Cosmo Pharmaceuticals N.V. ($COPN)

Ladies and gentlemen, welcome to the Full Year 2025 Results Conference Call and Live Webcast. I'm Mara, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Giovanni Di Napoli, CEO. Please go ahead, sir.

Good morning, good afternoon, and welcome, everyone. I'm Giovanni Di Napoli, CEO of Cosmo, and I'm joined today by our CFO, Svetlana Sigalova. Thank you for being with us for 2025 full year results. We walk you through our performance, our progress on strategic priorities and the path ahead. A quick note on forward-looking statements. 2025 was not a year of noise. It was a year of execution. Today, I want to walk you through 3 very clear messages. First, structural transformation has been delivered. Over the past year, we fundamentally reshaped Cosmo. We simplified, we focused, we aligned the organization around scalable platforms rather than isolated assets. What you're seeing today is not incremental improvement. It is a different operating model, leaner, more disciplined and built for leverage. Second, financial discipline and recurring revenue. We have moved from opportunistic revenue to structured, repeatable revenue streams. Recurring components are increasing. Cost control is embedded in the culture of Cosmo. Capital allocation is deliberate. We are building predictability into the model and predictability drives valuation. Third, 2026 catalyst and operating leverage. The work done in 2025 creates torque. The platforms we built now begin to scale. The operating structure we put in place starts to amplify growth. 2026 is not about rebuilding, it's going to be about compounding. So as we go through the results today, I want you to keep one lens in mind. This is a company that has completed a decisive structural evolution. We are now entering a phase of acceleration. Let's start with structural transformation. Before we go into the numbers, let me start with something more fundamental. Cosmo's mission is simple. We are building health confidence. Health confidence for patients, for physicians, for our partners and ultimately for our shareholders. This is not marketing language. It is how we design the company. In 2025, we translated that mission into 3 clear pillars: First, a recurring revenue model that brings visibility and predictability to the business. Second, an AI-enabled MedTech platform that is expanding across procedures and abandoning technology directly into clinical workflow. And third, a late-stage dermatology catalyst with positive Phase III results in androgenetic alopecia and 12-month safety data expected this spring 2026. Together, these elements combine durable recurring revenue, scalable technology and pipeline value. This is how we're building health confidence. What you see here is the architecture of Cosmo. This is not a single asset company. It is a recurring growth platform with catalysts. At the core is our recurring revenue engine, shifting the company from episodic growth to predictable growth. On top of that fits AI-driven operating leverage. Our installed base continues to expand and software applications layers on top of hardware. Hardware distributes software compounds. We then add pipeline catalysts, starting with Clascoterone, a late-stage dermatology asset with multiple partnering pathways. And finally, a strong balance sheet give us flexibility to invest, partner and scale the platform. So when you step back, the model here is simple. Recurring growth is the foundation. Catalysts are the multiplier. Let me now show you how that model translated into financial performance in 2025. Revenue reached EUR 104.2 million with approximately 85% now coming from recurring revenue. Recurring revenue grew 15% year-over-year, which was our commitment for double-digit growth, driven by strong GI Genius performance and solid contribution from Winlevi. EBITDA reached EUR 9.5 billion, reflecting operating discipline while continuing to invest in growth. And we closed the year with EUR 128.3 million in cash with 0 debt and the dividend maintained. So the message is clear. We delivered on guidance and above guidance. We did