Recordati Industria Chim

Good afternoon.

This is the Coral School Conference Operator. Welcome and thank you for joining the Recordati Preliminary Full Year 2020 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. Federica De Medici, Investor Relations and Corporate Communications. Please go ahead, Madam.

Thank you very much. Good morning, good afternoon, everyone, and thank you for attending the Recordati conference call today. I am pleased to be here on this call by our CEO, Andrea Recordati, and with the La Corte, our CFO, that will be presenting our 2020 preliminary full-year results and 2021 targets. They will be running you through the presentation. As usual, the second slide is available on our website under the investor section. After that, we will open up for Q&A. And I will now leave the floor to Andrea. Please go ahead.

Thank you, Federica. Good afternoon, ladies and gentlemen. Thank you for joining our 2020 results, preliminary results, conference call, and the 2021 targets conference. So, I would like to start by saying that I think that Recordati has delivered a resilient performance despite the challenging conditions in an unprecedented environment. The revenue is slightly down by 2.3% versus the previous year and or 0.4% up at constant exchange rates. In 2020, our group successfully overcome various challenges. some of which were expected, such as the loss of a marketing exclusivity for two corporate products and the entry of a new drug competing with Panamitin in the U.S., whilst others emerged during the year at the onset of the COVID-19 pandemic. The decline in specialty care, primary care, reflected loss of exclusivity of psilocybin in quarter one and pitavacitin in quarter three. Strong FX headwinds, especially on the Turkish lira and the ruble, Russian ruble, and COVID-19 effects on key market segments, particularly on the cough and cold and products linked to hospital procedures and more discretionary items with products for chronic therapies holding up better, as you will see in more detail later in the call. The growth of activities dedicated to the treatment of rare diseases was strong, recording an increase of 27.9%. Now, this business segment represents 22% of total revenues. Signifor and Signifolar reported double digits in market growth, and we're very happy with Exporito's launch uptake to date and the initial 12 million sales we booked into 2020. The U.S. business was further strengthened with strong initial uptake of space to drop following its launch in Q4, and also with a carbon union indication for organic acidemia, which was approved by the FDA in January 2021. Despite the pressure on top line, we were able to deliver solid operating performance. EBITDA growth was up 4.7% to $569.3 million, or 39.3% of sales, significantly above last year. Adjustment income at $410.4 million, which was up 7.3% since 2019, and equals 28.3% of sales from the 25.8% last year. The group continues to deliver a strong cash generation of around $350 million before milestones, next-year purchases, and dividends distributed. We have also further reinforced our portfolio specifically in support of our specialty and primary care business through new licensing agreements. A license agreement with Art Pharmaceuticals for Arts 1 is such an example, and also obviously the late, just announced agreement for the licensing of Eligard, in Europe, Turkey, Russia, and other countries from TOLMAR. Before handing over to Grigio da Corte, who will provide more detail on our financial performance, let me provide some more updates on our endocrinology portfolio and some details on the eligibility. You can please switch to the next page. So regarding the endocrinology franchise, the commercialization of Signifor and Signifolar is on track, recording net revenue of 67 million euros. The transfer of distribution from Novartis is now completed. Major new markets and new transfers were completed during June and July, and the smaller CEE markets have took place during Q4 of last year. We have new patient acquisitions across all approved indications, and Signifor grew double digits in in-market sales compared to 2019. Moving to Istoriza, the launch sequence was successfully initiated in the U.S. and part of the EU, despite the many challenges posed by the COVID-19 pandemic, which as you can surely appreciate, has quite an impact on the uptake of a launch product. We are satisfied with the early performance of H2O in this market, which is in line with our expectations, contributing net revenues of around 12 million euros, mainly in the US and France. We have strong support from top KOLs and patient organizations. The regulatory process started in March with a new drug application in Japan is on track, and we are expecting to launch in the second half of 2021. Based on what we see so far, we confirm our longer-term focus will be to reach them. Therefore, to achieve a leading market share with peak year sales estimated between 300 and 350 million euros, and potentially further upside from the expansion of the Indication Subscription Syndrome in the U.S. and through our geo-expansion strategies in the territories. Now let's move to our latest business development deal, finalized in January 2021 with Palma International LTD. Last month, we announced the closing of a licensed supply agreement with Palmer International to commercialize Eligard, the proline acetate, in Europe, Turkey, Russia, and other countries. Eligard is a marketed medicinal product for the treatment of hormone-dependent and bad-forced cancer. The agreement provides us with a new product that strengthens our presence in the urological area and fits very well with our geographical footprint. Eligard is a very well-established medication in a slightly growing market, which is worth about $1 billion, according to IMX in Europe, referring to 2019 sales, half of which is represented by no-protein-based products. Among this product category, Eligard has around 20% market share. Annual revenues in recent years were around $100 million. Under the terms of the agreement, we will have economic benefits from the 1st of January, 2021. Reporting net revenue in 2021 will depend on the exact timing of transfer sales and distribution market by market. So for our estimation for 2021, net revenue is around above 17 million euros, with an EBITDA contribution of around 20 million. We paid a crumb cash from this iteration of 35 million, plus milestones up to a total of 105 million plus Royal Prison sales. Milestones are linked to a submission of regulatory filing and subsequent approval of a new device, which will be easier to handle and is currently under development. €35 million first regulatory milestone is expected in Q4 2021, linked to the regulatory variation which is expected to be submitted by 31 October 2021. So, at this point, I will leave the floor to Luigi to take us through in more detail on our 2020 results. Thank you.

