Recordati Industria Chim

Good afternoon. This is the CORCO conference operator. Welcome and thank you for joining the Recordati 2020 first nine-month results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Marianne Tacchke, Director of Investor Relations and Corporate Communications of Recordati. Please go ahead, madam.

Good afternoon or good morning to everyone, and thank you for attending the Recordati conference call today. Andrea Recordati, our CEO, and Luigi Lacorte, our CFO, will be presenting our first nine-month 2020 results. For a better understanding of his presentation, please access the set of slides available on our website, www.recordate.com, under the Investors section and Presentations tab. At the end of the presentation, we will answer any questions you may have. Please go ahead, Andrea.

Thank you, Marianne. Good afternoon or good morning, ladies and gentlemen, and thank you for joining our first nine months results. So despite the continued challenging environment, performance across the group has shown notable resilience. Net revenue is slightly down by 0.6%, which is mainly due to the pandemic's impact on our reference market and severe foreign exchange headwinds, which stand at minus 1.7% for the first nine months and minus 3.9% in the third quarter. Profitability remains strong as a result of cost containment and improved product mix. EBITDA in the first nine months is $438.8 million, or 40.1% of sales, which is up 7.1% versus last year. Net income is $274.1 million, or 25.1% of sales, again up 8.1% versus 2009, the same period. An adjusted net income is 317.5 million, or 29% of sales, which again is up by 12.23% versus the first nine months of 2019. Sales of Signifor and Signifolar in the launch of Istoriza showed strong progress, contributing with 53.8 million of net revenue year-to-date. Istoriza is now on the market in the US, France, and Germany, with sales generated in line with the objectives. And we expect more than 10 million for the full year 2020. Activities leading to the addition of new products have also gone ahead in a recent time. We've launched cystic drops in the U.S. following the FDA approval. And this provides an important treatment option for cystinosis patients with corneal cystic crystal deposits. A pipeline was reinforced thanks to an exclusive license obtained from ARS Pharmaceuticals, a private U.S. company, for ARS-1, epinephrine nasal spray in late-stage development for emergency treatment of severe allergic reactions that can lead to anesthesia. The agreement grants commercialization rights to ricordati in the EU, UK, Russia, CIS, Turkey, Middle East, and other markets. Returning to the financials, our net debt at the 30th of September stands at $845.9 million, a reduction compared to the $902.7 million of the end of 2019, which reflects strong cash generation of around $267 million before milestones, net share repurchases, and dividend space. Just as a reminder, On the 1st of October, Recordati Board of Directors approved the proposed incorporation through reverse merger of FIMEI SPA and Rossini Investimenti SPA in Recordati SPA. As we mentioned in the dedicated call that we had on the subject, there would be no change to the respective shareholders in Recordati of its majority shareholder and other shareholders. There will be no change to reproductive financial position, strategy, or capital allocation policy, and the merger plan is subject to shareholder approval with a plan effective date in the first half of 2021. I will now leave the floor to Luigi Lacorte, our CFO, to take you through in more detail our first nine month results.

