Hikma Pharmaceuticals PLC (HIK) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Hikma April Trading Update. My name is Betsy, and I'm moderating your call today. [Operator Instructions]. I will now hand you over to your host, Riad Mishlawi, from Hikma to begin. Riad, please go ahead.

Okay. Well, good morning, everyone. Thanks for coming here and good to see you all again. As you all know, we had our press release this morning, we reiterated our guidance for this year. We have also certain points. I'm just going to go through some the messages that we had put across. The first part was that, we're very happy that we started the year picking up the momentum of last year. So it's been strong across all 3 businesses. As you know, last year, we talked about capacity for the injectables for quite some time. And we did say that we had installed 2 new lines. So we'll see the benefit of those 2 lines, now they had released lot of the problems that we have with capacity. And now we feel that the lives are giving us what we need. The Branded business is off to a good start. We were also always talking about the currencies, especially the Egyptian currencies in that area. And we -- I think Khalid will talk about this a little more, but we see it easing off and better than expected. So we feel that this division is also off to a good start. Generics is also performing well. You know all the story of the sodium oxybate and the momentum there, and we feel that this is continuing, especially on the top line. And we will answer some of the questions that I'm sure you have. And last week, most importantly, with this division, we had announced change in leadership. I think we always felt that this division, in particular, we needed to be -- we need to improve our R&D output, new products, BD and so forth. So we had -- we announced last week, was it last week? Not last week for the change of leadership and Hafrun Fridriksdotti will be joining us. She has incredible career in R&D and in technical aspects of this industry, and we feel that she will fill in the gap that we desperately need in that division. And overall, we're really excited. I think we are off to a good year and I hope this continues. We are pretty sure and confident that this will continue and this is why we reiterated our guidance. So with that, I'll open it to all of you to ask your questions.

It's Alistair Campbell from RBC. Maybe I'll just start with that change of leadership in Generics more specifically increased emphasis on the pipeline R&D. Do you think you'll be able to deliver that and achieve that within the current sort of broad margin construct you set as for that business going forward?

Yes, I think so. I think there are 2 different things -- the change of leadership will bring to 2 different things. The first is strengthening our R&D. Our R&D output, it's been weak. We have a very soft submission rate, very soft -- and our portfolio has been very soft for the future portfolio. So that's the first thing that we need to strengthen. I know this doesn't come overnight. That takes time to build. But the structure of this needs to be put together and the focus on getting this started and picking the right product for this business, I think the experience in doing this is very important and very positive. The other thing that it brings in is, as you all know, we want to invest in this business. We want to get products. So the evaluation of which product should we go after, what companies can we codevelop products with, and what should we acquire with. There are a lot of aspects to this that we need that deep technical knowledge to help us making that assessment and I think she will definitely bring in a lot of that value in.

Maybe just a follow-up question on the back of that. Emily from Barclays. If you could just perhaps describe within Generics R&D, are there any particular therapeutic areas or looking at more complex generics, more respiratory, you could just maybe expand on sort of opportunities for enhanced R&D investment just within Generics?

Yes, sure. I mean, of course, we want to go to something that we're a good technology and something that we're good at, something that we can manufacture ourselves that would be even better. So as you know, we're good in nasals and respiratory products. We have lines for those with a good technology. We have also a good market share with some of those products. So we'll continue to build on that. So this is the focus is how to build the products that we have to develop or acquire or add to the portfolio that we currently have. I think that's the focus. Also, there is a focus on what technology should we get into. We have a huge plant in Columbus. I'm not sure if any of you have seen it, but it's absolutely beautiful great area and has a lot of technology. We can absorb more technologies. We can invest in those technologies. I think it is the same concept that we did with injectables. Injectables our success is, we went ahead not only [ after ] products, but also [ after ] technology that will create differentiation. Complex products is definitely something that we want to get into, but that takes time. And we will start building that, we have some in the pipeline, but we need to build more, but also technology is something that will create a great differentiation between us and our competitors.

