Recordati Industria Chim

Afternoon, this is the Coral School Conference Operator. Welcome and thank you for joining the record at the 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, Judith, and good afternoon or good morning, everyone, and thank you for attending the Recordati conference call today. I'm pleased to be here with our CEO, Rob Cormans, and Vigila Corte, our CFO, that will be presenting the 2022 first half results. Then we'll be running you through the presentation. As usual, the set of slides is available on our website under the Investor section. After that, we will open up for Q&A. I will now leave the floor to Tob. Please, go ahead.

Thank you, Federica. I'm happy to announce very strong revenue and profit in the first half of this year for RecordAvi with continued strong cash flow generation. We have a revenue growth of over 15% and a constant exchange rate and adjusted for both the EUSA pharma acquisition and porting accounting of Eligart in 2021 prior to the switch to direct sales, our growth is strong and just under 9% compared to previous year. EBITDA at 334.9 million was up by 11.5% compared to the first half at 37.5% of revenue, reflecting the strong revenue growth and continued cost discipline more than offsetting impact of inflation. Also very strong free cash flow generation of 218.7 million, increasing by 7% versus the same period last year. There is a really strong momentum across both our businesses and continued post-COVID recovery. SPC with high single-digit growth ahead of reference markets. Of course, this level of growth rate is also explained by slightly softer growth first half of 2021, still at that point impacted from COVID. Overall, we're seeing a very strong rebound from the cough and cold segment and OTC, but we see also a very broad growth across the entire portfolio. And our rare disease business shows double-digit growth, driven by both Metabolic and the Endo franchise, with sales of Isteriza and Zicnipor on track with plan. And then our new rare oncology franchise, the former Usa Pharma, results are really above plan, with strong revenue of 46.1 million in quarter two, in part with some favorable phasing of shipments to partners in the quarter. The business is now fully integrated and fully operational and fully in line with our schedule. We've taken multiple actions to offset inflation. price increases across multiple parts of the portfolio wherever possible, and very effective SPC efficiency measures already announced earlier, like the right-sizing of our sales forces. These actions sustain our margins. Year-to-day results are affected by hyperinflation counting in Turkey, which determine revaluation of local assets and minor P&L impacts, resulting in a revenue uplift of around 3 million and a negative effect on operating margins of around 5 million. As expected, and broadly in line with our plan, non-recurring costs of 26.4 million. They're mostly related to the user pharma acquisition, that's about 15 million, and to one-off charges of SPCs rightsizing, and also to the assistance in the Ukraine conflict related to donations. As Luigi will explain later, our reported net income and operating income are impacted by fair value IFRS 3 adjustments related to the user pharma acquisition. And they are expected. And also some effects of volatility affecting our financial expenses. On an adjusted basis, our adjusted net income is $224.8 million, up 7.1% versus previous year. And with that, absorbing the unplanned ethics losses, particularly related to the Russian rule. Then there's also some good news from the ESC site. Our efforts to continue to be recognized by FTSE for good in next series, we are reconfirmed, and an increasing rate from gold to platinum by Ecovadis. Before handing over to Luigi Lacorte, I will give a little bit more detail on the performance of USA Pharmaceuticals. On the next slide, please. Here you see the USA Pharma results and some of the key highlights. Like I said, we are really well on track for the integrations. We've announced a new rare disease organization earlier this month, early July, and we are operating fully integrated with our own co-franchise in place. Sales in the second quarter of this year were 46.1 million, and pro forma first half of 2022 are 84.5 million, a growth of about 15% versus the first half of 2021, mainly driven by sales and performance across all regions and an increased penetration of Carziba in Europe, but also benefiting a little bit from shipments to partners, particularly China in relation to the SILVENT launch. For full year 2022, we expect to close close to 130 million revenue and EBITDA margins of approximately 25 to 30 percent. CARSIVA U.S. discussions with the FDA are ongoing. Target finding is still expected to be in 2024. And also, like we mentioned in first quarter results, We are looking at new indications for Sylvan in the process of evaluating this and should be able to come back later this year with some concrete proposals around it. Then there's very positive news related to the financing of the transaction. This has been finalized as a new five-year variable rate term loan at very competitive rates. which reflects the strong creditworthiness of our group. And finally, as anticipated before, we have finalized the purchase price allocation related to the user pharma acquisition. I will let Luigi explain and address the questions related to this. Luigi, please.