Thank you, Andrea, and good afternoon and good morning, everyone. On page 3, I'll start as usual with our corporate product sales, which account for close to 70% of revenue, and I'll start with our Lyric and EDP franchise. And starting with Zanidip, Zanidip continues to grow by mid-single digits in most, if not all, of the markets where we have direct selling organizations. The year-to-date growth of 3.8%, being lower than previous months due in part to the effects impact in Turkey, which is our third largest market, but also and primarily due to the normalization of shipments to our international licensees, which has been commented at the end of June, had higher than usual shipments in the first month of the year. Zanadip sales also reflect the drag in France from measures which were announced at the beginning of the year, which favored the dispensing of generics in pharmacies, measures which account actually for the majority, if not most of the reduction in Zanipre, so in Lyrica and Alapril combination year-to-date. Sales of Urorec of 58.5 million, are reflective of generic entry in key markets as of February of this year. And I'm pleased to say actually Ulurek is holding up in line, if not slightly better than Plan, in the face of the generic entries, with the sales in Turkey, where we don't have generics, continuing to grow. Similarly, Livazo also continues to grow. In this case, with generic entering our key markets, in particular Spain and Portugal, in the month of August, but with revenue in Turkey, Switzerland, and Greece, and again, other markets where we're not expecting a generic continuing to grow. Our metopolar franchise, is continuing to grow at high single digits, primarily in Central and Eastern Europe, and particularly in Poland, Romania, the Czech Republic, and CIS, and those markets where we've established direct selling organizations most recently. Other corporate products actually are the ones which have faced a bit the brunt of the COVID impact over the past months. Other corporate products include also corporate OTC, but actually the largest part of the reduction versus last year is driven by a select number of products which are particularly affected by the pandemic, and the main ones being, as we commented before, CitraFleet is impacted by lack of hospital procedures over the last months, and Isofra, respectively, anti-infectives and cough and cold medicines, which are particularly impacting Russia and Ukraine, and other probiotics and pediatric products in Spain. Drugs for rare diseases of 232.4 million grow at 31.2%. clearly affecting the strong contribution to revenue from our new endocrinology franchise, with both, as Andrea mentioned, Signifor and Istoriza progressing well and in line with expectations, specifically Signifor, Signifor-Lar on a like-for-like basis, continuing to grow above 10% relative to 2019. And ISDUISA revenue now above $5 million and on track to deliver on the four-year objectives that we set. Other products in the rare disease portfolio also driving growth, Carboglu, Cystidrops, Lidaga, and Juxtapede, just to mention the main ones, with growth of our legacy business somewhat held back by the erosion on panimitin in the U.S., which, however, I'm happy to say we've seen stabilize and, in fact, over the last couple of months, recover to the level of monthly sales achieved in the month of March and April and, therefore, bouncing back from a drop that we saw over the summer months where patient traffic to inclusion centers in the U.S. was more challenged. In terms of the key products on slide four, you'll see as usual the breakout of revenue for the key component parts of the portfolio. Noteworthy here obviously is the continued growth of rare diseases in the mix, which now accounts for over 21% of revenue. And with the share of OTC actually broadly stable. relative to previous months. And in fact, OGC year to date was impacted by the pandemic, is declining by low single digit and starting to show signs of stabilization. On page five, again, as usual, our revenue by key geography. with really a picture very similar to the one shared at the end of June with the exception of the other international sales which are, as I mentioned already, largely reflective of normalization of shipments to international licensees of their Canadian and also of the strengthening of the Euro versus most currencies. But starting from the top, Italy, with sales of close to 203 million, a decline of 5.7%. Yes, an impact of COVID on real floor, our cough and cold medicine, and to some extent on the OTC portfolio. But for the large part, a decline which is in line with expectations due to the generic entries on psilocybin, and the generic competition in the back end of 2019 on pantoprazole and lovastatin. We've seen good growth in Italy over the period of Regilla, Cardicor, and of course of Signifor contributing to revenue really across the geography, but Italy being an important one. Friends, I've mentioned already a large part of of the decline is really driven by the new measures which were introduced at the beginning of the year, which is also a bit, has led to slightly higher, somewhat higher than expected erosion on psilocybin, offset by the performance of psilocybin in other markets, but particularly punishing the French business. Once again here, a strong contribution from Signifor, and also in France, a good start of sales of East Teresa over the last few months. Germany revenue and the German business in general are somewhat less impacted by the pandemic, with revenue broadening in line with last year. There's long erosion really being due by competition in tenders on Orthoton. U.S. sales, obviously reflecting, as I commented previously, the growth of the rare disease portfolio, and in particular the contribution of Signifor and now also Isterisa and other products, part of that by Panimatin. Russia, other CIS in Ukraine are among the markets where the impact has been toughest. Sales of 69 million down 17.3% versus the first nine months of 2019 reflect 7.3% effects impact in Russia, where sales declined by 11.4% in local currency. Once again, driven by the impact of the pandemic on constant cold medicines and medicines for mild infections, offsetting the growth of the broader portfolio, in particular Zanidib and Proctoglivenol and Livazo, which continue to grow. CIS in Ukraine impacted by very similar dynamics and also down by 15% year-to-date. Spain, again, with a few products in the portfolio that have been impacted by the very strict lockdown in the market, which offsets the growth of Riojila, which was launched in the later part of 2019, and the contribution from rare diseases. And very similar dynamics also in Portugal, where again, I mean, aside from the pandemic, pandemic that we've seen obviously the effect of generic entry of Cilodocin both in fact in both Spain and Portugal and now most recently Livazo. Turkey, Central Eastern Europe and Western European markets together with North Africa are all growing at double digit. Turkey in particular in local currency growing by 14.6%. with a very broad-based growth of both our corporate products and our local products, but Turkey, unfortunately, being faced with an all-time weakness in the Delira and an effects impact year-to-date of 19%, clearly holding back our progress on a reported Euro basis in the market. growth, double-digit growth in Central Eastern Europe and other Western European countries is really driven by double-digit growth in Metropol, which is growing very nicely, and in Poland, the Baltics, Czechs, and the Nordics, particularly, once again, those markets where we've established direct selling organizations in more recent times. and North Africa sales growing both on the back of export sales to the regions of our Kassen and Bouchara portfolio, but also double-digit growth of our affiliate in Tunisia, Opalia Pharma. On page six, you'll see again as customary the breakout of our revenue, which is unchanged broadly relative to previous quarters. and just illustrates the diversified footprint of the group. Moving to slide seven and looking at our P&L, as commented, revenue marginally below last year or plus 1.1% at constant exchange rates. Despite that, despite the smaller, the marginal drop Our gross profit is actually up versus 2019 at 785.6 million euros or 71.8% of revenue with the margin improvement driven by the improved mix both in terms of country but also obviously in terms of composition of revenue with rare diseases representing a greater share of the business. SG&A expenses are favorable to a prior year with a reduction of close to 5%, being mostly driven by selling expenses, which stand at 23.5% of revenue, down 6% versus last year, really driven by the impact that COVID has had on levels of activity in the field, in particular in Q2. We have restarted, as we commented in the past, activities in the field in June, July in most markets, but clearly at a somewhat reduced pace and now faced once again with restrictions in some markets. Obviously, we've seen the news of France today. G&A cost at 4.9%, marginally up versus last year. behind additional investments that we made behind our endo franchise. R&D expenses at 9.7% of revenue are growing mostly due to the increased amortization of the intangibles that we acquired from Novartis and also other intangibles we added over the course of 2019, but also growing on the back of the studies that we took over from Novartis. Other expenses of $4.9 million are really reflective of the non-recurring COVID-related costs, which stand at $5.2 million at the end of September and which are for the vast majority made up of the donations which The group agreed at the start of the pandemic. The improved mix and the discipline around cost has helped to lead operating income of $364 million at 33.3% of sales and EBITDA of $438.8 million We still stand above 40% of revenue with the growth of operating income slightly lower than the 7% growth that we're seeing at EBITDA level because of the increased amortization and the non-recurring cost. So again, from our perspective, a very strong operating performance, which coupled with, as commented in prior quarters, lower financing charges and a lower tax rate benefiting from the patent box and different country mix of our business is leading to net income growth in the nine months of 8% and adjusted net income growth of 12.3%. Shifting to slide eight and just looking at the different contribution of our two businesses, three things that highlight. One, clearly the growing relevance of rare diseases, which now account for close to 27% of both EBIT and EBITDA, number one. Both of our businesses, both the rare disease and the specialty and primary care business, continue to show margin improvement relative to the same period last year. And third, and actually this you do not see from the slide, but for those of you who will read the finer details of our financial release, you may notice that our EBITDA for the specialty primary care business of 322 million euros in 2020 is exactly in line with the performance in the first nine months of 2019, which in a year impacted by COVID and with the loss of exclusivity of Cilodocin, I think is a significant performance of that business. And finally, from my side on slide nine, Alongside the continued positive operating performance at a sort of profit level, we continue to see a strong cash delivery of the business. A reduction in 56.7 million in our net debt reflects payments of 110.5 million euros in dividend a $90 million of milestones to Novartis for Cignafor and Istoriza, and net 15.6 million euros of share repurchases, implying an underlying cash flow before these items of 267 million euros, which is close to 100% of net income. Net debt is just below 1.5 times trading 12-month EBITDA with cash on hand of 278 million euros. So a strong balance sheet position. And with that, I'll turn back over to Andrea for the guidance for the remainder of the year.

