Hikma Pharmaceuticals PLC

Ladies and gentlemen, welcome to HECMA FY24 results. My name is Ada, and I will be the operator for today's call. If you would like to ask a question during the presentation, you may do so by pressing star followed by 1 on your telephone keypad. I will now hand you over to CEO, Riyadh Mishlawi. Riyadh, please go ahead.

Okay, well, good morning, everyone. Thank you very much for coming. Thank you very much for being online to listen to this. I have to introduce my – I should introduce my colleagues. I'm usually here with Khaled, but this time we're all together, so you'll have a chance to ask directly to the presidents and the responsibles of each of our divisions. So starting with Susan, head of the investor relations. Bill Larkin, he's head of the injectables division. Khaled Nebulsi, as you all know, he's the CFO. Madem Darwaza, he's president and vice chair of MENA. And we have also Hafron. She is the president of the generics division. I have to start to say that we had a fantastic year this year. It's been a year since I've taken over the CEO position, and not only that, but also Three of the people that we have in front of you here had their first year in the positions that they are in. Halfron had joined us in April, and Bill took this position, replacing me when I took the CEO. So despite new management, we also had added new management into the EC. We managed to work very well together. We managed to really do a lot of things that is part of the execution of the strategy that we had. And I believe we had really a stellar year. A lot of things we had done in preparing for the medium term and the long term for the company. So let me start with the year. So I think we had a great momentum here. We had excellent results. We were well ahead of our original guidance in February last year. We are about $140 million ahead of revenue and $40 million ahead of the EBIT. Injectables, 10%, growth of 10% in revenue, $1.3 billion for the first time, with $468 million up from $444 last year of core operating profits. The margins were at 35.3%. And really the most impressive part about it is in all three geographies, as you know, the injectables is the only global division that we have that services MENA, Europe, and the United States. And in this case, in last year, all three of those geographies had significant growth, especially in both MENA and Europe. Branded divisions were up by 9% in constant currency. to $769 million with a core operating profit of about 25, exactly 24.6, $182 million of core EBIT. Very good performance and really a lot of things that has happened in that division also to prepare for the medium term and the future. A lot of construction, expansion of capacity, and putting and installing new technologies there. In generic, very impressive 11%. As you know, with sodium oxibate coming in the year before, you know, coming in into this year, we're doing very low margins since our royalties have increased significantly. Still, we managed to do 11% over $1 billion in revenue with a core operating profit of $170 million. Two years ago, we came in to all of you and we're talking about this division saying, 100 to 120. And since then, we're really doing much, much better than this. And even in tough years when we had headwinds, we still have managed to do very well. 16.4% of the margins that for a year that we had some headwinds is very, very impressive. And I think we will talk a little bit about the future of this division and tell you a lot that is happening there. We had some really excellent strategic progress. As I said, we really put a lot of iron in the fire in the last year, not only externally and not only with the investors trying to communicate our strategy correctly, but also within the company. We've done a lot in the management or structure. We've done a lot in looking at expansion of markets. Europe had expanded. We did a lot in R&D, and we'll talk about this in the at the next session when we talk about next year. But what we did last year, of course, Zelia was a big thing for us. I think it was a great acquisition. It's really giving us exactly what we needed. R&D was our focus. We really needed to increase R&D. We needed to increase capacity. We needed to get some infusion to our pipeline. And really, Zelia has given us all of this. So some very good products. and with a good future, with good pipelines that we are finishing right now, and I think also coming in the United States with a huge facility and very unique technologies in aseptic backfillings and liquefaction. At this time, with the geopolitical situation, I think it made it even sweeter. So we have a lot that is going on with Delia, and we are progressing very well against it. We launched Lear Glutide. We're still the only ones in the market. We were the first in the market after Teva had gotten the authorized generic. We're still the only one approved besides them. It just shows that our BD had chosen the right partner, very active in doing more business with them. I think this is really a testament of how we're going about expanding our pipeline, not only through our organic R&D, but also through partnerships. We find a significant CMO for generics, and this is also something that we have talked about when we talked about the generics and what we need to do in the generics. We talked about we have capacity that we can use some contract manufacturing for that capacity, and we did. We went after big companies. branded companies, and we have a very impressive facility, very impressive quality record in the U.S. So that all gave us a huge advantage, and we found a lot of people that were very, very interested. We finally chose one that has a great potential, and we found a significant contract there. So that is very much of how our progress against the strategy that we have put forward. We partnered with Emergent on Klaxado. We can talk a little bit more. I'll leave it to Hafran if you have any questions about that, but I think this is very good. I think we can do better that way, much more effective marketing and much more cost management there. So I think it's a great deal, and I think Hafran can expand on that one. And the branded business, for a long, long time, it was very much stagnant at 20%. In the last three years, you see the growth. This year is not an exception, and the future will not be an exception. We feel that the momentum is there. We feel our size has been grown. We are still growing and investing significantly in MENA, and you can see the results. So this is something that will not stop, and the momentum will continue. Injectables, we're keeping the margins in the mid-30s. We're looking at absolute increase in profits. So we need to invest in the business, and we are investing in the business. We are investing in R&D. We are investing in capacity. All that costs money. So to be able to maintain the margins at a very high level, highest in the industry, and still, you know, would from absolute value increase the profitability, I think it's a great achievement. We're really prioritizing this absolute profit growth. I know a lot of people are stuck up on the margins, whether it's half a percent more, half a percent less, but we had some impressive ratios. But as you grow, we need to also look at other geographies that we can expand and not as high, but still give us an absolute growth in our profits. So we have to really give a balance to how much are we growing versus how much is our ratios being affected. For 2025, strong guidance also, good EBIT growth. Even when you include, and this is something that is very important, we have committed that we want to spend money on R&D. And this is why we recruited the people that you see in front of you, the R&D experts. They've all been in R&D. They have PhDs, done this, done that. And you can't recruit those people and tell them, no, we cannot expand the budget. That's the reason why we recruited them, and that's the reason why we're expecting them to do. R&D is our future. We really need to. We are now a very significant company, and we can't get away with just simple R&D. We have to go into the complex ones. and we have to go into very sophisticated R&D, and that requires some spend. So we are increasing our spend by 20% and still coming in with good forecast for next year and good guidance for 2025. So I'll leave it at that, and if you have any questions, the team is here, and we can just go as deep and detailed as you want.

