Laboratorio Reig Jofre, S.A. (RJF) Earnings Call Transcript & Summary

Thank you so much for attending this event joining us both remotely and live to this event organized by the Spanish Agency Institute of Analytics, where Reig Jofre will talk about 2024 and expectations for the current year. I'd like to thank Reig Jofre and its CEO, Ignasi Biosca for trusting us year after year in the organization of this event, even more so on the 10th anniversary of their listing in the Spanish stock market. I'd also like to thank BME for giving us these facilities that are so significant, so beautiful to carry out this -- to hold this meeting where analysts and listed companies meet. I'd now like to give the floor to the Communications Director, Inma Santa-Pau.

Thank you very much. We are delighted to welcome you to this presentation of the result for 2024 of Reig Jofre and expectations for 2025. As Alfredo was saying, it's a very significant year for this company. It's our 10th anniversary as a listed company. The -- your continuous support has been very appreciated. I'd like to thank the Spanish Institute of Analytics for holding our hand for 10 years. Now this event is streamed live through our website in webcast format, both in Spanish and in English as well as our LinkedIn profile. Now we'd like to greet all of you joining us through the Spanish Institute of Analytics Channel and Rankia and the Spanish Institute of Investments. Now this meeting will be around 1 hour long. Together with Laura Marti and Ignasi Biosca, our CFO and CEO, at the end, we'll give you some space for Q&A. We will also be answering questions through the streaming platform. And to start, I'd like to share with you our purpose and our mission as a pharmaceutical company through a video that we have prepared. We hope that this session will be very insightful and enriching for all of you. Thank you. Let's get started. [Presentation]

