Alvotech Q1 2025 Earnings Call Transcript

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May 8, 2025

There are 7 speakers on the call.

Operator

and thank you for standing by. Welcome to the Alvotech Q1 twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Benedict Stephenson. Please go ahead.

Speaker 1

Thank you. Welcome to Abatek's Q1 earnings call for 2025. Yesterday evening, the company issued a press release including financial results for the first three months of the year. A presentation accompanying today's earnings call can be found on our investor portal, investors.alvotec.com, under News and Events. We will be referring to individual slides during the presentation today.

Speaker 1

Our press release, presentation materials and statements that we make today may include forward looking statements. Please see our disclaimers on slide number two of the presentation. These statements do not ensure future performance and are subject to risks and uncertainties that are outlined in company filings with the Securities and Exchange Commission. These risks and uncertainties could cause actual results to differ materially from forward looking statements that are made. With me on today's call are Robert Westman, Chairman and Chief Executive Officer of Alvotech Anil Okay, Chief Commercial Officer Joel Morales, Chief Financial Officer and Balaji Prasad, Chief Strategy Officer.

Speaker 1

With that, I would like to turn the call over to Robert Westman. Robert?

Speaker 2

Thank you, Benedict, and thanks everyone for joining us, here today. Let me start with a brief note about our announcement this morning. Alwatec has decided to list the SDRs equity equivalents on NASDAQ Stockholm market. The Stockholm Exchange is one of the most active global trading hubs for technology and life science companies. We see this listing as a service both to our current and future shareholders.

Speaker 2

Trading in our stock will be more accessible, which we expect to broaden Alvotech's shareholder base and increase liquidity for Alvotech's shares. Trading in Alvotech STRs in Stockholm is expected to begin on May 19. So moving to our near term outlook. We have received very strong feedback from global partners interested in licensing rights to the new assets in our pipeline. This includes the Simcia biosimilar, which is part of our acquisition of Xbrain's R and D operation in Sweden.

Speaker 2

We have therefore decided to revise our full year guidance. Top line revenue guidance from 2025 is raised to $600,000,000 to $700,000,000 and adjusted EBITDA guidance is raised to $200,000,000 to $280,000,000 There are three key other messages I would like to highlight on this quarterly call. Let me first talk about our financial performance. In the first quarter, we delivered the fourth consecutive quarter of positive adjusted EBITDA and operating profits with triple digit increases in both product revenues and total revenues compared to the same quarter in the previous year. With our strengthening operational performance and positive cash flow from operations during the quarter, we expect to be free cash flow positive in 2025.

Speaker 2

Alvotech is therefore self funded in 2025 for the first time. The second message relates to our performance of biosimilar to Stellara. In the late February, we launched our Stellara biosimilar in U. S. Market after a highly successful commercial launch in Europe, Japan, and Canada.

Speaker 2

In most of the European markets where we have already launched, we are either the market leader or hold the second largest market share. A few days ago, we announced that the US FDA has approved our Stellara biosimilar as an interchangeable with the branch. We remain very excited about the opportunity to grow in The U. S. Stellara market.

Speaker 2

There is also significant room to grow demand for the Stellara biosimilar in Ex U. S. Markets for Alvotec. The third message relates to our strong medium term product launches. As we laid out in some details in our year end earning call, we have three biosimilar filings and the review in all major markets, which we expect to launch as soon as possible after approval in fourth quarter twenty twenty five.

Speaker 2

Our fourth biosimilar is also under review in UK and a marketing application will soon be filed for Europe. By early twenty twenty six, we will have moved from our current two marketed biosimilars to six marketed biosimilars. Our strong pipeline is further primed for product launches in 2026 and 2027. All of this will, of course, contribute to further diversification of product revenues. All of Above exemplifies our capability for integrated development and manufacturing that Alwatec has built over the past twelve years.