Thank you very much, Luigi. So regarding the full year 2020 outlook, with respect to our full year outlook, we're still expecting EBITDA and adjusted net income to be near the lower end of our 2020 guidance range that issued in February, which I remind you was 580 to 590 million euros for EBITDA and 480 to 480 million euros for adjusted net income. So the reduced operating expenses due to the reduced field activity and record office cost discipline offset the lower revenue and the incremental investments in the U.S. is to lead a launch. We need to confirm that EBITDA margin improvement is on track and to be able to maintain the lower end of our EBITDA and adjustment income targets. Revenues are expected to be marginally below the previous year due to both COVID-19 emergency continuing to impact demand also in the fourth quarter. and strong effect headwinds expected to affect sales by minus two to minus 3% over the year. Signifor Signifolar, Istoriza reported net revenue are on track to deliver 80 million euros in the year, of which Istoriza, as mentioned before, sales are expected to be about 10 million. The COVID-19 lockdown impact on activity spend is expected to continue offsetting lower revenue and incremental investments. like I mentioned just before, and we expect tax rates to be between 22% and 23%, thanks to a slightly better country mix and higher ongoing patent box benefits. Dividend payout policy is confirmed at 60% of reported net income, and an interim 2020 dividend of €0.50 per share is to be distributed in November. Lastly, before we move on to the Q&A, Being her last investor call as she's retiring at the end of this year, I would like to take this chance to really and heartfully kind of thank Marianne Taschke for the outstanding job she has done over 20 years in managing the investor relations protocol. Marianne, really thank you so much for your dedication on the world of professionalism and for all that you have done in all these years for this project. You will be greatly missed. So thank you, Marianne.

