Sartorius AG
XETRA:SRT
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Sartorius AG
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Good day, and welcome to the Sartorius and Sartorius Stedim Biotech conference call on the publication of the half-year 2018 financial results. Today's conference is being recorded. At this time, I would like to turn the conference over to Dr. Joachim Kreuzburg, CEO. Please go ahead, sir.
Thank you. Good day, and welcome everybody to our today's conference call on the half year's result for 2018. I would like to walk you through the results for the Sartorius Group for the first 6 months together with our CFO, Rainer Lehmann. And then after that, I will present to you the results for Sartorius Stedim Biotech for the first half of this year. And after that, we will have time for Q&A.So let me just kick off before I hand over to Rainer with highlighting the key results of the first 6 months of this year. We have achieved double-digit growth in sales and order intake for the group and also in most divisions. In Bioprocess, particularly, we have seen a very nice dynamic, quite a bit ahead of our expectation when you take the timing into account of the different quarters of last year. We have seen a performance in line with our expectations in LPS. And overall, we have been able to achieve an increase of our profit margin despite quite some headwinds from currencies. And as a result from the positive trend ahead of our expectation in BPS. We have upgraded our sales guidance a bit for Bioprocess and, therefore, also for the group. And now Rainer will talk you through the results in more detail.
Yes. Thanks, Joachim, also welcome from my side. Before I dive into the figures, a quick actually statement regarding our previous year figures. We had to restate H1 figures of 2017 due to the finalization of the purchase price allocation in conjunction with the acquisitions we did last year, Essen BioScience as well as Umetrics; complete normal procedure, the company has 12 months' time to finalize the purchase price allocation. We did so in time. And the effect, basically, on revenue was an adjustment downwards by EUR 1.7 million and was an EBITDA impact of 0.2 percentage points lower. So if -- in this presentation, you'll already, of course, see the restated figures. So I just want to make sure, when you look into your previous year figures, that you have these updated ones. So let's look at the sales revenue, 12% in constant currencies growth to EUR 758 million. As you see here, we already had some headwind of 4 percentage points from FX. In actual rates, growth was 8%. Also very nice, Order intake development was 12.7% growth in constant currencies. And as we always point out, the sales or the order funnel is nicely filled with EUR 50 million order intake above the half-year sales revenue.We also were able to improve our underlying EBITDA to almost EUR 190 million by 9.6% and which translates to an improvement of profitability from 24.6 percentage points last year to 25% this year. And the underlying EPS increased by 14% to EUR 1.16 for the ordinary and the EUR 1.17 for the preferred shares. Overall, also, I want to point out that the acquisition contributed roughly 2 percentage points of nonorganic sales growth. If we now go to the regional development, we see -- I want to start with the Americas, very nice performance, 16.6%. As Joachim pointed out in the highlights, very strong momentum in the U.S. But let's also keep in mind that we have lower or moderate comparables in that region. The LPS growth, of course, was fueled by the Essen acquisition. Very happy with the development there. In the EMEA region, we have to say very solid performance by the Bioprocess Solution division and a little bit, let's say, weaker performance on the laboratory side with just 3 percentage points growth. Asia Pacific continue a nice growth story. Both divisions really double-digit growth rates and what is very nice here, against fairly high comparables, if you look back to 2017 H1, we already showed there a 35% growth. Now on top of that, we actually have 12% growth, so that's really a nice development in that region and by both the -- those divisions.If we come now to the Bioprocess Solutions performance, order intake, strong development, 12.6% in constant currencies, really driven -- and it's nice to see via also a single-use product as well as equipment project on the order intake side. Sales growth of roughly 12% in constant currencies, really also driven by a pickup of our cell culture media business. Remember that last year, we had started our phase there. The trouble at the -- towards the end of H1 in -- with our partner Lonza on Walkersville. This so far has been resolved to the majority, obviously due to the drivers of this business so we see a nice development here picking up. In addition, of course, our filtration and bag business contributed, both with double-digit growth on the sales side.The Umetrics acquisition contributed roughly 1 percentage