Sartorius (Xetra:SRT) Q3 2026 Earnings Call

0:00 Ladies and gentlemen, welcome to the Sartorius and Sartorius Stedin Biotech's 9-month 2026 results call. Please note that the call is being recorded and streamed on Sartorius' website. Your participation in this implies your consent with this. A replay will be available shortly after the call. I would now like to turn the conference over to Petra Muller, Head of Investor Relations of Sartorius. Please go ahead.

0:27 Thank you, Operator. and hello and welcome to everybody. Joining me today are Michael Grosse, our CEO, Florian Funck, our CFO, Rene Faber, head of bioprocessing and CEO of Sartorius Berlin Biotech, as well as Alexandra Gatzemeyer, head of lab products and services. As always, we will start with prepared remarks followed by Q&A. The call is scheduled for one hour. Please limit yourself to one question to allow as many participants as possible to take part. If time permits, we will, of course, take follow-up questions at the end. Please note that management's comments will include forward-looking statements involving risks and uncertainties. And for details of the relevant risk factors, please refer to the Safe Harbor Statement in today's press release and also in the presentation.

1:17 And with that, I'm pleased to hand over to our CEO, Michael Grosse. Michael, please go ahead.

1:22 Thank you, Petra, and a very warm welcome from my side as well. I'm happy to report a solid set of results for the first nine months of 2026, with both of our divisions contributing to growth. At the same time, we further improved profitability and generated strong cash flow. This allowed us to continue deleveraging and further strengthen our balance sheet, all in line with the financial priorities we outlined at the beginning of the year. Let me share some high-level views here. At the group level, we saw solid growth during the first nine months of the year. Looking at the divisions, the strong operational sales growth in bioprocessing solutions was driven by healthy recurring business and the continued recovery of the non-recurring business, which grew year on year.

2:11 Overall, this confirms the equipment recovery we anticipated at the beginning of the year and supports our confidence in its further progression. Lab products and services performed particularly well and even exceeded our expectations. Growth was broad-based across the portfolio with particularly strong momentum in our bioanalytics business. And some pull forward in Q3. Here, AI-driven drug discovery workflows are becoming an increasingly relevant growth driver, and especially our Octet platform is very well positioned to benefit from this trend and the opportunities it creates. Overall, we are very pleased with our top-line performance, especially considering that tariff surcharges shifted from a benefit to a headwind in Q3, and MATIC is now fully reflected in our organic baseline.

3:06 If we strip out all tariff effects, our underlying growth actually accelerated compared with the previous quarter. Turning to profitability, higher volumes together with continued cost and operational discipline keep us well on track with our profitability objectives for the group and for both divisions. The combination of profitable growth and continued discipline on working capital translated into a substantial improvement in free cash flow. As a result, we further reduced leverage and continued to strengthen our balance sheet. Overall, we are very pleased with the progress we've made so far this year. The positive momentum is based on end markets that remain fundamentally intact.

3:53 We are seeing healthy pipelines and increasing research activities across our customers, which has supported demand for lab instruments and consumables. As these programs move through the pipeline, production volumes increase, and so does the need for bioprocessing solutions. In bioprocessing, customers are increasingly focused on improving productivity and efficiency while reducing costs. We saw the strong interest firsthand at our recent process identification forum in Göttingen, which brought together 130 participants from 54 biopharma companies and 30 external speakers across the industry. The discussions range from intensified upstream processing to continuous downstream manufacturing, automation, and data analytics.

4:42 My key takeaway was that the industry is increasingly moving from discussing the potential of process intensification to how to implement it in practice. Ratorius is very well positioned for this transition with technologies spanning the workflows from early process development to next generation bioprocessing. And of course, we do not stand still on the innovation front. First, in BPS, We have expanded our portfolio with technologies that improve oxygen transfer, enabling further process intensification in upstream and ready-to-use cytokines in closed sterile bags and a new animal component-free cell culture medium. Second, in LPS, we added an AI-powered in-queue site module for faster label-free stem cell analysis and a new octet biosensor for faster antibody measurement with less sample preparation.

5:39 Building on this, Let me briefly turn to our outlook. We confirm our full year guidance and continue to expect operational group sales growth around the midpoint of our 5% to 9% range and an underlying EBITDA margin slightly above 30%. For BPS, our expectations remain unchanged. YBF refined our expectations for LPS following the strong nine-month performance. We will come back to the details shortly. For that, I will turn the call over to Florian for the financial highlights. Florian.

6:13 Thank you, Michael, and a warm welcome also from my side. Let me start with the group's top line performance. Overall, our top line continues to build on the positive trajectory of recent quarters. First, we are seeing sustained strength in consumables alongside continued growth in our non-recurring business. Second, Growth is broad-based across all regions, with APEC performing particularly well, also supported by the continued recovery in China. And finally, our lab division showed substantial growth as the recovery continues to progress. With that backdrop, let's look at the financial results for the period in detail. As a brief reminder, we introduced operational sales growth last quarter.

7:00 This measure excludes the effect of tariff refunds and the corresponding customer compensation. We don't consider this to be part of our underlying operating top-line performance. In Q3, we received an additional $5 million in tariff refunds from the US Treasury. This brought the amount received in the first nine months to $31 million, while we claimed approximately $40 million in total. We are still expecting to receive the outstanding amount by year end, but there is a level of uncertainty to timing, of course. Corresponding customer compensation reduced sales growth by around 120 basis points in the first nine months. In Q3 alone, the impact was almost 60 basis points. Excluding this effect, group operational sales grew by 8.1% in constant currencies.

