Hikma Pharmaceuticals PLC (HIK) Earnings Call Transcript & Summary

So good morning, and good afternoon, everyone, and welcome to our new Meet the Management series. I'm Siggi Olafsson, the CEO of Hikma Pharmaceuticals. And today, we will meet the management of our Global Injectable Business. This is the first in a series of investor events we plan to hold this year. Since we are all exhausted from the long Zoom meetings, we decided to keep these events relatively short, only 90 minutes. And each event will focus on 1 of our 3 businesses. Of course, we would have loved to host you at our facility, but as you understand, that's not possible at the moment. If we move to the next slide, the safe harbor slide. Before we start, I'd like to remind you and refer you to this slide, the safe harbor statement in front of this presentation. If we move to the agenda, let's quickly review the agenda. I'll kick things off with a brief introduction to our Injectable business. Riad Mishlawi, the President of the Global Injectables, will then take you through more detailed overview of the business. Then Frank Savastano, the General Manager of Hikma Portugal, will present our injectable operation. Joel Rosenstack, the Chief Commercial Officer of the U.S. Injectable business will give overview of our business in the U.S. Riad will then come back and cover our pipeline and wrap up the presentation before we open there for questions and answers for all the participants in the meeting. So if we move to the next slide, I have to start by saying I'm really pleased to have the Injectable team here today. We have a great business, one that has gone from strength to strength in the recent year, and that -- and the one that has the most exciting prospects for the future of Hikma. The Injectables business is the largest of the 3 businesses of Hikma, delivering 42% of the total revenue in 2020 and 57% of the net operating profit. 2020 was another good year for the Injectables business. Revenue, up 10% versus 2019. And the core operating profit was up 12%. As I stated before, we benefit from our broad product portfolio, flexible manufacturing operation, a number of new launches and, last but not least, a very good cost control in the business. I could go on, but I really want you to hear from the rest of the team that are really delivering the results of the business. So with that, I will hand it over to Riad.

Thank you very much, Siggi. Good morning, good afternoon, everybody. We're pleased to have you here today and get a chance to talk to you about our business. We're very proud of what we have done and continue doing to grow this business. We will try to take you through some of the highlights, some of the key points and, hopefully, we'll be able to answer the questions that you would have at the end. I'm very pleased also to have with me here, Joel and Frank. They are 2 key leaders in our injectable business. Again, my name is Riad Mishlawi, I'm the President of the Injectables. I've been with Hikma for quite some time. I started as a Project Engineer in 1990. We are sorry again that we can't host you in sunny Portugal or Cherry Hill, New Jersey, but we just put a short video, just to give you a flavor of our facilities. You play the video now. [Presentation]