what we said. We improved the quality and predictability of our revenue base. We maintained financial discipline while investing in growth, and we preserve a strong balance sheet. This combination position Cosmo for sustained value creation. This is not a 1-year performance story. This is a compounding model taking shape. Now let me give you an update on our clinical and R&D pipeline. Our pipeline is focus is disciplined and aligned with areas where we see meaningful commercial opportunity. Let's start with Clascoterone 5% topical solution for main hair loss. We reported positive Phase III top line results last December 2025 with 12-month data safety and tolerability expected in spring 2026. This disease is a large global market opportunity with limited innovation. Patients are actively looking for new options and physicians want effective therapies with a strong safety profile. Well, Clascoterone has the potential to become the first new topical mechanism of action in this space in years. Given the strength of the data and the size of the market, we are seeing strong external interest and are actively evaluating strategic options to maximize shareholder value. I will come back to this later in the presentation. Moving to Ulcerative Colitis. Enrollment is progressing well with more than 50% of patients already in. We expect to complete dosing in by the end of this calendar year. Next, by Bile Acid Diarrhea. We currently have 19 active sites across the U.K. and Europe and expect to complete also the study and enrollment by the end of 2026. Just as a reminder, Bile Acid Diarrhea is a significantly underdiagnosed and underserved market, representing a very attractive opportunity for Cosmo in Specialty GI, aligned with our portfolio and gastroenterology focus. Finally, CB-03-10 in solid tumors. Dose escalation has been completed with no safety signals observed and we are planning to have a publication on this study in Q2 2026. Following that publication, we plan to initiate partnering discussions in order to be able to out-license this assets. This also was announced last year, and that's the plan moving forward. So if you step back, the structure is clear, a late-stage dermatology opportunity with near-term catalysts, mid-stage GI programs progressing on schedule, and a capital-efficient oncology strategy with clear partnering intent. This pipeline complements our recording commercial platform and adds additional value catalysts through 2026. Let me now move to MedTech AI, CDMO Gastro and a quick update on ESG starting with MedTech AI. We achieved EU MDR certification, reinforcing the durability of our platform in Europe. At the same time, we continue expanding the capabilities of the platform. Colon Pro integrates real-time detection, sizing, characterization and quality assessment, while the new application Cerebro brings AI guidance into upper GI procedure. We're moving from simple detection colonoscopy towards full workflow intelligence in GI. On the Apple Vision Pro, we completed the first feasibility study combining VisionPro with GI Genius treating 16 patients. The study was positive. A second study will begin in the second half of the year as we continue exploring how spatial computing can enhance procedure visualization and interaction with our customers. Moving to the Derma and Gastro. Winlevi received the EMA approval last fall 2025, with first European launches expected in this first part of the year in 2026. We also expanded approvals and commercialization across multiple international markets, strengthening our global dermatology footprint. In CDMO, we signed a multi-year manufacturing and supply agreement to Takeda for Mesalazine, adding long-term visibility and reinforcing our recurring revenue base. Finally, on ESG our scores improved across S&P, Morningstar and MSCI, with MSCI upgrading us to A rating. So the message here, again, is simple. We are scaling AI. We are expanding globally, and we are strengthening recurring revenues, and we continue to execute with discipline. Now let me hand over to our CFO, Svetlana Sigalova, who will present our 2025 financial results.

