Hikma Pharmaceuticals PLC

Okay. Good morning, everyone. I'm Guy Featherston, Investor Relations. Before we start, I'd like to remind you that any forward-looking statements or projections made by HICMA during this call are made in good faith based on information currently available and are subject to risks and uncertainties that may cause actual results to differ materially from those projected. For further information, please see the Principal Risks and Uncertainties section in HICMA's annual report. Thank you for joining this Q&A meeting for Hikmah's 2025 full year results. Our pre-recorded presentation is available on our website and this will be a Q&A session. We're joined today by Saeed Darwaza, CEO, Mazen Darwaza, Executive Vice Chairman and Deputy CEO, Khaled Nobilsi, Deputy CEO, North America and Europe, Afrin Frederick-Stottir, President, US and Global Head of R&D, We're also joined by John Kafer, who heads up the US Injectables commercial business, and we have Arab Kirby, recently appointed Acting CFO, and Susan Ringdahl, Investor Relations, also in the room. And with that, I will hand over to Saeed.

Thank you very much, and good morning everybody, and to my old friends, hello again. The decision for me to take over as CEO again was not really a very easy decision. giving up the beach and the sun and the good life was difficult. But I really felt very strongly compelled to do this. I remember before we IPO-ed, we were discussing the ideas of IPO-ing and not IPO-ing, and my father saying, my worry is that one day the team will lose sight of the long term and start looking at short term and short term wins. This is the only thing that I'm worried about. And frankly, in many ways, this is what happened, I think. The company had sort of started looking at short-term wins and fixation on modules of the injectable and so on, and really, you know, lost track. So that's why I felt very, very strongly about coming back again. And as you know, also I had to, you know, I decided to give up the chair position to concentrate 100% for the next two years on the CEO role. I want to also remind you that last time when I came in, we had a similar situation with the RX business. The generic business was also doing not very well when I had to step in back again. And for a period of a year or so, everybody was on us saying, get rid of this division. It's weighing you down. Why are you keeping it? But we said we will do what's required. We set... reasonable targets of 100 to 130 in EBIT and we said we will fix it and here we are a few years later we're looking at that business and it has margins of close to 20% and EBIT of 200 million or so. So we've done this before and we feel, I feel, we feel that we know exactly what needs to be done. It really is not a complicated formula. It's a simple formula. You need to do the right investments. You need to get the right people, the right talent, and take quick decisions. So, as I've said this morning, my focus is very clear. So, number one, we want stability. We want these two years where people can relax and focus on what is required for them rather than worry who is going to come in and what's going to happen. So we're reassuring our people, our stakeholders, our investors, this is Hikma, is a very, very strong company. And we have a slide that shows the kegel of the last five-year growth. This company has consistently delivered growth and quite good growth. Also, I'd like to remind you all that we have EBITDA margins of 25, while many of our competitors are striving to get to 22. The second thing is agility. We want to implement a structure of quick decision making and to allow people across the board to take these decisions. We don't want the decision making to be centralized with one or a few people or the executive committee. Rather, we need to empower people across the board to take decisions. I've always said companies that empower their youngsters, their under 40 crowd, are the ones that will be here tomorrow. Those that do not will disappear. So we'll be focusing on empowering everybody across the business so that we take these decisions. And investment, we have to accelerate investment. We have to take the investments that we need to do. So one of the first things we've done is we've taken the R&D budget out of the segments. So the segment heads cannot play with the R&D budget to achieve their targets. It's now a corporate decision. We have a budget for it, which is an aggressive budget. We have spent last year building the team. As you remember, we acquired... a great team in Croatia. Hafrun joined the company three years ago now, and Hafrun has a long, long track record in R&D, and she is directly in charge of the R&D team. So the other things we need to do is hire the right people. Again, John took over as commercial head of North America or U.S. injectables and immediately said, we need to hire so many people. Well, what are you doing? We need to do this. And we said, John, go ahead and do it. And he's already hired so many people and added to the team. We also hired a supply chain. We have now a fantastic supply chain team in place that will be working to make sure that we don't have bottlenecks across the group. And we are still looking to hire some more people, like the head of CMO. We are interviewing now. We want to hire somebody that has a lot of experience in CMO because we feel very strongly that Hikma is well-planned to be a major CMO supplier. And finally, what I started by saying, the fear of my father when we went IPO, long-term growth. Focus on the long-term. And that's what we are doing now. We are focused on the long-term. We are doing the right investments. We are adding, as we said, the R&D. Budget is much higher than it was before. I think we're targeting 5% to 6% now to spend on R&D. Hiring the right people. giving the plant managers the decision to buy the right equipment when they need it, not waiting for, you know, central engineering to come before they can buy that. So all these changes that we are taking, all these changes we are implementing, I think will be excellent for the future. Then I think we have to look at the structure that we are, you know, saying. Why this new structure? Some people have said it looks too complex. In my opinion, for me at least and for the team, it's a very simple structure. The MENA team is a fantastic team, strong team that has been doing an excellent job for the last 40 years. Hikma this year was number one company in MENA, among all companies. This is a big deal. And it's the MENA team that has delivered this. Mazen and his team have been doing this. So it was a no-brainer that the injectables in the MENA report to them instead of being a distraction for the whole team. And then Europe and, let's say, North America or USA, they share many plans and they share the products. So although doing business in Europe is different, but it's the same products and the same manufacturing teams. Khaled has been with us for quite some time now, and he has shown to be doing a great job. He understands this business, and we believe that it was time for him to step up and take a strong P&L position, I am very comfortable that he will do a great job. And Hafron, since he joined the company, has just won us all. He has done such an incredible job with RX, such an incredible job with the R&D team, and hiring the right people, and getting the right things in place, and at some point we will be sharing a clear R&D strategy for everybody, We are more than comfortable that with the help of John and his team and the RX team that has already proven to be an extremely effective team, we are very confident that this is the right way to go. So, we believe it's an extremely good company. We're in a very good position. We have a strong track record, a very strong track record of growth. We will be investing heavily in the next two years. And we know that we will go back to the, moving forward, we will go back to much stronger growth than what we have shown. Although what we have done is still quite good, we believe that we will do much better than that.

