Alvotech

Thank you for standing by. Welcome to the Alvatec Q1 2025 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear automatic message advising your hand is raised. To answer your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Benedict Stephenson. Please go ahead.

Thank you. Welcome to Alvatec's Q1 earnings call for 2025. Yesterday evening, the company issued a press release, including financial results for the first three months of the year. A presentation accompanying today's earnings call can be found on our investor portal, .alvatec.com, under news and events. We will be referring to individual slides during the presentation today. Our press release, presentation materials, and statements that we make today may include forward-looking statements. Please see our disclaimers on slide number two of the presentation. These statements do not ensure future performance and are subject to risks and uncertainties that are outlined in company filings with the Securities and Exchange Commission. These risks and uncertainties could cause actual results to differ materially from forward-looking statements that are made. With me on today's call are Robert Westman, Chairman and Chief Executive Officer of Alvatec, Anil Ok, Chief Commercial Officer, Joel Morales, Chief Financial Officer, and Balaji Prasad, Chief Strategy Officer. With that, I would like to turn the call over to Robert Westman.

Robert. Thank you, Benedict. And thanks everyone for joining us here today. Let me start with a brief note about our announcement this morning. Alvatec has decided to list the SDR's equity equivalents on NASDAQ stock home market. The stock home exchange is one of the most active global trading hubs for technology and life science companies. We see this listing as a service both to our current and future shareholders. Trading in our stock will be more accessible, which we expect to broaden Alvatec's share of the base and increase liquidity for Alvatec's shares. Trading in Alvatec SDRs in stock home is expected to begin on May 19th. So moving to our near term outlook, we have received very strong feedback from global partners interested in licensing rights to the new assets in our pipeline. This includes the SIMCIA Biosimilar, which is part of our acquisition of X-Brain's R&D operation in Sweden. We have therefore decided to revise our full year guidance, pipeline revenue guidance from 2025 is raised to $600 to $700 million. And adjusted debit guidance is raised to $200 million to $280 million. There are three key other messages I would like to highlight on this quarterly call. Let me first talk about our financial performance. In the first quarter, we delivered the fourth consecutive quarter of positive adjusted debit and operating profits with triple digit increases in both product revenues and total revenues compared to the same quarter in the previous year. With our strengthening operational performance and positive cashflow from operations during the quarter, we expect to be free cashflow positive in 2025. Alvatec is therefore self-funded in 2025 for the first time. The second message relates to our performance of Biosimilar to Stellara. In the late February, we launched our Stellara Biosimilar in US market after a highly successful commercial launch in Europe, Japan and Canada. In most of the European markets where we have already launched, we are either the market leader or hold the second largest market share. A few days ago, we announced that the US FDA has approved our Stellara Biosimilar as an interchangeable with the brands. We remain very excited about the opportunity to grow in the US Stellara market. There is also significant room to grow demand for the Stellara Biosimilar in ex-US markets for Alvatec. The third message relates to our strong medium-term product launches. As we laid out in some details in our year-end earning call, we have three Biosimilar filings in the review in all major markets, which we expect to launch as soon as possible after approval in fourth quarter, 2025. A fourth Biosimilar is also in the review in UK and a marketing application will soon be filed for Europe. By early 2026, we will have moved from our current two marketed Biosimilars to six marketed Biosimilars. Our strong pipeline is further primed for product launches in 2026 and 2027. All of this will of course contribute to further diversification of product revenues. All of above exemplifies our capability for integrated development and manufacturing that Alvatec has built over the past 12 years. It also underlines the advantage of Alvatec business to business model, which gives us the ability to address the entire global patient population through 20 strategic commercial partnerships across 90 different markets. At our year-end call, we also presented ambitious plan, which is already in motion, to increase the pace of development significantly, moving four to six new Biosimilar candidates into in-house process development each year. In summary, we have continued to build significant shareholder value, facilitated by our vertical integrated development approach and vertically integrated manufacturing ability. Our ability to execute new product launches in 2025 and coming years is the result of this investments coupled with our dedication of focus in pure play Biosimilars. Our increased pace of development is also reflected in increased business development activities. Finally, let me briefly address the impact of potential US tariffs on Alvatec. Tariffs on US imports of pharmaceuticals are still being reviewed and pharma imports to US remain duty-free. It is also worth noting that our partnership agreements specify that our products are delivered to our partners exports, which means that our partners are responsible for customs clearance and eventually import duties. We expect that if tariffs will apply to pharmaceuticals exported from Iceland, they will not be disruptive for Alvatec or our customers in 2025. Furthermore, given the market conditions and the anticipated tariff impact, we expect that our customers can remain competitive in the US market in the long run. And with that, I would like to turn the call over to Anil Okhai, our Chief Commercial Officer. Over to you, Anil.

