Bachem : Annual Report EN

BACHEM

ANNUAL REPORT

20

23

CHANGE AND CONTINUITY

Bachem is a leading, innovation-driven company specializing in the development and manufacture of peptides and oligonucleotides. The company, which has over 50 years of experience and expertise, provides products for research, clinical development, and commercial application to pharmaceutical and biotechnology companies worldwide and offers a comprehensive range

of services. Bachem operates internationally with headquarters in Switzerland and locations in Europe, the US and Asia. The company is listed on the SIX Swiss Exchange. For further information, see:

www.bachem.com

CONTENT

2

OUR BUSINESS

• WALKTHROUGH 2023

• LETTER TO SHAREHOLDERS

• MARKET ENVIRONMENT AND TRENDS

• VISION, MISSION AND STRATEGIC FOUNDATIONS

1. 2023 IN BRIEF

1. GROUP RESULTS

1. INNOVATION AND TECHNOLOGY
2. CUSTOMERS AND PIPELINE

1. OPERATIONS AND CAPACITY EXPANSION

20

SUSTAINABILITY REPORT

22 PEOPLE, CULTURE, EMPLOYER

1. SAFEGUARDING THE ENVIRONMENT

1. ACTING ETHICALLY

1. QUALITY AND SAFETY

32

CORPORATE GOVERNANCE

41

COMPENSATION REPORT

51

FINANCIAL REPORT

52 CONSOLIDATED FINANCIAL STATEMENTS

84 FINANCIAL STATEMENTS OF BACHEM HOLDINGAG

1. SHAREHOLDER INFORMATION
2. FINANCIAL CALENDAR

1 BACHEM ANNUAL REPORT 2023

WALKTHROUGH 2023

MARCH 3

MARCH 10

DIVERSIFICATION OF LARGE- SCALE CUSTOMER PORTFOLIO

Conclusion of a long-term framework agreement

for a development project with peptides with a volume worth over CHF 500 million 2027-2031.

MARCH 7

BUSINESS RESULTS: BACHEM ACHIEVES SOLID SALES GROWTH IN 2022

Sales increase by +5.7% year-on-year to CHF 531.7 million. EBITDA margin of 30.2%.

CAPITAL INCREASE

Raising of CHF 108.1 million in an accelerated bookbuilding process. The proceeds will be used to expand capacity at all locations.

APRIL 20

ANNUAL GENERAL MEETING 2023

Dividend increased to CHF 0.75 per share. All proposals of the Board of Directors approved.

MAY 7

TIDES USA

Presentations including the control of mutagenic and genotoxic substances in peptides and challenges for large-volume production of peptides.

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WALKTHROUGH 2023

JUNE 24

BACHEM AT THE AMERICAN PEPTIDE SYMPOSIUM

The Vincent du Vigneaud Prize for outstanding peptide research goes to Marcey Waters and Helma Wennemers.

JULY 27

SLIGHT SALES

GROWTH IN THE FIRST HALF OF 2023

Group sales increase to CHF 239.9 million (+2.1%, +5.3% in local currencies). EBITDA margin of 21.9%.

SEPTEMBER 15

BACHEM REORGANIZES RESPONSIBILITIES IN GROUP MANAGEMENT

CEO Thomas Meier takes on additional duties as Chief Operations Officer (COO) and has combined responsibility for the strategic and operational direction of production.

OCTOBER 24

BACHEM AT THE CPHI TRADE FAIR IN BARCELONA

Bachem presents solutions for scalable oligonucle- otide production and oligonucleotide quality control.

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LETTER TO SHAREHOLDERS

DEAR

SHAREHOLDERS

In 2023, Bachem increased sales by 8.6% to CHF 577.3 million. Profit at EBITDA level rose by 3.9% to CHF 166.7 million with a margin of 28.9%. If one takes into account the influence of the strong Swiss Franc, sales even grew by 12.8% and the EBITDA-margin was at 30.5%.