7:51 Including it, growth was 6.9% in constant currencies. Now turning to the divisions. Bioprocess Solutions continued to deliver solid broad-based growth. Operational sales increased by 8.1% in constant currencies, including the effect from tariff compensation to customers growth was 6.8% in constant currencies. Performance continued to be driven by our consumables business, which delivered healthy single-digit percentage growth in the first nine months of 2026. Our consumables grew at a double-digit rate. Please be reminded that our overall consumables business was partly diluted by volatility in our advanced therapies portfolio in Q2, which is obviously included in our nine-month view.

8:41 We continue to expect these ATS orders either towards the end of 2026 or in 2027. Overall, recurring business continued to benefit from healthy activity across our customers' drug development pipelines, supported by clinical trial activity, new drug approvals, and growing commercial manufacturing volumes. We were also encouraged by the ongoing recovery in the non-recurring business, which grew year on year. This confirms our view that the bottom is behind us and that the market continues to improve in a steady, consistent manner. Now let's turn to the LPS division. LPS delivered a very strong Q3 that exceeded our expectations.

9:27 Operational sales grew by 8.3% in constant currencies in the first nine months. Including the effect from tax compensation to customers, growth was 7.5% in constant currencies. We are clearly seeing positive underlying business trends across the LPS division. But in our view, part of the Q3 performance reflects demand pull forward and timing effects. It should be viewed in the context of a prolonged period of subdued customer investment and should therefore not to be extrapolated as a new run rate. Wealth was supported by the recurring consumables and service business as well as by instruments with particular strengths and analytical solutions.

10:14 This was supported by improving biotech funding, rising research activity, and a gradual release of customer capex. Finally, MATEC contributed approximately two percentage points to LPS growth, performing fully in line with our expectations. Overall, we are very pleased with the top-line performance, especially considering that tariff surcharges turned from a tailwind in the first half into a headwind in Q3. The reduction in surcharges rates from around 15% last year to approximately 10% this year represented a growth headwind in Q3 of roughly 40 basis points for both the Group and BPS and roughly 50 basis points for LPS. Taking this into account, our true underlying business momentum remains very solid.

11:04 Now let's talk about our regional performance. Overall, we saw broad-based positive development across all regions in the first nine months of 2026. Starting with EMEA, sales increased by 6.4% in constant currencies. EPS was the main contributor, while LPS also delivered a positive performance. In the Americas, operational sales increased by 8.4%, with both divisions contributing. Including tariff-related customer compensation, growth was 4.9% in constant currencies. The region was still affected by the Q2 project delays in ATS I mentioned earlier, but Q3 did not show any unusual ATS sales effects.

11:49 Asia Pacific remained our strongest region, with sales up by 11% in constant currencies. Both divisions delivered double-digit growth, also supported by a continued recovery in China. Let me now turn to profitability. Overall, we continue to make good progress during the first nine months of the year. Underlying EBTA increased by 6.9% to 828 million, while the corresponding margin expanded by 50 basis points to 30.2%. As in the first half, higher volumes and operating leverage were the main drivers of this improvement. These effects more than offset an unfavorable product mix and our continued investments in future growth areas.

12:35 On a net basis, tariff surcharges and the related customer compensation balanced each other out and had no impact on profitability of the divisions and the group. Looking at the divisions, bioprocess solutions generated underlying EBITDA of €714 million. The margin improved by 80 basis points year-on-year to 32.3%, primarily driven by higher volumes and operating leverage. In LPS division, underlying EBITDA came in at €114 million. The margin was broadly stable year on year, despite our continued investments in future growth initiatives. The clear sequential improvement in profitability was supported by the very strong top-line performance in Q3.

13:23 Overall, we are pleased with the continuous progress in profitability, which remains fully in line with our expectations for the year. Okay, so let's move on to have a look at performance below the underlying EBTA. Earnings as well as cash generation developed well in the first nine months. Underlying net profit increased by around 7% to 260 million, reflecting the improvement in operating profit discussed earlier. Underlying earnings per share increased accordingly to €3.76 per ordinary share and €3.77 per preference share. Reported net profit attributable to shareholders increased by 51% to €188 million.

14:09 This was primarily driven by the strong improvement in operating profit and significantly lower extraordinary expenses compared to the prior year period. Turning now to cash flow, where operating cash flow increased to €562 million, up around 10% year on year. Higher earnings and the refund of U.S. tariffs more than offset an increase in working capital. The working capital increase was basically in line with the growth of the underlying business. Free cash flow increased significantly by 55% to 310 million, driven by higher operating cash flow and lower CapEx. CapEx ratio was 9.6%. While capital expenditure remained below the prior year level, we continued to invest in key strategic projects and growth initiatives.

15:01 Finally, let me briefly turn to balance sheet and leverage. Long earnings and cash generation supported further balance sheet improvement. The equity ratio that you can see on the chart increased to 42.8% from 39.8% at year end 2025. Net debt decreased to 3.68 billion euros, which is almost 200 million less than 12 months ago and well above 60 million less than at year-end 2025. Net debt to underlying EBITDA improved to 3.3 times. This shows that we are continuing to make good progress on our leveraging path while still investing in the future growth of the business.

15:50 These developments reflect our disciplined approach to capital allocation and our commitment to maintaining a strong balance sheet and solid investment grade credit profile. Before we move on, let me briefly flag an upcoming change to our financial reporting. A new standard called IFRS 18 will become mandatory for financial years starting on or after January 1, 2027. This standard mainly changes the face of the P&L by dividing it into an operating, investing, and financing part and introducing standardized subtotals. It also increases the transparency around alternative performance measures and how these reconcile with the profits shown in the P&L.

