Alvotech ($ALVO)

Great. Well, good morning, everyone, and thank you for joining us. My name is Matt Dellatorre and I'm a biopharma analyst here at Goldman Sachs, and we're very pleased to continue the next session this morning with Alvotech, where I'm joined by Robert Westman, Founder and Executive Chairman; and Balaji Prasad, Chief Strategy Officer. Robert and Balaji, thank you for being here.

Thank you for hosting us.

Maybe to start, Robert, before we get into specific programs, and I know you guys had announcement this morning and made a big announcement last week. Maybe just for those of us less familiar with Alvo, give us a brief overview of the company and then frame for us where you all stand today, kind of like your key priorities. And how you're thinking about the outlook and strategy over the next couple of years?

It's a very good question, and yes, so I founded the company 2013. And the vision has been building a pure-play biosimilars, not focusing on anything else. We wanted to build end-to-end R&D in-house from cell line development to develop BLAs. We wanted also to have all the manufacturing in-house. Those 2 elements were always critical to us because it's a fairly complex products to develop and those are also very complex to manufacture to have it all in house. So we have invested in R&D and manufacturing close to $2 billion since we started 2013 and the company went commercial for first time in U.S. mid-2024. So the company is fairly young on the market, but we have been building all the infrastructure and what we have is a portfolio of 30 products, which we believe is the broadest portfolio in the industry, if you will. We have launched 5 products outside the U.S. We have 2 products on the market in U.S. And by later this year or late this year, we expect to launch among the 3 products into U.S. And then, of course, a few of the submissions, we will talk about, I'm sure, super exciting. And our aim is always to be in the first wave or be first to market. And we have all the infrastructure now which we can engage. We have commercial partners, which are covering more or less every market in the world, so we can roll out our products into 80, 90 markets and compete with the brand. So holistically, it's all coming nicely together, and the company is at a massive inflection point we believe now after we resubmitted the 3 BLAs into U.S.

Great. Yes. Maybe kind of diving into those resubmissions last week and some of the news this morning. You guys made a pretty material announcement last week that you've resubmitted your BLAs for biosimilars, Simponi and Eylea. I think many people were expecting this closer to end of the month. So maybe this came a little earlier than we all expected. Maybe walk us through how you got here and kind of how significant this is for you all?

Yes. I mean we are operating globally. So we basically -- currently, our facilities approved by all major regulatory health authorities in the world, including U.S. FDA. It was unfortunate that we got a [indiscernible] in the first round of the 3 pipeline products, was no comments on the BLAs themselves, but there were comments -- some comments on the facility. We have, of course, worked over 10 months in details to fix what we felt we needed to fix to make sure that we would not be in a position again to receive a CRL. So a lot of work has gone into that. We submitted last week biosimilar to Simponi, we are the first and the only one in Europe. We have launched now with our partner in Europe. We are seeing a very strong uptake in market share. We are up to 40% in some of the markets. We are seeing strong market uptake in Germany and Scandinavia and elsewhere. We have 1 competitor, which we believe will launch in Europe 1 day and the same 1 might launch into U.S. But we think we are in the first wave potential still first to market with biosimilar to Simponi in the U.S. And then we are launching Eylea -- biosimilar to Eylea and then probably XGEVA. So that will drive the growth of the business next year and going forward, but more importantly, the submissions and the filing acceptance by FDA on Entyvio is really, really a big milestone for us.

So I think on the question that you asked said, right, that most investors is expecting this towards the end of the month and now I think it was also because we had this FDA inspection last month, which we cleared very successfully. And so investors were wondering if because of that, we will be pushed out beyond June 2 and we are very happy to assure our investors that the observations that we had -- a few observations were manageable. And more importantly, the FDA also went through a lot of very comprehensively and that we are filing it on time in June, in the first week of June, signals that the inspections were really solid, and that's why the market also reacted the way it did and has more confidence in us now and today's news on AVT16 6 was like an icing on the cake. So really important to know that.

Great. Yes. Maybe could you maybe remind us a little bit of that you implemented were? And then can you talk about any kind of safeguards that are in place now to prevent any kind of similar issues in the future.

