Almirall, S.A. (ALM) Earnings Call Transcript & Summary

Good day, and welcome to the Almirall Full Year 2019 Financial Results and Business Update Presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Pablo Divasson. Please go ahead, sir.

Thank you, Jody. Good morning, everyone. Welcome to the Almirall Full Year 2019 Financial Results Conference Call. This presentation was released earlier this morning and is available on our corporate website. Presenting today, we have Peter Guenter, Chief Executive Officer; Michael McClellan, Executive Vice President, CFO; and Bhushan Hardas, Executive Vice President, Research and Development, CSO. Peter will make some introductory remarks about the year and later come back to sum up. Bhushan will update you on our pipeline, and Mike will provide you with detail on the financials and 2020 outlook. After that, we will open up for a Q&A session. Before we move ahead, I would like to remind you that certain statements that we will make in this presentation are forward-looking statements. These forward-looking statements reflect Almirall's judgment and analysis only as of today, and results may differ materially from current expectations based on a number of factors affecting our businesses. So with that, I will pass you over to our CEO, Peter Guenter.

Thanks a lot, Pablo, for the introduction, and good morning to everyone on the call. 2019 has been a very strong year for Almirall, both from a financial perspective and in terms of pipeline progress. We had a strong business momentum, driven by our growth drivers, and we are pleased to have delivered our upgraded EBITDA guidance, which we provided at Half 1. I will give you additional information later in this presentation on the growth drivers. Notable late-stage pipeline progress included lebrikizumab commencing Phase III clinical trials, and we expect to announce a complete filing of tirbanibulin before the end of the quarter. Additionally, as you are aware from our announcements at the beginning of the year, we have signed an option agreement to acquire Bioniz Therapeutics, a clinical-stage biopharmaceutical company. And we have signed 2 strategic collaboration agreements with 23andMe to license rights of the bi-specific monoclonal antibody and WuXi Biologics for multiple bi-specific antibodies targeting dermatology diseases. We have announced the acquisition of the China rights of Seysara, and we will initiate Phase III later this year. I will elaborate a bit more on this in my presentation. Furthermore, critical to any organization is the capabilities and people within, and we are pleased that we continue to attract key talent to Almirall like Volker Koscielny, Chief Medical Officer, who has started in January, joining us from Celgene. As I mentioned, we are pleased to deliver a strong set of financials and achieve our upgraded EBITDA guidance, following good performances from key brands and improved product mix, driving an increase in gross margin. Almirall starts 2020 with a good credit rating, reflecting our operational flexibility and healthy balance sheet, whilst we actively pursue other acquisitions and late-stage in-licensing opportunities that align with our corporate strategy. Taking a step back in our transformation journey over the last 2 years, I think it's fair to say that Almirall is fundamentally a different company than what it was a couple of years ago. There has been and will continue to be a transformation of the business. New Almirall, if I may call it like that, starts with the launch of Skilarence in October '17, which was our first launch in psoriasis in Europe. We then made the first in-licensing deal for a new mode of action in actinic keratosis, which is a pre-cancerous and very frequent disease in medical dermatology. At that time, it was in Phase II, and I'll come back to you shortly on where the product is now. A very important turning point was the acquisition of the medical dermatology portfolio of Allergan in the U.S. in August 2018, which came with an innovative novel antibiotic for moderate-to-severe acne, as you know, I'm talking about Seysara, which was then launched in January 2019. We had our first launch of a biologic in Europe with Ilumetri. Then, very significant in our view, we entered into an option deal with Dermira to acquire the European rights on lebrikizumab, an anti-IL-13 for the treatment of atopic dermatitis. When we saw what we thought to be very interesting data, we exercised the option, giving us unrestricted access to what we think has best-in-disease potential in this indication. And of course, recently, Lilly acquired Dermira, which we view very positively for Almirall. Firstly, it validates the hypothesis that indeed lebrikizumab is a very interesting molecule. And secondly, with the power of Lilly behind