Gerresheimer AG
XETRA:GXI
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Gerresheimer AG
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The conference is now being recorded. Welcome to the conference call regarding the publication of Gerresheimer AG's Q2 Results 2020. [Operator Instructions]. Now I hand over to Mr. Jens-Philipp Briemle, Head of Investor Relations at Gerresheimer AG.
Welcome, ladies and gentlemen, and thank you for joining us to review our second quarter results 2020. With me today are Dietmar Siemssen, our CEO; and Dr. Bernd Metzner, our CFO. As we did in the past, we are presenting a set of slides to accompany our remarks on this conference call. The interim report, the slide presentation and the press release are posted on the Investor Relations page. Please note that this call is being webcast live and will be archived on our website. Before we start, I would like to remind you that the presentations and discussions are conducted subject to the disclaimer. We will not read the disclaimer, but propose we take it as read into the records for the purpose of this conference call. Our agenda today starts with the presentation by Dietmar Siemssen and Dr. Bernd Metzner. After that, we will enter into a Q&A session. Now it is my pleasure to turn the call over to Dietmar Siemssen.
Yes. Thank you, Jens-Philipp, and good afternoon, ladies and gentlemen, also from my side. Good morning to those of you joining us from the U.S. Welcome to our Q2 results conference call. I hope everybody is healthy and doing well in those times. Today, I will give you insights in our second quarter as well as our -- an update on our progress of implementation of our growth strategy. Bernd is sitting next to me and the smile on his face looks promising for his presentation on the financial results. Afterwards, we will talk about the following 6 months of our fiscal year 2020 and the growth perspectives after COVID-19. So let's start. A key message right at the beginning, despite the COVID-19 challenges, the dynamic in our company is unchanged and the strategy implementation is well underway. Now in the second quarter, the growth levers are bearing results. We are accomplishing growth mode. The first results are now visible. Notwithstanding COVID-19, we focused on our growth projects, invested in additional capacity, in quality, excellence and digitalization. And we will continue to do so. Our business has proven robust. COVID-19 brings additional opportunities for us, our Gerresheimer is on a profitable and sustainable growth path. Reviewing the results of our second quarter, we are on track and stick to our targets. Q2 was our -- was a growth quarter. The solid growth in our pharma segments clearly overcompensated the COVID-19-driven temporary headwinds we are clearly facing in certain parts of the cosmetic business. We are on plan and delivered revenues of EUR 363 million and an adjusted EBITDA of EUR 84 million. The strong cash flow or free cash flow of EUR 45 million reflects excellent earnings quality in the second quarter. We feel rather comfortable with our liquidity position strengthened by the fact that we already secured the refinancing of our promissory loan maturing in November 2020. Alongside pursuing our growth targets, we also intend to remain a reliable dividend partner. That's why it was important to us to stick to the date of our Annual General Meeting which took place on June 24. This timing and the still ongoing limitations due to the pandemic led to the fact that we decided to hold the Annual General Meeting virtually, a new experience to us, which worked out very well. It actually opens new opportunities to involve investors and shareholders in a digital way. More than 86% of the capital stock has been represented, voting in favor of all agenda items with high majority, including another year of dividend raise now up to EUR 1.20 per share. Leveraging on the chances and opportunities of the pandemic, we are clearly aware of our responsibility towards our customers and not to forget have a crucial role to ensure delivery of much needed medication for millions of patients worldwide. We're handling the challenges of the pandemic successfully. All our plants are running to ensure business continuity. Beyond that, we are preparing our Gerresheimer for the day after tomorrow. What started as managing the pandemic, meanwhile, also offers new opportunities despite or even because of COVID-19. We see opportunities deriving from the long-term developments in global vaccinations, increased patient compliance as well as from a growing interest and demand of health care products, in general. The challenges we are facing in our cosmetics business, primarily in the area of high-value perfume packaging, are compensated by growing pharmaceutical packaging and drug delivery devices. But we see these impacts as -- on the cosmetic packaging as temporary, expecting recovery over the next quarters. Let me now elaborate on growth prospects we see in our vial business. It is important to underline that we support the COVID-19 vaccination or also medication campaigns of our customers in close cooperation. And of course, we are preparing for the delivery of the needed volumes of vials, no question. The vial business is important for Gerresheimer. We see promising growth not only from a potential vaccination to COVID-19, but also in a higher patient compliance for