Thanks. It's James Gordon from Barclays. Maybe first question just on the organisational structure you mentioned, and I do follow the logic about having people in each geography running the geography. but then at least your reporting, I believe, is still injectables, RX and branded. So might you actually just change the company and make it by the three geographies rather than the three types of division? Because ultimately, who's ultimately responsible for injectables now? Because it seems like lots of people have got responsibilities, is the first question. Maybe if I break them up?

Well, we said that for this year and maybe for the foreseeable future, we'll continue to report the injectable results because we didn't want to... say, you know, why are you running away from that? But the reality from a management point of view, when you look at Europe and the USA, it's 90% of the injectable business. And as I said, it is very different from the MENA injectables. The MENA injectables, there's a lot of products that are in-licensed and, you know, brought up from outside, while the U.S. is much more focused than Europe on manufacturing. So, Khaled... Hafroon, obviously, but ultimately Khaled is in charge of the U.S. and Europe and will be in charge, and of course myself, I will be working very, very closely with them. So I think this gives us the opportunity to really focus on the business rather than, you know, I think just forget the tail end, which is the MENA injectors, and as I said, I'm very comfortable that the MENA team will do a much better job than before. So the bulk of the business now, there is a clear focus on it. And we will be reporting geographically as well as segmentally for the foreseeable future.

Thank you. The second question would be, so what is the outlook now for injectables as in What's going to make it grow faster? And is the idea that now you've reset the margin to the level of this year, but you'd have a similar growth rate on the top line as you were previously hoping for?

First of all, as we said, the amount, the budget for the R&D is much bigger than it was the year before. So actually, if R&D growth was similar to the years before, then the results would be much better. But we said, no, we have to do this. We have to take this decision now. We have to invest. So again, it's investing. There's really, it's not a, you have to invest in the right people. And as I said, we have hired many, many people and there's still more to come. The R&D team, and we will be sharing more about the R&D moving forward. We believe that Hikma is extremely well positioned for CMO business. And we are in the process of recruiting a head of CMO in addition to the CMO team we have. So all these things will be working together to achieve, let me say, growth in the mid-term to long-term for the injectable.

So, James, just on the output for the injectable business, we know that this is not something that we would like to be growing. We have challenges at 25%. And this is something that we know that, and 26. There are different reasons for this. As I said in my presentation, it's reduced CMO. One of our main customers wants to do domestic manufacturing in the U.S. So we have a reduced contribution from that. This is something that we cannot offer until we have Zelia up and running in 2028. We are less optimistic on, let's say, the biosimilar that we have, although it's a very small part of our business and a little bit tight. And one of the product launches, main product launches, has been pushed. So, of course, going forward, we are going to go back to return to very good growth for injectable. on top line and in terms of the EBIT. So any company, any business goes into challenges. 25, 26 was a challenging year. I think from here, from 27, we are going to see a different outlook for the injectable business as we used to see in the past.