this brand in terms of medical affairs, evidence generation, evidence dissemination, life cycle management, et cetera, which, of course, also ought to be very helpful to us in Europe. We announced a number of deals at the beginning of the year, including Bioniz and 23andMe, which Bhushan will elaborate on a little later. So this is really where we are today, focusing on these launches and building a real pipeline of innovation for severe unmet medical needs in medical dermatology. Going forward, we are excited about and working towards key launches of future growth drivers with the launch of Tirbanibulin in Europe and the U.S. in 2021. The following years, we will be expanding Seysara's geography by submitting in 2023 in China and launching lebrikizumab in Europe in 2023. All this points towards significant mid-term value to be unlocked. Now turning to the launches. We are very pleased to see the performance of our recent launches. Skilarence has completed the European rollout, achieving good penetration and captured significant market share in the key markets of Germany and Holland, within the fumarate class. Ilumetri has performed well in the last quarter of the year, with strong unit growth quarter-on-quarter. We are encouraged by this momentum, which we expect to continue, after having negotiated the final price with the GBA in Germany. Seysara finished the year with 6% TRx market share. From the second week of January, we changed our PAP program, and we have seen an expected decline in TRx, which is totally aligned with our internal expectations. I will give you more details on this later. In 2019, we had 6,200 dermatologists prescribing Seysara and a total of more than 200,000 prescriptions. Turning to Skilarence. Germany and Holland are clearly showing very strong market shares. You can see from the slide, those impacts of those 2 launches with quite immediate impact. Moving forward, you should take into account a more gradual pace due to the very high shares in these 2 key markets of now 80% to 90%, meaning that our room to grow additional share is limited in those 2 key countries. In DMF-naive countries, the market penetration requires more time and indication, therefore, expect a more gradual increase going forward. Moving to Ilumetri. As you know, this is an IL-23p19 inhibitor and is our first biologic in psoriasis in Europe. Psoriasis carries a high disease burden, and patients can have a very significantly impacted quality of life. In such cases, therefore, it is important that any therapy provides long-term control. A short-term fix is not what is needed here, and patients need a long-term treatment strategy to reduce this disease burden and improve their quality of life. You can see from the slide that anti-IL-23 is clearly conquering the market. We are zooming in here on the dynamic segment of the market. There are compelling reasons for that. The anti-IL-23 class has a strong efficacy profile, with the key attributes being a proven lasting efficacy with convenient dosing and with no significant safety concerns. Now if we zoom into the Ilumetri performance. We are pleased with the performance of Ilumetri in Q4. You can see the patient data in Germany quarter-on-quarter, and you see that we are actually tracking very nicely with the update. Despite the launch of a new competitor, anti-IL-23, we continue to gain patients with Ilumetri. We even saw an acceleration in Q4. So this is certainly a very competitive space, but we think that we have a very good product in the right class. The majority of patients require clinically meaningful and reliable long-term control and are less concerned by rapid onset of action. In this context, Ilumetri has demonstrated clinically meaningful disease control by absolute and relative PASI, with 8 out of 10 patients staying on therapy for 5 years. Importantly, this was achieved without any new or emerging safety signal. With a highly favorable and very differentiated cost benefit ratio, Ilumetri can be considered the therapy of choice for the vast majority of patients that cannot be controlled by conventional systemic therapies. Seysara, our antibiotic and moderate-to-severe acne, has seen a very nice uptake of TRx during the first year since launch, reaching 6% market share in the U.S. in the broad oral antibiotic market prescribed by dermatologists by the end of the last quarter last year. The strategy has always been to generate a lot of user experience for the dermatologists, thanks to a generous co-pay offset by Almirall. This, we clearly achieved, and we have now established Seysara as the best-in-class oral antibiotic for moderate-to-severe acne. We have also flagged that we would start working as of the second year to improve the gross to net by introducing a new, less generous co-pay offset. This