Thank you very much. I guarantee you that in person, these facilities look much better. And hopefully, you will get to see them one of these days. The slide -- the next slide, I wanted to just explain to you about the journey to how we got to where we got today, give you some of the history and the story of the Injectables. The story of the Injectables has been driven by organic expansion and strategic acquisitions. I will consider 1990 as the birth of this unit when we started the greenfield construction of the Portuguese plant. I was the product engineer at the time for the facility. And the facility looked completely different. It was 1-story building with 2 filling line. Actually 1 filling line, that will work, so it was really 1 filling line. The facility ran on 1 filling line for some time. 2005, after the company went public, we went on a shopping spree. We acquired a small 30-employee facility in Italy with the lyophilization technology. Few months later, we acquired a similar-sized facility in Germany with high containment technology specialized in manufacturing of oncology products. But the acquisition that put us on the map was the MSI acquisition from Baxter. It was exactly 10 years ago in May. It is hard to imagine that 10 years ago, we were 6% in revenue of what we are today. But also 10 years ago, we had 6 lines, 6 filling lines in all of our networks. Today, we have 30. 10 years ago, we had a handful of products approved in the U.S. Today, we have one of the largest injectable portfolio with 110 products. This acquisition, along with major upgrades and new lines and capacity expansion, propelled us to become a major supplier of injectables in the U.S. in a very short time. On the other side, however, our infrastructure, especially when it comes to R&D, did not match the need for this new business. We knew in order to sustain our position, we needed to work to grow our portfolio. This time frame was very important in the competitive landscape of injectables in the U.S. At that time, if you have been following for some time, the injectables Hospira was having great difficulties. It was in and out of the market. Bedford has completely shut its doors and had, at some degree, with many shortages in critical drugs. Teva decided to close its Irvine facility. So the market at that time was in desperate need for a new strong player. This is where we fit right in. So the acquisition of Bedford in 2014 was the exact reason to fill this gap. Bedford brought us 114 products, many of which were interesting, but needed some repair, transferred our facilities. And some time, at the same time, we acquired -- we had to prepare some of the broken -- some of the broken ANDAs would be transferred to our facility. We also acquired the facility, and we had transferred a lot of the equipment to Portugal. The equipment we use to build and expand significantly our lyo and IV bag capacities. We've also added prefilled syringe capacity and state-of-the-art high-containment facility that we just inaugurated last year. So today, the U.S. market is our largest market by far. It's 70% of our total revenue, while both MENA and Europe was an equal share of 15%. Next slide, please. As Siggi has mentioned, our Injectables division today is 42% of our entire -- of the entire revenue of the company and 57% in the core operating profit contribution of Hikma. In the last 10 years, since the acquisition of Baxter multi-source business, we have been growing at the CAGR of 20%. Also in the last 10 years, we've been the third largest supplier of injectable products in the U.S. Today, we operate 5 manufacturing sites around the world. Frank will have a chance to speak to you about those sites. We operate globally, with presence in 3 major geographies: in the U.S., of course, Middle East, North Africa and Europe. And we do have one of the largest capacities in the world with an estimated 1 billion annual injectable units. Next slide, please. This slide -- in the next 3 slides, I will talk about our markets, I'll talk about the U.S. You will have the chance to listen to my colleague, Joel, for more details about the U.S. I'll also touch a little bit about Europe and about the Middle East. But I thought this chart is very interesting. If you -- just to introduce you about the competitive landscape of the U.S. market and the injectables. So if you look at your left-hand side, you'll see a very interesting chart. 3 players: Pfizer, Fresenius and us, Hikma, supply almost 60% of the injectable volumes in the U.S. Also, what you also can see is that there are more than 100 active U.S. generic injectable suppliers in the U.S. What's also amazing about this, that these 3 players have been holding this position for the last 10 years. They haven't changed. The only thing that changed, Pfizer used to be Hospira. I think this speaks to the strength of those companies. Because if you look between the third and the fourth, there's quite a lot of difference. We have been consistently holding this strength between the second or the third largest. We will swap ranks between us and Fresenius for the last 10 years. However, what we have improved on is the chart on the right-hand side. 10 years ago, if you -- today, if you look at it, we are #5 when it comes to the sales. But 10 years ago, if we had put that chart, we would be in the gray zone. We were beyond the colored part of this chart. What's interesting here is, similar to our many competitors on this chart, in 2014 and 2015, we had depended on 3 major products that constituted around 50% of our sales and 70% of our profit. Today, they represent, shockingly, around 2% of sales. So in the last 4 years, those products were just free falling. And the good thing about it all, why it is a good story, because we managed to offset this very steep erosion by consistent introduction of products to the market. We have been introducing about 15 to 20 products to the U.S. market every year. Although none of them are big blockbusters, but they filled the gap for this steep erosion and more. Next slide, please. In MENA, despite the difficulties in operation and operating within this region, it's 16 different countries, 16 different regulatory bodies, each one with different requirements, we managed to grow this business consistently. Our local presence in most of those countries and our relationship with institutional customers, coupled with our quality product reputation, we are increasingly seen as partner of choice in the region. Our CAGR of 15% over the last 3 years shows that the business has the right momentum. There are a few key drivers for our business growth. The first one is the rules of engagement has been clarified by many of the regulatory authorities. A few years back, our supply chain was very complicated and became very difficult to be competitive in some cases. Some products sometimes had to come -- be made in Germany or Italy, come to Portugal for testing, goes to Jordan for packaging before it goes to be distributed in countries like Saudi Arabia. There were reasons behind that, because there were a lot of requirements on the certificates of origin, there were a lot of requirements that we have to comply with. But recently, things have been clarified, and we are more now more effective and efficient in our supply process. But the other main driver for the growth is our biosimilar portfolio. Our partnership with Celltrion gave us an opportunity to be the first to introduce biosimilars in some of the countries in the region. We started with Remsima, Remicade, which has and continued to perform well. Recently, we added Herzuma, which is Herceptin. And Truxima or Rituxan, and in the process of expanding the launch to all the territories. We're leveraging our EU facilities to manufacture for this region, but increasingly, regulators are encouraging local manufacturing and giving them advantage. For example, in Algeria, if the product is made locally, importation will not be allowed. So we are increasing our investments in local facilities. In Algeria, for example, we're building a new injectable facility which will help us drive growth and -- in the market, and Frank will talk a little bit about that. Next slide, please. Europe. Europe is the underappreciated part of the business, I think. Although 3 of our 5 injectable facilities are in Europe, it really came under the spotlight in 2020 due to the really strong performance in Germany and Italy and also because of the COVID demand. Typically, the European market is a very low-margin market due to the type of business that it practices, which is mainly tender. Many of the European countries in the last, I don't know, 6, 7 years, operate based on just few tenders. They cover the whole country, all the regions. So you either win it all or lose it all, which makes it extremely difficult to operate, because you either lose everything or you commit to large volumes that you have to supply. So Europe always has been the last priority in allocating capacity after the U.S. and MENA. We have a broad portfolio, nevertheless, 88 products in Europe, and we are particularly benefiting from the 2020 new launches. In both Italy and Germany, we saw very high demand on some of those products. In order to help the cost structure of the plants in Europe, we depend a lot on -- we utilize -- we make sure that we utilize all the capacity that we have. And we depend on few very strategic CMO businesses. In 2020, for example, the CMO partnership with Gilead for remdesivir was a very important addition to this business, not only in terms of financial benefit, but also in the technical one. I think we created credibility with Big Pharma and other competitors through the abilities that we have in our manufacturing plant and the efficiency we operate in. I think Frank will tell you a little bit about how long it took us to transfer the product in a very complicated [ lifeline ] product. So we're very proud to be part of the solution. We were very proud to be part of the solution when we transferred this product since as a COVID-19 -- one of the remedies for COVID-19. Our priorities is to grow our portfolio through organic R&D, but also through partnerships. We know we can't develop everything. And in order for us to attract and leverage business development opportunity, we recognize we really need to be in all of Europe. Nobody is going to license you a product for half of Europe. They would rather get one person for all of Europe. And we only exist today in Germany, Italy and Portugal, a little bit of Austria and Netherlands and so forth. We do also operate in the U.K. with a partner. So in the last couple of years, we recognized we have to expand into other big countries in Europe, and we've been registering many of our products in both Spain and France and adding to our existing portfolio in the U.K. which we sell through a partner -- through a partnership agreement. We expect some of those revenues will be generated from those markets in the very near future. We really believe, as we build a stronger presence across Europe, we will be more attractive partner for BD opportunities. Next one, please. Our strategic priority has been consistent. Growing the portfolio, you will hear that throughout our presentation, portfolio, portfolio. This is something that is very important for us. We want to grow our portfolio. We have increased our spending on R&D, added capabilities and resources and developing partners through business development. Our goal is to add complex and hard-to-make products with limited competition. Complexity could be by formulation or by manufacturing technology. We keep investing in our operation. It is the heartbeat of this business, adding technology, expanding capacity, invest in automation while adapting best-in-class quality systems -- practices of quality systems. Expand geographies reach in Europe, we talked about that, whenever strategically makes sense. And identify adjacent businesses where we can leverage our infrastructure, experience and customer reach. And with that, I will hand it over to Frank to tell you a little bit more about the operations.