Good morning. Welcome to this presentation of the 2024 results, a historical year in financial growth indicators, but also important progress in our strategic vision and our path as a company following our purpose, which, as you've seen on the video, is precisely something as complex and noble as universalizing, yes, pharmaceutical solutions with -- based on science from the scientific development and tech production and direct and indirect marketing in the whole world. We are now talking about essential solutions for every moment of life from health in a broad perspective, from prevention and well-being to the most critical situations that your health can face. But always with a scientific baseline and tech foundations with natural complements through Forte Pharma to sleep better, plus hair products, drugs for infections and nails, joint pain without having to rely on drugs with side effects, natural products to balance skin microbiota and to reduce the impact of acne like Vincobiosis, which we will be launching this year, but also critical medicines like antibiotics. Let me remind you that 100 years ago, people would die from infections that today are quite straightforward, plus hospital solutions like anesthesia, vaccines, et cetera. All of them are essential or critical drugs in certain moments of people's lives, and they're all based on science. Reig is a pharmaceutical project that dates back 100 years. We are a pharmaceutical project, which throughout this last century, we have been committed to innovation, and that's why we have achieved the results we've achieved. We are committed to innovation in the classical traditional sense and innovation in product and our own brand, but also at Reig, we have developed our commitment, which tells us apart in the pharma sector with a specialist industrial technology to develop niche drugs. We have also said that our mission, our vocation is making health solutions universal, reaching more markets and more people and the international component of our business and our teams is, therefore, key. We have headlines -- sorry, headquarters in 8 countries, including the Czech Republic since 2024, 4 development and production centers, 3 in Spain, 1 in Malmo, Sweden, and we want to generate business in 70 countries. Around 60% of our turnover currently as a Group comes from our Spanish market. It is international. We have always had development and production in our DNA, development and production of drugs, and we are increasingly convinced of the value of having a European industrial fabric in health care. This European industrial fabric should be technological, clean, sustainable with highly qualified staff, creating jobs, wealth, high-quality employment and giving our continent a strategic autonomy, which will be increasingly relevant. Our 4 plants are all highly specialized and niche solutions that are high demand. In Barcelona, we focus on aseptic production of injectables with a biological baseline -- base. We are also looking at cell therapy and in Toledo, antibiotics derived from penicillin, which require segregated plants due to international standards and the potential allergic impact that they might have. And also, we produce both topical and enteral semi-solid products in our specialized Sweden plant. At the end of the day, these centers are allowed to develop our own drugs and provide services related to CDMO, Contract Development and Manufacturing Organization services. Why can we do this? Because we have the know-how, the facilities, the tech. And thirdly, we have the operational excellence, which, at the end of the day, distinguishes our high-quality processes. And these 3 elements combined tell us apart in the market and make us a unique stakeholder in the development and production of drugs today. At the end of the day, we have more than 1,429 employees, 106 employees more than in 2023. We are present in 8 countries. The biggest growth in 2024 happened outside of Spain with 170 professionals joining us in France, 140 in Sweden, Poland, Portugal, Belgium, United Kingdom and the Czech Republic, as I was saying for some months. Now we have 58% women, 24 nationalities in our staff. The workforce includes 52% higher education degree professionals and 95% have stable jobs with open-ended contracts. We are a huge team. We are a great team, and we want to do something great. But now let's move on to key figures of 2024, the most relevant indicators of our business development. Reig closed the 2024, achieving a historical record, focusing, as I was saying before, on our profitable growth and cash flow generation. With a turnover of EUR 339 million, a 7% increase compared to 2023, we were able to achieve a net profit that was 11% higher, 64% increase in our operating cash flow that is prior to investments up to EUR 31 million. EBITDA grew up to EUR 38.1 million, and we all -- we do this all at the same time as we reduced our net financial debt during 2024. The net financial debt over EBITDA was 1.5x instead of 1.6x in 2023. We are very proud, therefore, of the financial growth and profitability of -- and our cash flow as a company, which is all the result of our investment plan and our strategic plan as a company in the past years. In 2024, especially, a year where we were able to take on double-digit salary increases for our staff in Spain according to the following rather the chemical industry collective agreement that we are subject to. Beyond indicators that are purely financial, we are also very proud to be able to strengthen our presence outside because we are less and less dependent on the Spanish market. This is a road map we set many years ago. We want to be an international company with a very diversified risks. We want to identify opportunities for growth in different world markets, and we have grown 13% above the average outside of Spain. We will continue growing. We have seen that with the plant in the Czech Republic. EBITDA grew, or the EBITDA margin on sales grew to 11.2%, 12 basis points higher. This is our indicator with 54 new authorizations to market drugs in different markets and different products, different molecules around the world. This is the guarantee of our future success of our plans and our business. And we also were able to launch 22 different products, 17 in the realm of injectables and antibiotics and 5 of them were specialty products. Sales of value-added services, CDMO, specialized production, grew by 47%, an outstanding figure, mainly due to the investments we have carried out in the past years. We keep investing though in our CapEx, slightly more than EUR 19 million in 2024, more than the past few years. We basically want to strategically invest in our growth. In 2024, as we announced throughout the year, we spent -- we invested rather EUR 6.6 million in our vertical integration and biotechnology project that I will expand later. As we said last year, we approved a EUR 6.6 million investment in 2 lines, 1 for increase of our equity in Leanbio. Leanbio is our partner. It's an investee company. We finance Leanbio through debt to basically build a plant in the province of Barcelona, where we will be producing biological base raw materials that we will be able to integrate with our current fill and finish processes, aseptic fill and finish precisely in our Sant Joan Despí plant in Barcelona. Reig commitment to biotechnology dates back many years. We have been speaking about these advancements for many years, especially since 2018, where we created a joint venture with Leanbio, Syna Therapeutics. Then we had a license with Accord Healthcare for our [indiscernible] project, and we keep moving forward in 2024 with the vertical integration of finished products and raw materials that will definitely boost the future of Reig. Basically, we are speaking about, as I was saying, a turnover of EUR 339 million and EUR 189 million in direct sales to hospitals, pharmacies. And basically, other