3D Systems' Breakthrough Technology Revolutionizes Pharmaceutical Industry
2023-08-10
3D Systems, a leading company in the 3D printing industry, held its Q2 2023 earnings call to discuss industry trends, performance, and future outlook. Led by CEO Jeff Graves, the meeting emphasized the importance of scale and the growing utilization of 3D printing in real factory production environments.
One of the key highlights of the meeting was the company's breakthrough technology in the pharmaceutical industry. They have developed a technology called h-VIOS, which enables the sustainability of life in the laboratory for the reproducible study of new drugs. This innovation is expected to have a significant impact on the pharmaceutical industry by accelerating drug development.
Under the leadership of Ms. Taci Pereira, the company has already secured its first contract with a major pharmaceutical company and anticipates securing another contract with a second major pharma company later this year. This demonstrates the industry's recognition of the potential of the company's technology. Additionally, the company has five additional programs with other major pharma companies in its pipeline, indicating further growth opportunities and interest in the technology.
The company believes that its h-VIOS product can significantly reduce both the time and cost for its pharmaceutical partners. Bringing a new drug to market is a costly endeavor, estimated at $2.3 billion. By streamlining the drug development process, the company's technology has the potential to save pharmaceutical companies a substantial amount of money and time.
Overall, the company's breakthrough technology in the pharmaceutical industry is a highly promising and exciting development. With its potential to revolutionize drug development and attract major pharmaceutical partners, the company is well-positioned for growth and success in the industry.
In terms of market outlook, the company faces challenges in its dental business, with a projected decline of around 35% for the full year 2023. However, they remain optimistic about the second half of the year, expecting more favorable comparisons to the previous year. In non-dental markets, there was unexpected weakness in the second quarter, but opportunities in the industrial and healthcare segments are expected in the future. The near-term environment is uncertain, with customers reevaluating capital expenditures due to rising interest rates, tightening budgets, and a cautious macroeconomic outlook. Despite these challenges, the company is experiencing growth in vital verticals such as personalized health solutions and industrial segments, including foundries, aerospace and defense, consumer and durable goods, and semiconductors. The company's Titan extrusion printing platform is gaining international traction.
The key drivers of the business are the performance of the dental business and the revenues from non-dental markets. The decline in the dental business has been a primary driver, with expectations of a 35% decrease in 2023. However, there are signs of stabilization and improved year-over-year comparisons in the second half of the year. The company's strong position in orthodontics is a cornerstone of the dental business. On the other hand, unexpected weakness in non-dental revenues in the second quarter was due to postponed opportunities in industrial and healthcare segments. The company remains optimistic about long-term demand drivers in these markets, but the near-term environment is uncertain due to customer reevaluations, rising interest rates, tightening budgets, and a cautious macroeconomic outlook.
The competitive landscape for 3D Systems is evolving in several ways. Firstly, the company is actively working to expand into new markets beyond orthodontics, indicating a desire to diversify their market exposure. Secondly, they have reorganized themselves by market verticals, specifically targeting high-value market verticals in healthcare and industrial sectors. This strategic focus suggests an intention to gain a competitive edge in these sectors. Thirdly, the company claims to have the broadest portfolio of hardware in the industry, offering both polymer and metal printing technologies. This commitment to providing a wide range of printing solutions caters to different customer needs. Lastly, the company is proactively identifying and capitalizing on emerging market opportunities, potentially giving them a competitive advantage.
While the company's capital spending plans were not explicitly mentioned, it is implied that they are taking a cautious and conservative approach to cash spending. They are moving slowly on approving purchase orders for higher-priced products, and customers are also being more prudent in expanding capacity or bringing in new capabilities. This indicates a slower pace of capital expenditure and a focus on prudent expansion.
The participants of the 3D Systems Q2 2023 conference call and webcast included Dr. Jeffrey Graves (President and CEO), Michael Turner (EVP and CFO), Andrew Johnson (EVP, Chief Corporate Development Officer, and Chief Legal Officer), and Mick McCloskey (VP, Treasurer, and Investor Relations).
In conclusion, the conference call provided valuable insights into various important topics, including the significance of scale in the industry, the company's breakthrough technology in the pharmaceutical sector, their performance in the second quarter, and the outlook for the remainder of the year. For more detailed financial information, readers are encouraged to refer to the company's press release and SEC filings.
The company's focus on regenerative medicine, particularly 3D printed lungs, was also highlighted during the call. They believe this technology has transformational potential and have partnered with United Therapeutics to achieve human trials in 2026. With a significant unmet need for lung transplants, the company sees a clear path to commercialization. Additionally, they are developing a proprietary organ-on-a-chip platform called h-VIOS, which allows pharmaceutical companies to test drugs on a cellular-sized chip that mimics human organ response.
Overall, 3D Systems is positioned for growth and success with its breakthrough technology, strategic focus on high-value market verticals, and commitment to providing a broad portfolio of printing solutions.