future medication and an overall higher demand for vaccinations. We believe a vaccine for COVID-19 will expand the global vial market by around 2 to 2.5 billion units in single or also multi-dose vials over the next 2 years. We are expecting to serve at approximately 1/3 of this volume. Thus, we see a clear tailwind in sales for our vial business in both '21 and also '22. The supply chain for glass tubes is intact, and we have already secured our suppliers in order to ensure availability and delivery. With the expansion of our glass-converting capacities in 2019 and with the planned extension in 2021, we will be able to serve this worldwide demand. Beyond the short-term opportunities in vials due to the COVID-19, we are continuously working on solutions to further expand our product portfolio and the acceleration of the growth in our vial business. Midterm, we see significant opportunities from product innovations, such as Elite Glass and RTF, or ready to fill, vials. Our Elite Glass vials are highly break-resistant, extremely durable and its high resistance to delamination offers a perfect solution for highly demanding formulations like many of the biological drugs or biosimilars. And important to mention, Elite Glass vials have significantly reduced tolerances. This cuts the total cost of ownership while improving quality. The filling line speed at our customers can be increased by up to 25%. Our Elite Glass vials are available on the market, and we are supplying several customers today -- or we are starting today. We will see meaningful sales effects in the second half of 2020. With our ready-to-fill vials, we are expanding our value chain, taking over the washing, sterilization and packing of the vials for our customers, a portion of the value chain that fillers do not see as core. The fact that these process steps are now included into our product offerings opens clear advantages to our customers. As for example, reduced investments into machinery, less manpower, safety stock or reduced process timing. Most of the biological drugs that are usually filled in smaller lot sizes are already today filled in ready-to-fill vials. Let's come to Chart #7, our 3 growth enablers. The 3 growth enablers, strong mindset for growth, investment program and innovation, are building the basis for accelerated growth and have to be continuously evaluated, adapted and boosted. With regard to the 3 dimensions of growth levers, we have implemented further initiatives and measures within our strategy progress in the second quarter. The underlying target market in pharma performed very robust in second quarter. We improved the utilization of our molded glass capacities by an optimized global production planning. We have seen further tailwind in plastic packaging due to higher demand for over-the-counter drugs as well as hygiene products. Looking at growth segments. I would like to point out that the focus as well as the rollout of our investment strategy is unchanged, even in pandemic times. In Asia, we are ramping up 2 new facilities for plastic packaging. In India, we secured business continuity, which was intense work -- or still is intense work due to the COVID-19 in the second quarter. But India is becoming increasingly important for us. Our plastic packaging production in Kundli, near New Delhi, is performing very well. Now we already -- or now we have a second plant for these products in the west of the country where we already run 2 glass pharmaceutical packaging plants. This will enable us to better meet the large countries' growing demand for our products. Biotech is a highly promising and fast-growing market. A large proportion of new drugs are biotechnology manufactured. Typically, these are parenteral medications, meaning that they must be administered by injection or infusion. The molecule structure is very sensitive and also aggressive, requiring highly specialized primary packaging and products to ensure simple, safe administration of these drugs. Our GX biologic solutions setup precisely meets the need of this special customer group. The unit brings together our know-how, experts, services and product portfolio in a way that is individually tailored to biotech companies. Our products and services allow small- and medium-sized biotech companies to focus on their core competencies, developing new drugs. We offer consulting services on their respective product requirements during different clinical phases, support customers with regard to regulation and approval as well as provide laboratory services. We have brought all this together in a new team that is able to draw on Gerresheimer's resources worldwide. Our Primary Packaging Glass looks strong, also guiding mid-single-digit growth. The tubular glass business is expected to show solid growth, and we estimate a recovery in our cosmetic business. Opportunities due to COVID-19 are coming up, as mentioned, especially in supporting future vaccine campaigns with our products. But we have to see how much of this is really contributing already in 2020. I actually expect most of it more to be visible in '21 or '22. Worth mentioning in the positive development of our micropump project with SQ -- is SQ Innovation. The project is on schedule, and we hope that the clinical trials can be completed before year-end.[Foreign Language] Wait a second. I would say, it makes sense that I hand over to the financial presentation to Bernd.
