Fagron NV (FAGR) Earnings Call Transcript & Summary

Good afternoon, and welcome to Fagron's 2025 Capital Markets Day. I'm Ignacio Artola, Head of Investor Relations. And on behalf of the whole Fagron team, a warm welcome to those of you who are here today, I see a lot of familiar faces, but also to those who are joining us live stream online. Well, we have a lot to share today. Let me kick off before we get started. Please note the disclaimer behind me. And on the screen, you have it at the presentation that we have uploaded into our web. So the agenda for today, we will cover the content first by an introduction and a brief overview followed by our enablers. We will deep dive into them. That's going to take about 1 hour, then we will have a break, 30 minutes break. And after we come back, we will cover our regions followed by a wrap-up and Q&A session. It's going to be a consolidated Q&A. So you will have the opportunity to address any question about the whole content or whatever you feel like. And please, for those who are joining online, you can also participate. We welcome you to address questions by the platform question assistance anytime. Those questions will also be covered. Let me introduce the team today's speakers. So most of our executive leadership team, including our CEO, Rafael, our CFO, Karin; our COO, Vera, the area leaders of EMEA Costas and North America and as well as our global HR director Celine and our Vice President for Regulatory Affairs, Jay. And before I leave the floor to Rafael, Karin would like to show you a short video that nicely summarizes our value proposition as of today. Thank you. [Presentation]

Thank you, Ignacio. Thank you all for joining both here physically and also from the webcast. Special thanks to the Chairman of the Board, Mr. Koen Hoffman. Thank you, Koen, in the last years under your leadership, you have created an amazing Board always constructive and with a lot of interaction. So thank you for that. And what is a pharmaceutical compound, pharmaceutical compounding or personalizing medicine. A patient goes to a doctor and the doctor prescribes it, thinking of, okay, I want to adjust the dosage strength instead of the 25 milligrams commercial, I prefer to prescribe 200 milligrams. I'm a doctor and I want to adjust the dosage form. Maybe instead of taking a big pill, I want to prescribe Syrup. I may also think on let's instead of taking 5 different capsules with 5 different APIs, I prescribe one and of course, innovation therapies, each successful commercial product has been at a stage, a good pharmaceutical compound. You see pharmaceutical component throughout all therapeutical applications will of pediatrics, many compounders across the globe compound solutions for neonates in the UCI to be administered in the gastroenteral tube, and that's a beautiful part of our profession as well. This market is 1.5% of the total pharmaceutical market and permits throughout the whole health care value chain, raw materials, branded items, compounding services items are being sold and of course, we, as Fagron will procure our materials to process them and the main product categories we buy are APIs, pharmaceutical excipients and of course, packaging and equipment. What is Fagron? Fagron is the only global player, the global consolidator in a highly fragmented niche rapidly growing market, which is pharmaceutical compounding. More than 4,200 people with good, very good, excellent employee engagement scores and with a clear moat. We have scale. It's not the same buying 15,000 kilos of our material than 150 kilos and we are agile. We have a strong culture of innovation, entrepreneurship and quality. And when we look at what we sell, within 1 product segment, which is pharmaceutical compounding, we sell 3 categories. The first one, essentials, the raw materials. We acquired big quantities across the globe. We bring them in our facilities. We have in-house quality control testing, and this is very important. I repeat myself, in-house quality control testing. Jay will talk over later. We were back in our cGMP repackaging facilities, and then we sell them across the globe, more than 500,000 customers. We have the brands product category. Those are the products that we develop ourselves with our own IP, and they are intended to support pharmacies and whole field pharmacies making a safe medication and of course, prescribers in order to prescribe an effective compounded solution. And of course, we also have the compounding services where we compound different pharmaceutical forms, sterile, nonsterile. Now we look back the last 8 years that we have been together, we could divide it in 3 blocks. The first 2 years, we're planting to see it for operational excellence, for innovation, for organic growth, looking at the market, developing the pipeline. Of course, COVID came, we showed how resilient our business model is, how we can adapt to these times. And the last 3 years were the plant became a tree, and we could see strong operational performance, Vera will explain us about all our operational footprint, again, in-house quality control testing. And of course, we have seen an acceleration of our organic growth. We have welcomed new companies into our family in organic growth, and we have shown again how strong our operational footprint and our innovation power is. If we did that in these last 3 years, in '22, we had our Capital Markets Day. We acquired Letco in the U.S. We acquired the Fresenius Kabi Boston facility in the U.S., and he will tell us later more about this one. And we did get the warning letter in Minneapolis which accelerated the transfer of our production to Decatur, Alabama Letco. In 2023, we announced our Tampa facility, which is now, as we speak, online. We also invested together with Hans Waals, Managing Partner at Tiofarma, some resources in registrations for the Dutch and Belgium market as well. And we announced at the end of the year, changes in reimbursement policy for the pharmaceutical -- total pharmaceutical market in Poland and of course, compounding is a part of it. We entered '24 and in '24, we had some nice acquisitions, and we also announced 2 more brownfields, which we like a lot. Karin will explain later. Why is that? And we also, at the end of the year, announced -- explained that we had a warning letter in Wichita. And last week, we did get amazing news, which Jay will share later on. As every business we navigate through complexity. I remember my first day at Fagron that was October 15, 2002. And again, Hans, I named your name again, you told me in your office. We need to have the highest quality standards because this will make us the winner in the long term. And we couldn't agree more than that with you. We received during this period as again, said warning letter, Miniapolis accelerated the transfer to Decatur warning letter in Wichita, you will explain us more later on. We also saw, as we said, some regulatory changes, some reimbursement changes. We adapted quite well. We invested in the market, we invested in innovation, more script were generated last year in Poland. Quantities were up, prices were down. We could also offset -- you will explain Costa later on our diversified footprint in Europe and of course, as we are a public company, we show our results, some people like them and they say, why don't we enter also in this market, and we have seen in our second Brazil, third, the Netherlands, main markets, how private equity back some companies to enter in our markets. And we must say that we did a reasonable good job. We have shown how our competition playbook place first, defend market position, really strong operational excellence, efficiency. Second, innovation, let's work on the pipeline. You have seen it in Brazil last year. And third, again, maintaining the highest quality standards in the industry, which will set us apart. To sum up, give the word to Karin to look at the financials for the last 3 years. Last 3 years, what we've done -- we have worked extremely hard on the operational footprint, infrastructure organization processes. We have accelerated our growth. What are we going to see the next 3 years. We're going to accelerate our top line momentum. We're going also to improve profitability. And of course, we're going to start benefiting of our one-off CapEx. Thank you again, Koen for having also with the Board approved also. Thank you, [ Philippe ], active ownership in the Board, very active with the capital allocation exercise and with these one-off projects because we're going to start, entertain the next 3 years, the finalization of the construction of these one-off projects, for example, Tampa in the U.S., which we started entertaining. And now, Karin?

Thank you very much, Rafael. So good afternoon, everybody. A warm welcome also from my side. Before we look into the future, let's first take a moment and look at how we progress towards our initial compounding for Growth plan 2022 until 2024. Top line, we achieved a little over 9% organic growth against constant exchange rates. We targeted 8%. So slightly better than the plan. If you look at our REBITDA or our profitability, we are at EUR 174 million at the end of 2024, which is 20% REBITDA margin and an increase of 13.7% over the period. Different dynamics play into that progress during the years. Of course, we have elements that dilute our margin. One of them was a strategic acquisition we did in the U.S., a Boston facility, which gave us access to high-quality customers, diverse our footprint within the U.S. geographically, but also gave us capabilities from sterile to sterile compounding. However, it diluted our margins for the group as a whole. We see local changes, we see changes in Poland's reimbursement system. We have the Brazilian competition we will talk about today. Of course, there are other elements that have a positive impact. So we see operational excellence initiatives, amongst other things. So overall, we progress towards EUR 174 million EBITDA by 2024. We see a strong cash conversion. Operating cash flow targeted for over 70%. We hit 80%. Also free cash flow developments solid. So we target for a conversion of over 50%. We're almost at 64% over the period. And all in all, with a limited CapEx, we gave a range between 3% to 3.5% maintenance CapEx, and we're within that range at 3.1% of revenue. If we look at how we progressed in the regions compared to the plan that we laid out, we see that EMEA, low single-digit percentage of top line growth. We're within that range. Despite the changes in the Poland reimbursement system, we are well within that guided range. Latin America, as said, a competitive market, and we struggled in the first period with heightened competitions, which we took adequate measures. However, you've seen an impact there. We see a strong bounce back in 2024 H2. And again, Q1 of this year was very strong for LATAM. North America, fantastic results, almost 20% top line development, driven by that huge demand in compounding products for that U.S. market. And again, this is converted into cash. So we have good visibility on top line developments and strong cash conversion. We are overperforming there. So we are over 70% on operating cash flow conversion and over 50% on free cash flow conversion. Of course, as you can see, North America is really performing well, but we also see momentum building in the other regions, and we'll touch upon that today. I think we showed a very nice progress. However, we are well positioned today to accelerate that even further.

Thanks a lot, Karin. Before you take over for the targets for the next 5 to 6 years, let's understand where we are playing, right, the market overview. As we said, 1.5% of the total pharmaceutical market, $13.2 billion. We are only leading 11 markets. So this means that we have a lot of room for growth in the existing markets and regions where we are present, when we deep dive on those, except of the Czech Republic, we entertain 85% of market share. We see a lot of opportunities in the rest of the markets, and we're happy also to see that in the 3 main markets, the U.S., Brazil and the Netherlands, we still have room for strong organic growth. What's going to happen in the future? And this comes from independent report, independent data says that the market, the personalized medicine market will grow in the next 5 years up to $18 billion. And we see clear tailwinds. Aging population, personalization, we spoke at the beginning, prevention and lifestyle, increased regulation, very important, highest quality standards and of course, accessibility, drug shortages. The Board ask us in each Board interaction to bring and to share all these key trends and to go in deep in each one of the regions. When we start with aging population, we all become old, right? So we also support this process in life, and we even make medication here in the Netherlands for end-life therapies. So we see this permeating more in Europe than the other regions. It's there. When we go to personalization, we see personalization permeating throughout all the regions. As such, we have explained drug combinations, strengths, dosages, innovation therapies. When we go into prevention and lifestyle, we see markets without of pocket as well that people want to live longer and better. So compounding is really an added value to prepare these kind of treatments. When we go into increased regulation, we have seen across the Board that regulators are increasing the requirements. It's also remarkable in the FDA. And again, Jay will explain us later how this is playing out, right? So we need to set the highest quality standards. And of course, accessibility, we all know about drug shortages, product files of pharmaceutical companies need to be updated, for small batches, they might say, okay, we don't want to invest. It doesn't make economical sense. So then compounding is an amazing tool as well. So the market is going to grow, $18 billion. They use, of course, $9 billion, the greatest opportunity. However, there is market everywhere. And before going to the financials, we define together with the teams, a strategy and a general pattern set. A strategy needs to be easy to explain and to execute. People everywhere. Remember, 4,000 -- more than 4,500 people engage align. Celine will tell us more about that one. We have 4 clear enablers of our strategy, quality focus, global operational excellence, what we worked a lot on the last 3 years, Vera will tell more about it, specialized R&D that support our brands with higher margins, of course, and discipline, really disciplined M&A. This supports 4 pillars. The first one, we want to lead the essentials markets, the raw material markets, big quantities, in-house quality control, repack across the Board. Second, we want to increase materially the brands within the B&E segment. Third, we want to lead the sterile outsourcing operations globally. We want to support our customers because they need to invest in their facilities, in their process and Fagron can support. And of course, we want to optimize and innovate our legacy business across the Board. Together, we create the future of personalizing medicine. That's the roof. That's what keeps us every day aligned towards the next targets that we're going to see now.

