Hikma Pharmaceuticals PLC (HIK) Earnings Call Transcript & Summary

Great. Good morning, and good afternoon. I'm James Gordon, JPMorgan European pharma and biotech analyst. And today, at the JPMorgan Healthcare Conference, it's my pleasure to introduce Siggi Olafsson, CEO of Hikma, for this presentation. And today, we're going to have a 20-minute presentation from Siggi, and then we're going to have 20 minutes for your questions. And you can immediately start registering your questions. [Operator Instructions]. If you've any problems with that, you can also e-mail me. And with that said, I'd like to welcome Siggi to the conference. Siggi, over to you for the presentation.

Thank you, James. Good morning, and good afternoon, everyone. Pleasure to be with you, even though virtually like we are doing today. If we just go straight into the slide deck, if we go to Slide #3. If we start there, it's been almost 3 years since I joined Hikma. And over the time, these 3 years, we have been really focusing on strengthening the base of our business. We have strengthened our teams across the organization. We have improved our commercial capabilities and service level for sure. We have rolled out the operational efficiency and really improved our cost base. We have optimized our portfolio and really with a focus on higher-value opportunities, both what we are offering commercially but also in the R&D. And in MENA, we have really focused our strategy in MENA. We have tiered our market. So we have prioritized our marketing and commercial strategy in the region. So we are able to -- we were able to continue to make progress on all these initiatives in the course of 2020. While obviously, at the same time, we were managing the challenges of COVID-19 pandemic. I will now -- I will talk a little bit about the impact of COVID and the most recent trends I see in the industry from COVID. And then I will go a bit more details into each of the businesses. So if we move to Slide #4, as we all very well know, the COVID pandemic has had a huge impact everywhere, on people, communities, businesses, all around the world. And every market where Hikma operates, there's a huge impact of the pandemic. The pandemic really has caused a fluctuation in the global demand of pharmaceuticals across our markets, both for the injectable business and also for the non-injectable business. If I bring out the U.S., just to highlight, in first half of the year, we saw a pull-forward of the demand. There was -- that was driven by more 90 days claims and refill relaxation. At the same time, we saw a lower health care utilization overall, which translated into a slowdown, somewhat slowdown of the prescription. The prescription volumes have started to stabilize today for sure, but we are still down compared to last year. I think doctor visits are still low, and there is a reduction in diagnosis of new condition. We also saw a -- spikes in demand for COVID-related products. And at the same time, we saw a very much decrease in demand for products that we use to elective surgeries in the hospitals as the hospitals are focusing on treating COVID patients. We have seen, as you see on the graph also, a return of elective procedures, but the trend is now reversing a little bit as the infection is rising in the U.S. Since the outbreak, the treatment protocols for the treatment of COVID patients have changed and relatively fewer patients are being put on ventilators. The percentage of ICU patients on ventilators is down 28% since April peak. But however, the number of COVID patients now in hospitals in the U.S. is at all-time high. So while the percentage of those patients in the ICU has come down, the absolute number of critical patients are roughly the same as they were back in March of 2020. During these times, of course, our top priority has been the health and safety of our employees and the patients in our markets around the world that need our medications. The breadth of our portfolio, really the flexibility of our manufacturing capabilities and capacity, and the strength of our commercial and distribution channel have been most needed and really has served the customers and the patients extremely well in 2020. As we see a continued rise in cases in the U.S. and globally, we are keeping a really close eye to our customers to ensure that we are meeting their needs. But let's move to the Generics. So we go to Slide #6 for the overview of the Generics. Really, the generic business. The background to the generic business, it's gained scale with the Roxane acquisition in 2016. And since I joined the business, there has been a major cost cutting exercise, including, of course, the closure of the Eatontown manufacturing facility. The margin have improved significantly from 3.6% in 2017 to 17% in 2019, and our guidance for 2020, 18% to 19% net operating margin. In 2020, we saw a strong demand for our differentiated product and better than I expected and better-than-expected contribution from the new launches, with some additional demand from COVID-related products. Pricing has been relatively stable, in line with our expectation. So our estimation for 2020 is the price erosion in the U.S. Generics was approximately 5% for the year. If we move to Slide 17 (sic) [ Slide 7 ], really, the key strength to our -- is our broad and diversified product portfolio. Our offering now in the U.S. generic is 97 product. And with the broad portfolio, we are well placed to meet the demands of our customers. We benefit from the strength of our commercial teams and the strong relationships they have built over time with our customers. They've been able to drive a strong demand for our product, not just the products where we see a limited competition, which investors mostly focused on, but also in markets where we are 1 of 3 or more competitors. In fact, around 2/3 of the Generics revenue is generated by products that have 3 and 5 players on the market. And further 19% of our products have 6 or more players in the market. This really, really highlights our ability to compete and manage our portfolio well even in established markets when we are up against a number of competitors. Our high-quality operation, strong customer relationship and our ability to deliver really a consistent supply sets us apart, enabling us to sustain a good market position. We are the market leaders for over half of our products in the 3- to 5-player market. We are also the market leader for 13% of our product in the 6 or more player market. But the market, of course, in the U.S. remains highly competitive. We are seeing increased competition, and some of our top products are under threat. So bringing new products to market is really essential for driving the growth in the business. Moving to Slide 8. In 2020, we launched a number of products, including generic version of Zortress, generic version of Afinitor. We launched dicyclomine oral solution, rufinamide oral suspension. And really, these launches helped us to offset competition on our base business and, of course, the related price erosion that we saw. These launches are really great examples on how we are growing and diversifying our product portfolio. In 2015, we have the smaller, less diversified portfolio with the top 10 products contributing 93% of revenue. Today, the top 10 products contribute