Hypera Sa S/Adr

Good morning, ladies and gentlemen, and welcome to the Hypera Pharma conference about the 2025 earnings conference call. We have Breno Oliveira, the director, and Mr. Roman, who is the director of investor relations. This is going to be recorded, and the recording can be accessed on www. All participants will be only be watching the video conference during the call. Then we will start the Q&A session where further insert instructions will be given. Information contained in this conference call may contain forecasts or statements about future expectations, which is subject to known and unknown risks and uncertainties, which may lead these expectations to not become a reality or to become substantially different from the expectations. Now I'll give the floor to Mr. Brenno Oliveira, who will begin the presentation. Please, Mr. Brenno, you may proceed. Good morning. Thank you for joining our 2025 earnings conference call. The past year was marked by important operational and financial advances, which we'll talk about throughout the presentation. I'll begin by discussing our growth on slide number three. Our sellout grew 6.8% in 2025 with an increase in market share across the categories in which we operate. The launches in 2025 contributed 1.1 percentage point to our sellout growth during the year. We were able to accelerate growth after the successful completion of our working capital optimization process in April 2025. We grew 8.3% in the third quarter 2025 and 7.4% in the fourth quarter of 2025, outperforming the growth of our addressable market in both periods. The acceleration of our sellout growth is also the result of improved inventory management. at our customers, driven by initiatives implemented during the working capital optimization process, which allowed us to focus even more on seller performance. Moving to slide four, as mentioned in previous conference calls, we successfully completed ahead of schedule the working capital optimization process at the beginning of the second quarter of 2025. To achieve this, we changed our commercial policy with our customers, which resulted in a better distribution of order receipts, invoicing, and product deliveries throughout the months. We also strengthened our supply chain team which now monitors inventory levels at our customers and on a daily and more detailed basis by region distribution center and sku helping ensure that we did not experience product shortages at points of sales and consequently avoided negative impacts on our solid performance We also made adjustments to our sales structure to achieve greater alignment with the new commercial model implemented during the working capital optimization process. These adjustments generated important gains in commercial efficiency, contributing to the recovery of our profitability after the conclusion of the process. As a result, beginning in the second quarter 2025, we reduced our average collection period to approximately 60 days, almost half of what it had been previously, and in line with our initial objective. Our investment in working capital now represents 30% of our annualized net revenue, a reduction of approximately 20 percentage points compared to the second quarter of 2024. Our expectation is that, going forward, working capital investments will not exceed this level. The combination of solid growth and reduced working capital investment contributed to a record operating cash generation of $2.6 billion in the year and allowed us to maintain shareholder remuneration and our planned investments. In addition to the important operational and financial advances of 2025, we strengthened our corporate governance and the sustainability of our business, which I'll discuss in more detail on slide number five. We celebrated a shareholders agreement and return team joined the control block, further strengthening our corporate governance and strategic decision-making process, contributing to value creation for our shareholders. We also updated the composition of the people audit and governance and sustainability committees with the objective of strengthening the independence, technical expertise, and governance of the committees that support the board of directors. We also completed the migration of our management system to SAP S4 HANA without any significant impact on our operations. This is a robust platform that will enable great efficiency and agility, delivering gains in performance, process simplification, information quality and integration between the applications used by the company, increasing our operational productivity. With this migration, we are creating a solid foundation for new technology investments aimed at supporting our long-term growth. I will now hand the floor over to Roman, who will provide more details about our results. Thank you, Breno. Good morning, everyone. Starting with slide number six, in 2025, we delivered a revenue growth and consistent sell-up expansion with a net revenue of $7.7 billion, representing a 3.4% increase compared to the previous year. This growth was below the advance in sell-up mainly due to two factors. the temporary impact on sales resulting from the working capital optimization process initiated in third quarter of 2024 and completed in the second quarter of 2025, and the reduction in net revenue in the institutional market impacted by a lower level of sales to the public sector. Our gross margin was 59%, a level similar to that recorded in 2024. It's worth remembering that the gross margin in both 2024 and 2025 was impacted by changes in the mix of products sold and by lower operating leverage resulting from the working capital optimization process. In the fourth quarter of 2025, gross margin reached 61.6%, an increase of 0.4 percentage points compared to the third quarter of 2025 and 0.7 percentage points above the level recorded in the second quarter of 2024, the period prior to the working capital optimization process. This result confirms the normalization of gross margin following the completion of the working capital adjustment. Marketing expenses increased 11.3% in 2025, a level above the sellout growth. This increase mainly reflects higher investments to drive the growth of our brand portfolio, particularly through digital media. Selling expenses increased 2.7% in the year and 6.8% in the quarter compared with 2024 and the fourth quarter of 2024. The growth below sellout both for the year and the quarter reflects operational synergies obtained from the reorganization of our sales structure carried out in the first quarter of 2025 as previously mentioned by Brano. General and administrative expenses declined both in the year and in the quarter, compared with the same periods of the previous year, mainly due to a reduction in administrative structures and expenses, reflecting our discipline in cost management. As a result, a bid down from continuing operations reached 2.1 billion