put there the granulate system, et cetera. So the building will be handed over, including everything which is technically relevant to operations, to manufacturing, in fall '27. So in roughly 20 months from now. And then the team will take roughly 6 months until they have installed the molding machines and the first lines. So the first goods will leave Holly Springs in Q1 '28. That's realistic to assume that is where we have to plan together with our clients in the U.S.

[Unknown Analyst]

That's great. And then I had 2 questions just on the cash flow statement. One is you have a significant prepayment from customers for the first time that I can recall. I was wondering if you could give some background to that and to what it relates. I guess it's maybe ramp-up of the new facilities. But if you could talk a bit about how that's coming through and how that impacts cash flow.

[Samuel Kunzli, executive]

Gladly, I take that question, Peter. So it's true that we have co-investment, co-financing structures with our customers. And there is 2 elements I want to describe, which we also mentioned at our Capital Market Day, of how customers participate. Yes, the one thing is they make the finance equipment. So they really pay advance payments for those equipment dedicated for them. And the other element we have are capacity contribution. So they somehow reserve and co-finance platform capacities, which we build up. And you will see that now more often in our cash flow statement, because of this CHF 1.5 billion we're going to invest, roughly CHF 400 million we expect with co-financing from customers. So you will see that now more often such co-financing advances are coming into our balance sheet, and this will help, yes, the operating cash flow. These are the 2 elements there.

[Unknown Analyst]

Okay. And then last question was just on the intangible CapEx. I think you said of the CHF 20 million, about half related to the Delivery Systems business. And is that more or less the run rate going forward now?

[Simon Michel, executive]

I think it was all of it. It's actually half of the CHF 39 million -- half of it Delivery Systems, yes.

[Samuel Kunzli, executive]

But Peter was talking of the CHF 20 million in the actual year.

[Unknown Analyst]

Yes.

[Samuel Kunzli, executive]

That is right. Roughly half of it is the Delivery Systems business and the other half was still -- because we had still 4 months of Diabetes Care business in our business here. So we capitalized that. And you might not like that answer, but the decision when you capitalize, that depends always at which stage you develop something. And there is, like I told about the projects, a certain volatility, there is because whatever -- it's not always that you're constantly just developing and capitalizing new projects. There is a certain volatility in those capitalizations. But you will see that going forward very clearly because we are now a pure-play B2B company for the Delivery Systems business. And you very clearly see what is capitalized and what is expensed.

[Simon Michel, executive]

But it's probably right to assume that this first half year is not a typical year because we had a much larger amount in the P&L. We were putting more money in the innovation phase for YpsoFlow, YpsoDot, YpsoLoop. So if you are in the innovation phase, we put it directly into the P&L. And now we are moving those platforms over to the product areas. And now it's going to be capitalized to finalize the development before they are then industrialized. So now in H2, you will see a higher amount of capitalized R&D, maybe it's CHF 15 million. And then overall, we don't give a guidance here, but it will probably be a bit above CHF 20 million in the long run for R&D capitalized.

[Sam Ghezelbash, executive]

In the interest of time, maybe we'll ask to ask a few shorter questions. Julien, please feel free to unmute yourself and ask your question.

[Julien Ouaddour, analyst]

Hi, can you hear me?

[Sam Ghezelbash, executive]

Yes.

[Julien Ouaddour, analyst]

Thank you and congratulations on the strong performance in the first half. I just have a question on the sale of the Diabetes Care to TecMed. Since this is the company controlled by the founder, Willy Michel, I just want to ask about the risk of contagion between Ypsomed and TecMed. So this would be helpful for us also to analyze the consolidation scope.

[Simon Michel, executive]

So there is no consolidation happening. It's absolutely separated organization. TecMed is a company 100% under control of my father and Ypsomed is a stock listed company where the Michel family has roughly 70% of the shares. Or did I misunderstand your question?

[Julien Ouaddour, analyst]

No, no, this was the question about the risk of contagion because this is a special construct.

