Almirall, S.A.

Good morning to everyone on the call. Thank you for joining us to review Almiral's nine months 2023 results and business update. As per usual, you can find the slides to this call on the investor's page of our website at almiral.com. Please move to slide number two. I would like to remind you that the information presented in this call contains forward-looking statements, which involve known and unknown and risk, uncertainties, and other factors that may cause actual results to materially differ. With that, please advance to slide number three. Presenting today, we have Carlos Gallardo, Chairman and Chief Executive Officer, Mike McKillen, Chief Financial Officer, and Carl Singerbar, Chief Scientific Officer. Carlos will start with the highlights, Biologic Road Drivers and Recent Launches. Carl will provide you with details on the process of the panel before passing to Mike to review the financials. Carlos will then conclude the closing comments before opening up for a Q&A session. I would now like to pass it over to Carlos Gallardo, our chairman and CEO, to discuss the highlights. Please move to slide number five.

Carlos Gallardo Thank you, Pablo, and good morning to everyone in the call. I am pleased to say that Almiray continues to perform well through the first nine months of 2023. the business momentum from our growth drivers remain solid. Based on the good business performance year-to-date, we are nudging up our net sales guidance for full-year guidance, and we continue to expect to land in the middle of the range for the EBITDA guidance. The nine-month performance was driven primarily by our European dermatology business with a growth rate of almost 16%, underpinned by Illumetri and our recently launched products. Winzora, and Clicidi. Moving to key pipeline highlights, on September 15th, the CHMP of the European Medicines Agency issued a positive opinion recommending the marketing authorization of Eplis, which is the brand name for Lebrechizumab. Still in our late-stage pipeline, Clicidi Large Field Supplementary NDA in the U.S. was submitted this quarter. the launch is anticipated in the second half of 2024. For the rest of our portfolio, the CESARA dossier in China was submitted during the third quarter and we're expecting launch in 2024. And for EFICON as well, the regulatory review is ongoing and we expect the approval by the second half of 2024. Carl will elaborate on all this in more detail. Regarding the use of the proceeds of the capital increase of June, I am pleased to announce our first deal, the acquisition of the rights of Prometax in Spain, which is a perfect bolt-on for our neurology division in Spain. We are confident on our ability to drive commercial success for Prometax and to create value for the company. Please move on to the biologics growth drivers update on slide seven. As I mentioned before, Last September, the European Medicines Agency, CHMP, issued a positive opinion recommending the marketing authorization of Epilis. At this stage, we do not expect any delay in Europe related to the FDA CRL in the US. We continue working towards our existing timeline and to launch the product as expected at the end of the year. The commercial teams for the initial country launches are already in place and fully prepared for the rollout, in particular in Germany, where we expect a quick turnaround between approval and launch, and where we are very pleased with the level of awareness of the product within the dermatology community. Let's move to slide eight, please. Let's now take a closer look at the strong momentum of Illumetri, our anti-IL-23 biologic for psoriasis in Europe. I would first like to highlight that the anti-IL-23 class continues to maintain its leading market share of new patients amongst biologicals. As you can see here in the left map, the rollout process in Europe is well underway. We have launched a 200 milligram presentation, the autoinjector, and provided new clinical data. On the right side chart, we see that Illumetri is performing strongly in the first nine months, despite the usual summer softness. It also shows a more balanced growth with the sales contribution of other European countries that now already represent already a 50%, with Germany making up the other half. This demonstrates the good traction of the product in other key European markets where it has been launched. We expect Q4 to resume momentum, and we continue to expect full-year growth in absolute terms to be comparable to 2022. Now let's move to slide 10 to complete the updates on our recent thermal launches. Let's start with CliCity, where sales grew by 57% for the first nine months. In Europe, the product has seen solid adoption in key markets, with expansion in market share. In the US, we continue to differentiate CliCity from what is already available on the market based on efficacy, tolerability, and convenience. As a result, both dermatologists and patients report high overall level of satisfaction and willingness to repeat treatment with CliCity. We will soon reinforce the franchise with the launch of Clyde City Large Field, which is anticipated in the second half of 2024 in the US and in 2026 in Europe. Moving into Windsor in Europe, we are pleased with the progress, having achieved sales of around 12 million in the first nine months of the year, with solid share in Spain and Germany. With that, let me pass the word to Carl to cover our pipeline section.