16:36 Today, we calculate underlying EBITDA starting from EBIT and adding back depreciation, amortization, and adjustments. Under IFRS 18, we will start with the newly defined P&L line operating profit, while the at-backs remain quite the same. Most important takeaway from this, underlying EBITDA will remain our central profit KPI and the content of this number stays consistent with recent reporting. The new presentation will also not affect net profit or net cash flow. We will disclose underlying EBTA as a management-defined performance measure and provide a reconciliation to the closest IFRS-defined subtotal, which will be operating profit.

17:21 So in a nutshell, nothing changes in terms of Sartorius' underlying business performance reporting. IFRS 18 mainly changes how certain line items are represented and classified mainly in the P&L and to a limited extent in the cash flow statement. With that, Michael, back to you.

17:41 Thank you so much Florian. Now let's take a look at our full year guidance. We confirm our expectations for the group and BPS while raising them for LPS following the strong performance in the first nine months. At the top of the slide, you see our guidance ranges for sales revenue growth. These ranges cover both our operational view and the expected development including customer compensation related to tariffs. On an operational basis, we continue to expect growth broadly around the midpoint of our guidance ranges of 9-9% for the group, 6-10% for bioprocess solutions. For lab products and services, we have raised our expectations and now expect growth around the upper end of the 2-6% range.

18:29 Including customer compensation for tariff surcharges, we continue to expect growth in constant currencies to be in the lower Half of the respective guidance ranges for the group and BPS. For LPS, we now anticipate growth around the upper end of the range. As a brief reminder on tariffs, we submitted refund applications of approximately 40 million euros. By the end of September, we had received around 31 million euros. We are expecting the outstanding 9 million euros to be paid by year-end, but there is a level of uncertainty to timing. On M&A contribution, no changes here. The contribution from the MATAC acquisition remains unchanged of approximately 30 basis points for the group and 1.5 percentage points for LPS.

19:19 Turning to profitability, we continue to forecast an underlying EBITDA margin of slightly above 30% for the group and slightly above 32% for bioprocess solutions. Following the strong development in LPS, We have raised our margin expectations to slightly above 21% compared with our previous expectations of slightly below 21%. Finally, our expectations for the other key financial indicators remain largely unchanged. We have modestly lowered our full-year CapEx ratio expectation from around 12.5% to around 12%. Our expectation for a net debt to underlying EBITDA of slightly above three times at year-end remains unchanged.

20:07 Looking ahead to Q4, we continue to expect solid underlying development with further recovery in equipment and continued growth in consumables. However, Q3 benefited from some pull-forward and timing effects in LPS, and Q4 faces a not-too-easy comparison base across both divisions in absolute million euros. In addition, MATEC is now included in the organic comparison base and Harris surcharges represent a headwind compared to a tailwind in H1. Therefore, the strong Q3 growth rates should not be extrapolated into Q4. Finally, a brief update on FX. For the full year, we currently model an FX headwind of slightly more than one percentage point on a reported revenue growth. For Q4 in isolation, however, we expect FX to turn into a tailwind of slightly below two percentage points.

21:01 Further modeling assumptions can be found in the appendix of this presentation. Overall, our message is straightforward. Our underlying business continues to be strong. Consumables remain strong. The recovery in equipment is progressing as expected and improved visibility reinforces our confidence in the full year outlook. As you know, our goal is to continue to grow profitably above market. To achieve this, we are focusing on three key areas. Our portfolio, the customer experience, and operational excellence. But it's simply, we want Sartoris to become a more customer-centric, more focused, and more efficient company. To make this happen, we are adapting our operating model and are moving forward from our divisional structure and we'll no longer manage the business in separate divisional silos.

22:02 This also means change to the executive board responsibilities and to our external reporting structure from next financial year onward. But before we get into the details, let me first explain the key changes and why we are making them. At our Capital Markets Day, we talked about our ambition to further improve customer experience and become an even better partner for our customers. We want Sartorius to be easier to work with, better coordinated, and simpler to navigate. As our portfolio has become increasingly interconnected, customers are increasingly looking forward for complete solutions rather than only individual products. That's why we want to present Sartorius as one company, with one face to the customers and easy access to our full portfolio.

22:51 This is why we bring our commercial activities together under one organization. Alexandra Gatzemeyer will lead our global commercial organization as chief commercial officer, responsible for account management, marketing, and customer and technical services across the group. This allows us to present Sartoris as one company with clearer customer ownership, better coordination across our portfolio, and a more consistent experience for our customers worldwide. Second priority, we discussed that the Capital Markets Day was maintaining our innovation leadership while continuously improving operational excellence. To support this, our groups are being brought together under Rene Faber as Chief Product Officer, and he will be responsible for research and development, product management, technical sales, and manufacturing.

23:43 This creates clear accountability and helps bring decisions closer to the business and our customers. Last but not least, we created a global operations function under my leadership. Bringing these activities together allows us to establish common standards across the group, share best practices more efficiently and effectively, and further strengthen our operational excellence. And just to be clear, Rene will continue in his role as CEO of Statorius State in Biotech, and I will continue my role as Chairman of the Board of Directors of State in Biotech. With these changes, I am convinced that we have the right organizational setups to deliver on our ambition of becoming a more customer-centric, more focused and more efficient company. I also believe that we are well positioned for our next phase of growth.