Just I have one going on to your R&D focus. There bit of an update on it as the Ellipta collaboration that you had and what the progress is with regards to that in the Generics division? And also, there was a big change in Advair the generics at the beginning of the year. And I'm trying to understand what was the driver to that? Perhaps it seems to have given up on defending that franchise. And then maybe with injectables and the increasing capacity that you talked about with the 2 high-speed lines and, obviously, the slated growth in the division means that, that capacity will be used pretty quickly. So what are the plans in terms of expanding beyond those kind of 2 high-speed lines?

Yes, great questions. The first one for Ellipta I can give you more information. I can tell you that the collaboration continues. There's always an update and evaluation, and I'm happy that Hafrun will also help the evaluations of where we are, what we need to do and how can we accelerate this. This is something that would be very much our desire to add to our franchise that we already have today. So I think her experience and our assessment of where we are will be very valuable in this case. As far as Advair and what's happening in this year, yes, when -- at the beginning of the year, as you know, with Inflation Act that they had, there were a lot of -- and GSK seems to have decided to let go some of the market share that they had. And of course, as you can see, and you all probably can see that we had decreased our market share with Advair. And the 2 -- we have about 25% of market right now and I think Mylan has 40%. And so I think there is an opportunity for us to pick up what GSK had left off. Of course, that needs -- this is a complex manufacturing, and we need to make sure that our production is up to the par, and we pick up the contracts that we can deliver. So we are very busy doing this and our sales people and commercial people are doing a great job with this thing. So it has been positive for us. As far as the capacity in injectables, we have a good problem in injectables that whenever we add capacity, it seems like it gets consumed very quickly. So it's good. The demand is there. The only problem with that is adding capacity in this particular technology or a particular segment is not easy. You need to have planning. But luckily, our engineers are always ahead of the game. We just started building our fifth plant in Portugal. Actually, they started backing around 2 weeks ago. Equipment has been ordered. We have huge lines that have been ordered, lines that's already on order. This will take a couple of years before it actually materializes, but we're excited about this. So as soon as we got new lines coming in -- as you know, the capacity in the injectables has been going -- the expansion of capacity in injectables has been going on beyond Portugal. We have added a line in Cherry Hill last year, added also a fast line in Portugal. We have completed 2 plants now in North Africa that will be validated this year sometime or we will open the door towards the end of this year. Italy is also -- we doubled the capacity there, and they're in the last phases of validation and installation and so forth. And that should be coming in also at the beginning -- at the end of this year. But we also feel that this unit can also absorb a lot more demand, especially with contract manufacturing and other -- the growth of our products. As you all know, last year, we added 17 new products to our pipeline. This year, we're also adding some good number of products. So we're always growing. We're growing our portfolio. Demand is growing. Contract manufacturing is growing. So capacity definitely will always be needed, and we are planning ahead of time to continue adding capacity as we go.

Paul Cuddon from Numis. Just going back to Generics, I'm afraid, but you seem to be painting a picture of a sort of weaker pipeline to come through in the kind of years ahead. So I'm just wondering to what extent your previous $100 million to $120 million base profitability if more uncertain. Or are your new plans intended to grow that baseline generic profitability? So that would be the first question.

No. I think I'm not -- I'm very confident that the $100 million, $120 million that we had previously given the market is something that we can stick into -- stick to, and that would be the minimum number [indiscernible]. We want to make sure that the foundation of this division is strong and we want to build the future. So we don't want to depend on what we have today, but what we will have and can get in the future. I think there are 2 things that you want -- the changes that we're doing in this division shows, one, is our commitment to this division. We believe that this division is -- has the right foundation. We just need to make sure that we create a future to it. We have the right technology. We are in the right location in the United States, fantastic quality record. We have [indiscernible]. We are one of the largest facilities in the U.S. So we have all the elements to make this more successful than the way it is. I think what stands between us and doing this is creating future, creating a portfolio of products that -- it seems that we've had products coming in every other year, maybe every 2 to 3 years, and we should up at the end of product come down and we come down with it. We should be able to do that consistently. We should be able to have a momentum of products that when one comes and then comes down because anything that goes out is going to come down eventually, you have one right behind it. And it seemed as a void and a gap, and this is why everybody is not trusting this division in a way. And sometimes we call the cyclicality of this division and so forth. But I think we can fix all that. And the way to fix that is with a strong portfolio and a strong pipeline, and that's what we're planning to do.