EUR 150 million coming from a B2B business, where we basically sell produced -- products produced in our plants to other companies who are selling or distributing these products in their markets. And within this block, we would include the EUR 63 million of CDMO services, which have increased 47% in this -- in 2024. Basically, I'm talking about high added value services. To the right, you can see that our different business units are growing in 2024. The Pharmaceutical Technology division represent a 45% of the company turnover, 9% growth, 34% for SPC and the CHC or Consumer Healthcare division has grown mere 0.1%, but we have certain aspirations that I will get into later. Basically, let's get to the figures for each business unit. The Pharmaceutical Technologies business unit basically encompasses the therapeutics diagnosis, but it's especially focused on technology related to antibiotics and aseptic production injectables for hospital use. It is a business, as you can see that 63% international in sales, 21% of sales happens outside of Europe. So it's the business unit that is most internationalized. It is especially relevant in Japan and Asia as a whole. In 2024, we were able to consolidate a full year of the contract we announced in 2023 together with the Health Emergency Readiness and Preparation Agency of the European Commission to create a strategic capacity reserve to produce vaccines in future health emergencies, pandemics, et cetera, in the perimeter of the European Union. That's why this year we have consolidated a contract. The contract -- it's our first anniversary. We are paid an annual fee because we are always contributing to this reserve of the European Commission that should be ready to go if needed. We have made headway in 2024 in the third milestone in the development of biosimilar. It's now more advanced. We started this year in 2025, clinical Phase III, and we continue to advance in 6 development products, consortia, public and private with public subsidies, Spanish, regional or European. I would like to highlight 3 particular topics in terms of Pharma Technologies division. First, the historical trend. We've recovered historic data from this division. And we can see how after a couple of years, 2028, 2029 sic [ 2018, 2019 ] and 2020, where the turnover of the division was flat, around EUR 100 million. Thanks to the investments that we had made in the past and also as a result of the role that the Reig professionals play or played during the pandemic, we realized how afterwards in 2022, '23 and '24, the acceleration of the growth is very notable. And so we managed to have this accumulated 9% in the next 5 years. I'd also like to stress a second point. The growth is above 11% accumulated in the field of injectables and in antibiotics 6% as we already -- as we have been doing in the past few years. And the antibiotics business, here, we basically work to defend it in an environment that's very competitive at global level. But we've seen this past week that the President of the European Commission, Ursula von der Leyen, announced the new regulation for critical medicines. Reig Jofre have commitments to antibiotics, and we have 25 molecules out of 169 critical drugs identified by the European Union. We are members of the Critical Medicines Alliance. And as you might have seen this year, this new regulation has been announced, thereby the European Commission wants to boost its production, development and the independence of the supply chains of these type of products in Europe. We consider that this supports our strategy, our commitment to these type of products, which are essential. Therefore, we will continue to work on this path. In terms of Specialty Pharmacare, the specialty products, we have hit EUR 150 million of turnover in this business with 2 big franchises, osteoarticular products accounting for 61% of the total of the turnover and then dermatology, both grow, osteoarticular especially at the international level and dermatology with launches in the Spanish market. In any case, we see that the biggest growth in aggregate terms of this division happened at international level, above 30% of the international growth level, but we still have a business that's mainly based in the Spanish market. We are diversifying. And in the past few years, we've opened businesses in Poland and the Czech Republic, boosting the international business even outside of Europe. This is something that helps us to not be so reliant on the Spanish market and anything that is related to operating business in 1 single market. In Sweden, we've grown by 32% in this past year, mainly due to the increase in our specialization by offering services of dermatology and these products in Poland, we've grown by 12%. We opened the office during the pandemic. And in the Czech Republic, we recently announced its opening. Having a look now at the historic trends. We see that the accumulated and compounded growth in the past 5 years was at 17%. And basically, as it is set out in our strategy, we've managed to focus on 2 fields. First, creation of innovative products aiming to this innovation, not radical innovation, but incremental innovation that actually adds value to consumers or the system, patients and doctors as well. This enabled us to expand and grow internationally. We can see how a business that, in 2028, it was mainly a Spanish business, below EUR 49 million, and we hit this figure. We've grown not just in Spain, but also we've bet on internalization, and we've grown beyond our main markets. We can see as well that the launches that we've had at the top right in Poland, we are gaining market share. And we are standing out from our competitors, mainly in Spain and now in Poland. In this 2025 -- sorry, in Portugal, in 2025, we are growing, thanks to our launch in terms of sprays for nails to fight infections -- nail polishes. In terms of health care, we consolidated EUR 72 million, growing 0.1%. But basically, this is due to something that we already announced at the beginning of the year. We've moved away of the distribution of third-party brands, and we have focused on our own proprietary products, Forte Pharma and the Reig Jofre brands. These brands, of course, have a higher margin. And so there is a higher strategic focus for us. Once we are relevant in pharmacies in France, in Belgium and in Spain, we are able to keep betting on our own brands that provides us with a higher margin. In France, this business is -- the business where the main market is France. There, we want to grow outside of the French market, and therefore, the growth in Spain, our interest is strategic. And I would like to highlight that the loss of the distribution business in the French market, we've managed to offset it with a focus on the brand, which is the strategic access that we are betting on in this division. And as you can see in the top left graph, we are growing by 14%, EUR 7 million in this year, thanks to the Forte brand. They accumulated here 8%. So as you can see, all of the units in the first years, we've had relevant growth, close to double digits. And we also grow online. And here, the consumers are based on identifying the product to recognize it in the pharmacies to then order online. And as I was saying, we continue to work outside of the French market. In this field, of course, we are strongly betting on that. And after the pandemic, there's been a significant growth. The natural alternatives to the chemical-based drugs in order to [indiscernible] to prevent diseases and this model is something that in the past few years, and I'd like to insist that after the pandemic, we've seen that the growth in the market is significant and the trend of the European consumer is to go towards those types of natural solutions. It is now time to move on to the financial analysis. So I will give the floor to the CFO of Reig, who will dig deeper into the financial figures.

