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

Welcome, everyone. Thank you for standing by for Bora Pharmaceuticals Second Quarter 2026 Earnings Conference Call. Today, we have Bora Pharmaceuticals Group CEO and Chairman, Bobby Sheng; CFO, Alice Wang 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 the IFRS to non-IFRS measures are included in today's presentation, which is distributed and available to the public through our website. We will now begin our conference call. Bobby, the floor is yours.

Okay. Thank you, everybody, and thank you, all the shareholders and investors for coming on this call, and I will be doing the summary of the 2026 Q2 earnings this year. I think Nadiya went over some the disclaimers here, so we'll move past this slide. So Bora by the numbers, our market cap is USD 1.7 billion. We're the #1 pharma manufacturer in Taiwan. We have now currently 11 manufacturing sites. Now we have over 2,240 employees worldwide, and we export to over 100 countries. You can see on our footprint map here, our footprint in the United States is increasing, especially with the recent acquisition of the Rockville, Maryland biologics facility. So our footprint in the United States is getting bigger and the names of all the facility locations here are on the left. Now I'll go to the summary of our [ 2026 ] second quarter milestones, some key achievements and some financials. After some pullback in quarter 1, as we expected due to a scheduled site shutdown for maintenance and some supply chain issues, we have come back strong in the second quarter of 2026 for double-digit to triple-digit growth quarter-over-quarter on all our key metrics. So summaries here on the demand-driven recovery. Revenues were at TWD 5.889 billion, a growth of 47% quarter-over-quarter. Gross profits are at TWD 2.4 billion, a 69% quarter-over-quarter gross profit. And we have an EPS of TWD 4.36, which is a quarter-over-quarter growth of 1,786%. Net income pretax of TWD 812 million, which is a 269% quarter-over-quarter growth, some really strong numbers back to strong growth for us as a company in the quarter 2. Some highlights on the CDMO business. Obviously, the Maryland injectable facility is back to a full quarter of operations. And also, we see a lot of record highs in our demand and RFPs that has resulted in quarterly revenue for CDMO business of TWD 2.116 billion and a growth of 40% quarter-over-quarter. Pharma sales business that we see strong growth in that business as well, especially the Specialty Pharma and a quarterly revenue of TWD 2.934 billion, a growth of 30.4%, once again, led by our specialty rare disease franchise market. We also see strong visibility in the second half of 2026, a record high in our 12-month rolling backlog of USD 317 million and a record high of newly signed contracts in the number of USD 378 million. So a really, really strong quarter for us, also showing strong visibility into 2026 second half as well as future 2027. Some operational milestones in second quarter 2026. We signed a top 20 pharma company for a 10-year plus 2-year commercial contract. The tech transfer has started. I want to highlight that is for the Maple Grove facility. The Maple Grove facility is one of the largest Oral Solid Dose and one of the newest Oral Solid Dose facilities in the United States. We're seeing a record demand in contracts for that site, and it took a while, and I think we gave some indication for that last year that it will take a while for us to sign these larger pharma companies. But it is coming to fruition, commercial contribution should be seen in the third quarter of '27, but we are starting tech transfers into that facility in the second half of 2026. So exciting news there. And of course, because of that, we will still continue to make strong CapEx investments to increase the capacity of that facility. Our Maryland injectable site, the clients are transferring over to the FlexPro isolator line. That site actually has a lot of older technologies that we've installed and transferred into newer technologies into isolator lines. We did that in the -- all of 2025. We are seeing our first client transfer into the FlexPro line, which is a higher quality, higher efficacy and a better cost for us as well. So we're excited about that, and we expect a lot more clients to transfer into the FlexPro facility, which will also give us increased compliance with the FDA -- U.S. FDA and other regulatory bodies around the world. On the rare disease specialty pharma franchise, especially the VIGAFYDE franchise, we see increased demand and solid demand for that franchise as well, 58% specifically for the specialty quarter-over-quarter growth, and we're on track to achieve over 50% formulary coverage, which was our target with more regional plans and strong physician adoption. We renegotiated some terms with value chain -- supply chain partners because of our growth, we've been able to have strong positions with our supply chain partners, and we renegotiated some contracts to increase our gross margins. And we've also -- in an effort to focus our efforts into our specialty rare disease, we've also out-licensed some of our other 505(b)(2)s that we didn't feel were core to the specialty franchise, one of them being Stiripentol to one of our strategic partners, and we see some growth in that in the 2027, '28 for that product with our partner, of course. We also see a demand-driven growth for our pharma sales, which is primarily our generics as well as a new introduction into some of our reporting for our quarter is the consumer health contribution led by our investment into Sunway Biotech, and so we'll talk a little bit more about that. But Sunway Biotech, we've increased our investment into that consumer health company from 30-some percent to 40-some percent. Subsequently, they've acquired a nutritional company, a global company called