Stevanato Group - Q1 2023
May 4, 2023
Transcript
Operator (participant)
Good afternoon. This is the Chorus Call conference operator. Welcome. Thank you for joining the Stevanato Group's first quarter 2023 financial results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Lisa Miles, Senior Vice President, Investor Relations. Please go ahead, madam.
Lisa Miles (SVP, Investor Relations)
Good morning. Thank you for joining us. With me today is Franco Stevanato, Executive Chairman, Franco Moro, Chief Executive Officer, and Marco Dal Lago, Chief Financial Officer. A presentation illustrating today's results can be found on the IR section of our website. As a reminder, some statements being made today will be forward-looking in nature and are only predictions. Actual events and results may differ materially as a result of risks we face, including those discussed in item 3D, entitled Risk Factors, in the company's most recent annual report on Form 20-F, filed with the Securities and Exchange Commission. We encourage you to review the information contained in our earnings release in conjunction with our SEC filings and our latest Form 20-F.
The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances except as required by law. Today's presentation may contain Non-GAAP financial information. Management uses this information in its internal analyses of results and believes this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results, and providing meaningful period-to-period comparisons. For a reconciliation of the Non-GAAP measures, please see the company's most recent earnings press release. With that, I'll hand the call over to Franco Stevanato for opening remarks.
Franco Stevanato (Executive Chairman)
Thank you, Lisa, and thanks for joining us today. Our solid first quarter results confirm the positive momentum exiting 2022. They illustrate the strength in the fundamentals of our business as we advance our multi-year strategic plan to capitalize on rising demand and to drive durable growth. Our experience in delivering high quality, high-performing products makes us a partner of choice with customers. Our long history of embedding science, technology, and industry expertise to drive continuous advancements has led to highly differentiated product portfolio. We work alongside our customers to drive innovation by supporting them in the early stage development through the entire lifecycle of the drug. Our mission-critical products are built into the regulatory filings, creating a captive customer base. We operate in growing end markets with strong secular tailwinds. We have an increasing presence in biologics, which is the fastest-growing market segment.
We see ample opportunities in treatment classes such as GLP-1s, monoclonal antibodies, mRNA application, and biosimilars over the next several years. Our presence in GLP-1s dates back to 2010. We believe that we are well-positioned to further support customers in the upcoming waves of new indication for GLP-1s. While this presents a significant opportunity for us, it is just one of the many favorable tailwinds within the growing biologics market. Our global footprint, differentiated product portfolio, and integrated end-to-end solutions offer customers a unique value proposition. This provides us with sustained competitive advantages. We believe we are ideally poised to seize the opportunities in front of us to drive long-term organic growth and build shareholder value. I will now hand the call over to Franco.
Franco Moro (CEO)
Thank you, Franco. Starting on slide seven, we are off to a good start with the first quarter results, highlighted by 12% revenue growth and an Adjusted EBITDA margin of 26%. Strong demand for our EasyFill products has driven the shift in revenue towards more accretive high-value solutions, which represented approximately 32% of revenue in the first quarter. For the first quarter, new order intake decreased to approximately EUR 236 million compared to last year. This was due to the expected drop in COVID-19 orders and the normalization of customer ordering patterns as global supply chain stabilized. At the end of the first quarter, our backlog of committed orders totaled approximately EUR 955 million. Turning to page eight. During the quarter, we announced an agreement with Thermo Fisher to launch a fully integrated supply chain for our proprietary on-body delivery system.
The collaboration leverages the power of our integrated capabilities by bringing together our on-body delivery system, our ready-to-use EasyFill cartridges, and our assembly lines. Thermo Fisher Scientific will provide fill and finish and final assembly services. The collaboration offers pharma customers a proven end-to-end supply chain to support clients from drug development to commercialization. We also signed an agreement to develop and manufacture our Alba prefillable syringes for Recipharm's Soft Mist Inhaler. The combination of our Alba syringe and Recipharm's innovative technology delivers sensitive biologic more efficiently and provides enhanced stability and safety. Our Alba platform is purpose-built for biologics because it significantly reduces any potential interaction between the drug and the container. On page nine, the self-administration of medicine and pharmaceutical innovation are creating demand for our products.
