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

Welcome, everyone. Thank you for standing by for Bora Pharmaceuticals First Quarter 2025 Earnings Conference Call. We have here with us today Group Chairman and Bora Pharmaceuticals CEO, Bobby Sheng; and CFO, Alice Wang; Vice President, Simon Chen, with us. [Operator Instructions] Some of the statements that we make today regarding our business, operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our annual and financial reports, including the risk factors. We undertake no obligation to update any forward-looking statements. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of IFRS to non-IFRS measures is included in today's presentation, which is distributed and available to the public through our website. I would now like to hand the conference over to our speaker today, Bobby. Please go ahead.

Thank you, Nadiya. A pleasure speaking to everybody, and good morning to most of you and some in the evening for our U.S. listeners. Next page, please. So here's Bora by the numbers. I'm sure most of you are familiar with this. We have $2.5 billion in market cap, 2,100 employees, export to 100 countries, 10 manufacturing sites, over USD 600 million in revenue for 2024, 95% of revenues are outside of Taiwan, and we're #1 pharma manufacturer in Taiwan. Next page, please. Some highlights and milestones for Bora in quarter 1. Our CDMO revenues marked a historic high for us over the quarter 1. We completed our strategic consolidation of the U.S. CDMOs and USL capacity ahead of schedule. So as you know, we have the Maple Grove facility and the Baltimore facility in Camden. And the injectable facility is definitely coming online ahead of schedule, and the earnings for that site are coming ahead of schedule. We also confirmed our small molecule CDMO offerings and expansion in the -- focusing on Maple Grove facility and closure of the Plymouth facility. And then we've executed a structural transformation of the VIGAFYDE go-to-market model and acquiring Pyros into our company last year -- into USL last year. The VIGAFYDE strategy has proven very strong. And our go-to-market, we've executed extremely well and have some great results in that. We've also given some adjustments to the market, maintained our leadership position into DLS within the U.S. Next slide, please. Next slide, please. Here, I'd like to highlight some of our revenues. Our revenues for the quarter were TWD 4.4 billion and that is a decrease from our previous year -- previous quarter, sorry. Most of these revenues were fueled by additional customers across the CDMO side for our CDMO business. So Bora's CDMO business recorded a higher quarter of 52% from last year and 3% quarter-over-quarter. So we have strong CDMO sales, as I explained in the earlier pages. On the pharma sales side, we also had revenues increase of 82% from the -- year-over-year. Obviously, that's because of our addition of the USL products and our specialty pharma division with the addition of VIGAFYDE. Now as you can see, though, it's very clear that consolidated -- the TWD 4.48 billion is below our fourth quarter for 2024, and that's because of the 15 products that we discontinued. And I want to highlight that these products were already earmarked for discontinuation when we acquired the USL facility. I think a year -- I think maybe about in April or so of last year, we were highlighting the fact that after the acquisition, we were going to maneuver the company into higher-margin products, specialty generics that were more meaningful to the manufacturing sites and also to the company. So in conjunction with that, we followed on the discontinuation of 15 products. In addition, we've also moved 6 products from the Plymouth facility on to the -- our other sites within the network. Now all of this has resulted in a lower revenue. But as you can see from our cost of goods sold, we actually have increased our gross profit. So none of the discontinuations actually affected our gross profits. And so -- and we've been very disciplined in making sure that we keep the products that have the gross margins and discontinue the products that don't have them. So you can also see the gross margin for the quarter is 42%, which is 9% more than the previous quarter. And also, if you reduce the onetime adjustments for the discontinued operations, we are getting closer to 49% in gross margins. On the operating costs, with the discontinuation of some of the operations within the sites, we have a decrease in sales and marketing and decrease in G&A and decrease in R&D spend. So we have a decrease in total OpEx spend of 10% quarter-over-quarter and an increase of operating profit from the previous quarter. And that's what I really want to highlight here as our increase in operating profits as we continue to do quarter-over-quarter. And our net income with the nonoperations is -- with nonoperating of TWD 2.3 billion. I'll explain more of that as we get down the income statement here. But our net income before taxes is TWD 3 billion. Now from the discontinuation of the -- of some of the operations in Plymouth, we have a onetime discontinued operation adjustment of TWD 1.3 billion. Now that is an acceleration of the disclosure -- or discontinuation of products and acceleration of the closure of that site. And that is just a onetime that we think is needed to continue operation going forward in a profitable basis. The net income from continuing operations is TWD 2.7 billion, and net income for the quarter is TWD 1.4 billion. Now the operations -- basic EPS from continued operations is TWD 26 billion. And just for this quarter, if