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

Welcome, everyone, to the JPMorgan Healthcare Conference. We are pleased to have with us the Almirall management team here with us today, Carlos Gallardo, Chairman and CEO; Karl Ziegelbauer, CFO; Jon Garay, CFO; and Pablo Divasson, Head of IR. With that, we'll let Carlos have the stage. For logistics purposes, please reserve your questions until the end of the presentation.

Good evening, everyone, and thanks to JPM for inviting us one more year to present where we are in our journey towards leadership in medical dermatology. Here, I remind you of our disclaimers. I'm just going to spend a few seconds here, but it's in the print out that we have posted on the website. In terms of agenda for today, I would like you to tell you about our growth story in dermatology, and the transformational opportunity that we have ahead of us with our pipeline, and I will close with some closing remarks. For those of you that don't know Almirall are not familiar with Almirall, let me spend just a few seconds. So it's a European company based in Barcelona. It was founded 80 years ago. And in 2014, we took the strategic decision to focus exclusively on medical dermatology. Today, fast forward, we have already exceeded $1 billion in sales and more than 50% of those sales are already sales in medical dermatology. We have a solid base business and a very exciting dermatology growth engine, mainly driven by our 2 biologics, which is project -- which they are projected to grow double digit from now as a company. We're going to grow double digit from now until the end of the decade. We have a proven track record in executing commercially. We have 6 successful recent launches, both from internally developed compounds but also from licensed assets. We have what we believe is an extremely exciting pipeline. We have already now 3 POC proof-of-concept studies that are already ongoing and 3 more that will be ongoing before the year finishes. And we have other assets that are already in the clinic, Phase I that we will be updating you about as well. Overall, I think this is a testimony of the strong both commercial capabilities, but also very strong R&D capabilities that cover the whole value chain of the company. So why dermatology? Well, dermatology is already a very big market that is poised to grow double digit for now at least until the end of the decade. But also there's tremendous opportunity to innovate in dermatology. There are significant diseases that they have with severe unmet need that have no therapies approved. So it's a lot of opportunities for a company like us to innovate, particularly given the new exciting science that allows us to help us to understand better the biology of the diseases and help us to develop novel scientific hypotheses that we can translate into programs and eventually can translate into FDA and EMA approvals. So extremely exciting therapeutic area to be. We already have commercial assets in some of these categories. Of course, the biggest category being psoriasis, where we have a number of assets, notably Ilumetri, our biologic for moderate to severe patients, Ebglyss in atopic dermatitis, we have Seysara for acne, rosacea. And well, everyone is speaking about hidradenitis suppurativa as the key next indication that will be the next big indication in dermatology. Well, we have -- we don't have a commercial asset, but we have 2 molecules that we are moving into proof-of-concept studies. Already, we have a POC ongoing with our anti-IL-1RAP molecule, monoclonal antibody, and we will soon initiate our POC study with our anti-IL-21 monoclonal antibody. Talking about Ilumetri and Ebglyss that are our growth drivers. So let me spend a couple of minutes with those 2 products. These products are transforming the life of patients that are being prescribed with this product. But also what is transforming is the size of the company. What we're seeing is tremendous growth since 2 years ago until 2030, which means that the company is going to double in size, thanks to the growth of these 2 products. Let me start with Ilumetri. Ilumetri was launched 7 years ago. It has delivered tremendous growth to the company. It has the backwinds of an expanding market. Psoriasis you might think that it's a market that is busy, many biologics already launched more than 10 different classes, et cetera. But in Europe, only around 20% of eligible patients are treated with such advanced biologics. So this is still tremendous opportunity for market expansion, and we have the backwind on this market expansion. Moreover, we have the backwind of being in the winning class, the go-to class by dermatologists in Europe that is the anti-IL-23. And within this class, we are competing extremely well. We have more than 20% market share in this class, and we are continuing to increase this market share or sustain it. And why is that? Well, because in real world, Ilumetri delivers very good efficacy over the long term. And we have now that we have new ammunition to support our commercial organization to continue to increase this market share within the class. That is fantastic real-world data, for example, our POSITIVE study. But also we recently launched the 200-milligram presentation in addition to the 100-milligram presentation that we already had in the market. So now we have the 100, we have the 200 at the same price, by the way, which provides dose flexibility for dermatologists for difficult-to-treat patients. And that's been extremely well received by dermatologists. So overall, Ilumetri, very nice growth over the past 7 years. We believe we will continue to grow double