Thank you, Gio, and good morning, everyone. I will begin with a review of our 2025 financial results and performance drivers and then turn to our 2026 financial framework and outlook. Here, I will not repeat the full summary as Gio has already covered the key highlights, but I would like to underscore 2 points. First, our EBITDA performance exceeding the upper end of our guidance. That reflects operating discipline and the scalability of our recurring revenue model. Second, our balance sheet strength that preserves full strategic flexibility as we continue to invest in growth. I am particularly proud of the execution across the organization, delivering the current growth, maintaining cost discipline and strengthening profitability in a structural transition in year. With that, let me walk you through the financial details. Looking at the revenue composition, recurring revenues reached EUR 88.1 million, up 15% from 2024, consistent with a double-digit growth commitment we made at the start of the year. Project-based revenues were EUR 16.1 million. As a reminder, 2024 included EUR 186.3 million in Medtronic milestones. The revenue base is now significantly more predictable and commercially driven. This enhances visibility into 2026 and beyond. Now let me break down the drivers of our recurring revenue growth starting with GI Genius. Revenues reached EUR 17.9 million, representing 211% growth versus prior year. The triple-digit growth is exactly what we committed to at the beginning of 2025 and we delivered on that commitment. This reflects expanded installations, increase in adoption and continued collaboration with our partner, Medtronic. The growth rate here demonstrate the scalability of our platform as penetration increases. Moving to Winlevi. Revenues were EUR 17.2 million, up 27% year-over-year. Again, the double-digit growth is what we committed to at the beginning of 2025. This reflects growing physician adoption, improved market access and geographic expansion. Winlevi continues to establish itself as a differentiated product in its category. The remainder recurring revenues, approximately EUR 53 million comes from our legacy gastro product and CDMO. Within that, EUR 27.9 million from Mesalamine, EUR 15.6 million from CDMO and EUR 9.7 million from all other gastroenterology products. Our diversified base provides stability while growth asset scale, recurring revenue growth is driven by commercial assets with operating leverage, supporting continued expansion into 2026 and beyond. Let me walk you through the P&L with focus on cost discipline and profitability. As discussed, total revenues were EUR 104.2 million. Other income was EUR 7.2 million and includes certain nonrecurring items that we do not expect to repeat at the same level in 2026. On the cost side. Cost of sales increased to EUR 53.6 million. The increase versus prior year primarily reflects higher commercial volumes and product mix effects and recurring revenues expanded. Turning to operating expenses. Research and development expenses were EUR 34.2 million and decreased 14% versus prior year. This reflects focused execution across the pipeline, prioritization of key programs and disciplined external spend management, while continuing to advance our strategic assets. Selling, general and administrative expenses were EUR 26.8 million and decreased 26% year-over-year. This reduction was driven by operational focus and lower personnel-related costs as we align the cost base with the current structure of the business. Overall, operating expenses decreased 6% year-over-year. Recurring revenue growth combined with disciplined cost management, delivered EUR 9.5 million in EBITDA, exceeding the upper end of our guidance. This performance reflects operational execution. We will continue to actively monitor our cost base, pursue operational efficiencies and allocate capital to the highest return opportunities. The outcome is a more efficient operating model and improved profitability as we enter 2026. Let me now turn to 2026 guidance and the trajectory of Cosmo. On recurring revenues. For 2026, we guide to EUR 98 million to EUR 102 million, representing 11% to 16% growth and the 2024 to 2026 CAGR of approximately 13% to 15%. This reflects continued expansion of GI Genius and Winlevi supported by the stability of our gastro and CDMO base. On profitability. For 2026, we guide to EUR 10.5 million to EUR 13.5 million, representing 10% to 42% growth year-over-year. As a recurring revenue scale, operating leverage becomes more visible. The structural shift towards predictable commercial revenue supports our sustained EBITDA expansion. As we enter 2026, the business model has become an increasingly recurring, scalable and profitable. Let me summarize the 2026 financial framework. We guide to total revenues of EUR 105 million to EUR 110 million, of which EUR 98 million to EUR 102 million are recurring and project-based revenues are expected to be modest at EUR 7 million to EUR 8 million. Importantly, this guidance excludes any potential revenue from pipeline to development stage assets. Turning to R&D. For 2026, we expect research and development investments of EUR 25 million to EUR 30 million. This represents a disciplined and focused investment level aligned with key value-driving programs including Phase III and regulatory work in androgenetic alopecia, 2 Phase II gastro trials and continued MedTech AI expansion. We are investing where returns are highest while maintaining overall cost discipline. On profitability, 2026 EBITDA of EUR 10.5 million to EUR 13.5 million is driven by recurring revenue growth and operating leverage, combined with continued cost focus. And importantly, we expect to exit 2026 with approximately EUR 200 million in cash and investments with no debt. This strong balance sheet provides strategic flexibility to fund internal programs, evaluate partnering opportunities and maintain resilience. So the framework for 2026 is clear. Double-digit recurring revenue growth disciplined R&D investment, expanding EBITDA, strong year-end cash position, where scaling the business while preserving financial strength. Cosmo today is a recurring revenue business with expanding margins and a strong balance sheet. This financial structure gives us flexibility to invest in high-return opportunities, advance our late-stage pipeline, scale our AI platform and return capital to shareholders. Against that backdrop, the Board is proposing a dividend of EUR 2.10 per share. This increase reflects continued confidence in the strength of business and our disciplined capital allocation framework. We remain focused on investing in our growth opportunities while maintaining a consistent approach to shareholder returns. Subject to AGM approval, payment is expected on May 11, 2026. Let me close with our capital allocation framework. Our priorities remain clear and disciplined. Every year, we allocate across strategic research and development, partnership and licensing and organic business needs is focused on expanding our recurring revenue base and driving long-term profitability. In research and development, we invest in programs with clear value creation potential. In partnerships and licensing will pursue opportunities that accelerate growth while maintaining financial discipline. And in the core business, we continue to scale our platforms efficiently. At the same time, returns to shareholders remain a priority. The proposed dividend reflects confidence in the strength and stability of our business while continuing to invest for growth. With that, I will pass it back to Gio for closing remarks.