Yes, I may be -- so basically, when you go through an inspection, you answer the [indiscernible] then FDA ensure a par letter stating what they felt missing to basically approve your new filings. There were 3 main issues there. First was the [indiscernible] in our synergies. So we have a German made machine from [indiscernible] which I think every second sterile manufacturer has. So this machine requires a pharmaceutical grade silicon to lubricate when you start to operate the machine, especially with the apostopper, so the flow through the machine. FDA didn't like that. I think this might be a new theme. And we are most likely the first one to receive that one. But how that ended is that we managed in the end after stopping for a couple of weeks to operate a machine without any lubrication. So that was our answer to that. We are, of course, new in the market, as I said, in the U.S. We had complaints in U.S. over 500, 600 auto-injectors. At that time, we had produced 5 million, which proportionally is very small. But the overall FDA wanted us to tighten up the process, how we follow up to receive some of the faulty back because the U.S., as you might know, if you dial in to your pharmacy, you claim that your pen is fault. You get a new one. And the patients are not often giving the pens back, which in the end, we need to investigate. But we believe we have both internally and with [indiscernible] sets itself so far pen as we [indiscernible] in Switzerland, and we have not had any mechanical issue with the pen, to be honest. And then on -- when it comes to third point, which is general and environmental monitoring. We had hits in the facility, all below action limits, which means that they are not critical enough to be above action limits. But still, we wanted to have fewer of them. And collectively, we have implemented over 200 CAPAS to fix that and we submitted -- resubmitted with a 3-month data where we did not have any hits anywhere, even though we are looking at only below action limits. So I think we have addressed the fundamental, of course, what was pending, but more important, the fundamental of this facility. So I think we have gone over and above simply to make sure that we are not going to end up in a similar situation with the CRL.

Great. Right. And then your biosimilar Prolia and XGEVA, I think they were not included with this resubmission. What are your kind of expectations in terms of time lines for filing?

Sure. So Prolia and XGEVA is the marketing -- the authorization is with Dr. Reddy's, our partner. So for -- in the U.S. for most parts, we have partnered with XGEVA and this one is with Reddy's,and so they will be filing, which will be imminent.

Great. Maybe just lastly on the Simponi and Eylea the FDA just completed, I think, a routine CGMP surveillance inspection at Recuvic. I guess how do you view the likelihood of another reinspection?

Yes, it's an interesting question. So basically, we believe that the FDA went through all the open items from the PAL letter. We did not get any comments or outstandings on the BLA itself. So technically, they would not have to come, but we know that FDA has their own agenda. But what we have said, it does really matter to us at a common out, we are ready to receive FDA and we would just welcome them as a come. They could also decide not to come. But it's a 6-month clock. We expect that FDA generally is using the 6 months, so it's early December, which allows us to launch the 3 products into U.S. before year-end.

Got it. Maybe shifting over to the Entyvio update. This morning. You guys had a big announcement there. Maybe kind of just walk us through the update. And then you recently submitted an MAA to the EMA for the biosimilar in Europe. I guess how are you thinking about the opportunity in both Europe as well as the U.S.

Sure. So this is something that we're really excited about. We are very happy that the submission and that acceptance of it came through. And it's one of our most important near-term to medium-term opportunities that we have discussed about in the past. For context, the global market size of this is pretty large, around $7.5 billion. and has a sizable market in the U.S., right? And we expect to be in not just for one of the first market, but also going to be a limited competition for quite a while. So we are really happy to have this around and of course, sets the clock for a 12-month approval time line from the date of submission, right? So it could be one of our critical launches that we'll be looking forward in the next -- in the near term itself.

Yes. I just want to underline what Balaji said. I mean we have there a $7.5 billion opportunity. We believe there is only 1 developer, which is close to us. We are not aware of anyone which have submitted. We have also the subcu version of the product, which is important. So all in all, we believe that for most markets, this will be a launch next year for us. And so I want to underline what Balaji said. I mean we are super excited about this opportunity. And this is by far the biggest opportunity in our short history of being commercial, which is coming up.

