Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales grew 7% in constant currencies in the first half of the year, driven predominantly by the biosimilar business.
- Biosimilar business saw a fantastic 29% growth in constant currencies in the first half of the year.
- Core EBITDA margin improved significantly compared to the second half of last year.
- Sandoz Group AG (SDZNY, Financial) raised net sales guidance to mid- to high-single digits for the full year.
- Strong performance in all regions, with North America growing 23% in the quarter and 40% for the half year.
Negative Points
- Core EBITDA margin declined versus the first half of 2023 due to inflationary impact on cost of goods sold.
- Generics business in North America declined in the first half of the year.
- Price erosion and inflation on input costs impacted the core EBITDA margin.
- Higher costs of goods sold due to carryover of higher input costs in 2023.
- Significant costs related to the transformation program, with expected annualized run rate savings not fully realized until 2026.
Q & A Highlights
Q: The full year guide implies about 5 percentage points of core EBITDA margin expansion in H2. Can you help us with some numbers in terms of how much you're going to get from mix and efficiency, SG&A, and leverage?
A: The transformation benefits are indeed $50 million. For the rest of the costs, we expect a relatively flat number compared to the first half. The mix impact and the cost impact would be around 50-50 to reach that 500 basis points improvement. We aim to come as close to 20% core EBITDA margin as possible.
Q: There's been some talk about GLP-1s and you might go after biosimilar GLP-1s. How are you thinking about whether you'd invest lots in CapEx to make those or outsourcing them?
A: We intend to give more details in September. The first wave of GLP-1s will come off patent starting in Canada in 2026, with the US and Europe following in the early 2030s. We are investing heavily in injectable capabilities and are already in the auto-injector space. This isn't a technology we're unfamiliar with.
Q: On the US Hyrimoz dynamics, to what extent have the volumes in the second quarter exceeded the contracted minimum supply? Can you further increase your penetration rates?
A: The take-or-pay element of the contract is not that relevant now. We are seeing strong demand and have created our own brand momentum. We are still on contract with the other two remaining PBMs and expect a steady progression going forward.
Q: On the biosimilar of Stelara, what are you expecting in terms of the ramp-up in sales in Europe and the US?
A: The deal with ustekinumab is different from adalimumab. Given our strength in immunology and launch capabilities, we are confident. If we do a deal with a PBM, we will disclose it at the appropriate time.
Q: What made you amend Eylea launch date to TBD?
A: This is a complicated case with ongoing court proceedings. The launch could be between now and 2027. It's prudent to give a broader range, hence the TBD status.
Q: Can you comment on US pricing specifically and what you expect to see in the second half?
A: We traditionally assume about 4-5 points of price erosion, but we've seen much lower rates recently. We don't see any signals that this trend will change in the second half of this year.
Q: How should we think about the growth phasing from here with the new launches and the exit rate for this year?
A: The negative impacts from last year, such as apixaban and the strong cough and cold season, will wash out. We expect a strong position in Q4 with new launches like ustekinumab, denosumab in Canada, and natalizumab in the US.
Q: Do you think it would be possible to replicate the Cordavis agreement with other key PBMs in the US?
A: We don't expect own label with other PBMs. Our focus is on partnering with Cordavis and expanding Hyrimoz with other PBMs.
Q: Did the dynamics with Hyrimoz change anything in your pipeline strategy?
A: We focus on our pipeline from a European perspective and then drive opportunities into the US. We don't base our strategy solely on current PBM dynamics.
Q: Can you comment on the partnership with Evotec and the use of continuous manufacturing technology?
A: The partnership with Evotec includes development and supply components. Continuous manufacturing is an option but not critical. We are building a strategy that offers optionality and security of supply.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