Thank you. Thanks, James Gordon and Jason Morgan. Two questions on injectables, as that's why I've had some questions from people this morning. The first one was on the top line. So I think in H2, you did something like 8% organic local currency, but then the guidance implies for this year, for 25, more like 3% to 5% organic local currency. So if the first question is, why would there be that slowdown? And does your previous guide that you gave in 2023 that injectables should be something like a high single-digit business, Does that still apply? Is 25 a little bit exceptional, or have things actually slowed both for 25 and for the medium term?

No, I don't think so. I'll take part of this one. I'll give it to Khaled to talk a little bit more about the numbers. So our growth in the ejectables is still very, very healthy. However, you do have two markets that is affecting your ratios when you talk about ratios in particular. were growing significantly in Europe with their lower margins. If you compare this year to next year, Europe had done over 20% growth this year. They took a lot of opportunities and they grew significantly. For next year, We're not expecting the same amount of growth because of two things. One, we really grew very much this year. And the second thing is the fact that, you know, the euro and the FX headwind is not really helping you much there. You know, at the same time, you have MENA also that is growing and also impressive. That is not – would not the same, you know, expected ratios as we have in the U.S. Still, though, the U.S. is growing. We do have also, if you look at some of the things that we're doing, like Lidaglutide, we have growing some products that are partner products and that you would have to share some of the profitability with the partners. So it's not as high in terms of ratios, in terms of the profitability. But again, you know, from absolute value, it is more. So maybe this is why, you know, compiled together and taking Italia out and, you know, you would get to the, you know, 5% growth rather than But I don't think – I think it's very hard for you to take a chunk of something that we are all working on. The whole unit is working on Zellia. We are putting a lot of effort into R&D to complete some of the pipeline. We put a lot of effort in regulatory. A lot of our engineers and operations are doing so much to complete the plans, although we This is all behind the line, and it's not really has to do anything with revenue, but still there's a lot of effort of being there to make it to start producing.

For example, focusing on certain products, you take some of the products that you've been working on. So all in all, the strategy is to grow the business. So you have, as Riyad mentioned, you have a very tough come for Europe, growing at 20%. You have the effects in Europe. At the same time, you have the normal price illusion for the injectable business that you have to compensate. And we always said part of our strategy is either BD, organic, or new acquisition. So with Velia, this would have helped to achieve a very strong growth of 7% to 9%.