So, thank you, Andrea, and good morning, good afternoon, everyone. So, I'll start, as usual, by giving a little bit more granularity on our sales performance, starting with... sales of our key corporate products, which represents 69% of revenue. Zanideep, which currently remains our biggest product, with 134.6 million of revenue in 2020, finished the year flat, marginally ahead of 2019, and with growth across several markets, but notably in Italy, Germany, Poland, and Russia, offset by erosion in France due to new measures introduced at the beginning of 2020, in Article 66, which we've mentioned a few times over past quarters, and also due to the effect of currency changes, particularly impacting Turkey and international markets. 40% roughly of Zanibip sales are to our international affiliates. The Article 66 measures in France also accounted for most of the decline in the combination product Zanipress, which again is declining by close to 18% for the year. Metoprolol franchise, which is now our second biggest franchise for the group, grew nicely at 7.5%, with total revenue of $105.7 million, with broad-based growth particularly strong in Central and Eastern Europe, and particularly in those markets where where we have set up a direct selling organization most recently. UREC reflects clearly the impact of loss of inclusivity. You'll recall Generic entered the majority of markets in February of 2020. impacting particularly revenue in Italy, Spain, Portugal, and Germany. In fact, in most of the markets, Rolex sales held up better than expected. In fact, erosion was somewhat lower than anticipated at the beginning of the year. Some of that, unfortunately, upset by, again, measures favoring dispensing of generics in France, issued in early 2020. Notably, Eurorack continues to grow in markets where generics have not entered, Turkey, Greece, and Switzerland in particular. Similarly, Basel, revenue down by 1.8% at close to $53 million, reflects loss of exclusivity starting in August. which offset the growth that we saw in the first part of the year for Peter Vassatin. Again, here, the product is still growing in markets where we don't expect generics, mainly Turkey, Greece, and Switzerland. Other corporate products of $270 million, roughly. is where, as we commented in previous calls, we saw the brunt of the impact of the COVID-19 restrictions. Other corporate products include OTC, as we will recall. And here we've seen, and we commented before, a significant impact in our cough and cold franchises, which is particularly strong in Russia and other markets in Central and Eastern Europe. impacting sales of Isofra and Polidexa, and equally pandemic restrictions also impacting the sales of anti-infectants products in general. In many cases across Europe, we saw restrictions and significant reductions in elective hospital procedures, which impacted sales of Citrafleet and Enema Casin in Spain and Portugal, and generally a lower consumption of over-the-counter drugs and more discretionary medications. Within corporate products, to note the good growth of Regula, up more than 60% versus previous year. and growth also of some of our key products within OTC, prostagrivenol and Casalux in particular. Finally, drugs for rare diseases were up significantly with growth of close to 28%. They now represent close to 22% of revenue. Majority of the growth being driven clearly by in the chronology franchise and Singapore in particular, which added 57 million euros to revenue, which we already recorded in Q4 of last year. And it's a reason to contribute, as Andrea mentioned, 12 million euros of revenue. Noteworthy, we saw growth during the year also on Carboglu, Sister Gun, Sister Drop, Lidaga and Juxtapede, also amongst the several other product franchises which offset the erosion in the U.S. on Panimitin following the launch of their competitor. We're pleased to see that following a somewhat sharper than expected decline over the April through to June months, at the peak of the restrictions, we have seen sales stabilize and with a degree of erosion, which is now more in line with our expectations as patients flow readjusted to the COVID restrictions. So then on the next slide, on slide six, you'll see it will show the composition of Our portfolio, as I commented, rare diseases now represent 22% of the revenue, up from 16.9% in 2019. OTC is slightly down to 18.1% from 18.6% in 2019. And the incidence of local product portfolios also continues reducing this. and is now under 16% from 17% in 2019. Switching to slide seven and looking at revenues for key geographies, the picture is very much consistent with one that we commented in the last quarter and illustrates the differential impact that the pandemic has had on different parts of the portfolio and therefore also different markets. Sales in Italy were down close to 5%, reflecting generic erosion on Pantoprazole and Lanzo, which started in the second half of 2019, but also the loss of exclusivity of Ularec and lower market levels there. for some of our OTC products and Rufor. We did see in Italy a strong performance and growth of more chronic medications, namely Cardicor, Xanadip, and Obregila, and also clearly a strong contribution of the rare disease portfolio, offsetting some of those pressures. from the COVID restrictions. France down by 8.4% and this is one of the painful notes of 2020 as we've commented throughout the year with measures introduced in January of 2020 which favored the dispensing of generic medicines This impacted both the canidipine and combination sales and particularly impacted OREC revenue upon generic entry where erosion was higher than expected, all of it partly offset by what we saw being a very strong growth of the diseases and also of the local methadone franchise. Germany revenue held up better at minus 2.1% with monthly decline actually being due to generic competition on tenders of orthodontic with good growth in Germany once again. from the addition of Singapore, and also initial sales of Isterisa, which is off to a really strong start in Germany. U.S. revenue up by 14% in local currency, or 11.8% on a reported basis at 122.5 million euros. We did see a strengthening of the euro against the dollar in the back part of the year. Growth, as we have commented, mostly driven by the endocrinology franchise, but also good growth of Carboglu and sister drops following its launch yesterday. In the later part of the year, once again, all of those more than offsetting the erosion on pandemic. Russia, other CIS and Ukraine, revenue of just over 100 million. These markets really saw an impact, a combined impact, both of the COVID restrictions on the cost and cost portfolio, but also of effects with effects impact in Russia in particular of 11.7%, which led to accounted for a significant part of the decline in the reported figures there. Sales in Russia, as I said before, have a significant incidence of