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Grifols Sa Barc Ord New
7/27/2023
Hello, everyone, and welcome to the Grifols Second Quarter 2023 Conference Call. Thank you very much for taking the time to join us today. This is Nuria Pascual, Investor Relations and Sustainability Officer, and I'm joined by Thomas Glassman, our Executive Chairman and CEO, Grifols CFO Alfredo Arroyo, and Victor Grifols Deu, our Chief Operating Officer. This call will last for about 60 minutes. There will be a presentation of approximately 30 minutes followed by a Q&A session. If you want to raise a question, press star followed by five when the Q&A session begins. We will kindly ask you to limit your questions to a maximum of two. As a reminder, this call is being recorded and the materials for the call are on the investor relations website at griffols.com. The transcript and webcast replay of the call will also be available on the investor relations website within 24 hours after the end of the conference call. Before we start, I draw your attention to the forward-looking statement disclaimer on slide two in the slide deck of our release. Forward-looking statements on the call are subject to substantial risk and uncertainties. Speak only as of the call's original date, and we undertake no obligation to update or revise any of the statements. And now I would like to turn the call over to Thomas Glassman.
Thank you, Nuria. Good afternoon and morning to all on the call. Thank you for joining us. Today, I'm very pleased to announce the second consecutive quarter of strong results for Grifols. We are not only delivering on our commitments, but accelerating these as a result of our turnaround strategy. Although the first half of the year, all through the first half of the year, we have excelled in execution, proved financial discipline, and enhanced our performance culture. We advanced on all key priorities during this first half of 2023. Our operational performance continues to improve on a sequential basis. We are reporting sustainable revenue growth driven by biopharma, which is supported by solid underlying demand, favorable pricing, and product mix led by Sembify, which grew 26% in the first half of 2023. We have accelerated margin expansion, reaching an adjusted EBITDA margin of 22 percent plus for the first half, mainly driven by our strong business performance and well-executed operational improvement plan. During the first six months of 2023, we successfully deployed 100 percent of the Euro 450 million cash cost savings improvement plan. Evidence of this is the cost per liter reduction, which declined sharply since August of last year. By the end of 2024, we expect to have booked the full amount of Euro 450 million in savings on our P&L, considering the nine-month lag coming from our long inventory cycle, which, as you know, is characteristic of our industry. At the same time, plasma supply continues to grow at double-digit growth rates. As a result of this performance, we have exceeded our revenues and adjusted EBTA guidance for the first half and raised second half and full year 23 guidance. We reiterate... that leverage is a priority to us, and this includes reaching net debt to EBITDA of four times by the end of 2024. As mentioned in previous calls, we have several work streams in place to deleverage the company, and we are working with the intent to close one deleveraging transaction by year end. We will share more information on this matter when we are able to, including on the previously announced China opportunity. In addition to all these important milestones, we continue to focus on our innovation pipeline, where we are making solid advancements. Victor will take you through them shortly. Griffles is committed to creating value for all our shareholders and restoring goodwill with the financial community. We firmly believe that to do so, we must consistently deliver on our goals and commitments. One of these commitments was to enhance our communication with stakeholders, and we will continue to do so. In the first half of 2023, we had the opportunity to engage with more than 100 investors through honest and constructive discussions, which were much appreciated. Going forward, we will continue to expand our outreach and aim to engage with more equity and debt market participants. As indicated in the first quarter 23 earnings call, we made the decision to reinforce and expand our IR footprint in the U.S. to better serve investors in North America and globally. Now we can announce that this position has been filled and the onboarding process has started. I'm sure many of you will have the opportunity to interact with our new Senior Director of U.S. Investor Relations and Sustainability, who reinforces the global team led by Nuria Pasqual and Danny Segarra. Before Victor takes us through a business update, I would ask you at the end of our presentations to take a moment and review the comprehensive efforts GRIFFILS has also undertaken in terms of sustainability through our six pillars during the first half of 2023. These pillars represent our collective commitment to drive positive change and make a lasting impact. By reviewing the details of our sustainability initiatives, we trust that you will gain an appreciation of our efforts and progress spanning from environmental stewardship and social responsibility to ethical governance, supply chain excellence, and employee well-being. I would like to conclude by reiterating how encouraged I am by all our progress in the first half of the year, and I want to thank the entire Griffles team for their hard work, dedication, and perseverance. With that, I will now hand the call over to Victor.