Thank you, Riad. Hello, everyone. I'm Frank Savastano. I serve as the Senior Vice President and General Manager of Hikma in Portugal. I've been working at Hikma since January of 2012. And since joining Hikma, I've held senior supply chain and operations positions in the U.S. and in London. And in these roles, I represented our U.S. Generics division as well as our Injectable divisions. Before I joined Hikma, I spent many years working for Schering-Plough and Merck in the U.S., but now I work exclusively in Portugal, focusing on Hikma's Injectables division. Next slide. I'll start by sharing some information about our extensive manufacturing capabilities around the globe. So we have a current network of 5 manufacturing plants that supply injectable products that we sell in the U.S., in MENA and in Europe. We manufacture our products in a broad range of delivery systems, and we have specialized capabilities as well. In Cherry Hill, New Jersey, we mass-produce small parenterals and controlled drugs for the U.S. market. But we also supply large parenterals, prefilled syringes and emulsions from there, too. At our flagship facility in Portugal, we provide a wide range of products to all Hikma's markets around the world. As Riad mentioned, we operate some smaller facilities in Italy, in Germany and in Egypt. And these plants are generally producing niche product types, like cytotoxics in Germany, or they supply a smaller range of markets like in Egypt. Last but not least, we're in the early construction phase for a site in Algeria. And this facility will provide us with a broad range of product types, but at a small scale that will give us a manufacturing presence in one of the larger MENA markets. Next, please. So as I mentioned earlier, at Hikma Injectables, we have diverse manufacturing capabilities to support our broad portfolio. In our state-of-the-art facilities, we use automation to protect our products' quality, to reduce our operating costs and to increase our capacity. In addition to making parenterals in the more common vial and ampoule forms, we also have invested heavily in technology needed to produce more of your niche delivery systems and specialized products. For example, our sites use dedicated lines to produce parenterals and bags and then prefilled syringes. We fill our products in liquid, in suspension and in powder forms. And we've even invested in dedicated facilities or the strict controls that you need to produce things like cephalosporins, antibiotics, controlled substances and cytotoxics. I'd like to add that Hikma has some of the world's largest lyophilization capacity. This capability is in high demand globally since it's used for complex, branded, generic and even biosimilar products. Now if I could explain lyophilization, it's a process that's used to freeze dried products that aren't stable in its liquid form. An everyday example of this is powdered milk. So I'll try to paint a picture for you of what this lyo process entails. That's what we call it here, lyo. In Portugal, for example, we have 8 massive lyo chambers. They're each 30 square meters and 2 more smaller ones of 12 square meters. So these units often take up 2 floors when you consider the utilities that are needed to run them. If you -- at the start of every lyo process, the product is in a liquid form. And it's filled into vials in a closed system to protect the product from the bacteria and microorganisms that the people or environment may have. Our lines can use vacuum or they can use nitrogen to fill these products and protect it from oxygen because they're so sensitive. After that, our machines place a stop around the vial. And via robot, it aggregates all of the vials and then it puts it into the lyo chamber. That's the picture you see on the left there. Inside the chamber, the moisture's removed from the product using a process called sublimation. Now this process combines the factors of extremely high pressure and extremely cold temperature to remove the moisture from the product. After this process, the same robots remove the product and move it out of the lyo chamber for further processing. If I can offer one more data perspective. An average product could take about 3 days to lyophilize 40,000 units. In that same period of time, we could fill 30x as many liquid vials. So maybe like 2 million vials of liquids. The moral of my story is that this is a complex process. It requires expensive machinery, highly skilled technicians and product knowhow to ensure the success. Next slide. Besides the capabilities that already exist at Hikma, we continue to invest heavily in our facilities to expand our capacity and our technology. On an annual basis, we budget between $30 million and $40 million to improve our plants in the U.S. and Europe. And in recent years, we built a high-containment facility in Portugal. And in this facility, we also added significant lyo capacity to the network. We place orders for new fill lines and capping machines for both the U.S. and for Portugal. And we're replacing our manual packaging and inspection processes with automated machinery across our network. We've built or we've expanded our warehousing in our distribution spaces, and this will ensure that our supply chain is smooth. But we also continue to invest in new capabilities that align with both our R&D and our commercial team's plans so we can bring differentiated products to the market. Next, please. Another area of strength at Hikma is our quality track record. Producing in the sterile environment is challenging for any manufacturer, but consistently doing it well is a differentiator in itself. We've all seen providers of injectables experiencing hiccups in supply due to their quality or compliance failures. Maintaining consistent supply has provided Hikma with many opportunities to fill the gaps caused by those failures. In order to maintain our quality posture and our performance at Hikma, we routinely challenge the status quo. We leverage both internal and external expertise to do so. And as recently as last year, we had successful inspections by both the EMA and the FDA. However, we know that quality alone isn't a singular success factor. We strive to be efficient suppliers by doing things like increasing our batch sizes and reducing our fill-to-release cycle time. As I said earlier, we purchased new automated equipment for inspection and packaging to alleviate any bottlenecks that could occur. We try to be flexible to the market needs. Our supply chain and our commercial teams are in constant contact, regularly communicating to respond to rapidly changing needs. In addition, we're focusing our efforts on increasing our stock of key products and API to support these market dynamics. As an example, since the start of COVID, we have surges in demand from customers in the U.S. and in Europe for rocuronium. Now rocuronium is a cold chain product. It's used to sedate patients that are being put on ventilators. And as soon as we heard from our sales teams that these products are in need, we modified our plans. We leveraged our on-hand API inventory so we can get started, and we worked with our 2 approved API suppliers to keep up with the surge in worldwide demand. Next slide. In the years before COVID-19 and since the pandemic, customers have come to Hikma to support them with the reliable supply of critical drugs. Before the pandemic, Hikma was recognized by the FDA for introducing and supplying products on shortage. During the pandemic, hospitals in the U.S., in Europe and MENA and regulatory bodies in Europe routinely aligned with us to deliver critically necessary drugs. Hikma also successfully tech transferred remdesivir into our facility in 6 short weeks. This allowed Gilead to meet their COVID-19 supply goals, and it was extremely challenging product. As we look forward to the post-pandemic era, we're confident that Hikma's best-in-class operations will continue to drive Hikma's growth. Some of our capabilities, our capacity, our quality, our efficiency and our flexibility will continue to make Hikma the partner of choice. I'll now turn it over to Joel, who will talk about Hikma's U.S. commercials.

Thanks, Frank. Again, my name is Joel Rosenstack. I am the Chief Commercial Officer for Hikma's U.S. Injectables business unit. I've been with Hikma for 7 years, and I've been in the injectable generic industry for over 20, and I'm happy to be here with all of you today. I'm going to briefly talk about our U.S. Injectables business as well as provide an update on what we're seeing in the market related to COVID and elective surgeries. Next slide. As you can see on the left, we've been able to grow our portfolio at a steady rate and have 115 commercialized products spanning many therapeutic areas. Having such a broad and diversified portfolio is a key part of our strategy and has played an important role in our success over the years and especially during a volatile 2020. Last year, our products used for elective surgeries underperformed for obvious reasons, but we quickly learned that we also marketed 11 of the top 13 products used for COVID patients on ventilators, so that was a tremendous offset. On the right, you can see that our portfolio has been derisked over the years with our top 10 products accounting for 42% of revenue versus 60% in 2016 as we continue to broaden out and rely less on a few key products. Next slide. Diversification of our customer base is also an important focus for us. You can see that the group purchasing organizations remain a very important part of our business, and I don't expect that to change. Other areas of focus for us is the government business, which includes 340B hospitals. And of course, we continue to partner with wholesalers and oncology distributors. The other section in purple includes what I call shortage prevention agreements, which not only include Civica, but also a portion of the GPO business as they, too, are getting very active here in creating new contracts. Strategies for these new agreements include increased inventory levels on select essential medications, calling for manufacturing, raw material and component redundancies and redirecting product to dedicated warehouses. Due to our flexible manufacturing capabilities and strong quality track record, we are very much involved in these agreements, and we are increasing sales in that area. Those shortage prevention contracts, along with our sales to compounders and direct contracts with IDNs are key contributors to our continued growth. Next slide. Let's take a look at the shortage situation in the U.S., where the market continues to struggle. There are currently over 200 products on shortage, of which more than 100 are injectable. Of those 100, Hikma markets around 50. The breadth of our portfolio and flexible manufacturing capabilities enable us to supply more products into shortage situations to help alleviate these serious issues. We continue to grow our broad product portfolio to ensure we have the medicines patients need. In fact, we recently launched Thiamine, which is a product that is currently having a supply disruption in the market, and we are gearing up for another launch that appears to be experiencing similar disruptions. As discussed, we're delighted to be partnering with Civica and some of the major GPOs in an effort to prevent these shortages. Now for an update on the COVID impact in the U.S. market. As you can see on the left, elective surgeries were significantly down last year due to COVID, and I believe there is significant pent-up demand. On the right, you can see the demand increase for some of our COVID-related medicines. And you can see almost a mirror image to the elective surgery chart as a great deal of patients were on ventilators for a lengthy amount of time, requiring significant doses of many of the medicines we manufacture. This is a perfect example that illustrates the importance of having a diversified portfolio that is being produced by a high-quality, flexible manufacturing network. As far as expectations, as I mentioned, I do believe there is a great deal of pent-up demand on the elective surgery front. As vaccines continue to roll out, I believe we'll see elective surgeries coming back at a healthy rate. Now I'll hand it over to Riad, who will discuss our pipeline and our overall strategy for the global business.