And just some examples. So, of course, Tysven is an important product for us. That will drive some of the growth that we achieved this year, but we expect that to do even better in 2027, so that will be an important growth driver. Some of the products that we expected to launch this year pushed to next year, so that will be, again, another growth driver for 2027. We've got, of course, Continued expansion in Europe, that's been an important growth driver for us. That will continue. MENA has been also a good business. We signed six new biosimilars in MENA. So there are a lot of opportunities to grow. But, you know, I think as Khaled said, this is sort of a reset.

So the challenge is obviously, as you point out with the injectables and what we're doing with it, But I also like to remind everybody, this is a much bigger company than just the injectables, right? We have three very strong divisions. Two of them that are doing extremely well. The mean is growing at a very fast rate with very good margins. And the Rx, as I said, has done much better than anybody anticipated two years ago. If I told you we'd be doing 20% margins and with this kind of EBITDA, you know, people would, why did we keep on pushing you to sell it? So, there will be a lot of focus, there will be a lot of investment, and we feel very, very strongly that in the medium to long term, this business will, it is already, in my opinion, one of the best businesses. If you compare our margins to our competitors yesterday who upgraded from 18 to 19 percent, we are way ahead of them. Again, other competitors say we want to be at 22 percent EBITDA, we are at 25 percent EBITDA. So, this is a very good business. It's driven by three engines, and as we said, the focus is on long-term and total profitability, growth in earnings per share, rather than just focus on, keep on focusing. And I think this is what really hurt us the last few years, the over-focus on the margins of the injectables, where people start saying, don't sell anything less than 32, don't accept anything... If I can get $300 million worth of orders at 28%, I shouldn't take them? Of course we need. So that's why the focus will be on top-line growth and bottom-line growth rather than margins.

If I may ask a little bit about that, how we are going to rope. grow the injectable business moving forward. I don't know if you had the opportunity to listen to our presentation this morning, but I at least talked a lot about the ready-to-use platform. And even though, of course, the first product is Tysavan, as Susan mentioned, but we have multiple others in the pipeline. And for those products, they will be launched probably in early 28, so we will not see short-term I mean growth because of those products, but we have multiple products in the pipeline. And I talked about, I think, 15 ready-to-use products in our pipeline. And so, of course, moving forward, we will see the revenue and we will see the growth from this platform, which I'm very excited about. Just to repeat, I think it's a really good business.

The first question would be a follow-up on the previous answer in terms of what you described on the CMO challenges from one of your customers wanting to switch the manufacturing from Europe to the US. So how do you see that risk going forward for the rest of the injectables, CMO business, and just broadly how do you see the outlook for CMO overall from here? You know, you've got the small molecule contract in RX contributing this year and ramping next year, so just to remind us how you're seeing that outlook.

We looked at our plants in the USA, for instance, we looked at the Cherry Hill plant and see, so what were the bottlenecks, what was needed? Many times it's a small thing that you need to do to increase capacity. So working on increasing capacity significantly at Cherry Hill, and that will help us with the CMO business as more and more companies want to manufacture in the USA. Of course, we'll talk about RX later, CMO, because they already have a lot of orders in business. And then we acquired the Bedford site specifically for this. It's a big site. It has a lot of equipment in it. It needs to be re-engineered in a more modern way. We're working on that diligently. Sometimes new lines take a bit long to get. You know, you need to order them. It takes a year and a half to two years for the lines to be again. After they come in, you have to install, qualify, and get FDA approval. So it's a bit of a long process, long-winded. That's why we're guiding to 28. But with most of the CMO, the big business... You get the order and the expectation as you deliver two to three years down the road. They don't expect to deliver tomorrow because it's a process of moving products in and so on. So that's why we feel very strongly about hiring a head of CMO, somebody that has already strong experience, has well, good knowledge of the industry, and has good contacts with the companies that want to have a CMO business. So we're very confident, like in 28 and forward, for the injectables, we'll have a very strong CMO business. For now, we will be showing that the RX already has very strong CMO business. So overall, it will become quite a significant part of our business, let's say, three years down the road.

Very helpful. And second question is on R&D. So the increase of 5% to 6% of group sales, are you now comfortable with that as a ratio in terms of thinking about that level going forward? Ask me or you ask her. If you ask her, she says, no, we need more. If you ask me, it's enough. And when do we say pay off on those investments? Because I know you've mentioned 28 for the ready to use, but you started the increase in R&D last year. So just to...