Thank you, Robert. Starting this year, Alvatec has significantly increased its pace of development. We now have seven unique molecules in early phase, preclinical or clinical development. In addition to the two molecules already launched and four molecules already filed. Our total addressable market is currently estimated at over 185 billion US dollar. This does not include the 15 unique molecules for which we have already completed cell line development. Based on publicly available information, we believe that Alvatec has one of the broadest pipelines in the industry. These products are selected for high potential in markets that are still growing and where we expect to be early movers and with a differentiation. Recent additions to our portfolio are attractive for our partners from a technology indication and market potential perspective. We are in active discussions with multiple partners on new licensing deals regarding the earlier stage portfolio and expect to see the benefit of new contracts in Alvatec's P&L later this year. Regarding our marketed products, let me first start with a brief summary for the US market for Humira. We saw a strong uptake of Humira biosimilars in the US within 2024 and we view 2025 as another transformational year for the market. After the slow uptake of Humira biosimilars in the US, in 2023, the market transformation only started at the time of our Simlandi launch in May last year. Simlandi was of course the first high concentration site rate free interchangeable biosimilar to Humira in the US market. Conversion to biosimilars in the Humira market started accelerating in the second quarter of last year. By year end, the penetration of biosimilars reached at least 21% of the overall Humira market in the US with our shipments alone in 2024, representing about 12% of the total demand for Humira and Humira biosimilars. It should be noted that the statistics on demand for biologics and biosimilars in the US market are based on best publicly available data from IQVIA. However, as we have pointed before, these figures understate the real market share of biosimilars. No private label sales in the US are represented in the current IQVIA data set. We believe that 2025 will also be transformational for the Humira market as all major pharmaceutical benefit managers or PBMs have announced that they will exclude the originator from formularies. The market share of Humira biosimilars in the US still has significant room to grow. And we believe it's reasonable to expect that at least 50% of the US market could be converted to biosimilars by the end of this year. We see a very healthy order book for our Humira biosimilar in 2025. Our partner Teva continues to increase market share with formulary positions with larger PBMs as well as regional players. This includes formulary positions with Express Scripts, Prime, Karelon, some Blue Cross Blue Shield plans and Navitus. We have also continued to gain market share for our Humira biosimilar in ex-US markets. This includes high single digit market share in over 15 European markets where we have launched and a strengthening position in the Canadian market. In Canada, we are the fastest growing biosimilar in the AdalimMap market. Launches of our Humira biosimilars also continue in other ex-US markets. We have already gained approval in 60 of the 90 markets that we cover through deals with our commercial partners as an example, our Humira biosimilar has recently been launched in several Latin American markets. Moving on to AVTO4, our biosimilar to Stellara, we continue to build on the strong launch of this biosimilar under the Uspruvo brand with Stada in Europe. In Europe, we were the first to market with a biosimilar to Stellara and we continue to hold either the highest or second highest market share of biosimilars in each European market where we have launched. The European order book with Stada is robust and growing. It is worth reiterating that the entry of biosimilars in the European market contributed to a 9% expansion -over-year of the overall Stellara market. This is an important reminder that biosimilars entry can lead to a significant and sustainable market growth as availability increases with lower costs of access for patients to these vital biologics. We remain confident that our biosimilar to Stellara in Europe could reach a double digit share of the overall Stellara market in Europe by the end of this year with biosimilars in the aggregate holding a 50% share. As for other ex-US markets, Alvutec is still the only developer to launch a Stellara biosimilar in Japan. Even more than a year after we launched in Canada, the biosimilars market remains a limited competition with only two players in addition to the originator. As for the US market, we are now only a little over two months into our launch of Stellara biosimilar. As previously announced, open expiry of exclusivity for the first interchangeable biosimilar, we gained FDA approval for interchangeability for all presentations of the reference product effective from April 13th, 2025. We expect interchangeability to have a positive impact on the speed and extent of biosimilars conversion in the Stellara market. It is of course still early days, but we are already seeing robust purchase orders from different channels. Our partner Teva has won the business with Navitus and got formulary coverage with ESI in the last two months since we launched. Teva continues to pursue other big wins to gain meaningful share this year. Price competition, however, was strong, which we believe is based on opportunistic behavior and will be to the detriment of these developers. We will strive not to follow a similar strategy as we believe it's not sustainable in either the short or long-term and is not reflective of the value that we bring to the market. Sacrificing value for market share is not compatible with the level of quality, service, and reliability that Alvotec always aims to deliver. This being said, we should note that the level of competition in the US Stellara market has not come as a surprise. Any impact on pricing and volumes that we have experienced is already baked into our 2025 forecast and guidance. Let me now shift our focus to the four biosimilars that are currently being evaluated by healthcare authorities in major markets. AVTO3, our proposed biosimilar to Prolia, Xjiva, AVTO5, our proposed biosimilar to Symphony and Symphonia Aria, and AVTO6, our proposed biosimilar to Aelia, have pending marketing applications in both Europe, Japan, and the United States. We expect to launch all three by Q4 2025 in many major markets. Furthermore, our marketing application for AVTO23, a proposed biosimilar to Zolleyer, has been accepted for review by the UK Medicines and Healthcare Products Regulatory Agency. We expect to launch this biosimilar in early 2026. We are already working with our commercial partners on these four launches, and purchase orders have already been made. To single out only one of these four products with AVTO5, we expect to be the first to launch in all major markets and remain the only biosimilar in these markets for some time after launch. Our commercial partners for this product include Advanced Pharma in Europe, Teva in the US. They share our excitement for the market prospects for the first biosimilar to Symphony and Symphonia Aria, which retain significant market share as treatments of immunology diseases such as rheumatoid arthritis and psoriasis with worldwide sales of over 3.2 billion US dollars. Sales in ex-US markets represent 65% of this amount. We have already received 2025 purchase orders worth more than 20% of the overall European market from Advanced, and we expect to gain significant share in 2026. With this, I would like to hand the call over to our Chief Financial Officer, Joel Morales.