digit because, again, the market is expanding. We're in the winning class, which is growing faster than the market. And within the growing class, we are competing extremely well, holding market share or increasing market share in a number of countries. Ebglyss, more recently launched 2 years ago, 2.5 years ago in Germany, and we've been rolling out the launch in the other main markets in Europe. It's an anti-IL-13 monoclonal antibody. IL-13 is a key cytokine in atopic dermatitis, and we have the best anti-IL-13 monoclonal antibody. And not surprisingly, it has been the best launch in recent years in atopic dermatitis. We already have in all markets, double-digit dynamic market share, and our ambition is to be the most prescribed biologic in the treatment of moderate to severe atopic dermatitis patients. And by the way, we have already achieved this being #1 in terms of new prescriptions, at least in one of the markets in Europe. Feedback from physicians is excellent. So our job is to get physicians to dermatologists to try the product because once they try it, they like it and they continue to prescribe it in naive patients. Again, fair positioning, naive patients because it's the best treatment in disease. Together, we have guided the market that combined peak sales of more than EUR 100 million in 2030. Ebglyss, as you know, it's in earlier stages of its life cycle. What it means that together with our partner, Lilly, we plan to have a flow of clinical data readouts to address patient needs, but also to drive growth and value. So let me stop on a few of the studies in this timetable. First, of course, some of them will impact label, such as the pediatric study. So we will get -- hopefully, we'll get a pediatric indication. Let me perhaps mention the ADlong study that is long-term efficacy and safety, and we'll have 5-year data. We have already announced 4-year data that is -- that provides extremely good results, and we expect the 5-year results will be also very strong. The ADhope-2, which is a study where we are exploring longer dosing intervals. So what we're doing is with 2 injections of 200 milligram, we are dosing patients once every quarter. And again, we get successful results, we might be able to get this new dosing regimen in the label. Our partner, Lilly is developing Ebglyss in additional indications beyond dermatology, such as perennial allergic rhinitis and also chronic rhinosinusitis with nasal polyps. And I'm very happy to announce today that we have decided also to develop Ebglyss additional indications in dermatology, and we are starting with nummular eczema. So what is nummular eczema? Nummular eczema is idiopathic chronic inflammatory skin disease with significant unmet medical need. The need is so big that there's nothing approved. So there's nothing approved for this patient population, and we plan to be the first product approved to treat indication. The driver of the disease or the key cytokine is also IL-13. So we have confidence that Ebglyss will end up being a good treatment alternative for these patients. We expect to start enrolling patients in the second half of the year. So overall, we're very pleased to confirm our guidance that we provided for the full year. As a reminder, we're providing the full year results in February in our investor call. But today, we're happy to reiterate our guidance of growth -- sales growth of 10% to 13% versus 2024 and an EBITDA that will be between EUR 220 million and EUR 240 million. And also, we're happy to reiterate our midterm guidance of double-digit net sales between 2023 and the end of the decade, 2030 and an expansion of our EBITDA margin. Why we are expanding the margin? Because we have already done all the necessary investments in terms of infrastructure, in terms of field force, et cetera. So the top line is going to grow much faster than our OpEx line, and therefore, it's going to show down in profitability. So we expect to have EBITDA margins of 25% by 2028. So moving into the even more exciting part that is the pipeline. And before going straight to the pipeline, what I would like to say is what I said in my introductory slide, dermatology is a great place to be as a company that develops therapeutics as a scientist because there's still tremendous unmet need. And this slide tries to illustrate this unmet need. These are the key indications or the key diseases in medical dermatology, ranging for immune-mediated inflammatory diseases such as psoriasis, atopic dermatitis, HS, urticaria, alopecia areata, et cetera, non-melanoma skin cancer, where we also have programs and rare disease. The size of the part reflects a little bit the unmet need. So the challenge of physicians to achieve their treatment goals. Probably the exception is psoriasis where physicians are able to achieve their treatment goals in most of the patients. So it's clear skin or almost clear skin, the famous PASI 100 to PASI 90, thanks to products such as Ilumetri, Wynzora and Skilarence. But even in AD, where we have highly effective treatments such as Ebglyss, given the heterogeneity of the patient population, one size does not fit all. So we still need treatments that cover a wider part of the population and also go deeper in terms of efficacy. So there's still room to go in atopic dermatitis. But in other indications such as HS or alopecia areata, the unmet need is still tremendous. If you look at the bottom of the blue bar, these are our programs that we have in our pipeline. So we have programs for most of these diseases, right? And in the next slide, you'll see the traditional way to display our pipeline. And what we see here is the 6 proof-of-concept