Thank you, Ignasi, and good morning. Before delving into the 2024 details, I'd like to [ take stock ] on the historic to have framework of these results because this year we are celebrating our 10 years of being listed. As you can see to the left, we can see the results of our results account. In sales, we can see the continued growth year after year since 2014 to 2024, closing with EUR 339 million. Most importantly, we -- if we focus on the past 5 years, the annual compounded growth is 11%. And here, I'd like to link this to the graph at the bottom, where we can see the evolution of the EBITDA, reaching EUR 38 million in 2024. The growth has been 15% in these 5 years. Therefore, we have managed to increase the profitability of our sales. The sales have been generalized in the past few years across all of the business units as we have reviewed already. You need to remember that Pharmaceutical Technologies have grown by 9% since 2018. Specialty Pharmacare has grown by 17% and Consumer by 8%. All business units have grown very strongly. At the international level, I'd also like to stress out that sales in the past 5 years have grown by 13% compared to the 11% of growth globally. On the graphs at the middle, you can see our investment levels. As you have seen in the Ignasi's presentation before, we are very much focused on 2 types innovations, product innovation and brand innovation, and then technology innovation. As you can see at the top, we talk about innovation in terms of product and brand and the expenses that we do in RDI investment. This year, we closed with EUR 17 million invested in developing new products. And this accounts about 5% of sales, a ratio that remains constant over the years. At the bottom, we can see the investment, this regarding RDI, which is mainly investment in CapEx. And here, in 2024, as we already announced 1 year ago, we have again restarted strong investments after 3 years where they were more contained after year 2018, where we made a big investment when buying the osteoarticular portfolio and the investment of the injectable plant in Barcelona. And this year we are closing with '24. And later on, I will detail these investments further. On the right, we can talk about the financial solvency of the company. As you can see, the net financial debt closes with EUR 57 million. It continues to go down year after year, apart from 58% we then -- from '23. And in the EBITDA and net financial debt, in this ratio, we can see how we've increased the EBITDA and reduced the debt. We've reduced this ratio up to 1.5x. We've reduced year after year since 2019, the year of the big investments, where we reached the 2.7x peak. Now we are at 1.5x, which is a very solid level where we are prepared and in good position to -- for new investments. Moving on into more details of 2024, the income statement. We've already talked about sales of this growth of 7% at international level. This growth has been 13%. This stretches out our international expansion strategy. The gross margin almost EUR 200 million, 9% of growth. The gross margin grows more than sales. We got a ratio of 59%, which is above 58% that we closed with the previous year. I'd like to stress out the item of personnel expenses that Ignasi has already mentioned. This item has been increased by 16%. And mainly this is due to the increase of the salaries in Spain that went up by 13.3% according to the chemical industry collective bargaining. Having said that, we have generated more gross margin, and we have contained the other operating expenses. So we have been able to generate EBITDA of EUR 38.1 million, which accounts for an increase of 8% compared to the previous year. And so profitability will go up. In terms of the operating results, also very good, EUR 12.6 million, 20% increase. In the financial item, we've had a very good year. The financial expenses have gone down. This is thanks to a good policy in terms of consumption. We have our debt -- the structure of our debt is mainly at fixed rates. So we have not been impacted by the increases of interest rates, and we have duly managed exchange rate hedges. Then in terms of the participation in terms of equity, extended entities, we have Syna Therapeutics. And this year, we incorporated the results of 24% of the Leanbio company as Ignasi has already explained we have invested in that this year. This is a company and a product that grows, and therefore, this item this year has been reduced by EUR 1 million compared to last year. Despite that, we have managed a consolidated result in this exercise on double digits, both in growth with growth by 11%, and we have exceeded EUR 10 million in the results. And this is certainly a very positive result. I'd like to briefly go through the balance sheet. First, assets. The most important items here would be changes in investments. As I said, in total, this year, we have invested EUR 26 million out of them, EUR 16.9 million for CapEx industry, mainly in our plants of Barcelona and the Toledo plant, where we invested to increase profitability and productivity of our facilities. As I mentioned before, we have invested in biotechnology products in bio, EUR 6.6 million, and we have continued to invest in RDI. We have capitalized EUR 2 million this year from that. As to liabilities, that is the most important point. We continue to reduce the debt, and we continue to increase EBITDA. Therefore, our net financial debt stands at EUR 56.8 million, 1.5x, 0.1 points below the previous year, which shows financial solidity. I would also like to go through cash flows. We've had a very positive year this year. We have closed the year with EUR 10.5 million in cash, which accounts for EUR 4.9 million of cash that we have generated. How have we generated this cash? Well, in the operating results, we've had EUR 31 million, 64% above compared to last year. This is a very positive result. And it is thanks to, on the one side, the good results that we've had in the income statement and then the operating capital, that is better this year compared to last year. And mainly this is due to an improvement of the management of our inventories. Then investment activities, we have invested EUR 32 million. And in financing, we have a debt -- increased debt of EUR 4.5 million, mainly due to the financing of these CapEx facilities where we have invested this year. In total, the free cash flow adding subsidies that we have received, thanks to these investments in CapEx, we have a positive result of EUR 400,000. At Reig Jofre, of course, we make the most to get positive financial results. But at the same time, we want to create value, and we go the extra mile to contribute in the environment and in the society. In terms of environment, this year, we are continuing to make headway. We've reduced by 18% the CO2 emissions, just like the consumption of water and plastics. As to the social dimension, I'm very proud to say that I work at a company made up of 58% of women. We have created an equality plan this year. And this year, at the top management, we have 40% of women. We also invest in training for our teams, and we take care of the health of our employees. This year, we have reduced by 50% the occupational accidents leading to sick leaves. In terms of governance, governance is where directives from our Board come to be. That's -- for instance, this year, there's been a double materiality analysis being carried out this year. We have updated our code of ethics, and we have a new code of conduct for our suppliers as well. And with this, I'd like to give back the floor to Ignasi.