I just want to add something. You know, when you put guidelines and you put ratios and all this, you have to – put yourself in our place too. There are a lot that you're doing, a lot of it, you know, you will achieve, but you have to also give some room to yourself, you know, because you do have products that will get approved, but it's not up to you to when you get that approval. So you have to estimate, would I get it in July or would I get it in December, you know, and that makes the whole guideline shift. So you have to be somewhere in the middle. But I'm very optimistic how healthy is the injectables. With the addition of Italia and the pipeline that we have Italia and some of the products, we did put in the guidelines some of the interesting products that we are going to have in the medium term. This is something that is unusual. Usually we don't talk much about the medium term, but we would like to talk about those things. And if you can ask questions, and I think Bill will explain to you some of the key products that are coming in, with both of those divisions. So you can see that there is a lot that is happening, not only just the hope.

That was the second part. So would that imply then that, say, in 26, 27 or the medium term, do you think injectables could still be faster than 3% to 5% medium term because actually there's going to be benefits from Zellier in some years investing in F&D? Yes. You haven't changed the medium-term aspiration of still being high single-digit, and is the medium-term aspiration still that you keep to the mid-30s injectables margin, even with faster growth from some of the lower margin areas?

I think the growth is going to be very, very healthy in the medium term for the injectables, and there are reasons for it. So we expect in the medium term, for example, for Zellier to be completely, completely, please say. Inagreed. integrated into the division today. We think that the facility will be completed. And even now, while we are building this facility, we're getting a lot of people knocking on our doors for contract manufacturing. We will be making our own products right now. We depend on some of the products for contract manufacturing to fill some of the products that we have. We will be able to fill our own. we will have some of the biosimilars at that time approved that we are waiting for approvals for. And then we have one of the interesting products that we're working on right now, which is the vancomycin ready to use. I think Bill can talk a little bit about it. This is a very, very big and key product. Vancomycin is a huge product used in a lot of hospitals for many infections, and it comes in a powder form. we will be the only company that will offer it in a ready-to-use liquid form, which we think that we can have the opportunity to take a lot of that market. And on top of that, we have a lot of pipeline products that are being worked on, some on our own and some of the ones that we also got after we bought the Zellier. So all of that is coming from the medium term. A couple of what we have originally and what we do originally, I think that gives a very healthy outlook for the future.

And markets as well, like in Europe, still seeing growth. In MENA, we are investing in manufacturing capacities, so we'll see more growth. So across all divisions, across all regions, I mean, in the injectable business, we will see continuous growth. So no change to our outlook on the medium term.

And that's on both the top line and on the margins for injectables?

Yeah, we always said that the margin is going to be in the mid-30s.

Yeah, we see no reason why it should go. We're investing a lot in R&D, but still we are managing to continue the stable mid-30s.

Thank you. I'm Campbell from RBC. Just a couple of questions on generics, if I can. So I still get a few questions on generics profitability. So basically you talked about the 100 to 120 base, which clearly you've exceeded significantly. In 2024, the outlook for 2025, around 160 million-ish, that kind of level. The question I still get asked, though, is, is there still a meaningful contribution at the profit level from Oxibate in that 2025 number? Is there a risk that some of that erodes going into 2026? Can you sort of, to the degree you can, quantify that? And then maybe in terms of the investments you're making in R&D in the generics unit, What sort of timeframe you'd think before that starts to feed into, you know, an infection upwards in terms of top line for the unit?

Thank you. Do you want me to talk about sodium oxypate? I can go through that. Go for it. I mean, we expect, I mean, similar numbers both on the top line and the bottom line this year as we had last year for sodium oxypate. In the beginning of next year, we expect it will be a number of generic who will be able to launch that product. So that's something which is quite visible and quite well-known. So we still assume, I mean, significant contribution from that product into our pipeline next year as well. For short-term or for new products, I mean, when I came into the business, of course, I looked into what products were ongoing and which ones were progressing well, and probably one of the most exciting ones was epinephrine nasal spray, which we are hoping that we will be able to submit sometime this year. We have had a lot of discussion back and forth with FDA, and we are starting some discussion with other regulatory bodies as well. So the plan now is to submit that sometimes before the end of this year, I'm not going to talk about any specific month, but that will be a 505B2 application, so it should not take more than, yeah, of course you never know how long time the regulatory procedure takes, but under normal circumstances it should take maybe 12 months. So hopefully that will benefit us latest in early 27 or so. Then we have, over the last nine months, we have started nine new products internally, and then we have also been utilizing the capability in the other functions, and now we are co-developing. We started five new co-developments with Mina, which will clearly benefit us as well. So I'm quite optimistic about the future and the new pipeline, but we will, of course, continue to add new products in. We are very focused on nasal sprays. We are very focused on inhalation products without naming any. So I – then that's, of course, as we had mentioned, that's why we need to spend more money on R&D, and that's, of course, that will not necessarily help with the profitability in the short term, but, of course, in the long term it should, so –

And if it's the GCMO partnership that we sign, we'll definitely support the profitability of the generic business from 2027. Yep.