cough and cold medications and medications for acute conditions, which were among the most impacted by the pandemic. We did see in the market double-digit growth in local currency on Procter-Grivenol, Alphavit, Zanidib, Ulurek, and Dibajo, which part of set that. Revenue in... Smaller Central and Eastern European markets and other Western European markets both grew by double digits, driven by the strong growth of Metropolol, particularly in Poland, the Czech, Baltics and Romania, but also a good growth of Livago and Regina in Switzerland and the Nordics. And of course, here again, the contribution of rare diseases Revenue in Spain down by 11.5% to just under 84 million euros. Spain reflecting both the loss of exclusivity of Silodosin and Pitavastatin, but also, as I said, the significant impact from hospital procedures being put on hold for a large part of the year. which impacted sales of Cetraplete, which is one of the biggest franchises in the market and used for endoscopies, and Enema Cousin, and also a softer market for pediatrics and probiotics products. Turkey continued to grow double-digit in local currency terms with local growth of 11.6%, but reflects a staggering 23% headwind in terms of foreign exchange with significant erosion and decline of the Turkish lira over the course of the year. Growth of the Turkish business was broad-based and really driven both by our corporate products and also the local product portfolio. Portugal, revenue of 42.7, down by 3.9%, reflects very similar dynamics to the ones I mentioned earlier. for the Spanish market, with good growth of Regina, mostly in the case of Portugal and Spain, partially offsetting the pressures from the loss of exclusivity on Cilodecin and Pitavastatin. North Africa sales up by 2.3%, reflecting slightly down versus double-digit growth in the first part of the year, reflecting a bit of weakness of currencies against the euros in the later part of the year, and also some restrictions to exports towards some markets in North Africa in Q4. And finally, other international sales of just over $200 million, broadly slapped with 2019 stocks, with growth of rare diseases, in particular in MENA and Mexico, offset by impact of foreign currencies, weakness against the euro, and also some discontinuation of licenses for markets where we've taken back distribution of our products over the course of 2019. On slide 8, once again, the composition of revenue by key geography, very much unchanged, very similar to the snapshot last year, and just confirming the diversified footprint of the group, which we believe this year allowed us to deliver the kind of solid and resilient performance that that Andrea alluded to, with revenues slightly down, but plus 0.4% at a constant exchange rate basis. Switching over to slide 9 and looking at the P&L, the slight decline on the revenue line is, as you see, almost fully upset already at the gross profit level. thanks to improvement in gross margin to 71.9% of sales, driven mostly by the shifting mix of our portfolio towards rare diseases. SG&A at 421.9 million is down versus 19, reflecting lower level of activity spend in the face of COVID. We estimate we had roughly 35 million of savings, which we achieved this year, versus 2019 to offset the impact on the top line, particularly on selling costs, which are around 24.1% of sales. the G&A expenditure of 5% of sales broadly flat with 2019. R&D expenses are up by 12.8% at just over 10% of revenue, with the majority of the increase being driven by the additional amortization charges arising from the new products that we acquired from Novartis, and also from some of the studies that we inherited. We do expect R&D expenses as percent of revenue to stay broadly at this level as we go into 2021. Other expenses of $4.9 million reflect mostly the non-recurring costs of roughly $6 million. which we had in 2020 being mostly COVID-19-related donations. It also includes €0.5 million of non-recurring costs linked to the reverse merger transaction, which we announced earlier in the year. That leads to an operating income of €469 million, at 32.4% and slightly above prior year. EBITDA of 569.3 million or 39.3% of sales up 4.7% versus 2019, which once again we believe is very strong performance in a challenging environment today. And as we've commented in the past, the difference in growth rates between EBITDA and operating income being driven by the increased amortization year on year, and also the non-recurring costs which are adjusted in EBITDA, but not at an operating income level. Net income of $355 million, down 3.8%, but the reduction really do to the exceptional and non-recurring tax benefit of $27 million related to patent box linked to prior years, which was recorded at the end of 2019. We did have a small positive non-recurring tax item of $2 million in 2020. Adjusting for these, growth of net income would be 3.2%. And adjusted net income at $410 million is up 7.3% relative to 2019. This is on the back of the strong operating performance, but also thanks to lower financing charges. And this, whilst currency movements did put, particularly in the back end of the year, a bit of pressures on our operating margins, they did have a positive impact, which is accounted for in financial expenses, due principally to the positive impact these had on transactions no longer treated as hedges, which we called in the first half of the year and which were closed in April. and also to some exchange rate gains on settlement of currency transactions. Switching to slide 10, clearly rare diseases account for a growing share of both revenue and operating results, over 25% of both EBIT and EBITDA. It's contributed from our rare disease business with margins created in 2020, reflecting also a little bit the launch investments behind this Teresa. And noteworthy, though, specialty and primary care business, despite the LREs and COVID impact, delivered on an absolute basis operating results which were almost in line with 2019, which again, once again, we believe is very resilient and solid performance. Last from my side, net financial position with net debt like 11, net debt of just under $866 million. down versus $902.7 million at the end of 2019. This equates to roughly 1.5 times EBITDA, which is in line with where we said we would be in our plan assumptions, and really reflects the strong underlying cash flow performance of the group over the course of 2020. We paid 90 million US dollars of milestones to Novartis for the end of franchise transaction, 50 million euros to Ars Pharmaceuticals for the right to Ars One, dividends of 212.5 million, and had a net share repurchases of 12.2 million. with therefore an underlying cash generation of 360 million euros approximately, which remains in line with a track record of delivering cash at roughly 100% of net income. And with that, I will hand over to Andrea to talk about the expectations for 2021.

