Viatris Inc.

Good morning, everyone, and welcome to the Vietris Q2 2024 earnings call. All participants will be in a listen-only mode. Should you need assistance, please see a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Bill Cebulski, Head of Investor Relations and Capital Markets. Please go ahead.

Good morning, everyone. Welcome to our Q2 2024 earnings call. With us today is our CEO, Scott Smith, CFO, Doretta Mistress, Chief R&D Officer, Philippe Martin, and Chief Commercial Officer, Karine Le Goff. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2024 and various strategic initiatives. These statements are subject to risks and uncertainties. We will also be referring to certain actual and projected non-GAAP financial measures. Please refer to today's slide presentation and our SEC filings for more information, including reconciliations of those non-GAAP measures to the most directly comparable GAAP measures. When discussing 2024 results, we're making certain comparisons to 2023 results on a divestiture adjusted operational basis, which excludes the impact of foreign currency rates and also excludes the proportionate results from the divestitures that closed in 2024 and 2023 from the 2023 period. When discussing our expectations for 2024, we're making certain comparisons to 2024 results on a divestiture adjusted operational basis, which excludes the impact of foreign currency rates and also excludes from guidance the results from the date of closing until the end of the period of the divestitures that closed in 2024. With that, I'll hand the call over to our CEO, Scott Smith.

Good morning, everyone, and welcome to our second quarter earnings call. I'm pleased to announce we reported another strong quarter, our fifth consecutive quarter of operational revenue growth. We've had a great start to 2024, and with the completion of our divestitures in July, we are now an important inflection point for our company. Four years ago, Viatris embarked on a journey to build a new kind of healthcare company. By combining Mylan, a strong global generics company, and Upjohn, a division of Pfizer with 20 of the most iconic off patent brands, our goal was to build a unique global pharmaceutical company with the scale to bring patients access to high quality medicines worldwide. The team has done an outstanding job of executing the plan that was laid out when the two companies were brought together. Among the many accomplishments we have integrated two global companies, simplified and streamlined the business by completing our divestitures, returned the base business to growth, strengthened our balance sheet through significant debt pay down, returned capital to shareholders through dividends and share repurchases, and importantly, we've already started to build our portfolio of innovative assets. As we move forward in the second half of the year and beyond, we want to accelerate growth and shareholder return by building on the strength of our base business with an expanding portfolio of innovative, best-in-class, patent-protected assets that have the potential for meaningful revenue growth and patient impact. I believe we have all the components necessary to successfully execute our vision, including an extensive global footprint that reaches 1 billion patients annually, a globally integrated company with deep capabilities in manufacturing, medical, and regulatory affairs and commercialization, a robust development engine across a number of therapeutic areas, sector-leading cash flow generation from our base business to fund our vision and continue returning capital to shareholders, and we have added new skills, new capabilities, and new areas of expertise to our already strong and talented executive leadership team. Doretta Mistress, our Chief Financial Officer, Philippe Martin, our Chief R&D Officer, and Corinne Le Goff, our Chief Commercial Officer, joined the team within the last year and are on today's call. All the great work over the last several years has put the company in a position to deliver on our future vision. As we move forward, we will focus on three strategic pillars. First, our diversified and growing-based business. As we said, our extensive global footprint already reaches more than a billion patients every year. Our continued success in this part of our business comes from our large and diversified portfolio of generics and off patent brands that extends across markets and therapeutic areas. Here we have a clear legacy of deep product knowledge and extensive commercialization and development expertise. Second, our financial strength and significant cashflow. Our strong balance sheet and sector leading cash flow generation differentiate us from our peers. We continue to deliver on our financial commitments, including debt reduction and returning capital to shareholders through dividends and share repurchases. With divest your proceeds now in hand, we have a clear line of sight to meet our long term leverage target. And third, our expanding innovative portfolio. This area represents an increasing focus on efforts to identify, vet, and secure best-in-class patented assets. We are looking for assets that target significant unmet medical need in areas in which the company can be successful. By expanding our innovative portfolio, we have the potential to drive accelerated and durable revenue growth. As you know, we've already made disciplined investments in innovative assets in cardiovascular disease and immunology with Saladagrow and Saneramod. We are making significant progress in accelerating the development of these assets. Additional leadership and scientific expertise we have brought in along with the impressive core of competencies in key areas such as global manufacturing, medical affairs, regulatory, legal, and commercialization will all drive the success of this innovative portfolio. We are already making progress on these three pillars as evidenced by our strong results this quarter. I am pleased to report that in the second quarter, we delivered total revenues of $3.8 billion and operational revenue growth of approximately 2%. Adjusted EBITDA was $1.2 billion and growing approximately 2% from a year ago. Adjusted EPS was 69 cents per share. Second quarter free cash flow was $426 million, excluding the impact of transaction costs and taxes. It is important to note that we delivered new product revenue of $210 million in the quarter. With a strong second quarter results, we see momentum heading into the second half. As a result, we continue to expect 2024 year-over-year operational revenue growth of 2% and are raising our expected 2024 new product revenue range to $500 to $600 million. Now I'd like to turn the call over to Corrine to share some of her observations from her first few months at Beatrice. Corinne?