So Sodium Oxidate in 20 – correct me if I'm wrong – January 2026 will be open. So we will have also the choice whether we want to stick to being the authorized generic or go on our own. So that's a decision that we have to make. A lot of the generics can come in at that time. The only complexity with this one is if we go out and go on our own, the patients will have to resign with our REM program. So you'll lose everybody, and everybody will have to be coming in back. So if you do have generics coming in, then that's going to be now a challenge with what you need to do to make sure that the patients continue coming to you with your REM program. So there's a lot of decision-making that we'll have to do by the end of the year to see what is the best way we should go. But either way, I think we have done a fantastic job with the way that we are today as an autowire generic. And we may have a chance to see if we can continue with what we are, maybe just change some of the royalties there or go on our own. And so we'll have to choose to find out the best way for us. And I've had it saying, you know, CMO is a big thing. You know, we're spending a lot of money, capital. I mean, our client is spending a lot of capital in our plan to get the plant ready. It's a big product that we will be servicing for this company, and I think for the medium term it will be very healthy and profitable and healthy for this division. you put on top of it some of the products that are coming in, including ebonyphrine and some of the products that are coming in today, I think we have a very healthy medium term also for the genetics as well.

Just two topics, please. You have them maybe for you. I'd love to rather than peppering you with questions about exact products and when you launch them, just I'd love to hear what you liked when you turned up at Hikma in terms of the R&D, what you didn't like, and what you've done in terms of changing the strategy, just high level rather than product specific, that's question number one. And then to Riyadh or Khalid, Just on compounding, I know it's a lot, it's a slow burn and you're investing for the long term, but it feels a little bit, just from reading between the lines, it feels that a little bit of momentum has gone there. Just give us an update on how you're thinking about that business and what equitations. I think last year we were talking about maybe even getting breakeven this year. That doesn't seem on the table, but just give us an update on the compounding business. Thank you.

Okay, so maybe I can start with what I liked when I came into HICMA, I mean, from the R&D point of view. I mean, there is, of course, it was quite an impressive team which is located in Columbus, Ohio, but we've still been trying to figure out, I mean, did we necessarily have all the right people there or did we need to replace people or add some new people in and I hired the new head of R&D in middle of last year, and he started in end of last year. So, I mean, his expertise is mainly on inhalation products. So that is something which we want to be focusing on moving forward. And we also have the capability, of course, in Columbus to produce those products. So that's something which is important. I mean, I've been looking into all kinds of processes and procedures, and there is always an improvement opportunity, and we are just working on those and making good progress. But also, as I mentioned earlier, I mean, there are more opportunities to collaborate cross-functionally between the functions and do more together, and that's something which we have already started on and I strongly believe in.

And we have Zagreb as well. Sorry? We have Zagreb as well in... that we've capitalized on and having the team there as well for both generic and injectable.

Yeah, to talk about the compounding, we are very happy where we are with compounding. So we had to actually start from a blank sheet of paper and start again. As I told you before, when we got into the compounding, we thought, okay, we'll do exactly the same thing, just on a smaller scale. When we got into the compounding, when we found out that, no, it's a different business altogether. It's a different client that you have to service. It's a different way that you have to manufacture. It's a different way that the FDA is looking at you. It's a whole different that we really do benefit from the fact that we know this business well, that we manufacture the products well. But as a business, it's a whole different ballgame. You have to ship your products straight to your clients. So in the United States, we are the third or the fourth largest, second or the third largest in volume. But we have about a handful of customers because we sell to the wholesalers. That's what we have in our system. Now we have 4,000 different customers that you would have to get the DA license for, that you would have to vet, that you would have to get the financial credits for and all of those things. So it took us a while to get going. Coupled with the fact of how do we manage this facility, we thought managing this facility would be very easy. We know this inside out. Once we started finding out, look, our people that are selling this product, selling our core business, are not the same people that should be selling the compounding. The people that manufacture in our core business are not particularly, would be very good in managing the compounding. So we did a whole reshuffle. We got a new head of quality, new head of the plant, new head of the laboratory. We changed the way that we manufactured things. We got a head of commercial who had 20 years experience with SCA in the past, another compounding. And once we did this change, since then, every month has been a record month from the month before. Every month, including this month. including January, which is the toughest month to do it. So we are very happy where we are. We still want to take it easy. As you know, Fagran, just the other day, got a warning letter. A few of us got a warning letter. I see I got a warning letter. So the FDA is looking at this business and saying, I'm going to straighten out this business. I'm going to make it a lot more compliant than what it was before. We are doing well. We're communicating with the FDA. We have fixed many of the issues that they want us to fix. So we believe we're a good foundation, and the future, I think, is very, very positive for this.

