Viatris Inc.

Good day everyone and welcome to the Beatrice Second Quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please stay in 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 1 on your touchtone phones. To withdraw your questions, you may press star and 2. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Bill Cebulski, head of investor relations. Sir, please go ahead.

Good morning everyone. Welcome to our Q2 2025 earnings call. With us today is our CEO Scott Smith, CFO Doretta Mistress, Chief R&D Officer Fleet Martin and Chief Commercial Officer Corinne Legoff. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2025 and various strategic initiatives. These statements are subject to risk 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 2025 actual or reported results, we will be making certain comparisons to 2024 actual or reported 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 from the 2024 period. We may refer to those as changes on an operational basis. When comparing our 2025 actual or reported results to our expectations, we are making comparisons to our 2025 financial guidance. With that, I'll hand the call over to our CEO Scott Smith.

Good morning, everyone. We delivered strong second quarter performance and stayed sharply focused on our key 2025 strategic priorities, which are driving strong commercial execution across our global business of generics and established brands, advancing our late stage pipeline to drive future innovation, continuing to look at strategic, accretive in-market business development opportunities to drive near and midterm growth, progressing our enterprise-wide strategic review to position VH risk for sustainable growth in 2016 and beyond, and returning capital to shareholders through dividends and share buybacks. Let me begin with a few highlights from our second quarter performance. We achieved 3% divestiture adjusted operational revenue growth, excluding the impact from indoor, driven primarily by strength in Europe and the Greater China region. These results reflect the strength of our execution and the resilience of our diversified global business. We have also made significant pipeline progress. Five of our six anticipated phase three readouts have shown positive results. Most recently, this includes positive data from two ophthalmology programs targeting dim light disturbances and presbyopia, both of which address high unmet medical needs. With these readouts and our commercial assets, our eye care division remains well positioned to become a more meaningful contributor to VH risk over the next few years. Earlier this year, we shared positive results for effects for generalized anxiety disorder in Japan, Zulane low dose for contraception, and our fast-acting formulation of meloxicam and acute pain. These achievements reinforce the strength of our pipeline and lay the foundation for our future. A particular note, the two phase three studies for our meloxicam candidate demonstrated meaningful improvement in pain and reduced opioid use relative to placebo. A well-characterized and well-tolerated safety profile and superior pain control versus an opioid arm in post-hoc analyses. We expect to file by year end and intend to commercialize this as a branded product, tapping into an $80 billion US acute pain market. For Celada Grille and Senerimod, enrollment for the phase three global programs for both assets is progressing well with first data readouts expected in 2026. We continue to view both of these as potentially transformational blockbuster treatments for patients in their respective therapeutic areas. For Sotagliflozin, we received our first approval in the UAE earlier this year and filings are progressing well in other key countries around the world. As our pipeline advances, we remain committed to returning meaningful capital to shareholders. So far this year, we have returned more than $630 million, including $350 million in share repurchases. We continue to balance our focus on shareholder returns with strategic, accretive, in-market business development investments that could fuel future growth. We are also making strong progress on our enterprise-wide strategic review, evaluating all aspects of our business to ensure we're building a company that is both competitive today and prepared for the future. We plan to share an update of our progress during our Q3 earnings call in November. Turning to operational priorities, we remain focused on remediation efforts at our indoor facility, which are now nearly complete. Before the end of this month, we'll be asking the FDA for a meeting to discuss the progress of our remediation efforts and the potential timing for re-inspection of the facility. At our Nashuk facility, while FDA classification is still pending, all committed actions have been completed for some time. Encouragingly, we recently received FDA approval for Derunavir tablets and antiretroviral medicine made at our Nashuk facility. Finally, I'd like to touch on recent policy developments, including proposed U.S. tariffs, which could impact the broader pharmaceutical landscape. Vietrst serves approximately 1 billion patients worldwide each year. Our global supply chain is built to support patients where they live. Of the 37 manufacturing, distribution, R&D and packaging sites within our global network, eight are located in the United States, which should position as well to navigate the impact of any future changes to trade policy. While we're monitoring tariff developments closely in order to assess potential impact on our business, based on the available information, we do not anticipate any material effect on our 2025 financial picture. We will continue to assess the impact of any potential tariffs on patient access and company financials and will provide updates accordingly. We also continue to advocate strongly for thoughtful policymaking that protects access to medications, especially generics, which account for 90% prescriptions filled in the United States and just 1% of the total healthcare spend. Currently, more than half of our U.S. revenue is sourced domestically, and we are currently exploring ways to further leverage and expand our network. With that said, based on the current pricing dynamics in the generics industry, we believe that moving additional manufacturing of non-complex generics to the United States would be very difficult in the short term and not likely sustainable in the long term. However, our move towards more complex, innovative, higher margin products does bring potential opportunity to further expand our domestic footprint. We are committed to evaluating all possible options. Ultimately, our goal is to ensure the right infrastructure is in place to serve patients in the United States and around the globe and maintain a sustainable business model. In closing, we have great momentum going into the second half of the year. Given the strength of the results, we are reiterating our 2025 financial guidance ranges across all key metrics and currently expect to be in the top half of the range on revenue and adjusted EPS. We remain confident in the long-term trajectory of the interest. The strength of our business, our maturing late-stage pipeline, disciplined capital allocation, and strategic flexibility position us well for sustainable growth in 2016 and beyond. Now I'd like to turn it over to Philippe for more details on the pipeline.