Thank you, Rob, and good afternoon and good morning, everyone. I will comment first, as usual, revenue, but we'll try and go through this quickly so as to get to the P&L, which I'm sure some people may have questions. As Robert said, sales of both of our business units were very strong in the first half of the year, yes, benefiting from recovery of markets, but in a number of areas with growths ahead of the market as measured by Cuvia and with very strong momentum of our key growth drivers. I would first though like to call out on this slide the stability of our key mature products. The Lyokan Edipin franchise sales in markets where we have direct presence are broadly stable, with the decline overall really being driven, as we anticipated at the start of the year, from the loss of tenders in China and the high initial shipments we made to our Chinese distributor in 2021, and a little bit of phasing of shipments to our partners, particularly in Eastern Europe, which we do expect to recover in the second part of the year. You do see SELOCAN after an increase in 2020, decline in 2021, now again stable broadly in the first half of the year, as is Stilodosin. And nice to see actually Livazo posting strong growth on the back of growth in Russia, Portugal, and Switzerland. And I think this once again reinforces the ability of the group to stabilize and drive, sustain the sales of these products post-loss and exclusivity. You will see also a strong contribution to growth of Eligard, which we licensed at the beginning of 2021, which added close to 15 million of revenue in the first half of this year. Of course, as we've explained multiple times, Part of that is due to the gradual switch to direct selling over the first part of 2021, roughly 11 million of that account for roughly 11 million of the growth. But as you will see, Eligard, the Eligard franchise is starting to return to growth, particularly in Spain, in France, and now starting to see a good sign also in Italy and other markets. Sales of other corporate products, of course, grow very strongly, close to 19%, and these really reflect the recovery of the cough and cold portfolio, where revenue is pretty much back in line with levels achieved before the pandemic. We also see strong growth of the gastrointestinal portfolio, Citroën Fleet, Nema Kazen, Ria Giulia, and several of our OTC products. particularly probiotics, Maneuver Supremo, and the Exalign. All of this I would like to underline achieved whilst at the same time continuing to innovate our go-to-market approach and right-sizing in a targeted way some of our sales organization in SPC. Drugs for Rare Diseases, of course, posted a very high growth, close to 44%, 260.4 million. That includes the contribution of EUSA, which Rob has already spoken to, of 46.1 million. But nice to see both of our, let's say, legacy rare disease franchises, both the endo and the metabolic, both continuing to grow. In the case of Endo, it's nice to see Signifor continuing to grow above 10%, and the revenue of Isterisa at 36.5 million, two times the sales that were achieved in the first half of 2021. And on track to deliver on the expectations that we set for this product. Switching to slide five, you know, drugs for rare diseases, you know, now count for just under 30% of the revenue, and of course, will grow as we sort of now fully, you know, consolidate for a full year the revenue from EUSA. I'll again emphasize OTC growing by double digit, in fact, just above 15% in the first six months. On slide six, revenue by geography, and again here, I will now go market by market. I know it's a very busy day for many of you on the call. I'll just call out, comment some of the, let's say, outliers in terms of growth rates. But first of all, nice to see most of our key geographies growing. Now, of course, this reflects also the contribution of EUSA. Revenue in Italy growing by 6%. slightly below the average with a strong growth of cough and cold and OTC, and strong growth also of rare disease, which does, however, contribute a little bit less than for other markets in Italy, pending reimbursement discussions on East Teresa in particular. U.S. is clearly a key growth driver, and now our number two markets, market with growth of 48.4%. Now, of course, that benefits from a bit of tailwind on the U.S. dollar, which accounts for roughly 10 million of growth and the contribution of EUSA, which you will have worked out from Rob's slide, adds roughly 9 million of euros to revenue. But beyond that, as we already commented, strong growth in the U.S. of both the endo franchise and the metabolic portfolio, particularly perimetrin and cystic drops. I'll skip over to Turkey, where you will see revenue in Euro terms is essentially flat versus last year, reflecting the impact of very significant devaluation of the Turkish lira over the last 12 months. Revenue growth in local currency is up 68.4%, reflecting robust volume growth of the portfolio, but also significant price increases that were awarded by the authorities and reflected also the hyperinflation environment that the country is facing. Russia and other CIS in Ukraine, revenue of $50.3 million. is up by 51% versus last year. This reflects actually a very strong growth of Russia, of close to 65% in local currency. Russia failed for the first six months. We're at 41 million euros. And revenue in Ukraine at 6 million, we're just 6% down versus last year. Most of that obviously achieved over