Thank you, Thomas. Good afternoon, everyone, and thanks for joining us today. Turning to slide 6, we achieved revenues of more than $3.2 billion for the first half of the year, growing 13.1% at constant currency. and 14.8% on a reported basis. If we exclude biotest, total revenues reach almost 3 billion, an increase of 7.7% at constant currency and 9.4% reported basis. Biopharma revenues grew 14.9% at constant currency and 16.7% on a reported basis. to reach 2.7 billion, and by 8.4% at constant currency and 10.2% on a reported basis to 2.4 billion excluding biotest, backed by a robust underlying demand, favorable pricing, and product mix. Now turning to biopharma, slide number seven. The significant growth in our IG flagship product seen in Q1 has continued into Q2, resulting in a half-year growth of 13.6% at constant currency. As before, we have seen sustained upward momentum supported by higher plasma supply and robust underlying demand, coupled with favorable pricing and some product mix. Subcutaneous IG revenues grew 26% in half-year 2023, We continue to expand our offering of subcutaneous imine global in Chembify globally. And to that end, you would have seen that we initiated a launch in Spain and plan to launch Chembify in Australia in the second half of the year, just as two examples. In albumin, a strong demand and favorable pricing in China, and rest of the world are the main drivers of growth, offsetting some weaker volumes in the U.S. Going forward, overall, we expect volume demand to remain very robust throughout the year. Finally, our Alpha-1 and specialty protein segment grew 0.3% on cost and currency, driven by a mixed geographic volume performance in Alpha-1, with higher volumes in the US partially offset by lower volumes in certain European countries. We are increasing testing volumes in the Alpha-1, which will trigger further sales growth during the rest of the year. On the other side, we noted a favorable performance in our hyper portfolio and continued positive trend in our partnerships in bleed management products. Partially offsetting that, we have lower demand of our plasma derived factory product. Now turning to slide eight, Grifols is strengthening its IG franchise as we continue to see a solid growth opportunity in the 40 billion euro IG market, which is growing high single digits and is expected to continue to do so. We have three strong brands and a unique strategy to drive further growth. We are accelerating our commercial and innovation efforts to capture opportunities with our subcutaneous IG products, Chemify, which commands a higher price than IVIG and currently represents only a single digit percentage of our IG sales, and we expect this to continue increasing over time. In parallel, we are building on our IVIG Camon X track record, consolidating our industry-leading position in neurology and acute care while continuing our work to keep IgG therapy at the standard of care. In addition, we believe Biotech Gmugo will be instrumental in supporting this long-term growth and reinforcing our position in Europe. We continue to remain focused on the immune deficiency market, which comprises the largest share of IV IG usage, with primary and secondary immune deficiencies growing ahead of the rest of the users. As global plasma supply increases, we are anticipating a strong growth with opportunities on core indications, especially PID and secondary immune deficiency, but also in CIDP. Demand has remained robust and is expected to continue to be so. Many patients, even in top markets, remain underdiagnosed. Demand for treatment of secondary immune deficiency, for which currently there is no competitive threat, continues to show growth. Even though incidences of diseases are similar across geographies, consumption rates can vary very significantly among them. Actually, IG in the U.S. is still consumed at almost three times the rate per capita of population when compared to Europe. Therefore, IG market growth is expected to outpace potential erosion from disruptive technologies. Turning now to slide nine. Our ambition going forward is to increasingly focus on innovation as a key driver of our medium to long-term growth. To support this objective, we are expanding our existing commercial offering, as well as seeking new commercial opportunities, especially in the use of IG. We are pleased to announce that we achieved a number of key milestones since our last quarterly update. During Q2-23, we finalized the enrollment of the PRECIOSA trial and also for the SPARTA trial study, with the latter progressing ahead of schedule. We have also made significant advancements on our biotest innovation commitments, with both fibrinogen and trimodulin first trials on track. With regard to fibrinogen, we completed the at-first trial and presented top-line study results in line with our expectations. The data will be used for clinical submission both in Europe and U.S., where we expect to receive market approval by the end of 2024 and late 2025, respectively. For trimodulin, we initiated the escape trial study, and the feed sites have been already activated. And finally, we have completed Gmogos VLA submission to the FDA. Now moving into diagnostic, slide number 10. Diagnostic revenues continues to be driven by blood typing solutions, where we are seeing a strong growth across the U.S., Argentina, Brazil, and Spain. It is not worth mentioning that Grifols' block typing solutions is outperforming the market growth and continues to gain market share. As you saw in Q1, our revenues in NIT technology are somehow affected by the pricing concessions in exchange for extending a large contract with a key customers to up to 20 years. However, a number of factors in Europe and Asia are helping to partially offset this, including a strong demand in Japan and instrument sales in Philippines as an example. Now turning to slide 11. The biosupplies division revenues grew 57% at constant currency, benefiting from the integration of access biologicals. All three subdivisions have reported a strong revenue growth, with biosupplies diagnostics revenues more than doubling. And now I hand it over to Alfredo.
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