Thank you, Andrea, for your kind words.

So I think we can break up now to the Q&A session.

Operator, can you please open the Q&A section?

Excuse me. This is the Coruscant Conference operator. We will now begin the question. An answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one at this time. The first question is from Joe Walton of Credit Suisse. Please go ahead.

Thank you. I too would like to express my thanks for Marianne's help over many years, a really excellent IR, and your successor has got big shoes to fill. And my two questions, please. Looking at the third quarter, it looks like if we exclude the first-time contribution of Signifor Isterisa and we take out Currency, then it looks like your underlying sales have declined around about 7% which is actually a bit more than we saw in the second quarter. I wonder if you feel that there are any one-time aspects to that or whether that is a reasonable rate of decline to be thinking of for the fourth quarter. My second question is to do with the costs. You've obviously managed to offset the lower than expected sales with lower-than-expected costs. Are there any elements of this that you think you can carry on into 2021 and beyond, i.e., are there any new sort of marketing processes or things that you've found? Because clearly we're trying to look at how we should be forecasting margins into 2021 and beyond now. Many thanks.

Yeah, so... In terms of your question on the Q3 revenue growth, Joe, I think it's a little bit hard to predict at the moment what we've seen because of the evolving nature of the pandemic. I mean, what we've seen to date is that to the extent that the top line is impacted, costs are impacted as well. And if you like, there is a natural hedge there. Of course, the revenue in Q3 is impacted by a number of factors that we'd expect to normalize in Q1 of next year, being mainly the generic entry on silodosine and also being the drop in erosion that we saw in France for measures that were introduced at the beginning of this year. So what we're not going to be sort of updating today, any sort of longer term guidance in 2021, my short answer would be no, I wouldn't take that sort of Q3 trend, which clearly aside from those is impacted by the pandemic to extrapolate. In terms of the cost, as we've commented in the past, I mean, we do, I do expect, and what we've said in the past is two things. A large part of the savings are driven by lower activities in the field, which we've already started to see returning or coming back in the last few months, which is also shown by the sort of slightly higher selling costs as percent of sales in Q3. But some are also due to many events, large events, conferences, et cetera, being canceled and or becoming sort of digital in nature. And I would expect this probably to become a more lasting theme, if you like, as people learn to interact, particularly for these events virtually as opposed to face-to-face. Now, again, what we've said before is that our margins are tracking, underlying margin are tracking slightly favorable to the guidance which had been set in 2019. But again, we'll give a sort of fuller revision of that when we announce targets for 2021.

