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Catalent Inc (NYSE:CTLT)
Q3 2020 Earnings Call
May 5, 2020, 8:15 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Catalent Third Quarter Fiscal Year 2020 Earnings Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded.

[Operator Instructions] I would now like to hand the conference over to your speaker today, Paul Surdez, Vice President of Investor Relations. Thank you and please go ahead, sir.

Paul Surdez -- Vice President of Investor Relations

Good morning, everyone, and thank you for joining us today to review Catalent's Third Quarter Fiscal Year 2020 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 our 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. Slide 3, 4 and 5, discuss the non-GAAP measures and our just issued earnings release provides reconciliations to the nearest GAAP measures.

Catalent's Form 10-Q to be filed with the SEC later today, has 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.

John Chiminski -- Chair and Chief Executive Officer

Thanks, Paul, and welcome everyone to the call. We'll start today's comments with an overview of our response to the COVID-19 pandemic and how our early planning to implement responsive measures and quick reactions to emerging in unprecedented developments have enabled us to maintain business continuity.

I'm proud to report that the tireless efforts of employees across our company and our strong financial position have together permitted us to continue to meet our commitments to our internal and external stakeholders.

Please refer to Slide 6 and 7 for our COVID-19 discussion. First and foremost, our top priorities are ensuring that our employees have a safe and secure working environment, while at the same time keeping our facilities open so that the vital medicines we develop and produce are available for patients.

Catalent was proactive in February, establishing a COVID-19 response team and creating new processes to support our production workers so that they can safely and confidently come to work. We continued to follow and in many cases, even exceed local, state and national guidelines. Given our GMP culture, which has always included training for employees to stay home if sick and to promptly report illness, we had strong foundation on which to expand our safety measures.

Some of the measures we added include; severely restricting visitor and non-essential employee access to our sites; reorganizing our workflows and adding shifts to maximize social distancing; effectively sourcing PPE and requiring the use of masks; implementing virtual video inspections of our facilities for customers and regulators; eliminating almost all business travel; facilitating safer alternatives for travel to and from work and enhancing our IT infrastructure to comfortably handle the extra load for employees that are able to work remotely.

Looking toward the future, we have initiated a post lockdown task force, which focuses on operating during the next phase of the COVID-19 pandemic. Roughly 75% of our 13,500 employees do not have roles that allow for them to work from home. To recognize our site-based production and support employees for their personal commitment, reliability and resilience in keeping our sites running during this global emergency, we are providing most of our site-based employees with thank you bonuses totaling more than $5 million.

Catalent has more than enough cash to pay these bonuses itself, but as a sign of our management's sincere appreciation and our commitment to physical responsibility, these bonuses will be partially funded by contributions from the salaries of our executive and senior leadership teams. I personally volunteered to have my pay reduced by 40% for the next three months to support this effort.

Our employees are extremely motivated and driven by our patient-first culture as they know that their work improves the health and well-being of patients around the world. And now, in addition to the thousands of important products we produce every year, we're all extremely proud to be working with our customers and multiple COVID related vaccines, treatments and diagnostics to detect, prevent and address symptoms and effects of this disease, and I will share more with you on these developments in just a few moments.

I'm proud that Catalent's committed employees have kept our facilities open and our quality intact. However, the situation remains fluid and I want to be clear that we will not continue to keep a site or production line up and running if we think it isn't safe for our employees or will negatively impact quality. Managing our supply chain is another critical component of maintaining business continuity. We continue to stress tests and survey deep into our supply chain to mitigate risks.

To date, we've not identified any significant delay that may have a substantial effect on the delivery of any product or clinical trial supplies or that may impact our development services. We've adopted specific procedures to minimize and manage future disruption to our ongoing operations including expanding our safety stock of raw materials and securing personal protective equipment across our network as well as ongoing monitoring of our supplier stock levels to mitigate impact on future deliveries.

Note that our inventory levels will likely rise as a result of our proactive actions to secure safety stock for longer than normal periods. We've successfully navigated supply chain in other COVID related complexities thus far, and our proactive and continuing efforts position us for continued success.

However, the supply chain for our customer's products is dynamic and fluid so we will continue to focus on proactively identifying and resolving any global logistical challenge and there may be unforeseen challenges ahead.

When thinking about demand for our products and services, it should not surprise you, given our business model that we see both potential challenges and potential opportunities as we respond to the COVID-19 pandemic. However, due to the diversity of the 7000 products in our portfolio, with our top 20 products representing just 20% of revenue and our single largest at 4%, we're not currently seeing a net shift in overall demand.

We have identified several COVID related trends with respect to the demand for our services across all four business segments and we would like to share with you some notable observations.

First, due in part to the wide variety of products we produce we'd seen some increases and some decreases in customer forecast and orders which in both the third quarter and to-date in this quarter have been largely offsetting. Second, in our Clinical Supply Services segment, we experienced strong year-on-year growth in the third quarter. Contributing to this growth was a notable surge in storage and distribution services but that has moderated in the fourth quarter to-date.

We continue to monitor a variety of developing trends in this business, including to see whether a widely predictive slowdown in clinical trials is actually occurring. But we also note that CSS remains Catalent's smallest business segment. So these trends are likely to have only limited effect on Catalent's overall results.

Finally, about 30% of our revenues are for our development services across multiple segments, representing a wide range of R&D solutions, with most of the revenue tied to products that are in the later stages of development. It's important to note that we work on more than 1,000 development projects at any one time and it's one of the strengths of Catalent that a broad range of customers, products and programs mean that no single customer product or program is material to us.

We've not experienced a notable slowdown in demand for our development services but we are actively monitoring the situation and continue to take the pulse of our customers.

In the event there is a short-term decrease in demand for some early stage development services, it may be offset by an increase for COVID related services, depending on the size and duration of any potential market shifts and the timing of COVID related projects.

Due to our significant development, experience and capabilities across a broad range of advanced technologies, we are now helping our customers to develop, manufacture and supply COVID-19 vaccines and treatments across all four of our business segments, including projects for drug substance, drug products, oral, respiratory, analytical chemistry and clinical supply services.

As of last week, we've been presented with approximately 100 opportunities for COVID related programs, involving roughly 90 molecules, which we estimate to comprise roughly 45% of all COVID-19 products and treatments currently under development. Some of these projects have already been signed, including the partnership we announced on April 29th with Johnson & Johnson for the establishment of new segregated manufacturing capacity in preparation for large-scale commercial manufacturing in the United States for their lead vaccine candidate for COVID-19.

On March 30th, J&J announced the expected timeline for its lead vaccine candidate, including the initiation of human clinical studies by September 2020 and it's anticipation that the first commercial batches of a potential COVID-19 vaccine could be available for emergency use authorization in early 2021, a substantially accelerated timeframe compared to the typical vaccine development process.

