Bora Pharmaceuticals Co., Ltd. (6472) Earnings Call Transcript & Summary

Bora is the largest CDMO company in Taiwan by capacity. Bora is also the largest biotech company in Taiwan by revenue. Bora is also one of the fastest-growing Taiwanese listed companies across all sectors. From 2020 to 2024, Bora's revenue increased from $56 million to $600 million, representing a 4-year CAGR of 117%. So now let me introduce the speaker of today, Mr Bobby Sheng, who is the Chairman and CEO of Bora and who is also the man in the driving seat for all the successful M&A.

Thank you. Good afternoon. Thank you, everybody, for staying till Thursday to listen to the second to the last presentation of JPMorgan. So I feel very honored to have this position. So thank you for the introduction, Phoebe to Bora Pharmaceuticals. I'll go quickly into the presentation, so we only have 25 minutes. I found the company in 2007 with a vision to create a different world-class type of pharmaceutical services company. So we started with moniker of contributing to better health all over the world. And as we've evolved, we've had 2 businesses now expanding into the CDMO with commercial Rx expertise in Pyros Pharmaceuticals and biotech partners to optimize product, accelerate launches and scale supply to meet global patient needs. But also we have a commercial Rx division now in the U.S. supplying specialty branded generics and specialty branded drugs in the U.S. To get to know Bora, you get to know by the numbers, it's pretty easy. We're publicly traded on the Taipei Stock Exchange. Our market cap is around USD 2.4 billion. We have over 2,300 employees. We export to over 100 countries. We manufacture in 10 sites, 5 in the U.S. and 5 -- 5 in North America and 5 in Taiwan. Our revenues for 2024, over $600 million, and we just reported our revenues this last week. Our revenues are outside of Taiwan, 95%. So most of our customer base is within the U.S. and North America. And like Phoebe said, we are the #1 pharma manufacturer company in Taiwan. How do we achieve these numbers? Well, we achieved these numbers with an immense amount of hard work with the team, and we've shown some really rapid growth to get these strong financials. Over the last 4 years, our revenue has increased, a CAGR of 80% per year and our operating income within the last 3 years has been 185% CAGR, and we haven't been able to report our full year for 2024, but we expect a similar type of growth on the operating income. And also on the net profit, the 3-year CAGR is 74%, and we haven't reported the last year as well. So very strong financials for the last 4 years. And even amongst the previous years, we've had much more similar type of growth in our revenues. We've been able to achieve these revenues also by delivering most efficient use of capital. So our finance team is very diligent and so our return on equity is roughly about 30% in the last 4 years. And then our return on investment is roughly about 15% in the last 4 years. We've been consistently able to increase our cash flow position by now into year 2024 quarter 3 of $194 million in cash, and this is pre our ECB of $200 million that we did towards the end of 2024 as well. And we also managed to have increasing our equity over time as well. We use smart leverage for model acquisitions, but we continue to have a positive equity increase over the last 4 years. We've been able to have all this growth also responsibly and focus on maximizing shareholders. Our total annual shareholder return is 93.9% since 2018, that's almost we're doubling our return every year for our shareholders. The industry average is about 13%, and we're at 93.9%. Our market cap since IPO has increased 7,000% or roughly 700 times since that price. But we've been able to do so, have that increase with minimal paid-in capital. So our paid-in capital has only increased about 4x from 18 million shares to 100 million shares. So very efficient use of our capital to create maximizing our shareholder value. We've been able to do that because we have a dual engine strategy. And dual engine strategy means we have two real main core businesses at Bora. We have the CDMO business and we have the commercial Rx business. These two businesses have really contributed to incredible synergies, and I'll be able to express those synergies with you today. Obviously, these two business have two different characteristics. The CDMO business, it's a high growth, positive cash flow business as it's inflation and recession proof, the demand is always there, and a strong sustainable customer base, especially when you get to scale. The global commercial operation is a different characteristic. It's got high barrier brands, but also high growth, especially in the PIV generics, especially with high margins there. And we also have explosive growth in new product launches and so there's very dynamically rich opportunities within the space. Now how do these two different