Yeah, of course, we slightly increased investment in R&D last year, but that was, I mean, really a slight increase. But we also reorganized the R&D organization. So now we have a global R&D organization. And we also moved activity from U.S. into Croatia. So, of course, that is clearly helping significantly on that. on the injectable business, but we also have a very strong team focusing on inhalations, semi-solidant liquids in Columbus, in Ohio, and then of course our team in Jordan is focusing on solid orals, so I strongly believe that we have the right team in place. Would I always like more money for R&D? Yes, of course I would. So Saeed is correct there, but I feel very confident, though, with 5% to 6% of the revenue being spent on R&D. I think that's just in line with what our competitors are doing.

And we are going to see these returns coming into the coming years. Some of it will come in 27, some of it will come in 28 or 29 onwards.

Yeah, yeah, of course. R&D takes time, just so everyone knows that.

Thank you.

Hi, Beatrice Urban at Barenberg. Thank you for taking my questions. You discussed the focus on long-term growth. I mean, one of the targets out there is this kind of 5 billion 2030 revenue target. So my question really was does it still stand and would you be able to give some colour in terms of what is needed to get there and how that looks like over the coming years? And then just on your delay to system timing of some of the product launches and injectables, do you feel like the new timers that you've got are realistic and kind of how confident are you that you're going to be able to launch these products on time?

I'll take this first part about the $5 billion.

$5 billion. Yeah, so the $5 billion, when we set the $5 billion target, we said that this was an aspirational target, but we felt that it was very achievable with the business plan that we had and our business model, which has been to do bolt-on acquisitions as a matter of course. So we still do feel comfortable that $5 billion is within reach.

Very achievable, yes.

You know, it's it is we have we definitely see an acceleration of growth after 2026. And, you know, I think today it would require a bit of inorganic growth. But yeah, it is very much within within reach.

Yeah, it's not like we are talking about this transformation and like more of a product acquisition. So we are very close to the aspirational target of five billion. And if you look into the three businesses, the branded is still in very good growth. Acceleration, if you look into the past, it was five, six percent. Today we are going more, seven to eight. This is driving growth. High value products that we are getting into the MENA region. If you look into the number of licensing, Leals that we've been signing over the past five years have increased significantly, and now we are becoming more and more the partner of choice. So this is going to be a key driver. RX is growing with the CMO business. We are going to see more contribution coming in 27, 28, 29. So this is as well going to drive the growth. And injectable, of course, with all these RTUs and the products that we are working on, it's going to accelerate the growth for the injectable business. Remember, the injectable business has a large portfolio, so there will be always opportunities, there will always be shortages. Europe, we are seeing a very good growth, great potential, especially that the market is lacking products. So we are being the, I would say, most reliable hospital supplier in Europe now. All hospitals are coming to us and governments coming to us saying, we want this product. The agility that we have in Europe, providing the products on time, is differentiating us versus others. And this is why we've seen 23% growth this year in the injectable in Europe. Same for Mina. It's not just like the six biosimilar. We have many products that we have here. that we are going to launch in MENA for biosimilar. So this is going to be the growth driver, and we are very confident in our ability to continue growing the business. As said, 25, 26 might look challenging for the business, but this is a business cycle. But from here, we are going to continue growing.

The short answer is yes. The 5 billion is very achievable. We are extremely confident in our 26 guidance. And yes, the injectable launches that we'll be seeing in 28 and further will deliver the kind of growth that needs to be done.

Maybe just one question on RX. That one seems to go pretty well, and it looks like you have some room in terms of margin. You've been investing even more than what you're actually investing for injectables. Can you discuss the different moving parts this year? The base business, I think there might be some competition on certain products. On the flip side, you have some service payment from your CMO partner. Are you expecting at some point to be able to update the market on who is that CMO, what is the product, and what are the economics behind that? I mean, just a bit more visibility on the CMO because it's a huge moving part for RX for sure.

Yes, so this year the revenue from the CMO business will probably be around 10% of our business, but our target in 2030 is up to 20%, at least my target. So we are not going to share the name of our customers, but we are working with not only one, One big customer, but actually multiple. And some of them are talking about contracts which have not been signed, but are in negotiation phase. And we will be signing within the next, let's say, next few months. So that's going very well. You also asked about the base business. For example, a product like Atvir has been doing very well last year, and we expect the same this year. Gluticasome, we are the biggest volume. driver in U.S. for Fluticasone, as an example, or for Nasals. And that is a business which continues to do very well. And all our base business has been doing really well last year, and we haven't really seen any change, at least for the first two months of the year. So it's more stable than maybe most people believe it is.