Under our partnership with J&J, Catalent will accelerate availability of manufacturing capacity for J&J's program and will prepare for large scale commercial manufacturing in our Bloomington, Indiana facility. We also plan to hire approximately 300 additional employees beginning in July 2020 to deliver operational readiness and 24/7 manufacturing schedules for our portion of the projected demand of multi-dose units.

We also announced yesterday our partnership with Arcturus Therapeutics to support the drug substance manufacture of its COVID-19 mRNA based vaccine candidate in our Madison, Wisconsin facility. The partnership will combine Arcturus' vaccine technology with Madison's scalable CGMP manufacturing capabilities to potentially commercialize -- commercially produce millions of doses starting later this year.

In noting these programs, we recognize that it's always difficult to predict future demand for un-approved drugs and that historical statistics on the success of development programs suggest that many of the COVID-19 related projects our customers have brought to us may never achieve commercialization though we will do our part to maximize the odds that each and every one is successful.

Before moving on to summarize our third quarter results, I'd like to remind you that a key strength of Catalent is the wide diversity of our business, products, geographies and customers. This has helped us weather storms in the past and we see no difference today when we consider what this situation means for the long-term performance of the Company. While the crisis is still unfolding, we do not foresee this terrible pandemic creating a fundamental change to our business.

Due to our comprehensive capabilities, diverse revenue base and well-funded customers as well as the increasing need for complex solutions and our strengthened balance sheet, Catalent is well positioned to weather this crisis. While our industry will likely continue to experience change, we will quickly adapt and emerge as an even stronger company.

Now, I'm pleased to share with you a summary of our financial highlights from the third quarter, which are covered on Slides 8 and 9. Our revenue for the third quarter increased 23% as reported or 25% in constant currency to $761 million with 7% of the constant currency growth being organic.

Our adjusted EBITDA of $185 million for the quarter was above the third quarter of fiscal year 2019 on a constant currency basis by 22%, with 8% of the 22% being organic. Our adjusted net income for the third quarter was $83 million or $0.50 per diluted share, up from $0.49 per share in the corresponding prior year period.

All four reporting segments reported year-on-year growth with the Biologics, Softgel and Oral Technologies and Clinical Supply Services segments continuing their solid organic growth and our Oral and Specialty Delivery segment returning to organic growth. We further strengthened our financial position before the recent market volatility through a series of strategic transactions that funded important growth initiatives, increased cash on our balance sheet, lower the overall interest rate on our debt, and pushed out our nearest maturity dates.

As a result of these transactions, which Wetteny will later detail, combined with our cash generation in the quarter, we funded our entry into Cell Therapy through the acquisition of MaSTherCell, increased our cash position by more than $400 million, and reduced our net debt leverage ratio to 3.8 times from 4.2 times at December 31.

Our net leverage is currently at one of the lowest points during my entire 11-plus years at Catalent and our projections for further EBITDA growth mean that we will continue to naturally delever over time. Over the last 18 months, we have announced several substantial capital projects that will enable us to anticipate demand across our business including for our biologics and gene and cell products.

Given our strong cash position and long maturities, we can afford to invest now for the future, as planned. However we're keeping a very tight rein on these projects and we always have the ability to slow or halt them if conditions warrant, though at the moment we do not see a need to do so. Enabling the growth of our world-class Biologics business continues to be a key focus of Catalent.

During the quarter we completed two acquisitions that we expect will become future growth drivers for the Company. The January 1st acquisition of the facility in Anagni, Italy expanded our European capabilities in Biologics drug product, solid oral dose manufacturing, and packaging. Given the current high demand for sterile fill/finish product manufacturing capabilities for vaccines, the Anagni facility has the capability, talent and capacity to become a contributor in the global effort against COVID-19.

On February 10th, we completed our acquisition of MaSTherCell, which enabled Catalent to broaden its biologic portfolio to include Cell Therapy service offerings, including the development and manufacturer of both autologous and allogeneic cell therapies as well as a variety of related analytical services.

When combined with the Gene Therapy capabilities we acquired in 2019, we believe MaSTherCell establishes Catalent as a leader in Cell and Gene Therapy, creating deeper and broader relationships with customers and opening up cross-selling opportunities across Catalent's other technology platforms as we've already seen through our Gene Therapy acquisition.

Effectively integrating the premier assets we have acquired and deploying capex to increase and enhance our Biologics capacity and capability will underpin our ability to meet the needs of customers and their patients. We expect strong revenue and adjusted EBITDA growth from our Biologics offerings over time and continue to target the Biologics segment to make up approximately 50% of our total revenues in fiscal 2024 versus approximately one-third today and to be a primary driver of the margin expansion we expect for our company over the same period.

To help guide this growth, last week we announced the next generation of leadership for our cell and Gene Therapy business with the appointment of Dr. Manja Boerman as its President effective June 1st. As announced earlier this year, Manja joined Catalent in December and had since led our European Biologics business as well as our recently acquired Cell Therapy business.

Pete Buzy, who has led the Catalent Gene Therapy business since the Company's acquisition of Paragon Bioservices in May 2019, will be retiring on June 1st, but will remain with the Company as Chairman of the Gene Therapy in an advisory capacity for the next 12 months to support Manja as she transitions into her new role.

I would like to personally thank Pete, under whose guidance our Gene Therapy business has seen significant growth and continuous investment to meet the strong and growing demand for our adeno-associated virus vectors, next-generation vaccines, and oncolytic viruses.

Before turning today's presentation over to Wetteny who will take you through our third quarter financial results and the details related to our updated financial guidance, I'd like to point you to Slide 10 to highlight our progress on corporate responsibility.

I'm proud to let you know that we recently published our first Corporate Responsibility Report covering fiscal year 2019. A copy of this report may be found on our website. The report measures our progress across a range of important ESG, Environmental Social and Governance, metrics using the standards promulgated by the Sustainability Accounting Standards Board SASB, for the biotechnology and pharmaceuticals industries.

Our report brings a new level of transparency concerning and highlights our ambitions toward our companywide quality, safety, environmental sustainability and diversity inclusion efforts, all of which had become even more embedded in our culture over the last several years. The guiding light of our corporate responsibility efforts is our mission to help people live better, healthier lives.

As a global development and manufacturing partner for medicines, clinical trial materials and health products, the impact of our progress in all ESG areas and our company's ability to deliver on our mission has never been more important. Thanks to our corporate responsibility team and several of our site teams around the world, we have provided emergency relief grants to local charities in the communities where we operate that are supporting COVID-19 relief efforts.

In addition to corporate grants, our contributions include two-to-one company match for employees' charitable donations related to COVID-19 pandemic relief efforts. Our broad efforts to respond to the COVID-19 pandemic for employees, our communities, our customers, and ultimately their patients underscore why I continue to look forward to additional progress in our corporate responsibility and sustainability as Catalent grows.

I would now like to turn the call over to Wetteny.

Wetteny Joseph -- Senior Vice President & Chief Financial Officer

Thanks, John. I will begin this morning with a discussion on segment performance where both the fiscal 2019 and fiscal 2020 third quarter results are presented on the basis of the reporting segments we introduced earlier this fiscal year.

