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As filed with the Securities and Exchange Commission on June 21, 2021

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Stevanato Group S.p.A.

(Exact name of Registrant as specified in its charter)

 

 

 

Republic of Italy   3221   Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

Via Molinella 17

35017 Piombino Dese – Padua

Italy

+39 049 9318111

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Ompi of America, Inc.

41 University Drive No. 400

Newton, PA - 18940

+1 (267) 757-8747

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Lorenzo Corte

Skadden, Arps, Slate, Meagher & Flom (UK) LLP

40 Bank Street, Canary Wharf

London, E14 5DS

United Kingdom

+44 20 7519-7000

 

M. Ryan Benedict

Gregory P. Rodgers

Latham & Watkins LLP

Corso Matteotti, 22

20121 Milan

Italy

+39 02 3046-2000

 

 

Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company  ☑

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

 

Proposed

maximum

aggregate
offering price(1)

  Amount of
registration fee(2)

Ordinary shares without par value

  $100,000,000   $10,910

 

 

(1)

Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes ordinary shares that are issuable pursuant to the exercise of the underwriters’ over-allotment rights.

(2)

Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION, DATED              , 2021

STEVANATO GROUP S.P.A.

 

 

LOGO

Ordinary shares

 

 

This is an initial public offering of              ordinary shares without par value in the capital of Stevanato Group S.p.A. (“Shares”) by Stevanato Group S.p.A. The selling shareholder identified in this prospectus is offering an additional              Shares.

We currently estimate that the initial public offering price will be between $             and $             per Share. Prior to this offering, there has been no public market in the United States, or the U.S., for our Shares. Application has been made for the listing of our Shares on the New York Stock Exchange (“NYSE”) under the ticker STVN. We believe that upon completion of the offering contemplated by this prospectus, we will meet the standards for listing on the NYSE’s main exchange.

Following the completion of this offering, our outstanding share capital will consist of ordinary shares and class A multiple voting shares. Stevanato Holding S.r.l. will beneficially own all of our issued class A multiple voting shares and will be able to exercise         % of the total voting power of our issued and outstanding share capital immediately following the completion of this offering (or approximately         % if the underwriters’ option to purchase additional shares is exercised in full). Holders of ordinary shares will be entitled to one vote per share, while holders of class A multiple voting shares will be entitled to three votes per share. Upon any sale, transfer, assignment or disposition of any class A multiple voting shares by a holder thereof to a non-affiliate of such holder, each of such class A multiple voting shares will be automatically and immediately converted into one ordinary share.

Following the completion of this offering, we will be a “controlled company” within the meaning of the corporate governance rules of the NYSE because Stevanato Holding S.r.l. will beneficially own         % of the total voting power of our then outstanding share capital, assuming the underwriters do not exercise their over-allotment option, or         % of our then outstanding share capital if the underwriters exercise their over-allotment option in full. See “Principal and Selling Shareholder” beginning on page 128.

We are both an “emerging growth company” and a “foreign private issuer” as defined under U.S. federal securities laws and as such, will be eligible for reduced public company reporting requirements for this prospectus and future filings.

 

 

Investing in our shares involves risks. see “Risk Factors” beginning on page 20.

 

 

Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

PRICE US$              per Share

 

 

 

      

Price to
Public

      

Underwriting
Discounts
and
Commissions(1)

      

Proceeds
to us

      

Proceeds to
Selling
Shareholder

 

Per ordinary share

       $                    $                    $                    $            

Total

       $                    $                    $                    $            

 

(1)

See the section entitled “Underwriting” for additional disclosure regarding underwriting compensation payable by us.

To the extent that the underwriters sell more than              Shares, we and the selling shareholder have granted the underwriters the right to purchase up to an additional              Shares at the same price as the Shares offered through this prospectus, for              days after the date of this prospectus.

The underwriters expect to deliver the Shares against payment in U.S. dollars in New York, New York on or about              , 2021.

 

MORGAN STANLEY   BofA SECURITIES    JEFFERIES      
CITIGROUP   KEYBANC
CAPITAL MARKETS
   UBS
INVESTMENT
BANK
   WELLS
FARGO
SECURITIES
   WILLIAM
BLAIR

 

 

Prospectus dated              , 2021.


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You should rely only on the information contained in this prospectus and any related free-writing prospectus that we authorize to be distributed to you. We and the underwriters have not authorized any person to provide you with information different from that contained in this prospectus or any related free-writing prospectus authorized to be distributed to you. This prospectus is not an offer to sell, nor is it seeking an offer to buy, Shares in any state or other jurisdiction where such offer or sale is not permitted. The information in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies, regardless of the time of delivery of this prospectus or of any sale of the securities offered hereby.

Neither we nor any of the underwriters has done anything that would permit this offering or possession or distribution of this prospectus, or any filed free writing prospectus, in any jurisdiction other than in the United States. Persons outside the United States who come into possession of this prospectus or any filed free writing prospectus must inform themselves about, and observe any restrictions relating to, the offering of the Shares and the distribution of this prospectus or any filed free writing prospectus outside of the United States.

We are incorporated in Italy, and a majority of our outstanding securities are owned by non-U.S. residents. Under the rules of the U.S. Securities and Exchange Commission (“SEC”), we are currently eligible for treatment as a “foreign private issuer.” As a foreign private issuer, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic registrants whose securities are registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

We are responsible for the information contained in this prospectus. Neither we, the Selling Shareholder nor the underwriters have authorized anyone to provide you with different information, and neither we, the Selling Shareholder nor the underwriters take responsibility for any other information others may give you. We, the Selling Shareholder and the underwriters are not making an offer to sell, or seeking offers to buy, these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date regardless of the time of delivery of this prospectus or of any sale of the Shares.

 

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NOTE ON THE PRESENTATION OF INFORMATION

Throughout this registration statement, unless the context otherwise requires, references to “Stevanato Group S.p.A.”, “Stevanato”, the “Company”, “we”, “us”, “Group”, “our” and words of similar import refer to Stevanato Group S.p.A. and its consolidated subsidiaries.

Unless otherwise indicated, all references to “€”, “EUR” and “Euro” in this annual report are to, and amounts are presented in, euros. All references to “US$” and “$” are to U.S. dollars.

Financial Statements

We present in this prospectus the audited consolidated financial statements as of December 31, 2019 and 2020, as well as the unaudited interim condensed consolidated financial statements for the three months ended March 31, 2020 and 2021. These financial statements were prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

All references herein to “our financial statements,” “our audited consolidated financial information,” “our audited consolidated financial statements”, “our unaudited interim condensed consolidated financial information” and “our unaudited interim condensed consolidated financial statements”, are to Stevanato Group’s consolidated financial statements included elsewhere in this prospectus.

This financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, our audited consolidated financial statements and unaudited interim condensed consolidated financial statements, including the notes thereto, included elsewhere in this prospectus.

Following this offering, we will begin reporting consolidated financial information to shareholders. We maintain our books and records in euro and our financial statements will be prepared in accordance with IFRS, as issued by the IASB.

Our fiscal year ends on December 31. References in this prospectus to a fiscal year, such as “fiscal year 2020,” relate to our fiscal year ended on December 31 of that calendar year.

Special Note Regarding Non-GAAP Financial Measures

This prospectus presents our EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit, Adjusted Operating Profit Margin, CAPEX and Free Cash Flow, which are non-GAAP financial measures, and their reconciliations to the nearest measure as defined by IFRS, for the convenience of investors.

EBITDA is defined as net profit before income tax expenses, net financial expenses, including share of profit of associates, amortization and depreciation. Adjusted EBITDA is defined as EBITDA as adjusted for certain income and costs expected to occur infrequently, and that management considers not reflective of ongoing operational activities of the company. EBITDA is presented to aid management in their analysis of the performance of the Group and to assist in the comparison of our performance with that of our competitors. Adjusted EBITDA is provided in order to present how the underlying business has performed excluding the impact of certain non-recurring items, which may alter the underlying performance and impair comparability of results between periods. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA for a period by total revenue for the same period.

Adjusted Operating Profit represents Operating Profit as adjusted for certain income and costs expected to occur infrequently, and that management considers not reflective of ongoing operational activities. Adjusted Operating Profit is provided in order to present how the underlying business has performed excluding the impact of the adjusting items, which may alter the underlying performance and impair comparability of results between the periods. Adjusted Operating Profit Margin is calculated by dividing Adjusted Operating Profit for a period by total revenue for the same period.

 

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Capital expenditure, or CAPEX, is the sum of investment amounts on tangible fixed assets and intangible assets during the period (excluding right-of-use assets recognized during the period in accordance with IFRS 16—Leases). These investment activities consist of acquisitions of property and equipment and intangible assets.

Free Cash Flow is defined as cash flows from operating activities excluding interests paid and received, less investments in property, plant and equipment and intangible assets on a paid-out cash basis.

Management uses EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit, Adjusted Operating Profit Margin, CAPEX and Free Cash Flow to monitor the underlying performance of the business and its operations. These measures are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing these measures as reported by us to the same or similar measures as reported by other companies. These non-GAAP financial measures may not be comparable to similarly titled metrics of other companies.

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit, Adjusted Operating Profit Margin, CAPEX and Free Cash Flow are not measurements of performance under IFRS or any other generally accepted accounting principles, and you should not consider them as an alternative to loss for the period, operating loss or other financial measures determined in accordance with IFRS. These measures have limitations as analytical tools, and you should not consider them in isolation. See “Summary Consolidated Financial Data—Non-GAAP Financial Measures” for more detail on these limitations of EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit, Adjusted Operating Profit Margin, CAPEX and Free Cash Flow. Accordingly, prospective investors should not place undue reliance on these non-GAAP financial measures contained in this prospectus.

Market Share and Other Information

This prospectus contains data related to economic conditions in the market in which we operate. The information contained in this prospectus concerning economic conditions is based on publicly available information from third-party sources that we believe to be reasonable. Market data and certain industry forecast data used in this prospectus were obtained from internal reports and studies, where appropriate, as well as estimates, market research, publicly available information and industry publications. We obtained the information included in this prospectus relating to the industry in which we operate, as well as the estimates concerning market shares, through internal research, public information and publications on the industry prepared by official public sources.

There are a number of studies that address either specific market segments, or regional markets, within our industry. We have reviewed and analyzed data collected by, among others, IQVIA, Alira Health, Roots Analysis, Markets and Markets Research Pvt Ltd., Grand View Research and Evaluate MedTech and Global Data UK Ltd (“Global Data”). However, given the rapid changes in our industry and the markets in which we operate, no industry research that is generally available covers all of the trends we view as key to understanding our industry and our place in it as providers of drug containment, drug delivery and diagnostic solutions for the pharmaceutical, biotechnology and life sciences industries.

Due to the evolving nature of our industry and competitors, we believe that it is difficult for any market participant, including us, to provide precise data on the market or our industry. However, we believe that the market and industry data we present in this prospectus provide accurate estimates of the market and our place in it. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as other forward-looking statements in this prospectus. We have no reason to believe any of this information or these reports are inaccurate in any material respect and believe and act as if they are reliable. In addition, the data that we compile internally and our estimates have not been verified by an independent source. None of the publications, reports or other published industry sources referred to in this prospectus were commissioned by us or prepared at our request. Except as disclosed in this prospectus, we have not sought or obtained the consent of any of these sources to include such market data in this prospectus.

 

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Rounding

We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

Trademarks, Service Marks and Trade Names

We have proprietary rights to trademarks used in this prospectus that are important to our business, many of which are registered under applicable intellectual property laws. Solely for convenience, the trademarks, service marks, logos and trade names referred to in this prospectus are without the ® and symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This prospectus contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully before deciding whether to buy our Shares. You should carefully consider, among other things, our financial statements and the related notes and sections entitled “Risk Factors”, “Business”, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

STEVANATO GROUP

Overview

We are a leading global provider of drug containment, drug delivery and diagnostic solutions to the pharmaceutical, biotechnology and life sciences industries. We deliver an integrated, end-to-end portfolio of products, processes and services that address customer needs across the entire drug life cycle at each of the development, clinical and commercial stages. Our core capabilities in scientific research and development, our commitment to technical innovation and our engineering excellence are central to our ability to offer value added solutions to our clients.

We have secured a leadership position within the drug development and delivery value chain through our investment in research and development and the expansion of our global footprint and capabilities. Over our 70-year history, we have earned a leading reputation for high quality and reliability that has enabled us to become a partner of choice for more than 700 companies globally, including 41 of the top 50 pharmaceutical companies (which comprise all of the top 15), and eight of the top ten in-vitro diagnostic companies, as measured by 2020 revenue, according to data collected by Global Data. We also serve 15 of the top 20 biotechnology companies by market capitalization in the NASDAQ Biotechnology Index and over 100 biotechnology customers in total.

Our priority is to provide flexible solutions that preserve the integrity of pharmaceutical products and enable our customers to deliver safe and effective treatments to patients while reducing time to market, total cost of ownership (i.e., logistics, drug product waste, storage and personnel costs) and supply chain risk. We achieve this by developing our products in close collaboration with our customers, leveraging our scientific research capabilities, technical expertise and engineering and manufacturing excellence to meet their quality requirements.

Our solutions are highly integrated with the development, production and commercialization processes of our customers. In addition to manufacturing drug containment and delivery solutions, we provide a full set of services across all stages of drug development, from pre-clinical to clinical stage and commercialization. We also engineer machinery and equipment for the production of drug containment and delivery systems that can be integrated into both our customers’ and our own manufacturing processes. Our involvement at each stage of a drug’s life cycle, together with the breadth of our offering, enables us to serve as a one-stop-shop for our customers, which we believe represents a significant competitive advantage.

We operate across the healthcare industry and serve some of its fastest growing market segments, including biologics, biosimilars, vaccines and molecular diagnostics. As a result of how closely integrated we are in the drug production and delivery supply chain, we are well-positioned to benefit from secular trends within our target industries, such as increases in demand resulting from pharmaceutical innovation, acceleration and expansion of vaccination programs, growth in biologics/biosimilars, self-administration of medicines, aging demographics and increasing quality standards and regulation.

We estimate that our total addressable market, based on our current offering, exceeds $11 billion, in terms of revenue generated by all market participants in 2020, and consists of biopharmaceutical injectables and



 

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in-vitro diagnostic products. Within each of these markets, we operate in some of the fastest growing segments, including pre-fillable syringes, drug delivery systems, molecular diagnostics and assembly equipment. We believe there are opportunities to further expand our addressable markets, including by targeting (i) complementary containment solutions, (ii) additional delivery systems, (iii) complementary engineering solutions and (iv) aftersales support and services. For more information on our addressable market, see “Business—Our Industry and Growing End Market.

We operate our business in two segments:

 

   

Biopharmaceutical and Diagnostic Solutions, which includes all the products, processes and services developed and provided for the containment and delivery of pharmaceutical and biotechnology drugs and reagents, as well as the production of diagnostic consumables; and

 

   

Engineering, which includes all of the equipment and technologies developed and provided to support the end-to-end pharmaceutical, biotechnology and diagnostic manufacturing processes (assembly, visual inspection, packaging and serialization and glass converting).

 

 

LOGO

In 2020, we generated approximately 85% of our total revenue from our Biopharmaceutical and Diagnostic Solutions segment with the remaining approximately 15% from our Engineering segment.

We refer to premium products in the Biopharmaceutical and Diagnostic Solutions segment as our “high-value” solutions. “High-value” solutions are wholly owned, internally developed products, processes and services for which we hold intellectual property rights or have strong proprietary know-how, and that are characterized by particular complexity and high performance. Our “high-value” solutions deliver significant benefits to customers in terms of time-to-market and reduced total cost of ownership. Among our key “high-value” solutions is our EZ-Fill® line of ready-to-fill injectable products, which can be customized to clients’ needs. For additional information on EZ-Fill® see “Business—Business Segments—Biopharmaceutical and Diagnostic Solutions—Container Closure Systems (CCS).”

We have nine production plants for manufacturing and assembling pharmaceutical and healthcare products across Europe (Italy, Germany and Slovakia) and the rest of the world (Brazil, China, Mexico and the United States), five plants for the production of machinery and equipment (Italy and Denmark), two sites for analytical services (Italy and the United States) and two commercial offices (Japan and the United States). Our manufacturing facilities in Mexico (serving the U.S. market), China and Brazil all represent greenfield



 

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operations established by us. Our manufacturing facilities in Slovakia, Denmark, Germany and the United States were acquired in strategic transactions over the past 15 years. Our global footprint, together with our proprietary, highly standardized manufacturing systems and processes, allow us to provide quality consistent products and services to our customers in more than 70 countries.

Since the outbreak of COVID-19, we have increased production capacity to support our customers’ efforts to provide a rapid response to COVID-19. In this context, we have been providing: (i) glass vials and syringes to approximately 90% of currently marketed vaccine programs, according to our estimates based on public information (WHO, EMA, FDA); (ii) diagnostic solutions for the detection and diagnosis of COVID-19; (iii) glass forming lines, which are being installed worldwide, to facilitate the distribution of glass bulks and sterile vials and syringes; and (iv) visual inspection systems. COVID-19 has generated increased demand for our products and services, further enabling us to accelerate our growth strategy.

Our Competitive Strengths

The following are our key competitive strengths:

Leading global provider of mission-critical containment, delivery and diagnostic solutions for the pharmaceutical, biotechnology and life sciences industries

We are a recognized leader in providing mission-critical containment, delivery and diagnostic solutions to the pharmaceutical, biotechnology and life sciences industries. We operate on a global scale, offering our products, processes and services in more than 70 countries. We serve a large and diversified customer base, including many of the world’s largest pharmaceutical, biotechnology and diagnostics companies, contract manufacturers and producers of glass packaging. Our customer base comprises more than 700 companies globally, including 41 of the top 50 pharmaceutical companies (which comprise all of the top 15) and eight of the top ten in-vitro diagnostic companies, as measured by 2020 revenue according to data collected by Global Data. We also serve 15 of the top 20 biotechnology companies by market capitalization in the NASDAQ Biotechnology Index and over 100 biotechnology customers in total.

As a partner of choice to the pharmaceutical and biotechnology industries, our solutions have been widely adopted, giving us a leading position in several high growth segments of the pharmaceutical and biotechnology injectables market, including in biologics, biosimilars and vaccines. Within each of these markets, we operate in some of the fastest growing segments, where, based on available market data, we believe we are a global top three player by revenues, including number two in pre-fillable syringes, number one in pre-sterilized EZ-Fill® vials and number one in pen cartridges.

Integrated end-to-end platform spans the drug lifecycle, from design and development through commercialization

We offer solutions to our clients at each stage of the drug development process, from research and development, through clinical trials and commercialization. Our fully integrated, end-to-end value proposition allows us to reduce lead time, total cost of ownership (i.e., logistics, drug product waste, storage and personnel costs) and supply chain risk for our customers, while improving the reliability and safety of drug products.

The breadth of our integrated capabilities differentiates us from our competitors as we believe we are the only player in the industry to be active in both the drug containment, delivery and diagnostic solutions as well as engineering segments. The extensive scope of solutions that we offer makes us an attractive partner to both small, emerging businesses, which may look to outsource a portion of their manufacturing process, as well as to mature, commercial stage drug development organizations that require complex engineering solutions



 

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that can be integrated into their own production processes. By partnering with customers in the early development phase, we are in a prime position to play a key role as they add products to their pipelines and seek more advanced technical solutions. Our ability to seamlessly integrate our drug containment and delivery solutions with our engineering capabilities allows us to deliver significant value to our customers over time.

A common operating model in all our manufacturing facilities to uphold one consistent quality standard worldwide

Our manufacturing approach is based on the relentless pursuit of maximum efficiency and highest quality. Our manufacturing methods and processes are standardized as we utilize the same technology and adopt a common quality control approach across all of our production facilities. This allows us to provide consistent products, processes and services, both in terms of quality and time to market, to all of our customers from each of our manufacturing locations worldwide. It also gives us the flexibility, where needed, to distribute and balance production across our facilities (provided the facilities are validated by our customers), reducing waste and maximizing our efficiency as a group. Many of our customers access our products and services through a number of our facilities globally.

As a result of our commitment to manufacturing excellence and the breadth of our footprint, our customers view us as a functional extension of their operations. We are subject to rigorous audits by certification bodies and our customers, who perform more than 100 audits a year (other than 2020 which was affected by COVID-19 restrictions) on our manufacturing facilities. Further, given our reputation for reliability and our ability to establish new manufacturing facilities with the same standards as our existing ones anywhere in the world, our customers often coordinate with us to support their geographic expansion strategy by building out greenfield manufacturing facilities. This, in turn, provides us access to customers and allows us to further secure our long-term relationships with them.

Highly collaborative approach resulting in deeper strategic partnerships with clients and leading to high customer retention

We approach every customer relationship with the goal of partnering and adding value over a long time horizon, leveraging our technical expertise and our ability to collect analytical data to fully understand our customers’ objectives, needs and limitations. Drug containment and delivery solutions in particular are often borne out of years of collective effort with customers to develop the optimal manner of containing and delivering a drug product to patients. The customized solutions we provide vary depending on the characteristics and chemical composition of the pharmaceutical products, logistical needs (for example, ease of transport and shelf-life), patient community to which the drug product is primarily addressed (including, potentially, its geographic location) and specific regulatory requirements. The containment and delivery solutions that we provide are an integral part of the drug product itself and are included as part of the regulatory filings required to approve drug product marketing and commercialization. Providing high-quality products with specificity, sensitivity and consistency, coupled with extensive product validation data are fundamental drivers of customer loyalty. The quality and dependability of our drug containment and delivery solutions are critical to obtaining commercialization and marketing approval from regulatory agencies. As a result, it is often the case that drug product containment and delivery arrangements cannot be changed without amending the regulatory filing with the relevant agency. High switching costs and significant time delays are meaningful deterrents to a change in suppliers, which reinforces customer loyalty and strengthens customer retention. Over the past 10 years we have recorded a customer retention rate of approximately 97%.

Extensive scientific and engineering capabilities enable continuous innovation of proprietary products and processes

During our 70 year history, we have differentiated Stevanato Group by making significant ongoing investments in research and development to build our scientific, technical and engineering capabilities. We



 

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believe that customers rely on us because of our technical expertise, as well as our ability to design the best possible processes to meet their needs and the specifications required to effectively contain and deliver their drugs. As the needs of our clients evolve, we drive innovation within our proprietary products and processes to develop specialized or customized solutions. As a result of our investments in internal engineering capabilities, we own the most critical processes behind the products we manufacture and are able to respond faster to customer needs for new or customized products. Our engineering capabilities also allow us to scale up our production rapidly, where required, thereby reducing lead time for commercialization of drugs. Our research and development team comprises more than 100 highly skilled and specialized employees operating in our Italian (Piombino Dese and Milan), German (Bad Oeynhausen) and U.S. (Boston) facilities. We have an active pipeline of more than 50 ongoing R&D projects across all of our business segments. Our targeted investment in innovative products and technologies allows us to capture incremental pipeline opportunities and drive attractive growth, while delivering on our firm-wide commitment to provide the highest quality to customers.

Experienced board and executive leadership team with proven track record of excellence

We are led by an experienced and highly-motivated board of directors and executive leadership team with a proven track record of operational excellence. Our leadership team has consistently achieved results by responding to market developments and by capitalizing on opportunities for organic and inorganic growth. While our founding family continues to support our success and future growth as they have done since inception, we have, over the last several years, added to our board and executive team a number of professionals with decades of experience in the drug containment, delivery and diagnostics industries from all over the world. We believe that this has contributed greatly to our strategy building and execution capabilities by allowing us to gain a broader and more nuanced understanding of the market in which we operate, strengthening our ability to anticipate market trends and stay ahead of our competitors. Our strong corporate culture allows us to continuously expand these perspectives by adding diverse talent with deep knowledge and broad experience to our team.

Our Growth Strategy

Our growth strategy currently focuses on the following areas:

Expand our global market position in primary containment systems

We are determined to pursue attractive, organic growth trends in our core primary container business by investing in additional capacity to meet the growing demands of the expanding pharmaceutical, biotechnology and vaccine markets and continue to transition our customers to “high-value” solutions. We rely on a unique set of proprietary manufacturing processes to drive product innovations in our primary container business that benefit our customers. For example, EZ-Fill® containers, enable our customers to reduce time to market, lower their overall cost of ownership and reduce supply chain risk. By expanding our development capabilities and manufacturing capacity in North America, Europe and Asia to better serve our customers in our key end markets and support “high-value” solutions growth, we believe we will be able to continue developing our offering, particularly in biologics, to generate above-market growth and capture market share across our business segments. Our planned expansion also offers our customer base faster response time and supply chain redundancy, reducing risk for just in time manufacturing.

Leverage leadership in primary containment to build market position in drug delivery systems

We see a significant opportunity in the fast-paced evolution of drug delivery systems, especially in connection with biologic based therapies administered by injection. We believe that we can leverage this favorable trend in the drug delivery systems market by investing in further strengthening the integration of our drug containment and delivery capabilities in an effort to have the most compelling value proposition for our customers. In particular, we believe that by increasing the integration of our offering we can attract business from emerging



 

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biotechnology customers who have an increasing inclination to outsource the non-core phases of their development and manufacturing processes. We intend to strengthen our design and development capabilities to secure “high-value” contract development and manufacturing programs for drug delivery devices, also leveraging our positive track-record in the space and our ability to develop proprietary systems.

Accelerate market penetration in life sciences systems

Through focused marketing and business development activities, we intend to accelerate our market penetration in high-value, fast-growing life sciences segments, such as molecular and point-of-care diagnostics. With the increasing tendency of life sciences customers to outsource innovative design, development and assembly of specialized in-vitro diagnostic solutions, we believe that we can leverage our integrated capabilities and our ongoing efforts in design and development of such solutions to secure “high-value” projects from inception, therefore entering the market at an even earlier stage and capitalizing on new opportunities.

Increase our investments in research & development to address unmet market needs

Through continued investment in our R&D programs, we see opportunities to drive revenue and margin growth through processes that improve the quality and sustainability of our existing products. These investments are targeted at maintaining the stability, potency and purity of our customers’ products prior to administration. New therapies for diabetes, cancer and auto-immune diseases are based on large, complex molecules that are extremely sensitive to their storage environment. In many cases, our customers’ finished product formulations are viscous and require drug delivery devices for administration to patients. Our products, such as EZ Fill®, reduce our customers’ drug containment risks, such as the ones mentioned above. We also see growing interest within our customer base in systems that detect tamper evidence, anti-counterfeiting, inventory track and trace capability, and in the case of devices, smart systems that allow patient data capture.

Easy-to-use, accurate, reliable self-injection systems for complex pharmaceutical and biotechnology products represent a particularly attractive market opportunity. We have built a portfolio of devices for this market that can be used off the shelf or customized to the specific needs of the customer. We also see a growing market need for innovative containment and delivery systems for advanced cell and gene therapies. Effective solutions for these products will require innovative materials and coatings, system design and stability and compatibility testing, all of which are areas of strength for our development teams.

Build on our expertise in manufacturing, assembly and inspection systems for primary containers and complex, multi-component systems

Our market leading expertise in the design and manufacturing of glass converting systems for drug containment offers the opportunity to grow in complex, multi-component systems. Working closely with our customers, we can offer custom designed systems complete with vision inspection technology to assure the highest quality products. The enhanced scalability and flexibility of our assembly and packaging solutions are well suited to match emerging biotechnology customers’ requirements, such as smaller production batches with higher variability in dosage formats. We see future opportunities to apply these solutions to manufacturing multi-component devices for in vitro diagnostics, including point-of-care and self-injection devices for pharmaceutical and biotechnology.

Leverage our scientific and engineering capabilities across the drug development timeline

We have created an integrated, end-to-end, flexible portfolio of products, processes and services in order to collaborate closely with our customers from the preclinical phase through Phase III testing, regulatory filing and eventual commercialization. We believe that our ability to assist from the early stages of preclinical development is important in pursuing new customers because entering a new relationship at any later stage of the drug development cycle would require significant additional expenditure.



 

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Such close collaboration presents us with an opportunity to leverage our scientific and engineering capabilities to strengthen and expand our business relationships. By assisting customers through their production processes, we gain the visibility and knowledge that, combined with our skills and capabilities, allow us to anticipate their emerging needs and intercept new demands. We address these needs by continuing to expand our product offering and making new solutions available. Through close collaboration with our customers, we gain invaluable insight into system requirements and industry trends and challenges, which we re-deploy for our future development projects, or to secure new business. For instance, we intend to pursue new opportunities driven by the trend of biotechnology companies toward outsourcing non-core activities of their business.

Leverage our global geographical presence as a platform to increase our penetration in the North American and Asia Pacific regions

The North American and Asia Pacific (“APAC”) regions represent significant growth opportunities for our company. Both markets have well established research and manufacturing capabilities for biologic therapies covering both innovator and biosimilar products. We have a small but rapidly growing position in both regions, where we believe we can accelerate our recent growth by further expanding our manufacturing footprint. By providing locally sourced products we can deliver supply chain security, just in time delivery and reliable sourcing in terms of surge capacity to both existing and new customers. For example, our new plant in Indiana (U.S.) will represent a strategic location for us in proximity to key emerging biopharma players, enabling us to access an attractive biotech and vaccine market. We believe that we are well-positioned to expand our footprint and market share in the North American and Asia Pacific regions. In an effort to grant access to treatments and vaccines to a higher portion of their population and, therefore, improve their quality of life, APAC countries are showing a consistently growing demand for biologics and cell and gene therapy solutions, as well as strong inclination towards investment in biosimilars. We believe that our global footprint will allow us to take advantage of these favorable growth trends. We intend to further invest in the North American and APAC regions to increase our market penetration in these regions across the business segments in which we operate. Likewise, our new plant in Zhangjiagang (China) will grant us access to a growing vaccine market. Our efforts and intention to commit to the North American region have also been displayed by our appointment of a senior manager responsible for overseeing and implementing our commercial penetration strategy in this key geographical area.

Selectively pursue acquisitions and technology partnerships to augment and expand our product and service portfolio

We have a proven track record of successfully identifying, completing and integrating newly acquired complementary businesses and technologies. Our extensive knowledge of the competitive landscape and deep understanding of the evolving needs of our customers and end markets enable us to identify actionable opportunities to expand our portfolio. We employ a disciplined process to evaluate the strategic fit and financial prospects of acquisitions using a well-established set of criteria.

History

In 1949, Giovanni Stevanato founded Soffieria Stella, a specialty glass manufacturer, in Venice. Soffieria Stella, the precursor to Stevanato Group, operated until 1959, when Stevanato Group was established in Piombino Dese (Padua). Over the last 70 years, we have evolved from an Italian glassware manufacturer to a leading global provider of integrated solutions for the healthcare industry. Our growth has been driven by the internal development of new containment and delivery solutions as well as strategic acquisitions, enabling us to broaden our offering, our technical know-how and our international footprint.

We began our international expansion in 2005, with the acquisition of Medical Glass, a Slovakia based primary packaging manufacturing company. Subsequently, in 2007 and 2013, we acquired an Italian company, Optrel, and a Danish company, Innoscan. Both specialize in the production of inspection machines. These acquisitions marked our entry into the technology and equipment manufacturing business. In 2016, we pursued



 

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further expansion of our offering through the acquisition of: (i) Balda, a company specialized in developing and manufacturing plastic diagnostic consumables, drug delivery systems and medical components, (ii) SVM, a company specialized in the production of high-technology machines and systems for assembly, packaging and serialization of pharmaceutical products and (iii) Medirio, a start-up developing patents and other intellectual property for the wearable injectors business.

In parallel with our acquisition strategy, we regularly review our operations in the context of our organic growth plan. As a result of these ongoing assessments, we have expanded our offering through new departments, new laboratories, new offices and new plants. In 2019, we opened a new building in Piombino Dese (Italy) to increase our syringes production capacity and since 2008, we have opened three greenfield sites in: (i) Monterrey, Mexico in 2008; (ii) Zhangjiagang, China in 2012; and (iii) Sete Lagoas, Brazil in 2017.

Selected Risks

Our business is subject to numerous risks, as is more fully described in the section entitled “Risk Factors.” You should read these risks before you invest in our shares. We may be unable, for many reasons, including those that are beyond our control, to implement our business strategy. In particular, risks associated with our business include, but are not limited to, the following:

 

   

our product offerings being highly complex, and, if our products do not satisfy applicable quality criteria, specifications and performance standards, we could experience lost sales, delayed or reduced market acceptance of our products, increased costs and damage to our reputation;

 

   

our need to develop new products and enhance existing products, and to adapt to significant technological and innovative changes and respond to introductions of new products by competitors to remain competitive;

 

   

our backlog might not accurately predict our future revenue, and we might not realize all or any part of the anticipated revenue reflected in our backlog;

 

   

our failure to maintain and enhance our brand and reputation may materially and adversely affect our business, results of operations and prospects;

 

   

our high degree of dependence on our management and employees. Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees that we need to support our business and our intended future growth;

 

   

our business, financial condition and results of operations depend upon maintaining our relationships with suppliers and service providers;

 

   

our business, financial condition and results of operations depend upon the availability and price of high-quality materials and energy supply and our ability to contain production costs;

 

   

significant interruptions in our operations could harm our business, financial condition and results of operations;

 

   

as a consequence of the COVID-19 pandemic, sales of syringes and vials to and for vaccination programs globally, and visual inspection systems, increased resulting in a revenue growth acceleration. The demand for such products may shrink, if the need for COVID-19 related solutions declines;

 

   

our manufacturing facilities are subject to operating hazards which may lead to production curtailments or shutdowns and have an adverse effect on our business, results of operations, financial condition or cash flows;

 

   

we may face significant competition in implementing our strategies for revenue growth in light of actions taken by our competitors;



 

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our business may be harmed if our customers discontinue or spend less on research, development, production or other scientific endeavors;

 

   

the loss of a significant number of customers or a reduction in orders from a significant number of customers could reduce our sales and harm our operating results;

 

   

our business may suffer if we do not successfully manage our current and potential future growth;

 

   

we may not successfully identify or integrate acquired businesses or assets into our operations or be able to fully recognize the anticipated benefits of businesses or assets that we acquire;

 

   

our reputation, ability to do business and results of operations may be impaired by improper conduct by any of our employees, agents or business partners;

 

   

our global operations are subject to international market risks that may have a material effect on our liquidity, financial condition, results of operations and cash flows;

 

   

as a multinational corporation, we are exposed to fluctuations in currency exchange rates, which could adversely affect our cash flows and results of operations;

 

   

the laws and regulations which we are subject to, such as U.S., EU and other anti-corruption laws, trade controls, economic sanctions and similar laws and regulations in the jurisdictions which we operate, are complex and the regulatory and political regimes under which we operate are volatile. Our failure to comply with the relevant laws and regulations could subject us to civil, criminal and administrative penalties and harm our reputation;

 

   

we are subject to product liability and other claims in the ordinary course of business;

 

   

our trade secrets may be misappropriated or disclosed, and confidentiality agreements with directors, employees and third parties may not adequately prevent disclosure of trade secrets and protect other proprietary information;

 

   

if we are unable to obtain and maintain patent protection for our technology, products and potential products, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets;

 

   

we depend in part on proprietary technology licensed from others. If we lose our existing licenses or are unable to acquire or license additional proprietary rights from third parties, we may not be able to continue developing our potential products;

 

   

third parties may assert claims against us alleging infringement, misappropriations or other violations of their patents and proprietary rights, or we may need to become involved in lawsuits to defend or enforce our patents, either of which could result in substantial costs or loss of productivity, delay or prevent the development and commercialization of our products and potential products, or prohibit our use of proprietary technology or sale of products;

 

   

we may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful and have an adverse effect on the success of our business;

 

   

obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements;

 

   

we enjoy only limited geographical protection with respect to certain patents, and we may not be able to protect our intellectual property rights throughout the world;

 

   

we may be subject to claims that our employees, consultants, independent contractors or collaborators have wrongfully used or disclosed confidential information of their former employers or other third parties, and we may be subject to claims asserting ownership of what we regard as our own intellectual property;

 

   

if our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business may be adversely affected;



 

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given the relevance of our activity in the healthcare sector, investments by non-Italian entities in the Company, as well as certain asset disposals by the Company, may be subject to the prior authorization of the Italian government (so called “golden powers”);

 

   

the dual class structure of our shares, where each class A multiple voting share holds three votes, while an ordinary share only holds one vote, may adversely affect the value and trading market for the Shares causing a lower or more volatile market price for our Shares or adverse publicity or other adverse consequences;

 

   

our voting control is concentrated.

