Selvita Announces Its New Development Strategy for 2020 - 2023

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Apr 29, 2020, 12:38 ET

KRAKOW, Poland, April 29, 2020 /PRNewswire/ -- Selvita S.A. (WSE: SLV) - one of the largest preclinical contract research organizations in Europe, has published its development strategy for 2020-2023.

The announcement of the new development strategy comes shortly after the completed corporate split of Selvita and Ryvu Therapeutics, and constitutes a new opening and an indication as to how the CRO (Contract Research Organization) company plans to develop in the coming years.

The strategy assumes further development based on an organic growth accelerated with targeted acquisitions. In 2020-2023, the company intends to execute investments worth up to EUR 75-90 million.
For the execution of the strategy Selvita plans to raise approx. EUR 21 million by issuing up to 15% of the share capital in a Follow-On offering directed to qualified investors. Approximately 80% of the proceeds will be allocated for acquisitions.
The new development strategy assumes achieving over EUR 70 million in revenues, with a stable EBITDA margin and at least EUR 230 million market cap at the end of 2023.
Meanwhile, the company continues the dynamic growth of its business scale, increasing revenues by 41%, up to EUR 7.2 million in the first quarter of 2020 (preliminary results) and presenting a solid backlog of EUR 19.6 million, i.e. 44% higher than same time, last year.

The development plan is based on two pillars: organic growth and acquisitions. In line with the assumptions of the strategy, Selvita's main investment expenditures in 2020-2023 will focus around acquisitions of European preclinical CRO companies, as well as establishment of Selvita Research Center. Execution of these plans will enable Selvita to significantly increase the scale of the business and expand services offering, allowing for a three-fold increase in revenues in 2023. Selvita's Management Board expects that execution of the new strategy will also allow for an increase in the Company market cap to over EUR 230 million. Moreover, thanks to planned investment expenditures, Management hopes that Selvita will be able to strengthen its position on the market and as a result achieve in the mid-term, the position among TOP10 global preclinical CROs.

The increase in revenues and financial results, which we've been achieving initially as Services segment of the hybrid Selvita, and now as an independent entity, constitute accomplishment of the goals we have set ourselves in the strategy published in 2017, as well as communicated later on, aiming at an average 30% annual increase in revenues and double digit profitability.

Over the 12 years of our activity, we have become a highly recognizable and reputable company in the most important research outsourcing markets. We have foundations, as well as the abilities to set ourselves further ambitious goals - comments Bogusław Sieczkowski, co-founder and Chief Executive Officer at Selvita.

In order to reach goals set forth by the Company in the Strategy, it has to implement investment plan the value of which will amount of up to EUR 90 million by 2023. Approx. EUR 21 million will be secured from the share issue, whereas the remaining amount will be covered by Company's own funds, bank loans, as well as already received and future non-dilutive grants.

One of the major assumptions for further Selvita growth, are the acquisitions of selected preclinical CRO companies which will either complement the current Company offering, or will allow for the expansion of its operation scale. The selection criteria for an acquisition target, favors entities with standalone revenues in the range of EUR 2-20 million and 30 -150 employees. The Company plans to allocate EUR 35-50 million to the acquisitions over the next three years. Acquisitions will be also the area for which majority of the resources from the Follow-On offering (up to 2.38 million shares) will be allocated to. The share issue is subject to the approval of the Shareholders Meeting convened for May 26, 2020.

The next stage of Selvita's development assumes continuation of the dynamic growth. Organic growth will be supported with the acquisition program. Our ambitious development plans require a quick access to investment capital thus the decision to conduct a share issue. Proceeds from the offering will be allocated mainly to finance the acquisitions, which will allow us to expand our scale of business and be even more competitive on the global market – adds the CEO.