Can I just remind people that we have John, who's the commercial head of injectables, on the line, and Mazen, deputy CEO for MENA. So don't hesitate to address questions to them as well.

It's early for John, so you should really ask him questions now, because he woke up very early for you.

Thanks.

Christian, thank you. Again, not to belabor the point, but on injectors and the margin, just to be clear around, you know, it's been quite a dramatic shift, right, from mid-30s to high-20s now. that there isn't something sort of, well combination, one is you talk about the extra investments needed, implication potentially maybe that you weren't, you were underinvested before to some extent, so the margin was sort of where it was, and or is that fair? And then the second part is, is there something more structural around the market from a sort of pricing and competition issue that means margin? has the abstraction of travelers gone?

Okay, so first one, as I said, I mean clearly we said we're taking the R&D budgets out of the divisions and putting it as a corporate, so clearly indicating that at some point division heads were sort of reducing R&D expenditure to give higher margins, so by taking that out and having it as a corporate with a fixed number that we agree on, I think That will, you know, there will be lower margins a little bit to start with. But we are very confident that with the investments they are making in R&D, the new pipeline, the expansion in the manufacturing, and the CMO, that we will be achieving higher margins mid to long term. Okay. The second question was?

structural something in the market?

There's always competition. There's always people coming in. You lose a few products. We lost two or three products. We have competition coming in, two or three products that were doing extremely well. And that's why when you have such a well-diversified portfolio and you have so many products, Other products can pick up, and then new launches can pick up. So the market has always been competitive. It's always been competition is coming in. Do we feel that there's more competition? In some areas, yes. In some areas, no. But we're confident that with all the changes we're making, we are fine.

It's not like structural change in the market. The pricing is around, let's say, if we exclude the two top products that we have, it's 4% or almost less. So low to mid single digit price erosion that we've seen in this business. So nothing is abnormal.

And maybe if I may add, so I think over the last few years, the supply from third party has increased significantly. And third-party, of course, is not as profitable as if you're making the product internally. So I think it has been going from 20 to 30% over the last few years. So that's, of course, affecting the profitability. But also, I mean, there are different parts of the business which has higher profit than other parts. Of course, while you are building the business, injectable business in MENA, which is less profitable than the business in US and in Europe, of course, that will affect the overall business. injectable profitability, and that business has clearly been growing as well.

So those are at least two reasons in addition to... If you exclude the MENA margins, both for Europe and North America injectable business, the margin is north 30%.

Thanks. Maybe the natural follow-up is, I know you're probably reluctant to guide beyond kind of 26, but just to get a sense for that margin, and is 27 to 28 the floor, and then maybe that's similar until you really get into Azalea, and then margins should improve, or is this... Again, we're saying we're very comfortable that 28 and further margins improve.

I think... Once we assess everything and we have a plan, the right plan in place, are we going to be giving... May I take this?

In a way, we got it to 2027-2028. And I said in my presentation this morning, you can assume this is for the coming few years, but it's not like... If we have an opportunity that is sub 30, we are going to say no to it. So we don't want to be strictly held on these margins because we are going to focus on growing the profits and the EPS rather than just focusing on the margin, as Saeed mentioned. So you can't consider like this 27, 28 to the next three years. What has changed, just repeating to what I said earlier this morning, from November when we said the floor is 30%, is literally increased investments in R&D. We are increasing 15 million this year versus last year in injectable. You look into the investments that we are having, as Saeed mentioned, fitting in sales and marketing and the CMO. This is why we are going down like 2% to 3% point. It's not something structural in the business, but it's more investing for the future.

Just going to jump to the line for a call quickly now for a question.

If you would like to ask a question, please signal by pressing star and then one on your telephone keypad. We will pause for a moment to allow the questions to come in. Our first question comes from the line of Kane Slutskin of Deutsche Bank. Your line is now open.

Thank you. Thanks a lot. Morning, guys. Sorry, could you just clarify, I missed the last point on the higher R&D in injectables, but could you just sort of clarify sort of the lower guide, sort of those moving factors between higher R&D versus the lower CMO work, I think? in terms of which has moved the needle more there I assume it's the R&D but if you just clarify that and then just you're obviously spending some time doing the strategic review I'm just wondering at what point do you think you will be able to sort of reinstate a midterm or a new midterm guide and then just finally on the buyback just I guess you know why is it sort of taking so long to do it and you know because we Could we see a more permanent feature going forward if shares sort of remain where they are?