Okay. And now the emphasis on the specialty portfolio, that will be something that you sort of continue to increase the mix of within Generics?

Yes. The specialty is a fantastic idea, but it's a very difficult something that we really need to do, but we also need to make sure that we are realistic about what we're doing. So although a specialty business is something that we want to get into, it creates differentiation between us and other competitors. It gives us something on top of what we have today with the baseline of generic products. But we also have to know that we need to commit to it, and we need to have more than 1 or 2 products in the basket because it does require a lot of money to detail those specialty products. So -- and this is one of the things that we want to do. This is one of the things that we have talked about, what Hafrun can help us do and is assessing what other products can we add to that basket. Because really, it's not -- no matter how big the product is, the promotion of a product -- specialty product to the market is extremely expensive. So the more you have in that basket, the better you absorb that cost. And I think -- so this is where our focus is. Our focus is how can we make the specialty more successful than it is today. A fairly good start. I think we have a couple of good products. They've been growing, and I think they have a good future, but they will not have a fantastic future if we don't add to that basket most of it or be creative and getting something else to absorb the cost that we have. So we have a lot of ideas, and we're working with a lot of different ways, but this is something that we recognize that we need to fix.

Okay. And just for me, moving on to the U.S. injectables business. Obviously, Custopharm has been a fantastic acquisition. It's been a good contribution to growth, but focusing more on the organic growth drivers within injectables. Will that be lagging your 4% to 6% guidance for the division? Or could that -- sorry, 6% to 8% for the division? Or could that be kind of up at that level on an organic basis?

Yes. We have -- as you have seen, the 2 changes -- the 2 main changes that we have made since I took over, and it's only been 6, 7 months is that we appointed 2 presidents of the 2 of the 3 divisions that we have, very strong in R&D, very strong technically. And this is really to make sure that -- because we believe that the future comes with good organic R&D, good understanding to technical -- good understanding of -- good technical knowledge that we need to get to the -- within our company. Bill, who took over my role and President of the Injectables has a PhD in -- exactly in chemistry and has been in the R&D for quite some time all his carrier, has a great understanding. And in the very few months of being in this role, he had really improved the R&D and organized R&D. And I'm very hopeful, and obviously, if you see what we have done last year and how many products that we have introduced to the market and this year, we have a great output coming in. But I think the output is coming from simple products. We are concentrating on the more complex ones. So that's what Bill had bought in. I think we need to do more of that. I think there are a lot of ideas of how to do it, not only organically 100%. It could be organically, but it could be with help of the other people about a specialty codevelopment is something that we're looking at. Partnership with API companies that we can make, specialty API for all of those new concepts are things that we are very active doing in background right now. Of course, unfortunately, this is a business that I did say before is like a Christmas tree business, you plant the tree day, so you can sell it in 7 -- 6, 7 years. Nothing that you do today is going to show you tomorrow. But I think you need to see the activities that happen today that you can predict what happens tomorrow. And I think this is what we're doing. We're trying to plant as many trees as possible. We're trying to make sure that we have the right processes in place and invest in the right place. It's not the lack of investment. The most important thing about R&D, it starts with not investments to be honest with you, it's about picking the right product. Picking the right product means you need to know -- have a good understanding of the market, good understanding technically of the products and so forth. And I think this is where we see both the likes of Hafrun again and Bill bringing in and that's why we have made those changes and are actively working towards that.

Victoria Lambert from Berenberg. I just wanted to get a better sense of your biosimilar strategy. So -- I know you do a partnership, but it looks like you are well covered for some oncology products. But just wanted to get a sense of your exposure to immunology and ophthalmology biosimilars. Would you guys look to launch in these products in MENA with a partner? And do you manufacture most of these products on behalf of your partners? And then I just have a question on sterile compounding, how that's going. If you have all your licenses? And then you expect to be breakeven?