the course of Q1, before the conflict. We still continue to see some sales from Ukraine, but very, very limited, and we don't expect a significant contribution in the remainder of the year. We do also expect the demand in Russia to soften in the second half versus the strong levels, which clearly also reflect the destocking in the market in the first half of 2021. and the return to more normal levels of stock in the channel in the first six months of 2022. And finally, sales in North Africa are flat with still limitations of imports into Algeria, offsetting the growth of our Tunisia business, which is up 9%, and other international sales reflecting strong growth, a strong additional contribution from Costa Rica and the rare disease portfolio, which offset the decline in Lea Canidipine, which I've already commented. And you will see from the next slide that, of course, the group continues to have a very well-diversified footprint. The U.S. is not only our number two market, but soon we'll possibly start to compete with Italy to become our number one market for the group. And now then to the P&L, which on slide 8 you will see reflects what we see as very strong operating performance, but also a number of one-offs and unusual items, some expected, some obviously not expected, in particular the effects lawsuits, which I'll comment in more detail. As a result of the significant impacts on the reported results of the fair value adjustment arising from the consolidation under IFRS 6, under S3 as a business combination of EUSA, we did decide to add the two additional disclosures to facilitate the read of year-on-year underlying performance of the business, and you'll see clearly flagged there. But let me start commenting the figures. You know, gross profit, we already commented on revenue, obviously, growth of close to 16%. Gross profit of 70% of revenue is impacted by $16.9 million of unwind of the fair value adjustment to the inventory, which was acquired from EUSA, obviously for the portion which was sold in the quarter. Adjusted gross profit, which adjusts for this non-cash item at $641.5 million is at $13.6 percent increase versus last year and the margin of seventy one point nine percent you'll see is still a very strong level with the decline versus last year really do the two effects number one again as you recall in the first half of last year we were not yet selling in most of our markets as you are directly and that enhances growth margin by about 50 basis points. And the margin in the first half of 2022 is impacted by roughly 5 million adjustments arising from the application of YAS29 to our Turkish business, which in April met the criteria to be considered a hyperinflationary market. Barring these two effects, just the gross profit margin would be broadly in line with the levels achieved last year. SG&A expenses, you'll see exactly in line with the first half of 2021 in terms of incidence on sales. Growth, obviously, of 15.6%, reflecting the addition of EUSA and additional investments behind our growth drivers. you know, in part of set by, again, some of the initiatives that we've taken to innovate our business model and the SPC right-sizing. Selling expenses are 24.2% of revenue and G&A at 5.7% of revenue in the first half of 2022. R&D expenses at 11.1% of revenue. Also, and growing versus last year, clearly also reflect the consolidation of EUSA and continued progression of some of our pipeline programs. Half of the increase is driven by incremental amortization to the tune of 10 million, 6.2 million of which driven by amortization related to EUSA. Other income expenses reflects the non-recurring costs incurred for the acquisition of EUSA and the ones related to the right-sizing of SPC. You'll recall we had announced at the start of the year as part of our guidance that we were expecting 35 million for the full year, mostly coming from EUSA. Now clearly, a large share of that is incurred in quarter two, just after the acquisition was closed. 15 million of the 26.2 are driven by EUSA and 10 million from SPC. Operating income, which clearly is impacted by both the 16.9 million fair value adjustment to gross profit and the non-recurring cost I just commented, is at 26% of revenue. Adjusted operating income, which adjusts for these two effects, is at 30.9% of revenue. EBITDA, which is also adjusted for these items, is at 37.5% of revenue and growing by 11.5% versus last year. Both of these are remaining at strong levels. I would highlight both operating income and EBITDA are impacted by about 5 million operating impact of hyperinflation accounting in Turkey, which we do not adjust in these figures. Clearly, the somewhat less expected impact in the P&L for the first half of the year was the one which is impacting on financial expenses, 38.1 million, an increase of around 33 million versus last year. Now, one pick that, you know, our actual increasing debt financing cost is only around 4 million euros in the first six months, really driven by the extra debt taken on for the user position, and that's very much in line with our expectation. Unfortunately, impacting on this number is 14 million of effects, and then 14 million higher effects losses, you know, driven by the ruble. At the beginning of the year, upon escalation of the conflict, we created a small short position on the ruble to create an economic hedge against risks to the assets that we had in the market. Now, of course, as you know, the