Thank you, Carlos, and good morning from my side. This slide shows you the progress of our pipeline. We continue to advance both our early and late-stage pipeline, starting with leprechaun epclis. As already mentioned, we received a positive CHMP opinion on the marketing approval of epclis, and I will share more details on the regulatory status across Europe on the next slide. For Glyceri, we have completed the clinical study addressing the expansion to large field in the U.S. and submitted a supplementary NDA in August 2023. We expect launch in the second half of 2024. For Cythera in China, the phase three clinical study met primary and key secondary endpoint, and we submitted a dossier to the Chinese National Medical Products Administration at the end of September 2023. Approval is expected in 2024 in about 12 to 18 months. For efinaconazole, we are under regulatory review. We are facing delays in this regulatory process and expect now approval in the second half of 2024. The phase one of our anti-IL-1 rep monoclonal antibody is ongoing, and we aim to start phase one for our IL-2 new TNFC fusion protein that we developed in collaboration with CIMSIA later this year. As you can see, we are making very good progress with both our early and late stage pipeline, and we are on track to strengthen our leadership position in medical dermatology. Let's move to slide 13. On this slide, I would like to share the regulatory status of EFCLIS across Europe. We already covered the status in the European Union. As a reminder, we received a positive CHMP opinion on September 15th and expect European Commission approval by the end of November 2023. Regarding the United Kingdom, we submitted a marketing authorization application, MAA, in September 23. The approval from MHRA is expected by the end of the year, following the EC reliance procedure. In Switzerland, we submitted the MAA in June 2023, and the approval is expected by the end of 24. In addition to the progress in regulatory, we are extremely excited about the continuous flow of positive clinical data for lepricizumab. And I would like to share a few examples on the following three slides. Please move to slide 14. We published the results of the Advantage Phase 3b study at the recent European Academy of Dermatology and Venerology EADV Congress. As a reminder, the ADVANTAGE study is a randomized, double-blind, placebo-controlled phase 3 clinical trial to assess the efficacy and safety of lepricizumab in combination with topical corticosteroids in adult and adolescent patients with moderate to severe atopic dermatitis who are not adequately controlled with cyclosporine A or for whom cyclosporine A is medically not advisable. The study met the primary endpoint at week 16. At week 16, leprechizumab, 250 milligram every two weeks, plus TCS significantly improved signs and symptoms of AD measured by the eczema area and severity index 75%, EC75, in 68.4% of patients, while only 40.8% of patients on placebo plus TCS achieved EC75. Consistent benefit was also seen in additional endpoints such as EC90 investigator global assessment score, IGA, or purities measured by the numeric rating scale, NRS. The safety profile was consistent with a known safety profile of lubricism. Another example is shown on slide 15. Additional data presented at the EADV Congress showed sustained depth of response in patients that participated in the phase 3 monotherapy advocate 1 in 2 studies treated with leprechizumab over 52 weeks. Deep responses defined as total skin clearance EC100 and each relief of NRS 0 or 1 were achieved in 20 and 31% of patients, respectively, by week 16. These values were either maintained or even improved by week 52. These results suggest that leprechaun treatment can potentially allow patients and healthcare providers to elevate their expected treatment goals in ID beyond EC75 response. A third example is shown on slide 16. At the 43rd Annual Fall Clinical Dermatology Conference held in Las Vegas from October 19th to 22nd, our partner Eli Lilly presented the first results of the long-term extension study ACHOIN, which represented patients with moderate to severe atopic dermatitis who continue treatment with leprechizumab for up to two years and experience sustained skin clearance, itch relief, and reduced disease severity with monthly maintenance dosing. ACHOIN is a long-term extension of the leprechizumab monotherapy trials Advocate 1 and 2, and the combination study with topical corticosteroids Adhere. Patients taking lepricizumab who achieved IgA01 or EC75 at week 16 in advocate 1 and 2 and a tier were enrolled in a joint. Patients in the long-term extension trial received either 250 mg lepricizumab every two weeks or monthly after being rolled over from advocate 1 or 2 at week 52 or from a tier at week 16. As shown in the table, in a joint extension following Advocate 1 and 2, 76% of patients dosed every four weeks and 86% of patients dosed every two weeks maintained clear or almost clear skin, IgA 0 or 1, at two years of treatment. 96% of patients dosed every four weeks and 96% of patients dosed every two weeks maintained EC75. 83% of patients dosed every four weeks and 82% of patients dosed every two weeks maintained EC90. 90% of patients dosed every four weeks and 100% of patients dosed every two weeks maintained clinically meaningful reduction in each as measured by a 4.0 large reduction on the each severity on the PURITIS NRS at two years of treatment. In a joint extension following a tear, lepricizumab demonstrated similar results, as you can see at the right side of this table. The safety profile of lepricizumab in a joint was consistent with previous lepricizumab studies in patients with moderate to severe atopic dermatitis. These data are very reassuring and give us confidence that leprechizumab has the potential to be a first-line biologic and may support less frequent dosing during the maintenance phase. In summary, we continue to be extremely excited about leprechizumab and are confident on the expected approval and launch of leprechizumab towards year end. With that, I will hand over to Mike for the financial review.