Thank you very much. So our compounding for Growth plan 2025, 2030 is geared towards sustainable accelerated top line growth, a strong performance on profitability and robust cash conversion. We target for a high single to low double-digit percentage of top line growth organically against constant exchange rate. And that's driven by adding market gains in certain regions, customer wins and also a deeper penetration of existing markets. We are tracking towards 21% REBITDA by 2027, and that REBITDA is driven by operational excellence, operating leverage as we scale our facilities and regions and also branded products, which, in general, have a higher margin than our essential profile. We're tracking towards 70% cash conversion for operating cash flow and 50% conversion for free cash flow. And this is all with 3.5% of CapEx, maintenance CapEx and then the one-offs that we will talk about today as we fuel our future growth. The revenue mix in the region. So every region is different. That has to do with the maturity of the region, with compounding trends in that region, with different elements that play everywhere. So EMEA, as we said, a very diverse region, right? So we see opportunities in the Brands and Essentials, but also in Compounding Services, and we target a mid-single-digit percentage of top line growth. So a step-up compared to the targets we had previously. LatAm, a very competitive region. We target for high single-digit organic growth against constant exchange rate, driven by innovation, quality, but also sourcing scalability. And then finally, North America, again, it will remain our powerhouse, low to mid-teen top line growth driven by scaling up of our facilities, more outsourcing that we see and of course, innovations. We see Compounding Services growing faster than our Brands and Essentials and our brands growing faster than Essentials, really showing that focus on innovation and value add. So overall, a high single-digit to low double-digit percentage of top line growth. And on top of that, we see momentum for M&A. So it's not embedded in the guidance. It's on top of our guidance. And later today, we will share a bit more light on our M&A strategy going forward. If we look at our step-up in profitability margin, so we were at 20%, a good percentage in a very dynamic environment, and we expect a step-up towards 21% by 2027. That's driven by several enablers. The first one, operating leverage, where we see scaling as a main benefit in, for instance, the U.S. region. We see operational excellence as it's on procurement and sourcing, on manufacturing, on logistics. And then we have our specialized R&D, so our brand sales, which we also touched upon today, and that will also bring additional top line margin. Of course, there are elements that also play like the product mix in Compounding Services in general, so sterile to sterile margin versus API to sterile margin. And then we have the uncertainty macroeconomic, as you all know. So overall, we are confident that we can make the step up from 20% to 21%. After that, we also expect a gradual step-up in profitability towards 2030. Our capital allocation policy is there to maximize shareholder value and really focused around growth. So our first pillar is organic growth. We have CapEx projects running that are focused on high growth and margin accretive elements. A good example is the extension in Wichita that we announced for USD 39 million, which brings us $200 million of additional capacity, which we expect to utilize pretty quickly. So nice returns on investments and low CapEx, 3.5%. And the buckets can differ a bit based on the priority, but always with our long-term plan in the back of our minds. The second pillar, M&A, where we have a disciplined approach to valuation, but also to integration. We do small to midsized deals, and it has to have a strategic rationale that's clear. So it's all geographic expansion, it's market consolidation or it's adding additional capabilities. And the third pillar is dividend. And dividend, we determine together with the Board based on the results, based on the cash flow we have, but also on the prospects in the market. This is all underpinned by a strong balance sheet and a clear leverage strategy. So we have an internal threshold of 2.8x net debt to EBITDA. We are currently at 1.4x, and the banks allows for 3.5x. So overall, we -- our capital allocation policy is geared towards financing our growth plans going forward and the opportunities we see in the market. And with that, I want to hand to Vera and Jay.

Good afternoon, everyone. I'm Vera Bakker. I'm the COO of the company. I'm very happy to be here today to talk to you. I'm joined on the stage by Jay, our Senior Vice President of Regulatory Affairs. And together, we'll talk you through the first 2 enablers. We'll talk you through operations and quality. In a few moments, I'll talk about operations. And before that, I'll give the floor to Jay to talk you through our global quality program.

Good afternoon. My name is Jay McEniry. I oversee legal and regulatory for our North American companies and also consult with our global companies on regulatory affairs. I've been with the company, my 7-year anniversary is just in a couple of days. And so I've really enjoyed both the people and what we do for patients. I'm here to talk today about quality. Quality is at the heart of everything we do. And that makes sense. We source medicines. We make medicines. We repackage medicines. We distribute medicines that ultimately go into your bodies, into your loved ones' bodies, into your friends' bodies. So quality has to be the top most important pillar within our company. And with it, as Rafael mentioned earlier in his opening comments, with quality comes success, comes the last company, the last man standing in a very competitive landscape and a competitive landscape in many ways. In the U.S., where raising quality standards is resulting in some consolidation, in Brazil, where a wildly growing market brings new players in the market, there's a constant and a constant importance, and that is quality. And that's what we're focusing on at Fagron. So I'd like to speak a moment about the quality function, the quality team and how we guarantee that the medicines that we put into the bodies of you and your loved ones are safe. So the quality function is deeply embedded within this company. And that's important. And if I gave you the slide, it'd even be more helpful. That's important. We have 75 -- over 75 regulatory bodies that oversee our companies worldwide, and that's at the federal level, at the state or district level, at the local level, at the customer level, there are customer regulators that actually touch many of our facilities. But with that, we bring a robust global quality team of 615 members. You'll see later in the slides that we have around 4,200 employees worldwide. That's 15 -- almost 15% of our employees are focused on quality, and that speaks to the importance of quality within our ecosystem. Now in looking at quality, you need an established structure. And so let's work through our structure globally that feeds down to our operating entities. First, the organizational structure itself. We don't leave our operating entities to operate on their own. There is a global quality function, followed by an area quality function that then supports each operating entity's quality functions, ultimately, the 615 people we just mentioned. With that come global guidelines, consistent guidelines that we may test facilities on in order to determine that they are meeting the standards that we set, the high standards that we set within this industry. Also the quality specifications, the product specifications themselves, which we'll talk about a little bit more in a moment. Next, as Rafael mentioned earlier, we have brought in-house our quality testing across the world. This is incredibly important. Before and certainly with some of our smaller competitors, they rely and we rely on third-party testing operations. It did a good job, but could be inefficient, certainly more expensive. And we lost some of the control that we now have with our expertise in in-housing that function. I think it's incredibly important and will pay dividends well into the future. Finally, audits. Audits come from all different places. Internally, we audit ourselves frequently, sometimes without notice to test our functions. We retain third parties to audit, to look at our functions at each operating entity. We are also audited by our regulators. We're audited by our customers. We welcome these audits. These audits test. They push the teams. They ultimately raise the bar, which is what we're looking for. Let's go a little bit deeper in the life cycle of a product and how quality touches on those products. What you're looking at on the right side of your screen is a monograph. And when you look at a drug, where do you need to look first at a medicine? Where do you need to look first? The molecule itself. How do we determine that the molecule is pure? How do we determine that the molecule -- its chemical structure, its properties, its dissolution characteristics. All of those things are set forth in a monograph. This monograph is for ascorbic acid, vitamin C. Rafael doesn't want scurvy, and thus, this is a very important product to keep Rafael from getting scurvy when he takes a vote over to the U.S., and we welcome him all the time. With the monograph, we get to determine not only the chemical structure and the purity of a molecule, but also how to test it. How do you look at a molecule under the different testing mechanisms and determine that it is what it says it is. That is a drug monograph. So we take that monograph and in our in-house quality control testing, we make sure that the molecule itself is pure and is safe to be put into a patient. So what's next? What do you do with the molecule? You got to package it. One way that you can take a pure molecule and make it impure is to package it inappropriately. Thus, we have, through Vera's hard work and the hard work of our teams, top-notch facilities, world-class facilities across the globe to package these molecules into packages safely and under current good manufacturing practice standards. Those molecules are then distributed. We get to the compounding portion. Some go to our customers, some go to our compounding services where we make the medicines. The best raw materials, of course, forging raw materials because of the things that I just discussed with you. After that, we manufacture those materials and, again, world-class facilities brought to us by the expert leadership that you'll hear about in a moment. And again, test those products through our in-house testing operations. Now probably what many of you came to hear a little bit about, and that is the Wichita warning letter. Many of your names, and fortunately, I didn't get to see faces on that webcast. We talked about the Wichita warning letter in late December. And I'll level set and give a little bit of history for those who may not have joined us in that December WebEx. The FDA visited our Wichita 503B outsourcing facility in -- at the end of the second quarter of 2024. Following the inspection, as the FDA always does, they leave a Form 483 that lays out the inspectional observations that the FDA found that they asked the facility to look at and address and comment on. For the next 7 months, the facility provided a response and updates to the FDA, asked the FDA, of course, hey, let's meet if you have anything that you want to see different more from us, please let us know. But we believe that this is sufficient to address your concerns. And in December, unfortunately, the FDA chose to communicate with the facility for the first time since the June inspection with a warning letter. Now FDA has very limited means by which they may communicate with their operating facilities in the U.S., very few. You have a Form 483, you have an entitled letter, you have a warning letter, and it escalates from there. So they have very few ways in which they may communicate. It is unfortunate that the FDA chose to communicate with our facility via warning letter. But as we see with all Tier 1 outsourcing facilities in the U.S., that has been the means by which the FDA is communicating to press what we believe to raise the bar on the industry, which is not a bad thing and something we welcome. Following the receipt of the warning letter, we, of course, promptly responded with a very robust response and have been very careful to follow up with the FDA to show that robustness. As of our last response, we were close to 90% complete with our committed corrective actions. Last week, and what I really want to focus on, and this is going to make my Q&A a whole lot more -- a whole lot easier with you guys, I expect, we received a letter from FDA that stated within our responses, we again asked FDA, look, let's meet if there's something we're not doing that you want to see. FDA responded by saying, we have seen your responses. We believe that you're doing what we have asked you to do. We do not need to meet and that we will test you against your commitments and the corrective actions that you say you have taken at the next inspection. A phenomenal letter to receive. We were very excited to receive it in only 90 days following the warning letter, which I believe is very prompt given the situation, both with FDA responsiveness generally, but also with the situation in the U.S. with the changing of the guard at the administrative level. So the next step in this, of course, we will complete, and we're very close to completing all the corrective actions to which we have committed. We will then welcome FDA for another inspection to test us against those corrective actions that we have taken. Unfortunately, and Rafael has mentioned in the past, I mentioned on the December call, we can't -- we don't know when the FDA will be back. That is true, number one, because even under a normal circumstance, FDA inspects facilities based on a risk-based analysis, and there are many facilities that have never been inspected. And so we expected some time would pass before they would come back. Now we have the added complexity of changes in the administration, reductions in workforce at FDA that may further delay the ultimate visit and closeout of the warning letter. But we are very excited with the correspondence that we received. We know we are on the right track and believe that it will be business as usual moving forward. And with that, I'll turn it over to Vera.

Thanks a lot, Jay. So I joined Fagron just under 3 years ago. Last Capital Markets Day, I was actually sitting in the public, listening to all the updates. And for me, there were 2 key reasons to join Fagron. First one is the great purpose of the company. And the second one is the enormous growth potential of the business. As an operational person, there's nothing more exciting than working in a high-growth company and especially a company that really is at the forefront of a trend as exciting as personalizing medicine. Yes. So I'm very happy that I joined. I'm very happy to be here today. If I look at how historically Fagron has grown -- Fagron historically has grown a lot via M&A. And as a result of that, the operational footprint is quite fragmented. When I joined the company, there were a lot of initiatives ongoing to make sure that we make progress in getting more efficiencies and optimizing the operational footprint. And basically, my role is to accelerate the professionalism of the operational function. So I do that to make sure that we can continue to grow and that we can continue to grow in a profitable way. If I look at our portfolio and our operational footprint, as I said, it's quite broad. It's quite fragmented. We buy -- for example, we buy more than 3,500 materials. We do that from more than 1,500 vendors. And we buy up to -- for one material, we buy up to 9 different specifications. So for example, a relatively simple product like ascorbic acid, vitamin C, we buy 9 different specifications. You might think, hey, that is an easy one win, you can just harmonize it and simplify it. But actually, we're here to serve what our customers need. And our customers need this diversification, and they need different specs for different products that they compound. Yes. So today, we have more than 25,000 SKUs. I'll come back a little bit later with what we are doing on harmonize or on optimizing our portfolio. Yes, we repack our products in 10 regional production sites, and we distribute from 24 warehouses. And as Jay said, of course, everything that we do is regulated by more than 75 regulatory bodies. So quality really at the heart of everything that we do. So what do I focus on as my key priorities in order to run a highly efficient global operation. First thing that I focus on is product availability. Yes, product availability, it means that we have to make sure that our customers receive the right products at the right moment in time. This really is one of the key areas of focus for operations. Then the second part is maintain the highest quality standards, delivering the right standards for each market and each channel. Yes you'll hear us talk a lot about quality. You already heard it from Rafael. You heard it from Jay. We'll repeat it throughout the afternoon. Quality, quality, quality is everything for our company. So we focus a lot on that. Third one, competitive cost. So indeed, our scale, we get better and better in using our global scale. We can buy better. We can make better strategic relationships with our suppliers. And by doing that, we can actually get nice leverage. And of course, best-in-class facilities. We need to make sure that our facilities, they are ready to absorb the growth at the right quality. And of course, they also play a key role in absorbing and making our innovations big. So those are my key focus points. If I then look on an operational technical level, what are the key levers that I pull on a day-to-day basis? There are 5. First one is procurement, making sure that we make good deals, use our global scale and make strategic deals with key manufacturers. Second one, end-to-end planning. If I know what I'm going to sell in 6 months from now, I can make sure that I buy the right materials and have the right capacity available. Third one, operational portfolio optimization. That is all to do with making sure that we have the right products available for the right customers. So we're not just cutting our portfolio, but we're harmonizing labels, we're harmonizing pack sizes, all of those things, always keeping the customer in mind. Then manufacturing excellence, making sure that our factories operate at the best possible way. And of course, digitalization that's across our whole operation, and it is key to make sure that we have good data availability that we have visibility and that we optimize our operation. So if we then look at some of the things that we have achieved some tangible results over the last 3 years, yes, we're very proud of some of these results. So for example, in product availability, we moved from 84% to 89%. So we made a 5% improvement there, meaning that we actually make more products available for our customers, and this, in turn, helps our top line growth. Right first time, I'll explain very briefly what it means. Basically, right first time means that you don't have errors in the documentation of your batch records. And this, in turn, is a very good indicator of whether your processes are working. So having a 10% increase there from 79% to 89% means that we have much more control in our factories of what -- of how our processes work. Then procurement, of course, in 2022, we were coming out of the COVID period and we were having quite some significant headwinds, in terms of logistics, in terms of cost increases of, for example, vitamins, amino acids, some of those products. We're very happy to say that we swapped that around and that actually over the last 2 years, we have been able to deliver 3% of procurement savings. That means that we have been able to offset inflation and help the business in that way. Besides this, we started implementing a professional CapEx management structure. So we put a framework in place and all our major capital projects are now being run according to that framework. And one of the parts of that means that we do value engineering exercises. And as part of that, we delivered EUR 3.5 million in savings. Besides that, we have done optimization of our footprint. So we moved more than 2,500 SKUs into state-of-the-art facilities. And across Brazil and Belgium, we moved from 8 to 2 distribution centers. Yes, so we're very happy with these results but of course, there's much more to do. If we then look at where we spend our CapEx, so as Karin explained, we have maintenance CapEx and our one-off CapEx. Our maintenance CapEx is always in line with our mid- and longer-term strategy. So we make sure that we spend money on upgrades of our facilities, that we spend it on growth, that we spend it on quality, basically on all the topics that help our mid- and longer-term growth. If you look at EMEA, we've spent, for example, we spent money on expansion of our capacity in Poland, in Czech Republic, and we spent money in upgrade of our facilities and in quality. Then if we go across the Ocean, yes, starting with Latin America. We built a new compounding facility in Colombia. We upgraded our facility in Mexico. And in Brazil, we spent money in automation of our warehouse, in quality, in R&D, in various topics. And of course, most of our CapEx has gone to the U.S., our biggest growth engine. So we need to make sure that we invest the right amount of money and projects to be able to keep growing. Yes. So Wichita is, of course, our biggest growth engine. We have spent money in modernization, in automation and in CapEx expansion -- production expansion. So we invested in automatic labelers in expansion of our warehouse, in, of course, our in-sourced lab that Rafael and Jay alluded to. Across Boston and Las Vegas, we mainly spent money on debottlenecking our facilities to be able to keep up with the growth and Decatur invested in expansion of the warehouse and of upgrade of the clean rooms. Then -- so this is all within the maintenance CapEx within the 3.5% that Karin mentioned. And then besides that, of course, we also have a one-off CapEx. They are really the strategic projects that make sure that we are ready to capture any market opportunity in the future. Yes, the first one, Rafael already mentioned it, the new facility, Brownfield facility in Tampa. In a little bit, I'll show a video of it. It really, really looks beautiful. Then secondly, there's 2 projects ongoing, major capacity expansion in Wichita and a new compounding facility, also a Brownfield facility in the Netherlands. And last but not least, we are doing the feasibility study on the next expansion project in Vegas. So let's have a quick look at our new facility in Tampa. [Presentation]