Bachem has thus delivered a good annual result. The Board of Directors will propose to the Annual General Meeting that the dividend be increased by CHF 0.05 to CHF 0.80 per share.

As a specialist in peptides and oligonucleotides, Bachem is a leading supplier of complex molecules. In this space, a paradigm shift is taking place. For a long time, peptides were a niche product compared to other classes of active pharmaceutical ingredients. In the future, the top-selling pharmaceutical products worldwide will be based on peptides. This will lead to larger and longer term order volumes, a trend that continued in 2023. We announced a second significant order for peptides in March.

Bachem is expanding and driving changes within the company to accommodate this shift. A key priority is the construction of the world's most modern plant for the production of high volumes of peptides and oligonucle- otides (building "K") in Bubendorf. This new plant is scheduled to go into operation in the second half of 2024 and will be subsequently further expanded.

However, more capacity alone is not enough. The new world of large-scale production also requires additional processes and skills.

Bachem was able to achieve this growth last year thanks to improved capacity utilization of existing plants and, above all, the enormous commitment of its employees. We would like to thank our more than 2 000 employees for this!

The year also brought challenges. The organization had to be adjusted in the USA, particularly at the Torrance site, which led to redundancies. In Vionnaz, a fire in November led to temporary restrictions on small molecule production, luckily without any serious injuries.

The long-term strategy remains unchanged. Bachem has set itself the goal of remaining one of the leading companies for peptides and oligonucleotides, both in large-volume production and in the clinical development business. In order to remain competitive in the long term, Bachem also intends to defend a leading position in the industry in the production technology for

TIDES molecules.

Thanks to a strong market environment and our capacity expansion, we see the potential to reach one billion in sales by 2026 with an EBITDA margin of over 30%.

We are approaching 2024 confidently, building on our leading expertise and our highly motivated employees.

We would like to thank you, dear shareholders, for your trust and support.

Dr. Kuno Sommer	Thomas Meier
Chairman	CEO and Chairman of the
of the Board of Directors	Group Executive Board

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CORPORATE

EXECUTIVE COMMITTEE

Dr. Günther Loidl	Alain Schaffter
Chief Technology Officer (CTO)	Chief Financial Officer (CFO)
	Thomas Meier
Dr. Torsten Wöhr	Chief Executive Officer (CEO)
Chief Commercial Officer (CCO)	Chief Operations Officer (COO)

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MARKET ENVIRONMENT AND TRENDS

Global demand for peptides and oligonu- cleotides (TIDES) by the pharmceutical and biotechnology industry continues to grow. In 2023, the main headlines were captured by a new generation of medicinal products for diabetes and obesity. However, the role of chemically synthesized peptides and oligonucleotides is much bigger than this.

Complex "TIDES" molecules: from niche modality to mainstream

Suppliers to pharmaceutical and biotechnology companies - CDMOs (Contract Development & Manufacturing Organizations) - are becoming more critical. In par- ticular, the complex production of peptides and oligonu- cleotides favors specialized companies such as Bachem, which build customer relationships in early clinical development phases and accompany and support customers in all aspects of the development and approval process. This often allows the customer relationship to continue after a drug's approval.

Spotlight on GLP-1 drugs in Diabetes and Obesity

Over one billion people suffer from obesity and over 530 million from diabetes worldwide, according to the WHO.

Both are chronic diseases that can lead to serious health complications, including heart disease, stroke, blind- ness, and kidney failure. The burden of disease for these conditions is high across the world, as is the cost

of diabetes and obesity and the related complications to society.

A new generation of medicines, based on peptides are becoming available to treat diabetes and obesity. The use of glucagon-like peptide 1 (GLP-1) agonists in diabetes and obesity are major drivers of growth in the market for peptides. 2023 saw additional approvals for these drugs, as well as announcements by both originator pharma companies and pharma suppliers to ramp up manufacturing capabilities.

Beyond GLP-1

The growth of GLP-1 is putting the spotlight on the need for larger manufacturing volumes for peptides. This development adds to a trend with biopharma companies increasingly leveraging suppliers for the manufacture of drug product, even when partial in-house production is maintained.

