Catalent, Inc.

(NYSE:CTLT) Q1 2021 Results Conference Call November 3, 2020 8:15 AM

ET

Company Participants

Paul Surdez - Vice President, Investor Relations

John Chiminski - Chairman and CEO

Wetteny Joseph - SVP and CFO

Conference Call Participants

Dave Windley - Jefferies

John Kreger - William Blair

Tycho Peterson - J.P. Morgan

Juan Avendano - Bank of America

Jacob Johnson - Stephens

Jack Meehan - Nephron Research

Dan Brennan - UBS

Thomas Kelliher - RBC Capital Markets

Evan Stover - Baird

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Catalent, Inc.
First Quarter Fiscal Year 2021 Earnings Conference Call.

At this time all participants are in a listen-only mode. After the speakers�
presentation, there will be a question and answer session. [Operator Instructions].
Please be adviced that today�s conference is being recorded.

I would now like to hand the conference over to your speaker today, Paul Surdez,
Vice President of Investor Relations. Please go ahead, sir.

Paul Surdez

Good morning, everyone, and thank you for joining us today to review Catalent's
first quarter 2021 financial results. Joining me on the call today are John
Chiminski, Chair and Chief Executive Officer; and Wetteny Joseph, Senior Vice
President and Chief Financial Officer. Please see our agenda for this call on Slide
2 of the supplemental presentation, which is available on our Investor Relations
website at www.catalent.com.

During our call today, management will make forward-looking statements and refer to
non-GAAP financial measures. It is possible that actual results could differ from
management's expectations. We refer you to Slide 3 for more detail.

Slides 4 and 5 discuss the non-GAAP measures and our just issued earnings release
provides reconciliations to the most directly comparable GAAP measures. Please also
refer to Catalent's Form 10-Q regarding additional information on the risks and
uncertainties that may bear on our operating results, performance and financial
condition including those related to the COVID-19 pandemic.

Now I would like to turn the call over to John Chiminski whose prepared remarks are
covered on Slides 6 and 7 of the presentation. John?

John Chiminski

Thanks, Paul, and welcome, everyone, to the call. Before diving into the first
quarter results, I want to remind you that our top priority during the COVID-19
pandemic continues to be keeping our employees safe and maintaining business
continuity. I'm proud of our teams for literally working around the clock to
deliver high quality products and services including potential COVID-19 therapies
and vaccines for our customers and our patients around the world.

I'm pleased to report we had a very strong start to fiscal 2021, which when
combined with the higher levels of net demand we now expect for the back half of
the year, led us to raise our fiscal 2021 revenue expectation by $130 million to
$180 million and our adjusted EBITDA expectation by $40 million to $60 million.

In the first quarter. our constant currency revenue growth was 26% year-over-year,
of which 20% was organic. As a reminder, we also reported more than 20% organic
year-over-year revenue growth last quarter. Adjusted EBITDA of $174 million
represents constant-currency growth of 35% over the first quarter of fiscal 2020,
including organic growth of 23%. Our adjusted net income for the first quarter was
$78 million or $0.43 per diluted share, up from $0.26 per share in the first
quarter of fiscal 2020.

The Biologics segment was by far the strongest contributor to our first quarter
results as net revenue doubled over the first quarter of fiscal 2020 including 83%
organic growth with margin expansion of more than 900 basis points to 28.2%. While
projects related to COVID-19 were a notable contributor to our Biologics segment
growth similar to last quarter, underlying demand across the segment's offerings
was very high even when excluding these projects. Biologics continues to become a
more meaningful contributor to our growth profile with the segment contributing 44%
of the company's revenue in the quarter compared to 28% in the first quarter of
fiscal '20.

Also adding to the quarter's performance was the Clinical Supply Services segment,
which showed revenue growth after a dip in the fourth quarter of fiscal 2020 when
COVID-19-related clinical trial disruptions were most abundant. The top line growth
in these two segments more than offset headwinds experienced in the Softgel and
Oral Technologies and Oral and Specialty Delivery segments.

In Softgel and Oral Technologies, consumer health products had a slow start to the
year, which we attribute in part to a decrease in occurrence of common flus and
colds due to limited travel and social gatherings worldwide. Softgel and Oral
Technologies also experienced a decrease in revenue for prescription products in
North America. Looking ahead, we believe that some of the products we manufacture
that were approved earlier this year, experienced muted launches due to the COVID-
19 pandemic. We expect these products and other planned launches will see increased
demand and will contribute more in the second half of the fiscal year leading
Softgel and Oral Technologies to better performance than the first half.

For Oral and Specialty Delivery we saw continued revenue growth and new product
momentum in our Zydis platform, which was offset by a decrease in early phase
development activity due to pandemic-related mitigation efforts, including
lockdowns experienced worldwide. We continue to be very optimistic for long-term
growth in the OSD segment given its 200-plus molecule pipeline, including the new
novel Zydis Ultra technology, which will enable higher drug loading into each Zydis
tablet. We believe that the Zydis Ultra platform, after its commercial launch in
the 2022 to 2023 time frame, will drive significant volume growth and can
potentially lift the franchise to over 2 billion doses per year compared to the
current annual run rate of approximately 1.4 billion.

I'd now like to provide you with a brief update on our COVID-19-related programs as
Catalent continues to be a go-to company for potential COVID-19 therapies and
vaccines. We've now been awarded work on more than 60 COVID-19 related compounds,
including the three Operation Warp Speed Vaccine programs we previously
highlighted. We're actively working on projects across all four of our business
segments with some compounds involved in projects across multiple offerings.

The strategic investments we've made in biologic's capability and capacity over the
last few years, including the $200 million capital additions to our U.S. drug
product and drug substance capacity we began in January of 2019 and our acquisition
of the Anagni facility, were well timed to enable us to address the increased
demand we are seeing from the combination of our ongoing business and our COVID-19
therapeutic and vaccine candidates. This incremental capacity in our multi-dose
vial filling manufacturing capability has facilitated our ability to manufacture
potentially billions of COVID-19 vaccine doses over time while continuing work on
behalf of other customers.

Our response to our customers' needs has not only raised our profile with both
large pharma and biotech customers, it has also resulted in an acceleration of our
strategic capacity expansion plans, which will help to support the achievement of
our long-term growth targets. To better enable us to serve all of our customers
during this period of accelerated demand we recently made two additional drug
product investments in Bloomington, Indiana.