points of nonorganic sales growth. And the underlying EBITDA of the division, we're able to increase by 0.6 percentage points from 27.4% to 28% despite some headwinds from the FX side.If we then move to the LPS, here we see order intake of 13.1% in constant currencies and sales revenues of 12%. Of course, the Americas plays a major role here with roughly 21% revenue growth over previous year. Also, nice development in Asia Pacific with 20%. Essen, of course, also driving the American performance, roughly contributing 5 percentage points overall as nonorganic sales growth. The EBITDA margin is on previous year level at 17.1%. This is due to the fact that the economies of scale that we had there really were leveled out by the unfavorable FX headwinds.If we now move on to the next slide, we come to the -- some key indicators, starting with the underlying EBITDA, which I mentioned is at 9.6%. Financial result, also want to point out, this has been adjusted here as part of the purchase price allocation. It used to be EUR 0.9 million, now it's EUR 14.9 million. So of course, differential result, without that purchase price allocation, it would have been bearing a bit more interest, which makes absolute sense due to the financing of the acquisition that we have going on. Nice development on the underlying net profit, 14% increase to almost EUR 80 million and our net profit at EUR 57 million. Cash flow, strong improvement to EUR 92 million. Most of it then used on the -- for the investing activities or net investing cash flow at EUR 97.4 million, which translates then on the CapEx side to 13.2% investment ratio. Remember, in Q1, we had roughly 10%, and we are projecting for year-end to have roughly 15%. So this is pretty much in line with our expectations.On the key financial indicators on the next slide, we see the very strong and robust equity ratio of 35%. You see a slight increase in the net debt, which is expected, of course, one big driver is the payment of our dividend in Q2 as well as we had some stronger investments in Q2 that you see also from the -- in the CapEx ratio just mentioned before and as [indiscernible] factor had contributed towards some higher tax payments -- prepayments that we had to do in some of the German entities. Net debt under -- net debt to underlying EBITDA at 2.6, so really at a healthy level that we see striving towards year-end, more than 2.5. And with that, I'll hand over to Joachim for the outlook.
Thank you, Rainer. Yes, as already indicated at the beginning of our presentation here today, we have raised our guidance for the Bioprocess division and, therefore, also for the group, whereas we have confirmed the outlook for LPS. You now see all the details about this. Let me start to walk you through this table starting from the bottom. So for LPS, we confirm a sales revenue growth for the full year of between 12% to 15% in constant currencies and an increase of our underlying EBITDA margin by 1 percentage point in comparison to the 18.0% that we have achieved for the full year of 2017. There is no change in regards to the composition of this growth. We still expect 2.5 percentage points of nonorganic growth following the Essen acquisition at the beginning of last year. For Bioprocess, we so far have expected 8% to 11% of sales revenue growth. We now expect 12% to 15% in constant currency. This is quite a significant step-up. As you have heard before, we have achieved 13% in -- of increase in regards to the order intake and 12% for sales revenue growth. This is a figure above our expectation for the first half of the year. Keep in mind that particularly Q3 last year was relatively weak because of the negative impact, not only from the inability of Lonza to deliver media at that time to U.S. customers, but also because of the hurricane that has hit Puerto Rico and stopped deliveries from that facility for a couple of weeks, but also because of the low order level that we have seen at few key accounts during that time last year. So in other words, comps for Q3, in particular, but therefore also for H2, will be relatively low. So then we expect this quite a bit higher sales revenue growth for this year now.We confirm the increase of our underlying EBITDA margin by 0.5 percentage point on top of the 28.0% that we have achieved for 2017. Here, we do expect a slight movement of our product mix towards equipment for the second half of the year. It's nothing significant. But in comparison to the strong increase of business in consumer books for the first half of the year, we still expect a significant increase of that business for the second half of the year but an even stronger increase in relation to that of our equipment business. And that's why we confirm the margin step-up. For the Sartorius Group, all this adds up to also a sales revenue growth expectation of 12% to 15% and an increase of our underlying EBITDA margin by approximately 0.5 percentage point. We confirm the outlook for our CapEx ratio to be at around 15%. And we also confirm what