you include all of the onetime costs and the onetime benefits, the onetime expenses, the basic EPS for this quarter is TWD 13.55 billion. So in summary, I want to say what happened this quarter was expected, and it was an acceleration basically due to market conditions. And there were definitely some unfavorable market conditions that were existing in the generic business that really accelerated our plan to discontinue these products. As these products were discontinued -- I'm sorry, can you stay on that page? That's fine. I could talk about this later, but can you stay on that one page previously? Can you go back one page? Sorry. And so the discontinuation and acceleration of those products to be moved into other sites definitely showed an increase in the Plymouth facility costs. So it accelerated our closure of that section of the Maple Grove facility. So just to clarify, the Plymouth facility is part of the larger Maple Grove facility and is considered 1 site by the FDA. So the Plymouth facility had many disadvantages and definitely was, in our position, a site that we definitely did have no competitive production advantages. So in the USL operation, the Plymouth facility definitely was one that needed to be closed down basically due to market conditions and really was part of our plan when we acquired USL. Next page, please. And some highlights on the Upsher-Smith story. I don't want to focus on that because of the onetime costs here. We definitely have increased our operational efficiency by integrating the 3 teams and the sales and marketing infrastructure that has been done. The pipeline ramp-up, as you can see, we've integrated both pipelines, and you can see a decrease in R&D costs by integrating those pipelines. And I was explaining before, the market conditions definitely had us accelerate some of the reductions and the discontinuation in those products. And in evaluating the Plymouth site, especially the ASP products in the Plymouth site decreased by -- average selling price, that's ASP, decreased by 37% sequentially. So it's really a smart move by our team to accelerate the closure of that site, which will result, as you can see, in higher gross margins, which will result, as you can see, growing gross margins and also our ability to free up cash flow to invest in other parts of the business as we were going to as planned. Next slide, please. Next slide. And here's some part of the rationale for the site closure as well. We wanted to really right cost the profile, right? So a lot of the overhead that was in Plymouth was definitely not needed basically based on the new profiles of our new drugs that we're bringing in there. And the overhead of that facility was definitely too high. We want to make sure that, that was being rationalized correctly. And it was a decision by the team, and a very quick decision by the team, to make sure that we get that done within the quarter of first quarter 2025. We also wanted to have the right kind of technologies that could go into Maple Grove. And looking at Plymouth, the space was old. It was a very tired facility, and certain technologies that we wanted to move in there to make them right for CDMO just didn't have the sufficient space. So that was another rationale for really wanting to make sure that we're bringing in the right technologies that were ready for CDMO. Converting a site from an innovator facility or a generic facility into a CDMO, it's a very tedious process. But we want to make sure that the technologies and the production quality and also the production scale is ready for CDMO, and that was one of the rationales that we had for closing the Plymouth site. Finally, the focus on high-tech complex capabilities. We are talking about for -- so for Maple Grove, nasal sterile, high-potent API, high-potent products, drug products, and also different variations that would not fit in the Plymouth facility. So once again, some rationale for why we needed to close down that Plymouth facility and focus on the larger Maple Grove facility, which is a very high-valued asset, especially given Trump's tariffs and -- in the U.S. Also, as I explained before, we are unlocking a lot of cash flow. So -- and being financially disciplined as we always are at Bora, in closing of the Plymouth facility, we are freeing up cash flow. We expect to unlock about TWD 200 million in capital per quarter and also free up a lot of initiatives for CapEx into the current Maple Grove facility and also potential other M&A opportunities as well. Next page. Next slide, please. Bora still continues to deliver profit. Bora has always focused on delivering net income growth year-over-year for our shareholders. And our actions this quarter have given us a clear pathway for that growth in the future, even while doing so still having impressive numbers for quarter 1. We are more confident in our ability to increase the numbers quarter-over-quarter for the remainder of 2025, but really, really looking optimistic for 2026 as we move forward with a cleaner operation, higher gross margins and as we fill the current Maple Grove facility with CDMO customers as well. As you can see on the right side here, the CDMO business is actually increasing compared to the pharma sales, and we see the CDMO business growing pretty rapidly in the next 24 months. Next slide. Next slide, please. This slide, we just want to show that we really focus on core EBITDA. So there's a lot of acquisitions that we do year-over-year, but internally -- and we're going to have a practice to -- in these investor conferences and these investor meetings to really show our growth in its real