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

Good morning, everyone. Welcome to the 42nd edition of the JPM Healthcare Conference in San Francisco. I'm happy to introduce you to Carlos Gallardo, Chairman and CEO of Almirall. Thank you.

Thank you, [ Nikolo ], and good morning, everyone. It's a pleasure to be here with all of you, and thanks to J.P. Morgan for the kind invitation 1 more year. So almost 10 years ago, we took the strategic decision to focus exclusively on medical dermatology. So we started our journey to build a portfolio and to build a pipeline in this indication. Today, I'm very happy to share with you that we are a recognized leader in Europe, already in medical dermatology, with a strong portfolio of 48 products across different modalities: topicals, systemics and biologics. We have a strong commercial organization that covers 60% of office-based dermatologists in Europe and 90% of hospital-based dermatologists, and a growing and exciting pipeline also across different modalities of dermatology assets. Additionally, we have direct presence in the U.S. and also indirect presence in other geographies through partners and distributors. But why did we choose to focus on dermatology? 10 years ago, at that time, we already had a portfolio, thanks to the acquisition of Hermal. Also, there was -- there was tremendous unmet needs, so a great opportunity for us to develop exciting medicines to help patients. And it was specialty, and we were looking to stay away of primary care. So fast forward into this market, and we've seen that the growth in the market has occurred today. Dermatology is a market of around EUR 47 billion, mainly driven by the biologics in psoriasis. It's around 50% of the sales come from -- and that's U.S. and EU5 came from this disease area. But looking at the latest data from Evaluate Pharma, this market is expected to continue to grow double-digit, 10% year-over-year in the next 5 years. But there are other very attractive characteristics of this market, and that's why we are very excited to be focused on dermatology. First, there are many pipeline and product opportunities, particularly in the immunology-mediated diseases. If you look at our pipeline, we have 2 of such assets in our pipeline, the anti-IL-1-RAP and the anti-IL-2 fusion mutant, in which we do believe that we have a pipeline in our product already. We are positioned to treat chronic diseases. So we don't understand the biology well enough to enforce cure in these diseases. So they are chronic treatments. As I will show you, with an example in psoriasis later on, these novel mechanism of action drive higher biologics penetration. And the characteristic of these diseases is that only a small percentage of eligible patients are treated with advanced therapeutics, and therefore, every time there's a new mechanism of action, what it does is increases the penetration. So it does not cannibalize the previous sales, but increase the penetration. So that's positive, and we will see the example later on in psoriasis. And therefore, multiple products can coexist in the same indication. And that's important. That's important because we got aim for -- we can expect products growing in this disease until -- [ but in ] expiration. So in this market, how we performed recently? So in the past few years, we've been able to deliver a steady stream of launches and therefore, we believe that we have a proven track record of executing these successful launches, both of internally developed assets such as Skilarence, but also external and partner assets, such as the other ones that you see in the slide. And let me pause for a second on the latest -- on the last product that we have launched, Ebglyss lebrikizumab. This is a product that was approved by the European Commission in November last year, and that we have already launched in Germany just a couple of weeks ago. It's a product that is partnered with Eli Lilly. And we are delighted to have such a strong company as our licensor and as our partner, and we have a great collaboration in place. So what are we expecting from Ebglyss? We truly believe that Ebglyss has a potential to become a best-in-class treatment for atopic dermatitis, thanks to its unique mechanism of action. So the way it binds to IL-13, with high affinity and selectivity, results in great efficacy. We are seeing it in the clinical trials as early as week 16, but also we have data until 2 years where patients that respond well in week 16, they continue to respond. We continue to see efficacy of the product 2 years later. And of course, a unique dosing schedule, with 1 injection every 4 weeks. So super excited to have Ebglyss in our arsenal, in our repertoire of products to help patients in atopic dermatitis. It's launched already in Germany, and we are going to launch it this year in a number of countries as soon as we get pricing and we secure market access. And again, very excited to position Ebglyss as the best-in-class treatment for atopic dermatitis. So what can we expect of Ebglyss and the other innovative products? So we look in this slide, and we look from left to right. What we can see is that already from the innovative portfolio that we have launched in recent years, already 30% of our net sales, and that's data from last year, already account for -- are driven by this portfolio. And we move into the biologics, where we have the biggest opportunity. We look at Ilumetri, tildrakizumab, that we launched 4 years ago. Already has become, in 2022, was our best-selling product with EUR 122 million -- sorry, EUR 124 million. And this year, you look at the data, has grown more than 35%. So it's a growth that, as I mentioned before, continuous despite new mechanism of action entering psoriasis is a product that continues to show -- hold higher growth rates. Moving forward, if you add Ebglyss into medication, we see that we have a tremendous opportunity in terms of sales growth, with high double-digit growth expected until the end of the decade. So together, if we look at 2 biologics, we have announced peak sales of around EUR 700 million, which means that it's going to multiply by more than 5 our existing franchise today in atopic dermatitis and psoriasis. In addition, what are the areas that we are focusing in dermatology? So basically, we focus on areas of high unmet need. Okay? And so if you look at it, two of the areas we're focusing also have high prevalence, such as the immune-mediated inflammatory diseases, such as atopic dermatitis, HS, alopecia areata, vitiligo, psoriasis, and non-melanoma skin cancer, where we already have a strong presence in AK with Solaraze and Actikerall. But also, we are looking at rare dermatology diseases. As we'll see later, there are more than 1,000 when I learned about this data, I blow my mind away. But more than 1,000 rare disease in dermatology. And the vast