Germany, France, Tech ReviewGermany

Growing within a dynamic market

24.09.2007

With a reverse merger with the French disposable bags specialist Stedim S.A., Sartorius AG (Goettingen, Germany) has become one of the world’s leading providers of cutting-edge equipment and services for the development, quality assurance and production processes of the biopharmaceutical industry. European Biotechnology News spoke with Dr. Joachim Kreuzburg, the Chairman and CEO of Sartorius AG, and the newly formed, Euronext-listed Sartorius Stedim Biotech S.A. (Aubagne) about the merger, market opportunities in the fast-growing field of single-use technologies and the future strategy of the new enterprise.

Dr. Joachim Kreuzburg is Executive Board Chairman and CEO of Sartorius AG as well as Chairman of the Board and CEO of Sartorius Stedim Biotech S.A. He holds a university degree in machine engineering and a doctorate in economics, and has worked for the Sartorius Group since 1999. After holding various positions in Goettingen and Hamburg, Germany, he headed the Treasury & Investor Relations Department at Sartorius. Since November 2002, Dr. Kreuzburg has been a member of the Executive Board of Sartorius AG. As Executive Board Chairman, he is responsible for the Biotechnology Division as well as the Finance, Internal Auditing, Legal and Communications departments. The 42-year-old lives in Hanover, Germany. He is married and has a daughter.

Euro|BioTech|News
Dr. Kreuzburg, with the creation of Euronext-listed Sartorius Stedim Biotech S.A. Sartorius is striving to attain global leadership as a fully integrated supplier of bioprocessing products for the biopharmaceutical industry, with the focus on single-use products. What strategic assumptions are behind this aim, how much revenue and return do you expect over the mid-term, and what role will the new company play within Sartorius?

KREUZBURG:
By creating the new Sartorius Stedim Biotech company we have taken a major step forward, towards becoming a global technology leader for the biopharmaceutical industry. The reason for this business combination is easy to discern: Both Sartorius and Stedim have been serving the same customer markets and have product portfolios that ideally complement one another, meaning that we hardly have any overlaps. Geographically as well, we are a perfect match as Sartorius, unlike Stedim is already well positioned in Asia, whereas Stedim has contributed its special US market strengths.
This reverse merger transaction is already making an impact on our results in 2007: We expect pro forma sales revenue for the entire Sartorius Group to jump to €650 million to €670 million. During the next five years (up to 2011), we anticipate that our compound annual growth rate will be between eleven and twelve percent and that our EBITA margin will further increase.

Euro|BioTech|News
What is the global position of Sartorius Stedim compared with that of its competitors in this market segment? – In which segments is the new company well positioned and which areas have to be strengthened?

KREUZBURG:
Sartorius Stedim Biotech is one of the globally leading companies in bioprocessing technology. We are, as a result of Stedim, the Number One in aseptic bag technology for biopharmaceutical applications. This is important as it is a platform technology for diverse single-use applications in bioprocessing. We are also among the top three worldwide in fermentation, bioprocess filtration and various purification technologies, such as membrane chromatography, which are all core technologies from Sartorius. None of our competitors has such a broad line-up of products. We provide total solutions and will continue to follow our approach of supplying our customers’ needs for integrated technologies and products all along their bioprocessing chain.

Euro|BioTech|News
How far has Stedim already been integrated? What is the timetable for the next steps?

KREUZBURG:
We used the four months between the announcement of this transaction in February and its completion at the end of June intensively for integration planning. As far as this is concerned, we even introduced the new, integrated organisation immidiately the day following the closing of the transaction, and have been working since then on these new structures. Uniform branding has been completely implemented; the alignment of R&D activities and the harmonisation of administrative processes are far advanced. A few other issues, such as globally consistent, integrated supply chain processes, naturally take somewhat longer. We plan to have completed most of particular integration tasks by the end of the year.
However, our combined product portfolio is already organised and can be bought from a single vendor – Sartorius Stedim Biotech.