studies that we have already initiated or we are going to initiate in the next few months. In addition to these 6 POC studies, of course, I will spend some time talking about the read-through inducer and also a very exciting bispecific that we have in our pipeline that is anti-IL-13 and OX40 ligand. I think this slide we're very proud not on the slide, but on the content because for the last 3, 4 years, we have spending a lot of time in building our capabilities in R&D, so we could license and we could internally develop compounds and progress them to the clinic and to patients. And it makes us especially proud to be able to have a number of these programs already in patients. And we expect a flow of news to come starting at the end of this year and into 2027 with the results of the POC studies. So let me talk a little bit more about some of these programs. First, let me share with you our commitment to hidradenitis suppurativa. Hidradenitis suppurativa, as I said before, is the next big indication according to analysts in dermatology. It's extremely complex disease. It's chronic inflammatory skin disease leading to painful nodules, abscesses and tunnels that significantly impact quality of life, likely recurring targeting multiple diverse pathways for full relief. And again, this is our scientific hypothesis. If you look at what's available now and what's in the late-stage pipeline to treat HS, what we believe is that a majority of patients will not be able to achieve the treatment goals and that the unmet need is going to remain. Why? Because this is a complex disease. A complex disease requires a medication, a drug that targets multiple diverse pathways. And we have 2 molecules that do precisely that. Our anti-IL-1RAP monoclonal antibody that targets different immunomodulatory pathways. So it inhibits IL-1, IL-33 and IL-36. And there's evidence already in the clinic that IL-1 and IL-36 both have clinical efficacy in hidradenitis suppurativa. So what we are hoping to demonstrate is the additive or synergistic effects of these 2 mechanisms of actions combined in monoclonal antibody. Additionally, and that's already ongoing, and we're already dosing patients with our anti-IL-1 drug. The other drug that we're going to put into patients very soon is the anti-IL-1 monoclonal antibody and as well is targeting 2 different pathways for dual modulation of T cell and B cell components. And again, we have evidence based on internal experiments, but also in the scientific literature that there's a T cell component in HS and that there's a B cell component in HS. So we hope that IL-21 also we will be able to prove the effect of this medication in HS patients. Moving to the next slide. Another very exciting program that we are already in Phase II, and we're already dosing patients is our IL-2 mutant fusion protein. This is a regulator of the immune system. So basically, how it works is that it stimulates the expansion of T regulatory cells. We're hoping to restore the balance of the immune system. These mechanisms can work on a number, we believe it can work on a number of dermatology skin diseases. And that's why we're running 2 POC studies and our partner, Simcere is running a third POC study in atopic dermatitis, our partner. And we are going to do it in alopecia areata and in one more undisclosed indication. Again, very exciting scientific hypothesis and we look forward to see the results of this POC study. We have also another molecule, a small molecule that is a read-through inducer for a devastating disease. That is the junctional and recessive dystrophic epidermolysis bullosa. This is a disease in which because of the lack of collagen VII, skin blisters are caused, mucosal erosion is caused linked to inflammation, pain and scarring. Patients face high risk of death from infections, organ failure and skin cancer with, of course, significant clinical, economical and social burden. We have this small molecule, but what it does, it helps the protein to code again collagen VII, restoring the functional skin. It's already in Phase I, and we're trying to move it to patients as soon as we can, although we have not yet disclosed time lines for this molecule. And lastly, let me finish with another very exciting program that we have now in the clinical stage that is a bispecific for atopic dermatitis, our anti-IL-13 OX40 ligand bispecific antibody. As I mentioned before, although they are very -- there are efficacious treatments already approved for AD because of the heterogeneity of the patient population, not all the products work for all the patients. So there's still opportunity due to patient failures, and there's opportunity for treatments that offer broader, deeper efficacy and also potential for disease modification or even maybe partial remission or full remission. So we hope again to show the synergistic or additive effects of these 2 pathways soon with this bispecific. So overall, as a closing remark, we are a company fully focused and fully committed to medical dermatology, which is a great market because there's tremendous opportunity for unmet need. It's big, it's growing. We have a good commercial portfolio and an exciting pipeline. We have proven execution capabilities, but it is helping us to transform the company and to double the size of the company. And also, of course, we keep looking for additional licensing or bolt-on opportunities from a business development perspective. And of course, all this is translating into results. It's translating into results that we see with a double-digit growth of the organization and the margin expansion. Thank you very much. Time for questions.