Speaker 2

It also underlines the advantage of Alwatec business to business model, which gives us the ability to address the entire global patient population through 20 strategic commercial partnerships across 90 different markets. At our year end call, we also presented ambitious plan, which is already in motion to increase the pace of development significantly, moving four to six new biosimilar candidates into in house process development each year. In summary, we have continued to build significant shareholder value facilitated by our vertical integrated development approach and vertically integrated manufacturing ability. Our ability to execute new product launches in 2025 and coming years is the result of these investments coupled with our dedication of focus in pure play biosimilars. Our increased pace of development is also reflected in increased business development activities.

Speaker 2

Finally, let me briefly address the impact of potential U. S. Tariffs on Alvotec. Tariffs on US imports of pharmaceuticals are still being reviewed and pharma imports to US remain duty free. It is also worth noting that our partnership agreements specify that our products are delivered to our partners ex works, which means that our partners are responsible for customs clearance and eventually import duties.

Speaker 2

We expect that if tariffs will apply to pharmaceuticals exported from Iceland, they will not be disruptive for our tech or our customers in 2025. Furthermore, given the market conditions and the anticipated tariff impact, we expect that our customers can remain competitive in The U. S. Market in the long run. And with that, I would like to turn the call over to Anil Okai, our Chief Commercial Officer.

Speaker 2

Over to you, Anil.

Speaker 3

Thank you, Robert. Starting this year, Alvo Tech has significantly increased its pace of development. We now have seven unique molecules in early phase preclinical or clinical development. In addition to the two molecules already launched and four molecules already filed. Our total addressable market is currently estimated at over 185,000,000,000 US dollar.

Speaker 3

This does not include the 15 unique molecules for which we have already completed cell and development. Based on publicly available information, we believe that Alvo Tech has one of the broadest pipelines in the industry. These products are selected for high potential in markets that are still growing and where we expect to be early movers and with a differentiation. Recent additions to our portfolio are attractive for our partners from a technology indication and market potential perspective. We are in active discussions with multiple partners on new licensing deals regarding the earlier stage portfolio and expect to see the benefit of new contracts in Alwutek's P and L later this year.

Speaker 3

Regarding our marketed products, let me first start with a brief summary for The U. S. Market for Humira. We saw a strong uptake of Humira biosimilars in The US within 2024, and we view 2025 as another transformational year for the market. After the slow uptake of Humira biosimilars in The US, in 2023, the market transformation only started at the time of our Simlandi launch in May.

Speaker 3

Simlandi was of course the first high concentration citrate free interchangeable biosimilar to Humira in The US market. Conversion to biosimilars in the Humira market started accelerating in the second quarter of last year. By year end, the penetration of biosimilars reached at least 21% of the overall Humira market in The US. With our shipments alone in 2024, representing about 12% of the total demand for Humira and Humira biosimilars. It should be noted that the statistics on demand for biologics and biosimilars in The US market are based on best publicly available data from IQVIA.

Speaker 3

However, as we have pointed before, these figures understate the real market share of biosimilars. No private label sales in The US are represented in the current IQVIA data set. We believe that 2025 will also be transformational for the Humira market, as all major pharmaceutical benefit managers or PBMs have announced that they will exclude the originator from formularies. The market share of Humira biosimilars in The US still has significant room to grow, and we believe it's reasonable to expect that at least 50% of The US market could be converted to biosimilars by the end of this year. We see a very healthy order book for our Humira biosimilar in 2025.

Speaker 3

Our partner Teva continues to increase market share with formulary positions with larger PBMs as well as regional players. This includes formulary positions with Express Scripts, Prime, Carillon, some Blue Cross Blue Shield lens and Navitus. We have also continued to gain market share for our Humira biosimilar in ex US markets. This includes high single digit market share in over 15 European markets where we have launched and a strengthening position in the Canadian market. In Canada, we are the fastest growing biosimilar in the adalimumab market.

Speaker 3

Launches of our Humira biosimilars also continue in other ex US markets. We have already gained approval in 60 of the 90 markets that we cover through deals with our commercial partners. As an example, our Humira biosimilar has recently been launched in several Latin American markets. Moving on to AVTO4, our biosimilar to Stellara, we continue to build on the strong launch of this biosimilar under the Uspruva brand with Stada in Europe. In Europe, we were the first to market with a biosimilar to Stellara, and we continue to hold either the highest or second highest market share of biosimilars in each European market where we have launched.