is exactly what we did as of the second week of January. The logical recent TRx decrease is in line with our expectation, given the changes to our co-pay program that we initiated in the second week of January. Moreover, I can tell you that the overall market share of oral antibiotics has decreased versus December and that Seysara market share already starts to stabilize. Also, you can see from the slide that the absolute number of prescriptions starts to stabilize. More importantly, this expected decrease of prescriptions is actually eliminating the non-covered prescriptions in order to improve the gross to net. Actually, I can tell you that we see already significant improving -- improvement in the last weeks in the gross to net for January, despite being in the high deductible season, and this improvement should further develop throughout the year. Also, we have announced this morning that we have acquired the rights to Seysara in China, and we are planning to submit Seysara to the Chinese NMPA in 2023. There is a large acne population, leading to a potential of 13 million moderate-to-severe treated acne patients in the urban population by 2028. This is a large opportunity where we can launch an innovative product into a growing market with clinical development that is largely derisked. Our pricing research shows there is significant willingness to pay out of pocket in Tier 1 and Tier 2 cities, and we plan, therefore, to launch in such an out-of-pocket model, avoiding also lengthy pricing and reimbursement discussions. Entering into the late stage of our pipeline, we have made excellent progress there. We are building the clinical stage pipeline with very exciting products. Here, we're talking about lebrikizumab, Tirbanibulin and the recently announced BNZ-01, with more to follow in the course of 2020 and 2021. I mentioned before, we have also included Seysara for clinical in Phase III. Combining the peak sales potential of the recent launch of Skilarence, Ilumetri and Seysara, together with Tirbanibulin and lebrikizumab, gets you an excess of EUR 1 billion, another indication of the ongoing potential for transformation of a company that has just reported 2019 product sales of EUR 853 million. These peak numbers do not include BNZ-01 nor Seysara China. On lebrikizumab, this slide tells you why we are so excited by this opportunity. Since we exercised the option on lebrikizumab, there has been only positive news. Upadacitinib received its registration in rheumatoid arthritis with a black box. And we think it's very reasonable to assume that they will have a black box warning for AD also. We have initiated Phase III, even a little bit ahead of schedule in October 2019. Then 2 potential competitors dropped out of development, there was the IL-17C from Novartis that was stopped in October '19 and the anti-IL-33 from AnaptysBio that was stopped in November '19. In the meantime, Dupi has obtained market access nearly everywhere in the U.S., hence opening the way for future incumbents in that indication. And we note with interest Sanofi announcing in December 2019, the global peak sales potential for Dupi of EUR 10 billion, which we very much see as an external validation of the potential of lebrikizumab. And then in December, also Tralokinumab hit its primary endpoint, but with no details given. Perhaps of most relevance to Almirall was, of course, the acquisition by Lilly of Dermira, which we view as a very solid external validation that we made the right choice when we took the option on lebrikizumab. To expand a little bit more on Lebri's potential, we are pleased to see the latest report from DRG that supports our forecast for Lebri. In fact, DRG gives sales of EUR 532 million by 2028, in a market that keeps growing. I am not sure that potential for Almirall of this drug is sufficiently recognized by observers. We think that this product has a potential to be best-in-disease for atopic dermatitis. This graph shows a substantial market opportunity, and the good news is that today, there's only one biologic that is marketed, dupilumab of Sanofi. Since the launch, they have been able to secure a very good market access for dupilumab in Europe. This is a positive indicator for Lebri, as we will not have to open that market access in the atopic dermatitis space, instead, we will be able to follow on what Sanofi has already created with dupilumab. All observers say that the number of atopic dermatitis patients will be at least the same as psoriasis, but with a burden of disease that is probably even more important than the burden of psoriasis. We are excited by the profile of Lebri and what it has to offer for patients, and we are working towards launch of the product in early 2023. I will now pass over to Bhushan to discuss updates in the R&D pipeline.