Thank you, Carl. As Carlos mentioned, the first nine months of the year showed solid performance with net sales growth of 6.4%, giving us the confidence to guide to the mid-single-digit sales growth for 2023. We've seen strong sales growth in Europe from the dermatology portfolio, which has helped drive the overall net sales and a 2% core EBITDA increase year-on-year. We achieved a total EBITDA of $138.2 million in the first nine months of the year, down from the first nine months of 2022, mainly due to a lower contribution in other income due to last year's AstraZeneca COVID milestones. For the nine months, our gross margin came in at 64.9%, which is consistent with previous quarters and was impacted in part by higher royalties, as well as energy costs and inflation, which affected some of our material purchases. This is in line with our full-year expectation. SG&A in the first nine months of 2023 was $316.7 million, as we continue to invest in our newly launched products, as well as some of the pre-marketing ramp-up for EBLIS, which will accelerate in the final quarter and grow significantly next year. R&D investments increased to 11.6% of sales in the first nine months of 2023, compared to 11.3% of net sales that we have reported in the first nine months of 22. We expect the R&D expenses to accelerate in Q4 to normalize as expected to the full year range of 12% of net sales. We finished the first nine months of 2023 at 0.2 times net debt to EBITDA, which remains highly favorable. The increase from June is mainly explained by the recent PromoTax acquisition. Let's move to sales breakdown on slide 19. As you can see in slide 19, the dynamics of net sales, the European dermatology business has had a very strong performance with a 15.9% increase year-on-year, which I'll expand on in the next slide. We also had a strong nine-month performance from our general medicine and OTC businesses in the EU, which more than offset the expected decline in FACP Tessavelle following the patent expiration and price decrease experienced in Q4 2022. Our U.S. business recorded a decrease in nine months 2023, and I'll provide more details on the next slide. Rest of world dermatology sales showed a slight decline, but general medicine is growing, mainly driven by a rebound in immunorex sales. Overall, it's important to reiterate that our portfolio has limited patent expiry risk going forward in the midterm, especially now that the FSC Tessaville patent has expired. Let's take a closer look at dermatology business on the next slide. As you can see on slide 20, we had a very strong performance in Europe driven by the growth of Illumetri. Other products such as Glycerin and Windsor are also benefiting in Europe from the initial launches in key markets. Scalarins has declined in 2023 due to a continued shift from oral products to biologics in the psoriasis market. Focusing on our US business, the market share of Saesara has been stable, although we've seen continued pressure on that revenue due to higher rebates and more consignment sales. Klyceri keeps growing at a good rate, and we expect further acceleration coming after the large field approval in the second half of 2024. As you can see, the legacy business in the U.S. remains under pressure from ongoing generic erosion, mainly related to Axone and Tazeract and some smaller legacy brands. In the rest of the world, sales are declining slightly due to a lower cordon tape supply sales to Japan. Now moving on to the full financial statements on slide 21. We've seen the net revenue development in the previous slide, so let's focus on the rest of the P&L. Gross margin was in line with expectations at 64.9%, given the previously highlighted ongoing pressure of royalties, cost inflation, and product mix. Other income was lower than nine months 22 due to the milestone income recognized last year, which did not repeat. As most of the revenue related to the Covis Agreement was recognized in 2022, we should expect a lower contribution this year and going forward. R&D expenses are up slightly from 22, reaching 11.6% of net sales. The increase is mainly driven by the IL-1 WRAP project and EBLIS expenses. As I said earlier, we expect R&D costs to accelerate to the full year level of around 12% of net sales. SG&A investments grew in the low single digits compared to nine months 2022, But this will also accelerate in the final corner as we prepare for the expected launch of EBLIS. Financial expenses have been impacted by the share price fluctuations in Q3, linked to the equity swap on the balance sheet, which was a slight positive versus last year. I would like to remind you that our effective tax rate is affected by the inability to deduct U.S. tax losses against our profitable European business. The effective tax rate excluding the U.S. losses would be in the high 20%. We do not have any meaningful unusual items in the quarter and therefore normalized net income is almost aligned with net income. Please move to the next slide so we can look at the balance sheet in detail. On slide 22, the key point to highlight here is the impact of the capital increase and our recent investments. As previously mentioned, we received around 200 million euros worth of proceeds from the capital increase. A part of this has been allocated to short-term investments and the other part registered as cash equivalents. The increase in cash equivalents has been offset by the first investments as we executed in Q3, the PROMA tax upfront payment for 45 million euros. Although we are no longer in a positive cash position, our net debt ratio is highly favorable at 0.2 times. Let's take a look at the cash flow statement on the next slide. On slide 23, you can see that we delivered operating cash flows of 50 million in the nine months, lower than last year due to an increase in working capital. This has resulted in an outflow due to higher inventories, with certain products requiring higher stock levels due to the launch of EPCBIS, the continued growth of Ilimetri, and some stocking of Klyceri following the financial issues of our partner, which led to us taking over the manufacturing of the product. We expect the inventory outflow impact to end around 30 to 40 million for the full year, and accounts payable and receivables to normalize more in line with last year's numbers. The other adjustments are mainly related to the net financial income, including the differences in the value of the equity swap. Among the investing activities, we made key cash investments in nine months of 2023, such as the recent Prometax acquisition, the FSC-Tesavel extension deal, the PhysioRelax acquisition earlier in the year, and milestone payments related to Illumetri and Klyceri. The divestment line here refers to milestones and royalty collections from AstraZeneca Covus. These have been classified under investing activities due to the reduced focus in our operations and are lower than 2022 based on the agreed schedules. The short-term deposits I mentioned before are a result of the capital increase in June and will mature by the end of the year and return to the cash line. Let's move back to Carlos now for the conclusions and wrap-ups.