The first is the addition of a $50 million high-speed vial filling line that will
supplement our current capacity. Given our experience in facility and capacity
expansions, we expect to accelerate this project from a typical 18-month time frame
to approximately 10 months in total. We expect to bring this new high-speed vial
line into our operations in the fourth quarter of fiscal 2021 to support the
growing pipeline of commercial launches at the site.

The second drug product investment is the acquisition of a 23,000 square foot
manufacturing facility three miles away from our Bloomington campus, where we will
create a North American Center of Excellence for early phase clinical Biologics
formulation development and drug product fill-finish services. This $14 million
investment, which includes the acquisition, build-out and qualification of the
facility is expected to begin supporting customer programs starting in January. The
facility will enhance our OneBio drug development offering as it includes a new
flexible filling line ideal for enabling rapid changeover for greater efficiency in
the manufacture of clinical batches.

We also recently announced the expansion of our gene therapy campus near the BWI
airport to support our growing customer pipeline and increased market demand for
gene therapy products, which includes an overall investment of approximately $130
million to add five additional Phase 3 and commercial-scale manufacturing suites as
well as cold-storage warehousing in the first half of calendar 2022. When this
project is completed, the BWI campus will house a total of 15 gene therapy
manufacturing suites, each designed to accommodate multiple bioreactors for
commercial supply.

As we highlighted last quarter, the first facility on the campus was recently
approved by the FDA for commercial manufacturing and we expect to have all 10 CGMP
suites qualified and operational in the next few months. Five of these suites are
already qualified and operational including one suite where we accelerated start up
during Q1 in order to provide drug substance manufacturing to AstraZeneca for the
University of Oxford's adenovirus vector-based COVID-19 vaccine candidate.

We are also expanding our footprint in cell therapy where we opened our U.S.
clinical facility in Houston earlier this year and we continue to build out our
commercial-scale production and fill-finish facility in Gosselies, Belgium, which
is scheduled to open in late fall 2021. In addition, last week we signed an
agreement with Bone Therapeutics to acquire its subsidiary with a 41,000 square
foot purpose-built CGxP facility and manufacturing assets, which are located next
to our facility in Gosselies.

Additionally, Catalent will manufacture clinical material for Bone Therapeutic's

allogeneic osteoblastic cell therapy product. When the transaction closes, which we
expect to occur this month, the additional manufacturing capacity and technical
expertise from this facility and its employees will immediately expand our clinical
and commercial capacity for current late-stage customers as well as create a bigger
center of cell therapy excellence for Catalent in Europe.

In addition to capital investments and the addition of new facilities to our global
Catalent network, we continue our innovation and partnership efforts across the
company. The first example is also in our cell therapy offering where we announced
an agreement with BrainStorm Cell Therapeutics to manufacture it's autologous cell
therapy being investigated for the treatment of ALS also known as Lou Gehrig's
disease.

Under the agreement, the new facility in Houston will undertake the transfer of the
manufacturing process to provide future CGMP clinical supply for this treatment
with the potential to extend the partnership to include commercial supply should
the treatment be approved. We're proud to support BrainStorm in its pursuit of a
solution for this critical unmet patient need.

Another example is our recent partnership with Exelixis where our Redwood
Bioscience's subsidiary will develop multiple antibody-drug conjugates or ADCs for
Exelixis using our proprietary SMARTag technology over a three-year period. Under
the partnership, Exelixis will provide R&D funding targeting various oncology
indications and Catalent will be eligible for development in commercial milestones
and royalties on net sales of any product commercialized as part of the
collaboration. The SMARTag platform has recently demonstrated promising results in
the clinic, highlighting the potential to create ADCs with significantly expanded
therapeutic indices for cancer patients.

Innovation at Catalent also continues to make further advancements to our Softgel

Technologies, where we recently launched OptiGel DR, a technology for the
formulation and manufacture of delayed/enteric release Softgels. This new
technology eliminates the coating step and solves the processing and performance
challenges associated with conventionally coated delayed release softgels and has
the potential to encapsulate a wide range of ingredients.

This latest evolution allows our customers to design more efficient products and
bring superior pharmaceuticals and nutraceuticals to patients. Our site in St.
Petersburg, Florida is the first to offer this new technology with the capability
being expanded to our other Softgel manufacturing facilities in Brazil, Canada,
Germany, Italy and Japan in the future. And finally, I'm proud to highlight that in
September, Catalent was added to the S&P 500 Index. I believe this designation is
an affirmation of the substantial progress we've made in executing our growth
strategy since our IPO in 2014. Of course, this progress would not be possible
without the passion and dedication of our more than 14,000 employees whose
commitment to our mission to help people live better, healthier lives has never
been more critical or valued.

I'd now like to turn the call over to Wetteny who will review our financial results
for the quarter and our enhanced fiscal 2021 guidance.

Wetteny Joseph

Thanks, John. I will begin this morning with a discussion on segment performance.
As in past earnings calls, my commentary around segment growth will be in constant
currency. I will start my commentary on Slide 8 with the Biologics segment, which
is now our largest business segment.

Biologics revenue of $377.1 million increased 98% compared to the first quarter of
2020. The segment EBITDA increasing 194% for the same period. Acquisitions
contributed 15 percentage points to both revenue and segment EBITDA in the first
quarter, compared to the prior year period. The acquisitions that primarily
contributed to revenue and segment EBITDA includes MaSTherCell, the cell therapy
leader that we acquired in February 2020 and our Anagni facility, which we acquired
in January 2020 from Bristol-Myers Squibb and part of which includes an expansion
of our drug product business that falls within the Biologics segment.

Note that we continue to attribute all non-BMS work, including all COVID-19 vaccine
projects that we brought to the facility after the acquisition to organic growth in
the segment. The robust organic growth in our Biologics segment in the quarter was
driven across all segment offerings with elevated end market demand for our global
drug product substance and cell and gene therapy offerings with well over half of
the organic net revenue growth in the segment being driven by projects unrelated to
the COVID-19 pandemic.

Margin in the segment increased significantly both year-on-year and from the fourth
quarter as our capacity utilization increased across all major service offerings
and as we conducted start up activity for potential COVID-19 therapies and
vaccines. We expect strong growth for the Biologics segment for the remainder of
this fiscal year.

Please turn to Slide 9, which presents our Softgel and Oral Technologies segment.
Softgel and Oral Technologies revenue of $221.1 million decreased 17% compared to
the first quarter of 2020 with segment EBITDA decreasing 20% over the same period.
After excluding the impact of the October 2019 divestiture of the segment's
manufacturing site in Braeside, Australia, segment revenue and EBITDA declined 12%
and 21%, respectively. The decline was driven by reduced volumes of certain
prescription products in North America and in global consumer health products.