So for the first question, the biosimilars, it's a very tough industry as you can hear about it from what everybody is doing. Some people are doubling up on it, some people are just exiting by the way. It is not as crowded market. And I think it becomes extremely lucrative when you are the first, second, third, maybe in the market, that's when you really make a lot of your money. We came in, we are not -- we came in with partners because we can't make this ourselves, so we had to partner with people. And I think we partnered with the right partners because we do have the right transfer cost with them. I don't think we are going to be #1, #2 or #3 of those 3 products or 2 products that we have. So I think we have to wait and see. They might come to surprise us. But in either way, we feel that we can compete in the front because we are one of the first in the market. It's because we have a good cost base. And I think we can compete based on that. This is in the U.S. In MENA, it's a different story. I MENA we're leaders. We are partnering with Celltrion, and we have about products now -- 7 right -- we have 7 products and it's growing. We have a commitment and a great partnership with Celltrion to take their entire portfolio to MENA. We've been growing the market even more than the brand themselves. We have captured not only market share from the brand, but we're growing that ourselves too. We have plans to fill the product ourselves in MENA is something that we know we are in discussion with our partner with. So I think in MENA is we are on a good footing where we -- where our future is very bright, and I think we will be growing this business significantly in the next few years and adding more to the portfolio. U.S. and Europe we're at a different strategy. Again, we are not the pioneers and the leaders, but we think we will benefit from this as we get those products approved. As far as the compounding, we are happy with where we are with the compounding and as I always said that compounding is a great business, and you know about -- you seem to know a lot about compounding. So you really know that it is a good business. You know that there's a lot of potential of that business because a lot of the hospitals are keeping that business in until they trust the partner, they really don't want to give up what they have, but they would like to give up what they have because they're not in manufacturing. They are a hospital. But since they need -- they have that need and they need to satisfy it and they don't have many options. So many of them are choosing to keep it inside. This is where we're coming in, and we think we have a potential to grab this business. But we need to be careful also. We need to make sure that we start very slowly, we keep growing, we create foundation and trust and little by little we add partners, and this is exactly what we're doing. We have all the states right now -- all the significant states, not all 50. I think there a couple that we chose not to go after. But the last one was California, and we got approval for that. It is growing month-on-month. We had the change in leadership just we announced it internally just a couple of weeks ago. We've recruited people from good reputable compounded companies that do exactly that. We had built a good structure. We changed the structure to be a little bit more now that we have the infrastructure in place, the manufacturing in place. We concentrated in the motor, digital, commercial. So a lot of things going on, but we are very careful. The last thing that we want to do is disappoint somebody, make a mistake, not be able to deliver a product. So we really need to build that because we feel that this is a great potential. And if we do it right, from the ground up, we'll end up with a very good business in a few years.

Pete here from Citi. [indiscernible]. Three topics Branded, business development and compounding. I'll jump quick on each. But on Branded despite what we're seeing across the region, despite FX, geopolitics we are seeing this business is performing extremely well. So is this just broad-based strength and execution of strategy? Or is there anything you'd call out country-wise or product area wise is driving a better performance from Branded, that's question number one. On BD, we have [ Khalid ] and you're going to say what you're doing, but could you at least just characterize the environment for doing BD this year? I mean should we expect that something can get done. I know what you win. You have to repeat where your focus is, I know that but I just want to get a sense check environment for BD, good [indiscernible]. And then lastly, just coming back to the compounding business. This partnership you have with Civica was years ago. Once you get critical mass with service levels, does that turbocharge this compounding business? Or is that a step too far they are a very large hospital network. I'm just wondering whether your existing Civica collaboration would turbocharge your compounding business over time?