Thank you very much, Luigi. So if you could please turn to page 12 of the presentation. So the assumptions behind our 21 targets are summarized in this slide. Regarding the 2021 guidance, assuming that, and this is very important, assuming a gradual recovery of our reference markets after the COVID-19, we expect this to occur in the second half of 2021. So we still expect, obviously, some degree of uncertainty and volatility in the markets until the end of the first half. And obviously, also despite the continued adverse effects of roughly minus 2%, we expect to achieve a net revenue growth of 10% in 2021. Our key assumptions are the following. So specialty and primary care returning to low single-digit organic growth. following psilocybin and pitavacidin loss of exclusivity in 2020, and an assumed return to more normal market conditions, like I said, in the second half of the year. Of course, please keep in mind that the Q1 of 2020 was mostly free of COVID impact, and in fact, reflected overstocking by wholesalers, and was only partially affected by the loss of exclusivity impact on psilocybin. We expect Adegard revenues of around 70 million, or 70 million, I should say, subject to the exact timing of the in-market distribution as already highlighted. High double-digit growth of the right-to-do business, driven by continuous front-optic of the enterprise, signifies the reason that revenue is expected to be around 120 to 140 million euros over the year. With further growth also coming from sister drops, Lidaga juxtapid offsetting the pandemic and decline in the U.S. We expect R&D costs to remain around 10% of revenue, reflecting an incremental MSL to support the Endo franchise and the amortization charges related to the recent asset acquisitions. Assuming partial normalization of activities post-COVID-19, EBITDA margin will be about 38%, reflecting as well the transition costs on Heliguide. Financing costs of around $22 to $24 million are expected, with no effect gains losses assumed on this item. Tax rate will be around 20%, reflecting also $12.9 million of non-recurring actual benefits from the reverse merger transaction. To be noted that no new undisclosed acquisitions of business development initiatives are included in our 2021 targets. And last but not least, dividend payout policy is confirmed at 60% of total net income. If you could please switch to the last slide of the presentation, slide 13, which sums up the 2021 targets. So we expect to have revenues ranging from $1,570,000,000 to $1,620,000,000. EBITDA in a range that goes from $600,000,000 to $620,000,000 and adjusted net income of between $420,000,000 and $440,000,000. As previously mentioned, we also plan to provide an update to our three-year business plan in May. So this brings us to the end of our presentation, and I think we can, at this point, move to the Q&A. Thank you.

