Fagron Sa Ord

Hello and welcome to the Feigrin Half Year 2023 results. My name is Caroline and I will be your coordinator for today's event. Please note, this call is being recorded and for the duration of the call, your lines will be on listen only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand over the call to your host, Karen Wilk, to begin today's conference. Thank you.

Thank you very much, Caroline, and good morning all. Welcome to the first half-year results of Fagron. I'm here together with our CEO, Rafael Padilla, who will discuss the numbers and give a deep dive into the regions, and then Karen will take over for more information on the financials. And as just said, afterwards, the floor will be open for questions. Thank you.

Thanks, Karen. Good morning and welcome all. We're happy to report another set of strong results driven by solid execution on our strategic initiatives and improving operational capabilities. As we all know, during the first half of the year, we operated in a very dynamic and challenging environment, so it is pleasing to see organic revenue growth at 8.4%, and REBITDA increased by 14% to €72.2 million, with a margin of 19.4%. We saw strong performances in North America and EMEA, while we have good progress on structural improvements in Latam. This positive momentum is a result of our strategic actions and operational excellence initiatives, which, together with high-quality standards, are key factors in our industry. Our free cash flow for the first half reflects the one-off investments we made, which Karen will discuss later on. On the M&A front, the integration of LEPCO, FSS Boston, and Wildlife is progressing as planned, and we remain on the lookout for any opportunity in the market that meets our disciplined approach. Finally, for our 2023 full-year guidance, we expect high single-digit revenue growth with increasing profitability. Now, moving on to the regional update, EMEA's growing trajectory continues on the back of efficiency improvements seen to our Polish GMP repackaging facility, innovations and reinforcing registration and in licensing capabilities. This was further supported by strong demand across most of our markets. Pricing pass-through was very important in this region, and we have seen excellent execution on that front, although it is now fully completed. One of our key markets, the Netherlands, has shown again solid performance. While, explained before, we continue diversifying across the EMEA region and have delivered strong results in markets such as Poland, Czech Republic, South Africa, and UK. Moving into Latin, given the attractiveness of the Brazilian compounding market, the competitive landscape remains heightened while we see signs of customer demand improving. we continued our focus on maintaining market leadership and also drive operational efficiencies through several levers. Firstly, we have completed, earlier than planned, decentralization of our distribution activities in Brazil, and we expect to see operational benefits in the second half of this year. On brand rationalization, last year, we completed consolidation of three brands, and this year, on the equipment and packaging side, we combined three more. Given our strong innovation capabilities in this region, we have launched new successful products that are expected to drive margin growth. Next to this, we also continue to further diversify into Mexico and Colombia. Looking ahead to the second half of the year, we expect better revenue and margin performance on the back of our