Consequently, we expect that continued advancements in biologics, including mRNA applications, monoclonal antibodies, the newest class of GLP-1s and biosimilars, will drive durable organic growth over the long term. While GLP-1s have been an established treatment for diabetes for many years, they are demonstrating remarkable results in weight management. This is driving significant demand for obesity treatments. Diabetes and obesity affect a significant portion of the world's population, and the rates of incidence are expected to climb. According to the World Obesity Federation, an estimated 38% of the population was considered overweight or obese in 2020. This is projected to rise to 51% by 2035 if current trends prevail. Moving to Page 10. Today, the majority of injectable treatments for these diseases use either a pen device or autoinjector for self-administration.
In the case of a pen device, the doses can be modulated and the device can be used more than once. The pen uses a glass pen cartridge, and it is the standard delivery format adopted globally for diabetes care. For single-use autoinjectors, the standard format is a syringe. As the market leader in pen cartridges, we have built a leading franchise supporting diabetes management. Our established role in the diabetes market helped anchor our position as one of the primary suppliers in the GLP-1 market for obesity treatments. In fact, we are present in both commercialized GLP-1 products and new programs under development, including biosimilars. The range of products we supply today includes bulk cartridges, EasyFill cartridges, and high-value syringes. On the engineering side, we are also supplying lines for visual inspection and lines for assembly and packaging.
We expect that the GLP-1s will continue to contribute to growth in the coming years. Most importantly, our opportunity set is not limited to any single class of treatment. As Franco mentioned, we see broad opportunities across biologics, which is driving demand for high-value solutions. On Page 11, a brief update on our capital projects. In both the U.S. and Italy, progress is advancing largely as expected. As we mentioned last quarter, we accelerated our expansion plans in Indiana in response to higher demand for high-value solutions, driven principally by the growth in biologics. The first production lines are on-site. We are actively bringing on staff, and validation activities are still expected to begin in the fourth quarter. In Latina, Italy, validation is still expected to begin this summer, followed by commercial production in the fourth quarter. In summary, on Page 12, we are making substantial progress.
First, we are shifting our revenue mix toward high-value solutions. Second, we continue to build strategic collaborations to leverage our strengths and meet customer demand. Third, we believe we are well-positioned to capitalize on favorable industry trends, such as the expected increase in GLP-1s. Finally, we remain on track with our capacity expansion in the U.S. and Europe as we aim to build durable organic growth. With that, I now hand the call over to Marco.
Marco Dal Lago (CFO)
Thanks, Franco. Before I begin, I want to clarify that all comparisons refer to the first quarter of 2022, unless otherwise specified. Starting on Page 14. For the first quarter of 2023, revenue increased 12% to EUR 238 million or 11% on a cost and currency basis, principally driven by growth in both segments and the shift to high value solutions. We are making relevant progress growing our mix of high value solutions, which increased 25% to EUR 76.7 million in the first quarter of 2023, and represented 32% of revenue. As expected, revenue from COVID-19 decreased 57% over the prior year and accounted for 4% of revenue in the quarter.
For the first quarter of 2023, gross profit margin increased 20 basis points to 32%, mainly driven by more accretive high-value solutions and to a lesser extent, margin improvement in the engineering segment. As expected, this was offset by the increase in industrial costs and higher depreciation as our new plants come into service. We expect these temporary inefficiencies will continue throughout 2023, and this is assumed in our 2023 guidance. Operating profit margin in the first quarter decreased 80 basis points to 17.1%, mostly due to the higher SG&A expenses to support growth initiatives. Excluding startup costs on the new plants, Adjusted operating profit margin was 18.3% in the first quarter and consistent with the same period last year.