Thank you, Peter. I would like to spend some time to go through this slide in slightly more details, to further emphasize why we are so excited about lebrikizumab from a clinical as well as scientific perspective. Here, we see 3 [ cartoons ]. One, monoclonal antibody, which is already on the market, like Peter said, dupilumab, and two, under development, lebrikizumab and Tralokinumab. Dupilumab is a monoclonal antibody targeted towards IL-4 receptor, hence submitted to target mediated drug disposition, which has an impact on the half-life of the antibody and its ability to maintain systemic therapeutic levels within given time. Dupilumab prevents the dimerization of both type I and type II receptor complexes, thereby blocking type I as well as type II receptor signaling, that's why the signaling is much more wider. Recent studies have shown -- had many publications that say that IL-13 is primarily cytokine involved in atopic dermatitis inflammation. IL-13 is over-expressed locally in atopic dermatitis skin and has significant impact on skin biology, including recruiting inflammatory results at the lesion. Lebrikizumab is a monoclonal antibody designed to block IL-13 cytokine with very high affinity and up to 4 weeks half-life. Lebrikizumab specifically binds to an epitope that prevents it from binding IL-13 receptor alpha 1. Hence, there is no dimerization with IL-4 and formation of type II receptor complex and blocking of type II mediator signaling. At the same time, it does not prevent the IL-13 from binding IL-13 receptor alpha 2, which is also called decoy receptor, which is known to have anti-inflammatory properties. This specificity and high affinity of lebrikizumab is very important and has reflected in the clinical outcomes in the Phase IIb clinical trial that were already published. Lebrikizumab Phase IIb data, we see percentage change from baseline in Pruritus at 16 weeks to be close to 65% -- percentage IgA responders by about 40%. If you look at EASI-90, which is a very high bar to reach in atopic dermatitis, you see about 44% in EASI-90. On the other hand, tralokinumab is also a monoclonal antibody, against IL-13 cytokine, but it targets very different epitope. Tralokinumab prevents blocking of type II receptor, just like Dupi, but with a very low affinity. Larger number means low affinity, smaller number means a very high affinity. It also prevents IL-13 cytokine from binding to the IL-13 receptor alpha 2, a decoy receptor, thereby blocking its anti-inflammatory properties. These 2 functional characteristics, low binding affinity and blocking of IL-13 receptor alpha 1 and 2 sets tralokinumab far apart from high affinity and specificity of lebrikizumab. So in short, given the importance of IL-13 in atopic dermatitis, skin biology and its high targeted affinity, long half-life and specificity that targets prudent mechanism of action for atopic dermatitis, lebrikizumab presents the unique opportunity for benefiting the patients by improving efficacy as shown in Phase IIb, tolerability and convenience and long-term maintenance of atopic dermatitis. Now let us talk about the really exciting deal that we have with Bioniz. As shown in the slide, CTCL, despite the overall long survival rate in the early stages of the disease, the progression rate dramatically increases at IIB and the survival rate also decreases dramatically. There is an unmet need in these stages of the disease where today's available therapies have very high incidence or side effects and are not tolerated by patients. The patients have to go through multiple treatment regimens to survive. BNZ-1 is an extracellular peptide that binds to yc receptor, which prevents its dimerization with IL-2, 9 and 15. It is already in Phase I/II for CTCL, and FDA has granted orphan drug designation. We will evaluate the results of this particular trial and results of pre-Phase III meeting with the FDA. And at that time, we will execute an option. This will be around end of 2020. Once the option is executed, we will start Phase III clinical trial for CTCL in 2021, and Phase II for alopecia areata shortly thereafter. Almirall will have global rights for BNZ-1. Bioniz has the innovative platform technology for extracellular peptides that can inhibit multiple cytokine receptors. The platform technology is already in units and has shown target engagement. It is also clinically validated as we see in BNZ-1. End of this year, when we execute the option for BNZ-1, we will also initiate a research collaboration with the company, thereby, they will provide us 3 IND-approved molecules in inflammatory and/or immuno-dermatological indications in the coming 3 years. We are extremely excited about this collaboration so that we can bring technologies to the market which will benefit the patients. Being said that, I will hand it over to Mike to provide us with financial performance.