24:35 In this context, we will also adjust our external reporting as of 2027 and align our second reporting more closely with our corporate structure. taking into account our French-listed subgroup Sartorius Daily Biotech. The new segment structure will comprise of three building blocks. The former biopress solution, bioprocess solutions division will become the bioprocessing solution segment, exactly mirroring Sartorius Daily Biotech. As a result, sales revenue and EBTA, differences previously caused by product allocations and structural considerations, no longer exists. simplifying modeling for analysts covering both companies. The lab products and service division will become the research solution segment and comprise our business outside Sartorius Daily Biotech. Consequently, we will also find a separate reconciliation line in our financial reporting, which primarily reflects intercompany eliminations.

25:37 At the end of the day, these changes require only a limited restatement. They do not affect Sartorius Group revenues or underlying EBTA, and the separate reporting of Sartorius Data and Biotech remains entirely unchanged. I'm sure many analysts covering both Sartorius AG and Sartorius Data and Biotech will appreciate the modeling simplification that comes with this. We are announcing the intended reporting change early to give investors and analysts sufficient transparency and preparation time. For the 2026 full year results, we intend to report the year under the existing segment structure and additionally provide pro forma figures for 2025 and 2026 under the new reporting structure, including a reconciliation.

26:25 Our 2027 guidance will be presented on the basis of the new structure. Actual reporting under the new segment structure is scheduled to begin with the first quarter 2027 results. From that point onwards, we would no longer report the previous DPS and LPS segmentation. In summary, the adapted operating model and the planned reporting structure are both designed to support our one Sartorius approach, emphasizing customer centricity, clear portfolio focus, and a simple reporting. With that, I'm now handing over to Rene. Rene, please.

27:04 Thank you, Michael, and good afternoon, everyone. Looking at the first nine months of 2026, I'm very pleased with our performance. The bioprocessing business continues to develop well and broadly in line with our expectations. Demand for biologics remain robust, supporting healthy growth in our recurring business with consumables again making the main contribution. In advanced therapies, underlying market activity remains encouraging, particularly in earlier stage pipelines. Our equipment business grew nicely year-on-year, confirming ongoing recovery. Utilization rates continue to increase, triggering new equipment orders. Demand for high-throughput process development systems is high, supporting healthy activity levels of our customers.

27:54 I'm also encouraged by the continued traction of our innovative platforms, which help customers develop processes faster and manufacture drugs in a more efficient way. What I hear from customer is that there's no way around implementing every possible innovation in manufacturing. We have launched new intensified bioreactor back, enabling to make more product in low volumes. Interest in our bionic intensified downstream platform is high, and we believe our portfolio is very well positioned to support customers as they continue adopting high-efficient single-use manufacturing. Let's now turn to our financials. Starting with the top line, on an operational basis, excluding tariff-related customer compensation, sales revenue grew by 7.8% in constant currencies compared with the first nine months of 2025.

28:51 Including customer compensation, sales were up by 6.5% in constant currencies, reaching 2.29 billion. Customer compensation for tariff surcharges amounted Thank you very much. Underlying EBITDA increased by 4.8% to 716 million.

29:37 The margin remained robust at 31.3%, improving by 20 basis points year-over-year. Positive volume effects and operating leverage offset for the product mix. Carrier surcharges and related customer compensation balance each other out and on a net basis had no impact on profitability. Please note that underlying margin development was stronger than the reported 20 basis points. Increase suggests that as a higher brand name fee was a 25 basis point headwind compared with last year. We already discussed that one in Q1. Overall, a strong margin underscores the strength and the scalability of our business model.

30:27 Looking at regions, all three contributed to growth in the first nine months. EMEA maintained solid momentum with sales increasing by 6.5% in constant currencies to 982 million. In Americas, operational sales grew by 7.6% in constant currencies, including tariff-related customer compensation, growth was 3.9% in constant currencies, with sales reaching 783 million. The region was also still affected by the project delays in advanced therapies, as Florian mentioned earlier. Asia-Pacific was our strongest region, with sales increasing by 10.6% in constant currencies to 524 million.

31:15 This development was also supported by continued recovery in China. Overall, the regional picture remains broad-based, with positive contributions from all three regions. Let's move to net profit and cash flow. Both developed well during the first nine months. Underlying net profit grew by 9.4% to 350 million. Underlying earnings per share increased accordingly by 9.4% to 3.59. Reported net profit increased by 26.7% to 277 million, supported by the improvement in operating profit and lower extraordinary items compared with the previous year period.

32:03 Operating cash flow increased by 11.6% to $498 million. Higher earnings and U.S. tariff refunds more than offset the gross related increase in working capital. And pre-cash flow grew strongly by 58.5% to $264 million, driven by higher operating cash flow and lower capital expenditure. The capex ratio was 10.1% compared to 12.6% in the pre-year period. We continue to invest our global research and production infrastructure by staying disciplined on how we allocate the capital. A quick look at our balance sheet metrics.

32:49 The equity ratio increased to 54.6% compared to 51.7% at the year end of 2025. reflecting our strong capital structure and earnings development. Net debt decreased to 2.14 billion. The ratio of net debt to underlying EBITDA improved further to 2.26 times compared to 2.38 times at year end of 2025. Overall, this development underlined a very robust balance sheet position of Sartorius State in biotech. It's a solid foundation to support future growth while maintaining financial flexibility and Discipline. Two quick points before we move on to our guidance.

33:35 First, IFRS 18, which Florian explained earlier, will of course also apply to Sartorius Steading Biotech reporting as of Q1, 2027. Second, let me also underline that the one Sartorius approach does not change the reporting of Sartorius Steading Biotech. SSB will continue to report separately and with the same level of transparency as today. The underlying principles, governance and transparency will remain unchanged. So to our guidance, let me briefly comment on our confirmed 2026 outlook for Sato Estet in biotech. On an operational basis, we continue to expect growth around the midpoint of our guiding range of six to 10%.