businesses create synergies for us? It's actually very simple. On the CDMO side, we're actually able to have built-in capacity and captive capacity. So that allows us to really focus on reducing operations and also the assurity of capital -- of capacity allows us to maximize our efficiencies, focusing a lot of efforts on operational efficiency and not on when the next orders come in. We'll also be able to reduce the fluctuation of headcount, which also allows us to accelerate the clients' time to market because we're using the same people with the same resources. So that's very reliable for our customers. And we also have the unique ability now to also move the products around dynamically, whatever site is most efficient or most needed for that product, we have 10 sites that we can move them around in. So that creates a unique capability for us as a CDMO that no other CDMO has. On the commercial operations side, where our CDMO business allows it to become asset-light. So it allows them to really focus on R&D and some of the sales and marketing of their business. There's no resources for them to be allocated to manufacturing, regulatory compliance, site heads. And it's a very, very different labor-intensive business that really commercial Rx companies should not be focusing on. The access to state-of-the-art manufacturing expertise at scale. Most drug commercial companies, they really don't have a scalability to their manufacturing capabilities. So they're really at a disadvantage a lot when it comes to using state-of-the-art equipment and their ability to invest CapEx. And it also allows them to have the ability to scale up and create those efficiencies. We have -- they have more -- we'll be able to give them more on-time approvals because of our reliability and also stable supply chain. And finally, really allow them to -- that side of the business to focus on strategic growth of the brands with the foundation for generics. So we'd be really able to see a lot of synergies that only we have when we have these two business units within one -- under one umbrella. A little bit about our sites. We have 5 sites in Taiwan on the right. I won't get in too much of those. And then 5 sites, the top site on there, Plymouth and Maple Grove, that's actually 2 sites, so it's a total of 5 sites in North America. That really allows us to have a unique ability of scale. We're one of the few CDMOs in Asia that has over 10 sites, and then we'll continue to grow our footprint in North America and Asia as well. What are some unique characteristics about Bora CDMO that allows customers to continue to want to come back and really makes us a difference in the market? Well, first of all, we have the end-to-end solutions, and we're really a one-stop shop, mostly most formulations from all the way from development to commercial scale, that's really what the customers want, especially as our partners get larger and we get into large pharma, they really want an all-in-one solution. They want to go to a limited amount of vendors and suppliers that they can work with. One of our unique abilities is our quality and reliability as well. Our on-time in full, I would say, is best-in-class 94% on-time in full. Right first time is really our quality moniker, and that's at 95% right first time. And our yield to batch success rate is 100%. It's very, very competitive and very unique when you have a scale of 10 sites as we do. A couple of our unique competitive advantage. We view ourselves as a service company. So we definitely are customer, customer-centric. That's one thing, one of the reasons why we started Bora in the first place that we knew too many CDMOs were viewing themselves as a manufacturing facility. And we really want to view ourselves as a service company and making our partners succeed and succeed faster with a higher degree of accuracy. We're a large pharma quality with small biotech attention, and we have everything from development scale, and so we're very hands on with development scale, but we're also very, very stable and reliable on the commercial scale capabilities. So for our highlights in 2024, we produced over 2.8 billion doses. We had 7 commercial MSA signed. We have 16 launches for a total of 96 commercial products total within our network now, and we've delivered 40 new molecules on the R&D side as well. Some of the key metrics that we try to keep on improving on is our speed, and so we have a 6-day turnaround time, which is also, I'd say, best-in-class in the market. And we have a 2-week customer onboarding schemes. So that's something that we try to do as we continue to be focusing as a service company. We're always committed to scale, quality and service. Here's another 5 highlights that allow ourselves to accelerate into 2025 and have a bullish outlook on 2025. We've engaged in 140 accounts of new customer orders. And we also, our preferred partners were over 30% of our current clients. As you can see, we're