Please turn to Slide 11 which presents our Softgel and Oral Technologies business. As in past earnings calls, my commentary around segment growth will be in constant currency. Softgel and Oral Technologies revenue of $242.3 million decreased 3% over the third quarter of 2019 with segment EBITDA increasing 9%.

After excluding the impact of the October 2019 divestiture of the segment's VMS manufacturing site in Braeside Australia, segment revenue and EBITDA grew 4% and 13% respectively. The growth primarily relates to increased demand in the prescription products business in North America, which is partially attributable to recently launched products. In addition, the consumer health business had stronger demand in both Europe and North America. The segment's improvement in EBITDA was driven by favorable product mix across the network.

Slide 12 shows that our Biologics segment recorded revenue of $250 million in the quarter, which was up 88% versus the comparable prior year period with segment EBITDA growing 46%. Most of the revenue and all of the segment EBITDA growth was inorganic and driven by our Gene and Cell Therapy acquisitions as well as by our acquisition of the Anagni facility which recognized the portion of its revenue in the Biologics segment this quarter with the remaining portion being included in our Oral and Specialty Delivery segment.

In total, for the Biologics segment, these acquisitions contributed 77 percentage points to revenue and 51 percentage points to EBITDA growth. The EBITDA margin from acquisitions this quarter were below the segment average due to, a significant increase in on-boarding talent in the fast growing Gene Therapy business, mostly in the area of operations and quality; the lower margin currently being generated in the Cell Therapy business, which is expected to continue due to the cost of continuing to build out this relatively new business over at least the next 18 months; and the current under-utilization of the Anagni facility, which will begin to change in our fiscal year 2021 as we already have begun to see new customer activity outside of the BMS supply agreement. Excluding the acquisitions, the segment recorded organic revenue growth of 11% in the third quarter, with the biggest driver of the revenue growth stemming from continued growing demand for the U.S. drug product business.

However, organic segment EBITDA declined 5%, which was due to a number of factors including, unfavorable product mix; softness in the European drug product business; increased head count in U.S. drug product business to staff new production lines, including the recent completion of the $14 million integrated complex packaging suites in Bloomington; and the previously discussed completion of a limited duration customer contract, which had a particularly high drop through of EBITDA.

The end of this contract annualized in the third quarter, so we will no longer provide a comparison headwind beginning in the fourth quarter. Note that drug substance after excluding the completion of this non-cell line clinical manufacturing contract, grew both revenue and EBITDA year-over-year.

As a final note on Biologics, it is important to consider the large amount of development work being done in this business following the Gene and Cell Therapy acquisitions over the last year with approximately two-thirds of their revenue being generated by development programs, there will more likely be greater quarter-to-quarter fluctuations in financial performance. However, this increase in development revenue is primarily driven by mid-to-late stage projects and bodes well for the segment's future organic growth as these programs move toward future commercialization.

Slide 13 shows our Oral and Specialty Delivery segment recorded revenue of $181.4 million in the quarter, which was up 19% versus the comparable prior year period with segment EBITDA up 16% quarter-over-quarter. Most of the growth was driven by the acquisition of the Anagni facility which recognized more than half of its revenue in the OSD segment this quarter.

In total, the Anagni facility contributed 13 percentage points to revenue and 9 percentage points to EBITDA growth. As we just discussed with Anagni's Biologics component, margins are expected to be low until new customers are brought into the facility over time. We experienced strong growth in orally delivered commercial products in both the U.S. and in Europe.

The segment's respiratory and ophthalmic specialty delivery platform significantly picked up from last quarter due to new product launches, including one that benefited from a product participation component and a general increase in demand for respiratory products as a result of the COVID-19 pandemic.

The OSD segment continues to have a very strong development pipeline that is expected to drive future long-term growth. In order to provide additional insight into our long cycle segments, which includes Softgel and Oral Technologies, Biologics, and Oral and Specialty Delivery, each quarter we disclose our long cycle development revenue. As a reminder, these metrics are only directional indicators of our business, since we do not control the sales or marketing of these products nor can we predict the ultimate commercial success of them.

As you can see from our slide presentation today, in addition to disclosing each of the long-cycle segment development revenue in our 10-Q, we are also now presenting this information for you in the supplement we provide at the end of the earnings presentation slides.

For the first nine months of fiscal year 2020, we recorded development revenue across both small and large molecule of $666.2 million, which is more than 47% above the development revenue recorded in the same period of the prior fiscal year.

In addition to our quarterly disclosures of development revenue, we also provide the total number of new product introductions as well as expected revenue from these NPIs in the current year. We introduced 120 new products in the first nine months of fiscal year 2020 which are expected to contribute approximately $47 million of revenue in the fiscal year.

Now, as shown on slide 14, our Clinical Supply Services segment posted revenue of $88.9 million or 16% growth over the third quarter of the prior year, segment EBITDA of $24.6 million or 24% growth. The strong growth in both revenue and segment EBITDA was primarily driven by accelerated backlog burn for our storage and distribution services, as well as increased demand for manufacturing and packaging business.

As of March 31st, 2020, our backlog for the CSS segment was $396 million, up 1.5% from $390 million at December 31st. This segment recorded net new business wins of $96 million during the third quarter, which is a decrease of 15.1% compared to the very high level of net new business wins recorded in the third quarter of the prior year.

With a strong Q3 prior-year quarter rolling off and the accelerated revenue in the third quarter of this year, the segment's trailing 12-month book-to-bill is now 1.1 times compared to 1.2 times last quarter. As I mentioned, there are many cross currents in the CSS business. We are beginning to see signs of a slowdown of clinical trials, which will not be entirely offset by incremental demand we are seeing for trials related to COVID-19.

We believe there was a pull forward of clinical trial activity in March as CSS' early Q4 overall activity is lower than before the pandemic. Accordingly, we expect the growth rate of the CSS segment to significantly decelerate in the fourth quarter from the 16% growth in Q3. However, we expect demand to normalize later in the calendar year. So we are now planning to significantly variablize our cost to match the expected temporary slowdown in revenue.

Moving to adjusted EBITDA on Slide 15; third quarter adjusted EBITDA increased 20% to $185 million or 24.4% of revenue compared to 25% of revenue reported in the third quarter of the prior year. On a constant currency basis, our third quarter adjusted EBITDA increased 22%, including 8% organic growth.

On Slide 16 you can see that third quarter adjusted net income was $82.9 million or $0.50 per diluted share compared to adjusted net income of $71.2 million over a year ago.

Slide 17 shows our debt related ratios and our capital allocation priorities. As John mentioned earlier, since our last call, we executed several important financial transactions ahead of the recent market volatility that strengthened our balance sheet and reduced our leverage and weighted average interest rate. First, we raised approximately $500 million through an equity offering, which was used to finance the MaSTherCell Cell Therapy acquisition and paid down an intra-period revolver borrowings, with the remainder of net cash raised going to the balance sheet.