we have said earlier this year that as a result from the U.S. tax reform, the tax rate for the group is expected to be 2 percentage points below the level that we have seen for the year before and should be around 27% from this year onward.I would now like to immediately continue and walk you through the Sartorius Stedim Biotech Group's results, which, as always, are, to a large extent, identical to those of the Bioprocess division, just some slight differences because of the intra group business that Sartorius Stedim Biotech has with the LPS division. But of course, the key drivers are absolutely identical to those of the Bioprocess division that Rainer has mentioned just before. So we have seen an increase of our sales revenues by 11.1% in constant currencies and an increase of our order intake by 11.8%. So in a nutshell, the same figures then those that we have heard before but just 1 percentage point lower as expected. We also see a nice buildup of our order book here, and we also see an expansion of our EBITDA margin, in this case by 1 percentage point actually because of a little bit higher depreciation level following one aspect that I will mention in a minute. So we have achieved 27.8% here for the first half of the year, and also nice increase of our earnings per share. We have reached EUR 1.12 now, which is an increase by 16.5 percentage points, approximately.Again, the growth that we have achieved here distributes quite nicely across our regions, with Americas following a relatively weak first half of last year as we already have talked about leading with 15% approximately; EMEA at 9%; as well as Asia Pacific following a very strong first half of last year. The operating cash flow for Sartorius Stedim Biotech also shows a very strong set of figures. I believe, most comments have been made before. Of course, the key driver are the higher earnings here. The net investing cash flow reflects, on one hand, our very significant CapEx program. We added capacities in Puerto Rico as well as in Goettingen, our main site for single-use products. We also have expanded our France operations for our bags as well, so quite busy on that front. Acquisitions have been in this -- not in these figures in regards -- in comparison to last year where we have acquired Umetrics in the first half of the year. There's one special item that has led to a peak of our SSB CapEx, and that is that SSB has a little bit earlier than we initially planned for acquired software-related assets, particularly for the ERP system after the completion of the biggest chunk of our ERP rollout program. So that SSB now owns the key elements of this ERP system by itself and doesn't buy those services every month actually, and that has led also to the shift of depreciation versus cost that I was talking about. We did expect that to take place later or we initially planned to do this later this year, and we have now executed that in the course of Q2 already. So therefore, and you will see that in a minute, we confirm our guidance for the CapEx for the full year as this has been a onetime element during H1 only.The financial position remains very strong for SSB with a very healthy equity ratio as well as a very low net debt to underlying EBITDA. As you can read from this table, at least a lot of firepower for potential nonorganic growth initiatives for sure. And then finally, I would like to close this part of our presentation by walking briefly through the guidance for the full year of 2018. And pretty much as I have mentioned before for the Bioprocess division, we upgrade our sales revenue growth expectation quite substantially to 11% to 14% because of the dynamics and the comps that I was talking about before. We basically confirmed also our EBITDA margin guidance with the exception to this timing effect of the depreciation shift. Therefore, we now expect 28% here, following 27.3% for the year earlier. And we confirm the CapEx ratio to be at 15% as this special effect has been rather timing effect than anything else. So -- and again also in regards to the tax, we expect a level here going forward that is 2 percentage points lower than before and should be at 26% for the full year of 2018 then already.Thank you very much so far for listening, and now we would open the lines for Q&A.
[Operator Instructions] The first question comes from the line of Johnny Rowles of UBS. And the next question comes from the line of Markus Gola of MainFirst Bank AG.
So my first would be on the LPS division. In order to reach the lower end of the sales guidance, organic growth needs to accelerate to low double-digit territory in H2. However, order intake was only 2% in Q2, which does not bode well for Q3 organic sales growth. So what gives you the confidence to see skyrocketing sales in Q4 this year in the LPS division? My second question would be on Asia Pacific and BPS. It seems that sales growth here was rather flattish year-on-year in Q2. Is there any particular reason for the slowdown besides the high comparison base?