Thank you, Scott. We are proud of the significant progress our R&D team has made in advancing our pipeline of generics and late-stage novel and innovative assets. Starting with our Phase III programs, where five of our six anticipated Phase III readouts have shown positive results. We'll be presenting detailed results from our fast-acting meloxicum pivotal studies at the upcoming Pain Week Medical Congress in September. Five abstracts were accepted covering efficacy, safety, and reduction in opioid use in two different surgery models, as well as pharmacokinetics data. Overall, we remain highly enthusiastic about the potential of these assets as an acute pain non-opioid treatment option with a benefit-risk profile that offers potential advantages over available treatment options and may lead to a significant reduction in opioid use. We are awaiting FDA's response on the potential for an early submission and accelerated approval path given the strength of the data and the unmet public health need. We continue to target the submission of a new drug application by the end of this year. Turning to Zulane Lowdose, we remain on track to submit the NDA in the coming weeks and anticipate approval mid-next year. Our second contraceptive patch in development, a -gestrelamin-only weekly patch, is more than halfway through Phase III enrollment with data expected by early 2027. Now shifting to our ophthalmology programs. We are pleased with the positive results we recently shared from the second pivotal Phase III trial of MR-141 in Presbyopia. The results reinforce our confidence in MR-141 and its benefit-risk profile as a potential non-invasive option to support the millions of patients impacted by this condition. We expect that this data will be presented at the American Society of Cataract and Refractive Surgery Annual Meeting in April 2026. We are targeting our application to the FDA in the second half of 2025. In June, we also announced positive top-line results from our pivotal Phase III trial evaluating MR-142 in treating visual disturbances in low-light conditions following cataract or refractive surgery. The study demonstrated significant functional improvement in these patients in their ability to drive and function under low-light conditions. Importantly, there are currently no FDA-approved options, and the FDA has granted FASTRAC designation, further emphasizing the unmet need. This data will be presented at the American Academy of Optometry in October 2025. We recently started our second pivotal study and expect to have results in the first half of 2026. The last of the ophthalmology results that we recently announced was our Phase III study of MR-139 for blepharitis. The study did not meet its primary endpoint of complete resolution of debris at week 6. A nominally significant change from baseline in debris at week 6 was observed, suggesting that this mechanism of action remains relevant for the treatment of blepharitis. MR-139 was generally safe and well tolerated. Additional work is ongoing to determine the appropriate next step for this program. Moving to Cyladegrel and Senarimod. We are pleased with our recruitment efforts for these two programs. For Cyladegrel, we have reached an enrollment rate of approximately 600 patients per month, and anticipate we will reach approximately 1,000 patients per month by the end of the year, and reach full enrollment in 2026. Turning to Senarimod in SLE, enrollment is nearing completion and we have started notifying sites and investigators accordingly. We anticipate the first Phase III readout near the end of 2026, followed shortly thereafter by the second readout. In an effort to explore additional value this asset can bring to patients, we have received positive feedback from FDA and EMA on our proposed Phase III registration study in lupus nephritis, and anticipate having our first patient enrolled by the end of the year. We are also making great progress with a reminder of our late stage pipeline. Regarding soda glyphosine, we recently received our first approval in the UAE within a very short turnaround time. We have filed in Saudi Arabia and are expecting to file in Canada, Australia, New Zealand, Mexico, and Southeast Asian countries before the end of the year. As we mentioned in our last call, the JNDF or FXOR guide is under review by the Japanese Health Authority and is progressing well. We anticipate approval in the first half of 2026. In addition, we have had two recent approvals in China for Brana and Upelri, demonstrating our capabilities in that market. Finally, within our generic pipeline, all products scheduled for approval in Q2 were approved, except for iron sucrose. We believe our application is substantially through its scientific review and expect approval in the near future. The majority of our anticipated generics approvals are weighted toward the back half of the year. They remain largely on track, including for a triatite. Overall, we are pleased with the strong momentum we have across our pipeline and remain focused on delivering meaningful innovation for patients that address areas of significant unmet medical need. And now I'll turn the call to Dorreta.