clinical, and we have an increasing amount of commercial scale coming online. And then we have on our, as far as our dosage forms, we have pretty equally distributed out dosage forms throughout all our dosage capabilities. On the large molecule side, we have 25 project wins in 2024, and we're preferred partners for 1/4 of our clients. And also, as you can see, we go all the way from cell line development to analytical to commercial manufacturing, especially with our acquisition of Tanvex. We continue to invest in CapEx, especially the recent acquisition in our fill -- injectable fill and finish line because of the demand and tailwinds that are coming in injectables and our expertise in the injectable field. We're going to continue to invest in CapEx in all of our platforms that we're looking. And in our investments, we look for a 30% to 40% IRR threshold. We're investing 20% of our earnings into CapEx over the next 5 years. And then we have over 50% of those invested in commercial development. So we're really, really about expanding our scale and expanding our capabilities. I want to highlight some key acquisitions that we made in 2024 that really allowed us to have a really established footprint now in North America and create a foundation for growth within North America. First is our acquisition of Upsher-Smith, which within the recent 10 years is the largest investment in oral solid dose facility in North America. It's our first U.S.-based facility in North America, but now we have all our logistics with warehousing in it and really starting to create synergies within the network in that facility. It can have up to 5 billion units produced in oral solid dose. So we're very excited about that. On the sterile injectable side, and then we say when we expand, we expand for scale or scope. I think for the Upsher-Smith facility, it's about scale. And for the Camden facility, which is our first injectable facility, it's about scope. It's got process development, commercialization as well as fill and finish capabilities for a large molecule. We have over 20 customers in that facility already, and we're actually expanding production lines and expanding fill and finish lines in that facility as well. Finally, we're very, very excited about our strategic investment into Tanvex, which has a commercial facility in San Diego. It's one of the few commercial facilities that are approved by the FDA. I think there's less than 30 commercial approved facilities within the North America for U.S. FDA. It's got a lot of strategic -- it's a huge strategic alliance for us in Taiwan. It allows us to have development, speed capability in Taiwan and also move to commercial manufacturing and allow us to have fill and finish within the Camden facility. So as you can see, within last year, we've made enormous leaps to become a large CDMO within North America. And we have a robust CDMO capability, both in large and small molecule all the way from commercial -- all the way from development to commercial. With all that investment, though, we have to invest in our people as well, which is the most important part of the business, I think, because with all that capacity, we need the leadership to take our company to the next level. So we're very, very happy, delighted to have real 2 of the -- probably the most prominent leaders in the CDMO space, J.D. Mowery, which is the President of the CDMO business. He has over 25 years of experience and has led impactful leadership roles at Lonza, Genentech and JSR Life Sciences. And we have the pleasure of inviting Steve Lam to be the CEO of Tanvex, which is our large molecule facility, and we combined that with our large molecule facility in Taiwan as well. And he has established leadership positions in Lonza, Amgen and most recently, Patheon. These leadership positions, we feel, are extremely key in not only managing the integration of our acquisitions for last year, but also really leading us to bigger acquisitions and larger growth for many, many, many years to come. And now a little bit on our commercial facility, our commercial side of the business. We've rolled all of our commercial assets into Upsher-Smith, which is an acquisition we made last year. They are a 100-year-old brand company. And now, obviously, within the last 20 years, has converted into a generics brand company as well. They're extremely, extremely a strong foundation and well-known reliable brand name within the U.S. And as we continue to grow that business, for some of you that have been with us for a while and been into some of these presentations, we've committed with our acquisition of TWi in 2 years ago, we committed to really have a foundation of generics, but grow the branded and specialty branded business. In 2023, we've had -- only had 7 brands within the business. And now in 2024, we have 13 branded generics or branded specialty pharma, and we tend to exceed to 20% -- or 20 names, 20 brands by 2027. On the