Thank you, Svetlana, for walking us through our 2025 financial performance. Numbers reflect discipline focus and strong execution across the organization. That's clear. Let me now turn to 2026. As we look ahead, we see a year defined by clear catalysts and increasing operating leverage. The foundation has been built. The revenue mix has improved. The balance sheet is strong. Now the focus shift is acceleration. The next few slides, I will outline the key value inflection points ahead of us and how the platform we have constructed that translates into scalable growth, margin expansion and strategic optionality. 2026 is about converting structure into momentum. Let me spend a moment on Clascoterone 5% topical solution. Male androgenetic alopecia is a large, medically driven and underserved market. In the U.S. alone, approximately 65 million are impacted. This represents a market opportunity of roughly $20 billion with premium pricing potential that we tested to a very important market research last year. Importantly, there are limited differentiated FDA-approved therapies. Patients are willing to pay. Persistence rates create a recurring revenue dynamics here. So Clascoterone 5% topical solution introduced a new mechanism of action in a market that has seen very little real innovation over the last 30 years. As you all know, we have already delivered positive Phase III top line data. 12-month safety and tolerability data are expected in the next few months, spring 2026. Even the strength of the asset and the data set and the size of the opportunity, we are actively engaged in discussion with multiple leading global pharmaceutical companies. Now I will not comment on timing or structure today. But what I will say is this, an asset of this size at this stage, with this level of external interest has the potential to be value defining for customer. Our focus is simple: maximize long-term shareholder value, structure the right partnership, execute with discipline. This is a significant opportunity for Cosmo. Let me take a moment to frame now the MedTech AI franchise and business. And what does it mean for Cosmo? AI, artificial intelligence is rapidly becoming a foundational technology also in health care, not only in consumer. By 2030, the addressable market for MedTech AI is expected to reach approximately EUR 152 billion, growing at close to 40% annually. For us, this is not a distant opportunity. AI is already embedded in our GI Genius platform today. What we are doing now is expanding that foundation into new clinical applications, new procedures and new software layers. Our goal is simple. We want to build a scalable AI platform that sits directly inside the clinical workflow. So what you see here is the scale of the installed base. GI Genius is already deployed across the globe you can see here, U.S. and Europe and that installed base is the foundation of our strategy. So once the platform is in place, we can begin layering software application on top of it. Colon Pro for colorectal cancer screening, U.S. for pancreatic cancer detection, Barret's Esophagus detection, we just recently made an announcement and with a very important partnership with Amsterdam Medical Center on that topic. Esophageal symptoms analysis and emerging applications such as patient computing with the Apple VisionPro. This is how the model works. Hardware clear distributions, software creates scalability and recurring revenue compounds over time. What makes this model powerful is that it is repeatable. At the center is our installed base and the clinical data that it generates everyday real clinical practice. Around that foundation, we have built the infrastructure required to scale AI in medicine. So we have AI engineering and in-house development capabilities, regulatory and clinical infrastructure, strategic partnership and cloud capabilities, NVIDIA, Apple and the ability to deliver end-to-end solutions directly into the clinical workflow. This combination I promise is very rare. Many companies developed algorithms. Very few have the platform required to deploy AI at scale inside real medical procedures. Each new application strengths the platform, expand procedure reach and increase the value of our installed base. And importantly, the capabilities we have built in Cosmo allow us to extend this platform across additional procedures, additional specialties and clinical workflow over time. This is how we believe we can scale MedTech AI. And that is why we believe Cosmo is uniquely positioned to lead the next phase of AI adoption in the real clinical markets. All of this leads directly into 2026. Our focus for the year is very clear. First, continued scaling recurring revenue and AI software across our installed base. Second, advanced Clascoterone 5% topical solution to our regulatory and partnering milestone, unlocking the value of a large stage dermatology asset; and third, expand operating leverage as revenue grows across the platform. The combination of recurring revenues, AI software expansion and pipeline catalysts position Cosmo for meaningful value creation. Since the closing slide, based on everything we have discussed today, the message is clear. Clascoterone further on with strong Phase III data and active strategic discussion, an AI platform that is scaling and laying software onto hardware, a pipeline advancing with defined milestone and part intent, a recurring revenue base now driving the majority of our business. Cosmo is set up for value creation. 2026 is not a planning year. It is a year of actions. It is a year of results. We have capital, we have catalysts, we have operating leverage, execution now will drive the outcome. Thank you so much. And I'll open up now for Q&A.