Thank you, Scott. I have been with the company for about four months now, and based on what I've seen, I'm very excited about the opportunity ahead of us. I would like to share a few observations as I've gotten to know the global commercial organization. Our strong performance is a result of many puts and takes that only the diversity and the strength of our portfolio across geographies can allow. Our global commercial footprint is extensive. We have a presence in 165 countries and territories, which is an incredible platform to leverage as we continue to grow our base business and expand our innovative portfolio. We have a broad knowledge across many therapeutic areas and many of our branded and generic products are today's standards of care all over the world. This is a real differentiator as it demonstrates our unique ability to continue to drive volume and expand patient access at scale. As we prepare for additional innovative opportunities, we have a lot to build from. For example, if I think about Celatogrel, we are already leaders at rescue in emergency medicines, in COPD, in asthma, in anaphylaxis. We have years of experience in educating patients to identify an attack and act in the moment. Plus, we have deep expertise in cardiovascular with a portfolio that treats a very large patient population from CV risk factors to CV events like thrombosis, MI, and stroke. Finally, I love what I'm seeing in our teams. I am impressed with the agility and efficiency of the commercial organization. And I also see incredible energy, entrepreneurial spirit, and proactivity to seize opportunities and make a difference in patients' lives. I am excited to continue to work with the entire team at Beatrice on the tremendous opportunities ahead.

Thank you, Corinne. Your wealth of experience and global perspective have been invaluable as we continue to build the truly unique company we have envisioned. Now I'd like to turn the call over to Philippe to talk about our approach to R&D, both our base business and our innovative portfolio. Philippe?