ruble went from just over 90 to the euro at the end of Q1 to around 56 at the end of Q2. And that's generated a significant part of those effects losses and also triggered some consolidation adjustments for margin held in stock. The same is true to some extent of the U.S. dollar, but the majority of these are already driven by the ruble. In addition to that, we've had a net 4.7 million monetary loss arising from the application of just 29 in Turkey, driven by mainly the revaluation of shareholder equity in the local affiliate. So all in, on an income basis, reporting an income, you'll see 151.4 million is down 27% versus 2021, reflecting both these one-off impacts in 22, but also the high non-recurring tax benefits that we had in the first half of 2021 of $26 million. And you will see, to help understand the bridge between net income and adjusted net income, we've added on slide nine reconciliation, which you may be familiar with. We've typically shared this in our More detailed financial results we thought appropriate to already share that on this call, given the magnitude of the effects. And you see that net income of $151.4 million adjusted for the increase in amortization, the non-cash charges from the purchase price allocation to inventory, no recurring costs, and the net monetary gains and losses arising from application of the S-29. Net of the effects effects lead to an adjusted net income of closely $225 million, which is 7.1% increase versus last year. And you will notice, by the way, we're not adjusting for the effects losses, which impact financial expenses as we've never adjusted for these. And as we also said, we do expect to recover some of these in the remainder of the year. Hopefully that was clear, but obviously happy to take further questions. On slide 10, you will see EBITDA contribution of rare diseases is now roughly a third of the total. And margins of both franchises remaining strong. Clearly, rare disease EBITDA 42.3% is below the levels achieved last year. As we said, you know, in these first years, we expect EUSA EBITDA levels to be below the level of our legacy portfolio, but we do see EUSA achieving the levels of our balance of our rare disease business over time. And on slide 11, you know, summary of our cash flow statement, as Rob has highlighted, you know, free cash flow remains very strong, you know, despite the non-recurring cost at $218.7 million, an increase of just over 14% versus last year. And you recall last year was a strong year in terms of cash flow performance. You'll see that free cash flow is increasing. almost at the level of adjusted net income, so a higher rate than it has been historically. Clearly, the bottom part of the cash flow statement reflects the consideration paid for the acquisition of EUSA, net of the cash acquired, and the new financing that was taken on to finance that acquisition. On slide 12, in terms of net financial position, Clearly, from our perspective, continue to remain a very solid balance sheet with net debt of just over $1.4 billion, being slightly over 2.2 times EBITDA or slightly below 2.2 times if pro forma for EUSA results for a full 12 months. I'm sure that in terms of that increase in loans, as Rob has briefly commented, we're very happy with the terms of the financing we have achieved for the EUSA acquisition. And now finally, from my side, switching over to slide 13 and looking at the outlook and the projections for the remainder of the year. As we said, business momentum is strong, and on the back of that, we expect overall revenue to be at the top end of the guidance range that was set at the beginning of the year, with slightly favorable effects in the second half, which should have set the slight headwind that we had in the first part. We've been transparent about the assumption that we've used for the ruble, given the high volatility. and expect our specialty primary care business to grow low to mid-single digit. Obviously, it grew high single digit in the first half, but we all know that the second half will provide a somewhat tougher comparable, and we do, as we said, expect somewhat softening of demand in Russia and a limited contribution from Ukraine in the second part of the year. We do expect a legacy of air disease, these businesses to continue to grow at a sustained double-digit. Albeit, we will start to see a little bit of an impact, as we said, from the start of the year from generic erosion on Carboglu in the second half. We do expect that both of our key growth drivers, Aligard and Hemdo, to achieve the objectives that we set. And as you have seen, we expect slightly higher contribution from EUSA, close to $130 million revenue for the three quarters that we're consolidating. We expect EBITDA and adjusted income around the middle of the guidance range, as we do expect since targets were set a little bit higher inflationary pressure, particularly in the second half, and as I've commented, the impact of IAS 29. I do expect adjusted net income to be a little bit volatile because of the effects impact on financial expenses. And to help with modeling, we have set out on the bottom part of this slide the assumptions we're making around both financial expenses, the non-cash charges arising from the purchase price allocation of EUSA and finally the non-recurring cost of around 40 million with the slight acceleration of the right sizing in SPC. And with that, I'll turn over to Rob with some closing comments.