[Operator Instructions] The first question comes from the line of Bob Pooler from ValuationLab.

First of all, congratulations on the strong 2025 results and also your double-digit growth outlook for this year. If I may, first, a couple of questions on the products and then maybe on the operating and the financials. Just on GI Genius, we really see that the platform is now taking off. Where is this growth coming from? Is it more the U.S. or Europe? And also, you announced a collaboration last week, the R&D collaboration in the Netherlands. When do you expect also revenues coming from upper GI indications?

Bob, thank you so much for the question, Gio here. So the growth we have seen for GI Genius is coming both from the U.S. and Europe as well. Clearly, the U.S. market is larger by definition. So even a small percentage of increase means a lot in terms of volume, but both regions are demonstrating strong contribution in terms of further adoption. And in terms of upper GI, so we are actively working on the software part of the upper GI with Amsterdam and we have planned to release that part of the software base also regulatory approval in the U.S. end of next year. So just remember, also we have an application in upper GI that is called Cerebro that is going to be launched this year in June, July in Europe as this already have received the CE mark approval late last year. And also on top of this, we are integrating GI Genius with the electronic medical record in the U.S. And we're going to launch this application this year in the summer in the U.S., which is going to be a very important part of the growth that I was sharing during the presentation.

Okay. Then just on Winlevi, when do you expect significant revenue contributions coming from Europe?

Yes. So Europe, we're going to launch -- we are the first markets to get up and running before the summer. We have seen a lot of prework done by our partners, Glenmark and InfectoPharm. We are very pleased with the success of the drug also in the U.K., which we launched last year. And we expect to see strong supply requirement from Glenmark and InfectoPharm this year. So it's going to be a steady growth over the next foreseeable future for that platform for us in Europe as well.

Maybe just to add up, Bob, we will see the first revenues from Winlevi Europe on the supply side when we report the first half results in July.

Okay. Just on Breezula then, just to clarify, you expect the results of the next few months, I believe, is that what you said?

Yes. As we announced early in September and also today during the call, spring 2026, so we're talking about the next 2, 3 months. We're going to launch the data at 12 months, which is very important for the safety and tolerability to go together with the regulatory package for both U.S. and Europe, but also to show if the drug can be sustained over time.

Okay. Yes. On the partnering, of course, you're not going to explain what you're talking to, but could you maybe share a little bit your criteria because this is really a value defining event for Cosmo?