Thank you, Dietmar, and welcome to everybody also from my side. As you will see on the next few slides and already mentioned by Dietmar, despite COVID-19, we delivered the promised turnaround of our growth story. Now let's go into detail.Revenues in Q2 2020 came in at EUR 363 million from EUR 357 million in Q2 2019, resulting in a quarterly organic growth in our core business of plus 4.6%. This includes the mentioned COVID-19 onetime effect of about EUR 8 million in our cosmetic business. If you exclude this, the quarterly growth rate would have amounted to 7.1%, and shows our real underlying performance. The numbers of our core business exclude advanced technologies, which is, as you know, our innovation driver and investment case with negligible sales today, but huge sales and earnings potential.Let us turn to EBITDA. Without considering EUR 26 million in connection with the derecognition of contingent purchase price components from the acquisition of Sensile in Q2 2019, the adjusted EBITDA increased significantly from EUR 74 million to EUR 84 million. Organically, that means if it's adjusted and without taking the approximately EUR 2 million positive effect from the first-time application of IFRS 16 into account, this represents an excellent growth of 6.9%. In our core business, we grew organically even 13.7%.Summarizing that, 2 aspects needs to be highlighted. First, we delivered on our promises and turned into growth mode despite COVID-19. Second, our business is very robust and the impact of COVID-19 on parts of our cosmetic business, especially perfume flacons, need to be seen as temporary events. We are convinced that we will get out stronger of the pandemic than as the cosmetic division has been before.Below EBITDA, 2 further aspects in the P&L statements are worth mentioning year-over-year. First, one-off effects amount to around EUR 5 million and relate mainly to the COVID-19 pandemic to keep our business up and running as well as restructuring costs. Second, amortization declined due to the extension of useful life of Sensile's core technology. In the end, our adjusted EPS development summarizes our Q2 performance very well, 13.5% increase year-over-year. In other words, a strong second quarter.Let's now have a closer look at the performance of the single divisions in Q2. Plastic & Devices. Revenues increased strongly from EUR 188 million to EUR 201 million and the adjusted EBITDA from EUR 47 million to EUR 56 million. Analyzing this on the back of our resurgent Centor business, the very strong growth in Q2 has been driven by medical devices, plastic packaging and syringes. The Plastic & Devices division showed an organic revenue growth of 9% year-over-year. And the adjusted EBITDA margin improved to 27.9% on the back of an organic adjusted EBITDA growth of 16.3%.Primary Packaging Glass. Revenues remained flattish at EUR 162 million while the adjusted EBITDA increased from EUR 32 million in Q2 2019 to EUR 38 million in Q2 2020. Zooming into the analysis, the COVID-19 onetime hit in the cosmetic business of around EUR 8 million is masking our otherwise good performance in PPG. Without this COVID-19-related cosmetic hit, we would have demonstrated a good organic revenue growth of about 5%. In the end, the strength of our pharma and food and beverage business could almost entirely compensate our temporary negative impact in our cosmetic franchise.The adjusted EBITDA margin increased to 23.3% on the back of an organic adjusted EBITDA growth of 8.8%. The expansion in the adjusted EBITDA margin in Primary Packaging Glass was driven by our ongoing efficiency improvements, lower energy costs and an insurance compensation of EUR 2 million in the second quarter. This insurance compensation has its root cause in the furnace leakage in Chicago in Q3 2019 and, worth to be highlighted, mainly compensates for lost revenues. Rule of thumb, EUR 3 million lost sales leads to EUR 2 million insurance compensation and constitutes technically other income instead of sales.A few additional words on Advanced Technologies, Sensile. First, Advanced Technologies is an innovation driver by developing intelligent drug delivery systems and steered as a long-term investment case. Worth noticing, all the potential benefits of Sensile are not included in our midterm guidance or put differently, Sensile is financially a very promising call option for us.Second, as you know, end of last year, we changed our revenue model. Instead of getting reimbursed for the development costs from PharmaCo, we prefer to get a higher portion of the revenues from our PharmaCo partners instead. In other words, we evolved from a contract developer for PharmaCo to a revenue-sharing partner of PharmaCo.Third, the development of our micropump for chronic heart failure treatment with SQ Innovation is on track and we enter into a new phase, as explained by Dietmar.Fourth, notwithstanding of the investment case, the negative adjusted EBITDA has slightly improved to minus EUR 3 million from minus EUR 4 million in Q2 2020. We expect around EUR 5 million revenues and between EUR 10 million to EUR 15 million negative adjusted EBITDA contribution for the full year 2020.Let me now highlight the main points on the cash flow development on the next slide. Our free cash flow of EUR 45 million shows an excellent cash conversion and earnings quality for Gerresheimer clearly outperforming Q2 2019 when