Next, we paid down over $750 million of euro denominated loans and notes due 2024 and replaced them with roughly $900 million in unsecured euro denominated notes due 2028 at a much lower rate of 2.375% with the difference in cash after expenses going to the balance sheet. After these moves, our nearest term senior debt maturity now occurs in 2026, roughly six years out and all of our senior notes remain covenant light and all of our senior debt has been placed at very attractive interest rates.

In an abundance of caution, we put $200 million on our balance sheet through a borrowing under our $550 million revolving facility toward the end of the quarter. All of that cash remained on our balance sheet at the end of the quarter and we still have $350 million of unused capacity under the revolver, less the aggregate value of our outstanding letters of credit, the details of which are set forth in the Form 10-Q we are filing this morning.

In another move to strengthen our balance sheet and minimize the impact of any future volatility in market interest rates, we completed an interest rate swap agreement after the end of the quarter for approximately half of our pending US dollar denominated term loans swapping some of our LIBOR-based variable rates for fixed rates, making over 70% of our debt fixed rates.

As a result of the structure transactions we executed in the third quarter as well as the cash we generated in the quarter, our cash and cash equivalents balance at March 31st was $608 million compared to $189 million at December 31st. At the end of April, cash and cash equivalents were roughly the same as at the end of Q3.

Our aggregate net leverage ratio as of March, 31st, 2020 was 3.8 times, which was significantly reduced from the 4.2 times ratio at the end of the prior quarter, and an improvement of approximately two-thirds of a turn compared to the ratio at the time we announced the Paragon transaction approximately one year ago.

Historically, given the free cash flow generation of the Company and its growing adjusted EBITDA, the Company naturally de-levers between one half and three-quarters of a turn per year. However, given our elevated capex plans over the next 24 months, the reduction of leverage is expected to occur at a lower pace for that period.

We expect our fiscal 2020 capital expenditures to remain at approximately 13% to 14% of net revenue. Capex is expected to continue to be at elevated levels for the next two to three years. I'd like to make some general comments regarding the composition of our capex, which generally falls into three parts.

First, roughly 3% to 4% of revenue is spent every year to maintain our facilities and to meet the rigorous regulatory requirements for GMP manufacturing. Second, based on our insights regarding our basket of development projects and careful consideration of long-term expected demand, we build capacity with high confidence that a substantial portion of the new capacity will be engaged to meet our expected customer demand.

Finally, due to the natural attrition inherent in pharmaceutical development programs, it is difficult for Catalent to protect our interest and not invest capital speculatively for potential product launches. So we generally do not deploy capital to meet the anticipated needs of a single product. When we do, we require mix of customer-funded capex or take or pay arrangements to offset the risks associated with any single product.

Note that our growth capex is overwhelmingly discretionary and if there is an unforeseen issue related to the pandemic that should impact our cash position, we will be able to act swiftly to control the deployment of uncommitted capex as well as a portion of other discretionary operating expenses.

Now we'll turn to our financial outlook for fiscal year 2020 as outlined on Slide 18. John noted in his opening comments that we have updated our financial guidance and substantial part will take into account the anticipated near-term impact of the COVID-19 pandemic.

We continue to expect full year revenue in the range of $2.87 billion to $2.95 billion, as some expected lost revenue should be offset by new demand, including demand related to COVID-19. For full-year adjusted EBITDA, we now expect a range of $700 million to $725 million compared to the previous expectation of $711 million to $735 million. This change is as a result of lower productivity and increased net costs related to the pandemic.

The productivity impact includes a modest increase in absenteeism and adding additional shifts to accommodate social distancing. Elevated cost related to incremental PPE expense, incremental over time, enhanced IT and the thank you bonuses that John described earlier. To reflect the change in adjusted EBITDA, we are also updating our full year adjusted net income guidance to a range of $295 million to $320 million compared to the previous guidance of $307 million to $331 million.

As a result of the $500 million equity raise on February 4th, we now expect that our fully diluted share count on a weighted average basis for the fiscal year ending June 30th will be in the range of 165 million to 166 million shares compared to the previous range of 160 million to 161 million shares. This projection continues to count the preferred shares we issued in May of 2019 to fund part of the Gene Therapy acquisition as if all were converted to common shares in accordance with their terms.

We continue to expect our consolidated effective tax rate to be between 24% and 26% for the fiscal year. Our guidance ranges assume that there is no major external change to the current situation, including no major personnel issue and that our supply chain will remain intact so that production may continue.

Operator, we now would like to open the floor for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Tycho Peterson with J.P. Morgan. Your line is now open.

Tycho Peterson -- J.P. Morgan -- Analyst

Hey, thanks. John, congrats on announcing the vaccine deals. Just curious if you could help us think a little bit more about the potential tailwinds here for J&J to billion doses? Is $0.60 per dose kind of the right math, so maybe $130 million, $150 million per year? And because this is productions at risk, can you maybe just talk to that component of the deal? Sounds like there will be manufacturing at risk for emergency use initially before Phase 1 September?

John Chiminski -- Chair and Chief Executive Officer

Yeah. So first of all, I just like to say that Catalent has given our capabilities. Within the industry, we've really become a go-to company for COVID related vaccines and therapies and I mentioned in my prepared comments that we've had nearly a 100 touch points with about 90 molecules of which we've really secured somewhere around 30 signed deals.

So, I'm just incredibly proud that Catalent has been able to be, I would say, front and center partnering with our pharmaceutical and biotech customers to be able to really participate and being part of the solution.

With regards to J&J or any other customers that we -- that we have; we generally don't outline any specific terms with regards to those -- to those deals. I would just say that in constructing these deals, we make sure that we understand the fact that some of these or many of these may not actually be commercialized.

So we need to make sure that we get a return for our investments in the J&J deal and they're assisting in funding of the capex and we have, I would just say, put in place terms that ensure that you know Catalent will get a return for this investment.

It's kind of interesting in the J&J deal because of our -- the proactive nature of our business, we were putting online some additional capacity in Bloomington. As you well know, we had somewhere around $110 million investment going in there and we're actually going to be repurposing a line and dedicating it for J&J in this particular situation.

I'll ask if Wetteny wants to add any additional commentary with regards to the financials.

Wetteny Joseph -- Senior Vice President & Chief Financial Officer

Yeah, I think -- Tycho, the only thing -- a couple of things I would add is, given the -- even with the accelerated development path that J&J is on we likely won't see any significance -- provide a successful volumes here until well into the back half of our fiscal '21. So that's the first thing I would say.

And in terms of volumes, we won't give any precision other than to say this is structured so that we would provide a substantial portion of J&J's U.S. targets in terms of unit and volume. And the last point I'll make Tycho is, as you know, Catalent is a highly diversified company with 7,000 products across the world delivering to 80 countries.