Thank you, Joel. Thanks, Anil. I'll now provide a summary of our operating performance for the

period ending March 31st, 2025. On the following slide, you will find a summary of our adjusted operating results where we show key non-IFRS P&L line items and metrics for the full year. For reference, IFRS reported financials and reconciliations to our adjusted results are included in the slides in the appendix of this presentation. We achieved a strong 110 million in product revenues during the first quarter, an increase of 97 million or 784% versus the same period in the prior year. This increase was driven by the timing of our launches of biosimilars to Humira and Stellara in the US where shipments of product started to materialize in the second half of 2024 and continue throughout the first quarter of 2025. During the first quarter, we continued to ship our biosimilar to Humira to our US partners based on orders received. As a reminder, our commercial model is B2B so there can be inherent lumpiness associated with timing and quantities of purchase orders quarter over quarter. We also shipped additional volumes of our biosimilar to Stellara to our US partner during the quarter in support of the recent February launch. As Anil mentioned, in the short time since the launch, our partner has secured key contracts and we look forward to providing further updates as they expand upon the launch in the US throughout the year. We also experienced continued penetration of our biosimilar to Stellara across Europe. Our commercial partner has been successful in positioning our biosimilar as number one or number two by market share across multiple European markets and we continue to fulfill orders in the first quarter. Additionally, reorders for our biosimilar to Humira, which was first launched in Europe in 2022, increased in the quarter versus the same period in the prior year. As we've mentioned, our ex-US business continues to be a significant driver of our performance and we expect this part of our business to continue growing this year. Adjusted product margin in the first quarter was a very healthy 41% versus negative adjusted product margin for the same period in the prior year. This is driven by the timing of our new launches into US and rest of world markets in the second half of 2024. Adjusted product margin decreased somewhat from the fourth quarter when it was 45%. This was driven by an increase in product shipments to our ex-US commercial partners, particularly as we ship reorders for our biosimilar to Humira to our ex-US commercial partners and thus lower contribution this quarter from the US. We expect the first half product margins to be in the mid 30% range, driven by this geographic and product mix and expect our full year margins to be in the 38 to 41% range. We achieved 23 million in adjusted licensing and other revenue for the year, which is driven by performance milestones as our commercial partners launch new products and achieve net sales targets. We expect milestone revenues to continue increasing quarter over quarter, particularly in the second half of the year, where we expect to recognize approximately 75% of our full year milestone revenues. As we've communicated, we expect three new biosimilar approvals and launches in the fourth quarter of this year, which will drive this milestone revenue recognition. Furthermore, as you heard from Robert and Anil earlier, the anticipated addition of SIMSIA to our pipeline, coupled with our accelerated pace of development of the broader pipeline, has led us to increase the upper and lower end of our milestone revenue guidance range by 30 million to between 260 and 290 million dollars. Accordingly, total revenues are now expected to be in the range of 600 to 700 million dollars. We achieved positive adjusted EBITDA of 21 million for the quarter ended 2025 versus negative adjusted EBITDA of 38 million for the same period in the prior year. This is largely driven by the gross margin contribution in the period and lower OPEX, particularly lower R&D costs as we were concluding multiple clinical programs concurrently in the same period during the prior year. As a result of the increased guidance range and milestone revenues and incorporating some additional R&D costs, we are now increasing the upper and lower end of our 2025 adjusted EBITDA guidance range by 20 million to between 200 and 280 million dollars. Please refer to the slide in the appendix to today's management presentation for further details on our revised guidance for 2025 and a view into our target 2028 financial goals. In summary, we delivered our fourth consecutive adjusted EBITDA positive quarter, driven by strong product revenues and ongoing milestone revenue recognition. We expect each quarter to be EBITDA positive this year with a robust second half where most of our EBITDA will be generated. This is driven by the timing of our three new biosimilar launches and milestone revenue recognition. Turning to the next slide, you'll find a summary of our cash and liquidity for the year. With our improved operational performance, we now expect collections from the sales of our existing commercial products, new product launches and milestone achievement to be the primary source of our funding. During Q1, we generated 17 million of positive cash flows from operations, which is a significant financial milestone for the company, demonstrating the strengthening of our core business operations. We are still in the early days of our launches in the US and EU and naturally, while there can be lumpiness quarter over quarter, we do expect to be free cash flow positive this year, demonstrating our ability to self-fund our operations and investments into working capital as we prepare for three new biosimilar launches towards the end of this year. While we do not expect a significant cash build due to the funding of working capital requirements, we do expect to maintain our current levels of cash on hand throughout the year. Accordingly, we do not expect to rely on additional external sources of funding for us to continue investing behind our business. We closed the period ending March 31st with a billion 58 million in net debt. We expect our leverage to be in the mid single digit range as we exit the year. And as we've mentioned in the past, our term loan facility has favorable non-call features providing us with additional flexibility to potentially further reduce cost of capital over the near term. We closed the period ending March 31st with 301.9 million shares outstanding, including unvested earn out shares. In the appendix to our management presentation, you'll find a summary of shares outstanding. In closing, Q1 was another strong quarter for Alvatech, focused on operational execution as our products are launched into new markets and continue to expand in existing markets around the world. We continue to maintain sharp focus on scaling our operations and developing the next wave of biosimilars to bring to markets around the globe. And with that, I'd