As we mentioned on our last earnings call, we are seeing lower demand in cough,
cold and over- the- counter pain relief products, which we attribute to a
combination of consumers stocking in the early stages of the pandemic as well as
the effect of limited social gatherings and travel due to pandemic mitigation
efforts.

Margins in Softgel and Oral technologies were further impacted year-on-year by

elevated operating costs related to the pandemic, including cost of Thank You
bonuses, additional protective equipment and adjusted less efficient production
workflows put in place to facilitate social distancing among our employees. Note
that these higher costs impacted all segments.
Looking ahead at SOT for the remainder of the fiscal year 2021, we see underlying
momentum in prescription products that suggest a stronger back half of the fiscal
year, including our expectation that some product launches that occurred during the
lockdowns in Q3 and Q4 of fiscal '20 will experience increased volume demand as our
fiscal year progresses. Looking further out, we expect that this 41% year-on-year
growth in the SOT'S development revenue will eventually lead to more new product
introductions and we remain comfortable with the segment's long-term growth outlook
of 3% to 5%, although we forecast the segment to perform below that level this
fiscal year.

Slide 10 shows our Softgel and Oral and Specialty Delivery segment recorded revenue
of $158.3 million in the quarter, which was up 17% compared to the first quarter
for fiscal 2020. Excluding the portion of the acquired Anagni facility that is part
of the OSD segment, revenue declined 1%. Rising end market demand for commercial
products across our Zydis orally dissolving tablet technology platform was offset
by decreased demand for early phase development activities in the quarter following
COVID-19-related lockdowns and clinical trial disruptions.

Segment EBITDA was down 26% over the first quarter of 2020 and after excluding the
OSD portion of the acquired Anagni facility, segment EBITDA declined 61%. The
decline of OSD segment EBITDA is primarily due to a voluntary recall of a product
in our respiratory and ophthalmic platform that was launched last February, which
we called out on the third and fourth quarter calls as having a product
participation component.

The one-time charges associated with this recall totaled $12 million. Corrective
action plans are under way but a definitive timeline for product reintroduction has
not been determined. Excluding these charges, EBITDA margins was approximately 21%
roughly in line with the first quarter of last year. The OSD segment continues to
have a strong development pipeline, particularly in the Zydis platform, which John
highlighted earlier.

Turning to the remainder of our development revenue. In order to provide additional

insight into our long-cycle segments, which include Biologics, Softgel and Oral
Technologies and Oral and Specialty Delivery, each quarter we disclose our long
cycle development revenue in the current year. In the first quarter of 2021, we
recorded development revenue across both small and large molecule products of
$372.5 million, which is 84% above the development revenue recorded in the first
quarter of fiscal 2020.

Development revenue represented 44% of our revenue in the first quarter compared to
30% in the comparable prior-year period. The strong growth in the Biologics
business was the biggest driver of these year-on-year changes. In the first
quarter, our development pipeline led to 30 new product introductions.

Now, as shown on Slide 11, our Clinical Supply Services segment posted revenue of
$92.7 million, an increase of 8% over the first quarter of the prior year, and
segment EBITDA of $25 million or a 13% increase. The growth was driven by an
increase in clinical trial activity following pandemic-related delays and resulted
in strong demand in storage and distribution offerings across all regions. This
growth was offset partly by a reduction in demand for manufacturing and packaging
within North America.

As of September 30, 2020, our backlog for the CSS segment was $428 million slightly
higher than the $425 million at the end of last quarter and up 14% from September
30, 2019. The segment recorded net new business wins of $99 million during the
first quarter, a 6% increase compared to the first quarter of the prior year. The
segment's trailing 12-month book-to-bill ratio remained at 1.1 times.
Please note that in future quarters we will continue to disclose the CSS commercial
metrics in our prepared remarks and in the supplemental slide deck, including the
new trended slide that we that can now be found in the appendix but we will remove
the same information from our quarterly earnings release. You may have noticed that
our earnings release has been reformatted this quarter to allow for easier
readability by removing commentary that can be found in the slide deck as well as
the MD&A section of our 10-Q.

Moving to companywide adjusted EBITDA on Slide 12. Our first quarter adjusted
EBITDA increased 37% to $174.4 million or 20.6% of net revenue, compared to 19.1%
of net revenue in the first quarter of fiscal 2020. On a constant currency basis,
our first quarter adjusted EBITDA increased 35% including 23% organic compared to
the first quarter of fiscal 2020

On Slide 13, you can see that first quarter adjusted net income was $78.1 million
or $0.43 per diluted share compared to adjusted net income of $40.5 million or
$0.26 per diluted share in the first quarter a year ago. Slide 14 shows our debt-
related ratios and our capital allocation priorities. Our cash and cash equivalents
balance at September 30th was in excess of $1 billion compared to $953 million at
June 30th.

Our net leverage ratio was 2.6 times at September 30th compared to 2.8 times at
June 30th. Recall that last quarter, we lowered our long-term net leverage target
to 3.0 times compared to our previous target of 3.5 times. We are pleased that last
week, S&P recognized our efforts to further strengthen our balance sheet as they
upgraded a long-term credit rating to BB due to the rapid growth of our Biologics
business, improved margin profile and lower ratio of net debt to adjusted EBITDA.

Moving on to capital expenditures. We continue to expect capex as a percentage of

net revenue to remain at elevated levels for the next two fiscal years as we
continue our organic growth plans. In fiscal 2021, we are accelerating capex
spending in the first half of the year to meet customer demands and expect that
capex will be approximately 15% to 16% of 2021 revenue compared to our previous
estimate, which reflected 14% to 15% of revenue.

Now we turn to our financial outlook for fiscal 2021 as outlined on Slide 15. We
are raising our previously issued guidance to reflect first quarter performance and
to account for higher net underlying demand, including increased demand related to
potential COVID-19 therapies and vaccines as well as lower demand attributed to the
effects of the pandemic in some offerings and certain increased costs due to the
pandemic. The guidance ranges, which remain broader than in recent years due to the
increased uncertainty introduced by the pandemic, are now net revenue in the range
of $3.58 billion to $3.78 billion compared to the previous range of $3.45 billion
to $3.6 billion.

Adjusted EBITDA in the range of $880 million to $950 million compared to the
previous range of $840 million to $890 million and adjusted net income in the range
of $410 million to $470 million compared to the previous range of $390 million to
$435 million. We continue to expect that our fully diluted share count on a
weighted average basis for the fiscal year will be in the range of 178 million to
180 million shares and that our consolidated effective tax rate will be between 24%
and 26% in the fiscal year.