And could I just confirm, you've now got Cigna 4 control now in all of the markets? Has the registration been passed over to you? Because I know earlier this year some of the revenue was being sort of booked in other revenues rather than in sales when you didn't have the full rights to it. Has that complete transfer happened now?

This is Andrea, Joel. Yes, the transfer has been completed now.

I confirm. There's some small market, international market, but minor.

All the major countries where we operate, we have the marketing for this.

Thank you. The next question is from Nicola Storer of Kepler Chagrin. Please go ahead.

Yes, thank you. Thank you and good afternoon, everyone. My first question actually was on 2021 expectations. Probably I know that you cannot answer and you will explain us more on the year with the update of the plan, but just as a feeling probably the targets that you gave to the market at this moment seems out of reach in particular in terms of revenues considering the effects of COVID and also the fact that it seems you are late on M&A. So if you can comment a bit on that. And the second question is a curiosity about the new epinephrine spray that you will distribute in Europe. My understanding is that one of the main issues with epinephrine is the fact that it deteriorates with heat. And so my question is, does this new product endure this kind of problem or not? Thank you.

Let me do the first question, then if you can repeat the second one, because honestly I wasn't really clear on what you asked, but maybe Luigi got it. So, we plan to communicate guidance for 2021 in February, like for established practice, okay? And so it is a bit early today, okay, to kind of, you know, give you any guidance on 2021. Regarding for an updated plan for beyond that, so basically our three-year plan, we believe that for this to be helpful and meaningful, it needs to be done on the basis of... Excuse me for that. Someone had their phone on. It needs to be done on the basis of a somewhat more stable macroeconomic and market outlook, which obviously now is extremely difficult to predict considering the situation, Europe and the global situation with the pandemic. It is clear now that the pandemic will continue to affect the markets through Q4 and potentially also into the first half or part of the first half of 2021. So it is likely we will do this a bit later than in the year, hopefully in the month of May as done in 2019 when we'll do the capital markets day for presentation of our three-year plan. Regarding ours, I did not really get the question in its entirety.

I mean, clearly, the key advantages that we see from Nessie is the mode of administration and the speed with which it is absorbed by patients where administered. We're not sure, though, we heard exactly what you referenced as a key issue of current.

Exactly.

This is what I meant.

So this is a nasal spray, obviously.

no i mean the problem with the epipen which is what is available now for for patients suffering anaphylaxis is that it cannot be kept at above 25 degrees because otherwise it deteriorates because epinephrine deteriorates with heat so i was wondering if this new product could in some way fix this this issue which is quite relevant

Yeah, I don't believe we have that off the top of our heads, Nicola. I'm sorry. We need to come back to you on that one.

Okay. No worries. Thank you.

The next question is from Martino de Ambrogio of Equita. Please go ahead.

Thank you. Good morning. Good afternoon, everybody. First of all, I also thank very much Marianne for her collaboration over Thank you. The first question is on Isturiza. If you could provide an update on the timetable for next launches and just to double check if I'm right in estimating the next year 30, 40 million as a range for Isturiza standalone or if you prefer together with SigniCorea as you prefer. The second question is on the guidance. Just to understand, since we are back to lockdown in some countries, if your guidance is factoring in some restocking as it happened in the first quarter, or if you perceive something is happening in this sense or not?

Yeah. So on Easter Eiza and to your question, I mean, we're not going to give sort of 2021 guidance. I mean, what we said is Easter Eiza, we expect to deliver more than 10 million euros of revenue in the course of 2020. We won't give guidance for 2021. I think I heard you mention 30, 35 million being your number again. Maybe the only comment I'll make is it seems a bit on the low side, frankly, but we're not going to be more specific than that at this stage. I couldn't pick up the first part of your question on this, Teresa, in terms of what the next milestone is.