Corporate Information

Our principal executive offices are located in Via Molinella 17, 35017 Piombino Dese – Padua, Republic of Italy. Our telephone number is +39 049 9318111. Our website address is https://www.stevanatogroup.com/en. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus in deciding whether to purchase our ordinary shares. We have appointed a U.S. based head of investor relations to facilitate ongoing, transparent engagement with our shareholders. We do business under the commercial name Stevanato Group or SG. The duration of the company, which can be extended at any time by resolution of the shareholders’ meeting, is currently until December 31, 2050.

Corporate and Capital Structure

The following diagram illustrates our corporate structure following the completion of this offering:

 

 

LOGO

Enforcement of Civil Liabilities

We are incorporated and currently existing under the laws of the Republic of Italy. In addition, most of our directors and officers reside outside the United States, and most of the assets of our non-U.S. subsidiaries are



 

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located outside the United States. As a result, it may be a long and costly process for investors to effect service of process on us or those non-U.S. resident persons in the United States or to enforce in the United States judgments obtained in United States courts against us or those non-U.S. resident persons based on the civil liability or other provisions of the United States securities laws or other laws. It may be possible for investors to effect service of process within other jurisdictions (including Italy) upon us or those non-U.S. resident persons provided that, for example, The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters of November 15, 1965 is complied with.

Judgments of U.S. courts may be enforceable in Italy. Final enforceable and conclusive judgments rendered by U.S. courts, even if obtained by default, will not require retrial on the merits and will be enforceable in the Republic of Italy, provided that pursuant to article 64 of Italian Law No. 218 of May 31, 1995 (riforma del sistema italiano di diritto internazionale privato), the following conditions are met:

 

   

the U.S. court which rendered the final judgment had jurisdiction according to Italian law principles of jurisdiction;

 

   

the relevant summons and complaint was appropriately served on the defendants in accordance with U.S. law and during the proceedings the essential rights of the defendants have not been violated;

 

   

the parties to the proceedings appeared before the court in accordance with U.S. law or, in the event of default by the defendants, the U.S. court declared such default in accordance with U.S. law;

 

   

the decision is final pursuant to U.S. law;

 

   

there is no conflicting final judgment previously rendered by an Italian court;

 

   

there is no pending proceedings before an Italian court between the same parties over the same matter which were instituted before the U.S. proceedings; and

 

   

the provisions of such judgment would not violate Italian public policy.

In addition, pursuant to article 67 of Italian Law No. 218 of May 31, 1995, if a judgment rendered by a U.S. court is not complied with, its recognition is challenged or its compulsory enforcement is necessary, then a proceeding shall be initiated before the competent Court of Appeal in Italy to that end. The competent Court of Appeal does not consider the merits of the case but exclusively ascertains the fulfillment of all the conditions set out above.

In original actions brought before Italian courts, the enforceability of liabilities or remedies based solely on the U.S. federal securities law is debatable. If an original action is brought before an Italian court, the Italian court may apply not only Italian rules of civil procedure, but also certain substantive provisions of Italian law that are regarded as mandatory and may refuse to apply the U.S. law provisions or grant some of the remedies sought (e.g., punitive damages) if their application violates Italian public policy and/or any mandatory provisions of Italian law.

Italian shareholders should seek advice from their own counsel based on the applicable circumstances.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage, for up to five years, of specified reduced reporting and is exempt from other requirements that are otherwise generally applicable to public companies that are not emerging growth companies. These exemptions include:

 

   

the ability to include only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure in the registration statement on Form F-1 of which this prospectus is a part;



 

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not being required to comply with the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), which would otherwise be applicable beginning with our second annual report following consummation of this offering;

 

   

even if we no longer qualify as an emerging growth company, but remain a foreign private issuer (i) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (ii) not being required to submit certain executive compensation matters to stockholder advisory votes, including golden parachute compensation; and

 

   

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis).

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering or such earlier time that we are no longer an emerging growth company. As a result, we do not know if some investors will find our Shares less attractive. The result may be a less active trading market for our Shares, and the price of our Shares may become more volatile.

We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenue exceeds $1.07 billion; (ii) the last day of the fiscal year during which the fifth anniversary of the date of this offering occurs; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter; and (iv) the date on which we have issued more than $1.00 billion in non-convertible debt securities during any three-year period. We may choose to take advantage of some but not all of these reduced requirements. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equity securities.

Foreign Private Issuer Status

Upon consummation of this offering, we will report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

 

   

the rule under the Exchange Act requiring domestic filers to issue financial statements prepared under U.S. GAAP;

 

   

the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

 

   

the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

 

   

the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission (the “SEC”) of quarterly reports on Form 10-Q, containing unaudited financial and other specified information, and current reports on Form 8-K, upon the occurrence of specified significant events.

We will file with the SEC, within four months after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm.



 

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We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applied: (i) the majority of our executive officers or directors are U.S. citizens or residents; (ii) more than 50% of our assets are located in the United States; or (iii) our business is administered principally in the United States.



 

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THE OFFERING

 

Offering price

We currently estimate that the initial public offering price will be between $             and $             per Share.

 

Shares offered by us

             Shares (or              Shares if the underwriters exercise their over-allotment option to purchase additional Shares from us in full).

 

Shares offered by the Selling Shareholder

             Shares (or              Shares if the underwriters exercise their over-allotment option to purchase additional Shares from the Selling Shareholders in full).

 

Shares outstanding immediately after this offering

             shares (or              shares if the underwriters exercise their over-allotment option to purchase additional Shares from us in full).

 

Over-allotment option

We and the Selling Shareholder have granted to the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to additional Shares from us and up to             additional Shares from the Selling Shareholders.

 

Use of proceeds

We expect that we will receive net proceeds of approximately $             million from this offering, or approximately $             million if the underwriters exercise their over-allotment option to purchase additional Shares from us in full, assuming an initial public offering price of $             per Share, which is the midpoint of the estimated range of the initial public offering price, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

  We intend to use the net proceeds from this offering for general working capital and corporate purposes, including enabling us to satisfy the requirements of our investing activities and working capital needs and ensuring an appropriate level of operating and strategic flexibility. In particular, we plan to use part of the proceeds to further expand our manufacturing facilities in Piombino Dese, Italy, establish new greenfield plants for EZ-Fill® products, with a strong focus on biologics and vaccines, in Indiana (U.S.) and Zhangjiagang (China) (focusing also on engineering) and pursue strategic acquisitions to broaden our offering, our technical know-how and our international footprint. However, as our business needs continue to evolve, our intended use of proceeds may vary accordingly. See “Use of Proceeds” for more information.

 

  We will not receive any of the proceeds from the sale of Shares by the Selling Shareholder.

 

Dividend policy

We have not adopted a dividend policy. The amount of any future dividend payments we may make will depend on, among other factors, our strategy, future earnings, financial condition, cash flow,



 

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working capital requirements, capital expenditures and applicable provisions of our articles of association. Dividends are approved by our shareholders at an annual general meeting. According to the current articles of association of Stevanato Holding’s (our principal shareholder), the directors of such company must exercise their voting powers in such a way as to cause a distribution of at least 10% of our net income to our shareholders each year. Under Italian law, payment of annual dividends by the company is paid out of its distributable profits and available reserves for each relevant year. We have in place a number of financing agreements which include covenants that would restrict our ability, without the prior consent of the lenders, to distribute dividends if certain debt ratios are exceeded. See “Dividend Policy” for more information.

 

Lock-up

We, our directors and executive officers, our existing shareholders have agreed with the underwriters not to sell, transfer or dispose of any Shares or similar securities for a period of 180 days after the date of this prospectus subject to limited exceptions. See “Shares Eligible for Future Sale” and “Underwriting” for more information.

 

Pre-emptive rights

New issuance of shares of capital stock, including Shares or other classes of capital stock, are authorized pursuant to a resolution of shareholders at an extraordinary meeting. Pursuant to Italian law, shareholders are entitled to subscribe newly issued shares in proportion to their respective shareholdings. Subject to certain conditions, such pre-emptive rights may be waived or limited by a resolution of the extraordinary shareholders’ meeting. In such event, the proposal concerning the issuance of new shares must be justified by the board of directors and the relevant subscription price must be determined based on the value of the consolidated net worth of the corporation. External auditors of the corporation must issue an opinion on the fairness of the newly issued shares’ subscription price. Our shareholders authorized the disapplication of pre-emptive rights for a period of years from the date of the completion of this offering. See “Description of Share Capital and Articles of Association—Preferential Subscription Rights.”

 

Listing

We intend to apply to have the Shares listed on the NYSE under the symbol “STVN.”

 

Payment and settlement

The underwriters expect to deliver the Shares against payment therefor through the facilities of the              on                 , 2021.

 

Transfer Agent

Computershare Trust Company, N.A.

Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:

 

   

no exercise by the underwriters of their option to purchase additional Shares from us and the Selling Shareholders in this offering; and

 

   

an initial public offering price of $                 per share, which is the midpoint of the price range set forth on the cover page of this prospectus.



 

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SUMMARY CONSOLIDATED FINANCIAL DATA

Our audited consolidated financial statements and unaudited interim condensed consolidated financial statements are prepared and presented in accordance with IFRS, as issued by the IASB. Our selected income statements and other financial data with respect to the fiscal years ended December 31, 2019 and 2020 and our selected statements of financial position as of December 31, 2019 and 2020 have been derived from our Consolidated Financial Statements included in this registration statement. Our selected income statements and other financial data with respect to the three months ended March 31, 2020 and 2021 and our selected condensed consolidated statement of financial position data as of March 31, 2021 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus and have been prepared on the same basis as the audited consolidated financial statements.

Our historical results are not necessarily indicative of results expected for future periods.

The following table should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and notes thereto, which are included herein. Our Consolidated Financial Statements are maintained in euros. We refer you to the notes to our Consolidated Financial Statements for a discussion of the basis on which our Consolidated Financial Statements are prepared.

Consolidated Income Statements

 

     March 31,
2020
     March 31,
2021
     December 31,
2019
     December 31,
2020
 
     (amounts in € millions, except as indicated otherwise)  

Revenues

     136.4        192.8        536.5        662.0  

Gross Profit

     39.5        65.4        138.0        194.2  

Operating profit

     15.4        42.9        62.2        103.1  

Profit before tax

     10.8        41.7        54.7        96.3  

Net Profit

     7.2        36.6        38.7        78.6  

Net profit per ordinary share:

           

Basic earnings per ordinary share (Euro)

     0.08        0.41        0.44        0.89  

Diluted earnings per ordinary share (Euro)

     0.08        0.41        0.44        0.89  

Consolidated Statements of Financial Position

 

     March 31,
2021
     December 31,
2019
     December 31,
2020
 
     (amounts in € millions, except as indicated otherwise)  

Assets

  

Total current assets

     495.0        449.6        492.8  

Total non-current assets

     484.4        432.6        475.2  

Total assets

     979.3        882.2        968.0  

Liabilities and equity

        

Total current liabilities

     308.0        262.9        316.2  

Total non-current liabilities

     332.7        353.8        341.7  

Total liabilities

     640.7        616.7        657.8  

Total equity

     338.7        265.4        310.1  

Total liabilities and equity

     979.3        882.2        968.0  


 

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Consolidated Statements of Cash Flows

 

     March 31,
2020
    March 31,
2021
    December 31,
2019
    December 31,
2020
 
     (amounts in € millions, except as indicated otherwise)  

Profit before tax

     10.8       41.7       54.7       96.3  

Cash flow from / (used in) operating activities

     (9.3     5.9       42.6       155.7  

Cash flow from / (used in) investing activities

     (24.7     (22.4     (74.3     (96.1

Cash flow from / (used in) financing activities

     3.0       (19.8     42.2       (26.5

Net change in cash and cash equivalents

     (31.0     (36.4     10.4       33.1  

Other financial and operating data

 

     March 31,
2020
     March 31,
2021
     December 31,
2019
     December 31,
2020
 
     (amounts in € millions, except as indicated otherwise)  

EBITDA

     28.0        55.9        108.4        157.2  

Backlog

     324.8        665.1        303.8        606.7  

Non-GAAP Financial Measures

This prospectus presents our EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit, Adjusted Operating Profit Margin, CAPEX and Free Cash Flow, which are non-GAAP financial measures, and their reconciliations to the nearest measure as defined by IFRS, for the convenience of investors.

Management uses EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit, Adjusted Operating Profit Margin, CAPEX and Free Cash Flow to monitor the underlying performance of the business and its operations. These measures are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing these measures as reported by us to the same or similar measures as reported by other companies. These non-GAAP financial measures may not be comparable to similarly titled metrics of other companies.

EBITDA is defined as net profit before income tax expenses, net financial expenses, including share of profit of associates, amortization and depreciation. Adjusted EBITDA is defined as EBITDA as adjusted for certain income and costs expected to occur infrequently, and that management considers not reflective of ongoing operational activities of the company. EBITDA is presented to aid management in their analysis of the performance of the Group and to assist in the comparison of our performance with that of our competitors. Adjusted EBITDA is provided in order to present how the underlying business has performed excluding the impact of certain non-recurring items, which may alter the underlying performance and impair comparability of results between periods.



 

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The following table sets forth the calculation of EBITDA and Adjusted EBITDA for the three months ended March 31, 2020 and 2021 and the fiscal years ended December 31, 2019 and 2020 and provides a reconciliation of these non-GAAP measures to the most comparable IFRS measure, Net Profit. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA for a period by total revenue for the same period.

 

     March 31,
2020
    March 31,
2021
    December 31,
2019
    December 31,
2020
 
     (amounts in € millions, except as indicated otherwise)  

Net profit

     7.2       36.6       38.7       78.6  

Income Taxes

     3.6       5.1       16.0       17.7  

Finance Income

     (5.7     (2.0     (8.0     (14.9

Finance Expenses

     10.3       3.2       15.3       21.8  

Share of Profit of an Associate

     0.0       0.0       0.2       (0.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Profit

     15.4       42.9       62.2       103.1  

Depreciation and Amortization

     12.6       12.9       46.2       54.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     28.0       55.9       108.4       157.2  

Non-recurring items

     0.0       (0.3     0.0       3.0  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     28.0       55.6       108.4       160.2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA Margin

     20.5 %      28.9 %      20.2 %      24.2 % 
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Operating Profit represents Operating Profit as adjusted for certain income and costs expected to occur infrequently, and that management considers not reflective of ongoing operational activities. Adjusted Operating Profit is provided in order to present how the underlying business has performed excluding the impact of the adjusting items, which may alter the underlying performance and impair comparability of results between the periods.

The following table sets forth the calculation of Adjusted Operating Profit for the three months ended March 31, 2020 and 2021 and the fiscal years ended December 31, 2019 and 2020. Adjusted Operating profit margin is calculated by dividing Adjusted Operating Profit for a period by total revenue for the same period.

 

     March 31, 2020     March 31, 2021     December 31, 2019     December 31, 2020  
     (amounts in € millions, except as indicated otherwise)  

Operating Profit

     15.4       42.9       62.2       103.1  

Non-recurring items

     0.0       (0.3     0.0       3.0  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Operating Profit

     15.4       42.6       62.2       106.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Operating Profit Margin

     11.3     22.1     11.6     16.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Capital expenditure, or CAPEX, is the sum of investment amounts on tangible fixed assets and intangible assets during the period (excluding right-of-use assets recognized during the period in accordance with IFRS 16—Leases). These investment activities consist of acquisitions of property and equipment and intangible assets.

The following table sets forth the CAPEX for the three months ended March 31, 2021 and the fiscal years ended December 31, 2019 and 2020.

 

     March 31, 2021      December 31, 2019      December 31, 2020  
     (amounts in € millions)  

Addition to Property, plant and equipment

     18.4        69.3        89.1  

Addition to Intangible Assets

     0.7        5.9        6.4  

CAPEX

     19.1        75.2        95.5  


 

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See Note 17 “Intangible Assets” and 18 “Property, plant and equipment” to the Consolidated Financial Statements for additional details.

Free Cash Flow is defined as cash flows from operating activities excluding interests paid and received, less investments in property, plant and equipment and intangible assets on a paid-out cash basis.

The following table sets forth the calculation of Free Cash Flow for the three months ended March 31, 2020 and 2021 and the fiscal years ended December 31,

2019 and 2020.

 

     March 31, 2020     March 31, 2021     December 31, 2019     December 31, 2020  
     (amounts in € millions)  

Cash Flow from Operating Activities

     (9.3     5.9       42.6       155.7  

Interest paid

     1.2       1.1       4.7       5.4  

Interest received

     (0.2     (0.1     (0.6     (0.7

Purchase of property, plant and equipment

     (24.1     (21.7     (68.1     (89.6

Purchase of intangible assets

     (0.6     (0.7     (5.8     (6.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Free Cash Flow

     (33.0 )      (15.5 )      (27.2 )      64.4  
  

 

 

   

 

 

   

 

 

   

 

 

 

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Indicators of Performance and Financial Condition—Non-GAAP Financial Measures” for further information on non-GAAP measures.



 

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RISK FACTORS

An investment in our Shares involves a high degree of risk. You should carefully consider the risks and uncertainty described below, together with all of the other information in this prospectus, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes, before deciding to invest in our Shares. Additional risks not presently known to us or that we currently deem not material may also impair our business operations. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price and value of our Shares could decline due to any of these risks, and you may lose all or part of your investment.

Risks Relating to our Business and Industry

Our product offerings are highly complex, and, if our products do not satisfy applicable quality criteria, specifications and performance standards, we could experience lost sales, delayed or reduced market acceptance of our products, increased costs and damage to our reputation.

Most of our products are highly exacting and complex due to their use for containment and injection of biologic drugs and vaccines. Providing high-quality products that deliver specificity, sensitivity and consistency, together with extensive product validation data is a fundamental driver of customer loyalty and our reputation with life sciences researchers. Our operating results depend on our ability to execute and, when necessary, improve our global quality control systems, including our ability to effectively train and maintain our employees with respect to quality control. A failure of our global quality control systems could result in problems with facility operations or preparation or provision of defective or non-compliant products which could ultimately cause harm to the final user. In each case, such problems could arise for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with critical materials and components, failure by one or more of our suppliers to meet our quality requirements, or environmental factors and damage to, or loss of, manufacturing operations. Such problems could affect production of a particular batch or series of batches of products, requiring the destruction of such products or a halt of facility production altogether. Although we currently hold an insurance policy that covers liabilities for defective products and product recalls in amounts we believe to be adequate for our business, our coverage may not be adequate to insure against all product liability claims that may arise which may be particularly high in case failure of our products to meet the appropriate quality standards cause product recalls or damages to our customers or ultimate users. As a result of this, product defect claims or product recalls may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our success depends on our customers’ confidence that we can provide reliable, consistently high-quality products, which also requires us to provide validated data to support our customers’ use of our products. We believe that customers in our target markets are likely to be particularly sensitive to our products failing to meet the specifications shown on our data sheets. Our reputation and the public perception of our products and technologies may be impaired if our products fail to perform as expected or fail to meet applicable quality criteria, specifications or performance standards. If our products experience, or are perceived to experience, a material defect or error, this could result in loss or delay of sales, damaged reputation, diversion of development resources and increased insurance or warranty costs, any of which could harm our business. These risks are amplified in respect of our new product lines as we implement appropriate quality control criteria. We are reliant to an extent on customer feedback on the quality of our products, and it may take additional time for new products to meet the desired quality standards. Any defects or errors could also result in our inability to timely deliver products to our customers, which could in turn cause disruptions to our customers’ ability to obtain results, narrowing the scope of the use of our products and ultimately hindering our or their success in relevant markets. Even after any underlying concerns or problems are resolved, any lingering concerns in our target markets regarding our technology, product defects or performance standards could continue to result in lost sales, delayed market acceptance and damaged reputation, among other things. If problems in preparation or

 

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manufacture of a product, failure to meet required quality standards for that product or other product defects are not discovered before such product is released to our customers, we may be subject to adverse legal or regulatory actions, including halting of manufacturing and distribution, restrictions on our operations, civil sanctions, including monetary sanctions, and criminal actions. In addition, such problems or failures subject us to other litigation claims, including claims from our customers for reimbursement of the cost of lost or damaged materials. Our customers also require specific information regarding our products and their uses, and any inaccuracies in this information could lead to products being sold for the wrong uses and may result in our having to refund or replace the products in question. Any of the above problems may adversely affect our reputation, business, financial condition and results of operations.

We must develop new products and enhance existing products, adapt to significant technological and innovative changes and respond to introductions of new products by competitors in order to remain competitive.

We sell our products in industries that are characterized by significant technological changes, frequent new product and technology introductions and enhancements and evolving regulatory requirements and industry standards. As a result, our customers’ needs continue to evolve and our products may be superseded by new technologies (for instance if certain drugs are no longer administered through injectables) or their demand may decline. For instance, as our sales and profitability are largely dependent on the sale of products delivered by injection, if our customers reconfigure their drug product or develop new drug products requiring less frequent dosing, our sales and profitability may suffer. Likewise, if we do not appropriately innovate and invest in new products and technologies, and be open to broadening the scope of our offering, our product offerings may become less desirable in the markets we serve, and, although changing providers is a lengthy process for our customers, they could move to new technologies offered by our competitors, especially if such competitors are able to react more directly and effectively to a customer’s specific demand. Though we believe customers in our markets display a significant amount of loyalty to a particular product, we also believe that because of the initial time investment required by many of our customers to reach a purchasing decision for a new product, it may be difficult to regain a customer once that customer purchases a product from a competitor.

Moreover, there is a risk that the significant amounts of time and resources (approximately 2.6% of our 2020 revenue) that we invest in research, development and identification of new products would not result in the expected positive results for our business. If we invest our resources into a new product or product enhancement that fails to meet our high quality standards and market expectations or does not perform in the way it was intended, this could adversely affect our business. Our current customers may decide not to purchase these new products or product enhancements and / or purchase a product from a competitor or cease doing business with us altogether. It can take significant time to identify an unmet customer need and develop a product to meet that need, and to the extent we fail to obtain desired levels of market acceptance, our business, financial condition or results of operations could be adversely affected.

Our estimates of our addressable market include several key assumptions based on our industry knowledge, industry publications, third-party research and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions. Industry publications, research, surveys, studies and forecasts generally state that the information they contain has been obtained from sources believed to be reliable. If any of our assumptions or estimates, or these publications, research, surveys or studies prove to be inaccurate, then the actual market for our products may be smaller than we expect, and as a result, our product revenue may be limited and our business, financial condition or results of operations could be adversely affected.

Our backlog might not accurately predict our future revenue, and we might not realize all or any part of the anticipated revenue reflected in our backlog.

Our backlog represents, as of a point in time, estimated future revenue for work not yet completed under (i) specific purchase orders, with regards to our Biopharmaceutical and Diagnostic Solution segment, and (ii) certain one-off agreements, with regards to our Engineering segment. We recognize direct revenue over the life of the

 

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contract based on our performance of services under the contract. Contracts may be terminated or delayed by our customers or regulatory authorities for reasons beyond our control. To the extent projects are delayed, the timing of our revenue could be affected. In the event a customer terminates a contract, we are generally entitled to be paid for services rendered through the termination date and for services provided in winding down the project. However, we are generally not entitled to receive the full amount of direct revenue reflected in our backlog in the event of a contract termination. The duration of the projects in our backlog, and the related revenue recognition, ranges from several months to many years For orders that are placed inside a contractual firm period, we generally have a contractual right to payment in the event of cancellation. Fluctuations in our reported backlog levels also result from the timing and order pattern of our customers who often seek to manage their level of inventory on hand. Because of customer ordering patterns, our backlog reported for certain periods may fluctuate and may not be indicative of future results. A number of factors may affect backlog and the direct revenue generated from our backlog, including:

 

   

the size, complexity and duration of projects; and

 

   

the cancellation or delay of projects.

Our backlog at March 31, 2020 was 665.1 million compared to 606.7 million as of December 31, 2020 and 303.8 as of December 31, 2019. Although an increase in backlog will generally result in an increase in future direct revenue to be recognized over time (depending on future contract modifications, contract cancellations and other adjustments), an increase in backlog at a particular point in time does not necessarily correspond to an increase in direct revenues during a particular period. The timing and extent to which backlog will result in direct revenue depends on many factors, including the timing of commencement of work, the rate at which we perform services, scope changes, cancellations, delays, receipt of regulatory approvals and the nature, duration, size, complexity and phase of the studies. In addition, delayed projects remain in backlog until they are canceled. As a result of these factors, our backlog is not necessarily a reliable indicator of future direct revenue and we might not realize all or any part of the direct revenue from the authorizations in backlog as of any point in time.

If we fail to maintain and enhance our brand and reputation, our business, results of operations and prospects may be materially and adversely affected.

We believe that maintaining and enhancing our brand and reputation are of significant importance to the success of our business. We work to set a very high standard for the quality of our products and our ethical business practices, and we believe that this has been crucial to our success. We have employed and will continue to employ different types of consumer experience and interaction touchpoints designed to gauge consumer satisfaction with our products, and we also engage in rigorous product validation in order to continue to improve our product quality. We cannot assure you, however, that these activities will be successful or that we will be able to continue to maintain our brand and reputation as we expect. If our brand strength deteriorates, or if our brand is no longer associated with high-quality products, it could lead to fewer publication citations for our products, which could in turn further weaken our brand recognition and reputation. In addition, our competitors may increase the intensity of their consumer interactions or customer feedback processes, which may force us to increase our advertising spend to engage with our customer base and maintain brand and reputational awareness.

In addition, any negative publicity relating to our products or services, regardless of its veracity, could harm our brand and the perception of our brand in the market. With an increasing global focus on ethical business practices and good corporate behavior, and with such issues directly influencing consumer behavior, any failure to achieve or maintain the levels of corporate governance, social and environmental impact and corporate behaviors expected of us, including demonstrating dedication to the benefits of diversity, could negatively impact our brand and reputation. If our brand is harmed, we may not be able to gain new customers or continue to maintain positive relationships with our customers, and our business, prospects, financial condition and results of operations could be materially and adversely affected.

Part of our growth strategy is to increase direct customer interactions in multiple countries. Failure to anticipate and react to particular geographic requirements and sensitivities may have a negative impact on our

 

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brand and reputation, which may result in a decrease in sales or sales growth in such countries, which may adversely affect our business, prospects, financial condition and results of operations.

We are highly dependent on our management and employees. Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees that we need to support our business and our intended future growth.

Our success largely depends on the skills, experience and continued efforts of our management, including our Executive Chairman, our Chief Executive Officer and our senior leadership, as well as of our research and development and highly skilled employees. The replacement of certain members of our global leadership team would likely involve the expenditure of significant time and financial resources, and the loss of any such individual may significantly delay or prevent the achievement of our business objectives. Likewise, the members of our research and development team and our highly skilled employees, who our customers and competitors often seek to engage, may be difficult to replace in light of their sophisticated skills and experience and a shortage of such employees could disrupt our operations. As we continue to grow, our success also depends on our ability to attract, motivate and retain highly qualified individuals who will also fit within our culture. Competition for senior management and other personnel in our industry is intense, and the pool of suitable candidates is limited. If qualified personnel become scarce or difficult to attract or retain in our industry for compensation-related or other reasons, we could experience higher labor, recruiting or training costs. Further, new hires may require significant training and time before they achieve full productivity and may not become as productive as we expect. The failure to attract, retain and properly motivate members of our senior management team and other employees, to find suitable replacements for them in the event of death, illness or their desire to pursue other professional opportunities, or to maintain our corporate culture as we continue to grow, could have a negative effect on our operating results.

Our business, financial condition and results of operations depend upon maintaining our relationships with suppliers and service providers.

Our ability to sustain our income has been, and will continue to be, dependent in part on our ability to obtain favorable terms from our suppliers and services providers, including logistics services providers. These terms may change from time to time, and such changes could adversely affect our gross margins over time. In addition, our results of operations and cash flows could be adversely impacted by the acceleration of payment terms to our suppliers and/or the imposition of more restrictive credit terms and other contractual requirements. Further, if for any reason we enter into a contract with a supplier on unfavorable terms, it may harm our ability to negotiate our future contracts with that supplier or with other suppliers.

The loss of one or more of our large suppliers including as a result of consolidation, a material reduction in their supply of products or provision of services to us, extended disruptions or interruptions in their operations or material changes in the terms we obtain from them, could have a material adverse effect on our business, financial condition and results of operations.

Our business, financial condition and results of operations depend upon the availability and price of high-quality materials and energy supply and our ability to contain production costs.

Our operations depend upon our ability to obtain high-quality materials and energy supply at reasonable prices, therefore maintaining low production costs. Our ability to maintain an adequate supply of such materials and energy could be impacted by the availability and price of those materials and energy, the failure to maintain relationships with suppliers and any of such materials being proven to be toxic or otherwise inadequate to be used for the intended purpose. While we may seek to minimize the impact of price increases and potential shortages by, among other things, entering into long-term supply agreements, increasing our own prices and implementing cost-saving measures, our earnings and cash flows could be adversely affected in the event these measures are insufficient to cover our costs. Moreover, while we aim to maintain a large network of product

 

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suppliers, we are unable to predict any interruption or disruption in service from our key suppliers, particularly in light of the COVID-19 pandemic. In particular, for some of the materials we use in our production cycles, including glass tubes and DuPont synthetic fiber Tyvek®, we have a limited number of (or a single-source) suppliers worldwide, and selecting new suppliers would be a lengthy and time consuming process. Any interruption or disruption in service from particular suppliers of materials means that interruptions or stoppages in such deliveries could adversely affect our operations until arrangements with alternative suppliers. If this occurs, we could expend substantial resources and time in re-establishing relationships with third-party suppliers that meet the appropriate quality, cost and regulatory requirements needed for commercially viable manufacture of our products. If we are unable to obtain the materials we need at reasonable prices or at all, we may not be able to produce certain of our products at a marketable price or at all. If our supply of materials and components is adversely affected, including as a result of the COVID-19 pandemic, we could damage our relationship with current and prospective customers and our operating results and financial condition could be adversely affected.

Moreover, we are dependent upon the ability of our suppliers to provide materials that meet our quality standards, as well as delivery schedules. Our suppliers’ failure to provide expected materials that meet such criteria could adversely affect production schedules and contract profitability.

The continued supply of high-quality third-party materials and energy from our suppliers is subject to a number of risks, including:

 

   

the destruction of or damage to our suppliers’ facilities or their distribution infrastructure;

 

   

work stoppages or strikes by our suppliers’ employees;

 

   

the failure of our suppliers to provide materials of the requisite quality or in compliance with strict specifications;

 

   

the failure of essential equipment at our suppliers’ plants;

 

   

the failure of our suppliers to satisfy import and export control laws for goods that we purchase from them;

 

   

the failure of our suppliers to meet regulatory standards where applicable;

 

   

the failure, shortage or delay in the delivery of materials to our suppliers;

 

   

contractual amendments and disputes with our suppliers; and

 

   

inability of our suppliers to perform as a result of the weakened global economy, the COVID-19 pandemic or otherwise.

If we experience problems with suppliers, we may not be able to find acceptable alternatives, and any such alternatives could result in increased costs for us and possible forward losses on certain contracts. Even if acceptable alternatives are found, the process of locating and securing such alternatives might be disruptive to our business, might lead to termination of our supply agreements with our customers and might disrupt the operations of our customers leading to potential claims, any of which could adversely affect our business, financial condition and results of operations.

Significant interruptions in our operations could harm our business, financial condition and results of operations.

Manufacturing, distribution, service and logistics problems can and do arise, particularly in light of the COVID-19 pandemic, and any such problems could have a significant impact on our business, financial condition and results of operations. Accordingly, any significant disruptions to the operations of our manufacturing or distribution centers or logistics providers for any reason, including labor relations issues, power interruptions, severe weather, fire or other circumstances beyond our control could cause our operating expenses

 

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to increase without coverage or compensation or seriously harm our ability to fulfill our customers’ orders or deliver products on a timely basis, or both. Likewise, our ability to meet our customers’ needs and expectations may be frustrated by delays, issues or interruptions in ramping up new production lines or plants. We must also maintain sufficient production capacity in order to meet anticipated customer demand, which carries fixed costs that we may not be able to offset if orders slow, which would adversely affect our operating margins. If we are unable to manufacture our products consistently, in sufficient quantities and on a timely basis, our sales, gross margins and our other operating results will be materially and adversely affected. Prompt shipment of our products is also very important to our business. If we experience significant delays in our manufacturing, shipping or logistics processes, this could cause disruption to our customers and damage our current and future customer relationships and may adversely affect our business. Such delays may also adversely impact our new product development. For example, if we were to lose one of our sites where new product development is undertaken, we may not be able to transfer or replicate that product development at another site, with the result of lost time and financial costs of developing the new product. We may also use high-risk chemicals in the manufacture of certain of our products, which are subject to handling risks, and any disruption in our ability to source or appropriately store these chemicals could adversely affect our manufacturing operations.

As a consequence of the COVID-19 pandemic, sales of syringes and vials to and for vaccination programs globally, and visual inspection systems, increased resulting in a revenue growth acceleration. The demand for such products may shrink, if the need for COVID-19 related solutions declines.

Despite the initial short-term operational disruption, and the impact that measures established to respond to the COVID-19 pandemic had on our ability to carry out business development activities (which we believe may have had an impact on our ability to broaden our customer portfolio in the short-term), sales of syringes and vials to and for vaccination programs globally, and visual inspection systems, increased resulting in a revenue growth acceleration. We have been supplying: (i) glass vials and syringes to approximately 90% of currently marketed vaccine programs, according to our estimates based on public information (WHO, EMA, FDA); (ii) plastic diagnostic consumables for the detection and diagnosis of COVID-19; (iii) glass forming lines, which are being installed worldwide, to facilitate the distribution of glass bulks and sterile vials and syringes; and (iv) visual inspection systems.

There remains uncertainty around the magnitude of the long-term impact of COVID-19 on demand for our syringes, vials, plastic diagnostic consumables, glass forming lines, visual inspection systems and related products and services, which may shrink rapidly in the future, for instance:

 

   

as the pandemic abates or infection rates decline;

 

   

as governmental and health authorities relax rules on mandatory COVID-19 testing;

 

   

as vaccination programs are completed or re-vaccination / booster are not required; or

 

   

where injectable vaccines are replaced with other vaccines not requiring our products and services.

A lower rate of increase or a decline in sales of syringes and vials to and for vaccination programs, plastic diagnostic consumables for COVID-19 testing, glass forming lines, visual inspection systems and related products and services could adversely affect our business, financial condition and results of operations.

Our manufacturing facilities are subject to operating hazards which may lead to production curtailments or shutdowns and have an adverse effect on our business, results of operations, financial condition or cash flows.

Certain of our manufacturing processes involve heating glass to extremely high temperatures, forming plastic and operating heavy machinery and equipment, which entail a number of risks and hazards, including industrial accidents, leaks and ruptures, explosions, fires, mechanical failures and environmental hazards, such as spills, storage tank leaks, discharges or releases of toxic or hazardous substances and gases, including into the

 

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environment. Any of these events, which are generally more likely to occur as our machines approach time for refurbishment, could lead to requirements for environmental remediation and civil, criminal and administrative sanctions and liabilities. These hazards may cause unplanned business interruptions (also as a consequence of remediation actions), unscheduled downtime, transportation interruptions, personal injury and loss of life, severe damage to or the destruction of property and equipment, environmental contamination and other environmental damage, civil, criminal and administrative sanctions and liabilities and third-party claims, any of which may have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, under applicable local laws, including Italian law, our directors and officers may be subject to criminal liability, in connection with injuries occurred to our employees, as a result of workplace health and safety violations by reason of their position as employers (posizione di garanzia). Convictions of our directors and officers could negatively impact our reputation. Moreover, due to the long industrial history of our manufacturing facilities and the subsequent lack of detailed information regarding historical waste and chemical storage and disposal, the risk of soil, water or groundwater contamination and related civil, administrative and criminal liabilities cannot be eliminated.

We may face significant competition in implementing our strategies for revenue growth in light of actions taken by our competitors.

In each business segment in which we operate, we face significant competition, with many competitors focusing on specific regions, customers and/or specific product segments. Competitors range from smaller, specialized companies, which may be able to more quickly respond to customers’ specific needs, to large multinational companies who provide a full suite of products, which may have greater financial, marketing, operational and research and development resources than we do. Such greater resources may allow our competitors to respond more effectively with new, alternative or emerging technologies. Failure to anticipate and respond to our competitors’ actions may impact our future sales and earnings, in particular failure to react to competitors strengthening their brand, marketing or customer experience may negatively impact our ability to attract and retain customers.