like to turn the call back over to the operator for Q&A.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To answer your question, please press star one on one again. We will now take the first question. From the line of Ash Verma from UBS, please go ahead.

Hi,

good morning. This is Dee calling on behalf of Ash. Congrats on the quarter and congrats on getting the interchangeable label. I have two questions about similar style, if I may. First, can you help clarify the interchangeable exclusivity and how does that trigger specifically? And can your competitor, like Sendos, also get interchangeable label for their Belser & Sallera? What would be the value position of the last C if Sendos also get the interchangeable label? And then the second question, also on the Belser & Sallera, I know you guys have talked about you're working on the private label deal, but what's your latest thoughts on when the BDN may drop the brand from their plan? Thank you.

Thank you very much for the questions. Anil is speaking. So let me start with the first interchangeability question. Yes, we are very happy that we got our interchangeability designation as 30th of April. So the MGM's exclusivity has expired 30th of April. We have not seen all our competition yet getting the interchangeable designation, but we would of course expect some of them getting it. But from our perspective, this is very positive news to drive faster uptake throughout the year. When it comes to your second question, we have multiple active dialogue still continuing on the private label partners. And what I can say is that at least we are expecting more moves from the PBMs, excluding Stellara from the Formularies. If this happens, of course, this will open more opportunities for the biosimilar players. But from our perspective, we continue to have the dialogues. And if the brand is excluded, we will see

this as a big opportunity for the uptake.

Great, thank you. Thank you.

If you wish to ask a question, please press star one and one from your telephone. Please star one and one if you wish to ask a question. The next question comes from the line of calls from Northland Capital Markets. Please go ahead.

Thanks for the question and congratulations on the quarter and the progress. I'm wondering if you can quantify to your best ability what the buy-in of the stocking might have been for Stellara biosimilar, a salarcy in the first quarter, given the 110 million net product sales. Thanks.

Hi, Carl, thanks. This is Joel. I don't know if I would necessarily describe stocking, so I wouldn't quantify it that way. I think it's important to understand that we are a B2B business, which means that we're shipping against purchase orders that we receive against our commercial partners worldwide. There can be inherent lumpiness in this business model as our partners ultimately decide timing and quantities, shipped based on their own individual underlying commercial dynamics, depending on where in the world we're talking about. But that said,

I would say that this is driven more by timing of orders rather than stocking.

Great, thank you. Thank you.

Once again, if you wish to ask a question, please press star one

and one. There are no further questions at

this time. I would now like to turn the conference back to Benedict Stephenson for closing remarks.

Thank you, Sandra. On behalf of the AlboTech team,

I wanna thank you all for listening to our call today. Have a great rest of the day, and we look forward to talking to you all again. Goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.