value for growth and not just an EBITDA or an income statement-type growth. So if you take out our -- some of the onetime costs that are associated -- or onetime gains that are associated with our growth year-over-year, from 2002, as you can see, our core EBITDA has increased year-over-year. And in quarter 1 of 2025, we are poised to have another record year for our core EBITDA contribution to the company. Next slide. So a little bit about the Trump tariffs, and we may have a lot of questions about that, but I -- we don't want to say that. We are well, well, well positioned to take advantage of the current U.S. administration and the tariffs that they are imposing for -- or the proposed tariffs that could be imposed for our industry as well. A couple of charts I want to show you here. As far as the M&A side, we're seeing a much, much lower activity from China competitors on the M&A side. So we see a lot of advantages for us in the upcoming year and then next year for really high-value assets to be very reasonably priced. So we continue to be aggressive in our M&A strategy, and that only increases with the absence of China competitors in the M&A space within North America and Europe. On the right side, we definitely want to show some -- our analysis internally on the current tariff possible implications, and I want to focus on the bottom right. We expect -- given if there is a 20% to 30% tariff, we'd see a potential decrease of our gross margins from 0.5% to 1.5%. So we see that there will be effect, but our team is consistently, consistently evaluating all possible options with regards to our supply chain, with regards to our customers and with regards to a lot of our vendors. So this is a time where strong management, an A+ management, shows. And so this is a time for us to definitely react accordingly and also be proactively getting ahead of some of the current potential tariffs that come up. But I will say strongly that we have invested in the last 3 to 4 years in the U.S. And as it goes through on this slide, there's been over $200 billion invested by the top 20 pharma companies in the U.S. So we have been proactively doing that. And it's really not as -- not that we knew that Trump would have these tariffs, but we knew that ever after COVID, there was a strong move to have supply chain be closer to the customer or be closer to the patient. So in listening to our customers, we are very proactive in setting up locations within the U.S. to onshore or [ for ] onshore the production of our drugs for our clients and for our patients. And that definitely seems to be paying off at this point as well, not only in Taiwan, but in the U.S., sterile ointment, sterile nasal, sterile fill/finish, OSD and packaging lines, all within the U.S., especially in large molecule and small molecule as well. Next slide. And here's some summary of our quarter 1 2025 business. A highlight of ours is that we, as a global CDMO, continue to be recognized as a global CDMO. We are one of the top awards -- sorry, can you go back one slide? Can you go back one slide? We're as one of the top awards in our industry at a global conference in New York called DCAT. We were awarded 3 awards actually, but one of our cores was the most outstanding CDMO award in the industry. So this is something that we continue to show our value and continue to show our presence in the global CDMO space, and we will continue to do so in 2025 and 2026. Next slide, please. In 2025, we have an initiative to have our margin profiles improve as the synergies of high-value assets emerge. Maple Grove is the first CDMO business began in March. And we also are in discussions with 3 very, very large pharma clients to have a much larger partnership within that site. As you know, that is one of the top largest OSD facilities and a lot of furlough space in that facility for other potential production manufacturing capabilities. And given the current U.S. administration's push for local U.S.-based manufacturing, we are definitely in some very, very high-level discussions with C-level executives in a lot of top pharma to put many products, multiple products into the site. So we're very excited about that. In Maryland, we're very excited about the Flex line that will be going online in May. So -- sorry, in June and July of 2025. That's another 30% capability. We also signed and extended with -- a contract with an existing customer, a very large customer to continue manufacturing in the Mississauga facility, that's our Canadian facility. And we also see growing demand of partners for other customers within that facility despite the tariff complexity. So that's one thing I want to highlight here is that we don't see our customers changing our space. Our industry is very, very difficult to transfer manufacturing. So I think that's a strong point that you will see and a consistent message within our industry that it is very hard to transfer existing products from a site. So I think a lot of our customers, a lot of our large customers especially are holding steady and continuing to discuss very long-term supply chain agreements with our current facilities. And obviously, with some new facilities coming up or new equipment coming up, our current customers are very excited about giving us more products and have more demand for the facilities within the North America and the United States. And of course, we've achieved historic highs with project wins in Q1 2025. The Plymouth decommissioning is 90% complete, and we've kind of over-exhaustedly discussed that, but we are very happy with the closure. It is definitely on track and is turning results financially that we are already seeing in April and May as well. So we're very happy about that. The tech transfers for the U.S.