Thank you, Carlos, for the presentation. I'll kick it off with a few questions. You touched earlier on the full year 2025 guidance. Could you provide a bit more color on the SG&A and R&D costs as well as the revenue that you have seen in the fourth quarter?

Sure, Carlos. So for the fourth quarter, well, first of all, let us say that we are very confident and very positive about the company performance, and we are fully confident we will deliver the market guidance for this year. For the Q4 in terms of R&D, the R&D expenditure of net sales ratio of 12% that we presented in the Q3 earnings call is a good proxy as we continue investing in our POCs moving to Phase II programs, as Carlos has been explaining. In terms of SG&A, we would expect a certain pickup in Q4, just reflecting the usual timing of activities at year-end as we continue investing in our key products, mainly the commercial rollout of this.

Super. Then just looking forward into 2026, can you share any color on top line growth as well as SG&A, R&D and tax dynamics?

Yes. Sure. It is a bit too early for us to disclose 2026 performance figures because we have not yet disclosed the guidance for next year. But if a bit of context can help, we will be aligned with our midterm guidance. Just to remind you, basically, we have been made public that our revenue will be growing double-digit CAGR growth between 2023 and 2030. So in 2026, we will still be continuing in the double-digit growth area and this guidance does not include any M&A activity beyond the usual portfolio optimization that we make every year. In terms of gross margin, we can expect certain pressure downwards as some of our in-licensed products are subject to tier royalties and milestones, mainly Ilumetri and Ebglyss. Where the real margin expansion will be taking place in 2026 is at EBITDA level because basically our sales will be growing more rapidly than our expenses once the commercial infrastructure to launch Ebglyss has already fully deployed in the countries in which we operate. Similarly, following Carlos' presentation today, we have a very exciting pipeline with 6 POC moving into Phase II programs. So a proxy of R&D investment of net sales in the range of 12% is a good proxy for next year. And finally, in the area of tax, we will be contributing to free cash flow generation as well from tax point of view as we will be reducing the effective tax rate as we use the European gains to use the losses we have in the United States. So as a summary, we are accelerating company performance, not only on the R&D pipeline, but also on the operational excellence area.