commercial and operational excellence initiatives. To conclude, we remain committed to maintaining our market leading position in Brazil as it is the second biggest compounding market in the world, and long-term fundamentals remain attractive. Moving into the largest compounding market in the world, North America, we continue seeing structural growth as hospitals look for outsourcing of pharmaceutical compounding, while Anazeo is well-placed to capture the growing demand in prevention and lifestyle. Moving to B&E, As communicated before, we have now completed the transfer of our CGMP API repackaging activities to Letco and have decided to close down the remaining operations of the SIMPOL facility by the end of this year. Further, to build on our key strategic pillar to have market leadership in B&E, while maintaining highest quality standards, we have announced that we will invest in building a state-of-the-art CGMP repackaging facility in Decatur, Alabama. Moving to FSS, we have reached the 135 million run rate for Wichita and Boston combined. This was achieved on the back of strong market demand and increasing operational efficiencies. At Wichita, to further enhance our performance, we expect visual inspection to be operational in the second semester. Regarding Boston, integration is on track, and we have now 27 licenses, including Texas. As we guide it, we expect to be break-even during the second semester. To finalize, we are also very pleased with the developments of our Health and Wellness Division, which is capitalizing on strong underlying demand for personalized treatments as well as short-term drug shortages. We also confirm that our investment in the Tampa facility is progressing as planned. Moving on to the next slide. As mentioned, we're currently experiencing a fast changing environment where agility and guaranteeing the highest quality standards are key. Looking at the external factors, we closely monitor inflationary developments and as mentioned, while our other regions remain dynamic in pricing pass-through, a very well executed exercise in EMEA has now concluded. Regarding competitive landscape, we aim to maintain leadership in all our markets by strengthening our commercial approach, balancing competitive pricing, and being unique with our brands and the widest portfolio. Being the global pharmaceutical compounding leader, we have strengthened our quality management organization and continued implementing our global quality systems across all our regions, aiming to set the highest quality standards in the industry as the regulatory environment evolves. Also, in order to remain ahead of regulatory requirements, we commit to invest in state-of-the-art infrastructure, especially in North America. Truck shortages is a primary driver of our industry, and during the first half of this year, it has created favorable opportunities. This enables us to have potential structural long-term gains, such as onboarding of new customers. Coming to internal drivers, we have intensified our procurement and supply activities, resulting in stronger purchasing power and better logistic terms. Finally, on operational excellence, while we always focus on it, it has now become necessary to be our key strength to support our activities across the globe to be more competitive. And we already see good developments to increase product availability. Regarding our discipline and many activities, we continue to look actively for opportunities across all our markets. Now, Karin will go through the financial highlights analogy.

