CEO statement

With our new us plant, we are one step closer to becoming a global CDMO

The pandemic significantly impacted our market and patients, and slowed our growth. At the same time, we completed the acquisition of Foster Delivery Science in the US, bringing us additional expertise, product formulation capabilities, and production capacity. We will now integrate the operations in Sever Pharma Solutions and create a platform to meet the increased demand for our specialist knowledge.

During the year, the pandemic continued to impact our operations significantly. Our customers could not access hospitals and doctors similarly, leading them to postpone planned campaigns and product launches. The growth of new patients with diagnoses and the need for medicines also decreased when many chose to stay at home and not visit clinics. Our supply chain was also affected. There was a shortage of personal protective equipment and sterile consumables, as suppliers naturally prioritized the vaccine manufacturers.

Some of our customers temporarily also chose to put the development of new products on hold, but we have been able to transfer those resources to other projects. However, this meant that we could not reach the level of growth we had anticipated. Our goal was an annual growth of 15 percent, but the eventual outcome was 3 percent. This is still quite reasonable based on the conditions during the pandemic and how the market has generally been affected.

Market activity has already begun to increase, and many factors that were limiting our growth are no longer in place. One example is HIV treatment in developing countries, an area largely dependent on funding from governments and organizations like the UN, USAID, and various Non-governmental organizations (NGOs). For the past two years, they have been spending all their resources combating Covid-19. Now we can see the focus shifting back to the treatment of HIV and family planning, which will increase the demand for our products.

A new US site with expansion possibilities

We took another critical step towards becoming a global CDMO by acquiring the US-based company Foster Delivery Science during the year. The acquisition has given us access to a new facility for R&D, which provides unique expansion opportunities. In addition, we gained access to an entirely new therapy area that fits well into our existing product portfolio and our competencies regarding manufacturing and releasing active substances in vaginal rings and implants. Foster Delivery Science develops and manufactures injectable biodegradable ocular implants. It allows effective local treatment of many indications, such as changes in vision and diabetes-related blindness. There is a strong unmet demand in this segment, and we have high hopes that this will be a profitable new area for Sever Pharma Solutions. Foster Delivery Science also has excellent expertise in the pre-clinical phase, something we will be able to take advantage of and update our best practice. They also have extensive process knowledge in extrusion, so alongside our 30 years of experience, we can bring about a fruitful cross-fertilization of knowledge and skills.

The acquisition also gives us the possibility to expand our production. The Malmö site is located in a densely populated area with limited expansion opportunities. In contrast, there are large areas with space for additional buildings at the US site, enabling us to build commercial production facilities in the coming years.

The next step will be to fully integrating the US site into our existing business. We will base the technical integration on a multi-site setup, defining what we will manage locally and globally. We will also start working on a shared corporate culture, as we are becoming increasingly international.

Building a global CDMO

The successful acquisition of Foster Delivery Science has increased our interest in making further acquisitions. We continuously screen the market to find companies that can fit into our profile and help to grow our global presence. We are primarily looking for companies with expertise in special formulations in line with our expertise in extended release, such as implants, Intrauterine devices (IUD), and patches, with front-end technologies where we see a positive market trend.

Our goal is to build a global CDMO with a niche strategy. There are few high-potency product manufacturers, and almost no one works with polymer implants. In 2021, we expanded our portfolio to include the filling of sterile products. We have built and qualified a line and are now testing the first products, which we expect to launch in 2023. It is an auto-injector filled with sterile, high-potency liquid, which fits well within our niche.

Unique competence in an expanding market

The market outlook is generally positive, especially for our new implant types for ophthalmology. This is one of the therapy areas with the most substantial growth, and where we have several products under development and in clinical trial programs. We are seeing increased demand, so this will be one of our focus areas in the years to come.

Another factor driving the market is the need for increasingly cost-effective solutions. Here, our implants and products with extended release have an advantage because they work for months and, sometimes years. As the product is delivered locally, it also requires lower dosing. These products will also be highly effective for e.g. pain treatments, diabetes, and other chronic diseases where no dose adjustments are needed. In addition, it ensures that the patient receives the correct quantity of medication every day. An implant is positive for the cost of the dose, the effectiveness of the treatment, and the patient’s convenience – all essential factors as the number of patients with chronic diseases increases.

A one-stop shop

We are also seeing an increasing influx of new projects, which is positive. Our entire project organization is working full-time, focusing on building additional capacity in premises, equipment, personnel, and skills. We will do this step by step to ensure that we meet our customers’ needs. Many pharmaceutical customers want to keep clinical development and commercial manufacturing in the same place. We have an advantage because we are a full-service organization comprising the entire process. At the same time, we offer customers the flexibility to choose the services they need, such as market access and regulatory affairs support.

The challenge ahead lies in recruitment and finding the right skills. Our mix of pharmacy and polymer technology is unique, so we often recruit specialists in one category and train them internally in the other. We recruit from Sweden and Denmark, and now also the US. Our site is located near Boston, where there is a cluster of companies in medical technology and many people with pharmaceutical skills. Another critical area for securing competence is to work actively to retain our staff and offer the best workplace. It is essential to create optimal working conditions and opportunities for personal development. Our values and ambition to provide affordable medicines to the developing world will also attract talent.

Preparing for accelerated growth

In Sweden, we have seen very high growth rates, and this has created some bottlenecks. Work is underway to develop our internal processes and our organization to handle a more significant number of projects, coordinate our three sites, and create a common culture for the companies that are now part of Sever Pharma Solutions.

We have profitable growth and are both ready and able to make more investments, build a more robust structure, recruit more talent, and make more acquisitions. Together with all our competent and committed employees, we now have all the prerequisites in place to grow and make a difference in the world.

Malmö, October 14, 2022

Kenneth Stokholm, CEO