So for LPS, you are right. The second quarter has shown a little bit lower growth for the LPS division only. We monitor, of course, the pipeline very closely that we have. We, therefore -- I mean, this is pretty much, I guess, a comment that we make more often. We wouldn't recommend to overemphasize single quarters here. We -- as I said, we monitor our pipeline. We do expect a significant pickup of our growth rate for the second half of the year. That is what I would say. There's nothing, like, spectacular change or any particular product range behind this expectation. Of course, the proportion of the bioanalytics business is increasing as this business is growing around 30%, and the weight of this business is -- of course, is increasing, to some existing, quarter-by-quarter. But we also expect healthy growth rates from the other business segments, and product segments for the second half of the year. So I guess, the key message is let's not overemphasize single quarters. For Asia, it's exactly as you say. It's basically the comps. And more to say about that, we are satisfied with the development in Asia. We particularly see very healthy organic growth in both divisions and, therefore, we -- yes, it's really the tough comps that play a role here.
Okay. And If I may ask a quick follow-up question I forgot to Asia, given that you are growing quite nicely there. How likely is it that you will need to invest in local capacities, in particular, in China in the next year or thereafter?
That's indeed a very good and important aspect. We are looking into this matter very closely from different angles, and we believe there are 2 aspects to it. One is the increasing size, and we believe for quite a number of years to come still very dynamic market developments to be expected. So the sheer size of this market will play a role here. And the second one is that we, I believe, have to expect at some point in time that the Chinese government will expect and demand a higher level of local content. We do have a manufacturing site in Beijing where we produce a limited part of our product portfolio for both divisions. We are set up for expanding these activities step by step, and we might also consider a more significant expansion there at some point in time. We don't have any specific plans for doing so, but we are monitoring that very closely and we'll take the necessary actions when necessary. And again, I think the key message is, it's on our radar screen. We have all, let's say, tools in our toolbox to become more active here whenever necessary.
Next question comes from the line of Paul Knight of Janney Montgomery Scott.
Can you [indiscernible] on with the geographic expansion. Are you seeing more strength in the North American market? Or is it more in the U.S.? I know you wanted to be more in this North American opportunity. And could you talk about are you getting some additional share in the U.S., specifically on geography?
Yes. I think the aspect of gaining market shares in the U.S. and, therefore, also in North America in general is on our agenda for a couple of years already. And I guess, it will remain on our agenda for a couple more years. And that is simply because of the fact that, in particular, in the Bioprocess business, we -- these are markets that are not moving that quickly as we are talking about validated processes. And when we talk about market -- gaining market share, this very much relates to gaining higher share of new business in comparison to the share that we have with existing business. And that, of course, takes time. But the good news is there is -- we do have an outlook to continue growing faster than the market for a couple more years as we have done for more than 5 years now already. And the background for having the lower market share in the U.S. than in Europe for instance and also in most markets of Asia, is that our main competitors are U.S.-based companies. And at that point in time where Sartorius decided to focus on the biopharmaceutical market in particular, the big biopharmaceutical companies at that time like Amgen, for instance or Genentech already had chosen our competitors as their main suppliers. And we are gaining share also in these key accounts step by step. But again, this will remain on our agenda for sure for a couple more years, and we are very optimistic to rather continue gaining share here. Another item or topic coming from this is that we typically don't have much business to lose once a product that initially has been approved by the FDA becomes subject of biosimilar producers that we then can lose much share, much business whereas we typically win a substantial portion of this biosimilar business. That then often doesn't occur in the U.S., but I think it's something that is related to this particular situation in the U.S. Let me add that, and a little bit following the question that has been asked before, that, of course, Asia and, in particular, China, is very much in our growth agenda as well, less so because of the potential for gaining market share. I mean, we are always striving for gaining market share wherever we can but much more because of the market growth as such. And that multiplied by the size of that particular market, of course, is tremendous in China. So if we had to put 2 markets on top of our list where we focus on to get things done then, of course, this will be U.S. and China.
Next question comes from the line of Johnny Rowles of UBS.