We are pursuing a number of strategies to maintain and improve our revenue growth, including:

 

   

expand our global market position in primary containment systems;

 

   

leverage leadership in primary containment to build market position in drug delivery systems;

 

   

accelerate market penetration in life sciences systems;

 

   

increase our investments in R&D to address unmet market needs;

 

   

build on our expertise in manufacturing, assembly and inspection systems for primary containers and complex, multi-component systems;

 

   

leverage our scientific and engineering capabilities across the drug development timeline;

 

   

leverage our global geographical presence as a platform to increase our penetration in the North American and APAC regions; and

 

   

selectively pursue acquisitions and technology partnerships to augment and expand our product and service portfolio.

We may not be able to successfully implement these strategies, and these strategies may not result in the desired growth of our business. Failure to anticipate and respond to our competitors’ actions may adversely affect our business, financial condition and results of operations.

Our business may be harmed if our customers discontinue or spend less on research, development, production or other scientific endeavors.

Our customer base includes leading pharmaceutical, biologic, diagnostic and medical device companies worldwide. Many factors, including public policy spending priorities, available resources and product and

 

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economic cycles, have a significant effect on the capital spending policies of these entities. For instance, any change in the international healthcare systems, including the Patient Protection and Affordable Care Act (the “PPACA”) in the U.S., resulting in a reduced ability of pharmaceutical companies and healthcare providers to receive reimbursements by government authorities, private insurers and other third-party payers for the costs of our products, could result in reduced demand for our products.

Fluctuations in the research and development budgets of our customers could have a significant effect on the demand for our products. Our customers determine their research and development budgets based on several factors, including the need to develop new products, continued availability of governmental and other incentives and funding, competition and the general availability of resources. Any reduction in research and development budgets or a shift of any funding source currently allocated to our business sector to different areas of research, could adversely affect our business, financial condition and results of operations.

The loss of a significant number of customers or a reduction in orders from a significant number of customers could reduce our sales and harm our operating results.

Our operating results could be negatively affected by the loss of revenue from a significant number of our customers. Our sales are fairly well distributed, with 40.6% of our revenues deriving from our top ten customers and no individual customer representing more than 10.0% of revenues in 2020. However, consolidation within our customer base, including, in particular, among pharmaceutical companies, may give larger customers greater bargaining and buying power and operational sophistication, which can enable them to operate with reduced inventories. In addition, consolidation among our customers may lead them to rely on a reduced number of suppliers, with no assurance that they will continue using our products.

We maintain close business relationships with certain customers, working closely to build the specific custom tools they need, which will then become part of our product portfolio. Our operating results could be adversely affected by the loss of a significant number of these customers, particularly during the product development phase.

Our contracts generally do not contain minimum purchase requirements, and a significant portion of our sales are on a purchase order basis. Therefore, our customers are generally not obligated to purchase any fixed quantities of products, and they may stop placing orders with us at any time. If a significant number of customers purchase fewer of our products, defer orders or fail to place additional orders with us for any reason, our sales could decline, and our operating results may not meet our expectations. In addition, if those customers order our products, but fail to pay on time or at all, our liquidity and operating results could be adversely affected.

The level and timing of orders placed by our customers vary for different reasons, including individual customer strategies, the introduction of new technologies, the desire of our customers to reduce their exposure to any single supplier and general economic conditions. If we are unable to anticipate and respond to the demands of our customers, if we have an inadequate supply of products, insufficient capacity in our sites or if we experience any disruptions to our supply chain or distribution network, we may lose customers. Alternatively, we may have excess inventory or excess capacity, and either of these factors may have a material adverse effect on our business, financial condition and results of operations.

Our business may suffer if we do not successfully manage our current and potential future growth.

Over the last 70 years we have consistently expanded our operations and anticipate expanding further as we pursue our long-term growth strategy. The key elements of our growth strategy include, among other things, the expansion of our global market position in primary containment and drug delivery systems, accelerating penetration in life sciences systems, increasing our investments in research and development, building on our expertise in manufacturing, assembly and inspection systems for primary containers and complex, multi-component systems, leveraging our scientific and engineering capabilities, increasing our penetration in the

 

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North American and APAC regions and selectively pursuing acquisitions and technology partnerships to augment and expand our product and service portfolio. In particular, we also plan to use part of the proceeds of the Offering to further expand our manufacturing facilities in Piombino Dese (Italy), establish new greenfield plants for EZ-Fill® products, with strong focus on biologics and vaccines, in Indiana (U.S.) and Zhangjiagang (China) (focusing also on engineering) and pursue strategic acquisitions to broaden our offering, our technical know-how and our international footprint. Establishing new production plants for EZ-Fill® products represents a priority in light of the risks associated with our Piombino Dese (Italy) manufacturing facilities currently being the only ones devoted to the production of EZ-Fill® products which, in turn, exposes our business to risks of material disruption should any event affect the operation of such facilities. In general, such growth strategy and in particular the facilities expansion and the external acquisitions increase the complexity of our business and place a significant strain on our management, operations, technical systems, financial resources and internal control over financial reporting functions. Our current and planned personnel, systems, procedures and controls may not be adequate to support and effectively manage our future operations, especially as we employ personnel and maintain manufacturing facilities and distribution networks in several geographic locations.

We are also continuously expanding our product portfolio, and establishing and developing new products require significant management time and attention. If these products do not achieve the anticipated success or require greater levels of time and investment to reach the expected levels, it could adversely affect our business, financial condition and results of operations. Failure to appropriately integrate new products and business lines into our existing operations and systems can also affect the success of these products, and failure to adequately anticipate and plan for this integration could affect the success of these products and may also negatively impact our existing product offerings.

We may not successfully identify or integrate acquired businesses or assets into our operations or be able to fully recognize the anticipated benefits of businesses or assets that we acquire.

We consider acquisitions a useful instrument to complement our organic growth. We opportunistically explore acquiring other businesses and assets, and we have completed 3 acquisitions in the last five years, including: the acquisition of a 65% stake in the Danish SVM Automatik in February 2016, the acquisition of the operating unit of Balda Group in March 2016 and the acquisition of Medirio in May 2016.

However, we may be unable to identify or complete promising acquisitions for many reasons, including any misjudgment of the key elements of an acquisition, competition among buyers, the high valuations of businesses in our industry, the need for regulatory and other approvals, lack of internal resources to successfully pursue all attractive opportunities and availability of capital. When we do identify and complete acquisitions, we may face financial, managerial and operational challenges, including diversion of management attention and resources needed for existing operations, difficulties with integrating acquired businesses, integration of different corporate cultures, increased expenses, potential dilution of our brand, assumption of unknown liabilities, potential disputes with the sellers and the need to evaluate the financial systems of and establish internal controls for acquired entities. Further, we seek out acquisitions of companies that maintain the same high quality standards that we maintain, and if we misjudge or overestimate a company’s product quality standards, we may not be able to use these products or implement the strategies that were the primary reason for the acquisition, which would lead to a significant loss both financially and in time spent by our teams trying to integrate the product or implement the strategy. There can be no assurance that we will engage in any additional acquisitions or that we will be able to do so on terms that will result in any expected benefits.

In addition, our ability to realize the benefits we anticipate from our acquisition activities, including any anticipated sales growth, cost synergies and other anticipated benefits, will depend in large part upon whether we are able to integrate such businesses efficiently and effectively. Integration is an ongoing process, and we may not be able to fully integrate such businesses smoothly or successfully, and the process may take longer than expected. Further, the integration of certain operations and the differences in operational culture following such activity will continue to require the dedication of significant management resources, which may distract management’s attention from day-to-day business operations.

 

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There may also be unasserted claims or assessments that we failed or were unable to discover or identify in the course of performing due diligence investigations of target businesses. While we normally negotiate representation and warranties and related indemnification in relation to such acquisitions, these may not be enough to cover our exposure if a significant liability arises in connection with any acquisition agreement. We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that could adversely affect our business, financial condition and results of operations.

If we are unable to successfully integrate the operations of acquired businesses into our business, we may be unable to realize the sales growth, cost synergies and other anticipated benefits of such transactions, and our business, results of operations and cash flow could be adversely affected.

Our reputation, ability to do business and results of operations may be impaired by improper conduct by any of our employees, agents or business partners.

We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by employees, agents or business partners of ours (including third-party suppliers, distributors or of businesses we acquire or partner with) that would violate U.S. and/or other national laws, including the laws governing payments to government officials, bribery, fraud, kickbacks and false claims, pricing, sales and marketing practices, conflicts of interest, competition, export and import compliance, money laundering and data privacy. In particular, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Any improper actions by our employees, suppliers and distributors or allegations of such acts could damage our reputation and subject us to civil or criminal investigations in Italy, under Italian Legislative Decree No. 231 of June 8, 2001 (the “Decree 231”) pursuant to which a legal entity can be held liable to pay fines in connection with certain criminal offenses committed, inter alia, by its directors, officers or employees, the United States and in other jurisdictions, and any related shareholder lawsuits could lead to substantial civil and criminal, monetary and nonmonetary penalties and could cause us to incur significant legal and investigatory fees. In particular, pursuant to Decree 231, a defense can be established by an entity involved in a Decree 231 investigation, if such entity can prove, among others, that it adopted and properly implemented an organization, management and control model aimed at effectively preventing the commission of the criminal acts involved prior to such unlawful conduct having taken place. We approved and adopted the current version of our organization, management and control model provided by Decree 231 (“Model 231”) by means of a resolution of the board of directors dated April 7, 2021, and appointed the current supervisory body (the “Supervisory Body”) that supervises the functioning of and compliance with Model 231, and monitors and assesses the implementation status of preventive measures, with regular reports to the board of directors, in November 2020. The adoption of organization and management models does not by itself exclude applicability of the penalties provided by Decree 231. In fact, upon commission of an offense resulting in administrative liability of the Group pursuant to Decree 231, the court will evaluate the models and their actual implementation. Failure to comply with Decree 231 could result in the imposition of criminal sanctions on our directors and/or monetary sanctions, other types of sanctions (e.g., interdictory sanctions, including prohibitions, confiscation of the price or profits deriving from the crime and publication of the judgment) and loss of confidence of our customer base as well as render us ineligible to participate in a public tender or result in the termination of a public contract already awarded, which could have a material adverse effect on the business, financial condition, results of operations and prospects of the Group.

In addition, a government may seek to hold us liable as a successor for violations committed by companies in which we invest or that we acquire.

We also rely on our suppliers to adhere to our supplier standards of conduct, and material violations of such standards of conduct could occur that could have a material effect on our business, reputation, financial condition and results of operations.

 

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Our global operations are subject to international market risks that may have a material effect on our liquidity, financial condition, results of operations and cash flows.

We operate manufacturing facilities in Italy, Slovakia, Denmark, Germany, United States, Mexico, China and Brazil, and sell and distribute our products in more than 70 countries. As part of our business strategy, we will continue to seek to expand our sales and market share in various international markets in which we currently operate and evaluate expansion opportunities into additional international markets. The economies of some of these markets differ from the economies of our core markets factors in Europe and in some cases present new and greater risks. Our financial results and operations are substantially dependent upon macro-economic and political conditions, particularly in Italy, Slovakia, Denmark, Germany, United States, Mexico, China and Brazil, where we operate manufacturing facilities. High levels of sovereign debt in certain countries (including Italy), combined with weak growth, political instability and high unemployment rates, could lead to additional fiscal reforms (including austerity measures), sovereign debt restructurings, currency instability, increased counterparty credit risk, high levels of volatility and, potentially, disruptions in the credit and equity markets, as well as other outcomes, each of which, alone or combined with other factors, could have a material adverse effect on our business, results of operations, access to credit and capital markets and, therefore, our ability to implement our growth strategy.

Macro-economic difficulties and political instability remain particularly evident in Italy. Since January 2012, Italy’s sovereign debt rating has been downgraded by Standard and Poor’s, Fitch Ratings and Moody’s Investor Service, reflecting their views as to Italy’s increasing vulnerability to external financing risks and the negative implications these could have for economic growth and public finances as well as fragile market confidence and deterioration in Italy’s near-term economic outlook. Any further downgrade of the Italian sovereign debt rating could create additional economic uncertainty and negatively impact Italy’s growth, which could in turn affect consumer confidence, discretionary spending and, consequently, demand for our products.

Furthermore, policies, measures, controls or other actions implemented by the governments of emerging markets or countries which we target for increased sales may restrict our business operations or harm our financial results. As a result, our revenue is exposed to risks inherent to the country where we operate or intend to operate including risks related to differing political, legal, regulatory and economic conditions and regulations.

As a multinational corporation, we are exposed to fluctuations in currency exchange rates, which could adversely affect our cash flows and results of operations.

International markets contribute a substantial portion of our revenue, and we intend to continue expanding our presence globally. The exposure to fluctuations in currency exchange rates takes on different forms. International revenue and costs are subject to the risk that fluctuations in exchange rates could adversely affect our reported revenue and profitability when translated into Euro for financial reporting purposes. These fluctuations could also adversely affect the demand for products and services provided by us. As a multinational corporation, our businesses often invoice third-party customers in currencies other than the one in which they primarily do business (the “functional currency”), especially U.S. dollars and the Mexican Pesos. Movements in the invoiced currency relative to the functional currency could adversely impact our cash flows and our results of operations. As our international sales grow, exposure to fluctuations in currency exchange rates could have a larger effect on our financial results.

The deterioration of the sovereign debt of several countries, together with the risk of contagion to other, more stable, countries, has exacerbated the global economic crisis. In particular, a deterioration in general economic conditions caused by instability in the Eurozone could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

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We are required to comply with a wide variety of laws and regulations and are subject to regulation by various federal, state and foreign agencies.

In all the jurisdictions in which we operate, we are subject to a number of laws, regulations and practices concerning, inter alia, the health and safety of our employees, the use, manufacture and importing of chemicals and the protection of the environment and natural resources.

In the event that the applicable laws and regulations were to change such that our products or our production processes were subject to greater regulatory control or restrictions, it could have a significant impact on our ability to market and sell our products and could require us to spend significant amounts to ensure and monitor compliance with such laws and regulations such that our business, financial condition and results of operations could be adversely affected. For instance, both the EU and the United States are considering to further restrict in the next years the use of ethylene oxide, the main sterilizing agent used in our production processes. If the use of ethylene oxide is further restricted, or completely banned, this would require us to identify new sterilizing agents and would have a negative impact on our financial condition and results of operations.

We are also subject to a variety of federal, state, local and international laws and regulations that govern, among other things, the importation and exportation of products, the handling, transportation and manufacture of substances that could be classified as hazardous, laws governing government contracts and our business practices such as anti-corruption and antitrust laws. Although we believe that we comply in all material respects with applicable laws and regulations, there can be no assurance that a regulatory agency or tribunal would not reach a different conclusion concerning the compliance of our operations with applicable laws and regulations. In addition, there can be no assurance that we will be able to maintain or renew existing permits, licenses or other regulatory approvals or obtain, without significant delay, future permits, licenses or other approvals needed for the operation of our businesses. Furthermore, loss of a permit, license or other approval in any one portion of our business may have indirect consequences in other portions of our business if regulators or customers, for example, cease doing business with such other portion due to fears that such loss is a sign of broader concerns about our ability to deliver products or services of sufficient quality.

Any noncompliance by us with applicable laws and regulations or the failure to maintain, renew or obtain necessary permits and licenses could have an adverse effect on our business, financial condition and results of operations. Failure to comply with these laws and regulations can lead to agency action, including warning letters, product recalls, product seizures, monetary sanctions, injunctions to halt manufacturing or distribution, restrictions on our operations, withdrawal of existing or denial of future approvals, permits or registrations, including those relating to products or facilities and civil and criminal sanctions. To the extent these agencies were to take enforcement action, such action may be made publicly available, and such publicity could harm our ability to sell these regulated products globally and may harm our reputation. In addition, such actions could limit the ability of our customers to obtain regulatory clearance or approval for their products in the United States or abroad and/or our customers may incur significant costs in obtaining or maintaining such regulatory clearances or approvals in the United States or abroad. In addition, any such failure relating to the products we provide exposes us to direct and third-party product liability claims as well as contractual claims from our customers, including claims for reimbursement for lost or damaged products, as well as potential recall liability, which could be significant. Customers may also claim loss of profits due to lost or delayed sales, although our contractual arrangements typically place limits on such claims. There can be no assurance that any such contractual limitation will be applicable or sufficient or fully enforced in any given situation.

Given the relevance of our activities in the healthcare sector, investments by non-Italian entities in the Company, as well as certain asset disposals by the Company, may be subject to the prior authorization of the Italian Government (so called “golden powers”).

Due to the relevance of our activities in the healthcare sector, it is not possible to exclude the recurrence of the conditions for the exercise, by the Italian Government, of the so called “golden powers”, aimed at safeguarding the ownership structures of Italian companies operating in strategic sectors, which may adversely

 

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impact the liquidity and value of the Shares. The golden power regime, set forth in (i) Law Decree no. 21 of March 15, 2012 (converted into law by Law no. 56 of May 11, 2012), as amended and supplemented (“Golden Power Decree”), (ii) Law Decree no. 105 of September 21, 2020 (converted into law by Law no. 133 of November 18, 2020), as amended and supplemented, (iii) Law Decree no. 23 of April 8, 2020 (converted into law by Law no. 40 of June 5, 2020), as amended and supplemented, and (iv) Decree of the President of the Council of Ministers no. 179 of December 18, 2020, also cover the healthcare sector. The powers set forth in the Golden Power Decree include, inter alia, the powers to: (i) veto, or impose specific conditions on, the purchase by non-EU companies of shareholdings in companies having assets and relationships in sectors which are considered strategic (e.g., defense and national security, energy, transport and telecommunications, health, etc., the “Strategic Companies”), and (ii) veto, or impose specific conditions on, the adoption of certain corporate resolutions, acts or transactions by the same companies which may pose a threat to national security.

The Golden Power Decree requires companies to notify the office of the Italian Prime Minister within 10 days of: (i) any purchase by a non-EU entity of a stake in a Strategic Company resulting in the buyer acquiring control of such company pursuant to article 2359 of the Italian Civil Code and of the Italian Financial Act (TUF); and (ii) any resolution, act or transaction adopted by a Strategic Company resulting in a transfer of ownership, control or availability of strategic assets to a non-EU entity. Any resolution, act or transaction adopted by a Strategic Company, whose effect is to change the destination of a strategic asset, or a change in the corporate purpose of the Strategic Company. Furthermore, the regulation requires to notify the dissolution of the company or the amendment of certain provisions of their articles of association. The office of the Italian Prime Minister must exercise its power to veto the transaction or impose conditions within 45 days from the date of notice. In the interim, all rights related to the shares other than economic rights are suspended, and any decision adopted in violation of such suspension is null and void, but once the term has expired the relevant transaction can be completed. Should the office of the Italian Prime Minister veto the transaction, the buyer must sell the acquired shares or quotas within one year. As part of the emergency related to COVID-19, as a result of the Law Decree of April 8, 2020, no 23, these powers have been temporarily strengthened until June 30, 2021.

The violation of the notification obligation or of the prescriptions imposed by virtue of the exercise of special powers, unless the fact constitutes a criminal offence, is subject to a pecuniary administrative sanction up to double the value of the transaction and in any case not less than one percent of the cumulative turnover achieved by the companies involved in the last financial year for which the financial statements were approved.

As a result, our ability to pursue commercial or industrial strategic resolutions, acts or transactions that involve the acquisition of, or the subscription for, our shares by a partner (or that imply an amendment to our shareholders’ structure) may be restricted by the Italian Government’s decision to exercise its special powers with respect to our business. Therefore, the application of the golden powers regime could have a material adverse effect on our business, results of operations, financial condition or prospects.

Furthermore, in the future, our shareholders’ ability to enter into change of control or takeover transactions may be impacted by the exercise by the Italian Government of its special powers under the golden power regime. Our shareholders may not be able to transfer their interests or such a transfer may be subject to conditions, which diminish the value of the transaction and discourage investments. This may limit our shareholders’ ability to benefit from the proceeds of certain proposed asset sales or acquisitions or business combinations, and may limit our shareholders’ ability to benefit from possible premiums connected to a proposed change of control transaction, tender offer or other strategic transactions.

The laws and regulations which we are subject to, such as U.S., EU and other anti-corruption laws, trade controls, economic sanctions and similar laws and regulations in the jurisdictions which we operate, are complex and the regulatory and political regimes under which we operate are volatile. Our failure to comply with the relevant laws and regulations could subject us to civil, criminal and administrative penalties and harm our reputation.

Certain of our operations are subject to U.S., EU and foreign anti-corruption and trade control laws and regulations, such as the Foreign Corrupt Practices Act (the “FCPA”), export controls and economic sanctions

 

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programs, including those administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). As a result of doing business in foreign countries and with foreign partners, we may be exposed to a heightened risk of violating anti-corruption, export control, and sanctions laws and regulations.

The FCPA prohibits us from providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. It also requires us to keep books and records that accurately and fairly reflect our transactions. As part of our business, we may deal with state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA. Other anti-corruption legislation which we may be required to adhere to, sets out wider prohibitions including against private bribery, which is also relevant to our business.

Economic sanctions and export controls may restrict our ability to conduct business with or in certain jurisdictions, individuals and entities. We are not a U.S. person and are not owned or controlled by one or more U.S. persons. We have in the past engaged in dealings with parties in Cuba, Iran, and Syria, and we have ongoing de minimis activities with parties in Iran and Cuba. We believe that such activities have been conducted in compliance with all applicable sanctions and export controls, and are implementing policies and procedures designed to ensure continued compliance. However, we cannot be certain that these safeguards will be fully effective in the future to ensure compliance, and the scope and reach of U.S. sanctions laws could also change over time.

Violations of anti-corruption, export control and sanctions laws and regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment. There can be no assurance that all of our employees, consultants, agents or other associated persons will not take actions in violation of these laws and regulations, and that our procedures will effectively prevent us from violating these regulations in every transaction in which we may engage or provide a defense to any alleged violation. In particular, we may be held liable for the actions that our local strategic partners take inside or outside of the United States, even though our partners may not be subject to these laws. Such a violation, even if our policies prohibit it, could have a material adverse effect on our reputation, business, results of operations and financial condition.

We are subject to product liability and other claims in the ordinary course of business.

Our business involves risk of product liability claims related to providing incorrect product information at the time of purchase, claims for defective containment solutions which may impair drug efficacy and other claims in the ordinary course of business. Furthermore, there may be product liability risks that are unknown or which become known in the future. We may also face claims raised by our present employees for injury deriving from the lifting and handling of loads and the use of heavy machinery, as well as claims raised by our present and past employees for injury and illness from hazardous substances used or present at certain of our facilities. Substantial, complex or extended litigation on any claim could cause us to incur significant costs and distract our management. For example, lawsuits by governmental authorities, employees, shareholders, suppliers, collaborators, distributors, customers, competitors or others could be very costly and substantially disrupt our business. Our exposure to such claims may increase as we seek to increase the geographic scope of our sourcing and sales activities and to the extent that we expand our manufacturing operations. We maintain insurance policies but we cannot assure you that our insurance coverage will be available in all pending or any future cases brought against us. Furthermore, our ability to recover under any insurance is subject to the terms and conditions of such insurance, as well as the financial viability of our and such third parties’ insurers, as well as legal enforcement under the local laws governing these arrangements. Insurance coverage in general or coverage for certain types of liabilities, such as product liability in developing markets, may not be readily available for purchase or cost-effective for us to purchase. Furthermore, many of our insurance policies are subject to deductibles and retentions. Accordingly, we could be subject to uninsured and unindemnified future liabilities requiring us to provide additional reserves to address such liabilities. An unfavorable result in a case for which adequate insurance or indemnification is not available could adversely affect our business, financial condition and results of operations.

 

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Occasionally, we are also involved in disputes, litigation and regulatory matters incidental to and in the ordinary course of our business, including employment matters, commercial disputes, government compliance matters, environmental matters, and other matters arising out of the normal conduct of our business. Where merited, we will vigorously defend ourselves in such matters. There can be no assurance that the impact of any pending or future claims will not be material to our business, financial condition or results of operations.

We are exposed to credit risk on accounts receivable and certain prepayments made in the normal course of business.

Our average day sales outstanding for 2020 has been approximately 70 days, but a number of customers are pushing for longer payment terms (also offering no recourse discounting solutions). A substantial majority of our outstanding trade receivables are not covered by collateral or credit insurance. In addition, we may make advances to suppliers in the normal course of business. While we have procedures to monitor exposure to credit risk on trade receivables and other current assets, there can be no assurance such procedures will effectively limit our credit risk and avoid losses, which could have a material adverse effect on our financial condition and operating results.

We may be required to record a charge to earnings if our goodwill and other amortizable intangible assets or other investments become impaired.

We are required under IFRS to test goodwill for impairment at least annually and to review our goodwill, amortizable intangible assets and other investments, including those acquired through acquisition activity, for impairment when events or changes in circumstance indicate the carrying value may not be recoverable.

Factors that could lead to impairment of goodwill, amortizable intangible assets and other investments, including those acquired through acquisitions, include significant adverse changes in the business climate and actual or projected operating results and declines in the financial condition of our business. We may be required in the future to record additional charges to earnings if our goodwill, amortizable intangible assets or other investments become impaired. Any such charge would adversely impact our financial results.

If relations between China and the United States deteriorate, our business in the United States and China could be materially and adversely affected.

The relationship between China and the United States is subject to periodic tension. Changes in political conditions in the United States and China and changes in the state of China-U.S. relations are difficult to predict and could adversely affect our business. For instance, the U.S. administration has called for substantial changes to trade agreements and imposed significant increases on tariffs on goods imported into the United States, particularly from China. Other countries have responded similarly, with tariffs on goods entering their countries. We currently have facilities and sell products in China and have invested, and expect to continue investing, in the country, and if the Chinese government makes any changes to its laws or policy concerning foreign ownership of companies or assets located within China, or imposes any significant increases on tariffs on goods imported into or out of China, it could have a significant impact on our business and financial results.

If our employees were to engage in a strike or other work stoppage, our business, operating results and financial position could be materially adversely affected.

We employ approximately 4,350 employees, as at March 2021, in multiple jurisdictions (approximately 49% of which based in Italy, 12% based in Mexico, 9% based in Germany, 8% based in Slovakia, 6% based in the U.S., Brazil and Denmark and 4% based in China). A significant portion of our employees in Italy, Germany, Slovakia, Mexico, Denmark and China are covered by collective bargaining arrangements made either at the local or national level in their respective countries. Although we believe that our relations with our employees are satisfactory, no assurance can be given that this will continue. If disputes with our unions arise, or if our workers

 

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engage in a strike or other work stoppage, we could incur higher labor costs or experience a significant disruption of operations, which could have a material adverse effect on our business, operating results and financial position.

We are subject to tax laws, tariffs and potential tax audits in multiple jurisdictions that could affect our financial results.

We are subject to tax laws, tariffs and potential tax audits in multiple jurisdictions. The application and interpretation of these laws in different jurisdictions affect our international operations in complex ways and are subject to change, and some changes may be retroactively applied. Our tax liabilities in the different countries where we operate depend, in part, on transfer pricing and administrative charges among us and our subsidiaries. These arrangements require us to make judgments with which tax authorities may disagree, potentially resulting in the assessment of material additional taxes, penalties, interest or other charges to resolve these issues.

Transactions that we have structured in light of current tax rules could have material and adverse consequences for us if tax rules change. Tax audits, changes in tax laws, their application and interpretation or imposition of any new or increased tariffs, duties and taxes could increase our tax burden and materially and adversely affect our sales, profits and financial condition and could have an adverse effect on our business, net assets, or results of operations. Such factors could also cause us to expend significant time and resources and/or cause investors to lose confidence in our reported financial information.

We are exposed to Italian tax risks related to our multinational operations.

We operate in many different jurisdictions throughout the world, through our group companies. Over recent years, tax laws and practice applicable in various countries have become increasingly complex and sophisticated, particularly with respect to cross-border transactions. Italy has historically implemented a number of domestic provisions— including those implementing EU anti-abuse Directives and OECD principles – aimed at facing tax basis erosion schemes and allocation of income between associated enterprises adopted by multinational groups.

Italian Tax authorities are increasingly scrutinizing multinational groups based on these provisions by also enforcing exchange of information instruments in force with foreign tax authorities.

The combination of the above factors may lead to an increased likelihood of tax audits with respect, among other things, to: (i) tax residence, (ii) permanent establishment, (iii) transfer pricing, (iv) Controlled Foreign Company legislation, (v) taxation of dividends and capital gains derived upon interests held in companies located in low-tax Jurisdictions, (vi) withholding tax application on cross-border payments, and (vii) anti-hybrid mismatches. In any such case, depending on the specific circumstances, tax audits and/or tax litigations with the Italian tax authorities could result in tax liabilities and fines and penalties of significant amounts, which could be in excess of the amounts. We provide for in our financial statements for tax liabilities.

The application of indirect taxes could adversely affect our business and results of operations.

The application of indirect taxes, such as sales and use tax, value-added tax, provincial taxes, goods and services tax, business tax and gross receipt tax, to our business is a complex and evolving issue. Significant judgment is required to evaluate applicable tax obligations. As a result, amounts recorded may be subject to adjustments by the relevant tax authorities. In many cases, the ultimate tax determination is uncertain because it is not clear how new and existing statutes might apply to our business. A number of jurisdictions globally have introduced (or are looking to introduce) additional value added tax (or similar tax) calculation requirements as well as additional reporting, record-keeping, collection and remittance obligations on businesses like ours.

 

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There can be no assurance that we will not be a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares.

A non-U.S. corporation will be a passive foreign investment company (PFIC”) for any taxable year if either: (i) at least 75% of its gross income is “passive income” for purposes of the PFIC rules or (ii) at least 50% of the value of its assets (generally determined on the basis of a quarterly average) is attributable to assets that produce or are held for the production of passive income. Whether we are treated as a PFIC is a factual determination that is made on an annual basis after the close of each taxable year. This determination will depend on, among other things, the composition of our income and assets, as well as the value of our assets (which generally will be determined by reference to the public price of the Shares, which may fluctuate significantly), from time to time.

Based on the current and anticipated composition of our income, assets and operations and the expected price of the Shares in this offering, we believe we were not a PFIC for U.S. federal income tax purposes for our most recent taxable year and do not expect to be a PFIC for the current taxable year or for foreseeable future years. Nevertheless, there can be no assurance that we will not be a PFIC for the current taxable year or for any future taxable year. If we are treated as a PFIC for any taxable year during which a U.S. investor held Shares, such U.S. investor could be subject to adverse U.S. federal income tax consequences. See “Income Tax Considerations—U.S. Federal Income Tax Considerations – Passive Foreign Investment Company.”

We are subject to restrictive covenants under certain financing agreements, which could impair our ability to run our business.

We have in place a number of financing agreements which include covenants (such as negative covenants that would restrict our ability to distribute dividends and exceed certain indebtedness ratios) which may restrict our ability to operate our business. Our failure to comply with these covenants, including as a result of events beyond our control, could result in a default or event of default that could materially and adversely affect our financial condition and results of operations. For additional information on applicable regulations see “Management Discussion and Analysis—Liquidity and Capital Resources.”

The indemnification provisions of acquisition agreements by which we have acquired companies or businesses may not fully protect us, and we may face unexpected liabilities.

Certain of the acquisition agreements by which we have acquired companies or businesses require the former owners to indemnify us against certain liabilities related to the operation of the company or business before we acquired it. In most of these agreements, however, the liability of the former owners is limited, and certain former owners may be unable to meet their indemnification responsibilities. While we are protected by representation and warranties and related indemnification in relation to such acquisitions, these may not be enough to cover our exposure if a significant liability arose in connection with any acquisition agreement. We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our business, financial condition and results of operations.

Our business depends on our ability to use and access information systems, and any failure to successfully maintain these systems or implement new systems to handle our changing needs could materially harm our operations.

We depend on standardized procedures and multiple information systems for our operations, customer service and quality and safety procedures. Furthermore, we rely on information technology systems to process, transmit, store and protect electronic information, including confidential customer, supplier, employee or other business information. Through our online platform, we collect and store confidential information that website users provide to us when submitting queries or job applications.

 

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We use commercially available third-party technology solutions, software and software systems with some proprietary configurations. We also store data using third-party cloud services. Our information systems may be subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, vandalism, catastrophic events, natural disasters, terrorist attacks, hackers and other security issues as well as human error. If our information systems are damaged, fail to work properly or otherwise become unavailable, particularly in light of the COVID-19 pandemic, we may incur substantial costs to repair or replace them, and we may experience a loss of critical information, customer disruption and interruptions or delays in our ability to perform essential functions and implement new and innovative services. If the cloud service providers we use were to experience unplanned downtime, delays or other issues delivering data to our information technology systems, including due to increased usage during the COVID-19 pandemic, it could adversely impact business operations. The compromising of our information systems or those with which we interact could harm our reputation and expose us to regulatory actions and claims from customers and other persons, any of which could adversely affect our business, financial condition and results of operations.

In addition, we may not have the necessary resources to enhance existing information systems or implement new systems where necessary to handle our increasing volume and/or our changing needs, and we may experience unanticipated delays, complications and expenses in implementing and integrating our systems. Any interruptions in operations would adversely affect our ability to properly allocate resources and timely deliver our products, which could result in customer dissatisfaction. We currently rely on certain legacy systems that are no longer supported by their respective manufacturers, with only a small number of current employees able to maintain these systems. Any failure of these systems could have a business impact. The failure to successfully implement and maintain information systems could have an adverse effect on our ability to obtain new business, retain existing business and maintain or increase our sales and profit margins, any of which could adversely affect our business, financial condition and results of operations.

Cyber security risks and the failure to maintain the confidentiality, integrity and availability of our computer hardware, software and internet applications and related tools and functions, could result in damage to our reputation, data integrity and/or subject us to costs, fines or lawsuits under data privacy or other laws or contractual requirements.

The integrity and protection of the data we hold is critical to our business. The regulatory environment governing information, security and privacy laws is increasingly demanding and continues to evolve. Implementing and maintaining compliance with applicable security and privacy regulations may increase our operating costs and/or adversely impact our ability to market our products and services to customers. Although our computer and communications hardware are protected through physical and software safeguards, they are still vulnerable to fire, storm, flood, power loss, earthquakes, telecommunications failures, physical or software break-ins, software viruses and similar events. These events could lead to the unauthorized access, disclosure and use of non-public information. We could be subject to risks caused by misappropriation, misuse, leakage, falsification, system malfunction or intentional or accidental release or loss of information maintained in our information systems and networks and those of our OEM suppliers, including our cloud service providers. The techniques used by criminal elements to attack computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world. As a result, we may not be able to address these threats proactively or implement adequate preventative measures. If our computer systems are compromised, we could be subject to fines, damages, litigation and enforcement actions, and we could lose trade secrets, the occurrence of which could harm our business.

If we are unable to maintain reliable information technology systems and appropriate controls with respect to global data privacy and security requirements and prevent data breaches, we may suffer regulatory consequences in addition to business consequences. The European Union and the United Kingdom have adopted comprehensive data protection and security laws. The European Union’s Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General

 

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Data Protection Regulation), or the GDPR, which became effective in May 2018, as supplemented by national laws, and the UK GDPR (collectively, Applicable Data Protection Laws) impose strict requirements on controllers and processors of personal data in the European Economic Area, or EEA and the United Kingdom, including, for example, higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals and a strengthened individual data rights regime and shortened timelines for data breach notifications. Applicable Data Protection Laws create new compliance obligations and increase financial penalties for noncompliance (including possible fines of up to 4% of global annual revenues for the preceding financial year or €20 million, or £17.5 million in the UK, (whichever is higher) for the most serious violations). Data privacy laws in the European Union and the United Kingdom are developing rapidly and, as a consequence of Brexit, the UK will be free to diverge from European Union data privacy laws. We may therefore be subject in the future to separate and additional data protection obligations to those that we are already subject to. This may result in additional costs and may necessitate changes to our business practices, which in turn may compromise our growth strategy and otherwise adversely affect our business, reputation, legal exposures, financial condition and results of operations. In recent years, the United States and European lawmakers and regulators have expressed concern over electronic marketing and the use of third-party cookies, web beacons and similar technology for online behavioral advertising. In the European Union, marketing is defined broadly to include any promotional material and the rules specifically on e-marketing are currently set out in the ePrivacy Directive which will be replaced by a new ePrivacy Regulation. While the ePrivacy Regulation was originally intended to be adopted on May 25, 2018 (alongside the GDPR), it is still going through the European legislative process. The current draft of the ePrivacy Regulation imposes strict opt-in e-marketing rules with limited exceptions for business to business communications and significantly increases fining powers to the same levels as the GDPR. The UK has implemented the ePrivacy Directive into national law through the UK Privacy and Electronic Communications Regulation 2003, however it is unclear whether the UK will align itself to the ePrivacy Regulation, once implemented. This again introduces the possibility we will be subject to, and required to comply with, a separate and additional legal regime with respect to data privacy, which may result in additional costs and may necessitate changes to our business practices, which in turn may compromise our growth strategy and otherwise adversely affect our business, reputation, legal exposures, financial condition and results of operations.