Yes. So we're very proud of the team that made this happen. It's really a flagship facility, and we're very happy with it. So then let's translate everything that I've said into numbers, where -- what are the key targets for the coming few years? Yes, as I said before, product availability really is key for us. So both on product availability and on right first time, we want to move from the 89% where we are today to 95%. They really -- those 2 make sure that we can capture more clients, that we can continue to grow and really at the right quality levels. Procurement, we want to continue to deliver 3% of savings year-on-year. And with all the projects that we are doing, we will be adding more than EUR 500 million in additional capacity. Of course, there's always upsides and downsides to every plan. Upsides is some of the M&A opportunities that we have. AI can help us to go faster and also, of course, our quality differentiator. On the other hand, we know that at this moment in time, the world is quite volatile. There's a lot happening on the geopolitics. And in some areas, we are seeing a bit more worker shortages. However, as Fagron, we are really confident that with all the actions we have put in place and with all the actions we are implementing at the moment, we are very well prepared to navigate any volatility that is here at the moment. Yes. So thank you very much. And with that, I'll hand back over to Rafael for the next enabler.

Thanks, Jay and Vera. We move now to the next enabler, which is specialized R&D. The first day at the university, I started pharmacy, the professor said, a medicine needs to be safe and needs to be effective, right, also with compounding, safe and effective and a Fagron brand supports a pharmacist or hospital pharmacist to compound a safe medication and a doctor to prescribe an effective treatment with patients' adherence. So what is the brand? We have said it before. It's a product or solution developed by us with our own IP intended to help pharmacists to compound a safe product and a physician to prescribe an effective treatment. We divide it in 4 categories. Our lab category. You remember, we acquired in 2019, a company called Gako in Germany. There in Bamberg, Germany, we make equipment and supplies in the lab category, 4 compounders globally. Then we move to the right side of the slide, excipients. Here, they play among the 2 categories, excipients make a compounded medication safe because it's always the same excipient. Remember, the syrup at the beginning of the neonate, right, and also increase effectiveness for the doctor as we study also this delivery form. Then we go into the ingredients as a category we entered 3 years ago. Here, we develop our own phytoactives with pharmacological activity. We have a line that's called the Tricho Concept. We have revenues between high single-digit, low double-digit million euro sales. So quite interesting. We sell it globally, and we treat alopecia. And then we go into the last category, our testing. So we provide tools to physicians to have precision medicine, pharmacogenomic testing, which support the prescription of our brands. When you go to talk to pharmacists and to physicians, you need to, of course, convince them. And one great tool is the studies, the science behind. So when we look at the safety, what we have seen, we have done more than 850 studies, compatibility studies showing that our products work. And when you remember the ascorbic acid of Jay, he spoke about the monograph. We have submitted for more than 80 of these products in more than 80 monographs. So that's the bible of pharmaceuticals, our brands are and will be there. When we move into the effectiveness, we have done already more than 130 studies, which have been published and this amongst the more than 1,000 that we have already done, right? And this is extremely important as we are bringing all the science into 3 different platforms. If you remember in 2022, we spoke about the Fagron Academy that was our platform for knowledge. So Fagron Academy has grown up. It was a nice kid. The kid grew. And now we have 3 different platforms. We have, first of all, the library with these studies that we are now seeing on the screen. We are having the video platform with more than 500 hours of content in many different languages. And we have the formulary platform, which we're very proud of, more than 10,000 formulas to support doctors and pharmacies worldwide to prescribe and compound personalized medication. And now we're going to see a video of our formulary platform. [Presentation]

Is this successful? As we hear sometimes in Belgium, yes and no, right? Yes, because we see a good example with the Brazilian performance, no, because we have some room for improvement, especially the U.S., and Andy will tell us a lot about it on the brand strategy. We have a dedicated slide on that. So when we look at the Brazilian success, we see that we have launched in the last 3 years, more than 50 brands. We have more than 150 people focused on the brands on the sales side, on the research side. We have one state-of-the-art innovation center that supports all Fagron brands team across the globe. And what we can see with a good example, Pentravan is an excipient is a transdermal cream that brings an API up to bloodstream in almost 90% of concentration. We have seen how a brand that was magnificent developed in the U.S. has become a success in Brazil. So that's the model that we want to roll out globally. And in order to do that, of course, we have the 4 categories, the 4 segments that we have seen, the lab, the excipients, the ingredients and the testing with some examples, and we have a dedicated global R&D structure led by Savvas here present today. He's going in the breakout tour. He's going to show you our solutions there. We have 100 people dedicated for that. So we won't have a global rollout with a clear target, 35% of brands contribution in our B&E segment, having a margin uplift year-on-year of 15 bps. And of course, again, the recipe of success cross-selling opportunities across the globe as the Pentravan and of course, putting the brands in the pan of the prescribers. Therefore, we want to engage globally with key opinion makers and prescribers across the globe. And with that, we got the floor for our inorganic growth, Karin?

Yes. So our next enabler is M&A, so inorganic growth. So on top of the organic growth, we want to grow inorganically through M&A. We pursue a clear M&A strategic rationale. So it has to fit within the 3 categories. It's on the one side, market consolidation. We're a global player, so we want to benefit from that. We see product capabilities, increasing our product portfolios or our production capabilities, but also geographical expansion, right, entering to new markets. We have financial discipline. There are a couple of criteria that it has to be met. One is we do small to midsized deals, which are easier to integrate with offer a certain flexibility. We aim to pay a mid-to-high single-digit multiple on that, depending, of course, on the specific company and the region where it is, the risks that are embedded in that. Ideally, it adds margin as of day 1. Otherwise, there has to be a clear synergy case so that it will add value within a period of 18 to 24 months, and we track that actively. Of course, financial discipline is important, but what we also feel is that there needs to be a cultural fit. So values need to be aligned. There needs to be a quality mindset, an operational footprint. And of course, there has to be a relationship with customers in the market because overall, we do believe that a good integration starts with alignment. This is the track record over our current period. And of course, as you can see, we've done over 15 deals, smaller ones, different segments, so the Brands and Essentials, but also combining services. Different regions in all the regions where we're currently at, showing that diversification for us is important, also showing that we have a broad pipeline with acquisitions in multiple regions and in multiple segments. We spent EUR 193 million. Of course, this is adding the 2 acquisitions that are not closed today, but are signed. And we entered one new market, and that's Hungary. Of course, there are examples, especially in the U.S., where we see the regional expansion where we move to Boston, where we think regionally, that's an important one. If we now go back to the rationale of our strategic M&A, you see here the 3 buckets. So it's market consolidation on the one side, it's increasing the capabilities and geographical expansion. Market consolidation and Letco is a good example, very successful acquisition we did in North America. Product capabilities, whether it's registration capabilities, for instance, with Curaphar, but also entering new markets like [ pets ], where we took a very small position with Wildlife, Parma Produkt, so packaging, Injeplast, good example, packaging, where we enlarge our product portfolio, so we can offer that customer more alternatives. Overall, we are well positioned. We have a strong M&A pipeline. As said, we have 2 acquisitions that are pending closing, but we have 5 acquisitions that are in the integration phase. And we have a structured approach towards integration. As you can see, you see here strict time lines. But as you can imagine, the time lines are different per deal but the structured approach is the same. So we start, of course, by mitigating certain risks if there are risks and really ensuring the continuity of the business. So that means that we communicate with the people internally, but also with our customers. We immediately also start to see where are the benefits. So what's the synergy case, for instance, on procurement side, getting the data out of the company so that we can steer using that data. And then processes that take a bit longer, like an ERP implementation where you have to adjust certain processes, for example, or do a tech transfer where we move the manufacturing capabilities from that site to our own sites. Overall, the process needs to unlock value because integration, it can offer potential, but it can also lose value. So we want to have a structured approach that we copy throughout every deal that we are doing. We back test with the Board together every 12 months. We back test the acquisitions, mainly the assumptions we had initially in the plan, but also where are we on the synergy? Do we see that benefit unlocking? So this is the period 2022, 2024, how many deals we did. So we had EUR 90 million spent or almost EUR 90 million spent. And of course, we want to add value with the deals. So return on investment for those deals over 15%. And of course, every deal is different, right? So there are deals that have a better return than other deals. But in general, over the whole line, we are above 15%. The range of multiples that we pay is between 6% and 9%. And again, that determines especially on regions, risk, opportunities. We don't include any synergies in these multiples. Those are on top for us. So if you add that, multiples will be lower. And we have an integration period, an average of 18 to 24 months. So we have a very nice video to show one of our companies that we just acquired, and I think it's nice to show that one. [Presentation]

And with this I give the word to Celine.

Good afternoon, everyone. I'm very excited to talk a few moments to you about our people because at Fagron, we are very passionate about people and more specifically about engaged and thriving people, and that's also the reason why we put employee engagement at the center of our people strategy. At Fagron, so who are the people working at Fagron? Well, actually, they are here a bit with us today because as you can see on the wall, we have their pictures on our wall. And we are 4,200 people in total spread across the globe. They are equally spread across the 3 regions, and we do have a very healthy female/male balance with actually a slightly more female in our organization than male. We also have a healthy age distribution as well as a healthy retention rate with an average tenure of 4.7%. Among those 4,200 people, we have 650 people leaders, of which 270 are senior leaders. As I just mentioned, employee engagement is at the center of our people strategy. And we put a lot of efforts into employee engagement, boosting employee engagement, building a culture of belonging and togetherness. And our efforts have clearly given great results because as you can see on the figure here below, the past decades, we went from an employee engagement score from 18% to 87% end of last year. We performed a biannual global employee survey. And so this 87% that comes -- came out of that was a very remarkable score where we were very proud of, not because of the number on its own only, but also because we significantly outperformed the benchmark, which is the global pharma norm on its own already a challenging norm. Another figure that is remarkable is a 93% participation rate because this number shows us that our people are committed to voice their opinions and also to contribute to building the success of the organization. Our people strategy also nicely aligns with our ESG strategy with, as I said, employee engagement as one of the most important pillars with having nice results in the past, but also ambitious targets for the future. And we also have other targets, other pillars that we are actively working on, such as diversity and inclusion, such as employee well-being, compensation and benefits, learning and development, people leadership, all of these contributing also to employee engagement and all these pillars also with very concrete KPIs and objectives, allowing us to track our progress and also to measure our results and our impact. In addition, we also have a very comprehensive leadership framework. So we -- this organization is led by a very motivated group of people with also a very strong experience in the compounding business. So on average, our leadership team has 80 years of experience in the pharmaceutical compounding. And we also have so a comprehensive leadership development program consisting of a people leadership development program for all our people leaders across the globe. In addition, implementing a senior leadership program for nominated key leaders as well as a leadership accelerator program, allowing us to identify the talent of tomorrow to develop the future leaders of our organization. And by doing this, also having a funnel of succession of leaders of the future. Important element also in empowering our leadership is making sure that we have a motivating remuneration policy in place. And when we talk about executive remuneration, we have a few remuneration principles being an alignment with the business strategy, aligning with the people strategy, also balancing long-term and short-term objectives, then combination also of internal equity and external competitiveness, making sure that we have a nice and motivating remuneration package overall. This consists of a base salary as well as benefits and then in addition, variable payment. On one hand, we have the long-term incentives where we have the financial criteria on one hand and sustainability criteria on the other hand. The financial criteria are TSR, organic sales growth, REBITDA margin and cash conversion. all of which the metrics are clearly aligned with the strategy and with the figures that are shared with you today. Our STI also is a mix of financial criteria on one hand, specific targets on the other hand, clearly defined. And we also have multipliers for sustainability and also quality, as Vera mentioned, is at the heart of our organization, and it's also embedded in our remuneration through a multiplier for -- in the incentive for quality. So what's next going forward? Well, we will continue focusing on employee engagement and in addition, working on and continuing our leadership development, making sure that we equip and nurture the leaders of today as well as the leaders of tomorrow and making sure that we have a remuneration policy that is clearly aligned with all stakeholders' interest. Thank you. And now giving the word back to Ignacio.