Thank you, Philippe, and good morning, everyone. We had another strong quarter and the underlying fundamentals of our base business of generics and established brands remain strong. Today, I'll walk you through the key highlights, the progress we've made against our capital allocation plan, and our confidence in the outlook for the remainder of the year. Our second quarter results came in ahead of our expectations, reflecting our well-diversified global business. Total revenues for the quarter were $3.58 billion, which were down approximately 2% versus the prior year. Excluding the indoor impact of approximately $160 million, our operational revenue growth versus the prior year would have been approximately 3%. Now let me walk you through the commercial highlights for the quarter across our segments, which includes the indoor impact. In developed markets, we saw continued strengths in brands, which helped to partially offset the indoor impact. From a regional perspective, we continue to see consistent and durable growth from our European business, which grew approximately 2% this quarter in line with our expectations. In Europe, the brand's portfolio grew approximately 3%, led by EpiPen, Creon, and Brufen, in addition to positive contributions from key markets, including Italy. Generic's performance in Europe was flat year over year, despite the indoor impact, and continues to benefit from the new product revenues in key markets such as France. As anticipated, our North American business decreased 11% versus the prior year, primarily as a result of the indoor impact and competition on Wixella and other products. This was partially offset by continued growth in upelri and Brana, as well as contributions from new product revenues. In emerging markets, net sales exceeded expectations and increased approximately 1% versus the prior year. This was primarily driven by continued strengths in Turkey and our emerging Asia region, as well as stabilization in the Korean market. This performance helped to more than absorb the indoor impact affecting our ARV Generics business. In Jans, net sales decreased approximately 11%. Results were primarily driven by expected government price regulations and a change in reimbursement policy impacting off-patent brands in Japan and competition in Australia. This was partially offset by slight volume increases in our Generics portfolio in Japan. Lastly, we continue to see positive momentum in Greater China. Net sales exceeded expectations and grew 9%, driven by continued growth across our portfolio due to proactive patient choice. Net sales also benefited from the timing of customer purchasing patterns in the quarter, which we expect to moderate in the second half. Moving to the remainder of the P&L, adjusted gross margin of .6% in the quarter was in line with our expectations. As anticipated, margins were impacted versus the prior year due to the indoor impact, as well as price regulations in Japan. Operating expenses were down versus the prior year as a result of the planned cost saving initiative, which primarily benefited SG&A. Turning to free cash flow, we generated 167 million of cash in the quarter. Excluding the impact of transaction related costs, we would have generated 241 million during the quarter.