around 52% of revenue of the U.S. generic business. The new launches enable us to maintain and even further reduce the concentration of the portfolio. Move to Slide 9. Really, this year, we demonstrated the strength of our legal and regulatory capabilities. Following the approval of our icosapent ethyl capsules in May and the swift resolution of the outstanding patent litigation in September, we were able to accelerate our launch of icosapent to bring this important product to the market as quickly as possible launching in early November. Subsequent to this, Amarin filed a complaint of infringement. We believe Amarin's claims lack any merit, and I confirm that last week, on January 4, we filed a motion to dismiss this new complaint. If we go to Slide 10, we see for the first time, the -- some of the clinical results for our generic version of Advair Diskus. I'm very pleased that we were able to announce by the end of December, after almost 5 years of review at the FDA, that the agency has approved our generic version of Advair. Having only received approval just before Christmas, we are in the early stages of initiating our launch process, of course. On this slide, we have provided some data from the study, which demonstrates the clinical equivalence of our product to that of the originator, with Hikma's test results for forced expiratory volume clearly aligning with those of the originator. Also here, you can see our device, which has very similar economics, operation and usability to the originator. The approval of generic Advair marks an important milestone for our respiratory franchise. The technical know-how and regulatory insight that we have gained from this experience gives us the confidence and the ability to develop a pipeline of complex respiratory products. And so we are expecting to increase our investment in that business going forward. This includes our agreement with Vectura for the global development of commercialization of generic versions of GlaxoSmithKline's Ellipta portfolio. We also have some nice and niche nasal spray opportunities, which leverages our strong manufacturing capabilities in Columbus. When we -- if we move to Slide 12, I briefly will start to talk about the injectable business, which has been performing extremely well over the last few years. We have an increasingly diverse portfolio with less reliance on top products like in the generic business. In the first half of this year, we saw an increase in demand in U.S. and EU, driven in part by COVID-19. As treatment protocols shifted, we saw a slowdown in demand, and elective surgeries have been slow to recover. COVID-19 cases have been rising, and the breadth of our portfolio and flexibility in responsiveness is helping us to keep our customer well served at these times. Moving to Slide 13. We are really -- we have been launching a good number of products over the years. In 2020, we launched 11 products. Many of these were small -- relatively small opportunity, but together, they make a nice contribution and deliver a steady growth over time. The products we launched over the last 4 years are now contributing approximately 26% of the U.S. injectable revenues. Overall, we have an impressive track record of launches when compared to our peers, of course. This means our portfolio is growing and is becoming increasingly diversified. This is creating opportunities for us to -- reducing the concentration risk that we experienced in 2016 and 2017. Moving to Slide 14. Our MENA and European injectable business continued to perform well and support revenue growth for the segment. In MENA, we continue to drive demand across our portfolio, including our biosimilar products, which we are collaborating with Celltrion. We signed an exclusive license agreement with Sun Pharma for the injectable biologic product, Ilumya; and another one in December with Sesen Bio for their oncology product. These are just more examples of how we are increasing patients' access to innovative products in the MENA region. In Europe, we continue to see good performance. We are allocating more resources to this region, of course, with -- and with the investments in capacity we have made and our strong local manufacturing, we are -- now have the scope to manufacture products for this region and are exploring opportunities to enter new markets, including France and Spain. We also continue to grow our portfolios in these regions in the first half of the year, launching significant number of new products, both in Europe and in MENA. If we move to Slide 19 (sic) [ Slide 16 ], as you can see, the Branded business has been steady performer over the years, and margin have been very stable. We have a really strong market position. Our local expertise and the established position allows us really to attract the growth opportunities and navigate challenging conditions, if they arise. Despite some currency headwinds, which we always see, we have seen a good performance across our markets and continue to launch new products in all our markets. Moving to Slide 17, we are seeing a really good performance in our Tier 1 markets, driven by a resilient performance of our broad product portfolio. Algeria had a strong recovery after a really difficult 2019. Since then, the team has done an outstanding job in turning that business around, and this, on a much stronger footing today than before. In Egypt and Saudi Arabia, we saw a good demand across our end market portfolio, and really -- we really continue to launch new products navigating the challenges of working remotely, of course. In Saudi Arabia, we launched 3 new products. And in Egypt, we started to roll out some of the in-licensed product from CSC agreement in the respiratory field. Really, this strong performance of our portfolio and new launches has helped us to offset any reduction in demand on certain products, like anti-infectives. There was a significant reduction in anti-infective demand all across the world, especially in the MENA region. We are increasingly changing our approach from traditional sales approach to more collaborative approach with all the stakeholders in the health care field in our MENA markets. Our teams were able to respond quickly to the challenges posed by distance restrictions as a result of COVID, and we were really able to find new ways to reach health care providers across the regions. This, of course, included detailing doctors online, but also hosting a huge virtual health care conferences in the region. So to wrap this up, if we go to Slide 19, our business today is really on a strong footing and extremely well positioned to continue to grow organically. We have a strong quality record. We have a diversified portfolio and revenue stream with no significant dependence on 1 product or 1 opportunity. Our global manufacturing capabilities allows us to respond rapidly to market dynamics and serve our customers with a wide range of products. We are focused on the pipeline and really have prioritized the opportunities and deliver -- started to deliver on the pipeline in 2020. And last but not least, we have a strong balance sheet. We have a positive free cash flow, unlimited leverage, which allow us for a significant flexibility in our business going forward. So that was the presentation, James. Happy to take any questions, of course.