Thank you so much, Laura. I'd now like -- since we've got to this point in the presentation, I'd now like to highlight the fact that today is the 10th time we present our results. We have been in the Spanish Continuous Stock Market for 10 years, and the Reig family who so far had held 100% of the shares of its company to -- yes, we decided to work hand-in-hand with our investors to open up our possibilities to other people. Back then, we already highlighted that it was a growth project that even though we would retain our position, and we had worked for 90 years, we felt that we were a very young project focused on growth. When we look at our historical analysis, we've moved from a company which had EUR 150 million in turnover and EUR 17 million in EBITDA. And in the past 10 years, we have grown year after year every single year with an accumulated growth of 8% in compound terms. We have done this in every realm, in every business unit, every market. We are very satisfied. And yet, I'd like to insist that, today, Reig is a more robust, more resilient company. We are a more international company, more innovative company, more tech-based company and definitely more ambitious. We are more relevant at European level in the pharma sector, we are more committed with our own mission as we were able to see during the pandemic. So again, I'd like to thank the more than 5,000 investors who have trusted us from the funds, the big investors who stay with our analysts, who are paying attention to the development of our company, but also every retail investor trusting us from their online banking platform. They have trusted us for the past 10 years. Thank you. Now I'd like to move on to the last slide. The last slides are about 2025, our forecast, our expectations, what's ahead of us. In 2025, we want to make the year a year of growth and in line with basically our growth from the past years, but we want to continue to consolidate our strategic road map. We are extremely focused. We are starting this year highly focused on our project for them to be able to move forward, but we have to guarantee this growth. We want to focus particularly on a profitable growth. And this might only -- may only be achieved looking for efficiencies, operational excellence of our processes, internal digitization processes, investing in our personnel, looking for those high-margin businesses who will lead us towards the path of a profitable growth. We want to streamline our platforms, and we want to generate cash flow in the midterm. We will also, apart from the growth axis, we will keep working on consolidating and growing strategically in terms of integration with biotechnology. We believe that Reig, in the future, will be more about biotechnology. We will move from chemistry towards biotechnology to be able to open up new sectors. We won't do this so much in innovation of products. Of course, we will if we are able to, but especially technological innovation to accompany those innovative companies who will allow us to grow with them. We want to also grow and focus this year, 2025, on our productivity in terms of antibiotics. As we were saying before, antibiotics are not only strategic for our company, for the country, for our business unit. We want to be more efficient in our processes, more productive so that we can turn this into a business, allowing us to really generate those cash flows and investing to guarantee our supply chain and the autonomy of our supply chain in Europe, but also towards other continents. We also want to keep focusing on our commitment to innovation this 2025, innovation in products, products that really make a difference in the lives of our professionals, but also our patients, obviously, and which boost our international growth in those markets where we are already present, but also new markets through our partners and other commercial stakeholders who work with us. We want to keep consolidating the fifth axis, which is our proprietary brands. In CHC, we are committed to private label brands that medical, pharmaceutical and consumers can trust the market. We anticipate that we will keep growing, and we want to keep up with the market. We think that the strongest brands will be able to grow beyond the market average if we are able to tackle this complex 2025, where we really have to communicate directly with customers, with professionals and pharmaceutical professionals, which is the industry where we excel. We are able to join these messages together and our sales channels are opening up from -- I mean, pharmacies are obviously our real partner, but we are opening up our possibilities through online retailers, online platforms, e-commerce. And in 2024, as we announced back then, Reig is 1 of the 6 associated companies -- Spanish companies associated with the IPCEI project, a European project that is extremely important. It has to do with the health care of European countries through which basically the European Commission has eliminated the possibility or basically, it has freed grant concession reliance for the companies who want to emphasize or insist on their investor commitment -- the investor commitment of states in these investments that we are making both in innovation of products and innovation of technology. This will be result in 2025 through the IPCEI project and we hope to keep working with the Spanish authorities to move forward in this European project. We also are extremely excited to launch Vincobiosis in 2025. This is a product that is based on a natural solution for acne-prone skins. We believe it might be yet another vehicle of growth for our company in the midterm. Now let's move on to the Q&A session, if any.