Thank you, Celine. Well, there's much so far, but it's time to break -- to take a break. But unfortunately, we are going to keep you busy because we have planned some nice tour within the facility. So if you look at your batch, we have divided you guys into 2 groups, either gray color or red color. So one of you, the red color batch will start with our Global Innovation Director, Savvas, who will deep dive into our Brands and Pproducts with insightful, let's say, discussion. And the gray color batch is going to start to -- well, to see the automated robot system that we have at this current facility. And then we will switch, okay? For you to know, this is a 30-minute break. So for online audience, please we will be on time, okay? Here back. And as it is an EMP facility, no food is allowed. So please come with us. [Break]

Good. So welcome back. Now we have, let's say, our last block, let's say, to go with our regions and a wrap-up. And of course, the consolidated Q&A for you who are with us here, but also for those who have stayed tuned, and thank you very much for joining us virtually. So I leave the floor to Kostas for EMEA.

Thank you very much, Ignacio. A warm welcome also from my side. My name is Kostas Kouloridas. I'm a pharmacist in profession. My story begins in 2008 when actually I set up with my brother, a company that has been acquired by Fagron in 2014. And from 2014 until now, I had several positions. Last year, started as EMEA leader. So if we see the area, it's a very important area that constitutes more than 1/3 of the total revenues of Fagron. And the main strength of this area is the diversity. So it is an area that constitute of 1,000 -- more than 1,300 employees that we are selling to 30 countries. And we're just not only in the market, but we lead the market. And we are #1 already in 8 different markets. So if we see in 2024, we achieved to increase our growth to 4% compared to the previous years, the organic growth. And the most important thing is that we achieved to maintain our margin at the same level of 2023, even though there were like some regulatory challenges that you already know in Poland. But why actually? How we can actually achieve that? Because we have like a very strategic and commercial agility and flexibility, so we can deliver scale with flexibility. And we are, at the same time also, as Rafael and also my colleagues mentioned, quality with speed. But let's see how big is EMEA. EMEA is an area of approximately EUR 3.5 billion, and this is like from independent researchers. How do we serve it? We serve with a full product portfolio, including the full pipeline of products, raw materials, packaging, compounding appliances that you have seen already and at the same time, also with compounding services if needed. And we have a legacy brand that they are really recognizable by our customers. But for sure, we're not alone. There are like more in the game. So there are other players, of course, not offering the same portfolio, wide portfolio as we're offering, but also with the same targets. So what can we do extra in this area? We have the operational and the commercial strength to further like enforce our position on certain countries like Germany, like Austria, Switzerland, U.K. But of course, at the same time, we're also looking for candidates that are willing actually to join the group. And how do we achieve to be very good like in the market? Because we are continuously increasing our operation capabilities because we know that the market -- the compounding market in EMEA is very dependent on us, on our products, on our philosophy, on our strategy. And talking about operations, I would like to show you a video of our Fagron Services North Europe facility that is located in Poland. [Presentation]

State-of-the-art facility, a chocolate factory for a pharmacist. So if we see the market right now, we see different trends. Does it remain the same? No, it's the industry shifts. And we see 3 different categories. First of all, if you read the literature, if you simply Google, you will see that we are moving in the direction of RTAs of ready-to-administer solutions for the hospitals because the hospitals need like quick solutions, same for the patients. Why we do that? Because we are reducing the medical errors. Do we follow this trend? We are already here in this business because we're offering the syringes like in the hospitals that they can actually help them to avoid reconstituting themselves. But it's only that, not only. After COVID, we have seen like more and more that the synchronous care model is increasing. So people are going for a synchronous consultation. This is where actually the telemedicine is based and how we're connected with that because we are the player that is offering the raw materials, the brands, the vehicles. And in some cases, we are doing also the services for them, preparing the preparation that they're going to sell through telemedicine. And the last thing, as hypocrites were saying that prevention is more important than cure. We all believe here that prevention is moving upwards. And we are also there through a personalized approach, but also focusing both in the industry and pharmacy, how we can actually further like improve it. Talking about inorganic growth. Of course, we -- Karin explained the whole philosophy behind like our Q&A approach, and it's the same for EMEA. And I'm going to use some examples to help you to understand how it works. Recently, we bought Guinama and also EuroOTC. Why is that? Because we would like to strengthen our capabilities in 2 significant markets. The whole Iberian market like Spain, Portugal and also the German market, and we did that. How come? We are offering now better solutions for the pharmacies. So it means that the accessibility also for the patients is better. At the same time, we also make a geographical expansion. So we went to Hungary. We went to a conservative, let's say, market, the traditional market that through our products, we were able to bring them. We were able to modernize it, to bring it to another level. And this is what actually we are doing. But where the focus is in the end? The focus is really on acquiring companies that they're making compounding services because it's the most interesting part also for us in terms of profitability, but at the same time, also because we have like the direct access to the clinics, to the hospitals and to the patients in that case. We will continue looking for companies that they are linked to our foundation, the essential business, APIs. And at the same time, looking like also the high barrier countries where actually we are more successful, we will look for innovative companies that are bringing added value, synergistic effect for the long-term future of the company. So if we see the road map from 2025 to 2030, we want to be the market leader in every single country. We're going to strengthen our brands because the brands, again, as Rafael said many times, it's not like simply products. It's a platform. It's a vehicle. It's the thing that makes the compounding steps like easier for the pharmacist and also the things that make the physicians to generate prescriptions because it's easy to write a prescription with a brand. And moreover, of course, we're going to expand the compounding services focus on the sterile business because we see more and more that hospitals are outsourcing. Why? Because it's expensive for them or in some cases, they are missing like the knowledge to do it. And if we deploy the right capital as we're going to do for the right acquisitions, focusing like on the long-term strategy, this plan can actually give us a continuous mid-single-digit growth. And the most important thing is that an EBITDA range of above the group average. Now I'm going to hand over to Rafael to give us a nice opportunity that we're having.

Thank you, Kostas. Now we go into Asia Pacific. At the last Board strategy meeting, we were given a mandate to also explore the region which we are commercially not present. As we have said, we have a quality and procurement hub in Asia, not commercially. So we are exploring, of course, opportunities, 60% of the global population lives in Asia. We see wealthier agents. And of course, the trend for prevention and lifestyle is also there as it is in out-of-pocket markets like U.S., like Brazil. So we would like to explore this region. There are markets like Australia, where our regional competitor in the U.S., Medisca is having a leading position. So interesting markets for us. And we're going to do it in the next growth phase -- phase of growth, sorry, through a joint venture or an M&A. So it's a region that we're exploring. And as we said, the priorities for the next phase of growth is, of course, exploring this region together with white spots in EMEA as Kostas was saying. And now we go into Latin America, a region that we look with a lot of joy as it is the innovation powerhouse and of course, the operational powerhouse as well. Remember, we said about the operational capabilities that we have in LatAm, many times on the volumes that we deliver from our LatAm central distribution that Vera was explaining, 30 metric tons on a daily basis. So this is huge. And this is because Latin America has a country where compounding is an essence of life, that is the Brazilian market. More than 2 million scripts are being prescribed every single day. So this means that a lot of product is going through not only our facilities, but all the other facilities. And you also have very important markets like Mexico, like Colombia, Peru, a very interesting market, Chile, now Argentina with more economical fluidity. So you see also other opportunities in other markets there as well. When you look at our financials historically, we saw a bit of a dip lately. This is because during COVID, many Brazilians were looking for preventive therapies in order to be safe of the virus, of course. And after the COVID period of time, they decided, okay, let's go to leisure, let's travel, let's go to, in fact. And we were calling even physicians, say what's going, what's happening? We don't see as many prescripts as we used to see, right? And they said, man, people are canceling the visits -- so we need to be a bit patient, right? Together with that, if you recall, when we were talking about complexity, we had a competitor of us. Remember, in Brazil, we have more than 30 players, which was joining a big group backed by private equity and some competition started to erase. Again, we took the playbook that we were describing before, short-term market position, efficiency, midterm innovation, brands. We saw it more than 50 brands in the last 3 years and long term, maintaining the highest quality standards, and therefore, we could step up. So when we look at our position in the markets, we're present in Mexico, #2, very interesting market. We see a lot of opportunities there. Colombia, compounding services, somehow smaller, but together with Peru, Ecuador, opportunities there. And again, Brazil, the powerhouse, where we are absolute #1 in that market. And of course, as the market is growing, we also grow with the market. We were seeing 2 million scripts when we started in 2010, the market and this independent data you can find on the Internet from the NFARMAC that is the National Association of Compounding Pharmacies. It was 1 million scripts a day. So of course, the market is very dynamic. We also help the market with 150 people to increase their scripts there. And of course, we also need a factory to produce our goods there. And now we're going to see the most modern, the biggest, the most efficient repackaging, cGMP repackaging site in the world. [Presentation]

Yes. And if you recall, this one, we announced that we were building this one during the last Capital Markets Day in 2022. So we have been entertaining this new capacity in the last 3 years. So what are we going to see in the future? Of course, this market is going to grow. There will be underlying growth driven by innovation, personalization, prevision and lifestyle. Again, it's very important for us to keep the strong operational footprint that I spoke about the distribution center in Brazil with a lot of innovation. We have seen the new innovative items there, how they grow. We also have new products in the pipeline. When we talk about inorganic growth, as you are all aware, we acquired 2 companies, pending competition clearance, Purifarma will support us not only with volumes, but also with new segments, Industrial segments that also need raw materials and branded items as well. And of course, Injeplast, as Karin was explaining, now we have the capability to produce our own packaging. Remember, 2 million scripts a day, meaning 2 million of packaging a day. So we now have the capability to make these ones. Financially, what does it mean? High single-digit organic growth. Q1 was an excellent start for the region. And of course, our profitability will have also a step-up with this combination of operational excellence and, of course, brands and innovation. And now we move from Sao Paulo to Austin, where the powerhouse of the group, Andy?

Thank you, Rafael. Okay. Good afternoon, guys. Thanks so much for being here today. I'm Andy Pulido, and I lead our business in North America. By way of background, I joined the business in 2018 via the Humco acquisition when we sold our families business. We spent 2 years integrating the company with Fagron's U.S. foothold at the time. And then I assume the role that I'm in now as the leader of our North American business. If you recall at the CMD 3 years ago when we were in this room, we spoke a lot about our recent Letco acquisition and the commercial synergies that it would bring us. We spoke about our product portfolio at FSS, how we needed one-stop shopping, IV bags, OR syringes, cad cassettes and epidurals. And of course, we spoke about our $125 million run rate in Wichita that we were going to achieve. It's 3 years from now, and we achieved that $125 million and continue to deliver strong growth in our business, both in absolute terms and relative to our peer group in the U.S. In 2024, we reached $383 million in revenue, which represents 44% of Fagron's overall revenue, representing more than any other geography in the group. And what's driving that is a 74% portfolio in our compounding services and 19% in our Essentials business, both with very strong underlying demand. When you look at our organic growth, it remains robust, having just finished 23.1% in 2024, following a peak of about 25.5% in 2023. During that time, our margin profile has remained quite stable as well, having just finished 19.5% in EBITDA. The region also benefits from a great team. So we have 1,441 teammates today or that's as of March 31. Recently, we announced the closure of our CareFirst deal that actually takes us to around 1,550. And we have 63 pharmacists, which is best-in-class and industry-leading for our U.S. market. When we think about our scale and our marketing position, we're #2 in the Brands and Essentials segment and in compounding services in each vertical that we operate. So hospital outsourcing and lifestyle and prevention and health and wellness focused pharmacy. When we think about our market, okay, today, it's a EUR 5.7 billion market, increasing to EUR 9 billion by 2030. So there's very nice underlying trends that are driving that growth. We'll speak about that here. And when you think about where we operate, our geographic diversification and our business lines in the country, we're in key distribution hubs, so Central U.S., so our business in Wichita and of course, in Austin, Southeastern U.S. So Tampa, Florida, our state-of-the-art facility, a new 503A that Vera showed a video of that we're really proud. We have great geographic footprint now with our acquisitions of Fresenius Kabi's 503B as well as our recent deal in CareFirst and of course, our business in Las Vegas, which gives us West Coast distribution as well. I want to show you guys a quick video of our facility in Wichita and Boston, our FSS business that we're really proud of. [Presentation]