Thanks, Scott. I share the team's excitement about where we are today and where we are headed. I've had the opportunity to fully evaluate our R&D organization and further define our approach to innovation and growth. Our R&D strategy is driven by our deep in-house development capability. and two engines to fuel our growth, our base business pipeline and our innovative pipeline. Our base business pipeline provides Viatris with a diverse and resilient growth engine. We anticipate a steady flow of core generics and an ever-increasing flow of complex generics and novel 505b2-like products. The strong pipeline gives us confidence in achieving our new product revenue goals. Our focus for our innovative pipeline is on expanding our patent-protected portfolio of assets that have the potential for meaningful patient impact and the ability to address significant unmet medical need. I'm very impressed with the core competencies and talent we have at Viatris. In particular, our strong preclinical, clinical development and medical affairs teams across multiple therapeutic areas, our experience manufacturing and device teams over a wide range of dosage forms, and our proven regulatory, pharmacovigilance, legal, and IP skills. This foundation is especially critical as we expand our innovative portfolio. We are identifying assets where we can leverage our expertise and global network and are assessing each opportunity based on specific criteria. We are looking for dearest innovative assets that address significant medical need. This includes having a validated mechanism of action, a strong clinical proof of concept, and a clear path to regulatory approval. Zolatogrel and Sineramide are two great examples. Zolatogrel has the potential to relieve the high disease burden of acute MI and specifically address the dire need for early intervention at the onset of symptoms. B2Y12 inhibition is a well-established target in the treatment of MI, with multiple products approved for chronic treatment. Our differentiated pharmacokinetic profile and unique mode of administration, together with our robust Phase II data, gives us high confidence in silatogrel as a self-administrated emergency treatment for recurrent MI. Our comprehensive but simple Phase III study, SOS-MI, as a special protocol assessment in place with the FDA and receive fast-track designation. Tenerimod also has the potential to address a significant unmet medical need. SLE is a chronic and progressive autoimmune disease with limited treatment option and significant morbidity. Tenerimod, a novel S1P antagonist, has a unique mechanism of action targeting multiple aspects of lupus pathogenesis. A robust proof of concept was achieved in phase two, with data showing a highly differentiated safety and efficacy profile in a moderate to severe SLE patient population, similar to the patient population we expect to enroll in phase three. ScenariMod also has been granted fast track designation by the FDA, and we have three comprehensive phase three studies currently enrolling patients. With Celadogrel and ScenariMod now part of Viatris, we're able to leverage our global R&D network to accelerate clinical trial recruitment. We've already significantly increased the number of sites we are targeting for both programs, adding approximately 250 clinical sites. We've also significantly expanded the geographic footprint, adding key countries like China, India, and Japan to ensure a steady flow of patients. The team has been working hard to initiate these high recruiting sites, and we anticipate that most sites should be able to recruit patients by the end of this year, early next year, which could shorten development timelines. The Medical Affairs team is also working hard to deepen relationship with KOLs and increase Cenarimod's and Celadogrel's presence at key medical meetings around the world, like EFC, AHA, ACR, and APLAR. And we are pleased to announce that the Cenarimod manuscript for the Phase II care study has been officially accepted for publication in the Lancet Rheumatology. Another exciting innovative opportunity is with our eye care pipeline, and is the enriched tear film gene therapy technology we acquired as part of the OysterPoint acquisition, which has the potential to treat a multitude of ophthalmic diseases. Importantly, this technology is not genome editing, but rather it leverages normal cellular processes and proteins to deliver therapeutics to the tear field. Our most advanced project, called MR146, intended for the treatment of neurotrophic keratopathy, or NK, is reaching the IND stage with a validated therapeutic target for this disease. There is a significant medical need for patients with NK to have a treatment that restores corneal structure and neurological function with minimal treatment burden. These examples from our expanding innovative portfolio combined with our robust-based business pipeline energize me about the future and our ability to not only deliver on our vision, but also to address significant medical needs. I will now turn the call to Doreta.