Great. And you touched on this a bit, but I guess in that context, how are you thinking about the opportunity for Simponi, Eylea low dose and Prolia, XGEVA.

I mean, overall, I think Symphony us being alone, of course, outside the U.S. still today. it's being shown to be a good opportunity and being either first or 1 or 2 in the U.S. will also be very exciting. But again, Simponi is around $3 billion product. So just from a size perspective, Entyvio most likely will be even more exciting, if you will. We think with the low dose Eylea, there is still a strong market for the product. And we think we will be in a good position. I mean we know that Amgen has been super successful in U.S. And we have launched the product now into U.K. with a pretty strong market share just in a couple of months, over 5%. And we have rolled out the product into European Union. So excited about that. Prolia, XGEVA, we have always seen us more competitive and these that product was 1 of our first one to develop. So we entered -- finish it finishing it, but from gross profit, gross margin, I think for everyone, it will be more competitive to the other 2.

And in terms of market opportunity on both of these, so I think investors also tied up the fact that we had -- we didn't get to the market at the end of Q4 '25 or as we have thought. But the commercial opportunity of both of these, especially Simponi and Eylea, they're very much intact because most of the settlements are towards Q4 2026 or Q1 2027, and we'll be coming in with the next wave of launches. So the Eylea commercial opportunity, even if I had got an approval last year would still be very much the same and intact. And with Simponi, again, there is only one other filer who got approved a couple of weeks ago, and they have stated that they will be launching in Q4 2026, which with the resubmission that we announced last week, we expect to basically be in the first wave, if not the first to market with Simponi still. So the commercial opportunity is something which is very much intact on which clearly the misread or misunderstood the situation there. So that's, again, I think you paid to highlight, Matt.

Yes. Great. Yes. And then maybe kind of in the context of low dose Eylea, I think you guys are also pursuing high-dose Eylea. How are you thinking about kind of those time lines and that relative opportunity?

Yes. So I think Alvotech has been one of the pioneer to adjust to the changes of the brands. So we were the first 2 to adopt from low dose to high dose on biosimilar to Humira. And we went Entyvio with a subcu when we saw the plant going there. We also -- when we saw that Regeneron was going to launch a high dose 8 milligram, we basically internally before the product came to market made 5, 6 prototypes in-house. And when the product then launched, one of our formulation was perfect formulation from both [indiscernible] IP standpoint. So we always expect it to be in the lead. It's -- we have seen 40% conversion in Europe, 40% conversion in U.S. And that conversion, we believe, will continue. And we saw that Amgen announced that they are starting their clinicals for U.S. in June. And we have already been working on our clinical. So we should be ahead of them in the U.S. And we are pretty imminently filing already into rest of the world markets with the product. And what is also interesting is that the safety device or the [indiscernible] which they have been developing, we have spent 2 years from a similar device. So I think we will be in an absolutely pull position when it comes to high dose Eylea, super excited about that.

In terms of timing?

We will be submitting in rest of the world this year. And I would not rule out that, that could be luncheon approval. We are then finishing the clinicals in -- for the U.S. market. So we will be submitting a bit later there.

And then in terms of launch timing for U.S., is that -- do you have any clarity on that?

I would not comment on that until our clinical is done, if you will.

Yes. What we have said, though, is that we would -- it's one of our medium-term opportunities. And so definitely think about it in that time frame. -- that we have really excited about and there's a clear differentiator for us.

And then maybe moving to another kind of mega blockbuster KEYTRUDA very competitive market. But you guys recently, I think you guys have a partnership with Dr. Reddy's there. I guess maybe kind of walk us through the strategy for that molecule.

Yes. I mean it was kind of, as we all know, it's the biggest molecule in the world. In our mind, we wanted to have it in our pipeline to be able to offer it to our clients. But knowing also how many companies are developing the product that, in many ways, was not commercially as lucrative as it would be with the less competition. So we're kind of earlier doctor of stop doing the patient study or Phase III study already. We expected that we could skip the patient 3 for KEYTRUDA, which brought the cost substantially down. And then this is a co-development with where they will be in the end producing the drug substance. So we are sharing the cost. We believe we will be more cost competitive than most others. So that's kind of the approach we did to be in the product. But overall, I think it will be a pretty competitive molecule going forward.