Thanks, Rafa. Good morning, everyone, and thanks for joining the call. I would like to walk you through the H1 2023 financials in more detail over the next few slides. During H1 2023, our top line grew 13.1%, to 371.6 million euros, mainly driven by strong organic growth in North America and EMEA, the contribution of acquisitions and, to a lesser extent, ethics. Operating costs increased by 20.3%, reflecting inflation-related increases and higher volumes in North America. Profitability increased 10-day points year-over-year to 19.4%, reflecting the well-executed pricing pass-through in EMEA as benefits from operational excellence initiatives have come through. Operational cash flow improved 12% to 43.3 million, flowing mainly from EBITDA growth. Our net debt to EBITDA ratio ended at 1.9 times, which is flat compared to the end of full year 2022. This leaves us well positioned to capitalize on future opportunities. Moving on to the revenue bridge and P&L, The bridge on the next slide shows the sales development in H1 2023. EMEA increased 4.7% organically against constant exchange rates, North America at 19.2%, driven fully by the compounding services development, and LATAM remained slavish at minus 0.2%, reflecting the operating environment in the Brazilian market. Looking at the right side of the slide, both top line and profitability increased versus last year. EBITDA also increased 14.7%, mainly coming from revenue growth. The earnings per share ended at 46 cents, down 4.2%, reflecting the impact of financial hedges and increase in depreciation and amortization due to the acquisition and investment in Poland, Brazil, and North America. Moving on to the regions, we start with EMEA. EMEA's top line grew to 146 million euros, translating into a 6.1% increase. All business segments showed strong performance, and as highlighted by Rafa, was supported by well-executed pricing pass-through. Brands and essentials organic revenue grew 1.7% and 1.9% at CER, and this was supported by solid demand across most of our markets, successful product launches, and improved product availability, driven by the completed transition to our Polish GMP repacking facility. Compounding services in this region was the main contributor to the strong performance, with 12.3% organic revenue growth at CER. Here we saw good performance across our markets, driven by the strengthening of our registration business, stock compounding, and drug shortages in some markets. Cross-margin saw benefits from higher prices, and operating costs reflect the impact of inflation-related price increases, like higher wages. As a result, we saw a solid growth in the Ramadan margin for the region, improving by 170 base points year-on-year to 22.7%. Moving to the next slide on Latin America, so Latin America's revenue increased 2.4% to 80.5 million, mainly driven by ethics. During the period, we continue to experience pricing pressure due to a highly competitive landscape, which was partly mitigated by improvements in operational excellence. Gross margin for the region was impacted by higher volumes and lower prices as we focused on maintaining market position. As a result of that, lower price and competitive pressures, the revenue margin for the region ended at 15.7%, a 170 base point decrease versus last year. For H2 2023, we expect an improvement in profitability of this region, driven by the distribution centralization, the efficiency gains of brands optimization, and launch of new successful products at Consul Pharma. Moving on to North America. North America experienced the highest growth, reaching 145 million, which is a 29.2% increase. This result was mainly due to the impressive performance from Enaseo and Wichita. At the brand segment, we saw continued positive organic revenue development, supported by customer demands and increased product availability. The essential segment continued its recovery through the semester and is expected to continue going forward now that all our API repacking activities have been transferred to our LetGo facility and the sales forces have been integrated. The compounding services segment showed an outstanding organic revenue growth of 38% at CER, reaching 100.6 million due to new customer wins, market opportunities, and a higher consumer demand. Gross margin improved in this region on the back of a better sales mix. Operating expenses were higher given the rising scale at U.S. FSS and NSAO. Profitability increased 27.7% to 26.4 million, while Rebadaan margin decreased 20 base points to 18.2%, mainly due to the dilution from the Boston facility on a year-over-year basis. Sequentially, the margin in the region has shown good recovery, expanding by 270 base points from 15.5% in H2 2022. This trend is the result of our focus on operational excellence in the integration of Boston and Letgo. Moving on to the next slide, strong cash conversion remains an important element of our business. The operating working capital improved as a percentage of revenue compared to the same period last year. This is the result of better payment terms in EMEA and North America and factoring. However, absolute operating working capital increased year over year, driven by the seasonality as well as higher sales and production volumes in North America. Our CAPEX was 5.6% as a percentage of revenue. This was mainly driven by our one-off investments, namely the licensing deals in the Benelux and NSAO. Adjusting for these investments, the number stands at 3.5%, which is in line with our mid-term objectives. Operating cash flow increased to 43.3 million, mainly reflecting strong EBITDA growth. Finally, free cash flow reflects the discussed one-off investment and was 30.1 million excluding these investments. Net financial debt decreased 0.7 million to 273.3 million from 274 million at the end of last year. This leaves our net debt to EBITDA ratio at 1.9 times, same as it was the end of full year 2022, and well below our internal threshold of 2.8 times. These are opportunities in the market that matches our disciplined acquisition strategy. Before giving it back to Rafa, let me touch briefly on our outlook for the full year 2023. For full year 2023, we improve our organic revenue growth expectation from mid to high single-digit growth to high single-digit growth. For profitability, we expect an increase and a higher revenue margin on a year-over-year basis. And lastly, we expect CapEx to end at around 3.5% of total revenue, with a one-off CapEx related to the licensing deals Tampa and Decatur.