For the first quarter of 2023, net profit totaled EUR 28.3 million, and we delivered diluted earnings per share of EUR 0.11. This included an unfavorable impact to diluted EPS of approximately EUR 0.01 recorded in finance expense due to the unexpected strengthening of the Mexican peso against the euro and the US dollar. Excluding startup costs, adjusted net profit was EUR 30.4 million and adjusted diluted EPS of EUR 0.11. Adjusted EBITDA increased 15% to EUR 61.9 million, and Adjusted EBITDA margin was up 50 basis points to 26%. Moving to segment results on Page 15. For the first quarter, revenue from the Biopharmaceutical and Diagnostic Solutions segment increased 13% or 12% on a cost and currency basis to EUR 195.5 million over the same period last year.
Revenue from high-value solutions increased 25% to EUR 76.7 million, and revenue from other containment and delivery solutions increased 7% to EUR 118.8 million. Gross profit margin increased 80 basis points to 33.7% in the first quarter of 2023, mainly driven by the growing mix of more accretive high-value solutions. For the first quarter of 2023, operating profit margin for the BDS segment decreased to 19.8%, mainly due to higher SG&A costs to support growth initiatives. For the first quarter of 2023, revenue from the engineering segment increased 7% to EUR 42.4 million, driven by strong sales in visual inspection and assembly and packaging lines.
For the first quarter of 2023, gross profit margin for the engineering segment increased 30 basis point to 21.7%, driven by higher margins in all product families and ongoing business optimization efforts. Improvement in gross profit margin and higher absorption of SG&A costs led to operating profit margin of 15.2% in the first quarter of 2023, an increase of 140 basis points over the same period last year. On Slide 16, as of March 31st, 2023, we had a net debt for EUR 46.5 million and cash and cash equivalents of EUR 158.8 million. For the first quarter of 2023, net cash generated from operating activities was EUR 37.1 million and reflects our current working capital needs to support the growth in the business.
As expected, capital expenditures for the first quarter of 2023 were EUR 113.2 million as we expand our industrial footprint amid rising customer demand. This was the main reason for negative free cash flow of EUR 91 million in the first quarter. We believe that our cash on hand, coupled with our loan agreements, provides us with adequate liquidity to fund near-term growth. Lastly, on Page 17, we are reiterating our full year 2023 guidance. We continue to expect revenue in the range of EUR 1,085 million-EUR 1,115 million. Adjusted diluted EPS in the range of EUR 0.58-EUR 0.62 and Adjusted EBITDA in the range of EUR 290.5 million-EUR 302.5 million.
Our 2023 guidance assumes that for the second quarter of 2023, revenue is expected to grow in the range of mid-single digits to high single digits compared with the same period last year. Revenue will be stronger in the second half of 2023 compared with the first half of the year. High-value solutions will represent approximately 32%-34% of revenue. COVID-19 will represent approximately 2%-3% of revenue. Lastly, we are estimating a currency headwind of approximately EUR 13 million-EUR 14 million. Thank you. I end the call to Franco for closing comments.
Franco Moro (CEO)
Thanks, Marco. In closing, we are operating in an environment of favorable demand with attractive end markets characterized by strong secular tailwinds. We are executing against our strategic and operational priorities to capitalize on demand and support customers across the entire drug life cycle. We continue to make relevant progress as we advance our global expansion plans to increase our capacity in high-value solutions and enhance our proximity to customers, grow our mix of high-value solutions as customers turn to ready-to-use formats and move up the product value chain, invest in R&D to maintain and accelerate our market leading position and build a multi-year pipeline of new opportunities by supporting our customers through scientific innovation to meet their evolving needs. Lastly, we will host our first Capital Markets Day on September 27th in New York City. Stay tuned for updates over the next few months.
With that, let's open it up for questions.
Operator (participant)
Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. The first question comes from Derik de Bruin of Bank of America. Mr. De Bruin, your line is open, sir.