I could watch that all day. Okay. So you guys just saw our state-of-the-art facilities in Wichitown, Boston. We're really proud of it. Let's talk a little bit about what's driving the growth in the region. Again, EUR 5.7 billion in 2025 to EUR 9 billion in 2030. We see a few really key trends that are shaping up. Of course, I think in almost everyone's presentation, we've spoken about the quality and regulatory framework and the shifting dynamics that are occurring. We know for certain that our regulators in the U.S. are getting more stringent, they're requiring greater, higher quality standards, and we are shifting regulations. Not all of that is bad. Some of it is very good for players like us who've made great investments in our infrastructure and our teams. We look at changes in USP for state boards of pharmacy. So USP 795 and USP 797, which deal with nonsterile and sterile medicines. We look at the introduction from FDA on draft guidance as it relates from 503B to 503A, which paints a phenomenal regulatory pathway for players like us who have four 503Bs. So we expect this trend over the next 5 years of shifting regulatory environment to continue to play out. We feel that we're very well positioned to capture that as it does so. Telehealth. So it's been very popular recently in the last few years or at least post-COVID, where you have major players like Hims & Hers and [ Rowe ] that are speaking to millions of consumers and patients on our compounded medicines, and we're really excited about this. We think that it introduces not only new patients and consumers to our market, but it also drives categories that Fagron is deeply embedded in, such as health and wellness and lifestyle and prevention with our Anazao Health brand. And so that trend will continue on, and that will really be the key underlying growth factor along with the hospital outsourcing business that drives kind of that EUR 5.7 billion to EUR 9 billion trend. Let's talk a second about the short term. As we've all seen in the last few weeks, there is a lot of talk around tariffs. As a matter of fact, when I was flying over here the other day, we had a set of information. By the time that I landed here in the Netherlands, it has a new set of information. We talked about that. And then we had a dinner last night and it changed again. So it's quite dynamic, to say the least. I won't comment on how this thing shakes out, but ultimately, policy will take shape. And when that does, we will deal with concrete financials and the impact to our business, if any. At this point so far, we've seen a very limited impact. What I do want to take a note of is whatever plays out and whatever policy gets put in place, it will impact the entire Pharmaceutical segment. And there's a few key areas that we're well positioned to capture when that does so. Firstly is our contractual pricing mechanisms with our major GPOs and IDNs as well as our smaller transactional accounts. We account for full pricing pass-through in events such as these, and we work closely with our customers to ensure that it's done in the correct way. We have operational agility like nobody else in the U.S. market because we're a global company, we have factories not only in the U.S., but in Latin America and in Europe that we have access to. So when there is policy that's put in place, we'll be able to act very quickly and appropriately. And then lastly, the global scale of a player such as ours. We buy more active pharmaceutical ingredient and excipient material than any other player in the U.S. compounding pharma market. So that gives us a particular advantage when this thing does shake out, however that may be. Moving into some of the key initiatives for our midterm success. Again, we've talked a lot about quality. That's an underlying theme here. It's not going away. Quality for us will be synonymous with market leadership and market leadership will be synonymous with quality. So it's very important that we stay ahead of the regulations, continue to invest in state-of-the-art facilities and creating a very unified global quality structure during this process. Automation for us, particularly in compounding services. So if you remember at our last CMD, we spoke a lot about we need to expand our SKU count. We have to have one-stop shopping. We need to be able to be a full-service solution. We did that, and it's played out quite nicely for us in the marketplace with our customers. As we enter this next phase of growth, we need to standardize and we need to move the market into certain presentations so that we can more efficiently serve them and realize the efficiencies and the economies of scale of a growing market such as ours. And so the automation will be really, really key in nailing that standardization and then getting ramped up over the next few years when we introduce this. We've made a lot of investment in our facilities. So making sure that we deliver on budget and on time on our major capital projects, particularly with the Wichita expansion and with our Tampa facility like we've done. It's going to be very key for us realizing our midterm ambition. And then lastly, our Brands and Essentials business. For us, the Compounding Service segment has really driven the growth was 74% over the last few years, but we see substantial opportunity, particularly in our brands. And so we want to capitalize on that. It's a strategic priority of ours globally and a strategic priority of us here in the U.S. And so we're taking a pragmatic focused approach on it. We want to utilize the science and the R&D and the clinical data that we've -- that our team globally has put together, and we want to apply it to our local markets with our prescribers. And if we think about it from a competitive standpoint, we're really the only one doing this at scale in our market, and it's imperative that we not only utilize the infrastructure that you guys saw out there in the warehouse for the folks that are here in person, but also the presentation that Rafael showed earlier on our formulary and using our 63 pharmacists to talk to our pharmacy partners and customers in terms of using this clinical data in a way to not only grow their business but help patients as well. I'd also note in our midterm guidance, realizing our profitability goals and our step-up will be key in nailing this brand strategy. On M&A, the North America market continues to remain a robust market for M&A, particularly for bolt-ons. Over the last few years, we've done 4 deals, mostly very focused, disciplined deals that give us geography and market consolidation. The CareFirst deal enhances our product capabilities with a top-notch leading 50-state licensed pharmacy for non-sterile medicines. And then, of course, the Boston facility, giving us sterile to sterile capabilities. And like Karin mentioned, a top-notch customer and great geographic presence. So what can you expect going forward from us? I would expect more of the same, a very disciplined approach, opportunistic. We have the assets that we need today to be able to hit our midterm financial goals and our business plan. So anything that we would do would be to further increase our product capabilities, geographic coverage. It would be adding our sterile-to-sterile capabilities or our registration capabilities to protect the business that we're building, particularly on the sterile side. Okay. Lastly, our focus for the midterm. As you guys can see, we have a very clear and ambitious focus for North America. First and foremost, it is maintaining the highest quality standard. And if we can do this very well, which we will over the next 3 to 5 years, we will have market leadership in compounding services and Brands and Essentials. So you don't get the market leadership without having top-notch quality, and you can't have top-notch quality without making the investments like we're doing now. So this one will be very, very key for us. Further enhancing our operational capabilities, again, the automation projects that we have underway in Wichita, along with the expansion will be very key for us hitting our financial targets for the midterm. And then lastly, if there's opportunistic M&A that we can focus on. In terms of our guidance for the next 3 to 5 years, we expect low to mid-teens organic growth on the revenue side that will be mostly driven on the back end of our business plan. This year, of course, you have the GLP-1 headwind that will come to an end in Q2, but we also have 50-state licenses coming with our 503A Tampa facility in the second half of the year that we're really excited about. And then the -- for our profitability, broadly in line with the group's average. As we realize our automation plan and our facility expansion that coming online in 2027, you'll see us track more closer to that during that time frame. Okay. So now I'll turn it over to Rafael and Karin to wrap us up.

Thank you, Andy. Yes. So maybe to summarize, first, from a financial perspective, I think it's good to just go back to our guidance and our compounding for growth plan and maybe give a bit more granularity on that. So if we look at 2025 guidance, which we published this morning, we reiterated the guidance that we have given in February. So that means that for sales growth, we expect a mid-to-high single-digit percentage of organic growth. And as said by Andy, the biggest differentiator there is the tailwind we had on the GLP-1s. We need to stop with that, and we will. We expect to be in the mid of that given range, depending on the magnitude we have of sales in the second quarter. After that, we stop selling the product. We expect a slight improvement in profitability in 2025, as said, and a CapEx of around EUR 3.5 billion, excluding the one-offs that we explicitly announced. If we look at our compounding for growth plan over the long term, we expect a high single-digit to low double-digit organic growth, as said, against constant exchange rate. 2026, we will still see impact 2 quarters of not having the GLP-1 tailwind anymore. So you will see that translated in the North America region. Other regions, we guide for the numbers we have given today on the regions. REBITDA margin, a nice step up to 21% by 2027. And after that, we expect a gradual increase when the projects, for instance, the one that Andy spoke about in Wichita go online. Strong cash flow conversion, operating as well as free cash flow conversion, a strong element of our business model and clear policies on leverage. So 2.8x is our internal threshold. We have the ambition to doing M&A, but disciplined and also safeguarding our balance sheet. So capital allocation driven and focused on growth, benefiting from all the potential we see in the market organically, but also M&A. And then on top of that, dividend depending on the situation every year.

Thanks, Karin. So we came to an end. And what we have seen here today has been an evolution rather than a revolution. We understood the market where we operate, the personalizing medicine market, the pharmaceutical compounding market. We also understood how compounders help support patients' lives throughout all the stages of our lives, right? We have also seen that during the last 3 years, we have shown strong execution capabilities together with financial -- Dutch financial discipline and of course, we have a clear, easy to explain and execute strategy. Remember that house. And this is powered by more than 4,200 people with a strong company culture. Remember, employee engagement, [ 7% ] with strong company values and a clear purpose, which is together also with you, we create the future of personalizing medicine. So thank you very much. We start with Q&A.

Well, thank you very much. It's the most -- or not the most, but at least an important time of the session. So we have a lot of questions also from the online audience. So what we are going to do is that we're going to take a few questions from you guys, and then we are going to switch and to try to summarize topics from the audience. So Okay. Frank, please [indiscernible].

Yes. Frank Claassen from Banque Degroof. Question on the EMEA business. You think that you can accelerate growth there and compounding services is one of the main drivers here. But as far as I know, it's compounding services currently mainly in the Benelux. So what do you see in the other countries? Do you see the regulatory frameworks easing? And how do you think you can capture the growth opportunities there?

Thank you, Frank. Maybe Kostas, if you can.

Yes. Thank you very much for your question. It's true that the compounding services started like from the Benelux area because they were very innovative in the way they were thinking because they understood that it was not possible that every single compounding pharmacy would have whatever is needed to make compounding. At the same time, at the EMEA level, we see that we also have compounding services like in Israel. We are doing also in Czech Republic. We have also in South Africa. So it's not only in Benelux. What we are doing is that we're doing the mapping to see where actually it is allowed. And regarding your question, if this is something that is going to change, there is also the resolution of 2026, is it 2016 that explains that it's like an advantage for a country to have like facilities doing compounding services. So overall, yes, we see that it is something that's going to grow.

Yes. To complement as well, Kostas, Frank what you see is that, for example, in the U.S., these regulatory changes go much faster than in Europe, right? That normally takes more time. However, we believe that at any point of time, regulation will be supportive here.

Question on the growth CapEx, the CapEx projects, the strategic projects. So we have Wichita and in the Netherlands, and you're exploring something in Las Vegas. Will those 3 projects be enough to, let's say, have the capacity to hit your targets? Or could there be more growth projects along the way?

Yes, very good question. Thank you very much. I think with the projects we announced, we have sufficient capacity to do our compounding for growth plan. So if we split it per region, we invested historically in EMEA, as you all remember, maybe the Poland facility, which was also a Brownfield, very interesting metrics, but we upgraded that facility. We showed the video today of that. We have sufficient capacity for EMEA to grow on the back of that. All other investments that we need to do in facilities are all part of the maintenance CapEx. If we look at the Brazilian region, we have a very big facility in Annapolis, as we also saw a video of that, invested in the recent years within our maintenance CapEx, fully equipped to deliver what we need in the next couple of years in LatAm. Then we have the U.S., which is, of course, our growth region where we invested in a new facility in Tampa, which will bring the additional sales. We have sufficient capacity there now to grow the next couple of years. Same for the Wichita expansion. So we invest EUR 39 million. We get an additional EUR 200 million of capacity, and we expect to utilize that quickly. And then the Vegas part, indeed, we announced that. It's still in the phase that we need to finalize metrics, get formal approval. But with that, we are sufficiently equipped to grow the next couple of years. Maybe if I can add also a bit on the numbers because 3.5% of CapEx is low for a company as ours. That's the reason why we have a very strong cash conversion. However, if you take, for instance, the Tampa facility, it brings us to 5% max because it's split over 2 years. So you go to 5% max. Same with these new products that we announced, excluding Las Vegas, of course, because we're not there yet. It slightly increases the percentage for 1 or 2 years, but we'll see benefit of that. And our strong cash conversion remains an important topic. If we add 1% or 2% on top of that for very good reasons, we believe, I think it's a very good investment that we should do.

That's it for sure, always when we discuss this project, this Brownfield project with the Board and also with the rest of the teams, you see that for us, we take advantage of the licenses, right, for example, the Wichita expansion and also the culture of quality that we were seeing. So it's nice to have M&A. We like to have M&A, of course, because adds value to us. However, when we do this kind of investments, our teams are there, leadership is there. All the things that you have seen today is in place. So the growth is faster.

Yes. And maybe just to add one because a good example for the people that know the company for a longer time, Wichita was also an investment a Brownfield, right? We did a small acquisition, but then we did a whole new facility and look where we are today with that facility. So we do believe that it's an attractive business case to invest in that region. The other regions, we can -- the next couple of years in our compounding for growth plan, all upgrade with the maintenance CapEx that we announced.

Okay. And my last question, the veterinarian market, is that anything which is on your radar in your plans at all? Or is that just, yes. What are your thoughts on that?