Is break-even on the table as clear as that?

No, it is there. If it is not there, it's just slightly less, but it's there. I think that's...

Thank you. Paul from Deutsche Bank. Bill, in one year, you've increased the submissions for injection products by about 50%.

I'm just wondering if you could kind of elaborate on kind of where those submissions have gone, particularly if you did categories, geographies, and kind of what that might mean for the midterm kind of growth aspirations.

So overall, it was a focus when I came in to make sure we – drove the products through the pipeline. So we had a lot of things that were either in development that had technical challenges or were sitting at FDA. So we spent a lot of time in R&D kind of what we called cleaning out the pipe. So it was really around driving those things to completion. It was really mostly in the U.S. was the focus on that. So the bulk of those products came through there. It then freed us up to be able to do more, which is then to add in more complexity into the pipeline, which has been one of our focuses going forward. So it freed up the capacity to do that. Then along with that, I think with the Zili acquisition, as Riyad talked about a little bit as well, we got this interesting development center in Zagreb as well, and they have some unique expertise in what we're calling in our strategy these ease-of-use products that are ready to use bags, ready to dilute products, ready to deliver products. They had a basket of those products in the pipe. We have a basket of those from the Bedford site as well, and so we've kind of combined all that together strategically. So I think in, you know, the coming years, we're going to continue to see that kind of growth coming out of those types of products as well, so...

And secondly, on the generic CMO, which I think you must have signed before the talk as tariffs sort of entered the farmer narrative. So to what extent would others like you to be manufacturing products for them in the U.S. with the potential of tariffs going on, Canada, Mexico, kind of others? Or is that something that you don't really see?

Maybe I can start. I mean, we get a lot of requests of new CMOs. potential contracts and yeah we have visitors almost I would say every other week companies which are interested so it's not a lack of lack of interest it's maybe more capacity so we can of course only do so much and this deal which Ria mentioned earlier it will take quite a lot of effort and we're just both preparing for it and when we start the manufacturing it will be significant volume So we have to decide what can we do, what capacity will we have, so we don't have endless capacity. So we could clearly take on more. Yeah, it all depends on what kind of capacity we have.

I think there are two things when it comes to the CMO. I think if you want to grade yourself that you are a good CMO, you have to see if those companies that come to you continue coming to you and continue adding products to your pipeline. We have it. So we have a limited capacity in the injectables, but still we see a lot of people coming to us. As you know, we did a great deal with Gilead for Remdesivir. We introduced that product in record time to the US during the COVID time, and we see Gilead still coming to us with a lot more interest in doing more business with us. I think that's a testament of our quality, our collaboration. Still also we do biosimilars. We are lacking capacity, but capacity is coming. We are building, probably doubling our capacity, especially in the localization in the next two years. We're adding a huge facility in the U.S. with six lios over 300 square meters, 300 square foot. Those are considered very huge lios. We're adding six of them. We're also adding lines. for furring, we're adding lines also for bag, septic bag furring. So capacity is coming. Also in Portugal, as you know, we have a big facility that we broke ground, and that will house four huge 400 square foot lios. So I think from the capacity point of view, we're in progress. We're ahead of the game. A lot of that should be coming in in the next year or two. So when we talk about medium term, we're considering all of that too, because that will be coming. We are still healthy today, and I think that, in addition to what we have today, we'll be sitting in a very good position.

Good morning. Christian Glennie from Stiefel. Maybe one on branded and the margins there. And, yes, you did come in at your 25% level. for the year, but the split between the first half and the second half was particularly, you know, dramatic. And if there was maybe some expectation, there may be a bit of upside. It would have been maybe on the branded margin, for example, maybe a bit above the 25. So to come in sort of sub-20 implied by the full year number, is there – Is there any particular to call out there that maybe didn't quite sort of come through in the second half, or was that, I mean, I know it was on track, but nevertheless, and then as you think about 25, what might be the sort of rough split again in terms of all the sort of weightings in terms of that margin for 25?