-facing internal orders of 6 molecules will definitely bring a more cost-effective profile for USL, but then also give a lot more work and take up more capacity in our current North America and Taiwan facilities. Next slide, please. This slide I just want to focus for you on our continuing execution of our synergies. I think in large part, you can look ever since 2020, we've been focusing on North America. So within the last 5 years, we've built up a very, very nice foundation, a very nice footprint of manufacturing in the U.S. I would say one of the most complete footprints for a one-single CDMO within North America and within the U.S. There are some updates on our M&A activities. I'll start with the Upsher-Smith. We continue to invest in CapEx, and we definitely have some scale technologies that we're moving into Maple Grove site, and I'll explain some of those technologies in a couple of other slides. The CDMO for Emergent, that one is definitely going ahead of schedule. FlexPro will start contribution in July. And we also have approval internally for an additional line that will bring in additional revenue, and I'll explain that a little more in a couple -- in the next following slides. Next slide, please. For the Maryland facility I was speaking of, we've just approved internally to add additional product line in the aseptic processing space. And it's a near-term project, and we expect this ASP isolator line that was just approved by our Board, we expect that to be online and installed within 12 months and start producing revenue within 12 months. We expect this line to give us an additional pipeline of USD 40 million to USD 50 million in contract manufacturing work. Next slide. Next slide, please. A little bit about Maple Grove. As you know, in closing the Plymouth facility, our Maple Grove is actually an extremely, extremely valuable, I'd say, large facility, 6x the size of Plymouth, and it was built in 2003, expanded in 2022. We are moving forward of investment of tens of million dollars to unlock a lot of potential in Maple Grove facility. These investments are with existing clients and existing sales and existing pipeline that is coming in. But I will say we are in strong deep negotiations with some large pharma that will have substantial, substantial investment into this facility and substantial impact on our earnings and our growth within the next 12 to 18 months. So we're really excited about our investment. It's proven to be one of the most valuable investments we've made in the last 24 months. And the interest in this facility will prove it to work definitely within the next 2 to 5 years. It's going to be an amazing, an amazing, I would say, headquarters for our manufacturing CDMO within the United States. Next slide, please. Next slide, please. Here are some of our highlights again for what we've done in the first quarter. I want to just focus on maybe the -- highlighted on the left bottom here. We've looked and talked with many potential clients, and we see that we will be adding on sterile nasal ointment and high-potency-type products within our dosage forms. And then on the right, our numbers continue to be market-leading as far as the yield/batch success rate, right first time, on-time infill, which is OTIF, down a little bit, and that's a function of the scaling up the Maryland facility and getting that facility up to CDMO standards. So I think that number will go up as the Maryland facility, which -- I've talked before the Baltimore facility -- will go online and be much more efficient as it becomes a CDMO facility for Bora. Next slide, please. And some of the highlights for the CDMO business. We produced 600 million doses in quarter 1. We've got 10 commercial MSAs signed in quarter 1. 29% of our revenues are from the world's top 20 pharma companies, and that continues to grow quarter-over-quarter. We've added $78 million in backlog, okay? And that's incredible. I think we've announced that in Q4, we hired a new President, J.D. Mowery. He's brought on incredible skills and leadership, and the backlog of products continue to grow quarter-over-quarter. We're very excited about the new leadership team we have there with J.D. Mowery and some of the people that he's brought on. And we have an exciting announcement of one late-stage large molecule CDMO signed for Bora Biologics. That will probably be explained more in another meeting when we talk about Tanvex and Bora Biologics in that -- in their annual -- their quarterly investor meeting. Next slide. Some updates on the pharma sales side. Next slide, please. So as you can see quarter-over-quarter, our initial guideline to the investors and the shareholders 3 or 4 years ago when we got into this space was to continue to focus on high margin, continue to focus on specialty brands. As you can see, year-over-year, we are doing so. The percentage of specialty pharma continues to go up, which also continues to increase our gross margins and continues to increase the moat we build around our consistency of growth within our product profile. As you can see, it represents almost 34% or 30-some percent of our total product profile in quarter 1 of this year. Some highlights on the right. We're definitely seeing some competition in dexlansoprazole, in DLS. So you're seeing some losses there. You're definitely seeing some Y-o-Y changes. But as you can see, the specialty has grown a lot more year-over-year as well. And that will be a continued trend in increase in the specialty revenues and adjustment