Yes, that's a very good question, Frank. And when you look at the therapeutical applications where compounding is useful, veterinary is one of those, right? We have done the exercise because we acquired WildLife's a vet compounder. And we have seen that in our portfolio also in the B&E, we serve approximately 10% to the vet market. It's huge in countries like the U.S. as an example, also, now LatAm is growing Europe as well. So we see an evolution in that market. Now we have capabilities from both the Brands and Essential raw materials and the finished product. So it's up to us to expand that segment with the 3 platforms that you have seen today, right? So in the formulary, we have not yet a comprehensive vet form. However, we intend to invest more there because we believe that this also it's a trend. People spend more in their pets than sometimes, of course, it than in their sales. So it's -- we have the seed planted for future growth.

And the next question comes from Usama.

This is Usama from ABN AMRO. So I have 2 set of questions very fast. The first one is related to tariffs. I know it's a moving object, but in case the worst-case scenario realizes, how fast can you pass on the prices? Is it 6 months, 1 year? If you could just comment on it? And the second one is you have an ambition to grow your Brands and Essentials business. Just on a helicopter view, what would your unique selling point would be for your Brands and Essentials business? Is it pricing, product portfolio? What would you base it on across different geographies for the medium term?

For sure. So the first one, please, Jay and Andy, if you can come on stage 2 of you to comment on the first one.

Yes. I can comment on the pricing mechanism. So we have pass-through pricing. And while we do have contracts in place with major IDNs, particularly on the hospital outsourcing side, we do have mechanisms in place to immediately pass price on if necessary.

Okay. Thank you. And then regarding the Brands and Essentials, unique selling point, as we have seen today, Vera explained us on the SKU breadth. So that's for us, the starting point. We need to understand what the customer needs. And of course, compounding, you have seen that it's very varied, right? There are personalized patient-specific formulation. So it's somehow complex. So we can manage complexity, we win. So that's the first point. And this is being translated in product availability, which we made a nice step up from 85% to 89%. The plants are up to 95%. So that's first. Second, that will be service, right? Second, that's not well set in the marketplace with our customers. That's something that we need to work a bit better. We recognize this one is our unique and superior quality because we are the only global company in our segment, the only global one having operations in India and China with procurement and quality. We have quality people, 3 quality people on site, visiting the makers, as they say, the producers, they see the makers. And we have people in China also going to the producers, cutting deals to bring the products in the different geographies. So that's the second one. And then on the third, that would be pure innovation. What we have seen also, Usama today on the -- that's a very good question that you're raising because we can complement that on the brand side. Once the Pentravan, as an example, remember, the transdermal cream, 90%, it's on the pen of the doctor normally tends to stay. You have seen the revenues. We started with 2 million and it went to 6 million, and you see year-on-year an increase, new patients, right, but also new doctors that come there. And then, of course, when the customer buys the Pentravan normally for BHRT,bioidentical hormone replacement therapy, right, would go with progesterone as an example. So we try to bundle, okay, you want the Pentravan, for sure, you have progesterone with us. So we try to bundle this one. So these 3 would be the main key differentiating factors. Thanks for the questions.

Thank you. We are now taking some questions from the online audience, and we thank you for your participation because we got a lot of questions. So starting from the compounding for growth plan. People asked about how to frame the new midterm guidance in terms of the annual trajectory for revenue growth?

Yes. So it's a good question. I try to give a bit of granularity on the growth. So we gave a high single, low double-digit guidance, of which we believe that we will accelerate throughout the plan. Several reasons. First of all, the phasing out of the GLP-1s, which we have in 2025, you will see that translated into the numbers in Q3 and Q4. You will also see that next year. So in 2026, Q1 and Q2. And that will have an impact on our growth numbers for those 2 years. However, the underlying attractiveness of that market will remain. After that, we also see in 2027 that the new facility will go online in Wichita, which we are well positioned to take market share immediately and utilize that facility. So we expect that growth to build up towards the end of our plan and then towards the back end of that range of guidance that we have given.

And following up on this on our margins. People is asking how should we think about margin by region in the medium term or by full year 2027?

Yes. So we gave an overall margin of 21% by 2027, which is a step-up compared to the 20% we currently are. If you look at the different regions, there are different opportunities and the enablers, of course, and the magnitude of that is different in every market. So we see for Europe that they're currently at 21.5% EBITDA margin, and we see a slight improvement throughout the period driven by innovation, as you said today, of course, but also some operational excellence initiatives that we have. In the U.S., we expect a step-up every year, basically on scaling the facilities that we currently have and the other drivers that we have. We see U.S. profitability, which is currently at 19.5%, moving towards group average over the period of time. So the period of time it's 2025 until 2030. So in the midst of 2027, they will be below the group average still, but they have shown a nice step-up by the inhabitors that we've shown today. And then Lat Am, Lat Am had some dynamics in the profitability driven by that competitive niche we saw a heightening during the early phase of 2022 and 2023. We see that -- that's coming back again, having a positive impact also on our profitability or slightly over 18% currently, but we expect that we will move towards 19% to 20% over the period of time of the plan. They will show a nice step up already this year on the back of that. Keep in mind, H1 always less than H2. We have strong seasonality in that region. However, it will be at around 19% to 20% over the period.

Thank you, Karin. Excellent. Questions from in-person people. Yes, please, Thomas.

Yes, I just wanted to follow-up on the entire tailwinds that you have with GLP-1 looking forward? Are there any lessons learned in terms of benefiting from those types of drug shortages? Is that something that you think you can turn into some kind of recurring business model because it wasn't really touched upon yet. So I just wanted to...

Yes, that's a very good question. And what we clearly see is that accessibility drug shortages is a tailwind for our business, right? We were explaining about the profiles that pharmaceutical companies need to update and sometimes, they decide not to invest there and this product of this therapeutical category in their portfolio falls and then compounding is a great tool, [ 3 ] kilometers from here, hence at [ Euro Pharma ]. We produce right, many products for compounds for drug shortages. What we normally do. And when you take this specific case on the GLP-1s, we have taken this opportunity to gain new customers, right? So customers that, for whatever reason, we're not entertaining. Our products and services, they have knocked our door and we have said, okay, we welcome you, of course. We want to serve and we want to support. Can you also please bring other type of items or services that you would like to get from us? And this is what we do. So if I'm not mistaken, right, Andy, we have gained thousands of new customers at our Nexeo business. And this is how we tend to tackle. And always, please remember, GLP-1 can be an exceptional drug shortages sorry. However, the underlying trend, it's growing.

If I can add a second question to that. Just with regards M&A and it was quite a lot of detail given already. Lots of opportunities where there is growth. Based on what you said, I understand it's mostly I'll talk and opportunistic in the sense that if you identify nice targets, you would go for them at attractive pricing. Is there also like a certain priority in terms of regions and there's still quite a lot of areas in EMEA, for example, but also APAC that was mentioned at some point, do you have a certain priority in mind? Or is it just opportunistic across those regions?

Sure. We can comment [indiscernible] start, of course.

Okay. Yes. So we have a pipeline. As I said, we acquire small to mid-sized companies, usually family-owned. We try to stay a bit away of the PE exits and maybe target family-owned businesses, small, midsized companies. We have a wide pipeline of that, which we nurture, let's put it like that. So we invest in that pipeline, whether it's not executed on the short term, we feel positive that there's an opportunity maybe on the longer term. Of course, we have our internal priorities on where we want to focus. This year, APAC will be in new region, so there's focus on that. But again, no big transformational step in a new region. We want to do a small step, get to know the region, get to know the customers in the region before we explore other opportunities. Of course, U.S., as you can imagine, there are a lot of organic growth initiatives there. So also there, I think focus first will be on the organic growth initiatives. If there's a consolidation within the 503A sector, we will look at that and add that. But I think it's depending a bit on where we are in the pipeline on how we prioritize. You want to add something, Rafael?

Yes. Well said. And we're opportunistic. What we mean right from our Continental Europe to English, right, is that we have a clear road map. So this market is highly fragmented. Thousands of companies in this field. In Brazil, we have [ 3 providers ] for door materials, we have 9,000 compounding pharmacies. The same in the U.S., there are 5 to 7 providers to the market, but consolidated. However, there are more than 2,000 compounders, right? So the magnitude is huge in this respect. We tried to show today that on [indiscernible] the slides, the experience that we have in this market, you have seen Costas was coming from an acquisition of the company that the 2 of you operated together with Savvas. Andy, in your family company, right, with your dad, your uncle, Geraldino, that is not here present today. He was this business leader of a company in Brazil and the owner was not present there. So he was managing the business, right? And myself, I grew up when I was 21 years old with Hans, helped a lot there. So we know the market quite well, right? So we know all the -- not all the players, but we know the majority of them. And when we use the word opportunistic is, for example, Guinama, the acquisition we saw Eduardo. Eduardo has been his entire life working for the owner of Guinama that's Ignacio. And Ignacio is now 72 is a great guy. He's a pharmacist well. He started the business 30 years ago, 30, 40 years ago, and now he's 72 and after 20 years, believe me, 3 times a year, having lunch with Ignacio, with Eduardo, the 3 of us, close to the beach, right, between Barcelona and Valencia a common on, I don't know, now I'm 72, now it's time to -- yes, to join the family. He's very happy. We still have contact with Ignacio and Eduardo, of course, the same -- we grew in the company. So that's when we try to say opportunistic, but our road map is disciplined and very thorough.

Thank you, Thomas. So returning back to the online questions about the businesses. What has been the progress you made on optimizing the nonsterile business and registration business in the Netherlands, since the last CMD? We'll start with this, and then we'll follow-up with more.

Yes, maybe, Costas, you can help.

Yes. It is true that -- okay, even though like I own join that role like last year in July, I'm aware of the situation also the previous years because I weren't been like in the company and being involved like in those decisions. It is true that for the nonsterile business, we did like a lot of steps because we tried also to consolidate -- also to 1 producer, and this is like we cooperate with steel on bringing the volumes to them, which help us a lot with improving like our profitability and also the availability. So continuously the accessibility like for the patients in the market. And starting from 2020, when we realized that for certain products, we have to register them. Our decision was based on the fact that we have to register products, of course, it's not the intention to become like a generic company, but in the end to create registered products that they also have innovation and linked to the niche market. And there, we had like a lot of registrations that they give us also significant revenue and profit. And of course, we continue working in that direction to further improve it.

Okay. Thank you, Costas. And regarding, let's say, the our suppliers' partnership and the relationship we have with them. We have been asked about how -- if we have -- if we can elaborate on our relationship with Hims and if we work together with them on the pipeline or product development Hims and Hers.

Yes. Sure, Ignacio. Maybe, Andy, you can comment or please.

Without commenting on any specific customer because we have confidentiality contracts in place with our customers, at least the large scale ones. I will add that we are all over this telehealth thing. It's a huge trend in our business. It will drive growth in the region. It has for the last 2 years really at scale. It will for the next 5 years. We are not a telehealth platform. We are compounding pharmacies, and we serve compounding pharmacies. So our ability to have great partnerships with these guys. And Hims and Hers is a phenomenal one, but there's also many other great ones, is essential for our growth plan here in the next few years. Because of our capabilities, and it's a competitive market, but with our capabilities, we have excellent access to R&D. We have the pharmacist the need, we have the formularies they need. We own our own analytical testing laboratories, which is really important in the research and development process. So we're a unique partner for these types of companies to help them scale their business and help them watch new products. They're phenomenal marketing companies, but what we found is that most of them are not compounding operational companies, their marketing companies, they know how to talk to patients. So for us, we are -- we have many partnerships but without commenting on that specific one. Hopefully, that gives a little color with the way that we think about it and where we're focused here in the next few years.

So any -- yes, please.

So to the extent you have difficulty passing along 125% increase in the cost of your APIs and excipients. What's the meaning of this comment here on the slide, Brazilian operations as a strategic hedge? Local production provides optionality.

Yes. For sure. That's a great question, maybe Vera as your leading project Atlantic you can't comment on this.

Okay. So I think in general, when you look at the tariff situation, what Andy also said, it's very fluid. So we feel that we are better equipped than the majority of players because of the breadth of manufacturers that we work with and that we have direct partnerships with. Specifically in Brazil, we have set up an operation there that is able to also provide products for North America -- of Canada and for the U.S. It is a lower cost base. So everything that we produce there, we will have the benefit of the lower cost structure that we operate at in Brazil. Yes. So I hope that answers your question.

Thank you, Vera.

Any other question from the audience, please don't be shy. Maarten?

Maarten Verbeek, The IDEA! Last time I wonder 1. I think first for Jay. And you mentioned you've got approval from the FDA. They didn't visit you and they will do a next test later on. Purely hypothetically, when they would visit you again and they will find something which is not in line with what you said you would do, what will the FDA do?

Thank you. First, of course, it is difficult, if not impossible, to speak in hypotheticals especially when you are dealing with FDA and dealing with a regulatory scheme that continues to change and to increase. To the extent, well, #1, if we tell FDA, we're doing it, we're absolutely doing it. We -- that would be not a very good idea to take another approach. If FDA were to find an issue a nuance that they would like to see different, generally, that would come in a 483 as long as they -- as long as FDA saw that we were essentially doing what we were saying we do, and they may want to see something a little different, if so that comes in an inspectional observation where we would then set up corrective actions to take place following that inspection. Anything else they find that may be different than what was covered in the 2024, 483 or the corresponding warning letter. Of course, we come in a 483 observation, and we would start the corrective action process all over again. I hope that answers your question.