Weider Global Nutrition. Some of you may know it. It's a very, very well-known brand in the United States as well as in Europe for sports nutrition and global health. That is starting to see some great synergies. That Sunway Biotech acquired them in May of 2026. So we're seeing some contribution there, and that's definitely a strong foundation for growth, and we're really looking forward to increased contribution from that company and from our investment into that company in the near future. Some details into our income statement for second quarter. Once again, highlighting our back to profitable growth trajectory. Revenues are TWD 5.8 billion versus TWD 4.0 billion quarter-over-quarter. Gross profits increased 69% from TWD 1.4 billion to TWD 2.4 billion. Operating profits have almost doubled from TWD 400 million to TWD 986 million. And our net income is highlighted here at the bottom from 2026 quarter 1, TWD 32 million, all the way now up to TWD 597 million in net profits for second quarter. And finally showing the EPS of TWD 4.36 versus TWD 0.21 in the second quarter. On the right, I will show you a waterfall of some of the things that have happened over -- from quarter 1 into quarter 2 to give some further detailed explanation of the growth. CDMO, obviously, with the full quarter of operations for the Maryland facility and some increase in demand, obviously, from the onshoring and a lot of other activities, which I will talk about. We see a big jump back from the quarter 1 numbers. Obviously generics, a good bounce back from there, but really highlighted by our specialty and brand jump up from the first quarter of 2026. And then obviously, with the Sunway acquisition of Weider, there is a strong contribution from them as well. But as you can see, the growth in the second quarter is stable growth and it's continual growth for our operations, and we look forward to more contributions and more growth in [ 2026 ] for second -- third quarter and fourth quarter. We want to do also a year-over-year just to show that we are back into our growth mode compared even to last year. I won't focus on the numbers on the left. I'll just focus on some of the numbers on the right here. Revenues year-over-year for the second quarter is increased by 21% from TWD 4.8 billion to TWD 5.8 billion. Our gross profits have increased 20% from TWD 2 billion to TWD 2.4 billion, and our net income before tax has increased 46% year-over-year of roughly TWD 4.8 billion to TWD 6 billion. And then our net income from continued operations -- sorry, the previous number was from TWD 550 million to TWD 813 million net income before tax. And then now also the final net income from continued operations at TWD 448 million all the way up to now TWD 600 million in 2026. So we not only show quarter-over-quarter growth, we are back to also showing year-over-year growth as well. Also have another nice balance of our revenue mix. Our CDMO revenue represents 36% of our revenues increased again quarter-over-quarter and year-over-year. Our pharma sales represents 50%. We also did some product rationalization last year as well. So top line revenues year-over-year are a little bit off, but quarter-over-quarter, of course, that we've shown before, 30% quarter-over-quarter. And then also a more prominent position of specialty within the pharma sales division here. And finally, also because of our increased investment in Sunway and their acquisition of Weider, they've really jumped in their revenue representation within the Bora Group and now represent about 14% of our total top line revenues. And so we want to highlight them and give you -- give the investors an understanding of the products and the revenue mix within Bora Group. We've also been able to maintain a strong net debt-to-equity ratio while increasing our cash position now that this is primarily for the acquisition of the Rockville facility. So you see a big jump in cash there. We also continue to be diligent in our cash flow management to continue to decrease our net working capital over revenue usage as well. A few some highlights into our CDMO business in Q2. Once again, I will say we have a record high of backlog of USD 317 million. That's really roughly 90% of our last year's revenue. So definitely strong growth there in our backlog or orders on hand and also a record high of new business in the first half of 2026, in the sum of USD 378 million. We also see a record high in new molecules signed, 14 new molecules signed for our business, and they're all development stage, commercial stage. And as you know, as you can see with our Mississauga facility, with our Zhunan facilities and our mature facilities, these new molecules being signed eventually turn into commercial revenue for the sites. So we're really excited about these new molecules being signed. We see an increased prioritization of supply chain security and U.S. onshoring demand. As you can see now, we have 4 sites within the United States, 5 sites in North America, including our Canadian facility. We are seeing a huge, huge uptick in demand for onshoring, reshoring back into the United States and really having a huge advantage with our large U.S. footprint. And then finally, I will highlight the top 20 big pharma 10-year multidrug contract within our Maple Grove facility and starting Phase I product transfer in the second quarter of this year. We've also highlighted that to become a full-service CDMO facility and a top 10 CDMO facility worldwide. We definitely need to have a larger presence in biologics. We were able to do that. We announced an acquisition of MacroGenics biologic facility in Rockville, Maryland to give you some more highlights here as we've integrated them in parts of Q3, but we want to give you a highlight. And it's a 12,000 liter 5x 2,000 and 4x 500 liter FDA facility with 3 already commercial products being produced from that Rockville