Thank you, Luigi. So overall, very pleased with the performance of the business today. Yes, there are challenges, but we continue to be able, as Recordat has always done, to address these and do a really good business. We confirm all our targets for 2022 with revenues at the top end of the range, as Luigi already commented. The momentum is really good and I'm very confident for the outlook for the business and our ability to continue to thrive Yes, they're volatile times, but Recordati has been able to demonstrate also this year that we're able to deal with the challenges and the volatility, and we have a very, very good solid base for our business that is really growing nicely, and we expect to continue to do so. Thank you for your attention. This is the end of the presentation, and I'll open the floor to questions.

Thank you. This is the Coral School Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their 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 Harry Sapson with Credit Suisse. Please go ahead.

Brilliant. Thank you very much for taking my questions. I have three, please. So firstly, could you please touch on the dynamics that you're seeing in the underlying rare disease portfolio? So excluding the endo franchise in EUSA, it looks like it's growing around 5% year on year. Just wanted to understand some of the dynamics, whether there's anything dragging on growth there. My second question is on EUSA. Clearly it's progressing well. Would you say that the improved performance will follow through into 2023? Or are you comfortable with the previous guide that you gave of 150 million in sales? And then my third question is, well, we rarely get an update on the pipeline. So I just wanted to ask on some of the assets you have there, specifically the REC 0545 in maple syrup urine disease. What can we expect in terms of timing for that asset and any contribution? And then also your preparations for the nasal epinephrine spray with the expected decision from the EMA in the second half of this year. Many thanks.

Thanks, Eric. Happy to address some of the questions. For the rare disease, the metabolic traditional franchise, as we have highlighted, we do see some generic impact on two of our products there. We've seen for both products there, first generic entering the market already now, and we expect that for both of them, we will see additional generics coming into the market in the second half of the year. The first generic hasn't really surprised us, quite frankly. The performance continues to be strong, but we believe it's a bit too early to now say this is also gonna be the case for the second generic, right? We have a very good position with our patients, as close as you can get in all the legal frameworks and limitations there. And the business is holding on strong. And we're confident that we can continue to do well. But just to that extent, there will be most likely second generics coming in on the metabolic franchise. For you, we're absolutely happy with this opportunity. because business at the moment is performing really well. Frankly, I do believe that the momentum is good, but it's a little too early to call out any guidance for next year. We will now own this business for three months. We will give guidance definitely as we've always done towards the end or beginning of next year. And we'll also take the the time and the chance then to talk a little bit about some of the pipeline opportunities that we have with some of the current assets that are not in development but actually already on the market and we see additional indications as an opportunity for fairly affordable and nice opportunities there. I acoustically couldn't quite get the other part of your question quite frankly because the line broke a little.

yes sorry so it's my third question which was just around an update on the pipeline um so i think really the assets i was looking at were rec 0545 which is your rare disease asset in maple urine syrup disease sorry maple syrup urine disease um and i was wanting to just get an update on the timing for that and any potential contribution um for that and then also your preparations ahead of the nasal epinephrine launch in the second half of this year?