This

was in line with our expectations and reflects the timing of semiannual interest payments and working capital requirements in the quarter.

Moving

to capital allocation, we have repurchased shares totaling 350 million year to date.

Including

dividends paid, we have returned more than 630 million of capital this year to our shareholders. With this continued progress, we remain on track to deliver on our commitment of capital return this year. Now, a few comments on our outlook and phasing for the rest of the year. Based on the strong operational performance year to date and continued visibility of the anticipated indoor impact, we are reaffirming all guidance ranges. Within total revenues, we expect to be in the top half of the guidance range as a result of positive operational momentum and the year to date benefit from foreign exchange. We also expect adjusted EPS to be in the top half of the guidance range, primarily driven by share repurchases. Some of the pushes and pulls in this outlook include our continued expectation of divestiture adjusted growth, excluding the indoor impact of approximately 2%, continued growth in Europe, greater China, and emerging markets regions, and delays in the anticipated timing of approvals and launches of certain generic products, which could negatively impact our new product revenues this year. Lastly, we continue to monitor foreign exchange. If current rates were to hold for the remainder of the year, it could result in an additional 1% to 2% tailwind on total revenues. This could also result in adjusted EBITDA being in the top half of our guidance range. As a reminder, any potential foreign exchange tailwind benefiting total revenues would incorporate certain hedging program costs, which could reduce the benefit to adjusted EBITDA. It is important to note that our guidance does not account for any potential impact related to industry tariffs. However, as Scott mentioned, we continue to assess the potential for future impact, but based on available information, we do not anticipate any material impact on our 2025 financial results. The following are a few points about anticipated phasing for the rest of the year. Total revenues are still expected to be slightly higher in the second half at approximately 51%. This reflects phasing of indoor, normal product seasonality, and low to mid single digit growth in greater China. Adjusted EBITDA and adjusted EPS are still expected to be higher in the second half. This incorporates the timing of spend and investments we are making to support our pipeline and upcoming launches. Last, free cash flow is also expected to be higher in the second half and is expected to benefit from the timing of networking capital and disciplined inventory management. As you heard, our results for the quarter reflect strong performance. We remain encouraged by the underlying fundamentals of our global business growth and the success of our recent pipeline readout. With these positive trends, we are building strong momentum for the rest of the year. 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 touchtone telephone. To withdraw your questions, you may press star and two. 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. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster. And our first question today comes from Matt Delatorre from Goldman Sachs. Please go ahead with your question.

Hey, guys. Good morning and thanks for the question and congrats on the progress. Maybe just on capital allocation in the context of the current split between buybacks and BD, how much of a priority is growth at this point and what level of growth are you now aiming for as we think about full year 2017? And then in particular, what would make you more aggressive on the BD front? Thank you.

Thank you very much, Matt. You know, I'm not going to talk specifically about 26 and a number for growth, but relative to capital allocation, our plan has not changed. Staying the same, we're evenly, you know, over a period of time, over the next three to five years, we expect to both give back through dividends and share buybacks and also, and I think very importantly, we also need to build a portfolio of growth assets, use our capital to do business development. And what we're really looking for here in terms of business development is strategic assets that are accretive and in market growing assets to build a growth portfolio. So, you know, we're very focused on doing both, delivering capital right back to shareholders and also finding ways to build a growth pipeline. And I will say business development is just part of that growth pipeline going forward. Again, we're focused on strategic, accretive in market assets to bring into the portfolio. But we also have, you know, as we look at 26 and beyond, a lot of excitement around the launches that we have, positive data readouts that we had in 25 Lita launches, for example, effects our GAD in Japan, Gwendolyn, which is our, which is a contraceptive product in the United States, FastActing, Loxcam, you know, a couple of Icare readouts and launches in Presbyopia and DimLight and also launching SodaGo Flows and some key XUS markets. So we've got a lot of launches in 26. We've got some nice inflection points in terms of data readouts in 26 as well. Nethicon Japan, Progestin-only patch, and, you know, really importantly, Cinear Mod and SoladaGrow. So, you know, we feel good about the growth prospects. The base of the business is very solid. We've got a number of launches going into 26, and we've got capital to deploy to build a portfolio of growth assets.