Nothing really scares you expect from the FDA?

I would hope not. I mean, again, it is impossible to know until they come back. But our quality team is top-notch, our North American quality leader is top-notch. I do not anticipate any issues.

And one question for Andrew, if I may. In the presentation, you mentioned that you want to become the #1 in B&E. Some questions, who is the #1. And what's the gap between 1 and 2 and how do you want to close that gap?

So we benefit from excellent competitors in the U.S. So we really have 2 principal competitors, disco being the #1 player, [indiscernible] #2 in PCC and #3. We all have our points of differentiation, of course. What I see that Medisca does incredibly well, they have a phenomenal and very easy-to-use ordering platform. They have great scale and great selection on their active pharmaceutical ingredients. They have a nice brand selection as well. What we need to do to close the gap is we need to change the game, and that will come in the form of 2 different ways. Way #1 is a phenomenal brand strategy. When we sell commodities, we go to market with here's our commodity, here's our testing. Here's our source, here's our price. So within all commoditized markets, price is very, very key when there's not other points of differentiation. That's historically, how the market has been treated or how the market has been served in the U.S. When you go to market with a brand, we talk about our science, we talk about our R&D. We talk about the clinical benefits. We talk about the studies, and we compare head-to-head. And what we see is, we have a competitive advantage in this space. And this competitive advantage with the changes in regulation, particularly in 795, which deals with non-sterile medicines and the beyond you stating that you can put on them. This our R&D and our science allows us to compete with an edge because we have studies that the marketplace does not have. So we need to lean into that, and we need to do it now. The last 1.5 years, 2 years, we've been focusing on serving the market. And the market has experienced a nice tailwind with these GLP-1s and anyone that had available capacity, particularly on the sterile side, or had sales forces that needed something to do. They all went here. And so we serve them, particularly in our Brands and Essentials business. As that comes to an end in Q2, we'll get back to the fundamentals of the business. And that is leading with science, it's a strategic priority for us. It is making sure that when we lead with science and we help that customer develop a plan for that particular brand that we follow through with the whole shopping cart. It would be a shame, if a customer came to us, and we only sold them one item that we wouldn't have done a good job. So we need to take that brand approach and expand upon it with our science and also at our actives. That's how we'll compete and that's how we'll take over market share in a traditional market. Now how do we want to change the game? 503B to 503A regulatory changes are phenomenal for us. When we look at our 2 primary competitors in Brands and Essentials, Medisca and PCCA. We're the only player that actually has compounding experience. We own 4 503B -- 4 503B facilities, and we have right now, currently, 3 503As will soon be wind down to 2 after we fully transition our existing site in Tampa to our new state-of-the-art site. We know compounding. So with the increased regulatory changes that will occur in the next 5 years, you will see a much more consolidated marketplace. There will be players that do 10 compounding scripts a day that say, you know what, it's just not worth it for me to compounding. But I have a great relationship with my prescribers, they need compounds. So we have to -- in our Brands and Essentials business, we have to use our assets to help serve that base, and that will differentiate us dramatically versus those 2 players. So if we can do #1, focus on the fundamentals, lead with the brand strategy, do #2, change the game with 503B to 503A, will be in great shape, and I fully anticipate that will take us to the top position.

Great. Lastly, Fagron actually already had disclosed on target for 2030, which was not repeated in this presentation, what was mentioned in your annual report -- and that is a target for Fagron Brands of 30% of revenue by 2030. And also when you look at the possibility of reaching that target, it sounds impossible to me because last year, you already went down to 15%. And if Fagron continues to grow by some 10% to EUR 1.5 billion then brand should grow by roughly 25% per annum until 2030. So what's going on here? Is this target still in place or...

Can I comment on that?

Yes.

Yes. So it's a fair assumption. So we adjusted that target. And the reason we did that we have done that is because compounding services is becoming bigger and bigger. So we said brand strategy will remain. It's currently 15% of total sales. You see the huge variations through the regions. We believe that brands are really important. However, if you have a target where compound services is accelerated growth, especially if in the U.S., that target is difficult to get. So we adjusted the target in this communication to being 35% of the B&E sales. And we think that's a realistic achievable target that we will get based on the items we discussed today on brands and the initiatives we have. So it's a fair assumption and we adjusted to this one.

Thank you. Thank you very much, Karin and Maarten. And we need to get back to the online audience to touch on our enablers, so operations. Vera, what does it take to bring up product availability and first time right? And then is the low-hanging fruit gone and now it gets more difficult or the focus now there is to build from where we are? So it's kind of to elaborate on the product availability and the first time right, please.

Right. Very good questions. So I think, in general, one of the things that we need is disciplined in our processes, so if I look at product availability, a lot of that comes down to one of the levers that I mentioned, which is end to end planning. Yes. So we really need to make sure that we know what we need in the market. We can actually predict that. If we use our data, if we work with that then we know what capacity we need in our factories and we know when we need to order which materials. We're working very closely with our suppliers, making sure that they deliver on time. And those 2 together in combination with our portfolio optimization. And so, we're working very hard on harmonizing labels on making sure that we had some materials for which, at one point, we had plenty different sizes. Yes, we don't need 20 different sizes only in Europe for one specific material. Yes, we need to have the ones that the customer really demands from us and that the customer needs. So we are reducing the number of different sizes. We are harmonizing labels, and we're getting better in our end-to-end planning. And that will, in combination with real rigor and discipline, we believe that we can get to the targets.

Thank you. Now on branch and innovation, Rafael, please. There's a question that states that Fagron Academy is no longer mentioned as an enabler. Remember the house. And we are asking why, why we have removed it. And if we are still holding it, what is the cost of Fagron Academy and the return of it.

Yes, that's a very good question. Thanks, Ignacio. And what we have explained during the specialized R&D section today is that the Fagron Academy platform, which in fact was a formulary with joiner of many colleagues globally and sales team, together with the medical representative team visiting doctors, so we have professionalized under the leadership of Savvas. So we created 3 platforms what we set studies we have done in the last 3 years, more than 1,000 studies, 130 have been published, right? 80 submitted for monographs, that's super interesting. The second, we have worked on the video platform, you have had the opportunity to see in the booth there, 500 hours of content just to start, so we will operate this one. And the third one, of course, is the formulary as such, more than 10,000 formulas with how to compound stability, how to prescribe therapeutical application, right? So now it's up to the sales forces of each region/country to deploy these tools and to convince prescribers to prescribe our solutions, right? So a gynecologist, if you want to prescribe the HRT, you want to make a personalized progesterone script, you need to have a blood test, genetic tests, remember the panel pump, use the Pentravan because you have this assures right? So that's one channel. And secondly, what we are also creating Brazil is super strong, is also a platform to go to medical seminars to medical congresses to also create our own roadshows, with this committee and what really works is when a doctor talks to another doctor. So the key opinion leaders, the key opinion makers that collaborate with us on the studies, do also explain to other colleagues. I have used the progesterone and the Pentravan, the reaction I have had has been superior. And this creates novel effect with number of scripts, the product works, patient returns, patients happy, doctors says, okay. I have now a personalized approach with my patient. I want to do it because I want to have retention and it's a snowball effect that we want to create globally.

Thank you, Rafael. More questions from you guys. Yes, please.

You've made an acquisition on the packaging side, which could be seen as an upstream integration. Do you have plans to do that, to do more of that upstream integration? And if not, why not?

Sure. Thanks for the very good question. What we like to do that is we have this level of understanding also with the Board is that when we enter in a new product category, in this case, as you said, making packaging. We want to first learn something new for us. It's not a big acquisition. So we can play between markets around. We can learn. We have the -- say, the sickness, the child sickness priority has been set. And then when we have a good model, then we'll scale that, right? And this we have done with other activities. I remember many, many, many years ago, right, at that time that we were acquiring repackagers right? And it was at the beginning, somehow difficult. Now it seems easy for all of us. But at that time, it was really difficult, right, because it's new, it's repackaging. We only have here [indiscernible] Bufa and we were growing with that. Now we know what we do. Then we went to manufacturing, right? We acquired [indiscernible], the Czech Republic, the first time that we're manufacturing a cream, a gel a deal, right? So it was the first time for us. Now we know what to do, right? So now we scale it up, right? We have seen today specialized R&D with the branch. So it's the same with packaging. And packaging is something that the compounding pharmacy users. So we want to be active in this product category, of course, all in Brazil by worldwide, but first, we want to learn and then deploy this knowledge across the globe.

Thank you. We have more questions online, but I want to give you the opportunity as you have been here with us.

Okay. So I believe it was the last Capital Markets Day. You mentioned a $300 million run rate revenue in 2027 for FSS. And I'm wondering, if that number is still something you're expecting?

Sure. Yes, you can complement if you want to end on this one. What we try to bring to the audience at that time is the second one-off CapEx project. The first one was Tampa, right, for the reasons that you have heard today. Then we had, of course, Wichita. We have the $125 million target. If you remember at that time, we were not there, right? So, $125 million. And then we said, okay, this factory has a capacity of around $175 million to $200 million, the current Wichita facility. We call it E1 because it's in the east part of the city. So we call it E1, right? So when we $125 million, we see prospects, the market out of the $5.7 billion that Andy was referring, $3 billion is hospital compounding and out of the $3 billion, a bit more than 50% already at that time was less, if you remember, has been outsourced. We believe that the outsourcing trend will continue. So this means that the E1 facility will be filled shortly, right? So therefore, we want to bring new capacity online. And together at that time, when we were making the feasibility study and we decided with the Board, okay, we go for investment. It was $150 million to $175 million. Now we're taking maybe more because of the expansion that we did in E1, right, together with the new revenue that we'll generate from E2 which expansion because it's in the site across the road, 150 meters. So when you bring it together, which will be $300 million as from 2027, as Karin said during her part of the CapEx, we believe that we can fill that quickly will be a plant totally dedicated for IV bag, automated, labeling, visual inspection. We believe we will get there, right, Andy. And therefore, the $300 million as from 2027, we need to fill the facility as well, right? It will take -- you want to comment here as well.

If you look at the growth trajectory over the last few years in the business, we're on that path now. So like Rafael said, we need to ensure the way in which we grow when we introduced IV bags. It taught us a lot about the space constraints that we need in the business and how to introduce automation is quite complex for our type of business. So getting to that number for us it's essential that we nail some of these projects that we talked about for the midterm, but directionally, we're on that path.

But would you exit the year at that revenue run rate? Or you would achieve that revenue for 2027?

Sure. It depends on how quickly we can fill in the factory, right? We believe with the brownfield is easier than with an acquisition for the reasons that we explained today, the capacity that we announced was $39 million in investment with $200 million potential. Of course, we want to have it filled in day 1, not even year 1 -- in day 1, right? It's not a linear pathway, but we believe that we can get filled up quite quickly, 3 to 5 years. However, I see now 3 to 5 years. However, it's not a target is not a specific guidance as it happened at the $125 million, right? Because we have seen that, of course, there is progress along the way. However, we believe that we can bring it, yes, in this period of time, but please I repeat myself, right? It's not a clear target or guidance that Fagron in 2027, '32 in -- in 2032, we have $300 million out of the Wichita sites combined, right? That's -- we're sharing with you our thoughts.

Thank you. Coming back online and on capital allocation and specifically on CapEx. So we have talked about one-off CapEx, you explained before, Karin, now we have been asked about the final cash flow conversion. And so we have been asked about how to bridge the added capacity that we have disclosed associated to the different projects.

Yes. So maybe to start with the CapEx. Of course, if we look at the cash conversion targets that we were aiming for, it's excluding the one-offs. So we explicitly announced our one-off investments, which are 2, which are spread over 2 years, depending a bit on invoice and timing of that and payment of that. So 2025 and 2026, we have the 2 investments that will have an impact on our cash flow. It will bring our CapEx from 3.5%, which is maintenance to around 5%, depending a bit on the timing. So between 5% and 6% on the year, yet you take. So overall, it will have an impact on our cash conversion. I do think that the elements that are really strong at platform is our cash conversion. So if we look, for instance, last year, we had decided to bring factoring down that had an impact of $20 million and still our cash conversion. If you take that into consideration and the one-off CapEx is still very strong. So we had a free cash flow of around $60 million last year, including a $20 million reduction of factoring, including 1 of CapEx. So I think the cash conversion, it will, of course, be impacted by those one-off CapEx. However, the strong elements of our business model remain and we want to benefit, right, from, as we said, the opportunities in the market. And the attractiveness returns we see on those investments that we decide to do.

Very clear. And about the added capacity, we can bridge by projects, Vera or Karin?

Yes. I think it's, of course, a new facility. That's, I think, the biggest one, right, the $200 million, then we have the facility in Tampa, which will bring additional capacity. We have the facility in the Netherlands, which will bring additional capacity around $50 million. And the rest is the new facility we're building or going to build probably in Vegas. So that's how you bridge it.