Firstly, I'd be really interested to hear how you're now thinking about your 2020 guidance following the upgraded sales guidance this year. Also, a quick one on cell culture media. Just wondering how much [countries], the numbers this quarter, and what you're expecting for 2018. And in addition, in Lab Products & Services, your guidance in price had picked up towards the end of the year, but your order book greatly stayed low for Q2. So I'd be interested in hearing your thoughts there, too.
So the -- in regards to the 2020 guidance, we see ourselves being well on track. As we always have pointed out that also on our path towards the -- towards 2020. And also then beyond that, towards 2025, we, of course, always expect acquisitions to play a certain role even though one has to say that with the organic growth that we are achieving at the moment, we would get close to the target, maybe even without larger acquisitions. But again, we definitely believe that out in 2020, all the acquisitions may play a role. And we also see ourselves very well on track, not only in regards to top line but also in regards to profitability achievements. Cell culture media, here, we are also a little bit ahead of our initial expectations. We always said after we had to accept losing some business here in the course of last year, we have been cautious in regards to our growth expectations for this year, not because of the availability of the product as such. This is recovering now as we have talked about earlier. But, of course, the other aspect is how quickly we can win business back from customers. We have seen very, very solid double-digit growth during the first 6 months now, and we expect the business to be quite a bit north of EUR 50 million for the full year of 2018. And therefore, we should be around the 2016 levels again that we have seen before the problems in -- of 2017. And then for LPS, I think you mentioned bioanalytics. In particular, this is a business where orders are turned into sales revenues very quickly as the products of both Aetna and IntelliCyt are standard products. Most customer-related configurations are basically software-based so it can be realized very, very quickly. And therefore, as said before, the order book, which is indeed not that big, doesn't have a big impact on our guidance and our internal forecast. Much more important is the funnel that we are working on, and that is one that looks very healthy. And that is where we base our guidance on.
Next question comes from the line of Daniel Wendorff of Commerzbank.
Two on the Bioprocess Solutions business, if I may. The first one on the order intake in the second quarter. You mentioned, I think in the press release that this is also driven by equipment orders. Are we talking about new products here and expansion of existing contracts with customers in North America? And that would be helpful to know if you can shed a bit more color here and in general, the recovery you're observing and -- that should continue during the course of 2018 in light of your updated guidance. And is there any kind of inventory restocking in there coming from customers you experienced the opposite effect in 2017?
Yes, thank you for these questions. So for the order intake of Q2 and the equipment portion in here, we do have equipment business. And also, this has been the case in Q2 indeed, to some extent, with new customers, particularly then in North America indeed and in Asia but, of course, also with existing customers. And very often, these equipment orders are related to new products one way or the other of our customers indeed, yes? So that indeed is the case. Maybe there is a certain tendency that in Asia, equipment orders are coming from biosimilar producers or future biosimilar producers. And in North America, the proportion of originators is maybe a little bit higher. But that is -- the reason why we mentioned that is not that there is 1 -- that there are 1 or 2 spectacular equipment orders in there. It's a very healthy mix and distribution here. The point is that we also wanted to make you aware that there will be a certain and slight but yet relevant shift in product mix most likely for the second half of the year, also to set the expectations right in regards to the margin for the second half of the year. So nothing spectacular, very healthy, also a very positive expectation in regard to single-use business for the second half of the year. So -- and restocking, I mean, that's a good point indeed. And unfortunately, we always would repeat the comment that we don't have that deep insight into the stock levels of our customers. I think nobody basically has such deep insight to the best knowledge that we have restocking in the sense of onetime orders to fill up stock levels or so. It's nothing where we would have an indication for. Can we completely exclude this playing a certain role? Probably no. But we believe, as I guess we always would comment on this, we always rather recommend to take a longer-term approach of -- to analyzing our figures. Let's not put too much emphasis on 1 or 2 quarters, but let's see the line that goes through it. And I think if we talk about 3 years, 4 years or so, which I think is the right approach to our business anyways, then you see a very robust, very significant growth rate underlying all this.
The next question comes from the line of Patrick Jousseaume of Societe Generale.