There are also numerous U.S. federal and state laws and regulations related to the privacy and security of personal information. Although we take measures to protect data from unauthorized access, use or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance or other malicious or inadvertent disruptions. Any such breach or interruption could compromise our networks, and the information stored there could be accessed by unauthorized parties, manipulated, publicly disclosed, lost or stolen. Any such access, breach or other loss of information could result in legal claims or proceedings and liability under federal or state laws that protect the privacy of personal information and may result in regulatory penalties.

Additionally, the Gramm-Leach-Bliley Act of 1999 (along with its implementing regulations) (the “GLBA”) restricts certain collection, processing, storage, use and disclosure by covered companies of certain personal information, requires notice to individuals of privacy practices and provides individuals with certain rights to prevent the use and disclosure of certain non-public or otherwise legally protected information. The GLBA also imposes requirements regarding the safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines. In addition, many U.S. states in which we operate now or may operate in the future have laws that protect the privacy and security of sensitive and personal information. Certain U.S. state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts. State laws are changing rapidly, and there is discussion in the U.S. Congress of a new federal data protection and privacy law to which we may be subject.

We are also reliant on certain manual processes for collecting and processing data, and any failures in these processes or failure to handle the data collected in accordance with relevant regulations could lead to

 

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enforcement actions. Complying with all applicable laws, regulations, standards and obligations relating to data privacy, security and transfers may cause us to incur substantial operational costs or require us to modify our data processing practices and processes. Government enforcement actions can be costly and interrupt the regular operation of our business, and data breaches or violations of data privacy laws can result in significant fines, reputational damage and civil lawsuits, any of which may adversely affect our business, financial condition and results of operations. We may not be able to respond quickly or effectively to regulatory, legislative and other developments, and these changes may in turn impair our ability to commercialize our products or increase our cost of doing business. In addition, if our practices are not consistent or viewed as not consistent with legal and regulatory requirements, including changes in laws, regulations and standards or new interpretations or applications of existing laws, regulations and standards, we may become subject to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions or reputational damage. Any of the foregoing could have an adverse effect on our competitive position, business, financial condition, results of operations and prospects.

The uncertain effects of climate change and potential climate change legislation could lead to business interruption, significantly increased costs and/or other adverse consequences to our business.

Climate change and potential climate change legislation may present risks to our operations, including business interruption, significantly increased costs and/or other adverse consequences to our business. Some of the potential impacts of climate change to our business include physical risks to our facilities, water and energy supply limitations or interruptions, disruptions to our supply chain and impairment of other resources. In addition, if legislation or regulations are enacted or promulgated in the U.S., Europe or Asia or any other jurisdictions in which we do business that limit or reduce allowable greenhouse gas emissions and other emissions, such restrictions could have a significant effect on our operating and financial decisions, including those involving capital expenditures to reduce emissions, and our results of operations. Our manufacturing operations may not be able to operate as planned if we are not able to comply with new legal and regulatory legislation around climate change, or it may become too costly to operate in a profitable manner. Additionally, suppliers’ added expenses could be passed on to us in the form of higher prices and we may not be able to pass on such expenses to our customers through price increases.

Risks Relating to our Intellectual Property

Our trade secrets may be misappropriated or disclosed, and confidentiality agreements with directors, employees and third parties may not adequately prevent disclosure of trade secrets and protect other proprietary information.

In addition to registered intellectual property rights, we rely on trade secrets and confidential know-how to protect our technology, especially because we believe that patent protection alone would not be sufficient to protect our business. However, trade secrets and confidential know-how are difficult to protect, and we have limited control over the protection of trade secrets and confidential know-how used by our licensors, collaborators and suppliers.

To protect this type of information against disclosure or appropriation by competitors, our usual practice is to require our directors, employees, consultants, contractors and advisors to enter into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with us prior to beginning research or disclosing proprietary information. Moreover, we put in place appropriate procedures to identify confidential material and restrict access to documentation. However, current or former employees, consultants, contractors and advisers may unintentionally or willfully disclose our confidential information to competitors, we have entered into, and may in the future enter into additional, collaborations with our competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known to our competitors, are inadvertently

 

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incorporated into the technology of others, or are disclosed or used in violation of these agreements. Enforcing a claim that a third party obtained illegally and is using trade secrets and/or confidential know-how is expensive, time consuming and the outcome is unpredictable, and the enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction. Moreover, if any of our trade secrets and confidential know-how were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. In some cases, we have entered into joint development agreements with our competitors that necessitate the sharing of certain trade secrets with these competitors. Given that our competitive position is based, in part, on our know-how and trade secrets, a competitor’s knowledge of our trade secrets or other unauthorized use or disclosure could impair our competitive position and may have an adverse effect on our business and results of operations.

If we are unable to obtain and maintain patent protection for our technology, products and potential products, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.

Our success depends in part on our ability to secure and maintain patent protection with respect to our technology, current products and potential products, and any future potential products and technology we may develop. We seek to protect our proprietary position by filing or collaborating with our licensors to file patent applications related to our proprietary technologies, products and potential products.

The patent prosecution process is expensive, time consuming and complex, and we may not be able to file, prosecute, maintain, defend, enforce or license all necessary or desirable patents at a reasonable cost or in a timely manner in all desirable jurisdictions. As a result, we may not be able to prevent competitors or other third parties from developing and commercializing competitive products in all such fields and jurisdictions.

It is possible that we will fail to identify patentable aspects of our research and development output or fail to take the necessary steps to seek patent protection before it is too late to obtain patent protection. We may not have the right to control the preparation, filing, and prosecution of patent applications, or to maintain the rights to patents licensed from third parties. Therefore, these patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our relevant proprietary products and technology, including current products, potential products, and any future potential products we may develop, in whole or in part. Our existing patents may have issued with claims that fail to cover our relevant proprietary products and technology, including current products, potential products and any future potential products we may develop, in whole or in part. In addition, our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technology or from developing competing products and technologies. Patents may not be granted for a number of reasons, including known or unknown prior art, deficiencies in the patent application or the lack of novelty or the underlying invention or technology. In addition, publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in certain jurisdictions are not published until 18 months after filing or in some cases, at all. Therefore, we cannot be certain that we or our licensors were the first to make or file the inventions claimed in our owned or licensed patents or pending patent applications.

Even if patents do successfully issue and even if such patents cover our current products, current potential products and any future potential products we may develop, third parties may challenge their validity, ownership, enforceability or scope, which may result in such patents being narrowed, invalidated, or held unenforceable or circumvented. We may become involved in proceedings challenging our owned or licensed patent rights, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or could limit the duration of the patent protection of our technology, products and potential products. Such proceedings also may result in substantial costs and require significant time from our management and employees, even if the eventual outcome is favorable to us. In addition, the issuance of a patent does not give us the right to practice the patented invention. Third parties may have blocking patents that could prevent us from

 

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marketing our products, if approved, or practicing our own patented technology. Our competitors may also be able to circumvent our patents by developing similar or alternative potential products in a non-infringing manner.

Any of the foregoing could have an adverse effect on our competitive position, business, financial condition, results of operations and prospects.

We depend in part on proprietary technology licensed from others. If we lose our existing licenses or are unable to acquire or license additional proprietary rights from third parties, we may not be able to continue developing our potential products.

We are a party to certain license agreements for certain intellectual property and proprietary technology, and we may enter into additional agreements, including license agreements, with other parties in the future that impose certain obligations on us. If we fail to comply with our obligations to our licensors or any of our other current or future collaborators, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market any product, potential product or other technology that is covered by these agreements, which could adversely affect the value of the potential product being developed under any such agreement, or we may face claims for monetary damages or other penalties under these agreements. Termination of these agreements or reduction or elimination of our rights under these agreements may result in us having to negotiate new or reinstated agreements with less favorable terms, or cause us to cease or experience significant delays in the development and commercialization of our products, potential products or technologies and, our competitors or other third parties could have the freedom to market products and technologies identical or competitive to ours.

We may rely on third parties from whom we license proprietary technology to file and prosecute patent applications and maintain patents and otherwise protect the intellectual property we license from them. We may have limited control over these activities or any other intellectual property that may be related to our in-licensed intellectual property. We may have limited control over the manner in which our licensors initiate an infringement proceeding against a third-party infringer of the intellectual property rights, or defend certain of the intellectual property that may be licensed to us.

The growth of our business may depend in part on our ability to acquire or in-license additional proprietary rights. We may be unable to acquire or in-license any relevant third-party intellectual property rights that we identify as necessary or important to our business operations. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all, which would harm our business. In that event, we may be required to expend significant time and resources to redesign our products, potential products or technologies or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis, which could adversely impact our business, financial condition, results of operations and prospects.

Disputes may arise regarding intellectual property subject to a license agreement and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could affect what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our diligence, financial or other obligations under the relevant agreement, or we may face claims for monetary damages or other penalties under these agreements. Moreover, disputes may also arise over the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors or licensees and us and our partners. If disputes over intellectual property that we have licensed or any other dispute described above related to our license agreements prevent or impair our ability to use and enforce such intellectual property or maintain our licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected products, potential products or technologies. Any of the foregoing could have an adverse effect on our competitive position, business, financial condition, results of operations and prospects.

 

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Third parties may assert claims against us alleging infringement, misappropriations or other violations of their patents and proprietary rights, or we may need to become involved in lawsuits to defend or enforce our patents, either of which could result in substantial costs or loss of productivity, delay or prevent the development and commercialization of our products and potential products, or prohibit our use of proprietary technology or sale of products.

Our commercial success depends, in part, upon our ability to develop, manufacture, market and sell our products and other technologies without alleged or actual infringement, misappropriation or other violation of the patents and proprietary rights of third parties. However, our research, development and commercialization activities may be subject to claims that we infringe, misappropriate or otherwise violate patents or other intellectual property rights owned or controlled by third parties. The various markets in which we operate can be subject to litigation regarding patents and other intellectual property rights. For example, our third-party collaborators may not properly obtain, maintain, enforce or defend our intellectual property or proprietary rights or may use or misappropriate our proprietary information in such a way that could jeopardize or invalidate our intellectual property rights or expose us to potential litigation. Our competitors have made substantial investments in patent portfolios and competing technologies, and may have applied for or obtained or may in the future apply for or obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell our products. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us.

We may be subject to third-party claims including patent infringement or similar adversarial proceedings or litigation in various jurisdictions. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, and the holders of any such patents may be able to block our ability to commercialize the applicable product or potential product unless we obtained a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable. Third parties may obtain patents in the future and claim that use of our technologies, products and potential products infringes upon these patents. Additionally, because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our products, potential products or technologies may infringe. If any third-party patents issued from such applications were held by a court of competent jurisdiction to cover aspects of our products, potential products or technologies, the holders of any such patents may be able to prohibit our commercialization of the applicable product, potential product or technology until such patent expires or is finally determined to be invalid or unenforceable or unless we obtained a license.

In addition, defending such claims could cause us to incur substantial expenses and, if we fail, could cause us to pay substantial damages if we are found to be infringing a third party’s patent rights. Further, if a patent infringement suit is brought against us, our development, manufacturing or sales activities relating to the product, potential product or technology that is the subject of the suit may be delayed or terminated, as parties making claims against us may obtain injunctive or other equitable relief. As a result of patent infringement claims, or in order to avoid potential infringement claims, we may choose to seek, or be required to seek, a license from the third party, which may require payment of substantial royalties or fees, or require us to grant a cross-license under our intellectual property rights. These licenses may not be available on reasonable terms or at all. Even if a license can be obtained on reasonable terms, the rights may be nonexclusive, which would give our competitors access to the same intellectual property rights. If we are unable to enter into a license on acceptable terms, we could be prevented from commercializing one or more of our products, potential products or technologies, or forced to modify such products or potential products, or to cease some aspect of our business operations, which could harm our business significantly. We might also be forced to redesign or modify our products, potential products or technologies so that we no longer infringe the third-party intellectual property rights, which may result in significant cost or delay to us, or such redesign or modification could be impossible or technically not viable.

Even if we were ultimately to prevail, any of these events could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business, force us to face negative

 

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publicity, adversely impact prospective customers or prohibit us from manufacturing, importing, marketing or otherwise commercializing our products, potential products, services and technology. In addition, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors view these announcements in a negative light, the price of our ordinary shares could be adversely affected. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources, adversely affecting our ability to compete in the marketplace.

We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful and have an adverse effect on the success of our business.

Competitors or other third parties may infringe, misappropriate or otherwise violate our patents or other intellectual property. In addition, our third-party collaborators may use or misappropriate our intellectual property and proprietary information in such a way that could jeopardize our ownership and intellectual property rights. If we or one of our licensors were to initiate legal proceedings against a third party to enforce a patent covering one of our products or potential products, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in certain countries, defendant counterclaims alleging invalidity or unenforceability are commonplace. Third parties may initiate invalidity proceedings even in the absence of infringement proceedings. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements. Interference or derivation proceedings provoked by third parties or brought by us or declared by the relevant patent authority may be necessary to determine the priority of inventions with respect to our patents or patent applications. The outcome of proceedings involving assertions of invalidity and unenforceability during patent litigation is unpredictable.

If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our products, potential products and other technology, which may allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or could require us to obtain license rights from the prevailing party in order to be able to manufacture or commercialize our products, potential products or technologies without infringing third-party patent rights. Even if a defendant does not prevail on a legal assertion of invalidity or unenforceability, our patent claims may be construed in a manner that would limit our ability to enforce such claims against the defendant and others. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights. Even if we were to successfully assert our patents or other intellectual property rights, or to settle at an early stage, such litigation could burden us with substantial unanticipated costs or a court may not award remedies that sufficiently compensate us for our losses. The impact of public announcements of the results of hearings related to such awards on our business may be uncertain. Our patents and other intellectual property rights also will not protect our technology, products and potential products if competitors design around our protected technology, products and potential products without infringing our patents or other intellectual property rights.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

We rely on external law firms, their extended network of partners worldwide and their internal check procedures for patent maintenance and prosecution. In the event that we or our licensors fail to maintain the patents and patent applications covering our products and potential products or if we or our licensors otherwise allow our patents or patent applications to be abandoned or lapse, it could create opportunities for competitors to enter the market, which would hurt our competitive position and could impair our ability to successfully commercialize our products.

 

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We enjoy only limited geographical protection with respect to certain patents, and we may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents covering our technology, products and potential products in all countries throughout the world would be prohibitively expensive, and even in countries where we have sought protection for our intellectual property, such protection can be less extensive than those in Europe and the United States. Competitors may use our and our licensors’ technologies in jurisdictions where we have not obtained patent protection or licensed patents to develop their own products and, further, may export otherwise infringing products to territories where we and our licensors have patent protection, but where enforcement is not as strong as that in the European Union or the United States. These products may compete with our products, and our or our licensors’ patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many jurisdictions have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many jurisdictions limit the enforceability of patents against government agencies or government contractors. In these jurisdictions, the patent owner may have limited remedies, which could materially diminish the value of such patents. If we or any of our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be adversely impacted, which could have a material adverse effect on our business.

The legal system in certain foreign jurisdictions, particularly those in certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection. Proceedings to enforce our patent and other intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents and other intellectual property rights at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a commercial advantage from the intellectual property that we develop or license. Any of the foregoing could have an adverse effect on our competitive position, business, financial condition, results of operations and prospects.

We may be subject to claims that our employees, consultants, independent contractors or collaborators have wrongfully used or disclosed confidential information of their former employers or other third parties, and we may be subject to claims asserting ownership of what we regard as our own intellectual property.

We do and may employ individuals who were previously employed at universities or other life sciences companies, including our licensors, competitors or potential competitors. Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements with our employees, consultants, collaborators, independent contractors and other third parties with whom we do business include provisions requiring such parties to assign rights in inventions to us and to not use the know-how or confidential information of their former employer or other third parties, we may be subject to claims that we or our employees, consultants, collaborators or independent contractors have inadvertently or otherwise used or disclosed know-how or confidential information of their former employers or other third parties, or that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims, and if we fail, in addition to paying monetary damages, we may lose valuable personnel or intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property, which could result in customers seeking other sources for the technology, or ceasing from doing business with us. Moreover, any such litigation or the threat thereof may adversely affect our reputation, our ability to form strategic alliances, engage with scientific advisors or hire employees or consultants, any of which could adversely affect our business, including in terms of substantial cost, reputational loss and/or a distraction to our management and other employees.

 

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If conflicts arise between us and our collaborators or strategic partners, these parties may act in a manner adverse to us and could limit our ability to implement our strategies and protect our intellectual property rights.

If conflicts arise between our corporate or academic collaborators or strategic partners and us, the other party may act in a manner adverse to us and could limit our ability to implement our strategies and protect our intellectual property rights. Our collaborators or strategic partners may have or may, in the future, develop, either alone or with others, products in related fields that are competitive with the products we have or may develop. In addition, our collaborators or strategic partners may use our intellectual property and proprietary information in such a way that could jeopardize our ownership and intellectual property rights. Competing products, either developed by the collaborators or strategic partners or to which the collaborators or strategic partners have rights, may result in the withdrawal of partner support for our products.

Our collaborators or strategic partners also could preclude us from entering into collaborations with their competitors, fail to obtain timely regulatory approvals, terminate their agreements with us prematurely, fail to devote sufficient resources to the development and commercialization of products, use our intellectual property and proprietary information in such a way that could jeopardize our ownership and intellectual property rights, or merge with or be acquired by a third party who may do any of these things. Any of the foregoing could harm our development and commercialization efforts and materially adversely affect our business.

If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Although we currently own trademark registrations and have trademark applications pending, it may be possible that some trademarks may be the subject of a governmental or third-party objection, which could prevent the registration or maintenance of the same. We cannot assure you that any currently pending trademark applications or any trademark applications we may file in the future will be approved. If we are unsuccessful in obtaining trademark protection for our primary brands, we may be required to change our brand names; additionally, if competitors try to adopt trade names or trademarks similar to ours, this might impede our ability to build brand identity and possibly lead to market confusion, adversely affecting our business in the long-term. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our unregistered trademarks or trade names. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.

Risks Relating to Our Shares and this Offering

The price of our Shares may be volatile and may fluctuate due to factors beyond our control.

The initial public offering price for the Shares was determined through negotiations between the underwriters and us, and may vary from the market price of Shares following this offering. If you purchase our Shares in this offering, you may not be able to resell those Shares at or above the initial public offering price. The market price of our Shares may fluctuate significantly due to a variety of factors, including:

 

   

operating results that vary from our financial guidance or the expectations of securities analysts and investors;

 

   

the financial performance of the major end markets that we target;

 

   

our voting control is concentrated;

 

   

the operating and securities price performance of companies that investors consider to be comparable to us;

 

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announcements of strategic developments, acquisitions and other material events by us or our competitors;

 

   

failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;

 

   

issuance of new or updated research or reports by securities analysts;

 

   

changes in government regulations;

 

   

financing or other corporate transactions;

 

   

the loss of any of our key personnel;

 

   

sales of our Shares by us, our executive officers and board members, holders of our Shares or other shareholders in the future;

 

   

price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; and

 

   

other events and factors, many of which are beyond our control.

These and other market and industry factors may cause the market price and demand for our Shares to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their Shares and may otherwise negatively affect the liquidity of our Shares. In addition, the stock market in general, and pharmaceutical and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of the holders of our Shares were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our senior management would be diverted from the operation of our business. Any adverse determination in litigation could also subject us to significant liabilities.

The dual class structure of our shares may adversely affect the value and trading market for the Shares.

Our shares carry different voting rights depending on their class. Holders of ordinary shares are entitled to one vote per share, while Stevanato Holding S.r.l., our controlling shareholder and holding company of the Stevanato family, holds class A multiple voting shares granting them three votes per share. Under no circumstances the ordinary shares can be converted into class A multiple voting shares. We cannot predict whether our dual class structure will result in a lower or more volatile market price for our Shares or in adverse publicity or other adverse consequences. For example, certain index providers such as S&P Dow Jones and FTSE Russell have announced restrictions on including companies with multiple-class share structures in certain of their indexes. In addition, several stockholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our shares may cause stockholder advisory firms to publish negative commentary regarding our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices or any actions or publications by stockholder advisory firms critical of our corporate governance practices could adversely affect the value and trading market for our Shares.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our Shares and our trading volume could decline.

The trading market for our Shares will depend in part on the research and reports that securities or industry analysts publish about us and our business. Securities and industry analysts do not currently, and may never, publish research on us. If no or not enough securities or industry analysts commence coverage on us, the trading price for our Shares would likely be negatively affected. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our Shares or publish inaccurate or unfavorable

 

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research about our business, the price of our Shares would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Shares could decrease, which might cause the price of our Shares and trading volume to decline.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

We intend to use the net proceeds from this offering for general working capital and corporate purposes, including enable us to satisfy the requirements of our investing activities and working capital needs and ensure an appropriate level of operating and strategic flexibility. Generally, we intend to use part of the proceeds to further expand our manufacturing facilities in Piombino Dese (Italy), establish new greenfield plants for EZ-Fill® products, with strong focus on biologics and vaccines, in Indiana (U.S.) and Zhangjiagang (China) (focusing also on engineering), and pursue strategic acquisitions to broaden our offering, our technical know-how and our international footprint. However, as our business needs continue to evolve, our intended use of proceeds may vary accordingly. Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our Shares. The failure by our management to apply these funds effectively could result in financial losses or cause the price of our Shares to decline. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

Our voting control is concentrated.

Stevanato Holding S.r.l., our controlling shareholder and holding company of the Stevanato family, exercises a significant majority of the voting power with respect to our outstanding shares because of the multiple voting shares that it holds. class A multiple voting shares are entitled to three votes per share, and ordinary shares are entitled to one vote per share. Upon completion of the offering, Stevanato Holding S.r.l. may hold          % to          % of the voting rights of the Company, depending on whether and the extent to which the overallotment option in connection with the offering is exercised.

As a result, the Company qualifies as a “controlled company” pursuant to the NYSE listing rules and, therefore, Stevanato Holding S.r.l. potentially has the ability to control the outcome of matters submitted to our shareholders for approval, including the election and removal of directors and any arrangement or sale of all or substantially all of our assets. This concentrated control could delay, defer or prevent a change of control, arrangement or merger or sale of all or substantially all of our assets that our other shareholders may support. Conversely, this concentrated control could allow the holder of the class A multiple voting shares to consummate a transaction that our other shareholders do not support. In addition, the holder of the class A multiple voting shares may make long-term strategic investment decisions and take risks that may not be successful and/or may seriously harm our business.

Future sales, or the possibility of future sales, of a substantial number of our Shares could adversely affect the price of our Shares.

Future sales of a substantial number of our Shares, or the perception that such sales will occur, could cause a decline in the market price of our Shares.

Upon completion of this offering, we will have ordinary shares outstanding. The Shares offered in this offering will be freely tradable without restriction under the Securities Act, except for any of our Shares that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.

We, our executive officers, directors and substantially all of our shareholders, including the Selling Shareholder, have agreed, subject to specified exceptions, with the underwriters not to directly or indirectly sell, offer, contract or

 

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grant any option to sell (including any short sale), pledge, transfer, establish an open “put equivalent position” within the meaning of Rule 16a-l(h) under the Exchange Act; or otherwise dispose of any shares, options or warrants to acquire shares, or securities exchangeable or exercisable for or convertible into shares currently or hereafter owned either of record or beneficially; or publicly announce an intention to do any of the foregoing for a period of 180 days after the date of this prospectus without the prior written consent of the underwriters.

All of our Shares outstanding as of the date of this prospectus may be sold in the public market by existing shareholders 180 days after the date of this prospectus, subject to applicable limitations imposed under federal securities laws. See “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling our Shares after this offering.

In the future, we may also issue our securities if we need to raise capital in connection with a capital raise or acquisition. The amount of Shares issued in connection with a capital raise or acquisition could constitute a material portion of our then-outstanding Shares.

The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.

We are incorporated as a joint stock company (società per azioni) under Italian law. The rights of holders of ordinary shares and, therefore, certain of the rights of holders of Shares, are governed by Italian law, including certain provisions of the Italian Civil Code (the “Italian Civil Code”) and by our articles of association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. See “Description of Share Capital—Differences in Corporate Law” in this prospectus for a description of the principal differences between the provisions of the Italian Civil Code applicable to companies that are listed on a regulated market (società che fannno ricorso al mercato del capitale di rischio) and, for example, the Delaware General Corporation Law relating to shareholders’ rights and protections.

Claims of U.S. civil liabilities may not be enforceable against us.

We are incorporated under Italian law. Most of our assets are located outside the United States. The majority of our management and board of directors reside outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce judgments obtained in U.S. courts against them or us, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws.

No assurance can be given that we will continue to pay or declare dividends.

We have historically paid dividends during the last three years. However, there can be no assurance that we will pay or declare dividends in the future. The actual declaration and payment of future dividends, the amount of any such dividends, and the establishment of record and payment dates, if any, are subject to determination by our Board of Directors each quarter after its review of the current strategy, applicable debt covenants and financial performance and position, among other things. Our declaration and payment of future dividends is subject to risks and uncertainties, including: deterioration of our financial performance or position; inability to declare a dividend in compliance with applicable laws or debt covenants; an increase in our cash needs or decrease in available cash; and the business judgment of the board of directors that a declaration of a dividend is not in our best interest.

As a foreign private issuer, we are exempt from a number of rules under the Exchange Act, we are permitted to file less information with the SEC than domestic companies, and we will be permitted to follow home country practice in lieu of the listing requirements of NYSE, subject to certain exceptions. Accordingly, there may be less publicly available information concerning us than there is for issuers that are not foreign private issuers.

As a foreign private issuer, we are exempt from certain rules under the Exchange Act, including certain disclosure and procedural requirements applicable to proxy solicitations under Section 14 of the Exchange Act,

 

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our board of directors, officers and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act, and we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as companies whose securities are registered under the Exchange Act but are not foreign private issuers. Foreign private issuers are also not required to comply with Regulation FD, which restricts the selective disclosure of material non-public information. Accordingly, there may be less publicly available information concerning us than there is for companies whose securities are registered under the Exchange Act but are not foreign private issuers, and such information may not be provided as promptly as it is provided by such companies.

The NYSE corporate governance rules require listed companies to have, among other things, a majority of independent board members and independent director oversight of executive compensation, nomination of directors and corporate governance matters. As a foreign private issuer, we are permitted to, and we will, follow home country practice in lieu of the above requirements. As long as we rely on the foreign private issuer exemption to certain of the NYSE corporate governance standards, a majority of the directors on our board of directors are not required to be independent directors, our remuneration committee is not required to be comprised entirely of independent directors and we will not be required to have a nomination committee. Therefore, our board of directors approach to governance may be different from that of a board of directors consisting of a majority of independent directors, and, as a result, the management oversight of our Company may be more limited than if we were subject to all of the NYSE corporate governance standards. Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all NYSE corporate governance requirements.

We are an “emerging growth company” and it cannot be excluded that the reduced disclosure requirements applicable to emerging growth companies will make the Shares less attractive to investors.

We are an “emerging growth company” as defined in the JOBS Act. As an emerging growth company, we are only required to provide two years of audited financial statements and only two years of related selected financial data and management discussion and analysis of financial condition and results of operations disclosure. In addition, we are not required to obtain auditor attestation of our reporting on internal control over financial reporting, have reduced disclosure obligations regarding executive compensation and are not required to hold non-binding advisory votes on executive compensation. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. We have elected to take advantage of such extended transition period. We cannot predict whether investors will find our Shares to be less attractive as a result of our reliance on these exemptions. If some investors find our Shares to be less attractive as a result, there may be a less active trading market for our Shares and the price of our Shares may be more volatile.

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

As discussed above, we are a foreign private issuer and, therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2022. We would lose our foreign private issuer status if, for example, more than 50% of our shares were held by U.S. residents, and more than 50% of our total assets are located in the United States as of June 30, 2021. If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms beginning on January 1, 2023, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will

 

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lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the NYSE. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange. These expenses will relate to, among other things, the obligation to present our financial information in accordance with U.S. GAAP in the future.

The obligations associated with being a public company will require significant resources and management attention.

As a public company in the United States, we will incur legal, accounting and other expenses that we did not previously incur. We will become subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act, the listing requirements of the NYSE and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase the demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires that we file annual and current reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy, which could prevent us from improving our business, financial condition and results of operations. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. In addition, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage, and our business, prospects, financial condition and results of operations could be materially and adversely affected.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business, prospects, financial condition and results of operations could be materially and adversely affected.

For as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act (“Section 404(b)”). We could be an emerging growth company for up to five years. See “Prospectus Summary—Implications of Being an Emerging Growth Company” and “Prospectus Summary—Foreign Private Issuer Status.” Furthermore, after the date we are no longer an emerging growth company, our independent registered public accounting firm will only be required to attest to the effectiveness of our internal control over financial reporting depending on our filer status. Even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our management’s assessment or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are

 

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documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, in connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. Failure to comply with Section 404 could subject us to regulatory scrutiny and sanctions, impair our ability to raise revenue, cause investors to lose confidence in the accuracy and completeness of our financial reports and negatively affect the price of our Shares.

There is no existing market for our Shares, and we do not know if one will develop to provide you with adequate liquidity.

Prior to this offering, there has been no public market for our Shares. We cannot predict the extent to which investor interest in our Company will lead to the development of an active trading market on NYSE or otherwise or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling any of our Shares that you purchase, and the value of such Shares might be materially impaired. The initial public offering price for our Shares will be determined by negotiations between us and the representative of the several underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your Shares at prices equal to or greater than the price you paid in this offering.

If you purchase Shares in this offering, you will suffer immediate and substantial dilution of your investment.

The initial public offering price of our Shares is substantially higher than the net tangible book value per share. Therefore, if you purchase our Shares in this offering, you will pay a price per Shares that substantially exceeds our pro forma net tangible book value per share after this offering. Based on the initial public offering price of $             per Share, you will experience immediate dilution of $             per Share, representing the difference between our pro forma net tangible book value per share after giving effect to this offering at the initial public offering price. See “Dilution” for more detail.

We may need to raise additional funds to finance our future capital needs, which may dilute the value of our outstanding Shares or prevent us from growing our business.

We may need to raise additional funds to finance our existing and future capital needs. If we raise additional funds through the sale of equity securities, we may issue such additional shares at a discount to the trending price of our shares, which may dilute the value of our outstanding Shares. We may also decide to issue securities, including debt securities that have rights, preferences and privileges senior to our Shares. Any debt financing would increase our level of indebtedness and could negatively affect our liquidity and restrict our operations. We also can provide no assurances that the funds we raise will be sufficient to finance our existing indebtedness. We may be unable to raise additional funds on terms favorable to us or at all. If financing is not available or is not available on acceptable terms, we may be unable to fund our future needs. This may prevent us from increasing our market share, capitalizing on new business opportunities or remaining competitive in our industry.

If we fail to comply with requirements relating to being a public company in the United States when obligated to do so, our business could be harmed and our Share price could decline.

Prior to this offering, we were a private company with limited accounting personnel and other relevant resources with which to address our internal controls and procedures. Neither we nor our registered public accounting firm have performed an assessment or audit, respectively, of our internal control over financial reporting during any period in accordance with the provisions of the Sarbanes-Oxley Act and it is possible that, had we and our registered public accounting firm performed an assessment or audit, respectively, of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, significant

 

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deficiencies and/or material weaknesses which have been identified. The continued presence of material weaknesses and/or significant deficiencies in any future financial reporting periods could result in financial statement errors that, in turn, could lead to errors in our financial reports, delays in our financial reporting, and that could require us to restate our operating results, or our auditors may be required to issue a qualified audit report, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Shares could be materially and adversely affected. We might also not identify one or more material weaknesses and/or significant deficiencies in our internal controls in connection with evaluating our compliance with Section 404(a) of the Sarbanes-Oxley Act (“Section 404(a)”), which requires that beginning with our second annual report following our initial public offering, management assess and report annually on the effectiveness of our internal control over financial reporting and identify any material weaknesses in our internal control over financial reporting. Although Section 404(b) requires our independent registered public accounting firm to issue an annual report that addresses the effectiveness of our internal control over financial reporting, we have opted to rely on the exemptions provided in the JOBS Act, and consequently will not be required to comply with SEC rules that implement Section 404(b) until such time as we are no longer an EGC. We could be an emerging growth company for up to five years. “Prospectus Summary—Implications of Being an Emerging Growth Company” and “Prospectus Summary—Implications of Being a Foreign Private Issuer”. Furthermore, after the date we are no longer an emerging growth company, our independent registered public accounting firm will only be required to attest to the effectiveness of our internal control over financial reporting depending on our filer status. Even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our management’s assessment or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.

We expect our first Section 404(a) assessment to be required in connection with our annual report for the fiscal year ending December 31, 2022.

In order to achieve and maintain compliance with the requirements of Section 404(a), we will need to expend significant resources and provide significant management oversight. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors and employees, entail substantial costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management’s attention from other business concerns. These changes may not, however, be effective in maintaining the adequacy of our internal controls.

If either we are unable to conclude that we have effective internal control over financial reporting or, at the appropriate time, our independent registered public accounting firm is unable to provide us with an unqualified report on the effectiveness of our internal control over financial reporting as required by Section 404(b), investors may lose confidence in our operating results, the price of our Shares could decline, and we may be subject to litigation or regulatory enforcement actions. In addition, if we are unable to meet the requirements of Section 404, we may not be able to remain listed on the NYSE.

 

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical or present facts or conditions. These forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, these forward-looking statements which reflect our current views with respect to future events and financial performance. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect” and similar expressions identify forward-looking statements. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

 

   

our future financial performance, including our revenue, operating expenses and our ability to maintain profitability;

 

   

our expectations regarding the development of our industry and the competitive environment in which we operate;

 

   

our goals and strategies; and

 

   

our proposed use of proceeds.

The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including, without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions are reasonable, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors and matters discussed elsewhere in this prospectus, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:

 

   

our product offerings are highly complex, and, if our products do not satisfy applicable quality criteria, specifications and performance standards, we could experience lost sales, delayed or reduced market acceptance of our products, increased costs and damage to our reputation;

 

   

we must develop new products and enhance existing products, adapt to significant technological and innovative changes and respond to introductions of new products by competitors to remain competitive;

 

   

our backlog might not accurately predict our future revenue, and we might not realize all or any part of the anticipated revenue reflected in our backlog;

 

   

if we fail to maintain and enhance our brand and reputation, our business, results of operations and prospects may be materially and adversely affected;

 

   

we are highly dependent on our management and employees. Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees that we need to support our business and our intended future growth;

 

   

our business, financial condition and results of operations depend upon maintaining our relationships with suppliers and service providers;

 

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our business, financial condition and results of operations depend upon the availability and price of high-quality materials and energy supply and our ability to contain production costs;

 

   

significant interruptions in our operations could harm our business, financial condition and results of operations;

 

   

our manufacturing facilities are subject to operating hazards which may lead to production curtailments or shutdowns and have an adverse effect on our business, results of operations, financial condition or cash flows;

 

   

our business may be harmed if our customers discontinue or spend less on research, development, production or other scientific endeavors;

 

   

we may face significant competition in implementing our strategies for revenue growth in light of actions taken by our competitors; and

 

   

any other risk we mention in the section “Risk Factors.”