34:24 Including customer compensation for tariff surcharges, we expect reported growth in constant currencies to be in the lower half of this range. As a brief reminder on tariffs, we submitted refund applications of approximately 35 million. By the end of September, we had received around 28 million. We are expecting to receive the outstanding amount by year-end, but there is a level of uncertainty to timing. Turning to profitability, we continue to forecast an underlying EBITDA margin of slightly above 31 for the full year. Finally, we have modestly lowered our full year CapEx ratio expectation from around 13.3 to around 13%, reflecting our more focused prioritization of investment projects.

35:15 Our expectation for net steps to underlying EBITDA of slightly above two times at year end remains unchanged. FX headwind would be approximately 1.2 percentage points on reported revenue growth for the full year. For Q4, we expect now a tailwind of approximately 1.7 percentage points. Michael mentioned earlier, when thinking about Q4, please keep in mind that tariff surcharges will represent a headwind and that we are also facing and demanding comparison days with Q4 last year being our strongest quarter in absolute sales. So putting it all together, the underlying business remains healthy.

36:00 The first nine months give us a solid basis for the reminder of the year. Our focus now is on execution and finishing the year strongly. And with that, I will hand over to the operator for the Q&A. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and one at this time.

36:45 One moment for the first question, please. and the first question comes from Zain Ibrahim from JP Morgan. Please go ahead.

36:55 Hello, Zain Ibrahim, JP Morgan. Thanks for taking the question and I'll stick to one which is just if you could provide more color on the demand trend you're seeing from customers in bioprocessing both on the recurring side of the business and non-recurring and specifically how did market conditions evolve in Q3? It sounds like it's certainly getting better, Florian, from your comments but if you could maybe elaborate on that and I think Previously, you had a guidance for equipment of flat to slight growth for the year. So what's your latest view there?

37:29 Did someone get the question in full? I didn't understand fully acoustically. Can you just quickly repeat the main points of the question so the acoustics is not brilliant?

37:40 Sorry, hopefully you can hear me clearer. It was on latest demand trends in bioprocessing on recurring and non-recurring and how that's changing Q3 and what your latest view is on equipment for 2026 revenue growth.

37:55 Okay. Thanks, Ryan, for the question. Let me take that on. I think, you know, if we see and build on the continuation of, first of all, really a strong demand base on the volumes for the recurring business parts We look at our core consumables specifically. We see the continuation of the first six months of the year as well prolonged in Q3 across the board. Secondly, I think as highlighted during the presentation, We've seen a strengthening progression in the recovery of the instruments and equipment business as well quite widely across the regions. Here I think to outline is really the specific strong demand that we see on the bioanalytics front and as well on further desktop systems.

38:46 We expect, of course, this trend to further continue. We have good visibility for the full year, particularly when it gets to the instruments and equipment side, supporting our full year guidance as we outlined.

39:02 Thanks very much. Then the next question comes from Charlie Haywood from Bank of America. Please go ahead.

39:10 Hi, Charlie Haywood, Bank of America. Thanks for taking the question. It's actually on the LPS side. After obviously a very strong third quarter showing an early demand signal there, obviously appreciate there is some phasing element to that. We wanted to just understand more broadly how you see the potential opportunity here from, you know, I guess AI and AI-driven drug discovery for initially on the bioanalytics and LPS side and then maybe longer term on the bioprocessing side. Thank you.

39:39 Okay, thanks Charlie for the question. I think the LPS part of this Alexander will take. Thank you.

39:47 Let me take part on LPS drug discovery. So if you think about AI drug driven drug discovery, this was one of our strategic growth pillar. We were talking in the capital market day and we already play in this area. So one of the example Michael was talking earlier in an introduction about IncuSight, for example, where we have collaboration with NVIDIA and we have AI-powered assays already on instrument. And the second example, it's Octet. It's a flow BLI system where we have its real-time measurement label-free, so we do see this instrument participating in workflows at a customer site, and we would expect even further growth and innovations in that direction because there is instrument, consumables, software part, and, of course, services.

40:45 Anything to add there, Rene, on the BPS side when it gets to the AI tourism part

40:52 of this? I think it's interesting to see the discussions we are having with our customers who do process development. Those discussions are around how to get prepared for the increased number of trucks which are coming due to the AI development and the discovery. So the expectation clearly is will help, the AI will help in drug discovery to get more drugs into the manufacturing and also increase the success rate of these drugs. And the process development people are already preparing for that, how to deal with the increased numbers. And of course the high throughput systems like our EMBA system is exactly the solution to deal with that wave which is potentially coming.

41:45 Thank you. Then the next question comes from Matthew Weston from UBS. Please go ahead.

41:54 Thank you. As we look into 2728 and we think of the likely demand for new facility fit-out, particularly in the US in BPS, There's a big investor debate on whether Sartorius will lose share to your competitor with a 5,000-litre single-use bioreactor. So my question is really, where are Sartorius on scaling up your bioreactor volumes in single use? Do you think it will be a competitive advantage? And in particular, what in the Sartorius portfolio gives you confidence that you'll win your fair share of the RFPs when they come?