Thank you.

Okay.

We are now ready to take questions.

All right. Perfect. Excuse me. This is the Coruscant Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 under touchtone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from James from Jefferies. Please go ahead.

Hi, thanks for taking my questions. I'll start off with two, and I'll have a follow-up if I may. Just on the guidance, the consolidated guidance, The organic growth is around 10%. Thank you for the detail on the slide. I'm just curious, what does this assume for Levato and Eurorack? Are these losing exclusivity this year? And then the second is just on EBITDA guidance. At least looking at what this might be, X, the Elegal and Isterisa, is this basically declining to flat in 2021? And if so, what's driving that? Thank you.

Hi, James. So thanks for the question. So first of all, just to be clear, the overall revenue growth, which is quoted on slide 12 of 10% is the total revenue growth, which does reflect the 2% effects. You will see underneath it, we also mentioned the Aligarh revenue. So just to be clear, overall revenue growth is of around 10% is a total growth, and it's consistent with the range that we've provided for total revenue. You asked about xylodicin and pitavastatin further erosion next year. I would assume an extra $10 million for both, with xylodicin obviously being a larger product, but having gone generic in the early part of the year. With regard to Eligard, we are expecting an EBITDA contribution this year of around 20 million euros, which reflects this being the first year, also some transition costs. I'm not going to give a detailed EBITDA number for Endo. So hopefully that gives at least sort of answer to most of your question.

Thank you. And then just to follow up, 35 million euros of SG&A savings from COVID, how much of that is expected to return as normal activities resume? And does your guidance assume any further price erosion in Europe, please?

I'll answer this one, James. So we expect basically 50% of operational savings that will be delivered in 2020 that will be retained in 2021. Thank you.

The next question is from Martino D'Abroggi with Equita. Please go ahead.

Thank you. Good afternoon, everybody. My first question is on the R&D, because in 2020 it was 10% of sales, mainly because of lower sales. So I suppose the total amount was more or less in line with your expectation. You are guiding for another 10% in 2021, which is a quite high level compared to the past few years. Never achieved 10% for many, many years or so. Should we take this as a normal level going forward or is it because of specific studies you are financing right now?

Thanks for the question, Martino. I mean, the growth also in sort of 2021 will be, you know, in part the additional amortization that comes from the Aligard deal. We're assuming 20-year sort of amortization and assuming that on both the upfront and the additional milestone which will be paid, we assume, over the course of 2021. There is a little bit of additional investment behind the end of the franchise, but the majority really is the amortization, which is clear in that. But again, the forecast is for it to remain stable sort of flat in terms of percent of revenue. There is a little bit of studies, as we said, that sort of are continuing on the endo portfolio as well, and we do have some of our programs which are progressing, MTA in particular. But, again, the majority of it is amortization increases.

Okay, so we can take 10% as an indication also going forward, or it's probably declining?

We're not providing an update to the plan today, but it'll depend a little bit also on the type of deal that we may do in the future, as always, which is would they come with significant... If it were to be an M&A transaction with a significant part of the purchase price allocated to Goodwill, we won't have any amortization, we won't have any sort of increase in R&D. If it's intangible, specific assets, which is why we've sort of kind of shifted the emphasis on EBITDA and adjusting the income, which adjusts for amortization, if that makes sense.

Okay, thank you. The second question is on the 2021 guidance. In the past, you provided guidance, including acquisitions. I know I'm not asking you anything because it's impossible to predict, but do you feel confident to reiterate the guidance, including acquisitions? Because I ask you because last year, I remember the M&A processes were a little bit slowed down because of the COVID pandemic and so on. So probably, I don't know, maybe you are more confident today in either new licensed drugs or acquisitions. So just your feeling.

