Chit Chat Stocks Podcast Summary: "Leandro From Best Anchor Stocks Returns To Pitch An Underfollowed Biopharma Winner"

Release Date: July 23, 2025

Hosts: Ryan Henderson and Brett Shafer
Guest: Leandro from Best Anchor Stocks

1. Introduction

In the July 23, 2025 episode of Chit Chat Stocks, hosts Ryan Henderson and Brett Shafer delve into an in-depth analysis of Stevanato Group, an underfollowed player in the biopharma supply chain sector. Joined by recurring guest Leandro from Best Anchor Stocks, the discussion uncovers the company's history, market positioning, growth strategies, and future prospects.

2. Stevanato's History and Evolution

Leandro provides a comprehensive overview of Stevanato's origins and transformation over the decades.

• Founding and Early Years (00:32 - 02:56):
  "The company was founded around 70 years as a specialty glass manufacturer... initially in Venice," Leandro explains. Originally named Sofia Stella, the company evolved into Ompi, expanding from glass bottles to broader primary packaging solutions.

• Vertical Integration Milestone (02:56 - 04:01):
  In 1971, Stevanato established Spami, focusing on glass-forming technology. "This allowed the company to vertically integrate and focus more on the quality of their glass," Leandro notes, paving the way into the healthcare industry where quality is paramount.

• Recent Developments and IPO (04:01 - 04:32):
  Stevanato went public in 2021 during the pandemic, a strategic move to capitalize on the booming healthcare sector. Despite initial stock stagnation, Leandro views the IPO as a positive capital allocation:
  "They took advantage of a very good moment to raise capital, right?" (04:18)

3. Stevanato in the Pharmaceutical Supply Chain

Ryan Henderson seeks clarity on Stevanato's role within the pharmaceutical value chain.

• Pharmaceutical Value Chain Overview (05:10 - 07:03):
  Leandro outlines the stages from drug discovery to distribution, emphasizing Stevanato's position in the packaging phase, specifically in glass packaging known as fill and finish.
  "That's where Stevanato operates, it's glass packaging company... fill and finish." (06:32)

• Risk Aversion Context (07:03 - 07:46):
  Operating at the end of the value chain, Stevanato faces high regulatory and legal risks. A contamination incident could be catastrophic:
  "If something is contaminated due to packaging... you can face a lot of costs and eventually go bankrupt." (07:08)

4. Business Segments: BDS and Engineering Solutions

Brett Shafer prompts a breakdown of Stevanato's two primary business segments: Biopharma and Diagnostic Solutions (BDS) and Engineering Solutions.

• Biopharma and Diagnostic Solutions (08:09 - 09:04):
  Representing over 80% of current revenues, BDS includes various containment solutions like vials and pen cartridges. Leandro distinguishes between bulk and high-value products, noting that the latter involves additional services such as washing and sterilization:
  "High value products... can cost up to 10 times more than a bulk product." (09:04)

• Engineering Solutions (10:10 - 11:19):
  Although a smaller revenue contributor, Engineering Solutions are crucial for Stevanato's vertical integration. This segment involves selling equipment for assembly and inspection, essential for ensuring quality in containment solutions.

5. High Value vs. Bulk Products

Leandro delves into the dynamics between high-value and bulk products.

• Growth and Margins (09:04 - 13:04):
  High-value products not only offer double the gross margins compared to bulk products but are also experiencing faster growth. The shift towards biologics, which are more sensitive and require higher quality packaging, drives this trend.
  "Biologics are taking share of small molecules... these are injectables that are pretty sensitive." (12:30)

• Capital Intensity Comparison (13:04 - 13:55):
  Stevanato's investment in high-value products is likened to TSMC's capital-intensive model, providing a buffer against economic downturns with higher margins:
  "I always compare this case to TSMC's case because... they have high margins to defend against underutilization." (13:05)

6. Impact of AI and Future Growth Drivers

Addressing the role of AI in drug discovery, Leandro assesses its influence on Stevanato's future.

• AI's Asymmetric Risk-Benefit (14:44 - 16:16):
  While AI promises advancements in drug discovery, its disruptive potential in manufacturing and packaging is limited due to stringent regulations and the physical nature of Stevanato's products. However, increased drug discovery volume driven by AI could elevate demand for Stevanato's solutions:
  "More drug discovery will eventually lead to more volumes and more products required from Stevanato." (15:43)

• Biologics Growth (16:16 - 26:34):
  The rise of biologics and GLP1s (used in diabetes treatment) continues to bolster Stevanato's growth. Despite concerns about a potential shift to oral GLP1s, Stevanato anticipates and accounts for this transition in their capacity planning:
  "Stevenado has been pretty conservative in their estimates and they are estimating more in oral GLP1s in the next five years." (26:13)

7. Industry Cyclicality and COVID-19 Effects

Leandro explains the perceived cyclicality in the bioprocessing supply chain, attributing it to COVID-19-induced inventory adjustments rather than inherent industry volatility.