42:31 Thank you, Matthew. This one is for Rene. Thank you very much for the question. So first of all, what you are saying, and this is what we also hear, customers are preparing for increase of the capacities. Customers prefer single use, so single use is often the technology of choice. Now to the volumes, what we see in our discussions, and we recently had a nice presentation and a few platform wins or conversion of competitors by rigged platforms to ours due to the reason that the main driver and the main thinking of the customers is with the improved titers from the process development and the intensification of processes, the expectation is that the volumes of 2K and below powers the majority of the demands of our clients. of course we are watching the 5k topic here so far we see it's a rather a quick increase in capacity for these older legacy low titer processes which we don't believe is the future but we are in close in touch with customers to see what they exactly need thank you

44:01 The next question comes from Charles Whitman King from Barclays. Please go ahead. Hi, Charles Whitman King from Barclays. Thanks very much for taking my question. My question is just also thinking about kind of 27-28 dynamics as we roll forward off a strong year. I'm just thinking about potential benefit from this U.S. reshoring and timings compared to some peers. You previously said you expect orders over 27-28. with late 27 and 28 orders. I'm just wondering if that remains your expectation given what you've seen over the years so far. And also just if you can provide any further commentary around whether you think this US reshoring is driven by MSN expansions or is actually more reflective of a preference to shorten supply chains post-COVID and is therefore a bit more structural. Thank you.

44:47 Thank you, Charles, for your question. So I take that one up here. Yeah, so, I mean, basically, we stay in line with our indications of the way of how we look at the demand for the years 27 and 28 when it gets to particularly the non-recurring business and capex investments from the policy changes and the regulatory demands. So we, of course, have been very pleased in order to see the one other brownfield additions and capex demands coming from North America already during this year and the second half of this year so far. At the same time, we don't necessarily say that we would attribute that to recurring discussions. If we take that We still believe that we see some of the specific groundbreaking is taking place as we speak.

45:40 We continue to see that the expectation on order intake is there for the later part of 27 and 20 and then we'll basically spend over a longer period of time. Our judgment so far is not necessarily yet a very structural demand that comes from that. We still believe that there will be a specific regional overcapacity or global overcapacity be the consequence of those investments. So we see these investments that will come and spend through these years from 27, 28 onwards for the coming years to build up regional capacity particularly for the CAPEX. Thank you very much.

46:26 And the next question comes from Subbu Nambi from Guggenheim Securities. Please go ahead. Hey guys, thank you for taking my question. You've now delivered roughly 8% operational growth through the nine months with consumables healthy and equipment recovering. As you look into 2027, what needs to be true for bioprocess solutions to sustain the high single digit growth and how much confidence do you have that equipment can still become a meaningful contributor rather than the growth primarily coming from consumables? Thank you so much.

47:02 Thank you for your question, Subbu. Yeah, I think at this point in time, we don't want to preempt the exciting discussions that we probably will have done in 2027. So there is no need right now for us to talk about 2027 guidance. We are in the middle of our discussions in the executive team and then with the supervisory team to look at our budgets for the future. Of course, we see the momentum on the basic demand for our core consumables and broader recurring business to be robust and taking us into the year end. And therefore, there's as well no need to believe that those trends and the underlying demand of our customers in terms of increasing volumes in their output will change. So in this respect, we think this is for sure a guiding principle into the coming year. Again, we think it's too early now as well to make a clear note about how the non-recurring business will further develop.

48:05 However, of course, given the lead times, we have a bit better look here. That's the reason why we are rather confident with our projections for this year on the non-recurring side that we will see a slight growth for the full year. And we see this as a progression of the normalization in that part of the business. Again, having said that, it's important to see that the demands in CAPEX and CAPEX investments generally follow a higher degree of cycle and I would say some volatility on the basis of capacity and capacity utilization. Thank you so much. And the next question comes from Odysseas Manasiotis from BNB Paribas. Please go ahead.

48:51 Hi, thank you for taking my questions. I wanted to zoom into the strength of the LPS division in Q3, please. Could you give us a sense of, you know, roughly what proportion you saw from demand coming from analytics on the AI drug dev, like the Octa and QSI instruments, then broader LPS product demand from biotech funding, and also to what extent pull forward helped you here. Thank you.

49:24 Thank you for the question, Alicia. This is one for you, Alexandra.

49:28 Thank you for the question. And yes, we're very happy to see our performance in this nine months for LPS division. I think fair to say that we would not tell exact numbers of the estimation even on our pull forward from Q4 into Q3. but definitely the performance is truly driven by consumables, so recurring revenue within LPS, so we see the bioanalytic instruments are in use and in high use. At the customer side, it's released of the CAPEX by Academia and BioPharma, so execution of the planned projects on which we was working from the beginning of the year, and that's the drivers for this three quarters of the performance of LPS.

50:20 And the next question comes from Charles Weston from RBC. Please go ahead. Good afternoon. The integration of the functions from the two businesses is obviously a major step for the business. So can you tell us how far through this process are you? What do you think the key risks are? And what do you anticipate as the benefits? And is there a way that You'll be able to report on the progress here going forwards in a quantitative manner.

50:53 Yeah, thanks for the question. Appreciate that Charles. I will take that on. So we started to build this on a progressive basis. The new organization started in summer and we think that now of course we will formalize and have a full life then in the beginning of 2027 with these new responsibilities. We are well underway in the company in order to outline what does it mean in the new interfaces, in the direction with the teams. We're driving workshops and alignment sessions. So overall, I think I would say the spirit and the satisfaction with the team on the new structure is there and people have found mostly their place. Now, what does it really bring?

51:39 I mean, we discussed that a bit before. The main driver is threefold. On the one hand side, we always think that structure needs to follow strategy. So with our clarity that we're going to focus our strategy on the three pillar of products and innovation on customer centricity and operations, it's clear that we want to drive clear accountabilities and focus areas in the operating model with that. Secondly, we think the customers will really appreciate that step with a very clear note of one face to the customer to provide a clear entry point, a clear coordination of all efforts, and therefore as well a better way of coordinating and an easier way for us to interact. and last but not least, we look at our portfolio and its growing complexity always from a total workflow perspective, all the way starting from drug discovery, molecule development, process development, upstream-downstream manufacturing and taking as well now a consistent approach for all of our product development and product management across portfolio will drive strengthening of that path as well.