facility and revenue recognition will be starting in Q3 of this year. We've confirmed already in 2026 -- back half of 2026 to have 13 batches already committed, which is actually moderately ahead of the 2025 run rate. So definitely positive momentum and positive uptake. On the right here, I will show you that we already see about $60 million of 12-month rolling backlog for the site, which brings in a significant near-term commercial value and top line revenue contribution into our Bora Group. Finally, we expect higher value opportunities and I explained this in our last quarter that we expect a lot of synergies with Tanvex BioPharma, which is our San Diego facility as well as our Zhubei facility in Taiwan as well as finally, our Maryland injectable facility to offer a real end-to-end biologic solution all the way from cell line development to product -- drug substance and then drug product for the injectable facilities. Some outlook for the second half. Obviously, we see record backlog. One highlight is our Zhongli facility in Taiwan is starting to produce for a market in China and starting to expand in the China market as well. So that's -- as we expand our Asia CDMO footprint, that's a real highlight, and we expect high contributions from the China market in our Zhongli facility in Taiwan. Our back end has intensified our marketing efforts. So our marketing efforts to really lean in on the tailwinds for the U.S. CDMO demand when we see a record high demand for that. Also, our Rockville facility once again, will be contributing revenues in Q3, and we see that continuing forward in the second half of '26 and also into 2027. We're continuing to invest in the future. Once again, our Maple Grove facility looks really, really strong. We expect that to have a more kind of presence in our CDMO contribution for the whole group. And then also the Maryland facility, I want to address here is that we started to address a lot of the FDA issues from one of our inspections in Q2. And so the FDA inspection showed some, obviously, things we needed to improve on. And obviously, they wanted us to get into the isolator lines, which we are doing with our customers in Q3 and Q4. So we see that being addressed in a timely matter. And also, we see -- even though we are dealing with some of these adjustments, we see the same time production and batch releases for the remainder of '26. So we don't see a lot of disruption in batch release and production for the remainder of '26, and we also see volumes increasing in 2027 as well. On the right here, we'll also highlight that our qualified leads. We already see 400 marketing qualified leads, which really has matched our full year of qualified leads in 2025. So really 60-plus percent of inbound searches with -- and also Bora branded searches, surging 3x above our expectations as well. Bora Biologics, we see synergies there from Tanvex, and we see a strong uptick. Really the commercial capabilities of our Rockville facility now is also generating more demand from our other facilities in San Diego and Zhubei. Some of it into our pharma sales business, obviously led by the brand name of Upsher-Smith Group. We continue to see an increase in our highly focused franchise into the specialty pharma side of the business. What I want to highlight here is you can see our year-over-year values in pharma sales have increased up to [indiscernible]. We did some product rationalization through '24 and '25. But I really, really want to highlight, this is the first quarter in the first half of the year where our specialty rare disease business has increased and is now over 50% of our total pharma sales business. That was a strategic initiative for us starting in 2023. So we went from 2.9% in 2023 to 26.9% in 2024, 42% in 2025 and now for the first half of '26, specialty and rare disease represents 54.2%. Why do we do that? I want to highlight again, larger gross margins, more stability increase in demand, also patent-protected pricing and really a very different financial profile for these drugs to have. So we definitely -- our investment into specialty pharma, as you can see by our top line, by our gross margins and by our net income has paid off dividends for us and will continue to do so in the future as well. I also want to highlight here that -- we've increase -- due to increase in demand from government channels from our DLS and our other high-value generics, so we definitely see a stabilization to small growth in that generics division. A little bit more detail into our specialty business. It's really firing on all cylinders, like I said, we've had -- our revenues have grown 58.7% quarter-over-quarter and 47% over our 2025 numbers for the quarter. Obviously, it's highlighted by VIGAFYDE, but there are 6 other products within the Specialty Branded division that are all growing -- that are all contributing to the revenue growth and the quarter-over-quarter growth for the year -- for the quarter and for the year-over-year. We're expected to unlock up to 60%, so we focusing on vigabatrin franchise here. We're now hitting about 60% of the SABRIL peaks, SABRIL, which is the original branded drug that we've reformulated into the 505(b)(2) for VIGAFYDE. And so we definitely see some growth there as well. We also see unique patients dispensed quarter-over-quarter for second consecutive quarters in a row. So new patients coming into using VIGAFYDE. We've seen them increase quarter-over-quarter for 7 quarters in a row. Finally, we've out-licensed Stiripentol to refocus our attention into the franchises that we've been investing in. For our generics, as you can see, our high-value generics are increasing, once again, focusing on our high-value, high gross profit gross margin products. We have 6 new launches in those categories, supporting more diverse generic portfolio. And we expect pending approvals, we expect 6 more for the second