Sure. Great. Thank you very much. Also on capital allocation, there's another question, not about CapEx, but about -- it states that our targeted capital structure allows us for roughly $300 million of capital to be deployed. Based on the 2025 consensus EBITDA forecast and leverage forecast, okay? So let's take $300 million. What it gives us the confidence that we can deploy such an amount of money? And how would we see the speed doing M&A, growth CapEx and shareholding returns? And specifically, if Purifarma deal finally is not cleared. If we would consider spending money on share buyback.

Okay. Good question. So let's start with our first focus, organic growth. So capital allocation, first focus, organic growth. Investments we've done is, again, the USD 39 million and USD 50 million we announced. So that's our first priority for capital allocation. The second one is M&A. As I said, we have a disciplined approach. So we didn't put a target on that because we don't want to be forced into certain deals. We want to make a good return on the deals. We have a long-term vision on M&A so secondly. So overall, we have room to do M&A, but it depends a bit on the year and the time when we are going to do it and also valuations. Rest of that will be deployed to dividends. That is what we historically did, and that's also what in the future will do. We have sufficient room, if you look at our balance sheet, I think we are there's sufficient liquidity and also sufficient headroom, if you look at our leverage to do additional acquisitions. So to say that we are fully going to allocate such a huge amount to M&A, depends a bit on the deals that we have, the leverage that we have and also the insights that we have in what is going to happen in a very uncertain environment, right? So that's a bit how we see our capital allocation strategy.

Thank you. Very clear. Very Clear. Any questions from in-person audience? Yes, please, Thomas.

Yes, if I can add another question. I just wanted to check in with regards to everything that's happening with the FDA. There is a lot of turmoil on that side and departures and some layoffs as well. From your perspective, do you see any impact on that with regards to your discussions and maybe also in terms of potential scenarios going forward. Is there a scenario where, for example, it might take several years that before they come back. And then in the meantime, that warning letter just stays open or it will not get closed at all. Would that have a business impact? Or is that something that happens quite frequently?

Yes. And so, I'll take this in a couple of parts. #1, the new FDA is still taking shape. I mean Dr. McCary was just confirmed a few weeks ago. So on the positive side, Dr. McCary sat on a board of a company that owned a large compounding pharmacy, Dr. McCary has spoken to compounding positively, that is probably not the history that we have seen with most FDA commissioners. So that is on the positive side. On the potentially negative side because this is still a developing area, would be head count reductions at FDA and really overall at the Department of Health and Human Services, which is the parent entity to FDA and DEA and some other. That is where we tail into your second question, and that is, how long is it going to take to get those guys back into your facility. It's impossible to know right now. I do not believe it will be years with NS. Now whether that happens in 2025, is certainly not something that I would ever be comfortable going to Vegas and putting chips in that pot. It's simply given the turmoil within the agency, the fact that there are multiple 503Bs that have never been inspected, frankly, given the corrective actions that we've shown, I believe our risk level relative to other players in the market is falling and FDA inspects both on their own capacity and on the risk level associated with 503Bs relative to others. So when they will come back, it is impossible to say. And I don't even want to guess, but I doubt it will be 2025. Business impact as long as we do what we tell FDA that we are going to do, and that is to get through our corrective action plan through which we're already 90% there. And we should be done with all corrective actions, May, I think, was the target date that we had placed, and we are currently hitting those goals, there will be no business impact. We're very confident in what the quality team has done with the support of the operations team, of course. So I do not see any business impact whether the letter stays open or not. So certainly, from that perspective, we're very confident.

Thanks, Andy.

To go on the same subject. I think in the call, in December, you said that everybody had -- or that all your peers had received such a warning letter. Now given that you have received a letter to say that you're sort of out of the -- out of trouble. Do you know how -- whether your peers have received similar letters? Or were you actually the first one to receive that?

We were -- we were actually the last of the Tier 1 facilities to receive a warning letter, and I'm not going to name any other competitors, but these are all very in-public information. And so, FDA has been very active, very active in the space overall. I believe they've been more active with the -- what we've easily called the Tier 1 operators, the operators with the largest customer bases with the largest volume of dispense products with the largest revenues. In my opinion, my personal opinion, that is FDA's attempt to mature that area of the industry because you're Tier 1 operators as a percentage of the overall space take a very large percentage. A lot of smaller players, niche players that do small things, but the Tier 1s take a majority of the space and less the FDA, in my opinion, has been more aggressive in pushing the bar higher for those players, but we were the last. So what will happen in the future. Obviously, every -- every 503B, who has received a warning letter is going through the same process that we are, and that is FDA stated its concerns. You enter into corrective actions, you tell FDA what you're doing, and you hope for the letter that we received a week ago. I don't know, if anyone else who received that letter to be honest with you. So to that extent, I'm very comfortable where we are. And from an industry perspective, that -- that's just going to be the name of the game for a while is setting the bar higher, but we welcome it. And if anything, we invite it because we believe it will force more consolidation, and we're in a good position there.

About quality, again, but on the cost side of quality. So we have been addressed that quality and regulatory costs have been disclosed at around 12% to 14%, and if we can elaborate on how much of these costs are fixed versus variable and how much we can scale of this cost, as we grow organically or via M&A.

Yes. So if you look at the absolute amount is between $44 million and $50 million. A large part is related to testing, external testing and we optimize that. So that will go down that external testing that is basically driven by the tissue doing your products you send them to the lab. They come in, you pay for that. We did a big investment in Wichita last year on our own internalization of [indiscernible]. So that part is going down because we will do our own testing. Of course, the more products we do, the more testing we have. So that will remain. Also, if you look at the quality people, part of this is linked to the volumes we are doing, but part of it is also fixed, right? The overhead part is fixed. So on the long term, we do believe that the 12% to 14% will remain at that percentage, as we further optimize despite the fact that quality is becoming more and more important, and we want to invest. We're also, as Vera said in her presentation, optimizing it by looking at the deviations we have. So first time right, for instance, is a good example where we try to optimize that cost structure in combination with internalizing our lab activities. It will reduce our risk internalizing all our lab activities. We're not exposed to external labs anymore, and it also brings our cost down.

Great. Switching to tariffs, the hot topic of the moment. So what are our underlying assumptions that we have made in terms of tariffs for the guidance? And secondly, our potential tariffs as a threat or an opportunity? Interesting question.

Just maybe Andy, that's -- Andy, Karin to the...

To start, it's not included in the guidance. So we believe that, as I said today many times, it's too early to quantify, but we don't expect major impact. We're well positioned to increase prices, but it's not included in our guidance today. If we have more clarity on how it plays out in the world, we will, of course, if needed, just accordingly based on our initial analysis, there will be no big impact on our business. However, that said, it remains very intern, right? So I want to keep that.

And about being a threat or an opportunity...

Maybe it's a good one, Andy, you are to answer.

For us, it's hard to explain without assumptions at this point. But with -- I would just add though that any -- any situation such as this tariff policy change with the right perspective can be seen as an opportunity for us. So we're not going to -- we're in business to serve our customers that are one of our values of our company as our customer is #1. So we will watch this carefully and we'll do what's best for our customers and for our business. But I think it will require a certain perspective going through this to ensure that it's navigated correctly.

Very good. Thank you. Any other question from the...

I've got 2 questions. 1 is as far as that tariff is concerned, if tariffs were introduced, would it change your competitive position in the U.S., i.e., would it affect everybody in the same way? Or would it change that your competitiveness or your competitor position? And the second question is for you, Karin. You've set an upper limit for leverage. But if you believe the numbers, you hope you're going to generate in the coming years, is there an under and [indiscernible] that before you would consider taking more desisifaction on share buybacks or extraordinary dividends?

Financing in English is frontier, right?

Lower limit.

Right. Good. Just to comment on the tariffs one Patrick, what -- well, on the dedicated slide that I explained today, what we try to bring here to the audience is that, first of all, it's uncertain. So that has been said. Second, what we also experienced in the past when this settlement happened at a lower level, of course, is that we were well positioned contractually, right? Remember that we have a contractual obligation with our customers. We also have a transactional business, more in the raw materials. So in the contractual obligation, we will be fine, right? Transactionally, it's also a market price as we see in other markets like the Brazilian one is a good example. And here, we could also transact with our customers. And as Andy also explained today, we have a very good relationship with our customers and our customers acknowledge the situation that we are in, and they also understand that there must be a price impact even. Having said that, we have a beautiful moat, which is scale and agility. And I try to look at Philip from Active Orisi because always in our discussion side and positive interactions to work about the moat. And we see scale as an unique advantage of fiber, right? So what we experienced now, for example, hormones is a huge product category for us globally, right? Compounding is key in this therapeutical category. And we have, for example, as an example, progesterone 16 metric tons as a yearly volume. I think that in each prescription, you are doing less well, milligrams, right? So really feel. So there's a lot of prescriptions that we're preparing globally. And this volume, no one else in the industry has, right? We have been talking today about great competitors. We have heard names. We have also seen the peers on the screen. We can assure you because Vera and I, 3 times a year. We go to our China and India trips. We stayed there for 20 days, really in China, we've got very thin and in India, we get a bit bigger because of the food that we ate. And what we see is that when you talk about 16 metric tons, they can -- they treat you as a king. Sorry to say that, but that's how we're being treated. And when you tell them, a guys, because we have also good relationship with them. This is happening. Are you going to support? And they tend to say, yes, for sure. We also understand we're also customers of them, right? So this means that we are not going to benefit all of this. We're going also to support our customers because they also have customers. So if we would get any reduction the reduction would also be for our customers, right? And we believe that no one else in the industry has this kind of volumes. And this is how we clearly see that. And again, in business, things happen, right? We saw today quality, regulation and competition in that slide, and we could be agile to offset it, right? So this is what's happening to us. We are agile, and we believe also that we can offset this.

Thanks for the question. Is there a follow-up?

Yes, we follow-up, right, thank you very much. It's a nice question because we're at a lowest debt we've ever been at 1.4x as long as I'm here. So we don't have a hard under limits determined with the Board. So we do believe that we are at the low end of where we want to be. We also see that there are opportunities in the market. So from a capital allocation perspective, we want to focus on that. Of course, on the longer term, if they don't, for whatever reasons are there, we need to adjust our capital allocation policy. We do that at that time, if we need to. However, we see enough opportunities to grow organically on the one side, but also in doing M&A, if we see our pipeline. So we acknowledge the fact that we are at the low end currently. And of course, it's good to have a strong balance sheet. We want to invest and invest in future growth. So that's our focus. So no, there's no hard limit, but if needed, of course, together with the Board, we will determine what to do at that point.

Thank you. So getting back to the first right first time concept that we touched before, but now it's about the major drivers for mistakes, human error, customer ordering and the technology, what is the technology to drive improvement here. AI, for instance, so how much do these mistakes cost us in terms of margins and how can, of course, get this to improve. So it's a bit about the underlying of what's behind.

Right? So I think it's a combination. So part of the right first time has to do with the design of your documentation. So you need to make sure that you have the design of your documentation correct, and then you need to have the discipline to follow the full process. What you see in companies that grow fast, and we -- of course, we've seen major growth in which over recent years, you hire a lot of new people, yes. That means you need to train a lot of people, and that means that in the start. You will have a few more mistakes. It doesn't mean that any product that is not perfect, is not -- is going to the market, yes? So you have a very clear release process where those things are checked, and we are basically where corrections are made, yes? So it means you have double work in going back and correcting the documentation. The cost of that I find it very difficult to quantify. Yes, it's a good question. But today, I don't have an answer to that. But we'll think about that one, how we can better quantify it.

Excellent. Any other questions from the audience here, please.

Yes. The Wichita warning letter. Did it have any operational influence last year?

Yes, it didn't. No.

Okay. And my second question is talking about brands, brands. Are there always brands that are owned by the company?

There are some brands where we own the IP, as we said today, for sure, also the formulation. Remember, the base for [indiscernible] that we use also for neonates, right? So it's a family of products for suspension, right, solutions. There are 5 items. 1 is for neonates. For example, in this one, we own the formulation. It's ours. It's our development. It's protected to a 100% is the only product in the market, right, with studies. So we do own them, right? On the other product category that we explained today on the 5 actives, for example, for the [ TICO ], the alopecia branch products, there are 7 items there. And here, we also have submitted 2 patents there, and they are ours for already many years. So no one really can have this kind of items in the market. It's also true it's a very good question because some customers or customers, some providers, right, competitors have tried to copy such a range because it's quite successful. You have seen the numbers, but they don't have the ingredient that really makes it work, it's functional ingredient, right? So we try to protect all these developments that we do, for sure.

Thank you, Carlo. So on the EMEA region, Costas, how does the growth outlook of compounding depends on sterile versus non-sterile? And do we expect a decline in sterile considering alternative treatment options, in particular CTOs?

Yes. Okay. So we -- for sure, we see an evolution like on the sterile business, but still, actually, the non-sterile business is something that is present in the market for many years. As explained during the presentation that there is this kind of trend that is also evidence based that we're switching more and more to ready to administer medications because it's a necessity. So we do expect that this part of the business will continue increasing like over the coming years because it would be like a request lag from the hospitals. Does that answers the question or it's like something that are missing?

No, I think so, yes.

Okay.

Thank you very much, and thank you very much for joining us today, especially for those that have been here with us in person. And for any other questions, happy to touch base at your convenience and to, want to follow-up offline. Thank you very much.