majority of them, they have no FDA or EMA proof treatment, so a great opportunity. And also it's a great opportunity for products that are developed in the first bucket, the IMiDs, because some of them can present opportunities also to have efficacy in rare dermatology diseases. And even with lebrikizumab, we are looking into this bucket as we manage -- as we maximize the impact of this product. If we focus now on the immune-mediated inflammatory diseases, we see what I mentioned before, on one hand, there's very high prevalence. Again, this is data from U.S. and EU5, and we see the millions of patients with atopic dermatitis, psoriasis, vitiligo, HS, CSU, alopecia areata, et cetera. But it's more relevant is that if you look at the blue bar, we see that even in mature markets or more mature markets like psoriasis, only 23% of patients are treated with advanced therapies, okay? And that's 15 years or more than 15 years since we -- it was -- the first TNF was launched. So still tremendous unmet need. A vast majority of patients are not treated with the right medicines. And so we are very excited to be in these areas to be able to contribute to treat patients effectively and transform the patients of -- to transform the lives of these patients. I mentioned before that as new mechanism of action coming to these diseases, they do not cannibalize the previous products, but they had to drive presentation. So help me -- let's look at the example of psoriasis, that currently has had a 23% market penetration. If you look at this slide, where we can see is that just 16, 17 years ago, the first advanced biologic was launched, the TNF ENBREL, TNF-alphas. And what we can see is that in the last 17 years, there's been many new classes added. A few years later, year 5, the Stelara was added into the equation. Then the anti-IL-17s came in. Then the anti-IL-23s, in which we have Ilumetri, is one of our products there. And more recently, the TYK2. And if you look at the sales, you can see is that still today, all the mechanism of action, all the classes they still have the place in therapy and they have continued to grow. And that's very relevant because, as I mentioned before, what it helps, the new product helps to drive the penetration. That is really where the opportunity is. And that's mainly driven also by the heterogeneity of these diseases of psoriasis, atopic dermatitis in which one size does not fill all, and we need different types of medicines for different types of patients. So if you look at this, what does it mean also for atopic dermatitis, right? So atopic dermatitis, we can compare it a little bit to psoriasis, but now with a much less developed market. Atopic dermatitis, it's been only 6 years ago when Dupixent was launched. There's only 3 mechanisms of action, 5 products in the market. Ebglyss lebrikizumab is going to be the sixth one. And it's only 1 blockbuster to date when in psoriasis, there's at least 5 of these products. So tremendous opportunity for market expansion, and very good opportunity to penetrate this market. But we are not only focused on immunology mediated inflammatory diseases. As I mentioned before, we also -- we are also focused on developing drugs for non-melanoma skin cancer, Why? Because there's a growing incidence because of increasing sun exposure and aging population, not only in both in Europe and in the U.S. And the a lot of unmet need is still in this area. So melanoma has evolved much better in terms of treatment options. But SCC, BCC, et cetera, this area is still -- there's a lot of unmet need. There's still a lot of opportunity to develop innovative medicines to help patients in these indications. And the same thing applies to rare disease. As I mentioned before, 1,000 rare dermatology diseases and more than 90% of those have no treatment today. So there's a tremendous opportunity there as well to develop in innovative medicines. So if you look at our pipeline, of course, where we're focusing more of our efforts is in the first bucket, in the unmet. And we have 9 programs in discovery and 3 programs in early to mid development stage. And again, these are programs. And as I mentioned before, some of these programs we believe our pipeline in a product, such as our anti-IL-1-RAP and our anti-IL-2 fusion mutant where that are already in the clinic, both products in Phase I. In terms of non-melanoma skin cancer, we have two programs in discovery and 1 program in the clinic for onychomycosis. And how are we making sure, how are we trying to maximize our chances to be successful in R&D.? Well, by building a very clever, a very smart network of partnerships that give us access to the data therapeutic modalities for long-term success, right? So for example, for antibody discovery, we have announced in the past few months, a number of collaborations with Absci, with AlivaMab, with EpimAb that give us access to the discovery. And we believe that we're building this strong partnership with these companies that will help us maximize the chances of success with antibody discovery. But if we look at new chemical entities, same thing applies. We have a very successful collaboration in place now for more than a year now with Evotec and for one of our programs also with the University of Dundee. And I left the last -- the mRNA corroboration for the last as it was just announced a few weeks ago. Very exciting. We were meeting for the kickoff officially with the company yesterday. They have a great platform for mRNA, and we have signed an agreement to develop products or programs for non-melanoma skin cancer and other indications. So overall, very excited about how we are teeing ourselves up for success in discovery and looking forward to see these programs evolving in the future. So as a summary, we are already today a market leader in Europe, with 48 products in dermatology, across modalities and across dermatology diseases. We have a tremendous opportunity with our 2 biologics, Ilumetri and Ebglyss, that has been just recently launched in Germany. As I mentioned before, that combined, they can bring EUR 700-plus million in terms of sales, in terms of peak sales between now and until the end of the decade. Very attractive. We believe we have a very attractive pipeline in development in areas of great unmet need, but also as you've seen in the slides also in markets that have not been penetrated. Even mature market like psoriasis, only 23% market penetration. And lastly, we are financially strong, and we believe we have all the resources, the people and the financial resources in place to execute on our ambition. So today, already Almirall, a leader in dermatology in Europe, we're going to be working very hard to build on this leadership in Europe, but also in other geographies going forward. Thank you very much for your attention, and very happy to take any questions that you might have.