Great. Maybe switching over to business development. You all recently announced a partnership with Fuji Film biotech expands your global manufacturing network. -- and I guess, establishes a second source of commercial supply in both the U.S. and the U.K. Maybe can you elaborate on what drove the rationale for that deal?

Yes. So it's a very good question. So we have 1 facility in Iceland. It's state of the art, both drug substance, drug product with the capacity we have set beyond 2030. We have 5 products on the market. We have 30 products in the pipeline, which we believe, again, is the strongest pipeline in the industry. When we saw the patient study would be not needed going forward. Over 2 years ago, we increased the capacity in cell line development, process development and where we felt we had bottlenecks. So we have been on the case on starting new R&D program almost every second month for over 2 years. So when it comes to the capacity, we are seeing 3 launches in the U.S. end of this year. We are seeing that we are growing market share substantially outside the U.S., especially for biosimilar to Symphony. We are seeing our good colleagues here Teva growing the shares in both biosimilar to HUMIRA STELARA, which is nice to see. And then on top of that, we will be expecting to launch Entyvio into multiple markets. And this will all come into a very similar time frame. It will all happen, of course, throughout next year. So having [indiscernible] partner, which mainly is working with big pharma was something very valuable for us and will allow us to be more flexible in case we gain more market share, if there from our clients come in the same quarter to be able to still deliver on that. So it was very strategic and the long term. But of course, we will be using our own facility at the same time fully.

So we should think about it, it will be used for both commercial and pipeline products .

Yes. Yes, absolutely.

Okay. Great. Maybe kind of stepping back and looking at the biosimilar market a little more broadly Obviously, the opportunity over the next decade is very significant and kind of things have been changed regulatory-wise, you touched on some of the FDA changes. And then we've also seen changes on the payer side or private labels and things. I guess how do you guys kind of internally strategize and kind of think about the category overall in that context?

Yes. I think if we start at the beginning because it's a fairly young industry, if you will, as you know. So we saw quite a few players coming in at the beginning. And it was same -- I mean I was a pioneer in the generic industry since 1999, I built Actavis Alvogen quite a number of generic companies and we are starting a new area with biosimilars as we did 26 years ago in G&A, if you will. And it's only 5, 6 years since really adoption in U.S. on market share gains started to happen for biosimilars. We know those products are very effective but very costly. We think the trends now about 40% of the $1.8 trillion pharma market is biologics. We are seeing in Phase II, Phase III from the top 10 big pharma companies is biologics. So basically, we think we will see the trend from 40% to 50% and even 60% going forward. At the same time, the early adopters, some of them are leaving the scene, if you will. We have seen Boehringer Ingelheim. We have seen Pfizer and we have seen all the [indiscernible] are scaling down. One could say it's cheaper now to develop biosimilars. And the answer is yes. It does cost still $60 million to $90 million per product. And you need to build a facility, which cost you $0.5 billion at least. So it's a $1 billion venture before you get really into it and usually take 10 years. So I'm not seeing necessarily even though the regulations are changing a bit, that we will see a float of new players coming in. So all in all, I mean this is -- companies like ours is really needed just to sustain health care systems around the world. We have the pipeline to basically grow and support the markets in U.S. and Europe and where it is globally. So overall, I mean, we are extremely excited about our journey, which, in many ways, commercially is just starting.

Yes. And I think it's also important to note that though does CES waiver. The FDA may say, okay, CES waiver, but they're going to increase this scrutiny on all of the data that we submit for companies. And that really plays well for companies like us with a very strong R&D track record, a very strong process and analytical data capability to be able to showcase that. And this is not something that can be acquired by any new entrant overnight. So that really forms a moat to the industry and forms an entry barrier. That's something that we look to think that, especially on the top incumbents like us, it helps for us to grow and capitalize into this explosive growth period in biosimilars that is coming up over the next 10 years now.