Speaker 3

The European order book with TADA is robust and growing. It is worth reiterating that the entry of biosimilars in the European market contributed to a 9% expansion year over year of the overall Stellara market. This is an important reminder that biosimilars entry can lead to a significant and sustainable market growth as availability increases with lower costs of access for patients to these vital biologics. We remain confident that our biosimilar to Stellara in Europe could reach a double digit share of the overall Stellara market in Europe by the end of this year, with biosimilars in the aggregate holding a 50% share. As for other ex US markets, Alvotec is still the only developer to launch a Stellara biosimilar in Japan.

Speaker 3

Even more than a year after we launched in Canada, the biosimilars market remains a limited competition with only two players in addition to the originator. As for The US market, we are now only a little over two months into our launch of Stellara biosimilar. As previously announced, open expiry of exclusivity for the first interchangeable biosimilar, we gained FDA approval for interchangeability for all presentations of the reference product effective from 04/13/2025. We expect interchangeability to have a positive impact on the speed and extent of biosimilars conversion in the Stellara market. It is of course still early days, but we are already seeing robust purchase orders from different channels.

Speaker 3

Our partner Teva has won the business with Navitas and got formulary coverage with ESI in the last two months since we launched. Teva continues to pursue other big wins to gain meaningful share this year. Price competition, however, was strong, which we believe is based on opportunistic behavior and will be to the detriment of these developers. We will strive not to follow a similar strategy as we believe it's not sustainable in either the short or long term and is not reflective of the value that we bring to the market. Sacrificing value for market share is not compatible with the level of quality, service and reliability that Alvo Tech always aims to deliver.

Speaker 3

This being said, we should note that the level of competition in The U. S. Telara market has not come as a surprise. Any impact on pricing and volumes that we have experienced is already baked into our 2025 forecast and guidance. Let me now shift our focus to the four biosimilars that are currently being evaluated by healthcare authorities in major markets.

Speaker 3

AVTO3, our proposed biosimilar to Prolia, Xceva, AVTO5, our proposed biosimilar to Symphony and Symphony ARIA, and AVTO6, proposed biosimilar to Eylea, have pending marketing applications in both Europe, Japan, and The United States. We expect to launch all three by Q4 twenty twenty five in many major markets. Furthermore, our marketing application for AVT23, a proposed biosimilar to Xolair has been accepted for review by the UK Medicines and Healthcare Products Regulatory Agency. We expect to launch this biosimilar in early twenty twenty six. We are already working with our commercial partners on these four launches and purchase orders have already been made.

Speaker 3

To single out only one of these four products with AVTO5, we expect to be the first to launch in all major markets and remain the only biosimilar in these markets for some time after launch. Our commercial partners for this product include Advanced Pharma in Europe, Teva in The US. They share our excitement for the market prospects for the first biosimilar to Symphony and Symponiaria, which retains significant market share as treatments of immunology diseases such as rheumatoid arthritis and cirrhosis with worldwide sales of over US3.2 billion dollars Sales in ex US markets represent 65% of this amount. We have already received twenty twenty five purchase orders worth more than 20% of the overall European market from ADVANCE, and we expect to gain significant share in 2026. With this, I would like to hand the call over to our Chief Financial Officer, Joel Moralesh.

Speaker 3

Thank you. Joel?

Speaker 4

Thanks, Anil. I'll now provide a summary of our operating performance for the period ending 03/31/2025. On the following slide, you will find a summary of our adjusted operating results where we show key non IFRS P and L line items and metrics for the full year. For reference, IFRS reported financials and reconciliations to our adjusted results are included in the slides in the appendix of this presentation. We achieved a strong $110,000,000 in product revenues during the first quarter, an increase of $97,000,000 or 784% versus the same period in the prior year.