Derik de Bruin (Managing Director and Senior Equity Research Analyst)
Oh, sorry, I was on mute. Thank you. Sorry. Good morning. Thanks for taking my question. I appreciate the incremental color on the GLP-1. I think one of the questions that we've gotten from investors is, I mean, obviously these have been around for a while, and you've been building capacity and providing this market for a while. How should we think about what's, you know, potential incremental demand going here? I mean, are the capacities you're building right now, is it completely booked as it is for products, or is there some flexible opportunity should demand go a little bit higher? Just trying to understand what's embedded in your guide for the GLP-1.
Lisa Miles (SVP, Investor Relations)
Derek, it's a little bit challenging to hear you. I think your question relates to the incremental capacity that we're building as it relates to GLP-1. Is your question tied to the types of products that we're implementing as it relates to the capacity, or could you clarify that?
Derik de Bruin (Managing Director and Senior Equity Research Analyst)
Yeah. Basically, I was asking, the capacity you're bringing on. You know, is the capacity you're currently bringing on, line mostly is already filled, or is there some incremental? Or is there room for the growth? Basically, I'm just trying to figure out what is it? I mean, the GLP-1s have been around for a while. I'm just trying to figure out what is already embedded in your guide versus what could be incremental to the business given this class of drugs seems to be doing a little bit better.
Franco Moro (CEO)
Thank you, Derik, for the question. I have to start to say that all the growth opportunity we have in front of us are not linked specifically to any single therapeutic area. We are investing in high-value solutions because we see in the biologic space the most important opportunity that not only for GLP-1, but includes also other area of technologies like monoclonal antibodies, mRNA application, and then we look also to expansion in the biosimilars space for biologics. That said, obviously, also GLP-1 opportunities are embedded in our plan for the year and in our complex execution to have enough capacity to match customer demands in the years to come. We are executing accordingly.
Derik de Bruin (Managing Director and Senior Equity Research Analyst)
Thank you. A little bit of clarity on the second quarter guidance, mid to high single digit revenue growth. That was below sort of like where the consensus estimates were and we were. Can we sort of talk about pacing of revenues for the back of the quarter? I mean, you have a really tough comp in the fourth quarter. Do you, so I mean, just the way the guide reads is clearly it's a little bit more back-end loaded. Can you just talk about how would you think about pacing for the rest of the year on revenue?
Marco Dal Lago (CFO)
Yes, very good morning. In the second half of the year, we expect higher revenue than in the first half, similarly to what we have done last year. This year, in particular, we can see stronger revenue second half due to the visibility we have in our backlog and in the forecast from our customers. On top of it, you know very well, we are installing capacity in Italy that will be generating farther revenue in the second part of the year. This is what we can see today. We reiterate our guidance for the full year. We expect the second quarter mid-single digit to high single digit growth compared to last year's same period.
Derik de Bruin (Managing Director and Senior Equity Research Analyst)
Great. Thank you very much.
Lisa Miles (SVP, Investor Relations)
Thanks, Eric. Operator, next question, please.
Operator (participant)
Yes, ma'am. The next question is from Paul Knight of KeyBanc Capital Markets.
Paul Knight (Managing Director and Equity Research Analyst)
Yes. This would probably be for Marco Dal Lago. The question I have is when I look at COVID revenue in past periods, was that evenly distributed through all product lines, or was it within the Biopharma and Diagnostics Solutions group?
Marco Dal Lago (CFO)
It's totally reserved to the BDS segment. You know, the main format used for COVID treatment are vials, both in bulk and easy configuration. As expected, we can see a slowdown in COVID as anybody has. We reiterate our guidance to have between 2% and 3% of revenue from COVID in 2023.
Paul Knight (Managing Director and Equity Research Analyst)
Okay. high-value solutions was where most COVID would go, where revenue was recognized, Marco?
Marco Dal Lago (CFO)
In COVID business, we haven't experienced a different mix, compared to the rest of the company between high-value and other containment delivery solution.