It relates to Sartorius Stedim Biotech. I just wanted to have some explanation regarding the difference of drops between Q1 and Q2. Drops is, let's say, from revenue to EBITDA was around 15%, 1-5, in first quarter; around 50%, 5-0 in second quarter. Could you elaborate a bit on that, please?
Patrick, could you repeat which key figure are you talking about?
I am talking about EBITDA improvement divided by revenue improvement, which is, I think, 15% in Q1 and 50% in Q2 for SSB. So is it coming from product mix or [indiscernible] EBITDA you're on.
Yes, yes. Yes, Indeed, actually, the -- you are absolutely right. The increase has been more substantial in the second quarter. Second quarter has been a bit stronger in regards to top line growth. And indeed, mix has been a little bit more towards the single-use product and so product mix. These are the 2 key drivers, and that is also the context, again, why we are addressing the mix for the second half of the year, no doubt very healthy. But these slight shifts between single use and equipment have some impact on the EBITDA margin step-up indeed. So but -- so therefore, indeed Q2 has been particularly strong in that regard because of this healthy top line growth in conjunction with the mix.
And what you mean is that during H2, the product mix will be also a bit more in favor of single-use versus equipment?
No, no. The second half -- in the second half of the year, we will be a stronger growth of the equipment business again whereas that hasn't been that strong in Q2.
Next question comes from the line of Scott Bardo of Berenberg.
First question, please, is on the Lab Products & Service division. I think, historically, Sartorius has given very consistent and prudent guidance. So I just wonder whether you think at this point, given the relatively softer development in LPS, whether it's a prudent assumption to assume you end up at the lower end of the range rather than the upper end. It appears to us that the upper end would require a very significant acceleration in the second half of the year, which may be somewhat difficult to predict, given the capital nature of the Essen business. I just wonder if you can share some thoughts there. And following on from that, it seems that there is some quite mark to margin improvement required to get to 100 basis points for the full year. So again, is it something that you can achieve at the lower end of the guidance range? Or do you need the upper end of guidance range to fulfill the objective? That's the first question, please.
Yes, sure. So I guess if we would expect to reach just around the lower end, we would have considered to probably change our guidance a little bit. So we do expect that -- or we would say that the guidance very much describes well the range where we think to land in. And I would also make the comment that -- I mean, that's always the case when you have a range for the top line but just give an approximate margin guidance, then this approximate margin guidance maybe relates best to the midpoint of the guidance approximately with all those factors that may play a role like mix, et cetera. So -- and we indeed have confirmed our margin guidance. Maybe that narrows this a little bit down to how we think about that. But nevertheless, of course, as you asked rightly, what about the margin improvement, which is significant that we are expecting here for the second half of the year. Well, that does have a background very much in the mix. As I guess I have mentioned before where the second half of the year should be significantly stronger for the bioanalytics business as pretty much to be expected, given the fact that this business is growing around 30% on a yearly basis. Then, of course, basically, it grows quarter by quarter. And therefore, the weight and the influence on the margin of this business increases over time, and this business has a very healthy EBITDA margin contribution. So again, please accept that I can answer the guidance question only by describing the space a little bit, and then the mechanism for the margin, I hope, was clear.
And just a follow-up on that point. I guess, you've had now a reasonable amount of experience consolidating Essen, which continues to be the principal growth driver, if you like, of the division and somewhat of a different business mix, if you like, to your previous Lab Products & Service business. So I wonder if you could just share some thoughts historically speaking as to whether the leads that you have been expecting always materialized in business or whether as you identified before that you should really consider these, on a longer-term trend, these will come good at some point. So just the confidence levels around the leads, what's your historic experience been in that regard?
I would say, we -- the ability of our sales force to generate business based on the leads that we get is quite significant. The product is an outstanding product, given the fact that there is also no direct competition. And it helps our customers significantly to improve the productivity of their research processes. So that is pretty much in line with our expectation. However, particularly when it comes to academic customers, as you can imagine, they very often are restricted in regards to the budget. And a good portion of the customers here are academic institutions. So when I say that this -- the hit rate is in line with our expectations, then that definitely doesn't mean that this is 100% or anything close to that, but we would say this is a -- it's a healthy hit rate. Of course, as always, you would like to be even better in regards to lead qualification to improve the hit rate then furthermore. But basically, this is in line with our expectation and on a healthy level.