The underlying assumptions for our revised guidance are as follows. First, there is
no major external change to the current status of the COVID-19 pandemic and its
effect on our business. Next, in light of the uncertainties always inherent in
pharmaceutical development, we are not assuming that any of our customers' COVID-19
vaccine candidates will get FDA or other regulatory approval emergency or
otherwise. Third, we have factored in projected revenue from executed take-or-pay
arrangements, some of which include terms that triggered higher levels of volume
based on timing or milestones.

Fourth, revenue from acquisitions is projected to represent approximately 2 to 3

percentage points of our projected revenue growth rate for the year. And finally,
we attribute approximately 9 to 11 percentage points of the projected net revenue
growth to net COVID-19-related revenue versus our previous estimate of
approximately 5 to 7 percentage points. This estimate is based on factors that
affect multiple business segments including changes to the take-or-pay arrangements
we had previously taken into account, including some previously considered
arrangements that have increased in size based on reaching certain milestones.

Revenue not previously projected from additional projects amounting to COVID-19

related projects in which we are engaged, opportunity costs including work that
would likely have been placed in the same space and estimated loss revenue in parts
of the business due to the pandemic such as lower demand for consumer health
products as well as impacts to some prescription products.

Regarding our quarterly progression throughout the year, let me take a moment to
remind you or share with those newer to Catalent's story, this is a novelty in our
business. From a net revenue and adjusted EBITDA perspective, the first quarter of
any fiscal year is generally the lightest quarter by far and generally increasing
each quarter throughout the fiscal year. This seasonal effect has led to roughly
40% of our adjusted EBITDA being recognized in the first half of the year and 60%
recognized in the back half of the year. In fiscal 2021, we expect a slight change
to that mix with adjusted EBITDA contribution from the first half of fiscal '21
being approximately 41% to 42% of our expected full-year adjusted EBITDA.

Operator, this concludes our prepared remarks. I would now like to open the call
for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question today comes from Dave Windley from
Jefferies. Please go ahead.

Dave Windley

Hi, good morning. Thanks for taking my question. Very impressive Biologics growth,
again this quarter. I was hoping I could attempt to break it down a little bit, I
think from comments that you made the acquisitions contributed, maybe just under
$30 million, about $28 million and then I think Wetteny, you talked about kind of
non-COVID related programs driving the majority of growth.

So wondered if could we kind of guess that the COVID contributed, call it maybe $90
million, so is that right? And then of the remaining, call it $60 million, $65
million something like that, of growth year-over-year. Is that pretty balanced
across gene therapy and the Bloomington business and the Madison business or is
there one that's really driving that kind of core organic growth? So just again
trying to understand the contributors to Biologics growth. Thanks.

Wetteny Joseph

Yes so, Dave, first of all, we're very pleased with the growth in our Biologics
business for the quarter. You can see for the second quarter in a row very strong
growth coming from the segment. I'll remind you a couple of things and indeed,
significantly more than half of the organic growth in the quarter in the segment,
which was 83% clearly more than half of that coming from non-COVID-related
activities. So this will be the second quarter in a row we're seeing substantial
growth coming from this segment.

I will note that in Q1 last year, I would say it was a relatively weaker comp, as
we got off to a slower start in the segment across particularly our coating and
nucleic acid offerings here as compared to our gene therapy and cell therapy areas
and so we're very pleased with the growth and well above half of that coming from
non-COVID-related but still posting 82% organic growth on the quarter against, I
would say, relatively weaker comps.

Also the gene therapy side and cell therapy side of the business were significant
contributors to the organic growth but we won't go down to specifics. To give
enough color around this is to triangulate around a rough estimation around the
COVID-related programs but what I would say is there is not -- it's difficult to
get precision here when it comes to COVID-19. And some of the color I would add
here is that clearly from a development perspective, we have a fair amount of
start-up activities across this segment in particular, from a development
standpoint, some of our highly skilled personnel in our sites who are working
around the clock on development activities, which is somewhat difficult to
segregate them what they would have been doing, had they not been doing this work
clearly, they would have been engaged in other activities.

So I think there are some prioritizations and trade-offs that are happening in the
business that makes it difficult to get the precision here, but we believe
directionally what we've provided should be hopefully helpful in understanding that
the core growth in the business was still well above the long-term expectations we
have for this segment in the quarter, even when you take out the COVID-19 programs.

Dave Windley

Got it. If -- just a quick follow-up then. One of the questions that we get pretty
often is trying to understand how much the take-or-pay agreements that you were
including in guidance, kind of how much do those represent of what would be the
volume if one or more of your clients' vaccine candidates gets approved. Is there
any context that you can provide to help us understand? It sounds like it's more
than development but it's only a fraction of what your commercial revenue could be
and just kind of where is that breakpoint for the take-or-pay agreements? Thanks.

Wetteny Joseph

Yes, what I would say here, Dave, is there are too many variables to really
pinpoint what the exact effect would be, the timing of such approval if it does
happen and how much is left in the year etc., how many doses per vial? There are
lots of variables but what I would share with you in terms of the take-or-pay
agreements in the way that they work and how they're factored into our guidance is
that we have not factored in any approvals in our guidance here.

So we are including take-or-pay arrangement, which would largely fall, whether it's
the volume we need to produce or the take-or-pays that will take effect, to be
mostly in the second half of our year, not the first half. So it is not -- other
than start-up activities, the first half of the year is largely not impacted by
take-or-pay arrangements and they start to come in, in the second half. And if
there is an approval, with all the variables that I described, it's difficult to to
give even sort of a sense around what that might mean for us in terms of what the
volume might be. We're not factoring any approvals, as we said in the prepared
commentary and our guidance here.

Operator

Our next question comes from John Kreger from William Blair. Please go ahead.

John Kreger

Thanks very much. Wetteny, just a follow-up on Dave's last question. If an approval
would happen, let's say in the January time frame, would that cause the 9% to 11%
contribution in your view to likely change or is that more of fiscal '22 event for
Catalent?

Wetteny Joseph

Yes. So what I would say is yeah, and there are too many variables to determine
whether that would change or not. The way we've approached the guidance, including
just the take-or-pays means that we've only put in what is contractually bound. If
there are -- if the variables can include items such as the [acquittal] of the drug
product billing, will the customer be able to get sufficient substance internally
or from elsewhere to enable us to do more than the take-or-pays.