Speaker 4

This increase was driven by the timing of our launches of biosimilars to HUMIRA and STELARA in The U. S, where shipments of product started to materialize in the second half of twenty twenty four and continue throughout the first quarter of twenty twenty five. During the first quarter, we continued to ship our biosimilar to HUMIRA to our U. S. Partners based on orders received.

Speaker 4

As a reminder, our commercial model is B2B, so there can be inherent lumpiness associated with timing and quantities of purchase orders quarter over quarter. We also shipped additional volumes of our biosimilar to Stellara to our U. S. Partner during the quarter in support of the recent February launch. As Anil mentioned, in the short time since the launch, our partner has secured key contracts and we look forward to providing further updates as they expand upon the launch in The U.

Speaker 4

S. Throughout the year. We also experienced continued penetration of our biosimilar to SPELARA across Europe. Our commercial partner has been successful in positioning our biosimilar as number one or number two by market share across multiple European markets, and we continue to fulfill orders in the first quarter. Additionally, reorders for our biosimilar to HUMIRA, which was first launched in Europe in 2022, increased in the quarter versus the same period in the prior year.

Speaker 4

As we've mentioned, our ex U. S. Business continues to be a significant driver of our performance and we expect this part of our business to continue growing this year. Adjusted product margin in the first quarter was a very healthy 41% versus negative adjusted product margin for the same period in the prior year. This is driven by the timing of our new launches into U.

Speaker 4

S. And rest of world markets in the second half of twenty twenty four. Adjusted product margin decreased somewhat from the fourth quarter when it was 45%. This was driven by an increase in product shipments to our ex U. S.

Speaker 4

Commercial partners, particularly as we ship reorders for our biosimilar to HUMIRA to our ex U. S. Commercial partners and thus lower contribution this quarter from The U. S. We expect the first half product margins to be in the mid-thirty percent range, driven by this geographic and product mix and expect our full year margins to be in the 38% to 41% range.

Speaker 4

We achieved $23,000,000 in adjusted licensing and other revenue for the year, which is driven by performance milestones as our commercial partners launch new products and achieve net sales targets. We expect milestone revenues to continue increasing quarter over quarter, particularly in the second half of the year, where we expect to recognize approximately 75% of our full year milestone revenues. As we've communicated, we expect three new biosimilar approvals and launches in the fourth quarter of this year, which will drive this milestone revenue recognition. Furthermore, as you heard from Robert and Anil earlier, the anticipated addition of Cimzia to our pipeline, coupled with our accelerated pace of development of the broader pipeline has led us to increase the upper and lower end of our milestone revenue guidance range by $30,000,000 to between $260,000,000 and $290,000,000 Accordingly, total revenues are now expected to be in the range of 600,000,000 to $700,000,000 We achieved positive adjusted EBITDA of $21,000,000 for the quarter ended 2025 versus negative adjusted EBITDA of $38,000,000 for the same period in the prior year. This is largely driven by the gross margin contribution in the period and lower OpEx, particularly lower R and D costs as we were concluding multiple clinical programs concurrently in the same period during the prior year.

Speaker 4

As a result of the increased guidance range in milestone revenues and incorporating some additional R and D costs, we are now increasing the upper and lower end of our 2025 adjusted EBITDA guidance range by $20,000,000 to between 200,000,000 and $280,000,000 Please refer to the slide in the appendix to today's management presentation for further details on our revised guidance for 2025 and a view into our target 2028 financial goals. In summary, we delivered our fourth consecutive adjusted EBITDA positive quarter, driven by strong product revenues and ongoing milestone revenue recognition. We expect each quarter to be EBITDA positive this year with a robust second half where most of our EBITDA will be generated. This is driven by the timing of our three new biosimilar launches and milestone revenue recognition. Turning to the next slide, you'll find a summary of our cash and liquidity for the year.