First of all, I think in the MENA, our team did a great job, and you have to remember the MENA is 17 different markets. It's not one market like the U.S., or So every market has what we call the private sector and the public sector. The public sector usually is a tender. So our sales are split between private and public sectors. So the margins really are differentiated whether it's a tender business or it's a private business. So it's a matter of timing when you sell these products and when you ship them. This is what differentiates the margins. So as a whole, this is why we say we're near the 25th. margin as a group. Remember, five or six years ago, our margins used to be between 19 and 20. So during the last couple of years, we have really switched our business model from acute medications to chronic diseases. And chronic diseases basically is a long-term project where we are adding on our pipeline cardiovascular, diabetes, and hypertension. So this is where our growth momentum will be in the future. So we are shifting gradually from an acute business to chronic business, and we are shifting from tender business to more private sector business. So this is where we will be able to maintain our margins. Plus, in the MENA, as you are aware, that many countries have what they call protective legislation. So once you are in a country like Iraq, for example, or I'll give you Iraq. Iraq today has something like 92 manufacturing facilities. So if you don't manufacture in Iraq anymore, you will be stopped from exporting to Iraq. So the same thing goes in Saudi Arabia. Now we're seeing that shift. We're seeing it in Egypt. We're seeing it in Morocco. So this is why we have an extensive footprint, and this is why we're trying to maintain our margins in difficult situations. So we are confident medium term that we will continue to be in the range of 25 going forward. And growth, we will have a CAGR of 6%, 7% as we go during the next five years for the margins.

But in terms of the split between H1 and H2, it's in line with our expectations. So it's timing of tenders that took place in the first half related to certain high-value products. In the second half, we continued to sell, of course, but not the same, let's say – amount of tenders, but we have as well increase in sales and marketing activities. Usually in the MENA, most of the marketing activities takes place in the second half, more than the first half. We increase our R&D spend in the second half. So this is why nothing, I would say, abnormal for us other than the split between H1 and H2, but for the full year, it's in line with our guidance.

I have to add just a little bit to that. Okay, a market, for example. there are many tenders going on, if you look at some of those, so they're not all at the same time. In MENA, huge tenders happen at one time. Algeria, one huge tender. Saudi Arabia, one huge tender. There used to be many tenders. They combined them all into one tender. And because you win that tender at one time, you deliver at one time, and that's why the bulk happens at one time.

Maybe to a lesser extent than 2024.

Thank you. Maybe on the usual question around pricing, but maybe specifically just to clarify on the injectable price, you know, in terms of to what extent has any been in shift? What is the sort of ongoing pricing erosion with both injectables in the U.S. particularly and then generics?

Price erosion, is that what you're talking about? So mid to low single digits, kind of typical trend.

Not some change.

I'm just trying to get it. Yeah, we're not expecting any significant change in that going forward. And similar in generic?

I mean, it was around 6% last year. But, I mean, it's all based on the product mix. I mean, so you can't – it's difficult to guess. I mean, many of our products, which we are selling in the U.S., are quite old. They've been on the market for a long time. So maybe you see less price erosion in this. kinds of products. You see normally the highest price erosion for those which you are launching, and then more company comes in. So it's difficult, but it is a similar average that has been over the last 10 years. So some years have been more. Some years have been down to 15, but last year was around 6% for us.

Thank you. And maybe quickly on liraglutide, the At the moment, you're still the only straight pure play generic, as it were. The longer that goes on, I mean, just to categorize or give a bit of context around the potential benefit you might have from staying the only player in that market as you go through the year, or another way to say, how much is that expectation put in the current guidance for injectables?

So, yeah, I think a couple points on this one. So, one, I always like to toot our HICMA horn on this one. So we are the first and only approval on this product. So Teva actually is the authorized generic, so they actually don't have an approval in the U.S. We're the only one. So I think that's important about our performance. And so we're expecting near-term competition. We're hearing that competitors are – launching in the near term. If they don't for various reasons, then they'll be potentially upside to what we're forecasting for the year. But we're forecasting in more competitors coming in this year. Not approved as yet. They're not approved as of yet. Okay.

Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad now. Our first question from online is from Beatrice Fairbairn from Barenburg. Please go ahead.

Hi. I just had a question on the U.S. biosimilars. I was wondering whether you could provide an update on the status of your partner's donation biosimilar following its FDA filing in December. When kind of should we expect an approval of biosimilar and what sort of ramp up should we anticipate?

Thank you so much.

U.S.

biosimilar progress. Okay. So we have, as you know, we have two biosimilars in the U.S., ustekinumab and denosumab. Both of those products are under active review with FDA as we speak.

Great, thank you.

So expectations on timing, we're forecasting that we'll launch both of these products in 2026. Thank you.