For the next launches, the timetable for the next launches, Teresa, in the different countries.

Right, so we are launching it in France and Germany. It is available on a hospital free basis in Italy. And we expect it to... Of course, it's launched in the US since May. And we expect it to... I think the big question in Europe is not so much the launch, it's sort of the availability of reimbursement, which will... will sort of happen over the course of the next month and mostly in 2021. And I believe we've mentioned for Japan, 2022. I mean, Japan, it is slated for back end of 2021, 2022. In terms of restocking, no, I mean, frankly, we're not anticipating a restocking at this stage in Q4. Our sense is that the stocking that we saw in Q1 was mostly as a result of the trade fearing restrictions to transport and supply of medicines, which we saw was not really an issue at any point over the last few months. I mean, some generic companies were impacted for a short period of time, but in the grand scheme of things. So I don't believe and we're not anticipating in our guidance, a significant restocking in the next weeks leading up to the end of the year. At least that's the current view.

Sorry, just to complete the question around this reason, as I said, it would be more kind of harder on the 2021 targets and clearly, you know, the rollout and, you know, of the plan, the launch plan. And like Luigi kind of pointed out correctly what really counts is the reimbursement. But for the moment, we're expecting for 2021 to launch in the Nordics, Netherlands, Switzerland, and Central East in Europe. These are the main markets that we're expecting for 2021, and the others will follow in the years to come. But clearly, this is a moving process. It's a process with a lot of moving parts, so there might also be changes with the additional third countries in 2021. But at this moment in time, I can give you this market.

Thank you. If I may follow up on the EuroRef and Livazo, just to understand if there is an update on what is the normalized level of sales after the generic arrival. So I don't know if you can remind us what was your view and if it changed after the first sales of the generic versions.

No, I mean, it's unchanged. We expect $7 million for this year. Obviously, having generics having launched in August, that impact will be realistically a bit higher next year, but so far in line and, in fact, slightly better than planned, both for Basel and for St. Augustine, but marginally better than planned.

Okay, thank you.

The next question is from Isacco Brambilla of Mediobanca. Please go ahead.

Hi, good afternoon everybody. I have three questions. The first one is on U.S. elections. Is there for you any outcome which may be seen as more favorable than other based on electoral programs and so on? of the two parties. The second one is on your capex. If I saw correctly in the financial report, there was quite a substantial increase in capital expenditure this quarter. I guess maybe there is the cash out for the license with ARS included. If yes, can you quantify how much was related to this cash out. And that's it for now.

Thanks. We don't have any comments at the moment in time. We will have to see how this went. So we have no particular expectations one way or another regarding our portfolio in the US. In terms of...

No, and in terms of the second question on CapEx, looking at the sort of cash flow statements, investment in PP&E in terms of cash flow was $13 million in the first nine months of 2020, $14 million in the first nine months of 2019, so broadly comparable. The increase is obviously on the intangibles side. 92 million relative to 61 last year, and that's really reflective of the milestones that we paid for the approvals of Eastuliza in Europe and then in the U.S., and also a first commercial milestone of $10 million for the launch in Germany. So that's really the main items in terms of CAPEX, if you like.

Sorry, can I just finish off and answer for Matteo De Broglie from before? I only mentioned the countries already in the EMEA region when it comes to the launch of historisa that we expect in 2021. We're also expecting to launch in Japan. and also we're starting to start selling at a main patient use basis in Colombia, Israel, and Argentina. This is just to give you the full picture of our expectations. And that's what we are assuming in our .

The next question is from Casey of Goldman Sachs. Please go ahead.

Thank you. Thank you for taking my question. First of all, I would like to thank Marya for all the help and support she extended over the years. Thank you again, Marya. Onto the questions. Onto the questions, I have two, please. On the first one, in Turkey, beyond the obvious FX impact, are you seeing any headwinds in the region? Do you expect demand to be impacted going forward with personal finances dwindling there? And the second one, If I look at your other international sales in 3Q, looks like it's declined around 20% in sales after growing around 11% in first half. Was there any product or region which would explain this significant change in performance, please? Thank you.