I'll speak a little bit about the Branded and I'll give it to Khalid to talk about the currencies and what happened there. But -- as you know, in the last few years, we have been really investing in the Branded business. We've been adding many facilities, especially in oncology. Our chemical facility, our API facility has been working very hard trying to get unique molecules for oncology to service all these new plants that we have. So we have a new plant in Algeria. We have a new plant in Morocco. We have 1 in Egypt. We are really covering the whole area, especially in oncology, and this been growing very impressively. We are backward integrated, and we've been really spending a lot of money expanding our API facility. As you know, our API facility was extremely small in the past. So we've never really given a lot of attention. But in the last, I would say, 5 to 7 years, we have been looking -- we have changed strategy and we started focusing on it and we'll put some money into it. And right now, we're seeing the fruits of all that. So this is one big element of why the Branded is doing well. Also in the last few years, we've been investing a lot in BD partnerships. We did very well and also going from providing medicine more into the diagnostics, now more into -- a lot more transferring -- maybe transforming the company in -- I wouldn't say transforming, but adding to what we have from a provider of medicines to also providing solutions to medical, to more of the health company rather than just a pharmaceutical company and that has been entirely throughout all of the region. Locally, we've been expanding our facilities. And as you all know, there are a lot of facilities being built in that region and the last one that we were planning to break ground very soon on into the areas and this is going to be happening very, very soon. So a lot of activities have been going on the Branded. Maybe we never really talked about it to everybody, and this is why -- but if you look at the last 2 years, the Branded little by little was doing well -- has been doing well and this year is not an exception. So that was one element. And there's an element also of the currencies and all this. And do you want to...

Yes. Just maybe before getting into currency, the performance has been driven across all markets. So all markets have been doing very well, even in Egypt, although we have seen the currency and -- but the business itself has been growing. And one of the reasons why we've upgraded or slightly upgraded our operating profit guidance is the reason currency has been better than what we expected. When it's going to stabilize, maybe there could be a further upside. But so far, what we are saying, is we're seeing very good momentum. And this moment that has been driven across all markets.

[indiscernible] about BD and M&A. We have talked about the strategy that we have. And one of the strategy is looking for the future. I think this is one of the things that we have to strengthen because when we come to you and give you our results, you had already -- you want to go and say, okay, what's next? Where is it going in the future? And I think this is where we have to concentrate on. I think we're confident of what we do today. We're confident of what we can deliver at the year that we're talking about. But you all want to know, and we want to assure you of what happens in the future now. What will give us more in the future. This is why you're always asking about compounding, you're asking about all those potential halo breakthroughs. And I think this all happens with BD and M&A. And of course, with the portfolio R&D building in R&D. And this is where our focus is. This is why Hafrun -- this is why Bill is here, this is why Hafrun is here because we feel that, that is where we need technical people to evaluate. We need technical people to be able to build our R&D. And with those people added to our network to our company, we really can do better in R&D and BD. We can evaluate, we can be assured to that this is the way to go. And I think this is exactly what we're doing. So -- we did that in the R&D and the presidents and the management, but we also did the same thing in the structure that we have. So in our BD [indiscernible] department, as you know, in M&A and BD. We have restructured this department, added a lot of competent people to it. And we are focusing on this because we feel that this is an opportunity today. As you know, we have a good balance sheet. A lot of companies don't. They're highly leveraged and we're seeing a lot of opportunities. So this is the time now that we have to evaluate to see what we can grab, what we can -- what would be synergistic with what we have today. And there are targets and currently, we're evaluating many. And I hope by the end of this year, we should be -- we should have some hopefully. Compounding. For compounding, we -- I keep saying the same thing. It's a business that -- we all know we've talked about thinking that this business is very much similar to the core business that we have. And it is as far as the product as far as the GMPs, as far as the control that you have in manufacturing plant. Where it differs a lot is in commercial. In our core business, we have, what, 4, 5, 6 customers or wholesalers basically that they sell. In this business, we have 5,000 hospitals that we have to individual customers. You have to test, you have to bring them in and you have to go through all the credit through all the DA, licenses and all this. It takes time. It takes time. From us, we're happy to do it, but it's hard to get the attention of a pharmacist to say, "Hey, both -- we have to sell those 4 pages, and we have to go through the process to get you in." So that is going. We're putting more and more people into it to get more customers in. We feel that we can get a few IDNs with a representation of 100-plus hospitals. Maybe that would build. So we have -- we put a strategy together. How can we expedite this process, how can we get more and more customers in? But before we do that, we want to make sure that we have the infrastructure. The worst thing you would do is you would get orders if you cannot satisfy. So you have to make sure that both things are balanced. You want to encourage our commercial go and get orders, but you want to make sure that back your infrastructure, your manufacturing is healthy enough that you can satisfy all these orders. And we have been working on Board. We have put all our systems right now. Our water system has been validated. We've put all the equipment in. A lot of activities are happening on the ground, on the manufacturing floor. At the same time, we're doing a lot in the commercial. So they're going hand-in-hand together. Progress is definitely very evident. We're very hopeful. And hopefully, we will see -- pick up pretty soon.