Well, on that, we're progressing as planned. So the project is going according to plan. There's no, in that sense, no update to give of it, and it's good news. We're progressing as planned. The

Harry, I think on MSUD, we're on track with what we said in the past. I think we expect the filing at some point later this year, early next year. We've always, always said it's a fairly small patient population that we're looking at here. And I think your other question, if we've understood correctly, was around ours. the piperine spray. We are addressing questions that we have from European authorities and we plan to, as you may have seen, we pulled the dossier and prefer to resubmit. We're collecting additional data that was requested and expect to do that in the second half of this year. And then we'll have to see when we get the final green light from FEMA. Hopefully, that addresses your question, Harry.

Absolutely, Nino. Thanks very much, Luigi.

Thanks, Harry.

The next question is from Keyur Parekh with Goldman Sachs. Please go ahead.

Hi. Thank you for taking my questions, too, please, if I may. The first one is you're talking about reducing 64 kind of full-time employees kind of from an SPC perspective, just wondering if kind of how you guys are thinking about this kind of going forward. Is this kind of one and done, or do you think this is the kind of restructuring and reshaping of the business that we should continue thinking about as we go forward? And then separately, kind of from an FX perspective, apologies, Luigi, I know you spend a lot of time explaining this, but just trying to get my head around What kind of current levels of effects imply for your second half up and down the P&L? So obviously on hyperinflation, you will get a benefit kind of on the top line. But should we continue to expect kind of levels of impact further down the P&L? And when does that reverse out? Thank you.

Hi, Peter. I'll start with the second piece, if you like, on effects, and particularly hyperinflation. You're right, and hopefully we called it out. Hyperinflation added roughly $3 million to revenue in the first half of the year. Unfortunately, we hold at the moment a fairly Robust levels of inventory, let's put it like that, in Turkey, which means that the revaluation effect on inventory is slightly higher and offsets that so that at the gross profit and operating income level, the impact is around $5 million. Now, that's offset clearly in monetary gains and losses, which, however, you know, are impacted by the revaluation of the balance sheet, particularly of shareholder equity, which more than upset that to the tune of which result in the net 5 million that I spoke of. You know, we're making some assumptions obviously around inflation in Turkey and, you know, our estimates as we set out is for that to impact to the tune of around 10 million for the full year. I may comment, but then I'll turn it back to Bob. I mean, the right-sizing SPC will be a continuous improvement.

Yes, very much so. Of course, I think you've seen the biggest change, the right size in terms of numbers of people in this year. But we will continue to improve our commercial capacity not only footprint, but also ability, using more and more multi- and omni-channel, and this has impacted. And then, depending on whatever product we bring in additionally to launch, we might have to adapt to some extent, slightly, our structures. And so we continue to evaluate the market, the environment, the commercial effort we need, and the opportunities at hand. But it will be ongoing, but I expect the biggest part behind us

And the care, I guess we should say, you know, to some extent, you know, we're right-sizing, particularly on the sort of primary care lines. We're also, you know, on the rare disease side, the specialists, like we are, we are evolving the organization. So, you know, it's not just a net minus. Yeah, exactly.

Thank you.

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. Once again, if you wish to ask a question, please press star and 1 on your telephone. The next question is from Bruno Permutti with Indies of San Paolo. Please go ahead.

Good afternoon, everyone. I have a few questions. The first one concerns the prices. So I was a little bit surprised that you succeeded in increasing prices and to offset inflation. So if you can give us some details on this and on the size, more or less the size of on average which you had in the first half. And the second point also on prices concerns the outlook. So what do you expect in the coming months and do you expect any impact from eventual regulatory regulatory initiatives in the U.S. And the last one regards the FX impact. If you can share with us your budgeted U.S. dollar for any change and also if you made some guess on the Turkish Lira.