Thank you, Joel. If we can go to the next slide, please. As you can see by now, our pipeline is very important. And building it, especially with differentiated products, has been our top priority. So in the last few years, as I mentioned before, we had invested a lot in growing the pipeline. The acquisition from -- of Bedford, for example, added a significant number of products to our portfolio and was instrumental in getting us where we are today. But in recent years, we have increased our investment in R&D, focusing on complex products, hard-to-manufacture products and NPEs where we use the existing products but change potency, delivery system or presentation to make it a little more, I guess, you can call it product-friendly to doctors and nurses. To complement our R&D effort, we made a big push in the last few years to build our pipeline with partner products. And partnership could be licensed, could be co-development, could be by us manufacturing, somebody else developing it. But we partner with companies to give us more than we can do ourselves. The graph on the right side provides a little bit more details into the type of opportunities that we've been able to secure. We've done many, but we have here only the top 20 most attractive products that we have signed over the past few years. We've got some gap fillers. There are some nice, niche, short-term opportunities and also some good opportunities with limited competitions. We also have signed differentiated products that require equivalency studies, litigations or 505(b)(2). Many of these are sizable opportunities with addressable markets of over $100 million, with a couple of closer to $1 billion. So you can see that we have good momentum in terms of building our pipeline, and we will maintain this by continuing to invest in it. Next slide, please. I would just like to wrap up by summarizing our strategy in our near to midterm priorities. In operations, again, you hear us a lot about operations. Frank has talked a lot about what we do, what we can do, what we're trying to do and expanding. It is the heartbeat of the business. We continue to invest in automation and in high-quality equipment and capabilities. Of course, our commercial capabilities is key And customer-focused operation has been the strength of our business and really differentiates us from all of our other competitors in the market. We continue to leverage our customer relationship and maximize market potential. Clearly, the pipeline, I don't want to repeat that again, is a bit a huge focus, as I just explained. I'd just like to add a few words around diversification and expansion, as this is another lever for growth that we identified. I think I mentioned this during the European slide. We like geographically to expand, but it has to be strategic. And expanding in Europe, I explained to you why it made sense to us. We have a lot of potential in the existing markets that we have, and we have to focus on the existing market and grow them. But if we do find, and we did identify a few strategic expansions that we could do geographically, and we're doing exactly that. We talked also about identifying and leverage our experience in adjacent business opportunities. We're continuing to understand what we do, understand the customers, understand our strength and expand and look for opportunities to expand into adjacent businesses. Of course, people are very, very important. We have been investing a lot in our people, creating training, creating all kind of tools for them to get better, to get trained better and be stronger. We have -- I think we built very strong teams across the regions. Given our strong position in the market, we're increasingly able to attract best talent. People are going to be key and always been key to executing on our strategy. I would like to end with a quick summary of our priorities. We are focused on continuing to deliver mid- to high single-digit revenue growth. We're focused to continue growing this business. Of course, new launches will have to play a big role. We are going to -- we are targeting to achieve 10% of our revenue coming from new launches in 2023. This is really an internal target that we set ourselves in 2018. We have been doing good progress. In the Injectables this year, we achieved 7%. We still have 3% to go, and we're confident we will achieve it. We've been successful at delivering very attractive margins for this business and our aim to try to maintain the strong profitability going forward. The key to this is execution. We need to execute on our pipeline. We need to execute in creating efficient operations. We need to execute in keeping our people trained and very -- and motivated. I'm confident that we will be successful and hope that this will translate into increased market share. Finally, I would like to become -- my hope is to become not only the third in volume but also the third in value. So with that, I thank you very much, and I'll give it back to the speaker.

So now we are going to open it up for questions and answer, Layan. And anything you want to say, how people should lock in their questions?

Yes. Thank you, Siggi. [Operator Instructions] And with that, we have our first question from KC.

Can you hear me?

Yes.

Yes.

Perfect. In terms of the products by market size, the pipeline that you have put on Slide 24, when can we expect these big opportunities to be realized? Is it in the next 1 to 2 years? Or are these much more longer term opportunities? That's the first question. And the second question, given your focus on increasing your footprint in Europe, how should we think about the impact of that on your margins? Because Europe is lower margin than U.S. So over the next 3 to 4 years, how do you think margins will shape up for your Injectables business?

Siggi, you want to start with that? And...

Yes. So why don't I start with the margin and then Riad can talk about the business development and when that will be brought to the market. So this is -- so we have delivered a very high-margin business. We have been between 36% to 42% over the last many years for this business. We see that continuing, of course. When we grow faster in MENA and Europe, that could be a little bit dilutive to the business. But we always see the focus, as I've mentioned before, the base of the profitability in the short to medium terms is around 35%. And then as we guided for this year, we are guiding towards 37% to 38% with a growth in both Europe and MENA. So it's difficult to say. Obviously, we will guide for the year. But just to address the point on profitability, we still think this will be -- continue over the short to the medium terms to be a very profitable business with a pipeline that we have, with the position that we have, you've just heard from the team, in U.S., Europe and MENA. And there could be a little bit of movement based on the growth. But overall, I don't see a big change in the profitability based on where the growth is coming, at least in the short to the medium term. So Riad, maybe on the business development.