We caution readers of this registration statement not to place undue reliance on these forward-looking statements, which speak only as at their dates. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $             (€            ) million, assuming an offering price of $             (€            ) per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and assuming no exercise of the underwriters’ option to purchase                  additional Shares from us. If the underwriters exercise in full their option to purchase additional Shares from us, we estimate that we will receive net proceeds of approximately $             (€            ) million, assuming an offering price of $             (€            ) per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 (€            ) increase or decrease in the assumed offering price of $             per share would increase or decrease our net proceeds from the offering by $             million (€             million), assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Subject to applicable law, we may also increase or decrease the number of shares we are offering. An increase or decrease of 1,000,000 in the number of shares offered by us in the offering would increase or decrease the net proceeds to us by approximately $             million (€             million), assuming that the assumed offering price remains the same and after deducting underwriting commissions and estimated offering expenses payable by us. Each increase of 1,000,000 shares in the number of shares offered by us together with an associated $1.00 (€            ) increase in the assumed public offering price of $             per share, would increase our net proceeds from the offering by $             million (€             million), after deducting underwriting discounts and commissions. Each decrease of 1,000,000 shares in the number of shares offered by us together with an associated $1.00 (€            ) decrease in the assumed public offering price of $ per share, would decrease our net proceeds from the offering by $             million (€             million), after deducting underwriting discounts and commissions.

The actual net proceeds payable to us will be adjusted based on the actual number of shares offered by us in the offering, the actual offering price and other terms of the offering determined at pricing.

We intend to use the net proceeds from this offering for general corporate purposes, including enabling us to satisfy the requirements of our investing activities and working capital needs and ensuring an appropriate level of operating and strategic flexibility. In particular, we plan to use part of the proceeds to further expand our manufacturing facilities in Piombino Dese, Italy, establish new greenfield plants for EZ-Fill® products, with a strong focus on biologics and vaccines, in Indiana (U.S.) and Zhangjiagang (China) (focusing also on engineering), and pursue strategic acquisitions to broaden our offering, our technical know-how and our international footprint. However, as our business needs continue to evolve, our intended use of proceeds may vary accordingly.

 

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DIVIDEND POLICY

We have not adopted a dividend policy. In the years ended December 31, 2019 and 2020, we declared and paid dividends of an aggregate of €6,170,000 and €8,900,000 (€6,955,398 in dividends and €1,944,602 in distributable reserve), respectively. On January 20, 2021, we had declared and paid dividends of an aggregate of €11,200,000 out of the distributable reserve (the so called “riserva straordinaria”).

The amount of any future dividend payments we may make will depend on, among other factors, our strategy, future earnings, financial condition, cash flow, working capital requirements, capital expenditures and applicable provisions of our articles of association. Under Italian law, payment of annual dividends by the company is paid out of its distributable profits and available reserves for each relevant year. Dividends are approved by our shareholders at an annual general meeting, which must be convened to approve our annual financial statements within 120 or, under certain circumstances, within 180 days after the end of the financial year to which such financial statements relate. See “Description of Share Capital—Shareholders’ Meetings.”

According to current article 22 of Stevanato Holding’s (our principal shareholder) articles of association, the directors of such company must exercise their voting powers in such a way as to cause a distribution of at least 10% of our net income to our shareholders each year.

The Shares will have the same dividend rights as the other currently outstanding Shares and will be entitled to dividends, if any are declared and paid, starting from the year ending December 31, 2021.

We have in place a number of financing agreements which include covenants that would restrict our ability, without the prior consent of the lenders, to distribute dividends if certain debt ratios are exceeded. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.

Mandatory reserves

The payment of annual dividends is proposed by the board of directors and is subject to the approval by the shareholders at the annual general meeting. Before dividends are paid out of our net income in any year, an amount equal to 5% of such net income must be allocated to the company’s legal reserve until such reserve is equal to at least one-fifth of the nominal value of the company’s issued share capital. If our share capital is reduced as a result of accumulated losses, dividends may not be paid until the share capital is reconstituted or reduced by the same amount as the accumulated losses. Pursuant to articles 2433 et seq. of the Civil Code and article 28 of the articles of association, the board of directors may authorize the distribution of interim dividends, subject to certain limitations.

Repayment and Prescription

Any annual dividends declared by us must be paid in compliance with applicable laws. Shareholders cannot be required to repay dividends that have been paid based on duly approved financial statements, if the shareholders collected such dividends in good faith. Dividends not collected within five years from the date they become payable will be forfeited in the company’s favor and will be added to the reserves.

If the Company pays any dividends, they will be paid in Euro. See “Taxation” for a discussion of certain Italian income tax provisions regarding the taxation of dividends.

 

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CAPITALIZATION

The following table sets forth the Company’s cash and cash equivalents and capitalization as of March 31, 2021 on:

 

   

an actual basis, and

 

   

on an adjusted basis to reflect the issuance and sale of              Shares in this offering at an assumed public offering price of $             per Shares, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the application of net proceeds from this offering, as described under the section of this prospectus titled “Use of Proceeds”.

You should read this table together with our audited consolidated financial statements and related notes beginning on page F-1, as well as the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other financial information included elsewhere in this prospectus.

 

     As of March 31, 2021  
     Actual
(in € millions)
    As Adjusted(1)
(in € millions)
 

Cash and cash equivalents

     80.2        

Debt

    

Current debt

     66.4        

Non-current debt

     262.7        

Total Debt

     329.1    

Shareholders’ equity

    

Shares,              nominal value: shares issued and outstanding, actual              shares issued and outstanding, as adjusted

     20.0        

Reserves and Retained earnings

     282.5        

Net profit attributable to equity holders of the parent

     36.6        

Non-controlling interests

     (0.3      

Total shareholders’ equity

     338.7        

Total capitalization

     667.8        

 

(1)

Each $1.00 (€            ) increase or decrease in the assumed offering price of $             per share would increase or decrease our net proceeds from the offering by $             million (€             million), assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Subject to applicable law, we may also increase or decrease the number of shares we are offering. An increase or decrease of 1,000,000 in the number of shares offered by us in the offering would increase or decrease the net proceeds to us by approximately $             million (€             million), assuming that the assumed offering price remains the same and after deducting underwriting commissions and estimated offering expenses payable by us. Each increase of 1,000,000 shares in the number of shares offered by us together with an associated $1.00 (€            ) increase in the assumed public offering price of $             per share, would increase our net proceeds from the offering by $             million (€             million), after deducting underwriting discounts and commissions. Each decrease of 1,000,000 shares in the number of shares offered by us together with an associated $1.00 (€            ) decrease in the assumed public offering price of $             per share, would decrease our net proceeds from the offering by $             million (€             million), after deducting underwriting discounts and commissions. The as adjusted information discussed above is illustrative only and will change based on the actual public offering price, the actual number of Shares offered by us, and other terms of this offering determined at pricing.

 

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The number of our Shares to be outstanding after this offering is based on outstanding Shares as of                 , 2021.

Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:

 

   

no exercise by the underwriters of their option to purchase additional Shares from us and the Selling Shareholders in this offering; and

 

   

an initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus.

 

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DILUTION

If you invest in our Shares, your interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share immediately following the consummation of this offering.

At December 31, 2020, we had a net tangible book value of €             million ($             million), corresponding to a net tangible book value of €             ($            ) per share. Net tangible book value per share is determined by dividing (i) our total assets, excluding intangible assets, less our total liabilities by (ii) the total number of shares outstanding.

After giving further effect to our issuance and sale of Shares in this offering at an assumed initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and our application of the estimated net proceeds from this offering, as described under the section of this prospectus titled “Use of Proceeds”, our pro forma as adjusted net tangible book value as of              would have been €             million ($             million), or €             ($            ) per share. This represents an immediate increase of €             ($            ) in pro forma as adjusted net tangible book value per share to existing shareholders and immediate dilution of €             ($            ) in pro forma as adjusted net tangible book value per share to new investors purchasing shares in this offering. Dilution in net tangible book value per share to new investors is determined by subtracting as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by new investors.

The following table illustrates this dilution to new investors purchasing Shares in the offering.

 

Assumed initial public offering price

      $                

As adjusted net tangible book value per share as of December 31, 2020

   $                   

Increase in net tangible book value per share attributable to this offering

     
  

 

 

    

As adjusted net tangible book value per share after this offering

     
     

 

 

 

Dilution per share to new investors in this offering

      $    

Each $1.00 (€1.00) increase or decrease in the assumed public offering price of $             per share would increase or decrease each of as adjusted cash and cash equivalents, total equity attributable to our shareholders and total capitalization by approximately $             (€            ) million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions. We may also increase or decrease the number of shares we are offering. An increase or decrease of 1,000,000 shares in the number of shares offered by us would increase or decrease each of as adjusted cash and cash equivalents, total equity attributable to our shareholders and total capitalization by approximately $             (€            ) million, assuming that the assumed public offering price remains the same, and after deducting underwriting discounts and commissions. Each increase of 1,000,000 shares in the number of shares offered by us together with an associated $1.00 (€            ) increase in the assumed public offering price of $             per share, would increase each of as adjusted cash and cash equivalents, total equity attributable to our shareholders and total capitalization by approximately $             (€            ) million, after deducting underwriting discounts and commissions. Each decrease of 1,000,000 shares in the number of shares offered by us together with an associated $1.00 (€1.00) decrease in the assumed public offering price of $             per share, would decrease each of as adjusted cash and cash equivalents, total equity attributable to our shareholders and total capitalization by approximately $             (€            ) million, after deducting underwriting discounts and commissions. The as adjusted information discussed above is illustrative only and will change based on the actual public offering price, the actual number of share offered by us, and other terms of this offering determined at pricing.

 

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If the underwriters were to exercise their option to purchase additional Shares in full, the pro forma as adjusted net tangible book value per share after the offering would be $             (€            ) per share, and the dilution per share to new investors would be $             (€            ) per share.

The following table summarizes, on the pro forma as adjusted basis described above as of             , the differences between the number of shares purchased from us, the total consideration and the average price per share paid by existing shareholders and by investors participating in this offering, at an assumed public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and before deducting the estimated underwriting discounts and commissions and estimated offering expenses.

 

     Ordinary Shares
Purchased
    Total Consideration     Average
Price Per
Share
 
     Number      Percent     Amount      Percent  

Existing shareholders

                                    $                                 $                
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

New investors

            
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

               $                 $    
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

If the underwriters exercise their option to purchase additional Shares in full, the following will occur:

 

   

the percentage of our ordinary shares held by existing shareholders will decrease to         % of the total number of our shares outstanding after this offering; and

 

   

the percentage of our shares held by new investors will increase to % of the total number of our shares outstanding after this offering.

The above discussion and tables are based on shares outstanding as of             ,.

In addition, we may choose to raise additional capital due to market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities may result in further dilution to our shareholders.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with our consolidated financial statements and the notes included elsewhere in this prospectus. The following discussion contains forward-looking statements that involve certain risks and uncertainties including, but not limited to, those described in the “Risk Factors” section of this prospectus. Our actual results could differ materially from those discussed in these statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly under the “Risk Factors” and “Special Note Regarding Forward-Looking Statements” sections. Certain numerical figures set out in this section, including financial data presented in millions and thousands, have been subject to rounding adjustments and, as a result, the totals of the data in this section may vary slightly from the actual arithmetic totals of such information. In addition, as a result of such rounding, the totals of certain financial information presented in tabular form may differ from the information that would have appeared in such totals using the unrounded financial information.

Overview

We are a leading global provider of drug containment, drug delivery and diagnostic solutions to the pharmaceutical, biotechnology and life sciences industries. We deliver an integrated, end-to-end portfolio of products, processes and services that address customer needs across the entire drug life cycle at each of the development, clinical and commercial stages. Our core capabilities in scientific research and development, our commitment to technical innovation and our engineering excellence are central to our ability to offer value added solutions to our clients.

We have secured a leadership position within the drug development and delivery value chain through our investment in research and development and the expansion of our global footprint and capabilities. Over our 70 year history, we have earned a leading reputation for high quality and reliability that has enabled us to become a partner of choice for more than 700 companies globally, including 41 of the top 50 pharmaceutical companies (which comprise all of the top 15) and eight of the top ten in-vitro diagnostic companies, as measured by 2020 revenue, according to data collected by Global Data. We also serve 15 of the top 20 biotechnology companies by market capitalization in the NASDAQ Biotechnology Index and over 100 biotechnology customers in total.

Our priority is to provide flexible solutions that preserve the integrity of pharmaceutical products and enable our customers to deliver safe and effective treatments to patients while reducing time to market, total cost of ownership (i.e., logistics, drug product waste, storage and personnel costs) and supply chain risk. We achieve this by developing our products in close collaboration with our customers, leveraging our scientific research capabilities, technical expertise and engineering and manufacturing excellence to meet their quality requirements.

Our solutions are highly integrated with the development, production and commercialization processes of our customers. In addition to manufacturing drug containment and delivery solutions, we provide a full set of services across all stages of drug development, from pre-clinical to clinical and commercialization. We also engineer machinery and equipment for the production of drug containment and delivery systems that can be integrated into both our customers’ and our own manufacturing processes. Our involvement at each stage of a drug’s life cycle, together with the breadth of our offering, enables us to serve as a one-stop-shop for our customers, which we believe represents a significant competitive advantage.

We operate across the healthcare industry and serve some of its fastest growing segments, including biologics, biosimilars, vaccines and molecular diagnostics. As a result of how closely integrated we are in the drug production and delivery supply chain, we are well-positioned to benefit from secular trends within our target industries, such as increases in demand resulting from pharmaceutical innovation, acceleration and expansion of vaccination programs, growth in biologics/biosimilars, self-administration of medicines, aging demographics and increasing quality standards and regulation.

 

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We estimate that our total addressable market, based on our current offering, exceeds $11 billion in terms of revenue generated by all market participants in 2020, and consists of biopharmaceutical injectables and in-vitro diagnostic products. Within each of these markets, we operate in some of the fastest growing segments, including pre-fillable syringes, drug delivery systems, molecular diagnostics and assembly equipment. We believe there are opportunities to further expand our addressable markets, including by targeting (i) complementary containment solutions, (ii) additional delivery systems, (iii) complementary engineering solutions and (iv) aftersales support and services.

We operate our business in two segments:

 

   

Biopharmaceutical and Diagnostic Solutions, which includes all the products, processes and services developed and provided for the containment and delivery of pharmaceutical and biotechnology drugs and reagents, as well as the production of diagnostic consumables; and

 

   

Engineering, which includes all of the equipment and technologies developed and provided to support the end-to-end pharmaceutical, biotechnology and diagnostic manufacturing processes (assembly, visual inspection, packaging and serialization and glass converting).

In the three months ended March 31, 2021, we generated approximately 83% of total sales from our Biopharmaceutical and Diagnostic Solutions segment and approximately 17% from our Engineering segment, compared to 88% and 12%, respectively, in the three months ended March 31, 2020. Both for the year ended December 31, 2019 and 2020, we generated approximately 85% of total sales from our Biopharmaceutical and Diagnostic Solutions segment and approximately 15% from our Engineering segment.

We refer to our premium products in the Biopharmaceutical and Diagnostic Solutions segment as our “high-value” solutions. “High-value” solutions are wholly owned, internally developed products, processes and services for which we hold intellectual property rights or have strong proprietary know-how, and that are characterized by particular complexity and high performance. Our “high-value” solutions deliver significant benefits to customers in terms of time-to-market and reduced total cost of ownership. Among our key “high-value” solutions is our EZ-Fill® line of ready-to-fill injectable products, which can be customized to clients’ needs. For additional information on EZ-Fill® see “Business—Business Segments—Biopharmaceutical and Diagnostic Solutions— Container Closure Systems (CCS).”

We have nine production plants for manufacturing and assembling pharmaceutical and healthcare products across Europe (Italy, Germany and Slovakia) and the rest of the world (Brazil, China, Mexico and the United States), five plants for the production of machinery and equipment (Italy and Denmark), two sites for analytical services (Italy and the United States) and two commercial offices (Japan and the United States). Our manufacturing facilities in Mexico (serving the U.S. market), China and Brazil are greenfield operations established by us. Our manufacturing facilities in Slovakia, Denmark, Germany and the United States were acquired in strategic transactions over the past 15 years. Our global footprint, together with our proprietary, highly standardized manufacturing systems and processes, allow us to provide quality consistent products and services to our customers in more than 70 countries.

Since the outbreak of COVID-19, we have increased production capacity to support our customers’ efforts to provide a rapid response to COVID-19. In this context, we have been providing: (i) glass vials and syringes to approximately 90% of currently marketed vaccine programs, according to our estimates based on public information (WHO, EMA, FDA); (ii) diagnostic solutions for the detection and diagnosis of COVID-19; (iii) glass forming lines, which are being installed worldwide, to facilitate the distribution of glass bulks and sterile vials and syringes; and (iv) visual inspection systems. COVID-19 has generated increased demand for our products and services, further enabling us to accelerate our growth strategy.

 

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Factors Affecting Our Performance

Our financial condition and results of operations have been, and will continue to be, affected by a number of important factors, including the following:

Increasing Market Share in Growing Markets

We are a key partner to leading companies in the pharmaceutical, biotechnology and life sciences industries, serving as one of the preeminent providers of drug containment, drug delivery, diagnostic and engineering solutions to these end markets. The demand for our solutions is driven, in part, by trends affecting the pharmaceutical, biotechnology and life sciences markets, such as the aging of the global population, the increasing incidence of chronic diseases (e.g. diabetes), continued innovation in biologic injectables, increasing access to advanced healthcare in developing and transitioning countries, broader demand for vaccine programs, increasing propensity of biotechnology companies to outsource non-core competencies and growth in self-injection systems where the primary container (i.e., glass containers) is integrated into the delivery device. We believe that as a result of our global footprint and deep-rooted cooperation with our customers, we have been and will continue to be able to anticipate such market trends and adapt our products and services offering to benefit from them. Our ability to continue to grow our revenue and increase our market share will depend, in part, on our continued ability to target fast-growing market segments and to introduce new products and technologies more efficiently than our competitors.

Shift in Sales Mix Towards “High-Value” Solutions

We continue to increase our focus on our innovation platform to extend and improve our in-house proprietary product offering. Our “high-value” products generate substantially higher revenues and profits than other containment and delivery solutions. We also believe that “high-value” products will support continued market share expansion in research use markets while enabling us to extend our product offering, through industry partners, to clinical applications. We expect to continue to devote significant resources to increase the proportion of “high-value” solutions we offer by focusing on developing innovative new products, both as part of our existing portfolio and in complementary and adjacent markets.

Impact of COVID-19 Pandemic

In 2020, the global COVID-19 pandemic caused both governments and private organizations to implement numerous measures seeking to contain the spread of the virus. These measures impacted and are expected to continue to impact our business and operations in several ways.

Initial short-term impacts of COVID-19 on our production and operational capabilities included: (i) labor absenteeism; (ii) disruptions to production lines; (iii) delays in, and increased costs of, logistics; (iv) short-term drop in sales of certain non-COVID-19 related orders, which were cancelled and or postponed; and (v) increased labor costs in the form of employee bonuses to recognize and reward general efforts during the pandemic.

Despite the initial short-term operational disruption, and the impact that the measures established to respond to the COVID- 19 pandemic had on our ability to carry out business development activities (which we believe may have had an impact on our ability to broaden our customer portfolio in the short-term), sales of syringes and vials to and for vaccination programs globally and visual inspection systems, increased resulting in a revenue growth acceleration. We have been supplying: (i) glass vials and syringes to approximately 90% of currently marketed vaccine programs, according to our estimates based on public information (WHO, EMA, FDA); (ii) plastic diagnostic consumables for the detection and diagnosis of COVID-19; (iii) glass forming lines, which are being installed worldwide, to facilitate the distribution of glass bulks and sterile vials and syringes; and (iv) visual inspection systems. Going forward, we anticipate that demand for syringes, vials and related products and services will remain elevated as the COVID-19 vaccine and treatment roll-out continues globally and, more

 

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generally, as epidemic preparedness, including through new vaccination programs and booster shots, becomes a greater priority going forward. However, there remains uncertainty around the magnitude of the long-term impact of COVID-19 on demand for our solutions.

Maximizing Efficiency in Our Production Processes

Our production costs depend on our ability to maximize efficiency in our production processes. In 2018, we started the implementation of “SG Steps”, an operational excellence program aimed, among other things, at continuously improving the efficiency of our processes. Due to the integrated nature of our business, the “SG Steps” program resulted in an increase in the overall effectiveness of the equipment in our facilities, improved quality and efficiency in our global production processes and reduced delivery time, returns from customers, production scraps and waste. Our ability to maintain low production costs and, as a consequence, increase our profitability, will depend on how successful we are in further maximizing the efficiency of our processes, especially in newly acquired facilities where the “SG Steps” program will need to be implemented.

Selling, General and Administrative (SG&A) Expenses

We have historically recorded significant selling, general and administrative expenses associated with personnel expenses, expenses for professional services and other expenses, including depreciation and amortization. In recent years, as a result of the implementation of the “SG Steps”, our SG&A expenses have grown at a substantially lower rate than the growth of our revenue.

In 2020, our selling, general and administrative expenses were at 11.9% of our revenue compared to 14.3% in 2019. As a result of operating as a U.S. public company, we expect to incur additional general and administrative costs including expenses related to compliance with U.S. securities and stock exchange rules and regulations, additional insurance expenses, investor relations activities and other administrative and professional services, which may affect our SG&A to revenue ratio in the following financial years. In any given year, our aim is to grow revenue at a higher rate than the growth of our selling, general and administrative expenses (excluding non-recurring items such as expenses incurred in connection with our listing).

Research and Development Expenses

In 2020, our research and development expenses were 2.6% of our revenue, compared to 1.5% in 2019. Expenses in research and new product development are a strategic enabler for our future growth and we expect to continue to make substantial investments in this area in coming years. Through continued spending in our research and development programs, we intend to drive revenue and profit growth through processes that will improve innovation and quality of our existing products, facilitating the shift towards “high-value” products, services and solutions.

Our ability to leverage the significant investments in research and new product development which we made in recent years is critical to our future performance. We will continue to develop (i) containment solutions for innovative biologic drugs, including cell and gene therapies, and (ii) a sustainable pipeline of patient-centric drug delivery systems that support the transition of therapy from hospital to homecare and facilitate patient self-administration.

In the area of containment solutions, the development of new products will be targeted at maintaining the stability, potency and purity of our customers’ products prior to administration. New therapies for diabetes, cancer and autoimmune diseases are based on large, complex biologic molecules that are extremely sensitive to their storage environment. In the area of drug delivery systems, we will be targeting the development of easy-to-use, accurate, reliable self-injection systems for complex pharmaceutical and biotechnology products. We have developed a portfolio of devices for this market that can be used off-the-shelf or customized to the specific needs of the customer.

 

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We will continue developing new drug delivery systems based on three pillars: patient centricity, sustainability and digitalization, core capabilities to meet our customer’s need for connected health devices. We apply a rigorous “stage&gate” development process, which de-risks our development projects and reduces total development costs. Development timelines for new drug delivery devices typically fall into the range of four to five years to reach the start of initial production.

Key Indicators of Performance and Financial Condition

Non-GAAP Financial Measures

We monitor and evaluate our operating and financial performance using several non-GAAP financial measures, including: EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit, Adjusted Operating Profit Margin, CAPEX and Free Cash Flow. We believe that these non-GAAP financial measures provide useful and relevant information regarding our performance and improve our ability to assess our financial condition. While similar measures are widely used in the industry in which we operate, the financial measures we use may not be comparable to other similarly titled measures used by other companies, nor are they intended to be substitutes for measures of financial performance or financial position as prepared in accordance with IFRS.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

EBITDA is defined as net profit before income tax expenses, net financial expenses, including share of profit of associates, amortization and depreciation. Adjusted EBITDA is defined as EBITDA as adjusted for certain income and costs expected to occur infrequently, and that management considers not reflective of ongoing operational activities of the company. EBITDA is presented to aid management in their analysis of the performance of the Group and to assist in the comparison of our performance with that of our competitors. Adjusted EBITDA is provided in order to present how the underlying business has performed excluding the impact of certain non-recurring items, which may alter the underlying performance and impair comparability of results between periods.

The following table sets forth the calculation of EBITDA and Adjusted EBITDA for the three months ended March 31, 2020 and 2021 and the fiscal years ended December 31, 2019 and 2020 and provides a reconciliation of these non-GAAP measures to the most comparable IFRS measure, Net Profit. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA for a period by total revenue for the same period.

 

     March 31, 2020     March 31, 2021     December 31, 2019     December 31, 2020  
     (amounts in € millions, except as indicated otherwise)  

Net Profit

     7.2       36.6       38.7       78.6  

Income Taxes

     3.6       5.1       16.0       17.7  

Finance Income

     (5.7     (2.0     (8.0     (14.9

Finance Expenses

     10.3       3.2       15.3       21.8  

Share of Profit of an Associate

     0.0       0.0       0.2       (0.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Profit

     15.4       42.9       62.2       103.1  

Depreciation and Amortization

     12.6       12.9       46.2       54.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     28.0       55.9       108.4       157.2  

Non-recurring items

     0.0       (0.3     0.0       3.0  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     28.0       55.6       108.4       160.2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA Margin

     20.5     28.9     20.2     24.2
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Adjusted Operating Profit and Adjusted Operating profit Margin

Adjusted Operating Profit represents Operating Profit as adjusted for certain income and costs expected to occur infrequently, and that management considers not reflective of ongoing operational activities. Adjusted Operating Profit is provided in order to present how the underlying business has performed excluding the impact of the adjusting items, which may alter the underlying performance and impair comparability of results between the periods.

The following table sets forth the calculation of Adjusted Operating Profit for the three months ended March 31, 2020 and 2021 and the fiscal years ended December 31, 2019 and 2020. Adjusted Operating Profit margin is calculated by dividing Adjusted Operating Profit for a period by total revenue for the same period.

For further information on Non-recurring items see “General and Administrative Expenses” below.

 

     March 31, 2020     March 31, 2021     December 31, 2019     December 31, 2020  
     (amounts in € millions, except as indicated otherwise)  

Operating Profit

     15.4       42.9       62.2       103.1  

Non-recurring items

     0.0       (0.3     0.0       3.0  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Operating Profit

     15.4       42.6       62.2       106.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Operating Profit Margin

     11.3     22.1     11.6     16.0
  

 

 

   

 

 

   

 

 

   

 

 

 

CAPEX

Capital Expenditure, or CAPEX, is the sum of investment amounts in tangible fixed assets and intangible assets during the period (excluding right-of-use assets recognized during the period in accordance with IFRS 16 Leases). These investment activities consist of acquisitions of property, plant and equipment and intangible assets.

The following table sets forth the CAPEX for the three months ended March 31, 2021 and the fiscal year ended December 31, 2019 and 2020:

 

     March 31, 2021      December 31, 2019      December 31, 2020  
     (amounts in € millions)  

Addition to Property, plants and equipment

     18.4        69.3        89.1  

Addition to Intangible Assets

     0.7        5.9        6.4  
  

 

 

    

 

 

    

 

 

 

CAPEX

     19.1        75.2        95.5  
  

 

 

    

 

 

    

 

 

 

See Note 17 “Intangible Assets” and Note 18 “Property, plant and equipment” to the Consolidated Financial Statements for additional details.

For further information on Capital Expenditure on a paid-out cash basis see “Liquidity and Capital Resources Capital Expenditure” below.

Free Cash Flow

Free Cash Flow is defined as cash flows from operating activities excluding interests paid and received, less investments in property, plant and equipment and intangible assets on a cash basis.

 

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The following table sets forth the calculation of Free Cash Flow for the three months ended March 31, 2020 and 2021 and the fiscal year ended December 31, 2019 and 2020:

 

     March 31, 2020     March 31, 2021     December 31, 2019     December 31, 2020  
     (amounts in € millions)  

Cash Flow from / (used in) Operating Activities

     (9.3     5.9       42.6       155.7  

Interest paid

     1.2       1.1       4.7       5.4  

Interest received

     (0.2     (0.1     (0.6     (0.7

Purchase of property, plant and equipment

     (24.1     (21.7     (68.1     (89.6

Purchase of intangible assets

     (0.6     (0.7     (5.8     (6.4
      

 

 

   

 

 

 

Free Cash Flow

     (33.0     (15.5     (27.2     64.4  
  

 

 

   

 

 

   

 

 

   

 

 

 

For further information on cash flow see “Liquidity and Capital Resources Operating and Investing Activities” below.

Components of Our Results of Operations

The following discussion sets forth certain components of our statements of operations as well as factors that impact those items.

Results discussed in this section of the prospectus is consolidated according to IFRS accounting principles and therefore does not include Company’s inter-segment items.

Revenue and Segment Reporting

Our revenue is divided into two main segments:

 

  (i)   Biopharmaceutical and Diagnostic Solutions: which includes all the products, processes and services developed and provided for the containment and delivery of pharmaceutical and biotechnology drugs and reagents, as well as the production of diagnostic consumables. This segment is split into two sub-categories:

 

   

“high-value” solutions; and

 

   

other containment and delivery solutions.

 

  (ii)   Engineering:   which includes all of the equipment and technologies developed and provided to support the end-to-end biopharmaceutical and diagnostic manufacturing processes (assembly, visual inspection, packaging and serialization and glass converting). We believe operating in this segment differentiates us from our competitors, and enables us to provide integrated end to end solutions, reduce time to market and improve the quality of our products.

Revenue recognized in the three months ended March 31, 2020 and 2021 amounted to €136.4 million and €192.8 million, respectively, and those recognized for the years ended December 31, 2019 and 2020 amounted to €536.5 million and €662.0 million, respectively.

In the three months ended March 31, 2021, we generated approximately 83% of total sales from our Biopharmaceutical and Diagnostic Solutions segment and approximately 17% from our Engineering segment, compared to 88% and 12%, respectively, in the three months ended March 31, 2020. Both for the year ended December 31, 2019 and 2020, we generated approximately 85% of total sales from our Biopharmaceutical and Diagnostic Solutions segment and approximately 15% from our Engineering segment.

 

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Costs and Expenses

Cost of Sales

Cost of sales for the three months ended March 31, 2020 and 2021 amounted to €96.9 million and €127.4 million, respectively, while as of December 31, 2019 and 2020 amounted to €398.5 million and €467.9 million, respectively. Cost of sales primarily consists of the cost of materials, components and labor expense related to the production and distribution of goods and services. Cost of sales also includes depreciation and amortization of €10.6 for the three months ended March 31, 2020 and 2021, and €38.5 million and €45.3 million for the fiscal year ended December 31, 2019 and 2020, respectively.

Selling and Marketing Expenses

Selling and marketing expenses amounted to €6.3 million and €5.9 million for the three months ended March 31, 2020 and 2021, respectively, and to €26.1 million and €20.0 million for the years ended December 31, 2019 and 2020, respectively. These expenses are mainly related to personnel expenses for our sales organization. They include also depreciation and provision for bad and doubtful debts totalling €1.4 million for the three months ended March 31, 2020 and 2021, respectively, and to €4.6 million and €1.9 million for the years ended December 31, 2019 and 2020, respectively.

Research and Development Expenses

Research and development expenses amounted to €4.0 million and €5.8 million for the three months ended March 31, 2020 and 2021, respectively, and to €7.8 million and €17.4 million for the years ended December 31, 2019 and 2020, respectively. These expenses include costs for research and development activities to support the innovation of our product range and components and amortization of capitalized development costs.

General and Administrative Expenses

General and administrative expenses amounted to €14.2 million and €14.0 million for the three months ended March 31, 2020 and 2021, respectively, and to €50.6 million and €58.9 million for the years ended December 31, 2019 and 2020, respectively. These expenses include personnel expenses for general and administrative functions, consultancies, directors compensation, rental fees, depreciation and amortization.

 

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Results of Operations

Three months ended March 31, 2020 versus three months ended March 31, 2021

The following table sets forth our results of operations for the three months ended March 31, 2020 and 2021.

 

     March 31, 2020      March 31, 2021  
     (amounts in € millions)  

Revenue

     136.4        192.8  
     

Costs of sales

     96.9        127.4  
     

Gross Profit

     39.5        65.4  
  

 

 

    

 

 

 

Other operating Income

     0.2        3.2  
  

 

 

    

 

 

 

Selling and Marketing Expenses

     6.2        5.9  
  

 

 

    

 

 

 

Research and Development Expenses

     3.9        5.8  
  

 

 

    

 

 

 

General and Administrative Expenses

     14.2        14.0  
     

Operating Profit

     15.4        42.9  
  

 

 

    

 

 

 

Finance Income

     5.7        2.0  
  

 

 

    

 

 

 

Finance Expense

     10.3        3.2  
  

 

 

    

 

 

 

Share of Profit of an Associate

     —          —    
  

 

 

    

 

 

 

Profit Before Tax

     10.8        41.7  
     

Income Taxes

     3.6        5.1  
  

 

 

    

 

 

 

Net Profit

     7.2        36.6  
  

 

 

    

 

 

 

Revenue

Revenue increased by €56.4 million, or 41.4%, to €192.8 million for the three months ended March 31, 2021, compared to €136.4 million for the three months ended March 31, 2020.

Biopharmaceutical and Diagnostic Solutions. Revenue generated by the Biopharmaceutical and Diagnostic Solutions segment increased by €40.2 million, or 33.4%, to €160.6 million for the three months ended March 31, 2021, from €120.4 million in the three months ended March 31, 2020.

Revenue growth for this segment was due to: (i) the increase in sales volumes of our premium priced “high-value” solutions, which grew by €14.7 million, or 48.8%, to €44.9 million for the three months ended March 31, 2021, from €30.2 million for the three months ended March 31, 2020, reflecting our continuing efforts to strategically shift towards a product mix that includes a higher proportion of “high-value” solutions, such as EZ-Fill® products and “high-value” syringes; and (ii) a general increase in demand for our other containment and delivery solutions, which caused sales to increase by €25.5 million, or 28.2%, to €115.6 million for the three months ended March 31, 2021, from €90.2 million in the three months ended March 31, 2020. COVID-19 contributed to higher demand for our products, causing a revenue increase which more than offset the decrease in, or slower growth in, sales of products, services and solutions destined to businesses that were closed or less active as a result of COVID-19 business disruptions.

Engineering. Revenue generated by the Engineering segment increased by €16.2 million, or 101.1%, to €32.3 million for the three months ended March 31, 2021, from €16.0 million for the three months ended March 31, 2020.

 

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Revenue increase in this segment was amplified by the effects of COVID-19, which caused an increase in sales of visual inspection systems and glass forming lines. The increase was also due to higher sales of assembly and packaging machines.

Revenue Breakdown by Region.

Our ongoing geographic expansion resulted in an increase in sales in all markets where we operate and in particular in a €23.2 million, or 75.2%, increase in North America and a €5.2 million, or 47.9%, increase in APAC, which are our fastest growing markets, and a €26.7 million, or 29.5%, and €1.3 million, or 30.4%, increase in Europe and the South American region, respectively.

Cost of Sales

Cost of sales includes mainly raw materials and components, other variable costs, direct and indirect labor, depreciation of property, plant and equipment, utilities and manufacturing overhead.

Cost of sales increased by €30.5 million, or 31.5%, to €127.4 million for the three months ended March 31, 2021, compared to €96.9 million for three months ended March 31, 2020. Our overall cost of sales increased less than proportionally compared to our revenues, mainly as a consequence of our continuing efforts to increase efficiency in our production processes. The increase in cost of sales resulted from a general increase in cost of materials and components and direct and indirect personnel costs mainly due to the significant growth of our sales volumes. Cost of sales were also negatively impacted by a €4.0 million provision for a specific risk related to a potential customer claim relating to defective syringes.

Gross Profit

Gross profit increased by €25.9 million, or 65.6%, to €65.4 million for the three months ended March 31, 2021, compared to €39.5 million for the three months ended March 31, 2020. This increase was mainly driven by our Biopharmaceutical and Diagnostic Solutions segment for which gross profit increased significantly due to our continuing efforts to shift towards a product mix that includes a higher proportion of “high-value” solutions and to increase efficiency by better leveraging our installed capacity and fixed expenses. The increase in the Engineering segment gross profit was mainly driven by a substantial growth in sales of vision inspection and glass converting machinery and the adoption of integrated project management systems in our plants which created synergies through the pooling and more efficient utilization of resources across such entities. Gross profit improved also as a result of our greater focus on aftersales activities, which have higher gross profit margins compared to the sale of machinery.

Other Operating Income

Other operating income, which includes all revenue from customers not derived from the sale of our products, services and solutions such as revenue from feasibility studies, design, development and industrialization of new products, increased by €3.0 million to €3.2 million for the three months ended March 31, 2021, compared to €0.2 million for the three months ended March 31, 2020. Other operating income represents a minor part of our income and its amount varies yearly depending of the specific business agreements in place. The increase during the three months ended March 31, 2021 mainly accounts for fees collected from customers in connection with purchase orders or cancellation fees related to COVID-19, customers’ contribution for pre-feasibility studies and other grants.