of products to increase our gross margins, but not have as many SKUs in those maybe highly competitive, low-margin products within the generic space. So we're trying to get -- continue to get out of those. That message is very consistent. It's been very consistent quarter-to-quarter. It's been very consistent year-over-year. And we have successes in doing that in the previous years, and we see that we continue to have success with having the knowledge and having the clear mission to decommission low, if not negative gross margin products and focus on high-margin products. Some information on the pipeline here. For the Specialty business, we have 2 very exciting products that we see in the 505(b)(2) space with stiripentol and USL551. And for the generic business, we focus on high-margin specialty hard to manufacture, and we have 3 products in this space. I won't go into too much detail of those. And we have ANDA approvals. The most exciting one I could probably talk about is the deflazacort. We feel that, that is a very strong product that we can have a brand name that we'll have within the next couple of months, and we'll sell that as a branded drug as well. And some highlights on the mirabegron, and that has some legal issues that we've been able to take advantage of, and we're excited about that product in 2026. Next. Next slide, please. We continue to consolidate the commercial business under the Upsher-Smith name. That's a very, very strong name in the U.S. And as we continue to focus our commercial sales business within the U.S., the Upsher-Smith name is a very, very strong name within the U.S. So we want to make sure that we brand everything under the Upsher-Smith brand name. Next slide. Some highlights on the VIGAFYDE business. As you know, we purchased VIGAFYDE from Pyros in quarter 4 of last year. We've gotten orphan drug designation last year, and we're awaiting orphan drug exclusivity. We have a discussion meeting with Q2 of 2025 this quarter. We're preparing to submit for TSC in quarter 2 of this quarter of 2025. And we definitely -- the Medicaid process streamlined during the quarter improved protocol reimbursement recognition for VIGAFYDE as an innovative product. Basically, when you online or launch some of these products, the payer part is very, very important. And we -- and for this product specifically, we've had 100% coverage now in all the states, in all the hospitals. So that is extremely strong for a product launch of this size, which really validates our assumption that this is a groundbreaking, I would say, game-changing product within the infantile spasm space. Next slide. As we continue to invest heavily into VIGAFYDE, we're seeing great results. And on the -- focus on the right here, VIGADRONE plus VIGAFYDE. Basically, the vigabatrin portfolio has increased in new patient market share. So in quarter 4, 60% of all new patients were prescribed VIGADRONE or VIGAFYDE. Now in quarter 1, up to 70% of all patients for infantile spasm -- all new patients for infantile spasm were prescribed VIGADRONE or VIGAFYDE. That is definitely a strong, strong market position. Combined, these products added over 17 more patients -- 17% more patients in quarter 1 versus last quarter. So we had 17% more patients in this quarter versus last quarter. And in our revenues -- and so new patients over the next few quarters turn into revenues and prescriptions. And our investment in the last couple of months has definitely increased the VIGAFYDE revenues. Our VIGAFYDE revenues for Q1 of 2025 have increased 114% compared to last quarter. So we're very excited. Since our launch of VIGAFYDE, we've had over 400 new patients have been added into -- for this treatment for VIGAFYDE. So that means we had very meaningful penetration and very meaningful growth and definitely improving on the early intervention of this product for infantile spasm. Next slide, please. Next slide. So a little bit about Bora and what we're doing in the community. We're definitely highly focused on ESG. We think as a global company, we need to be globally responsible and lead by example. So in the TSWE -- TWSE's corporate governance evaluation, we ranked -- our ranking has improved to top 6% from 20% among listed companies, demonstrating our determination to derisk the lack of oversight. So we definitely continue to improve our governance within the corporation. Our MSCI ESG rating is A, and we're definitely trying to increase that over the next couple of quarters coming up. And a strong commitment for us has turned into the -- having a committed -- recognized by EcoVadis, and EcoVadis is something that a lot of pharma companies, a lot of big pharma companies look at, first and foremost, to decide which CDMOs they would like to use or partners they like to work with. We always focus on operational excellence and sustainability to drive mutual success. Some of our sustainability efforts is to -- we conducted an employee human rights due diligence survey. We have established a Board-level sustainability committee. So we do have a Board-level sustainability committee. We've committed to have achieved net zero by 2050 on the drug sustainability, drug supply side. Obviously, maintaining a high level of regulatory compliance is a must for us. So we continue to do that. Let's focus on the bottom right here, we have 0 recalls and no serious complaints through 2024. For having 10 sites and 0 recalls, that's a very, very high accomplishment for an up-and-coming growing CDMO company on the global stage. Next slide. That's it. Thank you, everybody, for your time. I hope we have a lot of time for some Q&A, and thank you.