My name is [ Antonio Minella ] from [ Sinofax ]. I would like to congratulate you twice for your anniversary, firstly, and secondly, for the incredible outcomes, which entail also a challenge because you need to keep up in 2025. Ignasi, you've been extremely prudent in your presentations on the last 10 years when it comes to analyzing the ecosystem of the sector and the market. The ecosystem tells us that today in the Spanish Congress, a law is being passed, which contains a provision on improving benchmark or reference prices, giving some oxygen to those prices -- to those drugs that have had to drop their prices because of the reference prices. So I'd like, Ignasi, to know, I know you're very cautious, could you please analyze the external ecosystem of what things are like nowadays? And Laura, from the financial point of view, what is the biggest challenge or biggest opportunity, threat for the next months?

Thank you very much for your question. I'd like to clarify that I am very prudent and open fora. But when I talk to the health care ministry in Spain, I'm very blunt. We have a very close relationship. We work hand-in-hand so that we can solve all of these issues. It's true there is a problem in Spain, a big issue because of the regulation of reference prices that were set historically in a time where the focus was basically to reduce the prices of drugs when they went from innovative drugs to off-patent drugs, but 20 years have passed. And we have this mechanism to lower prices and yet we can adjust to the increase of cost of raw materials, inflation, salaries, as we were highlighting before. It makes it very difficult for a company to be able to guarantee a supply of drugs and other medications that are often critical for patients. So administrations have been thinking about this for a long time. Is it key? It's crucial that we find a way to guarantee that with this adjustment of prices that are so constrained with very limited margins. I was talking about antibiotics a minute ago. We want to be able to solve this issue and have the capacity. For instance, in Toledo, in Spain, in Europe, we want to have production plants that are modern based on the production of antibiotics to guarantee our strategic independence from other continents vis-a-vis whatever happens in the future. We know how geopolitics changes every day. Anyway, we've also talked about the European Commission and the regulation. They have got to work. We need to keep striking a balance between the increase of regulations. On the one hand, the European Commission is saying, "Hey, let's boost the production of these kinds of essential medications," but we also have to increase the amount of reports, bureaucracy paperwork sometimes hindering our productivity in the continent. So we have to be very cautious as to the practical implementation of all of these matters so that they don't become a threat. And when it comes to the water -- wastewater treatment directives, we are fully committed as I was saying before. But again, we think that this directive needs to be well thought through so that there's -- we don't endanger the supply of water for the production of drugs outside of the perimeter of the union. We can work there so that we comply with the law, a law that basically creates a strategic risk if we lost control of supply chains and water supply. So administrations, again, I insist, I'm very blunt when I talk to public administrations in Spain and they are definitely aware of the issues we have. We need to find the right framework, legislation framework so that we can guarantee supplies and that we all as citizens have access to the drugs that we might need with that level of guarantee.

On my side, in terms of financial opportunities, there are many. We are facing a market in all our business units that are growing. So our company is well positioned from the human resources and technological capacities, innovative point of view to grow alongside the market. When it comes to financial threats, I think that the geopolitical context is slightly more complex, too. So we wake up every morning, and I think we all read news coming from other continents that are shocking. And even though at Reig, we are not heavily exposed to the U.S. because that's it, that we aren't. We have to pay attention to these matters. We are studying how the U.S. foreign policy might impact us and other companies.

Alvaro Lenze from Alantra. Congratulations for your results. I have several questions. When you talk about developing the biotechnology sector, I'd like to know, within the whole chain, where is Reig located? I mean, are you helping other labs develop products? Do you want to develop your own biosimilars or innovative marginal products, maybe become leaders in the marketing and commercialization of these products? I want to know because you've purchased part of Leanbio's equity, and I want to understand your investments in biotechnology. Secondly, you've talked about focus on cash flow. You have invested thoroughly this year, and yet you say that there are many investments coming your way to improve your positioning in antibiotics. It's very difficult to strike a balance between investments and cash flow. So could you please tell us a bit more about how you plan to strike this balance? I also see that 1.5x EBITDA margin, if -- I don't know if you are starting to stock on cash flow. Can you talk about your efficiency? Third question is about the guidance. It's quite broad, a bit vague. You talked about 11.2% EBITDA margin is far from your long-term goal. In the short-term you might not be able to quantify this, but what is your midterm ambition for your EBITDA margins?

Thank you, Alvaro, for your question. With regards to biotechnology and our strategic focus, as I was saying before, this advancement in biotechnology materializes in 3 aspects: talent, facilities and operational excellence of our processes and our way -- the way we work. We are still in this phase, this stage of basically building up our staff, strengthening our facilities. We are working parallelly by providing services to other companies, allowing us to maximize the value of our talent and facilities again. And at the same time, we want to do it by developing our own proprietary products. In the future, we believe there will be a natural balance where we will be able to get into the least innovative products like, for instance, biosimilars that have a huge financial potential and yet require less innovation. We believe that we can do this on our own. That is our ambition to be able to work on our own to get into biosimilars autonomously. But in parallel, we want to get into more innovative projects, therapeutics, more pioneering products that are in the border with or reaching what is providing services to other companies who can actually leverage our know-how, facilities and processes that are highly efficient. So -- and operationally excellent. So again, know-how -- the know-how of Reig will be leveraged by us, but we will also offer it to the market with an ecosystem that is developing a lot in Spain. There are so many start-ups in Spain right now who require our specific knowledge. This market has many big multinationals betting on working with more specialized partners to develop industrialization processes for these kinds of treatments. When it comes to the whole issue that you were mentioning on cash flow focus, yes, it's true. This is the first stage. I was talking before about operational cash flow. For me, that is the main challenge. We can deviate this towards investments. And when we are able to identify potential investment opportunities with an investment return that is relevant or sufficient for us to make that decision, we will. We are identifying opportunities. That is the stage in which we are in the past 2 years. You will see that we have kept investing over and over again, and we want to keep leveraging these opportunities. We want to take that leap between -- from chemistry to biotechnology to move on to molecular therapies, RNA therapeutics. This is a train we want to -- or an opportunity we want to seize. We think that 21st century pharma will be completely different to 20th century pharma. So again, cash flow -- free cash flow later. And yes, it's true that it wouldn't be operational or feasible to move the company towards a 0 level of debt equivalent to 0, but we think it's great to have a certain -- a low indebtedness level so that we have that margin if we do identify potential non-organic growth opportunities that we don't seek or look after. We are not a buildup, but we are always paying attention to those non-organic or inorganic opportunities. For instance, in the past, in 2009, 2010, we made our first acquisition in Sweden, which entailed a huge growth for us. There was an internal merging towards -- with nutraceutical. We became listed. We increased our business in France. We have doubled our business in France actually in the past 10 years. In 2020, or 2019 rather, we were able to buy equity from Bioibérica. And also, we grew a Spanish business into an international business. As a company, we are definitely always aware and looking for those opportunities that will increase our value, which have worked really well in the past and which allow us -- which require that we have a reasonable level of debt, reasonable level of cash flow, thinking about what will lead to higher returns for our company taking into account the cost of capital. So that's what makes sense to us. Scrip dividends. In the past few years, we have paid out scrip dividend in principle from the Board. This is a model that we expect to continue following in the short term. But at the same time, we see that, as a company, we are in -- at a position where we could move on whenever it is appropriate. I think it would make sense to move on to a dividend that is no longer scrip, but maybe a mixed formula of cash dividend and scrip dividends. But the model worked for us, and we think it is very much adapted to the type of investors that Reig has. Some shareholders really trust the product and want to keep growing with shares. So they bet on the future of Reig and other investors want to have more financial return in terms of dividends, and therefore, we give them the option. We consider it is a model that has worked for us and it works for us. We have nothing against the model. And finally, the growth target, I've mentioned before, the internal growth target as a company. Our target is to reach levels of about 15% of EBITDA. Compared to sales, we are at 11.2%. And we are working to maximize those more profitability business and eliminate those businesses, markets or products that generate less profitability that are complex, and therefore, we want to focus on higher profitability products to get closer to this 15% target in a reasonable amount of time. Thank you for your question.