[indiscernible]

Well, we can. I think the first thing that we wanted to do is make sure that we have all the hospitals. We cannot go to Civica and say okay, we will give you, but you cannot sell in this state and that state and in this state. So that was one of the obstacles that we have. Now, I think with California being online, we should be able to say that. The second thing that we should be able to say that whatever order you give us, we will guarantee we give you the whole model of Civica is that guarantee. I think the team is working with Civica and multiple other wholesalers, GPOs, and yes, we want to make sure that wherever we promise we deliver.

It's Christian Glennie with Stifel. A couple please. The usual one on Generics and pricing in the U.S., what was it like in the first quarter? And what's your outlook for the year on pricing. And then just coming back to the BD licensing partnership, talking a lot more about partnerships across your division, particularly Generics and specialties and others. Is that shift in response to something that you're seeing in terms of the strategic direction? Or is it more a reflection of kind of your leadership, your philosophy and how you think you should be looking outside a bit more maybe than historically it has.

I'll do the second one, and I'll get Khalid to talk about the pricing, he is good with numbers. For the second one, I would say, it's not a shift, its execution. We always knew that we really need to build our pipeline and we know that we can't make everything ourselves. We know we have to go out. And if you look at some of the specialties that we have and some of the partnerships that we have, we've done well. We've done well in partnership, but I think we could have done better in execution. Some of those contracts that we have within, did not go the entire way as we expected them to do. So I think it is really nothing changed. We know that the future is going to depend on what products you have on differentiation, on efficiency and the size of your portfolio, all of that. It's just how you execute towards that. And I think it's just a matter of execution. Take the pricing.

Yes. On pricing, we said at the end of last year that it's always been the pricing erosion in the Generic system the bid is to high single digits. So it's no change to this. It's -- we're performing very well so far. And this has been assumed in our guidance as well.

[Operator Instructions]

Maybe just almost like summarizing what you've really been saying, which is that you want to -- BD is really focused on building product pipeline and helping to strengthen that. Your R&D emphasis is again pipeline. So it's kind of already focused on building for future growth. I mean that's pretty standard for any pharmaceutical company. But -- so why the change in emphasis, I guess, is that not a change in the strategy there in terms of being much more focused on it.