Thank you. I think I can maybe take the R&D question if I could hear him correctly. I think he was asking about the spending for R&D. And the overall increase in the spending for R&D this year compared to last year is around $45 million a year over year. I think that was your question, but I'm not really...

Yeah, I was just wondering sort of in that lower guide, how much of it is sort of the lower CMO work you referred to versus R&D in terms of what's impacting the guide down?

CMO.

I think it's more evenly split across R&D, sales and marketing, and CMO. I would say those are the three biggest factors, and they're of more or less the same magnitude.

And the buyback, I agree with you. It's taking too long. But we have taken the decision to do that $250 million this year.

In terms of the medium-term guide, I think we'll get back to you on that. We know that it's important for the market. We want to get it right. And so, yeah, I think, you know, we'll come back to you.

All right. Thank you.

Thank you. There are no further questions. I'd now like to hand the call back to the HICMA team.

Julie Simmons, Pamela Libram. Just on a more product-specific basis, I'm wondering with Tizerband, clearly you've just launched it. It feels like the sort of momentum's pushed out a little bit to 27. Are you noticing anything from the first sales in the market there?

Good morning, this is John. John, you're on mute. I'm on mute, John. No, I am not on mute.

No, you're not on mute.

Okay, great. Hey, good morning, everybody. So we are an active launch moment for Tizivan. Let me just frame the market because this is important to understand because the RTU bag platform will follow a similar pattern. Vancomycin is a widely used product within the U.S. There's about 41 million grams of the product used in multiple forms from a very – or lyophilized powder to a frozen bag to obviously our ready-to-use bag. What we are selling is a system and a process change which in large hospital systems and large hospital groups that by default ties the fan would become the vancomycin of choice. So it is really more of a process change. Now, put it in perspective, we have already converted 13% of the entire gram market with our existing vancomycin ready-to-use bag. So we have a platform. We will expand that. Within that network, there's about 22,000 sites of care that use vancomycin within the U.S., all forms, long-term care, hospitals, and such. Our existing customer base on the existing bag product represents about 15% of those sites. So there is a very large universe of hospitals and health systems that have not used our historical bags. So there is a large opportunity there. So you have to think in terms of it as a process progression. So we're going to expand our existing base by expanding the usage of the product without restriction, and then we're also penetrating the – the customer bases that have not used our bag in the past. So, yes, this is going to be a progression into the back half of the year, but the momentum that we're seeing right now is very active and very encouraging.

Thank you. And just following up on that from a sort of RTU perspective longer term, do you think once a site is switched over to one RTU, it makes it easier to switch into another for a different product?

Yeah, and that's exactly why the way we're approaching this first one is extremely important. We want to make sure we have the processes in place. You know, hospitals and groups, they have to reprogram electronic medical record systems, infusion pumps, SOPs, ordering patterns, storage platforms, because you're bringing in a new form. So as we work with Tizavan as the foundational product, we want to make sure we fully integrate it properly. And I do believe that that will help us going forward with the additional bags as they come to market.

Charlie here with Bank of America. First one is just in our models would it be reasonable to assume that I guess at this stage a 30% mid-term injectable margin is off the table given focus on profitable growth? And then I'll get the second one in a sec. And then the second one's just on the mid-term guide, which obviously since giving it we've seen two cuts to. So first is, I guess, talk me through the decision to issue the mid-term guide if there were some underlying concerns on the spending, the short-term focus to give that. And then secondly, sort of, how can you reassure us and the market that this is sort of, you know, the last of the big cuts and we're back to something profitable, you know, we can return to something gross from here?

Again, as I said before, it's not a complicated formula. You have the right people, you have the right equipment, you have the right facilities, you have the right R&D. All of these things, when you invest properly, you take timely decisions to move the business forward. This is the formula for success, and we've had this formula for 40 years. We sort of slowed down in decision-making, became too centralized, we were not investing properly in the right places, and now we are reversing that. So that's why we feel very confident that, you know, at mid-term we will deliver what we're talking about.

And this is why, as well, 27 is going to be a year where we... 27 is going to be, as well, a year that we see a growth. So it's the bottom and the injectable, and from here we are going to grow in top line and in bottom line. In addition to the other two businesses, they continue to grow as I said earlier.