Thank you, Philippe, and good morning, everyone. To echo the comments from the team, we reported a strong quarter, and I want to spend some time walking through the highlights. But before I dive into the details, I want to take a moment to expand on our financial strength and how we think about it in the context of our overall strategy. First, we have built an extensive global footprint that already enables us to reach over 1 billion patients annually. We've successfully stabilized the base business and expect it to be a source of growth. And today we have a broad, and diversified portfolio across markets and therapeutic areas. Second, we have a strong balance sheet. We are committed to continuing to pay down debt and maintaining our investment grade rating and have a clear line of sight to reach our long-term gross leverage target this year. And finally, our ability to generate significant cash flow is sector leading. This gives us the financial agility to fund our vision and continue returning capital to shareholders. Now on to the results for the quarter. Our second quarter results demonstrate the power of what our portfolio can deliver. Operational revenue grew for the fifth consecutive quarter, up approximately 2%. This performance also carried through to adjusted EBITDA, and adjusted EPS, growing approximately 2% and 3% respectively. We also generated significant free cash flow of $426 million in the quarter, which was in line with our expectations. This excluded transaction costs and taxes from the divestitures. Let's move on to discuss the performance of our base business, which grew operationally on a year-over-year net sales basis. Both generics and brands grew this quarter, up approximately 2%. The growth of our base business included new product revenue that was exceptionally strong, with $210 million in the quarter. The year-to-date performance and outlook give us confidence to increase our expectation for the year to a range of $500 to $600 million. This quarter, all of our segments grew operationally versus the prior year. In developed markets, net sales grew 1% and was driven by strong new product performance, including contributions from Braina, Lisdex Amphetamine, and other generics in North America and Europe. In Europe, we are seeing durable growth across our diversified business. This is as a result of portfolio breadth across brands and generics, well-developed market positions, and strong performance in key countries such as France. In North America, we saw continued growth in generics, which was up over 3% versus prior year. The portfolio is benefiting from complex products such as Wixella and Braina. And within our brands business, net sales continue to be impacted by increased Medicaid utilization in certain non-promoted brands, as well as lower EpiPen volumes resulting from formulary changes in the previous quarter. In Greater China, net sales growth was approximately 5% over the prior year. This was as a result of strong demand across multiple channels in China, including e-commerce, retail, and private hospitals. In emerging markets, net sales grew 7%, driven by the expansion of our cardiovascular portfolio in certain Latin American countries, as well as strength in our MENA and Eurasia regions. These benefits help to absorb the ongoing impact of the therapy shift in the ARB market. And lastly, JANs grew approximately 1% over the prior year. benefiting from new products in Australia, and volume growth of our promoted brands in Japan. This served to offset the impact from government price regulations in these countries. Turning to the P&L and free cash flow, this quarter serves as another demonstration of our financial strength and ability to generate significant free cash flow. Our segment and product mix led to stable adjusted growth margins. The performance was in line with our expectations of approximately 58%. With respect to operating expenses, we are continuing to invest behind the business to fund our growth, which includes investments across segments, iCare, and in R&D. Free cash flow for the quarter was primarily impacted by lower adjusted EBITDA due to the closing of divestitures. Our free cash flow and existing cash on hand allowed us to strengthen our balance sheet with debt pay down of approximately $800 million in the quarter. And as we look towards the rest of the year, we expect to have an excess of $3 billion in cash available for deployment. This takes into account divestiture proceeds received in the third quarter, expected divestiture costs, and our latest outlook for free cash flow. We expect the significant financial flexibility will allow us to pay down additional debt to reach our long-term gross leverage target of approximately three times by the end of the year. We also expect to return capital in the form of dividends and will remain opportunistic with potential share purchases and business development activity. Let's move on to items related to our financial guidance and key metrics for the remainder of the year. We expect our strong momentum to continue, and as a result, we expect operational revenue growth of approximately 2% versus 2023 and stable adjusted EBITDA and adjusted EPS. Our expectation for the year is to be at the midpoint of the estimated guidance ranges. The assumptions driving total revenue growth include continued growth in developed and emerging markets, and better-than-expected performance in greater China and Jans, and new product revenue of $500 million to $600 million as a result of the strong uptake of generic launches and additional new products. We are adjusting the following metrics across the P&L. Increase in adjusted gross margin range due to better segment mix, and SG&A as a percentage of revenue is expected to be higher. This reflects the reduction in total revenues from the divestitures and the impact of the synergies and costs of providing transition services. We expect certain costs associated with performing the transition services to be included in operating expenses. The transition income is expected to be recorded in non-operating other income. A few comments on anticipated phasing for the third and fourth quarters. Total revenue is expected to be slightly higher in the third quarter, mainly due to normal product seasonality, and adjusted gross margin is expected to moderate in the fourth quarter due to normal product and segment mix. Taking these factors into consideration, we expect adjusted EBITDA, adjusted EPS, and free cash flow to be higher in the third quarter. To summarize, the results for the quarter demonstrate our solid fundamentals, including our diversified and growing-based business and our consistent, significant free cash flow generation. We are well positioned for a strong second half of the year and expect to deliver on our capital allocation framework in support of the vision Scott laid out at the top of this call. And with that, I'll hand it back to the operator to begin the Q&A.

Ladies and gentlemen, at this time we'll begin the question and answer session. To ask a question, you may press star and then one using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. Again, that is star and then one to ask a question. We'll pause momentarily to assemble the roster. And our first question today comes from Ash Verma from UBS. Please go ahead with your question.