the free cash flow amounted only to EUR 3 million. This outperformance is mainly triggered by strong revenues and, as a consequence, a very good adjusted EBITDA number in our core business.The net working capital reduction of EUR 23 million is based on operational performance, but also got supported by additional factoring in the amount of EUR 15 million. Factoring is financially attractive for us, often requested by our customers and improves our net debt. Furthermore, we had tax refunds in Germany due to high prepayments in the past. Why is this? Actually, we could make use of more than 10-year-old net operating losses from good old Gerresheimer times and turn them into a cash tax refund.With regards to tech CapEx, we have an investment program for 2020 in place, planning to invest around 12% of revenues. With about EUR 31 million CapEx spend in Q2 2020, we are implementing the CapEx projects almost according to plan. The big bulk of our investments in 2020 are yet to come and will include as well expansion CapEx to cope with the expected additional demand for vials.Let me now elaborate a bit more on the financial position of our company. We improved our leverage even in times of COVID-19. As you can see, our net financial debt, according to the credit agreement in force, decreased by EUR 41 million to EUR 976 million. The adjusted EBITDA leverage calculated as net debt to adjusted EBITDA decreased from 3.4x at the end of Q1 2020 to 3.2x as of end of May 2020, accordingly. Important to note, the financial covenant for our revolving credit facility stands at 3.75 at the moment, which gives us financial headroom in the amount of about EUR 175 million.As shown in the maturity schedule on the left -- lower left, we will have to refinance about EUR 190 million promissory loan by November this year. The bridge loan agreement has been signed on April 22, 2020, securing the repayment of the promissory loan of EUR 190 million. The bridge loan agreement has a term of up to 2 years. So we are highly flexible in choosing the right refinancing window, and we have a comfortable financial headroom. The fact that we have been able to secure our repayment so easily and cost-efficient in pandemic times is a clear sign of balance sheet strength, reflects our proven and resilient business model and trust in Gerresheimer.Before I hand over now to Dietmar, we would like to thank Jens-Philipp for the past year at the helm of our Investor Relations department. As most of you know, Jens-Philipp is leaving for personal reasons. Jens was doing a great job. The Board wish you all the best for your personal and professional future. Thank you, Jens, in the name of the Board of Management. Jens will be succeeded by Carolin Nadilo, who joined us a few months ago. We are very happy to have her on board, bringing in especially strong experience in banking and trading. So Carolin, welcome in your new position. With this, I hand back to Dietmar.
Yes. Thank you, Bernd. I'll do a short summarizing of the progress made actually in the second quarter. The implementation of our growth strategy is well on track. The dynamic in the company is actually very high and comprehensive projects and initiatives are executed along our journey. With this, let's take a look into the next months, especially the second half of 2020. We expect our plastics and device division to continue its actual solid performance. We are running on schedule and expect mid-single-digit growth, as announced. The medical devices as well as the syringes business are expected to contribute decisively to further growth. Our new plant in Skopje is on schedule and will start production this summer.Primary Packaging Glass looks strong, also guiding mid-single-digit growth. The tubular glass business is expected to show solid growth, and we estimate a recovery in our cosmetic business as well. Opportunities due to COVID-19 are coming up, as mentioned, especially in supporting future vaccine campaigns with our products, but we have to see how much of this really contributes already in 2020. As mentioned before, I expect most of it may more to be visible in '21 or '22. Worth mentioning is the positive development of our micropump project with SQ Innovation. The project is on schedule, and we hope that the clinical trials can be completed before year-end.We stick to our commitment and confirm our guidance for fiscal year 2020. We stick to our plan to deliver growth for Gerresheimer in this year. We are 100% dedicated to deliver our story, bringing our Gerresheimer onto a sustainable profitable growth path. Thus, we also confirm our midterm guidance. For the adjusted EBITDA margin, we confirm the 21% goal for 2020 as well as the steady increase up to 23% midterm. Our investments into growth projects, capacities, new products and digitalization are essential for our growth plans and will be at some 12% of revenues in 2020.To sum it up, the fiscal year 2020 is the turning point in terms of growth, and we are on track to deliver according to our plan. We are prepared for the time after the COVID-19, we take the opportunities and the learnings out of the pandemic in order to make our Gerresheimer even stronger and better than before. Our Gerresheimer long-term profitable growth journey has successfully started and I'm very happy about this.With this, I hand back to Jens-Philipp and look forward to your questions. Thank you.