And what, Matt, what we'd also add is kind of, we've talked about the base business growth. We continue to see disability generally to generate low single digits from a revenue perspective for the base business. This year, for example, we're on track to deliver on that 2% operational growth back indoor. And so the incremental investments and opportunities that Scott is mentioning would be additive to that baseline rate.

Absolutely. And we're looking for, you know, not just growth in one year. We're looking to put a program together to have sustainable long-term revenue and even a growth over.

And our next question comes from Umar Rafet from Evercore. Please go ahead with your questions.

Good morning, guys. This is JP in lieu of Umar. Congrats on a strong quarter, and thanks for taking our questions. So go ahead and go back to tariffs. You mentioned you have flexibility for next year. How are you thinking on the proportion of the risk, India versus EU? It looks like we're going to have two different kind of tariffs for each region.

So, yeah, thank you for the question, Aziz. So, you know, it's not clear to us at this point in time whether tariffs will be placed on pharmaceuticals. If they are, will it be placed on generic products? At this point, there are no tariffs. And so we're monitoring the situation very, very, very carefully. About half our products in the United States from a revenue perspective are manufactured in the United States. We do have some exposure in EU and India. I would say India is about 10 percent of our revenue. Significant volume in terms of product. It tends to be low margin OSD type products coming out of India, but it's 10 percent. So, you know, as the situation evolves, as we get more clarity on how tariffs may affect the overall industry, the generic industry, et cetera, you know, we model all kinds of things. But until we have clarity on that, it's very difficult to think of an impact. And again, I think both Doretta and I are prepared remarks mentioned that, you know, regardless of tariffs, how it evolves during the course of this year, we've put mitigations in place. We do not see any material financial impact in 25. And we'll know more about 26 and beyond once we get some specifics.

Our next question comes from David Amsallam from Piper Sandler. Please go ahead with your questions. And David, is it possible that your phone is on mute? All right. We'll move on to Ash Verma from UBS. Please go ahead with your questions.

Good morning. Thanks for taking our questions. So I wanted to ask about the China business. It seems particularly strong this quarter. I know you called out some partaking patterns. What's the growth excluding that? And then just more broadly, there's been a lot of by-forma dealmaking activity in the region increasingly. How much of that is the focus for you for your BDA efforts? And then the second thing on the enterprise wide strategic review, still waiting to hear a little bit clarity in terms of what is the scope of activities that you want to showcase and what's the timeline for that? Is there any potential cost optimization that can be a part of that exercise or should we not expect that? Thanks.

So let me maybe address that part first and then we'll go into China. The enterprise strategic review, we're well engaged in it. We're active looking at every part of the business. And I think the reason we're doing this now is I think it's a good time. We've done four divestitures. The company is a product of a merger of two different companies. And we're evolving our business model to sort of move up the value chain, get involved in more complex and innovative products. And so now is a good time to really take a look at things. Do we have the right people in the right places to be effective? This is sort of about making sure the company is as effective and efficient as possible, delivering the business today and delivering the business for the future. I believe there will be significant cost savings that come out of it as well, which will benefit the company. And I don't want to get ahead of myself. We're not through that full process yet. But, you know, in Q3, we have an expectation. My goal would be to be able to provide significant granularity relative to that program by the time we get to the Q3 call.