Just a third one, if I may. You talked obviously heavy investment the next two years. How confident are you that this is a two-year journey of heavy investment and that won't spill into three or four as the investments start continuing?

The investment is not a short term. It will continue to be, but we will start seeing the results of what we're doing now two years down the road and moving forward. But when we look at our five-year capex, our five-year R&D, all this will continue to grow.

Just to add to what Saeed just mentioned, in terms of the R&D, it takes time to see results, as Hetron said. In terms of sales and marketing, these are quick wins. So you invest today, it's not like going to take so much time until you get the returns. And this is what... John is focusing on. So you will have these investments and at the same time give you an example on the supply chain. Having somebody now focusing on the global supply chain would reduce our inventory levels, would reduce the slow moving items, which it was very big Failure to supply. Failure to supply. So the immediate impact will be significant improvements to margins. So this is why we are saying that we are moving in the right direction, and I think the results of this will come in the coming years, and we are confident about our medium-term outlook.

Thank you.

Hi, Christopher Richardson from Jefferies. A couple, if I may. You lowered CDMO or CMO expectations for the year as some customers require domestic production, which you said you can't offer. I was just wondering if there were any reasons for that.

As we said, in Zalia, our Bedford acquisition is going to be up and running towards the 2028. So it's the same machinery, the same lines. It's a replica to what we have in Portugal. Now, we couldn't offer because we don't have that facility up and running. So once we have that facility up and running, towards the end of 27, early 28 will be able to offer force.

As I said, again, the Cherry Hill plant and the other plants, we looked at optimizing the capacity there, looking at the bottlenecks, bringing in the lines that are required to up the manufacturing capacity.

And if I can add something about their X business, because we are only talking about injectables, and As I mentioned, I mean, we have this huge, I mean, of course, manufacturing site in Ohio, both for solid orals, for nasals, for inhalations. And that site has been getting a lot of attraction over the last year or so since all this discussion about domestic manufacturing started to happen in U.S. So there's a lot of interest in this. In us, in producing products for different clients, so I think this is going to be a big opportunity for us moving forward, both in the RX and also in the injectable business.

Many times clients come in, let's say for the solid oil, then they feel very comfortable with you and they open up and move injectables and other things for you.

Great, thank you. And just the guide cut in November was due to equipment delays. I was just wondering what the situation is now and what caused you to walk away from 27 and whether the timing for Bedford has changed at all.

No change to the guide that we had in late November. So all that we said that we are going to ramp up, start ramping up towards the end of 27 and the commercialization will start 28. So no change to our plans.

Great. And maybe just a quick final one. I was wondering if you could comment on the oral generics pipeline and the margins in USRX excluding any xyron impact.

Excluding, sorry?

The impact of xyron.

Sodium oxybate. Okay. So last year sodium oxybate was driving down our profitability. So the rest of the business was actually compensating for for the low profit of that product. We managed to negotiate a better deal, at least for this year and for next year. So we will have slightly better profit of that product, but so it will not be dragging down the overall profit for their ex-business. Is it helping this year? It potentially will.

Wonderful, thank you.

James?

On CMO, you mentioned you're looking for a new head of CMO. So just the characteristics you're looking for in the head of CMO in terms of the type of candidate profile that you're looking at and when we could expect the appointment. And does this mark a potential shift to making CMO like a fourth division that we've talked about in the past in terms of strategically, so integrating the Rx and injectables.

Historically we used to use CMOs as a fill-up, so we thought this is extra capacity, let's get products to fill it up. And then when we were approached or we found a client to come in and use the Rx site, It was more of a long-term agreement. So long-term agreements require dedicated facilities. They require dedicated lines and sometimes dedicated teams. And it's a lot of investment to do that. And it takes time to come in, but it's long-term. So this is what we want to do, not just bringing in short-term fixes. So to do that, you need somebody that has been doing that for a very long time. that knows which companies require CMO business. And also, I think, more importantly, when you do the contracts, when you're looking at, let's say, 5 billion tablets or something, half a cent per tablet extra gives you 50 million in profitability. having the right negotiation skills, the right contract skills, all these things. So this is what we're looking at. Now, we have this, but we think that getting a very senior person that has done this successfully is the right way to go. And as I said, we are interviewing. There are several people out there that are available with this kind of internet.

Makes sense.

And this could be a fourth division, very much so. Yes.

Just to switch on the CMO headwind for 26, was that one customer you lost that's gone from Europe to the US? I guess how was that conversation and how are conversations with the remaining customers to ensure that won't happen with someone else before the 28th?