I have 3 questions, but they are very brief. First one, moving on -- continuing on antibiotics.

Your name?

Miguel Medina. In terms of antibiotics, you've mentioned efficiency improvements, and related to the first question, well, I guess due to the pressure on prices in the past 20 years, the antibiotics operation is quite efficient at the moment. So I'd like to know whether this efficiency improvement depends on price revision, which is something that's maybe out of the control of Reig Jofre or maybe there are operational improvements that can contribute to the margin improvement. That's question number one. Number 2, Leanbio is a bet. I guess that it will continue to be there. But in the case of Syna, depending when there were milestone, it was positive or negative. So I hope that we have a milestone for 2025? And the last question, the CDMO growth, which was about 40% this year. I guess that it will play a relevant role in terms of the contract with the European Union. So I would like to know if we adjust the entire year of the European Union, I would like to know what would have been the growth?

Perfect. Well, thank you, Miguel, for your question. Regarding the question related to antibiotics, we are internally working a lot on that. The internal teams are focused on creating a process that's as effective as possible, concentrating volumes, making batches that are as big as possible and creating a lot of efficiency and productivity internally. In fact, one of our investments done in the middle of 2024, beginning of 2025, this is a new line for injectable antibiotics of high productivity and high capacity. We have managed to produce our unit or rather 4 units in the same amount of time than we used to produce just one, and we reduced cost. This is an internal process that all teams are working on, and we are working towards this operational efficiency in parallel. As we have mentioned before, as we answered, there is a very clear effort to work together with administrations to reflect this price increase. Now say that we have 350 people in Toledo working for operational efficiency. Well, we have 3 or 4 people working on that -- on the relationships with administrations in order to have to achieve this by the judgment in order to reflect the inflation increase. We have an antibiotics -- we have antibiotics with a price thereof EUR 0.98, which is about 100 pesetas, the former currency. So I mean, it is not acceptable that in -- we still preserve a price that is compared to the price in pesetas, in the former currency. The global demand has changed. Spain is trying to gain access to these antibiotics and so is the rest of the world. All countries are willing to pay much more than that. And of course, there are critical supply chains at global level. Would you like to answer the other question in terms of milestones?

Yes. This year, we've had a milestone in the year '24, and we expect to have more milestones in 2025 for Syna. The project that go together with milestones tend to alter figures that we try and be as transparent as possible as we hit those milestones because as I said before, in 2025, we started the Phase III clinical trial and afterwards, we will reach to regulatory approval and then commercialization phase and, of course, then royalties and market access. That will be linked to the market, and it will become a more recurrent and stable business, but we are still conditions to the quarter and the year. Depending on the quarter and the year, things changes. And the CDMO, the contract with the European Union, it is not included in the figures. The growth of 43%, this refers to the organic growth. In fact, the CDMO grows more in a specialty -- sorry, yes, especially pharma care grows more there in our plant of Sweden.

Very well. Are there any further questions?

Thomas from [indiscernible] from the FA Agency. Very quick. I've heard that in that misbalance between the elevated cost reduction of antibiotics and the consortium with administrators, I understand that this could jeopardize the production of the Toledo plant. And I understand that -- I don't know whether you are considering relocating to other countries. If that is the case, which countries would you be considering?