Great. Do you expect any divestments upcoming in 2026? And would the forward-looking guidance include these contributions?

So we are not looking any -- or we are not pursuing any special divestments. But just to be clear, as part of our market guidance, we usually include our portfolio optimization strategy. And if you look at our financial statements, something in the range 10 million to EUR 20 million is taking place every year, and this is normal portfolio optimization strategy.

Just moving on to some of the key products, starting with Ebglyss. How comfortable are you with the current consensus for 2026?

So right now, with the information we have something in the ballpark that the consensus is showing, which is EUR 180 million to EUR 190 million, we think is a reasonable assumption for next year. So we feel a comfortable space there.

Great. Earlier in the presentation, Carlos mentioned that Ebglyss has approximately 20% market share or maybe that was Ilumetri?

It's Ilumetri.

Ilumetri. So in terms of like the market share between naive versus switches, what does the dynamic look like now for Ebglyss? And do you have an approximate target that you would want to achieve in the next coming years?

Sure. As I mentioned before, Ebglyss has been the best launch in AD recently. From all the products that have been launched, we have already achieved double-digit dynamic market share in most countries. There's one country in Europe where we're already more prescribed than any other product, including Dupixent. And that's our ambition, our ambition because we believe it's the best in disease that eventually there will be more prescriptions, more initiations with Ebglyss that with the need of treatment, and that's what we're working towards.

Just I wanted to also briefly touch on the new Phase III study that you mentioned on nummular eczema. Could you just walk us through maybe what the rationale was to expand the indication? And also where do you see the potential upside and then the approximate market size for this indication?

Maybe I'll take this question. So we are very excited about Ebglyss. We believe this is the best antibody targeting IL-13. And as the pathophysiology is similar in nummular eczema, but the disease is distinct from atopic dermatitis, and there is no effective treatment available, we want to expand in this patient population. This is currently not included into our peak sales guidance as an indication. I think the prevalence of this disease, the reported data, there is big ranges kind of from 0.1% to 9%. We believe the real prevalence is a bit more on the lower end of that range. And we think once the treatment is available and if our study is positive, this would provide significant additional opportunity for Ebglyss.

Great. Just maybe going back to atopic dermatitis. You have a few additional competitors entering the market. So how do you see this market evolving in the next few years?

I mentioned before in my presentation that in psoriasis, only 20% of eligible patients were prescribed with advanced therapeutics. In the atopic dermatitis market, because it's less developed, it's even less than that. It's around 10%. So what we saw -- what we've seen in psoriasis market is the more entrants, the quicker is the market expansion. So we believe that more players is good in the sense of market expansion. And of course, because we believe that we have the best product out there to treat moderate to severe patients that we will be able to capture a majority of the market share of these new patients. So what we see is a dynamic market, of course, more noise, more market expansion, more competitive. And we believe that IL-13 is a key cytokine for the treatment of AD, which means that there are products that are not targeting IL-13. And so we believe that IL-13 and IL-13 monoclonal antibodies will be the ones that will be the winning class. And within this class, we believe we will have a majority of the dynamic market share.

Okay. Great. Moving on to Ilumetri. You mentioned you have a very good market share already. Do you have any growth expectations for 2026?

Yes. And the market continues to expand as well in psoriasis. And within this market expansion, the anti-IL-23 remains the go-to class or the favorite class for dermatologists in Europe, and we are competing very well. So overall, when you take the market expansion, you take the IL-23 winning class and how well we are competing within the class, we believe that we will continue to grow double digit in the near future.

Great. So in terms of the $300 million peak sales, does that also include the psoriatic arthritis indication?

We believe that psoriatic arthritis will be a small opportunity. We are going to see the full readout of the data up to week 52 before making a final decision. It's not included. So it's only upside. It can only add to the $300 million. But again, I want to manage expectations because it's a limited opportunity for Ilumetri.