It was one of our customers, not like they are shying away completely. They still have business with us, but they decided to, some of the manufacturing for their own benefits, they wanted to have it in the U.S. So it's not like the business is... going down. To replace, it's going to take some time to get a new customer, but we are confident of our ability to continue growing the CMO business. So it's a matter of time, but when we have Zazalia, of course, up and running, we will have much more clients, much more capacity to offer as well.

There's a lot of demand for U.S. manufacturing, and I think you know, the Bedford acquisition and what we're doing now, although it's going to take a little time, but like I said, if you want to get a client that will work with you long term, anyway it will take two years before you can move in the product. So now is the right time to get, you know, to get the clients in, get the orders in, so you can put the processes in and do the submissions and all these things, tech transfers and so on, so by 28 and more you'll be ready to launch. So it's The demand is there, and we are talking to a lot of companies.

So what they are saying is that if we would have had capacity in U.S. to take on those products in U.S., we could probably potentially have kept that customer. But we didn't have the capacity at that time, so I think that's – but now we are building that, so moving forward, we are –

And if you remember as well, when we did this acquisition and we took the Bedford site on, it was because we were reasonably capacity constrained in our existing facilities. And so we weren't really very actively selling CMO business at the moment because we don't have a lot of spare capacity for CMO without the Bedford site.

Thanks Christian Lenny thanks for the follow up just maybe on RX and just a couple of ones there on the I think you've alluded to a couple of the things around the moving the margin to 20% just to clarify the step up this year to 20% and is the 20% again another kind of base for the business going forward do you think and then just finally on nasal epinephrine what's the update there and obviously it's been delayed so what's the expectation around that I think it had been seen as potentially quite a significant product for you so just an update there

So maybe first on the margin, is 20% the best we can do? No, I think probably you will probably see some improvement moving forward as, I mean, in 27, even 28 as well. I'm not going to give you any numbers, but I don't think that's necessarily the top of the pie. With regards to epinephrine, as I think I talked about last time when we had this conversation, there were some requirements from FDA to run some additional study. That study is ongoing. And we are planning to submit in U.S. in, let's say, after a few months now. And we did file a product in U.K. last year. We will be filing in Europe as well, and we are actively discussing outlicensing the product in Europe. So that's the update. But because we have been working so closely with FDA over the last year or so on the product, I strongly believe that the review time will potentially be shorter than maybe we thought in the beginning.

It will be an exciting product for us.

But then I've also heard effectively you're going to centralize R&D spend and we could think of the divisions as being a bit X R&D. You're going to think about what that X R&D performance is. So if we're rebuilding our models off today, Is that how we should be thinking about HICMA now and are you going to start giving us then what the margins are for these three divisions without R&D and then the central R&D line? What do we do with that model?

Eventually. Eventually. This year we did not want to... Too much changing.

Too much changing.

Then changing your model. But eventually, next year, we will start seeing the margin without R&D. With and without. With and without.

So a bridge this year and then we do a rebuild for next year. Thank you.

Mazen, I think it would be great maybe, I think one of the strengths for the business in the MENA in the past year has been all of the partnerships that we've signed. We have the excellent momentum in terms of signing new partnerships. Maybe you could just talk a bit about why Hikmus seems to be the partner of choice in MENA.

You're on mute. Mazen, you're on mute.

No, he's not. He's just ferret. The sound is very low. No, try again.

He is on mute.

Yes, I can see him. Luckily, I didn't ask him any questions. Okay. Next question. When he comes back.

So can... Sorry, closing remarks.

Well, again...

First of all, it's good for me. I'm very happy to be back as CEO. I'm very happy to give up that chair position to be able to do this. We have an extremely good team. We work very, very well together. We have, I think, a very, very strong business. As we said, if you look at the last five-year CAGRs and the years before, you've seen how this business continues to grow. We will continue to grow it. We are taking quick decisions. We are implementing a culture of quick decision making. I also talked about the younger people in the company. So, for instance, from now on, the executive committees and the leadership council and so on, we will mix and match. So, it will not only be on seniority. We will be having more younger people join. There is obviously something we didn't talk about, a lot of focus on AI and seeing how AI can be implemented to move the business forward. So all in all, I feel very, very positive about this. This is a strong company that has been growing for a very long time, has a very solid foundation, has a strong leadership team, and a lot of talent across the board. And I am very confident that we will be delivering the kind of growth that we expect from ourselves and our shareholders expect from us. Thank you. Thank you, everyone. Appreciate you joining us. Thank you.