right here, a little bit of insight into where we want to go with our brands. We definitely are bullish about the CNS side of the business. As you can see, we have Qudexy and VIGADRONE, and I'll go into a little bit of our recent acquisition of VIGAFYDE. So VIGAFYDE, VIGAFYDE, why are we so excited about VIGAFYDE for the commercial Rx business? One, it's one of our uniquely branded patented 505(b)(2) drugs. It continues the commitment to grow within the foundation of generics and into the brands. And some of the special nuances about it, it is, I think, we would consider it a revolutionary product in the infantile spasm space within the last 15 years. It is truly groundbreaking. It enhances safety and precision, is clinically superior to existing products. It's obtained orphan drug designation, and we're awaiting ODE and also preparing the application for TSC indication as well. A little bit of insight. This drug, this API, vigabatrin, it used to be an oral powder for -- powder for oral solution. So you'd have to open it up 15 steps, mix it in the water and then feed the 0 to 2-year-old infant child along with a slew of other drugs that he's taking, very, very, very difficult to administer, very difficult to be accurate. Now with VIGAFYDE, it is a ready-to-use oral solution. So it's already an oral solution. And all they need to do is open it, take a syringe, get the right accuracy and feed it to the infant child, which is groundbreaking for the caregiver and groundbreaking for the parent as well. There's no mixing. It's always the right strength. It lasts for 90 days once opened, and there's no medication waste and no risk of contamination or reduction of how it well works. They've done many studies with VIGAFYDE. I want to share a study with you that's really eye-opening for everybody that actually sees the study. It's a human factor study comparing the dosing accuracy of VIGAFYDE ready-to-use compared to vigabatrin powder. And vigabatrin powder dose errors range from 62% below target to 24% above target. What does that mean? That means even experts that are dosing, they're actually going from anywhere from 62% below the target range of 100 -- 1,125 milligrams and going 24% above the target range up to 1,390 milligrams. So there really -- accuracy is a big, big issue with this drug, especially administering it by caregivers. And what is even amazing enough is amongst the inaccurate caregivers that are giving this, the experienced caregivers are actually only accurate 67% of the time. And actually, the inexperienced caregivers are actually -- within the inaccuracy part is 87% of that. So with VIGAFYDE, though, the actual doses ranges from 100 -- 1,110 milligrams, which is only 4% -- 4.7% below the target to 1,154 milligrams, which is 2.6% above the target. What does that mean? That means experienced and naive caregivers were able to give delivery dose within 10% of the target dose, basically 100% accuracy. So it's an amazing discovery for caregivers to not worry about dose. The improper dose even at above 10% is really damaging to the baby -- to the infant. And every spasm the baby has, it decreases their IQ by 2%. So it is a groundbreaking drug for this infantile spasm space. So with USL, which USL has actually the generic branded Vigadrone, and Pyros, which has VIGAFYDE, which is a company that we bought, will be the leaders in infantile spasm space. And we'll be broadening our offerings into the vigabatrin with vigabatrin powder -- sorry, VIGAFYDE vigabatrin oral solution, which means that we're the only pharmaceutical company offering 3 formulas. So we'll have the oral powder for solution, we'll have the oral solution, and we'll have the tablet form for once the infant is old enough to take the tablet. In that market, well, the original brand, which is SABRIL, which they genericized in 2017, their top line sales was USD 229 million. So we think that's a sizable target for us, that is a target we would like to reach for this product. A little bit about the generics portfolio and how that's really a foundation for our growth that we grow on top or we, as a foundation for the brands, to grow on top of. A little bit of highlights on some of the outstanding products that we have on the generics space. We are the largest producer and supplier of Dexlansoprazole in the generics space, and we are the largest producer and supplier of potassium chloride extended-release. We're very selective on the generics that we choose. I would say it's a platform for us and our gross margins are above peer average. Our gross margins are 63.2%, and our peer average is about 49.1%. We continue to have a development -- robust development with our partnerships with other companies in this space. and some of the highlights are Deflazacort tablets, which got approved in 2024. We're very, very bullish about that with the second one to launch in that space. And then we also have a GLP-1 project that is coming online, hopefully