52:47 And last but not least, bringing on an operational team in order to set the standards for quality for operations and drive in a consistent manner across the supply chain and operations framework will support our appetite for operational excellence improvements. Thank you. And the next question comes from Thibault Bouserin from Morgan Stanley. Please go ahead.

53:15 Thank you, Thibault Bouserin from Morgan Stanley. It's not clear if the tariff surcharge was refunded by all of your competitors. So do you have any customer feedback on what you did in terms of refunding these tariffs, surcharges, and do you see some positive outcome in your conversations with your customers?

53:41 All right, good then, Florian, we'll take that on.

53:46 Thibaut, as you can imagine, I think it is clear that first of all, we wanted to stay true to our words that if we are charging extra for the tariffs, there would also be refunds. And secondly, this was generally taken up very positively, of course, by the customers. And thirdly, we are currently in the process of getting these refunds out to the customers. Then the next question comes from Harry Gillis from Bernberg. Please go ahead.

54:24 Thank you very much for taking the questions. I want to push a little bit more on what the strength from AI-driven drug discovery workflows means in practice. Is this sort of AI-native companies? Is it biotech potentially benefiting from biotech funding, or is it large pharma companies in terms of the customer category. And then is it customers running more experiments per instrument, so it's higher consumables pull through? Or is it a mixture of that and instrument purchases? Thank you. And then I think just to follow on actually, you said the pull forward or the demand was very strong excluding the pull forward.

55:09 Can you just give us any sense to get comfortable that this wasn't simply Thank you so much, Harry, for the question. Alexandra, that's for you. Thank you for the question. Let me start from the answer on the last part.

55:35 There was no, fair to say, there was no like big tender, what you're saying, which affects this result like one-time effect. It's rather underlying strong performance across different segments and different geographies. But that's the results you can see now. And maybe to explain a little bit more on the AI-driven drug discovery on the customers and who do we see looking into these processes and looking into the instruments. So it's actually currently where you could say in the beginning of this journey, we see it at biopharma customers, we see it at academia, which are buying these instruments and running more experiments that they would run otherwise, because you can generate more results in real time with, again, in-queue site or octet.

56:28 and then you can feed your models with this data to create proposals for new targets and then you again need to go into the vet lab to test this target. So you actually at the moment generate more work in the vet lab through our portfolio and then testing your targets again using the portfolio which we can offer whether through LPS portfolio or as Rene was saying on the bioprocess side, We see our products being purchased through our customer base. It's maybe not that much by AI companies. I hope that gives you more colors.

57:09 Very clear. Can I just ask one quick follow-up? What are you seeing overall across the entire business in terms of U.S. academia and government? Thank you.

57:21 We see the performance maybe slightly improved, but we can't see maybe the performance we saw years before.

57:31 Thank you so much. And the next question comes from Oliver Reinberg from Kepler-Chevreux. Please go ahead.

57:43 Thanks very much for taking my question. I just wanted to talk about China. There's obviously quite some kind of progress in the R&D activities in this kind of country. So can you just talk to your market position in this kind of early stage companies in China and how that compares to the rest of the world? And part of this discussion, can you also add to what you see generally in terms of local competition, which product groups are affected and what kind of dynamic do you observe? Thank you.

58:11 Yeah. Thanks for the question, Oliver. I'll take that on. So, I mean, first of all, I would say we don't necessarily see a different level, let's say, of customer segments that we are active and we are well positioned in China compared to other countries. Secondly, I think if we look a little bit into the evolution in China and to the performance that we've seen there now recently, of course, there is an encouragement by the extra level of activities around the pipeline with really fueling a lot of the demand there on consumables. But it's pretty as well on the research side. So this, I think, is rather positive. And we see that in, I would say, on the biotech side, on the larger biopharma front, on academia, and to some degree as well, of course, by the CDMOs.

59:02 So overall, I would say from our expectation and from our perspective there, we see that is a healthy contribution that we've seen throughout the first half of the year and continuing into Q3. And we have reasons to believe that the underlying demand there will remain, looking at the approval rates, looking at the extra molecules that come on track on that.

59:29 Can you say a word in terms of where do you see most of the local competition?

59:35 The local competition, I would say, is not a large change in its position. So I think the majority of the focus of local competitors remains in the like-for-like local market for local production and activities in the biopharma market. And it's as well in the segment mainly active where I would say there's more comparable Thank you very much. And the next question comes from James Van Tempers from Jefferies. Please go ahead.

1:00:17 Yes, thanks for taking my question. I'd just like to ask about the bioprocessing market in your position. We hear a lot about higher titers and demand for single use, but a larger CDMO recently showed some data how most of the volume for biologics is driven by relatively few products and stainless steel, and late-stage pipeline likely has lower titers than are often cited by bioprocessing players, though there's obviously some flex for hybrid setups. So essentially, could these changes take 10 to 15 years to play out in practice? My question is, do you agree with that view in terms of how the titers will take an awful lot longer to come through? And how do you see the single-use share in the overall market? And do you see greater relative traction for you in biosimilars than originators?

1:01:05 and then my follow-up, if I can, is where do you see the main areas of the portfolio differentiation if portfolio intensification, for example, results in higher media demand if you don't see a way to differentiate in a 5K setup? Thank you.

1:01:22 Thanks for the question, or for the questions in this case, so we'll focus maybe on the first one. So, Rene, that's one for you.