You understand that there are too many variables for us to venture into any sort of
guesses as to what that could mean depending on when it happens, which product,
which jurisdictions is it going through, what the actual demand is. So if all those
things were in the lineup and the volume necessary is above the take-or-pay
minimums, then sure, that could potentially mean more volume coming from those
programs than the take-or-pay. These are some of the reasons why including being in
a pandemic, why we have a wider range in our guidance where no point is more
certain than another and I think we'll continue to do that as the year unfolds.

Q - John Kreger

Okay, thanks. And then a follow-up, John, for you on terms of kind of the M&A
strategy and capital deployment. I think in the past you guys have said you don't
really like dealing client facility deals but you've done two in the last year, is
your thinking about that opportunity changing?

John Chiminski

Yes, I would say it is, John. I mean first of all, when we are getting -- if you
look historically, I would say there is kind of a significant exiting of facilities
by pharma over the last, call it 10 to 15 years, that was just them basically
whittling down their overall capacity. But what we have found is that when we can
find a facility that has the capabilities in the geography that we're looking for
and can secure meaningful business with that -- with the owner of that facility
that we're willing to engage in it.

So certainly, we're not in the mode of, I would say, either consulting the industry
or just picking up as many facilities as we can but if you take a look at the Bone
Therapeutics and you take a look at the Anagni facility, they both were added to
our capabilities and overall capacity where we needed them. So just the recent
announcement here on Bone Therapeutics with a facility that's just walking distance
from our Gosselies -- our current Gosselies operation provides us immediate
capacity for potential late phase customers that could get approvals and will meet
that overall capacity.
And then in Anagni, I have to say this is probably one of the most fortuitous
acquisitions that we look to further build out our European CDMO business where we
happen to have an asset that had two vial filling lines and the capacity to -- or
the footprint to be able to add even additional capacity at the time -- at the
front end of this pandemic. So I would say that it's more in our mix, right now,
but we have a very clear criteria if you will, in terms of what we're looking for
and I think you see two really good examples in both Anagni and also in the Bone
Therapeutics facility.

And then maybe just to expand on your question just with regards to overall M&A.
Certainly we've been executing on an extremely strong strategic plan that has us
growing the company organically however, we continue to be very active in the M&A
space where we can add additional capability and capacity to accelerate our
strategic plans in an area that we continue to, I would say, hunt is -- in drug
product and drug substance capacity in Europe where we would like to continue to
build-out our footprint. We certainly have a great footprint in the U.S. that
continues to get even better. We'd also like to expand the Anagni facility in
Europe.

Operator

Our next question comes from Tycho Peterson from J.P. Morgan. Please go ahead.

Tycho Peterson

Hey, good morning. John, I want to start with Oral and Specialty Drug Delivery. You
noted decreased demand in early phase development programs, can you maybe just
touch on that dynamic? I mean the funding environment has been better, we've seen
kind of a pickup from some of your peers on the early stage side. And then, when do
you expect that segment to turn, if --you talked about it picking up in the back
half of -- end of the year? And then I think you noted new product launches have
also been impacted by the pandemic, so can you touch on that as well?

John Chiminski

Yes, so,Tycho, I'll unpack a few questions that you have in there. First of all,
with regards to our OSD segment, the development revenue and development pipeline
is generally a shorter cycle business and early on in the pandemic, we saw people
not knowing what was going to happen. In our Oral and Specialty Delivery, we
service a lot of small venture-backed companies that early on they didn't know
where the pandemic was going and they basically, I would say, sat still a little
bit. So we didn't pick up early on in the pandemic. Let's just call it kind of
through the March through May, June time frame, we just didn't have the same sort
of wins that we normally would.

And obviously, that impacted a little bit the development revenue in the OSD
segment. That being said, we're now in, I would say, a stable part of the pandemic
as it continues to develop where people really do understand their funding, they
still continue to operate and we're starting to see those wins, if you will,
pickup. And then I would just say, the OSD segment as Wetteny alluded to in his
prepared comments, really has one of the strongest overall pipelines in the
business over 200 molecule. So again with our Follow the Molecule strategy, I mean
we're working on these items all the way through getting development revenue and
hoping to get our customers all the way through launch. So again, very strong
pipeline there.

Now the other question you had was with regards to prescription demand and that's
in our SOT business and what we saw is that we had product launches in our SOT
segment that quite frankly, the launches were, the words I used in the prepared
comments were, muted meaning with the pandemic the ability for those customers to
fully launch and get their sales teams out into the doctor's offices and hospitals
to be able to promote those products and in some cases, they literally just stopped
on the promotion until they had better clarity on when they could actually deploy
some of their overall resources.

However, we do believe that we have some launches planned here for the second half
and we also expect that the muted launches that we had and some of these launches
in the SOT segment should gain momentum in the second half again, as we've seen --
we are running into the later phases of the pandemic and people know how to deal
with it and were moving along. So that's the way I would answer that question if
that's helpful, Tycho.

Tycho Peterson

That is, that is. And then just thinking a little bit about case loads going back
up here. I'm just wondering is there incremental risk on Softgel potentially
getting worse in the next quarter or two and then also CSS returned to growth and
trials have been back up and running but is there any risk there as cases go back
up of that going back in the negative territory?

John Chiminski

First of all, I would say this is not prepared comments, this is John Chiminski,
but right now we know that cases aren't really correlated, if you will, to death
rates in the U.S. In fact we see that there is -- we have rises in cases. And so
it's not necessarily impacting mortality rates and we're also seeing that although
we have a tightening of some measures in certain areas, we're not seeing wholesale
lockdown.

So we're not seeing the same sort of clinical trial holdback that we did early on
where you didn't have the actions -- access, if you will, to the clinical trial
patients and so forth. So I don't anticipate that unless things take a dramatic
turn and we actually do get to additional lockdowns that's a very strong doubt but
CSS business should continue to go ahead and perform.

There was a second part of that, Tycho?

Tycho Peterson

Well, similarly on Softgel. I mean, does that get worse sequentially here or do you
think we've kind of reached a bottom?

John Chiminski

Yes, I think that the thing I would mention on Softgel is that part of the slowdown
we saw was really in the consumer health area and that's kind of a crazy thing but
the flu season is virtually non-existent and people developing cough and cold. So
we're seeing -- we saw demand really here in the quarter just very, very low on the
consumer health products. I mean, just as a little bit of a trivia they literally
had hundreds of cases of flu in Australia compared to the normal thousand. So it's
pretty much a non-existent season.

So the only thing that we'll need to watch out for in Softgel is if we have
continued low consumer health demand based upon the social distancing and lack of
social gatherings and lack of travel ban really predicated us having some
challenges in the consumer health. So that's really one of the areas that we'll
watch out and maybe I'll ask Wetteny, if he wants to jump in here also.