Thank you very much Carlos and I'm happy to start the Q&A session. Then take some questions from the audience. I know we quickly touched base on lebri. I wanted maybe to discuss a little bit more if you have your feedback after the launch in Europe in December? And if thoughts on peak sales have changed now that you have more visibility on the competitive landscape? We see Dobson from Sanofi.

Sure. Well, we provided our peak estimate already a while back ago. And have you seen -- one of the key assumptions is how quickly the market would expand, right? So -- and we're looking at the proxy of psoriasis. So you can we're using similar -- multiple expansion in terms of patient evolution in the coming years. And also of course, the market share that we will achieve in terms of new patients, right? So we are revising continuously, as you can imagine, these metrics. I think that we might -- I think that probably all the assumptions that we put in place a number of years ago, all of them has come out as expected or even more favorably. For example, also the penetration of the JAKs, as we see probably we were over -- we over expected the role of the JAKs in the treatment of atopic dermatitis and at least in Europe, the penetration has been less than we expected, right? So we might update our forecast going forward, let's see. But I would say that either our assumptions have been confirmed or even they are becoming even more attractive to us as we get closer to launch.

Okay. Yes. I think we have a question from the audience.

How do you see -- congratulation for the great progress, by the way, clear vision some year ago and fantastic execution? How do you see the landscape of pricing and reimbursement for the kind of drugs you are in?