Thank you, Dietmar and Bernd. I now hand over to the operator, and we can start with the Q&A session.
[Operator Instructions]
If someone is raising a question, we actually can't hear anything that's why we are so quiet about it.
No. We're not there yet. We were just waiting for the question to be registered.
Okay.
So the first question is from Veronika Dubajova, Goldman Sachs.
Dietmar and Bernd, can you hear me okay?
Excellent.
Very good.
Very good. Excellent. I will keep it to two. If I can start, my first question is with the -- kind of on the full year margin guidance. In particular, if I look at the first half performance and historically, your second half margins tend to be quite much better than the first half and, of course, in the second quarter this year, you've also had the drag from the cosmetics. Just curious, why you are not raising the margin guidance for the full year. Are there risks or concerns or headwinds that you see as you head into second half? If you can help us understand your thinking on that, that would be very helpful.And then my second question is thinking about, Dietmar, your very helpful comments on the second half expectations, in particular, when it comes glass and the mid-single-digit growth rate. What's your degree of confidence in achieving that? And to what extent does that depend on the recovery of -- in cosmetics versus the kind of underlying business? I guess if you can just help us understand what risks do you see to that mid-single-digit growth rate for glass in the second half of the year, that would be helpful.
Maybe just, Veronika, to tackle your first question regarding the margin. And in the end, it's indeed, we delivered a very strong quarter in terms of EBITDA. And as you know, we beat the consensus massively on this end. And we are also positive for the margin development in the next couple of quarters. However, we never want to overpromise and underdeliver. And therefore, we'll look carefully on it again on Q3, if we see the numbers there, and then we'll make an update where we stand with our Q3 release. However, there's nothing in particular what keeps us worried as far as EBITDA is concerned.
Yes. Thank you, Bernd. I'd take over the second question with the prognosis and the cosmetic, yes. Let me answer in the following way. I think take the cosmetic aside, the businesses are all very -- running very smoothly. That's a fact. The cosmetic, will the recovery be very fast or is it a slow recovery? It's hard to predict. What we see at the moment is first positive impulses, but that does not absolutely guarantee that cosmetic will be back in -- on -- fully on track at the fourth quarter already. We believe that the guidance we gave to the market will be fulfilled. Yes, that's the point, what we see -- even though we may see -- take some further hits in the cosmetic.
Okay. That's very helpful. And if I can follow up just on the margin comments, Bernd, that you made. Anything unusual that would have particularly flattered the margin in the second quarter? I guess I'm just trying to understand if there is anything extraordinary that we should be looking at in the Q2 performance with a bit of caution? Or just you're being cautious about the guidance, but fundamentally, the second quarter gives us a pretty good picture of where the business is headed?
No, no. I'm -- basically, if you look at our second quarter, I mean you definitely had in PPG somehow the part of EUR 2 million energy costs, maybe more or less in this magnitude. And don't forget the insurance compensation, which we're having at EUR 2 million. And each quarter, we have basically a discussion with the insurance company how much we get basically compensated from the insurance because of lost revenues. That's a little bit what you need to see in the numbers. Other than that, this is really our underlying performance in our business, and we think also that we will continue accordingly. You could expect that you will be basically -- and this is what we are saying, going in line with the margin development of last year. In this kind of magnitude, this is what we -- this is actually what we see as far as the EBITDA line is concerned for the next 2 quarters.
Understood.
Veronika, just want to come back to your second question regarding cosmetic, and we debated this intent, as you can imagine, the part, how you would see this. And obviously, if you look for the next 6 months, it's basically also back-end loaded because it's clear we see that cosmetic gets better. We have the first indications, but it will last into the fourth quarter, and that's something what you need to see also if you see the pattern over the quarters and the performance pattern in -- over the quarters, that's obvious. Okay. Any additional question, Veronika?