And maybe how do you think in terms of how we'll actually see it play out with not requiring the Phase III? Do you -- I mean, clearly, some companies are still running Phase IIIs. And if you read the FDA guidance, it's like make an argument for why you don't need it. So do you all imagine it will be -- essentially no one will be running Phase IIIs in a few years? Or it will be dependent on?

I think it will be very exceptional if Phase III will be run going forward. And you need to have the analytical data to support that your product is interchangeable. And we have seen if you pass the PK the Phase III was not really I think anything into the development. That's why we expected this to come on this to happen, and that's why we adopted to it earlier than anyone else. And then, I mean, you asked about the market dynamics, private labels like in U.S., I mean, that's a U.S. thing. It mainly applies to retail products with our pharmacy benefit. We had Humira cost being the biggest one. There are not too many pharmacy retail benefit products coming out. So we are not really seeing the private label necessarily playing a big role going forward. It did in Humira with different success between the 3 PBMs. But overall, we think it will still be especially when you have a product more medical benefit, it will still be some of the smaller ones, both smaller PPMs and promotions and providing quality products to the market which will come.

Opportunity kind of outside of channel you're.

Yes.

Okay. Maybe turning to your guidance for the year. You gave 2026 guidance on the top line and then also maybe walk us through kind of what expectations are built into those. And given kind of the recent developments, how should we think about changes to those.

Yes. I mean we gave a range in the lower end of the range with $650 million and $180 million EBITDA. We did not have any of the 3 products which we are launching now into December into U.S. And because it's only 1 month, we took a moderate value being shipped to U.S. on the high end. So that's kind of explaining the range. But with the comfort that we have in, of course, the U.S. market, we strongly believe that we will be launching. And -- so that was kind of the rationale when we gave out the guidance because the clarity was not fully there when we gave the guidance out a few months ago.

Yes. That said, despite the FDA and some of the slowdowns that we take on, you should still see Matt, that even at the lower end of the range [indiscernible] '26. And once the each wave of launches materialize, we will be in a significant period of growth over the foreseeable next few years, and we're really looking forward to that.

Yes. Great. Great. You highlighted several times, the biggest probably pipeline in the industry, but I think 30 molecules in the pipeline. Maybe kind of in the last few minutes to walk us through what is what is like your strategy for selecting new molecules at this point? I mean do you guys revenue ranges.

No, it's a good question. I mean we have always said we want to open up access for patients. And we are doing that in Alvotech, been doing that in my career for 26 years. So if you're going to open up on access, we need to come with a molecule which is still not widely open for biosimilars. And that's why you heard us talking about first with high dose biosimilar Humira, first with Entyvio. First subcu with Entyvio, first with Simponi, first with high-dose Eylea. Because if you're not first or in the absolute first wave, you were kind of not opening up that access if they're already 5, 6, 7 plays. So our portfolio strategy is evolved and developed around that. And as you can imagine, you start the journey with the product. And then we usually take 5 to 7 years to develop a product. And we closely monitor what the plant is doing. And then very often, we are just to what the plant is doing to be able to open the access to the main strength or form of dosing they're adjusting to, if you will.

I think also, on Robert's point, I said earlier, revealed some of the secret sauce there. We have an exceptional R&D team. And that's why we have been able to get so many of these unique assets, be the first 2 markets. So 6 of the next 8 to 9 launches that we are looking at over the next few years, near to medium term, they're all going to be -- we are going to be either the first to market or in the first wave of biosimilars. And that is why earlier called out an explosive period of growth for us over the next few years. And so we have like -- apart from these, we have Ilaris, we have Cimzia, we have Taltz. These are all assets which will have a strong revenue and EBITDA contribution for us as we get to that -- those periods.

Yes. Great. Great. Well, with that, Robert? And Balaji, thank you both for joining us.

Yes, thanks for the invitation pleasure.

We look forward to the updates coming months. Thank you so much.

Thank you so much, Matt, and the Goldman for hosting us and great questions. Thank you.

Thank you.