Good morning. Thanks for taking our question. Congrats on all the progress. So I wanted to talk about 2025 dynamics a little bit. So I think the $2.3 billion pre-cash flow guide that you provided previously, what does that translate into EBITDA? Like if you look at the run rate that you've had sort of in the difference between EBITDA and free cash flow, it would roughly translate to 4.5 to 4.6 billion. Is that something that you would be comfortable with? And then secondly, on the new product revenue, so yeah, that's good to see you raising the guide there. Just what's driving that? Is that primarily the benefit that you saw by Brena, or are there more products that you think that you're benefiting from?

Thanks.

Thank you, Ash, and good morning. Thank you very much for the question. Sort of two parts here, right? Talking about new product revenue, which is very important as we move forward here, and we're very strong, we saw in the second quarter, and we're expecting full year, very strong new product revenue. And then also some 25 dynamics. I'll turn it over to Doretta to take those two for you.

Great. Thanks, Ash. So yes, on new products, To your point, we feel great about the momentum we've seen from the new product perspective this year. This quarter we did $210 million, and then when you add that to the $154 million that we did in the first quarter, already year-to-date we're at $354 million. And so that, in addition to the momentum that we're seeing broadly across our new product portfolio, and it really isn't dependent on one product, one region. We've seen growth, to your point, in Braina and Lisdexamphetamine. We've also seen growth in other generics in North America, but we've also seen new products in Europe and some additions in emerging markets in Jans. So as we look for the full year, the strong performance and the continuation of that really is going to be largely driven by products that we've already launched year to date, and that's what gives us confidence in the $500 million to $600 million for the year. With respect to 25 Dynamics, listen, it's still early. We feel good about the momentum that we're seeing thus far in 2024. kind of the stability of our revenue growth. We are going to continue to invest in our business from a kind of R&D and investment perspective to fuel our growth. But the kind of dynamics in terms of what we've seen from our free cash flow, we kind of continue to see the $2.3 billion that you mentioned in terms of free cash flow generation, and we're going to continue to – kind of focus on our EBITDA conversion going forward, but with respect to 25, I think it's still too early to get into the dynamics specific to 25.

And our next question comes from Chris Schott from JPMorgan. Please go ahead with your question.

Thank you so much. This is Katerina on for Chris, and thank you for taking your questions. I'll start with a bigger picture one, if I may. So just given that you're now done with the divestiture process, can you maybe talk about how you're thinking about the longer-term profile of the company, both from a margin standpoint and a top-line standpoint, and I guess where you see the most opportunity for the business from here? And then second question, just on business development, I think you've touched upon this in the prepared remarks, but just what's your latest thinking in terms of business development and balancing development stage and commercial stage deals? And just what do you think makes the most sense for the company and maybe where you're seeing more interesting opportunities? Thank you.

Yeah, thank you very much, Trina, for the question. Again, I'll maybe address the second one first. From a BD perspective, you know, we're engaged in a lot of different discussions. We're going to take a disciplined approach. You know, as we got through the investors, sort of the net effect of that is that we're going to get to, we've got line of sight and pay down our debt going into 2025. and executing on our capital allocation plan 100% where we're giving back to shareholders at least $2.3 billion in free cash flow through dividends and share buybacks, but also taking a disciplined approach to business development. We've got a diversified company in terms of the number of therapeutic areas that we're in. We're looking at a number of different assets. We're looking at things which can help us supercharge our growth as we get into 25 and beyond. It's very important to understand that the base business is solid. The base business, we're showing operational growth. And then on top of that, we want to add what I would consider significantly de-risk type assets from an innovative perspective, assets that can help us drive growth in the future, that are focused on unmet medical needs, that are patented, have long runways that we can invest in. But we're also going to shore up our base business as well. We're going to look for things currently marketed and different, particularly in particular geographies that we can be effective in. And so we're going to do business development to shore up the base. We're also going to do business development to bring in new innovative assets into the company.

Our next question comes from David Amsel from Piper Sandler. Please go ahead with your question.

Hey, thanks. So just a couple for me, and I apologize if you address this since I joined late. Can you talk about overall your innovative brand strategy? I mean, you did an important in licensing earlier this year. I guess my question here is how aggressive do you want to be regarding adding innovative brands in the U.S. and developed markets, broadly speaking. So that's number one. Then number two, can you just talk generally about complex generics and how we should think about contribution from complex products or new launches as we move through 25? It might be a little bit early. to think about that, but wanted to get a sense of what key launches on the complex front that you're flagging or should flag. Thanks.