Yes. On the business development, we have different types of business development. So we have what we call the fillers. Some, we already have launched a few products here and there. We're planning to launch another one this year. But the big product that we talked about are not going to be -- are going to be really starting in 2023, 2024. Those do require some more studies, require -- some of them require clinicals. So we see that this is going to come to fruition beyond 2023.

Our next question is from Pete Verdult.

Pete Verdult, Citi. Just a few questions, same topics. Can we just drill a bit on when we think about the pipeline, can we just return to that topic? Steadily launching 15 to 20 products a year has been the sort of messaging from the company. Is there anything short term that you would want to flag as a significant or more significant opportunity? And then when we think about the pipeline longer term, I mean, everyone likes to think that injectables will be mid- to high single-digit growth. But when does not having a U.S. biosimilar business start to impact the long-term growth outlook for injectables? So that's the sort of first area to come back to, sorry, Riad, Siggi. Secondly and more quickly, just on the margins, did you say that you are now more confident that you can maintain underlying profitability Injectables significantly above 35%? I think previously, it was low to mid-30s. So I just want to make sure I understand whether this is a reiteration of a message or higher confidence in the management team.

So maybe if I start on the last question, and then I'll leave the pipeline to Riad and Joel. So we -- I'm just saying the same, I'm reiterating that you think about the profitability in the short to the medium terms at mid-30s as the overall core operating profitability. And then when we have a good year, there could be better than that. As we said, for 2021, we are guiding towards 37% to 38%. So there's no change in the message of the profitability. So maybe we talk about the pipeline short term. Who wants to take that. Riad?

I'll take it, and maybe Joel can continue with that. So we did -- we always say 15 to 20, and we have been executing to that. But none of them, as I said before and during the presentation, are blockbusters. What makes them very valuable is the opportunities that you have that sometimes the market will present to you. We don't have anything that was really a bright star coming up. We do have good, decent products, but on those -- the way that we market, the fact that we have a big portfolio, gives us even now and then opportunities to make a big star. Joel, do you want to add to that?

Yes. During -- I mentioned during my presentation, we're really launching a lot of products into shortage situations. Thiamine is a perfect example. Last year, we were the first to market on a Nicardipine bag. So although not major blockbusters, the quality of our launches are absolutely improving. And then in the midterm, we've been incorporating a lot of the feedback from our customers into our pipeline development. So rather than launching typical vials, we're going to be coming to market more often with syringes, bags, things that are going to make life a little bit easier for the customers.

And as far as the biosimilar question, we do think it is a matter of when we get into the biosimilars in the U.S. We keep our eyes open, and we keep looking at when the opportunity is going to happen. We are -- we think it is eventually going to happen. The market is still -- there are a lot of competition there. There are a lot of people that are in it. Some are successful, some aren't. We're trying to make sure that we capture the right opportunity to be in this -- in the biosimilars.

Our next question is from Max Herrmann.

I hope you can hear me.

Yes.

Right. Three if I may. Firstly, just again on the European profitability and more conceptually, you obviously talked about the problems with the tender process and how it means that capacity given up to European business comes third after the U.S. and MENA. And I wondered what's changed there. I appreciate you need to get more pan-European in order to win more contracts, but why the change in putting capacity there? Is there no longer as much capacity opportunities in the U.S. and MENA? Secondly, just on shortages. I know you talked in the past about a slightly changed attitude to pricing with shortages and that -- and that may help strengthen your position longer term in the market. Is that still your attitude? Or historically, glycopyrrolate was obviously an example where you made a significant amount of money. It was one of your largest injectable products by far during a period of shortages. And then finally, you talked about the division being your most exciting from a growth perspective. Obviously, it's your largest division. In terms of what specifically there is, is it those 3 assets that you're talking about with $500 million to $1 billion-plus market potential -- or market opportunities, not in terms of your potential for that, but are those the key that get you excited? I'm surprised because, obviously, in the generics, we know you've got icosapent. You've got generic Advair. Those are the clear ones that potentially show opportunities, Ryaltris as well. So those are the 3 questions.

You want to take the shortages question, Joel? And maybe Frank can take the tender.

Yes, absolutely. Just again, our broad portfolio and our flexible manufacturing enables us to really play in that space. You tend to see higher margins for shortage products, because not only are we satisfying our contracted customers at the contract price, but those customers that aren't contracted will be buying off of contract, and that helps increase our ASP. The vast majority of our products are either flat or go down in terms of price erosion. So where we do have opportunities, we continue to look at those opportunities in a very responsible manner, making sure that we continue to provide access to our products to the market.

Okay. Just before I give it to Frank, I just wanted to say a couple of words about the EU. I don't think we're changing anything in the EU. I think the thing that has changed is our capacity has increased. So we are able right now to -- we still prioritize the same way, but we do have capacity that we can service Europe. So that's pretty much the main change. But Frank, do you want to add to that?

Yes, that's exactly what I was going to say. So over the last several years, we've been adding capacity into our network. And in addition, a lot of the products that we're registering throughout Europe are products that we make today. So it just adds to that from an efficiency perspective that we're making the same products that we are very familiar with. And it's -- I think that it's both a product capacity and efficiency are the main 2 drivers.

I think the last question you mentioned about -- I think I understood it right about BD. You were talking about what excites us about some of the projects that we have with BD. Is that the right question? Did I understand...

The excitement for the division versus the Generics division, where we can clearly see what the assets are that are coming through.

As you would expect, Max, this team is so much more excited about the Injectables business than the Generics division. But that's why they are leading it so well. But over to you, Riad.

I think, I mean what excited us about this division is not really one thing or another. I think this is one of the things that we showed that -- we don't have one product that is so dominant. Our portfolio is balanced. Our plants are very utilized, where everything is being utilized. Our cost structure is very strong. So anything that you can add to this business, it will just generate good things. I think we have built a very strong foundation. We have very good portfolio and growing, and with big portfolios, especially in the U.S. If you remember the chart that I put, the companies, 3, they dominate the volumes in the U.S. So this is -- this creates opportunities. And with big portfolio, carrying a big portfolio, then you can -- you have a lot of opportunities that you can capitalize on. I think what makes us excited is little things, not big things. And we've been doing this very little, slowly, and we're maintaining good profitability, and I think we'll continue doing so.

We have a couple of questions in our Q&A panel. This one is for Joel. So Joel, how much of a threat is Civica setting up capacity of their own in the U.S.? The recent announcement implies that this could be a short to midterm threat.

So that's a great question. Thank you for sending that in. Civica is absolutely a strategic partner of ours. When we entered into the relationship, it really showed confidence in our supply network or quality, and we're actually replicating that with our other GPO customers. They're not a material part of our business at this point. You referred to them starting their own manufacturing, that is the case. We know very well that it takes a very long time for things to get up and running. We're looking at probably about 3 years based on their latest feedback. And I believe based on some additional discussions, that their focus is going to be for products that they don't currently have as part of their partnerships. So I think we're a little bit away from them coming in that capacity.