Thank you, Bhushan. Now I want to take you through the financial part of the presentation. We've delivered what we believe is a very strong set of financial results for 2019. The key highlights are as follows: total revenues and net sales growing at 12% and 13%, respectively, boosted by our recent launches and a full year of our U.S. portfolio, mainly boosted by Aczone 7.5%. We have a positive evolution of the gross margin with a year-on-year improvement, driven by our improved product mix. We have made significant investments in key product launches, helped by reallocating savings from the divestment of our aesthetics business. With this, we delivered a strong operating leverage with EBITDA growth of 45% and a major improvement in the year-on-year margin. And this has helped us to achieve an excellent operating cash flow of EUR 276 million, aided by significant collection of milestones from AstraZeneca, primarily in Q4. When looking at Q4 2019 versus Q4 2018, we see sales flat and profit improved, mainly due to lower G&A -- R&D expenses. Gross margin was down, mainly due to a reallocation of wholesaler fees from the new U.S. portfolio to SG&A from a reduction of net sales in 2019. On this page, you can see the main contributors to net sales over the period. In particular, I want to highlight the strong contribution from our recently launched products as the ramp-up of Ilumetri and Seysara in the first year since launch has managed to hit our internal targets. We forecast a continued meaningful contribution from these products in the near term, as we continue to gain penetration in key geographies. We've achieved strong net sales growth of 13% in 2019, which is very much in line with the guidance given. Taking a look at the P&L in detail, you can see the 13% net sales growth that I mentioned. And in addition, gross margin achieving 71%, driven by favorable product mix. Other income was stable versus last year. Moving forward, we will see a significant reduction in other income as milestone-related income from AstraZeneca decreases sharply, and we switch to a predominantly royalty income model. R&D increased this year versus 2018 by 5%, due mainly to an increase in Phase IV studies for the recent launches. We achieved a 6% decrease in SG&A spending versus last year, though when you consider the divestment of the aesthetics business, the IFRS 16 changes and the wholesaler fee reallocation, underlying SG&A increased by high single digits. We will discuss this in more detail on the next slide. All of this led to an excellent EBITDA growth of 45%, with an important improvement in terms of EBITDA margin from 28% to 36%. Looking deeper at SG&A evolution in 2019, you can see over the year, we continued to manage SG&A expenses tightly overall, while investing in our recent product launches. We benefited from meaningful savings, following the divestment of our aesthetics business during last year. As you can see in the other column, the reclassifications mentioned during the 2018 year-end call amounting to roughly EUR 16 million related to lease accounting implementation and a reallocation of wholesaler fees in the U.S. to net sales aided the reduction of SG&A versus 2018. In 2020, we anticipate mid- to high single-digit increases in SG&A, excluding depreciation and amortization, to support our launches and continue the investment in our growth drivers. Going down the P&L, the combination of growth, improved product mix and limited expense increase provided operating leverage with solid EBITDA and EBIT margins increase. 2019 saw an effective tax rate of 17%, in line with our expectations. In 2018, due to the Allergan portfolio acquisition, we ran a new impairment test evaluation. And as a result, some tax assets linked to the previous U.S. impairments were reinstated, and that's why 2018 had a small income in the tax line. With this, we generated normalized net income of EUR 136 million and a normalized earnings per share increase to EUR 0.78 per share, up 53% from last year. Looking at the balance sheet, I simply want to highlight 2 elements: one, an increase in intangible assets following from the Dermira payment for lebrikizumab as well as additional investment in the Athenex product. And I also want to say that we finished the year with leverage of 1.5x EBITDA to net debt, which gives us the maximum flexibility for additional M&A activity going forward. Let's have a quick look at the cash flow statement. We delivered a strong operating cash flow, generating EUR 276 million from good collection in Europe and the U.S., which we're pleased with important conversion rate, an improvement versus last year, boosted by milestones received from AstraZeneca. Investments include the Dermira option and exercise fee as well as additional down payment on the Athenex product. For 2020, I want to show a summary slide of the guidance assumptions that we're using for the year. This shows our view of some potential impacts to the business this year, both positive and negative. There are multiple moving parts. However, overall, we anticipate an increase in the net sales as products continue to roll out across Europe and the U.S. strategy for Seysara to optimize profitability starting in January begins to bear fruit. I've already mentioned in some detail the future expected trend for other income and that we intend to invest to support our recent launches, which will lead to a mid- to high single-digit increase in SG&A spend in 2020. As you will see -- be aware, given that we've flagged it for some time, there is a generic launch for Aczone 7.5% in the U.S. that will impact us this year. There's one additional impact area that could adversely affect us in 2020. Our Spanish division is strong and a very profitable part of the business. We have a new government in Spain, and there could -- while there could be new measures, there have been nothing announced yet so far, but it would be remiss for us not to mention the possibility that at least some adverse impact this year or next could happen. Having said that, we have received no details that there's any proposed measures, but we'll let you know once something concrete is launched. With the previous assumptions presented, I can give you our guidance for 2020. We expect net sales of low to single-digit (sic) [ low to mid-single-digit ] growth. In terms of EBITDA, we expect to be between EUR 260 million and EUR 280 million for the full year, with the growth in the core EBITDA, as I will explain on the next slide. We've given a relatively wide-ranging EBITDA for this year, as we want to have caution. Because it's, firstly, we don't know if and when the Spanish government may implement any measures. And secondly, the speed of the generic launch of the Aczone 7.5% is not known at this point. These are the 2 largest swing factors in the range of the EBITDA for 2020. Here, I want to provide a slightly different perspective on the company's transformation. When looking at EBITDA, including, excluding other income. What you can see is that the core EBITDA has been growing in all of the last few years, while the significance of other income has been declining. As we mentioned in 2020, the other income will be mostly a royalty model and given the current performance of the underlying products, we expect this to be significantly lower than in the past. We expect core EBITDA in 2020 to be growing despite the impact of Aczone generics. And finally, on this slide, we want to reiterate our priorities when it comes to capital allocation. First, our priority goes to invest behind the new product launches, building our European psoriasis franchise and the U.S. acne franchise. It's clear that what we've created for ourselves is a lot of opportunities. Second, we are focused on strengthening our R&D pipeline, which is at the core of being a specialty pharma company. We've made very good progress, as Peter and Bhushan have explained. Third, we want to provide a secure and stable growth dividend to shareholders. At the Annual General Meeting on May 6, 2020, the Board of Directors will propose a gross dividend of EUR 0.203 per share in scrip dividend stable versus last year. Finally, we will focus on M&A for accretive deals that will reinforce our core business and bring critical mass to further leverage our fixed cost base. With that, I'll now pass back over to Peter to conclude the presentation.