No. I'm all set.
The next question is from Falko Friedrichs, Deutsche Bank.
I would have three questions, please. Firstly, a question on the sales guidance for this year. The mid-single-digit sales growth, does it still relate to the whole company? Or is it excluding the Advanced Technologies segment now? Or putting it differently, is the sales guidance only achievable for the core business in your view?And then secondly, on the strong growth in your Plastics & Devices segment, was some of this growth driven by larger stocking effects that your pharma customers experienced ahead of the lockdowns? Or would you say this didn't really affect your growth very much?And then thirdly, on your CapEx needs in 2021. As you shift some of the investments into next year and are also ramping up capacity for glass vials, do you feel comfortable that you can stay in your 8% to 10% of revenue range that you communicated?
Yes. Thank you for your questions. Yes. To the sales guidance, very clearly, this is all-in. If you only take the core business, that would be -- that would easily fulfill the guidance, but also the whole business, we are planning to be within the guidance. The strong plastic and device second quarter stocking effect, I was afraid actually that much more of this would be stocking. But meanwhile, we see that only a certain portion of it actually was stocking less than 30%. So actually, these businesses are running strong. Maybe 9% is really, really strong, but they are still running strong, and we are positive with this.The CapEx guidance for '21 is a bit more complicated because you have both effects. You have on the one side, certain things that are delayed. So they are moving over from '20 into '21, which will increase the '21 CapEx. But on the other side, we're also pulling certain things ahead. And the truth is I can't answer perfectly because we haven't finalized our plannings for the budget next year.
Maybe if I could just step in, too. What we do, and this is the normal process. We're collecting all the ideas for the next years, and we have a new strategic plan for the upcoming 4 years, and we will discuss and debate this in October, November and take a final decision where to invest into. And before that, it's not that possible to make a reasonable statement about this 8% to 10%, but this is the guidance out there, and there's nothing to change because we have this totally under control because we are basically making the CapEx. And this decision will be taken then in November and communicated then in February with our plan into next year or on our Capital Markets Day.
Ideally, we have more positive stories for the long-term guidance, and that will positively impact the CapEx or, in your view, negatively.
Okay. Perfect. If I can briefly follow up on this. Do you expect to receive certain amounts of funding from government authorities for those investments you're making for the production of vials for the vaccinations?
We have actually started to stretch our fingers in that direction but at the moment, I'm not overly positive. But maybe, Bernd is. He's so eager to get some money from this side, so maybe he can answer that.
No. No. Falko, indeed, we have looked at it and we are trying now in a very structured way to look at all the areas where we could get funding from because what we see also in other competitors and so on, they get easily it seems -- easily the money. And this is something what we need also to look at definitely. But one, you can be assured, we really look at it carefully, and let's see what will be the outcome. But we didn't plan this. By the way, we did not plan to get the funding from the government now.
The next question is from Scott Bardo, Berenberg.
Congratulations on the results. I'd like to focus on the COVID vial opportunity, which I think you've been describing more both in the media and with those press releases. You've been quite granular, Dietmar, on an expectation for a couple of billion, 2 billion, 2.5 billion additional vials surrounding any potential COVID vaccination. And I wonder if you can help us understand what is informing this decision? Is it -- or this view? Is it a best guess or are you now seeing concrete orders or expressions of will from customers?Second point on this, please. I just want to understand a little bit better to get a sense of perspective. I think you mentioned that you should uphold around a 30% share of this said opportunity. My understanding was that vials that you sell are only relatively cheap, a couple of euro cents or so. So that being said, if you're making, say, EUR 400 million a year, are we talking the prospective of about a 1% incremental group growth, so 6% rather than 5%? I'm just trying to get an understanding of how meaningful this may be to the business.Last question, please, on this. Obviously, it's interesting that you're building out the higher-value products, both ready-to-fill syringes and ready-to-fill vials. How quickly can one scale up those sorts of premium solutions such that you can confer favorable mix? Is there any opportunity to do that amid this COVID crisis?