Paul Knight (Managing Director and Equity Research Analyst)
Yeah.
Marco Dal Lago (CFO)
we expect-
Paul Knight (Managing Director and Equity Research Analyst)
Okay.
Marco Dal Lago (CFO)
The slowdown of COVID will not affect our mix.
Paul Knight (Managing Director and Equity Research Analyst)
Okay. Got it. Regarding the outlook on GLP-1s, Franco, is there any estimate that you believe you have in terms of market share for this developing market of GLP-1s?
Franco Moro (CEO)
Yeah, you know that all the estimates for this business line in GLP-1 talks about multi-billion overall business. Important for us is that in this business, we have the right mix of products that are cartridges in bulk for configuration and EasyFill configuration, and also syringes that are needed for the auto-injector. The current situation is overweighted in term of cartridges and bulk cartridges because it is more coherent with the past. GLP-1 is something that is commercial since many years. It's not completely new. We expect the evolution of this market going in the direction of high-value solution, both for EasyFill cartridges and high-value syringes.
That said, we expect to have a fair share of these market opportunities because we are the leader in the market for pen cartridges, and we are the second most important player in the syringe space. We expect to have a fair share of these opportunities, and our visibility is giving us a good prospect in this direction.
Paul Knight (Managing Director and Equity Research Analyst)
Okay. Lastly, Franco, when will Latina and when will Indiana, in your opinion, be generating revenue?
Franco Moro (CEO)
We are on track with our plans, we expect to have a commercial sales from Latina in the last quarter of this year and validation activity in Fishers, Indiana, under completion in the last part of the year to have our first revenue generation in the first part of 2024.
Paul Knight (Managing Director and Equity Research Analyst)
Okay, thank you.
Lisa Miles (SVP, Investor Relations)
Thanks, Paul. Jerry, can we have the next question, please?
Operator (participant)
The next question is from Patrick Donnelly from Citi.
Speaker 9
Hi, good morning. You have Lizzie on for Patrick. Just one more question on the second quarter guide. How should we think about margins? Then for the back half of the year as well, should we think of second half margins as higher than first half, along with revenue as you discussed before? Thanks.
Marco Dal Lago (CFO)
Yeah, thank you for the question. In the second part of the year, we expect to keep on having the similar mix we had in Q1. Our guidance is between 42%-44% on high-value solutions. We will have some better opportunity to leverage our fixed expenses in second part of the year due to the higher revenue. On the other side, we expect some inefficiencies related to the startup cost of the new facilities in Indiana and in Latina, in Italy. All overall, we plan to expand our margin in the second part of the year.
Speaker 9
Thanks for that. On the China facility, I think you mentioned last quarter you were pausing for now and then resuming planning and development in 2024. Is that still the right way to think about it? Just given there's so much demand in the US and Europe, I get for GLP-1s. That's it for me. Thanks.
Franco Moro (CEO)
It is, we confirm that what we said also during the last call, we are allocating our capital where we see the best opportunity and closer needs of our customer. We decide to accelerate investment in Italy and in Fishers, Indiana because there is the opportunity to leverage on the strong demand there. China will remain a strategic target for us in term of market, and we decided just to pause the investment for a while, and we still expect to take a decision for a new start of the initiative sometime in 2024.
Speaker 9
Great. Thank you.
Operator (participant)
The next question is from Timothy Daley of Wells Fargo.
Timothy Daley (Senior Equity Research Analyst)
Great. Thank you. I did want to dig a bit into market dynamics on self-injectables. I appreciate the color and the commentary around Stevanato's number one position in pen cartridges, and I think you mentioned you're number two in auto-injectors. I believe Wegovy and Ozempic are, you know, single shot injectors, so kind of that auto-injector number two position. Just given the attitudes around waste, environmental, plastics, et cetera, does this market allow itself, or does the drug allow itself to be utilized in a pen cartridge approach, so a multi-dose injector? You know, just any color there around, you know, this is a very attractive market. That's your number two position. What's your number one? Any potential for this dynamic to change in terms of the, you know, delivery mechanism? Thanks.