at the end of 2025. A little bit about Bora and our community. We're recognized by multiple global investors and capital markets with our most recent listing into the FTSE Taiwan Mid-cap 100 and the FTSE Taiwan Eight Industries. TIP Market Capitalization Top 500 Total Return Index. And finally, TIP Customized Taiwan Market Leaders Dividend Equal Weight Index. That's mouthful. We also have a commitment to our society, commitment to people. As far as the ESG ratings are concerned, we are an A for the MSCI ESG rating. But we also really believe in inclusion and diversity, 45% of our managers are female, 50% of our employees are international. And of our research team, 79% have Masters or PhD. And we're very, very big on culture. We think one of our very huge competitive advantages is our inclusion and our diversity, which really gives us a competitive advantage in the market. Finally, because of our team's efforts and our strive to perform to be top in the industry, we've received a lot of awards and accolades in 2000 -- 2020, I'm sorry, we were able to receive CPhI CEO of the Year award, which I was very proud to receive as a -- on behalf of the company. Last year, we received 2 Presidential Awards from the Taiwan Government and the Taiwan President, one that's most notably is the 2024 Presidential Innovation Awards, and we were able to receive an award and a cash price for that, and we donated that to the earthquake relief fund for the earthquake in Hualien. Some of our vision for 2025, what are our predictions, what are we looking forward to? Well, we want to drive sustainable growth and demand and capacity utilization while harmonizing our regulatory systems to enhance operational efficiency. We really want to integrate these sites that we've acquired. We have a huge operational efficiency program that we are implementing, and we want to continue to drive the growth in those sites. We want to achieve growing commercial launches. As you can see, we had 40 products that we've gone through development. We expect a lot of those to commercialize within 2025 and 2026. And as you know, commercialized products are really the foundation for high margins, the high growth within the CDMO business. We're going to expand and realize the full potential of the fill and finish. Fill and finish is a huge demand in our industry. We're going to continue to expand on our very, very strong foundation for quality at that Camden facility. So that's a real big CapEx investment for us. Maintaining momentum in upgrading aside from the Camden facility. We have a huge plan to invest in CapEx into the Maple Grove facility as well. And we think we're going to create some great scale within that facility, especially for OSD. We're looking forward to integrating the Tanvex facility into the Bora CDMO capabilities and unlock a lot of those synergies. That's an amazing site in San Diego, and we think that's going to be a huge foundation for our large molecule growth in 2025 and '26. We're going to start integrating some AI into our Bora standards and infrastructure, especially data-driven management, especially in our quality systems and our output systems. And finally, to continue in our M&A, like I said, we have a very, very strong cash position on top of our $200 million that we raised in our ECB from JPMorgan. Thank you. And we're going to continue to really get -- actually, I think it's a great opportunity to expand the M&A. We are in our infancy, I think, in the CDMO space. The top 10 CDMO providers only represent about 15% to 20% of the total market. And as you know, in mature industries, the top 5 really represent about 50% to 60% of the market. So we see a lot of opportunity to improve, a lot of opportunities to consolidate in the CDMO space. On the commercial Rx side of the business, we are going to expand and reach market presence for our VIGAFYDE and our Vigadrone brands. Like I said, we're very, very bullish about VIGAFYDE. I think we can capture a large, large part of the market and realize what SABRIL was doing back in 2017, so we can continue that growth and really provide something, I think, is groundbreaking for the caregivers and patients. We're going to execute successfully on our launches of our new products, especially in the specialty and generics segment. As you can see, our pipeline is very full. And so we're going to have some incredible launches in 2025. We're going to ensure a seamless integration into the acquired asset. We really -- as you can see, we've done 11 acquisitions in the last 7 years. A lot of our success has come from the actual focus on integration and unifying the companies, and we're going to do that with TWi, USL and Pyros now. Finally, once again, we're going to actively pursue M&A because I think that's really a great time for -- especially for specialty brands. especially in rare disease, I think it's a great time for M&A in this industry as well. All right. Thank you very much.