[Operator Instructions] We have a question from our covering analysts. First is, how to gauge the potential impact of Trump's policy to cut drug price in the CDMO and Pharma sales business, respectively? Bobby, please?

I think that's definitely a question. First and foremost, I want to say the executive order is an outline for what Trump and the administration likes to do. It's a very tedious process that needs to be executed, and there are definitely a lot of changes that will come our way. But on the CDMO side, we're actually seeing more -- we actually predict more benefits than more negative impact. Our current -- we've actually -- as soon as the executive order came out, we contacted all of our clients. They are very firm on the volumes that they will commit. They are very firm on the pricing that we have with them. So they do not have any concerns as of late. I think, like I said, there's going to be a long process. So we're going to see how that's going to affect. Also, we are hearing that it is only -- they're only focusing on Medicaid and they're focusing on the top 100 products. And so for better or for worse, those top 100 products aren't really in CDMOs. So I think that's one strength. And also, Medicaid is a very small part of the overall drug pricing in the U.S. So we'll see how far that goes as it goes beyond Medicaid. Also, they focus on the drug pricing around the world. And I think a lot of our products that we CDMO are the only manufacturer in the U.S. A lot of our products are OTC products, which means they're not prescription drugs, or over-the-counter drugs. So I will say we have a nice mix of customers that although we definitely will probably see an impact, we don't see anything currently in CDMO. I will give you another position that we are looking at in the CDMO industry. I think CDMO will actually benefit because what this current administration is trying to do is to try to have the -- I think to have the U.S. pharma companies operate more efficiently and effectively. And I think efficiency and effectively is good for the CDMO industry. I think there will be a lot more outsourcing, a lot more discussion of outsourcing products as pharma companies try to maintain their gross margins. And in maintaining gross margins, there's a lot of margins that can be gained by pharma companies by outsourcing some of their products. And I think that will be a positive addition for the CDMO industry. Now as far as our drug products are concerned, we're currently doing an evaluation of the -- if there's any drug impact. The only one we do see is potentially our VIGADRONE, VIGAFYDE within Medicaid, but then again, that is a very, very small portion, and we are currently doing an analysis, if there is any. One thing I will focus on, we are not top 100. We are considered an orphan drug or rare disease. We don't normally see policies with regards to price affect the rare disease and orphan drug space. So we are confident in that. However, we are always, always watching, and we do definitely have some alternatives that we can -- alternative options that we can enact specifically with regards to looking at our supply chain for our product and trying to reduce costs where possible, and there are some of those that are being implemented as we speak. So right now, we are optimistically cautious or cautiously optimistic about the current drug pricing with regards to how it reflects on our CDMO business and how it reflects on our commercial business. One more discussion is on the generic side. As you can see, the executive order for Trump does not talk about generics and does not mention generics. So we want to see how the administration views the generic business because that is normally a low-cost provider. And so it possibly could be out of the current discussions with regards to the current Trump executive order on lowering drug prices.