Thank you, Karin. To conclude, Pagron is a global, vertically integrated, niche, defensive, high-cash generating company operating in a highly fragmented industry. Our strength lies in having a resilient business model with a diverse geographical presence. These factors, together with demographics and personalization, contribute to our success. Our operational excellence initiatives will help optimize our business through global synergies and best practices while a disciplined M&A strategy remains a key part of our growth. Sustainability remains one of our main priorities and a strategic pillar, as together we create the future of personalizing medicine. With that, we open the floor for questions. Thank you all.

Thank you. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the first question from Linestein Demenster from ING. The line is open now. Please go ahead.

Yes, good morning. Thanks for taking my question. I hope you all can hear me. My first question is on Anazeo. To what extent do you expect to maintain current growth rates, which is partially linked to the recent drug shortages? Would you also quantify the significance of these shortages, including semaglutide, in the the one-age growth, maybe both on sales and EBITDA to sort of see the windfall impact here?

Yes, good morning. If we look at NSAO, we had good performance in the first six months with a growth of 26.1% that was supported by underlying strong demand for prevention and lifestyle products. Of course, we had some tailwind of drug shortages, but if we correct for that, we still see mid-teens growth for NSAO. And that's a bit similar as we saw full year 2022 for that business part. On drug shortages, we see the benefits. And it's difficult to say how long that will continue. It's part of our business model in general. We expect for the short term, specifically for NSAO, that that will continue.

Okay. It seems the windfall seems to accelerate in Q2 versus Q1. Is that right? And are there still some accelerations? potential in the second half?

We do see an increase Q2 compared to Q1. To state that there will be an acceleration in Q3 is too early. We cannot answer that sign.

Then also North America and more specifically on the margin, knowing that there's still sort of direct profitability from Boston, could you perhaps disclose the underlying margin? including Boston, or quantify the impact of Boston like you have done previously?

Yeah, so if we look at the Boston facility, it's still loss-making, and we expect, as Rafa said in the presentation, that it will reach break-even in the second half of the year. However, if we look overall at Boston and Wichita, we integrate the businesses, so there's one sales team and there's one go-to-market strategy, In H1, we combined the IT systems, the quality systems, and the objective is to leverage the sites as much as possible. Therefore, we do not disclose the separate run rates. We did saw nice progress in Boston in the second quarter on the back of obtaining new licenses and growing top line. So therefore, we expect to reach break-even in H2 2023. And on Wichita, we developed a strong top line growth at almost 50%. But as I said before, the timing on growth is depending on supply chain and operational factors and making sure, of course, we maintain the highest quality standards.

Next one is on EMEA. Could you separate the pricing impact as organically your essentials and brands only show muted sales growth, which is just that volumes are actually declining? And also, do I understand correctly that the pricing tailwinds will taper off in the second half, or do you still expect some benefits?

If you look at the European region, very solid good performance in H1, indeed driven partly by our executed pricing strategy, so increasing prices. We see a mix of price and volume. As you remember, in the first six months of 2022, we still had tailwinds because of COVID-19 volumes of testings we sold in that specific market. If you take that out, we see the underlying volumes in the European market growing. So we see nice developments. If we look at brands specifically, we see a slight decrease in the second quarter. While they had a very solid first quarter, the reason for that is bid timing and registration. So we do expect for the second half of 2023 that the growth for the brands will continue as the underlying demand is there in the European margin. So we do expect solid performance again for H2, all by knowing that the pricing increase cycle is at its end.

Okay. But year-over-year in the second half, should there still be an impact of the pricing initiative? Or is it sort of already, was there already an element in the second half of last year so that year-over-year impact will be sort of negligible?

Correct, Sainj.

The last one. Okay. Last question for me is also for you, Karen, unfortunately. Can you sort of elaborate what happened in the financial results with the hedges? Because that's a bit unclear to me with the sort of strong increase in financial expenses.

Yeah, so that's a fair question. So if you look at the financial result last year, there were some hatch valuations. So under IFRS, you can value that and book it through equity, depending on certain elements of the hatch or through P&L. And because of the specifics of the hatch, we booked it through P&L. And that's where you see translated into the numbers. So last year, the valuation of the hatch, which is in fact a non-cash element, went through the P&L and was a benefit. And this year, we see the valuation turning. So it's a cost because over the lifespan of the hatch, the valuation is zero. So you see that running through the P&L. So if we can do hatch accounting and put it through equity, we'll do that. But due to the specifics of this hatch, it wasn't possible. So therefore, you see that movement through the financial result. We tried to report it separately so we can disclose the impact of that. And of course, if you look at the financial result excluding the hatch, you see an increase. There was a similar amount financial result in H2, 2022, if you exclude the hatch. And the reason is that part of our financing is unhatched. So you see that having an impact, the interest rates rising, having an impact on our interest payments. Same for factoring interest repay, of course, and other interest-related elements that go through that line. So that's basically the reason for the increase.

the underlying results should be leading for to pencil in for the second half.