Yes. Thank you, Scott, for the questions. I'll probably just elaborate a little bit on this COVID vial potential. And you -- if I leave some questions open, you just jump in again. The following situations in -- the world market -- this 2.2 billion, 2.5 billion vials is actually a demand for the total world. Why is this actually? Because you might say that we need 4.5 billion to 5 billion vaccination shots in the end. But the most limitating factor is actually not the glass vials, it's actually the capacity of the fillers. So as the filling capacity is not so big, the customers or the potential producers of the vaccination have decided not into just single-dose vials, but also multi-dose vials. That resulted in this 2 billion to 2.5 billion additional vials.And the other aspect, you're also right, why are these Gerresheimer guys coming up with 1/3? That is a very realistic figure because there are more or less 3 key players of -- that would be able to deliver these additional volumes. And according to their capacities, even with additional invest, they will serve roughly 1/3 of these volumes. And I -- it's not just a dream anymore because actually, most of the orders are already in the books and negotiated with the customer, so it's done.Where you're also right is that the price levels -- if you tell my customers they are cheap, I would appreciate this. But the price level of the vials at the moment are, it's up to the size, of course, in between EUR 0.04 and EUR 0.07, so you can build something in between. Leading -- you are right. If it's EUR 400 million, and we take EUR 0.04 for the vial, it's EUR 12 million, maybe EUR 15 million sales on top, and you can do your own math what this means to the company. That's why I say so often, it is important to take this and I'm happy to take this business, but this is not our growth story. The growth actually comes from the solid growth path we brought the company on to.The third question also is linked to this because, of course, the question, how fast can you build up additional capacities for ready-to-fill? It's both the glass side and the investments that we've done in '19, we are doing in '20 and also '21, will help us to serve these COVID-19 vials. But I would not invest a lot of money just for the COVID-19 and not use these machines anymore 2 years later. It's because we are really seeing this growth coming for both normal vials, but also for the ready-to-fill vials.On top of this glass forming, of course, I need the washing, sterilization and other stuff. And here, we have started to invest. We built up capacities in Mexico, Querétaro, but also in Bunde, Germany. And for the time being, my problems would not be the capacity in this regard, but getting the sales in, which we are doing as we talk at the moment. And as there's more sales, I will be able to invest more. I hope that...
It's very helpful. Sure. And maybe just one quick follow-up, please. Can you communicate how many vials you're actually manufacturing today? Is that something you can share? And we noticed that the U.S. government or the U.S. Biomedical Advanced Research and Development Authority have awarded quite meaningful contracts, a couple of hundred million dollars to Corning for pharmaceutical-grade Valor glass and also $140 million to another syringe manufacturer. So the underlying nature of this question is, could this crisis actually be giving fuel to nationalism and seeding potential future competitors to Gerresheimer acting as some sort of negative? If you could share some thoughts there, that would be helpful.
Maybe to the first part because that's pretty easy. And we are actually producing roughly 3 billion vials a year. And the total market is, let me say, some 10 billion world market. And there are 2 others that are also producing roughly 3 billion, and then the others are smaller and minor. This increased nationalism is something we monitor very closely in the end. I would not -- I'm not appreciating this at all, but I don't think that this will really risk the business of Gerresheimer because we are really benefiting from our global footprint. We would, today, absolutely be able -- and we are doing this, serve the U.S., serve China, serve Europe. We are, today, already producing in the region for the region. And we actually benefit from this. If you look in the last months, in the COVID times, we absolutely benefited from the fact that we are producing in the region for the region and by the way, also receive our suppliers in the region for the region. We were never confronted with the fact that some airports were closed or the airplanes were not going because we're never using this kind of transport.
And the next question is from Aliaksandr Halitsa, H&A.
I have for you two questions. First one on the gross margin. If you can explain the driver -- the main drivers behind the 4 percentage points increase, is it more structural volume price? Or has there been any other moving parts to it?And the second one, maybe if you could add any color with regards to Gx solutions unit that tackles biotech in terms of -- you mentioned that you already collaborate there with companies. Any color on how many projects or how many potential drug candidates are you collaborating on? If you could add any color around those topics, it would be appreciated.