[Simon Michel, executive]

I mean, I think it's not really a special contract. It's just different investments. We have investments in other industries as a family. We have a very clear contract manufacturing relationship between Ypsomed and TecMed for the Orbit reservoir and the Orbit infusion sets. We manufacture those 2 devices in Schwerin in our clean room. This contract lasts minimum 3 years, maximum 5 years. Both parties have an interest to move it out as early as possible because we charge too much for them and we earn not enough. We would like to charge this dilute to our overall margin. Obviously, that's why we put it into Others. And we will need a clean room as well in roughly 4 years for our YpsoDose ramp up, our large volume injector. So it is a very clear, very transparent logic contract manufacturing relationship, very alike of the Sanofi relationship we had. So it's not even covered by product management, it's all done in operations directly in a very lean manner.

[Sam Ghezelbash, executive]

We'll move to Ed, please.

[Edward Hall, analyst]

My question is just on Holly Springs. I think you said this is set to open in Q4 '27. And you mentioned that labor is available. But could we talk about the gross profit margin here compared to European facilities? What's the pull and pushes on this? Is this anything from automation to sort of premium prices for onshoring in the U.S.? That would be really helpful to understand.

[Simon Michel, executive]

Thanks, Ed, for the question. So Ypsomed is installing the same equipment in Germany, as we do in Switzerland, as we do in China, as we will do in the U.S. So the manufacturing setup with ENGEL on molding, and with our partners, Micron and ATS on assembly, and eventually ASIC is remaining identical. We have a lower energy cost in America than in Germany, massively lower energy cost, but we have higher building cost than in Germany. We have lower people cost in America slightly than in Germany, although a bit the same, but of course, in China, they are lower. So if you compare all the 4 sites, America, Germany, Switzerland, and China, then America will, of course, be more expensive than Mainland China, but I mean, we talk a range of all sites of less than 10% difference on the cost of goods. But the logic is identical how we work.

Would you like to add something?

[Samuel Kunzli, executive]

Absolutely fine, summarized.

[Sam Ghezelbash, executive]

We'll move to Daniel.

[Daniel Jelovcan, analyst]

Yes, just a quick one. Holly Springs, I mean, do you all have fixed contracts with some customers? Or you just build it at the moment?

[Simon Michel, executive]

No, we have contracts. Good question. So that's actually why we waited another year. We wanted to have the ink. We have a couple of customers where we have contracts that we will deliver, we will move, and other customers are really new. So we want to ramp up the U.S. step by step, of course, but we have to fill this large site. And so yes, no, we have contracts, not just the building.

[Daniel Jelovcan, analyst]

So the risk is relatively limited as we can probably say?

[Simon Michel, executive]

Yes. I mean our team really proved that we can industrialize in a different place. I mean when I look at Schwerin, we're now just installing ASIC 10, the 10s line of its kind. And this is a very smooth program. The same teams come together with the builder, the contractors, we move it in and we ramp up. It's really smooth. And we are going to do the same thing now in China and in the U.S. In China also, the first 2 lines, they went just online. We didn't have it once in the Executive Board. I assume the same thing will happen in America. Obviously, we have to train the people. We will get them also to Switzerland. We train them for 3 months. They will get to know to their lines. They will go back to America and ramp up their lines.

And I had an extremely good impression when I was there last week. I was in several community colleges. We work very closely with those colleges to get staff that have a basic education. So America, what I have seen in North Carolina is much further than what we think here in Europe in terms of education. We have certain areas where the government really knows that biopharma, pharma, med-tech and specialty industries need people with an education. So those community colleges go to the high schools, they grab the students, they take them into the colleges, and together with the companies, they make 4 day in the company, 2 days at school, they make those joint programs. And these programs run in North Carolina for 5, 6 years. So I'm really confident we will find the people.

Also, if you look at the wage level, it's way below Massachusetts up in the north. So we are in the area of below $60,000 per operator. So we are actually even below the German level. So from that perspective, I believe we have made a very good selection.

[Daniel Jelovcan, analyst]

Then I wish you further good progress.