Correct, correct.

Okay, thanks for my question.

Thanks Stijn.

We will take the next question from line Frank Klaassen from the Grove Petercamp. The line is open now, please go ahead.

Yes, good morning Frank Klaassen from the Grove Petercamp. Three questions please. On the essentials business in the U.S., it was still down minus 15%. Is that purely because of the transition to Letgo? And now that is finished, could we expect growth in that business to return? That's my first question. Then secondly, the St. Paul's plant, you're going to close that. Will that lead to one-off costs? And what does that mean for the FDA warning letter, which is also on that plant? And then thirdly, the gross margin, we saw, yeah, nice jump to 16.7%. Yeah, what can we expect going forward? Is this all because of higher prices and lower raw material prices, or can we expect more benefit from lower raw material prices, lower transport costs? So some color on that, please. Thank you.

Good morning, Frank. Well, you see it right. When we look at the performance of B&E in the first semester, we see that we have been focused on structural improvements. As you said, we have been transferring and we are now complete the CGMP API repackaging activities from Minnesota into Letco in Alabama, right? And we have decided that the remaining activities there we will also transfer, so we will close down B&E. So this means that during the second semester, we will focus on the market, on going to market. As we said during the last call, we have also integrated the sales teams, the systems, the processes, right? So now we have full focus on going back to the market. We're number three in that market. That is very attractive. And our strategic priority is to be number one. So we expect to see growth during the second semester. And regarding the FDA warning letter, of course, it's still open. As we always explain, timing is not set. It's something that is not, there is not a clear timeline there. What we're doing is the seventh of each month, we update the progress on the remediation plan. Of course, now we are not having any production on the API side, right? And the products that we're producing, that facility that are in the market are being consumed. So we have already informed the FDA that we took that movement. And now we need to work on administrative tasks in order to bring the closure down of the letter when the FDA finds appropriate.

And then coming back to your question on costs related to the decommissioning of the St. Paul facility, these are limited and basically related to one of dismissal fees we expect. but this is not a material amount. And these costs are not yet reflected in the P&L of H1 2023. So that will be in H2 of 2023. And then the last one on margin expansion, as said, operational excellence, and I've explained it is very important for our business. So on the procurement side, combining our volume, having benefit from that in combination with the market dynamics we have. So overall, we expect for this year an increase in profitability margin compared to last year. And that is for many reasons. Of course, one of that is operational excellence initiatives we have in the different markets, but also on commercial strategies for that specific market.

And coming back on the last one, do you also see raw material prices coming down again a bit? And do you have to pass these on or – yeah. What about that dynamic?

Sure. We see, Frank, a stabilization of pricing in origin, right? So we saw a slight decrease a month ago, as we were discussing during the other call, right? And now we see stabilization. And on the logistic terms as well, we saw a decrease after COVID, and now we see stabilization there as well.

Okay. Okay, thank you very much.

Thanks a lot, Frank.

Thank you. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone paper. We will take the next question from line Alexander Kremic from Kepler Chevrix. The line is open now.

Please go ahead. Hi. Good morning. Congrats on the nice set of results. So, yeah, I just have two small questions. So in Latin, one of your competitors was taken over by a PE player last year. And they took an aggressive pricing strategy to gain market share. And I was just wondering, considering the results that were published today that came a bit below consensus, you know, clearly have been underestimating the impact there. So how much market share did you lose or if you lost any? And how long do you think this aggressive pricing strategy will last? And if you could maybe just shed some light also on the margin impact, that would be interesting as well. And then I was just also, the second question would be related to the expansion in U.S. You just mentioned that you had also a 20 million CAPEX plan for the second half and 2024 for a refactoring facility. I was just wondering how much additional capacity is that? How do we need to place it in the whole context of Faro? Thank you for that.