Well, I mean, I'd answer this. I mean, in 2020, we delivered on the acquisition side because, as you know, acquisition slash business development, obviously, I'm talking about ERIGAR, which is a substantial business development initiative for Le Corbaty and ends up reinforcing our SPC business. There was a slowdown, but we did not perceive such a slowdown in 2020 due to the COVID pandemic, honestly. So things on the business development and M&A kind of front did progress. We looked at various opportunities, but clearly not all opportunities pan out for a variety of reasons, and they're all different from one another. We don't get guidance in our yearly targets. We get guidance in our three-year plan targets. And we've always done this in the past and we will keep on doing this. So obviously we will build in some sort of objective on M&A targets in our business plan, which we will present in May. Clearly we have, we continue scouting, you know, we have a very, very kind of, you know, focused and intensive capping activity, both in STC and in the red heaters. And, honestly, we're not seeing any shortage of opportunities. So, obviously, the objective is to deliver also this year. But, as I said, you cannot kind of, you know, celebrate until you have the capping back. We'll give you some more outlook on this in the three-year plan.

Sorry, one follow-up. I sort of just realized I hadn't fully addressed, I think there was a third element to earlier question from James around profit evolution as implied in the guidance for 2021 ex the Eligard portion. Let's just to not forget in the context, you know, we are still factoring in in our guidance that a 2% headwind of effects versus sort of 2.6% of this year. We are anticipating, and I think this is consistent across the sector, COVID still to impact to some extent the first half of the year. And obviously, as I said, the sort of detail of the loss of exclusivity impact onto other European universities. So clearly there's still a a little bit of a handbrake from that as we go into 2021.

Operator, next question. If I may, am I still online? No, I don't. Yes, you are. Okay, sorry. Just the very last question on Signi for East Tourism. Could you provide a split between the two, like last year? And just to understand, Japan will be launched... in the second half, but probably this year it doesn't represent a significant contribution. And for Heligard, is it possible to have a big sales potential or 100 million is the reference point for the long term?

Okay, let me answer this. Regarding the first question of a split of our guidance of 120 to 140 million for the end of franchise, We will not be providing the product split of the 2021 estimate. We have given a split of the 2020 results and an indication of the 2020 growth rate, which we have seen so far on sitting for the sales achievement in 2019. Clearly, it's important to say that we also expect the story to account for a significant part of the growth in 2021. Japan, yes, like you correctly said, is not going to be a major contributor in 2021, so I will confirm that. And regarding Alicard, for the moment, I think we will confirm that, you know, the 100 million sales, full-year sales that we mentioned before, starting from 2022.

Thank you very much.

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

Hello, everyone. Thank you for taking my questions. I have a few modeling ones, please, and one big picture question. On the modeling ones, if it is a 13 million tax benefit, the non-recurring one that you have mentioned, is that part of your adjusted net income guidance or not, please? And second one, if I look at the M&A environment and the appetite from your side to do M&A, is it fair to say that we can expect some M&A in this year beyond what you have announced? or is that not likely to be the case? And the third one on Eligard, you've mentioned $70 million in sales and $20 million in EBITDA. Assuming you get the marketing rights all transferred, that becomes $100 million in sales. What would be the right EBITDA number, please? Is that still $20 million? Thank you.

Hi, Christy. Thanks for the question. So first of all, in terms of adjustment and income guidance, so To be clear, the $27 million non-recurring one-off was a sort of 2019 item, just to be clear. We have included in our guidance, or in fact, as you know, adjusting that income does not include non-recurring items. So we've mentioned it, but we've reminded you of the non-recurring benefits from the the reverse merger so that if you're wanting to model net income, you know that we have that additional benefit which doesn't go into adjusted net income. So, again, the $12.9 million recurring tax benefit from the reverse merger would not be included because it would be adjusted in the guidance that we have provided. On, I think, the Aligard one, expectations on EBITDA thereafter, I think you should model on the basis of a normal sort of SPC level margins, whether or not, you know, how quickly we get to that, whether that's already 2022, we'll see, and we'll provide an update when we do the three-year plan. But The number that we're quoting for this year is very much reflective of transition. And for M&A, in terms of expectations for this year, I mean, all I can say is M&A remains an integral part of the strategy. I replied to that question before.

It remains an integral part of our business development, a growth strategy. As I said, there's no shortage of opportunities that we're seeing, but again, until they materialize, it's difficult to make any predictions, and we're not going to give Like, we've never given targets for M&As for one-year targets. We will give you an outlook on what we expect for the free exam.

And so, just to be clear, the targets we've read out do not include other M&As that were mentioned in the presentation. Thank you.

The next question is from Joe Walton with Credit Suisse. Please go ahead.