So, Ash, let me address your China question. So in Q2, China grew 9 percent of personal growth. And that's really the result of our diversified commercial model, which is across e-commerce, retail and private hospitals. And we also benefited in the quarter from the timing of customer buying patterns. And that's what Dorada mentioned in her prepared remarks. Now, for the rest of the year, we expect the growth to moderate more to the low to middle-digit growth. But what we're seeing is the consistent demand for iconic brands that have very strong brand equity and notably the brands that offer patients really the trust that they need. So the brands that are sensitive to proactive patient demands. So the overlook is positive for China for the rest of the year. And as a reminder, you know, about 95 percent of all our brands went through the BPP process already. So that gives us some certainty on the outlook in

the region. And just a couple of comments on the China business for me. I think, you know, overall, the market has progressed very well, both in the base side and the innovative side in China. I'm very, very proud of the team we have there and how well they're executing. I think we see some really good momentum in our China business, which we're very pleased about. And relative to your BD comment, yeah, there's a lot of there's a lot of companies out there from a sort of biotech small pharma perspective. There's lots of discussions going on. China seems to be very active in that so far, not only, you know, sort of products in China for China, but China for the rest of the world. So, you know, lots of discussions, lots of interesting things happen in the China bio world, for sure.

And our next question comes from David Anselm from Piper Sandler. David, please go ahead with your questions.

Thanks. And sorry about that. And thanks for accommodating me. So a couple for me. Number one, and sorry if I missed this, can you just talk about contribution from new products in developed markets this year, if you can quantify that? And is that tracking to your stated expectation? Then secondly, looking beyond indoor, can you just talk about inspections at the other facilities that you've called out in the past? I think there was Nashik as well, but just wanted any color there to the extent there was anything new to add. And then lastly on Meloxicam, can you just talk about the commercial infrastructure you're going to be putting in place here? Is this going to be an office-based product, a hospital product, both? I mean, there's some promotion intensity here, so how are you thinking about overall level of investment given that you've got a filing coming up for that product? Thank you.

Please, Sereta, why don't you take the first one? Why don't I start

on the new product revenue? So I would just say generally, to your point, David, on any given year our expectation is to generate about $450 to $550 of new product revenue. I don't want to get into mix-shifts between developed markets, emerging markets. We really view it as a portfolio in terms of the total revenue. This year, and you heard in our commentary, we did assume that new product revenue would be back half-weighted just based on our estimated approval and launch timing of certain generics. And ultimately, that will be an impact of any potential delays of timing of approvals, such as, for example, kind of iron sucrose and others could negatively impact our new product revenues. But overall, I would just say we've taken all of these pushes and pulls into account with respect to our guidance commentary and our kind of total revenue range. And we're going to continue to monitor things as we move through the back here.

And I'll send it over to Corinne to talk about the Mille-Oxicam commercial strategy.

Hi, David. So as you know, we are very bullish about fast-stacking Mille-Oxicam. This is the moderate to severe acute pain market. It's large. It's an $80 billion opportunity in the U.S. We are in the midst of launch planning. It's progressing very nice. We're currently focusing on doing market research for positioning. We are doing our pricing and payer research. So it's a bit too early for us at the moment to give you more details on how we're going to go about launching these products, although we have some ideas. But what I can tell you is that it's going to be a large opportunity for the at risk going forward. And we are very much looking forward to finding these assets before the end of the year and launching this product potentially next year.

Thank you, Corinne. Yeah, we see that as a very significant opportunity for us going forward. You know, there'll be the right time and place to go through full commercial strategy structures. Do we do partnerships? Do we not? Exactly. How do we approach the market and those sorts of things? But, you know, we've got some work to do to get ready for that. We just got the data again in May and we've been doing very, very a lot of work, very hard work, head down, figuring out what our strategies are. And there'll be the right time when we can sort of unveil all that to you and in a good way. But again, we think this is going to be a very significant part of our portfolio going forward. In terms of the operations update, we are approximately 80 percent or so remediated in our indoor facility. We've got a good line of sight on completing all the remaining items. In the next couple of days, we're going to ask the FDA for a meeting to discuss not only how the remediation has been going, but also talk about timing for re-inspection of that facility. We'll have more clarity on the timelines of re-inspection and things once we do have that meeting, which will happen this month. The request will go in this month for that meeting. In terms of NASHC, I think it was an encouraging sign that the FDA approved the product that is manufactured in NASHC. Having said that, the FDA classification is still pending. We've completed all the actions for some time ago. And again, getting that approval of a product manufactured in NASHC, I think, is a positive sign there. So we're making a lot of progress on the operations front.