Now moving on to the pipeline. You mentioned you have like 6 POC studies either initiated or to be initiated. Could you maybe provide a bit more color on the dual strategy for HS using both IL-1 and IL-21?

Yes, happy to do so. As mentioned, hidradenitis is an extremely complex disease, requiring potentially addressing more than one pathway. And we have been looking for molecules and mechanism that actually do that. The anti-IL-1RAP addresses 6 different cytokines of the IL-1 family of cytokines, IL-1 alpha, beta, IL-33 and 3 isoforms IL-36. And the fact that antibody targeting individual components of that have already shown effect in different aspects of the pathophysiology makes us believe that combining this in one molecule gives us a chance to see a really significant and meaningful efficacy in this disease. Now the anti-IL-1RAP targets the innate part of the immune system, while the anti-IL-21 targets more adaptive, both B and T cells. And again, compounds that target one of these cell types have shown efficacy, and we believe maybe the combination can do better.

Great. So how do you think your IL-1 and IL-2 assets compared with other programs, which are aimed at treating similar diseases?

I mean there is a lot of activity ongoing in terms of clinical development in hidradenitis suppurativa, which is good because there is a very high medical need and it's really a devastating disease for patients. Most of this is life cycle management of a mechanism that have originally been developed for other indications. We have been very carefully thinking about how can we make a difference to that approaches, and that's why we have come up with those 2 mechanisms. Now we need, of course, to prove this in these proof-of-concept studies. But so far, based on what we know, we are very optimistic.

Great. So in terms of just the overall market size and peak sales for like these new assets, do you have any guidance that you would like to share with us?

I mean this is pretty early. The next step is now that we show that they actually work in this indication and perhaps then there is more of a time to talk about what could we eventually see for those assets from a commercial perspective.

Great. Moving on to M&A and in-licensing. Carlos mentioned that you would remain opportunistic. So just in that win, could you just provide profiles of assets that you would be interested in, in terms of stage, target, size, geography indications?

From a license perspective, we remain very interested and as part of our core business to license exciting molecules across any stage of the development cycle. Being realistic, we think that it's going to be more towards early stage of clinical development or even maybe preclinical is where we will have more opportunities to license assets. And just from an M&A, as I said before, we don't want to -- the way we're creating value in this company is by commercial excellence with our biologics and by progressing the pipeline. So we don't want to be distracted by big M&A, by a transformational M&A today. So what we are looking maybe for more bolt-on opportunities or rare disease indications that will not distract us from the big opportunity of value creation for us.

Do you have anything planned in the near term?

Well, we always have a handful of business development opportunities, both licensing and M&A that we are either advanced or negotiating at different levels at different stages, but it's very difficult to predict what will materialize if and when.

Okay. Just then on the last question, what do you expect your free cash flow and operating cash flow to be going forward?

So, from operational cash flow point of view, our message is our top line growth will be going all the way down to earnings per share and cash because basically our SG&A will be increasing with inflation. So this is our commitment and our leverage. In terms of cash flow for investment and financing activities, investments, something in the proxy we are disclosing nowadays, CapEx for manufacturing activities in the range of EUR 40 million to EUR 70 million makes sense. And then CapEx for investments that we usually disclose here, milestones with signing fees for deals, sales milestones for this already in place and so on, something in the range of EUR 70 million to EUR 100 million can be a good proxy. But again, we will improve in our cash flow generation because our top line growth will be going all the way down to earnings per share.

Great. Then just lastly, was there anything particularly in 2026 that you were excited about? Like you have a very busy and a very exciting year ahead. Or was there anything in particular?

We are very excited for the progression of our pipeline. We think that all the programs that we have in the pipeline have the potential to be best in disease and to play a significant role in addressing the large unmet need that we have in all these indications. So that's progressing the science is extremely exciting.

Super. With that, we'll end the presentation. Thank you.

Thank you.

Thank you very much.