1:01:29 Yeah, thank you, and I try to make it simple. So, of course, if you look ahead, There will be low-mix, high-volume products, and there will be low-volume, high-mix scenarios. And when we look at the pipelines of the customers, what is coming, we clearly see that the low-volume, high-mix is coming and growing faster and will be growing faster than a few single blockbusters. Our strategy and our strengths of Sartorius is to focus on these low-volume, high-mix scenarios where I believe it is clear that the titers and improvements in these processes, they are real.

1:02:20 Customers are asking for more intensified processes to do more in single use because the benefits are also clear in terms of cost, flexibility, sustainability. So that's where we see our above-market growth. But again, the few low-mix, high-volume blockbusters, that's real also and will stay there. And of course, our business in this segment, we sell a lot of consumables in stainless steel facilities, so it's not irrelevant for us. But strategic focus is there where the growth above-market is coming. And the next question comes from Anna Snopkowski from KeyBank.

1:03:10 Please go ahead.

1:03:13 Hi, this is Anna Snopkowski on for Paul Knight at KeyBank. Thanks for taking my question. I was just wondering if you could talk to the 14% growth you saw on the lab product side, specifically APAC, which I think grew over 20% in lab product. Do you think you could just talk through what is driving the strength in APAC and how much of that growth is coming from China? Thank

1:03:44 you, Jana. This one is for you, Alexandra.

1:03:45 Thank you. Yes, I think we, again, pleased to see our growth in APAC. It's, again, across portfolio, across the segments. Bioanalytics, recurring revenue is also supported by services in this region. If you think about China versus APEC, it would be fair to say that China is leading growth there, driven by our participation and R&D network within the China region. I think that would be my answer.

1:04:28 Thank you. And then maybe just one follow-up on your overall guidance and talking to the midpoint of the range. Do you think you could just walk through any of the swing factors that could get us either to the lower end or the higher end of the range, whether that's equipment recovering faster than expected or academic spend? Just anything you could highlight there.

1:04:55 Thanks, Anna, for the follow-up. I mean, we confirm our guidance on the basis of really seeing now enough visibility for the full year in order to stay with that statement. So, as well, we look at the visibility on the non-recurring business side. I think we have a very strong visibility towards the year-end. On consumers, we have a few weeks to go, but by and large, I think we feel very comfortable with the guidance on stating midpoint guidance for group and BPS and upper end for LPS. Then the next question comes from Falco Friedrichs from Deutsche Bank. Please go ahead.

1:05:40 Thank you very much. At a higher level, How far are we from a full normalization of the equipment business? I obviously appreciate that you may not be able to provide a precise timeline, but perhaps you could share your high level thoughts on where we currently stand. Thank you.

1:05:59 Yeah, thanks, Michael. The data tells us that we've seen this rather steady and continuous progression in the recovery of the equipment business. now for the last quarters. Again, I mean, the visibility in terms of the order book, backlog, opportunity pipeline and leads pipeline, we think there's a good reason to see that this is not changing dramatically, you know, from one month to the next month. To make a projection to where it will look like in 2027, we would like to wait until we make our guidance, look at our budgets and bring this together to the group.

1:06:48 And that's good. Thank you. And the next question comes from Delfina Lillouet from Bernstein. Please go ahead.

1:06:58 Yes, hello. Hi, good afternoon. Congrats on the result. Two follow-ups, please. One regarding the markets and specifically what you elaborate during the CND when it comes to the market share. from the R&D and from the commercial drugs in the market already. Have you made any progress in terms of penetration to that dedicated segment? And when you look forward, the entire biopharma market When do you think we're going to reach the capacity or what do you have, what can you share with us, what you have in your plan when it comes to effectively reaching this capacity? Is that for 2035? Is that for later? Is it for never?

1:07:45 What is your plan? Second question deals with more the reorg and the impact for Stedim now that we have BPS being exactly Exactly, Stedim, can you share with us if there is anything we need to keep in mind that was at the time of the acquisition and the Stedim quotation regarding Stedim that makes sense in the short term to keep the company quotas in the market?

1:08:20 Daphine, could you please repeat the background of your last question? We didn't get that here.

1:08:25 Yeah, no, the last question is regarding Stedim and questioning about the fact that you have to keep or you need to keep Stedim as a separate entity and quote it in the market now that it's completely BPS.

1:08:43 Okay, so yeah, I'll try to address that second question if I try to understand what you're after. So yeah, we will keep the setup that we're having and the legal entity of Stedim. Now, of course, we want to make that simplification to really make sure that we have one-on-one the same definition of now the new bioprocess segment. as much as the bioprocessing segment, as much as the saturated state and biotech perspective. So in this respect, there is no need to change. And again, as you know, that we've as well established that unit that is highly under control of the AG level as well for managing capital inflows.

1:09:31 So in this respect, I think that is right now the situation. Is there anything you want to add there, Florian?

1:09:36 Yeah, just one point. If your question was into the direction of a delisting, this is not in the cards. We are very happy with the current situation here. Okay, thank you. Ladies and gentlemen, as there are no more questions, I would like to turn the conference back over to Petra Muller, Head of Investor Relations.

1:10:02 Yes, thank you, thank you, this concludes our today's call. Please reach out to the IR team in case of any open questions. And before we close, maybe one final point. As some of you may have already noticed in our financial calendar, we are making a small change to our reporting schedule. Rather than releasing preliminary figures and then publishing the annual report and the UID a few weeks later, We will publish our full year results and both reports on February 23rd. It means you will have all the complete information available on the same day. We thank you for joining us today and wish you all a pleasant rest of the day. Take care and see you next time. Operator, you may now disconnect.

1:10:51 Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.