Selling and Marketing Expenses

Selling and marketing expenses decreased by €0.4 million, or 5.8%, to €5.9 million for the three months ended March 31, 2021, compared to €6.2 million for the three months ended March 31, 2020. This decrease, which was due to a reduction in travel, fair and exhibition expenses as a consequence of the COVID-19 pandemic, was partially offset by the increase in personnel expenses due to new hires.

 

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Research and Development Expenses

Research and development expenses increased by €1.9 million, or 47.4%, to €5.8 million for the three months ended March 31, 2021, compared to €3.9 million for the three months ended March 31, 2020, mainly in connection with our investments to structure our drug delivery systems department and setting up our new research and development lab in Boston.

General and Administrative Expenses

General and administrative expenses were substantially unchanged at €14.0 million for the three months ended March 31, 2021, compared to €14.2 million in the three months ended March 31, 2020. The reduction in personnel expenses (€1.4 million) due to a non-recurring accrual reversal related to cash settled awards under a now terminated stock option plan and the lower travel and business costs (reduced by €0.4 million) were offset by the non-recurring consultancy costs relating to our IPO process (€1.5 million).

Operating Profit

As a result of the foregoing, operating profit increased by €27.6 million, or 179.1%, to €42.9 million for the three months ended March 31, 2021, compared to €15.4 million for the three months ended March 31, 2020.

Net Finance Expenses

Finance expenses, net of finance income, decreased by €3.3 million (or 73.0%) to €1.2 million for the three months ended March 31, 2021, from €4.6 million for the three months ended March 31, 2020. Finance expense include bank interest on the Group’s financial debt (recalculated using the amortized cost method) and interest on leases, recognized in accordance with IFRS 16—Leases.

Profit Before Tax

Profit before taxes increased by €30.9 million, or 285.5%, to €41.7 million for the three months ended March 31, 2021, compared to €10.8 million for the three months ended March 31, 2020.

Income Taxes

Income taxes increased by €1.6 million, or 43.8%, to €5.1 million for the three months ended March 31, 2021, compared to €3.6 million for the three months ended March 31, 2020. Average tax rate decreased by 20.7%, from 33.05% to 12.33% in the first quarter of 2021. In March 2021, the group reached an agreement with the Italian Tax Authority regarding the applicability of the so called “Patent box regime”, resulting in a retroactive €5.5 million tax saving for the financial years 2016-2020. The normalized effective tax rate without this one-off item is 25.5%.

 

     March 31, 2020      March 31, 2021  
     (amounts in € millions)  

Income Tax Expenses reported in the statement of profit or loss

     3.6        5.1  

Net Profit

Net profit increased by €29.3 million, or 404.8%, to €36.6 million for the three months ended March 31, 2021, compared to €7.2 million for the three months ended March 31, 2020.

 

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Year ended December 31, 2019 versus year ended December 31, 2020

The following table sets forth our results of operations for the years ended December 31, 2019 and 2020.

 

     December 31, 2019      December 31, 2020  
     (amounts in € millions)  

Revenue

     536.5        662.0  

Costs of sales

     398.5        467.9  
  

 

 

    

 

 

 

Gross Profit

     138.0        194.2  
  

 

 

    

 

 

 

Other operating Income

     8.7        5.2  
  

 

 

    

 

 

 

Selling and Marketing Expenses

     26.1        20.0  
  

 

 

    

 

 

 

Research and Development Expenses

     7.8        17.4  
  

 

 

    

 

 

 

General and Administrative Expenses

     50.6        58.9  

Operating Profit

     62.2        103.1  
  

 

 

    

 

 

 

Finance Income

     8.0        14.9  
  

 

 

    

 

 

 

Finance Expense

     15.3        21.8  
  

 

 

    

 

 

 

Share of Profit of an Associate

     (0.2      0.1  
  

 

 

    

 

 

 

Profit Before Tax

     54.7        96.3  

Income Taxes

     16.0        17.7  
  

 

 

    

 

 

 

Net Profit

     38.7        78.6  
  

 

 

    

 

 

 

Revenue

Revenue increased by €125.5 million, or 23.4%, to €662.0 million for the year ended December 31, 2020, compared to €536.5 million for the year ended December 31, 2019.

Biopharmaceutical and Diagnostic Solutions. Revenue generated by the Biopharmaceutical and Diagnostic Solutions segment increased by €109.9 million, or 24.1%, to €564.9 million for the year ended December 31, 2020 from €455.0 million in the year ended December 31, 2019.

Revenue growth for this segment was due: (i) to the increase in sales volumes of our premium priced “high-value” solutions, which revenue grew by €55.6 million, or 61.3%, to €146.3 million for the year ended December 31, 2020, from €90.7 million for the year ended December 31, 2019, reflecting our continuing efforts to strategically shift towards a product mix that includes a higher proportion of “high-value” solutions, such as EZ-Fill® products and “high-value” syringes; and (ii) to a general increase in demand for our other containment and delivery solutions, which caused sales to increase by €54.3 million, or 14.9%, to €418.6 million for the year ended December 31, 2020, from €364.3 million in the year ended December 31, 2019. COVID-19 contributed to a higher demand for our products, causing a revenue increase which more than offset any decrease in sales of our products to businesses impacted by COVID-19 such as anesthetic, diagnostic, plastic and minor surgeries related businesses.

Engineering. Revenue generated by the Engineering segment, increased by €15.6 million, or 19.1%, to €97.1 million for the year ended December 31, 2020 from €81.5 million for the year ended December 31, 2019. Growth in this segment was driven by higher sales of visual inspection systems, which are utilized widely by companies supplying products and services to address the COVID-19 pandemic. This growth offset the lower increase in sales of assembly equipment and slight decrease in sales of glass forming machines resulting from the inability to travel and logistical difficulties with deliveries and in situ installation due to COVID-19.

 

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Revenue Breakdown by Region. Our revenue grew by €42.5 million, or 32.1%, in North America (which accounted for approximately 27.0% of our total revenue for the year ended December 31, 2020), by €11.6 million, or 20.9%, in the APAC region (which accounted for approximately 10.0% of our total revenue for the year ended December 31, 2020), and by €75.3 million, or 23.3%, in Europe (which accounted for approximately 60.0% of our total revenue for the year ended December 31, 2020) while it decreased slightly by €3.9 million, or 15.2%, in South America (which accounted for approximately 3.0% of our total revenue for the year ended December 31, 2020).

Revenue increase in the North America and the APAC regions resulted from our recent international expansion efforts. Since the beginning of 2020, we sought to strengthen our position in the United States by establishing leadership positions dedicated to that region within our organization. In addition, we recorded an increase in orders of “high-value” solutions in the United States by certain key customers, which also contributed to the increase in revenue in that region.

Cost of Sales

Cost of sales increased by €69.4 million, or 17.4%, to €467.9 million for the year ended December 31, 2020 compared to €398.5 million for the year ended December 31, 2019, mainly due to the cost of materials, components and labor expenses related to the production and distribution of goods and services. Cost of sales increased less than proportionally compared to our revenue, mainly due to our ongoing efforts to maximize efficiency through automation initiatives and reduction of scraps and returns from customers. COVID-19 caused a slight increase in our costs of sales due to the extra bonuses that we paid to our employees to reward work and attendance in the year ended December 31, 2020 and the new hires we made to address the increasing demand for our products and services and to ensure business continuity during the pandemic.

Gross Profit

Gross profit increased by €56.2 million, or 40.7%, to €194.2 million for the year ended December 31, 2020 compared to €138.0 million for the year ended December 31, 2019. This increase was mainly driven by the Biopharmaceutical and Diagnostic Solutions segment for which gross profit increased significantly due to the increasing proportion of “high-value” solutions sold, the increase in demand for our products and services during the pandemic and a less than proportional increase of our costs.

The increase in the Engineering segment gross profit was mainly driven by the adoption of shared management systems in our subsidiaries which created synergies through the pooling and more efficient utilization of resources across such entities.

Moreover, in 2020 we fully leveraged the capabilities integration among entities acquired in 2016 and newly established plant in Brazil.

Other Operating Income

Other operating income, which includes all revenue from customers not derived from the sale of our products, services and solutions such as revenue from feasibility studies, design, development and industrialization of new products, decreased by €3.5 million, or 40.2%, to €5.2 million for the fiscal year ended December 31, 2020 compared to €8.7 million for the year ended December 31, 2019. Other operating income represents a minor part of our income and its amount varies yearly depending of the specific business agreements in place.

Selling and Marketing Expenses

Selling and marketing expenses decreased by €6.1 million, or 23.3%, to €20.0 million for the year ended December 31, 2020 compared to €26.1 million for the year ended December 31, 2019. These expenses are mainly related to personnel expenses for our sales organization. They also include depreciation and provisions for bad and doubtful debts of €1.1 million for the year ended December 31, 2020 (€3.9 million for the year ended December 31, 2019).

 

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The decrease in selling and marketing expenses was mainly due to the reduction in bad debt provision and travel expenses and cancellation of trade fairs as a consequence of the COVID-19 pandemic, and to the decrease in marketing activities and business consultancies.

Research and Development Expenses

Research and development expenses increased by €9.6 million, or 122.2%, to €17.4 million for the year ended December 31, 2020, compared to €7.8 million for the year ended December 31, 2019. Such expenses include costs for research and development activities to support the innovation of our product range and components and include amortization of capitalized development costs.

The increase in research and development expenses reflects our strategy to focus on innovation and an increasingly higher mix of premium products and was primarily due to the development of proprietary products and our investments in connection with the continued development of “high-value” drug delivery systems, as well as other “high-value” products, engineering solutions and further investments in our analytical services.

General and Administrative Expenses

General and administrative expenses increased by €8.3 million, or 16.4%, to €58.9 million for the year ended December 31, 2020, compared to €50.6 million in the year ended December 31, 2019. These expenses mainly comprise personnel expenses for management of the company as well as depreciation and amortization of €5.4 million (compared to €6.1 million in 2019), of which amortization of fair value adjustments from purchase price allocations amounted to €1.0 million (as in 2019).

A material part of the increase (€2.8 million) was related to non-recurring litigation costs arising from a lawsuit brought by Clere BSD GmbH (plaintiff) against Balda AG (defendant), one of the Group’s subsidiaries, in connection with the payment of certain transfer fees for the acquisition of a patent by the defendant, where Clere was awarded €2.8 million. The litigation ended in 2020. The increase is also due to the business growth and the increase in personnel expenses for long-term incentive and cash settled awards.

Operating Profit

As a result of the foregoing, operating profit increased by €40.9 million, or 65.7%, to €103.1 million for the year ended December 31, 2020, compared to €62.2 million for the year ended December 31, 2019.

Net Finance Expenses

Finance expenses, net of finance income, decreased by €0.3 million (or 4.4%) to €6.9 million for the year ended December 31, 2020, from €7.2 million for the year ended December 31, 2019. Finance expense include bank interest on the Group’s financial debt (recalculated using the amortized cost method) and interest on leases, recognized in accordance with IFRS 16—Leases.

In 2020, COVID-19 caused fluctuations in the exchange rate of the main currencies we are exposed to (in particular the Mexican pesos) affecting our finance income and expenses.

Profit Before Tax

Profit before taxes increased by €41.6 million, or 76.1%, to €96.3 million for the year ended December 31, 2020, compared to €54.7 million for the year ended December 31, 2019.

Income Taxes

Income taxes increased by €1.6 million, or 10.5%, to €17.7 million for the year ended December 31, 2020, compared to €16.0 million for the year ended December 31, 2019.

 

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Income taxes

As a global organization, we and our subsidiaries file income tax returns in Italy, the U.S. federal jurisdiction and various state and other foreign jurisdictions. Deferred taxes are calculated based on the global allocation criteria, taking into account the cumulative amount of all the temporary differences, based on the average expected rates in force when these temporary differences reverse.

Deferred tax assets are recorded if there is reasonable certainty that the temporary differences will reverse in future years against assessable income not lower than the differences that will be reversed.

 

     December 31, 2019      December 31, 2020  
     (amounts in € millions)  

Current Income Tax

     

Current Taxes

     20.5        29.5  
  

 

 

    

 

 

 

Deferred Taxes

     

Deferred Taxes

     (4.5      (11.8
  

 

 

    

 

 

 

Income Tax Expenses reported in the statement of profit or loss

     16.0        17.7  
  

 

 

    

 

 

 

Current Taxes

Current taxes increased by €9.0 million, or 43.9%, to €29.5 million for the year ended December 31, 2020, compared to €20.5 million for the year ended December 31, 2019. This increase, due to higher pre-tax profits, was mitigated by the application of the hyper-depreciation (iper ammortamento) provided by the 2017 Italian Budget Law on certain machinery and by a change in the tax regime applicable to our Chinese business (to which a tax rate of 15% instead of 25% is now applicable).

Deferred Taxes

In 2020, we recorded a deferred taxes benefit of €11.8 million, compared to €4.5 million in 2019, mainly in connection with a step-up in the tax value of certain assets.

Income Tax Expenses reported in the statement of profit or loss

In 2020, we recorded income tax expenses reported in the statement of profit or loss of €17.7 million, compared to €16.0 in 2019.

Net Profit

Net profit increased by €39.9 million, or 103.1%, to €78.6 million for the year ended December 31, 2020, compared to €38.7 million for the year ended December 31, 2019.

Liquidity and Capital Resources

Since our inception, we have financed our operations mainly through cash generated by our operating activities and debt financing. Our primary requirements for liquidity and capital are to finance capital expenditures, working capital (which is the difference of current assets and current liabilities—net of current financial assets, current financial liabilities, cash and cash equivalents), and general corporate purposes.

Our primary sources of liquidity are our cash and cash equivalents and medium and long-term loans from a number of financial institutions, as described below. For the three months ended March 31, 2020 and 2021, we had cash and cash equivalents of €52.3 million and €80.2 million and other current financial assets of

 

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€40.6 million and €41.5 million, respectively, while as of December 31, 2020, we had cash and cash equivalents of €115.6 million (compared to €85.4 million in 2019) and other current financial assets of €41.5 million (compared to €41.3 million in 2019). Our cash and cash equivalents primarily consist of cash at bank and highly liquid investments, such as short-term deposits, which are unrestricted from withdrawal or use, or which have original maturities of three months or less when purchased. We believe that our total available liquidity (defined as cash and cash equivalents plus undrawn committed credit lines and marketable securities), in addition to funds that will be generated from operating activities, will enable us to satisfy the requirements of our investing activities and working capital needs for the next 12 months and ensure an appropriate level of operating and strategic flexibility.

Our total current liabilities were €308.0 million as of March 31, 2021 (compared to €316.2 million and €262.9 million as of December 31, 2020 and 2019, respectively), which primarily includes €87.4 million trade payables, €80.0 million financial liabilities, €30.8 million tax payables, €5.6 million lease liabilities and €104.3 other liabilities mainly relating to payables to personnel and social security institutions as well as allowance for future expected customer returns.

Financing activities

We manage our working capital to support our business and operations. In terms of financing activities, we have been actively seeking additional financing to improve our liquidity position and we have been able to raise capital through private placements to investors, as well as debt financing.

Pricoa Private Placement. On April 16, 2020 we entered into a note purchase and private shelf agreement with PGIM, Inc. and certain of its affiliates (the “Note Purchase Agreement”), pursuant to which, for a period of three years following the date of the agreement (unless earlier terminated) the company may issue, and PGIM, Inc. or certain of its affiliates may purchase, up to US$69.5 million of our notes. Additionally, on the same date, we issued €50.0 million of our Senior Notes, Series A, due April 16, 2028 to PGIM, Inc. (the “Notes”), with an interest rate of 1.4%. Repayment of the Notes is required to be made in two tranches, €25.0 million on April 16, 2027, and the reminder at the expiration of the notes.

Pursuant to the Note Purchase Agreement, Nuova Ompi S.r.l. provided to PGIM, Inc. and its affiliates a subsidiary guarantee, guaranteeing the repayment of the notes.

The Note Purchase Agreement imposes certain covenants on us, including: (i) the notes must always rank at least pari passu with all other unsecured and unsubordinated indebtedness of the company and the guarantor; (ii) any covenant included in a different financing agreement which is more favorable to the lenders must apply to the Note Purchase Agreement, as well; (iii) the aggregate EBITDA of the company and the guarantor must always be at least equal to a certain percentage of the EBITDA of our group; (iv) no merger or consolidation for any guarantor unless expressly permitted by the Note Purchase Agreement; (v) no dealings with sanctioned entities; (vi) the ratio of consolidated net debt to consolidated EBITDA not to be greater than 3.50 to 1.00 with an increase of up to 4.0x once; (vii) consolidated net debt to equity not to be greater than 2 to 1; (viii) no liens in excess of a certain amount except for, among others, (a) existing ones, (b) tax liens, (c) liens in the ordinary course of business, (d) judgment liens; (ix) no sale of assets in excess of a certain amount; (x) no subsidiary indebtedness beyond a certain basket; and (xi) no segregation of assets under Italian law.

Additional Medium and Long-Term Loan Facilities. As of March 31, 2021, we had medium and long-term loan facilities totaling €274.8 million in available principal, fully drawn down.

The total outstanding amount includes amounts raised between 2016 and 2019. In 2019, we raised approximately €100 million from four bank loans with an average term of five years, three-year pre-amortization period and €3.6 million due beyond five years. The all-in fixed interest rate, inclusive of hedging and upfront fees, is 1.5%. These loan agreements impose certain covenants on us, including: (i) not to exceed certain

 

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consolidated net debt to consolidated EBITDA ratios (not greater than 4.0 to 1.0 in three of the loan agreements and not greater than 3.5 to 1.0, at 4.0x, in the remaining fourth one); (ii) to maintain a consolidated net debt to equity ratio equal to or lower than 2 to 1 and at least amounting to €200 million; (iii) not to sell assets having a value, or to grant liens or loans to third parties, exceeding certain amounts; (iv) to ensure that the loans always rank at least pari passu with other debt of the company; (v) not to segregate assets (as defined under Italian law); and (vi) not to distribute dividends or reserves nor to carry out extraordinary transactions resulting in the breach of financial covenants.

In 2017 and 2018 we raised approximately €158 million from five loans with an average term of 4.4 years. These loans include covenants consistent with those described for the 2019 loans. The all-in fixed interest rate, inclusive of hedging and upfront fees, is 1.1%. The outstanding principal of the five loans as at March 31, 2021 is €87.3 due within five years.

The remaining €175 million was underwritten between 2016 and early 2017 mainly in connection with our strategic acquisitions. The outstanding principal amount as of March 31, 2021 was €84.7 million, due within five years. In 2019 the financial covenants included in these agreements were renegotiated to align them with those described above for the 2019 loans. Applicable interest rates are in the range of 0.70% to 1.35%.

Short-Term Loan Facilities. As of March 31, 2021, we had short-term facilities totaling €62.9 million in available principal, of which we had drawn down €4.6 million.

Capital Expenditures

Our capital expenditures consist of property, plant and equipment and intangible assets. During the three months ended March 31, 2021, our total capital expenditures were €19.1 million, which included (i) €14.2 million relating to our capacity expansion (including €6.0 million in new production lines for EZ-Fill® syringes in Piombino Dese, and the remainder in new production lines for bulk products in Mexico and Piombino Dese, new machinery for high precision plastic injection molding and assembly for container in vitro diagnostic solution required to face the increasing COVID-19 demand), (ii) €2.3 million for maintenance, increasing quality and improving our IT systems, (iii) €1.4 million to improve efficiency of our production processes, (iv) €0.8 million to improve safety our plants and production sites, and (v) €0.4 million for research and development, including laboratory equipment, molds and other related equipment.

During the fiscal year ended December 31, 2020, capital expenditures for growth and capacity expansion were €69.7 million, which included (i) €38.6 million relating to our new industrial property complex in Piombino Dese (Italy), (ii) €18.5 million for new production lines for non EZ-Fill® products in Piombino Dese, Mexico and Slovakia facilities (of which €11.6 million to face the increasing COVID-19 related demand), and (iii) €9.2 in facilities and machinery for high precision plastic injection molding and assembly for container in vitro diagnostic solution. Of the €38.6 million invested in our new plant in Piombino Dese, €15.1 million were spent to complete the construction of the plant and €23.5 million invested in machinery for the production of EZ-Fill® syringes (of which €9.1 million to face the increasing COVID-19 related demand).

Capital expenditures for maintenance, increasing quality and improving our IT systems amounted to €10.8 million, while for research and development, including laboratory equipment, molds and other related equipment, amounted to €8.4 million. We intend to devote the same portion of capital expenditures to growth and capacity expansion in future years.

Finally, we invested €3.8 million to improve efficiency of our production processes and €3.0 million to improve safety our plants and production sites.

We expect that the net proceeds from the offering and our cash and cash equivalents, in addition to funds that will be generated from operating activities, will enable us to satisfy the requirements of our investing

 

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activities and working capital needs and ensure an appropriate level of operating and strategic flexibility. In particular, we plan to use part of the proceeds to further enlarge our manufacturing facilities in Piombino Dese (Italy), establish new greenfield plants for EZ-Fill® products, with strong focus on biologics and vaccines, in Indiana, (U.S.) and Zhangjiagang (China) (focusing also on engineering), and pursue strategic acquisitions to broaden our offering, our technical know-how and our international footprint. However, as our business needs continue to evolve, our intended use of proceeds may vary accordingly.

Cash Flow

The following table presents the summary consolidated cash flow information for the periods presented.

 

     Three months
ended March 31
2020
    Three months
ended March 31
2021
    Year ended
December 31,
2019
    Year ended
December 31,
2020
 
     (amounts in € millions)  

Cash flows from / (used in) operating activities

     (9.3     5.9       42.6       155.7  

Cash flows from / (used in) investing activities

     (24.7     (22.4     (74.3     (96.1

Cash flows from / (used in) financing activities

     3.0       (19.8     42.2       (26.5

Net change in cash and cash equivalents

     (31.0     (36.4     10.4       33.1  

Cash generated from operating activities

Net cash generated from operating activities was €5.9 million for the three months ended March 31, 2021 (compared to €9.3 million cash used in operating activities in the three months ended March 31, 2020) and €155.7 million for the year ended December 31, 2020 (compared to €42.6 million for the year ended December 31, 2019). This improvement was mainly driven by EBITDA generation of €157.2 million and a reduction in our net working capital. In 2020, our working capital decreased by €33.2 million to €100.7 million (15.2% of revenue) from €133.9 million (24.9% of revenue) in 2019. In 2020, despite of the revenue increase, account receivables remained stable at € 128.0 million, as a result of a significant reduction in past due receivables, while account payable, grew by 24.9% in line with the revenue increase. Our inventories net of advances from customers decreased from 21.8% of revenue in 2019 to 18,9% of revenue in 2020.

Cash used in investing activities

Net cash used in investing activities was €22.4 million for the three months ended March 31, 2021 (compared to €24.7 million for the three months ended March 31, 2020) and €96.1 million for the year ended December 31, 2020 (compared to €74.3 million cash used in investing activities for the year ended December 31, 2019), consisting mainly of the purchase of property and equipment to increase our production capacity. In particular, more than 70% of our capital expenditures were made in order to increase capacity for EZ-Fill vials and syringes, acquire new machinery (including bulk lines for vials) and in connection with the construction of our new plant in Piombino Dese. We also invested in R&D and strengthening the security of our IT systems.

Cash used in financing activities

Net cash used in financing activities was €19.8 for the three month ended March 31, 2021 (compared to €3.0 generated from financing activities for the three month ended March 31, 2020) and €26.5 million for the year ended December 31, 2020 (compared to €42.2 million generated from financing activities for the year ended December 31, 2019). As of March 31, 2021, €4.1 million related to new borrowings and €11.4 million to loan repayment. Dividends distributed amounted to €11.2 million while payment of the principal portion of lease liabilities was €1.6 million.

 

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Net change in cash and cash equivalents

The net change in cash and cash equivalents was €36.4 for the three month ended March 31, 2021 (compared to €30.1 for the three month ended March 31, 2020) and €33.1 million for the year ended December 31, 2020, compared to €10.4 million for the year ended December 31, 2019.

Off balance sheet arrangements

Off-balance sheet arrangements may be summarized as follows:

 

     December 31, 2019      December 31, 2020  
     (in € millions)  

Guarantees

     74.9        86.6  

of which secured

     4.7        4.7  

As of December 31, 2020, we issued guarantees to third parties for €86.6 million in the ordinary course of business. Such amount includes advance payment and performance bonds as well as suretyships and letters of comfort to financial institutions on outstanding short-term facilities in favor of foreign subsidiaries; some of which include floating charges for €4.7 million.

Contractual Obligations and Commitments

The following table summarizes payments due under our contractual obligations and commitments at December 31, 2020:

 

     Due within one year     Due between
one and three
years
    Due between
four and five
years
    Due beyond
five years
     Total  
     (in € million)  

Borrowings(1)

     61.9       131.5       84.8       8.0        286.2  

Notes

     (0.1     (0.1     (0.1     49.9        49.6  

Lease liabilities(2)

     5.4       8.5       5.1       6.6        25.6  

Other liabilities(3)

     52.6       1.7             0.1        54.4  

Employee Benefits

           21.3       8.4              29.7  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total liabilities

     119.8       162.9       98.2       64.6        445.5  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

(1)

Represents the cash flow for loan repayment obligations, including amortized cost effect and bank overdrafts for Euro 0.6 million, relating to bank loans. The loans include provisions which may accelerate the reimbursement plan of the obligations, such as in case of breach of covenants, change of control or cross default.

(2)

Represents the discounted cash flow for lease obligations relating mainly to manufacturing facilities, plant and machinery and IT infrastructure, vehicles and other tangible assets.

(3)

Represents other liabilities reflected on our balance sheet and, in particular, payables to personnel and social security institutions as well as allowance for future expected customer returns and put option liabilities.

Recently Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position, result of operations or cash flows is disclosed in Note 3 to our audited consolidated financial statements included elsewhere in this prospectus.

Quantitative and Qualitative Disclosures about Market Risk

The Group is exposed to the following financial risks connected with its operations:

 

   

financial market risk, mainly relating to foreign currency exchange rates and to interest rates;

 

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liquidity risk, with particular reference to the availability of funds and access to the credit market, should the Group require it, and to financial instruments in general;

 

   

credit risk, arising both from its normal commercial relations with customers, and its financing activities.

These risks could significantly affect our financial position, results of operations and cash flows, and for this reason we identify and monitor them, in order to detect potential negative effects in advance and take the necessary action to mitigate them, primarily through our operating and financing activities and if required, through the use of derivative financial instruments.

The following section provides qualitative and quantitative disclosures regarding the effect that these risks may have upon us. The quantitative data reported in the following section does not have any predictive value.

Financial market risks

Due to the nature of our business, we are exposed to a variety of market risks, including foreign currency exchange rate risk and, to a lesser extent, interest rate risk.

Our exposure to foreign currency exchange rate risk arises from our global footprint (both in terms of productions and commercialization), as in some cases we sell our products in the currencies of the destination markets, which may differ from the currency of the countries the Group operates in.

Our exposure to interest rate risk arises from the need to fund certain activities and the possibility to deploy surplus funds. Changes in market interest rates may have the effect of either increasing or decreasing our net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions.

These risks could significantly affect our performance, and are therefore identified and monitored. We have in place various risk management policies, which primarily relate to foreign exchange, interest rate and liquidity risks.

In particular, to manage foreign exchange rate risk, we have adopted a hedging policy. Hedging activities are mainly executed at the corporate level, based on the information provided by the reporting system and utilizing instruments and policies conforming to IFRS. Hedging is undertaken to ensure protection in case an entity has transactions in currencies other than the one in which it primarily does business, also taking account of budgeted future revenues and costs. Despite hedging operations, sudden movements in exchange rates or erroneous estimates may result in a negative impact, although limited, on our results.

Information on foreign currency exchange rate risk

We are exposed to risk resulting from fluctuations in foreign currency exchange rates, which can affect our earnings and equity. In particular:

 

   

where a Group company incurs costs in a currency different from that of its revenues, any change in foreign currency exchange rates can affect the operating results of that company.

 

   

The main foreign currency to which we are exposed is the U.S. Dollar for sales in the United States and other markets where the U.S. Dollar is the reference currency, against Euro, Mexican Pesos and Renminbi. Other significant exposures included the exchange rate between the Euro and the following currencies: Renminbi, Japanese Yen, Danish Krone, British Pound and Swiss Franc. Only U.S. Dollar exposure, taken individually, exceeded 10% of the Group’s total foreign currency exchange rate exposure for commercial activity in 2020. It is our policy to use derivative financial instruments (primarily forward currency contracts, currency swaps, currency options and collar options) to hedge against exposures.

 

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Several subsidiaries are located in countries that are outside the Eurozone, in particular the United States, China, Japan, Mexico, Denmark, Brazil and Switzerland. As our reporting currency is the Euro, the income statements of those companies are translated into Euros using the average exchange rate for the period and, even if revenues and margins are unchanged in local currency, changes in exchange rates can impact the amount of revenues, costs and profit as restated in Euros. Similarly, intercompany financing may lead to foreign exchange rate impact due to different functional currencies.

 

   

The assets and liabilities of consolidated companies that report in a currency other than the Euro may vary from period to period as a result of changes in exchange rates. The effects of these changes are recognized directly in equity as a component of other comprehensive income/(loss) under gains/(losses) from currency translation differences.

We monitor our main exposures with regard to translation exchange risk, whereby fluctuations in the exchange rates of a number of currencies against the consolidation currency may impact the consolidated financial statement values, although there was no specific hedging in this respect at December 31, 2019.

Exchange differences arising from the settlement of monetary items are recognized in the consolidated income statement within the net financial income/(expenses) line item.

The impact of foreign currency exchange rate differences recorded within financial income/(expenses) for the year ended December 31, 2020, except for those arising from financial instruments measured at fair value, amounted to net losses of €0.4 million (compared to €0.6 million in 2019).

There have been no substantial changes in 2020 in the nature or structure of exposure to foreign currency exchange rate risk or in the Group’s hedging policies.

We actively hedge against economic-transactional risk; more specifically, forward and swap contracts, plain vanilla and collar options are used to manage the exposures. Such instruments are not currently designated as cash flow hedges and contracts are entered for a period consistent with the underlying transactions, generally ranging from three to twelve months.

The following is a list of contracts as of December 31, 2020:

 

(€ millions)

        0 to 6
months
     6 to 9
months
     9 to 12
months
     Total      Carrying
amount
   

Line item in the statement of
financial position

Notional amount

   Forward            19.554        19.55        (12   current financial liabilities

Average forward rate (EUR/DKK)

              7.447        —         

Notional amount

   Forward            6.246        6.25        19     other current financial assets

Average forward rate (EUR/USD)

              1.230        —         

Notional amount

   Forward            1.203        1.20        (3   current financial liabilities

Average forward rate (EUR/CHF)

              1.082          

Notional amount

   Forward            1.008        1.01        (0   current financial liabilities

Average forward rate (EUR/JP1)

              126.55          
              

 

 

    

 

 

   

Total

                 28.01        4    
              

 

 

    

 

 

   

 

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The following is a list of contracts as of December 31, 2019:

 

(€ millions)

        0 to 6
months
     6 to 9
months
     9 to 12
months
     Total      Carrying
amount
   

Line item in the statement of
financial position

Notional amount

   Forward      2.67        7.121        11.465        21.25        308     other current financial assets

Average forward rate (EUR/USD)

        1.119        1.125        1.131          

Notional amount

   Option      3.561        3.561        3.561        10.68        109     other current financial assets

Average forward rate (EUR/USD)

        1.16        1.17        1.16          

Notional amount

   Forward            11.912        11.91        (6   current financial liabilities

Average forward rate (EUR/DKK)

              7.460          

Notional amount

   Forward            1.198        1.198        (4   current financial liabilities

Average forward rate (EUR/CHF)

              1.085          

Notional amount

   Forward            1.046        1.046        5     other current financial assets

Average forward rate (EUR/JP1)

              121.62          

Notional amount

   Forward      189              189        0     other current financial assets

Average forward rate (EUR/CNY)

        7.901                
              

 

 

    

 

 

   

Total

                 46.28        41    
              

 

 

    

 

 

   

Information on interest rate risk

This risk stems from variable rate loans, for which sudden or significant interest rate fluctuations may have a negative impact on economic results. The monitoring of this risk is carried out at the corporate level and utilizes similar structures as those employed for the management of currency risks. We have hedges in place against interest rate risk, covering nearly all the loans contracted. Due to these operations, we have established a substantially fixed rate at improved conditions compared to the previous loans.

Our most significant floating rate financial assets at December 31, 2020 are cash and cash equivalents and certain financial current investments.

The financial liabilities composition and the impact of the hedging instrument on the statement of financial position as at December 31, 2020 and December 31, 2019 are as follows:

As of December 31, 2020

 

(€ millions)

   Interest Rate
Swap
    Fixed
Interest
    Floating
Interest
    Amortized Cost
Effect
    Total      Mark to Market IRS
Derivatives
 

Bank loans

     229.8       12.8       44.4       (0.7     286.3        (4.4

Bank overdrafts

         0.5             0.5     

Financial payables for share acquisition

         7.9             7.9     

Financial liabilities with related parties

           1.0                   1.0     

Notes

           50.0             (0.4     49.6     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total

     229.8       63.8       52.8       (1.1     345.3        (4.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Percentage on Total

     67     18     15       

 

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As of December 31, 2019

 

(€ millions)

   Interest Rate
Swap
    Fixed
Interest
    Floating
Interest
    Amortized
Cost Effect
    Total      Mark to Market IRS
Derivatives
 

Bank loans

     270.7       13.1       63.7       (1.1     346.4        (3.7

Bank overdrafts

         2.1             2.1     

Financial payables for share acquisition

         6.7             6.7     

Financial liabilities with related parties

           1.0                   1.0     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total

     270.7       14.1       72.5       (1.1     356.2        (3.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Percentage on Total

     76     4     20       

The risk arising from the net investment in foreign subsidiaries is monitored; no active hedging is currently being performed. With regard to commodity risk, we enter into fixed-price contracts for certain utilities.

Set out below is the impact of hedging on equity in “cash flow hedge reserve”:

 

     2020  
     (€ millions)  

As at January 1

     2.8  

Interest Rate Swap

     0.7  

Tax effect

     (0.2
  

 

 

 

As at December 31

     3.3  
  

 

 

 

The following table presents an analysis of sensitivity to a change in (i) interest rates on the portion of loans and borrowings affected, and (ii) exchange rates for the currencies we are majorly exposed to. With all other variables held constant, our marginality is affected as follows:

As at December 31, 2020

Interest rate sensitivity

 

Increase/decrease
in interest rate

 

Effect on profit
before tax, € thousand

+20 BP

  -20 BP   (21)   11

+50 BP

  -50 BP   (111)   26

+100 BP

  -100 BP   (406)   53

Exchange rate sensitivity

 

     Increase/decrease
in % points
     Effect on EBITDA,
€ millions
 

Euro

     1%        -1%        (0.9     0.9  

U.S. dollar

     3%        -3%        (2.5     2.7  
     5%        -5%        (4.1     4.6  

Euro

     1%        -1%        0.1       (0.1

Mexican Pesos

     3%        -3%        0.4       (0.4
     5%        -5%        0.6       (0.7

 

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As at December 31, 2019

Interest rate sensitivity

 

Increase/decrease
in interest rate

 

Effect on profit
before tax, € thousand

+20 BP

  -20 BP   (19)   19

+50 BP

  -50 BP   (195)   46

+100 BP

  -100 BP   (588)   93

Exchange rate sensitivity

 

     Increase/decrease
in % points
     Effect on EBITDA,
€ millions
 

Euro

     1%        -1%        (0.6     0.6  

U.S. dollar

     3%        -3%        (1.8     1.9  
     5%        -5%        (2.9     3.2  

Euro

     1%        -1%        0.1       (0.1

Mexican Pesos

     3%        -3%        0.4       (0.4
     5%        -5%        0.7       (0.7

Liquidity risk

Liquidity risk arises if we are unable to obtain the funds needed to carry out our operations under economic conditions. The main determinant of our liquidity position is the cash generated by or used in operating and investing activities.

