Siegfried’s small molecule sales to drive 5.9% CAGR through 2029: analysts

Driven by a healthy outlook for small molecule drug sales, Siegfried is well-positioned as a global contract development and manufacturing organization (CDMO) to grow at a 5.9% compound annual rate through 2029, according to analysts at William Blair. The firm on Tuesday initiated coverage of the Switzerland-based CDMO with an “outperform” rating.

“While often overlooked, we believe the small molecule space is an attractive market for CDMOs, and we expect a healthy outlook for small molecule drug sales,” analysts Max Smock and Christine Rains wrote in a Sept. 9 report to investors, while noting that approximately 80% of Siegfried’s revenue is generated from manufacturing services for small molecule drugs.

With about 3,800 employees across 13 sites in seven countries on three continents, Siegfried has grown into one of the world’s leading CDMOs, according to the analysts. Of Siegfried’s global network of 13 sites, eight locations are optimized for drug substances and five facilities are designed for drug products.

Siegfried’s only Asian site is in Nantong, China, which specializes in the custom synthesis of active pharmaceutical ingredients (APIs) and intermediates for the pharmaceutical industry. The company operates nine sites in Europe including a new quality control lab in Minden, Germany, and a new R&D center for drug substances in Evionnaz, Switzerland.

Within drug substances, the analysts’ report noted that Siegfried develops and produces advanced intermediaries and APIs, with about 75% of revenue generated from custom API manufacturing for individual clients and the remaining 25% coming from the CDMO’s broad portfolio of non-exclusive APIs and pharma-grade substances.

“Siegfried gained critical scale in small molecule API manufacturing a decade ago through one of its largest-ever acquisitions, the purchase of three European API sites from BASF, setting it on a pathway to improving profitability and making it one of the West’s leading outsourced API suppliers,” according to the analysts.

Drug products poised for growth

Due to the loss of COVID-19 sales over the last couple of years, Siegfried’s revenue from drug products declined to 31% in 2024. However, the analysts expect drug products revenue growth to outpace drug substances revenue growth with the company’s “more recent push into the faster-growing market for sterile injectables (most common dosage format for biologics), as well as its expanding capabilities in highly potent APIs (fastest-growing portion of the small molecules market).”

The analysts also expect Siegfried’s drug product segment margin to improve “so that it is closer to parity with the drug substance business over time” as the company ramps up production at its 2021 acquired finished dose site in Barberà del Vallès, Spain, from Novartis, as well as its new fill-finish lines in Europe and the U.S.

“We believe Siegfried’s available capacity in high-demand dosage formats differentiates the company from peers in the injectables space,” the analysts wrote. “Not only does Siegfried have vial filling capacity, which remains the most popular sterile packaging form, but it is also building up capacity for prefilled syringes and specialized cartridges/autoinjectors.”

At its Hameln, Germany site, Siegfried is adding two new manufacturing lines for pre-filled syringes and cartridges, the first expected to start generating revenue in 2026 and the second in 2027, in addition to expanding its fill-finish capabilities. The CDMO is also adding spray drying technology at its Barberà facility due to strong demand, with additional capacity expected to become available by the end of 2025 and to start generating revenue in 2027, according to the analysts.

Biologics opportunities, CGT challenges

Although Siegfried is a global CDMO focused on small-molecule drug substance and drug product manufacturing across a variety of dosage forms, primarily oral solids and sterile injectables, the analysts pointed out that Siegfried’s biologics drug product offerings are more limited — accounting for about 12% of sales. However, they said Siegfried is currently expanding its capacity and capabilities to take advantage of the growing momentum in the biologics drug product market.

“We consider the biologics drug product space to be one of the most attractive markets at present for CDMOs, and we expect a strong outlook for drug sales and continued increases in outsourcing penetration to drive a 10.6% biologics sales CAGR [for Siegfried] from 2025 through 2029,” according to the analyst report.

At the same time, when it comes to the cell and gene therapy (CGT) market, the analysts noted that Siegfried has a lack of experience and competes with several large global contract manufacturers — including viral vector manufacturing leaders Catalent and Thermo Fisher Scientific, as well as Charles River Laboratories, Fujifilm, Lonza, and Wuxi Biologics.

“While the company has a strong track record in the drug substance market for small molecules and in the drug product space for small molecules and biologics, Siegfried has limited experience in the cell and gene therapy market, where it will face competition from large and well-capitalized players with established viral vector operations,” the report states.

The analysts believe there could be a “sustained drag” on margins from Siegfried’s new viral vector facility in Zurich, Switzerland, which is expected to be operational in 2025. “In addition to the risk that Siegfried is not able to successfully break into the cell and gene therapy market, there is a possibility that this new offering may distract management from its core drug substance and drug product operations, further adversely affecting results,” they wrote.

US footprint, geopolitical tensions

In the U.S., Siegfried has three sites: Grafton, Wisconsin, Irvine, California, and Pennsville, New Jersey. Grafton specializes in early-phase development and manufacturing services, including services for projects with highly potent APIs. Irvine is a sterile drug product manufacturing site specializing in innovative and difficult to manufacture pharmaceuticals, ophthalmics, and drug delivery devices, while Pennsville is Siegfried’s drug substance manufacturing site for the U.S. market and provides spray drying operations globally.

In July 2024, Siegfried completed its acquisition of a CDMO in Grafton from Curia Global, expanding Siegfried’s range of drug substances offerings for small and medium-sized pharmaceutical companies.

Earlier this year, Chief Scientific Officer Stefan Randl told Pharma Manufacturing that Siegfried’s end-to-end service offerings from early-stage development through to commercialization — starting with drug substances and moving to drug products — is a value proposition that resonates with customers looking for a one-stop shop for both the development of active ingredients and finished formulated drugs.

While the CDMO is largely based in Europe, Randl noted the company’s “strong U.S. presence” including its recently acquired “Acceleration Hub” in Grafton designed to “help pharmaceutical companies accelerate their early-phase clinical materials.” Siegfried having multiple, reliable supply points — with “manufacturing sites spanning all the way from the U.S., across Europe, to Asia” — is critical for customers in the current geopolitical environment, according to Randl.

In their report, the analysts called out the fact that approximately 20% of Siegfried’s revenue is “tied to the U.S., making the company sensitive to any factors impacting international trade and geopolitics.” However, they expect any direct impact on margins to be minor given that the CDMO’s customers “typically take possession of finished goods as soon as the products leave Siegfried’s facilities, meaning it is not responsible for footing the bill for any tariffs.”