Thanks, Mike. So wrapping up, we have delivered a good operational performance in the first nine months of 2023. We expect to land in the mid single digit area for sales growth and in the middle of the range for the EBITDA guidance. This is a small upgrade in sales compared to our initial guidance back in February. Our focus strategy in the medical dermatology space positions us well for the midterm as we continue to execute on the transformation of the company by preparing the business for the launch of EPLIS by the end of the year, with commercial teams ready for the launch in the first countries. We are confident that Almirai's growth drivers will continue their trajectory throughout the rest of the year as we continue to support these key products. Illumetri has demonstrated a strong performance and we expect increasing contributions from the recent country launches. We also expect the positive trends from the rollout of Clyde City and Windsor in Europe to continue. Furthermore, as detailed by Carl, we are making good progress with our late-stage pipeline, while at the same time, we are strengthening our early-stage pipeline with exciting new assets. Finally, I would like to remark that we continue to explore other opportunities for early and mid-stage assets. We will make sure that deals we undertake are underpinned by scientific, strategic, and financial rationale. With this, we conclude this presentation. Pablo, I hand the call back to you.

Thank you, Carlos. Sandra, back to you for the Q&A, please.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We will now take the first question. One moment, please. It's coming from the line of Lucy Codrington from Jefferies. Please go ahead.

Hi there. Thank you for taking my questions. Just to start with, in terms of the small sales upgrade, I guess compared to your prior expectations, is that being driven by your dermatology franchise or your non-dermatology franchise or both in terms of their performance so far? In terms of the potential label for ErbGlyph or Leberkizumab, in terms of the dosing, is it likely that whatever is decided for the maintenance dose will be fixed, or is there any scope for a flexible dosing? Just looking at that long-term extension data, although the four-weekly is very competitive, there is some reduction versus the twice-weekly, at least in the IGA scores. So just whether patients would have the scope to increase based on that. Finally, just in terms of the EpiMav deal, could you just talk us through what you were thinking and what the kind of rationale was for that deal and when we might hear next steps for those assets? Thank you.

Okay. Lucy, thanks for the questions. Mike will take the first question about the NAIT cells, and Carl will get back to you with the other two questions. Thank you.

Yeah, thanks, Lucy. So overall, our dermatology business is pretty much in line with our expectations. We're doing well in many products. We're having a little bit of difficulty in the U.S. So the slight bump up in the guidance to the mid-range is really due to the nice performance in the general medicine and OTC business, which is complementing, of course, the dermatology. I'll remind you that Q4 will be a little bit of a tricky comparison because last year in Q4, we did have an 18 million product divestment. We're not going to have anything like that So the 6.4 will still end up in the mid-range, but we do have a tougher comparison in the fourth quarter. I'll pass over to Carl for the other two.