And I think that's a great point because we're not comparing them to an Indian competitor, for example, that we have to compete based on costs. The competition is based on products to make sure it's secure, it's there in the market. Creating a cost-efficient operation, it doesn't happen. You need the volume, and they're just starting. So it will take a while. But their biggest goal, I think, is to make sure that some of those products that are continually being on shortage to become secure.

Okay. So another question we have that was submitted is, what is your strategy for vertical integration into APIs? Do you consider your current strategy of partnership with API manufacturers offers any advantage over own API suppliers?

Yes. We have struggled with this in the past. I think now it's very clear what direction we have to go. We do have a small API plant, but it's designed for various specialty, less than 1 kilo type of product. So if we can't get a product or if we want to jump ahead in a patented type of molecule, this is when we use it. But we're not really there to be in the API business. I think it's a very competitive business. I think the scale makes a big difference in this business. And we really cannot compete with the big Indian and Chinese manufacturers. I think we use them in times when we do have a product that we cannot source a product material for, but other than that, I think we will leave it to that. We'll go for a third party. And it becomes very important for us to partner with third parties that know those molecules. So a lot of our partners that we're doing some good interesting products with are also API manufacturer. They understand the molecule and they also manufacture the API. So yes, the partnership would be great. If we can't do it that way, then we'll try to do it on our own.

Can I add one thing? So I think having API suppliers that aren't necessarily just our own also offers us opportunity to continuously reduce our costs, to provide additional security to the market as well. So we use those levers as additional ways of reducing risk in the supply chain.

I don't want to drill in too much into it, but it's very important -- this is a good question because API relationship with the supplier is different today. Today, API is saying, look, you're benefiting a lot and I'm not benefiting much. So let's partner together. So we don't call them suppliers anymore. We call them partners. We make an agreement that we both benefit. We make an agreement that if we make money, they make money, something like this. So it's changing and it's becoming more a partnership rather than having to be a vendor and a supplier.

Our next question is from Gregg Gilbert.

Siggi, can you hear me okay?

Yes.

Just two questions. My first is on the PD-1 space in the U.S. The Coherus decision to go branded instead of the biosimilar route created some interest and maybe telling. So I'm curious how you think about that particular area, which is obviously a multibillion-dollar area. And maybe a sneaky way for me to ask you more about your biosimilar strategy. And my second question is about Pfizer on that bar or the pie chart you showed, they're obviously a large player. But are they -- do they have a cohesive message to the marketplace? Do you view them in the trenches as sort of a big relevant -- or not big, they're obviously big, but a relevant cohesive integrated injectables player? Or is it more of a hodgepodge and you add it all up and you get a big slice of a pie chart?

So maybe Joel, do you want to start on what you think about Pfizer?

Sure. Yes. Pfizer, really over the last year, has come back in a pretty strong manner from where they were just a few years ago from a supply standpoint. Really can't speak too much to their overall focus and strategy other than what I'm seeing from this seat, which is they are a formidable competitor. They're a very aggressive company in this space. And again, I think they are looking to spend some time repairing some of the damaged relationships that occurred a couple of years ago after the Hospira acquisition.

Maybe if I start on the PD-1. So Coherus announced the PD-1. They also said they are still committed, I think, to the biosimilar. So yes, it's a little bit refocusing the company. I think our capabilities in the innovative development is not at that level that we would go into that field at the moment. There's already, I think, at least 5 PD-1s which are in late development. So that per se isn't our focus at the moment. People think about biobetters around the biosimilars. That could be an open opportunity. We also recognize that the reason we had mentioned that we expect to be in the biosimilars market in the U.S., the question is when to enter, is that after 2023, in a way after the Humira patent expiry, there will be so much many more products that will become available and the IP is expiring '24, '25 and '26. So we feel that, that is really how we think about it because I think the last point, if you look at every biosimilar opportunity, they're either filed or mostly filed, there's 5 plus, 5 to 10 players on each of the molecules that are coming out in the next 2 to 3 years. So that's the reason for the -- in a way why we are thinking about the biosimilars. We are very confident that we have the synergies, especially in commercial, and IP and supply chain and relationships with the hospitals. But also, we don't want to have our first entry into a market where 9 companies have already registered their presence. Maybe, Riad, to add to that. Do you want to add to that, Riad?

No, I think you covered everything.

So our next question is from James Vane-Tempest.

Just three high-level strategic ones, if I may, please. Firstly, thinking about expanding the business just more broadly. Just curious how you think about other opportunities in markets like Latin America, we don't have a presence or other businesses. I mean Kabi has a nutrition business, for example. So are there any other segments where you think Hikma can add value with the Injectable business you already have? Second question is just on your manufacturing capabilities. Do you need any other facilities, for example, in MENA, where I know there's a lot of sort of protectionist policies in terms of local manufacturing? And are there any other capabilities at the group level which you don't have, which you would like to have across the group? And then my third question is thinking about the internal targets, I know you mentioned 10% of new launches by 2023, I think you said you're already at 7%. So I'm just curious how we should think about that in terms of being able to externally validate it. And if you're already at 7%, is that a pretty low stretch in terms of where you could get to by 2023?

Frank, do you want to do the manufacturing part and I'll do the capabilities.

Sure. As far as the other facilities in MENA go, I think right now, based on what we've announced in terms of Algeria, that's where we strategically think is the best place to continue to grow our manufacturing facilities in the MENA. Otherwise, based on the existing network and the supply chain improvements that Riad mentioned, we feel pretty comfortable with where we stand right now. Obviously, that could change over time. But in today's world, that's our current perspective. And then in terms of other capabilities, I think between our business leaders and R&D, we're constantly surveying the injectable space looking for other areas that we want to necessarily enter into. Riad, I don't know if you want to comment on any in particular, but this is an ongoing activity that we're always in.

Yes, definitely. There are always areas that we can get into. And we're looking at not only getting the technology built in, but also couple it with the right product. You don't want to build technologies and not have the right product to use it for. So this is the balance that we are always looking at. But definitely, there are some ideas that we're looking at. And we're trying to work with R&D to see what products can we have in order for us to use this technology. So this is a continuing conversation that we have with R&D. As far as adjacent businesses and nutritionals, it is very attractive. I think nutritionals are a great business. I think it's -- Fresenius is a good being in this business. But I think it's a very complicated business. I think you have to commit to it. It's not only making the nutritionals, but also you have to have the pump, you have to have the bag, you have to have -- so there's a lot to it than just being a nutritional. It's not one product. It's a family of product. It's not one factory. It's a lot more than that. So it's a commitment. And it is something that we look at, we evaluate and we have done that. And at the right time, we'll see if it's feasible for us to get into it or not. But there are other things that we're looking at. Animal health, for example, we're looking at to see if there's an opportunity there. There's a lot in the animal health that is very common to the human products that we make. We're looking at how can we capitalize on this, how can we extend it, expand it. How can we get in this a bit more intensely. The regulatory guidelines for animal health is very different than human. So we're trying to study that and see how can we take advantage of that or capitalize on that. So there's a lot of areas that we think we can leverage our experience, our plants, our products. And we continue looking at where that would be.