Wetteny Joseph

Yes, just a couple of quick points with respect to SOT. As you know Tycho, we don't
get into specifics in terms of guidance by segment. But largely speaking I would
expect the SOT first half to look a lot more like the first quarter with improved
performance in the back half versus a very strong prior year. If you recall, in
fiscal '20 our SOT business, where we expect long-term growth in the 3% to 5%
range, was actually both more than twice that in the fiscal year last year.

So it's a combination of a tougher comparable for the segment as well as some of

the COVID- 19-related headwinds that we've already talked about that are impacting
the segment and I would expect the first half, again to be more like the first
quarter and improved performance in the back half. The other point I would make is
with respect to CSS to your point around increased cases etc.

What you may recall is a previous occurrence of this led to actually ramp up in CSS
before before it went down. We're very pleased with the net new business wins we're
seeing in the business throughout the pandemic, continued to stay healthy which
bodes well for long term performance of the segment. And we won't predict what
could happen here in the event of increased lockdowns, etc. but certainly a prior
occurrence led to a pick up in Q -- in our third quarter fiscal last year before
you saw it draw down in the fourth quarter.

Tycho Peterson

Okay, that's helpful. And then one quick one before I hop off. In the vaccine work,
I know your guidance doesn't assume any approvals, I'm just curious how much
lumpiness and volatility you think there will be once you have approvals.
Obviously, there have been government contracts and stockpiling or do you think it
will be relatively smooth when it comes to the scale up? Thanks

John Chiminski

Again, Tycho, we have take-or-pays that are in place and those take-or-pays do
contemplate a certain amount of capacity utilization. And so I think the area where
I think there could be and I wouldn't call it lumpiness but I would say, increased
demand is with regards to therapies that they get approved and depending on what
the uptake of those are that scenario where we would have to obviously respond to.
And the only other thing with regards specifically to the vaccines is whether or
not there would be volumes above and beyond the take-or-pays that we already have
in place.

Operator

Our next question comes from Juan Avendano from Bank of America. Please go ahead.

Juan Avendano

Hello. Congrats on the quarter. I might have missed this but what was the COVID net
revenue that you realized in the quarter across the whole company and not just
Biologics?

Wetteny Joseph

Juan, we didn't get precision on this but our estimation around the quarter is as
follows. We've delivered 20% organic growth in the quarter across the company. And
even if you were to exclude COVID-19 impacts you'd still have a double-digit
organic growth performance for the company. Another reminder I would give you is
when you think about the activities we have both across therapeutics and vaccines
here for COVID-19, the volumes and related take-or-pays really took effect more
toward the back half of our year than the first half. So really mostly, we have
start-up activities that are happening now that are contributing to the performance
and so I would expect, as we saw in Q4 as well as in Q1, most of the performance
here is not related to COVID-19. So this is two quarters of double-digit organic
growth excluding COVID-19 for the company.

Juan Avendano

Got it. I definitely appreciate the quarter given that you did provide guidance for
net COVID related revenue for the whole year, contributing 9 to 11 percentage
points. I just wanted to know how much was in the bag or realized in 1Q and how
much was left? Any quantitatives that you could share on that?

Wetteny Joseph

What I will tell you is directionally, the versus 9 to 11 on the year, the first
quarter is substantially below it. Again yeah, 20% organic growth on the company
and we still had well into double-digits excluding COVID-19. Again, I won't give
you precision here given all the factors we already discussed but as I said, the
take-or-pays that are factored into our guidance mostly take effect toward the back
half of the year not the first half, so I would stand to reason that the first
quarter would be largely non-COVID related when we think about organic growth.

Juan Avendano

Okay, thank you. And switching gears a little bit. We've seen a few clinical holds
and terminations on the gene therapy development projects in the last couple of
months. Has this changed the confidence of sponsors or your own confidence on the
potential opportunity from gene therapy going forward?

John Chiminski

No, not at all. I would say there's very specific factors involved in a couple of
those cases that came out and doesn't change either our outlook on the space or the
activity that we have in the gene therapy business.

Operator

Our next question comes from Jacob Johnson from Stephens. Please go ahead.

Jacob Johnson

Hey, just one for me and maybe following up on that last question, can you just
give us an update on how MaSTherCell's performing? Obviously it was a small revenue
base when you bought it, but as we look out the next couple of years, how should we
think about the revenue ramp here? And also can you just talk about how you're
integrating MaSTherCell with Paragon along with some of the other acquisitions
you've done here, and maybe how these companies work together?

A - John Chiminski

Yes, sure. Thanks for that question, Jacob. First of all, we're super excited to be
able to get our hands on this premier cell therapy asset and as I've said before,
we kind of caught this acquisition a little bit earlier in the cycle than we did
for example, with Paragon or even Bloomington. So over the next several years, we
don't expect significant revenue and EBITDA compared to the overall company, but we
expect fairly strong growth.

You can see that we made some pretty astute investments already both from a capex
standpoint as well as from a facility acquisition standpoint. So we're investing in
MaSTherCell at a facility that's down the street from Gosselies that is going to
have commercial manufacturing capability. In addition to that, we've invested capex
in the Houston facility, which is just recently opened.

And then finally with the Bone Therapeutics acquisition of their subsidiary got our
hands on a substantial facility and capabilities that are going to be able to have
us more quickly, being able to go commercial with potentially some of the late-
phase programs that we have within cell therapy. The integration is going extremely
well. I can tell you that we're off to, I would say, a strong wins rate as we're
kind of exiting the overall calendar year and obviously, we just talked about the
recent fairly significant win that we had with the company that's going to be able
to -- that is fighting ALS.

So I think putting all those things together, the acquisition is going very -- the
integration is going very well. We've also acquired some very good talent into that
facility. The other thing is, is that we also see significant synergies between our
gene therapy and cell therapy business. In that, a lot of the companies have both
gene therapy and cell therapy programs, so that's able -- we're able to work across
those facilities. And then also point to the Editas partnership that we have within
our cell therapy business actually expanding all the way through our clinical
trials.

So I feel very, very good. Again, we caught this one a little bit earlier in the
cycle, which means that we're going to be able to enjoy that future growth from, I
would say 10 years from now we're going to see really an explosion of cell therapy
products and approvals that should happen, which will be very exciting for patients
around the world.

Operator

Our next question comes from Jack Meehan from Nephron Research. Please go ahead.