Thanks a lot, Mike. So in closing, I would just say that we think that the strategic transformation of Almirall is now firmly underway. With the European psoriasis franchise and Seysara in the U.S., we have created a very good momentum. Looking at our pipeline, we have now a very attractive number of late-stage opportunities with significant future leverage on our growth profile. Then as you've heard from us before, a key component of our strategy remains to search for additional external opportunities to further complement our current growth profile and generate sustainable value for shareholders. Finally, we expect top line growth at low to mid-single digits. In the year, our biggest product in terms of sales, Aczone 7.5% goes generic. This shows that the underlying performance of the business remains strong and demonstrate our significant leverage for midterm growth. So Pablo, I'll hand back to you for the Q&A session.

Thank you, Peter. Jody, please, back to you for the Q&A.

[Operator Instructions] Our first question is from Trung Huynh from Crédit Suisse.

I have a few, if I can. Firstly, on 2020, do you see growth in the U.S. derm portfolio for 2020? And what products beyond Seysara, do you see that growth in? And can you outline the Spanish portfolio impact if the government chooses to implement these cost measures? And secondly, on Seysara, you know the scrips are starting to stabilize. Is today's level now the bottom or should we continue to expect a decline? And how long do you think it takes to get back to the level you were previously at? On your other growth drivers, if you have a look at Ilumetri and Skilarence, quarter-on-quarter sales growth seems to have really slowed. What can really get the sales going for these products? And are you still confident in your peak sales forecast for these products? And finally, just a quick modeling one. You've been helpful on the level of SG&A growth. Can you please be helpful in the level of R&D growth?