I know there was a lot of attention to the Formacon announcement last week that the pricing discounts are developing in a much more aggressive way than they'd initially expected. And I think some investors that we've seen have been traveling this across U.S. biosimilars. Do you have any – have you noticed any changes in the pricing outlook or discounts to branded products just at a high level?

So we did see the same thing on Eustachinamab. So the drop already is over 85%, so just with a few launches already. I think what maybe puts us in a more unique position than a lot of others is the partner that we have on ustekinumab specifically and the cost structure we have on it, we think we'll be able to be in a really competitive place overall. And so we've kind of forecasted in our view of our launch in 26 with kind of this kind of level of erosion, maybe even a little bit more. So it's not shocking to us.

just to the whole team, just the ambition, if any, that you have as it relates to semagnetide. I mean, you've done loragatide, and I apologize for already looking beyond that, but just what level of ambition, if any, do you have in terms of semagnetide? Two, just could you help me here sort of qualitatively? How much of the U.S. business can you supply through Cherry Hill and Ohio versus the network you have in in MENA. I realize you can't give exact numbers, but it's a tariff-related question. And then we have to ask you this every year, which is, you're not going to say what you're looking at and what size, but just the environment to do business development in terms of what you're seeing. I mean, how excited are you about being able to do further, utilizing the balance sheet further this year? Are there opportunities out there or, yeah, just characterize the environment for BD at the moment?

Maybe I'll jump out a few and then you can add the rest around it. So in So I'll start with peptides and then move into GLP-1s. So I think peptides specifically, I think we have a unique skill set within HICMA. So as I mentioned with liraglutide, we also had the first launch of calcitonin as well. So we do have a skill set both in R&D and regulatory and peptides, and we're going to leverage that going forward. We're certainly going to be in the GLP-1 space going forward, both either through internal development or partnerships and and many products and combinations of those. So we'll be certainly going to be participating in the GLP-1 space going forward. As far as then the plant in Cherry Hill and what part of the business for the U.S., Riyadh probably has a better view than I do. So that plant can do over 200 million units out of that facility. We do have the ability between Portugal and Cherry Hill where there are overlaps in the production. So if we see opportunities for the U.S. specifically around tariffs, there is an opportunity that we can shift production of some products from Portugal to Cherry Hill and vice versa. So, you know, we have those types of opportunities as well. But You probably know better on the overall markets furnished out of Cherry Hill. Sure.

So overall, we have generic, completely U.S.-based, manufactured, sold in the U.S., over a billion dollars. And then we have the U.S. injectables that are on a little bit more than $800 million actually is coming from the U.S., manufactured between three plants, Cherry Hill, Portugal, and a little bit in Germany. Cherry Hill actually makes probably around 60% of this and the rest between Germany and Portugal. And as Bill said, we have the ability to change that ratio if we choose to move some of those products to the U.S. So all in all, I would say not more than 20%, maybe a little bit more that is made outside of the U.S., none in India, none in China, all in Europe. And I think compared to many of our competitors, when it comes to this, we are a lot more U.S.-based than a lot of our competitors, even U.S. companies that we compete with. And with Bedford coming in, that ratio will be incredibly big as U.S. manufacturers. For BD? For BD, I think we have a great opportunity right now, especially with the world being so nervous. A lot of the foreign companies that had invested a lot in going to the U.S., making facilities that are FDA-approvable, now they're very nervous. What would happen? Some of them are our partners that we have products from. We would like to expand that relationship and see maybe we can help in this where we can move some of their IP into our own facilities in the U.S. I think we will be discussing a lot with our partners. I think also because of our manufacturing, majority of our manufacturing happens in the US. I think that could be a good proposition to Moscow.

Thank you. Paul, back on. Just the clarification on the Vanco Ready product you acquired and was on the market and you now need to gain approval for a reformulated version. So I'm just wondering kind of what was wrong with the original product and for what the implications are for kind of when you might get approval and the market potential thereafter.

So the product on the market today is a product that has a black box warning on it, as people are probably aware. We have a reformulated product, NDA product, that's under review actively with FDA now. We're expecting some news on that later this year. And that box is a reformulation. Sorry, it's a product that has a reformulation where the box will be removed. It's patent. Sorry, just one other thing on that, too. And it is a patent-protected NDA to 2035.