So maybe if I take the 10% growth because that was something I -- when I just joined Hikma, I put out as a statement in 2018, and maybe wasn't very much loved after I did that. But overall, it is a really good achievement. Because if you think about the business model, if you have revenue of approximately 10% from new launches every year, and you're experiencing low to mid-single-digit price erosion, you are showing a growth in the business. So the magic is not the 10%. The magic is to compensate for any erosion that you see in the business. And we set this target. And when we set this target, I think the Injectables business was at around 4% to 5%. And at the same time, we are growing the top line. So this always becomes a bigger number with the growth of the top line. So if we -- when we achieve the 10%, it's not if, it's when, I feel that is a very strong pipeline. But it's not only the pipeline on the approvals, it's the execution of the supply chain. It's the execution of the manufacturing plants, because as I have mentioned to investors before, even in 2020, we had more approvals from the FDA and from the agency that we didn't launch because we were so busy with the supply chain to deliver on the demand that we were getting from the hospitals, both in Europe, MENA and in U.S. So it's a combination of R&D, business development and the execution of the operational supply chain to achieve it. So I think when we get to that level, that will be probably best-in-class in comparison to many of our peers.

If I could just briefly add a little bit. What we've seen with all of the products that we've launched is you don't necessarily achieve the greatest sales in year 1. A lot of times, it's year 2 and 3 based on how the contracts work and a lot of things in the market. So when you look at the launches that we've had over the last 4 years, it accounts for over 25% of our business currently. So very, very impactful.

So our next question is from Thibault.

The first one is a concern that I heard from investors a few times. It's about kind of potential pipeline cliff in injectables in coming years as an industry in the past kind of switch to biologics. So could you just give us your thoughts on the timing of this, if it's a concern at all? And maybe it's kind of coinciding with, obviously, your interest in U.S. biosimilars on 2023. And the second question is on biosimilars in the MENA region. I think in the contract with Celltrion, you had options for additional products. So just wanted to know if you could give us an update on the opportunity here.

Siggi, I'll take the second one, you take the first.

Okay. So people -- first of all, on the pipeline, we still have, as you saw the pipeline, we still have a very full pipeline in the U.S., in MENA and in Europe, significant number of products. So in the short to the medium term, there's still not lack of opportunities. And maybe because on the injectables side, it's much less than on the solid oral side, where we are only -- our success is based on launching into a Paragraph IV opportunities. Here, we are introducing products to the market that are in short supply and grow over time. And as Joel mentioned, one of our recent launches this year was Thiamine, which was a shortage product in the U.S. and will continue to grow in our hands. So it's not the same patent cliff where you look into the patent expiry. And when those dry up, and certainly there is only biologic after that, we don't have any products. So -- but overall, what I've said and maintain is in the short to the medium term, for the next 3, probably 3 to 4 years, we have plenty of pipeline to work on and deliver to the market. But when you get to the middle of around '24, '25, to accelerate the growth of the company, you need to have some specialty. Is that pure biosimilars? Is that biobetters? Is it something else in the adjacent business that Riad is talking about? But we would like to find the new opportunities around that time to accelerate the growth. Because you're right, at the end of the day, the small molecules won't last forever, but we still have a very full pipeline to allow us to continue with the growth of the business.

Yes. And as far as the biosimilars in MENA, you are right, we do have a potential to grow our portfolio with Celltrion. Today, we have 3 products. We have done very well with the first one, Remsima. And I think Celltrion is happy with us. We're happy with their supply. We're looking at when and how to expand our business. We're not only limiting also to Celltrion. We're looking at other opportunities. But definitely, the biosimilar is going to be an important portfolio that we want to grow in MENA and add to the products that we already have.

Our next question has been submitted in the Q&A, and this is for Frank. Frank, has there been any shortages of raw materials due to the demand for COVID vaccines?

Well, none that we've experienced per se. So over the course of the pandemic, we've been working closely with all of our suppliers to ensure consistent supply for the various raw materials that we're procuring that we need to produce the medicines that we have demand for. So there's been a lot of media lately about glass vials. Early on in that process, early last year, we reached out to all of our vial suppliers to ensure that we would have consistent supply to cover off our forecasted demand for last year and into this year as well. So far, everything sounds good. The suppliers are continuing to signal to us that supply is coming in. And in the meantime, we've been increasing our safety stock levels across our facilities to ensure that, that remains the case.

I think just to add that in the last few years, we have been building redundancies. So glass vials, we have 4, 5 approved. Some of the raw materials we have multiple approvals of different suppliers. Even sometimes when it comes to the facilities, we have products that we can make in both facilities. So that flexibility that we have kind of also sometimes helps if something happens to one supplier that we have the option to go to another.

Our next question is from Pete Verdult.

One for Joel and one for Siggi. Testosterone, second biggest, I think, product for you guys in the U.S. Pfizer's saying that they're going to be diverting capacity away from their testosterone products. I realize the market is competitive, but given how important it is to the Hikma business, wondering how much of an upside this could be for you short term? That's question one. And then Siggi, forgive me, I realize today is all about Injectables, but it'd be remiss if not one analyst took the opportunity to ask you on the 2 topics that probably dictate the share price most right now. Is there anything -- even if there's no update that you can say as it relates to generic Advair and improving Vascepa API supply, forgive me for asking, but I think it's important.

So I'll take the first question. With regards...

You can also take the second, Joel. Feel free.

I'm sorry, I'm having some issues here with my AV. So with regards to Pfizer, yes, they are having issues with testosterone in the near term. We are a very big player in that space. As you had stated, it is a pretty competitive market. We do have a number of competitors there. So we're able to step up and fill the need of the market. However, I don't think the end result is going to be extremely material, but it's certainly something that we're going to keep our eyes on.

Yes. Peter, I somehow expected it to come. But obviously, we are focusing on the Injectables, but to close that topic in a way, we are working closely on both topics with the FDA on our pre-approval supplement for generic Advair and to find way to increase our -- the supply of icosapent capsules, but there is really no update on those 2 products.

Our next question is to Frank. You've talked a couple of times about the value of the Gilead contract and helping underpin Hikma's reputation in the market. Can you give more tangible examples of how this is proving or will prove helpful?