Thank you, Lucy, for the question. I mean, we submitted based on the data from Advocate 1 and 2 and the ATIR study. With respect to the label details, I think it's a bit premature to discuss them today, but we will be very happy to walk you through all the details after the approvals. With respect to the IPMAP deal, this is basically giving us access to a technology called SAP Intandem, how to build bispecific antibody. Bispecific antibody meaning antibody that can bind to two targets at the same time. We have a global license for this technology for up to three target pairs. And this is part of our discovery effort, bringing novel molecules from our own laboratories into clinical development. This is a research-based collaboration, so it will take some time until the first results emerge from that.

Very clear. Thank you.

Thank you. We will now take the next question from the line of Alistair Campbell from your Royal Bank of Canada. Please go ahead.

Morning, everyone. Thanks for taking my questions. Just one or two, please. First of all, from Mike, obviously the new guidance for this year is probably pointing to an EBITDA margin of a shade under 20%. I just wonder, obviously, you talked about launch costs accelerating next year, rightly so, because you want to maximize the potential of EGLIS. But do you think 2023 will mark the floor for the EBITDA margin? And how should we think about that progressing into next year? And then maybe as we think about EGLIS launch initially, I wonder if you've done the due diligence you've done in terms of the key European markets. What's your broad kind of estimate for current Dupixent atopic dermatitis sales in your key European markets? Thank you.

Yeah, so let me start with the first one, 2024. You know, we're not giving guidance for 2024 yet, but let me give everybody a few things to color it, and then I'll pass on to the next question. In 2024, you know, with the launch of EPCLSS, we're expecting sales to accelerate, so we will see a healthy growth. Growth's margin percentage should remain right around flat at that 65%, so we should be able to keep that pretty much in line. R&D percentage will probably be very similar at 12-ish. Where we will accelerate is in SG&A. We will make sure that we launch this product well and that we take all full advantage of all opportunities there. We do target to grow EBITDA, but whether or not we can keep the margin flat or there's just a slight decline will still be seen. So we'll give you an update in February on where we actually will come out with that. But this is now a growth. I would expect from 25 and beyond, we will definitely see margin accretion. But given the importance of the launch and uncertain timing as to when we will get into the second, third, fourth markets, just because of the price approval and market access, we will really make sure that we set ourselves up for the real accelerated growth in the future.

Thank you. Thanks, Mike, and thanks, Alistair, for the question. So I think for the second question, I think I'm going to take advantage that we have Paolo Cionini in the room that is our chief commercial officer to tackle this question. And I think Paolo is the first time joining us in this call, so why don't you very briefly introduce yourself before answering the question? Thank you, Paolo.

Yes, thank you, Carlos, and thank you, Alistair. Good morning, everybody. My name is Paolo Sonini. I'm the chief commercial officer for Almirail and happy to be here with you today. I didn't understand really the questions, the second question. Can you repeat it, Alistair?

Yeah, look, I was really just trying to get a sense of, and obviously we can see from Sanofi that European sales were too big, but obviously they don't split it out between atopic dermatitis and the other indications. So I was just wondering, you know, on the market, any sort of market due diligence you have done, what you broadly think that European dupixent atopic dermatitis market looks like currently in terms of sales?

Yeah, so thank you very much for the questions. I mean, well, the European market in atopic dermatitis is growing and is keeping the pace of that growth, even though we see that in general in atopic dermatitis market, there's factors affecting the access of the patients knowing to the clinics. So we were expecting maybe a better growth, I would say, but I think that that growth is limited by the fact that patients are struggling knowing, finding the right access to the clinics. But still, we are looking at the market that is really growing amazingly. So there's still a huge space for patients really to enter into treatment with a new product like biologics like Tupic Center.

Thank you.

Thank you. We will now take the next question from the line of from Morgan Stanley. Please go ahead.

Hello. Thank you for taking my questions. I just want to know if you could comment on, you know, where the bulk of the growth is coming from. Is it just, you know, growing in line with the market, or are you still taking some market share gains, you know, across Europe? And if you could comment on, obviously, the competitive dynamics that you're seeing in psoriasis. And, I mean, you know, the drug is currently annualizing around €170 million. And I'm just wondering how much more room for growth do you see from here? So we're obviously asking for a formal guidance, but rather a feel of how far we are from the pixels of this product. And then maybe on the Clicery large field, the U.S. launch next year, I just wanted to know if you could give us some color of how much of a step change you expect for growth of this product from the new indication. Thank you.