Yeah, thank you. Thanks a lot, Alexander, for your questions. And to start with LATAM, look, Brazil is the second biggest compounding market in the world. And what we saw during COVID, it was that the demand increased because patients were looking for prevention and lifestyle products. Of course, after COVID, there was a correction on the market. So the number of scripts decreased to have somehow correction, if you will. And therefore, the competitive pressure increased, right? Then what you said very well, there was a competitor taking over. Remember that we have around 30 competitors in this market. So not only this competitor that was taken over by PE, but also other competitors remain active in these attractive markets. Again, the volumes are huge, right? So we took, as we are market leaders, around 40%, we took the initiative to defend our market leading position. We have been increasing our participation slightly with this strategy. We see this as a real short-term. Having then a mid-term, a brand introduction strategy, we have launched successfully now in Consul Pharma. That's the biggest compounding fair in the world that happened the first week of July. New, interesting products in the brand segments, of course, and on the long-term, quality. And as you know, we have there a new CGMP repackaging facility in Annapolis. And now we worked also in a GDP distribution center where we centralized all our activities there, right? So now what we have seen at the end of Q2, we have seen early signs of improving customer demand. And then therefore, when you take the same rationale on what happened one year ago, approximately, we expect that the pricing pressure will ease. Next to this, what have we done, right? And we also communicate our projects, right? What we have done in that region. is first of all, we focus really on structural improvement, right? So last year, we rationalized three brands into one. This year, we have gone through a second rendition of that one in the packaging and equipment side, having one company called Fagron Solutions. That was the first thing we did. Second, as we said, we centralized all our activities in the distribution center that was planned to end during the second semester, and we have anticipated that one. So this will show benefits in the second semester. And as we said, we launched some interesting items during the Consul Pharma Fair in July and this will help our competitiveness there.

And coming back on the profitability for the region. So we saw a decrease in Rebadaan margin of 170 base points. If we look at price and volume dynamics, we see the volumes in the first six months increasing. So we see the underlying demand returning in that market. However, that was fully offset by the price erosion we experienced on margin. And that's also the reason for the decrease in profitability margin for the first six months. And we do expect an improvement of the profitability margin as a result of the actions we have taken in combination with the early signs of strengthening customer demand, as Rafa just explained. However, the quantum of the improvement will be dependent on the specific market developments for the Brazilian market.

And, Alexander, on your second question on the U.S., regarding the new CGMP repackaging facility that we announced today, this will be located in Decatur, Alabama, where the current Letco facility is just close by. So that's very interesting because we will not have any interruption in the current facility that we have now. And with the capacity plant, we expect to be number one or at least to be in line with our ambition of being number one in this market as we presented during our Capital Markets Day last year in our Compounding for Growth 2022-2026 plan.

Okay, thank you for that and congrats again. Thanks a lot, Axan.

Thank you. We will take the next question from line Chase Coulson from Wendlandt Camping. The line is open now. Please go ahead.

Hi, good morning, all. Thank you for taking my questions. I'll take them one at a time, if that's okay. Starting with, I see you published that the Wichita and Boston combined run rate of $135 million. Do you have any sort of year-end targets or even internal targets of what we can expect to achieve by the end of this year?

Thanks a lot, Chase. Good morning. So, as you said, we are at 135 Rand rate. We don't have specific targets for this combined entity as we align these ones with the midterm guys that we gave of meetings for the US as a whole.

Okay. And this new facility that you announced today with the 20 million investments, I see for the majority of that will be spent in 2024 and My question is when do you expect this facility to sort of be fully online or operating at full capacity?

Yeah, so maybe first to come back on the spend. Yeah, so we do expect approximately 20-25% spent this year on that specific investment and the rest in 2024. So the facility is expected to be operational in 2025.

Okay, that's great. And then lastly, just a more broad question on the acquisition landscape. Obviously, you did your acquisition at Q1, the wildlife pharmaceuticals. How are you looking at the acquisitions now? Do you have anything in your pipeline? And sort of what areas are you looking at?