And that level of diversification means that the top 20 products only account for 20% of our revenues. And I think even -- and with the work we're doing with J&J and others, we don't foresee that changing substantially in terms of the level of diversification in the company where a single product is going to -- is going to really define how we perform, overall.

Tycho Peterson -- J.P. Morgan -- Analyst

Thank. And then one follow-up. We're seeing a number of the drug company's scale up monoclonal antibody production as well as a way to bridge the gap until vaccines come on the market. Obviously they're proven safe. So just curious -- I mean, Lilly is going to start dosing first patients next month. Can you talk to that opportunity for you as well?

John Chiminski -- Chair and Chief Executive Officer

I would just say, Tycho, that we're seeing opportunities across every technology and capabilities that we have within the Company. Again, we'll not opine specifically with regards to one customer. But I would just say there is almost not a single business unit and technology that we have that isn't being asked to participate in some way, everything from -- again you know antibodies, the mRNA, adenovirus vaccines, our analytical capability our Clinical Supply Services, even our Softgel and Oral Technologies and our OSD business segment; every single business segment is somehow being drawn into a potential vaccine and a potential -- a potential therapy.

And I would just say, again, with Catalent's proactive nature of making sure we are building out capacity in our highest growth areas, the fact that we had acquired the Anagni BMS facility has proven to be really present. It has critical capacity that I think is very much wanted and needed in this COVID crisis, the build-outs that we've done in Madison, the expansion that we did and are doing in our Bloomington facility is almost as if Catalent is, again, the right company at the right time with the right capabilities and the right capacity.

So again, we're just -- we're just humbled and thrilled that we can be participating in such a substantial way in the COVID vaccines and therapies.

Tycho Peterson -- J.P. Morgan -- Analyst

Okay, thank you.

Operator

Thank you. Our next question comes from the line of John Kreger with William Blair. Your line is now open.

John Kreger -- William Blair -- Analyst

Thanks very much. John, if you -- I know one program is probably not going to be material, but have you had an opportunity to -- if you aggregated those 30 signed programs that you mentioned for COVID-19, give us a rough sense about what that would mean as, let's say, a percent of revenue in 2020?

John Chiminski -- Chair and Chief Executive Officer

Well, so first of all, I think we've been very clear here that we have headwinds and tailwinds that are largely offsetting. I think we made that very clear in the -- in the prepared comments and certainly we're not looking forward to fiscal year '21, but I would tell you that as we looked to our performance in the third quarter and have the visibility, with continuing uncertainties in this fluid environments to the fourth quarter, we've taken that all into account in our revised guidance, and obviously we've given ourselves a little bit wider berth for potentially some of those unknowns than we normally would have.

We've got a -- kind of a wider range than we would normally have sitting here in the four quarter. But, again, I would say that, certainly we've got some strong tailwinds that will modestly be offset by potential declines in CSS and other actions that we're taking that will kind of increase costs and reduced productivity.

So again, we feel confident in the revised guidance in the range that we'd given, and then obviously we'll have a view toward fiscal year '21 with the significant number of projects we have when we provide that guidance late in August.

John Kreger -- William Blair -- Analyst

Great, thanks. And then a follow-up, I think you've got five different facilities in your Biologics business now. Can you just run through the current utilization rates and to the degree that you've got capacity to unload some of these newer programs?

John Chiminski -- Chair and Chief Executive Officer

Yeah. I mean the way I would go through this. And again, we're working very closely with our customers. Starting with our Biologics facility, I would just say we're in Biologics drug substance facility in Madison, I would say that we are in good shape. We haven't yet secured a commercial customer yet in that facility, so that leaves us with some spare capacity plus new capacity that's going to be coming online with the fourth and fifth train that puts us, I would say, in very good position from an overall drug substance standpoint.

On drug product, this is a facility that, quite frankly, we already faced with very heavy demand and in fact the new demand was going to be coming on dovetailing in line with, when we were going to be operating at a capacity level that was, I would say, uncomfortable.

But in the current situation, I would just say that we have creatively and aggressively repositioned some of that capex to pull it in, including looking at additional capex for more capacity, given the significant demand that we have in drug products. But I again, feel that we're in good position to take not only J&J, but other significant customers from a drug product standpoint.

The real -- another jewel here is Anagni. Anagni, we brought on board and fundamentally right now we have just BMS as the customer there with the plan over the next two years to build up that book of business with Catalent -- other customers for Catalent beyond BMS and it turns out that the capabilities that they have from a drug product standpoint, again, can be, you know aimed toward and positioned for COVID drug product and we're already in conversations with multiple customers there.

So then, again, Catalent is becoming a go-to where we happen to have the right capability and capacity at the right -- at the right time. And then, certainly if there is anything that ends up going into a prefilled syringe format, we have -- we have capability and capacity in our Brussels facility.

But as you know, John, most of this stuff, given its highly accelerated state will likely be in multi-dose vials, including the J&J will in a vial that will probably have somewhere between three and five doses not yet determined.

So again, I would just say that Catalent is in a very strong position to address a lot of our customers, but things are; the capacity I had last Friday has changed on Monday, just based on the conversations and things going on with customers. So it's an exciting time, and again I'm just humbled and thankful that Catalent is going to be able to play a substantial role in being part of the solution for the COVID-19.

John Kreger -- William Blair -- Analyst

Sounds good. Thank you.

Operator

Thank you. And our next question comes from the line of Dave Windley with Jefferies. Your line is now open.

David Windley -- Jefferies -- Analyst

Hi, good morning. Thanks for taking my questions. John, I wanted to make sure I come away with the right understanding on a couple of things. The -- in the Biologics segment, you talk -- the acquisition certainly made a bigger contribution than we expected. That seems encouraging.

Excluding those, you talked about EBITDA down 5% year-over-year. I suspect the non-core products coming out of Madison was part of that. Were there other factors that influenced that year-over-year EBITDA comparison or was that one thing primarily the issue?

John Chiminski -- Chair and Chief Executive Officer

Well look, I think Dave I'll answer it briefly and turn it over to Wetteny. But I think you can see from our prepared remarks that there were multiple reasons with regards to Biologics' EBITDA being down. First of all, we're on boarding a significant amount of talent both within our Bloomington, as well as our Baltimore Gene Therapy business and then also our Cell Therapy business which when we did the acquisition, we told you that we wouldn't have meaningful contributions from that business, including Anagni. Those both had impacts both with regards to the EBITDA margin.

And then, specifically with regards to the EBITDA, I would say, again, it was the softness of the European drug product and what we mean by that is fundamentally the flu demand that we had there, again increased head count, and then there was also this limited duration non-cell line comparable that we have.

And again, I'll turn it over to Wetteny and see if he wants to get into any more precise details there. Yeah. Thanks, John. Dave, just to reminder, I mean, as we said in the prepared commentary, we've very pleased with the strengthening of our financial position that we did ahead of the market volatility. And frankly, from where we are right now on a year-to-date basis having been delivered companywide 8% organic growth year-to-date.