Great. We will kick off the Q&A portion now, and we've got about 20 minutes for Q&A. Maybe an area to start would be the Generics division, and in particular, you've had some significant recent approvals. So I have quite a lot of interest in generic Advair. Maybe could you just talk -- could you talk about how this product might ramp? Are there any constraints we need to think about in terms of manufacturing or in terms of needing to get the coverage somewhere? Is all guns blazing for it there? Or are still some things that need to happen?

So this is very early in the launch of the product. We just got the approval just before the Christmas and U.S. holidays. But we have started to offer the product. We -- in a way, the market today is that Mylan currently has 33% market share approximately based on IQVIA; Prasco, the authorized generic, has approximately 17%; and the GSK has approximately 50% of the market. How it is, is that the Generics business is the regular generic competition. So when we make an offer to the customers, usually, the other generic companies have right of first refusal. So there is a little bit of a time lag from our offer until we introduce the product to the market. But it's a regular business of introducing generics. When the brand maintains 50% market share, like for Advair, those -- that's build through contracts with the payers -- with the PBMs and the payers. So that would take a longer time. When we introduce the product at the price of the market, I think the negotiation with the PBMs, those negotiations are mainly between GSK and the PBMs, how much market share GSK wants to maintain in that market. So I would foresee that maybe we would move earlier into the generic portion of the market. But over time, I wouldn't be surprised if the branded level in the market will reduce somewhat over time. It's difficult for me to say how much that will be because that will be, in a way, the decision of GSK when that -- those opportunities come or what they do. But overall, I think there is a good opportunity for the product coming to the market. It was a long time coming, 4 years and 10 months, only took the approval for this product. But I still think the market is in place. And by the way, if you look at the market today, for the first time in the last 4 years, the market grew in 2020. Part of that might have been COVID related, but the total volume of generic Advair and Advair product grew in 2020, which is, I think, a good sign for our launch into the market.