Franco Moro (CEO)
First of all, I have to reiterate that GLP-1 is something that is commercial since a while. The introduction of the third GLP-1 treatment was approved by FDA in 2005. We are in the business from 2010 for GLP-1. There is a current situation that is more linked to the format for delivery adopted in the beginning. At the beginning, where the only format for cartridges was the bulk one, and the pen injector has been the first delivery system adopted globally, and is still the dominant one. It doesn't mean that the new treatments are not targeted different delivery format, trying to adjust to the patient needs and preferences.
For us, it's very important to be able to serve both formats, pen injector with the cartridges and EasyFill cartridges that are for multiple use, and also auto-injector with syringes that are for single use at the moment with the current technology. It's also important for us that auto-injector needs very high quality syringes with the special performances in terms of mechanical resistance and also gliding force to let the auto-injector works well. Our strength is to be present both formats, there is the reason why we are not targeting one single opportunities, but we are ready to serve our customers both way.
Timothy Daley (Senior Equity Research Analyst)
Tim, the only thing I wanna add to that is that we are seeing different approaches by different customers, and it's also important to point out that there are different approaches regionally as well. All right. No, I do appreciate all that color. Thank you so much for all that. Just curious on the order intake in the quarter. You know, just curious, can you give us a, you know, net new business growth rate on ex-COVID basis to help us understand kind of the book-to-bill dynamics, you know, when we take COVID out of the revenues and take COVID out of the orders? Thank you.
Lisa Miles (SVP, Investor Relations)
Was your question new order intake ex-COVID, Tim? Sorry, it was a little.
Timothy Daley (Senior Equity Research Analyst)
Yeah. Just trying to get to the book-to-bill on a clean, kind of non-COVID basis.
Franco Moro (CEO)
We did. We are looking at this trend about order intake, but I want to stress that order intake and backlog are good indicators of the demand, but they are not the only way we have visibility into the customer needs. We have always talks with customer and also discussion about the long-term agreement, multi-year agreement. The visibility in their needs is in this sense much higher, much deeper than only what is committed orders, because the backlog and order intake is only for we consider only committed orders. Sometimes the customer has to wait for issuing the committed order because they don't have already set the supply chain term of where they wanted to fill the container.
Committed orders are, and order intake, are good indicators, but we have much better visibility, and is this visibility that allow us to plan the future and our CapEx.
Timothy Daley (Senior Equity Research Analyst)
All right. Great. Thank you so much for the time.
Operator (participant)
The next question is from David Windley of Jefferies.
David Windley (Managing Director)
Hi, good morning. Thanks for taking my questions. Good, good afternoon in your case, probably. I wanted to follow up on Tim's question on the committed orders. If I look at the magnitude of COVID revenue in last year and this year, which, you know, would've been in the kind of EUR 22 million last year and maybe nine-ish, EUR 9.5 million, EUR 10 million this year, I'm guessing that the order magnitude for COVID would've been, you know, something around those numbers. Your change in orders year-over-year is EUR 88 million. It would seem like the majority of the change in orders year-over-year probably comes from the non-COVID reasons, the, you know, changes in timing of orders.
I wondered if you could peel that apart a little bit, confirm what I'm thinking, and maybe talk about what's happening in your order flow aside from COVID, ex-COVID. Thanks.
Marco Dal Lago (CFO)
Yes, thanks, David, from, for the question. Marco speaking. Yeah, right, last year we won about EUR 41.5 million of fresh orders in the first quarter related to COVID. This year, the amount is EUR 0. If you look at the fluctuation excluding COVID, yes, we had EUR 282 million last year and EUR 235 million this year. It's normal for us, I mean, quarterly fluctuation is a KPI. As Franco was mentioning, this is not the sole indicator we have to measure the demand coming from the market. We experienced fluctuation, but this is not the only indicator we have.