Thank you, Thibaud. Thank you, Thibaud. For the question. So as I mentioned before, Germany still represents 50% of our sales, but very quickly, let's say that the basket of the rest of the countries are really catching up and will exceed this current 50% for the other non-German sales. We're seeing a growth very close to 40% this year. That is quite in line with the class growth. So I think that at the beginning of the year, we saw some some gains in terms of market share, depending on which country you look at. But I think on net average, I would say, again, we're seeing a bit more pressure more lately on, let's say, on our ability to gain market share. But as I mentioned also now, we have launched a 200 milligram that we think is going to be very helpful for us to, let's say, start gaining market share again. We have learned the auto-injector, and also we have just published interim data on well-being, which is called the POSITIVE study, that is very novel and exciting data for the product. So I think the combination of our commercial pressure together with the novelties in the 200 mg, the auto-injector, and the POSITIVE data, will help us to, let's say, provide new wins in our pack to regain the market share. But again, Paolo is with us, so I'm sure that Paolo can provide more color on that.

Yes, Carlos, thank you very much. We are just complementing what Carlos was just saying. It's nice to see that we keep the pace in Germany, which is the biggest part of our market. Germany is progressing with this nice 24% growth, looking at the IQVIA data lately. But all the other countries are even better than Germany. So that means that in the future we can see maybe the weight of the other countries taking over the German positions into Illumetri. And I would say also that the 200 milligram is really one of the assets that we are really pushing because I think that 100-200 is really a right combination in order to have the right flexibility in treating psoriatic patients. in a way that all variances and variability of the disease can be addressed with a nice combination of the 100-200. So a very good asset that we can use in order to strengthen our competitive position in the psoriasis market.

And perhaps, Mike, you can take the large field.

Yeah, so we're expecting to get the approval and launch in the second half of next year, and we feel like that's really going to open up the possibility to really grow the product. We've got good results with the small field in terms of patient acceptance. The doctors definitely like the product as well, but we are competing face-to-face with cryotherapy, which is a medical procedure which is well-reimbursed in the U.S. So we feel that once we can get to the larger field, then we can get to the field treatment. There is a huge market demand in terms of volume with 5FU, which is a product that we feel we have a much better tolerability and safety profile against. So we think this will unlock the growth. Hard to tell exactly the numbers yet, but we're excited to get that into the market as soon as we have approval, and we think it'll be a nice inflection point for the product.

Thank you. We will now take the next question from the line of Guilherme Sampaio from CaixaBank. Please go ahead.

Hello. Thank you for taking my question. So three are my two on manufacturing. So the first one on QuireSiri, you mentioned that you're taking over the manufacturing of QuireSiri. In terms of profitability and cash flow generation, what's the expectations with the changes, especially as the products move to large fields? Second topic on any change plans in Lebregui's map and effective strategy following the FTA complete response letter to Lili. And the third one on pixels. When would we have an update for Lebregui's map pixels and more color on PySiri pixels? Thanks.

So, I would like you to repeat the first question, Guilherme. Thanks for the question. Let me answer first the question about manufacturing strategy. We do not plan to change anything about the manufacturing process, and we are fully confident on the robustness of the supply chain. And the third question, the peak sales, yeah. I think that we are not ready yet to provide a – we provided some time in the past 450 million peak sales. I think that we are not – prepared now to provide an update on these pixels estimates. But can you be so kind, please, to repeat the first question?

I can take it. Yes, we did move the manufacturing. Our previous partner, Athenex, went into bankruptcy, and they needed to close their manufacturing facility. Luckily, we had already started to ramp up our Rheinbeck site in Germany as a second source, and we recently got the FDA approval for that as well. So we've secured the supply. In the meantime, we asked them to produce quite a bit of stock so that we could make sure that we bridged over to our own approval. So that's why you see a little bit of the inflation of the inventory. Going forward, this should give us in the long term a cost advantage because we will be doing it internally within our own Rheinbeck factory, which is a top class facility in Germany. So we are looking forward to continuing to grow this product. the Rhinebeck facility is fully ready to produce the large field, which will be in a very similar packaging, just a larger quantity. So what could have potentially been a very difficult situation for us if we hadn't been already prepared has turned into to be something that will be an advantage to us in the long term.

Okay, thank you.