[Sam Ghezelbash, executive]

Thank you, Daniel. We'll move maybe last but not least, Anna, please feel free to unmute your mic and ask your question.

[Unknown Analyst]

Perfect. Can you hear me?

[Simon Michel, executive]

Yes.

[Unknown Analyst]

Okay. Maybe just a quick follow-up on that. I guess, outside the U.S., you're obviously expanding in Germany, but how much of your overall capacity that you're coming online between now and 2030 is already contracted?

And then just another follow-up. The auto-injector growth of 46%. Maybe just how much of that would be just driven by GLP-1 versus capacity coming online or just broader growth trends. Maybe if you could just talk about the 46%, if that would be a sustainable growth rate.

[Simon Michel, executive]

Sure. So I will have you specify, Samuel. But GLP-1, again, it is just about to start. So it's a smaller part of the 46%. We grow on various platforms. We can give a bit more flavor to GLP-1 just in a minute. On your other questions, we basically try to fill 5 out of 7 days. So when you ask us how much we have contracted, obviously, we have not contracted yet the full 5 days today of the capacity we are going to have by 2030, '31. But what we see in the pipeline and from our past, we closed roughly 35 deals per year, roughly 25, 27 survived. If you look back and we assume and we look at our pipelines, we have quite a good overview on global pharma pipelines, not only of new molecules in Phase II and Phase III, where we are in with devices, but also in emerging markets with biosimilars. So this gives us a high level of confidence that we are going to close certain contracts that will lead us to a 5 out of 7 days.

Now this is very important. Now obviously, in an optimized setting, you want to manufacture 7 days, but we need to have the spare capacity. And this sometimes hurts a bit. But we had situations in the past where customers just needed more devices, and we were always able to deliver, and this is still our promise. This makes us special compared to others that we are always able to deliver. And this is also why customers pay a premium at Ypsomed, because we can always deliver, and that's why we will always have some spare capacities. But when you look at the weekend shifts in Germany, the 6th day, I mean, you pay 25% more. Switzerland, the same thing; Sunday, 50% more. So from a cost of goods -- and of course, we want to run them as much as possible, but it also makes a bit more expensive. So overall, you can assume that we don't build capacity without contracting behind.

[Samuel Kunzli, executive]

Yes. If I may add to that one, we are lucky to be in an industry in which you have a very good visibility of the volumes. Our devices serve people with chronic conditions. So we get those customer forecasts for drugs where we are already selected. With switching being very difficult in our industry, we really have a very good visibility. And based on that visibility, we industrialize. And yes, Simon mentioned, a certain idle capacity we assume to have the flexibility for those customers. So we industrialize with visibility.

Then to your second question about the auto-injector growth, the more than 40% top line growth. The main drivers, these are now these platforms, the 1 milliliter and the 2.25 milliliter, which are now in a growth phase. So have in mind, we start now still on a low basis. So in percentage, that's always a lot of growth. And now, yes, incretins are kicking in, not yet being significant, but you start from a very low basis, the incretin sales come on the top. But relate that now to the overall top line growth we said midterm when the overall top line growth is a CAGR of 15%. And yes, I said that auto-injectors grow stronger than pens. Nevertheless, it's also fair to assume that this growth rate a little bit comes down. We grow in auto-injectors, but not year-on-year always by 40% and more. That gives you a little bit color on that one.

[Simon Michel, executive]

And when you look at overall GLP-1, that makes for the full year clearly below 10%. But this is customers in China, customers in Russia. We have Victoza, liraglutide out there. So we have a whole bunch of GLP-1 products out there. And then slowly, of course, certain volumes for our Danish customer. So I mean, it's a smaller part that is gradually increasing.

[Sam Ghezelbash, executive]

Perfect. Thank you very much, Anna, and thank you all of you for joining us today. Thank you, Simon and Samuel, for presenting our great achievements, the great financials, and we will be very much looking forward to continued discussion with you. Thank you all.

[Simon Michel, executive]

Excellent. Have a great week.

[Samuel Kunzli, executive]

Thank you.