Well, again, most of our -- for the 2 biologics, by the way, we have our rights in Europe. So we're only launching in the European market. And some of -- we have other products that are global, and we have products that are only U.S. But I think the -- we have pricing challenges -- the industry has pricing challenges everywhere in the globe, whatever you look at Europe, either U.S. or Japan, right? Where we are more comfortable operating, where we have -- we are a strong commercial presence is in Europe. And that we have -- almost every government has their own price -- their cost contended measures. Whether it's by price cuts, whether it's by rebates, whether it's by clawback contributions, et cetera. But again, this is the area where we have our expertise, where we operate. We look at our opportunity to help patients, right? I think that as long as we can help patients in a profitable way, we will continue to do so despite the ever increasing pressure from governments to contain to slow down the penetration. As long as governments continue to see us as a cost and as a cost center, right, it's going to be difficult to enter into different type of conversation. But we're working hard, we're working hard as a company. We're working hard as industry associations, in particular, to try to enter into a different type of dialogue. So they see that the overall contribution of medicines and the impact on patients and overall society, right? So as a summary, I would say that conditions keep deteriorating, so to speak, across the globe. But we still believe that if we bring innovative medicines in areas of high unmet need. There's a great opportunity to, again, one for patients and also make a good business out of it.

Okay. Yes. So I have to stay on the portfolio. On Wynzora, how is the rollout progressing in Europe? Can you comment on that?

Sure. And maybe Mike can add more color later on, but we are very, very happy with Wynzora. I think it's a clear example where I mentioned before the start of my presentation that we not only focus on areas of -- with high severity, right? We focus what the unmet need is. And in some cases, when speaking with dermatologists, it was clear that there was an unmet need in atopic dermatitis and psoriasis, et cetera, to look for more convenient products for mild patients for example. So there was an opportunity. There was a need. Dermatologists were asking for products that were more convenient for the patients. So we through our partnership with MC2, we were able to identify Wynzora with a superior formulation. And definitely, the patients do like the presentation and the penetration that we're seeing in terms of on the molecule -- on the combination of molecules is fantastic. I think that in particular in Spain, where we're seeing penetration that is fantastic. We're seeing also very good results in Germany. We launched recently in Italy as well. And then also, we have high expectations there. But Mike, can you provide maybe more color on Wynzora?

Yes. No. I think the launch has been going well. We continue to roll out in different countries. I mean this isn't going to be a huge blockbuster type product, but it's competing in a space where there's unknown market. There's known molecules, and we feel like we've got a very competitive one. So we started breaking the sales out. It's still in the high single digits going to double digits, but we expect this to continue to grow over the course of the next couple of years. So a really good opportunity. Very competitive. And like Carlos said, it kind of completes our psoriasis portfolio, because we've got a biologic, we've got a topical, and we also have an oral in Skilarence that's doing well in the markets where those kind of products are used. So overall, I think it's a very good positive momentum for the psoriasis franchise.

And I mean, going back to Ilumetri. If we think about 2024, can you comment on growth? And if you're adding any new countries, where you're planning to launch?

Ilumetri, as I mentioned in my presentation, last year '23, we saw north of 35% growth. We expect this year to contribute. I mean, it's going to be probably below this level of growth, but we are aiming for high double-digit growth for this brand. As I mentioned before, psoriasis, the number of treated patients is very low compared to the potential number of -- or the number of eligible patients for advanced formulations. And all classes that we have, there is a competitive market. There's more than 15 biologics in the marketplace fighting for new patients. But this 5, this push for new patients, what is doing is start increasing this penetration. So we believe that the anti-IL-23s is becoming the winning class in psoriasis. It's a class where dermatologists now they're using a majority of anti-IL-23 to -- in the majority of the patients, sorry. And we are one of those alternatives in the anti-IL-23. So we do believe that not only for this year, in '24, but in years to come until the end of anti-patent expiration. We believe that this product will continue to grow, and we'll continue to have an important role in the treatment of a moderate to severe patients in psoriasis.

Okay. Makes sense. And if we think about, still 2024 on the broader portfolio and the broader P&L, you expect -- I mean obviously expect growth at the top line, you -- what about EBITDA growth margin expansion? Can you maybe briefly mention growth pillars at top line? And then if we can also maybe discuss profitability a little bit?

Sure. I think that last year, let's say, that we hit the, let's say, the bottom in terms of EBITDA in absolute numbers. So from this year onwards, we plan to grow in terms of EBITDA from an absolute perspective. And we will announce, of course, the expectations for '24 in February. But Mike, do you want to provide a bit more color?