And actually, the share that GSK has managed to hold at the Advair market has surprised some people in sense of how much they have held, but it seems that they haven't had necessarily a very high value as maybe they've made some price concessions. Does the dynamic shift depending on how many players there are, whether it's worth the originator, keep on making big concessions versus giving up on a market becomes little bit of a free fall and the generic part of the market substantially increases?

Yes. So it's not for me to answer for the GSK's strategy. I think they might get a little bit upset if I answer for their strategy. But normally, for a normal generic introduction, the more generics there are in the market, the more price reduction is from the brand, the more costly it is to maintain a brand market share in agreements with the payers. So I think the more players there are, the more expensive it is to maintain this kind of a market share. But of course, it's the decision of the company, how much market share they want to do with this kind of arrangement.

And should we think of this as quite a short-term windfall for Hikma or something that could be quite a sustained generator of cash flows? How many other people do you think are going to come and ask you? And how long are you going to have the current status quo?

So I feel good about this opportunity. Clearly, maybe there's at least one other company that have announced they have filed this product. That is Cipla that announced middle of last year. Even though I don't expect them to take 4 years and 10 months to gain approval by the FDA like we did, but it will take some time to get approval. These are very complex products. This is a combination of 2 active ingredients in a device, in a respiratory, where you have to have a clinical study. So I think even in a 3-player market plus authorized generic, this will be a good market. I'm sure there are other companies developing this product, but this feels like a relatively good opportunity for some, at least in the short to the medium-term going forward.

And when we think about medium-term in Generics land, could medium-term -- could your peak sales be in something like '23? Or could it be nearer dated?

So usually, the peak sales happens in the first 18 months of the product because after that, you start to see the competition. But I think that -- how I explain these products is, these are products that have a long tail end. What I mean by that is if you have a regular tablet or relatively simple development, you gain a market share in the first 3, 4 months and you maintain that, but it declines. And when you have maybe 7 players in the market, the value is next to nothing. I don't foresee there will be 7 players on generic Advair. So the tail value of this opportunity could be a very long -- there could be a very long tail value of this product.

And how should we think about profitability for a product like this, both in terms of what will go through your P&L and then maybe also after any pay aways? Is this something that would be accretive to your margins?

So it will be accretive to our margins. I'm not going to guide yet on because we are in this close period, and we haven't guided for 2021. But remember a year ago, we guided for 2020, hoping that we would launch some time midyear or in the second half of the year, and we showed that it would be accretive to the overall profitability of Generics at that point in time. It's the same situation now. In terms of royalty payments, we have already accrued for them on our balance sheet. This came with the acquisition of Roxane in 2016. So the profitability on our P&L will be, in a way, what I call a clean profitability. All the royalty, obviously, even though they affect our cash flow, they have already been taken care of on our balance sheet in the business.

And maybe if we shift to another pretty recent launch. So you've now got generic Vascepa in the market, that launched towards the end of last year. In terms of that, I guess, similar question, but in terms of that product, are there any constraints about what you can be doing there? Are you capacity constrained in how much you can make, for instance?

Yes. So at the moment, we are restrained simply to build inventory and capacity. And that is linked to the access to the active ingredients. So we decided to launch this product in early November. We, obviously -- we don't talk about what kind of market share we have. But I think, you, James, you have looked at the IQVIA data, and you know that we are at approximately 10% to 12% market share for this product. We are working on increasing our capacity and output for this product because there is clearly a need, and patients are looking for alternative for this product. And we expect in 2021 to be able to increase our output. But the reason why we chose on relatively low market share is, what we wanted to do was to take a market share that we could maintain. We didn't want to take 40% market share and then walk away from part of our customers if we would run out of inventory. We wanted to take the right amount of market share, where we could service those customers over a period of time. And then slowly, we are going to build in our inventory and be able to take more market share in the market as long as the opportunities are out there.

And similar questions out there. At the moment, it's just you, but what is your expectation in terms of how much competition? When could other people come in? And how intense could that competition be?