Speaker 4

With our improved operational performance, we now expect collections from the sales of our existing commercial products, new product launches and milestone achievement to be the primary source of our funding. During Q1, we generated $17,000,000 of positive cash flows from operations, which is a significant financial milestone for the company, demonstrating the strengthening of our core business operations. We are still in the early days of our launches in The U. S. And EU and naturally while there can be lumpiness quarter over quarter, we do expect to be free cash flow positive this year, demonstrating our ability to self fund our operations and investments into working capital as we prepare for three new biosimilar launches towards the end of this year.

Speaker 4

While we do not expect a significant cash build due to the funding of working capital requirements, we do expect to maintain our current levels of cash on hand throughout the year. Accordingly, we do not expect to rely on additional external sources of funding for us to continue investing behind our business. We closed the period ending March 31 with $1,058,000,000 in net debt. We expect our leverage to be in the mid single digit range as we exit the year. And as we've mentioned in the past, our term loan facility has favorable non call features providing us with additional flexibility to potentially further reduce cost of capital over the near term.

Speaker 4

We closed the period ending March 31 with 301,900,000.0 shares outstanding including unvested earn out shares. In the appendix to our management presentation, you'll find a summary of shares outstanding. In closing, Q1 was another strong quarter for Alvetech focused on operational execution as our products are launched into new markets and continue to expand in existing markets around the world. We continue to maintain sharp focus on scaling our operations and developing the next wave of biosimilars to bring to markets around the globe. And with that, I'd like to turn the call back over to the operator for Q and A.

Operator

Thank you. We will now take the first question from the line of Ash Verma from UBS. Please go ahead.

Speaker 5

Hi, good morning. This is Dee calling on behalf of Ash. Congrats on the quarter and congrats on getting the interchangeable label. I have two questions on biosimilar Stellara, if I may. So, the first, can you help clarify the interchangeable exclusivity and how does that trigger specifically?

Speaker 5

And can your competitor, like, send those also get interchangeable label for their Balsamos, etcetera. What will be the value position of Velocity if Sandoz also get the intrinsurable label? And then second question also on the Balsamos, etcetera. I know you guys have talked about, like, you're working on the private label deal. But what's your latest thoughts on when the PBM may drop the brand from their plans?

Speaker 5

Thank you.

Speaker 3

Thank you very much for the questions. Anul is speaking. So let me start with the first interchangeability question. Yes, we are very happy that we got our interchangeability designation as April 30. So the Amgen exclusivity has expired April 30.

Speaker 3

We have not seen all our competition yet getting the interchangeable designation, but we would of course expect some of them getting it. But from our perspective, this is very positive news to drive faster uptake throughout the year. When it comes to your second question, we have multiple active dialogues still continuing on the private label partners. And what I can say is that at least we are expecting more moves from the PBMs excluding Stellara from the formularies. If this happens, of course, this will open more opportunities for the biosimilar players.

Speaker 3

But from our perspective, we continue to have the dialogues and if the brand is excluded, we will see this as a big opportunity for the uptake.

Speaker 5

Great. Thank you.

Operator

Thank you. The next question comes from the line of Carl Byrnes from Northland Capital Markets. Congratulations

Speaker 6

on the quarter and the progress. I'm wondering if you can quantify to your best ability what the buy out of stocking might have been for the Stellaris biosimilar Solartzi in the first quarter, given the $110,000,000 net product sales? Thanks.

Speaker 4

Hi, Carl. Thanks. This is Joel. I don't know if I would necessarily describe stocking, so I wouldn't quantify it that way. I think it's important to understand that we are a B2B business, which means that we're shipping against purchase orders, right, that we receive against our commercial partners worldwide.

Speaker 4

So there can be inherent lumpiness in this business model as our partners ultimately decide timing and quantities shipped based on their own individual underlying commercial dynamics, depending on where in the world we're talking about. But that said, I would say that this is driven more by timing of orders rather than stocking.

Speaker 6

Great, thank you.

Operator

Thank you. There are no further questions at this time. I would now like to turn the conference back to Benedict Stephenson for closing remarks.

Speaker 1

Thank you, Sandra. On behalf of the AlloTech team, want to thank you all for listening to our call today. Have a great rest of the day, and we look forward to talking to you all again. Goodbye.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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