Thank you. We will now take the next question from the line of Francisco Ruiz from BNP Paribas Exxon. Please go ahead.

Good morning and happy Almudena Day for all the people in Madrid. Almost all my questions have been answered. Just to clarification, the one in Illumetri, I don't know if I heard Mike saying that you expect the same growth in Illumetri this year than the previous year. but this would mean close to 50% growth. I mean, just to know if this is what you're assuming. The second one, if you could give us some detail on the milestones that will come after the approval of Lebrick Smart. Thank you.

Yeah, thanks. So when Carlos mentioned same growth, he meant the same absolute growth. So last year, In 2022, we saw roughly 40 million increase from the year before, and we're on track to do that again this year. Whether or not we can keep that pace next year, we'll see when we give the guidance in February, though we do expect to still grow significantly that product. In terms of milestones, we do have an approval milestone of 65 million euros that, depending on the timing of the approval, will either be paid in December or January. So we will have that, but that's always been expected and is part of our cash flow plan.

Okay. Thank you.

Thank you. We will now take the next question from the line of Alvaro Lence from Alantra Equities. Please go ahead.

Hi, thanks for taking my questions. I just wanted to know, I've seen a quite good performance of Evastel and Almax in Q3, probably higher than normal for a Q3. I just wanted to know if there's some demand pulled forward from Q4 or whether there's some changing trends there. Also, you've mentioned that R&D as a percentage of sales should remain stable in 2024, despite the fact that sales should accelerate. So I wanted to know, what are the main R&D projects that will be driving this growth. Also, on the M&A priorities, if you could indicate us what sort of facets are you looking for in terms of size and therapeutic indications or type of product, whether you're looking for more small molecules or biologics. And lastly, If I'm not mistaken, I've seen that you have delayed the expected launch of efinaconazole from late 2023 to second half 2024. I don't know if you mentioned this at the conference call, if you could explain what has happened there and what is the reason for the delay. Thank you.

Thank you, Alvaro, for the question. Perhaps, Paulo, you can take the first one.

Yes, absolutely. About Almax and Devastel. So thank you very much, Albert, for the questions. Well, on Almax, I can say that we are very happy about the performance we are having. In the first part of the year, I think that we benefit also for some situation in the stocks of our competitors. But now we have the new campaign, the advertisement campaign that we have just launched in September is going quite well. And I think that the product is progressing as per our expectations. In terms of Ebastel, seasonality in terms of allergy was not as expected, I would say. But despite that, I think that we have delivered as expected, I would say. So on Ebastel, I think that we are very happy as well.

Thank you, Paulo. Regarding the R&D costs going forward, Carl, I think that you're in the best position to answer the question.

Yes, thank you. As I mentioned, we're extremely excited about leprechaun and we will continue to explore this molecule together with our partner, NI Lilly, and considering other indication or further expanding in atopic dermatitis. That will be one area where we will invest. The second for glycerin large field. We have now completed the study in the US and submitted a supplementary NDA. We're in the planning stages of a study for the EU that we expect it will start soon. And then we want to advance our early stage pipeline for the IL-1 rep monoclonal antibody. We are in phase one, and once completed, we will start proof of concept study, so phase 2A clinical study. And we plan to start phase 1 for the IL-2 mutine FC later this year that then will be done in 2024. In addition, we are looking to in-license early stage asset and we'll plan also for further strengthening the early pipelines. with respect to your questions of small versus large molecules. I mean, if I understand it correctly, you're asking what will be our focus. Is that what you asked?

Yeah, in terms of R&D and also in terms of M&A.

Yeah, I think in terms of R&D, our focus is medical dermatology. And we focus really on understanding the disease and trying to identify novel ways and mechanisms how we can provide better products to patients. With respect to the modality that we use to address these targets and these unmet medical needs, we are agnostic. It can be either a small molecule. It can be also a biologics. And we have... the ability to basically cover both. It can be also, you know, a different modality if it turns out to be interesting in addressing an unmet medical need going forward.

And, Álvaro, in terms of M&A beyond R&D, what we're looking into is bolt-on opportunities in Europe, right? So largely in dermatology, but also That depends on the infrastructure we have in the different countries. If you look in Spain, as you know, we have an important infrastructure in general medicines and OTC as well, and also in the neurology division. And that's what drove the acquisition of Prometax, as it's a very nice boton for our neurology division in Spain, and also a few months ago with the acquisition of PhysioRelax, which plugged in nicely as well with the OTC infrastructure in Spain. You can expect kind of similar deals. If it's multi-country, it's going to be in dermatology. If it's in Spain, it could be dermatology, but also could be in one of these other divisions that I mentioned, and with a focus in Europe. We're missing one. Yeah, the efinoconazole question.