We don't know. Well, there are 2 other companies that have approval in hand. Dr. Reddy's has approval, and Dr. Reddy's was with us in the patent lawsuit. And Teva has approval in hand. And obviously, Teva has a settlement. There are some public information that they might be able to launch based on their settlement. It's not for me to answer that question. The fourth filer is there, too, but they don't have approval. So I think this will be a crowded market over a period of time. But I think it's also important for us to be the first to the market. I think that shows our technical capability. Also, I don't think investors realized how strong IP capabilities Hikma had and our understanding of the market and our strategy, and I think that really talks highly to that. This is a product -- probably, it's got more attention due to the originator of this product and the opportunity for Hikma per se. But I think, for us, and I want to highlight to people, it really highlights our technical R&D capabilities and IP capabilities of bringing this product first to market.

Just on the legal front, is the legal situation entirely resolved now? Or are the things still going on in the background? Do we need to keep an eye on anything there?

No. So obviously, I think, Amarin filed a patent lawsuit against us, again. They are taking a second bite at the apple. We, as I mentioned in my presentation, we filed the motions to dismiss on January 4, and I strongly recommend that investors read that motions to dismiss because we feel this is -- there is no merit for these legal actions, and we are going to defend that very vigorously.

Maybe last one on Vascepa, which would just be, how do we think about the profitability for this product? So there's a raw ingredient, which maybe is a bit more expensive. But over time, it sounds like you're going to be getting more supply over here. Is this a product that's going to be accretive to your gross margin? Is it going be accretive to your EBIT margin for the division?

No. So in the beginning, in the launch quantities we have, it's not going to be accretive to the overall gross margin of the business. It is because the launch quantity we needed to buy, we had to buy some time back when there was a limited competition in the market. But we believe that the cost of goods sold for this product will improve over time when more capacity comes online, and this will improve the cost of goods for this product over the year of 2021 and into 2022. But at the moment, in the initial phase, the cost of goods is very high and has a lower margin than our average gross margin in the business.

And if we think a bit more broadly, are there other sort of moving parts for Generics for this year? I think I heard you in the presentation talk about a nasal spray. So where are we on those?

So there are interesting things. So remember that we licensed in Ryaltris, the nasal spray, the combination nasal spray for allergic rhinitis from Glenmark. That is now pending approval at the FDA. I think Glenmark is working very hard with the FDA to secure that approval. You saw that Glenmark licensed the rights out for Europe, I think, last week. So I think that could be a good opportunity. We are preparing for that launch. That is a 505(b)(2). So it needs to be promoted. And we are building the infrastructure, the marketing material, the contracting with the payers, et cetera, on that product. The second product worth for looking at is our 505(b)(2) of naloxone nasal spray. This was a product that we acquired with the acquisition of Insys in 2019. This is in a way, when Narcan is a 4-milligram nasal spray, this is an 8-milligram. The feedback we hear from doctors and emergency ambulance workers is that simply 4-milligram is sometimes not enough dose. So that's why we are quite excited about that opportunity. We got a major CRL on that simply because we needed to move the manufacturing from Insys to our plant in Columbus, Ohio. We have now submitted all the data on the move to Ohio. We have already started to -- we have validated the manufacturing. We have a stability data. So we are hoping that maybe some time in 2021, there could be some movement on that regulatory front. Obviously, it's difficult to do. As I've said, when I was talking about generic Advair, when you have a major CRL, the average approval time is maybe 9 to 12 months. So we look to, maybe by the end of the year, to have some movement on that. But those are very interesting products which is right up our technical capability, but also, I think, moving the business a little bit into 505(b)(2) area.

And you mentioned 505(b)(2). So these are products that would require some promotional expense. Do we need to bear that in mind when we're thinking about OpEx for this division?

Yes. So how we think about it is, we have always had a small specialty business within the U.S. generic business. We have been promoting Mitigare, which is a colchicine product used for gout. Mitigare has been doing very well. We have a small rented sales force of approximately 50 to 60 sales reps, which have been promoting that. What happened last year is that Takeda has a colchicine tablets, Mitigare is a capsule, where they lost a patent case against Mylan. So the tablets have now become generic. So our Mitigare brand, even though it's still doing very well, it's a declining asset simply because the tablets have become generics. So we are shifting in a way the cost structure of lipid from the Mitigare over to the Ryaltris and building that out. Yes, will there be a little bit more investment there? For sure. Will it be a little bit dilutive to the overall profitability for the first year in the launch year? For sure. But overall, it's not a big movement due to the shift in focus from colchicine into Ryaltris on the naloxone spray. So I feel the strategy is the right. Yes, we will invest a bit more into the sales and marketing, but also, I think we will have a broader and less risky portfolio than just promoting one product.