Thanks, David. I think you used the language, you know, how aggressive we want to be from a BD perspective. I think what we want to be is we want to be disciplined. There are, you know, when we're engaged with a lot of companies, there's a lot of inbound that we've got both for things to help build the base business and in new innovative assets that we can take forward. And so, you know, we're carefully looking at them all. We're really looking forward to getting into 25 where we've got more capital to apply from a business development perspective. We want to build a pipeline of assets. You know, you mentioned that we already did a deal and in-licensed a lot of our own SceneraMod II products, which could be very, very important to us. We fully expect either as later in 24, as we get into 25, 26, to continue to add assets to the pipeline, both, again, to shore up and to accelerate the growth that we're seeing in the base business, and secondly, to add to the innovative portfolio. We plan on doing both, and I would say we want to do it in a smart and disciplined way.

Yes, regarding the complex generics, I think we, as you can see on this presentation that we've provided, we have over 250 products in the pipeline that are either under development or under regulatory review. So we know we'll have a steady flow of complex generic coming in every year, this year and 2025 and so on. So we feel confident about our complex generic pipeline.

And once again, ladies and gentlemen, if you would like to ask a question, please press star and then one. You may press star and two to remove yourself from the question queue. Our next question comes from Uma Rafat from Evercore. Please go ahead with your question.

Hi, guys. Thanks for taking my question. I have a two-part question on just broad investments. First, perhaps on GLP-1. Scott, I'm curious, what are your GLP-1 aspirations? What's the capacity now? And what type of CapEx investments are you or are you not looking to make? Just thinking about that out loud. And also, part two was, The investment on SceneraMod and Lupus, I'm curious how you guys are thinking about that in light of some really groundbreaking data we're seeing with CD19 CAR-Ts and presumably with bispecifics as well. And how do you put that in perspective relative to what we know on SceneraMod? That will be very helpful. And then finally, I think the prior question was on what are your complex generics in 25? I don't think I – maybe I misheard. What are the complex generics in 25 launches?

So thanks for questioning, Martha. Sort of three parts there, right? Complex generics, scenario mod, and how that fits into the therapeutic landscape as we move forward here in advances of the maiden lupus. And I think highly differentiated relative to CAR-T constructs or bispecifics and other things. And then just a little bit on the overall GLP-1 strategy. So I'll kick it over to Philippe from a pipeline and R&D perspective to address those questions, Philippe.

Yes, from a GLP-1 point of view, we are looking at developing multiple GLP-1s, semaglutide as well as liraglutide as well as Monjaro. So we're We are deep into the development of these assets from a supply chain standpoint. As you know, supply chain can be a little tight, but we've secured supply of API for all these assets and certainly have invested in our capability to manufacture these drugs going forward. So we anticipate we'll have a significant role going forward in that GLP-1 market. Regarding Scenarimod, I think if you were to compare the Scenarimod benefit-risk profile versus the one we anticipate from the CAR-T or the bispecific, you'll see that we anticipate to be in the higher end of efficacy with a safety profile that is clearly differentiated. CAR Ts and bispecific are typically having significant safety baggage, and so we anticipate our benefit profile will be very different, which will allow us to be placed prior to the use of either any bispecific, biologics, or CAR Ts going forward. I'm not even talking about the convenience factor of having an oral drug versus these CAR Ts that can be quite difficult to administer. And then on the last one, on the complex generic, I think I wouldn't highlight one specific product. I think it's the breadth of the pipeline that we have that we see will be delivered this year for the rest of the year, 25, 26. So we feel very confident in our new product revenue, as you can see, and we anticipate the same going forward.

Our next question comes from Balaji Prasad from Barclays. Please go ahead with your question.