Yes. The regulatory process for efinoconazole is a decentralized process. with Germany as the main reference state and then Italy as the second state, in contrast to this centralized EMEA process, where you have very kind of standard process and standard timeline, the timelines for this decentralized process are less clear and, you know, not following such a strict schedule. Yeah. Having said that, we are in the process of answering questions from regulatory authority together with our partner Kaken, and I think we're confident that we can bring this product to the market in 2024.

Okay, thank you very much.

Thank you. We will now take the next question. from the line of Jaime Scribano from Banco Santander. Please go ahead.

Hi, good morning. So three questions on my side. The first one on the IL23 market share chart, which you usually share with us every quarter, I just want to confirm that that the market share of IL-23 remains above, if I recall well, above 40%, just in case if you can give us some color on that. Second question would be in the new product you acquired, Rivastigmine, if you are able to give us already a range of sales and ABDA contribution. And the third one would be a little bit of follow-up on the guidance for 2024, just to better understand, Mike, what you said. So if you said top line accelerating bid from this year, so let's assume 6%, 7% year-on-year, growth in 24, R&D over sales of 12%, and SG&A growing 5%, 6% year on year. We end up to an EBDA of around 190, 195, which is more or less in line with consensus. My question is, if you find these assumptions reasonable, or you think the EBDA margin, as you pointed out, could be slightly below 20% in 2024. And as a result, the calculation I made may be a little bit too optimistic. Thank you very much.

Thanks for the question, Jaime. Yeah, on the IL23 class, we decided to take out the chart because it was focused in Germany, and now that we have launched in many other countries, I think it's important to reflect Illumetri as a European franchise as opposed to focus exclusively in the market shares in Germany. But as far as I know, for the first nine years, the market share of the class in Germany is 36%. So it continues to be the leading class in terms of new patients. That's new patients, I mean. And the second will be the IL-17 class with a 31% market share for new patients. Paolo, anything to add to that?

No, I think that is a very relevant question. Thank you for the questions because I think that we are in the right class, the IEL23. I think that we are keeping our positions, competitive position in the IEL23 class. And when we see the class and our positions in the overall biologics market, we see again every month, I mean, we are gaining positions. So we gain positions in terms of market share in the biologics class and we keep our positions in terms of IEL23 class.

Yeah, let me take the promo tax. We haven't given details, but it's a nice little product in our Spanish business. It doesn't change the complexion of the business, but it's a nice little add-on, and we'll probably give a little bit more flavor in February. As for 2024, we're not really giving guidance. I'd say of the things you mentioned, the one variable that we still need to really work on is the SG&A and where that level will come in. So The EBITDA numbers you talked about are not, you know, impossible, but they will be on the stretched end of things. So let's see how the Q4 goes, what we think will be the ramp-up and launch sequence of the different countries into 2024, and we'll give you, you know, of course, very solid numbers in our February call.

Okay, thank you very much.

Thank you. We will now take the next question from the line of Pablo de Renteria from Kepler. Please go ahead.

Pablo de Renteria Good morning, and thanks for the presentation. I just have one question for Carl, if I may. I see that the two-year clinical data of leperkizumab looks superior to the one-year data. I mean, I don't know if you could please provide some comment on this. Thanks.

Yes, thanks for the question. I mean, overall, we are very pleased with the overall profile and the data we're seeing with lepricizumab. I mean, with respect to long-term studies, it's very, you know, reassuring to see that also in the long term, we keep the efficacy in actually most of the patients. With respect to comparisons one year after another, you know, there is a certain variability that we have. in the different arms, you also have to look at what is actually the number of patients. So I'm not necessarily would read too much into that. I think the important message is that, you know, for the vast majority of patients, we can keep long-term the efficacy and they are controlled very well. And this is important because atopic dermatitis is a chronic disease that requires long-term treatment. And we believe with our data that show that we can keep those patients well-controlled within every four weeks doting, that this is a very attractive value proposition.

Okay, thank you.

Thank you. There are no further questions at this time. I would now like to turn the conference back to Pablo de Bazón for closing remarks.

Thank you very much, Sandra. We are not going to close our Q&A session. And with this, we will conclude our conference today. We want to thank you for your participation. You may now disconnect.