And again, this is from our base businesses, excluding Gene Therapy, from an organic perspective, 8% year-to-date. We're certainly are well positioned to deliver a solid year despite the impact of the pandemic, as we've already described are factored into what we can see as the puts and takes in terms of demand for the remainder of the year.

Now, to answer your question more directly in terms of -- adding to what John already said, our Biologics segment, as we've said and I'll remind you, has a number of development stage programs. While we're very pleased with the commercial approvals that we've seen, they're also relatively young in that they are continuing to grow. So we are continuing to add capacity in terms of people to access existing installed capacity and then adding new capacity as well.

So we expect more, I would say, variation from quarter to quarter in the business. But when you look at the performance of Biologics on a year-to-date basis, again on an organic standpoint, excluding the acquisitions, you will see that the business has delivered, including Q3, 13% top line growth, excluding the one-time this customer that we've talked about, this pre-determine and fixed-term contract, if we exclude that, 13% top line 11% EBITDA growth across the -- on an organic front, including Q3.

So I think -- yeah, looking at the performance in a single quarter, given what I've already said, we believe it isn't the right way to look at the business. You like to look it over a period of time and we're continuing to add capacity, which will have impacts on the EBITDA performance in addition to what John already highlighted.

David Windley -- Jefferies -- Analyst

Thank you. If I could just pivot to a different topic. On Softgel, you call out strength in prescription in North America, prescription obviously driving positive mix, I would think. Could you talk about the ebb and flow that -- you know sometimes the call out is, it's more consumer oriented, sometimes it's Europe versus North America. Do you think kind of North American prescription can be a persistent driver, positive driver and call out for a few quarter, given that you're talking about new product launches being a contributor there? Thank you.

Wetteny Joseph -- Senior Vice President & Chief Financial Officer

Yeah. So Dave, we've -- as we've tried to highlight, no two quarters are exactly alike in Catalent. I think that that's something that our investors are well-recognized in terms of quarter-to-quarter. So when you look at the full year, you've seen the performance across a number of years. So to look at prescription for example on a quarter-to-quarter basis, depending on what happened in the previous year and in the current year, and the timing of when product launches happen or when some of the more mature product start to naturally decline, that's going to have an impact on which part of the business is actually driving the growth.

Now when you look at the SOT segment and what it has delivered so far on a year-to-date basis, in the third quarter, you saw organic growth in that business of 4%. We said this is a segment that should deliver between 3% and 5% after adding the facilities to it. Previously it was at 2% to 4%. So this is right in the middle of that and the first half of the year was well above what we expect the business to grow on the long term.

So from quarter-to-quarter, if we've launched recent products on prescription end, which we saw that as we exited the prior fiscal year, and as we enter this one, that's going to have several quarters of tailwind as those products continue to grow and of course consumer will have a similar type facet as there are new launches or different factors in terms of the demand for those particular products.

So I think -- I think we're very pleased and certainly the mix is favorable when prescription drugs are behind the growth or supporting that growth, I should say, which we're seeing right now. But that really, quite frankly, begun in the fourth quarter of last year and we've seen that continue through the third quarter.

David Windley -- Jefferies -- Analyst

Okay, thank you.

Operator

Thank you. Our next question comes from the line of Jacob Johnson with Stephens. Your line is now open.

Jacob Johnson -- Stephens -- Analyst

Hey, thanks. Vaccine margins broadly, how do margins on vaccine work compare with the rest of Biologics in your portfolio?

Wetteny Joseph -- Senior Vice President & Chief Financial Officer

So, I would say drug product in general have margins that are sort of above our Company average. I'm not going to go into specific margin levels for vaccines as a sub-segment of certain product type in the business, but all I would say is we would expect margins that are slightly above our company average in these endeavors.

Jacob Johnson -- Stephens -- Analyst

Got it. I'll leave it there. Thanks.

Wetteny Joseph -- Senior Vice President & Chief Financial Officer

Thanks Jacob.

Operator

Thank you. And our next question comes from the line of Dan Brennan with UBS. Your line is now open.

Dan Brennan -- UBS -- Analyst

Great, thank you. Thanks for taking the question and congrats on the quarter. I was hoping to take a big picture view, if you don't mind, just on COVID-19. I know you spent some time already discussing some of the segments and the impact thus far. But could you just kind of give us a vantage point as we think about your fourth quarter.

And then, I know you're not going to discuss '21 right now, but as you think about possibly as we go through likely a difficult quarter now, but then come out of it. Could you characterize some of the headwinds and tailwinds for COVID-19 on your different segments? So, kind of how much is there a drag kind of being incorporated in and kind of what could be the possibility kind of coming out of it?

And then, kind of related to that, does the 4% to 7% organic guidance for the full year, is that still intact or did that change. Thank you very much.

John Chiminski -- Chair and Chief Executive Officer

Sure. So, Dan, I'll just first speak at a high level. So first of all, Catalent was extremely proactive in our COVID response, really having our teams up and running full starting in February. And so, I would say, the company has already been operating over the net -- over the last 2.5 to three months in, I would say, this new way with about 25% of our employees working from home and about 75% of our employees going in.

All of our sites are operational. Our number one priority is keeping our employees safe and that's why we've been able to have the confidence in the resilience of our employees to be able to come in to work and continue to do the important work for Catalent. I would say that, in our prepared remarks, we discussed the fact that you know if we look at some of the headwinds that we face, it's really around the area of slightly decreased productivity that comes from modestly higher absenteeism levels, some increased costs that we're incurring due to COVID, including many things that we're doing from a company benefit standpoint to help out our employees in this -- in this unprecedented time.

We're also, as I mentioned in my remarks, will be seeing -- like seeing higher inventory levels as we go out and increase our overall safety stocks. With regards to, just talking about the overall business segments. Certainly we discussed the fact that CSS business had a very strong Q3. We expect that not to be repeating in Q4, and actually that's where we would expect to see some -- so overall headwinds until we get some clarity around when there will be a snap back, if you will, on clinical trials.

Again, modest -- we've already have the taken into account for our fourth quarter and we'll have a much stronger view that again as we go into fiscal year '21 and set our guidance there, I would expect our Biologics and drug product to be in balance, if you will, with whatever potential headwinds that we may have for earlier clinical development, offset by a lot of the COVID related work that we -- that we have.

And then, with regards to our Softgel and I would say OSD business segments, again, this is where, in Softgel, we have our largest number of commercialized products, so it just tends to continue to roll and obviously seeing increased demand, I would say from our consumer health products in that business segment.

And then in OSD, where we have a little bit of watch out is just on the earlier development projects. But I think that will be offset by other opportunities in that -- in that business segment.

So again, I think Catalent's highly diversified nature across products in geographies and product type really positions us extremely well in this, in this current crisis. And again, I'm happy that we're also in a position to be able to potentially be a significant contributor on a lot of the vaccines and therapies.

And then, I'll ask Wetteny if he wants to, again at a higher level, add any additional details to what I provided.