In terms of Turkey demand, there has been some impact because you recall the local currency term. We've seen Turkey grow in previous periods at a much higher rate. Turkey is a market which is rather sensitive to promotion. the underlying fundamentals remain positive. And despite the upheaval, we're still seeing the business growing by 14% on a local currency basis. So we still see Turkey being a key growth driver for the group. Of course, hopefully at some point, the valuation of the VROP will hit a ceiling and, in fact, rebound. But I think in terms of underlying demand in the country, our view is that that remains positive. And our business continues to actually perform positively or even sort of vis-à-vis the market in Turkey. International sales is really driven by what I mentioned, which is The timing of shipment to licensees can tend to be a bit lumpy. I think I commented at Q2, we've seen some very high purchases in the first part of the year in some of our international businesses. And we've seen that normalize now in Q3. And that's really the end. It's particularly on their Canadian pin. And that's what you're seeing there on the sort of international sales line when looking at sales by geography.

Thank you.

The next question is from Harry Sefton of Jefferies. Please go ahead.

Yes, thank you for taking my questions. I'd also like to start by thanking Marianne for her support over the years. She's been extremely helpful, and I wish you a very happy retirement.

Thank you, Harry.

To start with, could I start on the endocrinology franchise? You mentioned that you've seen double-digit growth in Cignafor and Cignafor LAR. Just curious whether you're seeing that in acromegaly patients or Cushing's patients or a bit of both. Also on endocrinology with Isterisa launch. I know it's early days, but can you give us a sense of whether you're seeing patients uptake in the Cushing syndrome wider indication outside of the Cushing disease indication. As I understand, your guidance is really predicated on just the Cushing disease indication. And then my third question is just a bit more of a broad market question, but are you anticipating any drug pricing headwinds over the next year or so in any of your major markets and any color that would be much appreciated. Thank you.

So, thank you for the questions. So, on endo and the Singapore growth in particular, really that's across both the indications. And in fact, I think that we're most pleased with is you know, in the U.S., where we've obviously were more advanced, a little bit more advanced in the launch of Esteriza, the fact that we've seen new patient acquisition on Singapore in parallel to that is obviously, you know, very encouraging because, you know, one of our assumptions is that actually the two can be complementary, even if there will be a little bit of inevitable cannibalization, but actually that the portfolio cells can work well, and certainly the early signals are that that is the case, because we have seen a step up in number of patients in Signi4 and Signi4-LAR, and that is across the two indications. In terms of your question, and it's Teresa, and which type of patients and indications is that coming from, I really think it's too early, and we're not going to try and dissect that, nor to sort of second guess whether Some physicians may be seeing the benefit of Estreza beyond the current label. I mean, obviously, we've wanted to be clear on what our guidance is pegged to. But, you know, we know it is a space where physicians historically have been using products which were not strictly studied for Cushing's. But it's too early days to dissect that any further. In terms of drug pricing, it's been a fact of life in the sector over the last decade or more. We're not expecting that to be any different. Various countries with different points in time introduce different measures. We haven't built into our thinking. a significant change from what has been status quo in terms of year-on-year erosion over the past year.

For the next 12 months or so, we don't have any particular assumptions on price cuts. Unfortunately, like you've seen with France this year with the introduction of Article 66, that came out of the blue. So it's difficult to predict, but I think the record that we have shown over the years that it's been able to kind of withstand and adapt to this situation and challenges.

That's very helpful. Thank you. I'd just like one quick follow-up on the generic impact for Eurorack and Livazo. I'd just like to, if you could give us a sense of whether you've been able to offset some volume impact by cutting prices? I guess the question would be, have you seen a significant volume impact to both of those products with generic entry, or have you been able to offset that with pricing?