From an operating point of view, we manage liquidity risk by monitoring cash flows and keeping an adequate level of funds at our disposal. The main funding operations and investments in cash and marketable securities of the Group are centrally managed or supervised by the treasury department with the aim of ensuring effective and efficient management of our liquidity. We undertake medium and long-term loans to fund medium and long-term operations. We undertake a series of activities centrally supervised with the purpose of optimizing the management of funds and reducing liquidity risk, such as:

 

   

centralizing liquidity management;

 

   

maintaining a conservative level of available liquidity;

 

   

diversifying sources of funding of medium and long-term financing;

 

   

obtaining adequate credit lines;

 

   

monitoring future liquidity requirements on the basis of budget forecast and cash flow planning;

 

   

monitoring covenants on indebtedness.

Intercompany financing is conducted at arm’s length terms and normally involves the holding company. These measures currently sufficiently guarantee, under normal conditions and in the absence of extraordinary events, the degree of flexibility required by movements of working capital, investing activities and cash flows in general.

We believe that our total available liquidity (defined as cash and cash equivalents plus undrawn committed credit lines and marketable securities), in addition to funds that will be generated from operating activities, will enable us to satisfy the requirements of our investing activities and working capital needs and ensure an appropriate level of operating and strategic flexibility. We, therefore, believe there is no significant risk of a lack of liquidity.

 

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Credit risk

Credit risk is the risk of economic loss arising from the failure to collect a receivable. Credit risk encompasses the direct risk of default and the risk of a deterioration of the creditworthiness of the counterparty. The maximum credit risk to which we are theoretically exposed is represented by the carrying amounts of the financial assets stated in the consolidated statement of financial position sheet.

Where customers fail to meet payment deadlines, our financial position may deteriorate. Socio-political events (or country risks) and the general economic performance of individual countries or geographical regions may also assume significance in this respect. The credit risk is however mitigated by consolidated commercial relations with well capitalized multinational pharmaceutical and biologics companies and our guidelines created for the selection and evaluation of the client portfolio, which may require, where possible and appropriate, further guarantees from customers. In 2020, our day’s sales outstanding decreased by 16.6 to 70.5, compared to 2019.

Trade receivables as of December 31, 2020 amounting to €135.5 million (compared to €135.4 million as of December 31, 2019) are shown net of the allowance for doubtful accounts amounting to €7.7 million (compared to €7.4 million as of December 31, 2019).

Critical Accounting Policies and Significant Judgments and Estimates

The Consolidated Financial Statements are prepared in accordance with IFRS which require Management’s use of estimates and assumptions that may affect the carrying amount of assets, liabilities, income and expenses in the financial statements, as well as the disclosures in the notes concerning contingent assets and liabilities at the balance sheet date. Uncertainty about these assumptions and estimates could result in outcome that require material adjustments to the carrying amount of assets or liabilities affected in future periods.

Estimates are based on historical experience and other factors. The resulting accounting estimates could differ from the related actual results. Estimates are periodically reviewed and the effects of each change are reflected in the consolidated statement of profit or loss or in the consolidated statement of comprehensive income in the period in which the change occurs.

Revenue Recognition

We operate in several jurisdictions and assesses whether contracts with customers provide it with the right to consideration for the performance fulfilled based on legal assessment of applicable contracts and other source of enforceable rights and obligations (i.e., local regulations). With regard to revenue from contracts with customers for contract work and contract assets and liabilities, application of the cost-to-cost method requires a prior estimate of the entire lifetime costs of individual projects, updating them at each balance sheet date. This entails assumptions that can be affected by multiple factors, such as the time over which some projects are developed, their high level of technology and innovative content, the possible presence of price variations and revisions, and machinery performance guarantees, including an estimate of contractual risks, where applicable. These facts and circumstances make it difficult to estimate the cost to complete projects and, consequently, to estimate the value of contract work in progress at the balance sheet date. The Group estimates variable considerations to be included in the transaction price for the sale of products with rights of return and volume rebates. The Group forecasts sales returns using the historical return data to project expected return percentages. These percentages are applied to determine the expected value of the variable consideration.

Recoverable amount of goodwill

The impairment test on goodwill is carried out by comparing the carrying amount of cash-generating units and their recoverable amount. The recoverable amount of a cash-generating unit is the higher of fair value, less

 

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costs to sell, and its value in use. This complex valuation process entails the use of methods such as the discounted cash flow method which uses assumptions to estimate cash flows. The recoverable amount depends significantly on the discount rate used in the discounted cash flow model as well as the expected future cash flows and the growth rate used for the extrapolation.

Development costs

The amortization of development costs requires management to estimate the lifecycle of related products. Any changes in such assumptions would impact the amortization charge recorded and the carrying amount of capitalized development costs. The periodic amortization charge is derived after determining the expected lifecycle of the related product. Increasing an asset’s expected lifecycle or its residual value would result in a reduced amortization charge in the consolidated income statement. The useful lives of our development costs are determined by management at the time of capitalization and reviewed annually for appropriateness and recoverability.

Employee benefit liabilities

Employee benefits, especially the provision for employee severance indemnities and other long-term incentives, are calculated using actuarial assumptions; changes in such assumptions could have a material impact on such liabilities.

Leases

We cannot readily determine the interest rate implicit in the lease, therefore, the incremental borrowing rate (IBR) to measure lease liabilities is used. The IBR is the rate of interest that we would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). We estimate the IBR using observable inputs (such as market interest rates) when available and are required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating). We also determine the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group applies judgment in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, we consider all relevant factors that create an economic incentive for us to exercise either the renewal or termination.

Provision for expected credit losses of trade receivables and contract assets

We use a simplified approach in calculating estimated credit losses (ECLs) for trade receivables and contract assets, initially based on the Group’s historical observed default rates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed. The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. Our historical credit loss experience and forecast of economic conditions may also not be representative of the customer’s actual default risk in the future.

Income tax expense (current and deferred)

The consolidated Group is subject to various taxes in multiple jurisdictions. The determination of tax liabilities requires the use of assumptions with respect to transactions whose fiscal consequences are not yet

 

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certain at the end of the reporting period. Calculation of taxes on a global scale requires the use of estimates and assumptions based on the information available at the balance sheet date. The deferred tax asset realization is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and the tax loss carry forwards are utilized. Estimating future taxable income requires estimates about matters that are inherently uncertain and requires significant management judgment, and different estimates can have a significant impact on the outcome of the analysis.

 

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BUSINESS

Overview

We are a leading global provider of drug containment, drug delivery and diagnostic solutions to the pharmaceutical, biotechnology and life sciences industries. We deliver an integrated, end-to-end portfolio of products, processes and services that address customer needs across the entire drug life cycle at each of the development, clinical and commercial stages. Our core capabilities in scientific research and development, our commitment to technical innovation and our engineering excellence are central to our ability to offer value added solutions to our clients.

We have secured a leadership position within the drug development and delivery value chain through our investment in research and development and the expansion of our global footprint and capabilities. Over our 70-year history, we have earned a leading reputation for high quality and reliability that has enabled us to become a partner of choice for more than 700 companies globally, including 41 of the top 50 pharmaceutical companies (which comprise all of the top 15), and eight of the top ten in-vitro diagnostic companies, as measured by 2020 revenue, according to data collected by Global Data. We also serve 15 of the top 20 biotechnology companies by market capitalization in the NASDAQ Biotechnology Index and over 100 biotechnology customers in total.

Our priority is to provide flexible solutions that preserve the integrity of pharmaceutical products and enable our customers to deliver safe and effective treatments to patients while reducing time to market, total cost of ownership (i.e., logistics, drug product waste, storage and personnel costs) and supply chain risk. We achieve this by developing our products in close collaboration with our customers, leveraging our scientific research capabilities, technical expertise and engineering and manufacturing excellence to meet their quality requirements.

Our solutions are highly integrated with the development, production and commercialization processes of our customers. In addition to manufacturing drug containment and delivery solutions, we provide a full set of services across all stages of drug development, from pre-clinical to clinical and commercialization. We also engineer machinery and equipment for the production of drug containment and delivery systems that can be integrated into both our customers’ and our own manufacturing processes. Our involvement at each stage of a drug’s life cycle, together with the breadth of our offering, enables us to serve as a one-stop-shop for our customers, which we believe represents a significant competitive advantage. The chart below illustrates our presence across the pharmaceutical value chain.

 

 

LOGO

We operate across the healthcare industry and serve some of its fastest growing segments, including biologics, biosimilars, vaccines and molecular diagnostics. As a result of how closely integrated we are in the drug production and delivery supply chain, we are well-positioned to benefit from secular trends within our target industries, such as increases in demand resulting from pharmaceutical innovation, acceleration and expansion of vaccination programs, growth of biologics/biosimilars, self-administration of medicines, aging demographics and increasing quality standards and regulation.

 

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We estimate that our total addressable market, based on our current offering, exceeds $11 billion, in terms of revenue generated by all market participants in 2020, and consists of biopharmaceutical injectables and in-vitro diagnostic products. Within each of these markets, we operate in some of the fastest growing segments, including pre-fillable syringes, drug delivery systems, molecular diagnostics and assembly equipment. We believe there are opportunities to further expand our addressable markets, including by targeting (i) complementary containment solutions, (ii) additional delivery systems, (iii) complementary engineering solutions, and (iv) aftersales support and services.

We operate our business in two segments:

 

   

Biopharmaceutical and Diagnostic Solutions, which includes all the products, processes and services developed and provided for the containment and delivery of pharmaceutical and biotechnology drugs and reagents, as well as the production of diagnostic consumables; and

 

   

Engineering, which includes all of the equipment and technologies developed and provided to support the end-to-end pharmaceutical, biotechnology and diagnostic manufacturing processes (assembly, visual inspection, packaging and serialization and glass converting).

In 2020, we generated approximately 85% of total sales from our Biopharmaceutical and Diagnostic Solutions segment and approximately 15% from our Engineering segment. The figure below provides a breakdown of our segments, as well as the business lines included within each segment.

 

 

LOGO

We refer to premium products in the Biopharmaceutical and Diagnostic Solutions segment as our “high-value” solutions. “High-value” solutions are wholly owned, internally developed products, processes and services for which we hold intellectual property rights or have strong proprietary know-how, and that are characterized by particular complexity and high performance. Our “high-value” solutions deliver significant benefits to customers in terms of time-to-market and reduced total cost of ownership. Among our key “high-value” solutions is our EZ-Fill® line of ready-to-fill injectable products, which can be customized to clients’ needs. For additional information on EZ-Fill® see “Business—Business Segments—Biopharmaceutical and Diagnostic Solutions—Container Closure Systems (CCS).”

We have nine production plants for manufacturing and assembling pharmaceutical and healthcare products across Europe (Italy, Germany and Slovakia) and the rest of the world (Brazil, China, Mexico and the United

 

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States), five plants for the production of machinery and equipment (Italy and Denmark), two sites for analytical services (Italy and the United States) and two commercial offices (Japan and the United States). Our manufacturing facilities in Mexico (serving the U.S. market), China and Brazil are greenfield operations established by us. Our manufacturing facilities in Slovakia, Denmark, Germany and the United States were acquired in strategic transactions over the past 15 years. Our global footprint, together with our proprietary, highly standardized manufacturing systems and processes, allow us to provide quality consistent products and services to our customers in more than 70 countries.

 

 

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Since the outbreak of COVID-19, we have increased production capacity to support our customers’ efforts to provide a rapid response to COVID-19. In this context we have been providing: (i) glass vials and syringes to approximately 90% of the currently marketed vaccine programs, according to our estimates based on public information (WHO, EMA, FDA); (ii) diagnostic solutions for the detection and diagnosis of COVID-19; (iii) glass forming lines, which are being installed worldwide, to facilitate the distribution of glass bulks and sterile vials and syringes; and (iv) visual inspection systems. COVID-19 has generated increased demand for our products and services, further enabling us to accelerate our growth strategy.

History

In 1949, Giovanni Stevanato founded Soffieria Stella, a specialty glass manufacturer, in Venice. Soffieria Stella, the precursor to Stevanato Group, operated until 1959, when Stevanato Group was established in Piombino Dese (Padua). Over the last 70 years, we have evolved from an Italian glassware manufacturer to a leading global provider of integrated solutions for the healthcare industry. Our growth has been driven by the internal development of new containment and delivery solutions as well as strategic acquisitions, enabling us to broaden our offering, our technical know-how and our international footprint.

We began our international expansion in 2005, with the acquisition of Medical Glass, a Slovakia based primary packaging manufacturing company. Subsequently, in 2007 and 2013, we acquired an Italian company, Optrel, and a Danish company, Innoscan. Both specialize in the production of inspection machines. These acquisitions marked our entry into the technology and equipment manufacturing business. In 2016, we pursued further expansion of our offering through the acquisition of: (i) Balda, a company specialized in developing and manufacturing plastic diagnostic consumables, drug delivery systems and medical components; (ii) SVM, a company specialized in the production of high-technology machines and systems for assembly, packaging and serialization of pharmaceutical products; and (iii) Medirio, a start-up developing patents and other intellectual property for the wearable injectors business.

 

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We currently market our products, processes and services under the following brands: (i) SG Ompi, for primary containment solutions; (ii) SG Spami, for glass converting solutions; (iii) SG Lab, for analytical services; (iv) SG Balda, for diagnostic and drug delivery solutions; (v) SG Optrel and SG Innoscan, for visual inspection solutions; and (vi) SG SVM, for assembly, packaging and serialization. In the coming years, we plan to consolidate our offering under a single “SG” brand.

In parallel with our acquisition strategy, we regularly review our operations in the context of our organic growth plan. As a result of these ongoing assessments, we have expanded our offering through new departments, new laboratories, new offices and new plants. In 2019, we opened a new building in Piombino Dese (Italy) to increase our syringes production capacity and since 2008, we have opened three greenfield sites in (i) Monterrey, Mexico in 2008; (ii) Zhangjiagang, China in 2012; and (iii) Sete Lagoas, Brazil in 2017.

Our Industry and Growing End Market

We are a key partner to leading companies in the pharmaceutical, biotechnology and life sciences industries, serving as one of the preeminent providers of drug containment, drug delivery and diagnostic solutions to these end markets.

We estimate that our total addressable market, based on our current portfolio of products and services comprising container closure systems, drug delivery systems, IVD solutions, and engineering, exceeds $11 billion in terms of 2020 revenue.

Container closure systems and drug delivery systems represent mission-critical components of the pharmaceutical and biotechnology value chain for injectable drugs, which are produced for the treatment of a wide range of diseases from diabetes to cancer and other chronic conditions. Due to our competitive standing, we believe that we are well positioned to capitalize on several major demographic and technological trends generating growth in the global healthcare markets, including:

 

   

an aging population globally;

 

   

increasing incidence of chronic diseases (e.g. diabetes);

 

   

continued innovation in biologic based therapies which are administered by injection;

 

   

expanded access to advanced healthcare in developing countries;

 

   

broader demand for vaccine programs;

 

   

increasing propensity of biotechnology companies to outsource non-core competencies; and

 

   

growth in self-injection systems where the primary container (i.e., glass containers) is integrated into the delivery device.

We categorize our addressable market by direct markets and end markets. Our direct markets comprise various products and product categories in which we directly participate, such as container closure systems. Our end markets include the broader sectors from which we see demand for our products and services, such as vaccines and biologics.

 

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Direct Markets

 

 

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We serve the following direct markets:

Container Closure Systems (“CCS”)

The CCS market includes the markets for pre-fillable syringes (“PFS”), vials, cartridges and ampoules. Based on data collected by IQVIA, we estimate the total addressable market of CCS solutions to be approximately $2.8 billion as of 2020, expected to grow at a Compounded Annual Growth Rate (“CAGR”) of approximately 6% to 7% through 2024. Growth in the CCS market is driven by the increasing number of new drug launches by biotechnology innovators and international vaccine programs, both of which are expected to generate continued demand for pre-fillable syringes and cartridges. Customers in this market increasingly seek out “ready-to-use” products which include pre-sterilized offerings and ready-to-use packaging (PFS, vials, ampoules and cartridges) that provide higher flexibility, lower total cost of ownership and reduced time to market. In addition to these underlying drivers, the impact of COVID-19 and international vaccination programs are expected to produce further volume growth in pre-fillable syringes and vials. We have significant exposure to the highest-growth segments of the CCS market, with pre-fillable syringe and vial sub-segments estimated to grow at a CAGR of 8% to 9% and 7% to 8%, respectively.

Drug Delivery Systems (“DDS”)

Our addressable market in DDS, including both Contract Manufacturing Organizations and Contract Development and Manufacturing Organizations, consists of pen-injectors, dry powder inhalers, auto injectors, and non-insulin wearable devices. Based on data collected by IQVIA and Roots Analysis, we estimate the total addressable market for DDS, including proprietary and contract development manufacturing services, to be approximately $1.3 billion as of 2020, expected to grow at a CAGR of approximately 5% to 7% through 2024. Growth in the DDS market is also driven by increased demand for pen-injectors and dry powder inhalers for large, established drug classes such as insulin, as well generics and biosimilars. The increasing prevalence of diabetes and asthma, as well as expanded access to treatments for these conditions support continued growth in these markets.

In-Vitro Diagnostic (“IVD”) Solutions

The IVD solutions market consists of diagnostic devices and consumables for point-of-lab and point-of-care use. Based on data collected by Alira Health, we estimate the total addressable market for IVD solutions to be approximately $6.2 billion as of 2020, expected to grow at a CAGR of approximately 5% to 6% through 2024. Our IVD solutions are mainly utilized in molecular diagnostics, immunoassays and clinical chemistry development and manufacturing. Molecular diagnostics growth is primarily driven by technology advancements, with increasing need for sensitivity and specificity in testing. Immunoassay growth is driven by increasing impact of infectious disease and oncology testing. Finally, clinical chemistry consists of testing conducted by established large market participants. Both growing and established companies increasingly utilize cost-efficient manufacturing partners with expertise in design and manufacturing. We increasingly target the market for molecular diagnostics within IVD solutions, which we estimate to be growing faster than the broader market for IVD solutions at a CAGR of approximately 9% to 11% through 2024, based on Alira Health Analysis.

 

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Pharmaceutical & IVD Engineering

Our pharmaceutical and IVD engineering addressable market consists of assembly, visual inspection, packaging and serialization and glass converting machines. According to Alira Health and Markets and Markets Research Pvt Ltd. analysis, the total addressable market of pharmaceutical and IVD engineering was approximately $0.9 billion as of 2020, expected to grow at a CAGR of approximately 4% to 5% through 2024. This market requires critical engineering know-how developed over numerous years as well as regulatory approvals to market machinery. We expect increased regulatory scrutiny, trends toward more complex manufacturing systems, and the increase in digitalization and automation of manufacturing to continue driving growth in this segment. The market is expected to experience continued growth as the industry shifts towards enhanced service offerings and aftersales support. Consequently, aftersales services, including spare parts provisioning, machinery upgrades, periodic maintenance and warranty extensions, represent a critical portion of our growth derived from this segment. Within the pharmaceutical and IVD engineering market, we are increasingly targeting the market for assembly equipment, which we estimate to be growing at a CAGR of approximately 5% to 6% through 2024, based on Alira Health analysis.

Key End Markets

 

 

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The key end markets that we serve include biopharmaceutical injectables, which represent the majority of our business, as well as the rapidly growing in-vitro diagnostic sector.

Biopharmaceutical Injectables

The biopharmaceutical injectables end market comprises multiple distinct injectable drug categories such as biologics, vaccines, generics and insulin. According to data collected by IQVIA, the market for biopharmaceutical injectables is expected to grow at a CAGR of approximately 5% to 7% through 2024, outpacing growth in topical and oral routes of administration.

We increasingly serve some of the fastest growing segments within biopharmaceutical injectables, such as:

 

   

Biologics: a segment which, based on data collected by IQVIA, is expected to grow at a CAGR of approximately 7% and includes (i) antibodies and protein based therapies, the largest sub-segment of biologics, which is expected to grow at a CAGR of approximately 6% through 2024, based on data collected by IQVIA, driven by continued innovation, multiple product launches in niche and specialty markets and high unmet need; (ii) biosimilars, a smaller sub-segment which, based on IQVIA and Grand View Research data, is expected to grow at a CAGR of more than 10% through 2024; and (iii) cell and gene therapies, one of the fastest growing end markets in the pharmaceutical and biotechnology sectors, which is expected to grow at a CAGR of more than 30% through 2024, according to data collected by IQVIA, driven by continued innovation and funding; and

 

   

Vaccines: the global response to the COVID-19 pandemic has rapidly produced an international effort and broader focus around epidemic preparedness that is expected to drive growth in the vaccine injectables market. According to IQVIA, the injectable vaccines market is estimated to grow at a CAGR of approximately 11% through 2024.

 

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We also serve more mature and established markets such as:

 

   

Generics: which according to data collected by IQVIA, is expected to grow at a CAGR of approximately 2%;

 

   

Insulin: where we continue to observe steady growth in insulin injectables, driven by rising incidence and prevalence of diabetes. Diabetes prevalence is expected to grow at a rate exceeding global population growth, driven by aging demographics and economies shifting from low-to-middle income status. According to IQVIA, the market for insulin based treatments is estimated to grow at a CAGR of approximately 2% through 2024; and

 

   

Other / Other Injectables: includes other injectable such as heparin and water for injection, as well as inhalation devices.

In-Vitro Diagnostic

In-vitro diagnostic is an important and growing end-market where we participate with a focus on molecular diagnostics, point-of-care diagnostics and, increasingly, infectious diseases and oncology. With an increasing number of diseases to which molecular diagnostic technology and rapid advances in genomics can be applied, the molecular diagnostics end market is expected to continue to experience high growth. Additionally, the impact of COVID-19 has highlighted the growing importance of advanced diagnostics capabilities, contributing to further growth in this market.

Based on Alira Health and Evaluate MedTech market data, within the in-vitro diagnostic end market is expected to grow at a CAGR of approximately 5% to 7% through 2024, molecular diagnostics showing a higher growth rate of approximately 10%.

 

 

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Our Competitive Strengths

We have secured a leadership position as a critical solutions provider in the drug development and delivery value chain. Our integrated offering and track record of operational excellence has made us a partner of choice to the pharmaceutical, biotechnology and life sciences industries. We benefit from several competitive advantages that we believe will allow us to continue to deliver for customers and remain at the forefront of the markets in which we operate. The following are our key competitive strengths:

Leading global provider of mission-critical containment, delivery and diagnostic solutions for the pharmaceutical, biotechnology and life sciences industries

We are a recognized leader in providing mission-critical containment, delivery and diagnostic solutions to the pharmaceutical, biotechnology and life sciences industries. We operate on a global scale, offering our

 

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products, processes and services in more than 70 countries. We serve a large and diversified customer base, including many of the world’s largest pharmaceutical, biotechnology and diagnostics companies, contract manufacturers and producers of glass packaging. Our customer base comprises more than 700 companies globally, including 41 of the top 50 pharmaceutical companies (which comprise all of the top 15), and eight of the top ten in-vitro diagnostic companies, as measured by 2020 revenue according to data collected by Global Data. We also serve 15 of the top 20 biotechnology companies by market capitalization in the NASDAQ Biotechnology Index and over 100 biotechnology customers in total.

As a partner of choice to the pharmaceutical and biotechnology industries, our solutions have been widely adopted, giving us a leading position in several high growth segments of the pharmaceutical and biotechnology injectables market, including in biologics, biosimilars and vaccines. Within each of these markets, we operate in some of the fastest growing segments, where, based on available market data, we believe we are a global top three player by revenues, including number two in pre-fillable syringes, number one in pre-sterilized EZ-Fill® vials and number one in pen cartridges.

Integrated end-to-end platform spans the drug lifecycle, from design and development through commercialization

We offer solutions to our clients at each stage of the drug development process, from research and development, through clinical trials and commercialization. Our fully integrated, end-to-end value proposition allows us to reduce lead time, total cost of ownership (i.e., logistics, drug product waste, storage and personnel costs) and supply chain risk for our customers, while improving the reliability and safety of drug products.

The breadth of our integrated capabilities differentiates us from our competitors as we believe we are the only player in the industry to be active in both the drug containment, delivery and diagnostic solutions, as well as the engineering segments. The extensive scope of solutions that we offer makes us an attractive partner to both small, emerging businesses, which may look to outsource a portion of their manufacturing process, as well as to mature, commercial stage drug development organizations, that require complex engineering solutions that can be integrated into their own production processes. By partnering with customers in the early development phase, we are in a prime position to play a key role as they add products to their pipelines and seek more advanced technical solutions. Our ability to seamlessly integrate our drug containment and delivery solutions with our engineering capabilities allows us to deliver significant value to our customers over time.

A common operating model in all our manufacturing facilities to uphold one consistent quality standard worldwide

Our manufacturing approach is based on the relentless pursuit of maximum efficiency and highest quality. Our manufacturing methods and processes are standardized as we utilize the same technology and adopt a common quality control approach across all of our production facilities. This allows us to provide consistent products, processes and services, both in terms of quality and time to market, to all of our customers from each of our manufacturing locations worldwide. It also gives us the flexibility, where needed, to distribute and balance production across our facilities (provided the facilities are validated by our customers), reducing waste and maximizing our efficiency as a group. Many of our customers access our products and services through a number of our facilities globally.

As a result of our commitment to manufacturing excellence and the breadth of our footprint, our customers view us as a functional extension of their operations. We are subject to rigorous audits by certification bodies and our customers, who perform more than 100 audits a year (other than 2020 which was affected by COVID-19 restrictions) on our manufacturing facilities. Further, given our reputation for reliability and our ability to establish new manufacturing facilities with the same standards as our existing ones anywhere in the world, our customers often coordinate with us to support their geographic expansion strategy by building out greenfield manufacturing facilities. This, in turn, provides us access to customers and allows us to further secure our long-term relationships with them.

 

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Highly collaborative approach resulting in deeper strategic partnerships with clients and leading to high customer retention

We approach every customer relationship with the goal of partnering and adding value over a long time horizon, leveraging our technical expertise and our ability to collect analytical data to fully understand our customers’ objectives, needs and limitations. Drug containment and delivery solutions in particular are often borne out of years of collective effort with customers to develop the optimal manner of containing and delivering a drug product to patients. The customized solutions we provide vary depending on the characteristics and chemical composition of the pharmaceutical products, logistical needs (for example, ease of transport and shelf-life), patient community to which the drug product is primarily addressed (including, potentially, its geographic location) and specific regulatory requirements. The containment and delivery solutions that we provide are an integral part of the drug product itself and are included as part of the regulatory filings required to approve drug product marketing and commercialization. Providing high-quality products with specificity, sensitivity and consistency, coupled with extensive product validation data are fundamental drivers of customer loyalty. The quality and dependability of our drug containment and delivery solutions are critical to obtaining commercialization and marketing approval from regulatory agencies. As a result, it is often the case that drug product containment and delivery arrangements cannot be changed without amending the regulatory filing with the relevant agency. High switching costs and significant time delays are meaningful deterrents to a change in suppliers, which reinforces customer loyalty and strengthens customer retention. Over the past 10 years we have recorded a customer retention rate of approximately 97%.

Extensive scientific and engineering capabilities enable continuous innovation of proprietary products and processes

During our 70 year history, we have differentiated Stevanato Group by making significant ongoing investments in research and development to build our scientific, technical and engineering capabilities. We believe that customers rely on us because of our technical expertise, as well as our ability to design the best possible processes to meet their needs and the specifications required to effectively contain and deliver their drugs. As the needs of our clients evolve, we drive innovation within our proprietary products and processes to develop specialized or customized solutions. As a result of our investments in internal engineering capabilities, we own the most critical processes behind the products we manufacture and are able to respond faster to customer needs for new or customized products. Our engineering capabilities also allow us to scale up our production rapidly, where required, thereby reducing lead time for commercialization of drugs. Our research and development team comprises more than 100 highly skilled and specialized employees operating in our Italian (Piombino Dese and Milan), German (Bad Oeynhausen) and U.S. (Boston) facilities. We have an active pipeline of more than 50 ongoing R&D projects across all of our business segments. Our targeted investment in innovative products and technologies allows us to capture incremental pipeline opportunities and drive attractive growth, while delivering on our firm-wide commitment to provide the highest quality to customers.

Experienced board and executive leadership team with proven track record of excellence

We are led by an experienced and highly-motivated board of directors and executive leadership team with a proven track record of operational excellence. Our leadership team has consistently achieved results by responding to market developments and by capitalizing on opportunities for organic and inorganic growth. While our founding family continues to support our success and future growth as they have done since inception, we have, over the last several years, added to our board and executive team a number of professionals with decades of experience in the drug containment, delivery and diagnostics industries from all over the world. We believe that this has contributed greatly to our strategy building and execution capabilities by allowing us to gain a broader and more nuanced understanding of the market in which we operate, strengthening our ability to anticipate market trends and stay ahead of our competitors. Our strong corporate culture allows us to continuously expand these perspectives by adding diverse talent with deep knowledge and broad experience to our team.

 

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Our Growth Strategy

We believe that the breadth and quality of our products and services offering, our technical understanding of the drug-material interface, our innovative engineering and manufacturing excellence position us well to serve our global pharmaceutical, biotechnology and life sciences customers. We focus on our customer needs and the market trends described in the “Our Industry and Growing End Market” section and tailor our growth strategy to such needs and trends.

Our growth strategy currently focuses on the following areas:

Expand our global market position in primary containment systems

We are determined to pursue attractive, organic growth trends in our core primary container business by investing in additional capacity to meet the growing demands of the expanding pharmaceutical, biotechnology and vaccine markets and continue to transition our customers to “high-value” solutions. We rely on a unique set of proprietary manufacturing processes to drive product innovations in our primary container business that benefit our customers. For example, EZ-Fill® containers enable our customers to reduce time to market, lower their overall cost of ownership and reduce supply chain risk By expanding our development capabilities and manufacturing capacity in North America, Europe and Asia to better serve our customers in our key end markets and support “high-value” solutions growth, we believe we will be able to continue developing our offering, particularly in biologics, to generate above-market growth and capture market share across our business segments. Our planned expansion also offers our customer base faster response time and supply chain redundancy, reducing risk for just in time manufacturing.

Leverage leadership in primary containment to build market position in drug delivery systems

We see a significant opportunity in the fast-paced evolution of drug delivery systems, especially in connection with biologic based therapies administered by injection. We believe that we can leverage this favorable trend in the drug delivery systems market by investing in further strengthening the integration of our drug containment and delivery capabilities in an effort to have the most compelling value proposition for our customers. In particular, we believe that by increasing the integration of our offering we can attract business from emerging biotechnology customers who have an increasing inclination to outsource the non-core phases of their development and manufacturing processes. We intend to strengthen our design and development capabilities to secure “high-value” contract development and manufacturing programs for drug delivery devices, also leveraging our positive track-record in the space and our ability to develop proprietary systems.

Accelerate market penetration in life sciences systems

Through focused marketing and business development activities, we intend to accelerate our market penetration in high-value, fast-growing life sciences segments, such as molecular and point-of-care diagnostics. With the increasing tendency of life sciences customers to outsource innovative design, development and assembly of specialized in-vitro diagnostic solutions, we believe that we can leverage our integrated capabilities and our ongoing efforts in design and development of such solutions to secure “high-value” projects from inception, therefore entering the market at an even earlier stage and capitalizing on new opportunities.

Increase our investments in research & development to address unmet market needs

Through continued investment in our R&D programs, we see opportunities to drive revenue and margin growth through processes that improve the quality and sustainability of our existing products. These investments are targeted at maintaining the stability, potency and purity of our customers’ products prior to administration. New therapies for diabetes, cancer and auto-immune diseases are based on large, complex molecules that are extremely sensitive to their storage environment. In many cases, our customers’ finished product formulations

 

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are viscous and require drug delivery devices for administration to patients. Our products, such as EZ Fill®, reduce our customers drug containment risks, such as the ones mentioned above. We also see growing interest within our customer base in systems that detect tamper evidence, anti-counterfeiting, inventory track and trace capability, and in the case of devices, smart systems that allow patient data capture.

Easy-to-use, accurate, reliable self-injection systems for complex pharmaceutical and biotechnology products represent a particularly attractive market opportunity. We have built a portfolio of devices for this market that can be used off the shelf or customized to the specific needs of the customer.

We also see a growing market need for innovative containment and delivery systems for advanced cell and gene therapies. Effective solutions for these products will require innovative materials and coatings, system design and stability and compatibility testing, all of which are areas of strength for our development teams.

Build on our expertise in manufacturing, assembly and inspection systems for primary containers and complex, multi-component systems

Our market leading expertise in the design and manufacturing of glass converting systems for drug containment offers the opportunity to grow in complex, multi-component systems. Working closely with our customers, we can offer custom designed systems complete with vision inspection technology to assure the highest quality products. The enhanced scalability and flexibility of our assembly and packaging solutions are well suited to match emerging biotechnology customers’ requirements such as smaller production batches with higher variability in dosage formats. We see future opportunities to apply these solutions to manufacturing multi-component devices for in vitro diagnostics, including point-of-care and self-injection devices for pharmaceutical and biotechnology customers.

Leverage our scientific and engineering capabilities across the drug development timeline

We have created an integrated, end-to-end, flexible portfolio of products, processes and services in order to collaborate closely with our customers from the preclinical phase through Phase III testing, regulatory filing and eventual commercialization. We believe that our ability to assist from the early stages of preclinical development is important in pursuing new customers because entering a new relationship at any later stage of the drug development cycle would require significant additional expenditure.

Such close collaboration presents us with an opportunity to leverage our scientific and engineering capabilities to strengthen and expand our business relationships. By assisting customers through their production processes, we gain the visibility and knowledge that, combined with our skills and capabilities, allow us to anticipate their emerging needs and intercept new demands. We address these needs by continuing to expand our product offering and making new solutions available. Through close collaboration with our customers, we gain invaluable insight into system requirements and industry trends and challenges, which we re-deploy for our future development projects, or to secure new business. For instance, we intend to pursue new opportunities driven by the trend of biotechnology companies toward outsourcing non-core activities of their business.

Leverage our global geographical presence as a platform to increase our penetration in the North American and Asia Pacific regions

The North American and APAC regions represent significant growth opportunities for our company. Both markets have well established research and manufacturing capabilities for biologic therapies covering both innovator and biosimilar products. We have a small but rapidly growing position in both regions, where we believe we can accelerate our recent growth by further expanding our manufacturing footprint. By providing locally sourced products, we can deliver supply chain security, just in time delivery, and reliable sourcing in terms of surge capacity to both existing and new customers. For example, our new plant in Indiana (U.S.) will represent a strategic location for us in proximity to key emerging biopharma players, enabling us to access an

 

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attractive biotech and vaccine market. We believe that we are well-positioned to expand our footprint and market share in the North American and Asia Pacific regions. In an effort to grant access to treatments and vaccines to a higher portion of their population and, therefore, improve their quality of life, APAC countries are showing a consistently growing demand for biologics and cell and gene therapy solutions, as well as strong inclination towards investment in biosimilars. We believe that our global footprint will allow us to take advantage of these favorable growth trends. We intend to further invest in the North American and APAC regions to increase our market penetration in these region across the business segments in which we operate. Likewise, our new plant in Zhangjiagang (China) will grant us access to a growing vaccine market. Our efforts and intention to commit to the North American region have also been displayed by our appointment of a senior manager responsible for overseeing and implementing our commercial penetration strategy in this key geographical area.

Selectively pursue acquisitions and technology partnerships to augment and expand our product and service portfolio

We have a proven track record of successfully identifying, completing and integrating newly acquired complementary businesses and technologies. Our extensive knowledge of the competitive landscape and deep understanding of the evolving needs of our customers and end markets enable us to identify actionable opportunities to expand our portfolio. We employ a disciplined process to evaluate the strategic fit and financial prospects of acquisitions using a well-established set of criteria.

Business Segments

Our business operations are organized into two reporting segments: (i) Biopharmaceutical and Diagnostic Solutions, which includes all the products and services developed and provided for containment and delivery of pharmaceutical and biotechnology drugs and reagents, as well as the production of diagnostic consumables, and (ii) Engineering, which includes all the equipment and technologies developed and provided to support the end-to-end pharmaceutical, biotechnology and life sciences manufacturing processes (visual inspection, assembly, packaging and serialization and glass converting). In 2020, we generated approximately 85% of total sales from our Biopharmaceutical and Diagnostic Solutions segment and approximately 15% from our Engineering segment.

Biopharmaceutical and Diagnostic Solutions

Through our Biopharmaceutical and Diagnostic Solutions segment, we offer a wide range of development and manufacturing solutions to our pharmaceutical, biotechnology and life sciences customers. This segment comprises container closure systems (CCS), in-vitro diagnostic (IVD) solutions and drug delivery systems (DDS). We also provide analytical services and regulatory support exclusively to our customers, as ancillary services to the supply of containment solutions.