I think what I said in the presentation, it's in my opinion, clear, there is a lot of interest. We have perceived of interest since December. There is active conversation with multiple partners, big partners. And I think when time will come, we'll share more information. As of now, we are pleased with the interest we have perceived. The market is gigantic. And I want to reiterate the fact that with the market research that we conducted last year, this is a market of over $20 billion just in the U.S. So that's why like I said that this is a value defining asset for Cosmo moving forward.

I fully agree. And yes, just to that on the partnering announcement, of course, and the sign, of course, that could make a huge impact also maybe for this year on your milestone agreements, a milestone contribution there, too.

So I think you --

Yes, go ahead. No, please.

No, I was just saying that our guidance does not include any of this upside, which is a very important piece to clarify if someone did not get this. Our guidance do not guide on those opportunities, those assets that are very short term. So yes, expect to see more in 2026 on that side.

And just finally on the operating expense and your guidance there. You have really shown quite a lot of efficiency there. If you look at SG&A, quite a large drop there. How is this realized? And what's your guidance going forward both on SG&A and also then on R&D?

Bob, I'll take this one. So for R&D, we said that for 2026, we expect expenses to be EUR 25 million to EUR 30 million, which is a continued decline our guidance for 2027 could remain the same or be slightly higher, depending on how the assets that are currently in place to progress through the trials. I'm talking specifically now about Bile Acid diarreha and Distal Ulcerative Colitis. For SG&A, we believe that we now have a strong quarter that has been optimized. However, we continue to monitor for efficiency and it's possible that you will see the expense to decline slightly as we progress into 2027.

And just then what is your estimated cash and cash equivalent because after the year, of course, you have the offering part with Capital Group. What is your estimated cash for -- as of today more or less?

So the estimated cash and equivalents ending for 2026 is expected to be approximately EUR 200 million. I'd now like to open to other participants, please. Thank you so much for your questions.

The next question comes from the line of Nicolas Pauillac from Kepler Chevreux.

Congrats on the results. Maybe 2 for me. The first one is just on this project-based revenue guidance for next year. Could you just break it down a bit? I guess it would be like just commercial milestone that you have put into that from maybe Winlevi. Then a second one just on the -- if you could give us your thoughts on the Veradermics product. There has been a lot of noise around that since the IPO would be nice to have your view on that? And how do you think it might or might not impact the market for Breezula? And then maybe a third one, just -- do you have any idea of big [indiscernible] or things like that, that you would like to present more data on the efficacy on Breezula over the next month?

Nicolas. Let me take the first one. If I could please confirm that when you're talking about milestones, you're talking about 2026 or 2027?

'26.

So for '26, we expect milestones of EUR 7 million to EUR 8 million that are mainly related to legacy gastroenterology programs. So the milestones from Winlevi have been largely realized in 2025, and we do not expect any significant milestones from Winlevi until 2029 or 2030 or so. I will now pass it to Gio to talk about your questions regarding the Veradermics.

Yes. Thanks for the question, Nicolas. So we are very well aware of the Veradermics program. At this stage, we see it more on our side, the fact that we have completed a larger Phase II trial with over 2,000 patients. We have in the next couple of months, also ability to show data on safety and efficacy on 12 months. And I think that's going to be a very important piece and it's a very unique mechanism of action. Ours is an androgen receptor attacking the root cause of hair loss. What I can say is that the interest above hair loss across the market is really, really high, which is good for us because we are advanced compared to any other company. And I think this is going to bring us even more visibility than what we already have. And then regarding your last question, yes, we are planning to be at the American Dermatology Association event. I think it's going to be this April, May in the U.S. We add up a few things organized, and we'll report back as soon as we have more robust information to share with you.

Thank you. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to the speakers for any closing remarks.

Maybe just one quick comment. We will respond to all my questions via e-mail today. Thank you.

Thank you very much. Have a nice day. Bye.

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