Yeah, so the consistent strategy of the group has been to reduce price, continue to promote, to fight for volumes. and that has proven successful in the past and I think is holding up true also in this case with unfortunately again the one exception of France where unfortunately we've not seen the volume recovery that we would have hoped and in fact have seen a bit more erosion offset by the performance in other markets when it comes to siloedosine but because of the measures that we've referenced a few times France is the one outlier. But other than that, the answer is yes, we've seen volume holding and most of the impact being price-related. And usually it's price which impacts upon entry. So again, we would expect that after a year or so to start normalizing.

That's very helpful. Thank you.

The next question is a follow-up from Joe Walton of Credit Suisse.

Please go ahead. Just a few, please. I think I'm right that you said that there was a 10 million milestone that you paid on the launch of Isterisa in Germany. Are there any other significant milestones that we should be factoring into the cash flow going forward? My second question is on the Cushing's syndrome. It isn't clearly in your label. Is there work that you are going to be doing? Would you envisage initiating R&D to formally expand that indication? And if so, over what timeframe might you do that? And my final question is one to do with M&A. historically, you've had roughly half your growth from acquisitions and half your growth organically. And we've had a period, apart from the Cigna for Isterisa deal, which is obviously significant, where we haven't seen much in terms of deals. I wonder if you could just tell us whether your pipeline is as full as it normally is, if there's a particular reason why we haven't seen anything, maybe prices are too high or you've been too focused on executing what you're doing, and whether we should still be looking for a balance in terms of deals for both getting new products in, the Isterisa type deal, and also getting more tail products in from other companies, you know, the more like the Sellecken type deal.

Okay, maybe I'll start with this last question, Joe. Clearly we are, you know, our corporate development machine is quite efficient and believing when I say that we are constantly looking at different deals and we've looked over a lot of deals and also partially negotiated some for the year. Clearly it happens with some deals then we don't find the common ground on pricing and so forth. Sometimes because it's expensive, sometimes because there's also other issues behind the actual portfolios or products that we're looking at which are not related to price only. that come out obviously from due diligence from a you know a very far with due diligence that record that as you know is quite uh quite far about um this remains part of a strategy okay so i have to reaffirm that again this remains a key part of a strategy uh going forward uh we have things that we are progressing on at this moment in time i don't know obviously i cannot tell you and give you you know, any guidance if they're going to materialize or when they're going to materialize. But let's say that we are in the process of, you know, of negotiating some deals in order to kind of, you know, bring in new assets for business development activities. We are still going to be looking both at the products, you know, that tail products, but also coming out, you know, for SPC business, but not only also, you know, for assets similar to, you know, the stories of, And then there's obviously all the licensing-in kind of flow of products, and there's a lot of tools for very strong licensing-in team, which is clearly looking at a lot of dossiers and opportunities in the United States. So the answer is yes. There's been some time since we've done the deal on Novartis, some time, I wouldn't say been such a long time because we didn't know what this last year um hopefully we will see if we manage to do close something in the later part of this year if not if not surely in uh in 2021 but let's say that the machine is working non-stop on this yeah and um maybe uh from from my side uh on your first two uh questions in uh in reverse order if you if you allow me on the um

On your question around the broadening of the indication, we certainly plan to engage with the FDA around the broader indication. We believe that the data are already robust enough and we have the data available to support a potential filing for the new indication. But until we will have had those full discussions with the FDA, it's difficult In other words, we don't necessarily feel that we need another study to achieve that. Also, proof of that is the fact that it has been approved in Europe with the broader label. We now also have the results of the LINC4 study. In terms of your question around milestones, I mean, you may recall milestones were not disclosed at the time of the deal. However, when we are already in our end-of-year accounts, we published sort of in a note to the account both the milestones which were likely linked to the approval and those which were deemed probable being four milestones of equal amounts on approval of pricing in the four key European markets. These are the main ones outstanding in terms of on Easter Eid. Potential other milestones down the road are linked to some of the technical transfers of Singapore LARC in particular. which, however, will depend on how and if that transfer occurs. So hopefully that addresses your questions around this reason.

Thank you. Mr. Recordati, there are no more questions registered at this time.

Okay, thank you all for attending the call, and we'll keep in touch somehow.