• Pandemic-Driven Demand Surge (17:17 - 20:28):
  The pandemic led to a surge in orders as customers aimed to stock up and mitigate supply chain disruptions. Post-pandemic, as inventories normalize, this created a temporary dip in Stevanato's growth rates.
  "These numbers wouldn't have been possible without COVID." (20:28)

• Long-Term Stability (20:28 - 23:14):
  Historically, the healthcare industry remains stable due to consistent demand for medications. Stevanato's recent growth dip was an anomaly:
  "Before 2024, Stevanato grew 1%. In 2024... had not had a single year with growth of less than 10%." (20:28)

8. Capital Expenditures and Capacity Expansion

A central theme is Stevanato's aggressive capital investment strategy to meet rising demand.

• CapEx Rationale (21:24 - 23:24):
  Investments are driven by customer commitments rather than speculative growth. Stevanato is expanding facilities in the US and Europe to ensure geographic-dependent capacity, positioning themselves ahead of competitors.
  "Customers are asking the company to bring forward this CapEx rather than to defer the CapEx." (21:44)

• Risk Mitigation (23:37 - 26:33):
  The modular nature of new facilities allows gradual scaling, reducing the risk of overexpansion. Current ramp-up rates indicate strong ongoing demand, particularly from high-value product segments like GLP1s.
  "They are going to have the capacity in place... especially in the US." (23:37)

9. Competitive Landscape

Leandro characterizes the industry as a rational oligopoly dominated by a few key players, with high barriers to entry.

• Major Competitors (30:08 - 32:48):
  Stevanato, Shot (German), and Gersheimer (German) are the primary competitors. Gersheimer is considered lower quality, while Shot and Stevanato compete closely.
  "Entry barriers to the industry are pretty high for several reasons." (32:48)

• Barriers to Entry (32:48 - 33:25):
  High regulatory standards, customer trust, and long-term contractual relationships make it challenging for new entrants to gain market share.
  "It's a matter of trust that they've built through the decades." (33:25)

10. Valuation Insights

The discussion addresses why Stevanato might be undervalued despite appearing expensive based on superficial metrics.

• Misleading Metrics (38:56 - 39:59):
  Leandro argues that current financial figures don't reflect the company's true potential, as temporary headwinds have distorted growth and margin profiles.
  "Those numbers are very misleading." (38:56)

• Future Earnings Potential (39:59 - 42:49):
  With normalized operations, Stevanato is poised for double-digit growth and improved margins, suggesting significant upside from current valuation multiples.
  "Multiple expansion say of over 1000 basis points over the next 5 to 7 years is not out of the question." (40:38)

11. Management and Ownership Structure

Insights into Stevanato's governance reveal strong alignment between management and shareholder interests.

• High Insider Ownership (43:23 - 44:29):
  The founding family retains over 80% ownership, ensuring long-term commitment to the company's success.
  "The family has about 5 billion invested in the company... they're not going to burn money down the hole." (43:23)

• Incentive Alignment (45:34 - 46:40):
  The management incentive program is tied to Organic Growth and Return on Invested Capital (ROIC), promoting sustainable growth and efficient capital use.
  "Management incentives also point to them not being able to pursue cost growth at all costs." (46:07)

12. Risk Analysis (Pre-Mortem)

The episode concludes with a candid discussion of potential risks that could derail Stevanato's growth trajectory.

• Capacity Overexpansion (48:24 - 49:40):
  Despite current strong demand, there is a risk that future demand may not meet capacity projections, though current indicators are positive.
  "Customers are asking to bring this CapEx forward because they need the demand earlier than they expected." (48:24)

• Technological Shifts (49:11 - 49:21):
  Emerging technologies that allow oral administration of biologics could reduce Stevanato's market if injectable forms decline.
  "Maybe there's some kind of technology that allows biologics to transform into orals." (49:15)

• Quality Assurance (49:21 - 50:50):
  Any contamination or quality lapse could irreparably damage Stevanato's reputation and client trust, leading to severe financial and legal consequences.
  "Imagine if something doesn't get correctly sterilized and then there's contamination in a drug." (49:21)

• Execution Risks (50:50 - 51:14):
  While current management demonstrates reliability, future execution missteps remain a general business risk.
  "I don't think there's a reason to believe that's going to be the case... they have complied with what they have said." (50:50)

13. Conclusion

Leandro underscores Stevanato's robust position in a stable industry, backed by strong management, strategic capacity expansion, and alignment with long-term healthcare trends. With high insider ownership and a clear path for growth, Stevanato presents a compelling, risk-adjusted investment opportunity despite current valuation challenges.

Notable Quotes:

• "They took advantage of a very good moment to raise capital." — Leandro (04:18)
• "Biologics are taking share of small molecules... these are injectables that are pretty sensitive." — Leandro (12:30)
• "If something is contaminated due to packaging... you can face a lot of costs and eventually go bankrupt." — Leandro (07:08)
• "They are selling consumables in an industry that's going to be requiring these products no matter what." — Leandro (36:45)
• "It's a matter of trust that they've built through the decades." — Leandro (33:25)

Resources Mentioned:

• Best Anchor Stocks Newsletter: Free write-ups on bestankerstocks.com
• Fiscal AI: Stock research platform mentioned for additional investment insights.

Disclaimer: The information provided in this summary is for informational purposes only and does not constitute financial advice or a recommendation to buy or sell any securities.