Just taking your first question regarding the gross margin, in the end, you could say that it's a mixture, the growth between volume, price, but also product mix, especially if you compare this to Q1, for example. I mean if Centor -- especially if you look at plastic and devices, if Centor had a strong quarter like you had now in Q2, you also see this nicely in the margin development. So basically, it's a mixture. And my gut would tell me, okay, 1/3 is basically volume. 1/3 should be basically volume price -- volume as a, let's say, product mix and 1/3 should be priced something like this, like maybe a little bit less price, but that could be -- that's one of the explanations for our good performance in the second quarter.
Yes. Then I take the next question. Yes. You have to see that the way we structured our Gx biological solution, we only do since a couple of months and the results are actually visible. It's not a total game changer immediately that you booked EUR 30 million here and EUR 50 million here, it's smaller amounts because most of the biological smaller companies actually are smaller lot sizes. But we are very successful. I'm very proud on this team because we have smaller contracts with completely new customers. There's EUR 1 million here and there's EUR 2 million here, which this -- each and every of the orders are not working as a game changer, but the total amount will in the end be very beneficial for the company. And we also have to see that some of these drugs might move in the direction of more blockbuster, and then we will benefit more from this.
Okay. Understood. And then maybe just the last one on these insurance claims. You mentioned that the one in the U.S. has to do with the results you report or with 2019. What is it about this fire in the warehouse? Has this been the case in 2020? Or is it also stems from past year?
The things for this question, it seems from this year, from April, actually, what happened there basically, part of our inventory was burned to -- was basically burned, and we get a compensation for that. So from a pure picking point of view, you have to have a depreciation, but being negatively impacting EBITDA by around EUR 2.5 million or so, and this was compensated 1:1 by the insurance. This happened in May, May, April this year, and basically, it's neutral for our P&L line of the EBITDA.
And we have another question from Scott Bardo, Berenberg.
Sorry guys. Can you hear me okay? Sorry, I was on mute. Yes. Just a real quick one on financials for Bernd, please. Yes. So just with the one-off effects that you booked in the quarter between adjusted EBITDA, EBITDA for this EUR 4.5 million, I think you mentioned some of this was for heightened COVID-related costs. So I just wonder, in the sense your methodologies for assuming whether this is operational or nonoperational, so to say, just a bit of more clarity there. Also on amortization, please. That's come down quite a bit I think sequentially. Is this EUR 6 million or so the new run rate, would you say? Perhaps some guidance there.And lastly, pleasing to see you've got your watchful eye on the tax rate. Any developments actually to structurally lower the company's tax rate that you can inform us on?
Thanks a lot, Scott, for the question. Indeed, the exceptionals were relatively high with EUR 4.5 million, but this is very special in Q4. It was basically linked to the COVID-19 thing, although we basically -- if you want to make sure that your plants are up and running, your 37 plants, throughout the world, you give extra incentives. I mean you know that it was also explained by Dietmar that we had business continuity first. And therefore, we also incentivized basically our work force to work and continue working and this kind of affected this. And also in our exceptional expense for Q2, we will not repeat this going forward. We had certain restructuring elements as well included. And therefore, this EUR 4.5 million for the full year, I think that we will not have exceptional expenses. But in the end, you should have also finally the exceptional income because there will be a lot of -- for example, we sold now Kuessnacht where we got also some earnings now in Q3, which should really basically lead to a positive exceptional income for the full year 2020 if I look now in the next couple of quarters. And this is as far as the exceptional items are concerned.Regarding the amortization, it's basically linked to the prolongation of our core technology at Sensile as we have communicated this in our full year 2019 results. What happened there? If you look at the contract with SQ Innovation, the use of the technology is longer than what we have anticipated by around 10 years or something like this. And this basically leads then also to a prolongation of the -- for the write-down, if you want so -- and the amortization. And indeed, this -- what you have seen now in Q3 should -- Q2 should be also the run rate for 2020 I think Q3 and Q4 as well.And then last question regarding tax rate, we think that we should come into area of 29%, something like this for the full year. And this direction is what we're aiming for in the long run, Scott. So I take your question in the mid and long run, we also aspire to go to a normal tax rate of 25% mid to long term.
And there are no further questions at this point.
Thank you, operator. If there are no further questions, we would like to thank you for joining us today. Please note that we are going to publish our third quarter results for 2020 on October 13. It was a great pleasure and privilege working and interacting with you in quite exciting times. Thank you for your trust, support and the interesting and vital discussion we were having. All the best and speak soon.
Thank you.
Thank you.
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