Jack Meehan

Thank you. Good morning. I was hoping you could elaborate a little bit more on the
strength of the development work within the Biologics segment that in addition to
COVID seemed to drive a lot of the segment performance. So can you just elaborate
how much of that is coming from COVID maybe versus gene therapy, and then how did
that impact segment margins in the quarter or how the development margins compared
to the commercial work?

A - Wetteny Joseph

Yes, sure. We're very pleased with the performance of the Biologics business
overall. As I mentioned earlier, well above half of the 83% organic growth in the
segment was non-COVID related and also gene therapy was a significant contributor
to the growth in the business from revenue perspective. I think when you look at
the EBITDA margin expansion year-on-year, it would bode well for the level of
capacity utilization we have across the segment here as we are near capacity with
respect to some of our areas particularly around vial capacity, etc. and as you
know, we have new expansions that are on the way that will be up and running in the
next few months in those areas for remaining customers as well as those that are
pursuing COVID-19 vaccines and therapies.

So all those are contributors to the performance here from a margin perspective in
the quarter, which we're very pleased with in COVID-19 while contributing to the
performance wasn't substantially less than half. Development revenue continues to
be a large proportion of this segment as we have maturing pipeline of programs that
we're working with customers across the protein and nucleic acid side, the gene
therapy, cell therapy across all offerings within Biologics.

And so -- which again in the future, would bode well as those programs get
commercially launched in the future and we get closer to a balance in development.
And in commercial, the development revenue continues to be strong. We're seeing
several quarters of growth in development revenue, which is why you see about 44%
of our total revenue to be in development in this quarter versus roughly 30% a year
ago.

Operator

Our next question comes from Dan Brennan from UBS. Please go ahead.

Dan Brennan

Thank you. Thanks for taking the questions. So just on COVID, could you give us
some sense of the split between drug products and drug substance within your COVID
revenues and when we think about some of your customers potentially getting
approvals, is that all upside or does some of the take-or-pay contracts only
include capacity build out that incorporate like the volumes that could occur.

And then just one other -- one on COVID. If you mind if some of your larger
customers that you've reserved space for and are working with, if those companies
don't get vaccines approved, what should we think about the capacity being
allocated toward those customers?

Wetteny Joseph

Yes, maybe I'll start with the last part of your question and then work my way
back. Certainly, the capacity that we have here that is positioned to work on
COVID-specific programs is not specifically COVID-19 like we -- part of the reason
that we we're -- of those two companies here is because we have capabilities,
traditionally we've had in the company as well as it was added over the last
several years around a drug product, drug substance gene therapy, etc. as well as
capacity that we already had in flight before COVID-19.

Hence the capacity wasn't specifically contemplating this pandemic nor is it unique
to manufacturing COVID-19 therapies and vaccines. And so the long term prospects of
fill-finish, gene therapy, viral vector manufacturing drug substance for Biologics
all points with strong growth over a long-term, which is why we were pursuing these
extensions to begin with.

I'll remind you, January 2019 given the pipeline of products that we have in front
of us in our Biologics drug product fill-finish facility in the U.S. by way of
example, we could foresee the maturing pipeline requiring more and more capacity to
the point that we anticipated by 2021, we will be running out of capacity across
vials and closely so, across syringes.

So at that point, we announced an expansion of capacity for the facility as we

stand today, particularly with the COVID-19 programs as well. As we mentioned,
we're near capacity and our vials would be -- with more capacity coming on board
over the next few months to relieve that. So I think that's spells that this
capacity is very fungible plus the offerings we have within the segment are not
specific to COVID-19 and have confidence in their use beyond the need for us.

With respect to the take-or-pays, clearly the factors with our customers that
reflects what we anticipate the volume needs might be in the event of an approval
as well as the timing of those approvals and we in turn have been hiring and
training and onboarding resources to position ourselves in addition to the start-up
activities to be able to manufacture those volumes. So I think you would anticipate
that the customers' expectations with volumes are already somewhat reflected here,
but lots of variables could impact those as we go forward and we won't venture to
guess as to what that might be, but some of these are certainly already
contemplated in those take-or-pay arrangements.

And then lastly, the first one question is around drug substance and drug product.
We announced some of these programs already in terms of the work regarding vaccines
and therapies including there are sort of programs that we're working on and we
have not ventured to announce for various reasons, but we are looking at 60 -- over
60 compounds across the organization with majority of those in our Biologics
business. And they do span across both drug product, drug substance and I would add
gene therapy viral vector manufacturing as well.

So we're very pleased with the activities we have not only in Biologics but
elsewhere across the company, which again is why we say we are a go-to company for
COVID-19.

Dan Brennan

Thanks, Wetteny. And maybe just one follow-up just on Paragon. So the capacity that
you're building out today, I mean, to the extent some of the programs you are
working on go from clinical to commercial success. How do we think about the
capacity that you're planning and kind of what's the way to think about the revenue
impact for Catalent? Thanks.

Wetteny Joseph

So as we continue to expand in the suites, as John mentioned in our prepared

commentary, in the next few months we'll have 10 suites operational. A number of
customers have a subset of those suites under capacity reservations including
certain minimum volumes, which are again take-or-pay types of arrangements. And so
we anticipate volume increases across the segment and the pipeline continues to
mature, not only what we have within Catalent but at large, and we expect to
continue to on-board new customers and continue to drive programs through those
that are in the pipelines for commercial use.

So I think as volumes go through a factory of the company that has the skill that
we do at the upper end of utilization, those can drive meaningful margin
performance in the business, which we would anticipate over time. One last point
I'll make is, as we discussed last quarter, our gene therapy offering is now the
only CDMO operation in the world with a commercial license to produce gene
therapies, which positions us well to continue to not only perform for the
customers we are engaged with now but potentially more as the pipeline of gene
therapy continues to expand.

Operator

Our next question comes from Sean Dodge from RBC Capital Markets. Please go ahead.
Thomas Kelliher

Hey, good morning. This is Thomas Kelliher on for Sean, thanks for taking the
questions. I'll try and keep it a little brief. It has been answered earlier but
the kind of longer-term EBITDA margins for the Biologics segment is targeted around
35%. You guys are still anticipating reaching this by fiscal '24 or maybe exceeding
it or is there any change to this target that's -- within those last few months?

Wetteny Joseph

Yes. So look, our margin expectations for this segment remain unchanged. We've
given companywide margin expectations as we expand and we have said that as we grow
in Biologics, which you saw this quarter is 44% of our revenues. In Biologics,
being higher margin will propel the company margins to expand. So we continue to
expect that long term. Those won't be linear as we add capacity and we add
resources that are highly trained. There are highly complex and exacting processes
that we have. As we do so, those will add some variability across our margins and
keep in mind also that we have a large proportion of development programs, which
tend to be more variable than commercial manufacturing.