Thank you. Hi, good morning, and congratulations on the quarter. A couple of questions from me. Could you comment around the magnitude of the expected base business erosion from government price regulations in Japan and Australia? I presume in Japan it's the annual price cuts, or are there any other dynamics at play? Second, could you comment around the split between the innovative pipeline and non-innovative pipeline currently, and with the improvement in cash metrics, how do you see the spend on innovative R&D progressing into the next couple of years, or do you intend to keep it at a similar percentage? Thanks.

Thank you very much, Balaji. I'll kick the first question over to Dureta to talk about the dynamics that we're seeing in Australia, Japan, etc.

MS. Yeah, to your point, Balaji, we aren't seeing anything kind of that – it really is driven by the ongoing price – normal government price declines that we're seeing in Japan and Australia. Now, the offset to that is we actually have seen better volume in Japan as well. And given that, Japan is actually, and the broader JANZ region, is actually performing better than our expectations for the year.

And relative to your question on R&D spend and where we're going from an R&D perspective, maybe I'll make a general comment and Philippine comment as well here. But, you know, we're going to continue to invest in both the base business, the base generics, complex generics, and others, and in the innovative business. pipeline, you know, we've already, as we've talked about here, brought in a couple of new innovative assets, you know, through our business development activities, through the global healthcare gateway and others. We're going to continue to bring in assets and continue to develop them. So you might see some movement in the distribution of that spend as we bring in more innovative assets. But, you know, we're going to continue to invest in all components of the base business and in new innovative assets as we move forward. Okay. Thank you.

Our next question comes from Jason Gerberry from Bank of America. Please go ahead with your question.

Hey, guys. This is Bhavan Patel. I'm for Jason Gerberry. My first question is, can you approximate the full year 2024 EBITDA contribution from divestitures that provided partial first half 2024 contribution? Just so that we can understand the RemainCo business profile. and model appropriately headed into 2025 and onwards. And then my second question is, given all the changes in the portfolio relative to reported financial results in 2022 and 2023, do you see low 30% EBITDA margins similar to certain peers like Organon as a good long run assumption pending any breakthroughs on the pipeline side, of course. And with regards to your pipeline, Is there a timeline update based on new enrollment strategies for the Phase 3 Solatogrel SOS AMI trial? Thank you.

So, I'll thank you very much for the question. Ask Doretic to address the first part of your question, and then I'll talk about the timeline for Solatogrel and Ceramide later.

Great. Thank you. And on the divestitures, I think as we've laid it out when we started the year, the way we've approached it is as we closed the divestitures, we've adjusted and taken out the kind of impact from our – and provided the impact from our actuals and then also adjusted our guidance going forward to reflect those divestitures. And we'll continue to do that kind of now that the divestitures are behind us. As we get through the back half of the year and we look into 25, we will be providing that additional kind of detail as we move into the rest of the year. But as we had in our earnings presentation in our press release, we do lay out the components of both the divestitures that have closed as well as the impact to our guidance and our results. With respect to margins, I mean, I think as we think about the business, we have confidence in both our base business growth as well as the stability of our EBITDA margins as we continue to invest in growth. But as Scott laid out, as we continue to invest in the business, bring in more patent-protected, innovative assets, we have the opportunity to continue to expand the business. But I think we feel good about the stability of our EBITDA.

And then relative to pipeline acceleration on the innovative assets, I'll say that You know, we're very, very excited, obviously, with both Salada Grounds and Aramod. As I said in my prepared remarks, we're already making significant progress in doing the things we need to do to accelerate the development of these assets and move the timelines forward. I don't have a specific update for you on the date. We want to get in and do some remediation further, continue to open new sites, continue to invest in the development, and then, you know, by the time we get into the new year, we'll be able to be in a better position to give you sort of specifics on where we think those timelines are going. But we think we're going to significantly be able to help and accelerate the development timelines. And again, we'll look to update those timelines as we get into 2025.

And ladies and gentlemen, with that, we'll conclude today's question and answer session. I'd like to turn the floor back over to Scott Smith, CEO, for closing remarks.

Thank you, everybody, and thank you to the operator. In closing, it's been a great year for us so far. With the completion of our divestitures in July, we're at a turning point for the company. We have built a strong foundation, we have a bold vision for our future, and we have the key ingredients we need to be successful to deliver on our goals. Thank you all very much for your attention.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your line.