The Biopharmaceutical and Diagnostics Solutions segment includes our “high-value” solutions. These solutions are wholly owned, internally developed products, processes and services for which we hold intellectual property rights and have proprietary know-how and are characterized by particular complexity and high performance. Our “high-value” solutions represent a cross-section of our portfolio, including drug containment solutions such as NEXA®, LDP, ALBA® and a significant proportion of our EZ-Fill® line, as well as other drug delivery devices, molecular diagnostic solutions and analytical services.

Due to the technical complexity of our “high-value” solutions, and the significant value these generate for our customers, we enjoy premium pricing on these products, services and processes. Over time we have expanded our offering of “high-value” solutions, enabling us to drive significant growth from this category. Over the last five years of sales our “high-value” solutions have more than doubled to 23.3% of our total revenue as at March 31, 2021.

 

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By developing “high-value” solutions using our proprietary intellectual property, we are able to create exclusive products, processes and services that can be used across different clients. For example, our “high-value” drug containment solutions, such as ALBA® and NEXA®, are particularly well-suited to address the needs of customers in the biologics end market, as they:

 

   

reduce drug product waste in the pharmaceutical process by increasing the mechanical resistance of the containers;

 

   

maintain the integrity of drugs through reduced presence of extractables, leachables and visible / sub-visible particles in the containers;

 

   

minimize the interaction between the container and the drug; and

 

   

optimize the administration of biologics to patients, particularly with systems for the administration of viscous biologics products.

The strong relationships we have developed with our customers and our ability to work alongside them across each stage of the drug development process, from pre-clinical to clinical stage and commercialization, allow us to understand their specific needs at an early stage of the drug development and production process and provide appropriate solutions for such needs. Our strong relationships, our ability to provide a full set of solutions across the drug development process, and our expertise in developing and assembling machinery and equipment for the production of drug containment and delivery systems make us a partner of choice for our customers.

Container Closure Systems (CCS)

CCS are mission-critical components in the production of pharmaceutical and biotechnology products. Our container closure systems are complex and rely on multiple sophisticated industrial processes to form, treat, inspect and package these products. We believe that the breadth and variety of our CCS offering represents one of our key competitive advantages. Our portfolio of CCS products includes:

 

   

Pre-fillable Syringes (PFS): a wide range of sterile ready-to-fill (EZ-Fill®) syringes, available in a range of sizes from 0.5 ml to 5 ml with staked needle, Luer cone or Luer lock adapter. We also offer bulk syringes, which are available with or without staked needle;

 

   

Cartridges: a diversified offering of cartridges with bypass and multi-bypass systems suitable for both liquid and powder formulations, for the pharmaceutical, biotechnology and dental sectors. Cartridges are offered both in ready-to-fill (EZ-Fill®) and bulk options;

 

   

Vials: a broad range of vials, differentiated by size and capacity as well as ready-to-fill (EZ-Fill®) and bulk options. Our vials can be fully tailored to meet the different needs of pharmaceutical and biotechnology customers, including special formats such as micro-vials; and

 

   

Ampoules: a wide spectrum of ampoules and bulks.

 

 

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Our CCS portfolio comprises several innovation-driven “high-value” solutions. Our most innovative CCS solutions, some of which include integrated safety systems, are:

 

   

EZ-Fill®: EZ-Fill® solutions are ready-to-fill products that are provided to our customers after having already been washed, depyrogenated and sterilized in-house. We believe our EZ-Fill® solution positions us ahead of many of our direct competitors, as it allows us to provide maximum value to our pharmaceutical and biotechnology customers by: (i) reducing their capital investments in washing and sterilization equipment; (ii) being flexible and processable across different containers (i.e., syringes, vials, cartridges) on the same filling line; (iii) guaranteeing no glass-to-glass contact between different containers, (iv) delivering fewer breakages in the filling process of our pharmaceutical and biotechnology customers; and (v) being completely compatible with existing filling lines, in order to minimize disruption for customers. As the developers of EZ-Fill® systems, which we first started producing in 2007, we believe that our manufacturing technologies are the industry standard for ready-to-fill vials and cartridges, with more than 250 fill & finish lines installed using EZ-fill® packaging technology over the last 12 years;

 

   

Alba®: an innovative CCS solution for pre-fillable syringes, cartridges and vials targeting protein-based drugs (biologics) and enabling a drastic reduction of silicon oil particle leaks and delamination issues, which we launched in 2019; and

 

   

Nexa®: an innovative CCS solution for pre-fillable syringes, cartridges and vials providing high mechanical resistance and a superior cosmetic quality.

In-Vitro Diagnostics (IVD) solutions

Within the life sciences industry, we specialize in the development and manufacturing of customized diagnostic laboratory consumables (Point-of-Lab), as well as diagnostic consumables for use outside of laboratories (Point-of-Care) and IVD systems. These products are used in laboratories, hospitals, primary care facilities and in-home care settings on a worldwide scale.

The life sciences sector is complex as it requires constant cooperation with each customer for the development of the specific products they need. Whereas in the production of CCS we independently develop the shape and size of each container in accordance with customers’ instructions, the production of IVD solutions requires development of specific molds based on each customer’s requirements and specifications, which are then used for stamping of the final product. The development of these molds is a lengthy process that requires close cooperation with the customer and results in the customer retaining ownership of the mold(s). We intend to develop this business into an integrated platform covering all parts of the process, from product development to delivery of the final product, packaged and sterilized as needed.

 

 

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Drug Delivery Systems (DDS)

Our DDS offering includes the following four product categories:

 

  (i)   Pen Injectors: easy-to-use, safe devices containing a cartridge inside, which are mainly used for diabetes insulin treatments and which utilize a proprietary solution (Alina®) which we produce on the basis of an exclusive license from Haselmeier which we obtained in 2019;

 

  (ii)   Dry Powder Inhalers (DPI): breath-coordinated powder inhalers (mono or multidose), mainly used for asthma or other chronic obstructive pulmonary disease, which utilize a proprietary solution (ICOcap) which we produce on the basis of an exclusive license from Iconovo;

 

  (iii)   Auto-injectors: high-end easy-to-use devices (automatic injectors containing either cartridges or PFS) enabling biologics or emergency drug injection (MaverickTM); and

 

  (iv)   Wearable Injectors: wearable devices enabling on-body drug delivery through self-injection, for example for slow release injectable drugs. We own a proprietary solution (EZ-be Pod®) targeting high-end treatments such as pain management and oncology.

We also provide contract development and manufacturing services for customer-owned drug delivery devices, including design, manufacturing, industrialization, component manufacturing and high-precision injector molding and assembly.

 

 

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Analytical Services and Regulatory Support

We have two analytical testing facilities in Piombino Dese, Italy and Boston, Massachusetts focused on investigating the physical and chemical properties of primary packaging materials and components. By studying the interaction between container closure systems and drug products we provide valuable data to customers toward the definition of the optimal drug containment or delivery solution. This allows us to engage with our clients earlier in the development phase of their drugs and position ourselves well to become a supplier for their containment solution and potentially their drug delivery systems and related process equipment.

The containment and delivery solution that we provide is an integral part of the drug product itself and it is included as part of the regulatory filings required before commercialization. We also assist our customers in this phase of their drug product development by providing the support required to obtain the relevant regulatory authorizations.

Our key analytical services, supported by our regulatory know-how, include:

 

   

Chemical Analysis: chemical characterization of the container to detect and address the risk of chemical interaction with drugs. We can also assist in detecting and quantifying extractables and leachables;

 

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Surface Characterization: characterization of the physical and chemical properties of the containers’ surface to evaluate the performance and the reaction with the drug product;

 

   

Container Performance and Interaction: diverse range of investigative fields from material to chemical, physical and mechanical;

 

   

Drug Delivery System Testing: tests to ensure device compatibility, functionality and ease of use; and

 

   

Tailored Services: customized testing based on the specific need of each client.

 

 

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Engineering

Our engineering segment produces machinery for both in-house use and sale to customers. In our Piombino Dese (Italy), Bologna (Italy), Brabrand (Denmark) and Silkeborg (Denmark) plants, we produce equipment and machinery for all phases of the glass production process, as well as for the assembly of plastic products. We drive continuous technological advancements so that our equipment can consistently meet our client’s exact specification requirements. Our engineering services span all phases of the machinery production process from development and design, including the development of software and artificial intelligence models, to construction, assembly and testing. With approximately 60 specialists and technicians located worldwide, we provide after sales support to our customers with interactive tools and technical expertise, to ensure performance of their production sites.

Our engineering products include:

 

   

Assembly Equipment: we produce modular assembly equipment for flexible and scalable solutions. Our assembly equipment is highly automated and includes extensive in-line controls around product safety and functionality. Our platforms are available for prototyping, small batches and high volume production for pen injectors, auto-injectors, wearable injectors and inhalers;

 

   

Visual Inspection Equipment: we provide inspection solutions for ampoules, vials, cartridges, syringes or bottles, filled with clear or opaque liquids, emulsions, viscous gels, lyophilized products and other difficult-to-inspect solutions. Our diversified portfolio of products, which includes manual, semi-automatic and automatic equipment, also featuring artificial intelligence, allows us to deliver flexible inspection solutions at any stage of the product life-cycle, from lab development to high volume production;

 

   

Secondary Packaging and Serialization Equipment: our portfolio includes a broad range of modular solutions which can be configured and customized, in a compact footprint, for cartoning, labelling, case packing and palletizing, thereby ensuring traceability through serialization. We provide secondary packaging lines that adapt to both small batches and high production volumes for multiple different product formats, including glass primary containers and drug delivery devices. We focus on robotics, quick format change and gentle handling to ensure production reliability and efficiency; and

 

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Glass Converting Equipment: we produce fully automated, high-speed, precision glass forming lines which provide accurate processing of ampoules, vials, cartridges and syringes. To cover all steps of production, we also manufacture glass tube loaders, after forming lines and annealing ovens.

We also provide professional project management services, supporting our customers in designing their plant layout for the production of bulk and ready-to-use pharmaceutical and biotechnology primary packaging. As a result of the experience gained designing our greenfield plants in Italy, China, Mexico and Brazil, our offering includes support and consultancy around: (i) plant design, (forming lines, clean room areas and laboratory layout); (ii) plant construction (production flow, piping and instrumentation diagrams); and (iii) plant engineering (preliminary plant studies).

 

 

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Customers

We serve a large and diversified customer base of more than 700 companies worldwide, including many of the world’s largest pharmaceutical and biotechnology companies, life sciences companies, drug product and fill and finish contract manufacturers.

Our customer base includes 41 of the top 50 pharmaceutical companies (comprising all of the top 15) and eight of the top ten in-vitro diagnostic companies, as measured by 2020 revenue, according to data collected by Global Data. We also serve 15 of the top 20 biotechnology companies by market capitalization in the NASDAQ Biotechnology Index and over 100 biotechnology customers in total.

Drug containment and delivery solutions are an essential element in our customers’ manufacturing processes but generally represent a small fraction of the total cost of producing drugs. We therefore believe our customers choose our products, processes and services based on quality, reliability, innovation, speed to market and consistency rather than on costs.

We seek to maintain high levels of engagement with our customer base in order to deepen our relationships over time. Our deep, tenured relationships with our customers are supported by multi-year contracts which often contain cost pass-through provisions and have resulted in large recurring revenue streams. We engage with our customers through a variety of touchpoints, including direct visits, third-party and proprietary educational events, webinars, digital and social media communication channels designed to gauge consumer satisfaction with our products, technologies and services.

Our ten largest customers accounted for 40.6% of our consolidated revenue in 2020, and no single customer accounted for more than 10.0% of our sales.

 

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Customer Categories

We believe that quality, breadth of services and innovation are the main factors enabling us to deliver significant value to our customers making us a partner of choice for them. Our main customer categories include:

Pharmaceutical and Biotechnology Companies

Our pharmaceutical and biotechnology customers include large, international companies, as well as smaller regionally focused companies and manufacturers. We provide a diverse range of products, processes and services to these customers, both within our Biopharmaceutical and Diagnostic Solutions segment and our Engineering segment. Over time, we have invested in developing innovative products, services and solutions to serve pharmaceutical and biotechnology customers, which has enabled us to form long lasting relationships underpinned by the reliability and quality of our offering, processes and services. The validation process for suppliers of pharmaceutical and biotechnology solutions, both with regard to drug containment and delivery systems and engineering, requires rigorous evaluation of multiple quality and compliance criteria and can sometimes last several years. For this reason, we believe that we are well-positioned to enjoy durable long-lasting relationships with our customers, as we are deeply embedded in their production processes.

Life Sciences Companies

Our main life sciences customers are in-vitro diagnostic companies. We provide life sciences companies with contract development and manufacturing services for the plastic consumables used in their diagnostic tests and containment solutions for their reagents as well as machinery for the production, assembly and visual inspection of such products.

Drug Product / Fill & Finish Contract Manufacturers

We provide our solutions to drug product / fill & finish contract manufacturers. We provide these customers with glass and plastic containers as well as engineering solutions for the assembly, visual inspection, secondary packaging and serialization of their products.

Customer Service

We have a customer service team that works in parallel with the sales, supply chain, operations, technical and quality teams at our plants to collect feedback at every stage of our production process. We coordinate our customer service function centrally from our headquarters in Italy to ensure that our global team of customer service professionals applies consistent processes and procedures to guarantee quality and service levels.

Customer Contractual Arrangements

We have different contractual arrangements for different business segments. In our Biopharmaceutical and Diagnostic Solutions segment, our relationships with our customers are governed typically by master supply agreements the terms of which apply to each purchase order or product schedule through which customers place their request for the supply of our products. These are normally multi-year contracts which often contain cost pass-through provisions and have resulted in large recurring revenue streams. We negotiate different master supply agreements with each customer and, although similar, there are no standardized terms across agreements.

Sales in our Engineering segment relate to individual machinery and contracts and are therefore negotiated on an ad hoc basis. Pursuant to these equipment sale agreements, the intellectual property rights developed during the production of the relevant equipment and services remain our exclusive property save for cases of co-development with our customers.

 

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Backlog

As of March 31, 2021, our total backlog was €665.1 million compared to €606.7 million as of December 31, 2020 and €303.8 million as of December 31, 2019. This increase in backlog was mainly due to a general increase in demand for our products as a result of the COVID-19 pandemic and the improvements to our manufacturing processes, which by reducing the time to market of our customers’ products, have given us a competitive advantage. Another contributing factor for the increase in our backlog has been an increase in lead time for the supply of critical components like our products in the market.

In our Biopharmaceutical and Diagnostic Solution segment we generally operate under long-term supply and/or framework agreements. Our backlog represents, as of a point in time, estimated future revenues from work not yet completed under specific purchase orders.

In our Engineering segment we generally have one-off agreements and our backlog represents, as of a point in time, estimated future revenues from work not yet completed under those agreements.

To the extent projects are delayed, the timing of our revenue could be affected. If a customer cancels an order, we may be reimbursed for the costs and often for the missing profit we have incurred. For orders that are placed inside a contractual firm period, we generally have a contractual right to payment in the event of cancellation. Fluctuations in our reported backlog levels also result from the timing and order pattern of our customers who often seek to manage their level of inventory on hand. Because of customer ordering patterns, our backlog reported for certain periods may fluctuate and may not be indicative of future results.

Competition

We compete across a broad spectrum of products, processes and services for integrated containment and delivery solutions as well as engineering solutions. The breadth of our integrated capabilities differentiates us from our competitors as we believe we are the only player to be active in both the drug containment and delivery systems and engineering segments. We maintain constructive relationships with our competitors and in some cases we acquire production inputs for our primary packaging from them. Similarly, we sell our equipment and machinery and license certain intellectual property rights to competitors for use in their production processes.

Given the breadth of our offering, we have different competitors for different products, and in particular we consider the main competitors in each segment to be:

 

   

Container Closure Systems: Schott Pharmaceutical Systems, Becton Dickinson and Gerresheimer AG;

 

   

Drug Delivery Systems: SHL, Ypsomed Selfcare Solutions, West Pharma and Becton Dickinson;

 

   

Contract Development and Manufacturing: Gerresheimer AG, Jabil Packaging Solutions, Flex, Phillips Medisize and West Pharma; and

 

   

Engineering: Syntegon, Korber, ATS and Groninger.

Marketing

We market and sell our products both directly and, to a lesser extent, through a limited number of third-party partners globally.

Our salesforce is organized both vertically, by geography (Americas, EMEA and APAC) and key accounts, and horizontally, by business activity (technical pre-sales, product managers, aftersales and business development). Our sales team, of approximately 140 employees, works closely together in each area and region to ensure a coordinated approach.

We typically establish and maintain long-standing, direct relationships with all our customers and our salesforce proactively engages with our current and prospective customers to continuously share information and

 

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evaluate their needs, so that we may tailor our solutions in real time. Additionally, we host a series of events such as our Innovation Day and Pharmapack Symposium to provide a forum for collaboration and exchange of ideas with our customers. We work with and learn from our customers, and we develop products around their needs and to address their demands.

Manufacturing, Facilities and Supply Chain Overview

Our Approach to Manufacturing

Our manufacturing approach is based on the relentless pursuit of maximum efficiency and highest quality. We implement top of the line hardware and software solutions to deliver consistent quality standards, in an attempt to minimize human impact in the production chain. Our manufacturing methods and processes, which are standardized in all of our production facilities, allow us to provide consistent products, processes and services, both in terms of quality and time to market, worldwide. Our pro-active, forensic approach to manufacturing together with our careful oversight allow us to mitigate the risk of quality issues to customers, thereby reducing additional costs for them and us. At all stages of our manufacturing process we strive to preserve the integrity of medicines and protect the safety of patients.

Our ultimate goal is to achieve “zero quality issues” by delivering products and services that never fall short of client specifications, and by operating a quality control system capable of preventing a sub-standard product from ever being delivered to our customers.

RAFT (Right At First Time) execution, respect for deadlines and flawless processes enable us to achieve very high customer satisfaction, while fostering loyalty and enhancing our reputation. Moreover, the combination of our scientific skills and engineering capabilities, which makes us a unique player in the market, enables us to minimize waste and maximizing efficiency.

Digitalization along the manufacturing chain paves the way to make processes faster and more efficient and reduce defective products. Continuing technological innovation allows us to improve process robustness and increase output. By integrating different production steps like injection molding and assembly, we have successfully eliminated intermediate stocks, thereby realizing significant cost savings.

Our glass manufacturing process consists of four main steps:

 

  (i)   Forming: the glass tubes are cut into sections to form the primary packaging. Each glass tube is diverted into forming machines and shaped through a system of flames, blown air and toolings to create the primary packaging;

 

  (ii)   Treatment: to ensure the solidity of the freshly formed glass products, they undergo a heat treatment and are cooled in a controlled way inside a tunnel furnace known as an annealing lehr. Various treatments to achieve surface protection, water-repulsion or enhanced anti-friction are available to increase the products’ resistance;

 

  (iii)   Inspection: each item is checked using various inspection techniques depending on the customer and the product. Quality controls during the production process are strict and range from visual inspection, measurement systems and other laboratory tests. Such strict quality controls are required for us to meet our customers’ requirements in terms of dimensional precision, mechanical resistance, functional features, visual aspect (cosmetic defects below specification thresholds) and chemical stability. Our inspection techniques include visual, mechanical, video and light beam technology; and

 

  (iv)   Packaging: as they leave the production line, the products enter into a clean room (ISO 8 environment) and are packaged. The products are then automatically placed on pallets and labelled to ensure traceability. Our advanced traceability systems allow us to identify defective products and recall them should that become necessary.

 

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The EZ-Fill® process for syringes, vials and cartridges includes barrel washing with “water for injection” (for cartridges and syringes there are also inner body siliconization and closure assembly, while only for syringes needle assembly and needle siliconization with silicone oil), packaging into tub, nest or tray (tray only for vials) and final sterilization. The packaging is performed through a phase of automatic nesting, tub insertion and Steribag sealing, performed in an ISO 5 environment (alternatively, for vials, trays could also be used). The in-process and quality controls for batch release are performed through specific control plans.

Our plastic manufacturing process consists of five main steps:

 

  (i)   Injection Molding: this is one of the core competencies of SG Balda and thus of our production in Germany and the U.S. At this phase, we set up the relevant mold, prepare the injection molding machine and dry and/or condition the plastic granulate, before proceeding with the production of the relevant plastic parts on the basis of pre-defined production specifications. The entire range of different plastic products is processed on the basis of validated processes. Molds allow the production of up to 128 parts in a single cycle, which can last between 4 and 30 seconds;

 

  (ii)   Assembly: injection molded components can be assembled among themselves or with rubber, glass, metal or electronic components. Assembly processes could be carried out manually, but are almost entirely automatized;

 

  (iii)   In-line Inspection: based on a risk analysis, all process steps in the value chain are validated and appropriate quality control measures are established before production starts in the industrialization phase. In the case of fully automated assembly or packaging, these test steps are integrated into the automation process. Here, optical, tactile and electrical tests are carried out;

 

  (iv)   Quality control: this is an essential part of the production process. We carry out inspections in the form of in-process controls and/or after completion controls. Different procedures such as mechanical tests (forces, torques), dimensional tests (dimensions), optical tests, etc., are carried out to ensure that only products that meet the required specifications are delivered; and

 

  (v)   Packaging: the final process step is the packaging of the product into primary, secondary or tertiary packaging. Foils, blisters or printed cardboard are used for this purpose. Instruction manuals in different languages are enclosed.

Our engineering manufacturing process consists of nine main steps:

 

  (i)   Development: at this phase, intended product use is defined by the subject-matter expert, product risks are assessed through a failure mode and effect analysis (FMEA) and documented in accordance with relevant function specifications;

 

  (ii)   Design: design of the equipment based on the FMEA is reported in a specific format, including a traceability matrix that ties back to the user requirements specifications;

 

  (iii)   Production Base: prepare necessary documentation and release specific bill of materials;

 

  (iv)   Assembly: relevant equipment is then assembled, the relevant software installed and all connections are checked and tested based on ad hoc checklists;

 

  (v)   Running-in: the equipment is completed and test plans are prepared;

 

  (vi)   Factory Acceptance Test: systematic verification with predefined test based on FMEA risk assessment for the specific design. Testing covers all relevant customer requirements;

 

  (vii)   Commissioning: the equipment is transported to customer’s facility and installed based on pre-agreed requirements and specifications set out in ad hoc checklists;

 

  (viii)   Site Acceptance Test: systematic on-site verification according to pre-defined protocol and reporting to customer; and

 

  (ix)   Closing: project evaluation and monitoring to ensure continuous improvements.

 

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Facilities Overview

Below is a full list of our production facilities divided by business segment.

 

 

Biopharmaceutical and Diagnostic Solutions

 

   

Location

 

 

Product(s)

 

   

Piombino Dese, Italy

 

 

Primary Packaging (Vials, Cartridges, EZ-Fill®)

 

   

Latina, Italy

 

 

Primary Packaging (Cartridges)

 

   

Bratislava, Slovakia

 

 

Primary Packaging (Vials, Ampoules)

 

   

Monterrey, Mexico

 

 

Primary Packaging (Vials, Cartridges, Ampoules)

 

   

Zhangjiagang, China

 

 

Primary Packaging (Vials, Cartridges)

 

   

Sete Lagoas, Brazil

 

 

Primary Packaging (Vials, Cartridges, Ampoules)

 

   

Bad Oeynhausen, Germany

 

 

Medical Devices and components for Biopharma and Diagnostics

 

   

Ontario, California, U.S.

 

 

Medical Devices and components for Biopharma and Diagnostics

 

   

Oceanside, California, U.S.

 

 

Components for medical devices, aviation and consumer applications

 

 

 

Engineering

 

   

Location

 

 

Product(s)

 

   
Piombino Dese and Bologna, Italy  

•   Glass Converting equipment and lines

•   Assembly and Packaging equipment and lines

•   Visual Inspection Equipment

 

   

Aarhus, Denmark

 

 

•   Visual Inspection Equipment

 

   
Silkeborg, Denmark  

•   Assembly equipment and lines

•   Packaging equipment and lines

 

New Indiana and China facilities

We plan to use part of the proceeds of the offering to establish new greenfield plants for EZ-Fill® products, with strong focus on biologics and vaccines, in Indiana (U.S.) and Zhangjiagang (China) (focusing also on engineering). We are considering the construction of a plant in the State of Indiana involving a capital investment of up to $145.0 million for a manufacturing facility of up to 370,000 square-foot and the creation of more than 230 new full-time positions. As part of the potential expansion of Stevanato Group in Indiana, the Indiana Economic Development Corporation offered the Company up to $2.9 million in conditional tax credits and up to $500,000 in conditional training grants based on the Company’s job creation plans. These tax credits are performance-based, meaning the company is eligible to claim incentives once Hoosiers are hired and trained. The City of Fishers, where we are considering basing the plant, will consider additional incentives of up to $1.2 million.

 

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Supply Chain

We maintain positive relationships with suppliers across our business. The types of consumables we require differ by product as follows:

 

   

Primary Packaging: our primary packaging production requires the supply of adequate glass tubes, as well as plastic and rubber components. We currently have access to adequate supplies of glass tubes to meet our production needs through agreements with four suppliers: Schott, NEG, Nipro and Corning. Schott and NEG accounted for a significant percentage of our glass tube supply in 2020. With both Schott and NEG we have in place supply and purchase agreements requiring minimum purchase quantities covenants on Stevanato Group. Under the Schott purchase and supply agreement we must notify Schott in October every year of the desired quantity to be purchased the following year. If the required quantity exceeds the minimum quantity imposed on Stevanato under the agreement, Schott approval is required. We also have access to adequate supply of plastic and rubber components.

 

   

Plastic Consumables and Parts: we currently have access to adequate supplies of plastic to meet our production needs. In Germany, most of plastic agreements are driven by the final customers, while in the United States we have a reliable supplier list, and we procure material on a single order approach. Our plastic consumables and parts business also requires the supply of molds for the production of the relevant plastic parts.

 

   

Equipment: for our engineering business we need supply of machinery components which we assemble to produce our different engineering products. We meet our production needs with an enlarged supplier base, that allows us to have multiple sources and minimize risks.

For some of the materials we use in our production cycles, including glass tubes and DuPont synthetic fiber Tyvek®, we have a limited number of (or a single-source) suppliers worldwide, and selecting new suppliers would be a lengthy and time consuming process. Despite significant supply chain pressure during 2020 due to COVID-19 related bottlenecks; we were able to avoid any major supply disruptions by expanding the number of suppliers we typically work with.

Quality control

Providing high-quality products with specificity, sensitivity and consistency, coupled with extensive product validation data are fundamental drivers of customer loyalty. Customers in our target markets are particularly sensitive to products failing to meet specifications shown on data sheets. Our success depends on our customers’ confidence in our ability to provide reliable, consistently high-quality products, which includes our ability to provide validated data to support our customers’ use of our products. In this respect, we believe that our ability to provide consistent quality standards in each of our production facilities, due to our standardized production processes, allow us to win our customers’ trust and reliance.

Biopharmaceutical and Diagnostic Solutions

All of our facilities use efficient quality control and quality assurance procedures comparable to those used in the pharmaceutical and biotechnology industries at each stage of the manufacturing process. We are certified according to applicable ISO standards. We are subject to rigorous audits by certification bodies and our customers, who perform more than 100 audits a year (other than 2020 which was affected by COVID-19 restrictions) on our manufacturing facilities. Our control procedures in our glass manufacturing facilities focus on physical and chemical characteristics, dimensional aspects and product appearance and are carried out on each of: (i) the glass tubes and raw materials; (ii) the various process phases of production; and (iii) the finished products. Along the production line and before packaging each product undergoes an automatic inspection for cosmetic defects. Defective pieces are discarded. Inspection is carried out with highly sophisticated electronic devices using specific defect detection algorithms. At the end of the production line, products are checked using statistical control procedures to test their quality for specific cosmetic, chemical, physical and dimensional parameters. Each of our

 

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plastic manufacturing facilities also follows similar quality control procedures, albeit specific to plastic production. The control procedures include dimensional and functional tests, focused on the mechanic and cosmetic features of the products. In particular, checks are carried out on each of: (i) the raw materials; (ii) dyestuff, additives and components; (iii) the various process phases; (iv) semi-finished products; and (v) finished products.

Engineering

Our quality control systems and related activities are designed to ensure that our manufacturing processes, as well as those of our pharmaceutical customers and the contract manufacturing companies we rely on comply with Good Automated Manufacturing Practice (GAMP) standards based on the GAMP guidelines issued by the International Society for Pharmaceutical Engineering (ISPE). Each individual piece of machinery / equipment is developed and manufactured as a project, and ad hoc project management tools are utilized to manage every stage and minimize risk.

Our quality activities follow a Stage Gate Model which includes the following ten stages: (i) quotation: based on customer’s needs (URS—user requirements specifications); (ii) start-up: intended product use is defined by the subject-matter expert (SME), product risks are assessed through a failure mode and effect analysis (FMEA) and documented in accordance with relevant function specifications; (iii) design: design of the equipment based on the FMEA is reported in a specific format, including a traceability matrix that ties back to the user requirements specifications; (iv) production base: prepare necessary documentation and release specific bill of materials, whose accuracy is assessed based on ad hoc checklists; (v) assembly: all components are sourced from approved suppliers and subsequently checked ahead of distribution to the assembly line. The relevant equipment is then assembled, the relevant software installed and all connections are checked and tested based on ad hoc checklists; (vi) running-in: the equipment is completed and test plans are prepared; (vii) FAT: systematic verification with predefined test based on FMEA risk assessment for the specific design. Testing covers all relevant customer’s requirements; (viii) commissioning: the equipment is transported to customer’s facility and installed based on pre-agreed requirements and specifications set out in ad hoc checklists; (ix) SAT: systematic on-site verification according to pre-defined protocol and reporting to customer; and (x) closing: project evaluation and monitoring to ensure continuing improvements.

Logistics

Our products are delivered to our customers using various third-party freight, haulage transportation and warehousing providers. Each manufacturing facility has its own logistics team that is responsible for managing product storage and delivery accounts.

Shareholder Agreement with SVM Holding ApS

In 2016 we purchased, through our wholly owned subsidiary Stevanato Group International a.s., 65% of the issued share capital of SVM Automatik A/S. In connection with the transaction, Stevanato Group International a.s. and the seller, SVM Holding ApS, entered into a shareholders agreement to govern the co-operation between them in the period of joint ownership of the company. The board of the company is comprised of five members, three of which are appointed by Stevanato Group. Material decisions require the favorable vote of at least one of the directors appointed by the minority shareholder. Pursuant to the shareholders agreement, Stevanato Group International a.s. has a call option and SVM Holding ApS has a put option on the remaining 35% of the issued share capital of SVM Automatik A/S, respectively.

Intellectual Property and Information Technology

Intellectual Property

Our products, both in the Biopharmaceutical and Diagnostic Solutions and in the Engineering segments, are highly sophisticated and based on the development of specific know-how, processes and procedures. We actively

 

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protect our intellectual property rights and know-how through patents, trademarks and trade secrets. The technology behind our core products and processes is protected by 48 patent families, the most important ones being those devoted to the protection of the EZ-fill® solutions, the pre-sterilized drug containment solutions for aseptic manufacturing.

Our most distinctive brands are also protected via registered trademarks, the most important being: (i) SG-toothed wheel logo, (ii) EZ-fill®, (iii) ALBA® (relating to advanced drug containment solutions for optimized drug-containment interaction), (iv) EZ-be Pod® (relating to wearable injectors), (v) Alina® (relating to pen injector devices), and (vi) NEXA® (relating to superior drug containment solutions for mechanical resistance and cosmetic quality).

Information Technology

We have implemented, and maintain, various IT policies to protect the Group’s information and IT infrastructure. In 2017, we began our digital transformation to facilitate the Group’s growth in a globally competitive market. Our goal is to further improve, expand, and develop our digital ecosystem through 2021 and 2022. To date, we have:

 

   

migrated all users to the cloud-based Microsoft Office 365, which includes advanced threat protection and data loss prevention functionalities;

 

   

begun integrating all Group’s business divisions into the cloud-based enterprise resource planning system, with the aim of completing such integration by the first quarter of 2022; and

 

   

launched a “data factory” data intelligence solution based on Microsoft Synapse technology, providing business intelligence data.

Through 2021 and 2022, we intend to implement:

 

   

a secure digital work platform;

 

   

a fully integrated enterprise resource planning system for the whole Group;

 

   

cloud-based IT infrastructure through Microsoft Azure and Amazon Web Services; and

 

   

cutting edge digital and intelligence solutions.

Our IT infrastructure is hosted by Telecom Italia in a data center in Padua and is backed-up in Bologna. The Padua and Bologna data centers are connected to Amazon Web Services and Microsoft Azure cloud networks, based in Frankfurt and Dublin respectively. Our Group companies are connected to the data centers through multiprotocol label switching networks.

We have also implemented a cybersecurity improvement program to strengthen our existing IT security, foster greater cyber resilience of our IT systems, and improve our business continuity and disaster recovery procedures. As part of our cybersecurity improvement program, we have:

 

   

begun the process of documenting in writing our IT security processes and procedures;

 

   

implemented Palo Alto Networks’ Prima Cloud security platform to secure our cloud environments; and

 

   

reviewed our procedures in relation to quality and compliance requirements.

We will continue to further strengthen our cybersecurity program in 2022. We are not aware of any material cybersecurity incident over the past years, nonetheless we are also evaluating cybersecurity insurance options. For a description of the cybersecurity risks we may be facing see “Risk Factors – Risks Relating to our Business and Industry – Cyber security risks and the failure to maintain the confidentiality, integrity and availability of

 

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our computer hardware, software and internet applications and related tools and functions, could result in damage to our reputation, data integrity and/or subject us to costs, fines or lawsuits under data privacy or other laws or contractual requirements.

Research and Development

Research and development investment is a fundamental component of our growth and continued success. Our research and development team comprises more than 100 highly skilled and specialized employees operating in Italy, Germany and the United States of America.

The goal of our research and development effort is twofold: (i) to facilitate the transition from hospital to home care; and (ii) enabling biologics to reach the patient safely by meeting the most critical quality and performance requirements.

We pursue these goals by investing in both the Biopharmaceutical and Diagnostic Solutions segment (with the exception of in-vitro diagnostic products in relation to which we do not conduct research) and the Engineering segment. In 2020, for instance, we invested €17.4 million in research and development, a portion of which toward setting up a new laboratory in Boston, MA.

Our Biopharmaceutical and Diagnostic Solutions research mainly focuses on DDS patient-centricity, sustainability and digitalization and improvement of CCS production processes and coating systems. In this segment we conduct our development activities both autonomously and, to the extent our customers require specialized or customized products, in close cooperation with them. We are most frequently asked to produce specialized or customized products by our pharmaceutical and biotechnology clients (in both glass and plastic).

In particular, in the area of containment solutions, the development of new products will be targeted at maintaining the stability, potency and purity of our customers’ products prior to administration. New therapies for diabetes, cancer treatment and auto immune diseases are based on large, complex bio molecules that are extremely sensitive to their storage environment. In the area of drug delivery systems, we will be targeting the development of easy-to-use, accurate, reliable self-injection systems for complex pharmaceutical and biotechnology products. We have developed a portfolio of devices for this market that can be used off-the-shelf or customized to the specific needs of the customer.

We will continue developing new drug delivery systems based on three pillars: patient centricity, sustainability and digitalization, core capabilities to meet our customer’s need for connected health devices. We apply a rigorous “stage&gate” development process, which de-risks our development projects and reduces total development costs. Development timelines for new drug delivery devices typically fall into the range of four to five years to reach the start of initial production. We cooperate with third parties on joint development projects. Pursuant to the relevant joint development agreements with these third parties, we either own, or are entitled to co-ownership of or license rights to, the intellectual property rights developed in connection with these programs.

Our main focus in Engineering is on maximizing our machine performance while reducing total cost of ownership. Further, we are broadening our portfolio of products, processes and services with the aim of creating a stable platform able to minimize planned and avoid unplanned downtime, and developing and integrating artificial intelligence into our machinery.

In certain research areas, including chemical-physical and morphological characterization of glass surfaces and interactions with drugs, we cooperate with Universities such as Ca’ Foscari University (Venice, Italy), Federico II University (Naples, Italy), the National University of Ireland Mynooth (Ireland) and the University of Trento (Italy). Pursuant to the relevant cooperation agreements with these Universities, we either ow