Thank you. Just a few, please. On Isterisa, you've told us that you're off to a great start in Germany. I wonder if you could just help us with the landscape in the rest of Europe, where you've got pricing, where you've got reimbursement, whether that reimbursement level that you're getting in other countries is coming in at the same level. In Germany, you can sort of choose your level, can't you, for at least a year or so. So just give a little bit more of the flavor of the landscape, please, for Isterisa in Europe. A second question would be the trough level that we could get down to for the Basso and Eurorec. Now, I know they're not your products like Xanadip, but Xanadip, years past patent expiry, is still an incredibly important driver for you. I'm just wondering whether the 10 million of erosion that you talk about for this year is is where new countries are getting some generics or whether you feel that that is continued erosions. I'm just trying to get at the sort of level that we should be thinking of going forward with the level of support. And I'm thinking particularly because you did so well with Celican up 8%. Again, is Celican now, do you think, at a stable level or do you think that you'll be able to get some further growth from that product as you move it into some of your more peripheral markets? And my final question would be about the savings. Actually, now I've got two more, I apologize. The savings from COVID, you talk about 35 million of marketing savings. How quickly do you think that you will come back to spend that again? I assume not in 2021 because you told us that COVID will keep going for at least part of the year. But if we were to look further out and given the fact that you've got new, more specialist products coming through, Do you think we should be ramping up our SG&A? And my final question is a big picture question. You talked about the new measures that came in in France last year, which eroded some of your products more than you expected because the minute there was a patent expiry, it went to full genericization. Given that European governments are going to be short of cash, post-COVID, are there any other markets where you have any visibility of the same sort of let's use a true generic rather than a branded generic coming in that we might have to think about? Thank you.

Okay, thank you, Joe. I'll do my best. A lot of questions there. So I'll start with the last one because it's a relatively straightforward one. No, we're not foreseeing significant new measures being introduced across Europe as a result of the pandemic. Yes, governments are facing significant budget deficits, but one, at least from our vantage point, they don't seem in a hurry necessarily to claw those back. And hopefully they are working on a number of fronts in partnership with the pharmaceutical industry. And I think I've realized also the importance of a well-funded healthcare system. So I think I've mentioned in prior calls, you can mention a number of anecdotes where we see actually things going at the opposite direction. So, of course, it can happen, and it does happen from time to time, and it's been the history of the sector over the last 10 years, but we're not anticipating at this stage very significant pricing pressure or new generic measures across key markets yet. It's Teresa and how it's going in Europe. First of all, my apology. I put the emphasis on Germany and of course we're on track in Germany as well. France is right now the market where the launch is most advanced across Europe and that's on the back of the strong early access program that was in place in the country that also benefits from a more centralized management of these patients. So both France and Germany is where we're seeing a strong initial adoption. We are anticipating in Suiza to gain reimbursement in a number of European markets over the course of the year, but it will be later in the year. It's currently... Let's say we are still in negotiation, pricing negotiation discussions across in France and Italy. Germany, as you've mentioned, we're allowed to launch at our set price and then initiate negotiations one year later. post. So that's still all to play out, frankly. I mean, all I can say to that is that the product, as Andrea mentioned, has strong endorsement from KOL. It has a strong endorsement from the European authorities themselves when confirming orphan drug status. So we have no reason to believe we will not be getting the kind of recognition of the value of this Teresa that we think the product deserves. Livazo and Ularek, just to be clear, when I said 10 million sort of further erosion, that was 10 million on each of the two. And that's really just due to it being a four-year impact more than anything. In fact, we started to see, you know, in markets where sort of generics are have entered, for example, in the case of Ulurek in February, early March of 2020, we have started to see volumes stabilize. So I think those are more sort of full-year effects rather than the reflection of significant further erosion to come on a market-by-market basis. Sellocan was a good growth driver, a strong growth driver this year. We do still see an opportunity for growth, as I said, particularly in those markets, Central and Europe, Nordics, politics where we've set up our own direct selling operations more recently. I won't provide an exact number for that. but certainly we do see an opportunity there. And I think in terms of the savings on COVID, I think we've been quite consistent actually in the course of 2020 to signal that not 100% of the savings that we will be able to retain, but certainly some that we think are potentially here to stay. I think inevitably we all, and physicians, We'll get used to doing, particularly where spend was linked to large events and gatherings. But hopefully we'll return to face-to-face at some point. I don't think it will be at the same scale as in the past. I'm sure international travel will be, you know, restricted for a while. So I would not be sort of ramping up. Again, we haven't sort of done a sort of three-year plan update. We'll do that in May. But no, I would not be sort of foreseeing a sort of major ramp-up of spend in the years to come. Hopefully that has addressed most of your questions or all the questions, so shout it out.

Thank you. The next question is from Giorgio Tavolini with Intermonta. Please go ahead.

Hi, good afternoon. Thanks, everyone. Thanks for taking the question. I would like to have some color on the intangible amortization. I mean, in order to proper modeling the adjusted net income line for 2021, on what period do you expect to amortize the license regarding the ELEGARD? If it says to assume an overall 80 million amortization of intangible assets before taxes, I mean 65 million euros for 2021 net of tax. And the second question is on the financial cost in 2020. What is the detail on this line? And the third one is on the bussings. I mean, are you interested in accommodating at your production plan some production for bussings by acquiring rights in sublicense plans? in order to contribute to the speed up of the vaccine rollout. Thank you.