Very good. Very clear. And just lastly then just to come back to or expand upon Daniel's question about restocking. I think there's some evidence that the whole industry is enjoying pretty buoyant bioprocess growth at the moment accelerating from the prior year. I think you mentioned before that you can't be entirely sure that there's not some restocking effects here. But just to understand further, is there any noticeable dynamics with respect to product approvals or biosimilar entry or stronger vaccine season or anything of this nature that you believe could be underpinning an industry-wide resurgence?
Yes. I would say most of the dynamics in our industry are of longer-term nature, and I wouldn't see any specific driver here of those that you have mentioned. Basically, all our positive drivers all interplay healthy at the moment, but there is not the one driver that I would like to highlight here as an explanation for the healthy growth that we see at the moment. It's a mix of all these trends.
Next question comes from the line of Markus Gola of MainFirst Bank AG.
Thank you for taking my follow-up question, and it's actually on China. Do you see or expect any benefits from the political tensions between the U.S. and China, given that some of your major competitors are U.S.-based companies? And my second question would be actually on ViroCyt. It's roughly 2 years since you acquired this business, and I know it was a small acquisition. But the technology actually sounded quite interesting. So I just wanted to check whether this acquisition has lived up to your expectations? And are these ViroCyt products actually a part of your bioanalytics portfolio then?
Yes. Thank you for these 2 questions. I would absolutely hesitate to expect any positive influences from the world trade issues that we see with tariffs coming up in different product segments at the moments. I do not expect any positive influences on our business here. In turn, so far, we also don't see any negative influences. But I also wouldn't expect any positive ones at this point in time. On ViroCyt, ViroCyt, actually, we have now integrated into the bioprocess offering as we see stronger synergies here indeed, particularly when it is about quality assurance procedures. Business is roughly in line with our expectations. We indeed see that quite additional investments have been necessary to integrate this product sufficiently into our offering and to meet our customers' expectations, but we basically still see this being a positive addition to our portfolio.
Next question comes from the line of Aliaksandr Halitsa of H & A.
I was just wondering if you could remind us what is your edge that basically helps you win market share in the U.S.
So one aspect is, first of all, to set the perspective right, I would always prefer to look on it in a way of saying we want to win, and we do win by now approximately the same share of new business in the U.S. as we do in Europe and Asia. So I think that's an important aspect and perspective to take because this is the effect of what we're doing. And in the past, we won less -- a smaller share of new business in the U.S. than in other regions. So I think that's not just the shift of how to look on it, but it's substantial. Because the reason why we were winning less business in the U.S. than in Europe, for instance, has been, of course, not our product offering because the product offering is the same across all regions, but we have been less present in the market. We have less application specialists, for instance, located very closely at our customer site. And therefore, a couple of years back, we have started to substantially invest into our presence there and having more product specialists, for instance, being very close to the customers and making demos, et cetera, et cetera. So I think that has been very important to, not only in terms of the product portfolio, but also the stronger sales force being available there. But then, of course -- it's, of course, also but not only then for the U.S. a question of the product portfolio. And we believe that we have the broadest product portfolio in the market. We are, for sure, leaders in upstream, but we also have a very strong and compelling offering in the downstream arena. The acquisitions that we have made are all basically very complementary innovative technologies, partially technologies with a very strong differentiation against existing solutions. And then, of course, then also helps to open the door at a customer that so far maybe has been not a very strong Sartorius account. And that, of course, is something that we then use particularly in the U.S. to win accounts that have been maybe closed or almost closed in the past for us. So that's the mechanism. But again, I like and we like to rather take the view of saying let's win the same share of new business in the U.S. as in other regions.
Next question comes from the line of [indiscernible]
It's a little bit of a follow-on question where this just was asked. I was just wondering if Sartorius' market position within the CMO and CDMO market is stronger than in the classical pharma or biotech space. And this is maybe an explanation due to this outsourcing product and outsourcing trend that Sartorius is constantly growing also in the market?