Yeah, I think I just wanted to say a couple of words about this product. would be or will be a very important product. Vancomycin is used for a lot of infections. It's used in all hospitals. It's a huge market in the world, especially in the U.S., because they use this one more than anything else. In Europe, they use another antibiotic that doesn't exist in the U.S., but it's a big, big product. It is usually offered by body weight, so you have different brackets of it. and it is offered in a powder. So in order for you to infuse it to a patient, you need to dilute it into the right ratios of liquid, which is complicated. And so what happened, most of the vancomycin administered in the U.S. is compounded. So the compounding pharmacies, the compounding companies and pharmacies, they get the product, they dilute it, they put it in different brackets of bags and sold to the hospital. In this case, once we get approval, that there's no need. There's something that exists already, six different brackets that we have, depending on the body weight that you have, ready to use, liquid form, doesn't need to be compounded, and the most important thing, the one that comes from the pharmacies that are already compounded, it's good for a few weeks, a couple months maximum, while our product definitely has a much, much, much longer shelf. expression data.

I'm going to actually add one thing on top of that. So this product is used for sepsis. And so getting this product to the patient quickly is important. If you don't, people can lose limbs and or die. So you have to get this administered quickly. So all of these things that Riyad's talking about, taking it from a freeze-dried product to dilution, the time really matters. So this product really has an enormous upside. If you can just you know, grab it, administer it to a patient. So that time is really, really important.

One more maybe on generics and thinking about a CMO contract and then the potential impact of that 2027. I think in broad terms, I think you talked about utilization and generics being important. 50 to 60% or so, if that's the right number. And therefore, once that product's fully online, 27 and beyond, does that shift the... Is that sort of a contract that would shift significantly that utilization rate, if it's possible to say?

I'll say a couple words and have to have one answer this. The capacity utilization that we keep talking about is with the existing equipment that we have today. This contract will... with a lot more equipment and capacity in addition to what we have.

Yeah, and also how you calculate capacity. I mean, do you calculate it based on the number of people you have, or do you calculate it based on the equipment that you have? I would say that maybe Ria doesn't fully agree with me. I think we are 100% utilized based on the number of people that we have. But with this contract, we will need also, of course, to have a lot of equipment, but also people. to support that business, and that's something which we are already in progress of doing. So I'm not willing to give you utilization numbers because I think that you can calculate that on so many different ways.

But the fact that you are able to increase capacity today by having more people working more shifts, working on weekends, you can do that. We're not doing all of that today. So, yes, maybe we're utilizing more than that 50%, 60%. But usually, again, what Heflin is saying, depending on how you calculate capacity, it's the maximum capacity that you can get to or what capacity you're working at today. I think we're working at the capacity that matches our demand. But if the demand increases, we can also increase the capacity. I just wanted to repeat what I started with and what we tried to put across, which is the medium term. We talked about it in many of the questions that you had asked, but if we look at the next two to three years, so let's take division by division. If you look at the generics, we were just talking about it today, and the next medium term, we will have The project of contract manufacturing will be at full throttle, delivering a lot of financially healthy numbers to this division. We will have interesting products coming and then getting approved, nasal products like epinephrine and other technologies that we're working on. I think a lot of what we have, the R&D that we're spending money will be coming to fruition So I think that generics will be in a very, very good position in the medium term. If you look at the injectables, we talked about, the last question was talking about biosimilars, coming in also soon. Talked about Levenco Ready, Levenco Ready to Use, coming in also very soon. We talked about Zaria, a plant that was in the United States with huge capacity and technology, something that is very good to have, especially today, that will also increase our capacity, give us breathing room to also get more contract manufacturing opportunities. We also talked about the pipeline that we got from Zelia and the R&D Center that we will be looking at completing many interesting projects there, and we think that we can complete it. I think a lot of them were halted by Zelia because of financial difficulties, with their financial means, not because of any obstacles in developing those products. So we feel that we can complete those products. And, you know, compounding business should be healthy. It's going on the right track. We think that we also can be doing a lot with this business. I think this business is going to be a big contributor to our growth. MENA also, its momentum is very, very healthy. It continues to show the capabilities we had invested significantly in the last two years or three years in MENA, and we are still investing. We have new facilities in MENA. In Morocco, we have new facilities in Algeria. We're breaking ground into new facilities in Saudi Arabia. We're doing another facility of oncology in Saudi Arabia. We just finished a facility in Tunisia. So we have been investing in capital expenditure there and increasing a lot of spend in R&D. All the group is increasing in R&D about 20%, significant increase in R&D, still being able to get you numbers that are good, healthy, with healthy growth and spending. We need to spend on this business to grow. So doing that while we're still maintaining growth and healthy numbers, I think it's a great formula, and I think we are delivering this today, and we will be at the medium term.

Thank you.

Thank you.

Thank you. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.