Simple one. If I understand correctly, you're asking if we're doing anything with our manufacturing facilities to actually participate in the manufacturing of vaccines, right? Yes, yes. Well, no, the vaccines, let's say, industry is a very specific one. You need special, you know, manufacturing facilities. It's a very kind of, you know, adopted and designed specifically for the manufacturing of vaccines. So, no, it's not something that we would be able to set up, notwithstanding all the regulatory hurdles to accrue them and so forth and the heavy capital investment. So it's something which is completely out of our scope of business.

Amortization charges for 2021. We are amortizing the Aligarh outfront and first milestone over 20 years. Of course, we start amortization on East Teresa on a by-country basis as of the time when The product is launched in the market. You should assume an amortization after the charge in 2021 of over 17 million euros, roughly, Giorgio. Sorry, financial items for 2020, the gains from currency movements were in the range of 6-7 million euros, to give you an indication.

Okay, thank you very much.

As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Isacco Brambilla with Mediobanca. Please go ahead.

Hi. Good evening, everybody. Just a couple of questions from the side. The first one is on... your, let's say, your new additions to the Orphan Drugs portfolio, I mean, assist drops and second indication for Carbaglue. Can you remind us how we should look at these products if we were to rank your treatments for AIDS disease in terms of market opportunity? And the second question is on... your cash deployment. Arguably, the larger position, the larger license of Aligat brought in overall cash out lower than what we were expecting for acquiring 100 million euros under turnover. How do you intend to redeploy this additional power which you have now available? Thanks.

Question to you, thanks.

Yeah, sorry. So, thank you, Zach. So, sister drops in the U.S., we see sort of opportunity, which is sort of in terms of just to give it a scale, below 20 million U.S. dollar over time. The launch has started quite well, actually. In fact, if anything, it's ahead of our expectations. So, so far, so good. but that is the indication. It is a fairly, it is a sort of quite rare condition, so it's great news for patients, but yeah, it's clearly sort of more limited in scale relative to some of the other more recent additions. And carbogluol-A, similarly, I think it will contribute to the continued growth of Caldeglu in the US, but the indication is for use in acute setting and therefore is not going to be a very material driver on its own. In terms of cash, I mean, Clearly, when looking at our firepower, we don't just look at the cash on the balance sheet, but where we are in terms of our leverage overall. As I said, we're 1.5 times EBITDA, which is very much in line with where we said we would be. We did say when the plan was last refreshed that we would go up to a maximum of three, but only if... and when a very specific opportunity came about. And so nothing has changed really in terms of, from our perspective, we did a very significant deal in 2019 with over $400 million cash outlay. We've done this one now, and, of course, we'll continue to scout. We're continuing discussions for certain type of opportunities that we discussed in the past, both on the SPC side and the rare disease side. So I'm not sure we see it as being in a sort of very different position in terms of cash and leverage from where we thought we were going to be. I think we're pretty much in line with where we said we would be, actually, from that perspective. I hope that makes sense.

Yes, sure. Just one very brief follow-up, if I may. In terms of market multiples, have you seen any kind of change because of the healthcare emergency or nothing really material compared to the past?

No. Honestly, I'd say no. We haven't seen anything. Okay. Thank you. Market multiples, you know, due to COVID. Thank you.

As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is a follow-up from Joe Walton with Credit Suisse. Please go ahead.

Just a quick one on your share buyback program. Is that purely to offset expected share issuance or does that have some element of you thinking that the shares are particularly undervalued and you haven't got anything else that you need to spend your money on at the moment and therefore you're making a deliberate share buyback. Many thanks.

Thank you for the question, Gerald, but it is really a technical one. We have existing stock options program in place. Our programs actually do not foresee the issuance of new shares So the program foresees that any exercises would be fulfilled through treasury shares and all we're doing is sort of making sure that we have what is required to fulfill any potential sort of shares vesting, which are already vested or vesting between now and May. No, it's not because of, as I said, from our perspective, where we are in things like that is exactly where we thought we would be in the plan.

Thank you. Once again, if you wish to ask a question, please press star and one on your telephone. For any further questions, please press star and 1 on your telephone. Gentlemen, there are no more questions registered at this time.

Thank you very much. Thank you, everybody, for listening in. Take care, be safe, and we'll speak soon. Bye-bye.

Ladies and gentlemen, thank you for joining the conference this hour, and you may disconnect your telephones. Amen.