I don't feel it's a change of emphasis. I feel that it's something that we have always talked about. I think we need to execute, but as I understood your question is -- I think we -- when you have a business that has a cyclicality like what we have in the generics today, you introduce the product and you go up and then the product starts laying off and then we go down. And then you have -- you create this distrust with your investors, with your -- with the confidence in this business and we've seen it. We've seen a lot of people question why are you committing to a business that you have -- that you don't have assurance in continuing to deliver every year the same way. I think we want to change that. We did say, look, we think this business has the right elements. I think it's missing few and we have to go after fitting those missing elements [indiscernible] weaknesses. The weakness is in that portfolio. I think we have the right -- everything else is not only good, but it's fantastic. The site is pretty incredible in terms of capacity, in terms of size, in terms of cost capabilities, technology. It's got efficacy. We have great automation. I went for a tour with Hafrun the new addition to the team, the new President of this. As she's been there, done that. She's been in many companies, in big companies, much bigger than ours. She said this is the right asset I have seen. She said the automation is incredible that we have there. She said that some of the capabilities that we have is very impressive. So why are we having difficulty making this business bigger than it is today. And I feel it is really related to keep introducing new products, keep being very active in development. I think we kind of relax. And the reason why is because -- the reason why I think mainly we had a lot of changes in how we've set up R&D and who do that R&D. And we took R&D for BI when we acquired this facility then that has changed and somebody else has come in and stayed 2, 3 years if that has gone. And then somebody else came in then we changed the structure into global R&D. So we've never really been a very steady focus. We know where we're going. We know what we're going to spend. We know what we're going after. I think that's what we need to build. So it's not a shift. It's more of about -- we knew where we would need to go with it to execute. Execution and efficiency as well. It's the output of the R&D rather than the spend. So it's more focused on bringing more efficiency and more output of the R&D and the investments that we are making. And we're willing to spend more. I mean, we're not spending. We always said that we will do 6% to 7% of our revenue. We're spending a little bit less, especially in that division right now. So we have capacity to spend more. And if it is justified, we'll even spend more than that. We just need to make sure that's justified. We need to make sure that it makes sense and make sure that would be worthwhile.

Sebastien with Liberum. Two questions from me. First of all, just to hear what you're saying about the kind of pipeline in the Generics business, and I'm wondering, you obviously site acquisition is going to take a while to kind of build that pipeline. So how should we be thinking about the CMO business during that phase. We've seen growth in that part of the business that flows capacity to utilize capacity in the short term. And then the second question is just on sodium oxybate. I just want to pick up on something you said in terms of seeing volume growth there. I think the other main AG company is volume limited. Just want to check whether you've got any volume limitations on your kind of AG agreement?

I'll take the first one and the second one, you guys want to take that on the sodium oxybate or -- this is a very sensitive issue [indiscernible] it is a certificate what to say there. But -- your first one is in relation to -- I'm sorry, first question was the CMO. We did -- as you all know, we have -- in injectables, we have build the CMO business. The philosophy of the CMO business was, when we build facilities, it takes a while before we fill the facility. So it's an opportunistic type of business where we can come and sell that capacity to somebody else. So it's ready to take it rather than having to sit and absorb the cost. It's been a successful model. We've done very well to a point where now we're saying, well, maybe it should be a separate business. We're still looking at that. I think we can do it, and we're committed to do it, but we need to have the capacity before we commit to having an independent contract manufacturing unit in the injectables. And Generics, we have the capacity. We have a very good plan, as I mentioned before, quality record -- pristine quality record in the United States. So I think it's got all the right elements to attract contract manufacturing. But contract manufacturing requires also contracts, requires you know what who needs it, how you talk to them, how you bring it in, you transfer it. You need to transfer matters. It goes through 6, 7 audits before they -- it costs a lot of money to transfer the products and they don't want to give your products to contract manufacture to somebody that can get you in trouble. So it does take time for you to get that trust going. It does take time for the auditing to take place, and it does take time for transferring all the methods, transferring all this. We are in this process with a few clients, but also, we feel that with the technical people that we had added with the 2 new presidents that we had added both Bill and Hafrun have done this, as you all know, Hafrun's experiences in companies that have done a lot of that. And also Bill was, as you know, CEO of a company that did only virtual. So they know particularly well how this thing goes. So we're hopeful that we can -- with those leaders, we can grow this business well. We're committed to this business. We know that we can do good at it, but we also know that we really need to reach the right persons, right company and offer them the right attractive contracts for them to be motivated to move their product to us, but definitely, it's something that we're looking very closely at, and we are optimistic that we can grow this.

So we have the good manufacturing base. We have a strong quality track record. So we want to build on that, whether on CMO, at the same time, as Riad mentioned, bringing more into the specialty. We have [ Hafrun ] as well, it's growing very well. So this business is delivering good growth, but we want based on the output that we have to have a much stronger and hope. With Hafrun, we are sure that we can grow this business further.