Okay. Thank you, Trung. These are actually 5 questions. Let me take the Seysara question and the other growth drivers. So basically, the psoriasis franchise in Europe first, and then I'll turn it to Mike for the other questions. So on prescription Seysara, if you look at the evolution, it's true that we see the bottom coming close. I think what you should also take in mind when you look at the evolution over the last weeks is that you should really take the point of 3rd of January as the starting point and not the peak you saw on 20th of December, which is typically a peak in U.S. of the Christmas season for acne, that we really only [ buy back ] on the co-pay card after the 3rd of January. So this should really be the base. That's my first comment. My second comment is actually that yes, you saw the erosion of the Seysara prescriptions, but it's also a typical pattern then in the first weeks of January, the overall oral antibiotic market also decreases. So what we see actually in market share in the last weeks in the oral antibiotics segment, we see actually that we have already a flat market share since 2 or 3 consecutive weeks. So if you take all these factors together, I think we're probably very close to the bottom, and we can really start growing from this new base. Number two, on the other growth drivers, actually, we are very excited about Seysara and are really -- sorry, about Ilumetri. And I really invite you to look at the patient growth or the unit growth Q4 versus Q3. As demonstrated in the slide, we even had an acceleration in new patients putting or being treated with Ilumetri. And if you would normalize the sales of Ilumetri for the price decrease in Germany that we have, we're actually looking at EUR 22 million sales. So I really invite you to look at Ilumetri through this lens. And this is basically only Germany sales because we're just in the phase of launching in countries like Austria, Spain, Italy, we launched last week. And then hopefully, later during the year, we'll also launch in France after the summer break. So I think we're very, very optimistic on Ilumetri. And together with the continued gradual growth of Skilarence, we do confirm our global peak sales of the 2 products combined of EUR 250 million. So I'll now turn to Mike for the other questions.

Yes. So let me try to go through them. And if I miss anything, just let me know. So for 2020 U.S. derm, we're not going to give detailed numbers about the whole portfolio. But I think it's safe to say that we expect the generic impact on Aczone to be slightly more than the growth of the other products. So the U.S. overall derm portfolio will face a slight decline. In terms of other growth drivers there, I think tirbanibulin, when it's launched in 2021 will be a nice growth driver. The remaining part of the portfolio that we acquired from Allergan has some small growth in some of the products but some others facing some generic competition. If I move over to the Spanish portfolio impact, we're not giving any numbers directly on that because we don't have anything concrete in terms of measures yet. But safe to say that if we do have a significant impact, it will put us more towards the lower end of our guidance range than the higher end of our guidance range. And then overall, the last question, we did give guidance on SG&A. For R&D, we would expect a small increase, low single digits, some mid-single digits at the upper end of it, as we continue to fuel the studies needed for not only Phase IV for the recently launched products, but we are moving other things through the pipeline.

Our next question for today is from Francisco Ruiz from Exane.

So I have 3 questions. The first one is a follow-up on the Spanish measures. So could you confirm that you have already included in your guidance? The second one is if you could give us a detail of how much of the other income in 2019 comes from AstraZeneca, both royalties and milestones? And the third one, if you could detail what are the earn-outs on milestones that you have to pay in 2020, with the one that you already know?

Okay. I'll take the first question on the Spanish measures. So yes, we confirm that we have, let's say, call it a placeholder in our guidance for potential Spanish measures. And as Mike just explained, if those measures materialize, this will drive us to the lower end of the guidance, if not, this will drive us to the higher end of the guidance. But I think it's too early to really give you more color on that today. The only thing I can tell you is that we have conservatively planned for that. Mike, the questions on other income in 2019 and earn-out...

Yes. So for the other income, 2019, the majority of that income was all from AstraZeneca in the line other income and the majority was still the amortization of milestones from previous years as well as the cash that was actually collected in Q4 this year for the combo launch in the U.S. Going forward, we really don't see significant milestones in that line. And it's really just going to be royalties on the products that continue to be sold. Unfortunately, that product portfolio has been declining. And as of now, we haven't seen any rapid growth of this new combo launch. So we'll keep a close eye on it. But at this point, what we're guiding towards is what we see in that line. Then in terms of cash, most of the cash payment in 2019, there is another cash milestone coming in, in 2020, but it's related to income that's already been recognized.