Okay. I'll kick it off, and then I'll pass it to Riad as well. So I think Gilead and the remdesivir contract was good PR for Hikma. Under -- probably some of the more stressful circumstances in the middle of a pandemic, a big pharmaceutical company had asked us to produce a product that they had extremely high demand, that they were trying to rush out to the market. It was being -- it was given Emergency Use Authorization by the FDA and our teams here responded extremely well. So to tech transfer our product into a facility in 6 weeks is not typical. That's extremely atypical. So from a technical perspective, we were successful. From a supply perspective, we were successful. And this has got a lot of visibility. So why do I think that, that may help in the future? I think it gives us options. CMO opportunities are good options to have. So if other big pharmas saw that and want to approach us about opportunities, then it gives us things to consider. So that's my two cents on the topic.

I think that's exactly that. I think we are not a CMO, but CMO can give you an opportunity, especially if you choose a strategic partner for a CMO. I think you can utilize your plant. You can create partnerships beyond CMO, in many cases. Like in Italy and Germany, we did CMO to companies that gave us licenses for the products that we make CMO on. So sometimes, this opens up. So we like CMOs, but we have to do it responsibly. And Gilead, also as Frank has said, gave us some credibility that we can become a good CMO partner.

Our next question is a lot of the products losing exclusivity in the future are small volume and in the retail channel. Will this invite more competition and its growth likely to be more secular than in the past when manufactured with scale one?

I could answer that one. We do see that there are going to be some more specialty type opportunities, and we're very much interested in exploring those opportunities as well as leverage our existing infrastructure and where needed, build on, if necessary. You mentioned retail. We have a number of products testosterone. We just talked about that's injectable, but sold in retail. We have specialty products in our overall business where we're detailing. So it looks like a perfect fit, that area for us, and we continue to explore those opportunities.

So our next question is from KC.

On your current business, are you able to give us any sense of risk from competition? Maybe the percentage of sales that come from products with, let's say, less than 3 players currently?

Joel?

I didn't hear the end of it, but I think we're -- I know where you were going. So again, the thing that we've seen over the last number of years is really a derisking of our portfolio which allows me to sleep a little bit better at night. As an example, our largest product accounts for 9% of our overall business. Our second largest is 5%. So our competition, a lot of the competitors are relying on 2 or 3 blockbuster products that as soon as they get genericized, we're going to have a significant impact -- negative impact on their revenue and their margins. We really are, I think, fairly well protected in terms of our broad portfolio as well as our broad customer base in all the channels that we operate in.

Maybe I think what KC was also asking, how big portion of our portfolio has, let's say, more than 6 competitors? How much of the portfolio is a commodity injectables versus the specialty that we are talking about? Do you have that, Joel, available roughly? Or...

Even that's a pretty broad number. So we have a pretty even distribution between products where it's us and maybe one other competitor, where it's 2 or 3 players and then the more genericized products. So really a good cross section. And it's always changing, as you can imagine. Competitors are going in and out of the market on a lot of these molecules.

And that's key. I mean the testosterone example is a great example. You have 7, 8 people that are in the market. And then all of a sudden, it becomes something that is so valuable because one of the big players is not doing it anymore. So you have to continue watching the market. And if you have a big portfolio, this is the benefit of having a big portfolio.

Next question is from Rosie.

Can you hear me okay?

Yes.

Fantastic. So two from me, if I may. Firstly, just wondering if you're looking at all at the kind of iron replacement generic opportunity and what you're thinking kind of might come in that market. And then one kind of bigger picture question. How are you thinking about the threat from Indian players? I mean they have been talking a lot recently about kind of entering the biosimilar market in the U.S. and Europe. But how are you thinking about them kind of coming in and taking a bigger section of that pie chart in the U.S. in terms of kind of both revenue and volumes?

You want to start on the iron, Riad? I think you looked at it a few times in your career, I'm sure.

Well, today, we do have iron gluconate. We are the only generic of iron gluconate in the U.S. I think I'm not sure if the question was referring to another molecule that is very similar to the iron or...

It's -- basically, it's the product that people focus mostly on other products that are being used in the dialysis machines [ are given ]. Obviously, it's a huge product for Fresenius because of their linking to the dialysis units.

Yes. It's the iron sucrose and iron gluconate. They're very, very similar. We have to remember that Fresenius is a big player in dialysis. They own probably around 45% of the dialysis centers in the U.S. So they do -- but if they do have license for the exact product, so they would be the customer of their own -- provider of their own network. So we do have iron gluconate, which is equal and everything, except the protocol maybe is a little bit different. We've been doing -- it's been consistent. It's been stable. Maybe Joel can say a little bit more about it. But we try to get into -- we try to develop iron sucrose and we looked at it. But because of the fact that you have the big player of the dialysis is also the supplier of this product, it really did not make sense to us. But Joel, do you want to say something else?

I don't really have too much to add on that, Riad. I think you captured it well. There's a lot of barriers. We've done well with our iron product. And it's certainly something to look at. But as far as the question with respect to the Indian competitors, I've been in the industry for over 20 years, and the constant is there's always more competitors from India that are looking to get in. And recently, as you stated, Rosie, some of them are starting to ramp up. And we'll certainly keep an eye on that. We do have very competitive cost position to be able to compete well against them. We also have very good relationships because of our broad portfolio and our infrastructure with the group purchasing organizations and other customers that are really focused more on high quality and consistent supply versus just a downward spiral on price. So that's kind of what my thoughts are on that area.

We have another question for Frank. Frank, given the COVID environment and fewer in-person inspections, how are you maintaining quality?

It's a good question. We don't rely on the FDA or the EMA or any regulatory body to ensure quality. In fact, we have very strong quality management systems. They're governed by policies and procedures and strong oversight process from the operations to the internal quality units. As I talked about during the presentation, we also do our own internal audits. We use third parties to come and audit us. We are audited by our CMOs. We're constantly challenging the status quo, constantly ensuring that our quality is of the highest standard. So the fact that the regulatory bodies are geared or are coming, it doesn't really change anything that we're doing. But one other thing to note is that it was only last year that the Infarmed, the Portuguese health authority, came to Portugal and did an on-site inspection. And then the FDA did a paper audit based on the Infarmed inspection. So they relied on the local health authorities' inspection and did their own paper-based inspection. So both of those happened for Portugal and it was about 1 year ago to today.

[Operator Instructions] Looks like we don't have any more question, and I think that wraps up our Q&A session.

Susan, any final word?

No. I just want to say thanks very much for joining us. That wraps up the first of our Meet the Management events. We hope you'll join us again in June for a deep dive into the Branded business. And with that, we'll wrap up and just say thanks again to the panel.

Thank you.

Thank you. Bye, everyone.

Thank you. Bye-Bye.