in 2025. In the fourth quarter of 2025, the EBITDA from continuing operations was approximately 750 million, with a margin of 33.5%, a level similar to that observed in the previous quarter. Net income from continuing operations decreased by 11% in the year mainly due to two factors. Lower operating results as a consequence of the working capital adjustment and higher financial expenses. Moving now to slide 7 on cash flow and leverage. We recorded operating cash flow of $2.6 billion in 2025, the highest annual level in the company's history, reinforcing the strong cash generation capacity of our business. This performance mainly reflects the reduction in working capital investments, which fell to approximately 30%. of annualized net revenue starting in the second quarter of 2025 after the completion of the working capital adjustment process. We invested approximately $840 million in property, plant and equipment and intangible assets with highlights including scopolamine extraction site, expansion of production capacity at the Serra plant and investments in innovation, research and development, reinforcing our long-term growth strategy. Finally, Our net debt ended 2025 at $7.7 billion, equivalent to 2.6 times the annualized EBITDA from continuing operations of the fourth quarter of 2025. With that, I'll give the floor back to Bruno for the closing remarks. Thank you, Roman. In 2025, we accelerated the growth of our sellout, recovered our profitability levels, and delivered strong operating cash generation following the successful completion of the working capital optimization process. 2025 was a year of adjustments and of preparing the ground for the company's sustainable and profitable long-term growth. We started 2026 better prepared to capture the main opportunities in the Brazilian pharmaceutical market with a lighter and more profitable operation and the expectation of strong conversion of our results into operating cash flow. We should highlight that for 2026, we see opportunities to further reduce our investment in the working capital through reduction in internal inventories of raw materials and finished products. We remain the only company with a leading position across all segments of the pharmaceutical market and with the strength of our leading brands and our innovation pipeline, we are very well positioned to capture medium and long-term growth opportunities. For 2026, We already have important line extensions planned for our leading brands, and we are seeking to explore new markets, including large markets that have recently lost or are about to lose exclusivity in the short term, such as the semaglutide market. Thank you. Now we'll open the floor for the Q&A session. Thank you. We'll now start the Q&A session for investors and analysts. If you wish to ask a question, please click on raise hand. If your question is answered, you can leave the line by clicking on the lower hand. The first question comes from Mr. Joseph Giordano from JP Morgan. Please, Joseph, your mic is on. Hello, good morning, everyone. Good morning, Breno and Ramon. Thanks for taking my question. I'd like to explore three main aspects. The first one about the non-retail market. The expectation is to try to understand how much that offended the inventories and working capital throughout the year. You have to maintain a buffer to cater to the requests of the government, even if it's through distributors, and that has an impact on the inventory line. The second point, which is twofold, we see a contribution of more or less one point of the growth coming from new releases. So semaglutide, you said at the end, that's the point number two. I'd like to understand how we should look at semaglutide, how it will... contribute throughout 2026 and 2027. And lastly, I'd like to understand at which stage you are when it comes to the license for semaglutide and how you see the market potentiality, especially for the second half of the year. Thank you. Good morning. Thank you for the question. I'll take the first question and then Breno can take the rest of the question. Well, the institutional market maintained a lower pace, which we've been seeing in the previous quarters, especially due to sales to the public sector. We don't expect any big changes for next year, so it tends to grow closer to the current retail portfolio. So the dynamics shouldn't change too much from last year to 2026. What we do have for 2027 are new releases, especially in oncology, that start to help us with the future growth, which is part of the business case of the institutional market. It's an important part, and we see a greater contribution to growth starting from there. And Brenna will take the two questions. Good morning. Well, concerning the pipeline, except for semi-glutide, we believe that we have the possibility of maintaining the same levels. We still have the recent and future releases. We now are starting in the market of muscle pain, with Nosaldina and other brands. We've also recently entered the market of expectorants with a costly molecule that's still becoming more mature in the next few months and years. So we still see room for the growth of the recent releases and also in terms of what we're doing moving forward. Concerning semaglutide, I believe that that's our main bet for 2026. As you know, the patent will expire next week. But so far, no authorization has been issued by the health authority and Visa. We believe that they are working on analyzing the registers. And we believe that we'll be among the first to have our registrations assessed and that will be followed by the release. But after the registration, we need to start the drug production and it should take some months between approval and the release of the medicine. But we are very excited. It's a market of 5 billion reais approximately, the current semi-glutide market. And we believe that with the new players, this market tends to increase significantly. Five billion is restricted to the registered products market. There is a parallel non-audited market. of compounded medicines and also unregistered imports from Paraguay mainly. So the market is actually already bigger than that and tends to get even bigger with a greater availability of high quality products at more affordable prices for end consumers. So we're quite excited, but we're depending on InVisa's approval.

Thank you, Breno and Ramon. You're welcome.

Our next question is from Mr. Arthur Alves from Morgan Stanley. Please, Arthur, your microphone is on. Good morning, Brenno, Ramon. My first question is about the bill that's trying to eliminate the patent of triseptide. I'd like to understand if that's a risk or a potential. I'd like to understand how you see the potential attack to the product that will be the generic of semaglutide, and if there is space to enter this market, if the patent really expires, and if there are any initial conversations related to that.