We do have a strong position at the key CMO players, that's for sure a fact, but definitely not like the key or only growth driver or driver to outperform most of our competition. As -- and coming back to the key aspect that we were discussing before, gain of market share in the U.S., this is an aspect of different nature, and we definitely also win a lot of business with originators as we do with biosimilar producers, which is also a different kind of customer. So it's right. We do grow nicely with CMO key accounts or -- and also smaller CMOs, but we are happy to say that our growth is really very broadly based not only in regards to our product segments and the regions, but also in regards to the customer -- the types of customers that we have.
Next question comes from the line of Scott Bardo of Berenberg.
This is a quick follow-up. I wonder if you could share some thoughts, please, surrounding the proposed spinout of GE Healthcare, which I think should happen in the beginning of next year. Just wonder whether you think this could give rise to a more focused competitor or there will be no change at all or there will be a period of disarray in which the spinout occurs. Lastly, maybe could you share some thoughts about the potential to price out some of the bioprocess assets from GE as part of this process if there's any hope in that regard?
Yes, that was a very interesting question, Scott. As far as we understand that and expect that, also, there will be a spin-off of the health care business in total by GE so including the life science business. I also would not expect as of today that GE or GE Healthcare would divest a significant part of the life science business very early, particularly not any attractive pieces. The question in how far the spin-off will disrupt the business short term, I'm not sure. The business has been run quite independently so far so I guess they will be able to operate that pretty much as that has been so far, which means I guess not only because our business rather has long sales cycles and everything anyways, but I wouldn't expect much of a change as of today, given the fact that it has been an independent business already so far quite largely.
Next question comes from the line of Daniel Wendorff of Commerzbank.
Thank for taking my follow-up question that's also regarding the competitive situation in general as a follow-up. So if you look at your performance in North America and want to appraise it, how important is it for you to offer the full value chain from project definition management up and downtime process. Has this been a key differentiating factor meanwhile for you versus other U.S. competitors? Or how's the situation? Any color you can shed here would be much appreciated.
Sure. So in the U.S. but also in other regions, you would find a different type of customers with different preferences and different behavior. There are a couple of customers, particularly those who are around in the biopharma space for very long who have maybe a strong own team of process engineers on board who would be able to do process design by themselves, and those customers typically maybe talk to you more on a product basis. But then, of course, you also have customers. And there, maybe the tendency would be more in Asia, that don't have such a background and they strongly expect a solution provider and are looking for a solution provider to talk to, so somebody who really helps them to set up an entire process for them and optimize that for them. So that's the general situation, so different kind of customers who have different interests. However, what one can say is that there is a tendency towards that, that customers are looking for solutions rather than products, which is, I think, a very typical trend that you see when an industry is maturing step by step that our customers ask themselves what is their -- what their core competency is, whether it's the development of a new drug and maybe the marketing of a new drug or whether it's the production process for instance. And then I would say there is a clear trend towards that customers and also those who are established that have an own strong engineering backbone probably are rather looking for a partner with such solution provider abilities. So that's the underlying trend across the regions and also across, I would say, customer segments to quite some extent. And if we then look on this in comparison to our competition, then I clearly would say that this gives us an edge. We probably have built the solution provider offering earlier than others and, therefore, also a couple of our acquisitions that we have made partially already 15 years ago or so have been like first moves of building such a solution offering. And that has brought us into the position to acquire the market leaders in segments like bioreactors, in segments like single-use bags and the like. And therefore, I would say that the -- given the trend that I've tried to describe, the fact that we have built this portfolio that is differentiating positively in comparison to most of our competition is indeed an asset and a positive effect that we have.
[Operator Instructions] And there are no further questions at this time.
Yes. Thank you very much then everybody for attending our call for the half year's figures, appreciate it very much, also the discussion that we had. Looking forward to talk to you again later when we publish our Q3 figures in approximately 3 months' time. Have a great summer. Talk to you. All the best. Bye-bye.
Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.