Wetteny Joseph -- Senior Vice President & Chief Financial Officer

Yeah. So, part of your question was related to our guidance and what would organic growth be for the year? With the fluid situation related to the pandemic, we've decided to do two things with the guidance; one, maintain a fairly wide range even with one quarter remaining. We would typically have narrowed our range with only one quarter, but we decided to keep it the same. So that's one thing.

And the other thing we did was we didn't split organic versus inorganic here with, again, the last quarter. But I'd remind you that with the Paragon Gene Therapy acquisition being anniversaried, we only have really one month of inorganic in that. So inorganic becomes a -- relative to the first three quarters of the year, inorganic becomes a smaller element. Again, in relative terms, we still have the BMS acquisition and the MaSTherCell, acquisition obviously, but those two are much smaller than Paragon.

So the contributions from inorganic in the first three quarters would be far greater than the contribution in the last -- in the fourth quarter. So that's one reminder. Second one I would give you is, we've delivered 8% organic growth so far through the first three quarters, as I've mentioned, which positions us well to deliver on the year, again with the backdrop of everything we described in terms of the fluid situation to COVID-19.

So having delivered 8% year-to-date and we gave guidance of 4% to 7% for the year, clearly we're will position even though we're not splitting that for you with this this remaining guidance.

One final point I would make is really without giving specifics on segment by segment, I will give you a directional indicators. We've already discussed what's going on in CSS. But as we look at delivering the rest of this year and the guidance we've just provided, I would expect Biologics and our OSD segments to sort of, in relative terms, be leading the way here for the quarter with sort of SOC behind that, and then lastly CSS with some -- with some headwinds we'd already described there, in order to deliver the guidance and these are all factored in terms of what we've -- what we've provided already.

Dan Brennan -- UBS -- Analyst

Great, thank you.

Operator

Thank you. And our next question comes from the line of Ricky Goldwasser with Morgan Stanley. Your line is now open.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Great, thank you, and good morning. So clearly you've seeing strong demand. Wanted to drill a little bit deeper into the supply commentary that you provided in the prepared remark. So if you can give us some color on where you might see shortage disruptions, API price environment change. And when you talk about kind of like the buildup of inventory, maybe you can give us some more color on how much inventory or how many month of inventory do you have at hand? And is that enough to manage through a second surge scenario.

And then the final part of the question is, if we think longer-term beyond the current epidemic, there have been some discussion on whether we're going to see a shift of API back into the U.S. So any thoughts that you have on potential, kind of like a structural changes as a result of the environment we're in? Thank you.

John Chiminski -- Chair and Chief Executive Officer

Yeah, I'll actually answer the first -- Ricky. I'll answer the last question first and just say that I do think that there will be some longer-term structural shifts that are going to happen. I think that everybody is rethinking what it means to be a sovereign nation and have the ability to have a safe and secure supply chain.

So I think that there will be some longer-term structural changes, but again those are going to take time. I do think that, on a go-forward basis, there is certainly going to be a preference for domestic assets and when I say domestic I mean U.S. and Western European. So this is certainly not something that's going to be a switch that's going to be flipped with regards to changing the structure. But I do think that the preference toward domestic assets and a consideration of what is high risk supply chain is going to change over time.

Now backing up, with regards to Catalent, I think with regards to specific pressure. First of all, we've noted that 80% -- I would say that 80% of what Catalent sources directly is non-China, non-India. And that if we are to see any potential disruptions, those would probably be the first couple of -- couple of places. And for us that is in the area of some consumer health products, if you will, and that's where a lot of those APIs are sourced from.

But again, we have a very strong beat in signals on that and are proactively going out to increase our overall safety stocks. A lot of -- also a lot of the, I would say the APIs that are again, sourced from those areas of the world are for generics, of which -- that's a very small portion of the overall Catalent business at about 7%.

So again, I think we're just kind of well-positioned overall from that -- from that standpoint. That being said, you know we're trying to be incredibly proactive across the board and we are increasing our safety stocks. Normally, we are in a mode of somewhere between three and six months and we've -- are expanding those across our top products and that's also why I had mentioned that you will likely see a rise in our overall inventory levels, which we believe is the right trade-off right now to make sure that we continue to have the overall continuity of supply.

So, there may be some additional bumps in the road. But what we, what we've experienced so far and what we have current visibility to believe -- we believe that any impacts will be modest and likely offset by a lot of the increasing demand that we're seeing from a lot of these COVID related projects and hopefully that answered most of your questions Ricky. And if it didn't, rewind and let me know what else you'd like me to answer.

Ricky Goldwasser -- Morgan Stanley -- Analyst

No, that's good. Thank you.

Operator

Thank you. And our next question comes from the line of Juan Avendano with Bank of America. Your line is now open.

Juan Avendano -- Bank of America -- Analyst

Hi, thank you. Given the margin dilutive impact of recent acquisitions and the investments required to ramp up your Cell and Gene Therapy business, do you still think that you can achieve your fiscal year 2024 target of adjusted EBITDA margin of 28%-plus which now implies about 300 basis points to 400 basis points of margin expansion from fiscal year 2020?

Wetteny Joseph -- Senior Vice President & Chief Financial Officer

So Juan, this is Wetteny here. Clearly as we delivered last year, roughly a 140 basis points of margin expansion last year, again largely driven by our shift toward more Biologics. We continue to see line of sight to continue to expand our margins, particularly in our Gene Therapy and Biologics businesses.

As John mentioned in his prepared commentary, we knew once we made those acquisitions, namely Anagni and MaSTherCell that they would be margin dilutive initially. These are absolutely the right strategic assets for Catalent that bring on additional capabilities, but is also assets that have either existing capacities [Phonetic] Anagni that is very well suited, particularly in the reaction for addressing the current pandemic and potential solutions for that pandemic. This is a great asset for that that would potentially accelerate the ramp-up of the utilization of that facility, which would have significant impact on margins there.

And then with MaSTherCell, we continue to invest in that business as we prepare to open up and have already seen activity -- customer activity in our Houston facility for that business. So plan, and as we add capacity, we will see that to have an ebb and flow impact on our margin rates in parts of the business and as we get significantly high on the utilization in that installed [Phonetic] capacity, you see margins that are well above what we state as the long term positive. So we expect that to continue and absolutely be in line with our expectations to get to the -- to our margin targets by 2024, absolutely.

Juan Avendano -- Bank of America -- Analyst

Thank you.

Operator

Thank you. And our next question comes from the line of George Hill with Deutsche Bank. Your line is now open.

George Hill -- Deutsche Bank -- Analyst

Yeah. Good morning guys and thanks for taking the questions. A lot been covered. I guess, Whitney, I don't know if you would be willing to provide any more commentary on kind of what you've seen quarter-to-date as it relates to the CSS segment, particularly in supplies and I wanted to make sure I understood something correctly is that if we see a slowdown in drug R&D spending, does it only hit CSS or does it also hit the drug substance part of the biologics business as well?