And you put a chart up in the presentation, which was showing the progress you've made on profitability for the Generics division. Is that a trend that can continue? What are other things we need to be mindful of? I mean you mentioned pricing. Are there other reasons why you can't continue to improve the margin for this division?

So I think with the portfolio I have today, and I have to be careful now because I'm not guiding for 2021, we are going to do that by the end of February. But if you look at it by introducing generic Advair, I think there might be an opportunity to be in the 20s with a net operating profit of this business. What I also mentioned is now, when I'm finally showing and seeing success in the R&D area, in delivering finally the approval for generic Advair, showing the approval for icosapent, delivering on the promises on the pipeline, I'm seriously, as I mentioned, considering investing a little bit more in R&D. So the net margin might not increase over time, but I'm seeing the opportunities to see the increase in profitability now maybe to allocate a little bit more investment to R&D. What I've said before, James, was, and I've said it since I've joined Hikma 3 years ago, I think a business of our size should have an investment in R&D between 6% to 7% of revenue. We have been at 6% over the last 3 years. So my thinking is maybe there is an opportunity to increase to that to maybe getting closer to 7% when we have a time of the increased profitability in the underlying business and reinvest maybe the profitability -- some of the profitability from generic Advair into the Ellipta development to continue the growth of the business. So overall, very pleased with the increase in profitability, but I might use the opportunity to invest more in the R&D area.

I think I've been dealing with that long, and I've asked quite a few questions about Generics. So maybe just to switch gears to ask at least something on Injectables. So you were talking about how with COVID-19, that's a negative for elective procedures. How bad is that? As it -- how much of Injectables is actually sort of aligned to elective procedures that could be impacted? Could that be a big impact in '21? Or there's quite a lot of that already in the base for '20?

So how I think about 2021? I think if I think overall for 2021 for the injectable business, I think there is one headwind, where I don't think we will replicate the increased demand we saw due to COVID. I think what we saw in March and April, that will not be replicated simply because the protocols have changed, the treatment options are different. There is antibodies today. There is -- there are dexamethasone. There's different ways of treating patients today. So that is the headwind for the year. But the tailwinds could be that if there is more of a balancing of the elective procedures, it's difficult for me to measure how much that is because the vial doesn't know if it goes into the emergency room, if it goes to a COVID patient or elective procedures, the vial doesn't care. It goes into the hospital, so I can't see that exactly. IQVIA is trying to measure that, and I showed that in one of our slides. But I also feel this could be a tailwind that when they come back online, it's not like all the elective procedures that could have happened in 2020 will go away. They might come back in 2021. And on top of that, I wouldn't be surprised if we would deliver another year of 10 to 15 new launches in the market. So I'm very optimistic on the injectable business in 2021. Yes, we might not have the same COVID demand as before, but I think the elective surgeries might be a tailwind on top of the new launches in the market.

I can see we're almost out of time. Maybe I'll just squeeze in 2 questions that have been registered. One is that -- so in your slides, you note that only 20% of the generic portfolio has more than 6 players. What did this look like 3 years ago? Does it imply that 80% of your business has a risk of seeing increased competition as there are more lucrative opportunities on average?

So there was more 3 years ago, for sure. So we did a cleanup of the portfolio. We -- you need to think about it from the point of view where we manufactured and our cost of goods. So since 2017 to 2020, we have improved also our gross margin. Our gross margin in 2017 was 36%. We will be -- we're guiding towards the mid-40s at the moment. So there's a significant improvement. Part of that was the cost reduction in the manufacturing plant, cost reduction in API. But part of that was to prioritize the portfolio. We -- some of the commodities that we offered 3 years ago, where we were competing with many of the Indian and the Chinese players in the market, we simply cannot compete with a cost for products that are manufactured in Columbus, Ohio, versus Hyderabad in India. It's simply not sustainable. So I think our portfolio today is very different. Could we get more competition on our portfolio? Yes, of course, we could. But that is the nature of the business. But I think the portfolio that we have built today with high containment oral oncology drugs with a nasal spray, now with a respiratory portfolio, I think we are in a good position to maintain the margin. But also, I think we need to understand that we are not going to compete with our cost infrastructure on the big commodities that's out there, where the biggest price erosion has been.

Makes sense. Thank you very much. I can see we are out of time. So thank you very much for joining us today, and enjoy the rest of the conference.

Thank you, James.