So I think over time, we expect margins to expand and stabilize across the segment
as we add capacity, as we get at the higher end of capacity utilization, margins
will go up, as we add new capacity they will add a bit and then long term, our
expectations remain unchanged.

Last quarter, I did highlight the drawback that we see potentially continue,
particularly as we potentially still can manufacture large volumes of COVID-19
vaccines essentials, which is component sourcing materials that are used in those
might start to increase. And those we see as additive to the top line growth for
the company, there is a portion of our revenues that are where the component
sourcing, but to the extent they grow faster than the rest of the revenues that
could have, I would say, short-term impacts related to margins. But as I said,
those are additive to the business and won't change our long-term expectations.

Operator

Our next question comes from Evan Stover from Baird. Please go ahead.

Evan Stover

Yes. Hi, thanks for taking my question. You mentioned the slower than expected
uptake of some new product launches but I wanted to ask from a slightly different
angle, the actual NPI, new product introduction themselves. There were 30 in the
quarter and I know there's ebbs and flows there but that was a little bit I think
lower than what we've seen per quarter looking back to last year or two. So the
question would be, in addition to the slower product launches, are you seeing just
some changes in customer behavior overall maybe holding back on launching a product
period in this environment, and is that something that you expect to change as we
move through the pandemic?

A - Wetteny Joseph

Yes, Evan, first part of your question with respect to a slower update to product
launches and the NPIs being 30 in the quarter, we have -- NPIs, the timing of them
isn't something that we necessarily control whether you are in a pandemic or not.
There are regulatory pathways and other variables that are involved and the
customers are more in control of those.

As you know with Catalent, we have over 1,000 development programs and those launch
NPIs for us every year bedrock our long term growth. Any given quarter, those
numbers may move around but if you look at this first quarter versus last year
first quarter for example, we had 30 this year, we got 15 in terms of NPIs last
year. So not that those two years are not necessarily presented but I think with 30
NPIs in the quarter when we expect to do somewhere in the ballpark of 150, give or
take any given year, I'd say it's an average quarter probably. Again, higher than
the number of NPIs a year ago.

With the second, customer behavior, I would say we're seeing meaningful changes. I
think we've talked about lower early phase development programs with respect to
clinical programs, you saw some of that in our CSS business in the fourth quarter
last year. You see some of that in our OSD segment this quarter. So I think if you
look at across Catalent, May the late-phase programs tend to be more in terms of
proportion of development programs that we have and again timing of launches is not
something that we necessarily control nor do we see any meaningful or significant
change in customer behaviors around those. I think as products do get launched and
a fewer visits to -- physically to doctor's offices with respect to the sales in
general of our customers that may have an impact of the how fast the uptake is and
we saw some of that in our SOT segment from launches over the last two or so
quarters.

Evan Stover

Yes, makes sense. Final question from me. Can you help us decode exactly what's
going on with the OSD voluntary recall that you mentioned, obviously Catalent has
7,000 products, always dangerous to focus on one but it's just a little bit notable
that you called out product participation in FY2H '20 and then the negative impact
from this recall. Trying to figure out how those are connected, and maybe if there
is anything else to call out on what exactly happened there?

Wetteny Joseph

Yes, so first of all, thank you for highlighting the fact that Catalent is a highly
diversified company with 7,000 products and 1,000 development programs as well that
are contributing meaningfully to our revenues each period, and more and more we are
more exposed to Biologics representing a greater proportion of our revenues, which
is on a faster growing end. And despite, this part that you referred to, which we
did highlight in the second half of our prior year in the third and fourth quarter,
we delivered a solid quarter in Q1 and are pleased to be in position to be
increased in our guidance for the year.

Having said that, within OSD, you have this one product, which had an impact in the
quarter, we expected a $12 million cost that we saw in the quarter. And if you look
at the rest of the year, the product you are referencing with the second half
launch activity, and so we see that being more of a comparable challenge in Q3 and
Q4, but as we look at the OSD segment and we take out this -- if you assume, you
neutralize year-on-year, taking out this product you would still see a segment
that's delivering close to what we would or in line with what we would expect it to
do long-term, which is roughly 5% to 7%.

So we're pleased with this segment, we're pleased with the growth that we're
seeing, particularly in our guidance or the resolving franchise within the
business. And the pipeline that we have for Zydis as well as non-Zydis within this
segment is -- bodes well for the long-term growth of this segment. So we're very
pleased with the performance of this segment. If you take this product out, it does
have a product participation feature in it and -- which contributed to the second
half of last year, and as we said, will have an impact this year on a year-over-
year basis. Although, I won't venture to give more than we did in our prepared
commentary, which is there are activities underway with this program and we do not
yet have an estimation as to when or if that product will be coming back.

Operator

This concludes our question-and-answer session. I'll turn it back for any closing
remarks.

John Chiminski

Thanks, operator, and thanks, everyone for your questions and for taking the time
to join our call. I'd like to close by highlighting a few key points we covered
today. First, we're very pleased with a very strong start to fiscal 2021 including
20% organic net revenue growth and 23% organic adjusted EBITDA growth. Our first
quarter results combined with our increased forecast in the back half of the year
led us to raise our fiscal '21 net revenue growth expectation by approximately 5
percentage points and our adjusted EBITDA expectation by approximately 7 percentage
points.

Next, the transformative acquisitions we've made over the last several years
combined with our strategic internal growth investments across the Company were
well timed to enable us, not only to address the increased level of R&D innovation
across a broad range of therapeutic categories, but also to position Catalent to
play an important role in the efforts to create therapeutics and vaccines to combat
COVID-19. We are accelerating our strategic capex plans in our Biologics business,
which will help meet near-term demand as well as have the effect of sustaining our
long-term growth targets.

Last January, we announced our plan for Biologics to become 50% of our overall net
revenue by 2024 and this quarter we are nearing our target faster than expected
with our Biologics segment accounting for 44% of our net revenue. Finally, our
mission to develop, manufacture and supply products that help people live better
and healthier lives has never been more important. We continue to be thankful for
our 14,000-plus employees who live our Patient First culture and have worked hard
to carry out the great responsibility we have to maintain business continuity for
all of those counting on us to deliver, be it for a potential COVID-19 therapy or
vaccine or the 7,000 other products we produce every year for customers. Thank you.

Operator

Ladies and gentlemen, this concludes today�s conference call. Thank you for
participating. You may now disconnect.