Thank you for the questions, particularly on pricing. First of all, we didn't say that it's necessarily fully offset, but I think historically I've always commented that barring major new losses of exclusivity or major events, the company has seen a level of year-on-year price change of between plus and minus 1%. I think what we were able to do this year is go a little bit beyond that. I'd say if I exclude Turkey because Turkey is a little bit of an outlier and obviously it's hyperinflationary environment on the cost side as well. We're probably somewhere between plus one and plus 1.5 percent. So it's obviously positive and on our P&L that helps given the structure. And on effects, we typically budget on the basis of consensus in January. We don't typically set out or publish budget effects assumptions. We've now shared our assumptions, the planning assumptions for the ruble because the very high volatility that that currency has had and the impact that it's had on effects losses. Hope that makes sense.

On the question on the expected regulatory impact, frankly in the US for our disease business we do not see any impact coming from any of the measures in the coming period. And of course there are always discussions in Europe on what can governments do to help them manage all of the healthcare expenditures, but I don't think that they get specifically for our business, any more strict or restrictive than what we've seen so far. But that's a bit of crystal ball, frankly. And so far what we've seen is very clear from the U.S. We don't expect any real impact. Thank you.

The next question is from Giorgio Tavolini with Intermonte. Please go ahead.

Hi, good evening and thanks for taking my questions. I was wondering if you can elaborate more on the 40% increase of Heligard in the first half, what is driving this performance? And the second one is on the bridge of the organic growth, since I'm struggling to reconcile the 8.6% organic growth starting from the reported 15.8%. If I strip out six percentage points for M&A, the user, 46 million, basically, and also the effects, I don't get the 8.6. So I was wondering if you can double-check the numbers and also for the second quarter, what is the corresponding organic growth rate? And the third question is on the impact from inflation. In the first quarter presentation, you talked about 50 basis points on top of the other 50 basis points that you already anticipated, so roughly one percentage point impact from inflation. I was wondering if it's still valid, this indication, or not. Thank you.

Giorgio, hi. Thank you for the question. And yes, of course, we have double-checked the figures. And I think actually the answer to your first and second question are related in the sense that I think the piece which you're missing in your reconciliation is when I commented, Eligard, the revenue, I mentioned that roughly 11, so between 11 and 12 million of the growth is actually a function of the fact that in the first half of 2021, We did not yet in many of our markets have direct selling. So basically we booked in revenue just the gross margin that was transferred to us by Astellas. And I think we're being here extremely transparent and honest in stripping that out from our reported growth. So I think if you sort of add that to your numbers, you should come to us. the same figure that we come to because those are the things that we're stripping out, basically, EUSA, Eligard, and the minor effects erosion. In terms of, and again, the Eligard growth of 40%, as I said, for a big chunk is due to the different sort of selling models in the two halves. But obviously, we are starting to see growth in, as I commented, in a number of markets, on a product that was declining when we took it on, particularly good growth in France, Spain, but also Portugal, Turkey, and Italy. With regard to inflation, our view on that has not changed. As we said, though, we're not just going to sort of lie down and take the impact on the chain, but we have been doing what we can in terms of pricing, and maybe to more fully address the previous question, We've taken pricing up on our OTC portfolio, you know, across the region where we can and where we have more flexibility in some of the Central and East European markets, including Russia. We've taken pricing up. We regularly take, you know, single-digit price increases in the U.S. on the portfolio, as most other companies do. So all that... You know, it's that together with some of the measures we've talked about in terms of the right sizing are helping offset those equities. I will reiterate what we said in the past. We're not immune from inflation, and everyone sees the, you know, the spike that we've had over the last six months. Hopefully that answers your questions, Giorgio.

Yes, yes, very clear. Thank you, Luigi.

Once again, if you wish to ask a question, please press star and one on your telephone. Mr. Medici, there are no more questions registered at this time. I turn the conference back to you for the closing remarks.

Okay. Thank you very much for joining this call, and we wish all of you a very pleasant day.

Yes, thank you all for joining. For those who will have time to go on a summer break, wish you all a great break. And speak soon. Thank you all.

Thank you.

And speak soon. Thank you all.

Thank you.

And speak soon. Thank you all.

Thank you.

And speak soon. Thank you all.

Thank you.

And speak soon. Thank you all.

Thank you.

And speak soon. Thank you all.

Thank you.