Paul Cuddon from Numis again. Just a few GLP-1 related questions. I mean are you distributing those obesity applications in the MENA region, I mean could that be an opportunity? Could you actually manufacture them yourselves with any of your other facilities? I know it's peptides versus sterile injectables, but could you kind of rearrange the manufacturing? And if you're not, are you seeing any dynamic where there are injectable manufacturers that are switching capacity to GLP-1s to solve the shortage. Is that creating opportunities for you?

Yes, excellent question. it seems like this GLP is like the new penicillins in the world. It's a deal breakthrough, and we saw the acquisition of [indiscernible] a couple of days ago for this. So definitely, it's something that we are looking at. We have partners for that. And both in MENA and U.S. Did we say anything publicly about this? Okay. So we have partners. We're looking at different things and different options. We definitely are not ignoring this, but we know that we don't have it develop ourselves. So we have to go through partners. As far as manufacturing, yes, we can manufacture it. It's not a problem with manufacturing that in our facilities. Most of those products are placed in a special delivery system like autoinjectors or prefilled synergies, both of which we can make, so I don't think it would be a problem. I think the first thing is get it out of the market. When we do talk to partners, we always have that option, especially in MENA because you do have the preference for localization in MENA. So we can take -- we can consider that when we talk to people. So -- and for U.S., we are talking to partners that are able to give us the volume that we need. So it's something that we're watching very closely. We're talking to a lot of partners. Hopefully, soon we could see something there.

Maybe -- I know you mentioned track record in Generics from a regulatory perspective. I think in some of these recent meetings, you talked about the potential for greater FDA inspections industry-wide in injectables. I was just wondering sort of how has that materialized? And then maybe dovetailing into that, the question in terms of how the shorter situation looks in the U.S. for injectables.

Yes. The regulatory inspection is, as you all know, have picked up a lot since after COVID. During the 2.5 years of COVID time, there weren't much inspection, especially international inspection. Domestic and international kind of FDA has frozen. There've done a lot of virtual inspections where they ask before the paperwork, they go through all the paperwork without having to visit the site. It has changed now. They've been very active. They have been visiting all the sites. And we've seen people that have done well and people that have done terrible. We've seen a lot of warning that there's a lot of people had stopped manufacturing. And yes, and the shortages continue. It's between 140 to 160 products now on the list and we do have a lot of big portfolios that have been now and then. We do have opportunities that come across those shortages and our manufacturing plants are very good [indiscernible] making sure that those opportunities are fulfilled and captured. We have never seen orals in shortages, but now we're seeing them. So it's not only limited to injectables anymore. We're seeing some of the orals coming up. So this is going to continue. I think this is part of the system, is inherited and how the system is built in the U.S. And as long as there's a lot of pressure on pricing and a lot of pressure on the manufacturers to reduce their cost, there would be options where you decide to pull out from manufacturing for molecules because it gets to a point where it's not profitable anymore, and we go choose something else. That continues.

In orals are you referencing the ADHD meds because I've heard a lot of about that.

That's one of them.

And antibiotics I think.

Yes, antibiotics, penicillin is one, but that's different, that's more related to [ API ]. But, yes, there are a lot of different reasons why. Some relate it to [ quota from VA ] and how they distribute it, some relate it to API. But it's new to see in orals and shortages.

I think we'll wrap up, if you have any final words, otherwise, we can.

The final words is, look, we're -- I've been a CEO for a few months now. It's been exciting. It's been traveling a lot trying to understand what we have, what we need, how can we satisfy the needs, how can we fix some of the problems that we have, how can we accelerate the growth. It's has been very exciting. It will be more exciting when we actually show something that is substantial. And we're close. We feel that we are doing a lot now. And I think if you do a lot, then the results will show. Hopefully, you'll all see it soon. But, yes, we have a great company, a good foundation, great people. We are a public company. We work like a small group of about 10,000 people, but we work like a small company. We're a public company but we work like a private company. So we have a lot of advantages there and capturing everybody the motivation and given the right tools to grow. So I'm excited. I'm happy to where I am, and I look forward for the future.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.