Another key factor which will influence the Company's development will be the creation of Selvita Research Center with a research area of 4000 m2, planned to be ready in 2022/2023. Own laboratory space is an important competitive advantage for CRO companies. With the completion of the new Center, Selvita will have 10,000 m2 of research space available. As a consequence, the Company is planning to increase employment from current 500 to 700 employees by the end of 2023. Own laboratories and strengthening of the scientific staff, will allow Selvita to increase its scale of business, expand its services offer and launch innovative new services. The Company has already signed a preliminary contract for a plot of land in the neighborhood of its current laboratories. The initiation of the investment is planned for 2021. The total value of the investment will amount to approx. EUR 30 million and will be financed mainly from the bank loan, grant financing and own resources.

For the years 2020-2023, the Company also intends to spend approx. EUR 10 million for organic development and replacement investments.

We want to continue building our competitive position on the global market. Investment in our own research space has a double justification. On the one hand, we have exhausted the possibilities of further expansion of our rented research space in Krakow and we have to secure the space for further growth. On the other hand, we are currently in such a position and phase of corporate development that in order to further build our competitive position we need to own a part of the research space on which we operate. It offers stability which our customers ask for, and in addition, the mix of rented and owned space is considered as a golden standard among reputable global CROs. Additional research space, state-of-the-art equipment and innovative technologies, will allow us to significantly expand our offer and increase competitiveness. At the same time, acquisitions will enable us to increase the scale of business, as well as complement our competences. Until the end of 2023, we're planning to execute three acquisitions, with the first one taking place this year. We have analyzed over 170 companies, out of which we have selected 20 entities which drew our attention. With several of them we're in close contact – explains Boguslaw Sieczkowski.

Preliminary consolidated financial results for Q1 2020

The dynamic development of the Company is once again confirmed by the achieved financial results. The value of Services segment revenues in the Q1 2020 amounted to EUR 5.8 million, indicating a 45% increase in comparison to the same period last year. The Company's EBITDA profit for Q1 2020 reached EUR 1.7 million and was 52% higher than in Q1 2019. According to the company's preliminary results, the net result for Q1 2020 has increased by 95% compared to Q1 2019, up to EUR 0.9 million. At the end of March 2020, Selvita had EUR 3.8 million in cash. The company has also updated its backlog for this year - as of April 28, 2020, the value of the contracted portfolio of orders and grants, amounts to EUR 19.6 million* and is 44% higher than a year ago**.

* Backlog understood as the value of the contracted portfolio of orders arising from trade contracts and grant agreements signed as on April 28,2020.
** As on April 15, 2019

About Selvita

Selvita is a CRO (Contract Research Organization) Company providing multidisciplinary support in resolving the unique challenges of research within area of drug discovery, regulatory studies, as well as research and development.

The company was established in 2007 and currently employs ca. 500 professionals, of which over 1/3 hold PhD title. Selvita is headquartered in Krakow, Poland, with a second research site in Poznan, Poland and foreign offices located in Cambridge, MA and South San Francisco, in the U.S., as well as in Cambridge, UK. The company has a proven track record of successfully completed projects and customers in 40 countries. Majority of Company revenues come from pharma, biotech, chemical and agrochemical companies from the US and Europe. Selvita is listed on the Warsaw Stock Exchange (WSE:SLV).

Forward-Looking Statements

This release may contain forward-looking statements, including, among other things, statements regarding the guidance from management and financial results. Selvita cautions the reader that forward-looking statements are not guarantees of future performance. Forward-looking statements involve known and unknown risks, uncertainties and other factors which might cause the actual results, financial conditions, performance or achievements of Selvita, or industry results, to be materially different from any historic or future results, financial conditions, performance or achievements expressed or implied by such forward-looking statements. In addition, even if Selvita's results, performance, financial conditions, and the development of the industry in which it operates are consistent with such forward-looking statements, they may not be predictive of results or developments in future periods. Given these uncertainties, the reader is advised not to place any undue reliance on such forward-looking statements. These forward-looking statements speak only as of the date of publication of this document. Selvita expressly disclaims any obligation to update any such forward-looking statements in this document to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements, unless specifically required by law or regulation.

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SOURCE Selvita