No, that is not the case. I would like to be very clear. Reig has a commitment to essential drugs, and we are committed to antibiotics. Reig wants to make viable this business for it to be productive and profitable in order to continue to deliver as we have done in the past 20 to 30 years, continue to serve in the Spanish and European and international markets. We want to continue to supply something as basic as antibiotics. As I've said before, I'm aware that the Spanish administration, the Ministry for Health, is fully aware and also bets on having in Spain and in Europe a strategic plans such as this one. Therefore, there is the political will that is aligned to our vision, will as a company. The idea is to preserve the strategic product. And today, more than -- last year or 5 years ago, the pandemic clearly shows the importance of having the guaranteed supply chain, and the past events, geopolitical events also identify how certain products can be strategic in terms of defense for the continent. And therefore, we realize that it is worth guaranteeing the supply within the continent. This is related to the new regulation for critical drugs. Antibiotic -- the Toledo plant is for critical drugs and so the commitment is there. Now the problem is how do we manage to generate productivity on the one side, and then how do we reflect that on the price of these type of antibiotics because it is old functioned. This is due to a regulation that historically has been aimed to reduce prices, and therefore, it does not cover the inflation increases. But I'd like to be very clear, there are no plans in that sense.

Very well. Any further questions? There is a question over here.

My name is Thomas [indiscernible]. I'm an analyst and partner of the association, and I also represent the [ ESG ]. First of all, congratulations on your presentation. Thank you for talking about the ESG. Now I'm interested in the following. And I have the opportunity of having the CFO here, the CEO, and I'm interested in the following question. To what extent in a market with sustainable finance regulations, of course, the regulation is very strict even though it's been eased, but the environment is characterized by social sensitivity. So how do you use those ESG variables to -- for them to be competitiveness factors, to be eligible in terms of tenders with administrations? I mean, what is your strategy so that sustainable finances makes you more eligible with all of the advantages that comes with it?

Well, I would love to linger on this topic. Thank you so much for your question. It's very interesting. At the end of the day, we have always been very committed to ESG across all levels. We do essential solutions for health and the population so that we have a commitment to society. And this is rooted in the basis of our business. In parallel, we have a commitment to environment. We have always been focused on that. The water that comes out of our plant comes -- is actually cleaner than when it entered. And therefore, we have always been focused on that so that the output water is -- has been treated and it's even cleaner than the input water. With the increase of regulation, we kind of lose sight of that focus because until now, it was a flag that we have always been very proud of, and we have always stressed on that. But now we are evolving towards a model where it becomes something that's more regulated, therefore, the more beautiful side of things kind of goes unnoticed. Now it is a pillar based on compliance. I think things tend to change every now and then. But at the end, I'm sure that we will land all that, and we will find a balance. It is important to reach that situation. At the end of the day, we work for the society where we're living. We are lucky enough to work in health care, and we are fortunate to be an international company that serves people, not just people that live close to us, but rather to the planet at large. In terms of tenders and so on, well, it is difficult to showcase our product set, but the standard published yesterday in terms of critical drugs already introduces these type of variables. The valuation in public tenders for drug purchase, there is something there that I think is interesting. From a sustainability standpoint, using antibiotics that have been produced in Toledo, Spain -- in Spain or Europe is more sustainable than using a flight or using a ship to transport antibiotics all the way from Asia. Therefore, in these new regulations, we are starting to see these concepts, and we hope that really the world and Europe evolves, the regulatory framework evolves to really showcase and give credit to the companies that have always been committed to that. Again, it is clean, it is technological, it is sustainable. It is made up of a team that is trained, and therefore, is fundamental and it provides strategic autonomy to the country. Therefore, we are fully committed to all that. Companies must be able to clearly identify that our value for the future is there beyond the financial figures. But of course, the financial indicators must also includes financial sustainability in order to be able to keep investing and provide time and resources to all that. So yes, fully aligned with that. And I think that the world, the regulation goes towards that direction. This is a sector that is very much integrated in our society.

Very well. Any further questions?

The questions that we have received from the streaming platform actually are aligned with the questions that have been asked here. So we consider that they have been answered. Thank you again for your participation, for your time. And I'd like to say that this year, we have 134 people connected, more than last year. So we are very much happy. We hope to see you again next year. Before we finish, I would like to also bid farewell. And on the first hand, congratulations on your 10th anniversary. We are -- this is also our 60th anniversary. So we are very happy to. Also congratulations on your presentation. It's been brilliant, very concise. You've been around for many years. So we realize that you are improving year after year. Again, we will be delighted to have you here with us again next year to continue to see the evolution of your results that are very good pretty much across all of the business lines. And yes, to see you achieve that 15% profitability that I think the market will welcome with open arms. Thank you so much, everyone for your participation. Thank you for your attendance. And I would like to encourage you to join the institute. We are very pleased to have you here. These meeting are always very successful, and pay attention to the different invitations that we sent because we will do more events, and we will be very happy to have you with us. Thank you so much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]