Euro|BioTech|News
The new company, which is headquartered in Aubagne, France, has highly diverse products. Where will R&D and production (of filtration/separation products and of disposable bags take place, and where will the decisions be made?

KREUZBURG:
The reasons for selecting Aubagne as headquarters for Sartorius Stedim Biotech are strictly of a legal nature and can be explained by the fact that we chose a so-called “reverse merger” for our transaction structure. As a result of this structure, Sartorius Stedim Biotech remains a company listed on the stock exchange in France. Despite this, the global functions that you mentioned are essentially focused at the Sartorius parent company located in Goettingen, Germany, which thus represents the “central nerve centre“ of the new company. With manufacturing and sales companies in Europe, North America, Asia and North Africa, Sartorius Stedim Biotech enjoys a worldwide presence.

Euro|BioTech|News
What advantages will your customers get from the new company Sartorius Stedim Biotech?

KREUZBURG:
The new company will establish new levels of technology integration, security of supply and global services. They will benefit from the largest and most integrated portfolio of single- and multi-use biopharmaceutical production equipment as well as comprehensive related services, which will be supplied by only one provider.

Euro|BioTech|News
Sartorius already offered disposable bags before it merged with Stedim, which holds a 50% share of the ($120 million) world market in this segment. Why did Sartorius decide to integrate this technology into its own product portfolio instead of continuing alliances with bag technology providers?

KREUZBURG:
At Sartorius, we actually entered the disposable bag segment in 2004 through an alliance. As aseptic bags evolved from components into a core technology because of the shift in paradigm towards disposables, there were both technological and economical reasons that spoke in favour of adding this single-use technology to our own competence portfolio. In addition, more and more single-use bags and sterilising-grade filters are being used in tandem as a rule.

Euro|BioTech|News
Why is there currently a trend within the biopharmaceutical industry to change to disposables/bags instead of classic reusable equipment? In which areas and on which scale?

KREUZBURG:
For quite a few years, we have been observing that the biopharmaceutical industry is clearly moving away from reusable equipment toward disposable products and technologies. Weighing both the ecological and economical aspects, single-use technologies are the bottom line. They offer biomanufacturing companies more safety and reliability in preventing cross-contamination. As these technologies eliminate the need for cleaning validation, they reduce downtime in production and allow much more flexibility in changing out products. Moreover, they significantly lower production and investment costs, for example, for starting up operations using new production capacity levels. Seen ecologically, single-use products preclude the need for disposal of large quantities of biological residues and solvents.

Euro|BioTech|News
What market share do you see for disposable systems compared to the classic bioprocessing products?

KREUZBURG:
Currently, approximately 10% of our sterilising-grade filters are channelled into applications with single-use bags, and we estimate that this proportion will increase in the next few years to around 30%. Here, we assume that the market for applications with single-use bags will grow faster than the remaining market – and thus become the growth engine for our filter business.

Euro|BioTech|News
How far does Sartorius Stedim Biotech S.A.’s success depend on the success of biopharmaceutical products? What growth prospects do you estimate for the biopharmaceutical market?

KREUZBURG:
Naturally, our business success is linked, to a certain extent, to the development of the biopharmaceutical industry, although we do not depend on the approval of individual medications thanks to our broad customer base. The biopharma business continues to be on the upswing. Many diseases that have been incurable so far are now being treated, and conventional therapies replaced, by new biotherapeutic approaches that entail fewer side effects. The growth rate of biologics, which is a good twelve percent, has been roughly double that of the entire pharma market for several years running. Besides therapy fields already established for biologics, such as those for treating metabolic disorders, new cancer medications and vaccines are primarily contributing to aboveaverage growth rates. Against the background of this development, we are very confident about our future prospects.

Euro|BioTech|News
Dr. Kreuzburg, thank you very much for the interesting talk.

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