half of '26 and into -- all the way up to 2030 launches. For this quarter, I'll be talking more about our Consumer Healthcare business through our investment into Sunway Biotech. We've increased our investment into Sunway Biotech from 35.97% to 42% because of Sunway's acquisition into Weider Global Nutrition, they did a fundraising, and we've increased our position into Sunway. We're really pleased with the management team there, and we're really pleased with their acquisition similar to what Bora has done in their previous growth into acquiring a global brand, becoming a global powerhouse now in Consumer Healthcare. Some highlights here. Their core business is ingredients and seasonal sales. We've seen a 7% -- now that represents roughly about 7% of their total revenues. But quarter-over-quarter, we've seen a grow 40%. So obviously, dominated by the red yeast rice demand in Europe and now with the U.S. market with through Weider Global Nutrition. Brands now with Weider represent 70% -- 73% of the total revenues for Sunway. So as you can see, it is a monumental transformational acquisition for Sunway Biotech, and we see them really growing that division. And finally, for the domestic market, it represents 20% now, but we still see domestic market meaning domestic in Taiwan. That legacy business still has growth of 14%, representing about 20% of Sunway. For the second half of '26, we see Weider Global Nutrition, which is WGN. We expect them to start improving on their synergies and deliver meaningful revenues, profits and realize synergies into the second quarter -- second half, sorry, of 2026. A little bit into our Bora AIM, which is our AI Manufacturing platform that we did an announcement with Insilico, a JV with Insilico and some information on our sustainability profiles. So we continue to maintain our sustainability rankings. EcoVadis, we are at a committed level. Our FTSE is at 3.8% -- 3.8 out of 5. And our Taiwan Stock Exchange, we are in the 60 to 20th percentile of the Taiwan Stock Exchange for sustainability rankings. In quarter 2, we're excited to introduce Bora AIM, and this is our own internal developments, but also an announcement with one of the global leading AI drug development companies, drug discovery companies Insilico. So we're really happy to accelerate in our Bora AIM platform. We want to give you more announcements in the future. We do believe that this will be a huge competitive advantage for Bora going into next year. Some highlights though, I want to update you on. We have a beta version testing going live in the next 6 months for our CDMO business. Some highlights of what the beta testing will do, instead of reacting to failures in manufacturing, we're proactively identifying failure points before they occur that will save batches, saving tens of millions of dollars potentially in the future. We're going to beta test AI to reduce deviations. Deviations are very, very time constraining and very difficult to deal with. They take about 30 to 45 days once the deviation comes up in manufacturing. And then we have to produce CAPAs, which are corrective actions and preventive actions for those deviations. We see AI really advancing us going from 30 to 45 days of an investigation to now about 3 to 7 days. Finally, CMC documentation is really cumbersome in regulatory and really cumbersome to -- for admissions and approval times. We want to reduce 50% of the CMC documentation, obviously, which will increase the time to market for these drugs once they're after getting out of Phase III. We do see roughly about TWD 180 million opportunity here, obviously, some highlights here. According to McKinsey, 3x of leading pharmaceutical companies now file for submission. They want to do 3x faster according to Bora partners, the pharma sponsors now explicitly request digital capabilities from CDMO partners during contract negotiations. That's literally almost all of our partners are asking for now. So 92%, it's roughly 100%. Filings, we do see through AI, 8 to 12-week earlier after database block can generate about 180% -- TWD 180 million in net present value for some of these assets. And we definitely see Bora AIM or Bora now aims to become one of the forward-looking CDMOs capturing big pharma demand. And finally, to give you a strong look into 2026 second half, we definitely are bullish and we see continued momentum from our Q3 numbers. We see continued demand for our CDMO, continuing demand for the onshoring and demand for our U.S. facilities and site utilization is increasing, which will also increase our gross margin profiles. On the specialty pharma, we see continued growth -- double-digit growth in that as well, also stability in our generics platform over there. And also because of our investment in our acquisition of the Rockville facility, we see an increase in biologics impact and with -- starting with revenue contribution, but also gross margin increase and net income increase with the value synergies that we'll have with Tanvex and the rest of the group. And finally, Sunway Biotech's Consumer Healthcare business will continue to realize synergies from the Weider acquisition as it establishes a global presence in the consumer health care space. So overall, we are very positive from our Q2 earnings that we are positive that they will continue to bring strong growth momentum into Q3 and Q4 for the year. And thank you, [indiscernible]. That's the summary of our Q2 earnings for this year.

[Operator Instructions] We now have the first question on the acquisition of the Rockville facility. Bobby, if you could just paint a bit more color on its pipeline and where the synergies will come from? Do you expect it to benefit from Incyte's commercial products? Or how are the signings looking like at the moment?

Apologies. I don't see the Q&A questions come up on my right. But okay, can you restate the question again, Nadiya?