Thank you, Bobby. We're back with another question here is on our debt ratio. What is the company's plan to lower the debt ratio in 2025?

In 2025, we can see that our earnings from CDMO and commercial business, it will contribute on our cash flow. And the second part is we discontinue the Plymouth’ business, will also contribute TWD 1.6 billion. It can reduce our debt. And the third, we will reduce each subsidiary cash on hand level, but we also can reduce our debt ratio.

Thank you, Alice. Moving on, we have a couple more operational questions to Bobby. First is, for acquisitions, what would be the field the company is looking into at the moment? And does the company intend to continue to conduct any M&A activities in 2025?

Well, yes, I think we're still very bullish about the CDMO industry in general. We think it is a high-growth industry. We think all these actions that are happening within the U.S. and every action Trump is taking is advantageous to Bora, is advantageous to the CDMO industry within the U.S. as there will -- any pressures to -- on pricing, any pressures for gross margins, I think, benefits CDMO because outsourcing of manufacturing and having companies specialize in what they do, whether it be sales and marketing, R&D and manufacturing and the separation of these functions within the company, will definitely make the company more efficient. So I think on an M&A perspective, we see a lot of opportunities within the CDMO space. On the drug product side, I think we have a lot to extrapolate value from. So I'm very bullish on just the current pipeline that we have, although there could be potential opportunities within the product space. But I think given how unstable and unclear the future outlook for drug pricing is, I think we're comfortable with our product line, and we're comfortable with our pipeline. Any acquisition of future products would have to be very, very strategic, would have to be at a very, very low risk for Bora. So I think we'll be opportunistic on those at best. But I would say we're more cautious about any drug product acquisition. We're very excited about potential CDMO acquisitions. And I can never predict the road map, but acquisitions is definitely a part of our growth. We still see our company growing very rapidly in the upcoming years. We are still very short of our target goals of where we need to be globally. And we see the industry growing, and we see our customers continue to come to us with a lot more demand. So I think in the CDMO space, we will continue to grow, and acquisitions will be a very, very strong part of our growth in 2025 and 2026.