David Windley (Managing Director)
Got it. Related to that, you're talking about stronger growth in the second half. Can you talk about the visibility that you do have to that?
Marco Dal Lago (CFO)
Sure.
David Windley (Managing Director)
Either in committed orders or otherwise.
Marco Dal Lago (CFO)
Considering the Q1 revenues and the committed backlog only, we are covered for about 80% of the center point of our guidance. We still have nine months to generate the fresh order and to convert them into revenues for reaching our guidance.
Franco Moro (CEO)
Dave, we can confirm that these are the pretty normal situation at this time of the year. It is nothing that is different from the past, if you don't consider the different situation we experienced during COVID, but it's a very normal situation for the first quarter.
David Windley (Managing Director)
Got it. Great. Thank you. On the cost side, highlighted some additions in SG&A costs and BDS, as I suspect those are higher as you get closer to opening facilities in Latina and Indiana. You can correct me if I'm wrong there, but I'm wondering if that continues to ramp as we get closer to commercial revenue in those facilities, or have we seen a step function that now is more flat as we proceed through the year?
Marco Dal Lago (CFO)
We expect SG&A will be better leverage in the second part of the year. We are increasing SG&A expenses mainly driven by on the fact that we restart meeting customers with fair exhibition, and we are also strengthening the organization in G&A expenses with the regional organization and the public company status. Nevertheless, we expect in the second part of the year to better leverage our fixed expenses due to the growth of our business.
David Windley (Managing Director)
Okay, great. I'll leave it at that. Thank you.
Lisa Miles (SVP, Investor Relations)
Thanks, Dave.
Operator (participant)
The next question is from John Sourbeer of UBS.
Speaker 10
Hi. Hello. This is Teni calling in for John. Very good high HVS growth this quarter. Can you talk a little bit more about the traction we've seen around HVS? What is the typical timeline for introducing new products, and what are the drivers to get to this long-term mid-30% target? Thank you.
Lisa Miles (SVP, Investor Relations)
Just to confirm, your question is around high-value solutions and some of the drivers to get to our near-term target of the high 30%?
Speaker 10
Yes, that's correct. Also what's the typical timing for introducing any products in HVS?
Franco Moro (CEO)
The main driver for the growth of high-value solution is the fast growing area of biologics, where we have very strong demand related not only to GLP-1, as I mentioned before, but also in monoclonal antibodies and mRNA applications. This is the evidence that our strategy to invest in high-value solution is really something that matches the needs of our customers. The fact that we decide to accelerate our investment both in Europe, in Italy and in the US is because we have active programs with our customers that are in direction of the adoption of either clear cast devices and vials as a new standard in that space, and high-value syringes like Nexus syringes for injectors and other syringes that is the perfect answer to the needs of high sensitive biologic molecules.
Speaker 10
Thank you. If I could just, maybe one more. Can you talk a little bit more on pricing? What kind of, like, inflationary pressure are you know, experiencing in the quarter? Any pushback from customers on those pricing dynamics? Thank you.
Lisa Miles (SVP, Investor Relations)
May I ask you to repeat the question one last time?
Speaker 10
Sure. Can you talk a little bit more on pricing? What kind of inflationary sort of like pressure are you experiencing in the quarter? Are you receiving any pushback from customers on the pricing dynamics?
Marco Dal Lago (CFO)
Yeah, we can see inflation as anybody else. There are different level of inflation depending on the items. For example, we had a bit little of relief in energy cost and gas price in the first quarter, but on the other hand, the cost of labor is growing. Our methodology is the same we applied last year, planning in advance, more in advance compared with last year, but we keep on recalculating our cost basis and price accordingly to our customers.
Speaker 10
Thank you very much. Congrats on the quarter.
Franco Moro (CEO)
Welcome.
Operator (participant)
As a reminder, if you wish to register for a question, please press star and one on your touchtone telephone. For any further questions, please press star and one on your telephone. Okay, this ends the Q&A session. Ladies and gentlemen.