And given the outperformance of biologics in the quarter, I guess, can you talk about the outperformance of like the drug product stuff or the non-R&D related substance stuff versus what we're seeing kind of quarter-to-date?

Wetteny Joseph -- Senior Vice President & Chief Financial Officer

Sure. So, with respect to our CSS business, as I've said we're really very pleased with the performance of the overall company on a year-to-date basis, having delivered 8% organic growth, 7% in the third quarter including CSS which has been a big part of that and we saw substantial growth in our CSS business in Q3. Part of that was, we believe, essentially burning backlog faster in the third quarter in advance of potential disruption and the ability to deliver products to claim.

So we saw a higher storage and -- distribution activities in that segment. We've seen good packaging, I would say, activity in the business through Q3 and we're continuing to see that in Q4, I would say good packaging activity. But the slowdown we're seeing is in the distribution side, again, having seen that accelerate in Q3. So hopefully that gives you the color you're looking for with respect to CSS.

But in terms of our new business wins, we see those continue at a relatively healthy speed, even as we, as we are at this point in the quarter, which bodes well in terms of what we're seeing, what we're hearing from customers as well in terms of a temporary slowdown in certain activities that would then pick up at a later date. And one thing I would -- I would add is, with respect to how clinical trials run, unless the trial is completely I'll say canceled, if it takes longer, it actually results in more revenue for us because we would end up storing those materials for longer periods of time.

Those that are biologics that require cold temperature etc. would be nicely additive to what we would expect on an individual program that we are working with the customer on. So long-term slowing a clinical trial, but still running it tends to result in more revenue for us for that program. And it's only if it's -- again, completely canceled that there will be an issue.

The second part of your question with respect to R&D spend slowdown and what that would imply. As I mentioned on a year-to-date basis, we've seen the Biologics business really delivering 13% top line growth. That's across our development programs as well as those that are commercial. Keep in mind, two-thirds of the business are in development with most of those being in mid to late phases.

You've seen our drug product business over the last couple of years going from an acquisition of Bloomington that was doing 12 commercial programs now sitting at, I believe 22. And so that, I would say, is an indicator of the -- I would say maturity of the development pipeline where we have late-phase programs which we believe even in cases where there may be a slowdown in spending mid to late phase programs that show significant promise would continue to be funded and continue to drive revenue for us in our business and potential commercial launches as well.

So we think that if there is a slowdown that may impact the very early phase preclinical to Phase 1 types of programs, we still have significant portion of our programs that are more mid to late phase versus early phase across the company and we think that would continue to bode well for us from a development perspective and overall revenue standpoint. I hope that answer [Indecipherable].

George Hill -- Deutsche Bank -- Analyst

Okay, that's helpful. Thank you.

Operator

Thank you. And our last question comes from the line of Evan Stover with William W Baird. Your line is now open.

Evan Stover -- Robert Baird -- Analyst

Hey, I've got just one so we can get off the call here. On J&J, you already addressed that you've structured the deal for a return on investment even if this vaccine is not approved, but can you just talk to the level of potential drag in the second half of calendar '20 as you ramp. And I'm just wondering if the tremendous national urgency here and things like the recently announced operation warped speed, they're may be going to change how this project would roll through your P&L versus a normal vaccine fill/finish?

Wetteny Joseph -- Senior Vice President & Chief Financial Officer

Yeah. So what I would say Evan is, first of all, we are highly diversified, right, with 7000 products plus the number of development programs, as I just described that are mid-late phase programs that continue to drive volume across our businesses. So I want to just put that out there first, in terms of any single program not really significant moving the needle for us overall and we factored into our guidance that we just given and will continue to factor into the guidance next fiscal year, when we get to that points.

With respect to the balance of this fiscal year, that's very -- it's not very much that's going to be impacted by these programs even with the accelerated development, as we said, we anticipate adding significant headcount starting in July, which is effectively after our fiscal year.

And I would say between now and through that time, we'll be working with J&J and others around tech-transfer activities and other things that will also drive revenue into our facilities as we put our scientists and others to work and quality professionals to work to help -- to help develop the program to the point that it would potentially be commercially launched.

So between that time, I would say generally speaking and this is not specific to this one program, generally speaking, we are working with customers on development programs up to and including batches that are used for clinical trials. Tech-transfer if it's something that's been developed elsewhere that all drive revenue for our businesses.

So even with those investments without giving specificity with investments in headcount, we would have some offsetting revenues to go along with those. And as I've said, we don't expect any or any significant impact on the balance of this year and to the extent we expect anything, we factored that already in our guidance that we just gave.

Evan Stover -- Robert Baird -- Analyst

All right. That's it from me. Thank you very much.

Operator

Thank you. And this does conclude today's question and answer session. I would now like to turn the call back to John Chiminski for closing remarks.

John Chiminski -- Chair and Chief Executive Officer

Thanks, operator, and thanks everyone for your questions and for taking the time to join our call. I'd like to close by reminding you of a few important points. First, a key strength of Catalent that is even more evident today is the wide diversity of our business across products, geographies and customers. Due to our comprehensive capabilities, diverse revenue base, well-funded customers, the increasing need for complex solutions and our strengthened balance sheet, Catalent is not only very well positioned to weather this crisis, but also play an important role in the development of treatments and vaccines that will allow us to win the battle against COVID-19.

Second, we're committed to delivering results consistent with our updated financial guidance for this year and we're focused on continuing to drive organic revenue and EBITDA growth across all of our segments over the long term.

Third, it's a top priority to grow our world-class Biologics business and effectively integrate the premier assets we've acquired and deploy capex to further build out our capacity and capability to help improve the lives of patients and meet our customers' demand. We expect strong revenue and adjusted EBITDA growth from our Biologics offerings over time and target the Biologics segment to make up approximately 50% of our total revenues in fiscal 2024 versus approximately one-third today.

Finally, operations quality and regulatory excellence are at the heart of how we run our business and remain a constant focus and priority. Our employees' commitment to these areas have enabled us to keep sites open production running even during the worst pandemic of our lifetimes. We support every customer project with deep scientific expertise and a commitment to putting the patient first in all we do. Thank you.

Operator

[Operator Closing Remarks]

Duration: 79 minutes

Call participants:

Paul Surdez -- Vice President of Investor Relations

John Chiminski -- Chair and Chief Executive Officer

Wetteny Joseph -- Senior Vice President & Chief Financial Officer

Tycho Peterson -- J.P. Morgan -- Analyst

John Kreger -- William Blair -- Analyst

David Windley -- Jefferies -- Analyst

Jacob Johnson -- Stephens -- Analyst

Dan Brennan -- UBS -- Analyst

Ricky Goldwasser -- Morgan Stanley -- Analyst

Juan Avendano -- Bank of America -- Analyst

George Hill -- Deutsche Bank -- Analyst

Evan Stover -- Robert Baird -- Analyst

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