The demand for synthetically (i.e., chemically) produced peptides continues to grow strongly. However, other factors are also shaping the market:

GROWTH TRENDS FOR TIDES

MORE COMPLEX	LARGER	INNOVATIONS IN	NEW MEDICAL
MOLECULES	PRODUCTION	CHEMICAL	APPLICATIONS
	VOLUMES	SYNTHESIS

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MARKET ENVIRONMENT AND TRENDS

• The trend towards larger manufacturing volumes is fueled by oral dosage forms that require more active ingredient quantities.
• Cost-effectivechemical manufacturing is now available for molecules that could previously only be made recombinantly. These include several generics that promise expanded access to peptide-based medicines.
• Peptides are being used in new therapeutic indications areas.

With these driving forces, the global peptide API market is estimated to be CHF 1.6 billion, with over 1,100 pharma peptide projects worldwide. Currently, there are an estimated 83 marketed peptides in the world.

The global oligo API market is estimated to be CHF 1.3 billion, with 18 approved oligos globally and numerous recent and emerging new indications, such as psoriasis, polycythemia vera, IBD, and CV diseases. The potential application areas for oligonucleotides are therefore growing, as well - both in their use against rare diseases and in common diseases.

Macroeconomic challenges

Overall, the market for complex "TIDES" molecules is a growing and dynamic market with significant upside potential. However, there are also a number of challenges that companies need to navigate in order to be successful.

The CDMO market is not free from risk and 2023 did highlight some. For one, the need to increase volumes requires high level of capital, which means being able to secure customer trust for pre-payments in strained financial markets.

In addition, higher interest rates have made it more difficult for small biotech companies to receive funding, with fewer early-stage projects and less opportunity for small-scale manufacturing.

A space for specialists with resilience

So what do companies need to succeed in this environment?

• Smart portfolio selection, with expertise in identifying the right molecules.
• Focus on TIDES expertise, with people-basedknow-in chemical synthesis of these complex molecules.
• Large-scaletransformation and sufficient portfolio expansion.
• Solid financing, favouring well-leveraged companies with enough stability and long-term resilience.

The high degree of complexity of TIDES requires specialized and rare knowledge of chemistry and technology that needs to be maintained.

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VISION, MISSION AND STRATEGIC FOUNDATIONS

We are convinced that the role of TIDES as ingredients for medicines will grow in significance in the years ahead. Our products and services can positively impact patients' lives by helping to bring new and innovative therapies to market.

Bachem offers a differentiated value proposition that addresses pharma and biotech companies' unique needs in developing and manufacturing peptides and oligonucleotides.

In the world of active pharmaceutical ingredients, peptides and oligonucleotides, also known as TIDES, play a special role between chemically produced "small molecules" and biotechnologically produced "large mole- cules". They can be produced chemically, but require specialized knowledge in production and purification due to their complexity and molecular mass.

Our vision is clear: we want to remain the world's leading company in the development and production of peptides and oligonucleotides.

Our mission is to continue to develop our company as the world's leading specialist for peptides and oligonu-

cleotides. We are working towards a turnover of more than one billion Swiss francs and high profitability and want to maintain an unsurpassed position in our market.

Bachem's focus is to be the supplier in this class of API that best covers the entire spectrum of contract development and manufacturing (CDMO) for the pharma and biotech industry. By combining all three seg- ments, pharmaceutical and biotech companies can take advantage of Bachem's expertise.

Our offer covers three areas:

• Production of large quantities of standardized active pharmaceutical ingredients (APIs) according to the customer's exact process specifications (CMO).
• Services and manufacturing for customers conducting clinical trials prior to regulatory approval (CDMO).
• Pioneering role in the development and use of new manufacturing technologies that increase efficiency and production yields (trailblazing
  CDMO)

Bachem has identified five strategic foundations in order to remain a leader. The combination of these foundations sets us apart from our competitors.

VALUE PROPOSITION

CMO

CDMO

TRAILBLAZING CDMO

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