Yeah, so in H2 2023, we want to continue our disciplined approach in executing our M&A strategy. We've done five acquisitions last year. And in H1, we did two deals. And one of them is, of course, the wildlife acquisition. We see in the current M&A market that the valuation expectations remain at the high end. So prospective sellers are taking their time to sell and they test the market broadly. And sometimes they even abandon the processes. But however, we expect that M&A will bring further revenue upside on a reported basis in 2023. So we have a pipeline with acquisitions and they're basically in all regions where we currently active. And they're mostly small to mid-sized companies. or partnership opportunities, like we did, for instance, with the licensing deals in the first quarter of this year.

Okay, great. That's very clear. Those are all my questions. Thank you.

Thank you, Chase.

Thanks, Chase.

Thank you. We will take the next question from Line Matic. We'll be from the IDEA. The line is open now. Please go ahead.

Good morning. It's Martin of the IDEA. A couple of questions from my end. A bit of clarification on your capers are also what you just mentioned. Firstly, could you give a guidance what you expect to spend this year? And then am I right saying for next year it will be the 3.5% of revenues plus 75% of the $40 million U.S. investment?

Yeah, so in these CAPEX, if we look at CAPEX spend, it was 21 million for the first semester. So if we exclude the licensing deals and the investment in Tampa, we are at 3.5% of sales on the CAPEX. And it's a bit higher than last year's same period as to do with timing of invoices, investments, payments. However, for the full year, we expect to be at 3.5% as we guided on for CAPEX. If we look at the separate investments, indeed, as mentioned earlier, we expect the majority of the $20 million investment of the caterer to be spent in 2024. So that's 75% approximately of the $20 million. That's one. And then for the other investments, that's the Tempa investment, so the Anaseo expansion. We expect of the 18 million that we will spend 75% this year and the latter in next year. So that facility will be up and running somewhere next year. Okay. Yeah, okay, sorry.

Please go on.

Yeah, so on the long term, we reiterate the guidance on CAPEX being between 3% and 3.5% of sales.

Okay. Okay. Thanks for that. Then you made quite a step forward in obtaining licenses for Boston. If I'm right, at Q1 it was still 16, now it's 27. Firstly, what's your goal, what's your hope to have at the end of this year, and which important states are you still missing?

Yes, so good morning, Martin. And when we look at the states, as we also explained during the last call, we applied for four important states, being California, New York, Florida, and Texas. The last one we did get. So we expect developments on those three. Of course, it's not something depending on us, right? So you have the whole administrative procedures and everything. We are waiting, and whenever we need to add information, we do it diligently. So we are really excited to get those three new states that will help our Boston facility a lot. And for completion of the year, we do not have a target. We have, again, applied for other states as well, and when they come, we announce the progress to all of you.

Okay, thanks. And then could you clarify a bit on one of your statements in your press release that you hope to achieve market leadership in the B&E segment in North America? What will it take? Can you do this all organic or could you clarify that a bit?

Sure. So as we said, the B&E market in the U.S., it's very important for us as it is one of the biggest together with Brazil. And we are now at the number three position behind Medisca and PCA, very good players in this industry. And now with merging both Fagron and Letco activities, as we said, in the front side, also the systems, the processes, now transferring the operations to our Letco facility with the new investment that we have announced, adding extra capacity and, of course, being in line with our state-of-the-art infrastructure strategy worldwide. this has the sufficient requirements to get to market leadership on an organic basis.

And do you have set yourself a timeline for achieving that position?

For sure. This is in line with our Compound for Growth plan that we presented during the Capital Markets Day 2022-2026 period. Okay, thank you very much. Thank you.

Thank you.

Thank you. It appears no further question at this time. I'll hand it back over to your host.

Okay. Well, thank you all for dialing in and for your questions. We look forward to seeing you again at the presentation of our Q3 results. And for now, I wish you a happy rest of your summer. Thank you. Bye-bye.