Thank you, Bobby. Another operational question, could you help us with more details on the project onboarding cadence for the CDMO side regarding the backlog added in the first quarter, essentially the new site contract in the first quarter.

Sorry, say that again.

Could you detail more on the project onboarding cadence for our CDMO side? Essentially the new projects signed in the first quarter, what is the cadence of onboarding?

Well, I mean some of those projects are development projects, some are commercial projects, right? And so onboarding is very fast. It takes 30 to 60 days to onboard those projects. There's a lot of them. So it's not -- it was easy to describe them when we have 1 or 2 sites. So we have 9 sites, 10 sites across the network. So a lot of customers are being signed, a lot of commercial, a lot of development programs, but they normally take 3 to -- 30 to 60 days to onboard. And the development programs run about 18 months to about 2 years, and the commercial will obviously go on consistently for multiple years.

Please give us a second to go through the ongoing questions. Coming back with another question regarding the discontinued operations. I'm not sure if the market expected significant impact on discontinued operations in the first quarter. Why didn't Bora provide pre-warnings about this? Second one is, is there any significant potential onetime loss in the following quarters?

I think there's multiple reasons why we didn't provide pre-warning. The site closure has its cost, and we need to understand what those costs are as we close them. It would be unfair for us to give any guidance on closure costs, especially with regard that this is just a part of a larger site. So it's not a closure of a business. It's not a closure of a company. It is a closure of certain production lines within a site that we bought, within an acquisition that we bought, right? So we view it as a refinement or making the operation more efficient. And so we will need to have certain parts of that site be closed down, which had onetime on paper financial impact. So we felt that didn't require nor could we have the ability to give that kind of guidance on how much we were writing down. We just got the information recently. I hope the market and the shareholders appreciate how fast we were able to react to the condition. I think that would probably -- I would like -- for us, at least internally, I'm very, very proud of our team and our ability to identify the market difficulties, ability to forecast and look at leading indicators, not lagging indicators, leading indicators and say, hey, going forward, the site cost will increase as we discontinue these products. So the thought process wasn't, here's what we're going to do with the totality, and we already knew it was -- the thought process went from, okay, there's some headwinds in the market. These headwinds in the market deducted from us to say, okay, we need to discontinue 15 products. The discontinuation of these -- an accelerated discontinuation of these 15 products meant that we would need to have -- that we'd have a higher cost in the Plymouth facility. And then -- so we need to move products out of there, which deductive reasoning, okay, then that site -- actually, we had to evaluate the validity of that site by itself very quickly as a CDMO. And like I said, I want to commend our team who worked tirelessly to evaluate these certain conditions and react quickly enough so that the impact would only affect 1 quarter. I would like to focus on the positives of that and that the fact that we're not able to have -- give any indication or any sort of alert to the investors or the market of what that dollar amount is, I think that would be a little irresponsible to throw a number out there. These are the numbers that we've gotten most recently. And I will stress again from a process standpoint and from a legal process standpoint, we're not closing a company. We are not closing a full operation. It was part of an operation with some production lines. Although it was in a different facility, the closure of that facility was in due course of the normal evaluation of the business post acquisition. And once again, I want to also highlight focusing on the positives, this will result and has resulted already in higher gross margins and higher net profits for the company.

Thank you, Bobby. This marks the end of the earnings call today. Bobby, would you like to close the call?

Yes. I would like to thank all the investors for listening on this call. As you know, I'm sure everybody is very concerned about the current Trump administration and what all its policies and all its announcements affect our industry. I will -- I can only say that we are on top of everything every day. You have a strong leadership team here that is invested in the future and the future benefits and the future success of Bora. So I think the leadership team has reacted very, very strongly in a very positive manner to ensure the future profits and the future growth and the future potential of Bora. But I also really want to thank all the investors for your patience, investors for understanding the current market conditions and what the leadership team here is doing on a 24-hour basis to ensure the success of Bora in the future. Thank you, everybody.

Thank you for joining us today. Wish you have a good day or evening. Bye-bye.