And our next question comes from Jason Gerberi from Bank of America. Please go ahead with your question.

Hey, guys. This is Bob and Patel on for Jason. A couple of questions from us first on the pipeline for MR-141. How do you see this drug position relative to other newer eye drop therapies for the improvement of your vision? Do you expect a similar label indication? And what's the strategy to build this market where AbbVie was unable to with Unity? And then my second question is with regards to gross margins. So we saw sequential improvement from one cue 56 percent to two cues 58 percent. Maybe if you could provide some more color on the key drivers in this improvement. Is it from the makeshift from new product launches or are cost savings initiatives and supply chain efficiencies starting to materialize earlier than expected? Thank you.

It's up to the eye care question. I asked Philippe and Corrine to address that first.

Thank you. Yeah. So let me start in the last current to add. So, as you know, MR-141 offers a different mechanism of action than the approved myotic products, including the recently approved one. And we believe that this will lead to important differences in safety profile between these assets. The myotic effect on ciliary body leads to significant risk, blurry vision, headaches, risk of retinal detachment or tear. So we don't expect that kind of labeling for MR-141 based on the mechanism of action and the data that we generated in phase three. Now, importantly, you will remember that this asset was designed to reduce the pupil size to no less than two millimeters, which if you go below two millimeters, which is the case with the myotic assets, you will. That will lead to reduce vision in a dim light setting. So also a significant difference between these two assets. So we'll present our data in a medical meeting very soon in April of twenty twenty six and anticipate that we'll be able to file by the second half of twenty twenty five. I can turn it to Corrine.

So to your question about how this market is going to evolve, you know, it's a very large addressable market in the U.S. We have about one hundred twenty eight million patients who suffer from presbyopia and we really believe that this market is opening up to therapeutics. We now have to approve agents in this market. As you mentioned, we believe that our asset, phenolamine, can play a very important role in addressing the needs in this market. It's very unique patient population. It's a different mechanism of action. We expect a very different efficacy and safety profile than the assets that are currently approved. And, you know, we think it's a great opportunity as we build and continue to build our I care business. As you know, you know, we we have already an I care division with capabilities in the U.S. And we're looking forward to having a friend to them and contribute to the revenues of the I care business going forward.

I should make a comment on I care business in general. We've we've had some significant management changes. We've changed the footprint and the approach a little bit. I think we have now in place a world class team of people who have developed and marketed and sold blockbuster products, innovative products that really understand the marketplace very, very well. And again, some real world world class talent in that group. We you know, I think as I take a look at it, the world class group, the people that we have in place, the changes that we made to positive readouts recently for again, .O.B. and Dim Light. You know, I look for the I care division to become a significant contributor, a much more significant contributor than it is today to our overall business. So, you know, we're putting the efforts in there and hopefully we'll see some good return. And again, I expect more positive contribution from the I care division as we move forward. And I turned over to you right at the end of the gross margin.

Great. So with respect to gross margins, gross margins came in for the quarter in line with our expectations. The primary driver of the step up versus Q1 was a couple of fold one. We did see a slightly less mixed impact from indoor specifically as it relates to some of the penalties. And then we also saw some improved product and segment that impacted the quarter. But generally it was it was in line with our expectations. As we look in the second half, however, I would also say that from a second half perspective, I would say gross margins, we expect to be consistent from phasing perspective as what we saw in the first half.

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

Thank you very much and thank you to everybody on the call. Twenty twenty five is shaping up to be an important year for Beatrice. We are executing with purpose and precision, driving our business, advancing a high potential pipeline and returning meaningful value to shareholders. At the same time, we're planning for long term success. I'd like to add my sincere thank you to the more than 30,000 Beatrice employees around the world for delivering delivering an exceptional quarter in a challenging global environment. Thank you, everybody.

Ladies and gentlemen, that does conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.